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00:00Hey there, welcome back to ED. Now you're watching Market Patafat with me Ganeshka Sarkar and Ankita Saksena.
00:05A shifting focus to the primary markets then, now Jain Resource Recycling has planned an IPO worth 1,250 crore rupees.
00:13This IPO will open for subscription on September 24th and we caught up with the management of the company
00:19to understand their fund utilization plans and the growth roadmap going ahead.
00:23Let's listen in to a slice of that conversation.
00:25Our major import is, our major purchase is from the imports side and we also buy domestically.
00:36Domestically improving a lot. Now the government push for recycling is very big
00:41and we are now sourcing for domestic scrap also is going up
00:44and we assume that it will go to higher level as the country is growing in a very robust way.
00:51So this scrap will come more and it's getting more organized because of the regulations, rules of government also.
00:56Mike, 750 crores in OFS and 500 crores in primary issue. What are you going to use the primary issue for?
01:04So the primary issue basically would be used for repayment of the loans.
01:15Out of 500 crores, majority is going to be used in that and some portion will be used for general purpose businesses.
01:24What is the total debt that you have in your books?
01:26Total debt would stand at somewhere around 900 crores at present.
01:32And you will use what, 350 odd crores, 375 crores?
01:35375 or something like that, yes.
01:37Does this business require a lot of working capital?
01:40Yeah, it's a little capital intensive industry because of the, we buy from globally
01:48and we have to make payment on loading the material. The shipment shall take time. Some countries like 30 days, some countries take 45 days, something 60 days also.
01:57So capital get blocked in while shipping. But once it comes, it's very fast and around, I think 38 days, we are able to rotate the money from factory to the buyer's payment.
02:07So the majority money get blocked while shipping, during the shipment time.
02:12And how do you do that sourcing of your material? I mean, which are the countries from where you source normally?
02:17So we source globally around, I think 120 plus countries. And this sourcing happened around the clock, different time zone and different executives we have to source, talk to suppliers.
02:31Talk to suppliers. And we have regular suppliers, scrapyards, traders, keep giving to us.
02:38And when you refine the metal to, you know, refine metal alloys and ingers, which you do actually for lead, copper and aluminium, do you sell them globally or is it sold in the domestic market?
02:50No, we do both exports and we sell locally also. So we export to market, main market for us. Copper is for mainly China and Korea. And lead is for Korea. And sometimes Japan also. And our aluminium goes to Japan.
03:07And domestically, we sell to a lot of industries of copper and battery manufacturing and automobile casting of aluminium. We supply locally also. But major sales, of course, exports.
03:20How do you manage this forex fluctuation? Is it a natural hedge for you or there is a, you know, by the time you order and by the time it comes and the payments have to be made, how do you manage that forex translation which comes in?
03:34Because it could be volatile in that. Yeah. So as you could understand, a large chunk of import right now is from imports. And we also do exports. So to a large extent, to the extent we are exporting, we have natural hedge.
03:53Having said that, we have unhatched exposure of the purchase, which we have a very strong hedging mechanism and operation we hedge by buying and selling forwards.
04:06Give me a sense of, you know, are the supplies which you have from hundreds, hundreds of countries, which you said, do you have long term relationship or agreements with them for supply of these materials which you need to recycle?
04:21Yes. So certain supplies, we have some three months contracts, sometimes long term also. But mostly are spot contract because of the scrap getting generated there and there. So there are global tenders, there are global domestic supplies, there are demolition happening globally for the plants and housing complexes. So it keeps coming. And the scrapyards, they keep selling to us on spot market. And some are the long term also we have.
04:49Relationship and contract tenure. Yes. In this business relationship matters a lot. So there are suppliers with whom we have relationship for decades. Contracts are generally spot contracts or short term, maybe two months, three months. But if you have long term relationship, the business continues.
05:06What is the normally recovery rate from these scraps that you... So it is not uniform, sir. It depends on spec of the material. A different kibble has got different copper content.
05:18And different batteries have got different type of lead content. So the suppliers give the spec, the contract specs matter. Based on the specification of the raw material, we buy the and give the price to them. So it is not uniform because it's scrap. So how can it be uniform?
05:33So give me an idea of the kind of refining capacity that you have now for various metals, whether it's copper, lead or aluminum.
05:40So we have a total capacity of more than 300,000 tons annually. For aluminum, copper and lead put together. In this, of course, the lead constitutes the highest capacity, followed by copper and then aluminum.
05:56And is there a plan to expand that capacity? Of course. So we are expanding in various strategies we have.
06:03So we are going for expansion of these present capacities, what we are manufacturing. And we also have planned to do the value addition product.
06:11So we are going for this copper cathodes and wire rods and copper flats production. And the present capacity also is getting increased.
06:20What is capex for that actually? And how are you funding it? Because your current fund raise is for, you know, retiring some of the debt.
06:29So we, right now we are working on value addition project for the copper, in which we are making the high value added products of copper.
06:41So after we complete this project, there are more projects under study and in offing. In fact, the company has been profitable year on year.
06:56There are good internal accruals, which are enough to take care of the expansion projects.
07:02All right. Moving on then from the primary market action to stocks that are in focus today.
07:09For that, we are joined by Aditya Garwala, Head of Research and Investments.
07:12Invest for Edu Private Limited is joining us on the technicals and from our research team.
07:16We are joined by Rabindar. Hi, good afternoon to both of you.
07:18Thank you so much for taking the time out and joining us.
07:20Let's get going with all the stocks that are in focus today.
07:23Coming to you first, Aditya, your first stock that you picked out for us is Bajaj Auto.
07:28Now, Bajaj Auto today, you know, it's up almost 2% and besides the GST rate benefits that they are passing on,
07:36they have also given some extra benefits for the festive season as well.
07:40On the back of that, we do see the stock buzzing, but that's the fundamental part of it.
07:44On the technicals, what do you see and what are the levels to watch out for?
07:47Hi, good afternoon, Ankita. Thanks for the show.
07:50So, it's a good up move that we're witnessing in trade today backed by healthy volumes as well.
07:55So, overall looks like it's a move that is going to continue in the coming trading sessions as well.
08:00And if you take a look at the overall chart structure of Bajaj Auto over a longer period of time,
08:05you will notice that after a very long consolidation, stock eventually had broken out of a cup and handle pattern.
08:11And post breakout stock had witnessed a sharp up move.
08:14And after that, we witnessed a narrow consolidation phase on shallow volumes.
08:18And what we're witnessing in trade today is again a resumption of an up move on a very strong volume.
08:23So, that tells me that the up move has resumed again and is likely to extend in the coming trading sessions.
08:29On the upside, stock can easily test levels of 8,900 to about 10,000 on the upside.
08:39Give it at least a few trading sessions and you will see that kind of an up move, more of a positional bet that it is looking strong.
08:47On the downside, 8,900 is a strong support area for the stock.
08:50So, overall, I think offers an excellent reward with the stock loss just below 9,000.
08:54One should look for a target of 9,000 into 10,000.
08:57Indicators are also showing strength in the stock.
08:59So, definitely, it's a big up move that I'm seeing in the tubular space.
09:06All right.
09:07So, that's the view on Bajaj Auto.
09:10Those are the levels to track.
09:11But moving on, Rabindar, coming to you, Swiggy is the stock that you've picked out for us.
09:14It's down nearly 2% right now.
09:16I believe a brokerage report with a downgrade coming in.
09:20Swiggy is in focus on the back of the brokerage downgrade where GM Financial has come out with a note.
09:26And they have downgraded the stock to reduce rating from the hold rating and cut target price.
09:32And they have revised the target price to 440.
09:36They say that the Swiggy balance sheet remains a cause of concerns and requires remedial measures.
09:42And in their view, while media reports suggest that the company is considering a sale of their approximately 12% stake in Rapido to recapitalize its balance sheet,
09:52GM Financial believes that it sneaks to a much bigger war chest.
09:56And they have reiterated that Swiggy needs some much larger funds of USD 500 million to support its long-term ambitions in quick commerce.
10:05And till this, the hangover is lifted.
10:07GM Financial expects the Rapido transaction to go through in the second half of FI26.
10:13And therefore, factored in the process from the scale of stake sales at the upper end of the range discussed in the media report.
10:20So back of this, Swiggy is in focus on the stock is down approximately 2%.
10:24All right, with that, it's time for a quick breather.
10:27Don't go anywhere.
10:28After the break, we are getting you more buzzes on the other side.
10:30Stay tuned.
10:38Market Fata Fata, where we are getting you all the buzzes and stocks and news.
10:41Well, let me come to you, Aditya.
10:43You picked out a DLF for us.
10:45Tell us, what does DLF look like to you on the charts?
10:48If you look at DLF, it hasn't done much.
10:51I mean, it has been in a range for the past few weeks.
10:54From here on, what are the levels to watch out for?
10:57Though it's been a range, Ankita, but if you take a look at the overall chart setup,
11:01it's been making higher rise, higher lows.
11:03And right now, it's on the verge of a breakout from a narrow consolidation phase.
11:07My sense is, in the coming trading sessions, you will see an eventual breakout from that hurdle of 800 odd levels.
11:13And once it breaks out of that 800 odd level, you're going to see much higher levels in the stock.
11:18Maybe you can test levels of 830 as well.
11:20And once it takes up 830, 860 is the next target.
11:24So for a target of 830, 860, these are two targets that I'm playing with.
11:27On the downside, stock has good support around 770, 765 zone.
11:32So the restore reward is also in favor of going long at current levels.
11:35And plus, if you plot few moving averages, I see a positive crossover on that.
11:39And RSI has also moved into the bull territory.
11:42So overall, the chart setup is suggesting that a fresh leg of buying could come into the real estate space.
11:47And DLF could be the one stock to watch out for in this space for a target of 830, 860 in the near term.
11:56All right, so fresh leg of buying could come in the real estate space.
11:59And DLF is one to watch out for.
12:01That's the word coming from Aditya.
12:03But putting the spotlight on the IT space now.
12:05Now, the IT stocks are all in focus today and under pressure after the US government announced a $100,000 H-1B visa fee.
12:15That's sparking the initial panic across the Indian sector.
12:18However, the White House later clarified that it is a one-time charge.
12:21Only new petitions will be charged that and with the existing visa holders and renewables exempt on that charge.
12:30Now, brokerages say that the Indian IT remains most exposed to this move as a majority of H-1B visas go to Indian nationals.
12:38In fact, Annamura has come out with a report and it notes that the fee could hit the sector EBIT margins by 11 to 99 basis points and EPS by 0.5 to 6%.
12:49That's depending on the company's exposure though the industry is already shifting reducing visa dependence.
12:55So that's the word coming from the brokerage.
12:57In fact, Annamura maintains a buy rating on Infosys and Cofors saying that the long-term growth story remains intact despite the near-term cost headwinds that the sector is seeing.
13:07However, the entire sector is facing a lot of pressure today.
13:11All stocks trading in the red in the Nifty IT pack.
13:14All right, the entire IT pack is in focus on the back of that H-1B visa issue that's going on.
13:21But with that, Aditya and Rabinder, thank you so much for taking the time out and joining us.
13:26That was the last talk of the market for that part.
13:29But let's put the spotlight on the primary market.
13:32Another IPO that is set to hit the bosses, EPA Prefab Technologies that's worth 504 crores.
13:41That IPO will be opening for subscription on the 24th of September.
13:45And we caught up with the management to understand their fund utilization plans and the profitability outlook.
13:50Let's go across and listen to this slice of that conversation.
13:53Chartered is a packaging company and the kind of packaging which we do is called EPS, expandable polystyrene.
14:02It has basically two applications.
14:04One is on the packaging side and the other is on the insulation.
14:07So the insulation products which we made are used for cold-chain solutions in insulating the cold-chain solution walls and the floors and the roof.
14:14And, you know, like there was a time in the year 2008 when the market was moving towards the negative temperature cold storages.
14:23And that was the time we realized that the product EPS was not suitable to cater to the negative temperature cold storage, cold-chain requirements.
14:31And then we started getting into polyurethane sandwich panels which are called as puff panels.
14:36So we started this puff panel manufacturing and then eventually we got into smaller modular housing.
14:43We developed certain products for the modular housing, rapid housing.
14:46And then eventually we got into the bigger building space in the year 2017 and 18 by setting up our first prefab plant in Greater Noida.
14:56Nikhil, give us a sense of the 300 crores that you are raising from this issue is in primary.
15:03So what is it going to be used for?
15:10Yeah, so it will be going in three baskets.
15:13One is that we are doing a capex, you know, we are putting sandwich panel line in the north in Geloth.
15:19Around 100 or crores will go there.
15:21Then we are expanding our capacity for pre-engineered building fabrication in the south in Mambatu plant.
15:26So part of it around 60 crores will go there.
15:29And then we are also repaying our debt of around 70 crores.
15:33So majorly these are the portions, you know, apart from this there is GCP, General Purpose Corporate Fund.
15:39That is 25% of the balance, you know, that we'll be using for further requirements of the company.
15:47What is the current leverage on the books, debt on the books as you speak?
15:52The debt right now, or, you know, as on 1st of April 25, net debt was around 53 crores.
16:04So, you know, like we also, while the total debt was around 210 crores, including the term loan and the working capital limits.
16:12But at the same time, we had a FD of around 151 crores or 155 crores.
16:19So the net debt was around 53 to 55 crores.
16:23Give me a sense also of your order book.
16:26You know, you are into pre-fabrication structures and it's linked to very,
16:31and it's very closely linked to capex cycles in expansion of manufacturing units and other areas.
16:39So what is the kind of order book that you have?
16:41And is there a particular sector which is, which you have got more orders from?
16:46That's a great question.
16:49You know, like in our business, order books give a clear visibility for the next six to eight months.
17:00And for us, as we speak, we, the order book for EPAC Prefair right now is around 1140 crores.
17:07And most of the, you know, like we categorize the order book into three, three areas.
17:13One is on the manufacturing.
17:15So when we make new factories, then on the manufacturing side, typically it is around 60 to 65 percent of the order book for us.
17:22Then it is the warehousing, which are, which is around 25 to 30 percent.
17:26And then around seven to eight percent is coming from the high rise buildings.
17:31So, you know, like as we speak, the factories, we are getting more and more orders for factories these days because of the ongoing capex cycle in the country.
17:40And most of the orders, you know, like we are sector agnostic, but still most of the sectors, you know, like which are contributing immensely to our order book right now is renewable and FMCG and I would say auto.
17:55You know, interesting that you mentioned all these sectors and these sectors are growing in terms of expansion, which is happening to respective industries.
18:06Give you give me also a sense of how you are, you know, the packaging business is doing.
18:11It's 15 percent of your top line.
18:13How is it doing in terms of profitability?
18:16And, you know, do you plan to continue with that packaging business, given that is now a small portion of the entire book for you?
18:23See, there's a lot of emotional value to the packaging business because in the year 2000, we started with that.
18:35The plant is in Gretanoida.
18:37We have only one plant for that.
18:39And the plant is in Gretanoida very next to LG Electronics.
18:44And the relationship with LG for this company is more than 25 years.
18:50So around 40 percent of the revenue is coming from one single customer there.
18:55And the kind of tailwinds which we see right now in the prefab business as a management, we have decided to focus on prefab business for now.
19:04And the packaging business will continue to grow at a steady pace of six to eight percent depending on the growth of its major customer.
19:12Can you also give us a sense of the kind of, you know, timeline or turnaround time that you have normally for your order book?
19:19What is the normal turnaround time for this order book which you mentioned that, you know, it's over 1000 odd crores?
19:26Nikhil?
19:27Yes, so generally, you know, the project size that we take on an average takes around five to seven months from designing to manufacturing to execution at site.
19:42So there are smaller projects which gets done in around four months, four and a half months, five months.
19:47And there are some bigger projects which are, you know, taking around six to seven months.
19:52So generally, typically, our order book is seven to eight months, you know, which we have and we execute in the coming seven to eight months.
20:00As minutes later, we've done this.
20:01We won't.
20:02We didn't need it now, but for that part, you know, we can do it every Thursday.
20:03Anyways, so very soon.
20:04We'll see!
20:05We'll see you then.
20:06We'll see.
20:07Bye-bye.
20:08Don't worry.
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