Author - Aniket Khanolkar

Bajaj Auto- Exports saved the day for Bajaj Auto in November.

Excerpts from an interview of Mr Rakesh Sharma- ED- Bajaj Auto with CNBC- TV18

Update on the Indian Equity Market:

On Tuesday, NIFTY closed 0.5% lower. Among sectoral indices NIFTY PSU Bank (-2.9%), NIFTY Metal (-2.6%), and NIFTY Media (-2.4%) closed lower. While NIFTY Realty (+1.3%) and NIFTY IT (+0.5%) closed on a positive note. The biggest losers were Yes Bank (-7.6%), Bharti Infratel (-5.8%), Tata steel (-5.2%), whereas Bajaj Auto (+3.1%), Bajaj FinServ (+1.7%) and TCS (+1.6%) ended with gains.

  • They do not expect the sales in the month of December to hit      4 lakhs because it is a seasonally weak month.
  • Exports will continue to grow. But 3 wheelers and the domestic market will see a pullback when the model year changes.
  • The company is holding steady margins and there is no sacrifice of margins.
  • There is no need to shore up the sales in an unnatural way as November and December follow a high season period.
  •  The mix is holding steady for the company, 3-wheeler are improving and there is a gentle tailwind on the exchange rate side. So, the margins are not going to see any shift
  •  Speaking about international markets and exports, the international performance is steady and solid and the key driver for this has been the African continent where the economies are doing well.
  • Bajaj has a competitive position in the African continent, with every 3 bikes sold one is of Bajaj.
  •  Bangladesh and the Philippines are acting as bright stars and are an important market for Bajaj.
  • These markets are doing better than industry and are in top-10 markets for the company.
  •  Speaking about price hikes post BS-VI transition, Bajaj will have to look internally and externally but certainly, the prices will increase.
  • Given the situation of the economy any kind of price increase will have a dampening effect on the demand.

Consensus Estimate (Source: market screener)

·        The closing price of Bajaj Auto Ltd was ₹ 3261/- as of 03-December-2019. It traded at 18.5x/ 17.3x/ 16.8x the consensus EPS for FY 20E/ FY 21E/ FY 22E of ₹ 176/ 188/ 194 respectively.

·        Consensus target price of ₹ 3,069/- implies a PE multiple of 15.8x on FY22E EPS of ₹ 194/-.

Corporation Bank: Margins to expand on recoveries

Excerpts from an interview of Ms P.V. Bharathi, Managing Director, and Chief Executive, Corporation Bank with CNBC-Tv18:

Update on the Indian Equity Market:

On Thursday, NIFTY closed -0.3% lower. Among sectoral indices, NIFTY Metal (-2.2%), NIFTY Auto (-1.0%), and NIFTY FMCG (-0.6%) closed lower. While NIFTY Media (+4.1%), NIFTY Realty (+0.6%) and NIFTY Financial services (+0.3%) closed on a positive note. The biggest losers were BPCL (-6.0%), Coal India (-3.4%), Tata Steel (-3.3%) whereas Zee (+11.7%), Eicher Motors (+2.1%) and Dr Reddy (+1.4%) ended with gains.

  • Speaking about Essar steel judgement Ms P.V. Bharathi said that the Essar recovery which was long pending has now come. The bank expects that by November 2019 around ₹1,300 crore will be coming in.
  • The bank had already targeted recovery of ₹ 6,000 cr, including National Company Law Tribunal (NCLT) recoveries.
  • In the Essar Steel case, the bank has already provided 100% in respect of this account, so the entire amount of recovery will help to improve profit. In this process, the net interest margins (NIMs) will also increase by 40-50 bps.
  • The bank’s exposure to Bhushan Steel is small, it is ₹150 cr. The bank has around ₹2,500 cr exposure to Videocon.
  • The recoveries will increase profit; for the first half of the year net profit was up 24%.
  • Total profit by the end of FY20 would go up to ₹2,000 cr out of which ₹1,300 cr will directly come from recoveries.
  • The NPAs are less than 6%, the bank has been able to bring it down to 5.59% and by the end of FY20, it will be near 5.3%.
  • The targeted loan growth is ₹1,30,000 cr and at the beginning of the year, it was around ₹1,20,000 cr. The bank has targeted 60% growth in RAM (Retail, Agri and MSMEs) and 40% in corporate.
  • Speaking about the merger, Ms P.V. Bharathi said that it is expected to take place from 1 April 2020, once the process of valuation is over then swap ratios will come out.
  • Ms P.V. Bharathi says this is peak period for retail home loan growth as well as vehicle growth.
  • The total exposure to private sector NBFCs is ₹4,000 cr and the  exposure to Dewan Housing Finance Corporation is around ₹500 cr.
  • The bank has factored in around ₹750 cr of slippages in third quarter, last quarter it was ₹950cr.

Bank of Baroda: No Further Slippages

Update on the Indian Equity Market:

On Wednesday, NIFTY closed -0.6% lower. Among sectoral indices, NIFTY media (-4.5%), NIFTY PSU Banks (-3.1%), NIFTY Metal (-2.0%), NIFTY Bank (-1.8%), NIFTY PVT Bank (-1.8%) closed lower. None of the NIFTY sectoral Index ended on a positive note. The biggest losers were Yes bank (-5.7%), GAIL (-4.8%), ZEEL (-4.7%), whereas Britannia (+4.9%), TCS (+3.7%) and Reliance (+2.9%) ended with gains.

Bank of Baroda: No Further Slippages

Excerpts from an interview of Mr Murali Ramaswami, executive director, Bank of Baroda with CNBC-TV18:

  • Speaking about slippages, Mr Ramaswami mentioned that slippages during the last quarter were Rs 6,001 cr and 4 accounts constituted 60%-65% of it.
  • He said there is nothing to worry about as the worst is behind. Bank’s provision coverage ratio is adequate and the operating performance is growing continuously.
  • In total watch list of Rs 14,500 cr, DHFL is having exposure of Rs 1,900 cr.
  • Mr Ramaswami doesn’t expect any further slippages in the corporate book. About BBB accounts he says, that those are from quite some time with the bank and there are no new accounts.
  • Total exposure to NBFC’s is Rs 1.05 trillion and Rs 97,000 Cr is outstanding. One of the groups NBFC have slipped last quarter but as of now none of them are showing any sense of overdue.
  • Out of Rs 97,000cr outstanding, around Rs 10,000 cr is non reputed private sector.
  • Speaking about NPA’s he says, Gross NPA has come down from 10.28% to 10.25% on a quarterly basis. It will be sub-10% by the end of December quarter.
  • Net Interest Margin stood at 2.81%. Retail growth is primarily driven by auto and home loans. The current growth rate for auto and home loan is 16% and the expectation is that it will increase to 20%.
  • Retail loan, which is around ₹1.05 trillion is expected to rise to ₹1.3-1.35 trillion in this quarter. But overall advances are flat.
  • Some NBFCS have paid back and the bank didn’t take any additional exposure because of stress in that sector.
  • He added that HR integrations are complete, and the bank has saved ₹150 crores in amalgamation profits.
  • Speaking about MD, he says, that the bank does miss Mr Jayakumar. The government has given power to the ED’s to manage the business so there is no impact.

Consensus Estimate (Source: market screener website &

  • The closing price of Bank of Baroda was ₹ 93 /- as of 13-November-2019. It traded at a price to Book Multiple (P/B) multiple of 0.59x/0.54x/0.48x of the consensus book value estimates for FY20/21/22E of ₹ 157/172/192 respectively. 
  • Consensus target price of ₹ 128 /- implies a P/B multiple of 0.6x on B/V of ₹ 192 for the year ending Mar-22E.

Shriram Transport Finance Co: Rural market to see demand in December

Update on the Indian Equity Market:

On Friday, NIFTY closed 0.2% higher. Among sectoral indices, NIFTY media (+7.6%), NIFTY Metal (+2.3%), NIFTY PSU Banks (+1.4%) closed higher while NIFTY Auto (-0.7%), NIFTY IT (-0.5%) ended on a negative note. The biggest gainers were ZEEL (+18.5%), Bharti Infratel (+6.8%) and IndusInd Bank (+5.0%) whereas Yes Bank (-6.1%), Indian Oil Corporation (-2.8%) and TCS (-2.8%) ended with high losses.

Shriram Transport Finance Co: Rural market to see demand in December  

Excerpts from an interview of Mr Umesh Revankar, MD Shriram Transport Finance Co with CNBC-tv18:  

  • Speaking about ongoing talks on the merger of Shriram Transport Finance Co. (STFC) and Shriram City Union Finance, Mr Revankar said, it is still in the idea stage and yet to be discussed at the board level.
  • The merger will bring synergy in businesses. It will also give an opportunity for cross-selling and upselling some of the product across customer bases.
  • The customer base of Shriram Transport Union and STFC put together is about one crore.
  • Once the company will be in a position to offer multi-products, the cost of funds will also come down.
  • Speaking about employees, he mentioned that they won’t resist as the business is quite decentralized and operational freedom is given at ground level.
  • Speaking about the shift from BS-IV to BS-VI he mentioned, that as the cost of the vehicle will increase, the price of resale will also go up. He adds that the transactions will keep happening and the used vehicle market will also grow.
  • The company has penetrated 30% market so enough space is still left to penetrate.
  • Mr Revankar said, the demand is yet to be very positive but on the rural side the demand would come back as crop sowing got delayed by the extended monsoon. November and December may see a big demand in the rural market.
  • The urban market will take some time to grow. Growth of heavy vehicles depend on infrastructure and real estate so unless real estate and infrastructure activity pick up, it will take time.
  • Government is taking steps to restart infrastructure contracts, engineering, construction contracts it will help to get things to normal by December.

Consensus Estimate (Source: market screener website)

  • The closing price of SRTRANSFIN was ₹ 1,144/- as of 1-November-19. It traded at 1.4x /1.2x /1.0x the consensus Book Value for FY20E / 21E / 22E of ₹ 805/932/1078 respectively.
  • Consensus target price of ₹ 1289/- implies a Price to Book multiple of 1.1x on FY22E Book Value of ₹ 1089/-.

Festive season: A hope for automakers

Update on the Indian Equity Market:

On Wednesday, NIFTY closed 0.1% higher. Among sectoral indices NIFTY PSU Bank (+2.1%), NIFTY Auto (+1.3%), NIFTY IT (+1.0%) closed higher while NIFTY Media (-1.3%), NIFTY Realty (-0.9%), NIFTY Metal (-0.3%) ended on a negative note. The biggest gainers were HCL tech (+3.5%), Eicher Motors (+2.5%), Infosys (+2.3%) whereas Adani Ports (-6.1%), Bharti Airtel (-3.7%), Zeel (-3.4%) ended with high losses.

Excerpts from an interview of Mr Vinkesh Gulati, Vice President FADA (Federation Of Automobile Dealers Association)

  • The entire auto sector in our country has shown a downturn. With all major OEM’s showing a decline in number, it is the festive season which gives hope to automakers.
  • Mr Gulati says sentiment during festive season goes up and enquiries start to come in. Passenger vehicle (PV) segment is showing similar signs this year too.
  • It is expected that better conversions will happen as compared to the last six months.
  • He says the two-wheeler market is not showing good signs. The overall situation in the two-wheeler market is grim.
  • In the past year, the passenger vehicle (PV) segment has shown decline of 8-10 percent. This year the expected decline is less 1-2 percent or similar as last year.
  • The two-wheeler segment is expected to degrade and continue to decline around 8-12 percent.
  • Mr Gulati says the reason behind the decline of the 2-wheeler segment is because it is a reflection of rural and semi-urban market sentiment.
  • 2 wheelers segment is majorly based in the rural and semi-urban market and the sentiment there is still not changed. Rural market is still not picking up festive hype.
  • He says Automakers are offering steep discounts to increase sales and the festive season is the best time to buy.
  • Speaking on the discount front, he says, discounts are similar to what they were in Navratri. Furthermore, discount is given by dealers on their own to liquidate their inventory.
  • From December onwards it is expected that all OEM’s will come out with their BS-VI variants and again during December there will be discounts on BS-IV to liquidate inventory.

Sundaram Finance – Grabbing little pockets of opportunities available

Update on the Indian Equity market:

On Monday, NIFTY closed +0.22% higher. Among sectoral indices NIFTY Realty (+1.64%), NIFTY Auto (+1.47%), NIFTY Pharma (+1.19%) closed higher while NIFTY PSU Bank (-0.53%), NIFTY IT (-0.32%) ended on a negative note. The biggest gainers were ONGC (+5.50%), TATA Motors (+5.03%), Bharti Airtel (+2.62%) whereas Infosys (-3.50), Bajaj Finance (-2.65%), Bajaj FinServ (-1.22%) closed with high losses.

Excerpts from an interview with T.T Srinivasaraghavan, managing director, Sundaram Finance with CNBC- tv18

  • Talking about prevailing scenario in NBFC space Mr Srinivasaraghavan says NBFCs is probably the lousiest coinage that you could have for any industry, this is because it is as heterogeneous as anything could be.
  • However, he says, that clubbing everything together and saying NBFC is stressed sector will probably will be overstatement
  • Speaking about on ground situation he says, it is not looking much different and there are no signs on reviewal in short term.
  • There is overcapacity and nothing has happened much on the manufacturing side to soak up this additional capacity. Plus, the uncertainty about BS VI continues.
  • Right now, growth is not a priority from company’s point of view, because in a market which is tanking, it is not appropriate to swim against the tide and growing topline in an aggressive way is certainly not a part of the Sundaram Finance DNA.  
  •  The focus is making asset quality robust and grabbing coming opportunities.
  • Speaking about further quarters he says, higher delinquencies cannot rule that out, because in many states, there have been local issues where governments have either held back on payments to contractors or governments have rescinded contracts.
  • So, these local issues will certainly affect the cash flows.
  • Speaking about government purchases or the State Transport Undertaking (STU) purchases, he says, it is not really going to feed into business for banks and NBFCs but it will be a benefit for original equipment manufacturers’ (OEMs).
  • Mr Srinivasaraghavan says, now that interest rates have come down, corporate tax Is reduced. Corporates should come up and take some responsibility and do something that will help in near future instead of cribbing.
  • Mr srinivasaraghavan says the overcapacity is cyclical but this the longest one. He says, we should not worry about it in long term.
  • Scrappage is a welcome thing but it wont act as a magical wand. It has to accompanied by several other things.
  • He says, monsoon have been a great positive news in a gloomy horizon. At least we can hear about people enquiring, people may be looking at perhaps some buying, so post Diwali perhaps there could be some buying taking place.
  • He adds, that this time we will have a ‘pa’ shaped recovery, which is a Tamil alphabet. It is a flat line at the bottom, it is neither a U nor a V. It is two vertical lines on the side and a horizontal line connects both of them.

Consensus Estimate (Source: market screener website)

  • The closing price of Sundaram Finance was ₹ 1,610/- as of 14-October-19. It traded at 24.5x/ 21.5x/ 21.0x the consensus EPS for FY 20E/ FY 21E/ FY 22E of ₹ 65.6/ 74.7/ 76.5 respectively.
  • It trades as P/B 3.1x/2.8x/2.6x the consensus Book value per share for FY20E/FY 21E/FY22 of 507/568/607.

Bajaj Auto – Is the demand recovery around the corner?

Update on the Indian Equity market:

On Thursday, NIFTY closed 0.4% lower. Among sectoral indices NIFTY Metal (-3.0%), NIFTY Financial services (-1.2%), NIFTY BANK (-1.1%) closed lower while NIFTY Media (+2.5%), NIFTY PSU Banks (+0.2%) NIFTY Auto (+0.2%) ended on a positive note. The biggest gainers were Yes Bank (+33.6%), Bharat Petroleum (+7.5%), Zeel (+6.5%) whereas Vedanta (-4.7%), Hindalco (-4.0%), Coal India (-3.5%) ended with high losses.

Bajaj Auto – Is the demand recovery around the corner?

Excerpts from an interview with Rakesh Sharma – Executive Director, Bajaj Auto

  • Mr Sharma says that in the current situation retail numbers are the most important ones to look at. It was very difficult to manage the supply chain and putting it in line with demand fluctuations in the past few months.   
  • He says retail demand is showing signs of a pickup.
  • Speaking about the September month specifically, he says, retails in the second half of September have started to look up.
  • Though the company volumes are marginally lower as compared to last year, it is a good improvement in the prevailing scenario.
  • Speaking about exports he says that the global picture is pretty much stable. Africa is doing very well. The company gets 40%-45% of its business from Africa. Latin America continues to show muted growth caused mainly by the slowdown in Argentina and Mexico.
  • The Philippines is a market which the company is looking for.
  • Mr Sharma says, after a bit of a decline in 1Q FY20 the current quarter is looking much better.
  • He says the uptrend is visible in 125cc segment, mainly because of the anti-lock braking system (ABS) which increased the prices of 150cc plus segments.
  • Before the launch of Pulsar125, Bajaj Auto had a 1% market share. After its launch, it is in the range of 10%-12%.
  • Speaking about further discounts he says, they are not going to add much because the company had already announced festive schemes.

Consensus Estimate (Source: market screener website)

  • The closing price of Bajaj Auto was ₹ 2910 /- as of 03-October-19. It traded at 16.3x /15.0x the consensus EPS for FY20E/ FY21E of ₹ 178/193 respectively.
  • Consensus target price of ₹ 2832/- implies a PE multiple of 14.6x on FY21 EPS of ₹193/-

More needs to be done

Update on the Indian market:

On Tuesday, NIFTY lost its winning streak. It closed -0.10% lower. Among sectoral indices NIFTY PSU Banks (-2.34%), NIFTY BANK (-1.25%), NIFTY Financial services (-1.9%), NIFTY Auto (-0.38%) and NIFTY Metal (-1.63%) closed lower while NIFTY IT (+1.98%), NIFTY Pharma (+0.44%) NIFTY FMCG (+0.62%) ended on a positive note. The biggest gainers were Infosys (+3.88%), Zeel (+3.66%), Tech M (+3.11%) whereas Eicher motors (-3.84%), State Bank of India (-4.06%), JSW steel (-4.19%) ended with high losses.

Excerpts from a panel discussion with R.C. Bhargava, chairman, Maruti Suzuki India Ltd; Pawan Goenka, managing director of Mahindra and Mahindra; and Rajiv Bajaj, managing director of Bajaj Auto Ltd with CNBC TV18.

  • Finance Minister in a totally unexpected move reduced corporate tax on Friday. Effective tax rate now stands at 25.17%, inclusive of surcharge and cess. This move will help companies to increase their profitability. FM quoted that it will lead to revenue loss of ₹1.45tn.
  • Speaking about further discounts in auto sector, Mr Bhargava (Chairman, Maruti Suzuki) rules out the scope of further price cuts out of the tax savings. He says if we take a look at savings from the tax cut it is about one-fifth or one-sixth of total tax payment.
  • Mr Bhargava believes, it is better to pump benefits back in the company in the form of capex, more investments rather than more discounts in an environment where the discounts are at a peak.
  • Mr Bhargava says, Manufacturing in India has never grown at a high rate. The tax cuts will make manufacturing industry competitive. Moreover, customers don’t buy during uncertainty. Now that GST overhang is out of the way, we can see people making decisions.
  • Mr Bhargava believes, coming October will see much better retail sales than in the previous months.
  • Mr Goenka (MD, Mahindra & Mahindra), also praises the corporate tax cut as it will make Indian companies globally competitive.
  • He says, a wrong expectation has been coming out in the last two-three days that because of this, auto companies would be able to reduce prices. Tax cut is a stimulus which will help in mid and long term in the form of higher capacity, increase in employment rate.
  • On discounts he believes that even if entire benefit is transferred, M&M will be able to reduce vehicle price by about 0.5%, which means on a ₹8 lakh car by about ₹3,000.
  • Mr Goenka believes that there is a sentiment boost in the market which was needed in current scenario.
  • Mr Rajiv Bajaj (MD, Bajaj Auto) is also of the same opinion that this will benefit in the long run. Talking about its immediate effect on Bajaj Auto, the heavy investment in consumer offers and media spends that they have undertaken in a quarter will be reimbursed because of the lower tax rate.
  • Taking about reduction in tax for new entities, he says it might help Bajaj as it is about to sign-up with Triumph. How it turns out is a matter to look at.

Radico Khaitan (RDCK) – 1QFY20 – Cost pressure curbs high spirits

Dated :- 9th August 2019

1QFY20 Results

  • Radico Khaitan’s (RDCK) revenues grew by 20.8% YoY to Rs 623 Mn driven by 12% YoY volume growth in Indian Made Foreign Liquor (IMFL).
  • The higher margin Prestige & Above volumes increased by 16% YoY to 2.0 mn cases and the Regular & Other brands volumes reported an increase of 10.2% YoY to 4.3 mn cases.
  • EBITDA improved by 9.3% YoY to Rs 989 Mn. The EBITDA margins declined by ~170 bps to 15.9% impacted by increase in raw material costs.
  • PAT grew by 15.6% YoY to Rs 548 Mn driven by reduction in finance cost.

Management Commentary

  • The margins in 1QFY20 were lower 18% YoY on account of increase in Extra Neutral Alcohol (ENA) prices and ~15% YoY increase in glass bottles. The restriction on operations at the molasses plant by the Central Pollution Control Board during 1QFY20, led to additional costs of Rs 65mn.
  • Rampur Indian Single Malt and Jaisalmer Indian Craft Gin continue to see strong traction in the Indian as well as international markets. RDCK has tripled the manufacturing capacity of Rampur Indian Single Malt which will benefit company in the long run.
  • The management guided for ~9% volume growth in IMFL for FY20E led by ~14% YoY in the Prestige & Above category and ~6% YoY growth in the Regular & Other Brands category.
  • Raw material price pressure will keep the gross margins at ~47% and the EBITDA margins in the range of 16%-16.5% for FY20E.
  • RDCK is expected to be a debt free company within next 18 months.

Consensus Estimate (Source:

  • The closing price of RDCK was Rs 322/- on 09-Aug-19. It traded at 22x / 20x / 16x the consensus EPS for 20E /21E /22E EPS of Rs 14.1/ 15.5 /20.1 respectively.
  • Consensus target price of Rs 454/- implies a PE of 23x on FY21E EPS of Rs 20.1.