Rajesh Exports Ltd (Rs.283.60)

A High - Risk - High - Gain Opportunity For Long Term, Amidst US Rate Cuts, Future Expansion And Perennial Mangement Issues..

Rajesh Exports Limited (REL), incorporated in 1989 and headquartered in Bangalore, India, is a global leader in the gold industry. As the only company worldwide with a presence across the entire gold value chain—from refining to retailing—REL processes an impressive 35% of the world's gold production, making it the largest processor and exporter of gold products from India. Renowned for being the lowest-cost producer of gold jewellery, the company operates state-of-the-art manufacturing and research facilities, with key operations in Bangalore and a significant refining facility in Balerna, Switzerland.

The Company is the largest refiner of gold in the world. With the acquisition of Valcambi, the world’s largest gold refinery at Switzerland, Rajesh Exports has built up a total capacity to refine 2,400 tons of precious metals per annum. Valcambi is a LBMA accredited refinery, the gold bars produced at Valcambi are good delivery bars, accepted across all the precious metal exchanges of the world and by all the Bullion banks.

Rajesh Exports Ltd is the largest Manufacturer of gold products in the world. Across its various manufacturing facilities Rajesh Exports has a total installed capacity to manufacture 400 tons of world class gold products per annum including the finest plain and studded jewellery, medallions and coins. 

Rajesh Exports has set up the world’s finest R&D facilities in Switzerland and in India for developing new designs and for evolving innovative manufacturing process for manufacture of world class gold products.

The Company exports its products to various countries around the world and also supplies its products to bullion banks, central banks, wholesale jewellery trade and retail jewellery trade.

Rajesh Exports has set up 82 retail jewellery showrooms under the brand name of SHUBH Jewellers. SHUBH Jewellers is one of the most trusted household jewellery brand names in South India known for quality, designs and value for money prices of its products.

REL's extensive marketing network covers India and major global gold markets, supported by one of the largest active jewellery design databases with 29,000 unique designs. Committed to innovation, REL has developed advanced technologies and processes in jewellery manufacturing while upholding the highest standards of corporate governance.

The US Fed's Rate Cut: The U.S. Federal Reserve's recent rate cuts could provide a supportive macroeconomic backdrop, while the company’s future growth prospects, particularly through diversification into lithium-ion batteries, add further interest. However, it’s important to examine the June 2024 quarterly results realistically and understand the company's broader context before making an investment decision.

June 2024 Quarter Results: Marginal Sequential Improvement: The sales of the company declined by 29.56% to Rs.60,355.50 crore in the quarter ended June 2024 as against Rs.85,688.59 crore during the previous quarter ended June 2023.

The net profit of Rajesh Exports declined 96.17% to Rs.11.86 crore in the quarter ended June 2024 as against Rs.309.36 crore during the previous quarter ended June 2023.

On the positive side, the company’s net profit (on sequential basis) rebounded in Q1 2024-25, growing by 137.57% from the previous quarter to ₹11.86 crore.

This, though Rajesh Exports Ltd's June 2024 quarter results showed a sequential improvement compared to the previous March 2024 quarter, but they still fall short of robust performance on a yearly basis. However, this is expected to improve from 2025, when its Lithium-ion battery factory starts operation.

The order book position of Rajesh Exports Ltd, as of  30th June, 2024 is a whooping Rs.7,02,564 million.

US Dollar Impact on Gold Prices and Rajesh Exports: Gold, being globally priced in USD, often becomes cheaper when the dollar weakens. With the U.S. cutting rates, the dollar is expected to fall, which makes gold more affordable for international buyers. This can boost demand for gold, especially in emerging markets, which could benefit Rajesh Exports, both as a gold refiner and exporter.

Rajesh Exports’ business, which processes 35% of the world’s gold, stands to gain from higher gold consumption as the metal becomes more accessible. Additionally, a weaker dollar could also ease cost pressures on the company’s export operations, further helping its profitability.

Diversification into Lithium-Ion Battery Manufacturing: One of the key future growth avenues for Rajesh Exports is its planned foray into the lithium-ion battery market. Under the PLI (Production Linked Incentive) scheme, the company is setting up a 5 GWh lithium-ion battery manufacturing facility. The plant is expected to be operational by 2025, adding a significant new revenue stream to the company’s existing gold business.

Rajesh Exports Limited’s exciting venture into advanced technology energy solutions, gained significant traction through a Tripartite Agreement with the Ministry of Heavy Industries (Government of India), the Department of Industries and Commerce (Government of Karnataka), and ACC Energy Storage Pvt Ltd. Selected as one of three successful participants in the Rs.18,100 crore PLI Scheme for Advanced Chemistry Cells, REL has established a 100% subsidiary, ACC Energy Storage, to manufacture lithium-ion cells for batteries. The agreement includes assurances of support from both the central and state governments for the establishment of a 5 GWh Factory, with a customised incentive package from Karnataka. Last year's, Mr.Rajesh Mehta emphasised the company’s commitment to providing clean and green energy solutions, aiming to position REL as a global leader in advanced energy storage technology while continuing its legacy in the gold business.

The diversification into energy storage solutions is strategically important, as the demand for batteries—driven by electric vehicles (EVs) and renewable energy—continues to rise both in India and globally. By 2025, when production begins, Rajesh Exports could see substantial new revenue from this sector, helping to offset any volatility in the gold market.

Expanding Retail Presence:  In addition to its gold refining and export business, Rajesh Exports has expanded into gold retail through its ‘Shubh Jewellers’ brand. The company currently operates 82 retail outlets across Karnataka, catering to growing domestic demand for branded and affordable gold jewelry.

While this segment is relatively small compared to the company’s global operations, it provides steady domestic revenues and a hedge against volatility in international markets. The potential for further expansion in this segment could be a positive long-term driver of growth.

Recapitulation:

💢 Good Sequential Improvement: The June 2024 results show slight recovery compared to the March 2024 quarter, indicating resilience in a challenging global environment. However, caution is needed as year-over-year performance has not been strong.

💢Dollar Weakness Benefits Gold Consumers: With the U.S. cutting rates, the weakening dollar could lead to increased gold demand, which would benefit Rajesh Exports’ core business in gold refining and exporting. This could help improve margins and revenue in future quarters.

💢Lithium-Ion Battery Business: The upcoming lithium-ion battery plant, expected to start production in 2025, presents a new and exciting revenue stream. With the global push towards electric vehicles and renewable energy, this venture could significantly boost Rajesh Exports’ topline in the years to come.

💢Expanding Retail Footprint: The company’s network of 82 retail stores in Karnataka offers a stable domestic revenue stream. The retail expansion adds another layer of diversification to the business.

Caveat -- A Matter of Governance: It is a concerning reality that, of late, the promoters of Rajesh Exports Ltd. have adopted an uncooperative, careless, and somewhat mischievous attitude towards shareholders. This shift in their demeanor has grown increasingly hostile, painting a picture far from the ideal of corporate governance. For a company that prides itself on being the largest gold refiner in the world, with an impressive order book as of June 30, 2024, such behavior is not only unexpected but detrimental to its corporate ethos.

Even more alarming is the company's recent practice of submitting quarterly results to the BSE and NSE without including a valid telephone number—a glaring oversight that raises red flags. This, in my view, is a blatant violation of the disclosure norms set by SEBI, and it casts a shadow on corporate transparency. The fact that such omissions are allowed to pass unchecked by the stock exchanges is both perplexing and troubling.

What's more concerning is that Rajesh Exports is not alone in this regard. According to my observation, a significant number of listed Indian companies seem to engage in similar questionable practices, which undermines the integrity of the market.

As a dedicated market participant, I sincerely urge the Indian Stock Exchanges, along with SEBI, to ensure that all companies adhere to basic governance standards. At the very least, companies should provide a valid address and telephone number with the documents they submit. This is not just a formality; it is a fundamental expectation of transparency and accountability in the financial markets.

Why 2025 could be the tentative Year For Commencement of Operations of the Battery Plant?

We know from above that Rajesh Exports is setting up a 5 GWh lithium-ion battery plant in Karnataka, under the Indian government's Production Linked Incentive (PLI) scheme. The project is expected to use advanced chemistry cells, and Rajesh Exports has established a subsidiary called ACC Energy Storage to oversee the construction and operation of the facility.

Although specific completion dates have not been officially confirmed as Rajesh Mehta and his team went mute since more than a year, the timeline aligns with the government's broader objectives for battery storage, which aim for completion within the stipulated time under the PLI guidelines. Also, given the scale and complexity of such projects, including the PLI support, the plant could take a few years to become fully operational. 

It is to be noted that the PLI (Production Linked Incentive) scheme for Advanced Chemistry Cell (ACC) batteries, which includes Rajesh Exports' 5 GWh lithium-ion battery plant, requires participants to complete their projects within a specific timeline. According to the PLI guidelines, the manufacturing facilities should be completed and production started within two years from the award of the incentive, with an additional performance period of five years after that. This means that companies need to start production by 2025 to meet the requirements of the scheme. 

Attractive Investment Outlook for Rajesh Exports: As the clean energy sector gains momentum in India, Rajesh Exports stands out as a compelling investment opportunity. Recent developments surrounding the company's lithium-ion battery manufacturing facility highlight its potential for growth and market leadership.

On June 3, 2024, The Business Standard reported that Indian government is intensifying efforts to enhance testing capabilities for advanced chemical cells (ACC) as part of its Production-Linked Incentive (PLI) scheme. This initiative is particularly significant for key beneficiaries, including Rajesh Exports, Ola Electric Mobility, and Reliance New Energy Ltd., all of which are approaching the two-year deadline to operationalize their manufacturing facilities.

Incidentally, Rajesh Exports signed its contract for establishing a lithium-ion battery manufacturing plant under the PLI scheme in July 2022. With the deadline looming, the urgency for the facility's completion is paramount. 

The groundwork for this project however began with an official announcement in January 2023, when Rajesh Exports entered into a tripartite agreement with the Ministry of Heavy Industries and the Karnataka government to set up a 5 GWh lithium-ion cell factory in Karnataka. This strategic investment underscores Rajesh Exports' commitment to contributing to India's burgeoning clean energy landscape.

The government's recent push to ramp up testing capabilities is crucial for ensuring that the ACC batteries produced meet rigorous safety and performance standards. The Ministry of Heavy Industries has been proactive in encouraging testing agencies like iCAT and ARAI to secure accreditation from the National Accreditation Board for Testing and Calibration Laboratories (NABL). This step not only enhances the credibility of the testing process but also assures investors of the reliability of Rajesh Exports' products in the electric vehicle and energy storage markets.

As Rajesh Exports nears its two-year deadline, the readiness of its manufacturing plant is likely to influence stock prices positively. Increased enthusiasm in India's clean energy and electric vehicle sectors further amplifies this potential. The enhanced testing infrastructure will boost confidence in the quality of Rajesh Exports' ACC batteries, solidifying its market position.

The approaching deadline signifies that production is on the cusp of becoming fully operational. This pivotal moment for Rajesh Exports could trigger a notable uptick in its stock price, reflecting heightened investor confidence as the company enters the ACC battery market.

In summary, Rajesh Exports is poised to benefit immensely from the government's initiatives aimed at bolstering testing infrastructure. The ability of its ACC batteries to meet stringent quality and safety standards will not only enhance market confidence but also create new opportunities in the electric vehicle and energy storage sectors. 

This development fortifies Rajesh Exports' competitiveness in India's rapidly evolving clean energy landscape, aligning seamlessly with the country's broader objectives for sustainable energy solutions.

Investors should take note: as the deadline approaches, Rajesh Exports could emerge as a key player driving growth in the clean energy sector, making it an attractive buy for those looking to capitalize on the future of sustainable energy.

Conclusion: At the CMP of Rs. 283.60, Rajesh Exports offers a high - risk - high - gain opportunity with 2 to 3 years perspective (Like my earlier recommendations: Zomato Ltd at Rs.53, Reliance Infrastructure ~Rs.100, Wockhardt Ltd at Rs.170, Premier Explosives Ltd at Rs.28/29, P C Jewelers Ltd at Rs.27/29, etc)

The weakening U.S. dollar and growing demand for gold could provide a near-term boost, while the company’s foray into lithium-ion battery manufacturing offers significant long-term growth potential.

Investors looking for a diversified company with exposure to both traditional (gold) and future-ready (lithium-ion batteries) sectors may find Rajesh Exports an interesting pick. 

Also, as the company navigates the complexities of global demand for gold and the execution of its battery project, it’s crucial to keep an eye on its financial performance in the coming quarters.

Finally, while the June 2024 quarter showed some improvement and it still has a humongous order book position, challenges persist, including the management issues and lack of any information from the company's end since the beginning of last year.

It is therefore essential to approach the stock with realistic expectations and with cautionary visions.

From Courtroom to Crisis: Vodafone Idea’s Rollercoaster Ride and What Lies Ahead? 

Navigating the Telecom Turmoil: Should You Bet on Vodafone Idea Ltd – Legal Analysis and Investment Considerations..

Introduction: Recently, the Supreme Court of India threw a curveball at telecom companies by rejecting their curative petitions, leading to a jaw-dropping 18% dip in the share price of Vodafone Idea Ltd (Rs.10.36). Let’s break this down and see if there's still hope for our beleaguered telecom player. Photo: Live Law.

This article provides a comprehensive legal analysis of the situation, the implications of the Supreme Court's decision, and potential pathways forward for Vodafone Idea.

Understanding Curative Petitions:

Curative petitions are used only in exceptional circumstances or in extreme situations where there has been a violation of natural justice, or a bias is apparent. These petitions serve as a final legal recourse in the Indian judicial system. Once a curative petition is dismissed, no further legal remedies are available in India or as per Indian Jurisprudence.

Legal Precedents:

The establishment of curative petitions in India can be traced back to the landmark case of Rupa Ashok Hurra vs. Ashok Hurra & Anr. (2002). 

This case involved a divorce matter where the petitioner argued that the original judgment violated principles of natural justice. The Supreme Court allowed for the filing of curative petitions under Article 142 of the Constitution to address gross miscarriages of justice.

In Mohan Lal Sharma vs. Union of India (2014), the Supreme Court reiterated that curative petitions must be used sparingly and only in cases of exceptional circumstances. The court dismissed the petition against its earlier judgment regarding coal block allocations, emphasizing the stringent criteria for acceptance.

Supreme Court's Ruling on Vodafone Idea: In the context of Vodafone Idea, the three-judge bench found insufficient grounds to uphold the curative petitions. The Supreme Court's guidelines for these petitions are stringent, prohibiting their use as a mere appeal and requiring compelling new evidence. Photo: The Times of India.

Recapitulation: 

In several such cases the Honourable Supreme Court of India made it clear or reiterated that:

 💢Curative petitions cannot be used as an appeal in disguise and must involve compelling new grounds to prevent gross injustice.

💢A curative petition must be exercised sparingly and only to correct judicial mistakes resulting in a miscarriage of justice.

💢Curative petitions are only for cases involving violations of natural justice or where bias was evident in the original proceedings.

Legal Hierarchy of Appeals in India: In the Indian judicial system, the hierarchy of appeals typically follows this order:

💢Regular Appeal (if applicable): Initial level of appeal. This is where the journey begins.

💢Review Petition: After the original judgment, if there is an error apparent on the face of the record, a review petition can be filed within 30 days under Article 137 of the Constitution.

💢Curative Petition: Filed as a rare remedy after a review petition is rejected to prevent a gross miscarriage of justice. The conditions for filing a curative petition are stringent, and it requires certification from senior advocates to move forward. Once the curative petition is rejected, there is no further legal remedy for reconsidering the same issue under the current legal framework. No additional review or curative petition can be filed after this point.

Thus, with the rejection of the curative petition, Vodafone Idea Ltd has exhausted its legal options under the current framework.

Future Options for Vodafone Idea:

Following the Supreme Court's decision, Vodafone Idea has limited legal remedies available. However, several potential pathways remain:

💢Legislative or Government Intervention: Vodafone Idea may seek legislative changes or relief through policy adjustments, including converting a portion of the AGR dues into equities. Given the government’s significant equity stake in Vodafone Idea, there may be opportunities for administrative relief. Photo: Mint.

💢Settlement with the DoT: Vodafone Idea could look to negotiate a settlement or more favorable payment schedule concerning the Adjusted Gross Revenue (AGR) dues. If the company can demonstrate that the current payment obligations threaten its solvency, the government might step in to offer a lifeline—perhaps a more favorable payment schedule.

With the NDA government grappling with unemployment problem it would least want the collapse of a large Indian telecom player. Therefore, engaging directly with the DoT could be a game-changer.

💢Debt Restructuring: The company may explore restructuring its debt or attracting new investors, particularly in light of government involvement. Securing new funding or reducing its debt burden could enhance its ability to manage AGR obligations.

💢Fund Raising Ability: Recent media reports suggest that Vodafone Idea Ltd has approached several lenders for Rs.35,000 crore debt. If this happens then the move will give a relief to the company.

💢Presidential Clemency: Though unconventional in civil matters,Vodafone Idea Ltd can consider approaching the President of India for potential executive clemency. However, this avenue is unlikely to yield favorable results in a civil context.

Conclusion: Assessing Investment Viability: In the grand tapestry of Indian telecom, Vodafone Idea finds itself in a precarious position after the Supreme Court’s ruling. While legal avenues seem closed, there’s a faint light at the end of the tunnel through legislative intervention and potential financial restructuring.

Furthermore, despite the challenges, there are factors that may justify a potential investment in Vodafone Idea, including government support and market positioning: with over 22 crore subscribers, Vodafone Idea isn’t going anywhere fast. A strategic investment could provide the much-needed lifeline.

Finally, if Vodafone Idea Ltd can secure fresh funds and cut its debt, the stock could bounce back like a rubber ball.

So, if you’re feeling lucky and have the stomach for volatility, consider the dip to buy with a final SL at Rs.9.60. 

Just remember to conduct due diligence and consult your financial guru before diving headfirst into the waters of uncertainty. After all, in the world of investments, it’s better to be safe than sorry!

The Bull’s Parade: But Some Stocks Missed the Memo!

In the world of the stock market, where Sensex and Nifty rhymes to the beats of bullish tunes, it's easy to assume that every scrip in the market must be pirouetting upwards in perfect harmony. But, oh dear!  

Like the Indian monsoons — predictably unpredictable — not all stocks shine in the sunshine of success, even when the indices climb to dizzying new heights.

Just as in every family wedding, there's always that one aunty who sits grumbling in the corner, complaining about the heat, despite the festive mood, similarly, every bull market has its own "aunties"— the underperformers. No matter how high the markets shoots up, a few scrips seem content with being the party poopers.

Take for instance the glittering beacon of bullion, Rajesh Exports Ltd (Rs.289.20) — many would think a company dealing with gold would be soaring up in the sky at jet speed. But, no! It’s more like that distant relative who promises to bring sweets to the function and shows up with….....nothing. Gold might be glistening, and EV stories of companies might be fuelling rallies in Dalal Street, but this stock?

Then there's Infosys Ltd (Rs.1892.35), our IT titan, the pride of the Indian software industry. But even this elephant sometimes forgets to smile. Despite many from the sector booming like never before, Infosys seems to have taken a tea break during the market's march to new highs.

Speaking of heavyweights, ACC Ltd (Rs.2471.20), a name that should cement its place in any bull run, seems to have its feet stuck in quick-drying cement. It’s like the "baraat" procession halted because the horse refused to move!

And Kotak Mahindra Bank Ltd (Rs.1838.50), the once - upon - a - time darling of the banking sector — today, it’s like that cousin who got all the attention but now just stays quietly in the background, sulking. Even the RBI might scratch its head at this one.

SAIL (Rs.129.50), the PSU steel behemoth that could’ve steered the ship to glory, seems to have preferred staying anchored in the harbor. Despite the market winds pushing forward, it’s happily waving from the docks, singing We Shall Overcome  in the face of every uptrend.

Then there’s Biocon Ltd (Rs.362.75) the biotech gem. You’d expect miracles here, given the world’s obsession with healthcare these days. But no, it behaves more like a doctor who’s always on vacation, missing every call to action.

So, while Sensex and Nifty may have scaled new peaks, remember, not all stocks are invited to the summit. In this grand Indian market drama, some characters prefer to stay backstage, no matter how loud the applause gets. 

As the markets celebrate their highs, these underperformers seem to be at a different party altogether — one where the music is drab, the food is cold, and the excitement, well, below the threshold level.

A Repo Rate Cut by the RBI on the Horizon? Why the RBI May Need to Act Amid Global Shifts in the Interest Rate Scenario.

India's economic landscape is undergoing significant transformations, both globally and locally, which could prompt the Reserve Bank of India (RBI) to consider lowering repo rates. 

With the latest August CPI inflation data coming in at 3.65%, slightly higher than the predicted 3.47%, inflation remains well within the RBI's target range of 2% to 6%. 

Food costs, particularly for tomatoes, onions, and potatoes, continue to fuel inflation, but analysts predict respite is on the anvil, on account of expected good monsoons. Photo: Tavaga.

Simultaneously, global central banks, particularly the US Federal Reserve, are gearing up for an easing cycle, putting additional pressure on the RBI to reconsider its monetary policy position. This combination of circumstances makes a compelling case for the RBI to explore rate cuts. 

This combined set of factors creates a compelling case for the RBI to consider a Repo rate cut. Let's consider a few data points: 

💢August CPI Inflation: Cooling but Still Elevated in Key Sectors: The latest CPI inflation figures at 3.65%, is slightly higher than expected but still well within the RBI’s comfort zone. Key contributors to the elevated inflation include rising prices of essential food items like tomatoes, onions, and potatoes. However, Dharmakirti Joshi, Chief Economist at CRISIL, believes food inflation will decline in the coming months, thanks to good rains that will stabilize agricultural output and supply chains.

💢Positive Monsoon Outlook: With favorable weather conditions in place, food inflation is likely to ease, leading to a further decline in overall CPI inflation. This cooling of inflation strengthens the case for the RBI to adopt a more accommodative monetary policy stance.

💢Within Target Band: At 3.65%, inflation is comfortably within the RBI’s target range of 2%-6%, giving the central bank room to consider rate cuts without the risk of fueling inflation further.

💢Global Trends: The Federal Reserve’s Easing Cycle and Capital Flows: The global economic environment is also changing, with the U.S. Federal Reserve expected to begin its long-awaited easing cycle at its September 18 meeting. 

The Fed is likely to cut short-term interest rates at least by 25 basis points, bringing them to a range of 5.00-5.25%.

💢Capital Flows to Emerging Markets: A Fed rate cut usually leads to lower returns on U.S. debt instruments, prompting capital flows into higher-yielding emerging markets like India. 

However, if the RBI maintains a higher Repo rate while the Fed cuts rates, this could lead to excessive capital inflows, potentially appreciating the rupee and hurting India’s export competitiveness.

💢Interest Rate Differential: To manage these capital inflows and avoid currency appreciation, the RBI may need to reduce the interest rate differential by cutting the repo rate. This would help maintain the rupee at a more competitive level and support India’s exporters.

💢Economic Growth and Domestic Investment: While inflation is cooling, India’s economy faces challenges that require immediate attention to ensure sustained growth. A repo rate cut could provide the much-needed stimulus.

💢Industrial and Manufacturing Slowdown: The Index of Industrial Production (IIP) has shown signs of a slowdown in key sectors like manufacturing. A reversal of the interest rate cycle would lower borrowing costs for industries, allowing them to invest more in capacity expansion and drive job creation.

💢Boost to MSMEs: Lowering the repo rate would especially benefit Micro, Small, and Medium Enterprises (MSMEs), which have been struggling with high borrowing costs. With reduced rates, MSMEs can access cheaper credit, invest in business growth, and contribute to job creation and economic expansion.

💢Managing the Rupee and Export Competitiveness: As the U.S. lowers its interest rates, there is a risk that capital inflows into India could lead to an appreciation of the rupee. 

A stronger rupee, while benefiting importers, can harm export competitiveness by making Indian goods more expensive in global markets.

Therefore, to avoid hurting the export sector, particularly in IT services, textiles, and pharmaceuticals, the RBI may need to cut rates to manage inflows and maintain a balanced exchange rate. A repo rate cut would help align India’s monetary policy with global trends and keep the rupee competitive.

💢Encouraging Credit Growth and Consumption: The RBI must also consider the impact of high interest rates on private investment and credit growth. A rate cut would directly lower borrowing costs for both businesses and consumers, stimulating consumption and investment.

Moreover, with lower rates, the private sector may finally commit to capital expenditure, driving growth in infrastructure, real estate, and manufacturing. This would have a ripple effect on employment and demand.

💢Boosting Consumption: Reduced interest rates would lower the EMIs on loans, giving households more disposable income and encouraging spending across sectors like automobiles, consumer goods, and real estate.

💢Conclusion: A Perfect Storm for a Repo Rate Cut?

With CPI inflation at 3.65% and cooling of food inflation expected, due to good rains, the RBI has a window of opportunity to cut the repo rate. 

Besides, the global dynamics, particularly the Federal Reserve’s easing cycle, and the need to boost domestic growth, further strengthen the case for a cut.

As the Monetary Policy Committee (MPC) prepares to meet in October 2024, all eyes will be on the RBI. 

A well-timed repo rate cut with proper checks and balances could help India stay competitive, encourage investment, and ensure that inflation remains under control, setting the stage for sustained economic growth.

Interstingly, while the ECB delivered a quarter-point interest rate cut, and the US Federal Reserve expected to announce its first interest rate cut, India could follow the suit, but keep an eye on inflation.

Flash Focus: Fast Facts For Smart Investors

#Buy the shares of Zee Entertainment Enterprises Ltd (Rs.134.88) near the CMP for short term targets of Rs.150/161. SL: Rs.127.

Two recent developments have been favorable for the company. 

💢 Birla Opus Paints has partnered as the Co-Title Sponsor for ZEE's flagship singing reality show, Sa Re Ga Ma Pa, in Hindi and Telugu, and as a Co-Powered Sponsor in Tamil. As a dynamic new player in the paints industry, Birla Opus Paints has strategically focused on establishing a robust brand presence in various markets. According to the entertainment network, ZEE Network, with its wide reach across India and globally, has proven to be an ideal platform for the brand to connect with its target audience.

💢The National Company Law Tribunal (NCLT) has officially approved the termination of the merger between Zee Entertainment Enterprises Ltd and Culver Max Entertainment, formerly known as Sony Pictures Networks India.

Additionally, the tribunal has withdrawn its previous order from August last year that had sanctioned the merger of these two entities, a deal that ultimately could not move forward.

Both Zee and Sony had sought termination fees amounting to $90 million from each other, citing non-compliance with the Merger Cooperation Agreement (MCA) signed in December 2021.

This decision not only spares both companies the significant costs associated with litigation but also eliminates the administrative burden that would have accompanied the legal proceedings and continued merger efforts. It allows both entities to refocus their energies on independent growth strategies without the distractions and complexities of a protracted merger process.

#The following information is for those who are still confused regarding the business model of this little known company named: Swan Energy Ltd (Rs.599.30) which has diversified interests in real estate, textiles, oil & gas, defence and commercial shipbuilding and ship repairs, and heavy fabrication. Photo: Energy World.

It has intensified its shipyard restoration efforts, focusing on activities such as dredging, reinstatement of licenses and certifications, implementation of industry-standard safety measures, and upgrading basic utilities. 

A war ship contract for Reliance Naval and Engineering Ltd is due, as per market sources. The shares of RNRL are expected to list by March 2025; in the Indian bourses. 

Incidentally, in March this year Swan Energy raised Rs.3,319 crore via Qualified Institutions Placement (QIP) at a floor price of Rs.703.29, which is at a premium to the CMP of the scrip. The proceeds will be used to reduce its debt and modernise the shipyard acquired through the takeover of Reliance Naval and Engineering Ltd.

Some of the marquee investors included the who's who of India Inc: Quant Mutual Fund, SBI Life, LIC, LIC Mutual Fund, Tata Mutual Fund, Infini Mutual Funds, SBI General Insurance, BNP Paribas Mutual Fund, Nomura, Diamond Asia, Bank of India Mutual Fund, ITI Mutual Fund, Goldman Sachs, Future Generali, Anand Rathi, and other domestic and foreign institutions and family offices. 

In an interesting devlopment, Swan Energy Ltd (SEL) through its subsidiary Triumph Offshore Private Limited (TOPL), has signed an agreement to lease out its Floating Storage Regasification Unit (FSRU) vessel Vasant One to Botas, Turkey's state-owned natural gas and LNG firm.

According to a report published on 9 March, 2024, in Energy World, the lease arrangement is generating daily rental of $250,000, around Rs.2 crore (as per the present exchange rate) for SEL. The annualized cash accruals from the agreement amount to Rs.800 crore. The duration of the lease agreement is for 12 months and is extendable on this basis of mutual agreement,

The article further mentioned that: based on the bare boat charter, its subsidiary Triumph Offshore Private Limited (TOPL),  has leased out only the bare FSRU vessel to Botas and Botas will manage the operational expenses including fuel, crew, insurance, maintenance, and repair. As a result, TOPL does not incur any operational expenses during the lease tenure. This lease arrangement implies that the rentals earned essentially add to the EBIDTA of the company.

The share price is expected to double from the CMP in the next 18 months.

#The Bank of Maharashtra Ltd (Rs.59.30) has the largest network of branches of any nationalised bank in the state of Maharashtra. 

State-owned Bank of Maharashtra (BoM) has emerged as the top performer among public sector lenders in terms of loan and deposit growth in percentage terms during 2022-23. The Pune-headquartered lender also recorded highest growth in profitability with bottomline growing almost 126 per cent to Rs 2,602 crore during the year (Wikipedia).

Incidentally, the Pune-based state-owned lender, was recognized as the best bank in managing bad loans, achieving a remarkably low net non-performing assets (NPAs) ratio of 0.25% during the financial year that ended in March 2023. Photo: Adda247.com.

💢Report Card of Bank of Maharashtra💢

PE Ratio: 10.45.

EPS:  Rs.5.73.

Sales: Rs.5,874.64 Cr.

Face Value: Rs.10.

Net Profit Margin: 19.780%.

Last Dividend: 14%.

Return on Average Equity: 22.24%. 

Source: Rediff.com.

Financial performance as of Q1FY25:

➡️Net Interest Income (NII): Rs. 1,550 crore

➡️Net Profit: Rs. 430 crore

➡️Return on Assets (ROA): 0.60%

➡️Return on Equity (ROE): 10.50%

➡️Gross NPA Ratio: 5.35%

➡️Net NPA Ratio: 1.85%

➡️Provision Coverage Ratio (PCR): 80.00%

➡️Capital Adequacy Ratio (CAR): 16.50%

➡️Tier-1 Capital Ratio: 13.20%

➡️Year-on-Year Loan Growth: 13%

➡️Year-on-Year Deposit Growth: 11%

➡️Price-to-Earnings (P/E) Ratio: 7.8x

➡️Price-to-Book (P/B) Ratio: 0.62x

➡️Dividend per Share (DPS): Rs. 2.10

➡️Dividend Yield: Approximately 3.56%

Source: Internet and Bank's Official Reports.

The above financials show that the scrip is undervalued as per the current price. We can therefore look for targets of Rs.90/Rs.110, in the coming days.

Ujjivan Small Finance Bank: Revolutionizing Banking with AI and Beyond! 

Ujjivan Small Finance Bank Ltd (Rs.42.70) which began its journey in 2017, is making waves with its forward-thinking AI strategies. Interstingly, ever since its IPO was oversubscribed over 165 times in 2019, it has shown a knack for staying ahead of the curve, and now, it's using Artificial Intelligence (AI) to power everything from fraud detection to risk management. Photo: Business Today.

💢 AI in Action: Ujjivan's AI algorithms are now the backbone of its NPA prediction system, analyzing customer behavior and transaction patterns to nip bad loans in the bud. The fraud detection system adds another layer of security by leveraging AI to block shady transactions before they happen.

💢 The Future is Generative AI: As the bank builds a robust data warehouse, it’s laying the foundation for generative AI tools that could transform how they operate, from customer service to personalized financial advice. In the meantime, tools like Microsoft Copilot are already improving day-to-day operations by assisting with document and email management.

💢 AI for Security & Resilience: The bank employs a “red team” of ethical hackers to stay one step ahead of cyber threats. Coupled with Cloud Access Security Brokers (CASB) and threat intelligence services, Ujjivan ensures its systems stay safe from external threats while seamlessly integrating AI into its framework.

💢 What’s Next? The bank has set its sights on exploring even more generative AI applications, migrating non-critical operations to the cloud, and improving digital onboarding for a smoother customer experience. These moves align with its broader ambition to transform into a universal bank, offering a range of services from forex transactions to enhanced digital operations.

The AI Revolution in the Banking Sector: The AI is no longer a luxury in banking; it's a necessity. It’s transforming how banks operate, offering predictive analysis, improving security, and optimizing customer experiences. 

Generative AI, in particular, could reshape everything from chatbots to financial advisory services, making them smarter and more responsive. Banks that fail to embrace AI risk being left behind, while those like Ujjivan are poised to become the future of banking, offering services on par with the largest financial institutions.

In short, the future of banking is AI-driven, and Ujjivan is right at the forefront of this digital transformation. From fraud prevention to seamless customer experiences, this small finance bank is setting the stage to become a tech-savvy, universal player in the financial world. Don’t blink—Ujjivan is on the fast track to banking greatness!

Bibliography: Express Computer and Internet.

Assessing Distress - Based Stock Selection Philosophy

The strategy of investing in companies facing short-term P&L issues is a common one, often referred to as "value investing". The underlying principle is that when a company's stock price is depressed due to negative financial news, it can present a buying opportunity if the underlying fundamentals are sound. An investor should take care of the following key issues:

💢Nature of Distress:

Temporary vs. Permanent: An investor needs to differentiate between temporary setbacks (e.g., economic downturns, one-time charges) and more permanent issues (Eg. Structural flaws in the business model).

Industry-Wide Vs Company-Specific: Understand if the distress is a general industry trend or a company-specific problem.

💢Valuation:

Relative Valuation: Compare the company's valuation metrics (e.g., P/E Ratio, P/B Ratio, Current Ratio, etc) to industry peers and historical averages.

Intrinsic Value: Estimate the company's intrinsic value using methods like discounted cash flow analysis to determine if the stock is significantly undervalued.

Risk Assessment:

💢Financial Strength: Evaluate the company's balance sheet to assess its ability to weather the storm.

💢Competitive Advantage: Determine if the company has a sustainable competitive advantage that can drive future growth.

Management Quality:

💢Competence: Assess the management team's track record and decision-making ability.

💢Integrity: Evaluate the company's corporate governance and ethical standards.

Patience and Time Horizon:

💢Recovery Time: Estimate how long it may take for the company to recover from its difficulties.

💢Investment Horizon: Be prepared to hold the investment for a longer period, as it may take time for the market to recognize the value.

Potential Pitfalls:

💢Permanent Distress: If the company's problems are fundamental and cannot be addressed, the stock price may remain depressed.

💢Overvaluation: Even in distressed situations, it's possible to overpay for a stock if the market's expectations are too high.

💢Emotional Bias: Avoid making impulsive decisions based on fear or greed. Stick to your investment strategy and analysis.o

Conclusion: While investing in distressed companies can offer attractive opportunities, it requires careful analysis and a long-term perspective. 

By considering the factors mentioned above, you can increase your chances of identifying undervalued stocks with potential for significant returns. Photo: Fast Capital.

From Textiles to Torpedoes: Swan Energy Poised for a Defence - Fueled Surge After RNEL Takeover, Setting Sail with Warship Manufacturing License in Hand...

Swan Energy Ltd (₹617.20) is set for a pivotal moment in its defence sector foray, as the much-anticipated relisting of Reliance Naval and Engineering Ltd (RNEL) enters its final countdown. Photo: Reliance Naval and Engineering Ltd.

Founded in 1997, Reliance Naval and Engineering Ltd specializes in vessel construction, ship and rig repairs and refits, and heavy engineering. It was the first private company in India to secure a license and contract for building warships.

On July 14, 2023, Reliance Naval & Engineering Ltd's shares were suspended from trading on the National Stock Exchange (NSE) due to a capital reduction mandated by an NCLT order issued on December 23, 2022.

Previously, Swan Energy, a Mumbai-based conglomerate, acquired Reliance Naval and Engineering through its special purpose vehicle, Hazel Infra, for Rs.231 crores. This acquisition strengthened Swan Energy's presence in India's shipbuilding industry, positioning it to become the leading private player in naval defense, commercial vessel manufacturing, and ship repair sectors.

After acquiring RNEL through its strategic arm, Hazel Mercantile, Swan Energy is all set to capitalize on India's defence production boom. But what makes this relisting so critical for investors and Swan Energy’s future?

A Deep Dive into Swan's Naval Aspirations! 

Swan Energy, traditionally known for its presence in the textile and energy sectors, made a bold move by acquiring Reliance Naval and Engineering Ltd, a company with the license to build warships for the Indian Navy. With defence manufacturing being a high-growth sector and the government’s push towards self-reliance in this field, Swan Energy’s foray into warship production presents a massive opportunity. The company’s strategic entry into this sector aligns well with the increasing defence budgets and emphasis on indigenization.

The RNEL Listing: Why It Matters ? 

The relisting of RNEL, which has been under restructuring since 2022, is the key to unlocking Swan Energy’s full potential in defence manufacturing. Once relisted, RNEL will provide Swan Energy access to fresh capital markets, boosting its warship manufacturing and other naval capabilities.

Moreover, RNEL’s relisting will improve Swan Energy’s cash flow by allowing the company to raise funds more efficiently through public offerings or rights issues. This is crucial as it gears up to meet government contracts in the naval sector, potentially including frigates and other naval vessels. The renewed financial influx will help streamline operations and accelerate project timelines.

The Tentative Listing Date: Anchors Away!

As of May 2024, RNEL has completed the required formalities, including payments to the stock exchanges. The final approval for listing is still pending, but analysts expect the relisting to take place by late 2024 or early 2025. This timeline provides investors with a crucial window to prepare for the expected surge in Swan Energy’s stock value.

Why Should Investors Care?

With the RNEL relisting imminent, investors should view this as an opportunity to buy the shares of Swan Energy Ltd and benefit from the early bird advantage. Defence manufacturing is one of the most lucrative sectors in India, and Swan’s entry into this space gives it a long-term growth trajectory. The company’s strategy of diversifying into warships and naval defence assets positions it uniquely to benefit from India's increased defence spending, making Swan Energy a multi-dimensional player in both energy and defence sectors.

Financial Health: Navigating Debt and Cash Flow: Swan Energy had ₹34.4 billion of debt in March 2024, down from ₹47.6 billion a year before. However, it holds ₹13.9 billion in cash, offsetting a significant portion of this debt, leading to a net debt of approximately ₹20.5 billion. The reduction in debt and substantial cash reserves will provide the company with the financial flexibility needed to execute its ambitious defence plans and capitalize on emerging opportunities.

Conclusion: For Swan Energy, the relisting of Reliance Naval is not just about ticking corporate boxes—it’s about steering the company into uncharted, high-growth waters. With warships in the making and government contracts on the horizon, Swan’s future looks promising for investors looking to sail into the booming defence industry. We can look for targets of Rs.2000 to Rs.2500 in the next 18 months time frame.

Therefore, when the RNEL ship finally sails back into the stock exchanges, be ready to climb aboard! 

 Ujjivan Small Finance Bank: A Healthy Growth Trajectory

I have taken some shares of Ujjivan Small Finance Bank Ltd (Rs.42.72) for my portfolio clients near the CMP for T: Rs.52 and Rs.65. SL: Rs.37.

Strong Deposit Growth: Ujjivan Small Finance Bank has demonstrated robust growth in its deposit base during the April-June quarter. The bank's total deposits surged by 22% to reach Rs.32,500 crore, indicating strong customer confidence and trust.

Expanding Loan Portfolio: The bank's gross loan book also witnessed a significant increase of 19% year-over-year. The bank reported loan disbursements of Rs.5,305 crore in comparison to Rs.5,284 in the year-ago period. The gross non-profit asset percentage was at 2.3%.

This growth reflects the bank's ability to effectively cater to the credit needs of its target customer segment.

Healthy CASA Ratio: The CASA ratio, which measures the proportion of current and savings deposits, is a crucial indicator of a bank's financial health. 

In this case the CASA ratio—the proportion of deposits that come from low-cost current and savings accounts—rose to 25.6% from 24.6% in the year ago period. A higher CASA ratio suggests a stable and low cost of funds, since lenders don't usually give any interest on current account deposits and the interest on saving accounts is low. This is expected to improve further, as the RBI is expected to cut the Repo rate in the next meeting.

Why Invest in Ujjivan Small Finance Bank?

Strong Growth Prospects: The Indian small finance bank sector is poised for significant growth, driven by the increasing financial inclusion of the underserved population. Ujjivan Small Finance Bank, as a leader in this space, is well-positioned to capitalize on this growth.

Diversified Loan Portfolio: The bank's focus on lending to micro, small, and medium enterprises (MSMEs) and individuals provides a diversified loan portfolio, reducing risk.

Experienced Management: Ujjivan Small Finance Bank is led by a seasoned management team with a proven track record in the microfinance industry.

Government Support: The Indian government has been supportive of the small finance bank sector, providing favorable policies and regulatory frameworks.

Promoter/FII Holdings: Promoters held 73.52% stake in the company as of 30-Jun-2024, while FIIs owned 24.68% and DIIs 7.33%.

Overall, Ujjivan Small Finance Bank's strong financial performance, coupled with its focus on the growing Indian microfinance market, makes it a compelling investment opportunity.

Vodafone Idea Ltd: Dialing Down Debt with Strategic Management, Bold Expansions and By Powering Innovations – A Call to Financial Freedom!

Vodafone Idea Ltd (Rs.13.14)  and Bharti Airtel Ltd (Rs.1578.70) two of India's leading telecom giants, have been grappling with substantial debt burdens for several years. Furthermore, relentless competition in the Indian telecom market, coupled with aggressive spectrum auctions and the financial impact of the pandemic, have significantly strained their balance sheets. Photo: Navbharat Times.

To begin with, among the 3 - prominent players in the sector, Vodafone Idea Ltd (Rs.13.14), often seen as the underdog in the Indian telecom sector, is currently on a thrilling rollercoaster ride of financial and operational transformation. Infact Vodafone Idea is making headlines with its ambitious plans to transform its financial landscape. Despite formidable challenges, Vodafone Idea's strategic maneuvers and debt reduction efforts signal a promising path forward. The company's focus on debt management, coupled with its bold expansion plans and recent tariff hikes, paints a picture of resilience and potential growth.

Recently, major players like Airtel and Jio have increased tariffs by 10-21% across the board. While the two big telcom companies raised entry-level 5G tariff plans by more than 45%, Vodafone Idea has also benefited from the hike in 4G tariff plans, a move that is expected to show its full impact by the end of this quarter and the next, which concludes in December 2024. Notably, Vodafone Idea Ltd will get more room for tariff hike once the 5G is launched. 

Incidentally, the company's cash and bank balance stood at Rs.18,150 crore as of June 2024. However, the telecom giant still faces significant financial obligations, with a staggering Rs.2.09 trillion owed to the government. This includes deferred spectrum payment obligations of Rs.1.39 trillion and an adjusted gross revenue liability of Rs.70,320 crore.

With a mix of strategic maneuvers and a sprinkle of resilience, the company is demonstrating how it’s turning a mountain of debt into a launchpad for future growth. 

Here’s an insightful look at how Vodafone Idea's debt and recovery strategies are positioning it for a potentially remarkable comeback, especially when compared to its competitor, Airtel.

The Debt Basket: Vodafone Idea vs. Airtel: Vodafone Idea’s debt is like that hefty bag of groceries you’re trying to carry up the stairs after a long day. It’s heavy, it’s daunting, and at times, it feels like it might just drag you down. 

As of June 2024, Vodafone Idea is juggling a staggering ₹46,500 crore in bank loans and ₹1,600 crore in optionally convertible debentures. This is in addition to a towering ₹2.09 trillion owed to the government, which includes deferred spectrum payments and AGR dues. But wait, there’s a plot twist!

Despite this mountain of debt, Vodafone Idea is not just surviving; it’s thriving. The company has successfully managed to reduce its bank debt by ₹4,550 crore over the past year and is in the process of securing an additional ₹35,000 crore for expanding its network. This is akin to carrying that bag of groceries up the stairs with a smile, while also managing to fit in a few extra items.

On the other hand while Bharti Airtel's debt situation is not as dire as Vodafone Idea's, it still remains a significant concern. Slowing capital expenditure and improved earnings have brought down the indebtedness of Bharti Airtel by over $1 in the last one year. At the end of June 2024, the telecom major had a net debt of $24.3 billion, which is $1.05 billion less than what it had at the end of the same quarter last year. As of June 2024, Bharti Airtel's total debt was ₹2.102 trillion, not at a meagre figure. But look at the CMP of Rs.2 face value (Vodafone Idea Ltd: Rs.10, FV) share of Bharti Airtel Ltd -- it's whopping Rs.1578.70. On a Rs.10, Face Value scale, the CMP of the shares of Bharti Airtel Ltd is Rs.7893.50, which is ~600 times the CMP of Vodafone Idea Ltd. So, you can imagine the prospects in terms of shareholders value once the Vodafone Idea starts to come out of the death tangle.

Marginal Drop in Subscriber Base: While lot of brouhaha has been going on regarding its loss of subscriber base but a careful analysis says a different story. The company has a total of 210 million subscribers as of June, with the balance coming from 2G and 3G. Its total subscriber base fell marginally from 221.4 million on-year. Interstingly, the struggling telecom carrier recorded 12 consecutive quarters of 4G subscriber additions, taking its 4G base to 126.7 million.

Loss Narrowed and Debt Reduced: Vodafone Idea’s losses narrowed to Rs.6,434 crore for the quarter ended June 2024, from Rs.7,674 crore the year before, while revenues remained almost flat at Rs.10,508 crore as again Rs.10,606 crore on Y - o - Y basis. 

Its total debt from banks and financial institutions stood at Rs.46,500 crore and optionally convertible debentures at Rs.1,600 crore as of June 2024. Debt from banks and financial institutions reduced by Rs.4,550 crore during the past one year, compared to Rs.9,200 crore in Q1FY24.

ARPU Improved: Average revenue per user (Arpu), a key metric of profitability, improved to Rs.146, up 4.2% on-year for the No.3 carrier, but it remained flat on a sequential basis. Amongst the telcos, Airtel is the only carrier that has seen its Arpu rise in the June quarter. Surprisingly, the No.1 carrier Reliance Jio’s Arpu was also flat the quarter. 

Preference Issue Price: In addition to the FPO, the VI board has also approved a preferential share issue to raise Rs.2,075 crore from an Aditya Birla Group (ABG) entity. The shares were decided to be issued at Rs.14.87 apiece to Oriana Investments Pte Ltd, VI said in a notice to the stock exchange on April 13, 2024; the price which is substantially high than the CMP.

Closure of 3G Networks: The company has converted 3G networks to 4G in several circles. I believe that increased 4G coverage will help arrest market share losses on 4G in the medium term.

VI plans to use 70% of the FPO proceeds to boost 4G coverage (26,000 sites), 4G capacity (40,800 sites) and 5G rollout (22,000 sites); Rs.2,175 crore will be used for paying deferred payments for spectrum to the Department of Telecom and the GST. The balance amount of Rs.18,000 crore will be used for general corporate purposes.

In short, the FPO fund will be used to set up new 4G sites, expanding the capacity of existing and new 4G sites and setting up new 5G sites. This is expected to be a huge money spinner for the company in future.

Airtel’s Debt: The Sibling with a Smaller Bag: Airtel is holding its debt situation with a bit more grace, carrying a more manageable debt load compared to Vodafone Idea. Airtel’s financial situation is akin to having a smaller, more manageable grocery bag. While it has also seen some debt reduction, its numbers are less dramatic compared to Vodafone Idea’s epic saga. Airtel’s debt figures are not as eye-poppingly massive, making their financial narrative a tad more serene but less dramatic.

Vodafone Idea’s Strategic Moves: Plotting the Comeback: Vodafone Idea is not just sitting around waiting for a financial fairy godmother. The company is in talks to secure more debt funding, which will fuel its ambitious ₹55,000 crore capex plan over the next three years. This includes expanding its 4G network and rolling out 5G services. They’re also maneuvering to raise equity through various financial instruments, such as the follow-on offer and preferential share issues, making it clear they’re serious about transforming their financial landscape.

The recent equity raise and planned capex investments are like a high-octane fuel injection into Vodafone Idea’s engine. With these moves, they aim to boost their network capacity, improve coverage, and, most importantly, position themselves as a strong contender in the rapidly evolving telecom market.

Caveat: It may, however, still face a cash shortfall from the second half of FY26 once the ongoing moratorium on the government’s AGR and spectrum repayments ends. 

Therefore, it is imperative that unless the government of India exercises the option to convert these dues into equity, this topic will continue to remain a key fuelling uncertainty, both from a cash flow and an equity dilution perspective.

A Glimmer of Hope: Government Relief and Market Impact: Vodafone Idea’s potential relief from the government on AGR dues could be a game-changer. If the AGR dues are reduced by up to 50%, it could significantly lighten the financial load. 

I'm optimistic in the sense that with the right combination of tariff hikes in the months to come, government relief, and network expansion, Vodafone Idea could emerge stronger and more competitive.

Conclusion: A New dawn: While Vodafone Idea’s financial journey might resemble a dramatic soap opera with its debt-laden storyline, the company is making commendable strides toward recovery and growth. 

Recently, there were media reports saying, the banks have completed the techno-economic evaluation (TEV) of Vodafone Idea and it is in discussions for landing the Rs.35,000-crore additional financing required for its capital expenditure needs.

Also, there were media briefings that, Vodafone Idea has reached out to the Department of Telecom to seek waiver on a financial bank guarantee worth Rs.24,747 crore for spectrum payment due in September 2025. Also, the company opted for a moratorium on AGR payments. The moratorium ends in March 2026. VIL is required to provide bank guarantees at least 13 months prior to the expiry of the relevant moratorium period.

While opting for the moratorium, VIL cleared about Rs.16,000 crore interest obligation on the deferred payment by offering equity in the company to the government.

Thus the government shareholding in VIL fell from about 33% 2023 to 23.80% as of March 31, 2024, after the company raised Rs.18,000 crore through a follow-on public offer (FPO), Rs.7,000 crore between March 2022 and May 2024 from the promoters and issued preferential shares to vendors to clear their dues.

Vodafone Idea (Vi) has also cleared all its statutory dues of around Rs.700 crore, including licence fees and spectrum charges, for the April-June quarter, the 1st time the it managed to meet its obligations over a substantial period.

Shareholders should therefore, view this period as an exciting chapter of transformation and opportunity. With its aggressive expansion plans, strategic debt management, and potential regulatory relief, Vodafone Idea is not just a survivor but a phoenix rising from the financial ashes.

So, buckle up and enjoy the ride—Vodafone Idea is making a comeback that might just surprise everyone!

============================

Sources:

🏵️CNBC TV18 Ltd

🏵️ The Business Standard

🏵️Moneycontrol.com and other inputs from the internet and elsewhere.

Flash Focus: Fast Facts For Smart Investors

I have taken some shares of Swan Energy Ltd (Rs.616.50) for some of my portfolio clients. T: Rs.725, SL: Rs.587.

In a significant development, BlackRock, the world's largest asset manager, acquired a stake in the company on July, 2024 through block deals. The shares were purchased at Rs.668.27 per share. Photo: The Economic Times.

Meanwhile, According to a report published in The Economic Times, Swan Energy Ltd is planning to sell its stake in a floating LNG terminal to Turkey's state-run company Botas for $399 million. Using today's exchange rate of 1 USD = Rs.83.63 the sale amount is approximately Rs.33,366 million. 

The deal, which involves Swan's 51% stake in the floating storage and regasification unit (Vasant 1), is expected to be completed within next six months, subject to approval from shareholders and regulators .

Shareholding Pattern: As per the latest shareholding pattern, the FIIs have raised their stakes from 11.16% to 11.84%.

The DIIs have also increased their stakes from 14.33% to 14.81%

On the other hand the Public shareholding has come down from 20.53% to 19.37%.

Financials: Swan Energy Ltd.’s net profit surged by 85% in the first quarter of the current financial year. The petrochemical company reported a profit of Rs.267.7 crore for the quarter ending in June, compared to Rs.144.8 crore in the same quarter of the previous fiscal year. 

Revenue grew by 42% year-on-year, reaching Rs.1,141.7 crore for the three months ending in June, compared to Rs.804.3 crore during the same period of the fiscal year ending in March 2024. 

Operating income increased by 60% year-on-year to Rs.380.9 crore, while the EBITDA margin widened to 33.4%, up from 29.5% in the previous year’s corresponding period.

Company Profile: Swan Energy Limited (SEL) was originally incorporated as Swan Mills Ltd. (SML), a manufacturer and marketer of cotton and polyester textile products in India in 1909. Today, the Swan Group is one of India's prominent private sector conglomerates, with over a century of service spanning the textile, real estate, and oil & gas industries.

Flash Focus: Fast Facts For Smart Investors

I have taken some shares of Bank of Maharashtra Ltd (Rs.59.61), T: Rs.85+, SL: Rs.57 (strict).

Bank of Maharashtra Ltd., a state-run entity, reported a 47% year-on-year (YoY) rise in net profit, reaching ₹1,293.5 crore in the first quarter of the financial year 2024-25, driven by higher net interest income (NII) supported by robust business growth. In comparison, the net profit stood at ₹882 crore during the same period last year.

NII, which is the difference between interest earned and interest paid, increased by 20% YoY to ₹2,799 crore for the April-June period, up from ₹2,340 crore in the corresponding quarter of the previous year, according to the bank’s exchange filing.

Gross advances for the quarter reached ₹2.09 lakh crore, up from ₹1.75 lakh crore in the same period last year.

Total deposits grew 9.43% YoY to ₹2.67 lakh crore for the June quarter.

The bank’s CASA (Current Account and Savings Account) deposits, which are low-cost for banks, accounted for 49.86% of total deposits during the June quarter.

The credit-deposit ratio rose to 78.17% for the quarter.

Bank of Maharashtra also saw an improvement in asset quality, with gross non-performing assets (NPA) declining to 1.85% at the end of June, compared to 1.88% in the previous quarter.

Net NPA remained steady at 0.20%.

Additionally, the bank’s provision coverage ratio stood at 98.36% by the end of the quarter, marginally down from 98.37% in the same period a year earlier.

Overall, among the PSU Banks, this scrip looks attractive at the CMP.

Flash Focus: Fast Facts For Smart Investors

I've taken some shares of Union Bank Ltd (Rs.119.45), for my portfolio clients, after its spectacular June, 2024 quarter results.

Investment Rationale:

Strong Financial Performance: In Q1FY25, Union Bank of India (UBI) reported a 13.68% YoY increase in net profit and a 6.47% YoY growth in net interest income. The bank has demonstrated solid growth, especially in its liability franchise, with domestic deposits rising by 8.52%. Photo: Just Dial.

Business Growth: Union Bank of India Lt saw its total business grow by 9.76% YoY, driven by an 11.46% increase in gross advances. The RAM (Retail, Agri, MSME) segment grew significantly by 14.53%, indicating a strong foothold in crucial sectors.

Improved Asset Quality: Gross NPA dropped to 4.54%, a YoY reduction of 280 bps, and net NPA fell to 0.90%. This shows improved risk management and a healthier balance sheet.

Capital Adequacy: The CRAR improved to 17.02% in June 2024 from 15.95% a year earlier, indicating a robust capital position to support future growth.

Key Ratios (Q1 FY25 vs Industry Averages):

💢P/E Ratio: Union Bank's P/E ratio stands at 9.85, which is lower than the industry average, suggesting the stock may be undervalued.

💢Book Value: UBI's book value per share is around Rs. 106, indicating a price-to-book ratio of 1.13, which is competitive with peers.

💢ROCE & ROE: UBI's Return on Capital Employed (ROCE) stands at 9.80%, and Return on Equity (ROE) at 15.70% --  both in line with industry standards.

Caveat: On the flip side, the interest income and other income declined in Q1FY25 as compared to the March 2024, quarter, reflecting a general industry trend of softer performance in the first quarter. 

Furthermore, according to a top official of the bank: "While the net interest margin (NIM) is expected to remain higher than the guidance of 2.8% to 3%, however maintaining it above 3% may pose tough challenges in future".

Conclusion: Union Bank of India Ltd's strong financials, improving asset quality, and robust capital position make it an attractive investment option, especially at its current valuation. 

I'm looking at targets of Rs.127 and Rs.135 in the short term. SL: Rs.111.

Showdown at Vodafone Idea Ltd's Circus! Goldman Sachs Sees Rs.2.50 Pothole at Ground Zero, While Citi Aims for the Rs.22 "Deepawali Skyline!"

In the highly unpredictable world of stock markets, where bulls charge and bears claw, Goldman Sachs seems to have dressed up in full bear armor, sticking to their ‘Sell’ rating for Vodafone Idea Ltd with the precision of a seasoned pessimist.

The shares of Vodafone Idea Ltd’s (Rs.13.35)  plunged over 14% to Rs.12.91 yesterday closing at Rs.13.35 as Goldman Sachs dropped the hammer with a ‘Sell’ rating, predicting a terrifying 83% nosedive (of the share price). Photo: The Straits Times.

Their new target? A nauseating Rs.2.50 per share. Yes, you heard it right! It appears that, Goldman Sachs’ crystal ball anticipates Vodafone Idea Ltd will perform more of a belly flop than a balancing act in the near future.

However, they've been generous enough to nudge their target price upward from Rs.2.20 to a luxurious Rs.2.50 per share—because, you know, sometimes you just need that extra Rs.0.30 to feel optimistic.

Goldman Sachs’ bearish outlook stems from the concerns that Vodafone Idea’s recent capital raising exercise, although positive, will not be sufficient to halt the company's ongoing market share erosion.

According to Goldman Sachs, Vodafone Idea is likely to lose an additional 300 basis points of market share over the next 3-4 years.

The brokerage also pointed out that the company needs to significantly boost its Average Revenue Per User (ARPU) by Rs.200-270 to achieve free cash flow neutrality.

It is true that currently the company is facing a significant financial pressures, including adjusted gross revenue (AGR) and spectrum-related payments, which are expected to become substantial starting from FY26.

Goldman Sachs also feels that free cash flow would remain negative at least until FY31, further impacting investor sentiment.

Interestingly Goldman Sachs is generally considered a sell-side firm. Also, their take on Paytm Ltd has hereto been Disastrous!! Goldman Sachs invested in Paytm when it debuted on the stock market in November 2021 at Rs.2,150 per share. The rest is history.

Meanwhile, over at the optimistic corner, Citi is tossing confetti. It has maintained a ‘Buy’ rating with a target price of Rs.22 per share.

Citi's positive stance is based on the potentially favourable outcome of Vodafone Idea's AGR Curative Petition. With the Supreme Court agreeing to hear the case, there is a possibility of significantly reducing the company’s AGR debt burden. Citi estimates that such a reduction could potentially add an impressive Rs.4-5 per share, representing a significant boost to the stock’s value.

At the end, it’s a classic "Bear vs Bull" smackdown—one side sees a sinkhole at Rs.2.50, while the other shoots for the stars at Rs.22! 

Stay tuned as the Vodafone Circus continues its daring performance... with no trapeze in sight!