12 Feb

Union Bank likely to recover ₹30,000 mn in 4QFY20: Rajkiran Rai G. Chief Executive Officer (CEO), Union Bank of India

On Tuesday, Sensex ended up 236 pts higher and Nifty settled 76 pts higher at 12,108 level ahead of Delhi Assembly Elections outcome.  Last week of earnings season and macroeconomic data-points due to be released during the week including CPI/ WPI Inflation and IIP data expected to keep the markets volatile.
Among the sectors, Media (+1.6%), Metal (+0.9%), Bank (+0.8%) were the top-performing indices. All the key indices settled in the positive territory except FMCG index. Among stocks, Nestle India, Bharti Airtel, M&M and TCS were the top laggards, while gainers were NTPC, Maruti Suzuki, Power Grid, and IndusInd Bank.
Union Bank likely to recover ₹30,000 mn in 4QFY20: Rajkiran Rai G. Chief Executive Officer (CEO), Union Bank of India
Edited excerpts of an interview with Mr Rai, Chief Executive Officer (CEO), Union Bank; dated 11th February 2020:
  • Public sector lender Union Bank of India is expecting to recover and upgrade loans worth ₹30,000 mn in the March quarter, the bank’s chief executive officer (CEO) Rajkiran Rai G. said, taking its total recoveries in FY20 to ₹80,000 mn.
  • Mr Rai informed that total recoveries and upgradations for 9MFY20 have been ₹49,100 mn and are expecting another ₹30,000 mn in 4QFY20 both from the National Company Law Tribunal (NCLT) and non-NCLT accounts. So, the Bank can close the year at about ₹80,000 mn.
  • Of the expected ₹30,000 mn, Rai expects ₹10,000 mn from large accounts where resolutions have been already sanctioned and the rest from upgradations of bad loans into standard.
  • He is banking on the fact that settlements by defaulting borrowers tend to peak in the fourth quarter of every fiscal year. He is expecting one big steel account to close to resolution and that should give ~ ₹7000-8000 mn of recoveries.
  • In the December quarter, the bank recovered bad loans worth ₹25,830 mn, including ₹3,280 mn from written-off accounts. Banks write off loans from their books after fully providing for them when chances of recoveries seem bleak. However, recovery efforts are continued and whatever comes back is shown as other income.
  • Meanwhile, the bank said its 3QFY20 profit rose nearly four-fold to ₹5,750 mn from a year earlier, helped by better recoveries and higher interest income. The state-run bank had reported a profit of ₹1,530 mn in the year-ago period.
  • Mr Rai said that the Bank was helped by some good recoveries of ~₹20,000 mn which came from Essar Steel, Ruchi Soya Industries and Prayagraj Power Generation Co. Ltd.
  • According to him, in the Essar Steel loan, the bank had provided 50%, and it booked an interest income of ₹2,390 mn. On Ruchi Soya, it had 100% provisioning and the recoveries came from the written-off account.
  • Rai said the bank has not factored in “harmonization provisions” in this quarter and even the quantification has not happened. This category of provisions was recently reported by Punjab National Bank which set aside ₹15,000 crores in 3QFY20. These provisions apply to loans which were so far classified differently at different banks that are set to be merged. Union Bank of India will be merged with Corporation Bank and Andhra Bank.
  • Mr Rai explained that it is too premature to talk about that number (harmonization provision) and the RBI has not asked about it as well.

Consensus Estimate: (Source: market screener, investing.com website)

  • The closing price of Union Bank of India was ₹ 49/- as of 11 th February 2020. It traded at 0.4x/ 0.4x/ 0.3x the consensus BVPS for FY20E/ FY21E/ FY22E of ₹ 124/132/157 respectively.
  • Consensus target price of ₹ 69/- implies a Price to Book multiple of 0.4x on FY22E Book Value of ₹ 157/-.
By Bank , , 0 Comments Read more...
11 Feb

Need to see countercyclical flows in debt mutual funds- Mr S Naren, ICICI Prudential AMC

Update on the Indian Equity Market:

On Monday, NIFTY closed -0.55% lower. Among the sectoral indices, Metal (-3.0%), Auto (-2.5%), Media(-1.6%) closed lower. None of the sectoral indices closed on a positive note. The biggest gainers were UPL(+4.8%), Bajaj Finance (+1.6%), and Kotak Bank (+1.2%) whereas Zee Entertainment (-7.2%), M&M (-7.2%), and Tata Steel (-5.9%) ended with losses.

Edited excerpts of an interview with Mr S Naren, Executive Director and Chief Investment Officer, ICICI Prudential AMC with CNBC-TV18:

  • Mr Naren said the recent policy that the Reserve Bank of India (RBI) has come up with of giving term repo, may act as a trigger. Any bank that has surplus government securities gets easy access to cheap money to do onward lending.
  • This may bring down rates which may act as a route to give good returns on credit funds.
  • He further saidif valuations are attractive, cycle is attractive and people are not willing to look at the asset class in a big way then one should not bother about triggers, automatically trigger will come and money will be made.
  • Speaking on telecom sector he said, as long as we are dependent on telecom, the few survivors should do better because the amount of money that people spend on telecom each month is high.
  • There is a lot of opportunity in India and he said, it is better if we have 3 survivors in a big country like India and all the 3 should have a superb outlook for the next decade or two.
  • About the flows into mutual fund, he said theinvestors in India have been behaving brilliantly. Whenever markets go up the flows drop and whenever markets go down flows go up.
  • SIPs are stable. Itis only the debt side of business that is not having countercyclical flows.
  • There is a need to see countercyclical flows in debt schemes as equity schemes because there are opportunities which are being missed.
  • The debt mutual funds are equally important part in every investor’s asset allocationaccording to him.
  • The company is successful in getting money in asset allocator, fund of fund and categories like balanced advantage but target of getting mega funds in debt mutual fund is not achieved.

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

  • The closing price of ICICI Bank was ₹ 535/- as on 10-February-20. It traded at 32x/ 18x/ 15x the consensus earnings estimate of ₹ 16.6/ 29.0/ 35.5 for FY20E/FY21E/FY2E respectively.
  • Consensus target price of ₹ 624/- implies a PE multiple of 18x on FY22E EPS of ₹ 35.5/-.

 

By ICICI Bank 0 Comments Read more...
10 Feb

Reducing non-core debt to pare debt: Tata Motors

Update on the Indian Equity Market:

After a week-long rally, investors booked profits which led to a fall of 52 points in Nifty to close at 12,087. This follows the weak Asian markets following the rising death toll from a virus spreading from China. Apart from result season, there was no major catalyst to move the markets on Friday. Within the sectoral indices, Media (1.7%), Pharma (0.6%) and IT (0.5%) closed the day higher while REALTY (-1.8%), AUTO (-1.0%) and PVT BANKS (-0.5%) were the highest losers. Among the index stocks, ZEEL (5.5%), NTPC (3.2%) and COALINDIA (2.8%) led the gainers whereas EICHERMOT (-3.1%), TATAMOTORS (-3.0%) and INDUSINDBK (-2.7%) brought the index lower.

Reducing non-core debt to pare debt: Tata Motors

Excerpts from an interview with Mr Guenter Butschek, MD & CEO – Tata Motors published in Livemint on 7th February 2020.

  • Mr Butschek said that the company has invested sufficiently in its product library that includes common vehicle architectures, powertrains, transmissions, and other shared technologies to reduce overall product development cost.
  • He is confident that in the coming two years, the company will see strong growth as far as modularity is concerned across commercial and passenger vehicles. He said that the company has done homework on its turnaround plans, investing in new technology platforms such as CESS (connected, electric, shared and safe mobility) and tapping into the Tata Group companies’ strengths to build an electric vehicle (EV) ecosystem.
  • Referring to the company’s efforts to strengthen its financials, he said Tata Motors has turned cash accretive despite the collapse of the medium and heavy commercial vehicle (MHCV) segment, which contributes 47% of total commercial vehicle revenue that accounts for 65% of total domestic revenue.
  • The product portfolio of company is much better than what it was when the economic slowdown began two years ago. He is confident that once the economy revives, the significantly upgraded products would do much better in terms of cost-based contribution to company’s margin base.
  • Butschek said that customers would take a while to absorb the higher cost of purchases under BS-VI emission norms, which would entail a product price increase of 10-15%.
  • The company had ₹ 233,365 mn worth of debt in its India business as of 30th September 2019. The consolidated debt including Jaguar Land Rover (JLR) stood at ₹954,650 mn. He said that the company is planning to reduce non-core assets to reduce the debt.
  • The company is focusing on reducing costs, including material costs and working to enhance productivity.
  • As part of its turnaround plan, Tata Motors plans to launch 12-14 passenger vehicles over the next three to five years, besides at least four new electric vehicles over the next 18-24 months.

Consensus Estimate: (Source: market screener website)

  • The closing price of Tata Motors was ₹5/- as of 07-February-2020. It traded at 109x/ 11x/ 7x the consensus earnings estimate of ₹1.6/ 15.4/ 24.7 for FY20E/ FY21E/ FY22E respectively.
  • Consensus target price of ₹ 201 /- implies a PE multiple of 8x on FY22E EPS of ₹ 24.7 /-
By Tata Motors , , , 0 Comments Read more...
09 Feb

Learn to love momentum

Joachim Clement writes on his blog that the global bull market in equities is seemingly never going to end and investors wonder about what they should do who have missed the boat and only partially invested in the current bull market.

The usual fear is that if they invest now, they might be investing at the top of the market. Another argument is that every asset class seems overvalued. Given extremely low-interest rates, bonds don’t seem a viable option, stocks aren’t cheap either and many alternative asset classes like infrastructure or REITs have become expensive as well. There comes a point when avoiding an asset class on valuation grounds or for fear of an imminent bear market becomes counterproductive. By standing on the sidelines for too long the opportunity costs in terms of foregone returns can become so big that it may take you years and even decades to make up for them.

Value investors and long-term investors, in general, tend to look down on traders, but there are a few things that long-term investors can and should learn from them. First of all, they should learn that time in the market is more important than timing the market. One can only make money if one is invested. But being invested comes with the inevitable risk of drawdowns, which can be short-term in nature like in the US at the end of 2018, or a massive global bear market like in 2008. To deal with these risks of decline in share prices it is important to learn from short-term investors to respect and even love momentum. If price momentum goes against your position for too long, you should sell the position and buy it back at a later point in time when price momentum is more favourable again.

The maximum declines between 1998 and 2019 have also been massively reduced, showing that these momentum-driven strategies can help you avoid severe losses. If you are worried today about high valuations or the possible end of the current bull market, then the most important thing for you is to get into the market with a sensible plan to get out when momentum turns. But this is fine-tuning. The most important thing for investors today is not to be afraid of the bull market.

By Weekend Reading , , , 0 Comments Read more...
07 Feb

Gold should be viewed as an investment – S Subramaniam, Titan

Update on the Indian Equity Market:

On Thursday, the Monetary Policy Committee (MPC) of RBI decided to keep the policy repo rate unchanged and persevere with the accommodative stance as long as necessary to revive growth, while ensuring that inflation remains within the target.

The broad market index, Nifty50 ended the day marginally high. PSU Bank (+2.6%), Media (+1.6%) and Pharma (+1.3%) were the top gainers while FMCG (-0.6%), IT (-0.4%) and Realty (-0.3%) were the sectoral losers for the day. Amongst the stocks, Eicher Motors (5.4%), IndusInd Bank (+4.6%) and Zee Entertainment Enterprises (+3.9%) were the biggest gainers. Tata Motors (-2.9%), Cipla (-2%) and Titan (-1.6%) ended the day in the red.

Gold should be viewed as an investment – S Subramaniam, Titan

Excerpts of an interview with S Subramaniam, CFO, Titan. The interview was published in Livemint on February 6, 2020:

  • Titan recently released the 3QFY20 result. The numbers were largely in line with the street estimates and margins were better than expected.
  • Although the company is definitely gaining market share, it has been a bumpy ride. The months of October and November were pretty good but December was tough, so the market is a little shaky.
  • The CFO is hopeful of doing well in the coming quarter as well, the initial guidance of 11-13 percent growth in the jewelry segment has been maintained.
  • Growth in the jewelry business was guided at 2.5x by 2023, which may be at risk, considering that kind of growth is not happening. People looking at gold as an investment in addition to it being a jewelry item would help achieve that kind of growth.
  • The industry has been in pretty bad shape for a variety of reasons. The month of December saw a surge in the gold prices, which did not help. A lot of the jewelers are undergoing financial crises with a pretty bad liquidity situation. Those with adequate funds can possibly do better. Else this pain will continue industry-wide for some more time.
  • Moving to other business segments, the watch segment, World of Titan has witnessed 11 percent growth in the quarter. Although the growth was phenomenal, opportunity was missed on the trade channel because of stocking and in the e-commerce channel. 10 percent of the revenues come from the e-commerce segment which has been slowing down.
  • Margins would be an area of concern for the watch segment. It is expected to perform better including in the next quarter (Q4).
  • The expectation is that margin-wise, the company performance would be better in FY20 than FY19.
  • Growth has been challenging for the eyewear segment. The profitability challenges continue, which need to be addressed.

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

  • The closing price of Titan was ₹ 1259/- as on 6-February 2020. It traded at 69.6x/ 54.5x/ 45.6x the consensus earnings estimate of ₹ 18.1/ 23.1/ 27.6 for FY20E/ FY21E/ FY22E respectively.
  • Consensus target price of ₹ 1204 /- implies a PE multiple of 44x on FY22E EPS of ₹ 27.6 /-

 

By Titan , , , 0 Comments Read more...
06 Feb

‘Business to Lagos has not been impacted and there’s no reason to be circumspect’- Mr. Rakesh Sharma, executive director, Bajaj Auto

Update on the Indian Equity Market:

On Wednesday, NIFTY closed positive (+0.9%) at 12,090. NIFTY50 led by TATAMOTORS (+10.7%), YESBANK (+8.6%) and TATASTEEL (+5.8%). ZEEL (-6.4%), HEROMOTOCO (-3.6%) and DRREDDY (-3.1%) were the top NIFTY losers. METAL (+3.1%), REALTY (+2.2%) and FIN SERVICE (+1.4%) were the top gaining sectors. MEDIA (-0.8%) was the only sector that ended negatively.

Excerpts from an interview with Mr. Rakesh Sharma, Executive Director, Bajaj Auto published on Livemint on 5th February 2020:

  • There has been a ban on the movement of two-wheelers and three-wheelers on certain roads in Lagos city for quite some time. There has been a law that says two-wheelers and three-wheelers cannot ply within Lagos city on these roads.
  • What has happened now is that there has been a restatement of this law and thereafter more rigorous enforcement because of congestion which they are experiencing and that is what has triggered this spate of news.
  • There are some 400 roads and by lanes within the Lagos city which had been identified quite a few years ago, maybe a couple of years ago. So they are just enforcing those things that these vehicles are not permitted.
  • Nigeria is a large country and motorcycles in Lagos city is probably only 6-7% of their business. Similarly, three-wheelers is also about 10% of their business so it is really not a very significant event as of now.
  • One can run a motorcycle on a commercial basis in certain areas, but what happens is it becomes more inconvenient as suddenly if you have to go from point ‘A’ to point ‘B’ and in middle there is a road where it is not allowed, it becomes a problem.
  • Total two wheeler exports to Nigeria are less than 30% of their exports, in the magnitude of 25% or so.
  • As things stand now, they are not anticipating any major impact. In international business, this kind of things happens all the time.
  • Bangladesh did it last year when they did not permit the three-wheelers so these things sort of cancel each other. So it is not a significant event from their perspective- not for Nigeria and not for the international business.
  • It is difficult to imagine that this kind of thing suddenly becoming an epidemic across Nigeria. So according to him, they will wait and watch.
  • At this stage, it is not even a setback. It is temporary irritation and he said he would not classify this as a setback. They encounter these things all the time in emerging markets. It does not really make them sit up and sweat.

Consensus Estimate: (Source: market screener website)

  • The closing price of Bajaj Auto was ₹ 3,158/- as on 5-February-2020. It traded at 18x/ 17x/ 15x the consensus earnings estimate of ₹ 174 /183 /204 for FY20E/ FY21E/ FY22E respectively.
  • Consensus target price is ₹ 3,226/- which implies a PE multiple of 16x on FY22E EPS of ₹ 204/-
By Auto, Bajaj Auto 0 Comments Read more...
05 Feb

SBI Cards IPO to hit the market this quarter: SBI Chairman

Update on the Indian Equity Market:

On Tuesday, NIFTY ended positive at 11,979 (+2.3%). The top gainers in NIFTY were TITAN (+7.3%), Infratel (+5.7%) and IOC (+5.6%). ZEE (-5.3%), Bajaj Auto (-3.8%) and Yes Bank (-2.8%) were the top NIFTY losers. All the sectors were in the green. The top sectoral gainers were Metal (+3.3%), Financial Service (+2.9%) and Realty (+2.8%).

Excerpts from an interview with Mr Rajnish Kumar, Chairman, State Bank of India (SBI) that was published in Economic Times on 03rd February 2020:

  • SBI believed that no one needed an insurance cover as far as deposits in SBI are concerned. But as far as the system is concerned, after the problems with the cooperative bank which happened in Mumbai, there was a demand that the limit for insurance cover which was set some 27 years ago needs to be revised. This move was much needed and will create more confidence in the minds of the people about banks.
  • AGR Telecom problems: According to him, the matter is sub judice and will be waiting for the Supreme Court decision. The hearing is on 4th February. He thinks and believes that the matter will ultimately be sorted out to the satisfaction of both the parties – the government and the telecom operators. He had a general discussion with a lot of people in the telecom sector where they hinted that they will have at least three to four large telecom operators and the country cannot be served with a lesser number of telecom operators. This has given Mr Kumar  confidence and hope that this matter will get sorted out.
  • Barring one HFC account, things are looking up at least on the corporate recovery front.  This HFC account was in trouble, and SBI was readying for it since September and had started providing for it. Mr Kumar had said in the past that from the recovery and resolution perspective, December and March quarters are likely to be very good for the banking system. SBI is expecting some good resolution and implementation of resolution plans in respect of a couple of large accounts.
  • The loan growth for SBI was around 7% in this quarter coming from their international banking book. There is more demand for foreign currency borrowings from Indian corporates. The retail story is intact and SBI is growing very well. The only thing is the corporate sector demand revival. The loan pipeline is fairly good. As these loans get disbursed, FY21E growth numbers may turn out to be better than FY20. The utilization of limits definitely improved in the last two months and SBI may end up somewhere around 9% YoY growth.
  • The loan processing fee has improved significantly on a QoQ basis for SBI. It indicates that during the December quarter, SBI has processed more proposals. The loan pipeline is of more than Rs 1 lakh crore and all of these loans will get disbursed eventually over the next six months and that is a good indicator from a recovery point of view.
  • SBI Card valuation: According to him, the penetration of credit cards in India is very low and as the economy develops, there will be demand for credit and credit cards. At the same time, SBI card business is growing decently. SBI IPO is expected to happen in this quarter.
  • He said that the move by the government to divest stake in IDBI Bank and list LIC are two measures that stand out in this year’s budget.

Consensus Estimate: (Source: market screener website)

The closing price of SBI was ₹ 306/- as on 4-February 2020. It traded at 1.2x/ 1.1x/ 1.0x the consensus book value of ₹ 249/ 280/ 317 for FY20E/ FY21E/ FY22E respectively.

By SBI , , , , 0 Comments Read more...
05 Feb

TeamLease CFO: Confident to reach target margin of 3.5% in 4 years.

Update on the Indian Equity Market:

On Monday, NIFTY closed positive (+0.5%), recovering slightly from the post-budget decline seen on Saturday. Consumer stocks were the top gainers across NIFTY50 led by ASIANPAINT (+6.3%), NESTLEIND (+5.0%) and HINDUNILVR (+4.8%). INFRATEL (-6.1%), YESBANK (-4.6%) and ITC (-4.6%) were the top NIFTY losers. MEDIA (+1.7%), REALTY (+1.6%) and AUTO (+1.5%) were the top gaining sectors. PSU BANK (-2.5%), IT (-1.3%) and PHARMA (-0.5%) were the sectors that ended negatively.

We offer research services on the Indian equity market and plan to offer investment advice shortly. For information on our services, please visit our website http://www.assetmultiplier.co.in/

TeamLease CFO: Confident to reach target margin of 3.5% in 4 years.

Excerpts from an interview with Mr N Ravi Vishwanath, CFO, TeamLease that aired on CNBC-TV18 on 29th January 2020:

  • In 3QFY20, TeamLease’s revenue growth slowed down to ~15% from the range of 20% that the company used to deliver. The slow growth is largely reflective of the general economic slowdown. There is also impact of some large deals getting shifted from 3QFY20 to 4QFY20.
  • Over the long term should be able to maintain the growth of 20% as always committed.
  • The revenue for 9MFY20 has grown by up 18%. Management does not expect the full-year growth for FY20 to reach 20%. In FY21E, the topline growth could get back to 20%.
  • The specialized staffing business which included the IT, telecom and infra staffing is expected to grow over 20% in FY21E (IT, telecom, infra).
  • As far as telecom sector staffing is concerned, the worst is over for TeamLease. In FY19, they got into certain telecom, infra, and radiofrequency projects which resulted in lower profitability. The company has exited some of those mandates and will exit the 1 or 2 that are left as and when they get completed.
  • TeamLease has exited some lower profit mandates, especially in telecom. This should lead to better profitability going into FY21E. On the flip side, the company is in talks and has almost signed some better margin mandates in telecom now. The management expects the situation to only get better from here.
  • The per associate per month (realization in general staffing) has grown 5% YoY. Mr Vishwanath thinks that this growth will continue.
  • The management is targeting a margin of 3.5% over the next 4 years.

Consensus Estimate: (Source: market screener website)

  • The closing price of TEAMLEASE was ₹ 2,472/- as on 3-February 2020. It traded at 40.5x/ 31.8x/ 24.7x the consensus earnings estimate of ₹ 61.1/ 77.8/ 100.0 for FY20E/ FY21E/ FY22E respectively.
  • Consensus target price is ₹ 2,762/- which implies a PE multiple of 27.6x on FY22E EPS of ₹ 100.0/-

 

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.”

=======================================================================================

We have been running research service under the name “Asset Multiplier” for more than three years now. We have revamped our website completely. Please visit www.assetmultiplier.co.in and give us your feedback. We are gearing up for Investment Advisory services that are to be launched as soon as we get SEBI approval. This is a daily update related to stock market movers. This free email is being sent to friends and well-wishers. It will cover news/recent developments/interview with company management. It is not a recommendation but for information only. If you think someone else can benefit from this mail, please send name, phone number and email address. If you do not want to get this daily update, please let me know. If you want to know more about our services, please feel free to call me.

 

By TeamLease , , 0 Comments Read more...
01 Feb

Growth picking up post demonetization, GST- Mr V.P.Nandakumar, Manappuram Finance

Update on the Indian Equity Market:

On Friday, NIFTY closed -0.6% lower. Among sectoral indices NIFTY Metal (-2.3%), NIFTY Pharma (-1.2%), NIFTY IT (-1.1%) closed lower while, NIFTY Realty (+1.2%), NIFTY PSU Bank (+0.8%), NIFTY Bank (+0.6%) higher. The biggest gainers were Kotak Bank (+3.7%), SBI (+2.4%), IndusInd Bank (+1.9%) whereas Tata Motors (-5.0%), ONGC (-4.5%), and PowerGrid (-3.6%) ended with losses.

Edited excerpts from an interview of Mr V.P.Nandakumar, MD, CEO, Manappuram Finance on CNBC-TV18

  • Targeted growth in gold loan had been 10-12%. In three quarters the achieved growth is 11%.
  • Price increase of gold has helped the company and that has led to volume growth.
  • Microfinance institutions (MFIs) are doing well and the asset quality is also maintained in this difficult hour for the non-banking financial companies (NBFCs) industry. The gold loan industry and the MFI industry are faring better.
  • Overall demand is better  in last three quarters.
  • In non – gold loan, the recovery is slightly less because of natural calamities such as floods, political issues.
  • There is some interference of local politicians with the collection but the companies themselves are confident of achieving it.
  • 10%-15% AUM is growth is expected. changes made in regulation, demonetization, GST have crippled the market. The market is now picking up post-GST, demonetization.
  • The company has raised $300 Mn as overseas bonds and the cost is 11.6%. The coupon rate was 5.9% but because of hedging, the all-inclusive cost is about 11.6%.
  • The domestic cost is easing because of the banks’ lending rates, it has slightly come down. It is now 9.25%.
  • Speaking about the decision to take dollar loan Mr V.P Nandakumar says, the domestic cost is low but the sectoral liquidity pressure cannot be ignored. There is liquidity pressure in the NBFC sector.
  • Mr Nandakumar says natural calamity is a challenge that the company faced. In the last year, there had been floods and that had led to delays.
  • Speaking on asset quality, he says, the company is analyzing district wise and pin code wise. with these measures, he doesn’t think the asset quality will deteriorate any further.

Consensus Estimate (Source: market screener website)

  • The closing price of Manappuram Finance was ₹ 188/- as of 31-January-20. It traded at 2.8x / 2.3x / 1.8x the consensus Book Value for FY20E / 21E / 22E of ₹ 64.9/81.6/101 respectively.
  • Consensus target price of ₹ 190/- implies a Price to Book multiple of 1.8x on FY22E Book Value of ₹ 101.
By Gold loan NBFC, Manappuram Finance , , , , 0 Comments Read more...
31 Jan

In talks with lenders to restructure ₹ 22,000 mn debt: CG Power

Update on the Indian Equity Market:

Wednesday’s optimism in the market was short-lived as Nifty continued the downward journey closing 94 points lower at 12,035. This follows the weak global markets following the rising death toll from a virus spreading from China. The weekly and monthly F&O expiry added volatility in the markets. All the sectoral indices closed the day in red with Pharma (-2.3%), FMCG (-1.8%) and METAL (-1.6%) being the highest losers. Among the stocks, BAJAJ AUTO (1.6%), POWERGRID (0.8%) and ICICIBANK (0.8%) were few of the gainers while YESBANK (-5.2%), BAJAJFINSV (-2.8%) and RELIANCE (-2.7%) were the top losers.

Excerpts from an interview with Mr Sudhir Mathur, Executive Director– CG Power. The interview aired on CNBC-TV18 on 29th January 2020.

  • The company has taken impairment worth ₹ 12,500 mn on both Belgium group of companies and the rest of the international business to reflect the true realizable value. The company has also made provisions worth ₹ 2,650 mn. In pursuit of recoveries, the Company is sending out recovery notices to the non-paying accounts. The provision is made on the people whom the company could not trace or the letter came back undelivered. The provision does not include Avantha Group.
  • The strategic review of international business was started earlier on. As the Indian market is in the growth phase, the company wants to be in India. According to him, the opportunity in India is very large. The company has also got strong relationships right through the value chain, from the supplier partners to customers.
  • In the case of international business, if the company gets a good offer, it will sell the business. The India business has been EBITDA positive business. The company has ₹ 22,000 mn of debt on the books on account of just India operations. The company is working with the banks to create a debt structure that can be surfaced out of the company’s cash flows. The company also plans to monetize all the non-core assets like the transformer business in Kanjurmarg, CG House if required.
  • The company is also looking at equity raise as well. The company is looking to raise around ₹ 7,000 mn through equity. When he was told that the current market cap of the company is around ₹ 7,000 mn to which he said that the company is working closely with the existing shareholders and they have taken a huge hit.
  • There are options for raising money through rights, preferential as well as qualified institutional placement (QIP) in which the existing shareholders can participate. In the next 60 days till March-end, a lot of consultative work would need to happen on raising this equity.

Consensus Estimate:

The closing price of CG Power is ₹ 10/- as of 30-January-2020.  Consensus estimates for the company are not available on the market screener and investing. CG Power reported a net loss of ₹ 8.03/- per share in FY19.

By Uncategorized 0 Comments Read more...