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Volatile Tuesday

Tale of the Tape

Happy Tuesday everyone. Markets were volatile AF! 🤯

Nifty and Sensex erased all gains after opening sharply higher. Concerns over the rapid spread of Omicron and the effectiveness of vaccines against the new strain hurt sentiment. Midcaps (+0.5%) and Smallcaps (+1.6%) fared better. 👍 

Most sectors ended in the red. Metals (-2%) hit a four-month low. Energy and Auto stocks closed down 1%. IT stocks (+0.5%) edged higher for a second straight day. 📈

Devyani International zoomed +7%. Jefferies sees a 75% upside in the stock. 🍕 Read more below. 

IRCTC (+3%) partnered with redBus to provide rail ticketing services. PS, there’s one more partnership we’re excited! Our good friends at ChartMojo are now on Stocktwits. Check out the latest episode of Stocktwits & Friends – https://youtu.be/cmZ4M2PkEz4. Also, follow them for sick trade ideas here.

Reliance Capital was locked in a 5% lower circuit. The Reserve Bank of India took control of the company’s Board. ✅

Go Fashion had a bumper opening day on Dalal Street. The stock closed at Rs 1,254 per share, +82% from its IPO price. 💸 

Dilip Buildcon (+8%) won new orders worth Rs 636 cr. 🤑

Star Health IPO was subscribed just 12% on day 1. Tega Industries IPO opens for subscription tomorrow. More details are below. 📊

The Bombay High Court will continue hearing in the Zee-Invesco case from today. Zee closed down 2%. 👨‍⚖️

Cryptos traded mixed. Bitcoin was down 1%. Ethereum rose 3%. Meme coins like Shiba Inu (+26%) and Doge (+6%) saw big gains. 🐕‍🦺

Here are the closing prints:

Nifty 16,983 -0.4%
Sensex 57,065 -0.3%
Bank Nifty 35,695 -0.8% 

Delicious Returns

Devyani International is up +60% since listing. But, India’s hunger for fast food could see the KFC chain operator rally another 75%, according to global brokerage firm Jefferies. 😋

Devyani International is the largest franchisee partner for Yum! Brands in India. It operates +800 KFC, Pizza Hut, and Costa Coffee outlets. Jefferies believes its focus on aggressive store additions and market share gains from the unorganized sector to drive growth. It estimates the company operating profits to grow 37% compounded annually over the next three years. 📈

Devyani has also tweaked its store operations strategy to boost profitability. Due to Covid, these efforts did not move the needle much. However, under normal business conditions, the company’s margins may exceed the previous high of 22%-24%. 📊

But, it’s not all sunshine and roses. A resurgence in Covid infection, stiff competition, and rising input costs pose key risks. Nevertheless, the stock did get excited and jumped +7%. Anyone up for a pizza? 🍕


Up Next

Tega Industries IPO will open on Dec 1. The price band is fixed at Rs 443-453 per share. The company plans to raise Rs 619 cr from the markets.💸

Tega Industries is one of the leading manufacturers and distributors of mining components. Its portfolio includes 55 mineral processing and material handling products. It is also the second largest producer of polymer-based mill liners with a 5% global market share. The company has three manufacturing sites in India, and one in South Africa, Chile, and Australia. 🏭

Financial Snapshot:

  • FY21: Revenue: Rs 805 cr; +18% YoY
  • FY21: Net Profit: Rs 136 cr; +1.1X YoY

Tega’s strong financial track record, low debt, and reasonable IPO valuations are key positives. However, the IPO is a 100% Offer for Sale (OFS). Meaning the company will not receive any funds and its existing investors are cashing out. Weak market sentiment may also restrict listing gains. 😐


Don’t Lose Hope

Early Coinbase backer, Draper Dragon is reportedly eyeing an India debut. The fund will invest $75-100 million in blockchain and crypto startups in India. Hooray!!🍾

Draper Dragon is bullish on India’s crypto despite the regulatory uncertainty. So far, the fund has invested into four startups like CropBytes and Safle. It has now set its sights on startups engaged in metaverse, non-fungible tokens, and gaming projects. 🔥

Meanwhile, Finance Minister Nirmala Sitharaman’s remarks in the Rajya Sabha today seem promising. She informed that the Government is working on a new bill altogether. She said: 

There were other dimensions and the bill had to be reworked and now we are trying to work on a new bill. It will be introduced in the house once the cabinet clears the bill.

The government also won’t ban crypto advertisements. But, she pointed out the need to improve awareness associated with its risks. Given how harsh the previous draft was, the crypto industry is once again hopeful. 🤞


Who Run The World? Indians

Twitter co-founder Jack Dorsey resigned from his role as Twitter CEO. He will be replaced by Twitter CTO, Parag Agrawal. Namaste Agrawal Ji! 🙏

Under Dorsey, Twitter went mainstream with the social media platform garnering +200 million daily active users (DAUs). But, it wasn’t able to replicate the same success for its shareholders. Since listing in 2013, Twitter is up ~80%. For comparison, Facebook (Meta Platforms) is +580% in the same period. Disappointing revenue growth and constant tussle with investors added to the misery. 😑

In comes Agrawal. An IIT Bombay grad (PS – quick shoutout to our friends at IITB 😉), Agrawal joined Twitter in 2011. He was elevated to the role of CTO in 2017. Agrawal was instrumental in Twitter’s user base growth and his contribution across revenue and product engineering. Fun fact: Microsoft, Alphabet, Adobe and IBM are also led by Indian-origin CEOs. Following Agrawal’s elevation, Tesla CEO Elon Musk said: USA benefits greatly from Indian talent! ⭐

Agrawal has his tasks cut out. He needs to elevate Twitter’s revenues. The social media platform wants to increase its annual revenue by +2x to $8 billion by 2023. Weak user base growth in the US plus a dip in its monetizable DAU remain key concerns. Markets have not given a thumbs up to the new CEO yet. Twitter was down over 2%. 📉