- Poonawalla Fincorp: This NBFC stock rose 11.9% over the past week till Thursday on the back of a healthy long-term business outlook. The Chairman of the firm, Adar Poonawalla, believes the NBFC is well-capitalised to grow its assets under management (AUM) to Rs 50,000 crore in the next five years, say reports. The company also sold its housing finance arm, Poonawalla Housing Finance, for Rs 3,900 crore. The management believes this transaction will improve the company’s efficiency as it will increase resource allocation and focus on core segments like retail and small business financing. The company has been deleveraging over the past few quarters, which enabled it to show up in a screener for companies with declining debt.
Last year, the company was rocked by serious allegations of insider trading. Its Managing Director, Abhay Bhutada, resigned in September 2021 after SEBI barred him from the equity markets for alleged insider trading activities. He was reinstated in February 2022 and SEBI revoked its order in June.
After acquiring Magma Group in May 2021, the promoters rejigged its operations and management. They also reduced the number of branches to 115 from 300. This led to the company tightening its underwriting framework and write-off policy. It also focused on increasing collections to improve asset quality. According to Motilal Oswal, these changes have led to an improvement in credit rating, thus allowing the NBFC to reprice its liabilities to lower rates and access diversified sources of debt. Over the past year, the firm’s cost of borrowing has fallen 190 bps, the brokerage added.
- Deepak Fertilisers & Petrochemicals: This commodity chemicals company fell 22.4% during the week ending December 23 as the Securities and Exchange Board of India (SEBI) imposed a fine of Rs 45 lakh on Naresh Ramniklal Mehta and his wife Pallavi Naresh Mehta for insider trading. Because of this sharp drop in share price, the company’s promoter entity, Robust Marketing Services, pledged 5.4 lakh shares (or 0.46% stake) to top up the pledged shares to Bajaj Finance. Currently, the company’s pledged shares stand at 27.7% and it features in a screener of stocks with high promoter stock pledges.
After the sharp fall in share price, the stock rose 1% on December 15 as its board of directors approved the demerger of its mining chemicals and fertilisers businesses of Smartchem Technologies into Deepak Mining Services and Mahadhan Farm Technologies. This will be followed by the amalgamation of Smartchem Technologies with Mahadhan Farm Technologies. In reaction, the stock has risen over 10% in the past week.
Sailesh C Mehta, Chairman & Managing Director of the company, had said, “The proposed corporate restructuring shall considerably help create strong independent business platforms within the larger DFPCL brand umbrella, hence enhancing stakeholders' value over time.” The company features in a screener of stocks with improving return on capital employed (RoCE) over the past two years.
- Suven Pharmaceuticals: This pharma company’s share price fell over 4.7% on Monday after private equity investor Advent International agreed to acquire a 50.1% stake in it for Rs 6,313 crore from the Jasti family, the promoters of Suven Pharma. But the deal did not excite investors as the stock fell after the analyst conference call. Reports suggest lack of clarity post-acquisition as one of the reasons for the share price fall. However, the share price has been on an uptrend since October and as a result, the company features in a screener of stocks with strong momentum with their prices above short-, medium- and long-term moving averages.
Advent has made an offer for an additional 26% of Suven’s shares from public shareholders to comply with Securities and Exchange Board of India’s (SEBI) takeover rules. The promoter stake sale and open offer are priced at Rs 495 per share.
Advent International has been on an acquisition spree in the Indian pharma space for the past couple of years, starting with the acquisition of RA Chem Pharma in October 2020. After the merger completion, Advent intends to explore the merger of its portfolio company, Cohance Lifesciences, with Suven Pharma to build an end-to-end CDMO (contract development and manufacturing organisation) and merchant API player servicing the pharma and specialty chemical markets. In H1FY23, Suven Pharma derived 52% of its revenue from the CDMO space and 44% from the specialty segment.
- Godrej Properties: This realty stock has been in the news almost every other week for buying large land parcels for housing projects. In December, the company bought nearly 103 acres of land in Gurugram and Mumbai. However, investors were not too enthused by these acquisitions and the stock went down 1% in the past week. The stock has been trading nearly 5% down over the month and shows up in a screener of stocks trading below their first support or S1 level.
So far in FY23, the company has acquired land with a revenue potential of Rs 16,500 crore. This is over and above its guidance of Rs 15,000 crore for FY23. The company’s Executive Chairman, Pirojsha Godrej, says that he is bullish on sales bookings and new land acquisitions, and plans to add more such acquisitions to the bucket by March 2023.
However, reports suggest that the pace of new launches has been slower in comparison to its peers, and these land acquisitions need to result in better sales or they may affect the debt levels of the company. Jefferies expects Godrej’s debt to be in the range of Rs 300-700 crore for FY23-25. In Q2FY23, Godrej’s net debt stands at Rs 1,365 crore, a rise of 42.8% QoQ. Also, rising interest rates and inflation can affect housing demand in future.
On the bright side, the company’s Kandivali land acquisition on December 2 shows its improving micro-market selection. The Kandivali project has a revenue potential of Rs 7,000 crore. Trendlyne’s Forecaster also expects Godrej Properties’ operating revenue to grow 37.6% in Q3FY23 from actual operating revenue in Q2FY23. In Q2, it missed the Forecaster estimate by 38.4%.
- Mahindra CIE Automotive: This auto parts & equipment stock touched an all-time high of Rs 347.7 on Thursday. The stock is outperforming its sector by 17.6% according to Trendlyne’s relative returns screener. In the past month, the stock rose 18% while rising more than 45.7% in the past six months. Trendlyne scores the company with a durability score of 80 and a momentum score of 70. Durability score indicates strong financials and momentum score talks about the bullish or bearish nature of the stock.
This comes after the company announced its plans to sell its forgings business in Germany (a wholly owned subsidiary) on December 14. The subsidiary contributed 10% to its consolidated sales but was a loss-making unit. It indicated the challenges faced by its German operations were due to geopolitical conflict and higher energy prices.
Analysts from ICICI Direct and Motilal Oswal retain their stance on the stock, as the company is making changes in its functioning, and cutting down on loss-making units to improve its profitability. ICICI Direct has increased its target price by 26% to Rs 410. Motilal Oswal also maintains a ‘Buy’ on the stock as it expects new order wins and the current order book will help the stock outperform the domestic auto industry by nearly 10%. The company has a new order pipeline for making certain EV components.
The company’s current shareholding shows that Mahindra & Mahindra’s stake has reduced to 9.3% from 11.4% earlier. It is no longer a promoter of the company. CIE has a 65.7% stake and is driving the company towards better operational efficiencies. The company overall plans to direct its capex towards India business. It shows up in a screener of companies with low debt.
Trendlyne's analysts identify stocks that are seeing interesting price movements, analyst calls, or new developments. These are not buy recommendations.
