Business

Have you been tracking city gas distribution (CGD) stocks? If so, you might have noticed something alarming on November 18, 2024. Shares of key players like Indraprastha Gas Limited (IGL) and Mahanagar Gas Limited (MGL) plummeted by up to 20%, marking one of their sharpest declines in recent times.

This sharp drop follows the Indian government’s decision to cut the allocation of Administered Price Mechanism (APM) gas to CGDs for the second consecutive month.  

Let’s break down what happened, how it impacts the sector, and what this could mean for the companies involved.  

What is APM Gas Allocation, and Why is It Important?

APM natural gas is sourced from old domestic fields and priced significantly lower than gas from new fields or imported liquefied natural gas (LNG). For CGDs, this low-cost gas is critical because it helps them supply compressed natural gas (CNG) and piped natural gas (PNG) at competitive prices to consumers.  

When the government reduces APM gas allocation, these companies must look for costlier alternatives like New Well Gas, High-Pressure, High-Temperature (HPHT) gas, or spot LNG. This inevitably increases input costs, compressing profit margins and putting pressure on gas prices for end consumers.  

The Recent Cuts and Their Magnitude  

In October 2024, the government initially reduced APM gas allocations to CGDs by 20%. This was already a significant blow to their profitability. On November 16, 2024, a second round of cuts was announced:  

– IGL reported an additional 20% cut, bringing the total reduction to 40% in two months.  

– MGL faced an 18% additional reduction, piling on top of the earlier cut.  

– Adani Total Gas also indicated a 13% further reduction.  

The revised allocation levels mean companies need to rely more heavily on higher-priced gas, pushing their costs further. Source: MoneyControl 

Market Reaction  

The government’s decision to cut APM gas allocation sent shockwaves through the market, triggering a sharp sell-off in CGD stocks. IGL’s stock price plunged 20% to ₹325.05, marking a new 52-week low, with average trading volumes surging over tenfold. This decline pushed the stock below its previous low of ₹385.20, recorded on November 20, 2023. 

Similarly, MGL’s stock dropped 18% in intra-day trading to ₹1,075 on the NSE, edging closer to its 52-week low of ₹1,018, last seen on November 23, 2023. Both stocks have corrected significantly from their respective 52-week highs, with IGL down 43% and MGL down 46%. 

Meanwhile, Gujarat Gas shares saw a 9% decline, settling at ₹442.80 in intra-day trading. The widespread sell-off reflects investor concerns over CGD companies’ profitability challenges in light of these allocation cuts.

The Financial Impact on MGL & IGL

Both IGL and MGL have acknowledged the adverse impact on their profitability:  

• IGL’s statement highlighted that it receives a domestic gas allocation for CNG volumes at a government-fixed price of $6.5/MMBtu. With the revised allocation, the company foresees a sharp reduction in margins. IGL is now exploring alternatives to maintain supply stability, including long-term gas contracts and HPHT gas.  

• MGL noted a similar impact, emphasizing that it must bridge the shortfall using higher-priced alternatives. According to the company, the additional costs will necessitate significant price adjustments for CNG and PNG to offset lost margins.  

Brokerages have calculated the potential financial hit for CGD companies. Replacement gas, priced at around $13-14/mmbtu, could lower EBITDA per standard cubic meter (EBITDA/scm) by approximately ₹2.7-3. To recover this, CGD players must increase CNG prices by at least ₹4.5-4.8/kg. 

Source: MoneyControl

Broader Implications for CGDs  

This is not the first time CGDs have faced allocation cuts. The October 2024 reduction triggered heavy selling of CGD stocks, with analysts anticipating further challenges for the sector.  

The sharp pace of recent cuts and a lack of clear communication from policymakers have amplified market pessimism. According to Motilal Oswal Financial Services (MOFSL), CGD companies may need to hike CNG prices by ₹5-6/kg to maintain profitability. However, no action has been taken on price revisions so far, adding to the uncertainty.  

How will it Impact the Investors?  

The current situation has raised critical concerns among investors:  

1. Profitability Outlook: With escalating input costs, CGD margins are under pressure, and there’s no clarity on how or when companies will adjust prices to offset these impacts.  

2. Policy Ambiguity: The government’s lack of communication regarding the rationale for the cuts or any plans for stabilization has unnerved investors.  

3. Valuation Risks: Ongoing challenges could lead to further brokerage downgrades, which would weigh heavily on CGD stock valuations.  

The Road Ahead  

The CGD sector is at a crossroads. Companies struggle to adapt to the revised allocation framework by exploring costlier alternatives and potentially adjusting consumer prices. However, the absence of clear government policies and the sharp pace of cuts have left market participants wary of short-term recovery prospects.  

For now, CGD stocks are likely to remain under pressure, and investors will closely monitor any updates from companies and policymakers on how they plan to address these challenges.  

Conclusion:

Understanding the dynamics of the APM gas allocation cuts reveals that this is a critical moment for the CGD sector. While the immediate impact has been severe, the long-term implications depend on how quickly the companies can adapt and whether the government clarifies its policy direction.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

NIFTY50 and the SENSEX have been plummeting for over a week. The domestic stock market is struggling to stay rooted amidst the selling pressure. Consequently, the indices have slipped into one of the steepest correction phases in the past four years, which led to a fall of around 10%. 

Despite the weak global cues and the declining broader markets, one NSE SME stock grew its share price. Aditya Ultra Steel Limited, a stock listed on NSE SME, rose 8% and marked a rising trend. Read further to know the reasons behind the stock’s resilient positive returns. 

Overview of Aditya Ultra Steel Limited:

Aditya Ultra Steel Pvt. Ltd., part of the Aditya Group of Companies, specializes in manufacturing TMT bars for the construction and infrastructure industries. Incorporated in July 2011 as a Private Limited Company, it is registered in Gujarat at Dadra and Nagar Haveli. The company produces rolled steel products, primarily TMT bars, under the trusted Kamdhenu brand. These bars are designed for construction and infrastructure development projects, ensuring quality and durability.  

Their manufacturing plant is located in Wankaner, Gujarat. It features modern facilities, including advanced testing laboratories, and benefits from excellent transport connectivity to streamline operations. Aditya Ultra Steel focuses on the B2B market, delivering TMT bars tailored to the needs of various construction and infrastructure ventures.

The company manufactures TMT bars under a retail license agreement with the Kamdhenu brand, serving Gujarat’s Kutch and Saurashtra regions. It sells these bars through a distribution network of 73 dealers. To streamline deliveries, the company owns a fleet of 23 vehicles. A significant portion of its revenue, 57%, comes from its top customer, while 98.5% of its total income is generated from Gujarat.

Revenue and Profit Trends of Aditya Ultra Steel Limited:

Due to the expansion of the construction industry, the demand for TMT bars and the need for steel in different infra projects has increased gradually. The TMT bar market is set to see steady growth. Between 2022 and 2027, it is expected to expand at a CAGR of 4.34%. Looking ahead to 2033, the market revenue is predicted to grow faster, with a CAGR of 9.6%. 

The growth prospects and positioning of Aditya Ultra Steel Limited led to the company’s consistent rise in revenue and profits. In 2023-24, the company’s total income rose by 10.73% to Rs.588.59 crore from FY2023’s income of Rs.531.57 crore. 

Aditya Ultra Steel also clocked a profit of Rs.7.68 crore, almost double the net profit (after tax) of FY2023, Rs.3.7 crore. Over the past five years, the company’s profit trend has been as shown-

Apart from its steady finances, the company also came into the limelight due to its recently launched IPO on 16th September 2024 as a part of its expansion plans. Aditya Ultra Steel launched its SME IPO in September 2024 to raise Rs.45.88 crore for expansion, working capital, and corporate needs. The company was listed on the NSE SME on 16th September, with shares priced between Rs.59 and Rs.62. It made a strong debut, listing at Rs.69.60, about 13% higher than its issue price.  

On the same day, the stock touched a peak of Rs.72. However, by November 13, it hit an all-time low of Rs.50. Shortly after, the stock showed some recovery, gaining 8% on November 18, 2024.

Factors Contributing To The Share Price Growth:

1. Aditya Ultra Steel Limited posted good financials for the half-year ending September 2024. The company maintained strong growth during the first half of the financial year 2024-25 (H1FY25). In a press release on November 16, the company reported revenue of Rs.312.39 crore H1FY25. EBITDA stood at Rs.10.50 crore, while net profit reached Rs.5.20 crore.  
2. The company announced in its press release that it is focusing on expansion. This initiative focuses on increasing production capacity, improving operational efficiency, and adopting sustainable practices. The company’s September IPO was a part of this vision.
3. The company is setting up a 5 MW solar power plant in Jasdan, Rajkot, Gujarat. This project, worth Rs.15.35 crore, will have a capacity of 5,000 KWP. It aims to meet the company’s energy needs while promoting sustainability.
4. The company partnered with Maheshwar Ispat Private Limited to manufacture TMT bars from June 2023. In FY24, Maheshwar Ispat produced 10,866 MT of TMT bars, which made up 11.28% of the company’s total production.

Bottomline:

India’s steel and TMT market is growing, driven by rising demand for steel, the advantages of TMT bars, and the expanding global industry. Aditya Ultra Steel Limited is in a strong position to benefit from this growth and plans to expand in the coming years. However, as with any listed company, investing in it comes with risks, especially since it is a small-cap company. 

So, if you’re considering investing in Aditya Ultra Steel Limited, make sure to do thorough research on both the industry and the company’s fundamentals before making any decisions.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

Toyota Kirloskar Motor, Toyota’s Indian subsidiary, had a remarkable year, with profits reaching levels typically achieved over a decade. Sales rose by 66% year-on-year, and operating profit surged to nearly Rs. 6,000 crore—a 2.5-fold increase. 

This impressive growth highlights Toyota’s ability to align with market demand and optimize its operations, making FY24 a major milestone in the company’s journey in India. Here’s a look at the main factors driving this impressive financial achievement.

*All figures are in crores.

Rising Demand for SUVs and Premium Vehicles

In recent years, Indian consumer preferences have shifted significantly toward SUVs and premium vehicles, categories where Toyota has a strong presence. Models like the Toyota Fortuner, Innova Crysta, and new entrants in the hybrid segment have resonated well with Indian buyers seeking high-performance vehicles.

Key Points:

• Toyota’s SUV models are popular for their durability and performance, aligning with consumer preferences.
• Premium vehicles offer higher margins, contributing to a substantial increase in profits.
• Introducing hybrid models has positioned Toyota as an innovative and environmentally conscious brand.

4 Key Factors Behind Toyota’s India Business Success

Established Models Drive Revenue

Toyota’s classics, like the Innova and Fortuner, continue to drive substantial revenue, and regular price hikes push their ex-showroom prices higher. 

Key points:

• Increased Prices: Toyota’s popular models, the Innova and Fortuner, have seen substantial price increases since 2018, pushing their price ranges higher and boosting revenue.
• Sales Growth: Domestic sales of the Innova and Fortuner grew by 32% and 56%, respectively, from FY18 to FY24, reflecting sustained demand.
• Revenue Share: These two models make up around two-thirds of Toyota’s revenue in India, with the rest coming from rebadged Suzuki models.
• Cost Efficiency: With costs rising slower than revenue, Toyota’s revenue from these models has fueled the company’s impressive profit growth.

Source: ET Prime

Expanding with Suzuki Partnerships

Toyota’s collaboration with Suzuki has brought rebadged Suzuki models, including the Toyota Glanza, to the Indian market. These models have gained popularity and even outsold Toyota’s traditional models in recent months, enabling Toyota to reach a broader audience.

Key points:

• Strategic Partnership with Suzuki: Toyota’s collaboration with Suzuki aligns with its “Make in India” goals, particularly in the high-volume and electrification segments. Together, they hold a 55% market share in India.
• Expanded Product Line: Since rebadging the Maruti Suzuki Baleno as the Toyota Glanza in 2019, Toyota has introduced four rebadged models. These vehicles now outsell Toyota’s original models, making the brand more accessible and affordable.
• Price Positioning and Profitability: Rebadged Suzuki models, priced between Rs.7 lakh and Rs.20 lakh, complement Toyota’s higher-end models. Toyota’s premium image lets it charge a slight premium on these models, enhancing profits for both brands.
• Enhanced Dealer Offerings: The alliance broadened dealer offerings, allowing them to cater to a wider customer base, from compact cars to luxury models, helping retain lifelong customers within the Toyota lineup.
• Attracting New Customer Demographics: The rebadged models appeal to younger buyers seeking affordable, sporty options with Toyota’s brand reputation. This has added new segments to Toyota’s customer base.
• Rapid Product Expansion: Toyota quickly expanded its lineup without high R&D costs, capturing more market share and boosting sales momentum in India.

Success with Hybrid Technology

Hybrid technology is also a major factor in Toyota’s success. Models like the Urban Cruiser Hyryder, which feature hybrid solid options, cater to India’s growing interest in eco-friendly and fuel-efficient vehicles. 

Key Points:

• Shift in Consumer Perception: Toyota has successfully changed how Indian customers view hybrid vehicles, starting with the Innova petrol hybrid introduced in December 2022.
• Strategic Product Transition: Toyota paused sales of the diesel Innova Crysta for three months, encouraging customers to consider the new hybrid Innova. As a result, hybrids, such as the Urban Cruiser Hyryder, gained substantial traction, making up 23% of Toyota’s FY25 sales.
• Meeting Emission Goals and Customer Demand: Hybrids align with Toyota’s future emission strategy and prove that Indian customers are willing to pay for advanced technology. A hybrid Fortuner is also planned.
• New Market Positioning: The Innova Hycross has shifted its perception from a fleet to a premium personal vehicle, allowing Toyota to capture new customers. This repositioning also increases profitability, as the top hybrid model commands a higher price than the diesel variant.

Expanding Market Presence

Toyota has increased its distribution network, especially in tier-III and tier-IV towns, as well as rural areas. This expanded footprint has boosted Toyota’s visibility and consumer trust. 

Key Points:

• Increased Distribution Network: Toyota has significantly expanded its showroom and service center presence in tier-III and tier-IV towns and rural areas, boosting consumer confidence in the brand.
• Rural Market Strategy: While Toyota has targeted rural markets for some time, this focus has grown stronger in the last 2-3 years, supported by dealer feedback.
• Promotional Discounts: During the festive season, the company offered discounts on its vehicles, including Rs.30,000 off on the Fortuner and Rs.100,000 off on certain Innova Crysta variants, marking a shift from its premium brand positioning.
• Alliance Synergies Driving Growth: The Toyota-Suzuki partnership contributed to a 37% growth in Toyota’s dealership network from FY20 to FY24, with increased competition in the utility vehicle market helping both brands thrive. Source: ET Prime

Several other factors contributed to Toyota’s business success. Let’s examine these factors more closely.

Benefiting from Government Policies and Incentives

India has introduced various incentives to foster the adoption of cleaner and more sustainable vehicles. Toyota has adeptly positioned itself to benefit from these government initiatives, making it a preferred choice among environmentally conscious consumers.

Key Points:

• Government subsidies on hybrid vehicles reduce costs for consumers, driving sales.
• Policies promoting cleaner technology favor Toyota’s hybrid models.
• Regulatory support enhances Toyota’s profitability by reducing production and tax burdens.

Lean and Cost-Effective Operations

It well-known lean manufacturing system, the Toyota Production System (TPS), is vital in keeping operational costs low and efficiency high. By continuously refining its processes, Toyota maintains high-quality standards while controlling expenses, directly impacting profitability.

Key Points:

• TPS minimizes waste, optimizes inventory, and improves efficiency.
• Cost-effective operations increase Toyota’s profit margins without compromising quality.
• Streamlined production processes help Toyota meet rising demand quickly and efficiently.

Strong Brand Equity and Customer Loyalty

The company’s longstanding reputation for reliability and quality has built a loyal customer base in India. This brand equity ensures repeat customers and contributes to higher resale values for Toyota vehicles, reinforcing the brand’s desirability and driving more sales.

Key Points:

• Strong brand loyalty results in repeat purchases and customer referrals.
• The reputation for durability enhances the long-term value of its vehicles.
• High resale values and quality assurance attract new and loyal customers.

Impact of Global Supply Chain Constraints on Competitors

The company’s robust supply chain management has allowed it to mitigate challenges that affected other automakers. By maintaining close ties with suppliers and adhering to just-in-time (JIT) production, Toyota could deliver vehicles without major delays, capturing market share lost by competitors facing supply issues.

Key Points:

• Efficient supply chain management helped Toyota avoid production delays.
• JIT production minimizes inventory costs and keeps operations agile.
• Toyota capitalized on supply disruptions among competitors to capture additional market share.

What Lies Ahead

Toyota’s recent success demonstrates its adaptability and understanding of the Indian market. Looking forward, Toyota plans to continue investing in hybrid technology, expand its local manufacturing capacity, and introduce more models that cater to evolving Indian consumer preferences.

Toyota’s Upcoming Product Launches in India

• Fortuner’s Strong-Hybrid Powertrain (2025)—The Fortuner with a strong-hybrid powertrain is scheduled to be launched in early 2025.
• 2026 Milestones for Toyota – The e-Vitara, a rebadged Suzuki product, is expected to arrive in India by early CY2026.
• Other Expected Launches (2025-2026) include the Corolla Cross SUV, a smaller Fortuner hybrid, and the Landcruiser Prado. Source: ET Prime

Toyota’s Research and Market Strategy

• Extensive Pre-launch Research – Toyota conducts in-depth research to ensure new products are produced in manageable volumes and meet customer demands.
• Challenges with Previous Launches – Despite this approach, past models like the Etios (2010) and Yaris (2018) struggled in the Indian market.
• Reliance on Established Models—Toyota has relied on successful, older models like the Innova (2005) and Fortuner (2008).

Conclusion

Toyota’s ability to earn ten years’ worth of profits in just one year shows its smart strategy, flexibility with market trends, and focus on efficiency. By meeting India’s rising demand for SUVs and hybrids, improving local production, and building strong brand loyalty, Toyota has set a high standard for profitability in the Indian auto market. 

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

FAQs

Imagine being one of the 500 employees whose lives are about to change forever as Swiggy, India’s leading food delivery giant, launches its initial public offering (IPO). With a public listing set to unlock ₹9,000 crore worth of employee stock option plans (ESOPs), Swiggy is poised to propel these employees into the ‘crorepati’ club, creating one of the largest wealth generation events in India’s startup ecosystem.

With a large ESOP pool, Swiggy’s IPO has attracted significant attention. The Bengaluru-based company has made a name for itself in the food delivery industry and now stands as a testament to the financial opportunities for employees in high-growth tech companies. 

What are ESOPs

ESOPs, or Employee Stock Option Plans, are powerful tools for companies to compensate employees by offering them a stake in the company. Instead of or in addition to a traditional salary, employees are granted options to buy shares in the company at a set price, often below the market value. 

These options can later be exercised, allowing employees to convert them into shares. Employees then can either hold onto these shares, hoping for a further increase in value, or sell them, realizing their gains.

ESOPs at Swiggy

Swiggy has rolled out three major ESOP plans, initiated in 2015, 2021, and 2024, totaling nearly 230 million shares. Of these, around 9 million options have already been exercised, leaving a substantial portion still available for employees to convert into shares. 

The most recent ESOP grants included significant allocations to Swiggy’s leadership team, with close to ₹2,600 crore going to top executives like CEO Sriharsha Majety, CTO Madhusudhan Rao, and other senior company figures.

Name	Designation	ESOP Liquidity  (in Cr.)
Sriharsha Majety	Cofounder & Group CEO	1894.11
Amitesh Jha	CEO Instamart	126.41
Rohit Kapoor	CEO Food Marketplace	92.63
Rahul Bothra	Chief Financial Officer	81.73
Madhusudan Rao	Chief Technology Officer	81.73
Girish Menon	Chief Human Resources Officer	81.73
Phani Kishan	Cofounder and Chief Growth Officer	81.73
Nandan Reddy	Cofounder and Head of Innovation	81.73
Ashwath Swaminathan	Ex-chief Growth and Marketing Officer	54.48

In addition to this year’s IPO, Swiggy has previously facilitated liquidity for employees by allowing them to cash out some of their ESOPs. For instance, a buyback of ESOPs in July 2023 generated over ₹500 crore in liquidity for employees.

Swiggy’s IPO and the Market Impact

Swiggy’s IPO, valued at around ₹11,300 crore, is the biggest public offering by an Indian tech company since Paytm’s IPO in 2021. Institutional investors have shown a robust interest, with the IPO subscribed 3.59 times. Swiggy’s strong market performance has added to the enthusiasm, making it one of the most awaited listings of the year.

This enthusiasm isn’t surprising. Swiggy’s major rival, Zomato, made waves in the industry when it went public in July 2021, creating 18 dollar millionaires and minting wealth for numerous employees. Similarly, Paytm’s 2021 IPO led to financial gains for around 350 employees, many of whom became crorepatis overnight. Swiggy continues this trend in the consumer internet sector, solidifying its role as a key player in India’s tech ecosystem. Source: Economic Times

The Financial Mechanics

Employees converting their ESOPs to shares are liable to pay tax on the difference between Swiggy’s current share price and the price at which their options were granted. Swiggy has partnered with several financial platforms to ease this conversion process and support employees with the necessary financing.

Lock-in Exemptions

One unique advantage Swiggy employees have is an exemption from the mandatory one-year lock-in period. In July 2023, the Securities and Exchange Board of India (SEBI) granted Swiggy employees the ability to sell shares just a month after the IPO. This early liquidity option significantly boosts employees’ financial flexibility, allowing them to capitalize on their newly acquired wealth sooner than expected.

Swiggy’s Wealth Creation and the Startup Ecosystem

The economic impact of Swiggy’s ESOP liquidity event is expected to extend beyond individual wealth creation. Employees who gain substantial wealth through ESOPs often explore new ventures, invest in property, or build assets, potentially stimulating local economies. The wealth generated from Swiggy’s IPO could ripple out, with some employees even choosing to establish their startups, further enriching India’s entrepreneurial ecosystem.

Other consumer internet companies have also conducted significant ESOP buybacks and IPO events in recent years. Flipkart, a leader in India’s e-commerce sector, has conducted multiple ESOP buybacks, amounting to a total payout of $1.5 billion over several years. In 2023 alone, Flipkart paid out $700 million to its employees following its separation from PhonePe. Razorpay, another prominent Indian startup, conducted four ESOP buybacks between 2018 and 2022, generating over $90 million for 1,900 employees.

Companies such as Meesho, Urban Company, and Purplle have joined this trend by facilitating ESOP buybacks for their employees, enhancing wealth creation opportunities across the startup sector. The increase in ESOP-based wealth generation marks a pivotal shift in the Indian job market, where employees are not just earning salaries but are building substantial financial assets.

A Transformative Moment for Swiggy and Its Employees

As Swiggy goes public, nearly 5,000 current and former employees stand to benefit from its ₹9,000 crore ESOP pool, marking one of the largest wealth creation events in India’s startup history. The IPO provides a financial breakthrough for around 500 employees, who will join the ranks of the country’s ‘crorepatis.’ 

The journey of Swiggy’s employees highlights the transformative power of ESOPs as startups and established companies continue to leverage stock options to attract, retain, and reward talent.

Conclusion

Swiggy’s IPO is a significant step for the company and a momentous event for its employees, who have been instrumental in driving its success. As these employees stand on the brink of newfound financial freedom, Swiggy’s IPO is a powerful reminder of the opportunities in India’s vibrant and fast-evolving startup ecosystem.

Know more about:
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Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

The equity markets have seen a significant shift recently, with small-cap and mid-cap stocks drawing substantial investor interest. As valuations in these sectors surge, many investors reconsider blue-chip or large-cap stocks, often viewed as more stable and resilient. This article explores why bluechip stocks may be set for a resurgence and how current market conditions could favor these well-established companies.

So far in 2024, the Nifty 50 represents large-cap companies and has provided investors with around 12% returns. In comparison, the Nifty Midcap 100 and Nifty Smallcap 250 have delivered 22% and 25% returns, respectively, based on market data.

The Nifty Midcap 100’s current price-to-earnings (PE) ratio is 44.19, above its five-year average of 37.36, while the Nifty Smallcap 250 stands at 33.89, higher than its average of 29.05. In contrast, the Nifty 50’s PE ratio 23.32 sits just below its five-year average of 24.68.

It is important to note that many mid-cap and small-cap stocks now hold high valuations, which could limit their future return potential, according to industry experts. Over half of mid-cap index stocks trade with a price-to-earnings (PE) ratio above 40, suggesting potential overvaluation. 

Market experts increasingly point to bluechip stocks as valuations in small- and mid-cap sectors reach elevated levels. In the face of economic uncertainty, large-cap stocks present a more secure choice for cautious investors. However, this shift does not mean small- and mid-caps are losing their appeal entirely.

Source: Mint

3 Reasons Smallcap and Midcap Markets are Overheating

Record High Valuations:

Small-cap and mid-cap stocks have seen a significant run-up in prices. With high valuations, these stocks may now be trading above their fundamental value, raising concerns about a potential market correction.

Increased Retail Investor Interest:

Retail investors have flocked to smaller stocks for quick gains, increasing prices even further. While this trend is beneficial in the short term, it has created an imbalance in valuations, with some stocks priced much higher than their actual worth.

Vulnerability to Economic Shifts:

Small and mid-cap companies are generally more sensitive to economic shifts, making them riskier in the face of economic slowdowns or inflationary pressures. In contrast, large-cap companies often have diverse revenue streams and global reach, enabling them to withstand economic turbulence better.

The Appeal of Bluechip Stocks in an Overheated Market

Stability and Reliability:

Blue-chip stocks represent large, established companies with proven track records. They tend to be less volatile than small-cap and mid-cap stocks, making them appealing during market uncertainties.

Strong Fundamentals and Valuations:

Unlike their smaller counterparts, many blue-chip stocks are trading at more reasonable valuations. With consistent earnings, robust business models, and often dividend payouts, these stocks offer a safer bet for long-term investors looking for sustained growth.

Defensive Characteristics:

Blue-chip stocks typically can perform well even during economic downturns. Companies in sectors like consumer goods, healthcare, and utilities often remain resilient as they provide essential services that consumers continue to need, regardless of economic conditions.

3 Key Factors Contributing to the Bluechip Comeback

1. Shift in Investor Sentiment:

As the small-cap and mid-cap markets reach high valuations, some investors shift their focus to blue-chip stocks for better value and reduced risk. This shift in sentiment could drive more capital into large-cap stocks.

2. Institutional Investor Interest:

Large institutional investors, such as mutual funds and pension funds, prefer blue-chip stocks for their stability. The increased demand for blue-chip stocks could boost their prices as these investors rebalance their portfolios.

3. Potential Regulatory Concerns:

With high retail involvement and increased volatility in smaller stocks, regulatory measures to stabilize the market could be considered. Such measures could direct investor attention back to the blue-chip sector, less prone to speculative risks.

Key Sectors in the Bluechip Category Poised for Growth

1. Technology and Communication:

With continued demand for digital services, large-cap tech firms remain promising for long-term growth. These companies have significant resources to innovate and adapt to changing market needs.

2. Financial Services:

Banks and financial institutions, which form a substantial part of the blue-chip segment, are seeing renewed interest due to their resilience. As economic activity picks up, these companies are likely to benefit from higher loan demand and fee income.

3. Consumer Goods:

Firms that produce essential consumer goods, often considered defensive stocks, have shown steady performance. The demand for these products remains consistent, regardless of economic fluctuations, making them popular among risk-averse investors.

Risks and Considerations in Reinvesting in Bluechips

Slower Growth Potential:

Blue-chip stocks generally offer slower growth than small-cap and mid-cap stocks, which may not appeal to aggressive investors looking for high returns in a short period.

Sector-Specific Risks:

While blue-chip companies are more stable overall, fluctuating commodity prices and regulatory changes may affect certain sectors, such as energy. Investors should consider sectoral factors before investing.

Interest Rate Sensitivity:

As interest rates rise, some blue-chip companies, especially those with significant debt, may experience increased costs. Rising rates can also affect the discount rate for future cash flows, impacting valuations.

Tips for Investing in Bluechip Stocks

1. Prioritize Diversification:

A diversified portfolio of blue-chip stocks across different sectors can provide stability and growth, minimizing sector-specific risks.

2. Focus on Dividend-Paying Stocks:

Many blue-chip stocks offer dividends, providing an additional income stream. Dividend-paying stocks are often more stable and appeal to investors seeking regular returns.

3. Evaluate Long-Term Fundamentals:

Blue-chip stocks are generally more suitable for long-term investments. Focus on companies with strong fundamentals, steady earnings growth, and sound management practices.

Conclusion 

Overheating small-cap and mid-cap markets have raised concerns about a potential correction, prompting investors to consider blue-chip stocks a safer alternative. With solid fundamentals, defensive qualities, and resilience against economic downturns, blue-chip stocks offer stability and growth potential in a turbulent market. 

As investors reevaluate their portfolios, bluechips appear poised for a comeback. They provide a more balanced approach to long-term wealth creation.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

FAQ

Hindalco, a leading player in the metals sector, recently saw its shares drop by 6% after its U.S.-based subsidiary Novelis reported an 18%  decline in second-quarter profits. This downturn reflects Novelis’s various operational challenges, significantly impacting Hindalco’s overall valuation due to its reliance on the subsidiary for international operations.

Overview of Hindalco’s Business Structure

Hindalco Industries Limited is part of the Aditya Birla Group, a prominent aluminum and copper manufacturing company. It operates domestically and internationally, with Novelis being one of its major assets in the global market. Novelis specializes in rolled aluminum products and has a strong foothold in North America, making it a key contributor to Hindalco’s revenue and profit structure. 

Investors closely monitor Novelis’s performance, which significantly influences Hindalco’s consolidated financial outcomes.

Q2 Performance Highlights for Novelis

Novelis reported an 18% decline in profit for Q2, highlighting challenges in its operational environment. Here are some key aspects of Novelis’ recent performance:

• The company faced a demand reduction, leading to lower revenue. It reported an 18% decline in net income, totaling $128 million for the September quarter of 2024-25.
• The income decline is attributed to a $61 million charge due to production interruptions at the Sierre plant, higher restructuring and impairment expenses, and Weaker operating performance.
• Net sales for Q2 increased by 4.5%, reaching $4,295 million, compared to $4,107 million in the same quarter last year.
• EBITDA per tonne stood at $489/t, with adjusted EBITDA at $462 million for the quarter.
• The decrease in EBITDA was largely due to higher aluminum scrap prices, an unfavorable product mix, and flood-related disruptions at the Sierre plant.

Additional factors contributed to a substantial dip in Novelis’ profitability, triggering concern among Hindalco’s investors.

Stock Performance Over the Past Year

Hindalco shares have gained approximately 37% over the last 12 months, outperforming the Nifty 50 index, which rose by 26% over the same period.

Market Reaction to Hindalco’s Stock

Following Novelis’ Q2 results, Hindalco’s shares fell by 6%, reflecting investor apprehension over the company’s profitability and growth trajectory. This reaction is rooted in Hindalco’s dependence on Novelis as a revenue stream, and the profit contraction in the subsidiary could have a prolonged impact on Hindalco’s financial stability.

The market response can be attributed to several underlying concerns:

1. Reliance on Novelis for Revenue: Investors recognize that Hindalco’s performance is highly correlated with Novelis. Any adverse performance in Novelis quickly translates into diminished earnings for Hindalco.
2. Impact on Earnings per Share (EPS): Lower profits from Novelis are expected to affect Hindalco’s EPS in upcoming quarters, making it less attractive to investors focused on growth and dividend income.
3. Future Growth Concerns: Given Novelis’ challenges, the market is wary of Hindalco’s short-term growth prospects, which could impact its valuation.

Potential Impact on Hindalco’s Financial Health

Novelis’ performance dip presents several implications for Hindalco’s financial health and strategic direction. Some of the potential effects include:

• Short-Term Earnings Volatility: Hindalco might experience volatility in its earnings, especially if Novelis continues to face operational and market challenges. The profit margins could remain pressured, influencing Hindalco’s overall profitability.
• Need for Diversification: The dependence on Novelis may prompt Hindalco to explore additional growth opportunities in other regions or sectors to minimize the impact of Novelis’ performance on its consolidated results.
• Investor Sentiment and Stock Valuation: Continued weakness in Novelis’ results might lead to a conservative outlook from analysts, affecting Hindalco’s stock rating and valuation multiples in the near term.

Strategic Response from Hindalco and Novelis

To counteract Novelis’s challenges, Hindalco may implement several strategies to restore investor confidence and improve profitability. Here are potential steps that Hindalco and Novelis could consider:

1. Operational Efficiency Initiatives: Both companies may optimize operational efficiency to reduce costs. This could involve streamlining supply chain processes and adopting energy-efficient technologies to lower production expenses.
2. Hedging Against Input Costs: Hindalco might use hedging strategies to manage raw material and energy cost fluctuations, which would provide some protection against price volatility.
3. Product Portfolio Diversification: By expanding into other product lines or enhancing existing ones, Novelis could mitigate its reliance on any one sector, like automotive, which has shown instability.
4. Expansion into Emerging Markets: Hindalco and Novelis might look toward emerging markets, where demand for aluminum is expected to grow due to infrastructure projects and industrialization. These markets could offer new revenue streams and counterbalance challenges in North America.

Outlook for Hindalco Industries

Despite the current setback, the company has a track record of adapting to market fluctuations. In the long term, Hindalco could recover if it manages to leverage growth opportunities, particularly as the demand for sustainable and lightweight materials grows across industries. Here’s a look at the factors that could support Hindalco’s future growth:

• Sustainability Initiatives: Both companies invest heavily in sustainable manufacturing practices, including recycling initiatives. This focus aligns well with the global shift toward sustainability, potentially attracting new clients in the eco-conscious markets.
• Focus on Premium Products: Novelis can emphasize premium offerings like high-strength aluminum alloys, which are in demand in aerospace and electric vehicle (EV) manufacturing. These premium products command higher margins and are less susceptible to price wars.
• Growth in Electric Vehicles (EVs): The ongoing shift to electric vehicles presents a substantial opportunity for aluminum manufacturers. Lightweight materials are essential for enhancing EV efficiency, and Novelis could capture this growing demand by strengthening its EV sector partnerships.

Conclusion

The recent 6% drop in Hindalco’s share price underscores Novelis’ financial performance’s impact on the parent company. While challenges persist, Hindalco’s proactive strategies and strong industry position could help it navigate this period of volatility. By focusing on operational efficiencies, diversifying its product offerings, and expanding into emerging markets, Hindalco could strengthen its foundation for future growth.

Investors may need to monitor the company’s forthcoming quarters to see if these strategies positively impact its financial health. As the global economic landscape evolves, Hindalco’s ability to adapt and leverage new opportunities will determine its long-term stability and attractiveness as an investment option.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

FAQs

The pharmaceutical industry is no stranger to long-term investments in research and development (R&D). One of India’s prominent pharmaceutical companies, Wockhardt, witnessed an unprecedented stock surge, climbing fivefold due to the success of a unique molecule developed over 25 years. 

In July, Wockhardt’s new drug Zaynich, an antibiotic targeting highly resistant infections, helped treat a challenging infection in a young cancer patient in California. News of Zaynich’s successful trials is already boosting Wockhardt’s stock price, with some investors making long-term bets on the company.

Wockhardt’s shares have struggled, underperforming the Nifty 50 by over 150% over the past decade, impacting its reputation as an investment. However, its recent breakthrough antibiotic drug has sparked interest from mutual funds and prominent investors. 

Mutual funds and high-net-worth investors like Rekha Jhunjhunwala were among the first to spot the opportunity. The stock has surged 5x in a year to over INR 1,100 per share, yet the company’s financial struggles persist. It has reported losses for 11 straight quarters, its return ratios have declined for over a decade, and its sales growth remains highly inconsistent.

For Wockhardt chairman Habil Khorakiwala, it was a wait spanning over two decades. His first antibiotic, WCK771, began its journey in 2000, with Zaynich standing out as a promising lead that his scientists were hopeful about.

What is Zaynich

It is an antibiotic designed to combat bacterial infections that have developed significant resistance to other treatments. Known as WCK5222 or Zaynich, this unassuming drug has captured the attention of investors. Wockhardt now has an opportunity to reclaim its former glory.

WCK 5222: Zaynich

Indication Potential -Complicated Urinary Tract Infections -Complicated Intra-abdominal InfectionsBlood Stream Infections	WCK 5222 -Patents: Compound & Composition patent, granted in key markets. -Qualified Infectious Disease Product status granted by USFDA -Key opinion leaders from US, EU & China.
Treatment Regimen -Hospital Injectible -TID for 7-14 Days	WCK 5222 -Patents: Compound & Composition patent, granted in key markets. -Qualified Infectious Disease Product status granted by USFDA -Key opinion leaders from the US, EU & China.

The Financial Impact: Why Wockhardt’s Stock Surged

• Stock Market Reaction: Wockhardt’s stock performance reflected strong investor sentiment, rallying five times its previous value as news of the molecule’s success spread. This reaction highlights the market’s confidence in the drug’s revenue potential.
• Attraction for Institutional Investors: A breakthrough drug with regulatory approval attracts institutional investors. This spike indicates heightened interest, setting Wockhardt apart from its competitors in the pharmaceutical sector.
• Regulatory Milestones: According to reports, Wockhardt plans to secure Indian regulatory approval for Zaynich by March next year. Phase three clinical trials are expected to conclude by early 2026, and a global launch could follow by mid-2026.
• Breakthrough in Antibiotic Innovation: Zaynich combines Wockhardt’s drug, zidebactam, with cefepime, a Bristol-Myers Squibb antibiotic, and is one of the rare treatments effective against various difficult-to-treat pathogens discovered in the last five decades.
• A Timely Solution to Antibiotic Resistance: In a world where antibiotic misuse is rampant, fatal infections from resistant pathogens are becoming a leading cause of death. Zaynich provides critical hope, especially for patients facing severe infections after complex surgeries.
• Expansive Market Opportunity: According to Khorakiwala, this drug could benefit approximately 700,000 patients in the US alone, and it has an even larger market in India, impacting over 1.1 million. Source: Economic Times

Challenges and Future Prospects

Wockhardt is conducting a global phase three clinical study for Zaynich, indicating advanced human testing across multiple countries. Successful completion of this study could lead to registrations and marketing authorizations within the next two years.

Pricing Strategy

• When Zaynich becomes available in India, Wockhardt plans to price it at a 75%—80% discount compared to US rates, which range from USD 8,000 to USD 10,000 per treatment course.

Impact of Antimicrobial Resistance (AMR)

• In the US, there are over 2.8 million AMR cases annually, resulting in approximately 48,000 deaths.
• Wockhardt projects that by 2050, AMRs could cause over 8 million deaths worldwide and impact the global economy by USD 100 trillion.

Market Potential

• Zaynich represents a significant advancement in managing bacterial infections, particularly against carbapenem-resistant strains.
• Competitors include Pfizer’s Avycaz, Zavicefta, and Shionogi’s Fetroja.
• The global market for these drugs is expected to reach USD 1 billion, with potential sales for Zaynich projected at around USD 500 million in a few years.

Cautions and Considerations

• Zaynich will not be a first-line treatment due to the need for careful assessment to avoid misuse and resistance.
• Challenges may arise in achieving rapid adoption among doctors. Experts emphasize the importance of effective marketing and distribution for Wockhardt to capitalize on its research investments.
• Alliances with global players are recommended for better licensing and negotiation outcomes.

Competition Landscape

Orchid Pharma achieved a breakthrough with enmetazobactam (Exblifep) earlier this year, receiving FDA approval for complicated urinary tract infections. Companies are focusing on promising molecules to inhibit beta-lactamases, reducing the frequency of AMR development.

Bugworks is another player with promising antibiotic research, particularly with drug BWC0977, which is effective against various life-threatening infections. Other companies like Rempex Pharmaceuticals and Merck are also pursuing new treatment options.

Wockhardt’s Opportunity

Wockhardt faces significant opportunities in the market, but these come with considerable risks. The company’s track record in risk management has been inconsistent.

Historical Challenges

• In the early 2000s, Wockhardt accumulated debt by spending USD 453 million on three international acquisitions.
• The company suffered losses of INR 555 crore from foreign exchange and derivatives during the global financial crisis of 2008, which severely impacted its economic health.
• By 2012, Wockhardt resolved its debt issues through loan restructuring and the sale of hospital assets. It experienced a brief period of recovery, with sales exceeding INR 5,500 crore in FY13.

Recent Struggles

• Following this peak, Wockhardt entered a downward trend, with all seven manufacturing plants facing scrutiny from US regulatory authorities between 2014 and 2019.
• Additional debt restructuring and partial monetization of non-core businesses have kept the company afloat during these challenging years.
• In 2020, Wockhardt sold part of its domestic branded business, including a manufacturing plant in Baddi, Himachal Pradesh, to Dr. Reddy’s for INR 1,850 crore.

Current Risk-Reward Assessment

• With Wockhardt’s stock price already reflecting expectations of potential sales from Zaynich, the current risk-reward ratio appears unfavorable, indicating limited upside potential.
• The company must improve profitability before Zaynich’s launch to justify the current market valuation.

Source: Economic Times

Conclusion

The 25-year journey to develop this molecule speaks volumes about the dedication, innovation, and resilience required to thrive in the pharmaceutical industry. Wockhardt’s success could catalyze more investment in patient-centered R&D, reshaping market dynamics and inspiring confidence in long-term scientific pursuits.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

FAQ

Have you been tracking the movement of Reliance Industries Ltd (RIL) shares? Monday marked a significant moment as RIL shares turned ex-bonus for its sixth and largest bonus issue in Indian history—a 1:1 issue that has doubled shareholders’ stakes. What does this mean for investors, and how has the share price shifted following this major development?

The Bonus Issue and Its Impact on Shareholders

Reliance Industries recently declared a 1:1 bonus issue ahead of its Annual General Meeting (AGM), granting shareholders one bonus share for each share held. This latest bonus issue, the sixth in RIL’s history, is a milestone for the company and its investors. With each bonus issue, shareholders effectively double their holdings without making additional investments. Such an issue, especially on this scale, can profoundly affect stock liquidity, investor sentiment, and long-term market performance.

When RIL shares opened on Monday morning, they were adjusted for the bonus issue, reflecting a starting price of Rs 1,338—a 49.61% drop from Friday’s close of Rs 2,655.45. However, this apparent drop was only an adjustment, with the share price showing a modest gain of 0.77% on an adjusted basis.

How a Bonus Issue Affects Share Price and Shareholding

In financial terms, a bonus issue increases the number of outstanding shares in the market. As a result, the stock price adjusts downward in proportion to the bonus share ratio to keep the company’s overall valuation the same. This adjustment can make shares appear cheaper, often enhancing liquidity and opening doors for more investors. However, it also impacts the company’s free reserves and surplus, as they are adjusted to account for the additional shares.

This bonus issue was RIL’s first since 2017 when the stock was priced at Rs 725.65. Since then, RIL’s stock has surged by nearly 270%, delivering robust returns for its investors. This remarkable growth has led the stock to its latest adjusted value of Rs 2,655.45 just before Monday’s ex-bonus trading session.

Key Historical Context: RIL’s Bonus Issuance Track Record

Reliance Industries has a history of issuing bonuses at strategic points. The company’s previous bonus issuance was in 2009, when shares were issued in the same 1:1 ratio, and the stock turned ex-date on November 26 of that year. Notably, the 1997 issuance was also a 1:1 issue. Before this, RIL offered bonuses in the 6:10 ratio in 1983 and the 3:5 ratio in 1980. Each issuance has played a role in elevating the stock’s liquidity and rewarding shareholders, helping Reliance grow into one of India’s most valuable companies.

Bonus History of Reliance Industries Ltd.
Announcement Date	Bonus Ratio	Record Date	Ex-Bonus Date
05-09-2024	1:1	28-10-2024	28-10-2024
21-07-2017	1:1	09-09-2017	07-09-2017
07-10-2009	1:1	27-11-2009	26-11-2009
13-09-1997	1:1	29-11-1997	27-10-1997
28-10-1983	3:5	30-11–0001

Moreover, RIL has proactively offered rights issues, with five offerings, the latest one issued in May 2020. In a strategic move in July 2023, RIL completed the demerger of Jio Financial Services Ltd, creating additional value streams within its expanding corporate structure.

RIL’s Market Influence Following the Ex-Bonus Adjustment

RIL’s influence on the broader Nifty 50 index cannot be overstated. As shares adjusted for the 1:1 bonus on Monday, Reliance’s stock was a key contributor to the index’s gains, which rebounded after five consecutive days of losses. Monday’s session saw RIL add approximately 20 points to the Nifty, indicating its significant weight on the index and broader market sentiment.

Despite recent market headwinds, RIL’s stock rebounded from oversold levels on Friday. The Relative Strength Index (RSI) dipped to 29.5, indicating that the stock was near an oversold threshold (an RSI below 30 generally suggests this status). By Monday, the stock had rallied, trading at Rs 1,349—up by 1.7% from its adjusted opening price, showing resilience and renewed investor confidence.

Broader Market Trends and RIL Share’s Position

The past month has been challenging for the Indian stock market, with BSE-listed companies losing market capitalization worth ₹41 lakh crore since September 27, when the Nifty reached a record high of 26,277. Amid this market turbulence, Reliance shares declined by 13%, resulting in a loss of Rs. 2.77 lakh crore in market capitalization. However, RIL’s shares have shown stability year-to-date, up by 2.53%, in contrast to the BSE Sensex’s rise of 9.87% over the same period.

Analyst Sentiment: A Mixed Yet Optimistic Outlook for RIL

Market analysts have mixed but generally positive expectations for RIL’s future performance. According to PL Capital Institutional Equities, RIL’s core refining and petrochemical businesses may face challenges soon due to a muted refining outlook. Still, gas production is expected to hold steady at 28-30 mmscmd with realizations of around $10/MMBtu. Furthermore, Jio’s Average Revenue Per User (ARPU) saw a 7% quarter-on-quarter increase, and projections suggest continued growth bolstered by recent tariff adjustments.

RIL’s retail business is expected to maintain steady performance. JM Financial notes that RIL’s strategic focus on renewable energy and the green sector will likely strengthen its position over the coming years. They also highlight the potential for revenue growth in Jio and retail operations within the next 3-4 years.

What Lies Ahead for Reliance Industries

Reliance Industries continues to adapt and expand, both domestically and internationally. The company’s ventures into retail, telecommunications, and green energy signal a forward-looking strategy that positions it for long-term growth. RIL has committed an impressive Rs 75,000 crore to its renewable energy initiatives, which could transform India’s clean energy landscape.

Additionally, analysts believe that the potential demerger of RIL’s retail and Jio Platforms, combined with the expansion of green energy initiatives, could strengthen the company’s value and increase shareholder wealth. 

Conclusion

Reliance’s recent 1:1 bonus issue marks an important chapter in its history, reaffirming its role as a cornerstone of the Indian stock market. For current shareholders, the 1:1 bonus reflects RIL’s strategy to reward its investors while maintaining market liquidity. As RIL diversifies and adapts to market demands, its role within the Nifty 50 remains pivotal. Whether RIL can sustain the momentum of its impressive returns in the future is yet to be seen.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

Are you planning to buy a new car this festive season? If so, you might be surprised to learn that car dealerships across India are grappling with an unprecedented inventory pile-up. 

The Federation of Automobile Dealers Associations (FADA) recently reported that retail car sales in India plummeted by 18.81% in September, creating significant financial pressure on dealerships.

The overall inventory has reached an all-time high, with over 790,000 unsold vehicles worth approximately INR 79,000 crore, representing a supply lasting 80 to 85 days. This situation poses serious challenges to the automotive retail sector, raising concerns about its resilience amid persistent economic pressures and fluctuating demand.

Why the Retail Cars Overstock?

The Indian automotive market, once a beacon of growth, is now facing a period of uncertainty. Several factors have contributed to the current situation:

• Aggressive Dispatches: Automakers, eager to meet production targets, have been aggressively dispatching vehicles to dealerships, even in the face of slowing demand.
• Weak Consumer Sentiment: Rising interest rates, inflation, and geopolitical tensions have dampened consumer sentiment, reducing demand for new cars.
• Shifting Market Dynamics: The market is witnessing a shift towards premium and SUV segments, while demand for entry-level and mid-segment cars has softened.
• Production Challenges: Supply chain disruptions and component shortages have impacted production schedules, leading to an inventory build-up.

The market is also experiencing the impact of frequent new model launches, especially in the compact SUV category, which has led to competition among models and further inventory accumulation. As a result, older models are now piling up in dealerships, unable to keep pace with consumer preferences for the latest offerings. Source: Economic Times

Which Car Brands Are Most Affected?

While the entire industry grapples with inventory issues, some brands are more affected than others. Maruti Suzuki, India’s largest carmaker, is facing a significant inventory buildup, especially for models like the Baleno and Grand Vitara. Hyundai and Mahindra also deal with higher-than-normal inventory levels, particularly for specific models.

1 Mahindra & Mahindra

Mahindra dealers currently hold an average of 50 days’ worth of inventory, with popular models like the Bolero, Scorpio-N, and XUV700 experiencing varying demand across different regions. For example, urban dealerships have seen higher stocks of rural-favorite Bolero models, while tier-II and tier-III cities are witnessing higher supplies of Scorpio-N and XUV700 due to their popularity in metro regions.

2. Kia India

Kia dealers have managed to avoid high discount pressures, holding an average inventory of around 1.5 months. Models like the Seltos continue to perform well, while the recently launched Carnival MPV has drawn attention with a six-month waiting period. The South Korean brand appears less impacted by inventory challenges than other major automakers.

3. Maruti Suzuki India

Maruti Suzuki, India’s largest carmaker, deals with average dealership inventories of 60 days. However, some models like the Baleno and the Grand Vitara carry higher stock levels of up to 90 days. The premium Nexa outlets, which usually offer higher dealer margins, are experiencing flat growth due to high inventory levels.

Conversely, Arena outlets selling high-demand models like the Swift and Brezza have seen better performance, with Brezza carrying a waiting period of 15 days. However, internal competition has also impacted Maruti’s sales; the Swift has cannibalized 20% of Baleno’s sales, while Brezza has similarly affected Grand Vitara sales.

4. Tata Motors

Tata Motors is currently offering substantial discounts on several models, with the Tata Safari carrying a cash discount of INR 25,000 and a price drop of INR 1.8 lakh. The Harrier offers a similar cash discount and a price reduction of INR 1.6 lakh. The Nexon iCNG and electric models have drawn strong demand for Tata dealerships. In October, Tata adjusted its targets to reduce inventory; the company reduced its wholesale targets while raising retail goals to help dealers clear stock from an initial 90-day inventory level at the start of the month to 45 days by month-end.

5. Hyundai Motor India

Hyundai dealerships operate with inventories of 45 to 60 days, though the flagship Creta SUV is an exception, remaining a fast-mover without any discounts or significant stock buildup. The newly launched Alcazar has shown promise in the market, but models like the Exter are seeing slower demand, with inventory levels around two months. According to Samir Choudhry of Trident Automobiles in Bengaluru, a dealer’s business judgment often influences inventory decisions, but rapid stock build-up can lead to financial stress. Source: Economic Times

The Impact on Dealers

This oversupply of vehicles has put significant financial pressure on car dealerships. With unsold inventory piling up, dealers face challenges in managing cash flow and meeting their financial obligations. They are resorting to heavy discounts and promotional offers to clear the stock, which can erode profit margins. Many automakers, like Tata Motors, have restructured targets to adjust the stock burden on dealerships, while others are focusing on clearing older models through increased promotions.

New model launches and special editions are also being leveraged to drive showroom traffic, offering potential buyers an incentive to consider other available models alongside these fresh releases. Vehicles like the 2024 Maruti Suzuki Swift, Hyundai Alcazar, and Mahindra 3XO, as well as special editions from multiple automakers, are generating significant interest. However, most new models are in high demand and do not suffer from inventory overhang.

Outlook for Indian Car Dealerships

Dealerships hope the Diwali season will clear most of the current stock, and FADA is optimistic about improved sales continuing into November. However, the overall sentiment remains cautious, as several external factors have impacted auto sales over recent months, including a prolonged election season, extreme weather, and regional floods.

The Road Ahead

To address the overstocking issue, automakers and dealers may need to adopt a more cautious approach to production and inventory management. This could involve adjusting production schedules, offering more attractive financing options, and implementing innovative marketing strategies to stimulate demand.

As consumers, this presents an opportunity to negotiate better deals and secure significant discounts on new cars. However, it’s essential to carefully consider your needs and budget before making a purchase. The Indian auto industry is undoubtedly going through a challenging phase. However, it can emerge stronger and more resilient with the right strategies and adjustments.

*Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as recommendation or investment advice by Research & Ranking. We will not be liable for any losses that may occur. Investment in securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL, and certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

How does a ₹8,100 crore deal impact the Indian cement industry? How does it position Ambuja Cements, an Adani Group company, in its race to reach 100 million tonnes per annum (MTPA) cement capacity by 2025? These are the key questions that the latest acquisition by Ambuja Cements raises as the company continues its aggressive expansion strategy under the leadership of Adani Group.

On Tuesday, Ambuja Cements announced it will acquire a 46.8% stake in Orient Cement Ltd (OCL) for an equity value of ₹8,100 crore. This deal aims to bring Ambuja Cements closer to its target of achieving 100 MTPA capacity by the 2025 financial year and increasing its market share across India by approximately 2%. 

Key Details of the Acquisition

The acquisition will take place in two stages. First, Ambuja Cements will acquire 37.9% of Orient Cement’s shares from the company’s promoters and 8.9% from select public shareholders. Following this, Ambuja plans to launch an open offer to acquire an additional 26% stake in OCL’s expanded share capital.

The open offer will be priced at ₹395.40 per share, in line with the Substantial Acquisition of Shares and Takeovers (SAST) regulations. This open offer is expected to be completed within 3-4 months. Source: MoneyControl

This is Ambuja Cements’ fifth major acquisition since Adani Group took control of the company in September 2022. Prior to this, Ambuja made headlines with its June acquisition of Hyderabad-based Penna Cement, signaling its intention to consolidate its presence in South India. This latest move adds to Ambuja’s production capacity, boosting it by 8.5 million tonnes and bringing its total cement capacity to 97 MTPA. The company has set an ambitious goal of reaching 140 MTPA by 2028.

Strategic Significance of the Deal

Orient Cement’s plants in Telangana, Karnataka, and Maharashtra are crucial to Ambuja’s strategy to expand its footprint in South India.

The South Indian market is seen as a hotspot for infrastructure-driven demand, with major projects like the development of Andhra Pradesh’s new capital, Amravati, set to drive cement consumption. The Union Budget 2024 allocated ₹15,000 crore for Amravati’s development, which is expected further to spur demand for construction materials, including cement.

The acquisition also provides Ambuja access to Orient’s high-quality limestone reserves, an essential raw material in cement production. With existing statutory approvals in place, there is potential to increase Orient’s cement capacity from its current 8.5 MTPA to 16.6 MTPA in the near future. Source: Livemint

Competitive Landscape: Ambuja vs. UltraTech

Ambuja’s aggressive expansion in South India puts it head-to-head with UltraTech Cement, India’s largest cement producer, currently holding over 180 MTPA capacity. UltraTech, a key competitor, aims to reach 200 MTPA by 2027 and has also been expanding its presence in the South with its acquisition of Penna Cement. 

The southern region is becoming a key battleground for cement companies due to the expected rise in infrastructure demand. Cement firms are scrambling to secure production capacity to meet the upcoming demand boom, and Ambuja’s acquisition of Orient Cement is a significant step in this direction.

Stock Market Reaction

The news of the acquisition immediately impacted the stock prices of both Ambuja Cements and Orient Cement. Ambuja’s shares rose modestly, trading up 1.49% at ₹580 on the announcement day, while Orient Cement’s shares increased by 1.65%, trading at ₹358.25. However, despite this initial positivity, both companies’ stocks experienced a decline amid broader market corrections. Ambuja’s stock closed 2.4% lower at ₹558, while Orient Cement fell 2.5% to ₹343.4. 

Despite this short-term dip, Ambuja’s stock performance over the past year has been strong. Its share price has risen by 35%, significantly outpacing the 24% gain in the benchmark Sensex.

Adani’s Cement Strategy

Adani Group entered the cement sector by acquiring Ambuja Cements and ACC Limited in September 2022 for $10.5 billion, a strategic move to fill a key gap in its infrastructure portfolio. With its substantial interests in coal, power, logistics, and real estate, Adani saw significant synergies in integrating cement production into its ecosystem. 

These synergies offer Ambuja the potential for cost reductions in cement production, as Adani’s coal and power businesses provide essential inputs for the energy-intensive cement manufacturing process. This vertical integration is expected to give Ambuja a competitive edge in cost and efficiency.

In addition to the Orient Cement acquisition, Ambuja also acquired Sanghi Industries in Gujarat in August for an enterprise value of ₹5,000 crore. Sanghi Industries’ 6.1 MTPA production capacity further strengthens Ambuja’s market position, particularly in Western India.
Source: Economic Times

Conclusion

With the acquisition of Orient Cement, Ambuja Cements is solidifying its position as one of the dominant players in the Indian cement industry. The deal brings the company closer to its 100 MTPA capacity goal and enhances its presence in the crucial South Indian market. While Ambuja still faces stiff competition from industry leader UltraTech, its strategic acquisitions and synergies within the Adani Group position it well for the future.

*Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as recommendation or investment advice by Research & Ranking. We will not be liable for any losses that may occur. Investment in securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL, and certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

The Kamath brothers, founders of Zerodha, are known not just for running one of India’s top brokerage platforms but also for their varied investment choices. Their latest big move? They’ve invested Rs. 100 crores in Nazara Technologies, a gaming company set to ride the wave of India’s booming gaming scene. With 450 million gamers and a rapidly expanding market, Kamath is betting on the future of gaming.

Through his investment firm, Kamath Associates & NK Squared, he purchased ₹100 crore worth of shares in Nazara Tech at ₹714 per share. In this article, we’ll explore why Kamath chose Nazara and the growth of the gaming industry in India.

Per PWC’s Global Entertainment and Media Outlook, the Indian online gaming market is projected to grow at a compound annual growth rate (CAGR) of 14.5%, doubling from ₹33,000 crore in 2023 to ₹66,000 crore by 2028. Source: Mint

Nikhil Kamath’s Vision for the Gaming Sector

Before we discuss the growth of the gaming industry, let’s examine some interesting facts about Nikhil Kamath. His story is truly inspiring. Starting with just ₹ $8,000 at a call center, he built a fortune of $3.07 billion. As the co-founder of Zerodha, Kamath changed the brokerage industry with a zero-brokerage model, similar to how Jio transformed the telecom industry.

His belief in India’s rising consumption power has fueled his investments in companies that cater to growing Indian consumer demands. One of the most prominent examples is Kamath’s backing of Nazara Technologies, a leading name in Indian esports and gaming. He views Nazara Technologies as a key player in the gaming industry, which holds a unique position as one of India’s few listed gaming entities.

Why Did Kamath Place Big Bets on Nazara?

• Established Gaming Leader: Founded in 1999, Nazara has grown into India’s leading gaming and sports media company, driven by its mergers and acquisitions strategy.
• Diversified Revenue Streams: Nazara’s portfolio is well-diversified, including popular brands like Kiddopia, Sportskeeda, and Nodwin. In FY24, gaming accounted for 36% of its revenue, with 55% coming from esports and 9% from ad tech.

• Impact of GST Changes: Nazara’s shares dropped but quickly recovered, as the Real Money Gaming (RMG) segment minimally contributed to the company’s overall revenue after the announcement of GST changes.
• Cautious Expansion Approach: Due to ongoing regulatory uncertainties, the company took a cautious approach to expanding in the RMG segment.

Why the Gaming Industry?

India’s gaming industry has witnessed an exponential rise in recent years, with mobile gaming and esports leading the way. According to Kamath, the country’s increasing digital penetration and improved internet infrastructure have created a favorable environment for gaming companies to flourish. Moreover, with the younger population embracing esports and mobile games, the sector is expected to grow even further.

Enormous Potential in Gaming

• Kamath’s View on Gaming: Nikhil Kamath believes the gaming industry, particularly esports, has huge potential and could become the next big thing in India.
• Global Market Insights: On X (formerly Twitter), Kamath highlighted that the worldwide gaming market was worth $159.3 billion in 2020, nearly triple the $60.8 billion market of the film and music industries combined.
• India’s Gaming Landscape: With 45 crore gamers, including 18 lakh esports enthusiasts, India has become a major player in the gaming world. The online gaming community is growing at an impressive 10% CAGR annually. Projections indicate that by 2028, India will surpass China with 720 million gamers.
• Growth Potential: EY’s New Frontiers report indicates India’s gaming penetration is at 30%, which lags behind other countries like the USA (56%), China (53%), and Japan (83%), revealing immense room for expansion.

Young and Tech-Savvy Population

• Demographic Advantage: According to the India Brand Equity Foundation (IBEF), India is the youngest country in the world, with 45% of its population—over 60 crore people—under the age of 35. This youthful and tech-savvy demographic is a significant growth driver for the gaming industry.
• Internet Usage Trends: Gaming made up 53% of internet usage in 2023, following OTT platforms, communication, and social media. The rising smartphone users, expected to exceed 1 billion by 2025, will further boost gaming growth.

Source: Mint

Economic Growth and Revenue Opportunities

• Rising Income Levels: As India transitions from a low-income to a middle-income nation, its per capita income is projected to exceed $26,000 by 2047, a dramatic rise from the current $2,484.
• Revenue from In-App Purchases: Economic growth will likely lead to increased spending on in-app purchases, which currently account for 70% of mobile gaming revenue. This growth will drive revenue from free-to-play games through ads, subscriptions, and sponsorships.

Source: Mint

Financial Analysis of Nazara Technologies

Nazara Technologies has positioned itself as a leader in the space by building a diverse portfolio across gaming, esports, and edutainment. The company’s growth trajectory and strong foothold in emerging markets made it a perfect fit for Kamath’s investment philosophy, which seeks to tap into industries with high potential for consumer spending.

Market Cap as of 22.10.24 (In Cr)	Revenue		Net Profit		Stock Price CAGR (1Yr)	PE Ratio
	March 2024	March 2023	March 2024	March 2023
Rs. 6647	1138	1091	75	61	15%	79.6

Nazara has experienced slow growth over the past year, with revenue rising slightly from ₹1,091 crore in FY23 to ₹1,138 crore in FY24. Although revenue remained flat due to cost control measures, the company increased its net profit from ₹61 crore to ₹75 crore, registering a 20% growth. 

Merger & Acquisitions

• Nazara has actively pursued mergers and acquisitions, spending over ₹1,800 crore in the last six months, which could potentially double its revenue within two years.
• Recent acquisitions include Comic Con India, which hosts events related to popular culture, such as comics, cosplay, movies, merchandise, and gaming. The company has also acquired Publish. Me, Fusebox, Ninja, Freaks4U (investment), and Branded.
• In addition, Nazara launched its publishing division, “Nazara Publishing,” which promotes games developed by Indian creators. The company plans to release up to 20 games across mobile, web3, virtual reality (VR), and personal computers (PC) by mid-2025.

Source: Mint

Strategic Alignment: Zerodha and Gaming

While Zerodha is primarily known as a brokerage platform, the Kamaths’ investment in gaming reflects their broader interest in the Indian consumption story. 

Their exposure to sectors like gaming is rooted in the notion of identifying industries with untapped potential. His private investment vehicles, Kamath Associates and NK Squared, have a track record of backing consumer-focused startups like Licious (a meat delivery platform) and Third Wave Coffee. This demonstrates the Kamath brothers’ preference for companies that cater to everyday Indian consumers.

Business Model of Gaming Companies

The gaming industry faces significant hurdles due to regulatory uncertainties, which could impact its growth trajectory.

• Diverse Business Models:
  • Free Games: Include freemium, shareware, and ad-funded models.
  • Paid Games: Operate on upfront payments, subscriptions, and Real Money Gaming (RMG). In RMG, players pay an entry fee contributing to both platform revenue and prize pools for winners.

Regulatory Setback

• Complex Regulatory Landscape: The online gaming landscape in India has become increasingly complicated, especially for RMG, which is taxed at 28%.
• Tax Implications:
  • Games outside the RMG category face an 18% tax on platform fees.
  • The recent tax hike has caused turmoil in the industry, leading states like Tamil Nadu to ban RMG games despite the Supreme Court classifying them as skill-based.
• GST Changes:
  • Until mid-2023, GST was applied at 18% on gross gaming revenue.
  • The government’s decision to impose a higher GST rate of 28% on the entire contest entry amount (CEA) has significantly affected the ecosystem, dramatically increasing companies’ tax liabilities.
  • For example, a platform that previously paid ₹1.8 in GST on a ₹100 entry fee now faces a tax of ₹28.
• Financial Consequences:
  • The GST authorities have raised a demand exceeding ₹1.12 trillion due to this tax revision, which is currently under judicial review.

India’s Gaming Sector: A Growth Story

Despite all the regulatory hurdles and challenges, India’s gaming market is experiencing a phenomenal rise. The RMG market (Real Money Gaming) continues to be the largest segment in India’s gaming industry, generating ₹16,500 crore in revenue in 2023 and representing 83-84% of the overall gaming market.  The esports segment, in particular, has surged thanks to the rise of professional gaming leagues and competitions.

Nazara Technologies has played a pivotal role in shaping the Indian gaming landscape. As one of the few publicly listed gaming companies in the country, it has diversified its offerings across esports, interactive gaming, and learning apps for children, positioning itself as a multifaceted player.

The Future of Gaming Stocks in India

With the gaming industry’s rapid growth, more Indian companies will likely go public in the coming years. Nazara Technologies is a rare publicly listed gaming stock, but as investor interest grows, it could pave the way for other gaming firms to follow suit.

Conclusion

As India’s gaming market expands, the Kamaths’ early investment in this space could unlock new opportunities. Their diversified investment approach, which includes exposure to the gaming industry, highlights their foresight in identifying sectors that will drive India’s consumption story forward.

Their involvement in the gaming industry through Nazara Technologies is another example of their forward-thinking investment philosophy.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

FAQ

Bajaj Auto, the renowned Indian two-wheeler manufacturer, experienced a significant 9.5% drop in its stock price on Thursday, October 17th, 2024. This decline followed the release of disappointing second-quarter (Q2) FY25 financial results and a downward adjustment to the company’s full-year sales forecast.

Bajaj Auto Share Price Tumbles 9.5%

Bajaj Auto Q2 Performance Misses Expectations

While Bajaj Auto reported a 9.2% year-on-year increase in net profit for Q2, this figure fell short of analyst expectations. Investors were likely anticipating a stronger showing, particularly given the company’s previous track record.

Moreover, revenue surpassed the ₹13,000 crore milestone for the first time, reaching ₹13,247 crore for the quarter ending September 2024 – an increase of 20% compared to ₹10,838 crore in the same quarter last year. However, some analysts might have anticipated a more substantial growth. The profit for the quarter stood at ₹1,385 crore, reflecting a 37% decline from the ₹2,020 crore reported in the corresponding period of the previous year. Source: Moneycontrol

Financial Metrics:

Market Cap in Crores (as of 17.10.24)	CMP	PE Ratio	Revenue in Crores(Q2FY25)	Net Profit in crores(Q2Fy25)	Stock Price CAGR (5 Yrs)
₹2,89, 219	₹10,357	39.2	₹!3,247	₹1,385	30%

However, the bigger concern for investors was the company’s downward revision of its sales guidance for FY25. This suggests that Bajaj Auto is anticipating slower growth in the coming quarters than its initial projections.

Brokerages Turn Cautious

The weak Q2 performance and revised guidance have prompted several brokerages to adopt a more cautious stance on Bajaj Auto’s stock. While some analysts remain bullish on the company’s long-term prospects, they acknowledge the near-term challenges.

Brokerage Views:

• Macquarie: Maintains a “neutral” rating, citing disappointing gross margins.  
• Jefferies: Expresses optimism on the auto sector overall but remains cautious about Bajaj Auto.
• Citi issued a ‘sell’ recommendation for Bajaj Auto with a target price of ₹7,800 per share, indicating a potential downside of 33% from the last closing price ₹11,616. 
• Citi was surprised by the cautious outlook on festive demand despite Vahan data showing a 12% year-on-year increase in registrations.
• HSBC sets a target price of ₹14,000 per share for Bajaj Auto, highlighting its 30% growing market share. 

These mixed brokerage signals have contributed to the uncertainty surrounding Bajaj Auto’s near-term prospects. Investors are likely waiting for further clarity before making any significant investment decisions.

Source: Moneycontrol

Potential Reasons for Lower-Than-Expected Performance

Multiple factors may have affected Bajaj Auto’s lackluster Q2 performance and lowered guidance. Some potential reasons include:

• The company’s Q2 performance fell slightly below expectations, primarily due to a marginal miss in average selling prices (ASPs) and gross margins.
• Slowdown in Domestic Demand: The Indian two-wheeler market may be experiencing a slowdown, which could impact Bajaj Auto’s sales volumes.
• Rising Input Costs: Inflationary pressures and an increase in the cost of raw materials could be squeezing profit margins.
• Supply Chain Disruptions: Ongoing global supply chain disruptions might hinder the company’s ability to meet production targets.

Can Bajaj Auto Recover?

Despite the recent setbacks, Bajaj Auto remains a leading player in the Indian two-wheeler market. HSBC expects the next major disruption to come from the formalization of the e-rickshaw market, with Bajaj Auto’s potential entry playing a key role in this development.

The company enjoys a strong brand reputation, a robust distribution network, and a commitment to innovation. Here are some key factors that could influence the company’s future performance:

• Demand Recovery: A potential rebound in domestic two-wheeler demand could significantly improve Bajaj Auto’s sales figures.
• Cost Management: Effective cost management strategies could help mitigate the impact of rising input costs and improve profitability.
• Focus on Exports: A continued focus on exports could provide a vital source of growth for Bajaj Auto.
• Product Launches: Introducing new and innovative products could help Bajaj Auto maintain its competitive edge in the market.

The coming quarters will be crucial for Bajaj Auto. The company’s ability to navigate the current challenges and capitalize on growth opportunities will determine its future trajectory.

Investor Takeaway

The recent sell-off in Bajaj Auto’s stock presents an opportunity for investors to take a calculated approach. The near-term outlook appears cautious, and investors should consider their risk tolerance and investment horizon before making any decisions.

Further Considerations:

• Monitor future company announcements and analyst reports for updates on Bajaj Auto’s performance.
• Analyze the overall health of the Indian two-wheeler market and the broader economic landscape.
• Compare Bajaj Auto’s performance with those of its competitors.

*Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as recommendation or investment advice by Research & Ranking. We will not be liable for any losses that may occur. Investment in securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL, and certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

Ratan Naval Tata, one of India’s most revered industrialists, passed away on Wednesday at Mumbai’s Breach Candy Hospital at 86. The Chairman Emeritus of Tata Sons and recipient of India’s second-highest civilian honor, the Padma Vibhushan, had been in critical condition. Despite being under intensive care, his passing has left a nation mourning the loss of an iconic leader.

Ratan Tata was not just an industry titan—he embodied empathy, humility, and an unwavering moral compass. During his two-decade tenure as Chairman of Tata Sons, he transformed the group into a global powerhouse, steering it through an era of rapid globalization.

Under his leadership, Tata Sons became synonymous with trust, integrity, and excellence—values that Ratan Tata consistently championed throughout his career. So, what’s next? How is the market reacting to this news?

NOW SEE: Tata Motors Share Price | Tata Steel Share Price | Tata Power Share Price

Impact of Ratan Tata’s Death on Tata Sons & the Market

Ratan Tata’s passing has undoubtedly left a vacuum in both the leadership of Tata Sons and the wider Indian business community. As the stock markets reacted to the news, the performance of Tata Group companies came under scrutiny.

Tata Motors experienced a slight decline, while companies like Tata Chemicals and Indian Hotels surged in early trade. Investors and analysts are assessing the long-term implications of this loss, not just for the Tata Group but for the Indian market as a whole. 

Over the years, Tata Sons has evolved into a global conglomerate interested in diverse industries such as technology, automotive, and steel. Yet, the group’s core remains firmly rooted in the values that Ratan Tata championed.

The current chairman, Natarajan Chandrasekaran, acknowledged this in a heartfelt statement, emphasizing that Ratan Tata’s leadership will continue to influence the group’s direction for years. As the group moves forward, the ethos and principles Ratan Tata embodied—integrity, social responsibility, and global excellence—will remain at the heart of its operations. 

ALSO CHECK OUT: TCS Share Price | Tata Elexsi Share Price | Tata Chemicals Share Price | Tata Consumers Products Share Price

Financial Performance of Tata Group Stocks

Several Tata Group companies have seen increased market activity after Tata’s passing. Trent Ltd., in particular, has rallied by 168% in 2024, reflecting the group’s strong financial performance.

Despite the mixed results in Tata Motors and Trent, other companies within the conglomerate, including Tata Consultancy Services (TCS), Tata Elxsi, and The Indian Hotels Company Ltd., have remained solid performers.

Investors continue to watch closely as Tata Group’s financial strategies under Chandrasekaran evolve, with Ratan Tata’s enduring influence providing a steadying force.
Source: Business Standard

A Beacon of Corporate Leadership and Social Responsibility

Tata’s leadership extended far beyond financial success. His vision was rooted in social responsibility, believing a company’s success lies in how much it gives back to society. During his time at the helm, Tata Trusts grew into one of India’s largest philanthropic organizations, supporting education, healthcare, and rural development initiatives. This deep sense of duty to society became a cornerstone of his leadership, with projects that improved the lives of millions, particularly in underserved communities.

While his acquisitions of global brands like Tetley and Jaguar Land Rover made headlines, Tata’s greatest legacy was his commitment to creating a more equitable world. He famously said that a company’s welfare must be linked to the welfare of society—a principle that continues to guide Tata Sons today.

Ratan Tata’s Passionate Legacy

One of the more personal facets of Ratan Tata’s legacy was his profound compassion for animals, especially dogs. In 2018, he ensured a dedicated kennel was built at Bombay House to shelter stray dogs who frequented the headquarters. In July 2023, he inaugurated India’s first Small Animal Hospital in Mumbai. Spanning 98,000 square feet, the hospital offers advanced treatments like ICUs, CT scans, and specialized care, further exemplifying Tata’s empathy and commitment to improving all human and animal lives.

Humility Amid Greatness

His humility set Ratan Tata apart from many other business magnates. He never appeared on billionaire rankings despite leading one of the world’s most valuable conglomerates. This was mainly due to the unique structure of the Tata empire, with much of its profits channeled into charitable trusts.

Stories of his kindness are well-known. In one poignant example from 2021, Tata quietly traveled from Mumbai to Pune to visit a former employee who had been ill. It was a simple but profound reminder that behind the towering business legacy was a man who deeply valued personal connections and never forgot the people who contributed to his journey.

A Lasting Impact on Indian Business and Society

Ratan Tata’s legacy goes beyond financial success. His contributions to the business world and philanthropic endeavors have shaped the Indian corporate landscape and impacted millions of lives. While his passing marks the end of an era, his values and vision will continue to shape the future of Tata Sons and the Indian industry for generations.

As we reflect on his life and legacy, we are reminded of his own words, which perfectly encapsulate the spirit of his journey: “I would like to be remembered as somebody who had never hurt others and done work in the best interest of business. Remember me as a person who made a difference. Not anything more, not anything less.”

Ratan Tata made that difference. His life was humble, compassionate, and dedicated to building a better world—for business, society, and all beings. His legacy will endure as a beacon of leadership, kindness, and integrity.

Fundamentals of Companies

Tata Motors share price review: All you need to know

Tata Steel Share Price: All You Need To Know

Tata Consultancy Services Share Price: All You Need To Know

Tata Elxsi Share Price: All You Need to Know

Tata Chemicals Share Price: All You Need To Know

Tata Consumer Products Share Price: All You Need To Know

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

The Tata Group, one of the biggest conglomerates in India, has an incredible growth story to share over the last five years. One of its companies, Trent, has experienced a whopping fivefold increase in income, a remarkable achievement for a company of its size.

This impressive growth, especially considering the challenges of such a large organization, highlights the firm’s smart strategies, ability to adapt to the market, and operational efficiency. Let’s dive into how this Tata firm achieved record income and keep that momentum going!

Surge in Trent Share Price

Tata Firm Trent ranks among the top three fastest-growing companies across all sectors in the last five years. In 2019, Trent’s total income was Rs. 2,671 crore, which surged to Rs. 12,664 crore by 2024—marking a 5x increase or an impressive annual growth rate of 36%. Even more remarkable is the company’s profit growth, which soared at an astounding 73% annually over the same period. Trent’s shares skyrocketed by an incredible 1,490% between 2019 and 2024.  Source: Economic Times

Zudio: Major Growth Driver

One primary driver of this impressive growth is Zudio, Trent’s value-fashion chain. Launched a decade ago, Zudio has evolved significantly. It started as a clothing section within Star Bazaar, but its success led to dedicated stores nationwide.

Zudio began as an apparel brand within Star Bazaar, and at some point, it was officially named Zudio. According to industry experts,  Trent has significantly outpaced the industry, delivering a leading LFL growth (LFL stands for “Like for Like” and is a measure of sales growth that adjusts for new or closed stores and newly acquired companies) of +10%, gaining market share in the apparel segment, particularly in the value format. 

Despite an aggressive store expansion strategy, Trent has maintained a strong balance sheet with no operational weaknesses. 

Here is a list of 15 fast-growing companies over the last five years. While several matched Trent’s growth rate, they were relatively smaller. Many attribute this success to timing—being in the right market at the right time. Trent capitalized on the post-COVID-19 “revenge spending” wave, as consumers with disposable incomes in urban and semi-urban areas were eager to spend.

Company	Total Income (In crores)	Sales Growth from FY19 (x)	PAT (In Crores)	PATM (%)	ROCE (%)	PE (x)	1Y (%)
Indus Towers	30,171.0	4.0	6036.2	21.1	34.9	15.3	100.3
Dixon Tech.	17,713.5	5.9	374.9	2.1	34.7	196.4	168.4
Trent	12,664.4	4.7	1477.5	11.1	59.8	158.6	286.9
Adani Green Energy	10,460.0	4.8	1260.0	13.7	10.0	243.9	90.0
Delhivery	8594.2	5.1	-249.2	-3.1	-1.7	0.0	1.6
Bajaj Housing Finance	7617.7	6.6	1731.2	22.7	9.4	73.6	NA
FSN E-commerce Ventures	6415.6	5.5	43.7	0.7	8.1	0.0	28.8
CreditAccess Grameen	5172.7	4.0	1445.9	27.9	14.8	12.8	-9.0
Swan Energy	5100.1	5.6	585.9	11.7	9.8	48.7	97.3
Angel One	4279.8	5.4	1125.6	26.4	38.8	19.6	40.5
Route Mobile	4063.8	4.8	388.8	9.7	21.9	27.5	-0.7
RHI Magnesita India	3792.1	4.9	-100.1	-2.7	1.2	0.0	-16.5
GMM Pfaudler	3469.9	6.8	174.1	5.0	21.4	40.3	-23.5
JITF Infralogistics	3336.6	5.7	90.8	2.8	16.6	38.2	114.8
Sona BLW Precision Forgings	3208.8	4.6	517.8	16.3	25.9	83.0	25.3

Trent is currently the fastest-growing Indian company, boasting an impressive return on capital employed (ROCE) of about 60%. This figure has surged from 16% in FY22 to 60% in FY24. Fund managers who overlooked the company in 2022 due to its high PE multiple of 429x are now reconsidering their stance, questioning whether they should invest at a PE multiple of 160x.

Companies like Route Mobile and Sona BLW Precision Forgings have experienced similar growth rates, but their starting points were smaller than Trent’s. In FY24, Route Mobile reported sales of INR 4,000 crore, while Sona BLW posted INR 3,200 crore.

Aditya Birla Fashions Ltd (ABFL), which operates in a similar segment as Trent, achieved a top-line growth of 11.6% annually over the five years ending in 2024. During this period, ABFL’s stock rose by 70%, whereas Trent shares skyrocketed by an astounding 1,490%. The most rapid growth for Trent occurred within the past year, with its stock jumping 262%, while ABFL saw a 60% increase. The Nifty 50 index grew 2.3x over the last five years.

Understanding the Growth Story

Over the past five years, Trent has consistently delivered strong financial performance, recording an almost fivefold increase in income. This growth is not just impressive; it’s extraordinary, given the challenges of managing a large-scale operation.

With its diverse operations and extensive market footprint, the firm faced multiple challenges, such as increasing competition, fluctuating market demand, and operational complexities. However, by focusing on innovation, digital transformation, and strategic acquisitions, the company has overcome these obstacles and achieved record-breaking success.

5 Key Factors Behind the Trent’s Success

Digital Transformation

One of the company’s most significant growth drivers has been its focus on digital transformation. The firm has invested heavily in digital technologies to enhance operational efficiency, streamline processes, and deliver better customer experiences. The company has embraced technology to stay competitive in a rapidly evolving market, from automating backend operations to utilizing data analytics for informed decision-making.

Diversification

Diversification has always been a cornerstone of Tata Group’s strategy, and this firm is no exception. Over the years, it has expanded its operations into new markets and industries, reducing its reliance on any single revenue stream. This diversification strategy has helped the firm mitigate risks associated with market volatility and capitalize on emerging opportunities in different sectors.

Cost Optimization

Despite its large size, the firm has focused on cost optimization to maintain profitability. Adopting lean manufacturing practices, renegotiating supplier contracts, and improving operational efficiency have kept costs under control while growing the firm’s top line. This disciplined approach to cost management has allowed the firm to scale operations without compromising profitability.

Strategic Acquisitions

Acquisitions have played a pivotal role in the firm’s growth. Over the past five years, the company has made several strategic acquisitions that have allowed it to expand its market presence, acquire new technologies, and tap into new customer segments. These acquisitions have helped the firm grow and strengthened its competitive position in the market.

Focus on Innovation

Innovation has been at the heart of the Tata Group’s success, and this firm is no different. By continuously investing in research and development (R&D), the company has introduced new products and services that cater to its customers’ changing needs. This focus on innovation has helped the firm stay ahead of the competition and contributed to its revenue growth.

The Challenges of Managing a ‘Plus Size’ Firm

Managing a large-scale operation comes with challenges, and this Tata firm is no exception. One of the biggest challenges is maintaining operational efficiency across its diverse operations. Ensuring smooth operations can be daunting, with multiple business units, supply chains, and markets. However, the firm has been able to address these challenges through robust systems and processes, enabling it to operate efficiently at scale.

The Impact of External Factors

External factors such as economic conditions, government policies, and global market trends have also shaped the firm’s growth trajectory. For instance, the government’s push for digitalization and infrastructure development has created new opportunities for the company. Similarly, favorable economic conditions and rising consumer demand have supported the firm’s growth.

However, external factors have also posed challenges. The firm has had to navigate through regulatory changes, trade tensions, and geopolitical uncertainties, all of which have impacted its operations. 

Record-Breaking Income: The Numbers Speak

The firm’s financial performance over the past five years has been remarkable. Its income has risen nearly fivefold, reaching record levels despite the challenges posed by its size and external factors. This growth has been driven by digital transformation, diversification, cost optimization, strategic acquisitions, and innovation.

According to the company’s financial reports, revenue from its core business segments has consistently grown, contributing significantly to the overall income. Additionally, the firm’s focus on expanding into new markets has opened up new revenue streams, further boosting its financial performance. The firm’s profitability has also improved, with margins expanding due to cost-saving initiatives and operational efficiencies.

What Lies Ahead for the Firm?

The company is poised to capitalize on emerging market opportunities with a strong foundation built on digital transformation, diversification, cost optimization, and innovation. However, the firm must continue adapting to changing market dynamics and external factors to sustain its growth trajectory.

One of the critical areas of focus for the firm in the coming years will be sustainability. As global attention shifts towards environmental, social, and governance (ESG) factors, the company must integrate sustainability into its business practices to stay competitive. By adopting sustainable practices and reducing its environmental footprint, the firm can contribute to a better future and enhance its long-term competitiveness.

Additionally, the firm must continue investing in technology and innovation to stay ahead of the competition. The rapid pace of technological advancements means that companies must constantly innovate to remain relevant. By staying at the forefront of technology and innovation, the firm can maintain its competitive edge and continue its growth journey.

Conclusion

The nearly fivefold increase in income over the past five years shows how well the firm has handled challenges, seized opportunities, and executed its strategy. Despite its size, the company has demonstrated innovation and growth. 

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

FAQs

Mahindra & Mahindra (M&M), a leading name in the Indian automotive and agricultural machinery sector, has reported a significant rise in its auto sales for September 2024. The company witnessed a 16% year-on-year (YoY) growth in auto sales, selling 87,839 units during the month. This growth occurs as the Indian auto industry recovers from pandemic-related disruptions, highlighting M&M’s robust market presence.

Alongside the rise in auto sales, M&M’s tractor sales also registered a modest 2% growth, reflecting steady demand in the agricultural sector. This growth in both industries has positively impacted M&M’s stock, which saw gains in response to the company’s strong performance.

M&M’s domestic Passenger Vehicle (PV) sales reached 51,062 units in September 2024, marking a 24% increase from the 41,267 units sold in the same month last year. In the utility vehicles segment, M&M sold a total of 52,590 units, which includes exports. Additionally, the company saw a 6% year-on-year (YoY) rise in Commercial Vehicle (CV) sales, with 33,750 units sold in September, up from 31,918. Source: Mint

The rise in auto and tractor sales, coupled with M&M’s focus on electric vehicles and sustainability, has boosted investor sentiment. The company’s stock saw gains as the market responded positively to its solid performance. 

Automobile Sector Overview

India has a robust automotive market driven by both domestic demand and exports. In April 2024, the production of passenger vehicles, three-wheelers, two-wheelers, and quadricycles totaled 23,58,041 units. In FY23, automobile exports reached 47,61,487 units. The sector’s contribution to GDP has grown from 2.77% in 1992-1993 to around 7.1%. Source: Ibef.org

Key Drivers of Auto Sector Growth in India in 2024

The Indian auto sector experienced significant growth in 2024, driven by several key factors:

1. Economic Recovery: India’s economic recovery post-pandemic fueled increased consumer spending, leading to higher demand for automobiles.
2. Rising Disposable Income: A growing middle class with higher disposable incomes enabled more people to purchase vehicles.
3. Government Incentives: Government initiatives like the Production-Linked Incentive (PLI) scheme attracted investments in the auto sector, boosting manufacturing and job creation.
4. Infrastructure Development: Investments in road infrastructure and public transportation improved connectivity, making vehicles more accessible and convenient.
5. Urbanization: India’s ongoing urbanization has led to increased demand for personal transportation, especially in cities with growing populations.
6. Technological Advancements: Innovations in electric vehicles (EVs) and connected cars captured consumer interest and drove market growth.
7. Export Market Expansion: India’s auto industry expanded its exports to global markets, contributing to overall growth.

India is poised to become a leader in shared mobility by 2030, offering opportunities for electric and autonomous vehicles. The focus is increasingly shifting towards electric vehicles to reduce emissions, with the Indian government committing to ensuring that 30% of new vehicle sales are electric by 2030.

Overview of M&M’s September Auto Sales Growth

Returning to M&M auto segment performance, the rise in sales can be attributed to the increasing demand for both passenger and commercial vehicles.

Key Highlights:

• Passenger Vehicles (PVs): The passenger vehicle segment saw impressive growth, driven by demand for M&M’s SUVs and electric vehicles (EVs). The launch of new models and variants, coupled with strong consumer interest in EVs, has significantly boosted sales.
• Commercial Vehicles (CVs): The commercial vehicle segment also contributed to the overall growth, with an increase in demand for M&M’s light commercial vehicles (LCVs) and heavy commercial vehicles (HCVs). Infrastructure development and economic recovery have spurred demand in this sector.

The overall auto industry in India has shown signs of recovery in 2024, and M&M’s strong performance in September highlights its ability to capitalize on this resurgence.

Financial Highlights of M&M Auto

Market Cap in Crores (as of 1.10.24)	CMP (as of 1.10.24)	All-time High Level	PE Ratio	1 Yr CAGR	ROCE
₹ 3,93,857	3,167	3,222	35.6	99%	13.6%

Passenger Vehicle Sales: A Major Contributor to Growth

M&M’s passenger vehicle sales have been a significant driver of its overall growth in September. The company has been able to tap into the growing demand for SUVs, which has become a dominant segment in the Indian automotive market.

SUVs Leading the Way

M&M has been a pioneer in the SUV segment, and its models such as the Thar, XUV700, and Scorpio-N have continued to attract consumers. The SUV market in India has been expanding rapidly, with consumers preferring these vehicles for their comfort, safety features, and off-road capabilities.

M&M’s ability to consistently deliver high-quality SUVs with advanced technology and features has helped it maintain a competitive edge. The growing trend of electric SUVs has also benefited M&M, with its electric vehicle offerings gaining traction in the market.

Electric Vehicles: The Future of Mobility

M&M has made significant strides in the electric vehicle segment, positioning itself as a key player in India’s transition towards cleaner mobility solutions. The company’s focus on expanding its EV portfolio has resonated with environmentally conscious consumers, contributing to the rise in sales.

In September 2024, M&M’s EV sales saw a sharp increase, driven by models like the e-Verito and the recently launched XUV400 EV. The company’s efforts to enhance EV infrastructure, including charging stations, have further encouraged consumers to opt for electric mobility.

Light and Heavy Commercial Vehicles

M&M’s light commercial vehicles (LCVs) have witnessed strong demand, particularly in the e-commerce and logistics sectors. The increasing need for last-mile delivery solutions has driven demand for LCVs, and M&M’s offerings have been well-received in this space.

Heavy commercial vehicles (HCVs) have also seen a rebound in demand, supported by infrastructure projects and the revival of industries such as construction and manufacturing. M&M’s robust portfolio of HCVs, known for their durability and performance, has made them a preferred choice for businesses across various sectors.

Electric Commercial Vehicles: A Growing Segment

In line with its focus on sustainability, M&M has also been expanding its range of electric commercial vehicles. The company’s electric LCVs have gained popularity, especially among businesses looking to reduce their carbon footprint. This segment is expected to grow further as more companies adopt eco-friendly transportation solutions.

Tractor Sales: Modest Growth Reflects Steady Agricultural Demand

While M&M’s auto sales saw a remarkable 16% YoY growth, its tractor sales experienced a more modest 2% growth in September 2024. The tractor segment remains a crucial part of M&M’s business, given its leadership position in the Indian agricultural machinery market.

Factors Influencing Tractor Sales

The 2% growth in tractor sales can be attributed to a combination of factors, including a relatively stable monsoon season and steady demand from the agricultural sector. However, challenges such as fluctuating commodity prices and rural economic conditions have impacted growth in this segment.

Despite these challenges, M&M’s tractor sales remain strong, thanks to its diverse product offerings and widespread distribution network. The company’s tractors are known for their reliability and fuel efficiency, making them a popular choice among farmers across India.

Other Auto Stocks in Focus

Tata Motors

Financial Highlights

Market Cap in Crores (as of 1.10.24)	CMP (as of 1.10.24)	All-time High Level	PE Ratio	1 Yr CAGR	ROCE
₹ 3,54,874	₹964	₹1,179	10.5	55%	20.1%

For the quarter ending June 2024, the company reported revenue of ₹108,048 crores, an increase from ₹102,236 crores in the same quarter the previous year. Additionally, the profit for the quarter surged to ₹5,692 crores, up from ₹3,301 crores in the corresponding period last year, reflecting a growth of 53%.

Maruti Suzuki India Limited

Market Cap in Crores (as of 1.10.24)	CMP (as of 1.10.24)	All-time High Level	PE Ratio	1 Yr CAGR	ROCE
₹4,12,798	₹13,130	₹13,680	28.1	25%	21.8%

In the quarter ending June 2024, the company posted a revenue of ₹35,779 crores, up from ₹32,535 crores in the same quarter last year. The quarterly profit also saw a significant rise, reaching ₹3,760 crores compared to ₹2,543 crores in the previous year’s corresponding period, marking a 38.6% growth.

TVS Motor Company 

Market Cap in Crores (as of 1.10.24)	CMP (as of 1.10.24)	All-time High Level	PE Ratio	1 Yr CAGR	ROCE
₹1,34,154	₹2,831	₹2,958	78.5	87%	14.7%

In the quarter ending June 2024, the company recorded a revenue of ₹10,407 crores, an increase from ₹9,056 crores in the same quarter last year. The quarterly profit also rose significantly, reaching ₹485 crores compared to ₹441 crores in the corresponding period of the previous year, representing a growth of 9.5%.

Bajaj Auto

Market Cap in Crores (as of 1.10.24)	CMP (as of 1.10.24)	All-time High Level	PE Ratio	1 Yr CAGR	ROCE
₹3,39,003	₹12,139	₹12,774	42.3	144%	33.5%

In the quarter ending June 2024, the company reported a revenue of ₹11,932 crores, an increase from ₹10,312 crores in the same quarter last year. The quarterly profit also experienced significant growth, rising to ₹1,942 crores from ₹1,644 crores in the corresponding period of the previous year, reflecting a 16% increase.

Conclusion

In 2024, the Indian automobile sector experienced remarkable growth, fueled by several factors such as economic recovery, rising disposable incomes, government incentives, and technological advancements. This performance was further enhanced by increased exports and a growing demand for electric vehicles.

Mahindra & Mahindra’s impressive 16% year-on-year growth in auto sales, along with a 2% rise in tractor sales in September 2024, underscores the company’s strong market position and its ability to navigate a competitive and evolving landscape. The company’s focus on innovation, sustainability, and an expanded product portfolio has driven sales, augmenting its stock performance.

As India continues to urbanize and modernize, the automotive sector may play a crucial role in the country’s economic development, presenting opportunities for growth, job creation, and technological innovation.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

FAQ

In a move that could reshape India’s dessert landscape, ChrysCapital is all set to acquire two famous bakery and dessert chains, Theobroma Foods and Belgian Waffle Co, in a combined deal valued at approximately Rs 3,200-3,500 crore.

The private equity firm will create an investment platform to bring these beloved bakeries under its umbrella. The company has a 60-day window to submit a binding offer for Theobroma Foods and aims to finalize the terms for Belgian Waffle Co’s owner, Bloombay Enterprises, within 30 days.

Competing Bids and Existing Shareholders

Theobroma Foods’ acquisition has attracted significant interest from multiple investors, including food giant Switz Group and private equity firms Kedaara Capital, Carlyle, and ChrysCapital. The patisserie chain is backed by ICICI Venture, which holds a 42% stake. Prior reports indicated that Belgian Waffle Co. was nearing acquisition by ChrysCapital after submitting a binding bid to acquire the promoters’ and PE investor Marathon Edge Partners’ stakes.

ChrysCapital’s Expansion Plans

ChrysCapital, actively fundraising for its tenth fund, aims to create an investment platform that will combine Theobroma and Belgian Waffle. This strategic move aligns with the firm’s focus on technology and consumer-oriented small and mid-market businesses.

Theobroma: A Sweet Success Story

Founded in 2004, Theobroma has become a household name in India for its delectable pastries, cakes, and cookies. After a flagship store in Mumbai, the chain has expanded rapidly across the country. With its strong brand recognition and loyal customer base,

Theobroma’s acquisition is a strategic move for ChrysCapital. Established in 2004, Theobroma Foods has witnessed substantial growth and expansion. The patisserie chain operates approximately 220 stores and delivery-only outlets across 27 cities in India. The company’s strong financial performance, with an estimated FY24 adjusted EBITDA of Rs 60 crore on a topline of Rs 380-400 crore, has attracted significant investor interest.

Theobroma
Founded in	2004
Footprint Stores	220
Citywide Presence	27

Belgian Waffle: A Rising Star

Founded in 2015, Belgian Waffle has rapidly expanded its presence in the Indian market for innovative waffle creations. The company has demonstrated impressive growth with over 560 smaller-format stores and kiosks in 190 cities. In FY23, Belgian Waffle reported a revenue of Rs 150 crore, a significant increase from Rs 46 crore the previous year. ChrysCapital’s acquisition of Belgian Waffle Co. is expected to accelerate its expansion further and reach. The chain is likely to be bought for Rs 1,000 crore.

The Belgian Waffle Co.
Founded in	2015
Footprint Stores & Kiosks	560
Citywide Presence	190

ChrysCapital’s Ambitions Amid a Growing Market

ChrysCapital, a leading private equity firm, is known for its successful investments in various sectors. The company’s decision to acquire Theobroma and Belgian Waffle Co. reflects its confidence in the Indian food and beverage market. By combining these two strong brands, ChrysCapital aims to create a dominant player in the dessert segment. The acquisition comes amidst a growing trend of global food, café, and patisserie brands entering or expanding their presence in the Indian market. The Indian food services market is estimated to reach Rs 7.76 lakh crore by FY28, driven by a rising middle class, changing consumer preferences, and the increasing popularity of food delivery platforms. The acquisition of Theobroma and Belgian Waffle Co. aligns with ChrysCapital’s strategy to capitalize on this expanding market. 

Conclusion

ChrysCapital’s acquisition of Theobroma and Belgian Waffle represents a significant step in consolidating India’s bakery and dessert market. The deal reflects the growing demand for high-quality food and beverage experiences and the potential for substantial growth in the Indian food services sector. As these two prominent brands come under the umbrella of ChrysCapital, it is anticipated that they will continue to innovate and expand their reach, further shaping the landscape of the Indian food industry.

*Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as recommendation or investment advice by Research & Ranking. We will not be liable for any losses that may occur. Investment in securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL, and certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

FAQ

Meesho, one of India’s leading e-commerce platforms, is preparing to launch its much-anticipated annual event, the Meesho Mega Blockbuster Sale. This year’s sale will feature an impressive 42% year-over-year increase in its seller base and offer more products and brands than ever.

With popular brands like Mamaearth, Dabur, Titan, and Himalaya joining the platform, customers can expect an expansive range of branded offerings just in time for the festive season. Let’s explore what this year’s sale has in store.

A Growing Marketplace

Meesho Mall, the e-commerce platform’s branded marketplace, has expanded its offerings significantly. Partnering with renowned D2C brands like Mamaearth, Denver, Himalaya, Bajaj, Joy, Lotus Herbals, Biotique, Bata, Paragon, Relaxo, Liberty, and Meesho has increased its product diversity and appeal. The platform now boasts a portfolio of over 1,000 brands, representing a tenfold increase since its launch.

This expansion has led to a surge in popularity and growth. Meesho Mall has witnessed nearly double the order growth since its inception in August 2023. The platform’s popularity can be attributed to its broad categories: personal care, footwear, fashion, electronics, health and wellness, accessories, kitchen utilities, grocery, and sports and fitness.

Meesho’s Growing Seller Base

Meesho has solidified its position as the preferred platform for small businesses, attracting a staggering 2 million sellers for this year’s festival season. This remarkable growth is a testament to Meesho’s commitment to empowering MSMEs and individual entrepreneurs.

Comparison with Competitors

Meesho has outpaced its competitors regarding seller growth, demonstrating its strong appeal to small businesses. While Amazon India has also seen an increase in sellers, Meesho’s seller base remains significantly larger, particularly for the upcoming festival season.  

Meesho’s Seller Base:

• Meesho has attracted 2 million sellers for its annual festival sale, a 42% increase year-over-year.  
• This growth highlights Meesho’s ability to attract and retain small businesses.

Amazon India’s Seller Base:

• Amazon India has experienced a 14% growth in its seller base.
• Despite this growth, its seller base remains smaller than Meesho’s for the upcoming festival sale.  
• Amazon India currently has over 1.6 million sellers across the country.

Flipkart’s Seller Base:

• Interest from sellers for Flipkart has remained relatively unchanged.
• Flipkart announced over 1.4 million sellers on its platform, including those from Shopsy.
• This figure has remained consistent compared to previous years.

Meesho: Company Overview

Meesho, founded in 2015 by IIT Delhi graduates Vidit Aatrey and Sanjeev Barnwal, is a leading e-commerce platform empowering small businesses in India. With a vision to enable 100 million small businesses, Meesho provides a comprehensive platform that connects them with millions of customers.

Key Features and Benefits:

• Access to a Vast Customer Base: Meesho offers small businesses a platform to reach various customers across India.
• Diverse Product Categories: The platform features 30+ categories, allowing businesses to showcase their products to a diverse audience.
• Pan-India Logistics: Meesho provides reliable and efficient logistics services to ensure the timely delivery of products.
• Payment Services: The platform offers sellers and buyers secure and convenient payment options.
• Customer Support: Meesho provides dedicated customer support to assist businesses and customers throughout the transaction process.

Empowering MSMEs and Individual Entrepreneurs:

Meesho caters to many small businesses, including SMBs, MSMEs, and individual entrepreneurs. The company has enabled over 8.5 lakh seasonal jobs within its seller and logistics network, primarily in tier-3 and tier-4 regions.

The company has been instrumental in empowering businesses and consumers in underserved regions. With 75% of orders originating from tier 2 and tier 3 cities, Meesho democratizes access to branded products and fosters economic growth in these areas.

Meesho empowers these businesses to grow and succeed in the competitive e-commerce landscape by providing them with the necessary tools and resources.

A Platform for Growth:

Meesho’s mission is to create a sustainable ecosystem where small businesses can thrive. By providing access to a vast customer base, efficient logistics, and reliable payment services, Meesho helps companies expand their reach, increase sales, and achieve their growth objectives.

Benefits for Consumers and Brands

Wider Selection:

• Diverse Product Range: Meesho Mall offers a vast selection of products from both well-known and emerging brands, catering to diverse customer preferences.
• Accessibility: The platform is accessible to customers across India, including underserved regions, making branded products more accessible to a broader audience.

Affordability:

• Competitive Pricing: Meesho Mall provides competitive prices on branded products, making them more affordable.
• Value for Money: Customers can find high-quality products at attractive prices that offer excellent value.

Brand Growth:

• Expanded Reach: Brands partnering with Meesho can tap into a vast customer base, reach new markets, and increase their visibility.
• Increased Sales: Meesho’s growing user base has led to significant brand growth on the platform.
• Access to Emerging Markets: Meesho’s strong presence in tier 2 and 3 cities enables brands to reach underserved regions and expand their customer base.

Success Stories:

• Customer Growth: Meesho Mall has attracted over 3.2 crore shoppers in just six months, demonstrating strong demand for its offerings.
• Brand Growth: Through their partnership with Meesho, brands like Liberty, Denver, and Bella Vita have experienced substantial growth, with some seeing increases of over 200%.
• Customer Satisfaction: Meesho’s focus on providing a quality shopping experience has led to high customer satisfaction and loyalty.

Conclusion

As Meesho expands its seller base and product offerings, the upcoming Mega Blockbuster Sale reflects its continued growth ahead of the festive season. With the inclusion of significant brands like Mamaearth, Dabur, Titan, and Himalaya, customers can access a wider variety of products. This year’s sale marks a critical moment in Meesho’s ongoing efforts to diversify its marketplace and accommodate increasing demand during the festive period.

*Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as recommendation or investment advice by Research & Ranking. We will not be liable for any losses that may occur. Investment in securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL, and certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

Is the Indian power sector finally seeing a resurgence? The recent surge in Reliance Power share price and the strong performances of other industry giants like NTPC, Tata Power, and JSW Energy suggest so.

With the Nifty approaching 26,000, the Indian stock market is bullish. This positive sentiment has spilled over into the power sector, igniting a wave of optimism among investors. The three power companies mentioned above have been particularly impressive, demonstrating a consistent upward trend that could signal a new era for the sector.

Let’s analyze the performance of each of the four companies.

Reliance Power’s Strategic Move

Reliance Power’s stock price reached a 7-year peak of ₹40.05 on the NSE today, surpassing its previous high of ₹38.07. The company has made a significant move that has captured investor attention. The company’s announcement of a preferential issue of equity shares, raising a substantial sum of ₹1,524.60 crore, has sent ripples through the market.

Key Points from the Announcement:

• Preferential Issue: Reliance Power will issue 46.2 crore equity shares at a discounted price of ₹33 per share, a 14% discount to the previous day’s closing price.
• Promoter Group Ownership: Reliance Infrastructure will hold 24.88% of Reliance Power’s equity after the allotment, and the promoter group’s aggregate shareholding will reach 24.95%.
• New Investors: Authum Investment and Infrastructure and Sanatan Financial Advisory Services Private Ltd will acquire significant stakes in Reliance Power.
• Fund Allocation: A substantial portion of the proceeds, ₹803.60 crore, will be used to expand Reliance Power’s presence in renewable energy and other new business areas and meet long-term working capital requirements.

Implications of the Preferential Issue:

• Strengthened Financial Position: The capital infusion will bolster Reliance Power’s financial position, enabling it to pursue growth opportunities and meet its operational needs.
• Focus on Renewable Energy: The company’s intention to allocate a significant portion of the funds to renewable energy projects aligns with the growing emphasis on sustainable energy sources.
• Increased Promoter Group Control: The promoter group’s increased shareholding could strengthen its control over the company and its strategic direction.
• Attractive Valuation: The discounted share price offered in the preferential issue could make it appealing to investors seeking to acquire shares at a lower valuation.

NTPC’s Financial Metrics Improve

NTPC, a leading Indian power company, demonstrated strong financial performance in the first quarter of fiscal 2025. The company’s revenue and profit increased due to higher power generation and improved operational efficiency. The company’s portfolio of coal-based power plants, combined with its strategic focus on renewable energy, positions it as a key player in meeting the nation’s growing energy demands.

• Revenue and Profit Growth: NTPC reported a double-digit increase in income and profit in the first quarter of fiscal 2025, surpassing analyst expectations.
• Strong Revenue from Power Generation: Revenue from thermal power generation grew by 14.1%, driven by increased output and improved operating efficiency.
• Capacity Expansion: The company’s installed capacity increased by 3,024 megawatts, reaching 76,048 MW.
• Increased Generation: Gross generation rose 10.56% year-over-year, reflecting strong electricity demand.
• Coal Production: Coal production from captive mines for commercial use surged by 54.49%, supporting the company’s power generation activities.
• Improved Tariff: The average tariff from power generation increased from ₹4.53 to ₹4.68, indicating a healthier pricing environment.

Tata Power’s Financial Performance and Growth Initiatives

Tata Power, a prominent player in the Indian energy sector, reported a 4.20% year-over-year increase in profit for the June quarter. This marks the 19th consecutive quarter of profit growth, driven by strong operational performance across its generation, transmission & distribution, and renewable energy businesses.

The company’s diversified portfolio, combined with strategic initiatives in solar and electric vehicle charging infrastructure, positions it well for future growth. Tata Power has significantly progressed in expanding its renewable energy capacity and establishing a strong presence in the electric vehicle charging market.

Key financial highlights include:

• Profit Growth: A 4.20% year-on-year increase in profit.
• Renewable Energy Focus: 41% of Tata Power’s installed capacity is clean and green, with further expansion plans underway.
• Electric Vehicle Charging: The company has surpassed 1 lakh home EV charger installations and has a growing network of public and captive chargers.
• Order Pipeline: A robust order pipeline for utility-scale EPC and solar rooftop projects totaling ₹15,500 crore.

(Source: EconomicTimes)

JSW Energy Share Price Surges Over 90% in a Year

JSW Energy has exhibited impressive growth over the past year, with its share price surging by 96.91%. This outperformance relative to the broader market, as evidenced by the Nifty 100 index’s return of 54.26%, highlights the company’s strong financial performance.

Key indicators of JSW Energy’s growth include:

• Share Price Volatility: The stock’s 52-week range of ₹342.25 to ₹752.40 demonstrates its potential for significant price fluctuations.
• Revenue Growth: The company’s operating revenue for the trailing twelve months has reached ₹11,437.52 crore, with an annual growth rate of 10%.
• Return on Equity: JSW Energy’s ROE of 8% is fair but suggests room for improvement.
• Earnings Performance: The stock’s EPS rank of 88 indicates consistent earnings performance, while the RS rating of 76 suggests a need for stronger recent price performance.

While these three companies have been leading the charge, it’s important to note that the entire power sector is experiencing a positive uptrend. The combination of favorable market conditions, government support for renewable energy, and increasing demand for electricity has created a conducive environment for growth.

As the Indian economy expands, the demand for electricity is expected to rise. This and the government’s focus on renewable energy present significant opportunities for power companies. Investors bullish on the Indian economy and the power sector may want to consider these companies as potential investment options.

However, it’s essential to conduct thorough research and consider market volatility, company-specific risks, and individual investment goals before making investment decisions. Like any other industry, the power sector is subject to market fluctuations and unforeseen events.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

Vodafone Idea share price surged 10%  after announcing a $3.6 billion deal with global telecom equipment makers Nokia, Ericsson, and Samsung. The deal will help Vodafone Idea upgrade its network and improve its competitiveness in the Indian telecom market. This represents the initial phase of their ₹55,000 crore capital investment plan, aimed at expanding 4G services and introducing 5G in key regions.

The deal has been spread over three years, positioning the company to compete with market leaders like Jio and Bharti Airtel, who have aggressively pushed 5G adoption. This network expansion will improve service quality and enhance customer experience, a key concern for the company in recent years.

Vodafone Idea stock, which previously closed at 10.48, surged following the deal’s announcement, reaching a peak of 11.71 on the BSE on September 23.

The company recently raised ₹24,000 crore through a share sale and announced that this deal is the first phase of its “transformative” three-year ₹55,000 crore capital expenditure plan. The initiative aims to boost 4G coverage from 1.03 billion to 1.2 billion people, introduce 5G in key markets, and expand capacity to meet rising data demands. Although specific details of the agreements weren’t disclosed, it’s anticipated that around 40% will be allocated each to Ericsson and Nokia, with the remaining 20% going to Samsung.

Check Out Other Trending Stocks On Our Stocks Screener

Vodafone Idea Deal Highlights

• The deal is the largest ever telecom equipment deal in India.
• Nokia, Ericsson, and Samsung will supply Vodafone Idea with 5G RAN (Radio Access Network) equipment and core network and transport equipment.
• The equipment will be deployed across India over the next three years.
• The deal will help Vodafone Idea improve its network and services and regain market share.
• The deal is expected to create thousands of jobs in India.
• The deal will provide a major boost to the Indian telecom sector.
• The deal is expected to help to accelerate the deployment of 5G in India.
• The deal is a significant win for Nokia, Ericsson, and Samsung.
• The deal is a positive development for the Indian economy.
• The deal is a significant milestone for Vodafone Idea.

Background

Vodafone Idea has struggled to compete with its rivals, Reliance Jio and Bharti Airtel, in the Indian telecom market. The company has been losing subscribers and market share. The company is expected to see improved network performance, increased customer satisfaction, and regained market share. 

Benefits of the Deal

• Vodafone Idea said the deal will help build a world-class 5G network. The company said the network will provide its customers with a wide range of services, including high-speed internet, video streaming, and online gaming.
• The deal is also expected to create jobs in India. Vodafone Idea said the agreement will create thousands of jobs in the country, directly and indirectly.
• The deal will significantly boost the Indian telecom sector. It is expected to help accelerate the deployment of 5G in India, which is expected to bring a number of benefits, including faster internet speeds, improved connectivity, and new services.
• The deal is also a major win for Nokia, Ericsson, and Samsung. The companies have been investing heavily in India in recent years, and the deal is expected to help them consolidate their position in the Indian telecom market.
• The deal is a positive development for the Indian economy. It is expected to boost investment in the country and create jobs. It is also likely to help improve connectivity in India, which will benefit businesses and consumers.

Impact on the Indian Telecom Market

The deal is expected to have a positive impact on the Indian telecom market and accelerate the deployment of 5G in India. 5G is expected to bring a number of benefits to India, including faster internet speeds, improved connectivity, and new services. The deal is also expected to boost competition in the Indian telecom market.

Challenges Ahead

Despite the positive outlook, Vodafone Idea faces significant challenges in the competitive telecom landscape. The company is still grappling with substantial debt and losing subscribers to rivals with more robust networks. Vodafone Idea must address its financial constraints and focus on cost-effective strategies to roll out 5G services across India to make the most of this deal.

Moreover, regulatory hurdles and the high 5G spectrum acquisition cost could add to the company’s financial burden. However, with the backing of Nokia, Ericsson, and Samsung, Vodafone Idea is better equipped to navigate these challenges.

Government Support and the Role of Investors

The Indian government’s push for digital inclusion and rural connectivity offers Vodafone Idea an opportunity to leverage its network expansion. Government initiatives to make 5G accessible to all could complement the company’s strategy of penetrating underserved markets.

A New Chapter for Vodafone Idea

The $3.6 billion deal with Nokia, Ericsson, and Samsung is pivotal for Vodafone Idea. It signals the company’s intention to survive and thrive in an increasingly competitive telecom market. 

While challenges remain concerning debt and competition, this partnership provides Vodafone Idea with the tools needed to improve its network infrastructure, enhance customer experience, and potentially regain lost ground in the telecom sector. This deal could begin a new chapter for Vodafone Idea if executed well, positioning it as a strong contender in India’s digital future.​

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