Query Board

Query Board 

TATA MOTORS 

I have 787 shares of Tata Motors bought at the Rs 340 per share. Kindly suggest if I should exit or hold on to the stock with the hopes of earning some returns in the next one year. 

- Chandrakanta Patra 

Tata Motors Ltd. is India’s largest automobile manufacturing company. It offers a diverse portfolio of products comprising a sizeable range of cars, sports utility vehicles, trucks, buses and defence vehicles. On a consolidated quarterly financial basis, the company reported total income from operations of Rs 67081.29 crore in Q1FY19 versus Rs 91279.09 crore in Q4FY18, registering a fall of 26.50 per cent. The EBITDA dropped 60.68 per cent to Rs 4423.40 crore in Q1FY19 as against Rs 11250.24 crore in Q4FY18. Tata Motors reported a net loss of Rs 2168.60 crore in Q1FY19 as against net profit of Rs 1330.54 crore in Q4FY18. The consolidated annual performance of the company looks much more promising. The total income from operations increased to Rs 295,409.34 crore in FY18 from Rs 274,492.12 crore in FY17, posting a growth of 7.62 per cent. Its EBITDA went up by 16.68 per cent to Rs 34526.38 crore in FY18 from Rs 29588.69 crore in FY17. The net profit rose 20.31 per cent to Rs 9091.36 crore in FY18 from Rs 7556.56 crore in FY17. While the quarterly performance is not as satisfactory, the long-term financial performance of the company appears good. The company’s sales of commercial vehicles in India outperformed the industry by 23.3 per cent in 2018. Thus, we recommend our reader-investors to HOLD the stock 

POWER FINANCE CORPORATION LTD. 

I possess 100 shares of PFC purchased at Rs 164. Could you please advise if I should hold the stock or exit? Should I choose to exit, then at what price would it be advisable to do so? 

- Kardeepak Kumar 

Power Finance Corporation Ltd. (PFC) is the largest NBFC in India based on net worth and was conferred the title of a ‘Navratna CPSE’. On a standalone quarterly basis, the total revenue from operations stood at Rs 7,027.50 crore in Q1FY19 as compared with Rs 6,728.60 crore in Q1FY18, posting an increase of 4.44 per cent. Its EBITDA increased to Rs 6,958.17 crore in Q1FY19 as against Rs 5,551.03 crore in Q1FY18, registering a growth of 25.34 per cent. The net profit increased to Rs 1,373.26 crore in Q1FY19 from Rs 1,122.43 crore in Q1FY18, a growth of 22.34 per cent. As for the consolidated annual financial performance, the company’s revenue from operations fell 1.83 per cent to Rs 26,976.18 crore in FY18 from Rs 27,481.16 crore in FY17. However, its EBITDA rose 17.13 per cent to Rs 25,702.21 crore in FY18 from Rs 21,942.02 crore in FY17. The net profit also surged to Rs 5,844.11 crore in FY18 from Rs 2,236.10 crore in FY17, marking a remarkable growth of 161.35 per cent. 

Apart from the good financial performance and attractive valuation, PFC enjoys a healthy loan book and low levels of NPAs. It has consistently earned good profits and paid dividends regularly. It maintains low administrative costs in the industry. By virtue of these positive long-term drivers, we recommend our reader-investors to HOLD the stock.

BAJAJ HINDUSTAN 

I am holding 2,000 shares of Bajaj Hindustan since June 30, 2014, purchased at a price of Rs 31. Could you please advise what I should do now? 

- G.K. Kansara 

Bajaj Hindusthan Sugar Ltd. (BHSL) currently produces 38 million litres of ethanol in a year and has expanded its ethanol manufacturing capacity to about 218 million litres per year. 

On a standalone quarterly basis, the revenue from operations stood at Rs 1,456.24 in Q1FY19 versus Rs 1,566.20 crore in Q4FY18, posting a fall of 7.02 per cent. The company reported a negative EBITDA of Rs 74.74 crore in Q1FY19 versus negative EBITDA of Rs 65.64 crore in Q4FY18. The company incurred net losses of Rs 167.51 crore and Rs 157.77 crore in Q1FY19 and Q4FY18, respectively.

On a consolidated annual basis, the revenue from operations stood at Rs 5,942.71 crore in FY18 versus Rs 4,633.35 crore in FY17, posting a growth of 28.25 per cent. Its EBITDA stood at Rs 272.11 crore in FY18 as against Rs 851.14 crore in FY17, posting a decline of 68.02 per cent. The company reported a net loss of Rs 499.64 crore in FY18 versus a net loss of Rs 91.98 crore in FY17. 

In the sugar industry, the cost of production is more than the price of sugar. Additionally, the sugar consumption is lower than production, thereby creating a problem of excess inventory. To combat this, the government declared mandatory sugar exports of 2 million tonnes. 

Although the financials appear bleak, the company has indulged in financial restructuring and cleaning up of NPAs to improve its prospects. The sugar industry is cyclical and exposed to many risks. In an attempt to de-risk its business, the company has developed two mega thermal power projects in Uttar Pradesh. 

Additionally, India beat Brazil to become the largest producer of sugar in the world this year. The government has offered soft loans of Rs 44.4 billion to enhance ethanol production. This bodes well for the industry at large and the company as a consequence. Thus, we recommend our reader-investors to HOLD the stock. 

BHARAT DYNAMICS LIMITED
 

I was allotted 35 shares of Bharat Dynamics Limited through the IPO. Should I sell at the current market price to cut down my losses? Please advise. 

- Venkat Prasanna S 

Bharat Dynamics Ltd. (BDL) is a Government of India enterprise which is under the administrative purview of the Ministry of Defence. It is a Mini-Ratna Category–I public sector enterprise and serves as a major defence equipment manufacturer. It was established in Hyderabad in 1970. Currently, the company has three manufacturing units located in Hyderabad, Medak district of Telangana and Vishakhapatnam in Andhra Pradesh. As part of its expansion plans, the company intends to set up two more units–one at Amravati district in Maharashtra and another at Ibrahimpatnam in Telangana. 

On a quarterly financial basis, the company’s performance stands as follows. Revenue shrunk to Rs 548.43 crore in Q1FY19 versus Rs 2,021.40 crore in Q4FY18, posting a fall of 72.86 per cent. EBITDA dwindled 64.96 per cent, to Rs 145.61 crore in Q1FY19 versus Rs 415.64 crore in Q4FY18. Net profit slumped 75.69 per cent to Rs 81.82 crore in Q1FY19 from Rs 336.66 crore in Q4FY18. 

On the annual financial front, total income from operations was reported at Rs 4,587.60 crore in FY18 versus Rs 4,886.61 crore in FY17, registering a decrease of 6.11 per cent. Its EBITDA surged 17.49 per cent to Rs 668.02 crore in FY18 versus Rs 568.56 crore in FY17. The net profit went up to Rs 528.15 crore in FY18 as against Rs 524.05 crore in FY17, posting a marginal increase of 0.78 per cent. 

While the quarterly financial performance of the company is not exceptional, the company has done reasonably well on the annual front. Despite the technical challenges it faced, it continues to remain profitable and pay dividends. It has started executing its first export order of light weight torpedo and has bagged new orders worth Rs 2,175 crore. The company has a healthy order book of Rs 8,889 crore as on April 1, 2018. Its R&D expenses have grown at a CAGR of 23.60 per cent since 2015. By virtue of these factors, we recommend our reader-investors to HOLD the stock 

IDFC BANK 

Kindly advice on IDFC Bank’s stock, keeping in mind the IL&FS crisis. I am holding 160 IDFC Bank’s shares purchased at a price of Rs 52. 

- L. S. Sivakumar 

IDFC Bank provides services such as savings accounts, NRI accounts, fixed deposits, home loans and personal loans. It offers a diverse range of customer-centric financing solutions. It has three business verticals namely – commercial and wholesale banking, rural banking, personal and business banking. The company’s product mix is as follows: Income from investment (45.26 per cent), interest income (1.76 per cent), interest and discount on advances & bills (52.89 per cent) and interest on balances with RBI and other inter-bank funds (0.09 per cent). It has a subsidiary called IDFC Bharat Ltd. in which it has 100 per cent holding. 

Looking at the quarterly financial performance, the bank’s revenue rose 1.74 per cent to Rs 2,321.15 crore in Q1FY19 as against Rs 2,281.30 crore in Q4FY18. Its EBITDA jumped by a whopping 187.82 per cent to Rs 287.57 crore in Q1FY19 in comparison to Rs 99.91 crore in Q4FY18. The net profit reported a staggering leap of 332.98% to Rs 181.55 crore in Q1FY19 versus Rs 41.93 crore in Q4FY18. On a consolidated annual basis, its net operating income increased 6.06 per cent to Rs 9,098.47 crore in FY18 versus Rs 8,578.28 crore in FY17. Its EBITDA stood at Rs 343.81 crore in FY18 in comparison to Rs 866.63 crore in FY17, thereby plummeting 60.32 per cent. The net profit fell to Rs 879.91 crore in FY18 from Rs 1,018.68 crore in FY17, registering a decrease of 13.62 per cent. 

The financials of the bank appear good for the long run. The bank has expanded its global footprint to cover 35 cities in India. Over-two-and-half years, the bank has demonstrated significant growth in terms of network, customers and CASA. During FY18, the bank announced a prospective merger with Capital First Ltd., which will not only expand its customer base and CASA deposits, but also provide the benefits of diversification. Its stressed asset book is now stable at Rs 5,000 crore and well provided for. The bank also enjoys a strong capital base. By virtue of these factors, we recommend our reader-investors to HOLD the stock 

EQUITAS

I have purchased 200 shares of Equitas. Kindly advise if I should hold the stock or sell it. 

- Hitendra Lotlikar 

Equitas Holdings Ltd. invests in subsidiary companies and provides loans to micro and small enterprises across product segments like commercial vehicle finance, loan against property, gold loans, micro-finance, working capital and term loans. Equitas is a non-deposit taking, systematically Important, core investment company registered with the Reserve Bank of India. It is the first bank in the country to launch online ETC FASTag, thereby enabling customers to apply for electronic toll payment tags online. 

On a standalone quarterly basis, the total income from operations was Rs 3.40 crore in Q1FY19 as compared to Rs 3.35 crore in Q4FY18, posting a growth of 1.49 per cent. Its EBITDA rose 22.79 per cent to Rs 2.64 crore in Q1FY19 from Rs 2.15 crore in Q4FY18. The net profit increased 29.90 per cent to Rs 2.78 crore in Q1FY19 from Rs 2.14 crore in Q4FY18. On a consolidated annual basis, the revenue from operations surged 16.90 per cent to Rs 1,786.01 crore in FY18 versus Rs 1,527.75 crore in FY17. The EBITDA dropped to Rs 812.52 crore in FY18 from Rs 873.92 crore in FY17, posting a decline of 7.02 per cent. The net profit fell drastically to Rs 31.35 crore in FY18 from Rs 159.36 crore in FY17, registering a decline of 80.32 per cent. 

FY2018 was an important year as the company transitioned from being a NBFC to a bank. It expanded its national footprint by establishing 392 banking outlets as of March 31, 2018, spanning 15 states and Union territories. With over 2.70 lakh customers making deposits to the tune of Rs 4,700 crore, the company has managed to make up over 44 per cent of its borrowings and maintain a healthy CASA contribution of about 35 per cent. The capital adequacy ratio (CAR) of the company was 89.71% as of March 31, 2018 as against the minimum CAR requirement of 30% stipulated by the RBI. The bank expects revenues to rise from 2017-2018 onwards as it has started cross-selling third party products of insurance and mutual funds. By virtue of these factors, we recommend our readerinvestors to HOLD the stock.