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Sectors in Focus

Major Corporate Developments This Week

1. Newgen Software Technologies secured additional work order from global management consulting firm.
2. Happy Forgings bagged order worth Rs. 400 cr for supply of fully machined components for SUVs.
3. KPI Green Energy - company's subsidiary bagged a 1.5 MW solar power project.
4. TVS Motor Company - company said it has acquired stake in India Foundation for Quality Management.
5. PSP Projects is in receipt of new Work Order worth Rs. 630.90 Crores (excluding taxes) for Construction of Gati Shakti Vishwavidhyalaya at Vadodara for Rail Vikas Nigam Ltd in Government Category. The project is to be completed within a period of 30 months.
6. RITES & AD ports signed agreement for logistics infrastructure development.
7. Bharat Electronics - PSU firm inked a contract worth Rs. 2,167.5 crore with the Indian Navy to supply an indigenously designed EW (electronic warfare) suite for warships.
8. Tata Power signs agreement worth Rs. 105 crores with Tata Communications - Tata Power Renewable Energy Ltd (TPREL), has signed a power delivery agreement with Tata Communications for an 18.75 MW AC group captive solar power plant.
9. UPL: Fitch downgrades UPL Corp to BB+ from BBB-ve; outlook negative.
10. Adani Enterprises: Company's unit Mumbai Travel Retail completes incorporation of wholly-owned subsidiary OIFZCO.
11. Fineotex: Board meeting to consider Fund Raising via issue of warrants or debt securities
12. BPCL: Company commences pilot project to gain experience in handling hydrogen for automobile sector.
13. Dilip Buildcon: Company's joint venture with Vijay Kumar Mishra Construction gets order worth Rs 412.9 crore.
14. Tejas Networks: Company has received incentives worth of Rs 27.8 crore under PLI scheme .
15. KPI Green: Company said its wholly-owned subsidiary has received a new order for a 1.5-MW solar power project.

TechnoFunda Investing Quote from Legends -

A very profound quote by Charlie Munger, the real message in the quote is to be patient with our investments. Usually, investors respond to rapid market movements with active buying and selling; focusing more on the latter and compromising on sound investment strategies that can deliver good returns in the long run. Also, it is interesting to note that the term ‘waiting’ in the quote can be well explained with the ‘Power of Compounding’ where regularly investing can help you achieve your financial goals or ‘the big money’ as what is quoted.

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TechnoFunda 101 - Power Capsules

Learn technical as well as fundamental concept in a simple way

Understanding Leverage Ratios

A leverage ratio is like a financial detective tool. It helps us figure out how much debt a company is using to finance its activities and how that stacks up against its equity or assets. It's like comparing the portion of a house bought on mortgage versus what's already paid.

Why It Matters:

Understanding leverage ratios is crucial because they affect a company's ability to weather tough times. It also affects how much profit might swing with changes in sales. More debt means higher risk, but it also has the potential for higher returns if managed well.

Breaking Down the Key Ratios:

• Debt-to-Equity (D/E) Ratio: This is the ratio of total debt to total shareholders' equity. It shows us how a company is split between debt and equity. If a company has a D/E ratio of 1, it means it uses equal parts of debt and equity.

• Equity Multiplier: Found by dividing total assets by total shareholders' equity, the equity multiplier gives us an idea of how a company’s assets are financed. Higher numbers point to more debt.

• Debt-to-Capitalization Ratio: This shows the proportion of a company's capital that comes from debt. It takes into account short-term and long-term debt compared to the company’s overall capital.

• Interest Coverage Ratio: Operating income divided by interest expenses. This tells us how comfortably a company can pay interest on its outstanding debt. Higher is better, meaning the company earns well over its interest obligations.

Understanding 'Good' Leverage:

There isn't a one-size-fits-all 'good' leverage ratio. For instance, a utility company might have a higher acceptable leverage ratio compared to a tech start-up because it has more predictable cash flows to cover its debts.

What Investors Should Do with Leverage Ratios:

Use these ratios to:

• Compare companies in the same industry.
• Track changes in a company's debt usage over time.
• Evaluate the risk of investment based on a company's financial leverage.

In Summary:

Think of a company like a smoothie blend. Equity is fresh fruit (owned resources), and debt is like ice (borrowed resources). Too much ice makes it watery, too little and it's too thick. Leverage ratios help us find that perfect blend for a delicious investment smoothie.

Remember, leverage isn't inherently bad or good — it's all about how a company manages it.

🚀 My Content For This Week 🎬 YouTube: DEFENCE SECTOR ANALYSIS​ ​ 📋 Twitter: Vivek Mashrani, CFA @MashraniVivek 🎯 It was great connecting with Investing Community at #TIA2020 Chennai.....more than 700+ investors sitting for whole day... Equity Investing has great future for India You can download my presentation here: https://technofunda.co/tia2024 Thanks everyone... #technofunda 8:19 PM • Feb 17, 2024 8 Retweets 83 Likes Read 8 replies ​

🎙️ My Weekly Podcast For You

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Keep Compounding...

Vivek Mashrani, CFA Founder, TechnoFunda Investing

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