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Tesla Power India Launches ReStore: India's Premier Refurbished Battery Brand

Tesla Power India Launches ReStore: India's Premier Refurbished Battery Brand

Tesla Power India Launches ReStore: India’s Premier Refurbished Battery Brand

In a groundbreaking initiative towards fostering self-reliance, skill development, and advancing green technology, Tesla Power India proudly introduces ReStore, India’s inaugural refurbished battery brand. Headquartered in Gurgaon, Tesla Power India Private Limited, with its global headquarters in Delaware, USA, unveils a cutting-edge Electro-Chemical Battery Enhancement Process (EBEP) set to revolutionize the battery industry.

Strategic Expansion: 5000 “ReStore Battery Refurbishing Centers” by 2025:
In a significant stride, Tesla announces plans to establish 5000 “ReStore Battery Refurbishing Centers” across India by 2025, with over 500 centers already operational nationwide. This strategic move underscores Tesla Power India’s commitment to “Atmanirbhar Bharat,” “Skill India,” “Circular Economy,” and “Sustainable Environment.”

Proprietary Technology: Electro-Chemical Battery Enhancement Process (EBEP)
The proprietary EBEP technology marks a breakthrough in battery refurbishment, significantly extending the lifespan of various Lead acid batteries, including tall tubular inverter batteries and UPS VRLA batteries. This cost-effective solution enhances battery life by 1 to 2 years, providing customers with refurbished batteries under the brand name “ReStore” at nearly half the cost of a new inverter battery, accompanied by a warranty.

Compliance with Environmental Guidelines: Battery Waste Management Rules 2022:
Aligned with the “Battery Waste Management Rules 2022,” as recognized by the Central Pollution Control Board (CPCB), Tesla Power India embraces battery refurbishing as an approved business activity. This strategic move is anticipated to give rise to approximately 30,000 battery refurbishment centers, generating employment opportunities for over 1 lakh individuals. Addressing the annual disposal of around 10 crore lead acid batteries, costing Rs.40,000 crore to the Indian economy, ReStore’s launch mitigates economic strain and environmental hazards associated with improper disposal.

Mr. Kavinder Khurana, Managing Director’s Perspective:
Mr. Kavinder Khurana, Managing Director of Tesla Power India, expresses his enthusiasm for ReStore, stating, “It’s not just a refurbished battery brand; it’s a solution for employment generation in a new battery service industry. By offering affordable refurbished batteries with performance warranty, we aim to redefine the market and train micro and small entrepreneurs on our game-changing Electro-chemical battery enhancement process (EBEP) technology.”

ReStore: Pioneering Sustainable Solutions in Energy Storage:
ReStore emerges as the first refurbished battery brand in India, empowered by Tesla Power India. This launch reaffirms the brand’s commitment to delivering quality, reliability, and cutting-edge technology to the Indian market. Tesla Power India’s dedication to creating a positive impact on the environment, economy, and society is evident through ReStore’s offering of affordable and sustainable battery solutions, poised to drive significant change in the energy storage sector and beyond.

Conclusion:
Tesla Power India’s launch of ReStore not only introduces India’s premier refurbished battery brand but also signifies a commitment to sustainable practices, skill development, and environmental responsibility. With the innovative Electro-Chemical Battery Enhancement Process (EBEP) and plans for widespread expansion, ReStore is poised to revolutionize the battery industry, contributing to both economic growth and a greener future for India.

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Strategic Partnerships Fuel One97’s Financial Turnaround

RBI Introduces Revisions in Redemption Funds and CP Buyback Norms

RBI Introduces Revisions in Redemption Funds and CP Buyback Norms

RBI Introduces Revisions in Redemption Funds and CP Buyback Norms

On January 3, 2024, the Reserve Bank of India (RBI) implemented changes to the norms governing redemption funds and buyback of commercial papers (CPs). This move primarily impacts CPs and non-convertible debentures (NCDs) with original or initial maturity up to one year, reflecting adjustments based on market feedback.

Buyback Timelines Altered: Seven-Day Window Introduced:
Under the new guidelines, issuers of CPs are now permitted to initiate buybacks only after seven days from the date of issue. This represents a departure from the previous 30-day restriction outlined in the Operational Guidelines for Commercial Paper issued by the Fixed Income Money Market and Derivatives Association of India in 2020.

Uniformity in Buyback Offers Ensured:
The revised directives emphasize that the buyback offer must be extended uniformly to all investors in a specific issue, ensuring identical terms and conditions. Investors retain the option to either accept or reject the buyback offer, enhancing transparency and fairness in the process.

Pricing and Information Dissemination Guidelines Established:
According to the updated norms, buybacks of CPs and NCDs are mandated to be executed at the prevailing market price. Issuers are also required to promptly inform the Issuing and Paying Agent (IPA) and Debenture Trustee about buyback details on the execution date, with payments routed through the IPA.

Redemption Fund Handling: Timely Submission to IPA Required:
Guidelines stipulate that issuers must make funds for redemption available to the IPA by 3:00 P.M. on the redemption date, shifting from the previous 2:00 P.M. requirement. This aligns with the norms set by the Fixed Income Money Market and Derivatives Association of India.

Effective Date and Applicability:
The RBI has announced that these directions will be applicable to all entities dealing in CPs and NCDs with original or initial maturity up to one year. The revised norms are scheduled to come into effect from April 01, 2024, allowing stakeholders a transition period to adapt to the changes.

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OPEC's Crucial Role in 2024: Navigating Production Policies Amidst Challenges

OPEC's Crucial Role in 2024: Navigating Production Policies Amidst Challenges

OPEC’s Crucial Role in 2024: Navigating Production Policies Amidst Challenges

Introduction:
Recent years have unfolded with unprecedented geopolitical events, including Russia’s invasion of Ukraine in 2022 and Hamas attacks on Israel in 2023. These events, coupled with ongoing challenges such as tensions between China and Taiwan and North-South Korea dynamics, have raised concerns about potential disruptions in oil markets. However, despite the tumultuous events, the oil market has displayed resilience, with the benchmark Brent oil price closing lower in 2023.

Shifting Dynamics: Shale Revolution and OPEC’s Response
The rise of the U.S. shale sector from 2010 disrupted traditional oil market dynamics, leading to Saudi Arabia’s initiation of the 2014-2016 Oil Price War to undermine the U.S. shale industry. The unexpected resilience of the U.S. shale sector created a new normal in oil price dynamics, prompting the establishment of an informal oil price range by the U.S. to maintain stability.

Political-Economic Nexus: Informal Oil Price Range and Global Implications:
The U.S. informal oil price range, from US$40-45 per barrel (pb) to US$75-80 pb, is rooted in political and economic considerations. The correlation between oil prices, election outcomes, and consumer spending on gasoline plays a crucial role, historically influencing U.S. presidential election results. Meanwhile, China’s role in the global oil market has evolved, and its economic vulnerabilities are linked to its reluctance to escalate conflicts in the Middle East.

Economic Interplay and Future Outlook:
Navigating the uncertainties of 2024 requires considering the delicate balance between global geopolitics, oil markets, and economic factors. The strategic responses of major players, particularly the U.S. and China, will continue to shape the trajectory of oil prices and the broader global economic order.

According to the Asset & Wealth Management Investment Strategy Group (ISG) at Goldman Sachs, the price of a barrel of oil is expected to trade between $70 and $100 for most of 2024. This forecast reflects slowing oil demand growth, tighter financial conditions, and elevated U.S. recession odds. Short-term volatility is anticipated due to macroeconomic uncertainties and heightened geopolitical risks, particularly amid ongoing OPEC+ negotiations on 2024 production quotas.

OPEC’s Role in 2024:
OPEC’s production policy and discipline, especially from key producers like Saudi Arabia and Russia, are crucial in supporting the oil price path in 2024. Despite the challenging task of balancing the market, both countries have committed to production cuts, surprising the market with their implementation.

Impact of Israel-Hamas Conflict:
The Israel-Hamas war introduces potential oil price volatility. If the conflict escalates, there may be sharp but transitory increases in spot oil prices. Possible disruptions include tighter oil sanctions on Iran, attempts to block the Strait of Hormuz, an Arab oil embargo, and production cuts by other Arab producers. However, the dynamics of the global oil market have changed since the 1970s, and the overall impact of such conflicts on oil prices has been neutral in recent years.

Conclusion:
As we navigate the complexities of 2024, the interconnectedness of global geopolitics, oil markets, and economic considerations will continue to shape the future of oil prices. OPEC’s decisions, the evolving role of major players, and the resolution of geopolitical conflicts will play pivotal roles in determining the stability and direction of the oil market in the coming year.

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Budget 2024 Anticipations: Real Estate Industry's Wish List

Budget 2024 Anticipations: Real Estate Industry's Wish List

Budget 2024 Anticipations: Real Estate Industry’s Wish List

Budget 2024 Anticipations: Real estate consultancy firm Knight Frank India reported on Wednesday that the sales of residential properties priced at Rs 50 lakh and below declined to 97,983 units last year from 1,17,131 units in 2022. Consequently, the share of affordable homes in total housing sales has decreased to 30% from 37%.

The decline in sales of affordable homes is attributed to subdued demand due to the combined impact of rising property prices, increased home loan rates, and the disproportionately adverse effects of the pandemic in this category, according to the consultant.

On the contrary, JLL, in its report, anticipates an improvement in affordability for home purchases in 2024. This expectation is based on the anticipation of a 60-80 bps repo rate cut in 2023, which is expected to keep buyers’ affordability within a comfortable range and sustain market momentum in the coming year.

During this period of various growth figures, the industry expresses its expectations, hoping for them to be addressed in the upcoming Union Budget scheduled for presentation on February 1st. The upcoming budget is an interim one, typically presented when there’s insufficient time for a full budget, often due to upcoming elections or the end of a government’s term, serving as a bridge until the new government presents a full budget.

The real estate industry routinely presents an ambitious wish list to the Finance Ministry before the annual Union Budget.

Anticipations for Budget 2024: Real Estate
Anuj Puri, Chairman of Anarock Group, stated that the residential real estate market experienced extraordinary growth in 2023, with record-high new launches and home sales. In 2023, sales of housing in the top seven cities reached an all-time high of about 4.77 lakh units, while sales of newly launched homes reached almost 4.46 lakh units. Puri added that the outlook for the real estate industry in 2024 is positive, but the results of the upcoming general elections will also significantly impact the demand for and growth in residential real estate.

Industry status for the housing sector and single-window clearance for housing projects remain standard expectations this year as well. However, given the generally slow pace at which issues in the real estate sector are resolved, these expectations persist, though they remain as urgent as ever. That said, reasonable expectations are necessary for the interim budget before the general elections.

Maximum Deduction for Home Loans (under Section 24)
It is imperative to raise the Rs 2 lakh tax rebate on home loan interest rates provided under Section 24 of the Income Tax Act to at least Rs 5 lakh. This move could stimulate a more robust housing market, especially in the budget homes segment, which has seen a decline in demand since the pandemic.

Decisive Boost for Affordable Housing
The affordable housing segment has been severely affected by the pandemic, with a decline in overall sales to approximately 20% in 2023 from over 30% in 2022 and nearly 40% in the period before the pandemic, according to Anarock Research.

Several interest stimulants for developers and consumers in this market have expired in the last one to two years. To encourage developers to construct more affordable housing and enable customers to acquire such homes, it is essential to revive and extend significant benefits, such as tax breaks.

Modifying the qualifying standards for affordable housing to make more buyers eligible for additional deductions is necessary. The Ministry of Housing and Urban Poverty Alleviation defines affordable housing based on the buyer’s income, property size, and price. The government needs to reconsider the qualifying cost of properties within the affordable housing segment in cities, as the current definition of up to Rs 45 lakh makes them unaffordable for a significant share of the target clientele.

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Toyota's Bid to Badge Engineer Jimny and Swift Faces Rejection from Maruti Suzuki

Toyota's Bid to Badge Engineer Jimny and Swift Faces Rejection from Maruti Suzuki

Toyota’s Bid to Badge Engineer Jimny and Swift Faces Rejection from Maruti Suzuki

Maruti Suzuki has firmly rejected Toyota’s proposal to badge engineer two of its iconic models, the Jimny and Swift, citing their integral role in the brand’s identity. While the two automakers have previously collaborated successfully on models like the Baleno and Glanza, Ertiga and Rumion, and Grand Vitara and Urban Cruiser Hyryder, Maruti Suzuki is adamant about retaining exclusivity for the Jimny and Swift.

Toyota had expressed a keen interest in creating its versions of the popular Jimny and Swift, envisioning a Toyota-badged Jimny as an affordable 4×4 alternative to the relatively expensive Fortuner. Despite a recent decline in Jimny sales, Maruti Suzuki remains committed to preserving the iconic status of these models, emphasizing that core brand identity models are not meant for sharing.

The Swift, a consistent best-seller for Maruti Suzuki, averages over 17,100 units sold monthly. Toyota, having only retailed Maruti Suzuki’s premium Nexa products under its own brand, saw potential for significant sales growth by introducing a Toyota-badged Swift. The Glanza and Rumion, both badge-engineered Maruti models, currently contribute 25 percent to Toyota’s total monthly sales.

Maruti Suzuki drew a parallel between the request for Toyota to badge engineer the Jimny and Swift and asking the same for the Land Cruiser, highlighting a shared commitment to respecting core models defining their brand identity.

Rumors about Toyota’s plans to rebadge both the Jimny and Swift had surfaced soon after the Jimny’s launch. Suzuki declined the offer, stating that both models are integral to the brands’ DNA, and sharing them would dilute their iconic status. This decision impacted Toyota’s potential benefits in the Indian market, as a rebadged Jimny could have served as an affordable 4×4 SUV option.

The Swift, a consistently popular hatchback, could have further boosted Toyota’s monthly sales. Currently, rebadged Baleno and Ertiga models contribute 25 percent to total sales. If the Swift were added, it could potentially add another 25 percent. Although the Jimny faces pricing challenges in India, Maruti Suzuki has implemented discounts and introduced a Thunder Edition to stimulate sales.

In addition to this development, Maruti Suzuki is actively working on an electric vehicle (EV) expected to launch next year. Toyota is also set to receive a different version of this EV, likely an SUV comparable to the current Grand Vitara, with pricing estimated between Rs 20-25 lakh. This collaboration exemplifies the ongoing partnership between Maruti Suzuki and Toyota in developing diverse automotive solutions.

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Aarti Pharmalabs Q2FY24 result updates

API & Intermediates Fuel 58% Growth in Q2FY24 for Aarti Pharmalabs

API & Intermediates Fuel 58% Growth in Q2FY24 for Aarti Pharmalabs

Company Name: Aarti Pharmalabs Ltd | NSE Code: AARTIPHARM | BSE Code: 543748 | 52 Week high/low: 514/235 | CMP: INR 488 | Mcap: INR 4,418 Cr | PE: 23.3

Company Overview:

Aarti Pharmalabs Ltd is a subsidiary of Aarti Industries Ltd, involved in the manufacturing and distribution of pharmaceuticals and chemicals. The company operates in three business verticals: API & Intermediaries, CDMO & CMO Services, and Xanthine derivatives & allied. It is the largest Indian manufacturer of Xanthine Derivatives, widely used in beverages, cosmetics, and pharmaceuticals. The company boasts 150+ products, including 52+ patented files, and operates six manufacturing units in Gujarat and Maharashtra.

Topline dipped due to price reductions in certain products

In the recent quarter, the standalone revenue of the company declined by 11.96% YoY (-0.56% QoQ) to 356 Cr. This dip was attributed to the decrease in prices of certain products. However, the decline in selling prices was offset by an increase in volume and a decrease in raw material costs, resulting in an overall margin improvement across earnings levels.

Q2 EBITDA dips YoY, yet margins expand by 85 bps

The company witnessed an 8.18% YoY decrease in EBITDA, amounting to 74 Cr compared to the previous quarter’s 71 Cr. Surprisingly, the EBITDA margin expanded by 85 bps, reaching 20.72%. This margin growth, despite a drop in EBITDA, was fueled by increased volume and reduced raw material costs. On a QoQ basis, EBITDA increased by 3.19%, driven by lower raw material costs and operating expenditures.

APIs and Intermediates drive impressive 58% growth in Q2

Among the three business verticals, API & Intermediate emerged as the primary growth driver, contributing 58% to the revenue in Q2FY24. The remaining 42% was attributed to other verticals, such as CDMO & CMO Services and Xanthine derivatives & allied. The company foresees a robust growth trajectory in the CDMO / CMO pipeline, maintaining its significance in overall revenue.

Promising Future Outlook: Anticipated Growth Opportunities Ahead

The company is actively progressing on greenfield projects in Atali, Gujarat, expecting completion in H2 of FY 24-25. This project, with a total Capex plan of 350-500 Cr in phase 1, is set to increase capacity and introduce 40+ value-added products annually. Anticipating operating leverage in FY26, the company projects an EBITDA growth of 10-15% in FY24.

Valuation and Key Ratios

As of now, the stock trades at a multiple of 23.3x EPS (TTM) of Rs 20.9, with a market price of 488. The industry PE stands at 33.6x, while the company values the stock at 2.66 times its book value of Rs 183 per share. The EV/EBITDA multiple is at 13.47x, compared to the industry median of 18.62x. The trailing twelve months ROE and ROCE are 13.2% and 16.1%, respectively, with a robust interest coverage ratio of 14.2x, indicating strong solvency.

Q2FY24 Result Update: Standalone

➡️Standalone revenue witnessed an 11.96% YoY decline (-0.56% QoQ) to 356 Cr in Q2FY24 due to a drop in product prices.

➡️Gross profit decreased by 6.41% YoY (-1.48% QoQ) to 165 Cr, with gross margin expanding 275 bps YoY due to lower raw material costs.

➡️EBITDA decreased by 8.18% YoY but grew 3.19% QoQ to 74 Cr, driven by margin expansion. EBITDA margin expanded 85 bps YoY and 75 bps QoQ to 20.72% due to operating leverage.

➡️Operating profit (EBIT) decreased by 12.67% YoY (+2.50% QoQ) to 57 Cr, with EBIT margin expanding by 13 bps YoY and 48 bps QoQ to 16.14%.

➡️PAT decreased by 9.21% YoY (-1.44% QoQ) to 41 Cr, while the PAT margin expanded by 35 bps YoY to 11.73%.

➡️Earnings per share (EPS) for the quarter stood at 4.61 Rs, compared to 4.68 Rs in the previous quarter.

Conclusion

Aarti Pharmalabs Ltd, despite facing a decline in standalone revenue attributed to product price drops, showcased resilience with strategic measures. The focus on API & Intermediate business, upcoming greenfield projects, and favorable margins position the company for future growth. The financial indicators, along with ongoing expansion plans, suggest a promising trajectory, making Aarti Pharmalabs a noteworthy player in the pharmaceutical and chemical industry.

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LG Balakrishnan Q2FY24 result updates

LG Balakrishnan's Solid Profitability Amid Margin Pressures

LG Balakrishnan’s Solid Profitability Amid Margin Pressures

Company Name: L G Balakrishnan & Bros Ltd | NSE Code: LGBBROSLTD | BSE Code: 500250 | 52 Week high/low: 1,366/607 | CMP: INR 1,315 | Mcap: INR 4,121 Cr | PE: 16.5

Company Overview:

LG Balakrishnan & Bros Ltd specializes in manufacturing chains, sprockets, and metal formed parts for automotive applications. The company operates in two business segments: transmission and metal forming. In the transmission segment, products include chains, sprockets, tensioners, belts, and brake shoes. Metal forming products encompass metal sheet parts, machined components, and wire drawing products.

Q2 Sees Growth in Transmission, Metal Forming Lags

In Q2, the transmission segment exhibited strong performance with a robust 15.64% QoQ revenue growth (+4.47% YoY), while the metal forming segment faced challenges, experiencing a moderate decline of 0.36% QoQ (+8.86% YoY). Overall, standalone revenue witnessed a growth of 12.66% QoQ (+5.17% YoY).

Revenue up, but Year-over-Year margins dip

Despite a 5.17% YoY increase in revenue, margins faced pressure due to a significant rise in raw material costs and operating expenditure by 5.36% and 5.29%, respectively. EBITDA margins dropped by 13 bps YoY, and gross margins decreased by 9 bps YoY and 91 bps QoQ.

37% QoQ PAT Soars: Strong Topline and Operational Efficiency Drive Growth

Profit After Tax (PAT) surged impressively by 37.2% QoQ (+16.72% YoY), driven by robust topline growth and stable interest costs and depreciation. Interest costs remained stable, growing by 0.26% QoQ, while depreciation increased moderately by 0.50%.

Valuation and Key Ratios

The stock currently trades at a multiple of 16.5x Earnings Per Share (EPS) (TTM) of Rs 82, with a market price of 1,315. The industry PE stands at 32.2x, and the company values the stock at 2.81 times its book value of Rs 468 per share. The EV/EBITDA multiple is at 8.63x, compared to the industry median of 13.19x. The trailing twelve months ROE and ROCE are 19% and 24.2%, respectively, with a robust interest coverage ratio of 46.4x, indicating strong solvency.

Q2FY24 Result Update: Standalone

➡️Standalone revenue witnessed a 5.17% YoY growth (+12.66% QoQ) to 573 Cr, driven by robust growth in the Metal Formation segment.

➡️Transmission segment revenue grew by 4.47% YoY (+15.64% QoQ) to 478 Cr, while the metal formation segment surged by 8.86% YoY (-0.3% QoQ) to 95 Cr.

➡️Gross profit increased by 5% YoY (+10.77% QoQ) to 305 Cr, but gross margins dropped by 9 bps YoY and 91 bps QoQ to 53.29%.

➡️EBITDA grew by 4.41% YoY (+19.08% QoQ) to 102 Cr, with EBITDA margin down by 13 bps YoY and up 96 bps QoQ to 17.87% due to operating leverage.

➡️Operating profit (EBIT) increased by 6.52% YoY (+23.74% QoQ) to 85 Cr, with EBIT margin expanding by 19 bps YoY and 133 bps QoQ to 14.84%.

➡️PAT surged by 16.72% YoY (+37.2% QoQ) to 76 Cr, while the PAT margin expanded by 130 bps YoY and 236 bps QoQ to 13.21%.

➡️Earnings per share (EPS) for the quarter stood at 24.11 Rs, compared to 17.57 Rs in the previous quarter.

Conclusion

LG Balakrishnan & Bro’s Ltd demonstrated a mixed performance in Q2, with robust growth in the transmission segment but challenges in metal forming. While revenue showed a positive trend, margins faced pressure due to increased costs. Despite this, the company exhibited strong profitability with a significant surge in Profit After Tax. The valuation metrics and key ratios indicate a solid financial position, suggesting a potential for sustained growth. Investors may closely monitor the company’s strategies to address margin challenges in the metal forming segment.

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Roto Pumps Q2FY24 result update

Q2FY24 Snapshot: Roto Pump's Stellar Rise in Revenue and Profits

Q2FY24 Snapshot: Roto Pump’s Stellar Rise in Revenue and Profits

Company Name: Roto Pumps Ltd | NSE Code: ROTO | BSE Code: 517500 | 52 Week high/low: 438/214 | CMP: INR 391 | Mcap: INR 1,228 Cr | PE: 30.4

Company Overview:

Roto Pump Ltd is dedicated to the manufacturing of Progressive Cavity Pumps, offering efficient and reliable pumping solutions across diverse industries, including wastewater, sugar, paper, paint, and more. The product portfolio encompasses Progressive Cavity Pumps (PCP), Twin Screws Pumps, and additional Positive Displacement (PD) pumps such as AODD and Gear pumps. The company boasts a global presence, exporting products to 55+ countries and achieving installations of 2,75,000 pumps worldwide.

Q2 Demonstrates Resilient and Impressive Topline Expansion

In the second quarter, the company experienced substantial consolidated revenue growth of 45.06% YoY (+49.48% QoQ), reaching 81.4 Cr. However, a simultaneous increase of 72.44% YoY (+87.28% QoQ) in raw material costs resulted in a gross profit of 49.8 Cr, accompanied by a contraction in gross margin by 600 bps YoY and 780 bps QoQ.

First-half struggles: Cash conversion lags behind expectations

During the first half of the year, the company faced a significant challenge in cash conversion, standing at 60% of the cash profit (EBITDA). Despite reporting an EBITDA earning of 33 Cr in H1FY24, operating cash from activities amounted to only 21 Cr, reflecting a 60% conversion of EBITDA. This indicates a notable decline from the previous year’s cash conversion rate of 98%, primarily attributed to an increase in trade receivables in the first half.

First-Half Gross Debt Sees Decline

In H1FY24, gross debt decreased by 21%, reaching 30 Cr compared to 38 Cr in H1FY23. However, net debt (gross debt-cash) increased by 46.32% in the first half compared to the previous year, standing at 15 Cr. Cash equivalents declined by 47% to 15 Cr in H1FY24 compared to the same period in the previous year.

EBITDA Skyrockets 78% YoY on Strong Margin Growth

In Q2FY24, consolidated EBITDA demonstrated an impressive growth of 78.55% YoY (+63.11% QoQ), reaching 20 Cr. This surge was propelled by margin expansion, with EBITDA margin expanding by 470 bps YoY and 211 bps QoQ to 25.24%, showcasing strong operating leverage. The company’s EBITDA margin surpasses that of its peer companies.

Valuation and Key Ratios

The stock is presently trading at a multiple of 30.4x EPS (TTM) of Rs 12.9, with a market price of 391, and an industry PE at 30.4x. The company values the stock at 1.02 times its book value. The EV/EBITDA multiple stands at 17.8x, while the industry median is at 20.5x. The trailing twelve months ROE and ROCE are 22.4% and 30.4%, respectively, and the interest coverage ratio is a robust 14.9x, indicating strong solvency.

Q2FY24 Result Update: Consolidated

➡️Consolidated revenue grew 45.06% YoY (+49.48% QoQ) to 81 Cr in Q2FY24 vs. 54 Cr in the previous quarter.

➡️Gross profit increased 31.81% YoY (+32.54% QoQ) to 50 Cr, with gross margin dropping 600 bps YoY and 780 bps QoQ due to higher raw material costs.

➡️EBITDA grew 78.55% YoY (+63.11% QoQ) to 20 Cr driven by margin expansion. EBITDA margin expanded 470 bps YoY and 211 bps QoQ to 25.24% led by operating leverage.

➡️Operating profit (EBIT) increased 83.14% YoY (+74.36% QoQ) to 17 Cr, with EBIT margin expanding by 440 bps YoY and 300 bps QoQ to 21.21%.

➡️PAT surged 77.98% YoY (+70.47% QoQ) to 13 Cr, and the PAT margin expanded by 290 bps YoY and 193 bps QoQ to 15.71%.

➡️Earnings per share (EPS) for the quarter stood at 4.07 Rs, compared to 2.39 Rs in the previous quarter.

Conclusion

Roto Pump Ltd demonstrated robust topline growth in Q2FY24, driven by an impressive surge in consolidated revenue and EBITDA. Despite poor cash conversion in the first half, the company showcased resilience with a decline in gross debt and notable margin expansion. The stock’s valuation appears favorable, and strong financial ratios, including ROE and ROCE, underscore the company’s solid performance. Overall, Roto Pump Ltd presents a promising outlook with a strategic focus on diverse industries and a global footprint.

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Unlocking opportunities: Muthoot Microfin IPO analysis

Unlocking opportunities: Muthoot Microfin IPO analysis

Unlocking opportunities: Muthoot Microfin IPO analysi

Muthoot Microfin Ltd – IPO Note

Price Band: Rs. 277-291

Issue Date: 18th Dec-20th Dec

Recommendation: Apply

Company Overview: 

Muthoot Microfin Limited, a subsidiary of the Muthoot Pappachan Group, is a microfinance institution dedicated to empowering women in rural areas across India. Specializing in micro-loans, the company offers a diverse portfolio of financial products, including group loans for livelihood solutions, individual loans, and life betterment solutions such as mobile phone and solar lighting loans. Additionally, it addresses health and hygiene needs through sanitation improvement loans. Muthoot Microfin Limited also provides secured loans in the form of gold loans and its unique Muthoot Small & Growing Business (MSGB) loans, emphasizing support for small businesses. The company’s focus on social impact is evident in its commitment to fostering economic growth and improving living standards in underserved communities.

Company Profile:

  • Muthoot Microfin Limited is a leading microfinance institution in India, with a strong focus on serving women entrepreneurs in rural areas. The company is a part of the Muthoot Pappachan Group, a diversified conglomerate with a presence in various sectors.
  • Muthoot Microfin is the fourth largest NBFC-MFI in India in terms of gross loan portfolio. The company has a wide reach across 18 states and UTs, with over 1,340 branches and 3.19 million active customers. Muthoot Microfin has a robust IT infrastructure and a focus on digital collections. The company also has a strong presence in Tamil Nadu, with a market share of over 16%.
  • In recent years, Muthoot Microfin has been expanding its operations beyond South India. The company has opened over 700 branches in North, West, and East India, constituting 52.76% of its total branches. This expansion is a key part of Muthoot Microfin’s strategy to become the leading microfinance institution in India.
  • Muthoot Microfin is a well-established and respected company with a strong track record of financial performance. The company is well-positioned to continue to grow and expand in the future.

The Objects of the Issue:

  • Fund existing operations and exciting new initiatives like tech upgrades and geographic reach.
  • Boost capital to meet future needs and ensure growth.
  • Gain stock market visibility and access future capital.
  • Facilitate sale of shares by existing investors.

Outlook and Valuation:

  • Historically concentrated in South India, Muthoot Microfin has recently expanded its operations into North, West, and East India.
  • As of March 31, 2023, the company has 596 branches in North, West, and East India, representing 50.85% of total branches.
  • This expansion strategy is aimed at increasing the company’s footprint and customer base across diverse regions in India.
  • Growth Strategy: The company’s strategy of expanding across various geographies in India is expected to contribute to its ongoing growth in the coming years.
  • Competitive Landscape: According to the Red Herring Prospectus (RHP), Muthoot Microfin identifies Equitas Small Finance Bank Limited, Ujjivan Small Finance Bank Limited, CreditAccess Grameen Limited, and Suryoday Small Finance Bank Limited as some of its listed competitors.
  • Understanding the competitive landscape helps investors assess the market dynamics and positioning of the company.
  • Valuation and Peer Comparison:
    1. The company’s valuation is compared with peers in the microfinance and small finance banking sector.
    2. Peers’ average P/E (Price-to-Earnings) ratio is 18.22x, ranging from 6.33x to 26.67x.
    3. Muthoot Microfin’s P/E multiple, based on post-issue diluted FY23 EPS of Rs.11.54, is 25.23x at the higher price band.
    4. The assessment suggests that, compared to peers, the issue is considered fully priced in or fairly valued.
    5. At the higher price band, Muthoot Microfin’s listing market capitalization is projected to be approximately – Rs.4159.96 crores.
      ISSUE OFFER  
      Price band (INR) 277-291
      Bidding date DEC 18 – DEC 20, 2023
      Total IPO size (Cr) 960
      Fresh issue (Cr) 760
      Offer for sale (Cr) 200
      Market lot 51
      Face value (INR) 10
      Listing on NSE, BSE
      Retail Allocation 35%
      Rating Subscribe

Competitive Strengths:

  • Strong Brand and Market Leadership: Backed by a highly established financial services conglomerate, ensuring trust and brand recognition. Holds a significant market share in India, demonstrating experience and operational expertise.
  • Reliance on rural economies makes the company susceptible to agricultural downturns and economic fluctuations. Fosters income generation and economic activity in rural areas.
  • Focus on underpenetrated regions and product diversification indicates significant growth potential.
  • Aligns with social responsibility goals, potentially attracting ESG-conscious investors.
  • Wide geographical reach with over 1,340 branches, ensuring customer accessibility.
  • In-house technology development facilitates efficient loan disbursement and monitoring.
  • “Mahila Mitra” app promotes convenient payment methods for customers.
  • Offers various loan products, mitigating risk and catering to diverse needs.

Key Strategies:

  • Expand branch network and identify borrowers across India, not just South.
  • Build user-friendly platforms for smooth loan access and service.
  • Offer new loans and leverage referrals to grow customer base.
  • Diversify Funding: Tap new investors beyond traditional channels to fuel expansion.
  • Highlight social impact and invest in talent for sustainable growth.

Key Concerns:

  • Rural Vulnerability: Microfinance primarily serves rural populations, susceptible to agricultural downturns, weather fluctuations, and economic shifts. These external factors can impact borrowers’ repayment capacity and expose the company to loan defaults.
  • Regulatory Risks: The microfinance sector faces evolving regulations, some potentially affecting interest rates, loan sizes, and lending practices. Adapting to these changes without compromising profitability could be challenging.
  • Competition: The microfinance space is increasingly competitive, with established players and new entrants vying for market share. Maintaining a competitive edge in terms of interest rates, customer service, and technology could be costly.
  • High Credit Exposure: Muthoot Microfin’s loan portfolio is concentrated in a specific market segment. This concentration, while offering potential rewards, also exposes the company to higher risks if economic conditions in that segment deteriorate.
  • Customer Risk: Microfinance institutions (MFIs) often serve customers in the lower-income segments. Economic uncertainties or shocks affecting these customers may impact their ability to repay loans, leading to increased default risks.
  • Interest Rate Risk: The microfinance industry is vulnerable to interest rate fluctuations. Changes in interest rates can affect borrowing costs for both the MFI and its customers, influencing repayment dynamics.
  • Non-Performing Assets (NPA) Risk: An increase in non-performing assets or provisions can adversely affect the company’s financial health. This may result from economic downturns, borrower distress, or other factors impacting the repayment capacity of the customer base.
    Company Total income

           (ML)

    EPS P/E NAV Face value/Share
    Muthoot Microfin Limited 14463.44 14.19 20.5 139.15 10
    Peer group       1  
    Equitas Small Finance Bank Limited 48314.64 4.71 17.57 46.44 10
    Ujjivan Small Finance Bank Limited 47541.90 5.88 6.33 20.25 10
    CreditAccess Grameen Limited 35507.90 52.04 26.67 326.89 10
    Spandana Sphoorty Financial Limited 14770.32 1.74 381.72 436.58 10
    Bandhan Bank Limited 183732.50 13.62 17.32 121.58 10
    Suryoday Small Finance Bank Limited 128811 7.39 22.31 149.28 10
    Fusion Micro Finance Limited 17999.70 43.29 12.60 230.74 10
    PARTICULARS

    (In millions)

    FY23 FY22 FY21
    Equity share capital 1401.98 1333.33 1141.71
    Other equity 14856.51 12032.46 7757.19
    Net worth 16258.49 13365.79 8898.90
    Total Borrowings 51230.25 32969.85 25382.26
    Revenue from Operations 12906.45 7286.23 6227.84
    EBIDTA 7884.86 4256.60 3272.17
    PBT 2128.70 647.21 90.55
    Net profit 1638.89 473.98 70.54
    PAT 1639 474 70.4
    Total assets 85292 55915 41839

The image added is for representation purposes only

 

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Affle India Q2FY24 results update

Record-breaking CPCU Conversions Propel Affle India's 21.06% Revenue Growth

Record-breaking CPCU Conversions Propel Affle India’s 21.06% Revenue Growth

Company Name: Affle India Ltd | NSE Code: AFFLE | BSE Code: 542752 | 52 Week high/low: 1,244/866 | CMP: INR 1,244| Mcap: INR 17,439 Cr | PE: 66

Company Overview:

Affle India is a leading IT company engaged in providing mobile advertisement and software development services. The company operates in two business segments: Consumer Platform, delivering consumer recommendations and conversions through relevant mobile advertising, and Enterprise Platform, enabling offline businesses to go online through app development, O2O commerce, and data analytics. Affle India has a robust global reach in North America, Japan, Korea, and Australia.

Consumer Platform Thrives, Enterprise Platform Faces Challenges

In Q2FY24, the cost per converted user (CPCU) business model drove 92.9% of revenue, with the Consumer Platform segment growing 16.61% YoY. The Enterprise Platform revenue declined by 23.24% YoY, resulting in a standalone revenue surge of 15.51% YoY. The robust growth in the CPCU business model offset the slowdown in the enterprise platform segment during the quarter.

Record-breaking CPCU Conversions Propel Revenue Growth

During the quarter, the CPCU business achieved 72 Mn conversions, compared to 64.7 Mn in the same quarter last year. The average CPCU rate was 55.6 Rs, contributing to robust revenue growth of 21.06% YoY, reaching 400 Cr in Q2FY24.

Resilience Amid Challenges: Impact of Online Gaming and Fintech

Despite a combined impact of about Rs. 250 million from online gaming in India and the Fintech vertical in developed markets, the company delivered its highest revenue and EBITDA ever in this quarter and in the CPCU business. Regulatory changes towards the applicability of GST in the online gaming industry in India caused a pullback effect of about Rs. 110 million.

Valuation and Key Ratios

As of now, the stock trades at a multiple of 66x earnings per share (EPS) (TTM) of Rs 19.8, with a market price of Rs 1,244. The stock is valued at 10.4 times its book value of Rs 120 per share. In terms of EV/EBITDA, the company ranks 4th with a multiple of 46.61x, compared to the industry median of 17.88x. The trailing twelve-month return on equity (ROE) and return on capital employed (ROCE) stand at 18.5% and 20.2%, respectively. The interest coverage ratio is robust at 20.2x, indicating the company’s solvency.

Q2FY24 Result Update: Standalone

➡️In Q2FY24, standalone revenue grew 15.51% YoY (-2.41% QoQ) to 134Cr, driven by robust growth in the CPCU business.

➡️Consumer platform segment reported revenue of 131 Cr, growing 16.61% YoY, while the enterprise segment showed a slowdown in revenue by 23.24% YoY, resulting in a 15.51% growth in standalone revenue.

➡️EBITDA surged 25.16% YoY (+20.39% QoQ) to 21 Cr, driven by the consumer platform segment. EBITDA margin improved 120 bps YoY and 300 bps QoQ to 15.86%.

➡️Operating profit (EBIT) increased by 27.59% YoY (+22.83% QoQ) to 19 Cr, with an EBIT margin jumping by 130 bps YoY and 290 bps QoQ to 14.33%.

➡️Profit after tax (PAT) saw a remarkable surge of 22.69% YoY (+16.63% QoQ) to 18 Cr, and the PAT margin expanded by 80 bps YoY and 220 bps QoQ to 13.58%.

➡️Earnings per share (EPS) for the quarter stood at 1.30 Rs, compared to 1.11 Rs in the previous quarter.

Conclusion

Affle India’s Q2FY24 results reflect a strong performance driven by the robust growth in the CPCU business model, offsetting challenges in the enterprise platform segment. Despite external impacts from online gaming and Fintech, the company achieved its highest revenue and EBITDA, showcasing resilience and adaptability. The valuation and key ratios underscore the company’s solid financial standing. Affle India continues to demonstrate its position as a leading player in mobile advertising and software development services.

The image added is for representation purposes only

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