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Ultratech Q1 thrives on higher volumes and utilization

Ultra Tech Cements Results
23/07/2021

Most cement numbers were expected to do well in this quarter and we saw indications from ACC results. However, Ultratech Cements is the largest Indian cement company by a margin. It reported 54% sales growth but there was more to the Ultratech story in the Jun-21 quarter. Cement sales volumes were up 47% YoY while the cement capacity utilization ramped up from 46% to 73%. With cement production of 21.53 MT in the Jun-21 quarter, it made all the difference.

Let us now get to the specific top-line and bottom-line numbers. Ultratech Cement reported 54.21% growth in total sales revenues for the Jun-21 quarter at Rs.11,830 crore. During the same period, the net profits more than doubled to Rs.1,703 crore as the combination of higher volumes and higher capacity utilization became a force multiplier for profits. Like in the case of most industries, sequential sales and sequential profits were lower due to COVID 2.0, but that is a temporary phenomenon. What matters is that cement is having a whale of a time with the government spending heavily on infrastructure and Ultratech, being the market leader, is an obvious beneficiary of this trend.

Read: Cement Sector Updates

If you thought that higher volumes and higher capacity utilization must be a simple business, think again. Ultratech had to contend with 7% spike in raw material costs, 12% rise in power costs and 6% higher logistics costs. It managed to compensate for these costs through cost controls and inventory efficiency gains. For the quarter, Ultratech reported Rs.1,689 as EBITDA/ton, which is at par with the best in the industry. The best story of Ultratech came from the net margins at 14.39%; better than 10.35% in the Jun-20 quarter and 12.32% in the sequential Mar-21 quarter.
 

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Government looks all set to hive off BEML

BEML Divestment
23/07/2021

Going by the recent reports it looks like the BEML stock may be ripe for divesting by the government. As per the latest reports in the press, the government may have just about shortlisted the potential candidates for taking over the 26% stake in BEML. Whether the stake is handed over to 1 company or to multiple companies is a granular decision. The 4 companies shortlisted for the 26% stake in BEML are Tata Motors, Ashok Leyland, Bharat Forge and Megha Engineering. Megha Engineering is a Hyderabad-based player in infrastructure projects execution.

First, the background of this stake sale! DIPAM had originally set 01 March as the deadline for submission of expressions of interest (EOI). This was later extended to 22 March due to COVID 2.0. Now the bids have been analyzed and evaluated and as per reports, the four companies have been shortlisted. The government currently holds 54% in BEML and this stake sale of 26% will make the government of India a minority shareholder in BEML. While divestment price is not known, BEML currently has a market cap of Rs.5,350 crore so the 26% stake would be worth around Rs.1,390-1,400 crore.

BEML is one of the mini-ratna companies of the government and has a strong positioning in defence production, mining, aerospace, construction and even the manufacture of metro trains. Incidentally, BEML also manufactures critical military hardware like the launchers for the Prithvi Missile. Among the bidders, Tata Motors, Ashok Leyland and Bharat Forge have a strong defence franchise in their business models. BEML would help them add defence capabilities at a reasonable price. For the government, it will be one more small step towards its coveted Rs.175,000 crore divestment target for FY22.
 

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Big Bull Rakesh Jhunjhunwala's Portfolio 2021

Big Bull Portfolio
23/07/2021

In Indian stock markets, Rakesh Jhunjhunwala needs no introduction. Popularly called the “Big Bull”, he is the most successful non-promoter investor in India. With a portfolio worth Rs.20,000 crore, some of his top picks are almost as popular as his own persona.

Here is Rakesh Jhunjhunwala's portfolio as of June-21.

 

Company

Percent Holding

Market Value (22 Jul)

Titan Co.

4.8%

Rs.7,260 crore

CRISIL Ltd

5.5%

Rs.1,250 crore

Tata Motors

1.1%

Rs.1,143 crore

Lupin Ltd

1.6%

Rs.855 crore

Fortis Healthcare

4.3%

Rs.779 crore

 

Note: There are 9 stocks in which Rakesh Jhunjhunwala's holding is more than Rs.700 crore.

With such a formidable portfolio, Rakesh Jhunjhunwala's buy and sell are tracked closely. Here is what he bought and sold in the Jun-21 quarter.

First the buys! There were 2 new additions in Q1. He added 5.75 crore shares of SAIL and 1 crore shares of Indiabulls Housing Finance. In addition, he also added to his existing stake in 2 of his stocks. He added 78 lakh shares of Federal Bank taking his stake in the Kerala based bank from 2.4% to 2.8%. In addition, Rakesh Jhunjhunwala also bought 37.8 lakh shares of Edelweiss to enhance his stake from 1.2% to 1.4%.

 

Also Read: Stock holdings of top Stock Market Investors

 

Of course, there were sells too. Among his top holdings, he sold to reduce his stake in Titan from 5.1% to 4.8%. He also reduced his holding in Tata Motors from 1.3% to 1.1% during the Jun-21 quarter. In addition, Rakesh Jhunjhunwala was also a major seller in TV18 Broadcast and in Autoline Industries. 

There may not be any perceptible trend and would be normal portfolio churning. But investors would be obviously eyeing stocks like SAIL and Indiabulls Housing where he has picked up a fresh stake.

 

Related Article: Big Bull to Invest in Low Cost Airline in India

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Star Health Insurance Files DRHP - Insurance IPO

Star Health Insurance IPO
23/07/2021

Standalone insurance businesses in the private sector are rare. Normally, insurance companies in India have been backed by the government or by large banks like SBI, ICICI, HDFC and Kotak Bank. It is in this tough environment that the health insurance vertical of Star Health has garnered a 52% market share. 

A full 15 years after Star Health was floated by V Jagannathan of United India Assurance in 2006, it has decided to hit the IPO market with a proposed IPO to augment its capital base in sync with business growth.

Star Health has filed DRHP with SEBI for a combination of fresh issue and an offer for sale to early investors. The IPO will consist of Rs.2,000 crore to be raised via fresh issue of shares and 6 crore shares offered by way of OFS, at a price to be determined later. 

Currently, Star Health is owned to the extent of 90% by a consortium of Westbridge Capital, Madison Capital and Rakesh Jhunjhunwala. Earlier this year, another Jhunjhunwala backed company (Nazara Technologies) had also hit the IPO market with a pure OFS.

 

You might like: Rakesh Jhunjhunwala's Portfolio

 

While health insurance remains the bread and butter of Star Health, it also offers personal accident policies and overseas insurance. Health insurance in India gained immensely from the health awareness triggered by COVID-19 and Star Health, with a 52% market share and 30% share of individual policies, was a big beneficiary. 

In the health insurance space, Star Health competes with Max Bupa, ICICI Lombard, HDFC Ergo, NIA and Bajaj Allianz. In FY20, Star Health had underwritten gross premiums of Rs.6,870 crore and this is expected to have grown further in FY21. Star operates through 640 branches and settles claims through its all-India network of over 9,500 hospitals.
 

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What are investors so excited about IDFC

IDFC
23/07/2021

It is not often that you see IDFC rallying 19% in a single day, but in the last few days, the stock has been on an absolute run. It even scaled its 52-week high price level and touched Rs.62.60 on 22 July. 

IDFC was originally conceived 25 years ago to bankroll India’s infrastructure thrust. In 2014, IDFC got the banking license after which it hived off its infrastructure lending business into IDFC Bank, which commenced operations in Oct-15.

The rally gathered momentum after IDFC confirmed that it was eligible to exit its stake in IDFC First Bank having completed 5 years. Earlier, RBI had clarified that holding companies could exit their banking units, five years after the banks commenced business. 

Since IDFC First Bank had commenced operations in Oct-15, IDFC was officially eligible to exit its stake in IDFC First Bank. IDFC Bank had merged with Capital First in 2018 to form IDFC First Bank.

IDFC currently holds 36.6% in IDFC First Bank through its 100% holding in IDFC Financial Holdings. IDFC also holds 100% in IDFC AMC. However, it must be noted that IDFC has not expressed its intention to exit IDFC Bank. So, what makes markets so excited?

Markets are excited about IDFC for 3 reasons. Firstly, this would mean that the group would be able to engineer a reverse merger of IDFC into IDFC Bank, which is likely to substantially value accretive. 

Secondly, the merger of IDFC into IDFC Bank does away with the need for the parent to systematically reduce its stake in the bank as per RBI regulations. Finally, this merger will ensure that IDFC is not subjected to the traditional holding company discount any longer. That is what, perhaps, excited markets the most!

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Zomato IPO lists with a bang and stays on top

Zomato IPO Listing
23/07/2021

There was an urgency about the Zomato business model. Their food delivery model was based on quick delivery and adherence to the timelines. Not surprisingly, when it came to the Zomato listing, the company took an unprecedented decision to list the company 4 days ahead of schedule; on 23 July instead of 27 July. 

 

If ever there was a statement on timely delivery, this was it. That was on a lighter vein, because even the actual listing and trading on Day-1 was equally eventful. Now, for the listing story of Zomato.

 

With the solid response to the issue and a surfeit of demand from QIBs, it was apparent that Zomato IPO would be priced at the upper end of the band at Rs.76. However, against the discovered IPO price of Rs.76, Zomato IPO listed at Rs.115 on the BSE and Rs.116 on NSE. The listing price was at a premium of 52% over the IPO price.

 

On the NSE, Zomato IPO did come under pressure after scaling higher levels and closed at Rs.125.30, still a premium of 64.87% over the issue price and above the listing price on the first day of trading.

 

On the BSE, the stock closed at Rs.125.85, a premium of 65.59% over the IPO issue price and again well above the opening price on Day-1. It may be recollected that the Zomato IPO had been oversubscribed 38.4 times with strong demand from QIBs.

 

On Day-1 of listing, Zomato touched a high of Rs.138.90 on the NSE and a low of Rs.115. On Day-1, the Zomato stock traded a total of 69.49 crore shares on NSE amounting to value of Rs.8,625 crore. On the NSE, Zomato was the top stock on 23 July in terms of value traded and the second highest on volumes traded.

 

On the BSE, Zomato touched a high of Rs.138 and a low of Rs.114. On the first day, the Zomato stock traded a total of 4.52 crore shares on BSE amounting to value of Rs.576 crore. During the day, Zomato had crossed market capitalization landmark of Rs.100,000 crore but closed the day with market cap of Rs.98,732 crore. However, its free float market cap at the close of Day-1 is just Rs.8,886 crore.
 

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