Tale of the Tape 

Howdy folks. Markets took a beating today!

Nifty (-1.1%) and Sensex (-0.9%) fell after a selloff in some heavyweight stocks. Midcaps (-2.1%) and Smallcaps (-2.3%) had an even worse day. 452 stocks in the NSE 500 ended in the red!

It was a sea of red across sectors as well. Metals (-4%), Oil & Gas (-2.8%) and Auto (-2.4%) were the top losers.

Infosys (+2%) was the top Nifty gainer after solid Q1 results. Meanwhile, Paytm ended +2% higher despite rough Q1 numbers. More details below.

Sanstar IPO opened for subscription today! Check out our analysis below to help you decide whether to invest.

Zydus Lifesciences fell -4% after its Gujarat facility was red flagged by the USFDA.

SpiceJet rallied +5% intraday after its board said it would consider a fundraising plan via the QIP route on July 23.

Go Digit General Insurance (+1%) was in focus after Citi initiated coverage on the stock; the brokerage sees +24% upside from current levels.

RVNL was up +5% after its JV won a Rs 584 cr arbitration award. PS - the firm also signed an MoU with an Israeli firm to collaborate on a range of infra projects.

Results reaction. UltraTech Cement cracked -3% after its Q1 profit missed estimates. Meanwhile, Shoppers Stop fell -5% after reporting a Rs 23 cr loss for Q1!

Earnings
Earnings Roundup

Choo choo! The IT train continued today with Infosys (+2%) solid Q1 results beating all Street estimates. Several analysts are calling the ‘revival’ of the IT sector, with Jefferies saying the worst is now behind us. High on hype or on fundamentals? Let’s take a look.

Tbh, there’s a LOT of positives here. A strong Europe and a robust manufacturing vertical powered topline growth. Infosys is also FINALLY seeing demand revival in the all-important BFSI sector (+7.6% QoQ). A laser focus on cost cutting also boosted margins. The cherry on top: the firm raised its FY25 revenue guidance to 3%-4% vs 1%-3% earlier.

The only sour note is that despite a better outlook, headcount keeps dropping. Infosys ended Q1FY25 with over 1,900 fewer employees. It has promised to hire 15k-20k freshers this year, but we’ll see.

Here is its Q4 report card:

• Revenue: $4.7 billion; +3.6% QoQ constant currency (vs Est: +2.2%)

• EBIT Margin:  21.1%; +1% QoQ (vs Est: 20.7%)

• PAT: Rs 6,368 cr; +7.1% YoY (vs Est: Rs 6,198 cr)

Big Picture: Yes, the results were good, but were also helped a LOT by its recent acquisition of Germany’s in-tech and its India biz. There’s still some distance to go before a full recovery, but that’s not stopping brokerages from hiking price targets. The logic here is that Infosys was hurt the worst by the FY24 downturn and will benefit as growth returns. Bernstein is the biggest bull with a new target of Rs 2,100 p/sh vs Rs 1,650 earlier, citing an inflection point for the BFSI segment and an upswing in AI deals as positive triggers.

Infosys is +16% YTD.

Paytm Q1 results were weak AF! FYI - this is the second earnings after the big RBI nuke. Gross merchandise value (GMV) was down -9% QoQ.  Average monthly transacting users (MTU) dropped -8% QoQ. That said, the company says that the MTU base has now ‘stabilised’ at around 7.8 cr, which is good but still a major drop from Jan 2024. Overall, losses widened YoY due to the restrictions on its wallet, loans and FasTag biz. 

Here are its Q4 stats:

Revenue: Rs 1,502 cr; -36% YoY

Loss: Rs 840 cr vs Rs 358 cr last year

If the Q1 numbers painted a rough picture, why did the stock end up +2% higher? This is mostly because the company had warned how bad it would be. ICYMI - the guidance it gave last quarter said it would start bouncing back by Q3FY25, so a lot of the pain has already been priced in. Bullish commentary from the management also boosted sentiment, with execs saying that Paytm was awaiting approval to start onboarding new UPI users.

Paytm is -29% YTD.

Specials

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IPO

Sanstar IPO Review

Sanstar IPO opened for subscription today! The price band is fixed at Rs 90 - Rs 95 p/sh. The company aims to raise Rs 510 cr from the IPO.

Founded in 1982, Sanstar is India’s fifth biggest maker of maize-based speciality products. It turns maize into everything from thickening agents & sweeteners to ingredients in animal nutrition products. The food industry accounts for the majority of its revenue (58%), with exports making up 36% of its total topline. FYI - ITC, HUL and Godrej Agrovet are amongst its marquee clients. The company has been killing it over the last decade: its topline has grown at a CAGR of over 20%, although it did slow down in FY24.

FYI - the IPO has a decent fresh issue (Rs 397 cr). The money that comes into the company will be used for expansion (Rs 182 cr) and repaying debt (Rs 100 cr).

FY24 snapshot:

• Revenue: Rs 1,067 cr; -11% YoY

• EBITDA: Rs 98 cr; +36% YoY

• EBITDA Margin: 9% vs 6% last year

• PAT: Rs 67 cr; +60% YoY

Big Picture: Sanstar’s FY24 sales decline was mostly due a lack of capacity & plant maintenance issues. It hopes to resolve this by expanding its Maharashtra facility, which should be commissioned by June 25 and bump it up to India’s third-biggest player. That said, there’s a bunch of risks to watch out for. The company’s margins are obviously heavily tied to the price of maize, which is why it needs to move up the value chain. Finally, barriers to entry in this sector are VERY low, which explains the stiff competition Sanstar faces.

The IPO’s pricing is on the slightly expensive side, but current grey market data suggests it may list at a cool 44% premium!

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