Daily Brief India: Tata Motors ADR, Axis Bank Ltd, Zomato, Archean Chemical Industries, Dr Lal PathLabs Ltd, Phyx44, Tata Motors Ltd and more

• Yesterday, with earnings, Tata Motors Ltd (TTMT IN) announced that it would delist its ADS, making an application on or around 13 January.
• This sounds relatively benign because since 2004 when the ADS was listed, local funding capacity has increased substantially. It may no longer be needed. 
• But it is MUCH more interesting than that. There is lots of fun to be had here. 

• Post market close yesterday, Tata Motors Ltd (TTMT IN) announced that it intended to delist Tata Motors ADR (TTM US) and terminate its ADS program.
• The easiest option for most ADS holders will be to sell the ADS. That could take the ADS lower and to trade at a discount to the underlying shares.
• Sell Tata Motors ADR (TTM US) outright or sell the ADS/buy Tata Motors Ltd (TTMT IN) for an arb trade.

• The Government of India (GoI) aims to raise around US$500m via selling a 1.4% stake in Axis Bank Ltd (AXSB IN). 
• This won’t be the first selldown by GoI as it has been reducing its stake since 2019. We have covered a number of the past deals in the name.
• In this note, we will run the deal through our ECM framework and comment on other deal dynamics.

• Over the last five quarters, monthly transacting customers have increased by 36%, QoQ, the pace could be slower, but the trend remains upwards. 
• AOVs and Order frequency have the potential to inch up, but only over the long term.
• Take rates are inching up, delivery fees are going higher, and with a higher market share Zomato (ZOMATO IN) ‘s food delivery business is expected to continue improving. 

• Archean Chemical Industries (0810406D IN) is looking to raise about US$178m in its India IPO. 
• Archean Chemical Industries (ACI) is a specialty marine chemical manufacturer in India focused on producing and exporting bromine, industrial salt, and sulphate of potash to customers around the world. 
• We have looked at the background of the deal in our earlier notes. In this note, we will talk about the peer comparison and valuations.

• Dr Lal PathLabs Ltd (DLPL IN) reported revenue growth of 7% y/y in Q2FY23, driven by 15% y/y growth in non-COVID business, which clocked highest ever quarterly revenue.  
• Although business growth was mainly driven by a double-digit patient volume growth, average realization per patient also increased 3% y/y to INR746.
• Amid rising competition, the company reported sequential improvement in bottom-line. Normalized EBITDA increased 20% compared to Q1FY23. Normalized EBITDA margin improved 310 basis points sequentially.

• Phyx44, a biotech-enabled food science startup based in Bengaluru, India, has secured US$1.2 million in seed capital.

• The startup will use the money to accelerate R&D, expand the team and work on the co-development of product formulation with key partners.

• Founded in early 2021, Phyx44 develops animal-free milk proteins and fats for use in dairy products. It bets on microbial fermentation as the best way to replicate dairy.

Tata Motors’ Q2/22-23 results were better than expected, with reasonable improvement in revenue and earnings. That said, this was partly due to the low base effect last year, owing to COVID-19. The financial risk profile has improved slightly, on the back of the higher earnings and stable debt. Liquidity appears to be adequate, especially at Jaguar Land Rover (JLR).

The operating environment will likely remain difficult in FY 2022-23, and possibly for even longer. While we derive comfort from the growing order book, this accounts for only c. 50% of full-year deliveries for now, and is hence insufficient to provide firm revenue visibility. Still, the order book development indicates that demand for JLR’s vehicles is exceeding its ability to deliver.