India

• Delhivery is now looking to raise around US$700m in its upcoming India IPO, the company is backed by a host of financial investors, the largest being Softbank.
• Delhivery is an online logistics service provider which covers express parcel delivery, heavy goods delivery, part truckload (PTL) freight, truckload (TL) freight, supply chain solutions, cross border solutions etc.
• In this note, we talk about the updates from its RHP.

• Delhivery is the largest and fastest-growing 3PL express parcel delivery player in India. It has cut its IPO raise from Rs74.6 billion ($1 billion) to Rs52.4 billion ($0.7 billion).
• In Delhivery IPO Initiation: Can It Deliver?, we noted that the fundamentals are mixed as it has been unable to leverage strong growth to deliver profits or cash generation.  
• In this note, we look at the RHP which discloses 9MFY22 results. We continue to believe the negatives outweigh the positives. We are inclined to give the IPO a pass.

• Past phenomenal success of HDFC Bank (HDFCB IN) led to a belief that an oppressive work culture is the driver for performance and premium valuation
• Present CEOs at ICICI Bank Ltd (ICICIBC IN) and HDFC Bank believe a genteel and more humane approach can deliver similar results.
• Market has rewarded ICICI Bank and penalised HDFC Bank. Both CEOs are putting in place the building blocks for future sustained performance

This month, we provide an update on the developments in the Oil & Gas sector following Russia’s invasion of Ukraine.

The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the “In-Focus” section. The Asia Monthly is intended to broaden investors’ understanding of the Asian USD high-yield market.

• Can Fin Homes (CANF) reported strong set numbers in Q4FY22 with the pick-up in loan growth led by higher disbursements, improved NIMs due to higher yields, and robust asset quality
• We remain positive on the stock given its favourable loan mix, comfortable liquidity position, and robust CAR (23.3%)
• We maintain BUY with a target price of Rs 790 (2.5x FY24E BV), implying an upside of 23% from CMP.

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• Q4 results highlights: Disbursement growth of 13% yoy resulted in 8.4% yoy growth in portfolio AUM, driven by strong yoy growth in M&LCVs (20%), PVs (6%) and HCVs (8%).

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• Government of India (GoI) is looking to raise around US$2.7bn via selling a 3.5% stake in Life Insurance Corporation of India (LIC) in its upcoming India IPO.
• This is less than half of its initial plans in terms of fundraising target and comes at less than half of its initial valuation target.
• We have looked at various aspects of the deal in our earlier notes. In this note, we compare it’s anchor book results with recent listings.

In our next Webinar, we welcome back Analyst Ankit Agrawal, CFA, who will share and elaborate on three high-conviction ideas from the Indian market, across sectors and market caps.

The webinar will be hosted on Wednesday, 11 May 2022, 17:00 SGT/HKT.

• BAF reported strong Q4FY22 earnings led by 1) healthy AUM growth and 2) decline in provisioning. YoY, the NIM growth was similar to the AUM growth suggesting no margin compression.
• However, QoQ, BAF witnessed NIM compression, partly driven by interest reversal from a corporate account that became NPA. Overall, the management is confident of maintaining NIMs at current level. 
• The pace of core AUM growth also declined QoQ. However, this could be due to seasonality and despite declining pace, Q4FY22 core AUM growth was still healthy at 5%+.

• KPIT Tech reported strong Q4FY22 revenue growth (5%+ QoQ in constant currency [CC] terms). It also reported margin improvement, despite supply-side headwinds; with EBITDA margin at 18.6% vs 18.5% QoQ.
• FY23 guidance came in optimistic with revenue growth expected to be in 18-21% range in CC terms and EBITDA margin projected to remain stable in the 18-19% range.
• Demand environment continues to be robust with high visibility for growth. Q4FY22 total deal win was healthy at USD 200mm; including a large deal of Euro 70mm value.

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In our next Webinar, we welcome back Analyst Hemindra Hazari , who will outline his views on recent corporate governance developments in Indian financial institutions, separating the narrative from the reality on the ground.

The webinar will be hosted on Wednesday, 4 May 2022, 17:00 SGT/HKT.

Hemindra Hazari is a SEBI-registered research analyst with over 25 years of experience in the Indian capital markets, specialising in banking and economy research. He has managerial experience in establishing profitable equities business, leading, and mentoring analysts. He has worked with prominent foreign and domestic capital market firms such as UBS, Societe Generale, HSBC, ASK Raymond James, and Karvy Stock Broking, and is a regular guest on business media channels and is respected for his non-consensus view on stocks and the market.

• Life Insurance Corp of India (LIC) (1248Z IN) is the largest life insurer in India. At the IPO price range of Rs902-904, the Indian government aims to raise $2.6-2.7 billion. 
• In Life Insurance Corp of India IPO: Key Takeaways from the RHP,  we outlined the latest developments from the Red Herring Prospectus.
• In this note, we look at LIC’s valuation metrics. In light of the challenging market conditions, the IPO price range is reasonable.

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• Growth in number of subscribers on the back of increased workforce, it may be temporary spike
• Cost pressure visible as per our expectation and the margins continue to be at lower level on Y-o-Y basis
• Buyback of shares within a year of QIP meets more than the eye

• Last Friday was the last day of the review period for the MSCI May SAIR, Shanghai Shenzhen CSI 300 Index, STAR50 INDEX, KOSPI2 INDEX, KOSDAQ 150 Index and SENSEX INDEX. 
• We expect Yangzijiang Financial Holding (YZJFH SP) will be deleted from the FTSE Straits Times Index (STI) (STI INDEX) at the close on 4 May.
• ETFs focused on China, Taiwan and Hong Kong had inflows during the week while there were outflows on Korea focused ETFs.

• Several months ago, I published two Insights addressing aspects of the impending IPO of Life Insurance Corporation of India (1248Z IN) from several specific ESG perspectives.
• More specifically, they addressed: 1) LIC’s pursuit of pre-IPO ESG ratings, and 2) the decidedly weak (almost non-existent) ESG messaging in the Draft Red Herring Prospectus.
• I promised an update as the IPO drew closer. Unfortunately, no pre-IPO ESG ratings yet and the same generic pre-IPO message… but at this stage, none of that really matters.

• ACL reported encouraging Volume/Revenue growth of 3%/8% YoY but witnessed notable EBITDA/APAT de-growth of 19%/25% respectively YoY in Q1CY22
• We maintain our BUY rating on the stock with a revised TP of Rs 4,350/share (which includes Rs 275/share for the company’s stake in PMAG) as we value the stock at 17x its FY24E EPS
• TP implies an upside potential of 13.5% from the CMP.

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• Life Insurance Corp of India (LIC) (1248Z IN) is set to launch its IPO with the anchor investor offer period starting 2 May. The offer period closes on 9 May. 
• At the IPO price range of Rs902-949, the Indian government aims to raise $2.6-2.7 billion, which is materially lower than the initial target of $8.7 billion. 
• Following up on Life Insurance Corp of India IPO: Premium Market, in this note, we look at the latest developments from the Red Herring Prospectus. 

• SBI Life Insurance (SBIL) reported another consistent performance in Q4FY22. APE growth of 3.8% YoY was largely in line with expectations.
• VNB margin was reported at 25.9 (effective tax basis) witnessing an expansion of 270bps YoY with best-in-class cost ratios and improved persistency
• We remain positive on the stock and maintain a BUY rating with a Target Price of Rs 1,530/share (2.7x FY24EV), implying an upside potential of 37% from the CMP.

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• Apcotex Industries (APCOTEX) Q4FY22 results beat our estimates on all fronts. The revenues came in at Rs 277 Cr, reporting a 48% growth YoY, largely on a lower base of the last year.
• On a sequential basis, the top line grew by 10.7% on account of strong volumes and an increase in realizations
• We roll forward our estimates and multiple, valuing the company at 20x (30% discount to TTM PE of 28x) FY24E earnings to arrive at a revised TP to Rs 550/share (Rs 435 earlier).

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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. China Jinmao Holdings
2. Guangzhou R&F Properties
3. Sunac China Holdings
4. Greenland Hong Kong Holdings
5. Evergrande

and more…

• Campus Activewear Ltd (1535013D IN) is about to go public soon. 
• The RHP has portrayed Campus’s return ratios such as ROCE to be one of the highest in its peer group, inching past the likes of Bata India Ltd (BATA IN).
• However, upon further investigation of the financials, the return ratios seem to be mysterious, simply because of capital reserve arising from acquisition of promoter-companies, back when Ind AS was adopted.

• Government of India (GoI) is looking to raise around US$2.7bn via selling a 3.5% stake in Life Insurance Corporation of India (LIC) in its upcoming India IPO.
• This is less than half of its initial plans in terms of fundraising target and comes at less than half of its initial valuation target.
• We have looked at various aspects of the deal in our earlier notes. In this note, we compare it to its international peers and talk about valuations.

• Today is the last day of the review period for the June review of the S&P BSE SENSEX Index (SENSEX INDEX). Changes become effective at the close on 17 June. 
• We see Tata Motors Ltd (TTMT IN) and Tata Motors DVR (TTMT/A IN) replacing Dr. Reddy’s Laboratories (DRRD IN). Hindalco Industries (HNDL IN) is a close add on sector balance.
• The impact on DRRD IN will be higher than on TTMT IN, in terms of days of ADV to trade and days of delivery volume that needs to change hands.

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• Rates in Asia are among the worst performers this year, but they remain expensive – relative to the US and to their own history – and should continue to underperform.
• Other reasons for rates in Asia to sell off include: a marked increase in inflation, low projected real rates, currencies turning volatile, and deteriorating debt profiles.
• I like paying rates in Asia by pairing them with receivers in countries in other regions. China is an exception in the region as it remains in an easing mode.

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• Government of India (GoI) is looking to raise around US$2.7bn via selling a 3.5% stake in Life Insurance Corporation of India (LIC) in its upcoming India IPO.
• This is less than half of its initial plans in terms of fundraising target and comes at less than half of its initial valuation target.
• In this note, we will talk about the final deal terms and structure, RHP updates and do a quick valuation refresh.

• Axis Bank’s acquisition of the Indian Citi consumer banking franchise makes strategic sense, bolstering its market share and scale especially in credit cards, wealth management and incrementally in core deposits
• Strategy aside, Axis management’s execution needs to be totally on point to retain Citi clients and minimise the loss of key personnel given the acquisition’s seemingly full price tag
• Axis Bank tops the year-to-date share performance among the large cap Indian bank peers; yet we believe that, with regard to the Citi deal, management still has to deliver

• Bajaj Finance (BAF) reported a strong set of numbers in Q4FY22 which were ahead of our expectations, led by robust AUM growth of 29/9% YoY/QoQ and a strong PAT growth of 21/14% YoY/QoQ aided by lower provisions.
• The company’s AUM growth was driven by strong traction across products (except auto financing which de-grew by 16%)
• On the back of a recent correction in the stock, we revise our rating to BUY from HOLD with a revised target price of Rs 8,200 (7.8x FY24E ABV), implying an upside of 13% from the CMP.

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• Privi Speciality Chemicals (PRIVISCL IN)  is a manufacturer, supplier, and exporter of aroma and fragrance chemicals. 
• Promoter group and business restructuring took place last year where the Privi promoters bought majority stake from Fairchem, however, the source of funding remains unclear and yet to be observed.
• Even after restructuring of the business where oleochemicals was demerged into a seperate entity, Privi continues to have several discomforts in its balance sheet.

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• Kotak Mahindra Bank (KMB IN) is not a part of the FTSE All-World Index since the foreign room was less 20% over the last couple of years.
• Foreign room is 19.8% as of end March and small foreign selling is needed for Kotak Mahindra Bank to be added to the FTSE All-World Index at the September SAIR.
• If added to the FTSE All-World Index, passive trackers will need to buy 38.2m shares (US$861m; 11.1 days ADV; 22 days delivery volume) of Kotak Mahindra Bank (KMB IN).

• This insight focuses on private unicorns backed by Sea Ltd (SE US) , Walmart (WMT US) , Softbank Group (9984 JP) & Prosus NV (PROSY US) 
• Growth would require new and even larger investments across the Internet Sector.  
• Reliance and Tata’s retail plans are likely to challenge even giants like Amazon and Flipkart.

• The S&P BSE family of indices represents the performance of stocks listed on the Bombay Stock Exchange (BSE) across various sizes, themes, industries, and strategies.
• This series will mainly focus on the following indices of the S&P BSE family: S&P BSE 500, S&P BSE 200, S&P BSE 100, and S&P BSE SENSEX.
• In this insight, we take a look at the leading candidates who could become Adds/Deletes during the June 2022 Semi-annual Rebalance.

• Life Insurance Corp of India (LIC) (1248Z IN) filed its Red Herring Prospectus (RHP) with SEBI yesterday to raise between US$2.61bn and US$2.74bn selling 221.375m shares (3.5% of the company).
• The stake sale will value Life Insurance Corp of India (LIC) (1248Z IN) at between US$74.4bn-78.3bn. This is 1.1x the Embedded Value and sharply lower than initial indications.
• Fast Entry inclusion to the MSCI India index will be a close call, while inclusion to the FTSE All-World Index, NIFTY Index and SENSEX INDEX will take much longer.

• Government of India (GoI) is looking to raise around US$2.7bn via selling a 3.5% stake in Life Insurance Corporation of India (LIC) in its upcoming India IPO. 
• This is less than half of its initial plans in terms of fundraising target and comes at less than half of its initial valuation target.
• In this note, we will talk about the likely final deal terms and the likelihood of fast entry in the various indices.

• ICICI Bank: ICICI Bank (ICICIBC) delivered yet another strong quarter, with superior all-round balance sheet metrics (growth and asset quality), reflecting in +59% YoY growth in net profit
• The bank continued to gain traction on both sides of the balance sheet, with average CASA clocking 45% and YoY loan growth at 17%
• Net slippages were negative, resulting in negligible credit costs (adjusted for contingent provisions), as the stressed pool (restructured portfolio at 1%, BB & below portfolio at 1.3%) declined 40bps sequentially

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• Tata Communications’ (TCom) Q4FY22 data business net revenue grew only 5% YoY (+0.7% QoQ) which is below expectations.
• This should be partially weak from orderbook of Q3; while orderbook funnel has sequentially improved, management commentary does indicate gradual recovery in revenue growth.
• TCom revenue growth faced headwinds from fewer feet on the street, delay in decision making and under-performance of usage-based services.

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• Countercyclical diversified conglomerate evolution – ABCL has, over the past decade under Mr. Srinivasan’s leadership, seeded, nurtured and evolved as a countercyclical diversified conglomerate.

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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

• Rainbow Children’s Hospital (RCH) aims to raise around US$200m via issuing a mix of primary and secondary shares in its India IPO.
• RCH is a multi-specialty pediatric and obstetrics and gynecology hospital chain in India, operating 14 hospitals and three clinics in six cities, with a total bed capacity of 1,500 beds.
• In this note, we will talk about the recent updates and peer comparison.

• ICICI Bank (ICICIBC) reported yet another strong performance in Q4FY22 with a 59% YoY earnings growth, driven by 21% YoY growth in PPOP and a sharp decline of 63% YoY in provisions.
• The company’s NII growth was robust at 21% YoY, supported by a healthy loan book growth of 17% YoY and marginal NIM expansion (4% vs 3.96% in Q3FY22).
• We maintain a BUY rating on the stock with a revised target price of Rs 1,000 (SOTP basis core book at 2.8x FY24E ABV and Rs 173 Subsidiary Value), implying an upside of 34% from CMP.

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• While we have underweighted the IT sector (Report) HCL Technologies (HCLT) is a preferred pick due to (1) Significant narrowing of growth differential in FY23 despite disappointment on revenue guidance – vis-à-vis Indian Tier-1 growth leader Infosys.
• We also see modest acceleration in FY23 while most Tier-1 peers will see deceleration
• Our view that underlying growth in Products and Platforms (P&P) business is positive…(continued).

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• KNRC sits on a strong order book of ~INR100b (excluding recently won projects), which provides clear revenue visibility for the next three years.
• It has received appointed dates (AD) for two HAM projects in Jan’22 and financial closure (FC) in one HAM project in Apr’22, which will support execution in FY23E and FY24E.
• We expect margin to stay elevated, despite inflationary pressures from higher commodity prices, as a sizable portion (~26%) of its order book consists of irrigation projects.

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• LTTS reported a 3.6% QoQ CC growth in 4QFY22, 90bp below our estimate due to softer growth in Industrial Products (-0.5% QoQ), Medical Devices (flat QoQ), and Telecom and Hi-Tech (+1.1% QoQ), while Transportation grew a robust 7.8% QoQ.
• Despite the large 400bp shift in its on-site revenue mix and lower utilization (-80bp QoQ), operating margin was flat QoQ.
• Attrition spiked to 20.4% (+290bp QoQ) in 4QFY22, indicating continued supply pressures.

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• ANGELONE printed 15% growth in topline sequentially on a strong base (15% Q3), resulting in an 11% beat, led by better-than-estimated customer activity (higher average revenue-generating orders per customer) and stronger ancillary transactional revenue
• We are comforted by ARGO’s indicators of stabilisation, which include higher quality customer adds and improved activation levels
• Given the flat-fee model, ANGELONE is one of the best plays on the secular growth story in Indian capital markets and our highest-conviction BUY.

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• Rainbow Children’s Hospital (RCH) aims to raise around US$200m via issuing a mix of primary and secondary shares in its India IPO.
• RCH is a multi-specialty pediatric and obstetrics and gynecology hospital chain in India, operating 14 hospitals and three clinics in six cities, with a total bed capacity of 1,500 beds.
• In this note, we will talk about our earnings forecast and thoughts on valuation.

• Revenue fell 0.4% QoQ in USD CC terms in 4QFY22, but was above our estimate of -1.1% QoQ USD CC.
• The beat was led by both Services (+1.6% QoQ USD CC) and DLM (-9.3% QoQ USD).
• Growth in Services was driven by Portfolio (10% QoQ), Aerospace (3.9%), and Communications (3.5%), while growth in Rail Transportation (-9.5%) was weak.

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• Campus Activewear Ltd (1535013D IN) is looking to raise about US$184m in its India IPO, via a 100% secondary selldown.
• In comparison to peers, the firm has fared better during the pandemic, and had recorded stronger topline growth, even pre-pandemic.
• While a smaller player in the overall domestic footwear market, Campus is the largest domestic player in the niche sports and athleisure footwear market.