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Newer product offerings and new markets will increase market share soon
This year, the company expanded its product range by introducing new sectoral and thematic funds, and launching five new funds. Additionally, they enhanced their offerings with five new index funds and two ETFs. To improve customer reach and market penetration, the company opened 24 new branches last quarter. These expansions align with changing investor preferences and are expected to benefit the company in the medium to long term. By broadening their product base and entering new markets, the company aims to strengthen its position and attract more investors.
A changing market scenario and positive sector outlook will benefit AUM's growth.
The AMC sector is evolving with more public investors joining the market. The mutual fund market is set to grow due to factors like the increasing focus on financial savings among Indian households, the untapped potential of mutual funds, greater investor awareness, strong distribution networks, and the ease of digital transactions. In this positive environment, the company is positioned to benefit from its extensive distribution network, including HDFC Bank, and its strong brand. As a result, the company’s assets under management (AUM) are expected to increase, particularly in equity-oriented segments.
One 97 Communications Ltd.
Large and engaged customer base to generate stable business performance
As of April 2024, Paytm has a large and active customer base with 80 million monthly users. Many use the app for UPI payments, bill payments, and more. This large user base also supports Paytm’s commerce business, which includes ticketing for movies, air travel, sports events, and other services. Additionally, it helps build Paytm’s consumer loan portfolio. Unlike many competitors who focus mainly on point-of-sale and payment gateways, Paytm interacts directly with both consumers and merchants. This broad reach allows Paytm to generate revenue from both sides and cross-sell services, providing a more stable business model that can better handle regulatory and technological changes.
Moderating capex in India's business and net debt reduction a key positive
Paytm expects to reach breakeven in EBITDA by FY25, ahead of its earlier guidance. However, there will be a temporary impact of Rs. 100-150 crore on EBITDA in Q1FY25 due to disruptions in operating metrics like monthly transacting users, merchant base, and gross merchandise value (GMV). The company is confident of significant improvement from Q2FY25 as it restarts paused products and sees steady growth in these metrics. Continuous improvement in operating efficiency is expected to drive profitability. Lower growth in payment processing fees and marketing costs has also helped. The market seems to be overestimating Paytm’s marketing costs since most customer acquisitions have already been achieved.
Power Finance Corporation Ltd.
PFC's Strategic Role in India's Clean Energy Sector and Diversified Revenue
Power Finance Corporation (PFC) is well-positioned to benefit from India’s growing clean energy sector, supported by strong government initiatives and policies. Programs like RDSS and LPS are boosting the distribution sector and increasing capital expenditure in power, enhancing PFC’s specialised financing activities. PFC’s commitment to renewable energy is evident in its involvement in projects like the rooftop solar scheme (PMSY). The company’s recent move into infrastructure financing diversifies its portfolio and promises new revenue streams. With over 30 years of experience in the power sector and a focus on energy transition, PFC is set for sustained growth and stability in the medium to long term.
Capacity expansion nearing the completion stage
PFC improved its financial stability with a 3.34% NPA level and achieved 14% loan asset growth in FY24, including a 25% increase in renewable energy investments. By focusing on expanding its loan book in power and infrastructure, PFC expects similar growth next year. Resolving stressed assets like Lanco Amarkantak and Shiga Energy by FY25, along with careful lending practices, enhances profitability and investor trust. This demonstrates PFC’s commitment to financial resilience and maintaining high asset quality standards.
REC Ltd.
Robust order book set to boost revenue growth.
The company aims to increase its renewable energy portfolio to about 30% by the end of 2030. Last year, it approved renewable projects worth Rs. 1,36,000 crores. This year, it has a large pipeline of projects worth over Rs. 1,75,000 crores. Since renewable projects take longer to complete, typically around 2-3 years, the company expects significant disbursements from its renewable energy portfolio.
Power demand will increase due to a positive sector outlook.
The power sector has been growing, with power demand increasing by 8% last year and expected to rise by 11% this year. The government’s new distribution sector scheme (RDSS) and late surcharge payment rules are set to improve the sector further. Significant capital expenditure will be needed to set up distribution infrastructure. Therefore, the company sees a good business opportunity in the distribution sector and expects to benefit by increasing its assets under management (AUM).
Siemens Ltd.
Robust profit outlook with value unlocking through demerger
In Q2CY24, Siemens saw strong growth in revenue and profitability, with a 19% increase in revenue quarter-over-quarter and an EBITDA margin of 15%. The company is set to benefit from new orders in its energy business, which grew by 34% compared to last year. The Siemens Ltd. board has approved a plan to separate its energy business into Siemens Energy India Limited by CY25. This move will allow both companies to focus more sharply on their markets and maintain their own business structures with specialized market approaches.
Healthy capex across all business verticals
In addition to expanding its power transformer factory in Kalwa and vacuum interrupter factory in Goa, the company is planning more investments in various sectors. For the smart infrastructure business, it is expanding its factory in Goa with an investment of around Rs. 333 crores to meet the growing demand for critical industry, infrastructure, and power distribution components. In the mobility sector, the company plans a brownfield expansion with an investment of around Rs. 186 crores to build a state-of-the-art Metro train manufacturing facility in Aurangabad.
Sun TV Network Ltd.
Steady Growth in revenue to drag profitability
Despite the festive season, the company experienced a prolonged decline in ad revenues last year. However, increasing rural spending and decreasing inflation could help the company recover its ad revenue. Additionally, the company’s investment in OTT platforms is expected to provide steady revenue in the future. Industry trends such as a supportive market base, growth revival, and sector consolidation may also boost the company’s revenue growth.
Improving signs of FMCG spending could aid recovery in the coming period
With the arrival of the monsoons this year, rural demand is expected to increase compared to last year. The FMCG sector is likely to see growth in rural markets, leading companies to spend more on marketing. This increased marketing spend will boost ad revenue for media companies. Therefore, the company is expected to see growth in ad revenues, providing a stronger base than before.
Zomato Ltd.
Robust financial performance
For FY24, Zomato Ltd reported adjusted revenue of Rs. 13,545 crore, showing a 56% increase from last year and expects to maintain a 40% growth rate over the next few years. The company also reported positive EBITDA and PAT for the first time since its start. To keep this momentum, Zomato aims for a 4% to 5% EBITDA margin while continuing to reinvest in growth. Additionally, Zomato saw a 48% increase in Gross Order Value (GOV) between FY23 and FY24. The rise in demand recovery and higher acceptance of the gold program contributed to the GOV growth in its core food delivery business.
Focus on expanding its alternate business segment.
Zomato’s quick commerce segment, Blinkit, is planning aggressive expansion. The management aims to double the number of stores this year and hopes to increase its Gross Order Value (GOV) by 4 times in the coming years. They plan to keep reinvesting in Blinkit to grow quickly and target EBITDA neutrality soon. For its B2B business, Hyperpure, the management expects the growth rate to slow down slightly as the business scales, but it will still remain healthy and high. The company is focused on improving its growth prospects and expects margins to improve as the business expands.
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