Day: April 1, 2025

Cigarettes-to-hotels conglomerate ITC Ltd. announced on Monday, March 31, that it has decided to acquire the pulp and paper business of Aditya Birla Real Estate, under the name of Century Pulp and Paper on a slump sale basis.

The transaction will be done on a lump sum consideration of ₹3,500 crore on a cash-free, debt-free basis, subject to closing conditions. Century Pulp and Paper has an installed capacity of 4.8 lakh MT per annum.

Here are three key reasons why this deal is a good one:

First, it will increase ITC’s paper capacity immediately by 60% from the current 8 lakh MT per annum to 12.8 lakh MT per annum. For the December quarter, ITC’s paper business contributed to 12.6% of its overall topline of ₹17,052 crore.

Second, Century Paper and Pulp reported revenue of ₹3,375 crore in financial year 2024 and has maintained a similar run-rate over the last three years. The company has also reported an Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) of ₹500 crore. This means that the deal will be Earnings Per Share (EPS) accretive for ITC right from the first year.

Additionally, the paper business has been in a cyclical downturn for the last three to four years. A turn of the cycle will improve business metrics for the division as the deal has been done at the bottom of the cycle.

ITC is targeting synergies such as increasing its EBITDA per tonne for the paper business by 30% to 40%, its medium-term Return on Capital Employed (RoCE) to be in the high teens and debottleneck its capacity as well as increase it.

The transaction is likely to be completed in the next six months, subject to statutory approvals and conditions laid down in the Business Transfer Agreement (BTA).

Shares of ITC ended little changed on Friday at ₹410.25. The stock is down 22% from its 2024-peak of ₹528.

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Shares of debt-ridden telecom operator Vodafone Idea Ltd. are now locked in an upper circuit of 25% on Tuesday, April 1, after brokerage firm Citi opened a positive catalyst watch for a 90-day period on the stock, along with Indus Towers Ltd.

In developments over the long weekend, the government will now become the largest shareholder of Vodafone Idea after it will convert its spectrum dues into equity. The equity conversion of ₹36,950 crore, will take the government’s total shareholding in Vodafone Idea to 48.99%.

Citi has called this move a material development that will have significant positive implications. The brokerage also said that this is a major display of support by the government in a very timely manner.

The government’s move should provide significant relief to Vodafone Idea’s cash flow in the next three years and help it complete its bank debt raise, the Citi note said. Vodafone Idea has raised over ₹20,000 crore through its largest Follow-on Public Offer (FPO) last year and infusion of funds by promoters.

“Meanwhile, we also believe it will lift concerns on tariff companies like Indus Towers,” Citi said, adding that it has opened a 90-day positive catalyst watch.

Citi has a price target of ₹12 on Vodafone Idea, which implies a potential upside of 77% from Friday’s closing levels.

The brokerage has also opened a 90-day positive catalyst watch on Indus Towers, saying that it expects the resumption of dividend payouts and expects a ₹18 per share payout by April.

Citi’s positive stance on Indus Towers is also based on firm progress by Vodafone Idea on the completion of its debt raise.

“On our FY25-27E forecasts, we expect Indus Towers to deliver a core EBITDA CAGR of 10% excluding writebacks, underpinned by a tenancy CAGR of 8%,” Citi said.

Indus Towers’ implied dividend yield of 5% to 7% presents a compelling investment opportunity, according to Citi’s note.

Citi has a price target of ₹470 on Indus Towers, which implies a potential upside of 41% from Friday’s closing levels.

Macquarie believes that with underlying free cash flow generation inadequate to organically pay back obligations as per the timelines, there will be significant additional equity dilution risks for minority shareholders for Vodafone Idea.

For Indus Towers, the brokerage said that it does not see an improved tenancy outlook despite its key tenant Vodafone Idea getting a lifeline.

Macquarie has a “neutral” rating on Vodafone Idea with a price target of ₹7.

CLSA has also upgraded shares of Vodafone Idea to “outperform” and raised its price target to ₹10.

The brokerage said that following the tariff hikes, Vodafone Idea’s cash generation can fund its capex, while conversion of spectrum dues into equity takes care of repayments over the forecast period.

Out of the 21 analysts that now have coverage on Vodafone Idea, 11 of them still have a “sell” rating on the stock, while five analysts each have a “buy” and “sell” rating.

Among the 24 analysts covering Indus Towers, 13 of them have a “buy” rating on the stock, six of them have a “hold” rating, while five have a “sell” rating.

Shares of Vodafone Idea are trading 25% higher at ₹8.5, while those of Indus Towers are trading 6.9% higher at ₹357.5.

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Benchmark indices saw wild swings on Monday to end what was a dismal quarter on Wall Street a day ahead of US President Donald Trump’s reciprocal tariff announcements.

The Dow Jones recovered 900 points from the day’s low to end with gains of over 400 points. The S&P 500 and the Nasdaq also clawed back their losses from earlier in the session. Investors seeking safer bets led to a surge in Dow constituents Coca-Cola and Walmart.

US shares saw their worst quarter compared to the rest of the world since 2009.

Energy producers joined a rally in oil as Trump suggested the US may work to curtail crude shipments from Russia. A gauge of the “Magnificent Seven” megacaps extended a quarterly rout to 16% amid lingering concerns of an artificial-intelligence bubble.

It was the first time since the onset of the pandemic in March 2020 that bonds rose and stocks fell in a three-month period. The dollar, long a go-to hiding place during market selloffs, has not been acting as such lately. While the greenback saw a mild gain Monday, it suffered the worst start to a year since 2017.

The Trump administration’s mixed messaging on what new tariffs will be unveiled Wednesday and how they’ll be announced have traders flustered as they try to position around the biggest risk confronting the market in years.

Trump’s top spokesperson said the announcement would feature “country-based” tariffs, but added that the president is also “committed” to implementing sectoral duties at another time.

“Tariffs will likely continue to drive the market discussion,” said Chris Larkin at E*Trade from Morgan Stanley. “Whether tariffs are more or less rigid than expected could go a long way toward shaping the market’s near-term momentum.”

The yield on 10-year Treasuries declined three basis points to 4.22%. The Bloomberg Dollar Spot Index rose 0.2%. Gold topped $3,100 for the first time.

Ed Yardeni of eponymous firm Yardeni Research cut his year-end estimate on the S&P 500 to 6,000 from 6,400, saying Trump’s tariffs have heightened recession risks. The gauge close at 5,611.85 Monday.

“A happy outcome would be that the US would negotiate tariff reductions, but that won’t happen if the US slaps a 20% tariff on all imports across-the-board,” Yardeni said.

Amid all the concern about the economic impacts of tariffs, Goldman Sachs Group Inc.’s David Kostin now expects the S&P 500 to end the year around 5,700 versus his previous estimate of 6,200.

A stock-market signal is flashing a warning to investors hoping for a speedy recovery from this year’s sharp equity selloff.

The correlation between individual S&P 500 — measuring the degree to which they move in tandem — stands near the lowest level in 25 years even after rising this month, according to data compiled by independent strategist Jim Paulsen.

The S&P 500 briefly sank below the first ominous milestone traders were watching at the start of the session — 5,504.65, the intraday low touched on March 13. But the broad equities benchmark quickly reclaimed that level. The question now is whether it stays there.

Technical strategists also recommend keeping an eye on market breadth, looking for more evidence of washed-out conditions. A 10% or less reading in the percentage of stocks trading above their 20-day moving average would be “a good sign of a capitulation,” said Adam Turnquist, chief technical strategist at LPL Financial.

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