Crypto exchange Coinbase has announced new cost-saving measures. These include an indefinite suspension of hiring. The firm will also rescind certain job offers made to candidates. Looking at the recent decisions announced by big firms in the crypto space, a “crypto winter” will continue for several more weeks.
The last episode of “crypto winter” lasted from 2018 to late 2020 before prices rebounded and soared to record highs in 2021.
Crypto prices today: Bitcoin, ETH up 5%
Bitcoin is currently trading at $31,298.65, an increase of 5.05% over the previous day. Ethereum rose 5.23% over the last 24 hours to $1,889.13. Solana jumped 10.4% to $43.29, while Cardano is trading higher by 12.65% at $0.635. Avalanche (AVAX) surged 9.7% to $27.36. The global crypto market cap stands at $1.28 trillion, a 4.68% increase over the previous day.
Bored Apes co-founder criticizes Discord after NFTs worth 200 ETH snatched in exploit
Gordon Goner, co-founder of Bored Ape Yacht Club (BAYC) NFT collection, criticized Discord after its server was exploited and NFTs worth 200 Ethereum ($358,962) were stolen from users. He said the chat app is not working for Web3 communities. BAYC acknowledged the exploit on Twitter, adding, “The team caught and addressed it quickly.”
Terra’s Luna 2.0 sees dull start after failed crypto relaunch
The relaunch of Terra’s new LUNA 2.0 token has witnessed a dull start and failed to impress investors. The original Terra Chain has been rebranded as Terra Classic. Moreover, Terra was relaunched as Terra 2.0 as developers behind failed stablecoin TerraUSD voted to abandon the token in favor of creating a new blockchain and digital asset.
Japan passes landmark Stablecoin Bill for investor protection
Japan’s Parliament has passed a legal framework around stablecoins. It aims to provide a safety net for investors in the wake of last month’s TerraUSD collapse that resulted in multi-billion losses. Stablecoins will be considered as digital money and must be linked to the yen or another legal tender, guaranteeing holders the right to redeem them at face value.
Crypto prices today: Bitcoin up 1.5%, ETH down 0.4%
Bitcoin is currently trading at $30,362.81, an increase of 1.5% over the previous day. Ethereum fell 0.4% over the last 24 hours to $1,813.5. Solana rose 2.7% to $40.55, while Cardano rose 2.4% at $0.584. Avalanche (AVAX) rose 2.5% to $24.05. The global crypto market cap stands at $1.25 trillion, a 1.46% increase over the previous day.
New York Senate passes Bitcoin mining moratorium
The New York State Senate passed a bill targeting proof-of-work (PoW) mining early to address some of the environmental concerns surrounding cryptos. The bill will impose a two-year moratorium on any new PoW mining projects powered by carbon-based fuel in the Empire State. Existing mining firms or ones currently undergoing the permit renewal process will be allowed to continue operations.
Binance, The Weeknd launch ‘crypto-powered’ world tour
Crypto exchange Binance will sponsor musician The Weeknd’s upcoming world tour. The partnership will feature multiple non-fungible token (NFT) initiatives and a $2M donation to the artist’s XO Humanitarian Fund. Binance claims it will be the first global concert tour to tap Web3 tech for fan experiences.
Bitstamp launches Earn product for ETH, Algorand in US
Crypto exchange Bitstamp has launched the Bitstamp Earn product to American investors. The product is meant to be a turn-key Ethereum (ETH) and Algogand (ALGO) staking solution. Investors fund their Bistamp accounts and then collect staking rewards. Bitstamp takes a fee on the yield customers earn.
Here are some of the major updates that could move the markets tomorrow:
UltraTech Cement to invest Rs 12,886 crore towards capacity expansion
UltraTech Cement Ltd’s board has approved a proposal to invest Rs 12,886 crore to add 22.6 million tonnes per annum (MTPA) capacity to its total production. The company aims to set up integrated and grinding units and bulk terminals. These new capacities are expected to commence commercial production in a staggered way across India by the end of FY25.
Abdul Latif Jameel to invest Rs 150 million in Greaves Cotton’s EV arm
Saudi Arabia-based Abdul Latif Jameel International (ALJI) will invest $150 million (~Rs 1,160 crore) for a 35.8% stake in Greaves Electric Mobility (GEM). This values the electric vehicle (EV) arm at Rs 3,298 crore. ALJI has an option to invest another $70 million in the next twelve months. GEM has a strong presence in both electric 2-wheelers and electric 3-wheelers segments.
La Opala RG commences production at Uttarakhand unit
La Opala RG announced the commencement of commercial production at its green field plant at Sitarganj, Uttarakhand. The unit has a production capacity of 11,000 metric tons per annum. It is the second plant of the company in the state. La Opala RG is a pure-play tableware company. Its brands include La Opala, Diva, and Solitare.
BLS International signs pact with Royal Thai Consulate General
The Royal Thai Consulate-General, Mumbai, has authorised BLS International Ltd to accept and process visa applications. The company will provide Thai visa application services and value-added services like form filling assistance, SMS tracking, primetime submission, travel insurance, etc. BLS International is a trusted global tech-enabled services partner for governments and citizens.
Ashok Leyland unveils eight-wheel truck AVTR 2620
Ashok Leyland Ltd has unveiled its first eight-wheel truck (AVTR 2620), making the company the only player to have a full range of trucks based on lift axle technology. The new product can be operated as a 25.5 tonne truck with lift axle down and an 18.5 tonne truck with lift axle up, offering lower fuel and operating costs during light load.
Deepak Nitrite Ltd’s GIDC plant at Nandesari, Vadodra, witnessed five major chemical blasts today. Smoke was visible from a long distance, and 7-8 fire-fighters reached the spot to put out the fire. Deepak Nitrite manufactures and sells basic chemicals, fine & speciality chemicals, and performance products in India.
Jio-bp to partner with MG Motor, Castrol to boost EV adoption in India
MG Motor India and Castrol India Ltd will partner with Jio-bp to explore mobility solutions for electric cars. The three entities will explore setting up a four-wheeler EV charging infrastructure and expand Castrol’s existing auto service network to cater to EV customers. This partnership is in line with Jio-bp and MG Motor’s commitment to providing vast and reliable charging infra to electric car customers and accelerating EV adoption in India.
[Jio-bp is a joint venture between Reliance Industries Ltd (RIL) and British oil and gas major bp].
GR Infra’s arm signs pact with NHAI for road project in Andhra Pradesh
GR Madanapalli Pileru Highway Pvt Ltd (GRMPHPL) has signed an agreement with the National Highways Authority of India (NHAI) for a road project worth Rs 1,577 crore. The project consists of four-laning of NH-71 from Madanapalli to Pileru in Andhra Pradesh. The length of the road is 55.9 km. GRMPHPL is a wholly-owned subsidiary of GR Infraprojects Ltd.
SEBI penalises Eicher Motors for flouting rules
Securities and Exchange Board of India (SEBI) imposed a penalty of Rs 10 lakh for failing to follow rules in the duplicate share certificates case. The company has to pay the fine within 45 days. The order comes after the SEBI received a complaint from Adesh Kaur against the automaker. It mentioned that 903 shares of the company were fraudulently transferred to an account of an impersonator who managed to forge her signature and change her address.
Binance Labs announced a new $500 million fund for Web3 projects. The fund is backed by internet investment capital firm DST Global and global venture capital firm Bayer Capital. The money will be pumped into projects that can extend the use cases of cryptos and drive the adoption of Web3 and blockchain technologies. Binance Labs is the investment arm of Binance, the world’s largest crypto exchange.
Crypto prices today: Bitcoin falls 5.5%, ETH down 6.3%
Bitcoin is currently trading at $29,913.17, a decline of 5.54% over the previous day. Ethereum fell 6.31% over the last 24 hours to $1,818.59. Solana crashed 12% to $39.72, while Cardano fell 6.5% at $0.576. Avalanche (AVAX) fell 9.6% to $23.43. The global crypto market cap stands at $1.24 trillion, a 5.25% decline over the previous day.
Solana Blockchain down for four hours due to bug
Solana was down for about four hours today after a bug blocked consensus. Network validators disabled the feature to restart the network. According to Solana co-founder Anatoly Yakovenko and other developers, the issue was due to a bug with the durable nonce feature of the blockchain.
[Durable transaction nonces are a mechanism for getting around the typical short lifetime of a transaction’s recent block hash (reference number for a block in the blockchain)].
CoinSwitch launches India’s first rupee-based crypto index CRE8
CoinSwitch launched the Crypto Rupee Index (CRE8), India’s first benchmark index to measure the performance of the rupee-based crypto market. CRE8 tracks the performance of eight crypto assets that represent over 85% of the total market capitalisation of cryptos traded in Indian rupee.
Former OpenSea employee charged in insider trading scheme
The US Justice Department has charged a former employee of OpenSea (an NFT marketplace) with fraud and money laundering. The federal government called it the “first-ever digital asset insider trading scheme.” Nathanial Chastian allegedly profited from his role in selecting which non-fungible tokens (NFTs) would be promoted on OpenSea’s homepage.
Here are some of the major updates that could move the markets tomorrow:
Manufacturing PMI expands in May despite high inflation rate
India’s manufacturing activity expanded in May and sustained strong growth despite historically high inflation. The IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) stood at 54.6 in May 2022, compared to 54.7 in April. Factory output was boosted by a jump in international orders, which was at the highest level in over 11 years. PMI is a month-on-month calculation, and a value above 50 represents an expansion when compared to the previous month.
Maruti Suzuki India posted a 7.14% month-on-month (MoM) increase in total sales to 1,61,413 units in May 2022. Sales of its compact vehicle segment rose 12% MoM to 85,355 units. Exports rose 47% to 27,191 units.
Tata Motors Ltd registered a 3.1% MoM increase in total sales to 74,755 units in May. The automaker’s commercial vehicle sales rose 5.13% MoM to 31,414 units. Overall passenger vehicle wholesales rose 4.2% MoM to 43,341 units.
Mahindra & Mahindra’s auto segment posted total sales of 53,726 units in May, an increase of 15.44% MoM. M&M’s farm equipment segment posted a 12.74% YoY decline in sales to 35,722 units.
Bajaj Auto posted an 11.23% MoM fall in total sales to 2,75,868 units in May.
VA Tech Wabag gets €18 million order from Korea’s DL E&C in Russia
VA Tech Wabag Ltd has secured an order worth €18 million (~Rs 149 crore) from Korea’s DL E&C CO for a water treatment package for a EuroChem methanol production facility in Kingisepp, Russia. This order includes the design & supply, installation, and commissioning of a water treatment plant, scheduled to be completed in 15 months. The project will employ softening, ultrafiltration, and reverse osmosis technologies to treat brine water which will be reused as processed water in the facility.
Natco Pharma launches first generic version of Nexavar tablets in US
Natco Pharma Ltd announced the launch of the first generic version of Nexavar (Sorafenib) tablets in the US market. The product will be launched by Natco Pharma’s Hyderabad-based commercial partner, Viatris. Nexavar registered sales of $69.7 million for the year ending December 2021 as per IQVIA data.
Aditya Birla Group has announced the launch of its new direct-to-customer (D2C) entity– TMRW, which will acquire and incubate 30 brands over the next three years. The digital venture will also enable multiple founders to operate within a synergistic platform. TMRW will also tap into the capabilities and networks of the Aditya Birla Group and Aditya Birla Fashion and Lifestyle ecosystems.
Yes Bank shortlists JC Flowers as its ARC partner: Report
As per a CNBC-TV18 report, Yes Bank has shortlisted US-based private equity firm JC Flowers as its joint venture (JV) partner for its proposed asset reconstruction company (ARC). It is the second attempt by the bank to set up its own ARC after the Reserve Bank of India (RBI) turned down its earlier proposal in March 2021. As per the latest proposal, Yes Bank would hold a minority 20% stake in the proposed ARC. The remaining 80% stake would be held by its foreign JV partner.
Telecom operator Vodafone Idea announced the launch of its ad-tech platform Vi Ads. The artificial intelligence/machine learning (AI/ML) driven Adtech platform will provide marketers a return on investment (ROI)-focussed programmatic media buying platform. Vi Ads will enable marketers to engage with the operator’s over 243 million subscribers through multiple channels.
IT dept conducts searches in premises linked to Embassy Group
The Income Tax (IT) Department has conducted searches across premises linked to real estate developer Embassy Group in Bangalore, Gurgaon, and Mumbai for alleged tax evasion. The searches have been reportedly conducted across ~50 offices of Embassy Group and its affiliates.
The IT Dept is also searching premises of Indiabulls Real Estate in Mumbai’s Bandra-Kurla Complex (BKC) and Gurgaon area in the backdrop of its upcoming merger with Embassy.
Polygon increases KYC scrutiny of potential investments in India
Polygon is requiring extensive Know Your Customer (KYC) details to provide funding, investments, grants, or financial support to potential partners in India. The move is not a complete pause on funding to Indian projects but is related to increased government scrutiny. Developers in India have recently been talking about the difficulty of acquiring funding or investment from Polygon.
Crypto prices today: Bitcoin up 0.05%, ETH down 1.8%
Bitcoin is currently trading at $31,535.9, an increase of 0.05% over the previous day. Ethereum fell 1.87% over the last 24 hours to $1,933.02. Solana fell 2.8% to $44.88, while Cardano slumped 7.84% at $0.605. Avalanche (AVAX) fell 3.3% to $25.75. The global crypto market cap stands at $1.30 trillion, a 0.36% decline over the previous day.
Zcash’s NU5 upgrade with the Halo Arc product suite was activated on the mainnet (a live version of the network) on Tuesday. The upgrade not only improves the platform’s future scalability but also the foundational way that it protects users’ privacy. The crypto token is shifting to the Halo proving system, facilitating trustless digital cash payments on mobile phones.
Zcash is a cryptocurrency that uses cryptography to provide enhanced privacy for its users compared to other cryptos like Bitcoin.
UK Govt seeks to regulate stablecoins
Following the collapse of Terra (LUNA), the UK government has released a consultation paper on stablecoins. They aim to mitigate financial stability issues that may occur when a firm has reached systemic scale failure. In January 2021, the UK Treasury called for evidence inviting views from stakeholders on the UK regulatory approach to crypto-assets and stablecoins.
Twitter saw 1,374% increase in crypto-spam volume over 2 years: LunarCrash
According to crypto intel provider LunarCrash, there has been an estimated 1,374% increase in Twitter spam volume over the past two years. Crypto scammers often find creative ways to gain access to crypto-wallets and steal digital assets. These cybercriminals tag users in replies across hundreds of tweets. Hackers hijack verified and unverified accounts on Twitter to impersonate popular NFT projects.
Here are some of the major updates that could move the markets tomorrow:
India’s GDP growth slows to 4.1% in Q4; FY22 growth at 8.7%
India’s gross domestic product (GDP) in the January-March quarter (Q4 FY22) grew 4.1%. In the third quarter of FY22, GDP growth slowed to 5.4% from 8.5% in the second quarter and 20.3% in the first quarter. India’s economy had just begun to recover from the Covid-19 pandemic-induced slump when a rise in Omicron cases in January brought back restrictions.
The GDP growth in the financial year 2021-22 stood at 8.7%, compared to a contraction of 6.6% in FY21.
M&M raises auto, farm equipment biz capex by 27% till FY24
Mahindra & Mahindra Ltd has increased its mid-term capital expenditure for automotive and farm equipment business by 27% or Rs 3,400 crore to Rs 15,300 crore till FY24. The automaker aims to increase the capacity for its XUV700 and new models in the pipeline. The Rs 400 crore spike in capex for farm business will go into new plant expansion.
Construction firm NCC Limited secured three orders worth Rs 6,388 crores in May 2022. The company has received an order from Brihanmumbai Municipal Corporation for the design, build, operation & maintenance of the Malad Wastewater Treatment Facility under the Mumbai Sewage Disposal Project-II. It has received similar orders from other state government agencies.
CarTrade Tech partners with IDFC First Bank to offer financing solutions for used cars
CarTrade Tech Ltd has announced a strategic partnership with IDFC First Bank to offer easy and smart financing for used cars. The bank will become the preferred financier for customers purchasing used vehicles from CarWale abSure’s dealers with customised offerings to suit their needs. CarWale abSure is the used car platform of CarTrade Tech.
Defence Ministry signs Rs 2,971 crore deal with BDL
The Ministry of Defence has signed a deal with Bharat Dynamics Ltd (BDL) for the supply of Astra Mk-1 missiles for the Indian Air Force and Navy at the cost of Rs 2,971 crore. Astra Mk-1 is India’s first indigenous air-to-air missile. This project will act as a catalyst for the development of infrastructure and testing facilities at BDL.
Tata Elxsi partners with Lenovo to deliver XR solutions
Tata Elxsi has partnered with Lenovo to develop smart extended reality (XR) solutions for enterprise and engineering applications. Customers using Lenovo’s smart XR devices will benefit from end-to-end solutions and services from Tata Elxsi and Lenovo. The two entities will enable enterprises to deliver immersive digital transformation solutions.
Oil & Natural Gas Corporation (ONGC) said its crude oil production will rise 11% and natural gas output will jump 25% after newer discoveries in the western and eastern offshore start producing. Crude oil production is expected to rise from 19.54 million tonnes (MT) in FY 2021-22 to 19.88 MT in FY23 and 21.58 MT in FY24. ONGC will spend Rs 31,000 crore from 2022 to 2025 on exploration campaigns throughout India.
The fiscal deficit for FY 2021-22 worked out to be 6.71% of the gross domestic product (GDP). The figure is lower than the 6.9% projected by the Ministry of Finance in the revised budget estimates. The fiscal deficit in the absolute terms was Rs 15,86,537 crore (provisional). The revenue deficit at the end of FY22 was 4.37%.
[Fiscal deficit is the difference between the total revenue and total expenditure of the government].
Life Insurance Corp of India (LIC) made Rs 42,000 crore of gains from equity investments in the financial year ended March 2022 (FY22), up 17% YoY. The company reported equity gains of Rs 36,000 crore in the previous year. LIC’s Managing Director Raj Kumar said the insurer will match the profitability of its private sector counterparts in the next five years.
The stock markets have not been kind to investors over the past few months. Foreign institutional investors (FIIs) have pulled out nearly Rs 1.65 lakh crore so far from the Indian equity markets this year. Major IT stocks (mostly considered defensive stocks historically) have been under heavy selling pressure. The NIFTY IT Index has fallen ~24% since the beginning of April. For comparison, the NIFTY50 fell 9% during the same period. TCS, Infosys, and HCL Tech have all plummeted 10% each since mid-April, while Wipro crashed ~17%!
In this article, we discuss the factors behind the downtrend in IT stocks.
Reasons Behind the Fall in IT Stocks
Rising Inflation:
Globally, inflation rates are at sky-high levels. Goods and services have become expensive. India’s inflation rate has surpassed RBI’s projections due to many global factors, especially the Ukraine-Russia crisis and rising crude oil prices. It is time for the government to withdraw money out of the system.
The US Fed, Reserve Bank of India (RBI), and other central banks have increased interest rates aggressively. Unfortunately, this move could lead to a slowdown in the global economy. Many investors resorted to dumping IT stocks with high valuations in anticipation of a hike in interest rates.
To make matters worse, clients will be willing to spend less on digital projects, thereby affecting the revenues of IT firms.
Disappointing Q4 Results:
Even though IT giants like Tata Consultancy Services (TCS) and Infosys reported healthy revenue numbers in the March quarter (Q4 FY22), it did not translate into a comparable increase in profits. Most IT firms reported lower-than-expected earnings with weak operating margins. Thus, market participants simply lost confidence in the IT sector.
Decline in Margins:
The attrition rate within the IT industry remains at an all-time high. [The rate signifies the number of employees who had either resigned or retired and are not replaced. IT employees often have to endure long working hours and the pressure of meeting targets, leading to burnout.] Moreover, employee and travel costs have been rising rapidly after Covid-19 restrictions were lifted.
As a result of heavy competition and a limited supply of talent in the industry, most prominent IT firms are giving out salary hikes to retain employees. They have also resorted to mass hiring, which is a significant loss of man-hours and other resources. All these increased expenses are adversely impacting margins.
The Way Ahead
Most analysts are expecting IT stocks to drag down the markets further. The slowdown in economic growth, along with revenue and margin pressures, could continue. This phenomenon is not just unique to India. In fact, all major IT and growth stocks in the global stock markets have been severely hit by the prospects of higher interest rates.
On the flip side, this could turn out to be a good opportunity for investors to add or average IT stocks to their portfolios. Look into fundamentally strong companies in the Indian IT industry and buy them at fair valuations.
Have you added IT stocks over the past month? Let us know in the comments section of the marketfeed app.
The IPO ‘may-hem’ continues in the Indian stock markets! Gujarat-based speciality chemical manufacturer Aether Industries Ltd has launched its three-day initial public offering (IPO) today— May 24. In this article, we analyse the company and its IPO.
Company Profile – Aether Industries Ltd
Established in 2013, Aether Industries Ltd (AIL) is one of the fastest-growing speciality chemical manufacturing companies in India. It produces advanced intermediates and chemicals involving complex, differentiated chemistry and technology core competencies. They started building an in-house research & development (R&D) team in 2013 and commenced commercial operations in FY17.
The company operates through three business models:
Large-scale manufacturing of its own intermediates and speciality chemicals.
Contract research and manufacturing services.
Exclusive manufacturing
AIL’s portfolio consisted of over 25 chemical products as of March 31, 2022. Their key customers are based in North America, Europe, and India. Prominent clients include Adama Ltd (Israel), BYK Group (Germany), UPL Limited, Divi’s Labs, and Dr. Reddy’s Labs. The company derives 62.6% of its revenue from the pharma segment and 22.9% from the agrochemical segment. Exports make up ~49% of its total revenue, which also acts as a natural hedge against volatility in raw materials sourced from overseas. It owns and operates two manufacturing facilities in Surat, Gujarat.
Aether Industries grew at an annualized rate (CAGR) of 49.5% between 2019 and 2021. The company’s vision is to create a niche in the global chemical industry with a creative approach to chemistry and technology systems.
About the IPO
Aether Industries Ltd’s public issue opens on May 24 and closes on May 26. The company has fixed Rs 610-642 per share as the price band for the IPO.
The fresh issue of shares (of the face value of Rs 10 each) aggregates to Rs 627 crore. The IPO also includes an offer for sale (OFS) by promoters and early investors, aggregating to Rs 181.04 crore. Individual investors can bid for a minimum of 23 equity shares (1 lot) and in multiples of 23 shares thereafter. You will need a minimum of Rs 14,766 (at the cut-off price) to apply for this IPO. The maximum number of shares that a retail investor can apply is 299 equity shares (13 lots).
The company will utilise the net proceeds from the IPO for the following purposes:
Repayment/prepayment of borrowings – Rs 138 crore
Funding capital expenditure requirements (greenfield project in Surat) – Rs 163 crore
Funding working capital requirements – Rs 165 crore
General corporate purposes.
The total promoter holding in Aether Industries will decline from 96.96% to 87.09% post the IPO.
Financial Performance
AIL has posted a consistent increase in total revenue and profits over three financial years (FY19-21). The three part-business model works in perfect synergy. Its revenue from exports increased at a CAGR of 58.5% from Rs 100.09 crore in FY19 to Rs 251.6 crore in FY21.
The company reported a 32.5% YoY increase in revenue from operations to Rs 442.5 crore during the 9 months ended December 2021 (9M FY22). Net profit rose 72.7% YoY to Rs 82.9 crore during the same period. EBITDA stood at Rs 126 crore, up 64% YoY.
Risk Factors
Aether Industries faces various risks associated with operations involving the manufacture, usage, and storage of hazardous substances.
The company derives ~73% of its total revenue from top 20 customers (as of Dec 31, 2021). Its operations will be adversely affected if these customers choose not to source their requirements from AIL or if they terminate long-term contracts.
Non-compliance with safety, health, and environmental laws will severely harm AIL’s business.
The company does not have long-term agreements with suppliers of raw materials. A surge in the cost of raw materials or any shortfall in supply could adversely impact its overall operations.
All of AIL’s manufacturing facilities are located in Gujarat, exposing them to regulatory or geography-specific risks.
IPO Details in a Nutshell
The book-running lead managers to the public issue are HDFC Bank and Kotak Mahindra Capital. AIL filed the Red Herring Prospectus (RHP) for its IPO on May 16. You can read it here. Out of the total offer, 50% is reserved for Qualified Institutional Buyers (QIBs), 15% for Non-Institutional Investors (NIIs), and 35% for retail investors.
Ahead of the IPO, AIL raised Rs 240 crore from anchor investors.
Conclusion
The chemical industry is one of the most vital and fastest-growing industries in our country. Numerous companies thrive in this sector, which makes it highly competitive. They have flourished mainly due to the surge in demand from the agricultural, pharmaceutical, material science, and paint industries. As per a report from India Brand Equity Foundation (IBEF), the specialty chemicals sector is expected to grow at an annual growth rate of 12.4% to $64 billion within the next three years. The strong R&D capabilities and differentiated portfolio of products will help Aether Industries effectively compete in this sector.
AIL will be competing with leading players like Clean Science & Technology Ltd, Navin Fluorine International, Vinati Organics, PI Industries, and Fine Organics Ltd once it gets listed. You can read our in-depth analysis of India’s chemical industry here.
AIL’s IPO shares are trading at a premium of Rs 4 in the grey market. Before applying to this IPO, we will wait to see if the portion reserved for institutional investors gets oversubscribed. Do consider the risks associated with the company and come to your own conclusion.
What are your views on Aether Industries Ltd’s IPO? Will you be applying for it? Let us know in the comments section of the marketfeed app!
Luxury watch retailer Ethos Limited launched its three-day initial public offering (IPO) on May 18. The company sells some of the best-in-class premium watches in the world today. In this article, we analyse the company and its IPO.
Company Profile – Ethos Limited
Ethos Limited is one of the largest luxury and premium watch retailers in India. It had a 13% market share of the total retail sales in the premium & luxury watch segment as of FY20. Moreover, the company had a 20% market share exclusively in the luxury watch segment during the same period. Ethos sells 50 watch brands, including Omega, TAG Heuer, Rado, Longines, Tissot, Oris SA, and Rolex. These brands use expensive materials and delicate craftsmanship to create unique timepieces.
The company currently operates 50 physical stores across 17 cities in India. The stores are categorised into: 14 Ethos Summit stores and one airport store, 14 multi-brand outlets and 10 Ethos boutiques, 10 luxury segment mono-brand boutiques offering a single luxury watch brand, and one Certified Pre-Owned (CPO) luxury watch lounge. Its top three stores are located in the National Capital Territory of Delhi and Bengaluru (Tier-1 cities), accounting for one-third of its revenue.
Ethos also provides an omnichannel experience to customers through its website and social media platforms. Their online sales accounted for 37.64% of the total sales in FY21. The company’s loyalty program, called Club Echo, is a key source of repeat sales. They had access to a high net-worth Individual (HNI) base of over 2,83,300 at the end of March 31, 2022.
The company is a subsidiary of KDDL Limited, a leading manufacturer of watch components and high-quality precision stamped components.
About the IPO
Ethos Ltd’s public issue opens on May 18 and closes on May 20. The company has fixed Rs 836-878 per share as the price band for the IPO.
The fresh issue of shares (of the face value of Rs 10 each) aggregates to Rs 375 crore. The IPO also includes an offer for sale (OFS) by promoters and early investors, aggregating to Rs 97.29 crore. Individual investors can bid for a minimum of 17 equity shares (1 lot) and in multiples of 17 shares thereafter. You will need a minimum of Rs 14,926 (at the cut-off price) to apply for this IPO. The maximum number of shares that can be applied by a retail investor is 221 equity shares (13 lots).
Ethos will utilise the net proceeds from the IPO for the following purposes:
Repayment/prepayment of borrowings – Rs 29.89 crore
Funding working capital requirements – Rs 234.96 crore
The total promoter holding in the company will decline from 81.01% to 61.65%.
Financial Performance
Ethos’ revenue figures are inconsistent. It posted a 15.5% YoY decline in revenue to Rs 386.6 crore for the financial year 2020-21 (FY21). Net profit stood at Rs 5.79 crore in FY21, compared to a loss of Rs 1.33 crore in FY20. EBITDA fell 23% YoY to Rs 39.7 crore in FY21. The luxury and high luxury watch segment sales constituted ~58% of the total sales in FY21. Going forward, the growth of online retailers could create pricing pressures.
Interestingly, the company reported a revenue of Rs 418.59 crore during the first nine months of FY22 and the net profit jumped to Rs 15.99 crore.
Risk Factors
Ethos does not have definitive agreements for the supply of products or fixed terms of trade with a majority of its suppliers. The failure to successfully leverage supplier relationships and networks could adversely affect the company.
The company’s business partly depends on the continued success and reputation of third-party brands across the globe. Any negative impact on these brands or the failure to protect intellectual property rights may severely affect Ethos’ operations.
Most of the company’s suppliers work with them on a non-exclusive basis. In the absence of exclusivity with suppliers, Ethos may be subject to stiff competition from entities that have more resources.
Ethos is dependent on watch brands for the manufacturing of all the products it sells. Any disruptions in third-party manufacturing facilities or the failure to adhere to relevant quality standards could harm the company’s reputation.
The inability to identify customer demand accurately or maintain an optimal level of inventory in stores may adversely impact its operations.
IPO Details in a Nutshell
The book-running lead managers to the public issue are Emkay Global Financial Services and InCred Capital Wealth Portfolio Managers. Ethos Ltd filed the Red Herring Prospectus (RHP) for its IPO on May 6. You can read it here. Out of the total offer, 50% is reserved for Qualified Institutional Buyers (QIBs), 15% for Non-Institutional Investors (NIIs), and 35% for retail investors.
Ahead of the IPO, Ethos raised Rs 141.68 crore from nine anchor investors.
Conclusion
According to ICICI Securities, the premium and luxury watch market is expected to grow at a ~12% CAGR from Rs 6,600 crore in FY20 to Rs 11,900 crore in FY25. The high luxury watch market is expected to grow at a CAGR of 14% to Rs 1,040 crore over the next five years. Ethos plans to increase its store count by 13 over the next few years. Its business model requires access to high working capital to stock up inventory. A significant portion of the IPO proceeds will be used for this purpose. They also aim to improve the assortment of existing brands and bring new brands to India through exclusive partnerships.
Before applying to this IPO, we will wait to see if the portion reserved for institutional investors gets oversubscribed. Do consider the risks associated with the company and come to your own conclusion.
What are your views on Ethos Ltd’s IPO? Will you be applying for it? Let us know in the comments section of the marketfeed app.
The Adani Group has entered into definitive agreements to acquire a majority stake in Holcim AG’s cement businesses in India for a whopping $10.5 billion (~Rs 81,361 crore)! This buyout marks Adani’s entry into the cement industry and makes it the second-largest cement producer in India. In this article, we dive into the details of the acquisition and find out how the conglomerate plans to establish itself in the cement sector.
The Adani-Holcim Deal
The Adani Group will acquire Switzerland-based Holcim’s entire stake in two leading cement companies— Ambuja Cements Ltd and ACC Ltd. For the uninitiated, Holcim is the world’s largest cement manufacturer.
Through its subsidiaries, Holcim holds a 63.19% stake in Ambuja Cements and a 4.48% stake in ACC. [Ambuja Cements holds a 50.05% stake in ACC.]
The Ahmedabad-based conglomerate will offer Rs 385 per share for Ambuja Cements and Rs 2,300 per share for ACC Ltd.
With this acquisition, Adani Group will become the second-largest cement maker in India after Aditya Birla’s UltraTech Cement.
The group will establish its new materials, metal, and mining vertical once the deal is completed.
The sale of Holcim’s Indian business is expected to close in the second half of 2022.
Why is Holcim Leaving India?
After 17 years of steady operations, Holcim decided to exit its cement business in India. The exit is part of its ‘Strategy 2025’ initiative, which aims for sustainable solutions for the building materials sector. Cement is the most consumed product in the world. However, its production adversely affects the environment due to high levels of carbon dioxide emissions.
Thus, Holcim is going green and trying to reduce its dependence on cement. They have already sold stakes in cement operations across Brazil, Indonesia, Malaysia, and Zimbabwe. The company plans to diversify and ramp up its business in building materials (roofing, waterproofing, insulation, etc.) globally.
As per reports, many believe that intense scrutiny of the Competition Commission of India (CCI) on Holcim’s India operations could also be one of the reasons why the company was in a hurry to move out. The CCI opened its second investigation against Holcim in December 2020.
The Way Ahead
Over the past few years, Adani Group has diversified beyond its core businesses of operating ports, coal mines, and power plants into airports, data centres, and green energy. Now, its foray into cement production looks highly promising. In 2021, the group set up two cement subsidiaries— Adani Cementation Ltd and Adani Cement Ltd. It had announced plans to establish two cement manufacturing units in Dahej (Gujarat) and Raigarh (Maharashtra).
Ambuja Cements has a cement capacity of 31 million tonnes (MT), with six integrated cement manufacturing plants and 8 cement grinding units across India. Meanwhile, ACC operates 17 cement production units and nine captive power plants. It has a distribution network of 56,000 dealers and retailers across our country. With the deal finalized, Adani’s total production capacity will stand at ~70 metric tonnes per annum (MTPA)! With its deep expertise in infrastructure development, logistics, and renewable energy, the group aims to achieve higher margins in its cement business.
Cement is one of the most vital substances required in the construction sector. India’s current cement consumption stands at just 242 kg per capita, compared to the global average of 525 kg per capita. The growing middle class, rapid urbanisation, affordable housing projects, and post Covid-19 recovery in construction activities are likely to drive growth in the cement sector.
Let us look forward to seeing how the Adani Group executes its strategic plans! Will they be able to beat UltraTech Cement and become a leader in the cement sector? Let us know your views on this acquisition in the comments section of the marketfeed app.
The IPO frenzy within the Indian startup ecosystem resumes! Logistics and supply chain startup Delhivery has launched its three-day initial public offering (IPO). In this article, learn all about the company and its IPO.
Company Profile – Delhivery Limited
Delhivery Ltd is the fastest-growing fully integrated player in the logistics services market in India in terms of revenue as of FY21. The Gurgaon-based firm offers a wide range of logistics services, including express parcel delivery, heavy goods delivery, truckload freight, warehousing, cross-border express, and supply chain software. They also offer value-added services like e-commerce return services, payment collection & processing, installation & assembly services, and fraud detection.
Delhivery’s customers primarily include e-commerce marketplaces, direct-to-consumer (D2C) e-tailers, and small & medium enterprises (SMEs).
As of December 31, 2021 (Q3 FY22), the company’s total active customer base stood at 23,113. It posted a Rate Automated Sort Capacity of 3.70 million shipments per day during the same period. Delhivery has built a pan-India network. It services 17,488 PIN codes, covering 90.6% of the total 19,300 PIN codes in India! Its network infrastructure includes 124 gateways, 20 automated sort centres, 83 fulfillment centres, 35 collection points, 24 returns processing centres, and 2,235 direct delivery centres.
The size of the company’s active customers has grown four times in the last three financial years. They have also seen significant growth in PIN code reach and delivery points. Since its inception, Delhivery has invested heavily in cutting-edge engineering and technological capabilities to drive growth. They are backed by prominent venture capital firms like SoftBank and Tiger Global.
About the IPO
Delhivery Ltd’s public issue opens on May 11 and closes on May 13. The company has fixed Rs 462-487 per share as the price band for the IPO.
The fresh issue of shares (of the face value of Rs 1 each) aggregates to Rs 4,000 crore. The IPO also includes an offer for sale (OFS) by promoters and early investors, aggregating to Rs 1,235 crore. Individual investors can bid for a minimum of 30 equity shares (1 lot) and in multiples of 30 shares thereafter. You will need a minimum of Rs 14,610 (at the cut-off price) to apply for this IPO. The maximum number of shares that can be applied by a retail investor is 390 equity shares (13 lots).
Delhivery will utilise the net proceeds from the IPO for the following purposes:
Funding organic growth.
Funding inorganic growth through acquisitions and strategic initiatives.
General corporate purposes.
Financial Performance
Delhivery Ltd is yet to post profits. However, its revenue growth has been impressive. The company’s topline has grown at a CAGR of 48% from FY19 to FY21. Revenue from contracts rose 31% YoY to Rs 3,647 crore in FY21. Like most startups, Delhivery has been burning cash to focus on scaling its operations. It posted a negative free cash flow of Rs 246 crore in FY21, compared to Rs 848 crore in FY20. It may take them a few years to achieve profitability.
Freight, handling, and servicing costs surged to Rs 3,480 crore during the first nine months of FY22 from Rs 2,026 crore in FY21.
Risk Factors
Delhivery has a history of losses and negative cash flows from operating and investing activities.
The company relies on a scaled, automated, and unified network infrastructure for its business operations. The inability to maintain or expand its network infra will adversely affect its overall performance.
Any disruptions in Delhivery’s logistics and transportation facilities will severely impact its financial condition.
The company faces risks associated with shipments handled and transported through its network, which may not be fully covered by insurance policies.
Delhivery’s business and growth are highly correlated with the growth of India’s e-commerce industry. The inability to efficiently diversify into other industry verticles could harm its overall operations.
IPO Details in a Nutshell
The book-running lead managers to the public issue are Kotak Mahindra Capital, Morgan Stanley India, BofA Securities India, and Citigroup Global Markets India. Delhivery Ltd filed the Red Herring Prospectus (RHP) for its IPO on April 30. You can read it here. Out of the total offer, 75% is reserved for Qualified Institutional Buyers (QIBs), 15% for Non-Institutional Investors (NIIs), and 10% for retail investors.
Ahead of the IPO, Delhivery raised Rs 2,347 crore from 64 anchor investors.
Conclusion
The Indian logistics sector has been progressing at a rapid pace as a result of the constant growth of e-commerce platforms. It has become vital to our country’s overall economic growth. According to Delhivery’s RHP, the logistics sector is expected to grow at a CAGR of 9-10% to ~Rs 28.1 lakh crore by FY26! Delhivery’s long-term growth is heavily dependent on its ability to control costs. It may also need to pass on any increase in operating expenses to customers. The company has planned to use the issue proceeds to scale up its existing business by setting up offices and expanding the support team.
Delhivery will be directly competing with leading firms such as Blue Dart Express, TCI Express, Allcargo Logistics, and Mahindra Logistics once it gets listed.
The company’s IPO shares are trading at a premium of Rs 7 in the grey market. Before applying to this IPO, we will wait to see if the portion reserved for institutional investors gets oversubscribed. As always, consider the risks associated with the company and come to your own conclusion.
What are your views on Delhivery Ltd’s IPO? Will you be applying for it? Let us know in the comments section of the marketfeed app.
