Stocks For

SPECIAL EDITION

April 10, 2020

#50

8 904150 800041

08

STOCKS FOR

2020

By Ambareesh Baliga, Amit Khurana, Arunagiri N, Gautam Trivedi, Harendra Kumar, Mehul Bhatt, Safir Anand, Vijay Kedia, Vikas Khemani and Viraj Mehta

PERSPECTIVE BY DEVINA MEHRA, SHANKAR SHARMA AND CHAITANYA DALMIA

Making INDIA safe. connected. Smart.

Indus adds a layer of

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www.industowers.com

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Smart City Lighting

IP-67 certified hydraulically operated Kaizen box for equipment to provide uninterrupted services

Keeping in mind the Citizen’s requirement in the areas of Safety, Environment & Connectivity with next generation mobile services along with a robust Fiber infrastructure, a first of its kind in India - Public Private Partnership (PPP) initiative has been rolled out by New Delhi Municipal Council (NDMC) and Vadodara Municipal Corporation (VMC) and Indus Towers. Projects comprise of Smart Poles with LED lights, CCTV cameras, Environment Sensors integrated with the Command Control Center and will enable telecom service providers to offer public WiFi system at each pole. The Environment Sensors capture and display features on real time basis. The above projects are important initiatives under the Govt. of India’s Smart City Mission and truly demonstrates our credo of ‘Putting India First.

Measuring the Air Pollutants

EDITOR’S NOTE

Time to cherry pick The COVID -19 pandemic is an event none from our generation has experienced. To that extent, investors and speculators are in the dark about the final outcome and hence the current market panic. But as Warren Buffett has always emphasised, the secret of investing success is to be fearful when others are greedy and greedy when others are fearful. Sounds great but being ‘greedy’ when there is gloom, is really difficult. And that’s not only because it requires nerve to bet against the crowd. Mostly, when catastrophe strikes, you are low on liquidity, or there is great uncertainty over future cash flows. The future looks hazy — will things get worse, how much more, and when will they get better and so on. But then, as history has depicted, gloomy times provide the best opportunity to buy into the ‘right businesses’ with an adequate margin of safety. Are we at that point where investing can be hugely rewarding? Yes and no. It will depend greatly on which stocks you pick. Even today, after a 30% correction, many stocks still do not represent deep value and therefore unlikely to yield handsome return even with a longer holding period. Over the past few years, the market has been polarised in favour of consumer stocks because of heightened stress in core sector and financials. Several consumer stocks have taken a beating but they continue to be highly

valued. For all we know, this may be an inflection point, but there is also a possibility that this will continue to be the case because earnings visibility of other sectors will worsen with further demand destruction, higher delinquencies and delay in the private investment cycle. While it may take some more time to figure out who will be the front runners when sentiment revives, the multiple you are paying for downgraded earnings should be the criteria to pick stocks. In short, it’s not how much a stock has fallen from the peak that should determine your purchase decision, but how justified is the valuation from a future earnings perspective. Investment return, after all, is driven by earnings and earnings alone. Our annual feature, “My Best Pick”, comes this year at an interesting time. Keeping with tradition, we bring you 10 experts who present their best ideas. As usual, the disclaimer stands: these are not recommendations to buy, but ideas you could consider based on your personal portfolio.

N Mahalakshmi

www.outlookbusiness.com | email: [email protected]

/ 10 April 2020

3

Contents VOLUME 15, ISSUE 8, APRIL 10, 2020

PUBLISHED ON STANDS ON MARCH 27, 2020

Perspective

8 Renaissance Group’s Chaitanya Dalmia believes the current market carnage has brought market valuation closer to ground reality

12

58 First Global’s Devina Mehra and Shankar Sharma point out why getting asset allocation right is much more than specific stock selection

16

12 Ambareesh Baliga believes GMR is set to soar high with its laser focus on the airports business

22

26

16 Dolat Capital’s Amit Khurana feels Page Industries will continue to comfort investors 22 Rubber chemicals player Nocil’s expertise gives the stock its bounce, says Arunagiri N of TrustLine Holdings 26 TCPL, might look pricey but it’s worth every rupee, thinks Nepean Capital’s Gautam Trivedi

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10 April 2020 /

32

42

38

46

32 Elara Capital’s Harendra Kumar picks I-Sec for being an all-in-one stock with diversified business and strong fundamentals 38 In an uncertain time when the chips are down, Mehul Bhatt of OysterRock Capital is putting his faith in an old favourite — Nesco

34

50

54

42 The understated and low-key Transpek Industry is Safir Anand’s choice for its flair for innovation in the chemicals industry 46 Vijay Kedia of Kedia Securities advises us to watch out for Repro, which is set to disrupt the book publishing industry 50 To deal with market turbulence, Carnelian Capital Advisors’ Vikas Khemani relies on efficient general insurer ICICI Lombard 54 Bucking the trend with its clean gold loan book, Manappuram Finance is Equirus Securities’ Viraj Mehta’s best bet for 2020 / 10 April 2020

5

Contents

EDITORIAL TEAM N Mahalakshmi :Editor Rajesh Padmashali, V Keshavdev :Executive Editor FEATURES Krishna Gopalan :Deputy Editor Himanshu Kakkar :Assistant Editor Shruti Venkatesh :Senior Correspondent Debangana Ghosh, Hari Menon, Prathamesh Mulye :Correspondent COPY DESK Asha Menon :Associate Editor

BUSINESS OFFICE Chief Executive Officer: Indranil Roy Vice President-Integrated Solutions: Prashanth Nair National Revenue Head-Print: Archana Tyagi Vice President: Preeti Sharma Digital Team: Amit Mishra Principal Designer: R Balachandra Rao CIRCULATION & SUBSCRIPTION Gagan Kohli, Anindya Banerjee G Ramesh (South), Vinod Kumar (North)

Patricia Hou :Senior Sub-Editor

Arun Kumar Jha (East)

Rishabh Bhatnagar :Sub-Editor

Shekhar Suvarna

Shailaja Mohapatra :Trainee Sub-Editor ART Kishore Das :Chief Designer PHOTO RA Chandroo :Chief Photographer Vishal Koul :Principal Photographer

PRODUCTION General Manager: Shashank Dixit Chief Manager: Shekhar Pandey Manager: Sudha Sharma Associate Manager: Gaurav Shrivas ACCOUNTS

Faisal Magray :Photographer

Vice President: Diwan Singh Bisht

Ram Dharne :Photo Assistant

Company Secretary & Law Officer: Ankit Mangal

COVER DESIGN: KISHORE DAS COVER IMAGE: SHUTTERSTOCK

HEAD OFFICE AB-10, Safdarjung Enclave, New Delhi 110029; Tel: (011) 71280400; Fax: (011) 26191420, Customer Care: (011) 71280433, 71280462, 71280307 Mumbai: (022) 50990990; Kolkata: (033) 46004506, Fax: (033) 46004506, Chennai: (044) 42615225, 42615224, Fax: (044) 42615095; Bengaluru: (080) 43715021 Printed and published by Indranil Roy on behalf of Outlook Publishing (India) Pvt. Ltd. Editor: N Mahalakshmi. Printed at Kalajyothi Process Pvt. Ltd., Sy.No. 185, Sai Pruthvi Enclave, Kondapur - 500084, R.R.Dist. Telangana and published from AB-10 Safdarjung Enclave, New Delhi 110029 Published for 28 March-10 April 2020, Total number of pages: 58 + cover

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10 April 2020 /

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PERSPECTIVE

CHAITANYA DALMIA CIO, Renaissance Group

Corona ko blame karo na MONETARY GASOLINE FUELLED EQUITY MARKETS OVER THE PAST DECADE, AND NOW COULD JUST BE THE TIME TO GET RATIONAL ABOUT VALUATIONS

X

miniscule part of what has been driving markets. The biggest factor can be charitably described as ‘chimps with a bazooka’. The bazooka is armed with all the Puts that central banks across the world have underwritten. And chimps are ETFs. Add algorithm traders, cheap leverage and you have a heady mix. The fundamentals of the global economy have been on a weak footing for the past decade. The trouble with this instant-coffee world obsessed with data, even if it’s useless, is that majority of the markets miss the big picture or choose to do so. That’s myopia on the verge of blindness. Public money-laden private funds and governments are equally in cahoots. Markets have threatened to slip into a coma on any bad news and governments have been accommodating BACK STORY with morphine shots to revive the patient. This has Like mutual fund pioneer, John Templeton, I am aware been going on for a decade. of the perils of his axiom, ‘This time it’s different’. But I am compelled to use his maxim, though in the opAnd if one were to examine the phenomenon from posite connotation. During the past few years, we have point to point, it’s clear that whatever anaemic ecoseen significant changes in our country, each one of nomic expansion eked out was only due to far higher them unprecedented — demonetisation, GST, NCLT, leverage across the system. That also implies lower productivity. Clearly, monetary policy was broken, Article 370, NRC/CAA , AGR , IL&FS/DHFL/Yes Bank etc. and further fiscal incentives only transGlobally, we have seen change in geopoferred the burden from corporates to the litical equations, covert and overt trade Events of the taxpayer. The consumer inflation numwars, compression of tax arbitrages across jurisdictions, near-zero interest rates for past two months bers seem fudged anyway (with clumsy of core inflation and so on, or a decade across OECD countries, oil prices in the markets gimmickry the inflation basket itself is outdated — sub-$30, emergence of AI, social media destroying traditional media, shift in conmade me term ask anyone if their cost of living has gone sumer behaviour with marketplaces gainthe goings-on as up by less than 5% in the past decade). ing prominence, and so on. The combined effects of all the above is XX — ‘Xaggera- SOME (RELEVANT) DATA something either Jim Simons’ algorithm The earnings growth of Nifty companies tion Xtrapoor some big-data firm can decode. But has been meagre, to say the least. They even that combined impact, might be a have grown less than 7% p.a. in the past lated’ X… No, it does denote either kisses or a conjugal visit rejection, from the smiley-infested world we live in today. Nor does it refer to types of chromosomes. That’s an abbreviation I coined for ‘Xaggeration Xtrapolated’. We are in unprecedented times. I have witnessed markets hitting circuit breakers on the downside. I have also seen individual stocks hitting successive upper circuit. Needless to say, I have seen bull markets and bear markets. Bull markets have corrections as they ought to, and bear markets have pullback rallies. But, the events of the past two months in the financial markets made me term the goings-on as XX .  

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10 April 2020 /

Money for nothing

The story of growth revival was more alluring and prevailed over the reality of poor core earnings growth Nifty CAGR: -3%

12,000

Nifty CAGR: 37%

Nifty CAGR: 4%

Nifty CAGR: 7%

25

23.7 Nifty (LHS)

9,000 21.0

(RHS) Nifty P/E (x)

20

Average: 15.7x

6,000

15.1

10

3,000 0

15

5 Mar 98

Mar Mar 03 04

Mar Mar 08 09

Mar Mar 13 14

Mar 20 Source: Motilal Oswal Securities

five years (See: Money for nothing). However, Nifty doubled from 6,200 to 12,400. Implicitly, the Buffettquoting brigade led the multiple expansion in ‘quality’ stocks. It’s not as if the base multiple was ridiculously cheap; we were at 18x in 2014 and over the past two years, the market became very narrow and skewed. It eased the promotion of a host of analysts/relationship managers to money managers. You got paid 2/20 for investing in those specific dozen stocks which every man and his dog knew about, and were invested in. Just as an empty mind quickly becomes a devil’s workshop, the aforementioned excess liquidity had to find its way somewhere. Acknowledging the ‘risks in the markets’ and bad economic data, the liquidity stuck to those dozen stocks, leading to a bubble in their valuations. It’s obviously not the fi rst time this has happened, nor will it be the last. During the tech boom towards the end of the last century, Wipro traded at 300x and Infosys at 200x, never mind the scorching 100% growth in earnings. I am not even talking about shams such as DSQ Software and Pentasoft. Technology, media and telecom (TMT) stocks were destined to go all the way to heaven, and rest of the markets were touted as ‘old economy’ and considered ‘untouchables’. Similarly in the run-up to the 2008 global credit squeeze, infrastructure, real estate and steel stocks wore that halo. This time the darlings were mostly consumer stocks and non-corporate fi nancials.

LESSONS FROM THE PAST The technology bubble burst in 2000 due to the fundamental cocktail of high interest rates and high valuations, which eventually seemed unjustified with flat EPS growth. The benchmark fell 40 % in less than two years. It would need more than double that time to

cover lost ground. The second phase (2003 -2006) was based on low interest rates, cheap valuations and 60% growth in EPS, albeit on a depressed base, owing to positive operating and financial leverage. Liquidity started chasing the stocks, and the foundation was being laid for the next bubble. 2006 -2008 was the phase in the run up to the Lehman Brothers-induced global credit crisis, index earnings were up 85%! This is the time when EPS and P/E started chasing each other and catapulted the Sensex to 21,000. In hindsight, Lehman became the poster boy for that super-normal growth and super-rich valuations to mean revert. The benchmark lost 60% in little more than a year (quicker and deeper than the last time in 2000). The fourth phase between December 2008 and June 2010 saw some recovery in stock prices owing only to undervaluation, despite weak earnings growth. By November 2010, the Sensex had regained all its lost ground (little short of two years – again quicker than the last time). Since then and until now, I would keep it under the fi fth phase (2011 till 2019). The reason is simple. Recall all that tectonic change mentioned in the beginning and juxtapose it with Index earnings. It merely doubled in the past 11 years, since 2008. Even a bank FD doubled in lesser time. However, the Sensex almost tripled to 42,000 since June 2008.

WHY WE ARE WHERE WE ARE Now, why would anyone pay an equity risk premium for FD commensurate return? Is it not quirky? What is on display here is the undying belief of institutional investors in central banks, post the Lehman bailout (See: Never-ending party). Hence, zero interest rates, which in turn help governments overburdened with debt, is welcomed. These bottom-scraper rates are not seen as / 10 April 2020

9

PERSPECTIVE

We have seen reasonable prices in many a deeper underlying problem but become In equity mar- stocks and sectors over the past decade, de rigueur. The flattish yield curve sigkets, the expec- but have not really seen ridiculously cheap nifying a prolonged recession is ignored. which is what a deep bear market Poor core earnings growth is dismissed as tation of better prices, throws up. one-off in light of fiscal stimulus or hope growth keeps the Even though I thought markets of growth revival in the near future. And with all these assumptions, FIIs chasing should correct significantly, I attached a market going low probability to it,  given all the power relative return have net pumped in aluntil real un- central banks yield these days, and the most #5 trillion in equities since 2011 until that zero/very low discount rates acJanuary 2020, and mutual funds with derlying growth fact tually change everything in the world of their SIPs got another #3.75 trillion. Precatches up finance. This is what forced me to throw sumably, LIC’s inflows would be a positive in the towel and not wait for those ridicunumber as well. lous prices and buy a chunk (though thank God noFor sure, equity markets are a forward-looking asset where near fully) at reasonable prices. So even when my class, and so the expectation of better growth keeps framework told me to steer clear and wait for ‘as long as the market going until real underlying growth catchit takes’ as Buffett says, I was not fully convinced. Nor es up. But if the digression gets prolonged, you know could I bet on the ‘expected fall’ since the only way to you are treading on thin ice, which thins quicker undo that was to keep buying Puts and paying premiums, der a rising dawn. until the eventual collapse. World Wars have been triggered by seemingly inconsequential events. But, warlike conditions had   always been brewing under the surface. Its only in VIRUS, SERIOUSLY? hindsight can we say that a particular event triggered The virus and the news (who knows how much fake), the war. Financial markets are similar where reasons on which there has been an overdose from all imaginget attributed post collapse. Various small events able directions and sources, seems to be the event that keep occurring until that one event which turns into has triggered the long overdue correction in the mara snowball and takes the elephant down. And nobody kets. The five-year Index return stands at - 6%, as on 19 can predict in what form and when such an event will March, 2020. Even the broader Nifty 500 has returned take shape. - 6% over that period. It has taken only two months to wipe out the gains of almost four years (the Sensex was I have seen ridiculous prices way back in 2000, last at this level in May 2016). We have fallen 35% from and I have been forced to wonder over the past two decades if such prices shall be seen again. Bear the top, and this is on account of only #120 billion of markets are a part of investing, and to imagine a net outflow (FII and MF combined till 19th of March) perennially upward sloping index made no sense conagainst the 70x combined net inflows over the past desidering all that I have read and seen over the years. cade. Surely the economic impact of the virus shall be

Never-ending party

The massive injection of liquidity by global central banks kept equities on a tear 3,400 3,200 3,000 2,800 2,600 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1,000 800 600

16 15 14 13 12 11 10 9 8 7 6 5 4 3

S&P 500 & ASSETS OF MAJOR CENTRAL BANKS

S&P 500 Index Total Assets of Fed, ECB, BOJ (in $ trillion) QE1 2008

2009

QE2 2010

2011

Quantitative tightening

QE3 2012

2013

2014

2015

2016

2017

2018

2019

2020

Source: Yardeni Research

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10 April 2020 /

Value illusion

Forward Nifty P/E is now lower than its long-term average but ‘quality’ stocks still trade at a premium 25

12-month forward Nifty P/E (x)

23.3

22 19 16

Long-term average: 17.2x 15.1

13 10

Mar 05

Mar 06

Mar 07

Mar 08

Mar 09

Mar 10

Mar 11

Mar 12

Mar 13

Mar 14

Mar 15

Mar 16

Mar 17

Mar 18

Mar 19

Mar 20

Source: Motilal Oswal Securities

pullback and that too without outrageous net liquiddevastating, but the “Nanga nahayega kya aur nichodeity outflows, only indicates the omnipresence of ETF ga kya” economic environment is already abysmal. As it is, the market was out of sync with the economy for money compounded by algorithmic traders. The IPO many years. of the country’s premier exchange is stuck in a case allowing early and preferential access to some such As the market overshoots in either direction, here players. So, serious money can be made by these maare some more data-driven reasons to expect further chines. But technology can be destructively brutal, downside: First, a lot more money is queued up headand these hot money machines have XX impact on ing for the door as can be observed from the above mentioned liquidity inflows and outflows. Two, the the markets, which only leads to more volatility than earlier bear markets saw more than 50% drawdowns. desired, and can cause serious market dislocations. What adds fuel to the fire is the availability of stock We are far away from there even if we don’t go all the futures to raise the traded volume. Imagine, if the way this time. Three, we shall be at a median-ish P/E market falls 10% daily, it can shave off 65% value in band of 15 -16x closer to 25,000 for the Sensex. This number could be even lower given that FY21 may see two weeks. That sounds more like the Argentinean or Zimbabwean inflation nightmares of the past. Ideally, sharp earning downgrades. Severe bear markets can regulators need to figure out a way to keep the role of go to as low as 12x (See: Value illusion). Four, we may the machines to a manageable level. They also need be looking at supply shocks (and/or past monetary to ban or at least limit the use of leveraged products, stimulus rearing its ugly head) leading to high inflawhich don’t serve much purpose except to increase tion. Finally, and most importantly, the ‘pied piper’ trading volume, so that the exchange gets a premium stocks have still not corrected enough to what one may call intrinsically reasonable prices. IPO valuation. However, it is not all gloom. All the above only imAs for investors, they would do well to remain mindplies that the stocks that went to outrageous valuations ful of the risks and evaluate them appropriately before are unlikely to do much for the next decade. But besides fishing for return. Despite having heard ‘markets can those stocks (which also comprise the Index remain irrational longer than you can reto a large extent), there is a whole world solvent’, it’s quite hard to steer clear There is a whole main of stocks which have almost halved, have for half a decade if the valuations remain a stable business, don’t have any balance world of stocks elevated. Jhoot bhi agar sau baar bola sheet issue and are not run by crooks. Into sach lagne lagta hai. So come what that have almost jaaye trinsically, they are at ridiculous valuations may, valuation comfort is perhaps the no matter what assumptions one may make. halved, have a only basis to invest on and sleep well. On It won’t even need an eagle eye to find those thoughts, sleeping well may be a stable business second gems; they are scattered on the road. thing of the past; the machine-age mixed and don’t have with social media infodemic and cata  lysed with virtually free and unlimited MORAL OF THE STORY any balance leverage is likely to make XX bouts occur Given the ferocity of the fall, and the angle at which it has fallen with hardly any more often than ever before. So, brace! b sheet issues / 10 April 2020

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MY BEST PICK

AMBAREESH BALIGA INDEPENDENT MARKET EXPERT

FAISAL MAGRAY

GMR Infrastructure is cleaning up its act and has a golden goose in GMR Airports

12

*Ambareesh Baliga has an interest in the stock and has also recommended it to his clients

10 April 2020 /

GMR INFRASTRUCTURE

/ 10 April 2020

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MY BEST PICK

STOCK PRICE M-CAP FY20* RETURN TTM P/E ROE ROCE Net Sales LOSS

Market data as on March 20, 2020. Financials for 9MFY20; Return ratios as of FY19

17 103 billion 0.8 NA NA NA 62.06 billion 9.19 billion

I

n movies, an aircraft landing bumpily on a poorly built runway that ends in single-cabin office suggests a hick town. The protagonist has arrived in the back of the beyond. Over the years, airports have come to convey the poverty or prosperity of a city or a state. They are no longer mere transport hubs, with empty hours of waiting. They are vibrant spaces, where travelers are invited to engage with local history, art and food. One such is Indira Gandhi International Airport in New Delhi, with its famous hand sculptures. The airport has earned accolades as one of the world’s best, year after year, with its Terminal 3 built in a record time of 37 months, just before the biggest sporting event that Delhi hosted — Commonwealth Games in 2010. It is operated by Delhi International Airports, which is a subsidiary of GMR Airports, the fourth largest private airport developer in the world. It is in the thick of things, as the Indian government has recently unveiled plans to develop 100 greenfield airports by 2024. Air passenger traffic has more than doubled in the past decade and has seen a healthy double-digit growth over five years. As per a FICCI report, total air passenger traffic in India should grow 6x by 2040 to 1.1 billion at a CAGR of around 9%. The total number of operational airports may rise to 200. In the same period, global passenger traffic is expected to double by 2040 and reach 19.7 billion. 14

10 April 2020 /

According to a FICCI report, total air passenger traffic is expected to grow 6x to 1.1 billion by 2040

Data: Ace Equity

The airport business offers long-term visibility with a stable regulatory environment (after extensive regulatory experimentation). The revenue model is well diversified with non-aero revenue ranging from retail, food and beverages, cargo, rentals, advertisements and ground handling in addition to the regular aero revenue. GMR Airports has consistently performed well with FY20E Ebitda margin higher than 40% (See: Flying high). Globally, airport stocks are valued at around 18x EV/Ebitda. Despite the advantage of India’s higher growth rate, using the same yardstick would value GMR Airports at EV of #500 billion. However, GMR Airports is not listed, thus one needs to play this theme through the listed holding company GMR Infrastructure. The listed entity has had a tumultuous journey during the past decade, after initially being a much sought after infrastructure stock when it was listed in 2006. In addition to investment in airports, like many others who were riding the infrastructure wave, GMR stretched its balance sheet by committing big to energy and highway projects. The downturn in the economy post the Lehman Brothers crisis, the regulatory overkill and unkept promises such as PPAs as well as gas supply for power projects turned out to be its nemesis. The silver lining, however, were the airport projects that continued to be cash-positive. The past 10 years were spent fire-fighting, after which the management seems to have clarity on the way forward. They have de-

GMR INFRASTRUCTURE

Flying high

The core airport business has long-term revenue visibility... but also the highest debt 39.2 4.9 14.7

Gross Revenue PAT (# billion)

Total debt in %

EBITDA

Others

45.5 5.3 18.6

2

10

Energy Highways 10

Airport 43

35

Corporate

(Inc. debt for PE Exit)

9MFY19

9MFY20 Source: Company

cided to focus on the fledging airport business and divest the rest of the businesses at an opportune time. However, to immediately reduce the debt burden and clean the balance sheet, they have divested 49% of the airports business to Aeroports de Paris (Groupe ADP) at a post-money valuation of #220 billion, which is about #40 billion higher than their earlier agreement with the Tatas. Earn-out achievements may add another #45 billion in due course. GMR Infra would utilise part of the #100 billion it receives from Groupe ADP, to reduce debt from #95 billion currently to about #25 billion at the listed entity level. It has also been able to divest the 1,050 MW Kamalanga Thermal Power Plant to JSW Energy with an equity payout of #12 billion and made a similar divestment of Chhattisgarh Power project in 2019 to Adani Power at zero equity value. The road project vertical is self-sustaining. The other thermal projects, too, are self-sustaining with some of them providing a positive cash flow. The Rajahmundry Power Plant, which was an albatross around its neck, where it has 45% equity, has been able to go through a resolution plan and the debt has been brought down to sustainable levels. GMR is in a position to clean the balance sheet across verticals. A closer look reveals some hidden wealth in the backyard. GMR has 10,400 acres of port-based land at Kakinada in Andhra Pradesh with eight kilometres of coastline, which will be developed into a port by a

GMR Infra has decided to focus on the fledgling airport business and divest the rest

Note: Certain loans part of Energy and Others segment till Mar’19 are reclassified as Corporate Debt

third party utilising 2,000 acres. Another 2,500 acres may be developed as a mega petrochemical park by HPCL , GAIL and Haldia Petrochemicals. They also have 2,500 acres of land at Krishnagiri in Tamil Nadu. A special investment region is being set up on 600 acres in collaboration with TIDCO. The land should be in demand when global majors look for alternate regions for their manufacturing facilities post the Covid-19 scare and the US -China trade spat. Even assuming a paltry #5 million per acre, the land value works out to #65 billion. Additionally, there are claims of #39 billion pertaining to the road assets against government authorities which, when realised, will be added to the bottomline. There is also a 30% interest in PT Gems Coal Mines, which was acquired for around $500 million in 2011. Over the next two years, we should see the clean-up being completed. The airports business will drive the group valuation with a possibility of GMR Airports being listed independently and GMR Infrastructure shareholders directly holding the 51% currently (could go up to 59% with earnouts) held by the holding company. This could unlock huge value. Though Covid-19 is a risk factor for the airports business due to travel curtailment and lower footfalls, I would prefer to be an optimist looking at life beyond the next three to four months. The stock has corrected sharply by 33% due to the Covid-19 scare, making it an opportunity to buy for long-term growth. b / 10 April 2020

15

MY BEST PICK

AMIT KHURANA HEAD-INSTITUTIONAL EQUITIES, DOLAT CAPITAL

FAISAL MAGRAY

Page Industries will continue to comfort its investors through brand loyalty and strong distribution

16

*Amit Khurana does not own Page Industries, but Dolat Capital has recommended the stock to its clients

10 April 2020 /

PAGE INDUSTRIES

/ 10 April 2020

17

MY BEST PICK

STOCK PRICE M-CAP FY20* RETURN TTM P/E ROE ROCE Net Sales PAT

*Market data as on March 20, 2020. Financials for 9MFY20; Return ratios as of FY19

18,060 201 BillioN -23 52x 48 70 24 BillioN 3.12 BillioN

I

t fits like a song. The international brand that is known for comfort wear came to India in the mid ’90s and has since remained the first choice of innerwear for the aspirational youth. Sure, many came and went. The likes of VIP and Hanes have been a few competitors, but Jockey’s brand loyalty has only increased over time. With strong faith in its brand value, we believe Page Industries makes for a good bet, since it has had the exclusive rights to the brand in India since its entry in the market. In fact, the company has been reporting almost 35% CAGR growth over the past two decades. While its net sales grew at 19.4% CAGR from FY14 -19, PAT grew at 20.7% CAGR (See: Breathing freely).

THE PROMISE OF COMFORT One cannot really miss the Jockey logo on a storefront in all its black and white glory. Distributed in more than 63,000 outlets across 2,800 cities in the country, the brand enjoys a monopoly in the premium innerwear segment. To stay with the times, this century-old brand also sells via most e-commerce platforms. Despite rising competition from brands such as Dollar, Lux, Van Heusen and Rupa, the management is confident of sustaining volume growth. Strong recognition and high distribution are only a few factors that give Page Industries a pricing advantage over peers. To boost market share over the years, the company maintained advertising and promo18

10 April 2020 /

From 720 EBOs, Page Industries is confident of increasing the number to 1,000 by FY22, which will further improve its brand visibility

Data: Ace Equity

tion (A&P) spends at 4 -5% and undertook calibrated price hikes. Even though minor price changes lead to major volume deviation in mass-category products, Jockey has proved an exception to this rule. The company has taken annual price hikes of 4 -7% over a long period without having any impact on its volume. This goes to show that the brand has ‘stickiness’. One would hardly ever find discounts on Jockey products online as well. According to us, the brand strength is the ‘glue’. This has helped the company maintain its operating margin at 19 -22% over FY08 -FY19, which resulted in a similar growth in profitability. We also expect the ongoing store additions and innovations to help the company sustain its growth rate over the next few years. It already boasts of more than 720 exclusive business outlets (EBOs) in over 250 cities, which contribute to nearly 10% of the company’s revenue. Out of these, 530 are located on high streets and 170 in malls. They are confident of increasing that number to 1,000 by FY22, which will further improve Jockey’s brand visibility. With the recent foray into kids wear and new launches in athleisure, cross selling in EBOs is expected to gain momentum.

LADIES, FIRST As with most trends these days, Page Industries’ Jockey is shifting its focus towards women. It has introduced new women’s wear products including the Miss Jockey Collection, which is aimed at teen-

PAGE INDUSTRIES

Breathing freely

Page Industries has remained a consistent performer over the years Net sales CAGR 2014-19

19.4%

Net profit CAGR 2014-19

28.5

20.7%

25.5 21.3

18 15.1 11.7 8.6

1.1 FY13

2

1.5 FY14

FY15

2.3 FY16

2.7 FY17

Figures in # billion

age girls. During the past three years, contribution of Page’s dominant men’s segment has been gradually decreasing from 51% value in FY15 to 46% value in FY19. Volume has decreased from 61% to 54% over the same period. While men’s segment grew at value and volume CAGR of 19% and 9%, respectively, that of the women’s wear grew at 27% and 17%. Seeing that athleisure is catching on in a big way with women, we expect that segment to continue to drive earnings. As of now, the brand dominates with 20% market share in premium men’s innerwear and 5% in women’s. In a bid to diversify its portfolio and transform its men-centric brand image, Jockey also extended its foray in the kids’ category. Page Industries has emphasised that kidswear is another focus area, and losing no time, it has set up an independent team and realigned sales and marketing strategy for ‘Jockey Juniors’. With a view to strengthen its ground in the outerwear category, Jockey launched a new MOVE range for men and women. This need to diversify and cover all its bases has come from growing competition in the premium space. From mass players such as Rupa, Lux and Dollar to sports and leisurewear names such as Puma, Benetton, Levi’s and others, many brands are vying for a share of the premium innerwear category. Van Heusen’s recent success in this space is surely on Page’s radar. But anecdotal evidence suggests

3.5 FY18

3.9 FY19 Source: Dolat Capital

that Jockey has always bounced back from similar phases in history. In the domestic market, the brand witnessed many turbulent phases where it had to compete with local and foreign brands. The other challenge Page Industries has to face is an economic slowdown and sluggish consumer sentiment. For 9MFY20, the company’s revenue grew 7% YoY to #24 billion, with volume growth of just 1% YoY. But the slowdown has hit companies across the board. Furthermore, after a year of average performance, we expect growth on a favourable base. Once the economy recovers, Page Industries’ volume will pick up and reach past levels.

ARSENAL-READY

After a year of average performance, we expect growth on a favourable base. Once the economy recovers, volume will pick up

That has been reaffirmed through our interaction with multiple distributors. Page is ready with multiple new products, which can be launched any time. On ground, the sales team is focused on increasing the distribution and retail reach of kids wear, which can be a big lever in the coming decade. At an estimated FY21 P/E of 55.9x, its immediate valuation appears to be on the richer side, but it has long term potential to generate strong free cash flow along with a well-oiled inventory management and low requirement for incremental capex. Moreover, improvement in domestic demand will trigger significant growth in all the categories. With fundamentals in place and prospect of healthy volume growth, the company’s future prospects look snug. b / 10 April 2020

19

RA CHANDROO

MY BEST PICK

20

10 April 2020 /

NOCIL

AR UNAG I RI N FOUNDER, TRUSTLINE HOLDINGS

Coronavirus has wreaked havoc on global markets, but it could prove to be a boon for specialty rubber chemicals player Nocil *Arunagiri N and his clients own the stock

/ 10 April 2020

21

MY BEST PICK

STOCK PRICE M-CAP FY20* RETURN TTM P/E ROE ROCE Net Sales PAT

*Market data as on March 20, 2020. Financials for 9MFY20; Return ratios as of FY19

64 10 Billion -55 7.3x 16 25 6.33 billion 1.08 billion

I

t isn’t that hard to choose, and it’s a no-brainer. Yes, it’s a prim adaptation of the Justin Beiber song You stick out of the crowd, baby. But he’s singing about his love interest and this is about Nocil, a no-brainer stock, or a deep-value stock. Is this the best time to be talking about value stocks? Value as a strategy has been under-performing for an extended period of time since early 2018 because of flight to safety and polarised market dynamics. As a result, a value investor is a beast that is vanishing. Even the last man standing is being tested for his tenacity. One needs to be brave to back a value stock. But, do not be mistaken, it is not a ‘value for value’s sake’ kind of stock, rather a ‘growth at a discount’ stock. Nothing beats value that comes from trying to buy ‘quality-cum-growth’ at a discount, be it large-cap or small-cap. Of course, in small-caps, such spicy opportunities come more often, because the space is under-researched and under-covered — Nocil is one such opportunity. Openings in both — successful screenplays and stock research — are crucial. Good opening moves in stock selection usually start with the most critical question, that is, whether there is a competitive edge in the business and, more importantly, where does it come from? The answer to this question will determine whether one takes a deep dive into more due-diligence. 22

10 April 2020 /

Nocil has established itself as a niche speciality player in the rubber chemicals business

Data: Ace Equity

When one has the following factors supporting a product in any business, it invariably has a towering entry barrier or in other words, a durable competitive edge (leaving out the most obvious moats such as consumer brands):  Highly critical ingredient that contributes to the quality of end product, but at the same time, constitutes a very low percent of the end product in terms of unit value.  Long lead time for customer approval and stringent approval process.  Exceptional need for technical knowhow and long gestation period for setting up capacity.  Favourable replacement cycle in the end user markets.  Few limited specialised players (niche oligopolistic market). In the industry in which Nocil operates, the economics of business is extremely attractive with dynamics that reflect the above industry traits. Nocil has established itself as a niche specialty player in the rubber chemicals business with a high entry barrier. Rubber chemicals constitute only 3.5 - 4% as raw material to manufacture a tyre. However, that component is critical to the production of rubber to enhance its key characteristics such as elasticity, strength, durability, hardness, flexibility and resistance to wear. This blend of low unit value with high importance for the end product quality, acts as a critical source of competitive edge for the rubber

NOCIL

chemicals industry. Besides this industrylevel economics, Nocil also has another significant source of moat. That is, its business enjoys a high level of operational and process efficiency that comes from a long period of specialisation. Now that the opening move has been made, it is time for the main plot.

Many in one

Nocil is a one-stop shop for tyre companies across the world due to its diversified portfolio Revenue breakup (FY19)

Pre/Post Vulcanization inhibitor

10%

ATTRACTIVE DYNAMICS Globally, there are just a handful of rubber chemical players. First, there is a need for advanced technical manufacturing knowhow, high R&D investments and long customer approval process. Besides these, there is another critical factor that makes the industry dynamics attractive. This comes from the nature of the replacement cycle in the end-product (tyres) where rubber chemicals are used. The tyre industry’s replacement intensity makes the rubber chemical industry less cyclical in terms of demand volume. Nocil is the largest manufacturer of rubber chemicals in India with a domestic market share of 40% and a diversified 22 -product portfolio in the entire range of rubber chemicals (See: Many in one). It is also the fourth largest in the world, in terms of capacity, with a market share of 5%. Tyre manufacturers prefer to work with such companies with a diverse range, which can assure steady supply. Nocil’s expertise in the rubber chemical business spans over four decades, during which it has built business relationships with clients in over 40 countries. Just like its product pipeline, it has a diversified clientele that includes the likes of MRF, Apollo Tyres, Pirelli, CEAT, Michelin and JK Tyres to name a few. The company’s 65 -70% offtake is consumed by tyre manufacturers and the rest by non-tyre sectors such as latex, cycle tyres, surgical gloves and footwear among others.

GOOD BOOKS High quality business, check. Leadership in the market, check. With robust fundamentals in place, Nocil’s financial ratios paint a pretty picture. From 60% on operating profit to operating cash flow to over 48% on net profit to free cash flow, the company boasts a healthy balance sheet.

45% Accelerator 45% Anti oxidant Source: TrustLine Holdings

Nocil enjoys a strong net cash position of #1.47 billion (#8.9/share) as on FY19 and its expansion capex of #4.25 billion is com-

Nocil is the largest Indian manufacturer of rubber chemicals and has a domestic market share of 40%

pletely funded through internal accruals. Its revenue, operating profit and net profit grew at a CAGR of 10%, 27% and 34% over FY15 -19, respectively. Its operating profit and profit margins have grown from 15.8% and 7.9% to 28.1% and 15.2%, respectively (See: Growth formula). On the back of its robust earnings growth and cash flows, Nocil was able to clear its entire debt in FY18 (from #1.31 billion in FY14) and is currently debt free (See: Cash is king). In the current fiscal (9MFY20), revenue fell by 21% to #6.34 billion due to weak realisation, steep slowdown in domestic auto volumes and no benefit of anti-dumping duty in the second and third quarters. Its operating margin also contracted by over 670 basis points to 22.4% from 29.1% in 9MFY19. As a result, net profit fell by 27% to #1.09 billion. However, the management has guided a recovery in volume from Q4FY20 following the commercialisation of Dahej plant and renewed focus on volume growth, which will lead to positive operating leverage. FY21 could be a welcome change given a significant increase in enquiries from domestic and global OEMs on supply disruptions in China.

BANKING ON STRUCTURAL GROWTH The prevailing coronavirus crisis could turn out to be the biggest opportunity for Nocil. Reducing China dependency is no / 10 April 2020

23

MY BEST PICK

NOCIL

Growth formula

Cash is king

Quality business and market leadership have helped Nocil maintain healthy margins Ebitda margin (%)

Prudent cash management has allowed the company to shed all its debt

Profit margin (%)

27.5 19.5 11

0.40

28.1 22.4

21.5 17.8

15.8

Debt-to-equity (%)

0.45

17.6

17.2

0.35 0.30 0.25 0.20

13.1

0.15

8.1

0.10 0.05

FY15

FY16

FY17

FY18

FY19

9MFY20

0

FY14

FY15

FY16

FY17

FY18

FY19

FY20

Source: TrustLine Holdings

longer a cocktail discussion, it is a clear danger facing the boards of all global companies. Buyers everywhere are speeding up their ‘China hedging’ process, which kicked off post the US -China trade war. India is likely to be one of the potential beneficiaries, in industries such as specialty chemicals where the country is globally competitive. Right now, Chinese players dominate the global market with over 68% share, but that is likely to change and Nocil is well placed to capitalise on this transition. In fact, it has already done that once. In January 2019, the US imposed additional 15% duty on rubber chemicals from China. We believe this has acted as a trigger for Nocil to capture the incremental wallet share from Chinese rubber chemical players. In addition, the export market remains highly untapped for Nocil. With increased capacity, it can leverage and increase its global market share. Nocil’s current capacity utilisation stands at 45%, which means it has huge headroom for growth. With asset turn of 2x, and given the capex of #4.25 billion, the company has the potential to double revenue over the next three to four years. The other triggers that could boost growth are increasing share of radialisation, especially in the MHCV tyres (requires 1.3x-1.4x rubber chemicals compared with regular tyres), expected recovery in Indian automobile sector in FY21 and increasing pollution curbs in China. 24

10 April 2020 /

IT'S A STEAL

With asset turn of 2x, and capex of #4.25 billion, the company has the potential to double revenue over three to four years

Besides an experienced and competent management, a long and complex period of specialisation, attractive industry dynamics with high entry barriers and robust financials make this stock a high quality one from the smallcap space. With a market obsessed with quality and growth, one would have expected the stock to trade at a premium. But due to the overall global uncertainty, that has not happened yet. Its short-term earnings visibility is in question coupled with removal of anti-dumping duty. Hence, the stock has de-rated to a level where it offers a significant discount to what it is worth. In our estimate, the per-share intrinsic value for the stock, even with a conservative growth and margin assumption, works out to be around #220 -#230. At #64 per share (as on March 20), it trades at a sharp discount and offers substantial margin-of-safety of over 70%. Over a four-year period, it can provide significant upside to long-term investors as we expect the intrinsic value to grow at a reasonably high rate. Of course, no investment opportunity comes without any downside risks. In this one, a protracted delay in the recovery of demand in the domestic auto industry could pose a serious risk to earnings in the short-term. Since much of this risk is already in the price, further downside, if any, is likely to be limited. b

NATIONAL COOPERATIVE DEVELOPMENT CORPORATION (NCDC) IN SERVICE OF AGRICULTURE & RURAL DEVELOPMENT National Cooperative Development Corporation is promoting various development programmes through Cooperatives for agricultural activities like production, processing, marketing & inputs, storage, export & import of agricultural produce, foodstuff and allied activities. NCDC plays a key role in doubling farmers’ income through many modes including its Mission called SAHAKAR-22 targeting 222 districts in the country which include 117 Aspirational Districts identified by NITI Aayog. Activities broadly include:· · · · · · ·

Ginning, Pressing & Spinning, Weaving & Garmenting Sugar and other agro-processing units Credit for procurement and marketing of agriculture product Storage and cold chain activities Support to Cooperatives for undertaking Consumer Business All types of Industrial Cooperatives, Cottage & Village Industries, Handicrafts/rural crafts etc. Credit & Service Cooperatives Labour Cooperatives & Service Cooperatives: Water Conservation works & Irrigation in Rural Areas, Animal Care/Health,Agricultureal Insurance & Agriculture Credit, Rural Sanitation, Tourism, Hospitality & Transport/ Generation & Distribution of Power by New, Non-Conventional & Renewable Sources of Energy/ Rural Housing/ Hospital / Health Care & Education through Cooperatives etc. · Integrated Cooperative Development Projects in selected districts · Weaker Sections Fisheries, Dairy & Livestock, Poultry, Schedule Caste/ Tribe, Handloom, Coir, Jute, Sericulture, Hill area, & Labour & Women Cooperative · Assistance for Computerization Net NPA of NCDC are at zero and loan recovery position is approximately 99%. Cumulatively assistance of almost n1.25 Lac Crore has so far been provided for various cooperative development programmes by NCDC.

NATIONAL COOPERATIVE DEVELOPMENT CORPORATION

(An ISO 9001:2015 Certified Organisation) 4, Siri Institutional Area, Hauz Khas, New Delhi-110016 Phone: 26567475, 26567026, 26567202, 26567140 Fax: 0091-011-26962370, 26516032 Website: www.ncdc.in

FAISAL MAGRAY

MY BEST PICK

26

10 April 2020 /

TATA CONSUMER PRODUCTS

G A U TA M T R I V E D I CO-FOUNDER, NEPEAN CAPITAL

TCPL, with its vast distribution network and promising new management, looks expensive but holds great promise *Gautam Trivedi holds the stock in his fund’s portfolio

/ 10 April 2020

27

MY BEST PICK

STOCK PRICE M-CAP FY20* RETURN TTM P/E ROE ROCE Net Sales PAT

264 243 billion 33 68x 6.6 9.5 56.9 BillioN 4.73 billion

*Market data as on March 20, 2020. Financials for 9MFY20; Return ratios as of FY19

A

lmost exactly a year ago, the chairman of Tata Sons, N Chandrasekaran, decided to restructure the $113 billion conglomerate (FY19 revenue). The plan was to have the group focus on 10 verticals, merge businesses that have synergies with each other and be among the top three in each vertical. As a result, Tata Global Beverages (TGBL) and Tata Chemicals (TCL) decided to unite their consumer products businesses to form Tata Consumer Products (TCPL), a premier diversified consumer products company (See: The sum of parts). TCL shareholders would receive 1.14 shares of TGBL for every 1 share of TCL . TCL shareholders now own 31.4% of the combined entity. The scheme of amalgamation became effective from February 7 this year and the company has been renamed Tata Consumer Products. The new name is more befitting the future plans that the Tata group appears to have with TCPL . This is the fi rst of the many triggers that will play out. TCPL has become the Tata group’s vehicle for its FMCG ambitions with 91% of the revenue coming from branded products. The combined company is now home to various brands and businesses and the revenue mix is also set to change going forward. The company has the second largest branded tea company in the world and one of the largest in India, with iconic brands such as Tata Tea (first by volume and sec28

10 April 2020 /

TCPL has become the Tata group’s vehicle for its FMCG ambitions with 91% of the revenue coming from branded products

Data: Ace Equity

ond by value in branded tea in India) and Tetley (among the top three brands in the UK and Canada). Post-merger, branded tea accounts for 57% of revenue, down from 71% pre-merger. Coffee accounts for 13% of revenue, down from 17%. While Eight O’ Clock is the fourth largest player in coffee bags in the US, Tata Coffee Grand is an instant coffee brand in India launched in late 2015. An astounding 330 million servings of its beverage brands are consumed everyday globally. Starbucks India is a 50:50 joint venture with Starbucks that has 174 stores across 11 cities (as of December 2019). This business, which is already cash-positive, has a long runway for growing this iconic global brand in India. The company is taking a measured approach to expansion, much like group company Trent, which has built an outstanding retail fashion brand. The company is present in the water business with Himalayan Natural Mineral Water, one of the biggest brands in India. It also has Tata Gluco Plus that makes a glucose-based energy drink for the masses. It’s attractively priced at #10 and sold in seven different flavours. Currently available only in three states, it will be gradually launched in the rest of the country. The consumer products business, that comes from TCL , includes Tata Salt (the top branded salt in India with a two-thirds share of the branded market), and Tata Sampann that has branded pulses, spices and ready-to-cook packaged food. The

TATA CONSUMER PRODUCTS

The sum of parts

With a focus on branded products including tea and coffee, TCPL is an FMCG player to be reckoned with TCL #112 billion*

TGBL #72.5 billion* CPB

Others 12% Coffee 17%

84% Other Business

REVENUE (# BN) 72.52 18.47

Others

12%

16%

Tata Global Beverages Tata Chemicals’ Consumer Products

TCPL #90.99 billion*

57%

Salt

13%

71% Tea

18%

India Reach Coffee

Tea

EBITDA (# BN) 8.38 3.16 (#Households)

110 mn 140 mn

TCL to de-merge its Consumer Product Business (CPB) into TGBL through a NCLT approved Scheme of Arrangement; TCL shareholders will be entitled to receive 1.14 shares of TGBL for every 1 share of TCL; Post the Transaction, TGBL to be renamed as Tata Consumer Products Limited *FY19 Revenue

penetration of branded pulses, and spices and condiments businesses in India are merely 1% and 30%, respectively. TCPL expects strong growth in both these segments given the rise in modern trade, online trade and the secular trend of buying more branded goods. Their products are available with major online retailers such as Amazon, BigBasket and Flipkart. In fact, Tata Sampann is already the leading online pulses brand in India. The next trigger will be the unfolding of the synergies between TGBL and TCL . We believe that TCPL will be able to leverage Tata Salt’s 2.5 million distribution points and widen its reach to over 200 million households across India. Moreover, TCPL will be able to leverage the Tata group’s other consumer-facing businesses, namely Trent, Indian Hotels and Vistara. The other major trigger in the stock is the appointment of Sunil D’Souza, who takes over as managing director and CEO with effect from April 4, 2020. A graduate of IIM Calcutta, D’Souza joins from white goods major, Whirlpool of India. During his five-year tenure, Whirlpool’s sales grew 14% CAGR and profit grew 27% CAGR . Prior to that, he spent 14 years at PepsiCo’s Asian operations. Besides Sunil D’Souza, TCPL has made several senior management changes, hiring fresh talent such as Ajit Krishnakumar (COO), Adil Ahmed (head of international), Rakesh Sony (head of strategy and M&A) and Rishi Dang (head of US business).

TCPL will be able to leverage Tata Salt’s 2.5 million distribution points and widen its reach to over 200 million households

For a period of 10 years, that is, between 2006 and 2016 end, the stock price of the erstwhile TGBL went up a mere 32% from #94.50 to #124.45. As a result, investors had lost interest in the stock and missed the growth that came soon after Chandra assumed office as Chairman of the Tata Group on February 10th, 2017. The stock has since tripled to hit a lifetime high of #392 , before falling to #265 (on March 20, 2020). This was led more by the coronavirus correction in global equity markets than any change in fundamentals. What’s more, with 66.8% free float, the stock trades $28 million a day (last 3 months average), making it among the top 50 most liquid stocks in India. TCPL has a healthy balance sheet which generates free cash flow of #10 billion. Trailing twelve months (TTM) financials of TCPL have combined revenue of over #95 billion and Ebitda of over #12 billion. India will contribute more than 60% revenues, against 49% at TGBL . While the stock is not cheap at 24.5x FY21 price to earnings, we estimate that the P/E will expand as the story plays out and the stock catches up to the high valuations of its listed peers, such as Hindustan Unilever, Nestle and Dabur. Over the next five to 10 years, the company will introduce more FMCG products and pump them through its extensive nationwide distribution. We believe Tata Consumer Products is the next food and beverages giant in the making. b / 10 April 2020

29

MY BEST PICK

HARENDRA KUMAR MD, ELARA CAPITAL

FAISAL MAGRAY

ICICI Securities has a strong moat, thanks to its distribution reach and a strong product offering

30

*Harendra Kumar does not own ICICI Securities, but Elara Capital has recommended the stock to its clients

10 April 2020 /

ICICI SECURITIES

/ 10 April 2020

31

MY BEST PICK

STOCK PRICE M-CAP FY20* RETURN TTM P/E ROE ROCE Net Sales PAT

*Market data as on March 20, 2020. Financials for 9MFY20; Return ratios as of FY19

282 91 BillioN 12 18x 53 52 12.2 BillioN 3.86 BillioN

I

CICI Securities (I-Sec) is one of the largest and oldest equity brokers in India and ranks number one with an overall retail client base of 4.7 million, and number two by active client base with 10% market share and number two in market volume with a 9% blended market share — its retail volume share is higher than its blended share. While the advent of discount brokers has dented margin, I-Sec is still the number two by revenue market share, with a CAGR of 14% over FY14 -19. I-Sec is a full-scale broker and provides research, margin funding and a full bouquet of other financial products including mutual funds, life and general insurance, and third-party loan products. The leadership position extends even to the distribution piece, where I-Sec is the second-largest non-bank distributor with a market share of 4% as on FY19, as per AMFI. The capital markets business remains its crown jewel, with I-Sec being number one domestic financial advisor by revenue for FY19, as per Prime Database.

THE MOAT As a subsidiary of one of the largest private banks in India, the ICICI brand provides customers the trust, especially given the recent incidents surrounding client asset misappropriation, with client’s custody sitting with the bank. I-Sec has been an innovator from the start, with being the first to provide eATM facility to all cli32

10 April 2020 /

ICICI Securities is one of the largest equity brokers in India with client base of 4.7 million

Data: Ace Equity

ents, where up to #500,000 is transferred to all clients within half an hour against industry practice of T+2 (transfer day plus two) working days. I-Sec still has a sizeable customer base above the 40 -year age bracket, which is considered sticky and a segment that has been difficult to crack by discount brokers. The biggest moat in financial services in India has always been distribution, which serves the dual purpose of client acquisition and servicing. While the broking industry has moved online with 30% of the NSE cash and derivatives trade being done via the internet, broking still remains a light touch model, and being the subsidiary of a bank with 4,874 branches, of which 50% are in semi-urban and rural areas, has its advantages. We see enough room for the industry to expand client base from a mere 28 million retail participants (See: Geared for growth), of which I-Sec has 0.96 million on board as active users on December 2019 (See: More the merrier). Beyond the natural shift to financialisation of savings, which benefits the industry at large, the firm has other advantages including the 8,600 -plus sub-brokers.

BENEFICIARY OF CONSOLIDATION A growing client base (2x over FY14 -20) and a revenue pie (16% CAGR over FY14 -19) are testaments of I-Sec weathering the storm of discount broking, which heightened since FY17. Revenue did take a beating at 64%

ICICI SECURITIES

Geared for growth

More the merrier

In million

In million

I-Sec has close to 10% share of the overall active client user base

I-Sec has enough room for expansion Market participants 28

8.3

Demat holders 39 Individual tax filers 59

4.3

5.1

5.2

FY15

FY16

9.8

8.8

6

Retail MF folio 77 EPFO subscribers 170 Source: Elara Securities Research

FY14

CAGR in average daily turnover versus revenue growth of 16% over FY14 -19, though not

all was because of pricing but also a shift to derivatives and intraday trading. Recognising the needs of new-age customers and aggressive competition, the management led by Vijay Chandok has taken steps to bridge gaps in pricing and products. I-Sec launched a separate membership plan called Prime, where it has reduced the rack rates, although they are still higher than those of discount brokers. The steps have been well received with 5% of the customer base shifting to Prime, which has resulted in increased activation rates. Of the 230,000 Prime customers, 90% are in the first category, as per the management. While volume has held up for 60% for 9MFY20, broking revenue was down 2% YoY, which we ascribe to the launch of Prime at the start of the current fiscal. We currently do not build in any material shift of customers to Prime, and expect FY20 brokerage revenue to see 2% YoY growth. Margin trade financing, too, has picked up with a quarter on quarter jump in book to #11 billion in Q 3FY20 from #6.8 billion in Q 2FY20. Management sees this is as a stable source of revenue. Given its current networth of #10 billion, I-Sec has the ability to grow this 4x.

TIGHTENING RULES A POSITIVE Despite the growing size of the broking industry, the regulator has not increased

FY17

FY18

FY19

FY20*

Source: Elara Securities Research. *Till January 2020

I-Sec began a separate membership plan ‘Prime’ with reduced rack rates, although they are still higher than those of discount brokers

the minimum networth requirement for trading and clearing membership (TM & CM) in the capital market and futures and options segment, which currently stands at #30 million. The networth for large brokers remains high and comfortable and gives them an edge. The changing regulations, while do not directly increase the requirement, are pro-large brokers given their stronger balance sheets. We see tightening regulations working towards the benefit of large brokers and increasing networth requirement putting a floor to the price war. On one hand, a stricter implementation on margin funding will be detrimental for the industry at large. On the other, regulations to reduce settlement frequency and inability to use client assets post the Karvy episode work in favour of I-Sec. We expect a 27% CAGR in market volume over FY19 -24, with ISec growing higher at 28% as we build in market share gains. These gains could be sharp due to the reducing competition, but we keep them conservative, given the uncertainty around margin funding. We expect 12% CAGR in broking revenue over FY20 -22 on the back of 20% CAGR in market volume and a slight dip in yield to account for the impact of Prime and Option20.

AMAZON PRIME OF BROKING INDUSTRY I-Sec historically has had a diversified revenue mix, with distribution being an integral part at 23 -26% of revenue. This makes / 10 April 2020

33

MY BEST PICK

the company partly offset the cyclicality of the broking business. The management’s long-term objective remains to have a 50:50 broking and non-broking share, which stands at 57:43 currently. The largest pie in the distribution piece is mutual funds. With an MF AUM CAGR at 24% over FY14 -19, I-Sec has seen its client MF post an AUM CAGR of 35% over the same period, with market share in commissions going up from 2.3% in FY14 to 4.0% for FY19. The recent total expense ratio (TER) cuts have dragged MF revenue down 3.0% for FY19. We estimate MF revenue to fall by 16% YoY for FY20, with growth resuming over FY21-22. Being a one-stop shop, insurance is also a part of the bouquet of services. But unlike MF, the tie-up is only with group companies on the life (LI) and general insurance fronts, while for health, it has tie-ups with two standalone health insurers. The management is looking to go the open architecture route here too, which could be an additional growth lever. Revenue for the LI business has been flat in 9MFY20, due to subdued performance by ICICI Life Insurance with annualised premium equivalent (APE) up just 1.2% for 9MFY20. We see it improving once ICICI Prudential Life picks up steam. I-Sec has other distribution products, including the National Pension Scheme, Alternative Investment Fund, portfolio management services and fixed deposit, which contribute to 28% of distribution revenue.

The management’s long-term objective is to have a 50:50 broking and nonbroking share, which stands at 57:43 currently

Gilded edge

I-Sec’s parentage could spur the wealth management business AUM (# trillion)

IIFL Wealth 1.79 Edelweiss

1.11

CALL FOR EFFICIENCY

ICICI Securities 1 JM Financial 0.47 Motilal Oswal 0.19 34

10 April 2020 /

We expect distribution income to bottom out in FY20 for the combined impact of TER cuts and slower growth by ICICI Prudential Life. We estimate distribution income at a CAGR of 13% over FY20 -22. Long entrenched relationships are the backbone of wealth management, with I-Sec boasting of 65% of revenue contribution by customers who have been in association for more than five years. I-Sec classifies its wealthy clients as having asset under advice of more than #10 million and currently stands at an aggregate of #1 trillion spread over 30,000 strong client base (See: Gilded edge). Given limited disclosures, the potential from this pie could range from 12% to 30% of revenue. We see this piece gaining increased focus under the new management and could be a significant value driver. As far as investment banking activity goes, FY16 -18 were the best years as I-Sec reported #1.4 billion in revenue for FY18, at a CAGR of 31% over FY15 -18. FY19 was hurt by the IL &FS crisis, which combined with the fall in consumption reflecting in macro and GDP growth rate. With GDP growth and capex expected to bottom out, we expect capital market activity to revive in the medium term. Additionally, the government’s #2 trillion divestment target will be a key driver to revive capital market activities. I-Sec remains the largest domestic financial advisor by revenue, and a high share in public issuances will enable it to capture the above opportunity. We are conservative in our projections of overall revenue CAGR of 12% over FY20 -22 on the back of 12% CAGR in broking revenue and 13% for non-broking. We currently project 20% CAGR in market volume over FY20 -22 against 68% over FY17-19, and we expect further moderation in pricing owing to the adoption of Prime and Option20.

Source: Elara Securities Research

Profitability of the capital markets businesses is volatile, given the cyclical nature of business, which coupled with lofty employee cost, makes it a highly operating leverage play. For I-Sec, profit before tax margin has been moving from 20% for FY14 to 44% for FY19 and has maintained

ICICI SECURITIES

The perfect mix

Distribution business helps I-Sec offset cylicality of broking FY15

FY16

FY17

FY18

FY19

491 500 400

289

300 200

179

165

131

95

100 0

Equity + Derivative ADTO*

Note: Rebased FY14 to 100

MF AUM

*Average daily turnover

BIG TO BIGGER Insurance Premium

Source: Elara Securities Research

during 9MFY20. This is a result of the following: One, tight leash on other opex, which was up by 3% CAGR over FY14 -19, owing to the strategic shift in closing down branches. As per the management, direct cost toward branches is 10% of FY19 overall cost, and, thus, has further scope for rationalisation as it closes more branches. Two, given the increasing use of digital as a platform, I-Sec has broadly maintained headcount, but wage inflation has meant employee cost rising at CAGR of 11% over FY14 -19. Management is now only looking to fill vacancies which are crucial, else the headcount is expected to rationalise further. Three, the focus is also on reducing cost-income ratio to 50% by FY22.

ONE-STOP SHOP We see merit in financialisation of savings as a theme and expect fi nancial savings to post CAGR of 11% over FY19 -24. Even with intense competition in financial services and disruption from new entrants, we believe I-Sec will hold its fort as it has weathered the storm with a strong balance sheet. I-Sec’s net worth of #100 billion is more than combined networth of 400 small brokers. It ticks off all the boxes — leadership position across clients, revenue and distribution, and a strong brand that instills trust. The organisation has a lot of firsts to its credit and continues to innovate under the aegis of a new management, which we believe is of utmost importance, given the

competition from fintech. Another advantage to I-Sec would be the continued consolidation into larger brokers. A diversified business model and expectation of further diversification bode well to reduce cyclicality (See: The perfect mix). We expect FY20 to be a bottom for revenue growth and expect it to pick up to 12% CAGR over FY20 22. This clubbed with an 6% CAGR in opex would result in an earnings CAGR at 21% over FY20 -22.

I-Sec ticks off all the boxes — leadership position across clients, revenue and distribution, and a strong brand that instills trust in customers

We see changing regulations working in favour of large brokers as the smaller ones find it difficult to sustain incrementally. This opens up 35% of market share gains for large brokers. Risks from the entry of other big firms such as Paytm remains, but having weathered the onslaught from the largest discount broker Zerodha with continued increase in market share, I-Sec is likely to ride this one out, too. A one-stop shop for all financial products provides stickiness and is expected to provide delta to earnings and reduce cyclicality of business. Importantly, I-Sec has been an innovator at its core. With Chandok taking over charge in May 2019, the company has further strengthened its offerings. The incumbent management undertook an extensive internal assessment to bridge product gaps, further strengthen the core and plug excesses in cost. The new launches via Prime and Option 20 is already visible in a 133,000 increase in active client share over the past 10 -11 months to 988,000 in January 2020. Along with that, blended volume market share has also moved up from 8.1% to 8.9% as on December 2019. Additionally, the management looks to adopt open architecture in distribution of life and general insurance segments and acquire non-ICICI bank customers as well to broaden the customer base. We see strategies playing out well with Chandok at the helm until FY24. We are bullish on I-Sec with a target price of #610, based on an earnings growth model which implies a P/E of 26x. We see moat in the business, reflective in its wide distribution, brand name, good balance sheet, diversified revenue streams and strong execution. b / 10 April 2020

35

MY BEST PICK

M E H U L B H AT T FOUNDER, OYSTERROCK CAPITAL

FAISAL MAGRAY

Nesco, with its enviable real estate assets, well-managed cash-flow and competent management, looks like a good place to move into

36

*OysterRock Capital owns shares of Nesco in the fund’s portfolio and may buy or sell in the future and to that extent, could be considered as interested

10 April 2020 /

NESCO

/ 10 April 2020

37

MY BEST PICK

STOCK PRICE M-CAP FY20* RETURN TTM P/E ROE ROCE Net Sales PAT

*Market data as on March 20, 2020. Financials for 9MFY20; Return ratios as of FY19

502 35 BillioN 12 20x 16 23 3.13 BillioN 1.80 BillioN

W

hat do you love, in the time of corona? The question is inspired from the title of the famous Gabriel Garcia Márquez book, set in a period of cholera epidemic. We are in a similar situation. Much like the book’s protagonist Florentino Ariza, in times of market carnage like the one we are facing due to Covid-19, it is difficult to maintain a sense of equanimity. In the present milieu, many investments offer mouth-watering valuations for good businesses. But, my love for a clean, strong balance sheet and transparent management draws me towards Nesco, which has a history of healthy return ratios combined with an attractive valuation (that could get cheaper). Originally known as New Standard Engineering Company, Nesco figured out the potential of real estate and a way to commercially exploit it by creating an IT park lease rental business. And in the ’90s, it converted itself into a pure lease rental play. Its 65 acre land in Goregaon, Mumbai, has excellent connectivity — it is in close proximity to both the airports, and is right on the Western Express Highway. As an offshoot, the company also started a hospitality business and continues to run a legacy engineering business. Additionally, Nesco has embarked on an expansion plan that, in the short run, will add significant IT park space, to increase leasable area. To take advantage of the 38

10 April 2020 /

Data: Ace Equity

Mumbai Development Plan for 2034, Nesco plans to create a holistic growth programme including, potentially a hotel. The entire exercise is expected to be financed internally without equity dilution or debt and, interestingly, in some instances, even from customer advances. This makes for a formidable investment case. Now, let us dive into each of its diversifications. Exhibition Centre: In FY19, Nesco generated revenue of #1.56 billion with an EBIT of #1.26 billion from this business. It has a leasable area of ~0.65 mn sq ft. Typically, the space sees large, sizeable exhibitions every alternate year. The third and fourth quarters tend to be the best ones, while the second quarter is often weak due to the international calendar. It plans to construct the New Business Exhibition Center with built-up area of ~0.15 mn sq ft, which is expected to be completed in a few years.

Nesco figured out a way to commercially exploit its real estate by creating an IT park lease rental business

IT Park: Nesco currently has three operational IT buildings with a total of ~2 mn sq ft leasable area generating revenue of ~#1.37 billion in FY19 (See: Jewel in the crown). The construction of IT park 4 is also completed, which will add another ~2 mn sq ft of area. The handover of premises to lessors is currently underway. There are plans to construct one more building that will add 0.13 mn sq ft, in the next four years. Hospitality: Nesco has created food courts on its premises and is now look-

NESCO

ing at this business as a profit centre. For FY19, this division brought revenue of ~#350 million and an EBIT of #70 million on capital employed of ~#250 million. The company set up a state-of-the-art kitchen for #150 million and is expecting this business to grain traction. Engineering Division: Nesco makes surface preparation systems called ‘Indrabator’ shot blasting machines. For FY19, the revenue from this was ~#350 million with an operating profit of ~#70 million. Despite being the company’s legacy business, this division has become relatively insignificant. But, it plans to continue this operation without any further investment.

Jewel in the crown

The IT park business has compounded at 19.54% over the past decade Business exhibition centre

Others

0.81

0.82

1.41

1.45

1.32

1.30

0.99

0.65 0.47

0.42 0.23 0.54

0.44

0.91

0.95

0.85

1.11

FY12 FY13

FY14

FY15

FY16 FY17

0.34 0.65

0.76

Revenue in # billion

The leadership has a great record on governance issues and shun models such as JV or REIT structures, while focusing on the basics

1.37

1.20

0.90

0.28

FY10 FY11

0.38 0.48

0.37 0.27

0.45

EXHIBITING PROMISE All in all, the company plans to add over 4 mn sq ft of space over the next many years incurring a capex of #20 billion. The leadership team of Suman Patel and his son Krishna Patel, both with a strong pedigree and an excellent record on governance issues, shun models such as JV or REIT structures and continue to focus on basics. While the sheer size of Nesco’s land parcel gives it a competitive advantage, Reliance Industries plans to build a large convention centre in BKC, Mumbai. This might pose a direct threat to Nesco. However, due to the location, the size would be smaller than Nesco, which would limit it to only certain types of exhibitions. Also, combining forces for both companies — if it ever happens — could attract larger exhibitions, some of which do not happen in India or are moved to NCR for various reasons. A price war could lead to potential lower yields for both. Nesco faces various risks. One, if the economic slowdown persists, exhibition revenues could be affected due to lower occupancy. This can also reflect in the IT parks. Two, the large convention centre being built by Reliance Industries in BKC could compete for revenue. Three, a pandemic such as the coronavirus can pose considerable threat to the exhibition business, as congregation of large crowds is discouraged. Four, as work-from-home becomes an acceptable corporate norm post Co-

IT Park

1.56

FY18 FY19

Source: Jainam Share Consultant, Ace Equity

rona, commercial real estate will also see challenges in the coming year. However, in our view, issues such as the coronavirus will blow over. Locational advantages and top class infrastructure will ensure that Nesco’s rental business is not at significant risk. The company trades at a valuation of ~20x trailing 12 -month earnings. This considers a reduction in rentals due to tearing down of one structure for a new development and does not include the just operationalised IT park. However, earnings are likely to be lower in the current year due to the pandemic, and hence, valuation will seem elevated. But, taking into account consistent return ratios, long history of positive free cash flows and growth in revenue and earnings, the business offers good prospects to warrant making an investment case. In each of the businesses, increasing leasable area and rising rentals offer growth opportunities. If one applies a cap rate (not preferred), the numbers could become even more attractive. Also, in case of a benign interest rate environment, lowering cap rates would increase valuation. Future growth plans, sufficiency of internal accruals to fund growth, a competent management, size and locational advantages of the asset, and an attractive valuation make Nesco a solid business. So much like the protagonist of Love in the time of Cholera, Florentino Ariza, I keep going back to one of my old favourite stocks — Nesco! b / 10 April 2020

39

MY BEST PICK

SAFIR ANAND SENIOR PARTNER, ANAND AND ANAND

VISHAL KOUL

With macro dynamics shifting in its favour and a sturdy business model, Transpek Industry has the perfect formula for growth *Safir Anand owns the stock and is not a Sebi-registered advisor

40

10 April 2020 /

TRANSPEK INDUSTRY

/ 10 April 2020

41

MY BEST PICK

STOCK PRICE M-CAP FY20* RETURN TTM P/E ROE ROCE Net Sales PAT

*Market data as on March 20, 2020. Financials for 9MFY20; Return ratios as of FY19

1,390 7.91 billion -6 10x 24 27 4.03 billion 0.48 billion

E

verything does not have to be pomp and show. Just because something is not in the limelight does not mean it is not worth respect. How else would this world find gems such as Irrfan Khan or Pankaj Tripathi? They were underrated despite being in the industry for long, but today, both have a cult following of hardcore film-watchers. Transpek Industry is one such stock. Established in 1965 by Shroff Group, Transpek has been exploring all kinds of compounds — from sulphur to chlorine — and has earned a name for itself as a quality supplier and manufacturer of chemicals. With more than five decades of experience, the company has evolved as a fi rsttime manufacturer of several products in India and also built the market for these. They developed the process for chlorinated chemicals including thionyl chloride and various acid and alkyl chlorides that are used across industries such as agrochemicals, polymers, pharma, dyestuff, flavour and fragrance, and surfactants. If that exhaustive list of potential client sectors wasn’t enough to convince one, let’s turn to the overall outlook for Indian chemical companies. Demand continues to rise domestically and internationally, as companies are looking for sources outside of China due to high pollution levels and increasing cost. Not to mention the Novel Coronavirus outbreak that has jolted global markets into the realisation

42

10 April 2020 /

Data: Ace Equity

that heavy dependence on China will cost everyone dearly. According to the latest data compiled by India’s drug regulatory authority, 57 active pharmaceutical ingredients of crucial antibiotics, vitamins, and hormones or steroids could go out of stock in case of a prolonged lockdown in China. Moreover, western chemical companies are seeking strategic alliances and investment opportunities. In this aspect, they deem several Indian companies to be reliable, one of them being Transpek Industry. Besides the fact that the company delivers quality chemicals, it also counts some reputed pharma giants as its clients. Hence, in the foreseeable future, we expect the company to register solid growth for the Shroff Group.

UNIQUE STANDING

Transpek has been exploring all kinds of compounds, from sulphur to chlorine, and has earned a name as a quality supplier of chemicals

In 2017, Transpek struck a long term agreement with global giant DuPont to manufacture an existing product for the company for the next 10 years. The polymer chemicals are used to make Kevlar, a high performance heat resistant, strong synthetic fibre. In simple words, Kevlar is a super-strong plastic, a plastic so strong that it can stop bullets and knives and 5x stronger than steel. Yes, it’s Kevlar that is used to make bulletproof vests. It also has other applications, ranging from bicycle tires to racing sails. The deal is a big positive for Transpek since it ensures a stable client and revenue source for almost a decade. In fact, after signing this agree-

TRANSPEK INDUSTRY

Formula for success

With a number of major clients and focus on innovation, Transpek has delivered strong growth over the years Sales (# billion)

Net Profit (# billion)

OPM %

ROE %

2.90 0.22 13% 29%

2.84 0.21 17% 23%

3.17 0.30 17% 15%

3.61 0.26 13% 11%

5.95 0.66 20% 21%

FY15

FY16

FY17

FY18

FY19

5.70 0.79 22% 25%

FY20* *Estimate

for value creation, one cannot overlook Transpek’s upper hand in terms of exclusivity when compared to its peers. This can be attributed to factors such as backward integration and on-site production of intermediaries, a unique recycling system with closed loop chemistry and R&D recognised by departments of the Indian government. It also boasts of 100 acres of land with a green belt of more than 30,000 trees, fully fledged effluent management system with a licensed discharge facility to the central effluent channel and a selfsustained water source. Transpek’s focus on innovation is reflected in its pipeline of organic as well as inorganic products. Manufacturing technology for all of its existing products has been developed in-house.

ment, DuPont announced that it would be closing down its facility in the US to source from suppliers (read Transpek) who have “newer process technology”. The company also called Transpek’s technology “more productive” than its own. Even on the financial front, the company has performed well over the recent past. While net profit grew at CAGR of 31% from FY15 to FY19, sales grew at 19% CAGR (See: Formula for success). Even after the company had an accident at its plant in May 2019 and production was halted for two months, the company has managed to deliver steady growth over the past three quarters of FY20. The company also boasts healthy return ratio (See: Quiet underdog). Though the products it manufactures are chemicals that are hazardous in nature and, thus, timely environmental approvals and expansions are necessary

POISED FOR GROWTH

Quiet underdog

Transpek seems an attractive play on the rising specialty chemicals demand around the world Stock

CMP (#)

P/E (x)

Market cap (# billion)

D/E (x)

ROE %

Aarti Ind

772

24.7

134

0.91

24

Navin Fluorine

1,186

35.2

58.8

0

14

Alkyl Amines

1,250

13.8

25.5

0.44

24

Fairchem

454

64

17.6

0.85

18

Transpek

1,390

10

7.9

0.46

24

Data as on March 20, 2020

Source: Company, reports

Source: Companies, reports

During a recent board meeting, Transpek sought approval to undertake a greenfield expansion project at an estimated cost of #1.20 billion, funded by a mix of debt and equity. Even if it undertook the project, it will not hurt its books since its current fixed assets stand at #2.70 billion. As more global players see a reliable partner in Transpek, it can further boost its growth and assure steady return for investors. The DuPont deal is testimony to the company’s capability and the upcoming expansion can unlock the runway for this mid-sized chemical player, taking it to the next level of growth. b / 10 April 2020

43

MY BEST PICK

V I J AY K E D I A MD, KEDIA SECURITIES

FAISAL MAGRAY

Repro India is changing the way people read, and is set to capture a third of the market

44

*This is a personal analysis by Vijay Kedia, who has invested in Repro India and is not to be construed as a recommendation to buy or sell the stock

10 April 2020 /

REPRO INDIA

/ 10 April 2020

45

MY BEST PICK

STOCK PRICE M-CAP FY20* RETURN TTM P/E ROE ROCE Net Sales PAT

*Market data as on March 20, 2020. Financials for 9MFY20; Return ratios as of FY19

388 4.65 BillioN -32 18.6x 10.5 7.7 2.93 BillioN 0.17 BillioN

R

eaders are fickle creatures. Ask the publishers. They will tell you how a book that was all the rage yesterday has become as uninteresting as dust today. Therefore, publishers have to manage a promising business on a rickety supply chain. They are never sure what will be rejected, what will be read and what will be returned. Therefore, Repro comes as a godsend. Repro India has created a print-on-demand solution where it prints a book after the customer has bought it, hence disrupting the decades-old existing supply chain. Its solution fulfills the demand through various channels — by aggregating, digitising, listing titles on online storefronts, producing on demand, delivering anywhere in the world. Repro has done this through tie-ups with the world’s largest e-retailers — including Amazon, Flipkart, Paytm, Infibeam, Rediff and Snapdeal. Currently, India is the sixth-largest book market in the world and, with the total number of internet users in India expected to grow rapidly, the number of people expected to buy books online is increasing every day. Today, around 100,000 books are sold per day through online marketplaces. Books have emerged as an instrumental category for e-commerce business, accounting for 15% of the overall e-commerce trade, just trailing behind electronics at 34%, and apparel and accessories at 30%. The Indian e-commerce market is 46

10 April 2020 /

Data: Ace Equity

expected to grow to $200 billion by 2026, and the online book market in India is expected to grow to #80 -100 billion in the next three to five years. But the Indian book industry has its challenges. It receives no direct investment from the government, which is “a serious roadblock for publishers”. Other key challenges include fragmented nature of publishing and bookselling, a tortuous distribution system, and long credit cycles.

PUBLISHING DISRUPTED

Repro India prints a book after the customer has bought it, hence, disrupting the decades-old existing supply chain

Currently, the publishers face challenges in the traditional way of doing business. Books are produced and then sold — leading to high levels of inventory. The solution, therefore, is keeping zero inventory. By the time a book reaches the market or is actually sold, it might be out of date or no longer relevant. The solution, therefore, is zero obsolescence. All books are bought on consignment in various different geographies and so publishers may feel they have sold higher numbers than they actually have. The solution, therefore, is to entertain zero returns. Books are produced at one place and sent over to one part of the country, while the actual book may be required in another corner of the country. The Repro solution is a tech platform that aggregates content from publishers all over the world and reaches more books to more readers, anytime, anywhere! Just like aggregation platforms such as Uber and Airbnb, it connects products and

REPRO INDIA

Page turner

The company’s e-retail business has been quite a successful one, and it continues to grow at a healthy pace Revenue (million/quarter)

Volume (Books sold/quarter) Domestic

International

Total

400,000

367,327

320,554

Q1FY19

100 82.1

80

150,371

100,000 122,731 27,640 0

130

120

300,000 200,000

Domestic International Total

140

60 46,773 Q3FY20

61.8 48

33.7 40 28.2 20

Q1FY19

Q3FY20 Source: Company

services to users. Repro’s aggregation platform offers books to readers all over the world from publishers all over the world. It lists the publishers’ titles online through eretail giants such as Amazon and Flipkart, and readers order the online books from Repro. The platform then produces the book (after it has been bought) and delivers it in 24 - 48 hours. Repro then pays the publishers their royalty immediately on sale of the book. Hence, the publishers can focus their energies on creating a book, making no other investment. The industry need no longer be bogged down by worries about inventory, obsolescence, returns and wastage. Also, the cash flow is positive. Repro India tied up with US -based Ingram content group, which is one of the world’s largest content aggregators and distributors for books. They have the industry’s largest active book inventory with access to 14 million titles from 45,000 publishers. The company has exclusive agreement with Ingram in which the US company will provide international titles to Repro India to sell on Indian platforms, and Repro will also share domestic titles it has aggregated over the years from Indian publishers with Ingram to list those titles on international platforms.

BOOKED FOR GROWTH Repro started the print-on-demand operation in 2016 -2017 with ~90,000 titles, with one facility in Bhiwandi with a capacity of

With its capex almost over and a tie-up with US-based Ingram, Repro seems to be entering an exciting phase of growth

4,000 books per day and average sales of #250,000 a week. It saw 114% increase in volume of books from Q 1FY19 to Q3FY20. Similarly, its revenue also increased proportionally by 111% over the same period (See: Page turner). By the end of 9MFY20, it listed over more than five million titles, two operational facilities, one in Bhiwandi and other in Delhi and third facility is expected soon in Bengaluru and cumulative capacity will be 22,000 books per day and revenues are now touching #130 million per quarter. It has a negative working capital cycle. Repro seems to be entering an exciting phase of growth with its capex almost over and commercialisation of the new capacity set to start in FY21. The balance sheet has become healthy with debt/equity ratio falling to 0.35 in December 31, 2019, as against 0.52 in March 31, 2019. Operating cash flows have been improving and the company may start generating healthy free cash flows from FY21. The debtor days, too, have reduced from 105 to 68, over the same period. One thing to note is the old printing business could continue to be a cash cow for the company, in-spite of the topline being range bound. Thus, Repro would have a healthy working capital cycle and would become debt-free sooner than expected. Being the first-mover in this space, we expect Repro India to have minimum onethird market share in three to four years, and we are confident that it will disrupt the industry in a meaningful way. b / 10 April 2020

47

MY BEST PICK

VIKAS KHEMANI FOUNDER, CARNELIAN CAPITAL ADVISORS

FAISAL MAGRAY

Growth opportunity and a competent management are great for compounding capital, and that’s why ICICI Lombard makes the cut

48

*Vikas Khemani owns the stock

10 April 2020 /

ICICI LOMBARD

/ 10 April 2020

49

MY BEST PICK

STOCK PRICE M-CAP FY20* RETURN TTM P/bv ROE ROCE Net Sales PAT

*Market data as on March 20, 2020. Financials for 9MFY20; Return ratios as of FY19

1,004 456 BillioN 2.5 8.82x 21 329 70.5 BillioN 9.11 BillioN

S

tuff happens. Life is random and unpredictable. 2019 was a perfect illustration of this, with the floods in Kerala and Karnataka, and Cyclone Fani in Odisha to the big pandemic that has spooked everyone. In times of such uncertainty, insurance shines like a beacon. In India, the opportunity size of the insurance industry is huge, with the miniscule penetration in general insurance. Companies operating there usually don’t have to fight for growth. Therefore, we like ICICI Lombard. This industry has several things going for it. First is its size and scale. Second is the structural benefit inbuilt in the dynamics. Here, one receives cash upfront and pays later, leaving a large sum of money called ‘float’, which allows insurance companies to generate investment return while underwriting profit. That, in turn, helps these players generate good return on equity. The #1,700 -billion general insurance industry has been growing at 16% CAGR for the past 20 years and yet the premium per capita stands at only $19 in India. Whereas, in countries such as China, South Africa and Brazil, that figure is 8x to 10x higher. Within sub-segments such as motor, only 25% of two-wheelers and 60% of cars are insured as compared to the global benchmark of 90%. Even with something as crucial as health insurance, penetration is merely 27% in the country, and 89% 50

10 April 2020 /

Backed with a strong parentage, well-known brand and an experienced leadership, ICICI Lombard has the recipe to capture growth

Data: Ace Equity

of the private expenditure incurred on healthcare is out of the consumer’s pocket. These dynamics leave ample room for players to penetrate and increase the size of risk coverage. The other interesting trend playing out is the large market share movement from public players to private players, quite similar to what is being seen with banks. In early 2000, private players held around 13% of the market, which has increased to 55% in FY20. The mood towards PSU players has not been too sanguine. The government has also allocated #70 billion for mergers and the recapitalisation of general insurance companies to manage mandatory solvency ratios, which has soured the sentiment against them. In the recent past, regulatory changes such as mandatory third-party insurance of three years for four-wheelers and five years for two-wheelers have also helped the industry immensely. Thus, an insurance player gets the money upfront for three and five years — one could not ask for more in a float-oriented business.

STRONG LINKAGES Focusing on ICICI Lombard, this company brings with it a strong parentage, well-known brand and an experienced leadership. All these factors form a great recipe to capture growth in any good business. The dynamic and capable leadership of Bhargava Dasgupta makes it even more exciting. He is one of the best

ICICI LOMBARD

Getting it right

Conservative underwriting has ensured that ICICI Lombard continues to enjoy high solvency Underwriting profi ts/(losses) (# mn)

Solvency (%)

Underwriting margin (%)

-3.1

-622

-686

-489 -2.3

-430

-1.8

-322

-2.0

-400

-891

0.2

-363

-1,152

34

-1.4

-1.8

2.21 2.20

2.18

-2.8

2.10

-4.8

2.18

2.12

2.05 2.04

-6.4 Q2FY18

2.26

2.24

Q1FY19

Q4FY19 Q1FY20

Q3FY20

Q2FY18

Q3FY20 Source: Company, HDFC Securities

CEOs I have come across, who has prioritised product innovation, technology and risk management. ICICI Lombard is the largest private general insurer with a comprehensive and well-diversified product portfolio covering motor, health, fi re, engineering, marine and more coupled with strong infrastructure of 265 branches, 910 virtual offices and over 10,000 employees. The insurer’s premium income grew 16% CAGR over the past five years and net profit at 16% CAGR . Strong solvency ratio, combined ratios and loss ratios in comparison to its peers only validate the strong underwriting skills, risk averseness culture of the company combined with focus on profitability (See: Getting it right). Their ability to reject a less profitable business is commendable. For instance, it exited its crop insurance business and did not chase commercial vehicle insurance when it stopped looking lucrative. Yes, the recent regulatory plan of allowing life insurance players to sell health insurance policies can be an additional competitive factor, but I do not believe it will deter players such as ICICI Lombard. The company offers a huge back-end infrastructure across claims processing, tie-ups with third party administrators and hospitals. If anything, life insurance players should be wary of ICICI Lombard. Furthermore, corporates generally prefer insurance companies that provide a bou-

quet of services, so that they don’t have to deal with several vendors. What could have been another risk for the company — technology — has not yet posed a threat since the management has always been a bit ahead of the curve in terms of innovation and cost efficiency.

SOLID AND SOLVENT

ICICI Lombard should be able to double its profit from 11 billion to #20 billion over the next four years and further enhance its leadership

We believe ICICI Lombard should be able to double its profit from #11 billion to #20 billion over the next four years and further enhance its market leadership. If anything could dent its path towards accelerated profitability growth, it is only regulatory risk and persistent economic slowdown. But a great company will know how to navigate turbulence. Compounding at 15 -20%, with no additional capital requirement and a huge retail customer base, ICICI Lombard is more of a consumer business than a financial services one. Can the company reach $50 billion in market cap over the next decade? I believe the probability is quite high. Of course, the stock is not trading cheap. At 5.7x its estimated FY21 P/BV, the stock may look expensive to many investors but a business like this will remain expensive. Sure, in equities, one should never overlook risk. But, investing has always been a game of probability in an ever-changing world. And ICICI Lombard will compound over a long period. As the saying goes — if you want quality stocks, you have to pay for it. b / 10 April 2020

51

MY BEST PICK

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10 April 2020 /

MANAPPURAM FINANCE

V I R A J M E H TA HEAD–PMS, EQUIRUS SECURITIES

With steady cash flow, robust business model and prudent risk management, Manappuram Finance’s future looks golden

*The stock is part of Equirus Long Horizon Fund

/ 10 April 2020

53

MY BEST PICK

STOCK PRICE M-CAP FY20* RETURN TTM Pbv ROE ROA Net Sales PAT

*Market data as on March 20, 2020. Financials for 9MFY20; Return ratios as of Q3FY20

97 82 BillioN 23 2.3x 30.4 6.3 38.6 BillioN 10.8 BillioN

Data: Ace Equity

“When lending people money, be sure their character exceeds their collateral”

T

his lesson was one of the thousands in the American author’s book of life instructions, which, if our bankers had read, would have done great service to this country. While growth is important, risk assessment is vital. While asset quality is important, determining loss in case of a default is vital. While NIM is important, risk adjusted yield is vital. It may be a cliché, nonetheless true, that anyone can lend but not everyone recovers. This is where risk management plays an important role in any lending business. For instance, in the gold-loan business, a company would have to closely assess the quality of gold and price fluctuations, both are major risk parameters. While the first is objective, insulating against the latter requires a nuanced strategy. That’s why we like Manappuram Finance, a company that has smartly introduced an additional protection measure by shortening the tenure of loans to three months compared to industry practice of one year. Thus, it protects the lender from sharp vagaries of price fluctuations. It’s no wonder then that its gross NPA rose above 1% only in one out of the past five years, which was the year of demonetisation. From FY08 to FY12, its gold loans grew at a scorching pace with AUM increasing ~15x on the back of rising gold prices. Over 54

10 April 2020 /

– Jackson Brown Jr

the consequent five years, the industry underwent a consolidation, primarily due to stagnant gold prices and regulatory interventions. But now that the players have adjusted to the new norms, the industry is expected to grow at 8 -10% rate for the foreseeable future.

SAFE HAVEN

Manappuram has introduced an additional protection measure with a loan tenure of three months compared to industry practice of one year

Billionaire investor George Soros once wrote, “The act of lending can change the value of the collateral.” While this may be true in most forms of lending, it does not hold water in case of gold loans. Gold is a highly liquid asset and can be easily monetised in case of a default without having much effect on its value. Another common financial market wisdom falls on its face in case of Manappuram’s gold loans business — high risk, high return. The company has one of the highest spreads in the lending business and, despite being one of the safest forms of lending, it earns a very high yield. What further strengthens our case for the stock is the current economic turmoil. Considered safe and valuable when things get tough, gold holds a special appeal in Indian households. Collectively, Indians own more than ~20,000 tonne of gold, approximately valued at #80 trillion at current prices. At 70% loan-to-value ratio, this translates to an opportunity size of #56

MANAPPURAM FINANCE

Well-funded

A well-diversified liability mix ensures cost of capital is in check Bank Finance

Commercial Paper

Subordinated Bond

NCD

Others

All that glitters is not gold

Manappuram has derisked its business Gold loan AUM

in %

3.8

13.1

1 1

0.1

18.7 28.3

10.9

Non-gold AUM

FY19

2

23.6 100

33

FY15 82

FY15

52.7 FY18

62.8

67

Q3FY20 Source: Company, PL

trillion. Of this, organised gold loans have barely scratched the surface with 3% penetration. That means a long growth runway for players such as Manappuram Finance. Furthermore, lending is a commodity business and anyone including banks, NBFCs, local money lenders can lend against gold. However, specialised NBFCs have a distinct advantage against other lenders. Gold loan NBFCs enjoy speed and flexibility of local moneylenders while benefiting from much lower cost of funds. The company has already proved its mettle as it emerged out of the IL&FS fallout mostly unscathed. While the cost of borrowing for troubled NBFCs increased substantially over two years, Manappuram was not one of them. In fact, recent commercial paper issuance at 6.12% yield was at a much lower rate compared to peers (See: Well-funded). This is because of its high quality loan book backed by highly liquid collateral. Due to its healthy gold loans business, the company has maintained substantial cash flow, which has been prudently utilised by the management. From being a 100% gold loan company in FY14, Manappuram’s 33% of the loan book now comes from sectors such as micro finance, vehicle loans and housing finance. Ashirvad Micro Finance, which it acquired in February 2015, is now among the top five MFI lenders in the country. The subsidiary’s AUM has grown from #3 billion to more than #50 billion over the past five years. It enjoys RoA/ RoE of ~5.3%/~26.8% and gross NPA of

Source: Company, PL

<0.5% as of Q 3FY20. While Manappuram’s gold business continues to be a core one, we believe non-gold business will also be a substantial growth driver, contributing nearly 50% of the AUM in the next five years (See: All that glitters is not gold). With a customer base of 4.93 million customers, it has large cross-sell opportunities, which Manappuram should be able to capitalise.

SHINING BRIGHT

Due to its healthy gold loans business, Manappuram has steady cash flow, which has been prudently utilised by the management

Despite high growth over the past decade, Manappuram raised equity only once, in FY11. It has reported strong earnings growth with EPS rising from #1.8 in FY10 to #15.9 in FY19 on a trailing twelve months basis. The financier’s efforts to lower security cost over the years has also reaped rich dividends in the form of healthy return ratios — RoA of 6.3% and RoE of 30.4% on consolidated basis as of Q 3FY20. Despite being in a capital-intensive business, Manappuram has not missed dividend payouts for more than 15 years, which demonstrates the robustness of its business model as well as cash flows. All these factors prove the company has significant room to grow, and it would not even require much capex. It already has more than 4,600 branches across the country and as business grows, operating leverage should kick in, which would mean extremely attractive return ratios. At #82 billion market cap, Manappuram trades at ~5x estimated FY21 earnings. That, without a doubt, is a great steal. b / 10 April 2020

55

PERSPECTIVE

DEVINA MEHRA Co-founder and head of research, First Global

SHANKAR SHARMA Founder and vice chairman, First Global

What asset allocation is, what it is not FOR ASSET ALLOCATION STRATEGY TO WORK IN YOUR FAVOUR, INVESTORS MUST INCLUDE ALL ASSETS

R

emember XYZ stock I told you about three months ago? It is up by 80% since then”, “ABC ekdum solid hai. Just jump in”, “PQR kya lagta hai?” Sounds like a familiar party conversation…or something that you watch fi nancial channels for. If your endgame is to have fun discussion at parties, this is fi ne. But if your purpose is to protect and multiply your wealth, or to optimise your portfolio, you are frankly approaching the problem from the wrong end! Why? The answer takes you to Investing Basics 101. And, it is to do with asset allocation. Depending on the study you read (and there have been many, conducted over decades), you will find that fully 85 -92% of the returns of a portfolio come from asset allocation.

Just go and look at his record in the past 15 or 20 years and you will see an investor who has missed practically every single multibagger that the US market has given in this period: Amazon, Netflix, Domino’s, Google, Apple (he bought way too late), Facebook, Microsoft, and so on. He is an investor who has consistently underperformed the stock indexes. This is PRECISELY the problem with the ‘sexy’ bottom-up stock-picking approach. Everybody is relevant in a period. And one fine day, the market changes, and you and your strategy become irrelevant. Therefore, when you are picking people to manage your money, check the approach and their strategy.

THE GOLDEN KEY TO INVESTING

Most investors fall in the very familiar trap of getting over exposed to the hot asset class of that era. But the key point to always keep in mind is that if YOU GOT THAT RIGHT! you start playing every innings thinking that you Specific stock selection, which eats up most of your are going to get a hundred runs, you and your advisor’s waking hours contribnever going to be successful. Marutes only 10 -15% of the return. Moral Bottom-up stock are kets change; sometimes they become of the story: it does not make sense to easy, sometimes very tough. concentrate your resources and time on picking is a security or stock selection. But, all the The key to successful investing, over very difficult talk you will hear from portfolio managthe long term, is to have every major asers is about how good they are at picking art, and nobody set class in your consideration set, across stocks and great bottom-up winners. and currencies and across inhas been able to countries The uncomfortable point is — bottomvestible assets — equity, fixed income, up stock picking is a very, very difficult do it successful- real-estate, precious metals, other comart, and nobody in the history of investand more. ly for decades. modities ing has been able to do it successfully for The mantra: there is always a bull decades. Yes, not even Warren Buffett. Not even Buffett market somewhere in the world, even 56

10 April 2020 /

as there is a bear market elsewhere at the very same time. View this: Technology in 1998, Emerging Markets in 2004 - 07, Commodities 2003 - 08, US equitiestech 2010 onwards, Japan 2013 -15, Global Fixed Income 2009 onwards. Even more recently, 2018 and 2019 have been extremely difficult periods for Indian stock markets. Barring a handful of stocks, most have been in negative territory. Despite the difficult 2019 period, First Global’s global portfolio returns have been up 40%! That’s the beauty of asset allocation. To optimise your portfolio, it is important to have all asset classes in your consideration set and carry out dynamic and tactical asset allocation.

markets. For instance, let us look at the past 10 years. In two years, gold was the best performing asset class in India (partly due to currency movements), and in another year, it was the second-best performing asset class. In other years, real estate did extremely well. And now, through REITs and some other instruments, it is possible to get systematic exposure to real-estate as well. When we, at First Global, talk of ‘asset allocation’ it means that your consideration set has practically all the investible asset classes in the world. The other key is to have a dynamic and tactical asset allocation model, that is, assets are to be reallocated based on the tactical view of various asset classes at any point in time. Just crude measures — like at an age of X years, you should have 60% WHAT ASSET ALLOCATION IS NOT exposure to equity and 40% to debt — simply don’t The phrase ‘asset allocation’ is bandied around rather casually these days. Hence, it is important to underwork, if you are looking to protect and multiply stand what asset allocation is not. your wealth. We see this phrase being used quite lightly by many An in-depth understanding of the underlying asset financial advisors and fund managers classes is also important. Among other claiming to do asset allocation stratethis is to ensure that asset classes You may be get- things, gies. Only when one goes somewhat are largely not correlated. That comes ting trapped by from data and vast experience. Is your deeper into it, one realises that all the talk is about the nature of large-cap vermanager well-versed across asset the narrow ex- money sus small-cap Indian stocks or moving classes, across countries, across currenpertise of your cies? If not, you need to be very carefrom value strategies to growth strategies in terms of stock choice within the ful because you may be getting trapped money manIndian market. This, combined with into the narrow expertise of your money ager, which can manager, which is fine for him, but can some debt allocation, appears to be the philosophy underlying the so-called ‘asdisastrous for your portfolio. be disastrous for beFor set allocation’ strategy. example, if one has a positive view your portfolio on commodities and a positive view on In fact, some of the investment documents even cite the same studies that we Brazil and Russian equity markets, inmentioned — 85 -92% of a portfolio return comes from creasing exposure to both will most likely be correlated as commodity prices drive many of the large asset allocation, with specific stock-selection concompany earnings in these two markets. tributing only 8 -15%. The problem? The studies cited Currency alone, or a single country exposure, take into account a portfolio consideration set that can also change your portfolio return profi le is across countries and across asset classes, not just dramatically. couple of asset classes in a single country! So, for asset allocation strategy to really work in To conclude, investing is about batting like Sunil Gayour favour, your consideration set must include all vaskar: a steady, decidedly ‘unsexy’ approach of careassets — developed market equities, emerging market ful risk management through diversification across asequities, developed market fixed income, gold and set classes… just like Gavaskar played shots all around precious metals, other commodities, real-estate (REthe wicket, hit both pace and spin balls with equal mastery, and also batted well across the world. ITs) across countries and so on. Just changing allocation across different categories Bottom-up stock picking is a bit like Virendra Seof the Indian equity market or even Indian equity hwag: brilliant when it works, terrible when it doesn’t. and debt markets is simply not good enough. That is But, never steady or predictable. So, runs come with like playing football on 20% of the football field. It high volatility or standard deviation. Who would you want managing your money: Gavasmight be better than not playing at all... but can it rekar or Sehwag? The answer is obvious, isn’t it? b ally be called football? THE AUTHORS ARE FOUNDERS OF FIRST GLOBAL, Hence, it is important to look at asset classes beA GLOBAL PMS AND SECURITIES FIRM yond just debt and equity, even within the Indian / 10 April 2020

57

MY BEST PICK

WHAT A YEAR!

Amidst a weakening economy, uncertain policies and a global pandemic, the 16 stocks recommended in 2019 have delivered mixed return

I

SHUTTERSTOCK

t was a year when the Nifty hit an all-time high, but as the financial year comes to a close, it might end 30% below its peak. Out of the 16 stocks recommended by some of the top market experts in the country in March 2019, five delivered positive return. While Coffee Day Enterprises declined due to unfortunate events, even stocks such as Bombay Dyeing, Majesco and Tata Motors have not been spared in the market carnage. The only true winner in the list is specialty chemicals player Alkyl Amines, which was recommended by Viraj Mehta of Equirus Securities. With a gain of 53% since the recommendation, it tops the chart, followed by Dr Lal PathLabs, recommended by Saurabh Mukherjea of Marcellus Investment. As the market carnage continues amid the novel coronavirus scare, analysts believe the time is ripe to bet on quality stocks, and that’s what they have recommended this year. Here’s hoping FY21 is kinder. b

Taking stock

A quick look at how the top picks of 2019 have performed Reco price* (#)

Peak price post reco (#)

CMP** (#)

Change (%)

815

1,810

1,250

53

1,073

1,846

1,420

32

628

1,199

765

22

Gautam Trivedi, Nepean Capital

1,156

2,101

1,328

15

Aditya Narain, Edelweiss

2,749

3,364

2,879

5

392

552

344

-12

Gautam Duggad, Motilal Oswal Financial

6,558

7,758

5,094

-22

Harendra Kumar, Elara Capital

1,342

1,617

1,028

-23

Grauer & Weil

Arunagiri N, TrustLine Holdings

51

62

36

-29

Star Cement

Jigar Shah, Maybank Kim Eng Securities

100

140

70

-30

Greenply

Ekansh Mittal, Katalyst Wealth

154

194

101

-34

Engineers India

Ajay Jaiswal, Stewart & Mackertich

113

128

57

-49

Tata Motors

Ambareesh Baliga, Independent Market Expert

175

239

77

-56

Majesco

Mehul Bhatt, OysterRock Capital

497

587

206

-58

Bombay Dyeing

Gaurav Parikh, Jeena Scriptech

143

147

43

-69

Niraj Dalal, 3A Capital

287

318

26

-91

Stock

Recommended by

Alkyl Amines

Viraj Mehta, Equirus Securities

Dr Lal PathLabs

Saurabh Mukherjea, Marcellus Investment

Vaibhav Global

Vijay Kedia, Kedia Securities

Aavas Financiers Dr Reddy’s ICICI Bank

Vikas Khemani, Carnelian Capital Advisors

Maruti Suzuki Reliance

Coffee Day *As on March 22, 2019

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10 April 2020 /

**As on March 20, 2020