By Shreesh BiradarAs the world economy battled geo-political tensions and an economic slowdown, the International Monetary Fund (IMF) upgraded India’s GDP growth forecast for FY25 from 6.5% to 6.8%. However, the market saw increased volatility due to the election season. The broader Nifty 50 gained by 1.2% in April, while sectors like Nifty PSU Bank, Nifty Consumer Durables, and Nifty Auto gained by 8.5%, 7.1%, and 4.9% respectively.
Banking stocks rose on the back of higher deposit growth, improved CASA, and better liquidity positions in recent results. Higher volumes in the auto sector led by electric vehicle and premium segment sales drove auto stocks higher.
Indian equity mutual funds saw a net inflow of Rs 18,917 crore in April, with smallcap funds receiving the highest inflows of Rs 2,209 crore. Largecap and midcap funds recorded inflows of Rs 358 crore and 1,793 crore respectively. With institutional investors focusing away from large caps, the Nifty 500 rose 3.6% in the month, while the Nifty Smallcap saw a growth of 11.4%. Around nine new open-ended schemes were also launched during the month, which attracted Rs 1,532 crore in investments.
Stocks with increasing MF holding - SAIL, Crompton Greaves, City Union Bank, Jubilant Foodworks, RBL Bank
SAIL eyes growth with capacity expansion
Steel Authority of India (SAIL) is in the business of making steel and is one of the Maharatnas among India’s Central Public Sector Enterprises. The company owns five steel plants at Bhilai, Rourkela, Durgapur, Bokaro and Burnpur (Asansol) and three special steel plants at Salem, Durgapur and Bhadravathi. It also owns a Ferro Alloy plant at Chandrapur.
The firm posted volume growth of 5% YoY in FY24, to 19.2 million tonnes (MT). Coking coal prices have dropped by around 9% in Q4FY24, which is expected to help margin expansion. Falling steel prices due to rising Chinese imports, however, are likely to hurt the top line. The firm is operating around 95% capacity utilization and is planning additional capex in phases, starting with an expansion of 4.5 MT in its IISCO plant, and by 3 MT at Bokaro. Capex guidance for FY25 stands at Rs 6,000 crore.
Fund managers who bought shares of SAIL
Fund managers who added shares of Steel Authority of India to their portfolios include Richard D'souza for SBI PSU Fund, Abhishek Bisen and Hiten Shah for Kotak Equity Savings Fund, and Dhaval Joshi and Kunal Sangoi for Aditya Birla Sun Life Pure Value Fund. Fresh buys were done by Vasav Sahgal and Sanjeev Sharma for Quant PSU Fund, and Laukik Bagwe and Dhaval Gada for DSP Dynamic Asset Allocation Fund.
Crompton Greaves prioritizes growth avenues rather than margins
Crompton Greaves Consumer Electricals (CROMPTON) is a home appliances manufacturer with a focus on the fans business, which generates around 45% of its revenue. The pump business contributes 22%, while Crompton’s appliance and lighting business constitutes around 16% each. Its Butterfly Gandhimathi acquisition and other new products add 13% and 15% respectively to the total sales.
Crompton Greaves plans to focus on revenue growth by investing in newer products, expanding the distribution network, and increasing advertisement spending. The firm with its current market share at 27-28%, plans to gain further market share by focusing on its premium & super premium fans, and better channel mix. The firm undertook a price hike of around 3% in H2FY24 for its products. The price hikes will partially offset the margin losses due to higher advertisement spending. The firm is diversifying into the pump business, with a focus on agricultural and solar pumps.
Fund managers who bought shares of Crompton Greaves
Fund managers who added shares of Crompton Greaves Consumer Electricals to their portfolios include Rohit Singhania and Charanjit Singh for DSP ELSS Tax Saver Fund, Sandeep Manam and R. Janakiraman for Franklin India Smaller Companies Fund, Sailesh Raj Bhan and Kinjal Desai for Nippon India Multi Cap Fund. Fresh buys were done by Satish Ramanathan and Chaitanya Choksi for JM Flexicap Fund and Yogesh Patil and Dikshit Mittal for LIC MF Multi Cap Fund.
City Union Bank: Credit growth to pick up in FY25 on a low base
City Union Bank (CUB), one of India’s oldest private sector banks, has around 772 branches and is headquartered in Kumbakonam, Tamil Nadu. It specializes in micro, small and medium enterprises (MSME) loans and has a loan book of Rs 44,017 crore.
City Union Bank is diversifying its loan book to build up its asset quality. While traditionally focused on MSME loans, CUB is now shifting its focus towards newer products like personal loans, loans against property, housing loans, etc. The regulatory issues in its gold loan portfolio and higher NPAs in its MSME loans have hindered loan book growth, and the bank's loan book growth has been limited to below 5% for FY24. The bank's cost of capital has increased due to higher credit costs and a lower deposit base. However, loan growth is expected to pick up in FY25, as the firm has addressed regulatory issues in the gold loan portfolio and NPA slippages have moderated in its MSME portfolio.
Fund managers who bought shares of City Union Bank
Additional shares were bought by Abhishek Bisen and Arjun Khanna for Kotak Banking & Financial Services Fund and Trideep Bhattacharya and Sahil Shah for Edelweiss Small Cap Fund. Fresh buys were done by Samir Rachh and Kinjal Desai for Nippon India Small Cap Fund, Abhishek Bisen and Devender Singhal for Kotak Multicap Fund, and Rohan Korde and Nilay Dalal for ITI Banking and Financial Services Fund.
Jubilant Foodworks focuses on quick delivery and customer rewards
QSR player Jubilant Foodworks (JUBLFOOD) owns a wide portfolio of restaurant brands, including Domino’s Pizza, Popeyes, Dunkin, and Hong’s Kitchen. Despite recent diversification efforts, it relies heavily on Domino’s, which contributed 69.7% of revenue in Q3FY24. The firm has exclusive rights to develop and operate Domino’s Pizza in India, Sri Lanka, Bangladesh and Nepal. Jubilant Foodworks has 2,007 Domino’s stores across 407 cities.
The firm has launched free delivery for orders above Rs 149, rewards programs and Rs 99 meals. This is expected to increase the traction of its orders and help gain market share against Pizza Hut. However, higher incentives and lower footfalls at restaurants overall are expected to hit margins. The firm is undergoing store expansions in its foreign subsidiaries. The company expects moderating inflation, industry expansion and store additions to drive its bottom line.
Fund managers who bought shares of Jubilant Foodworks
Fund managers who added shares of Jubilant Foodworks to their portfolios include Neelesh Surana and Ankit Jain for Mirae Asset Large & Midcap Fund, Sailesh Raj Bhan for Nippon India Multi Cap Fund, and R. Srinivasan and Mohit Jain for SBI Focused Equity Fund. Fresh buys were done by Sumit Agrawal and Ritika Behera for Bandhan Large Cap Fund, and Aishwarya Agarwal and Kinjal Desai for Nippon India Vision Fund.
RBL Bank: Unsecured loans sustain margins
RBL Bank Ltd (RBLBANK), headquartered in Mumbai, is a banking and finance firm that specializes in retail loans and credit cards. It is one of the largest credit card issuers in India with a 5% market share. It caters to 15 million customers through 545 branches. Around 58% of its branches are located in metro areas. The bank has a strong footprint in Maharashtra, Karnataka and Tamil Nadu, with a loan book size of Rs 83,987 crore.
Credit cards are the key revenue driver for RBL Bank, making up nearly 20% of its loan book. The bank has a credit-to-deposit ratio of 81%, which it plans to increase further. The average CASA ratio improved by 140 bps QoQ and advance yields increased by 12 bps. However, increased term deposits have offset the gains in CASA. The bank has lowered its net NPA significantly to 0.7%. Higher provisioning has impacted profitability but has enhanced its provision coverage ratio to 72.7%.
Fund managers who bought shares of RBL Bank
Fund managers who added shares of RBL Bank to their portfolios include Sanjeev Sharma and Vasav Sahgal forQuant Small Cap Fund, Dhimant Shah and Rohan Korde for ITI Small Cap Fund, and Sandeep Jain and Miten Vora for Baroda BNP Paribas Banking and Financial Services Fund. Fresh buys were done by Hardik Shah and Ashish Naik for Axis Balanced Advantage Fund, and Amit Modani for Mirae Asset Multi Asset Allocation Fund.
Stocks with increasing MF holding - Engineers India, CDSL, Angel One, Amara Raja Energy, MGL
Engineers India - Execution quality remains key for huge order book
Engineers India (ENGINERSIN): This PSU specializes in consulting services and engineering of turnkey projects in oil, gas and petrochemical industries in India and abroad.
Engineers India is trying to diversify into new growth verticals like coal gasification, defense and transportation. Its network in the oil & gas industry has helped drive new projects. The firm has an order book of Rs 7,991 crore and another Rs 1,700 crore is in the pipeline. It has guided an EBIT of 27% for consultancy projects and 4% for turnkey projects. The firm is expanding its footprint in the Middle East to take maximum advantage of the oil & gas project hub.
Fund managers who bought shares of Engineers India
Fund managers who added shares of Engineers India to their portfolios include Sanjeev Sharma and Vasav Sahgal for Quant Small Cap Fund and Venugopal Manghat and Gautam Bhupal for HSBC Infrastructure Fund. Fresh buys were done by Sanjeev Sharma and Vasav Sahgal for Quant Value Fund, Gargi Banerjee and Deepak Ramaraju for Shriram Hybrid Equity Fund, and Anuj Kapil for Taurus Ethical Fund.
CDSL: Non-market linked revenue streams to cushion volatility
Central Depository Services (India) Ltd (CDSL) is a banking and finance firm that facilitates the holding of securities in dematerialized form and enables securities transactions. It is an intermediary for exchanges, clearing corporations, depository participants and investors. CDSL has more than eleven crore investor accounts.
In Q4FY24, CDSL saw an 85.9% YoY increase in revenue, driven by higher annuity income and equity delivery volumes. Annuity income is non-market linked and helps maintain revenue streams in the down cycle. Margins expanded by 580 bps to 61.4% in Q4FY24 driven by high margin depository services. The firm is expected to maintain margins of around 60% in FY25. CDSL’s venture into the insurance repository sector is also likely to add new revenue streams.
Fund managers who bought shares of Central Depository Services (India)
Fund managers who added shares of Central Depository Services (India) to their portfolios include Viral Shah and Dhaval Patel for NJ Balanced Advantage Fund and Shridatta Bhandwaldar and Amit Nadekar for Canara Robeco Emerging Equities. Fresh buys were done by Manish Lodha and Abhinav Khandelwal for Mahindra Manulife Small Cap Fund, Sachin Jain and Shreyash Devalkar for Axis Multicap Fund, and Hardick Bora and Sanjay Bembalkar for Union Flexi Cap Fund.
Angel One: Increased competition eating away at margins
Angel One (ANGELONE), is a capital markets firm with expertise in the brokerage business of stocks, currency, commodities and derivatives. It also earns revenue by providing margin facilities, depository services, mutual fund distribution, etc. The firm also has portfolio management services.
In Q4FY24, Angel One’s net profit increased by 27.4% YoY to Rs 339.9 crore, while revenue rose by 64.4% YoY to Rs 1,357.3 crore on the back of increasing gross client acquisition and average daily turnover (ADTO). The firm's EBITDA margin contracted by 770 bps YoY to 39% during the quarter. The company spent heavily on client acquisition and technological upgrades to fend off competition from online brokers such as Zerodha, Groww, and Upstox.
Fund managers who bought shares of Angel One
Fund managers who added shares of Angel One to their portfolios include Ankush Sood and Niket Shah for Motilal Oswal Flexicap Fund, Rupesh Patel for Nippon India ELSS Tax Saver Fund, and Manish Gunwani and Rahul Agarwal for Bandhan Core Equity Fund. Fresh buys were done by Anand Laddha and Dhruv Muchhal for HDFC Capital Builder Value Fund, and Sandeep Manam and R. Janakiraman for Franklin India Smaller Companies Fund.
Amara Raja Energy & Mobility: Auto division propels near-term growth
Amara Raja Energy & Mobility (ARE&M), headquartered in Hyderabad is an auto component manufacturer specializing in manufacturing lead-acid and lithium-ion storage batteries, and inverters. Its batteries find applications in the telecom sector, railways, automobiles, power control and home appliances. The firm is also into manufacturing lithium-ion batteries, contributing 4% of the total revenue.
Amara Raja's Q4FY24 revenue growth is expected to be around 15-16% YoY, aided by higher demand in the auto sector. The industrial division is also expected to see an uptick due to 5G expansion by telecom players. The firm is expected to see margin expansion on account of lower lead prices in the past two quarters. It is also seeing high traction in its industrial segments and is expected to clock more than 90% capacity utilization in the quarter. Amara Raja is also investing Rs 3,000 crore in building a 500 MWh lithium-ion plant.
Fund managers who bought shares of Amara Raja Batteries
Fund managers who added shares of Amara Raja Batteries to their portfolios include R. Janakiraman and Sandeep Manam for Franklin India Smaller Companies Fund, Rajat Chandak and Priyanka Khandelwal for ICICI Prudential Transportation and Logistics Fund and Manish Gunwani and Kirthi Jain for Bandhan Small Cap Fund. Fresh buys were done by Satish Ramanathan and Gurvinder Wasan for JM Flexicap Fund and Dhawal Dhanani and Paras Matalia for Samco Active Momentum Fund.
Mahanagar Gas to benefit from rising CNG adoption
Mahanagar Gas (MGL) is a city gas distribution utilities firm operating in Mumbai, its adjoining areas, and the Raigad district of Maharashtra. The company distributes CNG for use in motor vehicles, and PNG for domestic households and commercial/industrial use. Nearly 70% of the company’s revenue is from CNG sales. The firm has 347 CNG stations under its banner.
In Q4FY24, its net profit declined by 6.1% YoY to Rs 252 crore despite a 1% YoY growth in its revenue. Margins contracted on account of higher power and fuel costs, transportation, and dispensation expenses. Higher vehicle conversion to CNG along with an increase in piped gas connections are expected to drive future growth. The firm has a capex plan of Rs 1,000 crore for FY25. The government plans to raise the share of natural gas in India’s energy mix to 15% by 2030, up from the current 6%. This should boost MGL’s prospects.
Fund managers who bought shares of Mahanagar Gas
Fund managers who added shares of Mahanagar Gas to their portfolios include Dhaval Gala and Dhaval Joshi for Aditya Birla Sun Life PSU Equity Fund, Shreyash Devalkar and Mayank Hyanki for Axis Small Cap Fund, Anil Ghelani and Diipesh Shah for DSP Nifty Smallcap250 Quality 50 Index Fund, and Himanshu Mange for Nippon India Nifty Smallcap 250 Index Fund. Fresh buys were done by Harshal Joshi and Daylynn Pinto for Bandhan Multi Cap Fund.
