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- Boring Tuesday
Boring Tuesday
Yash Upadhyaya
April 02, 2024
Tale of the Tape
Hola Amigos! 👋
Nifty ended flat and Sensex down -0.2% as markets snapped a three-day rally. On the other hand, Midcaps and Smallcaps closed +1.2% each. The advance-decline ratio stood in favour of the bulls (3:2). 📈
Most sectors ended in the green. Metals (+1.5%), Real Estate (+1%), and Auto (+1%)saw strong buying. IT (-0.7%) was the top loser, while Pharma stocks (-0.1%) saw minor cuts. 💸
Aditya Birla Fashion Retail was the top gainer on the NSE 500 after announcing a new demerger. More details below on why this may help unlock value. 🔥
Bharti Hexacom’s Rs 4,275 cr IPO opens tomorrow. Read our top story below to help you decide whether to invest. 🔍
Tata Technologies gained +4% after announcing a partnership with BMW to develop automotive software. 💯
Hero Motocorp (-2%) was the top Nifty loser after its March sales missed analyst estimates. 🏍️
Aditya Birla Capital jumped +10% after Macquarie initiated coverage on the stock; the brokerage sees a further +16% potential upside. 🚀
AC stocks were up after the IMD issued a heatwave warning. Symphony (+10%), Voltas (+3%) and Blue Star (+2%) saw decent gains. 🥵
Interglobe Aviation rallied +3% intraday to hit a new record high after Vistara’s flight cancellation crisis. ✈️
IREDA hit a 5% upper circuit after posting a strong Q4 business update. Bharat Electronics (+5%) was up after reporting its highest-ever turnover of Rs 19,700 cr for FY24. 📊
Here are the closing prints:
Nifty | 22,453 | -0.1% |
Sensex | 73,904 | -0.2% |
Bank Nifty | 47,545 | -0.1% |
Stock
Change Of Plans
Aditya Birla Fashion Retail (+12%) was the top NSE 500 gainer after announcing the demerger of Madura Fashion & Lifestyle. Yes, ABFRL does a LOT of acquisitions, restructuring and demergers. ICYMI - Madura was merged with Pantaloons to create ABFRL back in 2015-16. But this time, experts say the move makes a lot more sense and could unlock value for shareholders. Here’s what you need to know. 😎
Madura accounted for ~60% of ABFRL’s topline and 75% of its EBITDA for 9MFY24. Put simply: it’s a BIG part of what ABFRL is right now. So why are they doing this? For starters, the company has been going through a rough patch. ABFRL has posted losses for the last 3 quarters due to weak demand + increased brand investments. But more importantly, their product portfolio is a mess. ❌
Consider this. Madura consists of a group of high-performing lifestyle brands (Louis Philippe, Allen Solly), casual wear (American Eagle), sportswear (Reebok) and innerwear (Van Heusen). The rest of ABFRL consists of ‘value retail’ (Pantaloons and Style Up), ethnic wear (TCNS, Sabyasachi, Tasva etc) and luxury (Lafayette, Galleries etc). 🥻
The problem is that these two product groups require different strategies, retail plays and more importantly investment. Birla acknowledges as much, noting that Madura will have a strong balance sheet after the demerger. And as for itself, it will raise “growth capital” to pursue upcoming market opportunities. 💰
Overall, a win-win for a company that has stumbled in recent times. Here’s hoping Aditya Birla won't be back with another whacky merger idea anytime soon. 🤞
Specials
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IPO
Numero Uno
The first IPO of the new financial year 2024-25 is here! Bharti Hexacom IPO opens for subscription tomorrow. The price band is fixed at Rs 542 p/sh - Rs 570 p/sh. The company aims to raise Rs 4,275 cr from the IPO. 💸
Founded in 1995, the company is a subsidiary of Airtel that provides mobile & data services in Rajasthan and Northeast telecom circles. As of Sep 2023, it had 29 million customers spread across both circles with a 40% market share in Rajasthan and 50% in the Northeast. Because of the rough geographic terrain, these two circles are under-penetrated (76% data penetration vs 82% country-wide) and naturally provide less ARPU (Rs 197 vs Rs 208 country-wide). It leases 80% of its towers and also leases all of its fibre from Airtel. On the positive side though it does own a varied pool of mid-band spectrum that allows it to offer 5G services. 🛜
FYI - the IPO is completely an ‘Offer for Sale’ issue. It will help provide a partial exit to the GOI-owned Telecommunications Consultants India, which owns a 30% stake. This means no money comes into the company, which is a NEGATIVE. 👎
FY23 snapshot:
Revenue: Rs 6,719 cr; + 22% YoY
EBITDA: Rs 2,884 cr
EBITDA Margin: 43.9% vs 35.1%
PAT: Rs 549 cr; -67% YoY
Big Picture: For interested investors, this is an extremely concentrated telecom play. On the positive side, the growth runway in Rajasthan and the Northeast is big. It’s also encouraging that Hexacom’s ARPU has jumped from ~Rs 135 in FY21 to Rs 197 now. Other key positive triggers include a long-awaited telecom tariff hike. 📱
On the downside, it's not too clear what you get with Hexacom that you don’t with Airtel. Also, execution & implementation will be critical for success here. The Northeast market can be volatile, which explains its smaller size + under penetration for all players. FWIW - the IPO is reasonably priced, but current grey market data suggests it may list at a meh 7% premium. 🥱
Are you applying for the IPO? |
Stocktwits Spotlight
PSUs are back baby!!! IREDA has pulled back sharply after the recent correction in broader markets. The stock has already jumped ~13% since Aditya Hujband aka MBA_INVESTMENTWALA’s recommendation on Stocktwits. In case you were wondering, the trade is still open with targets of 175-210 on the cards.
Follow him for more amazing insights and add $IREDA.NSE to your watchlist and track the latest from the community.
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