The volatile streak in the markets extended into a third straight day on Friday as investors continued to be on edge about the ongoing tensions between Russia and Ukraine.
The S&P BSE Sensex ended an extremely choppy day 54 points, or 0.1 per cent, lower at 57,833 levels, while the Nifty50 shut shop at 17,276, down 28 points or 0.16 per cent.
Reliance Industries, Infosys, Ultratech Cement, Bajaj Finance, ICICI Bank, Bharti Airtel, and M&M were the major drags on the Sensex today, accounting for most of the losses. This downside was capped by gains in HDFC twins, L&T, TCS, and Axis Bank.
In the broader markets, the BSE MidCap and SmallCap indices shed 0.8 per cent each with individual stocks, including Gland Pharma, Honeywell Automation, Astral Ltd, Hindustan Media Ventures, Asian Energy Services, and Unichem Labs cracking between 4 per cent and 8 per cent.
On the sectoral front, key indices ended in the negative zone led by the Nifty Realty index (down 1.2 per cent) and the Nifty Pharma index (down 0.8 per cent). On the upside, the Nifty Bank and Financial Services indices managed to close 0.2 per cent higher each.
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Verdict: Go for it!
Rs. 5,000 cr IPO:
- 70% OFS by promoter Nirma Group (95% holding to drop to 71%)
- 30% fresh issue for paring Rs. 7,130 cr debt by Rs. 1,350 cr
IPO Date: Mon 9th Aug to Wed 11th Aug 2021
Price band: Rs. 560-570 per share
Mcap: Rs. 20,350 cr, implying 25% dilution
Listing: 23rd Aug 2021
India’s Fifth Largest Cement Maker
Nirma Group’s Nuvoco Vistas has 22.32 MTPA cement capacity, 78% in fastest growing East market, where it is #1 player, and balance in North India. Company acquired 8.3 MTPA East-focused Emami Cement (Nu Vistas) in June 2020. 50% of its power requirement is met through captive sources. 1.5 MT capacity at Jharkhand is being commissioned next month, while another 1.2 MT is coming up at Bihar, which would hike total capacity to 25 MTPA by FY23.
FY21 Performance to Improve
FY20’s 90% capacity utilization dropped to 78% in FY21, as Q1FY21 volumes plummeted to 1.75 MT on account of lockdown. However, as the entire sector re-bounded, company’s capacity utilization in H2FY21 jumped to 93%, with sales at 10.4 MT in H2 over 17.3 MT in FY21. In FY21, revenue stood at Rs. 7,500 cr, on an average realization of Rs. 221 per bag. While Q1FY22 volumes have dipped marginally QoQ, volume for FY22 may easily rise to 20 MT i.e. 85% utilization, on strong sector-wise demand outlook.
EBITDA and Profitability
FY21 EBITDA stood at Rs. 1,500 cr or Rs. 966/MT, impacted due to lowerQ1FY21 volumes and one-time costs on Emami acquisition, leading to net loss of Rs. 26 cr in FY21. But Q4FY21 net profit came at Rs. 38 cr, with 4th quarter EBITDA strengthening to about Rs.1,045/MT, on operating leverage and industry-wide uptick in realisations from early March.
In FY22, EBITDA may improve by about Rs. 150/MT YoY, driven by (i) power cost saving from 2 upcoming plants (ii) Emami synergy benefits (iii) better product mix – 25% premium products over 20% and 85% trade sales from 73% in FY21.
Undemanding Valuation
With an Enterprise value (EV) of about Rs. 24,900 cr, Nuvoco’s EV of $143/MT, as well as EV/EBITDA of 11x, is the lowest among all the large capacity cement makers – Ultratech ($250, 14x respectively), Shree ($280, 18x), Ambuja ($240, 11x), ACC ($150, 11x), Dalmia Bharat ($150, 12x), Ramco ($195, 15x) and JK Cement ($235, 15x).
Post IPO, company’s debt-equity ratio will halve to 0.5 from 0.9 at present. Net-debt-to-EBITDA of 3x is likely to decline to 1.2x in next 2 years, on expected strong cash generation.
Having established a sizeable capacity, the company looks well placed to improve utilization levels as well as expand margins, all backed by very well-respected promoter.
Conclusion
High Growth Visibility, Strong Sector Outlook and Undemanding Valuation make this IPO an excellent and quality mid-cap pick, both from the short term and portfolio holding point of view. Apply for Nuvoco!
The original review has been penned by Geetanjali Kedia, appears on sptulsian.com and is available here.
- SMEL is one of the leading integrated metal producing and profit-making company.
- It has a well-diversified product portfolio in metal with the captive power plant.
- It suffered a setback for FY20 on account of expansion underway and higher provision.
- The issue is fully priced based on its financial data.
- Investors may consider an investment with a long-term perspective.
ABOUT COMPANY:
Shyam Metalics And Energy Ltd. (SMEL) is a leading integrated metal producing company based in India (Source: CRISIL Report) with a focus on long steel products and ferroalloys. It is amongst the largest producers of ferroalloys in terms of installed capacity in India, as of February 2021 (Source: CRISIL Report). The company has the ability to sell intermediate and final products across the steel value chain. As of March 31, 2020, SMEL was one of the leading players in terms of pellet capacity and the fourth-largest player in the sponge iron industry in terms of sponge iron capacity in India (Source: CRISIL Report).
The company primarily produces intermediate and long steel products, such as iron pellets, sponge iron, steel billets, TMT, structural products, wire rods, and ferroalloys products with a specific focus on high margin products, such as customised billets and specialised ferroalloys for special steel applications. Its TMT and structural products are sold under the brand ‘SEL’ and logo.
It also undertakes conversion of hot rolled coils to pipes, chrome ore to ferrochrome and manganese ore to silico manganese for an Indian steel conglomerate. The company is also currently in the process of further diversifying its product portfolio by entering into the segments, such as pig iron, ductile iron pipes and aluminium foil.
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IPO Snapshot
Indian Railway Finance Corporation (IRFC) is launching a Rs. 4,633 crore IPO, between Mon 18th Jan 2021 to Wed 20th Jan, 67% of which is fresh issue and 33% offer for sale (OFS) by Government of India, in the price band of Rs. 25-26 per share. Surprisingly, there is no retail discount, unlike most PSU IPOs of the past. Issue represents 13.6% of post-issue capital, with listing on 29th Jan.
IPO to raise Capital, and not simply Disinvestment
Unlike most PSU IPOs which are OFS to only meet government’s disinvestment target, majority of this IPO will provide growth capital, as this wholly-owned subsidiary of the government, funds wagon purchase/project assets of Indian Railways. Being an NBFC, company’s need for funds is high, with last fund raise being a Rs. 2,500 crore rights issue at face value of Rs. 10 in March 2020. Sovereign backing helps keep cost of funds low and NPAs nil.
Zero Tax Paying Company
While company is not exempt from income tax, its actual tax liability was nil in FY20 as well as H1FY21 and will continue to be so, as long term financial leasing of wagons and projects yields huge unabsorbed depreciation in the company’s books and MAT is not applicable. Thus company’s earnings, which is spreads on lease rentals over borrowing cost, translates into profitability, as operating expenses are minimal.
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Bar Chart Definition: Day Trading Terminology
A bar chart is a graph characterized by a vertical bar and it’s used by technical analysts to learn more about trends. In trading, a single bar is used to represent a single day of trading. As one of the most popular chart type aside from candlesticks, it represents price activity within a given period of time.
As a result, traders and investors use this chart type to spot trends and patterns. What you need to know is that a bar chart is similar to the candlestick. The only difference is that the body of a bar chart is not filled like that of a candlestick.
As the western version of the Japanese candlestick, they help investors and traders to observe the contraction and expansion of different price ranges.
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NSE has announced the list of trading holidays for the calendar year 2018. We are pleased to share the list of trading holidays for NSE & BSE below.
| Holiday |
Date |
Day |
| Republic Day |
January 26, 2018 |
Friday |
| Mahashivratri |
February 13, 2018 |
Tuesday |
| Holi |
March 02, 2018 |
Friday |
| Mahavir Jayanti |
March 29, 2018 |
Thursday |
| Good Friday |
March 30, 2018 |
Friday |
| Maharashtra Day |
May 01, 2018 |
Tuesday |
| Independence Day |
August 15, 2018 |
Wednesday |
| Bakri ID |
August 22, 2018 |
Wednesday |
| Ganesh Chaturthi |
September 13, 2018 |
Thursday |
| Moharram |
September 20, 2018 |
Thursday |
| Mahatama Gandhi Jayanti |
October 02, 2018 |
Tuesday |
| Dasera |
October 18, 2018 |
Thursday |
| Diwali-Laxmi Pujan* |
November 07, 2018 |
Wednesday |
| Diwali-Balipratipada |
November 08, 2018 |
Thursday |
| Gurunanak Jayanti |
November 23, 2018 |
Friday |
| Christmas |
December 25, 2018 |
Tuesday |
*Muhurat Trading will be conducted on Wednesday, November 07, 2018. Timings of Muhurat Trading shall be notified subsequently.
Holidays On Saturday / Sunday
| Holiday |
Date |
Day |
| Ram Navami |
March 25, 2018 |
Sunday |
| Dr.Baba Saheb Ambedkar Jayanti |
April 14, 2018 |
Saturday |
| Id-Ul-Fitr (Ramzan ID)* |
June 16, 2018 |
Saturday |
Holidays For Clearing & Settlement
| Holiday |
Date |
Day |
| Chhatrapati Shivaji Maharaj Jayanti |
February 19, 2018 |
Monday |
| Gudi Padwa |
March 18, 2018 |
Sunday |
| Annual Bank Closing |
April 01, 2018 |
Sunday |
| Parsi New Year |
August 17, 2018 |
Friday |
| Id-e-Milad |
November 21, 2018 |
Wednesday |
The official list is available here.
Team StockArchitect
