Consumer Analyst / Channel Surveillance Specialist, Trudence Capital Advisors

Pranav Bhavsar

Consumer Analyst / Channel Surveillance Specialist

Trudence Capital Advisors

Trudence Capital Advisors Private Limited is a SEBI-registered Research Analyst, holding SEBI registration number INH000015747. Our firm is dedicated to providing independent and unbiased research on Indian mid to large-cap companies. Trudence Capital is known for its counter-consensus views, with a focus on forensic research and on-ground primary investigations. Our research approach is thorough, involving detailed analysis of accounting practices and governance, alongside extensive channel checks.

Independent & Unbiased Research

Thematic (Sector/Industry)

<h3>About The Narrative</h3>
Earnings conference calls are important sources that aid us in the identification of potential catalysts and drivers of stock returns. Every quarter we go through these transcripts and connect them with primary research with the objective of assessing on-ground reality against management commentary. 
The edition focuses on key quotes from the earnings transcripts of <a href="https://www.smartkarma.com/entities/tvs-motor-co-ltd" target="_blank" data-smartkarma-citation="entities:16123:1" rel="noopener">TVS Motor (TVSL IN)</a> / <a href="https://www.smartkarma.com/entities/eicher-motors-ltd" target="_blank" data-smartkarma-citation="entities:18316:1" rel="noopener">Eicher Motors (EIM IN)</a> / <a href="https://www.smartkarma.com/entities/bajaj-auto-ltd" target="_blank" data-smartkarma-citation="entities:3613:1" rel="noopener">Bajaj Auto Ltd (BJAUT IN)</a> / <a href="https://www.smartkarma.com/entities/hero-motocorp-ltd" target="_blank" data-smartkarma-citation="entities:2391:1" rel="noopener">Hero Motocorp (HMCL IN)</a> 
We have separated the quotes to highlight Business Performance, Exports &amp; Premiumization, Commodity Inflation, Price Increases, Supply Chains and Margins, New Launches, EV, Demand  Environment &amp; Outlook.

About The Narrative
Earnings conference calls are important sources that aid us in the identification of potential catalysts and drivers of stock returns. Every quarter we go through these transcripts and connect them with primary research with the objective of assessing on-ground reality against management commentary. 
The edition focuses on key quotes from the earnings transcripts of TVS Motor (TVSL IN) / Eicher Motors (EIM IN) / Bajaj Auto Ltd (BJAUT IN) / Hero Motocorp (HMCL IN) 
We have separated the quotes to highlight Business Performance, Exports &amp; Premiumization, Commodity Inflation, Price Increases, Supply Chains and Margins, New Launches, EV, Demand  Environment &amp; Outlook.

The Narrative | Q2 FY22 | India 2Ws - TVS Motor / Eicher / Bajaj Auto/ Hero Motocorp

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<div>The <a href="https://www.smartkarma.com/entities/s-p-bse-sensex-index" target="_blank" data-smartkarma-citation="entities:31494:1" rel="noopener">S&amp;P BSE SENSEX Index (SENSEX INDEX)</a> is the flagship index of the Bombay Stock Exchange (BSE). The index has 30 stocks and is a free float weighted market cap index. The next rebalance will be effective after the close of trading on 17 December.</div><div>
The December review uses the market cap and turnover data from 1 May to 31 October to determine the stocks to be included and excluded from the index, and the announcement of the changes is done 4 weeks before the rebalance effective date.
With 6 days to go in the review period, we see <a href="https://www.smartkarma.com/entities/wipro-ltd" target="_blank" data-smartkarma-citation="entities:15360:1" rel="noopener">Wipro Ltd (WPRO IN)</a> as a high probability index addition. <a href="https://www.smartkarma.com/entities/bajaj-auto-ltd" target="_blank" data-smartkarma-citation="entities:3613:1" rel="noopener">Bajaj Auto Ltd (BJAUT IN)</a> is the lowest ranked index constituent and is a likely deletion from the index.
There is a (slim) possibility of <a href="https://www.smartkarma.com/entities/nestle-india-ltd" target="_blank" data-smartkarma-citation="entities:13101:1" rel="noopener">Nestle India (NEST IN)</a> being deleted from the index if it fails the annualised traded value test. As it stands, it is touch and go for the stock.
Passive trackers will need to buy over 2 days of ADV on <a href="https://www.smartkarma.com/entities/wipro-ltd" target="_blank" data-smartkarma-citation="entities:15360:1" rel="noopener">Wipro Ltd (WPRO IN)</a> and sell over 3.5 days of ADV on <a href="https://www.smartkarma.com/entities/bajaj-auto-ltd" target="_blank" data-smartkarma-citation="entities:3613:1" rel="noopener">Bajaj Auto Ltd (BJAUT IN)</a>. If <a href="https://www.smartkarma.com/entities/nestle-india-ltd" target="_blank" data-smartkarma-citation="entities:13101:1" rel="noopener">Nestle India (NEST IN)</a> is deleted instead, passive trackers will need to sell 7 days of ADV on the stock.
In terms of delivery volumes, the impact is much larger with passive trackers needing to buy 8.5 days on <a href="https://www.smartkarma.com/entities/wipro-ltd" target="_blank" data-smartkarma-citation="entities:15360:1" rel="noopener">Wipro Ltd (WPRO IN)</a>, while selling either 8.8 days on <a href="https://www.smartkarma.com/entities/bajaj-auto-ltd" target="_blank" data-smartkarma-citation="entities:3613:1" rel="noopener">Bajaj Auto Ltd (BJAUT IN)</a> or 13 days on <a href="https://www.smartkarma.com/entities/nestle-india-ltd" target="_blank" data-smartkarma-citation="entities:13101:1" rel="noopener">Nestle India (NEST IN)</a>.
</div>

The S&amp;P BSE SENSEX Index (SENSEX INDEX) is the flagship index of the Bombay Stock Exchange (BSE). The index has 30 stocks and is a free float weighted market cap index. The next rebalance will be effective after the close of trading on 17 December.
The December review uses the market cap and turnover data from 1 May to 31 October to determine the stocks to be included and excluded from the index, and the announcement of the changes is done 4 weeks before the rebalance effective date.
With 6 days to go in the review period, we see Wipro Ltd (WPRO IN) as a high probability index addition. Bajaj Auto Ltd (BJAUT IN) is the lowest ranked index constituent and is a likely deletion from the index.
There is a (slim) possibility of Nestle India (NEST IN) being deleted from the index if it fails the annualised traded value test. As it stands, it is touch and go for the stock.
Passive trackers will need to buy over 2 days of ADV on Wipro Ltd (WPRO IN) and sell over 3.5 days of ADV on Bajaj Auto Ltd (BJAUT IN). If Nestle India (NEST IN) is deleted instead, passive trackers will need to sell 7 days of ADV on the stock.
In terms of delivery volumes, the impact is much larger with passive trackers needing to buy 8.5 days on Wipro Ltd (WPRO IN), while selling either 8.8 days on Bajaj Auto Ltd (BJAUT IN) or 13 days on Nestle India (NEST IN).


Sensex Dec 2021 Index Rebalance Preview: Wipro Should Be Added, Deletion Has An Interesting Option

Equity L/S Analyst | Forensic Accounting | India, Yellowstone Equity

Ankit Agrawal, CFA

Equity L/S Analyst | Forensic Accounting | India

Shareholder activism is on the rise in India. Institutional shareholders are making their vote count. Proxy advisor firms are also playing a role in guiding institutions to leverage their voting rights prudently. Over the past few months, we saw several instances of activism, mostly through adverse voting and complaining on public forums like earnings call. In a couple of cases, large shareholders (&gt;10% ownership) have also used their rights under Companies Act to call an extraordinary general meeting (EGM) to push for change of board and management.
In our detailed insight below, we discuss many such instances that transpired over the past few months. We also discuss our key takeaways for the Indian markets from this uprising activism.

Shareholder activism is on the rise in India. Institutional shareholders are making their vote count. Proxy advisor firms are also playing a role in guiding institutions to leverage their voting rights prudently. Over the past few months, we saw several instances of activism, mostly through adverse voting and complaining on public forums like earnings call. In a couple of cases, large shareholders (&gt;10% ownership) have also used their rights under Companies Act to call an extraordinary general meeting (EGM) to push for change of board and management.
In our detailed insight below, we discuss many such instances that transpired over the past few months. We also discuss our key takeaways for the Indian markets from this uprising activism.

The Rise of Shareholder Activism in India

<div>
The objective of "The Narrative" is to aid us in assessing management commentary, which we can further connect with ground reality via primary checks, aiding us in identifying key catalysts that could be potential drivers of stock returns.
For the narrative, we will be covering commentary on Demand Environment &amp; Business performance; Margins &amp; Inventory; Supply Chain, price increases and discounting; Competition and market share; New launches; Electric vehicles (EVs); Outlook and Strategy
</div>
Companies covered included <a href="https://www.smartkarma.com/entities/mahindra-mahindra-ltd" target="_blank" data-smartkarma-citation="entities:16441:1" rel="noopener">Mahindra &amp; Mahindra (MM IN)</a> / <a href="https://www.smartkarma.com/entities/tata-motors-ltd" target="_blank" data-smartkarma-citation="entities:216:1" rel="noopener">Tata Motors Ltd (TTMT IN)</a> (Primarily Standalone India Business) / <a href="https://www.smartkarma.com/entities/ashok-leyland-ltd" target="_blank" data-smartkarma-citation="entities:20104:1" rel="noopener">Ashok Leyland (AL IN)</a> /  <a href="https://www.smartkarma.com/entities/maruti-suzuki-india-ltd" target="_blank" data-smartkarma-citation="entities:733:1" rel="noopener">Maruti Suzuki India (MSIL IN)</a>


The objective of "The Narrative" is to aid us in assessing management commentary, which we can further connect with ground reality via primary checks, aiding us in identifying key catalysts that could be potential drivers of stock returns.
For the narrative, we will be covering commentary on Demand Environment &amp; Business performance; Margins &amp; Inventory; Supply Chain, price increases and discounting; Competition and market share; New launches; Electric vehicles (EVs); Outlook and Strategy

Companies covered included Mahindra &amp; Mahindra (MM IN) / Tata Motors Ltd (TTMT IN) (Primarily Standalone India Business) / Ashok Leyland (AL IN) /  Maruti Suzuki India (MSIL IN)

The Narrative | Q1 FY22 | India 4Ws - MM, TTMT, AL, MSIL

Specialist in Indian Banking and Economic Research

Hemindra Hazari

Institutional investors were recently in the news for opposing a 10% pay hike for a CEO-promoter in FY2021, a year of bad results for his firm. One big story went unremarked: that the latest pay hike was on a high base, since the CEO had received a 51% pay hike in the previous year of poor performance (FY2020). Interestingly, two of the three ‘independent directors’ who staff the crucial Nominations and Remuneration Committee (NRC) are former employees of the firm.<a href="https://www.setindiabiz.com/learning/special-resolution/" target="_blank" rel="noopener">Special Resolutions</a>, proxy advisory firms and institutional shareholders are proving to be the bane of corporate India and of Chief Executive Officers (CEO) with generous remuneration packages seeking reappointment.  The case of Siddhartha Lal, the CEO-promoter of <a href="https://www.smartkarma.com/entities/eicher-motors-ltd" target="_blank" data-smartkarma-citation="entities:18316:1" rel="noopener">Eicher Motors (EIM IN)</a>, received wide publicity when institutional shareholders at the August 7, 2021 annual general meeting delivered a humiliating rebuke by rejecting his candidature. They expressed discomfort with the 10% remuneration hike Lal received in FY2021 on the back of poor financial performance by the company, and with the clause which stated that Lal’s future remuneration would be capped at 3% of the company’s profits.  On August 23, 2021, a chastened Eicher Motors decided to once again <a href="https://www.bseindia.com/xml-data/corpfiling/AttachLive/7d5bfd73-7dbf-4bdf-b6b0-0e7a90dca29e.pdf" target="_blank" rel="noopener">reappoint</a> Lal as managing director, but with a reduced remuneration cap of 1.5% of the company’s profits. They also issued a clarification justifying his remuneration hike in FY2021.The revised notice, citing Manvi Sinha, Chairperson of the NRC, gives rise to questions. It underlines the fact that NRCs appear ever willing to rubber stamp and defend the liberal remuneration packages provided to CEOs. The remuneration for promoter-CEOs like Lal ought to be dependent on the performance of the company, unlike remuneration for the general cadre of employees; thus the average 10% hike the firm claims it gave its employees (after adjusting for new hires/retirees) cannot be a justification for providing a 10% hike to Lal. Furthermore, Lal as a promoter with a substantial equity interest in the company, is also rewarded through dividends, and hence his remuneration is only one component of the monetary benefits he derives for his efforts.The <a href="https://www.bseindia.com/xml-data/corpfiling/AttachLive/7d5bfd73-7dbf-4bdf-b6b0-0e7a90dca29e.pdf" target="_blank" rel="noopener">clarifications</a> by S. Sandilya (chairman, Eicher Motors) and by Manvi Sinha, both members of the NRC, fail to explain why, in FY2020, when the sales, profits and profitability of the company declined, Lal was given a 51% (57% as per a different disclosure) hike in remuneration, in contrast to the 5% decrease in median salary of all employees. Therefore the 10% hike in Lal’s remuneration in FY2021 was on a base of a 51% hike in FY2020. For two successive years of declining performance by the company, an indulgent NRC was willing to handsomely reward Lal, completely delinking the CEO’s remuneration from the company’s performance. When institutional shareholders witness such blatant indulgence, it is a scathing comment on the independence and competence of the NRC and the board of directors.The NRC of Eicher Motors consists of 3 independent directors. Manvi Sinha has a background in media and has reportedly known Lal from childhood; S. Sandilya was for many years a senior executive in Eicher Motors; and Inder Mohan Singh, partner of the law firm Shardul Amarchand Mangaldas, was earlier the Head – Legal and Secretarial at Eicher Motors. While independent directors may have known the promoters or worked with them earlier, their decisions on the board must defend the interests of the company and not just the promoter. Sadly, the manner in which the board has rewarded Lal for two consecutive years, when the company performed poorly, speaks volumes about its competence and independence.

Institutional investors were recently in the news for opposing a 10% pay hike for a CEO-promoter in FY2021, a year of bad results for his firm. One big story went unremarked: that the latest pay hike was on a high base, since the CEO had received a 51% pay hike in the previous year of poor performance (FY2020). Interestingly, two of the three ‘independent directors’ who staff the crucial Nominations and Remuneration Committee (NRC) are former employees of the firm.Special Resolutions, proxy advisory firms and institutional shareholders are proving to be the bane of corporate India and of Chief Executive Officers (CEO) with generous remuneration packages seeking reappointment.  The case of Siddhartha Lal, the CEO-promoter of Eicher Motors (EIM IN), received wide publicity when institutional shareholders at the August 7, 2021 annual general meeting delivered a humiliating rebuke by rejecting his candidature. They expressed discomfort with the 10% remuneration hike Lal received in FY2021 on the back of poor financial performance by the company, and with the clause which stated that Lal’s future remuneration would be capped at 3% of the company’s profits.  On August 23, 2021, a chastened Eicher Motors decided to once again reappoint Lal as managing director, but with a reduced remuneration cap of 1.5% of the company’s profits. They also issued a clarification justifying his remuneration hike in FY2021.The revised notice, citing Manvi Sinha, Chairperson of the NRC, gives rise to questions. It underlines the fact that NRCs appear ever willing to rubber stamp and defend the liberal remuneration packages provided to CEOs. The remuneration for promoter-CEOs like Lal ought to be dependent on the performance of the company, unlike remuneration for the general cadre of employees; thus the average 10% hike the firm claims it gave its employees (after adjusting for new hires/retirees) cannot be a justification for providing a 10% hike to Lal. Furthermore, Lal as a promoter with a substantial equity interest in the company, is also rewarded through dividends, and hence his remuneration is only one component of the monetary benefits he derives for his efforts.The clarifications by S. Sandilya (chairman, Eicher Motors) and by Manvi Sinha, both members of the NRC, fail to explain why, in FY2020, when the sales, profits and profitability of the company declined, Lal was given a 51% (57% as per a different disclosure) hike in remuneration, in contrast to the 5% decrease in median salary of all employees. Therefore the 10% hike in Lal’s remuneration in FY2021 was on a base of a 51% hike in FY2020. For two successive years of declining performance by the company, an indulgent NRC was willing to handsomely reward Lal, completely delinking the CEO’s remuneration from the company’s performance. When institutional shareholders witness such blatant indulgence, it is a scathing comment on the independence and competence of the NRC and the board of directors.The NRC of Eicher Motors consists of 3 independent directors. Manvi Sinha has a background in media and has reportedly known Lal from childhood; S. Sandilya was for many years a senior executive in Eicher Motors; and Inder Mohan Singh, partner of the law firm Shardul Amarchand Mangaldas, was earlier the Head – Legal and Secretarial at Eicher Motors. While independent directors may have known the promoters or worked with them earlier, their decisions on the board must defend the interests of the company and not just the promoter. Sadly, the manner in which the board has rewarded Lal for two consecutive years, when the company performed poorly, speaks volumes about its competence and independence.

Eicher Motor’s Cosy NRC Rewards CEO-Promoter Lavishly Year After Year as Performance Plunges

India

Eicher Motors Ltd. manufactures light commercial vehicles which are sold domestically and are also exported to other countries. Eicher Motors also manufactures two-wheelers and automotive gears.

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Eicher Motors (EIM IN)

The Narrative | Q2 FY22 | India 2Ws - TVS Motor / Eicher / Bajaj Auto/ Hero Motocorp

The edition focuses on key quotes from the earnings transcripts of TVS Motor / Eicher Motors / Bajaj Auto / Hero Motocorp

Pranav Bhavsar

Sensex Dec 2021 Index Rebalance Preview: Wipro Should Be Added, Deletion Has An Interesting Option

Near the end of the review period, we see Wipro as a high probability add. Bajaj Auto could be deleted as the lowest ranked constituent, but Nestle...

Brian Freitas

The Rise of Shareholder Activism in India

Shareholder activism is on the rise in India with several recent instances where investors have raised concerns through voting rights and EGMs as...

Ankit Agrawal, CFA

The Narrative | Q1 FY22 | India 4Ws - MM, TTMT, AL, MSIL

For the narrative, we will be covering commentary from Companies covered included Mahindra & Mahindra (MM IN) / Tata Motors Ltd (TTMT IN) / Ashok...

Pranav Bhavsar

Eicher Motor’s Cosy NRC Rewards CEO-Promoter Lavishly Year After Year as Performance Plunges

Eicher Motors must realise the seismic shift in influence that Special Resolutions, proxy firms and shareholders can bring about, disrupting the...

Hemindra Hazari

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