Author - Abhishek Salunke

  • Abhishek Salunke
19 Feb

Planning for double-digit revenue growth in FY21E: Page Industries

Update on the Indian Equity Market:

Following its Asian peers, the markets continued the downward trajectory on Tuesday with Nifty closing 53 points lower at 11,993. With the majority of result season wrapped up by last Saturday, the focus has been shifted to the global macros. Within the sectoral indices, only two indices, Media (1.9%) and IT (0.6%) ended the day higher while METAL (-1.2%), AUTO (-1.0%) and REALTY (-0.9%) were the highest losers. Among the index stocks, COALINDIA (2.9%), ZEEL (2.7%) and BPCL (2.3%) were the gainers whereas INFRATEL (-11.3%), YESBANK (-6.3%) and TATAMOTORS (-3.9%) brought the index lower.

Excerpts from an interview with Mr. Chandrasekhar K., CFO – Page Industries published in ET NOW on 14th February 2020:

  • Commenting on the 3QFY20 result, Mr Chandrasekhar said that there is a temporary dip in PAT because of investments that company has made in sales, marketing, people and technology. This is the only way for company to drive sustainable growth in the future.
  • The growth in revenues for 3QFY20 as well as for 9MFY20 was at 7%. This was lower than what the company had expected. He said that if the company had volume growth in mid-teens, all of the above stated expenses would have been fully absorbed and the company would have maintained the margins. Whenever the demand returns, the margins will be back to the historical levels.
  • He said that the company operates in an under-penetrated premium apparel market and there are multiple opportunities for growth. The company is expanding its presence and distribution in exclusive business outlets and continue to invest in technology.
  • The street is expecting the industry to grow at 10% in FY21E. The company is also expected to achieve double-digit growth. He said that FY21E should be better than FY20.
  • Instead of looking at market share, the company focuses on the penetration levels in the industry. The company has a penetration of 20% into the premium men’s innerwear market. The company has penetration levels of 6-8% in women’s market as well as in athleisure which is an activewear segment.
  • The company enjoys a strong consumer base. It has a reach of more than 63,000 retail outlets and the company is able to withstand the slow phase. The company currently operates through 720 Exclusive Business Outlets (EBO) and has a target of reaching more than 1,000 EBOs by FY21E.
  • The company has aggressively ramped up the kids’ clothing portfolio. The acceptance has been pretty good in the market. The segment has grown almost 45% this year and the company has created a separate channel for kids. The company is also planning to open exclusive Jockey junior EBOs in the coming quarter.

Consensus Estimate: (Source: market screener website)

  • The closing price of Page Industries was ₹ 22,689/- as of 18-February-2020.  It traded at 63x/ 51x/ 44x the consensus earnings estimate of ₹ 362/ 445/ 520 for FY20E/ FY21E/ FY22E respectively.
  • The consensus target price for Page Industries is not available on market screener website.
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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 /-
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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.

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22 Jan

BFSI and retail will drive growth in the medium and long term: TCS

Update on the Indian Equity Market:

The markets continued the downward trajectory on Tuesday with the Nifty falling 55 points to close at 12,170. Monday’s fall was on the back of a combination of selling pressure from the DII and muted participation by FIIs. Within the index, some of the stock movements were a reaction to the quarterly results declared by the company. Within the sectoral indices, only Media (2.2%) closed the day in green while REALTY (-1.5%), AUTO (-1.4%) and METAL (-1.4%) led the laggards. Within the index stocks, INFRATEL (8.6%), ZEEL (4.5%) and BPCL (1.4%) were the top gainers whereas TATASTEEL (-3.3%), M&M (-2.9%) and TATAMOTORS (-2.4%) were the top stocks that ended in the negative.

Excerpts from an interview with Mr Rajesh Gopinathan, CEO – TCS. The interview aired on CNBC-TV18 on 20th January 2020.

  • TCS declared 3QFY20 results with a YoY increase of 0.2% in consolidated net profit at ₹ 81,180 mn. In this interview, he discussed the third quarter performance and the outlook in detail.
  • He is hopeful of sustaining margins at around 25 percent going forward on back of their strong delivery model. The company has been investing continuously in the organic talent building capability and over time, the investment into the group of 5-12 year old people has been significant. This has been going for on for last five- six years. He believes that the pool is now very strong and there is an opportunity to expand the base.
  • The company is aspiring to achieve margins of 26%. To achieve the target, the combination of operational elements and the currency needs to be supportive. Both the things came together in the 3QFY20. The currency will remain volatile. However, he believes that the way things are moving, probably that will also be supportive of the medium-term.
  • He said that the medium to long term growth trends will be based on BFSI and retail because the rest of the verticals are firing all cylinders. They are all well into the double digit space. In BFSI & retail, the company is observing very diverse performance across geographies and sub-segments. The weakness can be isolated down to the large banks and the large retailers in US and UK. The company is not losing wallet share in these geographies but it is the sub-segment that forms large part of the base business.
  • In terms of addition to headcount, he said that it is 23,500 this year, same as last year. The hiring was front-loaded during the current year.
  • In the retail space, more traditional retailers seem to be finding their groove. In the US, the players like Best Buy and Walmart are doing significantly better and standing up to the pure online players very well. He believes that the company will revert back to double digit growth in the retail segment.

Consensus Estimate (Source: market screener website)

  • The closing price of TCS ₹ 2,170/- as of 21-January-2020. It traded at 25x / 23x / 21x the consensus EPS for FY20E / 21E / 22E of ₹ 88.0/ 96.1/ 104.0 respectively.
  • Consensus target price of TCS ₹ 2,108/- implies a PE multiple of 20x on FY22E EPS of ₹ 104.0.
By IT, TCS , 0 Comments Read more...
17 Jan

Hopes high for a moderate or even no tax hike on Cigarettes in the budget: Wadhera

Update on the Indian Equity Market:

On a much volatile session, Nifty see-sawed in both directions to end the day with a gain of 12 points to close at 12,356. The weekly F&O expiry might be the reason behind this volatility. Among the stocks, EICHERMOT (4.3%), NESTLEIND (3.4%) and ZEEL (2.8%) took the index higher whereas NTPC (-2.3%), INFRATEL (-2.0%) and JSWSTEEL (-2.0%) were the laggards. Within the sectoral indices, all but one index, METAL (-1.3%) traded in red while MEDIA (1.4%), REALTY (0.7%) and PHARMA (0.4%) were the biggest gainers.

Excerpts from an interview with Mr Bhisham Wadhera, CEO – Godfrey Philips India. The interview aired on CNBC-TV18 on 15th January 2020.

  • In the first half of FY20, the company witnessed a growth of 15% in Cigarettes business. The outlook for the remaining FY20E and FY21E depends on the outcome of Union Budget which will be presented on 1st February 2020.
  • The government has realized that moderate hike in taxes increases their revenue substantially. He is of the opinion that there will be moderate or no tax increase on Cigarettes in the coming budget.
  • Though the cigarette industry is largely dependent on GST, the government introduced excise again in the last year. The company is not sure about how this will pan out in future.
  • The domestic market share of the company increased from 11.7% in the last year to 12.8% and including Marlboro, it is coming at 13.5% right now. The bulk of this has been on the back of new markets in Andhra Pradesh & Karnataka. He said that the company has been successfully attacking the ITC bastions pretty strongly.
  • The cess on tobacco is a subject of GST whereas the excise is a subject of Union Budget. There is a possibility of increase in the excise component. Last year, it was a nominal ₹ 5 per thousand cigarettes.
  • The company has launched a Marlboro lower-priced version of regular size filter in Delhi two months ago. It is at par with Gold Flake premium of ITC. The early signs show it is doing reasonably well.
  • From March- April, the company plans to expand its footprint in the North. As of now, the company operates through 100 stores. He plans to make a presentation to the board next month on the expansion plans. By the end of February, the expansion plan will be made public.

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

  • The closing price of GODFRYPHLP ₹ 1,397/- as of 16-January-2020. It traded at 20x / 17x the consensus EPS for FY20E / 21E of ₹ 71.4/ 83.3 respectively.
  • Consensus target price of GODFRYPHLP is not available.
By Cigarette 0 Comments Read more...
02 Jan

On track to achieve 10% loan growth in FY20: VP Nandakumar, Manappuram Finance

Update on the Indian Equity Market:

The stock market started 2020 on a cautious note as Nifty posted muted gains of 14 points to reach 12,182. Among the stocks, the gainers were led by ADANIPORTS (3.1%), POWERGRID (2.7%) and NTPC (2.1%) whereas TITAN (-2.8%), EICHERMOT (-1.9%) and INDUSINDBK (-1.5%) were the laggards. 6 out of 11 sectoral indices were in the red with MEDIA (-0.6%), AUTO (-0.5%) and REALTY (-0.3%) being the top losers while IT (0.5%), FMCG (0.3%) and FIN SERVICES (0.2%) were the gainers.

Excerpts from an interview with Mr VP Nandakumar, MD & CEO, Manappuram Finance published on ETNOW:

·        Manappuram has achieved net profit CAGR of 40% in the last 10 years. Mr Nandakumar talked about the strategy which helped the company to deliver growth. The company was focusing on reducing the contract period in gold loan from one year to three months with an option to the customer to renew that every quarter by paying full interest plus bringing the LTV to the new level.

·        The company is able to collect the interest almost every month now and the auctions have come down drastically. It used to be around 4-5% of the total disbursals in the past which has come down to less than 0.5% now.

·        He said that the emphasis is now on new customer acquisition and maintaining the customer base through the use of digital gold loan platform. This facility allows customers to store their jewellery for free. He can also use the gold to avail and service the loan 24 hours a day. Even after office hours, the company observes transactions worth millions of rupees taking place through online platform. Even on holidays, sometimes it touches ₹ 1,000 mn.

·        The company has given a guidance of 10% growth in the loan book for FY20. He is confident of achieving the target. As for the geographies, the growth has been seen all over India, other than the Southern states. This is because of the lower competition amongst the organised lenders. The Bimaru states (Bihar-Rajasthan-Madhya Pradesh-Uttar Pradesh) are showing better growth, the reason being low competition in the states. The strategy of expanding into places, where there is a high concentration of unorganised lenders is paying off for the company.

·        In the last few months, gold prices have gone up and the average LTV in the books have come down. It is somewhere near 60% now which indicates that many of the customers are not availing the full LTV. Maybe around 5-10% or maybe at the maximum 15% of the customers may go for the highest LTV. Others borrow on the basis of their need. The contract period is only for three months. The average life of the loan is around 70 days only. At 70 days average duration plus the LTV of around 60% and ticket size of around Rs 35,000, The Company is insulated by price fluctuation.

·        About the non-gold segment, the asset quality remains the same without any vitiation like in microfinance and the collection remains around 99%. The strategy is to focus on quality. It also enjoys the highest credit rating from CRISIL– AA minus and because of that, the liquidity comfort for the company remains good. For other businesses like vehicle finance, our GNPA was around 2.9% in the last quarter. That has been maintained at the same level whereas the industry GNPA remains higher.

·        In the home finance segment, NPAs are brought down consistently. This quarter, the company plans to bring it to around 4% and towards the end of this year, the company is trying to further bring it down to around 3%. The asset quality in non-gold segments will be improved at the cost of business, still, these businesses like microfinance may grow at around 30%, vehicle finance also may grow around 30%, as would CV financing.

Consensus Estimate: (Source: market screener website)

·        The closing price of Manappuram Finance was ₹ 177/- as of 01-January-20. It traded at 2.7x/ 2.2x / 1.8x the consensus Book Value estimate for FY20E/ FY21E/ FY22E of ₹ 65.7/ 81.3/ 97.6 respectively.

·        Consensus target price of ₹ 177/- implies a PB multiple of 1.8x on FY22E BV of ₹ 97.6/-.

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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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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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03 Dec

Yes Bank: $2 billion funding to be key driver when improving economy creates opportunities

Update on the Indian Equity Market:

Following the weak macro data released on Friday, the markets started the week on a negative note with Nifty falling 7.8 points to close at 12,048. Among the sectoral indices, all but one index, METALS (0.3%) traded higher whereas IT (-0.9%), AUTO (-0.9%) and PSU BANK (-0.9%) led the decline. Within the index stocks, BHARTIARITL (4.1%), JSWSTEEL (2.5%) and RELIANCE (2.3%) topped the chart whereas YESBANK (-6.6%), EICHERMOT (-5.2%) and INFRATEL (-3.2%) took the index lower.

Yes Bank:  $2 billion funding to be a key driver when improving economy creates opportunities

Yes Bank on Friday informed exchanges about raising $ 2 billion by selling new shares to a clutch of institutional investors and wealth managers. Key takeaways from the interview of Mr Ravneet Gill, MD & CEO, Yes Bank  dated 2nd December 2019 published in CNBC TV18:

·        On being asked why the bank is raising $ 2 bn instead of an earlier target of $ 1.2 bn, Mr Gill mentioned that given the increase in the authorised share capital which was approved in the board meeting of August, at the current market price, enables the bank to raise a lot more capital.

·        The market is worried about whether the Reserve Bank of India (RBI) will approve the names of investors. He said that the capital raising is taking place on a preferential allotment basis. There are strict guidelines in terms of qualification of investors.

·        According to the norms, any fund that has sold the Yes bank stock in the last six months is not allowed to participate. The one year lock-in period of the offer makes the domestic mutual fund ineligible. As a result, the bank had to work with limited planned universe. According to him, two things were important before finalizing names of investors; size and partners who were in alignment with the strategy of the banks and who could remain long-term partners for the bank.

·        About the investment offer made by Erwin Singh Braich for $1.2 bn, he said that the bank has done enough due diligence about this transaction. The big question is about whether the investor has the wherewithal to be able to bring in investment of that size. According to him, the investor will be able to satisfy the market on that very shortly.

·        He mentioned that although this is a binding offer, there is no bank guarantee attached to it. But the investors have gone to great length to show their resources of funding and whether they can meet the requirement or not.

·        About the voting rights post-dilution; he said that the investors have no desire for controlling the operations of the bank. The investors have invested based on the thesis that they see private banks in India as a very strong investment opportunity. As a result, even if the voting rights of these investors are curtailed by the RBI, it would not matter much to the investors.

·        The investors have asked for board representation. He defended this demand of investors by saying, “if you are making an investment of that size, then board representation makes sense.” He also added that they are not looking for management rights or control functions.

·        The bank has also received interest from the family office of Citax holdings Ltd. & Citax holding group for an investment of $500 mn. This will need the approval of RBI given the fact that the investment is for above 5% stake. The bank plans to take these bids to the regulator for approval.

·        He agreed that the current investments are done on below book value which is not a good idea for the existing shareholder. But the very reason why the bank is trading at a discount is that the market’s view is that it needs more capital. And the moment that capital comes, the market will see the pickup in valuations as well.

·        On the growth opportunities for the bank, he said that the country has hit the bottom in terms of economic macros and from hereon, there will be a pickup. This will create a lot of opportunities for the bank. The dislocation in the whole NBFC space and public sector banks expanded the addressable market for the bank. With the capital that is coming, the bank could grow at a very robust pace.

Consensus Estimate (Source: market screener website)

  • The closing price of Yes Bank was ₹ 64/- as of 02-December-19. The Consensus estimate for Book Value of Yes Bank is not available. 
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13 Nov

VIP Industries: Revenue growth target of 5-10% for next quarter as well as for the whole year

Update on the Indian Equity Market:

Markets started the week marginally higher as Nifty closed the day 5 points higher to 11,912. 6 out of 11 sectoral indices closed the day on a positive note with MEDIA (2.8%), PVT BANKS (1.4%) and BANK (1.3%) led the gains while IT (-0.5%), FMCG (-0.5%) and AUTO (-0.2) were the laggards. Among the stocks, ZEEL (6.2%), YESBANK (5.7%) and BPCL (2.8%) led the index higher whereas NESTLEIND (-2.4%), HEROMOTO (-2.1%) and HINDALCO (-2.1%) were the worst-performing stocks.

VIP Industries:  Revenue growth target of 5-10% for next quarter as well as for the whole year

Key takeaways from the interview of Mr Dilip Piramal, Chairman, VIP Industries dated 11th November 2019 published in LiveMint:

  • Mr Piramal started the interview with his remarks on the 2QFY20 performance of VIP Industries. He mentioned that though revenues were lower, EBITDA was higher due to two reasons. First, due to the implementation of IND-AS 116, the EBITDA went up by 6 basis points. Second, the company also witnessed improvement in gross margins which contributed to the EBITDA growth.
  • The company reported YoY growth of 3% in revenues. He said that he was not surprised by the lower growth in revenues as it aligns with the general trend in the economy.
  • About the revenue growth in the future, he said that things are slightly better than before. The company is looking to achieve between 5-10% growth in this quarter and for the whole year. This is lower as compared to the historical growth rate of around 25%.
  • On being asked about whether the customers are up-trading, he said that there is not much of a change. In fact, the lower end is increasing faster for about nearly one year.
  • He mentioned that there is no increase in competition for the company. The industry is very small with two bigger players and one quite small player who is very competitive in the lower end. It is more like a segment-wise competition. The competitive pressure is the same.
  • After the implementation of Goods and Service Tax (GST), the market share has moved from unorganised players to the organized players. The company achieved a growth of 25% in FY18 largely on the back of implementation of GST.

Consensus Estimate (Source: market screener website)

  • The closing price of VIP Industries was ₹ 437/- as of 11-November-19. It traded at 37x/ 30x the consensus EPS for FY 20E/ FY 21E of ₹ 11.8/ 14.6 respectively.
  • Consensus target price of ₹ 509/- implies a PE multiple of 35x on FY22E EPS of ₹ 14.6/-.
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