Reserve Bank of India – Press Releases
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Month: November 2021
3 Stocks To Buy As Recommended By ICICI Securities with Strong Upside Potential
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BPCL – Stake sale process to drive stock performance
The brokerage has set a target price of Rs 520 on BPCL for a 12-month period, implying a potential upside of up to 24% over the current market price of Rs 419.
Q2FY22 Results:
- In Q2FY22, BPCL announced better-than-expected performance.
- Revenue increased 13.3% from the previous quarter to Rs 101631.7 crore.
- GRM came in at US$6/bbl, which was higher than expected.
- The marketing segment saw an increase in inventories of Rs 227 crore. Subsequently,
- EBITDA came in at Rs 4477.7 crore, up 37.7% from the previous quarter.
- PAT came in at Rs 2694.1 crore, increasing 79.4 percent from the previous quarter.
Target and Valuation
“BPCL’s GRM improved during Q2FY22 and is likely to sustain at higher level given recovery in product cracks. We upgrade our rating on the stock from HOLD to BUY Target Price and Valuation: We value BPCL at Rs 520 i.e. average of P/BV multiple: Rs 527/share and P/E multiple: Rs 512/share,” the brokerage has said.
Key triggers for future price-performance:
Progress on divestment and favourable reaction from acquisition bidders Continued improvement in global refining product cracks (mostly diesel) Increased fuel demand and stable marketing margins.
Neogen Chemicals- Custom synthesis offers strong visibility ahead
The brokerage has set a target price of Rs 1570 on Neogen Chemicals for a 12-month period, implying a potential upside of up to 27% over the current market price of Rs 1236.
Q2FY22 Results:
- Because of improved utilisation of recently commissioned phase 1 capacity, numbers were higher than expected.
- Organic chemical segment (increased 36 percent YoY) and inorganic chemical segment (up 38 percent YoY) both reported revenue growth of 38 percent YoY to | 113.2 crore (up 63 percent YoY)
- Due to the absorption of fixed overheads, gross margins fell 184 basis points year over year to 43.3 percent, while EBITDA margin fell 80 basis points to 18.1 percent.
Target and Valuation
“The stock appreciated at 65% CAGR in last two years. We retain BUY rating on the back of better growth outlook from custom synthesis business Target Price and Valuation: We value Neogen Chemicals at 40x P/E FY24E EPS to arrive at a revised target price of | 1570/share (earlier | 1515/share),” the brokerage has said.
Key triggers for future price-performance:
A higher share of value-added business portfolio to improve profits profile of firm Allocation of incremental FCF towards organic/inorganic growth expected to expand return ratios further.
Indian Oil Corporation- GRM improvement drives profitability
The brokerage has set a target price of Rs 155 on Indian Oil Corporation for a 12-month period, implying a potential upside of up to 18% over the current market price of Rs 131.
Q2FY22 Results:
- On the profitability front, IOC’s results were better than expected.
- Revenue climbed 9.5 percent on a quarter-over-quarter basis to Rs 169770.8 crore (our estimate: | 157292 crore). Marketing revenues climbed 1% from the previous quarter to 18.9 MMT.
- GRM was reported at US$6.6/bbl, but core GRM was US$4.8/bbl. Core GRM improved from quarter to quarter. EBITDA was Rs 10628.1 crore, down 4.5 percent from the previous quarter.
Target and Valuation
“IOC’s core GRM improved in Q2FY22. We expect it to remain at current levels in coming quarters. Steady marketing margins and further sales pick-up are expected to lead to better profitability. We maintain our BUY rating on the stock. Target Price and Valuation: We value IOC at Rs 155 i.e. average of P/E multiple: Rs 151 /share and P/BV multiple: Rs 159/share,” the brokerage has said.
Key triggers for future price-performance:
Cracks in global refining product recovery (mainly diesel)
Demand for transportation fuels will continue to rise, while marketing margins will remain stable.
To promote total profitability, petrochemical prices are at a higher level. Profitability in the pipeline segment has remained stable over the last five years.
Payout of dividends on a regular basis.
Disclaimer
The above stocks are picked from the brokerage report of ICICI Direct. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.
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5 Midcap Stocks To Buy And Hold For The Festive Season
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Tata Power
Motilal Oswal expects Solar EPC to give a leg up in earnings for the next two years. Recent award wins, particularly from NTPC, have seen its EPC order book inflate to Rs 85b, thereby providing strong visibility.
“EBITDA from Solar EPC is expected to post a 30% CAGR over FY21-23. This -coupled with the commissioning of renewable projects and the takeover of Odisha DISCOMs -should lead to a 33% PAT CAGR over FY21-23. Furthermore, the possible benefit from the merger of CGPL with itself provides an upside to profitability,” the brokerage has said.
Buy Varun Beverages
According to Motilal Oswal Varun Beverages is expected to deliver strong volume growth across all the three product segments, with an increase in consumption patterns to pre-COVID levels.
“We expect strong demand traction over the next few years due to: a) strong distribution network, b) rising penetration in the newly acquired region (south and west India), c) diversifying product portfolio, and d) growing refrigerator penetration in rural/and semi-rural areas per household and higher power availability hours. We expect a revenue/EBITDA/PAT CAGR of 20%/25%/56% over CY20-23E,” the brokerage has said.
APL Apollo
Motilal Oswal also has a buy on the stock of APL Apollo. “We expect strong volume growth and improved profitability on the back of: a) increasing shift towards structural tubes (from RCC structures), b) a pan-India presence, coupled with diverse product offerings, c) behemoth market share, increasing the share of value-added products. Several cost-control measures, kicking-in of operating leverage, and growing share of VAP is expected to lead to improved margin and higher cash generation. We expect a revenue/EBITDA/PAT CAGR of 26%/26%/36% over FY21-24E,” the brokerage has said.
Orient Electric
“With demand scaling back gradually and the upcoming festive season ahead, we believe Orient Electric is best placed to capture this trend, with its strong manufacturing and distribution capabilities. We forecast a revenue/EBITDA/adjusted PAT CAGR of 19%/21%/25% over FY21-24E,” Motilal Oswal Financial Services has said.
Trident
Trident is witnessing robust demand after the lifting of COVID-related lockdown restrictions. The demand trend in Home Textiles is expected to continue, with freight cost gradually subsiding and pent-up demand in the US and Europe market. The Paper segment is expected to see a sharp recovery with the opening of offices and educational institutes.
Improvement in balance sheet of corporate India
“The country witnessed the third consecutive year of normal monsoon which is also likely to aid rural demand, and with the government balance sheet in good stead, we expect the government to press the fiscal pedal to drive growth over the next 6-12 months. Corporate India too surmounted the challenges posed by Covid with unprecedented cost containment measures with parallel improvement in balance sheet as well as cash-flows,” the brokerage has said.
Disclaimer
The above stock is picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.
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2 Stocks To Buy For Gains Up To 44%: ICICI Direct
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Buy Jindal Stainless Hisar with a target price of Rs 488
Jindal Stainless (Hisar) Limited (JSHL) is a major operator in the Indian stainless steel industry. “JSHL reported a healthy performance in Q2FY22. During Q2FY22, JSHL reported a consolidated topline of Rs 3743 crore, up 63% YoY and 35% QoQ, higher than our estimate of Rs 3465 crore. Whereas the consolidated EBITDA was at Rs 567 crore, up 95% YoY and 37% QoQ, higher than our estimate of Rs 475 crore. Consolidated PAT was at Rs 499 crore, up 196% YoY and 39% QoQ, higher than our estimate of Rs 374 crore” said the brokerage.
Key triggers for future price performance according to the brokerage
- With respect to the precision strip division, JSHL has recently commissioned the first phase of expansion wherein the precision strip capacity has been expanded from 22000 tonnes per annum (TPA) to 48000 TPA. Going forward after the second phase, precision strip capacity would be further expanded to 60000 TPA (from 48000 TPA) which would be completed by Q4FY23. The total CAPEX for both phases is Rs 250 crore.
- JSHL is also expanding blade steel capacity from current capacity of 14000 TPA to 24000 TPA in two phases at a total CAPEX of Rs 200 crore for both phases. After the first phase, the capacity would be expanded to 20000 TPA and is likely to be completed by Q2FY23 while post the second phase capacity would be expanded to 24000 TPA and be completed by Q2FY24.
- For FY22, for merged entity, JSHL has upward revised its EBITDA/tonne guidance to ~Rs 24000-25000/tonne (from Rs 18000-20000/tonne earlier).
What should investors do?
JSHL’s share price has grown by ~3.5x over the last 12 months (from ~Rs 97 in October 2020 to ~Rs 339 levels in October 2021). We maintain our BUY rating on the stock. We value JSHL at Rs 488, based on the merger ratio, said the brokerage.
Buy Sumitomo Chemicals with a target price of Rs 505
Sumitomo Chemical India (SCI) operates across the agro solutions (ASD), environmental health (EHD), and animal nutrition business verticals (AND). According to the brokerage the company has “reported revenue growth of 1% YoY to Rs 910.4 crore, impacted by sluggish growth from herbicides (-20.6% YoY). The gross margins fell 90 bps YoY to ~39% while EBITDA margin contracted 70 bps YoY to 23.6%. EBITDA was down 2% YoY to Rs 214.7 crore and PAT declined 2% YoY to Rs 154.2 crore owing to lower-than-expected operational performance.” The brokerage has also said that “overall numbers were below our estimates, impacted by subdued herbicides sales.”
Key triggers for future price performance according to the brokerage:
- Upcoming CAPEX for five molecules, which will be supplied to SCC Japan. Capex is earmarked at Rs 100-110 crore with an asset turn of around 2-2.5x.
- Potential opportunity of technicals manufacturing for Nufarm to improve export share meaningfully.
- Allocation of incremental FCF towards organic/inorganic growth likely to expand return ratios further.
What should investors do?
“The stock appreciated at 63% CAGR in the last two years. We retain BUY rating on the back of a better growth outlook from the outsourcing opportunity of SCC Japan. We value Sumitomo Chemicals at 50x P/E FY23E EPS to arrive at a target price of Rs 505/share (earlier Rs 505/share)”, said the brokerage.
Disclaimer
The above stocks are picked from the brokerage report of ICICI Direct. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.
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PNB Housing Finance to raise ₹2,000 cr via NCDs in tranches
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The Board of Directors of PNB Housing Finance Ltd (PNBHFL), on Tuesday, gave its nod for raising up to ₹2,000 crore via non-convertible debentures (NCDs) through one or more tranches.
The NCDs will be raised through private placement basis and could be both secured as well as unsecured NCDs. The details of the issue, including pricing, will be decided in the coming days.
This decision to go in for fund-raise via NCD route comes on the heels of PNBHFL board deciding not to proceed with the ₹4,000-crore preferential allotment deal with Carlyle Group and other marquee investors.
Meanwhile, PNBHFL has reported a 25 per cent decline in net profit for the second quarter ended September 30 at ₹235 crore (₹313 crore). PNBHFL had recorded a net profit of ₹243.28 crore in the first quarter this fiscal.
Total income for the quarter under review declined 21 per cent to ₹1,586 crore (₹2,022 crore). In the first quarter this fiscal, total income came in at ₹1,693 crore.
For the six months ended September 30, PNBHFL recorded net profit of ₹606 crore, compared to net profit of ₹725 crore in the same period last fiscal.
It may be recalled that the PNBHFL-Carlyle Group deal was shelved by PNBHFL after the deal had hit a roadblock post a proxy advisory firm red flagging the preferential allotment on the pricing front, contending that it was not in the interest of the promoter (PNB) as well as the minority shareholders of PNBHFL.
Market regulator SEBI had soon after this intervened and asked PNBHFL not to go ahead with the planned preferential issue until the valuation of the shares is done by an independent registered valuer.
PNBHFL had then fixed the preferential allotment price at ₹390 per share, lower than the stock price prevailing at that time. The company had preferred an appeal before the securities appellate tribunal (SAT) on the SEBI letter.
A two-member bench of the SAT, on August 9, gave a split verdict and directed that its interim order of June 21 will continue till further orders. SAT also restrained PNB Housing Finance from disclosing the voting results (of shareholders) on the fund raise plan.
Post the SAT’s split verdict, SEBI had filed an appeal at the Supreme Court against this verdict.
The Supreme Court dismissed the SEBI appeal against the SAT’s order in the PNBHFL’s ₹4,000-crore capital raising deal with Carlyle Group and other investors, stating that the appeal has become infructuous due to subsequent developments.
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BoI Q2 profit doubles to ₹1,051 cr on decline in loan-loss provisions
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Bank of India’s standalone net profit almost doubled to ₹1,051 crore in the second quarter against ₹526 crore in the year-ago period on the back of robust growth in other income and steep decline in loan-loss provisions.
During the reporting quarter, there was a reduction of ₹5,771.50 crore in gross non-performing assets (GNPAs), net of slippages.
The Mumbai-headquartered public sector bank’s net interest income declined 14 per cent year-on-year (y-o-y) to ₹3,523 crore (₹4,113 crore in the year-ago quarter).
Other income, including profit/ loss on sale of assets, profit/ loss on revaluation of investments (net), earnings from foreign exchange and derivative transactions, recoveries from accounts previously written off and dividend income, jumped 59 per cent y-o-y to ₹2,136 crore (₹1,346 crore).
GNPA position improved to 12 per cent of gross advances as of September-end 2021 against 13.51 per cent in the preceding quarter. Net NPAs position, too, improved to 2.79 per cent of net advances against 3.35 per cent in the preceding quarter.
Global deposits (domestic plus overseas) edged up by about one per cent y-o-y to ₹6,12,961 crore.
Global advances increased 2.70 per cent y-o-y to ₹4,18,895 crore, mainly on the back of growth in RAM advances (retail, agriculture and micro, small and medium). Corporate advances portfolio saw a de-growth.
Corporate loans
Atanu Kumar Das, MD and CEO, observed that out of the corporate loan sanctions pipeline of ₹35,000 crore, disbursement was less than ₹10,000 crore. However, Das expects corporate loan disbursements to gain traction in the third and the fourth quarters, which will help the bank end FY22 with an overall credit growth of 6-7 per cent.
M Karthikeyan, Executive DIrector, expects GNPAs to reduce by about ₹4,500 crore in the third quarter and about ₹5,000 crore in the fourth quarter.
In the current quarter, out of the recovery of ₹3,218 crore, the bank received ₹1,880 crore on account of resolution of DHFL.
Exposure to SREI Group
Karthikeyan said BoI has direct exposure of ₹1,024 crore to the SREI Group, which is undergoing corporate insolvency resolution process, and ₹970 crore via the pooled route.
The bank has made 50 per cent provision on its direct exposure.
On a consolidated basis, including the results of four domestic subsidiaries, four overseas subsidiaries, one joint venture and six associates, BoI reported a 97 per cent jump in net profit at ₹1,073 crore (₹543 crore).
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Bankers protest against Chaudhuri’s arrest, want FinMin to intervene
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Bankers are up in arms against what they perceive as an unjust punitive action against former SBI Chairman Pratip Chaudhuri who was arrested on Sunday for an alleged loan scam.
While prominent bankers have condemned the arrest as being detrimental to lending and credit flows, the Indian Banks Association (IBA) has asked the Centre to put in place a procedure to safeguard bankers against state-level authorities, including police, in cases of loan defaults.
Former SBI Chief arrested in Jaisalmer hotel loan case
Sunil Mehta, Chief Executive Officer of IBA told BusinessLine that the mechanism to protect bankers should be on the lines of that already in place for central investigative agencies such as the CBI. Mehta said IBA has written to the Secretary, Department of Financial Services (DFS) in the Finance Ministry and the Chief Secretary, Rajasthan Government, seeking their intervention. In its communication to the DFS, the IBA has said the bona fide decisions on loans should not be subject to arrest without a mechanism in place.
‘Examine the evidence’
“How can you arrest a person until you have sufficient evidence against him? It is humiliating to subject a person of Chaudhuri’s stature to go through this. People with sufficient knowledge should examine the documented evidence and find out if there is something mala fide,” Mehta said.
Bankers, including former SBI chiefs Rajnish Kumar and Arundhati Bhattacharya, have also voiced support for Chaudhary and highlighted the bankers’ precarious situation. Uday Kotak, Managing Director and CEO, Kotak Mahindra Bank and Chairman of the IL&FS board, said on Tuesday, “Based on what I have read, we need to have a criminal justice system which protects bona fide actions taken by lenders to recover their money.”
Meanwhile, industry observers pointed out that Chaudhuri retired as SBI Chairman on September 30, 2013. SBI had assigned the asset in March 2014 to Alchemist ARC. Pratip Chaudhuri joined the ARC Board only in October 2014. Some bankers pointed out that the allegation against Chaudhuri is not borne out as he was neither with the SBI nor with Alchemist when the asset was assigned to the ARC.
Alchemist ARC in a statement alleged that defaulters in the Hotel Gaudavan matter are taking the “judicial machinery for a ride”.
With inputs from Surabhi
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Poonawalla Fincorp board okays Magma HDI stake divestment
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The board of directors of Poonawalla Fincorp Ltd (PFL) has approved divestment of the company’s direct and indirect shareholding in Magma HDI General Insurance in order to comply with requirements of the Reserve Bank of India and IRDAI.
Sanoti Properties, held by Adar Poonawalla and Serum Institute of India, has agreed to acquire the direct and indirect stake of the company in Magma HDI.
“This structure is in line with other financial services groups with NBFC and general insurance operations and will allow a framework for continued business relationship between PFL and Magma HDI,” PFL said in a statement on Tuesday.
Also see: Poonawalla Fincorp: Consolidated PBT up 151% YoY
PFL will also divest its 48.89 per cent shareholding in Jaguar Advisory which, consequent to the above divestment in MHDI shares, will own only cash and cash equivalent, to Celica Developers, the joint venture partner in Jaguar Advisory.
Regulatory compliance
IRDAI’s Registration of Insurance Companies Regulations stipulates that a promoter of an insurance company cannot be a subsidiary of another company. Post the acquisition of PFL by Rising Sun Holdings in May 2021, PFL has become a subsidiary of RSH. As a result, IRDAI sought compliance from Magma HDI regarding its shareholding structure.
PFL is a joint venture partner in Magma HDI with Celica Developers, Jaguar Advisory and HDI Global SE.
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Bankers shocked over ‘high-handed’ move, BFSI News, ET BFSI
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Former State Bank of India (SBI) chairman Pratip Chaudhuri was arrested by the Rajasthan police on Monday on complaints from a loan defaulter sending shock waves in the banking industry that was just limping back to normalcy after years of fear of being implicated criminally on trumped up charges.
There was reportedly no notice or formal summons in a decade-old soured-loan case which has shaken the banking sector, stoking concerns the incident could delay decision making in multi-billion-dollar recovery initiatives of several lenders.
Former SBI chairman Rajnish Kumar termed his predecessor’s arrest as extremely unfortunate and a case of high handedness. “Prima facie, it seems to be a case of misrepresentation of facts and singling out of an individual, who held a high position, to seek publicity,” Kumar told ET. “In the process, the dignity of an individual has not been given any consideration. It needs to be looked into whether due process of law has been followed.”
Account Acquired by an NBFC in 2017
Chaudhuri was arrested from his Delhi residence by the Rajasthan police and taken to Jaisalmer on Monday. His subsequent bail application was rejected by the local magistrate. The case refers to the ‘Garh Rajwada’ hotel project in Jaisalmer, financed by SBI in 2007.
- Chaudhuri was arrested from his Delhi residence by Rajasthan police, taken to Jaisalmer on Monday
- Local magistrate rejected his bail plea
- Case refers to a Jaisalmer hotel project, financed by SBI in 2007 Account became an NPA in 2010
- Chaudhuri retired in 2013 NPA was sold to an ARC in 2014
- Bank not summoned or asked for its views in case
Since the project was not completed for three years and a key promoter passed away in April 2010, the account slipped into the non-performing asset (NPA) category in June 2010.
As the country’s biggest mass lender didn’t succeed in reviving the project, SBI sold the loans to the Alchemist Asset Reconstruction Co (ARC) in March 2014.
To be sure, it is unclear whether Chadhuri was arrested because of his role as SBI chairman or because he was later chairman of Alchemist ARC, which bought the assets from the bank. Police authorities in Rajasthan couldn’t immediately be reached for their comments.
Ironically, bankers said Chaudhuri retired from the bank six months before the sale of loans, in September 2013.
In a statement, SBI said the sale to Alchemist ARC was done through a laid-down process. Further, the account was taken to the bankruptcy court and was acquired by an NBFC in December 2017.
‘No Legal Basis’
The arrest, without any due notice or summons neither to the bank nor Chaudhuri, has not gone down well with current and former SBI executives. Former SBI deputy managing director Sunil Srivastava took to Twitter to express his displeasure. “Frankly, without notice and without summons, how can police from another state arrest someone in Delhi? Where is the due process of law? Absolutely pathetic. Is the system being gamed again by defaulters despite all efforts by Modi govt; time for overhaul of judicial processes to improve transparency and introduce accountability,” Srivastava wrote on the social media platform.
Interestingly, Alchemist ARC promoter Alok Dhir was not arrested and his mobile phone was switched off when ET tried to reach him. “Whatever it is, it does not have a logical or legal basis,” the chief of a large public sector bank said, on the condition of anonymity. “There have been numerous court orders, including from the Supreme Court, that directors are not liable for the faults or crimes of a company management. Some lower level judicial and police officers who have no clue of how banking works take these high-handed decisions to please higher-ups. This must stop.”
‘SBI not Party to Case’
SBI said despite the case involving its loan account, it was neither summoned nor asked for its side of the story.
“It transpires now that the borrower had initially filed an FIR with the state police against the sale of the asset to the ARC. Aggrieved against the negative closure report filed by police authorities, the borrower had filed a ‘protest petition’ before the CJM court,” SBI said in a statement. “Incidentally, SBI was not made a party to this case. All the directors of that ARC, including Mr Chaudhuri who joined their board in Oct 2014, have been named in the said case. Incidentally, Mr Chaudhuri retired from the bank’s service in Sep 2013.”
The bank said it has now accessed copies of the proceedings that show the court was not briefed correctly on the sequence of events.
Bank Offers Cooperation
“In as much as SBI was not a party to this case, there was no occasion for the views of SBI being heard as part of these proceedings,” the bank said. “SBI would like to reiterate that all due processes were followed while making the said sale to ARC. The bank has already offered its cooperation to the law enforcement and judicial authorities and will provide further information, if any, that may be called for from their side.”
Bankers said lessons have not been learnt despite recent judicial and police overreaches. They were referring to the dramatic June 2018 arrest of the Bank of Maharashtra CEO Ravindra Prabhakar Marathe, and executive director Rajendra Kumar Gupta. The police subsequently filed a closure report due to lack of evidence and Marathe and Gupta were reinstated.
“The point is that the police were not punished. There is no punishment for wrongful cases and judgements that can destroy careers. Law enforcement agencies are not acting with responsibility and this will have economic repercussions,” said the bank CEO cited above.
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Fino Payments Bank IPO fully subscribed on last day, BFSI News, ET BFSI
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The initial public offer of Fino Payments Bank was subscribed 2.03 times on the last day of subscription on Tuesday. The Rs 1,200.3-crore IPO received bids for 2,32,46,150 shares against 1,14,64,664 shares on offer, according to data available with the NSE.
The category for Qualified Institutional Buyers (QIBs) was subscribed 1.65 times, while that for non-institutional investors was subscribed 21 per cent and Retail Individual Investors (RIIs) 5.92 times.
The initial public offer (IPO) had a fresh issue of up to Rs 300 crore and an offer for sale of up to 1,56,02,999 equity shares.
The price range for the offer was at Rs 560-577 per share.
Fino Payments Bank had on Thursday said it has garnered Rs 539 crore from anchor investors.
Proceeds from the fresh issue would be used towards augmenting the bank’s tier-1 capital base to meet its future capital requirements.
Fino Payments Bank or FPBL is a scheduled commercial bank serving the emerging Indian market with its digital-based financial services.
The company is a fully-owned subsidiary of Fino Paytech, a pioneer in technology-enabled financial inclusion solutions.
Fino Paytech is backed by investors like Blackstone, ICICI Group, Bharat Petroleum and International Finance Corporation (IFC).
Axis Capital, CLSA India, ICICI Securities and Nomura Financial Advisory and Securities were the managers of the offer. PTI SUM ANU ANU
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