The SMID Show | Skipper & Zee In Focus | NDTV Profit
- #Skipper's rights issue
- Zee-Sony merger to be called off?
Hiral Dadia and Hersh Sayta bring you small and midcap stocks to keep up with on 'The SMID Show'. #NDTVProfitLive
- Zee-Sony merger to be called off?
Hiral Dadia and Hersh Sayta bring you small and midcap stocks to keep up with on 'The SMID Show'. #NDTVProfitLive
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TVTranscript
00:00 active. From the days though you have seen a good recovery that has come in as well near,
00:04 we actually managed to inch above the 21,700 mark but not holding those levels pretty closely
00:10 we are at 21,680 as we speak but gains of around almost 9/10th of a percent coming in
00:16 there. Let's quickly look at the top gainers Adani Ports, Adani Enterprises, two top gainers
00:21 in terms of today's day of trade as we speak. Tata Motors is seeing a good run today back
00:26 above the 800 mark and you have a Hero Motor which is seeing a good up move. Kotak Mahindra
00:32 Bank also trading in the positive. On the losing end you have names like Nestle, ONGC,
00:37 Britannia, UPL as well as HDFC Live, these are the ones which are trading under pressure.
00:43 Let's pull up a Bajaj Auto also on the screens on the back of the buy back and see what that
00:47 stock is doing in trade because pre-open did indicate a good up move, there was some cooling
00:50 of that happened, there you go. Just a 1.5% up move now in terms of Bajaj Auto and that's
00:55 mainly on the back of the acceptance ratio at retail level which will be absolutely on
01:00 the lower end. If you see in terms of Bank Nifty as well, again you are seeing a recovery
01:05 after yesterday's session, we are nearly at the day's highest levels in terms of Bank
01:08 Nifty with 11 advances as well as one decline coming in there and you have a Bandhan Bank
01:14 which is the top gainer with gains of 2%, Kotak Mahindra Bank, PNB, ICICI as well as
01:19 a Federal Bank which are seeing gains little over 1% whereas you have a AU Bank which is
01:24 seeing cuts of almost 3/10 to 4/10 of a percent. So that's what the markets are looking like
01:29 overall. But Harsh, overall if you see in terms of broader markets, what's the trend
01:33 that you are picking up because getting into 2024 as well the anticipation initially was
01:38 that probably you will start seeing some profit booking there but the run has continued. Absolutely
01:43 and the run seems to have continued but the outperformance is not visible at least in
01:48 trade today which is a little bit of a surprise. So good morning Hiral, good morning to everyone.
01:54 Well, let's quickly pull up the Nifty Mid Cap Index up around 4/10 of a percent or thereabouts
01:59 versus around 3/4 of a percent where the Nifty is currently at and Nifty Small Cap largely
02:06 in line with the benchmark. So that's a positive. Quickly on to names, some of the names which
02:12 are buzzing in trade within the Mid Cap space. You have the likes of the NICAs which are
02:21 continuing to gain in trade well today. You're also 6+% in trade up higher for NICA. You're
02:30 also within the Nifty Small Cap basket seeing good gains, the likes of an IRB gaining up
02:36 7% after a good set of December numbers which IRB seems to have clocked positive reaction
02:43 on that stock. Within the negatives you have the likes of a Bikaji or KEI which are trading
02:48 with cuts of around a percent or thereabouts within the Small Cap space. But in terms of
02:54 specific names you also have the likes of a GMDC up around 6% on the back of environmental
03:00 clearance for their Lignite plant or rather expansion of their capacity which will add
03:07 substantially to their top line. We did speak about IRB Infra you had within the large cap
03:13 names you had the likes of a Tata Motors which came out with numbers up 2% and you also have
03:18 the likes of a Fino payment applying for a small finance bank license up around 2.5%
03:24 in trade. So those are largely the names but one of the stocks which is in focus we have
03:30 Skipper in focus today. The company has received approval to raise roughly 200 crore via a
03:36 rights issue record date for that is set on as the 12th of January. The company's order
03:42 wins have been good. The Q2 orders stood at roughly 6000 odd crore and the Q3 order wins
03:50 also continue to be quite strong and there is a good bidding pipeline as well. So we
03:56 have the management with us largely with regard to what's going to drive growth on execution
04:02 of some of these orders. We have Sharan Bansal who is the Executive Director at Skipper Limited
04:07 who is joining us on the show live. Good morning, Sharan. It's a pleasure having you. Good morning.
04:15 So Sharan talk to us what's the plan 200 crore rights issue. Where are you planning to utilize
04:21 this 200 crore because on a balance sheet size of roughly 800 that's a large amount.
04:26 Yes, sure. As I have been guiding for about a few quarters now looking at the robustness
04:35 of the sector and the strong order win performance that the companies had, we are expecting a
04:42 very healthy top line growth of at least a 25% plus CAGR over the next three years. Now
04:50 to obviously with this growth of revenue, we can expect that the working capital requirements
04:56 of the company will also be going up. The idea of the management was that the entire
05:02 working capital should not be only debt funded. There should be a fair amount of equity funding
05:08 in that growth of working capital as well. So the 200 crore issue proceed will largely
05:14 go towards funding of increase in working capital and some amount will be for general
05:18 corporate purpose as well. So that essentially was the idea behind the rights issue to fund
05:24 the next set of growth for the company. Right. Sharan, this is Hiral on the side. Now with
05:30 regards to where the rights issue is concerned from here on, overall is this something which
05:37 will be utilized mainly from a FY25 perspective or are you seeing utilization happening in
05:43 FY24 itself, that's number one. And number two, which segment of business are you expecting
05:50 that will drive growth? Sure. So in terms of the proceeds, as of now
05:56 the company is calling in about 25% of the entire rights issue as application in the
06:06 rights issue. So you can assume roughly about 50 crores will be received in this FY24 itself
06:13 before March. And the balance amount, the company has not put a firm date, but tentatively
06:20 we expect to receive it by March 25. So that's the outlook when the entire rights proceeds
06:29 should be received by the company. In terms of business outlook and segments, of course
06:34 our engineering segment and infrastructure segment both have been doing very, very well.
06:40 Not just because of the rebound in transmission and distribution orders in the Indian market,
06:46 but also globally because thanks to the renewables push, there is a large amount of T&D investment
06:53 that we are seeing in many, many, many key markets where we operate. That is the flavor
06:57 of the season now almost everywhere that we see. And we expect this trend to continue
07:03 over the next five to 10 years as renewable investments pick up pace, we should see more
07:08 and more investments going into power transmission. That's the addressable segment for us. Again,
07:14 our polymer segment has seen very healthy growth in the first six months. And we do
07:20 expect that on the back of our national ad campaign, we should be seeing more and more
07:26 sales growth in that segment as well. Right, Charan. Charan, I just want to try and
07:31 understand the execution of your order book. Roughly 8000 crore is the order book you are
07:37 currently sitting on. Please correct me if I'm wrong on that count. But talk to us about
07:43 execution by FY25. How much of this are you looking to execute?
07:48 September it was about 6000 crores. We do have a bidding pipeline of more than 12,000
07:55 crores for which we are expecting orders and everyday orders are coming in as we speak.
08:01 The execution cycle of these orders you may expect to be roughly between 18 to 24 months.
08:07 Of course, the government of India is very focused on providing connectivity of power
08:14 transmission to 500 gigawatts of renewable power. So we can expect that yes, execution
08:20 will not be a challenge for these contracts. And of course, we do have a fair share of
08:24 export orders as well in this overall order book. So 18 to 24 months is what you can expect
08:30 the execution to take place in. Plus, of course, as we go along, new orders will keep
08:34 continuing to flow in. Right. Sharan, polymer business is something
08:39 where you are seeing good traction that is coming in. So overall, what's the trajectory
08:46 looking like on that front, number one? And overall, if you see, if you know, apart from
08:52 the way the order book has been growing, how are you expecting the revenue mix to change?
09:00 Business, you're right. We've seen almost 40 to 50 percent growth in volumes as well
09:06 as value over the previous six months. With the back on the strength of our national ad
09:13 campaign, we do expect that momentum to continue. There is a strong push on the water distribution
09:21 sector by the government of India through projects such as Jal Jeevan and Awas Yojana,
09:26 etc. So there is definitely a lot of demand coming in there. In terms of the revenue mix,
09:32 we do expect that because all our segments are growing well, we should continue to see a
09:41 20-10 mix, 70 percent on the engineering side, 20 percent on the polymer side and 10 percent
09:48 on the infrastructure side. Now, give or take 5 percent plus minus each and each segment,
09:52 we do expect that mix to continue. And are some of these new businesses,
09:58 Sharan, margin accretive for you? Is that a positive as well going forward? So how will
10:04 margins move? Definitely, it is on the radar of the company to improve bottom lines as we go ahead.
10:13 This is a very good time for us to be able to do that because we are enjoying an order book where
10:19 we have almost full revenue visibility over the next two years. Also, the company has consciously
10:26 been moving to more and more export markets and more and more business coming in from developed
10:32 markets. So we do expect that to contribute better to the margins. And in terms of overall,
10:40 currently, we do expect that margins will continue to be healthy from here on.
10:47 Right. Another question, Sharan, I have is the share of the non-TND products,
10:52 which includes railways as well as telecom. Now, that in the overall order book almost stands at
10:57 around 42 percent for you. Taking the kind of orders and the capex that the government has
11:03 specifically with regards to railways, how are you seeing that basket expand and how could Skipper be
11:09 a beneficiary? Our main segment focus continues to be power TND and telecom. We are there in the
11:19 railway segment, although we are not a large player there. Telecom currently constitutes bulk
11:25 of this non-TND order book that you see, because we secured some large contracts from BSNL in the
11:31 previous financial year. We expect that both power TND and telecom will see good growth in the years
11:40 ahead. That's that's the two focus segments for us. Telecom, because of the overall 4G, 5G rollout
11:48 that various operators are continuously investing in. So that should continuously see growth. Of
11:56 course, power TND for us is not just the India play, but also much more global play, where we
12:03 are active in about 65 countries worldwide. And, you know, again, as I mentioned earlier,
12:09 renewables are driving the need for more and more power transmission connectivity in a number of
12:14 countries. Right. Prashanth, two quick questions with regard to borrowing. Where does your
12:21 borrowing head from here on? Would you continue to fund some of the growth to borrowing? Of course,
12:26 you're doing some amount of equity. And point number two, at what cost is this coming out?
12:31 Because your interest costs seem slightly elevated. So just trying to understand what kind of what is
12:36 the kind of rate of borrowing? Our current rate of borrowing is about eight and a half to nine
12:42 percent. And this, of course, there's opportunity for this to come down as interest rates ease and
12:49 the company's performance gets better. And of course, we are quite focused on bringing down
12:55 our working capital number of days as well. The way we look at it is that the long term
13:01 borrowings of the company are only about two fifty crores and roughly about five hundred crores is
13:05 what our working capital borrowings are. We feel this is quite comfortable. Our company has very,
13:11 very healthy cash flows, so we don't see any challenge still to be extra sure about the
13:16 growth going forward. We've decided to bring in this equity of two hundred crores to the right.
13:22 If there is need be for further growth through equity, company would be open to that in the
13:27 future as well. Right. Last question, Sharan, coming to you is clearly from a guidance perspective,
13:34 revenue growth in excess of 25 percent CAGR for the next three financial years is what you've
13:39 already told the investors. And now taking into consideration the opportunities that already
13:46 stand in the renewable energy space, the kind of bid pipeline that you have for the international
13:51 markets as well, taking all of that into consideration, do you see any upward division
13:58 on that front on the top line as well as bottom line? And to what's the milestone that Skipper
14:03 wants to achieve in the next three to five years? Well, I think it's a little premature to talk
14:10 about the milestones of three to five years ahead, but certainly we do expect to hope to surprise the
14:17 market on the positive side where revenue performance is concerned and hopefully come
14:22 back next quarter on your show with a better guidance and more improved guidance going
14:27 forward as well. Sure, Sharan, we look forward to that and it'll be a pleasure having you again on
14:34 the show. But for today, thank you so much for all of that perspective for our viewers. It's time
14:40 for us to slip into a very short break. We'll be back with discussing the Zee Sony merger.
14:47 So stay tuned to NDTV Profit.
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16:04 You're watching the Small and Mid-Cap show. Clearly, if you go to see you have the media
16:08 space that is in focus and last couple of trading sessions have been very interesting for all the
16:14 names. Let's just pull up a few of the stocks. You have Zee Entertainment that has been in focus,
16:18 Den Networks, Athway Cable. All of them is something that has been on everyone's radar
16:24 over the last couple of trading days. Now, what's happening with this space to understand more
16:30 specifically with regards to where the Zee and Sony merger goes as well as the broadcasters who've
16:36 probably gone ahead and raised the TV channel, book a prizes and that will happen from the 1st
16:40 of February to discuss more on this. Joining us on the show is Ginesh Joshi from Prabhudas Leeladhar.
16:49 Ginesh, good morning and welcome to the show. Good morning. Ginesh, my first question coming to you
16:55 is on the Zee Sony merger. Firstly, there are media reports which are indicating that Sony India is
17:02 looking to cancel the merger deal with Zee Entertainment and they will issue termination
17:07 before the 20th of January 2024. And this is mainly over Zee's CEO, which is Puneet Koinka,
17:14 leading the merged entity. I mean, with him being on the board, how are you looking at this and
17:20 what's your view? So, obviously, this development is a big negative. But let us think of this
17:30 merger from a very strategic standpoint. Let us think for the time being that the merger does not
17:35 go through and what are the gains that can come through? Obviously, the Zee stock price will
17:40 correct by about 30-40% or even more from here on. So, they have nothing to gain. Even if we talk
17:46 from Sony's standpoint, if both of them do not come together and on the other hand, if Disney
17:52 and Viacom, they merge, then the competitive position of Sony also gets weakened. So, even
17:58 they do not have anything to gain if the merger does not go through. So, logically speaking,
18:03 it is in the interest of both the parties to come together and find out an amicable solution.
18:08 But going by what the media reports are currently, apparently, it seems that the discontent over the
18:15 CEO post remains from both sides and we'll have to wait and watch as to what the exact outcome is
18:22 from here on. So, Tinesh, then what would you advise investors who are holding Zee Entertainment
18:29 to do? Secondly, we have also seen large blocks that have happened on Zee Entertainment today.
18:34 So, a lot of buying interest has come in today's day of trade. What does that actually signify or
18:40 what does that actually tell you? See, that's a tricky question. I mean,
18:45 what to do with the stock? I'll give two answers. I mean, first is that if you believe that the
18:51 merger does not go through, which to my mind still is a very low probability, then as I mentioned
18:56 previously, there is a probability of further correction in Zee because obviously Zee on a
19:01 standalone basis is struggling big time and again, it will get a CG discount. So, I think there will
19:07 be more correction in Zee if the merger does not go through. But if it goes through where I feel
19:12 that the probability still is a bit high and they might come up with an amicable solution with
19:19 respect to the CEO post, then obviously the upside is there for the taking. But currently at this
19:25 price, obviously it's a double-edged sword, so to say. So, I would suggest that someone who's
19:30 already into the stock, they should probably wait and watch for the time being and fresh entry is
19:37 something which can be very tricky at this point in time. Right, Ginesh. Harsh also joining in the
19:43 conversation. Ginesh, we have some sort of confirmation with regard to broadcasters increasing
19:52 prices. Apologies for that. How does that impact valuations of companies as we speak and which ones
20:04 are the better placed with regard to having the absorption capacity for these price hikes?
20:11 So, yes, I mean, after NTU 3.0 came into effect, we saw the price hikes being taken by majority of
20:17 the broadcasters sometime back. But very recently, the broadcasters have filed a new RIO and which
20:25 signifies a price hike in quite a few bookings, even for Zee, Biocom, etc. I think this is perhaps
20:33 to cover up the content cost inflation because if you look at the price which they have paid
20:39 to acquire some of the sports properties, that is sky high. And hence, you might see the bookie
20:45 prices being increased, especially for Viacom. Even for Zee, we have seen some marginal increase
20:49 of about 5 to 10% in bigger bookies. So, this essentially should help their subscription
20:55 revenue. So, if I talk specifically about Zee, their annual subscription revenue is in the band
21:00 of about 3000+ crores. And I think we should see a mid single digit hike in the subscription
21:07 business because of implementation of NTU 3.0. Okay, so that's with regards to the price hikes.
21:14 And now, Dinesh, now that we are pretty close to the Q3 earnings season,
21:19 what's your view on the media space overall? And what would your topics be?
21:24 So, yes, I mean, this quarter, again, if I talk about broadcasters, we have seen some softness
21:32 in the ad environment. And also because of the fact that World Cup was there in this quarter,
21:37 we see a summit of shift happening in ad spends from the GEC to sports. So, it will be a
21:43 comparatively weaker quarter for broadcasters. We expect Zee to report a decline in domestic ad
21:50 revenue for this quarter. Margins can be slightly better at about 10-11% for Zee, but it will be
21:55 lower than what it was in the last quarter. Talking about the other name, which we cover,
22:00 which is PVR. Again, in this quarter, I mean, if we compare it with the previous quarter,
22:06 which was a blockbuster one, you will see some softness come through because the overall box
22:10 office collections have seen about 20% plus kind of a sequential decline. And again, if I talk
22:16 about the content slate for 4Q, that does not appear to be very exciting, so to say. So, I think
22:22 even PVR for a couple of quarters, one has to be cautious. And Zee, as I mentioned, is a double-edged
22:29 sword at this point in time. All right. Ginesh, also wanted your views on something like an Azara
22:36 tech. You have a business which is more or less in acquisition mode most of the time over the last
22:45 two years since its listing. Of course, very healthy gains seen by shareholders, last six
22:50 odd months, 50% plus with regard to shareholder returns. So, very solid there. How should one
22:56 look at valuations? That's point number one. And the second piece is with regard to the whole
23:02 gaming controversy that's playing out with regard to GST.
23:05 So, to answer your second question, yes, that GST implementation of 28% on full-back value,
23:13 obviously that has impacted the real money gaming space. But if I talk specifically about Nazara,
23:19 their contribution of RMG is roughly 5% or even less than that to the top line. So,
23:24 the impact on Nazara is not very high, so to say. But if I talk about their business,
23:29 I mean, a few of their acquisitions, Prima PC are facing certain headwinds, I mean,
23:34 beat Hedopia because of the change in the Apple's privacy policy or for that matter,
23:38 their recent acquisition, which was into the ethic category where they lost one client and
23:44 are witnessing a decline in revenue in that segment as well. And then even RMG, which I just
23:50 mentioned. So, a couple of business segments are facing certain headwinds, but obviously, I mean,
23:55 Nazara coming from a very acquisitive mindset and even the fact that it operates in a sunrise
24:01 industry, we should also pay attention to the cash, which they have. I think they have about
24:06 1300 crores of cash on the balance sheet. And there is a very strong probability that they
24:12 might acquire a few companies in the next, say, about 6 to 12 months. So, I think the re-rating
24:18 will depend upon the valuation at which they are acquiring these companies and in what
24:23 categories they acquire. So, the growth can be strong from here on, but we feel that one has to
24:30 be watchful given the fact that a couple of segments are not doing well. But re-rating will
24:35 depend upon the capital allocation decisions of the management. Right. So, these are a few stocks
24:42 one should be watching out for as well. Thank you, Junaid, so much for joining us on the show.
24:46 If we can just quickly pull up a five-day chart of the media index and that will tell you
24:51 what's happened. It's mainly Zee Entertainment that is a big overriding as of now, but a good
24:56 rally that we've seen over the last couple of trading sessions in terms of Den, Hathaway and
25:01 few other names as well. So, that's with regards to where the media space goes, but completely out
25:06 of time on this show. With that, it's a wrap on the Small and Mid-Cap show. Lots more news and
25:11 updates on the other side on NDTV Profit.
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