REC Ltd Q2FY24 results updates

After a strong Q2 in FY24 REC is ready for the rerating saga

After a strong Q2 in FY24 REC is ready for the rerating saga

Company Overview:

REC Limited (formerly Rural Electrification Corporation Limited) is a non-banking financial company (NBFC) under the administrative control of the Ministry of Power, Government of India. It is also registered with the Reserve Bank of India (RBI) as a public financial institution (PFI) and an infrastructure financing company (IFC).
REC was incorporated in 1969 to finance and promote rural electrification projects in India. Over the years, it has expanded its scope of business to include financing of the entire power sector, including generation, transmission, and distribution. REC also finances projects in the renewable energy and infrastructure & logistics sectors.

REC’s Q2 earnings soar on lower costs and higher margins:

REC Limited’s Q2FY24 earnings were strong on all counts, with a 17bps QoQ NIM uptick, provision reversal of ~INR 5bn, and high 20% YoY loan growth. The company is upbeat on growth guidance of 20% YoY, NIM steadying at 3.5%, and anticipated provision reversals for FY24, which signals strong book value accretion and potential valuation multiple re-rating.
a. NIM uptick: REC’s NIM uptick was driven by asset re-pricing across products, with yields climbing 15bps QoQ, and a favourable liability mix with ~40% borrowings being priced at ~7% (23bps lower than average CoF).
b. Provision reversal: REC reversed provisions of ~INR 5bn, including standard asset provisions created on grounds of prudency during the pandemic and ~INR 2.5bn write-backs led by resolutions of two assets.
c. Loan growth: REC’s loan growth accelerated to 20% YoY after a hiatus of four years, largely led by renewables, LPS, and infra portfolios.
d. Outlook: REC is upbeat on growth guidance of 20% YoY, NIM steadying at 3.5%, and anticipated provision reversals for FY24. This signals strong book value accretion and potential valuation multiple re-rating.

RECL’s loan growth surges on renewables, non-power sectors; FY24E-26E outlook upbeat:

RECL (presumably a financial institution) recorded a strong loan growth of 4% quarter-over-quarter (QoQ) and 20% year-over-year (YoY). This growth was largely driven by non-power loans in sectors like infrastructure, logistics, and e-mobility, as well as loans related to LPS (possibly referring to Loan Protection Scheme) and renewables.
The renewables sector constitutes 7% of RECL’s assets, approximately INR 300 billion. There is an expectation that this figure may increase significantly to INR 3 trillion by FY30 (fiscal year 2030). This growth could be triggered by a recent Memorandum of Understanding (MoU) worth INR 280 billion and the government’s goal to increase the share of renewables to 30% of the mix by FY30. Additionally, Q2 saw 25% of overall loan sanctions coming from renewables.
The non-power sector’s share in RECL’s portfolio has increased from 8% in Q1 to 13% of the mix. RECL is actively expanding its capabilities in terms of talent, skillsets, and pricing strategies, with a focus on state-backed, low-risk assets. The report suggests that RECL anticipates a higher loan Compound Annual Growth Rate (CAGR) of 19% in the fiscal years FY24E-26E. This expectation is based on the quality of renewable corporate clients and high-value infrastructure projects, which provide a robust outlook for the business.

RECL aims to maintain steady NIMs, write-backs to boost FY24 profits:

RECL is aiming to maintain steady NIMs. They are working to control credit costs with the goal of achieving a 0% net Non-Performing Asset (NPA) ratio by FY25. It’s noteworthy that RECL has not experienced any slippages in the past seven quarters, and they expect write-backs in FY24.
In the second quarter (Q2), RECL reported that Stage 3 assets, which typically refer to non-performing or impaired assets, stood at a five-year low of 3.14%. At the moment, there are 19 stressed projects with a total value of INR 149 billion in Stage 3. Out of these, five projects worth INR 18.8 billion are being pursued for resolution outside the National Company Law Tribunal (NCLT), and the remaining 14 projects worth INR 130 billion are undergoing resolution within NCLT. It is estimated that there will be a build-up of Gross Non-Performing Assets (GNPA) in the range of 2-2.4% and write-offs during FY24E-26E.

Valuations: Analyst sees 30% upside in RECL:

Despite recent price momentum, RECL is seen as having the potential for further re-rating. This is attributed to the company’s high double-digit growth visibility, positive performance in Q2, and the ability to maintain steady margins in a challenging funding environment. Additionally, the significant write-backs are expected to lead to a high return profile with an anticipated Return on Equity (RoE) of 18-19% and Return on Assets (RoA) of 2.8% in the fiscal years FY24-26E. In light of these positive factors, there has been a revision of the estimates for FY24E and FY25E, with an increase of 15% or more for each of these fiscal years.

REC Ltd Reports Strong Q2FY24 Result:

REC Ltd reported net sales of Rs 11,688.24 crore in September 2023, reflecting a significant increase of 17.4% compared to the same period in September 2022 when it was Rs 9,955.99 crore. The company’s quarterly net profit for September 2023 amounted to Rs 3,789.90 crore, indicating substantial growth of 38.72% from the figure of Rs 2,732.12 crore in September 2022. The EBITDA for September 2023 were reported at Rs 12,193.52 crore, showing strong growth of 32.98% from the EBITDA of Rs 9,169.73 crore in September 2022. REC Limited has a market capitalization of ₹79,668 Crores, reflecting the total market value of its outstanding shares. The stock’s Price-to-Earnings (P/E) ratio stands at 6.19, indicating its valuation in relation to its earnings. A lower P/E ratio suggests potential undervaluation. REC Limited’s Return on Capital Employed (ROCE) is 9.14%, showcasing its profitability relative to the total capital employed in the business. The company reported a Profit after Tax of ₹12,739 Crores, representing its net income after accounting for all expenses and taxes. REC Limited has a Price to Book Value (P/B) ratio of 1.25, implying that the current market price of the stock is slightly higher than its book value per share.


REC Limited, a government-controlled financial company, posted impressive Q2FY24 results. The highlights include a remarkable 17.4% YoY increase in revenue, reflecting strong growth. Notably, the company saw an uptick in Net Interest Margin (NIM), provision reversals, and a substantial rise in loan growth. REC is confident about its future, with a projected 20% YoY growth and stable NIM. The surge in loan growth was primarily fuelled by non-power sectors, and REC anticipates a higher growth rate in loans for FY24-26E. They are also focused on maintaining NIMs and managing non-performing assets.


Q2FY24: Shriram Finance reports robust AUM growth Drives NII soars to 4,594 Cr

Indian stock surge draws investors leaving China

Indian stock surge draws investors leaving China

Indian stock surge draws investors leaving China

India is expected to become the world’s third-largest economy by the end of the decade, with projections indicating a robust annual average real GDP growth of 6 percent, outpacing mostother major economies. This forecast comes from the consultancy firm Capital Economics. The Indian stock market has been on a tear in recent months, with the benchmark Sensex index rising by over 20% since the start of the year. This surge has attracted a wave of foreign investment, with many investors choosing to leave the Chinese market and invest in India instead.

Fertile Investing Ground

India’s economy and stock market have been doing well recently and India has also
outperformed china. The MSCI India index, which measures the performance of Indian stocks,has gone up by 7.5% this year, while the MSCI China index, which tracks Chinese stocks, has gone down by 7.6%. Over the last five years, Indian stocks have risen by 63%, while Chinese stocks have fallen by 18%. India’s economy is growing faster than China’s, with a growth rate of 7.8% in the June quarter, compared to China’s growth rate of 6.3%.

Foreign investors have been moving their money from Chinese stocks to Indian stocks, even though Indian stocks are more expensive and has higher valuations. This is because China’s economy hasn’t rebounded as strongly as expected, which has raised concerns about deflation (a decrease in prices) and made investors less confident in the Chinese market.

“India’s markets seem really encouraging and promising. They’re experiencing substantial growth, and there’s a lot of money being invested in building infrastructure. India is one of the fastest-growing economies. On the other hand, in China, we’re seeing issues in the property sector,” explained Jonathan Curtis from Franklin Templeton during his recent trip to India.

Indian stocks have outshined Chinese stocks by a significant amount. This is thanks to the billions of dollars invested by foreign funds and a growing number of individual investors who have tripled in number since the pandemic started.

Allocators Enticed

Foreign fund managers, who handle a lot of money (billions of $), are taking their investments out of Chinese stocks and putting some of it into Indian stocks, even though Indian stocks are considered relatively expensive. In August, they withdrew around $12 billion from Chinese stocks, while India received approximately $1.5 billion in investments, with a significant portion going into financial stocks.

China’s economy, which was expected to rebound strongly after the pandemic, hasn’t
performed as well as anticipated. This is due to problems in the housing market and increasing local government debt. Chinese households are saving more, which is leading to weaker domestic demand. This economic uncertainty has made investors less confident and has put pressure on stock prices. Experts have noted that China is different from other countries in its post-pandemic recovery because it’s facing a risk of prices falling instead of rising. This uncertainty about investing in China has opened up an opportunity for India.

India’s economic foundation looks good, despite challenges like geopolitical tensions, rising prices, and supply chain disruptions. In September, foreign investors sold about $1.8 billion worth of Indian stocks, but the Sensex (an Indian stock market index) still rose by 1,000 points in the same month, thanks to continued investments from local investors, particularly mutual funds.

Indian markets are not heavily dependent on China’s weakness, there are other reasons for their strength. The growing number of individual investors in India plays a significant role. Additionally, consistent investments through mutual funds are considered a healthy trend. Strong corporate earnings growth is also attracting investors. Hong Kong-based brokerage CLSA recently upgraded its view on India, saying it plans to allocate more weightage to India compared to what index management company MSCI suggests. They’re moving money out of China and Australia to invest more in India.

Investment Destinations

India’s technology sector is a popular choice for investment due to its successful digitization efforts and a tech-savvy population. The nation’s strong education system and English speaking workforce have contributed to this tech focus, with Indian-born
CEOs leading major U.S. tech companies.

Early-stage venture capital is a way for investors to enter India’s tech scene, with success stories like Flipkart, an e-commerce company, valued at around $40 billion after being acquired by Walmart. However, India’s investment landscape can be less liquid, making it challenging to find buyers for venture-backed companies.

The growing Indian financial sector is appealing to foreign investors, with HDFC Bank and Bajaj Finance stocks being popular choices. Infrastructure is another promising area for investment, thanks to government initiatives like the Delhi Mumbai Expressway project, which will significantly reduce travel times. One significant factor driving India’s growth is its young population, which is expected to contribute to a robust GDP and make India the world’s second-largest economy by 2070, according to a Goldman Sachs study. Investing in India today may be a wise choice if this bright future unfolds as predicted.


Dabur Subsidiaries Face Cancer Lawsuits in US and Canada

Dabur Subsidiaries Face Cancer Lawsuits in US and Canada

Dabur Subsidiaries Face Cancer Lawsuits in US and Canada

Overview of Dabur

Dabur India Ltd. is one of India’s leading consumer goods companies with a portfolio of over 250 herbal and Ayurvedic products. The company was established in 1884 and has a long history of developing and manufacturing traditional Indian healthcare products.

Dabur’s products are divided into several categories, including

➢ Healthcare This category includes products similar as Dabur Chyawanprash, Dabur Amla, and Dabur Honitus.
➢ Haircare This category includes products similar as Dabur Vatika, Dabur Amla Hair Oil, and Dabur Red Paste.
➢ Oral care This category includes products similar as Dabur Red Toothpaste, Dabur Lal Dant Manjan, and Dabur Meswak Toothpaste.
➢ Skin care This category includes products similar as Dabur Gulabari, Dabur Odomos, and Dabur Vatika Naturals.
➢ Home care This category includes products similar as Dabur Red Air Freshener, Dabur Odomos Mosquito Repellent Cream, and Dabur Pudin Hara.

About the case

Homegrown FMCG major Dabur on Wednesday said its three foreign subsidiaries are facing cases in civil and state courts in the US and Canada. Two consumers have filed suits against Dabur subsidiaries in the United States and Canada, alleging that the company’s Vatika Naturals Coconut Styling Gel caused them to develop cancer. The suits were filed in California and Ontario in late 2022 and early 2023, independently.

The complainants, both women, allege that the hair gel contains the chemical 1,4 dioxane, which is a known carcinogen. They claim that they used the hair gel for several times before developing cancer, and that the product’s marker didn’t adequately advise consumers about the risks of using it.

Dabur has denied the allegations, saying that its hair gel is safe and that there’s no scientific evidence that it causes cancer. The company has also said that it’s committed to consumer safety and that its products are tested to ensure that they meet all applicable safety norms.

The subsidiaries are Namaste Laboratories LLC, Dermoviva Skin Essentials Inc., and Dabur International Ltd. The suits are still in their early stages, and it’s too early to say how they will be resolved. still, they’ve raised concerns about the safety of Dabur’s hair products and other products that contain 1,4- dioxane.

What’s 1,4- dioxane?

1,4- dioxane is a synthetic chemical that’s used in a variety of artificial and marketable
products, including cosmetics, cleaning products, and paint strippers. It’s also a by- product of some manufacturing processes. 1,4- dioxane is a known carcinogen, and the International Agency for Research on Cancer (IARC) has classified it as a Group 2B carcinogen, which means that it’s “conceivably carcinogenic to humans.”

Implicit health pitfalls of 1,4- dioxane-
Exposure to 1,4- dioxane can do through inhalation, ingestion, or skin immersion. Cancer, skin irritation, eye vexation and 1,4- dioxane can irritate the airways and cause coughing, gasping, and shortness of breath.


MMFS Q1FY24 results updates

MMFS Q2FY24: PAT Drops to 235 Cr YoY Amid 45 bps NIM Compression

MMFS Q2FY24: PAT Drops to 235 Cr YoY Amid 45 bps NIM Compression

Company Overview:

M&M Finance, a leading Non-Banking Financial Company (NBFC), specializes in financing various types of vehicles, including new and pre-owned autos, utility vehicles, tractors, passenger cars, and commercial vehicles. Additionally, the company offers a range of financial services, encompassing mutual fund distribution, insurance broking, and housing finance. M&M Finance has strategically diversified its lending portfolio, extending its reach to retail and small to medium-sized enterprises in rural and semi-urban areas across India. As of Q2FY24, the company boasts an extensive network, with 1,368 offices spanning 27 states and 7 union territories, serving a substantial customer base of over 9.5 million individuals.

Loan book grew 27% YoY (+8.1% QoQ) to 93,723 Cr, fueled by auto and pre-owned vehicle loans.

M&M Finance experienced a remarkable 27% YoY increase in its loan book, with a further 8.1% QoQ growth, amounting to 93,723 Cr in Q2FY24. This growth was primarily driven by a strong performance in the auto, car, and pre-owned vehicle segments. Notably, the company’s disbursements increased by 12.61% YoY and 9.45% QoQ, reaching 13,315 Cr in the same period. The performance of the tractor portfolio and SME segments, however, remained sluggish. The Cars and Commercial Vehicles segment displayed notable growth of 25% YoY and 28% YoY, standing at 2,455 Cr and 1,511 Cr, respectively, while maintaining market share in various segments. New business segments, including SME, personal loans, and consumer loans, contributed approximately 12% to the overall loan mix.

NIMs compression ~45 bps QoQ and high credit cost ~2.8% (Q2FY23 – 2.5%):

In Q2FY24 yield moderated at ~35% bps QoQ while CoF rose 10 bps led to NIMs contraction by 45 bps QoQ stood at 6.5% in Q2 due to effect of change in portfolio mix (with higher mix of pre-owned vehicles and tractors) and increased interest cost. Annualized credit cost stood at 2.8% (Q2FY23-2.5%) higher than expectation for FY24 targeted between 1.5% -1.7% and included INR 3.5 bn of write-off (PQ-3.1 bn).

Minor improvement in asset quality & CAR strong at 18.7% in Q2

In Q2FY24, minor improvement in asset quality with GS3/NS3 declining to 1bps/9bps QoQ to 4.29%/1.71% with amounting GS3/NS3 stood at 4,024 Cr/1,562 Cr. Stage 2 declined 60 bps QoQ to 5.7% this resulted in 30+ dpd improving 70 bps QoQ to 10% and current level of write-off stood at 351 Cr in Q2FY24. Provision coverage on stage-3 assets stood at 61.2% against 60.1% in previous quarter. CAR strongly stood at 18.70% in Q2FY24 which is above the RBI guidelines 15%.

Valuation and Key ratios: ROA/ROE decline -130 bps/500 bps

Currently, M&M Finance’s stock is trading at 1.63 times its book value, at 151 per share, with the market price at 248 Rs. The company reported a decline in return ratios, with ROE decreasing by approximately 500 bps to 5.5%, and ROA decreasing by 130 bps to 0.9% in Q2FY24. The interest coverage ratio stood at 1.44x, indicating the company’s solvency.

Q2 FY24 Results Highlights: Standalone

➡️ In Q2FY24, interest income grew 25.32% YoY (+3.91% QoQ) to 3,153 Cr while interest expense grew 46.56% YoY (+8% QoQ) to 1,566 Cr resulted in Net interest (NII) income reaching to 1,587 Cr grew 9.64% YoY (+0.17% QoQ).

➡️ Pre-Provision operating profit (PPOP) increased 9.17% YoY (-5.07% QoQ) to 943 Cr due to rise in Opex by 8.32% QoQ because of company’s transformation strategy includes technology investment. Opex-to-average assets remained stable at 2.8% in Q2FY24.

➡️ Provision amount increased 215.72% YoY (+19.02% QoQ) to 626.55 Cr which includes 351 write-off led to decline PAT by 48% YoY (-33.30% QoQ).

➡️ PAT decline 47.54% YoY (-33.30% QoQ) to 235 Cr due to increase in provision 215% YoY results in EPS stood at1.90 Rs (PQ-2.84) decline 33% QoQ.


M&M Finance continues to expand its loan book and customer base, showcasing its presence and performance in the NBFC sector. While challenges in NIMs and higher credit costs require attention, the company’s strong CAR and provision coverage are notable strengths. The decline in return ratios reflects certain performance pressures, and management should focus on addressing these concerns to ensure sustained growth and profitability.


Q2FY24: Shriram Finance reports robust AUM growth Drives NII soars to 4,594 Cr

India’s soaring success: dedicated India funds outperforming emerging markets

India’s soaring success : dedicated India funds outperforming emerging markets

India’s soaring success: dedicated India funds outperforming emerging markets

Dedicated India funds have outperformed emerging market funds in recent months, as investors shift their focus to economies that are less reliant on China. India is one of the fastest-growing major economies in the world, and it is benefiting from a number of factors, including strong domestic demand, a young and growing population, and a government that is supportive of investment.

The average India fund returned 30.2% in the year to the end of September, compared to 18.7% for emerging market funds. This outperformance has been driven by a number of factors, including strong economic growth in India, a relatively low valuation for Indian stocks, and a favorable investment climate.

India’s economy is expected to grow at 7% in 2023, according to the World Bank, making it one of the fastest-growing major economies in the world. This growth is being driven by a number of factors, including a young and growing population, rising consumer spending, and increasing investment in infrastructure and manufacturing.

Indian stocks are also relatively undervalued, trading at a price-to-earnings ratio of around 17, compared to 20 for emerging market stocks as a whole. This makes Indian stocks attractive to investors who are looking for value. The Indian government has also taken steps to improve the investment climate in recent years. These steps include reducing red tape, simplifying tax rules, and improving corporate governance. These changes have made India a more attractive destination for foreign investors.

The outperformance of dedicated India funds is likely to continue in the coming months. India’s economy is expected to remain strong, its stock market is relatively undervalued, and the government is committed to improving the investment climate.


Benefits of investing in India-dedicated funds:-

1. Access to a growing economy:
India is the world’s fastest-growing major economy, with a projected GDP growth rate of 7% in 2023. This growth is being driven by a young and growing population, rising consumer spending, and increasing investment in infrastructure and manufacturing.

2. Undervalued stocks:
Indian stocks are trading at a relatively low valuation, compared to emerging market stocks as a whole. This makes Indian stocks attractive to investors who are looking for value.

3. Favorable investment climate:
The Indian government has taken steps to improve the investment climate in recent years, including reducing red tape, simplifying tax rules, and improving corporate governance. These changes have made India a more attractive destination for foreign investors.

4. Diversification:
Investing in India-focused funds can provide diversification benefits to your investment portfolio. These funds typically invest in a wide range of Indian stocks and securities, which can help spread risk across different sectors and industries within the Indian economy.

5. Expertise and local knowledge:
Many India-focused funds are managed by professionals with deep knowledge of the Indian market and its unique dynamics. They have the ability to conduct in-depth research, identify promising investment opportunities, and navigate the complexities of the Indian financial system.

US Market:

Demand for US sovereign debt is expected to hold up well in the next few months, but there are risks ahead in the next year from all directions. Fund flows into energy-dedicated funds have started to accelerate, as energy prices in the US are expected to be higher for a longer period.

Overall Flows Subdued:
Overall fund flows have been fairly subdued recently, with bond funds taking in a bit more money than equity funds. However, this is likely to change in the coming months, as investors look to rotate into more cyclical assets in anticipation of a stronger economic recovery.

Implications for Investors:
Investors who are looking for growth should consider overweighting emerging markets equities in their portfolios. They should also consider adding some exposure to energy-related stocks, as well as cyclical stocks that stand to benefit from a stronger economic recovery. However, investors should also be mindful of the risks associated with these investments,
including volatility and currency risk.


Neogen Chemicals’ EBITDA Soars to 29.46 Cr fueled by lower input costs


Banks' risky bet on unsecured loans

Banks' risky bet on unsecured loans

Banks’ risky bet on unsecured loans


Unsecured loans, also known as personal loans or consumer loans, are financial products that do not require borrowers to provide collateral. They have become increasingly popular among Indian consumers for their accessibility and quick approval processes. However, this rapid growth has led to concerns about the credit risk exposure of banks and the overall financial stability of the banking sector.

Indian banks have seen a sharp growth in unsecured loans in recent months, despite the Reserve Bank of India (RBI) cautioning them against such lending. Unsecured loans are those that are not backed by any collateral, making them riskier for banks.

According to a report by the Credit Information Bureau of India (CIBIL), unsecured loans grew by 22% year-on-year in the first quarter of 2023. This is faster than the growth of secured loans, which was 18%. The report also found that the average unsecured loan size has increased by 15% in the past year. This suggests that banks are becoming more comfortable lending larger amounts without collateral.

➢ HDFC Bank, ICICI Bank, and Kotak Mahindra Bank increased their unsecured loan portfolios by up to 30% in the July-September quarter.
➢ They anticipate that growth in the unsecured segment, which includes microfinance, credit cards, personal loans, and some retail loans, will continue.
➢ This growth comes despite concerns flagged by the Reserve Bank of India over the surge in such loans.
➢ HDFC Bank’s personal loan portfolio grew 15.5%, ICICI Bank’s credit card portfolio grew 29.5%, and Kotak Mahindra Bank’s unsecured portfolio grew 49.76%.
➢ IndusInd Bank’s microfinance portfolio grew 16%, credit card business grew 33%, and other retail loans climbed 64%.
➢ RBL Bank’s retail portfolio grew 35%.

The risk of defaults has prompted the RBI to warn banks against making excessive loans that are not secured. The RBI instructed banks to “exercise due caution” when making unsecured loans in a circular that was published in April 2023. Additionally, the RBI requested that banks “make sure the loans are used for productive purposes and that the borrowers have adequate repayment capacity.”

The RBI’s concerns have been shared by analysts. They caution that by making large loans in the unsecured market, banks are taking on excessive risk. They claim that a downturn in the economy could lead to a severe rise in unsecured loan defaults.


Impact of the growth in unsecured lending on the economy:

The growth in unsecured lending has had a mixed impact on the economy. On the one hand, it has boosted consumer spending and helped to drive economic growth. On the other hand, it has increased the risk of a financial crisis if there is a sharp increase in defaults on unsecured loans. The impact of the growth in unsecured lending on the economy will depend on a number of factors, including the overall health of the economy, the interest rate environment, and the creditworthiness of borrowers.

Concerns related to the growth in unsecured lending:

➢ It could lead to a rise in consumer debt levels. This is because unsecured loans are typically easier to obtain than secured loans.
➢ Another concern is that the growth in unsecured lending could lead to a bubble in the credit market. This is because unsecured loans are often used to finance consumption, rather than investment. If there is a sudden decline in consumer confidence, it could lead to a wave of defaults on unsecured loans.


Despite the RBI’s cautionary steps, unsecured loans have grown significantly in India’s banking industry. While they provide customers with convenient access to borrowing, they also pose hazards to both banks and borrowers. To guarantee the banking sector’s long-term stability, banks must strike a balance between profitability and responsible lending while complying to the RBI’s standards.

Neogen Chemicals’ EBITDA Soars to 29.46 Cr fueled by lower input costs


SBI Card Q2FY24 results updates

SBI Card Q2FY24: Navigating Headwinds with a Vision for Long-Term Success

SBI Card Q2FY24: Navigating Headwinds with a Vision for Long-Term Success

Company Overview:

SBI Card & Payment Services Limited (SBI Card) is a leading Indian credit card issuer and payment services provider. It is a joint venture between the State Bank of India (SBI), the country’s largest bank, and The Carlyle Group. SBI Card offers a wide range of credit cards, including super premium cards, premium cards, travel and shopping cards, classic cards, exclusive co-branded cards as well and corporate cards. SBI Card was launched in October 1998 and has since grown to become the second-largest credit card issuer in India, with a customer base of over 16 million cards in force. The company has a wide network of branches and ATMs across India and also offers its products and services through online and mobile channels. SBI Card is known for its innovative products and services, as well as its commitment to customer service. The company has won various industry accolades for its customer service, branding, product innovation and marketing.

Core earnings fall as NIM/retail spending falls; costs rise:

SBI Card’s second-quarter earnings were in line with expectations, but they did not provide a clear picture of the company’s performance. The following reasons contributed to the 2% in QoQ growth in core profitability:- Margin decline: NIM fell 12 basis points year on year to 11.3%, while yields fell 14 basis points year on year. The share of high-yielding receivables remained stable (62% of the mix over the last two quarters), while revolvers stayed stable. Furthermore, the corporation was unable to reprice EMI loans in time for the holiday season. Fee growth slowed to 3.5% as less lucrative corporate spending (increased 14% QoQ) outpaced retail spending (up 5% QoQ). Online retail spending on discretionary items (consumer durables, clothes, and jewelry) fell 44%. Analysts are cautious about discretionary spending since structural demand drivers are weak. Cost income increased to 57% (up 70 basis points QoQ) as a result of significant corporate spending and cash-back incentives (recent offers as high as 27.5% cash-back on select consumer durable goods).

Anticipated Impact of Industry Headwinds on SBI Card’s Q3 Earnings:

SBI Card’s third-quarter earnings are projected to be impacted by industry headwinds such as low revolvers, competition, poor discretionary expenditure, and risks associated with small-ticket card loans. As a result, analysts anticipate that the company’s receivables CAGR will fall from 30% to 27% in FY24-26E, while its spending CAGR will fall from 24% to 21%. Analysts anticipate that SBI Card’s cost-income ratio will stay elevated in FY24-26E, averaging 58%.

SBI Card Faces Trade-off Between Credit Cost and NII:

SBI Card is facing a difficult choice between increasing its net interest income (NII) and reducing its credit costs. On the one hand, the company is increasing its sourcing from open market and banca channels in order to boost revenues. However, this could lead to higher credit costs, which could offset the positives in NII. SBI Card’s self-employed and tier 3 sourcing climbed to 41% and 33%, respectively, in Q2, contributing to an increase in NII. However, credit expenses increased to 6.7%, and write-offs increased 9% year on year. Given that SBI Card is not immune to the unsecured credit market’s headwinds, analysts have revised down their credit cost/GNPA projections for FY24E/25E to 6.3%/2.7%, respectively.

Valuation Outlook: Downgrade to “Reduce,” TP Adjusted to INR 829:

The current valuation of the stock is INR 747 per share. With a book value of INR 117 per share, the market is trading at a Price-to-Book Value (P/BV) ratio of 6.43x, indicating that the stock is priced significantly higher than its book value. Furthermore, the Price-to-Earnings (P/E) ratio stands at 30.7x, suggesting that investors are willing to pay a premium for each unit of earnings generated by the company. This elevated P/E ratio could be a result of strong market sentiment, high growth expectations, or a combination of both. In evaluating this stock, investors should carefully consider whether the premium valuation aligns with their investment goals and risk tolerance. Exhibits 1-6 demonstrate a detailed examination of industry trends that suggest a considerable increase (an increase of 114 basis points) in the 90-day past due (90dpd) rate for credit cards, raising worries regarding SBICARD’s portfolio quality in the coming months. This condition produces a more obvious conflict between credit charges and net interest income (NII), which could have a detrimental influence on the company’s profitability.

Impressive Q2FY24 Financial Performance:

In the second quarter of the fiscal year 2024, the company reported robust financial results. Total revenue amounted to INR 14,286 crore, indicating a substantial 26% year-on-year (YoY) growth. The net profit also demonstrated remarkable performance, surging to INR 603 crore, marking a substantial 15% YoY increase. Earnings per share (EPS) reached INR 6.37, reflecting a solid 14% YoY growth. Additionally, the Return on Equity (RoE) stood at an impressive 25.7%, and the Return on Assets (RoA) was a notable 5.63%, showcasing the company’s strong financial performance and efficiency during this quarter.


SBI Card is a well-known Indian credit card issuer and provider of payment services with a proven track record of profitability and growth. However, the company is currently suffering industry headwinds such as low revolvers, competition, poor discretionary expenditure, and risks associated with small-ticket card loans. These obstacles are expected to have an immediate impact on the company’s profitability. Despite the challenges, SBI Card is well-positioned for long-term expansion. The company has a strong brand, a diverse product and service offering, and a sizable client base. SBI Card is also investing in digital and technology initiatives to enhance customer experience and operational efficiency.


Q2FY24: Shriram Finance reports robust AUM growth Drives NII soars to 4,594 Cr

Festive Season to Boost E-Commerce Sales in India

Festive Season to Boost E-Commerce Sales in India

Festive Season to Boost E-Commerce Sales in India

The festive season sales across e-commerce platforms have seen massive growth in 2023 as compared to muted growth in 2022, according to industry expertscommerce firms in India have seen huge growth in sales during the ongoing festive season, with some platforms reporting over 30% growth compared to the same period last year. This growth is being driven by a number of factors, including rising disposable incomes, increasing internet penetration, and attractive discounts and offers from e-commerce platforms.

The festive season is one of the most important periods for e-commerce firms in India, and they typically offer their biggest discounts and promotions during this time. This year, e-commerce firms have been particularly aggressive with their offers, in an effort to attract and retain customers. As the e-commerce industry matures, the report anticipates a rise in contributions from higher-margin categories such as beauty and personal care (BPC), home and general merchandise, and fashion during this year’s festive season.

Over recent quarters, we have observed an increased GMV from categories beyond electronics. While electronics tend to sell well during festive periods, a broader analysis of festive sales over the past few years reveals a clear trend towards category diversification. This is a positive development for the ecosystem, indicating consumers’ willingness to purchase a variety of product categories online and attracting more brands to meet their demands,” noted Mrigank Gutgutia, Partner at Redseer Strategy Consultants.

Flipkart and Amazon, the two largest e-commerce firms in India, have both reported strong sales growth during the festive season. Flipkart’s Big Billion Days sale, which began on October 8, saw a 30% increase in order volumes compared to the same sale period last year. Amazon’s Great Indian Festival sale, which also began on October 8, saw a 25% increase in order volumes.

Other e-commerce firms, such as Myntra, Meesho, and Snapdeal, have also reported strong sales growth during the festive season. Myntra, which is a fashion e-commerce platform, saw a 40% increase in order volumes during its End of Season Sale. Meesho, a social commerce platform, saw a 35% increase in order volumes during its Maha Diwali Sale. Snapdeal, a general merchandise ecommerce platform, saw a 20% increase in order volumes during its Diwali Sale.

E-commerce sales in the previous festive season were 35% higher than in 2021, representing a significant increase. The strong growth in e-commerce sales during the festive season is a sign of the growing maturity of the e-commerce market in India. It is also a sign of the increasing popularity of online shopping among Indian consumers.

The following have contributed to the massive growth in festive season e-commerce sales in 2023:

Recovery from the COVID-19 pandemic:

The e-commerce industry in India faced a challenging year in 2022 due to the COVID-19 pandemic. However, in 2023, the industry has made a remarkable recovery, with a significant surge in festive season e-commerce sales. Consumers have returned to online shopping in large numbers, driven by their increased comfort with digital retail and the industry’s enhanced infrastructure and safety measures. Businesses have employed innovative marketing strategies and attractive deals to entice shoppers. This resurgence in ecommerce sales in 2023 showcases the industry’s resilience and its ability to adapt, even in the face of adversity.

The rise of social commerce:

Social commerce is a new and growing trend in India. Social commerce platforms, such as Meesho and Shop Clues, allow consumers to shop online through social media platforms such as
WhatsApp and Facebook. Social commerce is particularly popular among consumers in rural and semi-urban areas, where internet access is limited.


The popularity of new product categories:

New product categories, such as electronics and fashion, are becoming increasingly popular among Indian consumers. These categories are driving a significant portion of the growth in e-commerce sales. Tier-II and Tier-III cities are driving growth: Tier-II and Tier-III cities are accounting for a growing share of e-commerce sales in India. This is due to the increasing internet penetration and rising disposable incomes in these cities.


Mobile commerce is on the rise:

Mobile commerce is also on the rise in India. More and more consumers are using their smartphones to shop online. This is convenient for consumers, who can shop from anywhere
and at any time. E-commerce firms are increasingly focusing on providing personalized shopping experiences to their customers. This is done by using artificial intelligence and machine learning to recommend products to customers based on their past purchase history and browsing behaviour.


Neogen Chemicals’ EBITDA Soars to 29.46 Cr fueled by lower input costs


Shaping the Future: Key Trends in the Hospitality Industry

Shaping the Future: Key Trends in the Hospitality Industry

Shaping the Future: Key Trends in the Hospitality Industry

The Indian hotel industry has been a key contributor to the country’s economy, with its substantial growth trajectory. India’s charm, characterized by its lively culture, rich historical sites, and breathtaking natural beauty, has captivated tourists from around the globe, establishing it as a favored travel destination. As a result, the hospitality industry in India has been growing, and it’s making a big contribution to the economy. In recent years, the industry has faced challenges posed by the COVID-19 pandemic. However, it has shown resilience and adaptability, positioning itself for a robust future. According to the Indian Brand Equity Foundation, in 2021, the travel and tourism industry added $178 billion to India’s economy, and it’s expected to increase to $512 billion by 2028.

Nonetheless, professionals in the field assert that what we see is only the beginning, as there exists vast, unexplored potential waiting to be unlocked beneath the surface. In 2022, India witnessed significant investments in the construction of hotels, boasting a total of 256 new establishments. The hotel industry is anticipated to achieve a noteworthy valuation of Rs 1210.87 billion by the conclusion of 2023, displaying a notable Compound Annual Growth Rate (CAGR) of 13% over the period from 2018 to 2023.

Despite the substantial growth in the Indian hospitality industry, a critical impediment remains – the shortage of skilled professionals. To address this hurdle, it is imperative to nurture a workforce that possesses a harmonious mix of technical proficiency, interpersonal skills, and cultural awareness, thereby guaranteeing guests enjoy exceptional experiences devoid of any impediments.

In order to tackle the deficiency of skilled personnel, Indian educational institutions must adopt a proactive strategy. The foremost aim of educators should be to create awareness among the general public regarding the immense potential of the hospitality and tourism sector. It is imperative for Indian society to acknowledge the remarkable opportunities presented by this industry.

To fully harness the extensive potential of India’s hospitality sector, it is essential to employ a multifaceted strategy. Initially, it is vital for both the government and stakeholders in the industry to cooperate in order to cultivate a climate that encourages expansion and investment. This involves the expansion of infrastructure, streamlining regulatory frameworks, and proactively promoting lesser-explored destinations to attract a greater number of visitors and strengthen the sector.

The past year has brought remarkable transformations to the hospitality sector, primarily due to the far-reaching effects of the COVID-19 pandemic on travel and tourism. While the world is gradually on the path to recovery, hotels and resorts are shifting their focus towards the upcoming five years. Anticipations for the hospitality industry are optimistic, as a surge in travel demand and a craving for distinctive experiences are expected to fuel its resurgence. Nevertheless, to maintain a competitive edge, hoteliers must be prepared to accommodate evolving consumer tastes and leverage technological progress. The hospitality industry is currently undergoing substantial changes that are expected to shape its trajectory over the next five years. These evolving trends encompass various dimensions.

1. Technology Integration:

The hospitality sector is standing at the threshold of a technological revolution that promises to enhance the guest experience and streamline operations. Innovations such as mobile check-ins, smart room keys, and remote interactions with hotel services are becoming increasingly prevalent. Guests can now perform tasks like room bookings, ordering room service, requesting housekeeping, and making payments using their mobile devices. A report by Google and Boston Consulting Group predicts that the Indian online travel market will reach USD 13.6 billion by 2023, with a compounded annual growth rate (CAGR) of 13.5% from 2023 to 2028.

2. Sustainability:

In alignment with the Swachh Bharat Abhiyan, the Indian government’s nationwide cleanliness campaign, hotels and resorts are actively implementing zero waste management systems. These initiatives involve the adoption of eco-friendly materials, the introduction of composting systems, and the promotion of recycling. Sustainability is gaining increasing importance as global attention is directed towards environmental responsibility.


3. Personalization:

With the abundance of guest data, hotels and resorts are harnessing the potential of data-driven personalization. This encompasses tailoring room preferences, crafting custom packages, and offering recommendations based on guests’ interests and past behavior. The utilization of mobile applications plays a crucial role in delivering these personalized experiences.


4. Health and Wellness:

The concept of wellness in the hospitality industry has evolved to include not only
physical health but also mental and emotional well-being. Hotels and resorts are now
providing comprehensive wellness programs that incorporate mindfulness practices,
yoga, meditation, and wellness coaching. Immersive wellness experiences extend
beyond spa treatments and fitness classes to encompass outdoor activities, cultural
experiences, and retreats in natural settings.


5. Rise of Bleisure Travel:

More people are combining work and leisure when they travel. The phenomenon of bleisure travel is gaining prominence, prompting hotels to cater to the needs of both business and leisure travelers. This trend includes the provision of high-speed internet workspaces and recreational amenities such as spas, fitness centers, and rooftop bars. Hotels are also adopting flexible booking options to accommodate the unpredictable schedules of business travelers, including flexible cancellation policies and 24-hour check-in/check-out.

In summary, the hospitality industry is in a state of continuous evolution. To thrive in this dynamic environment, hotels and resorts must proactively embrace these emerging trends and implement innovative solutions. By doing so, they can provide memorable and fulfilling experiences for guests while maintaining their competitiveness in this rapidly changing landscape.

Neogen Chemicals’ EBITDA Soars to 29.46 Cr fueled by lower input costs


MMFS Q1FY24 results updates

Credag outperforms analyst expectations Profit soar to 349 Cr

Credag outperforms analyst expectations Profit soar to 349 Cr

Company Overview:

CreditAccess Grameen Ltd is a Non-deposit taking NBFC-MFI (Micro Finance Institution) that specializes in providing microfinance loans, including income generation loans, family welfare loans covering medical and education expenses, home improvement loans for water and sanitation, and retail finance loans. The company also offers a wide range of products, such as unsecured business loans, 2-wheeler loans, gold loans, housing loans, and life insurance. They have expanded their reach by adding 51 new branches, bringing their total to 1,877 branches, and adding 3.36 lakh new customers, with 40% coming from states outside the top 3. Recently, the company raised 990 Cr through public NCDs with an average coupon rate of 9.3% and an average tenure of 3 years.

Robust Business momentum:- GLP/disbursement growth-36% YoY/13.5% YoY

In Q2FY24, the company experienced a significant growth in its Gross Loan Portfolio (GLP), which increased by 36% YoY and 3.1% QoQ, reaching 22,488 Cr. Disbursement amounts also grew by 13.5% YoY and 4.1% QoQ, totaling 4,966 Cr. Income generation loans (IGL) constituted 94% of the GLP, indicating a concentration risk on this product. The number of borrowers increased by 21.2% YoY and 4.1% QoQ, reaching 46.03 lakh.

Well Structured Liability Management:

CreditAccess Grameen Ltd has focused on securing long-term funding from foreign sources to mitigate short-term refinance risks. Their liability mix by tenure stands at 70% for long-term instruments, 23.5% for medium-term, and 6.7% for short-term as of Q2FY24. They maintain a diverse lender base, which includes 46 commercial banks, 3 financial institutions, 16 foreign lenders, and 6 NBFCs. Their cost of borrowing stood at 9.8% in Q2FY24

Asset Quality Improved & Strong CAR – 25% in Q2

The company’s asset quality improved significantly in Q2FY24, with Gross Non-Performing Assets (GNPA) reducing by 140 bps YoY and 12 bps QoQ to 0.77% amounting 173 Cr. Net Non-Performing Assets (NNPA) also declined by 53 bps YoY and 3 bps QoQ to 0.24% amounting 53 Cr. The company maintains a robust capital adequacy ratio of 25%, well above the RBI guideline of 15%. Collection efficiency stood at 98.7% in Q2

Valuation and key ratio: – ROA 170+ bps/ ROE 900+ bps/NIMs 110+ bps in Q2

The company’s stock is currently trading at 4.31 times its book value amounting to 364 per share at 1,571 Rs. In Q2FY24, they reported impressive return ratios, with Return on Equity (ROE) improving by 900 bps YoY and decreasing by 170 bps QoQ to 24.7%. Return on Assets (ROA) stood at 5.6%, growing by 170 bps YoY and decreasing by 20 bps QoQ. Net Interest Margins (NIMs) increased by 110 bps YoY and 10 bps QoQ to 13.1%, while the cost of borrowing grew by 60 bps YoY to 9.8%. The interest coverage ratio stood at 2.13x, indicating the company’s solvency.

Q2 FY24 Results Highlights: Standalone

➡️ In Q2FY24, the company saw significant growth in interest income, which increased by 53.95% YoY and 7.44% QoQ to 1,187 Cr. Interest expenses also grew by 55.13% YoY and 10.12% QoQ to 424 Cr, resulting in Net Interest Income (NII) reaching 763 Cr, a growth of 53.29% YoY and 6.01% QoQ, due to an increased yield on loans by 200 bps YoY and 40 bps QoQ to 21.1%.

➡️ Pre-provision operating income (PPOP) increased by 68.91% YoY and 4.28% QoQ to 565 Cr, attributed to a decline in the cost-to-income ratio by 650 bps YoY to 31.7%.

➡️ Provision decline 9.03% YoY (+25.46% QoQ) to 96 Cr while credit cost stood at 1.60% due to healthy asset quality in Q2FY24.

➡️ Net Interest Margins (NIMs) increased by 110 bps QoQ to 13.1%, while the cost of borrowing increased by 60 bps YoY.

➡️ Profit After Tax (PAT) surged by 99.38% YoY and 0.84% QoQ to 349 Cr, driven by strong GLP growth 36% YoY, NIMs improvement 110+ bps YoY, and cost efficiency. EPS for the quarter stood at 21.96 Rs (PQ-21.78) grew 99.38% YoY and 0.84% QoQ


CreditAccess Grameen Ltd appears to be on a strong growth trajectory with robust business momentum, well-managed liabilities, improved asset quality, and impressive financial performance in Q2FY24. The company’s focus on microfinance and other financial products, along with its diverse funding sources, positions it favorably in the market. The positive financial ratios and strong capital adequacy further enhance its prospects. However, there may be a need for diversification in the product portfolio to reduce concentration risk.


Q2FY24: Shriram Finance reports robust AUM growth Drives NII soars to 4,594 Cr