India

• The Cigniti-Coforge acquisition presents a unique investment opportunity in the IT services sector, with potential for significant returns.
• Coforge plans to acquire a 54% stake in Cigniti Technologies, expanding its presence in digital assurance and AI services.
• The deal is expected to be completed by Q2 of FY25, with an open offer price potentially higher than the current market value of Cigniti shares.

• UPL Ltd (UPLL IN)‘s Q4 FY23 results show a significant improvement in margins to 13% after a drastic fall to 1% in December 2023, despite a 15% YoY revenue decline.
• Revenue drops were driven by lower prices and high-cost inventory liquidation, yet margin recovery signals operational improvements and potential future stability.
• Planning to reduce the debt by raising capital via right issue as well as IPO of Advanta.

• Nexus Select Trust (NST IN) raised around US$391m in its India IPO in May 2023.
• NST is a REIT with a portfolio of 17 Grade A urban consumption centers. Its portfolio covers retail malls, office assets, hospitality assets and a renewable power plant. 
• In this note, we talk about the upcoming lock-up expiry and possible deal dynamics.

• SEBI observed White Organics and Add Shop Retail used circular transaction method to inflate financial performance of respective companies
• Promoter sell their holdings on the back of this inflated financial performance
• The forensic analysis delves into the modus operandi of these frauds

UPL Limited’s Q4/23-24 results appear to be better than in the past three quarters, with lower declines registered for revenues and EBITDA. That said, we note that this was against a low comparison base, with Q4/22-23 marking the beginning of the downturn. The company has been severely affected by post-patent competition and cheap supply from China, with these not likely to improve much in the near term. The financial risk profile deteriorated significantly, and is now not consistent with the Ba1/BB/BB+ rating. While liquidity appears to be adequate, we expect it to weaken during the year as the company takes on working-capital debt. We highlight that while leverage and the liquidity profile tend to be better at financial year-end, they typically deteriorate significantly during the year. However, the USD 500 mn right issuance should shore up the balance sheet significantly.

• Following HCL Technologies (HCLT IN)‘s fiscal 4Q2024 earning report last month, we have witnessed an acceleration in near-term earnings estimates downgrades.
• Based on near-term momentum indicators, it seems that we are only at the beginning stage of a prolonged period of underperformance.
• HCL Technologies currently trades roughly one standard deviation above its rolling 5-year historic average PE ratio.

• Aadhar Housing Finance(AHF) raised around US$360m in its India IPO, via selling a mix of primary and secondary shares.
• AHF is focused on the low income housing segments (ticket size less than INR1.5m) in India. It offers a range of mortgage-related loan products.
• We have looked at the company’s performance and valuation in our past notes. In this note, we talk about the trading dynamics.

• BAF reported a decent Q4FY24 led by strong AUM growth and robust customer acquisition. Adjusted for the impact of the regulatory ban, Q4FY24 results were in line with the expectation.  
• The biggest negative surprise in Q4FY24 was the 21bp NIM compression. NIM compressed led by AUM composition shifting incrementally to secured assets. 
• BAF is optimistic on growth across segments, except Rural B2C where risk metrics are somewhat elevated; however this should normalize, given Rural B2B is doing fine.

• GHCL Textiles (GHCLTEXT IN)  Aiming 25-30% revenue growth along with 15-20% average margins significantly increase the profitability of the company.
• Entering into value-added products like Functional fabrics and setting up their own manufacturing plant for fabric.
• Management Guidance on yarn prices, capex and debt profile of the company.

• Belstar Microfinance Ltd (3624918Z IN) is looking to raise US$156m in its upcoming India IPO. The bookrunners on the deal are ICICI Securities, Axis Capital, HDFC Bank, SBI Capital Markets.
• Belstar Microfinance (Belstar) is a non-banking finance company (NBFC) in India with a focus on furnishing micro-enterprise loans.
• As per the CRISIL report, the firm was the ninth largest NBFC – Micro Finance Institution (NBFC-MFI) in terms of assets under management (AUM) as of Dec 2023.

• Go Digit General Insurance is looking to raise around US$315m in its India IPO.
• Go Digit General Insurance is a digital full stack insurance company, offering motor insurance, health insurance, travel insurance, property insurance, marine insurance, liability insurance and other insurance products.
• We have looked at the company’s performance in our past note. In this note, we talk about the refiling updates and valuations.

• TBO Tek (0395045D IN) raised around US$186m in its India IPO, after pricing the deal at the top end of the range at INR920/share.
• TBO Tek is a global travel distribution platform. Its two-sided technology platform serves companies involved in the travel industry such as hotels, airlines, travel agencies and travel management companies.
• We have looked at various aspects of the deal in our previous notes. In this note, we talk about demand and trading dynamics.

Tata Motors’ Q4 and FY 2023-24 results were excellent in our view, with record high revenue and earnings. Net debt plunged by such a large amount that the Indian business has turned net cash, and the group remained on track to be overall net automotive debt free in FY 2024-25.

• Election-Related volatility being reflected in options. India VIX has surged 70% over the past two weeks. Quarterly IVs have seen the largest rise as they capture election result date.
• BankNifty IVs are finally responding as the market plays catch up to the bank regulator’s new-found aggressiveness
• Elevated Vol-of-vol observed the past few weeks. Vol-regime Switching Model continues to point to “High & Down” state. Odds of switching to a “High & Up” state are increasing.

• In FY24, Gravita India (GRAV IN) had faced qualified opinion from the auditors regarding its accounting pertaining to share based payments, which in a way boosted the earnings. 
• However, the unusual accounting behaviour is not for the company. We have seen some irregular line items in the past as well, w.r.t. gains and losses on commodities and forex. 
• Other key takeaways include negative free cash flows and difficulty in cash generation, revenues from traded goods not being in sync, fresh contingent liabilities, etc.

• NIFTY 50 represents the 50 largest stocks listed in the National Stock Exchange (NSE) of India and the NIFTY Next 50 index tracks the next 50 largest names.
• In this insight, we take a look at the names leading the race to become ADDs/DELs during the September 2024 index rebal event.
• More than 50% of the 6-month reference period is now complete. There are a couple of changes to the expected ADDs/DELs list since my last insight.

• Branches visited – Ajmer, Bengaluru, Mandya, Mysuru, Jaipur, Solapur, Pimpri and Pune.
• Business growth is driven by taking calls that peers are reluctant to take with regards to property and incomes.
• Lack of team and increasing competition are primary concerns that also warrant attention. 

• Indegene Limited (1864095D IN) raised around US$220m in its India IPO, via selling a mix of primary and secondary shares.
• Indegene is a “digital-first” commercialisation firm with an exclusive focus on the global life sciences industry.
• We had looked at the firm’s past performance and shared our thoughts on Indegene’s valuation in earlier notes. In this note, we will look at the trading dynamics.

• Swiggy aims to raise US$1.25bn in its upcoming India IPO. The company has filed confidentially for its IPO, which is likely to be launched towards the end of the year.
• Swiggy, along with Zomato, operates a duopoly that has come to dominate the food delivery market in India. In 1H24, Swiggy serviced over 274,000 restaurants via its 370,000 delivery partners.
• In this note, we will take an early look at the company based on the publicly available financials. 

• SK Finance Limited (0893736D IN) is looking to raise US$260m in its upcoming India IPO. The bookrunners on the deal are Kotak, Jefferies, Motilal Oswal, and Nomura.
• SK Finance is a non-deposit non-banking finance company middle layer (NBFC ML) operating in two main verticals, vehicle financing and financing for micro, small and medium enterprises (MSMEs).
• As per the CRISIL report in the DRHP, the firm was the fastest growing player in the vehicle financing and MSME financing segments based on AUM growth over FY21-23.

• As we progress in earnings season in line with our previous Playbook, this one focuses on select consumer names. 
• Names discussed include Titan Co Ltd (TTAN IN), Vedant Fashions (MANYAVAR IN) , Go Fashion India (GOCOLORS IN) & Shoppers Stop (SHOP IN).  
• Most names expect a soft Q1, and SHOP is targeting the most aggressive expansion.

• Dr. Reddy’s Laboratories (DRRD IN) reported 13% revenue growth to INR71.1B in Q4FY24. EBITDA climbed 15% to INR18.7B, while net profit zoomed 36% to INR13.1B.
• North America revenue grew 29% YoY to INR32.6B, driven by increase in volumes of base business, contribution from new launches, integration of Mayne portfolio, partly offset by price erosion.
• After adjusting for brand divestment, revenue from India increased 11% YoY. Gross margin improved 140bps YoY and 10bps QoQ to 58.6%, due to better product mix and cost savings.

• Quint Digital (QUINT IN) announces alterations to its MoA, changing its name and expanding its digital ventures, including joint ventures and acquisitions.
• Quintype Technologies India Limited’s impressive growth and the acquisition of Lee Enterprises (LEE US) highlight Quint Digital’s ambitions and potential.
• Despite debt concerns, Quint Digital’s strategic investments in digital media and technology position it for substantial growth, potentially reshaping the digital publishing landscape.

• Delta Corp Ltd (DELTA IN) sells its Nepal casino business to Ability Games amidst allegations of connections to illegal betting and money laundering.
• The ED’s investigations into Mahadev Online Book reveal a Rs 3,916 crore scam, freezing of Rs 580.78 crore assets, and involvement of companies like Ability Games.
• CEO of Delta Corp Ltd (DELTA IN)mentioned in ED statement that they have agreed for 10Crs over and above the transaction value.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Adaro Energy
• Greentown China
• Vedanta Resources

• Aadhar Housing Finance (AHF) is now looking to raise around US$360m in its India IPO, via selling a mix of primary and secondary shares.
• AHF is focused on the low income housing segments (ticket size less than INR1.5m) in India. It offers a range of mortgage-related loan products.
• We have looked at the company’s performance in our past note. In this note, we talk about valuations.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Adani Green Energy
• Japfa Comfeed Indonesia
• Medco Energi
• Pakuwon Jati

• Ajanta Pharma (AJP IN) reported strong Q4FY24 results, with double-digit revenue and PAT growth, and improving margins, driven by growth across all the business segments.
• The company has announced INR3.5B buyback plan, involving purchase of 10,28,881 equity shares (0.82% of the total paid-up equity share capital) at a price of INR2,770 per equity share.
• Ajanta Pharma is confident of maintaining double-digit growth going ahead with the existing products gaining market share, new launches, and expansion of field force.

Adani Ports and Special Economic Zone (APSEZ) has released FY 2023-24 numbers that were slightly above expectations. The company’s strong revenue and EBITDA growth (of 28% and 24% y-o-y, respectively) exceeded management’s guidance, supported by higher than estimated growth in cargo volumes. APSEZ appears poised to achieve its target of 500 MMT cargo volumes in 2025, supported by organic growth and the contribution from its latest acquisition (Gopalpur Port). Net adjusted leverage improved to 2.9x (FY 2022-23: 4.0x). We expect leverage to be stable in FY 2024-25, in line with management’s guidance.

APSEZ appears to have a renewed appetite for expansion (particularly in overseas markets, amid its already strong domestic position), which may present event risks. In the meantime, the company may remain affected by negative headlines related to corporate governance issues at the broader Adani Group.

• Implied Volatilities (IVs) have stabilized over the past few weeks & look to be in the early stages of an uptrend. 
• Breakdown in Spot-Vol correlation – higher IVs at a time when Equity Indices are flirting with All-time-Highs.
• Skew compression in BankNifty Options driven by call-buying on the break above 49000, further exacerbated by pre-election demand for June & July expiries. 

• TBO Tek (0395045D IN) is looking to raise approximately US$200m in its upcoming India IPO.
• TBO Tek is a global travel distribution platform. Its two-sided technology platform serves companies involved in the travel industry such as hotels, airlines, travel agencies and travel management companies.
• In this note, we provide a summary of its RHP updates and share our quick thoughts on valuation.