Author - Aniket Khanolkar

  • Aniket Khanolkar
13 Mar

Covid-19 impact on demand is yet to be felt in India – Mr. Sharma, Bajaj Auto

Excerpts from an interview of Mr Rakesh Sharma, Executive Director, Bajaj Auto with CNBC -TV18 dated 12th March 2020

Update on the Indian Equity Market:

On Thursday, NIFTY continued its losing streak, closing at 9,590 (-8.3%). The top losers in NIFTY50 were Yes Bank (-13.0%), UPL (-13.0%) and Vedanta (-12.6%). None of the Nifty stocks ended on a positive note. All the sectors ended on a negative note and the top sectoral losers were PSU Banks (-13.2%), Media (-10.3%) and Realty (-9.8%).

  • Speaking on demand Mr. Sharma said that the impact of Covid-19 in India is yet to be felt.
  • The supply chain is improving for Bajaj Auto and the imports from China have resumed.
  • The attendance of the tier-II, tier-III suppliers in China who supply to vendors of Bajaj Auto had dropped to 10% but now the attendance is steadily rising. Now attendance is about 75%.
  • There could be new linkages emerging between Italy, Germany, and China and if that happens the company will have to watch out but at this point, the supply chain situation is improving and the demand situation within the country is not yet seeing much of an impact.
  • Some congestion at ports is causing 6-7 days delay, but it is an insignificant issue for Bajaj Auto.
  • Speaking about the next quarter, he said, the recovery process will be slow as underlying demand was impacted because of the BS-VI shift and the sentiment is now affected because of the coronavirus.
  • Q1FY21 will be a difficult quarter, the virus will act as a negative force and adjustment of people to new cost which requires positive sentiment is difficult in this scenario.
  • Speaking about the current market scenario, he said the cost of money will not be an issue but due to the economic backdrop the logic on lending is becoming severe.
  • About the autos, he said 30-40 percent of sales in March have shifted to BS-VI.

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

  • The closing price of Bajaj Auto was ₹ 2,350/- as of 12-March-2020.  It traded at 13.5x/12.8x/ 11.4x the consensus earnings estimate of ₹ 173/ 183 /205 for FY20E/21E/22E respectively.
  • The consensus target price for Bajaj Auto is ₹ 3,280/- which implies a PE multiple of 16x on FY22E EPS of ₹ 205/-.
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03 Mar

No effect of coronavirus on supply production – Shashank Srivastava, Maruti Suzuki

Excerpts from an interview of Mr Shashank Srivastava, Executive Director – International Operations, Maruti Suzuki with CNBC-TV18 dated – 2nd March 2020:

Update on the Indian Equity Market:

NIFTY continued its losing streak on Monday, it closed at 11,133 (-0.6%). The top gainers in NIFTY50 were HCL Tech (+2.5%), Eicher Motor (+2.5%) and Nestle (+2.2%). Whereas Yes Bank (-6.7%), SBI (-5.1%) and Tata Steel (-4.7%) were the top losers. All the sectors ended losers except NIFTY IT (+1.4%). The top sectoral losers were Media (-4.6%), PSU (-4.5%) and Metal (-2.2%)

  • Speaking about the coronavirus impact on disrupting the supply chain, Mr. Srivastava says, there is no effect on the international operation as far as supply production is concerned.
  • On the domestic front, he says, as the first half (H1) figures were negative for the industry and also for Maruti Suzuki, somewhere in the range of like 16-17 per cent. The thirds quarter figures were positive for Maruti though the industry was negative.
  • February seems to be negative across the space, except for a couple of manufacturers like Ford and Renault.
  • Speaking about the BS-IV to BS-VI transition he says, the had some transition issue in February which would continue in March as well.
  • About the rural-urban split he says, Rural like last year was around 36 per cent of total sales. This year so far 38.5 -39 per cent is coming from rural areas. There has been an uptick in the second half.
  • The monsoon ending up with a positive 4% has led to the expectation of bumper rabi crop and therefore the sentiments in the rural areas are much better and that is reflected in the sales of the past few months.
  • Speaking about growth expectations, he says, the company is positive for the next year as rural demand sentimentally has been better. However, the consensus growth expectations seem to be in the range of 3-5 per cent for the industry.
  • The company has stopped BS-IV production altogether in January and now they are only producing BS-VI vehicles. The company started this transition almost a year ago.
  • The inventory of BS-IV stock is around 2500 units, which seems to be a half-day stock for the company.

Consensus Estimate: (Source: market screener website)

  • The closing price of Maruti Suzuki was ₹ 6,300/- as of 02-March-2020.  It traded at 31x/24.6x/ 20x the consensus earnings estimate of ₹ 202 / 256 / 314 for FY20E/ FY21E/ FY22E respectively.
  • The consensus target price for Maruti is ₹ 7,227/- which implies a PE multiple of 23x on FY22E EPS of ₹ 314/-.

 

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20 Feb

No problem on the retail front – V. Vaidyanathan, IDFC Bank

Excerpts from an interview of Mr. V. Vaidyanathan, Managing Director, and Chief Executive Officer, IDFC First with CNBC-TV18:

Update on the Indian Equity Market:

On Wednesday, NIFTY ended positive at 12,130 (+1.2%). The top gainers in NIFTY were Bharti Infratel (+7.0%), Grasim (+4.4%) and Coal India (+3.5%). Whereas Tata Motors (-2.2%), JSW Steel (-1.40%) and Sun Pharma (-1.32%) were the top NIFTY losers. All the sectors were in the green. The top sectoral gainers were pharma (+2.32%), Media (+1.94%) and FMCG (+16.4%).

  • Speaking about telecom exposure of the bank, Mr. Vaidyanathan said the total exposure to telecom is ₹ 5,900 crore out of which ₹ 2,700 crores are for Bharti Airtel and Jio together and ₹ 3,300 crore exposure for Vodafone on which the bank has taken 50% provision.
  • He says, out of the names other than Vodafone, there is nothing to worry about. Except for the telecom sector the total exposure on the watch list is roughly ₹ 3,500 crore, which the bank is tracking on a quarterly basis.
  • Out of the ₹ 3,400 crore watch list the bank has taken 51% provisions. The bank has exposure to Reliance Capital, Dewan Housing Finance Ltd (DHFL), and SICAL.
  • The bank has provided 75% provisions to Reliance and DHFL.
  • The bank has got ₹ 825crore on legacy watchlist accounts.
  • Out of the ₹ 51,000 crore book, close to 40% is MSME book, 49-50% is the consumer financing book and close to 11% is housing finance. For the bank, each one of these three segments are behaving very well.
  • Mr Vaidyanathan said people connect anything with anything, there are worries like coronavirus and some trade delays as well but, coronavirus has got nothing to do with secured and unsecured in India.
  • On the retail front the bank is not having any problem.

Consensus estimates:

  • The closing price of IDFC First Bank was ₹ 40/- as of 19-February-2020. The consensus target price for the bank is not available.
  • The bank reported a loss for the year ended 31st March 2019 of ₹ 4.7 per share. The reported loss for nine months ended 31st December 2019 stood at ₹ 6.10, which was ₹ 4.39 for nine months ended 31st December 2018.

 

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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/-.

 

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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.
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23 Jan

Growth is bound to come – Shyam Srinivasan, Federal Bank

Excerpts from an interview of Mr Shyam Srinivasan, MD & CEO, Federal Bank with CNBC TV-18 dated 21-01-2020:

Update on the Indian Equity Market:

On Wednesday, NIFTY closed -0.5% lower. Among sectoral indices NIFTY Metal (-1.5%), NIFTY PVT Bank (-1.0%), NIFTY Auto (-0.9%) closed lower. While Nifty Media (1.7%), NIFTY IT (+1.0%), NIFTY FMCG (+0.02%) closed on a positive note. The biggest gainers were Zeel (+4.9%), Grasim (+2.6%), Nestle (+1.8%) whereas ONGC (-5.3%), Cola India (-5.2%) and NTPC (-3.9%) ended with losses.

  • It was a weak third-quarter for Federal Bank as loan growth and net interest margins came in at an all-time low.
  • Mr Srinivasan says, there are no significant issues except for the two housing accounts which are under stress. Other granular businesses are showing marked progress and it will continue.
  • He says they don’t have a single case above 100 cr which is dodgy and therefore the outlook is positive.
  • Speaking about their non-corporate book, he says, their portfolio is significantly secured. Banks that celebrated unsecured success over many quarters had the gains and now have to face some pain.
  • As the portfolio is secured, between now and next 3-4 quarters, the bank does not expect any large formation of stress on the secured side unless property prices get crash.
  • On loan growth, he says, retail is looking north of 24-25 per cent. The large tickets are okay, so the blended margins as the bank exit FY20 will be between 14%- 15%.
  • The gold loan book is expected to grow at 25%. The bank is also gaining share in the auto loan segment, particularly in Mumbai, Kerala and south.
  • Agriculture is seeing pain across banks due to waivers announced by various states.
  • He says growth is bound to come. It cannot keep the system in paise mode. So, the focus will be on getting credit cost down.

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

  • The closing price of Federal Bank was ₹ 93.70/- as of 22-January-20. It traded at 1.2x / 1.1x / 1.0x the consensus Book Value for FY20E / 21E / 22E of ₹ 73.0/81.5/90.6 respectively.
  • Consensus target price of ₹ 112/- implies a Price to Book multiple of 1.2x on FY22E Book Value of ₹ 90.6.
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14 Jan

We have targeted 10-15% growth in gold loan -V.P. Nandakumar, Manappuram Finance

Excerpts from an interview of Mr V.P. Nandakumar, MD, and CEO, Manappuram Finance with Live Mint dated 13-01-2020:

Update on the Indian Equity Market:

On Monday, NIFTY closed +0.6% higher. Among sectoral indices NIFTY Realty (+2.1%), NIFTY IT (+1.7%), NIFTY Metal (+1.2%) closed higher. None of the sectoral indices closed on a negative note. The biggest gainers were Infosys (+4.7%), IndusInd Bank (+3.7%) and Coal India (+3.1%) whereas Yes Bank (-5.8%), Bharti Infratel (-1.2%), and UPL (-1.2%) ended with losses.

  • Mr Nandakumar says, the all-inclusive cost is expected to be around 11%. on January 13, 2020, the company will finalize the hedging portion.
  • The coupon rate is 5.9%. The hedging rate is yet to be finalized.
  • Mr Nandakumar says they want to diversity liability and this is a new addition.
  • The incremental cost is 9.2%, this is costly, but diversification of liability is needed as there are liquidity challenges in the non-banking financial companies (NBFCs) sector and the company is a little more cautious about that.
  • So far, the company has not been affected.
  • Speaking about the slowdown in vehicle financing, Mr Nandakumar says, they do not lend to fleet owners.
  • Primarily the thrust area is lending to the operators who have one-two trucks, this segment remains stable.
  • Recoveries remain the same. The company will be achieving around 30-35% growth in the commercial vehicle (CV) finance this year.
  • The company has targeted 10-15% growth in gold loan and they are confident to achieve it.

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

  • The closing price of Manappuram Finance was ₹ 177/- as of 13-January-20. It traded at 2.6x / 2.1x / 1.8x the consensus Book Value for FY20E / 21E / 22E of ₹ 65.7/81.3/97.6 respectively.
  • Consensus target price of ₹ 177/- implies a Price to Book multiple of 1.8x on FY22E Book Value of ₹ 97.6.
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03 Jan

2020 will be the best year in terms of recoveries – Rajnish Kumar, SBI

Excerpts from an interview of Mr Rajnish Kumar, Chairman, State Bank of India with live mint dated- 02-01-2019:

Update on the Indian Equity Market:

On Thursday, NIFTY closed +0.8% higher. Among sectoral indices NIFTY Metal (2.7%), NIFTY PSU Bank (+2.0%), NIFTY PVT Bank (+1.2%) closed higher. NIFTY IT closed on marginally negative. The biggest gainers were Tata Motors (+5.1%), Tata Steel (+4.3%) and UltraTech Cement (+4.2%) whereas Eicher Motors (-2.3%), BPCL (-1.0%), and Bajaj Auto (-0.9%) ended with losses.

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  • Mr Kumar says, there is an issue around credit growth particularly in the corporate sector. This year, estimated growth is around 7-8%.
  • Non-performing assets (NPAs) are alright, atheist the recoveries are happening.
  • Term loans are growing. The year-on-year growth is ₹1.7 trillion. Last year, the bank had seen good disbursements and that helped to achieve high credit growth of 13%.
  • He says the pickup in capacity utilization has not happened as of now. It would have been reflected in working capital utilisation if there was any pickup.
  • Speaking about sector growth, he says, only three sectors have proposals with SBI – roads, solar and city gas projects or oil and gas.
  • Speaking about Jet Airways, he says, it has been left to resolution professional. If the RP decides to go for one more round of bidding, then the bank will make one more attempt.
  • The pace of referrals with National Company Law Tribunal (NCLT) will come down. There are not many cases now that are ₹1,500 crore and above.
  • Speaking about steps expected by government or RBI to revive growth, he says, some sector-specific steps are required, telecom issues need to be sorted out.
  • In terms of recoveries, the coming quarters are going to be the best. 2018 was the best year in terms of NPA provisions and 2020 will be best year in terms of recoveries. 2021 onwards things will be normal unless there is a major shock.

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

  • The closing price of SBIN was ₹ 339/- as of 02-January-20. It traded at 1.3x / 1.2x / 1.0x the consensus Book Value for FY20E / 21E / 22E of ₹ 251/ 281/ 322 respectively.
  • Consensus target price of ₹ 376/- implies a Price to Book multiple of 1.1x on FY22E Book Value of ₹ 322/-.
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24 Dec

December is a big month for PVs: Ashish Kale, President, FADA

Update on the Indian Equity Market:

On Monday, NIFTY closed -0.1% lower. Among sectoral indices NIFTY PSU Bank (-1.3%), NIFTY Realty (-0.4%), and NIFTY FMCG (-0.5%) closed lower. while NIFTY Media (+0.9%) NIFTY Auto (+0.6%) Nifty Fin Services (+0.2%) closed on a positive note. The biggest losers were Yes Bank (-3.8%), Nestle (-2.4%), Reliance (-1.8%) whereas Zeel (+3.6%), Vedanta (+2.4%), Maruti (+1.6%) ended with gains.

Excerpts from an interview of Mr. Ashish Harsharaj Kale, President of Federation of Automobile Dealers Associations (FADA) with CNBC-TV18: 

  • Mr Kale said not just the companies, but even the dealers are currently at an inventory of 30-40 days.
  • The availability of fuel is now clear that it is going to be available only from April 1, pan India so most of the manufacturers have planned 100 percent production shift only by end of February or first week of March. So, dealers will continue to buy BS-IV vehicles and it will give a very short window of a month to liquidate the entire inventory.
  • Speaking about companies with larger inventories he said the Society of Indian Automobile Manufacturers (SIAM) would be better placed to talk about the inventory. About dealer inventory, the passenger vehicle (PV) inventory is at 30 days and both two-wheeler and commercial vehicle (CV) is at 40 days.
  • The demand situation in December is good but conversions have just started.
  • December is a big month for PV because of the year-end combined discounts that come in.
  • For two-wheelers and CVs enquires are coming.
  • Speaking about price hikes due to BS-VI transition, he says, few vehicles have already launched and the cost difference is between 10% to 13%.
  • In case of CVs the price change is anticipated to be in between 12% to 14%, although none of the manufacturers have come up with a BS-VI pricing.

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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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