Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<p>A "Buyback" is where (for our purposes) a publicly-listed company repurchases its shares from existing shareholders, sometimes in the market, sometimes in a structured buyback off exchange, and sometimes at a price higher than market price (in this insight, we will use the nouns "Buy-back" and "Buyback" interchangeably; the official regulatory documents in India often use the form with the hyphen).</p><p>When companies use excess cash to buy back shares, they often not only end up optimising their capital structure but also <em>"achieve</em>" EPS accretion with the aid of a reduction in the total share count of the company. Some companies use buy-backs to support their share prices during sluggish periods and others attempt to use it as a defence mechanism against hostile takeover situations.  Still others in India use it to return capital to their promoters.</p><p>All that is pretty well-known.</p><p>In India, such Buy-backs are governed by the <a href="https://www.sebi.gov.in/legal/regulations/jul-2019/securities-and-exchange-board-of-india-buy-back-of-securities-regulations-2018-last-amended-on-april-17-2020-_40327.html" target="_blank" rel="noopener">SEBI (BUY-BACK OF SECURITIES) REGULATIONS, 2018</a> (last amended on 17th April 2020) and are principally executed through three main mechanisms - Tender Offers, On-Market Transactions, and Book-building Processes. </p><p>This insight is the first of a two-part series by Quiddity on Indian Buy-backs.</p><p>In this insight, we will look into the regulations that govern each of the buy-back mechanisms to discover the basis for how they get executed.</p>

A "Buyback" is where (for our purposes) a publicly-listed company repurchases its shares from existing shareholders, sometimes in the market, sometimes in a structured buyback off exchange, and sometimes at a price higher than market price (in this insight, we will use the nouns "Buy-back" and "Buyback" interchangeably; the official regulatory documents in India often use the form with the hyphen).When companies use excess cash to buy back shares, they often not only end up optimising their capital structure but also "achieve" EPS accretion with the aid of a reduction in the total share count of the company. Some companies use buy-backs to support their share prices during sluggish periods and others attempt to use it as a defence mechanism against hostile takeover situations.  Still others in India use it to return capital to their promoters.All that is pretty well-known.In India, such Buy-backs are governed by the SEBI (BUY-BACK OF SECURITIES) REGULATIONS, 2018 (last amended on 17th April 2020) and are principally executed through three main mechanisms - Tender Offers, On-Market Transactions, and Book-building Processes. This insight is the first of a two-part series by Quiddity on Indian Buy-backs.In this insight, we will look into the regulations that govern each of the buy-back mechanisms to discover the basis for how they get executed.

Quiddity India Buy-Back Guide 2021: Regulations & Patterns

External broker reports(aggregated public sources), HDFC Securities

HDFC Securities

External broker reports(aggregated public sources)

Equity Bottom-Up

Aditya Birla Capital Ltd / Equity Bottom-Up

<p>Aditya Birla Capital: As outlined in our Initiation note, Aditya Birla Capital (ABCL) continues on its journey towards a credible makeover, driving consolidated return ratios closer to franchise potential over the next three years. We believe that ABCL is steadily repositioning its lending businesses towards retail and granular loans (58% of NBFC AUM towards Retail + SME + HNI; 29% of HF AUM towards affordable housing), likely to reflect in sustained improvement in franchise earnings. Although Q1FY22 was weak for insurers in general, we draw comfort from both of ABCL's insurance businesses steadily building their profitability trajectory (VNB margins +300bps YoY to -1.6% on account of better mix and all-time low loss ratios (40%) in the health insurance business).</p>
<div class="content-highlight"><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></div>

Aditya Birla Capital: As outlined in our Initiation note, Aditya Birla Capital (ABCL) continues on its journey towards a credible makeover, driving consolidated return ratios closer to franchise potential over the next three years. We believe that ABCL is steadily repositioning its lending businesses towards retail and granular loans (58% of NBFC AUM towards Retail + SME + HNI; 29% of HF AUM towards affordable housing), likely to reflect in sustained improvement in franchise earnings. Although Q1FY22 was weak for insurers in general, we draw comfort from both of ABCL's insurance businesses steadily building their profitability trajectory (VNB margins +300bps YoY to -1.6% on account of better mix and all-time low loss ratios (40%) in the health insurance business).
Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

HSIE Results Daily: Godrej Consumers, Cipla, GAIL, Gujarat Gas, Hindustan Petroleum Corporation,...

External broker reports(aggregated public sources), Motilal Oswal Financial Services Limited

Motilal Oswal

<p>GAIL reported an EBITDA in line with our estimate, as better performance in Gas Trading and LPG and Liquid HC business offsets lower profitability in the Petchem segment (impacted due to the planned shutdown in 1QFY22). The management guided that the Petchem plant is currently operating at...</p><div class="content-highlight"><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></div>

GAIL reported an EBITDA in line with our estimate, as better performance in Gas Trading and LPG and Liquid HC business offsets lower profitability in the Petchem segment (impacted due to the planned shutdown in 1QFY22). The management guided that the Petchem plant is currently operating at...Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Doing good, expecting even better 
- reiterate Buy

External broker reports(aggregated public sources), ICICI Securities Ltd

ICICI Securities Limited

<p>Gas transmission volumes flat; trading outlook encouraging Gas transmission segment volumes were flat YoY at 109.8 mmscmd in line with estimate. Transmission volumes are expected to improve driven by industrial/commercial demand post commissioning of pipelines. In the short term, volumes in the current quarter (Q1FY22E-TD) fell 10-15% in April, May and recovered in June. Hence, we revise estimate and expect volume at 112.7 mmscmd, 123.5 mmscmd in FY22E, FY23E, respectively, mainly due to additional domestic gas from newer fields.</p><div class="content-highlight"><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></div>

Gas transmission volumes flat; trading outlook encouraging Gas transmission segment volumes were flat YoY at 109.8 mmscmd in line with estimate. Transmission volumes are expected to improve driven by industrial/commercial demand post commissioning of pipelines. In the short term, volumes in the current quarter (Q1FY22E-TD) fell 10-15% in April, May and recovered in June. Hence, we revise estimate and expect volume at 112.7 mmscmd, 123.5 mmscmd in FY22E, FY23E, respectively, mainly due to additional domestic gas from newer fields.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Gail India: Gas Trading Holds Key To Profitability

<p>Star Cement: Star Cement reported a weak show in 4QFY21. Consolidated revenue rose 10% YoY to INR 6.03bn on 4/12% volume/NSR growth. However, EBITDA declined 16% YoY to INR 1.04bn due to significant cost inflation. Lower tax rate moderated APAT (at INR 853mn) decline to 1% YoY. We expect margin to expand FY22 onwards on production ramp-up. We maintain our BUY rating with a revised our target price of INR 125 (8x FY23 consolidated EBITDA). GAIL (India): Our BUY recommendation on GAIL with a price target of INR 195 is based on 9% CAGR expansion in gas transmission volume over FY21-23E to 124mmscmd on the back of (1) increase in domestic gas production, (2) increase in demand of RLNG, and (3) completion of major pipelines in the eastern and southern parts of India.</p><div class="content-highlight"><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></div>

Star Cement: Star Cement reported a weak show in 4QFY21. Consolidated revenue rose 10% YoY to INR 6.03bn on 4/12% volume/NSR growth. However, EBITDA declined 16% YoY to INR 1.04bn due to significant cost inflation. Lower tax rate moderated APAT (at INR 853mn) decline to 1% YoY. We expect margin to expand FY22 onwards on production ramp-up. We maintain our BUY rating with a revised our target price of INR 125 (8x FY23 consolidated EBITDA). GAIL (India): Our BUY recommendation on GAIL with a price target of INR 195 is based on 9% CAGR expansion in gas transmission volume over FY21-23E to 124mmscmd on the back of (1) increase in domestic gas production, (2) increase in demand of RLNG, and (3) completion of major pipelines in the eastern and southern parts of India.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

HSIE Results Daily: GAIL (India), Star Cement

India

GAIL India Limited processes and distributes natural gas and liquefied petroleum gas. The Company is a Government of India undertaking.

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Gail India (GAIL IN)

Quiddity India Buy-Back Guide 2021: Regulations & Patterns

This insight is a basic primer of Indian buyback types, rules and regulations, and is part of a two-part series, with the other part being a

Travis Lundy

HSIE Results Daily: Godrej Consumers, Cipla, GAIL, Gujarat Gas, Hindustan Petroleum Corporation,...

Aditya Birla Capital: As outlined in our Initiation note, Aditya Birla Capital (ABCL) continues on its journey towards a credible makeover, driving...

HDFC Securities

Doing good, expecting even better - reiterate Buy

GAIL reported an EBITDA in line with our estimate, as better performance in Gas Trading and LPG and Liquid HC business offsets lower profitability...

Motilal Oswal

Gail India: Gas Trading Holds Key To Profitability

Gas transmission volumes flat; trading outlook encouraging, Gas transmission segment volumes were flat YoY at 109.8 mmscmd in line with estimate.

ICICI Securities Limited

HSIE Results Daily: GAIL (India), Star Cement

Star Cement: Star Cement reported a weak show in 4QFY21. Consolidated revenue rose 10% YoY to INR 6.03bn on 4/12% volume/NSR growth. However,...

HDFC Securities

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