India July car, tractor sales race past pre-Covid levels, two-wheelers lag
India’s automobile sales staged a smart recovery in July, thanks to Covid-19 unlock measures by state governments and a low base effect.
Total vehicle sales jumped 34% to 1.55 million units for July 2021 from 1.16 million units a year earlier, as per data released by the industry body Federation of Automobile Dealers Associations (FADA).
However, sales were still 13% lower than the 1.79 million units sold in July 2019, before the onset of the pandemic.
On the plus side, sales of tractors and passenger vehicles have risen above pre-Covid levels. Tractor sales in July 2021 were 48% higher from the level two years ago while passenger vehicles, which include cars and sport-utility vehicles, grew 24%. Two-wheeler sales remained below the levels seen in July 2019.
“With entire country now open, July continues to see robust recovery in auto retails as demand across all categories remains high. The low base effect also continues to play its part. Auto retails have now started narrowing the deficit when compared to pre-Covid months,” said FADA president Vinkesh Gulati.
The medium- and heavy commercial vehicles segment recorded the highest year-on-year increase in sales on expectations the launch of various infrastructure projects may push demand for buses and trucks higher.
Other highlights for July
1. Sales of heavy commercial vehicles such as trucks and buses surged nine-and-a-half times to 11,307 units.
2. Sales of medium commercial vehicles jumped almost eight times to 2,888 units.
3. Tractor sales inched up 6.64% from a year earlier to 82,388 units.
4. Passenger vehicle inventory was 30-35 days at the end of July while two-wheeler inventory was 20-25 days.
FADA said prediction of a normal monsoon during August and September may boost sowing. This, in turn, may have a rub-off effect on rural sales, especially the tractor segment.
However, it warned that the highly contagious Delta variant of the coronavirus and a possibility of the third wave remain a threat and may disrupt the sales volume in coming months.
Global semiconductor shortage is also turning into a deep-routed problem for the passenger vehicle segment, FADA said.
Investing in International Mutual Fund Schemes? Check Out Their Favourite Stocks!
Indian stock market indices are trading at an all-time high and analysts have been apprehensive about how much steam is still left given the tepid recovery in the domestic economy. One way for local investors to diversify risk is to look to spread the bets with some allocation to foreign companies. One of the routes of doing so is via international mutual fund schemes.
While some fund managers handling flexi-cap (previously multi-cap) schemes have benefited from selectively making offshore investments, a more direct hedge for investors looking to derisk their exposure in India is to pick funds that solely invest overseas.
Fund of Fund or Active Mutual Funds – Which Has Done Better?
There are two typical sets of such mutual funds with one group largely tracking a foreign index as an exchange-traded find (ETF) or basically act as a fund of funds. Interestingly, these funds appear on top of the table if one stacks all international funds based on their three- and five-year returns.
Top 4 International Mutual Fund Schemes
Of the five international mutual fund schemes that have consistently generated at least 20% returns over a long period, four are those that track some index or invest in an underlying international fund acting as a feeder.
These four are Motilal Oswal Nasdaq 100 ETF, Franklin Feeder Franklin US Opportunities, PGIM India Global Equity Opportunities and Edelweiss Greater China Equity Offshore.
What is interesting is that while two of these four (PGIM and Edelweiss) follow a passive strategy, their expense ratios—or the fees they charge annually for managing the money—is on a par with active fund managers and in the 1-1.5% range. In comparison, typical management fees for passive international funds are in the 0.5-0.7% range.
Meanwhile, the sole outsider in this top-performing group is Nippon India US Equity. The only other international mutual fund that also scored 20%-plus returns in the last three years but marginally fell out from the club over the five-year time horizon is ICICI Prudential US Bluechip Equity.
Sectors, Stocks Where Active Funds Have Bet
Both the funds have the same five sectors topping the list: technology, services, healthcare, financials and FMCG. The only key difference is that Nippon has been overweight on services and healthcare compared to its peers. It has been underweight on FMCG and slightly less bullish in its portfolio construct on technology and financials.
On the other hand, ICICI Prudential US Bluechip has been overweight on healthcare and slightly more bullish on tech and FMCG sectors. It is underweight on financials and services stacks.
Notably, both these top performers have been underweight on consumer durables, which otherwise is among the key sectors for other international fund managers from India.
The common stocks that both these funds own are Alphabet Inc, Microsoft, Facebook and Amazon. These stocks also find a place in the portfolio of Parag Parikh’s flexi cap fund, one of the top performers in the flexi-cap group.
Nippon’s international fund has a total of around two dozen stocks. But it has a more concentrated portfolio with the top five stocks representing a third of the total basket.
The Nippon fund also has Netflix in its portfolio. Netflix, along with Facebook, Amazon, Apple and Google parent Alphabet are the famous ‘FAANG’ stocks that have led the technology pack in the last few years.
These apart, Nippon is also bullish on Mastercard, Iqvia, Enbridge and Lowe.
ICICI Prudential has its eyes set on ServiceNow, Tyler Technologies and Zimmer Biomet, though its wider basket means there is much less to differentiate among the stocks it owns.
5 BTST Stock Ideas: September 7
5paisa analysts bring the best intraday ideas, short-term ideas and long-term ideas for you. In the morning we provide best momentum stocks to buy or sell, while in the last trading hour we provide buy today sell tomorrow (BTST) ideas.
Here are the 5 buy today sell tomorrow (BTST) ideas for today (September 7)
BTST Idea 1: BUY
Current Market Price (CMP): 2382
Stop Loss (SL): 2340
Target Price (TP): 2475
Holding Period: buy today sell tomorrow
BTST Idea 2: SHORT
NATIONAL ALUMINIUM COMPANY LIMITED SEPTEMBER FUTURES
Current Market Price (CMP): 96.2
Stop Loss (SL): 97.5
Target Price (TP): 94
BTST Idea 3: BUY
HDFC SEPTEMBER FUTURES
Current Market Price (CMP): 2844
Stop Loss (SL): 2830
Target Price (TP): 2880
BTST Idea 4: SHORT
ALEMBIC PHARMACEUTICALS SEPTEMBER FUTURES
Current Market Price (CMP): 769
Stop Loss (SL): 774
Target Price (TP): 755
BTST Idea 5: BUY
LIC HOUSING FINANCE
Current Market Price (CMP): 422
Stop Loss (SL): 417
Target Price (TP): 434
Cloud services firm ESDS Software files for IPO
ESDS Software Solution Ltd, which provides cloud computing infrastructure as a service and software as a service, has filed draft documents (DRHP) with the Securities and Exchange Board of India to launch an initial public offering (IPO).
The IPO comprises a fresh issue of shares worth Rs 322 crore and an offer for sale of 2.15 crore shares by investors and promoters, according to the draft red herring prospectus filed with the capital markets regulator.
The selling shareholders include GEF ESDS Partners LLC, which is offloading 42.31 lakh shares; South Asia Growth Fund II LP, which is divesting 1.68 crore shares; South Asia EBT Trust (34,000 shares) and Sarla Prakashchandra Somani (4 lakh shares).
The company may also raise Rs 60 crore before the IPO either through a rights issue to existing shareholders, private placement or preferential offer. If it raises this amount, it will reduce the fresh issue size in the IPO proportionately.
ESDS Software will use Rs 155 crore out of the net proceeds from the fresh issue to buy cloud computing equipment for data centres. It will also use Rs 75 crore to finance its long-term working capital requirements and Rs 22 crore to repay debt.
ESDS Software operates an asset-light business model that allows its clients to scale quickly and reduce the cost of operations.
Its Infrastructure-as-a-service cloud computing services portfolio includes public cloud, private cloud, virtual private cloud, hybrid cloud and various community cloud offerings. Its indigenously developed vertical autoscaling technology, which powers its IaaS “eNlight Cloud”, is patented in the UK and the US.
As part of its SaaS offerings, it provides software products and applications, hosted on its cloud platform, on annual, semi-annual, monthly or quarterly subscription model. This allows its clients to develop, run and manage applications and services.
The company operates through three data centres—one each in Navi Mumbai, Nashik and Bengaluru. Its data centres cover, in aggregate, more than 50,000 square feet across the three locations.
It offers its services to government departments and companies across sectors such as financial services, technology, telecom, manufacturing, pharmaceuticals, real estate, retail and education.
The company has clients in many countries across the Asia-Pacific, Europe, the Middle East, the Americas, and Africa. Its customers include Larsen & Toubro Ltd, Tech Mahindra Ltd, EDF India Pvt. Ltd, Software Technology Parks of India, EPL Ltd, Symphony Ltd, and US Technology International Pvt. Ltd.
ESDS clocked a profit of Rs 5.48 crore on revenue of Rs 171.93 crore for the financial year ended March 2021. This compares with a profit of Rs 0.94 crore on revenue of Rs 158.57 crore in the previous year.
Axis Capital and IIFL Securities are the book-running lead managers to the issue.
Medical Equipment Firm Healthium Medtech Set to Launch IPO
Medical products and equipment maker Healthium Medtech has joined the rush of companies going public as it filed a draft red herring prospectus with India’s capital markets regulator to raise funds through an initial public offering.
Healthium’s IPO comprises a fresh issue of shares to raise Rs 390 crore and an offer for sale of 3.91 crore shares by selling shareholders. Promoter Quinag Acquisition will sell up to 3.9 crore shares while Mahadevan Narayanamoni will divest up to 1 lakh shares.
Quinag, which is backed by funds advised by private equity firm Apax Partners, holds a 99.79% stake in Healthium. It had acquired Healthium in 2018 from the company’s founders, TPG Growth and other shareholders.
Also Read: Upcoming IPOs List in 2021
Healthium Medtech IPO Details
Healthium Medtech plans to use about Rs 180 crore out of the net proceeds from the fresh issue to invest in subsidiaries Sironix Medical Technologies, Clinisupplies and Quality Needles.
It also plans to use Rs 50.09 crore to repay its debts, and Rs 58 crore for acquisitions and other strategic initiatives. Rest of the money will be used for general corporate purposes.
Financial performance of Healthium Medtech
Healthium’s revenue from operations has clocked a compound annual growth rate of 10.52% between 2018-19 and 2020-21. It increased revenue from operations and earnings before interest, tax, depreciation and amortisation (EBITDA) by 11.61% and 61% in 2020-21, despite an economic slowdown and the impact of the Covid-19 pandemic.
The company’s net profit jumped to Rs 85.43 crore in 2020-21 from Rs 36.76 crore in 2019-20 and Rs 13.73 crore the year before.
Healthium Medtech Market share
The company makes products used in surgical, post-surgical and chronic care fields. According to a Frost & Sullivan report, one in five surgeries conducted globally uses a Healthium product as of March 2021.
The company says that it is the largest independent medical device company and the second-largest company overall in India’s surgical consumables market with a share of 7.91% in value terms.
It is also the largest non-captive maker of surgical needles with a 22.3% share in overall volume sales globally and a 45.41% share of the non-captive market.
The company says the global market for products in its focus areas is likely to grow at an annualised pace of about 5% between 2021 and 2025, and is estimated to be $28.75 billion in 2025.
The size of the market for surgical consumables and arthroscopy products in India is estimated to be $455.84 million in 2021. This market is projected to grow at a CAGR of 9.6% between 2021 and 2025, Healthium says.
Superstar Investor Alert: Azim Premji-associated market funds add two portfolio companies in Q1
Private funds that invest on behalf of Wipro founder chairman Azim Premji picked up two new portfolio companies and likely exited one in the three months ended June 30, 2021.
The investment entities bet on multiplex operator Inox Leisure and tractor maker Escorts, buying a 1.49% and 1.37% stake, respectively, as per shareholding disclosures for the quarter.
The bet on Inox Leisure last quarter is probably based on the expectation of opening of cinema chains as the severity of the Covid-19 pandemic started receding after a spike in infection cases in April, especially in North India. Inox Leisure’s share price lost two-thirds of their value by May 2020 from the peak in February last year. It has doubled from its lows but it still has some road to cover to get back to the previous peak.
At the same time, the funds trimmed its holding or likely exited its investment in hospital chain Narayana Hrudayalaya. An investment entity under PremjiInvest, the family office of Premji that invests in both public and private markets through separate investment vehicles, held a 1.13% stake in the hospital chain but sold some or all of its stake last quarter.
Companies need to disclose public shareholders’ name with or over 1% stake in listed companies. Premji’s investment fund does not figure among the list.
Meanwhile, the funds trimmed their holding in three companies—Kolkata-based fast-moving consumer goods company Emami, Tata Group’s publicly listed retail arm Trent, and Zydus Wellness.
In Zydus, where it is invested via two entities, it trimmed stake of one and raised exposure via the other, even as cumulatively it marginally decreased its stake.
On the plus side, its holding rose marginally in Tube Investments Ltd. It also topped up its exposure to auto component maker Craftsman Automation last quarter.
Factoring out the investment entities’ stake in group flagship Wipro, they own a stake worth at least Rs 2,444 crore currently, based on the shareholding as of June 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, which manages both private investment and public market funds for Premji, is one of the larger professionally managed family offices active in the stock market. It has a portfolio of at least nine third-party companies in its basket.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 lender DCB Bank and JK Lakshmi Cement.
It is also an active private market investor with exposure to both startups as well as mature companies.