India

• In this insight, we take a look at the names leading the race to become ADDs/DELs for the NIFTY 50 and NIFTY 100 indices in the September 2023 rebalance.
• The NIFTY Next 50 methodology was supposed to change in June 2023 but this has been kept on hold for now. This change could still take place before September 2023.
• In this insight, we take a look at our expectations for index changes under both the existing methodology and the proposed new methodology.

Vedanta Ltd’s Q1/23-24 results were weak in our view, as expected. The company is facing challenges from lower commodity prices and the large debt-servicing and repayment requirements from parent Vedanta Resources. Gross debt and net debt increased significantly, while the cash declined materially. The low and declining cash position will limit VEDL’s dividend-upstreaming capacity this fiscal year.

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.

• HPCL-Mittal Energy Ltd
• Innergex Renewable Energy

• The NIFTY Index has been in a strong rally since early April 2023, returning almost +17% as of last Friday’s Close. The MRM tool shows the index is OVERBOUGHT WEEKLY .
• The NIFTY Index has reached a “Tails” area of the current pattern: forecasts in these price areas are less reliable, but the MRM tool indicates the index is topping.
• SHORT trades can be implemented at prices > Last Close (19745). Higher prices are possible, it could take +1/+2 weeks for the index to complete its topping process.

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.

• AAC Technologies Holdings
• JSW Steel Ltd
• Reliance Industries

• HDFC Bank (HDFCB IN) reported weak QoQ growth in deposits and advances. This is however temporary due to seasonality. The growth trajectory for rest of the year remains intact. 
• HDFCB continues to invest aggressively into expanding its geographical presence to drive growth. Benign credit cost enables investments without impacting the ROA.
• HDFC Ltd (“HDFC”) has been also merged into HDFCB effective Jul 1. The merged entity is carrying sufficient liquidity at 120%+ LCR to meet the additional CRR and SLR needs.

• We published on Polycab as our 2023 high conviction idea on Dec 25 2022. Since then, the stock has been up 75%+, exceeding our 65%+ upside FY26 target.
• The steep rise was probably driven by strong earnings growth on the back of upbeat demand environment led by healthy domestic capex, rising exports and robust housing demand.
• At the current valuation, Polycab is richly valued and we assign a “SELL” rating. Polycab’s current market cap at INR 68700cr+ is well above our FY26 projection of INR 63500cr+.

• Federal Bank (FB IN) aims to raise around US$370m via a QIP to increase its Tier-1 capital.
• The deal is well flagged as the company had earlier obtained board approval for a fundraising and had guided towards a funding raising in FY24.
• In this note, we talk about the deal dynamics and run the deal through our ECM framework.

• SAMHI Hotels (SAMHI IN)  plans to raise around US$200m (estimated) in its Indian IPO.
• Samhi is India’s third-largest hotel asset owner, by number of keys, with a portfolio of 25 operating hotel assets comprising 3,839 keys, as of Feb 2023.
• In this note, we look at its updated filings and discuss the changes since its last filing in 2019.

• Max Healthcare Institute (MAXHEALT IN) reported robust Q4 performance, with revenue and EBITA increasing 26% and 44%, YoY, respectively. Growth was driven by increase in ARPOB and occupied bed days.
• Max commissioned new 92 beds oncology block at one of its network hospitals in March. New oncology block contributed positively to revenue and EBITDA in the first month of launch.
• Max is on track to double its bed capacity in next 5–6 years. Apart from ongoing brownfield expansions, the company has land parcels with potential to add 1,000 beds.

• EbixCash (EBIXC IN), a subsidiary of Ebix Inc (EBIX US) and India’s largest end-to-end financial exchange, is seeking to launch an Rs60 billion (US$730 million) in July. 
• In EbixCash IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
• The key elements of the bear case rest on margin pressure due to rising operating costs, a related party being the largest customer, declining revenue visibility and deteriorating cash generation.

• India-based fashion brand Freakins has bagged US$4 million in its seed round led by Matrix Partners India and Blume Ventures.
• Founded in 2021 by Shaan Shah and Puneet Sehgal, Freakins is a direct-to-consumer clothing brand that specializes in denim.
• The Gen Z-focused firm has built up a catalog of over 1,500 styles, which it says caters to different body types.

• InterGlobe Aviation Ltd (INDIGO IN)’s co-founder Rakesh Gangwal’s 29%+ stake was released from lock-up today.
• He had earlier stated his intention to pare down his stake after a long drawn, and very public battle, with his co-founder Rahul Bhatia. 
• In this note, we will talk about the lockup dynamics and possible placement.

• EbixCash (EBIXC IN), a subsidiary of Ebix Inc (EBIX US) and India’s largest end-to-end financial exchange, is seeking to launch an Rs60 billion (US$730 million) in July.   
• EbixCash’s Forex operations have emerged as a leader in India’s airport Forex business. Also, EbixCash’s inward remittance business in India is the clear market leader.
• The key elements of the bull case rest on fast-paced growth, growth runaway from the post-COVID recovery, declining contract assets, improving balance sheet, and declining leverage.

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”.