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October 2020

insightMarket OverviewProminent HeadlinesQ&A with CIOStock Picks

Monthly Insight PerformanceSector Outlook Consumer DurableManagement Meet NoteEconomy Review

Startup CornerMulticap Funds ReclassificationMutual Fund OverviewTechnical View

Book ReviewWorld Economic Event Calendar

Ultratech cement ltd. | essel ProPack ltd. | Valiant organics ltd.

Q&A with CIO Mr. Taher Badshah,

Invesco Mutual Fund

PROMINENTHEADLINES

MarketOverview

Q&Awith CIOMr. Taher Badshah, Invesco Mutual Fund

MonthlyInsight Recommendation Performance

ManagementMeet Note• Ratnamani Metals &

Tubes Ltd.

EconomyReview - Agriculture Reforms

SEBIMulticap Funds Reclassification

TechnicalView

WorldEconomic Calendar

ProminentHeadlines September 2020

StockPicks• UltraTech Cement

Ltd.

• Essel Propack Ltd.

• Valiant Organics Ltd.

SectorOutlook - Consumer durable

StartupCorner

MutualFund Overview

BookReview - Mastering the Market Cycle

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MarketOverview

As was widely expected, market momentum has been impaired in the month of September and not just domestic but around the world led by fears of second wave of coronavirus in Europe as well as indecision with regards to second tranche of fiscal stimulus in US as elections draws near.

Amid lack of domestic triggers, domestic markets have been largely aligned with global counterparts and the soft economic progress as

suggested by economic indicators, is a major blockade. For India, while recent batch of weekly economic indicators have suggested some uptick, the fact that majority of the growth is either led by rural or pre-festive,

creates fear of sustenance. There has been uptick in E-way bills and electricity generation as well. For August while economic data set was better than July, nevertheless uptick in two-wheeler sales, tractor sales could be all traced to rural economy. Even for unemployment levels, urban data set represents slower recovery compared to rural and it could be traced to service sector where restrictions are

Paras Bothra

1 October 2020INSIGHT

While BSE Sensex is still down by ~8% YTD, BSE midcap index is just down by ~2% while BSE smallcap index is higher by more than 8% YTD. The optimism is however not justified by the valuations where majority of the constituents of the broader indices are under losses.

ICMR’s sero surveys implies that the worst is hardly over for India. So far, two sero surveys have been conducted and the latest one says India is yet to reach herd immunity while the first one said that 64 lakh Indians had been already infected by COVID-19 by May.

Even for Q1FY21, small firms have been the hardest hit by the pandemic, as shown by an analysis by CARE Ratings. Based on a universe of 1,686 stocks, 747 firms with net sales of below Rs 25 cr was the hardest hit with sales declining by 66.7% yoy during Q1FY21.

eased gradually and so the recovery, while the manufacturing sector is swiftly moving towards pre-covid levels. However, ICMR’s sero surveys implies that the worst is hardly over for India. So far, two sero surveys have been conducted and the latest one says India is yet to reach herd immunity while the first one said that 64 lakh Indians had been already infected by COVID-19 by May. India is one of the most vulnerable nations, when it comes to second wave of coronavirus, since we are yet to peak out from the first phase and hence the optimism with regards to the recovery of the economy will be painstakingly plagued with intermittent jitters. The earnings recovery which is so far expected to recover strongly in FY22, could take a postponement, which would certainly make markets jittery. However, despite the odds, Rating agency Standard and Poor’s (S&P) however reaffirmed India’s sovereign rating at the lowest investment grade (BBB-) with a stable outlook for the second time in four months betting on a strong revival in FY22.The silver lining has been the resurgence in the primary market and the issuances have been coming thick and fast. The bumper participation in some of the recent IPOs could have an inverse relation with the secondary markets, since money would be withdrawn from the markets to invest in IPOs and here again oversubscription of 73x to 151x implies that the upside is capped for the secondary markets or there are not enough opportunities available to

invest. In fact, given the sharp rally since March, some correction was warranted since the valuations have reached above historical average even on a forward basis. In such a scenario, any postponement of the earnings recovery could only bring uncertainty and volatility in the markets going ahead. The SEBI circular on margin requirement didn’t help either as it did some damage to volumes in the market and that’s permanent unless participants come to terms. While the circular on Multicap funds to encourage investments in midcap & small cap names was expected to be at the cost of ~Rs 20,000 cr outflows from largecaps. Probably, the market regulator was trying to address the polarity in the indices or even among the schemes where all three categories of stocks were allowed to invest, only to tilt towards largecaps. Thus, it was not serving the basic purpose of bring a diversified funds of different market capitalization as it was essentially a large cap one. While the rationale and thinking behind the move is just, the valuations are not specially for the smallcap stocks. While BSE Sensex is still down by ~8% YTD, BSE midcap index is just down by ~2% while BSE smallcap index is higher by more than 8% YTD. The optimism is however not justified by the valuations where majority of the constituents of the broader indices are under losses. Thus, naturally the fund managers are aghast at accumulating stocks from broader indices at these valuations.

Besides, the attractive names from these spaces have already had a run, the upside is fretted with obvious risks. Besides, post GST, India is slowly going through formalization of economy and hence consolidation is an enviable outcome at the cost of small players who doesn’t have the cashflow backing to compete with the larger players and hence give in. The strict lending norms and the reluctance of the banks towards these companies have meant scarcity of capital and even if they are available, they are at high costs, thus making the small players uncompetitive compared to the larger players who are cash rich and can access funds cheaply. In fact, a RBI study shows that these smaller firms witnessed decline in their revenue even before pandemic and for the firms generating less than Rs 25 cr annual revenue, they are the worst affected with steady decline since FY16. When it comes to profitability, the picture is gloomier than ever before with firms above Rs 1000 cr revenue to have showed some hopes. Even for Q1FY21, small firms have been the hardest hit by the pandemic, as shown by an analysis by CARE Ratings. Based on a universe of 1,686 stocks, 747 firms with net sales of below Rs 25 cr was the hardest hit with sales declining by 66.7% yoy during Q1FY21. The analysis stated that there is a clear negative relationship between the size of a company, as represented by its net sales and the fall in sales between April and June. In fact, companies with net sales of more than Rs 500 crore saw the least contraction in net sales at 22.4%.

2October 2020 INSIGHT

Sales (% yoy)

Profit (% yoy)

Q1FY21 yoy decline in net sales of firms (%)

<Rs. 25 cr (747 cos.)

-66.7

Rs. 50-100 cr (174 cos.)

-57.8

Rs. 250-500 cr (747 cos.)

-40.2

Rs. 25-50 cr (155 cos.)

-56.3

Rs. 100-250 cr (224 cos.)

-43.3

>Rs. 500 cr (258cos.)

-22.4

Source: RBI, Moneycontrol

Source: RBI, Moneycontrol, NA: value negligible or negative

Source: Mint, CARE Ratings

Annual sales in Rs cr FY16 FY17 FY18 FY19 FY20< 25 -43.2 -44.4 -30 -45.8 -47.825-50 -22 -8.2 -10.5 -4.1 -24.550-100 -8.6 -9.1 -7.7 6.2 -26.1100-150 -3.1 -2.2 0.5 6.3 -11.9500-1000 -0.4 0.5 7.4 10.1 -6.51000 and above -1.2 4 11 15 -3.2All companies -1.6 3.1 9.8 14 -4.2

Annual profit in Rs cr FY16 FY17 FY18 FY19 FY20< 25 NA NA NA NA NA25-50 NA NA NA NA NA50-100 NA NA NA NA NA100-150 NA -10.5 -149.1 NA NA500-1000 NA -120.4 -17.5 -84.6 NA1000 and above 7.8 12.2 2.2 39.9 -41.8All companies 9.3 11.2 -0.3 36.2 -58.7

In other developments, amid heavy criticism & protests from opposition parties, Govt. mustered the requisite strength in the upper house of Parliament to pass the contentious farm bills, which could help in doubling farm income and bring the much-needed investments in agriculture and food processing industry, a win-win for farmers as well corporates, although protests rage. Although, the decision rests with farmers whether to sell to mandi

or outside, there could be fine tuning in contract farming terms. The Govt. has also passed three labour bills and codified 44 labour laws under four heads: i) wages; ii) industrial relations; iii) social security; and iv) occupational safety, health and working conditions. These archaic labour bills lost its prevalence in modern world and it is a step further in providing ease of doing business, although they will also rage debates and protests. The steep drop in

Q1FY21 GDP print together with demand destruction has generated an eagerness for Govt. to spend higher. There are growing expectations of a second tranche of fiscal stimulus in the making, larger than the previous one addressed to creation of urban jobs much like MNREGA, a massive infrastructure push with focus on around 50 projects, and continuing with expanded direct cash transfer and foodgrain schemes. The RBI has so far supported the Govt. with purchase of G-secs in the secondary market through open-market operations and the Govt. has already borrowed around Rs 7.4 lakh cr through issuance of G-secs (out of the expanded borrowing target of Rs 12 lakh cr), and could borrow further Rs 4.5 lakh cr in second half. Besides, Govt. also keeps its divestment targets steady. Thus, markets remain hopeful of another stimulus package and with a blind eye by the rating agencies in pandemic (with regards to fiscal cliff), the timing is all that matters.

Paras BothraPresident - Equity Research (Retail)

Email - [email protected]: +91 22 6611 1700Direct: +91 22 6611 1786Mobile: +91 98203 97061


Prominent headlinesSeptember 2020

As far as the economy is concerned I think

the worst is over from a big shock but for things to normalise and go back to even a 5-6 percent normalised GDP growth rate, I think there are a lot of bumps along the way. I think there is a long and painful road to recovery for the core economy.

Shankar SharmaVice Chairman and Joint MD of First Global

As India aims to become a cloud-first nation and

with the government’s push for cloud adoption by MSMEs, it will be crucial for SMBs in India to think of themselves as Digital Enterprises. SMBs in India can contribute 30 per cent of the cloud market by 2025.

Debjani GhoshNasscom President

The typical conditions for the birth of a

bull market are here: you have a changed country, you have a deep fall in growth and everybody is perplexed by the rise of stocks. The market is looking into the future. The drop in interest rates is also one of the reasons for the bullishness in stocks.

Rakesh JhunjhunwalaPartner, Rare Enterprises

Sebi norms for categorization of mutual fund

schemes have two objectives – that the scheme portfolio should reflect the name of the scheme; and that the scheme performance can then be compared against an appropriate benchmark. The funds need to keep their scheme portfolios true to their label.

Ajay TyagiSebi chief

India needs to be “aggressive with spending” before

it’s too late and called for interest rates to be slashed given the signs of urban distress that have emerged in the wake of the Covid-19 pandemic. When the cost of not doing exceeds the cost of doing, then it would be a very unfortunate situation for the country. We should not let that happen - we should definitely take the risk of being aggressive with spending.

Sanjiv MehtaChairman, Hindustan Unilever

Re-privatization of select PSBs can then be

undertaken as part of a carefully calibrated strategy, bringing in private investors who have both financial expertise as well as technological expertise; corporate houses must be kept from acquiring significant stakes, given their natural conflicts of interest.

Raghuram RajanFormer RBI governor

Indian economy is unlikely to achieve the same level of

output that it had before the pandemic until possibly March April 2022. That’s two year wiped out of any economic growth. Assuming India’s trend growth rate is about 5%, we will be basically 10% below our trend growth rate in the middle of 2022. From that level I do think things are recovering. This may look like a V shaped recovery because the bottom was so depressed.

Ruchir SharmaHead of the Emerging Markets Equity team at Morgan Stanley Investment Management

India’s GDP growth has receded since 2018 because of

high growth in the first four years of the Modi government, and to get back to a 7% plus growth rate, India must open itself to free trade and recapitalize banks urgently.

Arvind PanagariyaFormer Vice Chairman, NITI Aayog

The concept of globalisation is undergoing a

transition in a world facing the challenge of COVID-19 pandemic and self-reliance is gaining momentum. The way India understands self-reliance is certainly being stronger, more confident and at the same time globally engaged.

Uday KotakCII President


Railways, highways and airports are drivers of

growth and this is the right time for these measures to counter the COVID-19 setback. We are not privatising Indian Railways. This is a public-private partnership. Private entities will source and operate trains using the Indian Railways infrastructure. This is a win-win situation for the private sector and Indian Railways. We want railways to be the major driver of India’s growth story.

Amitabh KantNITI Aayog CEO

By the end of September, the growth for

insurers will be better. The industry will be able to wipe out the downturn by the end of FY21. From July onwards, both life and general insurance sector is seeing a revival of premium growth. Segments like term and health insurance are among the most popular among customers.

Subhash C KhuntiaInsurance Regulatory and Development Authority of India (IRDAI) chairman

The country would be back to a high growth

path through reforms announced by the government, after overcoming the COVID-19 pandemic.

Krishnamurthy SubramanianChief Economic Advisor

The idea of one-time loan recast is to help these firms

recover from financial difficulties while helping banking system to control NPAs. There is a careful and balanced decision on the part of the RBI with respect to restructuring. On the one hand, the concern of any bank should be the protection of depositors’ interest, at the same time, banks have to keep the financial stability of banking sector in mind. The central bank is prepared to take further measures to prepare the economy and banking system to fight the Covid-19 pandemic.

Shaktikanta DasGovernor, Reserve Bank of India

The government’s decision to ease FDI norms in the

defence sector will push self-reliance in production and keep national interests and security paramount.

Piyush GoyalCommerce and Industry Minister

We are moving in a very dangerous

direction. Our world cannot afford a future where the two largest economies split the globe in a Great Fracture - each with its own trade and financial rules and internet and artificial intelligence capacities.

Antonio GuterresUN chief

NEP will open up India’s education sector so that foreign universities set up campuses and allow our students to get global exposure. Likewise Indian and global institutions will have research collaboration and student exchange programmes.

Narendra ModiPrime Minister

From a low base of this year, there is bound to be sharp recovery next year. However, that could mechanically arise from the low base. Then there is the issue of reckoning the extra expenditure of the central and state governments. This can be done in part by expenditure reprioritization. The pandemic has exposed the vulnerabilities of the health system and both the Centre and the states have to reprioritize their expenditure.

NK SINGH15th Finance Commission Chairman


Mr. Taher Badshah,Chief Investment Officer - Equities, Invesco Asset Management (India) Private Limited

Q&A with CIO

Outlook on the marketsAt the global level, from the standpoint of market as well as the economy, a liquidity led crisis has been avoided by major economies in the last 6-7 months, thanks to the monetary & fiscal policies adopted by all governments and central banks around the world. From here on we move towards the solvency phase and businesses will be tested in this phase with a good number of unknown outcomes as we go along, unfolding in the next two- or three-years’ time resulting in both positive & negative implications for some businesses. So, there will be businesses which will consolidate and there will be businesses which will gain while few will be weaned out as well. The recovery around the world could be a manufacturing led one where the reallocation of capital & labour is going to be relatively lesser, then those economies would have a faster path to recovery back to pre-covid levels and even exceeding that. Economies which are more driven by

services like India for example where 48-49% of GDP is driven by services, here there will be more relocation of labour and capital and will probably take little longer to recover compared to the rest of the world. Besides, 80% of India’s workforce is in the unorganized sector and that has its own set of challenges thus India might lag the overall recovery in a post-covid world. The twin engines of the world economy- US & China, their probability to come back to normal will be much faster even though they might have issues between them regarding trade related matters. When the crisis hit, US economy was on a firm footing and their banking system and overall economic system was in a better shape than what it was back in 2008-09, post global financial crisis. At that point of time, their banking system was significantly challenged as capital was impaired due to mortgage crisis and even though US Fed provided large scale stimulus (in % terms at least), it took a long time for US

markets to recover because whatever liquidity was provided went into repairing the balance sheets of many of these banks. That process took 2-3 years, after which they were able to claw back and start gradually coming back to that 1.5%-2% GDP growth and since then they did reasonably well with steady expansion of US markets which has happened over the last 7-8 years. In the process, their banking system has significantly deleveraged as well almost to the extent of 65% compared to what it was in the 2008-09 period. So, we believe that their starting point is good even from the point of view of households where savings have gone up and they have also been beneficiary of continuous fall in interest rates and which means that their starting point is much better compared to many other countries. So, we would like to think that as soon as the problem with pandemic subsides in the coming year or so, their economic expansion will be far more vigorous than for other countries in the world. The second engine China has also behaved very well despite the fact that the problem has started from there, they have come around very well. Besides, in the course of last 8-10 years, they have materially shifted their focus on economy from being an investment led economy to a consumption led one. So that also has been quite successfully achieved and now it is a lot more domestic economy driven than what it was.

At the global level, from the standpoint of market as well as the economy, a liquidity led crisis has been avoided by major economies in the last 6-7 months, thanks to the monetary & fiscal policies adopted by all governments and central banks around the world. From here on we move towards the solvency phase...


Thirdly, they have also deleveraged their banking system, their shadow banking problem which started before our NBFC problem started 2-3 years prior to that, has also now come under control. Lastly, if you see this time China has been the one country which has not resorted to any stimulus of any meaningful magnitude. In fact, they are the 1st ones to stimulate the economy post 2008-09 crisis even before the US. If these two engines do well and if the US-China trade relations do not take centerstage particularly post US elections, then they would add to the overall world growth and in the process, it would benefit some of the emerging market economies like India as well.Coming to the domestic economy, since the second half of 2019 we are incrementally running with a positive view on the Indian economy. We believed that India’s economic growth could be modestly better in 2020-21 compared to what it was in 2018-19 and that was predicated on few factors. One was clearly the fact that we were coming out of a banking problem where bulk of the large NPA problems were behind us. Although there had been some stress but nowhere close to the magnitude in 2013-14. We also had a NBFC related crisis starting with IL&FS in Nov’18. Even that had started to subside by the late part of 2019, thanks to RBI’s liquidity drive and the fact that interest rates were falling. Of course, it led to a situation where there was an upheaval in the NBFC space where large became larger and stronger, however the overall availability of capital and most importantly the cost of capital started to moderate and that eventually helped the overall

atmosphere as well. Along with that we were witnessing good signs of recovery in semi-urban/rural markets thanks to last year’s monsoon and we were starting to see inflation in commodity prices improved and food inflation getting better. These all resulted in higher discretionary income compared to past few years for the rural/semi-urban centers. Unfortunately, these developments got affected because of the pandemic in the last six months but some of these strengths are still valid. In fact, this year’s monsoon also has been better and essentially the rural story has got stronger on back to back good monsoons. Besides, rural focused Govt. programs have also helped which have only got bigger as time passed by. From the point of view of interest rates, India is now at a stage when interest rates are the lowest ever in a long period of time and this is the first time India is experiencing negative real interest rates. Inflation has spiked up in the last few months, although we believe that it would settle down and don’t fear the last few months reading as lower interest rates are here to stay. Meanwhile the transmission rate in the system has been much better than pre-covid. Pre-covid, we were witnessed repo rates to come off from 6.5% to 5.15% and post-covid it has come down further to 4%, however transmission has been greater between 5.15% to 4% compared to earlier. So, it is helping the borrowers whether be it mortgage or personal loans or any other form of lending. Lastly with regard to the banking system challenge on the background of the pandemic and the hit on lives and livelihood, job losses, income reduction and cashflow reduction for corporate, some part will definitely impact the banking system and cause temporary setbacks to the recovery process of the banking system. However, compared to what the outlook was in March & April, the situation is relatively better and didn’t turn out to be as ugly as anticipated particularly with respect to the moratoriums which are now out of the way and consumer behavior is relatively better and payment behavior hasn’t been vitiated and people are now going back to work. So, almost all banks & NBFCs have called for reduction in moratoriums with a couple of exceptions, so the liquidity risk which was there in the banking system is not of the same magnitude as what it

is today, it’s much lower. That extent there is a certain amount of relief, so we would believe that the economy still has those strengths and as the pandemic concludes or subsides, we would be able to take advantage of some of the factors. Of course, we will have some challenges along the way whether be it labour, capital or Govt. finances but at the same time there are a few factors which have worked in our favour as well.Meanwhile the markets have made a massive comeback from the close of March and we are almost back to pre-covid levels, but it has been a very structured kind of market movement. If you reflect back in the first instance, the markets preferred business where survivability was guaranteed and investors swiftly moved to companies like Hindustan Unilever, Nestle, Britannia, since everybody was shopping groceries during that period of time. After bit more clarity, in the second phase there were preference for companies where there would be least disruption to the earnings profile and hence there was preference for sectors like technology, IT, pharma etc. In the 3rd phase, there has been preference of companies where there is no growth in earnings now but there could be a recovery in earnings in the next 3-4 quarters and hence markets started to bet on recovery stocks,

From the point of view of interest rates, India is now at a stage when interest rates are the lowest ever in a long period of time and this is the first time India is experiencing negative real interest rates.

Compared to what the outlook was in March & April, the situation is relatively better and didn’t turn out to be as ugly as anticipated particularly with respect to the moratoriums which are now out of the way and consumer behavior is relatively better and payment behavior hasn’t been vitiated and people are now going back to work.


beta, mid-cap, small cap plays as the economy started to come out of the lockdown. So, one way it was a very orderly movement however nowhere we are at a stage, where valuations at least apparent valuations are not very compelling and we don’t have great visibility of earnings at least for the next few quarters and so the markets need to take a bit of a halt or pullback. Especially after a 50% rally, 10-12% or even a 15% correction would be a welcome one and don’t think anybody should grudge that. A deeper correction of 25-30% is not expected. While there is support of global liquidity, the fact that we are also returning back to normalcy, despite the virus spread. Now the attention of the market has moved away from the number of daily cases to fatality rates and recovery rates and so long that the recovery and fatality rates are getting better, the burden of the healthcare system is going to be under control. Apart from these, there will be news of vaccines, possible therapies and treatments which will keep coming. So, the chances of a sharp correction are very less and many things have to go wrong for markets to correct by a deeper magnitude. But markets need to step back a little and reassess earnings profile, take some breather and that will be good from the longer-term perspective. If markets continue to scale higher without visibility of earnings, then the correction at a

later date might be more vicious than what it might be today. At the same time, there are parts of the market which have underperformed, in fact the largest segment in the market which is banking & financial services haven’t played out at all, it is still well below what it was in January-February. Parts of consumer discretionary particularly which are leveraged to the urban centers of demand, those have also not done as well since tension and focus has been on semi-urban, agricultural and rural related businesses and so on. Parts of telecom have not done well either and technology is not very expensive and rather fairly valued considering that earnings visibility for these businesses are much better than others. There are pockets of stretch like parts of consumer discretionary businesses, midcap and small caps, parts of pharma which might be little over extended but the whole of the market is not something which is on the boil and therefore there will always be pockets of opportunities.

Either at the start of the bull market people make easy money or at the end, so what do you think that which stage of the bull market we are in and since many of the theme has played out, in this context what probable themes do you think not been captured by the market yet and you see opportunity and your take on conviction contra bets?There are some sections of the market which has still not done well, they are lagging both in terms of valuation and in terms of fundamental recovery. Clearly in financials we feel that there is room and particularly in many of these banks have got very strongly capitalized in the last few months and when they become the biggest lenders when the credit cycle resumes. So, to that extent therefore we can move our confidence but of course it might require a little longer to pan out. Today everybody is of the view that nobody knows as how life has been after Aug’31 on the moratorium but if let say the trend

works out even better and hopefully it should be the way it has been since March-April, so come 1st of October and if we gain some more confidence around how the asset quality trend has behaved, I won’t be surprised to see a sharp rally in that space because it underperformed in the last couple of months. As also it is not at all extended in terms of valuation. Infact thing out there are relatively cheap and also they are getting stronger in terms of capitalization. There are some which we still want to avoid but there are good set of few companies which are meaningful. There is even pocket of NBFCs particularly which are lending and have underlying collateral i.e, more secured lending, entities like gold financial, auto financing, mortgages are also kind of reasonably play in today’s market scenario..I think parts of consumer discretionary once again particularly the one I mentioned which is geared around the urban centres and urban demand are not doing well, some retailers, high end retailers, some pockets of auto, these have not done good so far, have scope of improvement. Places like Mumbai Delhi, Chennai, Kolkata to some extent or Pune has been in thick of the crisis and also, they being the large centres of demand. So once these places open up that could reap towards a different set of business which could do well. Some parts of telecom also, though there not many players as telecom did very well in the first half has underperformed meaningfully. Moreover, the whole AGR related issue is now behind us though market seems disappointed that the price hike etc. has not come about but I think it’s just a matter of time. The industry has moved well on the consolidation phase and I think that either in terms of the key performance indicator of these telecom companies, things are getting better. Plus, it is a great play on the digitalization, work from home and whole automation opportunity so that is one area which is very promising.There are also some interesting platform business, capital market plays with the resurgence of capital market activities, retail participation, financialization of savings. Theses platform business are well placed from balance sheet perspective, no challenge to balance sheet but they

Especially after a 50% rally, 10-12% or even a 15% correction would be a welcome one and don’t think anybody should grudge that. A deeper correction of 25-30% is not expected. While there is support of global liquidity, the fact that we are also returning back to normalcy, despite the virus spread.


are just providing their software platform and people are coming along with trading on it or B2B platform which are bringing face to face one business to another, those business are looking very promising. Certain Insurance plays are also quite interesting, there are also parts of AMC which can show some decent success. There are also new set of companies which are coming through the IPO route and many of them are very interesting from future perspective. Some parts of Oil & Gas particularly gas utilities have become attractive; they are at least cheaper than they were pre pandemic. Whole Gas from traditional fuels to gas stories is going to be larger and larger hence that is one theme which might play out. Defense is another area where opportunity might come up.There are also whole manufacturing related opportunities, some of them are visible some are not clearly visible at this stage, whether it is in manufacturing of consumer discretionary products or durables. Parts of consumer discretionary particularly to do with home improvement, white goods which may look expensive but some looks quite attractive.So, there are still pockets of markets

which are not fully exotic as far as valuation are concerned and there the opportunity is quite valid from 3-5 years perspective if not more.

Do you think if there is some downtrend in the market in near term?Equity investor at any point of time should always be ready to grasp 10-15% downside especially when market has given a runup of more than 50%. I think a minor correction will be healthy for the market. Again, market must have some reason to go up, either financial result to be good or the valuation is cheap. But if both are not their than there is a problem. I think up untill now what market did is mostly correct, but now if the market goes up another 15-20% without changing anything in the world, after that if there is a correction, that will be more severe. So, I think it will be better if we spend some more time here or go through some correction, so that we can get some earnings visibility from Q2FY21 results. So, I think some correction is due and one should be careful in this market.

Impact of new SEBI rule on multicap fundsLarger AUM in multicap fund can see some pressure due to the new SEBI rule. There is discussion going on with the SEBI (like time extension, introducing of new product), let see what the outcome will be. Moreover, it is still four months away which will be based on data from December 31, 2020. Further, I don’t think that it is healthy for retail investor to pile on to mid and small cap stocks thinking that large funds will reorient their strategy and they will gain from it. I think one can invest in mid and small cap stocks with a 2-3 years’ time horizon. Plus, mid and small cap stocks generally do well when domestic growth cycle is strong. So, when domestic growth cycle improves, mid and small cap stocks will outperform. So, if one invest in mid and small cap stocks with that perspective than that is good but don’t buy on expectation that I am buying today and some large buying will come in next 3-4 months as it can be a very risky investment.

What should be the profit making in equity shares in 5-10 years?In the current scenario, looking at the India’s growth prospects and expected growth rate in long-term, I think 10-15% CAGR profit is a good number especially when other assets are not performing, and interest rates are at lower level.

View on pharma and auto sectorIn pharma, we need to have a bottom up approach as we have to be particular about the company we buy as every company is different now with each one has its own business model. Previously all pharma companies were doing the same thing but now companies are focusing on different model like domestic, API, export, speciality, generic among others. So, business model, product profile and capital requirement are all changing. So, we have to go with the individual stock selection taking into consideration their individual strategies.In auto space, commercial and car manufacturer are looking better. In tractor and two-wheeler, there are some good rural players, but are bit expensive in term of valuation. Whereas companies which are more in cyclical segment of commercial vehicle and even urban centric products like car, can see some opportunity.

View on banking spaceThere can be contra bet on banking sector. But there also we need to be cautious in terms of stock selection as there are larger banks that are still available cheap. So, we don’t need to take risk by buying mid or small size banks as good banks are available at lower valuation. Further we can look into some NBFCs where there is secured lending. Now a days some asset managers also are preferring companies with non-lending business with strong balance sheet like insurance companies, AMCs, platform-based companies, which still looks good for investment.

I don’t think that it is healthy for retail investor to pile on to mid and small cap stocks thinking that large funds will reorient their strategy and they will gain from it. I think one can invest in mid and small cap stocks with a 2-3 years’ time horizon. Plus, mid and small cap stocks generally do well when domestic growth cycle is strong.

Disclaimer: Mutual Fund investments are subject to market risks, read all scheme related documents carefully.


UltraTech Cement ltd.Company InformationBSE Code 532538NSE Code ULTRACEMCOBloomberg Code ULTRACEMCOISIN INE481G01011Market Cap (Rs. Cr) 1,16,520Outstanding shares(Cr) 28.8652-wk Hi/Lo (Rs.) 4,754.1/2,910.0Avg. daily volume (1yr. on NSE) 571,490Face Value(Rs.) 10.0Book Value (Rs) 1,353.5

CMP:: Rs 4,030 • Rating: BUY • Target: Rs 4,543

Shareholding Pattern as on 30th June 2020

Promoters: 60.04%

FII: 16.10%

DII: 14.59%

Others: 9.27%

Investment RationaleMarket leader with wide presenceUltratech cement is the largest cement player in India with pan India market share of 24% and have a total installed capacity of 114.8 MTPA (million tonne per annum).

Over the years, it has expanded its presence through inorganic route and took the benefit of weak economic growth by acquiring the cement assets. Since 2017, it started acquisition by taking the asset of Jaiprakash Associates which provided additional diversification with an


its debt through free cash flow generation and selling of non- core assets and target to reduce the net debt to below 2x of EBITDA.Ultratech has already reduced its consolidated net debt by Rs 5,250 crore and itsreturn on equity has increased by ~300 basis points despite significant capex. The benefits of recentcapex as well as acquisitions are likely to be realized in the next few years. The reduction in debt has been realized due to better operating cash flows and selling off non-core assets. Considering the pandemic, the company has decided to restrict its FY21 capex substantially and the board of directors had approved capex of Rs 940 crore for making premium products. With a view to conserve cash, the company has restricted the overall capex plan to Rs 1,500 crore for FY21. Thus, these strategies will definitely sustain its balance sheet strength and help the company to ride out turbulent times.

Improving efficiency through various cost initiativesUltratech cement reduced variable cost by 4% in FY20 by increasing usage of low-cost additives as blended cement sales increased by 200bps to 68% in FY20. Further, company also reduced logistic cost by 4% due to network optimization. The company is also making investments in increasing the share of green energy in the overall energy mix. Ultratech has a total of 118 MW of WHRS and 99 MW of solar power energy, comprising 10% of overall energy mix. Company has also taken other initiatives such as use of alternative fuel, improving clinker factor and upgrading technology to enhance energy efficiency further. Moreover, the pet coke prices have gone down substantially in the last few months which positively impacted the gross margin of the company. Apart from these factors, the Government’s announcement of increasing the axle load specifications of trucks has also reduced the freight

cost for the company. Improving efficiency and lower costs will result in improvement in margins going ahead. Already it has reflected in Q1FY21 on EBITDA front, where EBITDA/t improved 24.3% QoQ (+2.8% YoY) to Rs 1,416 per tonne and EBTIDA margin improved by 130 bps YoY & 450 bps QoQ at 27.2%, despite of lower volume offtake during the quarter.

Government thrust on infrastructure to benefit the sectorGovernment seriously need effort on infrastructure front to pull up the economy from the recession which India has encountered since past few decades due to the outbreak of COVID-19. Government yet to declare a hefty stimulus package ahead of the festival season and this stimulus package is expected to be more inclined towards infrastructure related in order to reduce escalated unemployment in the country caused by the lockdown in entire country between March to May end. Further, government’s thrust on affordable housing for realizing its vision of “Housing for All” by 2022 and Smart City program should also help in demand growth for cement. Further, well spread

increased presence in central India, coastal Andhra Pradesh, Uttarakhand and Himachal Pradesh, and then the Binani Cement acquisition had given the access to Rajasthan, China and Dubai market. Company has also acquired Century Textiles and Industries cement asset having capacity of 14.6 MTPA, thus enabling Ultratech to cater to key micro markets in northern, western and eastern India. Company operates through 23 integrated plants, 1 clinkerisation plant, 27 grinding units and 7 bulk terminals and also has presence outside India in UAE, Bahrain, Bangladesh and Sri Lanka. Company has demonstrated good track record of ramping up of profitability of acquired assets within two years post consolidation. Further, company has highest retail sales with trade sales of around 78% reported in Q1FY21. Having pan India presence, company has mitigated the geographical concentration risk and is best proxy to play on India’s infrastructure story.

Focusing on deleveraging balance sheet and conserving cashAs the COVID-19 crisis hit the economy hard, so now in order to navigate the turbulent times, Ultratech cement focus is to deleverage its balance sheet and conserve cash and also at the same time strengthening its business relationships. Company has been constantly focusing on reducing

As the COVID-19 crisis hit the economy hard, so now in order to navigate the turbulent times, Ultratech cement focus is to deleverage its balance sheet and conserve cash and also at the same time strengthening its business relationships.

Ultratech cement is the largest cement player in India with pan India market share of 24% and have a total installed capacity of 114.8 MTPA (million tonne per annum).


Source: Bloomberg consensus

Ultratech Cement Ltd. 3 year Price Chart

Particulars (in Rs Cr) FY19 FY20 FY21E FY22E

Revenue 41,475.9 38,210.0 44,868.6 48,203.4

Growth (%) 1.4% -7.9% 17.4% 7.4%

EBITDA 9,283.6 8,572.7 10,247.4 11,758.3

EBITDA Margin (%) 22.4% 22.4% 22.8% 24.4%

Net profit 5,555.3 3,449.3 4,726.6 5,824.8

Net Profit Margin (%) 13.4% 9.0% 10.5% 12.1%

EPS (Rs) 192.6 116.4 160.6 209.0

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monsoon across the country and record khariff output during FY21 along with higher MSP prices and government focus on rural areas will drive the housing demand which in turn boost cement sales in coming quarters. In general October to May period is the construction season and typically the cement demand remains strong during that period. Further, the cement consumption in India is lowest among the developing

countries. The world average is 500-580 kg, while countries such as China have a per capita cement consumption of 1650-1750 kg, followed by Vietnam (800-850 kg) and Turkey (700-750 kg). The factors that are going to trigger cement sales are infrastructuraldemand especially for Government projects, as well as higher housing demand in rural and semi-urban areas.

Key risks � Cement demand is related

to infrastructure creation, thus prolonged economic slowdown could negatively affect the demand for housing as well as cement.

� Any increase in raw material cost like pet coke, diesel and gypsum could have negative bearing on the margins

ValuationUltratech cement is the largest cement player in India having pan India presence thus has mitigated the regional concentration risk. Over the years company has expanded its reach and capacity by acquiring the assets and has demonstrated good track record of ramping up of profitability of acquired assets within two years post consolidation.

Given the uncertainty over economic growth, company has focused on deleveraging its balance sheet and at the same time conserving the cash to deal with any unexpected challenges. Company has highest presence in trade channels with 78% reported in Q1FY21. Further, Ultratech has been putting efforts on improving efficiency and controlling the cost by increasing the share of green energy in the overall energy mix and using of alternate fuel. These all initiatives have resulted in operating margin improvement during Q1FY21 despite of low volume offtake. We believe, Ultratech has lots of competitive edge over its peers because of its scale, operating leverage, integrated operation and pan India presence. We also believe that company will efficiently ride out the turbulent times because of its professional management and healthy balance sheet and will come back strongly once the demand revival starts. Thus, we recommend our investors to BUY the scrip with target of Rs 4,543 from 12 months investment perspective. At CMP, the scrip is valued at EV/EBITDA multiple of 11x on FY22E Bloomberg consensusEBTIDA of Rs 11,758.3 crore.

In general October to May period is the construction season and typically the cement demand remains strong during that period.


essel Propack Ltd.Company InformationBSE Code 500135NSE Code ESSELPACKBloomberg Code ESEL INISIN INE255A01020Market Cap (Rs. Cr) 7625Outstanding shares (Cr) 31.552-wk Hi/Lo (Rs.) 318.6 / 105.2Avg. daily volume (1yr. on NSE) 280,878Face Value (Rs.) 2.0Book Value 50.0

Company OverviewEssel Propack Ltd. (EPL) is the largest global specialty packaging company manufacturing laminated, seamless or extruded plastic tubes catering to the FMCG and pharma space. Essel has 20 state of the art facilities in 11 countries, selling ~8bn tubes annually. It has one unit

each in the US, Mexico, Colombia, Poland, Germany, UK, Egypt, Russia and Philippines in addition to five in China and six in India. These facilities cater to diverse categories that include brands in beauty & cosmetics, pharma & health, food, oral and home. It offers customised solutions through innovations in materials, technology and processes.

CMP:: Rs 243 • Rating: BUY • Target: Rs 290

Share holding pattern as on June 2020 (%)

Promoters: 75.0%

FII: 4.9%

DII: 2.4%

Others: 17.7%


companies like Gerresiemher of Germany). Blackstone has stated mission for Essel - “Capital Efficient, Consistent Earnings growth”. The execution capability of Essel is further strengthened by guidance from ‘fit-for-purpose’ relevant industry veterans from Blackstone on driving the accelerated earnings growth, increasing wallet share from existing oral care customers and improving cost efficiencies. With the entry of Blackstone, the group has made significant changes in the top-level management to improve the corporate governance. The company has been adding marquee independent directors on board, professional management team, winding up related-party transactions and appointment of marquee auditors in order to improve its governance.

Long runway for growth in personal carePersonal care contributed 45% of Essel’s revenues (beauty and cosmetics 32%, and pharmaceuticals 9%) in FY20. Personal care is 3x the market size of oral care. However, the beauty & cosmetics segment continues to use plastic extruder tubes 6-8bn tubes p.a. (total demand: 12bn tubes) while the prescription pharmaceuticals segment is dominated by aluminum tubes. Laminated tubes provide much better aesthetic value (due to flat surface) for beauty & cosmetics and better barrier property for pharmaceuticals (such tubes also entail lowest cost of ownership). Adoption of laminated tubes in these industries would significantly benefit Essel. So, EPL is also well positioned to benefit from the increasing use of laminated tubes over aluminum. Better aesthetics, lower cost, higher plastic-barrier properties, product and design flexibility and higher sustainability, are some of the drivers believed to lead the shift from plastic/rigid tubes to laminated tubes. This segment is expected to show strong growth momentum coupled with superior

margins on the back of robust business pipeline, new launches and new customer wins. Also, new product launches such as Platina and Green Maple Leaf are expected to contribute to its growth.

Launch of Phoenix project to cut costs and boost marginsUnder Phase-I of project Phoenix, Essel managed to increase EBITDA margin by 180bp YoY to 20.2% in FY20. The company has already launched Phase-II of project Phoenix in Q1FY21 with aims to expand margins further by virtue of cost management and rationalization. Phase-II is focused on every cost item, making processes easier and making people more efficient and agile. Essel’s margins that are already the best in class are expected to improve further. The management has guided that while EPL’s focus to drive revenue growth by focusing on personal care category (beauty & cosmetics and pharma laminated tubes command higher margin than oral care products), the cost rationalisation steps by the company would continue to drive EBITDA margin, going forward. So, it is expected that margin improvement to sustain as EPL will also be benefited by low raw material cost.

The company dominates the oral care market with global market share of 37% and 65% market share in India.

Investment RationaleLeader in niche businessEPL is the leader in manufacture of laminated plastic tubes with market leader in oral care segment with global share of ~37% and caters to companies like Unilever, Colgate, P&G etc. In the Personal care market, its share stands at ~8% showing a vast scope of growth for EPL. The tubes industry is predominantly concentrated between few global players like ALBEA S.A., CCL Industries and Essel. The company is engaged in a very niche business considering its products are an integral part of the FMCG and Pharma space with packaging being one of the four key P’s of marketing mix that underpin the success of any brand. The opportunity in the business is quite evident by the fact that opportunity for oral care tubes is 14bn pa while for beauty & cosmetics is 12bn pa and pharmaceuticals is 10bn pa. EPL sells ~8bn tubes annually. EPL’s integrated and vast operations make it a preferred one stop solution for its big clients who form long term partnership with EPL. Its existing capacity can meet 2x the current demand and hence need for large capex is ruled out for the near term. Replacement of aluminium/plastic tubes by laminated tubes continues at a good pace across the globe due to better aesthetics, lower cost, higher plastic-barrier properties, product and design flexibility and higher sustainability. The unique business model, extensive reach, excess capacity and management focus will help the company to gain market share.

Improving governanceIn FY20, Blackstone acquired ~75% stake in Essel from earlier promoters and public. Blackstone has its proven legacy of value creation amongst its investments (Indian companies like S.H. Kelkar, Mphasis and packaging

The company has been adding marquee independent directors on board, professional management team, winding up related-party transactions and appointment of marquee auditors in order to improve its governance.


Consensus Estimate: Bloomberg

EPL 3Yr. Price Chart


Net Sales 2706.9 2760.1 3110.6 3431.0

Growth (%) 11.7 2.0 12.7 10.3

EBITDA 499.1 557.4 653.4 742.9

EBITDA Margin (%) 18.4 20.2 21.0 21.7

Net profit 190.1 212.2 267.3 336.8

Net Profit Margin (%) 7.0 7.7 8.6 9.8

EPS (Rs) 6.1 6.6 8.5 10.7

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Healthy financials set to improve furtherEssel has envisaged the strategy of mission 20:20:20 (20% each EBITDA margin, RoE, ROCE) with non oral share of 50% by FY22. Further, as part of its prudent capital allocation policy and in order to maintain sufficient liquidity, ESEL has reduced capex for FY20 to Rs. 130 cr (v/s average capex spend of Rs. 200 cr over the last five years), which proved beneficial for the company during the pandemic, as cash balance for FY20 increased by 1.8x YoY to Rs. 370 cr. Interestingly, cash flow generation has also seen a healthy improvement as the company was able to reduce

its net debt by Rs. 220 cr in FY20 vs a mere Rs. 130 cr reduction over FY16-19. In Q1FY21, company’s net debt is Rs. 248 cr. According to the management, the growth momentum is likely to continue in the overseas business (~70% of topline) supported by addition of new clients, market share gains and launch of new product categories. It is expected that financial performance of the company will improve going forward led by improved utilization, cost management, market share gain in Europe and rising share of non oral segment which will lead to sharp surge in return ratios. Huge cash reserves and steady cash inflow allows EPL to carry out its investment plans. With major capex behind, it is expected that EPL will be net debt free by FY22 and will return excess cash to shareholders or pursue inorganic growth opportunities.

Key Risks � Volatility in raw material prices

as they are highly correlated to the movement in crude prices.

� Operations in multiple countries heighten risk of currency fluctuations.

� Inability in gaining market share in non-oral care segment.

ValuationEPL’s continued focus in improvement in operating performance across the region

has helped the company to report the expansion in EBITDA margin. Given the traction in business and increase in wallet share in Europe in existing customer and maintaining the same in other regions will help the company to report EBITDA margin improvement going forward. Management indicated that the business development efforts are yielding results in Europe with strong business pipeline and expects the traction to continue going forward as well. In addition, change in product mix (focus on accelerated personal care segment) shall also support the earnings. Amidst the COVID-19 crisis, company has identified an extra source of revenue through introduction of hand sanitizer tube and in a very short span of time the company has become a leading supplier of hand sanitizer tubes. Based on prudent capex policy and improvement in operating efficiency, it is expected that net debt to decline further. EPL’s resilient oral care business along with new product offerings and accelerated personal care growth, coupled with innovation and prudent cost management, strong balance sheet and improving governance, are now working quite well and should help improve growth trajectory in future. Hence, we recommend our investors to BUY the scrip for a target of Rs. 290 from 12 months investment perspective. Currently, the scrip is valued at P/E multiple of 23.4x on FY22E EPS.

EPL’s resilient oral care business along with new product offerings and accelerated personal care growth, coupled with innovation and prudent cost management, strong balance sheet and improving governance, are now working quite well and should help improve growth trajectory in future.


valiant Organics Ltd.Company InformationBSE Code 540145NSE Code NABloomberg Code VORG INISIN INE565V01010Market Cap (Rs. Cr) 3530Outstanding shares (Cr) 1.252-wk Hi/Lo (Rs.) 3142.7 / 884.1Avg. daily volume (1yr. on NSE) 8,090Face Value (Rs.) 10.0Book Value 304.0

CMP:: Rs 2,906 • Rating: BUY • Target: Rs 3,350

Share holding pattern as on June 2020 (%)

Promoters: 47.8%

FII: 0.0%

DII: 0.3%

Others: 51.9%

Company OverviewValiant Organics Ltd. (VOL) is engaged in the business of Manufacturing of chemicals for Agro Intermediate and Pharma. Company is the market leader for Chloro Phenols in India & amongst the Leading manufacturer of Para

Nitro Aniline (PNA). Over the years, company has developed an extensive domain expertise in multiple process chemistries including Chlorination, Ammonolysis, Acetylation, Hydrogenation, Sulphonation and Methoxylation. Its products have been used in various industries such


as Agrochemicals account 40% of its topline followed by dyes & pigments 20%, Specialty chemicals 30% and Pharmaceuticals 10%. Chloro phenols account 62% of revenue while PNA contributes rest 38%. Company derives 85% revenue from domestic market and 15% from export market.

Investment RationaleBenefiting from industry dynamicsChina’s competitive position in the global markets has been diminishing in the past few years on account of stringent environmental and safety norms imposed and led to the shutdown of several chemical plants. With a significant increase in compliance costs, many chemical plant operations have become unviable. India, with its low-cost advantage, is emerging as an alternative manufacturing and supply chain hub for major global economies. Being among India’s leading specialty chemical manufacturers, Valiant Organics is well positioned to capitalise on these emerging business opportunities by significantly leveraging the operations, expanding capacities and extensive domain knowledge. The management remain confident of growing the market share in the domestic and international markets

by virtue of strong and niche product portfolio, enhanced capacities and R&D capabilities. The company is well positioned to take advantage of the growing opportunities in specialty chemicals, as India’s specialty chemicals market sets itself on the growth path for the coming years, and with a rising need for specialty chemicals in the end-use domestic markets.

Capacity expansion to aid growthVOL started expansion of its manufacturing capacities at Sarigam and Jhagadia in FY 2018-19. Despite all the macro challenges, it continued expanding and augmenting its manufacturing capabilities and completed the expansion of Chloro Phenols capacity at the Sarigam plant. It achieved a capacity expansion of 18,000 MT per annum during the year. The expansion has enhanced the Company’s capability of adding high margin downstream products by using new raw materials. The company is also working on new projects at Jhagadia. The Company has a landbank in Sayakha (68,000 sq.m.) and Dahej (12,000 sq.m.) for further expansion. A capex of Rs 100 crore has been allocated for the expansion projects at Jhagadia in FY21 and it is expected to commence other capacity expansion projects in FY 2021-22. Further, in order to benefit from surging and high growth API segment, company is expanding its API business which will increase the pharma revenue share in coming years.

Integrated operations are margin accretiveCompany has taken both backward and forward integration projects through strategic expansions. The backward integration at the Jhagadia plant helped the Company manufacture its raw materials in-house leading to significant cost savings and superior profit margins. This will also assist in maintaining product quality and better delivery timelines and optimize profits

margins in future. As per the government policy for Make in India, the Company is planning to apply for environmental clearance for drug Intermediates / API as import substitutes. It is also aiming to go for both organic and inorganic growth. As part of forward integration, VOL is leveraging its extensive domain experience and integrated manufacturing operations. It has increased the production capacity at Tarapur and Vapi plants in order to increase the share of value-added intermediates and import substitutes, which will enlarge the product value chain and will have significant cost benefit on end products. Company has also completed debottlenecking in Tarapur and Vapi plants in order to improve its operational efficiency and productivity. In order to bring more automation and better safety systems, company has implemented Distribution Control System (DCS) at Tarapur and Vapi plants. VOL is also working towards reducing plants’ energy requirement per unit of output and achieved moderate cost savings by converting high-pressure steam from manufacturing processes to power the plants. All these strategies are helping the company in maintaining consistency in product quality and optimizing the resources while lowering the production costs and maintaining healthy margins.

Strong financial performanceThe financial performance of the company appears to be quite

Valiant Organics Ltd. (VOL) is engaged in the business of manufacturing of chemicals for Agro Intermediate and Pharma. Company is the market leader for Chloro Phenols in India & amongst the leading manufacturer of Para Nitro Aniline (PNA).

The backward integration at the Jhagadia plant helped the Company manufacture its raw materials inhouse leading to significant cost savings and superior profit margins.


attractive. In last 5 years company has maintain RoCE of more than 40% with last year RoCE of 43.5% while RoE of the company is also strong at 45.3% in FY20. Chlorophenol business remains a high ROCE business for VOL. Post the acquisition of Abhilasha and Amariyot along with the new capex lined up it is expected that the company is capable to generate more that 30% ROCE in the business. VOL is successfully generating more than Rs. 100 cr cash from operation for last 2 years and capable enough to fund its inorganic growth & organic capital expansion without much increase in Debt. Net Debt/ Equity remains comfortable at 0.3x in FY20 and expected to remain at comfortable level going forward. The capacity expansion will enhance

the company’s capability of adding high margin downstream products by using new raw materials which is expected to improve the company’s financial performance along with the return ratios.

Key Risks � Any disruption in supply chain in

raw material pricing and sourcing.

� Delay in capex implementation or plant synchronization.

� Exposed to the constant risk of currency and commodity cycles.

ValuationVOL is part of the Aarti group of companies and is a market leader for Chloro Phenols in India & amongst the Leading manufacturer of Para Nitro Aniline (PNA). Acquisition of Abhilasha Tex-Chem and Amarjyot Chemical has provided VOL with a wide range of product basket and diverse chemistries thus catering to industries like agro, pharma, dye intermediates, pigments. The acquisitions led to 5x & 7.6x jump in revenues & profitability respectively between FY18 & FY19. VOL has strong list of clients in the likes of BASF, Lanxess, Bayer Crop Science, Coromandel, Gujarat Insecticides Ltd etc. The company is fully integrated and has an import substitution led story embedded for products like Para Anisidine (PA) and Ortho Amino Phenol (OAP) while for another

product, Para Amino Phenol (PAP), MoCF/DoP has been identified as one of the key sourcing materials and covered under production linked incentive scheme (PLI). Led by higher demand, the company is expanding in key high margin products which would augment its revenue & profitability ahead. The company has strong set of financials with high margin profile and high return ratios. Despite, such superior growth backed by capex and acquisitions, VOL’s debt-equity ratio is comfortable at 0.31x for FY20. Hence, we recommend our investors to BUY the scrip for a target of Rs. 3350 from 12 months investment perspective. Currently, the scrip is valued at P/E multiple of 18.8x on FY22E EPS.

Consensus Estimate: Ashika Research

Valiant Organics 3Yr. Price Chart


Net Sales 692.3 674.9 762.7 877.1

Growth (%) 473.8 -2.5 13.0 15.0

EBITDA 180.2 179.3 205.9 241.2

EBITDA Margin (%) 26.0 26.6 27.0 27.5

Net profit 133.2 140.5 160.2 188.6

Net Profit Margin (%) 19.2 20.8 21.0 21.5

EPS (Rs) 227.2 114.0 131.8 155.2

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The company has strong set of financials with high margin profile and high return ratios. Despite, such superior growth backed by capex and acquisitions, VOL’s debt-equity ratio is comfortable at 0.31x for FY20.

Hence, we recommend our investors to BUY the scrip for a target of Rs. 3350 from 12 months investment perspective. Currently, the scrip is valued at P/E multiple of 18.8x on FY22E EPS.


Monthly Insight recommendation Sheet

Script Buying Date QTY Bought

Rate Value Target Price

Target Return

Booked Date

Booked Price Value Profit Return Holding

Days

Annu-alised

ReturnUltratech Cement 01-Oct-20 124 4030 499720 4543 12.7%

Essel Propack 01-Oct-20 2058 243 500000 290 19.3%

Valiant Organics 01-Oct-20 172 2906 499832 3350 15.3%

Mishra Dhatu Nigam 01-Sep-20 2400 209 502246 260 24.2%

Hawkins Cooker 01-Sep-20 103 4852 499740 5890 21.4%

Phillips Carbon Black 01-Sep-20 4275 117 501035 151 28.8%

Wipro 03-Aug-20 1770 282 499999 325 15.1%

Divis Lab 03-Aug-20 190 2644 502371 3050 15.4% 10-Aug-20 3058.0 581026 78654 15.7% 7 816%

Fine Organics 03-Aug-20 230 2177 500822 2470 13.4% 24-Aug-20 2465.8 567123 66300 13.2% 21 230%

ICICI Securities 01-Jul-20 1050 476 499818 620 30.2%

Apollo Tyres 01-Jul-20 4600 109 501341 130 19.3% 10-Aug-20 126.6 582498 81157 16.2% 40 148%

Galaxy Surfactants 01-Jul-20 335 1490 499300 1680 12.7% 04-Aug-20 1684.0 564130 64829 13.0% 34 139%

Nestle India 01-Jun-20 28 17571 491987 19500 11.0%

Tech Mahindra 01-Jun-20 925 541 500453 ADD 29-Sep-20 773.7 715691 215238 43.0% 120 131%

Abbott India 01-Jun-20 30 16979 509375 19464 14.6%

Bharti Airtel 04-May-20 985 508 500232 610 20.1% 20-May-20 606 597058 96826 19.4% 16 442%

Pfizer 04-May-20 102 4934 503304 5800 17.5%

Bayer Cropscience 04-May-20 116 4287 497334 5425 26.5% 27-May-20 5281 612584 115251 23.2% 23 368%

ITC 01-Apr-20 2950 170.29 502363 ADD

Britannia Industries 01-Apr-20 184 2719 500320 ADD 29-May-20 3384 622704 122384 24.5% 58 154%

TCS 01-Apr-20 274 1827 500508 ADD 14-Sep-20 2480 679520 179012 35.8% 166 79%

HDFC Bank 01-Apr-20 586 852 499290 ADD

Britannia Industries 02-Mar-20 164 3048 499888 3400 11.5% 29-May-20 3384 555019 55130 11.0% 88 46%

Aarti Industries 02-Mar-20 505 990 499799 1177 18.9% 05-May-20 1139 575018 75220 15.1% 64 86%

Metropolis Healthcare 02-Mar-20 263 1885.73 495946 2200 16.7%

Bajaj Finance 03-Feb-20 115 4305.89 495178 5000 16.1%

Gujarat State Petronet 03-Feb-20 2040 246 501493 300 22.0% 01-Apr-20 169 344168 -157325 -31.4% 58 -197%

Granules India 03-Feb-20 3600 140 502632 170 21.8% 07-Feb-20 164 591156 88524 17.6% 4 1607%

Concor 01-Jan-20 870 574.99 500239 665 15.7%

Mahanagar Gas 01-Jan-20 470 1066 501095 1164 9.2% 23-Jan-20 1162 546140 45045 9.0% 22 149%

SIS 01-Jan-20 1020 490 500147 568 15.8% 07-Feb-20 559 570119 69972 14.0% 37 138%

HDFC Life 02-Dec-19 875 571 499608 680 19.1%

Dr. Reddy’s Lab 02-Dec-19 171 2923 499818 3503 19.8% 07-Apr-20 3554 607713 107896 21.6% 127 62%

Just Dial 02-Dec-19 875 570 499170 750 31.5% 01-Apr-20 288 251615 -247555 -49.6% 121 -150%

IRCTC 01-Nov-19 561 893 500709 1170 31.1% 30-Jan-20 1158 649638 148929 29.7% 90 121%

PI Industries 01-Nov-19 350 1432 501323 1613 12.6% 07-Feb-20 1612 564109 62787 12.5% 98 47%




Target Return

Booked Date


Days

Annu-alised

ReturnProcter & Gamble Hygiene 01-Nov-19 40 12325 492982 14078 14.2%

HDFC Bank 01-Oct-19 405 1235 500212 1395 12.9%

Indian Hotels 01-Oct-19 3130 160 500595 179 11.9% 01-Apr-20 74 230525 -270071 -53.9% 183 -108%

Siemens 01-Oct-19 330 1549 511213 1680 8.4% 23-Oct-19 1689 557420 46207 9.0% 22 150%

Gujarat Gas 01-Sep-19 2800 179 501501 200 11.7% 30-Oct-19 200 559048 57547 11.5% 59 71%

Hindustan Unilever 01-Sep-19 265 1888 500371 1975 4.6% 20-Sep-19 1957 518507 18136 3.6% 19 70%

Divi’s Lab 01-Aug-19 305 1636 498882 1750 7.0% 22-Oct-19 1757 535885 37003 7.4% 82 33%

ICICI Bank 01-Aug-19 1175 426 500234 473 11.1% 25-Oct-19 468 550206 49972 10.0% 85 43%

City Union Bank 01-Jul-19 2410 208 500935 254 22.2% 16-Jan-20 248 597005 96070 19.2% 199 35%

Reliance Nippon Life 01-Jul-19 2250 222 499773 265 19.3% 27-Aug-19 258 579510 79737 16.0% 57 102%

Sanofi India 01-Jul-19 87 5740 499387 6775 18.0% 29-Oct-19 6678 581029 81641 16.3% 120 50%

Asian Paints 01-Jun-19 346 1445 499797 1560 8.0% 02-Aug-19 1549 535985 36188 7.2% 62 43%

Axis Bank 01-Jun-19 614 812 498614 905 11.4%

Honeywell Automation 01-Jun-19 19 26087 495655 30195 15.7% 25-Oct-19 29105 552999 57344 11.6% 146 29%

MCX 01-May-19 575 868 499354 1005 15.7% 30-Aug-19 971 558147 58793 11.8% 121 36%

TCS 01-May-19 220 2259 496953 2490 10.2% 14-Sep-20 2480 545600 48647 9.8% 502 7%

Crompton Greaves Cons. 01-Apr-19 2138 234 501153 256 9.2% 20-Sep-19 251 536681 35528 7.1% 172 15%

Equitas Holdings 01-Apr-19 3637 138 500875 191 38.7% 01-Apr-20 42 152499 -348375 -69.6% 366 -69%

Page Industries 01-Apr-19 20 25219 504373 29080 15.3% 14-Aug-19 17525 350506 -153867 -30.5% 135 -82%

ITC 01-Mar-19 1800 278 500089 319 14.8%

Tech Mahindra 01-Mar-19 605 824 498456 960 16.5% 29-Sep-20 773.7 468101 -30356 -6.1% 578 -4%

HDFC Bank 01-Feb-19 240 2101 504338 1204 -42.7% 20-May-19 2403 576686 72348 14.3% 108 48%

Pfizer 01-Feb-19 163 3066 499703 3490 13.8% 20-Sep-19 3389 552433 52730 10.6% 231 17%

Abbott India 01-Jan-19 65 7593 493527 8580 13.0% 11-Jun-19 8566 556790 63263 12.8% 161 29%

Indraprastha Gas 01-Jan-19 1850 273 504362 315 15.5% 08-Apr-19 314 581748 77386 15.3% 97 58%

United Spirits 01-Jan-19 800 623 498624 735 17.9% 14-Feb-20 711 568576 69952 14.0% 409 13%

Berger Paints 01-Dec-18 1567 319 499873 369 15.7% 29-Aug-19 369 578223 78350 15.7% 271 21%

Cummins India 01-Dec-18 644 776 499744 889 14.6% 16-Jan-19 889 572516 72772 14.6% 46 116%

Dabur India 01-Nov-18 1299 385 500115 470 22.1% 20-Sep-19 470 610530 110415 22.1% 323 25%

Nestlé India 01-Nov-18 52 9680 503360 11370 17.5% 10-Jan-19 11370 591240 87880 17.5% 70 91%

Dr. Lal PathLabs 01-Oct-18 524 954 499896 1125 17.9% 06-Feb-19 1125 589500 89604 17.9% 128 51%

Godrej Consumer 01-Oct-18 651 768 499968 910 18.5% 01-Feb-20 688 447888 -52080 -10.4% 488 -8%

ABB India 01-Sep-18 378 1322 499716 1510 14.2% 14-Sep-18 1510 570780 71064 14.2% 13 399%

Bharat Forge 01-Sep-18 752 665 500080 752 13.1% 15-Mar-19 548 412284 -87796 -17.6% 195 -33%

Whirlpool of India 01-Sep-18 279 1795 500805 2033 13.3% 09-Oct-19 2033 567207 66402 13.3% 403 12%

Cipla 01-Aug-18 800 625 500000 715 14.4% 01-Feb-20 452 361600 -138400 -27.7% 549 -18%

Marico 01-Aug-18 1425 351 500175 408 16.2% 25-Sep-19 404 575700 75525 15.1% 420 13%

Dishman Carbogen 01-Jul-18 1916 261 500076 307 17.6% 03-Sep-18 307 588212 88136 17.6% 64 101%

Procter & Gamble Hygiene 01-Jul-18 51 9900 504900 11100 12.1% 17-Jul-18 11100 566100 61200 12.1% 16 277%

Bata India 01-Jun-18 654 764 499656 890 16.5% 23-Jul-18 890 582060 82404 16.5% 52 116%

CESC 01-Jun-18 624 802 500348 1020 27.2% 01-Feb-20 722 450528 -49820 -10.0% 610 -6%

Nestle India 01-Jun-18 53 9519 504507 10900 14.5% 01-Aug-18 10900 577700 73193 14.5% 61 87%

ITC 01-May-18 1786 280 500080 324 15.7% 03-Sep-19 323 576789 76709 15.3% 490 11%

Tata Chemical 01-May-18 656 762 499872 890 16.8% 01-Feb-20 758 497248 -2624 -0.5% 641 0%

Voltas 01-Apr-18 806 620 499720 720 16.1% 24-Oct-19 720 580320 80600 16.1% 571 10%

Britannia Industries 01-Mar-18 202 2480 500960 2845 14.7% 23-May-18 2845 574690 73730 14.7% 83 65%

Infosys 01-Mar-18 876 571 500196 667 16.8% 03-Jul-18 667 584292 84096 16.8% 124 49%

Godrej Consumer 01-Feb-18 714 701 500276 804 14.7% 27-Jun-18 804 574056 73780 14.7% 146 37%

Power Grid 01-Feb-18 2604 192 499968 223 16.1% 01-Aug-19 216 563115 63147 12.6% 546 8%




Target Return

Booked Date


Days

Annu-alised

ReturnMaharshtra Seamless 01-Jan-18 990 505 499950 585 15.8% 09-Jan-19 483 478170 -21780 -4.4% 373 -4%

Solar Industries 01-Jan-18 423 1182 499986 1480 25.2% 01-Feb-20 1340 566820 66834 13.4% 761 6%

Hindustan Copper 01-Dec-17 5263 95 499985 116 22.1% 30-May-18 76 399988 -99997 -20.0% 180 -41%

Petronet LNG 01-Dec-17 1992 251 499992 297 18.3% 23-Sep-19 297 591624 91632 18.3% 661 10%

Indian Hotels Co. 01-Nov-17 4673 107 500011 127 18.7% 04-Jan-18 127 593471 93460 18.7% 64 107%

KNR Constructions 01-Nov-17 2008 249 499992 297 19.3% 21-Dec-17 297 596376 96384 19.3% 50 141%

CDSL 01-Oct-17 1471 340 500140 424 24.7% 16-Mar-18 302 444242 -55898 -11.2% 166 -25%

Karur Vysya 01-Oct-17 4005 125 500053 145 15.8% 17-Aug-18 100 400500 -99553 -19.9% 320 -23%

Hindustan Unilever 01-Sep-17 411 1217 500187 1379 13.3% 18-Jan-18 1379 566769 66582 13.3% 139 35%

NMDC 01-Sep-17 3968 126 499968 142 12.7% 01-Jan-18 142 563456 63488 12.7% 122 38%

Indraprastha Gas 01-Aug-17 2137 234 500058 280 19.7% 11-Sep-17 280 598360 98302 19.7% 41 175%

Kaveri Seed 01-Aug-17 732 683 499956 790 15.7% 24-Dec-18 580 424560 -75396 -15.1% 510 -11%

Apollo Tyres 01-Jul-17 2083 240 499920 278 15.8% 07-Aug-17 278 579074 79154 15.8% 37 156%

Greaves Cotton 01-Jul-17 3145 159 500055 193 21.4% 26-Jun-18 140 440300 -59755 -11.9% 360 -12%

Bosch 01-Jun-17 21 23325 489825 27442 17.7% 18-Sep-18 21000 441000 -48825 -10.0% 474 -8%

Relaxo Footwears 01-Jun-17 2183 229 499907 286 24.7% 01-Nov-17 286 623247 123340 24.7% 153 59%

PI Industries 01-May-17 577 866 499682 1028 18.7% 09-Jan-18 1028 593156 93474 18.7% 253 27%

PNC Infratech 01-May-17 3226 155 500030 200 29.0% 26-Oct-17 200 645200 145170 29.0% 178 60%

Akzo Nobel 01-Apr-17 269 1862 500878 2135 14.7% 28-Dec-18 1680 451920 -48958 -9.8% 636 -6%

Crompton Greaves 01-Apr-17 2370 211 500070 244 15.6% 16-May-17 244 578280 78210 15.6% 45 127%

Deepak Nitrite 01-Mar-17 4673 107 500011 124 15.9% 02-Mar-17 124 579452 79441 15.9% 1 5799%

Manappuram Finance 01-Mar-17 5263 95 499985 120 26.3% 22-Dec-17 120 631560 131575 26.3% 296 32%

CESC 01-Feb-17 855 585 500175 671 14.7% 13-Feb-17 671 573534 73359 14.7% 12 446%

Dewan Housing 01-Feb-17 1724 290 499960 341 17.6% 14-Mar-17 341 587884 87924 17.6% 41 157%

Persistent Systems 01-Jan-17 812 616 500192 741 20.3% 09-Jan-18 741 601692 101500 20.3% 373 20%

Berger Paints 01-Dec-16 2083 240 499920 280 16.7% 25-Oct-17 280 583240 83320 16.7% 328 19%

Britannia Industries 01-Dec-16 332 1505 499660 1761 17.0% 26-Apr-17 1761 584652 84992 17.0% 146 43%

Dishman Pharma 01-Dec-16 2058 243 500094 300 23.5% 29-Mar-17 300 617400 117306 23.5% 118 73%

Max Financial Services 01-Nov-16 909 550 499950 650 18.2% 07-Apr-17 650 590850 90900 18.2% 157 42%

Minda Industries 01-Nov-16 4274 117 500058 151 29.1% 21-Apr-17 151 645374 145316 29.1% 171 62%

Natco Pharma 01-Nov-16 870 575 500250 737 28.2% 06-Feb-17 737 641190 140940 28.2% 97 106%

Vindhya Telelinks 01-Nov-16 693 722 500346 900 24.7% 05-Jul-17 900 623700 123354 24.7% 246 37%

Credit Analysis 01-Oct-16 381 1314 500634 1543 17.4% 10-Oct-16 1543 587883 87249 17.4% 9 707%

Nilkamal 01-Oct-16 374 1336 499664 1700 27.2% 17-Oct-16 1700 635800 136136 27.2% 16 622%

IDFC Bank 01-Sep-16 9025 55 499985 70 26.4% 22-Sep-16 70 631750 131765 26.4% 21 458%

Kirloskar Ferrous 01-Sep-16 5814 86 500004 113 31.4% 10-Apr-17 113 656982 156978 31.4% 221 52%

Mahanagar Gas 01-Sep-16 780 641 499980 748 16.7% 17-Oct-16 748 583440 83460 16.7% 46 132%

Mercator 01-Sep-16 9615 52 499980 71 36.5% 05-Jan-18 44 418253 -81728 -16.3% 491 -12%

Federal Bank 01-Aug-16 7692 65 499980 78 20.0% 25-Oct-16 78 599976 99996 20.0% 85 86%

Indian Oil Corp. 01-Aug-16 3683 136 499967 155 14.2% 05-Oct-16 155 570865 70898 14.2% 65 80%

LIC Housing Finance 01-Aug-16 963 519 499797 608 17.1% 19-Oct-16 608 585504 85707 17.1% 79 79%

Unichem Lab 01-Aug-16 1754 285 499890 360 26.3% 09-Jan-18 360 631440 131550 26.3% 526 18%

Aarti Industries 01-Jul-16 962 520 500240 620 19.2% 30-Aug-16 620 596440 96200 19.2% 60 117%

Capital First 01-Jul-16 12478 40 500018 47 16.7% 20-Jul-16 47 583504 83486 16.7% 19 321%

Godrej Properties 01-Jul-16 1370 365 500050 415 13.7% 05-Apr-17 415 568550 68500 13.7% 278 18%

Steel Strips Wheels 01-Jul-16 1096 456 499776 578 26.8% 25-Aug-16 578 633488 133712 26.8% 55 178%

Dabur India 01-Jun-16 1724 290 499960 335 15.5% 01-Nov-17 335 577540 77580 15.5% 518 11%

Glenmark Pharma 01-Jun-16 588 851 500388 985 15.7% 01-Nov-16 985 579180 78792 15.7% 153 38%

Godrej Consumer 01-Jun-16 1013 494 500084 583 18.2% 22-Feb-17 583 590917 90832 18.2% 266 25%

Tata Power Co 01-Jun-16 6849 73 499977 85 16.4% 17-Feb-17 85 582165 82188 16.4% 261 23%




Target Return

Booked Date


Days

Annu-alised

ReturnDCM Shriram 01-May-16 3185 157 500045 195 24.2% 27-May-16 195 621075 121030 24.2% 26 340%

Mahindra & Mahindra 01-May-16 752 665 500080 775 16.5% 20-Dec-17 775 582800 82720 16.5% 598 10%

PI Industries 01-May-16 787 635 499745 760 19.7% 27-Jul-16 760 598120 98375 19.7% 87 83%

ACC 01-Apr-16 365 1370 500050 1580 15.3% 27-Jun-16 1580 576700 76650 15.3% 87 64%

VA Tech Wabag 01-Apr-16 1931 259 500129 345 33.2% 24-Mar-17 345 666195 166066 33.2% 357 34%

Whirlpool India 01-Apr-16 735 680 499800 810 19.1% 07-Jun-16 810 595350 95550 19.1% 67 104%

Marico 01-Mar-16 2119 236 500084 280 18.6% 15-Jul-16 280 593320 93236 18.6% 136 50%

NTPC 01-Mar-16 4762 105 500010 123 17.5% 03-Jun-16 123 587313 87303 17.5% 94 68%

HCL Tech 01-Feb-16 577 866 499682 1020 17.8% 25-Jan-18 1020 588540 88858 17.8% 724 9%

HDFC 01-Feb-16 424 1180 500320 1400 18.6% 29-Jul-16 1400 593600 93280 18.6% 179 38%

Hero MotoCorp 01-Feb-16 195 2562 499590 2820 10.1% 02-Mar-16 2820 549900 50310 10.1% 30 123%

Indraprastha Gas 01-Jan-16 4762 105 500010 125 18.9% 29-Jun-16 125 594298 94288 18.9% 180 38%

Pidilite Ind. 01-Jan-16 907 551 499757 656 19.1% 20-May-16 656 594992 95235 19.1% 140 50%

SH Kelkar 01-Jan-16 2000 250 500000 310 24.0% 22-Aug-16 310 620000 120000 24.0% 234 37%

Texmaco Rail 01-Jan-16 3311 151 499961 183 21.2% 23-Nov-17 110 364210 -135751 -27.2% 692 -14%

Garware Wall Ropes 01-Dec-15 1289 388 500132 488 25.8% 09-Aug-16 488 629032 128900 25.8% 252 37%

Sanofi India 01-Dec-15 116 4300 498800 5060 17.7% 01-Mar-18 5060 586960 88160 17.7% 821 8%

Wabco India 01-Dec-15 80 6280 502400 7200 14.6% 28-Nov-17 7200 576000 73600 14.6% 728 7%

GP Petroleums 01-Nov-15 7463 67 500021 156 132.8% 07-Feb-17 95 708985 208964 41.8% 464 33%

HCC 01-Nov-15 28652 17 500007 29 65.4% 03-Jan-17 29 826909 326902 65.4% 429 56%

Inox Wind 01-Nov-15 1259 397 499823 500 25.9% 19-Oct-16 225 283275 -216548 -43.3% 353 -45%

Sterlite Tech 01-Nov-15 6993 72 500000 107 50.1% 20-Oct-16 107 750349 250349 50.1% 354 52%

Castrol India 01-Oct-15 2309 217 499899 255 17.8% 10-Jul-17 195 450255 -49644 -9.9% 648 -6%

Syngene Int 01-Oct-15 3115 161 499958 193 19.9% 21-Oct-15 193 599638 99680 19.9% 20 364%

Zee Ent. 01-Oct-15 1282 390 499980 464 19.0% 07-Jun-16 464 594848 94868 19.0% 250 28%

Berger Paints 01-Sep-15 3365 149 499943 176 18.8% 22-Dec-15 176 593682 93739 18.8% 112 61%

Ceat 01-Sep-15 463 1080 500040 1245 15.3% 10-Sep-15 1245 576435 76395 15.3% 9 620%

Cummins India 01-Aug-15 520 962 500240 1130 17.5% 06-Aug-15 1130 587600 87360 17.5% 5 1275%

Greenply Ind. 01-Aug-15 3281 152 500041 183 20.1% 12-May-16 183 600584 100543 20.1% 285 26%

SQS India BFSI 01-Aug-15 735 680 499800 863 26.9% 23-Nov-15 863 634305 134505 26.9% 114 86%

TIME Technoplast 01-Aug-15 7576 66 500016 81 22.7% 22-Aug-16 81 613656 113640 22.7% 387 21%

Asian Paints 01-Jul-15 658 760 500080 883 16.2% 31-Jul-15 883 581014 80934 16.2% 30 197%

Idea Cellular 01-Jul-15 4762 105 500010 122 16.2% 20-Dec-17 60 285720 -214290 -42.9% 903 -17%

Maruti Suzuki 01-Jun-15 132 3774 498168 4367 15.7% 04-Aug-15 4367 576444 78276 15.7% 64 90%

Whirlpool India 01-Jun-15 658 760 500080 879 15.7% 13-Jul-16 879 578382 78302 15.7% 408 14%

Sun pharma 01-May-15 541 925 500425 1220 31.9% 19-Aug-16 790 427390 -73035 -14.6% 476 -11%

Tata Global 01-May-15 3546 141 499986 174 23.4% 12-Jul-17 174 617004 117018 23.4% 803 11%

Tata Motors 01-May-15 971 515 500065 615 19.4% 20-Jul-16 490 475790 -24275 -4.9% 446 -4%

Ultratech 01-May-15 187 2680 501160 3300 23.1% 13-Apr-16 3300 617100 115940 23.1% 348 24%

Abbott India 01-Apr-15 124 4020 498480 4680 16.4% 04-Aug-15 4680 580320 81840 16.4% 125 48%

Elantas Beck India 01-Apr-15 442 1130 499460 1320 16.8% 29-Jul-15 1320 583440 83980 16.8% 119 52%

Strides Arcolab 01-Apr-15 434 1153 500402 1340 16.2% 10-Aug-15 1340 581560 81158 16.2% 131 45%

BEML 01-Mar-15 511 978 499758 1200 22.7% 09-Apr-15 1200 613200 113442 22.7% 39 212%

MCX 01-Mar-15 425 1177 500225 1552 31.9% 22-May-17 970 412250 -87975 -17.6% 813 -8%

Rolta 01-Mar-15 2618 191 500038 250 30.9% 26-Dec-16 61 159698 -340340 -68.1% 666 -37%

Amrutanjan Health 01-Feb-15 2227 225 499962 325 44.8% 17-Apr-17 325 723775 223814 44.8% 806 20%

HBL Power 01-Feb-15 14327 35 500012 55 57.6% 20-Feb-15 55 787985 287973 57.6% 19 1106%

Mangalam Cement 01-Feb-15 1558 321 500118 432 34.6% 16-Jan-18 432 673056 172938 34.6% 1080 12%

SML Isuzu 01-Feb-15 511 979 500269 1222 24.8% 10-Mar-15 1222 624442 124173 24.8% 37 245%

Dewan Housing 01-Jan-15 2519 199 500022 240 20.9% 15-Jan-15 240 604560 104539 20.9% 14 545%

Emami 01-Jan-15 1277 392 499946 462 18.0% 28-Jan-15 462 589974 90029 18.0% 27 243%

Torrent Pharm 01-Jan-15 456 1096 499776 1338 22.1% 18-Jun-15 1338 610128 110352 22.1% 168 48%


Consumer durable: Structural demand still intact

India’s consumer durable sector is still far behind other countries like China, Japan, US, Europe, etc. Despite of India’s large

economy size and huge population, the combined industry size of three essential consumer durables (Refrigerator, Washing Machine & AC) is only Rs 500 billion, much smaller than cars & two-wheelers. Rapid urbanization and increasing nuclear families are the main growth drivers for India’s consumer durable industry which witnessed muted growth in past couple of years amid weak economic sentiment. Penetration levels of various white goods appliances in India are still much below global peers. The penetration gap is the highest in air conditioners followed by washing machine and refrigerators. In terms of demographics, India’s current GDP per capita income levels and urbanization rates are what China had in 1998-2000. Thus, penetration levels across various white goods categories like AC and refrigerators also mirror the levels seen in China in 1998-2000. Hence, there is lot of

scope for Indian consumer durable sector to scale up its business in coming years in order to reach near to Chinese level. Further, the affordability of home appliance in past decade improved significantly where India’s GDP grew at a CAGR of 11% over FY10-FY19, while the average selling price of Washing Machine, AC and Refrigerator rose in only 5%-6% range. The recent outbreak of COVID-19 hasserious negative implications on India’s overall economic growth. All the global rating agencies slashed the Indian FY21 GDP growth forecast after it registered 23% steep fall in Q1FY21 number. On March 24, government announced countrywide stringent lockdown in order to curb the spread of COVID-19 and that has dismantled all the economic activities. This lockdown has put brakes on Indian manufacturing sector, adversely impacting the domestic supply chain. Moreover, social distancing, shutdown of shops and slump in discretionary spending by consumers further hit the economic activity in Q1FY21.

However, May onwards, government started to withdraw the lockdown on phase wise manner and economy again started to function normally. Indian consumer durable sector was hit hard due to the lockdown both on production and supply level. However, things are likely to improve in coming quarters on the back of normalizing of the economy post lockdown and increase in demand in upcoming festive season. Covid-19 has positively impacted some of the home appliances products (refrigerators, washing machines, dish washers, etc) as these products had witnessed demand during the lockdown. In order to maintain social distancing and to stay at home people are becoming self reliant and thus there have been demand for washing machines, dish washers, refrigerators, etc. Anyway, the long term structural demand drivers for consumer durable sector in India is still intact as this is very underpenetrated compared to other emerging countries and thus has huge opportunity for growth.


Low penetration provides huge scope of growthPenetration levels of various white goods appliances in India are still much below global peers. The penetration is lowest in air conditioners where India’s penetration at around 13 per 100 Households is much below its peer group at 72 per 100 House hold. This is followed by washing machine, refrigerators while the penetration in fans is similar to peers. The penetration trends for various categories across countries indicate that rising income levels and higher urbanization are the key demand

drivers for consumer durable industry in the long run. In terms of demographics, India’s current GDP per capita income levels and urbanization rates are what China had in 1998-2000. Thus, penetration levels across various white goods categories like AC and refrigerators also mirror the levels seen in China in 1998-2000. Hence, there is lot of scope for improvement in income levels and higher urbanization, which should sustain healthy growth momentum. In terms of income levels, India’s middle class is likely to expand by around 140 million households while high income

will add 21 million households by 2030. Further, India’s median age of population is around 31 years which is much lower compared to 40/42 years in US & China. Even, urbanization levels are still only at 34% in India which is steadily growing and is likely to jump sharply after reaching a certain threshold as seen in Thailand, Indonesia, etc. On per capita income front also, India also lagged its emerging peers China and India. So, overall there are enormous opportunities for growth for Indian consumer durable sector going forward.

Penetration across categores between India vs Global average (Units per 100 House Holds)

House Hold income profile in India

Source: Industry report Source: Industry report

India Global average

Television Refrigerator Washingmachine

Airconditioner

Microwave

100908070605040302010

0

2005

219mnMn Households

293mn 386mn

2018 2030F

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

HighUpper MidLower MidLow

1 8 2916

6151

97

127

168

132

57

151

Age wise population Unorganised (%) share in various consumer durable segments

Source: Industry report Source: Industry report

<15 Year 15-24 25-49 50-59 60-64 >=65

100

MedianAge

90

28

India 2018 India 2030F US China

31 40 42

8070605040302010

0

80%70%60%50%40%30%20%10%0%

Air

cool

er

Wat

er h

eate

r

Ligh

ting

Cabl

e &

Wire

Switc

h

Fan

Switc

hgea

r


GST implementation increasing the organized market shareVarious electrical and white good segments have a reasonably high share of the unorganized segment ranging from ~10% to 70% of the industry. Unorganized players mainly increase where the technology involvement is low, not critical component and lower price due to no taxes and use of below-standard components. While the implementation of GST has led to some shift to the organized segment,

and the share is likely to increase over the years. The growth of organized market share will be led by premiumization among customers, increase in technology and product complexity, higher marketing/branding activity and cost efficiencies due to the pan-India network of organized players. The roll out of GST has increased the compliance, accelerates the formalization and increased the market share of

organized players. Consumer durable sector is highly unorganized in various segments. Air cooler segment is most highly unorganized segment followed by water heater, Lighting, cable & wire. So, there are scope of organized players gaining more market share in cost of unorganized players on the back of branding, premiumization and better quality & services.

Availability of easy financing driving demandThe availability of easy finance is one of the main reason for improving affordability of the people to purchase consumer durable goods and thus supported the demand. The availability of finance to purchase consumer durables has increased significantly over the past few years on the back of rising penetration of financiers in urban and rural areas, easy availability of finance through

credit cards, lowering of replacement cycle of consumer products from 9-10 years to 4-5 years, increasing portfolio of products of financiers and availability of 0% interest and flexible duration schemes. The financing market recorded ~21% CAGR over FY15 to FY19 to touch Rs 726 billion. NBFCs dominate this segment and have seen consumer durables disbursements recording ~30% CAGR over FY15-FY19. Bajaj Finance’s, the largest Consumer finance & NBFC company in India

distribution network has nearly trebled in the urban segment and rose ~11x in rural areas. The emergence of organized retail, which recorded ~16% CAGR over FY13-17 also benefitted demand. Despite of such growth, the organized retail penetration still remained at around 10.6% in FY19. However, as per CRISIL the organized retail share is expected to touch 15% by FY24 and that will be going to benefit the organized consumer durable players.

Consumer Durables segment wise data

Volume CAGR Value CAGR

Segment Industry Size (Rs bn FY20)

Units (in millions) 5 Yr 10 Yr 5 Yr 10 Yr Organized

(%)Penetration

(per 100 HHs) Key players

Air conditioner 173 6 10.3% 8.7% 12.6% 13.4% 100% 13 Voltas, LG, Daikin, Lloyd, Hitachi, Bluestar

Refrigerator 295 12 11.7% 10.9% 18.7% 18.0% 100% 24 LG, Samsung, Whirlpool, Godrej

Washing Machine 115 7 7.5% 8.6% 10.1% 10.4% 100% 15 LG, Samsung, Whirlpool, Godrej, IFB

TV 503 19.9 9.8% 8.0% 15.2% 13.2% 100% 43 LG, Samsung, Whirlpool, Godrej

Microwave 20 1.5 1.4% 5.2% 6.3% 11.4% NA 4 LG, Samsung, IFB

Fan 93 65 5.9% 8.2% 8.1% 11.2% 75% 193 Crompton, Usha, Orient, Havells

Source: Industry report

Consumer Financing has increased significantly in past 5 years

NBFC leading the market share (%)

Source: Industry report Source: Bajaj Finance report

CD Finance market Finance Penetration (RHS)

1000900800700600500400300200100

0FY16 FY17 FY18 FY19 FY20E

32%

INR bn

23%24%

26%

28%

31%

30%

28%

26%

24%

22%

20%

NBFC BanksCredit Cards

FY15 FY16 FY17 FY18 FY19 FY20

32%

25%

43%

29%

28%

43% 47%

27%

26% 18%

25%

57% 58%

29%

13% 12%

30%

58%


Improving electrification levels also a demand catalystOver the past few years, the availability of electricity has improved significantly through various central/state government-sponsored schemes like DeenDayal Upadhyaya Gram Jyoti Yojana (DDUGJY) (rural electrification), Integrated Power

Development Scheme (IPDS) (power distribution), Pradhan Mantri Sahaj Bijli Har Ghar Yojana- Saubhagya (for urban regions, especially in Uttar Pradesh/Bihar) and Ujjwal Discom Assurance Yojana (UDAY) (support state discoms and drive electrification) with an aim to provide 24x 7 power to all citizen. Till 2019, it has been noticed that all inhabited villages stand electrified and states

have reported around 69% of the overall progress. Going ahead, the focus would be more on 24x7 power availability, electrification of all households, improving distribution and lower power outages especially in rural areas. Improving electrification is one of the main demand drivers for consumer durable goods and that will witness a healthy growth in coming years.

E-commerce a new platform for consumer durable companiesThe emergence of E-Commerce and disruption of online sales has opened another window of opportunity for Indian consumer durable manufacturers. Further, the online sales have got additional preference in this pandemic situation as the customers are reluctant to go to store physically to buy the products and feel more comfortable and safe by shopping through online. Sales through e-commerce platforms like Flipkart and Amazon have seen a sharp rise in preference in the past few years. These benefited from the sharp discounts in products compared to retail stores, the ability of new brands to avoid the investment in distribution network and scale up faster and attractive offers by these platforms during festive periods. Currently now, for established consumer durable players the e-commerce sales account around 10-12% of revenue compared to 2-3% few years back. The success was significant in the case of mobile phones where ~50-60% of festive sales were processed through this platform, followed by televisions. Hence, the adoption was faster in the case of products where portability is easier and after-sales service requirement is low. However, for larger appliances like refrigerator, ACs and washing machines the online share of sales is still low in between 5-10% as compared to China where it has already touched to around 50% for ACs. Thus, to gain and sustain market share the established consumer durable players are following OMNI channel of distribution (both offline and online presence). Further, the wide and extensive

distribution network covering the huge landscape in India is an important moat for any company, thus helping in pushing newer products and gaining share rapidly. Those companies which are entering into newer segments and reaching out to consumers’ across the country witnessing strong growth momentum. Better convenience for consumers along with availability of financing schemes lead to better penetration across both urban and rural areas.

Per capita consumption across state (kwh) Few states are getting less than 20 hrs power in a day

E-commerce sales steadily rising across categories (% of overall revenue)

Source: Ministry of Power Source: Ministry of Power


1200

Bihar Assam KeralaUP MPWestBengal

1000

800

600

400

200

0

Average hours of power supply in a day

12

10

8

6

4

2

024

8

109

1

20-24 15-20 <15

RefrigeratorTV AC WashingMachine

30%

25%

20%

15%

10%

5%

0%

2017 2018 2019


Segment Replacement (Years) Replacement demand (% of total sales)Air conditioner 8-10 40-45%Refrigerator 7-8 40-45%Washing Machine 7-8 45-50%TV 7-8 50-55%Microwave 7-8 60-65%Fan 12-15 55-60%

Categories Critical imported components Other imported componentsAir Conditioner Compressors IDU plastics, electronic chipsets and motorsRefrigerator Compressors Motors (for Frost Free variant)Washing Machine Motors Electronic Controller


Source: news article

Segment wise import content from China

Government’s Make in India program to boost domestic durable manufacturersThe recent standoff on the border with China has strengthened the government’s Make in India mission and to make India self reliant by reducing import dependency. India’s consumer durable industry is heavily dependent on import especially for critical components. AC, Refrigerator and Washing Machine are not imported from China on CBU (completely built units) basis by the major brands operating in India as they have local manufacturing / assembly units. However, India is

heavily reliant on China in terms of imports of critical components such as compressors and motors. Besides, electronic chipsets are also largely imported from China.Components such as compressors for ACs and Refrigerators have manufacturing hub in China’s Guangdong province, which is the second worst hit by COVID-19 after Wuhan. AC manufacturing in India is predominantly an assembly work as majority of the components are imported from China. For AC manufacturing, compressors form the most critical component of import from China, accounting for approximately 30% to 35% of the product cost. For refrigerators also,

the only critical component India import is compressors and here also China remains the key market for import of refrigeration compressors. For Indian washing machine industry, motors are the critical component of import from China. Other key import materials for washing machines are electronic controllers and gears. Hence, government’s mission of localizing the critical components of consumer durable products will savesubstantial cost for OEMs, generate high domestic demand, provide large export opportunities and will generate huge employment. If India become self reliant it will benefit both the OEMs and contract manufacturers going forward.

Banking on Festive demandAmid dismal macroeconomic prospects unleashed by the Covid-19 pandemic, consumer durable companies are now banking on the crucial festive season to recoup losses. Brands have been advancing production plans, expanding rural outreach and even planning attractive offers, hoping to achieve a 10-15% sales growth during this period after a lackluster May and a near wipeout in April. Currently, the growing work from home culture and the reluctance in hiring domestic help due to pandemic fear is leading to a spike in demand for home appliances like AC, refrigerators, washing machines and microwave ovens. With the onsets of the festive season and reopening of markets will drive the demand

going ahead. There will be some pent-up demand, with rural markets performing better after a normal monsoon and several firms reversing pay cuts in the urban. Industry believes that this festive year is very different and they are predicting that priorities will be different with consumers looking for products that enhance health & hygiene.Generally, the festive sales contribute 35-40% of the annual sales for the industry. Owing to the loss in sales during the lockdown months, the industry is projected to see de-growth of 10-12% in the current financial year (FY21). The economic uncertainty caused by COVID-19 outbreak hampered the demand and hurt consumer sentiments causing a loss of 30-40% in March. The loss in April was 100%

due to the nationwide lockdown, while there have been 60-70% decline in sales in the month of May.However, from June July onwards there has been an upswing in sales with the drop tapering to about 10% compared to last year. Thus, consumer durable companies are banking on the festive demand and increasing their existing capacity and production lines in order to meet the incremental demand.The year 2020 started in a negative note as COVID-19 started to spread across the world and brought the entire world in grinding halt. To curb the spread of the virus the government of respective countries announced the entire lockdown which severely affected the economic activities of entire world. India has


undertaken the longest lockdown started from 24th March which have a severe impact on domestic economy as reflected in GDP growth which plunged by 23% in Q1FY21. Manufacturing, tourism & travels, hospitality, etc are the sectors which hit hard due to the lockdown in the wake of COVID-19 outbreak.The consumer durable industry witnessed a loss of around 20% during the past few months due to lockdown

and tepid demand. However, in this festival season, industry is hopeful of recovering some of these losses. The onset of the festive season is expected to provide an impetus for a sustained demand across smaller markets. Besides, the demand is likely to sustain as the market penetration of appliances continues to remain low.For instance, refrigerators penetration stands at 34.1%, washing machines at 14.3% and air

conditioners the lowest with 4.8%, thus provide huge scope for Indian consumer durable players to scale up their business in coming years. Besides, other structural drivers like availability of finance to purchase products, increasing electrification, rising urbanization and growing preference for e-commerce are still intact will drive the long term demand for consumer durable products.

Consumer Durable Peer Set

Source: ACE Equity & Bloomberg

Company Name Mcap (Rs crs)

Revenue (Rs crs)

EBITDA (Rs crs)

PAT (Rs crs)

EBITDA Margin

(%)

PAT Margin

(%)

ROE (%)

ROCE (%)

D/E (x) 1 yr Forward

P/E (x)

1 yr Forward

EV/EBITDA

(x)

1 yr Forward P/Bvps

(x)

Havells India Ltd. 41,893 9,440 1,029 735 10.9% 7.8% 17.3 22.0 0.0 47.2 31.5 8.1

Whirlpool Of India Ltd. 25,781 5,993 673 476 11.2% 7.9% 20.6 28.6 0.0 42.8 29.7 7.7

Voltas Ltd. 21,461 7,627 687 590 9.0% 7.7% 14.1 18.7 0.1 32.6 28.0 4.3

Crompton Greaves Consumer Electricals Ltd.

16,477 4,520 599 496 13.3% 11.0% 43.1 35.4 0.3 31.8 24.3 7.8

V-Guard Industries Ltd. 7,053 2,503 258 188 10.3% 7.5% 20.6 26.4 0.0 32.7 22.3 5.5

Blue Star Ltd. 6,080 5,360 283 141 5.3% 2.6% 17.0 19.1 0.6 31.2 18.2 7.2

Symphony Ltd. 5,963 1,103 212 182 19.2% 16.5% 27.9 29.2 0.3 28.8 25.3 7.3

Johnson Controls - Hitachi Air Conditioning India Ltd.

5,848 2,197 172 84 7.8% 3.8% 12.8 15.0 0.2 37.4 26.0 6.9

Bajaj Electricals Ltd. 5,164 4,939 208 (7) 4.2% -0.2% -0.6 7.3 0.7 27.6 17.8 3.5

IFB Industries Ltd. 2,215 2,637 121 26 4.6% 1.0% 4.1 5.6 0.5 40.2 0.8 3.7


ratnamani Metals & Tubes Ltd.Company InformationBSE Code 520111NSE Code RATNAMANIBloomberg Code RMT INISIN INE703B01027Market Cap (Rs. Cr) 5,724Outstanding shares(Cr) 4.752-wk Hi/Lo (Rs.) 1,390/715Avg. daily volume (1yr. on NSE) 21,200Face Value(Rs.) 2.0Book Value (Rs) 376.4

Key Management meeting pointers � Started journey in 1985, initially

engaged in trading of stainless tool pipes in Mumbai by importing the products and selling in the market.Started with 2 units and started production and selling in the market. � Slowly and gradually increasing

production of carbon steel pipes. In 1995, company started the production of carbon steel pipes with diameter ranging from 16 inch to 60 inch. � Company has also set up a mobile

plant to meet up the requirement of

30,000 to 40,000 tonne of pipes in water segment by going to customers and manufactured there thus saving freight cost for the customers. � Company has established green

field unit in Kutch, Gujarat for the benefit of excise & sales tax. � Ratnamani Metal & Tubes ltd.

(RMTL) is the largest manufacturer of Nickel Alloy / Stainless Steel Seamless and Welded Tubes/Pipes and Titanium Welded Tubes in India and one of the leading manufacturers of Carbon Steel Welded Pipes (ERW, L-SAW and H-SAW), Stainless Steel / Carbon Steel Pipes with 3 Layer PE / PP Coating in India. � Company’s all order are make to

order. In Carbon steel segment 100% is make to order and in stainless steel pipe segment 80% is make to order. No stock and sales for the company only 10% stockis kept for faster selling. � In 1995, company set up 75,000

tonne of carbon steel pipe plant which was totally indigenous plant. � The main consumable industries

of company’s products are Oil & gas, Refinery, Petrochemical, City

Management Meet Note


Gas Distribution, Fertilizer, Nuclear Power, pharma, aerospace, launch pads, etc. � Order book has been affected

by slowdown in economy from March onward due to COVID crisis. Normally the order book stood at nearly Rs 12,200 crore in last 2 years. But this time, the total order in hand is Rs 950 crore but company has also bided some tender for some PSUs. So, company is expecting to bag some order by October of nearly Rs 400-500 crore order. Recently company has won an order of Rs 190 order in ERW segment from CGD segment. � 1QFY21 was impacted by COVID

and from Maycompany again started production with 33% of manpower and slowly increased to 50% of manpower. Company makes 2 shifts for 12 hours, so the plants can run for 24 hours. � Despite of challenges due to

COVID crisis, the operations are going on smoothly as raw materials are there and customers are buying the products and paying ona timely manner. � Before COVID crisis, new projects

were coming from domestic front as well as from international front, mainly from Middle East. However, investment has slowed down because of COVID reason and lower crude oil prices. Qatar is investing hugely on LNG pipes which is gas to liquid. � We are the only company from

India to supply pipes to Saudi Aramco and company is registered with all major Oil & Gas, power, fertilizers, Nuclear power companies since last 35 years. � Oil & gas, refineries all run 365

days in a year thus quality and reliability matter most in these industries and Ratnamani metal & tubes assured best quality and reliability of products. The steel pipes only account 7-8% of total cost of investments by Oil & gas and refineries thus they don’t want to compromise on that front and know the criticalness of these products. � Company also does exports to

overseas markets, where direct exports are around 20-25% and indirect exports is around 40-45%. Company use to give fabricated tubes to L&T, BHEL, Godrej and they use to export these equipments. Company delivers very high end tubes.

Indian Oil & Gas sector vision � Barmer Greenfield project is going

on and they have put tender also and company is already L1 bidder for nearly Rs 150-160 crore order. � IOCL is coming up with new

petrochemical plant in Paradip. Haldia petrochemical project is also going on and order expected from IOCL and BPCL. Then Euro-6 implementation is also going on in several plants which was halted due to COVID crisis. � Essar oil backed by Russian

company is also expanding their facility. Essar oil has only refinery and now they are going for downstream. � MPCL nuclear power plant is

coming up and company has already started working in Haryana in this year and that could result in good demand for stainless tubes and pipes. Then there is nuclear recycling board which also generate good demand for stainless tubes and pipes. Company recently completed Rs 90 crore order in nuclear recycling board for stainless tubes and pipes. � Due to China problem, lot of

chemical companies and pharma companies and API companies are coming into the country which will boost the demand for stainless steel pipes and tubes. � Further, 3 new fertilizer plants

are coming into the country where again there would be requirement of stainless steel tubes and pipes. � In international front, all the

countries like Saudi Arabia, Oman, Qatar, and Kuwait are on expansion mode. Recently, company has received order of around Rs 200-300 crore from Nigeria. � Company has also supplied good

quality of steel tubes to defence for BrahMos missile. These products mainly caters to defence and PSUs. Now, very good support is coming from government and Make in India program. Previously, government used to import high quality steel tubes from abroad and now things have changed since the Modi government came into power. � In last 3 years, company has been

working with Oil & Gas companies. Margins are low in water pipeline and not in oil & gas pipes. There are good margins in CGD pipes as company

use to do 3 layers of value addition (3 layers of quoting). In Oil & Gas segment there are high specification in the quality of pipes required and company is one of the largest producers of such pipes in India. � In ERW CGD pipe segment

company is running at 105% utilization, thus expanding the facility in this segment by 50,000 tonne which is expected to commercialize by January 2021. � India will be totally a gas network

country in next few years, so the demand for CGD pipes will be very robust. � Better utilization of plant and high

value of products over the year are the reasons for substantial growth in revenue between FY17-FY19. � When BJP came into power,

they took some time and from 2017 onwards, they started investments in Oil&Gas and cross country pipeline and that resulted in order book position started moving from July 2017 onwards. So, 2017-18 was a turning year for the company and 2018-19 was also a good year for the company. The year 2020-21 hit by the COVID crisis and it turned to be a challenging year for the company as lot of projects have been affected by lockdown. � Company is mainly investing in

stainless steel and higher valued added carbon steel pipes that is LSW. In ERW segment company is only investing in balancing equipments and debottlenecking. Hence, minimum capex will end up with higher capacity and basically company want to make a balance between topline and bottomline. � Stainless steel pipes and LSW

doesn’t have unlimited market potential in domestic market as well as in international market, thus need to make balance between lower value added products and high value added products.Company’s capacity will be more skewed towards higher value added products once the ongoing projects commercialize. So after 3 years, gradually company will witness the contribution of higher value added products to be higher in overall business. � In titanium products company is

one of the only two producers in the country. In Nickel alloy also company is the only manufacturer. Company


is always focusing on manufacturing niche products. In defence application products company is currently caters to India’s defence. In defence application products company is not a monopoly, it’s products are import substitution. � In last couple of years no

manufactures have gone for green field expansion of stainless steel

tubes; only they acquired the existing capacities. � The infrastructure projects

and investment announced by the government in Budget FY21 has not moved from ministry due to COVID-19 crisis. Economy is not favoring and government is now grappling with the COVID related issues.

� Company expects JAL NAL project will start from next financial year that is FY22 as due to COVID, Central government and state government are not in a position to take large capex. JAL NAL project will be only for helical pipes as helical pipes are only used for water pipelines.

Capacity and expansionCapacities – At a Glance (in MT) as of FY20 ExpansionCarbon Steel Pipes Chhatral Kutchh Total TotalL-SAW 30,000 10,000 40,000 120,000 160,000H-SAW / Spiral - 180,000 180,000 180,000ERW - 70,000 70,000 50,000 120,000Circ. Seam 60,000 - 60,000 60,000Sub Total 90,000 260,000 350,000 520,0003 Layer PE and FBE Coating 2.5 mln sq. mtrs

Stainless Steel Tubes / Pipes Chhatral Kutchh Total TotalSeamless 8,000 - 8,000 20,000 28,000Welded - 20,000 20,000 20,000Hot Extruded Seamless (for captive usage) - 7,000 7,000 7,000

Sub Total 8,000 20,000 28,000 48,000

EBITDA margin Break up of order book as of 1st September 2020

Segmental EBITDA Margin (%)

Carbon steel 5,00,000 tonne post expansion is around 10-12%

Stainless steel tubes & pipes

48,000 tonne post expansion is around 22-25%

Order book break up

Stainless tubes & Pipes

Rs 503 crore (Rs 483 crores + Rs 190 crore of order received )

Carbon steel tubes Rs 313 crore

Stainless steel � Seamless stainless steel: 8000

tonne with own captive hot extrusion capacity of 15,000 tonne which can give output of 7,000 tonne � Wielded pipes capacity of 20,000

and total saleable capacity of 28,000 steel for stainless steel pipes.

� Further company is adding 20,000 of new seamless stainless steel capacity then the seamless will become 48,000 tonne capacity.

Carbon steel � ERW capacity is 70,000 tonne

another 50,000 tonne to be added.

� Helical tubes have capacity of 210,000 tonne and LSW has capacity of 40,000 tonne and another 120,000 tonne of new capacity will be added taking the total capacity to 160,000 tonne for some years to come.

Going forward, 3 years down the line, margin contribution will be higher from the new capacity and LSW which cater to process pipes and line pipe requirements.


Financial position � However, despite of such

challenging times, company has not faced any issue in delay of payments from customers, price reset request from customers, order cancellation requests from customers. Hence, the cash position for the company will continue to be healthy. Company as of date on net basis is totally debt free company. � Company has cash & cash

equivalent of Rs 500 crore and after eliminating Rs 200 crore of liabilities, company has net cash of Rs 300 crore. Further, all the operating costs of the company are under control and all the plants are efficient despite of lower availability of labor the production has not suffered. � Debt will start coming down

and on net net basis company will continue to be debt free. Company expects peak level debt will be Rs 300 crore as of 31st March 2021 and then gradually it will start coming down.

Revenue guidance � Company expects Q2FY21 will be

much better than Q1FY21. However, there will be dip in 3QFY21 and again Q4FY21 will be normal. The order which company are now getting will be dispatched on Q4FY21 as there is lead time between receiving the order and dispatching these orders. � In FY21, company may see a dip in

revenue due to COVID related issues and slow order position. Company will end up FY21 with revenue of around Rs 2200 crore with same level of EBITDA margin and PAT margin which company has been reporting since last 7-8 years. � With the commercialization of new

plants company is expected to clock turnover in range between Rs 3,600-3,800 crore in FY22. � Margins expansions are expected

after 3 years and initially the product mix will be both low value added and high value added products. EBITDA margin in range of 16-18% is good for the company and gradually margin will improve over the years. � Company is adding new segment

in seamless steel pipe but it will take time to establish itself. Exploration pipe is also a niche product segment. For standard products company will commence production from new

capacity from January 2021 but for new set of products it will take time to bring into the market.

Competitors � APL Apollo tubes is only in ERW

segment. � Maharashtra Seamless is only

competing with the company in ERW city gas distribution pipeline. They are not competing in LSW segment. � In carbon steel tubes company’s

competitors are Welspun, Jindal Saw and Man Industries. � Company has presence across all

the verticals of carbon steel pipes.

Foreign exchange impact � Any currency fluctuation will not

have any impact on bottom-line as these are all accounting entry. Company always covers its foreign currency exposure on net basic without keeping it open. � Company is also an exporter and

importer, thus there is a natural hedge for the company. As of date, company has foreign currency exposure of USD 5 million on sell side. So company is only covering the net exposure.

Working Capital � Company use to cover its raw

materials on back to back basis so any large order intake will reserve in inventory, which is one reason of moving up of inventory. Due to COVID also the inventory has increased as there has been sudden lockdown announced by the government. � Around Rs 80 to Rs 90 crore

worth of materials are lying with the company during March 2020 which could not be dispatched due to COVID issue. � Company doesn’t go for any LC

bill discounting as the cost of letter of credit is always higher than the investment. � Company’s receivables are around

60-70 days. � Company’s order are all based

on fixed price terms and company cannot recover any incremental cost from customers. Company always cover its raw materials after receiving the order and it never keeps the raw material cost open.

Funding of Capex � Currently, there is no need for

equity dilution based on the capex plans. The ongoing capex will be mainly funded from internal accruals. Internal accruals will gradually be used to meet the incremental working capital requirements once the newer capacity start production. � Company is in raw material

intensive business and will require large quantity of raw materials once the new capacity start production at higher utilization rate. � Company will continue to be debt

free on net basis and cash flow will continue to be healthy. � Management is not looking for

any acquisition right now and first of all will strive to complete the capex which company has committed. Once the company will be comfortable with these capex then it will think of next phase of growth. � Company has plan to set up

Greenfield project in eastern part of India as there are demand for water pipeline. The setting of the project will incur a capex of nearly Rs 150 crore. But COVID-19 has put that plan on the back burner.

Outlook � Company’s management

remuneration policy is 10% due to the one time paid remuneration to the directors; otherwise the management remuneration policy is at 8%. � Company’s focus is not on the top

line but only focus on bottom-line and to maintain EBITDA margin. � Company always carries order

book position of 7-8 months of total plants turnover. In FY21, the order book has come down though there are lot of order books which are in pipeline and will be finalized in next few weeks of time. Company thinks that it is sitting on a reasonable order book and achieving turnover of Rs 2,200 crore will not be a issue. � Company believes that it doesn’t

means sense of depreciating your plant and machineries for sake of topline and management will follow this philosophy in coming years and will always emphasize on balancing between topline and bottomline and sustaining the margins.


eCOnOMy review:AgriCULTUre refOrMS

When the agricultural reforms were announced by NDA government, they were hailed by all and were compared to the nineties moment in agriculture, synonymous to the liberalization of the manufacturing sector in India. When the ordinances were promulgated on June 5th, even then there was support for the same, however when the bills were placed before Rajya Sabha to replace the three ordinances, all hell broke loose. Not only opposition parties have opposed the legislations, even long-term NDA allies like Shiromani Akali Dal spoke vehemently against, terming it an “anti-farmer” and eventually the party’s only representative in the Modi Govt., Harsimrat Kaur Badal resigned over the issue alleging the Bills to be detrimental to Punjab’s agriculture sector. While there was positivity with regards to the bills and were considered to be the ‘need of the hour’, suddenly a U-turn and condemnation of the bills wasn’t on the cards especially by allies like Shriomani Akali Dal and AIADMK. Just three political parties- YSRCP, Tamil Manila Congress and BPF- among the non-NDA, non-UPA groups came out in support. Parties like Trinamool Congress, DMK and CPM wanted the bill to be sent to a select committee of Rajya Sabha for greater scrutiny while Shiv Sena demanded a special session to discuss them. The opposition parties even decided to petition the President under Article 111 of Constitution, urging him not to give assent to the two farm Bills passed in the Rajya Sabha. The Opposition parties have argued that the Bills were passed in the Rajya Sabha post 1 p.m., when it

was scheduled to end. They further claim that the time of the House was extended without taking the sense of the House and therefore invalid. They allege that they were not allowed to speak, their mics muted, and the house was packed with security personnel to prevent any dissent. The bills were passed by voice vote essentially saying “yes” or “no” with the deputy chairman making the final decision on his perception, which side is louder while typically votes happen digitally with scoreboard displaying the tally. Media reports also suggest that the audio of the government broadcaster Rajya Sabha TV was cut off during this voice vote. This was followed by a ruckus and suspension of eight MPs and walkouts by opposition, while discussions went on and eventually contentious

bills passed by upper house. The bills have hence split opinions - while Prime Minister Narendra Modi called the reforms a “watershed moment” for Indian agriculture, opposition parties have termed them “anti-farmer” and likened them to a “death warrant”.Primarily, the agitation started with tractor protests by farmers of Punjab and Haryana in July in opposition to these ordinances. Even, the Punjab Assembly on August 28 passed a resolution rejecting the Centre’s ordinances. In a nutshell, the opposition parties opposed the bills and the farmers protested primarily on two grounds: (a) they believe that the move towards greater play of free markets is a ploy by the government to get away from its traditional role of being the guarantor of minimum support prices (MSPs) (b) corporate

The bills have hence split opinions - while Prime Minister Narendra Modi called the reforms a “watershed moment” for Indian agriculture, opposition parties have termed them “anti-farmer” and likened them to a “death warrant”


houses and large-scale institutional buyers taking over agriculture and the fear of contract farming affecting the small and marginal farmers. Besides, many parties also emphasised that agriculture is a state subject and the Centre should not legislate on it without wider consultations. Hence, most Opposition parties pressed for sending the two Bills to a Select Committee of the Rajya Sabha and had moved resolutions for the same. With the opposition emboldened by the farmers’ protests against the Bills, the Congress has already declared nationwide agitations from September 24. The protests have been the strongest in Punjab and neighbouring Haryana state, where the mandi system is strong and the productivity is high - so only the government has been able to buy that volume of produce at a set price. However, the agitation could quickly spread to other states as well since farmers are holding demonstrations in Bengaluru and Uttar Pradesh too and now could spread like wild fire.Clearly what are the bills all about and why the uproar? The farm bills are - Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services; Farmers Produce Trade and Commerce (Promotion and Facilitation) Bill; and Essential Commodities (Amendment) Bill. The Upper House, on Sunday (20th September), cleared the first two, paving the way for them to become laws (once President Ram Nath Kovind signs off) and triggering protests while the Essential Commodities (Amendment) Bill, 2020, was passed in Rajya Sabha by a voice vote on Tuesday (22nd September), in the absence of the Opposition, which boycotted proceedings. Lok Sabha had already passed it on September 15th and the bill replaces an ordinance promulgated in June and amends the Essential Commodities Act, 1955. Opposition have maintained that the Govt. has rushed through legislations in a near empty house without due discussions. Let us discuss the three bills in greater details and the reason for protests:

The Farmers’ (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020This bill permits farmers to enter into supply contracts with large buyers thereby enabling them to enter into long term contracts and hence higher predictability for income and thereby better adoption of technology as well as inputs. In other words, this bill gives the much-needed legal status for direct contract farming. Earlier contracts between the farmer and the buyer was routed through state APMCs (agricultural produce market committees) and rules varied from state to state. Hence, by getting into long term contracts with essentially large buyers, farmers could reduce risks associated with price volatility. The bill provides for pegging of prices to the Mandi (APMC) prices. Pre-signed contracts are also expected to result in lower marketing & selling costs for farmers. Although, farmers adopting this arrangement will have to abide by the contract terms and hence may not avail protection of MSP. All such contracts would have civil jurisdiction and breach of contract shall have no criminal implications.Reason for protests: It is feared that the farmers would pay a heavy price for their ignorance in both legal as well as terms of trade and they would be marginalized and exploited by large retailers. While there are layers of protection, however in worst eventuality, they fear

of losing their land holding since they would lose out to corporate houses in fighting legal cases. Direct contracts with large buyers would reduce the importance of state mandis, thereby reducing state’s income from various levies earned through APMCs as well as it would also eliminate different layers of intermediaries embedded in the present system.

The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) BillThis bill removes the barriers to movement of farm produce across India and gives the freedom to farmers to sell anywhere in the country. Essentially, this bill allows farmers to sell their produce outside the Mandi. The bill aims at freeing the farmers from the mercy of the commission agents and intermediaries thus enabling them to fetch better prices for their produce. The new bill thus ends the monopoly of state Mandis as they are now no longer bound to sell to state Mandis or APMCs only as was the case earlier. Besides, since there are no limitations for selling interstate, it will be a win-win situation for both farmers as well as consumers as farm produce moves from surplus to deficit regions thus correcting the pricing imbalance as well as chances of better prices for farm produce. Hence, this will create nationwide agri market and will strengthen e-NAM platform. It is important to note that this reform is an extension of Model Act initiated in 2003. Many states and union territories have already deregulated marketing of fruits and vegetable, trading on electronic platforms like e-NAM, setting up of agri produce markets (Mandis) in private sector, direct marketing of agri produce etc. The reason behind this new law therefore could be lack of adequate response to model law on part of many state governments.Reason for protests: This is very straightforward that states would oppose such a bill which would result in their revenue getting impacted as state governments would no more earn taxes from Mandis, same for the commission agents and intermediaries. There are apprehensions about the implementation of MSPs since they are tied with state Mandis, although the Govt. has assured that procurements under the MSP system will not be impacted by this move.

Essential Commodities (Amendment) Bill 2020This bill amends the Essential Commodities Act aimed at deregulating commodities and removes stock limits on commodities such as cereals, pulses, oilseeds, edible oils, onion and potatoes. This bill will help in creation of post-harvest infrastructure like warehouses and cold storages etc. by corporate which didn’t happen due to excessive regulations. Thus, this bill will help attract investments in agri warehousing and cold storages as large businesses maintains stock of agriculture commodities to meet the objective of price stabilization. Besides, this amendment will prevent wastage of agricultural produce due to lack of storage facilities. After the amendment, the supply of certain foodstuffs — including cereals, pulses, oilseeds, edible oils, potato — can be regulated only under extraordinary circumstances, which include an extraordinary price rise, war, famine, and natural calamity of a severe nature. In effect, the amendment takes these


items out from the purview of Section 3(1), which gives powers to central government to “control production, supply, distribution, etc, of essential commodities”. Essentially, this Act and the limitations were designed for an era of scarcity, which no longer the case. While the purpose of the Act was originally to protect the interests of consumers by checking illegal trade practices such as hoarding, it has now become a hurdle for investment in the agriculture sector in general, and in post-harvesting activities in particular.Reason for protests: The opposition believes that the amendment will hurt farmers and consumers, and will only benefit hoarders (since licenses will no longer be required to trade in these commodities). Farmers who are not deep pocketed will not be able to create storage facilities and hence removal of stock limits will result in hoarding and price manipulation by large retailers and intermediaries. Besides, the price triggers for imposing stock limits envisioned in the Bill are unrealistic — so high that they will hardly ever be invoked. In case of horticultural produce, a 100% increase in the retail price of a commodity over the immediately preceding 12 months or over the average retail price of the last five years, whichever is lower, will be the trigger for invoking the stock limit. For non-perishable agricultural foodstuffs, the price trigger will be a 50% increase in the retail price of the commodity over the immediately preceding 12 months or over the average retail price of the last five years, whichever is lower.The arguments both for & against hold grounds and it is not easy to support unanimously either. It is true that agriculture and related trade & commerce are State subjects and States frame the laws, rules and regulations. Most states have enacted laws to constitute Agriculture Produce Marketing Committees (APMC) in their respective jurisdictions. These APMCs appoint authorized

commission agents (Arhatiyas) and trade is facilitated by the commission agent for a fee which varies from state to state. APMC also charge fee on each trade executed within their infrastructure. Media articles state that presently various taxes/fee/commission in APMCs in various states range from 1% in some states to 8.5% in Punjab. In Maharashtra, the APMC income comes up to Rs 350 crore annually, although the states have highest number of APMCs too. Clearly, with contract farming and inter-state sales of farm produce, APMC will co-exist but they would lose a chunk of their revenue. No state government would like to lose a chunk of revenue of such proportions. Besides, there is fear among farmers that MSP may stop functioning as effective base price in the new system. Farmers and opposition parties are apprehensive that the MSP would lose its teeth with a pure market play. But the laws themselves are not shutting down the APMC mandis or the practice of MSPs. These would, on paper, offer a greater degree of autonomy to producers. However, farmers should have been offered more choices, for instance if a private deal is not distinctly better, a farmer can carry on as before. However, it is to be reminded that corporate farming does not manage to weaken the APMC (mandi system), it would only be because hordes of farmers choose corporate farming or sell outside existing mandis. APMCs have however exploited farmers as opined by 62nd Report of the Standing Committee on Agriculture 2018-19 which stated that the APMC has become “a hotbed of politics, corruption and monopoly of traders and middlemen” and that provisions of the APMC Acts are not implemented in their true sense. “Market fee and commission charges are legally to be levied on traders. However, the same is collected from farmers by deducting the amount from farmers’ net proceeds,” the Parliamentary panel said.

State/UT –wise details of market fee/cess being collected by APMCsS.No. Name of State/UT Rate of Market Fee in percent Ad Valorem Cess

1 Andhra Pradesh 1.0 (except fish 0.5%, prawn ,0.25%) Nil2 Arunachal 2.0 Nil3 Assam 1.0 Nil4 Bihar Act Repealed5 Chhattisgarh Fruits and Vegetable Nil

Paddy - 2.0, other commodities - 1Nil

6 Goa 1.0 Nil7 Gujarat Perishables 0.5-1.0

Food Grains 0.3-2.0Nil

8 Haryana Fruits and Vegetables - Nil Other Commodities -2.0 Cotton 0.8

1% Rural Development Fund Cess2% Rural Development Fund CessAuction fee - 0.08 per hundred Rupees

9 Himachal Pradesh 1 .0% Nil10 J & K Nil Market fee is not collected. However, gate

entry fee is collected from the selected markets of Narwal, Parimpora, Sopore, Kulgram, Shopian and Pulwana

11 Jharkhand 1.0


S.No. Name of State/UT Rate of Market Fee in percent Ad Valorem Cess12 Karnataka Perishables 1.0-1.5 as service charge

Others 1.5%Nil

13 Kerala No APMC Act14 Madhya Pradesh Market fee 2.0(Except Orange and Banana

- 1.0)Nirashrit Shulk 0.2% cess

15 Maharashtra 0.5-1.0 0.05 Supervision Fee16 Manipur No APMC Act17 Meghalaya 1 % Nil18 Mizoram Ground rent-Rs 5.0 per sq ft. Nil19 Nagaland Market fee-Rs. 2 per quintal as service

chargeNil

20 Odisha Perishables 1.0Food Grains (Paddy-2.0 and remaining- 1.0)

Nil

21 Punjab Market Fee - 2.0Cotton - 1.0For primary trade - 3 %

Rural Development Cess 2.0%

22 Rajasthan F &V user chargeJowar, Bajra, Maize, Isabgole, Cumin 1.0Other Commodities - 1.6

Nil

23 Sikkim Act not implemented24 Tamil Nadu 1.0 Nil25 Telangana 1.0 (except fish 0.5%, prawn Nil26 Tripura 2.0 Nil27 Uttar Pradesh Market Fee - 2.0 Development Cess - 0.5%28 Uttarakhand Fruits and Veg-1.0 Others - 2.0 Development Cess - 0.5%29 West Bengal Perishables Nil

Paddy 1.0, 6 % for specific buyersOther than paddy 0.5

Nil

B Union Territories30 Andaman

&Nicobar IslandsNo APMC Act

31 Chandigarh Market fee-2.0 on all agricultural produce except maize (1%)

Rural Development Cess - 2.0%

32 Dadra and Nagar Haveli

No APMC Act

33 Daman & Diu No APMC Act34 Delhi 1.0 Entry fee charged depending upon the type

of vehicle35 Lakshdweep No APMC Act36 Puducherry 1.0 Nil

Source: STANDING COMMITTEE ON AGRICULTURE (2018-2019)

On the contrary, despite the odds, there has been success stories of win-win partnerships between farmers and industry in India as highlighted by Mckinsey report titled ‘India as an agriculture and high value food powerhouse: A new vision for 2030’. One such example is of Reliance Retail which has acted as a key integrator bringing together the best input companies to provide the farmer with a best-in-class “banana kit”, and started a movement called “Kushal Kela Vikas Abhiyaan” in Maharashtra. The kit includes fungicide from BASF, fertilizer from Yara,

pesticide and organic manure from UPL’s subsidiary company SWAL and bunch cover bags from Reliance. These companies, apart from providing the inputs, also engage and educate the farmer through farmer meetings, field demonstrations, film shows, road shows, roundtable charts, etc. Apart from the collective transfer of knowledge to the farmers, this effort has helped increase farmer profits by over 80%. There are other examples like that of McCain demonstrated better incomes with some farmers in Gujarat who started exclusive farming for the


processing grade potatoes used to make French Fries. Through this pilot with progressive farmers, McCain was able to expand the area under cultivation of specific grade potatoes. There are other companies like Hindustan Unilever Ltd (HUL) which procures tomato paste from processing unit Varun Agro which in turn hands and regulates number of seeds to certain number of farmers under PPP model by Maharashtra Govt. The Mckinsey

report further reveals that there is even a tri-partite agreement between HUL, Rallis & ICICI wherein Rallis provides seeds and fertilizers ad ICICI provides finance and HUL procures final produce. ITC has turned around potential threats from intermediaries (commission agents) and turned them into samyojaks (cooperating commission agents) who provide a range of services for a fee in ITS’s e-choupal network for farmers.

Reliance Retail example: Holistic consortium created to provide best in class inputs to banana growers

Reliance Retail example: Farmers have increased profits by over 80%

Before After Before After Before After Before After Before After

CostUSD/acre

100% = 2,8143,024

30

390.16

0.17

4,725

6,552

1,911

3,528

YieldT/acre

Prices at farm gateUSD/kg

RevenueUSD/acre

Pro�tUSD/acre

Rel KitProppingLabourFertDripTC

53

18 5

45

61

Before

Grade A Grade A

Grade C Grade C

Grade B

Grade B

Before

0.15

15%

15%

70%80%

10%

After After

0.17

Quality improvementBuying - selling price di�erential to retailerUSD/kg

Source: India as an agriculture and high value food powerhouse, Mckinsey



There is not even an iota of doubt that the farm sector in India is in dire need to major reforms. The dismal capital formation in the agriculture sector is on account of the stock limits imposed courtesy Essential Commodities Act. Thus, the farm sector needed major reforms, which have not happened since Green Revolution and hence long due. The amendment of the Essential Commodities Act has been compared to the 90’s moment by prominent Agri Economists like Mr. Ashok Gulati. Reforms will help bring much needed investments in Agriculture thus lifting Agriculture GDP and hence overall GDP. The share of Agri component in overall GDP has remained ~14-15% mark for a while. What’s important to note that at the time of independence, ~70% of India’s workforce (a little less than 100 million) was employed in the agriculture sector and agriculture and allied activities accounted for ~54% of India’s national income. While the contribution of agriculture sector in national income has come down over the years, proportion of population engaged in agriculture has only fallen to 55%. Most importantly, proportion of landless labourers (among people engaged in this sector) went up from 28% (27 mn) in 1951 to 55% (144 mn) in 2011,

thus highlighting the level of impoverishment. Besides, the last Agriculture Census (2015-16) showed that 86% of all land holdings were small (between 1 and 2 hectares) and marginal (less than 1 hectare). The average size among marginal holdings is just 0.37 ha. Based on a 2015 study by Ramesh Chand, now a member of Niti Aayog, a plot smaller than 0.63 ha does not provide enough income to stay above the poverty line. These are such small plots that most farmers dependent on them are net buyers of food. As such, when MSPs are raised they tend to hurt the farmers the most. Hence, they fall into the debt trap as data shows that 40% of the 24 lakh households that operate on landholdings smaller than 0.01 ha are indebted. Low levels of income and correspondingly high levels of debt are characteristics of populous states like Bihar, West Bengal and Uttar Pradesh. However, how far the reforms will be beneficial for these farmers is debatable. The skepticism against these bills also emerges out of the lack of information available to farmers to negotiate the right prices for their produce in the open market. According to Niti Aayog report only 10% of farmers have knowledge of MSP ahead of sowing season.

Agri Capital formation stagnant The Farm Workforce

Indebtedness by landholders ( July 2012-June 2013)

YearTotal engaged in agriculture (% of

workforce)

Agricultural labourers (% of agricultural

workforce)

1951 69.7 28.1

1961 69.5 69.5

1971 69.7 37.8

1981 60.5 37.5

1991 59.0 40.3

2001 58.2 45.6

2011 54.6 54.9

Land Owned (hectare)

Indebted farm household (lakhs)

Average loan amount (Rs)

UP TO 0.01 10.02 31100

0.01-0.40 135.97 23900

0.41-1.00 152.16 35400

1.01-2.00 86.11 54800

2.01-4.00 56.10 94900

4.01-10.00 25.21 182700

10& above 2.92 290300

All India 468.48 47000

Source: MOSPI Source: Agricultural Statistics at a Glance, 2019; Indian Express

Source: Agricultural Statistics at a Glance, 2019; Indian Express

350,000

FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19

19%18%18%17%17%16%16%15%15%14%

300,000

250,000

200,000

150,000

100,000

50,000

0

GFCF (Rs cr) GFCF % of GVA

No. of operational holdings (% share)

Source: Agriculture Census 2015-16

Mar

gina

l

Smal

l

Sem

i-M

ediu

m

Med

ium

Larg

e

68%

18%10%

4% 1%


Share of Punjab & Haryana in output & Govt. Procurement The food processing sector haven’t taken off in India

and accounts for ~9% of GVA in manufacturing due to stock-holding limits so far imposed by the Essential Commodities Act and with the amendments done, it could pave the way for building large capacities in the food processing sector and thus in the process generate employment opportunities. In comparison, in other relevant countries the processing share is between 30 to 50%, going up to 100% for developed countries. Besides, this paves way for bigger export markets and India could be one of the top five exporters of agriculture and food products. A Mckinsey analysis has stated that packaged food is likely to grow by 9% annually to become an USD 126 billion industry by 2030 and most importantly it opens up gates for branded products.Source: Department of Food & Public Distribution, Ashika Research

Share in output (%) Share in MSP basedprocurement (%)

15%

29% 30%

65%Rice Wheat

Terms of trade (Farmer-non-farmer) Percentage of crop production that was procured at MSP in 2016-17

Source: Agricultural Statistics at a Glance, 2019; Indian Express Source: Committee on Doubling Farmers’ Income (2017), Ministry of Agriculture and Farmers’ Welfare; PRS

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

P

88

8587

92

100

97 97 9796

99 9998 98

100

103

Paddy Wheat All Pulses All Oilseeds

35.5

24.9

7.8

0.7

Land holdings and sources of agricultural credit (as of 2013)

Size of land (hectare)

Co-operative society Bank Money lender Shopkeeper/

traderRelatives/

friends Others

0-1 10% 27% 41% 4% 14% 4%1-2 15% 48% 23% 2% 8% 6%2-4 16% 50% 24% 1% 6% 4%4-10 18% 50% 19% 1% 7% 6%10+ 14% 64% 16% 1% 4% 2%

Source: Report of the Committee on Medium-term Path on Financial Inclusion, Reserve Bank of India; PRS

Other way to understand the plight of the farmers is to look at the Terms of Trade (ToT) between farmers and non-farmers. ToT is the ratio between the prices paid by the farmers for their inputs and the prices received by the farmers for their output, explained Himanshu, an economics professor at the JNU in an article titled “India’s farm crisis: Decades old and with deep roots”. As such, 100 is the benchmark. If the ToT is less than 100, it means farmers are worse off, which has been the case since 2010-11. Now coming back to the debate over whether the Govt. is trying to do away with the MSP, it is true that the importance of APMCs will be diminished and might be marginalized in due course, however the small & marginal farmers with the lack of knowledge of MSP let alone ruling prices in different states, they are expected to stick to the Mandi system. Besides, the major thing

to consider here is that while MSPs are announced for 23 crops actual procurement by the food corporation of India (FCI) happens primarily for wheat and rice and now active for pulses too. Besides, hues and cry from farmers of Punjab & Haryana are just for nothing. Historically, these states together account for 40% to 50% of Govt. (MSP based) procurement of rice and wheat. For 2019-20 marketing season, these two states together accounted for 30% of rice and 65% of wheat procured by Govt. Naturally, farmers from these two states are the major beneficiaries of the Govt. procurement scheme and are apprehensive. However, the state governments too earn handsomely since the APMC fees and taxes together with commission agent charges are the highest, hence there are vested interests.


Share of Food Processing in GVA-Manufacturing (%)

Source: mofpi, National Accounts Division, Central Statistics Office

8.7

FY13 FY14 FY15 FY16 FY17 FY18

8.3

7.9

8.5

8.78.8

Share of food processing in manufacturing GVA (%)

Source: RBI, Indian Express

16.2France (2018)

USA (2018)

New Zealand (2013)

Indonesia (2018)

India (2017)

11.4

34.3

35.5

9.7


Packaged food is a fast-growing industry in India with significant potential for branding

Food itemMarket size (USD million) Percentage

growth rate per annum (2010-30)

Branded product as a percentage of total category

2010 2030 2010 2030Milk 7,767 32.900 8 31 73Cheese 144 1,958 14 NA NAButter 254 1,340 9 6 19Vegetable & edible oils 3,931 10,331 4 32 59Sweet & savoury snacks 1,286 16,399 13 42 66Atta 574 8,158 13 4 44Processed poultry 398 8,340 17 6 49Fruit beverages 720 12,204 15 NA NABiscuits 2,753 13,145 8 NA NA


START-UP Corner

Mr. Mihir Mehta

At Ashika Capital, we are extremely passionate about fostering symbiotic relationships that are aimed at building and sustaining high-growth founder led businesses. We strongly believe that financial capital is the first steppingstone to build a scalable, sustainable and impactful business. Therefore, our endeavour is to identify great entrepreneurs in pursuit of building businesses that carry magnanimous investment potential. Here is an INSIGHT into businesses that we have worked/working with –

Crista SpicesIndia, also known as the land of Spices is responsible for over 70% of the world’s spice production. It is an

undeniable fact that Spices form the DNA of any food that not only excite your taste buds but are also loaded with phytonutrients and minerals that are essential for overall wellness. However, the problem is that consumers continue to bear the brunt of inferior quality, adulterated spices, which may cause serious health issues.Positioned in a market experiencing rapid consumer evolution, CRISTA Spices is on the path of creating an authentic, flavourful, premium spice brand that garners

trust. It is a brand-led by a millennial and relatable to millennials. Krishne Tanna (founder), is a part of the fourth-generation spice legacy. The business has already created a benchmark for quality and purity in the world of spices in the B2B segment as validated by its impressive clientele base. Armed with a vision to build a gold standard, modern, homegrown spice brand that caters to the modern consumer taste pallet, the business is focusing heavily on R&D to offer a diversified portfolio of spices that is not readily available in the market.The business is looking to raise USD 1 million to expand its production facility, create a unique brand, and hire a sales team.

Henry & SmithHenry & Smith is a leading D2C brand in the menswear category and in a short span has re-defined

the consumption of men’s bottom-wear, consistently delivering solutions focused value driven products.The products span the major categories across Chinos, Denims as well as Diffusion categories like belts, wallets and innerwear which is set to launch amidst the pandemic in Oct ’20. The business offers a variety of 30+ colours in close to 10 sizes with customer repeat rates of almost 50%.Backed by leading institutions like Rukam Capital

and WEH Ventures, the business has been adept in its response to the COVID-19 situation, remaining profitable and adapting its offerings and distribution presence. Armed with a proven product-price mix and credible team in place the business is looking to reorganize certain processes to better manage the supply chain.With a vision to democratize high quality solution driven mens-ware, across the spectrum, the business caters to a mass affluent segment and has grown to INR 2 cr. In MRR (pre-COVID).The business is looking to raise USD 1mn for further expansion.

These are the top three business opportunities that interested stakeholders can pursue from an investment standpoint. If you are interested to know more about these companies from the perspective of business operations, investment thesis, exit opportunities and more, please drop in a line to us at [email protected].

Origa LeasingOriga Leasing is India’s first LeaseTech company. Since inception, they have been providing high quality equipment

to smaller enterprises in both healthcare segments (hospitals sub 100 beds) & MSMEs (revenue < INR 100 cr). In addition to financial inclusion, they also aim for higher healthcare penetration in the interiors & work mostly with institutions in the tier 2 & 3 cities of India. By converting the high CAPEX model of purchasing equipment to an OPEX model of leasing, they help these enterprises grow.Origa Leasing focuses on providing its services to the

under-banked & non-banked, who lack long track records & collateral. They have developed a complete digital solution for servicing all the equipment needs of hospitals & MSMEs. The current fund raise is primarily being done to fulfil the immediate growth in demand in the healthcare space due to Covid-19. Currently they have a leasebook of US$5.4 mn translating into annualised revenues of US$1.1 mn which will grow from the additional leasing expected in FY21.Origa Leasing is led by a Founder-CEO with over 18 years of work experience having previously worked at ANZ Investment Bank, Clearwater Capital Partners & PwC. Elevar Equity, a global leader in Financial Inclusion Investments led their series A funding.


SeBi Multicap funds Reclassification

Composition of equity AUMs in August 2020 Multi-Cap Fund AUM

Source: AMFI India Source: AMFI India

160000155000150000145000140000135000130000125000120000115000110000

14.1

13.9

13.7

13.5

13.3

13.1

12.9

12.7

12.5

Muili Cap Fund: 19.1%

Large Cap Fund: 19.3%

Large & Mid Cap Fund: 7.5%

Mid Cap Fund: 11.5%

Small Cap Fund: 6.8%

Divident Yield Fund: 0.5%

Value Fund/Contra Fund: 6.9%

Focused Fund: 6.9%

Sectoral/Thematic Fund: 8.6%

ELSS: 12.8%

On September 11, 2020, the Securities and Exchange Board of India (SEBI) released a circular which

called for a material change in the portfolio structure of Multi-cap funds. SEBI unexpectedly tightened the investment norms for multi cap schemes of mutual funds—a category that invests in a mix of large-cap, mid-cap and small-cap shares - “in order to diversify the underlying investments of Multi Cap Funds

across the large cap, mid cap and small cap companies and be true to label”. The capital markets regulator has asked multi-cap funds, which manages investor money worth Rs 1.46 lakh crore, to invest at least 25% of their corpus each in large cap stocks, mid cap stocks, and small-cap stocks, a move that has triggered sharp protests in the industry. Currently, there are no restrictions. Further, SEBI also said that existing Multi Cap Funds shall ensure

compliance with these provisions within one month from publishing the next list of stocks by AMFI in January 2021. Last major circular of SEBI for mutual fund was in 2018 when SEBI had created category of large caps , Mid caps and small caps companies in accordance with the market cap of the company which contributed to a sharp selloff in mid and small cap companies as fund flow shifted from these stocks to large caps companies.

Apr

-19

Jun-

19

Aug-

19

Oct

-19

Dec

-19

Feb-

20

Apr

-20

Jun-

20

Aug-

20

AUM (Rs. Cr.) % of Equity AUM (RHS)


Summary of Mutual Fund AUMs

There are the 2 New SEBI Rules for Multicap FundMinimum allocation to equities was increased from 65% to 75%There was only one condition for Multi cap funds and that was 65% of their money should be invested in equities. But now at least 75% of the assets in a Multi cap fund need to be invested in equities. This change won’t have a major issue, because Multi cap funds are generally invested in equities most time. For example, the biggest fund in the category, Kotak Standard Multi cap Fund, which has over 97% of its assets invested in equities. So, this is not the problem.

Defined minimum allocation in each market capitalizationThe change in the SEBI circular regarding allocation is making everyone’s head spin. Earlier, the fund managers were free to choose in which companies they’d like to invest in without any restriction on whether they are large, mid, or small-cap companies. However, as per new circular, all Multi cap funds are to necessarily invest at least 25% of their portfolio in each capitalization category. This means at least 25% each in large-cap companies, mid-caps, and small-cap companies.

SEBI rules for Multi cap funds before the new changesMulti-cap funds are not complicated structures. In fact, there was only one condition. Multicap funds needed to have a minimum of 65% of their assets invested in equities at any given time. This means the fund manager was free to decide how much of the scheme assets were going to large-cap companies, mid-

cap, and small-cap companies. Now, SEBI defines a large-cap company as those listed companies which are ranked from 1st to 100th company in the Indian stock exchanges in the terms of market capitalization. Mid-cap companies are ranked from 101 to 250 in terms of market capitalization and small-cap companies start from the 251st ranked company. A list of these companies is available on the Association of Mutual Funds in India (AMFI) website. So, fund managers were flexibility of choosing company and the type of company i.e. large, mid or small-cap to take the most optimum investing decisions on behalf of the investors.

SEBI’s two objectives to achieve � True to Label schemes: The

portfolio should reflect the name of the scheme and the name of the scheme should correctly reflect the nature of the portfolio. SEBI says that they have enforced this 25:25:25 allocation upon the observation that many Multi-Cap Funds have over 80% of their investment in large-cap stocks which makes them more like large-cap funds rather than Multi cap funds. They further added in the clarification that the share of small-cap companies is in the lower single digits in some of these schemes. HDFC Equity Fund and the Motilal Oswal Multi cap 35 fund has over 85% of their portfolio in large-cap companies with little or no diversification into mid and small-cap funds. So, from the SEBI point of view, the name of the scheme and the nature of the scheme is completely at opposite ends and bordering on being misleading.

� Use of appropriate benchmarks: The SEBI has also made note of the benchmark that is used by the Multi cap funds is not in line with the composition of these schemes. That’s because the appropriate benchmark for large-cap funds is the NIFTY 50 while the benchmarks used by Multi cap funds are NIFTY 200 or NIFTY 500.

SEBI clarification on new circularSEBI in their clarification note has hinted at some options. These include:1. Mutual fund Multi cap schemes can rebalance their portfolio wherein most have to add to small and mid-caps and divest from some of the large-cap stocks in their portfolio2. Multi Cap schemes could inter-alia facilitate switch to other schemes by unitholders, merge their Multi Cap scheme with their Large Cap scheme or convert their Multi Cap scheme to another scheme category, for instance Large cum Mid Cap scheme.In addition to what SEBI says, some fund houses have hinted at converting the Multi cap fund into a thematic fund or a focused equity fund where there are no or low restrictions on market capitalization. SEBI has given until January 2021 to the mutual fund companies to make the requisite changes. It is highly unlikely the fund houses will make this change as this would not be an easy task plus it will change the risk-return profile of the funds.

Source: AMFI India

Scheme Name Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20

Multi Cap Fund 155925 148862 113908 129643 127304 135617 142267 146532

Large Cap Fund 154135 146317 113541 130343 128750 137148 145154 148723

Large & Mid Cap Fund 58772 56764 42972 49160 48664 52604 55208 57786

Mid Cap Fund 91197 89023 65805 74421 73352 79993 83303 88734

Small Cap Fund 52482 50967 35832 40483 39648 44679 46934 52119

Dividend Yield Fund 4416 4115 3282 3650 3629 3851 4107 4185

Value Fund/Contra Fund 55675 51200 39460 45535 45623 48764 51988 53137

Focused Fund 50209 49313 39072 44819 44326 48225 51142 53098

Sectoral/Thematic Funds 65599 63913 49844 56802 56023 60110 62908 66100

ELSS 101228 96565 74791 85214 83455 90025 94596 98701

Equity Oriented Schemes 789638 757038 578508 660070 650775 701016 737608 769115

Total Mutual funds 2785804 2722937 2226203 2393486 2454758 2548848 2711894 2749389


Counter argument to SEBI’s objectives � Lack of remarkable diversification

in most Multicap funds: The fund houses feel that the entire point of opting for Multi cap funds is to have the flexibility of moving between capitalization categories depending on present market conditions, future market outlook, and valuations. Diversification can be done using other tools like having a mix of large, mid, and small-cap funds in one’s portfolio but the objective of a Multi cap fund for investors is to build long term wealth. � Lower allocations to Midcaps/Small

Caps: Multicap Fund allocations to Mid/small caps have been lower and there has been very limited interest among funds for the same. This is because of issues with regards to high promoter pledges along with low floating stocks and trading volumes result in high impact cost at both entry and exit levels and easy manipulation � True to Label schemes: On the

point related to the divergence in the name and the nature of the scheme, it again seems to be a point of view issue. While SEBI looks at the word “Multi cap” as the components of the fund, the investors might be viewing the name around the flexible nature of the fund. Now, maybe if the name was Flexicap rather than Multicap, the issue of the name being misleading might not have come across. � Use of appropriate benchmarks:

Multi cap schemes to use the Nifty 200 or the Nifty 500 as benchmarks. Let’s take the Nifty 500 as the

benchmark for this discussion. Now, if we looked at the composition of the Nifty 500 in terms of large, mid, and small-cap stocks. We will find that Large-cap, Mid-cap and Small-cap stocks composition in Nifty 500 is 78%, 17% and 5%. In other words, SEBI’s contention of having an appropriate benchmark seems to be going against their own words.

Some of the options available to AMCs which may have no / negligible impact: � Continue the fund as is and

adhere to the new SEBI guidelines over the next 4 - 5 months. The fund houses are not required to make any immediate change to the scheme portfolio. � Merge the existing Multicap

scheme with their Large Cap or Large and Mid Cap scheme, based on their portfolio allocation. This will ensure that no / minimum change is required in the underlying portfolio of the multi cap scheme. If the merger option is exercised by the AMC, the existing investors will be provided an exit option (as per current regulations). � Approach SEBI to create a new

Flexicap Category (where fund managers will have flexibility to allocate) in addition to the existing Multicap category. The scheme can then be accordingly characterized and ensure they remain true to label, as required by SEBI. � Approach SEBI to change the

required % allocation to large, mid and small cap based on Nifty 500. The index currently has approx 78%, 17% and 5% allocation respectively based

on the weighted average market cap. � Approach SEBI to change the

scheme categorization from the existing Multi cap to a Thematic category. � Approach SEBI for an extension of

time frame to implement the changes.There may be other options available to them as well. As per news articles, some of the AMFI members have briefly discussed with SEBI and SEBI has asked them to provide the suggestions along with the relevant data points and rationale.In light of the above, a hasty decision currently to act on any scheme in the investors portfolio is not required. The portfolio construct should be based on the specific requirements of investors and their risk profile.

Investors should not act in hurryBasically, as an investor, you should not act in a hurry right now as most fund houses are evaluating the best course of action in order to maintain the risk profile of the respective funds. So, allow the news to sink in with all stakeholders including the regulator and the mutual fund companies. SEBI has already come out with a clarification and one can expect all mutual fund houses to release some communication regarding their views and actions pertaining to this circular. Nilesh Shah, Chairman AMFI and Managing Director, Kotak Mahindra Mutual Fund said “We will ensure compliance with SEBI Regulations as well as spirit & optimize risk adjusted return for our Investors. Don’t take Investment decisions in haste.”

Multi Cap Fund Corpus (Rs. Cr.)

Current Allocation (%) Potential Churn (Rs. Cr.)Cash &

EquivalentLarge Cap

Mid Cap

Small Cap

Cash & Equivalent

Large Cap

Mid Cap

Small Cap

Kotak Standard Multicap Fund 29,714 77.7 18.3 1.2 2.9 -9,084 2,006 7,078 862HDFC Equity Fund 19,798 85.9 8.4 3.9 1.8 -7,460 3,288 4,171 356Motilal Oswal Multicap 35 Fund 11,240 88.9 4.8 4.7 1.6 -4,552 2,267 2,286 180Aditya Birla SL Equity Fund 11,023 68.2 23.9 5.8 2.2 -2,245 127 2,119 243UTI Equity Fund 10,983 65.8 27.1 5.5 1.7 -1,920 -227 2,146 187SBI Magnum Multicap Fund 9,063 72.9 17.7 6.5 2.9 -2,342 666 1,673 263Franklin India Equity Fund 8,591 78.1 11.6 6.9 3.4 -2,708 1,152 1,558 292Nippon India Multi Cap Fund 8,053 53.1 24.5 19.0 3.3 -514 37 480 266Axis Multicap Fund 6,434 92.3 3.3 0.0 4.4 -3,007 1,396 1,609 283ICICI Pru Multicap Fund 5,594 75.0 14.0 8.3 2.7 -1,548 615 933 151IDFC Multi Cap Fund 4,847 53.4 29.2 13.1 4.3 -373 -206 579 208Parag Parikh Long Term Equity Fund 4,508 35.0 14.3 16.0 34.7 -886 481 407 1564DSP Equity Fund 3,726 70.1 23.0 5.6 1.4 -800 75 724 52L&T Equity Fund 2,366 73.0 15.1 9.6 2.3 -597 234 364 54


Multi Cap Fund Corpus (Rs. Cr.)

Current Allocation (%) Potential Churn (Rs. Cr.)Cash &

EquivalentLarge Cap

Mid Cap

Small Cap

Cash & Equivalent

Large Cap

Mid Cap

Small Cap

Canara Rob Equity Diver Fund 2,280 74.6 16.3 3.9 5.2 -679 198 481 119Tata Multicap Fund 1,695 67.8 22.4 8.3 1.5 -328 45 283 25Invesco India Multicap Fund 925 35.2 39.8 21.0 3.9 101 -137 37 36Baroda Multi Cap Fund 825 73.5 18.3 2.2 6.0 -243 55 188 50Principal Multi Cap Growth Fund 654 69.9 19.6 8.1 2.4 -146 35 111 16Sundaram Equity Fund 600 79.8 11.1 8.9 0.2 -180 83 96 1Edelweiss Multi-Cap Fund 560 73.9 14.8 9.6 1.7 -143 57 87 10BNP Paribas Multi Cap Fund 555 78.7 9.4 10.7 1.2 -166 87 79 7Union Multi Cap Fund 371 72.7 10.5 10.3 6.6 -109 54 55 24Mahindra Manulife Multi Cap Badhat Yojana 340 69.0 19.8 7.3 3.9 -78 18 60 13HSBC Multi Cap Equity Fund 330 76.9 15.5 6.9 0.7 -91 31 60 2LIC MF Multi Cap Fund 295 70.0 21.3 4.7 4.0 -71 11 60 12IDBI Diversified Equity Fund 290 68.0 18.3 11.8 1.9 -58 19 38 6PGIM India Diversified Equity Fund 226 62.1 18.4 14.2 5.3 -39 15 24 12Taurus Starshare (Multi Cap) Fund 200 82.8 12.6 2.4 2.2 -70 25 45 4Essel Multi Cap Fund 176 75.3 16.6 7.3 0.8 -46 15 31 1ITI Multi-Cap Fund 134 77.7 6.6 6.8 9.0 -49 25 24 12JM Multicap Fund 131 88.1 10.6 0.0 1.3 -52 19 33 2Shriram Multicap Fund 58 71.4 12.8 2.4 13.5 -20 7 13 8Quant Active Fund 36 18.0 21.4 53.1 7.5 9 1 -10 3Total AUM 146,621 74.0 16.4 6.0 3.6 -40,493 12,573 27,922 5,323

Source: ACE MF, Ashika Research Note: AUM as on August 30, 2020

Some of the following stocks are already owned by multiple multi cap mutual fund schemes and additional inflow can come in these stocks if the mutual funds decide to increase the allocation in the existing holdings:

Mid Cap Stocks Small Cap Stocks

AU Small Finance Bank Ltd. Crompton Greaves Consumer Electricals Ltd. Vaibhav Global Ltd. EIH Ltd.

Jubilant FoodWorks Ltd. Ipca Laboratories Ltd. Linde India Ltd. Indian Energy Exchange Ltd.

SRF Ltd. REC Ltd. PVR Ltd. TTK Prestige Ltd.

Bharat Electronics Ltd. Jindal Steel & Power Ltd. Persistent Systems Ltd. V-Mart Retail Ltd.

The Ramco Cements Ltd. MRF Ltd. KEC International Ltd. Dishman Carbogen Amcis Ltd.

Balkrishna Industries Ltd. Atul Ltd. Sheela Foam Ltd. Grindwell Norton Ltd.

Power Finance Corporation Ltd. Aditya Birla Fashion and Retail Ltd. Kalpataru Power Transmission Ltd. Century Textiles & Industries Ltd.

TVS Motor Company Ltd. Page Industries Ltd. BEML Ltd. Tata Chemicals Ltd.

Voltas Ltd. Bata India Ltd. Bharat Dynamics Ltd. Jyothy Labs Ltd.

CESC Ltd. Bharat Forge Ltd. Strides Pharma Science Ltd. Kennametal India Ltd.

Comparison between Nifty 50, Mid Cap 50 and Small Cap 100Source: News Article

Source: NSE

130

120

110

100

90

80

70

60

50

40

30

Jan-

18

Mar

-18

May

-18

Jul-1

8

Sep-

18

Nov

-18

Jan-

19

Mar

-19

Jul-2

0

May

-19

Sep-

20

Jan-

20

Jul-1

9

Mar

-20

Sep-

19

May

-20

Nov

-19

Nifty 50 Mid Cap 50 Small Cap 100


invesco india Contra fund

Mutual Fund Overview

Investment ObjectiveThe scheme seeks to generate capital appreciation by investing predominantly in Equity and Equity Related Instruments through contrarian investing i.e. it endeavours to find stocks that are priced significantly lower than what the fund management team believes is their true worth.

Fund Suitability � Investors looking for diversification � Investors looking for investments

in under-valued and overlooked stocks � With a long-term investment

horizon in order to realize the full potential of contrarian opportunities � Investors looking for sound

investment opportunities in times of volatility

Investment StrategyThe fund uses following three levers to construct the portfolio:(i) Stock selection - It follows a bottom-up approach for stock selection and has a contrarian bias. Such companies generally display following characteristics: companies trading below fundamental value; companies in turnaround phase and growth companies available at attractive valuations.(ii) Sector allocation - It takes active overweight/underweight sector positions w.r.t. the benchmark, based on the top-down view and valuation opportunities.(iii) Capitalization bias - The fund invests across market capitalization.


Stocks that fit into one of these categories typically display superior return profiles, but more importantly this enables fund managers to focus on the attributes that drive stock price performance and keep a watch for red flags.

The categorization framework enables us to filter the universe and identify the best investment opportunities.P2P: Path to Profit; ROE: Return on Equity. The above table is internal proprietary stock categorization.

Stock Categorization FrameworkStock Category Descriptions (e.g.) Growth Prospects

(e.g.) Company Attribute (e.g.) Financial Parameter (e.g.)

Leader Established companies

In line or better than industry

Track record of leadership, globally competitive

Industry leading margin/ROE

GrowthWarrior Young/established companies

Better than industry

Unique proposition and/or right place, right time

Margin & ROE Expansion

Star Young companies High growth Entrepreneur vision, scalability

Operating Leverage

Diamond Company with valuable assets Low growth Management intent to

unlock valueValue of asset/business

ValueFrog Prince Company in a

turnaround situation Back to growth Intrinsic strengths in core business

P2P, ROE expansion

Shotgun Opportunistic investment Positive surprise

Corporate event, restructuring, earnings news

Event visibility Event

Commodities Call on the cycle is paramount Positive

Integration, cost efficiency, globally competitive

Profit leverage

Important InformationNAV (G) (Rs.) 48.16NAV (D) (Rs.) 23.73Inception Date Apr 11, 2007Fund size(Rs.Cr.) 5019Fund Manager Taher Badshah, Dhimant KothariEntry load Nil

Exit Load For units in excess of 10% of the investment,1% will be charged for redemption within 365 days

Benchmark S&P BSE 500 TRIMin Investment (Rs.) 1000Min SIP Investment (Rs.) 500

Key RatiosBeta (x) 1.01Standard deviation (%) 6.44Sharpe Ratio 0.07Alpha (%) 1.92R Squared 96.77Expense ratio (%) 1.94Portfolio Turnover ratio (%) 0.75Avg Market cap (Rs. Cr.) 2,81,074

Portfolio as on August 31, 2020Stocks % of Net assetsReliance Industries 10.0HDFC Bank 8.5ICICI Bank 7.2Infosys 6.6Bharti Airtel 4.8Axis Bank 4.5Sun Pharmaceutical Industries 3.2HCL Technologies 2.5Apollo Hospitals Enterprise 2.4United Spirits 2.3

Asset AllocationEquity Cash97.95% 2.05%


% Sector Allocation

Power

Gas

Auto Anc.

Auto

Telecom

Pharma

Finance

Petroleum

Software

Banks

3.2

3.6

3.7

4.4

4.8

6.1

7.3

12.0

13.3

20.2

Note: All data are as on Aug 31, 2020; NAV are as on September 25, 2020

Source: Factsheet, Value Research

Performance of the Fund alongwith Benchmark (as on September 25, 2020)1 month 3 months 6 months 1 year 3 Years 5 Years Since Inception

Fund (%) -4.52 7.40 35.36 3.68 5.56 9.85 12.69Benchmark (%) -5.71 5.32 39.78 -5.74 3.10 7.84

Ashika Mutual Fund Recommendation Alpha GenerationMonth of Reco Fund Name Benchmark NAV as on

25.09.20201 Year

Return (%)3 Year

Return (%)5 Year

Return (%)

Sep-19 Can Robeco - Emerging equities Reg (G) NSE - NIFTY Large Midcap 250 TRI 97.5 7.7 3.9 10.3

Oct-19 LIC - Large & Mid Cap Fund - Reg (G) NSE - NIFTY Large Midcap 250 TRI 15.1 -1.4 3.5 9.5

Nov-19 ITI - Multi Cap Fund (G) NSE - Nifty 500 TRI 9.4 -11.9 0.0 0.0

Dec-19 Parag Parikh - Long Term Equity Fund Reg (G) NSE - Nifty 500 TRI 30.3 18.7 11.8 13.5

Jan-20 DSP - Dynamic Asset Allocation Reg (G) CRISIL Hybrid 35+65 Aggressive Index 16.4 4.2 5.2 7.1

Feb-20 Invesco - India Growth Opportunities Fund (G) S&P BSE 250 Large Midcap TRI 34.3 -0.3 4.5 8.5

Apr-20 DSP - Top 100 Equity Reg Fund (G) S&P BSE 100 TRI 195.2 -7.1 0.4 5.3

May-20 Axis - Focused 25 Fund Reg (G) NSE - Nifty 50 TRI 28.5 -2.3 5.6 10.4

Jun-20 Nippon India - Tax Saver (G) S&P BSE 100 TRI 43.9 -13.0 -10.1 0.6

Jul-20 SBI - Small Cap Fund Reg (G) S&P BSE Small Cap TRI 57.3 10.3 5.7 13.2

Aug-20 Aditya Birla SL - Focused Equity Fund Reg (G) NSE - Nifty 50 TRI 57.5 -2.1 1.3 6.6

Sep-20 Sundaram - Services Fund (G) S&P BSE 200 TRI 11.4 -1.2 0.0 0.0

Note: All data are as on Aug 31, 2020; NAV are as on September 25, 2020

Source: Factsheet, Value Research


All Data Belongs To September 25, 2020

NAV AUM (Rs Cr) 3 M 6 M 1 Yr 3 Yr 5 Yr

Since Inception

Return

Sharpe Ratio

Exp. Ratio

Large & Mid Cap FundSBI - Large & Midcap Fund Reg (G) 210.8 2889 7.0 32.4 (3.4) 2.2 6.6 13.1 0.0 2.1

Mirae - Asset Emerging Bluechip Fund Reg (G) 56.7 11316 9.4 40.2 6.0 6.6 13.4 18.3 0.2 1.8

ICICI Pru - Large & Mid Cap Fund Reg (G) 295.8 2500 6.1 31.1 (6.3) (0.9) 6.1 16.5 (0.1) 2.2

LIC - Large & Mid Cap Fund - Reg (G) 15.1 750 9.0 27.9 (1.4) 3.5 9.5 7.7 0.0 2.5

Sundaram - Large and Mid Cap Fund (G) 33.0 1249 8.6 31.5 (5.4) 3.3 8.2 9.2 0.1 2.2

Value FundSBI - Contra Fund Reg (G) 102.9 1330 12.1 42.4 1.1 (1.6) 3.9 16.5 (0.2) 2.2

IDFC - Sterling Value Fund Reg (G) 43.4 2632 13.7 48.9 (7.0) (5.7) 4.7 12.2 (0.2) 2.1

Nippon India - Value Fund (G) 70.0 2903 9.4 36.5 (3.4) 0.7 5.9 13.5 0.0 2.1

Kotak - India EQ Contra Fund (G) 51.2 818 8.3 35.2 (2.3) 4.4 8.6 11.4 0.1 2.5

Invesco - India Contra Fund (G) 48.2 5019 7.4 35.4 3.7 5.6 9.9 12.4 0.2 1.9

Focus FundAxis - Focused 25 Fund Reg (G) 28.5 11372 5.5 23.3 (2.3) 5.6 10.4 13.5 0.2 2.0

Mirae - Asset Focused Fund Reg (G) 11.7 3414 12.3 43.0 6.2 0.0 0.0 11.5 - 1.9

SBI - Focused Equity Fund Reg (G) 140.2 10248 1.5 21.2 (2.4) 5.5 9.4 17.8 0.2 1.8

DSP - Focus Fund Reg Fund (G) 22.8 1769 7.6 32.8 (3.4) 1.6 5.9 8.2 (0.0) 2.2

Sundaram - Select Focus Reg (G) 175.8 1064 5.2 29.6 (3.4) 4.2 7.7 17.1 0.1 2.4

ELSS FundMirae - Asset Tax Saver Fund Reg (G) 18.6 4181 11.0 42.0 4.7 7.0 0.0 13.9 0.2 1.8

Kotak - Tax Saver Scheme (G) 44.2 1244 7.9 33.6 0.1 3.6 7.8 10.5 0.0 2.3

Invesco - India Tax Plan (G) 52.2 1113 8.8 31.2 3.1 5.3 8.3 12.8 0.1 2.3

Axis - Long Term Equity Fund (G) 45.2 21905 4.2 21.2 (3.4) 5.2 8.1 15.0 0.2 1.7

SBI - Long Term Equity Fund Reg (G) 138.5 7435 8.5 38.7 1.3 0.9 4.7 14.7 (0.1) 1.8

Multi Cap FundParag Parikh - Long Term Equity Fund Reg (G) 30.3 4508 12.6 49.3 18.7 11.8 13.5 16.2 0.5 2.0

SBI - M Multicap Fund Reg (G) 45.7 9063 6.0 28.6 (8.0) 1.0 7.3 10.7 (0.1) 1.8

Kotak - Standard Multicap Fund (G) 34.1 29714 6.0 31.6 (3.9) 2.8 8.5 11.6 0.0 1.7

Motilal Oswal - Multicap 35 Reg (G) 24.7 11240 7.4 29.9 (5.6) (1.2) 7.3 15.1 (0.2) 1.8

ITI - Multi Cap Fund (G) 9.4 134 3.2 23.8 (11.9) 0.0 0.0 (4.6) - 2.6

Small Cap FundInvesco - India Smallcap Fund Reg (G) 11.1 614 12.5 42.1 9.3 0.0 0.0 5.7 - 2.5

SBI - Small Cap Fund Reg (G) 57.3 5039 17.2 46.9 10.3 5.7 13.2 17.1 0.2 1.9

Axis - Small Cap Fund Reg (G) 32.5 2720 16.0 38.1 6.4 8.5 10.8 18.8 0.2 2.1

HDFC - Small Cap Fund (G) 37.4 8645 16.4 50.2 (5.3) (0.4) 8.0 11.2 (0.0) 2.0

ICICI Pru - Smallcap Fund Reg (G) 25.3 1365 17.7 48.2 2.3 (0.8) 5.3 7.4 (0.1) 2.2

Thematic/Sectoral FundFranklin - Build India Fund (G) 32.4 918 (3.0) 23.2 (19.2) (5.1) 2.9 11.0 (0.2) 2.3

ICICI Pru - Banking & Financial Services Fund Reg (G) 48.5 2836 1.5 22.2 (23.7) (6.2) 6.0 13.9 (0.1) 2.1

Nippon India - Pharma Fund (G) 222.5 3653 15.9 63.6 57.1 19.6 7.6 21.0 0.7 2.7

Sundaram - Rural and Consumption Fund Reg (G) 39.6 1535 5.7 29.5 (3.7) (0.7) 9.3 10.1 (0.1) 2.2

Aditya Birla SL - Digital India Fund Reg (G) 71.1 540 34.4 66.2 32.3 25.1 14.6 7.8 0.8 2.6


All Data Belongs To September 25, 2020

NAV AUM (Rs Cr) 3 M 6 M 1 Yr 3 Yr 5 Yr

Since Inception

Return

Sharpe Ratio

Exp. Ratio

Blance/BAF FundSBI - Equity Hybrid Fund Reg (G) 137.0 31993 3.1 19.3 (1.2) 5.1 7.8 12.7 0.1 1.6

Sundaram - Equity Hybrid Fund Reg (G) 90.7 1595 4.0 23.2 (1.2) 4.7 7.7 11.8 0.1 2.2

ICICI Pru - Balanced Advantage Fund Reg (G) 37.3 26638 5.6 25.5 2.8 5.4 7.8 10.0 0.1 1.7

Kotak - Balanced Advantage Fund Reg (G) 11.6 4264 7.6 30.3 8.0 0.0 0.0 7.0 - 2.0

Aditya Birla SL - Balanced Advantage Fund (G) 54.4 2414 3.2 23.7 1.4 3.2 8.0 8.6 (0.0) 2.1

Equity Savings FundAditya Birla SL - Equity Savings Fund Reg (G) 14.0 506 4.3 14.4 3.2 2.6 6.1 5.9 (0.2) 2.5

DSP - Equity Saving Fund Reg (G) 12.9 419 4.7 17.5 1.3 2.5 0.0 5.8 (0.2) 2.4

Kotak - Equity Savings Fund Reg (G) 15.2 1367 4.0 16.5 5.5 5.7 7.1 7.3 0.1 2.2

Nippon India - Equity Savings Fund Reg (G) 10.0 422 1.5 11.8 (13.7) (6.4) (0.2) 0.0 (0.8) 2.6

SBI - Equity Savings Fund Reg (G) 13.6 1347 4.4 17.3 2.8 3.9 6.3 5.9 (0.1) 1.7

Arbitrage FundAditya Birla SL - Arbitrage Fund Reg (G) 20.5 4099 0.8 2.4 4.8 5.7 5.8 6.6 0.6 0.9

ICICI Pru - Equity Arbitrage Fund Reg (G) 26.4 9769 0.8 2.4 4.8 5.7 5.9 7.3 0.5 1.0

Kotak - Equity Arbitrage Fund (G) 28.6 15000 0.8 2.4 4.9 5.8 6.0 7.3 0.7 1.0

Nippon India - Arbitrage Fund (G) 20.5 7384 0.8 2.6 4.9 6.0 6.0 7.4 0.8 1.0

SBI - Arbitrage Opp Fund Reg (G) 25.8 3755 0.6 1.7 4.1 5.5 5.6 7.1 0.3 0.9

Index FundHDFC - Index Fund-NIFTY 50 Plan - (G) 101.0 1858 7.6 33.0 (3.3) 4.5 7.8 13.3 0.1 0.3

ICICI Pru - Nifty Next 50 Index Fund Reg (G) 23.3 782 2.0 35.9 (4.2) (1.5) 6.7 8.6 (0.2) 0.9

HDFC - Index Fund - Sensex Plan 333.5 1454 7.8 31.5 (2.9) 6.3 8.5 13.7 0.2 0.3

Motilal Oswal - Nasdaq 100 FOF (G) 17.2 868 7.5 38.4 49.0 0.0 0.0 33.3 - 0.5

Motilal Oswal - S&P 500 Index Fund Reg (G) 10.8 419 3.6 0.0 0.0 0.0 0.0 19.8 - 1.2

NAV AUMMod

Duration (in Yrs)

AMP (IN Yrs ) 3 M 6 M 1 Yr 2 Yr Sharpe Ratio

Exp. Ratio

Solutions

ICICI Pru - Retirement Fund Pure Debt Plan (G) 11.7 459 - 10.6544 (25/09/2019) 1.7 7.3 10.1 0.0 - 2.1

Aditya Birla SL - Retirement Fund 30s Plan (G) 10.0 150 - 7.07 (23/03/2020) 4.4 30.5 1.7 0.0 - 2.7

HDFC - Retirement Savings Fund Hybrid Equity Reg (G) 16.9 436 0.0 12.743

(23/03/2020) 7.1 27.1 1.1 3.5 0.0 2.4

Aditya Birla SL - Bal Bhavishya Yojna Wealth Plan (G) 10.4 282 - 7.38 (23/03/2020) 4.3 30.0 1.6 0.0 - 2.6

ICICI Pru - Child Care Gift Plan Reg 134.3 628 (0.0) 103.1 (23/03/2020) 6.0 23.4 (1.8) (0.6) (0.0) 2.5

Dynamic/Multi Assets

Invesco - India Dynamic Equity Fund (G) 29.5 744 (0.2) 22.68 (23/03/2020) 5.1 21.6 0.8 2.5 (0.1) 2.3

ICICI Pru - Asset Allocator Fund (FOF) (G) 58.3 8007 0.2 43.7926 (23/03/2020) 4.9 31.6 3.0 5.5 0.2 1.3

ICICI Pru - Multi Asset Fund (G) 253.5 10961 0.0 196.1272 (23/03/2020) 0.9 25.1 (3.6) (1.2) 0.0 1.7

SBI - Dynamic Asset Allocation Fund (G) 13.2 594 (0.1) 11.0136 (23/03/2020) 5.0 18.2 (1.6) (0.0) (0.1) 2.0

DSP - Dynamic Asset Allocation Reg (G) 16.4 1547 0.1 13.409 (23/03/2020) 2.6 18.0 4.2 6.6 0.1 2.3

Disclaimer: Mutual Fund investments are subject to market risks, read all scheme related documents carefully.


Technical viewKey takeaways from September 2020 � India’s Gross Domestic Product growth rate had

contracted by 23.9% for the April to June quarter

� India services PMI for the month of August came improved to 41.8 in August from 34.2 in July

� IHS Markit India Manufacturing Purchasing Managers’ Index stood at 52 in August 2020 from 46 in July

� India’s Index of Industrial Production contracted 10.4% in July 2020 compared to a year ago

� India’s CPI Inflation growth across the country eased to 6.69% in the month of August

� WPI, stood at (0.16%) (Provisional) for the month of August 2020 as compared to 1.17% during the corresponding month of the previous year.

� S&P Global Ratings has forecast India’s economy to shrink by 9% in FY21

� India’s trade deficit is at $6.77 billion,

compared to a shortfall of $13.86 billion in the same month last year.

� RBI mandated the automation of bad-loan recognition by banks by 30 June 2021.

� Lok Sabha passed the Banking Regulation (Amendment) Bill, 2020. With this new Bill, the central government aims to bring cooperative banks under the supervision of the RBI

� Lok Sabha, through voice vote, passed the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 and the Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020.

� SEBI issued a circular on multi cap schemes of mutual funds, requiring them to invest a minimum of 25% each in large, mid and small cap stocks, with the balance 25% giving flexibility to the fund manager

More than half of NSE 500 stocks have slipped below their 200 DMA after the recent selloff triggered by persistent worries of the second wave of Covid-19. About 170 of the top 500 stocks are currently trading more than 10% below their 200 DMA signaling broader weakness.


� Federal Reserve on Wednesday vowed to keep interest rates near zero until inflation is on track to overshoot the U.S. central bank’s 2% target

Markets corrected last month. Intermittent sell offs during the month kept the gains in check after 5 continuous months of gain. Market breadth was also negative with 9 out of the 21 trading sessions turned positive. On the sectoral front, all sectors ended deep in red mimicking broader markets. Nifty Metal, Banks and Realty were worst performers with each losing more than 12% last month. Other sectors were also in deep red with exception of Nifty IT and Teck which were up by 4.4% and 0.6% respectively. Broad market indices like the Nifty Mid Cap and Small Cap indices too ended in deep red with a decline of 8.1% and 5.7% respectively.

Nifty formed a bearish ‘Marubozu’ candle in weekly time frame, such pattern has a bearish implication as it paired most of the gains. Marubozu Pattern means that bears have completely reverse the gains hence bearish movement is on. Volumes were stronger in the broader market hence a cautious approach needs to be maintained. The market breadth remained negative with A/D ratio of 1:2 with Nifty Midcap, Small cap declined by 8.1%, 5.7%, respectively. Every rise is being pressurized by resistance and sellers dominated leading to gradual drift and threatening the major trend from positive to negative. Now it to hold above 10800 zones to maintain its upward trajectory towards 11250 followed by 11550, while on the downside key support exists at 10650 then 10450 zones.

80000

60000

40000

20000

-20000

-40000

-60000

-80000

0

Sep-

19

Oct

-19

Nov

-19

Dec

-19

Jan-

20

Feb-

20

Mar

-20

Apr

-20

May

-20

Jun-

20

Jul-2

0

Aug-

20

Sep-

20

Fll (Rs. Cr.) Dll (Rs. Cr.)

0

0

0

0

0

0

0

PSU

Met

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Real

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Fina

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4.4%

0.6%

-0.1

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-3.7

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.7%

-6.5

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-8.0

%-8

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-8.5

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-9.1

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-12.

1%-1

2.2%

-13.

3%-1

4.3%

-16.

2%

*From 28th Aug 2020 to 24 Sept 2020

On the oscillator front as per the Nifty daily chart, the daily momentum indicators are showing bearishness in the short term. On the weekly charts, most momentum indicators and oscillators has turned negative from neutral zone. RSI oscillator has breached its strong resistance of 50 and continues to trade below the 50 levels mark on the monthly chart as well, which seem as the reversal point from its March 2020 reading. Daily MACD Indicator has been struggling to sustain move above its zero line. Daily DMI Indicator has also reached the contraction zone after the positive move, which indicates the weakness in the short term trend. Hence as long as Nifty continues to trade above the 10800 level we could expect the short term bias to remain positive, breach of which could be extremely negative for the market.

Nifty remained volatile for major part of the month, however Index has been staging decline at every meaningful gain. The bulls last month has been able to defend the rising 200dma which is positive. Hence going by the present structure only a closing below the 50dma would possibly give strength to the bears. Interesting to note, that more than half of NSE 500stocks have slipped below their 200 DMA after the recent selloff triggered by persistent worries of the second wave of Covid-19. About 170 of the top 500 stocks are currently trading more than 10% below their 200 DMA signaling broader weakness. Nifty is currently trading just half a percent above its 200DMA while Nifty Midcap and Smallcap are 4% and 9% ahead of 200DMA. Since 200DMA is a long term average it is considered a major support level for the and Index or stock


In Elliott wave analysis currently, Nifty is in wave B of ‘Flat’ with an upward unfolding. The upside target for wave ’B’ of the flat as theoretically projects 78.6-80% of wave ’A’ comes around 11450-11500. On the downside the level of 10500 identified by the rising trendline in weekly chart and the 61.8% of the entire decline since Jan’20 would be crucial and would confirm the existence of Flat wave ‘B’. Wave C following Wave B would virtually be very sharp and would likely last for an average 12 months and may result in a fall between 40% and 60% from the level where the wave began.

Other correlated marketsOther correlated markets like in Bullion counter, Gold prices hit a more than two-month trough on, weighed down by a robust dollar. The dollar index held firm near a more than eight-week peak against rival currencies, as signs of an economic slowdown in Europe and the U.S. renewed concerns about a second wave of novel coronavirus infections. Gold prices also edged higher supported by renewed U.S.-China tensions and concerns over economic recovery.

Crude oil fell on concerns the economic recovery in the United States, the world’s biggest oil consumer, is slowing as the coronavirus outbreak lingers and a resurgence in European cases led to new travel restrictions there. Prices turned down after slow down in U.S. business activity, U.S. Federal Reserve officials also flagged concerns about a stalling recovery, and Britain and Germany imposed restrictions to stem new coronavirus infections all factors affecting the fuel demand outlook

Bulk flows from fund raising by domestic companies over $33.3 bn since early January this year which set the stage for rupee to rise beyond 74.00. However Federal Reserve latest monetary policy guidance which is somehow positive for dollar in short term as well as sell-off in global equities may cap the rally in rupee.

Crystal gazing the derivative dataFewer positions were carried forward to the October derivatives series on expiry of the September contracts as traders fretted about the near-term market prospects following the recent selloff. Mostly traders stayed on the sidelines, while some created fresh short positions with foreign portfolio investors (FPIs) have been continuously dumping shares for the past few trading sessions. dumping shares worth Rs 6,000 crore in the past six sessions. Nifty futures’ rollover to the October series was 70%, lower than the three-month average of 78%, Market wide rolls remained higher 92% vs 3month avg. of 89%. Hence outlook is turning negative as it seems that traders have exited their long position and fresh shorts being added followed by continuous selling by foreign investors. India VIX is up by 24 per cent on expiry-to-expiry basis. Higher volatility suggests bear grip with capped upside in the market. On the option front Since it is the beginning of new series, option data is scattered at various strikes. Maximum Put OI is at 10500 followed by 10000 strike, while maximum Call OI is at 11500followed by 12000 strike. We have seen marginal Call writing in 11000 and 11300 strike while Put writing is seen at10600 then 10500 strike. Option data suggests a wider trading range in between 10300 to 11500 zones

On the retracement principle we believe that Nifty has strong support at 10800. Hence, extended breather would get anchored around key support threshold of 10800 as it is confluence of 23.6% retracement rally since May 2020 (7583-11794) and the 200EMA in daily time frame. However a decisive close below 10800 would confirm a near term reversal and might undergo some price correction in coming days. The next crucial support emanates from 38.2% retracement of the same which comes around 10165 which further coincides with the swing low of 2018.


Call -Put Options Open Interests Distributions for Oct’20 Contract

3500000

9900

1425

012

5775

4155

7516

9560

0

3322

517

1450

1995

0 5665

50

2242

5 5414

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1912

561

1475

2329

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3960

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7807

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6612

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2133

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2410

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3789

0054

4800

1237

275

1643

550

5601

0060

7800

8360

2590

7575

8510

2598

6775

6903

7534

5825

1517

100

7995

75

6533

2510

7925 69

1125

6000

0

7130

2543

500

1000

0

1010

0

1020

0

1030

0

1040

0

1050

0

1060

0

1070

0

1080

0

1090

0

1100

0

1110

0

1120

0

1130

0

1140

0

1150

0

1160

0

1170

0

1180

0

3000000

2500000

2000000

1500000

1000000

500000

0

Call Put

3036

525

Summing it up:To sum up it seems that there is still room for correction in the market as inflows from FIIs who have turned net sellers in the month of September though a broad based recovery was seen but one can expect the selling to re-emerge at higher levels around 11250-11300. According to dow theory ‘Lower Top Lower Bottom formation too can be seen since May lows. Hence, the probability of Nifty sliding below 10820 – 10770 is quite high to test the next cluster of supports around 10600 – 10450. Although l Nifty bounced back sharply after taking support at its 200 days exponential moving average on daily charts which is placed at 10845 levels and as far as Nifty is holding above 10800 levels, the bias is likely to remain in favour of bulls.

Other indices to watch for:Nifty PharmaPositive Momentum in the Index remains strong with consistent higher high formation in weekly time frame. The index did not breach the trend line support and has been moving sharply. Positive momentum is clearly visible on charts and is likely to continue in forthcoming days, all short term and medium term moving averages are trending upward hence indicating the intermediate trend to remains positive. Supports are placed at 10900- 10700 while resistances are placed at 12550 – 13000.

Nifty ITThe Index after a brief consolidation has been making higher high and higher low formation reinstating of the presence of a strong trend. The Index has been presently trading above the 150% extension level of the previous level, now the Index is heading higher towards 161.8% followed by 178.2% at 20525 and 21490 respectively. The Index if holds above 19100 level then this move could continue. Supports are placed at 19100-18400 while resistances are placed at 20525 – 21490.


75 December 2019INSIGHT

This is another book from the stable of most renowned investor Howard Marks, who earlier wrote the book titled “The most important things illuminated” and won millions of hearts. His profound wisdom and experience of the financial market and his deep insight on risk & human psychology is a real treat for the student of finance and investing to only cherish in amazement, about the confluence of event make things work in cycles.

This book is all about understanding cycles in the financial world and how one can position himself, aggressive or otherwise and tilt the odds in his favor.

Instead of predicting macro which is fraught with lot of risk and is less useful in determining success for a vast majority of investors, one can gainfully spend time in three general areas: Trying to know more than others

about what is called “the knowable”: the fundamentals of industries, companies and securities,

Being disciplined as to the appropriate price to pay for a participation in those fundamentals, and Understanding the investment environment, we’re in

and deciding how to strategically position our portfolios for it.

In light of the above basis premises the book, the about calibrating one’s portfolio position is the most desired way. Also, in context of the above, the writer talks about risk as primarily the likelihood of permanent capital loss. Other, is the opportunity risk: likelihood of missing out on poten-tial gains. As there could be many different outcomes, uncertainty and risk are inescapable and hence one needs to understand the element of risk and encompass this element while positioning his portfolio in dif-ferent market cycles. Because of the likelihood of a range of possibilities, probability distribution reflects one’s view of tendencies appropriately.

The author goes on to explain that the nature of cycle is the oscillation of

Mastering the Market Cycle: Howard Marks “We may never know where we are going, but we’d better have a good idea where we are.”

BOOK REVIEW

Midpoint (secular trend) around which the cyclicality happens is the Happy medium. Importantly the secular growth rate may be subject to a cycle as well, but a longer term, more gradual one.


76December 2019 INSIGHT

things around the midpoint (Happy medium) or secular trend. Cycles vary in terms of reasons and details, and timing and extent, but the ups and downs (and the reasons for them) will occur forever, producing changes in the investment environment- and thus in the behavior that is called for. The extremes of the oscillation and in the cycles always revert to its mean.

The midpoint (secular trend) around which the cyclicality happens is the Happy medium. Importantly the secular growth rate may be subject to a cycle as well, but a longer term, more gradual one. Ultimately, the variations in those deviation timing, speed and extent from the mid-point- are largely produced by fluctuations in psychology. The developments could be both from exogenous factors and endogenous factors. Also, to note that symmetry in cycle only applies to dependably with direction, not necessarily to the extent, timing or pace of movement. The magnitude of upward or downward movement may or may not match.

Now he goes on to explain the economic cycle: The output of an economy is the product of hours worked and output per hour; thus, the long-term growth of an economy is determined primarily by fundamental factors like birth rate and the rate of gain in productivity. These factors relatively change little from YoY and only gradually form decade to decade. Hence the average rate of growth is rather steady over long periods of time. And the long-term trend is more to do with demographic movements, determinants of inputs, aspirations, education, technology, automation and globalization.

Short term variations in GDP can be because the number of workers working and the amount, they earn were relatively constant, we might expect the amount they spend on con-sumption to be similarly constant. But it isn’t. Spending fluctuates more than employment and earnings because of “marginal propensity to consume”. This propensity is variable in short run, consumption can vary inde-pendently of income. These spending pattern fluctuates with favorable headlines, strong economy, election

results presage, higher income, lower taxes, consumer credit, asset appreciation, celebration, wealth effect etc.

The author concludes that the economic/macro forecast may not bring individual prosperity in investing as they are less reliable and average secular trend are well known. Major deviation from trend (a) occur infrequently and (b) are hard to correctly predict, most uncon-ventional, non-extrapolation forecasts turn out to be incorrect, and anyone who invests on their basis is usually likely to do below average. So, surprise element is very rare and hard to consistently predict any major deviations year after year.

Here now comes the cycle in profits: Sales are responsive to economic cycle in some industries, and in some they aren’t. And some respond a lot, while others respond just a little. Sales of industrial raw materials and components respond to GDP expansion, Everyday necessities like food, beverages and medicines are less responsive to economic cycle, demand for low cost consumer item isn’t very volatile whereas luxury goods and vacation trips may, purchase of big ticket durable goods like cars and homes for individuals and trucks and factory equipment for businesses are highly responsive economic cycle, demand for everyday services generally isn’t volatile like transportation, haircuts etc. are less sensitive to changes in economy.

Because the operating leverage is great for companies when the economy does well and sales rise. Hence economic cycle has profound effect on some companies’ sales of but less on others. Largely because of difference in operating and financial leverage, given percentage change in sales has a much greater impact on profits of some companies than for others. And more importantly, idiosyncratic developments have a very significant impact on profits. These can be with regard to inventory man-agement, capital investments, production level, techno-logical advancements, changes in regulation and taxes etc.

Now with the backdrop in place with regards to the general definition of cycles and the economic cycle and profit cycle in place, the pendulum of investor psychology is of paramount importance in judging the true nature of cycles.

In business, financial and market cycles, most excesses on the upside-and the inevitable reactions to the downside, which also tend to over-shoot- are the result of exaggerated swings of the pendulum of psychol-ogy. Thus, understanding and being alert to excess swings is an entry-level requirement for avoiding harm from cyclical extremes, and hopefully for profiting from them. The oscillation happens Between greed & fear Between optimism and pessimism

In business, financial and market cycles, most excesses on the upside-and the inevitable reactions to the downside, which also tend to overshoot- are the result of exaggerated swings of the pendulum of psychology.



things around the midpoint (Happy medium) or secular trend. Cycles vary in terms of reasons and details, and timing and extent, but the ups and downs (and the reasons for them) will occur forever, producing changes in the investment environment- and thus in the behavior that is called for. The extremes of the oscillation and in the cycles always revert to its mean.

The midpoint (secular trend) around which the cyclicality happens is the Happy medium. Importantly the secular growth rate may be subject to a cycle as well, but a longer term, more gradual one. Ultimately, the variations in those deviation timing, speed and extent from the mid-point- are largely produced by fluctuations in psychology. The developments could be both from exogenous factors and endogenous factors. Also, to note that symmetry in cycle only applies to dependably with direction, not necessarily to the extent, timing or pace of movement. The magnitude of upward or downward movement may or may not match.

Now he goes on to explain the economic cycle: The output of an economy is the product of hours worked and output per hour; thus, the long-term growth of an economy is determined primarily by fundamental factors like birth rate and the rate of gain in productivity. These factors relatively change little from YoY and only gradually form decade to decade. Hence the average rate of growth is rather steady over long periods of time. And the long-term trend is more to do with demographic movements, determinants of inputs, aspirations, education, technology, automation and globalization.

Short term variations in GDP can be because the number of workers working and the amount, they earn were relatively constant, we might expect the amount they spend on con-sumption to be similarly constant. But it isn’t. Spending fluctuates more than employment and earnings because of “marginal propensity to consume”. This propensity is variable in short run, consumption can vary inde-pendently of income. These spending pattern fluctuates with favorable headlines, strong economy, election

results presage, higher income, lower taxes, consumer credit, asset appreciation, celebration, wealth effect etc.

The author concludes that the economic/macro forecast may not bring individual prosperity in investing as they are less reliable and average secular trend are well known. Major deviation from trend (a) occur infrequently and (b) are hard to correctly predict, most uncon-ventional, non-extrapolation forecasts turn out to be incorrect, and anyone who invests on their basis is usually likely to do below average. So, surprise element is very rare and hard to consistently predict any major deviations year after year.

Here now comes the cycle in profits: Sales are responsive to economic cycle in some industries, and in some they aren’t. And some respond a lot, while others respond just a little. Sales of industrial raw materials and components respond to GDP expansion, Everyday necessities like food, beverages and medicines are less responsive to economic cycle, demand for low cost consumer item isn’t very volatile whereas luxury goods and vacation trips may, purchase of big ticket durable goods like cars and homes for individuals and trucks and factory equipment for businesses are highly responsive economic cycle, demand for everyday services generally isn’t volatile like transportation, haircuts etc. are less sensitive to changes in economy.

Because the operating leverage is great for companies when the economy does well and sales rise. Hence economic cycle has profound effect on some companies’ sales of but less on others. Largely because of difference in operating and financial leverage, given percentage change in sales has a much greater impact on profits of some companies than for others. And more importantly, idiosyncratic developments have a very significant impact on profits. These can be with regard to inventory man-agement, capital investments, production level, techno-logical advancements, changes in regulation and taxes etc.

Now with the backdrop in place with regards to the general definition of cycles and the economic cycle and profit cycle in place, the pendulum of investor psychology is of paramount importance in judging the true nature of cycles.

In business, financial and market cycles, most excesses on the upside-and the inevitable reactions to the downside, which also tend to over-shoot- are the result of exaggerated swings of the pendulum of psychol-ogy. Thus, understanding and being alert to excess swings is an entry-level requirement for avoiding harm from cyclical extremes, and hopefully for profiting from them. The oscillation happens Between greed & fear Between optimism and pessimism

In business, financial and market cycles, most excesses on the upside-and the inevitable reactions to the downside, which also tend to overshoot- are the result of exaggerated swings of the pendulum of psychology.


Between risk tolerance and risk aversion Between credence and skepticism Between faith in value in the future and insistence of

concrete value in the present Between urgency to buy and panic to sell

The oscillation is one of the most dependable features of the investment world, and investor psychology seems to spend much more time at the extremes than it does at a “happy medium” The trendline rate of growth in economic output and

corporate profits is moderate. With pro-cyclical decisions cause growth to be abnormally rapid and hence the retreat and regression to the mean Likewise, it seems rational that, in the long run, stocks

overall should provide returns in line with the sum of their dividends plus the trendline growth in corporate profits, or something in the mid to high single digits. When they return much more than that for a while, the return is likely to prove to have been excessive-borrowing from the future and thus rendering stocks risky- meaning a downward correction is now in order.

Thus, understanding and being alert to excessive swings is an entry-level requirement for avoiding harm from cyclical extremes, hopefully for profiting from them.

The superior investor is mature, rational, analytical, objective and unemotional. And he buys when any dis-count of the price from the current intrinsic value, plus any potential increases in intrinsic value in the future, together suggest that buying at the current price is a good idea. And to be able to do so, the superior investor strikes an appropriate balance between fear and greed. The conflicting elements is kept in balance and take a even-keeled behavior. The superior investor takes opportuni-ties from both the virtuous circle and the vicious circle where exaggeration is clearly visible. The exaggeration is not the data or events; but the interpretation. And that fluctuates with swings in psychology. Accurate decision and appropriate conclusion happen objectively rather than emotionally and to shun the selective perception and skewed interpretation. And this requires great amount of self- awareness and self-restraint.

Now the most important element to handle and the author reflects the importance of the topic is the cycle in attitudes toward risk. Since (a) investing comes from dealing with the future but (b) the future isn’t knowable, that’s where the risk in investing comes from.

The widespread dislike for risk and the resultant

insistence on incremental potential return if incremental risk is to be borne are the reasons why different invest-ment avenues have different return profile with risk premium. These are general expectation and promises or “what may happen” or “should happen” rather than “will happen” or “sure to happen”.

The increase in expected return generally will appear to be consistently proportional to the incremental risk.

The key thing to note is that fluctuations in attitudes towards risk can cause expectations to the principles described here. Sometimes investors become too risk-averse, and sometimes they relax their risk aversion and become too risk-tolerant.

In times of obliviousness towards risk- or high-risk tolerance-the reduced demand in terms of risk premiums causes the slope of the line to flatten and the amount of risk compensation to shrink, i.e.; there’s less of a return increment per unit increase in risk. The payoff for risk-bearing is sub-par

The sequence of the event for risk is that positive event lead to optimism and it leads to make people more risk tolerant. Increase in risk tolerance causes lower risk premiums to be demanded. A reduction in demanded risk premiums equates to lower demanded returns on risky assets. A reduction of demanded returns on risky assets causes their prices to rise. Eventually higher prices make assets even riskier and attracts momentum investors.

It follows from the above that risk is high when investors feel risk is low. And risk compensation is at a minimum just when risk is at maximum.



Widespread risk tolerance- or a higher degree of investor comfort with risk- is the greatest harbinger of subsequent market declines.

The opposite happens with risk aversion and there is swollen risk premium. Screaming risk aversion makes them sellers- certainly not buyers at the bottom. It fol-lows that the risk is at its lowest when investors feel risk is high. Risk compensation is at its highest just when risk is at its minimum. Exaggerated payoff for risk-bearing.

Just as risk tolerance is unlimited at the top, it is non-ex-istent at the bottom. Avoid extremes in behavior. Rather tend towards the middle in most of the things- reasonable balance between too much and too little.

When total fear replaces a high degree of confidence, excessive risk aversion takes the place of unrealistic risk tolerance. Also, during negative envi-ronment, excessive risk aversion can cause people to subject investments to unreasonable scrutiny and endlessly negative assumptions. If optimism is low; expectations are modest; negative surprises are unlikely; and slightest turn for the better would result in appreciation.

So, for risk; skepticism calls for pes-simism when optimism is excessive. But it also calls for optimism when pessimism is excessive. Understand-ing how investors are thinking about and dealing with risk is perhaps the most important thing to strive for.

The rational investor is diligent, skeptical and appropri-ately risk-averse at all times, but also on the lookout for opportunities for potential return that more than com-pensate for risk and behave as contrarian.

Now comes the credit cycle: It takes only a small fluctua-tion in the economy to produce a large fluctuation in the availability of credit, with great impact on asset prices and back on the economy itself.

Profit fluctuates more than GDP, but still relatively moderately- but securities markets soar, and collapse do dramatically? I attribute this to fluctuations in psychology and, in particular, to the profound influence of psychol-ogy on the availability of capital. Credit market is most volatile of the cycles and has the greatest impact. Where we stand in the credit cycle-whether credit is readily available or difficult to obtain- is the greatest determinant of whether debt can be refinanced at a given time. Point to note that the worst loans are made at the best of times. It leads to capital destruction- that ism to the investment of capital in projects where the cost of capital exceeds the return on capital, and eventually to cases where there is no return of capital.

The degree of openness of the credit window depends almost entirely on whether providers of capital are eager or reticent, and it has a profound impact on economies, companies, investors and the prospective return and riskiness of the investment opportunities that result.

An uptight, cautious credit market usually stems from, leads to or connotes things like these:

Fear of losing money

Heightened risk aversion and skepticism

Unwillingness to lend and invest regardless of merit

Shortages of capital everywhere

Economic contraction and difficulty refinancing debt

Defaults, bankruptcies and restructurings

Low asset prices, high potential returns, low risk and excessive risk premiums

Quite reverse is the case of a generous capital market

The bottomline is that generous credit markets usually are associated with elevated asset prices and subsequent losses, while credit crunches produce bargain-basement prices and great profit opportunities.

Superior investing doesn’t come from buying high-quality assets, but from buying when the deal is good,

Generous credit markets usually are associated with elevated asset prices and subsequent losses, while credit crunches produce bargain-basement prices and great profit opportunities.



Widespread risk tolerance- or a higher degree of investor comfort with risk- is the greatest harbinger of subsequent market declines.

The opposite happens with risk aversion and there is swollen risk premium. Screaming risk aversion makes them sellers- certainly not buyers at the bottom. It fol-lows that the risk is at its lowest when investors feel risk is high. Risk compensation is at its highest just when risk is at its minimum. Exaggerated payoff for risk-bearing.

Just as risk tolerance is unlimited at the top, it is non-ex-istent at the bottom. Avoid extremes in behavior. Rather tend towards the middle in most of the things- reasonable balance between too much and too little.

When total fear replaces a high degree of confidence, excessive risk aversion takes the place of unrealistic risk tolerance. Also, during negative envi-ronment, excessive risk aversion can cause people to subject investments to unreasonable scrutiny and endlessly negative assumptions. If optimism is low; expectations are modest; negative surprises are unlikely; and slightest turn for the better would result in appreciation.

So, for risk; skepticism calls for pes-simism when optimism is excessive. But it also calls for optimism when pessimism is excessive. Understand-ing how investors are thinking about and dealing with risk is perhaps the most important thing to strive for.

The rational investor is diligent, skeptical and appropri-ately risk-averse at all times, but also on the lookout for opportunities for potential return that more than com-pensate for risk and behave as contrarian.

Now comes the credit cycle: It takes only a small fluctua-tion in the economy to produce a large fluctuation in the availability of credit, with great impact on asset prices and back on the economy itself.

Profit fluctuates more than GDP, but still relatively moderately- but securities markets soar, and collapse do dramatically? I attribute this to fluctuations in psychology and, in particular, to the profound influence of psychol-ogy on the availability of capital. Credit market is most volatile of the cycles and has the greatest impact. Where we stand in the credit cycle-whether credit is readily available or difficult to obtain- is the greatest determinant of whether debt can be refinanced at a given time. Point to note that the worst loans are made at the best of times. It leads to capital destruction- that ism to the investment of capital in projects where the cost of capital exceeds the return on capital, and eventually to cases where there is no return of capital.

The degree of openness of the credit window depends almost entirely on whether providers of capital are eager or reticent, and it has a profound impact on economies, companies, investors and the prospective return and riskiness of the investment opportunities that result.

An uptight, cautious credit market usually stems from, leads to or connotes things like these:

Fear of losing money

Heightened risk aversion and skepticism

Unwillingness to lend and invest regardless of merit

Shortages of capital everywhere

Economic contraction and difficulty refinancing debt

Defaults, bankruptcies and restructurings

Low asset prices, high potential returns, low risk and excessive risk premiums

Quite reverse is the case of a generous capital market

The bottomline is that generous credit markets usually are associated with elevated asset prices and subsequent losses, while credit crunches produce bargain-basement prices and great profit opportunities.

Superior investing doesn’t come from buying high-quality assets, but from buying when the deal is good,

Generous credit markets usually are associated with elevated asset prices and subsequent losses, while credit crunches produce bargain-basement prices and great profit opportunities.


the price is low, the potential return is substantial, and the risk is limited. These conditions are much more the case when credit markets are in the less-euphoric, more stringent part of their cycle. The slammed-shut phase of the credit cycle probably does more to make bargains available than any other single factor.

The rise and fall of opportunities in the market for dis-tressed debt stems from the interaction of other cycles: in the economy, investor psychology, risk attitudes and the credit market.

Point to note is that a distressed debt investor tries to figure out (a)what bankrupt company is worth (b) how the value will be divided among the company’s creditors and other claimants, and (c)how long this process will take. With correct answers to these questions, he can determine what the annual return will be on a piece of the company’s debt if purchased at a given price.

Putting it all together- the market cycle:

Prices are affected primarily by developments in two areas: fundamentals and psychology

Fundamentals, which is “events” can largely be reduced to earnings, cashflow, and the outlook for the two. They are affected by many things, including trends in the economy, profitability and the availability of capital.

And Psychology- how investors feel about fundamen-tals and value them-likewise affected by many things, particularly investors’ level of optimism and attitude toward risk.

The truth is that financial facts and figures are only a starting point for market behavior; investor rationality is the exception, not the rule; and market spends little of its time calmly weighing financial data and setting prices free of emotionality. Profit fluc-tuates moderately to long term GDP growth, because of the operational and financial leverage. Psychology fluctuates more than the profit growth and hence a highly volatile capital markets despite of meaningful changes in fundamentals from day to day or month on month. Add to it the liberal credit market which leads to explosion in risk perception and hence higher asset prices and then finally greed leading to a collapse in price of assets.

The first stage, when only a few unusually perceptive people believe things will get better

The second stage, when most investors realize that improvement is actually taking place, and

The third stage, when everyone concludes things will get better forever

“What the wise man does in the beginning, the fool does in the end.”

The most important thing to note is that the maximum psychology, maximum availability or credit, maximum price, minimum potential return and maximum risk all are reached at the same time, and usually these extremes coincide with the last paroxysm of buying.

This conceptual depiction indicates the relationship between cycle level and potential for return.

Now to the moot question of how to identify where the market stands in its cycle. Importantly, the elements that contribute to the market’s rise manifest themselves via valuation metrics-p/e ratios on stocks, yields on bonds, capitalization ratios on real estate, and cash flow multiples on buyouts-that are elevated relative to historic norms. All these are precursors of low prospective returns. The reverse is true when a market collapse takes

asset prices to bargain valuations. These things can be observed and quantified. Second, understanding of cycle positioning can be greatly aided by an understanding of how investors are behaving because it majorly bears the root cause of disproportionate risk in an asset. It is not you buy that determines your results, it’s what you pay for it. And what you pay -the security’s price and its relationship to intrinsic value- is determined by investor psychology and the result-ing behavior. Excellent investment decision can be made on the basis of present observations, with no need to make guesses about the future.

Now to cope with market cycles, authors remarks as mentioned below:

a>quantitative analysis of investment class

b>qualitative assessment of investors

Fundamentals, which is “events” can largely be reduced to earnings, cashflow, and the outlook for the two. They are affected by many things, including trends in the economy, profitability and the availability of capital.



behavior, risk, long-term growth, greed & fear etc.

The key question can be boiled down to two: how are things priced, and how are investors around us behaving? Assessing these two elements – consistently and in disciplined manner- can be very helpful. The answer to these to these will give us a sense fir where we stand in the economic cycle. Where we stand influences the tendencies and probabilities.

Also, as interesting view shared by the author is the fact that why targeting a bottom is wrong, and when should you then buy? The answer is simple: when price is below intrinsic value. What if prices continue downward> Buy more, as now it’s probably an even greater bargain. All you need for ultimate success in this regard is (a) an estimate of intrinsic value, (b) the emotional fortitude to persevere, and (c) eventually to have your estimate of value proved correct.

Understanding what things really mean- rather than how they make investors feel- is the first step toward doing the things that are right for the times.

Finally, on positioning a portfolio as market moves through its cycles is the essence, which the author simply puts it this way:

It is helpful to take an organized approach to what he calls the “twin risks.” The investors have to deal daily with two possible sources of error.

The first is obvious: The risk of losing money

The second is bit more subtle: the risk of missing opportunity

Investors can eliminate either one but doing so will expose them entirely to the other. So, most people

balance the two: When market is high in its cycle, they should emphasize limiting the potential for losing money, and when the market is low in its cycle, they should emphasize reducing the risk of missing opportunity. For this try to travel into the future and look back. What you think you might say a few years down the road can help you figure out what you should do today. These decisions relate directly to the choice between aggressiveness and defensiveness. Varying one’s stance between defensiveness (not losing money) and aggressiveness (not missing oppor-tunity) should be done in response to where the market stands in its cycle and, again this can be approached in terms of how the market is valued and how other investors are behaving.

For example, in late 2008/early 2009, an investor needed only two things to make a lot of money: money to invest and the

nerve to invest it. It he had those two things; he made a lot of money in the years that followed. In retrospect, what he didn’t need was caution, conservatism, risk control, discipline, selectivity and patience; the more of those things he had, the less money he made.

To my mind, this potentially reflects upon the hallmark of investing after understanding the valuation and the psychology of human behavior.

Finally, the three ingredients for success- aggres-siveness, timing and skill- and if you have enough aggressiveness at the right time, you don’t need that much skill.

Sir Isaac Newton:

I can calculate the motions of heavenly bodies, but not the madness of the people.”

The market’s rise manifest themselves via valuation metrics-p/e ratios on stocks, yields on bonds, capitalization ratios on real estate, and cash flow multiples on buyouts-that are elevated relative to historic norms.



behavior, risk, long-term growth, greed & fear etc.

The key question can be boiled down to two: how are things priced, and how are investors around us behaving? Assessing these two elements – consistently and in disciplined manner- can be very helpful. The answer to these to these will give us a sense fir where we stand in the economic cycle. Where we stand influences the tendencies and probabilities.

Also, as interesting view shared by the author is the fact that why targeting a bottom is wrong, and when should you then buy? The answer is simple: when price is below intrinsic value. What if prices continue downward> Buy more, as now it’s probably an even greater bargain. All you need for ultimate success in this regard is (a) an estimate of intrinsic value, (b) the emotional fortitude to persevere, and (c) eventually to have your estimate of value proved correct.

Understanding what things really mean- rather than how they make investors feel- is the first step toward doing the things that are right for the times.

Finally, on positioning a portfolio as market moves through its cycles is the essence, which the author simply puts it this way:

It is helpful to take an organized approach to what he calls the “twin risks.” The investors have to deal daily with two possible sources of error.

The first is obvious: The risk of losing money

The second is bit more subtle: the risk of missing opportunity

Investors can eliminate either one but doing so will expose them entirely to the other. So, most people

balance the two: When market is high in its cycle, they should emphasize limiting the potential for losing money, and when the market is low in its cycle, they should emphasize reducing the risk of missing opportunity. For this try to travel into the future and look back. What you think you might say a few years down the road can help you figure out what you should do today. These decisions relate directly to the choice between aggressiveness and defensiveness. Varying one’s stance between defensiveness (not losing money) and aggressiveness (not missing oppor-tunity) should be done in response to where the market stands in its cycle and, again this can be approached in terms of how the market is valued and how other investors are behaving.

For example, in late 2008/early 2009, an investor needed only two things to make a lot of money: money to invest and the

nerve to invest it. It he had those two things; he made a lot of money in the years that followed. In retrospect, what he didn’t need was caution, conservatism, risk control, discipline, selectivity and patience; the more of those things he had, the less money he made.

To my mind, this potentially reflects upon the hallmark of investing after understanding the valuation and the psychology of human behavior.

Finally, the three ingredients for success- aggres-siveness, timing and skill- and if you have enough aggressiveness at the right time, you don’t need that much skill.

Sir Isaac Newton:

I can calculate the motions of heavenly bodies, but not the madness of the people.”

The market’s rise manifest themselves via valuation metrics-p/e ratios on stocks, yields on bonds, capitalization ratios on real estate, and cash flow multiples on buyouts-that are elevated relative to historic norms.

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62September 2020 INSIGHT

For institution business please contactMr. Dilip Minny (Co-founder- Institution); Mobile: +91 90070 66096; Email: [email protected]

Products Products Contact

• TradeX (Mobile App & Web base)

• Online Equity, Derivative, Currency and Commodity Trading Facility

• InvestX (Mobile App & Web base) • A One Stop Solution to all

your Mutual Funds needs online.

• Back Office Reports on WhatsApp. Ashika BOT on

Whatsapp / Telegram.

• Ask ACIRA - • Online Customer service

for clients on our website.

• Margin Trading Facility (MTF)

• With this MTF facility client can trade inspite of debits beyond T+7.

• EKYC • it now takes just 30 mins to open an

Account.

• ReKYC • hassle-free & paperless modification

without stepping out.

• Research Services• A galaxy of potential research team

to provide the best equity research reports, ideas, solving queries and many more.

• Online Fund Transfer Facility

• Securities Lending and Borrowing (SLB) • Provide securities lending and

borrowing at a market competitive rates

• Depository Services (CDSL/NSDL) • Provide one roof solution wherein

seamless trading could be ensured through DP maintained with Ashika

For Business Opportunity please contact

Mr. Amit Jain (CEO – Retail)Mobile: +91 90070 66000E-mail: [email protected]

Mr. Niraj Sarawgi (CEO - PCG)Mobile: +91 91676 16989Email: [email protected]

For Services please contact

Mr. Ashwini Kumar Gautam (COO)Mobile: +91 90070 66097Email: [email protected]

Services at Ashika Stock Broking Limited

For start-up investing please contact Mr. Chirag Jain (CEO); Contact: +91 22 66111700; E-mail: [email protected]

Capital Markets Fund Raising Advisory Contact

• Issue Management • IPO / FPO • Right Issue • Qualified

Institutional Placement

• Open Offer • Takeover • buyback • Delisting

• Overseaslisting

• Underwriting

• Private Equity• Venture /

Growth Capital • Pipe

• Debt Syndication• Project Finance• Team Loan• Working Capital

Loan • Acquisition

Funding • Construction

Finance

• M &A• Merger / Acquisition /

Disposal• Management buy-outs /

buy-ins• Leveraged buy-outs • Joint Ventures• Strategic Partnership • Spin-Offs• Divestment

• Corporate restructuring• Capital Restructuring • Finance Restructuring

• Business Valuation• ESOP Valuation • Fairness Opinion

For Debt Fund Raising / Mergers & Acquisition / Business Opportunity please contact

Mr. Mihir MehtaContact: +91 22 6611 1770Email: [email protected]

Mr. Yogesh ShetyeContact: + 91 22 6611 1770E-mail: [email protected]

Services at Ashika Capital Limited

63 September 2020INSIGHT

Ashika Global Securities Pvt. Ltd is the holding company of Ashika Group, an RbI-registered non-deposit taking NbFC engaged in providing long term and short term loans & advances to individual & body corporate and Invest-ment in shares and securities. It has 6 wholly owned subsidiaries including Ashika Stock broking Ltd.

Ashika Global Securities Pvt. Ltd.

It is the Flagship company of the group and incorporated in the year 1994. A RbI registered Non-banking Financial Company carrying on NbFI Activities i.e. investment in shares an securities and providing Loan to Individuals, corporates HNI etc. The company floated its shares to public in 2000 and got listed with CSE. Thereafter, in 2011 , the shares were traded on bSE under permitted category and in 2014 got listed with MSEI. It has a registered FII as one of its investor.

Ashika Credit Capital Ltd.

Registered under ROC, Mumbai on 13 WJuly 2017. It is a wholly owned subsidiary of Ashika Global Securities Pvt Ltd. The company has created a trust named Ashika Alternative Investment and has applied to SEbI for registration under Category 3, AIF.

Ashika Investment Managers Pvt. Ltd.

Contact

Ashika Wealth Advisors is a boutique Wealth management firm offering personalized investment management solutions to high net-worth indi-viduals, families, businesses, trusts, private foundations, and non-profit organizations. Our aim is to grow Wealth by selecting the right balance of asset classes and product categories with timely switches and periodical rebalancing.

For Wealth Advisory please contact

Mr. Amit Jain (Co-Founder & CEO)Mobile: +91 93134 89991Email: [email protected]

Services at Ashika Wealth Advisory Private Limited



For institution business please contactMr. Dilip Minny (Co-founder- Institution); Mobile: +91 90070 66096; Email: [email protected]

Products Products Contact

• TradeX (Mobile App & Web base)

• Online Equity, Derivative, Currency and Commodity Trading Facility

• InvestX (Mobile App & Web base) • A One Stop Solution to all

your Mutual Funds needs online.

• Back Office Reports on WhatsApp. Ashika BOT on

Whatsapp / Telegram.

• Ask ACIRA - • Online Customer service

for clients on our website.

• Margin Trading Facility (MTF)

• With this MTF facility client can trade inspite of debits beyond T+7.

• EKYC • it now takes just 30 mins to open an

Account.

• ReKYC • hassle-free & paperless modification

without stepping out.

• Research Services• A galaxy of potential research team

to provide the best equity research reports, ideas, solving queries and many more.

• Online Fund Transfer Facility

• Securities Lending and Borrowing (SLB) • Provide securities lending and

borrowing at a market competitive rates

• Depository Services (CDSL/NSDL) • Provide one roof solution wherein

seamless trading could be ensured through DP maintained with Ashika

For Business Opportunity please contact

Mr. Amit Jain (CEO – Retail)Mobile: +91 90070 66000E-mail: [email protected]

Mr. Niraj Sarawgi (CEO - PCG)Mobile: +91 91676 16989Email: [email protected]

For Services please contact

Mr. Ashwini Kumar Gautam (COO)Mobile: +91 90070 66097Email: [email protected]

Services at Ashika Stock Broking Limited

For start-up investing please contact Mr. Chirag Jain (CEO); Contact: +91 22 66111700; E-mail: [email protected]

Capital Markets Fund Raising Advisory Contact

• Issue Management • IPO / FPO • Right Issue • Qualified

Institutional Placement

• Open Offer • Takeover • buyback • Delisting

• Overseaslisting

• Underwriting

• Private Equity• Venture /

Growth Capital • Pipe

• Debt Syndication• Project Finance• Team Loan• Working Capital

Loan • Acquisition

Funding • Construction

Finance

• M &A• Merger / Acquisition /

Disposal• Management buy-outs /

buy-ins• Leveraged buy-outs • Joint Ventures• Strategic Partnership • Spin-Offs• Divestment

• Corporate restructuring• Capital Restructuring • Finance Restructuring

• Business Valuation• ESOP Valuation • Fairness Opinion

For Debt Fund Raising / Mergers & Acquisition / Business Opportunity please contact

Mr. Mihir MehtaContact: +91 22 6611 1770Email: [email protected]

Mr. Yogesh ShetyeContact: + 91 22 6611 1770E-mail: [email protected]

Services at Ashika Capital Limited


Ashika Global Securities Pvt. Ltd is the holding company of Ashika Group, an RbI-registered non-deposit taking NbFC engaged in providing long term and short term loans & advances to individual & body corporate and Invest-ment in shares and securities. It has 6 wholly owned subsidiaries including Ashika Stock broking Ltd.

Ashika Global Securities Pvt. Ltd.

It is the Flagship company of the group and incorporated in the year 1994. A RbI registered Non-banking Financial Company carrying on NbFI Activities i.e. investment in shares an securities and providing Loan to Individuals, corporates HNI etc. The company floated its shares to public in 2000 and got listed with CSE. Thereafter, in 2011 , the shares were traded on bSE under permitted category and in 2014 got listed with MSEI. It has a registered FII as one of its investor.

Ashika Credit Capital Ltd.

Registered under ROC, Mumbai on 13 WJuly 2017. It is a wholly owned subsidiary of Ashika Global Securities Pvt Ltd. The company has created a trust named Ashika Alternative Investment and has applied to SEbI for registration under Category 3, AIF.

Ashika Investment Managers Pvt. Ltd.

Contact

Ashika Wealth Advisors is a boutique Wealth management firm offering personalized investment management solutions to high net-worth indi-viduals, families, businesses, trusts, private foundations, and non-profit organizations. Our aim is to grow Wealth by selecting the right balance of asset classes and product categories with timely switches and periodical rebalancing.

For Wealth Advisory please contact

Mr. Amit Jain (Co-Founder & CEO)Mobile: +91 93134 89991Email: [email protected]

Services at Ashika Wealth Advisory Private Limited



AWARDS

Helping Clients Reach for Better Via SIP – National from Franklin Templeton Investments, 2018NSDL STAR PERFORMANCE AWARD 2018

NSE Market Achievers Award 2018REGEIONAL RETAIL MEMBER OF THE YEAR 2018 -

EASTERN INDIA


EASTERN INDIA

NSDL Stock Performer Awards of the Year 2019

BTVI Emerging Company of the Year 2019

CDSL Excellent Performer in Depository Services

BTVI Young Business Leader of the Year 2019


Ashika Stock Broking Ltd.Ashika Stock broking Limited (“ASbL”) started its journey in the year 1994 and is presently offering a wide bouquet of services to its valued clients including broking services, depository services and distributorship of financial prod-ucts (Mutual funds, IPO & bonds). It became a “Research Entity” under SEbI (Research Analyst) Regulations 2014 in the year of 2015 (Reg No. INH000000206).

ASbL is a wholly owned subsidiary of Ashika Global Securities (P) Ltd., a RbI registered non-deposit taking NbFC Company. ASHIKA GROUP (details enumerated on our website www.ashikagroup.com) is an integrated financial service provider inter alia engaged in the business of Investment banking, Corporate Lending, Com-modity broking, Debt Syndication & Other Advisory Services.

There were no significant and mate-rial disciplinary actions against ASbL taken by any regulatory authority during last three years except routine matters.

DISCLOSUREResearch reports are being prepared and distributed by ASbL in the sole capacity of being a Research Analyst under SEbI (Research Analyst) Regu-lations 2014. The following disclosures and disclaimer are an essential part of any Research Report so being distributed.

1) ASbL or its associates, its Research

Analysts (including their relatives) may have financial interest in the subject company(ies). And, the said financial interest is not limited to having an open stock market position in /acting as advisor to /having a loan transaction with the subject com-pany(ies) apart from registration as clients.

2) ASbL or its Research Analysts (including their relatives) do not have any actual / beneficial ownership of 1% or more of securities of the subject company(ies) at the end of the month immediately preceding the date of publication of the source research report or date of the concerned public appearance. However, ASbL’s associates may have actual / beneficial ownership of 1% or more of securities of the subject company(ies).

3) ASbL or its Research Analysts (including their relatives) do not have any other material conflict of interest at the time of publication of the source research report or date of the concerned public appearance. However, ASbL’s associates might have an actual / potential conflict of interest (other than ownership).

4) ASbL or its associates may have received compensation for investment banking, merchant banking, broker-age services and for other products and services from the subject compa-nies during the preceding 12 months. However, ASbL or its associates or its

Research analysts (forming part of Research Desk) have not received any compensation or other benefits from the subject companies or third parties in connection with the research report/ research recommendation. Moreover, Research Analysts have not received any compensation from the companies mentioned in the research report/ recommendation in the past twelve months.

5) The subject companies in the research report/ recommendation may be a client of or may have been a client of ASbL during the twelve months preceding the date of con-cerned public appearance for invest-ment banking/ merchant banking / brokerage services.

6) ASbL or their Research Analysts have not managed or co–managed public offering of securities for the subject company(ies) in the past twelve months. However, ASbL’s associates may have managed or co–managed public offering of securities for the subject company(ies) in the past twelve months.

7) Research Analysts have not served as an officer, director or employee of the companies mentioned in the report/ recommendation.

8) Neither ASbL nor its Research Analysts have been engaged in market making activity for the companies mentioned in the report / recommendation.

DISCLAIMERThe research recommendations and information are solely for the personal information of the authorized recipient and does not con-strue to be an offer document or any investment, legal or taxation advice or solicitation of any action based upon it. This report is not for public distribution or use by any person or entity, where such distribution, publication, availability or use would be contrary to law, regulation or subject to any registration or licensing requirement. We will not treat recipients as customer by virtue of their receiving this report. The report is based upon the information obtained from public sources that we consider reliable, but we do not guarantee its accuracy or completeness. ASbL shall not be in anyways responsible for any loss or damage that may arise to any such person from any inadvertent error in the information contained in this report. The recipients of this report should rely on their own investigations.



AWARDS

Helping Clients Reach for Better Via SIP – National from Franklin Templeton Investments, 2018NSDL STAR PERFORMANCE AWARD 2018


EASTERN INDIA


EASTERN INDIA

NSDL Stock Performer Awards of the Year 2019

BTVI Emerging Company of the Year 2019

CDSL Excellent Performer in Depository Services

BTVI Young Business Leader of the Year 2019


Ashika Stock Broking Ltd.Ashika Stock broking Limited (“ASbL”) started its journey in the year 1994 and is presently offering a wide bouquet of services to its valued clients including broking services, depository services and distributorship of financial prod-ucts (Mutual funds, IPO & bonds). It became a “Research Entity” under SEbI (Research Analyst) Regulations 2014 in the year of 2015 (Reg No. INH000000206).

ASbL is a wholly owned subsidiary of Ashika Global Securities (P) Ltd., a RbI registered non-deposit taking NbFC Company. ASHIKA GROUP (details enumerated on our website www.ashikagroup.com) is an integrated financial service provider inter alia engaged in the business of Investment banking, Corporate Lending, Com-modity broking, Debt Syndication & Other Advisory Services.

There were no significant and mate-rial disciplinary actions against ASbL taken by any regulatory authority during last three years except routine matters.

DISCLOSUREResearch reports are being prepared and distributed by ASbL in the sole capacity of being a Research Analyst under SEbI (Research Analyst) Regu-lations 2014. The following disclosures and disclaimer are an essential part of any Research Report so being distributed.

1) ASbL or its associates, its Research

Analysts (including their relatives) may have financial interest in the subject company(ies). And, the said financial interest is not limited to having an open stock market position in /acting as advisor to /having a loan transaction with the subject com-pany(ies) apart from registration as clients.

2) ASbL or its Research Analysts (including their relatives) do not have any actual / beneficial ownership of 1% or more of securities of the subject company(ies) at the end of the month immediately preceding the date of publication of the source research report or date of the concerned public appearance. However, ASbL’s associates may have actual / beneficial ownership of 1% or more of securities of the subject company(ies).

3) ASbL or its Research Analysts (including their relatives) do not have any other material conflict of interest at the time of publication of the source research report or date of the concerned public appearance. However, ASbL’s associates might have an actual / potential conflict of interest (other than ownership).

4) ASbL or its associates may have received compensation for investment banking, merchant banking, broker-age services and for other products and services from the subject compa-nies during the preceding 12 months. However, ASbL or its associates or its

Research analysts (forming part of Research Desk) have not received any compensation or other benefits from the subject companies or third parties in connection with the research report/ research recommendation. Moreover, Research Analysts have not received any compensation from the companies mentioned in the research report/ recommendation in the past twelve months.

5) The subject companies in the research report/ recommendation may be a client of or may have been a client of ASbL during the twelve months preceding the date of con-cerned public appearance for invest-ment banking/ merchant banking / brokerage services.

6) ASbL or their Research Analysts have not managed or co–managed public offering of securities for the subject company(ies) in the past twelve months. However, ASbL’s associates may have managed or co–managed public offering of securities for the subject company(ies) in the past twelve months.

7) Research Analysts have not served as an officer, director or employee of the companies mentioned in the report/ recommendation.

8) Neither ASbL nor its Research Analysts have been engaged in market making activity for the companies mentioned in the report / recommendation.

DISCLAIMERThe research recommendations and information are solely for the personal information of the authorized recipient and does not con-strue to be an offer document or any investment, legal or taxation advice or solicitation of any action based upon it. This report is not for public distribution or use by any person or entity, where such distribution, publication, availability or use would be contrary to law, regulation or subject to any registration or licensing requirement. We will not treat recipients as customer by virtue of their receiving this report. The report is based upon the information obtained from public sources that we consider reliable, but we do not guarantee its accuracy or completeness. ASbL shall not be in anyways responsible for any loss or damage that may arise to any such person from any inadvertent error in the information contained in this report. The recipients of this report should rely on their own investigations.


Our initiatives at Gyanada

Code with Python workshop

The program focuses on the “How of thinking and not what of thinking “and aims to bring access and opportunity for children between the age group of 11-15 years learn to think, express and create using computer-based systems through two initiatives: Every child can code and Makers in the Making. As a COVID adaptation we’re running online coding workshops for children between the age group 13-16 on Python and Thunkable.Every child can code (ECCC): We have developed a structured training model to equip teachers with foundation to programming and physical computing. It is an initiative for teachers to upgrade their understanding and to integrate interdisciplinary and multidisciplinary approach to learning technology.

Makers in the Making (MIM): It is an advanced level after school program for a smaller batch of students who are interested to learn advanced programming tools and concepts on Raspberry Pi. It is implemented in the format of a workshop over a span of three years. It is an initiative for kids of 7th grade to 9th grade.

Our E-Learning initiative was launched this month with the first workshop to teach coding using Python. There are many reasons why Python was our top choice to teach kids how to code. The most important being, Python is a beginner friendly language, easy for kids to grasp who are new to programming. Currently it is one of the most popular languages. A lot of applications like Uber, Instagram, Netflix and even Google uses it. Literally everything can be made on Python, right from games, apps, websites to data

science models. It has a wide range and fit for all kind of use. Being easy to implement, you focus more time on building new forms of thinking rather than spending time on understanding the syntax.We have designed a curriculum which focuses on “how to think” part of coding and so is fit for beginners. We have a project-oriented approach that goes beyond just learning how to code on Python. It teaches us how to develop our ideas into reality through small interesting projects based on each concept taught in class. With our vision to make technology affordable for all, we’ll soon be launching workshops on Thunkable too.We would love to have more interested kids to join us for the workshop. Sign up on the google form: https://forms.gle/AAknt5BxsWkwyWz5A to know more details. Follow us on social media to stay updated with the happenings at Gyanada Foundation.

We, at Gyanada Foundation, engage students in practical learning. For this we provide kids with Gyanada Lab Kits. To help us fund these kits, visit: https://gyanada.org/donate.html. You can also write to us at [email protected] or connect with us at 9819044922. Our bank details are:

GYANADA FOUNDATION HDFC Bank, Stephen House Branch, Current A/c No. 50200002885400

IFSC CODE: HDFC0000008

MICR CODE: 700240002

gyanada e-learning initiative launching soon!Ashika Group supports charitable foundation to fuel the aspirations of young girls in India.With our vision to develop essential 21st century capacities, computational thinking and working with computer-based systems, we will be launching our e-learning module by September,2020.

It has been designed as two sub-initiatives: Every Child Can Code (ECCC) and Makers in the making (MIM).


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Registered OfficeTrinity226/1, A.J.C. bose Road7th Floor, Kolkata-700020Phone: 033-4010 2500Fax No: 033-4010 2543

Toll Free No.: 1800 212 2525For any research related query: [email protected]

Corporate Office1008, Raheja Centre,214, Nariman Point, 10th FloorMumbai-400021Phone: 022-6611 1700Fax No: 022-6611 1710

Group CompaniesAshika Stock Broking Ltd.

(Member : NSE, bSE, MSE, MCX, ICEX Depository participant of CDSL / NSDL, AMFI Mutual Fund Advisor, Research Analyst)

CIN No. U65921Wb1994PL217071SEbI Registration No : INZ000169130

SEbI Regsitration No : INH00000006 (RA)

Ashika Credit Capital Ltd.(RbI Registered NbFC)

CIN No. L67120Wb1994PLC062159

Ashika Global Securities Pvt. Ltd.(RbI Registered NbFC)

CIN No. U65929Wb1995PTC069046

Ashika Capital Ltd.(SEbI Authorised Merchant banker)

CIN No. U30009Wb2000PLC091674

Ashika Wealth Advisors Pvt Ltd.CIN number – U65999Wb2018PTC227019

SEbI Registered Investment Adviser

SEbI Registration number – INA300013759

Ashika Investment Managers Pvt. Ltd.CIN number – U65929MH2017PTC297291

www.ashikagroup.com



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omRegistered OfficeTrinity226/1, A.J.C. bose Road7th Floor, Kolkata-700020Phone: 033-4010 2500Fax No: 033-4010 2543

Toll Free No.: 1800 212 2525For any research related query: [email protected]

Corporate Office1008, Raheja Centre,214, Nariman Point, 10th FloorMumbai-400021Phone: 022-6611 1700Fax No: 022-6611 1710

Group CompaniesAshika Stock Broking Ltd.

(Member : NSE, bSE, MSE, MCX, ICEX Depository participant of CDSL / NSDL, AMFI Mutual Fund Advisor, Research Analyst)

CIN No. U65921Wb1994PL217071SEbI Registration No : INZ000169130

SEbI Regsitration No : INH00000006 (RA)

Ashika Credit Capital Ltd.(RbI Registered NbFC)

CIN No. L67120Wb1994PLC062159

Ashika Global Securities Pvt. Ltd.(RbI Registered NbFC)

CIN No. U65929Wb1995PTC069046

Ashika Capital Ltd.(SEbI Authorised Merchant banker)

CIN No. U30009Wb2000PLC091674

Ashika Wealth Advisors Pvt Ltd.CIN number – U65999Wb2018PTC227019

SEbI Registered Investment Adviser

SEbI Registration number – INA300013759

Ashika Investment Managers Pvt. Ltd.CIN number – U65929MH2017PTC297291

www.ashikagroup.com

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