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The Baseline
03 Mar 2023, 04:00PM
Chart of the week: From merger talks to bankruptcy threat, Zee Entertainment is going through a volatile time
By Abdullah Shah

The past few weeks have been turbulent for Zee Entertainment Enterprises. The company was placed under the corporate insolvency resolution process by the National Company Law Tribunal (NCLT) on February 24. However, the National Stock Exchange (NSE) removed the stock from the Insolvency and Bankruptcy Code (IBC) framework on Tuesday. The NSE’s actions came after the National Company Law Appellate Tribunal (NCLAT) stayed the NCLT order following an appeal from Zee’s Managing Director and CEO, Punit Goenka. 

Zee’s share price has gone through ups and downs as these events unfolded. In this edition of chart of the week, we take a look at the company’s price action since it first started talks about the merger with Sony Pictures Networks in September 2021.

The stock had surged almost 40% back on September 14, 2021, as the company’s two biggest investors, Invesco Developing Markets Fund and OFI Global China Fund LLC, holders of 17.9% stake in the company, called for an extraordinary general meeting. The purpose of the meeting was to oust Managing Director and CEO Punit Goenka and two other directors from the board. 

Almost a week later, on September 22, 2021, the stock rose again (31.7%) after its board approved the execution of a non-binding term sheet for the merger of the company with Sony Pictures Networks. Some principle terms included that the company’s shareholders will have a 47.1% holding in the merged entity, while Sony India will have 52.9%. Another term was that Sony India will have the right to appoint majority directors on the board, with Punit Goenka as the MD and CEO of the merged company. 

After the news about the merger settled, investors’ focus shifted to Zee’s Q3FY22 results. The stock fell for three consecutive sessions after the company posted a 25.3% YoY drop in net profit to Rs 298.7 crore in Q3FY22 on February 2, 2022. A fall in income from advertisement, subscriptions and other sales caused the revenue to decline by 22.6% YoY. 

However, the stock rose 16.7% on March 24, 2022, as its promoters showed their support for the merger and ended their demand  for an EGM to remove Punit Goenka from his post.

The company showed some signs of operational recovery as its revenue grew by 19% YoY to Rs 2,361.2 crore in Q4FY22, helping the stock rise for four consecutive sessions till May 31, 2022. The rise came as its revenue beat analysts’ estimates. On October 4, 2022, the stock rose 6.3% after its board approved the composite scheme of arrangement for its merger with Sony India following the nod from the Competition Commission of India (CCI). 

Recently, the merger came under scrutiny after the NCLT placed the company under corporate insolvency resolution process based on a petition filed by IndusInd Bank. Zee was a guarantor for Siti Networks for a loan worth Rs 83 crore owed to IndusInd Bank. This caused the stock to plunge 9.2% on February 24, 2023. Earlier in the month, the NCLT initiated insolvency proceedings against Zee Learn, a Zee Group company, after Yes Bank filed a petition for a loan default of Rs 469 crore by Siti Networks.

But the order was then stayed by the National Company Law Appellate Tribunal (NCLAT) on February 24 after hearing from Punit Goenka, and it has asked IndusInd Bank for a response in two weeks. On February 28, 2023, NSE followed suit by removing the stock from the Insolvency and Bankruptcy Code (IBC) framework, reverting the surveillance actions on the company, while also reincluding the stock in its futures and options contracts with expiry in May 2023. The stock rose 6.3% on the same day. 

Zee Entertainment is not out of the woods yet. This volatility in Zee’s share price is expected to continue as investors track the latest news and IndusInd Bank’s response to NCLAT. 

 
Trendlyne Marketwatch
Trendlyne Marketwatch
03 Mar 2023, 03:45PM
Market closes higher, Divgi TorqTransfer Systems’ IPO gets bids for 5.4X of total shares

Trendlyne Analysis

Nifty 50 closed at 17,594.35 (272.5, 1.6%), BSE Sensex closed at 59,808.97 (899.6, 1.5%) while the broader Nifty 500 closed at 14,774.75 (187.5, 1.3%). Of the 1,957 stocks traded today, 1,290 were on the uptrend, and 593 went down.

Indian indices extended the gains and closed in the green, with the Nifty 50 rising 270 points and closing just below the 17,600 mark. S&P Global India Service PMI Business Activity Index rose from 57.2 in January to 59.4 in February, a 12-year high.

Nifty Smallcap 100 and Nifty Midcap 100 closed in the green, tailing the benchmark index. Nifty PSU Bank managed to rise over 5% and closed higher. All major sectoral indices closed in the green. Nifty IT closed higher, tracking the tech-heavy Nasdaq 100 futures which are trading higher.

Major Asian indices closed higher amid positive global cues. European stocks trade higher, tailing the US indices futures in the green. S&P Global will release US Service PMI later today. Consensus estimates peg the US Service PMI at 50.5, indicating an expansion in the service sector.

  • Relative strength index (RSI) indicates that stocks like Procter & Gamble Health, Symphony, Equitas Small Finance Bank and Anupam Rasayan India are in the overbought zone.

  • JSW Steel is rising as Prabhudas Lilladher upgrades its target price to Rs 755, indicating an upside of 10%. The stock has been in the news recently after the National Company Law Tribunal (NCLT) approved the merger of its subsidiary, Hasaud Steel, with Asian Colour Coated Ispat.

  • Motilal Oswal keeps its ‘Buy’ rating on Axis Bank as it completes the acquisition of Citi Bank India’s consumer business. The brokerage believes the acquisition will add 18 lakh credit cards to Axis Bank and increase its market share by 3%. It expects the acquisition to be RoA accretive from CY24

  • Commercial services & supplies, transportation and realtysectors rise more than 8% in the past week.

  • Morgan Stanley expects India’s macroeconomic stability indicators to improve moderately in FY24 due to factors like easing of global commodity prices, healthy growth mix, and fiscal & monetary policies.

  • Reports suggest that promoters of Adani Group have sold stakes worth Rs 15,446 crore in four of its listed companies to GQG Partners, a US-based global equity investment firm. The proceeds will be used to prepay their debt. According to reports, shares of Adani Enterprises, Adani Ports & SEZ, Adani Green Energy and Adani Transmission have been sold.

  • Divgi TorqTransfer Systems’ Rs 412 crore IPO gets bids for 5.4X of the available 38.4 lakh shares on offer on the final day of bidding. The retail investor quota gets bids for 4.3X of the available 6.98 lakh shares on offer.

  • Caplin Point Laboratories' arm Caplin Steriles receives US FDA approval for rocuronium bromide injection, a neuromuscular blocking agent. It has US sales of approx $53 million for the year ending September 2022.

  • NTPC rises as Morgan Stanley sees an upside of 14% in the stock. The brokerage gives it an ‘Overweight’ rating with a target price of Rs 198. It says monetisation of renewable assets, new thermal orders and commissioning of pipeline plants will drive the stock upwards.

  • WPIL surges as it wins letters of acceptance worth Rs 1,225 crore from Madhya Pradesh Jal Nigam Maryadit for engineering, procurement, construction, testing, commissioning, and 10 years of operation and maintenance of Bebus Sunar 2, Kutne Rajnagar, Lower Narmada and Mann Dam multi-village schemes.

  • Adani Enterprises' arm Mundra Aluminium receives a letter of intent from the Government of Odisha for the Ballada bauxite block with an estimated total geological resources value of 22.13 million tonnes.

  • Metal stocks like Adani Enterprises, Vedanta and Hindalco Industries are rising in trade. The broader Nifty Metal index rises more than 2%.

  • Foreign institutional investors pull out Rs 2,140.7 crore from the equity market over the past week, according to Trendlyne's FII dashboard. Meanwhile, index options witness the highest inflow of Rs 29,594.6 crore from foreign investors.

  • State Bank of India is rising as it plans to cut its stake in YES Bank, according to reports. SBI’s three-year lock-in period with YES Bank will end next Monday. It has gained 33% from its 52-week low and is trading above its third resistance or R3 level.

  • India’s February Services PMI rises to a 12-year high of 59.4 from 57.2 in January.

  • ICICI Securities upgrades its rating on Finolex Industries to ‘Buy’ from ‘Add’ with a target price of Rs 196, indicating an upside of 16.4%. The brokerage remains positive on the firm’s prospects due to its leadership in agri-pipes, strong brand presence, focus on increasing its high-margin non-agri business and robust balance sheet.

  • Angel One rises as client base improves 52.2% YoY to 1.3 crore. The number of orders in February also increases 18.8% YoY to 8.4 crore.

  • Natco Pharma is rising as its board of directors is set to meet on Wednesday to consider the buyback of fully paid equity shares with a face value of Rs 2 per share. The company shows up in a screener of stocks with improving book value per share over the past two years.

  • Goldman Sachs maintains its ‘Buy’ rating on UltraTech Cement with a target price of Rs 8,500. The brokerage says the company’s valuations look attractive and expects volume to grow 10-12%, compared to the industry’s 6-8%.

  • PSU banks like Punjab & Sind Bank, UCO Bank, Bank of India, Union Bank of India and Bank of Maharashtra are rising in trade. The broader sectoral index Nifty PSU Bank is also trading in the green.

  • India Grid Trust acquires 100% shareholding in Khargone Transmission from Sterlite Power Transmission at an enterprise value of Rs 1,500 crore. The acquisition will take India Grid’s assets under management to Rs 22,700 crore.

  • Indian rupee appreciates 35 paise to 82.24 from the previous close of 82.59 against the US dollar in early trade today.

  • Bank of Baroda, Tata Power Co and Tube Investments of India outperform the Nifty 50 index over the month post their Q3FY23 results.

  • Alembic Pharma is falling as it takes an impairment charge of Rs 1,150.4 crore for three manufacturing facilities in Gujarat. The plants are likely to report lower earnings and revenue as US FDA approvals were delayed during the pandemic. The stock hit a 52-week low of Rs 476.5 and ranks medium on the Trendlyne checklist score.

  • Mahindra & Mahindra Financial Services’ total disbursements in February rise 53% YoY to Rs 4,185 crore. However, its collection efficiency falls by 1 percentage point YoY to 97%. The company says it has adequate liquidity buffer to cover fund requirements for three months. The stock shows up in a screener for companies with zero promoter pledges.

Riding High:

Largecap and midcap gainers today include Adani Enterprises Ltd. (1,879.50, 16.94%), Adani Ports & Special Economic Zone Ltd. (684.65, 9.91%) and Union Bank of India (72.40, 8.30%).

Downers:

Largecap and midcap losers today include Tube Investments of India Ltd. (2,707.05, -3.72%), YES Bank Ltd. (16.85, -3.71%) and Shree Cements Ltd. (25,655.90, -3.47%).

Volume Shockers

14 stocks in BSE 500 are trading on high volumes today.

Top high volume gainers on BSE included Finolex Cables Ltd. (775.85, 9.66%), Indigo Paints Ltd. (1,079.50, 8.51%) and Union Bank of India (72.40, 8.30%).

Top high volume losers on BSE were Mahindra Logistics Ltd. (363.20, -0.48%) and Alembic Pharmaceuticals Ltd. (502.75, -0.11%).

Vardhman Textiles Ltd. (313.45, 1.05%) was trading at 7.9 times of weekly average. Natco Pharma Ltd. (562.30, 1.64%) and Latent View Analytics Ltd. (357.00, 3.67%) were trading with volumes 7.0 and 4.3 times weekly average respectively on BSE at the time of posting this article.

BSE 500: highs, lows and moving averages

5 stocks made 52-week highs, while 11 stocks tanked below their 52-week lows.

Stocks touching their year highs included - Finolex Cables Ltd. (775.85, 9.66%), Jindal Stainless Ltd. (279.55, 0.22%) and Jindal Stainless (Hisar) Ltd. (520.85, 1.08%).

Stocks making new 52 weeks lows included - Alembic Pharmaceuticals Ltd. (502.75, -0.11%) and Bayer Cropscience Ltd. (4,217.40, -0.52%).

30 stocks climbed above their 200 day SMA including Vedanta Ltd. (289.25, 5.22%) and State Bank of India (561.20, 5.14%). 5 stocks slipped below their 200 SMA including CreditAccess Grameen Ltd. (966.60, -2.38%) and Edelweiss Financial Services Ltd. (62.50, -1.73%).

 
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The Baseline
02 Mar 2023
Screener of the week: Companies with increasing debt and reducing operating cash flows
By Abdullah Shah

The Adani Group controversy and a series of rate hikes have made investors cautious towards high-debt companies. So this week, we look at a screener of companies with high total debt-to-equity ratios. These businesses also saw their long-term debt-to-equity ratio rising and cash flows falling in FY22. 

This screener has 14 stocks from Nifty 500 and five stocks from the Nifty 50 index. Major stocks that show up in the screener are TVS Motor, Tata Motors, Adani Enterprises, Bharat Petroleum and Hindustan Petroleum. 

TVS Motor had the highest annual total debt-to-equity ratio of 3.5X among non-banking stocks. It posted an annual operating cash outflow of Rs 1,560 crore in FY22 against an inflow of Rs 1,151 crore in FY21. In H1FY23, the company’s long-term debt to equity ratio rose to 1.9X from 1.7X in FY22, as borrowings rose by 25%.

Tata Motors had an annual total debt-to-equity ratio of 3.1X in FY22. The company’s total debt-to-equity ratio rose to 5.2X in H1FY23, owing to a sharp rise in long-term liabilities. 

Adani Enterprises had a total debt-to-equity ratio of 1.9X in FY22, which fell to 1.3X in H1FY23, owing to equity fundraising. The company saw its cash flow from operating activities fall by 66% in the past fiscal.

You can find some popular screeners here.

 
Trendlyne Marketwatch
Trendlyne Marketwatch
02 Mar 2023
Market closes lower, Divgi Torqtransfer Systems’ IPO gets bids for 38% of total shares

Trendlyne Analysis

Nifty 50 closed at 17,321.90 (-129, -0.7%), BSE Sensex closed at 58,909.35 (-501.7, -0.8%) while the broader Nifty 500 closed at 14,587.25 (-77.6, -0.5%). Of the 1,951 stocks traded today, 823 were in the positive territory and 1,069 were negative.

Indian indices closed in the red, with the Nifty 50 losing nearly 120 points and closing below the 17,350 mark. Hindustan Aeronautics (HAL) settled in the green after the Union Cabinet approved the purchase of 70 Hindustan Turbo-Trainer aircraft from the company at a cost of Rs 6,828 crore for the Indian Air Force.

Nifty Smallcap 100 and Nifty Midcap 100 fell from their day’s highs and closed lower. Nifty Realty managed to rise over 2% and closed higher in a falling market. Nifty IT closed in the red, tracking the tech-heavy Nasdaq 100 futures, which are trading lower.

Major Asian indices closed flat to lower amid weak global cues. European stocks traded lower, tailing the US indices futures, which also traded in the red. Economists expect the Eurozone’s inflation to decrease marginally to 8.2% in February, a drop from 8.6% the prior month. Brent crude oil futures traded in the green after rising for two straight trading sessions following recent signs of improvement in China’s economy.

  • Bajaj Finserv sees a short buildup in its March 29 future series as its open interest rises 10.5% with a put-call ratio of 0.48.

  • BOB Capital Markets downgrades Tech Mahindra to 'Hold' from 'Buy' with a target price of Rs 1,160, indicating an upside of 5%. The brokerage believes that the company's new product, Sandstorm, will boost new deal wins. It expects the company's revenue to grow at a CAGR of 11% over FY22-25.

  • Commodity trading & distribution, edible oils and electric utilities industries fall over 23% over the past 90 days.

  • The Appellate Tribunal in New Delhi allows Reliance Capital’s lenders to conduct another round of auction. The order comes on a petition challenging an earlier NCLT Mumbai order restricting fresh bidding by the lenders of the bankrupt firm.

  • Divgi Torqtransfer Systems’ Rs 412 crore IPO gets bids for 38% of the available 38.4 lakh shares on offer on the second day of bidding. The retail investor quota gets bids for 1.6X of the available 6.98 lakh shares on offer.

  • BSE Power, Nifty Metal, Nifty Energy and Nifty Media fall more than 6% in trade in the past month.

  • Softbank’s arm SVF Doorbell (Cayman) sells a 3.84% stake (2.8 crore shares) worth Rs 954 crore in Delhivery in a bulk deal.

  • Realty stocks like Macrotech Developers, Sunteck Realty, Sobha and Godrej Properties are rising in trade. The broader sectoral index Nifty Realty is also trading in the green.

  • Global rating agency Moody’s keeps a stable outlook on India’s banking system. It states that strong fundamentals of the economy will help credit growth and asset quality.

  • CreditAccess Grameen is rising as the Assessment Unit of the Income Tax Department reduces the income tax demand for AY19 from the company to Rs 122.6 crore from Rs 2,333 crore.

  • Procter & Gamble Health and Equitas Small Finance Bank reach their 52-week highs of Rs 5,099.9 and Rs 74.8 per share respectively. Procter & Gamble has risen 23.8% over the past 30 days, while Equitas grew 38.2%.

  • Hemant Sikka, President of the Farm Equipment Sector at Mahindra & Mahindra, says normal monsoon and record high crop production have aided robust growth in tractor sales. He adds that the company’s exports have risen 5% year-to-date.

  • Axis Direct maintains its ‘Buy’ rating on Federal Bank with a target price of Rs 170, implying an upside of 26.4%. The brokerage believes the bank’s robust credit growth, rising fee income, improving asset quality and gradually moderating operating expenses will drive growth in the coming quarters.

  • Rail Vikas Nigam is rising as it emerges as the lowest bidder for manufacturing and maintaining Vande Bharat trains through its joint venture. Its joint venture partners are Metrowagonmash and Locomotive Electric System. The stock shows up in a screener for companies with high TTM EPS growth.

  • Bajaj Finserv rises 3% at the market open after receiving SEBI approval to launch its mutual fund business. The company will be the 43rd player in the MF space.

  • KNR Constructions is rising as it wins an order worth Rs 665 crore to develop a six-lane greenfield highway on the Bengaluru-Vijayawada economic corridor. The project will be completed in two years. The company shows up in a screener of stocks with upgraded broker recommendations or target prices in the past 90 days.

  • IT stocks like L&T Technology Services, Tata Consultancy Services, LTIMindtree and Tech Mahindra are falling in trade. The broader sectoral index Nifty IT is also trading in the red.

  • Eicher Motors' Royal Enfield wholesales rise 21% YoY to 71,544 units. Wholesales of 350cc engine capacity models rise 31% but models with engine capacity exceeding 350cc fall 30%.

  • Max Healthcare, Godrej Properties and Berger Paints (India) outperform the Nifty 50 index over the week post their Q3FY23 results.

  • The Union Cabinet signs an agreement with Larsen & Toubro (L&T) to acquire three cadet training ships for Rs 3,108.1 crore. L&T gains 47% from its 52-week low and is trading higher.

  • The Union Cabinet approves the purchase of 70 Hindustan Turbo-Trainer aircraft from Hindustan Aeronautics (HAL) at a cost of Rs 6,828 crore for the Indian Air Force. HAL will deliver the aircraft over six years, according to reports. The stock is trading near its 52-week high.

Riding High:

Largecap and midcap gainers today include Macrotech Developers Ltd. (997.35, 18.06%), Adani Transmission Ltd. (708.75, 5.00%) and Adani Green Energy Ltd. (535.00, 4.99%).

Downers:

Largecap and midcap losers today include YES Bank Ltd. (17.50, -4.37%), Siemens Ltd. (3,132.05, -3.84%) and PB Fintech Ltd. (560.00, -2.56%).

Volume Rockets

18 stocks in BSE 500 are trading on high volumes today.

Top high volume gainers on BSE included Macrotech Developers Ltd. (997.35, 18.06%), Rail Vikas Nigam Ltd. (65.65, 12.22%) and NBCC (India) Ltd. (36.20, 6.94%).

Top high volume losers on BSE were ICICI Lombard General Insurance Company Ltd. (1,086.85, -1.24%), Ajanta Pharma Ltd. (1,170.10, -0.75%) and Ircon International Ltd. (53.10, -0.65%).

Quess Corp Ltd. (363.90, 4.66%) was trading at 12.8 times of weekly average. Sunteck Realty Ltd. (305.50, -0.16%) and Amber Enterprises India Ltd. (1,951.05, 3.16%) were trading with volumes 6.8 and 6.4 times weekly average respectively on BSE at the time of posting this article.

BSE 500: highs, lows and moving averages

6 stocks made 52-week highs, while 8 stocks hit their 52-week lows.

Stocks touching their year highs included - Gujarat Pipavav Port Ltd. (109.20, 0.09%), Sonata Software Ltd. (801.70, 3.99%) and Jindal Stainless Ltd. (278.95, 2.88%).

Stocks making new 52 weeks lows included - Avanti Feeds Ltd. (364.00, -0.98%) and Cipla Ltd. (886.45, -1.46%).

26 stocks climbed above their 200 day SMA including NBCC (India) Ltd. (36.20, 6.94%) and Westlife Foodworld Ltd. (678.25, 4.69%). 11 stocks slipped below their 200 SMA including Maruti Suzuki India Ltd. (8,548.75, -2.46%) and Route Mobile Ltd. (1,317.00, -1.63%).

 
Trendlyne Marketwatch
Trendlyne Marketwatch
01 Mar 2023
Market closes higher, HDFC Sec keeps its ‘Buy’ rating on Sonata Software
Trendlyne Analysis

Nifty 50 closed at 17,450.90 (147.0, 0.9%), BSE Sensex closed at 59,411.08 (449.0, 0.8%) while the broader Nifty 500 closed at 14,664.85 (146.1, 1.0%). Of the 1,950 stocks traded today, 1,445 were on the uptick, and 445 were down.

Indian indices closed in the green after dropping for eight consecutive trading sessions. The Nifty 50 index rose above the key 17,400 mark. February GST collection stood at Rs 1.49 lakh crore, rising 12% YoY. FII sales from Indian markets stood at Rs 11,090 crore. DII bought Rs 19,239 crore in Indian markets.

Nifty Midcap 100 and Nifty Smallcap 100 closed in the green, tailing the benchmark index. Nifty Media and Nifty PSU Bank closed higher than Tuesday’s levels. Nifty IT closed in the green, despite the tech-heavy Nasdaq 100 closing in the red on Tuesday.

Major Asian indices closed higher amid positive news from China. Hong Kong’s Hang Seng index rose 4.1% as China’s manufacturing purchasing managers index has gone up to 52.6 in February, the highest since April 2012. On Tuesday, US stocks settled in the red with Dow Jones and S&P falling 0.71% and 0.31% respectively.

  • GR Infraprojects beats PNC Infratech in YoY revenue & net profit growth, PE ratio and broker average target upside. But it lags in MF & FII holdings, price to book value and 1-year price change.

  • Ahluwalia Contracts is rising as it bags an order worth Rs 169 crore for the construction of civil and structural work of the Data Centre Complex in Bhubaneshwar. The company's order book stands at Rs 4,333.6 crore in FY23.

  • Divgi TorqTransfer Systems’ Rs 412 crore IPO gets bids for 12% of the available 38.4 lakh shares on offer on the first day of bidding. The retail investor quota gets bids for 60% of the available 6.98 lakh shares on offer. The IPO is a fresh issue of Rs 180 crore and an offer for sale of 39.34 lakh shares.

  • Prashant Jain, Joint Managing Director and CEO of JSW Energy, says power demand has grown 7.5%-8% in February. He adds that EBITDA will improve to Rs 450 crore after the Mytrah acquisition.

  • Ashok Leyland’s medium & heavy commercial vehicle wholesales rise 42% YoY in February as bus wholesales grow more than 200%. The company shows up in a screener with decreasing RoA for the past two years.

  • Realty stocks like Macrotech Developers, Indiabulls Real Estate, Phoenix Mills and Sunteck Realty are rising in trade. The broader sectoral index Nifty Realty is also trading in the green.

  • Escorts Kubota is rising as its monthly tractor wholesales in February increase by 27.8% YoY to 7,811 units due to 27.4% growth in domestic tractor wholesales. The company's monthly wholesales of construction equipment improve by 21.8% YoY.

  • Vedanta is rising as it pre-pays its maturities till March 2023, deleveraging by $2 billion. This means it has achieved half of its 3-year debt reduction commitment in one year. It shows up in a screener of companies with high promoter pledges.

  • HDFC Securities maintains its ‘Buy’ rating on Sonata Software with a target price of Rs 775, implying an upside of 9.8%. The brokerage is positive about the firm’s prospects due to the ramp-up in international IT services, focus on improving sales engine and continued growth in domestic products & services.

  • Equitas Small Finance Bank, Campus Activewear and Mahindra CIE Automotive outperform the Nifty 50 index over the past week.

  • Rating Agency Moody’s revises India’s real GDP growth in 2023 to 5.5% from the earlier estimate of 4.8% in November 2022.

  • Divgi Torqtransfer Systems raises Rs 185.5 crore from anchor investors ahead of its IPO by allotting 31.43 lakh equity shares at Rs 590 per share. Investors include ICICI Prudential Mutual Fund, Nippon Life India and Quant Mutual Fund, among others.

  • Indoco Remedies falls as US FDA conducts good manufacturing practice inspection at plant II (sterile facility) and plant III (OSD facility) in Goa.

  • India’s manufacturing PMI falls to a four-month low of 55.3 in February. However, the PMI reading remains above the 50-mark, indicating expansion in manufacturing activity.

  • PSU banks like Indian Bank, Bank of Maharashtra, Punjab National Bank, Bank of Baroda and Canara Bank are rising in trade. All constituents of the broader sectoral index Nifty PSU Bank are also trading in the green.

  • One97 Communications (Paytm) is rising as it clarifies that it is not part of any negotiations regarding its major stakeholders cutting stakes in the company. This is in response to recent reports on Ant Group and Softbank looking to reduce their stakes.

  • India’s Q3FY23 GDP growth moderates to 4.4% due to the underperformance of the manufacturing sector.

  • Bajaj Auto's total monthly wholesales in February decline 11% YoY to 2.8 lakh units due to a 16% YoY fall in two-wheeler sales. Total domestic wholesales rise 36% YoY, while exports fall 38% YoY.

  • Hathway Cable & Datacom's Managing Director Rajan Gupta resigns due to personal reasons. His resignation will take effect from March 9, 2023.

  • Integrated Core Strategies buys a 0.67% stake (80.6 lakh shares) worth Rs 184.8 crore in Biocon in a bulk deal on Tuesday.

  • Axis Bank completes the acquisition of consumer business from Citibank N.A. and the NBFC business from Citicorp Finance at a consideration of Rs 11,603 crore. The stock shows up in a screener with improving RoA for the past two years.

Riding High:

Largecap and midcap gainers today include Adani Enterprises Ltd. (1,564.30, 14.70%), Adani Green Energy Ltd. (509.55, 5.00%) and Adani Transmission Ltd. (675.00, 4.99%).

Downers:

Largecap and midcap losers today include Gland Pharma Ltd. (1,292.75, -1.92%), Britannia Industries Ltd. (4,380.00, -1.83%) and Alkem Laboratories Ltd. (3,119.20, -1.76%).

Movers and Shakers

14 stocks in BSE 500 are trading on high volumes today.

Top high volume gainers on BSE included Alok Industries Ltd. (14.15, 13.20%), Rain Industries Ltd. (166.30, 8.30%) and Poly Medicure Ltd. (1,009.00, 7.70%).

Top high volume losers on BSE were Quess Corp Ltd. (347.70, -1.64%), Bombay Burmah Trading Corporation Ltd. (880.85, -0.86%) and Timken India Ltd. (2,930.00, -0.65%).

Adani Total Gas Ltd. (711.65, 4.88%) was trading at 27.6 times of weekly average. V-Mart Retail Ltd. (2,410.00, 0.05%) and Aegis Logistics Ltd. (366.00, 0.54%) were trading with volumes 5.9 and 5.6 times weekly average respectively on BSE at the time of posting this article.

BSE 500: highs, lows and moving averages

8 stocks took off, crossing 52-week highs, while 12 stocks hit their 52-week lows.

Stocks touching their year highs included - Finolex Cables Ltd. (733.05, 3.88%), Gujarat Pipavav Port Ltd. (109.10, 3.95%) and Sonata Software Ltd. (770.95, 6.15%).

Stocks making new 52 weeks lows included - Adani Transmission Ltd. (675.00, 4.99%) and Cipla Ltd. (899.60, -0.75%).

27 stocks climbed above their 200 day SMA including National Aluminium Company Ltd. (82.65, 5.62%) and KIOCL Ltd. (195.30, 4.13%). 15 stocks slipped below their 200 SMA including Brigade Enterprises Ltd. (475.55, -2.48%) and Aster DM Healthcare Ltd. (219.00, -1.73%).

 
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The Baseline
28 Feb 2023
Five analyst picks this week
By Suhas Reddy
  1. Prestige Estates Projects: Motilal Oswal maintains its ‘Buy’ rating on this realty company with a target price of Rs 675, implying an upside of 66%. Analysts Pritesh Sheth and Sourabh Gilda note that the company’s plans to double its sales bookings to Rs 25,000 crore by ramping up new launches is a key positive. They point out that Rs 7,500 crore of the firm’s planned capex (Rs 15,700 crore) for the next five years will be funded through external debt. Investors have been concerned about the strain this additional debt may cause on the balance sheet. But analysts believe Prestige’s rising cash flows and net worth will keep its debt-to-equity ratio stable. 

Sheth and Gilda are optimistic about the company’s ambitious growth guidance for the next five years, but believe the realty firm’s business development is key to realise the growth potential. They anticipate robust growth in rental income as well. They say, “Once the commercial portfolio fully stabilises over the next five to six years, it will generate rental income of Rs 3,200 crore.” The analysts expect the company’s revenue to grow at a CAGR of 8.6% over FY23-25. 

  1. Minda Corp: Axis Direct maintains its ‘Buy’ rating on this auto parts & equipment company with a target price of Rs 230, indicating an upside of 19.3%. Analysts Aditya Welekar and Shridhar Kallani maintain their previous recommendation and target price following Minda’s acquisition of a 15.7% stake in Pricol for Rs 400 crore. As this has been a financial investment and the company holds a minority stake, no synergies are expected from the acquisition, they add.  

The analysts maintain their positive outlook on the company’s growth prospects. They expect Minda Corp to be the prime beneficiary of product premiumization, growth in electric vehicle usage and increased business from commercial and passenger vehicle manufacturers. They are also upbeat about the management’s confidence to outperform the industry by 10-12% on the back of margin optimisation measures. 

However, they believe risks such as inflation, interest rate hikes and demand slowdown persist. “We maintain our cautious outlook on the 2W domestic market and overall export market in the next few quarters,” the analysts point out, and add that they expect the firm’s net profit to grow at a CAGR of 21.8% over FY23-25. 

  1. Supreme Petrochem: KRChoksey maintains its ‘Buy’ rating on this petrochemicals stock with a target price of Rs 427, indicating an upside of 12.1%. In Q3FY23, the company’s net profit fell 45.6% YoY to Rs 89.6% and revenue declined by 8.9% YoY. 

Analyst Abhishek Agarwal attributes this weak Q3 performance to lower realisations and volumes. However, the analyst remains optimistic about the company’s growth prospects given its capacity expansion projects, as he believes it will drive future growth. According to him, “The firm is enhancing its polystyrene (PS) and expanded polystyrene insulation (EPS) production capacities to cater to the increasing demand for its products. With enhanced capacity and healthy demand from end-user industries, it will see strong growth in the future.” 

Agarwal expects capacity expansion projects to add 1.2 lakh metric tonnes per annum of additional PS and EPS to its current capacity. The launch of new products and the production expansion will boost volume growth in the coming quarters, he says. He expects the company’s net profit to grow at a CAGR of 10% over FY22-24. 

  1. Muthoot Finance: Chola Wealth Direct maintains its ‘Buy’ call on this NBFC with a target price of Rs 1,350. This indicates an upside of 39.4%. According to analyst Huseain Kaizer Bharuchwala, the company has witnessed better gold loan demand in the past two months and it expects to return to double-digit gold loan growth in a few quarters. He believes that the tradeoff between loan growth and margin will persist “in the foreseeable future”.

The analyst says, “Muthoot, in our view, is unlikely to pursue gold loan growth at the cost of profitability. As pressure from banks and fintechs start subsiding and teaser loan rates impact vanish, we expect 10% growth in standalone AUM in FY24.” The analyst remains optimistic, expecting the company to regain some lost market share starting FY24 and returning to a double-digit growth rate in Q2FY24.

  1. Mahindra Lifespace Developers: ICICI Securities retains its ‘Buy’ call on this realty company with a target price of Rs 483, indicating an upside of 29.5%. After the company’s Chief Executive Officer (CEO) and Managing Director (MD) Arvind Subramanian resigned from his post, Mahindra Group replaced him with Amit Kumar Sinha. The resignation will take effect from May 22, 2023. Analyst Adhidev Chattopadhyay says, “The management transition comes at a time when the wheels for growth have been already set in motion, and barring any large churn in department heads, continuity in growth plans should not be a major hurdle.”

The analyst expects the company to achieve Rs 1,900-2,000 crore of FY23 sales bookings, implying 58% growth over FY22 sales. He estimates FY24 and FY25 sales bookings to be at Rs 2,340 crore and Rs 2,710 crore respectively on the back of a robust launch pipeline for FY24 and new project additions. “We believe that the company is on track to achieve its medium-term guidance of Rs 2,500 crore of residential sales bookings by FY25,” the analyst concludes. 

Note: These recommendations are from various analysts and are not recommendations by Trendlyne.

(You can find all analyst picks here)

 
Trendlyne Marketwatch
Trendlyne Marketwatch
28 Feb 2023
Market closes lower, metal stocks are falling

Trendlyne Analysis

Nifty 50 closed at 17,303.95 (-88.8, -0.5%), BSE Sensex closed at 58,962.12 (-326.2, -0.6%) while the broader Nifty 500 closed at 14,518.75 (-30.0, -0.2%). Of the 1,947 stocks traded today, 979 were in the positive territory and 911 were negative.

Indian indices closed in the red for an eighth consecutive trading session. The Nifty 50 fell below its 200-day simple moving average and closed just above the 17,300 mark. Vedanta extended its losses by 6.7% today after the Centre cancelled a proposal to sell its Africa-based zinc business to Hindustan Zinc for $2.98 billion over valuations concerns.

Nifty Smallcap 100 and Nifty Midcap 100 closed in the green, despite the benchmark index closing lower. Nifty Media and Nifty PSU Bank closed higher than Monday’s levels. Nifty IT closed in the red, despite the tech-heavy Nasdaq 100 closing in the green on Monday.

European indices traded lower after higher-than-expected inflation data from Spain and France. Elevated inflation may prompt the European Central Bank to further raise interest rates, which could impact already slowing economic growth. Major Asian indices closed mixed while the US indices futures traded marginally lower.

  • Relative strength index (RSI) indicates that stocks like Equitas Small Finance Bank, ZF Commercial Vehicle Control Systems India, Symphony and Sanofi India are in the overbought zone.

  • Uflex rises in a volatile market as the Income Tax Department completes raids at various locations of the company. The raid, which started on February 21, concluded on Monday, as declared in the clarification to NSE by the company.

  • Commercial services & supplies, utilities, and hardware technology & equipment sectors fall more than 18% over the past 90 days.

  • According to JP Morgan, market conditions are favourable for the real estate sector but the risk due to slowdown in the US persists. The brokerage says only DLF fits into the metrics of pre-sales growth and positive earnings.

  • HPL Electric and Power is surging as it bags an order worth Rs 409 crore for a smart meter pipeline project in west India, taking its order book to more than Rs 1,200 crore in February. The company features in a screener of stocks with strong cash-generating ability from core business.

  • Metals and mining stocks like Vedanta, Hindalco Industries, APL Apollo Tubes, Coal India and Tata Steel are falling in trade. The broader sectoral index BSE Metal is also trading in the red.

  • Vedanta, a high-volume loser stock in trade today, falls 12% in the past week after the Centre cancelled a proposal to sell its Africa-based zinc business to Hindustan Zinc for $2.98 billion over valuations concerns. The stock is trading below its second support or S2 level.

  • Media stocks like Zee Entertainment Enterprises, New Delhi Television, Nazara Technologies and Network 18 Media & Investments are rising in trade. The broader sectoral index Nifty Media is also trading in the green.

  • JSW Energy gains over 8% in trade today and ranks high in the Trendlyne checklist score. The stock shows up in a screener for companies with improving cash flow and high durability.

  • One97 Communications (Paytm) is down more than 8% in trade and ranks medium on the Trendlyne checklist score. The consensus recommendation for February has 9 analysts suggesting ‘Buy’ and 2 ‘Hold’.

  • Reports suggest that 76.9 lakh shares (0.1% equity) of Power Grid Corp of India, amounting to Rs 169.2 crore, change hands in a large trade.

  • Chola Wealth Direct maintains its ‘Buy’ rating on Muthoot Finance with a target price of Rs 1,350. This indicates an upside of 40.6%. The brokerage expects the company to regain its lost market share in FY24 and see a double-digit growth rate by Q2FY24. It anticipates the firm’s net profit to grow at a CAGR of 6.4% over CY22-24.

  • Zee Entertainment Enterprises is surging as the NSE removes the stock from the Insolvency and Bankruptcy Code (IBC) framework, reverting the surveillance actions on the company. It also reincludes the stock in its futures and options contracts with expiry in May 2023.

  • B Thiagarajan, Managing Director of Blue Star, says dealers have ample stock prepared as summer has begun. He expects 30% YoY growth for the company in this season.

  • Spicejet is falling as it announces that Carlyle Aviation Partners will acquire a 7.5% stake in the airline to help reduce its debt by $100 million.

  • Indian rupee appreciates to 82.68 from the previous close of 82.84 against the US dollar in early trade today.

  • Bharat Electronics, Kajaria Ceramics and Tech Mahindra outperform the Nifty 50 index over the month post their Q3FY23 results.

  • NHPC is rising as the Cabinet Committee on Economic Affairs approves Rs 1,600 crore for pre-investment activities and various clearances for Dibang Multipurpose Project, which is being developed by the company in Arunachal Pradesh. The company shows up in a screener for stocks with consistently high returns over the past five years.

  • Mastek is rising as it announces a strategic partnership with Netail to bring in AI-led retail software solutions for e-commerce and omnichannel retailers. This alliance will help both companies understand consumer behaviour and user experience, and have real-time market visibility. Mastek ranks high on the Trendlyne checklist score.

  • Dr. Reddy’s Labs signs an agreement to acquire the US generic prescription product portfolio of Mayne Pharma Group, an Australia-based firm, for $105 million (Rs 861 crore). The value of the addressable market in the US is approximately $3.6 billion for CY22, according to IQVIA.

  • Laxmi Organic Industries’ CEO & executive director Satej Nabar resigns from his posts, effective from April 2. Ravi Goenka steps down as managing director and will be redesignated as the chairman on April 3. Rajan Venkatesh will replace them as the CEO and MD for a tenure of five years.

Riding High:

Largecap and midcap gainers today include Adani Enterprises Ltd. (1,363.85, 14.27%), JSW Energy Ltd. (234.65, 12.68%) and Zee Entertainment Enterprises Ltd. (195.60, 6.91%).

Downers:

Largecap and midcap losers today include Vedanta Ltd. (268.35, -6.61%), One97 Communications Ltd. (597.25, -5.96%) and Adani Total Gas Ltd. (678.55, -5.00%).

Volume Shockers

33 stocks in BSE 500 are trading on high volumes today.

Top high volume gainers on BSE included Adani Enterprises Ltd. (1,363.85, 14.27%), JSW Energy Ltd. (234.65, 12.68%) and Elgi Equipments Ltd. (462.00, 7.65%).

Top high volume losers on BSE were Vedanta Ltd. (268.35, -6.61%), Adani Total Gas Ltd. (678.55, -5.00%) and Adani Transmission Ltd. (642.90, -4.99%).

CG Power and Industrial Solutions Ltd. (305.25, -1.82%) was trading at 22.8 times of weekly average. Biocon Ltd. (229.15, -0.20%) and HCL Technologies Ltd. (1,077.60, -0.59%) were trading with volumes 14.7 and 11.3 times weekly average respectively on BSE at the time of posting this article.

BSE 500: highs, lows and moving averages

3 stocks made 52-week highs, while 26 stocks were underachievers and hit their52-week lows.

Stocks touching their year highs included - Supreme Industries Ltd. (2,761.35, 0.76%), Triveni Turbine Ltd. (317.55, 5.62%) and Equitas Small Finance Bank Ltd. (71.50, 2.95%).

Stocks making new 52 weeks lows included - Adani Transmission Ltd. (642.90, -4.99%) and Bayer Cropscience Ltd. (4,279.95, -2.59%).

20 stocks climbed above their 200 day SMA including Elgi Equipments Ltd. (462.00, 7.65%) and YES Bank Ltd. (17.45, 6.40%). 33 stocks slipped below their 200 SMA including Vedanta Ltd. (268.35, -6.61%) and One97 Communications Ltd. (597.25, -5.96%).

 
Trendlyne Marketwatch
Trendlyne Marketwatch
27 Feb 2023
Market closes lower, Citi maintains its ‘Sell’ rating on Mphasis

Trendlyne Analysis

Nifty 50closed at 17,392.70 (-73.1, -0.4%), BSE Sensexclosed at 59,288.35 (-175.6, -0.3%) while the broader Nifty 500closed at 14,548.70 (-81.8, -0.6%). Of the 1,977 stocks traded today, 414 were on the uptick, and 1,525 were down.

Indian indices recoup losses made in morning session and still closed in the red for a seventh straight trading session. Nifty 50 fell over 60 points and closed just above 17,400 mark. Spicejet converts Rs 245 crore of debt from Carlyle Aviation Partners into equity. It also further plans to raise Rs 2,550 crore via qualified institutional placement.

Nifty Midcap 100 and Nifty Smallcap 100 closed in the red, following the benchmark index. Nifty Media closed deep in the red, led by Zee Entertainment Enterprise Limited. All other major sectoral indices closed lower except for Nifty Bank and Nifty Realty closing in the green.

European stocks trade higher as investors shrug off inflation and interest rate concerns. However, most major Asian indices closed lower, tailing US indices futures. Brent crude oil futures are trading lower waiting for signs of increased consumption from China.

  • Money flow index (MFI) indicates that stocks like Linde India, Finolex Cables, Zensar Technologies and PB Fintech are in the overbought zone.

  • Angel One and Rossari Biotech hit their 52-week lows of Rs 1,029.5 and Rs 639.9 respectively. Angel One falls for three consecutive sessions, while Rossari Biotech trades lower for two sessions.

  • Life Insurance Corp of India touches an all-time low of Rs 566, falling for the past six trading sessions. It shows up in a screener with declining net profit and margin QoQ. However, the stock has a high Trendlyne durability score.

  • Macrotech Developers rises over 10% in a weak market. The stock ranks high on the Trendlyne checklist score. The consensus recommendation for February shows 11 analysts recommending ‘Buy’, three maintaining ‘Hold’ and 1 ‘Sell’.

  • Bharat Electronics, Tata Consumer Products and Ambuja Cements trade below their second support or S2 level in a weak market.

  • Adani Group stocks decline as reports suggest that it is in talks with global credit funds to raise up to $400 million in debt against a key coal port, Carmichael mine. It contributes a large portion of the conglomerate's Australian fossil fuel exports.

  • Spicejet’s board approves the transfer of its cargo business to SpiceXpress & Logistics on a slump sale basis for Rs 2,557 crore. Also, it approves the conversion of liabilities worth Rs 244.6 crore with Carlyle Aviation Partners into equity and proposes to raise capital worth Rs 2,500 crore through qualified institutional placement.

  • Citi maintains its ‘Sell’ rating on Mphasis with a target price of Rs 1,705. The brokerage expects softness in the company’s mortgage business to continue in Q4. It says the overall growth could improve from Q1FY24.

  • Vedanta, Canara Bank and Manappuram Finance underperform their sector over the past month.

  • Axis Direct maintains its ‘Buy’ rating on Varun Beverages and raises the target price to Rs 1,500 from Rs 1,450. This implies an upside of 16.1%. The brokerage believes the company’s growth will be driven by the surge in sales and market share during summer. It expects the firm’s net profit to grow at a CAGR of 51.8% over CY21-24.

  • One97 Communications (Paytm) is rising as reports suggest that Sunil Mittal, Chairperson of Bharti Airtel, may buy a stake in the company and merge Airtel Payments Bank with Paytm Payments Bank. Meanwhile, Ant Group may cut its stake in Paytm to keep its holding within the required threshold, reports add.

  • IT stocks like Mphasis, Coforge, L&T Technology Services and LTIMindtree are falling in trade. The broader sectoral indices Nifty IT, BSE IT and BSE Tech are also trading in the red.

  • Abhijit Roy, Managing Director and CEO of Berger Paints, says Q4FY23 volume and value growth will be in the double digits as demand improves. He adds that the company’s market share will exceed 20% in FY24.

  • Granules India receives US FDA approval for losartan potassium tablets used to treat hypertension in adults and pediatric patients. The current annual US market for losartan potassium tablets is approx $336 million.

  • Bajaj Auto falls as reports suggest that it plans to cut down export production by nearly 25% in motorcycle and three-wheeler segments due to the looming uncertainties in Nigeria, one of its biggest export markets. Its capacity utilization may fall below 50% across its export-focused plants.

  • Media stocks like Zee Entertainment Enterprises, New Delhi Television, PVR and Dish TV India are falling in trade. The broader sectoral index Nifty Media is also trading in the red.

  • According to Goldman Sachs, there is moderate growth in Q3FY23 revenue but margins have recovered. Results are slightly below estimates. The brokerage expects Nifty to reach 20,500 levels by the end of CY23.

  • IRB Infrastructure Developers wins a project worth Rs 2,132 crore from the National Highways Authority of India for the upgradation of NH-27 from Samakhiyali to Santalpur to six-lane with paved shoulder.

  • Dr. Reddy's Labs, TVS Motor Co and Indus Towers outperform the Nifty 50 index over the month post their Q3FY23 results.

  • Power Grid Corp’s committee of directors approves four projects to set up transmission systems, relieve high loading and implement expansion schemes in the western and north eastern regions. The projects are estimated to cost around Rs 804 crore. It shows up in a screener of stocks with improving RoCE for the past two years.

  • NBCC bags the work of a project management consultant for designing, constructing and maintaining buildings of Motilal Nehru National Institute of Technology, Allahabad. The cost of the project is Rs 350 crore.

Riding High:

Largecap and midcap gainers today include Macrotech Developers Ltd. (807.75, 12.25%), Tube Investments of India Ltd. (2,660.50, 4.29%) and Bank of Baroda (159.00, 2.85%).

Downers:

Largecap and midcap losers today include Adani Enterprises Ltd. (1,193.50, -9.28%), MphasiS Ltd. (2,039.85, -7.19%) and Zee Entertainment Enterprises Ltd. (182.95, -6.44%).

Volume Rockets

12 stocks in BSE 500 are trading on high volumes today.

Top high volume gainers on BSE included Macrotech Developers Ltd. (807.75, 12.25%), RHI Magnesita India Ltd. (664.40, 7.76%) and Chemplast Sanmar Ltd. (408.35, 6.65%).

Top high volume losers on BSE were Uflex Ltd. (353.65, -17.42%), MphasiS Ltd. (2,039.85, -7.19%) and PNC Infratech Ltd. (281.85, -4.12%).

Affle (India) Ltd. (978.80, -1.15%) was trading at 6.4 times of weekly average. Sanofi India Ltd. (5,864.25, 5.41%) and Hitachi Energy India Ltd. (3,244.95, -0.89%) were trading with volumes 5.2 and 5.2 times weekly average respectively on BSE at the time of posting this article.

BSE 500: highs, lows and moving averages

36 stocks tanked below their 52-week lows.

Stocks making new 52 weeks lows included - ACC Ltd. (1,694.80, -2.03%) and Adani Transmission Ltd. (676.70, -5.00%).

10 stocks climbed above their 200 day SMA including RHI Magnesita India Ltd. (664.40, 7.76%) and ICICI Bank Ltd. (856.40, 1.99%). 40 stocks slipped below their 200 SMA including MphasiS Ltd. (2,039.85, -7.19%) and Bajaj Auto Ltd. (3,639.85, -5.46%).

 
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The Baseline
24 Feb 2023
Five Interesting Stocks Today
  1. Samvardhana Motherson International: This auto parts & equipment company’s share price has been on an uptrend since Monday, after its step-down subsidiary signed an agreement to acquire a 100% stake in SAS Autosystemtechnik at an enterprise value of 540 million euros (Rs 4,790 crore). As a result of the share price rise, the company features in a screener of stocks trading above their short-, medium- and long-term moving averages.

Based in Germany, SAS is a leading provider of cockpit module assemblies for cars. This acquisition will help Samvardhana improve integration in the automotive supply chain, increase customer proximity and diversify its products. Europe is a key market for Motherson, accounting for 60% of its revenues.

Vivek Chaand Sehgal, Chairman of Samvardhana Motherson International, said that the acquisition will help in diversifying the customer base and products. It will transform Motherson Group into a leading assembler of cockpit modules globally, with a special focus on EV models.

Analysts believe that the acquisition is in line with Samvardhana's strategy to expand its product line and enhance its footprint in the European market. ICICI Securities maintains its ‘Buy’ rating on the stock post the acquisition announcement. The brokerage believes the acquisition will help the company improve its logistical practices and, in turn, save costs and add new business opportunities.

  1. Bharat Dynamics: The Aero India event has helped this defence company takeoff. It has risen 22.2% over the past week on the back of multiple memorandum of understanding (MoU) contracts from Indian as well as foreign companies at Aero India 2023. It also won an export order worth $255 million (approximately Rs 2,108 crore) on Monday. This order will be added to the company’s already strong order book of Rs 11,906 crore as of November 2022. The company features in a screener of stocks near their 52-week highs with significant volumes.

However, the share price had previously fallen around 10% in five trading sessions starting February 7 after it announced Q3FY23 results. Its net profit declined 60.7% YoY to Rs 213.3 crore in Q3FY23 and revenue also fell 42.6% YoY to Rs 461.6 crore. Talking about the result, the management said, “Supply of certain electronic components was delayed due to the Russia-Ukraine conflict, and this impacted the performance during the period. The company is exploring alternatives to mitigate the impact.” 

ICICI Securities remains bullish on the stock and maintains its ‘Add’ rating with a revised target price of Rs 955, despite slower-than-expected order inflows during 9MFY23. The broker believes that the company is likely to benefit from several defence procurement opportunities in the pipeline.

The company has also launched several new products at Aero India 2023. It ranks high on Trendlyne’s checklist with a score of 56.5%, while the broker consensus on the stock is ‘Buy’.

  1. United Breweries: This breweries and distilleries stock has fallen 1.5% in the past week. On the technical front, the stock is trading down 7.7% over a month, 13% lower in the past 3 months and 5% lower over the year. It shows up in a screener of weak momentum stocks where the price is below short-, medium- and long-term averages.

United Breweries faced two major incidents this week. Its Managing Director & CEO Rishi Pardal resigned on February 17 (the announcement came in after market hours), causing the stock to fall 2% in trade on Monday. But the stock held its ground during the second incident: The Supreme Court (SC) stayed a penalty order from the National Company Law Appellate Tribunal (NCLAT) and the Competition Commission of India in an alleged beer cartel case against the company. However, the SC has directed the company to pay a 10% additional penalty over and above the 10% paid to NCLAT. The total fine slapped on the company is around Rs 873 crore.

Its Q3FY23 results have not been encouraging either. It reported a net loss of Rs 2 crore on lower sales volumes, especially in Tamil Nadu and Andhra Pradesh, triggering an impairment review by the company. It reported an exceptional loss of Rs 33 crore on its profit and loss statement, which is the amount of impairment of property, plant and equipment. The management, in its earnings call, says that they are not planning a restructuring in these states yet, but will improve sales volumes in the coming quarters. High raw material costs (up 22% YoY) and an increase in excise duty have also led to rising expenses eating into earnings.

The stock shows up in a screener of stocks with declining revenue for the past two quarters. However, Trendlyne’s consensus recommendation of February shows that 10 analysts recommend a ‘Buy’, 2 ‘Hold’ and 1 ‘Sell’.

  1. Zee Entertainment Enterprises Limited (ZEEL): This media stock slumped on Thursday and made news for its continued financial woes. It tanked 14% in the past two trading sessions after National Company Law Tribunal (NCLT) admitted IndusInd Bank’s insolvency plea against ZEEL.

In December 2021, Sony and ZEEL had signed a deal to merge their television networks, programme libraries, digital assets, and operations. But IndusInd Bank, Axis Bank and IDBI Bank opposed the ZEEL-Culver Max Entertainment (Sony) merger citing non-payment of dues. In line with that, IndusInd filed an application with NCLT seeking payment of Rs 89 crore against the loan default. Once the NCLT proceedings are initiated, the firm cannot go ahead with its merger.

ZEEL is also the guarantor for a Rs 150-crore loan given by IndusInd Bank to Siti Networks. Siti Networks is another Subhash Chandra-owned ESSEL Group company. NCLT has initiated insolvency proceedings against Siti Networks as well. The alternative solution for ZEEL is to repay the dues or file an appeal against the plea.  

ZEEL MD & CEO Punit Goenka says they will “take all measures to protect shareholder interests and ensure the timely completion of the deal”. On Friday, it was reported that ZEEL has challenged the Mumbai NCLT order and successfully received a stay order from National Company Law Appellate Tribunal (NCLAT) till March 29.

  1. Sonata Software: This IT consulting & software company rose 5.3% in trade on Thursday after announcing the acquisition of Quant Systems, a US-based software company. This comes while the company is in the midst of an uptrend since announcing its Q3FY23 results on January 24. Its net profit has risen 4.4% QoQ to Rs 117.7 crore and revenue surged 51.1% QoQ. Over the past month, the firm has gained 24.1% till Thursday and shows up in a screener for stocks trading above their short, medium and long-term moving averages.

    The acquisition of Quant Systems is set to be the largest in the company’s history. Sonata Software has agreed to buy a 100% stake in the US-based company for an upfront cash consideration of $65 million and deferred achievement-based payouts up to $95 million, payable over two years. The management believes this deal will accelerate growth and scale while strengthening the company’s capabilities in a wide range of services. Samir Dhir, CEO and Managing Director of the company, believes that the acquisition will contribute 16.7% to the consolidated revenue, according to reports. This acquisition will also add two large clients to the company’s top five client list.

    The management plans to accelerate growth by doubling its IT services revenue in the next four years by focusing on winning large deals. The company is looking to enhance its presence in the banking, financial services and insurance (BFSI) and healthcare verticals to accelerate its growth trajectory. According to Trendlyne’s Forecaster, the consensus recommendation on the company is a ‘Buy’.

Trendlyne's analysts identify stocks that are seeing interesting price movements, analyst calls, or new developments. These are not buy recommendations.

 
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The Baseline
24 Feb 2023
Chart of the week: India’s foreign exchange reserves under pressure?
By Abdullah Shah

India’s foreign exchange reserves declined for two consecutive weeks in February 2023, after rising for three straight months from November 2022 to January 2023. The week ending February 10, 2023 witnessed the sharpest fall in weekly reserves since April 2022. The reserves plunged by $8.4 billion. 

The Adani-Hindenburg saga caused a massive sell-off in the Indian equity market, and foreign institutional investors sold Rs 10,068.3 crore over the past 30 days. At the same time, the Indian rupee took a hit as the US Federal Bank raised interest rates by a further 25 bps on February 1, 2023. The Reserve Bank of India (RBI) has been selling US dollars to put a floor under  the rupee’s depreciation. This was the major reason for the decline in the foreign exchange reserves. 

Despite the decline in reserves, data shows that India is still at double the reserve levels in 2013, when the RBI had gone on a dollar selling spree as the US Fed slowed its pace of bond buybacks.

How is India doing relative to other emerging markets? For comparison, we can look at some economies in the world which are facing tough challenges for economic growth. Pakistan’s foreign exchange reserves has suffered a drastic decline of 61.4% since February 2022 and stands at a meagre $8.7 billion as of January 2023. The country had already secured a $6 billion bail-out from the International Monetary Fund (IMF) in 2019 followed by another infusion of $1 billion in 2022. It has a total foreign debt of $126 billion which includes loans from China, the World Bank and the Asian Development Bank.

Another neighbour, Sri Lanka declared bankruptcy in July 2022 with a possibility of having to default on its sovereign debt repayment. The country’s foreign exchange reserve stands at just $1.9 billion as of December 2022, down 19.6% since January 2022 with loans from the IMF, China, India and Japan. 

On the other side of the world, Turkey has seen its foreign exchange reserves fall to $75.6 billion in February 2023, its lowest level since July 2022. But it is still 21.9% higher than its multi-month low in August 2022. 

Despite the drop, India still has a comfortable reserves cushion, although the impact of the trade deficit and appreciating dollar in the coming months will have to be closely monitored. At its current level of $566.9 billion, India’s foreign exchange is estimated to cover for 9.2 months of imports projected for FY23.