In today’s briefing:
- Delhivery IPO: Peer Comparison and Valuation
- Rainbow Children’s Hospital IPO Trading – Decent Anchor, Strong Insti Subs but Limited Upside
- Mindtree-LTI: Merger Announced to Form India’s 5th Largest IT Services Player
- Reliance Industries – Energy Business Outlook Sanguine. Maintain ADD.
- 1QCY22 Results Update – Castrol (India)
- 4QFY22 Results Update – Britannia Industries
- Reliance Industries – Energy Business Outlook Sanguine
- DCB Bank: Growth Pick-Up and Asset Quality Trends Encouraging
- Cholamandalam Investment – Provision Write-Back Aids Profitability; Asset Quality Improves
- Blue Star – Result Above Expectations; Expect Margin Improvement in FY23
Delhivery IPO: Peer Comparison and Valuation
- Delhivery (1058656D IN) IPO will run from 11-13th May. The company plans to raise INR52.35bn (US$680m) through the issuance of a mix of new shares and OFS by existing shareholders.
- At the indicative IPO price range of INR462-487 per share, Delhivery will have a market capitalisation of INR334.7-352.8bn and a post-money EV of INR294.8-312.9bn.
- Delhivery plans to use the IPO proceeds for funding organic growth initiatives such as building scale and expanding network infrastructure as well as for funding inorganic growth.
Rainbow Children’s Hospital IPO Trading – Decent Anchor, Strong Insti Subs but Limited Upside
- Rainbow Children’s Hospital (RCH) raised around US$200m via issuing a mix of primary and secondary shares in its India IPO.
- RCH is a multi-specialty pediatric and obstetrics and gynecology hospital chain in India, operating 14 hospitals and three clinics in six cities, with a total bed capacity of 1,500 beds.
- In this note, we will talk about our the trading updates.
Mindtree-LTI: Merger Announced to Form India’s 5th Largest IT Services Player
- On 6th May 2022, Larsen & Toubro (LT IN)‘s publicly-listed subsidiaries Mindtree Ltd (MTCL IN) and Larsen & Toubro Infotech (LTI IN) announced plans to merge.
- I discussed this situation previously in Mindtree-LTI: A Potential US$20bn+ Indian Tech Merger; Mindtree Could Outperform LTI when the ratio was 0.66, expecting a scrip ratio north of 0.70.
- Below is a closer look at the details of the transaction and the outlook for the combined entity.
Reliance Industries – Energy Business Outlook Sanguine. Maintain ADD.
- Standalone oil to chemicals (O2C) segment: 1,370bn, primarily due to improved realisation, led by increase in oil prices Revenue grew 53% YoY to INR and higher volumes
- Oil & gas: Revenue grew ~4x YoY to INR 20bn and EBITDA improved ~5x YoY to INR 15bn, driven by sharp improvement in price realisaton and stable production from the KG D6 block.
- RJPL: Revenue improved to INR 261bn (+21% YoY, +8% QoQ) due to increase in ARPU to INR 168 (+21% YoY, +11% QoQ).
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1QCY22 Results Update – Castrol (India)
- Volume recovery strong, expect margin to rebound- Castrol (CSTRL)’s revenue missed our estimate while its EBITDA and PAT were above estimates
- Revenue below estimate, but beat on EBITDA and PAT – Revenue was 10% lower than estimate at INR12.4b (+9% YoY, +13% QoQ).
- Strategic developments during the quarter – CSTRL expanded its Castrol Auto Service (CAS) network to 116 multi-brand passenger car workshops in 50+ cities across India.
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4QFY22 Results Update – Britannia Industries
- Result beats expectations; but near-term outlook challenging
- Sales in line; margins ahead of estimates BRIT’s consolidated sales rose 13.4% YoY to INR 35.5b (inline )in 4QFY22.
- Highlights from the management commentary -forward commitments had helped protect margins in 4QFY22.
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Reliance Industries – Energy Business Outlook Sanguine
- Standalone oil to chemicals (O2C) segment: Revenue grew 53% YoY to INR 1,370bn, primarily due to improved realisation, led by increase in oil prices and higher volumes.
- Oil & gas: Revenue grew ~4x YoY to INR 20bn and EBITDA improved ~5x
YoY to INR 15bn, driven by sharp improvement in price realisaton and stable production from the KG D6 block.
- RJPL: Revenue improved to INR 261bn (+21% YoY, +8% QoQ) due to increase in ARPU to INR 168 (+21% YoY, +11% QoQ).
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DCB Bank: Growth Pick-Up and Asset Quality Trends Encouraging
- DCB Bank’s (DCB)Q4FY22 performance was strong with growth picking-up, NIMs at multiquarter high aided by better recoveries and asset quality improvement.
- We believe the stock trades at attractive valuations (0.5x FY24E ABV) and the improving operating performance and asset quality are key triggers for re-rating the stock
- We maintain our BUY rating with a target price of Rs 115/share (0.8x FY24E ABV), implying an upside of 47% from CMP.
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Cholamandalam Investment – Provision Write-Back Aids Profitability; Asset Quality Improves
- Disbursements strong: Disbursements at Rs127bn were up 58% YoY and 22% QoQ. Vehicle Finance disbursements grew by 43% YoY and 15% QoQ.
- Improved collections and higher write-offs lead to lower NPAs: Write-offs for 4QFY22 at Rs5.5bn (calc), 0.7% of gross advances, were higher than normal range of 10-20bps per quarter.
Other key takeaways: (1) Focus is to maintain NIM at ~7.5% levels and RoA at 3-3.5%
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Blue Star – Result Above Expectations; Expect Margin Improvement in FY23
- UCP Segment Update: RAC business recorded 47% YoY growth in 4QFY22. BSTAR grew faster than the market and ended FY22 with a market share of 13.25% vs 13% in FY21.
- EMPS and Commercial AC segment update: Carry forward order book at the end of FY22 was up 10.2% YoY at Rs32.53bn.
- Net debt and capital employed position: Net borrowings at the end of FY22 were Rs671.4mn (vs net cash position of Rs1.51bn at the end of FY21) due to planned advancement in inventory levels related to the procurement of long-lead raw materials and components in order to de-risk supply chain constraints and investments in expansion projects at Wada & Sri City.
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