BUSINESS

First market indulgence: Five options available; make an informed decision

Even after “Muhurat” trade on Sunday, November 12, the Diwali week brought positive news to Dalal Street and investors. Two of the four trading sessions of the week saw gains, but overall weekly profits exceeded the sum of the two days of gains and two days of losses. How much more and for how long would now be a pointless matter of debate. The topic is exceedingly complicated, so although we will try to address this later in the piece, it will only be somewhat.

At the conclusion of the week, NIFTY closed at 19,731.80 points, up 306.45 points, or 1.58 percent, while BSESENSEX gained 890.05 points, or 1.37 percent, to conclude at 65,794.73 points. The BSE100, BSE200, and BSE500 posted gains of 1.65%, 1.8%, and 1.96 percent, respectively, in the larger markets. While BSESMALLCAP increased 3.18 percent, BSEMIDCAP gained 2.5 percent.

The Indian Rupee gained 7 paisa, or 0.08 percent, against the US dollar to settle at Rs 83.27. The Dow Jones had a fantastic week as usual, rising over four of the five trading sessions. In a single session, it lost. The Dow Jones closed at 34,947.28 points, up 664.18 points, or 1.94 percent.

Right now, markets are at a crossroads of sorts. They seem to be driven by the midcap and smallcap area, which is illogical and raises the possibility that this might eventually result in excessive excitement. The out performance occurred more than three times on a Samvat-to-Samvat basis, which has to be stopped and corrected eventually. Reliance Industries and HDFC Bank, the two heaviest companies in the benchmark indexes, seem to be hibernating at the moment. Furthermore, it seems that pressure is still being applied on the IT pack, which witnessed some improvement last week. The Reserve Bank of India increased the risk-weight on consumer borrowing from 100% to 125%, further compounding the problems facing the benchmark indexes. In the short run, this will affect the cost of money, and in the long run, it will affect the overall cost of borrowing for the banking sector. Although there have been concerns regarding consumer credit and the potential for some of them to go delinquent, the action is nevertheless appreciated. The short- to medium-term performance of the banking sector will be impacted by this decision. One painful aspect of last week’s gain was Bank NIFTY.

It is enough to state that with so many non-performing equities, there would be pressure on the benchmark indexes in the near future. It would be inappropriate to anticipate that action in midcap and smallcap stocks would take its place. Thus, be prepared for a possible sideways shift for a while. The impact of the five state legislatures’ findings, which will be announced on December 3rd, would, at most, be a knee-jerk response.

In the next five days, we will be opening and closing five major market concerns. The next four would open on Wednesday and shut on Friday, while the first would open on Tuesday and close on Thursday. A week’s worth of market liquidity would be impacted as consumers looked to apply for these issues.

First up is a PSU company called Indian Renewable Energy Development Agency Limited, which is looking to expand its market position by offering to sell 26.87 crore shares at a price range of Rs 30-32 and is issuing 40.31 crore additional shares. The issue is available starting on Tuesday, November 21 and ends on Thursday, November 23. The firm has funded several projects from the whole value chain and, as its name implies, is the nodal agency for renewable energy. Its AUM as of September 30, 23 is Rs 47,500 crore. The company’s net neutral profit (NNPA) is 1.66 percent and its GNPA is 3.21%. The price to book range for the shares is 1.15–1.23. For the year that ended on March 23, the EPS was Rs 3.78. The company’s PE ranges from 7.94 to 8.47. The business has favorable comparisons with REC and PFC. Putting money into the firm makes reasonable since there is potential for short- and medium-term growth.

The second offering comes from Tata Technologies Limited, which is using the capital markets by putting 6.08 crore shares up for sale at a price between Rs 475 and Rs 500. The issue would go live on Wednesday, November 22, and end on Friday, November 24. There is nothing to dispute since this is a complete offer for sale. The company’s engineering and services and automotive businesses are its main sources of income. It is now collaborating closely with Airbus after receiving approval for the aerospace business vertical. The aerospace sector would start to generate revenue in the 2024 fiscal year. Being a major participant in the EV market, the firm has assisted several businesses all over the world in introducing EVs, repurposing ICE vehicles as EVs, and advocating for EVs as the future of transportation. Revenues of Rs 2,526 crore for the six months ended September 23 and Rs 4,414 crore for the year ended March 23 were reported by the business. Its PAT margin is at 14.14%. On March 23, the EPS was Rs 15.37. In the price range, the PE multiple is 30.90–32.53. The issue has a reasonable pricing and potential for short- to medium-term gain. At slightly over Rs 3,000 crore, the problem is rather tiny in size. Due to the excitement surrounding the issuance, many investors will be disappointed by the non-allotment. Regardless, there is a necessary investment to be made.

Flair Writing Industries Limited, a manufacturer of writing tools, is the third company to enter the market. It is leveraging the capital markets with a new issuance of Rs 292 crore and an offer to sell Rs 301 crore in the Rs 288-304 price range. The issue would go live on Wednesday, November 22, and end on Friday, November 24. With names including Flair, Hauser, and Pierre Cardin, the firm leads the market in writing tools. For the year that ended on March 23, it posted sales of Rs 942 crore. It also manufactures plastic items and engages in the consumer homeware industry. Its nearest rival would be the newly listed Cello World, which makes up around 15% of its total revenue from writing tools and dominates the plastics industry. In this instance, however, things are reversed, with writing tools becoming the main industry. The business has net margins that are just double digits, best in class. The business declared an EPS of 12.66 rupees. The PE multiple for the issue is 22.75-24.01 based on this EPS. The issue would perform well and provide room for appreciation in the short to medium term, given the success of Cello World and the similarities in business. One more investment that makes sense.

Gandhar Oil Refinery (India) Limited is the fourth issue to hit the market; it is aiming to raise cash in the Rs 160-169 price range. The offering for sale of 1.17 crore shares and a new issue component totaling Rs 302 crore comprise the issue. The issue would go live on Wednesday, November 22, and end on Friday, November 24. The firm, which produces the most white oils in the nation, had sales for the year that ended on March 23 of nearly Rs 4,000 crore. The business provides its goods to businesses in the performance oils, personal care, and healthcare sectors. It has factories in Sharjah, United Arab Emirates, and Maharashtra. For the year that ended on March 23, the firm posted an EPS of Rs 23.77. This EPS indicates that the issue’s PE is 6.73–7.11. In fact, the PE is appealing and has room to grow in the near to medium run. The business would expand in the markets in which it is a major player and make greater use of its capacity in Sharjah, a new factory that is not yet at full utilization. The Maharashtra plant’s capacity, which is almost at full use at 95%, is another goal of the problem, and expanding it would set the stage for future development.

The fifth and last issuance comes from Fedbank Financial Services Limited, which is seeking to raise capital on the market by offering to sell 3.51 crore shares at a price between Rs 133 and Rs 140. The issue would go live on Wednesday, November 22, and end on Friday, November 24. The business, an NBFC, focuses on the MSME market. They serve rising self-employed people as well as MSME’s. They provide mortgages and loans secured by property for business, gold, and house loans. Federal Bank is promoting the NBFC, and True North is a strategic PE investor who made an initial investment in the business around five years ago.

For the year that concluded on March 23, the firm posted an EPS of Rs 5.59. Based on these profits, the share’s PE is 23.79–25.04. Before the issue, the NBFC had a NAV of Rs 42.11. This means that the cost of a booking is 3.32. The valuation is a little high, and this will be made more apparent when the selling pressure on the BFSI market intensifies due to the RBI’s modification of the risk weightage for consumer loans. The mood would be impacted even if FedFina, the NBFC that is well recognized, is unaffected since it is not included in the section. The bank is now much more costly due to the valuations in light of the recent events, and this is the least desired alternative given the availability of four other issues on comparable dates. If there are finances available, the matter could be examined or put on listing.

There are five issues that the market will open and close between Tuesday, November 21, and Friday, November 24. The total cash to be raised will be almost Rs 7,400 crore, which is a respectable amount. Individual investors would be under pressure to deploy scarce resources as a result. Each person must distribute resources according to the likelihood of subscription, allocation, and ultimately earnings. Tata Technologies, for instance, has the most buzz and would get the most subscriptions, suggesting the hardest allocation. As previously stated and clarified, FedFina could react less strongly than Tata Technologies. Put simply, allocate part of your efforts toward these five difficulties by doing some study.

Expect sideways movement in the markets this coming week, along with some very volatile intraday swings. Weekly changes should be anticipated to be minimal. When heavyweight laggards start to participate in the benchmark indexes, there will be a significant upward rise. Trade carefully up until then.

 

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