Author - Richa Varu Rathod

  • Richa Varu Rathod
25 Mar

Bottom of pyramid businesses & SMEs are not highly leveraged, says Aditya Puri, HDFC Bank

Update on the Indian Equity Market:

On Tuesday, NIFTY ended up 190 pts up (+2.5%) at above 7,800 level amid Finance Minister Nirmala Sitharaman announcements to move tax deadlines and ease of rules to fight Coronavirus.

Among the sectoral indices, IT (6.1%), FMCG (3.2%) and PHARMA (2. 8%) were among the top gainers while REALTY (-2.0%) was the only sector to close lower. INFY (+14.0%), ADANIPORTS (+13.8%) and BRITANNIA (+11.8%) were the top gainers. M&M (-8.0%), GRASIM (-7.7%) and IndusInd Bank (-6.8%) were the top losers.

Bottom of pyramid businesses & SMEs are not highly leveraged, says Aditya Puri, HDFC Bank

Edited excerpts of an interview with Mr Aditya Puri, Managing Director & Chief Executive Officer of HDFC Bank; dated 23rd March 2020:

  • His views on COVID-19 – He is happy with the lockdown and suggested that we should control this situation and work towards decreasing the number of cases, this will be the best thing that can happen to everyone now.
  • When asked about where he sees the financial market and economy going ahead, he commented that in such crisis financial backing is needed looking at the difficulty we will be going through. A non-schedule rate cut is necessary for both to keep the yields in check as well as to give a clear message to the market that we are willing to go to whatever stake necessary. A forbearance for the cash flow problem that the virus will create is needed as it is not that the companies are going bad, there could be cash flow mismatches and the more liquidity provided will make sure that life after the virus is better.
  • While giving a picture about his bank he said that if the companies survive, the country will survive and the banks will also survive. HDFC Bank has been working on this. They are sitting on the liquidity of USD 5 bn and their total portfolio is rated AAA at an internal risk rating of 4.3. HDFC Bank has lent most of their wholesale to 80% to AAA companies. On the PL side, they have lent to the same fellows for salary and he expects salary cuts. 75-80% of personal loans and credit cards are to the same salaried employees there. It is difficult for the Bank to take a call before laying off starts but he expects salary cuts for sure before that.
  • He stated that as far as SME portfolio is concerned compared to the others, 80% of the portfolio has got additional collateral and they have a self-funding ratio in SME of 85%. He also said that he is more concerned with the health aspect than being concerned about the bank.
  • He further added that their bottom of the pyramid on the businesses is not highly leveraged, so when they went to the ground for the shopkeepers, they are not highly leveraged. A large part of SMEs also is not highly leveraged.
  • Talking about rural India he said that it is functioning in its own world. The only thing we have to do is stop people going back there and spreading. People there have the money and the demand is coming from rural areas.
  • With regards to earnings, he said that there will not be a flat quarter or a drop in profit and investors would be surprised with the numbers. He will also create a corona reserve and come out still okay.
  • On the work from the home structure, he said that ~33% of their people are working from home now and he sees no reason why they shouldn’t continue after corona which gives a further drop in our costs. So, their cost to revenue ratio is going down. HDFC Bank has substantially increased their distribution, they have the technology and USD 5 bn of liquidity and it is still coming in.

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

  • The closing price HDFC Bank was ₹ 774/- as of 23rd March 2020. It traded at 2.5x/ 2.1x/ 1.8x the consensus book value estimate of ₹ 311/ 360/ 420 for FY20E/ FY21E/ FY22E respectively.
  • Consensus target price of ₹ 1445/- implies a PBV multiple of 3.4x on FY22E EPS of ₹ 420/-
By HDFC Bank 0 Comments Read more...
16 Mar

Rural India has felt more of a squeeze from the slowdown, says Adi Godrej, chairman, Godrej Group

Update on the Indian Equity Market:

On Friday, NIFTY ended up 433 pts up (+4.5%) at above 10,023 level. It was an eventful and highly volatile session with significant gains after posting a record intra-day recovery. The Nifty50 index was locked in 10 per cent lower circuit early morning, prompting a halt in trading for 45 minutes. However, once the markets re-opened, the headline indices Sensex and Nifty shot up as much as 5,381 points and 1,604 points, respectively, from their early morning lows. The volatility index surged over 24 per cent during the session.

PSU Bank (+11.7%), Financial Services (+6.2%), and Metal (+6.5%) were the top performing sectors. Media (-0.6%) was the only loser for the day.

Among stocks, SBI (+14.9%), TATA Steel (+14.5%), and HDFC (+10.5%), were the top gainers. UPL (-7.2%) ZEEL (-4.2%) and NESTLE IND (-3.7%) were the top losers.

Rural India has felt more of a squeeze from the slowdown, says Adi Godrej, chairman, Godrej Group

While the discretionary spend in rural areas has not risen as per expectations, FY21 is likely to deliver better numbers than the ongoing fiscal, says Adi Godrej, Chairman of the Godrej Group.

Edited excerpts of an interview with Mr Adi Godrej, Chairman of the Godrej Group; dated 13th March 2020:

When asked about his views on GST implementation he said that the implementation of GST has been good for the economy and it would not be correct to attribute the decline in GDP growth to the new tax regime. There are other factors like the China and US trade war or the killing of an Iranian general by the Americans that might have impacted the economy; we can’t be sure. So, it’s a combination of geopolitical and other factors that have affected GDP growth. He also added that there is no doubt that the economy has slowed down, but it will recover, if only slowly and expects FY21 to be better than FY20.
He commented that for FMCG products, the slowdown has been more pronounced in the rural areas, though rural growth was ahead earlier. The rural economy has been impacted by the slowdown in production and an irregular monsoon. Also, the discretionary spend of the rural population has not grown as per expectations. He expects to fare better in FY21, though a lot would depend on government policy going forward.
When asked about his suggestion on steps that should be taken by government to boost overall consumption, he suggested that there might be no tax on agriculture, but animal husbandry is taxed fully, bringing under the net income from poultry, dairy, fisheries, etc. which affects rural growth.
He informed that Godrej Agrovet was affected but it managed to recover from the lows and the business is expected to grow provided the government accepts the suggestion of treating animal husbandry on a par with agriculture.
He stated that Godrej Consumer Products Ltd (GCPL) performed better in 3QFY20. The international businesses have been performing well as the economies there have done well, especially Indonesia, which is a large market for GCPL. The hair care business is rated number one in Africa; new products are being introduced in the haircare and repellant segments, besides those to prevent dengue and malaria.
When asked about the real estate business performance and company’s focus on residential or the commercial segment given the slowdown, he said that real estate business over the last two years we have had record sales and that the company will continue to grow both businesses though commercial segment as it is doing better. The factor contributing to such kind of growth even in a phase where construction projects are facing liquidity and demand-related obstacles is the reputation of the group and trust of the people on the brand.
When asked about his vision on India and Godrej group in next five to ten years he stated that he believes India has a great future. On purchasing power parity, India will be the largest economy in the world by 2050. At present, India is ranked third after China and the US and will overtake both. India will also overtake China on population. As far as the Godrej Group is concerned, it will keep growing faster than the economy.
Consensus Estimate: (Source: market screener, investing.com website)

The closing price of Godrej Consumer Products Ltd was ₹ 525/- as of 13rd March 2020. It traded at 36x/ 31x/ 28x the consensus EPS for FY20E/ FY21E/ FY22E of ₹ 15.6/18.1/20 respectively.
Consensus target price of ₹ 750/- implies a PE multiple of 37.5x on FY22E EPS of ₹ 20/-.

By Godrej Consumer Products , , , , 0 Comments Read more...
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...
15 Jan

Huge concern among buyers to invest in under-construction projects, says Rajnish Kumar, chairman, State Bank of India (SBI)

Update on the Indian Equity Market:

On Tuesday, Sensex ended up 92 pts higher and ended at 41,952 level and Nifty settled 30 pts higher at 12,362 level. Among the sectors, Nifty Media (+2.1%) and FMCG (+1.4%) were the top-performing indices while Nifty Private Banks closed 0.5% lower. Among stocks, Yes Bank, Indusind Bank, UPL, Reliance and Kotak Mahindra Bank were among major losers on the Nifty, while gainers were Vedanta, Britannia, Hero Motocorp, Zee Entertainment, MnM and ITC.

Huge concern among buyers to invest in under-construction projects, says Rajnish Kumar, chairman, State Bank of India (SBI)

Edited excerpts of an interview with Rajnish Kumar, Chairman, SBI; dated 13th January 2020:

  • SBI is coming up with a product where the bank backs up a builder to whom the bank has given loan and the buyer who buys homes from that builder will be guaranteed his principal no matter what happens to the builder. This is a product is for all Bank’s home loan buyers.
  • The purpose of this product is that there is a huge concern among the home buyers whenever they want to invest in under-construction projects and SBI finances them anyway, so the bank is taking project risk whenever they are giving a home loan for buying any flat in any project.
  • The level of due diligence which will be done in this case on the builder will be much higher. There is a clear advantage because SBI’s commitment on a particular project whether it is the guarantee of funding to the builder or the home loans on that particular project, they would be within the defined limit.
  • This product is SBI’s brainchild and builders are taken by pleasant surprise by this kind of thinking by the bank.
  • SBI has signed up with Sunteck. An MoU has been signed for three projects and for all these three projects due diligence will be done before approving the amount and the projects.
  • SBI is getting huge interest and a huge number of queries regarding this product.
  • The cost of the loan is same as far as borrower is concerned. As far as guarantee fees are concerned that will be charged to the builder. The financing cost for the builder is fairly high in today’s market, so there is arbitrage available and through this, there is a win-win situation for all the three — the homebuyers, the builder and the bank.
  • Home loan still continues to be one of the most profitable product for the bank.
  • SBI loan the portfolio consists of the salaried class which is a major segment for the bank. Among the non-salaried class, SBI is not as active. Among the salaried class, the defence employees, the central government, the state government, the state-owned undertaking employees are the major contributors to this segment making SBI’s market segment different. This is the reason why the percentage of NPA is very low and comparable to the best in the industry.
  • Any major economic slowdown will naturally impact SBI. However, the loan to value ratio is very low, the average is 60%. So in such a scenario where the loan to value ratio is very low and the stability of income is better, SBI is very hopeful of growing their home loan portfolio and at the same time maintaining its quality.
  • In the case of Bhushan Power, as soon as the legal stay by NCLT gets vacated, SBI expects the transaction to be closed within the next couple of days.

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

  • The closing price of SBI was ₹ 328/- as of 13th January 2020. It traded at 1.3x/ 1.2x/ 1.0x the consensus Book Value per Share estimate for FY20E/ FY21E/ FY22E of ₹ 251/282/324 respectively.
  • Consensus target price of ₹ 377/- implies a PBV multiple of 1.2x on FY22E BVPS of ₹ 324/-.
By SBI, Uncategorized 0 Comments Read more...
06 Jan

JSW Steel expects to be a 50 mn ton company by 2030: Seshagiri Rao Joint MD & Group CFO, JSW Steel

Update on the Indian Equity Market:

On Friday, Sensex fell over 162 pts and Nifty ends below 12,250. Market remained under pressure following US action to kill a top Iranian commander in an airstrike that ratcheted up tensions between the two countries.

Among the sectors, IT and pharma ended higher, while selling seen in the auto, bank, infra, FMCG and metal stocks. Among stocks, Zee Entertainment, Bharti Infratel, Asian Paints, Eicher Motors and Axis Bank were among major losers on the Nifty, while gainers were Sun Pharma, TCS, HCL Technologies, Tech M, GAIL and Infosys.

JSW Steel expects to be a 50 mn ton company by 2030: Seshagiri Rao Joint MD & Group CFO, JSW Steel

Excerpts from an interview with Seshagiri Rao, Joint Managing Director & Group CEO, JSW Steel; dated 2nd January 2020:

  • For the steel industry to be understood, one has to see what is happening globally because it is a globally traded commodity. Almost one-third of the steel is traded globally.
  • The trade dispute between China and the US was the starting point which led to an overall slowdown in the global economy and that has impacted the steel industry.
  • The steel-consuming sectors like construction, infrastructure, real estate, manufacturing and auto have seen slowdown globally and that has an impact. Global developments contributed to a bigger slowdown in India.
  • The slowdown in government expenditure and credit flow to the industry together had a very serious impact in the overall fall in demand and also fall in prices. At the same time, raw material prices have not fallen in the same proportion.
  • The FTA countries like Japan, Korea, and Asian countries continue to export steel into India because it has zero percent duty. It has gone up from around 58% last year to 77%. All these factors led to a fall in steel prices in India.
  • A bit of recovery was seen in Oct-19. So, the Dec-19 quarter ended EPS is going to be better which is heard from other steel companies. They have reduced inventories and their sales were better in the last quarter. This is the trend seen, which is expected to be better in the third quarter compared to the second quarter and 2HFY20 is expected to be better.
  • Steel prices have started going up from November 2019. Otherwise, the domestic prices are at a discount to the landed cost of imports in India. But prices are picking up and that is positive news stemming from the revival in domestic demand.
  • International prices used to be $430 and currently it is close to $520. Rupee depreciation has happened in India. So there is a scope for increase in domestic prices.
  • The international prices have started going up and in line with that, local prices have started increasing. Now, everybody has come back to the market for restocking and that is also one of the reasons why the price increases are seen.
  • JSW Steel increases the price every half year. So, whatever price fall has happened in the first half of the financial year, has been renegotiated for the second half. The prices in the second half for the auto sector were much lower than the current prices. This is one of the reasons why the price increase other than the auto sector will be better in the second half of this year over the last year because nobody is expecting global prices will fall below these levels so in line with that the local prices also will increase.
  • As far as India is concerned, steel demand will be driven by mostly infrastructure construction and real estate. The national infrastructure pipeline which has been announced for an investment of Rs 102 lakh crore in that the roads, energy, and urbanization will contribute close to 60% of the total infrastructure build in India. Out of the 60%, they are mostly steel-consuming industries where steel demand is quite positive for this pipeline of national infrastructure which has been announced.
  • The demand for steel in India is expected to look up from here on. JSW Steel is the only company which has been bringing in new capacity of 5 mn ton in FY21. And at the same time, downstream capacity expansion by 4 mn ton is coming up. This downstream capacity is in high value-added products. The expansions are very well-timed. The 18 mn ton capacity will go to 23 mn ton.
  • JSW Steel is currently running at 15-16% of present installed capacity. Even if it is assumed that current market share is maintained in the overall installed capacity, if 300 million ton is India’s capacity by 2030, JSW steel will be in the range of 45 to 50 mn ton by 2030. Considering the pace of growth in India, if this 300 million ton is expected to be achieved even earlier than 2030, JSW Steel will also grow at the same pace.

Consensus Estimate: (Source: market screener)

  • The closing price of JSW Steel was ₹ 272/- as of 3rd January 2020. It traded at 14x/ 12x/ 10x the consensus EPS estimate for FY20E/ FY21E/ FY22E of ₹ 19/23/28 respectively.
  • Consensus target price of ₹ 253/- implies a PE multiple of 9x on FY22E EPS of ₹ 28/-.
By JSW Steel, JSW Steel 1 Comment Read more...
01 Jan

Butylphenol to be Vinati Organics’ growth driver for the next 2-3 years: Vinati Saraf Mutreja MD & CEO, Vinati Organics

Update on the Indian Equity Market:

On Tuesday, Sensex fell over 307 pts and Nifty ends below 12,200. Markets witnessed profit booking ahead of the press conference from the FM.

Among the sectors, NIFTY AUTO was down by 0.9%, NIFTY IT by 0.8% and NIFTY Bank by 0.6%. Among stocks, NTPC, Sun Pharma and ONGC were the major gainers in the Sensex pack, while Tech Mahindra, Bajaj Auto and Reliance Industries were the major laggards in the trade today.

Butylphenol to be Vinati Organics’ growth driver for the next 2-3 years: Vinati Saraf Mutreja MD & CEO, Vinati Organics

Excerpts from an interview with Vinati Saraf Mutreja, Managing Director & CEO, Vinati Organics; dated 30th December 2019:

  • In 2006, Vinati Organics (Vinati) was a single product company. 2007-08 was a turning point for Vinati as growth of ATBS (Acrylamido tertiary-butyl sulfonic acid), star product for Vinati, suddenly picked up and Vinati started exporting IDB (Iminodibenzyl)
  • In 2010, Vinati started manufacturing IB, which is a raw material for ATBS. Backward integration helped in gaining economies of scale. Presently, Vinati is one of the largest manufacturers of IB with ~60-70% market share.
  • Vinati has a philosophy of generating wealth from waste or value-added products from waste which not only reduces the effluents but also reduces operating costs. These have been some of the key factors that have led to the growth of Vinati over the last decade.
  • Vinati is setting up a plant for manufacturing Butylphenol. These products go into fragrances, plastics, resins and they are at present imported from Korea, Singapore, etc. That is going to be the growth driver for the next two to three years.
  • ATBS, IBB are growing at 10% to 15% year on year. Similarly, talking about innovation, Vinati has about seven to eight products in the R&D pipeline and even if one or two see the light at the end of the day, they are expected to result in significant revenue. Vinati is looking at doubling revenues in the next three to four years.
  • The industry segment is quite diversified and they go from pharma to water treatment, to agro, to oil and gas. Vinati does see a bit of a slowdown coming from the oil and gas industry. The only way to make up for that is to keep adding new products into a portfolio and to keep diversifying.
  • In ATBS, Vinati competes with China and because of the new tariffs in the US, ATBS has become more competitive in the US but at the same time, the Chinese have started dumping the product in the rest of the world, especially Europe. So in the end, it is a zero-sum game and also because Vinati is into niche products. For other products, Vinati does not face much competition from China. In fact, it is a market for both, IBB and ATBS are exported to China and because of the environment crackdown, especially on Ibuprofen front, Vinati has seen a bit of a slowdown in the IBB segment this year from China.
  • ATBS margins went up essentially over the last one and a half to two years, because Lubrizol exited the industry and suddenly there was a shortage of the product and prices shot up. But now, with the new expansions coming in place and the slowdown in oil and gas, there is no more demand-supply imbalance. Some of those prices are due for a correction. Margins are expected to come down slightly, going forward to a more sustainable level.
  • IBB or ibuprofen is a consolidated market and over the last couple of years, new players have entered into the ibuprofen market because ibuprofen itself grows at 4-5% annually. Vinati will start supplying IBB to North America and expect to make up for IBB in fiscal year or calendar year 2020. Overall, one can expect IBB growth for the next two to three years to be 10-15% year-on-year.
  • The butylphenol plant should be ready in January next year and the total revenue potential from butylphenol is about Rs 4,000-4,500 mn. One can expect Rs 500-600 mn of revenues just in Q4FY20 and then in FY21, one can expect around Rs 2,500 mn. The sentiment from the customers has been positive and they are keen to start the plant as soon as possible because till now, they have been importing this product. They are really looking forward to having a local supplier.
  • The new brownfield ATBS plant has been slightly delayed. It is expected to start in Feb-20 and revenues out of that plant from Apr-21 onwards. Since the existing line for ATBS is running at close to full capacity, the 10-15% annual growth for ATBS will be serviced by a new line for the next three to four years.

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

  • The closing price of Vinati Organics was ₹ 1,983/- as of 31st December 19. It traded at 27x/ 24x/ 18x the consensus EPS estimate for FY20E/ FY21E/ FY22E of ₹ 71.3/79.7/105 respectively.
  • Consensus target price of ₹ 2,327/- implies a PE multiple of 22x on FY22E EPS of ₹ 105/-.
By Vinati organics 0 Comments Read more...
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. 
By Bank, Bank of Baroda 0 Comments Read more...
05 Dec

Yes Bank’s priority is to create a greater degree of comfort for depositors, clients, regulators

Update on the Indian Equity Market:

On Wednesday, Sensex gained 175 pts and Nifty ended at 12,043. The market was volatile due to mixed global and domestic cues. There was positive news flow on the trade tariff front from the US.

Among the sectors, except Infrastructure and Reality, all other sectors closed in the green. Among stocks, Tata Motors closed with gains of 7%, followed by metals stocks such as Tata Steel, and Hindalco which closed with gains of over 2 % each.

Yes Bank’s priority is to create a greater degree of comfort for depositors, clients, regulators

 Key takeaways from the interview of Mr Ravneet Gill, Chief Executive Officer, Yes Bank; dated 3rd December 2019:

·        When asked about raising the target of capital raising from USD $1.2 bn to 2 bn Mr Gill said that the opportunities for private sector Banks have become much broader and would like to monetize this big opportunity that lies ahead of them. He also stated that it was important for them to convey the message to the stakeholders that Bank is on a stronger and more stable footing.

·        According to Mr Gill, more capital is better than less, and quicker than later. The first priority for the bank should be to be able to create a very high degree of comfort, whether it is depositors, clients or regulators.

·        When asked about the valuation, he shared that the fundamental reason why Yes Bank is trading below book value is that there is a belief that the bank is not fully capitalized. He thinks the fundamental fix to this problem is capital.

·        According to him, once the capital comes in the bank, we will be able to see  that the bank will start to trade at a better multiple.

·        When asked about expecting any dispensation from SEBI on pricing formula, he replied that he won’t be asking for it as he doesn’t think there is a need to do so. The investors who have come in understand that they will need to come in at whatever is the pricing formula and the guidelines around pricing and he thinks they are happy to go with it.

·        He said that the final allotment will be done in the board meeting to be held on 10Th December 2019.

·        He mentioned that they are in discussions with the investors about creating a framework, creating a roadmap, which will facilitate the application to the RBI and for the RBI to take a view. He also clarified that he would not like to prejudge RBI’s views and they haven’t had a conversation with RBI yet.

Consensus Estimate (Source: market screener website)

  • The closing price of Yes Bank was ₹ 63/- as of 04-December-19. The Consensus estimate for Book Value of Yes Bank is not available. 

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26 Nov

Entering Mutual Fund Space to Cater to Customers’ ‘Changing Needs’ – Muthoot Finance CFO

Update on the Indian Equity Market:

On Monday, Sensex ended higher across-the-board buying and US-China trade talks optimism, Sensex gained 530 pts and Nifty ended at 12,079. News reports that China and the United States were ‘very close’ to a phase one trade deal, boosted investor sentiment further.

Among the sectors, all but media stocks ended in the green. Metal stocks rallied the most on renewed hopes of positive developments in US-China trade talks. The Nifty Metal index climbed over 3 per cent to 2,599 levels. Auto and Pharma stocks were next on the list. On the downside, Nifty Media index slipped over 1.5 per cent to 1,946 levels.

Among stocks, Bharti Airtel (up 7 per cent) emerged as the top gainer on the index while ONGC (down over 2 per cent) was the biggest loser. 

Entering Mutual Fund Space to Cater to Customers’ ‘Changing Needs’ –  Muthoot Finance CFO 
Key takeaways from the interview of Mr Oommen K Mammen, Chief Financial Officer, Muthoot Finance; dated 25th November 2019:

  • When asked about entering into the Mutual Fund space Mr Mammen said that Muthoot Finance Ltd.’s foray into mutual funds by acquiring IDBI Asset Management Ltd. will help cater to the changing needs of its two lakh customers.
  • Mammen told in an interview that if they don’t provide alternative investment products, customers might look into other opportunities.
  • He  stated that offering mutual fund options will help take care of their customer’s changing needs.
  • According to Mr Mammen, Mutual funds are the best asset class.
  • The acquisition worth Rs 2,150 mn is subject to regulatory approval and is expected to be completed by February next year.
  • Muthoot Finance will purchase 100 per cent equity shares of IDBI AMC and IDBI MF Trustee Company for a total consideration of Rs 215 crore, according to exchange data. IDBI Mutual Fund has an asset base of over Rs 5,300 crore. Muthoot Finance will acquire 66.67 per cent stake in IDBI AMC from IDBI Bank and 33.3 per cent from IDBI Capital Market & IDBI Securities.

Consensus Estimate (Source: market screener website)

  • The closing price of Muthoot Finance was ₹ 685/- as of 25-November-19 and traded at 10.5x /9.6x /8.2x the consensus EPS for FY20E / 21E / 22E of Rs 65/71/84 respectively.
  • Consensus target price of ₹ 765/- implies a PE multiple of 9x on FY22E EPS ₹ 84/-.
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15 Nov

UPL eyes ₹5600 mn of synergies from Arysta deal

Update on the Indian Equity Market:On Thursday, Sensex ended higher led by gains in financial services and IT sectors, Sensex gained 170 pts and Nifty ended at 11,872. Retail inflation jumped to 4.62% in October from 3.99% in September. Vodafone Idea fell 20.27% after the department of telecommunications (DoT) asked operators to conduct a self-assessment of pending dues after last month’s Supreme Court verdict that upheld the government’s definition of adjusted gross revenue.
Among sectoral Indices, BSE IT was the biggest gainer with a rise of 1.1% followed by BSE Consumer Durables 0.9% and BSE Finance 0.8%.  BSE Telecom lost the most at 2.8%, BSE Metal was down 2.0% and BSE Capital Goods slipped 0.8%.
Among stocks, ICICI Bank Ltd, Bajaj Finance Ltd, HDFC twins—HDFC Bank Ltd and HDFC Ltd, Axis Bank Ltd, and Yes Bank were the biggest gainers in the financial services sector. In the tech sector, Infosys Ltd, Tata Consultancy Services Ltd, and Tech Mahindra Ltd gained the most.



UPL eyes ₹5600 mn of synergies from Arysta deal
Key takeaways from the interview of Mr Anand Vora, Chief Financial Officer, UPL; dated 11th November 2019:

  • When asked about the Arysta acquisition and synergies, Mr Vora mentioned that UPL has already achieved Rs 3200 mn of synergies and targets ~ Rs 5600 mn of total synergies benefit to reflect in Profit and Loss Account for FY20.
  • Mr Vora said that the EBITDA margins will improve to about 16-20% due to the merger.
  • He commented on the tough external environment factors like the trade war and swine flu, not letting UPL take any price increase to push the volumes.
  • Mr Vora added that the debt increase is due to the seasonality of the business and high working capital which will decrease significantly after December as cash inflows start against the receivables and this has been the trend for the last three years.
  • He stated that the receivables have decreased as compared to last year and UPL is working in that direction. On average the net working capital of Arysta is higher than UPL but they are working on it and expect the working capital to trend closer to that of UPL.  
  • When asked about the pressure on demand globally, he commented that they are in crop protection chemical business and farmers rarely keep their land vacant. In fact, once they have invested in seeds and spent on fertilizers, they are left with no choice but to use the crop protection chemical to protect their crops.

Consensus Estimate (Source: market screener website)

  • The closing price of UPL was ₹ 535/- as of 14-November-19 and traded at 17.5x /11.5x /9.8x the consensus EPS for FY20E / 21E / 22E of Rs 31/47/55 respectively.
  • Consensus target price of ₹ 704/- implies a PE multiple of 12.8x on FY22E EPS ₹ 55/-.
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