Month: August 2021

2 Small Cap Stocks To Buy From Sharekhan For Gains Up To 30% Returns

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Arvind: Strong demand and recovery expected

Current market price Rs 96
Target price Rs 128

Sharekhan has retained a Buy on the stock with a revised price target of Rs 122. “We have reduced our earnings estimates for FY2022 to factor in COVID-led disruptions in the first quarter of FY2022 and broadly maintained it for FY2023 due to strong outlook in the textile business. In a stable business environment, the management is confident of doing sales volume of 90 million metres in the denim segment, 125 million-128 million metres in the woven segment and 48 million-50 million pieces in the garments business,” the brokerage has said.

Arvind: Buy the stock with a price target of Rs 128

Arvind: Buy the stock with a price target of Rs 128

“Increased revenue, steady improvement in Operating Profit Margins and reduction in debt would result in strong improvement in return ratios. The stock is currently trading at an attractive valuation of 5.7 times its FY2023E EV/EBIDTA. We maintain our Buy recommendation on the stock with a revised price target of Rs 122,” Sharekhan has stated.

Financial projections by Sharekhan for Arvind Ltd

FY 2021-22 FY 2022-23
Revenues Rs 5073 crores Rs 6788 crores
Net profits Rs -1 crores Rs 70 crores
EPS -0.05 Rs 2.71

Transport Corporation: Strong start for FY 2022

Transport Corporation: Strong start for FY 2022

Current market price Rs 421
Target price Rs 541

According to Sharekhan, Transport Corporation of India is expected to benefit from the logistics sector’s growth tailwinds led by GST (business moving towards the organised sector), impact of COVID-19 (increased outsourcing of logistics services to prevent supply chain disruptions in future), government thrust on Atmanirbhar Bharat (PLI incentives to increase domestic manufacturing in turn leading to increased logistics needs), and global supply chain re-alignments (India is expected to be one of the key beneficiaries of China +1 strategy for global manufacturers).

Logistics sector growth to drive Transport Corporation of India shares

Logistics sector growth to drive Transport Corporation of India shares

“We expect Transport Corporation of India to be on a long-term growth trajectory, driven by positive sectoral fundamentals and its inherent strengths and capabilities. We have revised our net earnings estimates for FY2022E and for FY2024E factoring higher Operating Profit Margins. We retain our Buy rating on the stock with unchanged SOTP based target of Rs. 541 owing to strong growth outlook and its favorable positioning,” the brokerage firm has said.

Financial projections by Sharekhan for Transport Corporation of Indoa

FY 2021-22 FY 2022-23
Revenues Rs 2,802.4 Rs 3,258.4
Net profits Rs 160.2 Rs 202 crores
EPS 20.9 Rs 26.30

Disclaimer

Disclaimer

Investing in stocks poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage houses are not liable for any losses caused as a result of decisions based on the article. Investors should take care because the markets have hit a new peak. Please consult a registered professional advisor before you take a decision.



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Franklin Templeton MF says returned ₹21,000 cr to investors of six shuttered schemes

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Franklin Templeton Mutual Fund (MF) on Wednesday said it has returned over ₹21,000 crore to unit holders of six shuttered debt schemes till date.

This amounts to 84 per cent of assets under management (AUM) as of April 23, 2020, when the fund house announced to shut its six debt mutual fund schemes, citing redemption pressures and lack of liquidity in the bond market.

Further, cash to the tune of ₹1,111 crore was available for distribution as of July 31 this year, Franklin Templeton Asset Management (India) Pvt Ltd President Sanjay Sapre said in a letter to investors.

The six schemes — Franklin India Low Duration Fund, Franklin India Dynamic Accrual Fund, Franklin India Credit Risk Fund, Franklin India Short Term Income Plan, Franklin India Ultra Short Bond Fund, and Franklin India Income Opportunities Fund — together had an estimated ₹25,000 crore as assets under management (AUM).

A total of ₹21,080 crore has been disbursed by SBI Funds Management Pvt Ltd (SBI MF) to the unitholders of six shuttered schemes in five tranches.

SBI MF was appointed as the liquidator for the schemes under winding up by the Supreme Court.

Under the first disbursement in February, investors received ₹9,122 crore, while ₹2,962 crore were paid to investors in April, ₹2,489 crore in May, ₹3,205 crore in June and ₹3,303 crore in July.

According to Sapre, the average net asset value (NAV) at which the five tranches have been disbursed for each of the six schemes is higher than the NAV as of April 23, 2020.

“We believe this supports the decision made by the Trustee in consultation with the AMC and its investment management team to wind up the six schemes in order to preserve value for our unitholders,” he added.

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Fintechs attract record $2 billion in H1: Report

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The first half was a record with fund flows totalling USD 98 billion, compared to USD 121.5 billion in 2020.

Attracting a little over USD 2 billion in the first half this year, the domestic fintech sector has almost matched its total funding in the entire 2020, making it the best run ever, according to a report.

The record investments have been led by merchant platform Pinelabs’ USD 285 million from private equity funding round, USD 100 million venture capital funding rounds, Cred’s (USD 215 million), Razorpay (USD 160 million), Kreditbee (USD 153 million), Ofbusiness (USD 110 million) and Bharatpe (USD 108 million), a KPMG report released on Wednesday said.

Most of the money has flown into the digital banking space and the second biggest was insurtech, wherein the first half saw several such startups, including Turtlemint (USD 46 million), Renewbuy (USD 45 million), and Digit Insurance (USD 18 million) raising funds from the mid-sized private equity and venture capital funds, it added.

According to the report, four of the top ten deals in Asia were into domestic companies during the period under review. While the Noida-based Pinebabs’ USD 285 million was the third-largest in Asia, the USD 215 million in a Series D round by the Mumbai-based financial software firm Cred was the fourth largest in the continent. Bengaluru-based payments app

Razorpay’s raised USD 160 million in the series E round, making it the eighth largest, and lending app Kreditbee’s mopped up USD 153 million in series C round, the tenth-largest in Asia. The report, which did not give any sector-specific total numbers, also said the exits are going to increase in the country, both in terms of IPOs (Policybazaar has filed for a Rs 6,500 crore issue), while Paytm has filed for a Rs 16,500 crore issue, making it the largest-ever IPO in the country; and also in terms of acquisitions.

On the M&A front, fintechs could be targeted by banks, larger fintechs or even a fintech services conglomerate. The report expects leading fintech unicorns to try to tap into the strong capital market by looking at IPOs over the next 12 months. Banks are also keen to partner with fintechs, especially neo-banks and wealth tech platforms, as per the report.

Globally, too, the first half was a record with fund flows totalling USD 98 billion, compared to USD 121.5 billion in 2020.
Of the total investments, the Americas were the most robust with over USD 51 billion investments, followed by the EMEA region with USD 39.1 billion, but the Asia-Pacific region saw a dip to USD 7.5 billion from USD 13.4 billion a year ago.

Merger and acquisitions continued at a very healthy pace, accounting for USD 40.7 billion across 353 deals globally against USD 74 billion across 502 deals during 2020.

The report expects the second half to remain very robust in most regions. While the payments space is expected to remain a dominant driver of fintech investments, revenue-based financing solutions, banking-as-a-service models, and B2B services are expected to attract more investments.

Given the rise in digital transactions, and the subsequent increase in cyberattacks and ransomware, cybersecurity solutions will likely be high on the radar of investors, the report noted.

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Sebi eases operational procedure to make fee payments, BFSI News, ET BFSI

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New Delhi: Easing operational procedure, markets regulator Sebi on Wednesday asked companies and merchant bankers to pay the fees for filing public issues through the payment gateway provided on its intermediary portal. The intermediaries can also generate an e-challan, which can be shared with the companies or entities for making the required payment. Once, the payment is made, the same will be updated on the Sebi’s intermediary (SI) portal, the regulator said in two separate notices.

They have been asked to refrain from transferring the Sebi fees directly to the bank account of the regulator or through offline modes since such payments bypass the existing SAP system and create reconciliation issues.

“It may be further noted that with effect from August 12, 2021, the fillings, where the payment has been made through modes other than the payment gateway of SI portal, may get delayed,” the regulator said.

This is applicable for making the payment of fees to Sebi in connection with the filings made under buyback of securities norms, ICDR (Issue of Capital and Disclosure Requirements) rules and SAST (Substantial Acquisition of Shares and Takeovers) Regulations.



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Analysts suddenly gung ho on this PSU bank, see up to 50% upside, BFSI News, ET BFSI

Banking & Finance

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NEW DELHI: Bank of Baroda (BoB) impressed Dalal Street with its June quarter operating performance. A double-digit growth in retail loans and an expansion net interest margin (NIM) in the challenging June quarter were noteworthy. Gross non-performing assets fell marginally, but the impact of the second wave of Covid on its retail and MSME books was visible on slippages and credit cost.

Analysts said the situation was still under control and the management commentary was strong.

They said a rebalancing of the portfolio in favour of retail and a gradual decline in the international book would support NIM for the PSU bank. This, along with a moderation in credit cost will improve the return on asset (RoA) trajectory for the bank, analysts said and suggested up to 50 per cent upside for the stock.

“BOB recently raised capital via QIP, leading to a reasonable CET 1 of 11.3 per cent. With the merger (Vijaya Bank and Dena Bank) and asset quality pain now largely over, we expect BoB’s return on equity (RoE) to gradually improve to 10-12 per cent over FY23-24 from a low of 1 per cent in FY21,” it said and suggested a price target of Rs 122.

At Monday’s close of Rs 81.15, that target suggested a 50 per cent upside.

Motilal Oswal Securities has hiked its earnings estimates by 47 per cent for FY22 and 22 per cent for FY23 post the bank’s Q1 numbers. Estimating an RoA of 0.7 per cent and an RoE of 10.3 per cent by FY23, it has upgraded the stock to ‘buy’, with a revised price target of Rs 100.

ICICIdirect also sees the stock at Rs 100. It listed four factors that would prove key to its performance. First is the shedding of the bank’s low yield exposure and its focus on retail segment. Secondly, a shift to the new tax regime, which is set to aid profitability. The third is the comfortable capital to risky asset ratio at 15.4 per cent, which may keep earnings dilution risk away. Lastly, the decent asset quality amid the tough situation would help.

The bank reported a net profit of Rs 1,209 crore compared with a loss of Rs 864 crore a year ago. Net interest income (NII) rose 16 per cent to Rs 7,892 crore. Net interest margin (NIM) came in at 3.04 per cent against 2.52 per cent YoY and 2.73 per cent QoQ.

Retail loans rose 12 per cent YoY, led by a 25 per cent growth in auto loans, 20 per cent growth in personal loans, and a 38 per cent growth in gold loans.

The loan book, however, declined 2 per cent due to a 10 per cent fall in corporate loans as the bank shed low-yielding loans.

The gross NPA ratio declined marginally to 8.86 per cent from 8.87 per cent in the March quarter and 9.39 per cent the year-ago period, as recovery and upgrades increased to Rs 4,435 crore from Rs 818 crore YoY. The bank management is targeting Rs 14,000 crore in recoveries in FY22 and has guided for 1.5-2 per cent credit cost and net slippages of less than 2 per cent.

“It was a relatively steady performance but uncertainty over subsequent Covid waves and relatively elevated stress pool still temper our enthusiasm on earnings stability. The bank’s recent capital raise was dilutive, which is a persistent challenge for PSBs. We are rolling overestimates to December FY22, revising our target to Rs 98 from Rs 95 earlier,” Edelweiss said.

Edelweiss said the demonstration of the merger value add and, indeed, getting through the current crisis without deep earnings erosion will be key to the stock performance.

The promised post-merger rationalisation benefits are not a foregone conclusion, given the complexity of the task at hand, it said and suggested that the valuation at 0.5 times FY22E P/BV lends some comfort.

JM Financial is building in a credit cost of 1.2 per cent and RoA of 0.7 per cent for FY23. It has a price target of Rs 95 on the stock.



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10 banks come together to set up Secondary Loan Market Association

Banking & Finance

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Ten major banks, including State Bank of India (SBI), ICICI Bank, Canara Bank and Standard Chartered Bank (SCB), have come together to set up the Secondary Loan Market Association (SLMA). It is aimed at promoting the growth of the secondary market for loans in India and also create an online platform for this purpose.

SLMA is a self-regulatory body and has been formed as per the recommendation of the Reserve Bank of India’s Task Force on the Development of secondary market for corporate loans.

Wanted: A secondary market for bank loans

The other members of SLMA are Kotak Mahindra Bank, Deutsche Bank, Bank of Baroda, Punjab National Bank, Axis Bank and HDFC Bank.

As per SLMA’s memorandum of association, it will facilitate, promote and set up an online system for the standardisation and simplification of primary loan documentation, and standardisation of documentation for the purchase and sale/assignment documentation and other trading mechanisms for the secondary loan market and its documentation.

Website, logo, launched

SLMA will also develop and promote standard trading, settlement and valuation procedures and practices and rules and timelines for the members for conducting the business and to fix transaction-related charges.

The company’s website and logo were digitally launched on August 11, 2021, by Saurav Sinha, Executive Director, Reserve Bank of India.

Bonding together

Sinha said an active secondary market for loans in India will offer benefits to various stakeholders by way of capital optimisation, liquidity management, risk management, exposure re-balancing and efficient price discovery mechanism.

He observed that since smaller banks are generally constrained for various reasons from participating in large and creditworthy lending exposures at the time of origination, the secondary market can enable them to participate in such exposures at a later stage and the constraints faced under the Large Exposure Framework will be a thing of the past.

Sinha also laid stress on the essential pre-requisites for a vibrant secondary market — an ecosystem of market intermediaries like facility agents, security trustee, arrangers, valuation agencies, etc.

Expanding the spectrum of investors

Ashwini Bhatia, Managing Director, SBI, noted that the conceptualisation and operationalisation of SLMA in a time-bound manner is an appropriate response to the long-felt need for wider participation in the loan market aided by appropriate risk mitigation. It will provide the banks and other participants a window for managing their loan assets portfolio, he added.

Bhatia underscored that presently, the primary and secondary markets are restricted to banks and non-banking finance companies and domestic and foreign investors participate only in distressed debt through Asset Reconstruction Companies.

“As such, there is a felt need to expand the spectrum of investors in the secondary market and Alternative Investment Funds/Mutual funds to invest in the secondary loan market,”he said.

Sanjay Srivastava, Chairman, SLMA, said the secondary market for loans in India will evolve on the strength of a systematic digital loan trading platform, standardisation of documents, active participation by stakeholders and effective price discovery mechanism.

Sunil Mehta, Chief Executive, Indian Banks’ Association (IBA), said currently the IBA is actively working on development of syndicated loan market in India and one of the key success factors for such market will be the parallel development of secondary market for sale of loan.

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Gold Prices might Remain Weak in India in August: Good Buy For Investors

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Investment

oi-Kuntala Sarkar

|

The month of August is witnessing the lowest gold price in India in the last 4-months. This has led to some questions regarding the movement of the precious metal in the near term. Gold has always been considered to be a safe haven for investors in the long term. Last year proved a boon for gold investors, as the precious metal rallied on the back of the Covid-19 outbreak, as investors turned risk averse. Now prices are going down again, it is giving hope to the investors to put money in gold.

Gold Prices Might Remain Weak in India in August: Good Buy For Investors

Gold prices in India have been static on 11th August from yesterday at Rs. 4528 for 22 carat gold and Rs. 4628 for 24 carat gold. Most of the gold jewelry is made with 22 carat gold because of its better durability. In addition to that price, gold jewelry consists making charges and GST.

Gold price fluctuation chart in India

In India, prices started to fall on a daily basis since 31st July this year. August has seen a consistent fall in the prices. Only on 5th August prices saw Rs. 20 hike than its earlier day in 10 grams gold. Other than that period the gold prices fell sharply.

In Bangalore, the price for 22 carat gold is Rs. 43,350, in Mumbai, it is Rs. 45280, in Kolkata, is watching one of the highest prices at Rs. 45700 and in Delhi, it is selling at Rs. 45500. In most of the cities on 7th August, the gold prices fell around Rs. 1000 per 10 grams. Since then gold rates did not give any sign to be up. On 30th and 31st July, the prices went highest in recent times at Rs. 47380 for 10 grams 22 carat gold.

Why did the rates go down-field?

It all began on Friday last week, as the employment and wages data was out by the labor department in the USA, it showed that the country’s economy is getting better momentum. This triggered investors to think that the US Fed Reserve might taper the stimulus that earlier helped gold to reach higher in 2020. Investors started to fear that the commodities might lose sheen and investors may prefer Government. bonds. This led to international gold prices spiralling downwards, impacting Indian gold rates negatively.

In the global markets, before the employment data, gold was trading at $1816 an ounce, but, in the last 3 trading sessions has now fallen to $1730 an ounce. Interestingly, the CPI data in the US is due later today and if this points to inflation worries, bond yields will rally and push gold prices further lower.

Thus, much of the movement of gold depends on inflation, bond yields, economic growth and movement of the US dollar against a basket of currencies.

Dropping gold rates always creates ground for the investors to put more money in the yellow metal. Additionally, the recently issued sovereign gold bond scheme – V by the RBI is also giving one more opportunity to invest in gold now, at lower prices. No further economic development can keep the gold prices low in August in India.



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RBL Bank empanelled as Agency Bank by RBI

Banking & Finance

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Private sector lender RBL Bank has been empanelled by the Reserve Bank of India (RBI) as an ‘Agency Bank’ to conduct banking business for the Central and State Governments.“The authorisation will enable RBL Bank, to handle a broad range of transactions related to government business, such as distributing subsidies, pension payments, collecting Central and State taxes including income tax, excise duties, customs, GST, stamp duty, registration, value added tax and professional tax, in both online and offline modes,” it said in a statement on Wednesday.

Also read: RBL Bank selects AWS to accelerate AI efforts

The accreditation comes on the heels of the RBI’s guideline authorising scheduled private sector banks as Agency Banks to carry out specific government-related business transactions.

Parool Seth, Head – FIG, Inclusive FI, MNC and New Economy Client Coverage, RBL Bank said, “With the RBI’s accreditation, we will be in a position to offer to the Centre and the State governments, cost and time-efficient best-in-class products and solutions.”

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2 Stocks To Buy From The Midcap Space That Can Yield 32% Gains

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Whirlpool of India: 32% Gains Possible

Broking firm, Motilal Oswal believes that the stock of Whirlpool of India can hit a target price of Rs 2,650, which means more than 32% gains from the current market price of Rs 2,006.

Whirlpool of India current market price Rs 2006
Target price Rs 2650
Potential profits 32.00%

“While demand has quickly normalized for Consumer Electrical categories, offtake for Durables remained under pressure in 1QFY22. Whirlpool of India first quarter FY22 two-year revenue CAGR of -18% is better than Room AC players in our coverage universe (barring Lloyd’s) and provides us confidence that the company continues to see market share gains rather than general apprehensions of a risk to market share,” the brokerage has said.

Target price of Rs 2,650 on the stock

Target price of Rs 2,650 on the stock

Unlike peers, Whirlpool of India hasn’t resorted to aggressive cost cutting measures during COVID-19. As the economy recovers from the lockdowns, operating leverage should aid margin normalization by FY24E to 11.3%.

“The impact of commodity price inflation has been higher than our expectation, leading us to cut our FY22E/FY23E EPS by 10% each. Our target price on the stock stands at Rs 2,650 per share (earlier: Rs 2,900 per share) as we roll forward our valuation to Sep’23E EPS, but cut our target P/E to 50 times. We maintain our Buy rating on the stock of Whirlpool of India,” the broking firm has said.

Motherson Sumi: Likely gains of 30% possible on the stock

Motherson Sumi: Likely gains of 30% possible on the stock

Motherson Sumi Systems current market price Rs 219
Target price Rs 285
Potential profits 30.00%

Not encouraging financial performance

Not encouraging financial performance

According to broking firm Motilal Oswal Motherson Sumi 1QFY22 performance was impacted by exogenous factors in all its businesses (COVID in India and supply-side issues in overseas businesses), sharp copper price inflation, and non-recurring expenses at PKC.

“While the near-term outlook is murky due to supply chain uncertainties, Motherson Sumi is well-positioned to benefit from cyclical recovery in its key businesses as well as from the strong order book and improving efficiencies in SMRPBV,” Motilal Oswal has said in its latest report, following the quarterly numbers of the company.

“We cut our FY22E EPS estimates by 8%/3%, factoring in headwinds from the semiconductor shortage as well as copper cost inflation. Maintain Buy, with target price of Rs 285 (Sep’23-based SOTP),” the brokerage has noted.

Disclaimer

Disclaimer

Investing in stocks poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage houses are not liable for any losses caused as a result of decisions based on the article. Investors should take care because the markets have hit a new peak. Please consult a registered professional advisor before you take a decision.



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Visible signs of economic revival, says finance ministry, BFSI News, ET BFSI

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NEW DELHI: There are visible signs of economic rejuvenation since the second half of May, with the second wave of the pandemic abating in most parts of the country and state governments lifting restrictions in phases, a finance ministry report said on Tuesday, while calling for sustaining the vaccination progress and the need for Covid-appropriate behaviour.

“The receding of India’s second wave, along with rapid progress in vaccination, has set the stage to further accelerate economic recovery. The movement of high frequency indicators in July clearly point towards a broad-based economic revival,” said the finance ministry’s monthly economic report for July, adding that these signs resonate with the fact that the economic impact of the second wave is expected to be muted.

It said PMI manufacturing sharply rebounded to be in expansionary zone across output and input sub-components of the index. Marking swift economic recovery, GST collection has reclaimed its Rs 1 lakh crore-plus territory in July, signifying increased business and consumer activity.

Rail freight at 112.7MT in July hit a record for the month and registered 18.3% growth (year-on-year) and13.2% rise compared to pre-Covid July 2019. The surge in economic activity is further corroborated by trends in Kharif sowing, fertiliser sales, power consumption, vehicle registrations, highway toll collections, e-way bills and digital transactions, said the report.

“Latest available data on growth of eight core industries, auto sales, tractor sales, port traffic, air passenger traffic also indicate sequential improvement from the contraction induced by the second wave,” it further added.

“At this juncture, the economy and society are at a crucial inflection point where sustenance of economic recovery, vaccination progress and Covid-19 appropriate behavioural strategies are needed in close synergy with each other.”

It said that having antibodies reduces the probability of acquiring serious illnesses, as is borne by studies. So, any subsequent waves are expected to be mild in terms of severity of disease.



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