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Your Questions September 2018

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By IE&M Research

I bought 500 shares of Equitas Holdings Ltd. at Rs139 some six months back. I saw it zooming 15% within a month but the move was short-lived. Now it’s struggling to float but there is no movement. Do you feel I missed the bus? I’m a long term investor and can keep it for a couple of years. – M Narayanan, Puducherry

BSE Code/ NSE: 539844/ EQUITAS; Face Value: Rs 10; CMP: Rs157
52 Weeks H/L (Rs crore): 183.50 – 129.60
HOLD

 

Although you mention that you are a long term investor but you’re behaving (in your letter, pun intended) as a trader. First of all, there is good news for you. The bank continues its focus on customer acquisition, with deposit account holders crossing 3.3 lakh in number. It has posted advances growth of 27% yoy, with overall advances increasing to Rs8,926 crore, which is quite an achievement in the duration and the present time. Strong growth was registered in all lending segments of Banking, Vehicle Finance, Business Loans and mid-Corporate loans. Equitas Holding’s Q1FY19 NII came at Rs254 crore, up by 18% yoy and it has reported consolidated net profit of Rs35.4 crore for the quarter as against Rs15.6 crore yoy, which has increasd by 126.8%. Again this is a remarkable achievement. Micro Finance advances grew by 6% yoy but a drop of 18% qoq, while non-micro finance advances grew by a healthy 60% yoy. The non-micro finance portfolio now forms about 73% of the total portfolio. You should remain invested at least for two fiscal to get the desired result.

 

I have 650 shares of Arvind Ltd. which I bought at Rs 417. I’ve been reading a lot about this counter. Can you please suggest me what steps I should take. – VS Kharade, Kolhapur, Maharashtra

BSE Code/ NSE: 500101/ARVIND; Face Value: Rs10; CMP: Rs398
52 Weeks H/L (Rs) 477.85 – 358; Market Cap Rs (crore): 10382
HOLD

 

 Arvind Ltd promoted by Lalbhai family, is a leading textiles company with presence in textiles, branded apparel and engineering business. Its branded apparel business has a portfolio of 15 international licensed brands (such as US Polo, Arrow, Tommy Hilfiger, Calvin Klein, etc) and 12 in-house brands (such as

Flying Machine). Arvind being a major player and having long history in textiles business would be benefited by rising disposable income, growth in retail sector and increasing preference towards branded apparels. The company has reported 13.32% increase in consolidated net profit to Rs 64.31 crore for the first quarter. Its total income during the quarter stood at Rs 2,874.59 crore (Rs 2,608.28 crore). Presently, the company is utilizing 10% of its fabric capacity for garmenting and targets to achieve 30-35% in the next three to four years. Arvind has taken decision to demerge its branded apparel and engineering business into separate companies and list them separately. The branded apparel business will be demerged into Arvind Fashions Ltd. (AFL) and engineering business will be demerged into Anup Engineering Ltd (AEL). The demerger would create three separately listed companies focusing on three different businesses which will lead to increase in focus of individual businesses. We believe that the demerger would also unlock value of each of the businesses post listing expected in next 3-6 months. You should hold it to take benefit. The textile industry in India has grown at a CAGR of over 10% in 2009-17 (July 2017) and is expected to reach US$ 250 bn by 2019. The current fashion retail market is US$ 46 bn and is expected to grow at a CAGR of 9.7% to reach US$ 115 bn by 2026. The growth is driven by increasing preference towards brands, favorable demographics led by large young population, increasing urbanization, entry of international brands, etc.

About the author: IE&M Team

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