Uncategorized

26 Aug

Revenues badly affected as theatres are closed – PVR

Update on the Indian Equity Market:
On Tuesday Nifty closed 0.05% higher at 11472. Among the sectoral indices, PSU Bank (+1.3%), Bank (+1.1%), and Financial Services (+0.9%) closed higher. Realty (-2.1%), Metal (-0.7%), and Pharma (-0.6%) sectors closed lower. Tata Motors (+5.3%), Bajaj Finance (+4.8%), and SBI (+3.4%) closed on a positive note. GAIL (-1.7%), NTPC (-1.5%), and Sun Pharma (-1.4%) were among the top losers.

Excerpts from an interview of Mr. Ajay Bijli, CMD, PVR with ET Now dated 24th August 2020:
• Revenues are badly affected as theatres are closed. Theatres were asked first to close down and now it will be one of the last few activities to be allowed to resume.

• Cinemas have closed down all over the world, but a lot of help was also given by the governments in various countries. But here in India the sector didn’t get any support.

• PVR is ready to resume its operations. The people of India have always loved to go out and watch films.

• Mr Bijli thinks five to six months of being deprived will not change people old habit of decade.

• In some malls of Delhi, footfall is already back to 90% of pre-covid level during weekends despite no cinema.
• OTT platform is a concern for PVR but in a country like India with 1500 films releasing, if 10-20 movies have gone in shutdown, it is fine.

• The company will focus on 3 buckets – rescue, revival and reinvention.

• As a rescue plan, PVR did rights issue. The company will focus on cost cutting and manage developer related issues. Revival will happen when the government gives permission to open and with new SOPs being ready comes reinvention mode.

• Survey suggest that youngsters are eager to come back.

• The company will continue with expansion. If there was no shut down, PVR would have done 100 screens last fiscal, but finished with 88 the company got licenses for the rest of the 12. Once the restrictions are lifted there will be opening of 15-20 new screens.

• The Mumbai drive in theater was on cards from a long period of time, the core business is cinemas and drive in model is yet to be tested.

Consensus Estimate: (Source: market screener website)
• The closing price of PVR was ₹ 1,324/- as of 25-August-2020. It traded at NM/ 38x/28x the consensus Earnings per share estimate of ₹ -80.9/35.3/47.5 for FY21E/ FY22E/FY23E respectively. (NM- Not Meaningful)
• The consensus average target price for PVR is ₹ 1,314/- which implies a PE multiple of 28x on FY23E EPS of ₹ 47.5/-
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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07 Jul

Demand will not be affected due to peak prices – HPCL

Update on the Indian Equity Market:

Markets started the week on optimism as Nifty closed the day 1.5% higher at 10,764. The optimism was such that within the Nifty index, 40 out of 50 stocks ended in green. The top gainers for Nifty 50 were M&M (+7.4%), BAJFINANCE (+6.5%) and HINDALO (+5.7%) while the losing stocks for the day BAJAJAUTO (-1.1%), GAIL (-1.0%) and BHARTIARTL (-0.9%). Ten out of 11 sectors ended the day in green led by REALTY (3.0%), AUTO (2.9%) and METAL (2.5%) while PHARMA (-0.6%) was the only sector in the red zone.

Edited excerpts of an interview with Mr M K Surana, Managing Director and Chairman, Hindustan Petroleum Corporation Ltd. (HPCL); dated 6th July 2020 from CNBC TV-18:

  • Sales during the current quarter were 88% of the last year’s same quarter. As construction and industrial activities pick-up, the company expects to reach hundred percent of last year’s sales figure in the coming quarters.
  • He mentioned that the demand for fuel is not expected to get affected due to peak prices. This is because the price elasticity is not profound in India due to the nature of the requirement. 
  • The current situation has made people opt for personal vehicles for commuting. People are buying vehicles irrespective of the price of fuel for safety reasons. He expects this trend to continue in the coming months as well. 
  • About the marketing margins, he mentioned that the rise in price of petrol and diesel is in line with global markets. Whenever the price of raw material rises, it hurts the margins of the company as the base becomes larger. 
  • The prices are going up because of the rise in international crude prices. Oil marketing companies have no say in determining the final prices so the margins get affected during a surge in crude prices.
  • Generally, the company derives 50% of the fuel demand from urban markets, 15% demand comes from highways and remaining 35% comes from the rural markets.
  • Initially during the lockdown, the percentage of rural demand was more than highways and urban demand. As the unlocking of economy is taking place, the demand is again increasing in urban and highways whereas rural demand remains intact.

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

  • The closing price of HPCL was ₹ 216/- as of 6-July-2020. It traded at 7x/ 5x the consensus EPS estimate of ₹ 32.6/ 39.4 for FY21E/ FY22E respectively.
  • The consensus target price of Rs 274/- implies a PE multiple of 7x on FY22E EPS of ₹ 39.4/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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09 Jun

Bank has started collections in non- containment zones-Bandhan Bank

Update on the Indian Equity Market:

On Monday, Nifty closed 0.3%higher at 10,167. Among the sectoral indices, IT(+1.8%), PVT Bank (+1.3%), Bank (+0.7%)closed higher, whereas Media (-1.7%), PHARMA (-1.4%) and PSU Bank (-1.2%) closed lower. Among the stocks GAIL (+7.5%), IndusInd Bank (+7.3%),and BPCL (+7.0%) closed on a positive note.ZEEL (-4.5%), ShreeCement (-3.9%) and Eicher Motor (-3.4%) were among the top losers.

Excerpts from an interview of Mr.Chandra Shekhar Ghosh, CEO, Bandhan Bankwith Mint dated  8thJune 2020:

  • The pandemic has brought in a whole new set of risks for banks which are both internal and external.
  • The bank is asking its customers to use more digital modes of transaction in the changed scenario.
  • Branches were operational throughout the lockdown by observing government and administration rules.For Bandhan Bank, there were not many people working remotely.
  • He said some things can be done virtually. Earlier all regional managers were mandated to come to the head office for meetings but now the bank is doing it virtually and it is working.These efforts are saving expenses on travel.
  • Every sector cannot work from home and in banking some jobs might be possible but not all.
  • For Bandhan Bank, there is not a greater degree of acceptability to work – from- home.There are a lot of security issues related to bankers working remotely and that includes possible violations of agreements with customers, bound by data-security clauses.
  • The bank will have to take a deeper look into how these risks could be mitigated and only then banks will be able to move towards a work-from-home model.
  • On recoveries, he saidcollections have just started and at the ground level, the borrowers, especially in micro-credit involved in livelihood projects and agriculture, are continuing their businesses. Due to lockdown the bank is not being able to reach them.
  • The bank has started collections in the non-containment zone. However, the problem is that collection executives are facing difficulties in collecting loans from villages, as local residents are not allowing outsiders to access those places, citing covid-19 risks.
  • Speaking about post covid-19 opportunities, he said secured credit is the area where there are big opportunities.
  • There are customers who have been regularly paying all equated monthly installments (EMIs) and are eligible for more funds. These are small businesses which are running despite the lockdown.
  • When the rural demand recovers, pick-up in two-wheelers and other vehicles popularly used in these areas will see demand, and so will bank loans in these segments. Demand for gold loans is also coming quite strong.

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

  • The closing price of Bandhan Bankwas ₹ 264/- as of 8-June-2020.  It traded at 2.4x/ 2.0x theconsensus book value estimate of ₹ 107/127for FY21E/ FY22E respectively.
  • The consensus average target price for Bandhan Bank is ₹284/- which implies a PB multiple of 2.2x on FY22E BV of ₹127/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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30 Apr

Higher but manageable inventory levels – MrAnil Kumar Chaudhary, Chairman, SAIL

Update on the Indian Equity Market:

 

On Wednesday, NIFTY50 closed positive (+1.8%) at 9,553. Within NIFTY50, HINDALCO (+7.0%), ADANIPORTS (+6.6%) and HDFC (+6.5%) were the top gainers, while AXISBANK (-3.6%), ASIANPAINT (-2.7%) and HINDUNILVR (-2.4%) were the top losers. Among the sectoral indices,METAL (+3.7%), FINANCIAL SERVICES (+3.4%) and MEDIA (+2.7%) gained the most. FMCG(-0.4%) andPHARMA (-0.01%) closed in the negative.

 

Higher but manageable inventory levels – MrAnil Kumar Chaudhary, Chairman, SAIL

 

Excerpts of an interview with Mr. Anil Kumar Chaudhary, Chairman,SAIL broadcasted on CNBC TV18on 24th April 2020:

  • As with most industries, steel industry is also facing issues in running facilities. Steel is a continuous process industry and has to continue to run albeit at a lower level.
  • Domestic orders have dried up. SAIL is dependent on export orders for now. As a result of continuous production and lower sales, there is a buildup of inventory.
  • Chaudhary believes that the current inventory level is high but manageable. Higher inventory is not unprecedented for steel industry. Current inventory for SAIL is close to 2 mn ton.
  • Inventory level was also high during the slowdown in July- October 2019. 31st October 2019 also had high inventory like current levels. But as of 31st Jan 2020, the inventory levels reduced to 1st April 2019 level.Mr. Chaudhary expects that similar performance will repeat if everything goes well and lockdown lifts on 3rd May 2020.
  • Chaudhary is confident that after lifting of lockdown there will be substantial demand from construction and infrastructure sectors. That should take care of SAIL’s high inventory levels. Other sectors such as automobiles or engineering may take time to revive.
  • For SAIL specifically, they have not seen issues in logistics. In lockdown, railways have become more efficient and even portsare able to handle exports.
  • Cash flow is a bit strained due to lower sales and continued fixed costs. Quite a few debtors have been due for repayments and SAIL has been getting those payments.
  • After lockdown, road transport has to be restored. Government is also really concerned about current state of affairs and they also want to ensure that the supply chains are restored as fast as possible.
  • SAIL has close to 70,000 employees.SAIL has to be able to ramp up production in time to bring down per ton cost of production. SAIL continues to incur fixed costs of about Rs 15,000 mnper month, major expense due to employee cost.
  • Chaudhary is confident that some government measures are going to help such as waiver of certain charges from power companies in some states. Interest cost in % terms has also come down.

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

  • The closing price ofSAIL was ₹ 30.1/- as of 29-April-2020. It traded at 8.4x/ 4.1x the consensus EPS estimate of ₹ 3.6/ 7.3 for FY21E/ FY22E respectively.
  • Consensus target price of ₹ 35.1/- implies a PE multiple of 4.8x on FY22E EPS of ₹ 7.3/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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13 Apr

Expect more pressure on power demand if lockdown persists- AK Singh, CMD, NHPC and Rajeev Sharma, CMD, Power Finance Corporation

Update on the Indian Equity Market:
On Thursday, NIFTY closed in green at 9,112 (+4.2%). Top gainers in NIFTY50 were M&M (+17.5%),
Maruti (+13.9%) and Cipla (+13.1%). The top losers were HUL (-3.3%), Dr Reddy’s (-2.2%) and Tech M
(-2.1%). Top sectoral gainers were Auto (+10.5%), Financial services (+5.8%) and Pvt Bank (+5.1%).
There were no sectoral losers.

Excerpts of an interview with Mr AK Singh, CMD of NHPC and Mr Rajeev Sharma, CMD, Power
Finance Corporation (PFC) with CNBC -TV18 dated 9 th April 2020:

  • The power ministry is working on a liquidity package for the sector and it has also issued a host of clarifications on relaxations for the distribution companies (DISCOMS).
  • After this scheme of 90-days moratorium, they have finalised their scheme for moratorium and the board has approved this and some DISCOMs are paying, some are not but as the situation unfolds, he is expecting the payments, said Mr Sharma (PFC).
  • He further added that they have prepared an action plan also for these three months to mobilise funds because they need to make repayments for their borrowings but they don’t see any problem. There is enough liquidity in the market.
  • Detailing the liquidity package which the government is pondering over, he added it is under advanced stage of discussion with the ministry of power.
  • They are requesting for a robust payment security mechanism as they extend further loans to DISCOMs, they are asking for a state government guarantee along with a provision in their annual budget for their repayments.
  • Very soon, this liquidity infusion scheme will be out and REC and PFC will be helping the state DISCOMs to pay the receivables.
  • “Just 21-day lockdown is not going to create much problem for us and it is not going to last more also. We are planning to restart the project which is on hold right now. So, I don’t think there is going to be much difference on this account for a company like us,” Mr. Singh added.
  • Power demand has declined 25-30 per cent. If the lockdown continues, this will put further pressure on DISCOMs and there will be more stress on balance-sheets.
  • As of now, he doesn’t see any problem of liquidity in the market. Enough money is available. Long-term Repo Operations (LTRO) has been declared by Reserve Bank of India (RBI), they are in consultation with State Bank of India (SBI).
  • It is cheaper money and banks can lend it over and above their exposure limits. In LTRO, that limit won’t be applied, so they are in consultation with SBI for that and with other banks also for commercial papers and other taxable bonds also, Mr Sharma explained.

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

  • The closing price of NHPC Ltd was ₹ 22/- as of 9th April 2020.  It traded at 8x/ 7x/ 7x the consensus earnings estimate of ₹ 2.8/ 2.9 /3.3 for FY20E/21E/22E respectively and the closing price of PFC Ltd was ₹ 90/- as of 9th April 2020.  It traded at 4x/ 3x/ 3x the consensus earnings estimate of ₹ 24.4/ 29.6 /34.8 for FY20E/21E/22E respectively
  • Consensus target price for NHPC Ltd. is ₹ 27/- which implies a PE multiple of 8x on FY22E EPS of ₹ 3.3/- and Consensus target price for PFC Ltd. is ₹ 136/- which implies a PE multiple of 4x on FY22E EPS of ₹ 34.8/-.

 

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08 Apr

Biosimilars will have a huge impact on global healthcare – Kiran Mazumdar Shaw, CMD, Biocon

Update on the Indian Equity Market:

On Tuesday, Nifty closed 8.8% higher at 8,792, taking cues from global markets.  All components of NIFTY50 ended with gains led by INDUSINDBK (+25.0%), AXISBANK (+20.1%) and GRASIM (+15.0%). All sectoral indices also ended with gains. NIFTY PVT BANK (+11.1%), NIFTY PHARMA (+10.4%) and NIFTY BANK (+10.4%) gained the most.

Biosimilars will have a huge impact on global healthcare – Kiran Mazumdar Shaw, CMD, Biocon

Edited excerpts of an interview with Kiran Mazumdar Shaw, Chairperson and Managing Director of Biocon Ltd.; dated 1st April 2020. The interview aired on CNBC-TV18.

  • Biocon received an Establishment Inspection Report (EIR) with Voluntary Action Indicated for it’s Malaysian unit in respect of production of glargine. Insulin glargine is a long-acting, manmade version of human insulin.
  • This is an important EIR for Biocon and with that, the management is confident that the approval will come in sooner than later. Inspection went well but in terms of launch, management needs to keep track of current crisis as US is going through a very bad phase.
  • Post the crisis, there will be a huge effort to bring down healthcare costs. Biosimilars will be extremely important in this effort. Insulin therapies are also going to play a very important role in cost cutting and biosimilar glargine, insulins and others are going to be extremely important.
  • In terms of opportunity, biosimilars business is a USD 7 bn business globally and USD 4 bn business in the US. With biosimilars, the access to insulin glargine is much larger. Biocon has a very important role to play in providing affordable access to glargine.
  • Including the private labs in testing for the current crisis has been a good move on part of the government. The issue regarding less number of approved kits is resolved and more kits are now being produced. The challenge now is that state governments are now restricting private labs from testing. Maharashtra, Telangana, Gujarat, West Bengal have put heavy restrictions on private labs. If private labs are restricted from conducting tests in large numbers, the purpose of including them in the testing arena is defeated.
  • Biocon has a turnover target of USD 1 bn in Biologics by FY22E. There is a lull created by the logistics issues currently. However, the target is still 2 years away and management hopes that the crisis will pass soon. This is a time when biosimilars will have a huge impact on global healthcare and that’s why Biocon will have a very big role to play.
  • The private sector is in close cooperation with government on various fronts including research, private testing, vaccine development, therapy developments and antibody based serological testing. This crisis has shown that we have to focus on these areas and our public health system has to be improved and there is a lot of opportunity for us to build a very robust healthcare ecosystem.

Consensus Estimate: (Source: market screener website)

  • The closing price of Biocon was ₹ 319/- as of 7–April–2020. It traded at 42.5x/ 31.9x/ 24.5x the consensus EPS estimate of ₹ 7.5/ 10.0/ 13.0 for FY20E/ FY21E/ FY22E respectively.
  • The consensus target price of ₹ 311/- implies a PE multiple of 23.9x on FY22E EPS of ₹ 13.
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03 Apr

To some extend pain is addressed by RBI- Mr Dinesh Khara, SBI

Update on the Indian Equity Market:

On Wednesday Nifty closed -4.0% lower at 8,253. Among the sectoral indices NIFTY IT (-5.5%), NIFTY Bank (-4.9%), NIFTY PVT Bank (-4.9%) closed lower. None of the sectors closed on a positive note. Tech Mahindra (-9.4%), Kotak Bank (-8.7%), and AXIS Bank (-6.2%) led the losing stocks. Hero Motocorp (+2.5%), Bajaj Auto (+1.0%), Bajaj Finance (+0.5%) were among the top gainers.

Excerpts from an interview of Mr Dinesh Khara, MD- Global Banking and subsidiaries of State Bank Of India with CNBC-TV18 dated 31st March 2020:

  • Speaking on recent measures by RBI Mr Khara said the steps taken by RBI have mitigated the stress which the bank would have seen on account of the 21-days lockdown which has been announced.
  • However, the only thing could be the special mention accounts – SMA-I and SMA-II, which normally has a tendency of seeing the recovery towards the latter half of the month. So there, the bank might face some kind of a situation but that also is being resorted through follow up mechanism.
  • He added the pain has been addressed to an extent of about 90 %.
  • Speaking about the moratorium, he said everybody is entitled to the moratorium unless they opt-out.
  • For the next quarter, on the margin front, the bank has not looked at this point as the issue is evolving.
  • On asset quality, Mr Khara said the bank is in the process of evaluating the impact and it would be too early to say anything.
  • On SMEs, SBI announced an emergency package for SMEs, which is 10 per cent of the working capital for all the accounts which are performing. This package was announced even before the steps taken by RBI.
  • Speaking about loan growth he said after the lockdown is taken off, there would be pent-up demand and to meet that demand, the corporates might go for shoring up their working capital too. Apart from that, there is bound to be some kind of reconstruction effort post COVID-19 and the bank is confident that will also bring in opportunities for credit growth.

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

  • The closing price of SBI was ₹ 187/- as of 01-April-2020.  It traded at 0.7x/ 0.6x/ 0.5x the consensus Book value per share estimate of ₹ 249/277/312 for FY20E/ FY21E/ FY22E respectively.
  • The consensus average target price for SBI is ₹ 384/- which implies a PB multiple of 1.2x on FY22E BVPS of ₹312/-.
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24 Mar

Hydroxychloroquine drug useful in clinical trials for Covid-19 infection: Cadila Chairman

Update on the Indian Equity Market:

After hitting the lower circuit in the first half of the day Nifty closed 13% lower at 7,610. Among the sectoral indices, NIFTY PVT Bank (-17.4%), NIFTY Bank (-16.2%), NIFTY Fin Services (-15.5%) closed lower. None of the sectors closed on a positive note. AXIS Bank (-27.6%), Bajaj Finserv (-27.5%), IndusInd Bank (-23.9%) closed lower. None of the NIFTY stocks closed on a positive note.

Excerpts from an interview of Mr Pankaj Patel, Chairman, Zydus Cadila with CNBC-TV18:

  • Anti-malaria drug Hydroxychloroquine has found to be useful in clinical trials of some patients with Covid-19 infection and Cadila is in a position to increase the production.
  • On Janta curfew, Mr Patel said that it is a unique idea and it will prepare everyone for a lockdown situation if any.
  • He said it is a positive step and with respect to clinical research being done, there are more than 10 drugs being tried out as a treatment for coronavirus infection.
  • A recent report by France researchers showed that hydroxychloroquine has found to be effective. So there is a possibility of use of it in the treatment of infection.
  • The company is closely watching this situation and is in a position to produce more as and when needed.
  • The manufacturing is dependent on local raw materials and there is no dependence on imported inputs so the company can supply this drug in sufficient quantity.
  • Speaking about Covid-19 impact on the company, Mr Patel said, the company does not see a challenge as the US supply will continue unless restrictions are imposed by the government. So there should not be any problem supplying drugs to the US and other markets.
  • As far as approvals are concerned, the process in on, not that for every drug approval there is an inspection necessary.
  • He added there will be some slowdown in the approval process as there is a slowdown and in the US people are working from home. However, it is not a major challenge.

Consensus Estimate: (Source: market screener website)

  • The closing price of Cadila was ₹ 281/- as of 23-March-2020.  It traded at 21.6x/ 17.5x/ 15.7x the consensus EPS estimate of ₹ 13/16/17.8 for FY20E/ FY21E/ FY22E respectively.
  • The consensus average target price for Cadila is ₹ 300/- which implies a PE multiple of 16.8x on FY22E EPS of ₹ 15.7/-.

 

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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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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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