Stock Market Investment Shot, 26 July 2022

Steel companies continued to see pressure on their operating profits. On Monday, Tata Steel posted 21% lower net profits at Rs7,714 crore for the June 2022 quarter. In Q1FY22, Tata Steel had reported net profits of Rs9,768 crore. Sales revenues of Tata Steel for the June 2022 quarter was up 18.8% yoy at Rs63,698 crore. There was a 20% spike in the cost of materials and the finance cost combined, which put pressure on the bottom line of the company. The company also took a hit due to weak exports post
export levies.

Zomato fell more than 14% at one point to a record low, but closed with losses of nearly 11.5% for the day at Rs47.50. The one-year lock-in of shares ended on Monday with a full year of listing completed.
The stock of Zomato had a stellar listing but has since lost more than 70% value from the peak due to valuation concerns. The sentiments have been quite weak around Zomato post the acquisition of Blinkit, as investors find the acquisition too steep and opaque. Blinkit marks Zomato’s big foray into the quick commerce area.

Net profits of Axis Bank for the June 2022 quarter nearly doubled to Rs4,125 crore, largely on the back of a fall in bad loans. For the June 2022 quarter, total income was up 12.2% at Rs21,728 crore. Gross NPAs of Axis Bank improved rather sharply on a yoy basis from 3.85% to 2.76%. Net NPAs almost halved to 0.64%. The main reason for the profit boost was the sharply lower provisions, which fell from Rs3,302 crore in Q1FY22 to Rs359.36 crore in Q1FY23. Axis expects to complete Citi integration by end of this year.

Tech Mahindra reported 24.8% sequential fall in net profits at Rs1,132 crore for the June 2022 quarter.
There was intense margin pressure amidst wage hikes and increase in travel and visa costs. Unlike the other large IT companies, Tech Mahindra witnessed a 200 bps fall in the rate of attrition. Revenues for the Q1FY23 quarter were up 4.9% at Rs12,708. However, the Tech Mahindra management has admitted that Q1 is seasonally a weak quarter. CME vertical contributed 40.4% of revenues and grew at 19.1% yoy.

Jubilant Foods will reduce dependence on Zomato and Swiggy for delivering Domino’s Pizzas across India. The idea of taking away business from these popular apps is to force them to keep commission in
check. Apart from the Domino’s Pizza brand, Jubilant Foodworks is also the Indian franchisee for Dunkin Donuts. Currently Jubilant has over 1,600 outlets across India and is the largest quick service restaurant
(QSR) service in India. Domino’s has alleged preferential treatment and exorbitant commissions by aggregators.

Finance minister, Nirmala Sitharaman, affirmed that the government was closely monitoring the current account deficit (CAD). This assumes importance in the light of rising crude prices and high gold imports.
To curb imports of gold, government had recently raised the customs duty on gold from 10.75% to 15%. This is expected to automatically reduce the CAD over time. In addition, the RBI has also announced a slew of measures to boost forex reserves. At the current run, CAD is expected to cross 5% of GDP in FY23. As India rushes to import coal amidst a major supply crunch, the biggest beneficiary has been the Adani group. Adani has been getting bulk of the import orders from NTPC Ltd. Out of the 20 million tonnes of coal import orders placed by NTPC, nearly 85% has been awarded to Adani Enterprises. Amidst a very warm summer, Indians have been using electricity like never before. The existing coal supply lines are just enough to meet the rising demand for power. Most of Adani group coal comes from the Australian mines.

The board of directors Bajaj Finserv is expected to consider a bonus issue and a stock split at its meeting on July 28th. Actual details will only be known after the meeting, but street estimates are of a 10-for-5 stock split combined with a 1:1 bonus. That means; the stock price would come down from the current Rs12,592 to a more affordable price of Rs3,148. Bonuses and stock splits tend to bring stocks in a popular range and improves liquidity. The first quarter results will also be taken up for consideration on 28th July.