India

• VBL has a history of commanding high growth through acquisitions, product portfolio and geographical expansions and operating leverage
• Varun is now focusing on interesting geographies and products which will aid its next level of growth
• There could be more than bigger success stories like Sting for Varun Beverages if it can repeat history

• In Q4FY24, Cipla Ltd (CIPLA IN) posted 10% YoY revenue growth to INR61.6B. Despite surging R&D expenditure, EBITDA increased 13% YoY to INR13B, leading to 54bps margin expansion to 21.4%.
• New launches in U.S. and outperformance in the domestic market driven by chronic portfolio should drive the growth. For FY25, the company has guided for EBITDA margin of 24.5–25.5%.
• Cipla shares soared 15% YTD. Last week, the promoters, Hamied family sold 2.5% stake in the company for ~INR26B, igniting a rally in share price.

While JSW Steel’s Q4/23-24 results were soft in our view, the full-year numbers were decent. Operational stats remained robust. The share of value-added products was high and continued to increase. The financial risk profile was unchanged q-o-q, but improved significantly from FYE 2022-23. However, liquidity deteriorated and was barely adequate.

We expect a stronger FY 2024-25 with higher revenue and earnings, as the steel operating environment appears to have bottomed out. Steel prices should remain stable, with possible upside. That said, the higher earnings could be offset by an increase in debt to cover the large and growing capex.

• Curtail Short Gamma & Short Vega exposure as Vol-regime has switched to “High & Up” state.  
• Short-Dated IVs traded markedly lower, driven by recovering equities & the 20-May market holiday
• Nifty50 vol curve is exhibiting unusual kinked shape. Monthly IVs are commanding a large vol markup relative to rest of the curve. 

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.

• Hopson Development
• Vedanta Resources

• Indian SMEs are new hot investment avenues selling stories to investors which might end to a case of pump and dump.
• SEBI in last few months have identified such cases in SMEs and microcaps.
• We delved into key guidelines on Indian Forensics to Identify and Avoid Storified Stocks

• Zen Technologies (ZEN IN) expands product range to drones, anti-drone systems, and medical simulators, enhancing opportunities beyond government contracts.
• Strong order book of Rs 1,401 crore, significant R&D investment, and government support for indigenous defence manufacturing drive growth.
• Zen Technologies (ZEN IN) diversified product portfolio and strategic government support position it well for significant growth in the defence and simulation markets.

• KPIT reported a strong Q4FY24 led by 5.1% QoQ revenue growth in constant currency (CC) terms. EBITDA margin came in better than expected at 20.7%.
• Overall, in line with our projection, KPIT even beat its upgraded guidance by posting YoY revenue growth of 39%+ in CC terms vs 37%+ guided.
• KPIT has guided for a strong FY25 with revenue guidance of 18-22% in CC terms and EBITDA margin of 20.5%+.

• LICHF faced some teething issues with technology during past 1Y due to which growth and reported asset quality had been subdued. However, with strong Q4FY24, LICHF is back on track.
• LICHF reported strong growth in disbursements. Q4FY24 disbursements were INR 18200cr+, a growth of 20%+ QoQ. NIM came in higher than expected at 3.15%, despite spike in bond yields.
• Asset quality improved significantly with Stage 3 assets declining to 3.31% vs 4.26% QoQ and Stage 2 assets declining to 4.20% vs 4.54% QoQ.

• A Detailed understanding of Thermal cum Renewable Power house JSW Energy Ltd (JSW IN) Business and their ambitious target to achieve 10 GW by FY25.
• Strategy 2.O, where company is planning for 20GW by 2025, energy storage system.
• JSW Energy’s strategic acquisitions and focus on renewables enhance growth prospects, with a vision to become a leading renewable energy provider.

• The Cigniti-Coforge acquisition presents a unique investment opportunity in the IT services sector, with potential for significant returns.
• Coforge plans to acquire a 54% stake in Cigniti Technologies, expanding its presence in digital assurance and AI services.
• The deal is expected to be completed by Q2 of FY25, with an open offer price potentially higher than the current market value of Cigniti shares.

• UPL Ltd (UPLL IN)‘s Q4 FY23 results show a significant improvement in margins to 13% after a drastic fall to 1% in December 2023, despite a 15% YoY revenue decline.
• Revenue drops were driven by lower prices and high-cost inventory liquidation, yet margin recovery signals operational improvements and potential future stability.
• Planning to reduce the debt by raising capital via right issue as well as IPO of Advanta.

• Nexus Select Trust (NST IN) raised around US$391m in its India IPO in May 2023.
• NST is a REIT with a portfolio of 17 Grade A urban consumption centers. Its portfolio covers retail malls, office assets, hospitality assets and a renewable power plant. 
• In this note, we talk about the upcoming lock-up expiry and possible deal dynamics.

• SEBI observed White Organics and Add Shop Retail used circular transaction method to inflate financial performance of respective companies
• Promoter sell their holdings on the back of this inflated financial performance
• The forensic analysis delves into the modus operandi of these frauds

UPL Limited’s Q4/23-24 results appear to be better than in the past three quarters, with lower declines registered for revenues and EBITDA. That said, we note that this was against a low comparison base, with Q4/22-23 marking the beginning of the downturn. The company has been severely affected by post-patent competition and cheap supply from China, with these not likely to improve much in the near term. The financial risk profile deteriorated significantly, and is now not consistent with the Ba1/BB/BB+ rating. While liquidity appears to be adequate, we expect it to weaken during the year as the company takes on working-capital debt. We highlight that while leverage and the liquidity profile tend to be better at financial year-end, they typically deteriorate significantly during the year. However, the USD 500 mn right issuance should shore up the balance sheet significantly.

• Following HCL Technologies (HCLT IN)‘s fiscal 4Q2024 earning report last month, we have witnessed an acceleration in near-term earnings estimates downgrades.
• Based on near-term momentum indicators, it seems that we are only at the beginning stage of a prolonged period of underperformance.
• HCL Technologies currently trades roughly one standard deviation above its rolling 5-year historic average PE ratio.

• Aadhar Housing Finance(AHF) raised around US$360m in its India IPO, via selling a mix of primary and secondary shares.
• AHF is focused on the low income housing segments (ticket size less than INR1.5m) in India. It offers a range of mortgage-related loan products.
• We have looked at the company’s performance and valuation in our past notes. In this note, we talk about the trading dynamics.

• BAF reported a decent Q4FY24 led by strong AUM growth and robust customer acquisition. Adjusted for the impact of the regulatory ban, Q4FY24 results were in line with the expectation.  
• The biggest negative surprise in Q4FY24 was the 21bp NIM compression. NIM compressed led by AUM composition shifting incrementally to secured assets. 
• BAF is optimistic on growth across segments, except Rural B2C where risk metrics are somewhat elevated; however this should normalize, given Rural B2B is doing fine.

• GHCL Textiles (GHCLTEXT IN)  Aiming 25-30% revenue growth along with 15-20% average margins significantly increase the profitability of the company.
• Entering into value-added products like Functional fabrics and setting up their own manufacturing plant for fabric.
• Management Guidance on yarn prices, capex and debt profile of the company.

• Belstar Microfinance Ltd (3624918Z IN) is looking to raise US$156m in its upcoming India IPO. The bookrunners on the deal are ICICI Securities, Axis Capital, HDFC Bank, SBI Capital Markets.
• Belstar Microfinance (Belstar) is a non-banking finance company (NBFC) in India with a focus on furnishing micro-enterprise loans.
• As per the CRISIL report, the firm was the ninth largest NBFC – Micro Finance Institution (NBFC-MFI) in terms of assets under management (AUM) as of Dec 2023.

• Go Digit General Insurance is looking to raise around US$315m in its India IPO.
• Go Digit General Insurance is a digital full stack insurance company, offering motor insurance, health insurance, travel insurance, property insurance, marine insurance, liability insurance and other insurance products.
• We have looked at the company’s performance in our past note. In this note, we talk about the refiling updates and valuations.

• TBO Tek (0395045D IN) raised around US$186m in its India IPO, after pricing the deal at the top end of the range at INR920/share.
• TBO Tek is a global travel distribution platform. Its two-sided technology platform serves companies involved in the travel industry such as hotels, airlines, travel agencies and travel management companies.
• We have looked at various aspects of the deal in our previous notes. In this note, we talk about demand and trading dynamics.

Tata Motors’ Q4 and FY 2023-24 results were excellent in our view, with record high revenue and earnings. Net debt plunged by such a large amount that the Indian business has turned net cash, and the group remained on track to be overall net automotive debt free in FY 2024-25.

• Election-Related volatility being reflected in options. India VIX has surged 70% over the past two weeks. Quarterly IVs have seen the largest rise as they capture election result date.
• BankNifty IVs are finally responding as the market plays catch up to the bank regulator’s new-found aggressiveness
• Elevated Vol-of-vol observed the past few weeks. Vol-regime Switching Model continues to point to “High & Down” state. Odds of switching to a “High & Up” state are increasing.

• In FY24, Gravita India (GRAV IN) had faced qualified opinion from the auditors regarding its accounting pertaining to share based payments, which in a way boosted the earnings. 
• However, the unusual accounting behaviour is not for the company. We have seen some irregular line items in the past as well, w.r.t. gains and losses on commodities and forex. 
• Other key takeaways include negative free cash flows and difficulty in cash generation, revenues from traded goods not being in sync, fresh contingent liabilities, etc.

• NIFTY 50 represents the 50 largest stocks listed in the National Stock Exchange (NSE) of India and the NIFTY Next 50 index tracks the next 50 largest names.
• In this insight, we take a look at the names leading the race to become ADDs/DELs during the September 2024 index rebal event.
• More than 50% of the 6-month reference period is now complete. There are a couple of changes to the expected ADDs/DELs list since my last insight.