Category: Personal Finance

NMDC

NMDC is the largest iron ore mining company in India. The company is also a good profit making company and has been regularly paying dividends.

“NMDC is a play on strong iron ore prices and volumes. We expect a strong 14% volume CAGR to 43mt over FY21-23E, aided by the resumption of the Donimalai mines and increased volumes at Chhattisgarh. While the non-renewal of export contracts implies higher domestic volume sales – given the robust demand and iron ore shortage domestically – we expect NMDC would be able to increase volumes in the domestic market,” the brokerage firm has said. Recently, the prices of iron ore have been trending upwards, which is good for the company.

NMDC: Potential for a 20% upside

Motilal Oswal Institutional Equities has placed a target of Rs 215 on the shares, which is a solid 20% higher from the current levels.

“We value the stock at Rs 215 per share on SOTP, valuing the Iron Ore business at 5.0x FY23E EV/EBITDA. We add the value of the steel plant at 25% of the book value. At current market price, the stock is trading at 4.0 times the core Iron Ore Mining business and provides an attractive dividend yield of 13%. Reiterate Buy,” the brokerage has said.

The shares of NMDC were last seen trading at Rs 175.60 on the NSE.

Bharat Electronics: Buy the stock with 16% potential upside

Motilal Oswal Institutional Equities has also placed a buy call on the stock of Bharat Electronics Ltd (BEL), which caters to the defence market.

According to the firm, the management of BEL aims to grow the non-Defense (Civil) part of the business, via categories like: a) medical equipment, b) metro projects, c) EV batteries, d) space systems, e) aerospace (sensors etc.), and f) smart city projects. It is aiming at an export growth of over 15% (over USD60m) in FY 2022.

“We forecast revenue/EBITDA/PAT CAGR of 11%/9%/11% over FY21-24E. We have built in a sufficient margin cushion as we assume an EBITDA margin of 21.7%/21.2% by FY22E/FY23E (v/s 22.6% reported in FY21). Our revised target price stands at Rs 195 per share (18 times FY23E EPS). At the current market price, the stock trades at 17x/16x FY22E/FY23E P/E, despite having an RoE/RoCE of 19%/20%, dividend yield of 3%, and FCF yield of 2-4%. Maintain Buy. Higher growth in the non-Defense business poses an upside risk to our EPS estimates, while working capital deterioration poses a key downside risk to valuations,” Motilal Oswal Institutional Equities has said.

Disclaimer

Views mentioned herein are taken from the brokerage report of Motilal Oswal. Neither the author, nor the brokerage nor Greynium Information Technologies would be responsible for losses incurred based on the article. Please consult a professional advisor. Investing in stock markets is risky.

Kotak Small Cap Direct Fund

According to Value Research, the 1-year returns of Kotak Small Cap Fund Direct-Growth are 114.89 percent. Chemicals, Engineering, FMCG, Construction, and Metals make up the fund’s top holdings. Century Plyboards (India) Ltd., Carborundum Universal Ltd., Sheela Foam Ltd., Supreme Industries Ltd., and Persistent Systems Ltd. are the fund’s top five holdings. The fund has Rs 4,294 crore asset under management (AUM) and a current NAV of Rs 154.11 as of June 23, 2021. The fund’s expense ratio is 0.52% and the minimum SIP amount is capped at Rs 1000. As an exit load 1% will be charged by the fund if units in excess of 10% of the investment are withdrawn within 1 year of the initial deposit.

Nippon India Small Cap Direct Fund

According to Value Research, the Nippon India Small Cap Fund Direct- Growth returns for the last year are 103.43 percent. Engineering, Chemicals, FMCG, Services, and Technology comprises the bulk of the fund’s holdings. Deepak Nitrite Ltd., TI Financial Holdings Ltd., Navin Fluorine International Ltd., Birla Corporation Ltd., and Bajaj Electricals Ltd. are the fund’s top five holdings. The fund’s expense ratio is 1.02 percent, which is higher than the other small cap funds in the category. The fund presently has Rs 14,318 Crore asset under management (AUM) and a NAV of Rs 76.29 as of June 23, 2021. The minimum SIP amount is Rs 100, and if redeemed within one year, an exit load of 1% is levied.

Top Rated Small Cap Funds

Here are the top-rated small-cap funds according to the data of Value Research:

Our take

Small-cap mutual funds, for instance, witnessed a strong surge in the fourth or last quarter of 2020, with good returns. According to the table above, several small-cap funds have generated returns of more than 100% in a year, while others have also performed well. The average returns of small-cap funds over the last 1-year is 95.3 per cent. Whereas, the average 3-year SIP returns are 37.75% and the average 5-year SIP returns are 22.02%, according to Value Research. As a matter of concern, small-cap funds are the ones that struggle the most when the stock market falls sharply. Small-cap funds can help you accomplish your long-term financial objectives if you are an investor with a high-risk appetite. To generate significant returns, stick with your purchases or hold them for a long time, but do not go with the past returns. But if you do not have much exposure to market behaviour or mutual fund investments and do not want to take a risk, it is better to avoid small-cap funds and stay invested or start investing in large, mid-cap or arbitrage funds.

Disclaimer

The views and investment tips expressed by authors or employees of Greynium Information Technologies, should not be construed as investment advise to buy or sell stocks, gold, currency or other commodities. Investors should certainly not take any trading and investment decision based only on information discussed on GoodReturns.in We are not a qualified financial advisor and any information herein is not investment advice. It is informational in nature. 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 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 GoodReturns.in

1. Bandhan Bank:

This new age bank has been given a ‘Buy’ rating by Axis Direct in its report dated June 15 at a price of Rs. 355.

The RBI released a consultative paper for the regularisation of norms for the microfinance sector with the primary focus being on (i) Avoiding over-indebtedness and multiple lending and (ii) Issues related to the pricing of microfinance loans for players. The emerging dynamics in the microfinance sector as well as the concerns of customer protection called for a review of the regulations for all the regulated entities (REs) engaged in microfinance. The recommendations attempt to ensure a level playing field between all the regulated microfinance entities., said the brokerage.

Further the brokerage iterated that it was viewed that the harmonization of guidelines for all microfinance entities would cap the margin at 10 percent plus the cost of funds for banks which would negatively impact their NIMs or net interest margin. But such a limit has not been specified for banks or SFBs. Nonetheless it augurs well for microfinance entities as they will be able to stick to healthy spreads thus boosting their return ratios. Surprisingly, the RBI has tweaked the pricing norms for NBFC-MFIs and proposed to align their pricing with other NBFCs, thus withdrawing the margin capping, added the report.

Also, there was seen a possibility of 2-lender cap to be levied on banks or SFBs, nonetheless the non-applicability of such norms work in the favour of Bandhan Bank and others MFIs in the industry.

ICICI Securities has also placed a ‘Buy’ call on the scrip with the target price of Rs. 465 to be realized in a 1-year period. This is a nearly 40% upside from the last closing price of the stock.

The scrip of Bandhan Bank on June 23, 2021 closed over 2% lower at Rs. 333.15 per share on the NSE.

M-cap of the stock is Rs. 53,659 crore, above industry median.

2. RBL Bank:

Emkay Research has placed a ‘Buy’ recommendation for the bank with a target price of Rs 255 for a duration of 12 months.

The brokerage believes RBL has emerged stronger from the deposit scare in FY20, and it has largely dealt with high risk & vulnerable corporate/retail portfolio in FY20/FY21. However, near-term asset quality risk remains with the onset of the second Covid-19 wave, leading to gradual moderation in credit cost in FY22 and going forward, added Emkay Research. Emkay Research takes comfort in the bank’s healthy capital position, improvement in liability profile and gradual uptick in its RoA/RoE to 1.4 per cent/8-13 per cent over FY22-24E from a low of 0.5 per cent/4 per cent in FY21.

The scrip of RBL Bank last traded at Rs. 208.35.

M-cap – Rs. 12,468 crore.

3. Bank of Baroda:

Brokerage firm ICICI Direct has a buy call on the public sector lender for a target price of Rs. 102 in the short term of 3-months. It has seen a gradual build-up of open interest in the last couple of months with the recent price performance. However, there is ample room for further increase in price. We expect further long additions in the stock once it sustains above Rs. 85 levels, said the brokerage.

The stock witnessed noteworthy delivery volume activity in January and May. Fresh delivery based buying was seen around Rs. 70-76. Hence, any declines in the stock can be utilised as a fresh buying opportunity The stock made a 52-week high near Rs. 100 in February 2021. Since then, it has corrected towards its medium term support of Rs. 64 levels. Currently, it has been largely range bound hovering around Rs. 78 and Rs. 86. It failed to sustain above Rs. 85 despite many attempts in the past trading sessions. However, recently, the stock has taken support at lower band level of Rs. 78 and is now witnessing fresh buying momentum.

M-cap – Rs. 42,560 crore

LTP- Rs. 82.3

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Why Has Infosys Come Out With A Share Buyback Plan?

Companies purchase back shares in the market at a greater price than the market price, usually to show confidence in the company’s future prospects or to claim that the shares are undervalued.

Companies with a huge cash pile and few investment alternatives are increasingly considering repurchase offers. Infosys has a lot of cash on hand, so it was an obvious choice for a buyback. In addition, a buyback made more sense from a tax standpoint than a special dividend.

The government levied an additional 10% tax on dividends in the hands of shareholders in the 2016 Union Budget. A buyback has no such tax implications, making it more tax efficient than a special dividend. Above all, a repurchase reduces the number of outstanding shares, which enhances the company’s EPS. At the very least, it has the potential to increase the company’s value!

How to Participate in Infosys Share Buyback?

You must have Infosys shares in your demat account as of the Infosys record date (2021). After you have the shares in your account, you can participate in the buyback.

To participate in the Infosys buyback, follow these steps: You must have an Infosys share in your demat account on the Record Date (2021). Because it takes T+2 days for shares to be deposited in your DP account, you should plan your purchases properly. Following that, the firm will announce when the repurchase window will open and shut, and you will be required to tender your shares in the buyback process. Your shares will be sold in the repurchase process, and the funds will be directly deducted from your bank account, depending on the buyback acceptance ratio. Any shares that are rejected will be returned to your demat account, where you can sell them on the open market or keep them for long-term benefit.

Infosys Buyback details

The indicative maximum number of equity shares bought back, assuming the market price of the equity shares is equal to the maximum buyback price, would be 5,25,71,428 equity shares, or approximately 1.23 percent of the company’s paid-up equity share capital as of March 31, 2021,” according to the advertisement.

Infosys will use at least half of the cash set aside as the maximum repurchase size, i.e. Rs 4,600 crore, for the buyback. The corporation will buy an estimated minimum of 2,62,85,714 equity shares based on the minimum buyback size and maximum buyback price.

Infosys Share Buyback History

This will be the third Infosys share repurchase if it goes through.

In 2017, Infosys conducted its first share repurchase, purchasing a total of Rs 13,000 crore in shares at a price of Rs 1,150 per share.

In 2019, Infosys bought back Rs. 8,260 crore in shares at a price of Rs 747 per share in its second buyback.

• Infosys Price: Rs1,503
• Market Cap: 6.38LCr
• P/E ratio: 33.02
• Div yield: 1.80%

The stock returned 142.31 percent over a three-year period, compared to 43.81 percent for the Nifty 100 index. Over a three-year period, the stock returned 142.31 percent, while the Nifty IT provided investors a 105.9% gain.

Share Buy Back Benefits to Companies?

When a business buys its outstanding shares, commonly known as a share buyback, it reduces the number of shares accessible on the open market. Companies buy shares for a variety of purposes, including boosting the value of remaining available shares, lowering the offering, and blocking other shareholders from engaging in the control.

As a result, the earnings per share (EPS) of the shares rise, while the price/earnings (P/E) ratio falls or the share price rises. Investors can see that the company has enough cash to deal with emergencies and that there is a low chance of economic troubles if shares are repurchased.