Have heard a lot of noise around IT sector margins suffering due to attrition.
Wanted to share some data and personal experience. Note that this only applies to the multinational companies. Don't apply it to all Indian IT companies.
Hiring people who are outside of the usual pay bands is very frequent for these multinational cos. The way companies handle this is to structure pay in a way that first year salary is higher than the current salary of employee.
The salaries then fall off, unless employee performs very well (in which case they deserve the hike).
What is the seller thinking? What is their thesis? It always helps to keep track of what can go wrong with the company so that when it actually goes wrong, you can act on it and are not affected by the myriad biases that humans have.
#idfcfirstb first, coz first is in the name. 1. Now that SA rates are not that high, casa growth can slow down. Could slow down to below 25% where bank is unable to maintain casa ratio while growing AUM at guided rate of 25%.
2. Too many landmines hidden in balance sheet. Wave 2 stress could be higher than guidance. If we annualize q1 numbers, stress in retail could be > 5% of book.
Infra book is landmine of its own. First DHFL, Reliance capital, now Vodafone Idea. Where does it stop? Maybe it doesnt
Every investor (including yours truly) makes the mistake of focussing on only the headline numbers and ignoring the underlying transformation. Taking lack of profit to be lack of numbers is akin to thinking that tip of iceberg represents entirity of the ice mass.
It is also a bit risky to assume that one cannot make money from high risk creditors. If that were the case, then companies like Bajaj finance would not exist. No, what is needed is the ability to price the risk properly.
2.5% credit costs on 9% incremental NIMs is easily absorbed. The underwriting quality is not reflected in credit costs, it's reflected in incremental credit costs adjusted NIMs.
I studied #camlin#fine#sciences for past few weeks. Does not deserve full thread imo so only sharing some key take-aways.
few things i like:
lot of triggers: more efficient manufacturing (lot of capex in Dahej), plans to forward integrate all catechol and hydroquinone production (higher Gross margins).
Manufacturing becoming more efficient incrementally(dahej instead of italy and other geopgraphies), the battery play (Lockheed contract) which definitely can be huge. Fermentation company that they are aquiring for omega 3 fatty acids production
There's a couple of key changes happening in the consumer facing FMCG brands which I think investors need to taje notice of and think about. Investors of #itc#hul#britannia need to think carefully about this. 👇👇
1️⃣ The retailer is becoming ecommerce heavy. Ex: I buy all my grocery on Tata big basket or Amazon. To me this represents a change in power dynamics across the value chain. The ability of Amazon or big basket to bargain is far higher than an offline only limited space distributor
Or a mom and pop front end kirana store. Now how fast this shows up in numbers and depresses working capital for brands is a function of market share of e-retail vs that of offline retail. I'd definitely track this if I were invested in the consumer facing brands.
Let us estimate the ROIIC for #Pix transmissions. See screener.in page for details on the capex that is ongoing.
To be more precise, ill estimate the ROCE for incremental capital deployed
1. 60 cr capex happening. 50% capacity expansion. 2. EBIT of 96cr in FY21. So incremental EBIT of 48cr assuming no margin expansion. 3. 150cr Working capital for FY21. 75cr for incremental sales assuming no change in WC position. 4. 48/(60+75) = 35.5%
FY21 ROCE is 28%.
Time for a thread on things I have learned in last 1 year. My key takeaways, and also mistakes I made.
If you like the thread, please retweet this tweet so it can benefit maximum investors.
1⃣ Predicting nifty levels and what broader markets will do is an exercise in futility
Nobody can do it consistently. This is because there are too many random variables (probabilistic outcomes) which control the level of nifty including but not limited to:
investors ease of access to money, federal bank action across the world, profitability of cos, demand, supply, extent of formalisation of economies, expectations of aforementioned factors and very broadly, the extent of innovation coming into the market
"Upsurge in the valuation of API companies is also because of formulation companies stocking up APIs. (~ to defensive buying of semiconductors by consumer electronics companies) “If earlier they’d stock for 3m , they began stocking for 6m-12m"
Correct comparison is to nearby countries with similar per capita incomes. India standa out head and shoulders above everybody else. Don't compare to China Japan uk and usa or russia. I am hopeful about the future.
Some CMS revenue postponed due to complex nature of projects (more on that later).
2⃣ Medium term guidance of 15-20% topline growth and 20% EBITDA margins
In b/w lines:
What we need to understand is that this is a very lumpy biz, even YoY there wont always be 15% growth.
Prices for Generic APIs are as per market movements. CMS revenues are lumpy. How can a management predict when will the Patent protected innovator molecule get commercialised? They simply cannot. With unit 3 ramping up & CMS revenue coming up, i fully expect 20% EBITDA margins
Look again at that dot. That's here. That's home. That's us. On it everyone you love, everyone you know, everyone you ever heard of, every human being who ever was, lived out their lives.
The aggregate of our joy and suffering, thousands of confident religions, ideologies, and economic doctrines, every hunter and forager, every hero and coward, every creator and destroyer of civilization, every king and peasant, every young couple in love, every mother and father,
...hopeful child, inventor and explorer, every teacher of morals, every corrupt politician, every "superstar," every "supreme leader," every saint and sinner in the history of our species lived there--on a mote of dust suspended in a sunbeam.
1. Credit costs of 2.5% in FY22, 2% in steady state.
In b/w lines: Bank has incremental NIMs of >9% which will support 2% credit costs. 1800cr provisions taken in Q1 represent a very conservative approach
A 850cr mumbai toll road account slipped into NPA due to covid lockdowns. There were partial payments. Expect it to come out of NPA post covid wave. VI exposure credit costs not included in 2.5% guidance.
2. Runway for growth is long
In b/w lines: Can grow loan book at 25% for a long time. Expecting 18-20% ROE from retail lending alone in steady state. CASA will also continue to grow enough to support retail lending needs. Enough cash right now.
#lauruslabs Q1 results key takeaways: 1. Diversification away from ARV
In b/w lines:
Currently 85% of filings in US/EU are ARV. This represents 11B$ of market opportunity.
But products under development (which represent 37B$ of opportunity) are skewed 80/20 for non-arv.
2. CDMO segment growth can surprise on upside.
In b/w lines:
the 195cr revenue in Q1 did not contain any one-offs. This represents a very good growth YoY growth of ~100%. Generally Q4 is strongest and Q1 this time was even higher. Only 4 products commercialised.
Huge potential for the 40+ products in pipeline. expecting this to drive growth in US and EU markets.