Tata Capital Limited ("TCL"), the flagship financial services company of the Tata Group, is a subsidiary of Tata Sons Private Limited and is registered with the Reserve Bank of India as a Systemically Important Non-Deposit Accepting Core Investment Company ("CIC").
TCL group has a diversified product portfolio with a presence in both the wholesale and retail finance segments.
In the previous tranche of preference shares, CRISIL had assigned ‘AAA/Stable’ rating on preference shares of ₹40 crore of Tata Capital Limited (TCL). CRISIL has also reaffirmed its ratings on the company's other debt instruments and long term bank facilities at 'CRISIL AAA/Stable/CRISIL A1+'.
About Preference Shares
Preference shares are one of the special types of share capital having fixed rate of dividend and they carry preferential rights over ordinary equity shares in sharing of profits and also claims over assets of the firm. It is ranked between equity and debt as far as priority of repayment of capital is concerned. Some of the key features of preference shares are:
Fixed Dividends - Preference shares carry a fixed rate of interest on the face value for payout of dividends
Preferential Rights - Preference shares have preferential rights over ordinary equity shares with respect to sharing of income and claims on assets. Preference share dividend has to be paid before any dividend payment to ordinary equity shares. Similarly, at the time of liquidation also, these shares would be paid before equity shares
No Voting Rights - These shares have no voting rights and the holders do not have any say in the management of the company
Fixed Maturity - Similar to a debt instrument, preference shares also have fixed maturity date
Dividends Paid out of Profits - Preference dividend is paid out of the divisible profits of the company. A company is not bound to pay dividend on preference shares if its profits in a particular year are insufficient. In case of cumulative preference shares, dividends are postponed to future years
* In pursuance of Section 43 of the Act, the CRPS shall carry a preferential right with respect to (a) payment of dividend calculated at a fixed rate, which may either be free of or subject to income tax; and (b) repayment, in the case of a winding up or repayment of capital, of the amount of the share capital paid-up or deemed to have been paid-up, whether or not, there is a preferential right to the payment of any fixed premium. Note: Investors are advised to consult their tax advisor before investing in any financial instrument.
Who Can Apply: Scheduled Commercial Banks; Co-operative Banks; Regional Rural Banks; Insurance Companies; Mutual Funds; Indian Companies and Bodies Corporate registered in India; Trust; Resident Individual Investors; Hindu Undivided Families through Karta; Limited Liability Partnerships; Public Financial.
Who Cannot Apply: Minors without guardians’ name; Association of Persons, Foreign Portfolio Investors; Qualified Foreign Investors; Foreign Nationals; Non-Resident Indians; Persons resident outside India; Venture Capital Funds; Alternative Investment Funds, Overseas Corporate Bodies; Foreign Institutional Investors; Multilateral and Bilateral Financial Institutions; Bodies Corporate incorporated outside India.
Disclaimer: This document is prepared by the Research Division of IndiaNivesh Securities Ltd (The Company) on the publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been taken based upon this information. IndiaNivesh Securities Ltd does not warranty either expressly of impliedly, the accuracy, completeness or reliability of any information provided herein. Neither IndiaNivesh Securities Ltd nor any of its employees / Directors / authorized representatives shall be liable for any direct, indirect, special consequential, punitive or exemplary damages including lost profits arising in any way from the information contained in this material, and hereby disclaims any liability with regard to the same. This report is disseminated for the information of authorized recipients only and is not to be relied upon or taken is substitution for the exercise of due diligence and judgment by any recipient. This report does not provide individually tailored investment advice; investor should seek independent financial advice with respect to the merits and risks involved in any of the matters concerning investment in the Schemes / products mentioned in the report.
Posted by Mehul Kothari | Published on 20-AUG-2019
Q1FY20 Earning Aggregates: A Snippet (Review)
Nifty 50For Q1FY20, Nifty 50 reported revenue growth of 7% and net profit growth of 1% on YoY basis. Profitability at the aggregate level has been languishing for the last couple of years, and the quarter gone by was no different. Tata Motors and Bharti Airtel dragged the profits down by around Rs. 6,500 crore, while SBI and ICICI Bank pulled it up by around Rs. 5,400 crore. On the sectoral front, banks and financials did well, IT delivered stable numbers, but refining companies’ dismal show continued. Alarmingly, Nifty 50 ex-financials reported PAT fell by ~13% (YoY).
Q1FY20 aggregates
Annual reported net profitNext 150 stocks by market capitalisationThe story was no different outside Nifty 50. A study of the next 150 stocks by market capitalisation shows Q1FY20 revenue growth of 3%, while net profit de-grew by 23%. The outliers were PSU banks helped by PNB, Interglobe Aviation and Reliance Capital, while refiners, Vodafone Idea and IDBI Bank were key draggers. Here, the fall in PAT of ex-financials 33% was far severe than overall. Primarily banks, financials, cement and pharmaceuticals delivered positive growth.
Q1FY20 aggregates
This basket annual aggregate is a mirror image of the NIFTY 50 performance for FY19 inclusive and/or exclusive of financials. For FY19, reported PAT was down 1%, whereas ex-financials it de-grew by 13%.
Annual aggregates: Reported net profitNext 300 stocks by market capitalisation (outside top 200 basket)The favourable base and turnaround of PSU banks helped this basket post decent gains. For Q1FY20, revenue grew by 3% enabling it to post aggregate profit of Rs.13,741 crore from Rs 3,736 crore in Q1FY19.Break-up of sectors
Q1FY20 aggregates
Annual aggregates: Reported net profit
Q1FY20 earnings: Key highlights
Our take: Decent recovery in the monsoons, lower interest rate trajectory, contained inflation, lower crude oil prices, healthy foreign exchange reserves, relative outperformance by the rupee, PSU banks back into the black, volume traction in FMCG and paints are factors capable enough to trigger a pull-back in the markets and provide a floor for corrections till Q2FY20 numbers are rolled out. The low base of Q2FY19 and for full year FY19 are an added plus. We expect PSU banks, pharmaceuticals, FMCG and infra stocks to positively surprise on earnings for the remainder of FY20. IT, private banks and select NBFCs will deliver steady numbers. Traction in Nifty 50 is likely to be led by expanding EPS rather than PER multiples. From here on, corrections are likely to be bought till the roll out of Q2FY20 numbers, the caveat being that any unprecedented global event may derail this thesis.)
Posted by Mehul Kothari | Published on 28-AUG-2019
Investment Rationale
Most of the PSU banks seem to be on the cusp of turnaround after years of rigorous overhaul of processes, systems and practices in place.
Canara Bank looks promising among the pack. In FY19, the bank bounced back into black.
Stellar Q1FY20 earnings : There was strong improvement in asset quality. Gross NPA was down to 8.80% as at June’19 from 11.08% YoY. Net NPA also improved to 5.35% (Q1FY20) from 6.91% (Q1FY19). Profit came in at Rs. 373 crore in Q1FY20 vis-a-vis Rs.313 crore in Q1FY19.
Business back on growth trajectory : Advances grew by 11.12% (YoY) in Q1FY20. In a falling interest rate scenario, we expect NIMs to be stable. Major driver being Retail Credit, which grew at 13.48% (YoY).
Pick up in monsoons, the government’s infra push, and slow but steady improvement in the economy is likely to maintain business growth momentum.
The board has passed the resolution for raising fresh equity of around Rs. 6,000 crore and unlocking value by disinvesting stake in Can Fin Homes, which at prevailing market price is worth around Rs. 1,400 crore, and will take care of capital needs for business growth.
The bank has delivered advances CAGR of 15.57% in the last 15 years, which grew from around Rs. 48,871 crore in 2004 to Rs. 4,28,114 crore by March’19. In the same period, CASA grew at a CAGR of 13.48%, which stands at around Rs. 6 lakh crore as at March’19.
Given the visibility, government’s determination and regulator’s approach, we believe Canara Bank is an attractive investment buy.
VALUATIONThe bank looks attractively priced. In favourable times it has commanded valuation of 1.5x P/BV on TTM basis. In the last 10 years, the bank was plagued by bad loans which resulted in the stock trading consistently below 1x P/BV, with a mean at 0.93x. We expect the business to grow by a tad over 10% for next two years, while the asset quality improves. Assuming 10% traction in advances, stable margins, 50 bps sequential improvements in gross NPA & net NPA, and operating margin at 30%, we arrive at FY21E book value of Rs. 538 per share. Here, we have not taken into account potential impact of upgradation and/or recoveries of existing NPA or bad loans. Conservatively valuing the bank at 0.9x P/BV at FY21E per share, we arrive at a target price of Rs. 484, implying an upside return of around 118% from the current levels. We recommend to accumulate Canara Bank.FINANCIAL SUMMARY
ASSET QUALITY
The concerted efforts of the bank for improving the asset quality have yielded results, with gross NPA decreasing from 11.08% as at June’18 to 8.80% as at June’19. Net NPA reduced from 6.91% in June’18 to 5.35% in June’19. This marked improvement in asset quality was on the back of significant recoveries and upgradations.
The provision coverage ratio (PCR) improved considerably during the quarter from 60.6% in Q1 FY19 to 68.12% in Q1 FY20
Slippage has been contained substantially slippage ratio stood at 0.91% in Q1 FY20 vis-à-vis 1.19 in Q1 FY19
About the CompanyCanara Bank is one of the largest public sector banks owned by the Government of India. It is headquartered in Bengaluru. It was established at Mangalore in 1906, and is one of the oldest public sector banks in the country. The government nationalized the bank in 1969. As of 31 March 2019, the bank had a network of 6,310 branches and more than 8,851 ATMs spread across 4,467 centers.)
Tata Capital Ltd – Preference Shares Issue 2019
About the Company
About Preference Shares
Preference shares are one of the special types of share capital having fixed rate of dividend and they carry preferential rights over ordinary equity shares in sharing of profits and also claims over assets of the firm. It is ranked between equity and debt as far as priority of repayment of capital is concerned. Some of the key features of preference shares are:
* In pursuance of Section 43 of the Act, the CRPS shall carry a preferential right with respect to (a) payment of dividend calculated at a fixed rate, which may either be free of or subject to income tax; and (b) repayment, in the case of a winding up or repayment of capital, of the amount of the share capital paid-up or deemed to have been paid-up, whether or not, there is a preferential right to the payment of any fixed premium. Note: Investors are advised to consult their tax advisor before investing in any financial instrument.
Who Can Apply: Scheduled Commercial Banks; Co-operative Banks; Regional Rural Banks; Insurance Companies; Mutual Funds; Indian Companies and Bodies Corporate registered in India; Trust; Resident Individual Investors; Hindu Undivided Families through Karta; Limited Liability Partnerships; Public Financial.
Who Cannot Apply: Minors without guardians’ name; Association of Persons, Foreign Portfolio Investors; Qualified Foreign Investors; Foreign Nationals; Non-Resident Indians; Persons resident outside India; Venture Capital Funds; Alternative Investment Funds, Overseas Corporate Bodies; Foreign Institutional Investors; Multilateral and Bilateral Financial Institutions; Bodies Corporate incorporated outside India.
Disclaimer: This document is prepared by the Research Division of IndiaNivesh Securities Ltd (The Company) on the publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been taken based upon this information. IndiaNivesh Securities Ltd does not warranty either expressly of impliedly, the accuracy, completeness or reliability of any information provided herein. Neither IndiaNivesh Securities Ltd nor any of its employees / Directors / authorized representatives shall be liable for any direct, indirect, special consequential, punitive or exemplary damages including lost profits arising in any way from the information contained in this material, and hereby disclaims any liability with regard to the same. This report is disseminated for the information of authorized recipients only and is not to be relied upon or taken is substitution for the exercise of due diligence and judgment by any recipient. This report does not provide individually tailored investment advice; investor should seek independent financial advice with respect to the merits and risks involved in any of the matters concerning investment in the Schemes / products mentioned in the report.
Previous Story
Nifty 50 - Q1FY20 Earnings Key Highlights
Q1FY20 Earning Aggregates: A Snippet (Review) Nifty 50For Q1FY20, Nifty 50 reported revenue growth of 7% and net profit growth of 1% on YoY basis. Profitability at the aggregate level has been languishing for the last couple of years, and the quarter gone by was no different. Tata Motors and Bharti Airtel dragged the profits down by around Rs. 6,500 crore, while SBI and ICICI Bank pulled it up by around Rs. 5,400 crore. On the sectoral front, banks and financials did well, IT delivered stable numbers, but refining companies’ dismal show continued. Alarmingly, Nifty 50 ex-financials reported PAT fell by ~13% (YoY). Q1FY20 aggregates Annual reported net profitNext 150 stocks by market capitalisationThe story was no different outside Nifty 50. A study of the next 150 stocks by market capitalisation shows Q1FY20 revenue growth of 3%, while net profit de-grew by 23%. The outliers were PSU banks helped by PNB, Interglobe Aviation and Reliance Capital, while refiners, Vodafone Idea and IDBI Bank were key draggers. Here, the fall in PAT of ex-financials 33% was far severe than overall. Primarily banks, financials, cement and pharmaceuticals delivered positive growth. Q1FY20 aggregates This basket annual aggregate is a mirror image of the NIFTY 50 performance for FY19 inclusive and/or exclusive of financials. For FY19, reported PAT was down 1%, whereas ex-financials it de-grew by 13%. Annual aggregates: Reported net profitNext 300 stocks by market capitalisation (outside top 200 basket)The favourable base and turnaround of PSU banks helped this basket post decent gains. For Q1FY20, revenue grew by 3% enabling it to post aggregate profit of Rs.13,741 crore from Rs 3,736 crore in Q1FY19.Break-up of sectors Q1FY20 aggregates Annual aggregates: Reported net profit Q1FY20 earnings: Key highlights Our take: Decent recovery in the monsoons, lower interest rate trajectory, contained inflation, lower crude oil prices, healthy foreign exchange reserves, relative outperformance by the rupee, PSU banks back into the black, volume traction in FMCG and paints are factors capable enough to trigger a pull-back in the markets and provide a floor for corrections till Q2FY20 numbers are rolled out. The low base of Q2FY19 and for full year FY19 are an added plus. We expect PSU banks, pharmaceuticals, FMCG and infra stocks to positively surprise on earnings for the remainder of FY20. IT, private banks and select NBFCs will deliver steady numbers. Traction in Nifty 50 is likely to be led by expanding EPS rather than PER multiples. From here on, corrections are likely to be bought till the roll out of Q2FY20 numbers, the caveat being that any unprecedented global event may derail this thesis.)
Next Story
Canara Bank Stock Prices – Shareholding Pattern, Charts & Financial Summary
Investment Rationale Most of the PSU banks seem to be on the cusp of turnaround after years of rigorous overhaul of processes, systems and practices in place. Canara Bank looks promising among the pack. In FY19, the bank bounced back into black. Stellar Q1FY20 earnings : There was strong improvement in asset quality. Gross NPA was down to 8.80% as at June’19 from 11.08% YoY. Net NPA also improved to 5.35% (Q1FY20) from 6.91% (Q1FY19). Profit came in at Rs. 373 crore in Q1FY20 vis-a-vis Rs.313 crore in Q1FY19. Business back on growth trajectory : Advances grew by 11.12% (YoY) in Q1FY20. In a falling interest rate scenario, we expect NIMs to be stable. Major driver being Retail Credit, which grew at 13.48% (YoY). Pick up in monsoons, the government’s infra push, and slow but steady improvement in the economy is likely to maintain business growth momentum. The board has passed the resolution for raising fresh equity of around Rs. 6,000 crore and unlocking value by disinvesting stake in Can Fin Homes, which at prevailing market price is worth around Rs. 1,400 crore, and will take care of capital needs for business growth. The bank has delivered advances CAGR of 15.57% in the last 15 years, which grew from around Rs. 48,871 crore in 2004 to Rs. 4,28,114 crore by March’19. In the same period, CASA grew at a CAGR of 13.48%, which stands at around Rs. 6 lakh crore as at March’19. Given the visibility, government’s determination and regulator’s approach, we believe Canara Bank is an attractive investment buy. VALUATIONThe bank looks attractively priced. In favourable times it has commanded valuation of 1.5x P/BV on TTM basis. In the last 10 years, the bank was plagued by bad loans which resulted in the stock trading consistently below 1x P/BV, with a mean at 0.93x. We expect the business to grow by a tad over 10% for next two years, while the asset quality improves. Assuming 10% traction in advances, stable margins, 50 bps sequential improvements in gross NPA & net NPA, and operating margin at 30%, we arrive at FY21E book value of Rs. 538 per share. Here, we have not taken into account potential impact of upgradation and/or recoveries of existing NPA or bad loans. Conservatively valuing the bank at 0.9x P/BV at FY21E per share, we arrive at a target price of Rs. 484, implying an upside return of around 118% from the current levels. We recommend to accumulate Canara Bank.FINANCIAL SUMMARY ASSET QUALITY The concerted efforts of the bank for improving the asset quality have yielded results, with gross NPA decreasing from 11.08% as at June’18 to 8.80% as at June’19. Net NPA reduced from 6.91% in June’18 to 5.35% in June’19. This marked improvement in asset quality was on the back of significant recoveries and upgradations. The provision coverage ratio (PCR) improved considerably during the quarter from 60.6% in Q1 FY19 to 68.12% in Q1 FY20 Slippage has been contained substantially slippage ratio stood at 0.91% in Q1 FY20 vis-à-vis 1.19 in Q1 FY19 About the CompanyCanara Bank is one of the largest public sector banks owned by the Government of India. It is headquartered in Bengaluru. It was established at Mangalore in 1906, and is one of the oldest public sector banks in the country. The government nationalized the bank in 1969. As of 31 March 2019, the bank had a network of 6,310 branches and more than 8,851 ATMs spread across 4,467 centers.)