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RBL Bank, WTF!?

Tale of the Tape

Good evening guys. It’s the last trading week of 2021! 😄

Nifty and Sensex rebounded sharply after opening lower to close near day’s high. Midcaps (+0.4%) and Smallcaps (+0.3%) also ended higher. The advance-decline ratio was evenly split. ✌️

Most sectors closed in the green. Pharma (+1.7%) rose for a fourth time in the last five days. NBFCs (+0.9%) and IT (+0.7%) also saw healthy gains. 💪

RBL Bank (-18%) was volatile AF. The sudden exit of its MD & CEO plus the appointment of an additional director by the RBI made investors nervous. Read more below. 😓

HP Adhesives had a decent listing. The stock closed at Rs 331 p/sh, +21% from its issue price. 📈

GMR Infra (+8%) will develop the Kualanamu International Airport (Project) in Medan, Indonesia. ✈️ 

Ashoka Buildcon (+11%) sold its stake in five highway projects for Rs 1,337 cr. 💸

Kabra Extrusion will raise Rs 300 cr to expand its EV battery capacity. The stock is locked in a 20% upper circuit. 🔋

Paras Defence (+7%) won an order to develop a border surveillance system from the Defence Research and Development Organization (DRDO). 🛡️

Cryptos extended their weekend gains. Bitcoin rose 1%. Ethereum was flat. Cardano, Polkadot, and Avalanche rallied between 4%-8%. 🤗

Here are the closing prints: 

Nifty 17,086 +0.5%
Sensex 57,420 +0.5%
Bank Nifty 35,057 +0.6%

Fishy Business

RBL Bank crashed 25% in early trade amidst speculation over the private lender’s future. 😓 

What’s the matter? Over the weekend, RBL Bank’s MD and CEO Vishwavir Ahuja went on indefinite leave. FYI – he recently signed a 1-year extension to his tenure. On the same day, the Reserve Bank of India (RBI) appointed an additional director to the bank’s board. 🧐

What’s the big deal? RBL Bank is undergoing a change in leadership. Ahuja was entrusted with the responsibility of finding and grooming his successor. His sudden exit without a clear succession plan raises doubts over the bank’s turnaround plans. Then there is the RBI. Usually, the central bank does not interfere with the management decisions of financial institutions. Unless, of course, the bank or NBFC is financially weak, and has poor corporate governance. This set the alarm bells ringing and investors pressed the sell button immediately as the markets opened. 📉

RBI later clarified that the appointment of an additional director is routine and that there was nothing wrong with the bank. The stock pared its losses but still ended down 18%. 🔻

Power Play

Vedanta will invest Rs 60,000 cr over the next three years to make semiconductors in India. 💰

The company is nailing down partnership deets with global chip makers like TSMC, LG, and Samsung. Also, it is scouting land and is in talks with various states to set up its factory. PS – this is Vedanta’s second attempt to crack the semiconductor market. Vedanta previously tied up with LG to build a $10 billion plant in Maharashtra. BUT, the project never took off! 😔

Vedanta’s latest move comes hot on the heels of the Government announcing a mega $10 billion scheme to boost the domestic semiconductor industry. The new scheme aims to end our import dependence and create 1 lakh new jobs. 😎

Vedanta has quietly made some interesting acquisitions. They recently acquired a leading nickel and cobalt producer for an undisclosed amount. Nickel and cobalt are key raw materials used in manufacturing EV batteries. With investments in chips and EV batteries, it appears that the company is transitioning from a commodity story to adding modern tech exposure. Watch out for this one. 🔥

Speaking of things to watch, the latest edition of Stock Room Sunday is out. In this episode, Vishal and Saket discuss markets, trade ideas, and look back on the top-performing companies of 2021. Watch here – 

Kick Start?

Ola Electric hasn’t gotten off to the electric start it hoped for with its new electric scooters. 🛵

Early buyers complained about a host of issues from quality control to lower range. Highly publicized features like mobile app support, remote unlocking, and voice-activated commands are all reportedly missing. Buyers were hopeful that all these issues would’ve been ironed out after an extra two-month delay. 😤

Ola is also facing production issues at its mega 500-acre FutureFactory in Tamil Nadu. The company’s body shop is operating at 50% capacity. Meanwhile, its paint shop is yet to start operations. Making a grand total of 150 units a day, the company faces an uphill battle to come good on its lofty ambitions. 🙅‍♂️

The teething issues come at a time when Ola is prepping up for an IPO. It plans to raise $1 billion from the markets. It recently raised $139 million in a pre-IPO round. A potential listing sometime in Q2 stays firmly on the cards. Until then, we hope the company gets to the bottom of its production issues. 🤞