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MOSL: Morning India (24/April/20): 1. Retail (Control the controllable, Survival of the fittest); 2. India Strategy (Insight into market-cap changes); 3. Technology; 4. Bharti Infratel; 5. Alembic Pharma; 6. Ma

MOrning India (24/April/20): 1. Retail (Control the controllable, Survival of the fittest); 2. India Strategy (Insight into market-cap changes); 3. Technology; 4. Bharti Infratel; 5. Alembic Pharma; 6. Mahindra CIE; 7. India Life Insurance; 8. EcoScope

 

 

Today’s top research idea

Retail: Control the controllable; Survival of the fittest

• Expect cost of retailing to fall 15-20pp, led by cost-cutting in marketing/advertising activity, on account of variable rental costs and savings from closed stores.
• Even rental cost is expected to see some waiver given the negotiations underway, as per our channel checks. Hence, the cost of retailing can be further reduced by 5-7pp, in effect reducing cash burn to 10-15% of revenue during lockdown.
• Inventory could be a key pain point once normalcy has returned as inventory typically comprises 30-45% of retailers' balance sheets (FY19).
• The extent of the impact on each company would depend on: a) the number of private labels and brand ownerships, b) astute inventory management, and c) the extent of inventory holding capacity.
• However, it may be wise to bet on players with sound execution capabilities and stable balance sheets, which could take advantage once the cycle revives. We prefer TRENT, ABFRL, and VMART.

Piping hot news

Govt decides to suspend up to 1 year IBC provisions that trigger fresh insolvency proceedings: Report

In a major relief for corporate borrowers hit hard by the coronavirus pandemic, the government has decided to amend the insolvency law to suspend up to one year provisions that trigger insolvency proceedings against defaulters, according to PTI sources. Further, the sources said amendments to the IBC (Insolvency and Bankruptcy Code) would pave the way for banks to restructure loans.