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Kishore Biyani’s Future Group stocks hit the upper circuit, FRL, FEL jump 10% on Delhi HC’s nod to Future-RIL deal

Future Group share prices hit the upper circuit on Tuesday after the Delhi High Court allowed the Kishore Biyani company to go-head with Reliance Industries Ltd (RIL) deal. On Monday, Delhi HC’s division bench stayed the single judge’s order passed which had directed Future Group to maintain status quo till further orders with regard to its Rs 24,713-crore deal with Reliance Retail. Future Retail Ltd shares hit 10 per cent upper circuit at Rs 80.50, Future Enterprises Ltd at Rs 11.78 apiece, Future Market Networks Ltd at Rs 19.15 apiece, Future Lifestyle Fashions Ltd at Rs 91.35 apiece, and Future Supply Chain Solutions Ltd at Rs 99.05. Similarly, Future Consumer Ltd shares were locked into 10 per cent upper circuit at Rs 8.67 apiece.

The legal battle involving Amazon, Future group & Reliance continues to influence the stock prices of the above mentioned companies leading to uncertainty and high volatility, says AR Ramachandran, Co-founder & Trainer, Tips2Trade. He advises investors to use every uptrend to exit Future group stocks as this legal battle could stretch out for a very long time. Ramachandran told Financial Express Online that currently, Rs 83-90 remains a strong resistance zone for Future Retail Ltd.

Reliance Industries Ltd (RIL) share price gained as much as 2 per cent to Rs 1,990 apiece on BSE. So far in the trade, 3.43 lakh have been traded on BSE, while 50.80 lakh shares have exchanged hands on the National Stock Exchange (NSE). Following this order from Delhi HC, now Future group can go ahead with the formalities related to the completion of the transaction. So far, the Competition Commission (CCI) and the Securities and Exchange Board of India (Sebi) have given their approval for the FRL-RIL deal. This deal now requires the approval of the National Company Law Tribunal (NCLT), which got stalled by the single judge’s February 2, 2021 order.

In the noon deals, BSE Sensex was trading 364 points or 0.71 per cent higher at 51,713, while the broader Nifty 50 index surged 110 points or 0.72 per cent to 15,225 levels.

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Mahindra & Mahindra shares hit 10% upper circuit as investors react to positive Q3 results

Mahindra & Mahindra’s (M&M) share price soared 10% to hit the upper circuit on Monday morning. The up-move in the stock came just days after the company reported its fiscal third-quarter earnings where the company reported a 40% on-year jump in net profit. Revenue of the firm stood at Rs 14,057 crore, up 16% from the same period last year. Domestic brokerage firms see positives in the company’s results with many increase their target price for the stock by as much as 20%. Shares of the company were currently trading at Rs 924 per share.

Positives up ahead

Analysts at Motilal Oswal said that M&M’s third-quarter performance was driven by good performance in both, Tractors as well as Autos businesses. “Furthermore, it has guided for an almost 90% reduction in international subsidiary losses in FY22E, driven by the completion of phase-1 of the capital allocation exercise,” they added. The brokerage said that M&M is the best rural proxy. “MM has one of the highest exposures to the rural markets (~65% of volumes), which would likely be less impacted by the on-going COVID-19 disruption. According to our estimates, rural markets should contribute over 60% to revenues, ~80% to core PAT, and ~70% to SOTP in FY22E,” they added.

So far in February, the stock price has jumped a massive 22%. Domestic brokerage and research firm Prabhudas Lilladher said that M&M has a sharp focus and execution on capital allocation to help prioritise investments and returns. Further, the company’s focus beyond tractors is also being noted as a positive. The move has so far resulted in farm machinery revenues growth of 48% on-year in the current fiscal, according to Prabhudas Lilladher. The report highlighted that M&M has the lowest system stock since the first quarter of fiscal 2018 both in tractors and Auto segment.

Management’s words

M&M’s management y expects the industry to log ~20% on-year growth in the tractor segment in the current fiscal year. Current production run rate for Thar is at nearly 3,000 units per month and would be ramped up to 4,000 units per month by April-May, the management said. Cumulative bookings as of date are at over 39,000. Further, they added that the SsangYong deal is moving forward, but toward the PrePackage scheme and not the ARS scheme under the bankruptcy court.

Target price

ICICI Direct expects sales, adjusted PAT to grow at 20%, 40% CAGR, respectively, in FY21E-23E. The brokerage firm has increased its target price to Rs 1,000 per share. Prabudas Lilladher has raised target multiples of core business to 18x (from 16x) to factor in faster than expected turnaround in subs, while the target price has been increased to Rs 1,011 per share. Analysts at Motilal Oswal have a target price of Rs 1,040 per share. HDFC Securities has the most modest upgrades with an ‘Add’ rating and a target price of Rs 880 apiece.

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RIL shares jump 3%, Future Retail, Future Enterprises hit upper circuit post SEBI nod on RIL-Future deal

Reliance Industries Ltd (RIL) share price surged over 3 per cent to Rs 2,119.80 apiece in a strong trade on BSE today. While shares of Future Retail Ltd and Future Enterprises Ltd hit their respective 5 per cent upper circuit of Rs 81.35 apiece and Rs 12.01 apiece, respectively. This surge in share prices was seen after the capital market regulator SEBI approved the Future Group’s proposed multi-billion dollar deal with RIL. Yesterday, market regulator gave a nod to Future Group’s scheme of arrangement and sale of assets to Reliance Industries. Moreover, Bombay Stock Exchange (BSE) also granted its ‘no adverse observation’ report to the Rs 24,713-crore deal. Last year in August, Reliance Retail Ventures Ltd (RRVL) announced plans to acquire the retail and wholesale business and the logistics and warehousing business from the Future Group.

Aditya Kondawar, Founder and COO, JST Investments told Financial Express Online that Sebi’s nod came as a dismay to Amazon who had written several letters to the market regulator and other regulatory agencies to not grant the deal a no-objection certificate. The Securities and Exchange Board of India has allowed the deal with some riders.

Since the middle of September 2020, RIL shares have corrected nearly 12 per cent. Last year in March, RIL hit a 52-week low of Rs 867.82 apiece led by a global sell-off due to COVID-19 pandemic. The Sebi’s nod to Future Retail and Reliance Industries Ltd deal has been a blessing in disguise for Future Retail investors, as AR Ramachandran, Co-founder & Trainer, Tips2Trade, told Financial Express Online that it allows them to have a better exit from the stock. “A close above Rs 82.5 could lead to a rally up to Rs 94 per share and even to Rs 100 per share in the coming sessions. While Rs 70 will act as strong support for Future Retail,” he added.

Meanwhile, S&P BSE Sensex was ruling at a record high of 50,184.01, up nearly 400 points, while the broader Nifty 50 index rallied to a fresh all-time high of 14,753.55.

“Company shall ensure that the shares of the transferee entity issued in lieu of the locked-in shares of the transferor entities are subjected to lock-in for the remaining period post scheme,” Sebi said. It also added that it was observed that there were certain ongoing litigations/arbitration/legal proceedings against the draft scheme.

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The limited upside in markets after the rally, Nifty to be at 15,000 by December 2021: Bofa Securities

After the strong rally since April, there is a limited upside in Indian equities and the markets will end 2021 with a low single digit gain, an American brokerage said on Wednesday.

Bofa Securities said it is ‘not as bullish’ and gave a target of 15,000 points for the 50-share benchmark Nifty by the end of the newly started year.

Markets have rallied by 80 per cent since April after a heavy 40 per cent correction following the announcement of the COVID-19-related restrictions. Many analysts, including RBI Governor Shaktikanta Das, have raised concerns over the over-heating in the markets.

The benchmark Nifty was trading 0.6 per cent up at 14,607 points at 1259 hrs on Wednesday. ”We are giving a target of 15,000 on the Nifty, which means there is a limited upside now. We are still bullish, but not as bullish,” its India equity strategist Amish Shah told reporters. He mentioned the strong rally witnessed by the markets in the immediate past for its more conservative view on the markets.

The brokerage is overweight on sectors including financials, metals and steel, and industrial, he said, adding that information technology, energy, consumer discretionary and auto are the sectors on which it is underweight.

Within the financial sector, Shah said the brokerage feels the banks are adequately provided for the possible asset quality reverses and called the prediction of a jump in the dud assets by RBI in its biannual Financial Stability Report as conservative. He said the valuations of banking and financial companies are also lower from the historical highs which make it an attractive bet, and adde d that there is also a chance of higher credit growth fueling earnings for select lenders which will make it an attractive bet.

On the metals and steel and industrials sectors, the call is driven more from a likely surge in capital expenditure from the government, real estate and infrastructure sectors which we should be seeing, he said.

The upcoming budget will have an expansionist bias in the fiscal policy while the inventory levels will dip in the realty sector, leading to a surge in new projects, he said. Shah, however, said that a full private sector capital expenditure cycle recovery is still two years away and it will be select sectors which will be seeing a growth in investments in 2021.

The target on the benchmarks also assumes a net addition of USD 10 billion to the foreign portfolio flows into the country, over and above the USD 22 billion in 2020, he said.

The foreign flows will continue on the back of stimulus measures and easy monetary policies in the developed world, he said, adding that Joe Biden will continue with such measures in the US on taking charge.

Shah also said that the government will continue on its reforms agenda in the new year as well and specifically pointed out power sector where there can be greater private sector play in distribution.

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