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BEML Surges by 7.86% on Likely Upgrade to Navratna Status
Business, Equities, Markets, Research, Result Updates - January 21, 2025

Zomato Q3FY25: Strong GOV Growth Amid Profitability Pressures

Zomato Q3FY25: Strong GOV Growth Amid Profitability Pressures

Company Name: Zomato Ltd | NSE Code: ZOMATO| BSE Code: 543320 | 52 Week high/low: 305 / 127 | CMP: INR 212 | Mcap: INR 2,04,829 Cr | P/E – 309

About the Stock
➡️Zomato is engaged in multiple business vertical segment such food delivery, quick commerce (Blinkit), going out and B2B supplies. Company has done rapid expansion in quick commerce segment by adding 368 net new stores in Q3FY25.

GOV shoot up led by all segment (up 57% YoY /14% QoQ)
➡️Zomato’s gross order value grew healthy across all the segment. GOV (B2C business) increased 57% YoY (+14% QoQ) to 17,671 Cr thanks to all segment. This growth is attributed to strong growth in food delivery business (up 17% YoY/ 2% QoQ) followed by Quick commerce (blinkit) (up 120% YoY/ 27% QoQ) and Going out (up 191% YoY/ 35% QoQ ). Quick commerce business operating under the name Blinkit 
➡️Key operating metrics of all business segment helps in robust growth. In blinkit business 368 net new stores and also added 1.3 million sqft of warehousing space, account for 30% of overall warehousing space. This rapid expansion will take time to ramp up the business across all new store.
➡️Average monthly customer surged 9% YoY (+0% QoQ) to 20.5 Mn in Q3FY25 vs 20.7 Mn in Q2FY25 for food delivery business. While Quick commerce (blinkit business) customer base nearly double from 5.4 Mn in Q3FY24 to 10.6 Mn in Q3FY25 reflecting the change in buying pattern of consumer and habit for convenience buying.
➡️Quick commerce (blinkit business) order value double to 110.3 Mn in Q3FY25 from 5.8 Mn in same quarter previous year led by increase in Average order value and new customer base.

Profitability disappoint on higher depreciation; Quick commerce turn negative from break even
➡️Zomato’s food delivery business has maintained the overall profitability despite the loss in quick commerce business (blinkit). Overall EBITDA surged 218% YoY (-28% QoQ) to 162 Cr driven by strong growth in food delivey business and margin expansion (100 bps YoY). While quick commerce adjusted EBITDA at loss of 103 Cr from -89 Cr in Q3FY24. EBITDA margin has expand 100 bps YoY to 4.71%. led by all segment.
➡️Despite the robust growth in quick commerce GOV, margins are not improving due to the rapid infrastructure expansion.
➡️EBIT decline 10% YoY (-285% QoQ) to -85 Cr due to increment in depreciation by 93% YoY to 247 Cr.
➡️PAT down 57% YoY to 59 Cr due to the higher depreciation. PAT margin decline 300 bps YoY to 1%. While on QoQ basis PAT down 66% due to higher tax expenses and interest cost.

Years Q3FY25 Q3FY24 YoY (%) Q2FY25 QoQ (%)
Revenue  5,405 3,288 64% 4,799 13%
COGS 1500 782 92% 1334 12%
Employee cost 689 423 63% 590 17%
Advertisement & sales promotion 521 374 39% 421 24%
Delivery & related charges 1450 1068 36% 1,398 4%
Other expenses 1083 590 84% 830 30%
Total OpEx 3743 2455 52% 3239 16%
EBITDA 162 51 218% 226 -28%
EBITDA Margin% 3% 2% 93% 5% -36%
Depreciation 247 128 93% 180 37%
EBIT -85 -77 10% 46 -285%
EBIT Margin% -2% -2% -33% 1% -264%
Interest expenses 43 18 139% 30 43%
Other income 252 219 15% 221 14%
PBT  124 124 0% 237 -48%
Tax expenses 65 -14 -564% 61 7%
Tax rate % 52% -11% -564% 26% 104%
PAT 59 138 -57% 176 -66%
PAT Margin % 1% 4% -74% 4% -70%
EPS 0.07 0.16 -60% 0.20 -68%
No. of shares 906 857 6% 872 4%

Valuation and Key metrics
➡️Currently the stock is trading at a multiple of 309x 0.75 EPS at the CMP of 212 Rs. Company trading at 9.65x its book value of 22.1 per share. Trailing twelve months ROE and ROCE stood at 1.12% and 1.14% respectively. Interest coverage ratio stood at 7.45x signify strong solvency.

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Affordable housing to take a hit in the upcoming Budget

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HAL Gains Momentum as Analysts Predict Strong Growth Potential
Business, Equities, Markets - January 20, 2025

Private Investments and Employment Set for Growth in India, CII Survey Shows

Private Investments and Employment Set for Growth in India, CII Survey Shows

Overview
According to a Confederation of Indian Industry (CII) survey, private investments—which are vital for economic expansion and job creation—are expected to pick up steam in the upcoming quarters after stalling out in recent years. The current state of the Indian economy is favorable for private investments, and the nation is emerging as a “bright spot” in the difficult global environment. By the first week of February, 500 firms would have participated in the ongoing pan-India survey. A sample of 300 businesses from all industry sizes (Large, Medium, and Small) served as the basis for the intermediate results. In order to evaluate the increase in private sector investments, employment, and pay growth, an industry survey was carried out.

Major companies have boosted their workforce
Remarkably, preliminary findings indicate that around 97% of the sample companies are anticipated to grow their workforces in 2024–2025 and 2025–2026. Indeed, according to 79% of the respondents’ companies, they have increased their workforce during the previous three years. According to the CII study, which was completed within the last 30 days, 75% of participants think that the state of the economy is favorable for private investment at the moment.

Further, India has emerged as a bright spot in this difficult global background, CII added, despite the fact that geopolitical fault lines have seriously hampered the global economy and disrupted global supply chains. The government’s prudent economic policies, which prioritized growth driven by public capital expenditures, contributed to the economy’s recovery.

Muted investment in the first half of the current fiscal quarter
An increase in private investments may be anticipated over the coming quarters, since 70% of the enterprises questioned stated that they will make investments in FY’26, according to Chandrajit Banerjee, Director General, CII.

One of the main causes of the drop in economic growth during the first half of the current fiscal year was muted investment. During the July–September 2024 period, India’s GDP growth fell to a seven-quarter low of 5.4%. Official projections predict that GDP growth will be 6.4% for the year. Because of restrictions relating to the Lok Sabha election, government capital expenditures were low in the first half of the fiscal year. According to Deloitte’s recent India Economic Outlook study, investors’ views were affected by global concerns regarding future trade, investment outlook, and changing technology and its impact, even if muted urban demand has been one of the factors driving low private sector investment.

Employment in the Manufacturing and Services Sector
It is anticipated that the manufacturing and services sectors will see an average growth in direct employment of 15 to 22 percent over the course of the upcoming year as a result of planned investments. The initial results on indirect employment showed similar forecasts, with manufacturing and service firms anticipating increases in indirect employment of roughly 14% and 14%, respectively, over current employment levels.

CII Forecasts Steady Economic Expansion and Rising Wages
Regular and contractual workers take less time to fill a vacant position, indicating the need to fill the availability of skilled staff at the higher level in sample firms. The majority of the firms surveyed suggested that it takes anywhere from one to six months to fill vacancies at the Senior Management, Management/Supervisory level.

Given the favorable outlook for the two key growth drivers, employment and private investments, the CII is optimistic that overall growth will likely stay steady at 6.4% to 6.7% this year and reach 7% in FY26. Banerjee stated. The average compensation rise for Senior Management, Managerial/Supervisory jobs, and regular workers increased by 10 to 20 percent in FY25, according to 40 to 45 percent of sample firms polled. This wage growth has an effect on personal consumption. Further, in FY 24, the pattern was comparable.

Conclusion
These are encouraging findings that demonstrate assurance on some of the key facets of the economy. The Director General of CII emphasized that the survey’s findings, when viewed in conjunction with other new economic indicators, will contribute to a thorough picture of the economy.

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Solid reason for GST reduction on two-wheelers

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Festo Launches ₹500 Crore Facility to Boost Automation
Business, Equities, Markets - January 20, 2025

Hike in costs of funding possibly affect margins of NBFCs

Hike in costs of funding possibly affect margins of NBFCs

The Non-Banking Financial Companies (NBFCs) in India are expected to face burdens in their profit margins in the third quarter of December, 2024. The reasons for this is due to increasing liquidity issues and also a spike in cost of funds. Apart from this, both the NBFCs and microfinance firms have a large portion of unsecured loans. Due to a significant portion of unsecured loans, both of them are expected to face issues of late loan repayments.

NBFCs margins
The Elara Securities’ analyst, Shweta Daptardar states that the NBFCs are expected to record a fall of 13 basis points on a year-on-year basis in net interest margins (NIMs). Here, a single basis is about 0.01 in percentage point.

In the situation of increasing cost of funds, NBFCs are focusing more on diversification of liability. It will help the companies to spread out their financial risks. The third quarter of the current financial year is anticipated to observe the increasing burden on NIM and also high cost of managing loans.

The firms are trying to maintain their profitability through making provisions for potential losses due to delayed or non-payment of interest and principal amount. They are also focusing on enhancing operational efficiency of the company. Despite this, NBFCs are projected to record a fall in return on assets in the third quarter.

Further the brokerage firm Elara projected the growth of advances to fall to less than 18 percent on a year-on-year basis compared to the growth of 20 percent in the previous financial year. Elara also states that this weakening growth can possibly be observed in the NBFCs until the completion of the current financial year 2025. The reason for this is due to issues such as balance sheet risks, funding issues, and challenges occurring during changing business models.

Asset quality of NBFCs
Abhijit Tibrewal, an analyst of Motilal Oswal stated that the improvement of NBFCs’ loan quality projected in the second half of the current financial year will not be seen in the third quarter of the current financial year. As there was no big distress of decline, the quality of loans (assets) will either stabilize or fall slightly.

For microfinance firms, the cost of loans is anticipated to persist high and are further projected to rise high. The exception to high loan costs is only power and affordable housing finance companies. The loan cost is projected to rise high for vehicle financing firms and other diversified financing firms as well. The only exception in vehicle financing firms is Mahindra and Mahindra Finance.

Further the brokerage firm states that the net profit growth of its firms under coverage universe to be around 8 percent on a year-on-year basis. This growth is affected by factors such as persistent higher cost of loans, burden of weak NIM, and also pressures faced by microfinance firms in this third quarter again.

Many large NBFCs will start to announce their results from 20th January, 2024 onwards. L&T Finance is the first NBFC to announce its result.

Bunty Chawla, an analyst of IDBI Capital states that the expansion of credit book growth is expected to slow in the third quarter. The reason for this is weakening growth in auto financing. He further states that contraction in loan quality of both housing finance firms and NBFCs. The risk of stage 3 Assets ( loans repayment overdue more than 90 days) for housing finance and NBFCs is projected to be increasing by every quarter. It is because of lack of collection of loan payments and also adverse impact of unpredictable rainfall.

The retail NBFCs are anticipated to be affected by increased regulations, regional issues and also excessive structural leveraging. The major burden of NBFCs is located in retail credit which amounts to 35 percent of the total NBFC loans. In contrast to this, the micro finance only contributes to about 3.4 percent total credit and 9.6 percent of total retail advances. This situation is quite a matter of issue.

The third quarter is not only a quarter of worry due to high asset cost, the fourth quarter of this financial year is also expected to face issues. NBFCs’ non-performing assets in the third quarter is projected to surge by 6 basis points and hike in loan costs by 56 basis points on a year-on-year basis. The reason for this is ongoing difficulties in the industry. It is also due to the cautious approach taken by companies towards provisioning for potential losses. The reason for keeping more funds for potential losses is due to stricter rules of supervision.

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Solid reason for GST reduction on two-wheelers

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Jio Financial Acquires Remaining SBI Stake to Fully Own Jio Payments Bank in ₹104.54 Crore Deal
Business, Equities, Markets, Research, Result Updates - January 20, 2025

Jio Financial Services Q3FY25 Result Update: Mixed Performance Amid Key Developments

Jio Financial Services Q3FY25 Result Update: Mixed Performance Amid Key Developments

Jio Financial Services Ltd (NSE Code: JIOFIN | BSE Code: 543940) reported a mixed performance in its Q3FY25 results. The company’s total income stood at ₹449 crore, reflecting an 8% year-on-year (YoY) increase but a 35% sequential decline. The growth was moderated by a 22% YoY decline in interest income from loans and investments, which was offset by an impressive 85% YoY surge in net gains from fair value changes.

Financial Highlights:
Pre-Provision Operating Profit (PPOP): PPOP grew 5% YoY to ₹330 crore, driven by higher employee costs (up 58% YoY) and increased operating expenses (up 20% YoY). However, on a quarter-on-quarter (QoQ) basis, PPOP declined by 40% due to the significant drop in total income.

Profit After Tax (PAT): PAT remained stable at ₹295 crore, with margins declining by 500 basis points YoY to 66%. The flat PAT was attributed to reduced contributions from associates and joint ventures.

Business Updates and Key Metrics:
Assets Under Management (AUM): The company’s AUM achieved a significant milestone, surging 248% QoQ to ₹4,199 crore from ₹1,206 crore in Q2FY25.

Payments Business: Jio Payments Bank (JPB) has grown its customer base to 1.89 million CASA accounts and expanded its business correspondent network to 7,300 BCs.

Asset Management Collaboration: The joint venture with BlackRock (50:50) filed for final approval to commence operations. Additionally, the company incorporated Jio BlackRock Investment Advisers Pvt. Ltd. in September 2024 to launch wealth management services.

Strategic Growth Outlook:
JFSL is well-positioned for robust growth, supported by its diversified product portfolio, digital-first approach, and strategic partnerships with industry leaders like BlackRock and Reliance. Key growth drivers include:

* Expansion in retail lending and corporate financing.
* Integration of tailored insurance products to cater to India’s growing demand for financial solutions.

Valuation Perspective:
Currently trading at a price-to-book value (P/Bv) of 1.28x, JFSL lags behind the sectoral average P/Bv of 1.81x. While the company reported lackluster growth in total income and flat PAT this quarter, its impressive AUM growth and upcoming asset management initiatives signal long-term growth potential.

Conclusion:
Although Q3FY25 results were underwhelming, JFSL’s strategic developments, particularly its venture with BlackRock, position it to capitalize on India’s evolving investment landscape. Investors should closely monitor the company’s progress in the asset management and wealth advisory segments for future growth opportunities.

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Solid reason for GST reduction on two-wheelers

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Indian Government prepares to make ecosystem for premium Electric Vehicles
Autos, Business, Equities, Markets - January 20, 2025

Indian Government prepares to make ecosystem for premium Electric Vehicles

Indian Government prepares to make ecosystem for premium Electric Vehicles

The government of India wants to develop an EV ecosystem for premium Electric Vehicles. Last year, the Indian government encouraged investment in manufacturing of premium EVs at the local level through the scheme known as Scheme for Manufacturing Electric Car (SMEC). The SMEC was announced on 15th March, 2024.

To support this goal, the government wants to invest in research and development (R&D). It also wants to provide funds for establishment of separate specialized production lines particularly for EVs in the midst of existing factories. It helps to streamline production of EVs and also does not disturb production of other vehicles. The official guidelines regarding the schemes will be announced soon.

About the SMEC scheme
The main goal of the scheme was to uplift the investment in production of premium Electric cars at local level. It is to promote manufacturing at the local level. The scheme gives import relaxation of about 15 percent for a duration of 5 years. The automakers can import EV vehicles of minimum worth, freight cost and insurance of $ 35,000 with benefit of this reduced import duty. However, the automakers have to make an investment of at least 500 million dollars to establish local production of EVs in order to obtain this benefit of import duty relaxation to 15 percent.

Discussion with Auto Industry stakeholders
This resolution of focus on R&D and separate production lines for EVs was taken after the meeting with auto industry shareholders in the previous week. The meeting was at the final round and the government decided to take an approach of investment in R&D as well as creation of separate specialized production lines for EVs in the existing production facilities.

Apart from this, companies are permitted to make an investment of about 500 million dollars in the new construction projects for EVs. The auto makers are supposed to make an investment in duration of three years from the date of approval under the SMEC. Only after following this criteria, the company can benefit from lower import duties. The requirement for investments in Research and Development is similar to the existing requirements of the Auto production-linked incentive (PLI) scheme.

The recent meeting was not attended by Vin Fast and Tesla. Despite this, several automakers such as Toyota, Škoda-VW, Hyundai, and Mercedes Benz India showcased liking for the scheme.

These interested automakers are quite worried about the amount of investment required for creation of specialized production lines for Electric Vehicles only. To make a big investment of amounts such as Rs. 4,000 crore, there should be a large-scale operation to make the project practical and successful. Automakers believe that investments in research and development will promote creation of advanced technology in Electric vehicles.

The reason for worries about the investment amount is due to 89,000 Electric vehicles being sold in India in the year 2023. The worth of these Electric vehicles were higher than Rs. 25 lakhs. This makes it difficult for local companies to make a large amount of investments. In midst of increasing disposable income levels of population and expansion of the Indian economy, the sales growth of Electric Vehicles is projected to hike at a quicker pace.

In conclusion, the Indian government aims to make sure that rising demand for Electric vehicles is fulfilled by local automakers only. The government also wants to build a favourable environment for production of advanced technologies and premium EV cars. To achieve these goals, it has implemented schemes like SMEC.

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Solid reason for GST reduction on two-wheelers

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Dharani Sugars Q1 FY2026: Challenges Amid Industry Headwinds
Business, Equities, Markets - January 20, 2025

RBI’s aggressive forex interventions

RBI’s aggressive forex interventions

Overview
According to a Reserve Bank of India (RBI) assessment, foreign exchange interventions, such as spot and forward trades, are successful in reducing capital flow volatility, with symmetric effects from purchases and sales. Michael Debabrata Patra, Sunil Kumar, Joice John, and Amarendra Acharya are the authors of the report “Foreign Exchange Intervention: Efficacy and Trade-offs in the Indian Experience.” Patra served as the RBI’s deputy governor till January 14. The article’s authors’ opinions are their own and do not necessarily reflect those of the RBI. The identification of threshold effects in forex interventions was also mentioned in the paper.

Sand in the Wheels tactics to reduce exchange rate volatility
The report made it clear that attempts to “throw sand in the wheels” in order to lessen exchange rate volatility are more successful than extensive interventions meant to affect the level of the exchange rate. According to the paper, both spot and forward foreign exchange interventions successfully reduce the volatility of capital flows, with symmetric effects of purchases and sales. It is also found that forex interventions have threshold effects. It is more efficient to throw sand in the wheels to reduce exchange rate volatility than to use significant interventions to affect the level of exchange. It went on to say that this conclusion has significant ramifications for how exchange rate policy is implemented in nations like India.

Effects of Capital Flows and Forex Interventions
The study, which examined how well the RBI has intervened in the foreign exchange market, concluded that changes in portfolio flows brought on by global spillovers were the main cause of exchange rate volatility in India. Purchases and sells had symmetric impacts, and it was discovered that both spot and forward forex interventions successfully reduced capital flow volatility. Furthermore, threshold effects are suggested by the effect of gross spot interventions on exchange rate volatility, which is consistent with the “leaning against the wind” theory. The report’s empirical research shows that the Indian economy has gone through times of exchange rate volatility due to the growing liberalization of capital and current transactions. Real economic activity was destabilized as a result.

According to the analysis, swings in portfolio flows caused by risk-on-risk-off sentiments are the main cause of this volatility. Global spillovers have a greater impact than variations in inflation or interest rates. This conclusion has important ramifications for how exchange rate policies are developed and implemented in nations like India. The paper emphasized how the macroeconomic policy framework of emerging market economies (EMEs) has been considerably reinforced by combining inflation targeting with foreign exchange interventions. As a result, these interventions are now acknowledged as valid tools in the macroeconomic toolbox of EMEs.

RBI’s continuous interventions are at what cost?
Nonetheless, it is important to note that the nation’s foreign exchange reserves have suffered as a result of aggressive forex interventions. When the value of the rupee declines, the RBI sells dollars to support the rupee, which depletes the forex fund. As expected, figures released by the RBI on Friday indicated that India’s foreign exchange reserves had fallen for a sixth consecutive week and were at a 10-month low of $625.87 billion as of January 10. The reported week saw the largest drop in reserves in two months, down $8.72 billion. The reserves have decreased by $79 billion from their peak of $704.89 billion in late September and have dropped by a total of $23.5 billion during the last five weeks.

Both the appreciation or depreciation of foreign assets held in the reserves and the central bank’s activity in the forex market result in changes in foreign currency assets. The RBI steps in on both sides of the foreign exchange market to stop excessive rupee volatility. Weak capital flows and a rising U.S. dollar have been ongoing challenges for the euro in recent weeks. However, the rupee’s losses have been kept to a minimum by the central bank’s regular interventions through state-run banks.

According to a Reuters story this week, the RBI would use its foreign exchange reserves more sparingly in the future to reduce volatility in the domestic currency market in the face of significant global headwinds. The rupee experienced its eleventh straight weekly decline in the week of January 10, when it fell to its then-record low of 85.97. The currency experienced its biggest weekly decrease in 18 months last week, dropping 0.6% to close at 86.61 to the dollar on Friday. India’s reserve tranche stake in the International Monetary Fund is also included in the foreign exchange reserves.

Future of the Rupee
According to Madan Sabnavis, Chief Economist at Bank of Baroda, we may have recovered from a large portion of the Rupee’s depreciation versus the US currency. Sabnavis contends that a stronger dollar is mostly to blame for the pressure on the Rupee to depreciate.

However, Sabvanis contends that India’s solid fundamentals have restrained the rupee’s decline, with the domestic currency’s depreciation being less than that of other world currencies on both a spot rate and inflation-adjusted basis.

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RBI's Revised Co-Lending Norms Set to Transform NBFC Growth
Business, Equities, Markets - January 20, 2025

RBI talks about Geopolitical ripple effects on Indian economy

RBI talks about Geopolitical ripple effects on Indian economy

Overview
In recent years, geopolitics and its tensions has become a critical issue in many countries in the world. Geopolitics plays a crucial role in influencing the economy of any country in the world. It affects the countries’ trade policies, currency fluctuations, supply chains, investment flows, accessibility to resources, and advancement in technology. The world is going through big changes with several countries taking steps towards protectionism, restrictions on transferring of technology, creation of geopolitical blocs, de-globalisation, and re-emergence of mercantilism (accumulation of wealth through trade surplus) in their economy.

The Indian economy is affected by geopolitics and its rising tensions. It is particularly affected when the dollar gets appreciated leading to outflow of capital and also when spike in tariff rates lead to adversely affecting export levels. It is important to measure the impact of risk on the economy to get a clear picture.

Events of High GPRI in India
The recent RBI Bulletin published with the name as “Geopolitical Risk and Trade and Capital Flows to India,” takes into consideration the problem of geopolitical tensions and its impact on India. To measure India’s response to the geopolitical challenges on both domestic and global level, it implements Geopolitical Risk Index (GPRI). This bulletin is written by former Deputy Governor of RBI, Michael Patra with researchers Harshita Keshan, Sheshadri Banerjee, and Harendra Kumar Behara.

To evaluate the GPRI, it takes into consideration various news which has geopolitical implications. In case of India, high GPRI was hit in situations such as Kargil War in the year 1999, Kashmir insurgency of 1990, Gujarat riots in 2002 and also Mumbai attacks in 2008. A strong correlation is observed between GPRI of India and the world in the years after 2014. It indicates that India is getting more connected with the changes in global geopolitics.

Impact of High GPRI
The High GRPI of India leads to several adverse effects on the economy of the country such as depreciation of rupee, fall in capital inflows to the country, and decline in trade flows. It also leads to contraction in trade terms of the country. The increase in geopolitical tension in the country leads to an increase in the cost of trading and a spike in export prices. Increase in export prices adversely affects the export level in any country. Also, the change or rearrangement of trade routes of the country is observed due to the rising tensions. It leads to a spike in cost incurred by exporters and also insufficiency in resource allocation. In case of country-specific risks, the major issue of depreciation of rupee currency is observed resulting in foreign investors rapidly converting rupee into dollar to prevent the adverse impacts of the risks. Despite this, the effect on capital flows of the nation is quite brief in nature.

While analysing the response of both capital flows and trade, the recovery of trade is recorded at a slower rate. The recovery measures taken for capital flows levels are instant and significant. It recovers back at a faster speed. In contrast to this, it takes longer for trade flows to recover. It usually needs about 6 to 7 quarters to bounce back to health completely. In case of GPRI of India, a one standard deviation of risk to domestic GPRI can cause fall in capital flows by 0.2 percentage point and decline in trade volumes by around 0.9 percentage point. Also, the capital flows are one which will recover at a faster speed.

Impact of Global GPRI on India
The high Global GPRI indirectly impacts the Indian economy adversely. It affects India’s trade flows, fall in trade terms and also increase in capital outflows. In case of impact of Global GPRI on India, a single standard deviation to Global GPRI can adversely impact capital flows by fall of 0.3 percentage point and contraction in trade volumes by around 1.0 percentage point. The trade volume takes around 6 to 8 quarters for recovery indicates gradual recovery.

Nature of Geopolitical Risks
The geopolitical shocks are quite different from the usual economic risks. It is quite tenacious and long-lasting in nature. It is also difficult to bounce back to normal. In case of India, the domestic risk impacts the competitive nature of export and also disruption in supply chains. On the other hand, international risks lead to challenges in capital flows and trade levels. It is the result of change in capital allocations, stricter trade policies, and also make foreign investors cautious about investment.

Response to GPRI
India can address the issue of domestic and international GPRI by expansion of trade agreements and improvement in infrastructure of the country leading to secure and efficient trade relations. It should also focus on diversification of trade sources instead of relying on one or two. It is also important to create financial buffers. The expansion of trade agreements by initiating bilateral swap agreements and partnership can help to reduce shocks of GPRI. Also, connecting with multilateral institutions such as the World Bank and IMF will help the country. The creation of strong safeguard and precautionary approach will certainly help India to tackle the rising geopolitical challenges.

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BEML Surges by 7.86% on Likely Upgrade to Navratna Status
Business, Equities, Markets, Result Updates - January 17, 2025

Sugar Industry Outlook: Prices, Production, and Market Trends

Sugar Industry Outlook: Prices, Production, and Market Trends

Domestic and Global Overview of sugar prices
The current sugar season is difficult for sugar mills. International raw sugar prices have decreased by 21% since the end of September. One factor adding to some pricing pressure is the Brazilian Real’s dramatic fall against the dollar, while another is healthier than anticipated output in important producing countries like Brazil and Thailand. Brazil is a major exporter of sugar, thus exporters will profit from a depreciating real.

Since exports have not yet been permitted, weak worldwide prices may put pressure on domestic producers’ realizations. However, depending on trade limitations, domestic prices are somewhat impacted by global price movements. Whether or not Indian sugar mills will be permitted to export during the current sugar season is still a major concern. The production of sugar for domestic use and ethanol diversion have been the government’s top priorities.

Impact of Ethanol Diversion on production
Cane crushing statistics as of December 31 were recently issued by the sugar industry group ISMA, and it showed a dramatic 16 percent decline as a result of rains impacting crushing in Uttar Pradesh. The season, which begins in October and concludes in September, is still in its early stages. A more precise estimate will be ready in March or April. The post-diversion amount for ethanol is currently 9.5 million tons. In a later statement, ISMA noted that ex-mill prices are less than the cost of production and that the government plans to evaluate the minimum selling price for sugar. Additionally, it stated that arrears for cane purchased during the current sugar season had accumulated to a total of Rs 6500 crore.

This situation is not new as noted by India Ratings about the state of the industry. Due to decreased recovery rates brought on by weather-related events and the red rod infestation in Uttar Pradesh, it is anticipated that this season’s sugar output will drop to 30-31 million tonnes from 34 million tonnes the year before. It will be the lowest sugar production since the 2020 sugar season if that occurs.

Sugar production predicted to fall
After the diversion of sugar for ethanol, production may fall slightly short of demand but there are ample opening stocks of sugar to take care of demand. The one thing that remains to be monitored on the cost front is the UP State Advised Price that is not out yet, which UP-based mills will need to pay to farmers. Lower output should ordinarily translate to higher domestic sugar prices and support profitability. If we look at government data on wholesale sugar prices, then they are up by only 0.2 percent over a year ago and up by 0.4 percent over three months ago. That looks hardly conducive for mills to raise prices. The government, of course, will be happy with that market situation as it wants to keep inflation under check. Since the government wants to control inflation, it will naturally be pleased with that market condition.

Sugar Mills’ Earnings from Ethanol
The next question is how much money sugar mills make from ethanol. The government halted ethanol diversion during the previous sugar season because it was concerned that it would limit the supply of sugar and cause prices to rise. The political sensitivity of such an event was increased by general elections. Although the regulations governing sugar diversion have been loosened, the India Ratings report indicates that during the current ethanol season, oil marketing corporations will mostly purchase maize as a feedstock for ethanol.

Indian Sugar stocks shoot up
In Thursday’s (January 16, 2025) trading, the majority of sugar stocks surged up to 8.1% as reports indicated the Indian government would likely decide soon to raise the minimum support price (MSP) of sugar. The price at which the government promises to purchase specific crops from farmers in order to guarantee that they receive a minimum price for their produce is known as the MSP. Its goal is to shield farmers from market price swings.

In terms of the BSE, Dhampur Sugar Mills, Dwarikesh Sugar, Dalmia Bharat Sugar and Industries, Shree Renuka Sugars, Bajaj Hindusthan Sugar, and Mawana Sugars all had increases of 5.9, 4.68, 4.14, and 3.46 percent, respectively.

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Expectation of allocations for Railway Sector to about Rs 3 Lakh Crore

Expectation of allocations for Railway Sector to about Rs 3 Lakh Crore

In the Union Budget 2025, there are currently high expectations in the market about a positive announcement for the railway sector. Despite this, many railway stocks are performing low compared to their high record trend in the year 2024. The reason for this is muted market sentiments. There are high expectations about the railway sector securing allocation of around Rs. 3 lakh in upcoming Union Budget 2025-2026.

Expectations about Allocation of Funds
In the Union Budget 2024, the funds allocated for the railway sector was slightly more than Rs. 2.62 lakh crore. Till the date of 5th January, the funds utilised accounts to Rs. 2 lakh crore. Many analysts estimate that the coming budget will record a rise in 15 to 20 percent of allocation of funds.

Partner and Vice President of Complete Circle Capital, Aditya Kondawar points out some likely projects such as improvements in KAVACH safety system, adoption of artificial intelligence (AI) for functions such as ticketing and also to raise funds in the Bullet Train project. He further points out allocation for projects such as Gati Shakti Multi-Modal Cargo Terminals (GCT) in order to encourage private investments in cargo infrastructure and also for the progress of the Amrit Bharat Station Redevelopment Scheme.

Increase in only allocation of funds in the railway sector is not enough. The utilisation of these funds is a very important step to achieve planned goals and development.

The equity research analyst at Choice Broking firm, Mandar Bhojane stated that the amount of capital expenditure in the railway sector has constantly increased in the duration of the previous five years. However, it has failed to achieve project timelines on time. He also believes that companies working in the railway sector will receive stimulus from the Indian government on the basis of schemes such as Public-Private Partnership (PPP) and Make in India.

Government Plans
The Indian government seemingly has plans to acquire 90 more Vande Bharat trains. At present, 136 Vande Bharat trains are functioning in India. It also has plans to use funds to build infrastructure for high-speed rail testing. The test track infrastructure is being constructed in Rajasthan which accounts to funds of Rs. 820 crore.

To increase Indian railway’s market share in cargo, it is expected to announce purchase orders of big wagons in the range of Rs 20,000 to Rs 25,000 crore. The current market share of the railway sector in cargo is about 27 percent. Also, the funds are projected to be used for the purpose of complete electrification of main railway lines as well as for enhancement of safety with improvement in level crossings, bridges and signalling.

Performance of Railway Stock
Many railway stocks are representing a weak trend. The railway stocks such as Jupiter Wagon and RailTel Corporation fell to 44 percent and 42 percent, respectively. Stock of Texmaco Rail and Container Corporation of India declined to 42 percent and 38 percent, respectively. While railway stocks such as IRCTC, IRCON International, RVNL declined to 35 percent, 48 percent, and 45 percent, respectively. Also, IRFC which was at its 52-week high fell to 48 percent.

Smallcase Manager and Co-Founder of KamayaKya, Nitya Shah stated that the Indian railway stocks were placed at very high valuation in recent times. Many railway stocks were considered multi-baggers in the period of the previous three years.

The railway stocks such as IRFC, IRCON International, Titagarh Wagons, and RVNL have given strong annualised returns in between 25 to 50 percent. The high valuations show positive expectations about the future growth. Despite this, there are rising concerns about whether these high valuations can be maintained or not in case of no corresponding increase in earnings of the firms. In present times, investors have to wait for better fair prices in this situation of high valuations of the stocks.

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RIL performance in third quarter supported by performance of consumer businesses

RIL performance in third quarter supported by performance of consumer businesses

Reliance Industries Limited (RIL) in terms of both EBITDA and revenue observed consecutive growth in the third quarter of the FY25. The main growth drivers were the Retail businesses and digital services of the firm.

Digital Services
The reason for increase in growth in the digital services segment of the business was mainly due to remarkable improvement in the Jio’s Average Revenue Per User (ARPU). This hike in ARPU indicates the potential of Jio to make more money from its customers. It is supported by factors such as increase in tariff, providing more expensive data plans and value-added services to customers.

Both EBITDA and revenue recorded a strong growth of 19 percent year-on-year. The growth in subscription additions was slow. However, the growth in ARPU was around 12 percent year–on-year. It was supported by a rise in contributions from 5G users and a spike in tariff.

Retail business
The revenue growth year-on-year of RRVL is high in single-digit for the third quarter of the financial year 2025. The positive growth was observed in consumption sections due to rise in positive customer sentiments. It was supported by the festive and wedding season. Also, the company’s strategy of network expansion along with strong growth in store throughput helped in achieving revenue growth.

In this quarter, RRVL recorded a year-on-year growth of 6 percent. It aims to draw more new customers, which is supported by growth of 15 percent in registered consumer base and 5 percent growth in shopping traffic.

The Business to customer (B2C) grocery recorded robust growth of 37 percent, supported by big stores. It observed growth in segments such as value apparel, premium personal care and general products. While, the retail electronic operations observed an increase in paying customers and a spike in average expenditures. While the fashion and lifestyle division of the company registered positive improvements due to launching of new fashion and enhancement of shopping experiences.

The contribution of digital and new commerce operations in total sales growth was 18 percent in the third quarter compared to 17 percent in the second quarter. The consumer brands’ revenue of the company is increasing at fast speed which accounts to Rs.8000 crore in the duration of nine months of the financial year 2025.

The total margins of RRVL raised by 8.6 percent due to increase in store throughput as well as efficiency in its operations.

One of the reasons for its increasing revenue growth is the company’s partnerships with global brands to expand its product base and to draw new consumers. In the third quarter, the company did a franchise partnership with Saks Fifth Avenue. It also did a joint venture with Mother care in order to get the Mothercare brand.

Oil and Gas Segment
In contrast to retail and digital services business, the oil and gas E&P segment recorded a fall in year-on-year revenue growth by 5 percent. The reason for decline in revenue was fall in volumes of gas and condensate in KGD6 and fall in prices of condensate and CBM gas. Though, it was partially balanced out by a rise in volumes of CBM gas and a slight rise in the price of KGD6 gas.

Oil to Chemical segment
Despite a fall in export by 9 percent, the revenues of the Oil to Chemical segment recorded an increase of 6 percent year-on-year growth. Overall revenue performance of the segment fell due to decline in export contribution.

The EBITDA of the segment increased by 16 percent on a quarter-on-quarter basis leading to improvement in margins by 165 bps. The transportation fuel prices were supported by robust demand in Asia except China. It was partially balanced out by the weak demand in China. Gasoline 92 RON prices in Singapore dropped slightly by $6.5 per barrel in the third quarter of financial year 2025 compared to $6.8 per barrel in the second quarter of the same financial year. The reason for this is sufficient supply in the market due to high US refinery production and slow demand in China.

The polymer margins of PVC and polypropylene were better which was partially supported by domestic demand levels and prices of Singaporean Naphtha. In contrast to this, polyester and polyethylene margins did not perform well.

Outlook
The diversified business structure of RIL is seen to be useful in the present domestic and international business challenges. Its proof is seen in the company’s growth in consumption-based businesses.

The company’s investment in 5G services is giving good results as 170 million 5G subscribers in the third quarter are recorded compared to 148 million subscribers in the second quarter. It made RIL as the biggest global 5G operator beyond China.

The broadband connectivity of Jio AirFiber is across India, particularly between the top 1,000 cities. It is important to note that more than 70 percent of the new connections are from these less served areas only. The home connection of Jio is increasing at a faster rate and the total installation has reached nearly 17 million. At global level, Jio is the fastest-growing fixed wireless operation. It has more than 2.8 million Jio AirFiber connections. The expansion of these services will certainly lead to a boost in financial performance of the company.

RRVL is also focusing on the creation of express deliveries of various products to fulfill consumer choice for quick delivery. It is implementing this plan through Jio Mart. The expansion of product base and improvement in customer sentiment will lead to a return of double-digit growth.

The E&P segment is going through temporary challenges. The 40 multi-lateral wells campaign (34 wells completed already) will help in production of CBM.

RIL will face risk and opportunity in the US-China trade war. RIL’s focus on premiumization in consumption productions and digitization will help its consumer-based operations. Directing cash flows in the clean energy sector will make RIL a key player in the transformation of the energy sector in India.

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