Zee Entertainment Enterprises Ltd (Rs.130.40):

I have taken some shares of ZEEL for my portfolio clients, with short term targets of Rs.157/161.

Zee Entertainment Enterprises Ltd (ZEEL) holds stakes in several companies, primarily in the media and entertainment sector. Here’s a breakdown of some of the key entities:

Zee Learn Ltd: Zee Entertainment Enterprises Limited (ZEEL) holds around a 16% stake in Zee Learn Limited. Both companies are part of the larger Essel Group.

Siti Networks: ZEEL was a guarantor for loans taken by Siti Networks but does not hold a direct equity stake. However, it has had to engage in settlement agreements due to financial guarantees provided.

Zee Studios Ltd.: This is a fully-owned subsidiary of ZEEL, involved in film production and distribution.

India Webportal Pvt. Ltd.: ZEEL has a joint venture stake in this company, which manages digital properties.

Margo Networks Pvt. Ltd.: This is another subsidiary, focusing on content delivery technology.

These holdings are part of ZEEL's strategy to diversify its media portfolio across traditional and digital platforms.

From Textiles to Torpedoes: Swan Energy Poised for a Defence - Fueled Surge After RNEL Takeover, Setting Sail with Warship Manufacturing License in Hand...

Swan Energy Ltd (₹617.20) is set for a pivotal moment in its defence sector foray, as the much-anticipated relisting of Reliance Naval and Engineering Ltd (RNEL) enters its final countdown. Photo: Reliance Naval and Engineering Ltd.

After acquiring RNEL through its strategic arm, Hazel Mercantile, Swan Energy is all set to capitalize on India's defence production boom. But what makes this relisting so critical for investors and Swan Energy’s future?

A Deep Dive into Swan's Naval Aspirations! 

Swan Energy, traditionally known for its presence in the textile and energy sectors, made a bold move by acquiring Reliance Naval and Engineering Ltd, a company with the license to build warships for the Indian Navy. With defence manufacturing being a high-growth sector and the government’s push towards self-reliance in this field, Swan Energy’s foray into warship production presents a massive opportunity. The company’s strategic entry into this sector aligns well with the increasing defence budgets and emphasis on indigenization.

The RNEL Listing: Why It Matters ? 

The relisting of RNEL, which has been under restructuring since 2022, is the key to unlocking Swan Energy’s full potential in defence manufacturing. Once relisted, RNEL will provide Swan Energy access to fresh capital markets, boosting its warship manufacturing and other naval capabilities.

Moreover, RNEL’s relisting will improve Swan Energy’s cash flow by allowing the company to raise funds more efficiently through public offerings or rights issues. This is crucial as it gears up to meet government contracts in the naval sector, potentially including frigates and other naval vessels. The renewed financial influx will help streamline operations and accelerate project timelines.

The Tentative Listing Date: Anchors Away!

As of May 2024, RNEL has completed the required formalities, including payments to the stock exchanges. The final approval for listing is still pending, but analysts expect the relisting to take place by late 2024 or early 2025. This timeline provides investors with a crucial window to prepare for the expected surge in Swan Energy’s stock value.

Why Should Investors Care?

With the RNEL relisting imminent, investors should view this as an opportunity to buy the shares of Swan Energy Ltd and benefit from the early bird advantage. Defence manufacturing is one of the most lucrative sectors in India, and Swan’s entry into this space gives it a long-term growth trajectory. The company’s strategy of diversifying into warships and naval defence assets positions it uniquely to benefit from India's increased defence spending, making Swan Energy a multi-dimensional player in both energy and defence sectors.

Financial Health: Navigating Debt and Cash Flow: Swan Energy had ₹34.4 billion of debt in March 2024, down from ₹47.6 billion a year before. However, it holds ₹13.9 billion in cash, offsetting a significant portion of this debt, leading to a net debt of approximately ₹20.5 billion. The reduction in debt and substantial cash reserves will provide the company with the financial flexibility needed to execute its ambitious defence plans and capitalize on emerging opportunities.

Conclusion: For Swan Energy, the relisting of Reliance Naval is not just about ticking corporate boxes—it’s about steering the company into uncharted, high-growth waters. With warships in the making and government contracts on the horizon, Swan’s future looks promising for investors looking to sail into the booming defence industry. We can look for targets of Rs.2000 to Rs.2500 in the next 18 months time frame.

Therefore, when the RNEL ship finally sails back into the stock exchanges, be ready to climb aboard! 

 Vodafone Idea Ltd: Dialing Down Debt with Strategic Management, Bold Expansions and By Powering Innovations – A Call to Financial Freedom!

Vodafone Idea Ltd (Rs.13.14)  and Bharti Airtel Ltd (Rs.1578.70) two of India's leading telecom giants, have been grappling with substantial debt burdens for several years. Furthermore, relentless competition in the Indian telecom market, coupled with aggressive spectrum auctions and the financial impact of the pandemic, have significantly strained their balance sheets. Photo: Navbharat Times.

To begin with, among the 3 - prominent players in the sector, Vodafone Idea Ltd (Rs.13.14), often seen as the underdog in the Indian telecom sector, is currently on a thrilling rollercoaster ride of financial and operational transformation. Infact Vodafone Idea is making headlines with its ambitious plans to transform its financial landscape. Despite formidable challenges, Vodafone Idea's strategic maneuvers and debt reduction efforts signal a promising path forward. The company's focus on debt management, coupled with its bold expansion plans and recent tariff hikes, paints a picture of resilience and potential growth.

Recently, major players like Airtel and Jio have increased tariffs by 10-21% across the board. While the two big telcom companies raised entry-level 5G tariff plans by more than 45%, Vodafone Idea has also benefited from the hike in 4G tariff plans, a move that is expected to show its full impact by the end of this quarter and the next, which concludes in December 2024. Notably, Vodafone Idea Ltd will get more room for tariff hike once the 5G is launched. 

Incidentally, the company's cash and bank balance stood at Rs.18,150 crore as of June 2024. However, the telecom giant still faces significant financial obligations, with a staggering Rs.2.09 trillion owed to the government. This includes deferred spectrum payment obligations of Rs.1.39 trillion and an adjusted gross revenue liability of Rs.70,320 crore.

With a mix of strategic maneuvers and a sprinkle of resilience, the company is demonstrating how it’s turning a mountain of debt into a launchpad for future growth. 

Here’s an insightful look at how Vodafone Idea's debt and recovery strategies are positioning it for a potentially remarkable comeback, especially when compared to its competitor, Airtel.

The Debt Basket: Vodafone Idea vs. Airtel: Vodafone Idea’s debt is like that hefty bag of groceries you’re trying to carry up the stairs after a long day. It’s heavy, it’s daunting, and at times, it feels like it might just drag you down. 

As of June 2024, Vodafone Idea is juggling a staggering ₹46,500 crore in bank loans and ₹1,600 crore in optionally convertible debentures. This is in addition to a towering ₹2.09 trillion owed to the government, which includes deferred spectrum payments and AGR dues. But wait, there’s a plot twist!

Despite this mountain of debt, Vodafone Idea is not just surviving; it’s thriving. The company has successfully managed to reduce its bank debt by ₹4,550 crore over the past year and is in the process of securing an additional ₹35,000 crore for expanding its network. This is akin to carrying that bag of groceries up the stairs with a smile, while also managing to fit in a few extra items.

On the other hand while Bharti Airtel's debt situation is not as dire as Vodafone Idea's, it still remains a significant concern. Slowing capital expenditure and improved earnings have brought down the indebtedness of Bharti Airtel by over $1 in the last one year. At the end of June 2024, the telecom major had a net debt of $24.3 billion, which is $1.05 billion less than what it had at the end of the same quarter last year. As of June 2024, Bharti Airtel's total debt was ₹2.102 trillion, not at a meagre figure. But look at the CMP of Rs.2 face value (Vodafone Idea Ltd: Rs.10, FV) share of Bharti Airtel Ltd -- it's whopping Rs.1578.70. On a Rs.10, Face Value scale, the CMP of the shares of Bharti Airtel Ltd is Rs.7893.50, which is ~600 times the CMP of Vodafone Idea Ltd. So, you can imagine the prospects in terms of shareholders value once the Vodafone Idea starts to come out of the death tangle.

Marginal Drop in Subscriber Base: While lot of brouhaha has been going on regarding its loss of subscriber base but a careful analysis says a different story. The company has a total of 210 million subscribers as of June, with the balance coming from 2G and 3G. Its total subscriber base fell marginally from 221.4 million on-year. Interstingly, the struggling telecom carrier recorded 12 consecutive quarters of 4G subscriber additions, taking its 4G base to 126.7 million.

Loss Narrowed and Debt Reduced: Vodafone Idea’s losses narrowed to Rs.6,434 crore for the quarter ended June 2024, from Rs.7,674 crore the year before, while revenues remained almost flat at Rs.10,508 crore as again Rs.10,606 crore on Y - o - Y basis. 

Its total debt from banks and financial institutions stood at Rs.46,500 crore and optionally convertible debentures at Rs.1,600 crore as of June 2024. Debt from banks and financial institutions reduced by Rs.4,550 crore during the past one year, compared to Rs.9,200 crore in Q1FY24.

ARPU Improved: Average revenue per user (Arpu), a key metric of profitability, improved to Rs.146, up 4.2% on-year for the No.3 carrier, but it remained flat on a sequential basis. Amongst the telcos, Airtel is the only carrier that has seen its Arpu rise in the June quarter. Surprisingly, the No.1 carrier Reliance Jio’s Arpu was also flat the quarter. 

Preference Issue Price: In addition to the FPO, the VI board has also approved a preferential share issue to raise Rs.2,075 crore from an Aditya Birla Group (ABG) entity. The shares were decided to be issued at Rs.14.87 apiece to Oriana Investments Pte Ltd, VI said in a notice to the stock exchange on April 13, 2024; the price which is substantially high than the CMP.

Closure of 3G Networks: The company has converted 3G networks to 4G in several circles. I believe that increased 4G coverage will help arrest market share losses on 4G in the medium term.

VI plans to use 70% of the FPO proceeds to boost 4G coverage (26,000 sites), 4G capacity (40,800 sites) and 5G rollout (22,000 sites); Rs.2,175 crore will be used for paying deferred payments for spectrum to the Department of Telecom and the GST. The balance amount of Rs.18,000 crore will be used for general corporate purposes.

In short, the FPO fund will be used to set up new 4G sites, expanding the capacity of existing and new 4G sites and setting up new 5G sites. This is expected to be a huge money spinner for the company in future.

Airtel’s Debt: The Sibling with a Smaller Bag: Airtel is holding its debt situation with a bit more grace, carrying a more manageable debt load compared to Vodafone Idea. Airtel’s financial situation is akin to having a smaller, more manageable grocery bag. While it has also seen some debt reduction, its numbers are less dramatic compared to Vodafone Idea’s epic saga. Airtel’s debt figures are not as eye-poppingly massive, making their financial narrative a tad more serene but less dramatic.

Vodafone Idea’s Strategic Moves: Plotting the Comeback: Vodafone Idea is not just sitting around waiting for a financial fairy godmother. The company is in talks to secure more debt funding, which will fuel its ambitious ₹55,000 crore capex plan over the next three years. This includes expanding its 4G network and rolling out 5G services. They’re also maneuvering to raise equity through various financial instruments, such as the follow-on offer and preferential share issues, making it clear they’re serious about transforming their financial landscape.

The recent equity raise and planned capex investments are like a high-octane fuel injection into Vodafone Idea’s engine. With these moves, they aim to boost their network capacity, improve coverage, and, most importantly, position themselves as a strong contender in the rapidly evolving telecom market.

Caveat: It may, however, still face a cash shortfall from the second half of FY26 once the ongoing moratorium on the government’s AGR and spectrum repayments ends. 

Therefore, it is imperative that unless the government of India exercises the option to convert these dues into equity, this topic will continue to remain a key fuelling uncertainty, both from a cash flow and an equity dilution perspective.

A Glimmer of Hope: Government Relief and Market Impact: Vodafone Idea’s potential relief from the government on AGR dues could be a game-changer. If the AGR dues are reduced by up to 50%, it could significantly lighten the financial load. 

I'm optimistic in the sense that with the right combination of tariff hikes in the months to come, government relief, and network expansion, Vodafone Idea could emerge stronger and more competitive.

Conclusion: A New dawn: While Vodafone Idea’s financial journey might resemble a dramatic soap opera with its debt-laden storyline, the company is making commendable strides toward recovery and growth. 

Recently, there were media reports saying, the banks have completed the techno-economic evaluation (TEV) of Vodafone Idea and it is in discussions for landing the Rs.35,000-crore additional financing required for its capital expenditure needs.

Also, there were media briefings that, Vodafone Idea has reached out to the Department of Telecom to seek waiver on a financial bank guarantee worth Rs.24,747 crore for spectrum payment due in September 2025. Also, the company opted for a moratorium on AGR payments. The moratorium ends in March 2026. VIL is required to provide bank guarantees at least 13 months prior to the expiry of the relevant moratorium period.

While opting for the moratorium, VIL cleared about Rs.16,000 crore interest obligation on the deferred payment by offering equity in the company to the government.

Thus the government shareholding in VIL fell from about 33% 2023 to 23.80% as of March 31, 2024, after the company raised Rs.18,000 crore through a follow-on public offer (FPO), Rs.7,000 crore between March 2022 and May 2024 from the promoters and issued preferential shares to vendors to clear their dues.

Vodafone Idea (Vi) has also cleared all its statutory dues of around Rs.700 crore, including licence fees and spectrum charges, for the April-June quarter, the 1st time the it managed to meet its obligations over a substantial period.

Shareholders should therefore, view this period as an exciting chapter of transformation and opportunity. With its aggressive expansion plans, strategic debt management, and potential regulatory relief, Vodafone Idea is not just a survivor but a phoenix rising from the financial ashes.

So, buckle up and enjoy the ride—Vodafone Idea is making a comeback that might just surprise everyone!

============================

Sources:

🏵️CNBC TV18 Ltd

🏵️ The Business Standard

🏵️Moneycontrol.com and other inputs from the internet and elsewhere.

Ujjivan Small Finance Bank: A Healthy Growth Trajectory

I have taken some shares of Ujjivan Small Finance Bank Ltd (Rs.42.72) for my portfolio clients near the CMP for T: Rs.52 and Rs.65. SL: Rs.37.

Strong Deposit Growth: Ujjivan Small Finance Bank has demonstrated robust growth in its deposit base during the April-June quarter. The bank's total deposits surged by 22% to reach Rs.32,500 crore, indicating strong customer confidence and trust.

Expanding Loan Portfolio: The bank's gross loan book also witnessed a significant increase of 19% year-over-year. The bank reported loan disbursements of Rs.5,305 crore in comparison to Rs.5,284 in the year-ago period. The gross non-profit asset percentage was at 2.3%.

This growth reflects the bank's ability to effectively cater to the credit needs of its target customer segment.

Healthy CASA Ratio: The CASA ratio, which measures the proportion of current and savings deposits, is a crucial indicator of a bank's financial health. 

In this case the CASA ratio—the proportion of deposits that come from low-cost current and savings accounts—rose to 25.6% from 24.6% in the year ago period. A higher CASA ratio suggests a stable and low cost of funds, since lenders don't usually give any interest on current account deposits and the interest on saving accounts is low. This is expected to improve further, as the RBI is expected to cut the Repo rate in the next meeting.

Why Invest in Ujjivan Small Finance Bank?

Strong Growth Prospects: The Indian small finance bank sector is poised for significant growth, driven by the increasing financial inclusion of the underserved population. Ujjivan Small Finance Bank, as a leader in this space, is well-positioned to capitalize on this growth.

Diversified Loan Portfolio: The bank's focus on lending to micro, small, and medium enterprises (MSMEs) and individuals provides a diversified loan portfolio, reducing risk.

Experienced Management: Ujjivan Small Finance Bank is led by a seasoned management team with a proven track record in the microfinance industry.

Government Support: The Indian government has been supportive of the small finance bank sector, providing favorable policies and regulatory frameworks.

Promoter/FII Holdings: Promoters held 73.52% stake in the company as of 30-Jun-2024, while FIIs owned 24.68% and DIIs 7.33%.

Overall, Ujjivan Small Finance Bank's strong financial performance, coupled with its focus on the growing Indian microfinance market, makes it a compelling investment opportunity.

Dhampur Sugar Mills Ltd: Buy

Buy the shares of Dhampur Sugar Mills Ltd near the CMP of Rs.223.94, T: Rs.281/ Rs.312. 

Introduction: Dhampur Sugar Mills, a leading entity in the Indian sugar industry, has established itself as a key player in the ethanol sector, leveraging its robust infrastructure to capitalize on India's evolving ethanol policy. 

With multiple sugar mills and distilleries under its belt, Dhampur Sugar has focused on transforming sugarcane byproducts like molasses into ethanol, a move that aligns perfectly with the government's push for ethanol blending in fuels.

Ethanol Policy of India: The latest ethanol policy of India, aimed at reducing the country's dependency on fossil fuels and boosting the renewable energy sector, has provided a significant impetus for companies like Dhampur Sugar. The policy promotes the production and blending of ethanol with petrol, encouraging sugar companies to diversify their operations and tap into this growing market. The government’s target of achieving a 20% ethanol blending rate by 2025 has opened up new revenue streams for ethanol producers, particularly in the agricultural sector.

Dhampur Sugar Mills has responded to this policy by ramping up its ethanol production significantly. In FY24, the company increased its ethanol output by nearly 28%, from 931.08 lakh BL to 1,189.78 lakh BL. This expansion has been driven by the addition of a 100 KLPD ethanol plant that utilizes maize and damaged food grains as feedstock, supplementing the company’s reliance on sugarcane. Furthermore, the company’s distillery capacity now stands at 350 KLPD, with plans for further expansion.

The ethanol segment has become the highest-earning division for Dhampur Sugar, contributing substantially to its overall revenue. In FY24, ethanol accounted for 24.7% of the company's standalone revenue, up from 16.8% in FY23. The segment’s share of operating profit also rose, highlighting its growing importance within the company’s business portfolio.

Short Term Trigger: According to stock market experts, sugar stocks are rising because the Government of India (GoI) has removed the cap on sugar diversion for ethanol production for the 2024-25 season. This policy change allows sugar mills to produce ethanol from sugarcane juice and B-Heavy molasses, enhancing their operational flexibility and potential profitability

Caveat: However, the current scenario of international sugar prices adds a layer of complexity to Dhampur Sugar's outlook. Sugar prices have been volatile, influenced by fluctuating global production levels and varying demand. Recently, international sugar prices have been on the rise due to reduced output in major producing countries like Brazil and India, coupled with increasing demand. While higher sugar prices can benefit the company by boosting revenue from sugar sales, they also pose a challenge by potentially increasing the cost of ethanol production if sugarcane prices rise in tandem.

This price volatility can have a dual impact on Dhampur Sugar's fundamentals. On the one hand, increased sugar prices can enhance profitability from the sugar segment. On the other hand, if sugarcane prices increase as a result, it could squeeze margins in ethanol production, especially as the company expands its reliance on sugarcane-derived ethanol. Nonetheless, Dhampur Sugar’s diversified approach, including the use of alternative feedstocks like maize and damaged grains, may help mitigate some of these risks, ensuring a more balanced and resilient business model.

Conclusion: 

Dhampur Sugar Mills Ltd is one of India’s leading integrated sugarcane processing companies. Its innovation and emphasis on continuous R&D has made it a technological leader in sugarcane processing and green energy solutions.

As India continues to push for higher ethanol blending rates and international sugar prices remain dynamic, Dhampur Sugar Mills Ltd is strategically positioned to navigate these challenges. 

The company’s proactive expansion in ethanol production and diversification of raw materials will be crucial in sustaining its growth and maintaining robust fundamentals in the face of an ever-changing market environment.

The current share price of the scrip is near its 52 - week low level, making it an ideal low risk investment option.

Bibliography:

💢 Equitymaster.com. "Top Ethanol Stocks in India 2024: Ethanol Companies to Add to Your Watchlist". 2024.

💢Dhampur Sugar Mills Ltd. 2024. "Annual Report FY24".

💢Government of India. 2023. "Ethanol Blending Policy: Vision 2025". Ministry of Petroleum and Natural Gas.

💢International Sugar Organization (ISO). 2024. "Global Sugar Market Analysis: 2024 Outlook".

💢Reuters. 2024. "Global Sugar Prices Surge as Production Declines in Major Markets".

💢Business Standard. 2024. "India's Ethanol Policy and Its Impact on the Sugar Industry".

💢Live Mint. 30 August, 2024. "Balrampur Chini, Dhampur Sugar to Dalmia Bharat: Why are sugar stocks skyrocketing today? — explained'.

Today's Call 

Buy shares of Sangam India Ltd (Rs. 406.25) around the current market price for a target of Rs. 442/511. Stop loss: Rs. 391.

Overview:  Sangam India Ltd is a leading textile manufacturer and exporter, particularly known for being Asia’s largest producer of PV dyed yarn at a single location. The company also specializes in ready-to-stitch fabrics.

Sangam India is well-positioned to benefit from the "China Plus One" strategy, where companies are diversifying their supply chains beyond China. 

Sector Outlook:  The textile sector, which has been sluggish for a while, is showing signs of revival. With the recent drop in cotton prices, the industry is expected to see a strong rebound in the second half of 2024.

Key Insights:  The company's increased production capacities are set to be fully operational by 2nd half of FY25. This should help in lowering costs through better optimization.

Future Projections:  Sangam India, a producer of cotton, PV-dyed yarn, and ready-to-stitch fabrics, aims to achieve a revenue of around Rs. 4,000 crore by FY25, following a significant expansion at its 7 (seven) production units in Bhilwara, Rajasthan.

Moreover, it is aiming to strategically leverage the D2C (director) market and the digitised textile space to further elevate its reach and supply in India and overseas.

Financials: The Net Sales of the company came at Rs.696.68 crore in June 2024 up 2.89% from Rs.677.13 crore in June 2023.

Quarterly Net Profit came at Rs. 12.75 crore in June 2024 down 10.15% from Rs.14.19 crore in June 2023.

The EBITDA stood at Rs.67.85 crore in June 2024 up 22.27% from Rs. 55.49 crore in June 2023.

The EPS of Sangam India Ltd has marginally increased to Rs.2.87 in June 2024 from Rs.2.86 in June 2023.

About the Company:  Sangam India Ltd is involved in producing and selling synthetic blended, cotton, and texturized yarn, as well as denim fabrics, and ready-made seamless garments. The company operates under various brands like Sangam Yarns, Sangam Suitings (its flagship brand), Sangam Denims, and C9 Airwear.

Its clientele includes notable names such as Banswara Syntex, Siyaram, RSWM Limited, Arvind, Trident, Marks & Spencer, Reliance Trends, Zivame, Myntra, Lifestyle International, Benetton, and Westside, among others.

NHPC Ltd (Rs.97.05): Buy

Book Value: Rs.37.61

P/E: Rs.26.97

Highlight: 25 power stations across 13 states. It has signed a MoU on 3 Jan 2024 with GPCL for proposed investment of Rs.4000 Cr in Kuppa Pumped Storage Project (750 MW), Chhota Udaipur, Gujarat.

Company Profile: NHPC is the largest hydropower company in India and holds the status of a Mini-Ratna Category-I Public Sector Undertaking (PSU).  Photo: Business Standard.

The company is involved in every phase of hydropower project development, from initial planning to final commissioning. NHPC has a strong track record, in-house engineering expertise, and consistently strong operational performance. 

With the government's goal to reach 500 GW of installed electricity capacity from non-fossil sources by 2030, hydropower is becoming increasingly important to provide grid stability, especially given the intermittent nature of solar and wind power. Hydropower can quickly adjust output, making it valuable for managing peak demand and maintaining grid frequency. 

Currently, only 46 GW of India's estimated 145 GW hydropower potential has been utilized, indicating significant untapped potential.

NHPC stands at a crucial juncture in the power sector, actively developing hydro and renewable energy projects with a total capacity exceeding 10,000 MW, including the ambitious 2,880 MW Dibang Multipurpose Project. Major projects such as the 2,000 MW Subansiri Lower Hydroelectric Project and the 800 MW Parbati-II Hydroelectric Project are nearing completion.

Recently, the company reached a significant milestone in the Subansiri Lower Hydroelectric Project with the successful installation of Spillway Radial Gates Nos. 7, 8, and 9, along with the sealing arrangement on April 25, 2024. Additionally, diverting the Dirki Nalla at the Dibang Multipurpose Project was a key step forward, ensuring all-weather road access to the site.

Furthermore, it is heartening to note that NHPC’s achievements were recognized on the international stage at the 26th World Energy Congress (WEC) in Rotterdam, Netherlands. NHPC signed a Memorandum of Understanding (MoU) with Ocean Sun, a Norwegian company specializing in floating solar technology.

Besides, under the MNRE-REIA Scheme, NHPC has signed Power Purchase Agreements (PPAs) and Power Sale Agreements (PSAs) for 3,000 MW of solar power. As the Renewable Energy Implementing Agency, NHPC will earn trading margins through this initiative.

In the last financial year, the total cumulative generation across all power stations reached 21,779 Million Units (MUs), with an overall annual Plant Availability Factor (PAF) of 77.60% for the financial year 2023-24. Six power stations met their annual design energy targets, while ten power stations achieved their respective Normative PAF. 

NHPC has 6,434 MW of hydropower projects under construction. With the anticipated completion of the 2,000 MW Subansiri Lower and 800 MW Parbati II projects by the end of FY24E, NHPC’s capacity is expected to increase by 40%, with the impact visible in FY25. 

The signing of multiple Power Purchase Agreements (PPAs) and Memoranda of Understanding (MoUs) for both hydro and renewable power projects, along with a regulated business model for hydropower, ensures strong earnings growth potential. Additionally, 1,105 MW of renewable energy projects are under construction, with more projects in the pipeline.

Earlier in March 2021, the company had informed that it has completed the formalities for the takeover of Rangit Stage-IV Hydro Electric Project (120 MW) by remitting Rs.165 crore to the account of JPCL for distribution to the creditors according to the approved resolution plan. JPCL is now a wholly-owned subsidiary of NHPC Ltd.

Shareholding: FII/FPI have increased holdings from 6.80% to 8.96% in Jun 2024 qtr. Number of FII/FPI investors increased from 319 to 569 in June 2024 quarter. Number of MF schemes increased from 27 to 28 in June 2024 quarter. Institutional Investors have increased holdings from 19.39% to 20.51% in June 2024 quarter. Life insurance corporation of India (LIC) has 3.84% stake in NHPC with 385,595,015 shares of the PSU for the June 2024 quarter (LIC stake was 3.24% stake in March 2024 quarter), according to Trendlyne.

​Q. Can the share of NHPC Ltd cross Rs.500 in the next 3 - 4 years ?

Ans. We know that NHPC Ltd (Rs.97.05, P/E: 24.70), serves both the Hydroelectric and Solar Energy Sectors.  But unfortunately the share price has not risen to the levels many renewable energy players from the sector has shown in the last  couple of years, viz. Waaree Renewables Technologies Limited (Rs.1432.45, TTM P/E: 90.26, Book Value: Rs.22.30), a vertically integrated new energy company that generates power from renewable sources, basically from solar space. Or Websol Energy Systems Ltd (Rs.955.45, FV: Rs.10, Book Value: Rs.25.52)

If we go by this logic of P/E or Book Value analysis then, the rough value of NHPC Ltd should be around Rs.275/300, after suitable discounting and post implementation of Capex plan, the share should cross Rs.500.

Conclusion: However, though taking a view on the share price of any company only through P/E analysis is not a correct method, even then I feel the share price of NHPC Ltd is highly undervalued, especially considering the vastness of its present and upcoming projects and its geographical reach.

Sarthak Industries Ltd (Rs.23.91): Buy

 Targets: Rs.31/37. 

Introduction: Incorporated in 1982, Sarthak Industries Ltd is engaged in manufacturing and repairing of LPG Cylinders and merchant trading of agri-commodities, mining and mineral based industry on opportunity basis.

Product & Services:

a) Industrial and household liquefied petroleum gas (LPG) cylinders of different weights

b) Trading of agro-commodities like vanaspati ghee, wheat, chana, Masoor, etc.

Manufacturing Unit:

Company's unit is located at Pithampur with a manufacturing capacity of 7 lacs cylinders per annum.

Clientele:

Indian Oil Corporation Ltd., Hindustan Petroleum Corporation Ltd., Bharat Petroleum Corporation Ltd. and also to private companies.

Revenue Breakup:

In Q1FY25 company generated revenue mainly from sale of LPG cylinders Rs.6.79 crore and Trading Business Rs.89 lakhs.

Source: Screener.

Financials:

The reported Standalone quarterly numbers for Sarthak Industries are:

Net Sales of the company came at Rs.7.62 crore in June 2024 down marginally by 2.29% from Rs. 7.80 crore in June 2023.

Quarterly Net Profit was seen at Rs.0.25 crore in June 2024 up a whooping 939.51% from Rs.0.02 crore in June 2023.

The EBITDA stood at Rs.0.57 crore in June 2024 up 72.73% from Rs.0.33 crore in June 2023.

Source: Money control.com.

Consolidated Numbers:

On consolidated basis, the total income of the company for the June, 2024 quarter came at Rs.8.44 crore Vs Rs.7.19 crore in Q4FY24 and Rs.8.67 crore in June, 2023 quarter.

The net profit of the company came at Rs.25.26 lakhs against Rs.2.43 lakhs in June, 2023 quarter and Rs.7.96 lakhs in the March, 2024 quarter, showing a significant improvement in the Bottomline.

Total Comprehensive Income for the June, 2024 quarter: Rs.26.98 lakhs Vs Rs.15.63 lakhs in March, 2024 and Rs.11.94 lakhs in the June, 2023 quarter on an equity capital of Rs.9.29 crore.

Reserves (excluding revaluation reserves): Rs.30.92 crore, which is more than 3 times its equity capital.