HCL Tech hits fresh record high ahead of Q2 results
Shares of HCL Technologies hit a fresh record high of Rs 887, up 2 per cent on the BSE, in intra-day trade on Tuesday ahead of its July-September quarter (Q2FY21) results due Friday, October 16. The stock of the IT consulting & services company surpassed its previous high of Rs 878.80 touched on October 8, 2020.
In the past one month, HCL Tech has outperformed the market by surging 23 per cent after the company said it expects the revenue and the operating margin for Q2FY21 to be meaningfully better than the top end of the guidance it had provided in July’2020.
“We have seen strong execution during the quarter to date, and continue to execute to the plan this month. The Revenue growth for the current quarter is expected to exceed 3.5 per cent quarter on quarter in constant currency (CC), enabled by broad-based momentum across all service lines, verticals and geographies,” HCL Technologies said in a mid-quarter business update on September 14.
The IT major further said the earnings before interest and tax (EBIT) margin for the quarter is expected to be between 20.5 per cent and 21 per cent. Good booking momentum continues this quarter, led by life sciences & healthcare, telecom & media and financial services verticals. The pipeline continues to look healthy across service lines, verticals and geographies, it said.
“HCL Tech indicated strong execution in the quarter update while deal ramp-up to drive revenue growth of at least 3.5 per cent quarter on quarter (QoQ), higher than 1.5-2.5 per cent growth rate guiding earnings call of Q1FY21. We believe 1 per cent of revenues will be added in FY21 due to DWS acquisition. Going forward, HCL Tech may initially increase 1.5-2.5 per cent sequential revenue growth guidance for Q3 and Q4 on an organic basis to 2-3 per cent,” analysts at Prabhudas Lilladher said in an earnings preview note.
Those at HSBC Securities don’t expect any change in 1.5-2.5 per cent sequential growth guidance for Q3 and Q4 but believe that if management alludes to higher confidence in the upper end of the guidance, that could be a positive surprise.
“We estimate 3.5 per cent constant currency (cc) growth for HCL Tech. Strong EUR and GBP should add another 170bp to USD growth. Margins should be within a narrow range as compared with Q1. We expect margins to expand marginally (20bps). The key focus areas are a commentary on renewal demand for products and platforms (especially IBM IP) along with demand recovery in ER&D will be crucial,” the brokerage firm said.
Kopran hits 52-week high after Crisil upgrades rating outlook to ‘Positive’
Shares of Kopran were locked in the 5 per cent upper circuit band at Rs 97.35 on the BSE on Tuesday, gaining 10 per cent in the past four trading days, after rating agency Crisil revised its outlook on the long term bank facilities of the company to ‘Positive’ from ‘Stable’. The rating agency reaffirmed its ‘CRISIL BBB’ rating on long term bank facilities, while short term ratings have been reaffirmed at ‘CRISIL A3+’.
The stock of the pharmaceutical company was trading at its 52-week high level. In the past month, it has rallied 39 per cent as compared to 4.4 per cent gain in the S&P BSE Sensex. Meanwhile, in the past three months, the stock has zoomed 157 per cent, as against 10.6 per cent rise in the benchmark index.
Trading volumes on the counter more-than-doubled with a combined 1.06 million equity shares changing hands on the NSE and BSE till the time of writing of this report. There were pending buy orders for 99,000 shares on both the exchange, data show.
“The revision in the outlook reflects the improvement in Kopran group’s business risk profile expected over the medium term. Improved demand from the export market, the addition of new geographies and new products under development, should result in higher revenue and profitability over the medium term,” Crisil said in a detailed rationale.
The manufacturing operations were not significantly impacted by lockdown and other measures taken by central and state governments to contain the spread of the Covid-19, since the company operates in the essential segment. “Group’s revenue improved by 43.6 per cent in the first quarter of fiscal 2021 (year-on-year) and net profits grew by 238 per cent; sustenance of revenue growth and profitability shall remain key monitorable,” it said.
“The ratings continue to reflect the extensive experience of promoters in the pharmaceutical industry, and the above-average financial risk profile despite debt-funded CAPEX in the past. These strengths are partially offset by the working capital-intensive operations, and susceptibility to volatile input prices,” it added.
Meanwhile, Kopran in 2019-20 annual report said the new products like Nitroxiline and Ticagrelor have been commercialised. Atenolol DMF has been approved by the US Food and Drug Administration (USFDA) and commercial supplies are commencing to various customers. The company has received approval for Pregabalin from the EU-GMP- and will be able to market the API in Europe. Company has filed USDMF for Azithromycin and Pregabalin.
“The company is expanding its API and Formulation portfolio and would be starting its sale of Atenolol in the US market during 2020-21. It expects to grow and improve its margin with new products, cost efficiencies and higher production. The company continues to pursue automation and expansion for growth for formulations and in its subsidiary Kopran Research Laboratories Ltd manufacturing APIs”, it said.
Tips to do Intraday along with a full-time job
Do you believe, if you still have a 9 to 5 job, becoming a professional trader in your spare time can be quite a challenge? Pursuing the goal of quitting your day job to become a profitable trader often seems like an unrealistic task for most people.
If you are someone who has a full-time job and you can still trade. Here are some tips to become an intraday trader with a full-time job.
Accept that it’s going to be challenging.
I don’t want to discourage you by saying this, but it’s a simple fact that juggling working full or even part-time and trying to be a day trader will be challenging. However, being prepared for this and making a game plan can really help.
Focus on your goals.
To help maintain motivation for trading with a full-time job, consider your ultimate goals. But don’t just think about career goals. Think about your long term goals and what you really hope to gain from day trading. Considering these long terms goals can help give you the determination and energy required to start trading while maintaining a full-time job.
Clever time management
Trading with a full-time job will require some creative time management. You’ll need to juggle commitments and make time for day trading. Waking up earlier, doing research on potential plays very early or very late, or working up to potential trading strategies on Sundays are all just a few ways that you can make use of your free time so that you can maximize the minutes you have to trade during market hours.
Since time will be at a premium as you embark on trading with a full-time job, it’s important to get really organized. Being organized both at work and home will reduce mental clutter and maximize free time so that you can focus on trading.
Of course, none of these tips will be very effective if you’re not consistent. Trading rewards consistency and practice. Keep this post bookmarked to refer back to if needed. With time and consistency, following these tips can help you make things happen while trading with a full-time job.
Govt announces cash-for-LTC, festival advance to boost consumer demand
Finance Minister Nirmala Sitharaman on Monday announced a payment of cash in place of LTC and Rs 10,000 festival advance to government employees to stimulate consumer demand during the festival season and boost the economy.
She also announced additional capital spending and Rs 12,000 crore, 50-year interest-free loan to states to boost the economy that has been battered by the pandemic and the resulting lockdown.
At a news conference, she said the government will give its employees income-tax-exempt cash vouchers in place of their entitled travel allowances this year.
This cash will have to be spent on buying goods that attract 12 per cent or more GST — a condition which eliminates the possibility of the cash being spent on food items.
Central public sector enterprises and banks will also follow the cue and give cash in place of leave travel concession (LTC) as travelling during the pandemic are near to impossible.
Additionally, the government will as a one-time measure give Rs 10,000 salary loan to all its officers and employees as festival advance.
These two measures are “expected to create a consumer demand of about Rs 28,000 crore”, she said.
The government, which had in May announced a Rs 20 lakh crore ‘Aatmanirbhar Bharat’ stimulus, is pushing ahead with a full opening to try to boost the economy ahead of the usually high-spending festival season.
A tough lockdown imposed to stem the spread of coronavirus had resulted in the economy contracting by a record 23.9 per cent during April-June.
Together with the loan to states and additional capital spending, Sitharaman said, “very rough estimate is that potential private-sector spending through LTC tax benefit will be at least equal to the government employee-led demand of Rs 28,000 crore and the total additional demand estimated to exceed Rs 1 lakh crore”.
She further said that the measures by the government to stimulate demand must not burden the common citizen with future inflation and must not put government debt on an unsustainable path.
“Today’s solution should not cause tomorrow’s problem,” she added.
Sitharaman said the central government employees get LTC in a block of 4 years (one to anywhere in India and one hometown; or two for the home town). Air or rail fare, as per scale/entitlement, is reimbursed and besides, leave encashment of 10 days (pay plus DA) is paid.
Due to COVID-19, employees are not in a position to avail LTC.
In place of one LTC, a cash payment will be made — full payment on leave encashment and payment of a fare in 3 flat-rate slabs depending on the class of entitlement. Fair payment will be tax-free.
An employee, opting for this scheme, will be required to buy goods/services worth 3-times the fare and 1-time the leave encashment before March 31, 2021, she said adding money must be spent on goods attracting GST of 12 per cent or more from a GST registered vendor and through digital mode.
If central government employees opt for it, the cost will be around Rs 5,675 crore. Employees of public sector banks and PSUs will also be allowed this facility and estimated cost for them will be Rs 1,900 crore.
The tax concession will be allowed for state government/private sector too, for employees who currently are entitled to LTC, subject to following the guidelines of the central government scheme.
Demand infusion in the economy by the central government and central PSE/PSB employees is estimated to be Rs 19,000 crore. Demand infusion by state government employees will be Rs 9,000 crore.
She said festival advance along with other similar advances were abolished on the recommendations of the 7th Pay Commission.
It is proposed to restore the festival advance with the one-time interest-free advance of Rs 10,000 to be availed by March 31. The amount is supposed to be recovered in a maximum of 10 instalments.
The outgo under the head is expected to be Rs 4,000 crore, she said adding if 50 per cent adoption by states is taken into account, another Rs 4,000 crore festival advances would be disbursed.
Employees will get pre-loaded Rupay card of the advance value. The government will bear bank charges in this regard.
The finance minister said Rs 25,000 crore additional budget will be provided towards capital expenditure on roads, defence infrastructure, water supply, urban development and domestically produced capital equipment for defence.
This is over and above the Rs 4.13 lakh crore capital expenditure announced in the Budget for 2020-21.
Also, a special Rs 12,000 crore interest-free, 50-year loan will be given to states for capital expenditure. Of this, Rs 1,600 crore will be for the North-Eastern states and Rs 900 crore for Uttarakhand and Himachal Pradesh.
Other states will get Rs 7,500 crore in proportion to their share in Finance Commission devolution — 50 per cent initially and balance after use of the first instalment, she said adding the remaining Rs 2,000 crore will be given to states that implement pre-agreed reforms.
Sitharaman said Rs 36,000 crore additional consumer demand will be created (Rs 28,000 crore through LTC voucher scheme plus Rs 8,000 crore through festival advance scheme). Also, Rs 37,000 crore of additional central and state capital expenditure will be incurred.
Total boost to demand is estimated at Rs 73,000 crore by March 31, 2021, she added.
Vedanta tanks 10% as delisting offer fails
Shares of Vedanta tanked 10 per cent to Rs 109.90 on the BSE in the early morning trade on Monday, after the company announced the failure of delisting offer as the promoters failed to garner the required number of shares.
The stock trades in the futures & option (F&O) segment, which has no circuit limits. Till 09:23 am, a combined 2.4 million equity shares had changed hands on the NSE and BSE. There were pending sell orders for around 28 million shares on both the exchanges.
Promoters of the diversified metal and mining company required 1.34 billion shares to successfully delist from exchanges. However, their five-day reverse book building (RBB) process, which ended on October 9 evening, saw only 1.26 billion confirmed bids.
“The total number of shares validly tendered by the public shareholders in the delisting offer is 1,255 million, which is less than the minimum number of shares required to be accepted by the acquirers for the delisting offer to be successful. Thus, the delisting offer is deemed to have failed, the company said in the exchange filing.
As the delisting attempt has failed the promoters will not acquire any shares tendered by public shareholders in the delisting offer and all shares will be returned to the respective public shareholders. The equity shares of the company will continue to remain listed on the stock exchanges, it said.
The failure of the delisting offer is sentimentally negative for Vedanta. According to a Business Standard report, Vedanta Resources founder Anil Agarwal and the management committee of Vedanta Limited are scheduled to meet Monday (October 12) to discuss the next course of action after the latter failed in its delisting attempt on Friday.
“A web conference has been scheduled between the management of Vedanta (Limited) and promoters of the company tomorrow to discuss the next course of action,” the report suggested.
In May, the promoters of Vedanta had announced a delisting offer at Rs 87.5 per share. Later in June, in a special resolution by postal ballot, 93.3 per cent of all shareholders and 84.3 per cent of public shareholders approved the delisting of shares of Vedanta.
ITC rallies over 4%; stock top gainer on BSE Sensex
Shares of ITC rallied as much as 4.37 per cent to Rs 175.20 apiece on the BSE on Monday after reports said global brokerage firm CLSA has upgraded the stock to “Outperform” from “Buy” with the target price of Rs 220 per share.
At 11:05 AM, the stock was trading over 2.75 per cent higher at Rs 172.50 on the BSE against Friday’s close of Rs 167.85. In comparison, the benchmark S&P BSE Sensex was trading 0.5 per cent higher at 40,712 levels.
The stock of ITC had hit a 52-week high of Rs 266.2 on November 11, 2019, while its 52-week low level stands at Rs 134.95, touched on March 13, 2020.
CLSA, as per reports, said the long-term positives of the company are unfolding as the revenue diversifies. Thus, the outlook is positive with compelling valuations.
The diversified conglomerate will focus on going deeper into Bihar and Bengal with its fresh dairy products over the next few years. Bihar and Kolkata in Bengal are the two markets where ITC’s fresh dairy products such as milk, curd, paneer and lassi – are currently available, said a Business Standard report dated October 8.
According to a yet another report by Business Standard, ITC’s Savlon is set to cross consumer spend of Rs 1,000 crore this year, a more than fourfold jump from last year and the first from the personal care portfolio to achieve the milestone. Sameer Satpathy, divisional chief executive officer, personal care products business at ITC, said, Savlon would be the first brand from the personal care portfolio to clock in consumer spend of Rs 1,000 crore.
Razorpay raises $100 million from GIC, Sequoia Capital India and others
Payments solution provider Razorpay on Monday said it has raised USD 100 million (about Rs 731 crore) in a funding round co-led by Singapore’s sovereign wealth fund GIC and Sequoia Capital India.
The round, which valued the company at over USD 1 billion also saw participation from Ribbit Capital, Tiger Global, Y Combinator and Matrix Partners, a statement said.
The company has witnessed a 300 per cent growth in its business during the last six months, it added.
Razorpay helps businesses modernise their financial infrastructure by providing intelligent automated payment and banking solutions to manage their entire money flow.
Razorpay has raised USD 206.5 million in investments since its inception in 2014. In 2019, it had raised USD 75 million in series C funding.
Razorpay plans to use the new funding to further strengthen and accelerate its two new product lines neo-banking platform RazorpayX and its lending arm Razorpay Capital, and invest in new initiatives to empower small and medium enterprises (SMEs), the statement said.
By FY2021, the company expects RazorpayX and Razorpay Capital to contribute 35 per cent of its revenue, with a 100 per cent increase in the company’s count of partner businesses, it added.
The funds raised will also be used towards hiring additional 500 employees by FY21, the statement said.
“Over the last six months, RazorpayX, the neo-banking platform, has witnessed 100 per cent growth, primarily because we built the product zero-up solely from the eyes of the customers’ needs,” Razorpay CEO and Co-Founder Harshil Mathur said.
Neobanking is a nascent but fast-developing space in the Indian market and has the potential to become the one-stop platform for a business’ banking needs, he added.
“This pushes us to develop new technologies that meet the rising demand,” Mathur said adding that Razorpay will power payments and banking for 50 million businesses by 2025.
Despite the COVID-19 disruptions, the Indian fintech market is expected to grow to Rs 6.20 lakh crores by 2025, the company said.
The significant demand for digital payments has accelerated Razorpay’s growth during the pandemic, it added.
The full-stack financial solutions company witnessed a 500 per cent growth in 2019.
It currently powers payments for over 5 million businesses including Airtel, BookMyShow, Facebook, Ola, Zomato, Swiggy, Cred, ICICI Prudential among others and aims to double this to 10 million by the end of this year.
WHAT IS A MANAGEMENT BUY-OUT (MBO)?
A Management Buy-Out is a kind of transaction through which the management team of a certain company, purchases the assets and the operations of the company they’re managing. Most of the time, the management team takes full control and ownership, using their expertise to grow the company and drive it forward.
How Does a Management Buyout (MBO) Work?
For example, Company ABCD is a publicly listed company where management controls 35% of the company’s stock and the remaining 65% is stock available to the public. Under an MBO, management will arrange to purchase enough shares of the outstanding stock from the public so that they end up with a controlling interest of at least 51% of the company’s total shares.
What makes a successful MBO?
A company with a good track record of profitability;
Good prospects for the company without high-risk factors;
A strong committed management team with a mixture of skills;
A vendor who is willing to explore a sale to the management team and who will accept a realistic price;
A deal structure that can be funded, and supported by the future cash flows of the company.
Importance of Management Buyout (MBO)
The primary difference between a management buyout and any other type of acquisition is the inherent knowledge and expertise of the buyers compared with the sellers. The buyers (management) will usually have more knowledge of the company and its prospects than the sellers. In most scenarios, the sellers rely on the input of management regarding the future of the company to help set the selling price. Here, the advisors become the buyers. In this scenario, the sellers are at a clear disadvantage.
For instance, the management, as buyers, may exploit their advantageous position by manipulating the stock price through certain types of stock sales so that they will achieve a lower buying price. They may also try to lower the purchase price of the company by taking aggressive write-offs to show less net income in the period leading up to the purchase. The sellers therefore must use caution about the buyers in an MBO.
Likewise, the management as buyers must also exercise caution concerning the financiers they bring to assist with the purchase. Venture capitalists, for example, may have different goals than the company’s management team regarding the expected timing and nature of the return on investment (ROI) in the company. In a case where a venture capitalist investor has gained a large enough stake in an MBO, the management who purchased the company may have less control over how to actually manage the company.
Rabo Equity sells entire 21.7% stake in Vacmet for around Rs 140 cr
Rabo Equity has sold its entire stake in Vacmet Ltd for around Rs 140 crore back to promoters, thus making an exit from the investment made in 2010.
Rabo Equity had invested Rs 50 crore in Vacmet in 2010.
Vacmet Ltd is into flexible packaging sector, producing BOPP Films, BOPET films and other speciality films at its three plants Mathura, Agra and Indore.
The company said in a statement that it has completed the full exit of its India Agri Business Fund from Vacmet Limited via two tranches of buyback by the company.
“The fund has made a good return on the sale of its 21.7 per cent shareholding acquired by investing Rs 50 crore made in 2010,” it said.
The company exited with over 2.5 times return on its investment and the deal was struck for around Rs 140 crore, the source said.
Vacmet has been growing at over 20 per cent each year. Its revenue has increased from Rs 257 crore in FY 2010 to Rs 1,848 crore in FY20.
Rajesh Srivastava, the executive chairman of Rabo Equity Advisors, said: “Vacmet has been a great investment for us. We always looked for companies where we could add value through our superior sector knowledge and outreach, associating with strong yet receptive management.”
For Rabo Equity, this is the 7th exit out of 10 investments for the Fund. The portfolio has been well spread across agri-biotech, vegetables, packaging, dairy and nutraceuticals and has already returned the principle and a decent return to its investors.
Larsen & Toubro up 4% after sinking 11% in 7 wks
Shares of Larsen & Toubro (L&T) rallied 4 per cent to Rs 914.70 on the BSE in the intra-day trade on Friday after global brokerage Jefferies maintained ‘buy’ rating on the stock with a SOTP price target of Rs 1,280 per share.
In the past seven weeks, L&T had underperformed the market by falling 11.5 per cent, as compared to 6 per cent rise in the S&P BSE Sensex.
Analysts at Jefferies said an early recovery in the macro investment cycle should see a sharp pick-up in the company’s order flow and valuations. The Middle East (ME) margin contraction factored-in does not come through in case of better margin order flow.
“L&T’s hydrocarbon segment and heavy engineering should continue to see improving margin trends. While the rising share of domestic execution backed by orders picked up in the last 2 years gives margin comfort,” the brokerage firm said in the stock update.
Meanwhile, Reserve Bank of India (RBI) governor Shaktikanta Das said today that the Indian economy will contract 9.5 per cent in fiscal 2020-21 due to disruptions caused by the Covid-19 pandemic that has hit economic activities.
“The manufacturing purchasing managers’ index (PMI) for September 2020 rose to 56.8, its highest mark since January 2012, supported by an acceleration in new orders and production. The services PMI for September at 49.8 remained in contraction but have risen from 41.8 in August. These expectations are also reflected in our growth projections which suggest that GDP growth may break out of contraction and turn positive by Q4,” the governor said in a statement.
Emkay Global Financial Services, on the other hand, expect L&T to report a 3.2 per cent decline in revenues in July-September quarter (Q2FY21) as the execution was impacted by the labour shortage, social distancing norms and deferral by indecisive customers.
“We expect a relatively lower impact in its services business, which should offset the revenue decline. Margins and working capital are also likely to deteriorate on lower resource utilization and difficulty in the receivable collection. Announced order inflows for Q2FY21 are about Rs 175 billion and we estimate Rs 27,000 crore of total order inflows during Q2, including service revenues,” it said.