LIC raises stake
Life Insurance Corporation of India (LIC) has increased its stake in Navin Fluorine International, one of the largest Indian manufacturers of speciality fluorochemicals, by about 0.24% through open market.
The insurance behemoth disclosed in a regulatory filing on Tuesday that it bought 1.21 lakh shares of Navin Fluorine International on January 08 at an average price of ₹3,630.39 apiece. As a result of this transaction, LIC raises stake in Navin Fluorine International crossed over 5%, reaching 5.04%.
Navin Fluorine International primarily focuses on fluorine chemistry, producing refrigeration gases, chemicals, inorganic bulk fluorides, and speciality organofluorines. It also offers contract research and manufacturing services.
The company’s shares have been on a downward trend since May 2022, owing to weak demand and elevated Chinese exports. Over the last nine months, including January, the stock has fallen from ₹4,668 per share to the current value of ₹3,504, losing 25% of its value. Despite this substantial decline, the stock has retained a gain of 415% over the last five years and an impressive 6265% over the last decade. LIC raises stake.
Jefferies maintains a ‘hold’ rating
In a recent note, global brokerage firm Jefferies said it expects a slowdown in company capex until the new MD establishes priorities after taking office. Leadership turnover remains elevated with the recent departure of the Head of Sustainability, it said. LIC raises stake.
Given persistent demand challenges in the first half of CY24, the brokerage foresees a gradual scale-up of Navin’s new agrochemical facility, where 50% of the capacity remains uncontracted. It anticipates ongoing delays in delivery schedules and expects a normalisation in demand by the end of FY25E.
Also Read: Q3 Result Preview: Specialty chemical sector companies to witness another weak quarter, say analysts
Jefferies projects a more favorable outlook for CDMO (Contract Development and Manufacturing Organisation). It said that the recent product deferrals to CY2024 are expected to expedite growth in FY25E, while a USD 40 million 3-year contract win from Fermion is anticipated to be a driving force behind growth in FY26E.
“The segment is lumpy, and the company’s strategy to target late-stage Phase 2 and Phase 3 molecules should help steer a faster ramp-up in the business, in our view. The management maintains guidance of reaching the US$ 100 million revenue target by FY26–27E, though this could be more gradual than earlier anticipated,” said the brokerage. LIC raises stake.
The brokerage has adjusted the FY24/25E EPS downward by 9%/7%, attributing it to a slower-than-anticipated recovery in chemicals demand and a year-on-year decline in CDMO in FY24E, and projects EBITDA growth of 39%/28% in FY25/26E. LIC raises stake.
It said that the company’s valuations remain premium to PI Industries and SRF. Therefore, it maintained its ‘hold’ rating on the stock with a target price of ₹3,425 apiece. LIC raises stake.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions. LIC raises stake.
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Kotak Mahindra Banks Q3 Results: Should you Buy, Sell or Hold the stock post earnings?
Kotak Mahindra Bank share price gained up to 1% in morning trades on the BSE on Monday post Q3 Results over the weekend. Even though net profit missed estimates of some analysts, the same was due to one-offs. LIC raises stake.
Kotak Mahindra Bank (KMB) reported standalone net profit growth of 7.6% YoY to ₹3005. This was slightly lower than analyst expectations as Q3FY24 results for Bank include ₹143 crore provision (post tax) on applicable Alternate Investment Fund (AIF) investments pursuant to RBI’s circular dated 19th Dec 2023 . Consolidated net profit stood at 4,265 (7% YoY growth). LIC raises stake.
Net Interest Income grew 16% year-on-year to ₹6554 Crore up 15.9% year on year was up 4.1% sequentially. Net interest Margins that had fallen in Q2FY23 however now stood stable at 5.22% sequentially. LIC raises stake.
Also read- Cipla shares jump 7% after Q3 earnings, hit new record high
Some analysts though have cut their forward estimates however generally analysts have maintained their positive stance. LIC raises stake.
Analysts at Motilal Oswal Financial Services have cut our FY24 and FY25 net profit estimates by 3.2% and 2.7% and estimate Kotak Mahindra Bank to deliver Return on Assets and Return on Equity of 2.4% and 14.4% by FY25. As per MOFSL Kotak Mahindra Bank delivered a mixed quarter with a miss in earnings due to high provisions, however, NIMs remained stable at 5.2% sequentially. Asset quality remained stable with slippages declining sequentially. Kotak Mahindra carries additional Covid-related provisions. LIC raises stake.
The Kotak Mahindra Bank continues to guide for steady growth trend and aims to improve the mix of unsecured loans to mid-teens, expressing confidence in the quality of the underlying portfolio, highlighted analysts.
Nevertheless those at Antique Stock Broking have marginally increased their estimates by 1%–3% over FY24–26 leading to a revised target price of ₹1,276 (2.6 times FY26 core Book Value and ₹178 for subsidiaries) As per Antique Stock Broking , the Net Non-Performing Loans NNPLs were stable sequentially at 0.4%, restructured loans remain low at 0.3%, along with countercyclical buffers standing at 1.4% of overall loans. LIC raises stake.
Also Read- Medi Assist share price makes a lukewarm debut, stock opens with 10% premium at ₹460 on NSE
Loan growth remains strong (4% sequentially and 19% year-on-year), with a fairly good all-round growth. Deposit mobilization was healthy at 3% sequentially (19% YoY) led by a 5% sequential increase in term deposits whereas CASA growth was flat sequentially LIC raises stake.
Analysts at Emkay Financial Services said that they expect Kotak Mahindra Bank’s RoA and RoE to normalize to 2.1% and 13% respectively from the highs of 2.4% and 14.5% in FY23 due to margins/LLP normalization. They have retain ADD ratings with a target price of Rs1,950 a share, implying 2.5 times Dec25 estimated core bank ABV and subsidiary value at Rs480/share LIC raises stake.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions
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Zee-Sony merger: CLSA downgrades Zee Entertainment to ‘sell’, slashes target price by 34%
Global brokerage firm CLSA has revised its recommendation on Zee Entertainment, changing it from a previous ‘buy’ rating to a ‘sell.’ This update comes in response to the cancellation of the $10 billion mega-merger with Sony Pictures Network.
“With Zee-Sony merger being terminated, we believe Zee’s PE will slump back to 12x levels, seen prior to the Sony merger announcement in August 2021,” the brokerage firm stated. LIC raises stake.
Also read: Mint Explainer: The collapse of Sony-Zee merger and its wider implications
The global brokerage firm has further slashed the target price of Zee Entertainment stock by 34% to ₹198.
Sony has formally asked Zee to halt the merger, while simultaneously seeking a termination fee of $90 million, alleging breaches on the part of the Indian media giant. Sony has escalated the matter by initiating arbitration proceedings against Zee. LIC raises stake.
Contrarily, Zee is challenging Sony’s assertions of breach, contending that its CEO, Punit Goenka, was even prepared to step down in the spirit of facilitating the merger. LIC raises stake.
The cancellation of the highly anticipated merger has reignited concerns about Zee’s corporate governance, especially in light of the unprecedented promoter share pledging crisis in 2019. During that crisis, the company’s promoters, the Essel Group, repaid loans through multiple stake sales to investors. LIC raises stake.
Also read: Sony demands $90 mn from Zee after terminating deal
Meanwhile, CLSA highlighted the considerable competitive challenges anticipated for Zee, serving as an additional deterrent for the stock. The firm foresees heightened competition in the media sector, particularly with the reported merger of Reliance and Disney Star. LIC raises stake.
The brokerage firm also sees a decline in the valuation of the company. “ With the merger terminated, Zee’s valuation will likely decline to 12x PE levels (Aug 21) seen prior to the merger announcement.”
CLSA analysts posit that the Zee-Sony merger could have effectively tackled Zee’s issue of low promoter ownership. Following the merger, Sony would have possessed a controlling 51 percent stake in the combined entity.
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Nearly 60% of Nifty 50 stocks are down this month; 8 stocks dipped more than 10%
The Nifty 50, representing the top 50 blue-chip companies across various sectors, has witnessed a significant downturn over the last six trading sessions, primarily driven by substantial selling in heavyweight sectors, notably banking. Major banks, following their weak Q3 performance, are witnessing a sharp drop in their share price.
Foreign portfolio investors (FPIs), on the other hand, have been actively selling, withdrawing over ₹28,000 crore from Indian markets in the last five sessions. The catalysts for this selling spree include the surge in US bond yields, concerns over geopolitical tensions in the Red Sea, and the prevailing trend of weak corporate earnings in Q3 so far, prompting FPIs to book profits.
Also Read: How does Indian market stack up against Asian peers when it comes to recent correction?
Against this backdrop, the Nifty 50 has seen a 2.27% erosion in value so far this month. From its all-time high of ₹22,115 points, the index has witnessed a 4% decline. Notably, the index experienced a drop exceeding 1% on two occasions in January. In the most recent trading session (Tuesday), it slipped below the 21,200 level in intraday trade, hitting the calendar year 2024 low of 21,192 points.
It is worth noting that the Nifty 50 witnessed a remarkable surge of 7.94% in December 2023, marking its most significant December gain since 2003. Before this, in November, the index recorded a gain of 5.52%. This robust rally propelled the index to conclude the calendar year 2023 with an overall gain of 20%, positioning Indian stocks as relatively more expensive on a global scale.
Also Read: Stretched valuations could weigh on Indian stock market returns in 2024, cautions CLSA
In the second week of the current month, foreign brokerage firm CLSA stated that India has now become the most expensive large market in the world, which may weigh on returns this year (2024).
60% of Stocks Register Downturn
Currently, 28 out of the 50 stocks in the Nifty 50, accounting for 56%, have yielded negative returns in the current month so far. Among these eight stocks lost more than 10% of their value.
The index experienced a downturn following the release of Q3 FY24 results by the heavyweight HDFC Bank on January 16. The bank’s performance fell short of street estimates, particularly in deposit and liquidity metrics, leading to a 15% decline in its share price (as of Tuesday closing price). In the previous session, the market capitalisation of the bank dipped below the ₹11 lakh crore mark, settling at ₹10.83 lakh crore.
Also Read: Nifty Bank slumps to a 7-week low, IDFC First Bank top laggard
Given HDFC Bank’s substantial 14% weightage in the Nifty 50 and a significant 30% weightage in the Nifty Bank index, its weak performance has contributed to the broader market decline. Other major banking players, including SBI, Kotak Mahindra Bank, IndusInd Bank, and Axis Bank, are also down between 1 and 10% in the current month.
Eicher Motors, a leading player in the two-wheeler industry, stood as the second-worst performer in the Nifty 50, witnessing a nearly 13% drop so far in the current month. In a recent note, Investec downgraded the stock to ‘Sell,’ citing intense competition in the premium bike segment.
The brokerage said that the company may lose market share as rivals like Triumph and Harley increase their India dealerships to 100 and raise production to 10,000 units per month.
Hindalco was another worst performer this month, witnessing a 12% decline. Concurrently, the FMCG company Hindustan Unilever (HUL) also experienced a nearly 11% loss in its shares thus far in the ongoing month. During Tuesday’s trading session, the stock took a 4% plunge, reaching an 18-month low, following the company’s lacklustre performance in the December-ending quarter, attributed to sluggish demand.
On January 19, HUL reported a standalone net profit of ₹2,519 crore in Q3 FY24. This represented a meagre 0.55% increase from ₹2,505 crore in the same quarter of the previous financial year, falling below street estimates.
Other stocks, including LTIMindtree, Asian Paints, JSW Steel, HDFC Life, UPL, M&M, Divis Labs, Nestle, Ultratech Cement, Bajaj Finserv, Britannia, Maruti Suzuki, SBI Life Insurance, Bajaj Finance, NTPC, Dr Reddy Labs, Grasim, ITC, Wipro, and Coal India have all experienced decline ranging from 0.15% to 10% in January so far.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.
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IPO investors call for rules to keep anchors from selling early
Some investors in US initial public offerings are demanding rules what they see as unequal treatment in the rules around how stock is allocated to so-called cornerstone investors in new listings.
An overwhelming 87% of 62 institutional investors said anchor investors — who agree to buy IPO shares before the offerings are sold to a broader group — should be required to hold onto their shares for a specified period after the listing, according to a KKR Capital Markets survey in December. In several prominent recent US listings where the companies chose to involve so-called cornerstones, no such restrictions on selling were imposed.
The polled investors, who collectively manage more than $10 trillion in assets under management, were almost evenly split as to whether anchor investors should be introduced at all.
The survey comes after a group of sizeable IPOs in the second half of last year allocated as much as 90% of the available stock to a concentrated group of large, long-only investors. While bankers touted the benefits of having such investors on board as providing added confidence and stability for the deal, and there have been no indications that anchors sold down their stakes, companies such as Arm Holdings Plc and Birkenstock Holding Plc still saw choppy trading after their debuts. The slumps have weighed on sentiment for other potential issuers.
“For those companies that come to market with anchor investors, it will be important to see those anchors ‘put their money where their mouth is’, with a true lock-up structure in place to ensure alignment with new investors,” said David Bauer, head of KKR’s public equity capital markets business.
Nearly 70% of the investors polled by KKR think the lock-up duration should be 180 days, and another 11% believe it should be even longer, at 360 days.
Investors surveyed are generally upbeat about prospects of this year’s IPOs, with 61% saying they don’t expect the presidential election to reduce their appetite for new issues. Many respondents also expect the Federal Reserve to cut rates, with 59% of them forecasting the 10-year Treasury will end the year yielding between 4% and 4.5%, the survey showed.
Anchor Investors
Last year’s fall class of new listings was characterized by prominent investors taking stakes in the new offerings, which had been relatively rare in the US before regulatory reforms in 2019.
Arm Holdings’s $5.3 billion September offering allocated as much as $735 million worth of shares to its biggest customers, including Apple Inc. and Nvidia Corp. In the same vein, Birkenstock said it would sell up to $300 million of its $1.5 billion offering to the Norwegian sovereign fund, T. Rowe Price Group Inc. and veteran investor Henry Ellenbogen’s Durable Capital Partners LP.
KKR is currently on the road marketing portfolio company BrightSpring Health Services Inc.’s IPO, which is set to raise as much as $1.36 billion. The deal doesn’t include a cornerstone allocation. Amer Sports Inc., which is in the market to raise up to $1.8 billion in a new share offering, does have anchors, and stipulated a 180-day lock-up for share subscriptions from its three existing investors, according to a term sheet seen by Bloomberg News.
The risk with a concentrated allocation to the top dozen or so long-only funds is that smaller investors and hedge funds are left out in the cold. If the initial allocation is too small for the investment to matter in an investor’s overall portfolio, they may not be inclined to further build their stake in the public market.
“Cornerstone investors are an important part of helping building momentum for the overall IPO market,” said West Riggs, head of equity capital markets at Truist Securities. “It is also important that cornerstone investors do not take up too much of the overall allocation as the public float still needs to be large enough to work for the rest of the book.” LIC raises stake.
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