Winning Strokes

When this report is being prepared the BSE Sensex was seen trading at 53,152.33 up 12.41 points (+0.02%), while the Nifty50 was seen at 15,924.00 up 6.30 points (+0.04%). The Nifty has reached my target of 15900 and hence we could expect a bit bull - softening in the bourses. Photo: The Times of India. 

#Smallcap scrips  are seen outperforming the frontline indices and investors have shown an increasing appetite to invest in them as their prices soared. However it is pertinent to mention here that the rally in small cap stocks is a global phenomenon not restricted to Indian market with S&P 2000 index turning out to outperform the blue-chip Dow Jones Industrial Average (DJIA), S&P 500 and tech-heavy NASDAQ composite in 2021.

#The stock of Reliance Capital Ltd (Rs.20.35) is likely to do very well in the bourses, due to lot of positive developments as mentioned below. 

#Reliance Nippon Life Insurance Company is amongst the leading private sector life insurance companies in India in terms of individual WRP (weighted received premium) and new business WRP. The company is one of the largest non-bank supported private life insurers with over 10 million policyholders*, a strong distribution network of 717 branches and 63,016 advisors as on March 31, 2020. The company holds Claim Settlement Ratio of 98.1% as on March 31, 2020.

Reliance Nippon Life Insurance Company is a part of Reliance Capital, a private sector financial services and non-banking company. Reliance Capital has interests in stock broking, life & general insurance, proprietary investments, private equity and other activities in financial services.

Recently,  an important hurdle to the sale of Reliance Capital's assets has been eased with Yes Bank and Axis Bank removing the red flag account status of Reliance Capital (RCap) as per the Reserve Bank of India guidelines. Both banks jointly have a debt exposure is Rs.1,575 crore and had objected to RCap's asset sale plans unless their dues were paid. Just a few days ago, Yes Bank moved into Anil Ambani group headquarters in Santa Cruz, Mumbai as part of a debt settlement deal with the Ambani group companies.

Financials: Reliance Capital, a part of Anil Ambani-promoted Reliance Group, reported narrowing of its consolidated net loss to Rs.1,649 crore in the fourth quarter ended March 2021. The company had posted a net loss of Rs.2,179 crore in the January-March quarter of the last fiscal.

Total consolidated income rose to Rs.5,163 crore in the quarter from Rs.3,780 crore in the year-ago quarter, Reliance Capital said in a regulatory filing. The company plans to cut its expanses and streamline its operations in Future. 

Meanwhile, the company had invited bids for all or part of RCL's stake of subsidiaries Reliance General Insurance, Reliance Nippon Life Insurance Company, Reliance Securities, Reliance Financial Limited and Reliance Asset Reconstruction Limited in December.

It plans  to sell 100% stake in Reliance Securities and Reliance Financial Limited. The company has invited bids for 49% stake in Reliance Asset Reconstruction Limited. It's 20% stake in Indian Commodity Exchange (ICEX) has also been put on sale.

Monetization process is run under the aegis of Committee of Debenture Holders and the Debenture Trustee Vistra ITCL India Ltd - which represents 93% of total outstanding debt of Reliance Capital remained at Rs.20,643 crore as on February 28, 2021.

The last date for submission of EoIs for the stake sale was December 1. In all, 60 different bids have been received by SBI Capital Markets and J M Financial Services, the advisors to the lenders.

Also, during any Pandemic people tend to incline more towards insurance, may be due to the fear of the disease and thinking about the well-being of their families. Probably, this is already being reflected in the Q4FY21 results, where the loss narrowed down on Q - o - Q basis. 

Meanwhile, the Economic Times, reported on April, 2021, that Reliance Nippon Life Insurance Company saw a 13% rise in its new business premium, a key metric for insurance companies, amid higher demand for risk cover amid the pandemic.

When much positives are on the anvil we can look for targets of Rs.61/157/172 in the coming months. Buy the share and keep holding with patience.

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#The shares of Future Retail Ltd (Rs.63) is trading flat now, after touching an intraday high of Rs.63.70. 

There are two prime points here:

• The marketplaces are NOT ALLOWED to hold inventories in India, according to the FDI norms. Amazon is a marketplace and Future Retail Ltd has a big inventory for its offline business. Hence, as per my view Amazon can't buy Future Retail with present laws in place. When they can't hold stake in a brick and mortar retail company at the moment, how they will be able to do after 3 - years? Hence, this is perhaps a lost battle for Amazon. 
• The recent media repeat suggests the company's business has improved, post the commencement of its e - commerce venture, where 50,000 - plus order offtakes  were seen a couple of months back. I feel this velocity might have increased further now. The business of e - commerce companies have been booming post knockdown.
• The Reliance group is proving goods for its business with an extended credit facility. 
• K V Kamath, committed has given a green signal to its loan recast proposals, along with Patel Engineering Ltd (Rs.19.20).

In view of all these positive developments , we can look for targets of Rs.70/92/131/157/180 in the coming days. Buy and keep holding with patience. There is nothing to fear in this counter as the consortium of lenders are behind the Future group. 

#Patel Engineering Ltd (Rs. 19.20), after its debt restructuring getting green signal from the K V Kamath committe, should slowly inch towards Rs.91/100. You should buy and keep holding.

#Den Networks Ltd (55.15) will come up with Q1FY22 results today. If you remember, in Q1FY21, Den Networks Ltd's consolidated net profit jumped an over four-fold at Rs.58 crore, on the back of strong operational performance by cable business. The company had a profit of Rs.14 crore in Q1FY20. 

Last year, post declaration of the Q1FY21 result, the scrip spurted, made 52 - week high and closed at Rs.109.60, . Let us hope for the best this year, but since the base year is strong, we may not get to see such scintillating performance in June, 2021 quarter result, on Q -o - Q basis.