It was a topsy-turvy week and the good part was that it was for just four days. Markets were super volatile and lost on two of the four trading days with the remaining two being flat. BSESENSEX lost 2,225.31 points or 3.90% to close at 54,835.58 points while NIFTY lost 691.30 points or 4.04% to close at 16,411.25 points. The broader markets saw BSE100, BSE200 and BSE500 lose 4.11%, 4.17% and 4.04% respectively while BSEMIDCAP lost 5.28% and BSESMALLCAP lost 5.31%. Stocks across the board were under pressure and there were just a handful of gainers in all.
The Indian Rupee was under pressure and lost 50 paisa or 0.65% to close at Rs 76.92 to the US Dollar. Dow Jones had a choppy week and managed to close virtually flat. It lost 77.84 points or 0.24% to close at 32,899.37 points.
The US FED raised interest rates by the widely expected 50 basis points on Wednesday but saw Dow Jones rise 932 points on the day of the announcement. On Thursday after having caught all short sellers on the wrong side the previous day, markets tanked 1,063 points. Friday saw markets opening weak and lose intraday about 525 points before recovering to close with losses of just 98 points. Markets have become vulnerable in the US and there is a wider belief that there would be another 4 rate hikes of 50 basis points or more in the next 10 months.
In India, RBI Governor, Shaktikanta Das called a surprise conference on Wednesday the 4th of May and announced a sudden and unexpected rate hike with effect from 21st May. Repo rate has been hiked by 10% from 4% to 4.40% while CRR has been hiked by 50 basis points to 4.50% from the earlier 4.00%. This hit our markets quite badly on Wednesday and we lost about 1,300 points on Wednesday. Looking at Dow doing well later that evening, our markets gained intraday on Thursday about 900 points but closed with gains of a mere 33 points. Friday was a big red day with losses of 870 points. Markets have broken key support zones in the previous week and we can expect some recoveries at best in the coming days. For the trend to change to positive it would be a long haul and we would need big news flow for that to happen.
The issue from LIC has opened and has been oversubscribed 1.63 times as of Saturday. There are 53.87 lac forms in the retail category which have been received. This is a new record for itself in terms of retail subscription. The issue is open for bidding on Sunday and the last day is Monday. There is a group of people who believe that shares of LIC would be available at a substantial discount to the issue price in less than six months. While each person is entitled to their own opinion, would like to just make two points here. The first is that there would be no dilution beyond the 3.5% through this issue for a period of a minimum 12 months. Second the present EV or Embedded value is based on 5% of profits being kept aside for shareholders. This would increase to 7.5% and then to 10% in the next two years. When profit component increases, the EV value increases. Take your call and use the last day to subscribe or choose to stay away.
The week ahead would see shares of Campus Activewear Limited list on Monday the 9th of April and shares of Rainbow Children’s Medicare Limited list on Tuesday the 10th of May. These two issues would be the first under the new rules of subscription of HNI bucket and RBI rule of 1 cr limit for HNI’s.
The week ahead has two primary issues as well with the issue from Prudent Corporate Advisory Services Limited tapping the markets with its offer for sale of 85.49 lac shares in a price band of Rs 595-630. The issue which has a size of Rs 538 crs would open on Tuesday the 10th of May and close on Thursday the 12th of May. The company is primarily a distributor of products manufactured by mutual funds and caters to authorised advisors and also to individual investors directly. The company has increased its AUM from Rs 32,000 as of 31st March 21 to Rs 48,000 crs at the end of December 21. There is a one-off item of acquisition of Rs 8,000 crs from Karvy at the end of November 21 at a cost of Rs 150 crs. This acquisition generates a revenue or yield of 65 basis points for Prudent. The company has earned and EPS of Rs 13.94 for the nine months ended December 21. Annualising the same for the 12 months and considering an additional income for the Rs 8,000 crs acquisition, the EPS for the full year 21-22 would be around Rs 19.50. At this EPS the PE band is 30.5-32.30. Considering the fact that the recently listed issue from Anand Rathi Wealth Limited reported an EPS of Rs 30.18 for FY22 and is trading at a PE multiple of 20.84 which is substantially cheaper, investors may form a valued opinion and make their own choice.
The second issue is from Delhivery Limited which is tapping the markets with its fresh issue for Rs 4,000 crs and an offer for sale of Rs 1,235 crs in a price band of Rs 462-487. The issue would open on Wednesday the 11th of May and close on Friday the 13th of May. Delhivery is the largest integrated logistics player and reported revenues of Rs 4,810 crs for the nine months ended December 2021. It has made seven acquisitions in this nine-month period and the full revenue impact based on current revenues would see a revenue increase of roughly Rs 300 crs per quarter going forward. The company has been incurring losses since inception and even for the nine-month period it lost roughly Rs 890 crs which included a non-cash item of Rs 299 crs.
While the logistics business in India is highly fragmented and the opportunity for the segments in which Delhivery is present is over 300 billion dollars, its present revenue is still to cross 1 billion. The opportunity is there, the company has spent in acquisitions and setting up the infrastructure. It has also learnt the ropes over the last few years. Turning the opportunity into sustainable profits maybe some time away. How long? A question which has no answer currently. In the shorter term look at Blue Dart Express Limited which has revenues of Rs 4,400 crs in 12 months ended March 2022 and a profit after tax of Rs 376 crs. The EPS is Rs 158.65 and the market cap Rs 16,219 which is less than half of Delhivery at Rs 35,000. Makes sense to invest in two shares of Blue Dart which would translate into Rs 13,670 against a lot of Rs 14,610 for Delhivery. Allow the share to list and wait for the turnaround in Delhivery and time your switch.
Coming to the markets in the week ahead. We are passing through tough times and FII’s seem to sell non-stop irrespective of markets. With key supports broken, one can only expect markets to bounce to regain some of the lost ground. Expect immediate resistance at levels of 56,000 and then at 57,000 on BSESENSEX and at 16,850 and then at 17,100 on NIFTY. This does not suggest that these are immediate targets but what could be levels in the medium term. The strategy would be to sell on strong rallies and buy on dips with traders avoiding overnight positions. The US markets are currently worrisome and do not provide clues as to how they would fare.
Trade cautiously and use large swings on the downside to buy and upswings to sell. Being patient would always help and with the pent-up demand of primary issues likely to tap markets, pick and choose to tap the markets.

The week ended 29th April 2022 was full of both sided sharp moves. The week began with an expected fall, rose the next day, fell the next day and kept on alternating between gains and losses all through the week. At the end of the week, it had lost on three of the five days. What was eventful was the fact that Friday was the day of reversal where markets gained initially and in the last hour just cracked. In the process the chart formation was that of an engulfing candle where both the previous days highs and lows were crossed and market closed lower. The week closed with small net change which does not convey the market movement. BSESENSEX lost 136.26 points or 0.24% to close at 57,060.89 points while NIFTY lost 69.40 points or 0.40% to close at 17,102.55 points. The broader markets saw BSE100, BSE200 and BSE500 lost 0.44%, 0.56% and 0.69% respectively. BSEMIDCAP lost 1.14% and BSESMALLCAP lost even more at 2.17%.

The India Rupee gained 6 paisa or 0.08% to close at Rs 76.42 to the US Dollar. Dow Jones had yet another Friday selloff when it lost 939 points. This is the second consecutive Friday when it has lost 900 points plus. The week ended with losses of 834.19 points or 2.47% to close at 32,977.21 points. Dow Jones had in the year to date lost 9.25% and is very close to the 10% level when the US gets worried about their markets. Nasdaq lost 4.17% for the week and is now down 21.16% on a year-to-date basis. It closed at 12,334.64 points and made a new low on Friday.

The US FED meets on the 3rd and 4th of May and would be raising interest rates. While a 50 basis points is a certainty, there is a growing feeling that the way inflation is shaping up, the hike could be even more.

The week ahead has a trading holiday on Tuesday and looking at the Dow on Friday, the opening of our markets would be gap down on Monday. With the Tuesday holiday and Fed meeting coming up, even lower prices would not attract investors or traders as they would be cautious. Expect markets to take a trend only post what the Fed does on Wednesday night.

April futures expired with the bears having it their way. The only saving grace was the fact that markets rallied on Thursday and allowed the bulls to recover some ground. The series ended with losses of 219.70 points or 1.26% to close at 17,245.05 points.
GST collections for April 2022 were at a new high of 1.68 lac crs. This is higher than the previous highest of Rs 1.42 lac crs. This sets the tone for recovery of the economy in FY22-23.

In primary market news, we had two issues which opened and closed for subscription during the week. These issues were the first under the new guidelines which restricted funding to just one crore per individual. There was also the bifurcation of the HNI bucket into two segments of 5% and 10% with the first being 2-10 lacs and the second 10 lacs and over.

The first thought that comes to mind post the subscription is the fact that HNI subscription has cooled of significantly. Subscription is a mere 22.25 times and just 3.73 times in the HNI category respectively. The days when subscription began at a three-digit level and went up to 400 and 500 times are certainly a thing of the past. This has also reduced the premiums significantly as there is no cost of funding. While everything seems fine for the moment, stock exchanges have chosen not to give the breakup of the two buckets of HNI subscription for reasons best known to them. Through this article I would request SEBI to direct the exchanges to disseminate the information as it is in the interest of investors.

The issue from Campus Activewear Limited which had tapped the markets with its offer for sale of 479.50 lac shares in a price band of Rs 278-292 was oversubscribed 51.75 times overall. The QIB portion was subscribed 152.04 times, HNI portion 22.25 times, Retail 7.68 times and Employee 2.11 times. In the 10 lac plus category roughly one out of three applicants would get shares worth Rs 2 lacs.
The second issue was from Rainbow Children’s Medicare Limited which had tapped the markets with its fresh issue of Rs 280 crs and an offer for sale of 2.4 cr shares in a price band of Rs 516-542. The issue was subscribed 12.42 times with QIB portion subscribed 38.90 times, HNI portion subscribed 3.73 times, Retail portion subscribed 1.38 times and Employee portion subscribed 0.31 times. HNI applicants in the 2lac plus category would get full allotment. I believe it would take a few issues for investors to understand where they should apply going forward.

The week ahead sees Life Insurance Corporation of India Limited tapping the markets with its offer for sale of 22.13 cr shares in a price band of Rs 902-949. The issue would have its anchor on Monday the 2nd of May and the issue would open on Wednesday the 4th of May and close on Monday the 9th of May. The issue is open for four days for subscription. This issue which would be the largest issue to ever hit the capital markets would raise about Rs 21,000 crs.

The issue has a reservation of 10% for Policy holders which is the first time ever that such a reservation is being made. They are also entitled to a discount of Rs 60 per share. The Employee quota is also for 10% and they along with Retail investors would get a discount of Rs 45 per share.

The issue which would have a market capitalisation of about Rs 5.92 lac crs is priced at 1.1 times its EV or embedded value. This is in line with large, mature international insurance companies from China which have the size and scale of LIC.

The government is selling 3.5% of the company and has given a commitment to investors that there would be no dilution of shares for a minimum of 12 months after listing. This one year holding period is enough to allow the share to establish its price and place in the capital markets.

Looking at the likely response, the opportunity that LIC has in the Indian markets, its growth over the last 22 years when privatisation took place and the fact that insurance is highly under-penetrated in India, offers great opportunity to investors looking at LIC. This is a must invest opportunity.

Coming to the markets in the four-day week ahead, they would be volatile and choppy. As mentioned early they would be under pressure on Monday when markets open. Going forward the key event would be the FED meeting for hiking interest rates which would be known to all on Wednesday night. Global markets would react to the same on Thursday morning. Looking at the trend and direction, markets are in a range bound movement where they tend to hit the lower and upper band every week. The band is 56,000-58,000 on the BSESENSEX and 16,800-17,400 on NIFTY. For markets to move in either direction they have to break out of these levels and then sustain the same. Currently we seem to be finding that tough.

However, this range bound movement is providing trading opportunities. How long this would last is debatable. I believe this is the week where markets will decide their trend one way or the other. Trade cautiously.

Campus Activewear Limited is tapping the markets with its offer for sale of 479.50 lakh shares in a price band of Rs278-292. The issue would open on Tuesday (April 26) and close on Thursday (April 28). The company would raise Rs1,394.3 crores at the top end of the price band.

The company is India’s largest manufacturer and seller of sports and athleisure footwear in the men, women and kids’ category. They launched the brand in 2006 and clocked sales of Rs 700 crore in the year ended March 2021. Looking at the nine months numbers for the period ended December 2021, revenues clocked were Rs842 crore. If one were to extrapolate these numbers for the period ending March 2022, it could be presumed that the sales would have crossed the 1,100 crore mark. It now appears that the company has reached an inflection point and one could expect the present number of Rs1,100 crore to more than double in the next two years because of its distribution reach, number of SKU’s, price points from Rs700-3500 and acceptability as an aspirational brand amongst tier-2 and tier-3 towns which account for about 3/4th of its total sales.

The company has a reasonable market share of about 17 per cent in the categories in which it operates. Roughly half the category is catered by the unorganised sector and the remaining half by the organised sector. With GST being introduced and the duty on footwear being increased at the beginning of the year, the unorganised market is losing dominance and market share at a rapid pace. Suffice to say that it is being replaced by the organised sector and here Campus has the advantage.

The company is present in the market place through over 19,200 retailers who are present in 652 cities across 28 states. The company has over 425 distributors across the country. In terms of new designs, it launched 583 new designs in the previous year. It has over 1,433 active designs for men, 241 active designs for women and 485 active designs for children and kids. Keeping the market fed with such a large number of SKU’s involves careful planning and execution. The company has direct to consumer initiative and uses third party websites to sell its products without allowing unhealthy competition. It spends about 6 per cent of its revenues on branding and digital initiatives.

The company is a fairly compact manufacturer relying heavily on its dedicated and exclusive team of vendor suppliers who provide the bulk of the uppers and soles required for the shoes that Campus makes. Campus produces about 10 per cent of its uppers and 37 per cent of its soles. However, the entire assembly of shoes is done inhouse and this ensures quality and strict control of inventory.

Campus products are available online with all of the leading brands like Flipkart, Amazon, Myntra and Nykaa. It also has its presence in large format stores and is steadily growing its EBO network. The company sold about 1.33 crore pairs in nine months and is expected to touch or cross the 2 crore mark at the end of the year March 2022.

The company reported and EPS of Rs 2.82 for the nine months ended December 2021 against similar previous year period of Rs 0.56. For the full year ended March 2021 the EPS was Rs 0.88. One must keep in mind that this was the period of Covid-19 when there were many constraints affecting industry and retailing as well. The full year earnings for March 22 on an annualised basis of 9 months December 21 would be Rs 3.76. Based on this EPS the PE band is 73.9-77.65. This compares very favourably with the competitors as listed in the RHP.

Campus has products which are competing with the likes of the multinational brands like Adidas, Reebok and Puma. The Indian brands who are partial competitors as they are not fully present across the value chain include names like Bata, Liberty and Relaxo.

Considering the fact that the company is at an inflection point and is well poised to more than double its revenue and profits in the next 24 months, based on annualised numbers for the year ended March 2022, the company offers scope for appreciation for medium- and long-term investors.

Being an Indian brand with no exports and clear focus on the sector in which it is operating gives the comfort that the company means business. The promoters of the company post this issue would continue to own close to 74-75 per cent of the company and there would be no overhang of any further sale. Subscription to the above issue is warranted and an investor would get returns on listing and in the medium to long term as well.