Please remember, these are not recommendations/ suggestions to buy or sell. Strictly for educational purpose the Indian Economy & Market Research Team has collected these details from the public domain for our subscribers as these couldn’t be a part of our regular monthly magazine.
CarTrade Tech entered the market with its IPO in August at Rs 1618 subscribed 20 times. It was Offer For Sale so all the money went to the Investor’s pocket who were smart enough to gauge the market mood leaving the company high and dry. So now 100 per cent stocks are with public. On August 16, listing day it opened at Rs 1600, made a high of rs 1618 and on January 28th the stock closed at Rs 653. After its listing the company declared two quarterly results – September quarter it had clocked sales of Rs78 crore, operating loss Rs 33 crore and net loss of Rs 38 crore; in December quarter it had clocked sales of Rs 89 crore, operating loss Rs 28 crore and net loss of Rs 23 crore. The question is at such performance why markets should give even this valuation. The sector has growth but coupled with huge competition. The IPO was recommended ‘APPLY’ by ALL the broking firms and analysts.
Happiest Minds Technologies’ IPO came at Rs 166, was listed on 17th September 2020 at Rs 350, and made a high of Rs 1580 on July 16, 2021. It’s a good company with credible management but all the revenue comes from digital business. Now look at its performance – Its profit in June 2020, Sep’ 20, Dec’ 20, March 2021, June 21, Sep’ 21 and Dec’ 21 was Rs 50 cr, 34 cr, 42 cr, 36 cr, 36 cr, 44 cr, and 49 cr respectively. During these 7 quarters sales increased but profit remained in Rs 50 crore ranges. Yet the stock is trading at Rs 1140, more than 10 times IPO price, at 102PE with Book Value of Rs 40; also once traded at 140PE when it made a high of Rs 1580. Even the best of IT stocks like Infosys is trading at 32-35PE, Wipro & Tech Mahindra at 25PE. But here where is no growth the stock is trading at such high PE. How long this high PE would be sustainable?
IndiaMART InterMESH’s IPO came at Rs 973 in June 2019 and company raised Rs 476 crore. In July the stock was trading at Rs 2020 and after 7 months in February 2021 it was trading at Rs 9950 almost tribled. It was right time when in February itself the company issued QIP at Rs 8615 raising Rs 1100 crore. A year after its high and the QIP now the stock is trading at Rs 4800. Now look at its performance – Its profit in June 2020, Sep’ 20, Dec’ 20, March 2021, June 21, Sep’ 21 and Dec’ 21 was Rs 74 cr, 70 cr, 80 cr, 56 cr, 88 cr, 82 cr, and 70 cr respectively. Can anyone identify growth? Still the stock was trading at 102PE when it was at its peak and even now trading at 50PE. Why even 50PE when there is no bottom line growth after two years?
The above three stray discussed IPOs are not alone. The list is too long to count. It is too interesting to understand who was smarter – those who sold or those who bought. Investors must know many more such new-age OFS IPOs will come where company will be continuously recording losses. When at high PE there is no growth the stock will come to this stage only. The company has to earn the high PE. The market is at present full of high PE stocks. It is for the investors to decide; especially new entrants in market should learn a lesson from this.
Canara Bank has recorded a profit of Rs1657 crore in its December quarter. If we see 9 months profit it comes to be Rs 4206 crore. On TTM basis also it has recorded the best performance. Its all-time high was Rs 821 recorded in November 2010. Now after such stupendous financials the company is available at Rs 240. Its Gross as well as Net NPA too have reduced considerably and provisions reduced 50 per cent.
The stock is ready to cross triple century.
BCL Industries, a part of Mittal group, is in the business of edible oil, Vanaspati, distillery, ethanol and realty. The company has recently increased its focus on ethanol and in this regard a huge expansion is being carried out. In Q3 it has clocked 42, 76 and 139 per cent increase in its sales, operating profit and net profit respectively which is its highest ever quarterly performance. For 9 months these numbers are 48, 64 and 110 per cent up respectively which again is highest ever. The stock is trading at 15PE and within last two months moved from Rs 218 to Rs 468. If there is any fall from hereon then it could be a best bet for long term investment.
Reliance Infrastructure surprised investors and analysts equally last week when it stood strong trading in three digits when the biggies were tumbling under huge pressure. It shows its inherent strength. When the company will receive the arbitrage money it will become debt-free. The looming Reliance Naval issue is also said to be over shortly at NCLT. All that indicates a clean company is about to emerge from the house of Anil Ambani group. The downside risk is hardly 20-25 per cent against possibility of 70-100 per cent upside. Risk Reward ratio is favourable and we may see a rocket moving towards blue sky very soon. Risk takers may book a seat till it is cheaper.
Uttam Sugar Mills is among the leading producer of Double Refined Sugar. It is also into ethanol and power. Out of 4 its 3 units produce 100 per cent sulphurless sugar whereas its Barkatpur plant has 450 lakh barrels per annum distillery capacity. The expansion is on to take it to 540 lakh barrel per annum. The company has ten folded its production in the last ten years with 2,000 TCD in 2001 to 20,000 TCD in 2011. Well-known investor Anil Goel and his wife Seema Goel have 7.05 per cent stake. On TTM basis it has recorded highest ever sales and operating profit. Its all-time high was Rs 470 and now available at Rs 207 only. Ethanol theme and good result will get it a re-rating, without doubt.
Nava Bharat Ventures, a diversified group with businesses in metals manufacturing, power, mining, agribusiness and healthcare and ferro alloys, is now a MNC, operating in India, South East Asia and Africa. In Q3 it has clocked 44, 50 and 42 per cent increase in its sales, operating profit and net profit respectively. Presently trading at 5PE after such phenomenal financial performance the stock is sure to be re-rated shortly. Keep an eye.
GMDC recorded good Q3 numbers as its sales was up 120 per cent and against Rs 39 crore operating loss it has recorded a profit of Rs 201 crore & net profit was Rs 150 crore against Rs 3 crore loss. For 9 months sales and net profit were up by 117 and 57 per cent respectively. These turnaround numbers are expected to be repeated in future also. This Gujarat government PSU stock gave 62 percent return in January itself with huge monthly volume never seen in its history. Seems something is brewing.
Thirumalai Chemicals ranks among the largest producers in the world of Phthalic Anhydride, Malic Acid, Maleic Anhydride and Fumaric Acid. It has a presence in more than 34 countries with widespread infrastructure. In Q3 it has clocked 70, 58 and 106 per cent increase in its sales, operating profit and net profit respectively. For 9 months these numbers are 102, 193 and 479 per cent up respectively. On TTM basis this is the highest ever recorded financial performance. Stocks from Specialty Chemicals without much growth are trading at 50PE whereas after making a high of Rs 326 in October 2021 this stock is available only at Rs 260 trading at 9.7PE.
Despite the unusual market movements, Dalal Path still finds its regulars looking up at the TV screen and discussing stocks. Some of the names our team heard are – Deepak Fertilizers, Maharashtra Seamless, Godavari Power and Taj GVK. Might be worth a second look.
THE SCOOP OF THIS WEEK
RASHTRIYA CHEMICALS & FERTILIZERS LTD. (RCF) is a PSU under the Ministry of Chemicals and Fertilizers based in Mumbai and fourth largest producer of fertilizers in India. On TTM basis the company has recorded highest ever performance on all fronts – sales, operating and net profit. Fertilizer companies also produce Methanol which is a low carbon, hydrogen carrier fuel. NITI Aayog has recommended its use in Inland Waterways and Army Trucks under its ‘Methanol Economy’ programme aimed at reducing oil import bill. If the recommendation is accepted by the government we will see Methanol story just like Ethanol. RCF also has 800 acre land parcel in Mumbai valued more than Rs 10,000 crore which is almost double its market cap. So it has 3 pluses and still presently trading at half of its high of Rs 150 recorded in 2008.