Daily Brief India: Adani Enterprises, Mankind Pharma, Hindustan Unilever, NIFTY Index, Tata Motors Ltd and more

• The Adani Enterprises (ADE IN) Further Public Offering (“FPO”) expected to raise Rs 200bn has its first leg publicly complete with anchor investors taking Rs 59.849bn. 
• Noted shortseller Hindenburg Research published a long report suggesting Adani Enterprises and indeed the Adani Group were over-priced according to fundamentals and were the result of  a “con.”
• Now the book build starts. Deal structure and Adani Group CFO comments continue to suggest that Liquidity is a Bug, not a Feature.

• Mankind Pharma is looking to raise about US$1bn in its upcoming India IPO.
• MP is a pharmaceutical company engaged in developing, manufacturing and marketing a range of pharmaceutical formulations across various acute and chronic therapeutic areas, as well as several consumer healthcare products.
• In this note, we talk about the not-so-positive aspects of the deal.

• Hindustan Unilever (HUVR IN)‘s strong quarterly performance was overshadowed by a proposed hike in royalty payments to parent Unilever PLC (ULVR LN) 
• HUVR’s historical royalty growth has been below revenue and PBT growth and hence does not generate any red flags in terms of minority shareholder protection.  
• While the impact on EPS is ~3%, we believe much of the reaction around HUVR’s Royalty is Noise. 

• At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. 1) Response to key levels. 2) Price action. 3) Momentum confirmation.
• Every recommendation requires definitive evidence of all 3 pillars to be regarded as a high probability outcome. 
• The Nifty Index (NIFTY INDEX) delivered upon our 3 pillars in Nov/Dec 2022. A consecutive down month in January will be further evidence of a likely 15%-18% correction.

In our view, Tata Motors’ Q3/22-23 results were solid and much better than expected, especially in terms of profitability and cash flows. The strong performance was driven by gradual improvement in chip supply, cost savings, product mix and softer commodity prices. Guidance is also positive. The financial risk profile should improve, supported by significantly higher earnings and slightly lower debt. Liquidity, at least at Jaguar Land Rover (JLR), remains sound. JLR has no debt maturities until January 2024.

While Tata Motors will likely be able to deliver earnings improvement in H2/22-23, we believe it might be difficult for the company to achieve net-zero auto debt in two years as guided, considering the challenging operating environment. In this context, a revision of this target is warranted.