How GST Cuts Are Fueling India’s Stock Rally

Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - October 26, 2023

Delta corporation wins interim relief in GST case

On October 24, 2023, the Bombay High Court granted interim relief to Delta Corp Ltd, India’s largest casino operator, in a case related to a Goods and Services Tax (GST) notice put out by the Directorate General of GST Intelligence (DGGI). The DGGI had released a notice to Delta Corp demanding payment of GST shortfall to the tune of Rs 16,195 crore for the period between July 2017 and March 2022.

Delta Corp had challenged the GST notice on the grounds that the DGGI had erred in its interpretation of the GST law and that the company had paid all applicable taxes. The Bombay High Court has now directed the DGGI not to pass any final orders on the GST notice without its prior permission.

The interim relief granted by the Bombay High Court is a positive development for Delta Corp, as it provides the company with some breathing space to defend itself against the GST notice. The company has said that it is confident of its legal position and that it will continue to cooperate with the DGGI.

Since the GST Council approved a 28% uniform tax on online gaming, casinos, and horse racing, the share price of Delta Corp has been subject to intense selling pressure. The tax notice made matters worse and severely harmed feelings. On October 16, 2023, Delta Corp shares fell 52% from their 52-week high of 259.95 reached on June 28, 2023, to a 52-week low of 124.60.

The DG GST sent Delta Corp and its subsidiaries a letter requesting more than $23,000 crore in tax payments for the time frame of July 2017 to March 2022 within the past month. The amount of the tax notice is greater than six times the current market cap of Rs 3,600 crore.

The Directorate General of GST Intelligence has published a notice for the payment of lack tax last month, valued at 16,822 crores. This includes notices for a total of $5,682 crore against three of its companies, Casino Deltin Denzong, Highstreet Cruises, and Delta Pleasure Cruise Company, as well as an alleged tax due of Rs. 11,139 crores, with interest and penalties, for the period from July 2017 to March 2022.

Furthermore, the casino operator received another notice from the DG GST this month regarding 6,384 crores. DeltaCorp said in a statement to the exchanges that it had received a notification under Section 74(5) of the CGST Act, 2017 and the West Bengal GST Act, 2017 from the Directorate General of GST Intelligence, Kolkata, asking for payment of shortfall tax. A regulatory filing states that there is a purported tax shortfall of 147,51,05,772 for the period of July 2017 through October 2022 and 6,384.3 crore for the period of January 2018 through November 2022.

Impact on delta corporation’s business:

The GST notice issued by the DGGI had cast a shadow on Delta corporations’ business, as investors were concerned about the potential financial impact of the case. However, the interim relief granted by the Bombay high court has removed some of this uncertainty. In response to the announcement, delta corporation shares increased 8.2% to 140.7 in the first two hours of trading. The stock’s opening price of 136.05 was a 4.6% increase over its previous closing price of 130. With a market capitalization of $3,590 billion at the time of reporting, the stock was trading 3.15% higher at $134.1 per share.

The company’s share price has rallied since the interim relief was granted, reflecting the positive sentiment among investors. Delta Corp’s business is also expected to benefit from the gradual reopening of the economy, as people are returning to casinos and other entertainment venues.

Neogen Chemicals’ EBITDA Soars to 29.46 Cr fueled by lower input costs

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Grainspan Boosts Ethanol Output with ₹520 Crore Investment in Gujarat Plants

Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - October 16, 2023

Neogen Chemicals' EBITDA Soars to 29.46 Cr fueled by lower input costs

Neogen Chemicals’ EBITDA Soars to 29.46 Cr fueled by lower input costs

Company Overview:

Neogen Chemicals Ltd is a prominent Indian manufacturer specializing in the production of specialty chemicals, with a focus on bromine and lithium-based chemicals, both organic and inorganic in nature. These chemicals find applications across diverse industries, including pharmaceuticals, agrochemicals, engineering, electronics, polymers, water treatment, construction, aroma chemicals, flavors, and fragrances. The company also offers custom synthesis and contract manufacturing services. In a strategic move, Neogen Chemicals Ltd has recently ventured into the manufacturing of lithium-ion battery materials for energy storage and electric vehicle applications through its subsidiary, Neogen Ionics Ltd. Additionally, the acquisition of BuLi Chemicals India Private Ltd has bolstered their technology platform, particularly in the production of N-Butyl lithium and other organolithium products.

Clientele:

Neogen Chemicals Ltd has a prestigious client base that includes Sun Pharma, Piramal, Hikal, Hetero, Voltas, Divis Laboratories, Solvay, and others. The company operates from four manufacturing sites and two research and development facilities.

Product Portfolio

The company boasts a diverse product portfolio, comprising over 244 products that are distributed not only in India but also in 29 countries, spanning regions such as the United States, Europe, Japan, and the Middle East. The revenue distribution indicates a mix of organic and inorganic chemicals, with a split of 68% and 32%, respectively. In terms of geographical reach, domestic sales account for 52% of revenue, while exports contribute to the remaining 48%.

Q1FY24 results update:

In Q1FY24, Neogen Chemicals Ltd posted a 15% YoY growth in revenue, reaching 170.12 Cr. This was, however, a 17% decline compared to the previous quarter. The revenue mix was predominantly organic, constituting 73%, while inorganic chemicals contributed 27%. In terms of domestic and export sales, the split was 65% and 35%, respectively. EBITDA exhibited a 20% YoY growth, amounting to 29.46 Cr, attributed to lower raw material prices, particularly in lithium, and other input cost efficiencies. EBITDA margins improved by 65 bps to 17.32% YoY. EBIT grew by 18% YoY to 24.54 Cr, accompanied by a 40 bps increase in EBIT margins to 14.4% YoY. PAT performance was moderate, growing by 3% YoY but declining by 20% QoQ to 11.43 Cr, mainly due to higher interest costs and depreciation associated with ongoing expansions. Consequently, PAT margins contracted by 80 bps to 11.43% YoY.

Conclusion:

Neogen Chemicals Ltd has demonstrated consistent growth and expansion, underpinned by its diverse product portfolio, strategic acquisitions, and foray into cutting-edge technology areas such as lithium-ion battery materials. While the company continues to experience financial growth, its Q1FY24 results reflect the impact of ongoing expansion efforts and external factors affecting profitability. Careful management of input costs and effective project execution will likely be essential moving forward as Neogen Chemicals Ltd navigates its path in the specialty chemicals industry.

Responsive Industries Ltd’s EBITDA Surged 172% YoY to 48.5 Cr

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Dabur Subsidiaries Face Cancer Lawsuits in US and Canada

Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - October 12, 2023

Dabur Q1FY24 Revenue Hits 3,130 Cr Amid Lower Inflation

Company Overview:

Dabur India Ltd, with a rich legacy of 138 years, stands as a prominent player in the fast-moving consumer goods (FMCG) industry. It boasts a diverse portfolio encompassing Health Care, Home and Personal Care, and Food and Beverages products. Dabur is recognized as the 4th largest FMCG company in India and the world’s largest ayurvedic and healthcare company, offering a portfolio of over 250 herbal/ayurvedic products. The company’s expansive distribution network covers 7.7 million retail outlets, extending its reach into both urban and rural markets.

Industry Overview:

The FMCG sector in India plays a pivotal role in the country’s economy. Notably, it continued to exhibit robust growth, even during the challenging years of the COVID-19 pandemic. Dabur benefited from a consumer shift towards natural healthcare products during this period. However, inflation and central bank interest rate decisions have presented challenges, impacting volume growth.

Strong Global Presence through robust distribution reach:

Dabur’s global reach is extensive, with products distributed to 120+ countries across four continents. This impressive reach is facilitated by 28 warehouses and 3000+ distributors in India alone. The company’s manufacturing infrastructure comprises 13 sites in India and 8 overseas locations. Notably, Dabur expanded its operations by acquiring a 51% stake in Badshah Masala, increasing its total manufacturing sites in India to 14.

Business Segments:

A Consumer Care Business: This SBU includes Health Care (HC) and Home and Personal Care (HPC) segments, contributing to 56.2% of Consolidated Sales.
Food & Beverages (F&B) Business: Comprising fruit-based beverages and a range of food products, this segment expanded with the addition of spices through the acquisition of Badshah Masala. It accounts for 15.1% of Consolidated Sales.
International Business: This segment combines Dabur’s organic overseas business with acquired entities such as Hobi Group and Namaste Laboratories LLC, making up 25.1% of Consolidated Sales. Dabur has significant market shares in various categories, including healthcare supplements, oral care, hair oil, and fruit juice.
The company has a 63.20% market share in healthcare supplements (chyawanprash), 17% in the oral care (toothpaste) segment, and 16.3% in the hair oil segment. It is a market leader in the fruit juice segment around 16.20% market share with its real and active brands.

Valuation and Key Ratios:

Dabur’s stock is currently trading at a multiple of 56.5x EPS of 9.77, with a market price of 547, while the industry PE stands at 40.5x. The stock is valued at 10.8 times its book value of 50.6 Rs per share. The company demonstrates robust return ratios, with ROE at 19.5% and ROCE at 22.7%. Moreover, the interest coverage ratio stands at 25.9%, indicating that the company’s earnings are significantly higher than its interest costs, reflecting a strong financial position. The EV/EBITDA ratio stands at 36.5x.

Q1FY24 Results Update:

In Q1FY24, Dabur reported a 10.91% YoY increase in revenue to 3,130 Cr, driven by increased sales volume due to reduced inflation in Q2, which boosted demand for consumer goods. EBITDA grew by 11.23% YoY and 47.55% QoQ to 605 Cr, with EBITDA margins remaining steady at 19.32%. This performance was despite rising raw costs and operating expenses. The company achieved a PAT of 457 Cr, reflecting a 3.53% YoY growth and a significant 55.97% QoQ increase. However, PAT margins witnessed a slight YoY decline of 100 bps, while they increased by 360 bps QoQ. The EPS for the quarter stood at 2.58 Rs, marking a 3.53% YoY growth.

Conclusion:

Dabur India Ltd, with its long-standing history, diverse product portfolio, extensive distribution network, and strong financial performance, continues to be a formidable player in the FMCG sector. Despite challenges such as inflation and interest rate fluctuations, the company has demonstrated resilience and growth, as evident from its Q1FY24 results. Investors may find Dabur an attractive proposition given its strong market position and financial stability.

Responsive Industries Ltd’s EBITDA Surged 172% YoY to 48.5 Cr

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Manorama Industries Ltd Q1FY24 results updates

Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - October 10, 2023

Manorama Industries Ltd PAT surges by 70.69% YoY

Company Overview:

Manorama Industries Ltd specializes in the production of specialty fats and butter derived from exotic seeds and nuts. The company is a prominent supplier of these specialty fats and butter, catering to the demands of the chocolate, confectionery, and cosmetics sectors. Moreover, they produce sal, shea, and mango-based cocoa butter equivalents (CBE), as well as shea-based specialty fats and butter.

Diverse Products Portfolio:

Manorama Industries boasts a diverse product portfolio, including Cocoa Butter Equivalent (CBE), Shea Stearin, Sal Butter, Sal Stearin, Mango Butter, Mowrah Butter, Kokum Butter, and De Oiled Cake (DoC). These products find applications in the chocolate manufacturing, confectionery, bakery, and cosmetics industries. The company serves various sectors, including food, chocolates, confectionery, cosmetics, and the HoReCa market.

Manufacturing Sites and Capacity Utilization:

The company’s primary manufacturing site is situated in Birkoni near Raipur, Chhattisgarh. This facility encompasses key processes such as expelling, extraction, refining, and fractionation. It has a substantial production capacity with 45,000 MT for refinery, 30,000 MT for interesterification, 25,000 MT for deodorization, 40,000 MT for fractionation, and 30,000 MT for blending and packing. The strategic location of the plant, at a mere 550 Km from the Visakhapatnam port and the anticipated Raipur-Visakhapatnam expressway, promises reduced transportation times, cost savings, and enhanced operational efficiency. As of June 2023, the company has invested 1,099.5 million in capital expansion.

Valuation and Key Ratios:

The company’s stock is presently trading at a multiple of 80.2x earnings per share (EPS) of 29, with a current market price of 2,325 Rs, while the industry’s price-to-earnings (PE) ratio stands at 43.9x. Furthermore, the stock is trading at 9.29 times its book value, which is 250 Rs per share. Manorama Industries exhibits robust return ratios, with a return on equity (ROE) of 10.5% and a return on capital employed (ROCE) of 13.2%. The interest coverage ratio stands at 6.43, indicating that the company’s earnings are 6.43 times its interest costs, underscoring its strong financial position. The enterprise value to EBITDA (EV/EBITDA) ratio stands at 39.7x.

Q1FY24 Results Updates (Standalone):

In Q1FY24, the company experienced substantial growth, with revenue increasing by 52.89% year-on-year (YoY) and 9.65% quarter-on-quarter (QoQ) to reach 111.56 Cr. This growth was driven by improving realizations and growing demand in the chocolates, confectionery, and cosmetic industries. EBITDA increased by 47.86% YoY and 13.05% QoQ to 18.64 Cr, although EBITDA margins dropped by 60 basis points YoY but increased by 50 basis points QoQ due to operational efficiency. Profit after tax (PAT) surged by an impressive 70.69% YoY and 15.57% QoQ, reaching 11.55 Cr, with PAT margins improving by 100 basis points YoY and 50 basis points QoQ to 10.36%. Earnings per share (EPS) stood at 9.71 Rs, a growth of 15.62% QoQ.

Conclusion:

Manorama Industries Ltd appears to be on a growth trajectory, as evidenced by its impressive Q1FY24 results, strong financial ratios, and a diverse product portfolio that caters to multiple industries. The company’s strategic manufacturing site location and ongoing capital expansion also bode well for its future prospects. However, investors should keep an eye on industry trends and competition as they assess the company’s long-term potential.

Manorama Industries. Strong Growth potential.

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Peerless Group to Exit Insurance Distribution and Double-Down on Hospitals

Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - October 6, 2023

Softtech Engineering Ltd's EBITDA Surged 26.85% YoY

Softtech Engineering Ltd’s EBITDA Surged 26.85% YoY

Company Overview:

Softtech Engineering Ltd, established in 1996, operates in the software products and services sector, primarily serving the architecture, engineering, and construction (AEC) industry. The company has a diverse portfolio comprising seven products that cover the entire construction value chain. Notably, their AutoDCR solution automates building and layout plan approvals, contributing to Smart City projects. Softtech Engineering Ltd has a global presence, having served over 4600 clients in India and around the world.

Product Portfolio:

Their product portfolio includes AutoDCR, PWIMS, and OPTICON. AutoDCR streamlines building plan approvals by analyzing 2D CAD drawings for compliance with Development Control Regulations. PWIMS offers integrated works and procurement management for civil infrastructure organizations, while OPTICON serves as an ERP solution for construction enterprises, optimizing various construction processes.

Industry Overview:

Operating within the IT and Technology industry, Softtech Engineering Ltd is positioned well, given the promising prospects of the Indian software product industry, expected to reach $100 billion by 2025. Furthermore, the growing demand for AI is driving the data annotation market, which is anticipated to reach $7 billion by 2030.

Valuation and Key Ratios:

As of the latest data, the stock of Softtech Engineering Ltd is trading at a substantial multiple of 77.6x earnings per share (EPS) of 3.78, with an industry PE ratio at 36.4. The stock also trades at 2.44 times its book value. The company reports a moderate return on equity (ROE) of 3.91% and return on capital employed (ROCE) at 7.85%. Additionally, an interest coverage ratio of 2.44x suggests the company’s solvency. The EV/EBITDA ratio stands at 14.2, and the total debt is reported at 48.1 Crores.

Q1FY24 Results Updates:

In the first quarter of FY24, Softtech Engineering Ltd witnessed robust YoY revenue growth of 54.97%, reaching 18 Crores, although it showed a minor QoQ increase of 2.57%. Operating expenses also increased by 67.55% YoY, reflecting growth challenges. EBITDA grew by 26.85% YoY to 4.75 Crores, but EBITDA margins dropped by 500 basis points (bps) YoY due to the significant increase in operating expenses. EBIT increased by 19.68% YoY, but margins declined by 200 bps YoY due to increased depreciation. Profit after tax (PAT) declined by 27.84% YoY, yet saw a substantial QoQ increase of 285.71%. The earnings per share (EPS) for the quarter stood at 0.49 Rs, marking a 27.54% YoY decrease.

Conclusion:

Softtech Engineering Ltd is a well-established player in the AEC software domain with a diverse product portfolio. While their Q1FY24 results indicate strong YoY revenue growth, increasing operating expenses and declining margins raise some concerns. Investors should carefully monitor the company’s ability to manage expenses and sustain profitability in a competitive and evolving market.

Responsive Industries Ltd’s EBITDA Surged 172% YoY to 48.5 Cr

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HUDCO Q3FY25 Results Update: Robust Performance Drives Strong Growth

Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - October 5, 2023

PFC Sanctions Rs 15,000 Cr, Forays into Airport Funding

Power Finance Corporation (PFC), a state-owned non-banking financial company (NBFC), has
sanctioned Rs 15,000 crore in new loans for various projects, including its maiden financing for a
greenfield airport in Andhra Pradesh.
The announcement was made on October 3, 2023, after the company’s board of directors (BOD)
meeting. The loans have been sanctioned for a variety of projects, including power generation,
transmission, and distribution, as well a renewable energy airport project.
Some of the key projects that have received funding from PFC include:
➢ Rs 3,000 crore for a 660 MW supercritical thermal power plant in Rajasthan
➢ Rs 2,000 crore for a 500 MW solar power plant in Gujarat
➢ Rs 1,500 crore for a 220-kV transmission line project in Maharashtra
➢ Rs 1,000 crore for a 100 MW wind power plant in Tamil Nadu
➢ Rs 500 crore for a greenfield airport project in Andhra Pradesh
PFC’s foray into funding airport projects is a new development. The company is looking forward to
diversify its portfolio and expanding into new infrastructure segments. The greenfield airport project in Andhra Pradesh is expected t be a major boost to the state’s economy and infrastructure.

PFC’s Q1 FY24 Net Profit Rises 31% to Rs 5,982 Crore

Power Finance Corporation (PFC) reported a 31% increase in its consolidated net profit to Rs 5,982.14 crore in the first quarter of the financial year 2023-24 (Q1 FY24), from Rs 4,579.53 crore in the corresponding quarter of the previous financial year. The company’s total income rose 13% to Rs 21,001.44 crore in Q1 FY24, from Rs 18,544.04 crore in Q1 FY23.

PFC’s asset quality improved during the quarter, with gross non-performing assets (NPAs) declining to 2.99% from 3.11% a year ago. Net NPAs also fell to 1.27% from 1.45% in the same period. The company’s board of directors recommended a 1:4 bonus issue for approval at the upcoming annual general meeting.

PFC’s strong performance in Q1 FY24 was driven by a combination of factors, including higher interest income, lower provisions, and improved asset quality. The company’s foray into new infrastructure segments, such as airports and green hydrogen, is also a positive development.

PFC to raise Rs 10,000 crore through tax-free bonds

PFC plans to raise Rs 10,000 crore through tax-free bonds in the current financial year. The company will use the proceeds to finance power projects and other infrastructure developments.
PFC is one of the few companies that is allowed to issue tax-free bonds. The bonds are attractive to investors as they offer exemption from income tax on the interest earned.

PFC to partner with NTPC to develop Green Hydrogen projects

PFC has signed a memorandum of understanding (MoU) with NTPC to develop green hydrogen
projects in India. The companies will work together to identify and develop potential projects.
Green hydrogen is produced using renewable energy sources, such as solar and wind power. It is a clean and sustainable fuel that can be used in a variety of applications, including power generation, transportation, and industrial processes.

PFC Inks MoU with IFC to Promote Sustainable Financing in India

PFC has inked an MoU with the International Finance Corporation (IFC), a member of the World Bank Group, to promote sustainable financing in India. The two organizations will work together to develop and implement sustainable financing solutions for the power sector and other infrastructure sectors. The MoU also includes a provision for the IFC to provide technical assistance to PFC to help it strengthen its sustainable financing capabilities.

South India Bank Ltd’s report robust PAT up 75.42% YoY

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Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - October 4, 2023

Responsive Industries Ltd's EBITDA Surged 172% YoY to 48.5 Cr

Responsive Industries Ltd’s EBITDA Surged 172% YoY to 48.5 Cr

Company Overview:

Responsive Industries Ltd, incorporated in 1993, is a prominent player in the PVC/polymer industry, specializing in the manufacturing and sale of various PVC-based products. The company has firmly established itself as a leader in the domestic market, boasting a market share of over 50% in vinyl flooring. Its diverse product portfolio includes vinyl flooring, synthetic leather, luxury vinyl tiles (LVT), and shipping ropes, catering to sectors such as healthcare, transportation, real estate (offices and residences), and more. Notably, the company recently introduced an innovative flooring product called IMPACT, featuring a hard layer interlocking design that can mimic the appearance of wood, marble, granite, and tiles.

Industry Overview:

The Indian Vinyl Flooring Industry is on a growth trajectory, expected to achieve a CAGR of 10% per annum, reaching a value of US$1,898 million by FY 2027. This growth can be attributed to the increasing demand for vinyl flooring due to its durability, ease of installation and maintenance, competitive pricing, and overall comfort compared to traditional flooring materials. Globally, the vinyl flooring market is valued at US$45.1 billion in 2022, with a projected CAGR of 12%, expected to reach US$65.6 billion by 2027. This global growth is driven by factors such as rising consumer demand for residential flooring, increased purchasing power, technological advancements, and the cost-effectiveness and longevity of vinyl flooring products.

Manufacturing and Distribution:

Responsive Industries operates 15 manufacturing sites located in Boisar, Mumbai, covering 62 acres of land. These sites include advanced logistics facilities, multi-modal cargo handling, and large raw material and engineering stores. In the flooring segment, the company boasts a total manufacturing capacity of 6,000 tons per month, along with 2,000 tons per month for synthetic leather and ropes. The company has a robust distribution network spanning 35 cities in India, with over 75 distributors domestically, and more than 300 distributors internationally. It also maintains relationships with over 500 architects. Additionally, Responsive Industries is a significant supplier to Indian Railways, holding orders worth 100 crore for raw materials for various projects.

Customer Base:

The company’s key clientele includes renowned names such as Tata Motors, Ashok Leyland, Olectra Greentech Limited, and JBM Auto Ltd. As of June 2023, Responsive Industries has secured total orders worth 60 crore from these esteemed clients, along with a substantial order book of 4.63 lakhs for waterproofing membranes.

Valuation and Key Ratios:

Currently, Responsive Industries’ stock is trading at a multiple of 152x EPS of 2.33 at a market price of 354, while the industry PE stands at 37.4. The company is trading at 9.42 times its book value, which is 37.6 Rs per share. In terms of return ratios, the company reports an ROE of 2.46% and an ROCE of 4.51%. The interest coverage ratio stands at 3.72%, indicating that the earnings are three times higher than its interest costs, reflecting strong solvency.

Q1FY24 Results Updates: Consolidated

In the first quarter of FY24, Responsive Industries demonstrated robust financial performance. The company witnessed a 15.70% YoY revenue growth, reaching 263 crore, while the cost of goods sold (COGS) increased by 21.64% YoY to 183 crore. This resulted in a gross profit of 79.5 crore, reflecting a 3.97% YoY growth. However, gross profit margins experienced a 300 basis point drop YoY to 30.215% due to rising raw material costs. Notably, EBITDA surged by 172.04% YoY to 48.5 crore, driven by improved operating leverage, leading to an EBITDA margin of 18.43% in Q1FY24 compared to 7.84% in Q1FY23. The EBIT grew an impressive 658.71% YoY to 34 crore, with EBIT margins standing at 12.95% in the latest quarter, a significant improvement from -2.68% in Q1FY23 due to operating leverage benefits. Profit after tax (PAT) increased by 420.18% YoY to 30 crore, with PAT margins at 11.40% in the latest quarter. Earnings per share (EPS) for the quarter stood at 1.12 Rs, reflecting a 31.98% QoQ growth.

Conclusion:

Responsive Industries Ltd has carved a niche for itself in the PVC/polymer industry, particularly in vinyl flooring, by offering innovative products and maintaining strong relationships with clients and distributors. The company’s financial performance in Q1FY24 reflects impressive revenue growth, margin improvement, and profitability, driven by efficient operations and improved leverage. Considering the company’s position in the growing vinyl flooring market and its recent financial performance, it appears to be well-positioned for future growth and value creation for its shareholders.

Astral Pipes posted a net profit of Rs. 96 Cr.

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Flexiloans Bags ₹375 Cr in Series C, Targets ₹5,000 Cr AUM Within 18 Months

Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - October 3, 2023

South India Bank Ltd's report robust PAT up 75.42% YoY

South India Bank Ltd’s report robust PAT up 75.42% YoY

Company Overview:

South India Bank, established in 1929 in Kerala, holds the distinction of being the earliest bank in South India. It primarily operates in Kerala and the southern regions of India, with plans for further expansion nationwide. The bank offers lending facilities at competitive rates to retail individuals and businesses, catering to various sectors, including corporations, personal, business, and agriculture. Additionally, it engages in para-banking activities such as debit card services, third-party financial product distribution, treasury operations, and foreign exchange transactions.

Branch Network:

As of June 2023, South India Bank boasts an extensive branch network of 941, inclusive of 3 satellite branches and 3 ultra-small branches, complemented by 1,296 ATMs spanning the country. Notably, a significant 82% of its branches are concentrated in Kerala and the southern region, posing geographic concentration risks. The majority of these branches, approximately 50%, are located in semi-urban areas. With an employee base of 9,894, the bank aims to enhance its presence with the opening of 17 banking outlets and 25 ATMs, along with 10 cash recycling machines in the financial year 2023-24.

Loan Book Concentration:

In Q1FY24, the bank’s loan book exhibits a notable concentration in the southern region of India, with 36% of loans sanctioned in Kerala and 35% in the southern states excluding Kerala, collectively forming 72% of the loan portfolio. The remaining 28% of loans are disbursed in the rest of India. The loan book is diversified among segments, with corporate loans accounting for 37%, personal loans at 23%, business loans making up 21%, and agriculture loans comprising 19% of the portfolio.

Segment-wise Performance in Q1FY24:

South India Bank’s gold loan book witnessed consistent growth, increasing by 21.04% YoY, primarily driven by retail and agriculture sub-segments. The personal loan segment expanded by 12.18% YoY, primarily attributed to housing loans. In contrast, business loans decreased by 14.57% YoY due to declines in MSME/SME and other loans. Corporate loans exhibited robust performance, growing by 47.94% YoY in Q1FY24, with a significant portion comprising AAA-rated and AA-rated companies.

Assets Quality and Capital Adequacy:

The bank’s asset quality improved in Q1FY24, with GNPA at 5.13% compared to 5.87% in the previous year and NNPA at 1.85% compared to 2.87%. South India Bank maintains a capital adequacy ratio of 16.49%, exceeding the RBI’s guideline of 15%. The provision coverage ratio increased to 76.54% from 70.11% in Q1FY23.

Valuation and Key Ratios:

Currently trading at 0.82 times its book value of 31.9 Rs per share, the bank exhibits improved financial metrics, with ROA and ROE at 0.73% and 11.80%, respectively. Net Interest Margins (NIMs) increased to 3.34% in Q1FY24, up 60 bps from 2.74% in Q1FY23. However, the CASA ratio declined to 32.64% from 34.4% in Q1FY23, and the cost-to-income ratio, while slightly high at 58%, improved from 62.7% in the previous year.

Q1FY24 Results Update: Consolidated

In Q1FY24, the bank reported impressive financials, with interest income growing by 24.86% YoY, resulting in net interest income of 807.77 Cr, a 33.87% YoY increase. Notable improvements were seen in corporate and personal segments. NIMs increased to 3.34% compared to 2.74% in Q1FY23. Pre-provision operating profit (PPOP) grew by 54.77% YoY. Profit after tax (PAT) recorded a significant 75.42% YoY growth to 202.5 Cr, with an earnings per share (EPS) of 0.97 Rs for the quarter. The collection efficiency also improved to 100.1% in Q1FY24 compared to 99.8% in the previous quarter.

Conclusions:

South India Bank demonstrates a strong regional presence, particularly in Kerala and the southern regions of India. The bank’s diversified loan portfolio, improving asset quality, and capital adequacy ratios above regulatory requirements indicate a positive outlook. Despite some challenges like geographic concentration and a slight decline in CASA, the bank’s performance in Q1FY24 showcases growth potential, especially in the corporate and personal segments.

Astral Pipes posted a net profit of Rs. 96 Cr.

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Aditya Birla Group: Billion-Dollar Fashion Ambition!

Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - October 3, 2023

Jindal Poly Films Ltd's PAT down 69.02% YoY to 97 Cr

Jindal Poly Films Ltd’s PAT down 69.02% YoY to 97 Cr

Company Overview:

Jindal Poly Films Ltd (JPFL), established in 1974, is a prominent player in the packaging industry, specializing in packaging films, non-woven fabrics, and label solutions. Their product portfolio encompasses a wide range, including BOPP, BOPET, CPP, Lamination Metallized films, Coated films, Thermal Lamination Films, and capacitor Films. Notably, JPFL boasts the world’s largest manufacturing plant for BOPET and BOPP films located in Nasik. The company operates across three key segments:

Presence in three segments:

1. Packaging Films: JPFL’s core business revolves around packaging films with a substantial production capacity. They produce BOPP, BOPET, and CPP films, among others, at their Nasik plant, with capacities of 2,94,200 TPA for BOPP, 1,70,000 TPA for BOPET, and 33,600 TPA for CPP.
2. Non-woven Fabrics: In the non-woven fabrics segment, JPFL manufactures spunmelt and spun bond fabrics with a total production capacity of 58,000 MT. These fabrics find applications in various sectors, including hygiene, medical, and industrial, serving multinational clients in the personal care domain.
3. Labelling Solutions: The company, through its subsidiary, has ventured into the labeling solutions business, positioning itself as a pioneer in innovative, environmentally friendly products that promote carbon neutrality for brands.

Industry Overview:

Packaging Films Industry: This sector is anticipated to achieve a CAGR of 4.1% from 2023 to 2033, reaching a market value of $223.5 billion by 2033. Growth factors include rising disposable incomes, improved living standards, and evolving consumer preferences.
Non-woven Fabrics Industry: Valued at $30.76 billion in 2022, this industry is projected to reach $60.23 billion by 2032, with a CAGR of 7%. The demand for non-woven fabrics is driven by their applications in manufacturing interlinings, insulation, protective clothing, and more.
Labelling Solutions Industry: This sector is expected to reach a valuation of $41.75 billion at a CAGR of 4.9% from 2023 to 2033, driven by increased demand for labels due to the growth of e-commerce and digitization.

Valuation and Key Ratios:

JPFL’s stock is currently trading at a multiple of 29.13x EPS 23.2, with a market price of 676 Rs, while the industry PE stands at 26x. The stock is trading at 0.70 times its book value of 961 Rs per share. The company reports an ROE of 6.63% and an ROCE of 12.5%, indicating moderate profitability. Additionally, the interest coverage ratio at 3.43% reflects the company’s high solvency, with earnings covering its interest costs threefold. The EV/EBITDA ratio stands at 7.08x, suggesting a reasonable valuation.

Q1FY24 Results Update: Consolidated

In Q1FY24, JPFL faced challenges as revenue decreased by 47.76% YoY (+2.74% QoQ) to 832 Cr, primarily due to a slowdown in the packaging business, which declined by 53.32% YoY. EBITDA decreased significantly by 96.55% YoY (-50.46% QoQ) to 13 Cr, resulting in EBITDA margins declining by 21.84% YoY to 1.54%. EBIT reached -37 Cr, down by 111.29% YoY, primarily due to a 17.16% YoY increase in depreciation. Despite these challenges, PAT showed positive results, supported by other income, standing at 198 Cr, with PAT at 97 Cr, down by 69.02% YoY. PAT margins declined by 8.05% YoY, standing at 11.74% in Q1FY24. EPS for the quarter stands at 22.29 Rs, marking a significant growth of 125.36% QoQ.

Conclusions:

Jindal Poly Films Ltd operates in industries with promising growth prospects, although it faced challenges in Q1FY24. The company’s diversified product portfolio and strong manufacturing capacities position it well for future growth opportunities. Investors should monitor its ability to address the challenges in the packaging business and capitalize on the growth potential in the non-woven fabrics and labelling solutions segments. Additionally, the valuation metrics indicate a reasonably priced stock in the current market context.

Astral Pipes posted a net profit of Rs. 96 Cr.

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Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - September 28, 2023

REC Limited's Signed MoU with PNB Sparks 6.38% Surge in Share Price:

REC Limited’s Signed MoU with PNB Sparks 6.38% Surge in Share Price:

Company Overview:

Rural Electrification Corporation LTD (RECL) is a significant player in the Indian power and infrastructure sector, serving both state-owned utilities and private companies. It plays a pivotal role in the nation’s electrification efforts and has witnessed substantial growth over the past five years. This analysis delves into the company’s activities, financial performance, and key trends.

REC Limited’s Signed MoU with PNB Sparks 6.38% Surge in Share Price:

On September 26, 2023, REC Limited made a significant stride in the financial world by forging a strategic Memorandum of Understanding (MoU) with Punjab National Bank (PNB). This landmark agreement paves the way for both entities to co-finance an impressive sum of Rs. 55,000 Crore over the next three years, dedicated to fueling infrastructure, power, and logistics projects under consortium arrangements. This exciting development sent shockwaves through the market, causing REC Limited’s share price to skyrocket by 6.38% in a single day, marking a remarkable 17-point jump to reach a trading price of 284 Rs. Investors and stakeholders alike are buzzing with anticipation as REC and PNB unite to power India’s growth and development in the coming years.

Funding Allocation and Growth:

RECL’s core function involves providing interest-bearing loans to various segments of the power sector, including generation, transmission, distribution, logistics, and renewables. In FY23, the company experienced remarkable growth, with total sanctions increasing by an impressive 393% year-on-year (YoY) to 2,68,461 Cr compared to 54,421 Cr in FY22. The highest sector-wise allocation of these funds was in logistics and infrastructure at 32%, followed by transmission and distribution at 30%.

Loan Disbursements and Portfolio Composition:

In terms of disbursements, generation accounted for 26%, distribution 25%, renewables 13%, and transmission 31%. In FY23, total disbursements grew by 51% YoY to 96,846 Cr compared to 64,150 Cr in FY22. Notably, over 90% of RECL’s loans are extended to state entities, resulting in a low likelihood of asset conversion into non-performing assets (NPAs).

Q1FY24 Results Update:

In Q1FY24, RECL experienced a 12% YoY decrease in net interest income, which amounted to 3,412 Cr compared to 3,880 Cr in Q1FY23. This decline can be attributed to a 50 bps increase in the cost of funds and a 25 bps decrease in the yield on loans. However, the pre-provision operating profit (PPOP) increased by 9% to 3,770 Cr, primarily due to operational efficiency improvements, including a reduction in operating expenses.

Asset Quality and Capital Adequacy & Key Ratios:

Asset quality improved significantly in Q1FY24, with gross NPAs declining to 3.28% from 4.41% in Q1FY23, a 1.13% YoY decrease. Net NPAs also saw a reduction, decreasing by 0.44% YoY to 0.97% in Q1FY24 compared to 1.41% in Q1FY23. The provision coverage ratio increased to 70.46% in Q1FY24 from 68.08% in Q1FY23. The capital adequacy ratio stood strong at 27.67% in Q1FY24, comprising tier 1 capital at 24.67% and tier 2 at 2.93%. Return on equity (ROE) also improved, reaching 19.98% in Q1FY24 compared to 18.9% in Q1FY23, reflecting a 1.08% YoY increase.

Margin and Spread Challenges:

RECL faced challenges in its core lending business, as the net interest margin (NIMS) declined by approximately 80 bps to 3.28% in Q1FY24, significantly lower than the industry average. The company’s cost of funds increased by 50 bps YoY to 7.23%, while the yield on funds decreased by 25 bps to 9.82% in Q1FY24, affecting the spread.

Conclusions:

RECL continues to play a crucial role in funding India’s power and infrastructure sectors. While facing challenges in its lending business, the company has shown resilience and adaptability, particularly in focusing on renewable energy sources. The improving asset quality and robust capital position bode well for its future endeavors.

Astral Pipes posted a net profit of Rs. 96 Cr.

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