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All you want to know about Vedanta’s plan to restructure, demerge key businesses

by 5paisa Research Team 18/11/2021

Mining and energy conglomerate Vedanta Ltd could soon list its three main arms—the oil and gas division, aluminium division and steel division—after it has carved them out as separate entities. 

This move, Vedanta said, will help unlock value and simplify the group structure. 

“Considering the scale, nature, and potential opportunities for various business verticals of the company, it should undertake a comprehensive review of the corporate structure and evaluate a full range of options and alternatives (including demergers, spin-offs, strategic partnerships, etc.,) for unlocking value and simplification of corporate structure,” the company said.

What has Vedanta done about its proposed plan so far?

The company has appointed a committee of directors to look into the proposed demerger of businesses and a separate listing of each one of them, it said in a stock exchange filing. 

What did Vedanta’s promoter Anil Agarwal say about the proposed move?

Agarwal told the Press Trust of India that following the restructuring of the group, the three businesses carved out of the company will operate parallelly. 

“All the three businesses have great potential for growth, and we think the model being evaluated will provide natural avenues for growth as well as enhance shareholder value,” he said.

“Over the past few years, the group has materially improved the operational performance of the businesses, increased cash flows, reduced debt whilst concomitantly focusing on accelerating investments in energy transition, health and safety, diversity and ESG (environmental, social, and governance) in general,” Agarwal said. 

Agarwal added that the move was intended to create independent, industry-leading, global public companies, where each can benefit from greater focus, tailored capital allocation, and strategic flexibility to drive long-term growth and value for customers, investors, and employees.

But isn’t this a U-turn of sorts? Wasn’t Vedanta looking to delist from the exchanges?

Yes, this is indeed a U-turn of sorts. In October last year, Vedanta’s promoter family led by Agarwal wanted to take the listed group company private. But the plan failed as non-promoter shareholders did not tender the requisite shares needed to let the company delist from the Indian exchanges. 

So, why did Agarwal want to take Vedanta private in the first place?

Vedanta’s promoter family wanted to take the company private as doing so would have allowed them to use its surplus cash and its dividends to cut the debt of the holding company. 

What do analysts have to say about the proposed move?

Analysts seem to be buying into Agarwal’s idea. Deven Choksey, managing director, KR Choksey Shares and Securities Ltd, told the Mint newspaper that since Vedanta is an integrated player, with both ferrous and non-ferrous businesses, it made sense to separate the businesses to unlock value.

“Currently, high metals and commodity prices are not getting reflected in the company’s business largely due to the integrated manufacturing they are doing,” he added. 

How did the Vedanta counter perform on Thursday?

The share market, however, appears not to have taken too kindly to the news as the counter was down 8.5% at close of trade on Thursday.

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What is the difference between Flexi-cap funds and Multi-cap funds?

What is the difference between Flexi-cap funds and Multi-cap funds?
by 5paisa Research Team 18/11/2021

Various schemes offer diversification within equity markets, out of which, we are going to focus on Flexi-cap funds in this article.

Presently, people are getting aware of the fact that investing is an essential aspect of every individual life. As for investing aid, you create a fund to fulfil various life goals. While formulating one’s portfolio he/she should make sure that diversification is the key aspect to receive optimal benefits.

Flexi-cap funds are equity-oriented mutual funds, which invest in stocks of the companies across the different market capitalisation such as large-cap, mid-cap, and small-cap. Flexi-cap funds allow investors to diversify their portfolio across sectors as well as market capitalisation, which mitigates risk as compared to small-cap funds and mid-cap funds. Fund managers assess the growth potential of companies, irrespective of their sizes, and invest the corpus of investors in the same, unlike small-cap funds, mid-cap funds, and large-cap funds, which are focussed on the company’s market capitalisation. Fund managers can shift between different sectors and companies, as & when required. If in case, any particular sector or market cap category such as large-cap isn’t doing well while mid-cap is expected to do better going forward, then fund managers will adjust their portfolio accordingly to capture the future growth.

Flexi-cap funds are quite similar to multi-cap funds in the way they invest across the market capitalisation but differ in the proportion of funds invested in each of the market capitalisations. In the case of multi-cap funds, SEBI has mandated a minimum of 75% of the total assets towards equity and equity-related instruments and a minimum of 25% of allocation towards small-cap and mid-cap stocks each. On the other hand, Flexi-cap funds have to put 65% of the total assets towards equity and equity-related instruments and there is no pre-defined proportion to invest in small-cap, mid-cap, or large-cap stocks. Due to this benefit in Flexi-cap funds, many AMCs recategorised the multi-cap funds to Flexi-cap funds.

Who should consider investing these funds?

  • Investors, who are ready to invest their money for at least 5 years, should consider investing in these funds.

  • Flexi-cap funds come under the high-risk category; so, investors should assess their risk appetite, needs and goals and then decide to invest.

  • Ideally, investors willing to diversify their portfolios across various sectors and market capitalisation to earn an optimal return should invest in these funds.

The following table depicts one-year return returns of the top five funds offering Flexi-cap funds based on AUMs: 

Fund Name  

1-Year Return (%)  

AUM (in crores)  

PGIM India Flexi Cap Fund  

66.70  

2,957.48  

BOI AXA Flexi Cap Fund  

62.09  

162.23  

Franklin India Flexi Cap Fund  

59.08  

10,612.25  

Parag Parikh Flexi Cap Fund  

57.54  

18,495.88  

HDFC Flexi Cap Fund  

57.50  

27,563.63  

 

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F&O Cues: Key support & resistance levels for Nifty 50

F&O Cues: Key support & resistance levels for Nifty 50
by 5paisa Research Team 18/11/2021

Today the Nifty F&O action for November 25 expiry shows strong resistance at 18,000.

Today Indian equity market hit a hattrick in terms of closing in the red. The frontline equity indices traded in the green for the first 30 minutes, however, soon it lost ground and traded in red for the entire day. Selling was intensified in last half an hour. Doctor Copper is currently trading at a five-month low, which is casting doubt on global economic growth going ahead and in turn, is weighing on the equity market.

Activity in the F&O market for the weekly expiry on November 25, 2021, shows that resistance has come down to 18,000. The highest call option open interest (115637) for Nifty 50 stood at a strike price of 18,000. In terms of the highest addition of open interest in the call options front, it was at 18,000 in the last trading session. A total of 71,758 open interest was added at this strike price. The next highest call option open interest stands at 18,500 where total open interest stood at 81,959.

In terms of put activity, the highest put writing was seen at a strike price of 17,300 (23,132 open interest added on November 18), followed by 17,000 (20,049 open interest added on November 18). The highest put open interest unwinding was seen at a strike price of 18,000 (5911 open interest shed on November 18).

Highest total put open interest (61,284) stood at a strike price of 17,500. This is followed by a strike price of 17,400, which saw a total put option open interest of 57,890 contracts.

Following table shows the difference between call and put options at strike price near to max pain of 17800.

Strike Price  

Open Interest (Call option)  

Open Interest (Put option)  

Diff(Put – Call)  

17,500.00  

11768  

61284  

49516  

17,600.00  

4523  

36933  

32410  

17,700.00  

19205  

40078  

20873  

17800  

52376  

49392  

-2984  

17,900.00  

70189  

25520  

-44669  

18,000.00  

115637  

34048  

-81589  

18,100.00  

59462  

12299  

-47163  

  

The Nifty 50 put call ratio (PCR) closed at 0.68 compared to 0.56  in the previous trading session. A PCR above 1 is considered bullish while a PCR below 1 is considered bearish. 

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Azim Premji-associated market funds add two portfolio firms, exit one

by 5paisa Research Team 18/11/2021

Private funds that invest on behalf of Wipro founder chairman Azim Premji picked up stakes in two new portfolio companies and likely exited one company during the three months ended September 30, 2021.

The investment entities bet on engineering firm CG Power & Industrial Solutions Ltd and luggage goods maker VIP Industries, buying a stake of 1.25% and 1.66%, respectively, as per shareholding disclosures for the quarter.

At the same time, the funds trimmed their holding or likely exited their investment in Kolkata-based FMCG company Emami. The funds also sold shares of farm machinery and tractor maker Escorts, Tata Group’s retail arm Trent and Murugappa Group’s engineering firm Tube Investments, which makes bicycles and other products.

Within this pack, the funds are believed to have fully exited Emami and snipped their stake in the other companies.

Companies need to disclose public shareholders name with or over 1% stake in listed companies. Premji’s investment funds do not figure among the list of Emami’s significant shareholders.

In the previous quarter ended June 30, the funds had trimmed their holding in three companies—Emami, Trent and Zydus Wellness while apparently exiting Narayana Hrudayalaya.

Interestingly, the fund had bet on tractor maker Escorts just the previous quarter. Escorts signed a big deal on Thursday with Japan’s Kubota, which is increasing its stake in the company. This pushed the stock higher.

A Premji-associated fund had also picked multiplex operator Inox Leisure in the previous quarter. It upped its stake marginally in the last quarter, too.

In Zydus, where it is invested via two entities, it trimmed stake of one and raised exposure via the other, something it did the previous quarter as well.

On the flip side, its holding rose marginally in Tube Investments during the previous quarter but declined more recently. It had also topped up its exposure to Craftsman Automation last quarter, same as previous quarter, showing it is bullish on the auto component maker.

Factoring out the investment entities’ stake in group flagship Wipro, the funds own a stake worth at least Rs 2,490 crore currently, based on the shareholding data as of September 30. The actual figure is expected to be higher as they may also be owning a small stake in several companies that may not be in the public domain as listed firms do not separately disclose name of shareholders if they hold less than 1%.

PremjiInvest manages both private investment and public market funds for Premji. It is one of the larger professionally managed family offices active in the stock market. It has a portfolio of at least ten third-party companies. Some other companies in its portfolio include Future Lifestyle Fashions and Future Retail.

Companies whose shares it had sold in the past include dairy company Parag Milk Foods, Tata group’s engineering and white goods company Voltas, private-sector lender DCB Bank and JK Lakshmi Cement.

It is also an active investor in private companies with exposure to both startups as well as mature companies.

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L&T Technology is trending for its high returns in last year

L&T Technology is trending for its high returns in last year
by 5paisa Research Team 19/11/2021

The company has won deals with NVIDIA and Mavenir

This technology arm of L&T Limited has been trending for its bullish trend barring only the previous trading session. The stock is up by 9% in the last five trading sessions. This buzzing stock has been a multibagger in just the last six months. The stock was trading at Rs 2,642 on May 18 from where the stock has rallied to Rs 5,676.5 as of November 18, generating a huge return of over 114%. When considering returns for the year-to-date, the stock has appreciated by 235%.

In short, you would have had a multibagger in your bag had you purchased this stock one year ago or even six months ago. 

The stock was buzzing since it was chosen by NVIDIA and Mavenir as engineering partners to accelerate the adoption of the industry's first converged AI-on-5G platform. Artificial Intelligence has been revolutionizing industries through advanced technology and automation. Combining it with 5G takes technology processes to the next level. The management said, “selecting L&T Technology Services as an engineering partner will enable the technology to reach organizations on a global level and unleash the endless possibilities provided by 5G.”

As far as the financial health of the company is considered, the recently disclosed quarterly financial results witnessed decent growth. The net sales for the quarter ended September stood at Rs 1608 crore which grew by 5.88% sequentially and 22.4% on a YoY basis (same quarter last year). The profitability too improved by almost 39% on a YoY basis to reach Rs 230.8 crore, up by 6.36% when compared to the previous quarter.

L&T Technology Services Ltd is primarily engaged in engineering and R&D services. The company offers consultancy, design, development and testing services across the product and process development life cycle. The stock has a 52-week high of Rs 5819.2 which was created in the recent bull rally and has a 52-week low of Rs 1645.00.

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Trending IPO listings: Sapphire Foods makes a modest debut

The stock price closed at a 3% premium to its issue price
by 5paisa Research Team 19/11/2021

The stock price closed at a 3% premium to its issue price

This franchise operator for YUM’s, Sapphire Foods Ltd, got listed on the exchanges on 18 November 2021. As we are all aware, apart from Diwali, investors have celebrated the IPO festival. The markets witnessed some firecrackers such as Nykaa bursting with listing gains, and some heavy firecrackers that didn’t light up at all to the expectations of investors - a prime example being Paytm.

Sapphire Foods, however, had a modest opening. The stock had a decent opening with a 15% premium at Rs 1360.75 on the BSE and Rs 1368 on the NSE. At the end of the day, the stock price closed at Rs 1216.05, down by 7.24% from its opening price and up by 3% from its issue price.

The company had a decent response from the public for subscription as the stock was subscribed 6.62x on the final day of bidding. The company had come out with its initial public offering (IPO) of equity shares of the face value of Rs 10 per equity share. The maiden offer comprised an offer for sale of shares worth Rs 2,073.25 crore by the promoters. The upper price band of the issue was fixed at Rs 1180 per equity share.

Sapphire Foods India is YUM brand's largest franchise operator in the Indian subcontinent in terms of revenue as of FY'20 operating KFC, Pizza Hut and Taco Bell restaurants. It is also Sri Lanka's largest international QSR chain in terms of revenue for FY' 2021 and the number of restaurants operated as of March 31, 2021.

The company is in the expansion phase and so the profitability has been deprived of the income statement. It has been suffering net losses for the past years. Although the top line of the company has been on a downtrend, part of the reason was the pandemic. It would be crucial to see how the QSR chain performs as a listed company.

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