In November, the Nifty 50 breached the 20,000 mark and delivered a 5.5% return for the month. November’s festive season with Diwali and other major festivals, gave the Indian economy a major boost. Consumers were bullish: auto sales volumes hit an all-time high, real estate firms saw record bookings, and banks experienced an uptick in retail loans despite higher interest rates. Oil prices also dropped below $80, providing relief to the exchequer. 

Indian equity mutual funds recorded a net inflow of Rs 15,536 crore in November, with small-cap stocks registering the highest inflow of Rs 3,699 crore, followed by mid-cap stocks at Rs 2,665 crore. As a result, Nifty Midcap 100 and Nifty Smallcap 100 saw rallies of 10.6% and 12% in November. 

Zomato’s MF holdings increase to 9,707 lakh shares in November

Zomato: acquisition Blinkit to fuel future growth

Zomato (ZOMATO), a software & services firm, is a fee-based online platform that connects customers to restaurants and delivery partners. It also offers  B2B services, dining-out booking services, and grocery deliveries, connecting local stores with end customers.

Zomato’s subsidiary Blinkit, had contributed positively to gross margins in Q2FY24 for the first time. Most of Zomato’s future growth prospects are tied to Blinkit ( its quick-commerce vertical). In this ‘all eggs in one basket’ situation, Zomato is counting on Blinkit to grow at 116% CAGR in FY24-FY25. The competitive pressures in the quick-commerce sector have eased, with smaller players facing funding constraints.

Zomato has increased its revenue through advertising and platform fees. However, it is crucial to fine-tune the platform fees, as customers may seek cheaper alternatives. The management aims to achieve a 4%-5% EBITDA margin for its food delivery business, which is projected to grow at a 32% CAGR in FY24-25. 

Fund managers who bought shares of Zomato

Fund managers who added shares of Zomato to their portfolios include Harsha Upadhyaya and Arjun Khanna for Kotak Flexicap Fund, Ajay Argal and Sandeep Manam for Franklin India Focused Equity Fund, Kinjal Desai and Ashutosh Bhargava for Nippon India ELSS Tax Saver Fund. Fresh buys were done by Dhaval Gala and Dhaval Joshi for Aditya Birla Sun Life Transportation and Logistics Fund, and Alok Bahl and Apurva Sharma for Helios Flexi Cap Fund.

GAIL (India): Easing LNG and natural gas prices to help profitability

GAIL (India) is a utilities firm and the largest state-owned natural gas processing and distribution company in India. It has interests in sourcing and trading natural gas, the production of LPG, liquid hydrocarbons and petrochemicals, the transmission of natural gas and LPG through pipelines, etc.

The decline in liquefied natural gas (LNG) prices due to the easing of global supply conditions has driven up GAIL's profitability. Natural gas prices also fell by 25.3% in November. In Q2FY24, GAIL’s net profit increased by 85.8% YoY to Rs 2,444.1 crore, despite a 14.7% decline in revenue. This margin improvement was on account of higher trading and distribution revenue. 

GAIL has also filed an arbitration case against SEFE Marketing & Trading Singapore, a former unit of Russia's Gazprom, seeking $1.8 billion in damages for not receiving the supply of LNG.

Fund managers who bought shares of GAIL

Fund managers who added shares of GAIL to their portfolios include Dinesh Balachandran and Mohit Jain for SBI Contra Fund, Laukik Bagwe and Dhaval Gada for DSP Dynamic Asset Allocation Fund, Dhaval Joshi and Kunal Sangoi for Aditya Birla Sun Life Pure Value Fund. Fresh buys were done by Sanjeev Sharma and Vasav Sahgal for Quant Multi Asset Fund, and Hiten Shah and Abhishek Bisen for Kotak Balanced Advantage Fund.

Bandhan Bank: Watch for margin pressure and NPA slippages

Bandhan Bank Ltd (BANDHAN) started its journey as a microfinance institution based in  West Bengal but has since grown into a major banking and finance player with a pan-India presence. The bank currently has a loan book of Rs 1,07,630 crore, mainly serving MSMEs, micro-entrepreneurs, and retail borrowers.

Bandhan Bank is expected to see a 20-25 bps increase in the cost of funds in FY24. Net interest margins are projected to moderate around 7-7.5%. However, the bank’s digital transformation and a reduction in network expansion to around 100 branches per year are expected to lower expenses. Its asset quality has seen higher slippages in the past two quarters. The slippages have been partly offset by better collection efficiency. The bank is actively trying to increase the share of secured loans from the current 44% to 50% by FY26. 

Fund managers who bought shares of Bandhan Bank

Fund managers who added shares of Bandhan Bank to their portfolios include Harshal Joshi and Daylynn Pinto for Bandhan Multi Cap Fund, Swapnil Mayekar for Motilal Oswal Nifty Bank Index Fund, and Mehul Dama for Axis Nifty Midcap 50 Index Fund. Fresh buys were done by Hiten Shah and Abhishek Bisen for Kotak Balanced Advantage Fund, and Vasav Sahgal and Sanjeev Sharma for Quant Active Fund.

Delhivery: Contract renegotiation may help make the business EBITDA positive

Delhivery provides supply chain, transportation and logistics services to e-commerce segments across the board. It is India’s largest e-commerce logistics provider with 2,880 delivery centres across the country.

In Q2FY24, the firm saw moderate revenue growth of 8.8% YoY. Delhivery has renegotiated some of its long-term contracts, which will help in margin expansion. While the EBITDA margins are still in the negative zone of -0.6%, there is optimism that EBITDA will turn positive by the end of FY24. The firm is also looking to expand its infrastructure in Chennai, Hyderabad and Noida.

Fund managers who bought shares of Delhivery

Fund managers who added shares of Delhivery to their portfolios include Neelesh Surana for Mirae Asset ELSS Tax Saver Fund, S Bharath and Ratish Varier for Sundaram Mid Cap Growth Fund, Mohit Jain and R Srinivasan for SBI Flexicap Fund, Ashish Naik and Vinayak Jayanath for Axis Business Cycles Fund, and Mehul Dama for Nippon India ETF Nifty Midcap 150 Fund.

Exide Industries: Venturing into lithium-ion battery manufacturing 

Exide Industries (EXIDEIND) is a Kolkata-based auto part & equipment manufacturer with expertise in lead-acid and lithium-ion storage batteries and inverters. Its batteries find applications in automobiles, industries, home appliances and submarines. The firm generates 74% of its revenue from the automotive space.

As a market leader in the storage battery space, Exide is focusing on EV batteries to gain first-mover advantage. The firm has a capex of Rs 6,000 crore planned, for developing 12 MWh lithium-ion batteries. It currently has an order book of Rs 600 crore for lithium-ion batteries. Exide Industries has partnered with China-based SVOLT Energy to ensure a steady supply of raw materials for this venture. Its debt-free balance sheet and Rs 5,000 crore investment in HDFC Life will provide its capex plans the cushion they need.

Fund managers who bought shares of Exide

Fund managers who added shares of Exide Industries to their portfolios include Arjun Khanna and Harsha Upadhyaya for Kotak Equity Opportunities Fund, Dhaval Gada and Laukik Bagwe for DSP Dynamic Asset Allocation Fund, Pranav Gupta and Haresh Mehta Aditya Birla Sun Life Nifty Smallcap 50 Index Fund, and Shreyash Devalkar and Karthik Kumar for Axis Nifty Smallcap 50 Index Fund. Fresh buys were done by Gargi Banerjee and Deepak Ramaraju for Shriram Multi Asset Allocation Fund.

Lemon Tree Hotel's MF holdings stand at 1,001 lakh shares in November

Lemon Tree Hotels: Asset-light model key to margins  

Lemon Tree Hotels (LEMONTREE) operates in the hotel business with various brands like Aurika Hotels, Lemon Tree Hotels, Red Fox and Keys. The firm currently manages  100 hotels, offering  9,700 rooms across 64 locations. It plans to add 26 hotels with 2,540 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 Gautam Bhupal and Sonal Gupta, for HSBC Consumption Fund, Mehul Dama for Nippon India Nifty Smallcap 250 Index Fund, Harsh Sethi for SBI Nifty Smallcap 250 Index Fund, and Arun Agarwal and Nirman Morakhia for HDFC Nifty Smallcap 250 Index Fund. Fresh buys were done by Apurva Sharma and Alok Bahl for Helios Flexi Cap Fund.

RBL Bank: Unsecured loans sustain margins 

RBL Bank Ltd (RBLBANK), headquartered in Mumbai, is a banking and finance firm that 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 Small Cap Fund, Devender Singhal and Abhishek Bisen for Kotak Multi Asset Allocation Fund, and Krishna Sanghavi and Kush Sonigara for Mahindra Manulife Business Cycle Fund. Fresh buys were done by Mohit Jain and Milind Agrawal for SBI Banking & Financial Services Fund, and Shiv Chanani for Baroda BNP Paribas Value Fund.

Ceat: Lower input costs help margin expansion

Ceat Ltd (CEATLTD) is a prominent tyre manufacturer catering to cars, SUVs, two-wheelers, commercial vehicles and tractors. The company has OEM partnerships with 27 vehicle manufacturers and a presence in 110 countries. It is also in the replacement market through a network of 4,500 dealers and 51,000 sub-dealers.

??In Q2FY24, Ceat experienced a positive trend, with  volume growth  from the OEM segment and lower raw material prices contributing to a 10.8 percentage point expansion in gross margins. However, raw material prices have seen an uptick in Q3, which could contract margins. The firm is exiting from smaller tyres in favour of larger ones, to boost margins.  

Additionally, the company stands to benefit from lower crude prices (below $80), which will boost margin expansion. Ceat also plans to expand its Ambernath plant’s capacity from 105 tonnes per day to 160 tonnes. The additional capex in FY24 is expected to add revenue to the tune of Rs 2,000 crore. 

Fund managers who bought shares of Ceat 

Additional shares of Ceat were added by Harsh Sethi for SBI Nifty Smallcap 250 Index Fund, Mehul Dama for Nippon India Nifty Smallcap 250 Index Fund, and Nirman Morakhia and Arun Agarwal for HDFC Nifty Smallcap 250 Index Fund, and Swapnil Mayekar for Motilal Oswal Nifty Smallcap 250 Index Fund. Fresh buys were done by Sharmila D’mello and Rajat Chandak for ICICI Prudential Transportation and Logistics Fund.

Minda Corporation: EV parts and new product launches to drive growth

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

Minda Corporation won orders worth Rs 3,500 crore, of which nearly 30% is related to electric vehicles (EV), including Rs 700 crore for battery chargers. Its new product launches like smart key lock sets are gaining traction and helping revenue growth. Its smart key vertical received orders worth Rs 450 crore in Q2FY24. 

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,  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 Sanjeev Sharma and Vasav Sahgal for Quant Small Cap Fund, Dhimant Shah and Rohan Korde for ITI Flexi Cap Fund, Mehul Dama for Nippon India Nifty Smallcap 250 Index Fund, Harsh Sethi for SBI Nifty Smallcap 250 Index Fund, and Arun Agarwal and Nirman Morakhia for HDFC Nifty Smallcap 250 Index Fund.

CDSL: Unlocking growth through demat of private limited companies

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 Q2FY24, CDSL saw a 39.2% YoY increase in revenue, driven by higher transaction volumes and annuity income. Annuity income, being non-market linked, helps maintain revenue streams in the down cycle. Margins expanded by 850 bps QoQ to 62.4% in Q2FY24. 

The compulsory demat of non-small private limited companies will have revenue potential. There are roughly 1.4 million private limited companies. 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 CDSL to their portfolios include Shridatta Bhandwaldar and Pranav Gokhale for Canara Robeco Small Cap Fund, Hardick Bora and Sanjay Bembalkar for Union Small Cap Fund, and Taher Badshah and Hiten Jain for Invesco India Focused 20 Equity Fund. Fresh buys were done by Trideep Bhattacharya and Sahil Shah for Edelweiss Mid Cap Fund and Amey Sathe for Tata Banking & Financial Services Fund