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Tech Mahindra Q4FY25: Despite modest revenue growth during the ongoing recovery phase, PAT jumps 80.3% year over year.
Result Updates - April 25, 2025

Tech Mahindra Q4FY25: Despite modest revenue growth during the ongoing recovery phase, PAT jumps 80.3% year over year.

Tech Mahindra Q4FY25: Despite modest revenue growth during the ongoing recovery phase, PAT jumps 80.3% year over year.

 

Despite difficulties in several important locations and verticals, Tech Mahindra, one of India’s top providers of IT services, exceeded analysts’ expectations with a solid performance in Q4FY25. At ₹4,252 Cr, the company’s Profit After Tax (PAT) increased by an astounding 80.3% year over year (YoY). Although sales climbed just 5.8% YoY, indicating persistent demand issues in some sectors, this impressive rise was driven by aggressive cost optimization efforts, improved margins, and enhanced operational efficiency.

After a protracted period of margin pressure and sluggish topline growth, Tech Mahindra is on the road to recovery, as seen by the company’s outstanding profitability performance during the quarter. Revenue growth is still slow despite PAT’s strong progress, highlighting some of the sector-specific difficulties and macroeconomic headwinds the company is now negotiating.

Growth by Segmentation: Mixed Performance Across Verticals

Uneven growth across business segments was highlighted by Tech Mahindra’s Q4FY25 statistics. The Enterprise segment which comprises BFSI, technology, and manufacturing saw a significant 7.7% YoY growth, indicating a high demand for services related to digital transformation. Increased use of cloud platforms, automation, and AI-driven solutions targeted at improving customer experiences and optimizing operations were especially advantageous to the BFSI vertical. In a similar vein, continuous investments in digitization and industrial automation by the manufacturing and technology sectors fueled expansion.
However, the usual growth driver for the Communications, Media, and Entertainment (CME) industry suffered a 2.5% YoY dip. Due to client budget cuts and postponed spending in the face of economic uncertainty, the telecom industry continued to face pressure. Demand has been slow as a result of media and telecom firms cutting down on investments in digital services and infrastructure upgrades.
Notwithstanding this drag, Tech Mahindra’s strategy emphasis on client diversification, high-value services, and developing technologies served to mitigate the overall effect and indicated the robustness of its larger portfolio.

Optimizing Costs and Improving Margin

The significant increase in profitability, which was fueled by rigorous cost optimization, was one of Tech Mahindra’s Q4FY25 reports’ main highlights. EBIT margins improved by 360 basis points to 11.8% from 8.8% in the same quarter last year as a result of the company’s successful efforts to cut subcontracting costs, minimize staff expenses, and simplify discretionary spending.
Additionally, the company’s continued emphasis on operational effectiveness and margin development is reflected in the EBITDA margin, which rose to 11.8%. Tech Mahindra’s dedication to cost control and profitability was evidenced by a 216-basis point increase in the cost-to-income ratio and better free cash flow generation. Strong operational efficiency efforts by the business also enhanced return on equity (ROE) and return on assets (ROA), both of which are anticipated to continue to grow in the future.

Dividend Payout and Balance Sheet

Tech Mahindra maintained a solid cash position and liquidity on the balance sheet, demonstrating continued financial prudence. A decrease in reserves was the main cause of the company’s reported small decline in net worth. Nonetheless, cash and cash equivalents increased to ₹1,521.8 Cr, indicating that the business is committed to keeping a healthy liquidity cushion.
The decrease in net current assets, which indicates increased operational cash flow efficiency, was a result of Tech Mahindra’s efforts to tighten working capital management. The business recommended a final payment of ₹30 per share, increasing the total dividend payout for FY25 to ₹45 per share, despite the modest fall in net worth This demonstrates the company’s continued dedication to its investors. This dividend payment demonstrates the company’s sustained capacity to produce robust cash flow and sustain shareholder dividends despite a difficult environment for revenue growth.

Management Plan and Prospects

The management of Tech Mahindra is concentrating on a three-year strategic transformation strategy. FY25 is the reset/recovery phase, focusing on addressing operational challenges and improving profitability. FY26 will aim for stability, refining strategies, while FY27 is expected to drive accelerated growth through successful execution of these plans.
The company is enhancing its Customer Experience (CX) capabilities by leveraging 5G, cybersecurity, and Generative AI (GenAI) to offer more personalized and intelligent services. This will play a crucial role in enhancing customer satisfaction and fostering loyalty. Additionally, Tech Mahindra is expanding its digital services and AI capabilities to offset slower growth in the telecom and media sectors, focusing on AI-powered services and cloud transformation.
Despite positive margin gains, short-term performance may be impacted by macroeconomic volatility and uncertainty in telecom/media sectors. However, Tech Mahindra’s strategic emphasis on digital services and AI technologies is expected to drive long-term growth.

Conclusion and Score

To sum up, Tech Mahindra has improved significantly in Q4FY25, demonstrating high profitability and cost effectiveness in spite of sluggish sales growth. The company’s concentration on high-value services, efficient cost-control strategies, and margin expansion all point to future success. But keeping up top-line growth will be essential to keeping investors confident.
We maintain our hold rating on Tech Mahindra due to the company’s present difficulties and sluggish revenue growth. Increased operational leverage, the CME segment’s recovery, the rapid expansion of innovative technologies, and the accomplishment of its strategic goals are important drivers of upside.

 

 

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HUL Delivers FY25 Results: Dividends and Strategic Growth Outlook

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HUL Delivers FY25 Results: Dividends and Strategic Growth Outlook
Result Updates - April 25, 2025

HUL Delivers FY25 Results: Dividends and Strategic Growth Outlook

HUL Delivers FY25 Results: Dividends and Strategic Growth Outlook

 

SUMMARY
For the fourth quarter of FY25, Hindustan Unilever Ltd (HUL) achieved a 3.7% rise in consolidated net profit, bringing the total to Rs 2,493 crore. The company recorded a 2.4% growth in operating revenue, amounting to ₹15,214 crore. Additionally, the board has proposed a final dividend of Rs 24 per share, highlighting their focus on rewarding shareholders.
Looking forward to FY26, HUL foresees a gradual recovery in demand, which it plans to support through strategic investments and ongoing efforts to transform its product portfolio. This approach aims to drive steady growth and strengthen its market position.
Enhancing Shareholder Value Through Strategic Dividends
The board has approved a final dividend of ₹24 per share, raising the total annual dividend paid to shareholders to ₹53 per share. However, the announcement of the record date for this dividend is still pending.
Over the past year, Hindustan Unilever Ltd (HUL) has declared multiple dividend payouts, including interim and special dividends, with amounts ranging from ₹10 to ₹24 per share.
HUL’s Q4 Net Profit Slips
Fast-moving consumer goods (FMCG) giant Hindustan Unilever (HUL) on Thursday announced a slight decline of 3.7% in its consolidated net profit, which stood at ₹2,464 crore for the fourth quarter (Q4) of the financial year 2024–25 (FY25). In comparison, the company had posted a net profit of ₹2,558 crore in the corresponding quarter of the previous year.
On a quarter-on-quarter basis, the net profit saw a sharper dip of 17.5% from ₹2,984 crore recorded in the preceding quarter.
The company reported a 3.5% year-on-year (YoY) increase in total income for Q4 FY25, reaching ₹15,979 crore compared to ₹15,441 crore. However, revenue showed little change when compared to the previous quarter.
Segment Performance Overview:
The Personal Care division recorded a 5% increase in profit, supported by modest sales growth under ongoing pricing pressure. Within this category, the Bodywash segment achieved double-digit growth, further solidifying its leadership position. Non-hygiene products delivered high single-digit growth, while skin cleansing products posted a modest, low single-digit increase.
The Home Care segment added ₹5,815 crore to the overall revenue, reflecting a 2% year-on-year rise. Growth was primarily driven by strong performance in premium fabric wash and fabric conditioners, along with contributions from the liquids portfolio, according to the company’s investor update.
In Beverages, tea experienced low single-digit growth due to pricing, whereas coffee maintained its strong momentum with continued double-digit expansion. The company held on to its leadership in both value and volume in the tea category.
Meanwhile, the Foods segment saw a decline in consolidated profit, which dropped 15% to ₹627 crore.
CEO Rohit Jawa Envisions FY26 Growth Path for HUL
In FY25, HUL achieved a turnover exceeding ₹60,000 crore, reflecting an Underlying Sales Growth of 2% and EPS growth of 5%. While absolute volume tonnage expanded by a mid-single-digit rate, this progress was somewhat diminished due to an unfavorable product mix,” stated Rohit Jawa, CEO and Managing Director, HUL.
He highlighted HUL’s competitive performance and its reinforced market leadership. “FY25 was a defining year in our portfolio evolution, marked by strategic developments in high-growth segments, enhanced investments in emerging channels, the acquisition of Minimalist, the sale of Pureit, and the planned separation of our Ice Cream business,” Jawa remarked. Looking ahead to FY26, HUL anticipates a progressive recovery in demand. “We remain focused on fulfilling a billion ambitions, leveraging our robust business fundamentals to sustain competitive advantage,” he stated. 

 

 

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Reliance Power Share Price Jumps 7% Amidst Flat Stock Market

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IREDA's PAT Soars 49% to ₹502 Crore!
Result Updates - April 16, 2025

IREDA's PAT Soars 49% to ₹502 Crore!

IREDA’s PAT Soars 49% to ₹502 Crore!

 

Strong growth in renewable energy financing pushes IREDA’s profitability and operational scale; significant improvement in asset quality and financial ratios underlines sector momentum.

Summary:

IREDA has reported a 49% year-on-year (YoY) increase in consolidated net Profit for Q4 FY25, reaching ₹502 crores compared to ₹337 crores in Q4 FY24. Revenue from operations also saw a solid 37% growth, hitting ₹1,904 crore. With a consistent focus on renewable energy financing, IREDA’s performance underscores the growing opportunities in India’s green economy transition.

Robust Profit Growth Driven by Renewable Sector Focus

IREDA reported a consolidated PAT of ₹502 crore for the quarter ended 31st March 2025, representing a significant 49% increase compared to ₹337 crore in the same quarter of the previous year. The performance was underpinned by a surge in revenue, which grew 37% to ₹1,904 crore from ₹1,391 crore in Q4 FY24. This indicates a numerical gain and reflects long-term structural shifts in India’s energy sector. As demand for green financing soars, IREDA has successfully captured a significant share of the lending market for renewables, leveraging its domain expertise and policy alignment.

IREDA announced a consolidated profit after Tax (PAT) of ₹1,699 crore for FY25, representing a 36% increase from ₹1,252 crore in FY24. This reflects robust loan disbursements, improved margins, and higher interest spreads in a conducive renewable energy financing environment. The key driver here was a policy push and financial schemes favouring renewable projects, such as rooftop solar, green hydrogen, and EV infrastructure, which IREDA is actively funding.  

Why This Is Good:

  • Sector Tailwinds: India’s push for energy transition creates a natural growth environment for IREDA.
  • Efficient Execution: Despite increasing finance costs, the company boosted margins, indicating efficient operations.
  • Government Backing: As a public sector enterprise, it benefits from sovereign credibility and favourable interest rate arbitrage.

Revenue Growth Outpaces Cost Inflation

Total income for Q4 FY25 stood at ₹1,915 crore, while for the whole year, it reached ₹6,755 crore, a 36% increase from ₹4,965 crore in FY24. Finance costs increased by 31% YoY to ₹1,104 crore in Q4, owing to higher borrowing volumes. Although finance costs increased by 31% to ₹1,104 crore due to higher borrowings, the outpacing growth in revenue allowed IREDA to maintain profitability and expand operating margins.

Operating Profit before depreciation and impairment came in at ₹770 crore in Q4 FY25, a 55% increase from ₹498 crore in Q4 FY24. Profit before Tax rose 31% YoY to ₹630 crore in the March quarter.  

Why This Is Positive:

  • Spread Management: Rising finance costs are typical in high-interest periods, but IREDA maintains the spread through strategic loan repricing.
  • Scalable Model: Revenue per employee leapt from ₹28.53 crore to ₹40.37 crore, proving economies of scale and a lean operational model.
  • Borrowing at Competitive Rates: Access to ECBS and perpetual bonds reduced the cost of capital.

 

Improved Asset Quality and Financial Metrics Indicate Strong Fundamentals

IREDA also reported a significant improvement in key financial ratios:

  • Net Interest Margin: Boosted to 3.27% in FY25 from 2.85% in FY24
  • Interest Spread: Widened to 2.42% from 2.16%
  • Earnings Per Share (EPS): Improved to ₹6.32 from ₹5.16 YoY
  • Revenue per employee: Leaped to ₹40.37 crore from ₹28.53 crore in FY24

This improved financial performance reflects the company’s success in optimising operations while expanding its loan book. These numbers validate IREDA’s focus on asset quality, risk management, and diversification beyond traditional renewable assets like solar and wind. The company increasingly funds new-age sectors like EV charging infra, grid-scale battery storage, and green ammonia.

 

Why These Are Strong Signals:

  • Stable Margins in a Volatile Rate Cycle: NIM expansion indicates successful loan repricing despite rising repo rates.
  • Diversified Exposure: Reduced risk concentration with exposure across 15+ clean energy sub-sectors.
  • Tech-Enabled Credit Monitoring: Lower NPAS and improved recoveries through digitised monitoring systems.  

 

Loan Book Expansion Reflects Demand Surge

IREDA’s gross loan portfolio grew to ₹75,320 crore by the end of FY25, signalling increasing demand for green energy financing. IREDA benefits from rising demand, fueled by India’s goal of 500 gigawatts of non-fossil fuel energy by 2030. The company also emphasised its readiness to support newer domains like offshore wind, ethanol-based fuels, and hybrid solar-wind parks.

As per the latest balance sheet, the company’s total liabilities stood at ₹79,728 crore, supported by ₹64,740 crore in borrowings and ₹10,266 crore in equity.

Strategic Initiatives and Recognition

IREDA’s transformation into a Navratna CPSE and its expansion into international markets through the GIFT City subsidiary reflect its growing strategic importance. The agency also secured foreign currency financing through a JPY 26 billion External Commercial Borrowing (ECB) from SBI Tokyo and raised ₹1,247 crore via perpetual bonds.

Additionally, between November 2023 and November 2024, the company received two CBIP awards for outstanding contributions to the RE sector and was ranked among India’s top five wealth creators.

Why Numbers Could Raise Concerns (Mild Risks)

While the overall story is highly positive, some challenges persist:

  • Rising Finance Costs: A 31% YoY rise in finance costs could compress margins if rate hikes continue.
  • High Leverage: With borrowings at ₹64,740 crore, debt servicing needs careful monitoring.
  • Execution Risk: As IREDA expands into newer domains (like green hydrogen), operational execution becomes critical.

However, these risks are currently outweighed by sector growth, government support, and the company’s evolving capabilities.

 

Comparison with Q4 FY24

Metric Q4 FY25 Q4 FY24 YoY Change
Revenue from Operations (₹ Cr) 1,904 1,391 +37%
Operating Profit (₹ Cr) 770 498 +55%
Profit Before Tax (₹ Cr) 630 480 +31%
Profit After Tax (₹ Cr) 502 337 +49%
Net Interest Margin (%) 3.27% 2.85% +0.42 bps
EPS (₹) 6.32 5.16 +22%

 

Future Projections: Green Horizon Beckons

Looking ahead, IREDA is positioned for significant growth due to

  1. Policy Push: The government’s PLI schemes, green bond frameworks, and the solarisation of agriculture will require massive funding.
  2. IPO Aftereffects: The 2023 IPO has enhanced transparency and market visibility, likely attracting more global institutional interest.
  3. Digital Transformation: AI-powered credit appraisal and automated compliance monitoring are on the roadmap.

If the current growth trends persist, IREDA’s loan portfolio will surpass ₹1 lakh crore by FY27. With expanding global partnerships, its role could evolve from a lender to a development finance institution, leading climate financing for South Asia.

Summary:

IREDA has reported a 49% year-on-year (YoY) increase in consolidated net Profit for Q4 FY25, reaching ₹502 crores compared to ₹337 crores in Q4 FY24. Revenue from operations also saw a solid 37% growth, hitting ₹1,904 crore. With a consistent focus on renewable energy financing, IREDA’s performance underscores the growing opportunities in India’s green economy transition.

 

 

 

 

 

 

 

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Traders claim that Trump’s tariffs have caused the $82 billion diamond industry to “ground to a halt.”

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Larsen & Toubro recorded strong revenue and PAT growth with highest quarterly orderbook in 3QFY25
Equities, Markets, Research, Result Updates - February 20, 2025

Larsen & Toubro recorded strong revenue and PAT growth with highest quarterly orderbook in 3QFY25

Larsen & Toubro recorded strong revenue and PAT growth with highest quarterly orderbook in 3QFY25  

About the Company

Larsen & Toubro (L&T) is a multinational company that operates in the technology, engineering, building, manufacturing, and financial services industries. L&T serves customers in many nations worldwide by addressing important demands in major sectors such as hydrocarbon, infrastructure, power, process industries, and defense. L&T operates in key, high-impact sectors of the economy, and our integrated skills cover the whole ‘design to deliver’ spectrum. The company excels in technology, engineering, construction, infrastructure projects, and manufacturing, and is a leader in all key business divisions.

Quarterly Results and Commentary

  • L&T reported a robust quarter performance with steady revenue growth across all its segments (+17.31% YoY) at Rs. 64667.78 Cr (+5.06% QoQ). with Infrastructure Projects (49% revenue share), IT & Technology Services (19% revenue share) and Energy Projects segments (17% revenue share) leading the revenue chart.
  • Consolidated revenue in Q3FY25 grew by a steady rate of 5.06% QoQ (+17.31% YoY) , driven by growth in Project and Manufacturing (P&M) businesses which include Infrastructure Projects , Hi-Tech Manufacturing, Energy Projects and Other segments hiked substantially on a YoY basis (+14.65%, +18.51%, +40.47% and +8.36% respectively). During the quarter, foreign revenues of Rs. 32,764 crore accounted for 51% of overall revenues, indicating better performance in the international P&M portfolio.
  • Gross Profit grew 9.84% YoY (+4.02% QoQ) with hiked COGS ~6% QoQ. Gross Profit margin shrunk by 310 bps and stood at around 45.60%.
  • EBITDA hiked by ~9.72% YoY to Rs. 7898.55 Cr. with EBITDA margin shrinking slightly by 65 bps YoY at around 12.21% owing to rise in employee cost (+16.18% YoY) while finance costs decreased due to decreasing borrowing levels and rates. EBITDA margins for P&M businesses including Infrastructure Projects, Hi-Tech Manufacturing, Energy Projects and Other segments grew by 5.5%, 18.2%, 8.3% and 27.5% YoY.
  • PBT for the P&M businesses such as Infrastructure Projects , Hi-Tech Manufacturing, Energy Projects and Other segments grew by 14.65% (Rs. 32407.98), 18.51% (Rs. 2589.08), 40.47% (Rs. 11055.35), 8.36% (Rs. 1887.41) YoY respectively. Whereas, PBT for the Services & Concessions segment showcased mild figures with IT & Technology Services shrinking ~7% standing at Rs. 1833.8, Financial Services having negligible PBT growth and Development Projects segment growing at 25.64% (Rs. 148.8). Other income YoY growth of ~15.5% reflects investment levels and yields while depreciation increased due to increasing P&M related spending and capitalization of new premises in LTIMindtree.
  • L&T’s PAT figures witnessed a hike of ~11% YoY (-3% QoQ) with PAT margins declining ~37 bps, owing to significant increase in share of PAT of joint ventures (+1519.76% YoY, +93.63% QoQ). Reported PAT growth indicates higher activity and enhanced treasury operations.
  • The company considerably improved its Net Working Capital (NWC) to Sales ratio, which fell from 16.6% in Q3FY24 to 12.7% in Q3FY25. This improvement was driven by improved customer collections, which increased the Gross Working Capital to Sales ratio. The group’s total collections (excluding Financial Services) increased by 20% YoY to ₹591 billion in Q3 FY’25, up from ₹494 billion in Q3 FY’24.

Orderbook Acceleration

During the quarter ending December 31, 2024, the Company received its highest quarterly orders of Rs. 116,036 crore at the group level, representing a significant 53% YoY growth.

    • Orders were received in several regions and sectors, including Thermal Power, Renewable, Power Transmission, Precision Engineering, Minerals & Metals, Water, Commercial Buildings, and Hydrocarbon Onshore. In the quarter, international orders were Rs. 62,059 crore, accounting for 53% of overall order inflow with Projects & Manufacturing businesses amounting around 52% at Rs. 98659 Cr and the Services segment at Rs. 17377 Cr. (~64%).
    • Simultaneously, the order book expanded around 42% in Q3FY25 and stood around Rs. 564223 Cr. Domestic prospects make up 59% of the healthy order prospects pipeline, which is expected to reach Rs. 5.5 trillion in the near future.

Key Product and Platform Growth

  • Revenue growth is driven by strong execution in the Infrastructure (15% YoY), Hydrocarbon (54% YoY), and Precision Engineering & Systems (34% YoY) businesses.
  • The increase in MCO expenses is due to increased activity and a higher share of P&M revenue. Employee costs are impacted by resource augmentation and wage increases across enterprises.
  • SG&A fluctuation is mostly due to execution ramp-up while the IT&TS segment has weaker operating leverage and an EBITDA margin that reflects revenue mix.

Segmental Growth

Infrastructure Project Segment witnessed a steady net revenue growth of ~15% QoQ standing at Rs. 32,130 Cr. out of which Rs. 13,540 Cr. coming from international revenue while EBITDA margin growing sideways at 5.5%. In Q3 FY’25, the Infrastructure division received orders totalling ₹491 billion, representing a 14% YoY increase, with 74% originating from international markets. Renewables, Power Transmission and Distribution, Water, Buildings & Factories, and Minerals & Metals were among the key industries driving growth. Strong international order momentum fuels order inflow growth while prospected pipeline of Rs. 4.0 trillion in the near term in momentum with healthy execution led by a substantial order book.

The Energy Projects business, which comprises Hydrocarbon and CarbonLite Solutions, received major orders, including two ultra-supercritical thermal power plants for CarbonLite Solutions and a massive international onshore order from Hydrocarbon. The order pipeline totals Rs. 1.44 trillion for Hydrocarbon projects, while the order book is Rs. 1.46 trillion (₹1.19 trillion for Hydrocarbon and Rs. 0.27 trillion for CarbonLite). Hydrocarbon project execution drove a 41% increase in revenue to Rs. 111 billion YoY. However, CarbonLite sales remained lower due to a declining order book. The EBITDA margin fell to 8.3% from 9.7% YoY, owing mostly to the execution stage of Hydrocarbon projects, while CarbonLite Solutions improved due to favourable claim settlements.

The Hi-Tech Manufacturing division, which includes Precision Engineering & Systems and Heavy Engineering, benefited from a repeat order for K9 Vajra in Precision Engineering and several overseas orders for Heavy Engineering. The order book currently stands at Rs. 418 billion while Precision Engineering maintained a solid execution pace, Heavy Engineering revenues were restrained due to early-stage project execution. However, cost savings in Heavy Engineering contributed to boost the segment’s total EBITDA margin.

In Q3 FY’25, the IT & Technology Services business, including LTIMindtree and LTTS, generated Rs. 121 billion in sales, with a moderate 8% increase due to market conditions. Despite macroeconomic problems, both corporations achieved significant transaction wins. However, sector margins fell due to salary increases and FX losses.

Financial Services segment’s income from operations grew at 14% QoQ standing at Rs. 3,880 Cr. owing to healthy credit-calibrated growth in disbursements. Book figures stood at Rs. 95,120 Cr. ( +16% 9M growth) RoA figures rounded to 2.27% despite sectoral headwinds.

The Development Projects segment, which encompasses Nabha Power and Hyderabad Metro, experienced revenue growth of 18% QoQ out of which Nabha Power constitutes majority share of Rs. 1,210 Cr. attributed to an enhanced plant load factor (PLF) and increased energy charges at Nabha Power. The ridership for Hyderabad Metro remained consistent at 4.45 lakh passengers daily in Q3 FY’25, showing a slight decrease from Q2 due to the festive holidays. PAT loss narrowed to Rs. 203 Cr. from Rs. 254 Cr. YoY, primarily due to reduced interest expenses resulting from debt reduction.

In the Others segment (Realty, Construction Equipment, Industrial Machinery, and Smart World & Communications), revenue increased by 9% YoY, fuelled by a rise in real estate handovers and robust sales in industrial machinery. The margins for this segment improved thanks to a more advantageous revenue mix in Industrial Machinery & Products.

Years (Figures in Rs. Crores) Q3FY25 Q3FY24 YoY (%) Q2FY25 QoQ (%)
Revenue  64667.78 55127.82 17.31% 61554.58 5.06%
COGS 35182.48 28282.95 24.39% 33209.76 5.94%
Gross profit 29485.30 26844.87 9.84% 28344.82 4.02%
Gross Margin% 45.60% 48.70% -6.37% 46.05% -0.98%
Employee cost 11912.19 10253.27 16.18% 11455.65 3.99%
Other expenses 9674.56 9392.95 3.00% 8972.12 7.83%
Total OpEx 21586.75 19646.22 9.88% 20427.77 5.67%
EBITDA 7898.55 7198.65 9.72% 7917.05 -0.23%
EBITDA Margin% 12.21% 13.06% -6.46% 12.86% -5.04%
Depreciation 1047.00 920.75 13.71% 1023.84 2.26%
EBIT 6851.55 6277.90 9.14% 6893.21 -0.60%
EBIT Margin% 10.59% 11.39% -6.96% 11.20% -5.39%
Interest cost 2486.00 2343.82 6.07% 2439.39 1.91%
Other income 967.87 837.75 15.53% 1101.27 -12.11%
PBT 5333.42 4771.83 11.77% 5555.09 -3.99%
Tax expenses 1332.00 1177.32 13.14% 1442.28 -7.65%
Tax Rate% 24.97% 24.67% 1.23% 25.96% -3.81%
 Share in profit/(loss) after tax of joint ventures/associates (net) 27.05 1.67 1519.76% 13.97 93.63%
PAT  3974.37 3592.84 10.62% 4098.84 -3.04%
PAT Margin% 6.15% 6.52% -5.70% 6.66% -7.70%
EPS 24.43 21.44 13.95% 24.69 -1.05%

Con Call Highlights

Guidance

  • L&T initially established a 10% growth target for order inflows but with ₹2,670 billion inflows for 9MFY ’25 (+16% YoY) and a strong ₹5.51 trillion prospects pipeline for Q4, the company is optimistic in surpassing this target with domestic capex environment is projected to improve in Q4, while overseas possibilities remain favourable, enabling additional growth.
  • The company had expected a 15% increase in revenue for FY 25, however, with group revenues already up 18% in the 9MFY25, and given the size and quality of the order book, it is possible to exceed this revenue projection by the conclusion of the fiscal year.
  • The Projects & Manufacturing division is expected to achieve an EBITDA margin of 8.2% for FY25, as forecast at the start of the fiscal year. To maintain profitability, the company will continue to prioritize effective execution and cost efficiency.
  • L&T has consistently generated strong free cash flow in recent years which increased capital allocation to new business areas such as green energy, data centres, and semiconductor design. These strategic investments are projected to boost the company’s long-term growth and returns, with contributions scheduled for the next Lakshya plan (FY ’27-FY ’31).
  • The company had previously projected a Net Working Capital (NWC) to Revenue ratio of 15% by March 2025, but with NWC to sales currently at 12.7% by Q3FY25, the business anticipates that it will remain at similar levels, demonstrating increased working capital efficiency driven by high customer collections.

Segmental Outlook

  • The Infrastructure segment’s order pipeline for the next three months is ₹4 trillion (₹3.15 trillion domestic and ₹0.85 trillion international), with an order book of ₹3.61 trillion, indicating a three-year execution term.
  • The Hi-Tech Manufacturing segment has an order book worth ₹418 billion and a pipeline of ₹65 billion for the next three months. While Precision Engineering maintained a solid execution pace, Heavy Engineering revenues were restrained due to early-stage project execution. However, cost savings in Heavy Engineering contributed to boost the segment’s total EBITDA margin.
  • Disbursements at L&T Finance increased steadily as lending costs remained under control, despite challenges in the microfinance sector. By Q3FY25, loan book realization had attained 97%, ahead of the Lakshya ’26 targets. 
  • The company received a ₹300 crore incentive under the Production-Linked Incentive (PLI) system for their green hydrogen project, which was won in the last quarter. However, this incentive is conditional on setting up the entire production capacity; if only a portion of the capacity is brought up, the incentive will be reduced. The company’s final decision on the project will be based on market evolution and economic viability.
  • The Energy business has order prospects worth ₹1.44 trillion, particularly for thermal power plants in India, hydrocarbon projects in India and West Asia, and gas-to-power opportunities. The company is still bidding on thermal power plant projects, particularly for Boiler Turbine Group (BTG) contracts. While the company is continuously looking for opportunities, it is also being selective based on manufacturing capacity, execution feasibility, and project location to assure efficiency and profit.
  • L&T’s current focus is on semiconductor design, particularly the development of intellectual property-led products. These designs will be produced by external fabs prior to any investment in a fabrication plant (fab). The company intends to build a robust semiconductor product portfolio over the next 2-3 years before determining whether or not to establish its own fab, however, near-term plans do not include establishing a semiconductor production facility.
  • Hydrocarbon Margin recognition is determined by the project’s stage of completion with some significant projects expected to cross the margin threshold soon, most likely in Q4FY25 OR Q1FY26. The company reported a 7.6% profit for the 9MFY25, which is expected to increase in Q4FY25 to reach the 8.2% full-year projection for the P&M portfolio. The company is on track with its execution strategy, and the temporary margin decrease has already been built into forecasts. As more hydrocarbon projects reach the margin recognition criteria, margins could improve in the next quarters. The company got large orders in FY ’24 and FY ’25, ensuring continuous execution and margin expansion.
  • Domestic and international infrastructure developments have comparable margin impacts with overall margin mix is constant, and the company is confident in meeting its 8.2% margin target for the year.
  • L&T has acquired a 15% share in E2E Networks for ₹1,080 crores, with an additional 6% stake transfer expected in May 2025. This is a strategic collaboration to integrate AI-powered cloud services into L&T’s data centre architecture. L&T will benefit from E2E’s AI capabilities, while E2E will use L&T’s data centre infrastructure to boost both firms’ market positions.
  • The Infrastructure sector has ₹4 trillion in order prospects, with the majority being domestic projects. Growth areas include public and private buildings (including hospitals), hydrogen-related projects, urban infrastructure (road networks, elevated corridors), water-related investments, and the metals sector (part of private sector capex). 75% of the opportunities are government-led (central and state), while 25% driven by the private sector, comprising real estate and data centres.
  • L&T is optimistic about defense spending, although short-term order prospects (next three months) are modest. Despite this, the business got a ₹6,500 crore Vajra deal in Q3FY25, increasing total defense orders to ₹12,000 crore over the 9MFY25. Defense projects take longer to complete, so while long-term prospects remain favourable, immediate order inflow is constrained.
  • There have been no major delays or payment concerns in Saudi Arabia. Furthermore, several non-priority projects have delayed due to capital reprioritization, but oil and gas, carbon capture, and petrochemicals remain top priorities, with gas development being the UK’s highest priority, and L&T has a large position in this area.
  • L&T received ₹900 crore from Telangana Govt for Metro Project, with an expected balance of ₹2,100 crore in the near term. The company plans to monetize Transit-Oriented Development (TOD) to reduce Metro’s present debt of ₹12,600 to ₹9,000 crore and lower interest costs.

Indian and Global Economic Scenario

India’s economic growth has slowed in recent quarters, with urban consumption slowing due to the depletion of pandemic-era excess savings, weaker formal sector pay growth, and tighter consumer credit standards. Rural consumption, on the other hand, has remained solid, thanks to strong agricultural activities. Public investments have also fallen, owing to recent national and state elections, while private investments have been inconsistent. However, recent improvements in high-frequency economic indicators show that the downturn may have bottomed out, with a near-term recovery fueled by higher government spending.

Globally, economic uncertainty exists as a result of armed conflicts, shifting political landscapes in several countries, and ongoing trade battles, all of which have the potential to reignite inflation.  Furthermore, central banks have few policy alternatives to address these difficulties, and governments with high debt-to-GDP ratios struggle to adopt effective fiscal policies.

On the plus side, the ceasefire between Hamas and Israel is likely to restore stability to the Gulf Cooperation Council (GCC) region.  Led by Saudi Arabia, the GCC is improving its physical and digital infrastructure while also monetizing its oil and gas assets.  Furthermore, numerous GCC countries are making great progress toward energy transition.

Larsen & Toubro Ltd secured orders worth ₹1.16 trillion during the quarter, representing a 53% year-on-year growth.  This was fueled by robust demand in the Infrastructure, Hydrocarbon, CarbonLite Solutions, and Precision Engineering & Systems areas.  Despite a slowdown in India’s economic activity in Q3, the company obtained ₹987 billion in orders for its Projects & Manufacturing sector, with domestic and overseas orders accounting for 48% and 52%, respectively.

Valuations

  • In present times, the stock of L&T is trading at multiple of 32.4x 101 EPS at the CMP of Rs. 3,276. In book terms, trading 5.05x than its book value of Rs. 649.  As of today, the ROCE and ROE of the company is at 13.4 percent and 14.7 percent, respectively.
  • Larsen & Toubro Ltd. announced an equity dividend of Rs. 28.00 per share throughout the last 12 months. The dividend yield of Reliance Industries Ltd. is 0.85% at the current share price of Rs. 3,276.

Investment Rationale

  • Larsen & Toubro announced that it has received a significant order from Hindalco to build a greenfield alumina refinery plant in Odisha with a capacity of 850 KTPA. L&T announced in an exchange filing that its Minerals & Metals (M&M) business vertical had obtained the order. According to the company’s definition, a major order is worth between Rs 2,500 crore and Rs 5,000 crore.
  • L&T’s Minerals & Metals (M&M) division has won a large contract worth between Rs 5,000 crore and Rs 10,000 crore to build a Pellet Plant and a Direct Reduction of Iron (DRI) Plant for a leading steel company in the Middle East and North Africa. L&T will handle engineering, supply, erection, and construction on the project, which is in line with worldwide decarbonization goals.
  • The government’s decision to enable private sector involvement in space research has opened up new opportunities for L&T. The business intends to develop its aerospace branch to take advantage of India’s expanding $44 billion private space market. L&T is cooperating with Hindustan Aeronautics Limited to develop the Polar Satellite Launch Vehicle (PSLV), with the first privately produced PSLV launch planned for early 2025.

 

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Hindustan Unilever Ltd. recorded flat volume growth and robust PAT driven by divestment in the 3QFY25

 

 

 

 

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FMCG companies initiative to lower replenishment period in rural areas
Equities, Markets, Research, Result Updates - February 20, 2025

Hindustan Unilever Ltd. recorded flat volume growth and robust PAT driven by divestment in the 3QFY25

Hindustan Unilever Ltd. recorded flat volume growth and robust PAT driven by divestment in the 3QFY25  

About the Stock

Hindustan Unilever Limited (HUL) is the biggest Fast-Moving Consumer Goods firm in India. The company has an experience of more than 90 years. It operates in various business segments- beauty and personal care, home care, food  and refreshments. HUL’s products are seen in at least 9 out 10 Indian households. The company is a subsidiary of Unilever, which is considered as the leading FMCG firm in the world.

The company’s sales are mainly in India. Its manufacturing units are located in different parts of the country. Some of the leading household products and brands of the company are Pond’s, Lakme, Lux, Knorr, Rin, Bru, Clinic Plus, and many more.

Quarterly Updates

Marginal growth in revenue and EBITDA

In the 3Q of financial year 2025. HUL recorded marginal growth in revenue and EBITDA by about 1.4 percent and 0.8 percent YoY, respectively.  The EBITDA margin is posted as 23.5 percent as it is contracted by 20 bps compared to 3QFY24. In terms of volume growth, it was flat YoY. The growth of the company was adversely impacted by elevated material prices and subdued  urban consumption demand in the country. The company also recorded shift of consumers towards small packs, despite of the prevailing premiumisation trend in the market.

Growth in PAT driven by divestment

The company registered a strong growth in terms of PAT which accounts to 19.1 percent YoY and 14.9 percent QoQ. One of the reason for this is income generation from divestment and also decline in advertising expense of the company. However, the growth in PAT (excluding exceptional items) contracts to -2.2 percent YoY and -5 percent QoQ. The growth trend was not surprising much due to muted growth in the second quarter as well and the prevailing market condition.

Flat Volume Growth

The growth in different segment was supported by pricing strategy but the volume growth remain flat for the company.

Segment-wise growth

  • Home-Care- It is the biggest segment of the company. In 3QFY25, the company recorded income of around 5.4 percent growth compared to 3QFY24. It was mainly driven by its volume growth in Fabric Wash and Household Care products growth. The segment recorded highest growth compared to other segments of the company.
  • Beauty and Wellbeing- The segment recorded marginal rise of 1.4 percent YoY in this third quarter. It was mainly driven by  Hair Care product portfolio and consumption of sachets.
  • Personal Care- The segment recorded contraction of around 3 percent YoY in this quarter due to  decline in demand for hygiene related products, especially skin cleansing products.
  • Foods- HUL recorded a flat income growth of 0.3 percent YoY. The revenue growth of segment suffered from inflationary pressures on consumption levels. In terms of volume growth, the company recorded mid-single digit contraction.

Commentary

  • The rural demand in the country is in recovery phase and urban consumption demand is moderate. In addition to this, the consumers are shifting towards smaller packets of products rather than large packets.
  • In terms of segment-wise performance, the home segment recorded high single-digit volume growth. Other segments like beauty and wellbeing segment observed contraction by low single digit and contraction to mid-single digit volume growth in food and personal care segment.
  • Despite the subdued consumption levels in the country, the home care segment was able to stand out as many products falls in the essential category.
  • The completion of the divestment of its Pureit, water-purifier business led to net profit of the company, other-wise it would have been flat in the third quarter of FY25. After excluding it, the company records net profit contraction by 2.2 percent YoY and 5 percent QoQ. The reason for this is higher deprecation cost and tax expenses in this quarter.
  • The company has taken some important decision such as divestment of Pureit, demerger of Kwality, acquisition of Minimalist and Vishwatej Oil Industries’ Palm Undertaking.
  • Beauty and wellbeing segment recorded marginal growth supported by strong growth in consumption and new products related to hair care division. It faced the issue of subdued performance in skin care and colour cosmetics due to delayed winter and mask skin portfolio.
  • In this current scenario, the company anticipates that the moderate consumption trend will continue in the upcoming quarters as well. It projects its EBITDA to be at the lower rate in the range of 23 to 24 percent.
Years (In Cr) Q3FY25 Q3FY24 YoY (%) Q2FY25 QoQ (%)
Revenue                       15,408          15,188 1.4% 15,508 -0.6%
COGS                        7,601 7367 3.2% 7,593 0.1%
Gross profit                        7,807 7821 -0.2% 7915 -1.4%
Gross Margin% 50.67% 51.49% -1.6% 51.04% -0.7%
Employee cost 684 649 5.4% 765 -10.6%
Other expenses 3553 3632 -2.2% 3,503 1.4%
Total OpEx 4237 4281 -1.0% 4268 -0.7%
EBITDA 3570 3540 0.8% 3647 -2.1%
EBITDA Margin% 23.17% 23.31% -0.6% 23.52% -1.5%
Depreciation 308 282 9.2% 305 1.0%
EBIT 3262 3258 0.1% 3342 -2.4%
EBIT Margin% 21.17% 21.45% -1.3% 21.55% -1.8%
Interest cost 105 81 29.6% 99 6.1%
Other income 312 285 9.5% 309 1.0%
PBT 3469 3462 0.2% 3552 -2.3%
Exceptional items 509 -30 -16
Tax expenses -977.00 -913 7.0% -924 5.7%
Tax Rate% -6% -6% 5.5% -6% 6.4%
PAT  3001 2519 19.1% 2612 14.9%
PAT Margin% 19.48% 16.59% 17.4% 16.84% 15.6%
EPS 12.77 10.72 19.1% 11.11 14.9%

Con Call Highlights

Consumption demand situation 

In the present times, India is facing subdued consumption demand in the market and a gradual recovery in demand at rural level. This resulted in the FMCG sector recording low volume growth in the previous  six months. The trends in the market indicate a rise in preference for small packs in various product portfolios. This trend is more observed for non-essential category of products, and less noticeable for Home Care products, which falls in the category of essential products. In terms of premiumization trend in the market continues to remain strong compared to the mass segment in the third quarter of the financial year 2025. It reflects that the consumer’s preference towards high-end products is strong even in midst of expansion in preference for small packets of various products in order to manage their total expenditures.

Elevated Commodity prices

The company recorded surged in prices of crude, palm oil, and tea on a year-on-year basis. In contrast to this, the price of soda ash continues to remain at the same level. In the third quarter of FY25, the prices of crude oil declined and depreciation of rupee took place by 1 percent compared to the dollar. Even so, there have been major fluctuations in the prices of crude oil, palm oil, and rupee. The company focuses on monitoring this price volatility and taking actions as required.

Positive Net Material Inflation (NMI)

In the previous quarter of FY25, the company observed a positive NMI indicating an increase in the total costs of the business. The company continues to adjust prices according to the change in NMI. These changes are seen in its price growth pattern in the third quarter. It aims to give good value to consumers. 

Performance of the company

In the midst of a rise in pricing, the company’s income was Rs. 15,195 crores. It highlights the sales growth of 2 percent driven by pricing and the volume growth has stagnated. Despite of the inflationary and other pressures, the company gave health gross margin growth of 50 percent and EBITDA was around 23.4 percent, marking it successfully in the company’s expected range of 23-24 percent. The company recorded PAT (Bei) growth was flat YoY. While, the EPS of the company surged to 19 percent due to divestment of Pureit business. The company’s income is supported by more than 80 percent of its sales from products which are considered to be better than its peers. More than 95 percent of the products in the portfolio used the strategy of unmissable brand superiority framework.  The company recorded a lower tax rate considering divestment of Pureit is around 26.8 percent (24.6 percent without consideration of divestment) in the 3QFY25. It is projected to be around 25.5 percent in the upcoming quarters. In terms of absolute volume growth, the company has an edge against its peers. The reason for subdued growth was due to few segments receiving a slowdown in demand. The company recorded a slowdown in growth in its Home Care segment.

Focus on Core brands

  • Glow and Lovely- It has a strong position in the market. Recently, the company has launched a new product of Glow and Lovely known as Glass Bright Gel. All the 6P’s of marketing are followed while launching this product.
  • Rin and Sunlight-HUL also relaunched Rin Bar with a super formula using novel polymer technology which makes it longer than its competitor’s product. It has resulted in slight rise in the market share. Sunlight is a 130 years old brand of HUL. The company promoted it through Durga Puja in Kolkata.
  • Moti Soap- In the last two years, Moti has become the first brand to be marketed through digital platforms. It resulted in the highest growth of the market share of the brand.

New Launches

  • The company launched Dove’s two new products- serum shower collection and scalp plus hair therapy. 
  • Lakme launched its Rouge Bloom collection through social-first media campaigns, Lakme fashion week, e-commerce, large-scale out-of-home media deployment and offline promotions.
  • TRESemme launched Silk Pressed range through first-of-its kind social-media and partnership with e-commerce, salons and professionals.
  • Knorr brand expanded its Korean products through launching Spicy gochujang and also aligning with Squid Game 2 for marketing campaigns.
  • Horlicks launched Strength Plus.
  • To expand its liquid market, the company launched Sun, a dishwash liquid brand which costs Rs. 99 per Liter.

Segment-wise Performance

  • Home Care- It is the biggest operational segment of the company. Its share in the total revenue is around 37 percent. The segment recorded growth in sales by 6 percent aided by high volume growth in single-digit. The performance in the segment was strongly driven by the broad base product portfolio. HUL recorded a double-digit surge in its liquid portfolio. In the third quarter of FY25, HUL relaunched Comfort. The company registered a robust growth in its leading diswash segment supported by being an essential commodity. The firm has decided to diversify its product range by adding Sun liquid dishwash and Vim surface cleaner. 
  • Beauty & Wellbeing- It contributes around 22 percent. The performance of the segment was adversely affected by delayed winter leading to subdued growth of 1 percent YoY. Hair Care achieved a mid-single digit in volume growth. The reason for this is increased demand for sachets, mainly premium shampoo sachets and also new and innovative products of the company. The company’s new innovative products include masks, conditioners, and serums. In contrast to this, skin care and colour cosmetics faced a slowdown in growth due to delayed winter and poor performance of mass skin products. While, the non-winter skin related products performed well. 
  • Personal Care- Its share in the total revenue of the company is about 15 percent. In this quarter, the company recorded a contraction of 4 percent in the segment due to low demand of hygiene related skin cleansing products. Despite this, the company saw continued progress in the skin cleansing segment compared to its peers due to its strategic actions, and good performance of non-hygiene related products. The company has taken into consideration to relaunch Lifebuoy. In midst of this, the company hit a robust double-digit growth in its leading bodywash segment. Supported by the performance of close up in the market, oral care registered a mid-single digit growth.
  • Food- The share of the Food segment in the total business of the company is about 24 percent. The revenue from the segment continues to be stable. However, the volume growth observed contraction leading to mid-single digit growth. Tea portfolio recorded low-single digit growth due to pricing strategy. The premium brands like Taj Mahal, and 3Roses gave a strong performance. The double-digit growth was observed in the coffee segment impacted by pricing strategizing and outperformance by new products. The nutrition drinks products were successfully able to gain both volume and value share compared to its peers. HUL has decided to expand its portfolio in terms of nutrition drinks for all age groups. The mid-single digit growth in packaged foods division was recorded mainly driven by strong sales in new and key product portfolios. The products like mayonnaise, ketchup, international sauces, and cuisines remain popular among consumers. Revenue from ice cream division was registered to be flat on YoY basis. Contrary to this, Food Solutions’ sales recorded a double-digit growth. 

In all the segments, the company recorded health margins – Beauty & Wellbeing (29%), Home Care (18%), Personal Care (18 percent), and Foods (20%).

Strategic Decision

  • Divestment of water business- The sale and divestment proceedings of Pureit was completed on 1st November. 
  • Demerge of Ice Cream Business- The company has decided to demerge Kwality Wall’s (India) Limited. As per the arrangement,  for each equity share of HUL will receive one equity share of the new entity. This demerger is projected to help the company to have robust growth and development in its business model and market position.
  • Acquisition of Minimalist- The premium brand, Minimalist was founded by Mohit Yadav and Rahul Yadav in the year 2020. It is one of the fastest-growth brands on the digital platform for the first digital brand. The company has successfully managed to reach INR 500 crores of revenue growth in a short period of 4 years. It is one of the few brands to remain popular since its launch.  It helped to strengthen HUL’s e-commerce presence and HUL will also launch in the offline segment. Further, minimalist has a presence in some international markets as well. HUL can use its global presence to increase the scope of the business in the international market. HUL will acquire about 90.5 percent of stake in the company at a pre-money enterprise value of Rs. 2,955 crores with the use of both secondary buyout and primary infusion. The  balance stake of 9.5 percent will be acquired in the upcoming 2 years. The transaction is anticipated to be closed in the first quarter of FY26.  This acquisition will aid the company to 900 basis points of growth in the Beauty and Wellbeing division in the upcoming few years and also address the gap of under indexation of premium products in this division.
  • Acquisition of Vishwatej Oil Industries Private Limited- It aims to acquire with the aim to build strong infrastructure and supply chain for palm under the National Mission on Edible Oils of India.

Future Outlook

HUL expects the current subdued demand trends to remain in the upcoming future as well. The company continues to keep an eye on different macroeconomic indicators like real wage growth, food inflation, and employment levels impacting the growth of the economy. The company focuses on having volume-led growth compared to its peers with a major focus on diversifying and developing the portfolio of the company. In case of continued price range of commodity prices in the upcoming quarters as well, the company is projected to record a low single-digit growth. In the scenario of elevated prices of material required, the EBITDA is projected to be in the lower range of 23 to 24 percent. The company’s focus is to increase its premiumization, strategic acquisition, and launching new products in the market. 

Valuations

In present times, the stock of  Hindustan Unilever Limited is trading at multiple of 51.1 x  45.7 EPS at the CMP of Rs. 2,250. In book terms, trading  10.4x than its book value of Rs. 216.  As of today, the ROCE and ROE of the company is at 27.2 percent and 20.2 percent, respectively. The company recorded net profit due to strong sales in Home care segment which partially offset the negative performance in the other segments.

Investment Rationale

  • Historically, FMCG sector in India is considered as the defensive sector. The rise in disposable income, growing young population, expansion in rural consumption will accelerate growth in the FMCG sector.
  • In last quarters, FMCG sector underperformed in the situation of subdued demand and narrowed down margins. Inflation in commodity prices led to higher input costs which in turn put burden on margins of FMCG companies. In order to relieve pressures on margins, many FMCG companies raised their pricing. It resulted in contraction in consumer demand in the sector.
  • In the recent times, the economy and FMCG sector is adversely affected by subdued urban consumption demand and elevated material prices. In contrast to the urban demand trend, rural demand in India is in its recovery phase. FMCG sector recorded shift of consumers towards small packs more than large packs. Despite this prevailing situation, consumers are inclined towards premium products in different segments.
  • FMCG firms are focusing on premiumisation of their product portfolio to accelerate demand at urban level. The consumption trend in urban areas indicate people preference for high-end products in the midst of expansion in growth of quick commerce.
  • In the year 2024, the inflation in commodity prices affected non-essential spending of the consumers. There is possibility of inflation acting as a challenge for the recovery of urban demand. It is likely for the action of shift towards premium products by FMCG players to suffer due to rising inflation.
  • In the month of December 2024, MPC of RBI projected Consumer Price Inflation (CPI) as 4.8 percent in the financial year 2025. Earlier, it was estimated to be 4.5 percent. It highlights the expansion in the inflationary burden in the upcoming financial year as well.
  • In the Budget 2025, the government of India announced tax relief to income up to Rs. 12.75 lakh with the aim to accelerate consumption demand in the country. It is expected to positively impact consumption-driven business in the economy. Apart from this, the Budget also empowers manufacturing and rural infrastructure of the country through National Manufacturing Mission and various initiative for rural regions. It will lead to self-reliance, better cost efficiency, expansion of domestic production, employment, market expansion, higher consumption, and development.
  • Agriculture, manufacturing, and consumer expenditure are the three crucial pillars for the progress of the FMCG sector. This initiatives for development of these pillars will lead to high growth and better opportunities for transformation will take place in the FMCG industry.
  • Large FMCG player like Hindustan Unilever was able to get advantage from recovery in rural demand due to its substantial presence in rural areas. Additionally, rural market is not impacted by the competition in the quick commerce businesses.
  • The latest report of NielsenIQ states that the premium and luxury products of FMCG are recording a remarkable growth in spite of the prevailing issues in the sector. The high-end products are able to gain strong growth compared to mass products in the market indicating a transformation in the consumer sentiments.
  • The contribution of the high-end products in the total sales of FMCG products is about 27 percent and it led to value growth of 42 percent in the sector. The crucial factors leading to this trend are urbanisation, higher income levels, growing preference for high-end products, expansion in use of smartphones.
  • Despite the rise in prices of high-end products, demand for it is increasing at double rate indicating shifted preference for value over cost in the consumer sentiments.
  • Unilever expects improvement in the demand condition in the Indian economy in the mid-term due to the recent implementation of fiscal and monetary incentives. HUL share in the global revenue of Unilever is more than 10 percent.
  • Unilever aim to invest capital in order to expand growth in the beauty and wellbeing segment. HUL steps towards acquiring Minimalist indicates its following of strategy to bring growth in beauty and well-being segment.
  • The overall FMCG market (where HUL participates) is around INR 1,70,000 crores out of which INR 68,000 crores is contributed by the beauty division itself.  The contribution of affluent beauty divisions in the beauty market is around 50 percent and its pace of growth is double the growth of the beauty market. In addition to this, the range of premium products purchased by consumers in India is in line with the other developed countries in the world. The total per capita expenditure on beauty in India is remarkably lower compared to the rest of the world. It signals higher chances of opportunities for the premiumization of the beauty market.
  • Additionally, HUL focuses on demerger of Kwality Wall Ltd. , acquisition of the Minimalist and Vishwatej Oil Industries, and expansion of product portfolio of the company.

 

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3QFY2025: TCS records PAT of rs. 12444 crore increased by about 12% YoY

 

 

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Reliance Power Share Price Jumps 7% Amidst Flat Stock Market.
Equities, Markets, Research, Result Updates - February 15, 2025

RIL recorded a strong growth mainly driven by growth in consumer-driven businesses in 3QFY25

RIL recorded a strong growth mainly driven by growth in consumer-driven businesses in 3QFY25 

About the Stock

Reliance Industries Limited (RIL) is an Indian multinational conglomerate with its headquarters in Mumbai. RIL’s wide business portfolio includes energy, petrochemicals, natural gas, retail, telecommunications, mass media, and textiles. Reliance is one of India’s most lucrative enterprises, as well as the largest publicly traded company in terms of market capitalisation (Rs. 17,25,242.22 Cr) and sales. It is India’s eighth largest employer, with about 236,000 employees.

Quarterly Updates

  • RIL reported a robust quarter performance with steady revenue growth across all segments (+6.9 percent YoY), with consumer business (~23 percent revenue) and O2C business (~57 percent revenue) in focus.
  • Consolidated revenue in Q3FY25 grew by a steady rate of ~ 7% YoY driven by growth in consumer business and O2C. Revenue from segments such as Retail, Digital Services and O2C hiked substantially on a YoY basis (+18.4%, +19.4% & +6.02% respectively). Oil and Gas segment contracted ~5% YoY owing to decline in volumes of KG D6.
  • EBITDA hiked by 7.71% YoY to Rs. 43789 Cr. with EBITDA margin improvement of ~13 bps owing to significant increase in EBITDA in the segment of Retail and Digital Services.
  • EBITDA for JPL grew by 18.8% YoY to Rs. 16,585 Cr. whereas, RJIL delivered a stable EBITDA growth of 17.7% (Rs. 15, 798 Cr.). For Retail segment the EBITDA stood strong at Rs. 6,828 Cr. (+9.5% YoY, +16.7% QoQ). Oil & Gas sector saw a decline of 4.1% YoY in EBITDA at Rs. 5,565 Cr. while EBITDA margins gained 100bps YoY.
  • RIL’s PAT figures witnessed a hike of 11.88% YoY (+14.15% QoQ) with PAT margins improving ~40 bps. Digital Services segment was the front runner of PAT growth with ~26% YoY, while the retail segment delivered PAT growth of ~9-10 percent YoY.

Commentary

  • Due to strong demand, strategic execution, and operational efficiencies, RIL produced a successful operating quarter with growth in all major segments. Further RIL states that it witnessed strong sequential growth in earnings led by positive contribution from all key segments
  • A robust festive season, higher consumer involvement, and market expansion with the opening of multiple new locations (+779 new locations) helped the retail segment achieve remarkable success. Performance was further enhanced by initiatives to increase productivity and optimize processes, especially in the grocery and fashion & leisure sectors where new formats resulted in record sales.
  • By growing its 5G network (170 million customer base) and gaining around 3.3 million new subscribers) boosting the ARPU to Rs. 203 thanks to tariff hikes, Jio maintained its momentum in the telecom and digital industries. Steady revenue growth was facilitated by enhanced pricing methods, higher user engagement, and increased data usage.
  • Improved refining margins, better product spread with PP and PVD deltas, and rising domestic demand for oil and petrochemical products which saw 44 percent hike in petrol sales and 23% hike in diesel sales, all contributed to the O2C (Oil to Chemicals) segment’s robust recovery.
  • Due to good market circumstances such as price in gas prices to $9.74 per million BTU, the Oil & Gas segment managed to maintain stability despite occasional output hiccups with lower production of KDG6 volume which amounted for lower revenue.
Years (Figures in Cr) Q3FY25 Q3FY24 YoY (%) Q2FY25 QoQ (%)
Revenue  243865 227970 7% 235481 4%
Excise Duty 3879 2884 35% 3946 -2%
COGS 152959 147502 4% 152902 0%
Gross profit 87027 77584 12% 78633 11%
Gross Margin% 36% 34% 5% 33% 7%
Employee cost 7155.00 6313 13% 6649 8%
Other expenses 36083 30615 18% 32926 10%
Total OpEx 43238 36928 17% 39575 9%
EBITDA 43789 40656 8% 39058 12%
EBITDA Margin% 17.96% 17.83% 0.69% 16.59% 8.26%
Depreciation 13181 12903 2% 12880 2%
EBIT 30608 27753 10% 26178 17%
EBIT Margin% 13% 12% 3% 11% 13%
Interest cost 6179 5789 7% 6017 3%
Other income 4214 3869 9% 4876 -14%
PBT 28643 25833 11% 25037 14%
Tax expenses 6839 6345 8% 5936 15%
Tax Rate% 24% 25% -3% 24% 1%
PAT  21804 19488 12% 19101 14%
PAT Margin% 9% 9% 5% 8% 10%
EPS 13.7 12.76 7% 12.24 12%

 

Con Call Highlights

Capex plan

Compared of the Capex of Q2FY25 which stood at Rs. 34,022 Cr. (allocated towards O2C and Energy segments while Jio’s allocation declined), the Capex for Q3FY25 was around Rs. 32,000 Cr. which is well below the cash profits of Rs. 38,000 Cr. RIL further plans on investing in growth opportunities across key segments.

Digital Services Segment

Tariff hikes, digital platform expansion, and a more diverse consumer base all contributed to growth in revenue for Jio with subscriber count reaching 482.1 million, with 3.3 million new additions, while ARPU rose to Rs. 203.3 per month Vs Q2FY25 ARPU of Rs. 195.1 per month. With the full impact of the July 2024 rate hike still being felt, Jio anticipates greater ongoing ARPU growth, subscriber additions, and rising digital revenues. 

Jio’s True 5G offerings are expanding with more than 170 million Jio 5G subscribers with Jio being network of choice for 70% of new 5G device users, the service currently accounts for almost 40% of all cellular traffic, which will shortly overtake 4G.

Jio’s home internet and AirFiber attracted around 2 million new connections (~17 million total connections) with 4.5 million AirFiber homes connected, with 70% of new connections coming from rural and small towns. Jio plans to hike connections in underdeveloped areas with greater demand. Further, Jio witnessed a significant hike of nearly 280 percent YoY in government connectivity tenders and a growing market share in corporate and financial sectors, and is preferred for providing providing IoT, private cloud, and SIP-based business solutions.

Jio is also advancing AI infrastructure by developing large-scale, reasonably priced computing power. JioBrain, Jio AI Cloud, and JioCloudPC are some of the platforms that are being used to incorporate AI throughout company operations.
Jio AI Cloud provides DigiLocker integration, AI-powered content management, and 100GB of free storage. JioCloudPC eliminates the need for expensive updates by transforming a TV and set-top box into a full-fledged PC with an 8GB multi-core processor and pay-as-you-go pricing.

Retail Segment

Robust growth in the Retail Segment was mainly driven by the festive and wedding seasons with AJIO reporting sales hike (+17% YoY) and electronics sales up 12% YoY, operational efficiencies, and store expansion, with 779 new openings bringing the total to 19,100. Grocery sales hiked (+37% YoY) owing to increase in retail stores, while luxury brands expanded globally, and jewelry sales held steady despite rising gold costs. In FY25, FMCG revenue topped Rs. 8,000 Cr, with Campa accounting for 10% of the market in important states. Reliance Retail is well positioned for long-term growth, with strong momentum across segments.

Oil and Gas and O2C Segment

Despite the lower production of KDG6 (- 5.3% YoY) at 28 million standard cubic meters, RIL’s Oil and Gas segment is still the largest contributor to the Indian Gas industry with a quarter revenue of around Rs. 6370 Cr. (+2.5% QoQ), mainly due to increased CBM production on multilateral wells. With 34 of the 40 wells functional, the capacity stands at 0.35 million standard cubic meters, the perspective is to increase the drilling of multilateral wells. Even with lower production of KDG6, the prices of gas have remained higher QoQ. The actual price of KDG6 at $9.74 per MMBtu was slightly lower than the ceiling price at $10.16 per MMBtu, while CBM prices were lower than QoQ at $10.58 per MMBtu. 

O2C segment displayed robust performance despite market volatility driven by a 9% rise in volumes, strong domestic demand, and cost advantages from ethane cracking. Polymer deltas improved slightly, and fuel cracks remained healthy despite declines in gasoline and gasoil margins. With aviation fuel witnessing a 9% increase in demand, Air BP-Jio grew 51%. With O2C margins fallen 30-70% over last five years, RIL to invest in ethane sourcing, refinery off-gas cracking, and gasification. Future outlook in investment further includes a 1.5 million-ton PVC and CPVC plant and increased specialty polyester production.

Domestic fuel consumption grew 9.6%, driven by PVs and two-wheelers. Retail volumes rose with schemes like ‘Happy Hour’, and diesel demand in India grew 5% YoY. In petrochemicals, PE demand stayed stable, PP and PVC saw strong growth, but polyester margins fell 12%. Reliance focused on production and marketing optimization to improve sales and margins

Global and Indian Scenario of Gas Industry

Market conditions were dynamic, with Brent crude prices falling 11% YoY due to a stronger dollar, weak demand from China, and high non-OPEC supply. Global oil demand rose by 1.5 million barrels per day, led by Asia, with strong gasoline and jet fuel demand.

In line with the gas market outlook, prices have stayed consistent throughout the quarter, ranging from $13 to $15 per MMBtu. In spite of severe supply disruptions, this stability has been fueled by strong demand, especially in India. Outages at Australian LNG terminals and the halt of Russian gas through Ukraine have affected global supply, lowering it by about 11 million tons annually. A tighter supply situation has resulted from these disruptions, which have increased market pressure.

RIL anticipates gas prices to remain firm in the short run as delays in LNG projects in Africa and Canada prevail which would further reduce oil supply by around 5 million tons making it difficult to meet global demand. Furthermore, Europe’s gas storage levels are far lower than they were last year (84%), at 68.8% compared to the five-year average of 74.8%. This drop in storage levels raises the possibility that Europe would need to import more gas, which would raise demand and keep prices high for some time to come.

With a 10% increase in consumption, the Indian gas market remained robust in 2024, propelled by the power, petrochemical, and city gas distribution industries. Despite high prices, LNG imports increased to 25.5 million tons, indicating an increasing reliance on natural gas. A positive price outlook was supported by the increase in the domestic gas ceiling price to $10.16 per MMBtu. India’s gas industry is well-positioned for long-term expansion due to robust imports and growing demand.

Valuations

  • In present times, the stock of RIL is trading at multiple of 24.9x 51.1 EPS at the CMP of Rs. 1,737. In book terms, trading 2.12x than its book value of Rs. 606  As of today, the ROCE and ROE of the company is at 9.61 percent and 9.25 percent, respectively.

Reliance Industries Ltd. announced an equity dividend of ₹10.00 per share throughout the last 12 months. The dividend yield of Reliance Industries Ltd. is 0.79% at the current share price of ₹1,270.30. The dividend yield, adjusted for bonuses and splits, is 0.39%.

Investment Rationale

  • RIL secured government incentives to produce EV batteries (advanced chemistry cell (ACC) batteries) with RIL receiving Rs 36.2 billion ($431 million) in incentives through the government’s production-linked incentive (PLI) scheme. Further in 2021, RIL had announced to develop 4 giga factories which will manufacture and fully integrate all the critical components of the new energy ecosystem for which the company would investment ~Rs. 75,000 Cr in the next 3 years. This commitment has been fostered as its quarterly capex over the last few quarters has been significantly diverted towards RIL’s new energy businesses.
  • RIL intends to commission its first solar gigafactory in FY25 as it pursues a green path to attain net zero carbon emissions from operations by 2035. In the latest annual report , the company stated that it intends to commission the first train of 20GW solar PV (photovoltaic) manufacture by the end of the fiscal year 2024-25, followed by a phased increase to 20GW by 2026. It intends to create a 50 GWh cell-to-pack manufacturing facility in FY27, with a goal of establishing 100 GW renewable energy capacity by 2030.
  • RIL’s Retail arm is expected to witness a boost as RIL plans to bring the Chinese fast-fashion brand Shein back to the Indian market by way of launching an independent app in the next few months.
  • Reliance reported record earnings, with consumer businesses contributing 52% of segment EBITDA. Energy demand remains strong in India, supported by economic activity and fuel recovery in APAC. Retail performance improved with festive demand and operational efficiencies. Jio benefited from tariff hikes and strong subscriber growth. This quarter reinforced Reliance’s long-term growth trajectory across all business segments. RIL stands on robust financials and a clear vision to expand its key business segments by way investing in Capex plan on a QoQ basis from Rs. 34,022 Cr. in Q2FY25 Vs Rs. 32,000 Cr. in Q3FY25.

 

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3QFY2025: TCS records PAT of rs. 12444 crore increased by about 12% YoY

 

 

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Sky Gold recorded boom in its net profit by 309 percent YoY in the 3QFY25

Sky Gold recorded boom in its net profit by 309 percent YoY in the 3QFY25 

About the Stock

One of the top jewellery enterprises in Mumbai, Sky Gold Limited was founded in 2008. The company’s operations have included designing, producing, and selling gold jewellery. The company specializes in 22-carat gold lightweight jewellery and uses casting to make jewellery. The company produces Turkish jewellery, Plan gold jewellery, and jewellery with studs of gold.
 With top jewellery retailers like Malabar Gold & Diamonds, Joyalukkas, Kalyan Jewellers, GRT Jewellers, Bhima Jewellers, and Senco Gold & Diamonds, the company operates on a business-to-business (B2B) basis. The company also collaborates with big wholesalers and as a result, has its products in over 2,000 showrooms throughout India. Sky Gold Ltd., recently onboarded the brand Indriya by Aditya Birla Jewellery. Indriya, a luxury jewellery brand that was introduced by the Aditya Birla Group in July 2024, elegantly combines modern design with traditional Indian craftsmanship. This partnership is a significant step for Sky Gold Ltd., which aims to rank among the leading gold merchants in India in the next five years by partnering with prestigious companies that share its commitment to excellence in design and quality.

 

Quarterly Update

Revenue growth surged 116.7% in Q3FY25

Sky Gold Ltd. reported a healthy quarter with topline growth of 116.7% YoY (+29.8% QoQ) to Rs. 99796.92 lakh. This growth was led by an increase in sales volume.

EBITDA Margins improved significantly

EBITDA growth seems robust YoY and QoQ as well, grew 218% YoY (+48% QoQ) to Rs. 5729.17 lakh. This growth attributed to margin expansion and solid topline growth despite higher operational expenses. EBITDA margin expanded 182 bps YoY to 5.74% and increased 70 bps QoQ to 5.04%. EBIT jumped 235% YoY (+48% QoQ) to Rs. 5442.97 lakh despite higher depreciation cost . Depreciation for the quarter stood at Rs. 286.20 vs Rs. 179.99 lakh in the same quarter previous year. EBIT margin hiked YoY and remained fairly stable on a QoQ basis.

PAT surged during the quarter

PAT boom 309% YoY (-0.47% QoQ) to Rs. 3653.98 lakh led by higher other income (up 1451%) and margin expansion. PAT margin stood at 3.66% for the quarter vs 1.94% in Q3FY24.

Successfully raised Rs. 270 Cr. through QIP

SGL raised Rs. 270 Cr. through qualified institutional placement (QIP) on October 17, 2024. A few powerful institutional investors, including Bank of India, Kotak Mahindra Life Insurance Co., and Motilal Oswal Mutual Funds, have joined SGL through QIP. The company plans on allocating this capital towards increasing the range of products offered, especially in jewellery made of 18 carat gold and diamonds, aiming for a total addressable market (TAM) of 65% by increasing capital injection into subsidiaries Sparkling Chains Private Limited and Star Mangalsutra Private Limited.

Changed name to Sky Gold and Diamonds Ltd.

Sky Gold Ltd. changed its name to Sky Gold and Diamonds Ltd., reflecting a strategic shift in the company’s focus beyond gold to encompass diamonds and other precious stones.

Years (In Cr) Q3FY25 Q3FY24 YoY (%) Q2FY25 QoQ (%)
Revenue  997.97 460.44 116.7% 768.85 29.8%
COGS 925.06 435.94 112.2% 718.89 28.7%
Gross profit 72.91 24.50 198% 49.95 46%
Gross Margin% 7% 5% 37% 6% 12%
Employee cost 8.04 3.12 158% 6.16 31%
Other expenses 7.58 3.34 127% 5.02 51%
Total OpEx 15.62 6.46 142% 11.17 40%
EBITDA 57.29 18.04 218% 38.78 48%
EBITDA Margin% 5.74% 3.92% 46.53% 5.04% 13.82%
Depreciation 2.86 1.80 59% 2.21 30%
EBIT 54.43 16.24 235% 36.57 49%
EBIT Margin% 5.45% 3.53% 54.64% 4.76% 14.66%
Interest cost 12.19 4.74 157% 10.13 20%
Other income 7.13 0.46 1451% 19.75 -64%
PBT 49.36 11.96 313% 46.19 7%
Tax expenses 12.82 3.02 324% 9.47 35%
Tax Rate% 26% 25% 3% 21% 27%
PAT  36.54 8.93 309% 36.71 -0.47%
PAT Margin% 3.66% 1.94% 88.75% 4.77% -23.32%
EPS 2.52 0.82 207% 2.75 -25%


Con Call Highlights

  • In the third quarter of the current financial year, the company recorded a growth in EBITDA margin by 217.6  percent YoY which accounts to Rs. 57.3 crores. In the 9-month of the financial year 2025, the company’ EBITDA improved by 115 basis YoY.
  • The net profit in the third quarter and 9-month of the current financial year were about Rs. 36.5 crores and Rs. 94.5 crores, respectively.
  • The company is in line with its target of Rs. 3,300 crores. It is positively supported by its efficient management and operational activities of the new client acquisition.
  • In the present times, the gems and jewellery industry in India is observing expansion of retail exposure by prominent brands in the industry to capture a big share in the organized market. Clients of Sky Gold are also set to aggressively achieve this goal. It will aid in the progress of the company.
  • The company successfully onboarded CaratLane and Indriya of Aditya Birla in its clientele base. Sky Gold expects to deliver monthly 50 kg each from both the companies in the upcoming quarters.
  • The advantage of the new clients is that these clients will give their own gold bullions. It will help the company to not fund debtors and inventory leading to increase in its gross margins.
  • The company earlier had guidance of Rs. 6,300 crores. Now it has increased to Rs 5,700  crore in FY26 and 7,200 core in FY27.
  • In the current gold price volatility, the market is observing strong consumption demand for wedding jewellery.
  • Sky Gold has expanded its market presence by increasing its manufacturing of 18 carat natural diamond jewellery, and lab-grown diamond jewellery. The company has planned to rebrand its name as ‘Sky Gold and Diamonds Limited’ indicating its strategic shift in the product portfolio.
  • India Rating, subsidiary of Fitch globally, has given Sky Gold a credit rating of ‘IND-A-/Stable’ for the company’s bank credits. Further, the company has been assigned ‘IND A-/Stable/ IND A2+’ rating for its fund-based working capital limits and proposed fund-based working capital limit.
  • The updated credit rating of the firm underlines robust operational efficiency and inorganic growth in the industry. It will further the company in lowering cost of funds and collateral requirements. It will also improve ROCE and ROE of the company.
  • Currently, the loan conversion to GML was around 20-25 percent. It faced a moderate process due to one of its banks. It has now moved towards ICICI bank and SBI in process. It is anticipated to reach 55 to 60 percent in the March quarter.
  • The company is currently focused on expanding its manufacturing in 18 carat rose gold, white gold jewellery, and natural diamond. Apart from this, the company successfully shipped its first of lab-grown diamond production to Limelight jewellery, which has 25 stores.
  • There is a rising expectation that the industry will record a shift  to the organized market by 78 percent in the upcoming 5-6 years due to a stable government and its policies.
  • The company is focused on increasing its export levels. It has already onboarded clients from Singapore and Dubai.
  • The plans to expand its facility as it anticipates a surge in growth of lab-grown diamonds and also growing preference for 18-carat.
  • Company is focusing on lowering debtor days and is anticipated to contract to 15 to 10 days. The company is aiming  for clients who will provide bullion advance or focus on cash and carry business model.
  • In terms of receivable cycle from export is around 7, 10, 15 days comparatively faster than India. The company’s goal is to achieve 15 percent of export levels, which is currently at 8 to 9 percent.
  • In the third quarter, the company received Rs. 3.3 cores from the sales of its investments and Rs. 2.4 cores from the interest income.
  • In case of release in this quarter as well, the company will get other income. Currently, Rs. 35 crores of shares are in the release process with the SBI.
  • In the upcoming financial year, debt is expected to be around Rs. 550 to 600 crores due to expansion of its various segments like lab-grown diamonds, natural diamonds, and 18-K carat.
  • The cash conversion cycle is expected to expand by more than 50 percent.
  • The lab-grown diamond is a devaluating asset which was earlier recording big falls and now its contractions are in a limited range. In this scenario, the company plans to order it only when an order for it is placed. This same model will apply to natural diamonds as well.
  • The company provides basic facilities like gymnasium and saloon to its artisans and karigars. Apart from this, the company provides incentives on the basis of their designs and its  performance in the market, and also the amount of production undertaken by them. The company only  needs about 1/3 employees in line with expansion in production due to adoption of the latest technology.
  • Increase in GML will help to improve finance cost to around 0.7 percent or 0.65 percent.
  • The margin guidance in terms of EBITDA and net profit is set at 5.5 percent and 3.5 percent, respectively inFY27. Also, 7 percent for gross margin in FY27.
  • The guidance in terms of volume growth is more than 1,050 kg in FY27.

 

Valuations

Currently the stock is trading at multiple of 49.8x 7.81 EPS at the current market price of Rs 367. In book terms, trading 15.5x than its book value of Rs. 23.7. As of today, ROCE stands at 18.6% while ROE is 23.2%.

 

Future Outlook

Through the capital raised, Sky Gold which has a strong hold in the 22K gold category, plans on expnding their product portfolio by stepping into emerging categories such as 18K gold, natural grown diamonds and lab-grown diamonds and at same time concentrating focus on value added studded jewelry segment by way of acquisition of subsidiaries to increase total marketable market (TAM). The company also plans on penetrating in international markets such as the Middle East, Singapore, Malaysia with revenue split on exports at ~7% currently.

 

Sky Gold aims to increase its capacity utilization to 1050 kgs per month which currently stands at 447 kgs per month. Further the company plans to expand revenue to Rs. 7,200 Cr. by FY 27, PAT margins to ~3% and a ROCE above 25% (ROCE currently stands at 18.6%).

 

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3QFY2025: TCS records PAT of rs. 12444 crore increased by about 12% YoY

 

 

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3QFY2025: TCS records PAT of rs. 12444 crore increased by about 12% YoY

3QFY2025: TCS records PAT of rs. 12444 crore increased by about 12% YoY 

About the Stock

TCS is an IT services, consulting, and business solutions provider that has collaborated with many of the world’s major corporations. TCS provides an integrated portfolio of IT, business & technology, and engineering services that are led by consultants and driven by cognitive technology. Its distinctive location-independent agile delivery model, which is acknowledged as a standard of excellence in software development, is used to deliver this.

 

Quarterly Update

  • TCS reported a mild quarter performance with steady revenue growth across all its segments (+5.60% YoY) at Rs. 63973 Cr. with BFSI (37% revenue share) and Communication, Media and Technology segment (19% revenue share) leading the revenue chart.
  • Consolidated revenue in Q3FY25 grew by a steady rate of 5.6% YoY and 3.6% YoY growth in US dollars ($7,539 million) and a constant currency revenue growth of 4.5% YoY, driven by growth in with BFSI and Communication, Media and Technology segment. Revenue from segments such as with BFSI, Communication, Media and Technology and Manufacturing hiked substantially on a YoY basis (+4%, +21% and +4% respectively). Life Sciences and Healthcare segment contracted ~4% YoY.
  • Operating margin stood at 24.5% YoY with sequential improvement of 40 bps QoQ, indicating better operational efficiency. Net margin was 19.4%, with EPS growing by 6.4% YoY.
  • EBITDA hiked by ~4% YoY to Rs. 17034 Cr. with EBITDA margin shrinking slightly by 42 bps at around 26.63% owing to rise in cost of equipment and licenses (+200% YoY) and a significant rise in employee cost (+3.5% YoY).
  • EBITDA for BFSI segment grew by 8% YoY to Rs. 6403 Cr. whereas, Consumer Business delivered a stable EBITDA growth of 15% YoY, 10% QoQ (Rs. 2971 Cr.). For Manufacturing segment the EBITDA stood at Rs. 2042 Cr. (+9% YoY). Communication, Media and Technology segment saw a decline of 16% YoY (+1% QoQ) in EBITDA, while Life Sciences and Healthcare segment’s EBITDA shrinking 6% YoY at around Rs. 1816 Cr.
  • TCS’s PAT figures witnessed a hike of 12.14% YoY (+4.09% QoQ) with PAT margins improving ~113 bps. Digital Services segment was the front runner of PAT growth with ~26% YoY.

Key Product and Platform Growth

  • Q3FY25 saw increment in new deals and go-lives in all major products and platforms for TCS.
  • Ignio, the AI-driven cognitive automation suite, secured 30 new deals and 9 go-lives, TCS BaNCS, the flagship product for financial services, achieved 4 new wins and 7 go-lives, TCS BFSI Products and Platforms had 3 new wins and 2 go-lives, Quartz, a blockchain and AI platform, had 1 new win and go-live, TCS TwinX, a digital twin solution, achieved 3 new wins and 1 go-live, while TCS ADD, a life sciences platform, had 3 go-lives.
  • While TCS OmniStore and TCS Optumera, AI-powered commerce and retail merchandising suites, both had new deals and go-lives both had new deals and wins, TCS iON, a platform for digital assessment and learning, added 38 new wins, with over 17 million candidates assessed.

Segmental Growth

BFSI segment grew by 0.9% YoY while Consumer Business Group grew by 1.1% YoY. Life Sciences & Healthcare saw a decline in growth with 4.3% YoY and Manufacturing hiked with 0.4%. Technology & Services declined by 0.4% YoY, Communication and Media declined by 10.6% YoY, Energy, Resources, and Utilities grew by 3.4% YoY and Regional Markets had a significant growth of 40.9% YoY.

Client Metrics

As of December 31st, TCS has more than 1,300 clients generating over $1 million in annual revenue each. In Q3FY25, TCS added 3 new clients in the $100 million-plus revenue category, bringing the total number of such high-value clients to 64.

TCV growth

TCS achieved a strong TCV of $10.2 billion in Q3FY25, a significant figure indicating large deal wins. North America TCV was $5.9 billion, BFSI TCV was $3.2 billion, and the consumer business contributed $1.3 billion to the TCV. There was double-digit growth in TCV YoY despite the absence of any mega deal wins.

Geographical growth

In major markets, the UK grew by 4.1%, while there was a decline in North America ( -2.3% YoY) and Europe (-1.5% YoY). India led with a 70.2% YoY growth followed by Middle East, Latin America, Asia Pacific with growth percent at 15% YoY, 7% YoY and 5.8% YoY.

Workforce Stats

  • At the end of Q3, TCS had 607,354 employees, representing 152 nationalities, with women making up 35.3% of the workforce. LTM attrition in IT services increased by 13%.
  • Over 25,000 promotions were awarded in Q3FY25, bringing total promotions for the fiscal year to 110,000+.
  • TCS to continue to invest in talent development through skill-building initiatives with Campus hiring progressing as planned leading to an increased number of hires expected next year.

Accounts receivable was at 74 days DSO while, net cash from operations was $1.54 billion, which is 105.3% of net income, showing strong cash generation. Free cash flow was $1.45 billion, and TCS had $7.28 billion in invested funds at the end of the quarter.

Years (Figures in Cr.) Q3FY25 Q3FY24 YoY (%) Q2FY25 QoQ (%)
Revenue  63973 60583 6% 64259 0%
COGS 3519 1173 200% 3230 9%
Gross profit 60454 59410 2% 61029 -1%
Gross Margin% 94% 98% -4% 95% 0%
Employee cost 35956 34722 4% 36654 -2%
Other expenses 7464 8300 -10% 7644 -2%
Total OpEx 43420 43022 1% 44298 -2%
EBITDA 17034 16388 4% 16731 2%
EBITDA Margin% 27% 27% -2% 26% 2%
Depreciation 1377 1233 12% 1266 9%
EBIT 15657 15155 3% 15465 1%
EBIT Margin% 24% 25% -2% 24% 2%
Interest cost 234 230 2% 162 44%
Other income 1243 862 44% 729 71%
PBT 16666 15787 6% 16032 4%
Exceptional Items 0 958 -100% 0 –
Tax expenses 4222 3732 13% 4077 4%
Tax Rate% 25% 24% 7% 25% 0%
PAT  12444 11097 12% 11955 4%
PAT Margin% 19% 18% 6% 19% 5%
EPS 34.21 30.29 13% 32.92 4%

 

Con Call Highlights

Demand Levers

Clients continue to prioritize cost efficiency and business transformation, with strong growth in GenAI, AI, and cloud services with investments in agentic AI are expanding, allowing for greater automation of commercial processes. Technology modernization, SAP S/4HANA, cloud adoption, AI-driven data strategies, and cybersecurity remain top priorities. Client IT budgets are predicted to remain constant in FY25 with early hints of discretionary expenditure resurgence in BFSI and retail.

Segment wise Demand Levers

  • In the BFSI segment, TCS assisted a worldwide bank in implementing an AI-led fraud detection system, which enhanced fraud detection by 18%, decreased false positives by 25%, and speed up reaction times by 50%.
  • In Consumer & Retail segment, retail markets expanded, as seen by a premium fashion retailer collaborating with TCS to develop an omnichannel strategy in the EU, reducing market entrance time by 30%.
  • While client budgets remained flat in Technology, Software, and Services, TCS continued to grow, such as by cooperating with a semiconductor giant to co-create AI-driven technology for CPUs, GPUs and SoCs.
  • In Life Sciences and Healthcare, AI is being used in genomics, cell treatment, and digital manufacturing. TCS assisted a medical technology business in digitizing device history records and modernizing its processes.
  • Manufacturing saw difficulty owing to macroeconomic concerns, but significant deal wins indicate future development, with a focus on smart manufacturing and AI-based automation.
  • The need for Communications, Media, and Information Services remains cost-driven, but telcos are investing in company expansion and IT efficiency.
  • Growth markets include cloud migration, ERP transformation, and digital infrastructure, with TCS’s global delivery centres and investments ensuring long-term development prospects.

Product based deal wins

TCS BaNCS completed a core banking modernization for Zions Bancorp, positioning the bank for greater market responsiveness and improved customer experiences while TCS BFSI Products and Platforms  cracked 15-year contract with Ireland’s Department of Social Pension to implement an Auto Enrolment Retirement Savings Scheme for 800,000 workers. The company also completed a complex migration for Scottish Widows, servicing 3 million UK customers.

Capital Allocation

TCS announced a dividend of ₹76 per share, including an interim dividend of ₹10 and a special dividend of ₹66 per share with regulation changes or tax changes will also be factored while announcing capital allocation policy and special dividend for this quarter.

Workforce Decline

The headcount decline slight in Q3FY25 (-0.89% QoQ) and stood at 607354 at the end of the quarter due to seasonality while on a long-term basis, there will be some correlation between the headcount and growth.

Bottoming out of key segments

The healthcare and life sciences industry is likely to bottom out in Q4, with growth picking up thereafter. Manufacturing is also expected to stabilize over the same time period. The US healthcare business is awaiting policy clarity, which is delaying discretionary expenditure. Once regulations are established, spending is expected to restart, accelerating the sector’s recovery.

BSNL Deal

The ramp-down of the BSNL contract is expected to be a margin lever for Q4FY25 with 70% of the contract has been completed, and as it tapers off, it could positively impact margins by reducing third-party costs. While TCS does not expect double digit revenue growth but revenue outlook is stronger QoQ with international businesses in focus. TCS qualifies for RFP floated by BSNL for 5G upgrade and would participate in the same.

Margin Aspiration

TCS aims to exit Q4 with margins of 26%-28%, although this is not guaranteed. Despite flat growth, the third quarter showed sequential improvement, and efforts will continue for greater improvements in the fourth quarter, albeit seasonality remains a barrier.

Furloughs Spillover into Q1FY26

TCS recognizes that, while furloughs may stretch into the early weeks of January in some regions, this represents a small proportion of total furloughs. As a result, they predict some furlough recovery in the coming quarter, although it will not be total owing to the spillover effect in specific locations.

Deal wins throughout segments

Deal activity has been high across all verticals, particularly BFSI, CBG, and Europe. There is a shift toward more sophisticated projects, such as application modernization, cloud, AI, and data. Deal cycles have shortened, with larger transactions closing more quickly, indicating enhanced decision-making. While there are no huge deals, TCS is still confident in managing revenue through new deals.

 

Valuations

  • In present times, the stock of TCS is trading at multiple of 29.3x 135 EPS at the CMP of Rs. 3,945. In book terms, trading 14.1x than its book value of Rs. 281.  As of today, the ROCE and ROE of the company is at 64.3 percent and 51.5 percent, respectively.
  • Tata Consultancy Services Ltd. announced an equity dividend of Rs. 124.00 per share throughout the last 12 months. The dividend yield of Tata Consultancy Services Ltd. is 3.17% at the current share price of Rs. 3,945 with most recent dividend announcement of interim dividend of Rs. 10 per share and Special Dividend of Rs. 66 per share.

Investment Rationale

    • TCS elevated its partnership with NVIDIA at the beginning of the quarter, launching industry-specific AI solutions through a new business unit within its AI.Cloud division. This extends their five-year relationship by integrating TCS’ domain experience with NVIDIA’s AI technology. The unit will provide tailored AI adoption methods using NVIDIA’s AI platforms and TCS’s proprietary architecture. NVIDIA NIM microservices and AI Foundry are among the solutions that help organizations scale AI use across industries.
    • TCS remains confident in compensating for the revenue loss from its mega-deal with BSNL, which is nearing completion. The BSNL contract is 70% complete, which indicates that its financial impact will begin to taper in Q4 itself. TCS is searching for several opportunities to close the revenue shortfall from this contract, whether through domestic or overseas partnerships.
    • Tata Consultancy Services Ltd. plans to upgrade BSNL’s 4G network to 5G after the sites and frequency ranges have been identified. The existing radio equipment can be upgraded with a software update, and BSNL will have adequate coverage with the activation of 100,000 4G sites. Full deployment is scheduled in May 2025.

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PC Jewellers recorded a strong net profit of Rs. 148 Cr in 3QFY25 mainly driven by strong festive demand

 

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PC Jewellers recorded a strong net profit of Rs. 148 Cr in 3QFY25 mainly driven by strong festive demand

PC Jewellers recorded a strong net profit of Rs. 148 Cr in 3QFY25 mainly driven by strong festive demand

About the Stock

PC Jeweller Ltd. is involved in the operations of manufacturing, sale and trading of diamond studded jewellery, gold jewellery, and silver articles. It is one of the important jewellery firms in the Indian organised jewellery retail sector.

It offers a diverse range of diamond, silver, and gold jewellery for various occasions like wedding, party and casual wear as well. It has several famous jewellery collections- Bandhan, Anant, The Fluttering Beauty, Animal Collection, Dashavatar, Amour, Folia Amoris, Hand Mangalsutra, Wedding Collection, Men’s Collection, and many more

The company had its own in-housing manufacturing and designing facility. It has around four manufacturing units located in Noida, Uttar Pradesh. 

The company has three wholly-owned subsidiaries- PCJ Gems & Jewellery Limited, Luxury Products Trendsetter Private Limited, and PC Jeweller Global DMCC.

In the third quarter of the financial year 2025, the company had around 55 showrooms (consisting of 3 franchisee showrooms) in around 41 cities in 15 states of India. In this quarter, the company’s showrooms at Allahabad and Preet Vihar were closed. The company is currently operating in the domestic market only. 

 

Quarterly Update

1.In the third quarter of the financial year 2025, PC Jewellers recorded a robust growth of about 1496 percent in the revenue which accounts to Rs. 639 crore compared to the its revenue growth of Rs. 40 crore in the same quarter of the previous financial year.  The company recorded a turning point from being in loss to profit in the third quarter of the current financial year.

2.In the third quarter of the financial year 2025, the company recorded a surged in total expenses to Rs. 535 crore from earlier total expenses of Rs. 244 crore in the same quarter of the previous financial year which accounts to about 199 percent. It is because of hike in cost of materials consumed and the increase in rise in the purchase of stock.

3.The company recorded growth in EBITDA (including other income) by about 323 percent YoY in 3QFY25 which accounts to Rs. 155 crore compared to loss of Rs. 69 crore in the same quarter of FY24.

4.The company also registered a strong growth in its PAT by about Rs. 146 crore compared to its loss of Rs. 200 crore in the same quarter of the previous financial year. The company recorded a consolidated net profit of Rs. 148 crore.

 

Commentary

1.In the previous  financial year 2024, the company was record loss. The company was facing the debt and financial issues.  In the current financial year, the company has started to record profit. It has taken measures like one-time settlement with the bank and preferential issuance of fully convertible warrants to investors in the current financial year.

2.The company recorded strong growth in terms of revenue due to rise in consumption demand by consumers. The reason for the strong growth is mainly driven by festive and wedding season. It led to the hike in the consumer demand levels. This revenue growth is based completely on its sales at domestic level. 

3. The rise in total expenses in terms of purchases of stock and cost of material consumed indicates company trying to match up with the robust consumption demand driven by festive and wedding season, along with elevated gold prices.

Years (In Cr) Q3FY25 Q3FY24 YoY (%) Q2FY25 QoQ (%)
Revenue 639 40 1495% 505 26%
COGS 505 96 428% 404 25%
Gross profit 134 -56 340% 101 32%
Gross Margin% 20.94% -139.03% 115% 20.03% 5%
Employee cost 7 7 0% 5 30%
Other expenses 17 11 59% 10 62%
Total OpEx 24 17 36% 16 51%
EBITDA 110 -73 251% 86 29%
EBITDA Margin% 17.24% -182.35% 109% 16.95% 2%
Depreciation 5 5 4% 4 17%
EBIT 105 -78 236% 81 29%
EBIT Margin% 16.48% -193.93% 108% 16.13% 2%
Interest cost 3 126 -98% 2 91%
Other income 44 4 1133% 44 1%
PBT 146 -200 173% 124 18%
Tax expenses 0.08 0 -55 -100%
Tax Rate% 0% 0% -11% -100%
PAT 146 -200 173% 179 -18%
PAT Margin% 22.89% -500.12% 105% 35.44% -35%
EPS 0.27 -0.43 163% 0.38 -30%

 

Con Call Highlights

1.The company recorded a rise in its domestic sales by Rs. 639 crore in the third quarter of the financial year 2025. It is mainly driven by a hike in consumer demand due to the wedding and festive season leading to an increase in consumption and customer traffic for the company and the sector.

2.In the first three quarters of the financial year 2025, the company was successful in recording a PBT of Rs. 353 crore compared to its loss of Rs. 525 crore in the previous first three quarters of the financial year 2024. It indicates remarkable progress for the company.

3.To address the issue of debt burden and bring financial stability in the company, the company took the approach of offering to subscribe and issuance of warrants.

4.On 30th of September, 2024, PC Jewellers completed its one-settlement agreement with its consortium banks. In the period of third quarter, the company paid its payment as per the decided timeframe in the Settlement Agreement.

5.On 11th October, 2024, the company executed its issuance of warrants of Rs. 2,702.11 crore which received a subscription of about 99.89 percent. In the third quarter, the company allotted about 118,41,30,520 equity shares by converting its warrants. The company executed this conversion after getting 75 percent  of the issue price from its investors. The company recorded a strong support by investors for the preferential issuance of fully convertible warrants due to the decision of the Union Budget to change import duty on gold to 6 percent from earlier 15 percent.

6.In the period of the third quarter of FY25, the company declared its first-ever stock split with the ratio of 1:10. It resulted in change in face value Rs. 10 to Rs. 1.

7.The company’s efforts to increase its brand presence and expansion in marketing is reflected in its performance of 9 months of the financial year 2025.

8.The company now has 55 showrooms (consists of 3 franchisee showrooms) in 41 cities in about 15 states in India.

9. The company is optimistic about its growth in the industry as well as development in business operations in the upcoming quarters. 

 

Valuations

In present times, the stock of PC Jeweller Ltd is trading at multiple of 20.6 x  0.73 EPS at the CMP of Rs. 13.7. In book terms, trading  2.14x than its book value of Rs. 6.35.  As of today, the ROCE and ROE of the company is at -1.74 percent and -19.0 percent, respectively. The company recorded a net profit of Rs. 146 core in the third quarter of FY25 due to strong consumption demand driven by festive and wedding season.

 

Investment Rationale

India is known for its high jewellery consumption levels. India consumes about 850 to 900 tonnes of gold on yearly basis. In the period of April to December of the year 2024, India recorded expansion in import levels of gold jewellery to around 87.4 percent higher in relation to its import levels in the previous financial year of the same period. These imported gold jewellery prominently includes rings, chains, and earrings. 

India’s Gem and Jewellery  sector plays a crucial role in the progress of the Indian economy. The reason for this is that this industry is considered as one of the biggest exporters of India in the world.  It also plays a major role in creating jobs for artisans.  One of the issues in this industry is the proportion of unorganized jewellers is higher than organized segments. In the FY 2023, the organized retail jewellery segment comprised around 37 percent of jewellers at both regional and national level. There is a positive projection of rise in market size of the Indian jewellery retail industry to 145 billion US dollar  by the financial year 2028.

In the Union Budget 2025, the jewellery companies got the relief as the budget announced reduction in tariff duties to jewellery  by  20 percent. It was earlier 25 percent. It resulted in a rally of many jewellery companies to about 9 percent. Apart from this, the budget announced lowering duties on platinum metal by about 5 percent which was earlier 25 percent. It also IGCR conditions imposed on Lab Grown Diamond (LGD) leading  to becoming duty-free product. The objective of these measures is to contract the cost and to raise the demand in the market. It is also anticipated to promote the luxury jewellery segment.

Budget 2025 announcement of tax relief for income up to Rs. 12.75 lakhs is expected to aid in increasing demand in the jewellery industry and also rise in job levels in the sector. In the first 9 months of the current financial year , domestic jewellery companies recorded a rise in consumption due to hike in gold prices,  high number of auspicious days and wedding days,  and consumers moving towards branded jewellery. 

In the current financial year, the company has started to record profit after a long period of loss. The company is now focused on increasing its market presence in India. It is expected to continue to get benefitted with the expansion in consumption demand of the consumers. 

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HDFC bank Q3FY25: Loan growth decline, NIMs margin stable

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HDFC bank Q3FY25: Loan growth decline, NIMs margin stable
Equities, Markets, Research, Result Updates - February 11, 2025

HDFC bank Q3FY25: Loan growth decline, NIMs margin stable

HDFC bank Q3FY25: Loan growth decline, NIMs margin stable

About the Stock

HDFC Bank Limited is recognized as the biggest private sector bank in India in terms of assets value. The market capitalization of the bank is around Rs. 13,17,354 crore. On the basis of its large market capitalization , it is considered as the third biggest company on the Indian stock market. 

The company is active in various segments of banking which includes retail banking, wholesale banking, and rural banking. The bank has five major subsidiaries- HDFC Asset Management Company Limited (HDFC AMC), HDB Financial Services Limited, HDFC ERGO General Insurance Company Limited, HDFC Life Insurance Company Limited, and HDFC Securities Limited. 

Quarterly Update

1.Growth in net income and net profit- In the third quarter of the current financial year, the company recorded a growth of 7.7 percent YoY in net interest income which accounts to around Rs. 30,653.25 crore. HDFC also recorded a rise in PAT by 2.2 percent YoY which accounts to Rs. 16,735.5 crore. In terms of quarter-on-quarter basis, the rise in net income was about 1.8 percent. The provisions for NPAs fell to about 25 percent leading to a rise in net profit on a year-on-year basis.

  1. Robust growth in deposit ratio and slowdown in loan growth- HDFC recorded a strong  growth in its average deposit to around 15 percent YoY compared to moderate growth of gross advances by only 3 percent. It is faster than the credit growth of the bank. It acts as an aid for the bank in achieving the goal of stable credit-deposit ratio. Currently, the AUM advances growth of 7.6 percent YoY. 
  2. Slowdown in CASA- The company recorded weak CASA of only 1.1 percent QoQ growth in the third quarter of FY25. Consumers are opting more for time deposits due to economic uncertainties and high interest rates. The average time deposits surged by 22.7 percent in the third quarter.
  3. Stable Net interest Margin- In the third quarter of the financial year 2025, the company recorded a net margin of 3.43 percent compared to 3.46 in the previous quarter of the same financial year. It accounts for marginal decline. 
  4. Marginal increase in GNPA and NPA- The company recorded growth in GNPAs  to about 1.42 percent higher than the 1.36 percent in the previous quarter of the current financial year. Also, the company recorded a net NPA increase of about 0.46 percent compared to its net NPA growth of 0.41 percent in the second quarter of the current financial year. The reason for this is hike in GNPA and NPA is the seasonal slippage.
Years (In Cr) Q3FY25 Q3FY24 YoY (%) Q2FY25 QoQ (%)
Interest Income 76006.88 70582.61 7.7% 74016.91 2.7%
Interest Expenses 45353.63 42111.27 7.7% 43903.01 3.3%
NII 30653.25 28471.34 7.7% 30113.9 1.8%
Other income 11453.56 11137.04 2.8% 11482.73 -0.3%
Total net income 42106.81 39608.38 6.3% 41596.63 1.2%
Employee Cost 5950.41 5351.76 11.2% 5985.3 -0.6%
Other expenses 11156 10609.32 5.2% 10905.59 2.3%
Tota Opex 17106.41 15961.08 7.2% 16890.89 1.3%
PPOP 25000.4 23647.3 5.7% 24705.74 1.2%
Provision 3153.85 4216.64 -25.2% 2700.56 16.8%
PBT 21846.55 19430.66 12.4% 22005.18 -0.7%
Tax Expenses 5111.05 3058.12 67.1% 5184.31 -1.4%
Tax Rate% 23% 16% 48.6% 24% -0.7%
PAT 16735.5 16372.54 2.2% 16820.87 -0.5%
PAT% 22% 23% -5.1% 23% -3.1%
EPS 21.88 21.40 2.2% 21.99 -0.5%
No. of shares 765 765 765

Commentary

  1. The company recorded contraction in provisions of NPAs to around 25 percent leading to rise in net profit in the third quarter of FY25. The reason for this is wholesale credit segment performing well. Earlier, the contingent provision was set aside for its wholesale account. As it was unutilised due to performing assets in the segment, the company recovered it.
  2. The growth in deposit ratio is mainly driven by rise in retail term deposits rather than CASA ratio. The consumers’ preference towards term deposits was high in the third quarter due to the high interest rate and market condition in the economy. The management is also focused on holistic customer relationships. It believes CASA will gain again when changes in the interest rate take place.
  3. The loan portfolio of HDFC recorded contraction in credit growth by 10.4 percent YoY in corporate and other wholesale segments. While, the growth in credit creation of the commercial and rural banking segment was 11.6 percent. Apart from this, the growth in retail loans was about 10 percent due to cautious steps taken by the company in the midst of growing uncertainties in the economy. The growth in retail credit is mainly driven by growth in retail non-mortgages by about 10.5 percent YoY compared to 9.7 percent YoY in the retail mortgages segment. Overall, it aids in the company’s steps to stabilize its credit-to deposit ratio in the upcoming to 2 to 3 years.  
  4. 4. The growth in NIM margin is stable and fairly in range of its trend in previous consecutive quarters. The reason for this is a cautious approach towards loan growth and focus on deposit growth. It is also due to the shift of consumers towards retail term deposits in the scenario of macroeconomic uncertainty and high interest. This cautious approach of the bank can possibly lead to stable NIMs in the upcoming terms as well. 

Key Concall Highlights of 3QFY25
• HDFC Bank Ltd underlines some of the prevailing macroeconomic conditions such as moderate growth in demand at
urban levels, tightening of liquidity, depreciation of rupee, sluggish growth in private capital investment, and rise in
capital outflows in the midst of growing uncertainties in the world.
• Some positive indications like rise in government expenditure and also expansion in rural demand in the economy is
observed. It resulted in strong growth in service exports and inflation levels are gradually slowing down.
• Robust growth in deposit ratio to about 15 percent mainly driven by retail term deposits. While, slowdown in CASA
ratio and loan growth. It is expected to achieve stability in credit‐to‐deposit ratio in the upcoming 2 to 3 years.
• The employee headcount of the rose again by 2,10,000 in the 3Q compared to its contraction in 2Q of the current
financial year. The company is currently focused on increasing productivity of the employees.
• Addition of more than 1,000 branches YoY in the 3QFY25 and still able to maintain growth in cost at around 7 percent.
It indicates productivity gains for the company.
• Post‐merger of the company, the company manages to open about 1.9 million fresh accounts. It indicates the success
of the merger.
• The company aims to make investment in branches, people and technology. It expects to grow at a similar pace in the upcoming financial year 2026 and higher in the financial year 2027.

Valuations

In present times, the stock of HDFC is trading at multiple of 19.1 x  91.3 EPS at the CMP of Rs. 1,759. In book terms, trading  2.90x than its book value of Rs. 601  As of today, the ROCE and ROE of the company is at 7.67 percent and 17.1 percent, respectively. The company is progressive in terms of its strategy to expand deposit levels and is supported by hike in retail term deposits and moderate loan growth.

Investment Rationale

  • According to the Economic Survey of 2024-2025, the monetary and financial sector in India has recorded a robust performance in the first three quarters of the financial year 2025. Overall, the growth of bank deposits was in double-digit. 
  • According to the recent RBI report,  the banking sector in India recorded profitability for the sixth year in a row in the financial year 2023-24. It is anticipated to record profitability in the current financial year as well.  Also, the GNPAs of the Indian banking sector went down to 2.7 percent which  is the lowest since the last 13 years. It indicates an improvement in the asset quality of the banks 
  • In the first half of the current financial year, Indian banks are recording a continued rise in their Return on Assets and Return on Equity by 1.4 percent and 14.6 percent, respectively.  Apart from this, the scheduled commercial banks in India (including 21 private sector banks and excluding RRBs) recorded growth in their consolidated balance sheet 15.5 percent in the financial year 2023-2024. 
  • In the budget 2025, the decision of tax relief up to Rs. 12.75 lakh income is not only expected to drive consumption in the economy but also increase deposits levels of the banks to more Rs. 40,000 to 45,000 crore. It is anticipated to aid in mitigating liquidity issues of the banking sector.  
  • In terms of growth of HDFC Bank, the growth of the deposit ratio of the company is also increasing like the overall growth of deposit levels of the banking sector. It accounts for 15 percent YOY in the third quarter.  After the company’s merger in the year 2023, the company planned a goal to contract its loan-deposit ratio in the upcoming 2 to 3 years and to bring better financial stability in the company. 
  • Its result in the third quarter of FY25 indicates its progressive steps towards lowering loan-deposit ratio. Currently, the credit to deposit ratio is around 98 percent. The company believes that it will grow in line with the industry growth in the upcoming financial year and higher in the financial year 2027.

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Renewable Energy Sector Awaits Budget 2025 for Key Support Measures

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