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After blockbuster IPO and listing, Nykaa posts 96% drop in Q2 profit; shares slip

by 5paisa Research Team 15/11/2021

In quite an anticlimactic turn of events, fashion and cosmetics e-tailer Nykaa reported a staggering 96% year-on-year decline in its second quarter net profit barely days after its blockbuster initial public offering.

Net profit for July-September fell to just Rs 1.2 crore from Rs 27 crore a year earlier. 

Even on a sequential basis the net profit was down 66% as compared with Rs 3.5 crore for the April-June quarter, as the company spent more on advertising and marketing in a bid to acquire more customers. 

This is the first time that Nykaa is declaring its results following its bumper listing, which saw its market capitalization zoom past the Rs 1 trillion mark. Its IPO was covered 82 times and its shares had nearly doubled on debut last week. On Monday, shares of Nykaa fell nearly 5% to Rs 2,244.20 apiece in morning trade.

The decline in net profit came even as Nykaa’s revenue from operations zoomed 47% in the September quarter to Rs 885 crore from Rs 603.8 crore a year earlier. Revenue rose 8% sequentially, from Rs 817 crore in April-June.

Nykaa said gross profit margins were up 345 basis points to 39.3% over the same period last year. 

Nykaa reported a 286% increase in its marketing and advertising expenditure for the quarter to Rs 121.4 crore as against Rs 31.5 crore in the same quarter last year. This was the biggest expense item for Nykaa, and dragged the net profit down. 

Nykaa Q2: Other highlights

1) Beauty and personal care segment’s gross merchandise value grows 38% to Rs 1,186 crore.

2) The GMV for the fashion segment was up 215% YoY to reach Rs 437 crore.

3) Fashion segment contributed 27% to Nykaa’s GMV in Q2, up from 14% in the corresponding quarter last year.

4) Nykaa increased its warehouse storage capacity by 37,000 square feet to 665,000 sq ft. 

5) Annualised unique transacting customers reached 7.2 million in Q2.

6) Beauty and personal care vertical’s customers grew 40% to 1.3 million.

Nykaa management commentary

Nykaa founder and chief executive officer Falguni Nayar said the company maintained growth momentum in its beauty business, accelerated the fashion business and is now focussing on brand-building. 

“Increased marketing spends led to acceleration of customer acquisition, also evident in the unique visitor and transacting customer metrics. The company continues to invest in expansion of retail stores and fulfilment capacity ahead of the festival season,” she said. 

The company said that in the second quarter it opened eight new stores including in cities like Gwalior, Kochi, Mysuru, and Ranchi. Nykaa now operates 84 physical stores across the country. 

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FIIs have been bearish on many mid-cap stocks. Find out more

by 5paisa Research Team 15/11/2021

Indian stock indices are consolidating after hitting a new peak even as investors, anticipating a correction form these levels, are looking at shuffling their portfolio.

Foreign portfolio investors (FPIs) or foreign institutional investors (FIIs) had become more cautious about investing in India but they did pump in more money into a clutch of midcap stocks over the past few months.

On the flip side, quarterly shareholding data shows they also decreased their holding in more than 200 listed companies. Of these, the offshore investors pushed down their stake by two percentage points or more or nearly one in three companies.

There were at least 54 mid-cap stocks with current market valuation ranging from Rs 5,000 crore to Rs 20,000 crore where FPIs cut stake during the July-September quarter. This is just marginally lower than 57 mid-cap stocks where they bought additional stake last quarter. Interestingly, FIIs had sold shares of an equal number of companies (54) in the previous quarter ended June 30.

If we compare with the quarter ended June 30, there were many mid-caps that have seen FPIs cut stake for consecutive quarters. These include Thyrocare, Jubilant Ingrevia, Just Dial, Manappuram Finance, Natco Pharma, auto component maker Mahindra CIE, Apollo Tyres, CESC, City Union Bank and Redington.

A sector-wise analysis shows companies where FIIs cut stake in July-September are spread across a wide range of sectors. These are healthcare and pharmaceuticals, financial services, construction, engineering and industrial, logistics, technology and auto ancillaries.

Top mid-caps where FIIs cut stake

Among the largest mid-caps that saw offshore portfolio investors turn bearish during the three months ended September 30, 2021, are hospital chain operator Fortis Healthcare, real estate developer Phoenix Mills, gold loan financier Manappuram Finance, and mid-sized drugmakers Natco, Alembic and Glenmark.

Apollo Tyres, Affle India, Firstsource Solution and Cyient were among the other companies in the list.

FIIs also diluted stake in RBL Bank, City Union Bank, CESC, Amara Raja Batteries, Lux Industries, Route Mobile, Redington, Indiabulls Housing Finance, Laxmi Organic, Jubilant Ingrevia, Mahindra CIE and Zensar Technologies.

A quick look at the basket of companies commanding a market capitalisation of $1 billion or more where FIIs snipped their holding last quarter throws up a few more names.

These include Jubilant Pharmova, Century Textiles, CreditAccess Grameen, KIMS Hospitals, MCX, McDonald’s franchisee Westlife, Allcargo Logisics, Shyam Metalics, P&G Health, Dilip Buildcon, Mastek, Sobha, eClerx, IRB Infra, Kalyan Jewellers, V Mart and Delta Corp.

Mid-caps where FIIs sold 2% or more

Foreign portfolio investors cut their stake by over 2% in 20 mid-cap firms. These included names like Just Dial, Jubilant Ingrevia, Indiabulls Housing Finance, Tejas Networks, Allcargo Logistics, Religare Enterprises, RBL Bank, eClerx Services, Cyient and MCX.

Of these, Just Dial has been acquired by Reliance Industries while Tejas has been bought by Tata Group.

Laxmi Organic, Chalet Hotels, BSE, Greenpanel, Apollo Tyres, Mahindra CIE, Redington (India), Phoenix Mills, Affle (India) and Great Eastern Shipping were the other mid-caps where offshore investors diluted significant stake.

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Should investors take profits off the table in this red-hot stock after a vertical rise? Read to know more!

Should investors take profits off the table in this red-hot stock after a vertical rise? Read to know more!
by 5paisa Research Team 15/11/2021

Historically we have seen whenever the stock’s RSI inches close to the 91-94 mark, it witnesses profit booking.

Olectra Greentech Ltd (OGL), a group company of MEIL is a pioneer in electric bus manufacturing and insulators in India. With this endeavour, OGL has been a part of building Power Transmission and distribution in India.

The stock has registered a fresh 52-week high on Monday and interestingly it is locked at the upper circuit limit at Rs 789.45 on NSE. The stock is on a roll hitting upper circuit limits frequently. The stock did touch the upper circuit on Friday as well today (Monday).

On an MTD basis, the stock is up by over 40%. And if this isn’t enough to excite you, the gains delivered by the stock on a YTD basis would certainly amaze you. The shares of Olectra Greentech Ltd are up by a staggering 481% and in the last one year, the stock price has witnessed over a 10-fold jump in its stock price. It has outperformed not only frontline indices but also the broader market. As a result, the stock has an RS (Relative Strength) rating of 98 which is great indicating the outperformance as compared to other stocks.

The stock from a technical standpoint is comfortably placed above its key moving averages and is up by 54% from its 50-DMA and 167% from the 200-DMA.

Recently, the company announced that it has been awarded an order of 100 electric buses from one of the State Transport Corporations under the FAME-II scheme of the Government of India. This order for the supply of 100 electric buses on a gross cost Contract (GCC)/OPEX model basis (for Inter-City Operations) is for a period of 12 years (Contract Period). The value of this contract is approximately Rs 250 crore.

These e-buses shall be delivered over a period of 10 months. Maintenance of these buses shall also be undertaken by the Olectra during the contract period. With this, the total order book of Olectra for electric buses against the above and earlier orders stands around 1,550 electric buses.

The 14-period RSI on the daily chart has marked a fresh high, which is positive, but its reading stands at 87.63. Historically we have seen whenever the stock’s RSI inches close to the 91-94 mark, it witnesses profit booking. Will the history repeat? Only time would tell.

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IRCTC: Is the stock back on a bullish track?

IRCTC: Is the stock back on a bullish track?
by 5paisa Research Team 15/11/2021

A largecap company and a sector leader, IRCTC has the potential for strong growth and provide good business management.

Indian Railway Catering and Tourism Corporation (IRCTC) is engaged in Catering, Hospitality, and transportation. Their main share of revenue comes from internet ticketing, travel and tourism, and packaged drinking water (Rail Neer). A largecap company with a market cap of Rs 72,844 crore and a sector leader, IRCTC has the potential for strong growth and provide good business management. IRCTC has a PE of 171.83 which is lesser than its sector PE of 295.87 indicating that the price is not trading at a higher premium. The major stake is held by the promoters (67.4 per cent) which includes the Government of India.

IRCTC was in the news for the last couple of weeks due to its stock split and sharp sell-off. After the corporate action, the stock took a deep dive as it witnessed a correction of as much as 50 per cent from its all-time high levels and on the way down the stock breached its 20-DMA. Currently, the stock is trading at the level of Rs 909 and it has reclaimed its key short-term moving average i.e. 20-DMA. The 20-DMA moving average is one of the key moving averages used by short-term traders to gauge the short-term trend of the stock. The stock is trading strongly for a few days accompanied by above-average volumes and interestingly took support at 50-DMA. The RSI is positioned at 56, showing strength in the stock. It is showing a U-shape recovery and is expected to trade strong in the upcoming trading sessions.

On Monday when the stock is up almost 5.5 per cent, the change in futures open interest is up by 3.65 per cent indicating that long positions have been added. On the call side, the highest open interest has been seen at the strike price of 1000. The PCR stands at the very low of 0.47 which indicate that reversal is on cards. The stock looks attractive from a short term perspective and traders must keep an eye on this stock.

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These equity MF schemes saw most outflows in Q2. Do you hold any of these?

by 5paisa Research Team 15/11/2021

India’s mutual fund industry has posted robust growth in the recent past as stock markets bounced back swiftly since the March 2020 crash and as more investors shifted to equities instead of relying only on fixed-income products.

The value of assets managed by the MF industry has increased almost 35% to Rs 37.41 trillion in September 2021 from Rs 27.74 trillion in September 2020, according to latest data from the industry group Association of Mutual Funds in India (AMFI).

Within this, the share of equity-oriented MF schemes has risen to 47.2% of the total industry assets in September 2021 from 40% in September 2020. This indicates an increase in the number of investors in such schemes as also growth in the value of assets held by these schemes.

However, there is a divergence in the MF schemes that have grown their assets under management (AUM) and those with smaller AUMs than before.

Mutual funds launched 32 open-ended and 11 close-ended schemes during July-September. These include 13 equity schemes, 18 debt schemes, six exchange-traded funds (ETFs) and one hybrid scheme. These schemes mobilised a total of Rs 49,283 crore, AMFI data show.

Overall, open-ended equity schemes recorded total redemption of almost Rs 72,500 crore during the second quarter as investors sought to take some profit in the wake of the stock market’s relentless rise. This was up from Rs 55,113 crore in the April-June period.

The flexi-cap, large-cap, mid-cap, small-cap and thematic fund categories recorded strong outflows, but also received fresh inflows in huge quantities. Two categories—Value and contra funds, and tax-saving—recorded net outflows to the tune of Rs 1,193 crore and Rs 2,162 crore, respectively.

A closer look at the data shows the schemes that recorded the highest outflows. Here are those schemes:

Large cap

The total assets in this category rose to Rs 2.18 lakh crore as of September 30, 2021, from about Rs 1.95 lakh crore three months before, AMFI data show. This segment accounts for nearly 17% of the open-ended equity fund assets.

The funds that recorded the most outflows were HDFC Top 100 Fund (Rs 666 crore). It was followed by Aditya Birla Sunlife Frontline Equity (Rs 649 crore) and ICICI Prudential Bluechip Fund (Rs 613 crore).

These funds had also recorded the highest outflows in the previous two quarters as well.

Flexi cap

This is the second-largest segment among open-ended equity funds, barring ETFs. The total assets in this category rose to Rs 2.15 lakh crore as of September 30, 2021, from about Rs 1.76 lakh crore three months before.

The scheme that recorded the most net outflow was HDFC Flexi Cap Fund, which lost Rs 1,380 crore.

Kotak Flexi Cap and Motilal Oswal Flexi Cap were the other key laggards, losing Rs 1,001 crore and Rs 747 crore, respectively, during the second quarter, according to Morningstar data.

Mid Cap

The total AUM of mid-cap schemes climbed to Rs 1.53 lakh crore as of September 2021 from Rs 1.35 lakh crore at the end of June. This is 12% of the open-ended equity MFs.

HDFC MF was the laggard in this category, too. The HDFC Midcap Opportunities Fund recorded net outflows of Rs 734 crore.

This was followed by Franklin India Prima Fund, which lost Rs 387 crore, and L&T Midcap Fund, which lost Rs 300 crore, as per Morningstar data.

Small Cap

The total AUM of this category increased to Rs 98,014 crore at the end of September 2021 from Rs 85,957 crore three months before. Small caps form 8% of total open-end equity assets.

During the three months through September, Franklin India Smaller Companies Fund recorded the highest net outflows at Rs 461 crore. It was followed by HDFC Small Cap Fund with Rs 444 crore and L&T Emerging Business Fund with Rs 255 crore from their baskets.

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How to compute sufficient and adequate Life Insurance?

How to compute sufficient and adequate Life Insurance?
by 5paisa Research Team 15/11/2021

Insurance planning is the most important section of financial planning. An individual should possess sufficient and adequate insurance in order to protect against any uncertain events.

We live in a world full of uncertainties, surrounded by risks right from morning till we go to bed at night. So, as much as it's essential to save money for a future livelihood it is equally important to protect such savings that they don’t get used up due to uncertain mishaps.

How do we protect against such risks? The answer to this question is insurance. Insurance is the means through which an individual can protect himself and his family against any unfortunate event and offer financial assistance during such situations. Insurance planning is the most important section of financial planning. There are a variety of insurance policies available covering different types of risks such as Life insurance, Health Insurance, Motor vehicle insurance, Liability insurance, Renter’s insurance, etc.

Life insurance is designed primarily to protect the dependents or beneficiaries in case of the insured’s unexpected death. Ideally, life insurance should be bought by individuals who have dependents or he is the sole breadwinner of the family. Through life insurance, the beneficiaries will have the financial resources to protect their future income and pay for immediate and future financial obligations.

Purchasing adequate insurance cover is very important; underinsurance, as well as over-insurance both, can be risky. Underinsurance can lead to great financial stress in case of unfortunate events. On the contrary, over-insurance can lead to higher monthly premiums, which may hamper your current finances. With this, we come to know the importance of purchasing sufficient and adequate insurance cover, which won’t cause financial stress and support in hard times.

There are two popular ways of estimating insurance cover:
 

  1. Needs-Based Approach 

  1. Human Life Value Approach
     

For instance,

Mr and Mrs Yadav aged 34 and 30 years have a life expectancy of another 45 years. Their data depicts the following information:

• Mr Yadav is the sole breadwinner of the family and has no children.

  • Current investments have a market value of Rs 20 lakh.

  • Annual expenses of Rs 2.5 lakh (including Rs 50,000 of Mr Yadav's personal expenses)

  • Mr Yadav’s income post-tax is Rs 6 lakh. He will retire at the age of 60.

  • The inflation rate of 6% per annum, salary growth is 4% and returns on investment are 8% p.a.
     

Let’s see what insurance cover Mr Yadav will require using both the abovementioned methods
 

  1. Needs Approach:

Annual expenses = Rs 2.5 lakh 

Less: Mr Yadav’s expenses (as after the death of Mr Yadav, these expenses won’t be required and so, it will get deducted) 

Net annual expenses = Rs 2 lakh (Rs 2.5 lakh - Rs 50 thousand) Mrs Yadav will require in case Mr Yadav dies.

Inflation rate = 6% p.a.

Investment rate = 8% p.a.

Real rate of return = 1.887%

Life expectancy of Mrs Yadav = 45 years (Mrs Yadav will require annual expenses for 40 years in case Mr Yadav dies).

The current investment that they already possess = Rs 20 lakh (will deduct this amount as insurance is needed are in excess of investment).

Therefore, life cover required = Rs 41,42,630.12. 

  

2. Human Life Value Approach 

The post-tax annual income of Mr Yadav = Rs 6 lakh (Mrs Yadav will require income replacement of Rs 6 lakh, which will be growing by the salary growth rate in case Mr Yadav dies). 

Salary growth rate = 4% p.a.  

Investment rate = 8% p.a.  

Real rate of return = 3.774% p.a.  

The current investment that they already possess = Rs 20 lakh (will deduct this amount as insurance is needed in excess of investment). 

Therefore, life cover required = Rs 90,68,484.12  

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