Global investing house Morgan Stanley increased overweight stance on financials. Morgan is betting on rising short rates, higher credit growth and peaking credit costs. Financials have underperformed this bull rally. While Morgan Stanley has a 600 bps overweight on Financials, it has a 500 bps underweight on IT sector. It is also underweight on healthcare and materials. Corporate balance sheets are healthier and legacy bad loans largely provided for. They expect banks to compound earnings at 20-30% over 3 years.
Hindustan Unilever reported 17% higher net profits at Rs.2,243 crore for the Dec-21 quarter. With a 2% growth in volumes, HUL gained market share in rural and urban centres. Operating profits grew at a faster clip than the top line as the operating profit growth was most visible in the home care segment and the foods segment. However, even the chairman, Sanjiv Mehta, has conceded that the short term operating environment remained challenging for HUL. Sales revenues were up 10% yoy at Rs.12,900 crore in Q3.
Biocon reported 17.68% growth in net profits at Rs.219.60 for the Dec-21 quarter. Total sales revenues for the quarter stood at Rs.2,223 crore rising 18% on a yoy basis. The big contributor was the bio-similar segment that showed revenue growth of 27.6% at Rs.981cr. The generics recorded growth of around 5% at Rs.607 crore in the third quarter. Even the research services segment saw limited growth of 9.7% at Rs.641.4 crore. Total expenses for the third quarter were also sharply higher by 15.6% at Rs.1,906 crore.
Apollo Tyres has picked up a 27.2% stake in CSE Deccan Solar. This company is a subsidiary of Cleantech Solar. This acquisition will guarantee supply of 40 million units of solar power annually for its Oragadam plant, near Chennai. This particular plant in South India has installed capacity of 900 tonnes of tyres per day. Apollo Tyres will offtake optimal quantity of 20% of total requirements in Chennai since solar power is produced only few hours each day. Its solar power cost is lower than the unit rate it pays to the SEB.
Emcure Pharmaceuticals got SEBI approval for its Rs.5,000 crore IPO and plans to hit the IPO market by the first week of February. The Rs.5,000 crore IPO will comprise of a fresh issue of Rs.1,100 crore with the balance being an OFS by the promoters. Bain Capital, one of the early investors in Emcure will also be participating in the OFS. Emcure will utilize Rs.947 crore to pre-pay loans. It is a market leader in HIV anti-viral, gynaecology and blood-related therapeutic areas. Its target markets are spread across 70 countries.
The IPO of Adani Wilmar will open for subscription on 27th January and close on 31st January. It may be recollected that the issue size has already been reduced from Rs.4,500 crore to Rs.3,600 crore and the entire amount will be a fresh issue. Adani sells cooking under the Fortune brand and is a 50:50 JV with Wilmar of Singapore. In FY21, Adani Wilmar had total revenues of Rs.37,195 crore. Out of IPO proceeds, Rs.1,900 crore will be allotted for capital expenditure and Rs.1,100 crore will be used for debt repayment.
Vedanta Resources plans to create a $10 billion fund to bid for assets of BPCL and other similar companies. Agarwal has clarified that BPCL would just be one of the options the fund will look at. Vedanta plans to fund the purchase of BPCL through a mix of own funds and debt. Currently, Vedanta is also exploring new opportunities in new zinc, gold and magnesium. Agarwal has already spelt out his overarching intent to become zero-carbon group by 2050. It will invest $5 billion in medium term to reduce its carbon footprint.
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