India

• The six-month reference period for NIFTY September 2022 Rebalance ends tomorrow.
• In this insight, we take a look at the names that could become ADDs/DELs for the NIFTY 50, 100, and 500 Indices in the September 2022 Rebalance.
• In addition, I have discussed some trading opportunities with interesting potential index flow dynamics.

• Mamaearth (1652951D IN)‘s in one of foremost D2C personal care brands. Initially started with baby products, the brand now offers a full range of toxin free, natural products.  
• Channel feedback suggests good products and premium pricing, but chasing traditional retail is not easy and will test Mamaearth’s execution capabilities. 
• COVID has boosted financials. Revenues have skyrocketed and the company has become profitable. The way forward for traditional retailing and its execution will be the key.  

• The situation in West Bengal is improving/stable. While Assam is showing no signs of improvement
• Recent floods have impacted collections, however, as highlighted earlier they are not likely to slip into NPA.
• The asset quality downcycle could be on the verge of ending.  Additional provisioning requirements should be sharply lower from Q3. 

• This is our first report on Nocera and we look to provide a detailed account of the various industries that the company operates in and the key macro-economic factors.
• While Nocera did report a net loss and incurred one-time costs related to its listing last year, things ought to be entirely different in 2022.
• However, given how quickly the company’s revenues are increasing, the stock price should also rise quickly.

• This is our first report on EzFill Holdings and we look to provide a detailed account of the various drivers that will be responsible for the company’s growth in the coming years.
• However, it is trading at a revenue multiple of around 1x whereas it can easily command a 5-6x revenue multiple.
• EzFill’s current share price does not reflect the potential upside of its huge revenue growth potential as well as its attractiveness as an acquisition target for oil majors.

• KPIT Technologies (KPITTECH IN) [“KPIT Tech”; “KPIT”] reported a robust Q1FY23 earnings with CC revenue growth of 6% QoQ (26% annualized), well above the 18-21% guided for FY23.
• The biggest positive surprise was on the margins front with EBITDA margins coming in at 19.4%, exceeding the 18-19% band guided for FY23, despite the supply-side headwinds.
• More importantly, the demand outlook continues to be promising despite macro-economic concerns around US and Europe.

Tata Motors’ Q1/22-23 results continued to be weaker than expected as well as guided, mainly due to the weakness in Jaguar Land Rover (JLR), which more than offset Tata Motors India’s reasonable performance. Gross leverage remained almost stable, given the small increase in debt and minimal decline in EBITDA. However, net leverage deteriorated significantly, due to the increase in net debt. Liquidity is adequate. The debt maturity profiles for both JLR and Tata Motors India are evenly spaced out.

Despite management’s consistent guidance and hints at an improvement in the situation, retail sales continued to be materially lower on a y-o-y basis (albeit relatively flat q-o-q). We expect the semiconductor shortage to persist for at least another 18 months. The industry will need to rebuild the chip and component supply chains, which could take time. Thus, we have a cautious view on management’s persistent optimism.

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.

• KWG Living Group
• Lifestyle International Holdings
• Vedanta Resources

• FirstCry (0172540D IN) is one of the leading and only surviving Omni channel retailer that specialises in baby products. 
• Channel feedback is positive, the strategy of opening company-owned and operated stores, and segregating online and offline operations is working well.  
• Increasing revenues, profitable operations and limited competition make FirstCry a compelling narrative that should be on the watchlist. 

• Sula Vineyards (1332009D IN) is looking to raise about US$175m in its upcoming India IPO. The deal will be run by Kotak, CLSA and IIFL Securities.
• Sula Vineyards (SV) distributes wines under a bouquet of brands. In addition to its flagship brand “Sula,” popular brands include “RASA,” “Dindori”, “The source,” “Satori”, “Madera” & “Dia”. 
• Currently, it produces 56 different labels of wine at four owned and two leased production facilities located in the Indian states of Maharashtra and Karnataka.

• Pepperfry (0096696D IN) is one of the largest furniture and home decor marketplaces in India. Recently also started offering appliances to serve as a one-stop home shop. 
• Our channels indicate higher AOVs and different customers compared to Swedish giant IKEA. Marketplaces like Pepperfry solve the problem of discovery for customers looking for furniture in a new location. 
• The WFH tailwind is fading away. With revenues declining, profitability is distant, and with the financial position that is yet to improve caution is warranted.  

The Asia HY Trade Book for July 2022 includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative-value charts and lists of the bonds across Asia (ex-Japan) HY and crossover credits.

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.

• Central China Securities
• China South City
• Tata Motors ADR

• While HDFC Bank (“HDFCB”) is doing all the right things (distribution expansion, digital infrastructure revamp) from a long-term perspective, it also has near-term growth triggers led by its retail book.  
• Excluding auto sector and two-wheeler loans, HDFCB’s retail book grew 25% YoY in Q1FY23. As the supply chain disruptions recede, HDFCB’s retail book growth could surprise on the upside.
• HDFC Bank (HDFCB IN) is also making decent progress in its digitization upgrades which should further bolster the growth and productivity.

• Cars24 (1716847D IN) is one of India’s leading used auto (primarily car) marketplace.  The company claims a 90% share in the online used car market. 
• Channel feedback suggests no customer loyalty and a poor competitive position compared to local unorganised sales yards. 
• Losses narrowing due to reduction in expenses, declining revenues and recent high profile exits all point to caution. 

• In this insight, we take a look at the names leading the race to become ADDs/DELs for the BSE SENSEX, 100, 200, and 500 Indices in the December 2022 Rebalance.
• SENSEX and BSE 100 could both see one index change each. There could be multiple ADDs/DELs for the BSE 200 and BSE 500 indices.
• There are several trading opportunities with interesting potential index flow dynamics.

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.

• Honghua Group
• Tata Steel Thailand

• We are seeing some positive signals that suggest the lows for this bear market may have already been established, or at the very least, that downside is limited from here.
• Still, YTD downtrends remain intact on the global MSCI equity indexes, and we need to see reversals of their downtrends in order to get more constructive at the index level.
• Cyclical Growth Sectors continue to gain momentum and we are upgrading the MSCI ACWI Technology, Consumer Discretionary, and Communication Services Sectors from underweight to market weight. Add exposure.

• Life Insurance Corp of India (LIC) (LICI IN) and Tata Power (TPWR IN) will replace Nmdc Ltd (NMDC IN) and Piramal Enterprises (PIEL IN) at the close on 5 August.
• In September, Adani Wilmar (AWLTD IN), Indian Railway Catering and Tourism (IRCTC IN), Bharat Electronics (BHE IN), Hindustan Aeronautics Ltd (HNAL IN) and Mphasis Ltd (MPHL IN) are potential inclusions.
• At over 4 days of deliverable volume to trade, the impact is especially large on  Bharat Electronics (BHE IN), Zydus Lifesciences Ltd (ZYDUSLIF IN) and Lupin Ltd (LPC IN). 

• Kotak Mahindra Bank (KMB) was deleted from the FTSE All-World Index following the introduction of the minimum headroom rule. With foreign room below 20%, the stock was not added back.
• The latest shareholding pattern as of 30 June shows foreign room at 20.01%. This means that Kotak Mahindra Bank (KMB IN) should be added to the index in September.
• However, the inclusion will take place in a staggered manner. Subject to foreign room staying above 20%, the inflows will come over the next couple of years.

• Major theft of Rs 342 mn ($4.3mn) in ICICI Bank Ltd (ICICIBC IN) ‘s currency chest near Mumbai
• Apparently a single ICICI Bank staff responsible and shockingly had sole access to the currency chest 
• Reflects extremely poorly on ICICI Bank’s currency chest security protocols and processes and heightens concerns of reputational and operational risk at the bank

• SignatureGlobal India Pvt Ltd (1468641D IN) is looking to raise around US$125m in its upcoming India IPO. The deal will be run by Axis, ICICI, and Kotak.
• Signature Global is a real estate development company in India, with its primary operations being the development of residential real estate projects in the affordable and mid segment.
• As of FY22, it had completed five projects with a land area of 34.9 acres and an aggregate saleable area of 2.86m sqft.

• Bharat FIH (BFIH IN) is India’s largest Electronic Manufacturing Services (EMS) provider and the largest mobile phone manufacturing and assembly services provider to Xiaomi Corp (1810 HK). 
• It has received Sebi approval for an IPO to raise Rs50,038 million (US$625 million), split equally between a primary and secondary raise. The offer will launch in August. 
• The fundamentals are challenged due to its reliance on Xiaomi, market share pressure, glacial revenue diversification, low margin and cash burn. We would pass on the IPO.

• This is our first report on UCaaS player, RingCentral.
• The company started off with 2022 reasonably well with solid revenue growth and expansion in both free cash flow and operating margins.
• Currently, it is the only company that offers a fully integrated solution that combines UCaaS and CCaaS on one bill.

• This is our first report on broadcasting giant, Sirius XM Holdings.
• The company reported strong first-quarter growth in subscription and advertising revenue, as well as strong cash flow generation.
• We initiate coverage on Sirius XM Holdings with a ‘Hold’ rating.

• With over 90% of the review period complete, Adani Enterprises (ADE IN) is a high probability inclusion to the NIFTY Index (NIFTY INDEX) and will replace Shree Cement (SRCM IN). 
• We estimate passive NIFTY Index (NIFTY INDEX) trackers will need to buy nearly 7% of the real float on Adani Enterprises (ADE IN) and the stock should continue to outperform. 
• Adani Green Energy (ADANIGR), Adani Transmission (ADANIT) and Avenue Supermarts Ltd (DMART) have higher average free float market caps and could be included if added to the F&O segment.

• The current excess rainfall across India is so far not leading to any material damage in rural India. 
• Britannia Industries (BRIT IN) continues to operate in a favourable environment and is possibly even immune to down trading. 
• Dabur India Ltd (DABUR IN) channels remain optimistic about matching YoY value growth, however, in terms of volume there still is quite a bit of ambiguity. 

• Healthvista India (1370230D IN) is looking to raise about US$126m in its upcoming India IPO. The deal will be run by SBI Cap, IIFL Securities and JM Financial.
• Healthvista India is an out-of-hospital healthcare service provider. Under its brand Portea, it offers services such as primary care, geriatric and palliative care, amongst others. 
• It also distributes specialty pharmaceuticals and provides “point of care” medical equipment for sale and rental.

• Medical tourism in India was negatively impacted by the pandemic. As the government is lifting travel restrictions, reopening border, and resuming international flight services, medical tourists have started returning back.
• Large corporate hospitals, having pan-India presence, like Apollo Hospitals Enterprise (APHS IN) are set to benefit from this trend. Medical tourism contributed 10% of revenue of Apollo in pre-pandemic era.
• Apollo’s market dominance and expansion plan in hospital and foray into online services have sharpened its competitive edge over competitors. Its healthcare business is expected to grow mid-teens this year.

• Zomato (Zomato IN) raised US$1.3bn in its India IPO in Jul 2021. At that time, it was the largest technology sector listing in India.
• Zomato is one of two leading food delivery app operators in India. It recently acquired Blinkit marking its foray into the instant grocery segment.
• In this note, we will talk about the lock-up dynamics and updates since our last note.

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 South City
• NagaCorp Ltd
• Vedanta Resources

• Dredging Corp Of India (DCIL IN) has been seeing a heavy churn in top personnel lately, including the most critical sacking of MD and CEO, Mr. G.Y.V Victor.
• It was reported that there has been suppression of facts, material misrepresentation of facts and false claims in support of his experience criteria submitted by GYV Victor.
• This is a key governance red flag and the fact that the investigation was made after one year of his appointment indicates loopholes in the governance and recruitment controls.

• This is our first report on the material science behemoth, Corning.
• Both the gross margin and operating margin have been increasing since the start of 2022.
• The company also collaborated with 5E Advanced Materials to supply boron specialty materials.

• Corning is a major material science player that has been experiencing a rapidly improving margin profile since the past few results.
• Both the gross margin and operating margin have been increasing since the start of 2022.
• The management appears confident in their ability to promote long-term profitable growth combined with their steps to increase margins.

• Tatas are scripting India’s early journey in electric cars – Tata Motors Ltd (TTMT IN) accounted for 87% of the 8077 electric cars sold in Q1FY23 (1605 units in Q1FY22).
• The rapid roll-out of charging infrastructure across the country by Tata Power (TPWR IN) and the success of Tata’s electric car (compact SUV). Tata Nexon EV, are key factors. 
• Demand and infrastructure for electric cars seem to be in place but market growth is restricted by a lack of choice/adequate supply in the popular price range (<USD 20K).

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. Yankuang Energy Group
2. Powerlong Real Estate Holdings
3. Sawit Sumbermas Sarana
4. Vedanta Resources
5. Tata Motors Ltd

and more…

• Alkem Laboratories Ltd (ALKEM IN) earns 71% of total revenue from domestic business, which is the most important growth lever of the company. Domestic business revenue grew 29% in FY22.
• The company dominates the anti-infective segment, through its mega brands, with a market share of 12.9%. In the chronic segment, Alkem is growing fast to emerge as a significant player.
• Regular new product launches, including biosimilars, should continue to contribute to Alkem’s growth and fill portfolio gaps. Entry into new therapies would also be an important growth engine, going forward.