Trade Talk | Vedanta To Demerge Biz Into Six Firms; Pharma In The Spotlight
- Vedanta to demerge into six firms
- Market cues and stocks to watch
All this and more on Trade Talk with Alex. #BQLive
- Market cues and stocks to watch
All this and more on Trade Talk with Alex. #BQLive
Transcript
00:00 watching Trade Talk on BK Prime. My name is Alex. Let's very quickly take you through
00:04 the stocks that you'll have to watch out for in trade today. And because we've come back
00:08 to trade after a long weekend, there's going to be a lot of stock specific action because
00:14 a lot of news flow coming in post market hours on Friday. Let's begin with one of the key
00:19 talking points over the weekend and that is Vedanta because the company has announced
00:25 something that was in the works for some time that the buzz on the street as well that the
00:29 company is going to in fact be splitting into six entities, all of which will be listed
00:35 to tell you more about what the fine print is. I'm joined by Rishi. Rishi, good morning.
00:41 This is something that is happening now after a decade where you know, a decade back, they
00:47 decided to merge. Why are they doing that? So it's quite funny because the reason that
00:52 they're giving for both of them, both the merger and the demerger is simplifying the
00:56 corporate structure. So that's one part of it. But to get into the details of the demerger,
01:01 it is going to be splitting into six entities, which would be one Vedanta itself. And apart
01:05 from that, it is going to be splitting its aluminium, base metals, oil and gas, steel
01:10 as well as power into separate and these are going to be listed within the next 12 to 15
01:15 months. The entire demerger is going to take around 12 to 15 months. Now, the residual
01:19 Vedanta Limited would include the prominent Hindustan Zinc, its flagship company, and
01:23 it will also include its recent foray into semiconductors and display glass facilities
01:28 and as well as stainless steel. Now, Hindustan Zinc also announced that it is going to have
01:32 separate legal entities for its zinc and lead business, its silver business as well as recycling
01:36 business. If you look at why, another reason that Vedanta is saying is that it expects
01:42 value unlocking from this demerger and it's going to be a simple vertical split in the
01:47 sense that for every one share that you hold of Vedanta Limited, you'll get one share each
01:52 of the new five entities. If you look at its business segment, its largest segment is its
01:57 base metals, which is one part of it is aluminium, which accounts for about a quarter of its
02:02 overall revenue. Then there is base metals, which includes its international zinc business
02:06 as well, which again accounts for about 16%. Now, if you also look at the EBITDA margins,
02:12 the oil and gas as well as the Hindustan Zinc aspect, that is the residual Vedanta aspect
02:16 are contributing to quite a lot of its overall EBITDA margins. Now, within this business
02:21 segment, if you look at the steel segment is one where Vedanta was looking to maybe
02:27 sell it off. It is still considering it is in talks with investment bankers to value
02:32 it, etc. But at the end of the day, the important problem that Vedanta is facing is its debt,
02:39 its parent's company's debt. Now, for FI24, it's facing an outstanding debt of about $2.1
02:44 billion. And for FI25, there's an outstanding debt of about $3.8 billion. And according
02:49 to Kotak, it expects a, I'm not getting the right word, it's getting a value gap, a funding
02:57 gap of $3.1 billion for FI25. So that's a key problem. And both, a couple of analysts
03:03 have come out with a report that is Modalal, Oswal and Nuama, both of them feel that the
03:06 debt, any developments with regards to the parent refinancing its debt is going to be
03:11 key to watch out for. And this demerger is not going to as such affect its ability to
03:16 pay debts or boost as such. So those developments are still going to be key to watch out for.
03:21 Perhaps the value unlocking part is something to pay attention to.
03:25 Yeah, as well.
03:26 Certainly. Rishi, thanks so much for joining and giving us that perspective. The funding
03:29 gap is something that remains a critical watching point for Vedanta. Let's also focus in on
03:35 the pharma pack because we've got quite a few news updates from the likes of Suen all
03:40 the way to Cipla. And we're joined by Monal to give you all of the latest updates there.
03:45 Let's start with Suen. Morning.
03:47 Morning, Alex. Yes, a lot of action on the pharma front. Suen Pharma has been acquired
03:52 by Advent International and it's done through its subsidiary, which is Cypress-based. Now,
03:57 50.1% stake has been sold off by the Jasti family at Rs. 495 per share. The remaining
04:04 26% is to be taken over via a public offer. This would take the total holding of Advent
04:10 International to 76.1%. Out of the 90.1% approved limits. Now, mind you, in mid-September, the
04:18 government had approved an FDI of 9,500 odd crore rupees in Suen Pharma by foreign funds,
04:25 which is Advent Funds, and that would have allowed it to hold 90.1% stake. A new board
04:31 of management and directors have been appointed.
04:34 On the other fronts, now, Aurobindo Pharma has received one observation from the US FDA
04:40 and this has been, the observation is procedural in nature and the company is working close,
04:46 is what it said, to resolve this observation. Now, Cipla has also diverted 51% stake in
04:52 the UAE subsidiary and its investments for around Rs. 50 crore. And this would seize
04:59 the company's investment in Saba and the subsidiaries of the UAE from 29th September onwards. That's
05:04 it on the Pharma front, Alex.
05:06 Fantastic. So, three stocks to watch out for. Thank you so much, Monar, for bringing us
05:09 those updates. Alright, let's also move on to the other stocks that you need to watch
05:14 out for on account of being in the news and Varsha is joining in with the list as usual.
05:17 Morning, Varsha. What's on your list?
05:19 So, let's start with companies with order wins. First, we have Kalpataru Project International.
05:23 The company has received new orders of around Rs. 1,000 crores. FY24 order info stands at
05:28 Rs. 8,400 crore. Next, we have RVNL, where the company has won around Rs. 1,000 crore
05:33 order for infrastructure development in Himachal Pradesh from HP State Electricity Board. Time
05:38 period by which the order is to be executed is 24 months. Then we have again the Rites
05:43 and Care Ratings, where Rites, which is a transport infrastructure consultancy and engineering
05:48 firm signed a MOU with Care Advisories Research and Training Limited, which is a subsidiary
05:54 of Care Ratings Limited. As part of the MOU, both entities will also collaborate for providing
06:00 ESG consultancy services. Then we have Gautam Adani's group is planning to build 10 gigawatt
06:06 of integrated solar manufacturing capacity by 2027 as it looks to capture the energy
06:11 transition business. Now, group currently has a solar manufacturing capacity of 4 gigawatt.
06:16 Adani Solar has a confirmed order of over 3,000 megawatt in exports that are to be serviced
06:22 over the next 15 months and recently raised $394 million for solar manufacturing. Then
06:27 we have VIP Industries. The promoter of the company are considering selling their stake
06:32 and the deal including a potential open offer could be worth as much as $1 billion and see
06:37 the promoter completely exit the business. Now, promoters have hired the investment banking
06:42 team of Incred Capital to manage the sale. Also, promoter group owns a little over 50%
06:47 of the VIP Industries. The market value of VIP Industries is around 9,310 crores, valuing
06:53 the promoter's stake at about 4,650 crores. Lastly, one should watch graphite stocks as
07:00 graphite related stocks extend recent gains in Asia Pacific region due to optimism on
07:05 the outlook for the materials used in making batteries for electric vehicles. Now, EV demand
07:11 growth is expected to increase fivefold by 2030, helping drive demand for graphite as
07:16 a feedstock for battery anodes. One of the UBS analysts wrote in a note last week. Now,
07:22 considering Indian stocks, one should keep a watch on HED and Graphite India.
07:26 Fantastic. All right. So, it's a whole host of stocks and don't forget, Varsha, we've
07:31 also got the auto stocks to track today because some of them have reported their volume numbers
07:35 for the month of September. Some of those numbers looking quite good, one must say,
07:40 ahead of the festive season this year. Do check out the website for all of those details,
07:45 but we're completely out of time on this edition of Trade Talk. It's been an absolute
07:50 pleasure bringing it to you. Do stay tuned. This is BQ Prime.
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