Jio’s Giant Leap: Reliance Confirms IPO in Early 2026

Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - November 3, 2023

RIL Reports Strong Q2FY24 Performance Across Diverse Business Segments

Company Overview:

Reliance Industries Ltd is a conglomerate engaged in multiple sectors, including Oil to Chemicals (O2C), Oil and Gas, and Retail, encompassing electronics, fashion & lifestyle, grocery, and beverages, as well as Digital services. Notably, within the Digital Business, Jio stands out, contributing a significant 85% to the overall 5G capacity and ranking as India’s top 5G network. In the retail sector, footfalls reached a remarkable 260 million, showing a 41% YoY increase, and 471 new stores were added, bringing the total count to 18,650 in Q2FY24.

Retail segment achieved record EBITDA, up 41% YoY, with 260 million footfalls and an 80 bps margin expansion in Q2

In Q2FY24, the Retail segment reported revenue of 77,163 Cr, a robust 18.8% YoY growth (+10.29% QoQ). This growth was primarily attributed to the strong performance in the grocery business, which experienced a 33% YoY increase. EBITDA reached 5,820 Cr, reflecting a strong 32.10% YoY growth, with contributions from grocery and fashion & lifestyle consumption. EBITDA margins expanded by 80 basis points YoY to 7.56%, driven by festive demand. Notably, the company added 2,033 new stores YoY, including 471 new stores in Q2FY24, bringing the total count to 18,650. Footfalls reached an impressive 260 million, marking a 41% YoY increase, and registered customers grew by 27% YoY, totaling 281 million.

Digital service Growth led by strong subscriber addition-32.1 Mn YoY (11.1 Mn in Q2) & growing 5G adoption

The Digital service business reported revenue of 32,657 Cr, reflecting a growth of 10.48% YoY (+1.81% QoQ). This growth was driven by a robust net subscriber addition of 32.1 million YoY and 11.1 million in Q2FY24. EBITDA increased by 14.48% YoY (2.55% QoQ) to 14,071 Cr, with EBITDA margins expanding by 150 basis points YoY to 43.09%. The Average Revenue Per User (ARPU) grew by 2.6% YoY, reaching 181.7 Rs, with a total of 459.7 million subscribers. The company also experienced substantial growth in data traffic, which increased by 28.5% YoY to 36.3 Exabytes, driven by the growing adoption of 5G and higher engagement on home STB. Notably, over 70 million subscribers migrated to 5G, and 8,000 towns were covered with true 5G.

Robust O2C EBITDA Growth supported by strong domestic demand and tight fuels market

In Q2FY24, minor improvement in asset quality with GS3/NS3 declining to 1bps/9bps QoQ to 4.29%/1.71% with amounting GS3/NS3 stood at 4,024 Cr/1,562 Cr. Stage 2 declined 60 bps QoQ to 5.7% this resulted in 30+ dpd improving 70 bps QoQ to 10% and current level of write-off stood at 351 Cr in Q2FY24. Provision coverage on stage-3 assets stood at 61.2% against 60.1% in previous quarter. CAR strongly stood at 18.70% in Q2FY24 which is above the RBI guidelines 15%.

KG D6 gas production added sharp improvement in oil and gas Business in Q2

In Q2FY24, the Oil and Gas business reported robust revenue of 6,620 Cr, showing a significant 71.8% YoY growth (+42.9% QoQ), primarily due to the strong production from the KG D6 block, reaching 68.3 MMSCMD, marking a 65.8% YoY increase compared to 19 MMSCMD in Q2FY24. The Oil and Gas segment reported an all-time high EBITDA, growing by 50.3% YoY (+18.7% QoQ) to 4,766 Cr, driven by higher volumes and an improvement in price realization on a YoY basis. However, EBITDA margins declined by 10.31% YoY (-14.69% QoQ) to 71.99% in Q2 due to costs related to MJ field commissioning and decommissioning of the Tapti field.

Valuation and Key Ratios:

Currently, the stock is trading at a multiple of 23x EPS (TTM) of 101 Rs, with a current market price of 2,320 Rs, and an industry price-to-earnings ratio of 11.1x. The company reports an ROE of 2.27% and ROA of 1.18% in Q2FY24. The interest coverage ratio stood at 5.63x in Q2FY24, indicating the company’s solvency, while the current ratio stood at 1.16x in Q2FY24.

Q2 FY24 Results Highlights: Consolidated

➡️ In Q2FY24, consolidated revenue grew by 1.08% YoY (+11.44% QoQ) to 2,31,886 Cr, primarily due to lower O2C revenues with a 14% decline in crude oil.

➡️ Consolidated EBITDA increased by 31.98% YoY (+7.55% QoQ) to 40,968 Cr, with solid growth across all operating segments. EBITDA margins were up by 400 basis points YoY to 17.67%, due to a decline in the cost of goods sold (COGS) by 4.03% YoY but maintained a 0.69% QoQ.

➡️ PAT surged by 28.15% YoY (+8.87% QoQ) to 19,878 Cr while PAT growth in consumer business tempered by higher depreciation with growth in asset and higher network utilisation. PAT margins expanded 180 bps YoY (stable on QoQ basis) to 8.57%

➡️ Interest cost grew 25.85% YoY (-1.82% QoQ) to 5,731 Cr with gross debt stood at $35,606 Mn and net debt at $14,176 Mn. Capex stood at 38,815 Cr primarily towards 5G roll-out and building retail ecosystem.

➡️ Earnings per share (EPS) for the quarter stood at 29.36 Rs, representing significant 28.15% YoY and 8.87% QoQ growth.

Conclusion:

Reliance Industries Ltd has demonstrated strong performance across its diversified business segments, with remarkable growth in Retail, Digital services, and Oil and Gas. The company’s robust financials and its focus on expanding its 5G network and retail presence position it favorably for future growth and sustainability.

Q2FY24: Shriram Finance reports robust AUM growth Drives NII soars to 4,594 Cr

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Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - November 3, 2023

After a strong Q2 in FY24 REC is ready for the rerating saga

Company Overview:

REC Limited (formerly Rural Electrification Corporation Limited) is a non-banking financial company (NBFC) under the administrative control of the Ministry of Power, Government of India. It is also registered with the Reserve Bank of India (RBI) as a public financial institution (PFI) and an infrastructure financing company (IFC).
REC was incorporated in 1969 to finance and promote rural electrification projects in India. Over the years, it has expanded its scope of business to include financing of the entire power sector, including generation, transmission, and distribution. REC also finances projects in the renewable energy and infrastructure & logistics sectors.

REC’s Q2 earnings soar on lower costs and higher margins:

REC Limited’s Q2FY24 earnings were strong on all counts, with a 17bps QoQ NIM uptick, provision reversal of ~INR 5bn, and high 20% YoY loan growth. The company is upbeat on growth guidance of 20% YoY, NIM steadying at 3.5%, and anticipated provision reversals for FY24, which signals strong book value accretion and potential valuation multiple re-rating.
a. NIM uptick: REC’s NIM uptick was driven by asset re-pricing across products, with yields climbing 15bps QoQ, and a favourable liability mix with ~40% borrowings being priced at ~7% (23bps lower than average CoF).
b. Provision reversal: REC reversed provisions of ~INR 5bn, including standard asset provisions created on grounds of prudency during the pandemic and ~INR 2.5bn write-backs led by resolutions of two assets.
c. Loan growth: REC’s loan growth accelerated to 20% YoY after a hiatus of four years, largely led by renewables, LPS, and infra portfolios.
d. Outlook: REC is upbeat on growth guidance of 20% YoY, NIM steadying at 3.5%, and anticipated provision reversals for FY24. This signals strong book value accretion and potential valuation multiple re-rating.

RECL’s loan growth surges on renewables, non-power sectors; FY24E-26E outlook upbeat:

RECL (presumably a financial institution) recorded a strong loan growth of 4% quarter-over-quarter (QoQ) and 20% year-over-year (YoY). This growth was largely driven by non-power loans in sectors like infrastructure, logistics, and e-mobility, as well as loans related to LPS (possibly referring to Loan Protection Scheme) and renewables.
The renewables sector constitutes 7% of RECL’s assets, approximately INR 300 billion. There is an expectation that this figure may increase significantly to INR 3 trillion by FY30 (fiscal year 2030). This growth could be triggered by a recent Memorandum of Understanding (MoU) worth INR 280 billion and the government’s goal to increase the share of renewables to 30% of the mix by FY30. Additionally, Q2 saw 25% of overall loan sanctions coming from renewables.
The non-power sector’s share in RECL’s portfolio has increased from 8% in Q1 to 13% of the mix. RECL is actively expanding its capabilities in terms of talent, skillsets, and pricing strategies, with a focus on state-backed, low-risk assets. The report suggests that RECL anticipates a higher loan Compound Annual Growth Rate (CAGR) of 19% in the fiscal years FY24E-26E. This expectation is based on the quality of renewable corporate clients and high-value infrastructure projects, which provide a robust outlook for the business.

RECL aims to maintain steady NIMs, write-backs to boost FY24 profits:

RECL is aiming to maintain steady NIMs. They are working to control credit costs with the goal of achieving a 0% net Non-Performing Asset (NPA) ratio by FY25. It’s noteworthy that RECL has not experienced any slippages in the past seven quarters, and they expect write-backs in FY24.
In the second quarter (Q2), RECL reported that Stage 3 assets, which typically refer to non-performing or impaired assets, stood at a five-year low of 3.14%. At the moment, there are 19 stressed projects with a total value of INR 149 billion in Stage 3. Out of these, five projects worth INR 18.8 billion are being pursued for resolution outside the National Company Law Tribunal (NCLT), and the remaining 14 projects worth INR 130 billion are undergoing resolution within NCLT. It is estimated that there will be a build-up of Gross Non-Performing Assets (GNPA) in the range of 2-2.4% and write-offs during FY24E-26E.

Valuations: Analyst sees 30% upside in RECL:

Despite recent price momentum, RECL is seen as having the potential for further re-rating. This is attributed to the company’s high double-digit growth visibility, positive performance in Q2, and the ability to maintain steady margins in a challenging funding environment. Additionally, the significant write-backs are expected to lead to a high return profile with an anticipated Return on Equity (RoE) of 18-19% and Return on Assets (RoA) of 2.8% in the fiscal years FY24-26E. In light of these positive factors, there has been a revision of the estimates for FY24E and FY25E, with an increase of 15% or more for each of these fiscal years.

REC Ltd Reports Strong Q2FY24 Result:

REC Ltd reported net sales of Rs 11,688.24 crore in September 2023, reflecting a significant increase of 17.4% compared to the same period in September 2022 when it was Rs 9,955.99 crore. The company’s quarterly net profit for September 2023 amounted to Rs 3,789.90 crore, indicating substantial growth of 38.72% from the figure of Rs 2,732.12 crore in September 2022. The EBITDA for September 2023 were reported at Rs 12,193.52 crore, showing strong growth of 32.98% from the EBITDA of Rs 9,169.73 crore in September 2022. REC Limited has a market capitalization of ₹79,668 Crores, reflecting the total market value of its outstanding shares. The stock’s Price-to-Earnings (P/E) ratio stands at 6.19, indicating its valuation in relation to its earnings. A lower P/E ratio suggests potential undervaluation. REC Limited’s Return on Capital Employed (ROCE) is 9.14%, showcasing its profitability relative to the total capital employed in the business. The company reported a Profit after Tax of ₹12,739 Crores, representing its net income after accounting for all expenses and taxes. REC Limited has a Price to Book Value (P/B) ratio of 1.25, implying that the current market price of the stock is slightly higher than its book value per share.

Conclusion:

REC Limited, a government-controlled financial company, posted impressive Q2FY24 results. The highlights include a remarkable 17.4% YoY increase in revenue, reflecting strong growth. Notably, the company saw an uptick in Net Interest Margin (NIM), provision reversals, and a substantial rise in loan growth. REC is confident about its future, with a projected 20% YoY growth and stable NIM. The surge in loan growth was primarily fuelled by non-power sectors, and REC anticipates a higher growth rate in loans for FY24-26E. They are also focused on maintaining NIMs and managing non-performing assets.

Q2FY24: Shriram Finance reports robust AUM growth Drives NII soars to 4,594 Cr

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Gabriel India Stock Rockets Nearly 80% in 13 Sessions: What’s Driving This Surge?

Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - November 1, 2023

MMFS Q2FY24: PAT Drops to 235 Cr YoY Amid 45 bps NIM Compression

Company Overview:

M&M Finance, a leading Non-Banking Financial Company (NBFC), specializes in financing various types of vehicles, including new and pre-owned autos, utility vehicles, tractors, passenger cars, and commercial vehicles. Additionally, the company offers a range of financial services, encompassing mutual fund distribution, insurance broking, and housing finance. M&M Finance has strategically diversified its lending portfolio, extending its reach to retail and small to medium-sized enterprises in rural and semi-urban areas across India. As of Q2FY24, the company boasts an extensive network, with 1,368 offices spanning 27 states and 7 union territories, serving a substantial customer base of over 9.5 million individuals.

Loan book grew 27% YoY (+8.1% QoQ) to 93,723 Cr, fueled by auto and pre-owned vehicle loans.

M&M Finance experienced a remarkable 27% YoY increase in its loan book, with a further 8.1% QoQ growth, amounting to 93,723 Cr in Q2FY24. This growth was primarily driven by a strong performance in the auto, car, and pre-owned vehicle segments. Notably, the company’s disbursements increased by 12.61% YoY and 9.45% QoQ, reaching 13,315 Cr in the same period. The performance of the tractor portfolio and SME segments, however, remained sluggish. The Cars and Commercial Vehicles segment displayed notable growth of 25% YoY and 28% YoY, standing at 2,455 Cr and 1,511 Cr, respectively, while maintaining market share in various segments. New business segments, including SME, personal loans, and consumer loans, contributed approximately 12% to the overall loan mix.

NIMs compression ~45 bps QoQ and high credit cost ~2.8% (Q2FY23 – 2.5%):

In Q2FY24 yield moderated at ~35% bps QoQ while CoF rose 10 bps led to NIMs contraction by 45 bps QoQ stood at 6.5% in Q2 due to effect of change in portfolio mix (with higher mix of pre-owned vehicles and tractors) and increased interest cost. Annualized credit cost stood at 2.8% (Q2FY23-2.5%) higher than expectation for FY24 targeted between 1.5% -1.7% and included INR 3.5 bn of write-off (PQ-3.1 bn).

Minor improvement in asset quality & CAR strong at 18.7% in Q2

Valuation and Key ratios: ROA/ROE decline -130 bps/500 bps

Currently, M&M Finance’s stock is trading at 1.63 times its book value, at 151 per share, with the market price at 248 Rs. The company reported a decline in return ratios, with ROE decreasing by approximately 500 bps to 5.5%, and ROA decreasing by 130 bps to 0.9% in Q2FY24. The interest coverage ratio stood at 1.44x, indicating the company’s solvency.

Q2 FY24 Results Highlights: Standalone

➡️ In Q2FY24, interest income grew 25.32% YoY (+3.91% QoQ) to 3,153 Cr while interest expense grew 46.56% YoY (+8% QoQ) to 1,566 Cr resulted in Net interest (NII) income reaching to 1,587 Cr grew 9.64% YoY (+0.17% QoQ).

➡️ Pre-Provision operating profit (PPOP) increased 9.17% YoY (-5.07% QoQ) to 943 Cr due to rise in Opex by 8.32% QoQ because of company’s transformation strategy includes technology investment. Opex-to-average assets remained stable at 2.8% in Q2FY24.

➡️ Provision amount increased 215.72% YoY (+19.02% QoQ) to 626.55 Cr which includes 351 write-off led to decline PAT by 48% YoY (-33.30% QoQ).

➡️ PAT decline 47.54% YoY (-33.30% QoQ) to 235 Cr due to increase in provision 215% YoY results in EPS stood at1.90 Rs (PQ-2.84) decline 33% QoQ.

Conclusion:

M&M Finance continues to expand its loan book and customer base, showcasing its presence and performance in the NBFC sector. While challenges in NIMs and higher credit costs require attention, the company’s strong CAR and provision coverage are notable strengths. The decline in return ratios reflects certain performance pressures, and management should focus on addressing these concerns to ensure sustained growth and profitability.

Q2FY24: Shriram Finance reports robust AUM growth Drives NII soars to 4,594 Cr

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Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - October 31, 2023

SBI Card Q2FY24: Navigating Headwinds with a Vision for Long-Term Success

Company Overview:

SBI Card & Payment Services Limited (SBI Card) is a leading Indian credit card issuer and payment services provider. It is a joint venture between the State Bank of India (SBI), the country’s largest bank, and The Carlyle Group. SBI Card offers a wide range of credit cards, including super premium cards, premium cards, travel and shopping cards, classic cards, exclusive co-branded cards as well and corporate cards. SBI Card was launched in October 1998 and has since grown to become the second-largest credit card issuer in India, with a customer base of over 16 million cards in force. The company has a wide network of branches and ATMs across India and also offers its products and services through online and mobile channels. SBI Card is known for its innovative products and services, as well as its commitment to customer service. The company has won various industry accolades for its customer service, branding, product innovation and marketing.

Core earnings fall as NIM/retail spending falls; costs rise:

SBI Card’s second-quarter earnings were in line with expectations, but they did not provide a clear picture of the company’s performance. The following reasons contributed to the 2% in QoQ growth in core profitability:- Margin decline: NIM fell 12 basis points year on year to 11.3%, while yields fell 14 basis points year on year. The share of high-yielding receivables remained stable (62% of the mix over the last two quarters), while revolvers stayed stable. Furthermore, the corporation was unable to reprice EMI loans in time for the holiday season. Fee growth slowed to 3.5% as less lucrative corporate spending (increased 14% QoQ) outpaced retail spending (up 5% QoQ). Online retail spending on discretionary items (consumer durables, clothes, and jewelry) fell 44%. Analysts are cautious about discretionary spending since structural demand drivers are weak. Cost income increased to 57% (up 70 basis points QoQ) as a result of significant corporate spending and cash-back incentives (recent offers as high as 27.5% cash-back on select consumer durable goods).

Anticipated Impact of Industry Headwinds on SBI Card’s Q3 Earnings:

SBI Card’s third-quarter earnings are projected to be impacted by industry headwinds such as low revolvers, competition, poor discretionary expenditure, and risks associated with small-ticket card loans. As a result, analysts anticipate that the company’s receivables CAGR will fall from 30% to 27% in FY24-26E, while its spending CAGR will fall from 24% to 21%. Analysts anticipate that SBI Card’s cost-income ratio will stay elevated in FY24-26E, averaging 58%.

SBI Card Faces Trade-off Between Credit Cost and NII:

SBI Card is facing a difficult choice between increasing its net interest income (NII) and reducing its credit costs. On the one hand, the company is increasing its sourcing from open market and banca channels in order to boost revenues. However, this could lead to higher credit costs, which could offset the positives in NII. SBI Card’s self-employed and tier 3 sourcing climbed to 41% and 33%, respectively, in Q2, contributing to an increase in NII. However, credit expenses increased to 6.7%, and write-offs increased 9% year on year. Given that SBI Card is not immune to the unsecured credit market’s headwinds, analysts have revised down their credit cost/GNPA projections for FY24E/25E to 6.3%/2.7%, respectively.

Valuation Outlook: Downgrade to “Reduce,” TP Adjusted to INR 829:

The current valuation of the stock is INR 747 per share. With a book value of INR 117 per share, the market is trading at a Price-to-Book Value (P/BV) ratio of 6.43x, indicating that the stock is priced significantly higher than its book value. Furthermore, the Price-to-Earnings (P/E) ratio stands at 30.7x, suggesting that investors are willing to pay a premium for each unit of earnings generated by the company. This elevated P/E ratio could be a result of strong market sentiment, high growth expectations, or a combination of both. In evaluating this stock, investors should carefully consider whether the premium valuation aligns with their investment goals and risk tolerance. Exhibits 1-6 demonstrate a detailed examination of industry trends that suggest a considerable increase (an increase of 114 basis points) in the 90-day past due (90dpd) rate for credit cards, raising worries regarding SBICARD’s portfolio quality in the coming months. This condition produces a more obvious conflict between credit charges and net interest income (NII), which could have a detrimental influence on the company’s profitability.

Impressive Q2FY24 Financial Performance:

In the second quarter of the fiscal year 2024, the company reported robust financial results. Total revenue amounted to INR 14,286 crore, indicating a substantial 26% year-on-year (YoY) growth. The net profit also demonstrated remarkable performance, surging to INR 603 crore, marking a substantial 15% YoY increase. Earnings per share (EPS) reached INR 6.37, reflecting a solid 14% YoY growth. Additionally, the Return on Equity (RoE) stood at an impressive 25.7%, and the Return on Assets (RoA) was a notable 5.63%, showcasing the company’s strong financial performance and efficiency during this quarter.

Conclusion:

SBI Card is a well-known Indian credit card issuer and provider of payment services with a proven track record of profitability and growth. However, the company is currently suffering industry headwinds such as low revolvers, competition, poor discretionary expenditure, and risks associated with small-ticket card loans. These obstacles are expected to have an immediate impact on the company’s profitability. Despite the challenges, SBI Card is well-positioned for long-term expansion. The company has a strong brand, a diverse product and service offering, and a sizable client base. SBI Card is also investing in digital and technology initiatives to enhance customer experience and operational efficiency.

Q2FY24: Shriram Finance reports robust AUM growth Drives NII soars to 4,594 Cr

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Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - October 30, 2023

Credag outperforms analyst expectations Profit soar to 349 Cr

Company Overview:

CreditAccess Grameen Ltd is a Non-deposit taking NBFC-MFI (Micro Finance Institution) that specializes in providing microfinance loans, including income generation loans, family welfare loans covering medical and education expenses, home improvement loans for water and sanitation, and retail finance loans. The company also offers a wide range of products, such as unsecured business loans, 2-wheeler loans, gold loans, housing loans, and life insurance. They have expanded their reach by adding 51 new branches, bringing their total to 1,877 branches, and adding 3.36 lakh new customers, with 40% coming from states outside the top 3. Recently, the company raised 990 Cr through public NCDs with an average coupon rate of 9.3% and an average tenure of 3 years.

Robust Business momentum:- GLP/disbursement growth-36% YoY/13.5% YoY

In Q2FY24, the company experienced a significant growth in its Gross Loan Portfolio (GLP), which increased by 36% YoY and 3.1% QoQ, reaching 22,488 Cr. Disbursement amounts also grew by 13.5% YoY and 4.1% QoQ, totaling 4,966 Cr. Income generation loans (IGL) constituted 94% of the GLP, indicating a concentration risk on this product. The number of borrowers increased by 21.2% YoY and 4.1% QoQ, reaching 46.03 lakh.

Well Structured Liability Management:

CreditAccess Grameen Ltd has focused on securing long-term funding from foreign sources to mitigate short-term refinance risks. Their liability mix by tenure stands at 70% for long-term instruments, 23.5% for medium-term, and 6.7% for short-term as of Q2FY24. They maintain a diverse lender base, which includes 46 commercial banks, 3 financial institutions, 16 foreign lenders, and 6 NBFCs. Their cost of borrowing stood at 9.8% in Q2FY24

Asset Quality Improved & Strong CAR – 25% in Q2

The company’s asset quality improved significantly in Q2FY24, with Gross Non-Performing Assets (GNPA) reducing by 140 bps YoY and 12 bps QoQ to 0.77% amounting 173 Cr. Net Non-Performing Assets (NNPA) also declined by 53 bps YoY and 3 bps QoQ to 0.24% amounting 53 Cr. The company maintains a robust capital adequacy ratio of 25%, well above the RBI guideline of 15%. Collection efficiency stood at 98.7% in Q2

Valuation and key ratio: – ROA 170+ bps/ ROE 900+ bps/NIMs 110+ bps in Q2

The company’s stock is currently trading at 4.31 times its book value amounting to 364 per share at 1,571 Rs. In Q2FY24, they reported impressive return ratios, with Return on Equity (ROE) improving by 900 bps YoY and decreasing by 170 bps QoQ to 24.7%. Return on Assets (ROA) stood at 5.6%, growing by 170 bps YoY and decreasing by 20 bps QoQ. Net Interest Margins (NIMs) increased by 110 bps YoY and 10 bps QoQ to 13.1%, while the cost of borrowing grew by 60 bps YoY to 9.8%. The interest coverage ratio stood at 2.13x, indicating the company’s solvency.

Q2 FY24 Results Highlights: Standalone

➡️ In Q2FY24, the company saw significant growth in interest income, which increased by 53.95% YoY and 7.44% QoQ to 1,187 Cr. Interest expenses also grew by 55.13% YoY and 10.12% QoQ to 424 Cr, resulting in Net Interest Income (NII) reaching 763 Cr, a growth of 53.29% YoY and 6.01% QoQ, due to an increased yield on loans by 200 bps YoY and 40 bps QoQ to 21.1%.

➡️ Pre-provision operating income (PPOP) increased by 68.91% YoY and 4.28% QoQ to 565 Cr, attributed to a decline in the cost-to-income ratio by 650 bps YoY to 31.7%.

➡️ Provision decline 9.03% YoY (+25.46% QoQ) to 96 Cr while credit cost stood at 1.60% due to healthy asset quality in Q2FY24.

➡️ Net Interest Margins (NIMs) increased by 110 bps QoQ to 13.1%, while the cost of borrowing increased by 60 bps YoY.

➡️ Profit After Tax (PAT) surged by 99.38% YoY and 0.84% QoQ to 349 Cr, driven by strong GLP growth 36% YoY, NIMs improvement 110+ bps YoY, and cost efficiency. EPS for the quarter stood at 21.96 Rs (PQ-21.78) grew 99.38% YoY and 0.84% QoQ

Conclusion:

CreditAccess Grameen Ltd appears to be on a strong growth trajectory with robust business momentum, well-managed liabilities, improved asset quality, and impressive financial performance in Q2FY24. The company’s focus on microfinance and other financial products, along with its diverse funding sources, positions it favorably in the market. The positive financial ratios and strong capital adequacy further enhance its prospects. However, there may be a need for diversification in the product portfolio to reduce concentration risk.

Q2FY24: Shriram Finance reports robust AUM growth Drives NII soars to 4,594 Cr

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Flexiloans Bags ₹375 Cr in Series C, Targets ₹5,000 Cr AUM Within 18 Months

Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - October 27, 2023

Q2FY24: Shriram Finance reports robust AUM growth Drives NII soars to 4,594 Cr

Company Overview:

Shriram Finance, a prominent Non-Banking Financial Company (NBFC) in the retail finance industry, has been a leading provider of financial services in various sectors, including passenger vehicles, construction equipment, MSMEs loans, gold loans, personal loans, and working capital loans. Notably, the company has shown exceptional growth by opening 100 new branch offices in the past year, expanding its reach to 2,975 branches in Q2 FY24, including 1,027 in semi-urban areas, 1,552 in rural areas, and 396 in urban areas. Shriram Finance’s total Assets Under Management (AUM) have impressively crossed the 2,000 billion mark in Q2 FY24, registering a YoY growth of 19.65%. The company serves a vast customer base of 7.71 million individuals across India.

Robust AUM growth crossed 2,000+ bn in Q2FY24:

In Q2 FY24, Shriram Finance achieved a remarkable milestone by crossing the 2,000 billion AUM threshold, demonstrating a substantial YoY increase of 19.65%. The growth was particularly prominent in the passenger vehicles segment, which saw a 32% YoY surge, along with personal loans at 73% YoY, MSME loans at 25.67% YoY, and two-wheeler loans at 22.49% YoY. Notably, passenger and commercial vehicles collectively accounted for approximately 70% of the AUM in Q2 FY24, firmly establishing Shriram Finance’s leadership in commercial vehicle financing.

Segment wise – PL/MSME/PV outperform in Q2

In Q2 FY24, specific segments stood out with remarkable performance. The personal loan (PL) portfolio surged by 73.34% YoY, reaching 88,384 million INR, with a Gross Stage 3 (G3) rate of 5.17%. Similarly, the MSME loan book reached 213,103 million INR, growing by 25.67% YoY, and the Gross Stage 3 (GS) rate stood at 5.42% in Q2. The passenger vehicles loan book registered substantial growth, reaching 396,935 million INR, up by 32.30% YoY, with a GS rate of 6.26%.

Asset Quality improved (GNPA/NNPA), CAR maintained at 22.15% in Q2:

In Q2 FY24, Shriram Finance demonstrated enhanced asset quality, with a reduction in Gross Non-Performing Assets (GNPA) on both YoY and QoQ bases, declining to 5.79%. Moreover, Net Non-Performing Assets (NNPA) also decreased to 2.80% in Q2 FY24, compared to 3.32% in Q2 FY23. The Capital Adequacy Ratio (CAR) stood at a healthy 22.15%, well above the RBI guideline of 15% for NBFCs.

Valuation and Key Ratios:

Shriram Finance’s stock is currently trading at 1.46 times its book value, amounting to 1,234 INR per share at a current price of 1,798 INR. The return ratios improved in Q2, with Return on Equity (ROE) at 15.40% in Q2 FY24, compared to 15.19% in the previous quarter, and Return on Assets (ROA) at 3.14% in Q2 FY24, versus 3.08% in Q1 FY24. The Interest Coverage Ratio stood at 1.64x, indicating the company’s solvency.

Q2 FY24 Results Highlights: Standalone

➡️ In Q2 FY24, the company’s interest income grew by 15.81% YoY (+6.88% QoQ) reaching 8,216 crore INR, while interest expenses increased by 11.98% YoY (+3.85% QoQ) to 3,621 crore INR. Consequently, Net Interest Income (NII) reached 4,594 crore INR, marking a 19.02% YoY (+9.39% QoQ) growth.

➡️ PPOP grew by 16.27%YoY (+11.34% QoQ) to 3,480 Cr mainly due to a decline in the cost-to-income ratio to 25.68%.

➡️ NIMs improved by 60 basis points, standing at 8.93% (PQ-8.33%). This improvement was primarily driven by the outstanding performance of personal loans, MSME loans, and passenger vehicles in Q2.

➡️ PAT surged by 12.59% YoY (+4.50% QoQ) to 1,751 crore INR, attributed to strong AUM growth, NIMs+8%, and operating efficiency, resulting in an Earnings Per Share (EPS) of 46.69 INR for the quarter (PQ-44.68) grew 4.5% QoQ.

Conclusion:

In conclusion, Shriram Finance’s Q2 FY24 performance underscores its continued growth and stability in the retail finance industry. With a substantial increase in AUM, improving asset quality, and solid financial ratios, the company is well-positioned for sustained success in the coming quarters, making it a notable player in the NBFC sector.

Neogen Chemicals’ EBITDA Soars to 29.46 Cr fueled by lower input costs

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Grainspan Boosts Ethanol Output with ₹520 Crore Investment in Gujarat Plants

Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - October 16, 2023

Neogen Chemicals' EBITDA Soars to 29.46 Cr fueled by lower input costs

Neogen Chemicals’ EBITDA Soars to 29.46 Cr fueled by lower input costs

Company Overview:

Neogen Chemicals Ltd is a prominent Indian manufacturer specializing in the production of specialty chemicals, with a focus on bromine and lithium-based chemicals, both organic and inorganic in nature. These chemicals find applications across diverse industries, including pharmaceuticals, agrochemicals, engineering, electronics, polymers, water treatment, construction, aroma chemicals, flavors, and fragrances. The company also offers custom synthesis and contract manufacturing services. In a strategic move, Neogen Chemicals Ltd has recently ventured into the manufacturing of lithium-ion battery materials for energy storage and electric vehicle applications through its subsidiary, Neogen Ionics Ltd. Additionally, the acquisition of BuLi Chemicals India Private Ltd has bolstered their technology platform, particularly in the production of N-Butyl lithium and other organolithium products.

Clientele:

Neogen Chemicals Ltd has a prestigious client base that includes Sun Pharma, Piramal, Hikal, Hetero, Voltas, Divis Laboratories, Solvay, and others. The company operates from four manufacturing sites and two research and development facilities.

Product Portfolio

The company boasts a diverse product portfolio, comprising over 244 products that are distributed not only in India but also in 29 countries, spanning regions such as the United States, Europe, Japan, and the Middle East. The revenue distribution indicates a mix of organic and inorganic chemicals, with a split of 68% and 32%, respectively. In terms of geographical reach, domestic sales account for 52% of revenue, while exports contribute to the remaining 48%.

Q1FY24 results update:

In Q1FY24, Neogen Chemicals Ltd posted a 15% YoY growth in revenue, reaching 170.12 Cr. This was, however, a 17% decline compared to the previous quarter. The revenue mix was predominantly organic, constituting 73%, while inorganic chemicals contributed 27%. In terms of domestic and export sales, the split was 65% and 35%, respectively. EBITDA exhibited a 20% YoY growth, amounting to 29.46 Cr, attributed to lower raw material prices, particularly in lithium, and other input cost efficiencies. EBITDA margins improved by 65 bps to 17.32% YoY. EBIT grew by 18% YoY to 24.54 Cr, accompanied by a 40 bps increase in EBIT margins to 14.4% YoY. PAT performance was moderate, growing by 3% YoY but declining by 20% QoQ to 11.43 Cr, mainly due to higher interest costs and depreciation associated with ongoing expansions. Consequently, PAT margins contracted by 80 bps to 11.43% YoY.

Conclusion:

Neogen Chemicals Ltd has demonstrated consistent growth and expansion, underpinned by its diverse product portfolio, strategic acquisitions, and foray into cutting-edge technology areas such as lithium-ion battery materials. While the company continues to experience financial growth, its Q1FY24 results reflect the impact of ongoing expansion efforts and external factors affecting profitability. Careful management of input costs and effective project execution will likely be essential moving forward as Neogen Chemicals Ltd navigates its path in the specialty chemicals industry.

Responsive Industries Ltd’s EBITDA Surged 172% YoY to 48.5 Cr

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Dabur Subsidiaries Face Cancer Lawsuits in US and Canada

Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - October 12, 2023

Dabur Q1FY24 Revenue Hits 3,130 Cr Amid Lower Inflation

Company Overview:

Dabur India Ltd, with a rich legacy of 138 years, stands as a prominent player in the fast-moving consumer goods (FMCG) industry. It boasts a diverse portfolio encompassing Health Care, Home and Personal Care, and Food and Beverages products. Dabur is recognized as the 4th largest FMCG company in India and the world’s largest ayurvedic and healthcare company, offering a portfolio of over 250 herbal/ayurvedic products. The company’s expansive distribution network covers 7.7 million retail outlets, extending its reach into both urban and rural markets.

Industry Overview:

The FMCG sector in India plays a pivotal role in the country’s economy. Notably, it continued to exhibit robust growth, even during the challenging years of the COVID-19 pandemic. Dabur benefited from a consumer shift towards natural healthcare products during this period. However, inflation and central bank interest rate decisions have presented challenges, impacting volume growth.

Strong Global Presence through robust distribution reach:

Dabur’s global reach is extensive, with products distributed to 120+ countries across four continents. This impressive reach is facilitated by 28 warehouses and 3000+ distributors in India alone. The company’s manufacturing infrastructure comprises 13 sites in India and 8 overseas locations. Notably, Dabur expanded its operations by acquiring a 51% stake in Badshah Masala, increasing its total manufacturing sites in India to 14.

Business Segments:

A Consumer Care Business: This SBU includes Health Care (HC) and Home and Personal Care (HPC) segments, contributing to 56.2% of Consolidated Sales.
Food & Beverages (F&B) Business: Comprising fruit-based beverages and a range of food products, this segment expanded with the addition of spices through the acquisition of Badshah Masala. It accounts for 15.1% of Consolidated Sales.
International Business: This segment combines Dabur’s organic overseas business with acquired entities such as Hobi Group and Namaste Laboratories LLC, making up 25.1% of Consolidated Sales. Dabur has significant market shares in various categories, including healthcare supplements, oral care, hair oil, and fruit juice.
The company has a 63.20% market share in healthcare supplements (chyawanprash), 17% in the oral care (toothpaste) segment, and 16.3% in the hair oil segment. It is a market leader in the fruit juice segment around 16.20% market share with its real and active brands.

Valuation and Key Ratios:

Dabur’s stock is currently trading at a multiple of 56.5x EPS of 9.77, with a market price of 547, while the industry PE stands at 40.5x. The stock is valued at 10.8 times its book value of 50.6 Rs per share. The company demonstrates robust return ratios, with ROE at 19.5% and ROCE at 22.7%. Moreover, the interest coverage ratio stands at 25.9%, indicating that the company’s earnings are significantly higher than its interest costs, reflecting a strong financial position. The EV/EBITDA ratio stands at 36.5x.

Q1FY24 Results Update:

In Q1FY24, Dabur reported a 10.91% YoY increase in revenue to 3,130 Cr, driven by increased sales volume due to reduced inflation in Q2, which boosted demand for consumer goods. EBITDA grew by 11.23% YoY and 47.55% QoQ to 605 Cr, with EBITDA margins remaining steady at 19.32%. This performance was despite rising raw costs and operating expenses. The company achieved a PAT of 457 Cr, reflecting a 3.53% YoY growth and a significant 55.97% QoQ increase. However, PAT margins witnessed a slight YoY decline of 100 bps, while they increased by 360 bps QoQ. The EPS for the quarter stood at 2.58 Rs, marking a 3.53% YoY growth.

Conclusion:

Dabur India Ltd, with its long-standing history, diverse product portfolio, extensive distribution network, and strong financial performance, continues to be a formidable player in the FMCG sector. Despite challenges such as inflation and interest rate fluctuations, the company has demonstrated resilience and growth, as evident from its Q1FY24 results. Investors may find Dabur an attractive proposition given its strong market position and financial stability.

Responsive Industries Ltd’s EBITDA Surged 172% YoY to 48.5 Cr

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Manorama Industries Ltd Q1FY24 results updates

Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - October 10, 2023

Manorama Industries Ltd PAT surges by 70.69% YoY

Company Overview:

Manorama Industries Ltd specializes in the production of specialty fats and butter derived from exotic seeds and nuts. The company is a prominent supplier of these specialty fats and butter, catering to the demands of the chocolate, confectionery, and cosmetics sectors. Moreover, they produce sal, shea, and mango-based cocoa butter equivalents (CBE), as well as shea-based specialty fats and butter.

Diverse Products Portfolio:

Manorama Industries boasts a diverse product portfolio, including Cocoa Butter Equivalent (CBE), Shea Stearin, Sal Butter, Sal Stearin, Mango Butter, Mowrah Butter, Kokum Butter, and De Oiled Cake (DoC). These products find applications in the chocolate manufacturing, confectionery, bakery, and cosmetics industries. The company serves various sectors, including food, chocolates, confectionery, cosmetics, and the HoReCa market.

Manufacturing Sites and Capacity Utilization:

The company’s primary manufacturing site is situated in Birkoni near Raipur, Chhattisgarh. This facility encompasses key processes such as expelling, extraction, refining, and fractionation. It has a substantial production capacity with 45,000 MT for refinery, 30,000 MT for interesterification, 25,000 MT for deodorization, 40,000 MT for fractionation, and 30,000 MT for blending and packing. The strategic location of the plant, at a mere 550 Km from the Visakhapatnam port and the anticipated Raipur-Visakhapatnam expressway, promises reduced transportation times, cost savings, and enhanced operational efficiency. As of June 2023, the company has invested 1,099.5 million in capital expansion.

Valuation and Key Ratios:

The company’s stock is presently trading at a multiple of 80.2x earnings per share (EPS) of 29, with a current market price of 2,325 Rs, while the industry’s price-to-earnings (PE) ratio stands at 43.9x. Furthermore, the stock is trading at 9.29 times its book value, which is 250 Rs per share. Manorama Industries exhibits robust return ratios, with a return on equity (ROE) of 10.5% and a return on capital employed (ROCE) of 13.2%. The interest coverage ratio stands at 6.43, indicating that the company’s earnings are 6.43 times its interest costs, underscoring its strong financial position. The enterprise value to EBITDA (EV/EBITDA) ratio stands at 39.7x.

Q1FY24 Results Updates (Standalone):

In Q1FY24, the company experienced substantial growth, with revenue increasing by 52.89% year-on-year (YoY) and 9.65% quarter-on-quarter (QoQ) to reach 111.56 Cr. This growth was driven by improving realizations and growing demand in the chocolates, confectionery, and cosmetic industries. EBITDA increased by 47.86% YoY and 13.05% QoQ to 18.64 Cr, although EBITDA margins dropped by 60 basis points YoY but increased by 50 basis points QoQ due to operational efficiency. Profit after tax (PAT) surged by an impressive 70.69% YoY and 15.57% QoQ, reaching 11.55 Cr, with PAT margins improving by 100 basis points YoY and 50 basis points QoQ to 10.36%. Earnings per share (EPS) stood at 9.71 Rs, a growth of 15.62% QoQ.

Conclusion:

Manorama Industries Ltd appears to be on a growth trajectory, as evidenced by its impressive Q1FY24 results, strong financial ratios, and a diverse product portfolio that caters to multiple industries. The company’s strategic manufacturing site location and ongoing capital expansion also bode well for its future prospects. However, investors should keep an eye on industry trends and competition as they assess the company’s long-term potential.

Manorama Industries. Strong Growth potential.

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Peerless Group to Exit Insurance Distribution and Double-Down on Hospitals

Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - October 6, 2023

Softtech Engineering Ltd's EBITDA Surged 26.85% YoY

Softtech Engineering Ltd’s EBITDA Surged 26.85% YoY

Company Overview:

Softtech Engineering Ltd, established in 1996, operates in the software products and services sector, primarily serving the architecture, engineering, and construction (AEC) industry. The company has a diverse portfolio comprising seven products that cover the entire construction value chain. Notably, their AutoDCR solution automates building and layout plan approvals, contributing to Smart City projects. Softtech Engineering Ltd has a global presence, having served over 4600 clients in India and around the world.

Product Portfolio:

Their product portfolio includes AutoDCR, PWIMS, and OPTICON. AutoDCR streamlines building plan approvals by analyzing 2D CAD drawings for compliance with Development Control Regulations. PWIMS offers integrated works and procurement management for civil infrastructure organizations, while OPTICON serves as an ERP solution for construction enterprises, optimizing various construction processes.

Industry Overview:

Operating within the IT and Technology industry, Softtech Engineering Ltd is positioned well, given the promising prospects of the Indian software product industry, expected to reach $100 billion by 2025. Furthermore, the growing demand for AI is driving the data annotation market, which is anticipated to reach $7 billion by 2030.

Valuation and Key Ratios:

As of the latest data, the stock of Softtech Engineering Ltd is trading at a substantial multiple of 77.6x earnings per share (EPS) of 3.78, with an industry PE ratio at 36.4. The stock also trades at 2.44 times its book value. The company reports a moderate return on equity (ROE) of 3.91% and return on capital employed (ROCE) at 7.85%. Additionally, an interest coverage ratio of 2.44x suggests the company’s solvency. The EV/EBITDA ratio stands at 14.2, and the total debt is reported at 48.1 Crores.

Q1FY24 Results Updates:

In the first quarter of FY24, Softtech Engineering Ltd witnessed robust YoY revenue growth of 54.97%, reaching 18 Crores, although it showed a minor QoQ increase of 2.57%. Operating expenses also increased by 67.55% YoY, reflecting growth challenges. EBITDA grew by 26.85% YoY to 4.75 Crores, but EBITDA margins dropped by 500 basis points (bps) YoY due to the significant increase in operating expenses. EBIT increased by 19.68% YoY, but margins declined by 200 bps YoY due to increased depreciation. Profit after tax (PAT) declined by 27.84% YoY, yet saw a substantial QoQ increase of 285.71%. The earnings per share (EPS) for the quarter stood at 0.49 Rs, marking a 27.54% YoY decrease.

Conclusion:

Softtech Engineering Ltd is a well-established player in the AEC software domain with a diverse product portfolio. While their Q1FY24 results indicate strong YoY revenue growth, increasing operating expenses and declining margins raise some concerns. Investors should carefully monitor the company’s ability to manage expenses and sustain profitability in a competitive and evolving market.

Responsive Industries Ltd’s EBITDA Surged 172% YoY to 48.5 Cr

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