October 6, 2022

CCI To Zee-Sony Merger: Qubool Hai

Tale of the Tape

Good evening everyone and Happy Friday Jr. 🤗

Markets extended their gaining streak. Nifty and Sensex closed up 0.3% each, despite late selling pressure. Midcaps and Smallcaps both rose 1.2%. Nearly 3 stocks gained for every 1 loser. 🚀

Most sectors ended in the green. Metals (+3.3%) gained the most followed by Real Estate (+2%) and IT (+1.6%). Pharma (-0.3%) stocks witnessed profit booking. 💰

Zee Entertainment soared +6% intraday after receiving the Competition Commission of India’s (CCI) approval for the merger with Sony India. More details below. ✅

Bajaj Finance (-1%) and Godrej Consumer Products’ (-5%) Q2 business updates failed to excite investors. Read more below. 🤕

Bharat Forge rallied +8% intraday after North America class 8 truck sales hit a new all-time high in September. 🚛

SpiceJet (+6%) will gain big time from the GOI’s move to increase the loan limit to the aviation sector from Rs 400 cr to Rs 1,500 cr. ✈️

Hindalco (+4.5%) was the top gainer on Nifty. Global brokerage firm Investec sees a +45% upside from current levels. 🤑

Atul Auto (+4%) will consider raising funds on October 8. 💸

Sterlite Technologies (+8%) expects to gain big time from the 5G revolution; aims for $880 million in sales in FY23. 📶

Cryptos barely moved. Bitcoin traded flat. Ethereum was up 1%. 🥱

Here are the closing prints:

Nifty	17,331	+0.3%
Sensex	58,222	+0.3%
Bank Nifty	39,282	+0.4%

(ZEE) Entertainment Entertainment Entertainment

The Zee Entertainment and Sony Pictures India marriage finally received the Competition Commission of India’s (CCI) blessings!!! 🙏

The antitrust watchdog gave “conditional” approval to the merger. Experts say this may involve shutting down some channels but it won’t have a significant impact on operations. The exact details of these conditions were not made public yet. 📺

With this approval, the merger is almost certain to go through lifting a major overhang from the stock. PS – Zee’s share price fell over 35% this year amidst concerns over delays in regulatory approvals. 💯

The Zee-Sony merger will create India’s largest broadcasting company. Zee is dominant in regional channels. Sony, on the other hand, has a strong presence in the sports and general entertainment categories. The two companies also have a robust pipeline of OTT content catering to different audiences. Post-merger, the combined entity will also become the 3rd biggest OTT player with ~13% market share. 👑

Timely approval, resolution of Invesco dispute and hopes of strong ad revenue growth in the second half of FY23 may trigger the stock’s rerating, said experts. PS – CLSA sees ~20% upside from current levels. 💰

This is Business

We break down more Q2 business updates and market reactions today. 📈

Bajaj Finance reported a below-par Q2 performance. The company gave out fresh loans to 68 lakh customers, up 8% YoY. Assets Under Management (AUM) hit a new all-time high of Rs 2.2 lakh cr, up 31% YoY. Bajaj Finance added 26 lakh new customers in Q2. 📊

Investors, however, weren’t too impressed. For starters, the number of fresh loans has grown at just 2% compounded annually over the past 3 years. Experts fear rising interest rates may only slow down growth further. Lower repeat transactions by existing users raise questions over the company’s ability to “acquire and cross-sell”, said Macquarie. Bajaj Finance’s steep valuations (7.4x price-to-book value) do not help its cause either. 👎

Godrej Consumer Products (-5%) was the top F&O loser after a disappointing Q2 update. They expect India sales volume to fall 4%-5% led by weakness in rural demand. Operating profits are expected to drop 15%-16% due to higher ad spending and a slowdown in Indonesian business. 📉

This comes as a rude shock as the company had guided for improved performance in the second quarter. Volatility in palm oil prices (key raw material), and muted exports remain top concerns said experts. Godrej Consumer Products remains hopeful of a better second half but seems like investors are not buying it (pun intended). 🙈

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