Category: Personal Finance

Virtual investor conference held on November 22- Key takeaways:

1. CESC intends to become more flexible and digital on the distribution front such that capex can be implemented on just in time basis for higher returns.

2. For the medium term, the company focuses on inorganic expansion of its distribution segment by acquiring new areas. The company bets big on distribution de-licensing and privatisation.

3. Kolkata license area continues to be the key focus business.

4. It aims to scale up adoption of new technologies including EV charging, BESS, microgrids, among others, and is performing well on the ESG front.

State of the art technology deployment at its distribution areas including:

1) Big data analytics, AI / ML, IoT for predictive analytics and real-time monitoring,

2) automating redundant practices /services

3) deploying smart metering

4) moving from smart to intelligent grid solutions,

5) digitising customer services and providing value-added services for premium customers,

6) leveraging blockchain technology for demand side management.

Recently won bid:

Lately the company won the bid for acquiring Chandigarh discom (the transfer though is awaiting court direction).

No concerns around generation front in the next decade:

“CESC has a portfolio of 2,125 MW of operational thermal assets with varying residual lives. However, in-

line with the declaration during COP-26, where India insisted on phasing-downof coal generation vs phasing-out approach insisted upon earlier, the management expects its thermal assets will not face any operational concerns over the next decade, despite sustainability-related challenges”, said the report.

CESC to scale up in EV charging and battery storage infra:

As of now the company has 3 operational public EV charging stations and is looking to increase its penetration and create a larger scale public and home charging infrastructure.

Performing well on the ESG front: CESC’s ESG rating upgrade from B to BB by MSCI is proof of the various steps which the company has taken on the

ESG front. “It considers sustainability as one of the core areas and is working to increase its footprint in tRE, EV, electric cooking and BESS spaces. On the

generation front, despite 100% thermal portfolio, CESC’s plants are among the most efficient in the country and there has been a steady decrease in emission intensity in all its generation stations from FY18 to FY20. It also continues to remain committed on biodiversity, employee and community welfare fronts”, adds the report.

Valuation

“We maintain BUY on the stock with SoTP-based target price of Rs120. The stock is currently trading at FY24E P/E of 6.7x, P/BV of 0.9x, and a dividend yield of 7.2%”, says the brokerage firm.

Disclaimer:

The stock has been picked from the brokerage report of ICICI Securities. 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.

Q1FY22 results of Power Finance Corporation Ltd

According to the brokerage “The company has reported weak growth figures for the Q1FY22; however, the asset quality numbers have improved. Net Interest Income for the quarter stood at Rs.3,525 Cr, up 14.7% for both YoY and QoQ. NIM for the quarter was at 3.7% – up 40 bps QoQ backed by higher lending yields. Management intends to pass on the fall in funding cost in coming quarters. Operating profit grew by 29.5% YoY, while sequentially it was down by 10.5%. Other income was down by 92% QoQ, this has resulted in 2% sequential de-growth in Net profit.”

HDFC Securities has stated that the company’s “Total AUM of Rs. 369983 Cr grew by 7.3%/1.4% YoY/ QoQ. Disbursement during the quarter was weak, due to overall weak demand from the sector. It was down by 45% YoY and 18% QoQ. Under Atamnirbhar Discom Scheme the company has so far sanctioned Rs.67,699 cr and disbursed Rs. 38,501 cr. The company has also declared an interim dividend of Rs. 2.25/- per equity share of Rs. 10/- each for FY22.”

The brokerage claims that “As of Q1FY22, the Capital Adequacy Ratio (CAR) stood at 21.16% with Tier – I capital ratio at 17.56%. Being a Government-owned entity, PFC has the highest domestic credit rating of “AAA” and international ratings stood at “BBB-“. PFC has a well-diversified resource profile with 63% money raised from bonds, 20% via loans from various entities, 1% from commercial papers (CP) and 16% via foreign currency loans. Further, ~86% of the foreign currency exposure with 5 years residual maturity is hedged.”

The brokerage’s take on Power Finance Corporation Limited

According to the research report of the brokerage “Further, to tap into newer areas of opportunities, the company is looking to fund segments like e-mobility, utility scale energy storage etc. The company has a sufficient capital adequacy level and resources profile is also diversified. The Indian government has recently accorded “Maharatna” status to PFC which will enable it greater operational and financial autonomy to offer competitive financing for the power sector, which will go a long way in making available affordable and reliable ‘Power For All 24×7. This will also help PFC in pushing the government’s agenda of funding under the National Infrastructure Pipeline, a national commitment of 40% green energy by 2030 and effective monitoring and implementation of the New Revamped Distribution Sector Scheme with an outlay of more than Rs.3 Lakh Cr.”

HDFC Securities has also claimed in its research report that “PFC is a consistently high dividend paying company, the yield at the current price stands at ~7.3% which makes it one of the highest dividend paying companies in the listed space. For the last five years, the average dividend payout as a percentage of equity share capital stood above 40% (except for FY19). PFC’s high dividend seems sustainable as it has lent to relatively risk-free public sector entities and its capability to distribute dividends remains good even in case a good portion of its private sector lending goes bad. The stock is trading at only 0.5x FY23E P/ABV. We feel that such high dividend yield and low valuations provide a margin of safety for investment in the company at the current level.”

Buy Power Finance Corporation Ltd with a target price of Rs. 167

HDFC Securities has noted in its research report that “Since the past few quarters, the company has been able to deliver strong growth momentum along with considerable improvement in the asset quality. Also, the emerging trend in the power sector gives us confidence in the company’s ability to keep growing at a fast growth rate. We have envisaged 6% CAGR growth for top line and 8% for bottom line, while the loan book is estimated to grow at 7.5% CAGR over FY21-23E. We feel that worst in terms of asset quality deterioration in the power finance segment is over. There could be higher recoveries in the next two years than slippages. Further PFC is also holding sufficient provisions. RoAA is estimated at 2.2% for FY23. In the medium term, credit cost normalisation and cost control remains the key drivers for stable RoA and RoE.”

According to the brokerage’s call “We feel that investors can buy PFC at the LTP of Rs.137.3 (0.5xFY23E ABV+ REC value after holding company discount) and add on dips to Rs.123 (0.43xFY23E ABV+ REC value after holding company discount) band. We expect the Base case fair value of Rs.157 (0.6xFY23E ABV+ REC value after holding company discount) and the Bull case fair value of Rs.167 (0.65xFY23E ABV+ REC value after holding company discount) over the next 2 quarters.”

Disclaimer

The stock has been picked from the brokerage report of HDFC Securities Limited. 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.

1. SBI Small Cap Fund:

This small cap fund from SBI commands a decent AUM of Rs. 10626 crore as on October 31, 2021, attracting an inflow to the tune of 46 percent of investment into the category. The fund launched in the year 2009 has since inception offered return of 21.12 percent. The scheme’s return is benchmarked to S&P BSE Small Cap TRI.

Of more than 90% allocation in equities, over 66 percent is deployed in small cap stocks. Top 10 stocks in the fund’s portfolio include Carborundum, Sheela Foam, Blue Star, Hatsun Agro, Finolex, JK Cement, V-guard, Elgi , V-Mart and Triveni Turbine.

In 1-year time frame, the fund has delivered return of 59.95 percent as against the benchmark which has outperformed delivering return over 73 percent.

Notably, SIP in the scheme can be initiated for just Rs. 500. Also talking about its rating, Value Research has accorded the fund a 4-star rating.

2. Nippon India Small Cap Fund:

Again an old mutual fund scheme in existence since 2010 from the house of Nippon India has assets under management of Rs. 17197 crore. The expense ratio of the fund is 1.81 percent. The fund’s performance is benchmarked against NIFTY Smallcap 250 TRI.

SIP in the scheme can be kicked off with just Rs. 100 and there is 1 percent exit load charge applicable in case of redemption within 30 days.

The fund’s corpus is distributed between large, mid and small cap stocks with the exposure in the small cap category being over 73 percent. Investors with investment horizon of at least 3-4 year with high risk appetite can bet on the fund.

In the 1-year period, the fund has outperformed its benchmark offering return of 81 percent.

Top stock holdings in the fund are Deepak Nitrite, Tube Investments, Birla Corp, Bajaj Electricals, Radico Khaitan, Navin Flourine, Orient Electric, Balram Chini Mills among others.

3. Mirae Asset Emerging Blue Chip Fund:

This is a large and mid cap fund from the house of Mirae Asset and commands a decent AUM of more than Rs. 20000 crore. Expense ratio of the fund is at 1.68 percent while the fund despite its classification as a bluechip fund is segregated to carry a higher risk.

Of an almost entire allocation into equities, major part is deployed into large and mid cap funds. The fund in a 1-year period has outperformed Nifty 50 by a tad and offered return of 49.09%.

The fund for initiating SIP requires minimum SIP investment of Rs. 1000 and for lump sum the investment needed is Rs. 5000.

Top 10 stocks in the portfolio of the scheme’s fund include ICICI Bank, Infosys, HDFC Bank, Axis Bank, SBI, Mphasis, Voltas, JK Cement, TCS and Gujarat State.

4. Quant Tax Plan:

Among the different mutual fund categories, this equity linked savings scheme has also outperformed in 10-year SIP returns with an annualized return of 24.48%. The fund’s corpus is having the most allocation in large and small cap scrips.

The fund hence apart from capital appreciation also provides income tax benefit as for investment up to Rs. 1.5 lakh the amount can be claimed as deduction under section 80C. Remember as it is a tax plan, there is a minimum lock in of 3 years.

Fund’s major holdings are following scrips including L&T, RIL, ITC, SBI, Vedanta, Adani Ports, Indiabulls Real Estate, HDFC Bank and ICICI Bank.

SIP in the fund can be initiated for a minimum of Rs. 500. Return-wise the fund has outperformed the Nifty 50 TRI over the last 1-year period and generated return of 80.8%.

5. Kotak Small Cap fund:

This not so large small cap fund was launched in 2005 and since then has provided return of 18.26%. Benchmark of the fund is Nifty Small cap 100 TRI and the scheme’s expense is 1.96 percent as on October 31.

In its portfolio, as the fund category suggest there is large concentration of small cap scrips with its top stock holdings being Century Plyboards, Carborundum, Sheela Foam, Persistent Systems, Galaxy Surfactants among others.

SIP in the fund can be started for Rs. 1000. In the last 1-year period, the fund’s return are at 86.41%.

5 Top Equity Mutual Funds based on SIP 10-yr. returns and Rating

Conclusion:

Now as past returns do not guarantee similar returns in the future we certainly do not recommend buying or investing into these mutual funds without due diligence. Furthermore as equities are close to their all time high you can take a calibrated approach and not park a lump sum amount.

Also, as in the current scenario when equities are highly volatile your take on equity SIPs be dictated by your current circumstances say as in if your regular income is at risk in any way you can move your corpus in SIPs to either a short term debt fund or a savings account generating a higher return.

Disclaimer:

All readers and investors should note that neither Greynium nor the author of the articles, would be responsible for any decision taken based on these articles. Please 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 on GoodReturns.in