The big news last week was in the telecom sector, with the over $200 billion Adani Group’s telecom arm Adani Data Networks making public its decision to participate in the upcoming 5G spectrum auction. This marks the foray of the group into telecom industry. Following the news, all Adani group stocks were in green, with Adani Power Transmission, which is the group’s power arm, being the biggest gainer last week.

The stock of Adani transmission, which the country’s largest private sector power transmission company, clocked 14 per cent gains in the week ended July 15. The company owns over 18300 circuit kilometre power transmission assets. Mumbai power distribution business is housed in its subsidiary Adani Electricity Mumbai Limited (AEML), which it acquired in 2019. Qatar Investment Authority holds 25 per cent stake in AEML. Adani Transmission’s revenue grew 13 per cent in FY22 to ₹11,257 crore, compared to ₹9,926 crore in FY21. However, profit performance remained lacklustre with operating profit margin declining from 51 per cent in FY21 to 48.8 per cent in FY22, which had a cascading effect on its net profit as well. Reported profit declined by 4 per cent to ₹1,235 crore in FY22. The stock currently trades at an astronomical valuation of about 219 times its estimated FY23 earnings and 259 times its actual FY22 earnings. While there is a case for sharing some of the power transmission infrastructure like towers for telecom connectivity as well, the optimism in the stock based on this appears far-fetched.

The other significant gainer for the week was Star Health and Allied Insurance, which is a key player in the health insurance space. The stock made a good 16 per cent gain for the week ended July 15. This was helped by the company’s announcement regarding partnership with the common service centre (CSC) of the Ministry of Electronics and Information Technology. There are about 5 lakh CSCs across the country which deliver government and public services to people in the rural areas. The company plans to provide special insurance products designed to meet the needs of rural customers. This will go a long way in increasing the penetration of health insurance in rural markets. The current product offering includes travel, personal accident besides health insurance and is marketed through multiple channels such as agents, brokers, and digital channels also. Even as the company managed to grow revenue by 9 per cent in FY22 to ₹5,446 crore, its profitability took a beating, with Star reporting operating loss of ₹825 crore vis-à-vis profit of ₹268 crore in FY21. This was due to higher claims on account of Covid second wave in early FY22. The company has taken price hikes in its health insurance products which should help the FY23 performance. The stock currently trades about 55 times its estimated FY23 earnings.

The stock of KRBL Ltd, a major player in the basmati rice exports and branded food industry, also witnessed a good 11 per cent gains for the week. The company’s shares had been under pressure till mid-June after reporting weak performance in the March 2022 quarter. Revenue for the quarter was flat at ₹987 crore Y-O-Y. The company’s profits took a big hit, falling 21 per cent for the quarter at ₹109 crore. The poor performance was on account of distributor issues in the Saudi Arabian market, which the company appears to have resolved now. It is expected to report better performance in FY23 and beyond. Post the resuts driven correction, the stock has been seeing some bounce and that appears to have played out last week as well.

social-fb COMMENT NOW