BILKULONLINE
By Arun Kejriwal
Mumbai, Feb 18: Markets in the week gone by were volatile and choppy. On more than one occasion during the week one saw opening losses being wiped out and similarly profits too being wiped out.
At the end of the week, we saw markets gaining on four of the five trading sessions and losing on one. BSE Sensex gained 831.15 points or 1.16 per cent to close at 72,426.64 points while Nifty gained 258.20 points or 1.19 per cent to close at 22,040.70 points.
The broader markets saw BSE 100, BSE 200 and BSE 500 gain 1.26 per cent, 1.23 per cent and 1.08 per cent respectively. BSE Midcap gained 0.91 per cent while BSE Smallcap was up 0.02 per cent. The top sectoral gainer was BSE Auto which outperformed the broad markets and was up almost 5 per cent.
The Indian Rupee gained 2 paisa or 0.02 per cent to close at Rs 83.02. Dow Jones was choppy and gained on three of the five trading sessions, losing on two. At the end of the volatile week, Dow was marginally negative, losing 43.70 points or 0.11 per cent to close at 38,627.99 points.
The week gone by was full of listings and we had as many as five listings during the week. The first was from Apeejay Surrendra Park Hotels Limited which had issued shares at Rs 155. Shares of the company listed on Monday, February 12, and closed day one at Rs 203.45, a gain of Rs 48.45 or 31.25 per cent. By Friday, the shares lost some ground and closed at Rs 194.70, a gain of Rs 39.70 or 25.61 per cent.
Wednesday the 14th of February saw three listings and they were certainly not the best that one has seen in a very long time. The first was from RP Tech Limited which had issued shares at Rs 311. The discovered price was Rs 335, a gain of Rs 24 or 7.71 per cent. At the end of the day, the share closed substantially lower at levels of Rs 320.10, a gain of Rs 9.10 or 2.92 per cent. By the end of the week, the share gained substantially and closed at Rs 345.65, a gain of Rs 34.65 or 11.14 per cent.
The second of Wednesday’s listings was from Capital Small Finance Bank Limited which had issued shares at Rs 468. The discovered price was Rs 435, a loss of Rs 33 or 7.05 per cent. The share slipped further during the day and made a low of Rs 421.10. It recovered from here to close around the open at Rs 436.05, a loss of Rs 31.95 or 6.82 per cent. At the end of the week, the share regained some ground and closed at Rs 449.25, a loss of Rs 18.75 or 4.01 per cent.
The third of Wednesday’s listings was from Jana Small Finance Bank Limited which had issued shares at Rs 414. The listing price was Rs 396, a loss of Rs 18 or 4.34 per cent. The share lost sharply as the day progressed and made a low of Rs 365. The share closed marginally higher than the low at Rs 366.80, a loss of Rs 47.20 or 11.40 per cent. During the remaining two days of the week the share regained lost ground and closed at Rs 419.5, a gain of Rs 5.05 or 1.22 per cent.
The fifth and final listing of the week was from Entero Healthcare services Limited which had issued shares at Rs 1,258. The discovered price was Rs 1,245, a loss of Rs 13 or just about 1 per cent. The share closed day one at Rs 1,149.50, a loss of Rs 108.50 or 8.62 per cent.
These four listings show one thing clearly that primary markets are overheated and the valuations which are being asked for are unrealistic in most cases. There is no comfort in the valuations and one bad day at the bourses can knock the company off its pedestal. Time for promoters and merchant bankers to pull up their socks and ensure that they and their clients do not become greedy or it would become a case of the chicken that lays the golden egg being slaughtered.
There is one IPO from Juniper Hotels Limited which is tapping the capital markets. The issue consists of a fresh issue of Rs 1,800 crore in a price band of Rs 342-360. The issue would open on Wednesday (February 21), and close on Friday (February 23).
The company is the only hotel developer which has a 50:50 joint venture or partnership with a leading global hotel operator and is the only one of its kind in India. Further, there is no investment made by any global hotel operator in a hotel company in India.
The issue has 75 per cent reservation for QIBs, 15 per cent for HNIs and 10 per cent for retail as the company has not reported profits over the last three years. In terms of revenues, the company reported revenues of Rs 717.3 crore for the year ended March 23 and EBITDA of Rs 327.4 crore. EBITDA margin was at 45 per cent. The company has earned a negative EPS of Rs 13.88 in FY21, Rs 13.08 in FY22 and a much-improved negative Rs 0.10 for the year ended March 23.
The objects of the issue are to repay Rs 1,500 crore towards the company’s debt. This would lead to a profit in the next financial year simply because of interest costs on the retired debt being saved. The company is currently paying about 11 per cent on its debt. Post this payment, one would expect the debt rating of the company to also improve which would lead to savings and hence higher profits.
The company is comparable to its peers which include the Chalet Hotels, Indian Hotels, Lemon Tree and East India Hotels. Juniper Hotels is an asset heavy company and owns all the hotels which are currently managed by Hyatt. It would continue this model and remain an asset-owned hotel company.
The company is in the midst of expanding its hotel, Grand Hyatt at Kalina, Mumbai, which would become the largest hotel in the country post the expansion. At present, the company has 1,836 keys in seven operating hotels, has a MICE area of 1.27 lakh sq. ft. and commercial space of 1.44 lakh sq. ft.
Juniper Hotels merits subscription looking at the opportunity that exists and the single largest benefits of becoming almost a debt free company post IPO and which has had a global hotel operator as its equal partner for 25 years.
Coming to the markets in the week ahead, expect markets to remain choppy and volatile. What has happened in the week gone by is the fact that markets have weathered the storm and have made a setup from where the all-time high can be challenged. Whether they will be crossed or not is another question.
The setup has become positive and there are possibilities that if the momentum continues, they could be crossed. As is expected in markets when a new high is made, markets become even more volatile and choppy. Already markets are in a choppy condition and with possibilities of new highs they would be choppier and even more volatile. Time therefore to become cautious. Trade with stop losses and refrain from taking large positions.
The strategy for the week would be to keep one eye on the indices and the other on traded volumes. At around new highs, volumes tend to increase sharply. The direction or trend of markets gives an indication of where they are then headed. Use sharp rallies to sell into the market what you own and refrain from shorting the markets. At the same time use only sharp dips to buy and that too from the large cap space only.
Trade cautiously.
(Arun Kejriwal is the founder of Kejriwal Research and Investment Services)