23 Dec

Over 10% growth in both revenue and profit in Q3: KRBL (One of the largest Basmati exporters in India)

Update on Indian Equity Market:
Indian markets closed the week with muted gains on Friday. Nifty closed the day 12 points higher at 12,272. The best performers within the index were TITAN (3.5%), TATASTEEL (3.4%) and UPL (3.1%) whereas Vedanta (-2.7%), KOTAKBANK (-2.0%) and TATAMOTORS (-1.5%) were the worst performers. Within the sectoral index, PSU BANK (2.3%), MEDIA (1.2%) and METAL (0.6%) led the gains while AUTO (-0.4%), PHARMA (-0.3%) and FMCG (-0.1%) were the laggards.

Key takeaways from the interview of Mr Anil Mittal, Chairman and Managing Director, KRBL Ltd; dated 20th December 2019.
 About the promoter shareholding in the company, Mr Mittal mentioned that the promoters intend to increase the shareholding to 63-64% from current levels of 58.8%. The promoters have bought 450,000 shares from the open market recently. However, he added that it also depends on the price of the stock.
 In 2Q, the results were lower than expectations. This was because of an order worth 32,000 tonnes of rice were stuck at the ports on account of delay of LCs. He mentioned that the company has shipped all the material in 3Q. Despite the slowdown, he is confident of having robust 3Q. He highlighted that the management is expecting the revenue and profit to grow more than 10% in the 3QFY20E.
 There was one case in which the Enforcement Directorate froze one of the properties valued at about ₹ 150 mn. This case has come before the High Court and it will take 2-3 years to finalize this issue. The total amount involved is ₹150 mn. He is confident that the verdict will be in the company’s favour. It will come through a legal process.
 In terms of the brands, the company’s flagship brand, India Gate, is in great demand in the international market as well as in Domestic market. In the category of India Gate classic, there is virtually no competition for this SKU. This particular brand is fetching the highest price in the entire world, including India. Five years ago, the company developed a new brand called Unity to exclusively cater to middle-class families. This brand has picked up momentum and is doing well, much beyond the company’s expectations.
 Iran has been a concern for the company since last 6-7 months in terms of payments and orders. There has been no demand from the country for last 4 months. For the orders previously received and executed, the payments are stuck and exporters are having a hard time. However, the company expects that this market will open up by the first week of January.
Consensus Estimate (Source: market screener website)
 The closing price of KRBL was ₹ 281/- as of 20-December-19. It traded at 11x/ 10x the
consensus EPS estimate for FY20E/ FY21E of ₹ 25.2/ 29.3 respectively.
 Consensus target price of for KRBL is not available.

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20 Dec

Corporate credit, investments have picked up pace, says Bank of Baroda (BoB) Executive Director Murali Ramaswani

Update on the Indian Equity Market:
On Thursday, Sensex gained 115 pts and Nifty topped 12,250. The National Company Law Appellate Tribunal (NCLAT) on Wednesday reinstated Cyrus Mistry as chairman of Tata Sons, holding his removal in October 2016 as “illegal” and it is also aid that Tata Sons’ move to turn into a private company from a public limited was unlawful and ordered its reversal. 

Among the sectors, NIFTY AUTO was up by 1% and NIFTY IT by 0.6%. Among stocks, Yes Bank, TCS and Bharti Airtel shares were among the biggest gainers, gaining up to 7%.

Corporate credit, investments have picked up pace, says Bank of Baroda (BoB) Executive Director Murali Ramaswani

Key takeaways from the interview of Mr Murali Ramaswami, Executive Director, Bank of Baroda; dated 17th December 2019:

  • When asked about exposure to Essar Steel, Mr Ramaswami said that they had exposure to Essar Steel but did not make any money because it was cash outright sale.
  • When asked about recovery Mr Ramaswami commented that recovery has been good. As of now, BoB has got about Rs 95,000 mn through National Company Law Tribunal (NCLT). Some have been approved, and some are under approval. Mr Ramaswami is expecting ~Rs 94,500 mn resolutions to happen in next 60 days.
  • Mr Ramaswami stated that Slippages have come down. Normally slippages used to be ~Rs 60,000 mn but in 3QFY20E only Rs 40,000-45,000 mn is expected.
  • The NPA scenario is improving as a lot of NCLT cases are getting resolved. As of Sept-19, Gross NPA (non-performing asset) ratio is at 10.25 and net NPA at 3.91. Mr Ramaswami expects GNPA to reach below 10 by Mar-20
  • Mr Ramaswami commented on loan growth and mentioned that retail segment grew by 7-8% year to date, auto loan is growing at 22-23%, the home loan is growing at around 5-6% and education loan around 11% and other loans around 11-12%. MSME segment has witnessed marginal growth, agriculture grew by 2%.
  • He further stated that corporate credit has picked up as far as Bank of Baroda is concerned. BoB has sanctioned about Rs 320 bn in the last one month out of which Rs 90 bn is already disbursed. In the next 15-20 days, another Rs 200 bn disbursement is expected.
  • When asked about loan growth Mr Ramaswami stated that he expects loan growth to be ~5-6% in December-19 and if the same momentum continues ~11% growth in March-19.
  • He mentioned that the Net Interest Margin (NIM) is at 2.7% domestic and 2.9% Gross. He expects NIM to be above 3% in 3QFY20E as saving bank account grew by 9-10% and bulk deposits are strong. Cost of deposits has come down from 5.14% to 4.46%. 

Consensus Estimate (Source: market screener website)

  • The closing price of Bank of Baroda was ₹ 99/- as of 19-December-19. The consensus estimate for Book Value of Bank of Baroda is not available. 
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19 Dec

Increase in the average rates not significant, says Indian Hotels CEO Puneet Chhatwal

Update on the Indian Equity Market:

On Wednesday, NIFTY50 closed 0.5% higher at 12,225. NIFTY50 gainers includes M&M (+3.6%), Sun Pharma (+2.5%), and JSW Steel (+2.1%). NIFTY50 losers includes Tata motors (-2.9%), GAIL (-2.1%) and Grasim (-1.9%). Pharma (+1.2), and Media (+0.8%) were the top sectoral gainers. PSU Banks (-1.9) and Media (-0.4%) were the only losing sectors.

Excerpts from an interview with Mr Chhatwal, CEO, Indian Hotels. The interview was published in Livemint dated 18th December 2019

  • IH has a lot of last-minute pick-ups and till now the demand has been holding quite well. The volumes are okay. What has not done so well this year is the increase in the average rates.
  • IH has come from such a low base and there has been the GST reduction since 1st October, but the rate increases are not as evident as all of them would like to see.
  • Weddings are recession proof so weddings happen and they happen this time of the year, so they do fill-up the hotels.
  • Similar is the case in all those religious circuits that they are strong in. They just opened hotel in Tirupati, so if people have to go to Tirupati they will go to IH. According to him, the unrest in the North-East or in Delhi won’t have an impact on this kind of business.
  • Their backbone is really the Taj brand and on the luxury segment, whether it is chauffeur driven cars or it is hotels, disruption has not really played a significant role. They announced the opening of the 50th Ginger and they have repositioned the Ginger brand.
  • This year started with the terror attack in Sri Lanka. They have three properties there so they went down. Colombo has bounced back quite well, Bentota has not. It is hopefully coming because now it is the season time. The year before that there was the political unrest in Maldives.
  • London has been very strong, New York and  San Francisco has been strong. Cape Town has problems or challenges both politically as well as with water availability. If you have a larger portfolio, large footprint, it balances out.
  • Opening hotels is definitely on their agenda. They have guided that IH will open a hotel a month, they are ahead on that too. They will open 12 hotels this year and this number may even increase to more than a hotel a month across all IH brands.
  • Their own capex has been limited to either renovating their most iconic asset in Delhi, the Mansingh, or bringing to life in 3-4 months the Connaught and that is where IH is putting in capex. Otherwise, it is normal capex, which is 4-5% of total revenue.
  • When IH builds new destinations like they built Goa as a destination 40-50 years ago, it took 3-4 years but then now everybody breaks even in Goa very fast. Now they are doing the same with Andaman with Havelock.
  • They are actually at 19% EBITDA margins for this year, year-to-date and the second half is more important. One is that 60% of revenues come from there and the margins are much higher in the second half.
  • IH is definitely looking at a further improvement and improvement has been almost 600 basis points in the first half so that is very positive news. 

Consensus Estimate (Source: market screener website)

  • The closing price of Indian hotels was ₹ 146/- as of 18-December-19. It traded at 42x/34x/29x the consensus EPS estimate for FY20E/ FY21E/ FY22E of ₹ 3.5/4.3 /5.1 respectively.
  • Consensus target price of ₹ 187/- implies a PE multiple of 37x on FY22E EPS of ₹ 5.1/-

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18 Dec

It’s a perfect storm in the consumer goods sector, says Godrej’s Gambhir

Update on the Indian Equity Market:

On Tuesday, NIFTY50 closed 0.9% higher at 12,082. NIFTY50 gainers include Tata Steel (+4.6%), Bharti Airtel (+4.5%), Vedanta (+3.4%) and Hindalco (+3.3%). NIFTY50 losers include Sun Pharma (-1.3%), GAIL (-0.9%) and Bajaj Auto (-0.7%). Metal (+2.9), IT (+1.9%) and Media (+1.0%) were the top sectoral gainers. Pharma (-0.3) and Realty (-0.3%) were the only losing sectors.

Excerpts from an interview with Mr Vivek Gambhir, MD & CEO, Godrej Consumer Products Ltd (GCPL). The interview was published in Livemint dated 16th December 2019

  • For packaged consumer goods companies, rural growth slowed to a seven-year low in the September quarter, according to market researcher Nielsen India.
  • A general gloom in consumer sentiment and stagnating wages continue to impact sales of daily goods in India’s hinterland said, Mr Vivek Gambhir.
  • The slowdown has been persistent for the last three or four quarters according to Mr Gambhir. GCPL saw the first signs around October 2018. Over the last few quarters, along with the slowdown in demand, they have seen liquidity pressure in the channels (wherein traders and distributors have limited access to cash or credit from the market). Similarly, over the last three to six months, consumer sentiment has also worsened. So, in some ways, what the Company is seeing currently is a perfect storm in the FMCG sector with the confluence of slowing demand, channel liquidity pressure and weakening consumer sentiment which has been exacerbating the situation.
  • Reasons for the slowdown: Data on real wage growth in the rural sector shows that real wages have been flat or declining over the last one or two years. According to him, what consumers do is, once certain products are within their spending basket, they spend on them for a while. Then they start dipping into their savings. Even savings rates have come down in India recently. But when sentiment becomes sour, then things start affecting the sector.
  • GCPL has seen such a similar kind of situation in its first couple of quarters. They have seen a volume growth of 6-7%, which is not a bad volume growth. Volume growth is not translating into value growth because of consumer incentives and offers. He believes that is the right call to take as the P&L is quite healthy. GCPL is sitting on attractive margins. The need of the hour is to stimulate demand. Ideally, GCPL would like to be at double-digit volume growth and the efforts going forward will be to get back there.
  • In a slowdown, home and personal care get impacted more than food, according to him. The indulgence categories like beauty products and chocolates continue to grow as consumers like some ‘feel-good” factor even in a slowdown. The slowdown has been quite pervasive and has impacted most categories, particularly in rural India. Within the home and personal care, discretionary categories such as skin creams, conditioners, hair oil, hair colour get impacted. But more items are considered as discretionary for rural consumers given their lower income levels.
  • In the last two or three months, both staples and discretionary have been impacted quite a bit; that is consumer sentiment has worsened. People had very high expectations post the elections. Since they did not see any improvements, the mood seems to have worsened.
  • Views on changing goods and services tax (GST) slabs again: At this stage, trying to do too much with GST rates will be a mistake in his opinion. Companies need time to let the GST rates settle. There are a lot of implementation issues that need to be addressed. The Companies need to continue to work with various stakeholders, particularly small businesses and, in GCPL case, channel partners, to help them deal with what has been one of the largest tax reforms in Indian history post-independence. At this stage, trying to do too much with GST rates to drive short-term collections may not be the right strategy. It is important to stay the course, rather than to make rate changes that are currently being discussed.

Consensus Estimate (Source: market screener website)

  • The closing price of Godrej Consumer Products Ltd was ₹ 677/- as of 17-December-19. It traded at 43x/37x/33x the consensus EPS estimate for FY20E/ FY21E/ FY22E of ₹ 16.0/18.6 /20.7 respectively.
  • Consensus target price of ₹ 753/- implies a PE multiple of 36.4x on FY22E EPS of ₹ 20.7/-.
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17 Dec

Motherson Sumi: FY20 revenue target will be achieved through acquisitions.

Update on the Indian Equity Market:

On Monday, NIFTY50 closed 0.2% lower. NIFTY IT (+1.0%), NIFTY REALTY (+0.3%), NIFTY FIN SERV (+0.1%) closed higher. NIFTY METAL (-1.3%), NIFTY FMCG (-1.2%, NIFTY AUTO (-1.0%) were the top losing sectors. Among NIFTY50 stocks, TCS (+2.8%), HCLTECH (+1.7%) and TECHM (+1.7%) were the top performers. GRASIM (-2.4%), ADANIPORTS (-2.3%) and ITC (-1.9%) were the top losers.

Motherson Sumi: FY20 revenue target will be achieved through acquisitions.

Excerpts from an interview with Vivek Chaand Sehgal, Chairman, Motherson Sumi Systems published in ET Auto dated 15th December 2019.

  • Motherson Sumi has projected $18 bn revenue for FY20. There is no further scope for organic growth and growth will come from acquisitions. The timing of acquisitions cannot be pre-planned. Due to pain in the system, valuations are very low and the management is standing by the March 2020 target.
  • New acquisitions have to be on the management’s terms. They require the new acquisitions to deliver 40% ROCE and are ready to walk away if the criterion is not met.
  • Management has 11 companies under the radar for acquisition. The topline could be anywhere between $30-35 bn. The timeline could be longer but management is confident to hit a number close to their topline target.
  • According to Mr Sehgal, the current situation in Indian automobile space is worse than the 2009 crisis. In 2009, a particular segment of the world was affected and the strike back was fast. Currently, the slowdown is prolonged. Every aspect of not just Indian but the global automotive industry is going through a churn.
  • Motherson is in a better place than peers because almost its entire order book and new plants cater to new models by OEMs.
  • Things should improve in the next 6-9 months with clarity on EU, hopeful end to the American trade war and shift to BS-VI in India.
  • On the global side, some stress is felt in India and China.   Europe is in little stress but is coming out of it. America is in a re-assessment mode and is thinking of build-in America.
  • Motherson has maintained a strategy such that no company, no component, no carmaker should contribute more than 15% of their turnover. In the last five years, they have opened around 34-35 plants around the world. They are working to set up plants in countries where needed. Motherson is not affected so much by the trade wars, because they are producing locally in those places.
  • Peers should focus on cutting costs to bring down the cost of parts.
  • Green shoots are visible but it is uncertain whether the industry has bottomed out.

Consensus Estimate (Source: market screener website)

  • The closing price of Motherson Sumi systems was ₹ 141/- as of 16-December-2019. It traded at 26.1x/ 20.7x/ 17.4x the consensus EPS for FY20E/FY21E/FY22E of ₹ 5.4/ 6.8/ 8.1 respectively.
  • Consensus target price of ₹ 145/- implies a PE multiple of 17.9x on FY22E EPS of ₹ 8.1/-.
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16 Dec

Gold financing is our core competency and will stick to it: Mr George Muthoot, MD, Muthoot Finance

Update on the Indian Equity Market:

On Friday, NIFTY ended 1% higher at 12,087. Among the sectoral indices, Nifty PSU Bank (+4%), Nifty Metal (+2.3%) and Nifty Realty (1.7%) were the biggest gainers. None of the indices ended in the red. The stocks rallied on the back of optimism over a trade deal between the US and China. Adding to the sentiment was the victory of the Conservative Party in the UK elections. Among the Nifty50 stocks, Axis Bank (+4.2%), Vedanta (+3.8%) and Hindalco (+3.6%) were the biggest gainers.  Dr Reddy’s Laboratories (-2.8%), Bharti Airtel (-2.0%) and Zee Entertainment Enterprises (-1.6%) were amongst the losers.        

Gold financing is our core competency and will stick to it: Mr George Muthoot, MD, Muthoot Finance

Excerpts from an interview with Mr George Alexander Muthoot, MD, Muthoot Finance published in Economic Times on 10th December 2019:

  • The core strength of the business is gold financing. 90 per cent of the portfolio is only gold loans. Focusing on their core competency is has helped them get good business till date.
  • Their business is not dependent on gold prices since the average tenure of the loans is four months. If there was a sudden movement like 50 per cent fall in gold prices in two-three months, it would be a problem. Small up or down movement in the prices does not affect their business.
  • Talking about the business opportunity, he said that the market is huge since there are 30,000 tonnes of gold lying as ornaments. The organised gold lending market is just about 100-200 tonnes.
  • As the market develops, more and more people are using the opportunity to monetise the idle gold. To attract new customers, they are undertaking a lot of advertising.
  • Moving on to the rationale behind purchasing IDBI’s AMC business, he says the company has good customers who have been investing in the company because they relate to the company and are confident of depositing their money with them. The company believes that if they were to start a mutual fund, they will retain their customers.
  • Although the company has guided for revenue growth of 15 per cent, they would probably achieve 15-20 per cent growth this year. Gold finance acts as bridge finance for people unable to get loans from the banks. Once people are able to obtain a bank loan, they replace the gold loan with it.
  • People have a variety of options to obtain financing. Microfinance or fintech finance has not affected the gold financing market.
  • Their focus is on customer convenience. The average ticket size is ₹ 40,000, there is no service charge or pre-payment charges.
  • On diversifying the core business, he said the gold loan is their core strength and they will stick to it. Mutual funds are just a service offered to the customers. It is just a way for customers to deposit their excess money.

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

  • The closing price of Muthoot Finance was ₹ 717/-  as of 13-December-19. It traded at 2.5 x/2.1 x/ 1.8 x the consensus book value per share (BVPS) of ₹ 285/ 338/ 397 for FY20E/21E/22E respectively.
  • Consensus target price of ₹ 779 implies a PB multiple of 1.9 x on FY22E BVPS of ₹ 397/-.
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14 Dec

The best way to invest is the one that works for you

Tadas Viskanta writes on his blog that investing is to a large degree a solved problem. We know, by and large, what works and mostly what doesn’t. But that doesn’t mean that everyone should invest exactly alike. Don’t let anyone tell you otherwise.

Why? Because we all have unique situations, differing histories and wildly varying risk tolerances. Constructing an efficient portfolio today is straightforward. Humans are not. Dialling in a portfolio in sync with our risk tolerance is no small feat.

There are as many solutions as there are people. For some people holding more cash than can be reasonable is a way to sleep better at night. This may not jibe with most models but it works for them. For others, 100% equities are perfectly reasonable. For other people kicking the cash habit is really difficult.  So long as the products are low cost, transparent and risk-appropriate for the end-user. Who are we to judge?

The point is there is no perfect way to invest. Just as there is no perfect way to parent. Everyone parent, child and situation are different. Parenting like investing requires consistency and care, not perfection.

Have you made some mistakes getting to where are you are today? Everyone has. Nobody hits on an investment strategy that works for them right out of the gate. Even if they did it would have to change with them over time. As Kristine Hayes at Humble Dollar writes: As with most things in life, there’s no “one size fits all” solution when it comes to finances. Rather than questioning the decisions I’ve made in the past, I’m beginning to appreciate the things I’ve done right.

Tadas Viskanta reminds us to be grateful for how you got here, because something will change. Soon you will be off in a different direction, figuring things out as you go.

“The best strategy is the strategy you can stick with through thick and thin. That will differ for all investors.” – Wes Gray founder Alpha Architect, an asset management firm 

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13 Dec

Benefits of lower commodity cost are passed on to the consumers- Tata Global Beverages

Update on the Indian Equity Market:

On Thursday, NIFTY closed 0.5% higher. Among sectoral indices NIFTY Metal (+2.4%), NIFTY PSU Bank (+2.2%), and NIFTY Auto (+1.3%) closed higher. NIFTY IT (-1.0%) closed on a negative note. The biggest gainers were Tata Motors (+6.9%), Yes Bank (+5.8%), Vedanta (+3.7%), whereas Infosys (-2.6%), TCS (-1.9%) and ONGC (-1.6%) ended with losses.

Excerpts from an interview of L. Krishnakumar – Executive Director and Group Chief Financial Officer with CNBC- TV18:

  • Mr Krishnakumar said the company is exploring synergies between the consumer business of Tata Chemicals and Tata Chemicals business, and the integration as a larger Food & Beverage company is exciting.
  • The merger will give an opportunity to build scale, both in the existing portfolio that they have in tea, and expand the salt and pulses portfolio of Tata Chemicals.
  • The distribution strength of both the companies will come together to have a direct and indirect reach. It gives an opportunity to cross-sell different products.
  • It will help to innovate and bring new products, as it comes with a lot of intellectual property and people with research and development (R&D) experience in the F&B space.
  • The volume growth in India is strong; it is growing more than 8%. Tea is doing well. In overseas markets, Tetley as a brand had share gains. Teapigs, which is a premium brand, continues to do well.
  • New product launches such as Cold Infusions, has got about 25% market share in the UK. Overall in developed markets, the company is growing in single digits. In India, the growth rate is much higher, at more than 8%.
  • The commodity environment is soft. While volumes are growing, there is no price action that the company is taking. The realisations are lower than in the previous year. The price benefits of lower commodity cost are passed on to the consumers.
  • Commodity cost, especially for tea, is similar to what it was in the first half of the year. Coffee prices in the recent weeks have seen an upward trend. Overall the commodity environment, at this point, is pretty much similar to what it was in the earlier part of the year.
  • Tata Gluco Plus is doing well and it is growing in double digits. It was recently launched in the Eastern markets and it is successful in Odisha, as well as the markets in the North. There are opportunities to scale up the product.
  • The acquisition of Dhunseri Tea and Kalaghoda is doing well.
  • Speaking about Starbucks, Mr Krishnakumar said the stores are more than 160 in number and it is growing at about 30%. Increasing trend of delivery-based sales is improving profitability. The business is growing very fast and company plans to reach to 180-190 stores by the end of financial year.

Consensus Estimate (Source: market screener website)

  • The closing price of Tata Global Beverages was ₹ 323/- as of 12-December-2019. It traded at 37.5x/ 32.6x/ 29x the consensus EPS for FY 20E/ FY 21E/ FY 22E of ₹ 8.6/ 9.9/ 11.1 respectively.
  • Consensus target price of ₹ 308/- implies a PE multiple of 27.7x on FY22E EPS of ₹ 11.1/-.

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12 Dec

Thyrocare: There is a possibility of doing a Jio in the diagnostic industry

Update on the Indian Equity Market:

In a much volatile trading session, markets ended the three-day losing streak as Nifty closed 0.5% up at 11,910. The weekly F&O expiry likely fuelled the volatility in the market. Among the sectoral indices, 9 out of 11 indices traded higher with IT (1.2%), REALTY (0.9%) and FIN SERVICES (0.7%) leading the index while METAL (-0.3%) and PSU BANK (-0.1%) were the only losers. Within the index stocks, GAIL (5.3%), ZEEL (4.9%) and NTPC (2.9%) topped the chart whereas YESBANK (-13.9%), HEROMOTO (-1.9%) and VEDL (-1.3%) offset the gains.

Key takeaways from the interview of Dr A. Velumani, Chairman and MD-CEO, Thyrocare Technologies dated 11th December 2019 published in CNBC TV18:

  • In the last few days, reports indicate that Reliance Industries is set to enter the diagnostics business through its subsidiary Reliance Life Sciences. On this development, Dr Velumani commented that it was an expected move. He said that initially there was a monopoly of BSNL and MTNL, and then came Airtel. There is a possibility of doing a Jio in the diagnostic industry and he is confident that if it gets executed well, it will be very powerful.
  • The industry is already very competitive. The company was able to grow at a CAGR of 40-50% for the first 10 years. He mentioned that the growth was coming because the business model was new to industry at that time. In the current scenario, getting 20% YoY growth itself is very challenging for company. He added that this is happening because the market has understood what works and how it can be made to work.
  • He pointed out to the opportunities to disrupt the diagnostics market. He was tempted to disrupt the market in the past. But, in an investor-dependent company, in a listed company, every decision needs a discussion and after discussions there are no decisions.
  • He said that he is happy to experiment new things until EBITDA of company goes below that of others in the market.
  • About the growth estimates in the Pathology segment, he said that the company delivered growth of 13% in Q1 as well as Q2 of FY20.He expects the FY20E to end somewhere in the 13-14% range which he considered as a good growth in the current market situation.
  •  On being asked about possibility of consolidation in the industry, he said that this industry is brand-driven. Whether it’s a small, local or national brand. Acquiring and merging the brands result in the loss of one brand. Buying a costly brand by paying a premium and killing that brand is something that is not wise. There are some challenges in doing it. He made a case for big players. He is of the opinion that big players can do many things because this industry has a huge potential. It is large and highly unorganized.

Consensus Estimate (Source: market screener website)

  • The closing price of Thyrocare was ₹ 533/- as of 11-December-19. It traded at 23x/ 21x/ 18x the consensus estimate EPS of ₹ 23.1/ 25.4/ 29.8 for FY20E/21E/22E respectively.
  • Consensus target price of ₹ 636/- implies a PE multiple of 21x on FY22E EPS of ₹ 29.8.
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11 Dec

Rs 600 Crore debt repayment in the next 6 months: Mr Anil Dua, Group CEO, Dish TV

Update on the Indian Equity Market:

On Tuesday, NIFTY50 closed 0.7% lower at 11,857. None of the sectors ended in green. The top losing sectors were Media (-1.9%), PSU Bank (-1.6%), Metal (-1.4%) and IT (-1.4%). The gainers among the stocks were Bajaj Finance (+1.3%), Hindustan Unilever (+1.1%), and Cipla (+1.1%). The top losers were Yes Bank (-10.4%), Zee Entertainment Enterprises (-5.1%), and GAIL (-4.4%).

Excerpts from an interview with Mr Anil Dua, Group CEO, Dish TV, published in Livemint dated 10th December 2019:

  • There has been a downgrade from CARE on the short-term bank facility due to a delay in a ₹250 crore short-term loan. This is a temporary downgrade, due to the bunching of some payments.
  • The company has paid ₹ 850 crores in the last eight months and will pay another ₹ 600 crore in the next six months. This repayment will include the ₹ 250 crore delayed payment.
  • Once the debt is less than ₹ 2,000 crore level, they will be comfortable as their Earnings before Interest, taxes, depreciation and amortisation (EBITDA) is more than ₹2,000 crores.
  • They plan to repay about ₹ 800 crores next year as well. This repayment will mostly be done by internal accruals. The company is hoping to get alternate credit facilities to finance their regular capex so that utilisation of cash flow can be normalised towards debt repayment.
  • Talking about the business environment in the new tariff regime, he said the transitional disruption has now settled down.
  • They hope to continue building on their subscriber base and investing into the future with new products such as their new android box.
  • With revenue of more than ₹ 6,000 crores and EBITDA of more than ₹ 2,000 crores, they expect an improvement in EBITDA margins as seen in the last quarter.
  • The Videocon merger has helped realise synergies in interest cost, power cost, logistics, transport and administration. They expect to realise more synergies in content cost, which has been impacted by the new tariff order.

Consensus Estimate (Source: market screener website)

  • The closing price of Dish TV India was ₹ 13/- as of 10-December-19. It traded at 21 x/8.7 x/ 5.4 x the consensus EPS of ₹ 0.6 /1.5 /2.4 for FY20E/FY21E/FY22E respectively.          
  • Consensus target price of ₹ 27.8/- implies a PE multiple of 12x on FY22E EPS of ₹ 2.6.
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