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IPO Week Is Here!!!

Tale of the Tape 

Hey guys. Welcome back to the market of stocks! 😇

The Nifty and Sensex ended another boring range-bound session with minor cuts; down -0.2% each. Midcaps (+0.1%) and Smallcaps (-0.1%) were equally lifeless. The advance-decline ratio was split evenly. 👎

Most sectors ended in the red but the losses were limited. Autos (-0.8%) and Metals (-0.5%) were the top losers, mostly due to profit-booking. IT stocks (+0.6%) bucked the trend. 📈

After a great 2023, what does the future look like for the auto sector? Read our top story below. 🏍️

It’s IPO week! Fedbank Financial Services issue opens for subscription on Wednesday. More details below. 💸

Mankind Pharma (+4%) hit an all-time high after being added to FTSE’s global indices. 🚀

Prataap Snacks jumped 20% after 13 lakh shares (5.4% equity) changed hands in a block deal. 🤝

Newgen Software (+5%) will consider the proposal of a bonus issue on Nov 27. ✌️

Indian Hotels (+2%) was in focus after global brokerage firm UBS upgraded its target price to Rs 500 p/sh; +19% from current levels! 🤑

Oberoi Realty hit a 52-week-high after announcing its foray into the NCR market. 🏗️

Cipla’s Pithampur unit received a warning letter from the United States Food and Drug Administration (USFDA). The stock closed flat. ⚠️

Talbros Automotive was locked in a 20% upper circuit after winning multiple orders worth Rs 580 cr. 💰

Here are the closing prints: 

Nifty 19,694 -0.2%
Sensex 65,655 -0.2%
Bank Nifty 43,584 Unchanged

What’s Next For Auto Stocks?

Auto stocks have been KILLING it this year. The Nifty Auto Index is up 32% YTD, with many companies hitting lifetime highs. Where does the party go from here? Here’s a quick list of pros and cons for you to consider: 🤓

First, the positives. ✅

1) Strong demand: Auto sales hit an all-time high during the Navratri period. Dealers sold a whopping 7.59 lakh vehicles; +18% YoY. More broadly, 2023 has been a GREAT year for premiumisation across both car & two-wheeler firms. Consumers are willing to spend more for better models. FYI – Maruti Suzuki, the king of cheap cars, will easily hit a 25% market share in the SUV segment. As you can imagine, this is great for margins. 📊

2) Falling input costs: The sector’s supply chain was rough from 2020-2022. But issues like chip problems are now sorted. On top of this, overall raw material costs (steel etc) have cooled off. The biggest bullish factor is that crude has softened immensely. This helps at both the company’s end (in manufacturing) as well as the consumer (lower fuel prices if the GOI plays ball). FYI – Brent crude is now at a 4-month low! 😀

On the flip side, here are some negatives. ❌

1) Expensive loans: Vehicle loans doubled over the last 3 years, but the pace has slowed down a little. This is partly due to the RBI raising interest rates over the last year. But beyond that, loans for electric vehicles (the ‘future’ of the sector) are still costlier than loans for petrol & diesel vehicles. Most companies have invested heavily in the EV segment, so it’s important for things to change on the financing front as well. 🚗

2) High inventory: Current passenger vehicle stock is around 3.2 lakh units, which translates to 30 days of inventory. Usual stock levels hover around 21 days of inventory. Why is inventory so high if festive sales were good? It’s complicated, but it’s partly due to a slowdown in entry-level cars in the Western and South Indian markets. If customers buy more premium models, affordable car sales naturally will fall. 👎

Stocktwits Specials

Hey guys, we’ve curated a list of top dividend stocks with their record date this week. In less than 5 minutes, we’ll walk you through these top dividend stocks and cover key fundamental, technical and news-related events surrounding these.

Watch Now

Fedbank Financial Services IPO

Fedbank Financial Services IPO opens for subscription on November 22! The price band is fixed at Rs 133 – Rs 140 p/sh. The company aims to raise Rs 1,092 cr from the IPO. 💸

For the unaware, the company is Federal Bank’s NBFC arm and primarily focuses on providing gold & MSME loans. FYI – its assets under management (AUM) grew at a CAGR of 33% between FY20-FY23. As of March 2023, it was the fastest-growing gold loan NBFC among its peers. While it has branches over most of the country, FedBank is more dominant in the Western and Southern markets. 🏦

FYI – the IPO consists of a fresh issue of shares worth Rs 600 cr. The remaining Rs 492 cr will be through the ‘offer for sale route’. The money that comes into the company will be used to meet its future capital requirements as it looks to expand into new regions. 🧑‍💼

FY23 snapshot:

  • Net interest income: Rs 638 cr; +34% YoY
  • PAT: Rs 180 cr +74% YoY
  • Gross NPA: 2.03%
  • Net NPA: 1.59%

Big Picture: The company’s business model hedges against risk pretty well. In economic upswings, MSME loans generally grow and do well. In downswings, gold loans tend to take off. By catering to both segments, it ensures that at any given point in time, half of its business will be firing on all cylinders. 🔥

That said, there are a couple of issues. While its bad loan situation has gotten better, it’s still worse than many of its peers. It’s also heavily concentrated in specific regional markets. This reflects the broader demand; But for some players, this also sets a ceiling on growth while opening themselves to stiff competition. ⚔️

FWIW – the IPO is reasonably priced. But, the latest grey market data suggests it may list only at a meh 6% premium. 😐

Stocktwits Spotlight

Here’s an interesting chart setup on BHEL by Saurabh Nandi. Follow him for more awesome trading insights and add $BHEL.NSE to your watchlist and track the latest from our community. 

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Disclaimer: Saurabh Nandi is not a SEBI registered advisor and you should not construe any information discussed herein to constitute investment advice. Consult your financial advisor prior to making any actual investment or trading decisions.