Equity Research

Max Life Insurance – Revised Deal, Positive for Max Financial

August 26, 20202 min read

Max Financial Services and Axis Bank have revised their agreement terms, with Axis Bank now to buy a 17% stake in Max Life Insurance versus 29% earlier. From Axis Bank’s perspective, the stake is lower but Axis Bank retains control/right. Axis bank currently holds 1% in Max Life and after the closure of revised deal its stake would go to 18% and Max Financial Services would hold 82%.

Axis Bank – The value accretion reduction for Axis Bank versus the earlier deal could be made up by getting additional payout / commission, which is restricted (more…)

Equity Research

Should you own the Life Insurance Business ?

July 21, 2020July 21, 20204 min read

Protection is the most profitable part of business. Life insurers will benefit from monetisation of opportunity in life-protection with rising awareness in post Covid, favourable demographics and reasonable costs. Penetration of protection is low at 10% of addressable population with scope for market to double in five years (+23% CAGR over three years).

Insurance stocks have fared well in the current environment due to their relative defensive nature as compared to banks/NBFCs. Recent growth trends are encouraging, significantly better than initial expectations. However, ability of insurance companies to deliver yoy stable/increase in VNB (Value of New Business) remains a crucial monitorable. Traction in protection business will provide tailwinds to all players. While capital market inflows / ULIPs will likely remain weak, ability of insurance companies to underwrite/scale up traditional business assumes importance. Better product-mix (higher protection & non-par savings share) should (more…)

Equity Research

Does HDFC AMC deserve High Valuation ? Review

April 13, 2019April 18, 20202 min read

HDFC Asset Management Company – HDFC AMC has a strong brand pull (benefitting from parentage), relatively higher proportion of equity assets and continued delivery on fund performance make it one of the best plays to capitalize on the financial savings opportunity in the country.

Big Opportunity
MF AUM is just c.12% of GDP (vs global average of 62%). Long term AUM growth rates have been healthy (18% CAGR over last 19 years) and we see them sustaining in the future. Importantly, share of individual investors in the AUM has been inching up and the uptick in “sticky retail flows’ should shield the industry from cyclical whipsaws in the market. HDFCAMC is one of (more…)

Equity Research

Valuation of Indian Markets & Relentless FII Selling

October 3, 2017April 18, 20203 min read

Foreign Institutional Investors have been net sellers in the last two months offloading stocks worth about Rs 24,000 Cr [Aug & Sep] Source: NSDL. Domestic Investors have aggressively bought stocks to ward off free fall in the markets. To us it is a sure sign indication of downward revision of Earnings for FY 2018 from Rs 1626 to Rs 1601 and further down to Rs 1550 as we start getting the September quarter results.

Valuation of Indian Markets:
Instead of the BSE 500, we are now taking into (more…)

Equity Research

Why Value Investing Does not Work in India ?

March 5, 20172 min read

Indian small & midcap stocks have witnessed a sharp rally since the lows of Aug 2013 and have outperformed large caps significantly over this period. A large part of this relative outperformance is explained by the price multiple rerating seen over this period. While the price multiple rerating does explain a large part of equity returns in the short run, it is the underlying business performance and earnings growth that should drive performance in the long run.

In fact it’s quite interesting to note that for small stocks, the multiple (more…)

Equity Research

Why Investor Dislike Birla’s Grasim – Aditya Birla Nuvo Merger ?

August 17, 20162 min read

Grasim Industries Ltd has proposed to merge Aditya Birla Nuvo Ltd with itself. Shareholders of Aditya Birla Nuvo would get 3 shares of Grasim for every 10 shares they hold. Thereafter, Aditya Birla Financial Services – would be demerged and listed as a separate entity where for every 1 share held in Grasim a shareholder will get 7 shares in Aditya Birla Financial Services which would be then listed separately.

Wouldn’t it be better to first demerge Aditya Birla Financial Services from (more…)

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