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BTST Trading Ideas for Today

1. BAJAJFINSV SEP FUT

- Current Market Price: Rs. 16,820

- Stop Loss: 16,670

- Target: Rs. 17,100

2. HAVELLS SEP FUT

- Current Market Price: Rs. 1,451

- Stop Loss: Rs. 1,438

- Target: Rs. 1,474

3. BHARTIARTL SEP FUT

- Current Market Price: Rs. 685

- Stop Loss: Rs. 680

- Target: Rs. 699

4. WELCORP

- Current Market Price: Rs. 125

- Stop Loss: Rs. 122

- Target: Rs. 132

5. KOTAKBANK SEP FUT

- Current Market Price: Rs. 1,815

- Stop Loss: Rs. 1,832

- Target: Rs. 1,782

In what promises to have cascading inflationary impact on the economy, Coal India is looking to hike coal prices by 10-11%. The chairman, Mr. Pramod Agarwal, confirmed that the need to hike prices had been felt in internal discussions and there was almost a consensus on the subject. However, since the government is the majority owner of Coal India, the final decision will vest on the government.

The current average regulated price of coal is Rs.1,394 per tonne. The last price revision had happened in 2018. However, Coal India management  admitted that costs had spiralled on a variety of fronts in the last two years making a strong case for a hike in the price of coal. However, the bigger issue is the wage revision that is due shortly.

In the last wage agreement signed with the employees, Coal India had give a hike of 20% to its employees. The wage revision will again become due this year and this price hike is meant to compensate CIL for that. Coal India has an annual wage bill of Rs.37,000 crore and the wage revision that is due from July will cost the company another Rs.10,000 crore. All these factors need to be compensated for.

The big challenge is the inflationary impact. It is estimated that a 10% spike in coal prices will increase the power cost by 30 paisa per unit. That could have a downstream cascading effect. That would be the contentious issue at a time when the RBI is trying hard to hold inflation under 6%.

The real reason for CIL looking to hike prices is the sharp in global coal prices. This reduces the advantage for most power companies to import coal from other countries. Even with a hiked price, Indian coal can still be competitive. That is what is driving CIL to urge the government for a price hike.

One of the unique features of digital players is speed and flexibility. In a show of alacrity, Zomato has taken a decision to pull out of groceries retailing and its nutraceuticals business and concentrate on its core food delivery business. Zomato will also exit its much smaller nutraceutical business selling health and fitness products.

Zomato was running grocery deliveries on a beta basis. However, its experience was of poor customer experience as well as gaps in order fulfilment. In the last few years, a number of dedicated logistics focused companies have come up in the digital space, and substantially crunched the time to delivery. Zomato did not see too much value in investing resources in this area.

There is one more reason for Zomato to stay away from delivery of groceries. It recently picked up 10% stake in Grofers and would prefer to leverage the groceries delivery franchise of Grofers to spearhead that side of the business. Grofers has fine tuned groceries down to delivery in under 10-20 minutes through a fine-tuned collection and deep-tech delivery model. Zomato would rather develop on this model rather than reinvent the wheel.

Zomato had entered the groceries delivery business during the pandemic last year but with activities getting back to normal, it does not see too much benefit. Also, Zomato hopes to derive better outcomes from its Rs.745 crore investment in Grofers. Hence, Zomato has already clarified that it does not intend to get into this activity of groceries delivery and would prefer to leave to specialists like Grofers.

Zomato has already communicated to all its grocery partners, that it will shut its grocery pilot effective 17th September. Grofers offers delivery of groceries in as short as 10 minutes. Grocery delivery is a different ball game relying on smart hub locations, supply chains and deep tech to understand customers better. That is not the core competency of Zomato anyways.

Grey market premium or GMP may not have much of official value, but as an information indicator it is useful. It gives a quick view on where the stock is expected to list and at what levels it could trade. This is specifically in case of IPOs where the GMP is a good lead indicator of how the stock could list.

GMP signals for Ami Organics

Ami Organics IPO closed on 03-Sep and the issue was subscribed 64.54 times. The issue has been priced at Rs.610 and the discovered price represents the upper end of the IPO price band. Ami Organics is a pharma intermediates manufacturer with a solid franchise of API clients in India and abroad. The stock is slated to list on Tuesday, 14-September.

As of Monday, the GMP was hinting at a premium for Ami Organics. Against the issue price of Rs.610, the GMP was hinting at a listing price of Rs.767, representing a premium of Rs.157 over the issue price. In percentage terms, this is a 25% premium as signalled by the grey market.

GMP signals for Vijaya Diagnostics

Vijaya Diagnostics IPO closed on 03-Sep and the issue was subscribed 4.54 times. The issue has been priced at Rs.531 and the discovered price represents the upper end of the IPO price band. Vijaya Diagnostics is a specialized diagnostics and testing company with a solid franchise of direct customers. The stock is slated to list on Tuesday, 14-September.
As of Monday, GMP was hinting at a discount for Vijaya Diagnostics. Against the issue price of Rs.531, the GMP was hinting at a listing price of Rs.522, representing a discount of Rs.9 over the issue price. In percentage terms, this is a 2.26% discount as signalled by the grey market.

It must be noted that GMP prices are unofficial and hence must be taken as purely indicative and not as conclusive indicators of listing price.

Also Read: 

Upcoming IPOs in 2021

IPOs in September

After a lull in capital spending in the midst of the pandemic in 2020, specialty chemical companies will see capital expenditure (capex) rising by 50% yoy to Rs.6,200 crore in FY22. This takes the capex of specialty chemical companies back to pre-COVID levels. Specialty chemicals are specialized chemicals that go into a number of user industries like pharmaceuticals, paints, petrochemicals, metal products etc.

Specialty chemicals companies are seeing solid traction from domestic and export demand. Domestic demand has been rising with revival in most of the user industries back to normal levels of output. The latest IIP numbers reflect that Indian economy is back to pre-COVID levels of output. In the Indian markets, specialty chemical companies have gained from higher demand and better price realizations.

Also Read: Rally in Specialty Chemical Companies

The big shift has happened on the exports front. In last 2 years, the Chinese government clamped down heavily on the Chinese chemical companies that did not comply with environment norms. That drastically reduced the chemical output from China in the global export market. 

Additionally, the pandemic highlighted the risks of depending too much on China for the supply chain. Till 2019, most countries relied on China to supply specialty chemicals for various applications. However, the pandemic led to severe supply chain embarrassments forcing global companies to look at India as an alternative. 

There were other factors favouring Indian companies. Lower supplies from American hubs due to hurricanes and blockade of Suez Canal impacted global supply chains of specialty chemicals. Since demand was robust, specialty chemical companies could easily pass on higher crude costs via higher prices. This has encouraged a surge in capex this year.

Last year, revenue growth for specialty chemical companies fell to 10% and is expected to revive to 20% in FY22. Apart from the China factors, Western nations are increasingly looking at India, which is already among the top-3 specialty chemicals manufacturers in the world. Higher capacities will just underscore that advantage.

Fabindia, which is already a household name in ethnic wear and local arts and crafts, is looking at an IPO to raise close to $1 billion or approximately Rs.7,400 crore. The IPO will be a mix of a fresh issue and an offer for sale. Reportedly, Fabindia has already shortlisted I-Sec, SBI Caps, JP Morgan, Credit Suisse and Nomura Advisory as their investment banks to lead manage their public issue.

While the specifics of the issue are not yet available, it is estimated that Fabindia could look at an overall valuation for the business at $2 billion. Out of this, 25% of the shares or nearly $500 million could be an offer for sale or OFS while another $500 million may come from fresh issue, leading to infusion of funds into the company. 

At Rs.7,400 crore, this will be among the largest issues in recent times. The only issue this year that was larger was Zomato which raised Rs.9,375 crore via its public issue in July this year. The other large issue was Nuvoco Vistas which was worth Rs.5,000 crore. Of course, there is the Paytm IPO that will be close to Rs.16,000 crore and the biggest of them all, LIC, which is expected to be a Rs.75,000 crore issue.

Fabindia counts Premji Finvest, the family office of Azim Premji, as well as Nandan Nilekani and Rohini Nilekani among its current equity investors. While it is almost confirmed that Premji Finvest may look at a partial exit in the OFS, it is not clear what the Nilekani family proposes to do with its stake.

Fabindia sells wares of over 40,000 artisans and craftsmen across the length and breadth of India. They have a large number of dedicated stores across India through which these ethnic products are reached out to the public. Fabindia plans to use the fresh funds to expand its store presence. IPOs have already raised close Rs.60,000 crore this year across a total of 36 public issues. 
 

Also Read: 

Upcoming IPOs in 2021

IPOs in September