Introduction Of Futures & Options Contracts On 15 Additional Securities –
Capital First, Muthoot Finance, Equitas Holdings, Ujjivan Financial Services, Max Financial Services, Indian Bank, Reliance Defence and Engineering, InterGlobe Aviation, PVR, Dalmia Bharat, Infibeam Corporation, Suzlon Energy, Piramal Enterprises, Escorts, Shree Cements.
ALERT: As per media reports, Lupin, Cipla, Cadila are in fray to acquire the respiratory drugs portfolio of Novartis AG. The portfolio of brands on offer could fetch as much as $500 million in a sale. Novartis portfolio includes top-selling brand TOBI Podhaler, a drug prescribed for symptomatic relief to patients suffering from cystic fibrosis, a genetic lung disorder. The brands are sold in as many as 60 countries by Novartis – Long term positive for the company who would acquire (win the bidding) as respiratory drugs portfolio are likely to be the next big revenue generators.
Dilip builcon: The company has received letter of Award from NHAI for four laning from Nalagampalli to AP/Karnataka border under NHDP-IV on EPC mode. The project cost is Rs503.1 crore having length of 47.7km which is to be completed in 24 months. The development is positive for Dilip Buildcon.
Bank of India to raise Rs 204 crore by issuing shares to LIC on preferential basis at Rs116.8 per share
Viewpoint – Kajaria Ceramics: The leader will reap a rich harvest from improving dynamics of the tiles sector
• A seasoned market leader in tiles sector with insatiable thirst for expansion: Kajaria Ceramics is the largest manufacturer of tiles in India (Ceramic and Vitrified both) and the ninth largest in the world, having an annual capacity of 68.6 million square meters (Msm) across four states (nine operating plants). Since FY2010, the company has added 45Msm capacity at a CAGR of 17% and will further add 5.7Msm (through the acquisition of a 51% stake in Floera Ceramics in Andhra Pradesh, plant to be commissioned by September 2018). In the Rs26,000 crore (763Msm) Indian tiles industry, Kajaria has positioned itself as a market leader with a strong pan-India distribution network of 1,100 dealers.
• GST implementation to result in market share gains and higher profitability: Currently, Kajaria is operating in a highly unorganized market (roughly 50% market share of the unorganised market in India), with national brands cornering 50% share. The impending implementation of GST will provide a level-playing field to the company, helping it to increase its market share (price gap will reduce between branded and unbranded players). Further, there will be room for higher realisations to maintain premium for the company’s products, which should result in an enhanced profitability going ahead.
• Structural growth catalysts for tiles industry intact: India’s per capita consumption of tiles remains low at 0.61 compared to Saudi Arabia (9.48), China (3.57) and Brazil (3.99). This provides a huge opportunity for Kajaria to grow through capacity expansion. Further, the government’s thrust on Affordable Housing, Smart Cities, rising per capita income, the Seventh Central Pay Commission bounty are other key structural triggers for the Indian tiles industry in general and specifically for Kajaria to drive sustainable long-term growth.
• A capital-efficient business model with a robust balance sheet: During FY2013-FY2016, Kajaria has incurred over Rs200 crore capex annually, owing to strong operating cash flows (supported by a 24% CAGR in EBITDA). Consequently, the company’s debt-to-equity ratio declined from 0.73x in FY2013 to just 0.17x in Q3FY2017. The company’s efficient and prudent use of capital has also led to consistently high RoCE and RoE of over 20% and over 25%, respectively during FY2013-FY2016. We believe that Kajaria has carved out a capital-efficient business model, which is likely to be sustainable going forward.
• Valuation and outlook: Being the largest tiles manufacturer in India, Kajaria will be the biggest beneficiary from GST rollout and India’s structural growth impulses. Also, it has amply demonstrated the ability for efficient capital allocation and has reinvented itself to yield industry-leading returns. Consequently, we have a ‘positive’ view on Kajaria and expect it to generate 20% returns over the near to medium term.
JMC projects has secured new orders for commercial and residential projects worth Rs1058 crore; positive for Kalpataru Power
IRB Infrastructure: The company’s board has approved acquisition of 34% stake in its subsidiary Aryan Infrastructure Investments (presently IRB holds 66% stake) from promoter and promoter group entity making it wholly owned subsidiary of the company. Neutral read thru for IRB Infrastructure.
Hero Motocorp offers discounts upto Rs 12,500 to clear inventory of BS3 vehicles; to impact profitability in Q4FY17; stock price already factoring higher discounting impact Hero Motocorp is offering huge discounts to clear the BS3 vehicles inventory after the Supreme Court has banned the sales of such vehicles after 31st March 2017. Hero is offering rebate of Rs 12,500 on its scooters, Rs 7,500 on premium bikes and Rs 5,000 on entry level mass market motorcycles. Hero has about 10-12 days of inventory and is offering higher discounts as it has limited scope of diverting the inventory to export markets. Also as per the company, converting BS3 vehicles to BS4 is cumbersome process and involves additional costs such as logistics and assembly line expenses apart from the cost of material required to be fitted to comply with BS4 regulations and is preferable to clear the inventory thru higher discounts. Given the higher discounting, we expect Hero’s profitability to be impacted in Q4FY17.
Maruti Ciaz to be sold through Nexa outlets from April 1, 2017.
Maruti Suzuki India mid-size sedan Ciaz will be sold through its premium channel Nexa from April 1, 2017. Nexa has 250 outlets across India and covers around 95% of the cities. With Ciaz joining Nexa family, contribution from the premium retail chain is expected to be more than 15% of total sales by the end of 2017-18.
M&M considers entry of Ssangyong utility vehicles and introduction of electric vehicles in US, China; positive read thru
Mahindra aims to enhance its investments and presence in the U.S. and Chinese markets through its South Korean auto unit, Ssangyong Motor Co. Ssangyong is expecting to decide by mid year on a plant to build in Chinese market whereas for a U.S. entry would take at least three years. Ssangyong had in October 2016 signed an initial joint-venture agreement with China’s Shaanxi Automobile Group Co., the country’s fourth-largest maker of heavy-duty trucks by output. Mahindra is considering introducing high-end electric vehicles made by its Italian affiliate Pininfarina in the U.S. and China.
Lux Group rejigs growth strategy; eyes Rs 2000-crore sales by 2020 through premiumisation, portfolio extension and venturing into new market and geographies
Lux Group has reworked its growth strategy to target youth, and expects to clock Rs 2,000 crore sales by 2020, on the back of premiumisation of its innerwear brands and portfolio extensions. The company is now focusing on the Rs 2,400 crore active wear market offering a casual and alternative line of clothing. Presently there are seven exclusive stores, and in the next year the company plans to open 14-15 more stores. Lux Industries, which has a strong foothold in export markets including Africa, Middle East and some countries of South East Asia, is also looking at expanding its footprint in European and US markets.
Zensar Technologies to acquire Keystone India
Zensar Technologies has entered into a slump sale agreement with Keystone Logic Solutions to purchase entire undertaking and business of Keystone india on a slump sale basis. The cost of acquisition stands at Rs 132.4 crore and is an all-cash deal. Zensar expects the transaction to be completed by the first week of April.
Tata Motors to merge wholly owned subsidiary TML Drivelines with self; no impact on consolidated earnings; Neutral
Tata Motors is planning to merge its wholly owned subsidiary TML Drivelines with itself. TML Drivelines manufactures axles, gearboxes, crankshafts and Forgings for Tata motors commercial vehicles. Since Tata Motors fully owns TML Drivelines, the merger will have no impact on the consolidated earnings. Neutral for Tata Motors.
TCS collaborates with SATS for smart watch solution
TCS announced that it has collaborated with airport ground handling and food solutions provider SATS to develop a smart watch solution for airport technical ramp operations. The Technical Ramp Smart Watch solution was designed to increase operational efficiency by streamlining on-ground processes and enhancing communication, productivity and safety through technology.
Century Plyboards (India): The company has commenced newly set up production facility “Purbanchal Timber Industries” at Palasbari, Kamrup in Assam. Positive read thru for the stock.
Bharti Airtel: Airtel Money partners TUCKSEE to provide electronic property rate payment for Ledzokuku-Krowor Municipal Assembly (LEKMA)
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