Business

Accenture started fiscal year 2025 with stellar performance, reinforcing its reputation as a global leader in IT services and consulting. The company’s Q1 results, driven by robust demand for generative AI (GenAI) services, have exceeded market expectations, underscoring its strategic focus on innovation and client-centric solutions.

The company’s shares surged by 8% following the announcement of its Q1 results. The robust quarterly performance and upgraded guidance for the full year and second quarter drove a 7% increase in its share price in the U.S. market. This upward trend also influenced Indian IT companies, with Wipro and Infosys ADRs rising 2.3% and 3% during early trading on December 19 on the New York Stock Exchange. Source: Moneycontrol

New bookings totaled $18.7 billion, surpassing last year’s numbers. Revenue climbed to $17.7 billion, beating analysts’ expectations. The company increased its annual revenue growth forecast to 4%-7% from the previous projection of 3%-6%. The company anticipates second-quarter revenue to range between $16.2 billion and $16.8 billion. Source: Moneycontrol

Here’s a detailed look at Accenture’s Q1 achievements and the factors propelling its growth.

Impressive Revenue Performance

Accenture’s revenues for the first quarter of FY25 reached $17.7 billion, marking a significant 8% growth in local currency and a 9% increase in U.S. dollars compared to last year. This revenue performance surpassed analysts’ projections, demonstrating the company’s ability to navigate market complexities and capitalize on emerging trends.

Key Metrics at a Glance:

Revenue	New Bookings	Operating Income	Earnings Per Share (EPS)
$17.7 billion (8% growth in local currency)	$18.7 billion	$2.95 billion (15% year-over-year increase)	$3.59 (16% year-over-year growth)

The strong revenue growth was boosted by the rising adoption of digital transformation solutions, with generative AI playing a pivotal role.

Generative AI: The Catalyst for Growth

A standout factor in Accenture’s Q1 success has been the surging demand for its generative AI services. As organizations across industries strive to harness the potential of AI for enhanced efficiency and innovation, Accenture has positioned itself as a trusted partner in this transformative journey.

Generative AI Highlights:

• Accenture secured $1.2 billion in new bookings specifically linked to generative AI projects in Q1.
• Since September 2023, the company has accumulated $4.2 billion in generative AI-related bookings.
• GenAI services are being utilized to optimize business processes, enhance customer engagement, and drive innovation. Source: Accenture

By integrating generative AI into its service offerings, Accenture has met and exceeded client expectations, solidifying its competitive edge.

Strong Bookings Across Verticals

Accenture’s Q1 bookings totaled $18.7 billion, marking a 1% year-over-year growth. This included $9.2 billion in consulting bookings and $9.5 billion in managed services bookings. The balanced growth between consulting and managed services underscores Accenture’s capability to meet a wide range of client needs, from strategic planning to operational execution.

Regional and Industry Breakdown

Regional Performance:

• America: Revenues grew to $8.73 billion, reflecting a 9% increase in U.S. dollars and an 11% rise in local currency.
• Europe, Middle East, and Africa (EMEA): Revenues reached $6.41 billion, up 10 percent in U.S. dollars and 6 percent in local currency.
• Asia Pacific: Revenues totaled $2.54 billion, marking a 6% increase in U.S. dollars and 4% in local currency.

What Sets Accenture Apart?

Accenture’s success is no accident. It stems from strategic foresight, innovation, and a relentless focus on client satisfaction. Here are some key reasons:

• Commitment to Innovation

Accenture consistently invests in emerging technologies, such as generative AI, cloud computing, and cybersecurity. These investments enable the company to stay ahead of industry trends and offer cutting-edge solutions.

• Comprehensive Service Portfolio

Accenture’s diverse offerings, from strategy consulting to managed services, cater to client needs. This diversification ensures steady revenue streams and positions the company as a one-stop solution provider.

• Global Reach with Local Expertise

Accenture operates in over 120 countries and combines its global scale with local insights to deliver customized solutions. This approach has been crucial in addressing clients’ unique challenges in different regions.

• Focus on Talent and Capability Building

Accenture’s greatest asset is its workforce. The company’s emphasis on talent acquisition, upskilling, and fostering a culture of innovation ensures its teams are equipped to handle complex projects.

Implications for the Indian IT Sector

Accenture’s Q1 performance has implications for the global IT landscape, including the Indian IT sector. Companies like Infosys, Wipro, and TCS often take cues from Accenture’s results to gauge industry trends.

Key Takeaways for Indian IT Giants:

• The rising demand for generative AI presents a significant growth opportunity.
• Emulating Accenture’s focus on innovation and client-centric solutions can drive long-term success.
• Diversifying service portfolios and investing in talent development are critical for staying competitive.

Conclusion

Accenture’s Q1 results demonstrate its strength and flexibility in a changing industry. The company exceeded revenue expectations by harnessing the power of generative AI’, focusing on clients’ needs, and setting the foundation for future growth.

As businesses globally embrace digital transformation, Accenture’s solutions and innovative approach make it a trusted partner in navigating today’s business challenges. Whether you’re an investor, client, or industry observer, Accenture’s Q1 performance provides valuable insights into the growing IT sector and its vast opportunities.

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

SpiceJet, one of India’s leading budget airlines, has recently made headlines by resolving a long-standing $16 million dispute with Genesis, a prominent aircraft lessor. This development marks a critical turning point for the airline and has sparked a sharp rise in its share prices.  Source: Economic Times

Following the announcement, SpiceJet’s share prices surged by 13.5% on 19th December 2024, reaching an intraday high of ₹61.30 per share.

SpiceJet resolved its $16 million dispute with Genesis by paying $6 million in cash and issuing $4 million in equity. The settlement also includes the dismissal of ongoing lawsuits between the parties. Additionally, Carlyle Aviation converted its debt into equity in SpiceJet, further strengthening its balance sheet. Source: Economic Times

Key Highlights of the Settlement

Financial Terms of the Agreement	SpiceJet will pay Genesis $6 million in cash. Genesis will acquire $4 million in equity in SpiceJet at a price of ₹100 per share. The agreement is expected to result in substantial cost savings for SpiceJet, supporting its long-term growth objectives.
Commitment to Financial Stability and Legal Resolution	The settlement emphasizes SpiceJet’s dedication to restoring financial stability and operational resilience. Both parties have agreed to withdraw all ongoing litigation and disputes upon satisfying the settlement terms. This agreement adds to SpiceJet’s successful resolutions with other lessors, including Horizon Aviation, Engine Lease Finance Corporation, Aircastle, Wilmington Trust SP, Shannon Engine Support, and Export Development Canada.
Support from Stakeholders and Improved Credit Ratings	In September 2024, Carlyle Aviation converted $30 million of lease arrears into equity in SpiceJet at ₹100 per share, indicating growing confidence in the airline’s recovery. Acuite Ratings & Research Limited recently upgraded SpiceJet’s credit rating by four notches, acknowledging its improved financial position.

Let’s look at SpiceJet’s financial performance

Financial Highlights

Market Cap in Crore (as of 19.12.24)	CMP (as of 19.12.24)	High	ROCE %	1Yr Return %
7,784	60.7	79.9	1.64	-7

The company reported revenue of ₹7,050 crore in March 2024, reflecting a 20.5% decline compared to ₹8,869 crore recorded in March 2023. It incurred a loss of ₹409 crore, a significant improvement from the ₹1,503 crore loss reported in 2023. Source: Screener

The Background of the Dispute

The disagreement between SpiceJet and Genesis revolved around unpaid dues related to aircraft leases. As a lessor, Genesis provides aircraft to airlines under leasing agreements, and disputes over payment can significantly strain operations.

FoSpiceJet’s financial challenges were compounded by broader issues, including the pandemic’s impact on the aviation industry and rising operational costs. The $16 million owed to Genesis became a pressing concern, leading to legal and reputational risks for the airline.

A Step Towards Stability

After prolonged negotiations, SpiceJet and Genesis reached a mutual settlement. The resolution underscores the airline’s commitment to improving its financial stability and maintaining strong relationships with its lessors. This resolution is expected to free up airline resources and enable it to concentrate on its core operations.

Impact on SpiceJet’s Share Prices

The news of the settlement sent SpiceJet’s share prices soaring. Investors responded positively, viewing the agreement as a signal of the airline’s improving financial health.

Following the announcement, SpiceJet’s shares increased significantly by 13.5%, closing higher than their previous levels. Market analysts believe this surge reflects renewed investor confidence in the airline’s ability to navigate challenges and capitalize on growth opportunities in the aviation sector.

What Does This Mean for Genesis?

For Genesis, resolving this dispute represents a strategic decision to avoid prolonged litigation and secure payment. As one of the leading aircraft lessors globally, Genesis is interested in maintaining positive relationships with its clients. The settlement allows Genesis to focus on its broader portfolio without the distraction of unresolved disputes.

Broader Implications for the Aviation Industry

This agreement has implications beyond SpiceJet and Genesis. It highlights the critical role of effective negotiations in resolving disputes between airlines and lessors. With the aviation industry gradually recovering from the pandemic, maintaining strong partnerships is essential for sustained growth.

Other airlines struggling with similar challenges might take cues from this resolution, emphasizing the importance of collaboration and proactive problem-solving.

The Role of Financial Health in Airline Operations

Financial stability is a cornerstone of success for any airline. Disputes like the one between SpiceJet and Genesis often arise when airlines face liquidity issues. In recent years, SpiceJet has faced its share of financial struggles, including delayed payments to vendors and lessors.

The resolution of this dispute signals that SpiceJet is taking steps to address these challenges. By clearing its dues and strengthening its financial position, the airline can focus on expanding its fleet, enhancing customer experience, and exploring new revenue streams.

Investor Sentiment and Market Trends

SpiceJet’s settlement with Genesis has not only boosted its share prices but also highlighted broader trends in the market. Investors increasingly reward companies that demonstrate resilience and a commitment to resolving financial disputes.

For SpiceJet, this positive sentiment could translate into increased market capitalization and greater interest from institutional investors. Moreover, the airline’s efforts to streamline its operations and reduce liabilities align with investor expectations for long-term value creation.

Challenges Ahead

While the agreement with Genesis is a significant milestone, SpiceJet still faces challenges. The airline must address its overall debt burden, improve cash flow, and invest in fleet expansion to remain competitive.

Additionally, operational efficiency and customer satisfaction must remain top priorities. Airlines must continually innovate and adapt to changing consumer preferences in a fiercely competitive market.

Lessons for the Industry

The SpiceJet-Genesis settlement offers valuable lessons for the aviation sector:

• Proactive Dispute Resolution: Timely negotiations can prevent prolonged legal battles and minimize financial strain.
• Building Trust with Lessors: Maintaining transparent communication with lessors is essential for smooth operations.
• Focus on Financial Discipline: Airlines must prioritize financial discipline to navigate industry challenges effectively.

The Road Ahead for SpiceJet

Looking ahead, SpiceJet has a unique opportunity to leverage this positive momentum. The airline can focus on:

• Expanding Its Fleet: Adding new aircraft to its fleet to meet rising demand.
• Enhancing Customer Experience: Investing in technology and services to improve passenger satisfaction.
• Exploring New Routes: Expanding its network to tap into underserved markets.

Conclusion

The settlement between SpiceJet and Genesis marks a turning point for both parties. For SpiceJet, it represents a step towards financial stability and operational resilience. For Genesis, it underscores the importance of strategic negotiations in maintaining strong client relationships.

As the aviation industry continues to evolve, this agreement serves as a reminder of the power of collaboration and proactive problem-solving. 

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

Bollywood’s glitz and glamour often hide its challenges. But in 2024, the curtain has been pulled back, revealing a struggling industry. With soaring star salaries, a series of flops, and a disconnect with audiences, Bollywood is in trouble.

The key question is why big-budget films failed while mid-budget movies succeeded. Does this point towards a new direction for the survival and growth of Bollywood?

A Wake-Up Call for the Industry

Bollywood’s challenging year in 2024 has sparked significant conversations about the need for change. Amid soaring star salaries and underwhelming big-budget films, industry experts are calling for re-evaluating priorities, particularly regarding budgeting and collaboration.

According to Sacnilk, a box office research firm, the total gross box office collection 2024 stands at ₹10754 crore. This marks an 18.2% decline compared to ₹13,161 crore in 2023. The drop is even more pronounced for Hindi films, with their gross box office collection plunging by 25% to ₹4,534.2 crore in 2024 compared to the previous year. Source: Economic Times

The success of “Pushpa 2: The Rule” highlights an untapped audience.

Trade analysts believe that Pushpa 2: The Rule’s phenomenal success —over Rs 500 crore in its dubbed Hindi version alone—underscores the importance of a large audience. Audiences in tier II and tier III cities, crucial for films’ success in theatres, should not be overlooked. Source: Economic Times

This year has brought valuable lessons for Bollywood, emphasizing the importance of careful budgeting and industry collaboration. Let’s examine what’s going wrong and what the future might hold.

A String of Flops: The Box Office Reality

Bollywood’s report card for 2024 isn’t pretty. Big-budget movies expected to earn hundreds of crores have flopped, with audiences rejecting clichéd plots and lackluster performances. 

Why is this happening? Many moviegoers feel Bollywood has lost its connection with its audience. The era of predictable masala films seems to be over as viewers look for more meaningful content. Regional cinema and OTT platforms fill this gap with fresh stories and strong narratives.

Weak Scripts and Storytelling

Bollywood’s over-reliance on formulaic storytelling has been a problem for years, and 2024 seems to be the breaking point. Audiences are tired of recycled plots and predictable and outdated twists. Movies that depend on star power without strong scripts are being rejected.

In contrast, regional cinema and OTT platforms thrive because they take risks. From dark thrillers to slice-of-life stories, they offer narratives that resonate with diverse audiences.

Changing Audience Preferences

Indian audiences are evolving, and Bollywood has struggled to keep up. Exposure to global cinema, K-dramas, and anime has shifted viewer preferences. The younger generation, in particular, values originality and depth over formulaic storytelling.

This disconnect has left Bollywood lagging. While some filmmakers are trying to innovate, the industry’s reluctance to break the norm is holding it back.

The Financial Fallout

Bollywood’s struggles have significant financial consequences. Distributors and producers are bearing the brunt of underperforming films. A series of flops can force smaller production houses to shut down, while even big studios are rethinking their investments.

Theater chains are also feeling the impact. Multiplexes, which rely heavily on Bollywood films, are reporting lower attendance. Some are now partnering with regional and international studios to stay afloat.

The Need for Realistic Budgeting

Industry insiders emphasize that common sense must prevail when planning film budgets. Experts argue that stars, directors, and artists should adopt a more practical approach to their remuneration. The high costs associated with star salaries and production are often not justified by box office returns.

A notable takeaway from 2024 is aligning budgets with realistic expectations. Many films with inflated budgets have struggled to recoup costs, highlighting the need for a shift toward financially viable projects.

Mid-Budget Films Lead the Way in 2024

2024 has been marked by the triumph of mid-budget films rather than blockbusters featuring big star names. Films like Munjya, Shaitaan, and Stree 2 have emerged as major successes. These films showcase how well-crafted stories can resonate with audiences and achieve widespread acceptance across diverse regions.

These films show that good storytelling is more important than star power. Their strong plots have attracted audiences from various states, proving that great content can succeed without big-name actors. Source: Economic Times

Collaborative Efforts for a Sustainable Future

The industry must embrace a collective effort to tackle these challenges. Collaboration between stars, filmmakers, and production houses is essential to creating films that are artistically satisfying and financially sustainable. A shared vision for compelling content within reasonable budgets could help Bollywood regain its footing.

Mass Appeal is Key to Success

Industry experts stress that filmmakers should focus on scripts with mass appeal. Mass audiences tend to be more regular theatergoers and can be more unforgiving than niche audiences with refined tastes. Catering to this broader demographic is essential for ensuring consistent box office success.

Avoiding Film Clashes for Better Box Office Potential

One key lesson for the industry from 2024 may be avoiding film clashes on the same weekend. Competition between multiple films on the same weekend can prevent each movie from reaching its full box office potential.

Can Reinvention Be The Answer?

Bollywood has faced tough times before and bounced back. The shift from single screens to multiplexes and the rise of digital cinema were turning points. Today, the need for reinvention is urgent.

The industry must prioritize storytelling and creativity, invest in talented writers, explore diverse genres, and collaborate with regional industries to craft a turnaround. Understanding what audiences truly want is key.

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

The Indian music industry is thriving, combining creativity with business opportunities and drawing significant investor interest. The sector resonates well with the investment community with its rich cultural heritage and increasing demand for diverse musical genres.

The increasing prominence of India’s music industry is underscored by the visits of Universal Music and Warner Music’s global CEOs to the country. These visits reflect their commitment to expanding operations in India through organic growth and strategic acquisitions. Source: Economic Times

Let’s explore why India’s music industry is becoming a lucrative playground for investors.

The Scale of India’s Music Industry

The industry, valued at approximately ₹24 billion by the end of 2023, is projected to grow significantly, reaching ₹37 billion by 2026. This translates to an estimated compound annual growth rate (CAGR) of 14.7%.

India’s Potential as a Global Music Hub

Industry experts emphasize India’s potential to emerge as a significant growth market for the global music industry. The anticipated merger of two leading video platforms—Disney+ Hotstar and JioCinema—is predicted to redirect the focus of major players toward music streaming. Experts are optimistic that subscription services will experience a significant boom in India within the next 12 to 15 months. Source: Economic Times

A Thriving Creative Ecosystem

India’s music industry produces an impressive 20,000 to 25,000 original songs annually, created by a robust community of over 40,000 music professionals. Last year, it generated an impressive ₹12,000 crore in revenue, accounting for about 6% of the country’s media and entertainment sector, as highlighted in an EY report titled ‘The Music Creator Economy.’ This vibrant ecosystem reflects the country’s immense creative potential and cultural richness. Source: Economic Times

Music’s Integral Role Across Platforms

The report underscores the central role of music across various media platforms, including:

• Streaming Services: Driving digital consumption.
• Films and Television: Enhancing storytelling through soundtracks.
• Radio: Reaching diverse audiences.
• Gaming and Social Media: Creating engaging and immersive experiences.

Key Players in the Spotlight

The Indian music industry has several players who have successfully captured market share and investor attention. Here’s a look at some of the leading entities:

T-Series

It is the world’s largest YouTube channel in terms of subscribers, and it dominates the Bollywood music scene with an extensive catalog.

Saregama

Known for its vast library of classical and modern music, it strategically invests in new-age digital initiatives.

JioSaavn and Gaana

Popular music streaming platforms have millions of active users and strong backing from corporate giants like Reliance and Times Internet.

Independent Labels and Artists

The rise of indie music and self-published artists has created a parallel ecosystem that thrives on innovation and originality.

Key Music Companies	Major Music OTT Platforms
T-Series	JioSaavn
Zee Music	Spotify
Saregama	Amazon
Sony Music	Prime Music
Warner Music	YouTube Music
Universal Music	Gaana
	Apple Music

T-Series: A Global Powerhouse

T-Series, one of the top YouTube channels worldwide, boasts a staggering 281 million subscribers, underlining India’s dominance in the global digital music space.

Key Factors Driving Growth

1. Digital Revolution: The proliferation of smartphones and affordable internet has brought music closer to millions of Indians.
2. Streaming Platforms: Services like Spotify, JioSaavn, and YouTube Music have transformed how people consume music, making it more accessible.
3. Regional Content Boom: There’s an increasing demand for regional and vernacular music catering to India’s diverse population.
4. Live Performances: Post-pandemic, live concerts and music festivals are back in vogue, contributing significantly to the industry’s revenue streams.

India’s Music Consumption Trends

Indian listeners spend an average of 20 hours per week enjoying music, surpassing the global average of 18 hours. With over 750 million smartphones equipped with radio and music capabilities, music’s accessibility and popularity in India continue to grow.

Why Investors Are Tuning In

The music industry’s steady growth trajectory and evolving landscape have made it a good proposition for investors. Here are some reasons why the sector is striking the right note:

1. Revenue Diversification

The industry has diversified its revenue streams beyond physical sales and radio royalties. Key revenue sources now include streaming subscriptions, digital advertisements, licensing for films, TV shows, and advertisements, merchandise sales, and live events and concerts

2. Global Appeal of Indian Music

Indian music’s global popularity, fueled by Bollywood and the rise of independent artists, has opened up international markets. Platforms like Spotify report significant streaming numbers for Indian songs in countries like the US, UK, and UAE.

3. Technology Integration

Technological advancements like artificial intelligence (AI) and blockchain are reshaping the music industry. From AI-generated playlists to blockchain-based royalty tracking, innovation enhances operational efficiency and revenue management.

4. Booming Regional Market

The regional music market is a goldmine. With over 19,500 dialects in India, regional content offers unparalleled growth opportunities, making it a focal point for investors.

Challenges Facing the Industry

While the music industry’s prospects are promising, it’s not without challenges. Addressing these issues will be critical to sustaining investor confidence:

Copyright and Royalties  

Ensuring fair compensation for artists and composers remains a contentious issue. The lack of a robust copyright enforcement mechanism can deter creators and investors alike. Despite the growth of legal streaming platforms, piracy continues to impact revenue.

Monetization of Free Users

Converting free users on streaming platforms to paid subscribers remains challenging in price-sensitive markets like India. 

Fragmented Market

The industry’s fragmentation, with multiple languages and platforms, poses logistical and operational challenges.

Trends Shaping the Future of Indian Music

As the industry evolves, several trends are emerging that promise to redefine its future:

• Rise of Independent Artists: The internet has democratized music production and distribution, allowing independent artists to bypass traditional gatekeepers and reach global audiences.
• Collaborations and Crossovers: Bollywood and regional artists are increasingly collaborating with international musicians, creating unique fusion genres.
• Subscription-Based Models: Platforms focus on converting free users to paid subscribers through exclusive content and premium features.
• AI and Personalization: AI-driven recommendation systems enhance user experiences, making music discovery more intuitive and enjoyable.

Is it the Right Time to Invest?

With favorable demographics, growing digital adoption, and an expanding middle class, the Indian music industry could be considered a good investment option. Here’s why now is the opportune moment:

• Untapped Markets: Regional and vernacular music remain underexplored but highly lucrative.
• Policy Support: Government initiatives to promote creative industries add to the sector’s appeal.
• Technological Advancements: Streaming and content creation innovations are unlocking new revenue streams.

Conclusion

India’s music industry is striking all the right notes, resonating with investors looking for high-growth opportunities. From digital streaming to regional content and international collaborations, the sector is a symphony of innovation and potential. With the right mix of creativity and commerce, it may be a star performer in India’s economic growth story.

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.

FAQs

Success stories in business often feel like modern-day fairy tales, full of surprising breakthroughs and incredible growth. Among them is one standout tale—a lesser-known firm that achieved a remarkable 50-fold revenue increase just two years after joining Flipkart as a seller. 

This is the story of the Secunderabad-based Manasanipally family, the driving force behind SV Electronics Private Ltd (SVEPL). This family-run business, specializing in selling electronics like laptops and audio devices, saw its revenue skyrocket after listing its products on Flipkart. In just two years, its turnover went through the roof, marking an extraordinary journey of growth and transformation. 

Curious about how they pulled it off? Let’s break it down step by step to uncover the secrets behind this phenomenal success. Source: Economic Times

SV Electronics Financial Performance in FY23 & FY24

By the end of FY23, SVEPL reported a 108% jump in revenue, with a turnover of Rs.85.49 crore. The company’s profit after tax (PAT) also increased, rising from Rs.17.7 lakh to Rs. 20.39 lakh. In their annual report, the directors expressed optimism about the company’s future, expecting even better performance in the coming year.

SVEPL’s performance in FY24 exceeded all expectations. The company achieved a staggering turnover of Rs.1969.71 crore, marking an unprecedented 2,200% increase in revenue compared to the previous year. In their recent annual report, the directors attributed this dramatic growth to the boom in e-commerce during the period.

The company recorded a total gross revenue of INR 1969.71 crore during the year, as against INR 85.63 crore in the previous year, recording a sharp rise of over 2,200% in total revenues due to a surge in the e-commerce business.  Source: Economic Times

The Profit After Tax did not experience a proportional increase, rising by less than four times to Rs.77.85 lakh despite revenue soaring 22 times. This was despite a massive 50x surge in turnover—from Rs.40 crore to nearly Rs. 2,000 crore in under two years. 

The Flipkart Deal and a Remarkable 50x Growth

According to the Walmart-owned e-commerce giant, Flipkart has over 300,000 registered sellers in India. Many work tirelessly to scale their businesses while competing with numerous lesser-known rivals.

To capitalize on the growing e-commerce wave, SV Electronics Private Ltd (SVEPL) strategically partnered with Flipkart, setting up a dedicated online division. According to the company’s FY23 annual report, SVEPL entered into agreements for wholesale supply with the group’s wholesale arm and a services agreement with Flipkart Internet, which manages the marketplace platform. Similar arrangements were also established with Myntra Designs and Myntra Jebong, further expanding the company’s reach. Source: Economic Times

Why Flipkart? The Power of E-Commerce

Flipkart, one of India’s largest e-commerce giants, provided the perfect launchpad for small and medium enterprises (SMEs). Its robust logistics network, massive customer base, and user-friendly seller interface allowed smaller players to compete with established brands on an even footing.

For this firm, listing on Flipkart meant access to millions of potential customers—something impossible through brick-and-mortar stores. The platform also offered valuable insights into customer preferences, enabling the company to tweak its products to match market demand.

The Early Days of SV Electronics

SV Electronics, founded as a public company in the late 1990s, was initially managed by its Managing Director, M. Venkateswara Rao, along with a few external partners. At the time, the company operated physical stores in the Secunderabad area, specializing in selling electronic goods.

Over time, ownership consolidated within Rao’s family. Almost all shares were held by Rao, his wife, brothers, and nephews, making it a closely-knit family business. The shift to e-commerce and strategic partnerships later transformed this modest venture into a remarkable success story.

Holding Pattern of SV Electronics

Stakeholder’s Name	Stake (%)
Venkteswararao Manasanipally	34.81
Manusanipally Varadaraju	17.74
Manasanipally Roopa	17.40
Nagaraju Manasanipally	12.23
Manusanipally Ravikanth	9.50
Manasanipally Amarnath	3.40
Manusanipally Krishna Moorthy	3.02
Thotaiah Manasanipally	0.95
Narasimha Rao Manusanipalli	0.95

Product Portfolio and Sales Dynamics of SV Electronics

• Most of SVEPL’s sales were generated from high-value items such as laptops, audio devices, and wearables.
• Popular brands among SVEPL’s bestsellers included Acer, Asus, Lenovo, and HP.

• SVEPL did not need to establish physical locations in each state to comply with GST requirements.
• There didn’t have to increase the number of staff within the finance department to handle the growing number of transactions.
• Flipkart’s ecosystem managed all operational and compliance tasks centrally.

• SVEPL outsourced key operations to leading firms to streamline its processes. Deloitte Touche Tohmatsu India Limited assisted with GST registrations across various locations, filed periodic and annual GST returns, conducted GST-related reconciliations, and offered advisory services to the online business division.
• KPMG Assurance and Consulting Services LLP was contracted to provide end-to-end services for setting up books of accounts and treasury, overseeing ongoing bookkeeping, supporting periodic book closures, and coordinating audits for the online business division.

Flipkart’s Two-Tier Structure and Its Impact

In 2021, ET Prime highlighted a detailed account of thirty firms authorized by Flipkart to act as distributors and diamond sellers. This two-tier structure, developed with the assistance of Big Four consultants, allowed Walmart’s arm to both own and sell stock, potentially bypassing restrictions imposed by FDI norms. 

Under Indian FDI policy, foreign investment is prohibited in multi-brand retail, but there are no such restrictions in wholesale or marketplace businesses. This gap necessitated a network of third-party firms that could be controlled operationally, ensuring the smooth functioning of Flipkart’s e-commerce business.

Preferred Sellers and Annual Fee

Unlike individual sellers who have gradually built their businesses on Flipkart, companies like SVEPL maintain a deeper and more strategic engagement with the e-commerce giant. A key indicator of this relationship is that SVEPL’s entire online business was developed without significant capital increases. As of March 2024, the company’s share capital remained at Rs.2.65 crore, while its long-term borrowings were Rs. 61 lakh.

Preferred Sellers: A Special Category

These firms are termed “preferred sellers” in regulatory terms and essentially lend their names for a fee. According to industry sources, SVEPL earns around Rs.2 crore annually from this arrangement. Through service providers, Flipkart handles all aspects, including stock management, goods movement, bookkeeping, and GST compliance. The seller’s primary concern is managing its monthly cash flow, approximately Rs.16-17 lakh.

Only a few companies have joined this exclusive network, with SVEPL being one of the select few. Unlike regular sellers, who pay substantial fees to the marketplace, these special sellers enjoy a different arrangement.

How SVEPL Gained Access to the Network

So, how did SVEPL become one of the lucky few chosen for this inner circle of Flipkart’s selling network? Insiders suggest that SVEPL’s success in joining the exclusive network was partly due to the company’s connection to a former Flipkart executive. Rao, the managing director of SVEPL, was reportedly close to Santosh Kumar B, a former senior executive in Flipkart’s finance department. Kumar, a chartered accountant, is believed to have played a pivotal role in creating the two-tier structure to navigate complex retail and FDI policies. Based on his recommendation and internal advocacy, SVEPL was selected for listing.

Conclusion

SV Electronics’ transformation from a family-run business to a powerhouse in e-commerce showcases the immense potential of strategic partnerships, particularly with platforms like Flipkart. Their 50x revenue growth in just two years highlights how leveraging e-commerce, smart outsourcing, and a favorable network can propel a small business to extraordinary success. 

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.

FAQs

Remember when Zomato was soaring high, fueled by the pandemic-induced food delivery boom? Well, the company has recently faced a significant setback. The tax authorities have issued a hefty GST demand of over ₹803 on Zomato.

This unexpected development has sent shockwaves through the market, leading to a 2.36% decline in Zomato’s stock price. As investors grapple with this news, it raises questions about the company’s future prospects and potential impact on its financials.

Let’s look into the details of this tax dispute and its implications for Zomato and its shareholders.

The Tax Demand: Details and Context

On December 12, 2024, Zomato revealed in a BSE filing that it had received a tax demand order from the Joint Commissioner of CGST & Central Excise, Thane Commissionerate, Maharashtra. The order, dated November 12, 2024, confirmed a GST demand of ₹401.70 crore from October 29, 2019, to March 31, 2022. Additionally, the order imposed interest and penalties of the same amount, taking the total demand to ₹803.40 crore.

The notice alleges that GST was not paid on delivery charges collected from customers during the specified period. Zomato stated that it plans to appeal the decision, emphasizing its confidence in a favorable outcome based on advice from external legal and tax advisors.

Market Reaction to the GST Notice

Following the announcement, Zomato’s shares moved mixed on the National Stock Exchange (BSE). After opening at ₹291.80, they climbed to ₹295 but closed at ₹284.9. The stock traded flat in the early hours today, oscillating between minor gains and losses. 

Despite the flat trading performance, Zomato’s market capitalization remains robust at ₹2.75 lakh crore. Notably, Zomato’s stock reached a 52-week high of ₹304.50 on December 5, 2024, reflecting a significant 150% rebound from its 52-week low of ₹120.25 recorded on December 21, 2023.

Historical Background of the Tax Dispute

This recent order isn’t Zomato’s first run-in with tax authorities. On December 27, 2023, Zomato disclosed that it had received a show cause notice (SCN) from the Directorate General of GST Intelligence, Pune Zonal Unit, under Section 74(1) of the CGST Act, 2017. The notice sought an explanation for an alleged tax liability of ₹401.70 crore for non-payment of GST on delivery charges collected on behalf of its delivery partners.

The allegations were based on amounts collected as delivery charges from customers during the referred period. The latest demand order appears to be a continuation of this earlier investigation.
Source: BusinessToday

Financial and Business Performance

Despite the tax controversy, Zomato has delivered robust financial performance and steady growth in its share price over the past year. Here’s a snapshot of its financial trajectory:

• Yearly Performance: The stock has surged 138% over the past 12 months.
• Six-Month Performance: It gained 54% in the last six months.
• 2025 YTD Performance: A staggering rise of 129%.
• One-Month Performance: A modest growth of 10.5%.

For the second quarter ending September 30, 2024, Zomato reported:

• Net Profit: ₹176 crore, a multifold increase from ₹36 crore a year ago.
• Revenue from Operations: ₹4,799 crore, up by 68% YoY.
• EBITDA: ₹230 crore with a margin of 4.7%, an improvement of 50 basis points quarter-on-quarter.

Fundraising and Strategic Growth

In November 2024, Zomato raised ₹8,500 crore via Qualified Institutional Placements (QIP), issuing 33.65 crore shares at ₹252.62 per share. The funds are earmarked for:

1. Strengthening the balance sheet.
2. Supporting the growth of its quick commerce arm, Blinkit.

This marked its first significant fundraising since its stock market debut in July 2021. The move comes as competition intensifies in the quick commerce sector, with Swiggy recently raising ₹11,300 crore through an IPO and Zepto securing over $1.3 billion in fresh funding.

Index Inclusion and Potential Fund Inflows

Zomato’s strong performance has earned it a spot in India’s premier indices:

• Sensex Inclusion: Effective December 23, Zomato will replace JSW Steel in the 30-stock Sensex index.
• Nifty 50 Speculation: A report by JM Financial suggests that it’s inclusion in the Nifty 50 could lead to fund inflows of approximately $607 million. Source: BusinessToday

Industry Competition and Challenges

The company’s growth hasn’t been without challenges. The entry of Amazon into the quick commerce space has spurred investor concerns, leading to recent selling pressure on shares of the company and its competitor Swiggy. This adds to the ongoing pressures of inflation and high operational costs that the food industry is navigating.

What Lies Ahead?

As Zomato prepares to appeal the ₹803 crore tax demand, the outcome will significantly affect its financial health and market reputation. While the company’s fundamentals remain strong, this regulatory hurdle highlights the challenges of operating in a dynamic and highly regulated market like India. The coming months will reveal how Zomato balances its growth ambitions with compliance challenges, ensuring its position as a leader in the food delivery and quick commerce sectors.

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.

You likely woke up to the unsettling news that OpenAI’s ChatGPT was facing a global outage in the early hours of today. A staggering 74% of users worldwide reported issues, underscoring the critical role AI plays in our digital lives. This incident, coupled with the simultaneous outage of Meta’s platforms like WhatsApp, Facebook, and Instagram, served as a stark reminder of the potential disruptions that can occur when AI systems falter.

As the world grapples with the implications of such outages, India’s mid-sized IT service providers are emerging as key players in the AI revolution. Let’s explore how these companies strategically position themselves to capitalize on the opportunities and overcome the challenges presented by this rapidly evolving technology.

Divergent Paths to AI Adoption

Unlike their larger peers like TCS and Infosys, which boast vast resources and established training infrastructure, mid-sized IT companies take a unique approach to AI adoption.

These mid-sized IT players, including LTIMindtree, Mphasis, and Persistent Systems, actively invest in acquisitions and partnerships to accelerate their AI capabilities. This inorganic growth strategy allows them to quickly bridge the gap and compete in a rapidly evolving market.  

Strategic Acquisitions: Building Blocks for Success

Let’s take a closer look at some recent examples showcasing how these mid-sized companies are leveraging acquisitions to advance AI.

• LTIMindtree and Voicing.AI: In a strategic move, LTIMindtree invested up to $6 million in Voicing.AI, a young U.S. company specializing in human-like AI voice agents. This partnership focuses on disrupting customer engagement with Agentic AI, a next-generation AI technology that goes beyond simple responses. Agentic AI can actively suggest solutions, manage workflows, and provide real-time updates, potentially saving businesses up to 60% and addressing a market with a potential lost revenue of $3.7 trillion. 
  
• Mphasis and Silverline: For $132.5 million, Mphasis acquired Silverline, a New York-based Salesforce partner specializing in digital transformation. This acquisition strengthens Mphasis’ capabilities in conversational AI and user experience enhancement, allowing it to cater to the growing demand for AI-driven automation. 
  
• Persistent Systems and Arrka: Recognizing the importance of data privacy in the age of AI, Persistent Systems acquired Arrka, a Pune-based data privacy consultancy, for $1.7 million. This strategic move ensures compliance with data privacy regulations and fosters trust in Persistent’s AI models.  

These acquisitions are not just about acquiring expertise – they also offer mid-sized companies a chance to gain market credibility and access new clients who might otherwise be loyal to larger players.

AI’s Impact on Customer Engagement

AI’s potential in customer engagement is exemplified by its application in customer engagement. With technologies like Agentic AI—which moves beyond responding to prompts to suggesting actions and executing workflows—companies are transforming client interactions. These solutions enhance customer satisfaction and bolster sales effectiveness, providing a competitive edge in the marketplace.

Financial and Market Dynamics

The financial performance of these mid-sized firms underscores their agility and market-focused strategies. For the year ending March 2024:

• LTIMindtree reported revenues of $4.29 billion.
• Mphasis recorded $1.61 billion.
• Persistent Systems achieved $1.19 billion.

These figures highlight the significant contributions of mid-sized IT firms in the global AI narrative, especially as they strategically position themselves to tap into high-growth areas.

Key Challenges in AI Deployment

While the potential of AI is immense, several challenges hinder its widespread adoption:

• High Deployment Costs: Developing and deploying AI models can be expensive, requiring significant investments in infrastructure, data, and skilled personnel.
• Data Quality and Quantity: AI models rely on large, high-quality datasets to learn and make accurate predictions. Data scarcity or poor quality can limit the effectiveness of AI solutions.
• Model Complexity and Interpretability: Complex AI models, such as deep neural networks, can be challenging to interpret and understand. This lack of transparency can hinder trust and adoption.
• Ethical Concerns: AI raises ethical questions about bias, fairness, and privacy. It is crucial to ensure that AI systems are developed and used responsibly to avoid negative consequences.
• Talent Scarcity: The demand for AI talent, especially data scientists and machine learning engineers, exceeds the supply. This talent gap can hinder the development and deployment of AI solutions.

To overcome these challenges, mid-sized IT companies are focusing on:

• Scalable and Cost-Effective Solutions: Developing AI solutions that can be deployed efficiently and reasonably.
• Data Quality and Governance: Implementing robust data governance practices to ensure data quality and privacy.
• Model Interpretability: Using techniques to make AI models more transparent and understandable.
• Ethical AI Development: Adhering to ethical principles and guidelines for responsible AI use.
• Talent Development and Retention: Investing in training and development programs to build a skilled AI workforce.

The Big Players: Different Strategies for the Same Goal

While mid-sized companies aggressively pursue acquisitions and partnerships, larger IT giants like TCS and Infosys are not lagging. They are strategically investing in building their internal AI capabilities.

• TCS, India’s largest IT exporter, established AI Cloud in May 2024. This unified business unit merges its cloud and AI operations, demonstrating its commitment to offering comprehensive AI solutions.
  
• Infosys: Infosys launched its AI platform, Topaz, in 2023. Topaz offers a variety of AI solutions and services and has over 10 AI platforms that cater to diverse business needs. 

TCS and Infosys boast impressive revenue figures, demonstrating their established market presence. Their internal AI development allows them to offer customized solutions to a vast client base.  

The Way Forward

The race for AI dominance is reshaping the IT services landscape. For mid-sized IT companies, acquisitions and partnerships are more than a shortcut; they’re a necessity to remain competitive. These strategic investments allow them to penetrate markets traditionally dominated by larger firms and deliver innovative solutions tailored to evolving client needs.

Conclusion
In a world where technology evolves faster than ever, mid-sized IT companies have demonstrated that adaptability and strategic foresight can carve out a significant share of the future. By embracing AI and addressing its challenges head-on, these companies survive and thrive in an increasingly competitive industry.

What does this mean for the broader AI ecosystem? Simply put, the innovations driven by mid-sized IT firms are paving the way for a more diversified and resilient technological 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 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.

Thanks to an unprecedented deal surge across sectors, the investment banking world is gearing up for a record-breaking year in bonuses. As the economy finds its rhythm post-pandemic, investment bankers are reaping the rewards of an active market driven by share sales, mergers, debt funding, and IPOs. 

Banker Bonuses Expected to Cross ₹1,000 Cr

According to Native, a recruitment firm serving the financial services sector, bonuses in 2024 could surpass ₹1,000 crore, with ₹700 crore earmarked for over 350 top executives. This group includes managing directors, partners, and directors at global and domestic investment banks, earning an average fixed salary between ₹1.5 crore and ₹2.5 crore. Investment bankers anticipate bonuses ranging from 300% to 375% this year. Source: Mint

This article dives into the factors fueling this financial boom and what it means for the sector.

Investment Banks Record Robust Fee Earnings in 2024

• Investment banks in India collectively earned $776.5 million (₹6,587.8 crore) in fee income, according to data from the London Stock Exchange Group, a leading analytics and data provider.
• Axis Bank, Kotak Mahindra Capital, Jefferies, Goldman Sachs, Citigroup, and Morgan Stanley were among the fee league’s top performers.
• The fee income includes earnings from equity capital markets, debt capital markets, and M&A deals, reflecting a diverse revenue base. Source: Mint

A Year of Record Listings and Transactions

According to industry experts, record-high bonuses for i-bankers and merchant bankers are due to the number of listings and secondary transactions. These factors highlight India’s strong investment banking environment in 2024, driven by active capital markets and a steady flow of deals.

Generous Bonuses for Campus Hires

Over 70 campus recruits in 2024, with an average fixed annual salary of ₹30 lakh, are projected to receive at least 100% bonuses. Combined, these bonuses are estimated to surpass ₹20 crore, according to Native, a recruitment firm specializing in financial services. Bonuses in 2021 and 2022 were modest, but there was an improvement in 2023. In 2024, record-high capital market activity and a surge in deal-making led to unprecedented bonuses. Source: Mint

What’s Driving the Deal Frenzy?

1. Robust IPO Market: Companies from diverse industries turn to public markets to secure funding. In 2024, the investment banking sector witnessed remarkable growth, marked by a significant rise in fee pools. This growth was fueled by high-profile initial public offerings (IPOs) from major players like Hyundai Motor India, Swiggy, Ola Electric, and FirstCry.

2. Rise in Mergers and Acquisitions (M&As): Consolidations in sectors such as telecom and retail fuel a surge in mergers and acquisitions (M&A) as companies aim to enhance their market positions. The M&A landscape also experienced increased activity across industries like industrials, consumer goods, and financial services. This broad spectrum of deals cemented 2024 as a pivotal year for the investment banking sector.

3. Private Equity Investments: Private equity (PE) participation in businesses like ITC and Trent has significantly strengthened the deal pipeline, driving notable funding inflows. Additionally, large block deals involving ITC, Trent, and Bharti Airtel fueled the momentum. These transactions allowed PE investors to partially exit their stakes, generating substantial revenue for investment banks.

4. Debt Fundraising: Firms like Swiggy and Airtel leverage debt markets to support expansions and new projects, providing i-banks with additional deal flows.

A Phenomenal Year for Deals and Rewards

According to industry experts, this year has been phenomenal from a deals perspective. 2024’s impressive activity in IPOs, block deals, and M&A has not only strengthened the investment banking sector but also set new benchmarks for compensation, reflecting the industry’s exceptional performance.

Sectors Leading the Charge

The surge in deals is not limited to a single industry. Here’s a closer look at some sectors that are driving growth:

• Technology and Startups

The tech space continues to dominate fundraising activities—unicorns like Ola Electric spearhead IPOs, showcasing India’s potential as a global innovation hub.

• Retail and Consumer Goods

Established players like Trent and ITC actively engage in equity and debt markets, backed by strong investor confidence in consumer-centric businesses.

• Telecom and Digital

Airtel’s debt fundraising efforts exemplify the growing reliance on i-banks to secure digital transformation and network expansion funding.

Why Are Bonuses Important for Investment Banks?

Bonuses are not just a monetary reward but a key retention tool in the highly competitive i-banking industry. As deals grow in complexity and value, so does the need to attract and retain top talent. Here’s why bonuses matter:

1. Rewarding Performance: High bonuses reflect the significant revenue bankers generate through successful deals.
2. Talent Acquisition and Retention: Competitive pay structures, including bonuses, ensure that banks can attract the best professionals in the market.
3. Boosting Morale: Recognition of hard work through bonuses motivates teams to deliver exceptional results.

Retention Challenges Amid High Demand for Deal Makers

Retaining top talent has become challenging as companies seek more skilled dealmakers, driving bankers to command higher premiums. Both domestic and global banks are implementing retention strategies, such as deferred bonuses and long-term incentives to retain high performers. 

Exodus of Bankers Reversed in 2024

When deal activity was subdued in previous years, many investment bankers left the sector, searching for better opportunities. While many moved to corporate roles or started their ventures, others transitioned to the private equity and venture capital sectors. 

However, in 2024, this trend has reversed. According to Native data, the percentage of investment bankers exiting for corporate or private equity careers has dropped from nearly 50% in 2023 to just 36% in 2024.

Challenges on the Horizon

While 2024 is shaping to be a stellar year, it’s not without challenges. The economic landscape remains dynamic, with factors like inflation, geopolitical tensions, and regulatory hurdles posing risks. Here’s what i-banks need to navigate:

• Market Volatility: Fluctuating stock markets could impact IPO valuations and investor sentiment.
• Interest Rate Risks: Rising interest rates may affect debt fundraising activities and overall deal attractiveness.
• Regulatory Oversight: Stricter compliance requirements could slow down deal closures, adding complexity to the process.

The Ripple Effect on the Economy

The i-banking boom isn’t just good news for bankers; it signals a positive economic trend. A thriving capital market boosts overall economic activity, providing companies with the funds needed for growth and innovation. The trickle-down effect extends to job creation, technological advancements, and enhanced market efficiency.

Looking Ahead

To maintain the growth trajectory, i-banks must continue to innovate and adapt to changing market dynamics. Key strategies include:

1. Leveraging Technology: Advanced analytics and AI tools can streamline deal processes, improving efficiency and outcomes.
2. Focusing on Sustainability: Green financing and ESG-compliant investments are emerging as new growth areas.
3. Expanding Global Networks: Collaborating with international players can open doors to more significant deals and diversified funding sources.

Conclusion

The investment banking industry is set for an exceptional year, with a surge in deals leading to record bonuses. From tech startups to retail giants, the wide range of transactions highlights the strength and potential of Indian markets. While challenges remain, the overall outlook is positive, making 2024 an exciting year for bankers and investors.

Investment banks are driving their growth by seizing opportunities and managing risks while shaping India’s economic future. With great rewards ahead, 2024 is poised to be a landmark year for investment banking.

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.

FAQs

Non-banking financial Companies (NBFCs) have been a significant part of India’s financial ecosystem, offering loans, credit, and other financial products to individuals and businesses. 

However, rising borrowing costs pose significant challenges, especially for new-age NBFCs. Often relying on digital platforms and innovative models, these companies feel the heat as profits take a hit. According to regulatory filings, NBFCs experienced a decline in net profits between the September quarters of 2023 and 2024, with a few managing to maintain flat earnings or show modest growth.

The Digital Lenders’ Association of India observed that fintechs providing unsecured consumer loans have recently changed due to regulatory guidance on loan duration, pricing, and handling customer complaints.

Let’s explore what’s happening and why this is important.

Financial Performance of Key NBFCs

NFBC	Financial Performance
KreditBee	Net Profit Decline: Bengaluru-based KreditBee reported a 20% drop in net profit, down to ₹20.7 crore for the quarter ended September 30, compared to ₹25 crore a year ago. Revenue Growth: Operational revenue rose by 73% to ₹518 crore. Soaring Expenses: Expenses increased by 84%, primarily due to higher borrowing costs and impairments on financial instruments.
Pune-based Fibe	Stable Net Profit: Fibe recorded a net profit of ₹12.4 crore, unchanged from the previous year. Revenue Growth: Operational revenue increased by 56% to ₹252 crore. Expense Surge: Total expenses grew by 63%, reaching ₹235 crore.

Lendingkart	Net Loss: Ahmedabad-based Lendingkart posted a net loss of ₹65.6 crore, a sharp reversal from a net profit of ₹29 crore a year earlier.
Kinara Capital	Fiscal H1 Loss: Bengaluru-based Kinara Capital reported a net loss of ₹32 crore in the first half of FY25, compared to a profit of ₹8 crore during the same period last year.
Paisalo Digital	Modest Gains: New Delhi-based Paisalo Digital recorded a net profit of ₹49.5 crore in Q2 FY25, up from ₹47 crore a year ago.
Ugro Capital	Profit Increase: Ugro Capital’s net profit rose by 21%, reaching ₹35 crore in Q2 FY25, compared to ₹28.8 crore in the same period last year. Strategic Focus: The company prioritizes profitability over aggressive disbursement growth, adhering strictly to RBI guidelines.

Industry-Wide Borrowing Cost Analysis

Fintech companies catering to the riskiest segments of the consumer market have faced significant increases in borrowing costs. According to industry experts, the rise ranges between 125 and 300 basis points, depending on the scale of operations.

Cost Increase by NBFC Tier

• Base Layer NBFCs: Borrowing costs have increased by over 200 basis points.
• Middle Layer NBFCs: Costs have risen by 50-80 basis points.
• Largest NBFCs: Borrowing cost increases capped at 50 basis points.

Source: Economic Times

The Rising Cost of NBFC Borrowing: What’s the Story?

Borrowing costs are the interest rates NBFCs pay when they take loans or raise funds from banks, financial markets, or other institutions. Over the past year, these costs have been climbing due to higher policy rates set by the Reserve Bank of India (RBI) and global financial conditions.

Managing higher borrowing costs is tough but manageable for traditional NBFCs, which already have established customer bases and significant assets. However, new-age NBFCs—those using digital platforms, fintech solutions, and non-traditional methods—are under immense pressure. Their business models, often centered on quick growth, rely heavily on external funding.

Why Are New-Age NBFCs Feeling the Strain?

Dependence on Debt

Unlike traditional financial institutions that can use customer deposits as funding sources, NBFCs rely on borrowing. With rising interest rates, the cost of these loans has surged, directly impacting their profitability.

Lower Margins

Many new-age NBFCs operate in niche markets, offering small-ticket loans or catering to underserved segments. While this allows them to grow quickly, it also means thinner profit margins and higher borrowing costs, which further shrink these margins.

Competition in Digital Lending

With several players entering the digital lending space, pricing pressure is high. New-age NBFCs often offer competitive interest rates to attract customers. However, they find it hard to pass on the higher borrowing costs to customers without losing market share.

The Profitability Challenge

Profitability is becoming a major concern for new-age NBFCs. As borrowing costs eat into profits, many companies struggle to show significant returns. Investors, who were initially excited by the growth potential of digital lenders, are now demanding sustainable profits.

Some NBFCs resort to cost-cutting measures, like reducing marketing expenses or focusing on high-yield segments. However, these measures come with risks. For instance, cutting back on customer acquisition could slow growth, while focusing solely on high-yield segments might increase default risks.

Balancing Growth and Profitability

New-age NBFCs face the tough task of maintaining growth while controlling costs. Their business models, which prioritize customer speed and convenience, often require significant spending on technology, data analytics, and customer acquisition.

To make matters worse, regulatory changes and compliance requirements add another layer of costs. For example, stricter know-your-customer (KYC) norms and data privacy regulations mean additional investments in systems and processes.

Shift Away from Risky Borrowers Raises Concerns

Industry experts highlighted that some borrowers might revert to informal financing channels as digital lending platforms scale back and stop serving high-risk borrower segments.

What Does This Mean for Customers?

For borrowers, rising NBFC borrowing costs could mean slightly higher interest rates or stricter eligibility criteria. While some customers might find it harder to get loans, others might benefit from innovative loan products as NBFCs try to stay competitive.

Customers should stay informed about loan terms and conditions and compare options before committing. With digital platforms offering easy access to loan comparisons, this has become more straightforward than ever.

A Broader Impact on the Economy

The struggles of new-age NBFCs could have ripple effects on India’s economy. NBFCs play a crucial role in lending to micro, small, and medium enterprises (MSMEs), which are the backbone of the economy. If NBFCs pull back on lending due to profitability concerns, it could slow economic growth.

Moreover, a dip in investor confidence in digital NBFCs could impact the entire fintech ecosystem, potentially slowing down innovation in financial services.

The Role of Regulation

The RBI has been proactive in ensuring the stability of the NBFC sector. However, balancing regulation with innovation remains a challenge.

For example, stricter norms help reduce risks but can also increase operational costs for new-age NBFCs. A collaborative approach, where regulators and NBFCs work together, is essential to address these challenges without stifling growth.

Strategies to Navigate the Crisis

Despite these challenges, there are ways for new-age NBFCs to adapt and thrive. Let’s look at a few strategies they could adopt:

Diversify Funding Sources

Relying solely on bank loans or market borrowing isn’t sustainable. To reduce their dependency on high-cost debt, new-age NBFCs could explore partnerships, securitization, or equity financing.

1. Focus on Operational Efficiency
   Automating processes, using advanced analytics for credit assessment, and cutting unnecessary overheads can help reduce costs without sacrificing customer experience.
2. Target High-Quality Borrowers
   Shifting focus to customers with better credit profiles can reduce default risks and improve profitability. While this might slow down customer acquisition, it ensures more stable returns.
3. Innovate Loan Products
   Offering flexible repayment options, loyalty rewards, or value-added services can help attract and retain customers without aggressive pricing.

A Path Forward for New-Age NBFCs

Higher borrowing costs are undeniably a significant challenge for new-age NBFCs. However, these companies can navigate the crisis with the right strategies and emerge stronger. Diversifying funding sources, improving operational efficiency, and innovating products are critical steps in this journey.

At the same time, customers and regulators have roles to play in supporting a healthy and sustainable NBFC ecosystem. Customers should make informed choices, while regulators must ensure a balanced approach to fostering innovation and stability.

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.

FAQs

India’s healthcare sector is abuzz with the news that Singapore’s GIC (Government Investment Corporation) is increasing its investment in Asia Healthcare Holdings (AHH), acquiring an additional 15% stake in the platform. Currently, the global private equity firm TPG has the majority stake in AHH through its equity investment arm, TPG Growth. 

However, with this stake, GIC will emerge as the largest shareholder. This strategic move comes ahead of AHH’s potential IPO in the next 1-2 years and will likely take its valuation to an estimated $800-900 million. Let’s explore why the move is significant for its various stakeholders and India’s healthcare sector. Source: Live Mint

Here’s a snapshot of the expansion’s key highlights:

Key Update	Details
GIC’s Stake Increase	Additional 15%
Valuation of AHH	$800-900 million
Key Acquisitions by AHH	₹600 crore for Nephrology stake

Objectives Behind the Transaction

Several factors drive this development:

1. Liquidity for TPG: TPG is divesting a portion of its stake to provide returns to its investors.
2. Preparation for IPO: AHH is gearing up for a public listing in the next 1-2 years. This transaction is expected to streamline its structure for the IPO.
3. Guaranteed Returns: The deal is likely to include provisions for guaranteed returns linked to the upcoming IPO, which will benefit both sides.

GIC’s Role in AHH’s Growth

GIC’s involvement with AHH is not new. In February 2022, GIC had invested $170 million (₹1,280 crore) in AHH, acquiring a minority stake of 40-45%. This initial investment positioned GIC as a significant stakeholder. With the upcoming transaction, GIC will assume a majority role, giving it greater control over AHH’s strategic direction.

This move is expected to strengthen AHH as it prepares for the public markets while expanding its footprint in India’s evolving healthcare landscape. Source: The Times of India

What Makes AHH Stand Out?

AHH is a single-specialty healthcare platform, focusing on specific care areas rather than a multi-specialty approach. Its portfolio includes:

• Motherhood Hospitals: Specializing in maternity care.
• Asian Institute of Nephrology and Urology: Focused on kidney care.
• Nova IVF: A leading provider of fertility treatments.

In recent years, AHH has made significant acquisitions to expand its capabilities. In September 2023, it acquired a majority stake in the Asian Institute of Nephrology and Urology for ₹600 crore.

This followed its earlier success in selling Cancer Treatment Services International in 2019 for $283 million. However, the deal is said to benefit not only AHH but also India’s growing healthcare sector. 

Why the Stake Increase Also Matters to India’s Healthcare Sector

India’s healthcare market, valued at US $110 billion in 2016, is projected to grow significantly, reaching $638 billion by 2025. An aging population and the increasing prevalence of non-communicable diseases drive this growth. Also, a larger population now has access to quality healthcare. 

Since the COVID-19 pandemic, the healthcare environment has improved and become favorable for public listings. Over 20 healthcare-related IPOs have raised ₹35,000 crore since April 2020, highlighting the sector’s strong growth potential.

From GIC’s stake increase, experts note that private equity investors are increasingly exiting through IPOs or strategic sales, capitalizing on the sector’s robust growth. Besides, AHH’s focus on single-specialty healthcare aligns with the industry’s shift toward holistic and integrated models. By focusing on areas like nephrology, maternity, and fertility, AHH is meeting the rising demand for specialized care.

The transition of GIC to a majority stakeholder positions AHH to leverage its expertise and financial backing, ensuring sustained growth and innovation in its offerings.

Conclusion

Singapore’s GIC’s 15% stake expansion in Asia Healthcare Holdings (AHH) signals confidence in India’s booming healthcare sector. AHH is set for significant growth, with a valuation of $800-900 million and a potential IPO in 1-2 years.

As India’s healthcare market, valued at USD 110 billion in 2016, is projected to grow significantly, reaching USD 638 billion by 2025, AHH’s focus on single-specialty care aligns with rising demand for specialized services, making this a critical milestone for both AHH and India’s healthcare evolution.

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