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Business, Editorials, Equities, Health, Markets, Research - September 16, 2022

Dr. Lal Pathlabs reported a net profit of Rs. 58 Cr.

Dr. Lal Pathlabs reported a net profit of Rs. 58 Cr.

Dr. Lal Pathlabs reported a consolidated net profit declined 57% to Rs 58 crore for the first quarter June 30. The company had reported a net profit of Rs 134 crore in the April-June period of the last fiscal. The revenue from operations declined to Rs 503 crore in June 2022 from Rs 607 crore in June 2021. In Q1FY23, DLPL served 69 million patients and collected 180 million non-Covid-19 samples. The company declared an interim dividend of Rs. 6/share.

The diagnostic sector will experience tremendous growth.

Dr. Lal PathLabs reported healthy core business performance, driven by increased penetration, digitalization, enhanced testing facilities, and increased home sampling. Swasth fit contributed to 21% of total revenue; packaged tests accounted for 30% of sales. The company targets pre-Covid-19 level growth of 13-15% over the year and strives to double its volumes over 2-3 years.

The Indian diagnostic sector holds significant growth potential, as was evident by the industry’s response to the pandemic, and organised national brands have met these challenges without raising prices. The industry has seen the entry of many new competitors and the growth of the organised sector, both due to overall market growth as well as an accelerated shift from the unorganised to the organised segment.

The customers appreciate the certainty of quality and effectiveness that Dr. Lal PathLabs provides, which the unorganised players will not be able to successfully deliver. In the future, they will build and drive growth through organic expansion of lab and collection centre infrastructure, inorganic expansion, use of technology to improve customer experience, and provision of value-added services at one level while driving internal process efficiencies at another level to achieve productivity. On the organic front, the initiative of the creation of Hub Labs has started yielding good results, especially in the northern part of India. This will also give the capability to go deeper into Tier-II and Tier-III towns in large states like UP, Bihar, etc.

Valuations:

Dr. Lal Pathlabs, EPS was at Rs.6.2 in June 2022, down from Rs.15.74 in June 2021. The ROCE and ROE were at 29.4% and 25.1%, respectively. The stock was trading at a P/E ratio of 73.4x. The debt-to-equity ratio was 0.35x, whereas the asset turnover ratio was 1.04x. The interest coverage ratio stood at 12x. The scrip is trading at Rs.2389, down by 1.89% on Wednesday.

Everest Kanto reported a total revenue of Rs. 380 Cr.

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Kaveri Seeds reported a net profit of Rs. 240 Cr.
Business, Editorials, Equities, Food, Markets, Research - September 16, 2022

LT FOODS reported an operating profit of Rs.166 cr.

LT FOODS reported an operating profit of Rs.166 cr.

LT Foods (LTF’s) declared its Q1 FY22-23 results with revenue rising 32.8% YOY to Rs 1,611 crore. The operating profit was up by 27.7% to Rs 166 crore and net profit went up by 23.28% YOY. Its profit margins recovered sequentially but contracted YOY. The net profit stood at Rs. 95 Cr, compared to Rs. 76 Cr. in June 2021. The revenue growth was on account of accelerated brand investments across various segments.

Margins under pressure:

The gross margin improved by 110bps YoY, aided by an improvement in product mix and higher realisation. However, EBITDA margin fell by 40 basis points year on year to 10.0% due to higher freight costs and additional brand investments.LTF has a strong focus on a value-added portfolio, which will support margin improvement in the long-term. The Health & Convenience product segments, which include ready-to-eat products, contributed 2% in FY22, an improvement from 1.5% in FY21. The company targets a 150 bps expansion in EBITDA margin through product mix, operational efficiency, and scale.
The green energy initiatives by the company will provide production efficiency. We anticipate that EBITDA margins will moderate in the near future due to higher costs, but will gradually improve thereafter. LTF’s consistent efforts on brand strengthening and distribution network expansion, as well as region and product diversification via organic and inorganic routes, have been the growth strategy.The recent acquisition in the Jasmine rice segment will strengthen market share. The re-opening of HoReCa channels is also aiding growth, while LTF’s strong focus on value-added products will improve margins.

Valuations:

LT Foods’ EPS was at Rs. 2.80 in June 2022, up from Rs. 2.27 in June 2021. The ROCE and ROE were at 14.8% and 15.6%, respectively. The stock was trading at a P/E ratio of 9.47x. The debt to equity ratio was 0.66x, whereas the asset turnover ratio was at 1.28x. The interest coverage ratio stood at 7.55x. The scrip is trading at Rs. 91.6, up by 2.92% on Monday.

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Everest Kanto reported a total revenue of Rs. 380 Cr.
Business, Editorials, Equities, Markets, Research, Uncategorized - September 12, 2022

Everest Kanto reported a total revenue of Rs. 380 Cr.

Everest Kanto reported a total revenue of Rs. 380 Cr.

The net sales stood at Rs 380.53 crore in June 2022, up 13.58% from Rs 335.02 crore in June 2021. The quarterly net profit was at Rs. 38.70 crore in June 2022, down 44.1% from Rs. 69.23 crore in June 2021. The EBITDA stands at Rs. 61.23 crore in June 2022, down 32.98% from Rs. 91.36 crore in June 2021. The company incurred a total expense of Rs. 331 Cr as compared to Rs. 257 Cr in June 2021.

Increasing CNG and Hydrogen Consumption To Drive Cylinder Demand:

Everest Kanto Cylinders Ltd. is a major player in High Pressure Seamless Steel Gas Cylinders. It generated its major revenue from India, which was around 270 Cr with a profit of Rs. 44 Cr. while the USA contributed 57 Cr. with  profit of Rs.2 Cr. The UAE reported total revenue of Rs. 51 Cr. and a net profit of Rs. 8 Cr. They manufacture a wide range of cylinders for industrial gases, medical gases, fire fighting equipment, beverage industry accumulator shells, aerospace scientific research, and CNG-NGV cylinders.

The auto OEMs have significantly reduced diesel vehicle production due to rising costs and lower demand. The Vehicle Scrappage Policy is expect to drive new vehicle sales and CNG adoption. The STCs continue to convert diesel bus fleets to CNG. CNG prices in India are link to key international benchmarks and are at  significant discount to other liquid fuels. The CNG vehicles operate at a much lower cost per km.India is a participant in the global commitment to set net zero emission targets.

Over 30 countries have released hydrogen roadmaps, committed more than USD 70 billion in public funding, and total investments are expected to exceed USD 300 billion in hydrogen spending through 2030. The government of India notified its Green Hydrogen Policy with the aim of making India a Green Hydrogen Hub. This involves scaling up the use of domestically produced hydrogen to significantly reduce energy imports. The policy is in line with the country’s pledge to be carbon neutral by 2070. India’s hydrogen demand is expected to increase five-fold by 2050, from 6 MPTA in 2020. 80% of the demand in 2050 is expected to be green in nature.

Valuations:

Everest Kanto EPS has decreased to Rs. 3.45 in June 2022 from Rs. 6.17 in June 2021. The debt to equity ratio was 0.14x, whereas the asset turnover ratio was at 0.8x. The interest coverage ratio was at 33.6x compared to 6.3 in June 2021. This was due to a reduction in debt. The scrip is trading at Rs. 123, up by 5% on Monday.

 

 

 

HUL Q1 FY23 Result Update: HUL beats estimates with Rs 2,381-cr net profit in Q1; revenue up 19.6%

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Astral Pipes posted a net profit of Rs. 96 Cr.
Banking, Business, Editorials, Equities, Markets, Research, Research Reports, Result Updates - September 9, 2022

Tata Steel reported a net profit of Rs.7714 crores.

Tata Steel reported a net profit of Rs.7714 crores.

Tata Steel reported a PAT of Rs 7714 crore in Q4FY22, down from Rs 9,835 in Q4Y22. The company in Q1FY23 reported an EBITDA of Rs. 14973 crore, compared to an EBITDA of Rs. 15,891 crore in Q4FY22. During Q1FY22, the company recorded its EBITDA as Rs. 15,892 crore. Tata Steel announced a dividend of Rs 51 per equity share in FY22. Tata Steel’s PAT peaked in the second quarter and has fallen since then. The company’s PAT stood at Rs 12,548 crore in Q2FY22. The steel sector has been under pressure due to high input costs of coal and iron ore.

Plans to invest in India and Europe

Tata Steel plans to invest Rs 12,000 crore in India and Europe in FY23, TV Narendran, the company’s chief executive officer (CEO) and managing director (MD), said on July 18. The company expected to invest Rs 8,500 crore in India and Rs 3,500 in Europe. The major focus is on the Kalinganagar Plant in Odisha and plans to expand the plant’s capacity from 3 MTto 8 MT.
Over the last one-month, domestic hot rolled coil (HRC) prices have been range bound and hovered at 57500-9500/tonne. The domestic steel prices has seen sharp fall in coking coal prices augurs well for Indian steel players. The benefit of lower coking coal costs is likely to feed through to the cost base by September 2022 for Tata Steel Indian operations and by Q3FY22 for Tata Steel European operations. For Q1FY23, Tata Steel European operations reported EBITDA/tonne of US$360/tonne (US$89/tonne in Q1FY22 and US$241/tonne in Q4FY22).
Tata Steel plans to restart NINL’s blast furnace in the next three months and ramp up capacity to 80-100 KT/month run-rate by Mar’23. Tata Steel remains committed to its annual deleveraging target of US$1 billion in line with its capital allocation strategy to reduce debt.
Valuations:
The EPS was Rs. 6.36 in the June quarter. The stock is trading at a PE ratio of 3.32x. The EBITDA was at 2.96x. The ROCE and ROE stood at 31.6% and 42.6%, respectively. The stock was trading at Rs.106 on September 8th, down by 1.63%.

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Jindal Stainless Steel reported a PAT of Rs. 329 crores.
Business, Editorials, Equities, Markets, Research, Research Reports, Result Updates - September 9, 2022

Jindal Stainless Steel reported a PAT of Rs. 329 crores.

Jindal Stainless Steel reported a PAT of Rs. 329 crores.
JSL reported a steady operational performance for the quarter,with a consolidated PAT of Rs.329 crore. JSL’s standalone operations reported a sales volume of 235530 tonnes and a total revenue of Rs.5336 crores. The standalone operations EBITDA/tonne came in at 22216/tonne, and the consolidated top line for the quarter was at Rs. 5474 crores, up 36% YoY but down 17% QoQ. For Q1FY23, JSL reported consolidated EBITDA of Rs. 549 crore, down 9% YoY and 35% QoQ. On a consolidated basis, JSL reported an effective tax rate of 23%, compared to 33% in Q1FY23. Hence, due to a lower-than-expected effective tax rate, JSL’s consolidated PAT came in higher. JSL’s consolidated PAT for Q1FY23 was at 329 crore, up 8% YoY but down 56% QoQ.

JUSL to be acquired:
The options are being reconsidered for the blast furnace capex, which was earlier considered in JUSL. The management was clear on the cost competitiveness of the pig iron route for 400 series production along with liquid ferrochrome. However, management was aware of the potential future balance-sheet stress caused by the investment, as well as the related-party transactions and roadblocks to a potential future merger. The management wants to minimise related-party transactions and is also looking at likely options for JSL to acquire JUSL and thereby maintain the favourable tenure of term loans present in JSL’s books.
There is a huge risk from Indonesian exports in the 200/300 series in India. Even for the industries linked to approval/accreditation, depending on the extent of interest from the Indonesian players, we see a possibility of imports increasing substantially. The government has already removed the anti-dumping duty on stainless steel imports (Indonesia is an FTT partner, and does not charge any import duty on stainless steel imports). Perhaps, given the size of the market, policy support may not be as readily forthcoming for stainless steel as it is for steel.

Valuations:
The EPS was Rs. 6.11 in the June quarter versus Rs. 14.00 in March 2022 and Rs. 6.21 in June 2022. The stock is trading at a PE ratio of 3.70x. The EBITDA was at 3.22x. The ROCE and ROE stood at 37.8% and 45.1%, respectively. The stock was trading at Rs.134 on September 8th, up by 0.90%.

 

 

Nestle India reported a net profit of Rs. 515 crores:

Genus Paper And Boards reports a net profit of Rs. 4.81 crores.

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Nestle India reported a net profit of Rs. 515 crores:
Business, Editorials, Equities, Markets, Research - September 7, 2022

Nestle India reported a net profit of Rs. 515 crores:

Nestle India reported a net profit of Rs. 515 crores:

Nestle India reported a total revenue growth of 16.1% YoY and 1.4% QoQ to Rs. 4036.6 crores. The net profit decreased by 4.3% YoY and 13.3% QoQ to Rs. 515.3 crores. Domestic sales increased by 16.4% with a healthy balance of pricing and volume & mix, and export sales increased by 0.7%. The cost of materials increased due to inflation, particularly edible oil, milk and its derivatives, and packaging materials, partly offset by better realizations. The 15% raw material inflation led to a 304bps decline in gross margins, to 54.0%. The EBITDA decreased by 3.4% YoY and 11.4% QoQ to Rs. 819.5 crores, while the EBITDA margin came in at 20.3%, which declined by 409bps YoY and 293bps QoQ.

Maintaining steady growth through the launch of new products.

The milk products and nutrition sectors witnessed double-digit growth, driven by strong growth in the Milkmaid brand. The out-of-home categories such as confectionaries and liquid beverages registered a strong growth of above 20% on the back of the opening up of offices and business-led initiatives, while the food category continued its strong double-digit streak of growth with improved market share in MAGGI Noodles. The company continued to see strong momentum in megacities and metros, as well as strong acceleration across smaller towns and classes.

Nestle is continuously focusing on entering new categories to maintain its consistent growth momentum in the medium to long term. The company acquired the pet food business of Purina Petcare India Pvt. Ltd. (PFB) from its parent entity Nestlé S.A. for Rs. 123.5 crores. The pet food business (PFB) has evolved very positively and has an exciting future with pet adoption on the rise post-pandemic. PFB has clocked a CAGR of 39.4% over CY18–21 and a turnover of Rs. 36 crores in FY22, valued at a price-to-sales ratio of 3.4x its sales. It derived 14% of its sales from the e-commerce channel. The pet food market in India has been estimated at Rs. 4,000 crores, with dry dog food comprising 75% of the category.
Going forward, leveraging Nestlé India’s network would further accelerate the growth of the pet food business in India. Nestle India Ltd. (NIL) is the market leader in instant noodles and baby food products in India and the No. 2 player in the instant coffee and chocolate segment. One of the most interesting aspects of NIL in recent years has been the spontaneous pace of launches. Since 2016, NIL has launched over 90 products across segments, including new launches as well as variants to boost volume growth and market share gain, with 20 projects in the pipeline.

Nestle continues to focus on innovation to drive growth. New launches across segments have led to strong volume growth over the last few years. The management stated that innovation will be undertaken across product categories and that some of the products launched in the global market can also be introduced in the domestic market. The company is also considering adding new categories that will add value to its existing portfolio. It is expected that the aggressive pace of new innovations, the success of new launches, and the improvement in demand could further accelerate the company’s growth. The major risks for the NIL are increased competitive intensity, rising input prices with an inability to pass on the same, and higher-than-expected A&P spending.

Valuations:

NIL will continue to deliver strong growth going forward as well and will gain share in the core categories, led by distribution expansion, further strengthening of its position in rural areas with the launch of new products backed by R&D capabilities, and growth in the premium portfolio. These factors, along with market leadership in 80% of its categories, mean the company has enough pricing power to further drive premiumization along with volume growth. The EPS was Rs. 53 in the June quarter. The stock is trading at a PE ratio of 80x. The EBITDA was at 50.4x. The ROCE and ROE stood at 147% and 113%, respectively. The stock was trading at Rs. 19196 on September 7th, down by 0.81%.

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CDSL reported a net profit of Rs. 58 crore in the June quarter.
Business, Editorials, Equities, Markets, Research - September 7, 2022

CDSL reported a net profit of Rs. 58 crore in the June quarter.

CDSL reported a net profit of Rs. 58 crore in the June quarter.

CDSL reported a consolidated net profit of Rs.58 crore in the June quarter as against Rs.64 crore in June 2021. The total consolidated revenue stood at Rs 140 crore, compared to Rs 117 crore in June 2021. The EBITDA for the company was at Rs. 81 crore as compared to Rs. 87 crore in June 2021. The company’s total expenses rose to Rs 66 crore from Rs 44 crore in Q1FY22. The operating profit margin for June FY22 was 53% compared to 63% for the previous year’s quarter.

Sustainable long-term growth

The transaction revenues jumped from a quarterly rate of Rs10.7 Cr in FY20 to Rs29.8 Cr/50.0 Cr in FY21/FY22 with increased market activity. However, the number of trades has been down from 170 Cr in Q4FY22 to 157 Cr in Q1FY23, partially offset by an increase in delivery proportion. Additionally, IPO-related revenues and online data charges will also be lower. Therefore, expect sequential revenue and/or EBITDA to decline by 3 or 6.5% in Q1FY23E to Rs. 130 Cr./80 Cr.
The share of market-linked businesses increased to 69% of the total mix in FY22 from an average of 50% in FY18-FY20. However, the scope for a strong market bounce-back poses upside risk. The structural script remains integral with the number of demat accounts having increased from 1.25CR in May’17 to 6.70CR in May’22, a 40% CAGR over the past 5 years. The total number of NSE-active clients has increased from 1.08 crore in Mar ’20 to 3.77 million in May ’22. The number of companies with CDSL has increased from 10,000 to 18,613 over the past 5 years. CDSL’s market share in total demat accounts has increased from 44% in FY17 to 71% in FY23. The optionalities can keep accruing. While the national academy depository has not materialised, there are several optionalities that will accrue to CDSL, such as: an increase in traction for eMargin pledge services; insurance and commodity repositories; and operations in CDSL IFSC Ltd. Risks include swings in market volumes on both sides

Valuations-

The EPS was Rs. 5.53 in the June quarter. The stock is trading at a PE ratio of 49.6x. The EBITDA was at 37.8x. The ROCE and ROE stood at 41.9% and 31.6%, respectively. The stock was trading at Rs. 16.8 on September 6th, down by 0.30%.

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Dalmia Bharat posted a net profit of Rs. 280 Cr. in the June quarter.
Business, Editorials, Equities, Markets, Research, Uncategorized - September 6, 2022

dalmia-bharat-posted-a-net-profit-of-rs-280-cr-in-the-june-quarter

Dalmia Bharat posted a net profit of Rs. 280 Cr. in the June quarter.

Dalmia Bharat’s revenue from operations increased 27.44 percent to Rs 3,302 crore during the quarter under review, as against Rs 2,591 crore in the corresponding period of the previous fiscal. The company had posted a net profit of Rs 280 crore during the April-June quarter a year ago, Dalmia Bharat said in a regulatory filing. Dalmia Bharat’s total expenses rose 37.7 percent to Rs 3,072 crore in Q1 FY 2022–23 from Rs 2,231 crore a year ago.

In the April-June quarter, sales volume increased by 26.53 percent to 6.2 million tonnes, up from 4.9 million tonnes in Q1 FY2021-22.The net debt/EBITDA stood at 0.59x. The cost of borrowing was 5.7% for the current quarter compared to 5.3% in June 2021.

Key highlights for the quarter:

The continuous efforts and resilience of teams have enabled them to deliver good performance again on the back of strong volume growth and continuous cost leadership. The company did capacity additions and commenced commercial production of a 2.9 Mn Tonnes Murli Cement plant in Maharashtra. The firms’ total cement capacity increased to 35.9 MNT and their total clinker capacity stood at 18.9 MNT. In FY22, CO2 emissions were reduced further to 489kg/ton of cement, with a water positivity of 12.5x. They doubled renewable power capacity to 62.6 MW and signed an MoU with FLSmidth A/S, a leading supplier of technology for the cement industry, to develop a breakthrough innovation to support sustainability in the cement industry and a completed restructuring of the refractory business. The company will divest its IEX investment as and when it requires additional funds for CAPEX.

The management aims to save power and fuel costs as it commissions 41MW/69MW of WHRS/solar power units in FY23, taking the total renewable capacity to 173MW in FY23 from 105MW in FY22. The management is optimistic about demand and expects it to rise in FY23, led by government spending on infrastructure and housing. The major risks for the company to watch are lower demand and higher costs.

Valuations:

The EPS stood at Rs. 10.46 for June 2022, which was at Rs. 31.76 in March 2022 and Rs. 12.13 in June 2021. The stock has a ROCE of 7.09% and an ROE of 7.47%. The P/E ratio is now 26.6x, up from 25.1x five years ago. EBITDA is at 12.8x and the return on assets is 4.71%. The interest coverage ratio is 6.54x and the asset turnover ratio is 0.49. The share is trading at a price of Rs.1531, down by 0.37%.

Tarsons Products earned Rs. 29 crores in net profit.

 

 

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Genus Paper And Boards reports a net profit of Rs. 4.81 crores.
Business, Editorials, Equities, Markets, Research - September 6, 2022

Genus Paper And Boards reports a net profit of Rs. 4.81 crores.

Genus Paper And Boards reports a net profit of Rs. 4.81 crores.

Genus paper and boards reported a consolidated net profit of Rs. 4.81 crores in the June quarter as against Rs. 3 crores in June 2021. The total revenue stood at Rs 179 crore, a YOY growth of 195%. During this period, the company incurred a total expense of Rs. 172 crores. The EBITDA for the company was at Rs. 6.35 crore as compared to Rs. 4.19 crore in June 2021. The Kraft paper segment contributed to a total revenue of Rs. 157 crores, while the Coke business generated revenue of Rs. 21 crores. The company incurred a finance cost of Rs. 2 crores.

Muzaffarnagar unit to boost profitability.

The company has successfully commenced production of duplex paper from one of the production lines at a new unit in Muzaffarnagar, Uttar Pradesh. The Muzaffarnagar unit has manufacturing facilities for the production of kraft paper and duplex paper. Genus Paper & Boards’ EPS has grown by 28% each year, compounded over three years. If growth like this continues, then shareholders will have plenty to smile about. One way to double-check a company’s growth is to look at how its revenue and earnings before interest and tax (EBIT) margins are changing.

The good news for Genus Paper & Boards shareholders is that EBIT margins have grown from 3.9% to 7.1% in the last 12 months and revenues are on an upward trend as well. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Genus Paper & Boards’ continuing strength. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it’s a good stock to follow.

The paper industry in India is growing steadily with increasing demand from various segments like education, business & corporate and commercial printing. The demand and growth drivers have come from a combination of factors such as rising income levels, growing per capita expenditure, rapid urbanization, industrial production, government spending on education, and increased school enrollments. Higher disposable income, coupled with urbanization, is expected to drive new and different consumer behaviours for paper products.

Valuations:
The EPS was at Rs. 0.19 in the June quarter. The stock is trading at a PE ratio of 15.6x. The EBITDA was at 10.3x. The company has a low-interest coverage ratio of 5.39x. The stock was trading at Rs. 16.8 on September 6th, down by 0.30%.

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Vodafone Idea reported lower margins-
Business, Equities, Research Reports - September 6, 2022

Vodafone Idea reported lower margins-

Vodafone Idea reported lower margins

Vodafone Idea reported a consolidated loss of Rs 7,295 crore in the June quarter as against Rs 7,312 crore in June 2021. The total revenue stood at Rs 10,410 crore, a YoY growth of 13.7%. The revenue metric improvement was largely a function of residual tariff hike pass-through and one extra day during the quarter, which led to 3.2% QoQ growth. Vodafone Idea’s ARPU for the quarter improve by 23.4 percent YoY to Rs 128, aided by tariff hikes. 

 

Restricted Competitiveness:

The subscriber base declined from 3.4 million to 240.4 million, with a churn rate of 3.5%. The 4G sub-base saw an addition of merely 0.9 million QoQ to 119 million. Data traffic/MOU increased 4%, 2% QoQ to 5.4 GB, 620 minutes, respectively. Data usage and subscriptions increased 4% year on year to 13.3 GB, but remained lower than peers, who use nearly 20 GB per month. Similarly, capex was at 840 crore vs. 1210 crore in Q4. The management reiterated its intent to raise tariffs by the end of the current calendar year, which will lead to a rise in ARPU. The net debt, at 1.982 lakh crore, was up by 1820 crore QoQ. The net debt includes deferred spectrum liability of 1.166 lakh crore, AGR liability of 67270 crore, and bank borrowing of 15200 crore. While the recent government measures ensure the survival of VIL, staying competitive will be a function of how quickly it raises funds. Substantial fundraising to meet capital spending to expand 4G network coverage, launch 5G and stay competitive  Improvements in subscriber churn and 4G subscriber metrics Many key risks for the company are its inability to raise funds and expand coverage to compete.

The company has acquired mid-band 5G spectrum in 17 priority circles and mmWave 5G spectrum in 16 circles. It has also acquired an additional 4G spectrum in three circles, i.e., in Andhra Pradesh, Karnataka, and Punjab, for 18799 crores, payable in 20 annual instalments of 1681 crores per annum. It did not specify any time frame for the 5G launch. The company expects cash EBITDA to improve as 5G spectrum deployment occurs. It will result in a reduction in SUC charges, while there will be some lower tower rent benefits. The Board of Directors has approved the allotment of 42.77 crore warrants to Vodafone Group on a preferential basis. This, coupled with the earlier preferential raise in Q4 of  4500 crore, takes the total fund infusion by the promoter groups to 4986 crore, largely to pay Indus Tower dues. The company recently agreed to convert interest accrued from the four-year moratorium into equity. It indicated that DoT has confirmed the NPV of Rs 16,300 crore. This equity conversion will lead to dilution with the government owning 33% in VIL and the promoters (Vodafone and Aditya Birla group) owning 50%.

Key Triggers

The outstanding debt will come down by a similar amount, with an annual interest cost savings of Rs 1200 crore from the same. The government also has the discretion to convert total deferred moratorium dues into equity at the end of four years. The guidelines for this are still awaited. VIL remains the weakest private telco. The need for capitalization is urgent, owing to the company’s impending debt repayment, lagging network spending, and continued relative market share loss. It is highlighted that recent government relief measures would ensure the survival of VIL, but the future growth outlook remains uncertain.

Valuations:

In the June quarter, the EPS was Rs. 2.27).The stock is trading at a PE ratio of 86.2x. The EBITDA was at 3.97x with an interest coverage ratio of 0.30x. The stock was trading at Rs. 9.28 on Septembe up by 3.69%.

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