Markets continued their volatile
way in the four-day trading week gone by. We saw markets opening with a gap on
Monday as expected but profit taking followed. The gains continued on Tuesday
and Wednesday before the holiday on Thursday. Friday saw markets opening strong
but were rattled by savage profit taking which saw more than half the weekly
gains being erased. BSESENSEX ended the week with gains of 386.76 points or
0.77% to close at 50,792.08 points, while NIFTY gained 92.85 points or 0.62% to
close at 15,030.95 points. The broader markets saw BSE100, BSE200 and BSE500
gain 0.43%, 0.41% and 0.49% respectively.
The Indian Rupee gained 5 paisa
or 0.07% to close at Rs 72.78. Dow Jones had a stellar week and hit a new
lifetime high on Friday. Dow gained 1,282.34 points or 4.07% to close at
32,778.64 points. The close was just 15 points shy of the lifetime high.
Last week I had talked about the
Monday phenomenon and how since the 1st of February each Monday has
seen markets opening strong and gain ground. This week I am going to talk about
the Friday phenomenon where over the last four weeks markets have lost ground
each time on a Friday. NIFTY lost 140 points on Friday the 19th
February, 570 points on Friday the 26th of February, 140 points on
Friday the 5th of March and 145 points on Friday the 12th
of March. Will Monday and Friday continue to perform the same way in the coming
week as well?
The week ahead is full of IPO’s
and one gets a feeling that promoters and merchant bankers believe it’s now or
never.
Anupam Rasayan Limited is tapping the capital
markets with its fresh issue for Rs 760 crs in a price band of Rs 553 to 555.
The issue has opened on Friday the 12th of March and would close on
Tuesday the 16th of March. The company is in the business of custom
synthesis and manufacturing of speciality chemicals in India. The company had
reported revenues of Rs 539.38 crs for the year ended March 2020 which improved
to Rs 563.16 crs for the nine months ended December 2020. When compared with
the year ago period, this turnover was Rs 374.5 crs. In terms of profit for the
period the same was Rs 52.97 crs for March 2020, Rs 48.09 crs for nine months
December 20 and Rs 42.80 crs for the nine months December 2019. The EPS on a
fully diluted and restated basis is Rs 6.94 for the year ended March 2020. This
translates into a PE band of 79.68-79.97. Certainly, expensive when compared to
the peers as listed in the offer document. Considering the fact that the
company has already completed its capex and would be utilising the issue
proceeds for repaying its debts, it could be presumed that there would be a
saving of Rs 55-60 crs on interest repayment itself going forward.
Craftsman Automation Limited is
tapping the capital markets with its fresh issue of Rs 150 crs and an offer for
sale of 45,21,450 shares in a price band of Rs 1488-1490. The size of the
combined issue is between Rs 822-823 crs. The issue opens on Monday the 15th
of March and would close on Wednesday the 17th of March. The company
is a diversified engineering company having three business verticals. The first
is in the automotive space where it makes powertrain and other equipment. The
second is automotive aluminium products and third is industrial and engineering
which also includes the storage solutions business which is currently small but
a fast-growing segment. The revenues for the company were about Rs 1,500 crs
for the 12 months ended March 20 of which the split has been as about half from
power train, a little over a third from aluminium products and the balance from
industrial and engineering. The blended EBITDA was around 30%. The performance
in the nine months ended December 2020, were muted with the first quarter being
virtually a write off. The revenues were Rs 1,022 crs with blended EBITDA margins
about 30%. The company has performed better in the second and third quarter and
the trajectory shows and implies that in the year 2021-2022 they should be back
on track having encountered the two major crisis of the previous two years
namely, the transition of BS IV to BS VI and the effect of covid-19. The
company reported an EPS of Rs 20.41 for the year ended March 2020 which was Rs
48.39 for the previous year. The fall was on account of the shift from BS IV to
BS VI. At the above EPS, the PE ratio is 72.91-73. The NAV of the company is Rs
355.93 as at 31st December 2020. Going by the headline number the PE
looks expensive, but considering the fact that migration from BS IV to BS VI is
once in a lifetime, benefit of doubt should be given to Craftsman.
Laxmi Organics Limited is tapping
the capital markets with its fresh issue of Rs 300 crs and an offer for sale of
Rs 300 crs. The issue opens on Monday the 15th of March and closes
on Wednesday the 17th of March. The price band is Rs 129-130. The
company is currently in two business verticals where the larger business is the
manufacture of Acetyl Intermediates and the second vertical is Speciality
intermediates. Of the total Rs 1,530 crs revenue in the year ended March 2020,
roughly 60% of revenues were from the acetyl business while 40% were from the
speciality intermediates business. The company has acquired the unit of Miteni
of Italy who is a leading global player in the fluorochemical space. The plant
is in the process of being relocated to Lote Parshuram near Mahad in
Maharashtra, and would be commissioned in the second quarter of FY21. Laxmi
Organics has earned an EPS of Rs 2.86 for the year ended March 20 which has
improved significantly to Rs 2.02 for the half year ended September 2020. There
is virtually no seasonality in the chemical industry and typically the two
halves of the year are fairly similar in nature. The PE ratio of the company is
45.10 to 45.45 based on full year March 2020 numbers. If one were to annualise
the six months results the PE ratio would drop significantly to 31.93-32.17
times. Considering the importance of speciality chemicals and fluorochemicals
going forward and the stance being adopted against China where China plus one
is becoming a norm, Laxmi Organics is well poised to reap the benefits going
forward. It has the new fluorochemicals plant slated for production in less
than six months as well as the in-operation Acetyl Intermediate plant scheduled
to be integrated into Laxmi by September 21. Investment is warranted in Laxmi
considering the present performance and the future of the company.
Suryoday Small Finance Bank
Limited is tapping the capital markets with its fresh issue of 81.50 lac shares
and an offer for sale of 1.09 cr shares. The price band is Rs 303-305. The issue
opens on Wednesday the 17th of March and closes on Friday the 19th
of March. The company is a small finance bank and started its journey from the
microfinance business. Its current AUM (assets under management) is Rs 4,000
crs. The company is present in 11 states and 2 union territories with the
largest exposure being in Maharashtra and Tamil Nadu, with over 55% exposure of
the AUM. The company had reported an EPS of Rs 13.30 on a diluted basis for the
year ended March 2020. The PE for the company at this EPS is 22.78-22.93 times.
The period April-December 2020 has been tough for this sector and almost all
companies have faced tough times with Suryoday being no exception. The NAV as
on 31st March 2020 was Rs 123.13 which makes the price to book based
on these numbers high at 2.48 when compared with peers. Secondly the size of
the bank currently is quite small when compared with peers which makes like to
like comparison difficult.
The final issue is from Kalyan
Jewellers Limited which is tapping the capital markets with its fresh issue of
Rs 800 crs and an offer for sale of 375 crs. The price band is Rs 86-87. The
issue opens on Tuesday the 16th of March and closes on Thursday the
18th of March. The company which is a pan-India company selling gold
and studded jewellery reported revenues of just over Rs 10,000 crs for the year
ended March 2020. The only company which Kalyan considers as its peer, Titan
reported revenues of double that amount. Over 83% of Titan’s revenues came from
the jewellery business and balance from segments like watches, wearables and
others. Titan reported net profit of Rs 1,258 crs while Kalyan reported a net
profit of Rs 142 crs. The EPS for Kalyan on a fully diluted basis based on
March 2020 results was Rs 1.49. Based on this EPS, the PE ratio is 57.72-58.29
times. The nine-month numbers for December 2020 have not been considered as
they were not comparable due to covid-19 situation. Jewellery companies barring
a couple have not made money for investors in India.
The primary issue from Easy trip
Planners Limited was subscribed over 160 times. The issue received excellent
response from all categories. QIB portion was subscribed 77.95 times, HNI
portion 384.26 times and Retail portion was subscribed 70.78 times. There were
19.94 lac applications.
On the covid-19 front, the world
saw 12,04,01,798 patients, 26,64,764 deaths and 9,69,45,686 patients
recovering. In India we saw 1,13,85,158 patients, 1,58,762 deaths and 1,10,05,445
patients recovering. Compared to the previous week, the world saw 29,66,604 new
patients, 59,917 deaths and 40,02,888 patients recovering. In India we saw 1,55,887
new patients, 872 deaths and 1,24,565 patients recovering. Some significant
events have happened where Brazil has again overtaken India in number of cases
and gone to the second spot after the USA. Secondly the number of new cases in
India continues to be on the rise and is a cause for concern. Thirdly as of
date more than 3 cr people have been vaccinated and the number is increasing on
a daily basis. Hopefully the increase in daily cases should come under check in
the next couple of weeks.
The markets would continue to
remain choppy and volatile. With Dow hitting new high, liquidity being at unheard
levels and interest in the market growing, markets should continue to trade in
a broad range. With there being a predictable movement for two of the five
days, expect markets to give opportunities to trade on both sides. Trade
cautiously.