By Ketan Sonalkar
Every month, the mutual fund data offers insights into which sectors and companies look promising to fund managers. This month, trends suggest that sectors like autos and luggage manufacturers are likely to see revival in FY22. Mid tier IT service companies also find favour, with investor confidence intact in these companies after a very encouraging FY21.
This screener shows stocks which saw mutual funds increase their holdings in the past month.
SBI Life – Life insurance gains traction on increased customer awareness
SBI Life benefited from the increased health focus during the pandemic, as more customers became aware of the need for life insurance. In Q4FY21, the company posted its best quarterly revenues and net profit in its history. It also saw the highest ever annual revenue in FY21, crossing Rs 1000 crore for the first time.
With the onset of the pandemic in Q1FY21, SBI Life has quickly adapted itself to the digital world with 99 percent of its applications being submitted digitally. It also has a distinct advantage in distribution with over 24,000 branches of parent State Bank of India, and another 947 offices of its own. Among insurance companies, SBI Life had the lowest opex (operational expenditure) ratio of 7.9% in FY21.
With increasing demand, a digital approach, and strong parentage, MFs see a promising future for SBI Life.
ICICI Prudential Value Discovery Fund Growth, HDFC Balanced Advantage Fund Growth, Aditya Birla Sun Life Flexi Cap Fund Growth andAditya Birla Sun Life Frontline Equity Fund Growth are some of the funds who have bought into this stock last month.
VIP Industries – Reducing additional baggage and awaiting a flying start
VIP Industries is Asia’s largest and the world’s second largest luggage manufacturer. With pandemic and travel restrictions during FY21, business was severely impacted and revenues fell YoY throughout FY21.
Taking stock of the situation, the company embarked on a journey towards leaner operations.Over 100 EBOs (exclusive brand outlets) have been closed. Rentals for operational stores are being renegotiated. The saving grace in FY21 was the e-commerce channel which contributed to about 17% of the sales. Cost rationalisation measures included increasing the inventory sourcing from its Bangladesh unit. The overall cost of production in Bangladesh is 15% lower than its China unit, and there is no import duty on products manufactured in Bangladesh when imported in India.
The current demand from customers is primarily for value products which is also impacting margins. As the world re-opens for travel, there will be a return of demand for premium products, and ultimately the company expects to get back to the margins achieved before the pandemic began.
HDFC Capital Builder Value Fund Growth, Aditya Birla Sun Life Multi-Cap Fund Regular Growth, Aditya Birla Sun Life Small Cap Fund Growth andCanara Robeco Small Cap Fund Regular Growth are some of the funds who have bought into this stock last month.
Mindtree – Capturing mindshare and wallet share of customers
IT companyMindtree delivered more than 2X returns for investors in FY21. The company, in all four quarters of FY21 registered a higher YoY revenue as well as net profits. The annual revenues in FY21 are the highest in the company’s history at Rs 8119.5 crore.
The management has guided for EBITDA margins of 20% in FY22. This is backed by a strategy of focusing on becoming an end-to-end service provider, client mining, expansion in Europe, focus on whitespace opportunities, a dedicated hyperscaler vertical and industry partnerships and consulting to drive long term growth.
The travel vertical which was severely impacted in FY21 due to travel restrictions across the world is expected to pick up momentum in Q2FY22.
Axis Flexi Cap Fund Regular Growth, Aditya Birla Sun Life Pure Value Fund Growth, Axis Small Cap Fund Regular Growth and ICICI Prudential Technology Fund Growth are some of the funds who have bought into this stock last month.
Hero MotoCorp – Premium and electric bikes set to drive growth
Hero MotoCorp is the largest Indian manufacturer of two wheelers. While FY21 was a challenging year, the company showed resilience and has sequentially increased its revenues for the last three quarters of FY21, with Q3FY21 delivering the highest revenue in the last ten quarters.
While the company’s mainstay has been commuter bikes, going forward the focus is also on gaining market share in premium products. The deal with Harley Davidson came through in October 2020 and the company will be distributing Harley motorcycles, and working on joint development of 600-800 cc (cubic capacity) bikes.
HeroMotoCorp also owns about 35% stake in electric scooter maker Ather Energy. Plans are in place to offer electric two wheelers under the ‘Hero’ brand. The recent tie up with Taiwan’s Gogoro Network using swappable battery technology will be an advantage in the electric two wheeler space. The swappable battery technology eliminates the need for charging the vehicle at an electric point and a drained out battery is replaced with a fully charged one.. This saves on time as fixed charging takes a few hours in a static position.
With consumer trends shifting towards electric mobility, HeroMotoCorp is suitably positioning itself for a pie of the electric two wheeler market.
ICICI Prudential Value Discovery Fund Growth, IDFC Arbitrage Fund - Regular Plan - Growth, DSP Tax Saver Fund Regular Plan Growth andInvesco India Growth Opportunities Fund Growth are some of the funds who have bought into this stock last month.
Coforge – Forging ahead with million-dollar deals
Coforge is a midcap IT company which has delivered more than 3X returns for investors in FY21. Furthermore, the company posted continuous sequential growth over the last six quarters. The company also ended FY21 with an annual revenue growth of 10.4%, clocking its highest ever annual revenues of Rs 4,695 crore. The latest quarter Q4FY21 saw the company seal two large deals worth $201 million, and addition of 14 new clients.
The management is confident about its performance in FY22 on account of deal wins and has guided for a 17% YoY growth in FY22. The travel and hospitality vertical which was severely impacted in FY21 is expected to revive in FY22. With the increase in deal size in the travel and hospitality vertical, and increased adoption of cloud by clients in this segment, the management expects travel to be the fastest growing vertical in FY22.
L&T Infotech – Cutting edge technologies set to drive the future
L&T Infotech (LTI) is another mid-size IT company that has delivered 2X returns for investors in FY21. The company has seen continuous YoY growth in revenues and net profit for the last six quarters. The company also ended FY21 with the highest ever annual revenue and net profit in the history of the company.
LTI has strengths in end to end solutions in cloud migration and data analytics coupled with the company's ability to win large deals. The company in Q4FY21 won two large deals with net new TCV (total contract value) of $66 million. The addition of two Fortune 500 clients in FY21 also make a strong case for long term prospects of the company.
Mid tier IT companies have grown at a faster pace than the market leaders in FY21 and this trend is expected to continue in FY22. LTI is one of the IT companies that holds potential to outperform the leaders in FY22.
UTI Flexi Cap Fund Regular Plan Growth, IDFC Arbitrage Fund - Regular Plan - Growth, Tata Arbitrage Fund Regular Growth and Tata Digital India Fund Regular Growth are some of the funds who have bought into this stock last month.
Bajaj Holdings and Investment – Strong subsidiaries hold ground even in challenging times
Bajaj Holdings and Investment, by nature of being a holding company, has over the past decade benefited from the strong performance of its subsidiaries Bajaj Auto, Bajaj Finserv and Bajaj Finance, with the highest contribution from Bajaj Finance.
The general insurance subsidiary, Bajaj Finserv was close to the top in its sector for YoY net profit growth in Q4FY21, which grew YoY by 403.5% with a net profit of Rs 979.1 crore. Another factor that boosted the company’s topline was the increased awareness of insurance in the backdrop of the pandemic.
Bajaj Auto also did better than expected in FY21 registering a fall in revenues of 7%, which was far better than market expectations. With the subsidiaries Bajaj Finance and Bajaj Finserv expected to improve their performance in FY22, Bajaj Holdings offers good prospects to its investors.
Parag Parikh Flexi Cap Regular Growth, SBI Nifty Next 50 Index Fund Regular Growth, Parag Parikh Tax Saver Fund Regular Growth and Nippon India ETF Nifty 100 are some of the funds that have bought into this company.
Lux Industries – Merger expands wardrobe offerings
Lux Industries is India’s leading innerwear manufacturer (by volumes). The company got statutory approval in April 2021 for the merger of two of promoter owned companies Ebell Fashions Pvt Ltd (brand Lyra) and J.M Hosiery and Co Ltd (brand GenX) with Lux Industries. These brands would now be a part of the overall offerings of Lux Industries under a single umbrella. The merger is expected to significantly add to the top line of the company with additions to the product portfolio and entry into newer segments thereby offering a wider share of the customer’s wardrobe.
The company recently announced a greenfield expansion with a capital expenditure of Rs110 crore and has identified a land parcel with construction area of around 4,60,000 sq. ft. Of the total area, 20-30% will be used for manufacturing units and the rest for warehousing, storage, and other associated activities.
Lux Industries looks attractive to long-term investors with a wider range of offerings post merger, and expansion plans.
Nippon India Growth Fund - Growth, BOI AXA Tax Advantage Fund Regular Growth, BOI AXA Small Cap Fund Regular Growth andNippon India Small Cap Fund - Growth are some of the funds that have bought into this company.