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!

Vodafone Idea Ltd: Targets after Tariff Hikes.

CMP: Rs.13.35.

After the recent tariff hike by telecom companies in India, several brokerage houses revised their price targets for Vodafone Idea Ltd, reflecting a more optimistic outlook due to expected revenue growth. Here are some of the updated targets:

💢ICICI Securities: Rs. 13, maintaining this target due to expectations of improved EBITDA in FY25-27 and increased investments in network infrastructure.

💢Motilal Oswal: Rs. 15, following the company's focus on addressing its funding gap and network expansion.

💢Citi: Rs. 22, maintaining a relatively optimistic view on Vodafone Idea’s ability to grow with tariff hikes.

💢Deutsche Bank: Rs. 1.50, reflecting a more conservative outlook amid concerns over competition.

💢Emkay Global: Rs. 14, citing the potential for improved cash flow and debt reduction.

💢Kotak Securities: Rs. 12, expressing a moderate stance on revenue improvement post-hike.

💢JP Morgan: Rs. 16, highlighting better ARPU and debt reduction prospects.

💢HDFC Securities: Rs. 13, viewing the tariff hikes as a lifeline for financial recovery.

💢Jefferies: Rs. 15, anticipating that network improvements could help Vodafone Idea regain market share.

💢Morgan Stanley: Rs. 14, citing increased competition but improved financials post-tariff hikes.

These targets indicate that many analysts are cautiously optimistic about Vodafone Idea's recovery, especially with the potential for revenue improvement from the tariff hikes. Photo: iStock

Vodafone Idea Ltd: The Target in the last 6 Months.

CMP: Rs.13.35

Here are the targets set by various brokerage houses for Vodafone Idea over the last six months. These varying targets reflect different views on the company's path going forward, with some being more optimistic about potential government relief and market conditions, while others remain cautious due to Vodafone Idea's financial constraints. Photo: The Brand Hopper.

💢Nomura India raised its target price by 131% to ₹23, citing potential improvements in the company’s outlook.

💢Motilal Oswal set a more conservative target at ₹10, highlighting concerns over the company’s financial struggles.

💢Credit Suisse gave a target price of ₹5, pointing out the intense competition and Vodafone Idea’s high debt.

💢Kotak Securities placed a target of ₹12, factoring in potential relief from government measures.

💢ICICI Securities targeted ₹8, warning about the impact of delayed tariff hikes on revenue growth.

💢JP Morgan has a target of ₹6, focusing on Vodafone Idea’s weak subscriber base compared to competitors.

💢HSBC suggested ₹18, indicating optimism around long-term recovery but emphasizing operational challenges.

💢HDFC Securities set a target of ₹9, noting the need for equity infusion and tariff increases.

💢Axis Capital placed the target at ₹7, with concerns about high capital expenditures required to stay competitive.

💢Jefferies gave a ₹11 target, stressing Vodafone’s financial vulnerabilities amidst the ongoing industry price wars.

Flash Focus: Fast Facts For Smart Investors 

#NMDC Ltd (Rs.211.60):

💢Since it's a public sector enterprise, NMDC enjoys the benefit of government support. Government initiatives like the National Steel Policy aim to double the domestic steel production capacity, which will directly benefit NMDC's iron ore sales.

💢NMDC is India's largest iron ore producer, contributing over 30% of the country's total production. With increasing demand for steel due to infrastructure development and the NDA government's "Make in India" initiative, the demand for iron ore is likely to remain robust in the coming years. Photo: NMDC Page, Facebook.

💢NMDC Ltd continues to maintain a strong pricing power, as global iron ore prices remain elevated due to supply constraints and high demand from steel producers, particularly in China and India.

💢NMDC is almost debt-free, with a minimal debt-to-equity ratio, ensuring financial stability and reducing the risk of financial stress.

💢NMDC is embarking into steel production through its Nagarnar Steel Plant. Once operational, this will diversify the company's revenue streams, reducing its dependence solely on iron ore mining. This expansion is expected to enhance NMDC’s earnings over the next few years.

💢NMDC Ltd has shown a solid track record in terms of revenue generation, profitability with healthy margins, and a robust dividend payout policy, showcasing its operational efficiency 

The company has consistently rewarded shareholders with dividends, offering a dividend yield of 4-5%, making it attractive for income-focused investors. The current dividend yield is 2.72%. 

💢The P/E ratio of NMDC Ltd is 10.48 times as of 04-Sep-2024, a 64% discount to its peers' median range of 29.15 times. The industry P/E is 20.09. 

Thus the company's P/E ratio is significantly lower than the industry average, indicating the stock is undervalued.

💢NMDC’s P/B ratio stands around 2.41x, suggesting a bargain for value investors compared to peers trading at higher multiples. 

Conclusion: NMDC Ltd offers a compelling investment case due to its strong fundamentals, attractive valuation, government support, and strategic initiatives. The combination of a high dividend yield, revenue diversification through steel production, and an undervalued price make it an attractive buy for both growth and income investors.

#NHPC Ltd (Rs.98.05): The elevation of NHPC Ltd (Rs.97.60) to Navaratna status is likely to be highly beneficial for shareholders, share price, and the company’s fundamentals. Here's how it can drive positive changes:

💢Increased Autonomy for Expansion and Investments: The Navaratna status generally grants greater financial and operational autonomy. It allows a company to make substantial investments (up to ₹1,000 crores without government approval) in domestic and international projects. Photo: News9 Live.

This could accelerate capacity expansion in NHPC Ltd including new hydroelectric and renewable energy projects, potentially boosting revenues and earnings in the long term.

Moreover, this autonomy may enable NHPC to diversify its portfolio and explore profitable ventures in the solar and wind energy sectors, further strengthening its fundamentals.

💢Improved Financial Performance: With more freedom to invest and make strategic decisions, NHPC will be better equipped to execute projects faster and more efficiently, which can lead to an improved financial performance, enhanced profitability and higher returns on equity (ROE).

As a corollary to that a stronger financial base and improved cash flows could lead to higher dividends for shareholders, making the stock even more attractive for income investors.

💢Boost to Shareholder Confidence: Navaratna status is a prestigious recognition, which often improves market sentiment around a company. 

For shareholders, this boosts confidence level in the management’s ability to make independent and strategic decisions for long-term growth. Such recognition tends to lead to increased investor interest in the scrip, resulting in an uplift in the stock’s valuation.

Besides, this recognition can create a positive sentiment that may reflect in a rise in share price, as the market perceives NHPC as a stronger, more self-reliant company.

💢Potential for International Projects: With greater autonomy, NHPC can now explore international markets highly complex and good margin projects, opening up new avenues for revenue generation. This, if happens would not only mark its global presence as a leader in the space, but will also diversify its risk by reducing dependence on the domestic market.

Complex International projects may lead to higher margins and revenue diversification, which would strengthen NHPC's financial stability and offer long-term growth potential, further benefiting shareholders.

💢Strategic Partnerships and Collaborations: Navaratna companies have greater flexibility to form joint ventures and strategic partnerships, both domestically and internationally. NHPC can now collaborate with other energy players to leverage technology, expertise, and capital, leading to more efficient project execution and faster expansion.

💢Stronger Fundamentals: Navaratna status can lead to improved operational efficiency, faster project execution, and enhanced corporate governance, all of which having the capacity to improve the company’s fundamentals. Better governance and management practices usually result in more stable earnings, lower operational risks, and higher investor trust, all contributing to a more robust financial foundation.

Conclusion: The analysts are of the view that the elevation of NHPC to Navaratna status will significantly boost its ability to grow, invest, and improve profitability, benefiting both shareholders and the company’s fundamentals. 

Shareholders may see long-term gains from improved earnings, better dividends, and a potential appreciation in share price due to increased investor confidence and strategic growth opportunities.

 Today's Calls

#Buy the shares of Dhampur Sugar Mills Ltd near the CMP of Rs.223.94, T: Rs.281/ Rs.312. 

Introduction: Dhampur Sugar Mills, a leading entity in the Indian sugar industry, has established itself as a key player in the ethanol sector, leveraging its robust infrastructure to capitalize on India's evolving ethanol policy. 

With multiple sugar mills and distilleries under its belt, Dhampur Sugar has focused on transforming sugarcane byproducts like molasses into ethanol, a move that aligns perfectly with the government's push for ethanol blending in fuels.

Ethanol Policy of India: The latest ethanol policy of India, aimed at reducing the country's dependency on fossil fuels and boosting the renewable energy sector, has provided a significant impetus for companies like Dhampur Sugar. The policy promotes the production and blending of ethanol with petrol, encouraging sugar companies to diversify their operations and tap into this growing market. The government’s target of achieving a 20% ethanol blending rate by 2025 has opened up new revenue streams for ethanol producers, particularly in the agricultural sector.

Dhampur Sugar Mills has responded to this policy by ramping up its ethanol production significantly. In FY24, the company increased its ethanol output by nearly 28%, from 931.08 lakh BL to 1,189.78 lakh BL. This expansion has been driven by the addition of a 100 KLPD ethanol plant that utilizes maize and damaged food grains as feedstock, supplementing the company’s reliance on sugarcane. Furthermore, the company’s distillery capacity now stands at 350 KLPD, with plans for further expansion.

The ethanol segment has become the highest-earning division for Dhampur Sugar, contributing substantially to its overall revenue. 

In FY24, ethanol accounted for 24.7% of the company's standalone revenue, up from 16.8% in FY23. The segment’s share of operating profit also rose, highlighting its growing importance within the company’s business portfolio.

The Short Term Trigger: According to stock market experts, sugar stocks are rising because the Government of India (GoI) has removed the cap on sugar diversion for ethanol production for the 2024-25 season. This policy change allows sugar mills to produce ethanol from sugarcane juice and B-Heavy molasses, enhancing their operational flexibility and potential profitability

Caveat: However, the current scenario of international sugar prices adds a layer of complexity to Dhampur Sugar's outlook. 

Sugar prices have been volatile, influenced by fluctuating global production levels and varying demand. Recently, international sugar prices have been on the rise due to reduced output in major producing countries like Brazil and India, coupled with increasing demand. 

While higher sugar prices can benefit the company by boosting revenue from sugar sales, they also pose a challenge by potentially increasing the cost of ethanol production if sugarcane prices rise in tandem.

This price volatility can have a dual impact on Dhampur Sugar's fundamentals. On the one hand, increased sugar prices can enhance profitability from the sugar segment. On the other hand, if sugarcane prices increase as a result, it could squeeze margins in ethanol production, especially as the company expands its reliance on sugarcane-derived ethanol. 

Nonetheless, Dhampur Sugar’s diversified approach, including the use of alternative feedstocks like maize and damaged grains, may help mitigate some of these risks, ensuring a more balanced and resilient business model.

Also, its March and June, 2024 quarter results were not upto the mark. 

Conclusion: 

Dhampur Sugar Mills Ltd is one of India’s leading integrated sugarcane processing companies. Its innovation and emphasis on continuous R&D has made it a technological leader in sugarcane processing and green energy solutions.

As India continues to push for higher ethanol blending rates and international sugar prices remain dynamic, Dhampur Sugar Mills Ltd is strategically positioned to navigate these challenges. 

The company’s proactive expansion in ethanol production and diversification of raw materials will be crucial in sustaining its growth and maintaining robust fundamentals in the face of an ever-changing market environment.

The current share price of the scrip is near its 52 - week low level, making it an ideal low risk investment option.

Bibliography:

💢 Equitymaster.com. "Top Ethanol Stocks in India 2024: Ethanol Companies to Add to Your Watchlist". 2024.

💢Dhampur Sugar Mills Ltd. 2024. "Annual Report FY24".

💢Government of India. 2023. "Ethanol Blending Policy: Vision 2025". Ministry of Petroleum and Natural Gas.

💢International Sugar Organization (ISO). 2024. "Global Sugar Market Analysis: 2024 Outlook".

💢Reuters. 2024. "Global Sugar Prices Surge as Production Declines in Major Markets".

💢Business Standard. 2024. "India's Ethanol Policy and Its Impact on the Sugar Industry".

💢Live Mint. 30 August, 2024. "Balrampur Chini, Dhampur Sugar to Dalmia Bharat: Why are sugar stocks skyrocketing today? — explained'.

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

#NMDC Ltd: Those traders who are not comfortable with Q1FY25 results of Dhampur Sugar Mills Ltd (Rs.227) can BUY the shares of NMDC Ltd (Rs.210.55) near the CMP for short term targets of Rs.227/232. SL: Rs.203.

NMDC is recognized as one of the world's low-cost iron ore producers and operates India's only mechanized DIAMOND -  mine in Panna, Madhya Pradesh.

The company currently produces over 45 million tonnes per annum (MTPA) of iron ore from its key mining hubs in the Bailadila sector of Chhattisgarh and the Donimalai region in Karnataka. NMDC aims to increase its iron ore production capacity to 100 million tonnes by FY30.

Over FY25, NMDC is likely to surpass 50 million tonne production, driven by improved capacity and strong domestic demand, according to Sneha Poddar of Motilal Oswal Financial Services.

All of NMDC's mining complexes have received a 5-star rating from the Indian Bureau of Mines, under the Ministry of Mines, highlighting its commitment to scientific and sustainable mining practices.

NMDC also boasts its own R&D Centre in Hyderabad, recognized as a Centre of Excellence by UNIDO. Both its mines and R&D Centre hold ISO and EMS certifications.

Meanwhile, LKP Research has a positive (Bullish) outlook on NMDC Ltd and has issued a buy recommendation for the stock, setting a target price of ₹297 in its research report dated April 24, 2024.

LKP Research's report on NMDC Limited emphasized the company's status as India's largest iron ore producer and a 'Navratna' public sector enterprise under the Ministry of Steel. 

The report suggests that the Indian steel industry, supported by substantial government investment and favorable economic shifts, is competitively positioned against its global peers.

LKP Research initiates coverage on NMDC with a valuation of 6.5x FY26E EV/EBITDA, setting a target price of Rs.297. 

Over the period of FY24E-26E, NMDC is expected to achieve a compound annual growth rate (CAGR) of 12.9% in Revenue, 18.8% in EBITDA, and 19.1% in PAT.

India's Bangladeshi Connection: The Textile Industry's Interdependence

Introduction: Bangladesh, the world's second-largest exporter of garments, is a key player in the global textile market. Its remarkable success is driven by an efficient supply chain that appeals to major global brands seeking cost-effective production solutions.

A significant factor behind this achievement is the strong economic cooperation between Bangladesh and the European Union (EU). Under the EU-Bangladesh Cooperation Agreement of 2001, the partnership extends beyond trade and economic development to include human rights, good governance, and environmental initiatives. Photo: India Today.

Bangladesh and WTO: Bangladesh's membership in the World Trade Organization (WTO) since 1995 further bolsters its position.

As a least developed country, it benefits from the EU's 'Everything but Arms' (EBA) arrangement, which provides duty-free and quota-free access to the EU market for all exports except arms and ammunition. This arrangement has been pivotal for Bangladesh, which is the one of the largest beneficiaries under the EBA framework.

The EU remains Bangladesh's primary trading partner, accounting for 20.7% of the country’s total trade in 2023, while Bangladesh is the EU's 36th largest trading partner.

Notably, clothing comprises over 90% of the EU’s total imports from Bangladesh, highlighting the country's dominance in this sector. Meanwhile, EU exports to Bangladesh are primarily machinery and chemical products.

While China remains the global leader in the apparel market, with exports valued at $182 billion in 2022, Bangladesh has firmly secured the second spot. Following Bangladesh are Vietnam ($35 billion), Turkey ($20 billion), and India ($18 billion). 

Bangladesh’s apparel industry contributed a staggering 84.58% of its export earnings during this period, underscoring its critical role in the national economy. This favorable trade environment also presents significant opportunities for Indian textile companies.

Firms like Sangam India Ltd (An Indian Yarn and Fabric manufacturer, Rs.417.20), have found a lucrative market by supplying yarn and fabrics, particularly polyester viscose dyed yarn, to Bangladesh's thriving garment industry. The consistent demand from Bangladesh enables these Indian companies to maintain robust business, ensuring a steady market for their products.

Thus, the stability of Bangladesh is as vital for the continuity and growth of its garment industry, as with the fortunes of Indian Yarn and Fabric Manufacturers. Or any disruption in Bangladesh is likely to have a major impact on the Indian textile sector.

As Dr. Muhammad Yunus has emphasized, political and economic stability in Bangladesh is therefore essential for sustaining this symbiotic relationship. Any instability could disrupt the supply chain, directly impacting Indian suppliers who rely heavily on consistent orders from Bangladeshi manufacturers.

Conclusion: The interdependence between India and Bangladesh in the textile sector highlights the importance of stability in the region. While Bangladesh's growth in the global apparel market provides substantial opportunities for Indian companies, any disruption in its stability could have far-reaching consequences.

Ensuring political and economic stability in Bangladesh is not just a regional concern but a strategic necessity for the sustained growth of the textile industries in both countries.

Highlights:

🏵️Bangladesh's Position: Bangladesh is the world's second-largest garment exporter, significantly benefiting from EU trade agreements.

🏵️Economic Cooperation: The EU -  Bangladesh Cooperation Agreement and the 'Everything but Arms' arrangement provide substantial trade benefits to Bangladesh.

🏵️Global Apparel Market: China leads, followed by Bangladesh, Vietnam, Turkey, and India in global apparel exports.

🏵️Indian Opportunities: Indian companies like Sangam India Ltd. capitalize on supplying yarn and fabrics to Bangladesh.

🏵️Importance of Stability: Political and economic stability in Bangladesh is crucial for sustaining the textile industry's growth in both nations.

Today's Call 

Buy shares of Sangam India Ltd (Rs. 406.25) around the current market price for a target of Rs. 442/511. Stop loss: Rs. 391.

Overview:  Sangam India Ltd is a leading textile manufacturer and exporter, particularly known for being Asia’s largest producer of PV dyed yarn at a single location. The company also specializes in ready-to-stitch fabrics.

Sangam India is well-positioned to benefit from the "China Plus One" strategy, where companies are diversifying their supply chains beyond China. 

Sector Outlook:  The textile sector, which has been sluggish for a while, is showing signs of revival. With the recent drop in cotton prices, the industry is expected to see a strong rebound in the second half of 2024.

Key Insights:  The company's increased production capacities are set to be fully operational by 2nd half of FY25. This should help in lowering costs through better optimization.

Future Projections:  Sangam India, a producer of cotton, PV-dyed yarn, and ready-to-stitch fabrics, aims to achieve a revenue of around Rs. 4,000 crore by FY25, following a significant expansion at its seven production units in Bhilwara, Rajasthan.

Moreover, it is aiming to strategically leverage the D2C (director) market and the digitised textile space to further elevate its reach and supply in India and overseas.

Financials: The Net Sales of the company came at Rs.696.68 crore in June 2024 up 2.89% from Rs.677.13 crore in June 2023.

Quarterly Net Profit came at Rs. 12.75 crore in June 2024 down 10.15% from Rs.14.19 crore in June 2023.

The EBITDA stood at Rs.67.85 crore in June 2024 up 22.27% from Rs. 55.49 crore in June 2023.

The EPS of Sangam India Ltd has marginally increased to Rs.2.87 in June 2024 from Rs.2.86 in June 2023. 

About the Company:  Sangam India Ltd is involved in producing and selling synthetic blended, cotton, and texturized yarn, as well as denim fabrics, and ready-made seamless garments. The company operates under various brands like Sangam Yarns, Sangam Suitings (its flagship brand), Sangam Denims, and C9 Airwear.

Its clientele includes notable names such as Banswara Syntex, Siyaram, RSWM Limited, Arvind, Trident, Marks & Spencer, Reliance Trends, Zivame, Myntra, Lifestyle International, Benetton, and Westside, among others.

Capital Punishment: A Barbaric Relic in a Modern Society

"The degree of civilization in a society can be judged by entering its prisons." – Fyodor Dostoevsky.

Introduction to the Landscape of Capital Punishment: Before delving into the discussion on the Trinamool Congress (TMC) of Bengal’s move to enact a law mandating the hanging of rapists, let us first take a sweeping glance at the global landscape of capital punishment—a complex canvas woven with threads of morality, legality, and cultural beliefs.

As of August 2024, the world stands divided on the issue of the death penalty. A significant shift has occurred, with 112 countries having abolished this ultimate form of punishment, renouncing it as a relic of a less enlightened past. Meanwhile, 54 countries still uphold the death penalty in both law and practice, holding firm to the belief that such measures serve as a necessary deterrent to the gravest of crimes. Then there are the 23 countries that, while retaining the death penalty in law, have turned away from its actual practice, having refrained from executions for at least a decade. A few nations, like Malaysia, have taken a middle path, easing their stance by partially abolishing the mandatory death penalty for certain serious crimes, signaling a gradual shift towards a more humane approach. 

This global panorama presents a myriad of perspectives, reflecting the deep and often conflicting values held by different societies on justice, punishment, and the sanctity of life. In such a scenario, enacting a law to HANG Rapists is just another route to take the world to savagery.

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

In the labyrinth of legal and moral debates, the question of capital punishment has always sparked fierce contention. While some argue that it serves as a powerful deterrent, history and human psychology paint a different picture. 

Take, for example, the harsh punishments of 16th century England, where pickpocketing was deemed a capital offense, punishable by hanging. Yet, even with the gallows looming as a constant threat, did pickpocketing cease? Quite the contrary; crowds drawn to public executions often found their pockets picked, illustrating the ineffectiveness of fear as a deterrent. 

Moving to more contemporary settings, let's consider Saudi Arabia, where beheadings are still carried out in public squares, aiming to deter crimes like murder and drug trafficking. Despite these brutal measures, crime persists, suggesting that the spectacle of death does not cleanse the streets but rather, it desensitizes the public to violence. When the state itself employs death as a form of punishment, it sends a grim message: that brutality is acceptable under the guise of justice.

Closer to home, we have the political rhetoric of leaders like Mamata Bandyopadhyay (Banerjee). Despite her legal background, one could question her grasp of criminal psychology. 

Her call for capital punishment in certain henious crimes seem less about understanding crime prevention but more about appeasing a vocal, reactionary populace. 

Her stance, like that of many leaders, overlooks the complex motivations behind serious crimes like Rape - Murder, which are often rooted in social, economic, or psychological factors that a noose or an executioner's blade cannot address.

Capital punishment, therefore, is not just an act of violence; it is an abdication of responsibility, a refusal to engage with the underlying causes of criminal behavior. 

It is a reactive measure, not a proactive one. As mentioned in my recent blog post discussing SEBI's verdict on Debock Industries Ltd., real change comes from thoughtful, strategic actions, not from reactive measures that serve only to placate public outrage or garner votes.

The proponents of capital punishment often fail to recognize this distinction. They shout and play to the gallery, feeding into a cycle of violence rather than fostering a culture of understanding and rehabilitation. 

It’s a form of populism that might win votes but does little to uplift the moral and intellectual fabric of society. True progress, after all, is marked by the ability to empathize, to seek solutions that go beyond the simplistic binary of retribution and forgiveness.

Conclusion: Capital punishment, far from being a solution to grave crime, is a symptom of a society that has yet to evolve beyond its basest instincts. 

It brutalizes, it desensitizes, and most importantly, it fails. If we wish to build a just and humane society, we must look beyond the gallows and the chopping block, and towards a deeper understanding of justice, one that seeks not to destroy but to heal.

The SEBI Shuffle: When the Regulator Plays Catch-Up in Slow Motion

"Why close the barn door after the horse has bolted? Because sometimes, it's the only trick SEBI knows."

Debock Industries Ltd (Rs.6.31), a small-cap company listed on India's NSE, has recently become the center of a regulatory storm, albeit a delayed one. On August 23, 2024, SEBI barred the company’s promoters from accessing the capital markets due to significant financial irregularities. 

The action by SEBI, however, comes two years after the alleged malpractices occurred in FY22 and FY23, a delay that raises eyebrows and questions about the efficacy of India's primary market regulator.

SEBI's Belated Crackdown: A Case of Too Little, Too Late

According to SEBI, Debock Industries’ financials for FY22 and FY23 displayed a suspicious surge in revenue and purchases. This was allegedly a smokescreen, timed to coincide with the company's migration to the NSE main board. 

These financial shenanigans according to the regulator allowed the promoters to portray a healthier financial status, which was, in fact, a mirage designed to deceive investors. The problem, however, lies not just in the alleged financial irregularities but in the timing of SEBI's response. 

Why did it take until FY25 to take action on activities that occurred two years earlier?

SEBI's order: A blank - fire towards investor protection and a Pattern of Reactive Regulation:

The order which includes banning the promoters, may seem like a firm stance against corporate malpractice, but in reality, it’s akin to bolting the stable door long after the horse has fled. 

Investors who were duped by the fabricated financials are left holding the bag, and the regulatory response seems more like an afterthought than a proactive measure to safeguard their interests.

This isn’t the first time SEBI has been accused of moving too slowly. The Debock Industries case is a glaring example of a broader pattern where SEBI appears to act only after the damage has been done. The regulatory body often steps in with bans and penalties years after fraudulent activities have been committed, leaving investors to fend for themselves in the meantime.

I reiterate: one might ask, what’s the point of regulatory action if it doesn’t happen in real time? 

Incidentally, the time SEBI decided to act against Debock Industries, the alleged deceptive gains had already been made, and the alleged fraudulent figures had already served their purpose. It’s a bit like a fire department arriving at a burnt-down house and proudly declaring they’ve stopped the fire from spreading—after everything of value has already been lost.

Erroneous Phone numbers/Addresses: or Listed Companies: Strengthening Regulatory Oversight: Ensuring Accurate Disclosures in Stock Exchanges:

I would like to take the opportunity to mention that even today, as per my knowledge goes, there are n - number of instances where listed companies on the NSE and BSE have failed to provide up-to-date addresses and contact (phone) numbers on their websites and on the BSE/NSE portals. Unfortunately, despite raising this issue multiple times through blog posts and social media platforms such as Facebook and Twitter (X), there has been little action to address this loophole. 

On one occasion, I personally contacted the NSE to report fictitious phone numbers listed in a PDF submitted to the exchange. Disgustingly, instead of taking immediate corrective measures, I was advised to email the company directly, and if there was no response, to follow up with NSE—a rather ineffective and cumbersome approach to addressing corporate misconduct.

Moreover, there are several companies with significant disclosure issues on the stock exchanges. 

Besides, WhatsApp and Telegram groups are created to jack up share prices in broad daylight in full view of the regulator. How much a share can be jacked up can understood from the current share price of Brightcom Group Ltd.

Thus, when a company presents manipulated or synthetic financial statements, it is imperative for regulators to act promptly rather than taking years to uncover the fraud. If this lag in regulatory action continues, we risk encountering more cases like Debock Industries Ltd. 

The responsibility of a regulator, especially when dealing with the financial assets of investors, is to act swiftly and decisively, not to respond only after years have passed with a simple declaration of banning the wrongdoers.

Such delayed actions serve little purpose if they do not ultimately enhance shareholder value. Regulators must be more proactive in ensuring that corporate disclosures are timely, accurate, and transparent to protect investor interests effectively.

The SEBI needs to revamped its Regulatory Vigilance:

SEBI, under the aegis of the Finance Ministry, must adopt a more aggressive stance against potential Frauds. This means not just reacting to violations but also instituting preventive measures. 

Early detection systems could be bolstered by deploying cutting-edge technology, such as AI-driven analytics and blockchain for real-time tracking of financial transactions and disclosures. By minimizing the lag between the identification of red flags and regulatory action, SEBI could act swiftly to prevent damage rather than merely punishing it after the fact.

Steps Towards Better Investor Protection:

To prevent "Debock-style" episodes, in future, the SEBI needs to rethink its approach. Here are a few steps that could make a significant difference:

💢Timely Interventions: SEBI must ensure that its surveillance systems and investigation processes are robust and agile enough to detect and act on fraudulent activities as they happen, not years after the fact.

💢Improved Transparency: Listed companies should be required to maintain accurate and up-to-date information on their websites and with the stock exchanges. The lack of such basic compliance is a glaring loophole that can easily be exploited by fraudulent companies.

💢Utilizing Technology: SEBI should leverage advanced data analytics and AI for real-time monitoring of trading activities and financial disclosures. By identifying anomalies early, the regulator can take swift action, preventing fraud from escalating.

💢Investor Education: While regulatory oversight is crucial, investors also need to be educated about red flags and encouraged to conduct their due diligence before investing in any stock.

Conclusion: From Firefighting to Fire Prevention:

"The best way to catch a fish is to cast your net when the fish are swimming, not after they’ve already left the pond."

The case of Debock Industries Ltd mirrors previous corporate scandals like Brightcom Group Ltd, where warning signs were visible long before the regulatory intervention. 

Despite the clear indicators of fraud, stock price manipulation, and blatant disregard for regulatory norms, action was delayed, allowing the situation to escalate unchecked. This lapse in action is comparable to notorious cases like Dinesh Dalmia’s DSQ Software and Ramalinga Raju’s Satyam Computers, both of which have become infamous examples of corporate misconduct and regulatory failure. Such cases highlight the urgent need for more proactive and timely regulatory measures to prevent similar situations in the future.

For the SEBI and other regulatory bodies to truly serve its purpose of protecting investors, the lesson is clear: it needs to shift from a reactive to a proactive regulatory model -- from being a reactive entity that only steps in after the damage is done to a proactive force that prevents the damage from occurring in the first place.

The case of Debock Industries should serve as a wake-up call, highlighting the need for more immediate and effective oversight. Investors deserve a market that is fair, transparent, and well-regulated, where regulators don’t just show up to close the barn door but ensure the horses are never stolen in the first place. Let’s hope SEBI takes this opportunity to improve, rather than merely repeat the mistakes of the past.

Finally, with more stringent rules, better technology, and a commitment to investor protection, we can avoid future scenarios where the regulator arrives not just late, but far too late. It’s therefore high time for SEBI to act before the barn door even creaks open, ensuring that all investors can feel secure in the marketplace.

Debock Industries Ltd (Rs.6.43): Hold.

Recent reports have surfaced about the Securities and Exchange Board of India (SEBI) taking action against Debock Industries Ltd following allegations of financial misconduct. The NDTV website reported on August 25, 2024:

"Mukhesh Manveer Singh, Chairman and Managing Director of Debock Industries, and Priyanka Sharma, the former Non-Executive Director, have been barred from holding any director or key managerial roles in listed companies or SEBI-registered intermediaries."

"Promoter Sunil Kalot is also prohibited from trading or accessing the capital markets. The involved parties are required to deposit Rs 89.24 crore, identified as illicit gains, into an interest-bearing Escrow Account within 15 days. Furthermore, they must return all funds raised from the rights issue, except the amount already impounded, back to the company."

"Banks and depositories linked to these individuals have been instructed to freeze their accounts and restrict transactions, allowing only those necessary to comply with SEBI’s order. No debits are allowed from these accounts without SEBI’s authorization, except for transferring funds to the Escrow Account."

According to my contacts in Rajasthan, SEBI’s order was issued without a show cause notice, raising concerns about the fairness of the process. A source, who preferred to remain anonymous, expressed surprise at SEBI's decision and mentioned that they plan to challenge this unilateral order in court or before the appropriate authorities shortly.

The source also indicated that the Granite Mining Operations will commence after the monsoon (probably post Deepawali), and everything else remains on track—suggesting there's no immediate cause for concern.

Nonetheless, it's advisable to hold the stock with a strict stop-loss at Rs.6. Avoid taking new positions until the situation becomes clearer and more transparent, as unforeseen developments could impact the stock further.

 NHPC Ltd (Rs.97.05): Buy

Book Value: Rs.37.61

P/E: Rs.26.97

Highlight: 25 power stations across 13 states. It has signed a MoU on 3 Jan 2024 with GPCL for proposed investment of Rs.4000 Cr in Kuppa Pumped Storage Project (750 MW), Chhota Udaipur, Gujarat.

Company Profile: NHPC is the largest hydropower company in India and holds the status of a Mini-Ratna Category-I Public Sector Undertaking (PSU).  Photo: Business Standard.

The company is involved in every phase of hydropower project development, from initial planning to final commissioning. NHPC has a strong track record, in-house engineering expertise, and consistently strong operational performance. 

With the government's goal to reach 500 GW of installed electricity capacity from non-fossil sources by 2030, hydropower is becoming increasingly important to provide grid stability, especially given the intermittent nature of solar and wind power. Hydropower can quickly adjust output, making it valuable for managing peak demand and maintaining grid frequency. 

Currently, only 46 GW of India's estimated 145 GW hydropower potential has been utilized, indicating significant untapped potential.

NHPC stands at a crucial juncture in the power sector, actively developing hydro and renewable energy projects with a total capacity exceeding 10,000 MW, including the ambitious 2,880 MW Dibang Multipurpose Project. Major projects such as the 2,000 MW Subansiri Lower Hydroelectric Project and the 800 MW Parbati-II Hydroelectric Project are nearing completion.

Recently, the company reached a significant milestone in the Subansiri Lower Hydroelectric Project with the successful installation of Spillway Radial Gates Nos. 7, 8, and 9, along with the sealing arrangement on April 25, 2024. Additionally, diverting the Dirki Nalla at the Dibang Multipurpose Project was a key step forward, ensuring all-weather road access to the site.

Furthermore, it is heartening to note that NHPC’s achievements were recognized on the international stage at the 26th World Energy Congress (WEC) in Rotterdam, Netherlands. NHPC signed a Memorandum of Understanding (MoU) with Ocean Sun, a Norwegian company specializing in floating solar technology.

Besides, under the MNRE-REIA Scheme, NHPC has signed Power Purchase Agreements (PPAs) and Power Sale Agreements (PSAs) for 3,000 MW of solar power. As the Renewable Energy Implementing Agency, NHPC will earn trading margins through this initiative.

In the last financial year, the total cumulative generation across all power stations reached 21,779 Million Units (MUs), with an overall annual Plant Availability Factor (PAF) of 77.60% for the financial year 2023-24. Six power stations met their annual design energy targets, while ten power stations achieved their respective Normative PAF. 

NHPC has 6,434 MW of hydropower projects under construction. With the anticipated completion of the 2,000 MW Subansiri Lower and 800 MW Parbati II projects by the end of FY24E, NHPC’s capacity is expected to increase by 40%, with the impact visible in FY25. 

The signing of multiple Power Purchase Agreements (PPAs) and Memoranda of Understanding (MoUs) for both hydro and renewable power projects, along with a regulated business model for hydropower, ensures strong earnings growth potential. Additionally, 1,105 MW of renewable energy projects are under construction, with more projects in the pipeline.

Earlier in March 2021, the company had informed that it has completed the formalities for the takeover of Rangit Stage-IV Hydro Electric Project (120 MW) by remitting Rs.165 crore to the account of JPCL for distribution to the creditors according to the approved resolution plan. JPCL is now a wholly-owned subsidiary of NHPC Ltd.

Shareholding: FII/FPI have increased holdings from 6.80% to 8.96% in Jun 2024 qtr. Number of FII/FPI investors increased from 319 to 569 in June 2024 quarter. Number of MF schemes increased from 27 to 28 in June 2024 quarter. Institutional Investors have increased holdings from 19.39% to 20.51% in June 2024 quarter. Life insurance corporation of India (LIC) has 3.84% stake in NHPC with 385,595,015 shares of the PSU for the June 2024 quarter (LIC stake was 3.24% stake in March 2024 quarter), according to Trendlyne.

​Q. Can the share of NHPC Ltd cross Rs.500 in the next 3 - 4 years ?

Ans. We know that NHPC Ltd (Rs.97.05, P/E: 24.70), serves both the Hydroelectric and Solar Energy Sectors.  But unfortunately the share price has not risen to the levels many renewable energy players from the sector has shown in the last  couple of years, viz. Waaree Renewables Technologies Limited (Rs.1432.45, TTM P/E: 90.26, Book Value: Rs.22.30), a vertically integrated new energy company that generates power from renewable sources, basically from solar space. Or Websol Energy Systems Ltd (Rs.955.45, FV: Rs.10, Book Value: Rs.25.52)

If we go by this logic of P/E or Book Value analysis then, the rough value of NHPC Ltd should be around Rs.275/300, after suitable discounting and post implementation of Capex plan, the share should cross Rs.500.

Conclusion: However, though taking a view on the share price of any company only through P/E analysis is not a correct method, even then I feel the share price of NHPC Ltd is highly undervalued, especially considering the vastness of its present and upcoming projects and its geographical reach.

 Today's Call 

Buy the shares of Indowind Energy Ltd (Rs.26.20) near the CMP for targets of Rs.32/35. SL: Rs.24.

The production suffered a bit in the last quarter due to the wind season starting late by a month (for the current year). This aberration is expected to get optimised in the current quarter. 

Furthermore, the power tariff in Tamil Nadu was increased w.e.f 1st July 2024 by TANGEDCO. The resultant revenue benefit will be available from this (June - September) quarter. Hence, we might get to see a sharp uptick in both top and bottomlines from Q2FY25, onwards.

 Winning Strokes: Think Different 

The key equity indices barely managed to stay in the green on Thursday, with the Nifty just above 24,800, as the market rode a roller coaster thanks to the weekly F&O expiry. The Sensex added a mere 147.89 points (0.18%) to hit 81,053.19, and the Nifty 50 nudged up by 41.30 points (0.17%) to settle at 24,811.50. Broader markets took the lead, with the Mid-Cap and Small-Cap indices gaining 0.67% and 0.47%, respectively.

While European and Asian markets celebrated the possibility of a U.S. rate cut like it was a long-lost friend, a sobering reality check arrived in the form of a massive downward revision in U.S. payrolls data—818,000 fewer jobs than previously thought. 

Cue the nervous laughter about a potential recession in the world’s largest economy. Investors are now anxiously awaiting Federal Reserve Chair Jerome Powell's upcoming remarks at the Jackson Hole Symposium on Friday, hoping for some clarity amidst the uncertainty.

#BLB Ltd (Rs.21.84) hit another Buyer Freeze. However, the stock exchanges have reduced the circuit limit and has put restrictions in day trade. 

Reducing the circuit limit to below 2% from ~5% just after few days of trade shows the bankruptcy of intellectual capital of those at the helm of the stock exchanges. There can be circuits but putting a speed breaker after every 10 metres on slight pretext, goes to show the (rotten) quality of brains working in the surveillance department of the BSE/NSE. Unfortunately, both the stock exchanges have not been performing well after the new SEBI chairperson stepped in. 

Furthermore, the website of NSE does not even show the closing price of the scrip. From the beginning NSE website has been worst in terms of design and content. The Bombay Stock Exchange, standing firm at Dalal Street, still stands tall among all the exchanges in India, however much NSE thinks to ecplise it. 

#The stock of Coffee Day Enterprises Ltd (Rs.41.16) hit the Upper Circuit yesterday. However, it might face headwinds to cross Rs.41/42 ranges. Hold!! 

#The stock of Vodafone Idea Ltd (Rs.16.20) has started to inch towards Rs.22/24/27/34 ranges. 

By the way, the telecom companies are expected to do exceptionally well in future due to fast change of Technology from 3G to 4G to 5G, enhancing the user experience and shifting a large part of the technology savvy audience from Television Segment to Internet based video streaming networks. This Aditya Birla group company, with government of India stake is sure to do well in future. Accumulate in dips. 

#The stock of Sarthak Industries Ltd (Rs.24.80) put up an impressive performance yesterday. The scrip made an intraday high of Rs.25.90 before closing, 4.55% in the BSE. I have recently recommended the shares after its good June, 2024 quarter results. It will invariably cross Rs.50, over a period of time. 

#I have taken some shares of NHPC Ltd (Rs.97.93) for my portfolio clients, considering its future growth trajectory. I have considered the 1st Target of Rs.109, followed by Rs.117. 

Now tell me at the moment, which according to you is a better investment option?

💢Tata Power Ltd (Rs.422.75) with Face Value of Re.1 (one) and P/E 42.57.

💢NHPC Ltd (Rs.97.93) with Face Value of Rs.10 (ten) and P/E of 23.88. Besides, NHPC Ltd is planning to add capacity at a massive 21% CAGR over FY24-27E, though a large part of it is only expected in FY27E. Nevertheless, share price of a company always moves in advance, like we had seen in Zomato Ltd. 

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#The stock of Devyani International Ltd (Rs.181.40) made an intraday high of Rs.182.80, before closing up 3.54%. I have already predicted when it was around Rw.169/Rs.170 that it will make a new 52 - week high in the coming days, due to the scintillating performance of its overseas business and due to the ensuring Festival Season kickstarting with Ganpati Festival in Mumbai and elsewhere. The stock has been on roll since then. Moreover, the company came out with good numbers for the June, 2024 quarter. Hold! 

#My recommended P C Jewelers Ltd (Rs.108.76) made a new 52 - week high Today. I have been recommending the scrip since it was around Rs.27. In this context keep a close eye on Rajesh Exports Ltd (Rs.298.25). 

Meanwhile, according to a report published in Business Standard on 26 July, 2024: Jewellers are now rolling in gold as buyers rush to stock up on bling, thanks to the government's shiny new import tax cuts on gold, silver, and platinum. With prices dropping faster than a bride’s bouquet toss, Mumbai’s Zaveri Bazaar is buzzing like a beehive, boasting a whopping 60-70% surge in customer traffic.

The government earlier slashed Customs duties on gold bars from 15% to 6%, and now gold dore gets away with just a 5.35% duty. Silver isn’t left out of the party either, with bars and dore now taxed at a cool 6% and 5.35%, respectively. This price correction has seen people rushing to jewellers like an alcoholic to a beer bar.

In Delhi, where jewellers previously saw tumbleweeds rolling through their shops, foot traffic has spiked by at least 50% since the Union Budget announcement. As Yogesh Singhal, chairman of the Bullion and Jewellers Association, quipped, “Customers are coming in; even if they aren’t buying, at least they’re browsing, which is more than we could say before the Budget.” And with the wedding season around the corner, it looks like the glitterati are gearing up for a golden October!

 Today's Call 

#Buy the shares of Plaza Wires Ltd (Rs.89.60) near the CMP for targets of Rs.117/ Rs.132.

Looking back, the past year brought a solid 9.5% increase in revenues for Plaza Wires Ltd. Impressively, revenue has grown by 38% over the last three years, helped by the recent 12 months of growth. Consequently, it's fair to conclude that the company's recent revenue growth has been exceptional.

#Buy the shares of MTNL Ltd (Rs.67.70) near the CMP for targets of Rs.100+.

In recent months, the government has shown a preference for transferring control of MTNL's operations to BSNL without officially merging the two companies. Reports suggested that this approach would avoid some of the logistical challenges of a merger, such as de-listing MTNL and buying back a certain number of shares, which in turn would be beneficial for the shareholders.

Recently, the MTNL announced that it has approved this plan, with the new agreement allowing BSNL to manage the operator for the next ten years. The deal has the potential to be renewed by mutual consent and can also be terminated by either party with six months' notice.

However, this solution comes with its own challenges -- the Department of Telecommunications (DoT) is currently investigating the tax implications of such an agreement, stating that they will not approve the deal until they are certain it will not lead to unexpected tax liabilities for the government. Having understood that, I feel there is no other better option at present to revamp the fundamentals of the MTNL.

So, whatever be the way, it is good to see that the NDA Government is taking steps to revive the health of the MTNL. 

When Charts Collide With Common Sense!!

Let’s start with a little wisdom:

"Investing in shares is an art, not a science."

We all know that technical analysis often feels like performing a post-mortem on stocks, while true investing requires foresight and correct analysis of the future variables. Photo: VectorStock.

In the vibrant world of stock market analysis, the debate between fundamentalists and technicians has been ongoing for ages. It’s like an old comedy act— remember Laurel and Hardy — but with a lot more financial jargon firmly planted on the space.

The fundamental analyst is akin to a seasoned sage, armed with balance sheets and income statements, whispering tales of profit margins and debt ratios. These are the experts who can discern whether a company is a goose ready to lay golden eggs or just another lame duck. 

Fundamental analysts are like doctors, constantly monitoring a company's health. They delve into financial reports, gauge earnings, and even probe management’s mindset, all in an effort to foresee whether the company has a prosperous future ahead.

And technical analysts? I feel they are the share market’s version of Sherlock Holmes. These sleuths who examine charts with the intensity of a detective -- analyzing every candlestick pattern. They’ll spot a head and shoulders pattern and proclaim, "The stock is about to soar—or maybe crash—depending on how they look at it!" They proudly flaunt themselves as the master of understanding the rhythm of the market 

In this  context let me share a little story about two stocks: Sakuma Exports Ltd (Rs.8.39) and Sarthak Industries Ltd (Rs.24.63).

When Sakuma was around Rs.10, a technical analyst confidently pointed to the chart, interrupted me in between and  said: "This stock could soar to Rs.12, since I glided through candlestick patterns and moving averages". 

"See that trendline?" 

"It’s pointing to a perfect pirouette to Rs.12!",  he quipped staring at my face.

Meanwhile, I’m standing in the wings, holding the voice of caution, advising against it. 

"Don’t put your money on Sakuma it looks highly overvalued at the CMP," I warned, time and again, "this rally might just be a mirage." 

And then what happened? 

The stock never took the leap to conquer Rs.10 on the upside, leaving our chart-loving friend staring at his screen, possibly questioning his career choices.

On the flip side, while the former looked to be costly, the case of Sarthak Industries Ltd (Rs.24.63), is just its mirror image; after it recently reported strong results for the June 2024 quarter. But did anyone notice? Not really!!

This happened, even though I gave a brief review of the company on this blog -- ironically,  traders and investor, chose to ignore my words. Probably they will buy when stock will hit Rs.40. It’s like the Suzlon Energy saga all over again. I recommended Suzlon at Rs.6.10, but my advice fell on deaf ears of the investors, some even questioning me about the debt of the company. The stock has already soared to Rs.81+. Suddenly, everyone’s on board! The irony is thick enough to slice with a knife.

Conclusion: In the grand arena of stock investing, fundamental analysis is like a skilled trapeze artist, calculating every move with precision and foresight. Technical analysis, on the other hand, often resembles the clown car—entertaining, unpredictable, and sometimes downright perplexing.

Sure, technical analysis might give you a quick thrill (or a moment of despair), but true investing requires you to be both an artist and a visionary, with enough common sense to sidestep the pitfalls on the trading floor. 

So, before you put your trust in the next chart that promises the moon, remember: stocks are more than just lines on a graph—they’re the unfolding stories of businesses. 

Finally, I reiterate when you’re deciding where to invest your hard-earned money, keep in mind: it’s not just about what the charts are saying; it’s about the future narrative a company is crafting, and whether or not you believe in that story.