Stock Market Investment Shot, 21st September 2022

In a move that raises questions about the indebtedness of the Adani group, it pledged shares of ACC and Ambuja Cements worth $13 billion, just days after the acquisition. That is nearly 57% of ACC encumbered and 63% of Ambuja Cements encumbered. That makes both these stocks vulnerable. The buyout of ACC and Ambuja gives the Adani group access to nearly Rs11,000 crore of cash. Adani just moved into cement by buying out the Holcim stake in ACC and Ambuja. Both companies have rallied
sharply since the deal.

RBI removed Central Bank of India from Prompt Corrective Action (PCA) framework. Central Bank already complied with NPA and capital ratio parameters to be eligible for removal from PCA. Even post removal, Central Bank would still be subject to certain conditions and continuous monitoring. It may be recollected that RBI had placed Central Bank under PCA in 2017 due to sky-high net NPAs and ROA in the negative. Central Bank net NPAs shrank from 10.2% in 2017 to 3.93% in 2022 showing substantial
provisioning done.

Advanced Enzyme Technologies rallied 12% on NSE to Rs298 after Singapore based Nalanda India Fund hiked its stake in AET. On Tuesday, Nalanda had bought 29.1 lakh shares, representing 2.6% stake. The seller was the promoter of Advanced Enzyme Technologies. As of June 2022, Nalanda India Equity Fund is already holding 6.23% in the company. Advanced Enzyme Technologies is a research driven company with leadership in manufacturing of enzymes and probiotics catering to health and nutrition based industries.

Yes Bank board approved sale of stressed loans worth Rs48,000 crore to JC Flowers Asset Reconstruction. The deal has been approved to be executed under the Swill Challenge method. Under the Swill Challenge method, the highest bid placed in the first round of an auction becomes the base price for next round. The entity making the highest bid in the second round is given the asset. In Q1FY23, Yes Bank had reported improvement in asset quality with gross NPAs falling from 15.6% to 13.45% and net NPAs down to 4.17%.

The renewable energy arm of Hero Group, Hero Future Energies (HFE), has bagged an investment of $450 million to be invested jointly by KKR and the parent, Hero group. The break-up is not available. The funds will be used to enhance capabilities across solar, wind, battery storage & green hydrogen. The outlay for HFE will also enable the efforts of the two investors to decarbonise and transition towards sustainable energy. In 2019, HFE reorganised its business to expand its global portfolio and access
cheaper funding.

Just a couple of days after FY21 losses came in at a record Rs4,564 crore, Byju’s has informed its employees that the company was targeting $2 billion revenues and positive bottom line. However, it did not specify any time lines. According to Byju Raveendran, the company has been clocking Rs1,000 crore of sales each month in the last 5 months. Byju’s had explained the delay in filing FY21 results to the change in revenue recognition policies and to the consolidation of numerous acquisitions made during the previous fiscal.

The battle between Twitter and Elon Musk is getting tougher as Twitter Inc will question Elon Musk under oath in Delaware next week. This is part of the litigation on the decision by Elon Musk to walk away from the $44 billion bid that he had originally made for Twitter. While Twitter has accused Musk of breach of the April takeover agreement, Musk protested that Twitter underreported its fake accounts and also did not make adequate data available for due diligence. Musk had agreed to buy Twitter at $54.20 per share.

The problems at SpiceJet are compounding. Nearly 80 pilots who operate the Boeing 737 fleet and the Bombardier Q400 fleet have been placed on leave without pay for 3 months. This move is intended to cut costs. This would allow SpiceJet to rationalize pilot costs as per the permitted size of the fleet, allowed to fly by the DGCA. SpiceJet had been restricted to 50% of its capacity vide an order issued on 27th July by DGCA. In this period, SpiceJet has to demonstrate flight-worthiness and face up to enhanced surveillance.