In September, the Nifty 50 and Nifty 500 indices rose by 2% and 2.2%, respectively, on the back of cooling inflation and an upbeat earnings outlook. However, a surge in oil prices due to ongoing OPEC+ production cuts halted the market rally temporarily that month. 

Indian mutual funds recorded a net Systematic Investment Plan (SIP) inflow of Rs 16,043 crore during the same month. Large-cap stocks saw  a net outflow of Rs 111 crore, while small and mid-cap stocks had net inflows of Rs 2,678 crore and Rs 2,001 crore, respectively. 

The volatility in large-cap stocks has shifted the focus back to mid and small-cap growth stocks. This interest was evident as the Nifty Smallcap 100 and Nifty Midcap 100 indices shot up by 4.1% and 3.6% respectively in September. 

Lemon Tree Hotels’ MF holdings increased to 965.8 lakh shares in September

Lemon Tree Hotels: Asset-light model key to margins  

Lemon Tree Hotels (LEMONTREE) is engaged in the hotel business with various brands like Aurika Hotels, Lemon Tree Hotels, Red Fox and Keys. The firm currently has 96 hotels comprising 9,400 rooms across 61 locations. It plans to add 30 hotels with 2,840 rooms in the next two years. 

The firm has been on an expansion spree and recently signed two new properties in Somnath and Dehradun. These properties are expected to be operational by FY25 and FY27, respectively. The firm’s asset-light model through franchised hotels will accelerate its growth with lower capex. The recent uptick in leisure travel, international events, corporate events, and exhibitions is also contributing to increased room occupancy.

Fund managers who bought shares of Lemon Tree Hotels

Fund managers who added shares of Lemon Tree Hotels to their portfolios include Samir Rachh and Kinjal Desai for Nippon India Small Cap Fund, Harsh Sethi for SBI Nifty Smallcap 250 Index Fund, Dhruv Bhatia for Bank of India Small Cap Fund, and Arun Agarwal and Nirman Morakhia for HDFC Nifty Smallcap 250 Index Fund. Fresh buys were done by Gautam Bhupal and Sonal Gupta for HSBC Consumption Fund.

RBL Bank: Unsecured loans sustain margins 

RBL Bank Ltd (RBLBANK), headquartered in Mumbai, specialises 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 13.6 million customers through 520 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 73,087 crore. 

Credit cards are the key revenue driver for RBL Bank, making up nearly 40% of its loan book. The bank has a credit-to-deposit ratio of 85%, which it plans to increase further. The majority of RBL Bank’s deposits are expected to be repriced in Q2FY24, leading to rising costs of funds and moderating yields. The pressure on margins has affected the bank's profitability, but the good news is that stable NPAs have led to lower provisioning requirements. The management has guided for a credit growth of 20% CAGR and net interest income growth of 23% in FY24-25 (currently at 4.8%).

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 for Quant Flexi Cap Fund, Dhimant Shah and Rohan Korde for ITI Small Cap Fund, and Shiv Chanani and Miten Vora for Baroda BNP Paribas Mid Cap Fund. Fresh buys were done by Abhishek Bisen and Devender Singhal for Kotak Multi Asset Allocation Fund, and Krishna Sanghavi and Kush Sonigara for Mahindra Manulife Business Cycle Fund.

Aurobindo Pharma: Injectables and US market aids top-line growth

Aurobindo Pharma (AUROPHARMA) is a major manufacturer of active pharmaceutical ingredients (APIs), branded drugs, and generic pharmaceuticals. US and European markets account for nearly 75% of its revenue. The firm has received 466 Abbreviated New Drug Approvals (ANDAs) from the US Food and Drug Administration (USFDA) so far.

Aurobindo Pharma recently launched a greenfield facility for injectables at Visakapatnam and entered into a partnership with Singapore-based Hilleman Labs for pediatric vaccines. Amid drug shortages in the US, the company expects price stabilization as competition recedes in its segments. Its newly launched injectables are gaining traction, with five new injectables launched and 19 products approved in Q1FY24 alone, including 7 injectables. The firm is expected to grow at an 11% CAGR from FY24 to FY25, supported by healthy growth in the injectable business and biosimilars sector in the US, as well as new product launches in the US and Europe. 

Fund managers who bought shares of Aurobindo Pharma

Fund managers who added shares of Aurobindo Pharma to their portfolios include Chirag Setalvad and Dhruv Muchhal for HDFC Mid-Cap Opportunities, Daylynn Pinto and Nishita Shah for Bandhan Sterling Value Fund, and Sanjeev Sharma and Vasav Sahgal for Quant Active Fund. Fresh buys were done by Ravi Gopalakrishnan and Ashish Aggarwal for Sundaram Large and Mid Cap Fund, and Sankaran Naren and Dharmesh Kakkad for ICICI Prudential Value Discovery Fund.

Shriram Finance: Merger and rising interest rates add to the woes

Specialising in vehicle and equipment financing, as well as serving micro, small and medium enterprises, Shriram Finance Ltd (SHRIRAMFIN) has an AUM of Rs 1.93 lakh crore and a customer base of 7.54 million. The NBFC also offers gold and personal loans.

The FY23 merger with Shriram Transport Finance and Shriram City Union Finance has expanded the company's geographical reach, facilitating growth in its MSME loan book. The merger also created a Rs 1,513 crore intangible asset, which will be amortized over the next four years. The margin pressure due to the merger and rising interest rates will weigh down the NBFC’s profitability. Adding to this is the stiff competition from nationalized banks in the vehicle loan space. However, the company expects credit growth to exceed 20%, which will positively impact its top line.

Fund managers who bought shares of Shriram Finance

Fund managers who added shares of Shriram Finance to their portfolios include Pankaj Tibrewal and Arjun Khanna for Kotak Emerging Equity Fund, and Shriram Ramanathan and Gautam Bhupal for HSBC Aggressive Hybrid Fund. Fresh buys were done by Mehul Dama for Nippon India ETF Nifty Next 50 Junior BeES, Kayzad Eghlim and Nishit Patel for ICICI Prudential Nifty Next 50 Index Fund, and Sharwan Kumar Goyal and Ayush Jain for UTI Nifty Next 50 Index Fund.

Minda Corporation: Electric vehicle parts and new product launches to drive growth

Minda Corporation, a manufacturer of automobile components like mechatronics, security systems, die casting, telematics, instrument clusters sensors, serves both the passenger and commercial vehicle sectors. With a manufacturing base in India, the company caters to clients in Germany, China, Japan, Poland, Mexico, etc.

Minda Corporation has a total order book of Rs 3,000 crore, of which nearly 50% is related to electric vehicles (EV), including Rs 750 crore for battery chargers. Its new product launches like smart key lock sets are gaining traction and aiding revenue growth. Acquiring new customers and adding new products are expected to help Minda Corporation’s export revenue. The management expects the firm’s revenue to grow by  23% in FY24-25,  along with a 150 basis points expansion in EBITDA margins.

Fund managers who bought shares of Minda Corporation

Fund managers who added shares of Minda Corporation to their portfolios include Manish Lodha and Abhinav Khandelwal for Mahindra Manulife Small Cap Fund, and R Sivakumar and Hitesh Das for Axis Equity Saver Fund. Fresh buys were done by Mehul Dama for Nippon India Nifty Smallcap 250 Index Fund, Swapnil Mayekar for Motilal Oswal Nifty Smallcap 250 Index Fund, and Harsh Sethi for SBI Nifty Smallcap 250 Index Fund.

JK Lakshmi Cement's MF holdings stood at 272.3 lakh shares in September

JK Lakshmi Cement: Higher infra spends help volumes 

JK Lakshmi Cement (JKLAKSHMI) is a cement manufacturer with plants in Rajasthan, Haryana, Chhattisgarh, Orissa and Gujarat. The company has a total production capacity of 13.9 million tonnes (MT) and also operates 117 MW power plants, supplying 70% of its energy requirements. It has integrated units at Udaipur and Durg, while grinding units are located at Jhajjar, Cuttack and Surat (Gujarat)

JK Lakshmi Cement has seen an uptick in production volume and capacity utilization due to higher spending on Infra projects and affordable housing. The firm's ongoing capacity expansion is expected to boost volume sales. Also, a decrease in the prices of pet coke and coal has led to margin expansion. The firm plans to further expand margins by selling value-added products, increasing its reliance on renewable energy, and improving logistics efficiency. It is currently adding a capacity of 2.5 MT at a cost of Rs 1,650 crore, which is expected to be completed by FY25. It also plans to take the total capacity to 30 MT by the end of FY30.

Fund managers who bought shares of JK Lakshmi Cement

Fund managers who added shares of JK Lakshmi Cement to their portfolios include Anand Radhakrishna and Rajasa Kakulavarapu for Templeton India Value Fund, Harshal Joshi and Daylynn Pinto for Bandhan Multi Cap Fund, and Harsh Sethi for SBI Nifty Smallcap 250 Index Fund. Fresh buys were done by Sachin Padwal-Desai and Umesh Sharma for Franklin India Balanced Advantage Fund, and Anish Tawakley and Sri Sharma for ICICI Prudential Smallcap Fund.

CSB Bank: Eyes branch expansion to increase market share

CSB Bank (CSBBANK), owned by Fairfax, is one of the oldest private sector banks in India. With roots in Kerala, the bank specializes in gold and small and medium enterprise (SME) lending. It caters to 2.2 million customers through 704 branches. Around 58% of its branches are located in semi-urban and rural areas. The bank has a major presence in South India and a loan book size of Rs 22,000 crore. 

Facing stiff competition in gold loans from nationalized banks and slowing growth in SME lending due to rising interest rates, CSB Bank is trying to diversify itself into retail banking. CSB Bank is seeing healthy growth in retail segments on the back of strategic capex for new branches. The bank plans to double its branch count by FY30. CSB’s rise in the cost of funds has been offset by an increase in yields. Its interest margins have been stable at around 5.4%.

Fund managers who bought shares of CSB Bank

Fund managers who added shares of CSB Bank to their portfolios include R Srinivasan and Mohit Jain for SBI Magnum Global Fund, Jaiprakash Toshniwal for LIC MF Flexi Cap Fund, and Mehul Dama for Nippon India Nifty Smallcap 250 Index Fund. Fresh buys were done by Karthikraj Lakshmanan for UTI MNC Fund, and Roshan Chutkey and Sharmila D’mello for ICICI Prudential Banking and Financial Services Fund.

CDSL: Higher annuity income boosts top-line 

Central Depository Services (India) (CDSL) 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 eight crore investor accounts.

In Q1FY24, CDSL saw a 20% YoY increase in revenue, driven by higher annuity income and equity delivery volumes. Annuity income is non-market linked and maintains revenue streams during market downturns. Although margins contracted by 183 bps to 53.9% in Q1FY24, the company’s revenue should expand by 17% in FY24 according to analysts, with a projected EBITDA margin of 56.5%. The firm is also venturing into the insurance repository sector, subject to regulatory approvals. 

Fund managers who bought shares of CDSL

Fund managers who added shares of Dixon Technologies to their portfolios include Taher Badshah and Dhimant Kothari for Invesco India Contra Fund, Vishal Mishra and Shridatta Bhandwaldar for Canara Robeco Equity Taxsaver Fund, and Dhimant Shah and Rohan Korde for ITI Small Cap Fund. Fresh buys were done by Hardick Bora and Sanjay Bembalkar for Union Small Cap Fund, and Alok Singh for Bank of India Tax Advantage Fund.

Sobha: Robust launch pipeline and geographical expansion to aid top line

Sobha (SOBHA), based in Bangalore, is engaged in real estate construction, development, and sales. The company has developed townships, housing apartments and commercial real estate. It has also ventured into interior works, metal works and concrete products, providing backward integration.

Sobha’s Q2FY24 operational data indicated that it hit a lifetime high in pre-sales, of Rs 1,720 crore, with an average price realization of Rs 10,223 per square foot. The entire sales in Q2FY24 were dependent on inventory as they did not have any new launches in the quarter. Also, its 15-million-square-foot launch pipeline for the next two years provides revenue visibility. The escalating value of real estate in metro cities contributes to higher price realization. A case has been filed against Sobha however, for forging a no-objection certificate provided by the municipal corporation. Home buyers have accused the firm of misappropriation to the tune of Rs 1,040 crore.

The firm's expansion into cities like Kochi and Gurugram has broadened its geographical footprint and contributed to margin growth. This diversification comes even as demand in the premium luxury segment is seeing a notable uptick.

Fund managers who bought shares of Sobha

Fund managers who added shares of Sobha to their portfolios include Manish Gunwani and Kirthi Jain for Bandhan Emerging Businesses Fund, and Satish Mishra for Tata Mid Cap Growth Fund. Fresh buys were done by Venugopal Manghat and Gautam Bhupal for HSBC Value Growth Fund, Satish Ramanathan and Asit Bhandarkar for JM Value Fund, and Ravi Gopalakrishnan and Rohit Seksaria for Sundaram Small Cap Fund.

Kaynes Technology: New semiconductor plant to open better avenues

Kaynes Technology (KAYNES) is an IoT solution provider and an integrated electronics manufacturer. The firm has capabilities across the entire spectrum of electronics system design and manufacturing (ESDM) services. The firm operates eight manufacturing facilities across India (in Karnataka, Haryana, Himachal Pradesh, Tamil Nadu, and Uttarakhand). The automotive sector is a major segment that provides nearly 34% of its revenue.

As the company mostly caters to other industrial businesses, its primary exposure is to the business-to-business (B2B) segment. This segment has lower competition and higher margins. However, its top five customers contribute nearly 44% of its revenue, which poses a risk. Kaynes Technology plans to set up a Semiconductor Assembly and Testing (SAT) facility and a Printed Circuit Board (PCB) manufacturing plant at a cost of Rs 3,750 crore. The firm currently meets nearly 65% of its semiconductor requirements through imports.

Fund managers who bought shares of Kaynes

Fund managers who added shares of Kaynes Technology to their portfolios include Amit Nigam and Pranav Gokhale for Invesco India Multicap Fund, and Dhimant Shah and Rohan Korde for ITI Multi Cap Fund. Fresh buys were done by Sonam Udasi and Aditya Bagul for Tata India Consumer Fund, Sachin Relekar and Nishita Shah for Bandhan Flexi Cap Fund, and Piyush Baranwal and Ramesh Mantri for WhiteOak Capital Multi Cap Fund.