FMCG & Banking Stocks Underperform

Fri, 23 Sep 01:30 pm

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Indian Indices have continued to remain listless during the post-noon trading session amid mixed global cues. Barring FMCG & banking stocks, major sectoral indices are witnessing buying interest with stocks from realty, oil & gas leading the pack of gainers.

The BSE Sensex is trading lower by 29 points (down 0.1 %) while the NSE Nifty is trading lower by 8 points (down 0.1%). The BSE Mid Cap index is trading up by 0.6% and BSE Small Cap index is trading higher by 0.7%. Gold prices, per 10 grams, are trading at Rs 31,219 levels. Silver price, per kilogram is trading at Rs 47,198 levels. Crude oil is trading at Rs 3,068 per barrel. The rupee is trading at 66.62 to the US$.

As per an article in Business Standard, Larsen & Tourbo has bagged an order from Vietnam Border Guard for design & construction of high speed patrol vessels. The contract is valued at US$ 100 million.

The contract also provides for L&T to transfer design and technology along with supply of equipment and material kits for construction of follow-on vessels at a Vietnam shipyard. The contract provides for supply of 12 vessels. These would be delivered over 30 months.

In keeping with the government of India's Make in India policy, complete design and engineering of the vessels will be undertaken at L&T's dedicated Warship Design Centre with the vessels being built at L&T's state of the art Kattupalli Shipyard, off Chennai. The company also recently bagged orders worth Rs 17.26 billion across various other business segments.

Diversification continues to help L&T (Subscription Required) negotiate and get better terms and margins for projects. Apparently, this is because it is less desperate to win orders as compared to a company which are present in only a couple of sectors. Its reputation, extensive technical prowess, and large skilled workforce have enabled L&T to command a certain premium from customers and vendors alike. Whether, further addition to these new projects provide a cushion to its profitability will be an interesting thing to watch out for going forward.

Meanwhile, shares of L&T Technology Services Ltd, a subsidiary of L&T debuted at a 4.7% premium on the stock market today. The issue was subscribed 2.52 times earlier this month.

The category reserved for institutional investors was subscribed 5.01 times, while the retail investor and high net-worth individual categories were subscribed 1.75 and 1.03 times, respectively. L&T sold a 10.2% stake in the subsidiary, which will fetch the company Rs 8.9 billion at the upper end of the price band.

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Moving on to the news from IT sector. As per an article in a leading financial daily, Wipro Consumer Care and Lighting, part of the Wipro, is buying 100% of Zhongshan Ma Er Daily Products Limited. It is a Chinese Fast Moving Consumer Goods (FMCG) company.

Reportedly, the acquisition will see Wipro's consumer care arm buy the entire stake of shower and bath goods maker Zhongshan Ma Er Daily Products. Post-acquisition, Wipro Unza, the South East Asian arm of Wipro Consumer Care and Lighting, will touch an annual run rate of close to RMB 1 billon. However, the transaction is subject to regulatory approvals.

Recently, Wipro's FMCG arm also bought Singapore's skin care brand Bio-essence. Apparently, the latest move highlights the foray it has made recently into one of the world's most sizable and evolving consumer markets. Simultaneously, it has also expanded its portfolio in India by acquiring brands such as Glucovita, Chandrika, Aramusk and North-West Switches.

For Wipro's consumer segment, overseas markets constitute about 51% of its total sales currently. The figure is expected to touch 55% with the recent acquisition, the reports noted.

Going forward, whether Wipro continue to expand its footprint into other emerging markets overseas through mergers and acquisitions will be the key thing to watch out for.

Wipro was trading down by 0.3% at the time of writing.

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