Author - Mrunmayee Jogalekar

5 focus areas to reinvigorate the company – Wipro

Update on the Indian Equity Market:

On Thursday, Nifty closed 2.4% lower at 11,680. Within NIFTY50, ASIANPAINT (+0.4%), JSWSTEEL (+0.2%), and COALINDIA (+0.1%) were the only gainers, while BAJFINANCE (-5.0%), TECHM (-4.4%), and ICICIBANK (-4.1%) were the top losing stocks. All the sectoral indices closed with losses led by BANK (-3.4%), PVT BANK (-3.3%), and FINANCIAL SERVICES (-2.9%).

5 focus areas to reinvigorate the company – Wipro

Excerpts of an interview with Mr. Thierry Delaporte, MD & CEO, Wipro, published in the Business Standard on 14th October 2020:
● Out of the impacted sectors, Wipro is now seeing a good volume of deals in the BFSI, retail, and consumer sectors. The manufacturing sector is still impacted by the pandemic. However, the need for transformation will lead to growth coming back in the next couple of quarters. The aerospace and automobile sectors are still under pressure.
● Clients have intent on reducing expenses. But in reality, spending on technology actually increases. Spending on technology is a business requirement now. Not just the CIO but also the chief marketing officer, chief of the supply chain, chief digital officer are all asking for technology. The reduction will be in terms of spending on legacy processes.
● Wipro is focusing on five main areas. They are-
1. Focus on large clients and large deals as opposed to going after new clients
2. Focus on more markets and sectors where Wipro can claim leadership
3. Refine offerings by creating more vertical differentiation
4. Invest in talent to acquire the best domain and technology expertise
5. Refine the operating model to drive simplicity and nimbleness
● In order to chase and win large deals, Wipro plans to enhance and reinforce the global client partners’ power so they can have a bigger impact on clients.
● Due to the pandemic, Wipro has now learned that employees can work from home productively. On the other hand, they also need to connect with the rest of the organization for the culture and sense of belonging. Mr. Delaporte is of the view that going forward there will be a hybrid model where employees will have more flexibility without any judgment on where they choose to work from.
Consensus Estimate (Source: market screener website)
● The closing price of WIPRO was ₹ 342/- as of 15-October-2020. It traded at 20.3x/ 19.0x/ 17.9x the consensus EPS estimate of ₹ 16.8/18.0/19.1 for FY21E/ FY22E/ FY23E respectively.
● The consensus target price of ₹ 283/- implies a PE multiple of 14.8x on FY23E EPS of ₹19.1/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

Expect double-digit growth in 3QFY21E– LIC Housing Finance

Update on the Indian Equity Market:

On Wednesday, Nifty closed with 0.7% gains at 11,739. Within NIFTY50, TITAN (+4.5%), BAJAJ-AUTO (+3.6%), and HEROMOTOCO (+2.9%) were the top gainers, while BAJFINANCE (-4.1%), BPCL (-2.8%), and HINDALCO (-2.7%) were the top losing stocks. Among the sectoral indices, AUTO (+1.4%), IT (+0.6%), and PVT BANK (+0.6%) were the top gainers while MEDIA (-2.5%), REALTY (-1.9%), and METAL (-1.5%) were the top losing sectors.

Expect double-digit growth in 3QFY21E– LIC Housing Finance

Excerpts of an interview with Mr. Siddhartha Mohanty, MD & CEO, LIC Housing Finance (LICHSGFIN), that aired on CNBCTV18 on 6th October 2020:
● Post the highly impacted months of April and May, LICHSGFIN experienced good growth in disbursements June onward. This growth has been particularly in the affordable segments. However, off late, Mr. Mohanty has also observed some uptick in demand in above mid-segment, as well as premium segment disbursements picked up since June.
● LICHSGFIN has almost reached pre-COVID levels in terms of disbursements owing to good traction in the month of September.
● Despite the inauspicious periods of ‘shraadh’ and ‘adhik maas’ in September, the 2QFY21 has been very good.
● Management expects the positive trend to continue and expect double-digit growth in 3QFY21E. Several factors are into play to motivate home buyers to purchase now. Government has given several incentives including the extension of PMAY CLSS scheme till March 2021, and reduction in stamp duty to 2% up to December 2020 by Maharashtra government. Apart from that, some developers are also giving concessions to attract customers.
● LICHSGFIN has also introduced innovative products to attract customers such as 6 EMI waivers for borrowers who are undertaking immediate purchase/ moving of the house.
● For LICHSGFIN, developer loan book is less than 7% of the total book. Considering sales velocity, within the developer segment, LICHSGFIN focuses more on affordable housing. Even now, LICHSGFIN has been lending to developers but on a very limited basis.
● LICHSGFIN has also seen better than expected collections. A substantial portion of borrowers who were under moratorium have also started paying in September.
● Despite increased competition in home loans, LICHSGFIN has managed to sustain its market share and maintain stable margins.
Consensus Estimate (Source: market screener and investing.com websites)
● The closing price of LICHSGFIN was ₹ 283/- as of 07-October-2020. It traded at 0.7x/ 0.7x/ 0.6x the consensus Book Value per Share estimate of ₹ 386/428/472 for FY21E/ FY22E/ FY23E respectively.
● The consensus target price of ₹ 331/- implies a PB multiple of 0.7x on FY23E BVPS of ₹ 472/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

All three companies- Finance, Life and General Insurance growing well– Bajaj Finserv

Update on the Indian Equity Market:

On Friday, Nifty closed with 2.3% gains at 11,050. Within NIFTY50, BAJAJFINSV (+6.6%), HCLTECH (+5.3%), and CIPLA (+5.1%) were the top gainers, while SBILIFE (-1.1%), BPCL (-0.9%), and UPL (-0.6%) were the only losing stocks. All the sectoral indices ended positive withIT (+3.5%), MEDIA (+3.4%), and AUTO (+3.4%) gaining the most.

All three companies- Finance, Life and General Insurance growing well– Bajaj Finserv

Excerpts of an interview with Mr. Sanjiv Bajaj, Chairman and MD, Bajaj Finserv (BAJAJFINSV), published on ETBFSI website dated 23rdSeptember 2020:
• Seven or eight years ago, the life insurance company (BALIC) and general insurance company (BAGIC) contributed to around 75-80% of Bajaj Finserv’s consolidated profits. BALIC contributed the largest, followed byBAGIC, and the least contribution came from Bajaj Finance.
• This has changed significantly since then. Today, Bajaj Finance is the largest contributor to consolidated profitability, followed by BAGIC and BALIC respectively.
• Bajaj Finserv owns 74% of the two insurance companies and a little under 52% of the finance company. So the proportion of the profit pick up ends up being different.
• All three engines are growing well so the shareholders get a diversified mix of profits from these companies.
• Companies under the Bajaj Finserv umbrella have become even more digital than before. Management has plans for the businesses to come out stronger, better and to provide a set of solutions for customers keeping in mind lessons learnt in this crisis is what the customers need.
1. Bajaj Allianz Life Insurance (BALIC)
• Life insurance is a peculiar business in the sense that when it is growing fast, the business burns more cash upfront in the form of commissions and expenses. But the company earns premium over a period of time and makes profits in later years. On the other hand, through slow growth years, the opposite happens and the profit goes up.
• Post the difficult lockdown phase, BALIC’s premium collections have come back to 80-85% of pre-COVID levels.
• The two insurance businesses are distributed very well through the country. As a result the recovery is quite good because recovery outside of the top 10, 20 cities has been very strong.
2. Bajaj Allianz General Insurance (BAGIC)
• Bajaj’s market share within general insurance companies is between 6.5% and 7%. Bajaj runs a diversified set of business lines, and most of these lines have market shares which are more or less around the 6.5%-7%`range.
• The market share also varies year on year based on changing competition and market opportunities.
• Bajaj may not be the cheapest policy issuer but is quick, fair, and transparent not only in policy issuances but also in claim handling.
• In the case of crop insurance, it is about 6.5-7% of Bajaj’s mix of the overall industry’s share. There are two main seasons -kharif and rabi –and the share of this business line in Bajaj’s business depends on what the dynamic is in that season. But it normally evens out over a year.
• In terms of uptick in motor insurance, the picture is still not very clear. There is growth due to pent-up demand and further growth is expected due to the upcoming festive season. But what will happen post that towards end of FY21E is unclear.
• The demand is still interwoven with the impact of the pandemic on local lives. Bajaj saw good growth in June. But July and part of August were terrible because of local lockdowns.
3. Bajaj Finance
• Due to the local lockdowns in the last few months, the business in top 20 cities got severely impacted.
• Bajaj Finance got impacted more compared to BAGIC and BALIC as it has a large percentage of business coming from the top 20 cities. But things have been getting better from August.
• Over two-thirds of the borrowers, who took the moratorium, had never bounced with Bajaj Finance earlier. That means they were conserving liquidity.
• Almost 30% of the book took a moratorium in the first couple of months. It came down to the low teens in the last two months. As people got more confident and as the cities and businesses started opening up, they started paying as well and that is a very good sign.
• Even though things are moving in the right direction, the situation is still unpredictable. Bajaj Finance continues to be extra conservative, has stocked up on liquidity and continues to make additional provisions.
• Bajaj Finance also remains conservative in incremental lending and will go back to growth when things start to improve.

Consensus Estimate (Source: market screener and investing.com websites)
• The closing price of BAJAJFINSV was ₹ 5,784/- as of 25-September-2020. It traded at 2.6x/ 2.3x/ 2.0x the consensus BVPS estimate of ₹ 2,188/2,478/ 2,873 for FY21E/ FY22E/ FY23E respectively.
• The consensus target price of ₹ 7,248/- implies a PB multiple of 2.5x on FY23E BVPS of ₹ 2,873/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

Will not need to dip into capital for provisioning –Indiabulls Housing

Update on the Indian Equity Market:

On Wednesday, Nifty closed with0.7% gains at 11,605. Within NIFTY50, DRREDDY (+4.4%), M&M (+4.0%), and HINDALCO (+3.9%) were the top gainers, while INDUSINDBK (-2.0%), NTPC (-1.6%), and INFRATEL (-1.1%) were the top losers. Among the sectoral indices, REALTY(+2.3%), PHARMA (+2.1%), and AUTO (+1.5%) gained the most. MEDIA (-1.6%) andPSU BANK (-0.5%)ended with losses.

Will not need to dip into capital for provisioning –Indiabulls Housing

Excerpts of an interview with Mr. Gagan Banga, Vice Chairman and MD, Indiabulls Housing Finance (IBULHSGFIN), aired on CNBC-TV18dated 15th September 2020:
• Indiabulls Housing has raised Rs 6,830 mn via QIP and Rs 5,220 mn through stake sale in OakNorth bank to build capital buffer. This will be used as growth capital. With this capital raise, the capital adequacy has gone up to 31%.
• Higher capital buffer will also help as a positive affirmation for credit rating agencies. Indiabulls Housing has been on a downward rating trajectory from AAA to AA. Management wants to get it back atleast to AA+ levels.
• Management has plans to increase capital further by about Rs 10,000 mn and increase capital adequacy up to 32%.
• In 1QFY21, AUM was flattish and similar trend persists for 2QFY21. Management expects growth from 2HFY21.
• Indiabulls Housing continues its strategy of reducing the real estate developer book. The gross developer book has reduced by Rs 180 bn in the last 2 years. In 1QFY21 and 2QFY21 the sell down has been about Rs 30 bn and 21 bn respectively. These developer loans are being refinanced by Indian PSU and private banks, as well as through a few securitization transactions with foreign institutions.
• Of the Rs 180 bn sell downs so far, there has been no discount required as the properties are prime with good LTVs of ballpark 50%.
• As a result of reduction in developer loans book, Indiabulls Housing is getting converted into a retail lending focused company.
• As Indiabulls Housing pursues growth in retail book, management expects AUM growth of 10% for FY21E. True to the adopted asset light model, the balance sheet growth will remain lower at 5%.
• Within retail book, the ratio of home loans to Loan Against Property (LAP) is 60:40.LAP segment on a risk adjusted basis has attractive RoA. On the asset quality front, this product has a 50% LTV and monthly principal amortization and the product is performing well.
• Through the last few months, initially 50-55% of LAP borrowers had taken moratorium but by August the number had declined to 20%. By September, the EMIs are getting backed and there is no significant increase in people who are not able to pay.
• Indiabulls Housing also raised Rs 15 bn to put into completion of projects which is a positive for the industry. Over the last 60-90 days, apartments across the board are selling at a strong momentum.
• Indiabulls Housing is now at a quarterly pre-provisioning operating profit (PPOP) level of about Rs 6,000 mn. Like in 1QFY21, material portion of the PPOP will be used to make provisions throughout FY21E. Indiabulls Housing will not need to dip into capital for provisioning.

Consensus Estimate (Source: market screener and investing.com websites)
• The closing price of IBULHSGFIN was ₹ 187/- as of 16-September-2020. It traded at 0.5x/ 0.5x/ 0.4x the consensus BVPS estimate of ₹ 392/408/ 445 for FY21E/ FY22E/ FY23E respectively.
• The consensus target price of ₹ 160/- implies a PE multiple of 0.3x on FY23E EPS of ₹ 473/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

Remains financially strong and net debt free–Page Industries

Update on the Indian Equity Market:

On Monday, Nifty closed with0.35% gains at 11,374. Within NIFTY50, INFRATEL (+5.7%), HDFCLIFE (+3.2%), and DRREDDY (+2.3%) were the top gainers, while M&M (-3.6%), UPL (-2.8%), and BAJFINANCE (-2.5%) were the top losers. Among the sectoral indices, FMCG (+0.6%), IT (+0.6%), and MEDIA (+0.3%) gained the most. REALTY (-0.9%), AUTO (-0.5%), and PVT BANK (-0.3%) ended with losses.

Remains financially strong and net debt free–Page Industries

Excerpts of an interview with Mr. Chandrasekar, CFO, Page Industries, aired on ETNow dated 7th September 2020:
• Page Industries has seen significant improvement in demand. From 0 sales in April, -80% YoY in May, -40% YoY in June, -30% YoY in July to a YoY growth in August, there is a good month-on-month uptick. Outlook remains optimistic for rest of the year.
• The buildup in demand has been gradual so Mr. Chandrasekar doesn’t think it was just pent up demand. Secondary sales are more than factory sales. All indications suggest that things are getting back to normalcy.
• August sales are a pretty good indication that demand is back. But predicting full year growth rate is still difficult.
• Sales via e-commerce inJuly and August were better than the past trend. E-commerce has seen YoY growth of about 200%. Purchasing modes have changed across sectors. In terms of margins and investments for Page, e-commerceis more or less similar to other distribution channels.
• Procurement control works between a range of +/-1% so raw material cost has remained more or less the same. Page is trying to work on procurement optimization, but in the near future,raw material cost will be rangebound.
• Page has done significant optimization on the other operating expense including wages, factory overheads, selling overheads, advertising,and corporate overheads. They have managed significant reductions over 4QFY20 as well as 1QFY20.
• Page’s cash position of Rs 1,700 mn as of 1QFY21 is better than any time during the past year. They have done a lot of work across working capital. Page has not borrowed any funds and continues to remain net debt free.
• Page is also paying vendors earlier than they are asking. MSMEs need support to remain afloat at this point. It is also in the interest of Page to help the small businesses as they are trusted vendor partners. Despite that, Page has improved its cash position.
• Page hasretained all employees during this difficult time.
• A specific European fund has raised concerns that Page Industries is not following best manufacturing practices. Mr. Chandrasekar assured that Page’s manufacturing practices are based on fundamental and ethical policies. Page has published sustainability report for the past 2 years in the public domain which can be referred to address concerns. Page has been in the business long enough to know that it’s a people intensive business and the company hasto take care of its employees.
• Men Innerwear market is growing at about 11% YoY and is expected to grow to Rs 900 bn by 2028 from 350 bn currently. Women innerwear market is expected to grow at about 12.5% YoY to Rs 680 bn by 2028 from Rs 210 bn currently. Page is very small in the overall market size. Premiumization will continue to happen in the market so maintaining market share is not an issue. The issue is about increasing geographical reach and introducing new offerings in the women and kids segments.
• Page will resume capex and other business investments once the business gets back to normal levels from the covid-19 disruption.

Consensus Estimate (Source: market screener and investing.com websites)
• The closing price of PAGEIND was ₹ 18,296/- as of 7-September-2020. It traded at 91.5x/ 47.0x/ 38.7x the consensus EPS estimate of ₹ 200/ 389/ 473 for FY21E/ FY22E/ FY23E respectively.
• The consensus target price of ₹ 17,617/- implies a PE multiple of 37.2x on FY23E EPS of ₹ 473/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

COVID has created both opportunities and challenges for Pharma companies- Lupin

Update on the Indian Equity Market:

On Tuesday, Nifty closed flattish with just 0.1% gains at 11,559. Within NIFTY50, INDUSINDBK (+6.5%), M&M (+4.2%), and TATAMOTORS (+4.1%) were the top gainers, while ONGC (-1.4%), RELIANCE (-1.4%) and BAJAJAUTO (-1.3%) were the top losers. Among the sectoral indices, REALTY (+6.4%), PSU BANK (+1.1%), and AUTO (+1.0%) gained the most. FMCG (-0.3%) and IT (-0.1%) ended with losses.

COVID has created both opportunities and challenges for Pharma companies- Lupin

Excerpts of an interview with Mr. Ramesh Swaminathan, Executive Director- CFO and Head- Corporate Affairs, Lupin, published on Economic times website dated 26th August 2020:
• Lupin has the approval to manufacture generic version of ProAir- albuterol sulphate. This is a very important market for LUPIN in the inhalation space. The overall market for Ventolin, Proventil and ProAir combined is $ 1.1 bn with volume share of 44%, 9% and 47% respectively.
• The Albuterol Sulphate is a complex product and the competition expected is less. The price erosion could also be potentially lower due to lower competition.
• Lupin has been working on 12 to 15 products in the respiratory segment for the past several quarters. A large chunk of Lupin’s R&D spends is for complex generics including the inhalations portfolio, biosimilars, and complex injectables. The drugs device combination in the inhalation space makes it particularly interesting and challenging, though the mechanical trials associated with it are daunting and expensive.
• Generic ProAir is a very profitable product and Lupin will try to maximize on that considering their market share record. Even though the device itself and API will be imported, given the price stickiness, the gross margins are expected to be good.
• Apart from ProAir, Lupin has plans for several other products in the Respiratory space. Some known products include Fostair in the EU market, first to file in terms of Spiriva which could be in FY23, Dulera in FY22 and a host of other products.
• Generic market in the US has been witnessing a decline. What was potentially a $67 bn market 3-4 years ago has come down to $ 57-58 bn levels. Companies which were at the top have come down in terms of market share whereas Indian companies have been ramping up. But there is a lot of potential in other emerging markets. The good thing about any generic portfolio is that it can be levered across various markets.
• Lupin’s US revenue of $ 155-158 mn in 1QFY21 was an aberration and they expect to bounce back from those levels 2QFY21E onward. Lupin had a stroke of bad luck with metformin and that would also be back by the end of 2QFY21. Products like Albuterol lined up will help Lupinto be back into the revenue levels seen over the last several quarters.
• Covid has brought in opportunities for Pharma companies but also posed a lot of challenges to the supply chain. One of the opportunities is the Albuterol market itself which is growing at 13%. But in general, the topline has been impacted across markets.
• In case of India, after virtually no growth in 1QFY21, July was okay, and in August Lupin reached the same levels as last year and expect things to pick up September onwards.
• Both acute and chronic in the US have declined and markets like Philippines or Latin America, Mexico in particular, have been significantly impacted.
• Sales promotion and travel expenses have certainly come down. Lupin is also exploring newer ways of promoting their products with doctors in India as well as overseas.

Consensus Estimate (Source: market screenerwebsite)
• The closing price of LUPIN was ₹ 983/- as of 27-Aug-2020. It traded at 44.6x/ 35.2x/ 28.7x the consensus EPS estimate of ₹ 25.7/ 37.6/ 47.1 for FY21E/ FY22E/ FY23E respectively.
• The consensus target price of ₹ 882/- implies a PE multiple of 18.7x on FY23E EPS of ₹ 47.1/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

Working toward becoming a technology and IP driven organization- PIIND

Update on the Indian Equity Market:

On Tuesday, Nifty closed 1.2% higher at 11,385. Within NIFTY50, GRASIM(+6.5%), ULTRACEMCO (+3.3%), and JSWSTEEL (+3.1%) were the top gainers, while BPCL (-1.2%), TECHM (-0.9%) and CIPLA (-0.8%) were the top losers. Among the sectoral indices, REALTY (+4.0%), PVT BANK (+2.2%), BANK (+2.2%), and MEDIA (+2.2%) gained the most. PHARMA (-0.1%) was the only sector to end with losses.

Working toward becoming a technology and IP driven organization- PIIND

Excerpts of an interview with Mr. Mayank Singhal, MD&CEO, PI Industries (PIIND) published on Economic times website dated 12th August 2020:
• The companyplans to invest the Rs 20,000 mn QIP funds across different categories over the next 2 quarters. One way is into inorganic opportunities to get into complementary adjacencies- including pharmaceuticals. The other way is by acquisition of smaller blocks which could be synergistic and complementary in terms of technology.
• PIIND has 1 or 2 branded products that it plans to launch in the Indian domestic market in FY21. They also plan to commercialize 2 new products for the global contract manufacturing business.
• Over last 5-6 years, PIIND has made aggressive investments in R&D to become a more knowledge-based partner. They are working towardbecoming more of a technology and IP driven organization over next 4-5 years.
• Mr. Singhal expects India to fare well in the global shift in manufacturing. If supported through strong policies in the area of manufacturing chemical industry, India could move to the next level. India should specifically focus towards IP generation and creation which wouldbe an edge over the Chinese competition.
• In India about 50-60% of agriculture is dependent on monsoons. PIIND has 30-40% of its revenue dependent on India. Considering good monsoons currently, PIIND like all India business-based companies will do well.
• PIIND is supplying an intermediate to a Japanese client, for a drug approved for Covid-19 treatment. PIIND is also looking to supply the intermediate to Indian producers entering into the space.
• PIIND plans to grow aggressively in next 3-4 years by utilizing its competency in chemistry and technology. With that into perspective, PIIND has also recently filed 7 patent applications based on process in chemistry capabilities.
Consensus Estimate (Source: marketscreener website)
• The closing price of PIIND was ₹ 1,965/- as of 18-Aug-2020. It traded at 44.6x/ 35.2x/ 28.7x the consensus EPS estimate of ₹ 44.1/ 55.8/ 68.5 for FY21E/ FY22E/ FY23E respectively.
• The consensus target price of ₹ 2,014/- implies a PE multiple of 29.4x on FY23E EPS of ₹ 68.5.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

Plan to diversify and de-risk operations using QIP funds- PIIND

Update on the Indian Equity Market:

 

On Friday, Nifty closed almost flat- just 0.1% higher at 11,214. Within NIFTY50, ASIANPAINT (+4.7%), BAJFINANCE (+3.7%), and UPL (+3.5%) were the top gainers, while TITAN (-2.5%), HCLTECH (-2.1%) and INFY (-2.0%) were the top losers. Among the sectoral indices, PSU BANK (+1.0%), PVT BANK (+0.9%), and METAL (+0.9%) gained the most.  IT (-1.0%), PHARMA (-0.6%), and REALTY (-0.3%) made the most losses.

 

Plan to diversify and de-risk operations using QIP funds- PIIND

 

Excerpts of an interview with Mr.Mayank Singhal, MD&CEO, PI Industries (PIIND) aired on CNBC-TV18 dated 7th August 2020:

  • PIIND reported 41% growth in 1QFY21. Looking at 2QFY21, management expects export business to continue to grow as it is backed by a good order book.
  • For the domestic business, 1Q is about pre-placement of products. There has been a good demand with the early onset and higher levels of monsoons. Looking at present scenario, management expects domestic business to be in line with estimated growth.
  • PIIND’s latest acquisition, Isagro, started contributing to the revenues 4QFY20 onward. In 1QFY21, Isagro contributed Rs 1,000 mn to the total revenue, a growth of 13% YoY. Out of that, Rs 300 mn were exports.
  • Management expects Isagro integration to be complete by 3QFY21E. Initiative for Isagro is to make it a horticulture specialist in the distribution segment by offering different value proposition to farmers.
  • PIIND expects to commercialize 4-5 new products in FY21. New products do not have a substantial impact on revenue in the first year of commercialization. These products will do well over next 3-5 years.
  • PIIND recently raised capital via QIP. Management is looking at M&A opportunities in adjacent segments, widening technology portfolio and de-risking operations and plan to create a different organization in next 5 years.
  • PIIND was able to have a very good growth in 1QFY21 as the team anticipated certain challenges that could come arise because of China. They were able to adapt swiftly in terms of supply chain and proper management of plants. PIIND lost 10-15 days of production in the early days but is now operating at full capacity.
  • PIIND has formed 2 new subsidiaries for pharma intermediates. The discussions are in very initial phases now. Management expects to share a more detailed communication in next couple quarters.

Consensus Estimate: (Source: investing.com website)

  • The closing price of PIIND was ₹ 1,950/- as of 07-Aug-2020. It traded at 43.7x/ 35.6x/ 29.2x the consensus EPS estimate of ₹ 44.6/ 54.7/ 66.7 for FY21E/ FY22E/ FY23E respectively.
  • Consensus target price of ₹ 1,805/- implies a PE multiple of 27.1x on FY23E EPS of ₹ 66.7.

 

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

Gold loan is currently the easiest access to credit- IIFL Finance

Update on the Indian Equity Market:

 

On Wednesday, Nifty closed 0.9% lower at 11,203. Within NIFTY50, DRREDDY (+6.3%), TATASTEEL (+4.0%), and INDUSINDBK (+3.1%) were the top gainers, while RELIANCE (-3.9%), M&M (-2.7%) and HCLTECH (-2.5%) were the top losers. Among the sectoral indices, PHARMA (+3.1%), PSU BANK (+1.5%), andMETAL (+0.9%) gained the most.  AUTO (-1.2%), IT (-0.9%), and FIN SERVICE (-0.6%)made the most losses.

 

Gold loan is currently the easiest access to credit- IIFL Finance

 

Excerpts of an interview with Mr.Saurabh Kumar,Head- Gold Loans, IIFL Finance (IIFL)published on the Economic Times website dated 29thJuly2020:

  • In the last 1 year, gold prices have risen 50%. This is a big benefit for borrowers as they are able to borrow 50% more compared to what they could last year against the same amount of gold.
  • In the past month, there has been a 25-30% growth in gold loan business.
  • IIFL is now at pre-covid levels in terms of gold loan disbursements.
  • There is a lot of demand for gold loans from farmers and SMEs. There is a pickup in agricultural activities leading to capital requirement for farmers. As businesses try to unlock, they are also trying to bridge working capital gaps.
  • There is approximately 24,000 tonnes of gold in India and gold is saved for a rainy day. Out of the entire gold, only 5-6% is leveraged against gold loans. The current situation brought on by covid-19 is the kind of rainy day when people need to leverage gold to survive, or take control of opportunities in the current context. Thus the opportunity for gold loans is huge.
  • Primary customers of gold loans are farmers and SMEs across sectors. All of them need working capital at this point in time. Gold is the easiest access to credit currently. It requires minimal paperwork. A person can walk into an NBFC branch like IIFL and pledge theirjewelry and walk out with a loan in 30 minutes.
  • Gold loan is typically for a tenure of about six to nine months. Farmers and SME customers get flexibility to repay unlike overdraft products or a term loan where there is a fixed duration and there are prepayment charges, penalties etc.
  • Borrowers usually repay a gold loan by making a payment once in two/three months or the moment they have cash inflows. During March to May, IIFL had given moratorium to the customers which led to slower repayments. As businesses are unlocking, a lot of repayments are happening. Borrowers are opting out of moratorium and making payments. As the businesses start operating, IIFL Finance expects to see near normal levels in July and August.

Consensus Estimate: (Source: investing.com website)

  • The reported BVPS as of 1QFY21 was Rs 126.8/-
  • The closing price of IIFL was₹ 71.2 /- as of 29-July-2020 and was trading at 0.6x the 1QFY21 BVPS.
  • Consensus estimates are not available for IIFL.

 

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

 

Increasing number of borrowers are moving out of moratorium- L&T Finance Holdings

Update on the Indian Equity Market:

 

On Monday, Nifty closed 1.1% higherat 11,022. Within NIFTY50,BRITANNIA (+5.1%), WIPRO (+4.4%), and INFY (+4.4%) were the top gainers, while SUNPHARMA(-3.9%), CIPLA (-2.2%) andZEEL (-1.7%) were the top losers. Among the sectoral indices, IT (+2.6%), FIN SERVICE (+1.6%), and BANK(+1.6%) gained the most.  PHARMA (-1.6%) was the only sector to close in red.

 

Increasing number of borrowers are moving out of moratorium- L&T Finance Holdings

 

Excerpts of an interview with Mr. Dinanath Dubhashi, MD&CEO, L&T Finance Holdings Ltd (L&TFH)published on Economic Times website dated17thJuly2020:

  • In 1QFY21, entire Rs 2,250 mn of exceptional gains have been put towards one-time provisions for COVID-19 impact.
  • In 1QFY21, the three months- April, May and June have been 3 very distinct months. Moving from lockdown to unlock, there was an uptick from April to May to June. The uptick has been very good in rural areas and noticeable everywhere else also. That is reason for being optimistic.
  • In terms of sectors showing revival, tractor is one industry where there is actually positive growth in the month of June 2020 versus June 2019. All disbursements to tractors have grown by 19% YoY in June 2020. The quarterly numbers are negative because April was zero but June has shown the first uptick.
  • There is no concrete answer on how NPAs will be but there are a few noticeable trends in terms of moratorium. For micro loans, loans under moratorium in June have reduced to 48% from 100% in April and May 100%. In the same period, for 2-wheelers, loans under moratorium in June have gone down to 33% from 58-60%. In April, the overall portfolio under moratorium was 75%, it has reduced to 18% in June 2020. Substantial number of accounts under moratorium in June have already paid off in July. So an increasing number of people are paying.
  • L&TFH is holding Rs 90 bn of excess liquidity vs normal levels of around Rs 35-40 bn. As a result of this excess cash, there was a negative carry of Rs 840 mn in 1QFY21. This resulted in NIMs being lower in 1QFY21.

Consensus Estimate: (Source: market screener and investing.com websites)

  • The closing price of L&TFHwas ₹ 62.8/- as of 20-July-2020. It traded at 0.8x / 0.7x the consensus BVPS estimate of ₹ 77.3/ 89.0 for FY21E/ FY22E respectively.
  • Consensus target price of ₹ 72.3/- implies a PE multiple of 0.8x on FY22E BVPS of ₹ 89.0/-.

 

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”