India

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.

• Agung Podomoro Land
• Azure Power Global Ltd

We view ReNew Energy Global as “Medium Risk” on the LARA scale. The company is India’s largest renewable power producer (13.7 GW of total capacity and 8 GW of operating capacity at end-March 2023), and enjoys good access to capital. It benefits from stable cash flows and priority dispatch to the grid (e.g. solar), resulting in a robust business profile. The key risk is counterparty payments (DISCOMs). The merger with RMG Acquisition Corp II, a Nasdaq-listed SPAC, has increased ReNew’s transparency, reporting standards, checks and balances as well as cash proceeds to fund capex. The credit is weighed down by high leverage and the company’s aggressive expansion plan to triple its capacity by FYE 2024-25, with capex expected to surge 3-4x to USD 1.5-2.4 bn.

Our Credit Bias is “Stable”, due to the robust nature of the utilities business.

Controversies are “Immaterial”. The ESG Impact on Credit is “Moderately Positive” in our view, due to the nature of ReNew’s business (renewable energy). This should facilitate better access to capital, especially from ESG-minded institutional investors.

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. Central China Real Estate
2. Anton Oilfield
3. Seazen (Formerly Future Land)
4. Agung Podomoro Land
5. Hopson Development

and more…

Azure Power’s change of auditor, appointment of new CEO and CFO, and the company’s delisting are credit negative in our view. The company had previously informed onshore lenders that the audit of FY 2021-22 results was nearly completed, and that Azure might be able to avoid being delisted. However, auditor SR Batliboi & Co’s resignation does not bode well for the company. The new auditor and new management will take time to get up to speed on Azure and the results. 

• The promoters of Patanjali Foods aim to sell up to 9% of the company via an FPO. 
• The sale is being done so as to increase the firm’s public shareholding to the minimum required 25% imposed by SEBI.
• We have looked at the background of the deal in our earlier note, in this note we talk about the recent update and run the deal through our ECM framework.

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.

• Azure Power Global Ltd

Vedanta Resources Ltd is widely reported to be exploring asset-liability management related to the USD bonds due in 2024 and 2025. The plan apparently involves: [1] repaying USD 500 mn of the secured USD 1 bn 13.875% January 2024 notes, while rolling the remaining principal into the unsecured USD 9.25% 2026 notes; [2] converting the USD 950 mn 6.125% August 2024 notes into new secured notes due in 2026; and [3] redeeming USD 250 mn of the USD 1.2 bn 2025 notes, while exchanging the remaining principal into a new bond due in 2027.

The proposal might not be well-received by the affected bondholders, who would likely expect full repayment at maturity. We move to “Hold” on the VEDLN notes from “Buy”.

• Utkarsh Small Finance Bank (1639303D IN) IPO opens for subscription this week.
• The company currently is fifth largest SFB in India and has demonstrated robust growth in loan portfolio, deposits and improved productivity in the last two years.
• However, one must be cautious of the write offs worth INR 6 bn done in the last two years which benefitted the NPAs

• Dr Lal PathLabs Ltd (DLPL IN) reported 14% and 16%, YoY, revenue growth from its non-COVID business in 4QFY23 and FY23, respectively.
• The company’s base business is now back to pre-COVID trajectory. Margins are also nearing pre-COVID level. Going ahead, the company has couple of margin levers.
• Due to lesser competitive threat and uncertainty over COVID, FY24 is lesser challenging than the previous year. The company expects higher revenue growth in FY24 than FY23.

• Hang Seng has announced the conclusions of the market consultation. Primary-listed foreign stocks will be eligible for inclusion in the HSI INDEX and HSTECH INDEX from the December rebalance.
• The coming week has the rebalances for the NIFTY Index, Nifty Next 50 Index, Nifty Bank Index and SENSEX Index as a result of the HDFC Limited/ HDFC Bank merger.
• There were inflows to Tracker Fund of Hong Kong Ltd (2800 HK) and outflows from Hang Seng H Share Index ETF (2828 HK) during the week.

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. Greentown China
2. First Pacific Co
3. Vedanta Resources
4. China Jinmao Holdings
5. Lifestyle International Holdings

and more…

• The investor spotlight is on the HDFC Bank-HDFC merger, and we continue to favour HDFC Bank with its positive passive investor momentum, premium returns and merger synergy potential
• Bank of Baroda, although not in the limelight like HDFC bank, is our value stand-out among the Indian bank peer group and it warrants increasing investor attention, in our view
• Bank of Baroda is delivering on improving asset quality and returns; the shares have positive momentum, and we see great value on its 1x PBV ratio to ROE of 15%

• Hero Motocorp (HMCL IN)  & Harley Davidson (HOG US) launched their collaborative creation, the Harley-Davidson X440, in India.
• While this is a step in the right and anticipated direction, there are potentially grave mistakes that need to be corrected.
• For HOG, there is more to lose than to gain from this development. Additionally, Eicher Motors (EIM IN) moat around the brand and a strong riding culture is likely underrated.

• Following HDFC Limited (HDFC IN)‘s delisting, JSW Steel Ltd (JSTL IN) will be added to the S&P BSE SENSEX Index (SENSEX INDEX EQUITY) at the close on 12 July.
• The change was largely expected, but passive trackers need to buy over 5 days of ADV and nearly 12 days of delivery volume of JSW Steel Ltd (JSTL IN) .
• The HDFC Limited (HDFC IN) delisting could help Wipro Ltd (WPRO IN) in avoiding deletion from the S&P BSE SENSEX Index (SENSEX INDEX EQUITY) in December.

• Macrotech Developers (LODHA IN) had several issues on the balance sheet and governance front earlier. While, the debt levels have significantly come down since the time, governance however needs improvement. 
• Flat sales and margin contraction, driven by some bizzarre expenses needs attention including some elongated debtors.
• We suggest investors should remain cautious about future uncertainty, as impairment of loans and adverse outcome of contingent liabilities may have a dent on the balance sheet. 

• HDFC Limited (HDFC IN) will stop trading at the close on 12 July and will be deleted from all indices at the close on that day.
• As expected, LTIMindtree (LTIM IN) will be added to the NIFTY Index while Jindal Steel & Power (JSP IN) will be added to the NSE Nifty Next 50 Index.
• Importantly, HDFC Limited (HDFC IN)‘s foreign shareholding has dropped over the quarter ended 30 June and that has index implications for future passive flows to HDFC Bank (HDFCB IN). 

• Q1FY24 AUM growth came in stellar at 9%+ QoQ, led by highest-ever quarterly AUM addition of INR 22700cr vs INR 16537cr QoQ. 
• BAF recorded its highest-ever quarterly increase in customer franchise at 3.84mm, taking the total to 72.98mm vs 69.14mm QoQ. New loans booked were also strong at 9.94mm vs 7.56mm QoQ.
• Deposits book grew strong to INR 49,900cr vs INR 44,666cr, a growth of 11.7%+ QoQ. Liquidity surplus is at INR 12,700cr vs INR 11,852cr QoQ.

• In this insight, we take a look at the Potential ADDs/DELs for the BSE SENSEX, 100, and 200 Indices in the December 2023 Rebalance.
• The HDFC/HDFC Bank Merger is expected to trigger index changes in the next few days and we take a look at our expectations for these intra-review changes.
• Apart from that, I see no other changes for SENSEX in December 2023. However, there could be up to six changes for both BSE 100 and BSE 200.

The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks. The Asia Monthly is intended to broaden investors’ understanding of the Asian USD high-yield market.