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Infosys to LTIMindtree: IT Stocks Climb on Fed Relief
Economy, Expert Views, Market News, Markets - January 9, 2024

SEBI Announces Comprehensive Framework for Short Selling and Securities Lending

SEBI Announces Comprehensive Framework for Short Selling and Securities Lending

In a significant development, the Securities and Exchange Board of India (SEBI) has unveiled a comprehensive framework governing short selling and securities lending and borrowing scheme (SLBM). The regulatory body’s announcement, made on Friday, outlines key guidelines aimed at fostering transparency and integrity in the Indian securities market.

Inclusion of All Investors in Short Selling, With a Strict Prohibition on Naked Short Selling:
SEBI has granted approval for investors across all categories to participate in short selling activities. However, a notable restriction has been imposed to disallow naked short selling, a practice where a seller engages in short selling without possessing the securities at the time of the trade. This measure is designed to ensure the legitimacy and stability of the market.

Eligibility of All F&O Segment Stocks for Short Selling:
SEBI’s directive highlights that all stocks trading in the futures and options (F&O) segment are eligible for short selling. This move is anticipated to enhance market liquidity and provide investors with a broader range of options for executing short selling strategies.

Obligation Adherence for Delivering Securities:
The market regulator emphasizes the mandatory obligation for all investors to deliver securities at the time of settlement. This requirement underscores SEBI’s commitment to upholding the integrity of transactions and ensuring timely fulfillment of contractual obligations.

Prohibition on Day Trading and Intra-day Square Off for Institutional Investors:
SEBI’s framework explicitly prohibits institutional investors from engaging in day trading or squaring off transactions intra-day. This measure aims to promote a more stable and long-term approach to investing among institutional participants.

Supreme Court’s Directive Prompts Investigation:
The regulatory changes follow a directive from the Supreme Court, urging SEBI to investigate potential losses suffered by investors and assess any breaches of the law related to short positions. This directive was prompted by allegations from US short seller Hindenburg Research, which claimed that the Adani Group had violated stock market rules. SEBI is currently conducting an investigation into these allegations.

Introduction of Securities Lending & Borrowing Scheme (SLBM) Concurrent with Institutional Short Selling:
SEBI has announced that the introduction of a comprehensive Securities Lending & Borrowing Scheme (SLBM) will coincide with the implementation of short selling by institutional investors. This integrated approach aims to facilitate a more robust and efficient securities lending mechanism in the market.

Enhanced Disclosure Requirements for Brokers and Investors:
SEBI has mandated brokers to collect and upload scrip-wise short sell positions on exchanges before the commencement of trading on the following day. Retail investors have the flexibility to make necessary disclosures by the end of the trading hours. The regulatory body emphasizes the importance of transparent reporting to enhance market visibility and public awareness.

Balancing Market Stability and Efficiency:
Acknowledging the potential impact on market efficiency, market experts caution that limitations on short selling, particularly naked shorting, may impede liquidity, especially in smaller stocks. However, SEBI’s move is seen as a proactive measure to curb market manipulation and protect retail investors. A data-driven approach, with periodic reviews and adjustments, will be crucial to maintaining a healthy balance between market stability and dynamism. Monitoring the impact of these regulations will be essential to assess whether the benefits of curbing manipulation outweigh potential costs to market efficiency.

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Strategic Partnerships Fuel One97’s Financial Turnaround

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Interest Payment Burden to reduce in FY26
Economy, Expert Views, Market News, Markets - January 8, 2024

Anticipation Grows as Experts Suggest Bank Privatization Unlikely in Upcoming Union Budget Vote on Account

Anticipation Grows as Experts Suggest Bank Privatization Unlikely in Upcoming Union Budget Vote on Account

Introduction:
As the country awaits the Union Budget scheduled for February 1, 2024, financial experts express skepticism regarding the inclusion of bank privatization announcements. Given that this budget is categorized as a vote on account, analysts assert that major policy initiatives, particularly the contentious issue of bank privatization, may not find a place in the interim budget.

Economic Veterans Share Insights:
Renowned economist and former finance secretary, Montek Singh Ahluwalia, emphasized the nature of interim budgets, stating, “This is an interim Budget; so it’s like a non-Budget you are not supposed to announce any new thing.” He underscored the tradition of interim budgets primarily echoing election manifestos without introducing groundbreaking policies.

Finance Minister Nirmala Sitharaman further clarified the government’s stance on December 7, asserting that the upcoming budget would lack “spectacular announcements.” She highlighted that the regular budget with substantial policy declarations would be presented in July, post the general election.

Former Deputy Governor of the Reserve Bank of India, R Gandhi, echoed similar sentiments, emphasizing the limited scope of the upcoming vote on account. “It is only a vote on account, not a budget. So don’t expect any policy initiatives,” Gandhi remarked.

Recap of Previous Budget Announcements:
The backdrop of this anticipation stems from Sitharaman’s previous budget presentation in 2021-22, where she outlined the government’s intent to privatize public sector banks (PSBs) as part of a broader disinvestment strategy aimed at generating Rs 1.75 lakh crore. However, the proposed privatization, except for IDBI Bank, did not materialize, raising questions about the timing and implementation of such decisions.

Financial Stability of Public Sector Banks:
Notably, industry experts have assessed the current situation of public sector banks and suggest that, at present, they are in a robust financial position. Former finance secretary Subhash Chandra Garg affirmed, “There is no chance to touch issues like bank privatization in the interim Budget.” He pointed out that banks are enjoying favorable conditions, marked by improved earnings, successful fund raising, and strong capital positions.

A Moneycontrol analysis of the July-September FY24 quarter reveals double-digit profits and enhanced asset quality in India’s banking sector. Major banks, including the State Bank of India (SBI), Bank of Baroda (BoB), and Punjab National Bank, reported substantial profits, reflecting a positive trend in the industry.

Government’s Stance and Future Projections:
A finance ministry official indicated that critical decisions, including bank privatization, are likely to be deferred until after the general elections. The official stated, “Every government makes the decisions at the right time. So, I don’t think that anything is going to happen before the general elections.”

As the nation awaits the Union Budget on February 1, 2024, the financial landscape remains poised for potential shifts post the general elections, leaving experts and stakeholders keenly observant of the government’s future policy directions.

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Tesla Shares Surge 3% Following Elon Musk’s $1 Billion Stock Investment
Economy, Expert Views, Market News, Markets - January 8, 2024

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

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

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

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

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

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

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

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

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

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Strategic Partnerships Fuel One97’s Financial Turnaround

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RBI's Revised Co-Lending Norms Set to Transform NBFC Growth
Economy, Expert Views, Market News, Markets - January 5, 2024

RBI Introduces Revisions in Redemption Funds and CP Buyback Norms

RBI Introduces Revisions in Redemption Funds and CP Buyback Norms

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

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

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

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

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

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

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Strategic Partnerships Fuel One97’s Financial Turnaround

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Markets Plunge as Middle East Tensions Erupt: Oil Soars, Aviation and Equities Suffer
business update, Economy, Expert Views, Market News, Markets - January 5, 2024

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

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

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

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

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

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

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

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

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

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

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Indian Land Deals Surge 47% in 2024, Residential Sector Leads
business update, Expert Views, Market News, Markets, Real Estate, Real Estate News - January 4, 2024

Budget 2024 Anticipations: Real Estate Industry's Wish List

Budget 2024 Anticipations: Real Estate Industry’s Wish List

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

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

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

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

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

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

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

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

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

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

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

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Maruti Suzuki's new facility faces short delay; 2025-26 production kick-off
Automobile News, Autos, business update, Expert Views, Market News, Markets - January 4, 2024

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

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

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

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

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

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

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

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

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

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India: Infrastructure Set to Outpace IT as the Growth Engine
Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports - January 3, 2024

Reliance's Strategic Investment Sparks 20% Surge in Alok Industries Stock

Reliance’s Strategic Investment Sparks 20% Surge in Alok Industries Stock

On January 2nd, Alok Industries experienced a significant upswing in its stock, witnessing a remarkable 20% surge to reach its highest level in 52 weeks at Rs 25.80. The driving force behind this surge was the substantial investment made by Reliance Industries Ltd in non-convertible redeemable preferential shares, amounting to a substantial Rs 3,300 crore.

The intraday trading session for Alok Industries was dynamic, with the stock opening at Rs 21.65 and reaching a high of Rs 25.80. The stock also encountered a low of Rs 21 during the session. The closing price settled at the day’s peak of Rs 25.80, representing a notable 20% change from the previous closing figure of Rs 21.50. As of now, the market capitalization for the company stands impressively at Rs 12,852.15 crore.

Trading volumes in the counter saw a significant uptick, with a staggering 11 crore shares changing hands on the exchanges. This heightened activity is indicative of the heightened investor interest in Alok Industries. Furthermore, the stock has demonstrated a substantial 31% increase in the last month, underlining the positive sentiment surrounding the company.

Upon the successful receipt of the substantial subscription money of Rs 3,300 crore from Reliance Industries Limited, the Company promptly allocated 3,300 crore non-convertible redeemable preference shares. These preference shares, carrying a 9% interest rate, were issued at a face value of Rs 1 each for cash at par. The terms and conditions of this allocation were previously approved by the shareholders of the Company through a special resolution passed on December 23, 2023.

At the end of the September quarter, Reliance Industries Limited already held a significant stake in Alok Industries, amounting to 40.01%. In addition, JM Financial Asset Reconstruction Co controlled a noteworthy 34.99%. These ownership structures provide insights into the strategic alliances and interests that have played a pivotal role in shaping Alok Industries’ recent financial landscape.

It’s crucial to delve into Alok Industries’ recent history to understand the context of its financial developments. In pursuit of ambitious expansion goals, the company had undertaken substantial borrowing, accumulating debt up to a staggering Rs 30,000 crore. However, the company faced challenges in meeting its financial obligations, ultimately leading to its classification as one of the 12 stressed units under the amended Insolvency and Bankruptcy Code (IBC). The subsequent declaration of insolvency marked a significant chapter in Alok Industries’ corporate journey.

Alok Industries is a prominent integrated textile company with operational plants located at Vapi in Gujarat and Silvassa, a Union territory near Vapi. The company boasts a diverse and expansive customer base spanning the globe, including global retail brands, importers, private labels, domestic retailers, garment and textile manufacturers, as well as traders. The company’s presence as a popular penny stock, trading near Rs 25, adds another layer of intrigue to its narrative.

Reliance Industries, in its stock exchange notification, emphasized that the acquisition of these preference shares constituted a related party transaction. Importantly, this transaction had received prior approval from the shareholders of Alok Industries and was conducted on an arm’s length basis. It’s noteworthy that neither the promoter nor the promoter group and group companies were directly involved or held interests in this transaction. Equally significant is the disclosure that no governmental or regulatory approvals were required for the completion of this transaction.

In conclusion, the recent developments in Alok Industries’ stock and financial landscape, particularly the strategic investment by Reliance Industries, underscore the intricate dynamics at play in the corporate realm. The company’s journey, from insolvency to attracting substantial investments, reflects the resilience and adaptability required in the ever-evolving business landscape. Investors and industry observers will undoubtedly continue to monitor Alok Industries’ trajectory as it navigates the challenges and opportunities that lie ahead.

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Murae Organisor Reports Promising Q1 2026 Results: A Positive Start to the Fiscal Year
Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - December 28, 2023

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

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

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

Company Overview:

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

Topline dipped due to price reductions in certain products

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

Q2 EBITDA dips YoY, yet margins expand by 85 bps

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

APIs and Intermediates drive impressive 58% growth in Q2

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

Promising Future Outlook: Anticipated Growth Opportunities Ahead

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

Valuation and Key Ratios

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

Q2FY24 Result Update: Standalone

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

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

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

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

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

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

Conclusion

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

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Talbros Automotive Components Accelerates to New Highs on ₹580 Crore Order Win
Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - December 28, 2023

LG Balakrishnan's Solid Profitability Amid Margin Pressures

LG Balakrishnan’s Solid Profitability Amid Margin Pressures

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

Company Overview:

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

Q2 Sees Growth in Transmission, Metal Forming Lags

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

Revenue up, but Year-over-Year margins dip

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

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

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

Valuation and Key Ratios

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

Q2FY24 Result Update: Standalone

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

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

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

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

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

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

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

Conclusion

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

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