Trade Talk | #Tesla to buy parts from India worth $1.9 billion in FY24.
Alex Mathew and Hiral Dadia take us through key market levels as well as highlight stocks to keep on watch as we go into trade. #BQLive
Alex Mathew and Hiral Dadia take us through key market levels as well as highlight stocks to keep on watch as we go into trade. #BQLive
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NewsTranscript
00:00 Good morning and thanks so much for tuning in.
00:02 You are watching Trade Talk on BQ Prime.
00:04 My name is Alex Mathew and with me is Heeral Dharia.
00:06 Good morning, Heeral.
00:07 Good morning, Alex.
00:08 Well, 20,000 has been captured and held, at least for now.
00:13 And the broader market saw quite the relief rally yesterday.
00:16 Absolutely.
00:17 And it's interesting to see how we've managed to close above the 20,000 levels for the first
00:22 time.
00:23 So there is that absolute bullishness that you are seeing.
00:26 But how sustainable it is, is what we need to wait and watch because absolute buying
00:30 was coming in in terms of sectors like metals, oil and gas, as well as telecom.
00:35 If you see in terms of conversations that we've been having with technical analysts
00:39 as well, what they are indicating is that that 19,950, that is going to act as a key
00:45 support zone as well.
00:47 And 2100 to 2150 is going to be the key resistance that we need to wait and watch.
00:53 Though there are indicators which are indicating that we are in that overbought zone already
00:58 specifically with regards to where broader markets go.
01:02 Though we did see a relief rally yesterday, was that just a one-off or is that going to
01:07 continue is another aspect.
01:10 Now, clearly, if you see occasional pauses or dips, something similar to what occurred
01:16 on Tuesday is what we should be anticipating from here on as well.
01:20 And what analysts are indicating is that all of these dips that we are seeing in terms
01:24 of intraday markets should be actually capitalized on and investors should consider profit-taking
01:31 at higher levels.
01:32 The key question overall that we ask over here, Alex, is that is the risk/reward now
01:38 becoming favorable for large caps versus the broader markets?
01:44 The moment you get an answer to that, you know how the money flow will actually be as
01:48 well.
01:49 Clearly, if you see the FIs, 1600 crores is the kind of sell number yesterday.
01:53 So last 10 sessions, FIs have been sellers, DIIs have been buyers.
01:57 Where the FIs are liquidating position, the fortnightly data that comes in will be absolutely
02:03 crucial to wait and watch and see because that will give you a trend as well in terms
02:06 of the sector rotation as well as if the rotation is happening from the broader markets to large
02:11 caps.
02:12 And very lastly, if you see in terms of stocks, India Bulls Housing Finance, PNB, Glenmark,
02:17 Aarti Industries and then Decimals, good volumes is what we saw on these five counters and
02:23 the uptick was also pretty strong.
02:24 And the key event now is the US inflation data today.
02:28 No, it's out.
02:29 So, the inflation data is out, 6.7%.
02:32 Now, basis that, the Fed interest rate decision next week is going to be crucial to watch
02:37 out for.
02:38 No, certainly.
02:39 And you said it, that's what's playing out globally.
02:40 As of now, you have mixed trade in the Asia-Pacific region.
02:44 And like Kiril pointed out, we'll have to see if these levels are held.
02:48 To give you a sense of what is playing out in the F&O space, though, we've got Agam joining
02:52 in to give us the key levels to watch.
02:55 Agam, morning.
02:56 Good morning.
02:57 What are you picking up?
02:58 All right, Alex.
02:59 So, yesterday, a lot of call sellers were taken by surprise because of the surprise
03:04 up move that we saw in the markets.
03:06 And that's a theme that just very well may play out.
03:09 We may see a lot of swings on both sides and still expect the indices overall in the long
03:16 term to perhaps consolidate in a certain range.
03:19 As I said, today is the Nifty weekly options expiry.
03:22 So, a lot of focus will be there.
03:24 But I'm going to start off with what's happening in the futures.
03:27 So, the September futures has added, well, less than a year, 0.8% in OIS, so not too
03:32 much change there.
03:33 But the Bank Nifty September futures has shed as much as 7.1%.
03:38 And this indicates a lot of covering in terms of the positions.
03:42 Of course, in terms of the options expiry, which is today, we are watching out for.
03:47 And today, of course, all the focus will be on the Nifty because the Bank Nifty and the
03:51 Fin Nifty expiries are already out of the way through the course of the week.
03:55 So, today, we're keeping an eye on the 20,200 call, which did see a lot of addition in OIS.
04:02 And on the lower end, we continue to see more and more addition around the 19,900 and the
04:08 19,800 puts, where also we saw a lot of writing coming through.
04:12 Besides that, also keeping an eye on a whole host of active stocks.
04:17 So, as I was mentioning, we're also starting to see a lot of traction around the 20,000
04:22 put mark as well, where we've seen significant amount of addition.
04:26 Finally, moving down to stocks, well, a bunch of PSUs rallied yesterday and a significant
04:32 amount of short covering came through.
04:35 This was after a lot of weakness that we saw in the two to three sessions preceding yesterday.
04:40 So, Banco Baroda and Canada Bank stand out there with significant decline in their open
04:46 interest even as the stocks moved up, so short covering there.
04:49 And Grasm also moved up around 3%, with short covering seen there as well.
04:54 But once again, all eyes will remain on the index today.
04:57 Absolutely.
04:58 In fact, as Agam was pointing out, thanks for that, but the aggressive put writing and
05:03 that short covering, that's something which actually helped us see that recovery in the
05:07 second half of the trading session.
05:08 So, that was an interesting move in terms of intraday.
05:11 And in addition to that as well, if you see the futures open interest addition as well,
05:15 I think it's positive for almost eighth or ninth consecutive session, right?
05:20 So, there is some bit of conviction that is coming in at least from an F&O perspective.
05:24 Let's see what the weekly series tells us as well.
05:27 Thank you, Agam, for getting us the details.
05:28 But moving on, you have a whole host of sectors that will continue to remain in focus.
05:34 One such that we will be focusing on is the auto ancillary pack.
05:39 To be noted that we don't really know a lot of companies that have already been supplying
05:44 to Tesla, but the comments that have come in from the Commerce Ministry with regards
05:49 to the business that Tesla has been giving to India, as well as the uptick they are expecting
05:54 from it.
05:55 Let's understand from Rishi, what is it and what could be the potential companies that
06:00 do get impacted as well?
06:01 Rishi, good morning.
06:02 Good morning.
06:03 So, Piyush Goyal mentioned that Tesla has already been sourcing auto components worth
06:07 $1 billion for the past year, and it may almost double to $1.7 to $1.9 billion for the next
06:13 financial year.
06:14 Now, Tesla, according to media reports, has been lobbying for some tax cuts because currently
06:20 the government imposes a 100% tax on imported cars of value over $40,000 and 70% tax for
06:26 cars under that value mark.
06:28 Now, the center has asked the company to commit to local manufacturing before it actually
06:33 allows for tax cuts.
06:34 So this is just a background.
06:35 Now, with regards to yesterday's news, and some stocks may get a boost today after Piyush
06:40 Goyal mentioned this, but as we said earlier as well, we don't quite know the exact companies
06:46 that currently supply to Tesla.
06:47 Some of them of this list, maybe some of them may not be and none of them may be.
06:52 It can be either of these cases, but they may regard this get a boost as many of the
06:56 majors like Tesla source.
06:57 Now, first, I would like to mention Madras and Sumi, which is into wiring harness and
07:04 vision systems.
07:05 There's also Sonar BLW, which has invested a lot lately into EVs, particularly into drivetrains
07:11 and differential gears.
07:13 There's also Endurance Tech, which is primarily into brakes, castings and suspension.
07:17 It actually recently also made an acquisition into the EV battery space.
07:22 There's also Minda Industries, Amararaja, Exide that are all into EV parts, EV batteries.
07:27 There's FIUM that is into LED lighting as well.
07:29 According to some media reports, Bharat Forge and Sundar Industries have already been supplying
07:34 to Tesla, but we will need to confirm this news as well.
07:39 The government has also been rolling out a lot of PLIs for the auto components and auto
07:43 ancillaries.
07:44 So I believe the stocks may see some action today.
07:47 But we may need to wait for it.
07:48 And yesterday we did hear comments on it as well with regards to the schemes that would
07:51 be coming in for auto ancillary companies who would be supplying to EV majors as well.
07:56 So I think a double booster in the offering for auto ancillary companies, Alex.
08:01 Absolutely.
08:02 All right.
08:03 Thank you so much for those updates.
08:04 Remember, in the auto space, there are two ways in which you can bring in cars from overseas,
08:09 either through a CBU, which is a completely built unit, and that's what Tesla currently
08:13 does or a CKD, which is assembled.
08:16 And the second option, of course, reduces the tax implication in a significant way.
08:21 Perhaps that is something that Tesla might be discussing in the future, which would also
08:26 imply an increase in local sourcing.
08:28 I guess from that list, we can rule out a few of the companies.
08:32 Specifically the battery makers as well.
08:33 The battery makers, because Tesla, as most people know, manufactures its own batteries.
08:38 All right.
08:39 Let's turn attention to Bombay Dime, because this is going to be a stock that could see
08:44 action in trade today because of the announcement of a very large land deal.
08:49 One particular consultancy, real estate consultancy, has said that this is not just the largest
08:54 land deal in Mumbai.
08:55 It could very well end up being the largest land deal in India.
08:59 We've got Mihika joining in to give you some perspective on that.
09:01 Mihika, morning.
09:02 Morning.
09:03 So, the board of Bombay Dime and the manufacturing company has green-lighted a proposed sale
09:08 of the company's 22-acre land parcel in Worli, Mumbai, to Goisu Realty Pvt. Ltd., which is
09:15 a subsidiary of the Japan-based Sumitomo Realty and Development Company.
09:20 The total consideration for the sale stands at Rs. 5,200 crore, which is interestingly
09:25 higher than Bombay Dime's Rs. 2,900 crore market capitalization.
09:30 The building on the Worli land realized around Rs. 22 crore of only rental income last fiscal,
09:35 which represented about 0.8% of the total revenue.
09:38 Now, the sale will be held in two phases.
09:41 Upon approval of the shareholders, the company will receive about Rs. 4,675 crore from the
09:47 buyer in phase one.
09:49 And the balance amount of Rs. 525 crore will be received upon completion of certain conditions
09:54 by Bombay Dime and the agreement execution for phase two.
09:58 The company is carrying out this sale in order to deleverage and strengthen its balance sheet
10:02 in order to have funding for future real estate projects.
10:05 On the completion of the sale, the company will record a pre-tax profit of over Rs. 4,300
10:10 crore and it will also report a strong positive net worth and be able to pay future dividends.
10:16 Proceeds from the sale will be also used to pay off the company's borrowings, thereby
10:21 saving interest costs and removing charges that have been held on the collateral or the
10:25 pledged assets.
10:27 The company is also in principle approved development of unutilized land parcels held
10:32 by the company.
10:33 These land parcels have the potential to create about 3.5 million square feet of residential
10:38 and commercial property, which would realize a revenue of about Rs. 15,000 crore over the
10:43 next few years.
10:44 The company will follow phased development for better cash flow management and will continue
10:49 to explore more joint developments and partnership opportunities.
10:52 Now, these recent approvals are very much in line with the strategy that the company
10:56 laid down in March 2022 in order to change its future trajectory.
11:00 The 2022 strategy said that it would lay more emphasis on the realty side of the business
11:07 to drive for future growth and profitability.
11:09 It also stated that the company will develop its unutilized land parcels and monetize on
11:14 its land bank, which it clearly did so.
11:17 And the company is also set and it aims to deleverage the company in order to improve
11:22 its credit rating and also help future funding for its real estate projects.
11:26 So, and by the way, interestingly, the stock was up about 7% in trade yesterday.
11:31 Something that the markets were anticipating.
11:33 And the other interesting aspect is that the proceeds of this, though it's split in two
11:38 parts, most of it is coming in the first phase.
11:40 And that first phase itself is larger than the market capitalization of Bombay Dang as
11:45 it stands right now.
11:46 2,900 crores, right?
11:47 The market cap and the deal were 5,000 odd crores.
11:49 So an interesting fact over there.
11:52 And let's see how the stock reacts in trade overall.
11:54 Thanks, Mika, for getting us the details.
11:56 But moving on, a whole host of Pharma names that continue to remain in focus along with
12:02 a few others.
12:03 But Bajaj Healthcare and Subin Pharma will be in focus.
12:06 We have Varsha standing by to take us to these two names as well as the others.
12:10 Varsha, what do you have in store?
12:12 So, let's focus on few stocks that one should watch.
12:15 So starting off with IRCTC.
12:17 Now, the company signed MOU with Maharashtra State Road Transport Corporation to enable
12:23 MSRT's online bus booking services via its bus booking portal.
12:28 Now, this partnership will enable passengers to book their MSRCT's bus journey tickets
12:34 through the IRCTC portal.
12:36 And this is expected to be operational by the end of this month.
12:39 The next company that we have is Aditya Birla Fashion and Retail.
12:44 Now, Louis Phillips, which is owned by Aditya Birla Group, has entered into the Middle East
12:49 region with the opening of brand's newest outlet in the UAE.
12:53 Besides, Aditya Birla plans to increase its retail footprint by launching several additional
12:58 EBOs, that is, exclusive brand outlets of its brands throughout the Middle East in the
13:03 near future.
13:04 Then we have Subin Pharma.
13:06 Now, the government on Wednesday approved foreign direct investment of up to Rs. 9,589
13:12 crore in Subin Pharmaceuticals Limited by Cypress-based Barhanda Limited.
13:16 Now, the approval is for acquisition of up to 76% of the equity shares of Subin Pharma
13:23 by Barhanda Limited.
13:24 Now, this would bring the total foreign investment to 90.1%.
13:28 Now, this acquisition would be made by way of transfer of shares from existing promoter
13:33 shareholders and public shareholders through a mandatory open offer.
13:37 Also, this is in line with the foreign direct investment policy regime for the pharmaceutical
13:41 sector, which allows 100% foreign investment under the automatic route in Greenfield Pharmaceutical
13:47 Project and up to 74% in Brownfield Project, beyond which government approval is required.
13:53 Now, Adwin Funds, which are under the management of American company Adwin International Corporation,
13:59 hold the entire investment in the foreign investor firm Barhanda.
14:03 Now, it has made investments of about US$75 billion in 42 countries, while Adwin India
14:09 has invested about Rs. 34,000 crore in 20 Indian companies across healthcare, financial
14:15 services, industrial manufacturing and IT services.
14:18 The release also highlighted that the total FDI inflows in pharmaceutical sector has been
14:23 Rs. 43,713 crore during the last 5 years, that is from FY19 to FY23.
14:30 The sector has witnessed significant FDI growth of 58% in the last financial year.
14:36 The next we have Bajaj Healthcare.
14:38 Now, the company has received establishment inspection report from USFDA for pre-approval
14:44 inspection at its Varodhra plant with 0483 observations.
14:48 Now, this EIR serves testament to upholding global standards of quality and compliance.
14:54 Also, this plant is EU GNP certified.
14:57 The receipt of the ERI also opens up the opportunities for filing companies' own drug master files
15:04 with the USFDA as well as CDMO opportunities that companies are in with various customers
15:09 across the globe.
15:10 Also, it opens up business opportunities in Canada, Brazil markets.
15:14 And since this is pre-approved inspection, chances are that the company might have orders
15:19 in hand already.
15:21 And then we have Reliance Retail.
15:23 Now, Reliance Retail is in talks to raise US$1.5 billion from existing investors, including
15:29 sovereign wealth funds of Singapore, Abu Dhabi, and Saudi Arabia, according to some of the
15:34 media reports.
15:35 Now, the talks are part of internal target to raise almost US$3.5 billion by the end
15:40 of September this year.
15:42 And out of that, US$1 billion investment has been committed by Qatar Investment Authority.
15:48 And earlier this week, KKR & Company also announced an injection of US$250 million.
15:53 Now, out of US$1.5 billion, Singapore's GIC, then Abu Dhabi Investment Authority, and Saudi
16:03 Arabia's Public Investment Fund are looking to invest at least US$500 million each in
16:08 the Reliance Retail.
16:09 Now, they will value the retail arm at almost US$100 billion.
16:13 GIC, PIF, and ADI are among the world's biggest investment funds, and they own almost 4.4%
16:21 stake in the Indian retailer.
16:23 And Reliance Industries, the retail arms parent, also plans to invest in the ongoing fundraising.
16:28 Alright, thanks so much, Varsha, for bringing us those updates.
16:32 Let's stick with stock-specific news.
16:36 And in fact, we're joined by Saloni now to take us through another list of companies
16:41 that are in the news.
16:42 Saloni, morning, what are you picking up?
16:44 Morning.
16:45 So, first thing, we're on NBCC.
16:46 So, the company signed a quarterly part-time memorandum of understanding with the Ministry
16:51 of Steel, Rashtriya Ispat Nigam, and the National Land Monetization Corp.
16:56 As per the MOU, NBCC would act as the technical cum transaction advisor and assist the three
17:03 in monetization of non-core assets of RINL at Vishakhapatnam.
17:08 The company also received a work order from SAIL.
17:11 So, this is a Rs. 180 crore order received by the company for project management services
17:16 at SAIL's Bokaro plant.
17:18 Then we've got Adani Enterprises.
17:20 So, the Wind Energy Solution Division of the company, which is Adani Wind, announced its
17:25 5.2 MW wind turbine generator, which is India's largest turbine, which received a type certification
17:32 from the German firm Windgard.
17:34 So, this enables the company to start production for the global markets.
17:38 Then we've got KPI Green Energy, which successfully commissioned the 7.8 MW wind-solar hybrid
17:43 power project, which comprises of 4.2 MW wind capacity through the company itself and 3.6
17:49 MW solar capacity through its subsidy, which is KPI G-Energia, for the company's client,
17:55 which is Monosteel India.
17:56 Lastly, we've got Lloyds Engineering Works, which was formerly known as Lloyds Steel Industries,
18:02 which entered into an agreement with Bhabha Atomic Research Centre for the transfer of
18:06 technology of multi-effect distillation with thermo-vapor compression desalination technology,
18:13 the license for which will air the company in executing orders related to desalination,
18:18 and the license will be valid for 5 years from the date of commencement of the agreement.
18:22 This technology tie-up would also assist the company on a long-term basis as it helps in
18:27 further diversification of the order book.
18:29 Thanks, Saloni, for getting us the details.
18:31 A whole host of names that do remain in focus in today's session and two from the entire
18:37 list from the pharma back that continues to remain in focus, as Varsha was mentioning,
18:42 because yesterday's session as well, we did see a good uptick in names like Glenmark,
18:47 Ajanta Pharma, Granules, strong moves that were coming in.
18:50 There's a probability that could continue in today's session as well.
18:53 But let's shift focus to the primary markets.
18:56 You have Sami Hotels that will be in focus where the IPO opens up today.
19:01 I think 616 odd crores is what they've managed to raise through the anchor book.
19:06 Himansh is standing by to get us more in terms of what is it about and which are the peers
19:11 that get impacted.
19:12 So, a whole host of peers that will be impacted, but the market is showing an increasing appetite
19:16 for these high-value IPOs.
19:18 And now we've got two that are open for issue today.
19:20 Firstly, we have Sami Hotels, a hotel ownership and asset management platform.
19:25 So the total issue sizes are set at 1,370 crores, of which 1,200 crores is a fresh issue
19:32 allocated for, you know, repayment and repayment of their borrowings of certain subsidiaries.
19:38 The company also has the third largest set of operational keys in its inventory, and
19:43 the portfolio comprises of almost 4,000 keys across 31 operating hotels.
19:52 And they're located in various urban centers across India and metro cities, which are seeing
19:57 an increasing demand from both domestic customers as from foreign travelers that are increasingly
20:02 coming into these cities for business and leisure purposes.
20:06 Now, the company has raised about 616 crores from anchored investors, like you rightly
20:11 said.
20:12 And a substantial portion of this was subscribed by the government of Singapore and the Monetary
20:17 Authority of Singapore.
20:18 So is it worth subscribing?
20:20 Well, the viewers, you have to keep in mind that the company had incurred losses for the
20:24 previous three financial years, and they also have a negative net worth.
20:28 The company also has a very high debt-to-equity ratio of standing at 3.45 times, with the
20:32 current portion of non-current borrowings and interest standing at over 2,000 crores.
20:37 So the burden of this debt financing may limit business expansion opportunities down the
20:41 line.
20:42 And the business is also seasonal and cyclical in nature.
20:45 So revenue per available room, a very key metric to monitor for hotel businesses, it
20:50 fluctuates between 3,300 to 3,900, almost 4,000 between the first and second half of
20:56 the year, as it was observed in the financial year 2023.
20:59 But overall, the prospects look good for this company.
21:03 And if our viewers want to tune in and, you know, listen to IPO and find out more details
21:07 from the management, that would give them a better direction and sense as to subscribing
21:12 to some hotels is worth it.
21:13 That's a very good point.
21:14 In fact, let's also talk about the second company that you have information on that
21:19 Zaggle.
21:20 What can you tell us about this issue?
21:22 Right.
21:23 So Zaggle, it's another prepaid, so Zaggle prepaid ocean services, a fintech company
21:28 plans to raise about 563 crores and lion's share of that 392 crores is a fresh issue.
21:35 And so about the business, the company operates in the business to customer segment and offers
21:40 a solution for spending, spend management through its prepaid cards and also has an
21:44 employee management service.
21:47 So overall, it has 50 million prepaid cards that are issued by our banking partnerships.
21:51 And it has so far served over 2 million customers.
21:55 So Zaggle prepaid has raised 253 crores from anchor investors yesterday ahead of its IPO.
22:02 And the price band for the issue is fixed at 156 to 164.
22:06 I heard Neeraj earlier today in trade setup saying that he has spoken to some analysts
22:10 who speak highly of this IPO.
22:12 So that could be a key thing to look out for.
22:15 But coming back to the risks that the IPO, the company does not have any listed peers
22:20 per se in India or abroad, making it difficult for investors to benchmark the performance
22:26 and evaluate the financial performance so far.
22:29 But the company experienced negative operating cash flows in financial year 2023 and also
22:34 had a negative net worth in the preceding two fiscals.
22:38 And the company is also exposed to the counterparty risk, which is the case with a lot of financing
22:44 companies.
22:45 So these are the few things to keep in mind.
22:46 But besides this, I also have the subscription data for day one for RR cable that we spoke
22:52 about yesterday.
22:53 So the IPO has been subscribed 25% as of day one.
22:56 And although institutional investors have not subscribed yet, non-institutional investors
23:02 have subscribed by 29% and retail investors have subscribed by 36%.
23:06 And whereas the employee reserve portion has been subscribed by 58% so far.
23:10 Thanks, Himansh.
23:11 It's interesting at 25% subscription and with this, two other interesting IPOs, as you mentioned,
23:17 are opening Zaggle as well as Samy.
23:20 So let's see where the fund division actually happens.
23:23 And the IPO market is also buzzing because apart from these that you mentioned, you have
23:28 GSW, Infra, Signature Global, all of these are in the offing.
23:32 So I think it's going to be a lot of work for you to actually call out as to what are
23:36 the other IPOs in the making from here on.
23:38 And even for investors who might just be spoiled for choice as to which ones to subscribe.
23:42 But certainly a very interesting time ahead.
23:45 I have a question though.
23:46 Is it Kabel or is it cable?
23:48 So Kabel from a German perspective, that's how RR Kabel.
23:52 But let's see what the management calls themselves as well.
23:54 RR cable or RR Kabel.
23:57 And Hemant said exactly the right thing.
23:59 In fact, he stole my line, but I'm going to repeat it.
24:02 All of these companies do speak to BQ Prime and you'll find all of those interactions
24:07 on the IPO Adda show.
24:09 In the meanwhile, that brings us to the end of this edition of Trade Talk.
24:13 It's been an absolute pleasure bringing it to you.
24:15 Do stay tuned.
24:16 Lots more coming up over the course of the day.
24:18 And this is BQ Prime.
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