Market Overview Monthly Insight Performance Startup Corner Book Review Prominent Headlines Sector Outlook Consumer Durable Multicap Funds Reclassification World Economic Event Calendar Q&A with CIO Management Meet Note Mutual Fund Overview Stock Picks Economy Review Technical View insight October 2020
Q&A with CIO Mr. Taher Badshah, Invesco Mutual Fund
UltraTech Cement ltd. | Essel Propack Ltd. | Valiant Organics Ltd. Market Economy Overview Review - Agriculture 1 33 Reforms
Prominent Startup Headlines Corner PROMINENT September 2020 HEADLINES 4 41
Q&A SEBI with CIO Multicap Funds Reclassification Mr. Taher Badshah, Invesco Mutual 6 Fund 42
Stock Mutual Picks Fund Overview • UltraTech Cement Ltd. • Essel Propack Ltd. • Valiant Organics Ltd. 10 46
Monthly Technical Insight View Recommendation 19 Performance 51
Sector Book Outlook - Review - Consumer durable Mastering the 23 Market Cycle 55
Management World Meet Note Economic • Ratnamani Metals & Calendar 29 Tubes Ltd. 61 MarketOverview
As was widely expected, market momentum has been impaired in the month of September and not just domestic but around the world led by fears of
Paras Bothra second wave of coronavirus in Europe as well as indecision with regards to second tranche of fiscal stimulus in US as elections draws near.
mid lack of domestic triggers, creates fear of sustenance. There has been domestic markets have been largely uptick in E-way bills and electricity generation aligned with global counterparts as well. For August while economic data set was and the soft economic progress as better than July, nevertheless uptick in two- suggestedA by economic indicators, is a major wheeler sales, tractor sales could be all traced blockade. For India, while recent batch of to rural economy. Even for unemployment weekly economic indicators have suggested levels, urban data set represents slower some uptick, the fact that majority of the recovery compared to rural and it could be growth is either led by rural or pre-festive, traced to service sector where restrictions are
1 INSIGHT October 2020 eased gradually and so the recovery, Besides, the attractive names from while the manufacturing sector is these spaces have already had a run, swiftly moving towards pre-covid While BSE Sensex the upside is fretted with obvious levels. However, ICMR’s sero surveys is still down by ~8% risks. Besides, post GST, India is implies that the worst is hardly over YTD, BSE midcap slowly going through formalization for India. So far, two sero surveys of economy and hence consolidation have been conducted and the latest index is just down is an enviable outcome at the cost of one says India is yet to reach herd by ~2% while BSE small players who doesn’t have the immunity while the first one said smallcap index is cashflow backing to compete with that 64 lakh Indians had been already higher by more the larger players and hence give infected by COVID-19 by May. India in. The strict lending norms and the is one of the most vulnerable nations, than 8% YTD. The reluctance of the banks towards these when it comes to second wave of optimism is however companies have meant scarcity of coronavirus, since we are yet to not justified by the capital and even if they are available, peak out from the first phase and they are at high costs, thus making hence the optimism with regards valuations where the small players uncompetitive to the recovery of the economy majority of the compared to the larger players who will be painstakingly plagued with constituents of the are cash rich and can access funds intermittent jitters. The earnings cheaply. In fact, a RBI study shows recovery which is so far expected to broader indices are that these smaller firms witnessed recover strongly in FY22, could take a under losses. decline in their revenue even postponement, which would certainly before pandemic and for the firms make markets jittery. However, generating less than Rs 25 cr annual despite the odds, Rating agency revenue, they are the worst affected Standard and Poor’s (S&P) however with steady decline since FY16. When invest. In fact, given the sharp rally reaffirmed India’s sovereign rating at it comes to profitability, the picture is since March, some correction was the lowest investment grade (BBB-) gloomier than ever before with firms warranted since the valuations have with a stable outlook for the second above Rs 1000 cr revenue to have reached above historical average even time in four months betting on a showed some hopes. Even for Q1FY21, on a forward basis. In such a scenario, strong revival in FY22. small firms have been the hardest any postponement of the earnings hit by the pandemic, as shown by an The silver lining has been the recovery could only bring uncertainty analysis by CARE Ratings. Based on resurgence in the primary market and volatility in the markets going a universe of 1,686 stocks, 747 firms and the issuances have been ahead. The SEBI circular on margin with net sales of below Rs 25 cr was coming thick and fast. The bumper requirement didn’t help either as it the hardest hit with sales declining by participation in some of the recent did some damage to volumes in the 66.7% yoy during Q1FY21. The analysis IPOs could have an inverse relation market and that’s permanent unless stated that there is a clear negative with the secondary markets, since participants come to terms. While relationship between the size of a money would be withdrawn from the the circular on Multicap funds to company, as represented by its net markets to invest in IPOs and here encourage investments in midcap & sales and the fall in sales between again oversubscription of 73x to 151x small cap names was expected to be April and June. In fact, companies implies that the upside is capped for at the cost of ~Rs 20,000 cr outflows with net sales of more than Rs 500 the secondary markets or there are from largecaps. Probably, the market crore saw the least contraction in net not enough opportunities available to regulator was trying to address sales at 22.4%. the polarity in the indices or even among the schemes where all three ICMR’s sero surveys categories of stocks were allowed to invest, only to tilt towards largecaps. Even for Q1FY21, implies that the Thus, it was not serving the basic small firms have worst is hardly over purpose of bring a diversified funds been the hardest hit of different market capitalization as it for India. So far, two by the pandemic, as sero surveys have was essentially a large cap one. While the rationale and thinking behind shown by an analysis been conducted and the move is just, the valuations are by CARE Ratings. the latest one says not specially for the smallcap stocks. Based on a universe India is yet to reach While BSE Sensex is still down by ~8% YTD, BSE midcap index is just of 1,686 stocks, 747 herd immunity down by ~2% while BSE smallcap firms with net sales while the first one index is higher by more than 8% YTD. of below Rs 25 cr said that 64 lakh The optimism is however not justified by the valuations where majority was the hardest hit Indians had been of the constituents of the broader with sales declining already infected by indices are under losses. Thus, by 66.7% yoy during COVID-19 by May. naturally the fund managers are aghast at accumulating stocks from Q1FY21. broader indices at these valuations.
October 2020 INSIGHT 2 Sales (% yoy)
Annual sales in Rs cr FY16 FY17 FY18 FY19 FY20 < 25 -43.2 -44.4 -30 -45.8 -47.8 25-50 -22 -8.2 -10.5 -4.1 -24.5 50-100 -8.6 -9.1 -7.7 6.2 -26.1 100-150 -3.1 -2.2 0.5 6.3 -11.9 500-1000 -0.4 0.5 7.4 10.1 -6.5 1000 and above -1.2 4 11 15 -3.2 All companies -1.6 3.1 9.8 14 -4.2
Source: RBI, Moneycontrol
Profit (% yoy)
Annual profit in Rs cr FY16 FY17 FY18 FY19 FY20 < 25 NA NA NA NA NA 25-50 NA NA NA NA NA 50-100 NA NA NA NA NA 100-150 NA -10.5 -149.1 NA NA 500-1000 NA -120.4 -17.5 -84.6 NA 1000 and above 7.8 12.2 2.2 39.9 -41.8 All companies 9.3 11.2 -0.3 36.2 -58.7
Source: RBI, Moneycontrol, NA: value negligible or negative
Q1FY21 yoy decline in net sales of firms (%) Q1FY21 GDP print together with demand destruction has generated an
Paras Bothra President - Equity Research (Retail) Email - [email protected] Phone: +91 22 6611 1700 Direct: +91 22 6611 1786 Mobile: +91 98203 97061
3 INSIGHT October 2020 ebi norms for ndian economy is Prominent categorization unlikely to achieve Sof mutual fund Ithe same level of schemes have two output that it had headlines objectives – that the before the pandemic scheme portfolio until possibly March September 2020 should reflect the April 2022. That’s two name of the scheme; year wiped out of any and that the scheme economic growth. s far as the performance can Assuming India’s trend economy is then be compared growth rate is about Aconcerned I think against an appropriate 5%, we will be basically the worst is over from benchmark. The funds 10% below our trend a big shock but for need to keep their growth rate in the things to normalise and scheme portfolios true middle of 2022. From go back to even a 5-6 to their label. that level I do think percent normalised things are recovering. GDP growth rate, I Ajay Tyagi This may look like a think there are a lot of Sebi chief V shaped recovery bumps along the way. because the bottom I think there is a long ndia needs to be was so depressed. and painful road to “aggressive with recovery for the core spending” before Ruchir Sharma I Head of the Emerging economy. it’s too late and called Markets Equity team at for interest rates to Morgan Stanley Investment Shankar Sharma be slashed given the Management Vice Chairman and Joint MD of First Global signs of urban distress that have emerged ndia’s GDP growth in the wake of the has receded since s India aims to Covid-19 pandemic. 2018 because of become a cloud- When the cost of not I high growth in the first first nation and doing exceeds the A four years of the Modi with the government’s cost of doing, then government, and to push for cloud it would be a very get back to a 7% plus adoption by MSMEs, unfortunate situation growth rate, India must it will be crucial for for the country. We open itself to free trade SMBs in India to think should not let that and recapitalize banks of themselves as Digital happen - we should urgently. Enterprises. SMBs in definitely take the risk India can contribute 30 of being aggressive Arvind Panagariya per cent of the cloud with spending. Former Vice Chairman, NITI market by 2025. Aayog Sanjiv Mehta Debjani Ghosh Chairman, Hindustan Nasscom President Unilever he concept of globalisation is undergoing a he typical e-privatization T transition in a world conditions for of select PSBs facing the challenge of the birth of a can then be T R COVID-19 pandemic bull market are here: undertaken as part of and self-reliance is you have a changed a carefully calibrated gaining momentum. country, you have a strategy, bringing in The way India deep fall in growth and private investors who understands self- everybody is perplexed have both financial reliance is certainly by the rise of stocks. expertise as well as being stronger, more The market is looking technological expertise; confident and at the into the future. The corporate houses must same time globally drop in interest rates is be kept from acquiring engaged. also one of the reasons significant stakes, given for the bullishness in their natural conflicts of Uday Kotak stocks. interest. CII President
Rakesh Jhunjhunwala Raghuram Rajan Partner, Rare Enterprises Former RBI governor
October 2020 INSIGHT 4 ailways, highways he idea of one- and airports time loan recast is Rare drivers of Tto help these firms growth and this is the recover from financial right time for these difficulties while helping measures to counter banking system to NEP will open up India’s the COVID-19 setback. control NPAs. There is We are not privatising a careful and balanced education sector so that Indian Railways. This decision on the part of foreign universities set is a public-private the RBI with respect to partnership. Private restructuring. On the up campuses and allow entities will source and one hand, the concern our students to get global operate trains using of any bank should the Indian Railways be the protection of exposure. Likewise Indian infrastructure. This is depositors’ interest, and global institutions will a win-win situation for at the same time, the private sector and banks have to keep have research collaboration Indian Railways. We the financial stability and student exchange want railways to be the of banking sector in major driver of India’s mind. The central bank programmes. growth story. is prepared to take Narendra Modi further measures to Prime Minister Amitabh Kant prepare the economy NITI Aayog CEO and banking system to fight the Covid-19 y the end of pandemic. September, the growth for Shaktikanta Das B Governor, Reserve Bank of insurers will be better. India The industry will be able to wipe out the downturn by the end he government’s of FY21. From July decision to ease From a low base of this onwards, both life TFDI norms in the year, there is bound to and general insurance defence sector will sector is seeing a push self-reliance in be sharp recovery next revival of premium production and keep year. However, that could growth. Segments national interests and like term and health security paramount. mechanically arise from the insurance are among low base. Then there is the the most popular Piyush Goyal Commerce and Industry issue of reckoning the extra among customers. Minister expenditure of the central Subhash C Khuntia Insurance Regulatory and e are moving and state governments. Development Authority of in a very India (IRDAI) chairman This can be done in part by Wdangerous direction. Our world expenditure reprioritization. he country cannot afford a future The pandemic has exposed would be back where the two largest Tto a high growth economies split the the vulnerabilities of the path through reforms globe in a Great health system and both announced by the Fracture - each with its government, after own trade and financial the Centre and the states overcoming the rules and internet and have to reprioritize their COVID-19 pandemic. artificial intelligence capacities. expenditure. Krishnamurthy Subramanian Antonio Guterres NK SINGH Chief Economic Advisor UN chief 15th Finance Commission Chairman
5 INSIGHT October 2020 markets to recover because whatever liquidity was provided went into repairing the balance sheets of many of these banks. That process took 2-3 years, after which they were able to claw back and start gradually coming back to that 1.5%-2% GDP growth and since then they did reasonably well with steady expansion of US markets which has happened over the last 7-8 years. In the process, their banking system has significantly deleveraged as well almost to the extent of 65% compared to what it was in the 2008-09 period. So, we believe that their starting point is good even from the point of view of households where savings have gone up and they have also been beneficiary of continuous fall in interest rates and which means that their starting point is much better compared to many other countries. So, we would like to think that as soon as the problem with pandemic subsides in the coming year or so, their economic expansion will be far more vigorous than for other countries in the world. Q&A with CIO The second engine China has also behaved very well despite the fact that the problem has started from Mr. Taher Badshah, there, they have come around very Chief Investment Officer - Equities, Invesco Asset well. Besides, in the course of last 8-10 years, they have materially Management (India) Private Limited shifted their focus on economy from being an investment led economy to a consumption led one. So that also has been quite successfully achieved Outlook on the markets services like India for example where and now it is a lot more domestic 48-49% of GDP is driven by services, economy driven than what it was. At the global level, from the here there will be more relocation standpoint of market as well as the of labour and capital and will economy, a liquidity led crisis has probably take little longer to recover been avoided by major economies compared to the rest of the world. in the last 6-7 months, thanks to the At the global level, Besides, 80% of India’s workforce is monetary & fiscal policies adopted from the standpoint in the unorganized sector and that by all governments and central has its own set of challenges thus of market as well banks around the world. From here India might lag the overall recovery on we move towards the solvency as the economy, a in a post-covid world. The twin phase and businesses will be tested liquidity led crisis engines of the world economy- US in this phase with a good number & China, their probability to come has been avoided by of unknown outcomes as we go back to normal will be much faster major economies in along, unfolding in the next two- or even though they might have issues three-years’ time resulting in both the last 6-7 months, between them regarding trade positive & negative implications for related matters. When the crisis hit, thanks to the some businesses. So, there will be US economy was on a firm footing monetary & fiscal businesses which will consolidate and and their banking system and overall there will be businesses which will policies adopted economic system was in a better gain while few will be weaned out as by all governments shape than what it was back in 2008- well. The recovery around the world 09, post global financial crisis. At that and central banks could be a manufacturing led one point of time, their banking system where the reallocation of capital & around the world. was significantly challenged as capital labour is going to be relatively lesser, From here on we was impaired due to mortgage crisis then those economies would have a and even though US Fed provided move towards the faster path to recovery back to pre- large scale stimulus (in % terms covid levels and even exceeding that. solvency phase... at least), it took a long time for US Economies which are more driven by
October 2020 INSIGHT 6 atmosphere as well. Along with that is today, it’s much lower. That extent we were witnessing good signs of there is a certain amount of relief, so From the point of recovery in semi-urban/rural markets we would believe that the economy view of interest thanks to last year’s monsoon and still has those strengths and as the rates, India is now at we were starting to see inflation in pandemic concludes or subsides, we commodity prices improved and would be able to take advantage of a stage when interest food inflation getting better. These some of the factors. Of course, we will rates are the lowest all resulted in higher discretionary have some challenges along the way ever in a long period income compared to past few years whether be it labour, capital or Govt. of time and this is for the rural/semi-urban centers. finances but at the same time there Unfortunately, these developments are a few factors which have worked the first time India got affected because of the pandemic in our favour as well. is experiencing in the last six months but some of Meanwhile the markets have made negative real interest these strengths are still valid. In fact, a massive comeback from the close this year’s monsoon also has been rates. of March and we are almost back better and essentially the rural story to pre-covid levels, but it has been has got stronger on back to back good a very structured kind of market monsoons. Besides, rural focused movement. If you reflect back in the Govt. programs have also helped first instance, the markets preferred Thirdly, they have also deleveraged which have only got bigger as time business where survivability was their banking system, their shadow passed by. From the point of view of guaranteed and investors swiftly banking problem which started interest rates, India is now at a stage moved to companies like Hindustan before our NBFC problem started when interest rates are the lowest Unilever, Nestle, Britannia, since 2-3 years prior to that, has also now ever in a long period of time and this everybody was shopping groceries come under control. Lastly, if you is the first time India is experiencing during that period of time. After bit see this time China has been the negative real interest rates. Inflation more clarity, in the second phase one country which has not resorted has spiked up in the last few months, there were preference for companies to any stimulus of any meaningful although we believe that it would where there would be least disruption magnitude. In fact, they are the 1st settle down and don’t fear the last to the earnings profile and hence ones to stimulate the economy post few months reading as lower interest there was preference for sectors like 2008-09 crisis even before the US. rates are here to stay. Meanwhile the technology, IT, pharma etc. In the 3rd If these two engines do well and if transmission rate in the system has phase, there has been preference of the US-China trade relations do not been much better than pre-covid. companies where there is no growth take centerstage particularly post Pre-covid, we were witnessed repo in earnings now but there could be US elections, then they would add rates to come off from 6.5% to 5.15% a recovery in earnings in the next to the overall world growth and in and post-covid it has come down 3-4 quarters and hence markets the process, it would benefit some of further to 4%, however transmission started to bet on recovery stocks, the emerging market economies like has been greater between 5.15% to 4% India as well. compared to earlier. So, it is helping the borrowers whether be it mortgage Coming to the domestic economy, or personal loans or any other form since the second half of 2019 we of lending. Lastly with regard to Compared to what are incrementally running with a the banking system challenge on the outlook was in positive view on the Indian economy. the background of the pandemic March & April, the We believed that India’s economic and the hit on lives and livelihood, growth could be modestly better in job losses, income reduction and situation is relatively 2020-21 compared to what it was in cashflow reduction for corporate, better and didn’t 2018-19 and that was predicated on some part will definitely impact the few factors. One was clearly the fact turn out to be as banking system and cause temporary ugly as anticipated that we were coming out of a banking setbacks to the recovery process problem where bulk of the large NPA of the banking system. However, particularly with problems were behind us. Although compared to what the outlook was respect to the there had been some stress but in March & April, the situation is moratoriums which nowhere close to the magnitude in relatively better and didn’t turn out to 2013-14. We also had a NBFC related be as ugly as anticipated particularly are now out of the crisis starting with IL&FS in Nov’18. with respect to the moratoriums way and consumer Even that had started to subside which are now out of the way and behavior is relatively by the late part of 2019, thanks to consumer behavior is relatively better RBI’s liquidity drive and the fact that and payment behavior hasn’t been better and payment interest rates were falling. Of course, vitiated and people are now going behavior hasn’t been it led to a situation where there was back to work. So, almost all banks vitiated and people an upheaval in the NBFC space where & NBFCs have called for reduction large became larger and stronger, in moratoriums with a couple of are now going back however the overall availability of exceptions, so the liquidity risk which to work. capital and most importantly the cost was there in the banking system is of capital started to moderate and not of the same magnitude as what it that eventually helped the overall
7 INSIGHT October 2020 beta, mid-cap, small cap plays as the later date might be more vicious works out even better and hopefully economy started to come out of the than what it might be today. At the it should be the way it has been since lockdown. So, one way it was a very same time, there are parts of the March-April, so come 1st of October orderly movement however nowhere market which have underperformed, and if we gain some more confidence we are at a stage, where valuations in fact the largest segment in the around how the asset quality trend at least apparent valuations are not market which is banking & financial has behaved, I won’t be surprised to very compelling and we don’t have services haven’t played out at all, see a sharp rally in that space because great visibility of earnings at least it is still well below what it was in it underperformed in the last couple for the next few quarters and so the January-February. Parts of consumer of months. As also it is not at all markets need to take a bit of a halt discretionary particularly which are extended in terms of valuation. Infact or pullback. Especially after a 50% leveraged to the urban centers of thing out there are relatively cheap rally, 10-12% or even a 15% correction demand, those have also not done as and also they are getting stronger would be a welcome one and don’t well since tension and focus has been in terms of capitalization. There are think anybody should grudge that. A on semi-urban, agricultural and rural some which we still want to avoid but deeper correction of 25-30% is not related businesses and so on. Parts there are good set of few companies expected. While there is support of of telecom have not done well either which are meaningful. There is even global liquidity, the fact that we are and technology is not very expensive pocket of NBFCs particularly which also returning back to normalcy, and rather fairly valued considering are lending and have underlying despite the virus spread. Now the that earnings visibility for these collateral i.e, more secured lending, attention of the market has moved businesses are much better than entities like gold financial, auto away from the number of daily cases others. There are pockets of stretch financing, mortgages are also kind to fatality rates and recovery rates like parts of consumer discretionary of reasonably play in today’s market and so long that the recovery and businesses, midcap and small caps, scenario.. fatality rates are getting better, the parts of pharma which might be little I think parts of consumer burden of the healthcare system over extended but the whole of the discretionary once again particularly is going to be under control. Apart market is not something which is the one I mentioned which is geared from these, there will be news of on the boil and therefore there will around the urban centres and vaccines, possible therapies and always be pockets of opportunities. urban demand are not doing well, treatments which will keep coming. some retailers, high end retailers, So, the chances of a sharp correction Either at the start of the some pockets of auto, these have are very less and many things have bull market people make not done good so far, have scope of to go wrong for markets to correct easy money or at the end, improvement. Places like Mumbai by a deeper magnitude. But markets Delhi, Chennai, Kolkata to some need to step back a little and reassess so what do you think that extent or Pune has been in thick of earnings profile, take some breather which stage of the bull the crisis and also, they being the and that will be good from the longer- market we are in and since large centres of demand. So once term perspective. If markets continue these places open up that could reap to scale higher without visibility of many of the theme has towards a different set of business earnings, then the correction at a played out, in this context which could do well. Some parts of what probable themes telecom also, though there not many do you think not been players as telecom did very well in Especially after the first half has underperformed captured by the market yet meaningfully. Moreover, the whole a 50% rally, 10- and you see opportunity AGR related issue is now behind us 12% or even a 15% and your take on conviction though market seems disappointed correction would be that the price hike etc. has not come contra bets? about but I think it’s just a matter a welcome one and There are some sections of the of time. The industry has moved don’t think anybody market which has still not done well on the consolidation phase and should grudge that. well, they are lagging both in I think that either in terms of the terms of valuation and in terms key performance indicator of these A deeper correction of fundamental recovery. Clearly telecom companies, things are getting of 25-30% is not in financials we feel that there is better. Plus, it is a great play on the expected. While room and particularly in many of digitalization, work from home and these banks have got very strongly whole automation opportunity so that there is support of capitalized in the last few months is one area which is very promising. global liquidity, the and when they become the biggest There are also some interesting fact that we are also lenders when the credit cycle platform business, capital market returning back to resumes. So, to that extent therefore plays with the resurgence of capital we can move our confidence but normalcy, despite market activities, retail participation, of course it might require a little financialization of savings. Theses the virus spread. longer to pan out. Today everybody platform business are well placed is of the view that nobody knows as from balance sheet perspective, no how life has been after Aug’31 on the challenge to balance sheet but they moratorium but if let say the trend
October 2020 INSIGHT 8 which are not fully exotic as far as What should be the profit valuation are concerned and there making in equity shares in I don’t think that it the opportunity is quite valid from is healthy for retail 3-5 years perspective if not more. 5-10 years? investor to pile on In the current scenario, looking at to mid and small Do you think if there is the India’s growth prospects and some downtrend in the expected growth rate in long-term, cap stocks thinking I think 10-15% CAGR profit is a good that large funds market in near term? number especially when other assets will reorient their Equity investor at any point of time are not performing, and interest rates should always be ready to grasp are at lower level. strategy and they will 10-15% downside especially when gain from it. I think market has given a runup of more View on pharma and auto one can invest in mid than 50%. I think a minor correction sector will be healthy for the market. Again, and small cap stocks market must have some reason to In pharma, we need to have a bottom with a 2-3 years’ go up, either financial result to be up approach as we have to be particular about the company we buy time horizon. Plus, good or the valuation is cheap. But if both are not their than there is a as every company is different now mid and small cap problem. I think up untill now what with each one has its own business stocks generally do market did is mostly correct, but model. Previously all pharma well when domestic now if the market goes up another companies were doing the same thing 15-20% without changing anything but now companies are focusing on growth cycle is in the world, after that if there is a different model like domestic, API, strong. correction, that will be more severe. export, speciality, generic among So, I think it will be better if we spend others. So, business model, product some more time here or go through profile and capital requirement are some correction, so that we can get all changing. So, we have to go with the individual stock selection taking are just providing their software some earnings visibility from Q2FY21 into consideration their individual platform and people are coming results. So, I think some correction is strategies. along with trading on it or B2B due and one should be careful in this platform which are bringing face to market. In auto space, commercial and car face one business to another, those manufacturer are looking better. In business are looking very promising. Impact of new SEBI rule on tractor and two-wheeler, there are Certain Insurance plays are also multicap funds some good rural players, but are quite interesting, there are also bit expensive in term of valuation. Larger AUM in multicap fund can see parts of AMC which can show some Whereas companies which are more some pressure due to the new SEBI decent success. There are also new in cyclical segment of commercial rule. There is discussion going on set of companies which are coming vehicle and even urban centric with the SEBI (like time extension, through the IPO route and many of products like car, can see some introducing of new product), let see them are very interesting from future opportunity. what the outcome will be. Moreover, perspective. Some parts of Oil & Gas it is still four months away which will particularly gas utilities have become be based on data from December 31, View on banking space attractive; they are at least cheaper 2020. Further, I don’t think that it is There can be contra bet on banking than they were pre pandemic. Whole healthy for retail investor to pile on sector. But there also we need to be Gas from traditional fuels to gas to mid and small cap stocks thinking cautious in terms of stock selection stories is going to be larger and larger that large funds will reorient their as there are larger banks that are still hence that is one theme which might strategy and they will gain from it. available cheap. So, we don’t need to play out. Defense is another area I think one can invest in mid and take risk by buying mid or small size where opportunity might come up. small cap stocks with a 2-3 years’ banks as good banks are available There are also whole manufacturing time horizon. Plus, mid and small at lower valuation. Further we can related opportunities, some of them cap stocks generally do well when look into some NBFCs where there are visible some are not clearly domestic growth cycle is strong. is secured lending. Now a days some visible at this stage, whether it is So, when domestic growth cycle asset managers also are preferring in manufacturing of consumer improves, mid and small cap stocks companies with non-lending discretionary products or durables. will outperform. So, if one invest in business with strong balance sheet Parts of consumer discretionary mid and small cap stocks with that like insurance companies, AMCs, particularly to do with home perspective than that is good but platform-based companies, which improvement, white goods which may don’t buy on expectation that I am still looks good for investment. look expensive but some looks quite buying today and some large buying attractive. will come in next 3-4 months as it So, there are still pockets of markets can be a very risky investment.
Disclaimer: Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
9 INSIGHT October 2020 UltraTech Cement ltd. CMP:: Rs 4,030 • Rating: BUY • Target: Rs 4,543
Company Information Shareholding Pattern as on 30th June 2020 BSE Code 532538 NSE Code ULTRACEMCO Bloomberg Code ULTRACEMCO ISIN INE481G01011 Market Cap (Rs. Cr) 1,16,520 Promoters: 60.04% Outstanding shares(Cr) 28.86 FII: 16.10% 52-wk Hi/Lo (Rs.) 4,754.1/2,910.0 DII: 14.59% Avg. daily volume (1yr. on NSE) 571,490 Others: 9.27% Face Value(Rs.) 10.0 Book Value (Rs) 1,353.5
Investment Rationale Over the years, it has expanded its presence through inorganic Market leader with wide route and took the benefit of weak presence economic growth by acquiring the Ultratech cement is the largest cement assets. Since 2017, it started cement player in India with pan acquisition by taking the asset of India market share of 24% and have Jaiprakash Associates which provided a total installed capacity of 114.8 additional diversification with an MTPA (million tonne per annum).
October 2020 INSIGHT 10 increased presence in central India, its debt through free cash flow coastal Andhra Pradesh, Uttarakhand generation and selling of non- core As the COVID-19 and Himachal Pradesh, and then assets and target to reduce the net crisis hit the the Binani Cement acquisition debt to below 2x of EBITDA.Ultratech had given the access to Rajasthan, has already reduced its consolidated economy hard, China and Dubai market. Company net debt by Rs 5,250 crore and so now in order has also acquired Century Textiles itsreturn on equity has increased by to navigate the and Industries cement asset having ~300 basis points despite significant turbulent times, capacity of 14.6 MTPA, thus enabling capex. The benefits of recentcapex Ultratech cement Ultratech to cater to key micro as well as acquisitions are likely to focus is to deleverage markets in northern, western and be realized in the next few years. its balance sheet eastern India. Company operates The reduction in debt has been and conserve cash through 23 integrated plants, 1 realized due to better operating and also at the same clinkerisation plant, 27 grinding cash flows and selling off non-core time strengthening units and 7 bulk terminals and assets. Considering the pandemic, also has presence outside India in the company has decided to restrict its business UAE, Bahrain, Bangladesh and Sri its FY21 capex substantially and the relationships. Lanka. Company has demonstrated board of directors had approved good track record of ramping up capex of Rs 940 crore for making of profitability of acquired assets premium products. With a view to cost for the company. Improving within two years post consolidation. conserve cash, the company has efficiency and lower costs will result Further, company has highest retail restricted the overall capex plan to in improvement in margins going sales with trade sales of around 78% Rs 1,500 crore for FY21. Thus, these ahead. Already it has reflected in reported in Q1FY21. Having pan India strategies will definitely sustain its Q1FY21 on EBITDA front, where presence, company has mitigated balance sheet strength and help the EBITDA/t improved 24.3% QoQ the geographical concentration risk company to ride out turbulent times. (+2.8% YoY) to Rs 1,416 per tonne and and is best proxy to play on India’s Improving efficiency through EBTIDA margin improved by 130 bps infrastructure story. various cost initiatives YoY & 450 bps QoQ at 27.2%, despite Focusing on deleveraging Ultratech cement reduced variable of lower volume offtake during the balance sheet and conserving cost by 4% in FY20 by increasing quarter. cash usage of low-cost additives as Government thrust on As the COVID-19 crisis hit the blended cement sales increased by infrastructure to benefit the economy hard, so now in order 200bps to 68% in FY20. Further, sector to navigate the turbulent times, company also reduced logistic cost by Government seriously need effort on Ultratech cement focus is to 4% due to network optimization. The infrastructure front to pull up the deleverage its balance sheet and company is also making investments economy from the recession which conserve cash and also at the same in increasing the share of green India has encountered since past time strengthening its business energy in the overall energy mix. few decades due to the outbreak relationships. Company has been Ultratech has a total of 118 MW of of COVID-19. Government yet to constantly focusing on reducing WHRS and 99 MW of solar power declare a hefty stimulus package energy, comprising 10% of overall ahead of the festival season and energy mix. Company has also this stimulus package is expected Ultratech cement is taken other initiatives such as use of to be more inclined towards the largest cement alternative fuel, improving clinker infrastructure related in order to factor and upgrading technology to player in India with reduce escalated unemployment in enhance energy efficiency further. pan India market the country caused by the lockdown Moreover, the pet coke prices have in entire country between March share of 24% and gone down substantially in the to May end. Further, government’s have a total installed last few months which positively thrust on affordable housing for capacity of 114.8 impacted the gross margin of the realizing its vision of “Housing for MTPA (million tonne company. Apart from these factors, All” by 2022 and Smart City program per annum). the Government’s announcement of should also help in demand growth increasing the axle load specifications for cement. Further, well spread of trucks has also reduced the freight
11 INSIGHT October 2020 monsoon across the country and countries. The world average is Given the uncertainty over economic record khariff output during FY21 500-580 kg, while countries such growth, company has focused on along with higher MSP prices and as China have a per capita cement deleveraging its balance sheet and at government focus on rural areas will consumption of 1650-1750 kg, the same time conserving the cash to drive the housing demand which in followed by Vietnam (800-850 kg) deal with any unexpected challenges. turn boost cement sales in coming and Turkey (700-750 kg). The factors Company has highest presence in quarters. In general October to May that are going to trigger cement sales trade channels with 78% reported period is the construction season are infrastructuraldemand especially in Q1FY21. Further, Ultratech has and typically the cement demand for Government projects, as well as been putting efforts on improving remains strong during that period. higher housing demand in rural and efficiency and controlling the cost by Further, the cement consumption in semi-urban areas. increasing the share of green energy India is lowest among the developing in the overall energy mix and using Key risks of alternate fuel. These all initiatives Cement demand is related have resulted in operating margin In general October to infrastructure creation, thus improvement during Q1FY21 despite to May period is prolonged economic slowdown could of low volume offtake. We believe, the construction negatively affect the demand for Ultratech has lots of competitive season and typically housing as well as cement. edge over its peers because of its the cement demand Any increase in raw material cost scale, operating leverage, integrated like pet coke, diesel and gypsum operation and pan India presence. remains strong We also believe that company will during that period. could have negative bearing on the margins efficiently ride out the turbulent times because of its professional Valuation management and healthy balance Ultratech cement is the largest sheet and will come back strongly cement player in India having pan once the demand revival starts. Thus, India presence thus has mitigated we recommend our investors to BUY the regional concentration risk. Over the scrip with target of Rs 4,543 from the years company has expanded 12 months investment perspective. its reach and capacity by acquiring At CMP, the scrip is valued at EV/ the assets and has demonstrated EBITDA multiple of 11x on FY22E good track record of ramping up Bloomberg consensusEBTIDA of Rs of profitability of acquired assets 11,758.3 crore. within two years post consolidation.
Ultratech Cement Ltd. 3 year Price Chart
Particulars 6000 FY19 FY20 FY21E FY22E (in Rs Cr) 5500 Revenue 41,475.9 38,210.0 44,868.6 48,203.4 5000 Growth (%) 1.4% -7.9% 17.4% 7.4% 4500 EBITDA 9,283.6 8,572.7 10,247.4 11,758.3 4000 EBITDA Margin 3500 22.4% 22.4% 22.8% 24.4% (%) 3000 Net profit 5,555.3 3,449.3 4,726.6 5,824.8 2500 Net Profit 2000 13.4% 9.0% 10.5% 12.1% Margin (%) 18 19 20 Jun- 18 Jun- 19 Jun- 20 Sep- 17 Sep- 18 Sep- 19 Mar- Mar- Mar- Dec- 17 Dec- 18 Dec- 19 EPS (Rs) 192.6 116.4 160.6 209.0 Source: Bloomberg consensus
October 2020 INSIGHT 12 Essel Propack Ltd. CMP:: Rs 243 • Rating: BUY • Target: Rs 290
Company Information Share holding pattern as on June 2020 (%) BSE Code 500135 NSE Code ESSELPACK Bloomberg Code ESEL IN ISIN INE255A01020 Market Cap (Rs. Cr) 7625 Outstanding shares (Cr) 31.5 Promoters: 75.0% 52-wk Hi/Lo (Rs.) 318.6 / 105.2 FII: 4.9% Avg. daily volume (1yr. on NSE) 280,878 DII: 2.4% Face Value (Rs.) 2.0 Others: 17.7% Book Value 50.0
Company Overview each in the US, Mexico, Colombia, Poland, Germany, UK, Egypt, Russia Essel Propack Ltd. (EPL) is the and Philippines in addition to five largest global specialty packaging in China and six in India. These company manufacturing laminated, facilities cater to diverse categories seamless or extruded plastic tubes that include brands in beauty & catering to the FMCG and pharma cosmetics, pharma & health, food, space. Essel has 20 state of the art oral and home. It offers customised facilities in 11 countries, selling solutions through innovations in ~8bn tubes annually. It has one unit materials, technology and processes.
13 INSIGHT October 2020 The company dominates the oral care companies like Gerresiemher of market with global market share of Germany). Blackstone has stated The company 37% and 65% market share in India. mission for Essel - “Capital Efficient, has been adding Consistent Earnings growth”. The Investment Rationale execution capability of Essel is marquee Leader in niche business further strengthened by guidance independent EPL is the leader in manufacture of from ‘fit-for-purpose’ relevant directors on board, laminated plastic tubes with market industry veterans from Blackstone professional leader in oral care segment with on driving the accelerated earnings management team, global share of ~37% and caters to growth, increasing wallet share winding up related- companies like Unilever, Colgate, from existing oral care customers party transactions P&G etc. In the Personal care market, and improving cost efficiencies. and appointment of its share stands at ~8% showing a With the entry of Blackstone, the marquee auditors in group has made significant changes vast scope of growth for EPL. The order to improve its tubes industry is predominantly in the top-level management to governance. concentrated between few global improve the corporate governance. players like ALBEA S.A., CCL The company has been adding Industries and Essel. The company marquee independent directors on is engaged in a very niche business board, professional management margins on the back of robust considering its products are an team, winding up related-party business pipeline, new launches integral part of the FMCG and transactions and appointment of and new customer wins. Also, new Pharma space with packaging being marquee auditors in order to improve product launches such as Platina and one of the four key P’s of marketing its governance. Green Maple Leaf are expected to mix that underpin the success of Long runway for growth in contribute to its growth. any brand. The opportunity in the personal care business is quite evident by the fact Personal care contributed 45% Launch of Phoenix project to cut that opportunity for oral care tubes is of Essel’s revenues (beauty and costs and boost margins 14bn pa while for beauty & cosmetics cosmetics 32%, and pharmaceuticals Under Phase-I of project Phoenix, is 12bn pa and pharmaceuticals 9%) in FY20. Personal care is 3x the Essel managed to increase EBITDA is 10bn pa. EPL sells ~8bn tubes market size of oral care. However, margin by 180bp YoY to 20.2% in annually. EPL’s integrated and vast the beauty & cosmetics segment FY20. The company has already operations make it a preferred one continues to use plastic extruder launched Phase-II of project Phoenix stop solution for its big clients who tubes 6-8bn tubes p.a. (total demand: in Q1FY21 with aims to expand form long term partnership with EPL. 12bn tubes) while the prescription margins further by virtue of cost Its existing capacity can meet 2x the pharmaceuticals segment is management and rationalization. current demand and hence need for dominated by aluminum tubes. Phase-II is focused on every cost large capex is ruled out for the near Laminated tubes provide much better item, making processes easier and term. Replacement of aluminium/ aesthetic value (due to flat surface) making people more efficient and plastic tubes by laminated tubes for beauty & cosmetics and better agile. Essel’s margins that are already continues at a good pace across barrier property for pharmaceuticals the best in class are expected to the globe due to better aesthetics, (such tubes also entail lowest cost of improve further. The management lower cost, higher plastic-barrier ownership). Adoption of laminated has guided that while EPL’s focus to properties, product and design tubes in these industries would drive revenue growth by focusing flexibility and higher sustainability. significantly benefit Essel. So, EPL is on personal care category (beauty The unique business model, also well positioned to benefit from & cosmetics and pharma laminated extensive reach, excess capacity the increasing use of laminated tubes tubes command higher margin and management focus will help the over aluminum. Better aesthetics, than oral care products), the cost company to gain market share. lower cost, higher plastic-barrier rationalisation steps by the company would continue to drive EBITDA Improving governance properties, product and design margin, going forward. So, it is In FY20, Blackstone acquired ~75% flexibility and higher sustainability, expected that margin improvement to stake in Essel from earlier promoters are some of the drivers believed to sustain as EPL will also be benefited and public. Blackstone has its proven lead the shift from plastic/rigid tubes by low raw material cost. legacy of value creation amongst its to laminated tubes. This segment investments (Indian companies like is expected to show strong growth S.H. Kelkar, Mphasis and packaging momentum coupled with superior
October 2020 INSIGHT 14 its net debt by Rs. 220 cr in FY20 has helped the company to report EPL’s resilient oral vs a mere Rs. 130 cr reduction over the expansion in EBITDA margin. care business along FY16-19. In Q1FY21, company’s net Given the traction in business and debt is Rs. 248 cr. According to the increase in wallet share in Europe in with new product management, the growth momentum existing customer and maintaining offerings and is likely to continue in the overseas the same in other regions will help accelerated personal business (~70% of topline) supported the company to report EBITDA care growth, coupled by addition of new clients, market margin improvement going forward. with innovation share gains and launch of new Management indicated that the and prudent cost product categories. It is expected business development efforts are management, that financial performance of the yielding results in Europe with strong strong balance sheet company will improve going forward business pipeline and expects the and improving led by improved utilization, cost traction to continue going forward as management, market share gain in well. In addition, change in product governance, are now Europe and rising share of non oral mix (focus on accelerated personal working quite well segment which will lead to sharp care segment) shall also support and should help surge in return ratios. Huge cash the earnings. Amidst the COVID-19 improve growth reserves and steady cash inflow crisis, company has identified an trajectory in future. allows EPL to carry out its investment extra source of revenue through plans. With major capex behind, it introduction of hand sanitizer tube is expected that EPL will be net debt and in a very short span of time free by FY22 and will return excess the company has become a leading Healthy financials set to improve cash to shareholders or pursue supplier of hand sanitizer tubes. further inorganic growth opportunities. Based on prudent capex policy and Essel has envisaged the strategy of improvement in operating efficiency, mission 20:20:20 (20% each EBITDA Key Risks it is expected that net debt to decline margin, RoE, ROCE) with non oral Volatility in raw material prices further. EPL’s resilient oral care share of 50% by FY22. Further, as as they are highly correlated to the business along with new product part of its prudent capital allocation movement in crude prices. offerings and accelerated personal policy and in order to maintain Operations in multiple countries care growth, coupled with innovation sufficient liquidity, ESEL has reduced heighten risk of currency and prudent cost management, capex for FY20 to Rs. 130 cr (v/s fluctuations. strong balance sheet and improving average capex spend of Rs. 200 cr governance, are now working quite Inability in gaining market share in over the last five years), which proved well and should help improve growth non-oral care segment. beneficial for the company during the trajectory in future. Hence, we pandemic, as cash balance for FY20 Valuation recommend our investors to BUY increased by 1.8x YoY to Rs. 370 cr. the scrip for a target of Rs. 290 from EPL’s continued focus in Interestingly, cash flow generation 12 months investment perspective. improvement in operating has also seen a healthy improvement Currently, the scrip is valued at P/E performance across the region as the company was able to reduce multiple of 23.4x on FY22E EPS.
EPL 3Yr. Price Chart
Particulars (in Rs Cr) FY19 FY20 FY21E FY22E 320 Net Sales 2706.9 2760.1 3110.6 3431.0
270 Growth (%) 11.7 2.0 12.7 10.3
EBITDA 499.1 557.4 653.4 742.9 220 EBITDA Margin (%) 18.4 20.2 21.0 21.7
170 Net profit 190.1 212.2 267.3 336.8
Net Profit Margin (%) 7.0 7.7 8.6 9.8 120 18 19 20 EPS (Rs) 6.1 6.6 8.5 10.7 Jun- 18 Jun- 19 Jun- 20 Sep- 17 Sep- 18 Sep- 19 Sep- 20 Mar- Mar- Mar- Dec- 17 Dec- 18 Dec- 19
Consensus Estimate: Bloomberg
15 INSIGHT October 2020 Valiant Organics Ltd. CMP:: Rs 2,906 • Rating: BUY • Target: Rs 3,350
Company Information Share holding pattern as on June 2020 (%) BSE Code 540145 NSE Code NA Bloomberg Code VORG IN ISIN INE565V01010 Market Cap (Rs. Cr) 3530 Promoters: 47.8% Outstanding shares (Cr) 1.2 FII: 0.0% 52-wk Hi/Lo (Rs.) 3142.7 / 884.1 DII: 0.3% Avg. daily volume (1yr. on NSE) 8,090 Others: 51.9% Face Value (Rs.) 10.0 Book Value 304.0
Company Overview Nitro Aniline (PNA). Over the years, company has developed an extensive Valiant Organics Ltd. (VOL) domain expertise in multiple process is engaged in the business of chemistries including Chlorination, Manufacturing of chemicals for Ammonolysis, Acetylation, Agro Intermediate and Pharma. Hydrogenation, Sulphonation and Company is the market leader for Methoxylation. Its products have Chloro Phenols in India & amongst been used in various industries such the Leading manufacturer of Para
October 2020 INSIGHT 16 by virtue of strong and niche product margins in future. As per the Valiant Organics Ltd. portfolio, enhanced capacities and government policy for Make in India, (VOL) is engaged R&D capabilities. The company is the Company is planning to apply well positioned to take advantage for environmental clearance for in the business of of the growing opportunities in drug Intermediates / API as import manufacturing of specialty chemicals, as India’s substitutes. It is also aiming to go for chemicals for Agro specialty chemicals market sets itself both organic and inorganic growth. Intermediate and on the growth path for the coming As part of forward integration, Pharma. Company years, and with a rising need for VOL is leveraging its extensive is the market specialty chemicals in the end-use domain experience and integrated leader for Chloro domestic markets. manufacturing operations. It has increased the production capacity Phenols in India & Capacity expansion to aid growth at Tarapur and Vapi plants in order amongst the leading VOL started expansion of its to increase the share of value-added manufacturer of manufacturing capacities at Sarigam intermediates and import substitutes, and Jhagadia in FY 2018-19. Despite Para Nitro Aniline which will enlarge the product value all the macro challenges, it continued (PNA). chain and will have significant cost expanding and augmenting its benefit on end products. Company manufacturing capabilities and has also completed debottlenecking completed the expansion of Chloro as Agrochemicals account 40% of its in Tarapur and Vapi plants in order Phenols capacity at the Sarigam plant. topline followed by dyes & pigments to improve its operational efficiency It achieved a capacity expansion of 20%, Specialty chemicals 30% and and productivity. In order to bring 18,000 MT per annum during the Pharmaceuticals 10%. Chloro phenols more automation and better safety year. The expansion has enhanced account 62% of revenue while PNA systems, company has implemented the Company’s capability of adding contributes rest 38%. Company Distribution Control System (DCS) at high margin downstream products derives 85% revenue from domestic Tarapur and Vapi plants. VOL is also by using new raw materials. The market and 15% from export market. working towards reducing plants’ company is also working on new energy requirement per unit of projects at Jhagadia. The Company Investment Rationale output and achieved moderate cost has a landbank in Sayakha (68,000 savings by converting high-pressure Benefiting from industry sq.m.) and Dahej (12,000 sq.m.) for dynamics steam from manufacturing processes further expansion. A capex of Rs China’s competitive position to power the plants. All these 100 crore has been allocated for the in the global markets has been strategies are helping the company in expansion projects at Jhagadia in diminishing in the past few years on maintaining consistency in product FY21 and it is expected to commence account of stringent environmental quality and optimizing the resources other capacity expansion projects and safety norms imposed and while lowering the production costs in FY 2021-22. Further, in order to led to the shutdown of several and maintaining healthy margins. benefit from surging and high growth chemical plants. With a significant API segment, company is expanding Strong financial performance increase in compliance costs, many its API business which will increase The financial performance of chemical plant operations have the pharma revenue share in coming the company appears to be quite become unviable. India, with its years. low-cost advantage, is emerging as an alternative manufacturing Integrated operations are margin The backward accretive and supply chain hub for major integration at the global economies. Being among Company has taken both backward Jhagadia plant India’s leading specialty chemical and forward integration projects manufacturers, Valiant Organics is through strategic expansions. helped the Company well positioned to capitalise on these The backward integration at the manufacture its raw emerging business opportunities Jhagadia plant helped the Company materials inhouse by significantly leveraging the manufacture its raw materials in- leading to significant operations, expanding capacities house leading to significant cost cost savings and and extensive domain knowledge. savings and superior profit margins. superior profit This will also assist in maintaining The management remain confident margins. of growing the market share in the product quality and better delivery domestic and international markets timelines and optimize profits
17 INSIGHT October 2020 the company’s capability of adding product, Para Amino Phenol (PAP), The company high margin downstream products MoCF/DoP has been identified as has strong set of by using new raw materials which is one of the key sourcing materials expected to improve the company’s and covered under production linked financials with financial performance along with the incentive scheme (PLI). Led by higher high margin profile return ratios. demand, the company is expanding and high return in key high margin products which ratios. Despite, such Key Risks would augment its revenue & superior growth Any disruption in supply chain in profitability ahead. The company backed by capex and raw material pricing and sourcing. has strong set of financials with high acquisitions, VOL’s Delay in capex implementation or margin profile and high return ratios. debt-equity ratio is plant synchronization. Despite, such superior growth backed by capex and acquisitions, VOL’s comfortable at 0.31x Exposed to the constant risk of debt-equity ratio is comfortable at for FY20. currency and commodity cycles. 0.31x for FY20. Hence, we recommend Valuation our investors to BUY the scrip for a target of Rs. 3350 from 12 months VOL is part of the Aarti group of attractive. In last 5 years company investment perspective. Currently, companies and is a market leader for has maintain RoCE of more than 40% the scrip is valued at P/E multiple of Chloro Phenols in India & amongst with last year RoCE of 43.5% while 18.8x on FY22E EPS. the Leading manufacturer of Para RoE of the company is also strong Nitro Aniline (PNA). Acquisition of at 45.3% in FY20. Chlorophenol Abhilasha Tex-Chem and Amarjyot Hence, we business remains a high ROCE Chemical has provided VOL with a recommend our business for VOL. Post the acquisition wide range of product basket and investors to BUY the of Abhilasha and Amariyot along diverse chemistries thus catering with the new capex lined up it is scrip for a target of to industries like agro, pharma, expected that the company is capable Rs. 3350 from 12 dye intermediates, pigments. The to generate more that 30% ROCE months investment acquisitions led to 5x & 7.6x jump in in the business. VOL is successfully perspective. revenues & profitability respectively generating more than Rs. 100 cr cash between FY18 & FY19. VOL has Currently, the scrip from operation for last 2 years and strong list of clients in the likes of is valued at P/E capable enough to fund its inorganic BASF, Lanxess, Bayer Crop Science, multiple of 18.8x on growth & organic capital expansion Coromandel, Gujarat Insecticides Ltd FY22E EPS. without much increase in Debt. Net etc. The company is fully integrated Debt/ Equity remains comfortable at and has an import substitution led 0.3x in FY20 and expected to remain story embedded for products like at comfortable level going forward. Para Anisidine (PA) and Ortho Amino The capacity expansion will enhance Phenol (OAP) while for another
Valiant Organics 3Yr. Price Chart
Particulars (in Rs Cr) FY19 FY20 FY21E FY22E 3300 Net Sales 692.3 674.9 762.7 877.1 2800 Growth (%) 473.8 -2.5 13.0 15.0 2300 EBITDA 180.2 179.3 205.9 241.2 1800 EBITDA Margin (%) 26.0 26.6 27.0 27.5 1300 Net profit 133.2 140.5 160.2 188.6 800 Net Profit Margin (%) 19.2 20.8 21.0 21.5 300
18 19 20 EPS (Rs) 227.2 114.0 131.8 155.2 Jun- 18 Jun- 19 Jun- 20 Sep- 17 Sep- 18 Sep- 19 Mar- Mar- Mar- Dec- 17 Dec- 18 Dec- 19
Consensus Estimate: Ashika Research
October 2020 INSIGHT 18 Monthly Insight Recommendation Sheet
Annu- Buying Bought Target Target Booked Booked Holding Script QTY Value Value Profit Return alised Date Rate Price Return Date Price Days Return Ultratech Cement 01-Oct-20 124 4030 499720 4543 12.7%
Essel Propack 01-Oct-20 2058 243 500000 290 19.3%
Valiant Organics 01-Oct-20 172 2906 499832 3350 15.3%
Mishra Dhatu 01-Sep-20 2400 209 502246 260 24.2% Nigam
Hawkins Cooker 01-Sep-20 103 4852 499740 5890 21.4%
Phillips Carbon 01-Sep-20 4275 117 501035 151 28.8% Black
Wipro 03-Aug-20 1770 282 499999 325 15.1%
Divis Lab 03-Aug-20 190 2644 502371 3050 15.4% 10-Aug-20 3058.0 581026 78654 15.7% 7 816%
Fine Organics 03-Aug-20 230 2177 500822 2470 13.4% 24-Aug-20 2465.8 567123 66300 13.2% 21 230%
ICICI Securities 01-Jul-20 1050 476 499818 620 30.2%
Apollo Tyres 01-Jul-20 4600 109 501341 130 19.3% 10-Aug-20 126.6 582498 81157 16.2% 40 148%
Galaxy Surfactants 01-Jul-20 335 1490 499300 1680 12.7% 04-Aug-20 1684.0 564130 64829 13.0% 34 139%
Nestle India 01-Jun-20 28 17571 491987 19500 11.0%
Tech Mahindra 01-Jun-20 925 541 500453 ADD 29-Sep-20 773.7 715691 215238 43.0% 120 131%
Abbott India 01-Jun-20 30 16979 509375 19464 14.6%
Bharti Airtel 04-May-20 985 508 500232 610 20.1% 20-May-20 606 597058 96826 19.4% 16 442%
Pfizer 04-May-20 102 4934 503304 5800 17.5%
Bayer Cropscience 04-May-20 116 4287 497334 5425 26.5% 27-May-20 5281 612584 115251 23.2% 23 368%
ITC 01-Apr-20 2950 170.29 502363 ADD
Britannia Industries 01-Apr-20 184 2719 500320 ADD 29-May-20 3384 622704 122384 24.5% 58 154%
TCS 01-Apr-20 274 1827 500508 ADD 14-Sep-20 2480 679520 179012 35.8% 166 79%
HDFC Bank 01-Apr-20 586 852 499290 ADD
Britannia Industries 02-Mar-20 164 3048 499888 3400 11.5% 29-May-20 3384 555019 55130 11.0% 88 46%
Aarti Industries 02-Mar-20 505 990 499799 1177 18.9% 05-May-20 1139 575018 75220 15.1% 64 86%
Metropolis 02-Mar-20 263 1885.73 495946 2200 16.7% Healthcare
Bajaj Finance 03-Feb-20 115 4305.89 495178 5000 16.1%
Gujarat State 03-Feb-20 2040 246 501493 300 22.0% 01-Apr-20 169 344168 -157325 -31.4% 58 -197% Petronet
Granules India 03-Feb-20 3600 140 502632 170 21.8% 07-Feb-20 164 591156 88524 17.6% 4 1607%
Concor 01-Jan-20 870 574.99 500239 665 15.7%
Mahanagar Gas 01-Jan-20 470 1066 501095 1164 9.2% 23-Jan-20 1162 546140 45045 9.0% 22 149%
SIS 01-Jan-20 1020 490 500147 568 15.8% 07-Feb-20 559 570119 69972 14.0% 37 138%
HDFC Life 02-Dec-19 875 571 499608 680 19.1%
Dr. Reddy’s Lab 02-Dec-19 171 2923 499818 3503 19.8% 07-Apr-20 3554 607713 107896 21.6% 127 62%
Just Dial 02-Dec-19 875 570 499170 750 31.5% 01-Apr-20 288 251615 -247555 -49.6% 121 -150%
IRCTC 01-Nov-19 561 893 500709 1170 31.1% 30-Jan-20 1158 649638 148929 29.7% 90 121%
PI Industries 01-Nov-19 350 1432 501323 1613 12.6% 07-Feb-20 1612 564109 62787 12.5% 98 47%
19 INSIGHT October 2020 Annu- Buying Bought Target Target Booked Booked Holding Script QTY Value Value Profit Return alised Date Rate Price Return Date Price Days Return Procter & Gamble 01-Nov-19 40 12325 492982 14078 14.2% Hygiene
HDFC Bank 01-Oct-19 405 1235 500212 1395 12.9%
Indian Hotels 01-Oct-19 3130 160 500595 179 11.9% 01-Apr-20 74 230525 -270071 -53.9% 183 -108%
Siemens 01-Oct-19 330 1549 511213 1680 8.4% 23-Oct-19 1689 557420 46207 9.0% 22 150%
Gujarat Gas 01-Sep-19 2800 179 501501 200 11.7% 30-Oct-19 200 559048 57547 11.5% 59 71%
Hindustan Unilever 01-Sep-19 265 1888 500371 1975 4.6% 20-Sep-19 1957 518507 18136 3.6% 19 70%
Divi’s Lab 01-Aug-19 305 1636 498882 1750 7.0% 22-Oct-19 1757 535885 37003 7.4% 82 33%
ICICI Bank 01-Aug-19 1175 426 500234 473 11.1% 25-Oct-19 468 550206 49972 10.0% 85 43%
City Union Bank 01-Jul-19 2410 208 500935 254 22.2% 16-Jan-20 248 597005 96070 19.2% 199 35%
Reliance Nippon 01-Jul-19 2250 222 499773 265 19.3% 27-Aug-19 258 579510 79737 16.0% 57 102% Life
Sanofi India 01-Jul-19 87 5740 499387 6775 18.0% 29-Oct-19 6678 581029 81641 16.3% 120 50%
Asian Paints 01-Jun-19 346 1445 499797 1560 8.0% 02-Aug-19 1549 535985 36188 7.2% 62 43%
Axis Bank 01-Jun-19 614 812 498614 905 11.4%
Honeywell 01-Jun-19 19 26087 495655 30195 15.7% 25-Oct-19 29105 552999 57344 11.6% 146 29% Automation
MCX 01-May-19 575 868 499354 1005 15.7% 30-Aug-19 971 558147 58793 11.8% 121 36%
TCS 01-May-19 220 2259 496953 2490 10.2% 14-Sep-20 2480 545600 48647 9.8% 502 7%
Crompton Greaves 01-Apr-19 2138 234 501153 256 9.2% 20-Sep-19 251 536681 35528 7.1% 172 15% Cons.
Equitas Holdings 01-Apr-19 3637 138 500875 191 38.7% 01-Apr-20 42 152499 -348375 -69.6% 366 -69%
Page Industries 01-Apr-19 20 25219 504373 29080 15.3% 14-Aug-19 17525 350506 -153867 -30.5% 135 -82%
ITC 01-Mar-19 1800 278 500089 319 14.8%
Tech Mahindra 01-Mar-19 605 824 498456 960 16.5% 29-Sep-20 773.7 468101 -30356 -6.1% 578 -4%
HDFC Bank 01-Feb-19 240 2101 504338 1204 -42.7% 20-May-19 2403 576686 72348 14.3% 108 48%
Pfizer 01-Feb-19 163 3066 499703 3490 13.8% 20-Sep-19 3389 552433 52730 10.6% 231 17%
Abbott India 01-Jan-19 65 7593 493527 8580 13.0% 11-Jun-19 8566 556790 63263 12.8% 161 29%
Indraprastha Gas 01-Jan-19 1850 273 504362 315 15.5% 08-Apr-19 314 581748 77386 15.3% 97 58%
United Spirits 01-Jan-19 800 623 498624 735 17.9% 14-Feb-20 711 568576 69952 14.0% 409 13%
Berger Paints 01-Dec-18 1567 319 499873 369 15.7% 29-Aug-19 369 578223 78350 15.7% 271 21%
Cummins India 01-Dec-18 644 776 499744 889 14.6% 16-Jan-19 889 572516 72772 14.6% 46 116%
Dabur India 01-Nov-18 1299 385 500115 470 22.1% 20-Sep-19 470 610530 110415 22.1% 323 25%
Nestlé India 01-Nov-18 52 9680 503360 11370 17.5% 10-Jan-19 11370 591240 87880 17.5% 70 91%
Dr. Lal PathLabs 01-Oct-18 524 954 499896 1125 17.9% 06-Feb-19 1125 589500 89604 17.9% 128 51%
Godrej Consumer 01-Oct-18 651 768 499968 910 18.5% 01-Feb-20 688 447888 -52080 -10.4% 488 -8%
ABB India 01-Sep-18 378 1322 499716 1510 14.2% 14-Sep-18 1510 570780 71064 14.2% 13 399%
Bharat Forge 01-Sep-18 752 665 500080 752 13.1% 15-Mar-19 548 412284 -87796 -17.6% 195 -33%
Whirlpool of India 01-Sep-18 279 1795 500805 2033 13.3% 09-Oct-19 2033 567207 66402 13.3% 403 12%
Cipla 01-Aug-18 800 625 500000 715 14.4% 01-Feb-20 452 361600 -138400 -27.7% 549 -18%
Marico 01-Aug-18 1425 351 500175 408 16.2% 25-Sep-19 404 575700 75525 15.1% 420 13%
Dishman Carbogen 01-Jul-18 1916 261 500076 307 17.6% 03-Sep-18 307 588212 88136 17.6% 64 101%
Procter & Gamble 01-Jul-18 51 9900 504900 11100 12.1% 17-Jul-18 11100 566100 61200 12.1% 16 277% Hygiene
Bata India 01-Jun-18 654 764 499656 890 16.5% 23-Jul-18 890 582060 82404 16.5% 52 116%
CESC 01-Jun-18 624 802 500348 1020 27.2% 01-Feb-20 722 450528 -49820 -10.0% 610 -6%
Nestle India 01-Jun-18 53 9519 504507 10900 14.5% 01-Aug-18 10900 577700 73193 14.5% 61 87%
ITC 01-May-18 1786 280 500080 324 15.7% 03-Sep-19 323 576789 76709 15.3% 490 11%
Tata Chemical 01-May-18 656 762 499872 890 16.8% 01-Feb-20 758 497248 -2624 -0.5% 641 0%
Voltas 01-Apr-18 806 620 499720 720 16.1% 24-Oct-19 720 580320 80600 16.1% 571 10%
Britannia Industries 01-Mar-18 202 2480 500960 2845 14.7% 23-May-18 2845 574690 73730 14.7% 83 65%
Infosys 01-Mar-18 876 571 500196 667 16.8% 03-Jul-18 667 584292 84096 16.8% 124 49%
Godrej Consumer 01-Feb-18 714 701 500276 804 14.7% 27-Jun-18 804 574056 73780 14.7% 146 37%
Power Grid 01-Feb-18 2604 192 499968 223 16.1% 01-Aug-19 216 563115 63147 12.6% 546 8%
October 2020 INSIGHT 20 Annu- Buying Bought Target Target Booked Booked Holding Script QTY Value Value Profit Return alised Date Rate Price Return Date Price Days Return Maharshtra 01-Jan-18 990 505 499950 585 15.8% 09-Jan-19 483 478170 -21780 -4.4% 373 -4% Seamless
Solar Industries 01-Jan-18 423 1182 499986 1480 25.2% 01-Feb-20 1340 566820 66834 13.4% 761 6%
Hindustan Copper 01-Dec-17 5263 95 499985 116 22.1% 30-May-18 76 399988 -99997 -20.0% 180 -41%
Petronet LNG 01-Dec-17 1992 251 499992 297 18.3% 23-Sep-19 297 591624 91632 18.3% 661 10%
Indian Hotels Co. 01-Nov-17 4673 107 500011 127 18.7% 04-Jan-18 127 593471 93460 18.7% 64 107%
KNR Constructions 01-Nov-17 2008 249 499992 297 19.3% 21-Dec-17 297 596376 96384 19.3% 50 141%
CDSL 01-Oct-17 1471 340 500140 424 24.7% 16-Mar-18 302 444242 -55898 -11.2% 166 -25%
Karur Vysya 01-Oct-17 4005 125 500053 145 15.8% 17-Aug-18 100 400500 -99553 -19.9% 320 -23%
Hindustan Unilever 01-Sep-17 411 1217 500187 1379 13.3% 18-Jan-18 1379 566769 66582 13.3% 139 35%
NMDC 01-Sep-17 3968 126 499968 142 12.7% 01-Jan-18 142 563456 63488 12.7% 122 38%
Indraprastha Gas 01-Aug-17 2137 234 500058 280 19.7% 11-Sep-17 280 598360 98302 19.7% 41 175%
Kaveri Seed 01-Aug-17 732 683 499956 790 15.7% 24-Dec-18 580 424560 -75396 -15.1% 510 -11%
Apollo Tyres 01-Jul-17 2083 240 499920 278 15.8% 07-Aug-17 278 579074 79154 15.8% 37 156%
Greaves Cotton 01-Jul-17 3145 159 500055 193 21.4% 26-Jun-18 140 440300 -59755 -11.9% 360 -12%
Bosch 01-Jun-17 21 23325 489825 27442 17.7% 18-Sep-18 21000 441000 -48825 -10.0% 474 -8%
Relaxo Footwears 01-Jun-17 2183 229 499907 286 24.7% 01-Nov-17 286 623247 123340 24.7% 153 59%
PI Industries 01-May-17 577 866 499682 1028 18.7% 09-Jan-18 1028 593156 93474 18.7% 253 27%
PNC Infratech 01-May-17 3226 155 500030 200 29.0% 26-Oct-17 200 645200 145170 29.0% 178 60%
Akzo Nobel 01-Apr-17 269 1862 500878 2135 14.7% 28-Dec-18 1680 451920 -48958 -9.8% 636 -6%
Crompton Greaves 01-Apr-17 2370 211 500070 244 15.6% 16-May-17 244 578280 78210 15.6% 45 127%
Deepak Nitrite 01-Mar-17 4673 107 500011 124 15.9% 02-Mar-17 124 579452 79441 15.9% 1 5799%
Manappuram 01-Mar-17 5263 95 499985 120 26.3% 22-Dec-17 120 631560 131575 26.3% 296 32% Finance
CESC 01-Feb-17 855 585 500175 671 14.7% 13-Feb-17 671 573534 73359 14.7% 12 446%
Dewan Housing 01-Feb-17 1724 290 499960 341 17.6% 14-Mar-17 341 587884 87924 17.6% 41 157%
Persistent Systems 01-Jan-17 812 616 500192 741 20.3% 09-Jan-18 741 601692 101500 20.3% 373 20%
Berger Paints 01-Dec-16 2083 240 499920 280 16.7% 25-Oct-17 280 583240 83320 16.7% 328 19%
Britannia Industries 01-Dec-16 332 1505 499660 1761 17.0% 26-Apr-17 1761 584652 84992 17.0% 146 43%
Dishman Pharma 01-Dec-16 2058 243 500094 300 23.5% 29-Mar-17 300 617400 117306 23.5% 118 73%
Max Financial 01-Nov-16 909 550 499950 650 18.2% 07-Apr-17 650 590850 90900 18.2% 157 42% Services
Minda Industries 01-Nov-16 4274 117 500058 151 29.1% 21-Apr-17 151 645374 145316 29.1% 171 62%
Natco Pharma 01-Nov-16 870 575 500250 737 28.2% 06-Feb-17 737 641190 140940 28.2% 97 106%
Vindhya Telelinks 01-Nov-16 693 722 500346 900 24.7% 05-Jul-17 900 623700 123354 24.7% 246 37%
Credit Analysis 01-Oct-16 381 1314 500634 1543 17.4% 10-Oct-16 1543 587883 87249 17.4% 9 707%
Nilkamal 01-Oct-16 374 1336 499664 1700 27.2% 17-Oct-16 1700 635800 136136 27.2% 16 622%
IDFC Bank 01-Sep-16 9025 55 499985 70 26.4% 22-Sep-16 70 631750 131765 26.4% 21 458%
Kirloskar Ferrous 01-Sep-16 5814 86 500004 113 31.4% 10-Apr-17 113 656982 156978 31.4% 221 52%
Mahanagar Gas 01-Sep-16 780 641 499980 748 16.7% 17-Oct-16 748 583440 83460 16.7% 46 132%
Mercator 01-Sep-16 9615 52 499980 71 36.5% 05-Jan-18 44 418253 -81728 -16.3% 491 -12%
Federal Bank 01-Aug-16 7692 65 499980 78 20.0% 25-Oct-16 78 599976 99996 20.0% 85 86%
Indian Oil Corp. 01-Aug-16 3683 136 499967 155 14.2% 05-Oct-16 155 570865 70898 14.2% 65 80%
LIC Housing 01-Aug-16 963 519 499797 608 17.1% 19-Oct-16 608 585504 85707 17.1% 79 79% Finance
Unichem Lab 01-Aug-16 1754 285 499890 360 26.3% 09-Jan-18 360 631440 131550 26.3% 526 18%
Aarti Industries 01-Jul-16 962 520 500240 620 19.2% 30-Aug-16 620 596440 96200 19.2% 60 117%
Capital First 01-Jul-16 12478 40 500018 47 16.7% 20-Jul-16 47 583504 83486 16.7% 19 321%
Godrej Properties 01-Jul-16 1370 365 500050 415 13.7% 05-Apr-17 415 568550 68500 13.7% 278 18%
Steel Strips Wheels 01-Jul-16 1096 456 499776 578 26.8% 25-Aug-16 578 633488 133712 26.8% 55 178%
Dabur India 01-Jun-16 1724 290 499960 335 15.5% 01-Nov-17 335 577540 77580 15.5% 518 11%
Glenmark Pharma 01-Jun-16 588 851 500388 985 15.7% 01-Nov-16 985 579180 78792 15.7% 153 38%
Godrej Consumer 01-Jun-16 1013 494 500084 583 18.2% 22-Feb-17 583 590917 90832 18.2% 266 25%
Tata Power Co 01-Jun-16 6849 73 499977 85 16.4% 17-Feb-17 85 582165 82188 16.4% 261 23%
21 INSIGHT October 2020 Annu- Buying Bought Target Target Booked Booked Holding Script QTY Value Value Profit Return alised Date Rate Price Return Date Price Days Return DCM Shriram 01-May-16 3185 157 500045 195 24.2% 27-May-16 195 621075 121030 24.2% 26 340%
Mahindra & 01-May-16 752 665 500080 775 16.5% 20-Dec-17 775 582800 82720 16.5% 598 10% Mahindra
PI Industries 01-May-16 787 635 499745 760 19.7% 27-Jul-16 760 598120 98375 19.7% 87 83%
ACC 01-Apr-16 365 1370 500050 1580 15.3% 27-Jun-16 1580 576700 76650 15.3% 87 64%
VA Tech Wabag 01-Apr-16 1931 259 500129 345 33.2% 24-Mar-17 345 666195 166066 33.2% 357 34%
Whirlpool India 01-Apr-16 735 680 499800 810 19.1% 07-Jun-16 810 595350 95550 19.1% 67 104%
Marico 01-Mar-16 2119 236 500084 280 18.6% 15-Jul-16 280 593320 93236 18.6% 136 50%
NTPC 01-Mar-16 4762 105 500010 123 17.5% 03-Jun-16 123 587313 87303 17.5% 94 68%
HCL Tech 01-Feb-16 577 866 499682 1020 17.8% 25-Jan-18 1020 588540 88858 17.8% 724 9%
HDFC 01-Feb-16 424 1180 500320 1400 18.6% 29-Jul-16 1400 593600 93280 18.6% 179 38%
Hero MotoCorp 01-Feb-16 195 2562 499590 2820 10.1% 02-Mar-16 2820 549900 50310 10.1% 30 123%
Indraprastha Gas 01-Jan-16 4762 105 500010 125 18.9% 29-Jun-16 125 594298 94288 18.9% 180 38%
Pidilite Ind. 01-Jan-16 907 551 499757 656 19.1% 20-May-16 656 594992 95235 19.1% 140 50%
SH Kelkar 01-Jan-16 2000 250 500000 310 24.0% 22-Aug-16 310 620000 120000 24.0% 234 37%
Texmaco Rail 01-Jan-16 3311 151 499961 183 21.2% 23-Nov-17 110 364210 -135751 -27.2% 692 -14%
Garware Wall Ropes 01-Dec-15 1289 388 500132 488 25.8% 09-Aug-16 488 629032 128900 25.8% 252 37%
Sanofi India 01-Dec-15 116 4300 498800 5060 17.7% 01-Mar-18 5060 586960 88160 17.7% 821 8%
Wabco India 01-Dec-15 80 6280 502400 7200 14.6% 28-Nov-17 7200 576000 73600 14.6% 728 7%
GP Petroleums 01-Nov-15 7463 67 500021 156 132.8% 07-Feb-17 95 708985 208964 41.8% 464 33%
HCC 01-Nov-15 28652 17 500007 29 65.4% 03-Jan-17 29 826909 326902 65.4% 429 56%
Inox Wind 01-Nov-15 1259 397 499823 500 25.9% 19-Oct-16 225 283275 -216548 -43.3% 353 -45%
Sterlite Tech 01-Nov-15 6993 72 500000 107 50.1% 20-Oct-16 107 750349 250349 50.1% 354 52%
Castrol India 01-Oct-15 2309 217 499899 255 17.8% 10-Jul-17 195 450255 -49644 -9.9% 648 -6%
Syngene Int 01-Oct-15 3115 161 499958 193 19.9% 21-Oct-15 193 599638 99680 19.9% 20 364%
Zee Ent. 01-Oct-15 1282 390 499980 464 19.0% 07-Jun-16 464 594848 94868 19.0% 250 28%
Berger Paints 01-Sep-15 3365 149 499943 176 18.8% 22-Dec-15 176 593682 93739 18.8% 112 61%
Ceat 01-Sep-15 463 1080 500040 1245 15.3% 10-Sep-15 1245 576435 76395 15.3% 9 620%
Cummins India 01-Aug-15 520 962 500240 1130 17.5% 06-Aug-15 1130 587600 87360 17.5% 5 1275%
Greenply Ind. 01-Aug-15 3281 152 500041 183 20.1% 12-May-16 183 600584 100543 20.1% 285 26%
SQS India BFSI 01-Aug-15 735 680 499800 863 26.9% 23-Nov-15 863 634305 134505 26.9% 114 86%
TIME Technoplast 01-Aug-15 7576 66 500016 81 22.7% 22-Aug-16 81 613656 113640 22.7% 387 21%
Asian Paints 01-Jul-15 658 760 500080 883 16.2% 31-Jul-15 883 581014 80934 16.2% 30 197%
Idea Cellular 01-Jul-15 4762 105 500010 122 16.2% 20-Dec-17 60 285720 -214290 -42.9% 903 -17%
Maruti Suzuki 01-Jun-15 132 3774 498168 4367 15.7% 04-Aug-15 4367 576444 78276 15.7% 64 90%
Whirlpool India 01-Jun-15 658 760 500080 879 15.7% 13-Jul-16 879 578382 78302 15.7% 408 14%
Sun pharma 01-May-15 541 925 500425 1220 31.9% 19-Aug-16 790 427390 -73035 -14.6% 476 -11%
Tata Global 01-May-15 3546 141 499986 174 23.4% 12-Jul-17 174 617004 117018 23.4% 803 11%
Tata Motors 01-May-15 971 515 500065 615 19.4% 20-Jul-16 490 475790 -24275 -4.9% 446 -4%
Ultratech 01-May-15 187 2680 501160 3300 23.1% 13-Apr-16 3300 617100 115940 23.1% 348 24%
Abbott India 01-Apr-15 124 4020 498480 4680 16.4% 04-Aug-15 4680 580320 81840 16.4% 125 48%
Elantas Beck India 01-Apr-15 442 1130 499460 1320 16.8% 29-Jul-15 1320 583440 83980 16.8% 119 52%
Strides Arcolab 01-Apr-15 434 1153 500402 1340 16.2% 10-Aug-15 1340 581560 81158 16.2% 131 45%
BEML 01-Mar-15 511 978 499758 1200 22.7% 09-Apr-15 1200 613200 113442 22.7% 39 212%
MCX 01-Mar-15 425 1177 500225 1552 31.9% 22-May-17 970 412250 -87975 -17.6% 813 -8%
Rolta 01-Mar-15 2618 191 500038 250 30.9% 26-Dec-16 61 159698 -340340 -68.1% 666 -37%
Amrutanjan Health 01-Feb-15 2227 225 499962 325 44.8% 17-Apr-17 325 723775 223814 44.8% 806 20%
HBL Power 01-Feb-15 14327 35 500012 55 57.6% 20-Feb-15 55 787985 287973 57.6% 19 1106%
Mangalam Cement 01-Feb-15 1558 321 500118 432 34.6% 16-Jan-18 432 673056 172938 34.6% 1080 12%
SML Isuzu 01-Feb-15 511 979 500269 1222 24.8% 10-Mar-15 1222 624442 124173 24.8% 37 245%
Dewan Housing 01-Jan-15 2519 199 500022 240 20.9% 15-Jan-15 240 604560 104539 20.9% 14 545%
Emami 01-Jan-15 1277 392 499946 462 18.0% 28-Jan-15 462 589974 90029 18.0% 27 243%
Torrent Pharm 01-Jan-15 456 1096 499776 1338 22.1% 18-Jun-15 1338 610128 110352 22.1% 168 48%
October 2020 INSIGHT 22 Consumer durable: Structural demand still intact
ndia’s consumer durable sector scope for Indian consumer durable However, May onwards, government is still far behind other countries sector to scale up its business in started to withdraw the lockdown like China, Japan, US, Europe, coming years in order to reach on phase wise manner and economy etc. Despite of India’s large near to Chinese level. Further, the again started to function normally. Ieconomy size and huge population, affordability of home appliance in Indian consumer durable sector the combined industry size of past decade improved significantly was hit hard due to the lockdown three essential consumer durables where India’s GDP grew at a CAGR both on production and supply level. (Refrigerator, Washing Machine & of 11% over FY10-FY19, while the However, things are likely to improve AC) is only Rs 500 billion, much average selling price of Washing in coming quarters on the back of smaller than cars & two-wheelers. Machine, AC and Refrigerator rose normalizing of the economy post Rapid urbanization and increasing in only 5%-6% range. The recent lockdown and increase in demand in nuclear families are the main growth outbreak of COVID-19 hasserious upcoming festive season. Covid-19 drivers for India’s consumer durable negative implications on India’s has positively impacted some of industry which witnessed muted overall economic growth. All the the home appliances products growth in past couple of years global rating agencies slashed the (refrigerators, washing machines, amid weak economic sentiment. Indian FY21 GDP growth forecast dish washers, etc) as these products Penetration levels of various white after it registered 23% steep fall had witnessed demand during the goods appliances in India are still in Q1FY21 number. On March 24, lockdown. In order to maintain much below global peers. The government announced countrywide social distancing and to stay at home penetration gap is the highest in air stringent lockdown in order to curb people are becoming self reliant and conditioners followed by washing the spread of COVID-19 and that thus there have been demand for machine and refrigerators. In terms has dismantled all the economic washing machines, dish washers, of demographics, India’s current activities. This lockdown has put refrigerators, etc. Anyway, the long GDP per capita income levels and brakes on Indian manufacturing term structural demand drivers urbanization rates are what China sector, adversely impacting the for consumer durable sector in had in 1998-2000. Thus, penetration domestic supply chain. Moreover, India is still intact as this is very levels across various white goods social distancing, shutdown of underpenetrated compared to other categories like AC and refrigerators shops and slump in discretionary emerging countries and thus has also mirror the levels seen in China spending by consumers further hit huge opportunity for growth. in 1998-2000. Hence, there is lot of the economic activity in Q1FY21.
23 INSIGHT October 2020 Low penetration provides drivers for consumer durable will add 21 million households by huge scope of growth industry in the long run. In terms 2030. Further, India’s median age of demographics, India’s current of population is around 31 years Penetration levels of various GDP per capita income levels and which is much lower compared to white goods appliances in India urbanization rates are what China 40/42 years in US & China. Even, are still much below global peers. had in 1998-2000. Thus, penetration urbanization levels are still only at The penetration is lowest in levels across various white goods 34% in India which is steadily growing air conditioners where India’s categories like AC and refrigerators and is likely to jump sharply after penetration at around 13 per 100 also mirror the levels seen in China reaching a certain threshold as seen Households is much below its peer in 1998-2000. Hence, there is lot of in Thailand, Indonesia, etc. On per group at 72 per 100 House hold. This scope for improvement in income capita income front also, India also is followed by washing machine, levels and higher urbanization, lagged its emerging peers China and refrigerators while the penetration which should sustain healthy growth India. So, overall there are enormous in fans is similar to peers. The momentum. In terms of income opportunities for growth for Indian penetration trends for various levels, India’s middle class is likely consumer durable sector going categories across countries indicate to expand by around 140 million forward. that rising income levels and higher households while high income urbanization are the key demand
Penetration across categores between India vs House Hold income profile in India Global average (Units per 100 House Holds)
Mn Households 219mn 293mn 386mn 100% 1 8 100 16 29 90 90% 61 80 80% 51 70 60 70% 168 50 40 60% 97 High Upper Mid 30 50% 20 151 Lower Mid 10 40% Low 0 30% 132 Television Refrigerator Washing Air Microwave 127 machine conditioner 20% 10% India Global average 57 0% 2005 2018 2030F
Source: Industry report Source: Industry report
Age wise population Unorganised (%) share in various consumer durable segments
Median Age 28 31 40 42 100 90 80% 70% 80 60% 70 50% 60 40% 30% 50 20% 40 10% 30 0%
20 Fan
10 Switch Lighting
0 cooler Air Switchgear
India 2018 India 2030F US China Cable & Wire Water heater Water <15 Year 15-24 25-49 50-59 60-64 >=65
Source: Industry report Source: Industry report
October 2020 INSIGHT 24 GST implementation increasing the organized market share Various electrical and white and the share is likely to increase organized players. Consumer durable good segments have a reasonably over the years. The growth of sector is highly unorganized in high share of the unorganized organized market share will be led by various segments. Air cooler segment segment ranging from ~10% to premiumization among customers, is most highly unorganized segment 70% of the industry. Unorganized increase in technology and product followed by water heater, Lighting, players mainly increase where the complexity, higher marketing/ cable & wire. So, there are scope technology involvement is low, not branding activity and cost efficiencies of organized players gaining more critical component and lower price due to the pan-India network of market share in cost of unorganized due to no taxes and use of below- organized players. The roll out of players on the back of branding, standard components. While the GST has increased the compliance, premiumization and better quality & implementation of GST has led to accelerates the formalization and services. some shift to the organized segment, increased the market share of
Consumer Durables segment wise data Volume CAGR Value CAGR Industry Size Units (in Organized Penetration Segment 5 Yr 10 Yr 5 Yr 10 Yr Key players (Rs bn FY20) millions) (%) (per 100 HHs) Voltas, LG, Daikin, Lloyd, Hitachi, Air conditioner 173 6 10.3% 8.7% 12.6% 13.4% 100% 13 Bluestar Refrigerator 295 12 11.7% 10.9% 18.7% 18.0% 100% 24 LG, Samsung, Whirlpool, Godrej Washing Machine 115 7 7.5% 8.6% 10.1% 10.4% 100% 15 LG, Samsung, Whirlpool, Godrej, IFB TV 503 19.9 9.8% 8.0% 15.2% 13.2% 100% 43 LG, Samsung, Whirlpool, Godrej Microwave 20 1.5 1.4% 5.2% 6.3% 11.4% NA 4 LG, Samsung, IFB Fan 93 65 5.9% 8.2% 8.1% 11.2% 75% 193 Crompton, Usha, Orient, Havells
Source: Industry report
Availability of easy credit cards, lowering of replacement distribution network has nearly financing driving demand cycle of consumer products from trebled in the urban segment 9-10 years to 4-5 years, increasing and rose ~11x in rural areas. The The availability of easy finance is one portfolio of products of financiers emergence of organized retail, which of the main reason for improving and availability of 0% interest and recorded ~16% CAGR over FY13-17 affordability of the people to flexible duration schemes. The also benefitted demand. Despite of purchase consumer durable goods financing market recorded ~21% such growth, the organized retail and thus supported the demand. The CAGR over FY15 to FY19 to touch Rs penetration still remained at around availability of finance to purchase 726 billion. NBFCs dominate this 10.6% in FY19. However, as per CRISIL consumer durables has increased segment and have seen consumer the organized retail share is expected significantly over the past few years durables disbursements recording to touch 15% by FY24 and that will on the back of rising penetration of ~30% CAGR over FY15-FY19. Bajaj be going to benefit the organized financiers in urban and rural areas, Finance’s, the largest Consumer consumer durable players. easy availability of finance through finance & NBFC company in India
Consumer Financing has increased significantly in NBFC leading the market share (%) past 5 years
INR bn 1000 32% 31% 900 30% 18% 13% 12% 800 32% 29% 26% 700 28% 29% 30% 28% 25% 600 26% 25% 28% 27% 500 26% 24% 400 57% 58% 58% 300 23% 24% 43% 43% 47% 200 22% 100 FY15 FY16 FY17 FY18 FY19 FY20 0 20% FY16 FY17 FY18 FY19 FY20E NBFC Credit Cards Banks CD Finance market Finance Penetration (RHS)
Source: Industry report Source: Bajaj Finance report
25 INSIGHT October 2020 Improving electrification Development Scheme (IPDS) (power have reported around 69% of the levels also a demand distribution), Pradhan Mantri Sahaj overall progress. Going ahead, the Bijli Har Ghar Yojana- Saubhagya focus would be more on 24x7 power catalyst (for urban regions, especially in availability, electrification of all Over the past few years, the Uttar Pradesh/Bihar) and Ujjwal households, improving distribution availability of electricity has improved Discom Assurance Yojana (UDAY) and lower power outages especially in significantly through various central/ (support state discoms and drive rural areas. Improving electrification state government-sponsored electrification) with an aim to provide is one of the main demand drivers for schemes like DeenDayal Upadhyaya 24x 7 power to all citizen. Till 2019, consumer durable goods and that will Gram Jyoti Yojana (DDUGJY) (rural it has been noticed that all inhabited witness a healthy growth in coming electrification), Integrated Power villages stand electrified and states years.
Per capita consumption across state (kwh) Few states are getting less than 20 hrs power in a day
1200 12 10 1000 10 9 8 800 8 6 600 4 400 2 1 200 0 24 20-24 15-20 <15 0 Bihar Assam UP West Kerala MP Bengal Average hours of power supply in a day
Source: Ministry of Power Source: Ministry of Power
E-commerce a new platform for consumer distribution network covering the huge landscape in India durable companies is an important moat for any company, thus helping in pushing newer products and gaining share rapidly. Those The emergence of E-Commerce and disruption of companies which are entering into newer segments and online sales has opened another window of opportunity reaching out to consumers’ across the country witnessing for Indian consumer durable manufacturers. Further, strong growth momentum. Better convenience for the online sales have got additional preference in this consumers along with availability of financing schemes pandemic situation as the customers are reluctant to lead to better penetration across both urban and rural go to store physically to buy the products and feel more areas. comfortable and safe by shopping through online. Sales through e-commerce platforms like Flipkart and Amazon have seen a sharp rise in preference in the past few years. These benefited from the sharp discounts in products E-commerce sales steadily rising across categories compared to retail stores, the ability of new brands to (% of overall revenue) avoid the investment in distribution network and scale up faster and attractive offers by these platforms during festive periods. Currently now, for established consumer durable players the e-commerce sales account around 30% 10-12% of revenue compared to 2-3% few years back. The success was significant in the case of mobile phones 25% where ~50-60% of festive sales were processed through 20% this platform, followed by televisions. Hence, the adoption 15% was faster in the case of products where portability 10% is easier and after-sales service requirement is low. 5% However, for larger appliances like refrigerator, ACs and 0% washing machines the online share of sales is still low in TV AC Refrigerator Washing between 5-10% as compared to China where it has already Machine touched to around 50% for ACs. Thus, to gain and sustain 2017 2018 2019 market share the established consumer durable players are following OMNI channel of distribution (both offline and online presence). Further, the wide and extensive Source: Industry report
October 2020 INSIGHT 26 Segment Replacement (Years) Replacement demand (% of total sales) Air conditioner 8-10 40-45% Refrigerator 7-8 40-45% Washing Machine 7-8 45-50% TV 7-8 50-55% Microwave 7-8 60-65% Fan 12-15 55-60%
Source: Industry report
Government’s Make heavily reliant on China in terms the only critical component India in India program to of imports of critical components import is compressors and here also such as compressors and motors. China remains the key market for boost domestic durable Besides, electronic chipsets are import of refrigeration compressors. manufacturers also largely imported from China. For Indian washing machine industry, The recent standoff on the border Components such as compressors motors are the critical component of with China has strengthened the for ACs and Refrigerators have import from China. Other key import government’s Make in India mission manufacturing hub in China’s materials for washing machines are and to make India self reliant by Guangdong province, which is the electronic controllers and gears. reducing import dependency. India’s second worst hit by COVID-19 after Hence, government’s mission of consumer durable industry is heavily Wuhan. AC manufacturing in India localizing the critical components dependent on import especially is predominantly an assembly work of consumer durable products will for critical components. AC, as majority of the components savesubstantial cost for OEMs, Refrigerator and Washing Machine are imported from China. For AC generate high domestic demand, are not imported from China on manufacturing, compressors form provide large export opportunities CBU (completely built units) basis by the most critical component of and will generate huge employment. the major brands operating in India import from China, accounting for If India become self reliant it will as they have local manufacturing / approximately 30% to 35% of the benefit both the OEMs and contract assembly units. However, India is product cost. For refrigerators also, manufacturers going forward.
Segment wise import content from China
Categories Critical imported components Other imported components Air Conditioner Compressors IDU plastics, electronic chipsets and motors Refrigerator Compressors Motors (for Frost Free variant) Washing Machine Motors Electronic Controller
Source: news article
Banking on Festive demand going ahead. There will be some due to the nationwide lockdown, pent-up demand, with rural markets while there have been 60-70% decline Amid dismal macroeconomic performing better after a normal in sales in the month of May.However, prospects unleashed by the Covid-19 monsoon and several firms reversing from June July onwards there has pandemic, consumer durable pay cuts in the urban. Industry been an upswing in sales with the companies are now banking on the believes that this festive year is very drop tapering to about 10% compared crucial festive season to recoup different and they are predicting to last year. Thus, consumer durable losses. Brands have been advancing that priorities will be different with companies are banking on the production plans, expanding rural consumers looking for products that festive demand and increasing their outreach and even planning attractive enhance health & hygiene.Generally, existing capacity and production lines offers, hoping to achieve a 10-15% the festive sales contribute 35-40% in order to meet the incremental sales growth during this period after of the annual sales for the industry. demand. a lackluster May and a near wipeout Owing to the loss in sales during the in April. Currently, the growing work The year 2020 started in a negative lockdown months, the industry is from home culture and the reluctance note as COVID-19 started to spread projected to see de-growth of 10-12% in hiring domestic help due to across the world and brought the in the current financial year (FY21). pandemic fear is leading to a spike in entire world in grinding halt. To The economic uncertainty caused demand for home appliances like AC, curb the spread of the virus the by COVID-19 outbreak hampered refrigerators, washing machines and government of respective countries the demand and hurt consumer microwave ovens. With the onsets announced the entire lockdown sentiments causing a loss of 30-40% of the festive season and reopening which severely affected the economic in March. The loss in April was 100% of markets will drive the demand activities of entire world. India has
27 INSIGHT October 2020 undertaken the longest lockdown and tepid demand. However, in this conditioners the lowest with 4.8%, started from 24th March which festival season, industry is hopeful thus provide huge scope for Indian have a severe impact on domestic of recovering some of these losses. consumer durable players to scale economy as reflected in GDP growth The onset of the festive season is up their business in coming years. which plunged by 23% in Q1FY21. expected to provide an impetus for Besides, other structural drivers like Manufacturing, tourism & travels, a sustained demand across smaller availability of finance to purchase hospitality, etc are the sectors which markets. Besides, the demand is likely products, increasing electrification, hit hard due to the lockdown in the to sustain as the market penetration rising urbanization and growing wake of COVID-19 outbreak.The of appliances continues to remain preference for e-commerce are consumer durable industry witnessed low.For instance, refrigerators still intact will drive the long term a loss of around 20% during the penetration stands at 34.1%, demand for consumer durable past few months due to lockdown washing machines at 14.3% and air products.
Consumer Durable Peer Set
Company Name Mcap Revenue EBITDA PAT EBITDA PAT ROE ROCE D/E (x) 1 yr 1 yr 1 yr (Rs crs) (Rs crs) (Rs crs) (Rs crs) Margin Margin (%) (%) Forward Forward Forward (%) (%) P/E (x) EV/ P/Bvps EBITDA (x) (x) Havells India Ltd. 41,893 9,440 1,029 735 10.9% 7.8% 17.3 22.0 0.0 47.2 31.5 8.1 Whirlpool Of India 25,781 5,993 673 476 11.2% 7.9% 20.6 28.6 0.0 42.8 29.7 7.7 Ltd. Voltas Ltd. 21,461 7,627 687 590 9.0% 7.7% 14.1 18.7 0.1 32.6 28.0 4.3 Crompton Greaves Consumer 16,477 4,520 599 496 13.3% 11.0% 43.1 35.4 0.3 31.8 24.3 7.8 Electricals Ltd. V-Guard Industries 7,053 2,503 258 188 10.3% 7.5% 20.6 26.4 0.0 32.7 22.3 5.5 Ltd. Blue Star Ltd. 6,080 5,360 283 141 5.3% 2.6% 17.0 19.1 0.6 31.2 18.2 7.2 Symphony Ltd. 5,963 1,103 212 182 19.2% 16.5% 27.9 29.2 0.3 28.8 25.3 7.3 Johnson Controls - Hitachi Air 5,848 2,197 172 84 7.8% 3.8% 12.8 15.0 0.2 37.4 26.0 6.9 Conditioning India Ltd. Bajaj Electricals Ltd. 5,164 4,939 208 (7) 4.2% -0.2% -0.6 7.3 0.7 27.6 17.8 3.5 IFB Industries Ltd. 2,215 2,637 121 26 4.6% 1.0% 4.1 5.6 0.5 40.2 0.8 3.7
Source: ACE Equity & Bloomberg
October 2020 INSIGHT 28 Management Meet Note
Ratnamani Metals & Tubes Ltd.
30,000 to 40,000 tonne of pipes in Company Information water segment by going to customers BSE Code 520111 and manufactured there thus saving NSE Code RATNAMANI freight cost for the customers. Bloomberg Code RMT IN Company has established green ISIN INE703B01027 field unit in Kutch, Gujarat for the benefit of excise & sales tax. Market Cap (Rs. Cr) 5,724 Ratnamani Metal & Tubes ltd. Outstanding shares(Cr) 4.7 (RMTL) is the largest manufacturer 52-wk Hi/Lo (Rs.) 1,390/715 of Nickel Alloy / Stainless Steel Avg. daily volume (1yr. on NSE) 21,200 Seamless and Welded Tubes/Pipes Face Value(Rs.) 2.0 and Titanium Welded Tubes in India and one of the leading manufacturers Book Value (Rs) 376.4 of Carbon Steel Welded Pipes (ERW, L-SAW and H-SAW), Stainless Steel / Key Management meeting Carbon Steel Pipes with 3 Layer PE / PP Coating in India. pointers Company’s all order are make to Started journey in 1985, initially order. In Carbon steel segment 100% engaged in trading of stainless tool is make to order and in stainless steel pipes in Mumbai by importing the pipe segment 80% is make to order. products and selling in the market. No stock and sales for the company Started with 2 units and started only 10% stockis kept for faster production and selling in the market. selling. Slowly and gradually increasing In 1995, company set up 75,000 production of carbon steel pipes. In tonne of carbon steel pipe plant 1995, company started the production which was totally indigenous plant. of carbon steel pipes with diameter ranging from 16 inch to 60 inch. The main consumable industries of company’s products are Oil & Company has also set up a mobile gas, Refinery, Petrochemical, City plant to meet up the requirement of
29 INSIGHT October 2020 Gas Distribution, Fertilizer, Nuclear Indian Oil & Gas sector use to do 3 layers of value addition Power, pharma, aerospace, launch vision (3 layers of quoting). In Oil & Gas pads, etc. segment there are high specification Barmer Greenfield project is going in the quality of pipes required Order book has been affected on and they have put tender also and by slowdown in economy from and company is one of the largest company is already L1 bidder for producers of such pipes in India. March onward due to COVID crisis. nearly Rs 150-160 crore order. Normally the order book stood at In ERW CGD pipe segment nearly Rs 12,200 crore in last 2 years. IOCL is coming up with new company is running at 105% But this time, the total order in hand petrochemical plant in Paradip. utilization, thus expanding the facility is Rs 950 crore but company has also Haldia petrochemical project is in this segment by 50,000 tonne bided some tender for some PSUs. also going on and order expected which is expected to commercialize So, company is expecting to bag some from IOCL and BPCL. Then Euro-6 by January 2021. implementation is also going on in order by October of nearly Rs 400- India will be totally a gas network 500 crore order. Recently company several plants which was halted due to COVID crisis. country in next few years, so the has won an order of Rs 190 order in demand for CGD pipes will be very ERW segment from CGD segment. Essar oil backed by Russian robust. company is also expanding their 1QFY21 was impacted by COVID Better utilization of plant and high and from Maycompany again started facility. Essar oil has only refinery and now they are going for downstream. value of products over the year are production with 33% of manpower the reasons for substantial growth in and slowly increased to 50% of MPCL nuclear power plant is revenue between FY17-FY19. manpower. Company makes 2 shifts coming up and company has already for 12 hours, so the plants can run for started working in Haryana in this When BJP came into power, 24 hours. year and that could result in good they took some time and from 2017 demand for stainless tubes and pipes. onwards, they started investments Despite of challenges due to in Oil&Gas and cross country COVID crisis, the operations are Then there is nuclear recycling board which also generate good demand for pipeline and that resulted in order going on smoothly as raw materials book position started moving from are there and customers are buying stainless tubes and pipes. Company recently completed Rs 90 crore July 2017 onwards. So, 2017-18 was the products and paying ona timely a turning year for the company and manner. order in nuclear recycling board for stainless tubes and pipes. 2018-19 was also a good year for the Before COVID crisis, new projects company. The year 2020-21 hit by the were coming from domestic front Due to China problem, lot of COVID crisis and it turned to be a as well as from international front, chemical companies and pharma challenging year for the company as mainly from Middle East. However, companies and API companies are lot of projects have been affected by investment has slowed down because coming into the country which will lockdown. of COVID reason and lower crude oil boost the demand for stainless steel pipes and tubes. Company is mainly investing in prices. Qatar is investing hugely on stainless steel and higher valued LNG pipes which is gas to liquid. Further, 3 new fertilizer plants added carbon steel pipes that is We are the only company from are coming into the country where LSW. In ERW segment company India to supply pipes to Saudi Aramco again there would be requirement of is only investing in balancing and company is registered with all stainless steel tubes and pipes. equipments and debottlenecking. major Oil & Gas, power, fertilizers, In international front, all the Hence, minimum capex will end up Nuclear power companies since last countries like Saudi Arabia, Oman, with higher capacity and basically 35 years. Qatar, and Kuwait are on expansion company want to make a balance Oil & gas, refineries all run 365 mode. Recently, company has between topline and bottomline. days in a year thus quality and received order of around Rs 200-300 Stainless steel pipes and LSW reliability matter most in these crore from Nigeria. doesn’t have unlimited market industries and Ratnamani metal Company has also supplied good potential in domestic market as well & tubes assured best quality and quality of steel tubes to defence for as in international market, thus need reliability of products. The steel BrahMos missile. These products to make balance between lower value pipes only account 7-8% of total mainly caters to defence and PSUs. added products and high value added cost of investments by Oil & gas and Now, very good support is coming products.Company’s capacity will be refineries thus they don’t want to from government and Make in India more skewed towards higher value compromise on that front and know program. Previously, government added products once the ongoing the criticalness of these products. used to import high quality steel projects commercialize. So after 3 Company also does exports to tubes from abroad and now things years, gradually company will witness overseas markets, where direct have changed since the Modi the contribution of higher value exports are around 20-25% and government came into power. added products to be higher in overall business. indirect exports is around 40-45%. In last 3 years, company has been Company use to give fabricated tubes working with Oil & Gas companies. In titanium products company is to L&T, BHEL, Godrej and they use to Margins are low in water pipeline and one of the only two producers in the export these equipments. Company not in oil & gas pipes. There are good country. In Nickel alloy also company delivers very high end tubes. margins in CGD pipes as company is the only manufacturer. Company
October 2020 INSIGHT 30 is always focusing on manufacturing tubes; only they acquired the existing Company expects JAL NAL project niche products. In defence capacities. will start from next financial year application products company is The infrastructure projects that is FY22 as due to COVID, Central currently caters to India’s defence. and investment announced by the government and state government In defence application products government in Budget FY21 has are not in a position to take large company is not a monopoly, it’s not moved from ministry due to capex. JAL NAL project will be only for products are import substitution. COVID-19 crisis. Economy is not helical pipes as helical pipes are only In last couple of years no favoring and government is now used for water pipelines. manufactures have gone for green grappling with the COVID related field expansion of stainless steel issues.
Capacity and expansion
Capacities – At a Glance (in MT) as of FY20 Expansion Carbon Steel Pipes Chhatral Kutchh Total Total L-SAW 30,000 10,000 40,000 120,000 160,000 H-SAW / Spiral - 180,000 180,000 180,000 ERW - 70,000 70,000 50,000 120,000 Circ. Seam 60,000 - 60,000 60,000 Sub Total 90,000 260,000 350,000 520,000 3 Layer PE and FBE Coating 2.5 mln sq. mtrs
Stainless Steel Tubes / Pipes Chhatral Kutchh Total Total Seamless 8,000 - 8,000 20,000 28,000 Welded - 20,000 20,000 20,000 Hot Extruded Seamless (for captive - 7,000 7,000 7,000 usage) Sub Total 8,000 20,000 28,000 48,000
Stainless steel Further company is adding Helical tubes have capacity of 20,000 of new seamless stainless 210,000 tonne and LSW has capacity Seamless stainless steel: 8000 steel capacity then the seamless will of 40,000 tonne and another 120,000 tonne with own captive hot extrusion become 48,000 tonne capacity. tonne of new capacity will be added capacity of 15,000 tonne which can taking the total capacity to 160,000 give output of 7,000 tonne Carbon steel tonne for some years to come. Wielded pipes capacity of 20,000 ERW capacity is 70,000 tonne and total saleable capacity of 28,000 another 50,000 tonne to be added. steel for stainless steel pipes.
EBITDA margin Break up of order book as of 1st September 2020
Segmental EBITDA Margin (%) Order book break up 5,00,000 tonne post expansion Carbon steel Stainless tubes & Rs 503 crore (Rs 483 crores + is around 10-12% Pipes Rs 190 crore of order received ) Stainless steel tubes & 48,000 tonne post expansion is pipes around 22-25% Carbon steel tubes Rs 313 crore
Going forward, 3 years down the line, margin contribution will be higher from the new capacity and LSW which cater to process pipes and line pipe requirements.
31 INSIGHT October 2020 Financial position capacity from January 2021 but for Funding of Capex new set of products it will take time However, despite of such Currently, there is no need for to bring into the market. challenging times, company has not equity dilution based on the capex faced any issue in delay of payments plans. The ongoing capex will be from customers, price reset request Competitors mainly funded from internal accruals. from customers, order cancellation APL Apollo tubes is only in ERW Internal accruals will gradually be requests from customers. Hence, the segment. used to meet the incremental working cash position for the company will Maharashtra Seamless is only capital requirements once the newer continue to be healthy. Company as competing with the company in ERW capacity start production. of date on net basis is totally debt free city gas distribution pipeline. They Company is in raw material company. are not competing in LSW segment. intensive business and will require Company has cash & cash In carbon steel tubes company’s large quantity of raw materials once equivalent of Rs 500 crore and after competitors are Welspun, Jindal Saw the new capacity start production at eliminating Rs 200 crore of liabilities, and Man Industries. higher utilization rate. company has net cash of Rs 300 Company will continue to be debt crore. Further, all the operating costs Company has presence across all the verticals of carbon steel pipes. free on net basis and cash flow will of the company are under control continue to be healthy. and all the plants are efficient despite of lower availability of labor the Foreign exchange impact Management is not looking for production has not suffered. Any currency fluctuation will not any acquisition right now and first of all will strive to complete the capex Debt will start coming down have any impact on bottom-line as these are all accounting entry. which company has committed. Once and on net net basis company will the company will be comfortable with continue to be debt free. Company Company always covers its foreign currency exposure on net basic these capex then it will think of next expects peak level debt will be Rs 300 phase of growth. crore as of 31st March 2021 and then without keeping it open. gradually it will start coming down. Company is also an exporter and Company has plan to set up importer, thus there is a natural Greenfield project in eastern part of Revenue guidance hedge for the company. As of date, India as there are demand for water pipeline. The setting of the project Company expects Q2FY21 will be company has foreign currency will incur a capex of nearly Rs 150 much better than Q1FY21. However, exposure of USD 5 million on sell crore. But COVID-19 has put that plan there will be dip in 3QFY21 and again side. So company is only covering the on the back burner. Q4FY21 will be normal. The order net exposure. which company are now getting will Outlook be dispatched on Q4FY21 as there is Working Capital lead time between receiving the order Company use to cover its raw Company’s management and dispatching these orders. materials on back to back basis remuneration policy is 10% due to the one time paid remuneration to the In FY21, company may see a dip in so any large order intake will reserve in inventory, which is one directors; otherwise the management revenue due to COVID related issues remuneration policy is at 8%. and slow order position. Company reason of moving up of inventory. will end up FY21 with revenue of Due to COVID also the inventory Company’s focus is not on the top around Rs 2200 crore with same level has increased as there has been line but only focus on bottom-line of EBITDA margin and PAT margin sudden lockdown announced by the and to maintain EBITDA margin. government. which company has been reporting Company always carries order since last 7-8 years. Around Rs 80 to Rs 90 crore book position of 7-8 months of total With the commercialization of new worth of materials are lying with plants turnover. In FY21, the order plants company is expected to clock the company during March 2020 book has come down though there turnover in range between Rs 3,600- which could not be dispatched due to are lot of order books which are in 3,800 crore in FY22. COVID issue. pipeline and will be finalized in next few weeks of time. Company thinks Company doesn’t go for any LC Margins expansions are expected that it is sitting on a reasonable order after 3 years and initially the product bill discounting as the cost of letter of credit is always higher than the book and achieving turnover of Rs mix will be both low value added and 2,200 crore will not be a issue. high value added products. EBITDA investment. margin in range of 16-18% is good for Company’s receivables are around Company believes that it doesn’t the company and gradually margin 60-70 days. means sense of depreciating your plant and machineries for sake of will improve over the years. Company’s order are all based topline and management will follow Company is adding new segment on fixed price terms and company this philosophy in coming years and in seamless steel pipe but it will take cannot recover any incremental cost will always emphasize on balancing time to establish itself. Exploration from customers. Company always between topline and bottomline and pipe is also a niche product segment. cover its raw materials after receiving sustaining the margins. For standard products company will the order and it never keeps the raw commence production from new material cost open.
October 2020 INSIGHT 32 Economy review: Agriculture Reforms
When the agricultural reforms were announced by NDA was scheduled to end. They further claim that the time of government, they were hailed by all and were compared the House was extended without taking the sense of the to the nineties moment in agriculture, synonymous to House and therefore invalid. They allege that they were the liberalization of the manufacturing sector in India. not allowed to speak, their mics muted, and the house was When the ordinances were promulgated on June 5th, packed with security personnel to prevent any dissent. even then there was support for the same, however when The bills were passed by voice vote essentially saying the bills were placed before Rajya Sabha to replace the “yes” or “no” with the deputy chairman making the final three ordinances, all hell broke loose. Not only opposition decision on his perception, which side is louder while parties have opposed the legislations, even long-term typically votes happen digitally with scoreboard displaying NDA allies like Shiromani Akali Dal spoke vehemently the tally. Media reports also suggest that the audio of against, terming it an “anti-farmer” and eventually the the government broadcaster Rajya Sabha TV was cut off party’s only representative in the Modi Govt., Harsimrat during this voice vote. This was followed by a ruckus and Kaur Badal resigned over the issue alleging the Bills to be suspension of eight MPs and walkouts by opposition, detrimental to Punjab’s agriculture sector. While there while discussions went on and eventually contentious was positivity with regards to the bills passed by upper house. The bills bills and were considered to be the have hence split opinions - while Prime ‘need of the hour’, suddenly a U-turn The bills have hence Minister Narendra Modi called the and condemnation of the bills wasn’t split opinions - while reforms a “watershed moment” for on the cards especially by allies like Indian agriculture, opposition parties Shriomani Akali Dal and AIADMK. Just Prime Minister have termed them “anti-farmer” and three political parties- YSRCP, Tamil Narendra Modi likened them to a “death warrant”. Manila Congress and BPF- among called the reforms Primarily, the agitation started the non-NDA, non-UPA groups came a “watershed with tractor protests by farmers out in support. Parties like Trinamool of Punjab and Haryana in July in Congress, DMK and CPM wanted the moment” for opposition to these ordinances. Even, bill to be sent to a select committee of Indian agriculture, the Punjab Assembly on August 28 Rajya Sabha for greater scrutiny while opposition parties passed a resolution rejecting the Shiv Sena demanded a special session Centre’s ordinances. In a nutshell, the to discuss them. The opposition parties have termed them opposition parties opposed the bills even decided to petition the President “anti-farmer” and and the farmers protested primarily under Article 111 of Constitution, on two grounds: (a) they believe that urging him not to give assent to the likened them to a “death warrant” the move towards greater play of free two farm Bills passed in the Rajya markets is a ploy by the government Sabha. The Opposition parties have to get away from its traditional role argued that the Bills were passed in of being the guarantor of minimum the Rajya Sabha post 1 p.m., when it support prices (MSPs) (b) corporate
33 INSIGHT October 2020 houses and large-scale institutional buyers taking over of losing their land holding since they would lose out to agriculture and the fear of contract farming affecting corporate houses in fighting legal cases. Direct contracts the small and marginal farmers. Besides, many parties with large buyers would reduce the importance of state also emphasised that agriculture is a state subject and mandis, thereby reducing state’s income from various the Centre should not legislate on it without wider levies earned through APMCs as well as it would also consultations. Hence, most Opposition parties pressed for eliminate different layers of intermediaries embedded in sending the two Bills to a Select Committee of the Rajya the present system. Sabha and had moved resolutions for the same. With the opposition emboldened by the farmers’ protests against The Farmers’ Produce Trade and the Bills, the Congress has already declared nationwide Commerce (Promotion and Facilitation) agitations from September 24. The protests have been the strongest in Punjab and neighbouring Haryana state, Bill where the mandi system is strong and the productivity is This bill removes the barriers to movement of farm high - so only the government has been able to buy that produce across India and gives the freedom to farmers volume of produce at a set price. However, the agitation to sell anywhere in the country. Essentially, this bill could quickly spread to other states as well since farmers allows farmers to sell their produce outside the Mandi. are holding demonstrations in Bengaluru and Uttar The bill aims at freeing the farmers from the mercy of Pradesh too and now could spread like wild fire. the commission agents and intermediaries thus enabling them to fetch better prices for their produce. The new Clearly what are the bills all about and why the uproar? bill thus ends the monopoly of state Mandis as they are The farm bills are - Farmers (Empowerment and now no longer bound to sell to state Mandis or APMCs Protection) Agreement of Price Assurance and Farm only as was the case earlier. Besides, since there are no Services; Farmers Produce Trade and Commerce limitations for selling interstate, it will be a win-win (Promotion and Facilitation) Bill; and Essential situation for both farmers as well as consumers as farm Commodities (Amendment) Bill. The Upper House, on produce moves from surplus to deficit regions thus Sunday (20th September), cleared the first two, paving correcting the pricing imbalance as well as chances of the way for them to become laws (once President Ram better prices for farm produce. Hence, this will create Nath Kovind signs off) and triggering protests while nationwide agri market and will strengthen e-NAM the Essential Commodities (Amendment) Bill, 2020, platform. It is important to note that this reform is an was passed in Rajya Sabha by a voice vote on Tuesday extension of Model Act initiated in 2003. Many states and (22nd September), in the absence of the Opposition, union territories have already deregulated marketing which boycotted proceedings. Lok Sabha had already of fruits and vegetable, trading on electronic platforms passed it on September 15th and the bill replaces an like e-NAM, setting up of agri produce markets (Mandis) ordinance promulgated in June and amends the Essential in private sector, direct marketing of agri produce etc. Commodities Act, 1955. Opposition have maintained that The reason behind this new law therefore could be lack the Govt. has rushed through legislations in a near empty of adequate response to model law on part of many state house without due discussions. Let us discuss the three governments. bills in greater details and the reason for protests: Reason for protests: This is very straightforward that The Farmers’ (Empowerment and states would oppose such a bill which would result in their Protection) Agreement on Price Assurance revenue getting impacted as state governments would no more earn taxes from Mandis, same for the commission and Farm Services Bill, 2020 agents and intermediaries. There are apprehensions about This bill permits farmers to enter into supply contracts the implementation of MSPs since they are tied with state with large buyers thereby enabling them to enter into Mandis, although the Govt. has assured that procurements long term contracts and hence higher predictability for under the MSP system will not be impacted by this move. income and thereby better adoption of technology as well as inputs. In other words, this bill gives the much-needed Essential Commodities (Amendment) Bill legal status for direct contract farming. Earlier contracts 2020 between the farmer and the buyer was routed through state APMCs (agricultural produce market committees) This bill amends the Essential Commodities Act aimed at and rules varied from state to state. Hence, by getting into deregulating commodities and removes stock limits on long term contracts with essentially large buyers, farmers commodities such as cereals, pulses, oilseeds, edible oils, could reduce risks associated with price volatility. The bill onion and potatoes. This bill will help in creation of post- provides for pegging of prices to the Mandi (APMC) prices. harvest infrastructure like warehouses and cold storages Pre-signed contracts are also expected to result in lower etc. by corporate which didn’t happen due to excessive marketing & selling costs for farmers. Although, farmers regulations. Thus, this bill will help attract investments in adopting this arrangement will have to abide by the agri warehousing and cold storages as large businesses contract terms and hence may not avail protection of MSP. maintains stock of agriculture commodities to meet the All such contracts would have civil jurisdiction and breach objective of price stabilization. Besides, this amendment of contract shall have no criminal implications. will prevent wastage of agricultural produce due to lack of storage facilities. After the amendment, the Reason for protests: It is feared that the farmers would supply of certain foodstuffs — including cereals, pulses, pay a heavy price for their ignorance in both legal as oilseeds, edible oils, potato — can be regulated only well as terms of trade and they would be marginalized under extraordinary circumstances, which include an and exploited by large retailers. While there are layers extraordinary price rise, war, famine, and natural calamity of protection, however in worst eventuality, they fear of a severe nature. In effect, the amendment takes these
October 2020 INSIGHT 34 items out from the purview of Section 3(1), which gives commission agents (Arhatiyas) and trade is facilitated by powers to central government to “control production, the commission agent for a fee which varies from state to supply, distribution, etc, of essential commodities”. state. APMC also charge fee on each trade executed within Essentially, this Act and the limitations were designed their infrastructure. Media articles state that presently for an era of scarcity, which no longer the case. While the various taxes/fee/commission in APMCs in various purpose of the Act was originally to protect the interests states range from 1% in some states to 8.5% in Punjab. of consumers by checking illegal trade practices such as In Maharashtra, the APMC income comes up to Rs 350 hoarding, it has now become a hurdle for investment in crore annually, although the states have highest number the agriculture sector in general, and in post-harvesting of APMCs too. Clearly, with contract farming and inter- activities in particular. state sales of farm produce, APMC will co-exist but they Reason for protests: The opposition believes that the would lose a chunk of their revenue. No state government amendment will hurt farmers and consumers, and will would like to lose a chunk of revenue of such proportions. only benefit hoarders (since licenses will no longer be Besides, there is fear among farmers that MSP may stop required to trade in these commodities). Farmers who functioning as effective base price in the new system. are not deep pocketed will not be able to create storage Farmers and opposition parties are apprehensive that the facilities and hence removal of stock limits will result in MSP would lose its teeth with a pure market play. But the hoarding and price manipulation by large retailers and laws themselves are not shutting down the APMC mandis intermediaries. Besides, the price triggers for imposing or the practice of MSPs. These would, on paper, offer stock limits envisioned in the Bill are unrealistic — so a greater degree of autonomy to producers. However, high that they will hardly ever be invoked. In case of farmers should have been offered more choices, for horticultural produce, a 100% increase in the retail price instance if a private deal is not distinctly better, a farmer of a commodity over the immediately preceding 12 months can carry on as before. However, it is to be reminded or over the average retail price of the last five years, that corporate farming does not manage to weaken the whichever is lower, will be the trigger for invoking the APMC (mandi system), it would only be because hordes stock limit. For non-perishable agricultural foodstuffs, the of farmers choose corporate farming or sell outside price trigger will be a 50% increase in the retail price of existing mandis. APMCs have however exploited farmers the commodity over the immediately preceding 12 months as opined by 62nd Report of the Standing Committee or over the average retail price of the last five years, on Agriculture 2018-19 which stated that the APMC has whichever is lower. become “a hotbed of politics, corruption and monopoly of traders and middlemen” and that provisions of the APMC The arguments both for & against hold grounds and it Acts are not implemented in their true sense. “Market is not easy to support unanimously either. It is true that fee and commission charges are legally to be levied on agriculture and related trade & commerce are State traders. However, the same is collected from farmers by subjects and States frame the laws, rules and regulations. deducting the amount from farmers’ net proceeds,” the Most states have enacted laws to constitute Agriculture Parliamentary panel said. Produce Marketing Committees (APMC) in their respective jurisdictions. These APMCs appoint authorized
State/UT –wise details of market fee/cess being collected by APMCs
S.No. Name of State/UT Rate of Market Fee in percent Ad Valorem Cess 1 Andhra Pradesh 1.0 (except fish 0.5%, prawn ,0.25%) Nil 2 Arunachal 2.0 Nil 3 Assam 1.0 Nil 4 Bihar Act Repealed 5 Chhattisgarh Fruits and Vegetable Nil Nil Paddy - 2.0, other commodities - 1 6 Goa 1.0 Nil 7 Gujarat Perishables 0.5-1.0 Nil Food Grains 0.3-2.0 8 Haryana Fruits and Vegetables - Nil Other 1% Rural Development Fund Cess Commodities -2.0 Cotton 0.8 2% Rural Development Fund Cess Auction fee - 0.08 per hundred Rupees 9 Himachal Pradesh 1 .0% Nil 10 J & K Nil Market fee is not collected. However, gate entry fee is collected from the selected markets of Narwal, Parimpora, Sopore, Kulgram, Shopian and Pulwana 11 Jharkhand 1.0
35 INSIGHT October 2020 S.No. Name of State/UT Rate of Market Fee in percent Ad Valorem Cess 12 Karnataka Perishables 1.0-1.5 as service charge Nil Others 1.5% 13 Kerala No APMC Act 14 Madhya Pradesh Market fee 2.0(Except Orange and Banana Nirashrit Shulk 0.2% cess - 1.0) 15 Maharashtra 0.5-1.0 0.05 Supervision Fee 16 Manipur No APMC Act 17 Meghalaya 1 % Nil 18 Mizoram Ground rent-Rs 5.0 per sq ft. Nil 19 Nagaland Market fee-Rs. 2 per quintal as service Nil charge 20 Odisha Perishables 1.0 Nil Food Grains (Paddy-2.0 and remaining- 1.0) 21 Punjab Market Fee - 2.0 Rural Development Cess 2.0% Cotton - 1.0 For primary trade - 3 % 22 Rajasthan F &V user charge Nil Jowar, Bajra, Maize, Isabgole, Cumin 1.0 Other Commodities - 1.6 23 Sikkim Act not implemented 24 Tamil Nadu 1.0 Nil 25 Telangana 1.0 (except fish 0.5%, prawn Nil 26 Tripura 2.0 Nil 27 Uttar Pradesh Market Fee - 2.0 Development Cess - 0.5% 28 Uttarakhand Fruits and Veg-1.0 Others - 2.0 Development Cess - 0.5% 29 West Bengal Perishables Nil Nil Paddy 1.0, 6 % for specific buyers Other than paddy 0.5 B Union Territories 30 Andaman No APMC Act &Nicobar Islands 31 Chandigarh Market fee-2.0 on all agricultural produce Rural Development Cess - 2.0% except maize (1%) 32 Dadra and Nagar No APMC Act Haveli 33 Daman & Diu No APMC Act 34 Delhi 1.0 Entry fee charged depending upon the type of vehicle 35 Lakshdweep No APMC Act 36 Puducherry 1.0 Nil Source: STANDING COMMITTEE ON AGRICULTURE (2018-2019)
On the contrary, despite the odds, there has been success pesticide and organic manure from UPL’s subsidiary stories of win-win partnerships between farmers and company SWAL and bunch cover bags from Reliance. industry in India as highlighted by Mckinsey report titled These companies, apart from providing the inputs, also ‘India as an agriculture and high value food powerhouse: engage and educate the farmer through farmer meetings, A new vision for 2030’. One such example is of Reliance field demonstrations, film shows, road shows, roundtable Retail which has acted as a key integrator bringing charts, etc. Apart from the collective transfer of together the best input companies to provide the farmer knowledge to the farmers, this effort has helped increase with a best-in-class “banana kit”, and started a movement farmer profits by over 80%. There are other examples like called “Kushal Kela Vikas Abhiyaan” in Maharashtra. The that of McCain demonstrated better incomes with some kit includes fungicide from BASF, fertilizer from Yara, farmers in Gujarat who started exclusive farming for the
October 2020 INSIGHT 36 processing grade potatoes used to make French Fries. report further reveals that there is even a tri-partite Through this pilot with progressive farmers, McCain agreement between HUL, Rallis & ICICI wherein Rallis was able to expand the area under cultivation of specific provides seeds and fertilizers ad ICICI provides finance grade potatoes. There are other companies like Hindustan and HUL procures final produce. ITC has turned around Unilever Ltd (HUL) which procures tomato paste from potential threats from intermediaries (commission agents) processing unit Varun Agro which in turn hands and and turned them into samyojaks (cooperating commission regulates number of seeds to certain number of farmers agents) who provide a range of services for a fee in ITS’s under PPP model by Maharashtra Govt. The Mckinsey e-choupal network for farmers.
Reliance Retail example: Holistic consortium created to provide best in class inputs to banana growers
Source: India as an agriculture and high value food powerhouse, Mckinsey
Reliance Retail example: Farmers have increased profits by over 80%
Cost Yield Prices at farm gate Revenue Pro t USD/acre T/acre USD/kg USD/acre USD/acre 6,552 3,024 Rel Kit 39 0.17 3,528 100% = 2,814 3 0.16 5 Propping 45 Labour 30 Fert 4,725 Drip 61 1,911 TC 5 18
Before After Before After Before After Before After Before After
Buying - selling price di erential to retailer Quality improvement USD/kg
Grade C 0.17 Grade C 0.15
15% Grade B 10% Grade B 15%
70% Grade A 80% Grade A
Before After Before After
Source: India as an agriculture and high value food powerhouse, Mckinsey
37 INSIGHT October 2020 There is not even an iota of doubt that the farm sector in thus highlighting the level of impoverishment. Besides, India is in dire need to major reforms. The dismal capital the last Agriculture Census (2015-16) showed that 86% of formation in the agriculture sector is on account of the all land holdings were small (between 1 and 2 hectares) stock limits imposed courtesy Essential Commodities and marginal (less than 1 hectare). The average size among Act. Thus, the farm sector needed major reforms, which marginal holdings is just 0.37 ha. Based on a 2015 study have not happened since Green Revolution and hence by Ramesh Chand, now a member of Niti Aayog, a plot long due. The amendment of the Essential Commodities smaller than 0.63 ha does not provide enough income to Act has been compared to the 90’s moment by prominent stay above the poverty line. These are such small plots Agri Economists like Mr. Ashok Gulati. Reforms will help that most farmers dependent on them are net buyers of bring much needed investments in Agriculture thus lifting food. As such, when MSPs are raised they tend to hurt Agriculture GDP and hence overall GDP. The share of Agri the farmers the most. Hence, they fall into the debt trap component in overall GDP has remained ~14-15% mark as data shows that 40% of the 24 lakh households that for a while. What’s important to note that at the time of operate on landholdings smaller than 0.01 ha are indebted. independence, ~70% of India’s workforce (a little less Low levels of income and correspondingly high levels of than 100 million) was employed in the agriculture sector debt are characteristics of populous states like Bihar, West and agriculture and allied activities accounted for ~54% Bengal and Uttar Pradesh. However, how far the reforms of India’s national income. While the contribution of will be beneficial for these farmers is debatable. The agriculture sector in national income has come down over skepticism against these bills also emerges out of the lack the years, proportion of population engaged in agriculture of information available to farmers to negotiate the right has only fallen to 55%. Most importantly, proportion of prices for their produce in the open market. According to landless labourers (among people engaged in this sector) Niti Aayog report only 10% of farmers have knowledge of went up from 28% (27 mn) in 1951 to 55% (144 mn) in 2011, MSP ahead of sowing season.
Agri Capital formation stagnant The Farm Workforce
Total engaged in Agricultural labourers Year agriculture (% of (% of agricultural 350,000 19% workforce) workforce) 300,000 18% 18% 1951 69.7 28.1 250,000 17% 1961 69.5 69.5 200,000 17% 150,000 16% 1971 69.7 37.8 16% 100,000 15% 1981 60.5 37.5 50,000 15% 1991 59.0 40.3 0 14% FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 2001 58.2 45.6 GFCF (Rs cr) GFCF % of GVA 2011 54.6 54.9
Source: MOSPI Source: Agricultural Statistics at a Glance, 2019; Indian Express
Indebtedness by landholders ( July 2012-June 2013) No. of operational holdings (% share)
Land Owned Indebted farm Average loan (hectare) household (lakhs) amount (Rs) 68% Up to 0.01 10.02 31100 0.01-0.40 135.97 23900 0.41-1.00 152.16 35400 1.01-2.00 86.11 54800 18% 10% 4% 2.01-4.00 56.10 94900 1% 4.01-10.00 25.21 182700 Small Large 10& above 2.92 290300 Semi- Medium Medium Marginal All India 468.48 47000
Source: Agricultural Statistics at a Glance, 2019; Indian Express Source: Agriculture Census 2015-16
October 2020 INSIGHT 38 Land holdings and sources of agricultural credit (as of 2013)
Size of land Co-operative Shopkeeper/ Relatives/ Bank Money lender Others (hectare) society trader friends 0-1 10% 27% 41% 4% 14% 4% 1-2 15% 48% 23% 2% 8% 6% 2-4 16% 50% 24% 1% 6% 4% 4-10 18% 50% 19% 1% 7% 6% 10+ 14% 64% 16% 1% 4% 2%
Source: Report of the Committee on Medium-term Path on Financial Inclusion, Reserve Bank of India; PRS
Other way to understand the plight of the farmers is to to consider here is that while MSPs are announced for look at the Terms of Trade (ToT) between farmers and 23 crops actual procurement by the food corporation of non-farmers. ToT is the ratio between the prices paid India (FCI) happens primarily for wheat and rice and now by the farmers for their inputs and the prices received active for pulses too. Besides, hues and cry from farmers by the farmers for their output, explained Himanshu, of Punjab & Haryana are just for nothing. Historically, an economics professor at the JNU in an article titled these states together account for 40% to 50% of Govt. “India’s farm crisis: Decades old and with deep roots”. (MSP based) procurement of rice and wheat. For 2019-20 As such, 100 is the benchmark. If the ToT is less than marketing season, these two states together accounted for 100, it means farmers are worse off, which has been the 30% of rice and 65% of wheat procured by Govt. Naturally, case since 2010-11. Now coming back to the debate over farmers from these two states are the major beneficiaries whether the Govt. is trying to do away with the MSP, it is of the Govt. procurement scheme and are apprehensive. true that the importance of APMCs will be diminished and However, the state governments too earn handsomely might be marginalized in due course, however the small since the APMC fees and taxes together with commission & marginal farmers with the lack of knowledge of MSP let agent charges are the highest, hence there are vested alone ruling prices in different states, they are expected interests. to stick to the Mandi system. Besides, the major thing
Terms of trade (Farmer-non-farmer) Percentage of crop production that was procured at MSP in 2016-17
103 35.5 100 100 99 99 98 97 97 98 97 96 24.9
92
88 87 7.8 85
0.7
FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Paddy Wheat All Pulses All Oilseeds FY19P
Source: Agricultural Statistics at a Glance, 2019; Indian Express Source: Committee on Doubling Farmers’ Income (2017), Ministry of Agriculture and Farmers’ Welfare; PRS
Share of Punjab & Haryana in output & Govt. Procurement The food processing sector haven’t taken off in India and accounts for ~9% of GVA in manufacturing due to Rice Wheat stock-holding limits so far imposed by the Essential 65% Commodities Act and with the amendments done, it could pave the way for building large capacities in the food processing sector and thus in the process generate employment opportunities. In comparison, in other 29% 30% relevant countries the processing share is between 30 to 50%, going up to 100% for developed countries. Besides, 15% this paves way for bigger export markets and India could be one of the top five exporters of agriculture and food products. A Mckinsey analysis has stated that packaged Share in output (%) Share in MSP based procurement (%) food is likely to grow by 9% annually to become an USD 126 billion industry by 2030 and most importantly it opens Source: Department of Food & Public Distribution, Ashika Research up gates for branded products.
39 INSIGHT October 2020 Share of Food Processing in GVA-Manufacturing (%) Share of food processing in manufacturing GVA (%)
8.8 8.7 8.7 France (2018) 16.2 8.5 8.3 USA (2018) 11.4
7.9 New Zealand (2013) 34.3
Indonesia (2018) 35.5
India (2017) 9.7 FY13 FY14 FY15 FY16 FY17 FY18
Source: mofpi, National Accounts Division, Central Statistics Office Source: RBI, Indian Express
Packaged food is a fast-growing industry in India with significant potential for branding
Branded product as a Market size (USD million) Percentage Food item growth rate per percentage of total category 2010 2030 annum (2010-30) 2010 2030 Milk 7,767 32.900 8 31 73 Cheese 144 1,958 14 NA NA Butter 254 1,340 9 6 19 Vegetable & edible oils 3,931 10,331 4 32 59 Sweet & savoury snacks 1,286 16,399 13 42 66 Atta 574 8,158 13 4 44 Processed poultry 398 8,340 17 6 49 Fruit beverages 720 12,204 15 NA NA Biscuits 2,753 13,145 8 NA NA
Source: India as an agriculture and high value food powerhouse, Mckinsey
October 2020 INSIGHT 40 Start-up Corner
At Ashika Capital, we are extremely passionate about fostering symbiotic relationships that are aimed at building and sustaining high-growth founder led businesses. We strongly believe that financial capital is the first steppingstone to build a scalable, sustainable and impactful business. Therefore, our endeavour is to identify great entrepreneurs in pursuit of building businesses that carry magnanimous investment potential. Here is an INSIGHT into businesses that we Mr. Mihir Mehta have worked/working with –
Crista Spices trust. It is a brand-led by a millennial and relatable to millennials. Krishne Tanna (founder), is a part of the India, also known as the land of fourth-generation spice legacy. The business has already Spices is responsible for over 70% of created a benchmark for quality and purity in the the world’s spice production. It is an world of spices in the B2B segment as validated by its undeniable fact that Spices form the DNA of any food impressive clientele base. Armed with a vision to build that not only excite your taste buds but are also loaded a gold standard, modern, homegrown spice brand that with phytonutrients and minerals that are essential for caters to the modern consumer taste pallet, the business overall wellness. However, the problem is that consumers is focusing heavily on R&D to offer a diversified portfolio continue to bear the brunt of inferior quality, adulterated of spices that is not readily available in the market. spices, which may cause serious health issues. The business is looking to raise USD 1 million to expand Positioned in a market experiencing rapid consumer its production facility, create a unique brand, and hire a evolution, CRISTA Spices is on the path of creating an sales team. authentic, flavourful, premium spice brand that garners
Henry & Smith and WEH Ventures, the business has been adept in its response to the COVID-19 situation, remaining profitable Henry & Smith is a leading D2C and adapting its offerings and distribution presence. brand in the menswear category Armed with a proven product-price mix and credible and in a short span has re-defined team in place the business is looking to reorganize certain the consumption of men’s bottom-wear, consistently processes to better manage the supply chain. delivering solutions focused value driven products. With a vision to democratize high quality solution driven The products span the major categories across Chinos, mens-ware, across the spectrum, the business caters to a Denims as well as Diffusion categories like belts, wallets mass affluent segment and has grown to INR 2 cr. In MRR and innerwear which is set to launch amidst the pandemic (pre-COVID). in Oct ’20. The business offers a variety of30 + colours in close to 10 sizes with customer repeat rates of almost 50%. The business is looking to raise USD 1mn for further expansion. Backed by leading institutions like Rukam Capital
Origa Leasing under-banked & non-banked, who lack long track records & collateral. They have developed a complete Origa Leasing is India’s first LeaseTech digital solution for servicing all the equipment needs of company. Since inception, they have hospitals & MSMEs. The current fund raise is primarily been providing high quality equipment being done to fulfil theimmediate growth in demand to smaller enterprises in both healthcare segments in the healthcare space due to Covid-19. Currently (hospitals sub 100 beds) & MSMEs (revenue < INR 100 they have a leasebook of US$5.4 mn translating into cr). In addition to financial inclusion, they also aim for annualised revenues of US$1.1 mn which will grow from higher healthcare penetration in the interiors & work the additional leasing expected in FY21. mostly with institutions in the tier 2 & 3 cities of India. By converting the high CAPEX model of purchasing Origa Leasing is led by a Founder-CEO with over 18 years equipment to an OPEX model of leasing, they help these of work experience having previously worked at ANZ enterprises grow. Investment Bank, Clearwater Capital Partners & PwC. Elevar Equity, a global leader in Financial Inclusion Origa Leasing focuses on providing its services to the Investments led their series A funding.
These are the top three business opportunities that interested stakeholders can pursue from an investment standpoint. If you are interested to know more about these companies from the perspective of business operations, investment thesis, exit opportunities and more, please drop in a line to us at [email protected].
41 INSIGHT October 2020 SEBI Multicap Funds Reclassification
n September 11, 2020, the across the large cap, mid cap and compliance with these provisions Securities and Exchange small cap companies and be true to within one month from publishing Board of India (SEBI) label”. The capital markets regulator the next list of stocks by AMFI in released a circular which has asked multi-cap funds, which January 2021. Last major circular of Ocalled for a material change in the manages investor money worth Rs SEBI for mutual fund was in 2018 portfolio structure of Multi-cap 1.46 lakh crore, to invest at least 25% when SEBI had created category of funds. SEBI unexpectedly tightened of their corpus each in large cap large caps , Mid caps and small caps the investment norms for multi cap stocks, mid cap stocks, and small- companies in accordance with the schemes of mutual funds—a category cap stocks, a move that has triggered market cap of the company which that invests in a mix of large-cap, sharp protests in the industry. contributed to a sharp selloff in mid mid-cap and small-cap shares - “in Currently, there are no restrictions. and small cap companies as fund flow order to diversify the underlying Further, SEBI also said that existing shifted from these stocks to large investments of Multi Cap Funds Multi Cap Funds shall ensure caps companies.
Composition of equity AUMs in August 2020 Multi-Cap Fund AUM
160000 14.1 Muili Cap Fund: 19.1% 155000 13.9 Large Cap Fund: 19.3% 150000 13.7 Large & Mid Cap Fund: 7.5% 145000 140000 13.5 Mid Cap Fund: 11.5% 135000 13.3 Small Cap Fund: 6.8% 130000 13.1 Divident Yield Fund: 0.5% 125000 12.9 Value Fund/Contra Fund: 6.9% 120000 115000 12.7 Focused Fund: 6.9% 110000 12.5
Sectoral/Thematic Fund: 8.6% 19 19 20 20 ELSS: 12.8% Jun- 19 Jun- 20 Oct- Apr- Apr- Feb- Dec- 19 19 Aug- 20 Aug- AUM (Rs. Cr.) % of Equity AUM (RHS)
Source: AMFI India Source: AMFI India
October 2020 INSIGHT 42 Summary of Mutual Fund AUMs
Scheme Name Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Multi Cap Fund 155925 148862 113908 129643 127304 135617 142267 146532 Large Cap Fund 154135 146317 113541 130343 128750 137148 145154 148723 Large & Mid Cap Fund 58772 56764 42972 49160 48664 52604 55208 57786 Mid Cap Fund 91197 89023 65805 74421 73352 79993 83303 88734 Small Cap Fund 52482 50967 35832 40483 39648 44679 46934 52119 Dividend Yield Fund 4416 4115 3282 3650 3629 3851 4107 4185 Value Fund/Contra Fund 55675 51200 39460 45535 45623 48764 51988 53137 Focused Fund 50209 49313 39072 44819 44326 48225 51142 53098 Sectoral/Thematic Funds 65599 63913 49844 56802 56023 60110 62908 66100 ELSS 101228 96565 74791 85214 83455 90025 94596 98701 Equity Oriented Schemes 789638 757038 578508 660070 650775 701016 737608 769115 Total Mutual funds 2785804 2722937 2226203 2393486 2454758 2548848 2711894 2749389
Source: AMFI India
There are the 2 New SEBI Rules for Multicap Fund Minimum allocation to equities cap, and small-cap companies. Now, Use of appropriate benchmarks: was increased from 65% to 75% SEBI defines a large-cap company The SEBI has also made note of the There was only one condition for as those listed companies which are benchmark that is used by the Multi Multi cap funds and that was 65% ranked from 1st to 100th company cap funds is not in line with the of their money should be invested in the Indian stock exchanges in the composition of these schemes. That’s in equities. But now at least 75% of terms of market capitalization. Mid- because the appropriate benchmark the assets in a Multi cap fund need cap companies are ranked from 101 to for large-cap funds is the NIFTY 50 to be invested in equities. This 250 in terms of market capitalization while the benchmarks used by Multi change won’t have a major issue, and small-cap companies start from cap funds are NIFTY 200 or NIFTY because Multi cap funds are generally the 251st ranked company. A list of 500. invested in equities most time. For these companies is available on the example, the biggest fund in the Association of Mutual Funds in India SEBI clarification on new category, Kotak Standard Multi cap (AMFI) website. So, fund managers circular Fund, which has over 97% of its assets were flexibility of choosing company SEBI in their clarification note invested in equities. So, this is not the and the type of company i.e. large, has hinted at some options. These problem. mid or small-cap to take the most include: optimum investing decisions on 1. Mutual fund Multi cap schemes Defined minimum allocation in behalf of the investors. can rebalance their portfolio wherein each market capitalization most have to add to small and mid- The change in the SEBI circular SEBI’s two objectives to achieve caps and divest from some of the regarding allocation is making True to Label schemes: The large-cap stocks in their portfolio everyone’s head spin. Earlier, the portfolio should reflect the name 2. Multi Cap schemes could inter-alia fund managers were free to choose of the scheme and the name of the facilitate switch to other schemes by in which companies they’d like to scheme should correctly reflect the unitholders, merge their Multi Cap invest in without any restriction on nature of the portfolio. SEBI says scheme with their Large Cap scheme whether they are large, mid, or small- that they have enforced this 25:25:25 or convert their Multi Cap scheme cap companies. However, as per allocation upon the observation that to another scheme category, for new circular, all Multi cap funds are many Multi-Cap Funds have over instance Large cum Mid Cap scheme. to necessarily invest at least 25% of 80% of their investment in large- their portfolio in each capitalization cap stocks which makes them more In addition to what SEBI says, some category. This means at least 25% like large-cap funds rather than fund houses have hinted at converting each in large-cap companies, mid- Multi cap funds. They further added the Multi cap fund into a thematic caps, and small-cap companies. in the clarification that the share fund or a focused equity fund where of small-cap companies is in the there are no or low restrictions on SEBI rules for Multi cap funds lower single digits in some of these market capitalization. SEBI has given before the new changes schemes. HDFC Equity Fund and until January 2021 to the mutual fund Multi-cap funds are not complicated the Motilal Oswal Multi cap 35 fund companies to make the requisite structures. In fact, there was only has over 85% of their portfolio in changes. It is highly unlikely the fund one condition. Multicap funds large-cap companies with little or no houses will make this change as this needed to have a minimum of 65% diversification into mid and small- would not be an easy task plus it will of their assets invested in equities cap funds. So, from the SEBI point of change the risk-return profile of the at any given time. This means the view, the name of the scheme and the funds. fund manager was free to decide nature of the scheme is completely at how much of the scheme assets were opposite ends and bordering on being going to large-cap companies, mid- misleading.
43 INSIGHT October 2020 Counter argument to SEBI’s benchmark for this discussion. Now, on the weighted average market cap. objectives if we looked at the composition of Approach SEBI to change the Lack of remarkable diversification the Nifty 500 in terms of large, mid, scheme categorization from the in most Multicap funds: The fund and small-cap stocks. We will find existing Multi cap to a Thematic houses feel that the entire point of that Large-cap, Mid-cap and Small- category. opting for Multi cap funds is to have cap stocks composition in Nifty 500 the flexibility of moving between is 78%, 17% and 5%. In other words, Approach SEBI for an extension of capitalization categories depending SEBI’s contention of having an time frame to implement the changes. on present market conditions, future appropriate benchmark seems to be There may be other options available market outlook, and valuations. going against their own words. to them as well. As per news articles, Diversification can be done using some of the AMFI members have other tools like having a mix of large, Some of the options available briefly discussed with SEBI and mid, and small-cap funds in one’s to AMCs which may have no / SEBI has asked them to provide the portfolio but the objective of a Multi negligible impact: suggestions along with the relevant cap fund for investors is to build long Continue the fund as is and data points and rationale. term wealth. adhere to the new SEBI guidelines over the next 4 - 5 months. The fund In light of the above, a hasty decision Lower allocations to Midcaps/Small houses are not required to make any currently to act on any scheme in the Caps: Multicap Fund allocations to immediate change to the scheme investors portfolio is not required. Mid/small caps have been lower and portfolio. The portfolio construct should be there has been very limited interest based on the specific requirements of among funds for the same. This is Merge the existing Multicap investors and their risk profile. because of issues with regards to scheme with their Large Cap or Large high promoter pledges along with and Mid Cap scheme, based on their Investors should not act in hurry low floating stocks and trading portfolio allocation. This will ensure Basically, as an investor, you should volumes result in high impact cost at that no / minimum change is required not act in a hurry right now as most both entry and exit levels and easy in the underlying portfolio of the fund houses are evaluating the best manipulation multi cap scheme. If the merger course of action in order to maintain option is exercised by the AMC, the the risk profile of the respective True to Label schemes: On the existing investors will be provided funds. So, allow the news to sink point related to the divergence in the an exit option (as per current in with all stakeholders including name and the nature of the scheme, regulations). the regulator and the mutual fund it again seems to be a point of view companies. SEBI has already come issue. While SEBI looks at the word Approach SEBI to create a new Flexicap Category (where fund out with a clarification and one “Multi cap” as the components of can expect all mutual fund houses the fund, the investors might be managers will have flexibility to allocate) in addition to the existing to release some communication viewing the name around the flexible regarding their views and actions nature of the fund. Now, maybe if Multicap category. The scheme can then be accordingly characterized pertaining to this circular. Nilesh the name was Flexicap rather than Shah, Chairman AMFI and Managing Multicap, the issue of the name being and ensure they remain true to label, as required by SEBI. Director, Kotak Mahindra Mutual misleading might not have come Fund said “We will ensure compliance across. Approach SEBI to change the with SEBI Regulations as well as spirit Use of appropriate benchmarks: required % allocation to large, mid & optimize risk adjusted return for Multi cap schemes to use the Nifty and small cap based on Nifty 500. The our Investors. Don’t take Investment 200 or the Nifty 500 as benchmarks. index currently has approx 78%, 17% decisions in haste.” Let’s take the Nifty 500 as the and 5% allocation respectively based
Current Allocation (%) Potential Churn (Rs. Cr.) Corpus Cash & Multi Cap Fund (Rs. Cr.) Large Mid Small Cash & Large Mid Small Equivalent Cap Cap Cap Equivalent Cap Cap Cap Kotak Standard Multicap Fund 29,714 77.7 18.3 1.2 2.9 -9,084 2,006 7,078 862 HDFC Equity Fund 19,798 85.9 8.4 3.9 1.8 -7,460 3,288 4,171 356 Motilal Oswal Multicap 35 Fund 11,240 88.9 4.8 4.7 1.6 -4,552 2,267 2,286 180 Aditya Birla SL Equity Fund 11,023 68.2 23.9 5.8 2.2 -2,245 127 2,119 243 UTI Equity Fund 10,983 65.8 27.1 5.5 1.7 -1,920 -227 2,146 187 SBI Magnum Multicap Fund 9,063 72.9 17.7 6.5 2.9 -2,342 666 1,673 263 Franklin India Equity Fund 8,591 78.1 11.6 6.9 3.4 -2,708 1,152 1,558 292 Nippon India Multi Cap Fund 8,053 53.1 24.5 19.0 3.3 -514 37 480 266 Axis Multicap Fund 6,434 92.3 3.3 0.0 4.4 -3,007 1,396 1,609 283 ICICI Pru Multicap Fund 5,594 75.0 14.0 8.3 2.7 -1,548 615 933 151 IDFC Multi Cap Fund 4,847 53.4 29.2 13.1 4.3 -373 -206 579 208 Parag Parikh Long Term Equity Fund 4,508 35.0 14.3 16.0 34.7 -886 481 407 1564 DSP Equity Fund 3,726 70.1 23.0 5.6 1.4 -800 75 724 52 L&T Equity Fund 2,366 73.0 15.1 9.6 2.3 -597 234 364 54
October 2020 INSIGHT 44 Current Allocation (%) Potential Churn (Rs. Cr.) Corpus Cash & Multi Cap Fund (Rs. Cr.) Large Mid Small Cash & Large Mid Small Equivalent Cap Cap Cap Equivalent Cap Cap Cap Canara Rob Equity Diver Fund 2,280 74.6 16.3 3.9 5.2 -679 198 481 119 Tata Multicap Fund 1,695 67.8 22.4 8.3 1.5 -328 45 283 25 Invesco India Multicap Fund 925 35.2 39.8 21.0 3.9 101 -137 37 36 Baroda Multi Cap Fund 825 73.5 18.3 2.2 6.0 -243 55 188 50 Principal Multi Cap Growth Fund 654 69.9 19.6 8.1 2.4 -146 35 111 16 Sundaram Equity Fund 600 79.8 11.1 8.9 0.2 -180 83 96 1 Edelweiss Multi-Cap Fund 560 73.9 14.8 9.6 1.7 -143 57 87 10 BNP Paribas Multi Cap Fund 555 78.7 9.4 10.7 1.2 -166 87 79 7 Union Multi Cap Fund 371 72.7 10.5 10.3 6.6 -109 54 55 24 Mahindra Manulife Multi Cap Badhat Yojana 340 69.0 19.8 7.3 3.9 -78 18 60 13 HSBC Multi Cap Equity Fund 330 76.9 15.5 6.9 0.7 -91 31 60 2 LIC MF Multi Cap Fund 295 70.0 21.3 4.7 4.0 -71 11 60 12 IDBI Diversified Equity Fund 290 68.0 18.3 11.8 1.9 -58 19 38 6 PGIM India Diversified Equity Fund 226 62.1 18.4 14.2 5.3 -39 15 24 12 Taurus Starshare (Multi Cap) Fund 200 82.8 12.6 2.4 2.2 -70 25 45 4 Essel Multi Cap Fund 176 75.3 16.6 7.3 0.8 -46 15 31 1 ITI Multi-Cap Fund 134 77.7 6.6 6.8 9.0 -49 25 24 12 JM Multicap Fund 131 88.1 10.6 0.0 1.3 -52 19 33 2 Shriram Multicap Fund 58 71.4 12.8 2.4 13.5 -20 7 13 8 Quant Active Fund 36 18.0 21.4 53.1 7.5 9 1 -10 3 Total AUM 146,621 74.0 16.4 6.0 3.6 -40,493 12,573 27,922 5,323
Source: ACE MF, Ashika Research Note: AUM as on August 30, 2020 Some of the following stocks are already owned by multiple multi cap mutual fund schemes and additional inflow can come in these stocks if the mutual funds decide to increase the allocation in the existing holdings:
Mid Cap Stocks Small Cap Stocks Crompton Greaves Consumer AU Small Finance Bank Ltd. Vaibhav Global Ltd. EIH Ltd. Electricals Ltd. Jubilant FoodWorks Ltd. Ipca Laboratories Ltd. Linde India Ltd. Indian Energy Exchange Ltd. SRF Ltd. REC Ltd. PVR Ltd. TTK Prestige Ltd. Bharat Electronics Ltd. Jindal Steel & Power Ltd. Persistent Systems Ltd. V-Mart Retail Ltd. The Ramco Cements Ltd. MRF Ltd. KEC International Ltd. Dishman Carbogen Amcis Ltd. Balkrishna Industries Ltd. Atul Ltd. Sheela Foam Ltd. Grindwell Norton Ltd. Power Finance Corporation Ltd. Aditya Birla Fashion and Retail Ltd. Kalpataru Power Transmission Ltd. Century Textiles & Industries Ltd. TVS Motor Company Ltd. Page Industries Ltd. BEML Ltd. Tata Chemicals Ltd. Voltas Ltd. Bata India Ltd. Bharat Dynamics Ltd. Jyothy Labs Ltd. CESC Ltd. Bharat Forge Ltd. Strides Pharma Science Ltd. Kennametal India Ltd.
Source: News Article Comparison between Nifty 50, Mid Cap 50 and Small Cap 100
130 120 110 100 90 80 70 60 50 40 30 19 20 20 18 18 19 19 18 Jul- 19 Jul- 18 Jul- 20 Jan- 20 Jan- 19 Jan- 18 Sep- 19 Sep- 20 Sep- 18 Mar- Mar- Mar- Nov- Nov- May- May- May-
Nifty 50 Mid Cap 50 Small Cap 100
Source: NSE
45 INSIGHT October 2020 Mutual Fund Overview
Invesco India Contra Fund
Investment Objective Investment Strategy The scheme seeks to generate The fund uses following three levers capital appreciation by investing to construct the portfolio: predominantly in Equity and Equity (i) Stock selection - It follows a Related Instruments through bottom-up approach for stock contrarian investing i.e. it endeavours selection and has a contrarian bias. to find stocks that are priced Such companies generally display significantly lower than what the fund following characteristics: companies management team believes is their trading below fundamental value; true worth. companies in turnaround phase Fund Suitability and growth companies available at Investors looking for diversification attractive valuations. Investors looking for investments (ii) Sector allocation - It takes active in under-valued and overlooked overweight/underweight sector stocks positions w.r.t. the benchmark, based on the top-down view and valuation With a long-term investment opportunities. horizon in order to realize the full potential of contrarian opportunities (iii) Capitalization bias - The fund invests across market capitalization. Investors looking for sound investment opportunities in times of volatility
October 2020 INSIGHT 46 Stock Categorization Framework
Stock Growth Prospects Financial Descriptions (e.g.) Company Attribute (e.g.) Category (e.g.) Parameter (e.g.) Track record of Established In line or better Industry leading Leader leadership, globally companies than industry margin/ROE competitive Young/established Better than Unique proposition and/ Margin & ROE Growth Warrior companies industry or right place, right time Expansion Entrepreneur vision, Operating Star Young companies High growth scalability Leverage Company with Management intent to Value of asset/ Diamond Low growth valuable assets unlock value business Value Company in a Intrinsic strengths in core P2P, ROE Frog Prince Back to growth turnaround situation business expansion Corporate event, Opportunistic Shotgun Positive surprise restructuring, earnings Event visibility Event investment news Integration, cost Call on the cycle is Commodities Positive efficiency, globally Profit leverage paramount competitive
The categorization framework enables us to filter the universe and identify the best investment opportunities. P2P: Path to Profit; ROE: Return on Equity. The above table is internal proprietary stock categorization.
Stocks that fit into one of these categories typically display superior return profiles, but more importantly this enables fund managers to focus on the attributes that drive stock price performance and keep a watch for red flags.
Important Information NAV (G) (Rs.) 48.16 NAV (D) (Rs.) 23.73 Inception Date Apr 11, 2007 Fund size(Rs.Cr.) 5019 Fund Manager Taher Badshah, Dhimant Kothari Entry load Nil For units in excess of 10% of the investment,1% will be charged for redemption within 365 Exit Load days Benchmark S&P BSE 500 TRI Min Investment (Rs.) 1000 Min SIP Investment (Rs.) 500
Key Ratios Portfolio as on August 31, 2020 Beta (x) 1.01 Stocks % of Net assets Standard deviation (%) 6.44 Reliance Industries 10.0 Sharpe Ratio 0.07 HDFC Bank 8.5 Alpha (%) 1.92 ICICI Bank 7.2 R Squared 96.77 Infosys 6.6 Expense ratio (%) 1.94 Bharti Airtel 4.8 Portfolio Turnover ratio (%) 0.75 Axis Bank 4.5 Avg Market cap (Rs. Cr.) 2,81,074 Sun Pharmaceutical Industries 3.2
Asset Allocation HCL Technologies 2.5 Equity Cash Apollo Hospitals Enterprise 2.4 97.95% 2.05% United Spirits 2.3
47 INSIGHT October 2020 % Sector Allocation
Power 3.2
Gas 3.6
Auto Anc. 3.7
Auto 4.4
Telecom 4.8
Pharma 6.1
Finance 7.3
Petroleum 12.0
Software 13.3
Banks 20.2 Note: All data are as on Aug 31, 2020; NAV are as on September 25, 2020
Source: Factsheet, Value Research
Performance of the Fund alongwith Benchmark (as on September 25, 2020) 1 month 3 months 6 months 1 year 3 Years 5 Years Since Inception Fund (%) -4.52 7.40 35.36 3.68 5.56 9.85 12.69 Benchmark (%) -5.71 5.32 39.78 -5.74 3.10 7.84
Ashika Mutual Fund Recommendation Alpha Generation
Month NAV as on 1 Year 3 Year 5 Year Fund Name Benchmark of Reco 25.09.2020 Return (%) Return (%) Return (%) Sep-19 Can Robeco - Emerging equities Reg (G) NSE - NIFTY Large Midcap 250 TRI 97.5 7.7 3.9 10.3 Oct-19 LIC - Large & Mid Cap Fund - Reg (G) NSE - NIFTY Large Midcap 250 TRI 15.1 -1.4 3.5 9.5 Nov-19 ITI - Multi Cap Fund (G) NSE - Nifty 500 TRI 9.4 -11.9 0.0 0.0 Parag Parikh - Long Term Equity Fund Dec-19 NSE - Nifty 500 TRI 30.3 18.7 11.8 13.5 Reg (G) Jan-20 DSP - Dynamic Asset Allocation Reg (G) CRISIL Hybrid 35+65 Aggressive Index 16.4 4.2 5.2 7.1 Invesco - India Growth Opportunities Feb-20 S&P BSE 250 Large Midcap TRI 34.3 -0.3 4.5 8.5 Fund (G) Apr-20 DSP - Top 100 Equity Reg Fund (G) S&P BSE 100 TRI 195.2 -7.1 0.4 5.3 May-20 Axis - Focused 25 Fund Reg (G) NSE - Nifty 50 TRI 28.5 -2.3 5.6 10.4 Jun-20 Nippon India - Tax Saver (G) S&P BSE 100 TRI 43.9 -13.0 -10.1 0.6 Jul-20 SBI - Small Cap Fund Reg (G) S&P BSE Small Cap TRI 57.3 10.3 5.7 13.2 Aditya Birla SL - Focused Equity Fund Aug-20 NSE - Nifty 50 TRI 57.5 -2.1 1.3 6.6 Reg (G) Sep-20 Sundaram - Services Fund (G) S&P BSE 200 TRI 11.4 -1.2 0.0 0.0
Note: All data are as on Aug 31, 2020; NAV are as on September 25, 2020 Source: Factsheet, Value Research
October 2020 INSIGHT 48 All Data Belongs To September 25, 2020
Since AUM Sharpe Exp. NAV 3 M 6 M 1 Yr 3 Yr 5 Yr Inception (Rs Cr) Ratio Ratio Return Large & Mid Cap Fund
SBI - Large & Midcap Fund Reg (G) 210.8 2889 7.0 32.4 (3.4) 2.2 6.6 13.1 0.0 2.1
Mirae - Asset Emerging Bluechip Fund Reg (G) 56.7 11316 9.4 40.2 6.0 6.6 13.4 18.3 0.2 1.8
ICICI Pru - Large & Mid Cap Fund Reg (G) 295.8 2500 6.1 31.1 (6.3) (0.9) 6.1 16.5 (0.1) 2.2
LIC - Large & Mid Cap Fund - Reg (G) 15.1 750 9.0 27.9 (1.4) 3.5 9.5 7.7 0.0 2.5
Sundaram - Large and Mid Cap Fund (G) 33.0 1249 8.6 31.5 (5.4) 3.3 8.2 9.2 0.1 2.2 Value Fund
SBI - Contra Fund Reg (G) 102.9 1330 12.1 42.4 1.1 (1.6) 3.9 16.5 (0.2) 2.2
IDFC - Sterling Value Fund Reg (G) 43.4 2632 13.7 48.9 (7.0) (5.7) 4.7 12.2 (0.2) 2.1
Nippon India - Value Fund (G) 70.0 2903 9.4 36.5 (3.4) 0.7 5.9 13.5 0.0 2.1
Kotak - India EQ Contra Fund (G) 51.2 818 8.3 35.2 (2.3) 4.4 8.6 11.4 0.1 2.5
Invesco - India Contra Fund (G) 48.2 5019 7.4 35.4 3.7 5.6 9.9 12.4 0.2 1.9 Focus Fund
Axis - Focused 25 Fund Reg (G) 28.5 11372 5.5 23.3 (2.3) 5.6 10.4 13.5 0.2 2.0
Mirae - Asset Focused Fund Reg (G) 11.7 3414 12.3 43.0 6.2 0.0 0.0 11.5 - 1.9
SBI - Focused Equity Fund Reg (G) 140.2 10248 1.5 21.2 (2.4) 5.5 9.4 17.8 0.2 1.8
DSP - Focus Fund Reg Fund (G) 22.8 1769 7.6 32.8 (3.4) 1.6 5.9 8.2 (0.0) 2.2
Sundaram - Select Focus Reg (G) 175.8 1064 5.2 29.6 (3.4) 4.2 7.7 17.1 0.1 2.4 ELSS Fund
Mirae - Asset Tax Saver Fund Reg (G) 18.6 4181 11.0 42.0 4.7 7.0 0.0 13.9 0.2 1.8
Kotak - Tax Saver Scheme (G) 44.2 1244 7.9 33.6 0.1 3.6 7.8 10.5 0.0 2.3
Invesco - India Tax Plan (G) 52.2 1113 8.8 31.2 3.1 5.3 8.3 12.8 0.1 2.3
Axis - Long Term Equity Fund (G) 45.2 21905 4.2 21.2 (3.4) 5.2 8.1 15.0 0.2 1.7
SBI - Long Term Equity Fund Reg (G) 138.5 7435 8.5 38.7 1.3 0.9 4.7 14.7 (0.1) 1.8 Multi Cap Fund
Parag Parikh - Long Term Equity Fund Reg (G) 30.3 4508 12.6 49.3 18.7 11.8 13.5 16.2 0.5 2.0
SBI - M Multicap Fund Reg (G) 45.7 9063 6.0 28.6 (8.0) 1.0 7.3 10.7 (0.1) 1.8
Kotak - Standard Multicap Fund (G) 34.1 29714 6.0 31.6 (3.9) 2.8 8.5 11.6 0.0 1.7
Motilal Oswal - Multicap 35 Reg (G) 24.7 11240 7.4 29.9 (5.6) (1.2) 7.3 15.1 (0.2) 1.8
ITI - Multi Cap Fund (G) 9.4 134 3.2 23.8 (11.9) 0.0 0.0 (4.6) - 2.6 Small Cap Fund
Invesco - India Smallcap Fund Reg (G) 11.1 614 12.5 42.1 9.3 0.0 0.0 5.7 - 2.5
SBI - Small Cap Fund Reg (G) 57.3 5039 17.2 46.9 10.3 5.7 13.2 17.1 0.2 1.9
Axis - Small Cap Fund Reg (G) 32.5 2720 16.0 38.1 6.4 8.5 10.8 18.8 0.2 2.1
HDFC - Small Cap Fund (G) 37.4 8645 16.4 50.2 (5.3) (0.4) 8.0 11.2 (0.0) 2.0
ICICI Pru - Smallcap Fund Reg (G) 25.3 1365 17.7 48.2 2.3 (0.8) 5.3 7.4 (0.1) 2.2 Thematic/Sectoral Fund
Franklin - Build India Fund (G) 32.4 918 (3.0) 23.2 (19.2) (5.1) 2.9 11.0 (0.2) 2.3
ICICI Pru - Banking & Financial Services Fund Reg 48.5 2836 1.5 22.2 (23.7) (6.2) 6.0 13.9 (0.1) 2.1 (G)
Nippon India - Pharma Fund (G) 222.5 3653 15.9 63.6 57.1 19.6 7.6 21.0 0.7 2.7
Sundaram - Rural and Consumption Fund Reg (G) 39.6 1535 5.7 29.5 (3.7) (0.7) 9.3 10.1 (0.1) 2.2
Aditya Birla SL - Digital India Fund Reg (G) 71.1 540 34.4 66.2 32.3 25.1 14.6 7.8 0.8 2.6
49 INSIGHT October 2020 All Data Belongs To September 25, 2020
Since AUM Sharpe Exp. NAV 3 M 6 M 1 Yr 3 Yr 5 Yr Inception (Rs Cr) Ratio Ratio Return Blance/BAF Fund
SBI - Equity Hybrid Fund Reg (G) 137.0 31993 3.1 19.3 (1.2) 5.1 7.8 12.7 0.1 1.6
Sundaram - Equity Hybrid Fund Reg (G) 90.7 1595 4.0 23.2 (1.2) 4.7 7.7 11.8 0.1 2.2
ICICI Pru - Balanced Advantage Fund Reg (G) 37.3 26638 5.6 25.5 2.8 5.4 7.8 10.0 0.1 1.7
Kotak - Balanced Advantage Fund Reg (G) 11.6 4264 7.6 30.3 8.0 0.0 0.0 7.0 - 2.0
Aditya Birla SL - Balanced Advantage Fund (G) 54.4 2414 3.2 23.7 1.4 3.2 8.0 8.6 (0.0) 2.1 Equity Savings Fund
Aditya Birla SL - Equity Savings Fund Reg (G) 14.0 506 4.3 14.4 3.2 2.6 6.1 5.9 (0.2) 2.5
DSP - Equity Saving Fund Reg (G) 12.9 419 4.7 17.5 1.3 2.5 0.0 5.8 (0.2) 2.4
Kotak - Equity Savings Fund Reg (G) 15.2 1367 4.0 16.5 5.5 5.7 7.1 7.3 0.1 2.2
Nippon India - Equity Savings Fund Reg (G) 10.0 422 1.5 11.8 (13.7) (6.4) (0.2) 0.0 (0.8) 2.6
SBI - Equity Savings Fund Reg (G) 13.6 1347 4.4 17.3 2.8 3.9 6.3 5.9 (0.1) 1.7 Arbitrage Fund
Aditya Birla SL - Arbitrage Fund Reg (G) 20.5 4099 0.8 2.4 4.8 5.7 5.8 6.6 0.6 0.9
ICICI Pru - Equity Arbitrage Fund Reg (G) 26.4 9769 0.8 2.4 4.8 5.7 5.9 7.3 0.5 1.0
Kotak - Equity Arbitrage Fund (G) 28.6 15000 0.8 2.4 4.9 5.8 6.0 7.3 0.7 1.0
Nippon India - Arbitrage Fund (G) 20.5 7384 0.8 2.6 4.9 6.0 6.0 7.4 0.8 1.0
SBI - Arbitrage Opp Fund Reg (G) 25.8 3755 0.6 1.7 4.1 5.5 5.6 7.1 0.3 0.9 Index Fund
HDFC - Index Fund-NIFTY 50 Plan - (G) 101.0 1858 7.6 33.0 (3.3) 4.5 7.8 13.3 0.1 0.3
ICICI Pru - Nifty Next 50 Index Fund Reg (G) 23.3 782 2.0 35.9 (4.2) (1.5) 6.7 8.6 (0.2) 0.9
HDFC - Index Fund - Sensex Plan 333.5 1454 7.8 31.5 (2.9) 6.3 8.5 13.7 0.2 0.3
Motilal Oswal - Nasdaq 100 FOF (G) 17.2 868 7.5 38.4 49.0 0.0 0.0 33.3 - 0.5
Motilal Oswal - S&P 500 Index Fund Reg (G) 10.8 419 3.6 0.0 0.0 0.0 0.0 19.8 - 1.2
Mod Sharpe Exp. NAV AUM Duration AMP (IN Yrs ) 3 M 6 M 1 Yr 2 Yr Ratio Ratio (in Yrs) Solutions
10.6544 ICICI Pru - Retirement Fund Pure Debt Plan (G) 11.7 459 - 1.7 7.3 10.1 0.0 - 2.1 (25/09/2019)
7.07 Aditya Birla SL - Retirement Fund 30s Plan (G) 10.0 150 - 4.4 30.5 1.7 0.0 - 2.7 (23/03/2020)
HDFC - Retirement Savings Fund Hybrid Equity 12.743 16.9 436 0.0 7.1 27.1 1.1 3.5 0.0 2.4 Reg (G) (23/03/2020)
7.38 Aditya Birla SL - Bal Bhavishya Yojna Wealth Plan (G) 10.4 282 - 4.3 30.0 1.6 0.0 - 2.6 (23/03/2020)
103.1 ICICI Pru - Child Care Gift Plan Reg 134.3 628 (0.0) 6.0 23.4 (1.8) (0.6) (0.0) 2.5 (23/03/2020) Dynamic/Multi Assets
22.68 Invesco - India Dynamic Equity Fund (G) 29.5 744 (0.2) 5.1 21.6 0.8 2.5 (0.1) 2.3 (23/03/2020)
43.7926 ICICI Pru - Asset Allocator Fund (FOF) (G) 58.3 8007 0.2 4.9 31.6 3.0 5.5 0.2 1.3 (23/03/2020)
196.1272 ICICI Pru - Multi Asset Fund (G) 253.5 10961 0.0 0.9 25.1 (3.6) (1.2) 0.0 1.7 (23/03/2020)
11.0136 SBI - Dynamic Asset Allocation Fund (G) 13.2 594 (0.1) 5.0 18.2 (1.6) (0.0) (0.1) 2.0 (23/03/2020)
13.409 DSP - Dynamic Asset Allocation Reg (G) 16.4 1547 0.1 2.6 18.0 4.2 6.6 0.1 2.3 (23/03/2020)
Disclaimer: Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
October 2020 INSIGHT 50 Technical View
Key takeaways from September 2020 compared to a shortfall of $13.86 billion in the same month last year. India’s Gross Domestic Product growth rate had contracted by 23.9% for the April to June quarter RBI mandated the automation of bad-loan recognition by banks by 30 June 2021. India services PMI for the month of August came improved to 41.8 in August Lok Sabha passed the from 34.2 in July More than half of Banking Regulation (Amendment) Bill, 2020. With this new Bill, the IHS Markit India Manufacturing NSE 500 stocks central government aims to bring Purchasing Managers’ Index stood at 52 have slipped below cooperative banks under the in August 2020 from 46 in July their 200 DMA supervision of the RBI India’s Index of Industrial after the recent Lok Sabha, through voice Production contracted 10.4% in July selloff triggered by vote, passed the Farmers’ Produce 2020 compared to a year ago persistent worries of the second wave of Trade and Commerce (Promotion India’s CPI Inflation growth across and Facilitation) Bill, 2020 and Covid-19. About 170 the country eased to 6.69% in the the Farmers (Empowerment and month of August of the top 500 stocks Protection) Agreement of Price WPI, stood at (0.16%) (Provisional) for are currently trading Assurance and Farm Services Bill, the month of August 2020 as compared more than 10% below 2020. to 1.17% during the corresponding their 200 DMA SEBI issued a circular on month of the previous year. signaling broader multi cap schemes of mutual funds, S&P Global Ratings has forecast weakness. requiring them to invest a minimum India’s economy to shrink by 9% in FY21 of 25% each in large, mid and small cap stocks, with the balance 25% India’s trade deficit is at $6.77 billion, giving flexibility to the fund manager
51 INSIGHT October 2020 Federal Reserve on Wednesday vowed to keep interest rates near zero until inflation is on track to overshoot the U.S. central bank’s 2% target Markets corrected last month. Intermittent sell offs during the month kept the gains in check after 5 continuous months of gain. Market breadth was also negative with 9 out of the 21 trading sessions turned positive. On the sectoral front, all sectors ended deep in red mimicking broader markets. Nifty Metal, Banks and Realty were worst performers with each losing more than 12% last month. Other sectors were also in deep red with exception of Nifty IT and Teck which were up by 4.4% and 0.6% respectively. Broad market indices like the Nifty Mid On the oscillator front as per the Nifty daily chart, the Cap and Small Cap indices too ended in deep red with a daily momentum indicators are showing bearishness in decline of 8.1% and 5.7% respectively. the short term. On the weekly charts, most momentum indicators and oscillators has turned negative from 80000 neutral zone. RSI oscillator has breached its strong 60000 resistance of 50 and continues to trade below the 50 levels 40000 mark on the monthly chart as well, which seem as the 20000 0 reversal point from its March 2020 reading. Daily MACD -20000 Indicator has been struggling to sustain move above -40000 its zero line. Daily DMI Indicator has also reached the -60000 contraction zone after the positive move, which indicates -80000 the weakness in the short term trend. Hence as long as -19 -20 -20 -20 -20 -19 -19 -20 -19 t y v c a r p r a e c e b e p e p ug-20 Jul-20 Jan-20 Jun-20 O A F S S M D Nifty continues to trade above the 10800 level we could N o A M
Fll (Rs. Cr.) Dll (Rs. Cr.) expect the short term bias to remain positive, breach of which could be extremely negative for the market. 0
0 4.4% 0.6% 0 0 -0.1% 0 -1.8% -3.7% -5.7% -6.5% -7.5% -8.0% -8.1% 0 -8.5% -8.9% -9.1% -9.3% 0 -12.1% -12.2% -13.3% -14.3% -16.2% x y y e e o G IT er as ial ap eck u t etal w PSU able T tili t M C A eal t oods o idcap M ens e Banks F U R P u r inan c S Oil/ G M F ndust r Small C I Healthca r ons D apital G C C
*From 28th Aug 2020 to 24 Sept 2020 Nifty remained volatile for major part of the month, Nifty formed a bearish ‘Marubozu’ candle in weekly however Index has been staging decline at every time frame, such pattern has a bearish implication as meaningful gain. The bulls last month has been able to it paired most of the gains. Marubozu Pattern means defend the rising 200dma which is positive. Hence going that bears have completely reverse the gains hence by the present structure only a closing below the 50dma bearish movement is on. Volumes were stronger in the would possibly give strength to the bears. Interesting to broader market hence a cautious approach needs to be note, that more than half of NSE 500stocks have slipped maintained. The market breadth remained negative with below their 200 DMA after the recent selloff triggered by A/D ratio of 1:2 with Nifty Midcap, Small cap declined by persistent worries of the second wave of Covid-19. About 8.1%, 5.7%, respectively. Every rise is being pressurized by 170 of the top 500 stocks are currently trading more than resistance and sellers dominated leading to gradual drift 10% below their 200 DMA signaling broader weakness. and threatening the major trend from positive to negative. Nifty is currently trading just half a percent above its Now it to hold above 10800 zones to maintain its upward 200DMA while Nifty Midcap and Smallcap are 4% and 9% trajectory towards 11250 followed by 11550, while on the ahead of 200DMA. Since 200DMA is a long term average downside key support exists at 10650 then 10450 zones. it is considered a major support level for the and Index or stock
October 2020 INSIGHT 52 On the retracement principle we believe that Nifty has In Elliott wave analysis currently, Nifty is in wave B of strong support at 10800. Hence, extended breather would ‘Flat’ with an upward unfolding. The upside target for get anchored around key support threshold of 10800 as wave ’B’ of the flat as theoretically projects 78.6-80% of it is confluence of 23.6% retracement rally since May wave ’A’ comes around 11450-11500. On the downside the 2020 (7583-11794) and the 200EMA in daily time frame. level of 10500 identified by the rising trendline in weekly However a decisive close below 10800 would confirm chart and the 61.8% of the entire decline since Jan’20 a near term reversal and might undergo some price would be crucial and would confirm the existence of Flat correction in coming days. The next crucial support wave ‘B’. Wave C following Wave B would virtually be very emanates from 38.2% retracement of the same which sharp and would likely last for an average 12 months and comes around 10165 which further coincides with the may result in a fall between 40% and 60% from the level swing low of 2018. where the wave began.
Other correlated markets Crystal gazing the derivative data Other correlated markets like in Bullion counter, Gold Fewer positions were carried forward to the October prices hit a more than two-month trough on, weighed derivatives series on expiry of the September contracts down by a robust dollar. The dollar index held firm near as traders fretted about the near-term market prospects a more than eight-week peak against rival currencies, following the recent selloff. Mostly traders stayed on the as signs of an economic slowdown in Europe and the sidelines, while some created fresh short positions with U.S. renewed concerns about a second wave of novel foreign portfolio investors (FPIs) have been continuously coronavirus infections. Gold prices also edged higher dumping shares for the past few trading sessions. supported by renewed U.S.-China tensions and concerns dumping shares worth Rs 6,000 crore in the past six over economic recovery. sessions. Nifty futures’ rollover to the October series was Crude oil fell on concerns the economic recovery in the 70%, lower than the three-month average of 78%, Market United States, the world’s biggest oil consumer, is slowing wide rolls remained higher 92% vs 3month avg. of 89%. as the coronavirus outbreak lingers and a resurgence in Hence outlook is turning negative as it seems that traders European cases led to new travel restrictions there. Prices have exited their long position and fresh shorts being turned down after slow down in U.S. business activity, added followed by continuous selling by foreign investors. U.S. Federal Reserve officials also flagged concerns about India VIX is up by 24 per cent on expiry-to-expiry basis. a stalling recovery, and Britain and Germany imposed Higher volatility suggests bear grip with capped upside in restrictions to stem new coronavirus infections all factors the market. On the option front Since it is the beginning affecting the fuel demand outlook of new series, option data is scattered at various strikes. Maximum Put OI is at 10500 followed by 10000 strike, Bulk flows from fund raising by domestic companies over while maximum Call OI is at 11500followed by 12000 $33.3 bn since early January this year which set the stage strike. We have seen marginal Call writing in 11000 and for rupee to rise beyond 74.00. However Federal Reserve 11300 strike while Put writing is seen at10600 then 10500 latest monetary policy guidance which is somehow strike. Option data suggests a wider trading range in positive for dollar in short term as well as sell-off in global between 10300 to 11500 zones equities may cap the rally in rupee.
53 INSIGHT October 2020 Call -Put Options Open Interests Distributions for Oct’20 Contract
3500000 Call Put 3000000
2500000 3036525
2000000 1695600 1643550 1517100 1500000 1424100 1237275 1278075 1066125 986775 907575 836025 1000000 851025 799575 690375 713025 691125 607800 653325 611475 566550 544800 560100 541425 415575 378900 500000 345825 232950 213300 171450 125775 107925 78000 14250 43500 60000 33225 39600 19125 0 19950 22425 9900 10000 10100 10200 10300 10400 10500 10600 10700 10800 10900 11000 11100 11200 11300 11400 11500 11600 11700 11800
Summing it up: To sum up it seems that there is still room for correction in the market as inflows from FIIs who have turned net sellers in the month of September though a broad based recovery was seen but one can expect the selling to re- emerge at higher levels around 11250-11300. According to dow theory ‘Lower Top Lower Bottom formation too can be seen since May lows. Hence, the probability of Nifty sliding below 10820 – 10770 is quite high to test the next cluster of supports around 10600 – 10450. Although l Nifty bounced back sharply after taking support at its 200 days exponential moving average on daily charts which is placed at 10845 levels and as far as Nifty is holding above Nifty IT 10800 levels, the bias is likely to remain in favour of bulls. The Index after a brief consolidation has been making higher high and higher low formation reinstating of the Other indices to watch for: presence of a strong trend. The Index has been presently Nifty Pharma trading above the 150% extension level of the previous Positive Momentum in the Index remains strong with level, now the Index is heading higher towards 161.8% consistent higher high formation in weekly time frame. followed by 178.2% at 20525 and 21490 respectively. The The index did not breach the trend line support and has Index if holds above 19100 level then this move could been moving sharply. Positive momentum is clearly visible continue. Supports are placed at 19100-18400 while on charts and is likely to continue in forthcoming days, resistances are placed at 20525 – 21490. all short term and medium term moving averages are trending upward hence indicating the intermediate trend to remains positive. Supports are placed at 10900- 10700 while resistances are placed at 12550 – 13000.
October 2020 INSIGHT 54 BOOK REVIEW
Mastering the Market Cycle: Howard Marks “We may never know where we are going, but we’d better have a good idea where we are.”
This is another book from the stable of most renowned Being disciplined as to the appropriate price to pay for a investor Howard Marks, who earlier wrote the book participation in those fundamentals, and titled “The most important things illuminated” and won Understanding the investment environment, we’re in millions of hearts. His profound wisdom and experience and deciding how to strategically position our portfolios of the financial market and his deep for it. insight on risk & human psychology is a real treat for the student of finance In light of the above basis premises and investing to only cherish in Midpoint the book, the about calibrating one’s amazement, about the confluence of (secular trend) portfolio position is the most desired event make things work in cycles. way. Also, in context of the above, the around which writer talks about risk as primarily This book is all about understanding the cyclicality the likelihood of permanent capital cycles in the financial world and how loss. Other, is the opportunity risk: one can position himself, aggressive happens is the likelihood of missing out on poten- or otherwise and tilt the odds in his Happy medium. tial gains. As there could be many favor. different outcomes, uncertainty and Instead of predicting macro which Importantly the risk are inescapable and hence one is fraught with lot of risk and is less secular growth needs to understand the element useful in determining success for a of risk and encompass this element vast majority of investors, one can rate may be while positioning his portfolio in dif- gainfully spend time in three general subject to a cycle ferent market cycles. Because of the areas: likelihood of a range of possibilities, as well, but a probability distribution reflects one’s Trying to know more than others view of tendencies appropriately. about what is called “the knowable”: longer term, more the fundamentals of industries, gradual one. The author goes on to explain that companies and securities, the nature of cycle is the oscillation of
55 INSIGHT75 INSIGHT DecemberOctober 2020 2019 things around the midpoint (Happy medium) or secular results presage, higher income, lower taxes, consumer trend. Cycles vary in terms of reasons and details, and credit, asset appreciation, celebration, wealth effect etc. timing and extent, but the ups and downs (and the The author concludes that the economic/macro forecast reasons for them) will occur forever, producing changes may not bring individual prosperity in investing as in the investment environment- and thus in the behavior they are less reliable and average secular trend are well that is called for. The extremes of the oscillation and in known. Major deviation from trend (a) occur infrequently the cycles always revert to its mean. and (b) are hard to correctly predict, most uncon- The midpoint (secular trend) around which the cyclicality ventional, non-extrapolation forecasts turn out to be happens is the Happy medium. Importantly the secular incorrect, and anyone who invests on their basis is usually growth rate may be subject to a cycle as well, but a longer likely to do below average. So, surprise element is very term, more gradual one. Ultimately, the variations in rare and hard to consistently predict any major deviations those deviation timing, speed and extent from the mid- year after year. point- are largely produced by fluctuations in psychology. Here now comes the cycle in profits: Sales are responsive The developments could be both from exogenous factors to economic cycle in some industries, and in some they and endogenous factors. Also, to note that symmetry aren’t. And some respond a lot, while others respond just in cycle only applies to dependably with direction, not a little. Sales of industrial raw materials and components necessarily to the extent, timing or pace of movement. respond to GDP expansion, Everyday necessities like The magnitude of upward or downward movement may food, beverages and medicines are less responsive to or may not match. economic cycle, demand for low cost consumer item isn’t very volatile whereas luxury goods and vacation trips may, purchase of big ticket durable goods like cars and homes for individuals and trucks and factory equipment for businesses are highly responsive economic cycle, demand for everyday services generally isn’t volatile like transportation, haircuts etc. are less sensitive to changes in economy. Because the operating leverage is great for companies when the economy does well and sales rise. Hence economic cycle has profound effect on some companies’ sales of but less on others. Largely because of difference in operating and financial leverage, given percentage Now he goes on to explain the economic cycle: The output change in sales has a much greater impact on profits of of an economy is the product of hours worked and output some companies than for others. And more importantly, per hour; thus, the long-term growth of an economy is idiosyncratic developments have a very significant impact determined primarily by fundamental factors like birth on profits. These can be with regard to inventory man- rate and the rate of gain in productivity. These factors agement, capital investments, production level, techno- relatively change little from YoY and only gradually logical advancements, changes in regulation and taxes etc. form decade to decade. Hence the average rate of growth is rather Now with the backdrop in place with steady over long periods of time. regards to the general definition of And the long-term trend is more to In business, cycles and the economic cycle and do with demographic movements, financial and profit cycle in place, the pendulum of determinants of inputs, aspirations, investor psychology is of paramount education, technology, automation market cycles, importance in judging the true nature and globalization. most excesses on of cycles. Short term variations in GDP can the upside-and the In business, financial and market be because the number of workers cycles, most excesses on the upside- working and the amount, they earn inevitable reactions and the inevitable reactions to the were relatively constant, we might to the downside, downside, which also tend to over- expect the amount they spend on con- shoot- are the result of exaggerated sumption to be similarly constant. But which also tend swings of the pendulum of psychol- it isn’t. Spending fluctuates more than to overshoot- ogy. Thus, understanding and being employment and earnings because of alert to excess swings is an entry-level “marginal propensity to consume”. are the result of requirement for avoiding harm from This propensity is variable in short exaggerated swings cyclical extremes, and hopefully for run, consumption can vary inde- profiting from them. The oscillation pendently of income. These spending of the pendulum of happens pattern fluctuates with favorable psychology. Between greed & fear headlines, strong economy, election Between optimism and pessimism
DecemberOctober 2020 2019 INSIGHTINSIGHT76 56 things around the midpoint (Happy medium) or secular results presage, higher income, lower taxes, consumer Between risk tolerance and risk aversion insistence on incremental potential return if incremental trend. Cycles vary in terms of reasons and details, and credit, asset appreciation, celebration, wealth effect etc. Between credence and skepticism risk is to be borne are the reasons why different invest- timing and extent, but the ups and downs (and the ment avenues have different return profile with risk The author concludes that the economic/macro forecast Between faith in value in the future and insistence of reasons for them) will occur forever, producing changes premium. These are general expectation and promises or may not bring individual prosperity in investing as concrete value in the present in the investment environment- and thus in the behavior “what may happen” or “should happen” rather than “will they are less reliable and average secular trend are well that is called for. The extremes of the oscillation and in Between urgency to buy and panic to sell happen” or “sure to happen”. known. Major deviation from trend (a) occur infrequently the cycles always revert to its mean. The oscillation is one of the most dependable features of and (b) are hard to correctly predict, most uncon- the investment world, and investor psychology seems to The midpoint (secular trend) around which the cyclicality ventional, non-extrapolation forecasts turn out to be spend much more time at the extremes than it does at a happens is the Happy medium. Importantly the secular incorrect, and anyone who invests on their basis is usually “happy medium” growth rate may be subject to a cycle as well, but a longer likely to do below average. So, surprise element is very term, more gradual one. Ultimately, the variations in rare and hard to consistently predict any major deviations The trendline rate of growth in economic output and those deviation timing, speed and extent from the mid- year after year. corporate profits is moderate. With pro-cyclical decisions point- are largely produced by fluctuations in psychology. cause growth to be abnormally rapid and hence the Here now comes the cycle in profits: Sales are responsive The developments could be both from exogenous factors retreat and regression to the mean to economic cycle in some industries, and in some they and endogenous factors. Also, to note that symmetry Likewise, it seems rational that, in the long run, stocks aren’t. And some respond a lot, while others respond just in cycle only applies to dependably with direction, not overall should provide returns in line with the sum of a little. Sales of industrial raw materials and components necessarily to the extent, timing or pace of movement. their dividends plus the trendline growth in corporate respond to GDP expansion, Everyday necessities like The magnitude of upward or downward movement may profits, or something in the mid to high single digits. food, beverages and medicines are less responsive to or may not match. When they return much more than that for a while, the economic cycle, demand for low cost consumer item isn’t return is likely to prove to have been excessive-borrowing very volatile whereas luxury goods and vacation trips from the future and thus rendering stocks risky- meaning The increase in expected return generally will appear to may, purchase of big ticket durable goods like cars and a downward correction is now in order. be consistently proportional to the incremental risk. homes for individuals and trucks and factory equipment for businesses are highly responsive economic cycle, Thus, understanding and being alert to excessive swings The key thing to note is that fluctuations in attitudes demand for everyday services generally isn’t volatile like is an entry-level requirement for avoiding harm from towards risk can cause expectations to the principles transportation, haircuts etc. are less sensitive to changes cyclical extremes, hopefully for profiting from them. described here. Sometimes investors become too risk- in economy. averse, and sometimes they relax their risk aversion and The superior investor is mature, rational, analytical, become too risk-tolerant. Because the operating leverage is great for companies objective and unemotional. And he buys when any dis- when the economy does well and sales rise. Hence count of the price from the current intrinsic value, plus In times of obliviousness towards risk- or high-risk economic cycle has profound effect on some companies’ any potential increases in intrinsic value in the future, tolerance-the reduced demand in terms of risk premiums sales of but less on others. Largely because of difference together suggest that buying at the current price is a good causes the slope of the line to flatten and the amount in operating and financial leverage, given percentage idea. And to be able to do so, the superior investor strikes of risk compensation to shrink, i.e.; there’s less of a Now he goes on to explain the economic cycle: The output change in sales has a much greater impact on profits of an appropriate balance between fear and greed. The return increment per unit increase in risk. The payoff for of an economy is the product of hours worked and output some companies than for others. And more importantly, conflicting elements is kept in balance and take a even- risk-bearing is sub-par per hour; thus, the long-term growth of an economy is idiosyncratic developments have a very significant impact keeled behavior. The superior investor takes opportuni- determined primarily by fundamental factors like birth on profits. These can be with regard to inventory man- ties from both the virtuous circle and the vicious circle rate and the rate of gain in productivity. These factors agement, capital investments, production level, techno- where exaggeration is clearly visible. The exaggeration relatively change little from YoY and only gradually logical advancements, changes in regulation and taxes etc. is not the data or events; but the interpretation. And that form decade to decade. Hence the fluctuates with swings in psychology. Accurate decision average rate of growth is rather Now with the backdrop in place with and appropriate conclusion happen objectively rather steady over long periods of time. regards to the general definition of than emotionally and to shun the selective perception and And the long-term trend is more to In business, cycles and the economic cycle and skewed interpretation. And this requires great amount of do with demographic movements, profit cycle in place, the pendulum of financial and self- awareness and self-restraint. determinants of inputs, aspirations, investor psychology is of paramount education, technology, automation market cycles, importance in judging the true nature and globalization. most excesses on of cycles. Short term variations in GDP can the upside-and the In business, financial and market be because the number of workers cycles, most excesses on the upside- working and the amount, they earn inevitable reactions and the inevitable reactions to the The sequence of the event for risk is that positive event were relatively constant, we might downside, which also tend to over- to the downside, lead to optimism and it leads to make people more risk expect the amount they spend on con- shoot- are the result of exaggerated tolerant. Increase in risk tolerance causes lower risk sumption to be similarly constant. But which also tend swings of the pendulum of psychol- premiums to be demanded. A reduction in demanded risk it isn’t. Spending fluctuates more than ogy. Thus, understanding and being to overshoot- premiums equates to lower demanded returns on risky employment and earnings because of alert to excess swings is an entry-level Now the most important element to handle and the assets. A reduction of demanded returns on risky assets “marginal propensity to consume”. are the result of requirement for avoiding harm from author reflects the importance of the topic is the cycle causes their prices to rise. Eventually higher prices make This propensity is variable in short cyclical extremes, and hopefully for exaggerated swings in attitudes toward risk. Since (a) investing comes from assets even riskier and attracts momentum investors. run, consumption can vary inde- profiting from them. The oscillation dealing with the future but (b) the future isn’t knowable, pendently of income. These spending happens It follows from the above that risk is high when of the pendulum of that’s where the risk in investing comes from. pattern fluctuates with favorable psychology. Between greed & fear investors feel risk is low. And risk compensation is headlines, strong economy, election The widespread dislike for risk and the resultant at a minimum just when risk is at maximum. Between optimism and pessimism
December 2019 INSIGHT 76 57 INSIGHT77 INSIGHT DecemberOctober 2020 2019 Widespread risk tolerance- or a higher degree of investor The rational investor is diligent, skeptical and appropri- comfort with risk- is the greatest harbinger of subsequent ately risk-averse at all times, but also on the lookout for market declines. opportunities for potential return that more than com- The opposite happens with risk aversion and there is pensate for risk and behave as contrarian. swollen risk premium. Screaming risk aversion makes Now comes the credit cycle: It takes only a small fluctua- them sellers- certainly not buyers at the bottom. It fol- tion in the economy to produce a large fluctuation in the lows that the risk is at its lowest when investors feel risk availability of credit, with great impact on asset prices is high. Risk compensation is at its highest just when risk and back on the economy itself. is at its minimum. Exaggerated payoff for risk-bearing. Profit fluctuates more than GDP, but still relatively moderately- but securities markets soar, and collapse do dramatically? I attribute this to fluctuations in psychology and, in particular, to the profound influence of psychol- ogy on the availability of capital. Credit market is most volatile of the cycles and has the greatest impact. Where we stand in the credit cycle-whether credit is readily available or difficult to obtain- is the greatest determinant of whether debt can be refinanced at a given time. Point to note that the worst loans are made at the best of times. It leads to capital destruction- that ism to the investment of capital in projects where the cost of capital exceeds the Just as risk tolerance is unlimited at the top, it is non-ex- istent at the bottom. Avoid extremes in behavior. Rather return on capital, and eventually to cases where there is tend towards the middle in most of the things- reasonable no return of capital. balance between too much and too little. The degree of openness of the credit window depends almost entirely on whether providers of capital are eager or reticent, and it has a profound impact on economies, companies, investors and the prospective return and riskiness of the investment opportunities that result.
An uptight, cautious credit market usually stems from, leads to or connotes things like these: Fear of losing money Heightened risk aversion and skepticism Unwillingness to lend and invest regardless of merit Shortages of capital everywhere Economic contraction and difficulty When total fear replaces a high degree refinancing debt of confidence, excessive risk aversion Generous credit Defaults, bankruptcies and takes the place of unrealistic risk restructurings tolerance. Also, during negative envi- markets usually ronment, excessive risk aversion can are associated Low asset prices, high potential cause people to subject investments to with elevated returns, low risk and excessive risk unreasonable scrutiny and endlessly premiums negative assumptions. If optimism asset prices Quite reverse is the case of a generous is low; expectations are modest; and subsequent capital market negative surprises are unlikely; and slightest turn for the better would losses, while The bottomline is that generous credit result in appreciation. credit crunches markets usually are associated with elevated asset prices and subsequent So, for risk; skepticism calls for pes- produce bargain- losses, while credit crunches produce simism when optimism is excessive. basement prices bargain-basement prices and great But it also calls for optimism when profit opportunities. pessimism is excessive. Understand- and great profit ing how investors are thinking about opportunities. Superior investing doesn’t come and dealing with risk is perhaps the from buying high-quality assets, but most important thing to strive for. from buying when the deal is good,
DecemberOctober 2020 2019 INSIGHTINSIGHT78 58 Widespread risk tolerance- or a higher degree of investor The rational investor is diligent, skeptical and appropri- the price is low, the potential return is substantial, and The third stage, when everyone concludes things will comfort with risk- is the greatest harbinger of subsequent ately risk-averse at all times, but also on the lookout for the risk is limited. These conditions are much more the get better forever market declines. opportunities for potential return that more than com- case when credit markets are in the less-euphoric, more “What the wise man does in the beginning, the fool does pensate for risk and behave as contrarian. stringent part of their cycle. The slammed-shut phase The opposite happens with risk aversion and there is in the end.” of the credit cycle probably does more to make bargains swollen risk premium. Screaming risk aversion makes Now comes the credit cycle: It takes only a small fluctua- them sellers- certainly not buyers at the bottom. It fol- available than any other single factor. The most important thing to note is that the maximum tion in the economy to produce a large fluctuation in the lows that the risk is at its lowest when investors feel risk psychology, maximum availability or credit, maximum availability of credit, with great impact on asset prices The rise and fall of opportunities in the market for dis- is high. Risk compensation is at its highest just when risk price, minimum potential return and maximum risk all and back on the economy itself. tressed debt stems from the interaction of other cycles: in is at its minimum. Exaggerated payoff for risk-bearing. are reached at the same time, and usually these extremes the economy, investor psychology, risk attitudes and the Profit fluctuates more than GDP, but still relatively coincide with the last paroxysm of buying. credit market. moderately- but securities markets soar, and collapse do This conceptual depiction indicates the relationship dramatically? I attribute this to fluctuations in psychology Point to note is that a distressed debt investor tries to between cycle level and potential for return. and, in particular, to the profound influence of psychol- figure out (a)what bankrupt company is worth (b) how ogy on the availability of capital. Credit market is most the value will be divided among the company’s creditors volatile of the cycles and has the greatest impact. Where and other claimants, and (c)how long this process will we stand in the credit cycle-whether credit is readily take. With correct answers to these questions, he can available or difficult to obtain- is the greatest determinant determine what the annual return will be on a piece of the of whether debt can be refinanced at a given time. Point company’s debt if purchased at a given price. to note that the worst loans are made at the best of times. Putting it all together- the market cycle: It leads to capital destruction- that ism to the investment of capital in projects where the cost of capital exceeds the Prices are affected primarily by developments in two Just as risk tolerance is unlimited at the top, it is non-ex- areas: fundamentals and psychology istent at the bottom. Avoid extremes in behavior. Rather return on capital, and eventually to cases where there is tend towards the middle in most of the things- reasonable no return of capital. Fundamentals, which is “events” can largely be reduced balance between too much and too little. The degree of openness of the credit window depends to earnings, cashflow, and the outlook for the two. They almost entirely on whether providers of capital are eager are affected by many things, including trends in the Now to the moot question of how to identify where the or reticent, and it has a profound impact on economies, economy, profitability and the availability of capital. market stands in its cycle. Importantly, the elements companies, investors and the prospective return and And Psychology- how investors feel about fundamen- that contribute to the market’s rise manifest themselves riskiness of the investment opportunities that result. tals and value them-likewise affected by many things, via valuation metrics-p/e ratios on stocks, yields on particularly investors’ level of optimism and attitude An uptight, cautious credit market usually stems from, bonds, capitalization ratios on real estate, and cash flow toward risk. leads to or connotes things like these: multiples on buyouts-that are elevated relative to historic The truth is that financial facts and figures are only a Fear of losing money norms. All these are precursors of low prospective starting point for market behavior; investor rationality returns. The reverse is true when a market collapse takes Heightened risk aversion and skepticism is the exception, not the rule; and asset prices to bargain valuations. Unwillingness to lend and invest regardless of merit market spends little of its time calmly These things can be observed and Shortages of capital everywhere weighing financial data and setting Fundamentals, quantified. Second, understanding of Economic contraction and difficulty prices free of emotionality. Profit fluc- cycle positioning can be greatly aided When total fear replaces a high degree which is “events” refinancing debt tuates moderately to long term GDP by an understanding of how investors of confidence, excessive risk aversion growth, because of the operational Generous credit Defaults, bankruptcies and can largely are behaving because it majorly bears takes the place of unrealistic risk and financial leverage. Psychology markets usually restructurings be reduced the root cause of disproportionate tolerance. Also, during negative envi- fluctuates more than the profit risk in an asset. It is not you buy that Low asset prices, high potential to earnings, ronment, excessive risk aversion can are associated growth and hence a highly volatile determines your results, it’s what returns, low risk and excessive risk cause people to subject investments to capital markets despite of meaningful cashflow, and you pay for it. And what you pay -the with elevated premiums unreasonable scrutiny and endlessly changes in fundamentals from day the outlook for security’s price and its relationship negative assumptions. If optimism asset prices Quite reverse is the case of a generous to day or month on month. Add to it the two. They to intrinsic value- is determined by is low; expectations are modest; and subsequent capital market the liberal credit market which leads investor psychology and the result- negative surprises are unlikely; and to explosion in risk perception and are affected by ing behavior. Excellent investment losses, while The bottomline is that generous credit slightest turn for the better would hence higher asset prices and then decision can be made on the basis of markets usually are associated with many things, result in appreciation. credit crunches finally greed leading to a collapse in present observations, with no need to elevated asset prices and subsequent including trends price of assets. make guesses about the future. So, for risk; skepticism calls for pes- produce bargain- losses, while credit crunches produce in the economy, simism when optimism is excessive. The first stage, when only a few basement prices bargain-basement prices and great profitability and Now to cope with market cycles, But it also calls for optimism when profit opportunities. unusually perceptive people believe authors remarks as mentioned below: pessimism is excessive. Understand- and great profit things will get better the availability of Superior investing doesn’t come a>quantitative analysis of investment ing how investors are thinking about opportunities. The second stage, when most from buying high-quality assets, but capital. class and dealing with risk is perhaps the investors realize that improvement is from buying when the deal is good, most important thing to strive for. actually taking place, and b>qualitative assessment of investors
December 2019 INSIGHT 78 59 INSIGHT79 INSIGHT DecemberOctober 2020 2019 behavior, risk, long-term growth, balance the two: When market is high in greed & fear etc. The market’s its cycle, they should emphasize limiting the potential for losing money, and when The key question can be boiled rise manifest the market is low in its cycle, they should down to two: how are things emphasize reducing the risk of missing priced, and how are investors themselves opportunity. For this try to travel into around us behaving? Assessing via valuation the future and look back. What you think these two elements – consistently you might say a few years down the road and in disciplined manner- can metrics-p/e can help you figure out what you should be very helpful. The answer ratios on stocks, do today. These decisions relate directly to these to these will give us a yields on bonds, to the choice between aggressiveness sense fir where we stand in the and defensiveness. Varying one’s stance economic cycle. Where we stand capitalization between defensiveness (not losing money) influences the tendencies and ratios on real and aggressiveness (not missing oppor- probabilities. estate, and cash tunity) should be done in response to Also, as interesting view shared flow multiples on where the market stands in its cycle and, by the author is the fact that why again this can be approached in terms of targeting a bottom is wrong, and buyouts-that are how the market is valued and how other when should you then buy? The elevated relative to investors are behaving. answer is simple: when price is For example, in late 2008/early 2009, an below intrinsic value. What if historic norms. investor needed only two things to make prices continue downward> Buy a lot of money: money to invest and the more, as now it’s probably an nerve to invest it. It he had those two things; he made even greater bargain. All you need for ultimate success a lot of money in the years that followed. In retrospect, in this regard is (a) an estimate of intrinsic value, (b) the what he didn’t need was caution, conservatism, risk emotional fortitude to persevere, and (c) eventually to control, discipline, selectivity and patience; the more of have your estimate of value proved correct. those things he had, the less money he made. Understanding what things really mean- rather than how To my mind, this potentially reflects upon the hallmark they make investors feel- is the first step toward doing of investing after understanding the valuation and the the things that are right for the times. psychology of human behavior. Finally, on positioning a portfolio as market moves through its cycles is the essence, which the author simply puts it this way: Finally, the three ingredients for success- aggres- It is helpful to take an organized approach to what he calls siveness, timing and skill- and if you have enough the “twin risks.” The investors have to deal daily with two aggressiveness at the right time, you don’t need possible sources of error. that much skill. The first is obvious: The risk of losing money The second is bit more subtle: the risk of missing Sir Isaac Newton: opportunity I can calculate the motions of heavenly bodies, but not the Investors can eliminate either one but doing so will madness of the people.” expose them entirely to the other. So, most people
DecemberOctober 2020 2019 INSIGHTINSIGHT80 60 behavior, risk, long-term growth, balance the two: When market is high in greed & fear etc. The market’s its cycle, they should emphasize limiting the potential for losing money, and when The key question can be boiled rise manifest the market is low in its cycle, they should down to two: how are things emphasize reducing the risk of missing priced, and how are investors themselves 2 opportunity. For this try to travel into 9 16 23 around us behaving? Assessing 30 via valuation the future and look back. What you think Friday these two elements – consistently you might say a few years down the road and in disciplined manner- can metrics-p/e can help you figure out what you should be very helpful. The answer ratios on stocks, do today. These decisions relate directly to these to these will give us a yields on bonds, US: Change in Nonfarm Payrolls in Nonfarm US: Change Rate JN: Jobless of Mich. Sentiment US: U. Goods Orders US: Durable Rate US: Unemployment to the choice between aggressiveness MoM UK: Industrial Production MoM Inventories Wholesale US: Trade Balance GBP/Mn UK: YoY Orders Tool JN: Machine YoY Spending JN: Household EC: CPI YoY of Mich. Sentiment US: U. MoM Advance US: Retail Sales MoM US: Industrial Production US: Business Inventories PMI Mfg Japan Bank JN: Jibun PMI Manufacturing Eurozone EC: Markit PMI US Manufacturing US: Markit YoY CPI JN: Natl Fuel MoM Auto Inc UK: Retail Sales Industries Infrastructure IN: Eight MoM JN: Industrial Production Rate JN: Jobless of Mich. Sentiment US: U. QoQ SA EC: GDP sense fir where we stand in the and defensiveness. Varying one’s stance economic cycle. Where we stand capitalization between defensiveness (not losing money) influences the tendencies and ratios on real and aggressiveness (not missing oppor- probabilities. estate, and cash tunity) should be done in response to Also, as interesting view shared flow multiples on where the market stands in its cycle and, by the author is the fact that why again this can be approached in terms of 1 8 15 22 29 targeting a bottom is wrong, and buyouts-that are how the market is valued and how other when should you then buy? The elevated relative to investors are behaving. Thursday answer is simple: when price is For example, in late 2008/early 2009, an below intrinsic value. What if historic norms. investor needed only two things to make prices continue downward> Buy IN: RBI Repurchase Rate Repurchase IN: RBI PMI Mfg India IN: Markit Claims US: Initial Jobless US: ISM Manufacturing PMI US Manufacturing US: Markit a lot of money: money to invest and the Claims US: Initial Jobless Balance Account Current JN: BoP PMI Services CH: Caixin China Comfort Consumer US: Bloomberg Basis Trade Balance BoP JN: IN: Exports YoY Claims US: Initial Jobless CH: CPI YoY MoM Index Industry Tertiary JN: Manufacturing US: Empire Claims US: Initial Jobless Sales Home US: Existing Index US: Leading Confidence EC: Consumer Comfort Consumer US: Bloomberg Claims US: Initial Jobless Rate Refinancing EC: ECB Main Annualized QoQ US: GDP Approvals UK: Mortgage MoM Sales Home US: Pending more, as now it’s probably an nerve to invest it. It he had those two things; he made even greater bargain. All you need for ultimate success a lot of money in the years that followed. In retrospect, in this regard is (a) an estimate of intrinsic value, (b) the what he didn’t need was caution, conservatism, risk emotional fortitude to persevere, and (c) eventually to control, discipline, selectivity and patience; the more of have your estimate of value proved correct. those things he had, the less money he made.
Understanding what things really mean- rather than how 7 21 14 To my mind, this potentially reflects upon the hallmark 28 they make investors feel- is the first step toward doing of investing after understanding the valuation and the the things that are right for the times. Wednesday psychology of human behavior. Finally, on positioning a portfolio as market moves through its cycles is the essence, which the author simply puts it this way: Applications Mortgage US: MBA CI Index JN: Leading Index JN: Coincident YoY Price Index UK: House Prices YoY IN: Wholesale MoM JN: Industrial Production Applications Mortgage US: MBA US: PPI Final Demand MoM MoM SA EC: Industrial Production YoY UK: CPI Applications Mortgage US: MBA MoM NSA UK: PPI Output UK: RPI MoM Finances (PSNCR)UK: Public Applications Mortgage US: MBA MoM PX House UK: Nationwide MoM Inventories Wholesale US: MoM US: Retail Inventories Finally, the three ingredients for success- aggres- It is helpful to take an organized approach to what he calls siveness, timing and skill- and if you have enough the “twin risks.” The investors have to deal daily with two aggressiveness at the right time, you don’t need possible sources of error. that much skill. The first is obvious: The risk of losing money
The second is bit more subtle: the risk of missing Sir Isaac Newton: 6 13 27 20 opportunity I can calculate the motions of heavenly bodies, but not the Tuesday Investors can eliminate either one but doing so will madness of the people.” expose them entirely to the other. So, most people conomic Calendar IN: Markit India PMI Services India IN: Markit PMI Composite India IN: Markit Trade Balance US: UK Construction PMI UK: Markit/CIPS US: CPI MoM Claims Change UK: Jobless CH: Trade Balance Rate Count UK: Claimant Statement Budget US: Monthly Starts US: Housing Permits US: Building YoY Sale Condominiums for Tokyo JN: SA Account EC: ECB Current Confidence Consumer US: Conf. Board Goods Orders US: Durable Index Manufact. US: Richmond Fed MoM Price Index House US: FHFA Air Ex Nondef US: Cap Goods Orders 5 12 19 26 Monday orld E orld US: ISM Services Index UK Services PMI UK: Markit/CIPS PMI Services Japan Bank JN: Jibun Services PMI Eurozone EC: Markit MoM EC: Retail Sales YoY IN: Industrial Production IN: CPI YoY JN: PPI YoY Flows TIC Long-term US: Net YoY CH: GDP YoY CH: Industrial Production YoY CH: Retail Sales JN: Trade Balance Sales Home US: New Activity Manf. Fed US: Dallas Index Activity Nat Fed US: Chicago CI Index JN: Leading YoY JN: PPI Services W 2020 October CH: China, JN: Japan Kingdom, UK: United Union, States, EC: European IN: India, US: United
December 2019 INSIGHT 80 61 INSIGHT October 2020 Services at Ashika Stock Broking Limited Services at Ashika Wealth Advisory Private Limited
Products Products Contact Contact • TradeX (Mobile App & Web • EKYC For Business Opportunity please Ashika Wealth Advisors is a boutique Wealth management firm offering For Wealth Advisory please contact base) • it now takes just 30 mins to open an contact personalized investment management solutions to high net-worth indi- • Online Equity, Derivative, Account. viduals, families, businesses, trusts, private foundations, and non-profit Mr. Amit Jain (Co-Founder & CEO) Currency and Commodity • ReKYC Mr. Amit Jain (CEO – Retail) organizations. Our aim is to grow Wealth by selecting the right balance of Mobile: +91 93134 89991 Trading Facility • hassle-free & paperless modification Mobile: +91 90070 66000 E-mail: amitjain@ashikagroup. asset classes and product categories with timely switches and periodical Email: [email protected] • InvestX (Mobile App & without stepping out. com rebalancing. Web base) • Research Services • A One Stop Solution to all • A galaxy of potential research team Mr. Niraj Sarawgi (CEO - PCG) your Mutual Funds needs to provide the best equity research Mobile: +91 91676 16989 online. reports, ideas, solving queries and Email: [email protected] • Back Office Reports on many more. Ashika Global Securities Pvt. Ltd. WhatsApp. Ashika BOT on • Online Fund Transfer Facility For Services please contact Whatsapp / Telegram. • Securities Lending and Borrowing (SLB) Ashika Global Securities Pvt. Ltd is the holding company of Ashika Group, an RbI-registered non-deposit taking • Ask ACIRA - • Provide securities lending and Mr. Ashwini Kumar Gautam (COO) NbFC engaged in providing long term and short term loans & advances to individual & body corporate and Invest- • Online Customer service borrowing at a market competitive Mobile: +91 90070 66097 ment in shares and securities. It has 6 wholly owned subsidiaries including Ashika Stock broking Ltd. for clients on our website. rates Email: ashwinikumar@ashika- group.com • Margin Trading Facility • Depository Services (CDSL/NSDL) (MTF) • Provide one roof solution wherein • With this MTF facility seamless trading could be ensured client can trade inspite of through DP maintained with Ashika Ashika Credit Capital Ltd. debits beyond T+7. For institution business please contact Mr. Dilip Minny (Co-founder- Institution); Mobile: +91 90070 66096; Email: [email protected] It is the Flagship company of the group and incorporated in the year 1994. A RbI registered Non-banking Financial Company carrying on NbFI Activities i.e. investment in shares an securities and providing Loan to Individuals, corporates HNI etc. The company floated its shares to public in 2000 and got listed with CSE. Thereafter, in 2011 , the shares were traded on bSE under permitted category and in 2014 got listed with MSEI. It has a registered FII as Services at Ashika Capital Limited one of its investor. Capital Markets Fund Raising Advisory Contact
• Issue Management • Private Equity • M &A For Debt Fund Raising / • IPO / FPO • Venture / • Merger / Acquisition / Mergers & Acquisition / Ashika Investment Managers Pvt. Ltd. • Right Issue Growth Capital Disposal Business Opportunity please • Qualified • Pipe • Management buy-outs / contact Institutional buy-ins Registered under ROC, Mumbai on 13 WJuly 2017. It is a wholly owned subsidiary of Ashika Global Securities Pvt Placement • Leveraged buy-outs Mr. Mihir Mehta Ltd. The company has created a trust named Ashika Alternative Investment and has applied to SEbI for registration • Debt Syndication • Joint Ventures Contact: +91 22 6611 1770 under Category 3, AIF. • Project Finance • Strategic Partnership Email: [email protected] • Open Offer • Team Loan • Spin-Offs • Takeover • Working Capital • Divestment Mr. Yogesh Shetye • buyback Loan Contact: + 91 22 6611 1770 • Delisting • Corporate restructuring • Acquisition E-mail: yogeshs@ashika- • Capital Restructuring Funding group.com • Overseaslisting • Finance Restructuring • Construction Finance • Business Valuation • Underwriting • ESOP Valuation • Fairness Opinion
For start-up investing please contact Mr. Chirag Jain (CEO); Contact: +91 22 66111700; E-mail: [email protected]
SeptemberOctober 2020 2020 INSIGHTINSIGHT 6262 63 INSIGHT September 2020 Services at Ashika Stock Broking Limited Services at Ashika Wealth Advisory Private Limited
Products Products Contact Contact • TradeX (Mobile App & Web • EKYC For Business Opportunity please Ashika Wealth Advisors is a boutique Wealth management firm offering For Wealth Advisory please contact base) • it now takes just 30 mins to open an contact personalized investment management solutions to high net-worth indi- • Online Equity, Derivative, Account. viduals, families, businesses, trusts, private foundations, and non-profit Mr. Amit Jain (Co-Founder & CEO) Currency and Commodity • ReKYC Mr. Amit Jain (CEO – Retail) organizations. Our aim is to grow Wealth by selecting the right balance of Mobile: +91 93134 89991 Trading Facility • hassle-free & paperless modification Mobile: +91 90070 66000 E-mail: amitjain@ashikagroup. asset classes and product categories with timely switches and periodical Email: [email protected] • InvestX (Mobile App & without stepping out. com rebalancing. Web base) • Research Services • A One Stop Solution to all • A galaxy of potential research team Mr. Niraj Sarawgi (CEO - PCG) your Mutual Funds needs to provide the best equity research Mobile: +91 91676 16989 online. reports, ideas, solving queries and Email: [email protected] • Back Office Reports on many more. Ashika Global Securities Pvt. Ltd. WhatsApp. Ashika BOT on • Online Fund Transfer Facility For Services please contact Whatsapp / Telegram. • Securities Lending and Borrowing (SLB) Ashika Global Securities Pvt. Ltd is the holding company of Ashika Group, an RbI-registered non-deposit taking • Ask ACIRA - • Provide securities lending and Mr. Ashwini Kumar Gautam (COO) NbFC engaged in providing long term and short term loans & advances to individual & body corporate and Invest- • Online Customer service borrowing at a market competitive Mobile: +91 90070 66097 ment in shares and securities. It has 6 wholly owned subsidiaries including Ashika Stock broking Ltd. for clients on our website. rates Email: ashwinikumar@ashika- group.com • Margin Trading Facility • Depository Services (CDSL/NSDL) (MTF) • Provide one roof solution wherein • With this MTF facility seamless trading could be ensured client can trade inspite of through DP maintained with Ashika Ashika Credit Capital Ltd. debits beyond T+7. For institution business please contact Mr. Dilip Minny (Co-founder- Institution); Mobile: +91 90070 66096; Email: [email protected] It is the Flagship company of the group and incorporated in the year 1994. A RbI registered Non-banking Financial Company carrying on NbFI Activities i.e. investment in shares an securities and providing Loan to Individuals, corporates HNI etc. The company floated its shares to public in 2000 and got listed with CSE. Thereafter, in 2011 , the shares were traded on bSE under permitted category and in 2014 got listed with MSEI. It has a registered FII as Services at Ashika Capital Limited one of its investor. Capital Markets Fund Raising Advisory Contact
• Issue Management • Private Equity • M &A For Debt Fund Raising / • IPO / FPO • Venture / • Merger / Acquisition / Mergers & Acquisition / Ashika Investment Managers Pvt. Ltd. • Right Issue Growth Capital Disposal Business Opportunity please • Qualified • Pipe • Management buy-outs / contact Institutional buy-ins Registered under ROC, Mumbai on 13 WJuly 2017. It is a wholly owned subsidiary of Ashika Global Securities Pvt Placement • Leveraged buy-outs Mr. Mihir Mehta Ltd. The company has created a trust named Ashika Alternative Investment and has applied to SEbI for registration • Debt Syndication • Joint Ventures Contact: +91 22 6611 1770 under Category 3, AIF. • Project Finance • Strategic Partnership Email: [email protected] • Open Offer • Team Loan • Spin-Offs • Takeover • Working Capital • Divestment Mr. Yogesh Shetye • buyback Loan Contact: + 91 22 6611 1770 • Delisting • Corporate restructuring • Acquisition E-mail: yogeshs@ashika- • Capital Restructuring Funding group.com • Overseaslisting • Finance Restructuring • Construction Finance • Business Valuation • Underwriting • ESOP Valuation • Fairness Opinion
For start-up investing please contact Mr. Chirag Jain (CEO); Contact: +91 22 66111700; E-mail: [email protected]
September 2020 INSIGHT 62 63 INSIGHTINSIGHT SeptemberOctober 2020 AWARDS Ashika Stock Broking Ltd.
Ashika Stock broking Limited (“ASbL”) Analysts (including their relatives) Research analysts (forming part of started its journey in the year 1994 and may have financial interest in the Research Desk) have not received any is presently offering a wide bouquet of subject company(ies). And, the said compensation or other benefits from services to its valued clients including financial interest is not limited to the subject companies or third parties broking services, depository services having an open stock market position in connection with the research and distributorship of financial prod- in /acting as advisor to /having a loan report/ research recommendation. ucts (Mutual funds, IPO & bonds). It transaction with the subject com- Moreover, Research Analysts have not became a “Research Entity” under pany(ies) apart from registration as received any compensation from the SEbI (Research Analyst) Regulations clients. companies mentioned in the research 2014 in the year of 2015 (Reg No. report/ recommendation in the past 2) ASbL or its Research Analysts INH000000206). twelve months. NSDL Stock Performer Awards CDSL Excellent Performer in BTVI Emerging Company BTVI Young Business Leader (including their relatives) do not have of the Year 2019 Depository Services of the Year 2019 of the Year 2019 ASbL is a wholly owned subsidiary of any actual / beneficial ownership of 5) The subject companies in the Ashika Global Securities (P) Ltd., a RbI 1% or more of securities of the subject research report/ recommendation registered non-deposit taking NbFC company(ies) at the end of the month may be a client of or may have been Company. ASHIKA GROUP (details immediately preceding the date of a client of ASbL during the twelve enumerated on our website www. publication of the source research months preceding the date of con- ashikagroup.com) is an integrated report or date of the concerned cerned public appearance for invest- financial service provider inter alia public appearance. However, ASbL’s ment banking/ merchant banking / engaged in the business of Investment associates may have actual / beneficial brokerage services. banking, Corporate Lending, Com- ownership of 1% or more of securities 6) ASbL or their Research Analysts modity broking, Debt Syndication & of the subject company(ies). have not managed or co–managed Other Advisory Services. 3) ASbL or its Research Analysts public offering of securities for the There were no significant and mate- (including their relatives) do not subject company(ies) in the past rial disciplinary actions against ASbL have any other material conflict of twelve months. However, ASbL’s taken by any regulatory authority interest at the time of publication of associates may have managed or co– during last three years except routine the source research report or date managed public offering of securities matters. of the concerned public appearance. for the subject company(ies) in the However, ASbL’s associates might past twelve months. DISCLOSURE have an actual / potential conflict of Research reports are being prepared 7) Research Analysts have not served interest (other than ownership). and distributed by ASbL in the sole as an officer, director or employee capacity of being a Research Analyst 4) ASbL or its associates may have of the companies mentioned in the under SEbI (Research Analyst) Regu- received compensation for investment report/ recommendation. lations 2014. The following disclosures banking, merchant banking, broker- 8) Neither ASbL nor its Research and disclaimer are an essential part age services and for other products Analysts have been engaged in of any Research Report so being and services from the subject compa- market making activity for the distributed. nies during the preceding 12 months. Helping Clients Reach for Better Via SIP – National companies mentioned in the report / NSDL STAR PERFORMANCE AWARD 2018 However, ASbL or its associates or its from Franklin Templeton Investments, 2018 1) ASbL or its associates, its Research recommendation.
DISCLAIMER The research recommendations and information are solely for the personal information of the authorized recipient and does not con- strue to be an offer document or any investment, legal or taxation advice or solicitation of any action based upon it. This report is not for public distribution or use by any person or entity, where such distribution, publication, availability or use would be contrary to law, regulation or subject to any registration or licensing requirement. We will not treat recipients as customer by virtue of their receiving this report. The report is based upon the information obtained from public sources that we consider reliable, but we do not guarantee its accuracy or completeness. ASbL shall not be in anyways responsible for any loss or damage that may arise to any such person from any inadvertent error in the information contained in this report. The recipients of this report should rely on their own investigations.
NSE Market Achievers Award 2018 NSE Market Achievers Award 2017 REGEIONAL RETAIL MEMBER OF THE YEAR 2018 - REGEIONAL RETAIL MEMBER OF THE YEAR 2017 - EASTERN INDIA EASTERN INDIA
SeptemberOctober 2020 2020 INSIGHTINSIGHT 6464 65 INSIGHT September 2020 AWARDS Ashika Stock Broking Ltd.
Ashika Stock broking Limited (“ASbL”) Analysts (including their relatives) Research analysts (forming part of started its journey in the year 1994 and may have financial interest in the Research Desk) have not received any is presently offering a wide bouquet of subject company(ies). And, the said compensation or other benefits from services to its valued clients including financial interest is not limited to the subject companies or third parties broking services, depository services having an open stock market position in connection with the research and distributorship of financial prod- in /acting as advisor to /having a loan report/ research recommendation. ucts (Mutual funds, IPO & bonds). It transaction with the subject com- Moreover, Research Analysts have not became a “Research Entity” under pany(ies) apart from registration as received any compensation from the SEbI (Research Analyst) Regulations clients. companies mentioned in the research 2014 in the year of 2015 (Reg No. report/ recommendation in the past 2) ASbL or its Research Analysts INH000000206). twelve months. NSDL Stock Performer Awards CDSL Excellent Performer in BTVI Emerging Company BTVI Young Business Leader (including their relatives) do not have of the Year 2019 Depository Services of the Year 2019 of the Year 2019 ASbL is a wholly owned subsidiary of any actual / beneficial ownership of 5) The subject companies in the Ashika Global Securities (P) Ltd., a RbI 1% or more of securities of the subject research report/ recommendation registered non-deposit taking NbFC company(ies) at the end of the month may be a client of or may have been Company. ASHIKA GROUP (details immediately preceding the date of a client of ASbL during the twelve enumerated on our website www. publication of the source research months preceding the date of con- ashikagroup.com) is an integrated report or date of the concerned cerned public appearance for invest- financial service provider inter alia public appearance. However, ASbL’s ment banking/ merchant banking / engaged in the business of Investment associates may have actual / beneficial brokerage services. banking, Corporate Lending, Com- ownership of 1% or more of securities 6) ASbL or their Research Analysts modity broking, Debt Syndication & of the subject company(ies). have not managed or co–managed Other Advisory Services. 3) ASbL or its Research Analysts public offering of securities for the There were no significant and mate- (including their relatives) do not subject company(ies) in the past rial disciplinary actions against ASbL have any other material conflict of twelve months. However, ASbL’s taken by any regulatory authority interest at the time of publication of associates may have managed or co– during last three years except routine the source research report or date managed public offering of securities matters. of the concerned public appearance. for the subject company(ies) in the However, ASbL’s associates might past twelve months. DISCLOSURE have an actual / potential conflict of Research reports are being prepared 7) Research Analysts have not served interest (other than ownership). and distributed by ASbL in the sole as an officer, director or employee capacity of being a Research Analyst 4) ASbL or its associates may have of the companies mentioned in the under SEbI (Research Analyst) Regu- received compensation for investment report/ recommendation. lations 2014. The following disclosures banking, merchant banking, broker- 8) Neither ASbL nor its Research and disclaimer are an essential part age services and for other products Analysts have been engaged in of any Research Report so being and services from the subject compa- market making activity for the distributed. nies during the preceding 12 months. Helping Clients Reach for Better Via SIP – National companies mentioned in the report / NSDL STAR PERFORMANCE AWARD 2018 However, ASbL or its associates or its from Franklin Templeton Investments, 2018 1) ASbL or its associates, its Research recommendation.
DISCLAIMER The research recommendations and information are solely for the personal information of the authorized recipient and does not con- strue to be an offer document or any investment, legal or taxation advice or solicitation of any action based upon it. This report is not for public distribution or use by any person or entity, where such distribution, publication, availability or use would be contrary to law, regulation or subject to any registration or licensing requirement. We will not treat recipients as customer by virtue of their receiving this report. The report is based upon the information obtained from public sources that we consider reliable, but we do not guarantee its accuracy or completeness. ASbL shall not be in anyways responsible for any loss or damage that may arise to any such person from any inadvertent error in the information contained in this report. The recipients of this report should rely on their own investigations.
NSE Market Achievers Award 2018 NSE Market Achievers Award 2017 REGEIONAL RETAIL MEMBER OF THE YEAR 2018 - REGEIONAL RETAIL MEMBER OF THE YEAR 2017 - EASTERN INDIA EASTERN INDIA
September 2020 INSIGHT 64 65 INSIGHTINSIGHT SeptemberOctober 2020 Gyanada e-learning initiative launching soon! Ashika Group supports charitable foundation to fuel the aspirations of young girls in India. With our vision to develop essential 21st century capacities, computational thinking and working with computer-based systems, we will be launching our e-learning module by September,2020. It has been designed as two sub-initiatives: Every Child Can Code (ECCC) and Makers in the making (MIM).
Our initiatives at Gyanada Group Companies The program focuses on the “How of thinking and not what of thinking “and aims to bring access and opportunity for children between Ashika Stock Broking Ltd. Ashika Capital Ltd. the age group of 11-15 years learn to think, (Member : NSE, bSE, MSE, MCX, ICEX Depository participant (SEbI Authorised Merchant banker) express and create using computer-based of CDSL / NSDL, AMFI Mutual Fund Advisor, Research Analyst) CIN No. U30009Wb2000PLC091674 systems through two initiatives: Every child CIN No. U65921Wb1994PL217071 can code and Makers in the Making. As a SEbI Registration No : INZ000169130 COVID adaptation we’re running online coding SEbI Regsitration No : INH00000006 (RA) workshops for children between the age group Ashika Wealth Advisors Pvt Ltd. 13-16 on Python and Thunkable. CIN number – U65999Wb2018PTC227019 Every child can code (ECCC): We have developed Ashika Credit Capital Ltd. a structured training model to equip teachers SEbI Registered Investment Adviser (RbI Registered NbFC) with foundation to programming and physical SEbI Registration number – INA300013759 computing. It is an initiative for teachers to CIN No. L67120Wb1994PLC062159 upgrade their understanding and to integrate interdisciplinary and multidisciplinary approach Ashika Global Securities Pvt. Ltd. Ashika Investment Managers Pvt. Ltd. to learning technology. (RbI Registered NbFC) CIN number – U65929MH2017PTC297291 Makers in the Making (MIM): It is an advanced level after school program for a smaller batch of students who are CIN No. U65929Wb1995PTC069046 interested to learn advanced programming tools and concepts on Raspberry Pi. It is implemented in the format of a workshop over a span of three years. It is an initiative for kids of 7th grade to 9th grade.
Code with Python workshop Our E-Learning initiative was launched this month with the first workshop to teach coding using Python. There are many reasons why Python was our top choice to teach kids how to code. The most important being, Python is a beginner friendly language, easy for kids to grasp who are new to programming. Currently it is one of the most popular languages. A lot of applications like Uber, Instagram, Netflix and even Google uses it. Literally everything can be made on Python, right from games, apps, websites to data Registered Office Corporate Office science models. It has a wide range and fit for all kind of use. Being easy to implement, you focus more time on building Trinity 1008, Raheja Centre, new forms of thinking rather than spending time on understanding the syntax. 226/1, A.J.C. bose Road 214, Nariman Point, 10th Floor We have designed a curriculum which focuses on “how to think” part of coding and so is fit for beginners. We have a 7th Floor, Kolkata-700020 Mumbai-400021 project-oriented approach that goes beyond just learning how to code on Python. It teaches us how to develop our Phone: 033-4010 2500 Phone: 022-6611 1700 ideas into reality through small interesting projects based on each concept taught in class. With our vision to make Fax No: 033-4010 2543 Fax No: 022-6611 1710 technology affordable for all, we’ll soon be launching workshops on Thunkable too. We would love to have more interested kids to join us for the workshop. Sign up on the google form: https://forms.gle/ AAknt5BxsWkwyWz5A to know more details. Follow us on social media to stay updated with the happenings at Gyanada Toll Free No.: 1800 212 2525 Foundation. For any research related query: [email protected]
We, at Gyanada Foundation, engage students in practical learning. For this we provide kids with Gyanada Lab Kits. To help us fund these kits, visit: https:// gyanada.org/donate.html. You can also write to us at [email protected] or connect with us at 9819044922. Our bank details are: www.ashikagroup.com GYANADA FOUNDATION HDFC Bank, Stephen House Branch, Current A/c No. 50200002885400 IFSC CODE: HDFC0000008 MICR CODE: 700240002 A Product | [email protected]
October 2020 INSIGHT 66 67 INSIGHT September 2020 Group Companies
Ashika Stock Broking Ltd. Ashika Capital Ltd. (Member : NSE, bSE, MSE, MCX, ICEX Depository participant (SEbI Authorised Merchant banker) of CDSL / NSDL, AMFI Mutual Fund Advisor, Research Analyst) CIN No. U30009Wb2000PLC091674 CIN No. U65921Wb1994PL217071 SEbI Registration No : INZ000169130 SEbI Regsitration No : INH00000006 (RA) Ashika Wealth Advisors Pvt Ltd. CIN number – U65999Wb2018PTC227019 Ashika Credit Capital Ltd. SEbI Registered Investment Adviser (RbI Registered NbFC) SEbI Registration number – INA300013759 CIN No. L67120Wb1994PLC062159
Ashika Global Securities Pvt. Ltd. Ashika Investment Managers Pvt. Ltd. (RbI Registered NbFC) CIN number – U65929MH2017PTC297291 CIN No. U65929Wb1995PTC069046
Registered Office Corporate Office Trinity 1008, Raheja Centre, 226/1, A.J.C. bose Road 214, Nariman Point, 10th Floor 7th Floor, Kolkata-700020 Mumbai-400021 Phone: 033-4010 2500 Phone: 022-6611 1700 Fax No: 033-4010 2543 Fax No: 022-6611 1710
Toll Free No.: 1800 212 2525 For any research related query: [email protected]
www.ashikagroup.com A Product | [email protected]
67 INSIGHT September 2020