India

• Emcure Pharmaceuticals seeks to raise INR19.5B in upcoming IPO through a fresh issue of INR8B and an OFS of 11.4M shares. IPO price band has been set at INR960–1,008.
• The issue will open for subscription on July 3 and close on July 5. Bidding for anchor investors will open on July 2. Lot size for bidding is 14 shares.
• IPO proceeds will be used to repay debt. As at March 31, 2024, the company’s outstanding borrowings stood at INR21B against cash balance of INR2B.  

• Rising exports, as it has higher margins and Growth in Non-Auto sectors
• Acquisition of ACIL, JMT auto, TSUYO, and Multitech Auto will drive revenue
• Reducing dependency on a single product or categories and single customer

• RPPL executed well in FY24 with sales volume growth at 18% YoY. However, sudden and significant contraction in raw material prices dampened FY24 sales value growth to just 9% YoY.
• Exports sustained its quarterly run-rate of INR 10cr+ in Q4FY24, resulting in FY24 aggregate exports sales at INR 42cr. Exports contributed 15% of revenues in FY24 vs 5% in FY23.
• RPPL is also making good progress with its new initiatives. Its Olive Ecopak venture began commercial production in Mar 2024. Its injection molding segment is also scaling up well.

• Jyoti Resins and Adhesives (JRA IN) engages in manufacturing of synthetic wood adhesives under ‘Euro’ brand and claims to be the second largest player in its respective market.
• While on ground, Euro has gained good traction and has received positive feedbacks, there are however several takeaways noticed on the forensic end.
• These include Lack of clarity on revenue figures, low FA base, lack of disclosures of important accounting policies such as leases and customer rewards, etc.

• Kolte Patil reported a muted Q4FY24 with sales value flattish at INR 743cr vs INR 746cr QoQ. However, overall FY24 ended strong with sales value growing at 25%+ YoY.
• New project acquisition ended FY24 at INR 6000cr+, which was below the guidance of INR 8000cr. However, Kolte Patil remains upbeat and has guided to do INR 8000cr in FY25.
• Even with lower than expected project acquisitions, Kolte Patil is well positioned with INR 25000cr worth of projects portfolio. It has guided for 25% CAGR in sales value through FY25-27.

• According to local media, LG Electronics is reviewing for a potential IPO of LG Electronics India. LG Electronics has approached JP Morgan and Morgan Stanley to be potential IPO underwriters.
• If LG Electronics’ Indian subsidiary is listed, it is expected to be able to raise at least $500 million from the stock market.
• Post IPO, the market value of LG Electronics India is estimated to be between $2.1 billion (3 trillion won) and $4.3 billion (6 trillion won).

• Dr. Reddy’s Laboratories (DRRD IN) has signed a definitive agreement with Haleon (HLN LN) to acquire latter’s global portfolio of consumer healthcare brands in the nicotine replacement therapy outside US.
• The company will acquire the portfolio for a total consideration of £500M ($633M). In 2023, the portfolio generated ~£217M ($274M) revenue. Purchase consideration values the business at EV/sales of 2.3x.
• The acquisition will not stretch the balance sheet as Dr. Reddy’s has a cash balance of $990M as on March 31, 2024. The transaction is expected to complete in 4Q24.

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 Ports & Special Economic Zone
• Bharti Airtel
• Lippo Malls Indonesia Retail Trust
• Vedanta Resources

• Shankara Building Products L (SHANKARA IN) is seeing a healthy topline growth in the last three years but this is accompanied with margin contractions.  
• As far as the forensics are concerned, the company does not have grave auditor red flags like earlier but there are still some eye-catching checks.
• Caution must be given to the finance costs of the company which look on a higher side vis-a-vis the borrowings. Moreover, inadequate provisioning might also expose out some receivables.

• With emerging centers scaling up and established centers growing steadily, HCG’s profitability is growing strong. HCG’s Q4FY24 PBT grew to INR 28cr vs INR 13cr YoY and INR 3cr QoQ. 
• With the patient mix improving for emerging centers with growing vintage, ARPOB for emerging centers has crossed INR 40000, a rise of 12.2% YoY.
• We estimate that by FY26, HCG’s PAT could exceed INR 260cr, leading us to value HCG at a market cap of around INR 10000cr at 38x+ FY26 exit P/E.

• Despite the recent rally in Bandhan Bank Ltd (BANDHAN IN), the stock should be deleted from the NSE Nifty Bank Index (NSEBANK INDEX) in September.
• Canara Bank (CBK IN) should be added to the NSE Nifty Bank Index (NSEBANK INDEX) and passive trackers will need to buy 1x ADV and over 2x delivery volume.
• Bandhan Bank Ltd (BANDHAN IN) is safe for now but could be deleted from a large global index in the next few months on further underperformance.

• We interact with a few business partners of Eureka Forbes (EUREKAFO IN)  to understand the latest on-ground business developments.
• Key areas that are probed include feedback on product quality and innovation, attachment rates for AMC services, key drivers of volume, improvements in service quality, and product premiumization.
• Based on our interactions, it is quite evident that the company is not interested in developing its offline sales channels, i.e., the franchises.

• The FMCG business has been now sustaining an annualized revenue run-rate of INR 500cr+. Q4FY24 FMCG revenue was INR 135cr+, similar to Q3FY24 and a growth of 30%+ YoY.
• Firstsource Solutions (“Firstsource”) , the BPO business, has been sustaining its recovery after a lull period for two years. Its revenue grew 4.2% QoQ and 4.5% YoY in constant currency.
• The Sports business revenue continue to be dominated by IPL. Having played three seasons now, RPSGV’s IPL franchise, Lucknow Super Giants (LSG), has made its place and holds significant value.

• Exceeding our upgraded FY24 PAT estimate of INR 350cr+, Nesco reported PAT of INR 363cr, led by Q4Y24 PAT of INR 105cr, a rise of 24% YoY and 12%+ QoQ.
• Q4FY24 revenues grew 6%+ QoQ and 20%+ YoY. Growth was driven by BEC where revenues grew 6% QoQ and 31%+ YoY. IT Park revenue grew 2% QoQ and 13% YoY.
• For FY25, we estimate that Nesco could post a PAT of INR 420cr+. Per our FY25 exit P/E of 26x+, Nesco could be valued at around INR 11000cr.

• Hyundai Motor (005385 KS) is looking to raise around US$3bn via listing its India unit, Hyundai Motor India. HMI is a wholly owned subsidiary of the Hyundai Motor Group.
• HMI primarily manufactures and sells four-wheeler passenger vehicles and parts. Currently its vehicle portfolio includes 13 passenger vehicle models across sedans, hatchbacks, SUVs and battery EVs.
• In this note, we talk about the not-so-positive aspects of the deal.

• SEBI introduced the SPECIAL CALL AUCTION framework for Listed Holding Companies to unlock the value.
• The first special call auction is set to take place in October.
• Some companies are trading at a discount of more than 50% or even 80%, post this framework, shares will be traded at fair value.

• Kama Holdings (KHL IN)is available at 80% discount to its NAV.
• Kama Holdings (KHL IN) is Holding company of SRF Ltd (SRF IN), which has tailwind across segments.
• If the discount were to narrow from 81% to 56%, the price of Kama Holdings (KHL IN) could potentially double, assuming all other factors remain constant.

• Avanse Financial Services (1288481D IN) is looking to raise up to US$419m in its upcoming India IPO. The bookrunners will be JPM, Nomura, Kotak, Avendus, Nuvama Wealth and SBI Capital.
• Avanse Financial Services (AFS) is an education focused non-banking financial company (NBFC) operating in India. 
• It offers full stack education products ranging from education loans for students to growth capital for education institutions through education infrastructure loans. 

• Hyundai Motor (005387 KS) is looking to raise around US$3bn via listing its India unit, Hyundai Motor India. HMI is a wholly owned subsidiary of the Hyundai Motor Group.
• HMI primarily manufactures and sells four-wheeler passenger vehicles and parts. Currently its vehicle portfolio includes 13 passenger vehicle models across sedans, hatchbacks, SUVs and battery EVs.
• In this note, we talk about the positive aspects of the deal.

• Implied Volatilities (IVs) stabilized over the week after falling dramatically since the 04-June-2024 India General Election results.
• No tactical changes required while IVs are stable & “High & Down” Vol-state is maintained.
• Vol Curve continues to be in Contango. Lack of significant event risk should keep term structure locked in its current orientation. 

• Allied Blenders & Distillers (9844250Z IN) is looking to raise about US$180m in its upcoming India IPO.
• ABD is the largest Indian-owned Indian-made foreign liquor (IMFL) company and the third largest IMFL company in India, in terms of annual sales volumes between FY14 and FY22.
• In our previous notes, we talked about various aspects of the company. In this note, we talk about its RHP updates and our thoughts on valuation.

• Edelweiss reported a strong Q4FY24 led by robust performance across businesses. The asset management business continues to be the lead performer. Insurance businesses are also growing at an industry-leading pace.
• Most notably, the credit business seems to be gaining momentum now, led by co-lending. MSME co-lending disbursements tripled while housing finance (HFC) co-lending disbursements doubled in FY24. 
• To unlock value and reduce debt at the corporate level, Edelweiss is planning a minority stake sale in the Alternative Asset Management business.

• Muthoot Microfin (MUTHOOTM IN) raised around US$115m in its Indian IPO, after pricing the deal at the top end of its IPO range at INR291/share.
• Muthoot Microfin is a microfinance institution providing micro-loans to women customers with a focus on the rural regions of India.
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• India’s passenger vehicle industry is shifting towards alternative fuels and facing intense competition, amidst changing customer preferences.
• Despite a growing vehicle market, Hyundai Motor India (HMIL) faces a tough battle to defend its market share given changing industry dynamics.
• With more competitors in the fray, including its parent group company Kia and EV leader BYD, Hyundai Motor India is in for a challenging ride.

• Bajaj Housing Finance (BHF IN) is looking to raise around US$830m in its upcoming India IPO.
• BHF is a non-deposit taking housing finance company engaged in mortgage lending since FY18. Its mortgage products include home loans, loans against property, lease rental discounting and developer financing.
• In this note, we 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.

• Bajaj Housing Finance (BHF IN) is looking to raise around US$830m in its upcoming India IPO. 
• BHF is a non-deposit taking housing finance company engaged in mortgage lending since FY18. Its mortgage products include home loans, loans against property, lease rental discounting and developer financing.
• In this note, we talk about the positive aspects of the deal.

• In FY24, Morepen Laboratories (MORE IN) achieved revenue, EBITDA, and PAT growth of 20%, 101% and 150%, YoY, respectively, driven by medical devices and API businesses.
• Business has stabilized in FY24 and Morepen is seeing fresh buying of medical devices. With expanding capacity, glucometer and BP monitor are expected to maintain ~30% growth momentum.
• Morepen aims to expand API product portfolio and geographic reach, while maintaining global leadership positioning in six key widely used API products.