Greenply Industries to explore demerger of its MDF division into Greenpanel Industries

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Greenply Industries’ board gave its approval for the demerger of company’s MDF division into Greenpanel Industries. V Venkatramani, CFO of the company told that the approval will now allow them explore the possibilities.

Total debt of the company currently stands at Rs 609 crore of which Rs 380 crore is the MDF share and the balanced Rs 229 crore is for plywood. As and when the demerger happens, all debt taken on account of MDF would be transferred to the new entity, said Venkatramani.

Explaining the rationale behind this demerger, he said “We expect MDF to grow at a far more rapid pace than plywood and we want to have more focus on the MDF business.”

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Asian shares edge higher after Fed raises rates; dollar downbeat

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Asian markets rose on Thursday after the US Federal Reserve raised interest rates for the first time this year.

Japan’s Nikkei 225 rose 0.84 percent and the broader Topix edged up by 0.46 percent, with the mining and oil sectors climbing 4.5 percent and 2.8 percent, respectively, in early morning trade.

Elsewhere, South Korea’s benchmark Kospi rose 0.87 percent with gains seen in major sectors, including technology, trading houses, manufacturing names and oil-related stocks.

Meanwhile, the Hang Seng Index was up 0.45 percent. Over on the mainland, the Shanghai composite tacked on 0.18 percent and the Shenzhen composite added 0.27 percent.

In Australia, the S&P/ASX 200 reversed losses seen earlier to drift higher by 0.02 percent as declines were seen in all sectors except energy, materials and gold producers.

Mining majors traded firmly in positive territory, while oil producers gained on the back of the more than 2 percent rise in oil prices overnight. Woodside Petroleum gained 2.67 percent and Beach Energy advanced 2.38 percent.
Fed raises rates

The Federal Reserve raised rates by 25 basis points to a range of 1.5 percent to 1.75 percent at the end of its policy meeting on Wednesday, as was widely expected.

The central bank indicated that it still expected two more hikes this year, but upgraded its projection for the benchmark rate in 2019 to 2.9 percent. Growth forecasts for this year and the next were also raised.

Those moves showed that the FOMC was seeking “to strike a balance between showing a need for more rate hikes in the long term … but not rocking market sentiment too much with the median for 2018 staying at three hikes,” Tai Hui, chief market strategist for Asia Pacific at J.P. Morgan Asset Management, said in a note.

He added that the lack of surprises on Wednesday meant that stock markets in the region would likely be relatively muted.

US stocks whipsawed in the last session, touching session highs shortly after the Fed made its announcement, but ultimately closed slightly below the flat line.

Following the hike stateside, the Hong Kong Monetary Authority on Thursday also raised its base rate by 25 basis points due to the Hong Kong dollar’s peg to the greenback.

Meanwhile, concerns over trade tensions were also in focus in the region, with President Donald Trump expected to announce tariffs against China during U.S. hours, Reuters said, citing a White House official.

In corporate news, tech giant Tencent Holdings fell 1.77 percent. It had announced that net profit for the quarter ending Dec. 31 rose 98 percent to 20.8 billion yuan (USD 3.3 billion) on Wednesday. That beat the 16.9 billion yuan average forecast in a Thomson Reuters survey.

In currencies, the dollar remained on the back foot after its overnight fall. Analysts indicated that one reason for the decline was due to some investors having expected the Fed’s “dot plot” to reflect four rate hikes instead of the three that it maintained for this year.

The dollar index, which tracks the greenback against six rival currencies, stood at 89.496 at 9:29 a.m. HK/SIN. Against the yen, the dollar slipped further below the 106 handle to trade at 105.71.

On the commodities front, US West Texas Intermediate crude added 0.2 percent to trade at $65.30 per barrel and Brent crude futures rose 0.14 percent to USD 69.57. Oil prices had jumped overnight after data on Wednesday showed US crude inventories declined instead of rising, as was expected.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Zensar Tech goes shopping, buys Cynosure for $33 million

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Zensar Technologies has acquired US based company, Cynosure for USD 33 million. Zensar in the last couple of years has decided to focus on three primary segments – insurance, high-tech and retail, said Harshvardhan Goenka, Chairman of Zensar Technologies.

“50 percent of our total business is insurance and we have been looking at opportunities as to how we can grow our insurance practice. We have some marquee clients in the US, in South Africa and Europe”, he added.

Cynosure is one of the leading Guidewire platform companies based out of Chicago with the back office in Bangalore. The company has a track record of growing by over 50 percent a year. “Cynosure was a great opportunity.”

Talking about the benefits, he said “It has around 150 people, it is primarily in the property and the casualty space. It is a business which is massive in terms of size.”

Speaking of funding this acquisition, Goenka said that a large part of this acquisition will be funded through internal accruals and some part through debt.

Below is the verbatim transcript of the interview.

Q: Can you explain the rationale behind this?

A: Zensar in the last couple of years has decided to focus and there are three primary segments that we are focusing on, one is insurance, the other is high-tech and the third is retail. 15 percent of our total business is insurance and we have been looking at opportunities as to how we can grow our insurance practice. We have some marquee clients in the US, South Africa and Europe and our desire was how to get into the Guidewire platform.

Much of the implementation that has been happening in the insurance space has been on the guidewire platform. Cynosure was a great opportunity, it is one of the leading guidewire platformed companies based out of Chicago with a back office in Bangalore. We felt that there were a lot of benefits by acquiring Cynosure. It has around 150 people, it is primarily in the property and casualty space. A business which is massive in terms of size and growing.

We also felt that there was a huge opportunity with insurance companies now wanting to become digital. There is the potential for customers to ask for an omnichannel offering and we felt by this acquisition not only would there be synergies in terms of customers, we could introduce Cynosure to our customers and vise versa but also we could take our offerings to the cloud and digital platform and the track record of Cynosure has been pretty good. It has been growing by over 50 percent a year and we are hoping that this kind of growth can continue in the future.

Q: Would the acquisition be earnings accretive immediately?

A: Yes. It will be. The turnover of Cynosure is about USD 20 million plus and the total amount that we will be paying will be around USD 33 million plus the incentives based on future guidelines.

Q: This will be funded via internal accruals?

A: A large part will be through internal accruals but some part will be through debt. It was earlier owned by a four partners led by Sid Wadhwa who was the largest shareholder and they will continue working within the organisation, Zensar organization, Sid Wadhwa will take over as the head of the insurance practice itself.

Q: Let us move on to other group companies. Let me begin with Ceat which has been leader in that particular space. Could you talk to us a little bit about the efforts underway at Ceat to go after the passenger car tyre market? More than a couple of years back Ceat was known as a truck and heavy vehicle tyre manufacturer, you moved aggressively into the two-wheeler space and now you wanted to do as far as the passenger car space is concerned. Where are we there in that journey?

A: We made a very conscious journey difference where we said we will more and more move to the consumer segment and the problem in tyre business is it was very much dependent on commodity prices. So the actual profit play is if we can convert tyres from a commodity to a consumer play and that is what we have been attempting in the last couple of years.

The emphasis has been primarily on two-wheeler and passenger car tyres and we have increased significantly our market share in both these categories. We are putting in significant investments. We have put up a new plant in Nagpur to make two-wheeler tyres. We are now putting up a large tyre capacity in Chennai for passenger car radial tyres, we are expanding our capacity in Baroda. So there is nearly a Rs 4,000 crore expansion which is going on at full speed. That on the one hand.

Q: That will be completed over the next two years or so?

A: In the next one year to one and a half years. On the other hand, we are also putting up a capacity for off-the-highway tyres primarily farm tyres meant for the international market. Even the passenger car tyres that we are looking at – a large capacity will be for the most sophisticated European market.

Q: Ceat maybe the most valuable business in the group right now, in terms of growth rates over the next couple of years when you said that you are bullish about the market and Ceat being the player it is in the industry, any projections you can make for growth at the company not just this year but the next couple of years?

A: What we are aiming for is not to be the largest tyre company but to be the most profitable tyre company. So I think the entire emphasis is how to grow profitability and that will be our objective in the future.

Today, the most valuable company within the group is KEC.

Q: So you bring me to my next question which is KEC. There is very much a B2B kind of business, right?

A: Yes, KEC is primarily EPC player. Our major play is in power transmission where we are global leaders and we have plans not only in India but countries like Mexico and Brazil, we are doing projects around the world, in some of the most difficult terrains in Afghanistan and in Congo and in Africa, we are a leading player in Latin America, we are the largest players, so transmission is one part of the business, the second part is railway infrastructure.

Q: How quickly is that coming along?

A: It is coming along very well because it is a new business for us, which we started a couple of years back and I am very happy to say that the government has been very proactive giving a lot of orders in railway electrification, we are today clearly the number one player and our order book is nearly Rs 4,950 crore. So the railway business augurs extremely well for the future.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Valuations do not warrant a buy yet; upbeat on private banks, housing, says Sanjay Mookim

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

The market has corrected from the top but it is not in a comfortable valuation territory yet, said Sanjay Mookim, Director-India Equity Strategy, Bank of America.

“Valuations are better than what they were in mid-January of 2018 but not yet in the buy zone”, he said.

The crude is around $70 per barrel currently, however, Mookim says it will not run away in a hurry and remain in a range around mid $60/bbl.

According to him, though India outperformed the other Emerging Markets (EMs) earlier on back of favourable macros like lower crude prices, bond yields, it could under perform EMs at least for the next several months.

Talking about flows, he says institutional inflows are a good sign but are not sufficient to propel markets up.

“From a broader index perspective one can expect a 10 percent correction in price to earnings (PE) and the downside for midcaps would be larger”, said Mookim.

Mookim also added that the house remained upbeat on the housing theme because of regulations like RERA, good demand and several government policies. “The cumulative momentum in housing is very powerful.”

Below is the verbatim transcript of the interview.

Anuj: All through last year you were complaining that there is absolutely nothing that you can do in this market, it has run-up so much. Has the correction now got us back into bit of a value zone?

A: It is obviously better than before or mid-January. But I don’t think valuations have got into a territory where you can comfortably ask for people to buy yet. If you look at the Nifty it is still only back to where it was in December and in several midcap stocks and the midcap index price-earnings ratio (P/E) are not even back to where they were in December. So, yes, there is an anchoring biased, market has corrected from the top, but I wouldn’t say that we are in comfortable valuation territory just yet.

Latha: The latest scare, incremental scare is this crude engine towards USD 70 per barrel. How would you interpret this as an investor?

A: Our House view isn’t that crude will run away in a hurry. We think that crude remains range bound in the mid US 60 at best. However, it is a broader read across to India. If you remember India has outperformed emerging markets (EMs) dramatically in 2014. So, even after the recent weakness, we are still sitting on a fairly strong cumulative gain over EMs over the last three years in total. That gain had happened because of the favourable macro.

The macro is now deteriorating with the oil price, with reflation, bond yields and increase in political uncertainty if I am add. There is a lot for India to be worried about and none of this is going to change in the near term. So, we stick with our call. We think India will have trouble times. India probably continuous to underperform EM for the next several months.

Sonia: What about the flows? Domestic flows have been pretty good especially in the month of February that came in from Mutual Funds, how did you read into that and do you think that could be something that could continue through the course of the year?

A: Flows have been encouraging and that is a good sign. We were all comfortable on that count. We are hoping and all of us are that flows don’t start to reverse because that could be very troublesome. But I have been arguing for many months now that institutional flows in themselves are not an indicator or a sufficient enough explanation for the market upside. That is what we are seeing now. Because even though the flows are positive, we are able to see correction in the market. This maybe because there has been enough issuances, so the flows have been absorbed by paper supply but also because the upside was probably more driven by retail and High Net-worth Individual (HNI) flow rather than institutional flow that we all daily look at. Yes, the flows being strong is a good sign, but they may not be insurance from downside.

Latha: What is valuations zone for you and are some stocks already their?

A: From a broader Index perspective you would look for about a 10 percent at least correction on PEs. Now this could happen either because earnings expectations get upgraded or with time as stock roll forward into earnings. On midcaps I think the downside is perhaps larger because the premiums to large caps today are still very elevated.

Now what I want to highlight is that it is not just the earnings growth, but the earnings expectations also that matters. If you are in an environment where you are seeing continued downgrades for a companies then it is very for those stocks to perform. So there is this narrative that everybody looks at growth and saying this growth is going to come back this year which it will, but is it going to be better than expectation is the key question to my mind. We still struggle to see that happening.

MSCI India, we think it is trading India about 17.5 times forward PE whereas the long-term average is about 15.5 that is why I said that we need perhaps about 8-10 percent correction to get to close to averages.

Anuj: In term of portfolio positioning now what is your view on the larger sectors? Let us start with financials and then of course I would also want to know your view on IT?

A: Financials, we are overweight, we keep arguing that growth is going to continue to work. Until we start to see a major global correction growth is the style that will continue to perform. Within the financials our clear favourite is for private sector consumer oriented. It is kind of boring, but I have been arguing that your portfolio should be a boring portfolio in India, safe avoid risk sort of an attitude. That is where I am not allowed to name names, but there are very staple, standard private sector banks which have done well which might continue to do well, on the financials.

I can anticipate your question on the public sector banks perhaps which we would still be very selective there. We have buys on some of them, but I do think that you need to see some resolution to the current issues before the stocks actually starts sustainable upside. So, very selective positioning in public sector banks.

On IT, again, we are selectively stock pickers. As a sector I am underweight on IT because I don’t think you are in a growth mode in IT just yet. But expectations are improving in certain stocks and therefore there might be selective opportunities.

Sonia: I also want to check with you on what your view is on the housing theme? This was a theme that you had last year, the untapped potential in housing whether it is in cement, in paints, in real estate and that worked quite well. What is the status now, do you continue to be bullish here?

A: Yes, we are, we have done lot of work recently, reiterating our view on this and adding to those positions. Because we think that several issues or several blocks have fallen on place. Regulatory wise there is a lot more clarity with Real Estate Regulatory Authority (RERA), there is a price correction, time correction that you have seen with prices not really going anywhere for very long time.

The demand for real estate in India is infinite. I mean we dug up data, 40 percent of Indian households live in one room homes. This is not one BHK, it is just one room home. Even the average family size is 4.5 people. So, frankly, the demand is really not an issue. The government policies are working so it is not just talk, you are seeing numbers, you are seeing expenditure behind the housing schemes both in rural and in urban India.

Therefore, we do thin that cumulative momentum in housing is very likely to turn positive. You could play the real estate stocks, you could play the housing ancillaries, but on a two or three year theme we think this can be very powerful.

Latha: Have you all lately downgraded any numbers for the current year itself FY18 and have you all downgraded for FY19 at all? If yes which pockets?

A: FY18, we have seen a little bit of upgrades and this I think is because people have been marked to marking the December quarters numbers and how trends have been so far in March. As a consequence you have seen cuts to FY19 and dramatic cuts to FY19. MSCI India and in mid of December people who are looking at 27 percent growth for FY19 that is down to 18 percent already. So, significant reduction and I argue as a strategist that you might see a couple more percentage points of cuts for FY19 itself hopefully not more.

Sonia: What is your view on how the global setup is panning out? We got the FOMC policy, a lot of people indicate that it is not really a big deal whether it is three rate hikes or four from the US. We will be sort of moving on our domestic cues. Is that the feeling you are getting as well that India could decouple for the rest of the year?

A: No, I don’t think there is any reason for India to decouple. Decoupling would happen if any variable in India were favourable either the macro or the micro which is earnings. I don’t think that is going to happen, in fact even on the micro we are worse than the region where everybody else are seeing positive revisions, we are not. There is no case to be made therefore for a decoupling. If there is global uncertainty and increased global volatility, we will be joined at the heap to that phenomena.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow