Market Walk

Daily Market Highlights OCT 11th

Reliance Industries announced the acquisition of 40% in Sterling & Wilson Solar for Rs.2,850 crore. SWSL is owned by Shapoorji Pallonji group. The deal will be done by Reliance New Energy via preferential issue and open offer. The acquisition will enable Reliance to make inroads into Middle East markets. After the fallout with Tata Sons, SWSL was in a severe liquidity crunch. SWSL has over 11 GW solar turnkey projects executed across 24 countries and it provides a comprehensive spectrum of solar energy turnkey solutions.

There was some respite in the midst of the coal and power crisis as power consumption dipped 2% or 72 MU to 3,828 MU. This will lessen the intensity of the coal crisis. Across India, power plants are grappling with short supply of coal despite India producing record coal. The movement of fuel from mines to power units was hit by rains. On Saturday, 1.92 million tonnes of coal was despatched with consumption at 1.87 million tonnes. The coal crisis has been a combination of surge in demand and sudden supply disruption.

For the week ended 08-Oct, 8 of the top-10 most valuable companies on Nifty added Rs.232,800 crore in market cap. RIL and TCS were big gainers as Sensex rallied 2.2% to close above 60,000. RIL market cap grew Rs.93,824 crore while TCS grew Rs.76,200 crore for the week. Among other gainers, Infosys gained Rs.24,857 crore, Bajaj Finance Rs.12,914, HDFC Bank Rs.10,881 crore and ICICI Rs.7,403 crore. Among companies losing value, Hindustan Unilever ceded Rs.14,615 crore and Kotak Bank lost Rs. 11,697 crore.

FPIs were net buyers of Rs.1,997 crore in October 2021. For the first week of October, these FPIs infused Rs.1,530 crore into equities and Rs.467 crore into debt. Earlier FPIs had infused Rs.26,517 crore in Sep-21 and Rs.16,459 crore in Aug-21. According to traders, FPIs were moving out of banking and into IT. Ironically, FPIs had sold IT stocks worth $1 billion in Sep-21. India, Philippines and Thailand reported FPI inflows while Taiwan, South Korea and Indonesia witnessed big FPI outflows. US yields could hold the key.

For the first time in fiscal 2021-22, credit growth turned positive on a yoy basis at 0.1%, reflecting gradual pick-up in demand. As per RBI data, the bank lending till 24-Sep was up Rs.7,283 crore even as outstanding bank credit stood at Rs.109.56 trillion. The positive growth over last year has been despite the sharply negative impact of COVID 2.0. While credit was driven by agriculture and retail, weak growth in credit to industry and services remains a challenge. The festival season lasting up to Dec-21 will also boost credit.

Even as OYO has just announced its Rs.8,430 crore IPO, brokers like Bernstein are already positive on the stock. In fact, Bernstein has outlined 4 reasons why they find OYO attractive to apply in the IPO. Firstly, it has a huge short-stay market to address expected at $1.9 billion The second is consolidation in hotels. Non-branded hotels will be a logical extension for OYO. Thirdly, OYO has built a competitive moat like 70% direct customer sand 78% repeat customers. Lastly, cost cuts led to 3-fold increase in contribution profit.

Macrotech Developers (Lodha Builders) plans to reduce its debt from Rs.12,508 crore to Rs.10,000 crore by Mar-22 via collections from home sales, land sale and rental office asset. For the Sep-21 Q2, Macrotech reported Rs.3,453 crore worth of revenues including Rs.2,003 crore of local revenues and Rs.1,450 crore from London projects at Grosvenor Square and Lincoln Square. For the Sep-21 quarter, the collections stood at Rs.1,912 crore. Post the IPO, Macrotech had cut its debt from Rs.16,076 crore to Rs.12,435 crore.

IIFL Finance, one of India’s largest NBFCs, closed its retail bond issue 10-days early due to the strong subscription demand at 9.35 times. While the base size of the NCD was Rs.100 crore, it got applications worth Rs.935 crores. The company has a Greenshoe option to retain up to Rs.900 crore. IIFL Bonds offer highest effective yield of 8.75% for 60 months tenor. IIFL Finance bondholders get an added incentive of 0.25%. It has loan AUM of Rs.43,160 crore with 93% retail focus. Gross NPA are comfortable at 2.21%

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