Month: August 2021

Stocks To Buy: For A 25% Upside Buy This Restaurant Chain Shares, Says Motilal Oswal

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oi-Sunil Fernandes

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Broking firm, Motilal Oswal has a buy call on the stock of Burger King India and sees a potential upside of 25% on the shares from current levels.

Current market price Rs 168
Target price Rs Rs 210
Gains % 25%

Strong financial performance

According to Motilal Oswal. despite dine-in restrictions due to the second COVID wave, Burger King India delivered a strong 1QFY22 performance, led by the delivery channel. The recovery trends in Jul-Aug’21 continue to remain encouraging, the brokerage has noted.

“As states allow operations at Malls (55% of the stores are in Malls) and dine-in, Burger King India will see significant improvement in its performance. Its recently launched Stunner menu has also gotten off to a good start. With the widening of the value platform and elevation of the entry point, the Stunner menu is expected to significantly aid Burger King India’s performance,” the brokerage has said. According to it, with the widening of the value platform and elevation of the entry point, the Stunner menu is expected to significantly aid Burger King’s performance. “We continue to remain bullish on Burger King India as the the Stunner menu enhances the value platform, while being gross margin accretive. The introduction of BK Café is expected to boost SSSG and margin.

Apart from this the strong network expansion, won’t materially impact ADS, and its royalty rate is capped at 5% till CY39, while offering visibility on margin expansion. Also, the company has reduced its rental expenses. We maintain our Buy rating with a target price of Rs 210 per share (28x Sep’23E EV/EBITDA),” the brokerage has said.

Burger King India clocked a 130% quarter on quarter with sales growth in own app orders and over 1 million app downloads in 1QFY22. Its goal is to have one-third of delivery orders from the BK app. Burger King India is likely to open a few cafés in 3Q (for test marketing) v/s 4QFY22 guided earlier. It has mapped 75-100 restaurants for adding BK Cafés. All new outlets will have a BK Café. All this should boost the performance of the company in the coming quarters, which makes the shares of Burger King India an interesting stock to buy at the current levels.

Stocks To Buy: For A 25% Upside Buy This Restaurant Chain, Says Motilal Oswal

Disclaimer

The article is informational in nature, which is taken from the brokerage report of Motilal Oswal institutional Equities. Please do consult a professional advisor. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and authors do not accept culpability for losses and/or damages arising based on information in the article.



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Delhi govt’s finance dept relaxes norms for departments on expenses above Rs 1 crore, BFSI News, ET BFSI

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NEW DELHI: With the pandemic making a big dent on Delhi government’s revenue, finance department had issued orders to ensure better cash management, including asking all departments to seek its relaxation before incurring expenditure of Rs 1 crore and above. The department, in its recent order, has relaxed this criteria.

In various orders on “expenditure management and rationalisation of expenditure” since the Covid-19 outbreak, different directions have been given on any expenditure of Rs 1 crore and above. In an office memorandum issued on June 17 this year, the finance department’s budget division had directed that all the administrative secretaries and heads of departments to obtain relaxation from the finance department for incurring expenditure of Rs 1 crore or more.

In a recent office memorandum, however, the finance department has allowed seeking relaxation through letters instead of files. In the memorandum, the finance department has stated that it was observed that several proposals were being sent to the department for relaxation, which was required only in cases where the expenditure was of Rs 1 crore and above. “These proposals are in turn examined in the finance department, which takes time and delays the process,” it stated.

In a partial modification of the instructions issued on June 17, the office memorandum issued on August 10 stated that it has now been decided that the administrative departments were not required to send files to the finance department for relaxation. Instead, they would approve the proposals at their level and “send a letter on a weekly basis” to the finance department in a tabulated format.

The orders on expenditure management, however, exclude certain expenditures from the necessary approvals, such as expenditure related to salaries and allowances, medical reimbursement, pension of senior citizens and widows.



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HDFC Bank approves issuance of debt instruments in the form of AT1 bonds from overseas markets

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HDFC Bank on Monday said it will issue debt instruments in the form of Additional Tier 1 bonds in international markets. “…we had informed the stock exchanges that the Board of Directors of HDFC Bank in its meeting held on July 17, 2021, is contemplating raising of long term funds through the issuance of Basel III compliant Additional Tier 1 Bonds (Notes), in the international markets, subject to market conditions,” it said in a stock exchange filing.

An offering memorandum has been prepared and shall be made available to the prospective investors in relation to the contemplated issue of Notes, it further said. The bank, however, did not specify the amount to be raised.

Ba3 (hyb) rating

Meanwhile, Moody’s Investors Service in a statement said it has assigned a Ba3 (hyb) rating to HDFC Bank’s proposed USD-denominated, undated, non-cumulative and subordinated AT1 capital securities. “The Ba3 (hyb) rating is three notches below HDFC Bank’s baa3 Baseline Credit Assessment (BCA) and Adjusted BCA, reflecting the probability of impairment associated with non-cumulative coupon suspension, as well as the likelihood of high loss severity when the bank reaches the point of non-viability,” it said. In its meeting on July 17, the bank’s board had approved the issue of standalone foreign currency-denominated Perpetual Debt Instruments as Basel III-compliant AT1 bond for foreign (global) investors outside India, on an unsecured , public or a private placement basis, along with a proposed listing of the AT1 Bonds and other related activities in the course of the financial year 2021- 22, subject to market conditions and applicable approvals.

Also read: Is HDFC Ergo Optima Secure value for money?

Earlier, the State Bank of India had also raised capital by AT1 bonds in the overseas market. The capital raised through the AT1 bonds will help enhance the bank’s capital base. HDFC Bank’s total Capital Adequacy Ratio was at 19.1 per cent as on June 30, 2021 as against a regulatory requirement of 11.075 per cent.

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2 NBFC And Clothing Stocks To Buy For Gains Up To 68% And Good Dividends

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Buy Power Finance Corporation for 68% Gains

Current market price Rs 131
Target price Rs Rs 220
Gains % 68%

Emkay Global has recommended buying the stock of Power Finance Corporation for a target price of Rs 220, as against the current market price of Rs 131.

According to the brokerage house, asset-quality trends were encouraging, as out of the total Stage-3 assets of Rs 211.5 billion for 26 projects, 16 projects worth Rs 158.2 billion are already admitted under the NCLT with 69% provision coverage, while 10 projects worth Rs 53.3 billion with 54% coverage are being pursued outside the NCLT. Overall coverage improved to 65% from 63% last quarter.

Aatmanirbhar plans for SEB may support near-term disbursements; however, finding new growth avenues – amid weak thermal power additions – is a necessity, Emkay Global has said.

“We continue to like the company based on improving asset-quality trends and an attractive risk-reward. Maintain Buy on the stock of Power Finance Corporation and roll forward to Sept’22E with a revised target price of Rs 220 (Rs 215 earlier), corresponding to 1x P/Adjusted Sept’23E book. We are increasing the dividend payout estimate to 45% by FY24E, based on revised guidelines from the RBI,” the brokerage has said.

PFC is also available at a good dividend yield of more than 7%.

Buy TCNS Clothing stock

Buy TCNS Clothing stock

Current market price Rs 568
Target price Rs Rs 860
Gains % 51%

The brokerage is also bullish on the stock of TCNS Clothing and has suggested buying the stock for gains up to 51%.

“Revenue recovery of 35% in Q1 was in line with peers and better than 10% recovery seen last year. Better recovery was aided by a healthy 112% recovery in the ‘online & others’ channel. The physical channels (EBO/LFS) remained impacted with a 15-20% recovery due to store closures for half of Q1 and operational restrictions upon opening. TCNS Clothing, however, indicated a faster recovery of 70% for operational stores and a better fresh sales mix in the ongoing EOSS,” the brokerage has said.

According to Emkay Global, TCNS Clothing does not plan to raise additional capital to fund organic growth. Notably, TCNS Clothing was also able to tide through the FY21 Covid crisis with a stronger debt-free balance sheet, unlike many apparel peers, which raised capital to either fund losses or pursue grow

“We increase FY23/24 EPS estimates by 20% and 4% on front-loading of per-store recovery in FY23E vs. FY24E earlier. TCNS’ design/sourcing edge, agile back-end and strong online presence keep us positive. Maintain a Buy on the stock of TCNS Clothing with a revised target price of Rs 860,” the brokerage has said.

Disclaimer

Disclaimer

The article is informational in nature, which is taken from the brokerage report of Emkay Global. Please do consult a professional advisor. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and authors do not accept culpability for losses and/or damages arising based on information in the article.



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Siva Industies lenders, slammed NCLT over settlement deal, to move NCLAT, BFSI News, ET BFSI

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The Siva Industries resolution has many a twist left.

After the National Company Law Tribunal rejected the one-time settlement offer made by Siva Industries and ordered that the company will go into liquidation, the lenders are planning to move the appellate tribunal NCLAT.

The NCLT order

The NCLT Chennai Bench, comprising R. Sucharitha and Anil Kumar B., said in the order, “The purported settlement plan proposed by the promoters of the Corporate Debtor is not a Settlement simpliciter, rather it is a ‘Business Restructuring Plan’. As per the plan, there is no final offer made by the promoter of the corporate debtor and also the acceptance made by the CoC in this regard. There is no finality reached between the promoter of the Corporate debtor and the CoC of the Settlement proposal; hence based on ambiguity of the terms of settlement, we cannot order for the withdrawal of CIRP.”

The order also said that seeking liquidation should there be a default was beyond the scope of IBC.

The NCLT said the application made by RCK Vallal, one of the shareholders of the company, is not conforming to the Section 12A of the Insolvency and Bankruptcy Code.

Paltry recovery

Eyebrows had been raised at the settlement offer as public sector banks agreed to settle with the promoter of Siva Industries, a huge loan of Rs 4,863 crore at just 318 crore — recovery of only 6.5 per cent.

Lenders were even withdrawing the bankruptcy process of Siva Industries,

It was pointed out that the settlement amount accepted by banks is even lower than the liquidation value of Siva Industries — will result in loss of approximately Rs 4,700 crore public money

Instead of invoking personal guarantee of promoters, the public sector bank Canara Bank privately sold its exposure of Rs 1,148 crore to a foreign owned ARC — International Asset Reconstruction Company Private Limited (IARC).

CBI has also filed criminal case against former senior officials of IDBI Bank and Sivasankaran for allegedly defrauding the lenders to the tune of Rs 600 crore.

Other rejections

Bankruptcy experts have termed the settlement unusual, citing the rejection of such offers by promoters in the past.

The acceptance of Sivasankaran’s offer differs from the usual pattern of rejection by creditors of such deals proposed by promoters seeking to withdraw their companies from bankruptcy proceedings.

Atul Punj of Punj Lloyd, Videocon’s Venugopal Dhoot, Sanjay Singal of Bhushan Power and Steel, and the Ruias of Essar Steel had all made offers to creditors to persuade them to drop bankruptcy proceedings. All were rejected.

In DHFL’s case, the promoter Kapil Wadhawan had offered to repay the debt in full, but the lenders ruled in favour of Piramal.

Experts say while banks may be getting the most out of such settlement in absence of any serious bid, but such a move weakens the IBC, especially Section 29A that bars promoters from bidding for their assets in a bankruptcy court. The Siva deal, if it goes through, could set a precedent of promoters striking settlement deals with banks when there are no bidders.



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Afghanistan central banker flees as currency drops to record low

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Afghanistan’s central bank governor departed the country as Taliban fighters took control of the capital, with the rising political turmoil pushing the nation’s currency to a record low.

The Afghani fell 1.7 per cent Tuesday to 83.5013 per dollar, a fourth day of decline, according to data compiled by Bloomberg. The central bank was told there would be no more dollar shipments on Friday, which curtailed its ability to supply currency and led to more panic, Governor Ajmal Ahmady wrote in a Twitter thread.

The governor got on a military plane at the airport where thousands sought to leave as the Taliban’s rapid territorial advance led to the collapse of the government. There was no evacuation plan, and President Ashraf Ghani’s departure without creating a transitional government contributed to the chaos, Ahmady wrote.

Also read: MEA sets up Afghanistan cell to coordinate repatriation

“Currency spiked from a stable 81 to almost 100 then back to 86,” the central banker wrote. “I held meetings on Saturday to reassure banks and money exchangers to calm them down.”

On Sunday, the governor left the central bank and went to the airport where he saw other government leaders. More than 300 passengers were packed into his flight, though it had no fuel or pilot, he wrote. “It did not have to end this way. I am disgusted by the lack of any planning by Afghan leadership,” he wrote.

The turmoil in Afghanistan spilled over into markets in Pakistan. Sovereign dollar bonds due 2031 for Pakistan dropped 1.8 cents on Monday, the biggest decline since the government priced the notes in March. Pakistani dollar bonds were the biggest losers in Asia on Monday, according to a Bloomberg Barclays index. The notes rose 0.2 cents on the dollar on Tuesday to 100.5 cents.

Also read: US President says he stands ‘squarely behind his decision’ to withdraw troops from Afghanistan

Investors are concerned over any impact on law and order in Pakistan, and whether “global forces will try to isolate Pakistan” due to its alleged support of the Taliban, said Abdul Kadir Hussain, the head of fixed-income asset management at Dubai-based Arqaam Capital.

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ICICI Securities Is Bullish On These 2 Mid Cap Stocks With Potential Returns Up To 27%

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Buy TCNS Clothing with potential upside of 27%

TCNS Clothing, founded in 1997, is a Mid Cap company in the Apparels sector with a market capitalization of Rs 3,484.02 crore.

According to ICICI Securities, through its three popular homegrown brands, TCNS has emerged as the market leader in the women’s ethnic area, thanks to its multi-distribution channel approach and robust supply chain infrastructure.

ICICI Securities sees an upside of 27% in the stock of TCNS Clothing to Rs 700, from the current market price of Rs 553.

“Since our initiation report, the stock price has appreciated by ~38%. We maintain BUY rating on the stock with an unchanged target price. We value TCNS at Rs 700 i.e. 35x FY23E EPS”, the brokerage said in its research report.

Key triggers for future price-performance:

  • In FY22, there will be a healthy store addition pipeline with the opening of 60+ additional stores on a net basis (40+ stores have already been inked).
  • Continues to expand its omni distribution channel by introducing new business models such as a third-party market place and developing ‘online-first’ product lines.
  • Creating a new integrated warehouse to improve supply chain efficiency and scale up B2C delivery (to be set up by December 2021)
  • 15 existing stores were upgraded and expanded at favourable long-term leases in prominent malls and high streets.
  • Increasing focus on network expansion in tier III/IV cities, mostly through a franchisee-led strategy.

Buy KNR Constructions, Says ICICI Securities

Buy KNR Constructions, Says ICICI Securities

KNR Constructions Ltd., founded in 1995, is a Mid Cap business in the Infrastructure sector with a market capitalization of Rs 8,361.10 crore.

According to broking fir, ICICI securities, irrigation, and urban water infrastructure management are two areas where the organization has a strong presence. Over the last three years, the company has reported a 24.5 percent revenue CAGR and has regularly delivered an industry-leading operating margin of 20%. Prudent management, no net debt, and strong return ratios (RoCE: >23%)

ICICI Securities sees an upside of 20% in the stock of KNR Constructions to Rs 340, from the current market price of Rs 284.

“KNR’s share price has grown at 33% CAGR over the past five years. We maintain our BUY rating on the company. We value KNR at Rs 340/share,” ICICI Securities said in its report.

Key triggers for future price-performance:

  • KNR is anticipated to be one of the biggest beneficiaries of the growing road and irrigation sectors (Jal Jeevan Mission)
  • Strong order book position, receipt of assigned dates in a majority of its projects, and execution pick-up will result in an 18.8% topline CAGR in FY21-23E.
  • The operating margin is expected to remain high due to a price escalation clause in the road agreement and higher profits at irrigation projects.
  • Asset-light strategy utilising monetisation to generate additional cash flows

ICICI Securities Is Bullish On These 2 Mid Cap Stocks With Potential Returns Up To 27%

ICICI Securities Is Bullish On These 2 Mid Cap Stocks With Potential Returns Up To 27%

Stock Name Recommendation Target Price Current Market Price Potential Gain
KNR Constructions BUY 340 284 20%
TCNS Clothing BUY 700 553 27%

Disclaimer

Disclaimer

Investors should not make any trading or investment decisions solely based on the information presented in this article. We are not a licensed financial counsellors, and the information provided here does not constitute investment advice. It is a piece of information extracted from ICICI Securities brokerage report. Please seek the advice of an expert. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates, the author, and the brokerage firm take no responsibility for losses or damages resulting from the information in this article.



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BoM tops PSU banks in terms of loan, saving deposit growth in Q1, BFSI News, ET BFSI

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New Delhi: State-owned Bank of Maharashtra (BoM) has emerged as the top performer among public sector lenders in terms of loan and savings deposit growth during the first quarter of the current financial year. The Pune-headquartered lender recorded 14.46 per cent increase in gross advances at Rs 1,10,592 lakh crore in April-June period of 2021-22, as per the published data of BoM.

It was followed by Punjab & Sind Bank which posted 10.13 per cent growth in advances with aggregate loans at Rs 67,933 crore at the end of June 2021.

When it came to deposit mobilisation, BoM with nearly 14 per cent growth was a notch behind Punjab and Sind Bank, while the country’s largest lender State Bank of India recorded 8.82 per cent rise.

However, in absolute terms SBI’s deposit base was 21 times higher at Rs 37.20 lakh crore as against Rs 1.74 lakh crore of BoM.

Current Account Savings Account (CASA) for BoM saw 22 per cent rise, the highest among the public sector lenders, during the quarter.

As a result, CASA was 53 per cent or Rs 92,491 crore of the total liability of the bank.

Total business of BoM increased 14.17 per cent to Rs 2.85 lakh crore at the end of June 2021.

For the first quarter, BoM’s standalone net profit more than doubled to Rs 208 crore as against Rs 101 crore in the same period a year ago.

The bank’s asset quality improved significantly as the gross bad loans or gross non-performing assets (NPAs) dipped to 6.35 per cent of gross advances by the end of June 2021 as against 10.93 per cent by the end of first quarter of the previous fiscal.

In absolute terms, gross bad loans stood at Rs 7,022 crore at the end of June 2021, lower than Rs 10,558.53 crore recorded in the same period a year ago.

Net NPAs nearly halved to 2.22 per cent (Rs 2,352.75 crore) from 4.10 per cent (Rs 3,677.39 crore).



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Microfinance captains expect a turnaround during festive season, BFSI News, ET BFSI

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Microfinance loan repayment has risen sharply to about 90% on an average by the end of July from a low of 65-75% in May-June with economic recovery and the number of Covid-19 cases coming down. Industry captains expect business to be back to full swing not before the third quarter as the impact of the second wave is still being felt while the sectoral loan volume shrunk 14% in the April-June period.

“We are expecting recovery around the Durga Puja season. This is the time when business grows. But if the third wave comes, the recovery may be delayed by another quarter,” said Chandra Shekhar Ghosh, managing director at Bandhan Bank, the country’s largest microfinance lender. About 60% of Bandhan’s loan assets are unsecured micro loans.

The largest NBFC-MFI CreditAccess Grameen in terms of loan outstanding said its collection efficiency improved to 91% (excluding arrears payment) in July compared with 81% in June. The same parameter for Ujjivan Small Finance Bank improved to 93% in July from 78% in June. It was 79% as against 70% for Suryoday Small Finance Bank.

Bandhan Bank’s collection efficiency in micro loans was 77% in June.

All microfinance lenders have collectively disbursed Rs 25,820 crore in the June quarter, which was 14% lower than in the March quarter, according to data collated by Sa-Dhan, the oldest microfinance industry association.

Lenders across the board have raised their respective loan provisions in the June quarter to cover the possible future credit risk and took a hit on their profitability.

“We expect business — both in terms of loan disbursement and repayment – to be back to March level (pre-second wave level) by September,” Satin Creditcare Network chairman HP Singh said.

The sector’s gross loan outstanding fell 14% to Rs 2,14,528 crore from Rs 2,49,333 crore three months back.

“We have seen a recovery in microfinance operations since July,” said P Satish, executive director at Sa-Dhan.

A third wave, if it comes, can create further disruptions.

“Just about when we were coming out of the impact of Covid-19, the second wave struck. Though we had higher disbursement during the first quarter of the current fiscal compared to the same period of previous fiscal, business of the sector faced major challenges with full and partial lockdowns. Small MFIs bore the major brunt as access to funds from banks was restrained,” Satish said.



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HDFC Bank’s AT1 bonds get Moody’s Ba3 rating, BFSI News, ET BFSI

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MUMBAI: HDFC Bank‘s proposed Additional Tier 1 (AT1) bonds have been rated Ba3, three notches below their deposit ratings by Moody’s, with limited likelihood of any rating upgrade in the next 12-18 months due to possible weakness in sovereign rating and the likelihood of rising bad assets in the Indian financial system.

The bank will be the first private sector lender to offer those quasi-equity securities offshore if it finally launches the overseas sale that is expected to open for subscription in the next 7 days.

HDFC Bank will likely set a benchmark for many other local lenders including Union Bank of India, State Bank of India and Axis Bank.

S&P is also expected to come out with a similar rating grade for HDFC Bank’s AT1 series.

The initial guidance is likely to be less than 4 per cent, although it could finally settle anything between 3.5 per cent and 4 per cent, said people familiar with the matter. The size of the issue is expected to be in the range of $500 million to $1 billion depending on investor demand, ET reported on July 29.

“Roadshows have just begun across the world,” one of the persons cited above said.

In between, there were hard negotiations for the pricing particularly after a Thai bank raised AT1 at about 4 per cent two weeks ago.

The borrower is actually looking for 3.5 per cent, which looks tough. Still, there will be good demand for any paper series, branded with the HDFC mark, dealers said.

HDFC Bank and individual investment bankers could not be contacted immediately for comments.

Nearly a dozen banks have been appointed to help the proposed bond sale. Those banks include Barclays, Bank of America, Citi, HSBC, JP Morgan, Standard Chartered, MUFG, Sofgen, BNP Paribas and Morgan Stanley.

AT1, also known as perpetual bonds, add to banks’ capital base unlike perpetual papers issued by any corporate. Such securities do not have any fixed maturity but generally have a five-year call option that allows an exit route for investors.

“The Ba3 (hyb) rating is three notches below HDFC Bank’s baa3 Baseline Credit Assessment (BCA) and Adjusted BCA, reflecting the probability of impairment associated with non-cumulative coupon suspension, as well as the likelihood of high loss severity when the bank reaches the point of non-viability,” Moody’s said in a report Monday.

The principal and any accrued but unpaid distributions on these capital securities would be written down, partially or in full, if HDFC Bank’s common equity tier 1 (CET1) ratio is at or below 5.5 per cent any time prior to 1 October 2021, and 6.125 per cent from and including 1st October, 2021.

In such a scenario, the write-down may be temporary, and the amount could be reinstated subject to the Reserve Bank of India‘s (RBI) conditions, Moody’s said.

“A lowering of HDFC Bank’s BCA (Baseline Credit Assessment) will lead to a rating downgrade of the proposed AT1 securities,” Moody’s added.



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