PFC Withdrawals May Impact Zero-Coupon Bond Market

Research, Research Reports, Result Updates - August 20, 2024

IREDA Q1FY25 Sees Record Loan Disbursement of ₹25,089 Crore

Company Overview:

Indian Renewable Energy Development Agency Ltd (IREDA) is an Indian public sector company that provides financial backing and additional assistance for projects related to renewable energy sources, energy efficiency, and conservation. Established in 1987, IREDA is a Navratna institution under the administrative jurisdiction of the Ministry of New and Renewable Energy, owned by the Indian government. IREDA was listed on the NSE and BSE following its initial public offering (IPO) in November 2023.

IREDA, a public limited company under government ownership and a non-banking financial institution, is committed to the development, encouragement, and funding of projects related to energy efficiency, conservation, and new and renewable energy sources. The company holds the status of a Mini Ratna (Category I).

Industry Overview & Growth Drivers:

India’s Green Financing Scenario: According to the International Renewable Energy Agency’s (IRENA) 2023 global ranking, India ranks fourth in the world for installed capacity of renewable energy, fourth for installed capacity of wind power, and fifth for installed capacity of solar power.

Bidding activity in other renewable energy sectors also increased in FY24:

The Government of India secured contracts for approximately 412,000 MTPA of green hydrogen production, with a 30-month timeline for commissioning.
Production of electrolysers: Under the Strategic Interventions for Green Hydrogen Transition Scheme (Tranche-I), a production capacity of approximately 1,500 MW was granted.
Solar PV production: Under the Solar PLI Scheme (Tranche II), letters of award were issued for 39,600 MW of fully and partially integrated solar PV module manufacturing plants.
Battery production: Under the Advanced Cell Chemistry PLI Scheme, a request for proposals was issued for a 10 GWh production capacity, which was later approved in April 2024.

Key Drivers for Growth in Solar and Wind Segments:

The budget for grid-based solar power projects in 2024–2025 is ₹10,000 crore, compared to ~₹4,757 crore in 2023–24, according to updated estimates.
In 2024–25, wind power was allocated ~₹930 crore, compared to ~₹916 crore in 2023–24.
Utility-scale solar and onshore wind: 50 GW of yearly bids for utility-scale solar and onshore wind have been planned, with allocations distributed among SECI, NTPC, NHPC, and SJVN, and a minimum of 10 GW of wind capacity announced for the period of 2023–2028.
Additionally, 50 solar parks with a combined capacity of more than 37,490 MW have been approved by the MNRE across 12 states, with about 10,401 MW of that power already put into service.

Hydropower: Depending on their scale, hydropower projects are categorized as large or small. In India, hydropower facilities with a capacity of 25 MW or less are classified as small hydro projects and fall under the purview of renewable energy. Following a government notification in 2019, large hydropower projects (>25 MW) have also been classified under renewables.

Important government initiatives promoting growth include:

Budgetary Focus: Aggregation machinery will help meet the mandate to combine CBG with piped gas and CNG, reducing the cost of LNG imports and enabling greenfield capacity development.
PLI for Manufacturing of High-Efficiency Solar Modules & Electric-Mobility Promotion Scheme 2024 (EMPS 2024)
Waiver of Interstate Transmission System (ISTS) charges for solar PV manufacturing capacity
₹564.75 crore allocated under the scheme from FY 2023–2024 to FY 2026–2027.

Q1FY25 Quarterly Results:

The company’s highest-ever disbursement of ~₹25,089 crore in FY24 led to an incremental rise in its loan book to ~₹59,698 crore at the end of FY24.
Interest on loans increased by 44.84% in FY24 compared to FY23, contributing to the 42.56% increase in total income in FY24 over FY23.
Finance costs rose by 51.51% over FY23, primarily due to higher borrowing to meet the increasing demand for lending operations.
Interest expenses on borrowings increased by 70.59% due to additional funding raised through term loans from banks and other financial institutions at attractive domestic market rates.
Loans increased by 27.14% in FY24, mainly due to an increase in net disbursement.
The company achieved an all-time high PAT of ~₹1,252.23 crore and increased its net worth to ~₹8,559.43 crore in FY23.
The company’s capital adequacy is well within RBI guidelines, with a CRAR of 20.11% compared to the minimum allowable floor of 15%.
The debt-to-equity ratio decreased to 5.80 times in FY24 from 6.77 times in FY23 due to a new stock issue and retained earnings that were greater than the debt increase at the end of the fiscal year.
Operating profit margin grew by 3.76% in FY24 to 32.92% from 32.69% in FY23, driven by an improvement in net margin due to higher interest income.
The net profit margin increased from 24.82% in FY23 to 25.22% in FY24, primarily due to a 1.61% increase in the interest income margin.

Sanctions and Disbursements:

A 14.63% rise was observed over the ~₹32,586.60 crore sanctioned in the previous year. During FY24, loans totaling ~₹25,089.04 crore were disbursed, marking a 15.94% increase over the ~₹21,639.21 crore disbursed in the previous year.

Loan Book and Disbursement:

During FY24, loans disbursed reached ~₹25,089.04 crore, a 15.94% increase from ~₹21,639.21 crore the previous year. This marks the largest yearly payout in the company’s history.
The company’s loan book increased by 26.81% from ~₹47,075.52 crore as of March 31, 2023, to ~₹59,698.11 crore as of March 31, 2024.

Key Financial Ratios:

Ratios

30, June 2024

31, Mar 2024

30, June 2024

Rate of Return on Loan Assets%

10.01%

9.97%

9.64

Percentage charged for borrowings %

7.78%

7.81%

7.83%

Spread of Interest%

2.23%

2.16%

1.81%

Margin of Net Interest (%)

3.29

2.85%

3.23

Ratio of Debt to Equity

5.83

5.80

6.35

CRAR (%)

20.11%

19.52%

19.95%

EPS (Rs)

5.16

1.43

1.29

Net Non-Performing Assets (NPAs):

The company’s NPAs decreased to 0.99% in FY24 from 1.66% in FY23, a significant 40.36% decrease from the previous year.
Additionally, the company saw a 32 basis point increase in interest spread, with the net interest margin rising to 2.85% in FY24 from 2.82% in FY23.
The company achieved a ten-year low of 0.99% for the Net NPA ratio at the end of FY24, compared to 1.66% at the end of FY23.
The company’s systematic recovery procedures resulted in a drop in GNPA and NNPA to 0.99% and 2.36%, respectively.
A strong emphasis on recovery and resolution measures led to the net removal of three loan accounts from the NPA list and the recovery of ₹212.70 crore from NPA loans, of which ₹90.68 crore is owed towards the principal and ₹122.02 crore towards interest income, including ~₹58.39 crore in recovered written-off assets.

Future Outlook:

Prospects for India’s Green Finance Industry and Government Initiatives: India’s green finance industry is expanding rapidly, driven by significant government initiatives and a global commitment to enhancing renewable energy capacity. By 2030, up to ~₹46 lakh crore is expected to be invested in India’s renewable energy sector. The FY25 Union Budget allocation for renewable energy has increased by 46% over the previous year to reach ₹14,980 crore, reflecting the country’s commitment to this sector.

Key Policies Announced for FY24:

Utility-Scale Solar and Onshore Wind: SECI, NTPC, NHPC, and SJVN have been allocated shares of the 50 GW yearly bidding cycle, including at least 10 GW of wind capacity for the 2023–2028 period. The MNRE has also approved 50 solar parks with a combined capacity of around 37,490 MW across 12 states, with 10,401 MW of that power already operational.
Rooftop Solar: The PM Surya Ghar Mufti Bijli Yojana was introduced, with an initial investment of ~₹75,021 crore, covering 10 million households. Under the program, each household will receive 300 free units of power per month, resulting in annual savings of approximately ₹15,000 to ₹18,000 per household.
Hydropower: Developers are provided with the option to determine tariffs by backloading, provided they extend the project life to 40 years, shorten the debt repayment period to 18 years, and implement a 2% escalating tariff. For hydroelectric projects where the construction work is awarded and a PPA is signed until June 30, 2028, ISTS charges have been partially waived, with the waiver available in increments of 25% from July 1, 2025, to July 1, 2028.
Offshore Wind: The MNRE has announced a bidding trajectory for 37 GW of offshore wind capacity, while CTU has completed the planning for transmission infrastructure for the first 10 GW of offshore capacity (5 GW each off the shores of Gujarat and Tamil Nadu). Additionally, regulations for offshore wind leases have been published, offering the possibility of extending the lease duration to 35 years.

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Prestige Group Plans ₹42,000 Crore Housing Launches in FY26 Amid Real Estate Boom

Research, Research Reports, Result Updates - August 20, 2024

Robust Profitability and Asset Quality Improvements Highlight Repco Home Finance's Q1 FY25

Robust Profitability and Asset Quality Improvements Highlight Repco Home Finance’s Q1 FY25

Repco Home Finance’s Q1 FY25 performance shows robust growth and improved financial metrics across various segments.

The company’s credit book grew by 8.3% year-over-year to Rs. 13,701 crores, with AUM reaching Rs. 13,513 crores as of March 31, 2024. Credit sanctions increased slightly by 0.2% to Rs. 727 crores, while disbursements slightly decreased to Rs. 680 crores.

Total income surged by 13.6% to Rs. 416 crores, with NII growing by 8% to Rs. 175 crores. Net profits showed significant advancement, rising by 18% to Rs. 105 crores. The company maintained a solid loan spread of 3.4%.

KEY INDICATORS FOR Q1 FY25: (Figures in Rs. million)

METRICS	Q1 FY25	Q1 FY24	GROWTH %
Sanctions	7,272	7,258	0.2%
Disbursements	6,804	6,843	-0.6%
Net Interest Income	1,749	1,619	8.0%
Operating Revenue	4,078	3,645	11.9%
PBT	1,366	1,198	14.0%
PAT	1,054	891	18.3%

RELATIVE PERFORMANCE – Q O Q:

Particulars	Units	Q4 FY24	Q1 FY25
Sanctions	Rs. Mn	9,777	7,272
Disbursements	Rs. Mn	8,946	6,804
Net Interest Income	Rs. Mn	1,723	1,749
PAT	Rs. Mn	1,081	1,054
NIM	%	5.1	5.1
Yield on Assets	%	11.7	12.0
Cost of Funds	%	8.3	8.6
Spread	%	3.4	3.4
Return on Assets	%	3.2	3.1
Return on Equity	%	16.5	16.3

Profitability metrics improved, with return on assets increasing to 3.1% from 2.8% and return on equity rising to 16.3% from 15.8%. The credit portfolio remained diversified, with non-salaried segments accounting for 51.6% and salaried segments for 48.4%. Housing loans comprised 74.3% of the outstanding loan book, while home equity products made up 25.7%.

Income & Earning Growth QoQ: (Amt in Rs. Mn)

Metrics	Q1 FY24	Q4 FY24	Q1 FY25
Income from Operations	3,645	3,926	4,078
NII	1,619	1,723	1,749
Net Profit	891	1,081	1,054
Net Worth	24,050	26,771	27,709

Asset quality showed improvement, with GNPA decreasing to Rs. 583 crores from Rs. 695 crores year-over-year, although slightly up from Rs. 552 crores in the previous quarter. The GNPA ratio improved to 4.25% from 5.5% year-over-year, while the NNPA ratio decreased to 1.7% from 2.8%. The company maintained strong provision coverage, with expected credit loss provisions at Rs. 519 crores or 3.8% of total loan assets.

Asset Book: (Amt in Rs. Mn)

Type	Q1 FY24	Q4 FY24	Q1 FY25
Sanction	7258	9777	7272
Disbursements	6843	8946	6804
Loan Book 1. Salaried 2. Non salaried	126554	135134	137011
	51.8	51.4	51.6
	48.2	48.6	48.4
Mix of Loan Portfolio 1. Home Loan 2. Home Equity
	76.9	74.7	74.3
	23.1	25.3	25.7

ECL PROVISION (Amt in Rs Mn):

Particulars	Jun 23	Mar 24	Jun 24
Gross Stage 3	6947	5516	5826
% portfolio Stage 3	5.5%	4.1%	4.3%
ECL Provision Stage 3	3571	33597	3600
Net Stage 3	3376	1918	2226
Coverage ratio Stage 3	51.4%	65.2%	61.8%

Gross Stage 1 & 2	119607	129618	131185
% portfolio in Stage 1 & 2	94.5%	95.9%	95.7%
Total ECL Provision	5240	5179	5193

Repco Finance maintained a robust capital position with a capital adequacy ratio of 34%, well above the regulatory requirement of 15%. The company’s distribution network expanded to 181 branches and 42 satellite centers across 13 states and union territories.

Profitability Ratios: (Amt in Rs. Mn)

Metric	Q1 FY24	Q4 FY24	Q1 FY25
Net Interest Margin	5.1%	5.1%	5.1%
Spread	3.3%	3.3%	3.4%
Return on Equity	15.1%	16.5%	16.3%
Return on Assets	2.8%	3.2%	3.1%

This comprehensive improvement in growth, asset quality, and profitability metrics positions Repco Home Finance well for sustained performance in FY25, despite potential market challenges such as elections and heatwaves. The company’s focus on retail lending in both housing and home equity segments, coupled with a strong capital base, provides a solid foundation for navigating the evolving financial landscape.

Quarterly Performance Analysis:

Repco demonstrated strong execution in Q1 FY25. The company’s credit book grew by 8.3% year over year to Rs. 13,701 crores, while total income surged by 13.6% to Rs. 416 crores. Net interest income increased by 8% to Rs. 175 crores, and net profit showed significant improvement, rising by 18% to Rs. 105 crores. The company maintained a solid loan spread of 3.4%. Asset quality improved, with the GNPA ratio decreasing to 4.25% from 5.5% year over year, despite a slight increase in the GNPA amount due to factors like elections and heatwaves. Profitability metrics also improved, with return on assets increasing to 3.1% and return on equity rising to 16.3%. The loan portfolio remained diversified between non-salaried (51.6%) and salaried (48.4%) segments, with housing loans comprising 74.3% of the outstanding loan book. Repco Home Finance maintained a strong capital position with a capital adequacy ratio of 34%, well above the regulatory requirement. These results indicate robust growth and improved financial metrics across various segments, positioning the company well for the financial year despite potential market challenges.

In the transition from Q4 FY24 to Q1 FY25, Repco Home Finance experienced some changes in its financial metrics. Loan sanctions decreased from Rs. 9,777 million to Rs. 7,272 million, while disbursements also declined from Rs. 8,946 million to Rs. 6,804 million. However, the company’s Net Interest Income slightly increased from Rs. 1,723 million to Rs. 1,749 million. Profit After Tax (PAT) saw a notable decline from Rs. 1,081 million to Rs. 1,054 million. The Net Interest Margin (NIM) remained stable at 5.1%. The Yield on Assets improved from 11.7% to 12.0%, while the Cost of Funds increased from 8.3% to 8.6%. Despite these changes, the company maintained its spread at 3.4%. Profitability measures showed a slight decrease, with Return on Assets dipping from 3.2% to 3.1% and Return on Equity declining from 16.5% to 16.3%. These figures suggest that while Repco Home Finance faced some challenges in loan growth, it managed to maintain relatively stable performance in terms of interest income and overall profitability.

Net Sales increased by 11.89% from Rs. 364.48 crore in June 2023 to Rs. 407.83 crore in June 2024. Quarterly Net Profit increased by 17.91% from Rs. 95.44 crore in June 2023 to Rs. 112.53 crore in June 2024. EBITDA increased by 14.38% from Rs. 326.38 crore in June 2023 to Rs. 373.32 crore in June 2024. Repco Home’s EPS grew from Rs. 15.26 in June 2023 to Rs. 17.99 in June 2024.

Industry Overview:

The global economy remains strong, with steady growth and inflation gradually returning to targeted levels. Although risks persist, such as potential price surges due to geopolitical tensions in regions like Ukraine and Gaza, and ongoing core inflation driven by tight labor markets, the overall global outlook remains relatively balanced. Global GDP is projected to grow by 3.1% in FY24 and 3.2% in FY25, while global headline inflation is expected to decrease from 6.9% in FY23 to 5% in FY24, and further to 3.4% in FY25. However, differences in disinflation rates across major economies may lead to currency fluctuations, affecting financial sectors. Additionally, high interest rates may have a more pronounced cooling effect than anticipated, potentially leading to financial stress as fixed-rate mortgages reset and households struggle with high debt levels.

India continues to be one of the fastest-growing economies globally, with an estimated GDP growth of 8.2% for FY24, up from 7% in the previous year. The IMF projects a growth rate of 6.8% for FY25, driven by public investment and strong domestic demand. Contributing factors include high capacity utilization in manufacturing, government capital expenditure, FDI inflows, and strong financial and corporate sector balance sheets, which are expected to support a positive economic cycle. Digitalization initiatives are expected to enhance formalization, financial inclusion, and economic opportunities, contributing to India’s sustained rapid growth. India’s large and young population offers opportunities for growth, employment, and consumption-driven expansion, with investments in education and skill development being crucial for inclusive progress. However, challenges persist, such as geopolitical tensions, volatility in global financial markets, geo-economic fragmentation, and extreme weather events, all of which pose risks to the economic outlook. To mitigate these risks, ensuring resilience through the diversification of trade partners and strengthening domestic capabilities will be critical. Contributing factors include a decline in rural consumption due to an uneven monsoon and crop yield in FY24, as well as a potential slowdown in government capital expenditure early in FY25 ahead of the general elections. Geopolitical tensions and financial market volatility continue to pose risks to the inflation outlook, with the Reserve Bank of India projecting CPI inflation at 4.5% for FY25.

Asset Quality:

The asset quality of Repco Home Finance has shown a mixed trend over the past year, as reflected in both the graph and the provided data. The Gross Non-Performing Assets (GNPA) ratio has generally improved, decreasing from 5.5% in June 2023 to 4.3% in June 2024, despite a slight uptick from the March 2024 low of 4.1%. In absolute terms, GNPA amounted to Rs. 583 crores as of June 30, 2024, down from Rs. 695 crores a year earlier, but up from Rs. 552 crores at the end of March 2024. This marginal increase was attributed to the impact of national elections and prevailing heatwaves during the quarter.

ECL PROVISION (Amt in Rs Mn):

Particulars	Jun 23	Mar 24	Jun 24
Gross Stage 3	6947	5516	5826
% portfolio Stage 3	5.5%	4.1%	4.3%
ECL Provision Stage 3	3571	33597	3600
Net Stage 3	3376	1918	2226
Coverage ratio Stage 3	51.4%	65.2%	61.8%

Gross Stage 1 & 2	119607	129618	131185
% portfolio in Stage 1 & 2	94.5%	95.9%	95.7%
Total ECL Provision	5240	5179	5193

SECTOR WISE MOVEMENT (Amt in Rs. Mn):

Particulars	Jun 24		Jun 23
	AUM	%	AUM	%
Stage 1	1,15,222	84.0%	1,01,622	80.3%
Stage 2	15,963	11.7%	17,985	14.2%
Stage 3	5,826	4.3%	6,947	5.5%
Grand Total	1,37,011	100.0%	1,26,554	100.0%

Similarly, the Net Non-Performing Assets (NNPA) ratio has shown improvement, declining from 2.8% in June 2023 to 1.7% in June 2024, with a slight increase from the 1.5% recorded in March 2024. In monetary terms, NNPA stood at Rs. 223 crores as of June 30, 2024, a significant reduction from Rs. 338 crores a year ago, though up from Rs. 192 crores at the end of the previous quarter.

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India’s Power Capacity Expands Significantly: From 305 GW to 476 GW Over Ten Years

Research, Research Reports, Result Updates - August 19, 2024

REC Ltd. Achieves 30% YoY Growth in Net Interest Income for Q1FY25

REC Ltd Achieves 30% YoY Growth in Net Interest Income for Q1FY25

Current Market Price	INR 579.65
Current Market Cap	INR 1,53,938 Cr.
High/Low	INR 654/ INR 231
BSE Code	532955
NSE Code	RECLTD
Bloomberg Code	RECL:IN
P/BV	2.1

About the Stock:

REC Ltd., formerly known as Rural Electrification Corporation Limited, is an Indian government-owned public sector company under the Ministry of Power. Established in 1969, REC Ltd. was initially tasked with funding and promoting rural electrification initiatives throughout India. Over time, the company’s scope has expanded to include funding projects related to power generation, transmission, and distribution in both urban and rural areas. REC Ltd. has consistently demonstrated strong financial performance, characterized by solid profitability, liquidity, and solvency. The majority of its revenue comes from interest income on loans to companies within the power sector, supported by a robust capital structure.

Price Performance:

1 Month	-6.16 %
3 Month	7.12 %
1 Year	159.76%
3 Year	408.96%

Industry Overview:

The power sector has thrived during the post-pandemic recovery phase, driven by increased demand and a focus on energy transformation. In the fiscal year 2023–2024, total power generation reached 1,738 BU, representing a 7% increase compared to the previous year. However, renewable energy sources, including hydropower, accounted for 364 BU, marking a 2.2% year-over-year decrease. Notably, large hydro generation experienced a significant 17.8% slowdown despite a 10.9% increase in renewable energy generation. Total power generation from non-fossil fuels stood at 412 BU, a 1.4% decrease from the prior year, resulting in non-fossil energy comprising 24% of the total. Additionally, the fiscal year saw a 26 GW increase in installed electricity capacity, bringing the total to 442 GW by the year’s end. Remarkably, renewable energy accounted for 73% of the new capacity. The non-fossil capacity share increased from 43% to 45% year-over-year, with peak power consumption reaching a record-breaking 240 GW, up from 215.9 GW the previous year.

Q1FY25 Financial Performance Analysis:

In Q1FY25, REC Ltd. reported a 19% year-over-year growth in total income, rising from INR 10,981 crores in Q1FY24 to INR 13,037 crores. This impressive growth is likely due to an expanded loan book and higher interest revenue, reflecting the company’s strong operational performance. Net interest income (NII) increased by 30% YoY, from INR 3,612 crores in Q1FY24 to INR 4,713 crores in Q1FY25, underscoring REC Ltd.’s ability to effectively manage interest rates and boost lending income.

REC Ltd.’s net profit grew by 16% YoY to INR 3,442 crores in Q1FY25, up from INR 2,961 crores in Q1FY24, highlighting its strong profitability driven by increased revenue and lower expenses. Total comprehensive income, which includes net profit and other comprehensive income, rose by 12% YoY to INR 3,525 crores in Q1FY25, further demonstrating the company’s enhanced equity value and overall financial health.

Disbursements:

	Q1FY25 (INR in Cr.)	Q1FY24 (INR in Cr.)
Generation	4,667	4,446
Renewables Incl Large Hydro	5,351	1,534
Transmission	1,443	837
Distribution	20,714	22,411
a) Distribution Capex	1,980	1,863
b) LPS & LIS	3,007	9,551
c) RBPF	15,727	10,997
I&L – Core	5,753	3,605
I&L – E&M	2,229	890
STL/MTL	3,495	410
Total Disbursements	43,652	34,133
% Increase in Q1FY25 over Q1FY24	28%

Sanctions:

	Q1FY25 (INR in Cr.)	Q1FY24 (INR in Cr.)
Generation	35,552	15,519
Renewables Incl Large Hydro	39,655	24,985
Transmission	7,169	6,808
Distribution	7,600	33,861
a) Distribution Capex	4,200	11,341
b) LPS & LIS	–	13,620
c) RBPF	3,400	3,500
d) Special Loan	–	5,400
I&L – Core	19,815	5,810
I&L – E&M	–	3114
STL/MTL	3,000	700
Total Sanctions	1,12,791	90,797
% Increase in Q1FY25 over Q1FY24	24%

The company’s loan book exhibited robust growth, increasing by 17% YoY from INR 4.54 lakh crores in Q1FY24 to INR 5.30 lakh crores in Q1FY25. This expansion indicates REC Ltd.’s successful operations and its ability to finance major projects. Moreover, asset quality improved as net credit-impaired assets declined from 0.97% YoY to 0.82% of total assets in Q1FY25, reflecting better credit risk management and effective recovery procedures.

REC Ltd.’s net worth significantly increased from INR 60,886 crores in Q1FY24 to INR 72,351 crores in Q1FY25, representing a 19% YoY rise. This growth indicates a strong equity foundation, enhancing the company’s financial stability. The capital adequacy ratio (CAR) for Q1FY25 was a robust 26.77%, well above the regulatory requirement. With Tier I at 24.27% and Tier II at 2.50%, this solid CAR highlights REC Ltd.’s strong capital structure and its capacity to absorb losses while expanding its business.

In summary, REC Ltd.’s Q1FY25 results demonstrate solid and well-managed financial performance, marked by significant growth in revenue, profitability, and asset quality. The company’s strategic focus on expanding its loan book and efficient cost management has led to improved interest rates and net interest margins.

Over the past seven quarters, from December 2022 to June 2024, the financial institution’s asset quality has steadily improved. Gross credit-impaired assets have consistently decreased, from 3.63% in December 2022 to 2.61% by June 2024, indicating a substantial reduction in the risk associated with the loan portfolio. Similarly, net credit-impaired assets, which consider impairments after provisions, have significantly declined from 1.12% in December 2022 to 0.82% by June 2024, showcasing effective provisioning and recovery efforts.

Borrowings:

Particulars	Q1FY25 (INR in Cr.)	Q4FY24 (INR in Cr.)	Q1FY24 (INR in Cr.)
Domestic Borrowings:
Institutional including Subordinated Bonds	1,93,011	1,81,471	1,60,325
Loans from Banks, FIs, NSSF, etc	75,043	79,806	85,492
54EC Capital Gains Tax Exemption Bonds	43,246	42,356	38,908
Tax Free Bonds	8,999	8,999	10,307
Infra Bonds	4	4	4
Total Domestic Borrowing	3,20,303	3,12,636	2,95,036
Foreign Currency Borrowings:
External Commercial Borrowings (Bonds & Term Loans)	1,08,644	1,00,169	83,464
FCNR (B) Loans	29,847	25,139	19,082
Total Foreign Currency Borrowings	1,38,491	1,25,308	1,02,546
Grand Total	4,58,794	4,37,944	3,97,582

During the same period, the provision coverage ratio, which measures the extent to which provisions cover impaired assets, fluctuated. It started at 69.11% in December 2022, peaked at 70.64% in March 2023, and then slightly dipped before stabilizing in the subsequent quarters at around 68-70%. While the ratio remains relatively high, the slight decline towards the end suggests that even as the bank’s asset quality improves, it may be slightly reducing its provision buffer, possibly due to increased confidence in asset quality.

The yield on loan assets for Q1FY25 was 9.99%, slightly higher than the 9.82% recorded for Q1FY24. This yield stability indicates that REC Ltd. has maintained profitability in its lending operations, whether through favorable changes in loan terms or a stable interest rate environment.

Key Ratio & Analysis:

Yield on Loan Assets (%)	9.99
Cost of Funds (%)	7.05
Interest Spread (%)	2.94
Net Interest Margin (%)	3.64
Return on Net Worth (%)	19.51
Interest Coverage Ratio (Times)	1.54
Debt Equity Ratio (Times)	6.27

In Q1FY25, the cost of funds decreased to 7.05%, down from 7.23% in Q1FY24. This reduction in financing costs may be attributed to better debt management or favorable borrowing terms, thereby enhancing the company’s profitability.

The interest spread, which is the difference between the cost of funding and the yield on loan assets, improved from 2.59% in Q1FY24 to 2.94% in Q1FY25. This suggests that REC Ltd. has increased the margin between what it pays for funds and what it earns on loans, indicating more profitable lending operations.

The net interest margin (NIM) grew to 3.64% in Q1FY25, up from 3.28% in Q1FY24. The growth in NIM, a critical indicator of a company’s profitability, demonstrates REC Ltd.’s effective allocation of interest income against its interest expenses.

Return on net worth (RoNW) decreased slightly from 19.98% in Q1FY24 to 19.51% in Q1FY25. Although the decline is minor, it suggests a slight drop in the company’s return on equity, possibly due to slower net income growth or an expanded equity base.

During Q1FY25, the interest coverage ratio remained steady at 1.54 times, compared to 1.53 times in Q1FY24. This stability indicates consistent performance in managing the company’s debt obligations, demonstrating its ability to meet interest commitments from earnings.

The debt-to-equity ratio in Q1FY25 was 6.27 times, slightly lower than the 6.42 times noted in Q1FY24. A lower ratio indicates that REC Ltd. has marginally reduced its reliance on debt financing, leading to a more balanced capital structure.

Future Outlook:

REC Ltd. is strategically positioned as a key financier of power infrastructure projects across India. Given the Indian government’s ambitious infrastructure development plans, including rural electrification and renewable energy expansion, REC Ltd. is expected to continue playing a crucial role in funding large-scale power projects. The government’s commitment to achieving universal electricity access and enhancing the reliability of power supply, particularly in rural and underserved areas, ensures a steady flow of projects and opportunities for REC Ltd.

As India strives to meet its renewable energy targets, REC Ltd. is likely to focus more on financing projects related to solar, wind, and other renewable energy sources. This shift aligns with global trends and India’s commitments under international agreements like the Paris Accord. By supporting the transition to a greener energy mix, REC Ltd. can diversify its portfolio and position itself as a leader in financing sustainable energy projects, potentially enhancing its reputation and attracting new business.

REC Ltd. has consistently demonstrated strong financial performance, driven by the size of its loan portfolio, steady revenue growth, and profitability. The company’s sound financial management practices and substantial capital base provide a solid foundation for future growth. As India’s economic development, urbanization, and industrialization progress, REC Ltd.’s loan disbursements are expected to increase, further boosting profitability and shareholder value.

Conclusion

REC Ltd. is well-positioned to benefit from India’s ongoing infrastructure and energy development initiatives. Its strong financial base and focus on funding critical power projects contribute to a positive long-term outlook. However, the company must navigate sector-specific challenges and adapt to evolving market conditions to sustain its growth trajectory.

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IREDA Q3FY25: Robust Loan Growth, Improved Asset Quality YoY, PAT Up 27%

Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - August 16, 2024

Power Grid Strengthens Southern Grid with Successful Project Completion

The nation’s top power transmission provider, Power Grid Corporation of India Limited (POWERGRID), has successfully commissioned a project for “Augmentation of Transformation Capacity in the Southern Region,” marking a critical milestone. The objective of this effort is to improve grid stability and strengthen the electricity transmission infrastructure in the southern states of India.

Project Specifics and Advantages:
Power Grid has not made the project’s details available to the general public. On the other hand, we may deduce the following from the project title:

Emphasis on Transformers: It is probable that this project entailed the installation of either new or upgraded transformers. Transformers are essential for efficiently transmitting power over long distances by stepping up or down voltage levels.
Enhanced Capacity: The project intends to “augment” transformation capacity, implying an expansion of the southern grid’s total capacity to handle power. This means that more power can be sent, meeting the rising demand and making it easier to integrate renewable energy sources.

Enhanced Grid Stability: The upkeep of grid stability depends on a strong transmission infrastructure with sufficient transformation capacity. For businesses and homes in the southern area, this means fewer power outages and higher-quality power supplies.

Importance to the Southern Area: The southern part of India has grown significantly in the last several years, which has increased demand for power. In order to meet this rising need, this initiative will:

Enabling electricity Transmission: By facilitating the transmission of extra electricity from generation sources to distribution networks, the increased capacity will guarantee that customers will always have access to power.

Integration of Renewable Energy: The South has a lot of potential for renewable energy sources, such as wind and solar power. By strengthening the grid’s infrastructure, this initiative makes it possible to seamlessly include these renewable energy sources into the overall power mix.

Enhanced Power Quality and Reliability: The project will minimise power outages and disruptions by improving power quality and reliability through increased grid stability.

The Commitment of Power Grid to Sturdying the Country’s Grid

Power Grid is essential to the development and upkeep of the national transmission network in India. The accomplishment of this project successfully highlights the company’s dedication to:

Infrastructure Expansion: To fulfil the nation’s rising demand for power, Power Grid is constantly modernising and expanding the nation’s grid.
Grid Resilience: By funding initiatives that increase transmission capacity and stability and reduce the likelihood of power outages, the corporation prioritises grid resilience.
Integration of Renewable Energy: Power Grid is actively engaged in building infrastructure to enable the integration of renewable energy, acknowledging the significance of this energy source in India’s energy mix.

Financial performance of the company:
The P/E ratio of 7.66 and the P/B ratio of 1.90 indicate a moderate value for this firm. Positive valuation indicators are further shown by its P/S ratio of 3.45 and EV/EBITDA ratio of 6.83. The firm has grown steadily over the last three years, with a three-year compound annual growth rate (CAGR) of 9.89% for sales and 19.22% for net profit. The firm has strong interest coverage ratios of 4.20, while having a debt to equity ratio of 1.52. However, with a current ratio of 0.91 and a quick ratio of 0.88, liquidity ratios show some pressure. The ROCE of the firm is a commendable 12.81%. With a gross profit margin of 88.85%, an operating margin of 59.60%, and a net profit margin of 34.00%, the company is clearly exceptionally profitable. With respect to book value per share (excluding Reval Reserve), it is Rs. 119.01. Basic EPS and Diluted EPS are both Rs. 22.10. With a face value of Rs. 10, a substantial dividend of Rs. 18.75 per share is given out. With a market valuation of Rs. 251,255 crore, the business has a strong position in the market and investor trust.

The “Augmentation of Transformation Capacity in the Southern Region” project has been successfully put into service, signifying Power Grid’s dedication to fortifying the national grid and streamlining the integration of renewable energy sources. This initiative should help Power Grid’s long-term growth prospects and investor value, even if an exact valuation impact cannot be calculated without particular financial information.

India’s economic growth and energy security depend heavily on Power Grid’s efforts on modernising and expanding its grid and infrastructure. The project’s successful completion establishes a favourable precedent for next initiatives and establishes Power Grid as a major participant in India’s changing energy environment.

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Waaree Energies Surges Over 11% on FTSE Index Inclusion Buzz

Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - August 16, 2024

Mahindra Lifespaces Acquires New Land to Expand Its Presence in Bengaluru

Leading Indian real estate developer Mahindra Lifespaces Developers Ltd. (MLDL) has furthered its presence in Bengaluru by purchasing a plot of property in the desirable Whitefield neighbourhood, totalling about 2 acres. The statement demonstrates MLDL’s dedication to the booming residential sector in the city.

Specifics of the Land Acquisition and Project Prospects:
It is anticipated that the recently purchased property tract has 0.2 million square feet of developable potential, or saleable area. Mid-premium residential flats are anticipated to be featured in the project, which has an estimated Gross Development Value (GDV) of ₹225 crore. This acquisition is emphasised by MLDL as a critical step in realising their goal of building sustainable urban communities.

Specifics of the Land Acquisition
• Land size: around two acres
• 0.2 million square feet of saleable area is the developable potential.
• Gross Development Value (GDV): Approximately $27 million, or ₹225 crore.
• Focus of the project: mid-range residential properties

Latest Information & Updates:
MLDL is benefiting from this land acquisition in Bengaluru, which increases their potential for land bank expansion to ₹2800 crore in FY24 (according to ICICI direct analysis). This graphic illustrates the company’s diversification strategy by including a Mumbai rehabilitation project. Analysts see this land bank expansion positively, suggesting that MLDL is concentrating on growing the total scope of its business

Recent Developments and Market Position:
This land acquisition in Whitefield marks MLDL’s second such move in the area for FY24. Earlier this year, they secured a larger land parcel of 9.4 acres. This strategic focus on Whitefield highlights their confidence in the locality’s potential for residential development
Mahindra Lifespaces’ third-quarter net income increased 33% to Rs 33.21 cr, or Rs 198 cr. Mahindra Lifespace Developers Ltd, a real estate company, recorded a 33% rise in its consolidated net profit for the quarter that ended in December, coming in at Rs 33.21 crore.
Its net profit for the previous year was Rs 25.02 crore.According to a regulatory filing, total income increased significantly to Rs 198.14 crore in the third quarter of the current financial year from Rs 33.32 crore in the same period last year.

From April to December of current fiscal year, net profit increased to Rs 100.88 crore from Rs 17.67 crore during the same time the previous year. Additionally, total revenue increased from Rs 253.22 crore to Rs 389.30 crore in the first nine months of FY23. The company’s market capitalization stands at Rs. 9,095 crores. Despite its sizeable market cap, the financial metrics paint a mixed picture of its performance. The stock opened at Rs. 579.00, slightly higher than the previous close of Rs. 564.90. Over the past year, it has seen highs of Rs. 632.80 and lows of Rs. 316.00, indicating significant volatility. In terms of profitability, the company faces challenges with negative gross profit margin (-9.42%) and net profit margin (-2.52%). However, it manages to achieve a modest return on equity of 5.61% and return on assets of 2.80%. The return on capital employed (ROCE) is negative at -3.81%, suggesting inefficiencies in capital utilization. The company maintains a healthy current ratio of 1.52, indicating its ability to cover short-term liabilities. However, the quick ratio is relatively low at 0.35, reflecting potential liquidity concerns. On the positive side, the debt-to-equity ratio is low at 0.15, indicating a conservative capital structure. Interest coverage ratios stand at -5.24, indicating a potential inability to cover interest expenses with earnings. The asset turnover ratio is low at 0.15, suggesting inefficiencies in asset utilization. Over the past three years, the company has experienced a significant decline in net profit at a CAGR of -70.01%. Despite this, the stock trades at a relatively high P/E ratio of 53.67 and P/B ratio of 3.02, indicating possibly overvaluation. The EV/EBITDA ratio is negative at -98.69, which may suggest distress or undervaluation. The company’s total asset value is Rs. 3,610 crores, reflecting the scale of its operations.

There is a lot of demand in the Whitefield real estate market in Bengaluru. With their well-timed land acquisitions, MLDL is well-positioned to benefit from this expansion. Potential purchasers may be certain that a well-designed and well-executed living environment will be provided by their experience in creating high-quality residential projects. With the recent purchase of property in Bengaluru, Mahindra Life spaces has increased their footprint in a significant market. The project’s capacity to build mid-premium residential flats will help meet the expanding need for high-quality housing in the city. MLDL has a solid financial position and a track record, which will help them build this project effectively.

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Genus Power Aims for 1.5M Smart Meters Monthly!

Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - August 16, 2024

Reliance Industries enters into PPA with Adani Power subsidiary

Reliance Industries Limited (RIL) has entered into a significant power purchase agreement (PPA) with Mahan Energen (MEL), a subsidiary of the Adani Power. This 20-year deal, valued at Rs 50 crore, marks a strategic collaboration between two of India’s industrial giants. The crux of the agreement lies in APML supplying electricity to RIL for a period of 20 years. The deal likely involves bulk power supply to cater to RIL’s vast energy requirements across its refineries, petrochemical plants, and other operations. The agreement signifies a Rs 50 crore investment from RIL, likely towards securing a stable and reliable power source for the next two decades. This strategic move can potentially lead to cost savings for RIL in the long run, especially considering the rising costs of conventional power generation.

Company Overview

Reliance Industries Limited (RIL), has a diversified presence across sectors like petrochemicals, refining, retail, telecom, and now increasingly, renewable energy.

Market Capitalization of RIL is ₹ 2,010,621 Cr. TTM EPS is 103.41. TTM PE is 28.74. P/B is 2.45. ROE is 8.94 % and ROCE is 9.14 %. Share Price of the company opened at ₹2,985.75 and closed at ₹2971.70. For Q3 of FY24: Revenue of the company is ₹2,48,160 cr. Net profit is ₹19,641 cr. EBITDA is ₹44,678 cr. Capital Expenditure is ₹ 30,102 Cr. Cash & Cash Equivalents is ₹ 192,371 Cr.

Adani Power is an Indian multinational power and energy company situated in Khodiyar, Ahmedabad, India. It is a subsidiary of the Adani Group. It is a privately owned thermal power producer with a 12,450 MW capacity. It also runs a 40 MW mega solar facility in Naliya, Bitta, Kutch, Gujarat.

Market Capitalization of Adani Power is ₹205,883 Cr. TTM EPS is 60.50. TTM PE is 8.82. P/B is 12.55. ROE is 44.8 %. ROCE is 15.8 %. Share price of Adani Power opened at ₹520.00 and closed at ₹533.80 For Q3 of FY24: Revenue is ₹12,991.44 Cr. EBITDA is ₹5,059 cr. Profit After Tax is ₹2,737.96 Cr. EPS is 6.61. Total assets are ₹88,289.84 Cr.

The RIL-APML deal holds immense significance for India’s power sector. It highlights a growing trend of collaboration between private players to ensure efficient and reliable power supply. The deal could potentially pave the way for further consolidation within the power sector, with other companies exploring similar arrangements. The agreement might indirectly propel both companies to prioritize renewable energy sources in their future endeavors, considering India’s ambitious clean energy targets.

RIL might secure a competitive electricity tariff compared to prevailing market rates through this long-term agreement. This could lead to significant cost savings over the 20-year period, particularly if energy prices rise in the future. RIL, with its vast energy requirements across its various ventures, might be seeking to diversify its power procurement sources. This agreement could be a strategic move to hedge against potential price fluctuations or secure a reliable backup option. APML, a prominent player in the Indian power sector, assures a reliable source of electricity for RIL’s operations. This can minimize disruptions and ensure smooth functioning of RIL’s facilities.

The Reliance-Adani Power PPA presents a captivating development in the Indian energy sector. The long-term benefits in terms of cost optimization and reliability are remarkable. deal signifies a strategic alliance with long-term implications for both companies. This collaboration, coupled with the focus on renewable energy, paves the way for a more sustainable and secure energy future for India.

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Jindal Steel & Power Q1 FY26: Profits Surge on Operational Gains and Strategic Growth

Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - February 13, 2024

Vibhor Steel Tubes IPO Overview

IPO Details:

Price Band: ₹141 – ₹151 per share
Lot Size: 99 shares
Cost per Lot: ₹14,949
Issue Size: Approx. ₹72 crore

The offer and objects

➡️The offer includes a fresh issue of up to 4,779,444 equity shares at the upper price band of Rs 151 and 5,118,411 equity shares at the lower price band of Rs 141, totaling Rs 72.17 crore.

➡️The company intends to use the net proceeds from the fresh issue to meet the company’s working capital needs, totaling Rs 62 crore, with the remaining funds allocated for general corporate purposes.

Company Overview

Vibhor Steel Tubes Ltd is engaged in the manufacturing and supply of steel pipes and tubes to various industries in India. The company’s product portfolio includes Mild Steel/Carbon Steel ERW Black and Galvanized Pipes, Hollow Steel Pipes, and Cold Rolled Steel (CR) Strips/Coils.

Manufacturing Units and Workforce

Currently, the company operates two manufacturing units and one warehouse located in Raigad, Maharashtra, and Mahabubnagar, Telangana. The Raigad unit serves as an ideal location for 100% export of the company’s products. As of September 2023, the company employs a total of 636 individuals, including laborers.

Association with Jindal Pipes for 6 Years

The company has entered into a strategic agreement with Jindal Pipes Ltd for a duration of six years to manufacture and supply finished goods under the brand name “Jindal Star.” The agreement stipulates two main terms: 1) a minimum order of 1,00,000 MT per annum and 2) a turnover discount of 2% of the net sales price to Jindal Pipes Limited. This collaboration provides the company with a stable business outlook for the next six years.

Terms and conditions of the Agreement with Jindal Pipes

➡️The selling price will be determined periodically through mutual agreement, taking into consideration the prevailing market prices for the end product. However, it shall never fall below the sum of raw material costs (steel plus consumables) and variable expenses (labor and power).
➡️JPL commits to placing orders with a minimum quantity of 1,00,000 MT per annum to maximize the utilization of Unit I & Unit II capacities of our Company.
➡️In case of any shortfall in off-take by Jindal Pipes Limited or in supply by Vibhor Steel Tubes Limited, the defaulting party will compensate at the rate of Rs. 2,000 per MT for the deficit. This compensation obligation ceases once the minimum order quantity is achieved.
➡️Vibhor Steel Tubes Limited agrees to grant a turnover discount of 2% on the net sales price to Jindal Pipes Limited.
➡️The duration of this agreement is six years from April 01, 2023, with the option for renewal if mutually agreed upon by both parties.

Revenue Concentration Risk – 93% Sales from Jindal Pipes

The company’s revenue heavily relies on its top customer, Jindal Pipes, contributing to 93% of the total revenue for FY23. While this concentration poses a risk, minimum offtake clauses help mitigate potential downsides. Other customers include De Wit Bouwmachines BV and Macro Metal Handelsgesellschaft MBH.

Capacity Utilization stood at 71.6%

Over the past three years, the company has increased its capacity utilization from 41.82% to 71.68%, indicating a growing demand for its products. Despite this improvement, the plants are not operating at full capacity, with a 30% reserve to meet future demand.

Negative Cash Flow Impact on Working Capital

The company reported negative cash flows from its operating activities in H1FY2024 and FY2021. The steel business’s working capital intensity poses a challenge, and insufficient cash flows may adversely affect working capital requirements.

Expansion Plans in Telangana and Odisha

Vibhor Steel Tubes plans to enhance manufacturing and galvanizing capacity at the Telangana plant and establish a new plant in Odisha. The company has added new products to its portfolio, such as crash barriers and square pipes. The total capex for these expansions is approximately Rs 60 crore, funded through a mix of debt and internal accruals.

Peers of Vibhor steel tubes

1.APL Apollo Tubes Limited
2.Hi-Tech Pipes Limited
3.Rama Steel Tubes Limited
4.Goodluck India Limited (listed)

These companies operate in the same industry, manufacturing similar products to Vibhor Steel Tubes. However, it’s important to note that while they are part of the peer group, they are not direct competitors. This is because these companies sell their products in the open market, whereas Vibhor Steel Tubes has a unique business model. Vibhor Steel Tubes exclusively serves one customer, Jindal Pipes Limited, and supplies all finished goods/products on behalf of Jindal Pipes Limited.

Particulars	Total Income	EPS	PE ratio	ROE
Vibhor steel Tubes	1,114	14.85		22.6
APL Apollo Tubes	16,213	23.15	70.39	21.36
Hi-Tech Pipes	2,388	3.06	27.66	9.01
Goodluck India	3,086	33.31	17.82	14.16
Rama Steel Tubes	1,336	1.22	28.93	10.97

Financials and Valuation

For FY2023, consolidated sales increased by 36% to Rs 1113.12 crore. The OPM rose by 50 bps to 4.1%, leading to a 54% increase in OP to Rs 45.59 crore. The FY2023 EPS on post-issue equity is Rs 11.1, and at the upper price band of Rs 151, the P/E works out to be 13.7. Compared to its listed peers, Vibhor Steel Tubes demonstrates competitive financials with an EBITDA margin of 4.2% and ROE of 25.5%.

Key Financial Performance	FY23	FY22	FY21
Revenue	1,113	818	510
Total Income	1,114	818	511
EBITDA	47	30	20
EBITDA%	4.21%	3.69%	3.90%
PAT	21	11	0.6
PAT%	1.89%	1.39%	0.13%
CFO	7	-34	45
Net Worth	93	72	60
Net Debt	127	106	59
Debt Equity ratio	1.63	1.77	1.23
ROCE%	16.48%	12.09%	9.90%
ROE%	25.51%	17.11%	1.14%

Conclusion

Vibhor Steel Tubes Ltd operates in the steel pipes and tubes manufacturing sector, with a strategic collaboration with Jindal Pipes providing a stable revenue stream. While facing a concentration risk with 93% of sales from Jindal Pipes, the company shows positive signs of growth, increased capacity utilization, and expansion plans in Telangana and Odisha. However, negative cash flows and the highly competitive market warrant careful monitoring of its financial performance.

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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

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 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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