India

• The NIFTY Index has been rallying for months, but in the last few weeks there has been a considerable slow down in its rising pace.
• Currently the index is at a point where it could pull back this coming week, based on our MRM patterns reading.
• A possible alternative scenario would be a continuation of the rally for a total of 4-5 weeks up in a row.

• Bharti Hexacom (6597372Z IN), a 70% owned subsidiary of Bharti Airtel (BHARTI IN), aims to raise up to US$513 million at an IPO price range of Rs542-570 per share.
• We previously discussed the IPO in Bharti Hexacom IPO: The Bull Case and Bharti Hexacom IPO: The Bear Case. 
• Our valuation analysis suggests that the IPO price range is unattractive. Therefore, we would not participate in the IPO.

• Bharti Hexacom is looking to raise up to US$513m in its upcoming India IPO.
• Bharti Hexacom (BH) is a communications solutions provider offering consumer mobile services, fixed-line telephone and broadband services to customers in the Rajasthan and the North East telecommunication circles in India.
• We have looked at the company’s past performance in our earlier notes. In this note, we talk about valutions.

• There is a lot of excitement and uncertainty about the paint sector especially Asian Paints’ leadership in the broader market and among analysts.
• We interact with a couple of paint dealers across Delhi and Dimapur to gauge the sentiment on the ground.
• While there is no denying that Grasim Industries (GRASIM IN) poses a credible threat it might be too early to write off the market leader Asian Paints (APNT IN). 

• Genesys Intl Corp (GENE IN) or (GICL) is engaged in Geospatial services.
• The balance sheet of the company is surrounded by impairments; in the last few years, the company has impaired a major chunk of its intangibles, investments, goodwill and advances
• Other forensic insights include doubts on revenue recognition, struggle with the cash flows and earnings quality, recon issues and treatment of few line items

• Discover SCILAL’s debut in the stock market after demerger form Shipping Corp Of India (SCI IN), its strategic disinvestment, and the hidden value within its diverse asset portfolio.
• Real Estate Assets in company and future outlook by management of SCILAL over the years going forward.
• The market value of assets is twice more than the book value. Value bet but can take longer time to monetize the same.

• With around 3.4% QoQ CC revenue growth in Q3FY24, the BPO business, Firstsource Solutions (“Firstsource”), is recovering back to normal, after seeing cyclical dip over the past couple of years.
• The FMCG business is scaling up well. Q3FY24 revenues came in at INR 135cr, a growth of around 12% QoQ, led by festive season demand. YoY growth was 17%+.
• The Sports business reported muted revenues in Q3FY24 as currently the revenue stream is dominated by the IPL event which typically happens in the March to June period.

• Nesco reported a strong Q3FY24 led by significant growth in the exhibition business. It grew by 55%+ YoY and grew 3%+ QoQ despite Q2 being a seasonally strong quarter.
• The IT business performed steady with revenues at around INR 80cr and EBIT at around 65cr. Revenue declined by -4% QoQ, led by slight decline in occupancy.
• Nesco is now on track to beat our prior FY24 upgraded PAT estimate of INR 330cr+. It may now end FY24 with a PAT of INR 350cr+.

• Despite Q3 being seasonally weak, HealthCare Global Enterprises (“HCG”) reported 11% YoY growth in revenues. Q3FY24 revenue came in at INR 470cr.
• HCG has been focusing on fortifying its clinical talent strength and increasing business promotion. This has been yielding positive result, with Kolkata and Mumbai seeing 57% and 17% YoY growth.
• With the operationalization of four radiation machines now behind us, Q3 saw improved mix of radiation oncology with its growth at 13% YoY vs 11% YoY in overall revenue.

• Rajshree Polypack (“RPPL”) reported a robust Q3FY24 led by strong volume growth of 29%+ YoY. EBITDA margin also expanded leading to EBITDA growth of 35%+ YoY.
• Export business continues to grow steadily with quarterly run-rate now at INR 10cr. This suggests that on an annualized basis, exports could be INR 40cr vs INR 30cr guided earlier.
• Injection molding business is doing well and has reached optimum capacity utilization. RPPL is exploring to expand this capacity and is also expecting it to become profitable from next quarter.

• Bharti Hexacom (6597372Z IN), a 70% owned subsidiary of Bharti Airtel (BHARTI IN), aims to raise up to US$513 million at an IPO price range of Rs542-570 per share.
• In Bharti Hexacom IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
• The bear case rests on low geographic diversification, slowing growth, share overhang from TCIL’s desire to exit fully, mid-tier revenue growth and EBITDA margin. 

• ChrysCap is looking to raise around US$295m via selling a 2.8% stake in Mankind Pharma.
• MP is a pharmaceutical company engaged in developing, manufacturing and marketing a range of pharmaceutical formulations across various acute and chronic therapeutic areas, as well as several consumer healthcare products.
• We have looked at the IPO, lock-up release and prior placement in our earlier notes. In this note, we talk about the current deal dynamics.

• Bharti Hexacom (6597372Z IN), a 70% owned subsidiary of Bharti Airtel (BHARTI IN), aims to raise around US$500 million at a valuation of US$3.3-4.2 billion. 
• The offer is a pure secondary offering. The Government of India aims to reduce its stake from 30% to 15% of outstanding shares. 
• The bull case rests on market share gains, ARPU growth, low churn rates, improving margins, cash generation and low leverage. 

• B2B ecommerce startups in India and Southeast Asia have been facing challenges in scaling up their businesses after the pandemic.
• In December 2023, Indian unicorn Udaan laid off at least 100 employees after raising US$340 million, while two months earlier, Indonesia-based Ula announced that it was also cutting jobs and transitioning out of its inventory-led FMCG distribution business.
• However, positive news comes from B2B startup Jumbotail, which has raised US$18.2 million in an equity round.

• SynPhNe (Synergistic Physio-Neuro Platform), a wearable solution designed to treat stroke and other neurology-related disorders, has received US$5 million in a Series A funding round.
• Event Horizon Technologies, an affiliate of the Nadathur Group, is one of the key investors in this round. The Group is the family office of Nadathur Raghavan, co-founder of Indian software giant Infosys.
• This fresh capital will be used by Singapore-based SynPhNe to expand its rehabilitation services, particularly in the US market.

• Ipca Laboratories (IPCA IN) reported strong Q3FY24 results, with revenue and net profit increasing 33% and 67%, YoY, respectively. Domestic formulation and generic exports remained main growth drivers.
• Ipca’s India formulation business revenue is expected to grow 15% YoY to ~INR7,000 million in Q4FY24. The company guided for 13–14% domestic revenue growth in FY25.
• Riding on improving profitability at Unichem operation and launch of U.S. product, Ipca is expecting 10–12% growth in EBITDA and 2% improvement in EBITDA margin in FY25.  

• Indian markets to implement T+0 settlement cycle starting 28-March-2024. Phase-wise transition planned .
• Upcoming long weekends causing drastic markdown in IV levels. This combined with “High & Down” vol regime – short gamma/ short vega trades recommended.  
• Contango shape of Volatility curves are an additional reason to be short gamma & earning theta

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• On the IPO front, Trial Holdings (5882 JP) ended up doing better than we expected, while Hong Kong finally got its first US$100m+ listing for the year.
• For placements, India was again at the forefront, this time with a not-so-pleasant results of Tata Consultancy Svcs (TCS IN). 

• Healthy sales volume (up by 9% YoY to 512,205 MT) drive revenues in Q3FY24
• EBITDA per ton remain subdued, but expected to steadily gather strength
• Acquisitions coupled with ramp up of existing capacity will help take the growth story forward

• Jindal Steel & Power (JSP IN)  has been engaging in high related party transactions with few promoter entities and the engagement is increasing year on year.
• The company still faces pain in its foreign mining operations especially Australia. A large amount of loans has been impaired and written off lately.
• The company also sees high churn in board of directors. However, on the flipside, the deleverage is visible and overall balance sheet health has improved.

• Coforge (COFORGE IN) is looking to raise around US$386m in its upcoming qualified institutional placement (QIP).
• In an announcement released on Saturday, Coforge had mentioned its board’s approval to raise up to INR32bn via a QIP. Since then, the shares have corrected 9.1%.
• The deal would be a large one to digest at 14 days of three month ADV. That being said, the company’s last selldown did well.

• In Q3FY24, Maruti Suzuki India (MSIL IN) reported revenue of INR 335Bn, a growth of 14.6% YoY on the back of higher realization and volume.
• EBITDA margin expanded 210bps YoY to 12.3% as higher volume, favorable commodity price played a role in tandem.
• The company is planning 2x increase in its annual production capacity to about 4Mn by 2030-31. Capacity expansion plans augur well for the company in medium to long term.

• Sudden resignation of Ravi Narayanan Group-Head in charge of retail branches, retail liabilities and third party products as he wishes to pursue entrepreneurship.
• Possible explanation is that the bank like other banks is finding it difficult to raise retail deposits and pressure is building up on senior management
• Bank has a high LDR and reportedly the banking regulator is demanding the bank to lower its LDR. This will have consequences on future loan growth or on NIM

• Rain Industries (RINDL IN) is one of the global leaders in coal tar pitch and calcined petroleum coke. The company also engages in cement manufacturing.
• The company has been facing heat lately especially business related. The fact that there are goodwill impairments, reversal of DTA and costly refinancing puts Rain in a worrying shape.
• The company also has seen impairment in fixed assets especially the CWIP. The company also faces high liability for its DB plan in Germany.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Adani Green Energy
• Adani Ports & Special Economic Zone
• MGM China Holdings

• Promoters in Aditya Birla Sun Life AMC (ABSLAMC IN) are looking to raise US$189m via an offer for sale (OFS). This assumes that the over-allotment option is exercised.
• This appears to be done in a bid to meet SEBI’s 75% free-float requirement for listed firms in India. .
• News of the selldown had surfaced a week earlier leading to a correction in share price. As such, we would argue that the deal here is well flagged

• Edelweiss Financial Services (“Edelweiss”) reported a steady Q3FY24 led by robust profitability from across businesses except insurance, which is in gestation phase. All its businesses are scaling up well.
• Edelweiss’ credit business reported good traction in co-lending. 80% and 32% of the disbursals in the NBFC and the HFC businesses, respectively, came from co-lending. 
• Within the asset management vertical, the mutual fund business is growing well with 23% YoY growth in overall AUM and 47% YoY growth in equity AUM.

• Baazar Style Retail (1635104D IN) is the fastest growing value retailer in eastern and north- eastern India, with market leadership in West Bengal, Odisha, and Assam.
• The proposed IPO is a combination of fresh issue of equity shares worth INR1,850M and OFS of up to 16.9M equity shares by promoter group entities and other selling shareholders. 
• The company may consider raising INR370M in a pre-IPO placement round. If the pre-IPO placement is undertaken, the amount raised from such placement will be reduced from the fresh issue.

• Nuvama Wealth Management (“Nuvama”) has been seeing strong growth across all its businesses. Wealth management business is scaling up well. Capital markets business continues to benefit from the upbeat cycle.
• The asset management business is in its infancy but is scaling up well. Nuvama launched a new real estate fund via a 50:50 JV with Cushman & Wakefield.
• Given wealth management is still nascent in India; the growth potential is huge for Nuvama. At the current valuation, an investment in Nuvama has potential to more than triple.

• Tata Sons, holding company of Tata Group, is looking to raise around US$1.1bn via selling a 0.65% stake in Tata Consultancy Svcs (TCS IN).
• The deal doesn’t appear to be well-flagged although it could be part of Tata Sons’ recent moves to avoid an RBI mandated listing next year.
• In this note, we talk about the deal dynamics and run the deal through our ECM framework.

• ICICI Securities Shareholders will consider delisting proposal at the end of March-24 which will decide its fate
• Swap Ratio based on current prices offers limited downside for I-Sec Shareholders if delisting goes through.
• There could be potential upside of 20% if delisting fails.

• In Q3FY24, Larsen & Toubro (LT IN) witnessed order inflow of INR 760bn (up 25% YoY) bolstering the order book to INR 4.7tn at the end of December 2023.
• Margins continued to remain under pressure in 9MFY24 due to cost pressures in legacy jobs.
• Strong project execution and healthy order book are expected to drive future growth with margins reviving after bottoming out.