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DOMS Industries IPO Note: A deep dive into the leading stationery player

DOMS Industries IPO Note: A deep dive into the leading stationery player
DOMS Industries Ltd – IPO Note
Price Band: Rs. 750-790
Issue Date: 13th Dec-15th Dec
Recommendation: Apply

Overview: 

Established in 2006, DOMS Industries Ltd is a prominent player in the stationery and art products market. With a strong focus on research, development, and backward integrated manufacturing, DOMS has gained significant market presence both domestically and internationally, spanning over 45 countries. The company holds the second-largest market share (by value) in India’s branded stationery and art products market, boasting around 12% as of FY23. DOMS Industries Limited specializes in the design, development, and sale of stationery and art products, categorized into seven segments, including scholastic stationery, scholastic art material, paper stationery, kits and Combos, office equipment, hobbyist and craft items, and artistic supplies are all available.

Company Profile:

  • DOMS Industries has established itself as one of the globally recognized entities with such a comprehensive product portfolio in the ‘stationery and art material’ sector.
  • Under its flagship brand ‘DOMS’ and other associated brands like ‘C3,’ ‘Amariz,’ and ‘Fixyfix,’ the company effectively markets its diverse range of products. Manufacturing operations are conducted at facilities situated in Umbergaon, Gujarat, and Bari Brahma in Jammu and Kashmir.
  • With an expansive multi-channel distribution network, DOMS Industries has secured a robust pan-India presence and a global footprint, serving over 45 countries across the Americas, Africa, Asia Pacific, Europe, and the Middle East.

The Objective of the Issue:

  • Total issue amount: Rs 1,200 Crores, comprising a fresh issue of Rs 350 Crores and an offer for sale of Rs 850 Crores by promoters.
  • Utilization of fresh issue proceeds:
  1. Financing the construction of a new manufacturing facility.
  2. Expanding DOMS’ production capabilities for writing instruments, watercolor pens, markers, and highlighters.
  3. Allocation for general corporate purposes.
  • A proposal to partially finance the cost of establishing the new manufacturing facility.

Outlook and Valuation:

  • DOMS Industries exhibits robust revenue growth, healthy profit margins, and superior return ratios when compared to industry peers.
  • The company stands to benefit from increasing literacy rates, a growing student population, and rising disposable income in India, creating a favorable market environment.
  • DOMS is a trusted and reputable name in the Indian market, offering a combination of quality products and affordability, which enhances its position among consumers.
  • DOMS maintains a strong commitment to research and development, staying ahead of industry trends by regularly introducing new and innovative products to the market.
  • The upcoming new manufacturing facility is expected to significantly boost production capacity. This strategic move positions the company well to meet the growing demand for its products, aligning with market trends and customer needs.
  • The company has demonstrated strong financial performance, with a Compound Annual Growth Rate (CAGR) of 23% for revenue and 42% for Profit After Tax (PAT) between FY20 and FY23.
  • The issue is valued at 46 times the FY23 Earnings Per Share (EPS) and 33 times the annualized H1FY24 EPS, suggesting what is perceived as fair valuation.
  • The company’s valuation metrics reveal a substantial market assessment, with an EV/EBITDA ratio of 38.6. Additionally, the Price-to-Earnings (P/E) ratio stands at 32.9.

    ISSUE OFFER  
    Price band (INR) 750-790
    Bidding date 13th Dec-15th Dec
    Sector Stationary
    Total IPO size (Cr) 1200
    Fresh issue (Cr) 350
    Offer for sale (Cr) 850
    Market lot 18
    Face value (INR) 10
    Listing on NSE, BSE
    Retail Allocation 10%

Competitive Strengths:

  • Strong brand recognition in India, especially in smaller towns and rural areas.
  • Extensive portfolio caters to various needs, from basic school supplies to professional art materials.
  • Robust distribution network present in over 45 countries.
  • Regular introduction of new and improved products to stay ahead of trends.
  • Vertical Integration: 13 manufacturing facilities across India for cost control and quality assurance.
  • Optimized logistics and inventory management for faster delivery and reduced waste.
  • Experienced personnel ensure high-quality production.
  • Sustainable Practices: Commitment to environmental responsibility enhances brand image.

Key Strategies:

  • Doms has a strong brand recognition, Leveraging trust in “DOMS” across India.
  • Expanding portfolio: From school supplies to professional art materials.
  • It has a Wide distribution network, reaching consumers and retailers in India and 45+ countries.
  • Continuous innovation: Introducing new products to stay ahead of trends.
  • Vertical integration: 13 manufacturing facilities for cost control and quality assurance.
  • Faster deliveries, reduced waste, and improved costs.
  • Skilled workforce: High-quality production and sustained success.
  • Enhancing brand image and resonating with eco-conscious consumers.

Key Concerns:

  • DOMS Industries has a notable dependency on FILA Group, particularly for export sales, with FY23 export sales to FILA amounting to Rs. 159 Cr. This constitutes 12.9% of total sales and a significant 61.6% of export sales.
  • The company faces a potential risk due to the substantial concentration of its major product category, Wooden Pencils, which accounts for approximately 32% of total sales. Any decline in the sales of wooden pencils could adversely impact the company’s overall revenue.
  • In the competitive industry landscape, effective competition is crucial for DOMS. Inability to compete effectively may lead to adverse effects on business performance, operations, and profitability.
  • The company’s strategic approach involves acquisitions, posing a potential risk. Inability to manage the expansions resulting from these acquisitions may have a material adverse effect on DOMS’ business operations, impacting financial results negatively.
  • DOMS relies significantly on key products, particularly wooden pencils, for a substantial portion of its Gross Product Sales.
  • The ‘general trade’ distribution network plays a vital role for DOMS, accounting for more than 70.00% of its Gross Product Sales.
  • FILA, a promoter of DOMS, is crucial for the company’s business operations and research and development (R&D) capabilities.
  • Operating in a competitive business environment, DOMS faces competition from both organized and unorganized players.
  • The company’s dependence on natural resources for raw materials and potential pricing pressure from suppliers are additional factors influencing its operational landscape.

Comparison with Listed Industry Peers: 

FY23 FIGURES DOMS KOKUYO CAMLIN LTD LINC LTD FLAIR WRITING INSTRUMENTS
Revenue 1212 775 487 943
CAGR (20-23) 22.8% 6.9% 7.4% 18.0%
EBIDTA Margin 15.4% 7.0% 12.6% 19.5%
ROCE % 33.1% 12.0% 31% 33.4%
ROE % 28.9% 9.3% 21.1% 31.4%
Debt/equity 0.3 0.2 0 2.5
EV/EBIDTA 26.4 27.0 20.1 22.9
P/E 46.6 57.4 33.2 34.3

 

PARTICULARS FY23 FY22 FY21
Equity share capital 3.73 3.73 3.73
Other equity 3370.59 2468.74 2332.38
Net worth 3553.45 2580.94 2416.79
Total Borrowings 151.55 28.52 28.99
Revenue from Operations 12118.90 6836.01 4028.17
EBIDTA 1866.60 697.13 300.25
PBT 1387.63 240.24 (75.78)
Net profit 1028.71 171.40 (60.26)

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RBI Charts Course for Sustainable Growth: Inflation Control as the Key

Zensar Technology Ltd Q1FY24 results updates

Digital Services Propel Zensar's Q2 Growth to 1,240 Cr

Digital Services Propel Zensar’s Q2 Growth to 1,240 Cr

Company Name: Zensar Technology Lyd | NSE Code: ZENSARTECH | BSE Code: 504067 | 52 Week high/low: 578/202 | CMP: INR 519 | Mcap: INR 11,751 Cr | PE: 22.4

Company Overview:

Zensar Technology, a member of the RPG group, specializes in providing IT services and solutions. The company’s offerings encompass experience services, advanced engineering services, data engineering and analytics, application services, and foundation services. Zensar focuses on industry verticals such as Hitech & Manufacturing, Consumer Services, Banking & Financial Services, and Insurance.

Business Segment: Digital Application & Digital Foundation Services

Digital Application services contribute 81.8% to the company’s revenue, including custom applications management services spanning development, maintenance, support, modernization, and testing across various technologies and industry verticals. Digital Foundation services make up the remaining 18.2%, offering infrastructure management services through a managed service platform employing automation, autonomics, and machine learning.

Moderate Revenue as Hitech and Healthcare Verticals Decline

The revenue exhibited stability, experiencing a marginal 0.5% year-over-year (YoY) growth and a more notable 1.11% quarter-over-quarter (QoQ) increase, reaching 1,240 Cr. This performance was influenced by a slowdown in sectors like Hitech and Healthcare. Notably, Banking and Financial Services demonstrated a robust sequential QoQ revenue growth of 3.1% and an impressive quarterly YoY growth of 7.8% in constant currency.
On the other hand, Manufacturing and Consumer Services showcased a noteworthy sequential QoQ growth of 6.7%, but experienced a slight quarterly YoY decline of 0.7% in constant currency. In contrast, Hitech and Healthcare encountered challenges, with an 8% QoQ decline (-16.9% YoY) and a 1.5% QoQ decrease (-4.7% YoY) respectively.

Geographical Revenue Breakdown in Q2FY24

South Africa experienced a 7.9% QoQ growth in constant currency, contributing 12.2% to total revenue. UK/EU exhibited an 11.3% QoQ growth, representing 21.6% of total revenue. The USA, despite being the major contributor at 66.2%, reported a 4.3% QoQ decline in revenue.

Client Concentration Risk Reduction

In Q2FY24, the top 5 clients accounted for 31.5% of total revenue, compared to 34.6% in Q2FY23. Similarly, the contribution of the top 10 clients decreased from 45.5% in Q2FY23 to 42.2% in Q2FY24, and the top 20 clients contributed 58.3% in Q2FY24 compared to 60.7% in Q2FY23. This indicates a decline in revenue concentration among the top clients, suggesting a positive trend for revenue growth.

Services Performance in Q2

On a QoQ basis, Advanced Engineering Services recorded a growth of 7.8%, Experience Services grew by 3.1%, Application Services and Enterprise Application Services grew by 0.2%, while Foundation Services remained flat. Data Engineering and Analytics experienced a decline. These key service lines collectively constituted 34.0% of total revenues.

Valuation and Key Ratios

Currently, the stock trades at a multiple of 22.4x earnings per share (EPS) (TTM) of 23.2 Rs, with a market price of 519 Rs. The company’s stock is valued at 3.63 times its book value of 144 Rs per share. In EV/EBITDA, the company ranks 7th with a multiple of 12.53x, compared to the industry median of 17.37x. The trailing twelve-month return on equity (ROE) and return on capital employed (ROCE) stand at 11.2% and 14.5%, respectively. The interest coverage ratio is robust at 28.4x, indicating the company’s solvency.

Q2FY24 Result Update: Consolidated

➡️In Q2FY24, revenue remained moderate, growing 0.5% YoY (+1.11% QoQ) to 1,240 Cr due to the slowdown in the Hitech and Healthcare verticals.

➡️EBITDA surged 119.07% YoY (+0.35% QoQ) to 230 Cr, driven by a decline in operating expenditure. The EBITDA margin expanded significantly by 1000 bps YoY to 18.61%.

➡️Operating profit (EBIT) increased by 245.73% YoY (+3.46% QoQ) to 194 Cr, with an EBIT margin jumping by 11.1% YoY and 36 bps QoQ to 15.66%.

➡️Profit after tax (PAT) saw a remarkable surge of 206.16% YoY (+11.3% QoQ) to 174 Cr, and the PAT margin expanded by 940 bps YoY and 130 bps QoQ to 14.02%.

➡️Earnings per share (EPS) for the quarter stood at 7.69 Rs, compared to 6.91 Rs in the previous quarter.

Conclusion

Zensar Technology reported stable Q2FY24 results with a 0.5% YoY revenue increase, despite challenges in Hitech and Healthcare sectors. The company demonstrated resilience in diversified geographical and client revenue streams. Notable growth in EBITDA, operating profit, and PAT reflects operational efficiency, contributing to positive market valuation and improved financial ratios.

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Strategic Partnerships Fuel One97’s Financial Turnaround

India's Twin Deficits: Positive Trends Emerge in Fiscal and Current Account Dynamics

Beyond GDP: Understanding the disconnect between economic growth and consumer confidence in India

Beyond GDP: Understanding the disconnect between economic growth and consumer confidence in India
Introduction:

India has experienced strong GDP growth in recent quarters, reflecting positive economic fundamentals. However, the RBI’s surveys on consumer confidence indicate a discrepancy between these macroeconomic indicators and the sentiments of the average consumer. Understanding this incongruity is crucial for policymakers, businesses, and investors to make informed decisions in navigating the economic landscape.

RBI surveys:

Recent surveys conducted by the Reserve Bank of India (RBI) have revealed a surprising disconnect between the nation’s strong economic growth and the sentiments of urban consumers. While the Indian economy has been showcasing robust growth, with a GDP of 7.8% in the June 2023 quarter and 7.6% in the September quarter, consumer confidence seems to be lagging behind. This report aims to analyse this disconnect and explore its potential implications.

The latest RBI Consumer Confidence Survey reports a stable consumer confidence index at 92.2, indicating a consistent economic perception. Despite increased pessimism about current economic conditions, optimism grows regarding current income levels, reaching the highest since July 2019. Compared to September 2023, the overall consumer confidence remains unchanged, showing positive shifts in income and spending but lingering negativity in price levels, economic situation, and employment. Looking ahead, the one-year consumer confidence index reflects positive sentiments in income and spending, with a slight dip from the previous survey, while concerns persist in price levels, economic situation, and employment.

1. The RBI Inflation Expectations survey:

The RBI Inflation Expectations survey reveals that current inflation perception among households decreased by 20 basis points to 8.2%. Over the fiscal year, expectations dropped by 70 basis points to 8.2%. While the three-month median inflation expectation remains stable at 9.1%, the one-year outlook increased by 20 basis points to 10.1%, yet lower than the start of the fiscal year at 10.5%. The survey indicates widespread anticipation of inflation across various product categories, driven by budgetary pressures. Notably, food products and services play a crucial role in shaping overall inflation expectations. In summary, consumers expect higher inflation in the coming months due to household budget challenges.

2. The RBI’s survey of professional forecasters sayings on GDP:

The RBI’s survey of professional forecasters reveals a 20 basis points upgrade in real GDP growth for FY24 to 6.4%, with FY25 forecast remaining at 6.3%. Despite appearing pessimistic compared to the RBI’s 7% projection for FY24, the forecast ranges from 5.8% to 7.4%. The survey anticipates a 6.0% annual growth in real private final consumption expenditure for FY24 and a more optimistic 7.5% growth in gross fixed capital formation, driven by the government’s robust capex. The November survey also revises the real gross value added (GVA) up by 10 basis points to 6.2%, signalling overall optimism in macroeconomic growth, although the median figure differs from RBI projections.

3. According to an RBI survey of professional forecasters on inflation:

The RBI survey of professional forecasters indicates an expected moderation in inflation, specifically in the Consumer Price Index (CPI). For FY24, annual headline inflation is projected at 5.4%, declining to 4.7% in FY25. The forecast suggests a gradual decrease, with Q3FY24 expected at 5.4%, followed by moderation to 5.2% in the subsequent two quarters. By the end of FY25, headline inflation is anticipated to reach 3.9%, well below the RBI’s 4% target.
Core inflation, excluding certain categories, is seen at 4.3% in Q3 and expected to remain between 4.1% and 4.4% over the following three quarters. The overall trajectory of inflation, driven by core inflation, is on a downward path, providing a more sustainable scenario compared to the cyclical nature of food and fuel inflation.

4. According to the RBI survey of professional forecasters on the external sector:

• Merchandise exports are expected to decline by -7.1% in US dollar terms for FY24, while merchandise imports are likely to fall by -5.4%. The survey does not cover services trade, but potential improvements are anticipated in this area.
• For FY25, there is optimism, with merchandise exports and imports expected to grow by 5.0% and 6.2% respectively. The services trade is expected to show greater traction in FY25.
• The current account deficit (CAD) is projected to be 1.7% of GDP in FY24, decreasing to 1.6% in FY25. Positive prospects for services exports are expected to contribute favourably to the current account.

Potential Reasons for the Disconnect:

1. Unequal Distribution of Gains: The benefits of strong GDP growth may not be evenly distributed among various income groups, contributing to a sense of economic inequality.
2. Perceived Job Insecurity: Even with economic expansion, concerns about job security and underemployment may be prevalent, influencing consumer sentiment.
3. Inflationary Pressures: Rising inflation rates can erode the purchasing power of consumers, affecting their confidence in making discretionary purchases.
4. Psychological Factors: Consumers may be hesitant to spend due to global uncertainties or geopolitical tensions.

Implications for the economy:

• Policy Considerations: Policymakers need to consider measures that address the concerns of individual consumers, such as targeted economic policies, social safety nets, and employment generation initiatives.
• Business Strategy: Understanding the consumer sentiment disconnect is essential for businesses to tailor their strategies, marketing, and product offerings to align with consumer expectations and economic realities.
• Investor Caution: Investors should be mindful of the potential impact of muted consumer confidence on certain sectors, adjusting their investment strategies accordingly.

Conclusion:

The findings from the RBI surveys highlight the importance of addressing the divergence between strong GDP growth and consumer confidence. A holistic approach involving targeted policies, business strategies, and investor awareness is essential to bridge this gap and ensure that the benefits of economic growth are felt at the individual consumer level. The coming months will be critical for stakeholders to collaborate and implement measures that foster inclusive economic growth and enhance consumer well-being.

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RBI Charts Course for Sustainable Growth: Inflation Control as the Key

Policy watch: RBI holds rates, Moderates growth forecast for 2024

Policy watch: RBI holds rates, Moderates growth forecast for 2024

Policy watch: RBI holds rates, Moderates growth forecast for 2024
Introduction:

The Reserve Bank of India (RBI) has concluded its latest monetary policy review with a cautious yet optimistic stance as the country prepares to welcome the New Year. The central bank, while remaining vigilant to emerging economic challenges, has taken steps to support growth and maintain stability in the financial system. This report provides an overview of the key highlights from the recent RBI policy announcement and analyses the potential implications for the Indian economy in the coming year.

As the global economic landscape continues to evolve amid ongoing uncertainties, central banks play a crucial role in shaping monetary policies that balance growth objectives with inflation control. The RBI, in its recent policy review, has demonstrated a nuanced approach that seeks to address the challenges faced by the Indian economy while fostering a positive outlook for the upcoming year.

Key Highlights of the RBI Policy:

 Repo Rate Unchanged at 5.9%: The RBI has decided to keep the repo rate unchanged at 5.9%, signalling a steady approach to monetary policy. This move aims to provide stability to the financial markets while supporting economic recovery.
 Policy Stance remains “Withdrawal of Accommodation”: The central bank has maintained its policy stance, signalling a commitment to gradually withdrawing accommodative measures. This decision suggests a cautious approach, balancing the need for economic support with concerns about potential inflationary pressures.
 Inflation Projected to Moderate to 4% in Q4 FY24: The RBI’s inflation outlook anticipates a moderation to 4% in the fourth quarter of the fiscal year 2023-24. This projection reflects the central bank’s attention to inflation dynamics and its efforts to ensure price stability in the economy.
 Growth Forecast Revised Downward to 6.8% for FY24: In response to evolving economic conditions, the RBI has revised its growth forecast downward to 6.8% for the fiscal year 2023-24. This adjustment acknowledges the challenges faced by the economy while providing transparency about the central bank’s expectations.
 Focus on Maintaining Financial Stability: The policy highlights underscore the RBI’s commitment to maintaining financial stability. This includes efforts to strengthen regulatory frameworks, enhance risk management practices, and ensure the resilience of the financial system in the face of potential disruptions.
 RBI to Remain Vigilant and Monitor Evolving Economic Situation: The central bank has reiterated its commitment to vigilance, emphasizing its role in closely monitoring the evolving economic situation. This proactive stance indicates a readiness to respond to changing conditions, ensuring that policy measures remain adaptable to emerging challenges.

Market Reaction:

The Indian stock market initially reacted positively to the policy announcement, with the benchmark BSE Sensex index rising over 2%. However, the gains were short-lived, and the market ended the day flat.

RBI’s Stance on Liquidity and Market Impact:

Despite refraining from introducing fresh liquidity measures, the Reserve Bank of India (RBI) has emphasized its agility in liquidity management and maintained the possibility of utilizing policy tools like Open Market Operations (OMO) Sales. The absence of unexpected announcements led to a firming of the 10-year sovereign bond yield, reaching 7.26%, while the equity markets closed just below the 21,000 marks.

The central bank’s decision to hold off on new liquidity measures signals a measured approach, suggesting a current satisfaction with prevailing market conditions. However, the emphasis on nimble liquidity management underscores the RBI’s preparedness to adapt to changing economic circumstances. The mention of OMO Sales being “not off the table” implies that the central bank retains flexibility, ready to deploy additional measures when warranted.

The market response was notable, with the 10-year sovereign bond yield experiencing upward pressure, indicating a revaluation by investors in light of the absence of immediate liquidity injections. Concurrently, equity markets closed marginally below 21,000, reflecting a cautious sentiment among market participants. The reactions suggest that investors are carefully assessing the implications of the RBI’s decision and its potential impact on economic and market conditions.

Conclusion:

In conclusion, the RBI’s recent monetary policy review strikes a careful balance between supporting economic recovery and addressing inflation concerns. Maintaining the repo rate at 5.9% provides stability, while the decision to withdraw accommodative measures reflects a cautious approach. The downward revision of the growth forecast to 6.8% acknowledges economic challenges.
Market reactions indicate investor scrutiny, with a brief surge followed by a flat close. The RBI’s commitment to financial stability and its readiness to deploy liquidity measures position the economy for resilience. As India enters the New Year, the central bank’s nuanced stance sets the stage for stability and growth amid evolving economic conditions.

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RBI Charts Course for Sustainable Growth: Inflation Control as the Key

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Anticipation and Trends: Insights into Asian stock markets amid US inflation release

Anticipation and Trends: Insights into Asian stock markets amid US inflation release
Introduction:

Asian stock markets experienced a positive trend in the latest trading session as investors cautiously awaited the release of US inflation data. The anticipation surrounding the inflation figures contributed to a mix of optimism and caution among market participants, leading to a modest but noticeable uptick in stock prices across the region.

Market Overview:

Asian Markets:
Major Asian stock indices, including the Nikkei 225 in Japan, the Hang Seng Index in Hong Kong, and the Shanghai Composite in China, displayed gains during the trading session. This upward movement was attributed to a variety of factors, such as positive economic data from the region and a sense of optimism stemming from global recovery efforts.

US Inflation Data:

The key driver of market sentiment during this period was the impending release of US inflation data. Investors closely monitored these figures as they are crucial in shaping expectations for future monetary policy decisions by central banks. The US Federal Reserve has consistently emphasized its commitment to an accommodative monetary stance, and any surprises in inflation figures could influence these policy considerations.

Asian stocks rise ahead of US inflation numbers:

Asian stocks inched up cautiously on Tuesday, with investors awaiting a crucial US inflation report that could influence the Federal Reserve’s policy outlook. The MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.49%, while the Japanese Nikkei gained 0.36%. Australia’s S&P/ASX 200 index was the top performer, climbing 0.61%.

The market’s cautious optimism was fueled by the expectation that US inflation may have peaked. Investors are hoping that the US Consumer Price Index (CPI) data released later today will show a decline in the headline inflation rate from 3.3% in October to 3.7%. A lower-than-expected reading could ease concerns about aggressive interest rate hikes from the Fed, boosting risk appetite.

However, the market sentiment remains fragile as a higher-than-expected inflation reading could lead to further tightening by the Fed, impacting global economic growth. Additionally, investors are also watching out for other central bank meetings this week, including the European Central Bank, Bank of England, Norge’s Bank, and the Swiss National Bank.

Regional Highlights:

Japan: The Nikkei 225 edged up 0.36%, supported by gains in technology and consumer discretionary stocks. However, the gains were capped by a weaker yen, which fell to a one-year low against the US dollar.
China: Mainland China’s blue-chip CSI 300 index edged down 0.28%, while the Hong Kong Hang Seng index fell 0.20%. Investors remained cautious amid concerns about the slowing Chinese economy and the lack of clear policy support from the government.
Australia: The S&P/ASX 200 index rose 0.61%, led by gains in energy and materials stocks. The market sentiment was boosted by positive earnings reports from major companies and rising commodity prices.
South Korea: The KOSPI index gained 0.33%, supported by gains in tech and healthcare stocks. Investor sentiment was also lifted by expectations of a slower pace of interest rate hikes from the Bank of Korea.

Market Sentiment Influencing Factors:

1. Global economic recovery: The continuous global economic recovery, fueled by vaccine rollouts and fiscal stimulus measures, offered a positive backdrop for equity markets. Positive economic indications from major economies, such as solid manufacturing data and improved employment figures, aided the general positive sentiment.

2. Central Bank Policies: Investors closely monitored central bank announcements for any indications of prospective monetary policy adjustments. The Federal Reserve’s stance on interest rates and asset purchases remained a focus, and any signals of a policy shift might have an influence on market dynamics.

3. Geopolitical developments: While geopolitical concerns were not the primary focus, continuing events and developments in many countries, such as trade talks and diplomatic ties, influenced market mood to some extent.

Conclusion:

Asian stocks rose cautiously in anticipation of US inflation data, reflecting a mix of optimism and caution. The expectation of a potential decrease in US inflation boosted market confidence, but fragility remains amid concerns about aggressive Fed actions. Regional highlights showed varied performances, influenced by factors like currency dynamics and regulatory uncertainties. Overall, investors are navigating a nuanced landscape shaped by global economic recovery, central bank policies, and geopolitical events, requiring vigilance and adaptability.

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RBI Charts Course for Sustainable Growth: Inflation Control as the Key

Navneet education Q2FY24 result update

Paper Price Surge Hits Q2 Profits: Navneet Education Adapts with Price Adjustments

Paper Price Surge Hits Q2 Profits: Navneet Education Adapts with Price Adjustments

Company Name: Navneet Education Ltd | NSE Code: NAVNETEDUL | BSE Code: 508989 | 52 Week high/low: 176/88.1 | CMP: INR 143 | Mcap: INR 3,231 Cr | PE: 26.5

Company Overview:

Navneet Education is a key player in the manufacturing and trading of educational books, reference materials, and stationery, with a significant market presence in both paper and non-paper categories. The company commands a dominant market share of 65% in western India and exports its stationary products to over 30 countries, with a focus on the US. Navneet Education operates three manufacturing sites in Dadra & Nagar Haveli, Palghar, and Gandhinagar.

Paper Price Surge Causes 20% Quarterly Revenue Drop:

In Q2FY24, the company experienced a 20% quarter-on-quarter (QoQ) revenue decline, primarily attributed to a surge in paper prices. The quarterly revenue plummeted by 66.42% year-on-year (YoY) and 19.41% QoQ due to increased paper costs. To counteract this rise, the company raised prices on some publication products, leading to decreased demand. Furthermore, changes in the paper pattern for certain standards resulted in the postponement of related examination book releases to the third quarter.

Resilient Stationary Business in Q2:

Despite challenges in the publication segment, the stationary business demonstrated resilience with a marginal decline of 0.79% QoQ and a substantial 46.65% YoY decrease. The domestic stationary market usually performs well in Q4 and Q1, and the company anticipates achieving a growth of 12%-15% in this segment for FY24. In H1FY24, the overall stationary business recorded revenue of Rs. 547 crores and EBIT of Rs. 71 crores, reflecting a margin of approximately 12.9%.

Segment-Wise Performance in Q2:

For Q2, consolidated revenue contracted by 66.42% YoY, reaching 266 Crores, primarily due to the slowdown in the publication business. The publication segment was significantly impacted, with an 83.08% YoY decrease in revenue to 73 Crores, while the stationary business remained resilient, declining by 0.79% QoQ and 46.65% YoY to 190 Crores.

Valuation and key ratio

As of now, the stock trades at a multiple of 26.5x earnings per share (EPS) (TTM) of 10.4 Rs, with a market price of 143 Rs. The industry price-to-earnings (PE) ratio is at 28.7x. The company’s stock is valued at 2.54 times its book value of 56.3 Rs per share. In terms of enterprise value/earnings before interest, taxes, depreciation, and amortization (EV/EBITDA), the company ranks 6th with a multiple of 11.39x, compared to the industry median of 18.11x. The trailing twelve-month return on equity (ROE) and return on capital employed (ROCE) stand at 15% and 19.4%, respectively, with a healthy interest coverage ratio of 12x.

Q2FY24 Result Update – Consolidated

➡️In Q2FY24, consolidated revenue declined by 66.42% (-19.41% QoQ) to 266 Crores, primarily attributed to challenges in the publication business stemming from the rise in paper prices.

➡️Gross profit decreased by 63.56% YoY, reaching 134 Crores, while gross margin improved by 400 basis points YoY to 50.56%, driven by a decline in raw material costs by 68.91% YoY.

➡️EBITDA experienced a significant downturn, decreasing by 102.06% YoY to -4.30 Crores, mainly due to challenges in the publication business. EBITDA margin stood at -1.62% in Q2FY24 compared to 26.39% in Q2FY23.

➡️Operating profit (EBIT) decreased by 109.65% YoY to -18.9 Crores in Q2FY24, with an EBIT margin of -7.11%, contrasting with 24.74% in Q2FY23.

➡️Profit after tax (PAT) decreased by 75.44% YoY to 35.6 Crores, supported by a one-time gain from the sale of a plant worth 68 Crores. PAT margin dropped by 500 basis points YoY to 13.39%.

➡️Earnings per share (EPS) for the quarter stood at 1.58 Rs, a significant improvement compared to -0.10 Rs in the previous quarter.

Conclusion:

Navneet Education faced significant challenges in Q2FY24, marked by a substantial decline in consolidated revenue, primarily attributed to the impact of rising paper prices on the publication business. While the stationary segment exhibited resilience, the company navigated the downturn by adjusting prices and strategizing for a rebound. The focus on cost management, evident in improved gross margins, showcases the company’s adaptability. With a strong market presence and strategic manufacturing capabilities, Navneet Education aims to overcome challenges, emphasizing growth prospects in the stationary business for the remainder of FY24. Investors should monitor the company’s efforts to mitigate the impact of external factors on its financial performance.

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CL Educate Q2FY24result update

EdTech and MarTech: CL Educate's Strategic Shift Towards Higher Margins

EdTech and MarTech: CL Educate’s Strategic Shift Towards Higher Margins

Company Name: CL Educate Ltd | NSE Code: CLEDUCATE | BSE Code: 540403 | 52 Week high/low: 91/48.8 | CMP: INR 80.9 | Mcap: INR 445 Cr | PE: 15.3

Company Overview:

CL Educate is a prominent player in the Indian EdTech and MarTech segments, providing education and test preparation training programs, including tuition for school students and coaching for entrance exams. The company has a presence in over 90 cities in India and globally in the UAE. Under the MarTech segment, CL Educate offers Event management, Digital, and CEP services. The company boasts a 35%+ market share in MBA and Law Test preparation.

EdTech Business Revenue Remains Stable as EBITDA Surges 17% YoY

In Q2FY24, EdTech business revenue showed a nearly flat growth of 6.63% YoY, while EBITDA in this segment surged by 17%. The flatness in EdTech revenue is attributed to academic seasonality, with the CLAT (Law Exam) moving from a summer exam to December. The platform business in the EdTech segment grew by 30% in H1, adding 42 new clients. Publishing revenue increased by 18%, with improved margins due to a decrease in paper prices by 18%-20%. The repeat customer strike rate increased by 90%, billing grew by 30%, and collections increased by 40%.

MarTech Business Topline Growth Stalls, but EBITDA Grows 60% – Margins Expand:

While MarTech business topline growth declined by 10.6%, EBITDA in this segment grew by an impressive 60%. The company strategically let go of lower-margin businesses, such as support services, focusing instead on high-margin marketing and B2B demand generation. New customers were added in sectors such as Fintech, FMCG, Financial services, and Automobiles.

PAT Jumps 26.2% YoY on Lower Interest Cost and Tax Rate:

In Q2FY24, Profit After Tax (PAT) increased by 26.2% YoY (1.54% QoQ) to 5.56 Cr, despite flat revenue for the quarter. The growth in PAT was driven by a 14.82% YoY decrease in interest costs to 0.54 Cr and a 16.19% YoY decrease in tax expenses to 1.88 Cr. The tax rate declined by 8.48% YoY to 25.33% in Q2FY24, compared to 33.81% in Q2FY23.

Q2FY4 Concall Highlights:

➡️The CLAT exam’s move to December led to increased sales of long-duration courses, contributing to higher ARPU and margins.

➡️The company will focus on CUET for 2024 test prep and the IPM crash season in H2.

➡️The increasing number of CAT takers, now at 3.3 lakhs, compared to 2.2 & 2.6 lakhs in the last 5-7 years, is expected to bring more business, where the company holds a 25%-30% market share in CAT test prep.

Valuation and key ratio

The stock is currently trading at a multiple of 15.3x EPS (TTM) of 3.13 Rs at a market price of 80.9, with an industry PE at 76x. The company’s stock is valued at 1.56 times its book value of 51.9 Rs per share. In EV/EBITDA multiple, the company holds the 7th position with a multiple of 10.57x, while the industry median stands at 29.63x. Trailing twelve-month ROE and ROCE stood at 8.16% and 6.81%, respectively, while the interest coverage ratio demonstrated the company’s solvency at 6.13x in Q2FY24.

Q2FY24 Result Update – Consolidated

➡️In Q2FY24, consolidated revenue growth was nearly flat, down by 0.58% YoY (-1.08% QoQ) to 89 Cr, primarily due to a decline in the MarTech business segment. The company’s strategic focus on higher-margin services, such as marketing and B2B business, offset the decline.

➡️Consolidated EBITDA declined by 15.52% YoY (-24.05% QoQ) to 6.72 Cr due to lower margins in the EdTech business. EBITDA margins were down 130 bps YoY and 228 bps QoQ to 7.55%.

➡️Operating profit (EBIT) decreased by 41.08% YoY (-39.49% QoQ) to 3.32 Cr due to higher depreciation, with EBIT margin declining by 250 bps YoY and 237 bps QoQ to 3.74%.

➡️PAT surged by 26.2% YoY (+1.54% QoQ) to 5.56 Cr, driven by lower interest costs and tax expenses, leading to a PAT margin increase of 133 bps YoY and 16 bps QoQ to 6.25%.

➡️EPS for the quarter stood at 1.01 Rs compared to the previous quarter’s 0.99 Rs.

Conclusion:

CL Educate demonstrates resilience in its EdTech and MarTech businesses, navigating seasonality challenges and strategically optimizing its service portfolio for higher margins. Despite flat revenue, the company’s focus on long-duration courses and strategic adjustments positions it well for future growth. The positive trajectory of key financial indicators and a strong market share in critical test preparation segments contribute to a promising outlook for CL Educate.

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Strategic Partnerships Fuel One97’s Financial Turnaround

Unlocking the Philippine Defense Market: Opportunities for Indian Companies

Unlocking the Philippine Defense Market: Opportunities for Indian Companies

Unlocking the Philippine Defense Market: Opportunities for Indian Companies
Introduction:

Indian defense companies are looking to capitalize on the Philippines’ military modernization program by exporting a range of platforms, from protective gear to fighter jets. This follows the recent $375 million deal between the two countries for India to supply three BrahMos cruise missile batteries to the Philippines.
The relationship between India and the Philippines has been historically cordial, with diplomatic ties dating back several decades. In recent years, both countries have sought to deepen their economic and strategic partnerships.
India’s growing defense capabilities, technological advancements, and competitive pricing make it an attractive partner for the Philippines as it aims to modernize its armed forces. This report examines the potential for Indian defense exports to meet the Philippines’ evolving security needs.

Current State of Defense Exports:

I. India’s Defense Industry:
India has emerged as a key player in the global defense market, showcasing advancements in missile technology, naval systems, and other military hardware. Indian defense companies have successfully exported equipment to various countries.
India aims to significantly increase its defense exports, aiming for a threefold jump to $5 billion annually by 2024-2025. This ambitious target reflects India’s growing capabilities in defense manufacturing and its aspirations to become a major global player in the industry.
II. Philippines’ Defense Requirements:
The Philippines faces security challenges that necessitate the modernization of its armed forces. The government has expressed its intent to acquire advanced defense systems and equipment to bolster national security.

Market Analysis:

The Philippines is one of the largest arms importers in Southeast Asia, with a defense budget of around $5.5 billion in 2023. The country is looking to modernize its military to counter China’s growing presence in the South China Sea. This has created a significant opportunity for Indian defense companies, which are looking to diversify their export markets.

Potential Areas of Collaboration:

➡️Naval Systems:
India’s expertise in naval technology, including shipbuilding and submarine capabilities, aligns with the Philippines’ need to enhance its maritime defense capabilities.
➡️Aerospace and Aviation:
Indian companies specializing in aircraft manufacturing, avionics, and unmanned aerial vehicles (UAVs) can offer solutions to address the Philippines’ requirements for air force modernization.
➡️Cybersecurity and Intelligence:
With the increasing importance of cybersecurity, Indian firms can provide expertise in securing critical infrastructure and intelligence-sharing mechanisms.

Challenges and Opportunities:

1. Competition:
While Indian companies possess significant advantages like competitive pricing, proven performance in challenging environments, and a rapidly growing domestic defense industry, they face stiff competition from established players like the United States, Russia, and South Korea. Overcoming this competition requires a strategic approach focused on:
o Developing products tailored to the specific needs of the Philippines.
o Collaborating closely with the Philippine government and military to build trust and strategic partnerships.

2. Cultural Sensitivity:
Understanding the cultural nuances and preferences of the Philippines is crucial for successful collaborations. Building trust and relationships will be key to overcoming cultural challenges.

Regulatory and Policy Environment:

1. Export regulation:
Navigating the complex regulatory landscape governing defense exports is crucial for the success of this endeavor. Both India and the Philippines have their own export control regulations, and Indian companies must comply with them when exporting to the Philippines. The Indian government’s efforts to streamline export control procedures are expected to significantly ease the process for companies seeking to export defense equipment.
2. Government Support:
Both the Indian and Philippine governments are actively promoting defense cooperation between the two countries. This includes providing critical support to Indian companies seeking to enter the Philippine defense market. The Indian government’s establishment of a dedicated defense export agency further demonstrates its commitment to supporting its defense industry on the global stage.

➡️Beyond Equipment: Collaborative Efforts-
The partnership between India and the Philippines extends beyond the purchase of defense equipment. Both countries are actively collaborating in the critical areas of hydrography and maritime affairs, recognizing their shared interests in maritime security and navigation.

➡️Bilateral Maritime Dialogue:
The establishment of a bilateral Maritime Dialogue provides a formal platform for India and the Philippines to discuss maritime issues, share information, and develop coordinated responses to common challenges. This dialogue mechanism facilitates greater understanding and cooperation on maritime security, safety, and environmental protection.

➡️Enhanced Hydrographic Cooperation:
India and the Philippines have also pledged to strengthen their collaboration in hydrography, a crucial aspect of maritime navigation and safety. This cooperation will involve sharing expertise, technology, and resources to improve hydrographic data collection, mapping, and charting in the region.

➡️Mutual Benefits:
The expanding defense cooperation between India and the Philippines offers mutual benefits for both countries. India gains access to a new and growing market for its defense exports, while the Philippines receives valuable equipment and expertise to bolster its maritime security capabilities.
The deepening partnership between India and the Philippines represents a positive development in the Indo-Pacific region. As both countries continue to strengthen their maritime capabilities and cooperation, their collective efforts will contribute to a more stable and secure maritime environment for all.

Conclusion:

As India seeks to expand its footprint in the global defense market, the Philippines presents a promising opportunity for collaboration. By addressing challenges and leveraging each other’s strengths, Indian companies can contribute to the modernization efforts of the Philippines’ armed forces, fostering a mutually beneficial partnership.

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RBI Charts Course for Sustainable Growth: Inflation Control as the Key

Dmart Q2FY24 result updates

DMart Q2FY24 Working Capital Boost: Inventory and Payable Days Decrease

DMart Q2FY24 Working Capital Boost: Inventory and Payable Days Decrease

Company Name: Avenue Supermarts Ltd | NSE Code: DMART | BSE Code: 540376 | 52 Week high/low: 4,229/3,292 | CMP: INR 4,062 | Mcap: INR 2,64,411 Cr | PE: 113

Company Overview:

Avenue Supermart is primarily engaged in the business of retail supermarts under the brand name “D-Mart.” The company offers products in three categories at its stores: Food, Non-food, and Merchandise & Apparel. The Food category includes groceries, dairy, staples, beverages, fruits, and vegetables. Non-food comprises home care, personal care, toiletries, and general merchandise, while Merchandise & Apparel includes bed & bath, toys & games, garments, and footwear. Over the last year, the number of stores increased by 34, bringing the total count to 336, with a presence across 22 cities in India as of September 2023.

Q2 Sees Surge in Topline Growth Despite 9.09% YoY Dip in PAT

In Q2FY24, D-Mart reported an 18.67% YoY growth in topline, while PAT was down 9.09% YoY to 623. The slowdown in PAT was attributed to an increase in operating expenditure (up 18.2% YoY) and tax rate (up 18.5% YoY). This led to a decline in PAT margin by 150 bps YoY and 60 bps QoQ to 4.94% in Q2FY24. The sudden increase in tax expenses is due to the absence of a tax benefit in Q2FY23.

Q2 Maintains EBITDA Stability Amid Margin Decline

The company reported an EBITDA of 1,005 Cr, growing 12.66% YoY but declining 2.93% QoQ. The EBITDA margin during the quarter dropped 42 bps YoY and 75 bps QoQ, primarily due to higher COGS and operating expenditure. Purchase stock increased by 19.3% YoY to 10,771 Cr, while operating expenditure grew 18.2% QoQ to 847 Cr.

Accelerate Working Capital: Optimize Inventory and Payable Days

Lower inventory and payable days led to a faster working capital cycle. Inventory days reduced by 2.1 days to 30.3 days in Q2FY24, and payable days declined 1.2 days to 6.4%. This resulted in a Net working capital day (Inventory days – Payable days) of 23.9 days in H1FY24 compared to 24.8 days in H1FY23, indicating improved working capital efficiency.

Key Operating Metrics

Total bill cuts grew 36% half-yearly to 14.7 Cr in H1FY24. Revenue from sales per retail business area sq ft increased by 5% half-yearly to 16,729 in H1FY24. Like-for-like growth, representing the growth in revenue from the sale of the same store, stood at 8.6% in H1FY24 compared to 41.6% in H1FY23.

Valuation and key ratio

The stock is currently trading at a multiple of 113x EPS (TTM) 35.9 Rs, at the current market price 4,062 with an industry PE at 61.7x. The company’s stock is valued at 15.2 times its book value of 268 Rs per share. In EV/EBITDA multiple, the company holds the 1st position with a multiple of 67.43x, surpassing the industry median of 27.64x. Trailing twelve-month ROE and ROCE stood at 16% and 20.1%, respectively, while the interest coverage ratio demonstrated the company’s solvency at 53.3x in Q2FY24.

Q2FY24 Results Updates – Consolidated

➡️In Q2FY24, Revenue grew 18.67% YoY (+6.4% QoQ) to 12,624 Cr, driven by an increase in volumes.

➡️Gross profit increased 15.13% YoY (+2.8% QoQ) to 1,852 Cr, while gross margin declined 45 bps YoY and 50 bps QoQ to 14.67%.

➡️EBITDA surged 12.66% YoY (-2.93% QoQ) to 1,005 Cr, driven by increased revenue, with EBITDA margin dropping 42 bps YoY and 75 bps QoQ to 7.96%.

➡️Operating profit (EBIT) increased 13.77% YoY (-4.87% QoQ) to 831 Cr, while EBIT margin declined 28 bps YoY and 78 bps QoQ to 6.58%.

➡️PAT was down 9.09% YoY (-5.37% QoQ) to 623 Cr due to the decline in margins, with PAT margin dropping 150 bps YoY and 60 bps QoQ to 4.95%.

➡️EPS for the quarter stood at 9.58 Rs compared to the previous quarter at 10.12 Rs.

Conclusion:

D-Mart showed growth in Q2FY24 with an 18.67% YoY increase in revenue, but PAT declined by 9.09% due to higher operating expenses and tax rates. EBITDA remained robust, although margins dipped. The company demonstrated improved working capital efficiency, and key metrics like total bill cuts and like-for-like growth exhibited positive trends. Valuation metrics suggest a premium stock, and Q2FY24 results indicate a focus on volume-driven revenue growth.

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Strategic Partnerships Fuel One97’s Financial Turnaround

India's Inflation Soars in November: A Look at the Drivers and Policy Response

India's Inflation Soars in November: A Look at the Drivers and Policy Response

India’s Inflation Soars in November: A Look at the Drivers and Policy Response

Introduction:

In November, India experienced a notable rebound in inflation, primarily attributed to a surge in food prices. The increase, marked by various factors, poses challenges to the ongoing efforts to maintain price stability. This report delves into the key contributors to the inflation rebound, its implications, and potential considerations for policymakers.
➡️India’s retail inflation, measured by the Consumer Price Index (CPI), rose to 5.70% in November 2023, driven by higher food prices.
➡️This marks a rise from 4.87% in October and brings inflation closer to the upper end of the Reserve Bank of India’s (RBI) target range of 2-6%.
➡️The increase in food prices, which account for nearly half of the inflation basket, was led by items like onions, tomatoes, and pulses.
➡️Core inflation, which excludes volatile food and energy prices, remained subdued at 4.3%.

REASONS FOR THE INFLATION REBOUND:

I. Unfavorable weather conditions: Heavy rains and unseasonal hailstorms in key agricultural regions disrupted crop production and led to supply-chain disruptions.
II. Festive season demand: Increased demand for food items during the festive season put a strain on existing supplies, pushing prices higher.
III. Global factors: The ongoing war in Ukraine and other geopolitical uncertainties continue to impact global commodity prices, including food and energy.

IMPLICATIONS:

I. Impact on Consumer Purchasing Power: The rise in inflation, particularly driven by higher food prices, could potentially erode consumer purchasing power. This may have implications for household budgets and discretionary spending, impacting overall economic activities.
II. Policy Challenges: The inflation rebound poses challenges for policymakers tasked with maintaining a delicate balance between price stability and supporting economic growth. Policymakers may need to reassess monetary and fiscal measures to address emerging inflationary pressures.
III. Interest rates: It can lead to higher interest rates, which can make it more expensive for businesses to borrow and invest.

POLICY RESPONSE TO INFLATION:

I. Monetary Measures:
The Reserve Bank of India (RBI) has proactively responded to the inflationary pressures by implementing a series of repo rate hikes. Since May 2023, the central bank has raised the repo rate four times. This monetary tightening is a strategic move aimed at curbing inflation and maintaining price stability.
II. Future Monetary Policy Outlook:
Given the persistent inflation challenges, there is a likelihood that the RBI will continue its monetary policy tightening in the upcoming months. The objective is to bring inflation back within the central bank’s target range, demonstrating a commitment to inflation control.
III. Government Intervention:
Apart from monetary measures, the government is expected to take initiatives to address supply-chain disruptions and enhance agricultural productivity. These interventions are crucial in tackling the root causes of the inflationary pressures, particularly in the context of rising food prices.
IV. Supply-Chain Management:
Government efforts may focus on fortifying supply chains to minimize disruptions and ensure the smooth flow of essential goods. Enhancing the resilience of supply chains is essential for stabilizing prices and mitigating the impact of supply-side shocks.
V. Agricultural Productivity:
To address inflation at its source, the government may implement policies aimed at boosting agricultural productivity. This could involve investments in technology, infrastructure, and agricultural practices to improve output and reduce dependency on imports.

FUTURE OUTLOOK:

I. The future trajectory of inflation will depend on several factors, including global commodity prices, weather conditions, and the success of government policies.
II. Experts predict inflation could stay above 5% in the next few months due to seasonal factors and possible supply-side bottlenecks.
III. The RBI’s policy decisions will be crucial in managing inflation and ensuring economic stability

CONCLUSION:

In conclusion, November’s inflation surge, led by higher food prices, poses a significant challenge to India’s price stability objectives. The RBI’s repo rate hikes signal a proactive approach to control inflation, complemented by expected government interventions targeting supply chains and agricultural productivity. Future inflation trends hinge on global factors and policy effectiveness. With projections indicating inflation above 5%, the RBI’s decisions will be pivotal for sustaining economic stability.

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RBI Charts Course for Sustainable Growth: Inflation Control as the Key