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Exploring new horizons-Kotak Mahindra Bank

20/10/2021

Kotak Mahindra Bank-An Overview 
Kotak Mahindra Bank (KMB) is one of India's leading banking and financial services group, offering a wide range of financial services.KMB has transformed from an NBFC (non-banking financial company) into one of the fastest-growing banks in India after obtaining a banking license in 2003. The bank offers personal finance solutions from savings accounts to credit cards, distribution of mutual funds to life insurance products. Kotak Mahindra Bank offers transaction banking, operates lending verticals, manages IPOs, and provides working capital loans. Kotak has one of the largest and most respected Wealth Management teams in India, providing the widest range of solutions to high-net-worth individuals, entrepreneurs, business families, and working professionals. Over the years, it has entered various financial service businesses, such as securities, investment banking, life insurance, asset management, and retail banking, and it has become a leading player in domestic capital markets. 

Recent updates from the company shows that the growth appetite improved a bit in retail & SME, the large corporate lending still not big focus despite bank's low funding cost,bank is open to new opportunities, prefering credit cards, gold, & MFI loans,succession will offer scope to reorg. teams & look at fresh talent — our base case is internal elevation for CEO. Growth uptick & succession will be key to stock returns.
Bank has scaled up liability franchise well with Casa ratio of 60% but it has been conservative about growing the large corporate book due to predicted lower yields. Limited changes are found to that outlook, and even if book starts to grow from here, it may lag the retail piece. Recently, Kotak group acquired a small vehicle financing arm of Volkswagen India that gave them Rs13bn of loans (0.5% of consolidated loans) and 30k customers. Management is open to new opportunities in new areas such like credit cards, gold financing and MFI Kotak intends to acquire Citibank's India credit card business which would provide more contributions to loans.

So the quality of cross-sell to these customers will be key to value creation, with 
valuation estimated at US$2.5-3bn.As the Bank prepares for succession after retirement of Mr. Uday Kotak (Promoter and CEO) and Mr. Dipak Gupta (Jt. MD) in Dec-23, it is taking a holistic view about it. Mr. Kotak might return as non-executive director for a reasonable term (up to 8yrs) to guide the bank. Bank seems to be open to choices from inside and outside the bank and to make required changes in the team. 
There will be preference to recruit fresh talent from tech-domains. Mr. Manian (Group President, Corp & Investment banking)launched bank's consumer franchise &. Mr Shah (Group President in charge of key subsidiaries) are likely key contenders.So far, among large private banks, only Axis Bank has appointed CEOs from outside.While there is time for succession planning, pickup in growth and clarity on plans will be key to valuation re-rating. 

Parameters to kickstart investing in Kotak
The bank owned a total assests of Rs.3602517mn in FY20 which grew upto Rs.3834886 mn.Net profit increase from Rs.59472mn in FY20 to Rs.69649mn in FY21.P/E ratio is 43.Earning Per Share grew from 31 to 35 from FY20 to FY21.Like al other banks, Kotak also faced challenged due to COVID-19.But the effect is comparatively lower.

 

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Anticipation of golden days drives IDBI 51% in a month.

Anticipation of golden days drives IDBI 51% in a month!.
by 5paisa Research Team 20/10/2021

Quarter and half-yearly results amidst divestment plans by GOI and LIC creating a buzz for IDBI Bank.

Financial Results of the Bank for the quarter and half year ended September 30, 2021, to be declared tomorrow (21/10/2021).

FY 2021 marked the rejuvenation of the lender, who came out of the Prompt Corrective Action “PCA” imposed by RBI in 2017 on account of high non-performing assets and a negative return on assets.

For the first time in five years (2016-2020), the bank reported a Net Profit of Rs 1359 crore after a string of net losses. The bank turned around on all parameters largely due to a more efficient product mix with a tilt towards Retail Advances (62%) against corporate advances (38%) and high recoveries.

The lender has shown its resilience to improved efficiencies, signalling that the worst is over and is well behind.

The net NPA percentage for the last reported quarter (ended on 30th June 2021) was at 1.67 as compared to 1.97 (for quarter and year ended on 31st Mar 2021). Capital Adequacy Ratio percentage (Basel III) also showed improvement at 16.23 against 15.59 for the periods under review. Return on Assets per cent wise (Annualised) stood at 0.83 against 0.46 for the above periods respectively.

With the economy reviving, improved operating environment and declining credit costs are expected to drive the Q2 performance of the bank with improved profitability and capital.

The stock has seen a jump of 51.56% in the last one month from the levels of Rs 36.95 apiece to Rs 56.

The bull rally in the bank was largely on account of divestment plans of GOI and LIC  in expectations of value unlocking for the shareholders.

Jointly Government of India and Life Insurance Corporation of India holds 94.71% bifurcated into GOI (45.48%) and LIC (47.24%) respectively.

At the current market capitalization of the bank, the divestment could result in the realization of Rs 28000 crore for the Government of India for selling its entire stake of 45.48% in the bank.

Life Insurance Corporation of India (LIC), which owns 49.24%, will also offload its stake to transfer the management control to the new buyer. The extent of stake dilution by both the government and the insurer will be decided in consultation with the RBI. The transaction adviser( KPMG India) is expected to  finalize the deal structure of the sale as the government targets floating the Expression of Interest ( EoI ) in December 2021. The potential buyer will have to infuse funds, bring in new technology, and implement best management practices for the growth of IDBI Bank. It will have to generate more business for the lender without being dependent on LIC or the government for funds.

Key takeaways

  1. The improved performance by IDBI is driven by the lifting of PCA which gives impetus to its expansion plans.

  1. Forthcoming divestment by GOV & LIC leading to value unlocking and opportunity to shift the bad assets to NARCL and vetting potential buyers with a cleaner balance sheet at a higher valuation.

  1. The transfer of management by LIC may lead the bank to newer heights in terms of performance and growth.

All these factors do vouch for the further potential for upside in the stock which the near future may unfold.

The stock of IDBI Bank was trading at Rs 55.90 at 12.43 pm today.

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Paras Defence hits upper circuit, rockets to all-time high!

Paras Defence hits upper circuit, rockets to all-time high!
by 5paisa Research Team 20/10/2021

Issued at 175 per share, Paras defence and space technology delivered listing gains of 185%.

The stock of Paras defence and space technology which was listed on 1st October 2021, at Rs 498.75 per share on BSE, hit its upper circuit and reached an all-time trading high of Rs 1003 today. This was a result of stock’s transfer from T-group to rolling segment, which came into effect from 18th October.

Paras defence and space technology Ltd (PDSTL) is engaged in the provision of products and solutions for Defence and Space Applications. It is involved in five business verticals, which are defence and space optics, defence electronics, heavy engineering, electromagnetic pulse protection solutions and niche technologies.

As a leading ‘Indigenously Designed Developed and Manufactured’ (IDDM) company, PSTD’s marquee clients include ISRO, DRDO, Bharat Electronics, Bharat Dynamics Ltd, Rafael Advanced Defense Systems, Israel Aerospace Industries and Hindustan Aeronautics Limited to name a few.

With the ever-increasing security threats, the Government of India, in its ‘Atma Nirbhar Bharat’ initiative, has identified the defence industry as one of its key focus areas. In the 2021-22 budget, it allocated Rs 4,78,196 crore to its defence expenditure. Owing to the rising demand in the sector, the Government of India has called for increased participation of the private sector.

PTSDL, with over four decades of experience and strong relationships with the government, is set to benefit from this development. With successful partnerships with leading national and international space and defence companies, the company has positioned itself for long term growth. It has a sharp focus on improving its product portfolio, enhancing its existing capabilities and developing its strategic position in the United States and Europe, where it sees good growth prospects across various product segments.

In FY21, the company's revenue stood at Rs 143.33 crore. Its EBITDA came in at Rs 43.4 crore and the net profit was reported at Rs 15.79 crore.

On Monday, 18th October, the company via its press release on the stock exchanges, informed that its Board of Directors have given a go-ahead for the incorporation of an Associate Company in association with Krasny Defence Technologies, which is the country’s first three-dimensional service enterprise that provides technical maintenance and logistic support for the state-of-the-art equipment/systems of the Indian Defence Forces that comprise navy, coast guard, army and air force. The proposed associate company shall be named either Paras Krasny Defence Technologies or Krasny Paras Defence Technologies or such other name which the Central Registration Centre (CRC) of the Ministry of Corporate Affairs will approve. It shall be engaged in the field of maintenance, servicing and repairs of defence equipment and naval vessels.

At 1.17 pm, the share price of Paras Defence and Space Technology Ltd was trading at Rs 1003, as against the previous day’s trading price of Rs 911.85, hitting an upper circuit of 10% on BSE.

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Domino’s Pizza franchisee Jubilant FoodWorks Q2 profit up 58% but stock tanks

by 5paisa Research Team 20/10/2021

Jubilant FoodWorks Ltd, the Indian franchisee of pizza chain Domino’s and the most valued restaurant chain in the country, came up with strong earnings as well as revenue growth numbers for the second quarter but still saw investors dump its shares on Wednesday.

The company’s stock price crashed 8.6% and was quoting at Rs 3,962.5 apiece just before market close on the BSE after results were declared.

Jubilant FoodWorks reported a consolidated net profit of Rs 119.8 crore for the three months ended September 30. This is up 58% than a year earlier and 73% higher on a sequential basis.

Consolidated revenue shot up 36.7% to Rs 1,116.2 crore from Rs 816.3 crore in the same period last year. On a sequential basis, revenue rose 25%.

Jubilant FoodWorks: Other key highlights

1) EBITDA margin in Q2 declined to 25.8% from 26.5% in the second quarter of last year.

2) Margin shrank due to 40% increase in cost of raw materials and 51% jump in manufacturing expenses.

3) Same-store sales growth (SSSG) was 26.3% in Q2. This compares with a 20% decline in the same quarter last year but probably wasn’t enough for the investors.

4) Jubilant opened a record number of new stores—60—during the quarter.

5) The company opened 55 stores of Domino’s, two stores each for Dunkin’ Donuts and Hong’s Kitchen, and one store of Ekdum.

6) Sri Lanka and Bangladesh registered sales growth of 88.4% and 33.2%, respectively.

7) In Sri Lanka, the company achieved record sales. It opened three new Domino’s stores, taking the total to 31.

Jubilant FoodWorks management commentary

Jubilant chairman Shyam S. Bhartia and co-chairman Hari S. Bhartia said that the second quarter saw a strong all-round performance with revenue, profitability and store growth numbers hitting record highs.

“The new investments announced during the quarter will help steer the company towards its goal of becoming a multi-brand, multi-country business driven by technology and will create significant value for all stakeholders,” they said.

Pratik Pota, CEO at Jubilant Foodworks, said that the company delivered a robust top-line growth, strong EBITDA margins and record new store openings notwithstanding the operating challenges and inflationary headwinds.

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Jio stake and value unlocking makes Mukesh Ambani the richest businessman in Asia.

Jio stake and value unlocking makes Mukesh Ambani the richest businessman in Asia.
by 5paisa Research Team 20/10/2021

On average, daily wealth creation velocity since 2020 is Rs 163 crore which made him around Rs 60,000 crore in the last year, a rise of 9%.

Mukesh Ambani continues to be the richest man in India for the 10th consecutive year with a wealth of Rs 7,18,000 crore. On average, his daily wealth creation velocity since 2020 is Rs 163 crore which made him around Rs 60,000 crore in the last year, a rise of 9%.

Majority of his wealth is driven by Reliance Industries, Ambani’s family have about 50% shareholding in the company. Reliance Industries became the first Indian company to cross the USD 200 billion (Rs 15 lakh crore) market cap driven by retail and telecom operations. The share price has increased from Rs 1,987 to Rs 2,698 in 2021 which is 35% up YTD.

Turnaround in Reliance Industries business.

Till 2016, the company has been sticking with a traditional oil refinery, petrochemical business, and retail to some extent. Looking at the smartphone usage and requirement of mobile data, Ambani re-entered the telecom business, he provided data, unlimited calls at a much cheaper rate. Within a launch year, Jio got five crore subscribers, and now they have the largest market share in terms of subscribers.

Ambani was able to understand the telecom market potential much earlier. In 2010, he bought a 96% stake in Infotel who was the successful bidder in all 22 circles of the auction for broadband wireless access.

With this turnaround in the business, the company can make collaboration with big tech giants like Facebook. Ambani outlined JioMart which is Jio’s new digital commerce platform and WhatsApp together will enable about three crore small Indian grocery stores to do digital transactions. These shopkeepers will be able to do digital transactions with their customers. This means that you will be able to order and deliver daily items from all the local shops.

Within 5 years, his wealth has grown five times. In the 2016 Forbes list, his net worth was Rs 1,45,000 crore and now it is 7,18,000 crore. His plans are focused on transforming its legacy power business with a push into green energy, committing more than USD 10 billion over three years.

From time-to-time business keeps on changing, but his leadership on the wealthy list remains the same!

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Trending stocks: Keep a close eye on these small-cap stocks for 21 October 2021.

Trending stocks: Keep a close eye on these small-cap stocks for 21 October 2021.
by 5paisa Research Team 20/10/2021

Nifty Bank index ended the session on a flat note, marginally down by 0.06%. Metal stocks witnessed selling pressure and lost shine.

Frontline indices Nifty 50 and Sensex on Wednesday, ended in the red territory down by more than 0.70% each. Nifty Bank index ended the session on a flat note, marginally down by 0.06%. Metal stocks witnessed selling pressure and lost shine. BSE Small-cap index closed at 28,878.73 recording losses of 2.31%.

Keep a close eye on these trending small-cap stocks for Thursday, 21 October 2021:

Tata Teleservices (Maharashtra) – The company has recently announced the launch of ‘Smart Internet’, the industry’s first smart internet leased- single suite combining high-speed internet with cloud-based security and greater control at an optimized cost. Due to the increased frequency and sophistication of cyber-attacks like phishing, ransomware among others, network manageability and visibility has always been a concern that has rendered many businesses unproductive with a profound impact on their financials, reputation, and sustainability. Smart Internet helps overcome all these challenges.

It is clear that as businesses are rapidly digitalizing, they are becoming an easy target for cyber-attacks. They need to invest in reliable security solutions to safeguard their vital digital infrastructure. Security, ultra-fast and reliable connectivity, visibility and manageability are the key attributes of the Smart Internet solution. 

BL Kashyap and Sons – The company has announced that it has been awarded a new project for civil work of commercial space at Gurugram worth Rs 62.15 crore. Their order book during FY 2021-22 stands at Rs 756.02 crore. As the industry continues to get back on its feet, BL Kashyap and Sons Limited looks forward to building more structures that will add more value by defining technological innovations and implementing contemporary construction methods.

With specialization in integrated Engineering, Procurement and Construction (EPC) services for civil construction and infrastructure sector projects, the company has become synonymous with innovation, quality and timeline delivery over the years.

52-week High Stocks - The following small-cap stocks have made fresh 52-week high today – Jyoti Structures, Monte Carlo Fashions, Archidply Décor, TCNS Clothing, Pokarna Limited and Sasken Technologies. Keep a close eye on these counters on Thursday, 21 October 2021.

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