Yesterday’s Market Performance

Nifty: 17546.70 I 15.30 (0.09%)
FII Sell Net: 1943.26 CR
DAX: 15,506.74 I 158.21 (1.03%)

Sensex: 58927.33 I -77.94 (0.13%)
DII Buy Net: 1850.20 CR
FTSE: 7,083.37 I 102.39 (1.47%)

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In today’s issue, we discuss;

• Zee Entertainment Board approves merger with Sony India
• Indian Hotels has given a breakout and tested its 52-week high.
• Adani competes with Ambani to make the world a better place
• And an educational concept to widen your horizon (not saying otherwise 🙈)  Read along!

Zee Entertainment: 336.80 | +81.10 (+31.72%)

• The script zoomed over 30% after the company signed a merger deal with Sony Pictures India. “The board of directors of ZEEL, at its meeting held on 22nd September, has approved the execution of a non-binding term sheet (term sheet) with Sony Pictures Networks India Private Limited (Sony India)

KEC Internationals: 441.70 | -13.15 (-2.89%)

• The script shed over 2% on 22nd September even though the firm said it has secured new orders of Rs 1,157 crores across its various businesses.

Zee Entertainment Board approves execution of a non-binding agreement with Sony India: What’s up and what do you need to know? 😮

What’s up? 

• Board of Directors of Zee Entertainment gave in-principal approval on Tuesday night to allow shareholders of Sony Pictures Network India (a step-down subsidiary of Sony Japan) to hold a majority stake in a newly merged entity, housing two of India’s biggest media conglomerates
• The two companies have agreed to a 90-day binding exclusivity period from the signing of the term sheet to finalise a definitive agreement (pending due diligence process)

• Shareholders of Zee will hold 47.07% stake in the newly formed merger company, while the balance will be held by the promoters of Sony India (post-infusion of growth capital by the latter to the tune of USD 1.5% Billion)
• Based on existing estimated equity shares of Zee & SPN, the indicative merger ratio would have been 61% in favour of Zee; however with infusion of capital, Zee takes on a minority status (in terms of shareholding) in the new entity
• The current promoter group (Chandra + Goenka Family) will continue to hold 3.99% in the new entity, with the option of increasing their shareholding up to 20%, in accordance with applicable laws
• Mr. Puneet Goenka (Current MD of Zee Entertainment) is expected to continue as the MD & CEO of the newly formed entity

Nice!! Give some context? (Yesss, for sure)

• So Zee’s been in the news lately, with the largest shareholder, Invesco raising red flags in the company’s working & management and asking for a makeover of the board

• Since then, the stocks knew only one direction, with >60% gain in the performance indicating that the market believes in the underlying business capability, and have limited faith in the incumbent management

• The market was enthused with the merger announcement, pre-market opening (22nd September 2021), with the stock closing up ~30% during the day

• In 2019, when Zee was going through another round of debt-related issues, the erstwhile Mr. Chandra had initiated talks with Sony Pictures on a potential merger, only for talks to break down over valuation differences

• In 2016, Zee had sold its Sports Network, Ten Sports to Sony Pictures for USD 385 Million

We’ve covered the stock in the past, you can check out our previous issues to get a timeline of events – 

Quarterly Results Link 

• The combined entity will own 75 TV Channels, 2 Video Streaming Services (Zee5 & Sony Liv), two film studios (Zee Studios & Sony Pictures Films India), and a digital content studio (Studio NXT) making it the largest entertainment network in India (phews)

• Sony Pictures has built out a strong OTT platform, that has a mix of Sporting & Non-Sporting related content; through three sporting events (Euros, India Men’s Cricket & Olympics) Sony Liv increased its subscriber base from ~5 Million to 7.5 Million in the span of 2 months

• Zee5 has penetrated into Tier 2 & behind, through regional & non-Hindi content, helping establish viewership in Bharat, complementing Sony’s predominantly Hindi & English content

Indian Hotels is on the cusp of a breakout? Covid-19 has seriously impacted Hospitality & Tourism; time to see the change? 🤔

• Analysing Indian Hotels Ltd on a weekly time-frame (over 50 weeks), indicates that the stock just gave a breakout above its main (3-4 year) resistance level

• The stock had been trading below its multi-year resistance (around 160-162) and has finally closed above this level, indicative of a clear consolidation and breakout (we noticed a multi-year consolidation rally in ACC a few months ago, and that one was huge!!)

• The past 18 months have seen the stock consistently (albeit with some lapses or corrective moves) maintain a strong uptrend (categorized as prices breaking earlier highs & continuously making new ones or impulsive moves)

• In an uptrend, rising prices are called impulsive moves whereas falling prices are called corrective moves, with the opposite being true in a downtrend (falling prices are corrective and rising prices are corrective)

That’s awesome. So will it be a good time to enter this breakout?

• Let’s shift to a smaller time frame to answer that question; looking at the stock on a 10-minute, helps us avoid any potential traps

• On a 10-minute time-frame, after the initial breakout above 160 levels (which was seen on the weekly chart above) a resistance band around 168-170 is created (view image below).

• After a breakout, price retests hold the key for a long sustained rally; A retest refers to prices reversing direction after a breakout and returning to the initial breakout level and holding the fort

• In this case, retest 1 is the retest at the first resistance point of 160-162 and retest 2 is at the resistance band of 168-170; in both situations, the stock has successfully retested the levels where it gave the initial breakout, indicative of the potential for a strong rally (void of any potential traps)

So should we keep a track?

• We started on a weekly time-frame with overall price action and trend analysis and took second confirmation on a 10-minute time frame, taking into consideration multiple retests that the stock has made (helping us avoid any potential traps)

• Finding multiple confirmations while performing technical analysis on a chart is important and helps avoid traps, at the same time notifies us about any upcoming trades and breakouts

What else caught our eye? 👀

Adani competes with Ambani to make the world a better place

• Adani has committed to invest $20 billion (Rs. 1.48 trillion) over 10 years in the renewable energy supply chain

• Reliance Industries has previously committed Rs.75000 crores to be invested in the same over the next 3 years

• Currently, 43% of their EBITDA is from utilities from their green businesses. Their current renewable energy capacity stands at 15GW.

HDFC now sells infra bonds 

• HDFC Bank is set to raise up to Rs 5,000 crore by selling infrastructure bonds in the local market.

• These bonds will most likely be of a 7-year maturity and offer 6.45-6.55% interest, and their primary target is large insurers and pension funds.

China finds its way into the PLI Scheme 

• Given the geopolitical tension between the two countries, Chinese firms had refrained from applying directly for the PLI Scheme fearing disqualification

• Companies have been allowed to collab with Chinese firms (approval to be given on a case by case basis) since the gov realized the need for ancillary Chinese firms

• This is good news for all sectors but more so for the IT Hardware and Automobile sector since their supply chains are highly dependent on Chinese firms.

Merger