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Vodafone opts for 4 Year Moratorium on AGR Charges

Vodafone opts for 4 Year Moratorium on AGR Charges
by 5paisa Research Team 21/10/2021

Almost a month after the government offered the telecom relief package, Vodafone idea has opted for the 4-year moratorium which pertains to payment of AGR charges and spectrum usage charges. Bharti is yet to respond to the 4-year moratorium offer. The last date for giving a declaration of intent to avail the moratorium happens to be 29th October.

AGR stand for the Annual Gross Revenues and has been the bone of contention regarding the inclusion of non-telecom revenues. That has been settled by the court and the telecom companies have to pay the AGR dues to the government and the moratorium only allows for postponement of the dues considering the cash flow constraints.

However, even Vodafone plans to avail the facility in tranches. To begin with, the board of Vodafone Idea has only approved the moratorium for the Spectrum Usage Charges and not for the AGR charges. The SUC will now be deferred during the four year period from October 2021 to September 2025.

The Telecom Relief package offered by the government on 15-September included this four year moratorium clause as well as the facility to convert the principal statutory dues to the government into equity; subject to conditions. However, this can be done at the end of 4 years once the moratorium is completed. It will address the cash flows issue but not the profitability issue for the telecom companies.

Vodafone has total debt of Rs.191,000 crore in its books and there were worries that the implosion of Vodafone would have serious repercussions in terms of jobs, dues to banks, dues to the government and dues to other operating creditors. The telecom companies basically have 4 years to bring their operations back on track.

The catch in the entire moratorium story is that the company availing the moratorium facility will have to pay interest on the outstanding amount. This interest will be charged at 2% above the MCLR (marginal cost of funds based lending rate). That would be a substantial cost and add to the eventual liability by a big chunk. 

That explains why telecom companies have been generally wary of jumping at the moratorium offer. Bharti Airtel has already hinted that it may not be too keen to avail the moratorium considering its huge costs.

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Mirae Asset Mutual Fund Crosses Rs.1 Trillion AUM

Mirae Mutual Fund Crosses Rs.1 Trillion AUM
by 5paisa Research Team 21/10/2021

Mirae Mutual Fund, part of the Mirae group of South Korea, may not have been around as many of the bigger names. But the growth in AUM of this fund has been phenomenal. The fund started operations in India in 2008 and by 2016, the fund had AUM of just about Rs.6,495 crore. Most of the humongous growth in AUM has come after that.

The growth since 2016 has been virtually explosive. For example, between 2016 and 2021, the AUM of the Mirae AMC has grown from Rs.6,495 crore to Rs.100,841 crore. In the last 6 years, the AUM has grown at above 100% in 2 years and above 80% in 1 year. In the remaining 3 years, AUM grew at above 50%.

The overall AUM has grown almost 15-fold in the last 6 years and positions Mirae among the top 10 in terms of overall AUM and top 6 in terms of pure equity AUM. We will come to the equity story in greater detail.

Out of the total AUM of Rs.100,841 crore, equity AUM accounts for a whopping 84% while hybrid funds and debt funds account for 7% each. The balance is accounted for by ETFs. In terms of share of equity as a percentage of AUM, Mirae has the highest ratio and this growth in equity AUM has been driven by performance and consistency over the years.

The growth in AUM of Mirae has not just come from the equity market rally. Some of the folio numbers are impressive. Its investor folios have crossed 43.7 lakhs and it has a whopping 15.4 lakh SIP folios. Out of the Rs.10,300 crore of SIP flows in the month of September, Mirae alone attracted Rs.796 crore.

In a way, good performance of Mirae equity funds has pulled in a lot of long-term SIP-based funds. For example, just two of their extremely popular funds viz. Mirae Asset Large Cap and Mirae Emerging Market Blue Chip Fund have a combined AUM of around Rs.52,000 crore accounting for over half the overall AUM of Mirae.

If you look at the top-12 fund houses by AUM, most of them are either bancassurance plays or affiliated to large industrial conglomerates. The only examples of pure fund house driven AUM is of DSP and Mirae. That is what makes this milestone unique for Mirae.

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Fisdom Launches Stock Broking Services

Fisdom Launches Stock Broking Services
by 5paisa Research Team 21/10/2021

Fisdom, one of India’s fastest growing wealth advisory platforms, has now made a foray into stock broking. Fisdom is backed by Naspers. Incidentally, Naspers is a South Africa headquartered technology investor with deep value investments in a number of internet and fintech propositions across the world.

The stock broking venture will position Fisdom as an advisory based stock broker offering a wide array of financial products and services. This would include equity, futures, options, ETFs, Gold Bonds, NCDs as well as services like currency broking. All this would be backed by strong research pool as well as screeners to shortlist companies.

Direct investing or do-it-yourself investing has become the big craze in India, especially after the surge of millennials in stock market trading. This trend has been underlined by a lot of value added digital services being provided by the low cost broking houses like Zerodha, Upstox, 5Paisa and Paytm Money.

Of course, cost would continue to be a major consideration for the do-it-yourself or DIY investor. Fisdom will target the long term investors and the aggressive traders. The idea is to have a dual pricing approach. For the long term investors and the small traders, the focus will be on offering zero brokerage or near zero brokerage offerings to clients. 

For the aggressive traders, who churn large volumes on thin spreads, Fisdom will offer a fixed subscription model. Here the clients will pay a fixed brokerage amount for a month and on that amount they will be allowed to put in almost limitless trades. Only the statutory charges will be billed on actuals. This is likely to attract aggressive churners of capital.

Fisdom already operates a successful mutual fund distribution platform and wants to extend that logic to equities. Apart from low costs, Fisdom will also offer a host of add-ons like research coverage on nearly 3,500 stocks, research tools like quants and technicals as well as smart screeners enabling the right search in a short time.

The broking opportunity looks salivating with the demat account doubling in the last 18 months from 3.5 crore to 7 crore. Of course, the risk is that the broking end is already getting crowded and differentiation and a unique proposition will make the difference in the final analysis. That would be Part-2 of the fight for the broking mindshare.

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Bandhan Financial May Look to Buy into Future Generali Insurance

Bandhan Financial May Look to Buy into Future Generali Insurance
by 5paisa Research Team 21/10/2021

Bandhan Financial, the holding company of Bandhan Bank, plans to foray into the insurance business by picking up a stake in Future Generali Insurance. Bandhan Financial had monetized close to Rs.10,600 crore from the sale of its stake in Bandhan Bank to comply with the RBI stipulations on promoter holding in banks. This cash will now be used.

Future Generali is a 3-way joint venture between Future Group, Generali and Industrial Investment Trust (IIT). While Future group holds 34% and IIT holds 17%, the balance 49% is held by Generali group. Bandhan Financial has already made it clear that it would be willing to pay a control premium, but only if it gets management control of Future Generali. It is not keen on being a junior partner.

This is not the first attempt by the Future group to monetize its stake in Future Generali. Future group was in talks with Sachin Bansal of Flipkart some time back but the talks did not materialize. Future Group has been looking to monetize its assets but then insurance is one of the few businesses to be left with Future group after their merger with Reliance Retail.

An important factor in this entire deal will be the Generali group. This Trieste, Italy based group already has 49% and as per the modified FDI rules for insurance investments, they can take their holding in the insurance joint venture up to 74%. They would be keen to make the best of the vast insurance opportunity available in the Indian context.

For FY21, Future Generali had collected first year premiums of Rs.521 crore and total gross premiums written was Rs.1,322 crore. The business model is up and running and that will be an advantage. Bandhan bank, with its vast distribution network, will be in a position to leverage the insurance business to the hilt. In short, there are synergies in the deal.

Recent reports on the insurance industry outlook show a humongous opportunity. India is at an inflexion point wherein the gap between the longevity funding needs and the retirement savings are at their highest level. 

That makes insurance an important part of the financial plan. While neither Bandhan Financial nor Future group or Generali have commented, the battle for insurance mind share is going to be the next big battleground.

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Asian Paints Share Q2 Results

Asian Paints share Q2 Results
by 5paisa Research Team 21/10/2021

You can be sure that there is pressure on margins when a marquee company like Asian Paints reports pressure on profits. In fact, for the Sep-21 quarter, Asian Paints has reported pressure on operating and net profits, largely due to a spike in raw material costs. Apart from the steep increase in Brent crude prices, supply chain constraints were also responsible. Here is a quick story of the Asian Paints Q2 results.

India’s largest paints company, Asian Paints, reported 32.6% growth in total revenues for the Sep-21 quarter at Rs.7,096 crore. Asian paints broadly operates in two segments viz. the paints segments and the home improvement solutions, which is much smaller. In both the segments, the sales growth remained robust, largely on the back of festival demand. Here is a quick snapshot of the financials of Asian Paints.

Asian Paints Q2 results

Rs in Crore

Sep-21

Sep-20

YoY

Jun-21

QOQ

Total Income (Rs cr)

₹ 7,096.01

₹ 5,350.23

32.63%

₹ 5,585.36

27.05%

Operating Profit (Rs cr)

₹ 701.70

₹ 1,071.62

-34.52%

₹ 712.97

-1.58%

Net Profit (Rs cr)

₹ 595.96

₹ 830.37

-28.23%

₹ 568.50

4.83%

Diluted EPS (Rs)

₹ 6.21

₹ 8.66

 

₹ 5.93

 

OPM

9.89%

20.03%

 

12.76%

 

Net Margins

8.40%

15.52%

 

10.18%

 


Let us turn to the operating profits of the company. On a YoY basis, the operating profits were down -35% at Rs.702 crore. This operating profits is before interest and after depreciation but excludes other income from the revenue calculation. The main pressure point on operating profits came from the spike in raw material costs.

The spike is quite obvious. On a YoY basis, the raw material costs were up nearly 73% in the Sep-21 quarter and almost accounted for 5% of sales. Even an attempt at inventory efficiency gains did not help much in the final analysis. As a result, operating margins almost halved on a YoY basis as high crude prices and supply chain constraints took its tool.

Check - Asian Paints - Quarterly Results

Net profits in the quarter fell by -28% YoY at Rs.596 crore largely due to the operating profit pressures getting transmitted to the bottom line. Of course, the interest costs are quite low for Asian Paints and they don’t make a material difference in the overall scheme of things.

Paints are crude oil intensive and with Brent crude crossing $85/bbl that was bound to be the big challenge. Net margins at 8.40% was sharply lower than 15.52% in Sep-20 quarter. Asian Paints announced an interim dividend of 365% on its par value.

Also Read:- 
 

1. Crude Oil at $83/bbl – Who Gains and Who Loses

2. Paint Sector Stocks

3. Sectors dependent on crude Oil

4. Crude Oil at $75/bbl – Here comes inflation

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Gold Plus to Launch IPO of Rs.1,200 crore

Gold Plus Launch IPO of Rs.1,200 crore
by 5paisa Research Team 21/10/2021

Gold Plus Glass Industry is likely to file the draft red herring prospectus (DRHP) for its proposed IPO. The DRHP filing is likely to happen around late December or in early January, so the entire process will only start after that. Gold Plus Glass is backed by Premji Invest, the family office of Azim Premji of the Wipro Group.

While details are yet to be available, only the size is known and that Jefferies and Axis are among the investment bankers to the issue. The company will look at a combination of a fresh issue and an offer for sale, where the original promoters will look to partially monetize their holdings in the company.

The company is planning to use the fresh funds to expand its capacity to manufacture solar glass and float glass. In fact, the combined capacity of Gold Plus to manufacture solar glass and float glass currently stands at 1,250 tonnes per day. Post the expansion, this capacity will stand enhanced to 1,900 tonnes per day.

It is interesting to under the applications of float glass and solar glass. Solar glass is a high resistance glass that is used in solar panels that are used to produce electricity. It is a high-end form of glass. Float glass, on the other hand, is more of a distortion free material that finds extensive application in domestic use.

The total project cost for the expansion will be Rs.2,200 crore which will be funded partially through the fresh issue, partially through internal accruals and partially through debt. Float glass and solar glass factories typically have a gestation period of 2-3 years. It will invest in 1 solar glass line and 2 float glass lines in all.

Once the entire expansion goes on stream, Gold Plus targets annual revenues of Rs.3,000 crore. It also sees a huge export market for this glass. Currently, in the float glass and solar glass segment, there are established players like Saint Gobain, Asahi Glass and Gujarat Guardian. Amidst rising global demand, Gold Plus wants to emerge the largest Indian producer of specialized glass.

Premji Finvest had allocated Rs.400 crore for a stake in Gold Plus in the year 2018. Its current value is not known.

Also Read:-

Upcoming IPOs in 2021

List of Upcoming IPOs in October 2021

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