Yesterday’s Market Performance
Nifty: 15752.40 I 171.00 (-1.07%)
FII Sell Net: 2198.71 CR
DAX: 15,133.20 I -407.11 (-2.62%)
Sensex: 52553.40 I 586.66 I (-1.10%)
DII Buy Net: 1047.66 CR
FTSE: 6,844.39 I 163.70 (-2.34%)
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In today’s issue, we discuss;
- The country’s largest private sector lender HDFC Bank dropped the Q1 results.
- India has a record USD 6.3 Billion of funding & deals in the second quarter of this year, what else is waiting for the investors? Gonna be interesting for sure.
- Tata Power’s performance, other important financial news, and an educative concept to help you keep learning. Read along!
Tata Power: 125.80 | 1.65 (1.33%)
The Tata backed firm added 1% after the company joined hands with HPCL to set up electric vehicle charging stations at its petrol pumps across the country
L&T Finance Holdings: 90.55 | -4.35 (-4.58%)
The stock price slumped 4% after the company reported a 20% rise in net profit at Rs 178 crore for June quarter 2021-22
Note: Above are not owned by the authors of the newsletter and are neither recommendations to buy the stocks; not our style at FinLearn.
India’s foremost lender (private) dropped its numbers over the weekend; what do you need to know and what else can you extrapolate from HDFCB’s quarter? 🤓
Credit growth remained moderate at 14% YoY, mainly due to a continued retail drag (growth was sub-par at 9% YoY), that was partly accentuated by Covid induced lockdowns (more so during the second wave) and continuation / non-resolution of the suspension of the card
The bank has strategically built out a strong (ish?) SME portfolio, that now constitutes ~21% of Total Loans and has upped the ante in its corporate book (gaining market share from Public Sector Banks) driving scale & building a long term fee business
RBI completed a special tech audit, with the bank noting a resolution to the problem (embargo on issuing new cards and conducting online business activities) is imminent (massive overhang on the stock); expect accelerated growth & regaining market share (for what has typically been a very strong business for HDFCB)
The management alluded to strong pent-up demand in the retail space (revenue spending et al.), with limited localized lockdowns helping in pushing demand (think: vehicle sales)
Nice! Costs? NPAs? 🤔
The bank reported a PAT of INR 77 Bn (up 16% yoy), which missed Street consensus estimates of INR 80 Bn on the back of higher NPA formation (Gross NPAs were up 15bps qoq to 1.5%, which is also a decadal high);
Elevated stress in retail / agri portfolios and lower collections due to limited mobility lead to an elevated GNPA ratio (could be indicative of things to expect from other major Banks?); subsidiary HDB Financial services reported a jump in GNPA from 3.9% to 7.8% in Q4FY21
The bank’s restructured book has increased to 0.7% of loans vs 0.6% in the previous quarter and has the potential of inching up further with some more restructuring expected before September end
Margin pressure has been partly offset by increased forex revenue and acceleration in the SME segment (noted above); growth in corporate book tailored to take PSB market share, has had near term margin impact
- From touching an all-time high in Jan-21, the stock has struggled (for lack of a better word) and that is apparent especially, with the variation in asset quality between the two lockdowns; collection efforts for the bank are second to none (we’re talking about HDFCB here) so the impact can be transitory in nature, and/or wait for another quarter to see the full impact?
The street has not considerably changed their estimates, and even a changing product portfolio (margin impact to be minimal) the bank can be expected to deliver 2% RoA / 17-18% RoE over FY22-24E
Another massive overhang on the stock is the culmination and discontinuation (potential?) of the tech embargo, and a resolution is expected in the short-term
To make sense of the above numbers (in case you had some confusion), we run a course on the Art of Stock Picking & Long Term Investing. Head over to FinLearn Academy to know more!
Zomato’s IPO last week was monumental? to say the least! What else is brewing in the Tech Startup space and how / when will you as a retail investor be a part of it? 🧐
- Last week had a lot going on; in the public markets, Zomato successfully raised USD 1.3 Billion in funding, Paytm filed a draft prospectus for what could be India’s largest-ever IPO (surpassing the Coal India IPO in 2009); in the private space, Flipkart raised USD 3.6 Billion at a valuation of USD 38 Billion in the largest ever private financing round the country has ever seen (phews!!)
So what’s enthused, investors? – India has ~625 Million new internet users, who have leveraged the Reliance Jio movement and become ‘digitized’ in the last 2/3 years, just getting started in the world of e-commerce, social networking and video streaming; in a nutshell – opportunity size. It’s always about the opportunity size
India has a record USD 6.3 Billion of funding & deals in the second quarter of this year, in april alone, half a dozen unicorns were born, and funding rounds now last for weeks vs months when the space was fresh
The next 24 months are critical – Paytm (noted above) has just recently filed its Draft prospectus, Policy Bazaar, Delhivery, Ola and Flipkart are all expected to access the public markets soon enough – giving retail investors an opportunity to play the ‘tech’ game (that has all this while been limited to few global investors and Indian angels)
Nice! Tell me more? 🤔
- India’s population is expected to overtake China in the next decade, and with the other South Asian giant somewhat reigning in on its massive tech space, global investors seem extremely enthused about the Indian opportunity
Chinese regulation has wiped ~USD 800 billion in market cap, since record highs in Feb-21, while shaving billions of networth of its tech entrepreneurs (we don’t know where Jack Ma is either, jk jk)
While India recorded massive inflows in the first half of this year, Chinese tech suffered, with funding to companies decreasing by 18% from a peak of USD 27.7 Billion in the fourth quarter of 2020
It’s all activity and it’s all funding – both large & small alike; good times
What else caught our eye? 👀
Domestic Air Passenger traffic grew in June (over May, take it with a pinch of salt)
- Indian airlines registered an increase of 47.2% (mom) and 56.9% (yoy) in passenger traffic (albeit on an extremely small base); directly correlated to the number of Covid cases seen in the country, there has been a marked decrease in the last two months
- The government currently allows airlines to operate 65% of pre-Covid flights; interesting Load Factor (defined as passengers carried per flight) was highest for SpiceJet (71%) followed by GoAir (70.9%) and Indigo (62.2%) (Spice & Indigo are listed)
Ola Electric commenced bookings for its e-scooter over the weekend
- Ola Electric commenced bookings for its e-scooter, allowing consumers to reserve one for a non-refundable deposit of wait for it, INR 499; likely to go on sale at the end of this month?
- The company received 1 Lakh bookings in 24 hours of opening of pre-launched bookings, making it the ‘most pre-ordered scooter in the world’ (not making this up)
- Shares of incumbent OEMs (think: Bajaj Auto, TVS Motor and Hero Motor Corp) were unperturbed by this announcement; you still need to sell the scooter right?
It shows how much a company or firm pays out in dividends every year as compared to the stock price.