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Luxury EV Face Tax Jolt: India Panel Proposes GST Hike
Business, Equities, Market News, Markets - December 27, 2024

Tata Motors Stock Slump: Analyzing the Decline and Road Ahead

Tata Motors Stock Slump: Analyzing the Decline and Road Ahead

Tata Motors stock is down 35% from its peak of ₹1,179, presenting a potential buying opportunity for those aware of the reasons behind the decline. The stock appears attractive from a valuation perspective due to its steep fall from August to date. Among the four leaders in the auto sector, Tata Motors has experienced the steepest decline during this period while ranking second with a 15.31% contribution to the sector. Let’s analyze the reasons behind this drop and whether it is sustainable.

Despite sector challenges, the Nifty Auto Index has shown resilience, partially recovering from a 19% decline over the last two months. As of December 26, the index remains 17% below its all-time high. In contrast, Tata Motors’ performance lags behind its peers: while M&M is trading 7% below its peak, Maruti Suzuki is down 20%, and Bajaj Auto has declined 31% over the same period. Tata Motors faces challenges across multiple business segments, including domestic passenger and commercial vehicles, as well as its premium brand, Jaguar Land Rover (JLR).

Reasons Behind the Steep Fall
CV Volume Struggles in Q2
Tata Motors, which holds a 38% market share in the domestic CV market, is now facing headwinds. In Q2FY25, domestic wholesale CV volumes declined by 19.6% YoY due to a slowdown in government infrastructure projects, reduced mining activity, and lower fleet utilization caused by heavy rains. These factors contributed to a revenue decline of 13.9% in Q2FY25 and 5.2% in the first half of the fiscal year.

Price Hike for Trucks and Buses (Effective January 1, 2025)
Tata Motors announced a price hike of up to 2% for its trucks and buses, effective January 1, 2025. This is the fourth price increase, reflecting the broader struggles faced by Indian automakers. The hike will vary across models and variants but will affect the entire commercial vehicle range. Additionally, the company recently announced a 3% price hike across its entire vehicle lineup, including electric models, citing rising input costs as the primary reason. These costs include a surge in commodity prices, steep import duties on raw materials, and persistent supply chain challenges.

Uncertainty in China and Europe Hurts JLR Performance
In Q2FY25, EBITDA declined 16% YoY, and margins dropped 230 basis points to 11.4%, attributed to JLR’s weaker-than-expected performance. JLR faced temporary supply constraints and ongoing economic challenges in Europe and China. Supply disruptions, including aluminum shortages and delayed shipments, along with a tough macroeconomic landscape in these regions, further pressured operations.

Slow Passenger Vehicle and EV Sales
Tata Motors’ passenger vehicles and EVs have also slowed down. The recently launched Curvv EV, which accounts for 20% of EV bookings, faced ramp-up issues. However, the company expects to resolve these problems and plans to launch three to four new variants in the second half of FY25.

Tata Motors Gears Up for Growth with EV Focus and Profitability Goals
After a challenging Q2 FY25, Tata Motors is focusing on strategic recovery, aiming to become net debt-free and boost profitability. A moderate recovery in the domestic market is anticipated, supported by festive demand and infrastructure investments. Easing supply issues are expected to enhance JLR’s wholesale performance. The company is targeting revenue of around ₹2.5 lakh crore for JLR, with an EBIT margin exceeding 8.5%, driven by a stronger focus on luxury and EV offerings.

The CV segment emphasizes innovation and service quality, while the PV division focuses on retail expansion and cost control. Tata Motors plans to mainstream EVs through a diversified portfolio and a robust ecosystem, preparing to capture significant market share. As supply constraints ease and demand improves in H2 FY25, the company remains cautious about global market conditions, particularly in China and Europe. By balancing growth initiatives with disciplined resource management, Tata Motors is positioning itself for sustained long-term growth.

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India’s $30 Billion Sulfur-Cutting Program: A Strategic Review
Business, Equities, Market News, Markets - December 26, 2024

India’s $30 Billion Sulfur-Cutting Program: A Strategic Review

India’s $30 Billion Sulfur-Cutting Program: A Strategic Review

India’s coal-fired power plants, which supply a substantial portion of the country’s electricity, are at the center of an ongoing review of a $30 billion sulfur-cutting program. This initiative, part of India’s broader environmental goals, aims to mitigate the harmful effects of sulfur emissions from coal plants. As India looks to balance economic growth with environmental sustainability, this review is crucial not only for energy policy but also for the financial performance of coal-based utilities.

Background: The Need for a Sulfur-Cutting Program
Sulfur dioxide (SO2), a major air pollutant, is released during the burning of coal. It contributes to smog formation and respiratory diseases and is a significant factor in acid rain. In response to these environmental concerns, India’s Ministry of Environment, Forest and Climate Change (MoEFCC) proposed the $30 billion sulfur-cutting program in 2015. The program mandates power plants to install flue-gas desulfurization (FGD) units to reduce sulfur emissions significantly. These systems, which scrub sulfur from plant emissions, are vital to meet India’s international commitments under the Paris Agreement and the country’s own ambitious air quality standards.

Given the scale of the program, its review has raised questions about the feasibility of implementation, especially in light of the ongoing challenges faced by the Indian power sector.

Economic and Environmental Rationale
India’s power sector, predominantly fueled by coal, faces two critical challenges: the rising demand for energy and the urgent need to reduce carbon emissions. Coal accounts for about 70% of the country’s electricity generation. However, the environmental impact of coal combustion, particularly the emission of sulfur and other pollutants, has made this sector a target for reform.

The sulfur-cutting program aims to address these environmental issues while maintaining the country’s energy security. The installation of FGD units, which are costly and technologically challenging, is seen as a long-term solution. While it promises significant improvements in air quality, especially in the densely populated northern regions, the immediate financial burden on utilities is considerable.

Financial Impact on Power Utilities
The $30 billion sulfur-cutting program represents a massive investment for India’s coal-based utilities. Many of these companies are already grappling with financial stress due to low tariffs, high debt levels, and increasing competition from renewable energy sources. The additional costs of installing and maintaining FGD systems could strain their balance sheets, particularly given the extended timeline for the plants to recover these investments.

This financial pressure could have downstream effects on the stock prices of these utilities, which are often major players in the Indian power sector. For instance, companies like NTPC Ltd., Power Grid Corporation, and Adani Power have significant coal-based power portfolios. Investors in these companies are concerned about the potential for rising operational costs and reduced profitability, especially if power tariffs do not adjust accordingly to account for these increased expenditures.

Moreover, the financing of such a large-scale program raises questions about the sustainability of coal as the backbone of India’s energy strategy. Analysts are increasingly questioning whether continuing investments in coal-fired power plants are economically viable in the long term, particularly when renewable energy sources such as solar and wind are becoming more cost-competitive.

The Role of Government Subsidies
The Indian government has announced that it will provide financial support to utilities in the form of subsidies to mitigate the cost burden of installing FGDs. This support is crucial, as the upfront capital required for the program is substantial. However, the effectiveness of these subsidies remains to be seen, as there are concerns about delays in disbursal and the potential for further financial strain on government resources.

Subsidies could also play a role in the debate over the continued reliance on coal. While the Indian government has expressed its commitment to transitioning towards cleaner energy sources, coal still plays a critical role in ensuring energy access for millions of Indians, especially in rural areas. Therefore, the sulfur-cutting program can be viewed as a bridge between India’s current energy needs and its future goals of decarbonization.

The Renewable Energy Challenge
India’s renewable energy sector, which has seen impressive growth over the last decade, is expected to play an increasing role in the country’s energy mix. The government’s focus on expanding solar and wind energy capacity could reduce the future demand for coal-fired power. This transition is crucial for achieving India’s climate targets and improving air quality in urban areas. However, the pace of this transition remains slow, and coal remains a dominant source of electricity generation.

While coal may be phased out in the future, the current financial commitment to sulfur-cutting technologies suggests that the government is taking a cautious, incremental approach rather than an abrupt transition. This strategy is likely to placate both environmental advocates and coal-dependent industries, though it remains a delicate balancing act.

Conclusion
India’s review of its $30 billion sulfur-cutting program is a critical moment for the country’s energy sector. The challenges posed by the program—financial, technological, and environmental—highlight the complex dynamics of balancing economic growth with sustainability goals. For investors, the ongoing review raises important questions about the future of coal in India’s energy mix and the long-term viability of power utilities that rely heavily on coal. As the program moves forward, its impact on both the environment and financial markets will be key to understanding India’s transition towards a cleaner, more sustainable energy future.

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Bosch Ltd Q2 FY26: Auto Demand Boosts Sales, Profit Inches Up Despite Higher Costs
Business, Equities, Market News, Markets - December 26, 2024

Strong Growth in India's Auto Components Industry: A Positive Outlook for FY25

Strong Growth in India’s Auto Components Industry: A Positive Outlook for FY25

The Indian auto components industry has demonstrated impressive growth in the first half of FY25, reporting an 11.3% increase in its overall performance. This growth marks a significant recovery from the challenges faced during the pandemic years, and its trajectory indicates a strong future for the sector. In this article, we will delve into the key factors behind this growth, the current challenges the industry is facing, and the outlook for the coming months.

Key Growth Drivers
One of the primary reasons for the robust performance of the auto components sector in H1 FY25 is the strong demand recovery in both domestic and export markets. The rebound in vehicle production, along with the push towards electric vehicles (EVs), has spurred increased demand for components. This surge is seen not only in traditional vehicle segments but also in emerging markets, as global automakers look to India for cost-effective manufacturing solutions.

The Indian government’s initiatives to boost manufacturing under the “Atmanirbhar Bharat” initiative and the introduction of incentives for EV components have played a pivotal role. Policies such as the Production Linked Incentive (PLI) scheme have also provided a much-needed boost to the sector, encouraging innovation and competitiveness within the industry.

Export Market Growth potential
Exports have been a strong contributor to the growth of India’s auto components industry. As global automotive manufacturers diversify their supply chains, India has become a preferred destination for sourcing auto components, especially due to its cost advantages and strong manufacturing capabilities. In particular, demand from markets like North America, Europe, and ASEAN countries has seen notable growth.

The robust export performance highlights India’s growing importance as a global auto components hub, which is expected to further strengthen as the country continues to improve its infrastructure and ease of doing business. Additionally, the growing adoption of electric and hybrid vehicles worldwide presents new export opportunities for Indian manufacturers of EV components and batteries.

Technological Advancements and Innovation
Technological innovation is another critical factor contributing to the growth of the auto components industry. The shift towards electric and autonomous vehicles has spurred companies to invest heavily in research and development (R&D). Indian auto component manufacturers are increasingly focusing on designing and producing advanced components, such as electric motors, batteries, and charging infrastructure, to cater to the needs of the global automotive market.

Additionally, the use of AI, IoT, and automation in manufacturing processes has improved efficiency, reduced costs, and enhanced product quality, which further supports the industry’s growth.

Challenges Facing the Industry
Despite the positive growth trajectory, the auto components sector still faces several challenges. One of the most pressing issues is the volatility in raw material prices, particularly steel and aluminum, which have been subject to global supply chain disruptions. These fluctuations can impact profitability and cost structures for manufacturers, especially small and medium-sized players.

Another challenge is the skill gap in the workforce. As the industry increasingly embraces digital technologies and new manufacturing techniques, there is a growing need for skilled labor. Addressing this gap through targeted training and education programs will be crucial to sustaining long-term growth.

Outlook for the Future
Looking ahead, the outlook for India’s auto components industry remains positive, driven by strong domestic demand, expanding export opportunities, and technological advancements. The growing emphasis on sustainability and the shift towards electric vehicles is expected to create new avenues for growth, particularly in the development of EV-specific components.

In addition, as global supply chains continue to evolve, India’s strategic position as a manufacturing hub will likely strengthen, ensuring its competitiveness in the global market. With the support of government policies and private sector investments, the Indian auto components industry is poised for continued growth in the second half of FY25 and beyond.

Conclusion
The auto components industry’s 11.3% growth in the first half of FY25 demonstrates its resilience and potential. While challenges like raw material price volatility and workforce development need to be addressed, the sector’s long-term prospects remain robust. With the right investments in innovation and skills development, India is well-positioned to solidify its place as a key player in the global auto components market.

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MRF Q1 FY26: Revenue Up, Profits Down on Margin Pressures
Business, Equities, Market News, Markets - December 24, 2024

Auto Sector Eyes 5% Growth in 2025

Auto Sector Eyes 5% Growth in 2025

Auto Sector Eyes 5% Growth in 2025
Passenger vehicle sales in India are expected to grow by 5% in calendar year 2025, underscoring healthy consumer demand despite a high base. This growth projection stems from factors such as increased government spending, a favorable monsoon, and strong rural market sentiment bolstered by robust crop yields, according to senior industry executives.

While the SUV segment continues to dominate, there are signs of a resurgence in demand for entry-level small cars, as evidenced by a notable uptick in two-wheeler sales in recent months. This trend suggests a broader recovery in consumer confidence, particularly among price-sensitive buyers.

Recent Performance and Growth Drivers
Passenger vehicle sales faced subdued growth during the initial months of the fiscal year, with sales rising by only about 1% in October and 4% in November. The first quarter of FY25 witnessed a modest 3% growth. However, the industry has demonstrated resilience, particularly in the aftermath of the pandemic, when India emerged as one of the few markets globally to witness a sharp rebound in auto sales. In 2023, car sales surpassed the 4 million mark for the first time, a milestone repeated in 2024.

With the general elections concluded, automakers anticipate a pickup in government spending, further fueling demand. Additionally, a better-than-expected monsoon is set to enhance rural consumption, providing a critical boost to passenger vehicle sales in 2025.

Industry Insights
Hardeep Singh Brar, Senior Vice President and Head of Sales and Marketing at Kia India, expressed optimism about the coming year. “I feel next year the industry will grow by 5%. Government investments will be back. IT layoffs are behind us,” he said. Brar highlighted early signs of recovery in the sector, including fresh hiring initiatives by leading companies and favorable monsoon conditions.

Economic activity in 2025 is expected to rise, primarily driven by rural consumption and an anticipated increase in government expenditure. In its latest report, HDFC Securities emphasized India’s economic resilience, noting that the country is likely to outperform its global peers in GDP growth. Dhiraj Relli, Managing Director and CEO of HDFC Securities, commented, “India will largely be an outlier in GDP growth compared to its global counterparts. We anticipate the growth for FY26 to be volume-led, with BFSI, industrials, cement, energy, and IT sectors being the engine drivers.”

The Indian economy is projected to expand by 6.7% in FY26, creating a conducive environment for sustained growth in the automobile sector. According to an industry veteran, the market dynamics in terms of demand and supply have normalized, paving the way for steady growth. “While the percentage growth is likely to be small, it is important to factor in that this growth is coming on a very high base of about 4.3 million units,” the veteran noted. Encouragingly, small car sales, which had been under pressure, appear to be stabilizing, as indicated by the strong performance in two-wheeler sales.

Two-Wheeler Sales: A Positive Indicator
Sales of motorcycles, scooters, and mopeds rose significantly by 16.2% to 18.44 million units between January and November 2024, according to data from the Society of Indian Automobile Manufacturers (SIAM). This growth reflects improving consumer sentiment, particularly in rural areas, and bodes well for the broader automotive market. A rise in two-wheeler sales is often a precursor to increased demand for entry-level passenger vehicles, as it signals improved affordability and mobility aspirations among consumers.

Seasonal Impact and Inventory Replenishment
In December 2024, car dispatches from factories to dealerships surged by an estimated 10-12%, reaching 315,000-322,000 units. This uptick was primarily driven by manufacturers replenishing stocks at dealerships following robust festive season sales. The festive period traditionally accounts for a significant portion of annual automobile sales in India, and the strong performance during this time further underscores the sector’s recovery.

Outlook for 2025
The Indian automobile market’s growth prospects for 2025 are bolstered by several factors:

Government Spending: With elections concluded, an uptick in infrastructure and development projects is expected, which will indirectly support automobile sales by boosting economic activity and disposable incomes.

Favorable Monsoon: A good monsoon not only ensures robust agricultural output but also strengthens rural purchasing power, a key driver for small car and two-wheeler sales.

Economic Stability: The stabilization of global macroeconomic conditions, coupled with India’s projected GDP growth of 6.7%, provides a solid foundation for sustained demand.

Normalization of Supply Chains: After grappling with supply chain disruptions in recent years, the industry is now operating in a more stable environment, ensuring timely deliveries and reducing waiting periods for popular models.

Consumer Sentiment: The return of hiring activity in key sectors and the resolution of IT layoffs have improved consumer confidence. This, combined with increased affordability due to stable financing options, is likely to drive demand across segments.

Challenges Ahead
Despite the optimistic outlook, the industry faces certain challenges. High interest rates and elevated fuel prices could weigh on affordability for some consumers. Additionally, the push towards electric vehicles (EVs) and stricter emission norms may require significant investments from automakers, potentially impacting their short-term profitability.

Nonetheless, the industry is well-positioned to navigate these challenges. Automakers are increasingly focusing on product innovation and expanding their EV portfolios to align with evolving consumer preferences and regulatory requirements.

Conclusion
The Indian passenger vehicle market is set to maintain its growth trajectory in 2025, driven by favorable economic conditions, strong rural demand, and increased government spending. While challenges remain, the industry’s resilience and adaptability, coupled with supportive macroeconomic factors, are likely to ensure a steady pace of growth. With sales projected to rise by 5% on a high base, the coming year promises to be another milestone in the Indian automotive sector’s recovery and expansion.

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Visteon Invests $10M in India's Camera Manufacturing!
Business, Equities, Market News, Markets - December 24, 2024

Bank Deposit Rates Unlikely to Decline Amid Strong Loan Demand

Bank Deposit Rates Unlikely to Decline Amid Strong Loan Demand

Bank deposit interest rates in India are expected to remain steady through the remainder of FY25 as banks grapple with heightened credit demand and tighter liquidity conditions. Despite a recent cut in the cash reserve ratio (CRR) by the Reserve Bank of India (RBI), lenders are unlikely to lower deposit rates significantly, given the need to mobilize funds for a seasonally strong credit demand in the fourth quarter.

CRR Cut Offers Limited Relief
The RBI’s reduction in the CRR by 50 basis points earlier this month released an estimated ₹1.16 lakh crore into the banking system, temporarily easing liquidity pressures. However, this move is insufficient to offset broader systemic liquidity challenges. “While system liquidity is likely to continue to be in deficit in December 2024, the recent CRR cut by the RBI should provide some relief. Deposit rates are unlikely to show a material decline as the busy credit season lies ahead,” noted Karan Gupta, Director – Financial Institutions at India Ratings.

Liquidity Challenges Persist
As of mid-December, the banking system’s liquidity situation has deteriorated significantly. Liquidity swung from an average surplus of ₹25,000 crore in early December to a deficit of ₹1.11 lakh crore by December 16. This steep decline was largely attributed to quarterly advance tax payments by corporates, which drained liquidity from the system. The persistent deficit is expected to keep short-term rates elevated, with experts noting an increase of 5-10 basis points in short-term borrowing costs compared to early December levels.

Deposit Growth Matches Credit Growth
On the deposit side, growth has finally converged with credit growth, both clocking an annual increase of 10.6% and 10.7%, respectively, as of November 29. This convergence is a positive development for the banking system, as it alleviates the earlier mismatch between credit expansion and deposit mobilization. Nonetheless, maintaining this balance is critical, especially during periods of heightened loan demand.

Credit Demand Peaks in Q4
Traditionally, the fourth quarter sees a surge in credit demand driven by working capital requirements and seasonal business needs. This year is no different, with the banking system reporting a year-on-year credit growth of 10.6% as of November-end. Although this is a moderation from the double-digit growth observed earlier in FY25, the demand remains robust enough to exert pressure on banks to sustain elevated deposit rates to attract funds.

Marginal Impact on Bank Margins
The CRR cut has a nuanced impact on bank profitability. According to Soumya Kanti Ghosh, Group Chief Economic Adviser at the State Bank of India, “The reduction in CRR may not mathematically translate to any change in deposits and lending rates. However, it may have a positive impact on margins of 3-4 basis points for banks.” This modest improvement in margins provides some relief but does not fundamentally alter the funding cost dynamics for banks.

Rising Reliance on High-Cost Funding
To meet funding requirements, banks have intensified their efforts to attract deposits by offering higher term deposit rates. Additionally, many lenders have turned to certificates of deposit (CDs), a relatively costlier funding avenue, to bridge liquidity gaps. “Deposits have remained prominent in FY25 as banks have intensified efforts to strengthen their liability franchise and have offered higher term deposit rates,” said Sanjay Agarwal, Senior Director at CARE Ratings. “The banks are additionally obtaining funds through certificates of deposit, albeit at a comparatively higher expense.”

Funding Conditions to Remain Tight
Experts broadly agree that funding conditions for banks will remain tight in the foreseeable future. While deposit rates have likely peaked, they are expected to stay elevated as banks compete to secure funds amid volatile liquidity conditions and strong credit demand. The need to maintain an adequate liability base to support credit growth means that any reduction in deposit rates is unlikely before the end of FY25.

Implications for Borrowers and Depositors
For borrowers, the stable to marginally higher interest rate environment could mean higher borrowing costs, especially for short-term credit facilities. On the other hand, depositors stand to benefit from attractive term deposit rates, as banks continue to offer competitive returns to secure funds.

Outlook for FY26
As we approach the end of FY25, the outlook for FY26 hinges on several factors, including RBI’s monetary policy stance, global interest rate trends, and domestic economic conditions. If liquidity conditions improve and credit growth stabilizes, there may be room for banks to reassess deposit rates. However, the current environment suggests that deposit rates will remain a focal point for banks to navigate through the immediate challenges.

In summary, while the CRR cut has provided temporary relief, the interplay of strong credit demand, volatile liquidity conditions, and external pressures will likely keep deposit rates elevated in the near term. Banks will need to carefully manage their funding strategies to sustain growth and profitability in this challenging environment.

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Equity Right Honored as “Best Wealth Management and Investment Banking Firm” at Times Leading Icons Awards 2024
Autos, Business, education, Equities, Market News, Markets, Real Estate, Research - December 23, 2024

Equity Right Wins "Best Wealth Management and Investment Banking Firm" at Times Icons Awards 2024

Equity Right Wins “Best Wealth Management and Investment Banking Firm” at Times Icons Awards 2024

Equity Right, a distinguished boutique Portfolio Management Services (PMS) firm, has added another feather to its cap by winning the prestigious “Best Wealth Management and Investment Banking Firm” award at the Times Leading Icons Awards. The award was presented to Mr. Gaurav Daptardar, Founder and Director of Equity Right, by Miss World 2017, Manushi Chhillar, at a grand ceremony held at Novotel, Andheri.

This recognition is a testament to Equity Right’s unwavering commitment to excellence, innovation, and delivering personalized financial solutions that empower clients to achieve their financial aspirations.

About the Times Leading Icons Awards
The Times Leading Icons Awards celebrate entrepreneurial excellence and achievements across diverse industries, spotlighting individuals and organizations that shape the future. The 2024 edition brought together leaders and innovators who have made significant contributions to their respective sectors. Among them, Equity Right was lauded for its stellar performance in wealth management and investment banking, solidifying its reputation as a trusted name in the financial services industry.

A Rigorous Selection Process
Equity Right’s achievement was the result of a meticulous and transparent selection process led by Advance Insights. The assessment combined secondary research, factual surveys, and feedback analysis to identify the most deserving winners. The evaluation criteria encompassed:

  • Growth trajectory and business performance
  • Customer feedback and satisfaction
  • Social media presence and engagement
  • Industry recognition and thought leadership

Nominees were assessed through detailed questionnaires, telephonic interviews, email correspondence, and personal visits. Social media profiles and client reviews played a pivotal role in validating the firm’s eligibility. Based on a comprehensive scoring mechanism integrating factual data and qualitative insights, Equity Right emerged as the top performer in its category.

A Decade of Excellence in Wealth Creation
Over the past decade, Equity Right has established itself as a leading player in the financial services industry. The firm’s impressive 27% compound annual growth rate (CAGR) on client portfolios highlights its ability to deliver superior results while prioritizing long-term value creation.

Operating across several key verticals—Investment Banking, PMS, Merchant Banking, and Investor Relations—Equity Right has consistently demonstrated its commitment to client-centric strategies. Its expertise in equity research and financial market navigation has enabled clients to achieve sustainable growth, reinforcing the firm’s standing as a trusted partner in wealth creation.

Looking Ahead
This recognition underscores Equity Right’s role as a frontrunner in the financial sector and its dedication to excellence. As the firm continues to innovate and expand its services, it remains committed to helping clients achieve financial success through bespoke strategies, cutting-edge solutions, and unmatched industry expertise.

“This award is a reflection of our team’s hard work, dedication, and passion for delivering exceptional value to our clients,” said Mr. Gaurav Daptardar. “We are grateful for this honor and remain steadfast in our mission to empower clients in their journey toward financial growth and stability.”

About Equity Right
Equity Right is a boutique Portfolio Management Services firm specializing in wealth management, investment banking, and equity research. With a focus on personalized financial solutions and sustainable growth, the firm has become a trusted name in the financial sector, consistently delivering outstanding results for its clients.

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Mahindra & Toyota Drive SUV Boom Amid Industry Challenges
Business, Equities, Market News, Markets - December 23, 2024

Mahindra & Toyota Drive SUV Boom Amid Industry Challenges

Mahindra & Toyota Drive SUV Boom Amid Industry Challenges

Mahindra & Toyota Drive SUV Boom Amid Industry Challenges
In 2024, India’s automotive industry has witnessed significant shifts, with Mahindra & Mahindra and Toyota Kirloskar Motor achieving record sales despite prevailing challenges. This trend underscores the evolving dynamics of the Indian car market, characterized by a growing consumer preference for SUVs and strategic adaptations by manufacturers.

Mahindra & Mahindra’s Performance
Mahindra & Mahindra has experienced a remarkable surge in sales, particularly in the SUV segment. In October 2024, the company reported its highest-ever SUV sales, delivering 54,504 vehicles—a 25% year-over-year increase compared to the same month in 2023.
NDTV
This achievement marks the second consecutive month of record-breaking sales for Mahindra, reflecting its successful alignment with consumer preferences favoring larger vehicles.

The company’s robust performance is further evidenced by its financial results. In the second quarter, Mahindra reported a 13.2% rise in profit to ₹38.41 billion, surpassing analysts’ expectations. This growth is attributed to higher SUV sales and a recovery in tractor demand, with SUV volumes rising by 19% despite industry-wide challenges.
Reuters

Toyota Kirloskar Motor’s Performance
Toyota Kirloskar Motor has also demonstrated impressive growth. In October 2024, the company reported a 41% year-over-year increase in sales, delivering 30,845 units. Domestic sales accounted for 28,138 units, while exports contributed 2,707 units.
The New Indian Express
This performance highlights Toyota’s strong market presence and its ability to meet the rising demand for SUVs in India.

Market Dynamics and Consumer Preferences
The Indian automotive market has been increasingly dominated by SUVs, with consumers showing a clear preference for these vehicles over smaller cars. This shift is evident in the sales figures of major manufacturers. For instance, Maruti Suzuki, traditionally known for its small cars, reported a 19.4% increase in SUV sales in October 2024, achieving record-high figures in this segment.

This trend towards SUVs is driven by several factors, including the perception of better safety, higher ground clearance suitable for diverse Indian terrains, and a growing aspirational value associated with owning larger vehicles. Manufacturers like Mahindra and Toyota have capitalized on this shift by expanding their SUV portfolios and introducing models that cater to the evolving preferences of Indian consumers.

Industry Challenges
Despite these successes, the industry faces challenges, including fluctuating demand and inventory management issues. In September 2024, dealer inventories reached critically high levels of up to 85 days, prompting concerns about overstocking. However, the festive season in October helped reduce these inventories to more manageable levels, as manufacturers and dealers offered promotions to boost sales.

Additionally, the industry has been navigating the transition towards electric vehicles (EVs) and adhering to stricter emission norms. While the demand for EVs is gradually increasing, the current market is still predominantly driven by internal combustion engine vehicles, particularly SUVs. Manufacturers are balancing the need to invest in future technologies with the immediate demand for conventional vehicles.

Strategic Implications for Investors
For investors, the strong performance of Mahindra & Mahindra and Toyota Kirloskar Motor indicates a positive outlook for companies with a robust SUV lineup and the ability to adapt to market trends. Mahindra’s consistent growth in SUV sales and its strategic positioning in the agricultural sector through its tractor business provide a diversified revenue stream, enhancing its investment appeal.

Toyota’s emphasis on quality and its expanding portfolio in the Indian market also make it a noteworthy player. Its ability to achieve significant sales growth amidst industry challenges reflects operational efficiency and market adaptability.

However, investors should remain cognizant of the broader industry challenges, including inventory management and the ongoing transition to EVs. Companies that effectively navigate these challenges while aligning with consumer preferences are likely to sustain growth and offer favorable returns.

Conclusion
The record sales achieved by Mahindra & Mahindra and Toyota Kirloskar Motor in 2024 underscore the dynamic nature of the Indian automotive market. The growing consumer preference for SUVs has been a significant driver of this growth, with manufacturers that align their strategies accordingly reaping substantial benefits. While challenges persist, the ability to adapt to market trends and manage operational complexities will be crucial for sustained success in this evolving industry landscape.

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Z47 Launches $400M Fund for India's Tech Boom
Business, Equities, Market News, Markets - December 23, 2024

Shriram Finance Targets ₹5,000 Cr AUM with New Green Finance Vertical

Shriram Finance Targets ₹5,000 Cr AUM with New Green Finance Vertical

Shriram Finance Limited, a prominent player in India’s non-banking financial sector, has announced the consolidation of its green financing initiatives under a new vertical named Shriram Green Finance. This strategic move aims to expand the company’s focus beyond electric vehicle (EV) financing to encompass a broader spectrum of sustainable projects, with a target to achieve an asset under management (AUM) of ₹5,000 crore over the next three to four years.

Strategic Focus and Objectives
Building upon its existing expertise in EV financing, Shriram Green Finance plans to diversify its portfolio to include:
Electric Vehicles (EVs): Financing for a range of EVs, including two-wheelers, to promote cleaner transportation options.
Battery Charging Stations: Supporting the infrastructure necessary for EV adoption by funding charging facilities.
Renewable Energy Products and Solutions: Investing in sustainable energy projects to contribute to a greener economy.
Energy-Efficient Machinery: Providing financial solutions for machinery that enhances energy efficiency across various industries.

By consolidating these efforts under Shriram Green Finance, the company aims to provide sharper focus and clarity to its sustainability initiatives.

Geographical Outreach and Partnerships
Initially, Shriram Green Finance will concentrate its efforts in the regions of Karnataka, Kerala, the National Capital Region (NCR), and Maharashtra. The company is actively engaging with original equipment manufacturers (OEMs) producing EVs to establish long-term partnerships, ensuring seamless and accessible vehicle financing solutions for consumers.

Leadership Perspectives
Umesh Revankar, Executive Vice Chairman of Shriram Finance, emphasized the company’s commitment to aligning its strategies with the global shift toward a greener economy. He stated, “This initiative is a testament to aligning our strategies with the global shift toward a greener economy, and we are charting a course for long-term value creation that balances profitability with purpose.”

Y.S. Chakravarti, Managing Director and Chief Executive Officer of Shriram Finance, highlighted the company’s vision to build a sustainable ecosystem benefiting all stakeholders. He remarked, “At Shriram Finance, we view sustainability as an essential driver of progress. The Green Finance vertical exemplifies our vision to build a sustainable ecosystem that benefits all stakeholders.”

Funding and Investment Plans
To support its ambitious goals, Shriram Green Finance plans to raise funds from both global and domestic sources, focusing on green investments for onward lending to its customer base. This approach not only broadens the company’s funding avenues but also aligns with international and national efforts to promote sustainable development.

Market Context and Opportunities
India’s renewable energy sector has experienced significant growth over the past decade, driven by government initiatives and a heightened focus on sustainability. Similarly, the EV sector is undergoing rapid expansion, propelled by ambitious policies, technological advancements, and increasing environmental awareness. The development of charging infrastructure, including fast-charging and battery-swapping technologies, further supports this growth.

OUTLOOK BUSINESS
By leveraging its extensive customer base, particularly in semi-urban and rural areas, Shriram Finance is well-positioned to play a transformative role in green financing. The company’s strategic focus on these high-growth sectors indicates a commitment to contributing to India’s sustainable development goals while exploring new business opportunities in the evolving green economy.

Conclusion
Shriram Finance’s launch of Shriram Green Finance represents a significant milestone in its journey toward fostering sustainable and inclusive growth. By consolidating its green financing initiatives under a dedicated vertical, the company aims to provide focused financial solutions that support the transition to a low-carbon economy. With a clear target of achieving ₹5,000 crore in AUM over the next three to four years, Shriram Green Finance is poised to make substantial contributions to India’s green finance landscape, balancing profitability with purpose and aligning with global sustainability trends.

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Business, Equities, Market News, Markets - December 20, 2024

Indian Auto Components Industry Grows 11.3% in H1 FY25

Indian Auto Components Industry Grows 11.3% in H1 FY25

The Indian auto components industry has demonstrated robust growth in the first half of the fiscal year 2024-25 (H1 FY25), achieving an 11.3% increase in market size compared to the same period in the previous year. According to a report by the Automotive Component Manufacturers Association (ACMA), the industry’s valuation rose from USD 36.1 billion in H1 FY24 to USD 39.6 billion in H1 FY25.

Market Dynamics and Consumer Preferences
Several key trends have contributed to this growth, reflecting evolving consumer preferences across various vehicle segments:

Passenger Vehicles (PVs): There has been a notable shift towards larger vehicles, particularly Utility Vehicles (UVs). The UV segment experienced a 13% increase in demand, with UV1 models—vehicles measuring between 4,000 to 4,400 mm in length and priced under ₹20 lakh—seeing a substantial 25% surge in sales.

Two-Wheelers: The market for motorcycles with higher engine capacities has expanded significantly. Sales of motorcycles with engine capacities ranging from 350cc to 500cc soared by 74%, indicating a consumer preference for more powerful two-wheelers.

Electric Vehicles (EVs): The EV segment exhibited mixed results. Overall EV sales increased by 22% in H1 FY25 compared to the same period last year. Electric two-wheelers (e-2Ws) led this growth with a 26% rise in sales. However, electric passenger vehicles (e-PVs) experienced a 19% decline in sales, suggesting potential challenges in consumer adoption or market offerings in this sub-segment.

Factors Driving Growth
The industry’s growth can be attributed to several factors:

Economic Recovery: Post-pandemic economic recovery has bolstered consumer confidence, leading to increased spending on automobiles and, consequently, auto components.

Government Initiatives: Policies promoting manufacturing and the adoption of electric vehicles have provided a conducive environment for industry expansion.

Technological Advancements: The integration of advanced technologies in vehicles has increased the demand for sophisticated auto components, contributing to market growth.

Challenges and Considerations
Despite the positive trajectory, the industry faces certain challenges:

Supply Chain Disruptions: Global supply chain issues, including semiconductor shortages, have impacted production schedules and could pose risks to sustained growth.

EV Adoption Barriers: The decline in e-PV sales highlights potential obstacles in the electric vehicle market, such as inadequate charging infrastructure, higher upfront costs, or limited consumer awareness.

Outlook
The Indian auto components industry is poised for continued growth, supported by favorable economic conditions and evolving consumer preferences. However, addressing supply chain challenges and enhancing the ecosystem for electric vehicles will be crucial for sustaining this momentum.

In conclusion, the 11.3% growth in H1 FY25 underscores the resilience and adaptability of the Indian auto components industry amid changing market dynamics and consumer behaviors.

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Business, Equities, Market News, Markets - December 20, 2024

The Rise in Delinquencies in Microfinance Loans

The Rise in Delinquencies in Microfinance Loans

The microfinance sector, a critical pillar of India’s rural credit system, has been facing a sharp rise in delinquencies. The reasons for this troubling trend are multifaceted, encompassing political events, weather-related disruptions, and excessive lending practices, as highlighted by industry executives during a webinar organized by rating agency ICRA. Despite these challenges, there is cautious optimism that the situation may stabilize in the next fiscal year.

Rural Priorities Shift Amid Economic Strain
In the past few months, rural households have shifted their financial priorities. With food inflation biting into household budgets and wage growth stagnating post-COVID-19, many families have chosen to focus on essentials and repay secured loans such as home and gold loans over microfinance obligations. This trend has significantly impacted the repayment capacity of borrowers in the sector, resulting in rising defaults.

“Post-COVID, people suffered job losses, and incomes were impacted. However, due to ample liquidity, loans were still accessible. Wage growth has yet to catch up, and with high food inflation, rural households are prioritizing essentials,” said Sadaf Sayeed, CEO of Muthoot Microfin Ltd. Over-leverage stemming from multiple factors, including political and weather events as well as excessive lending, has compounded the problem.

Sharp Deterioration in Asset Quality
The microfinance sector’s gross non-performing assets (NPA) surged to an 18-month high of 11.6% at the end of September. Factors like the heatwave, the two-month-long general elections, and overleveraging of customers have strained the sector’s asset quality. Regulatory actions have also played a role. In October, the Reserve Bank of India (RBI) barred two NBFC-MFIs from conducting fresh business, citing violations such as charging excessive interest rates and failing to adequately assess household income and repayment obligations.

Structural Challenges and Overlapping Loans
The issue of overlapping loans to the same customers has further exacerbated the sector’s challenges. Vineet Chattree, Managing Director of Svatantra Microfin Pvt Ltd, pointed out that this practice has increased leverage across the industry, making it difficult for borrowers to keep up with repayments.

Historical disruptions like demonetization in 2016 and the COVID-19 pandemic in 2020 have also acted as trigger points for defaults. R. Bhaskar Babu, CEO of Suryoday Small Finance Bank, noted that these events disrupted the traditional group meeting model for repayments, which had been a cornerstone of microfinance operations. “Each company will now have to find its own solution,” he added, emphasizing the need for innovation and adaptation within the sector.

Steps Toward Recovery
Despite the current headwinds, the industry has begun taking steps to address the crisis. According to Sadaf Sayeed, the microfinance sector has reduced its outstanding loan book by ₹40,000 crore as part of its deleveraging efforts. Additionally, the self-regulatory body Microfinance Institutions Network (MFIN) has tightened its lending norms. Members are now advised to refrain from lending to customers with overdue loans of more than 60 days and outstanding amounts exceeding ₹3,000, compared to the earlier 90-day threshold.

Regional Disparities and Natural Calamities
Regional disparities have also played a significant role in the sector’s struggles. High per capita income states like Kerala, Tamil Nadu, and Karnataka have shown relatively better repayment trends. In contrast, states like Odisha, Jharkhand, and Bihar have been hit hard by natural calamities and other socio-economic issues. However, there are signs of improvement post the Kharif crop harvest, as rural households gain liquidity to address overdue loans.

Balancing Returns and Affordability
Balancing profitability with borrower affordability remains a critical challenge for microfinance institutions (MFIs). Sayeed stated that Muthoot Microfin has set a net interest margin target of 12% to 13%, which aims to ensure sustainable returns for investors while keeping interest rates reasonable for borrowers. This balanced approach is vital for the sector to regain stability and maintain its social impact.

Outlook: Stabilization in Sight?
While the current fiscal year has been challenging, industry experts express cautious optimism for the future. The combination of deleveraging efforts, stricter regulatory compliance, and potential economic recovery post-harvest season provides a glimmer of hope. However, the sector must continue addressing structural issues, such as overleveraging and overlapping loans, to build a more resilient framework.

In conclusion, the rise in delinquencies in microfinance loans underscores the need for a holistic approach that considers borrower affordability, effective regulatory oversight, and sustainable lending practices. As a key driver of financial inclusion, the sector’s recovery is essential not only for rural households but also for the broader economy. Stakeholders must collaborate to ensure that microfinance continues to empower communities while navigating the complexities of a dynamic economic landscape.

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