Wednesday, 5 July 2017

GST: Making Indian Economy A Bahubali  

The mere word ‘Tax’ puts me off. Throughout my graduation and PG, I just scraped through taxation and was propped up by economics & banking which gave some meaning to my otherwise aimless yonder. I dislike anything knotty or convoluted and thus taxation was out of my orbit of understanding. This being a mild prequel of my educational background, you would understand my horror when one fine day my daughter wanted to know everything about tax. “You are too young for all this, you don’t even have to pay taxes yet”. “My teacher asked me the full form of GST & I don’t know, Just Imagine”. This was some three months back.

After demonetization our political pundits would not have believed that GST would be rolled out on the dotted date and that too hassle free. Sensex and the Nifty saluted by soaring 1% on Monday, the very next business day, 3rd July. GST and its successful rollout has even shifted the focus from our soaring banking woes, NPA mess and loan waiver spree among state governments. Why? Are these issues less important or have they lost their meaning and have been accepted as a congenital disorder having no remedy. Moving on with GST, which is no more a burning issue but has become a reality of our daily economic lives. Adopted on 1st July 2017, Goods and Service Tax has unified India into an economic behemoth ready to move with stupendous alacrity in global trade & economic warfare. Foreign analysts have been gaping with amazement of how seamlessly 29 states and 7 union territories have adopted GST without any scandalous disruption. 

So going back to my daughter’s inquisitive enquiry, I was forced to unravel the mysterious multilayered single tax regime now effectively functional in our economy. The basis logic of GST is that the tax under this regime will be collected at every stage of value addition and the credit of tax paid at the previous stage will be available to set off tax to be paid at the next stage of transaction. Thus GST has subsumed the obnoxious 17 central and state taxes and 23 cesses leading to higher efficiency, lower retail prices and greater ease of doing business. The GST tax rates 5%, 12%, 18%, & 28% have been categorized by the GST council, the all powerful decision making body which has demonstrated in itself the potency of Indian federalism in its true spirit. 

Removal of inter-state economic barriers, expanding tax base, easy and transparent compliance are some of the apparent rewards of GST, the larger impact will be felt through the benefits of input credit, unwinding of corrupt bureaucratic machinery, accounting shadow economy and hitting black money hoarders which will tighten the nuts and bolts of the Indian economy making it more agile in the long run. Implementation of GST & digitalization has de-cluttered the Indian taxation system paying way for higher investment and growth. So what next, Let’s just enjoy the ride with automakers & real estate reducing their prices and FMCG companies ready to pass on the benefits to the end consumer. Don’t forget we belong to the fastest moving economy in the world, 1-2% rise here and there should not matter. Yes, Indian economy is BAHUBALI in the making.


Monday, 26 June 2017

Tuesday, 20 June 2017

HEY MR. BARNIER, WE ARE ALL THATCHERITES

Though I was a great fan of her’s since childhood, I never got a chance to write anything about one of the most charismatic leader of her times, Margret Thatcher. And so, I should be thankful to the current UK Prime Minister for urging me to go back to the golden years of Thatcherism. From a grocer’s daughter she became the first woman prime minister of United Kingdom. Had she been there at this very moment negotiating with EU Brexit Secretary, Michel Barnier, she would have said just three words, “ NO, NO, NO” which the EC had heard loud and clear in 1990.  Anyways, there would have been no BREXIT, WHY? Because she would never have promised a referendum to win an election. No referendum, no snap elections and no BREXIT. She would have simply said, “We are out, You Take Care of Yourselves”. And the people of Britain would not have been so uncertain about their future under her command especially the 18-35 year olds who voted for Labour.

Democracy is defined as, “Of the People, By the People and For the People”. This being one of the famous statements by Abraham Lincoln summarizes the inherent uncertainty in every national economy today. Though the power vested in the respective national governments is of the people and by the people but, Is it for the people, which is the major dilemma in every global citizen’s mind who struggles on everyday basis against racisim, gender inequality, religious intolerance or economic consequences of rising automation. But where has this “For The People” gone, was it ever there. Was it only followed by Gandhi, Karl Marx, Lincoln and thus forgotten like an unwanted ancestral article left in the attic and used only in celebratory speeches on national events.

Global economy has always been influenced or shaped by individual economic policies followed by powerful nations in the name of world economic stability inherently suiting their own economic agendas. Whether it was Bretton woods or Petrodollar system, World Bank, IMF or the EU formulated to amend the world pecking order have resulted in mass economic turbulence worldwide resulting in financial crisis plaguing the entire western world even today.


So, right now what should the Tories do, keep staring at the half empty glass or the lost 8 seats. For God’s sake its ALMOST A MAJORITY. While Mr DD (UK Brexit secretary) negotiates a soft landing for his country, his Premier can Google in her precious spare time of how the Indian Government managed its economic crisis in 1991 in spite of being in minority for five full fledged years. If that seems to be more time consuming, there is another option of just envisioning of what Baroness Thatcher would have done. Had she been alive, she would have taken this European bull by the horns to reignite the whole conservative party, not apologize publically and instead would have said, “You turn if you want to. The lady's not for turning”. 

Friday, 9 June 2017

KEI INDUSTRIES LTD RESEARCH REPORT - Q4 FY17
DEMONETIZATION STEERS THE WAY FOR SWACHH BHARAT NIRMAN

My annual vacation coincided with our Modi government completing three successful years and me 18 years of being an NRI (Non Resident Indori). Yeah am proud to say that I belong to the cleanest city of India, Indore, which seemed unachievable few years ago. Something has changed over time, new commercial & residential settlements expanding the city, IT companies garnering campuses, improved public transport system and every kind of retail brand opening its shop here. So is this happening everywhere. Is every city striving to become something like this or is in the process of reinventing itself to catch up with the new mantra of ‘Swatch Bharat Abhiyaan’ or ‘Make in India’ or borrow some ideas from our western counterparts and Make India Great Again. No No… we can’t do that or we’ll have to go back to our golden age, the era of Emperor Chandragupta Maurya II. We don’t have to be great again, all we have to do is just keep moving and that is what every city, whether Tier I or Tier II or classified smart city and our well known metros are doing. 

So giving this discussion a slight quantitative flavor, let’s talk about Demon Demono who just like James Bond has been hanged once and lived twice after the December quarter GDP numbers were out. Right now our learned analysts have been proved right with 6.1% growth for the March quarter. So after all that huffing and puffing about GDP numbers being manipulated, they have been proved right for their myopic sensibilities about the seventh largest economy in the world as per the World Economic Forum in March this year. So at whatever rate the Indian ship is moving, it now stands behind United States of America, China, Japan, Germany, Britain and France. Favoured by low crude prices globally, controlled inflation and of course economic reforms undertaken over the last two years has helped us move past Brazil, Italy and Canada making up the top ten economies of the world. Crude prices are going to remain benign due to US shale oil boom and Iran disregarding its OPEC brothers and of course India, third largest crude consumer aiming to go all electric by 2030. Inflation will be controlled in the absence of political policy paralysis and the most important axle in the wheel of Indian fortune is the economic agenda to be followed to place India in the top three countries of the world by 2050. And that is what PWC study predicts. So should we be worried about March quarter GDP. Instead of being vexed about every quarterly growth, we should be more concerned about our banking sector and low private sector investment.


RBI has invoked PCA (Prompt Corrective Action) on PSU Banks and pulled up private sector banks for not following NPA disclosure norms in the fourth quarter indicating the central bank’s commitment to put the banking sector on the right track. In the same league, debt laden corporate is being prodded both by the government and RBI to shed its non-core assets or give up equity to lender’s consortium and move towards higher productivity. So let’s not miss the woods for the trees and play with all the right moves whether its Paris accord or GST implementation. India has become a beacon of global certainty evident from FPI flows of $ 9 bn outpacing strong FDI flows over the last two years and $ 60bn of gross foreign direct investment by the end of fiscal year 2016-17. But as disciples of finance we should not forget that only three things are certain in life, death, taxes and trash. So let’s at least reduce trash both physically and mentally and it will do wonders even in the most impenetrable spaces of financial world making the world economy more habitable for global investors. 

Thursday, 11 May 2017

EURO WINS ITS WATERLOO & BAHUBALI HEARTS GLOBALLY

From last Sunday, I have been thinking what made me more happy, euro being saved or witnessing the conclusion of epic saga Bahubali. Though Bahubali was with me for over 2 years now, euro existed for over 20 years. I still remember the day; one of my professors asked me why I was so keen on giving a presentation on EURO. “Do you think it will work”, he jibed. “It will survive, Sir”. And survive it did, right from the very beginning, from Greece to Ireland to Spain & Italy and now of course BREXIT. After the general elections cum referendum on Euro, Britons are preparing for their own on June 7th. Europe is hell bent on extracting 100 bn euros alimony, isolating Britain from clearing house business and with global Banks already moving jobs, THREXIT cannot be completely ruled out.

French elections coincided with BAHUBALI crossing Rs. 1000 crore worldwide in just 10 days, Phew! We already knew of global markets flush with liquidity but BAHUBALI has also confirmed that Indian economy has been successfully re-monetized. What would otherwise explain first day collections of Rs. 121 crore  and Rs. 335 crore first weekend in India. Re-monetization is definitely evident from Indian passenger vehicle market crossing 3 million units benchmark and moving strongly month on month. Realty markets also seem to have shrugged demono-fears with residential sales rising 13% in the fourth quarter in the top nine cities in India. But who cares! People on the street are least concerned with lower fuel prices and falling interest rates, what was important over the last weekend was the exuberance over 2 year wait coming to an end of ‘Why did Katappa Kill Bahubali’. While the rest of the world was worried about President Trump successfully completing 100 days in office and apprehensive about the remaining 1360 days, we are soaked in the land of Mahishmati. Not only us, even people in England are feeling the heat after watching ‘Bahubali’ lamenting the fact that they belonged to the land of frequent general elections and referendums without saviors. In case they maintain their status quo, they might be left of course with the Pound, closed borders, lower GDP, lesser jobs and declared currency manipulators with President trump slamming the phone on them, Really! ask the Australians. So the next thing after India IT exports in the Trump firing line would definitely be Indian Films daring to compete with Hollywood standards.

Coming back to France and its new President Emmanuel Macron, it has been no less than a soap opera as people rejected mainstream political parties to elect an independent candidate and the youngest president for the first time in France History. The French soap opera had its lows as Macron’s emails getting hacked and dumped before the decisive vote and it was hurtful to see Euro’s life being risked by populist eurosceptics. But what hurt me more was the lukewarm response to Bahubali by our own Bollywood stars. May be they are still reeling under demonetization……. Hail Mahishmati ….. Hail Modi.

Wednesday, 26 April 2017

TATA CONSULTANCY SERVICES LTD Q4 FY17
INFOSYS RESEARCH REPORT Q4 FY17
FRENCH SHOWERS GRATIFY GLOBAL STOCK MARKETS

 ‘Better than expected’ is going to be the most used term by analysts in the coming few months. Ultratech, HDFC Bank, Indian Bank, Wipro and Reliance Industries should thank these pessimistic pragmatic analysts for zooming their stocks. How!  It’s easy, you just need to give a bleak picture of the company and then after the results are delivered, the whole financial media shrieks in chorus, OMG “BETTER THAN EXPECTED”. And then the media circus starts for the next quarter & year estimation. Indian Stock markets were battered over the last few days with so called geopolitical tensions ranging from North Korea to France to Middle East, President Trump expressing his desire for a weak dollar, UK Premier deciding to make hay when the sun shines or till the sun shines. Last but not the least, our own IT top guns giving muted quarterly results.

Though our Indian weather forecasters are betting on divergent monsoon schedule for the country, our stock markets received unexpected French showers with Mr Macron entering the last lap of national elections. So whom should we thank for this global relief rally? Mr Macron whom we hardly know, President Trump declaring that China is no more a currency manipulator, Ms Pen for giving the reason for markets to cheer or David Cameroon who miscalculated everything in the first place. So this is what we mean by global CUES and 50% of the equity markets are run by them. Last week when the UK Prime Minister Theresa May suddenly announced general elections two years ahead of schedule, pound jumped and equity markets fell. Why, are we still anticipating some miracle! Britain and European Union are divorced now and need some strength from these elections to carry on with the impending divorce proceedings. Britain conservatives striking it hot on brexit sentiment and European Union holding on to liberal & market favorite Macron. You can't blame the markets for falling in love with him. We all want equality and hate capitalism but love capitalists. Nobody remembers Gandhi, Karl Marx, Mandela or their ideals. Elon Musk is the ideal for the current generation and so it won't be right to blame the markets. But what happens in case Mr trump gets Ms Pen for company. I think first reaction would be from the USA. And that too by Madam Yellen resigning because she might be asked to perform dual duties for both the FED and the Bank of France. And the country which would top happiness index would be Greece and Mr Tsipras if ranked individually for world politicians. As for Indian economy we’ll be just stunned for some time and then move on with resilience.

Fourth quarter results have started pouring in and are definitely encouraging and we are no more dependent just on FPI flows. Domestic flows have shown enough depth and given strength to our stock markets which are said to have run ahead of their valuations. But when Marc Faber says that Mr Modi is better than President Trump, can we help it. Well for India we know that we got the right fundamentals and FUNDAMENTALS CREATE WEALTH. And this very moment, S&P BSE Sensex has crossed 30,000, Nifty is beyond 9350 & Indian Rupee at 20 month high.


Wednesday, 12 April 2017

DAILY STOCK MARKET WRAP UP
CENTRAL BANKS, AVENGERS OF OUR ESOTERIC FINANCIAL WORLD

March has been quite an eventful month for global markets as it revealed a sense of optimism amid political shenanigans. I am talking about the better half of any national government, the Central Bank. The FED, Bank of Japan, ECB, Bank Of England and our own Reserve Bank Of India. Optimism among bankers, especially central bankers is just defined by two words these days, hawks and doves. It can be also less dovish or more hawkish whatever the analysts are more comfortable with to create a melodrama about one of the most boring jobs in financial world, i.e controlling interest rates, reining in inflation and maintaining both sense & sensibility among participants of the financial world. If not for them world economic order would have become an illusory maze.

Early March, European Central bank (ECB) started with being less dovish which meant no change made to their bond buying program with rates being held constant. Optimism came from the rise in headline inflation which was 2% in February on the back of increasing fuel prices which the bankers had been praying for over the last two years. Lack of appropriate structural reforms have made these central bankers god fearing optimists. Bank Of England, led by Mr Mark Carney followed the same rerun though the votes were split 8 to 1 for keeping the rates on hold with a base rate of 0.25% and Inflation being just below 2% in January 2017. Bank Of England was relatively even more less dovish. In between these two divorcees, came Madam Yellen to increase FED rates which the markets digested immediately as she had been preparing the expected delicacy for over 3 months signifying FED’s hawkish stance. US Fed raised its overnight fund rate to 1% and has indicated three more hikes in the current year. US FED under Madam Yellen has almost erased the memories of taper tantrum making the mighty central bank more congenial and humble at the same time. Bank Of Japan policy almost coincides with BOE and was the easiest to comprehend though it sent confusing signals through lesser bond purchases in the month of February. BOJ held short-term interest rate target of minus 0.1 and kept bond purchases intact. The central bank expects inflation to touch 1% by the end of the year as exports & factory output seem to be coming back to life.

Done with G-4, Reserve Bank of India surprised Markets with 25 basis point hike in reverse repo rate taking it to 6% and repo rate being held at 6.25% as expected. Though analysts were predicting some vague standing deposit facility to suck out liquidity, RBI in one stroke has endeavored to remove distortion in the money market caused by demonetization and bring the money market rate in tandem with RBI policy rates. RBI has also allowed banks to invest in REITs and net owned funds of ARCs have been increased to Rs. 100 crore.


Though analysts and financial think tanks would call any of these monetary policy decisions as predictable or nudged by their respective governments, just imagine the financial world without them. Or should we envision if these apex institutions would have got greater sphere for using their functioning armory, there would have been no Lehman, no pound manipulation, no brexit and in Indian scenario PSU banks would have been in better shape.  So let’s hail their credibility and wait for June monetary policy schedule. 
CIPLA LTD RESEARCH REPORT - Q3 FY17
VOLTAS LTD RESEARCH REPORT - Q3 FY17

Wednesday, 5 April 2017

DAILY STOCK MARKET WRAP UP

VOLTAS LTD - Q3 FY17

VOLTAS LTD exhibited strong resilience despite demonetization with double digit growth in both EBDITA & PAT. PAT stood at Rs. 816 Mn against Rs. 573 Mn corresponding period previous year growing 42% YOY. Sequential growth was also strong at 13% in the current December quarter. Revenue declined 6% YOY at Rs. 12001 Mn in the current quarter against Rs. 12724 Mn same period previous year but on quarterly basis, growth was at a strong 22% in Q3 FY17.  EBDITA jumped 2 times and stood at Rs. 1486 Mn in Q3 FY17 against Rs. 812 Mn corresponding quarter previous year as operating expenditure declined 9% YOY. On sequential basis, EBDITA expanded 10% in the current December quarter. Operating expenditure was at Rs. 11171 Mn in the current quarter against Rs. 12226 Mn same period previous year. Other Income grew 2.4 times buttressing company’s bottom-line in the current quarter and was reported at Rs. 597 Mn compared to Rs. 249 Mn in Q3 FY16. With all round double digit growth, both EBDITA & Net Profit Margin expanded 600 bp  & 229 bp YOY respectively. One basis point is 1/100th of a percentage. EBDITA & Net Profit Margin stood at 12.38% & 6.80% in the current December quarter.

Voltas Ltd with market cap of Rs.137067 Mn is India's largest air conditioning company, and one of the world's premier engineering solutions providers and project specialists. The company offers engineering solutions for a wide spectrum of industries in areas such as heating, ventilation and air conditioning, refrigeration, electro-mechanical projects, textile machinery, mining and construction equipment, water management & treatment, cold chain solutions, building management systems, and indoor air quality. The company has performed well despite a tough demonetization hit December quarter both YOY and sequentially due to controlled cost structure, higher other income and lower finance costs. Though intense competition and higher input costs are expected to impact margins, pick up in the domestic economy augurs well for the company.

 We recommend BUY for the stock for medium & long term investment with PE multiple of 26.69 x FY17E & 22.52 x FY18E with a target price of Rs. 525.



Disclaimer                                       
                                      
The information and opinions contained in the research reports have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. The research report does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Clients should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, if appropriate, seek professional advice, including but not limited to tax advice. The reports do not take into account the particular investment objectives, financial situations, risk profile or needs of individual clients. The user assumes the entire risk of any use made of this information. This report is not to be relied upon in substitution for the exercise of independent judgment.

The price and value of investments referred to in this research and the income from them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur.

Research data and reports published/ emailed/ text messaged via Short Messaging Services, Online Messengers, WhatsApp etc/transmitted through mobile application/s, including but not limited to FLIP™, Video Widget, telephony networks, print or electronic media and or those made available/uploaded on social networking sites (e.g. Facebook, Twitter, LinkedIn etc) is for informational purposes only. The reports are provided for assistance and are not intended to be and must not alone be taken as the basis for an investment decision. The user assumes the entire risk of any use made of this information. Though disseminated to clients simultaneously, not all clients may receive the reports at the same time. We will not treat recipients as clients by virtue of their receiving this report.

The reports include projections, forecasts and other predictive statements which represent our assumptions and expectations in the light of currently available information. These projections and forecasts are based on industry trends, circumstances and factors which involve risks, variables and uncertainties. The actual performance of the companies represented in the report may vary from those projected.

The opinions expressed in the reports are subject to change but we have no obligation to tell our clients when our opinions or recommendations change. The reports are non-inclusive and do not consider all the information that the recipients may consider material to investments.

We shall not be in any way responsible for any indirect, special or consequential damages that may arise to any person from any inadvertent error in the information contained in the reports nor do they take guarantee or assume liability for any omissions of the information contained therein. Information contained therein cannot be the basis for any claim, demand or cause of action. These data, reports and information do not constitute scientific publication and do not carry any evidentiary value whatsoever.

The user should consult their own advisors to determine the merits and risks of investment and also read the Risk Disclosure Documents for Capital Markets and Derivative Segments as prescribed by Securities and Exchange Board of India before investing in the Indian Markets. The securities discussed in this report may not be suitable for all investors. Investors must make their own investment decision based on their own investment objectives, goals and financial position and based on their own analysis. Prospective investors and others are cautioned that any forward-looking statements, if any, are not predictions and may be subject to change without notice.

This report may provide the addresses of, or contain hyperlinks to websites. Except to the extent to which the report refers to material we take no responsibility whatsoever for the contents therein. Such addresses or hyperlinks are provided solely for your convenience and information and the content of the linked site does not in any way form part of this report. Accessing such website or following such link through this report shall be at your own risk.

The author of this Research Report accepts no liability and will not in any way be responsible for the contents of this report or for any losses, costs, expenses, charges, including notional losses/lost opportunities incurred by a recipient as a result of acting or non-acting on any information/material contained in the report. This is not an offer to sell or a solicitation to buy any securities or an attempt to influence the opinion or behavior of investors or recipients or provide any investment/tax advice. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.

Wednesday, 29 March 2017

DAILY MARKET WRAP UP
INDIAN ECONOMY IN A SWEET TINA SPOT

 “It’s the TINA factor sweetheart”, I quipped when my 12 year old was emphatic over her social science & biology grades. I explained that there was no other alternative for her than to study. “Really! You are funny Ma”. She has no idea that these days even stock market surges are being attributed to this renowned acronym, TINA (There Is No Alternative). Well Indian Stock markets are soaring these days and people i.e investors, hedge fund managers, brokerage houses, analysts are not finding any reason for it. How long can they keep giving UP election results as a reason for the REASONS why our NIFTY might touch 9300 in few months? So for most of them when the markets go up its ‘TINA’ and when the market goes down its TRUMP. And mind you both TINA & TRUMP are mutually exclusive.

Stock markets were once considered as barometer of economic prosperity & financial health of a country. But this theory has long been forgotten in the era of liquidity & uncertainty. As a result investors are more driven by sentiments & information flow within the market than by its fundamentals. With respect to India, there is no uncertainty left, so no reasoning left for upside risk for the economy. Analysts keep on harping on policy continuity on reforms and predicting 2019 general elections and even beyond that as if they were discussing some telecom company’s extension offer. Have the macro fundamentals just gone up after UP assembly elections or have we started using prism glasses. But the question remains, why the Indices are moving up without any backing from corporate earnings. I think most of us have forgotten what we learnt in our graduation days.  PEST.


PEST is nothing but Political, Economic, Social & Technological external factors that influence any company or industry. These factors are analyzed by any sane serious investor before putting his hard earned money in stocks or companies. And India has all these factors in the right place at the right time. So when the dollar seems to be confused about its own divergent economic & fiscal policies, Indian Rupee is gaining strength over the convergence of its socio-economic-political policies. Now for pragmatists who need facts, IIP for January was 2.7%, PMI above 50, controlled inflation at 3.65% within RBI limit, forex reserves have gone up to $367 billion, exports grew 17.50% in February which is a sixth consecutive rise this year and last but not the least GDP at 7.1% is the fastest growing in the world.  Now coming back to corporate earnings, growth is definitely not anemic but in single digits which is expected to rise in double digits by financial year 2018 and investors both domestic & foreign are betting on this growth as evident from FPI flows of Rs.22268 crore this month, highest since February 2013. Government is moving with GST implementation by July this year, NPA resolution policy next month and other land, labor and agricultural reforms. So foreign analysts are rightly calling us of being in a SWEET TINA SPOT. But I really love this word TINA, which I am planning to give it to my newborn niece. Yes, you guessed it right, I didn’t find any other name!!

Friday, 24 March 2017



HAVELLS INDIA LTD - Q3 FY17


HAVELLS INDIA LTD reported stable third quarter FY17 with PAT rising at 28% YOY despite demonetization. PAT stood at Rs. 1530 Mn against Rs. 1199 Mn corresponding period previous year. Sequential growth was reported at 5% in the current December quarter. Revenue was seen at Rs. 16221 Mn rising 13% YOY, though growth was slower at 4% sequentially. EBDITA was reported at Rs. 2194 Mn in Q3 FY17 against Rs. 1985 Mn corresponding quarter previous year, registering a double digit growth of 11% YOY. On quarterly basis, EBDITA declined 7% in the current Q3 FY17 as operating expenditure rose 15% YOY. Operating expenditure stood at Rs. 14592 Mn compared to Rs. 12731 Mn corresponding quarter previous year. Other Income too played it’s part and  jumped 2 times YOY buttressing company’s bottom-line in the current quarter. Other Income was reported at Rs. 264 Mn compared to Rs. 134 Mn in Q3 FY16. Increase in other income is due to interest earned on funds received from Sylvania divestment. Havells India witnessed strong volume growth & demand in industrial cable & lighting divisions in the current quarter.  With double digit growth Net Profit Margin rose 105 bp YOY & 8 bp sequentially. One basis point is 1/100th of a percentage. EBDIA & Net Profit Margin stood at 13.52% & 9.43% in the current December quarter. The company is also focused on deleveraging itself as Net Debt has halved from Rs. 553 Mn in Q3 FY16 to Rs. 114 Mn in the current December quarter.  The company has current cash holdings of about Rs.14313 Mn as on 31st December 2016.Havells India Ltd with market cap of Rs. 282455 Mn is a leading FMEG company.  The products of the company range from industrial and domestic circuit protection switchgear, cables and wires, motors, fans, power capacitors, compact fluorescent lamps, luminaries for domestic, commercial and industrial applications, modular switches covering household, commercial and industrial electrical needs, water heater and domestic appliances.   The company has performed well despite a tough demonetization hit December quarter. The company has strong fundamentals and is poised for higher growth with its foray into consumer durables industry with Lloyd acquisition. We recommend BUY for the stock for medium & long term investment with PE multiple of 46.29 x FY17E & 37.14 x FY18E with a target price of Rs. 590.


Disclaimer                                       
                                      
The information and opinions contained in the research reports have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. The research report does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Clients should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, if appropriate, seek professional advice, including but not limited to tax advice. The reports do not take into account the particular investment objectives, financial situations, risk profile or needs of individual clients. The user assumes the entire risk of any use made of this information. This report is not to be relied upon in substitution for the exercise of independent judgment.

The price and value of investments referred to in this research and the income from them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur.

Research data and reports published/ emailed/ text messaged via Short Messaging Services, Online Messengers, WhatsApp etc/transmitted through mobile application/s, including but not limited to FLIP™, Video Widget, telephony networks, print or electronic media and or those made available/uploaded on social networking sites (e.g. Facebook, Twitter, LinkedIn etc) is for informational purposes only. The reports are provided for assistance and are not intended to be and must not alone be taken as the basis for an investment decision. The user assumes the entire risk of any use made of this information. Though disseminated to clients simultaneously, not all clients may receive the reports at the same time. We will not treat recipients as clients by virtue of their receiving this report.

The reports include projections, forecasts and other predictive statements which represent our assumptions and expectations in the light of currently available information. These projections and forecasts are based on industry trends, circumstances and factors which involve risks, variables and uncertainties. The actual performance of the companies represented in the report may vary from those projected.

The opinions expressed in the reports are subject to change but we have no obligation to tell our clients when our opinions or recommendations change. The reports are non-inclusive and do not consider all the information that the recipients may consider material to investments.

We shall not be in any way responsible for any indirect, special or consequential damages that may arise to any person from any inadvertent error in the information contained in the reports nor do they take guarantee or assume liability for any omissions of the information contained therein. Information contained therein cannot be the basis for any claim, demand or cause of action. These data, reports and information do not constitute scientific publication and do not carry any evidentiary value whatsoever.

The user should consult their own advisors to determine the merits and risks of investment and also read the Risk Disclosure Documents for Capital Markets and Derivative Segments as prescribed by Securities and Exchange Board of India before investing in the Indian Markets. The securities discussed in this report may not be suitable for all investors. Investors must make their own investment decision based on their own investment objectives, goals and financial position and based on their own analysis. Prospective investors and others are cautioned that any forward-looking statements, if any, are not predictions and may be subject to change without notice.

This report may provide the addresses of, or contain hyperlinks to websites. Except to the extent to which the report refers to material we take no responsibility whatsoever for the contents therein. Such addresses or hyperlinks are provided solely for your convenience and information and the content of the linked site does not in any way form part of this report. Accessing such website or following such link through this report shall be at your own risk.

The author of this Research Report accepts no liability and will not in any way be responsible for the contents of this report or for any losses, costs, expenses, charges, including notional losses/lost opportunities incurred by a recipient as a result of acting or non-acting on any information/material contained in the report. This is not an offer to sell or a solicitation to buy any securities or an attempt to influence the opinion or behavior of investors or recipients or provide any investment/tax advice. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.

Saturday, 18 March 2017


WHEELS INDIA LTD - Q3 FY17

Wheels India Ltd reported strong yearly growth in December quarter FY17. Revenue or Income From Operations rose 14% YOY from Rs. 4698 Mn to Rs. 5365 Mn in the current Q3 FY17. PAT jumped at a phenomenal growth rate of 121% YOY and stood at Rs. 132 Mn compared to Rs. 60 Mn in the current December quarter.  EBDITA stood at Rs. 450 Mn compared to Rs. 380 Mn in the same period previous year growing by 18% YOY. Quarterly growth was somber with Revenue & EBDITA declining 2% whereas Net Profit managed to rise 1% in the current December quarter. Operating Expenditure jumped 14% YOY from Rs. 4473 Mn to Rs. 5076 Mn in the current December quarter. On quarterly basis there was decline of 1.5% to cope with low revenue growth.  As a result EBDITA margin declined 2 basis points YOY and was reported at 8.39% in the current December quarter. Operating costs constitute 95% of total revenues. In addition to that, higher interest or Finance costs need to be curtailed and comprise 2% of Revenues or 88% of Net Profit. Net Profit Margin was reported at 2.46% jumping 119 basis points YOY compared to same period previous year. Sequentially there was a jump of 6 basis points. Other Income aided rising 73% YOY and was reported at Rs. 8.30 Mn compared to Rs. 4.80 Mn corresponding quarter previous year. QOQ, other Income jumped 20% in the current Q3 FY17.  

Wheels India is a leading manufacturer of steel wheels for passenger cars, utility vehicles, trucks, buses, tractors & construction equipment. Apart from wheels other divisions are air suspension, energy equipment & heavy engineering division. The wheels division contributes 50% of revenues for the company. Air suspension business has reported strong volume growth in the first nine months of the year. The company has a diversified base with over 30 customers spread globally such as Japan, Korea, US,  Brazil, China to name a few.

We recommend BUY for the stock for medium & long term investment with PE multiple of 25.80 x FY17E & 22.61 x FY18E with a target price of Rs. 1355.


Disclaimer                                       
                                      
The information and opinions contained in the research reports have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. The research report does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Clients should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, if appropriate, seek professional advice, including but not limited to tax advice. The reports do not take into account the particular investment objectives, financial situations, risk profile or needs of individual clients. The user assumes the entire risk of any use made of this information. This report is not to be relied upon in substitution for the exercise of independent judgment.

The price and value of investments referred to in this research and the income from them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur.

Research data and reports published/ emailed/ text messaged via Short Messaging Services, Online Messengers, WhatsApp etc/transmitted through mobile application/s, including but not limited to FLIP™, Video Widget, telephony networks, print or electronic media and or those made available/uploaded on social networking sites (e.g. Facebook, Twitter, LinkedIn etc) is for informational purposes only. The reports are provided for assistance and are not intended to be and must not alone be taken as the basis for an investment decision. The user assumes the entire risk of any use made of this information. Though disseminated to clients simultaneously, not all clients may receive the reports at the same time. We will not treat recipients as clients by virtue of their receiving this report.

The reports include projections, forecasts and other predictive statements which represent our assumptions and expectations in the light of currently available information. These projections and forecasts are based on industry trends, circumstances and factors which involve risks, variables and uncertainties. The actual performance of the companies represented in the report may vary from those projected.

The opinions expressed in the reports are subject to change but we have no obligation to tell our clients when our opinions or recommendations change. The reports are non-inclusive and do not consider all the information that the recipients may consider material to investments.

We shall not be in any way responsible for any indirect, special or consequential damages that may arise to any person from any inadvertent error in the information contained in the reports nor do they take guarantee or assume liability for any omissions of the information contained therein. Information contained therein cannot be the basis for any claim, demand or cause of action. These data, reports and information do not constitute scientific publication and do not carry any evidentiary value whatsoever.

The user should consult their own advisors to determine the merits and risks of investment and also read the Risk Disclosure Documents for Capital Markets and Derivative Segments as prescribed by Securities and Exchange Board of India before investing in the Indian Markets. The securities discussed in this report may not be suitable for all investors. Investors must make their own investment decision based on their own investment objectives, goals and financial position and based on their own analysis. Prospective investors and others are cautioned that any forward-looking statements, if any, are not predictions and may be subject to change without notice.

This report may provide the addresses of, or contain hyperlinks to websites. Except to the extent to which the report refers to material we take no responsibility whatsoever for the contents therein. Such addresses or hyperlinks are provided solely for your convenience and information and the content of the linked site does not in any way form part of this report. Accessing such website or following such link through this report shall be at your own risk.


The author of this Research Report accepts no liability and will not in any way be responsible for the contents of this report or for any losses, costs, expenses, charges, including notional losses/lost opportunities incurred by a recipient as a result of acting or non-acting on any information/material contained in the report. This is not an offer to sell or a solicitation to buy any securities or an attempt to influence the opinion or behavior of investors or recipients or provide any investment/tax advice. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.

Tuesday, 14 March 2017

DCB BANK LTD -Q3 FY17
DCB BANK LTD reported stellar third quarter results despite demonetization with PAT, NII, PBT, Advances & Deposits all growing in double digits. PAT for the December quarter stood at Rs. 513 Mn compared to Rs. 412 Mn same period previous year rising 25% YOY. Net Interest Income, difference between interest earned and expended was at Rs. 2095 Mn in the current quarter against Rs. 1605 Mn corresponding quarter previous year, expanding 31% YOY. Net Interest Margin reported at 3.95% seems to be stable in a demonetization hit quarter. NPA ratios have improved both yearly and sequentially in the current December quarter. Gross NPAs as a percentage of Gross Advances improved 43 basis points YOY at 1.55%. Net NPAs as a percentage of Net Advances was reported at 0.74% in the current Q3 FY17 against 1.12% same period previous year recovering 38 basis points YOY. One basis point is 0.01%. Provisions & contingencies increased 45% YOY at Rs. 305 Mn vis-à-vis Rs. 210 Mn in Q3 FY16. Double digit growth was visible in all business segments except corporate banking which contributes 12% to total revenues. Retail & Treasury rose 22% & 13% accounting 64% & 23% respectively in the current December quarter. Other banking business growing 2.5 times YOY was 1% of revenues. CASA ratio at 25.85% jumped 394 basis points YOY due to demonetization impact. CASA deposits increased from Rs. 32175 Mn in Q3 FY16 to Rs 48709 Mn in current December quarter, jump of 51% YOY. Other income or non interest revenue accounting 10% of the total income of the bank rose at 36% YOY at Rs. 641 Mn against Rs 472 Mn same period previous year. Deposits outpaced Advances moving at 34% yearly and 7% QOQ. Advances also grew at a healthy yearly rate of 24% though sequential growth was dismal at 1.03% in the current December quarter. Cost income ratio of bank improved to 59.42% in the current December FY17 against 60.07% corresponding quarter previous year.
 DCB Bank with high Net Interest Margin, stable NII and growing profitability is marching towards sustainable growth for long term. We recommend BUY with PE multiple of 22.41x FY17E & 19.06 x FY18E for medium and long term investment with a target price of Rs. 278.  

Disclaimer                                       
                                      
The information and opinions contained in the research reports have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. The research report does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Clients should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, if appropriate, seek professional advice, including but not limited to tax advice. The reports do not take into account the particular investment objectives, financial situations, risk profile or needs of individual clients. The user assumes the entire risk of any use made of this information. This report is not to be relied upon in substitution for the exercise of independent judgment.

The price and value of investments referred to in this research and the income from them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur.

Research data and reports published/ emailed/ text messaged via Short Messaging Services, Online Messengers, WhatsApp etc/transmitted through mobile application/s, including but not limited to FLIP™, Video Widget, telephony networks, print or electronic media and or those made available/uploaded on social networking sites (e.g. Facebook, Twitter, LinkedIn etc) is for informational purposes only. The reports are provided for assistance and are not intended to be and must not alone be taken as the basis for an investment decision. The user assumes the entire risk of any use made of this information. Though disseminated to clients simultaneously, not all clients may receive the reports at the same time. We will not treat recipients as clients by virtue of their receiving this report.

The reports include projections, forecasts and other predictive statements which represent our assumptions and expectations in the light of currently available information. These projections and forecasts are based on industry trends, circumstances and factors which involve risks, variables and uncertainties. The actual performance of the companies represented in the report may vary from those projected.

The opinions expressed in the reports are subject to change but we have no obligation to tell our clients when our opinions or recommendations change. The reports are non-inclusive and do not consider all the information that the recipients may consider material to investments.

We shall not be in any way responsible for any indirect, special or consequential damages that may arise to any person from any inadvertent error in the information contained in the reports nor do they take guarantee or assume liability for any omissions of the information contained therein. Information contained therein cannot be the basis for any claim, demand or cause of action. These data, reports and information do not constitute scientific publication and do not carry any evidentiary value whatsoever.

The user should consult their own advisors to determine the merits and risks of investment and also read the Risk Disclosure Documents for Capital Markets and Derivative Segments as prescribed by Securities and Exchange Board of India before investing in the Indian Markets. The securities discussed in this report may not be suitable for all investors. Investors must make their own investment decision based on their own investment objectives, goals and financial position and based on their own analysis. Prospective investors and others are cautioned that any forward-looking statements, if any, are not predictions and may be subject to change without notice.

This report may provide the addresses of, or contain hyperlinks to websites. Except to the extent to which the report refers to material we take no responsibility whatsoever for the contents therein. Such addresses or hyperlinks are provided solely for your convenience and information and the content of the linked site does not in any way form part of this report. Accessing such website or following such link through this report shall be at your own risk.


The author of this Research Report accepts no liability and will not in any way be responsible for the contents of this report or for any losses, costs, expenses, charges, including notional losses/lost opportunities incurred by a recipient as a result of acting or non-acting on any information/material contained in the report. This is not an offer to sell or a solicitation to buy any securities or an attempt to influence the opinion or behavior of investors or recipients or provide any investment/tax advice. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.