Business

Reliance Power, a flagship company of the Anil Ambani-led Reliance Group, has recently been in the spotlight for all the right reasons. Its share price surged, hitting a 5% upper circuit in the stock market. This surge came after the Solar Energy Corporation of India (SECI) lifted its ban on the company from participating in renewable energy tenders. 

This development is attracting considerable attention from investors and analysts alike. But what’s driving this sudden momentum, and what does it mean for investors? Let’s break it down in simple terms. Source: Mint

Stock Performance on December 4

Reliance Power opened trading at its upper circuit limit of ₹41.07 on Wednesday, December 4, showcasing a strong bullish trend. This followed a modest 1.03% gain in the previous trading session on December 3, when the stock closed at ₹39.12 on BSE.

What is an Upper Circuit?

Before diving deeper, let’s quickly understand what a stock must hit the “upper circuit.” Stock exchanges set daily limits on how much a stock’s price can rise or fall, known as circuit limits. When a stock hits the upper limit, trading in that stock is temporarily halted because the price has risen as much as allowed for the day.

For Reliance Power, reaching the 5% upper circuit means strong buying demand, likely fueled by the positive news. 

Reliance Power Share Price Trend

Reliance Power has showcased strong growth, with its stock rising by 68% as of December 3. In contrast, the equity benchmark Sensex has posted a 12% increase during the same timeframe.

The stock hit its 52-week low of ₹19.37 on March 14 and reached a 52-week high of ₹54.25 on October 4. Despite this impressive yearly growth, monthly trends have been mixed. The stock surged 59% in September but saw declines of over 12% in October and 9% in November.

Why SECI Lifted the Ban

Last month, SECI barred Reliance Power from bidding on renewable energy projects, citing allegations of submitting fake documents in a tender for a 1,000 MW/2,000 MWh battery storage system. This led to the cancellation of the tender.

However, a week before SECI reversed its decision, the Delhi High Court stayed the ban, except for Reliance Power’s subsidiary, Reliance NU BESS. This court order played a major role in SECI lifting the ban, enabling Reliance Power to participate in future renewable energy tenders.

Background of the Tender Issue

The controversy originated from a SECI tender released in June for a large-scale BESS project. Reliance Power was accused of submitting falsified documents during the bidding process, leading to its disqualification and a temporary ban from future tenders. The ban initially raised concerns about the company’s credibility and ability to secure future contracts in renewable energy.

However, the Delhi High Court’s decision to stay the debarment and SECI’s subsequent withdrawal of the ban has helped restore some market confidence in Reliance Power.

A Brief Look at Reliance Power’s Journey

Reliance Power was once seen as a major player in India’s energy sector, with a diverse portfolio of power generation projects, including thermal, solar, and hydro. However, the company struggled with multiple issues over the years:

• High Debt Levels: Reliance Power borrowed heavily to finance its projects, leading to unsustainable debt.
• Project Delays: Delays in execution resulted in cost overruns and missed revenue opportunities.
• Regulatory Challenges: Navigating India’s complex energy regulations further impacted operations.

These challenges led to a drop in its share price, making investors cautious. However, the recent debt restructuring hints at a possible recovery, attracting renewed interest.

Impact on Market Sentiment

The removal of the ban is seen as a positive development for Reliance Power, especially as it paves the way for the company to participate in future renewable energy opportunities. Investors responded enthusiastically, as evidenced by the stock hitting its daily price limit.

This news boosts the company’s prospects in the renewable energy sector, an area with significant growth potential, given India’s focus on transitioning to clean energy sources.

What This Means for Investors

If you’re an investor or considering becoming one, here are a few things to keep in mind about Reliance Power:

1. Short-Term Opportunity: The recent rally could present opportunities for short-term gains, but be prepared for volatility. Stocks undergoing restructuring often experience sharp price swings.
2. Long-Term Potential: Those with a long-term outlook can consider this a positive sign. However, it is essential to monitor the company’s financial performance closely in the coming quarters.
3. Risks Remain: Despite the optimism, Reliance Power still has hurdles to overcome, including operational challenges and the need for consistent cash flow generation.
4. Diversification is Key: Don’t always put all your eggs in one basket. Balancing investments across different sectors and companies can help mitigate risks.

What’s Next for Reliance Power?

Lifting the ban is a crucial step for Reliance Power as it seeks to strengthen its position in India’s growing renewable energy sector. The company now has the opportunity to bid for key projects that could drive future growth and diversification.

While this development is a positive sign, Reliance Power must address operational challenges and reputational concerns stemming from the tender controversy. Ensuring transparency and compliance in future tenders will be essential to rebuilding trust and securing long-term investor confidence. 

Broader Implications for the Market

Reliance Power’s turnaround may affect the broader market, particularly for the Anil Ambani-led Reliance Group. If the company successfully stabilizes its finances, it might also restore investor confidence across other group companies.

India’s power sector is at a key turning point, with increasing energy demand and government support for renewable energy. A strengthened Reliance Power could majorly meet these needs and become an essential player in the sector.

Conclusion

The 5% upper circuit in Reliance Power’s share price is a positive development. While this is undoubtedly a positive step, the company’s long-term success will depend on its ability to execute projects efficiently, manage its finances wisely, and capitalize on opportunities in renewable energy.

For investors, the recent surge reminds them of the stock market’s dynamic nature. Whether looking for short-term gains or long-term growth, staying informed and weighing the risks is crucial. Reliance Power might still have a long way to go, but it seems to be moving in the right 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.

FAQs

For years, the question of who reigns supreme in India’s ride-hailing market had a simple answer: Ola and Uber. But has that started to change? With a growing foothold across cabs, auto-rickshaws, and bike taxis, Rapido has emerged as a serious contender. How did this once niche player in bike taxis manage to carve out a significant market share in a space dominated by giants? And more importantly, could Rapido truly disrupt the Ola-Uber duopoly and reshape the market?

Let’s break down the numbers, strategies, and shifts in user behavior to understand how this triangular battle is unfolding.

Market Share: A Shifting Landscape

Rapido’s entry into the ride-hailing market has transformed the competitive landscape. According to recent industry estimates:

• In the cab category, Uber leads with 50% market share, followed by Ola at 34%, and Rapido trailing with a 14% share.
• The auto-rickshaw segment paints a different picture, with Uber holding 40%, Ola at 26%, and Rapido emerging as the second-largest player with 31%.
• Rapido dominates the bike-taxi category with a commanding 56% market share, leaving Ola and Uber far behind.

Rapido’s co-founder and CEO, Aravind Sanka, disputes these figures, claiming a stronger foothold: 18% in cabs, 33% in auto-rickshaws, and 61% in bike taxis. While the exact numbers may vary, Rapido’s rapid rise across categories is undeniable.
Source: Economic Times

Rapido’s Strategic Growth

1. Humble Beginnings to Unicorn Status

Founded in 2015, Rapido entered a market already dominated by Ola and Uber, which boasted valuations of USD 5 billion and USD 60 billion, respectively. With just USD 2 million in initial funding, Rapido focused on perfecting its bike-taxi operations. In a market where many bike-taxi startups failed, Rapido navigated regulatory challenges and optimized its operations to become the largest player in this segment.

By mid-2022, Rapido had expanded its services to include auto-rickshaw bookings and last-mile delivery. A USD 200 million funding round in 2024 pushed Rapido’s valuation to USD 1.07 billion, marking its entry into the unicorn club. However, this was a “flat round,” reflecting cautious investor sentiment given Ola and Uber’s entrenched presence.

2. Financial Efficiency

Rapido has managed to grow while keeping costs in check. Despite expanding operations, its workforce has remained steady at 700 employees for the past two years. Revenue grew by 46% year-on-year to INR 648 crore in FY24, and losses were nearly halved to INR 370 crore. In FY25, the first-quarter loss stood at just INR 17 crore, a significant improvement.

App Activity: Gauging User Engagement

The app activity data highlights Rapido’s rise:

• Monthly Active Users (MAUs): Uber leads with 33.6 million, followed by Rapido at 31.8 million, and Ola at 28.6 million.
• New Downloads (2024): Rapido amassed over 33 million downloads, outpacing Uber (17.7 million) and Ola (17.3 million).
• Total App Installs: Ola leads with 206 million, followed by Uber (178 million) and Rapido (120 million).
• Monthly Downloads: Rapido dominates with 6.3 million, compared to Ola (5.3 million) and Uber (5.2 million).

These figures reflect Rapido’s ability to attract new users and maintain a competitive user base, challenging Ola and Uber on digital platforms.

The Subscription Model: A Game Changer

Rapido has capitalized on a shift in the revenue model within the ride-hailing industry. Traditionally, platforms charged a commission (up to 30%) on fares. Now, a subscription-based model allows drivers to pay a fixed fee, which is generally lower. This shift has benefited Rapido in three key ways:

1. Driver Attraction: Lower subscription fees encourage drivers to join, reducing their operational costs.
2. Cheaper Fares: With reduced overheads, Rapido offers fares that are 10%-15% cheaper, attracting cost-conscious riders.
3. Market Disruption: This model has disrupted the three-wheeler and bike-taxi categories and is gradually impacting the cab segment.

Challenges for Ola and Uber

Ola’s Decline

Ola, once a leader in India’s ride-hailing market, has been steadily losing its competitive edge. The shift is evident from app activity data provided by platforms like Sensor Tower and Similarweb, which show that Ola has now dropped to the third position in terms of monthly active users and new app downloads, trailing behind Uber and Rapido.

Key Indicators of Decline:

• Daily Trips: Ola’s daily trips have dropped to 460,000, significantly lower than Uber’s 840,000 and only slightly ahead of Rapido’s 320,000.
• Car Segment Share: Ola’s market share in the car-hailing segment has shrunk to 30% in terms of trip numbers.
• App Metrics: While Ola boasts an impressive 206 million total app installations, its inability to retain active users and attract new downloads has weakened its position.

Uber’s Resilience

Unlike Ola, Uber has demonstrated resilience and adaptability, maintaining its foothold in the market, especially in the premium cab segment. Data shows that Uber has not only closed the gap with Ola but also surpassed it in critical metrics like daily trips and active user base.

Uber’s Strategic Strengths:

• Core Mobility Focus: Uber has stayed committed to its core ride-hailing business, helping it navigate post-pandemic challenges.
• Expanded Offerings: The company has diversified its services, introducing quadricycles, bike taxis in select cities, courier services, and even bus shuttle operations, starting in Delhi with plans for further expansion.
• Partnerships: Uber’s exclusive tie-up with Everest Fleet ensures a steady supply of vehicles, a significant advantage in a market where driver retention is a challenge.

Pressures from New Models:

• The rise of subscription-based revenue models, like Rapido’s, has started to challenge Uber’s traditional commission-based system.
• Uber’s commission revenues attract higher taxes compared to subscription revenues, creating an uneven playing field. The issue is currently being debated by the Central Bureau of Indirect Taxes and Customs (CBIC) and the Karnataka High Court.

Source: Economic Times

The Road Ahead

The Indian ride-hailing market is no longer a straightforward duopoly. Rapido’s dominance in bike taxis, significant share in auto-rickshaws, and steady growth in the cab segment have reshaped the competitive dynamics. As of 2024, the market is a three-cornered contest, with Rapido demonstrating its ability to disrupt and innovate.

While Uber holds its ground and Ola faces challenges, Rapido’s trajectory suggests it is well-positioned to continue gaining traction. The ride-hailing sector’s evolution will depend on how these players adapt to new revenue models, user preferences, and market conditions.

By challenging the status quo and leveraging strategic advantages, Rapido has established itself as a formidable player in India’s ride-hailing economy. As the numbers suggest, the competition is far from over.

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.

Honasa Consumer Ltd., the parent company of Mamaearth, a popular brand in the personal care segment, recently witnessed a dramatic 40% plunge in its stock value. This drop has raised concerns among investors and consumers alike for a brand known for its focus on sustainability and natural ingredients. Let’s explore what led to this fall and three strategies that could help Honasa Consumer regain investor confidence and revive its stock. Source: ET Prime

What Happened to Mamaearth’s Parent Company?

When Honasa Consumer, Mamaearth’s parent company, entered the stock market, it carried high hopes. As a leader in the D2C (Direct-to-Consumer) space, the company aimed to leverage its strong brand recognition and loyal customer base. Its IPO was expected to attract significant investor interest, positioning the brand for long-term growth.

Post-Listing Setback

Despite the initial buzz, Honasa Consumer’s stock faced substantial selling pressure after its listing, leading to a steep 40% drop in its valuation. Notably, the stock fell below its IPO price of ₹324 earlier this month and is currently trading at around ₹262. Source: ET Prime

Mounting Challenges Impacting Performance

The company’s recent performance has revealed several hurdles:

Revenue & Profit Decline: The latest quarter reported a revenue drop, raising concerns about the company’s growth trajectory.

Market Cap in crores (as of 03-12-24	CMP	PE Ratio	Debt to Equity	ROCE %
₹ 8,496	₹ 262	113	0.10	17.1

In the quarter ending September 2024, Honasa Consumer reported revenues of ₹462 crore, marking a decline compared to ₹496 crore in the same quarter of the previous year. Additionally, the company posted a loss of ₹19 crore for this quarter, a significant contrast to the ₹29 crore profit recorded during the corresponding period last year.

Key Reasons Behind Honasa Consumer’s Decline

• Legal Troubles: Ongoing legal issues have added to the company’s difficulties, creating uncertainty among investors. A court has ordered the attachment of Honasa’s assets in response to a ₹57 crore compensation claim filed by its former distributor, RSM General Trading. This legal dispute has damaged the company’s reputation and raised concerns about its governance.
• Intensifying Competition: The online personal care market is becoming increasingly crowded, with established giants like Hindustan Unilever and Procter & Gamble dominating the space. This makes it challenging for newer entrants like Honasa to maintain momentum.
• Investor Behavior: Foreign investors are offloading shares, while mutual funds are hesitant to buy, reflecting a lack of confidence in the stock’s recovery prospects. As of September 2024, mutual funds own a 3.8% stake in the company, while FPIs hold 19%. Retail investors have a smaller share of 2.4%. Foreign companies that previously held stakes in Honasa, including Peak XV Partners, Sequoia Capital Global, Sofina Ventures, and AIFs like Stellaris Ventures and Fireside Ventures, sold their shares on September 12.
•  Broader market conditions: With cautious investor sentiment and volatile markets, stocks like Honasa Consumer have faced additional selling pressure, further dragging down valuations.
• Operational Concerns and Inventory Dispute: The All India Consumer Products Distributors Federation (AICPDF) accused Honasa of holding unsold inventory valued at ₹300 crore, including near-expiry stock. However, the company denied this claim, stating that its actual inventory was ₹40.69 crore. Despite this, the issue has raised concerns about the company’s supply chain inefficiencies and its effects on distributors.

Source: ET Prime

Why Honasa Consumer’s Decline Matters

The drop in Honasa Consumer’s stock is a setback for the company and a signal to other D2C brands planning to go public. It raises important questions about how these companies should balance growth aspirations with profitability and market expectations.

3 Strategies to Revive Honasa Consumer’s Stock

While the stock’s decline is concerning, it is not insurmountable. Here are three strategies to help Honasa Consumer regain investor confidence and revive its stock value.

• Rethink its D2C strategy: Once a strength, the direct-to-consumer model is now facing challenges due to slowing demand and rising costs. Honasa must reevaluate this strategy and explore alternative distribution channels to improve profitability.
• Resolve legal disputes: The ongoing legal case in Dubai is damaging investor confidence. A quick resolution is crucial to restore trust and minimize potential financial losses.
• Improve inventory management: Honasa must implement effective inventory management practices to avoid excess stock and minimize losses. This will also help strengthen distributor relationships and ensure smooth supply chain operations.

The Road to Recovery

While the immediate future appears challenging, Honasa Consumer can still turn things around with decisive action. A successful execution of the recovery plan, coupled with a return to profitability, could help the company regain lost ground.

Technical indicators like the 20-day and 50-day EMAs can provide valuable insights into the stock’s potential trajectory. Crossing these key levels would signal early signs of a turnaround. However, if the stock continues to trade below these levels, it may struggle to recover.

Conclusion

The 40% plunge in Honasa Consumer’s stock is undoubtedly a wake-up call for the company. However, it’s not the end of the road. The company can turn things around by focusing on its core strengths, diversifying distribution channels, and enhancing financial transparency.

Honasa Consumer’s journey serves as a lesson for other D2C brands on the importance of managing valuations, market expectations, and operational excellence. 

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 electric vehicle (EV) revolution is picking up speed, and Tesla is front and center in this exciting shift. But it’s not just about Tesla—the entire EV ecosystem plays a big role. From battery makers to software companies, the EV boom is opening up opportunities across many industries. But what about the lesser-known players—the stocks that aren’t obvious but stand to benefit from this transformation?

Tesla’s India Buzz and the Broader EV Transformation

In the coming months, discussions about Tesla entering India are likely to gain momentum. While geopolitical factors like import duty negotiations could add some drama, the focus remains on the transformative impact of the EV sector.

Whenever a sector undergoes a significant shift, certain companies naturally emerge as prominent players—like automakers and auto ancillary firms in the EV space. However, there are also companies that may not immediately seem connected to EVs but stand to benefit from the industry’s growth. These unexpected players, while not directly part of the EV sector, could play a pivotal role in shaping its ecosystem.

The NSE has created an index to track the EV ecosystem comprehensively. Within this index, several companies specialize in embedded software tailored for EVs. Additionally, some auto ancillary companies, well-prepared for this shift, have successfully transitioned to support the EV industry. Others have launched operations dedicated exclusively to the EV sector. Source: Economic Times

Look at all the companies in the new Nifty EV & New Age Auto Index.

Nifty EV & New Age Auto Index Stocks

Company	Market Cap in crore (as of 28-11-24)	CMP	PE Ratio	ROCE %	3 Yrs Return %
Tata Motors Ltd.	289068	785	8.63	20.1	19
Amara Raja Energy & Mobility Ltd.	23263	1271	24.0	18.7	28
Maruti Suzuki India Ltd.	344868	10969	24.6	21.8	16
KPIT Tecnologies Ltd.	38731	1413	53.3	38.4	47
Varroc Engineering Ltd.	7956	521	15.1	17.5	21
Reliance Industries Ltd.	1738910	1285	25.6	9.61	5
Bharat Forge Ltd.	62319	1338	62.8	12.9	24
Hero Motocorp Ltd.	96600	4830	23.4	29.1	25
TVS Motor Copmany Ltd.	115744	2436	61.4	14.7	53
Samvardhana Motherson International Ltd.	113777	162	30.0	13.7	12
Ashok Leyland Ltd.	69257	232	26.4	15.0	25
Motherson Sumi Wiring Ltd.	28445	64.3	43.1	48.0	–
Tata Elxsi Ltd.	42028	6748	51.4	42.7	6
CG Power & Industrial Solutions Ltd.	115519	756	129	46.6	73
Sona BLW Precision Forgings Ltd.	41406	666	72.1	24.0	-3
UNO Minda Ltd.	59561	1037	66	19.9	34
Mahindra & Mahindra Ltd.	363117	2920	30.5	13.6	52
Eicher Motors Ltd.	132177	4822	31.0	31.0	27
L & T Technology Services Ltd	55418	5236	44.1	33.4	1
Bosch Ltd.	102461	34,740	51.2	20.6	29
Olectra Greentech Ltd.	12973	1581	116	14.8	25.8
JBM Auto Ltd.	18312	1549	97.8	14.4	64
Rattanindia Enterprises Ltd.	9010	65.2	12.6	2.89	13

The EV revolution isn’t just about carmakers or batteries; it’s about a comprehensive ecosystem involving various industries. Beyond automakers, several companies are transforming themselves to cater to the growing EV demand. These include firms that supply specialty chemicals for battery production and others developing components essential to the EV ecosystem.

Here’s a list of 8 lesser-known stocks that may not immediately come to mind when one thinks of EVs.

Jupiter Wagons Ltd.

Jupiter Wagons Ltd. is a leading Indian manufacturer of railway freight wagons, passenger coaches, and wagon components.  Headquartered in Kolkata, the company caters to both Indian Railways and private sector clients. ^{Jupiter Wagons plays a crucial role in India’s railway infrastructure development with a focus on innovation and quality}.

Company	Market Cap in crore (as of 28-11-24)	CMP	PE Ratio	ROCE %	3 Yrs Return %
Jupiter Wagons Ltd.	20856	491	57.0	31.7	144

Tata Technologies Ltd.

Tata Technologies is a global leader in product engineering and digital solutions. They serve major players in automotive, aerospace, and industrial machinery sectors. With a focus on innovation and digital transformation, they help clients design, engineer, and manufacture better products. Their expertise lies in areas like engineering services, product development, and digital manufacturing solutions.

Company	Market Cap in crore (as of 28-11-24)	CMP	PE Ratio	ROCE %	3 Yrs Return %
Tata Technologies Ltd.	38143	940	59.0	28.3	–

Tube Investments of India Ltd.

Tube Investments of India Ltd. (TI) is a leading Indian engineering conglomerate. It specializes in manufacturing a wide range of products like bicycles, precision steel tubes, automotive components, and industrial chains. TI is known for its strong focus on quality, innovation, and customer satisfaction. It is a part of the prestigious Murugappa Group.

Company	Market Cap in crore (as of 28-11-24)	CMP	PE Ratio	ROCE %	3 Yrs Return %
Tube Investments of India Ltd.	69882	3613	87.0	26.3	29

Schaeffler India Ltd.

Schaeffler India Ltd. is a leading manufacturer of high-precision bearings and automotive components. Part of the global Schaeffler Group, it supplies crucial components for engines, transmissions, and chassis systems. With a focus on innovation and sustainability, it caters to both the automotive and industrial sectors. Its products are designed to enhance efficiency and reduce emissions.

Company	Market Cap in crore (as of 28-11-24)	CMP	PE Ratio	ROCE %	3 Yrs Return %
Schaeffler India Ltd.	55450	3548	58.4	26.7	32

Gujarat Fluorochemicals Ltd.

Gujarat Fluorochemicals Ltd. (GFL) is a leading Indian manufacturer of fluorochemicals and refrigerants. ^{It caters to various industries, such as automotive, electronics, healthcare, and construction. GFL is known for its innovative products and commitment to sustainability. It has a strong global presence and is} a major player in the fluorochemicals market.

Company	Market Cap in crore (as of 28-11-24)	CMP	PE Ratio	ROCE %	3 Yrs Return %
Gujarat Fluorochemicals Ltd.	43164	3929	105	9.76	25

Exide Industries Ltd.

Exide Industries Ltd. is a leading Indian manufacturer of storage batteries. It caters to a wide range of applications, including the automotive, industrial, and telecom sectors. Exide is known for its high-quality products and strong distribution network. It is committed to providing reliable and efficient power solutions to its customers.

Company	Market Cap in crore (as of 28-11-24)	CMP	PE Ratio	ROCE %	3 Yrs Return %
Exide Industries Ltd.	38,777	456	46.4	10.2	40

Tata Chemicals Ltd.

Tata Chemicals Ltd. is a leading global manufacturer of chemicals and fertilizers. It produces a wide range of products, including soda ash, inorganic chemicals, and specialty chemicals. Focusing on sustainability and innovation, it contributes to various industries like agriculture, consumer goods, and industrial manufacturing. Its products are used in everyday life, from food to pharmaceuticals.

Company	Market Cap in crore (as of 28-11-24)	CMP	PE Ratio	ROCE %	3 Yrs Return %
Tata Chemicals Ltd.	28106	1103	45.8	7.81	8

Himadri Speciality Chemical Ltd.

Himadri Speciality Chemical Ltd. is a leading Indian manufacturer of specialty chemicals and carbon materials. It caters to diverse industries like steel, aluminum, plastics, automotive, and construction. With a focus on innovation and sustainability, it produces a wide range of products, including coal tar pitch, carbon black, naphthalene, and specialty oils. Himadri is committed to providing high-quality solutions to its customers.

Company	Market Cap in crore (as of 28-11-24)	CMP	PE Ratio	ROCE %	3 Yrs Return %
Himadri Speciality Chemical Ltd.	25884	524	53.8	18.8	128

Key Points on the EV Ecosystem and Emerging Opportunities

Batteries

The battery is the most critical component of an EV. Companies like Ola Electric are investing in advanced batteries, such as their Bharat 4680 battery, to power the future of EVs.

The focus goes deeper into the supply chain—companies are working on providing the essential materials required to manufacture EV batteries. This includes firms supplying specialty chemicals and other critical inputs that form the foundation of the battery ecosystem.

The EV Supply Chain

The EV supply chain spans from the most unexpected players (e.g., specialty chemical providers) to the more obvious ones like Ola Electric and automakers actively involved in EV production. This interconnected chain highlights opportunities across industries, not just within traditional auto or EV firms. Source: Economic Times

Why the EV Boom is Bigger Than Tesla

While Tesla has captured global attention, it’s important to note that the EV ecosystem extends far beyond one company. Governments are setting ambitious EV adoption targets, and traditional automakers are rapidly expanding their EV offerings. This surge creates opportunities in industries that may not immediately come to mind but are critical to EV adoption.

Is the Ecosystem Ready for Tesla?

Tesla’s vision has always been ambitious, from building cutting-edge EVs to scaling up its Gigafactories. But even Tesla can’t do it alone. Its success depends on a robust ecosystem of suppliers and partners.

The readiness of this ecosystem depends on several factors:

1. Infrastructure: Charging networks need to expand rapidly to match growing EV demand.
2. Supply Chain Resilience: From rare earth elements to semiconductors, supply chains must adapt to the increased demand for EV components.
3. Policy Support: Governments worldwide must invest in incentives, infrastructure, and research to support EV adoption.

What Should Investors Watch For?

For those looking to capitalize on the EV boom, here are some key trends to monitor:

• Battery Innovations: Breakthroughs in battery technology could shift market dynamics, benefiting companies that adapt quickly.
• Global Expansion: Companies with international operations are better positioned to benefit from the worldwide EV push.
• Regulatory Changes: Policies promoting EV adoption will directly impact companies across the ecosystem.

The Road Ahead

The EV revolution is reshaping industries far beyond the automotive sector. While Tesla remains a driving force, the ecosystem supporting EVs is just as critical—and often overlooked.

The EV ecosystem is evolving to support this shift as the world moves toward electrification. Whether or not it’s entirely ready for Tesla, one thing is clear: the opportunities in this space are immense, and the players who adapt quickly will drive 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 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

Hindustan Unilever Limited (HUL), a household name in India’s FMCG sector, has separated its ice cream business. This strategic decision is turning heads, sparking interest from both the financial markets of Dalal Street and everyday consumers on Main Street. It reflects the rising importance of the ice cream category and highlights HUL’s commitment to maximizing shareholder value.

Analysts believe the demerger presents an exciting opportunity for existing investors to gain a stake in a dedicated ice cream entity. This segment, characterized as a high-growth business, has the potential for a 15-20% compound annual growth rate (CAGR) and profit margins between 5% and 9%. Source: Mint

HUL’s Financial Performance

HUL reported a revenue of ₹59,144 crore from operations in FY23, which grew by 2% to ₹60,469 crore in FY24. Meanwhile, the company’s net profit increased by 1.5%, rising from ₹9,962 crore in FY23 to ₹10,114 crore in FY24.

Let’s explore why this decision could be a game-changer.

A Scoop of Business Potential

HUL’s ice cream segment, home to popular brands like Kwality Wall’s, Cornetto, and Magnum, may account for only 3% of the company’s total revenue, roughly ₹1,800 crore in FY24. While this might seem modest, the category has been identified as a high-growth area. However, significant investment is required to unlock its full potential. 

This separation is expected to give the ice cream business the flexibility and focus needed to thrive independently. According to the company, this move will allow the new entity to have a dedicated management team and greater flexibility to adopt strategies tailored to its unique business model. Source: Economic Times

A Rare Move in the Ice Cream Industry

Globally, pure-play publicly-listed ice cream companies are a rarity. Most ice cream operations are integrated into broader FMCG businesses. Apart from Vadilal Industries, the most prominent players in India’s ice cream market, such as Amul, Arun, Havmor, Naturals, and Baskin Robbins, remain privately owned.

HUL’s decision stands out, reflecting its confidence in the segment’s growth prospects and its ability to create significant shareholder value through this focused strategy.

Comparison Between Vadilal’s and HUL’s Ice Cream Business

Vadilal’s Ice Cream Business		HUL’s Ice Cream Business
Revenue	Operating Profit Margin	Revenue	Revenue Share
Rs.1,125 Crores	20%	Rs.1,800 Crores	3%

What it Means for the Shareholders

For HUL shareholders, creating an independent listed entity for the ice cream business is a noteworthy value addition. It allows them to remain part of the business’s growth journey while enjoying greater transparency and a sharper operational focus.

The spin-off aims to maximize shareholder value by potentially unlocking new investment opportunities in the fast-growing ice cream market. This sector thrives thanks to rising consumer demand for indulgent and premium products.

The Growing Ice Cream Market in India

India’s ice cream industry is enjoying a rapid growth trajectory! In 2023, the market reached a noteworthy ₹228.6 billion. However, the real excitement lies in its future. Projections by IMARC Group indicate the market is set to soar to a staggering ₹956 billion by 2032, fueled by a strong compound annual growth rate (CAGR) of 17.4% from 2024 to 2032.

Who’s Leading the Pack?

The competitive landscape is buzzing with big players like GCMMF (Amul), Kwality Wall’s, Vadilal, Mother Dairy, Hatsun, and Cream Bell. Each brand is carving out its niche through premium offerings, affordability, or regional dominance.

What’s Driving This Growth?

Several factors fuel the rising popularity of ice cream in India:

• Rising Disposable Incomes: People are more willing to indulge in premium and experimental flavors as incomes grow.
• Consumer Cravings for Indulgence: Ice cream is not just a treat but an experience. Consumers are actively seeking rich, indulgent options.
• Innovative Offerings: Leading brands are captivating the market with exciting new flavors, healthier options, and creative packaging. Brands are stepping up with exciting innovations. Creambell’s Fun Spin Range and international-inspired flavors like Green Apple and Chocky Swirl bars highlight the market’s move toward diversification and novelty. These creative offerings cater to a younger, experimental audience looking for unique and fun experiences.
• Expanding Distribution Networks: Whether in bustling cities or remote villages, better distribution channels are making ice cream accessible to all.

Challenges of the Demerger

While the spin-off strategy can be a good decision, there are hurdles to overcome. Developing local capabilities and managing the transition without disrupting operations will be critical. Additionally, competition in the ice cream sector is fierce, with domestic and international players vying for market share. Ensuring robust growth while maintaining profitability will require strategic planning​

Main Street’s Sweet Spot

Beyond the financial markets, this move could resonate with consumers. As the ice cream business gains independence, it might expand its product range and distribution network. This would likely lead to more innovative offerings tailored to diverse consumer needs. With brands like Kwality Wall’s already enjoying a strong presence, the spin-off could further enhance customer experiences.​

What Lies Ahead?

The board has yet to finalize the separation mode, with options like demerging and listing the business or outright sale being considered. The decision is expected by year-end and will set the stage for the ice cream business’s future trajectory. This is an opportunity for HUL to streamline its focus and enhance its presence in trending demand spaces such as health and beauty.​

A Win-Win Strategy?

HUL’s ice cream spin-off exemplifies strategic foresight. While Dalal Street anticipates the financial benefits of this move, Main Street can look forward to a more dynamic and consumer-centric ice cream brand. If executed well, this separation could become the sundae of choice for investors and consumers alike.

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 keeping an eye on the telecom sector lately? If so, you might have noticed some exciting developments. On Tuesday, November 26, Vodafone Idea Ltd (VIL) showcased one such instance as its share price soared by 18.79% to reach an intraday high of ₹8.28, eventually closing 7.88% higher at ₹7.53.

This rally followed reports that the Union Cabinet approved a significant bank guarantee waiver for telecom operators. Let’s explain what happened, why it matters, and how it impacts Vodafone Idea and the broader telecom sector.

The Bank Guarantee Waiver

The Union Cabinet’s decision to waive bank guarantees (BGs) for telecom operators has been viewed as a critical move to ease the sector’s financial burden. Historically, Indian telecom companies have been required to provide BGs for deferred payments on spectrum purchased in auctions.

Although the 2021 telecom reforms eliminated the BG requirement for spectrum acquired from 2022 onwards, obligations for earlier auctions remained. Reports indicate that telecom operators, including Vodafone Idea and Airtel, collectively owe the government over ₹30,000 crore in BGs.

The Cellular Operators Association of India (COAI) had advocated for this change, citing the need to improve cash flow and allow greater investment in network infrastructure. Vodafone Idea, the most financially strained operator, gains the most from this decision.
Source: Livemint

How It Impacts Vodafone Idea Share Price

Vodafone Idea’s financial troubles have been well-documented. The company owes over ₹24,700 crore in BGs and has struggled to meet its obligations in recent months.

1. Missed Payments:
   • On November 1, Vodafone Idea defaulted on a BG payment of approximately ₹350 crore related to spectrum acquired in the 2012 auction.
   • In September, it missed a BG payment exceeding ₹4,600 crore for the spectrum bought in the 2016 auction.
2. Relief from Waiver:
   By waiving BG requirements for pre-2022 spectrum payments, the government is offering Vodafone Idea immediate financial relief. The waiver reduces the company’s liability, giving it more flexibility to seek additional credit from banks.
3. Funding Requirements:
   To sustain its operations and compete with rivals like Bharti Airtel and Reliance Jio, Vodafone Idea is seeking ₹25,000 crore in loans and ₹10,000 crore in BGs or letters of credit. The BG waiver strengthens its case for securing these funds.
4. Performance Metrics:
   Despite its challenges, Vodafone Idea showed signs of recovery in the second fiscal quarter ending September 30:
   • Consolidated loss narrowed to ₹7,176 crore, compared to ₹8,737 crore in the same period last year.
   • Revenue from operations increased to ₹10,932 crore, up from ₹10,716 crore.
   • Average Revenue Per User (ARPU) rose to ₹166, marking a 7.8% sequential increase.

Source: Livemint

Market Reaction and Trading Activity

The news of the BG waiver sparked a significant rally in Vodafone Idea’s share price. The share price rose by 18.79%, reaching an intraday high of ₹8.28 before settling at ₹7.53, a 7.88% gain.

• Volume Spike:
  Trading volume surged, with 18.72 crore shares exchanging hands on the BSE. This figure was substantially higher than the two-week average volume of 4.97 crore shares.
  
• Turnover and Market Cap:
  The day’s turnover on the counter stood at ₹147.92 crore, with Vodafone Idea commanding a market capitalization of ₹52,483.96 crore.

Comparative Outlook with Rivals

While the bank guarantee waiver benefits all telecom operators, Vodafone Idea gains the most due to its higher BG obligations. For comparison:

• Airtel:
  Airtel’s BG payment of ₹2,200 crore for the 2016 auction is due in September 2024.
  
• Reliance Jio:
  Jio’s BG of ₹4,400 crore for the same auction is due after Airtel’s payment.

Airtel and Jio have healthier financial positions and lower outstanding BG obligations than Vodafone Idea.
Source: The Economic Times

A Step Toward Recovery

The telecom sector has been grappling with heavy debts and intense competition, especially after the introduction of Reliance Jio in 2016. Vodafone Idea, the most debt-laden player, has faced significant hurdles in maintaining operations and retaining market share.

• Subscriber Base:
  Vodafone Idea’s total subscriber base stands at 205 million, with 125.9 million 4G subscribers, slightly down from 126.7 million in the previous quarter.
  
• Fundraising Efforts:
  The company recently raised ₹24,000 crore through equity and actively seeks additional funds to support its operational needs and network expansion.

The Broader Implications

The bank guarantee waiver is not just a win for Vodafone Idea but a potential game-changer for the entire telecom industry. By improving cash flow and reducing financial strain, the move encourages greater investment in infrastructure, which is critical for the rollout of advanced technologies like 5G.

For investors, the rally in Vodafone Idea’s stock reflects renewed optimism about its ability to navigate its financial challenges. However, the path to recovery remains complex, requiring sustained efforts to improve operational efficiency and secure funding.

Conclusion

The Union Cabinet’s decision to waive bank guarantees for telecom operators marks a significant shift in policy, offering much-needed relief to the struggling sector. For Vodafone Idea, the move represents a lifeline as it works to stabilize its finances and remain competitive in a challenging market.

As the dust settles, all eyes will be on how the company leverages this relief to strengthen its position and drive long-term growth. The journey ahead is undoubtedly challenging, but the waiver provides a critical foundation for rebuilding.

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 Adani Group, an Indian conglomerate, has recently faced another significant blow. On Thursday, November 21st, shares of all Adani Group companies took a substantial hit, plummeting between 10% and 20% at the market open. This sharp decline was triggered by severe allegations against Gautam Adani and other key executives by the US District Court and the Securities & Exchange Commission (SEC).

What Led to the Adani Stock Crash?

On November 21, U.S. authorities, including the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC), unsealed charges against Gautam Adani and other senior executives from the Adani Group. The charges revolve around allegations of bribing Indian government officials between 2020 and 2024 to secure lucrative contracts for solar energy projects. These contracts, valued at over $2 billion in post-tax profits over two decades, were allegedly obtained through unethical practices.

The Allegations Explained

The U.S. indictment accuses Gautam Adani, Sagar Adani, Vneet Jaain, and others of conspiracy to defraud U.S. investors by concealing bribes and misrepresenting their financial dealings. Key allegations include:

• Bribery Amount: The group is accused of paying $250 million to Indian officials.
• Deceptive Practices: The executives reportedly raised over $3 billion in loans and bonds based on falsified information.
• Code Names and Concealment: Investigators revealed that internal communications referred to Adani using code names like “Numero Uno” while others worked to obstruct inquiries into the matter​. Source: BusinessToday

Immediate Market Reactions

The allegations have sent shockwaves through the market, leading to a significant sell-off of Adani Group stocks. Two of the group’s flagship companies, Adani Ports and Adani Enterprises, both listed on the Nifty 50 index, plunged by 10% each. Other group companies, including Adani Green Energy, Adani Energy Solutions, Adani Total Gas, and Adani Power, experienced 15% to 20% decline.

Even companies indirectly linked to the group, such as ACC and Ambuja Cements, saw declines​. The broader market reacted cautiously, with the BSE Sensex dropping by 0.57% to 77,134 points.

Impact Beyond Stock Prices

The $250 million bribery allegations have created ripple effects beyond Adani Group’s share prices. The immediate fallout saw the cancellation of a $600 million dollar bond offering, which the group had planned to raise capital for its renewable energy projects. This decision reflects a cautious approach amid heightened scrutiny from global investors and regulators. 

The bond market, often a gauge of investor sentiment, responded negatively as Adani’s existing U.S. dollar bonds fell sharply during Asian trading hours, indicating reduced confidence in the conglomerate’s financial standing.​

Institutional investors, who were previously optimistic about Adani’s resilience post-Hindenburg allegations, are now re-evaluating their positions. Notably, GQG Partners, one of Adani’s significant backers, released a statement to the Australian Exchange expressing concerns and intent to reassess their portfolios in light of the bribery charges. Such developments could dampen the group’s ability to attract international investments, a vital component of its ambitious expansion plans​. Source: CNBC

A History of Scrutiny

This scandal adds to a growing list of controversies surrounding the Adani Group. In 2023, Hindenburg Research accused the group of stock manipulation, accounting fraud, and improper use of tax havens, calling it “the largest con in corporate history.” While Adani denied the allegations, the fallout wiped out over $111 billion in market capitalization, exposing vulnerabilities in the conglomerate’s corporate governance. 

Despite recovering from that crisis through strategic investments from institutions like GQG Partners, these new allegations reinforce concerns about governance and ethical practices within the organization.​

Regulatory scrutiny of the Adani Group has been consistent, both domestically and internationally. In India, the Securities and Exchange Board of India (SEBI) has investigated allegations of money laundering and financial irregularities, although it has faced criticism for delays in taking decisive action. Internationally, this latest bribery case further underscores challenges for companies operating in emerging markets, where regulatory oversight and transparency often face systemic constraints. Source: India Business News​

What’s Next?

The road ahead for Adani Group is fraught with uncertainties. The U.S. legal system’s involvement, including civil and criminal charges, could lead to prolonged litigation. The allegations of fraud and corruption may compel existing investors to reassess their exposure, potentially leading to further sell-offs or funding challenges. If proven, these charges could result in hefty fines or restrictions, impacting the group’s ability to raise capital in global markets.​

Domestically, the allegations may spur stricter regulatory scrutiny from Indian authorities, which could impose additional compliance requirements on Adani Group’s projects and financing strategies. This would likely increase operational costs and slow its ongoing renewable energy and infrastructure projects, such as its ambitious solar energy ventures​.

In Conclusion,

The group’s next steps will likely involve aggressive legal defenses and public relations campaigns to rebuild investor confidence. However, the dual challenge of legal battles in the U.S. and scrutiny at home will test the group’s resilience and ability to navigate this crisis while maintaining its growth trajectory. For stakeholders, this situation highlights the intricate interplay between global compliance standards and business practices in emerging markets.

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.

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