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Established player in oil and gas industry in India with continued support from the government
BPCL has a dominant position in the domestic market for key petroleum products such as high-speed diesel (HSD), motor spirit (MS), Superior Kerosene Oil and Liquefied Petroleum Gas (LPG). BPCL has its presence in both upstream and downstream segments. It is India’s second-largest OMC and is India’s third-largest refining company with a total refining capacity of 35.3 MMTPA, representing around 15% of India’s total refining capacity.
BPCL maintains robust marketing margins amidst 73% profit decline
BPCL’s Q1FY25 saw a dramatic 73% decline in net profit to Rs 2,841.6 crores, largely due to weakened gross refining margins, which fell to US$ 7.86 per barrel from US$ 12.64, and higher crude oil prices influenced by geopolitical tensions. Despite this, the marketing segment remained robust, with a net margin of Rs 4.3 per litre and a 3% increase in marketing volumes, supported by higher MS and LPG demand. The company also benefited from a Rs 400 crore marketing inventory gain and expanded its market share to 26.9%. Looking ahead, BPCL is set to invest Rs 16,400 crores in FY25, focusing on refinery expansion, pipeline infrastructure, and increased retail outlets, which should help mitigate current challenges and support long-term growth.
HCL Tech Ltd
Steady performance likely from H2FY25 onwards
The company maintained its guidance of 3-5% CC growth for FY25 and expects growth to return from Q2 onwards. The management indicated that growth recovery in Q2 will be broad-based, with all verticals and geographies witnessing improvement driven by ramp-up of deal wins, except for BFSI, which the State Street JV divestiture will impact. HCL Tech is likely to perform well in FY25 due to a higher non-discretionary portfolio, better deal conversions, healthy TCV, and a robust pipeline.
Multiple long-term contracts to aid financial performance
HCL Tech has underperformed during the quarter as its growth outlook for FY25 is impacted by weak H1FY25 due to the offshoring of one of its large FS deals and the State Street JV divestiture. However, we expect this to be largely priced in and post H1, the growth trajectory should improve and align with large-cap peers. We believe HCL Tech is well-placed from a long-term perspective, given its multiple long term contracts with the world’s leading brands. Moreover, we believe that an encouraging demand environment will help eliminate uncertainty over discretionary spending.
PAYTM
Large and engaged customer base to generate stable business performance
Paytm’s business model is built on a large and active customer base of 7.8 million monthly transacting users as of June 2024. These users primarily use the app for UPI-based payments, bill payments, etc. It also supports Paytm’s commerce business, which includes tickets for movies, air travel, sports events, and other services. This diverse customer base is instrumental in establishing Paytm’s consumer loan origination portfolio. Unlike many of its competitors who are primarily focused on point-of-sale and payment gateway services with little direct interaction with customers, Paytm has a significant presence among both consumers and merchants. This wide reach enables it to generate revenue from both merchants and consumers, and allows for cross-selling opportunities, providing a stable business model that can better withstand regulatory and technological changes.
Revenue and profitability to improve going forward
Paytm’s performance during the quarter aligned with expectations and it focused on increasing the merchant and consumer base for cross-selling financial services. The company is also confident of meaningful improvement from Q2FY25, as the company restarted certain paused products and achieved steady growth in operating metrics. We believe constant improvement in operating leverage will continue to drive its profitability. As we advance, we expect revenue and profitability to improve, driven by growth in operating parameters such as GMV, an expanding merchant base, recovery in loan distribution business and continued focus on cost optimization.
Petronet LNG Ltd
Positioned for success with lower LNG prices and increased gas demand
Gas consumption is projected to rise, supported by moderate LNG prices and a stable market. Spot LNG prices are expected to fall in 2025-26 due to increased global liquefaction capacity, which will enhance supply and drive prices down. As a leading player in India’s LNG import sector, Petronet LNG, backed by major public sector companies like ONGC, GAIL, IOCL, and BPCL, holds a 33% market share and manages approximately 75% of the country’s LNG imports. The company operates two regasification terminals with a combined capacity of 22.5 MMTPA and is effectively expanding its facilities at competitive costs. These factors position Petronet LNG to capitalise on market trends and drive robust future growth.
Strong Q1FY25 with record throughput and robust financial performance
Petronet LNG’s Q1FY25 results exceeded expectations, with EBITDA reaching Rs 1,560 crores (up 42% QoQ and 32% YoY) and PAT climbing to Rs 1,142 crores (up 55% QoQ and 45% YoY). The successful recovery of past use-or-pay (UoP) dues and improved operational efficiency contributed to this performance. The Dahej terminal excelled, with throughput of 248 TBTU and a 109% utilisation rate, while the overall port throughput increased to 262 TBTU. With strong results and the upcoming Dahej terminal expansion, we remain optimistic about the company’s performance in future.
RVNL
RVNL expands global presence with new subsidiary in Uzbekistan and strategic MoU with Israeli partner
During the quarter, RVNL established a subsidiary, “Rail Vikas Nigam LLC,” in Uzbekistan. Additionally, RVNL signed a Memorandum of Understanding (MoU) with United Construction Limited of Israel to collaborate on projects across various sectors, including railways, MRTS, tunnels, highways and expressways, bridges, building works, airports, ports, irrigation, and power transmission and distribution, including solar and wind energy projects in Israel.
RVNL reports weak Q1FY25 results but maintains positive outlook with strong order book and revenue guidance
In Q1FY25, RVNL reported weak performance with revenue declining by 27% YoY to Rs 1,026 crores and PAT falling by 35% YoY. The management attributed this decline to one-off factors and expects improved execution from 2QFY25, aiming to meet the FY25E revenue guidance of Rs 22,000 crores. Despite a flat revenue outlook compared to FY24, RVNL’s strong order book of Rs 83,200 crore (4x TTM revenue) provides strong visibility. The company projects a revenue rebound in the remaining quarters, targeting Rs 17,700 crores over the next three quarters, reflecting an 8% YoY increase.
TCS Ltd.
Strategic focus on emerging technologies driving market leadership despite near-term hiccups
The IT industry is witnessing macro challenges, especially in North America & Continental Europe, leading to project ramp-downs, a slowdown in discretionary spending and an extension of deal tenure. These are short-term demand troubles, and the longer-term tech spend trajectory remains robust, led by cloud, AI, data and generative AI. TCS Ltd.’s strategic emphasis on emerging technologies such as Gen AI, cloud, cyber resilience, and digitalization positions it as a leader in the market. By leveraging these technologies, the company offers innovative solutions to clients across diverse verticals, including fashion, banking, insurance, and aerospace. Considering its client profile, ability to win large deals, and strong demand pipeline, TCS will be a key beneficiary in a challenging environment.
Strong operational strategies driving profitable growth
The company’s ability to prioritise business-critical projects with immediate return on investment aligns well with client sentiment amidst uncertain economic conditions. Moreover, we expect TCS to be a key beneficiary considering the client profile and the recent large deal wins. In addition, we expect H2FY25 to be better than H1FY25 led by ramp up in deal wins and healthy deal pipeline. This coupled with the company’s focus on technologies like 5G, IoT, generative AI and virtual reality/metaverse will drive long term growth. Additionally, TCS’s focus on improvement in utilisation, higher realisation, automation, lower sub con cost and decelerating supply side pressure will drive margins.
Zomato Ltd.
Food delivery business on a strong growth runway
Food consumption in India contributes a quarter of India’s GDP, of which 10% is driven by restaurant food. Moreover, the growing internet penetration in India will support growth of the food-delivery business. The company also noted that there were no specific concerns from restaurant partners regarding demand during the quarter, indicating a stable outlook for the food delivery sector. The company exhibits strong optimism regarding growth prospects across food delivery and quick commerce segments, with strategic investments to enhance customer experience and service quality. They are navigating challenges focusing on maintaining profitability and expanding market share.
Focus on expanding alternate business segments
Zomato’s quick commerce segment, Blinkit, is on an aggressive expansion spree, with the management intending to double its store count in the year and hoping to increase its GOV by 4x in the coming fiscal years. The management also plans to keep reinvesting into its quick commerce business to grow as fast as possible, and capturing a modest market share within this space. Moving to its B2B business Hyperpure, the management believes that as the business scales, the growth rate will observe a slight downward trend but remain healthy and high. The company is focused on improving its growth prospects and expects the margin to improve as the business grows.
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