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Zomato Q3FY25: Strong GOV Growth Amid Profitability Pressures
Equities, Markets, Research, Research Reports, Result Updates - October 23, 2024

Zomato Q2FY25: Food Delivery Leads Profitability; Quick Commerce Expands Rapidly

Zomato Q2FY25: Food Delivery Leads Profitability; Quick Commerce Expands Rapidly

Company Name: Zomato Ltd | NSE Code: ZOMATO| BSE Code: 543320 | 52 Week high/low: 298 / 101 | CMP: INR 510 | Mcap: INR 2,26,469 Cr | P/E – 305

About the Stock
➡️Zomato is engaged in multiple business vertical segment such food delivery, quick commerce (Blinkit), going out and B2B supplies. Company has done rapid expansion in quick commerce segment by adding 152 net new stores in Q2FY25.

GOV shoot up led by all segment (up 55% YoY /14% QoQ)
➡️Zomato’s gross order value grew healthy across all the segment. GOV (B2C business) increased 55% YoY (+14% QoQ) to 17,671 Cr thanks to all segment. This growth is attributed to strong growth in food delivery business (up 21% YoY/ 5% QoQ) followed by Quick commerce (up 122% YoY/ 25% QoQ) and Going out (up 171% YoY/ 46% QoQ including the acquisition of Paytm’s entertainment business).
➡️Key operating metrics of all business segment helps in robust growth. In blinkit business 152 net new stores and 7 warehouse added. This rapid expansion will take time to ramp up the business across all new store.
➡️Average monthly customer surged 13% YoY (+2% QoQ) to 20.7 Mn in Q2FY25 vs 18.4 Mn in Q2FY24 for food delivery business. While Quick commerce customer base nearly double from 4.7 Mn in Q2FY24 to 8.9 Mn in Q2FY25 reflecting the change in buying pattern of consumer and habit for convenience buying.
➡️Quick commerce order value double to 92.9 Mn in Q2FY25 from 45.5 Mn in same quarter previous year led by increase in Average order value and new customer base.

GOV Q2FY25 Q2FY24 YoY (%) Q1FY25 QoQ (%)
Food Delivery 9,690 7,980 21% 9,264 5%
Quick Commerce 6,132 2,760 122% 4,923 25%
Going-Out 1,849 682 171% 1,268 46%
Total  17,671 11,422 55% 15,455 14%
Operating Metrics Q2FY25 Q2FY24 YoY (%) Q1FY25 QoQ (%)
Food Delivery
Avg Monthly Customer (Mn) 20.7 18.4 13% 20.3 2%
Restaurant Partner (000′) 292 238 23% 276 6%
Delivery Partner (000′) 498 410 21% 469 6%
Quick Commerce
Order (Mn) 92.9 45.5 104% 78.8 18%
AOV (INR) 660 607 9% 625 6%
Customer (Mn) 8.9 4.7 89% 7.6 17%

Profitability soar on growth in food delivery business & Margin expansion; Quick commerce near by break even
➡️Zomato’s food delivery business has maintained the overall profitability despite the loss in quick commerce business. Overall EBITDA surged 581% YoY (+28% QoQ) to 226 Cr driven by strong growth in food delivey business and margin expansion (636 bps YoY). While quick commerce adjusted EBITDA come to near by break even at -8 Cr from -125 Cr in Q2FY24. EBITDA margin has expand 636 bps YoY (+50 bps QoQ) to 4.71%. led by all segment.
➡️Despite the robust growth in quick commerce GOV, margins are not improving due to the rapid infrastructure expansion. In Q2FY2, 152 net new store and 7 warehouses added lead to margin dilution for short term as new store and warehouse take few months to ramp-up.
➡️EBIT grew 126% YoY (+64% QoQ) to 46 Cr due to increment in depreciation by 41% YoY to 180 Cr. EBIT margin lead the growth up 710 bps YoY (+29 bps QoQ) to 0.96%.
➡️PAT surged 389% YoY to 176 Cr thanks to higher other income of 221 Cr. PAT margin jump 241 bps YoY to 3.67%. While on QoQ basis PAT down 30% due to higher tax expenses and interest cost.

Years (in Cr) Q2FY25 Q2FY24 YoY (%) Q1FY25 QoQ (%) Commentry 
Revenue  4,799 2,848 69% 4,206 14% Driven by healthy GOV across all segment
COGS 1,334 674 98% 1099 21%
Employee cost 590 417 41% 529 12%
Advertisement & sales promotion 421 355 19% 396 6%
Delivery & related charges 1,398 919 52% 1,328 5%
Other expenses 830 530 57% 677 23%
Total OpEx 4,573 2,895 58% 4,029 14%
EBITDA  226 -47 581% 177 28% Led by food business & Margin expansion;
Quick commerce near by break-even
EBITDA Margin% 4.71% -1.65% 6.36% 4.21% 0.50%
Depreciation 180 128 41% 149 21%
EBIT 46 -175 126% 28 64%
EBIT Margin% 0.96% -6.14% 7.10% 0.67% 0.29%
Interest expenses 30 16 88% 25 20%
Other income 221 212 4% 236 -6%
PBT 237 21 1029% 239 -1%
Tax expenses 61 -15 507% -14 536%
Tax Rate% 26% -71% 136% -6% 539%
PAT 176 36 389% 253 -30% Pushed higher other income
PAT Margin% 3.67% 1.26% 190.13% 6.02% -39.03%
EPS 0.20 0.04 374% 0.29 -31%
No. of Shares 872 845 3% 870 0%

Fund raise planned via QIP for strong cash postion
➡️Comapny has propsed the plan to board forraising 8,500 Cr by issue of equity shares via QIP. Management aim to enhance cash balance given the competitive landscape and and much larger scale of business currently.

Valuation and Key metrics
➡️Currently the stock is trading at a multiple of 305x 0.84 EPS at the CMP of 256 Rs. Company trading at 10.6x its book value of 24.1 per share. Trailing twelve months ROE and ROCE stood at 1.12% and 1.14% respectively. Interest coverage ratio stood at 9.18x signify strong solvency.

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Equities, Markets, Research, Research Reports, Result Updates - October 22, 2024

Jana SFB Q2FY25: Secured Growth Drives Advances, Profit Declines Amid MFI Stress

Jana SFB Q2FY25: Secured Growth Drives Advances, Profit Declines Amid MFI Stress

Company Name: Jana Small Finance Bank Ltd | NSE Code: JSFB| BSE Code: 544118 | 52 Week high/low: 761 / 365 | CMP: INR 510 | Mcap: INR 5,352 Cr | P/BV – 1.49

About the stock
➡️Jana SFB is leading small finance bank engaged in providing MSME loan, affordable housing loan, 2W loan, gold loan, Micro LAP etc. Jana SFB has rapidly expanded network with 776 banking outlet including 261 outlet in unbanked rural centres, in 22 states/ 2UTs while serving 4.5 Mn active customers.

Robust Advance growth thanks to secured book; Disbursement slowdown
➡️Jana’s total advance book grew 17.3% YoY (+2.5% QoQ) to 26,411 Cr thanks to the secured book. Secured book at 65% of the Jana total book report a growth of 28.6% YoY (+7.4% QoQ) to 17,063 Cr while Unsecured book moderate at 1% YoY and de-growth 5.4% QoQ to 9,348 Cr. Secured book contribution jump from 56% in Q2FY24 to 65% in Q2FY25 and management further planning to increased its weight in overall book.
➡️Healthy growth of secured book attributed to affordable housing (up 43.3% YoY) and Micro LAP (up 24.2% YoY) segment. This both combines cross the milestone of 10,000 Cr. 2W and gold loan also report a sound growth of 95% and 80% YoY but have low weightage in overall book. MSME and term loans to NBFCs grew 16.5% YoY and 3% YoY respectively.
➡️Disbursement growth modest at 0.3% YoY and 3.3% QoQ to 8,457 Cr due to MFI challenges.
➡️Deposit growth higher than advance growth at 31% YoY to 24,808 Cr while CASA as % of total deposit remains flat.

Book Growth (As on)  Q2FY25 Q2FY24 YoY (%) Q1FY25 QoQ (%)
Advance  26,411 21,842 17.30% 25,751 2.50%
Secured  17,063 12,183 28.60% 15,800 7.40%
Unsecured 9,348 9,255 1.00% 9,853 -5.40%
Disbursement  8,457 8,432 0.30% 8,178 3.30%
Deposit 24,808 17,118 31% 23,667 4.60%

NII Soar on solid advance growth while NIMs contract
➡️Interest income grew 19% YoY and remain flat on QoQ to 1,166 Cr led by solid secured book growth while yield down 30 bps YoY (-90 bps QoQ) to 17.2%. NII grew 13% YoY to 594 Cr with support of advance growth while CoF expand and NIMs decline. On QoQ NII down 3% led to modest growth of book on QoQ and NIMs contraction. PPOP report 6% YoY while decline 16 QoQ to 299 Cr due to lower other income. PAT down 21% YoY and sequentially 43% to 97 Cr led by higher provision growth.

All figures are in Cr 

Years  Q2FY25 Q2FY24 YoY (%) Q1FY25 QoQ (%) Commentry
Interest income  1,166 979 19% 1,167 0%
Interest expenses 572 453 26% 557 3%
NII 594 526 13% 610 -3% Healthy advance lead growth, NIMs contract
Other income  176 164 7% 189 -7%
Total Net income 770 690 12% 799 -4%
Employee expenses 296 239 24% 278 6%
Other OpEx 175 168 4% 165 6%
Total Opex  471 407 16% 443 6%
PPOP 299 283 6% 356 -16% QoQ decline due to 30 bps decline in NIMs
Provision 210 160 31% 196 7%
PBT 89 123 -28% 160 -44%
Tax expenses  -8 0 -10 -20%
Tax rate  -9% 0% -6% 44%
PAT  97 123 -21% 170 -43% Higher provision degrowth PAT 
PAT% 7% 11% -33% 13% -42%
EPS 9.28 16.73 -45% 16.27 -43%
No. of equity shares  10.45 7.35 42% 10.45 0%

Asset quality tempered on stress in MFI segment
➡️Jana asset quality has been decline due to the stress in the MFI segment. GNPA/NNPA jump 55 bps/13 bps YoY and 35 bps/remain flat QoQ to 2.86%/0.95%. Net NPA has 82% secured loan which signifies higher chances of recovery. Company has already done strong PCR for all business, PCR up 230 bps YoY (+450 bps QoQ) to 67.2%.

Asset Quality Q2FY25 Q2FY24 YoY (bps) Q1FY25 QoQ (bps)
GNPA 2.86 2.31 55 2.51 35
NNPA 0.95 0.82 13 0.95 0

Valuation and key metrics
➡️Currently the stock is trading at multiple of 1.49 price to book value and book value per share stood at 342 Rs. Yield decline 30 bps YoY (-90 bps QoQ) to 17.2% while CoF jump 60 bps YoY and remain flat on QoQ to 8%. Yield contraction is led by competitive environment and challenges in MFI segment while CoF expansion driven by increase in deposit rate for attracting retail deposit. This result in decline in NiMs by 20 bps YoY and 30 bps QoQ to 7.7%. Return ratio disappoint as ROE and ROA down by 500 bps and 40 bps YoY. Company’s capital position remain solid with 20.1% Capital adequacy ratio.

Key metrics  Q2FY25 Q2FY24 bps Q1FY25 bps
Yield 17.2 17.5 -30 18.1 -90
CoF 8 7.4 60 8 0
NIMs 7.7 7.9 -20 8 -30
Credit Cost 1.86 2.33 -47 186
ROA 1.2 1.6 -40 2.1 -90
ROE 14.5 19.5 -500 18.8 -430
PCR 67.2 64.9 230 62.7 450
CAR 18.8 17.5 130 19.3 -50
CASA 20.1 20.5 -40 20.4 -30

Management Guidance for FY25.
➡️Management expect overall 20% growth in AUM and deposit in FY25.
➡️PAT growth of 30%-40% in FY25 will led by advance and disbursal growth.
➡️ROA and ROE maintained at 1.8% -2% and 19%-21% respectively. Company will continue to increase the secured business led to decline in NIMs.

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Giva Raises Fresh Capital to Strengthen Jewelry Business, Valued at ₹3,950 Crore
Equities, Markets, Research, Research Reports, Result Updates - October 21, 2024

LTFH Q2FY25: Strong Retail Loan Growth, NIM Expands, CoF Remains Stable

LTFH Q2FY25: Strong Retail Loan Growth, NIM Expands, CoF Remains Stable

Company Name: L&T Finance Ltd | NSE Code: LTF| BSE Code: 533519 | 52 Week high/low: 194 / 127 | CMP: INR 167 | Mcap: INR 41,591 Cr | P/BV – 1.71

About the stock
➡️LTFH is leading NBFC cater diversified financial lending prodcut in both rural and urban areas. Its offer consumer loan, 2W loan, home loan, MFI, farm and SME loans. Distribution network remain strong with 13,200+ distribution touch point, pan India presence in 2 lakh villages/100+ citiesand cover 18 states in India.

Reatil book shine up (28% YoY) led by 2W, HLand MFI segment
➡️LTF retail loan book has been contributing 95%> of overall loan book, company achieveing its FY2026 lakshya goal. Retail book grew 28% YoY (+5% QoQ) to 88,975 Cr driven by 2W, HL and MFI segment. 2W book contribute 14% of retail book, growing 33% YoY and MFL contribute 30% of retail book, growing 22% YoY and Home loan contribute 20% of retail book, growing 39% YoY in Q2FY25.
The total book increased by 22% YoY (+5% QoQ) to 93,015 Cr led bt strong growth in retail book.
➡️Whole sale book report 56% YoY growth but its weight has been reduce to only 4% in overall loan book in Q2FY25.
➡️Retail disbursement grew 12% YoY (+2% QoQ) to 15,092 Cr led by 2W and home loan segment. While MFL shake the disburesement growth down by 5% YoY and its contribute 35% of retail disbursement.
➡️Company’s borrowing lagging in line with credit growth. Borrowing grew half of loan book growth at 11% YoY to 84,912 Cr during the quarter.

Key metrics  Q2FY25 Q2FY24 YoY (bps) Q1FY25 QoQ (bps)
Yield 15.38 15.23 15 15.54 -16
CoF 7.8 7.79 1 7.85 -5
NIMs 8.94 8.62 32 9.31 -37
Credit Cost 2.59 2.58 1 2.37 22
ROA 2.6 2.42 18 2.68 -8
ROE 11.65 10.81 84 11.58 7
PCR 71 76 -500 75 -400
CAR 22.16 25 -284 22 16

NII grew on book growth, yield expansion and stable CoF
➡️Interest income grew 15% YoY (+6% QoQ) to 3,654 Cr driven by robust retail book growth and expansion in yield by 15 bps YoY. NII increased 18% YoY (+4% QoQ) to 2,178 Cr attributed to NIMs expansion by 32 bps YoY and stable CoF at 7.8%. PPOP grew robust at 25% YoY (+14% QoQ) to 1,490 Cr thanks to higher other income and stable other OpEx. Profitability comes in line with topline, grew 17% YoY (+2% QoQ) to 697 Cr due to higher provision expense (up 40% YoY).

All figures are in Cr.

Years  Q2FY25 Q2FY24 YoY (%) Q1FY25 QoQ (%) Commentry
Interest income  3,654.41 3,168.54 15% 3,452.62 6% Driven by book growth and yield expansion
Interest expenses 1,476.28 1,324.91 11% 1,351.41 9%
NII 2,178.13 1,843.63 18% 2,101.21 4% led by stable CoF and Nims jump by 32 bps YoY
Other income  369.61 313.53 18% 331.99 11%
Total Net income 2,547.74 2,157.16 18% 2,433.20 5%
Employee expenses 548.78 448.62 22% 519.34 6%
Other OpEx 508.88 515 -1% 601.41 -15%
Total Opex  1057.66 963.62 10% 1120.75 -6%
PPOP 1,490.08 1,193.54 25% 1,312.45 14% Grew by other income and stable other Opex
Provision 550.51 396.15 39% 390.18 41%
PBT 939.57 797.39 18% 922.27 2%
Tax expenses  242.89 203.17 20% 237.02 2%
Tax rate  26% 25% 1% 26% 1%
PAT  696.68 594.22 17% 685.25 2% Kick in opEx efficiency offset by higher provision,
PAT grew in line with NII
PAT% 17% 17% 1% 18% -4%
EPS 2.79 2.39 17% 2.75 2%
No. of equity shares  249.26 248.3 0% 248.98 0%

Asset quality dissapoint on QoQ basis
➡️LTF asset quality has maintain on YoY basis but decline sequentailly. GNPA down 8 bps YoY but jump 5 bps QoQ to 3.19% while NNPA dissapoint YoY as well as sequentially by 14 bps/17 bps to 0.96%. Its normal effect due to the lower base on last quarter while NNPA below the management target of 1% till FY26.

Asset Quality Q2FY25 Q2FY24 YoY (bps) Q1FY25 QoQ (bps)
GNPA 3.19 3.27 -8.00 3.14 5
NNPA 0.96 0.82 14.00 0.79 17

Valuation and key metrics
➡️Currently the stock is trading at multiple of 1.71 Price to book value. Yield on loan jump 15 bps to 15.38% while CoF remain stable at 7.8% YoY. This result in expansion in NIMs by 32 bps to 8.94% as of Q2FY25. credit cost remain stable at 2.59% YoY while increased by 22 bps QoQ.

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South Indian Bank Q2FY25: Strong Profit, NIMs Contract, Asset Quality Improves

South Indian Bank Q2FY25: Strong Profit, NIMs Contract, Asset Quality Improves

NII Moderate; Strong Profitability; NIMs contract; Asset quality improved

About the Stock
➡️South indian bank is private sector bank operate in south region of India headquartered in Kerala. The bank has 955 branch network and majority situated in south India. The customer bas has increased from 7.3 Mn to 7.8 Mn within one year period. The bank loan book is well diversified 40% with corporate and remaining 60% retail book includes personals, agri and business.

Strong growth in Advances and Disbursement in Q2FY25
➡️The bank has reported strong growth annually in key business parameter. Gross Advances grew 13% YoY to 84,714 Cr, with corporate segment contributing 40% of the loan book, growing at 24% and personal segment contribute 25%, growing at same pace 24% while business loan and Agriculture contribute 15% and 20% respectively. Disbursement grew 77% YoY to 76,872 Cr led by corporates book. While the bank deposit lagging behind, increased by 9% YoY and borrowings decline 56% YoY. The CASA stand at 31.8% in Q2FY25 lower by 8 bps YoY.
➡️Personal segment loan book driven by growth in mortgage loan at 75% followed by home loan loan at 42%, gold loan 11%, auto loan 18% and credit card 37%.
➡️Retail disbursement momentum help by home loan, auto loan while agriculture and personal loan remains flat annually.

NII growth moderate while PAT jump 18% led by other income and lower tax
➡️Interest income increased by 11% YoY (+2% QoQ) to 2,355 Cr driven by yield expansion and advance growth. The yield on loan expand 19 bps YoY to 7.68% while Cost of fund jump 23 bps to 4.80% result contraction in NIMs. NII grew moderate at 6% YoY (+2% QoQ) to 882 Cr due to high expansion in CoF makes contract NIMs by 7 bps. The bank’s PAT surged 18% YoY (+10% QoQ) to 325 Cr led by higher other income and lower tax expense despite the jump in credit cost. The stable the employee cost and total operating cost kick in operating leverage and boost the profitability.

Asset quality enhanced; stress book reduce
➡️Company has reduced the stress assets from 1,159 Cr in Q2FY24 to 476 Cr in Q2FY25. Bank has churned 75% of overall loan book since covid level and 93% current GNPA from old book. GNPA/NNPA stood at 4.40%/1.31% decline by 56bps/39 bps YoY (10bps/13 bps QoQ). Slippages ratio decline to 0.36% in Q2FY25 vs 0.42% in Q2FY24. The provision coverage ratio expand 290 bps YoY to 80.7% vs 77.8% in Q2FY24.

Valuation and Key metrics
➡️Currently the stock is trading at 0.76 price to book value. The yield on advances jump 19 bps to 7.68% while CoF decline by 23 bps YoY to 4.80%. This result in contraction in NIMs by 7 bps to 3.24%. The increased in deposit rate to maintain and increased the deposit growth led to higher CoF and contract NIMs as Yield is stable.

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IPO Research Note on Waaree Energies Ltd

IPO Research Note on Waaree Energies Ltd

Company Overview
Waaree Energies Ltd. is a leading player in the solar energy sector, with a strong presence across manufacturing, EPC (Engineering, Procurement, and Construction), and independent solar projects. Originally incorporated as Anmol Fluid Connectors in 1990, it transitioned into renewable energy by rebranding as Waaree Solar in 2007 and later becoming Waaree Energies. The company exports solar products to over 68 countries and operates one of India’s largest solar photovoltaic (PV) module manufacturing facilities.

With the ambitious expansion of 6GW capacity in Odisha, Waaree aims to strengthen its foothold across the solar energy value chain, enhancing vertical integration from wafer production to module manufacturing.

  • IPO Details
    IPO Type: Fresh Issue and Offer for Sale (OFS)
  • Fresh Issue Size: ₹30,000 million
  • Offer for Sale (OFS): Up to 3.2 million equity shares
  • Face Value: ₹10 per share
  • Price Band: ₹1427 to ₹1503
  • Bid Lot Size: 9
  • Use of Proceeds: Primarily for:

Funding 6GW manufacturing plant in Odisha
Working capital needs
General corporate purposes
Anchor Investor Bidding Date: One day prior to the IPO opening

  • Stock Exchange Listing: NSE and BSE

The IPO will consist of both fresh shares and an offer for sale by promoters, including Waaree Sustainable Finance and key stakeholders. Investors will participate through the book-building process, and the final price will be determined based on investor demand during the bidding period.

Industry Outlook and Growth Drivers
India’s solar energy industry is poised for significant growth, driven by a shift toward clean energy, government incentives, and decreasing production costs. Solar power accounts for nearly 50% of India’s renewable energy capacity target by 2030.

Key Growth Drivers:
Government Support and PLI Schemes: India has introduced the Production-Linked Incentive (PLI) scheme to boost domestic manufacturing of solar modules and reduce import dependency.
Carbon Emission Targets: India’s commitment to net-zero carbon emissions by 2070 and intermediate targets for 2030 will enhance the adoption of solar energy solutions.
Increasing Solar Adoption: Commercial, industrial, and residential sectors are witnessing increasing demand for rooftop solar and utility-scale installations.
Technological Innovations: New technologies like bifacial modules, half-cut cells, and enhanced efficiency systems will drive market demand.
Falling Costs: The declining cost of PV modules has made solar power more attractive compared to other energy sources.

Key Financial Analysis
Revenue Growth: Waaree has posted consistent revenue growth, benefiting from rising domestic and export demand for solar modules.
Profit Margins: The company enjoys stable margins, though fluctuations in raw material prices (such as polysilicon) remain a challenge.
Debt Levels: Waaree’s ongoing capacity expansion has led to higher debt, but the company maintains manageable leverage levels, supported by cash flows from operations.
Cash Flow Position: Positive cash flow generation provides a cushion for working capital requirements and reduces dependency on external borrowings.

Comparison with Competitors
Key Competitors:

Adani Solar: An integrated solar manufacturer with strong backing from the Adani Group. It benefits from scale and group synergies.
Vikram Solar: Focused on high-quality manufacturing and strong export business. However, Waaree has a more diversified business model with its EPC and project businesses.
Tata Power Solar: A well-established player in the EPC segment. Tata focuses on project development, while Waaree offers a wider range of solar products and solutions.
Waaree Energies distinguishes itself with its focus on integrated operations (from manufacturing to EPC) and ambitious capacity expansion, making it one of the few companies in India capable of scaling quickly to meet growing demand.

Risks and Challenges
Volatility in Raw Material Prices: Polysilicon and other components are key to solar module production. Any fluctuation in global prices could impact margins.
Policy Risk: Changes in government incentives, import duties, or tax policies could affect profitability.
Execution Risk: Timely completion of the 6GW project in Odisha is critical to the company’s growth outlook. Delays or cost overruns could impact financial performance.
Competition from Global Players: Chinese solar manufacturers continue to dominate the market with competitive pricing.
Currency Risk: The company’s exposure to international markets exposes it to foreign exchange fluctuations.

Valuation Outlook
Waaree’s IPO valuation will be based on its growth potential, industry positioning, and earnings outlook. Comparable solar companies in India trade at P/E multiples of around 25-30x. Given Waaree’s expansion plans, strong demand outlook, and government support for domestic manufacturing, it may command a premium valuation. However, market sentiment toward the renewable energy sector will play a crucial role in determining final valuation multiples.

Recommendation
Waaree Energies offers a compelling investment opportunity, driven by:

  • Robust government incentives under the PLI scheme
  • Strong demand for solar modules in India and export markets
  • Expansion of the 6GW plant, positioning it for long-term growth

    However, the company faces risks from raw material volatility, execution challenges, and global competition. Investors with a long-term outlook on the renewable energy sector may consider subscribing to the IPO. The company’s ability to manage its expansion efficiently and sustain margins will be critical in delivering shareholder value post-listing.

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Hyundai IPO: Accelerating Toward Long-Term Growth
Business, Equities, IPO research, Market News, Markets, Research, Research Reports - October 15, 2024

Hyundai IPO: Accelerating Toward Long-Term Growth

Hyundai IPO: Accelerating Toward Long-Term Growth

IPO Overview
Hyundai Motor India Limited (Hyundai) is gearing up for a landmark Initial Public Offering (IPO), set to be the largest in Indian history. The offering is an entirely offer-for-sale issue, allowing existing shareholders to monetize their holdings. With a price band of ₹1865-1960 per share, the issue size at the upper end will be ₹27,870 crore, implying a market cap of ₹1,59,258 crore. Priced at a 19.3x FY27 earnings multiple, the IPO offers investors a chance to capitalize on Hyundai’s strong market presence and promising future in the passenger vehicle (PV) industry.

Investment Highlights
1. Wide Product Portfolio and Market Leadership
Hyundai’s diverse range of offerings includes hatchbacks, sedans, and SUVs, providing an edge over competitors like Maruti Suzuki, which has traditionally been focused on entry-level and compact cars. This product diversification allows Hyundai to cater to a broader spectrum of customers, stabilizing its revenues across market cycles.

The company has also established a significant foothold in the export market, strengthening its position as a global player with higher average selling prices (ASPs) internationally. Hyundai is India’s largest passenger vehicle exporter, which not only enhances profitability but also mitigates domestic market risks.

2. SUV Leadership Fuels Margin Growth
The SUV segment remains Hyundai’s key growth driver. In FY24, Hyundai sold 3,89,000 SUVs, contributing to 63% of its domestic volumes, a stark contrast to Maruti Suzuki’s 36% SUV mix. SUVs, being premium products, command higher ASPs and margins, driving 7.4% CAGR growth in ASPs between FY22 and FY24.

This strategic focus on high-margin segments enabled Hyundai to achieve 100 bps expansion in EBITDA margins, even as commodity prices rose during FY21-FY22. Hyundai’s ability to maintain profitability through an optimized product mix highlights the company’s superior operational model.

3. Operational Efficiency and Capacity Expansion
Hyundai’s operational efficiency is reflected in its 10x asset turnover, outperforming Maruti’s 8x. The company’s plants run in three shifts, ensuring optimal utilization of capacity. Hyundai recently acquired General Motors’ Talegaon plant, which will expand its production capacity from 8.1 lakh units to 10.7 lakh units by FY29. The ₹32,500 crore investment required for this expansion will be funded entirely from internal accruals, underscoring the company’s financial strength.

4. Electric Vehicle Push and Future-Readiness
Hyundai is aggressively preparing for the transition to electric vehicles (EVs). It already has the Kona Electric on the market and plans to launch the Ioniq 5 soon. Hyundai aims to roll out six EV models by 2028 and is investing ₹4,000 crore in manufacturing and infrastructure to support this transition. This focus on future mobility solutions positions Hyundai as a frontrunner in the evolving EV landscape, giving it a competitive edge over peers like Maruti Suzuki, which has been slower to embrace the shift to electric.

5. Valuation and Attractive Pricing
At the upper price band, the IPO is valued at 19.3x FY27E P/E, which we believe is reasonable given Hyundai’s earnings potential. Additionally, the IPO is priced at a 12% discount to Maruti Suzuki’s trailing FY24 P/E, indicating that the company has left value on the table for investors. This makes Hyundai’s IPO not only an attractive long-term bet but also competitively priced compared to industry peers.

Risks to Consider
Supply Chain Dependence:
Hyundai imports about 20% of its cost of goods sold, mainly semiconductor components. Any disruption in global supply chains could impact production and profitability. However, the Indian government’s push for domestic semiconductor manufacturing may reduce this risk over time.

Rising Competition:
Hyundai faces intensifying competition in the SUV and EV segments from new players like Kia and MG Motors, which could put pressure on its market share and pricing power.

Royalty Payments:
Hyundai pays 3.5% of its sales as royalty to its parent company in South Korea. An increase in royalty payments could negatively impact margins.

Conclusion: A Compelling Long-Term Investment
Hyundai Motor India’s IPO presents a solid investment opportunity, backed by its strong market positioning, leadership in SUVs, and aggressive push into EVs. The company’s operational efficiency, combined with a diverse product portfolio and export strength, ensures a stable and scalable business model.

While the size of the IPO may limit listing gains, Hyundai’s growth prospects, competitive pricing, and strategic capacity expansion make it an attractive bet for long-term investors. Investors looking to ride India’s automotive growth story, particularly in high-margin SUVs and EVs, will find Hyundai well-positioned to capitalize on future opportunities.

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ACME Solar Unveils 19.8 MW Wind Project in Gujarat
Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - October 11, 2024

IREDA Q2FY25: Hydro and Solar Loans Lead Growth as India Targets 500 GW RE

IREDA Q2FY25: Hydro and Solar Loans Lead Growth as India Targets 500 GW RE

About the stock
➡️IREDA is PSU NBFC engaged in the business of financing green energy projects. Its finances project such as solar, wind power, hydro power etc. GoI has conferred the Navratna status upon IREDA in April 2024. Loan portfolio well diversified across the 23 states and 4 UT in FY24. It contributing major role in fueling the India’s RE taget of 500 GW by 20230.

Loan book up double digit 36% YoY /8% half yearly
➡️As on 30 sep 2024, loan book stood at 64,564 Cr represent growth of 36% YoY while half-yearly growth was moderate at 8%. This growth led by loan given to state utilities (43% YoY) followed by hydro power at 37%, solar 19% and wind at 7%.
➡️Along with loan book disbursement and sanction grew 44% and 240% to stood at 4,461 Cr and 8,650 Cr respectively.

Asset quality improved – GNPA down 17 bps/ NNPA jump 5 bps
➡️During the half year FY25, gross asset quality has improved by 17 bps declined in GNPA stood at 21.9% (1,415 Cr) in Q2FY25. While NNPA jump 5 bps to 1.04% (666 Cr) despite the surge in provision coverage ratio.

Borrowing jump 10% H2FY25 – domestic rise while foreign declined
➡️During H2FY25 company’s borrowing increased by 10% to stood at 54,639 Cr. Dometic borrowing raised 13% to 45,691 Cr while foreign borrowings declined 4%.
➡️In domestic borrowing, bank loan weightage has declined to 49% in Q2FY25 vs 59% in Q2FY24. while money raised through bonds weightage rise to 51% in Q2FY25 vs 41% in Q2FY24. The rising chance of rate cuts will declined the borrowing cost for company as bank loan and bond both equal weight in borrowing.
➡️Within the foreign borrowing, un-hedged portion rise to 27% in Q2FY25 vs 22% in Q4FY24. While hedged portion has declined equally to increased in un-hedged. The surge in un-hedged portion increased the currency risk.

Valuation and key metrics
➡️During the quarter, Yield on loan jump 15 bps to 9.92% while Cost of borrowing decline by 5 bps to 7.8%. This result in surge in spread and NIMs by 20 bps and 17 bps to stood at 2.12% and 3.34% respectively. The cost of borrowinf can further decline in coming quarter as RBI ready to ease monetary policy. Capital Adequacy ratio stood at 20.24% which is above the guidance of RBI but decline by 68 bps YoY.

Q2FY25 Results updates
➡️Interest income increased by 37% YoY (6% QoQ) to 1,577 Cr while interest expense jumped 30% YoY (6% QoQ) to 1,030 Cr. This result in NII grew by 52% YoY (8% QoQ) to 547 Cr. The surge in NII led by Nims expansion and increased in new loan book.
➡️PPOP grew 36% YoY (11% QoQ) to 494 Cr due to rising Opex (411% YoY). While PAT surged by 36% YoY and moderate on QoQ basis at 1% to stood at 388 Cr. The Jump in provision off set with the reduction in tax expense makes PAT growth unchanged with Operating profit.

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RBI's Surprise Rate Cut Sends Realty Stocks Tumbling: Is It Time to Reassess?
Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - October 7, 2024

RBI’s October MPC: Rate Status Quo Likely Amid Persistent Inflation Concerns, Global Risks

RBI’s October MPC: Rate Status Quo Likely Amid Persistent Inflation Concerns, Global Risks

India’s Monetary Policy Committee (MPC) is set to reconvene this week, marking the first meeting for its three new external members: Ram Singh (Director, Delhi School of Economics), Saugata Bhattacharya (veteran economist), and Nagesh Kumar (Director, Institute for Studies in Industrial Development). Given their fresh appointments, all three are expected to follow the Reserve Bank of India’s (RBI) house view on rates, at least initially, as noted in a recent Bank of America report. While the new members lack any known rate biases, newcomers traditionally adopt the majority stance in their early days.

This is significant because it suggests that the RBI is likely to maintain the status quo on rates for the tenth consecutive policy meeting. This pattern aligns with Governor Shaktikanta Das’ cautious stance, particularly on inflation, which remains a key concern for the central bank’s policymakers.

Despite headline inflation falling below the RBI’s medium-term target of 4%—with CPI inflation at 3.65% in August, slightly up from July’s 3.6%—the central bank continues to exercise caution. The RBI’s reluctance to declare victory over inflation stems largely from persistent food price pressures. Governor Das, in the minutes of the August MPC meeting, underscored that while the base effect has helped lower headline inflation, food prices continue to pose challenges, and inflation expectations among households are rising. Therefore, monetary policy needs to remain vigilant to the risk of food price pressures spilling over into core inflation.

Adding to these inflationary concerns are risks posed by the geopolitical tensions in the Middle East. India is one of the world’s largest importers of crude oil, and escalating conflict in the region, particularly between Israel and Iran, could disrupt oil supplies and send prices skyrocketing. This could increase India’s oil import bill, which would, in turn, fuel inflation. Although crude oil is currently trading below the RBI’s assumed $85 per barrel average for FY25, any significant upward movement could complicate the inflation outlook. The central bank will undoubtedly factor this geopolitical risk into its deliberations.

Inflation is not the only concern for the MPC, however. Economic growth, while improving, remains below potential. Although India’s economy has shown some signs of recovery, unemployment continues to rise, and small businesses are grappling with high borrowing costs. Small and medium-sized enterprises (SMEs), in particular, are struggling with rising interest payments, and there are growing concerns about asset quality in the SME sector. In light of these challenges, there is a strong case for the RBI to begin cutting interest rates to stimulate growth.

The RBI, however, faces a dilemma. On the one hand, inflation pressures, especially in food and core inflation, suggest the need for a cautious approach to rate cuts. On the other hand, the economic reality on the ground—rising unemployment, underwhelming growth, and financial strain among small businesses—argues for the central bank to shift its focus toward supporting growth.

The recent 50 basis point (bps) rate cut by the US Federal Reserve will also be a topic of discussion at the upcoming meeting. While the RBI Governor has consistently maintained that the Fed’s actions do not dictate India’s rate policy, the reality is that central banks around the world, including India’s, cannot fully ignore rate moves in major economies like the US. The Fed’s rate cut may influence the MPC’s thinking, particularly if global economic conditions continue to weaken.

In summary, while the October meeting is likely to result in a rate status quo, the groundwork is being laid for a potential rate cut in the next few months. With inflation pressures still present but stabilizing, and economic growth faltering, the RBI will likely need to pivot toward growth support soon. However, much will depend on how inflation, particularly food prices, evolves in the coming months, and how global risks, such as the Middle East conflict and US monetary policy, unfold. If inflationary pressures subside, a rate cut could be on the horizon by the end of the year.

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Sensex Jumps 450 Points Amid Renewed US-China Trade Hopes and Strong Sectoral Buying
Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - October 7, 2024

Kaynes Technology Acquires Iskraemeco India to Strengthen Presence in Smart Meters

Kaynes Technology Acquires Iskraemeco India to Strengthen Presence in Smart Meters

Kaynes Technology, a leading player in India’s Electronics Manufacturing Services (EMS) market, is positioning itself for rapid growth across several high-potential segments, including smart meters, semiconductors, and printed circuit board (PCB) manufacturing. The company has recently acquired a 100 percent stake in Iskraemeco India, a subsidiary of a Slovenian company, which is a strategic move aimed at strengthening its foothold in the smart meter market.

The acquisition deal, valued at Rs 43 crore, gives Kaynes full control of Iskraemeco India, a company that generated Rs 65 crore in turnover in FY24. While Iskraemeco India is still operating below break-even levels, the enterprise value (EV)/sales ratio of 0.7 times makes the deal attractive, especially given the long-term potential of the smart meter market in India. This acquisition aligns with Kaynes’ broader strategy of leveraging new growth opportunities in the evolving smart meter ecosystem, driven by the Indian government’s ambitious Smart Meter National Program (SMNP).

Tapping into the Smart Meter Opportunity
The Smart Meter National Program, part of the government’s larger power sector reform, seeks to replace 25 crore traditional electricity meters with prepaid smart meters over the next five years. The initiative includes modernizing infrastructure such as feeders and transformers, with an estimated total capital expenditure of Rs 1.5 lakh crore. With smart meter penetration currently standing at just 2-3 percent, there is substantial room for growth. The goal is to bring more transparency and efficiency to India’s power sector, and Kaynes sees this as a major area of opportunity.

To capitalize on this demand, Kaynes has set up a dedicated manufacturing plant for smart meters in Hyderabad. The facility has a current production capacity of 1 million units, but the company plans to scale this up to 4 million units in the near future by adding additional assembly lines. This move will allow Kaynes to ramp up its production capabilities to meet the growing demand from government projects and utilities across India.

The acquisition of Iskraemeco India further solidifies Kaynes’ position in this market. Iskraemeco India has secured a significant order from Power Grid Corporation of Gujarat to install 3.5 million smart meters over the next 12-18 months. This deal provides a strong revenue stream in the near term and reflects the high demand for smart meters, driven by government mandates and infrastructure upgrades. Kaynes is also expecting additional orders from the central government as well as from various state governments, which could provide further tailwinds for its smart meter segment.

The smart meter business currently contributes 2-3 percent of Kaynes’ total turnover, but management expects this to increase to 10 percent by FY25, bolstered by its strong order book and recent acquisitions. Over the medium term, the company also plans to expand its portfolio to include gas and water meters, thereby broadening its market presence in utilities.

Deploying Capital for Expansion
Kaynes Technology has been actively deploying capital to fuel its expansion plans. In 2023, the company raised Rs 1,400 crore through a qualified institutional placement (QIP). These funds have been allocated toward expanding its presence in both domestic and international markets. In January 2024, Kaynes acquired Digicom Electronics, a California-based EMS company, for $2.5 million. This acquisition marks Kaynes’ entry into the U.S. market, a key growth area for the company as it seeks to diversify its revenue streams.

Additionally, Kaynes acquired a minority stake in Mixx Technologies, an electronics manufacturing and PCB assembling services company, for $3 million. This acquisition is in line with its strategy to enhance its capabilities in PCB manufacturing, a key area of growth for the company.

In September 2024, Kaynes received cabinet approval to set up a semiconductor manufacturing plant in Gujarat, another significant step toward building a diversified electronics manufacturing portfolio. This new facility will allow Kaynes to tap into the growing demand for semiconductors, both in India and globally.

Strong Order Book and Growth Outlook
Kaynes Technology currently boasts an order book of over Rs 5,000 crore, with a book-to-bill ratio of 2.5x, offering strong growth visibility over the medium term. The management has reiterated its revenue guidance of Rs 3,400 crore for FY25, with an operating margin target of 15 percent. Over the longer term, Kaynes has set a revenue target of Rs 8,000 crore by FY28, of which 75 percent is expected to come from its core EMS business. The remaining 25 percent will be driven by growth in semiconductors, PCBs, smart meters, and the Kavach project (an indigenous safety system for railways).

The acquisition of Iskraemeco India is expected to be margin accretive over the medium term as Kaynes ramps up smart meter production and secures new orders. The company’s strategy of acquiring complementary businesses, deploying capital for capacity expansion, and entering new markets is poised to fuel its growth trajectory in the coming years.

Valuation and Investor Outlook
At its current market price, Kaynes Technology trades at an FY26 price-to-earnings (PE) multiple of 71 times, with a price/earnings-to-growth (PEG) ratio of 1.4x. While the company’s robust growth outlook is priced into the stock, investors may want to wait for better entry points given the elevated valuations. However, for long-term investors, Kaynes’ strong order book, aggressive expansion strategy, and growing presence in high-potential markets like smart meters and semiconductors make it a compelling play on India’s rapidly growing electronics manufacturing sector.

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Giva Raises Fresh Capital to Strengthen Jewelry Business, Valued at ₹3,950 Crore
Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - October 4, 2024

NBFC Loan Sanctions Q1 FY2024: Gold Loans Dominate Amid Slowdown in Unsecured Personal Loans

NBFC Loan Sanctions Q1 FY2024: Gold Loans Dominate Amid Slowdown in Unsecured Personal Loans

The latest data from the Finance Industry Development Council (FIDC) reveals a significant shift in the lending practices of Non-Banking Financial Companies (NBFCs) for the first quarter of FY2024. Gold loans have emerged as the dominant loan category, growing by 26% year-on-year to ₹79,218 crore. This rise in gold loan sanctions comes as NBFCs slowed their lending towards unsecured personal loans, which declined by 4% year-on-year due to the Reserve Bank of India’s (RBI) tightening regulations on unsecured credit.

Key Highlights:
Surge in Gold Loans: Gold loans accounted for the largest share of loan sanctions by NBFCs, reflecting their increasing preference for secured lending amid a changing regulatory landscape. The 26% growth from ₹63,495 crore last year to ₹79,218 crore in Q1 FY2024 underscores the sector’s focus on gold-backed financing.

Decline in Personal Loans: Unsecured personal loans, previously a dominant segment, witnessed a decline of 4% during the same period. This drop can be attributed to the RBI’s November 2023 decision to increase the risk weight on unsecured consumer credit from 100% to 125%, effectively raising the cost of capital for NBFCs extending such loans. The higher risk weight led to a shift in strategy as NBFCs redirected their focus toward secured lending products like gold loans, which offer better risk-adjusted returns.

RBI’s Regulatory Scrutiny: The RBI has increased its vigilance on NBFCs, particularly regarding gold lending practices. During its onsite examinations, the central bank observed several irregularities, including the use of third-party agents for loan sourcing, valuation practices without customer presence, insufficient monitoring of loan end-use, and lack of transparency in gold auctions during defaults. In response, the RBI issued a stern warning, mandating corrective measures within three months to avoid potential regulatory action.

Rising Property and Housing Loans: Property loans experienced a healthy growth of 21% YoY, now ranking as the fourth-largest loan category sanctioned by NBFCs. Housing loans also continue to hold a significant share of the total NBFC loan portfolio. However, unsecured business loans, like personal loans, have seen a deceleration, influenced by the same risk weight increases implemented by the RBI.

Shift Towards Secured Lending: The regulatory changes have made unsecured lending more expensive for NBFCs, prompting them to reallocate capital towards safer, secured lending options such as gold loans. The RBI’s sectoral deployment data supports this trend, showing that the gold loan portfolio of banks surged by 41% in August 2023, becoming the second-fastest-growing loan segment after renewable energy projects.

Implications for NBFCs:
Focus on High-Yield Secured Loans: The sharp rise in gold loans highlights a strategic pivot by NBFCs toward high-yielding but secured assets. Gold loans, backed by collateral, provide a safer lending avenue with attractive yields, making them a preferred choice in the current regulatory environment.

Cost of Capital and Credit Risk: With increased risk weights on unsecured loans, NBFCs face a higher cost of capital in those segments, reducing their appetite for such products. Consequently, gold loans have emerged as a favorable alternative, offering a secured product with relatively lower credit risk.

Potential Regulatory Risks: While gold loans present a lucrative opportunity, NBFCs must address the regulatory concerns raised by the RBI. Non-compliance with corrective measures could lead to stricter regulatory oversight, higher penalties, or restrictions on lending, impacting overall business operations.

Sectoral Diversification: NBFCs are likely to continue diversifying their loan portfolios, focusing on secured lending products such as gold and property loans, while cautiously navigating the unsecured credit landscape.

Conclusion:
The gold loan segment is expected to remain a growth driver for NBFCs in the near term, as the regulatory environment continues to favor secured lending. However, NBFCs will need to remain vigilant in complying with RBI’s guidelines to avoid regulatory backlash, while also exploring opportunities in other secured lending sectors such as housing and property loans to balance their portfolios effectively.

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