India

• In its recent result, Bandhan Bank Ltd (BANDHAN IN) did not report the kind of improvement in asset quality in its core Microfinance segment that we were hoping to see.
• Fresh slippages into overdue accounts did not slow down as anticipated; NPA levels remained elevated; Loan growth is below the target run-rate.
• We anticipate the recovery to be drawn out, and hence suggest keeping patience. But  we maintain our long-term valuation of Bandhan Bank unchanged at 2.1x FY25e P/BV, implying +56% upside.

• Loan mix is improving, away from non-INR loans, asset mix is improving with less RIDF bonds, and bank is seeing an expanding LDR. 
• Loss loans and doubtful loans are in major decline, they are less important to total NPLs, and still credit costs were high in 1Q24, likely overly conservative.
• Credit growth is now at 22.6% YoY from 14.9% YoY one year ago, with consistent acceleration. With just 6% loan share, growth can remain high.

JSW Steel has delivered strong Q2/23-24 results in our view, driven by higher volumes and a recovery in steel prices. The numbers were in line with management’s earlier guidance for an improvement in operating environment and steel prices. The financial risk profile is improving, and liquidity is adequate.

Steel prices remained the key credit driver. A small price increase has resulted in a significant EBITDA increment, due to the high operating leverage. Based on management’s guidance for an improvement in the operating environment and steel prices, we expect better H2/23-24 numbers, with revenues inching up and a larger earnings improvement. Debt will likely remain stable following the merger with JISPL (completed in Q2), and the leverage profile should continue improving on the back of higher earnings.

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.

• Lippo Malls Indonesia Retail Trust
• Vedanta Resources

• Blue Jet Healthcare Ltd (BJHC IN) is a CDMO focusing on specialty pharmaceutical and healthcare ingredients and intermediates. The company targets to raise $100M from its upcoming India IPO.
• The IPO, which will open for subscription on October 25, consists of OFS of 24.3M shares by two of the promoters. The price range has been fixed at INR329–346/share.
• Blue Jet enjoys a competitive advantage in the global contrast media market through established customer relationships with the top contrast media manufacturers. The company is on a capacity expansion spree.

• The investigative analysis highlights a deceptive and confusing saga involving the Vedanta Group’s semiconductor venture in India. 
• The group skillfully blurred the lines between Vedanta Ltd (VEDL IN)  and Vedanta Resources (VED LN), creating an impression that the semiconductor business was under Vedanta Limited, despite previous clarifications. 
• Eventually, regulatory authorities penalized Vedanta for disclosure lapses, exposing governance concerns and a lack of transparency in this complex corporate maneuver.

• Foreign investors sold ~5.7m shares of Indusind Bank (IIB IN) from July to September. That selling has pushed foreign room above the key 15% threshold.
• With foreign room crossing 15%, passive trackers will need to buy a chunk of Indusind Bank (IIB IN) stock at the end of November.
• There will be positioning on Indusind Bank (IIB IN) though it appears some of that was taken off in the last couple of days.

• Over the last few weeks, companies in India have been disclosing their shareholding pattern as of end-September. There are a few companies with significant float changes from end-March and/or end-June.
• The changes in free float could be reflected in domestic and global indices over the next couple of months resulting in action from passive trackers.
• We find 9 stocks where there could be inflows with passive trackers needing to buy over 1 day of ADV on most stocks.

• The Government of India (GoI) is looking to raise up to US$130m from trimming its stake in Housing and Urban Development Corporation Limited (HUDCO IN). 
• The base deal includes a 3.5% stake sale, with an option to double it up to 7%. The selldown is targeted at meeting SEBI’s minimum public float requirements of 25%. 
• At 7.5 days of three month ADV, the deal isn’t a very large one for the firm to digest.

• Triveni Turbine (TRIV IN)  is one of the leading players in manufacturing of steam turbines, which in turn has uses across various energy intensive industries. 
• The company has recovered well from covid, has a robust order book in conjuction with healthy financial position. Balance sheet is debt-free, high cash and lean WC cycle. 
• The only possible risk that comes to the balance sheet would be of potential statutory disputes. The contingent liabilities remain under-stated.

• ICICI Prudential Life Insurance (IPRU IN) reported its 2Q24 earnings results yesterday, with flat sales and decreasing margins
• The lack of support from ICICI Bank, its parent, has been the main concern, with ICICI Pru consistently losing market share to other private peers due to below-par growth.
• We value ICICI Pru at ~1.4x FY25e P/EV, implying a -15% downside to current price, reflecting the bleak outlook in terms of growth and margins in the medium-term.

• HDFC Bank (HDFCB IN) released its first results since its amalgamation. This can make comparatives difficult where historicals are not adjusted, except for some QoQ items.
• We use Dupont Analysis to better understand how the newly amalgamated bank looks now compared with the past, which generally shows a more profitable bank at the core. 
• Credit costs, tax expenses are also positives, with the former improving 27bps YoY and the latter improving 23bps YoY. Investment income is a major positive driver in Sep 23 quarter.

• Asirvad Micro Finance Limited (1053198D IN) is looking to raise around US$183m in its upcoming India IPO. The deal will be run by JM Financial, Kotak, Nomura, SBI Caps.
• Asirvad Micro Finance Limited (Asirvad) is a non-banking finance company (NBFC), and a microfinance institution (MFI) offering small loans to low-income women in India.
• As per the CRISIL report, Asirvad was the largest MFI in India in terms of geographical coverage and third largest MFI in India in terms of AUM, in FY23.

• Agilus Diagnostics Limited (SRLL IN) is the largest diagnostics service provider in terms of number of laboratories and the second largest in terms of revenue from operations in India.
• Agilus has built an extensive network spread across 25 states and five union territories in India. An asset light model enables growth of the service network in a cost-effective manner.
• Indian diagnostics industry is expected to have a CAGR of 8–10% during FY23–28 to reach INR1,150B–1,250B in FY28, providing immense growth opportunities for large players like Agilus.

• Polycab India, Macrotech Developers, Paytm, Tata Communications, Tata Motors DVR, Apl Apollo Tubes, Persistent Systems and Suzlon Energy have run up over the recent past and have heightened investor attention.
• The increase in market cap has put the stocks on active manager radars and could also result in the stocks being added to global indices in the near future.
• We take a look at the positioning on the stocks and recommend pair trades to reduce market risk while trying to capture alpha.

• LICI has significant 62% market share of new business premiums with 92% coverage of all districts in the country, compared with 72% for all of the private sector combined.
• Long track record of operations since 1956 and strong growth, with recent years seeing exceptional strength in net profit, and with ROE reaching 148%.
• Well maintained SG&A costs with revenue growth exceeding policy benefits growth, with strong investment returns, especially in FY23. 1Q24 also shows continued operational strength, in a hugely under-penetrated market.

• HDFC Life Insurance (HDFCLIFE IN) reported 2Q24/ 1H24 results last week which were decent given the context: moderating VNB Margins amid changing product-mix and growth outlook positive for remaining year.
• The strong growth at the HDFC Bank counter is the key positive, though expected, on back of the HDFC Bank-HDFC merger.
• We value HDFC Life (HDFCL) at ~2.4x FY25e P/EV, implying a ~5% upside to current price. HDFCL is fairly valued in our view.

• Agilus Diagnostics Limited (SRLL IN) is looking to raise around US$200m in its upcoming India IPO. The deal will be run by Citi, Axis Capital, and ICICI Securities.
• Agilus Diagnostics Limited (Agilus) is a diagnostic testing service provider.
• As per the CRISIL report, the firm was the largest diagnostics service provider in terms of number of laboratories and the second largest in terms of FY23 sales.

• The NIFTY 50 Index closed last week up at 19751.05, 2nd week up, in synch with the S&P 500 INDEX WEEKLY bounce.
• The index has not moved up much from a price perspective, weak bounce. Resistance levels must be monitored: if the index rallies this week it could pull back next week.
• The trade orientation is to go SHORT once the NIFTY reaches Q2/Q3 OVERBOUGHT resistance levels in the 20167-20230 price area, this week. SHORT Trade at Close is also valid.

• The trade remains Long Nifty with a watch on earnings. 
• Infosys Ltd (INFO IN) reported a beat on revenues and a miss on EPS, heading into seasonally weak quarters is the pain now consensus? 
• Other names discussed include Delta Corp Ltd (DELTA IN), HDFC Asset Management Co Ltd (HDFCAMC IN) and Avenue Supermarts Ltd (DMART IN). 

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.

• Lippo Malls Indonesia Retail Trust
• Tata Motors ADR

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. Shui On Land
2. Seazen (Formerly Future Land)
3. Yuexiu Property
4. China Hongqiao
5. Longfor Properties

and more…

• SBI Life leads the Private Life Insurers in India in terms of market share, thanks to exclusive access to Banca channel of the largest bank in the country.
• SBI Life has been one of the best-performing life insurers in terms of growth as well as margin expansion among peers in recent years, which we expect to continue. 
• SBIL is our primary pick in the Indian Life Insurance space with an upside of ~24% and its relatively cheaper valuations offers a margin of safety to cover near-term risks.

• We visit the ‘City of Joy,’ Kolkata, to understand the state of the industry, focusing on microfinance and the status of lenders concentrated in the region.
• Multiple factors argue for a cyclical bottom for lenders operating in West Bengal and Assam. 
• We have been positive on Bandhan Bank Ltd (BANDHAN IN), but it is a play on cyclicality rather than a complete turnaround & transformation of its habits.

• Market concern on company’s redemption of Bonds of $ 3 bn in 2024 
• Liquidity gap for company is much larger estimated at nearly $11 bn
• Company needs to raise long term funds and/or divest assets to raise the required amount

• In Aug 2022, Zomato (ZOMATO IN) completed the acquisition of 91% of Blinkit’s outstanding shares via issuing its own shares. These shares were released from their lockup in Aug 2023.
• Softbank then sold a part of its stake in Aug 2023, the rest of its stake will come out of lockup soon.
• In this note, we will talk about the lock-up dynamics and recent updates.

• The WisdomTree Emerging Markets ex-State-Owned Enterprises Index measures the performance of emerging markets stocks that are not state-owned enterprises.
• The October rebalance will result in a one-way turnover of ~16% and in a one-way trade of US$329m. There are 16 stocks with over US$3m to trade.
• HDFC Bank (HDFCB IN) will be added to the index while there will be selling in Taiwan Semiconductor (TSMC) (2330 TT).

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 Ports & Special Economic Zone
• Shui On Land
• Yuexiu Property

• In just five years, India’s electric-vehicle sector has surged, positioning the country to become the world’s largest EV market by 2030.
• In addition to their cost and environmental advantages, EVs also enjoy tax benefits in India. However, despite having 3 million EVs on the road, the country hasn’t established standardized charging protocols for these vehicles.
• With that in mind, Raptee said it is the first Indian EV startup to opt for the Combined Charging System Type 2 connectors, or CCS2. By integrating both AC and high-power DC charging, the system expedites the charging process, particularly at Level 3 charging stations.

• India’s inclusion in global bond indexes by JP Morgan is significant, but the expected foreign inflow is relatively small, not likely to impact exchange rates or interest rates significantly.
• The bond inclusion won’t strengthen the Rupee against the Dollar due to limited foreign inflows. A slight reduction in interest rates is expected with JP Morgan’s inclusion.
• Indian bonds offer attractive yields, but rising US bond yields and rupee depreciation could affect foreign investor interest. This development could lead to improved fiscal policies and Indian bond markets.

• Devyani International (DEVYANI IN) is one of the largest franchisee of Yum! Brands Inc (YUM US)  in India and operates brands like KFC, Pizza Hut and Costa Coffee, etc.
• After a turbulent pandemic, the company has reported growth in topline and robust profitability in F22 and F23. But, these have been boosted by several one-off items.
• The company also faces difficulty in generating positive FCFs while we also remain caution about the Nigerian Operations and the associated forex losses.

• In this insight, we take a look at the Potential ADDs/DELETEs for the BSE SENSEX, 100, and 200 Indices in the December 2023 Rebalance.
• At present, I do not see any changes for the SENSEX index. For the BSE 100 and BSE 200 indices I see six and five changes respectively.
• Some of these changes are different from those expected in my last insight. However, the changes expected in this insight will be my final expectations for the December 2023 Rebalance.

• With rising urbanization and increased social media exposure to global beauty trends, India’s beauty and personal care market is now set to hit US$38 billion in value by 2028.
• A big part of that growth has come from direct-to-consumer brands: in the past four to five years, over 80 of them have emerged, accompanied by a wave of investments.
• One of these D2C players is Pilgrim, which recently raised US$20 million in a series B funding round led by Vertex Ventures Southeast Asia and India.