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MOSL: Morning India (01/October/18): 1. Sun Pharmaceutical – ART (Significant rise in related-party sales); 2. Phoenix Mills (Annual Report Update); 3. EcoScope (Monsoon season ends with 9% deficit)

MOrning India (01/October/18): 1. Sun Pharmaceutical – ART (Significant rise in related-party sales – at 30% of revenue); 2. Phoenix Mills (Organic and inorganic opportunities driving aggressive growth); 3. EcoScope (Monsoon season ends with 9% deficit)

 

Today’s top research idea

Sun Pharmaceutical FY18 (ART): Significant rise in related-party sales – at 30% of revenue

• Sun Pharmaceuticals' FY18 annual report highlights a significant increase in (a) related-party transactions - sales to entities controlled by KMP at INR79.9b (30.2% of consolidated revenue) from INR0.1b in FY17 and (b) loans and advances given to non-related parties at INR23.3b from INR10.4b in FY17.
• Investments in non-core assets stood high at INR191b, 50% of NW (FY17: INR169.1b). Yield on non-core investments was low at 3% and borrowing cost stood at 5% (gross debt at INR107.8b v/s INR100.2b in FY17), leading to a negative carry.
• Furthermore, deterioration in cash conversion days to 255 (FY17: 231) led to a decline in operating cash flow by 49% to INR34.3b. Intangible assets stood high at INR107.2b (28% of NW), mainly due to acquisitions.

Piping hot news

IL&FS to raise Rs 15000 crore, hike borrowing limit to Rs 35000 crore

• Infrastructure Leasing & Financial Services Ltd (IL&FS), whose recent debt defaults sparked concern about contagion in the financial markets, secured a lifeline after shareholders approved its plans to raise money through debt and equity. Stockholders green-lit IL&FS’s plans to raise as much as Rs 15,000 crore through a non-convertible debt issue, hike the firm’s borrowing limit by 40% to Rs 35,000 crore and increase its share capital to enable a rights offering, the company said in a filing.