India

• In Nov 2021, Paytm raised around US$2.2bn via selling a mix of primary and secondary shares in its IPO. 
• The company is backed by Alibaba (ADR) (BABA US), Softbank Group (9984 JP) and counts Berkshire Hathaway Inc Cl A (BRK/A US) among its investors. 
• In this note, we will talk about the upcoming lockup expiry.

• Fusion Micro Finance Ltd (1053199D IN) raised approximately US$134m in its India IPO.  
• Fusion Micro Finance (FMF) is a non-banking financial company – microfinance institution (NBFC-MFI) that provides financial services to unserved and underserved women in rural and peri-rural areas across India.
• We have looked at various aspects of the deal in our previous notes. In this note, we talk about the demand for the deal and the trading dynamics.

• Global Health (Medanta) (GH IN) raised approximately US$268m in its India IPO.  
• Global Health (GH) is a hospital network that operates under the Medanta brand. The firm currently has five hospitals in operation and one more planned for development. 
• We have looked at various aspects of the deal in our previous notes. In this note, we talk about the demand for the deal and the trading dynamics.

• We see 4 potential adds, 1 close add and 1 potential delete for the FTSE All-World/All-Cap indices at the upcoming QIR that will be implemented at close on 16 December.
• The largest impact will be the passive selling on Golden Agri Resources (GGR SP) due to a nationality change from Singapore to Ineligible.
• There is a big lock-up expiry on Delhivery where US$2.89bn of shares will be free for trading on 21 November – that is significantly larger than the potential passive buying.

• Tata Motors Ltd (TTMT IN) will eliminate its ADS program. This is another potentially juicy trade. 
• Canada’s Brookfield, along with EIG look to take over Origin Energy (ORG AU), one of Australia’s largest energy companies.
• This OZ Minerals Ltd (OZL AU) trade is fundamentally a bit short gamma on copper. If copper takes another dive, then it may no longer be interesting to be long. 

• IndiaFirst Life Insurance (1083896D IN) is looking to raise about US$250m in its upcoming India IPO. The deal will be run by ICICI, Ambit, BNP, BOBCap, HSBC, Jefferies and JMF. 
• IndiaFirst Life Insurance (IFLI) Is a private life insurer in India with a product portfolio of retail and group products, ranging across different segments. 
• The company’s retail product portfolio in India comprises nine participating products, 16 non-participating products (comprising 11 nonparticipating savings products and six non-participating protection products) and four unit-linked products.

• Our Indian bank profitability and credit quality screens, in terms of credit quality metrics to end-September 2022, continued in a constructive vein, although pre-provision profitability trends generally softened
• The solid macro-economic backdrop has supported credit quality to September-end, as the declining NPA ratios and cost of risk show; yet India may be approaching peak level for its macro-indicators
• Much good news is discounted by the macro and easy credit conditions; we are negative on State Bank of India and ICICI Bank, but we remain positive on HDFC Bank

• Yesterday, with earnings, Tata Motors Ltd (TTMT IN) announced that it would delist its ADS, making an application on or around 13 January.
• This sounds relatively benign because since 2004 when the ADS was listed, local funding capacity has increased substantially. It may no longer be needed. 
• But it is MUCH more interesting than that. There is lots of fun to be had here. 

• Post market close yesterday, Tata Motors Ltd (TTMT IN) announced that it intended to delist Tata Motors ADR (TTM US) and terminate its ADS program.
• The easiest option for most ADS holders will be to sell the ADS. That could take the ADS lower and to trade at a discount to the underlying shares.
• Sell Tata Motors ADR (TTM US) outright or sell the ADS/buy Tata Motors Ltd (TTMT IN) for an arb trade.

• The Government of India (GoI) aims to raise around US$500m via selling a 1.4% stake in Axis Bank Ltd (AXSB IN). 
• This won’t be the first selldown by GoI as it has been reducing its stake since 2019. We have covered a number of the past deals in the name.
• In this note, we will run the deal through our ECM framework and comment on other deal dynamics.

• Over the last five quarters, monthly transacting customers have increased by 36%, QoQ, the pace could be slower, but the trend remains upwards. 
• AOVs and Order frequency have the potential to inch up, but only over the long term.
• Take rates are inching up, delivery fees are going higher, and with a higher market share Zomato (ZOMATO IN) ‘s food delivery business is expected to continue improving. 

• Archean Chemical Industries (0810406D IN) is looking to raise about US$178m in its India IPO. 
• Archean Chemical Industries (ACI) is a specialty marine chemical manufacturer in India focused on producing and exporting bromine, industrial salt, and sulphate of potash to customers around the world. 
• We have looked at the background of the deal in our earlier notes. In this note, we will talk about the peer comparison and valuations.

• Dr Lal PathLabs Ltd (DLPL IN) reported revenue growth of 7% y/y in Q2FY23, driven by 15% y/y growth in non-COVID business, which clocked highest ever quarterly revenue.  
• Although business growth was mainly driven by a double-digit patient volume growth, average realization per patient also increased 3% y/y to INR746.
• Amid rising competition, the company reported sequential improvement in bottom-line. Normalized EBITDA increased 20% compared to Q1FY23. Normalized EBITDA margin improved 310 basis points sequentially.

• Phyx44, a biotech-enabled food science startup based in Bengaluru, India, has secured US$1.2 million in seed capital.

• The startup will use the money to accelerate R&D, expand the team and work on the co-development of product formulation with key partners.

• Founded in early 2021, Phyx44 develops animal-free milk proteins and fats for use in dairy products. It bets on microbial fermentation as the best way to replicate dairy.

Tata Motors’ Q2/22-23 results were better than expected, with reasonable improvement in revenue and earnings. That said, this was partly due to the low base effect last year, owing to COVID-19. The financial risk profile has improved slightly, on the back of the higher earnings and stable debt. Liquidity appears to be adequate, especially at Jaguar Land Rover (JLR).

The operating environment will likely remain difficult in FY 2022-23, and possibly for even longer. While we derive comfort from the growing order book, this accounts for only c. 50% of full-year deliveries for now, and is hence insufficient to provide firm revenue visibility. Still, the order book development indicates that demand for JLR’s vehicles is exceeding its ability to deliver.

• In Nov 2021, PB Fintech raised around US$793m in its India IPO, via selling a mix of primary and secondary shares.  The lock-up on its pre-IPO shareholder will expire soon.
• The company operates two platforms: Policybazaar operates in India’s online insurance product and service industry; and Paisabazaar platform operates in India’s online credit industry. 
• In this note, we will talk about the upcoming lockup expiry.

• The Administrator of the Specified Undertaking of the Unit Trust of India (SUUTI) is offering 46.53m shares of Axis Bank Ltd (AXSB IN) at a floor price of INR 830.63/share.
• This will take SUUTI’s stake in Axis Bank Ltd (AXSB IN) to zero and remove an overhang on the stock.
• Coming in close to Bain’s partial stake sale last week, the stock could trade heavy. But Axis Bank Ltd (AXSB IN) still trades cheaper than peers.

• In Nov 2021, Nykaa raised around US$720m in its India IPO, via mostly selling secondary shares.
• Nykaa is a lifestyle focussed e-commerce platform and consumer brand offering a portfolio of beauty, personal care and fashion products, including its own branded products.
• In this note, we will talk about the upcoming lockup expiry.

• Delhivery (DELHIVER IN) raised US$675m in its IPO and started trading on 24 May. The stock dropped below its IPO price a couple of weeks ago.
• Lock-Ups on pre-IPO investors expire on 20 November with 598m shares (US$2.89bn) becoming available for sale. Sell before then or hold off on buying.
• Delhivery (DELHIVER IN) is a potential inclusion to the MSCI Small Cap and FTSE All-World indices in the next month. Passive buying will be overshadowed by lock-up expiry.

• Archean Chemical Industries (0810406D IN) is looking to raise about US$176m in its India IPO. 
• Archean Chemical Industries (ACI) is a specialty marine chemical manufacturer in India focused on producing and exporting bromine, industrial salt, and sulphate of potash to customers around the world. 
• ACI has been growing on the back of increasing production capacity, sales volume and average selling prices in recent years. However, the firm had nearly defaulted previously. 

• Cipla Ltd (CIPLA IN) is a strong play in Indian generic pharmaceutical industry, due to its niche and differentiated respiratory and peptide injectable portfolio, which has less competition.
• The company has launched couple of complex respiratory products in the US market, which has accelerated its revenue growth. Multiple high-value launches are also lined up for this year.
• Cipla’s India business is on a strong footing, led by core portfolio tailwind in prescription and trade generics businesses. Q2FY23 marked the sixth consecutive quarter of market beating growth.

Adani Ports and Special Economic Zone’s (APSEZ) H1/22-23 results were moderately strong. The company reported robust earnings growth and margin expansion, supported by organic growth in cargo volumes and improved pricing. Leverage improved, as the company applied positive FCF towards debt reduction. That said, we expect slightly negative FY 2022-23 FCF, owing to higher full-year capex and the Haifa port acquisition. 

We note APSEZ’s continued aggressive growth ambitions, which would keep Net Debt/EBITDA at a moderate 3-4x. The company’s intention to bid for the Container Corporation of India (valued at a hefty USD 5.8 bn) may present an event risk, though the impact on leverage would ultimately hinge on APSEZ’s funding plans.

• Five Star Business Finance (0958461D IN) is looking to raise around US$250m in its upcoming India IPO. 
• Five-Star Business is a non-banking financial company (NBFC-ND-SI) that provides secured business loans to micro-entrepreneurs and self-employed individuals.
• We have looked at various aspects of the deal in our previous note, in this note, we talk about valuations.

• Five Star Business Finance (0958461D IN) is looking to raise around US$250m in its upcoming India IPO. 
• Five-Star Business is a non-banking financial company (NBFC-ND-SI) that provides secured business loans to micro-entrepreneurs and self-employed individuals.
• In this note, we talk about the RHP updates and undertake a peer comparison.

• Equity markets have been under a correction phase for more a year now; Nifty topped out in Oct’21 and is now back to near highs.
• In fact, last month’s close was an all time high close for Nifty on a monthly basis and 1st ever close above 18000 levels.
• Though such market corrections are not good from the return’s perspective, but they play a very important role.

• Post the end of the review period, we see 7 potential adds and 2 potential deletes for the MSCI India Index at the November SAIR.
• Inclusion in the index will require passive trackers to buy 6-21 days of ADV on the stocks. That increases to 16-45 days of delivery volume.
• Cumulative excess volume indicates pre-positioning on most potential adds. Foreign Portfolio Investors (FPI) have increased their holding on all potential adds over the July-September quarter.

• Dr. Reddy’s Laboratories (DRRD IN) reported strong Q2FY23 results, with revenue growing 9% y/y, mainly driven by North America business due to launch of gRevlimid in the US market.
• GRevlimid is not a one-off opportunity and will contribute meaningfully over the next few quarters as well. Price erosion in the base business continues to be within normal range.
• Adjusted for the covid product sales during Q2 FY22, and the brand divestment income in Q1 FY23, Indian business has grown in mid-teens year-over-year and mid-single digit sequentially.