Hindalco: Hindalco’s Stock Up as Novelis Subsidiary Files for US IPO
The Hindalco reported it fully owned subsidiary of Novelis is requested approval to SEC for releasing IPO in the US Market worth of $1.2 Billion and company asset worth is $18 Billion.
If this IPO launches it is the Biggest gain for Hindalco industries and presence in the US revenue will be boost up.
HINDALCO INDUSTRIES Market price is moving in Ascending Triangle and market has reached resistance area of the pattern
Hindalco Industries witnessed a nearly 2 percent surge in its share value on May 14, following an announcement by its fully-owned subsidiary, Novelis Inc. Novelis filed a registration statement on form F-1 with the Securities and Exchange Commission (SEC) regarding its proposed initial public offering (IPO) of common shares.
The IPO is anticipated to raise approximately $1.2 billion, with an expected valuation of $18 billion. Novelis, headquartered in Atlanta, holds the distinction of being the largest producer of flat-rolled aluminum products globally, serving diverse industries from automotive to beverage packaging. It plans to list its common shares on the New York Stock Exchange (NYSE) under the ticker symbol ‘NVL’.
The specifics of the IPO, including the number of shares offered and the price range, are yet to be finalized. Novelis expects to conclude this process once the SEC concludes its review. The company first disclosed its IPO plans in February 2024.
Reports suggest that Novelis Inc. aims to complete the IPO offering as early as June, with formal marketing expected to commence in approximately two weeks.
Morgan Stanley, BofA Securities, and Citigroup have been appointed as the lead book-running managers for the proposed IPO, while Wells Fargo Securities, Deutsche Bank Securities, and BMO Capital Markets will serve as additional book-running managers. Co-managers for the proposed offering include BNP Paribas, Academy Securities, Credit Agricole CIB, PNC Capital Markets LLC, and SMBC Nikko.
Over the past year, the stock has demonstrated significant growth, rallying over 56 percent, outperforming the benchmark Nifty 50, which rose by 20 percent during the same period.
Notably, Novelis reported robust financial performance in Q4FY24, prompting bullish sentiment among brokerages towards Hindalco stock. Jefferies reiterated a ‘buy’ rating on the stock, raising the target price to Rs 810 per share, citing reasonable valuations. Similarly, CLSA maintained a ‘buy’ call with a target price of Rs 770 per share, emphasizing further potential for margin improvement at Novelis.
Despite the recent uptick in Hindalco’s share price, analysts at Nuvama suggested a ‘hold’ rating, anticipating limited upside in the near term. They advised investors to await lower entry points before considering re-entry into the stock, while revising the target price to Rs 651 from Rs 508 earlier.
UPL: Brokerages Concerned About UPL’s Earnings, Despite $500M Rights Issue
The UPL is set to proposal for $500 Million Rights issue for its debt reduction process and amount to Rs.4200 cr via collection from Right issues. The Company has increased net debt to $2.7 Billion from $2.1 Billion Last quarter.The Revenue for this quarter reported Rs.40 cr and Revenue declined to 15% as Rs.14087 cr in this Q4 2024. This company is picking up from the losses in the last 2 quarters.
UPL Market price is moving in Ascending channel and market has reached higher low area of the channel
UPL, a prominent agrochemical manufacturer, is preparing to embark on a rights issue to raise up to $500 million (approximately Rs 4,200 crore) in funds aimed at alleviating its substantial debt burden. Despite this proactive measure, brokerages express apprehension regarding the numerous near-term challenges confronting the company.
Brokerages remain cautious towards UPL due to several pressures on its balance sheet, exacerbated by ongoing sectoral weaknesses. Of particular concern is the significant surge in the company’s debt over the past year, contrary to expectations of a reduction, which has garnered unfavorable attention from brokerages.
Anticipated challenges such as continued pricing pressures, especially in the initial half of FY25, coupled with weakened profitability and escalating debt levels, are paramount among brokerages’ concerns regarding UPL’s outlook.
As of March-end, the company’s debt ballooned to $2.7 billion, up from $2.1 billion in the corresponding period the previous year. This escalation in debt levels was attributed to declining profitability and reduced factoring.
Jefferies, a brokerage firm, expressed disappointment at the heightened debt levels of UPL, surpassing the firm’s estimates. The surge in debt also resulted in an increase in the average cost of debt to 7 percent from 6 percent in the preceding fiscal year, according to Jefferies.
In response to these developments, Jefferies revised its price target for the stock downward to Rs 610 while maintaining its ‘buy’ recommendation.
Despite these challenges, UPL aims to mitigate its net debt to $300-400 million by FY25 through the rights issue, targeting a net debt-to-EBITDA ratio of less than two times by the end of the fiscal year. Currently, UPL’s net debt-to-EBITDA ratio stands at approximately four times, excluding foreign currency losses.
The company reported a net profit of Rs 40 crore for the March quarter, a significant decline of 95 percent compared to the same period last year but surpassing estimates of a net loss. This marked a reversal from the two consecutive quarters of losses reported in FY24.
Looking ahead, UPL expects a 4-8 percent growth in topline for FY25, despite a 15 percent decline in revenue to Rs 14,078 crore in Q4. The company anticipates facing challenges in the first half of FY25 due to high-cost inventory liquidation, but it projects a recovery in demand and pricing in the sector in the latter part of the fiscal year.
However, brokerages like Kotak Institutional Equities and Motilal Oswal Financial Services remain cautious, expecting ongoing challenges in the first half of FY25. While they anticipate a potential recovery in demand and pricing in the second half, they emphasize the importance of cash flow generation and debt repayment for UPL amidst its short-term hurdles.
Shriram Finance: Shriram Finance Surges 5% on Housing Finance Unit Sale; Brokerages Unconcerned
The Shriram Finance Board approved Sale of its Housing Finance unit to US Based Equity Firm Warburg Pincus at the value of Rs. 4630 cr. This stake is just 4% in the Shriram Parent company and Overall Shriram Finance company Gross NPA declined to 5.45% from 6.21% in the past quarter, Net profit increased to 57% as Rs.2021 cr and Revenue came at 24% up as Rs.9918 cr. Net NPA decreased to 2.70% from 3.19% in this quarter.
SHRIRAM FINANCE LTD Market price is moving in Ascending channel and market has reached higher high area of the channel
On May 14, shares of Shriram Finance experienced a significant surge, rising over 5 percent to Rs 2,419 per share, subsequent to the approval by the board for the complete sale of its housing finance arm, Shriram Housing Finance (SHFL), to the US private equity firm Warburg Pincus for a sum of Rs 4,630 crore. This deal marks the largest merger and acquisition (M&A) transaction in the housing finance sector. Despite the optimism surrounding this development, brokerages expressed divergent views regarding its potential impact on the non-bank lender.
Morgan Stanley maintained an ‘overweight’ rating on Shriram Finance, with a target price of Rs 3,050 per share, asserting that the transaction is not expected to have a significant impact on the company’s valuation. According to Morgan Stanley analysts, the housing finance subsidiary represents just 4 percent of the sum-of-the-parts (SOTP) valuation for Shriram Finance.
Contrary to this perspective, CLSA analysts anticipate a profit and loss gain of Rs 2,350 crore from this transaction, which equates to approximately 3 percent of the market capitalization. Additionally, CLSA highlighted that Warburg valued the company at 2.4 times price-to-book (PB) ratio and 21 times price-to-earnings (PE) ratio, which is comparatively lower than the multiples assigned to peers such as Aavas Financiers, Home First Finance, and Aptus. As a result, CLSA reiterated an ‘outperform’ rating on the stock, with a target price of Rs 2,800 per share.
Kotak Securities retained its ‘buy’ recommendation on Shriram Finance, with a target price of Rs 3,000, anticipating that the sale of Shriram Housing will augment the book value by 3-4 percent. They also projected that the valuation for the deal would be marginally higher than the Rs 44 per share ascribed in the SOTP valuation. Kotak Securities expressed confidence in the core business of Shriram Finance, emphasizing its strong asset quality.
Warburg Pincus is poised to acquire the stake in Shriram Housing through its affiliate, Mango Crest Investment, from all the sellers. The proposed transaction, valued at Rs 4,630 crore for equity and convertible instruments of SHFL, is subject to regulatory approvals.
Shriram Finance currently holds an 84.82 percent stake in Shriram Housing Finance, while the remaining 14.94 percent is owned by San Francisco-based private equity player Valiant Capital Management. As part of this transaction, Valiant will also divest its entire equity stake to Warburg Pincus.
JM Financial, Barclays, and Avendus served as financial advisors to Shriram Finance Limited (SFL), Shriram Housing Finance Limited (SHFL), and Valiant Capital Management.
In the January-March quarter (Q4FY24), Shriram Finance witnessed a notable increase in consolidated net profit, which surged 57 percent year-on-year (YoY) to Rs 2,021 crore, while total income soared 24 percent YoY to Rs 9,918 crore. Additionally, the company’s gross non-performing asset (NPA) for the quarter improved to 5.45 percent in Q4FY24 from 6.21 percent in the corresponding period of the previous year, with net NPA standing at 2.7 percent in Q4FY24, compared to 3.19 percent in Q4FY23.
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