Margin growth hopes give hospital, pharma IPOs booster shot

Filings by the hospitals as well as pharmaceutical spaces in 2023 for an initial public offering (IPO) have seen a surge, compared to a slow 2022.

IPOs totalling Rs 6,563 crore have been launched this calendar year so far, with those aggregating Rs 8,775 crore still in the pipeline. Of the total Rs 15,338 crore in 2023 — both launched and expected — Rs 6,087 crore is in the hospitals, diagnostics, and medical equipment spaces, while Rs 9,252 crore is in the pharma and drugs space.

There were two IPOs in 2022 — both in the hospitals/diagnostics space — raising Rs 3,786 crore. There were none in the pharma/drugs space.

“Pharma and API (active pharmaceutical ingredient) companies have typically grown with private equity funding, and the good companies throw up enough cash so as to not require primary capital, which is why the IPOs have almost all been ‘offers for sale’. Firms that are of a decent size or niche will have takers,” said Venkatraghavan S., managing director and head (equity capital markets), Equirus Capital.

Considering that 2022 wasn’t too great for IPOs, the Rs 3,786 crore raised that year was not that bad too, he pointed out.

In 2021, total of Rs 6,375 crore was raised from IPOs by hospitals, diagnostics services, and medical equipment suppliers. The figure was Rs 5,208 crore for pharmaceutical and drug manufacturers.

“Hospitals and diagnostics are capital-intensive businesses. India has, specifically post-Covid, seen the need for good hospitals and allied services, so there have been fundraisings on that count. Those that are profitable and with a viable business model for the long term will always find fancy among investors,” added Venkatraghavan.

This rising interest begs the question: what has given the booster shot to the sector?

Experts say developments have been positive from across the spectrum. While diagnostics services providers are doing well, a good showing by the pharma index has also lifted spirits.

“Good news across the sector, especially a strong showing by the listed pharma stocks, has led to expectations of higher growth for FY24. For hospitals, much of the capex seems to be over, which likely means margin growth next year,” said Pranjal Srivastava, partner (investment banking), Centrum Capital.

He added that pharma funds keep looking for new ideas and fresh investment avenues, which has also led to interest in the counter and stronger prospects.

The Nifty Pharma index has gained 19.43% in the last one year, while the Nifty Healthcare has returned 19.06% during the same period.

While 2022 was a disappointing year for IPOs, one could have expected the hospitals and pharma spaces to have thrived, given that the country was yet to recover from the aftermath of Covid.

“Much of 2022 was spent in preparation for the IPOs. The preparation time is 7-9 months, which leads to a lag between performance and filing of the DRHPs. Further, filings take a backseat when market sentiment is low, so a revival in sentiment in 2023 has led to more companies planning to list,” Srivastava pointed out.

Srivastava said the outlook for next year is quite healthy, given the number of DRHP filings seen. Mankind Pharma’s Rs 4,326-crore IPO in April this year was the largest in the space this year.

OMC capital infusion plan for FY24 scaled down

The capital infusion plan for state-run oil marketing companies (OMCs) may turn out to be much lower than the budgeted level of Rs 30,000 crore in the current fiscal.

The government is weighing the option of releasing only a part of the budgeted amount in the current fiscal, and balance in subsequent years if found necessary after assessing the financial position of these companies, according to official sources.

The change in the plan is in view of the improved revenues of the firms in recent months. Also, there are concerns about the shareholders having to cope with a fall in earning per share (EPS) as a result of the budgeted equity infusion plan.

“Capital infusion will happen gradually as that much cash is not immediately required by OMCs due to their improved revenues in recent months,” a senior official told FE, adding that “only a portion” of the amount may be provided to the OMCs in FY24.

Following the Budget announcement, the BPCL Board in June approved an Rs 18,000 crore rights issue to shareholders, entailing at least Rs 9,500 crore capital infusion by the Centre for its 52.98% stake. In July, the IOC board approved a rights issue for raising Rs 22,000 crore, which requires the government to infuse at least Rs 11,330 crore for its 51.5% stake.

The remaining amount of capital infusion by the government was to go to HPCL, a subsidiary of state-run upstream major ONGC, likely through a preferential allotment.

“Putting too much additional equity is problematic as other shareholders would also infuse equity in their rights issues. EPS will come down, which will impact the share prices also,” the official added.

EPS of IOC, BPCL and HPCL suffered in the previous financial year due to sharp increases in crude prices, which could not be passed fully to consumers due to price freeze. The IOC EPS fell to Rs 5.98 in FY23 (from Rs 26.34 in FY22), BPCL’s to Rs 8.78 (Rs 41.31) and HPCL’s -Rs 63.26 (Rs 13.97). Lower EPS, an indicator of lower profitability, impacts investor sentiment on the stocks, hurting minority shareholders the most.

The combined loss of three state-run retailers – IOC, BPCL and HPCL for the first half of the last financial year was a whopping Rs 21,201 crore due to petrol and diesel prices freezing when global prices rose. To compensate them, the Centre provided an equivalent amount of budget support last year.

IOC reported a net profit of Rs 13,750 crore in Q1FY24 compared with a net loss of Rs 1,992 crore in the year-ago quarter. BPCL reported a net profit of Rs 10,551 crore during the quarter against a loss of Rs 6,263 crore in Q1FY23.HPCL’s net profit was Rs 6,766 crore in Q1FY24 vs loss of Rs 8,557 crore in the same period last year.

“Retail fuel prices in India have been frozen since May 2022, but we view the prolonged state interference as credit-neutral. This is because price controls have continued through periods of both rising and falling crude prices, allowing OMCs to recoup losses during subsequent periods of high crude prices, even over a protracted timeframe,” Fitch Ratings said in a note.

Due Russia-Ukraine war, the Indian basket of crude prices shot up by an average of 18% in FY23 to $93.15/barrel compared with $79.18/barrel in FY22. The Indian basket of crude oil averaged $74-75/barrel in May and June 2023, $80.37 in July, $86.43 in August, $93.54 in September and $89.4 so far in October reflecting fluctuations in prices due to global developments. OMCs are expected to continue making profit till the oil price remains below $85 a barrel, analysts have said.

Recently oil prices have moved up due to conflict in Israel.

“Another war has started (in Israel) and elections are coming up. If OMCs are not able to raise prices when the cost rises, whether the government will reduce excise duty or OMCs will absorb losses for a while needs to be seen,” another official said.

IOC has projected a capex of Rs 30,395 crore in FY24 compared with Rs 35,205 crore in FY23. BPCL’s estimated capex is Rs 10,000 crore in FY24 from Rs 11,527 crore in FY23. HPCL to invest Rs 10,210 crore in FY24 as against Rs 13,847 crore in FY23.

The share price of IOC, BPCL and HPCL rose 1.01%, 2.23% and 2.08% respectively on Monday from the previous closing price on the BSE.

Crude oil prices touch four-week highs; silver outperforms gold, silver support at Rs 68,800 level

By Saumil Gandhi

Bulls were able to defend the $1900 mark in yellow metal; the latest bounce in gold was mainly supported by the softer US jobs market data. The job data reported an addition of 209,000 nonfarm payrolls for the month of June, which was lower than the market estimate of 225,000. On the other side, silver has outperformed gold prices in the prior week. In the energy pack, Crude oil prices have extended their gains and reached four-week highs. The recent rally in crude was mainly supported by supply concerns.

Bottom-fishing action was seen in the bullion complex by market participants at the end of the prior week; the rally from the lower level was mainly backed by a softer U.S. Jobs report and a weaker greenback. For the week, Comex gold settled marginally higher by 0.30%. In the meantime, the latest data showed that China continued to increase its gold holdings for the eighth straight month, with economic and geopolitical concerns, as well as a desire to diversify away from the US currency, driving the purchases, which also favored the bulls during the previous week. On the other hand, Money managers have increased their bullish gold bets by 12,733 net-long positions to 99,205, weekly CFTC data on futures and options shows.

Silver September MCX Futures closed at the Rs 71,310 mark and Comex Silver closed around the $23.08 mark, with a rise of 1.83% and 1.38%, respectively. The dollar index closed below the 102-mark, and this is the first weekly decline in the greenback seen after two consecutive positive weekly closings.

Going forward, we expect Investors will have a keen eye on upcoming FOMC member speeches, along with inflation numbers from China and the U.S. Such a data pack could offer further momentum to the dollar index and bullion pack. On the other hand, recent weakness in the rupee has also supported domestic bullion prices to rally higher compared to the global market trend.

We believe that for this week, the recent weakness in the greenback is expected to support the bullion market for the short term, and Comex Gold could move in a range of $1900 to $1960 with a moderately positive bias. Comex Silver has immediate support at $22.05, followed by $21.45, and resistance at $23.41 (100 DEMA) and then $24.25 per ounce.

Back home, MCX Gold August contact could move in the range of Rs. 58,120 to Rs. 59,560. MCX Silver September contract has resistance at Rs 73,025 and support at Rs 68,800 for this week.

(Saumil Gandhi, Senior Analyst (Commodities), HDFC Securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)

Dollar plunges as US inflation cools-off; rupee sees volatility but remains range-bound on equity inflows, RBI buying

By Gaurang Somaiya

Rupee remained a bit choppy this week and volatility remained elevated after the release of inflation numbers on the domestic as well as global front. There has been quite a bit of see-saw that has been seen in the market and that is led by a couple of important events that unfolded on the global front. At the start of the month, we had robust private payroll numbers that led to strength in the dollar against its major crosses but slower inflation number just turned the table around for the greenback and it retraced to fall below the 100 mark.

This week, on the domestic front, no major cues are lined up and it will be the global factors and the move in the dollar that will guide the Indian Rupee. The Dollar Index is now below the psychological mark of 100 and further weakness in the greenback could trigger an up move in the major crosses including the rupee. From the US, retail sales and Philly fed manufacturing Index will be important to watch. Weaker-than-expected economic number could weigh on the dollar and thereby help the rupee extend gains. We expect the USDINR(Spot) to trade sideways with a negative bias and quote in the range of Rs 81.80 and Rs 82.80.

Global Currencies

The dollar fell to the lowest level in 15-months on back slower growth in inflation in the US. Data showed inflation grew at 3% in June in comparison to 4% rise in the previous month. Ahead of the release of the data most market participants remained cautious and volatility remained low. After the release of the economic data the dollar index fell below the 100 mark and seems to be sustaining below it. From the US, except inflation no other economic data was released and did not have much of an impact on the market. This week, market participants will be keeping an eye on the retail sales and Philly fed manufacturing Index from the US. Broadly, we expect the dollar to remain under pressure and quote in the range of 97.80 and 101.20.

A sharp up move was seen in both these major crosses Euro and Pound; the move was driven more by weakness in the dollar than by its own fundamentals. From the UK, employment and GDP numbers were released and data showed the unemployment rate in the UK rose marginally to 4% in comparison to 3.8%. At the same time, the UK economy shrank less-than-expected suggesting that the widely forecasted slowdown caused by high inflation and higher interest rate was not underway. This week, inflation and retail sales numbers from the UK will be important to watch; expectation is that inflation could come in marginally lower and that could weigh on the currency a bit after rallying in the last few weeks.

Japanese Yen was one of the volatile currencies amongst the major crosses following suspected intervention from the Bank of Japan. Market participants also have started to build expectations that policymakers that the BoJ may start to change their view on the deflationary mindset. We expect that volatility for the safe haven currency could continue to remain elevated this week as well. For the USDJPY, the pair could be trading in a wide range and in the zone of 137.50 and 140.50.

(Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services. Views expressed are the author’s own. Please consult your financial advisor before investing.)

Influencer marketing is a must have for digital marketing: reveals report

Social Beat’s Influencer.in released, ‘The Influencer Marketing Report 2023’ . It presents a comprehensive look at the industry providing insights on Influencer Marketing and its trends. The report for 2023 was compiled based on over 500 survey responses by Indian content creators, and over 50 marketers in the June to August period of this year. The report offers actionable insights for brands intending to include influencer marketing in their marketing mix.

One key revelation included the increasing popularity of Short-Form Videos with over 92% of influencers preferring generating content using this medium with YouTube Shorts emerging as the preferred platform for content creation. This reflects broader social media trends towards quick, visually engaging content.

Brand spends on Influencer marketing remains low with most apportioning only 5-10% of their marketing budgets to this medium.

61% of brands prefer to work with micro creators over celebrities as they are often seen as being more authentic and relatable to their followers, which can make them more effective at driving engagement and sales.

While macro-influencers and mega-influencers are also popular, they tend to be more expensive to work with. If you want to reach a large audience quickly they’re a good option, but may not be as effective at driving engagement as micro- and mid-tier influencers.

Short-Form videos and authenticity drive Influencer Marketing in 2023. The survey revealed 92% of Influencers preferred content using short-form videos, a huge shift in influencer activations. YouTube emerged as the preferred platform for more than 51% of influencers.

Short-form video content like Reels and YouTube Shorts the most popular format among Influencers.

“Influencer marketing is poised to play a significant role in the future of our brand’s marketing mix. Its ability to connect authentically with our audience, facilitate niche targeting, and diversify our content offerings makes it a compelling channel. I am confident in our decision to continue investing in influencer marketing, adapting our approach as the landscape evolves and leveraging its potential to drive sustained growth and customer acquisition,” Arjun Bhatia, chief marketing officer & SVP, Bharat Matrimony, said.

Challenges

57.8% of the influencers surveyed feel that the most commonly cited challenge is that the budgets do not align with demands or expectations.

51% of male influencers said brands were too focused on short-term goals and metrics rather than thinking long-term.

Many also mentioned tight delivery timelines imposed by brands as an issue as this constraints creativity and quality.

“The Influencer Marketing Report 2023 showcases the growing preference among brands for authentic connections with their target audiences through micro-creators. As well as the graduation in sophistication with influencers using AI and other tools. Over 50% of creators use AI for content creation while around 33% use it for engagement and writing. Brands now have the opportunity to engage with select influencers as long-term brand partners to provide more specific content,” Arushi Gupta, Business Head, Influencer.in, said.

Influencers are now actively seeking tools, including ideas and content creation using AI, to enhance their performance. Nearly half, at 48%, are in search of workflow optimisation dashboards, while a substantial 46% are actively seeking tools to keep them well-informed about emerging trends. While 50% are using AI tools to generate content ideas.

Follow us onTwitter,Instagram,LinkedIn,Facebook

Stock markets climb in early trade, Sensex up 232.43 points, Nifty gains 71.85 points; extend rally for 2nd day running

Equity benchmark indices began the trade on an optimistic note on Tuesday, extending their previous day’s rally, amid firm trend in global markets.

The BSE Sensex climbed 232.43 points to 65,229.03 in early trade. The NSE Nifty gained 71.85 points to 19,377.90.

Bharti Airtel, Axis Bank, Reliance Industries and IndusInd Bank were among the laggards.

In Asian markets, Seoul, Tokyo, Shanghai and Hong Kong were trading with gains.

The US markets ended in the positive territory on Monday.

Global oil benchmark Brent crude declined 0.02 per cent to USD 84.40 a barrel.

Foreign Institutional Investors (FIIs) offloaded equities worth Rs 1,393.25 crore on Monday, according to exchange data.

The BSE benchmark had climbed 110.09 points or 0.17 per cent to settle at 64,996.60 on Monday. The Nifty gained 40.25 points or 0.21 per cent to end at 19,306.05.

Xiaomi Pad 6 buying guide: 10 things to know before you spend Rs 26,999

1/10

Xiaomi Pad 6 has officially arrived in India. With its premium all-metal design and high-end feature set, Xiaomi is looking to undercut OnePlus. Its real kicker though is the tablet’s affordable price. The Pad 6 starts at just Rs 26,999 even as the OnePlus Pad can go up to Rs 40,000.

2/10

The Pad 6 has a body made of metal. It weighs 490g and measures 6.51mm.

3/10

It has an 11-inch 2.8K resolution LCD display with a 7-stage 144Hz refresh rate (30/48/50/60/90/120/144Hz) and up to 550nits of peak brightness.

4/10

The panel supports Dolby Vision.

5/10

Xiaomi Pad 6 has the Qualcomm Snapdragon 870 inside. It is powered by an 8,840mAh battery and supports 33W fast charging.

6/10

You get a 13MP camera on the rear and 8MP camera on the front.

7/10

The tablet runs MIUI 14 for Pad with Android 13.

8/10

Xiaomi will sell a custom keyboard and stylus accessories for the Pad 6.

9/10

While the keyboard will cost Rs 4,999, the second-generation Xiaomi Smart Pen will be available for Rs 5,999. You can also get a separate case (without keyboard) at a price of Rs 1,499.

10/10

Xiaomi Pad 6 with 6GB RAM and 128GB storage price is set at Rs 26,999. A model with 8GB RAM and 256GB storage will set buyers back by Rs 28,999.

Mphasis: Growth to rebound in FY25; Driving incremental efforts to stimulate growth engines

We hosted Nitin Rakesh, the MD & CEO of Mphasis, at its prestigious flagship conference, AGIC 2023 Through his presentation, he touched upon the implications of Generative AI (subset of LLM) on business operations and the cannibalisation impact it may pose to the technology service lines.

Moreover, we also attended Mphasis (MPHL)’s analyst meet recently. The key takeaways from the meet are:

However, it’s pertinent to note that Mphasis’ present valuation, with a valuation of 22x FY25E EPS, appears to adequately incorporate the anticipated rebound in earnings growth for the following year. As a result, we reiterate a Neutral stance on the stock, and our target price (TP) of Rs 2,250 is based on a multiple of 21x FY25E EPS.

Customer-centric strategy drives positive outcome

MPHL is focused on augmenting customer stickiness to have a complete ownership of the business solutions and participate in the account planning process, instead of just delivering project-based solutions through RFPs. The company believes that it has built robust account mining and scaling teams (Tribes and Squads) that participate in cross-functional activities. Further, the strong GTM strategy is augmenting these teams, and shortening the sales cycle by deeper mining and large deal origination activities. The NCA strategy is progressing very well and the company has been successful in onboarding strategic logos (potential to scale) and acquiring large deals.

BFS continues to be the key focused vertical

BFS continues to be an anchor vertical for MPHL. With matured BFS vertical, the company is exploring other emerging markets and seeking referral points through the top-10 banking accounts. BFS is a key vertical (~50%) and has driven a major part of the offshoring.

Sustained margin delivery by flexing multiple levers

MPHL’s offshore mix has witnessed a significant shift to 48% in 1QFY24 from 42% in FY20, which largely absorbed the incremental costs and delivered stable margins over the last eight quarters. Pyramid rationalisation, improvement in utilisation and growing offshoring have largely supported margin, and kept it within the guided band.

Gen AI to support and augment IT operations

On a boarder sense, the management was quite optimistic on the implications of Generative AI on executing and augmenting business activities that require cognitive and analytical capabilities. The interactive language model would replace manual operations that involve repetitive and mundane tasks such as support desk, contact center agents and iterative business operations.

Although management indicated an early sign of recovery in mortgage business with improving revenue visibility on its BFS portfolio, we maintain our Neutral rating on the stock factoring in the near-term weakness in Direct business. However, the weakness will be offset by better medium-term growth due to strong deal wins.

Rishabh Instruments IPO subscribed 31.65 times on last day of bidding

The Initial Public Offering (IPO) of global energy efficiency solution company Rishabh Instruments was subscribed 31.65 times driven by heavy demand from institutional buyers on the last day of bidding on Friday.

The IPO received bids for 24,65,71,162 shares against 77,90,202 on offer, as per the NSE data.

The IPO comprises a fresh issue of equity shares aggregating up to Rs 75 crore and an Offer For Sale (OFS) of up to 94.3 lakh equity shares by its promoter group shareholders and an existing investor.

The company has fixed a price band for the IPO at Rs 418-441 per share.

On Tuesday, the company said it raised Rs 147.23 crore from anchor investors.

Proceeds from the issue worth Rs 59.50 crore will be used towards financing the expansion of its manufacturing facility in Nashik and for general corporate purposes.

The company’s equity shares will be listed on the BSE and the NSE.

DAM Capital Advisors, Mirae Asset Capital Markets (India), and Motilal Oswal Investment Advisors Ltd are the book-running lead managers to the issue.

The Nashik-based firm is focused on electrical automation, metering and measurement, precision-engineered products with diverse applications across industries, including power and automotive sectors.

Nifty to gradually head towards 19700, Bank Nifty may consolidate; RIL, Tata Motors among preferred stocks

By Dharmesh Shah

The equity benchmark extended gains and clocked a fresh all time high backed by strong FII’s inflow. As a result, Nifty settled the previous week at 19332, up 0.7%. The broader market relatively outperformed the benchmark as Nifty midcap, small cap gained 0.9% and 2.5%, respectively. Sectorally, PSU Banks, Oil & Gas, Auto remained in limelight while IT and private banks relatively underperformed during the week.

Technical Outlook

The Nifty started the week with a positive gap (19189-19246) and recorded fresh All Time High of 19523. However, profit booking in recently run up stocks from the higher levels amid volatile global cues led index to par some of intra-week gains. Consequently, weekly price action resulted into small bull candle carrying higher high-low, indicating continuance of positive bias.

We reiterate our positive stance and expect Nifty to gradually head towards our earmarked target of 19700. However, bouts of volatility owing to volatile global cues amid overbought conditions can not be ruled out. Key point to highlight is that, since March buy on dips strategy has continued to fare well as Nifty has not corrected more than 400 points while sustaining above 20 days EMA. Thus, any decline from hereon should not be construed as negative instead capiatliase it as an incremental buying opportunity since we do not expect index to breach the key support threshold of 19100. In the process, stocks specific outperformance is expected to continue amid onset of earnings. Our target of 19700 is based on 138.2% external retracement of Dec-Mar decline 18887-16828.

On the broader market front, Nifty midcap recorded a fresh All Time High and small cap index closed at 15 months high. The current up move is backed by sturdy market breadth as currently 77% stocks are trading above 200 DMA, highlighting inherent strength. Thus, focus should be on accumulating quality stocks on dips.

Sectorally, IT, Auto, PSU, Pharma would remain in focus. Key point to highlight is that, Nifty PSU banking index has approached near multi year highs. We expect, PSU bank index to give multi year breakout and rally 15%-20% over next few months and relatively outperform.

On stock front, in large cap we prefer Axis Bank, SBI, Reliance Industries, Infosys, Hindalco, BEL, Tata Motors, Sun Pharma, Titan, DLF, IOC while in midcap Granules, Union Bank, Hind Oil Exploration, Graphite, Coforge, KPR Mills, Bhel, Brigade, NCC, EIH Ltd, Engineers India, Apollo Tyres will remain in focus

Structurally, the formation of higher peak-trough on the monthly chart signifies elongation of rallies that makes us confident to revise support base at 19100, as it is confluence of: (a) Since March Nifty has not corrected more than 400 points. In current scenario 400 points correction will mature at 19123. (B) 50% retracement of current up move (18645-19523), at 19085.

Bank Nifty Outlook:

The Bank Nifty extended gains despite profit booking on Friday amid global volatility. Private banking stocks that have seen a run up over past few months were subject to profit booking. The Bank Nifty closed at 44925, up 0.4% for the week.

The weekly price action formed a small bodied candle with higher shadow indicating exhaustion of upward momentum as index rallied 17% over past fifteen weeks.

We expect index to consolidate this week amid positive bias in the 44000-45500 range. Sustaining above last week high of 45500 would indicate resumption of upward momentum towards 46300 in July as it s 138.2% external retracement of Dec-Mar decline (44151-38613). Buy the dips

PSU banks are expected to relatively outperform as PSU banking index is poised for multi year breakout indicating structural turnaround.

From structural perspective, Bank Nifty has retraced its December – March decline in faster time. Hence any temporary breather from hereon would provide fresh investment opportunity to ride the uptrend

The formation of higher peak and trough on the larger degree chart makes us confident to revise support base at 44000 as it is 61.8% retracement of most recent up move from lows of 43300 and confluence of rising 50 day ema.

(Dharmesh Shah – Head Technical, ICICI Securities. Views expressed are author’s own.)