India: SRF Ltd, Max Healthcare Institute, Vedant Fashions, Dixon Technologies India Ltd, Vardhman Special Steels Ltd, Kabra Extrusion Technik, Kotak Mahindra Bank, Marico Ltd, Intellect Design Arena, Siyaram Silk Mills and more

• The review period for the NIFTY 100 Index ended on 31 Jan. The rebalance will be effective after the close on 30 March and the announcement will come end February.
• Potential inclusions are Zomato (ZOMATO IN), Mindtree Ltd (MTCL IN), SRF Ltd (SRF IN), Indian Railway Catering and Tourism (IRCTC IN) and Tata Power (TPWR IN). 
• Potential deletions are Yes Bank (YES IN), Indraprastha Gas (IGL IN), Jindal Steel & Power (JSP IN), Aurobindo Pharma (ARBP IN) and Hindustan Petroleum (HPCL IN). 

• Max Healthcare Institute (MAXHEALT IN) plans to double its bed capacity with an investment of $450 million over the next four years. The company has a net debt/EBITDA of 0.2x.
• Due to its favorable market positioning, Max Healthcare demonstrates best-in-class occupancy and ARPOB. Its non-COVID occupancy was at five-month high of 82% in October.
• Despite having a big run in 2021, further stream is left in Max Healthcare shares, with upcoming capacities, business recovery, and margin expansion.

• Vedant Fashions is looking to raise up to US$420m in its India IPO.
• It is a fashionwear company targeting the Indian wedding and celebration wear segment. According to CRISIL, it was the largest company in India in the men’s Indian wedding wear segment.
• In this note, we will run the deal through our ECM framework and talk about the deal background.

• Dixon Technologies is India’s leading electronic manufacturing (EMS) provider and one of the largest beneficiaries of the government’s PLI scheme.
• Dixon operates in both original equipment manufacturing (OEM) and original design manufacturing (ODM)
• Strong RoE, RoCE at ~20%, ~24%, respectively (three year’s average)

• Vardhman Special Steel (VSSL) is among India’s leading steel bar producers for automotive applications. It has specialised product offerings, which include steel bars, rods & bright bars of various categories of special & alloy steel.
• VSSL, incorporated in May 2010, is headquartered in Ludhiana, Punjab
• In August 2019, VSSL had entered into a strategic alliance with Aichi Steel Corporation (ASC) Japan, the main material producer for Toyota Group wherein ASC had participated in equity and had entered into a Technical Assistance Agreement

• Kabra Extrusion Technik (KET), incorporated in 1982, is India’s prominent player (~40% market share) in the organised plastic extrusion machinery used for manufacturing pipes, profiles & films. It is primarily a capex linked product.
• Interestingly, in the recent past, KET has ventured into manufacturing (assembly) of lithium-ion battery packs for EV under its new division Battrixx
• Export turnover amounts to ~30% of total revenue as of FY21

We upgrade from REDUCE to ADD with an SOTP-based target price of INR2,040 (standalone bank at INR1,448, 3.7x Sep-23 ABVPS). Kotak Mahindra Bank’s (KMB) Q3FY22 performance was broadly in line with our estimates, predominantly on the back of a favourable credit cost outcome (credit costs at negative 20bps due to lower slippages and reversal of COVID provisions). However, the biggest surprise was on the balance sheet front with a second straight quarter of 8% sequential loan growth, driven by sustained acceleration across home loans as well as unsecured personal loans and credit cards.

AU Small Finance Bank: AUBANK’s Q3FY22 earnings were 14% ahead of our estimates due to lower-than-expected provisioning. Asset quality continued to improve with negative net slippages in the quarter, driving GNPA down to 2.6% (Q2FY22: 3.2%). The bank sustained its business momentum, with strong disbursement growth (+33% YoY, +59% QoQ). AUBANK has further stepped up its investments on franchise-building blocks (employees, branches, tech) and new asset classes (credit cards, merchant acquiring), which are likely to stretch expense ratios and drag near-term profitability metrics (opex to assets at ~5%).

• Intellect Design Arena (Intellect) provides software products to retail, corporate banking, insurance & treasury.
• The company is a transition from a product company to a platform company
• Intellect generates 55% of revenues from developed markets and rest from emerging markets Recently, it saw a turnaround in margins (from 5% in FY20 to 23% in FY21)

• Siyaram Silk Mills (SSML), a fabric and apparel manufacturer, has created a strong brand portfolio largely catering to the Tier II & III towns.
• Siyaram’s brand portfolio consists of reputed brands like Siyaram (flagship brand), Oxemberg, MSD and J Hampstead
• Over the last decade, the company has gradually expanded its fabric and garment capacities and simultaneously managed to reduce the debt/equity from 1.0x in FY12 to 0.2x in FY21