India

• Regulatory Tangles:Promoters faced cricket betting allegations, SEBI penalties, debarment from financial markets and a litany of investigations. Legal and financial risks loom due to regulatory delays and unresolved litigations.
• Operational and Financial Hurdles:Excessive inventory, delayed payments, and opaque related-party transactions.Weaker margins, ROE, and underutilized manufacturing hint at broader governance frailty.
• Debt Dilemmas and Transparency Concerns: Heavy reliance on high-interest promoter loans. Governance lapses are reflected in financial metrics, raising questions about transparency and conflicts of interest.

• Blackstone (BX US) is looking to raise around US$834m through a secondary block deal. This will be a clean-up as Blackstone fully exits from Embassy Office Parks REIT (EMBASSY IN).  
• The deal is a large one to digest, at approximately 397.2 days of three month ADV and 20.7% of current mcap.  
• In this note, we will talk about the selldown and run the deal through our ECM framework.

Vedanta Resources (VRL) has launched a consent solicitation for an extensive liability management exercise. The company is seeking consent from noteholders of its four bonds to extend the maturities of three of the bonds (the January 2024, August 2024 and 2025 notes) to 2027-2028. There will be no haircut on the principal, and the coupon for the August 2024 notes and 2025 notes will be increased to match that of the January 2024 notes.

In our opinion, the terms of the proposal are mixed and the timeline is very tight. Failure to receive the requisite consent may lead to the company defaulting on the January 2024 notes. The new financing cannot be used to repay the January 2024 notes if the liability management exercise does not go through. In this case, there would be no time for VRL to come up with a revised proposal before the maturity of the January 2024 notes.

We acknowledge the company’s efforts in terms of the improved security packages and higher coupons. We recommend that noteholders accept the proposal and provide consent.

• INOX India Limited (INOX IN) raised around US$175m in its Indian IPO, after pricing the deal at INR660/share. It will begin trading tomorrow on 21st Dec 2023.
• Inox India is a manufacturer of cryogenic equipment. As per CRISIL, the firm was the largest Indian exporter of cryogenic tanks in terms of FY23 sales.
• We have looked at various aspects of the deal in our previous notes. In this note, we talk about demand and trading dynamics.

• 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 for the NIFTY 50 and NIFTY Next 50 indices in the March 2024 rebalance.
• There could be multiple changes for NIFTY 50 and separately, there could be five changes for NIFTY Next 50. The NIFTY 50 changes could have high impact.

• India Shelter Finance (0570670D IN) raised around US$144m from its India IPO.
• India Shelter Finance (ISF) is a retail-focused HFC targeting the self-employed customer with a focus on first time home loan takers in the low and middle income group.
• We have covered various aspects of the deal in our previous note. In this note, we will talk about the demand and trading dynamics.

• We see 8 stocks moving from MidCap to LargeCap, 8 stocks moving from LargeCap to MidCap, 11 stocks from SmallCap to MidCap, and 14 stocks from MidCap to SmallCap.
• Some stocks were added to global indices last month while some could be added in February. There are potential index implications for the NIFTY Index and Nifty Next 50 Index too.
• The upward migrations have continued to outperform the downward migrations. The largest recent outperformance has come from stocks expected to move from the Mid Cap to the Large Cap segment.

• Credo Brands (Mufti) (CREDO IN) IPO opens as a full OFS worth INR 5.5 bn. 
• The company operates ‘Mufti’ which is one of the renowned brands in Indian Men Casual Fashion category. 
• CMBL faces several questions including employee pay vs KMP, accounting for unsold inventory, delay in important payments, conflict of interest with BoD/SMPs etc.

• While the profitability of Stylam Industries (SYIL IN) is growing healthily (>30% YoY) in H1 FY24 due to margin expansion, revenues are trending at -4.5% YoY.
• The company became net cash in H1 FY24 (73 crore INR)  and zero gross debt. A strong balance sheet would aid in the company’s expansion plans. 
• Trading at 23x/18x FY24e/25e, we see strong growth ahead for the company as it cements its position as one of India’s top laminate export players. 

• Muthoot Microfin (1363943D IN) is looking to raise up to US$116m in its Indian IPO, after downsizing from an earlier reported float of US$163m.
• Muthoot Microfin (MMF) is a microfinance institution providing micro-loans to women customers with a focus on the rural regions of India.
• In our previous note, we looked at the company’s performance. In this note, we talk about the company’s RHP updates and share our quick thoughts on peer comp and valuation.

• 7 weeks up in a row and very overbought, the NIFTY Index could pullback from its highs this week and/or the next.
• A pullback to the 21008-20542 support area could be an occasion to enter LONG, profitable if the index rebounds from there and continues to rally into January.
• The potential pullback appears to be a short-lived retracement down, based on MRM pattern readings.

• The Indian Market (~$4 trillion) has now overtaken Hong Kong as the 4th most-valued stock market after the US, China, and Japan. 
• We recently concluded an exploratory trip to Patna, the capital, and also the largest city of the state of Bihar, Summarized thoughts on companies focused in this insight. 
• Multiple stocks covered in the Insight. The future of Easy Trip Planners (EASEMYTR IN), especially if it’s banking on franchisee expansion, could go the other way around.

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.

• JSW Infrastructure
• Lippo Malls Indonesia Retail Trust
• SK Hynix

• LICHF reported a decent Q2FY24 led by a strong NIM (3.04%). Growth has been somewhat subdued due to technical issues, however, these have been resolved and October is tracking well.
• LICHF reiterated its full-year FY24 NIM guidance at 2.6-2.8%. Credit cost, except for one-off item of INR 104cr in Q2FY24, continues to be below 50bp annualized.
• Despite a subdued H1FY24, LICHF has maintained its FY24 AUM growth guidance to 10%+. This implies that LICHF can grow AUM at 5%+ QoQ over the next two quarters.

• InterGlobe Aviation Ltd (INDIGO IN) (Indigo) has turnaround and is on path to achieve record profits in FY2024 on strong demand, stable FX and lower jet fuel prices 
• However, engine problems will hurt capacity deployment in 4QFY24 and FY2025, and the engine manufacturer has been very vague and unreliable in presenting its remedial plans 
• Share price near all-time high and valuations (PE, EV/EBITDAR) are expensive compared to global LCCs. TP of INR2,513 (14% DOWNSIDE) pegged to 15x FY2025 PE (top-end LCC cycle)  

• HCG reported a strong Q2FY4 with revenue growth of 16% YoY and 5.7% QoQ. EBITDA margin expanded 120bp QoQ to reach 17.8%.
• Emerging centers are scaling up well with revenue growing at 29% YoY in Q2FY24. Matured centers’ revenue also grew at a healthy pace of 13% YoY.
• HCG is continuing to upgrade infrastructure of existing hospitals. It added 3 robotic surgery machines across 3 centers. It operationalized 4 new LINACs and plans to install six more LINACs. 

• Bajaj Finance Ltd (BAF) reported a decent Q2FY24. AUM growth came in at 33% YoY. Profitability was also strong with ROA and ROE at 5%+ and 24%+, respectively.
• While, the overall outlook remains robust, BAF may see some NIM pressure due to rising cost of funds. However, majority of this is likely to be offset by operating leverage.
• BAF’s initiative to enter into new segments like microfinance and new car financing is progressing well. New car financing expansion is already ahead of plan with presence in 85 locations.

• INOX India Limited (INOX IN) is looking to raise up to US$175m in its Indian IPO.
• Inox India is a manufacturer of cryogenic equipment. As per CRISIL, the firm was the largest Indian exporter of cryogenic tanks in terms of FY23 sales.
• In our previous note, we looked at the company’s background. In this note, we talk about the company’s performance and share our quick thoughts on valuation.

• India Shelter Finance (0570670D IN) is looking to raise US$144m from its India IPO.
• India Shelter Finance (ISF) is a retail-focused HFC targeting the self-employed customer with a focus on first time home loan takers in the low and middle income group.
• In this note, we will look at past performance, and share our thoughts on valuation.

• India Shelter Finance (0570670D IN) (ISFC) IPO worth INR 12 bn opens for subscription this week. The issue comprises INR 8 bn fresh issue and INR 4 bn OFS. 
• ISFC has been generating high growth in AUM and disbursements in the last few years. The company has also improved its NPAs and stability.
• However, there are few cautions regarding employee productivity and on the opex side. Also, slippages have increased in H1F24.

• IDFC First Bank Limited (IDFCBK IN)  has built a banking franchise that holds the best promise among the mid-sized banks in India for long-run outperformance.
• A high-yielding and retail-oriented loan book, track record of pristine asset quality, superior funding profile boosting best-in-class retail deposit base, and incrementally improving unit economics.
• We value the stock as a long-term Buy, with 35% upside in near-term, as the bank continues to realize the benefits of its increasing scale on its earnings profile.

• RPSGV’s BPO business, Firstsource Solutions, is stabilizing and reported flattish QoQ revenue growth. EBIT margin has also bottomed out and is now at around 11%, an expansion of 300bp YoY.
• FMCG Business continues to maintain an annualized revenue run-rate of INR 400cr+. The Sports business generated revenues of INR 50cr+ vs INR 15cr YoY. 
• The FMCG and the Sports businesses hold tremendous scalability potential going forward. The IPL Lucknow franchise also owns a team named Durban in the South Africa T20 league.

• Alkem Laboratories Ltd (ALKEM IN) is flying high on strong Q2 numbers. The shares rallied 23% since the company announced Q2FY24 result in early November, widely outperforming Nifty Pharma index.
• In Q2FY24, revenue grew 12% YoY, and gross margin expanded 380bps to 61.4% backed by lower raw material cost and lower intensity of price erosion in US market.
• For the U.S. business, Alkem is looking at high-single-digit growth in dollar terms for FY24. The company has reiterated FY24 gross margin guidance at 59.0–59.5%.

• Doms (DOMS IN) IPO opens for subscription soon. The INR 12 bn IPO includes INR 3.5 bn fresh issue and the remaining as offer for sale. 
• The company is a prominent player in the Indian stationary market and has one of the most diverse product portfolio with a market share of 12% in F23. 
• DOMS ticks right in majority of the boxes when it comes to operations and B/S health. One must still be cautious regarding dependence on FILA group, and faster depreciating rates.  

• A group of shareholders is looking to raise around US$600m via selling a 6.9% stake in Mankind Pharma.
• MP is a pharmaceutical company engaged in developing, manufacturing and marketing a range of pharmaceutical formulations across various acute and chronic therapeutic areas, as well as several consumer healthcare products.
• We have looked at the IPO and lock-up release earlier. In this note, we talk about the other deal dynamics.

• The broader sentiment remains positive, with markets primarily driven by participation from foreign investors, wise to increase the trailing stop at 20,600 for any possible change in trend.
• We have already highlighted the weak operational performance of Whirlpool of India (WHIRL IN) , the company’s tax woes continue. 
• Names covered in this insight include Whirlpool of India (WHIRL IN) , Thyrocare Technologies (THYROCAR IN), Paytm (PAYTM IN) and Flywire Corp (FLYW US) 

• Doms (DOMS IN) is looking to raise around US$140m in its India IPO.
• DOMS is a leading player and brand in India’s stationery and art products market. It designs, manufactures, and sells a wide range of products, primarily under its flagship brand ‘DOMS’.
• We have looked at the company’s past performance in our earlier note. In this note, we talk about valuations.