Stock Market Investment Shot, 14th September 2022

US Consumer inflation for August 2022 was marginally lower at 8.3%, but still nearly 20 bps higher than street estimates. While gasoline prices have been tapering, that has been more than offset by a spike in food and core inflation. Food inflation was up 11.4% yoy, the highest yoy spike since May 1979. Even core inflation in the US bounced back by 30 bps to 6.3% in August 2022. This is likely to ratify the view of the Fed that inflation is not going away in a hurry. That makes a 75 bps Fed rate hike in September
inevitable.

The most dreaded word for IT companies is moonlighting and now Infosys has made its displeasure with such practices obvious. Moonlighting refers to employees taking up side gigs to work on more than one job at a time. Infosys has shot a mail to employees asserting that dual employment or “moonlighting” is not permitted and is a violation of the employment contract. Infosys has warned its employees of strict disciplinary action, even culminating in termination of employment. Moonlighting is quite common in IT.

Madhabi Puri Buch, chairperson SEBI, clarified that the regulator had no intention of getting into the finer aspects of issue pricing, even for new-age technology companies. There has been hue and cry over digital companies pricing aggressively. However, Madhabi underlined that SEBI will restrict itself to making more elaborate disclosures mandatory. SEBI was OK with pricing as long as it could be justified with adequate data and underlying business case. Several digital IPOs are trading at deep discounts to their IPO prices.

Macleods Pharmaceuticals joins the long list of marquee names to defer their mega IPO plans. It was slated to be one of the biggest pharma IPOs, but it feels the market conditions are not conducive enough. This decision was based on discussions with key investors. Earlier, PharmEasy the digital
pharma market place, had also deferred its IPO. Macleods was supposed to be a Rs5,000 crore IPO. Instead, the company will look to raise around $100 million via private sale. Macleods Pharma is a cash-rich, zero debt business.

Adani Enterprises, the holding company cum incubator of the Adani group, became the fourth Adani stock to cross Rs4 trillion market cap. Other Adani stocks to cross this Rs4 trillion market cap mark were Adani Transmission, Adani Total Gas and Adani Green Energy. Adani Enterprises has surged 24% in the last 1 month and 70% in the last 3 months, outperforming the Sensex more than 4 times over. Adani Enterprises also got a leg up from inclusion in the Nifty-50 index in place of Shree Cements effective 30th September.

A day after CPI inflation in India bounced back to 7%, HSBC Global Research has pegged its repo rate expectations at 6% by December. That would entail another 60 bps rate hike in the next 2 meetings of the MPC this year. Most economists are pegging the terminal rates in India at closer to 6.5%. August also saw the core inflation bouncing back to 6.17%, even as food inflation showed a bounce. Food inflation is likely to trend higher due to weaker than expected Kharif output this year. RBI’s Median inflation target is 4%.

According to reports, private equity giant (KKR) may be looking to exit Avendus, a homegrown financial services group. KKR is looking at a valuation of around $600 million and will be one of KKR’s biggest exits
from financial services in India. KKR is the largest shareholder in Avendus with around 60% stake. KKR had just completed a Rs9,000 crore exit from Max Healthcare. It is expected that nearly 75% stake in Avendus may be sold to a new buyer. KKR had paid $115 million for the stake in 2015, so it should be a good exit.

Adani Transmission has incorporation a 100% subsidiary, Adani Electricity Jewar Limited (AEJL) for its transmission and power business. AEJL will commence business operations soon. The new subsidiary will carry on the business of transmission, distribution and supply of power as well as infrastructure services. Adani Transmission already has a market cap of Rs4.50 trillion. In the June 2022 quarter, the transmission business revenues grew 10.4% yoy while the distribution business revenue grew 27% in the
same period.