Markets had a topsy-turvy time in the four trading sessions during the last week. While at the end of Thursday, it looked like we would end with losses, the sharp move on Thursday night in the US, saw markets globally turn on their heels and register big gains.
Friday saw markets gain close to 1,180 points on BSESENSEX and 320 points on NIFTY. This not only wiped out the losses but also helped in the week closing with gains. BSESENSEX gained 844.68 points or 1.39 per cent to close at 61,795.04 points while NIFTY gained 232.45 points or 1.28 per cent to close at 18,349.70 points.
The broader markets saw BSE100, BSE200 and BSE500 gain 1.04 per cent, 0.87 per cent and 0.77 per cent respectively. BSEMICAP lost 0.71 per cent while BSESMALLCAP lost 0.42 per cent. Friday’s rally was fairly skewed and was led by a handful of stocks and hence the same was not reflected across the market. Indian markets gained on two of the four sessions and lost on the remaining two sessions.
The Indian Rupee had a very strong showing and gained Rs 1.64 or 1.99 per cent to close at Rs 80.80 to the US Dollar. Dow Jones had a great week on the back of encouraging fall in inflation numbers. CPI data for October 22 came at 7.7 per cent against 8.2 per cent for September and 8.3 per cent for August. This gave great confidence to the US markets and they gained 1,201 points on Thursday post the announcement. Following this, FED Chairman also hinted that the time may have come to pause the steep 75 basis hikes done consecutively over the last four occasions.
In primary market news the rush of IPOs continues. There was the listing of DCX Systems Limited which had issued shares at Rs 207 on Friday. The discovered price was Rs 286.25 on BSE and Rs 287 on NSE. The closing price was Rs 308.00, a gain of Rs 101.80 or 49.18 per cent.
The issue from Bikaji Foods International Limited which was entirely an Offer for sale for Rs 881 crore in a price band of Rs 285-300 was oversubscribed 26.93 times. The QIB portion was subscribed 80.63 times, HNI portion 7.09 times and Retail portion 4.75 times.
The issue from Global Healthcare Limited which consisted of a fresh issue of Rs 500 crore and an offer for sale of 507.61 lakh shares in a price band of Rs 319-336 was oversubscribed 9.75 times. The QIB portion was subscribed 29.51 times, HNI portion was subscribed 4.07 times and Retail was subscribed 0.89 times.
The issue from Five Star Business Finance Limited which had tapped the markets with its offer for sale of Rs 1,960 crore in a price band of Rs 450-474 received tepid response. The issue was subscribed 0.73 times overall with the QIB portion subscribed 1.87 times. The HNI portion subscribed 0.65 times and Retail hardly subscribed at a mere 0.12 times. As this issue was entirely an offer for sale issue, it met with the minimum subscription norms, and would be treated as closed, even though it was not fully subscribed.
The issue from Archean Chemical Industries Limited which consisted of a fresh issue of Rs 805 crore and an offer for sale of 161.50 lakh shares in a price band of Rs 386 – 407 was oversubscribed. The issue was subscribed 48.58 times by QIB, 15.34 times by HNI and 10.19 times by Retail. The overall issue was subscribed 32.53 times.
Two issues are currently open. The first is from Kaynes Technology India Limited which has tapped the capital markets with its issue which opened on Thursday the 10th of November and would close on Monday the 14th of November. The issue consists of a fresh issue of Rs 530 crore and an offer for sale of 55.84 lakh shares in a price band of Rs 559-587. The company Kaynes is an end-to-end and IoT solutions enabled electronics manufacturing player, having capabilities across the entire spectrum of electronics system design and manufacturing (ESDM) services. It has an order book of Rs 2,200 crore to be executed over the next 18 months. This implies that the revenues which were at Rs 710 crore for the year ended March 22 would double to Rs 1,400 crore or thereabouts, if the order book is to be completed in 18 months. This doubling would happen with the capacities available with the company.
The company has also received approval under the PLI (production linked incentive scheme) and is in the process of setting up the new facility under the same scheme. This would help the company in achieving a substantial jump over its existing revenues as the new capacity under the PLI scheme has a high asset turnover ratio.
The company reported revenues of Rs 710 crore for the year ended March 2022 and a profit after tax of Rs 41.67 crore. The revenues for the first quarter ended June 22 have risen to Rs 199.97 crore with the profit after tax at Rs 10.04 crore. The EPS for the year ended March 22 is Rs 9.70 basic and fully diluted at Rs 8.93. For the first quarter June 22, the EPS is Rs 2.11 on a fully diluted basis. The PE band of the issue is 62.60 – 65.73. The business is interesting and promising. It offers appreciation on listing.
The issue from Inox Green Energy Services Limited has opened on Friday the 11th of November and would close on Tuesday the 15th of November. The price band of the issue is Rs 61-65. The issue size is Rs 740 crore with a fresh issue component of Rs 370 crore and an offer for sale component of Rs 370 crore. The company going public services and maintains the WTG which are made by Inox Wind. The parent Inox Wind has an order book of 1,488.7 MW of WTGs. This becomes a healthy pipeline of future orders. To this is the comfort of already servicing 2,792 MW of WTGs. The company is present in eight wind rich states of the country. In terms of manpower and technology, it is fully equipped and also has the backing of the parent for supply of timely spares.
While there is opportunity and work available today, the pipeline going forward would be even stronger as the government is committed to increasing incremental wind power and renewable energy generation going forward. The parent has developed and successfully launched an efficient 3.3 MW WTG, which will help in generating higher electricity at more affordable rates.
The objects of the fresh issue include a repayment of debentures of Rs 260 crore. This would bring down the debt and because of interest saving, help the company earn profits at the net level. In terms of revenues, the company reported revenues of Rs 172.16 crore for the year ended March 22 and EBITDA of Rs 100.26 crore. In the first quarter of June 22, revenues were Rs 61.78 crore and EBITDA was Rs 18.93 crore. The company has not made a net profit, hence there is no EPS and also no PE ratio.
The prospects for the company are good in the long run. There is every possibility that in the run-up to profitability, the share may be available at a price lower than the issue price. Look to buy at prices lower than the issue price for profits in the long run.
The final issue is from real estate company Keystone Realtors popularly known as Rustomjee. The company is tapping the capital markets with its fresh issue for Rs 560 crore and an offer for sale of 75 crore in a price band of Rs 514-541. The issue opens on Monday the 14th of November and closes on Wednesday the 16th of November. The company is present in the rich and opportunity providing MMRDA area of Mumbai where it does new projects and also redevelopment projects.
The company had revenues of Rs 1,269.36 crore for the year ended March 22 and a profit after tax of Rs 135.82 crore. The company reported an EPS of Rs 13.96 for the year. The PE band is 36.83-38.76. The NAV for the year ended March 22 is Rs 93.24. The comparison with its peers makes it in line but more expensive than Macrotech developers and Oberoi Realty and cheaper than Godrej Properties and Suntec. The company has an interesting model and should be looked at for investments.
Coming to the markets, we have made 52-week highs but not lifetime highs. However, we are very close to them and are just within handshaking distance. An attempt to break them would be made next week and the momentum that markets got last Friday after Thursday’s rally in the US should hold markets in good stead. The note of caution is however that markets were rather skewed last week. It would therefore be important to see that for markets to sustain these new heights, markets must gather breadth and build on the rally of last week. If that does not happen, we may make new highs and then correct.
The strategy for the week would be to ride the rally and use strong rallies to book profits as the market is skewed. If markets improve their breadth, we could look at re-entering markets. Till then be nimble footed and have eyes on the ground looking for first signs of trouble.
(Arun Kejriwal is the founder of Kejriwal Research and Investment Services. The views expressed are personal)