India

• The BHARAT 22 ETF (ICICIB22 IN) will rebalance on 17 March while the CPSE ETF (CPSEBE IN) and Nifty Bank Index (NSEBANK INDEX) will rebalance on 29 March.
• There are no constituent changes for the indices in March but there will be capping changes for the stocks and there is a reasonable impact on some stocks.
• There are stocks that will have opposing flows on the two days, while there are some stocks that will have same way flows from passive trackers.

• Post market close yesterday it was announced that GQG Partners (GQG AU) had invested INR 154.46bn (US$1.87bn) in four Adani Group companies via block deals.
• The blocks were at a discount of 4.3% for Adani Ports & Special Economic Zone (ADSEZ IN) to 12.2% for Adani Enterprises (ADE IN). 
• There will be an increase in the free float for some Adani Group companies as a result of the blocks and there are implications for the stocks in indexes.

• In Q3 FY23, Aurobindo Pharma (ARBP IN) recorded net profit of INR4.9B (~$60 million), down 19% YoY. Consensus expected the company to report net profit of INR5.2B during the quarter.
• Net profit was negatively impacted by 51% YoY increase in R&D expenditure due to biosimilar pipeline progress. R&D expenses are expected to remain high over the next 6–7 quarters.
• The company had negative free cash flow of $82M. With lack of any immediate catalyst or shareholders’ reward, we don’t expect multiple expansion for Aurobindo Pharma at least in near-term.

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.

• Greenko Energy Holdings (“Greenko”; “the company”) is one of the leading independent clean energy companies in India.
• As of September 2022, the company had total operational capacity of about 5.3 gigawatts (GW) – excluding a stake in hydropower operator Teesta Urja Limited – across a diversified portfolio of renewable energy assets.
• Wind energy contributes about 3.2GW of operational capacity, hydro contributes about 0.6GW and solar contributes about 1.5GW.

• Nexus Select Trust (NST IN)  is looking to raise up to US$500m in its upcoming India IPO. 
• NST is a REIT with a portfolio of 17 Grade A urban consumption centers. It is backed by Blackstone.
• In this note, we will talk about the not-so-positive aspects of the deal.

• Nexus Select Trust (NST IN)  is looking to raise up to US$500m in its upcoming India IPO. 
• NST is a REIT with a portfolio of 17 Grade A urban consumption centers. It is backed by Blackstone.
• In this note, we will talk about the positive aspects of the deal.

• Varun Beverages Ltd (VBL IN) is engaged in manufacturing, selling, bottling and distribution of beverages of Pepsi brand.
• It operates mostly in India but also looks after, Sri Lanka, Nepal, Zambia, Morocco and Zimbabwe, as per franchisee agreement with PepsiCo India.
• Key forensic concerns include unusual accounting with respect to containers, trend in discounting, advances to a related entity, etc and some governance alarms. 

• Dr. Reddy’s Laboratories (DRRD IN) entered into a definitive agreement to acquire the U.S. retail generic prescription product portfolio of Mayne Pharma (MYX AU) for $105M.
• The deal will add approximately 85 approved generic products and four pipeline products. For the fiscal year ending June 30, 2022, this portfolio generated revenue of $111M.
• Considering the revenue potential, the acquisition price seems to be reasonable. Being a high margin and limited competition portfolio, the acquisition will be earnings accretive for Dr. Reddy’s.

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.

• China Jinmao Holdings
• Vedanta Resources

• A key re-rating trigger for Edelweiss’ stock is nearing as its wealth management (WM) arm gets close to demerge and list over the next couple of months.
• Edelweiss’ WM business could list at a market cap of around INR 8750cr, suggesting that Edelweiss’ 44% stake in it alone could be valued at INR 3850cr.
• Edelweiss also reported strong Q3FY23 earnings with 31% YoY growth in ex-insurance PAT. Edelweiss has significant potential to re-rate over the next couple of years as the credit business normalizes.

• Schneider Electric Infrastructure (SCHN IN) is engaged in manufacturing of products and systems for electricity distribution, such as distribution transformers, medium voltage switchgears, etc.
• After plagued with losses for most of last decade, the company has entered into positive net worth and profit territory. 
• However, forensics do indicate concerns on aspects such as borrowing rates, inventory verification, contingent liability, etc. including few governance woes.

• Short-Term borrowing plays an important role in the Adani group
• Rescinding of Adani Enterprises FPO and meltdown in share prices heightened liquidity concerns of the group
• This analyst estimates the liquidity gap to be around US$ 8 bn for FY2023 which needs to be bridged by long-term funds and/or cash flow from operations

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.

• China Jinmao Holdings
• Lenovo
• China Datang Corp Renewable Power

• HCG continues to scale up well as its new centers are maturing. Its mature centers are also growing at a healthy pace.
• Margins are improving across the board led by 1) Realization Improvement 2) Operational Efficiencies 3) Operating Leverage and 4) Improving Mix of Cases.
• FY24 is all set to be a defining year in terms of HCG’s financial performance across growth and profitability.

• IdeaForge Technology Limited (1475641D IN) is looking to raise around US$100m in its upcoming India IPO. Some of its notable pre-IPO investors include Qualcomm, Infosys, Celesta Capital (VC).
• IdeaForge develops and manufactures unmanned aerial systems (UAS) and unmanned aerial vehicles (UAV).
• The bookrunners on the deal are JM Financial and IIFL Securities.

• Zee Entertainment Enterprises (Z IN) have yet again been bombarded with a corporate hurdle since the NCLT has admitted the company into CIRP relating to Siti Cable Network (SITINET IN).
• It is found that ZEEL has created provisions in the balance sheet, however it should be noted that the CRIP might lead to cash outflow in future. 
• Apart from the current CIRP, ZEEL also has other litigation risks that should not be overlooked.

We view Tata Steel as “Low Risk” on the LARA scale. The company has delivered outstanding results in recent years (before the current downturn in the steel industry), with significant deleveraging and strong earnings growth. This resulted in a substantial boost to its credit profile. We view favourably the company’s track record of achieving guidance, especially in terms of deleveraging. The business’ cyclical nature is offset by Tata Steel’s commitment to paying down debt, balancing growth and deleveraging.

We like Tata Steel’s size, complete vertical integration and diversified operations. The Indian operations enjoy strong domestic demand (which supports capacity expansion), and benefit from trade protectionism (a safeguard duty). We incorporate a credit uplift on account of Tata Group’s strong reputation, which partly mitigates the highly cyclical nature of Tata Steel’s commoditised steel-making business.

Our Credit Bias on Tata Steel is “Negative”. This is due to a sharp deterioration in the operating environment, especially in Europe, driven by high energy and coking coal costs. The structural weaknesses in the European business will likely weigh on the group during downturns.

The ESG Impact on Credit is “Neutral”. The metal & mining industry is exposed to regulatory and geopolitical risks. Furthermore, the nature of the industry places Tata Steel under scrutiny from environmental agencies and investors. However, the company has managed this well by making significant efforts for environmental factors. That said, there is room for improvement in the management of water, waste and toxic materials, as well as in social aspects. While there has been some controversy (most notably in the sudden change of chairman at Tata Sons in 2016, and later at Tata Steel), this was some time ago and the new chairman has since proven himself. Thus, we see Controversies as “Immaterial”.

• Apollo Hospitals Enterprise (APHS IN) recorded 19% revenue growth in Q3. The largest segment, healthcare services, which contributed 51% of total revenue, grew 10%. However, net profit dropped 33%.
• The company’s bottom line bled mainly due to high operating cost of the digital healthcare services platform, Apollo 24/7. Excluding operating cost of Apollo 24/7 EBITDA would have grown 10%.
• The company believes that it is at the peak burn rate for Apollo 24/7 operating cost this quarter and expects losses to moderate from here on.

• Kratos Studios, a Web3 gaming venture based in India, has raised about US$20 million in seed funding at a valuation of US$150 million.
• The round was led by Accel and saw participation from Prosus Ventures, Courtside Ventures, Nexus Venture Partners, and Nazara, among others.
• Kratos was built by Manish Agarwal, previously CEO of gaming company Nazara, and Ishank Gupta, a former executive at multinational firms like Belgian brewing firm Anheuser-Busch InBev.

• Honasa Consumer (HC) is looking to raise about US$350m in its upcoming India IPO.
• HC’s product portfolio includes products in the baby care, face care, body care, hair care, color cosmetics and fragrances segments.
• In this note, we will talk about the not-so-positive aspects of the deal.

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 Transmission
• Tata Motors ADR