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Retail Sector - QSR, Grocery, Jewellery and Apparel Stocks Performance

Retail Sector Stocks Performance
by Nikita Bhoota 27/08/2021

Retailers across QSR, grocery, jewellery and apparel highlight strong performance YoY on a low base, despite Covid 2.0, though a sequential sales decline occurred. This decline has been varied across sectors, with QSR displaying higher resilience compared with apparel/grocery/jewellery players on account of convenience channel strength. Though footfall in malls/EBOs sharply declined QoQ, it was partly offset by strong online contribution, higher conversion rates and average basket size. 

    Lower customer footfall in malls & EBOs strongly hit apparel players in 1Q (SHOP/ABFRL/TRENT/VMART saw QoQ sales dip of 70%/57%/58%/50%, resp). This was partly offset by growing omnichannel contribution, higher conversion rates and larger ticket sizes. Page, selling more essential apparel and with higher salience of General Trade/MBO stores in neighborhoods, saw a smaller decline, of 43%. In jewellery, Titan and Kalyan saw a QoQ sales decline of 55% and 52%, respectively, with the lower contribution of studded. 

    QSR performance was driven by robust growth in the convenience-channel (delivery & takeaway). Within QSR, JUBI saw lower sequential sales dip of 14% vs Westlife (-28% QoQ) & Burger King (-24% QoQ). Dine-in format saw muted sales on operating restrictions. 

    DMart (QoQ sales down) and Reliance Retail grocery were impacted by stringent restrictions on store operating hours and poor product mix (mainly essentials). E-commerce formats for both players, i.e. DMart Ready and JioMart, however, saw strong YoY growth as both players maintain their online thrust.

Retail Stock Performance:

Nifty 50 has rallied 45% from Aug 25, 2020-  Aug 25, 2021. Here, we have discussed some of the retail stocks that have surpassed Nifty 50 index performance or have given positive returns in the same period. 
 

Company Name

25-Aug-20

25-Aug-21

Gain

Jubilant FoodWorks Ltd.

2,106.9

3,827.7

81.7%

V-Mart Retail Ltd.

2,030.8

3,582.6

76.4%

Avenue Supermarts Ltd.

2,341.2

3,789.7

61.9%

Titan Company Ltd.

1,136.5

1,822.7

60.4%

Page Industries Ltd.

20,392.5

31,061.4

52.3%

Westlife Development Ltd.

379.0

512.7

35.3%

Shoppers Stop Ltd.

181.4

240.1

32.3%

Source: Ace Equity

Retail stocks have given huge returns in the past one year. Jubilant FoodWorks Ltd rallied the most 81.7% from Aug 25 2020-  Aug 25, 2021 followed by V-Mart Retail Ltd 76.4%, Avenue Supermarts Ltd 61.9%, Titan Company Ltd 60.4%, Page Industries Ltd 52.3%. Shoppers Stop Ltd jumped the least 32.3% in the same period.

Disclaimer: The above report is compiled from information available on the public platforms. These are not buy or sell recommendations.

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Vijaya Diagnostics Centre IPO Investment Note

Vijaya
27/08/2021

Vijaya Diagnostics is a fairly well known diagnostic brand in the Southern part of India. Vijaya is the largest diagnostic chain in South India and also the fastest growing chain. It offers end-to-end solutions for pathology and radiology testing. Unlike many of the diagnostic centres, that are B2B in their model, Vijaya has adopted a predominantly B2C approach. More than 90% of its revenues come from customers directly walking into one of their diagnostic centres for a test. In 2014, Vijaya had taken over Medinova and is looking to expand further through the inorganic route.

Vijaya Diagnostics IPO is tapping the primary market with an IPO of Rs.1,895 crore consisting entirely of an offer for sale (OFS). The IPO has been priced in the band of Rs.522-531.

Key terms of the Vijaya Diagnostics IPO offer

Key IPO Details

Particulars

Key IPO Dates

Particulars

Nature of issue

Book Building

Issue Opens on

01-Sep-2021

Face value of share

Rs.1 per share

Issue Closes on

03-Sep-2021

IPO Price Band

Rs.522 - Rs.531

Basis of Allotment date

08-Sep-2021

Market Lot

28 shares

Refund Initiation date

09-Sep-2021

Retail Investment limit

13 Lots (364 shares)

Credit to Demat

13-Sep-2021

Retail limit - Value

Rs.193,284

IPO Listing date

14-Sep-2021

Fresh Issue Size

Nil

Pre issue promoter stake

59.78%

Offer for Sale Size

Rs.1,895 crore

Post issue promoters

54.78%

Total IPO Size

Rs.1,895 crore

Indicative valuation

Rs.5,414 crore

Listing on

BSE, NSE

HNI Quota

15%

QIB Quota

50%

Retail Quota

35%

Data Source: IPO Filings

Check out highlights of Vijaya Diagnostics business model

1.   Offers over 740 routine tests and over 870 specialized pathology tests
2.   Gets 95% of its revenues from states of Telangana and Andhra Pradesh
3.   Operates through a network of 80 diagnostic centres and 11 reference laboratories
4.   Smart growth in net profits and ROCE over the last 3 financial years
5.   Promoter Surendranath Reddy, Karakoram Fund and Kedaara will offer in the OFS
6.   Company has a 40 year pedigree having been established way back in 1981

 

Important Financials of Vijaya Diagnostics

Vijaya diagnostics is a profit-making company with consistent growth in top-line revenues, bottom-line net profits and return on capital employed. EBITDA  has grown 50% in the last 2 financial years.

 

Financial Parameter

Fiscal 2020-21

Fiscal 2019-20

Fiscal 2018-19

Net Worth

Rs.359.23 cr

Rs.274.14 cr

Rs.207.01 cr

Revenues

Rs.376.75 cr

Rs.338.82 cr

Rs.292.59 cr

EBITDA

Rs.177.88 cr

Rs.147.98 cr

Rs.118.48 cr

Net Profit

Rs.84.91 cr

Rs.62.51 cr

Rs.46.27 cr

Net Margins (%)

22.54%

18.45%

15.81%

ROCE (%)

42.01%

33.28%

30.06%

Data Source: Company RHP

The sharp growth in the net margins is a corollary to net profits growing much faster than growth in sales. From a shareholder perspective, what is material is the sharp increase in ROCE from 30.06% to 42.01%. This has been achieved through best in class operating revenue per customer at Rs.1,214 and operating revenue per test at Rs.428. These numbers have been benchmarked with competition by a CRISIL report.

How do the financials of Vijaya Diagnostics compare with the peer group? The CAGR growth in patient volumes between 2017 and 2021 for Vijaya was 14%, compared to 13% for Dr. Lal Pathlabs and Metropolis and 10% for Thyrocare. Vijaya has tests per patient at 2.7X compared to 2.4X for Dr. Lal Pathlabs, 2.1X for SRL and 1.9X for Metropolis. Vijaya has managed better customer penetration, especially in the particular geography.

Investment Perspective for Vijaya Diagnostics

Diagnostic testing is a fast growing business and the need to undergo regular check-ups was highlighted by the pandemic. Most of the listed diagnostic laboratories like Dr. Lal Pathlabs, Metropolis and Thyrocare have seen positive re-rating post the pandemic.

Here are key pointers for an investment view on the IPO.

  a)    Vijaya Diagnostics has the highest ratio of B2C to B2B at 93:7. This compares favourably with 23:77 for Thyrocare, 44:56 for Metropolis and 60:40 for Dr. Lal Pathlabs. Higher B2C business indicates higher level of customer brand recall and better retention.

  b)    Let us compare Vijaya Diagnostics with the peer group on operating revenues and operating profits per test. Vijaya ranks second after Metropolis in operating revenue per test and ranks on top in operating profit per test.

  c)    In terms of operating income and operating profit per patient, Vijaya Diagnostics scores substantially higher than peer group due to its strong B2C focus, which results in better customer penetration.

  d)    If you compare it's P/E ratio based on indicative post-issue valuations, it discounts profits at a P/E ratio of a little over 60X. That is still lower compared to 74X for Metropolis and 107X for Dr. Lal Pathlabs based on FY21 earnings. 

Vijaya Diagnostics offers an established story to participate in the fast growing diagnostic demand in India. In a competitive industry, Vijaya has got its profit per customer model right.
 

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Ami Organics IPO: 7 Interesting Things to Know Before Investing

Ami Organics
27/08/2021

Ami Organics IPO opens for subscription on 01-Sep and closes on 03-Sep. Ami Organics manufactures specialized intermediates for the pharma industry (APIs) and also for the agrochemicals sector. The IPO of Rs.570 crore will consist of fresh issue of Rs.200 crore and offer for sale (OFS) of Rs.370 crore. Price band has been fixed at Rs.603-Rs.610.

7 Interesting facts about Ami Organics IPO

1)    Ami Organics is one of the leading manufacturers of key APIs including Dolutegravir, Trazodone, Entacapone, Nintedanib and Rivoraxaban. It has a leadership position in each of these specialized intermediates.

2)    Since its inception in 2004, Ami Organics has developed and commercialized 450 pharma intermediates for APIs across 17 therapeutic areas. It already has 8 patent applications that have been accepted and 3 applications that are pending.

3)    Ami Organics supplies APIs and specialty chemicals to over 150 customers spread across 25 countries, including India. Some of its marquee clients include Laurus Labs, Cadila, Cipla, Fermion OY, Sintetici SPA, Medichem SA and Midas Pharma GMBH.

4)    Over the last two financial years, the revenues of Ami Organics grew 43%, EBITDA by 90.45% and net profits by 131%. This resulted in net margins of the company expanding from 9.77% in FY19 to 15.85% in FY21.

5)    Nearly 70% of the fresh issue portion of Rs.200 crore will be utilized for repayment of loans. The loan repayment is expected to be completed in FY22 itself, to improve solvency ratios. The balance 30% will be used for working capital.

6)    Ami Organics has already done a Rs.100 crore pre-IPO placement to key investors including Plutus Wealth Management, Malabar India Fund, IIFL Special Opportunities Fund and Malabar Value Fund.

7)    Based on the post-issue indicative market cap of Rs.2,220 crore, the IPO price discounts the latest year earnings at a P/E ratio of 41X. That is reasonable considering that the peer group typically trades at a P/E of 50X to 70X.
 

Also Read: Upcoming IPOs in September 2021

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Ami Organics - IPO Note

IPO Note
29/08/2021

Ami Organics is a 17-year old company located in the state of Gujarat and specializing in the high growth segments of Active Pharma Ingredients (APIs) and specialty chemicals. Essentially, Ami Organics caters to the pharmaceuticals and the agrochemicals space and has over 150 clients spread across 25 nations including India. Ami organics operates through 3 plants; all located in Gujarat at Ankleshwar, Sachin and Jhagadia with total capacity of 6,060 MTPA (million tonnes per annum). Jhagadia and Ankleshwar were acquired in Mar-21 and are not reflected in FY21 results.

Ami Organics IPO is tapping the primary market with an IPO of Rs.570 crore consisting of a fresh issue of Rs.200 crore and an offer for sale (OFS) of Rs.370 crore. The IPO is priced in the band of Rs.603-610.

Key terms of the Ami Organics IPO offer

 

Key IPO Details

Particulars

Key IPO Dates

Particulars

Nature of issue

Book Building

Issue Opens on

01-Sep-2021

Face value of share

Rs.10 per share

Issue Closes on

03-Sep-2021

IPO Price Band

Rs.603 - Rs.610

Basis of Allotment date

08-Sep-2021

Market Lot

24 shares

Refund Initiation date

09-Sep-2021

Retail Investment limit

13 Lots (312 shares)

Credit to Demat

13-Sep-2021

Retail limit - Value

Rs.190,320

IPO Listing date

14-Sep-2021

Fresh Issue Size

Rs.200 crore

Pre issue promoter stake

47.23%

Offer for Sale Size

Rs.370 crore

Post issue promoters

41.05%

Total IPO Size

Rs.570 crore

Indicative valuation

Rs.2,225 crore

Listing on

BSE, NSE

HNI Quota

15%

QIB Quota

50%

Retail Quota

35%

Data Source: IPO Filings

Some highlights of Ami Organics core business

1.    It has a leadership position in most of the specific APIs it manufactures
2.    Commercialized over 450 pharma intermediates in 17 therapeutic areas
3.    Eight patent applications approved and 3 more in process
4.    Net margins improved from 9.77% to 15.85% over last 2 years
5.    Completed Rs.100 crore pre-IPO placement with marquee investors
6.    Pharma intermediates account for 88.4% of total revenues
7.    Pharma intermediates Trazodone and Dolutegravir top revenue contributors

Important Financials of Ami Organics

Ami Organics is a profit-making company with consistent growth in top-line revenues, bottom-line net profits and net profits margins. Its return on net worth (RONW) is way above the peer group.

 

Financial Parameter

Fiscal 2020-21

Fiscal 2019-20

Fiscal 2018-19

Net Worth

Rs.166.93 cr

Rs.111.81 cr

Rs.82.22 cr

Revenues

Rs.340.61 cr

Rs.239.64 cr

Rs.238.51 cr

EBITDA

Rs.80.15 cr

Rs.41.02 cr

Rs.42.08 cr

Net Profit

Rs.54.00 cr

Rs.27.47 cr

Rs.23.30 cr

Net Margins (%)

15.85%

11.46%

9.77%

EBITDA Margins (%)

23.53%

17.12%

17.64%

ROCE (%)

25.25%

22.40%

29.11%

RONW (%)

32.35%

24.57%

28.33%

Data Source: Company RHP


Across key ratios like net margins and return on equity, growth has been significant in FY21 over FY19. The only catch has been flat to lower ROCE. However, since a chunk of the fresh fundraising will be utilized for repayment of debt, the ROCE should improve in the coming quarters. Also, its capacity utilization at the Sachin facility is just 63% and an improvement will result in better-fixed cost absorption.

Currently, the capacity of the Ankleshwar plant and the Jhagadia plant have not been included as they were only acquired in March 2021. Once they also come on stream, the boost to the top line and the bottom line would be significant. Already, the RONW of Ami Organics is well above the peer group in the industry.

Investment Perspective for Ami Organics

Active Pharma Ingredient or APIs is a fast-growing segment globally. For a long time, China has been the global leader in the supply of pharma intermediates. However, post the pandemic and the supply chain constraints, most global pharmaceutical players are looking at India as a viable option. That opens up a big window of opportunity.

a)    Nearly 70% of the fresh issue proceeds will go towards repaying of debt. This will not only improve the solvency ratios of the company but also improve the ROCE ratios. This is likely to favorably impact valuations post the IPO.

b)    Among its top revenue-generating intermediates like Trazodone, Dolutegravir, Entacapone and Pazopanib, Ami Organics has an intermediates market share ranging from 70% to 85%, giving them leadership in these core segments.

c)    Ami Organics is likely to gain from high entry barriers in the pharma intermediates industry. Compliance requirements are stringent and in this area, the company has built solid entry barriers since it takes a long time to get enlisted as an API supplier.

d)    If you compare Ami Organics on the P/E ratio based on indicative post-issue valuations, it discounts FY21 profits at a P/E ratio of 41X. That is relatively attractive if you compare it with peer group companies like Aarti Industries and Vinati Organics.

Ami Organics brings to the table the combination of a solid financial track record, a commitment to reduce debt as well as smart entry barriers built up in the pharma intermediates business. The pricing is reasonable and Ami Organics may have the added advantage of being in the right industry at the right time.

Check: 7 Interesting Facts about Ami Organics
 

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Bharti Airtel to raise Rs.21,000 crore via Rights Issue

Bharti Airtel Rights Issue
29/08/2021

The board of Bharti Airtel has approved the issue of rights shares to the tune of Rs.21,000 crore or about $2.83 billion. The company has announced that the rights will be priced at Rs.535 per share, which represents a discount of 9.78% to the closing price of the stock on 27-Aug. Normally, companies issue rights to existing shareholders at an attractive discount to make the subscription attractive.

Bharti Airtel is yet to announce the record date for the rights issue because the rights offer will only be made to shareholders whose names appear in the register of shareholders as on the record date. Normally, 2 trading days prior to the record date is considered the last cum-rights date and the day after that, the stock starts trading ex-rights.

The board has already spelt out terms of payment for the rights issue. eligible shareholders will only have to pay 25% of the amount at the time of application of rights and the balance 75% will be payable in two instalments within a period of 36 months. The instalment dates are yet to be decided. Existing shareholders will get 1 rights share for every 14 shares held.

This will be the single biggest rights issue in India after the Rs.53,000 crore rights issue by Reliance Industries in 2020, which also entailed paying the rights subscription in 3 instalments. That means, Bharti shares will also trade simultaneously under partly-paid and fully-paid categories.

Promoters will fully subscribe to their quota of rights and will also take up any rights not taken up by other shareholders. Bharti Airtel needs a continuous supply of funds to take on competition from Reliance Jio as well as to pay the AGR dues of Rs.20,000 crore that is still pending to the Department of Telecommunications towards AGR charges. Rights proceeds will be used to bridge the funding gap.

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Sovereign Gold Bonds 6th Tranche opens on 30th August

Sovereign Gold Bonds
29/08/2021

The sixth tranche of the Sovereign Gold Bonds issue for FY22 (the last for H1) opens for subscription on 30-Aug and closes on 05-Sep. This SGB tranche is priced at Rs.4,732 per gram, which is lower than the fifth tranche. In addition, digital applications get an additional discount of Rs.50 per gram, so the effective price will be Rs.4,682 per gram.

Sovereign Gold Bond prices are linked to benchmark 24-carat gold prices in the Indian market and units equivalent to grams of gold are issued. The returns on gold bonds will depend on the price of gold but there is an assured interest of 2.50% per year payable semi-annually. The gold principal of SGBs and the interest are guaranteed by the government.

Also Read: Merit in Buying Digital Gold

Sovereign gold bonds can be held in physical certificate form or in your Demat account. These bonds have a maturity of 8 years but after 5 years the RBI offers a buyback window for investors. In addition, SGBs are also listed after a period of 6 months, although liquidity in secondary markets is quite thin. Only if SGBs are held till maturity, the capital gains are free of tax. Otherwise, gains will be taxed at non-equity rates. Interest will be fully taxable.

Investors can buy a minimum of 1 gram of gold equivalent and a maximum of 4 kg per person and 20 kg in the case of trusts in one year. However, multiple family members can each buy up to 4 kg in a year. These gold bonds can be purchased from designated post offices, from SHCIL, from the online broking platforms of BSE and NSE as well as through banks. However, payment banks and SFBs are not eligible to sell Sovereign Gold Bonds.

Since 2015, the government has sold gold bonds worth Rs.32,389 crore till date.
 

See: How to buy Digital Gold

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