Daily Brief India: Bajaj Finance Ltd, Vikram Solar, JSW Steel Ltd and more

• Bajaj Finance Ltd (BAF IN) reported key performance metrics for Q3FY23. AUM growth came in weak with incremental AUM addition at just 12,500cr vs 14,700cr YoY. 
• QoQ, the AUM growth looks decent at 5.5%+, however, given that the Q3FY23 was a festive season quarter, QoQ comparison is not as relevant.
• However, BAF did a good job on customer acquisition. It acquired 3.1mm new customers (highest ever quarterly increase) vs 2.56mm YoY, a growth of 21%+.

• Vikram Solar (0490158D IN) is looking to raise around US$260m in its upcoming India IPO. 
• Vikram Solar (VS) is an integrated solar photo-voltaic (PV) modules producer and an integrated solar energy solutions provider.
• As per CRISIL, it was one of India’s largest module manufacturers and held a 19% domestic market share, as per operational module capacity.

We view JSW Steel as “Low Risk” on the LARA scale. The company has demonstrated a strong and resilient track record throughout the cycle. JSW’s large and growing scale, with increasing vertical integration, partly offsets the industry’s cyclicality as well as JSW’s aggressive expansion plan and acquisitions. The group has weathered the challenging operating environment well, despite a sharp slowdown in the Indian economy in 2019 and the COVID-19 pandemic. Furthermore, the company’s improving vertical integration (in terms of captive iron ore and coal supplies) has reduced exposure to supply and price volatility for raw materials. We note positively the Indian government’s continued willingness to support the domestic steel market, which has partly offset cheap exports from steel-surplus countries (e.g. China, Russia, South Korea and Japan). We also view favourably JSW’s position as the largest player in the Indian market, with a low cost base. The company has managed to turn around Bhushan Power & Steel, which had been acquired in bankruptcy court proceedings.

Our fundamental Credit Bias is “Negative”, due to the sharp deterioration in the operating environment. This was in turn driven by high coking coal prices and increased energy costs.

Controversies are “Immaterial”. While JSW has faced some issues (e.g. villagers’ protests against plants or controversial land sales by local governments to the company), such events are immaterial and quite common in India. The ESG Impact on Credit is “Neutral”. The metals & mining industry is exposed to regulatory and geopolitical risks, and the nature of the extraction process places JSW under scrutiny from environmental agencies and investors. However, the company has managed these well, considering the significant ESG efforts it has made.