- #BajajFinance, #ITC, #VodafoneIdea in focus
- L&T, #BajajFinserv, Dr. Reddy's to declare Q3 results
Find out where money is moving in the market today with Hiral Dadia and Agam Vakil on 'Hot Money'. #NDTVProfitLive
- L&T, #BajajFinserv, Dr. Reddy's to declare Q3 results
Find out where money is moving in the market today with Hiral Dadia and Agam Vakil on 'Hot Money'. #NDTVProfitLive
Category
📺
TVTranscript
00:00 (upbeat music)
00:02 (upbeat music)
00:05 (upbeat music)
00:08 (upbeat music)
00:11 (upbeat music)
00:13 (upbeat music)
00:16 (upbeat music)
00:18 (upbeat music)
00:23 (upbeat music)
00:28 (upbeat music)
00:32 (upbeat music)
00:37 (upbeat music)
00:44 (upbeat music)
00:46 (upbeat music)
00:53 (upbeat music)
00:58 (upbeat music)
01:05 (upbeat music)
01:13 (upbeat music)
01:16 (upbeat music)
01:20 (upbeat music)
01:26 - Markets of days low, however, still under pressure.
01:33 Sensex marginally above the 71,700 mark,
01:37 while Nifty trades below 21,750.
01:40 (upbeat music)
01:42 Sectoral indices trade mixed,
01:45 with media coming out as the top gainer,
01:48 led by Z Entertainment, while financials under pressure.
01:52 Bajaj Finance shares dip over 4% in early trade
01:57 on the back of Q3 numbers.
01:59 Companies, consumer finance, business, so elevated losses.
02:02 And more earnings on our radar.
02:07 We have L&T, Bajaj FinServ, and Dr. Reddy's
02:10 that are expected to come out with their Q3 numbers today.
02:14 Post giving a big thumbs up to Adani Enterprises,
02:20 Cantor Fitzgerald now see a likely demerger
02:24 of Adani's airport business.
02:26 And this is after completion of Navi Mumbai Airport.
02:30 (upbeat music)
02:35 (upbeat music)
02:38 Hello and welcome.
02:46 This is Hot Money.
02:46 I am Agam Akhil, and with me is Hiral Dadia.
02:50 And this show, we take you through all the stocks
02:52 which are buzzing in trade.
02:54 At the moment, we are seeing a lot of strength
02:56 in the markets, but I'm gonna,
02:57 before I address the markets,
02:59 wanna talk about KPRT tech earnings,
03:01 which are coming through.
03:02 Well, they seem largely in line with expectations.
03:06 We have seen a little bit of an uptick
03:07 when it comes to your revenue number,
03:09 currently standing at around 1,256.57 odd crores.
03:14 On the other hand, when it comes to profitability,
03:17 that is also looking at a sequential uptick,
03:19 standing at around, well, right,
03:23 so that stands at around 156.7 crores
03:26 against 141 odd crores.
03:29 Certainly an improvement, but remember
03:31 that KPRT tech is one of those counters
03:33 which has run up substantially over the course
03:36 of the last 12 months, and for good reason too,
03:39 because if you consider the year-on-year basis numbers,
03:42 and I'm looking at the nine-month numbers right now,
03:46 we are looking at well over a 40% growth
03:49 on a year-on-year in terms of revenues,
03:51 and profitability also comes through.
03:53 Remember, this is with a backdrop
03:56 of a lot of changes economically,
03:58 pardon me, challenges economically
04:01 when it comes to markets in the Europe as well as the US.
04:04 Well, we have seen this particular company scale those,
04:09 pardon me, scale those, well, challenges,
04:11 and we are looking at fairly steady numbers,
04:15 on the back of which we have seen KPRT technologies
04:17 now turn into the red from, well,
04:20 trading marginally in the green.
04:22 But to a certain extent, all the positives
04:24 have been factored in, and I reckon a lot of questions
04:28 will be about what the way forward is,
04:31 especially when it comes to its premium clientele,
04:34 which would, of course, include something like an Audi
04:36 and a BMW heater.
04:37 - Absolutely, and a clear competitor comes in
04:40 as a Tata Technologies, right, for KPIT as well,
04:44 so both of these comparatives interesting,
04:47 but now KPIT tech absolutely in the green scene
04:49 gains of over 1% as we speak
04:52 since the time Agam started addressing it.
04:54 But moving on, you have a RR cable that is in focus
04:57 as well on the back of numbers.
04:59 Let's pull up that counter.
05:00 Revenues have seen a growth of around 10%.
05:03 You have seen a dip on the margins front
05:05 as well as a mild dip on the profitability front.
05:09 The stock is down almost 3 1/2 to 4% in trade.
05:11 Rajesh Jain, CFO at RRKR Kabul joins in.
05:15 Rajesh, good afternoon and welcome to the show.
05:18 If you could help us understand, firstly,
05:20 have the numbers met your internal expectations
05:22 and what has worked and what has not worked
05:24 this time around?
05:26 - Good afternoon, Nital,
05:27 and thanks for inviting us on your channel.
05:30 So if you see this quarter and if you see company
05:33 as a whole for this nine-month performance
05:36 year-on-year basis, overall,
05:38 we have achieved a volume growth of 20%,
05:40 which is in expectation in line with our projections.
05:45 And when this industry is going at 13 to 14%,
05:49 we are able to have the volume growth of 20%
05:53 year-on-year basis on nine-month basis, which is good.
05:56 And even in FMAG, which is contributing 12%
05:59 in our overall business,
06:00 that is also growing at the rate of 20%,
06:03 while that industry is hardly growing at less than 10%.
06:06 And the players are struggling even to maintain
06:08 their last year sales figures.
06:12 So in that way, whatever we have expected,
06:14 though if we see only this quarter,
06:17 then there are some figures are not as far
06:20 as the industry estimates,
06:22 but overall we are in line with our estimates
06:25 and our plans.
06:26 - Rajesh, morning, this is Agam here.
06:28 My question is to do with your operating margins
06:31 at the moment.
06:32 You know, I do look at our decline
06:35 on a year-on-year basis for the quarter,
06:36 but on a nine-month basis,
06:38 we are certainly seeing an improvement
06:40 and expansion in your EBITDA margins.
06:42 My question really is that if we are looking
06:45 at a contraction for just third quarter,
06:48 is there a likelihood that that could perhaps spill over
06:51 to the upcoming quarters as well?
06:53 And also if you could perhaps elaborate
06:56 why there is a contraction in the third quarter?
06:59 - Very rightly said by you.
07:02 If we see only this quarter,
07:03 then of course there is a decline in our margins,
07:06 but if we see on a year-on-year basis,
07:08 for nine-month basis,
07:09 then there is a good improvement in our margins.
07:12 And again, this is in line with our planning
07:14 or whatever estimates we have given that
07:17 we aim to improve our margins by 140%
07:21 and as per our current estimates also,
07:23 we'll be able to achieve our yearly figures,
07:26 whatever we have planned.
07:28 And only for this quarter, yes,
07:29 there was some impact due to like,
07:32 you'll see we are in copper wiring cable industry
07:35 where copper prices also play some role
07:38 and there is always a time gap
07:40 between passing all the prices to our consumer.
07:43 In this quarter, we have seen copper prices
07:46 have grown by almost 5%
07:48 and majority of the part have been passed on,
07:50 but in next quarter, again, this will be recovered
07:53 and we are expecting we will be able to gain the margins
07:57 what we were having in first half of this year.
08:00 - Right.
08:03 Overall, Rajesh, I do understand, you know,
08:05 how copper prices have been impacting it.
08:07 I think that's one of the reasons
08:09 why we are seeing the translation on the top line as well.
08:12 But overall, with regards to where the demand
08:14 in housing and construction goes,
08:17 how is that coming across?
08:19 And in terms of contribution,
08:21 how much is that helping, you know,
08:23 or adding to your revenues now?
08:25 - So in our case, like 70% of our revenue comes from wire
08:31 and only 30% comes from cable.
08:33 And we are seeing very good demand,
08:35 particularly in tier three and four cities
08:38 where we have the major outcast always.
08:41 And it seems the real estate industry,
08:44 housing sector and renovation sectors is doing good.
08:48 And we expect that it will keep doing good
08:50 backed by government support
08:52 because government is also aiming
08:54 good infrastructure development as well as housing for all.
08:57 So we expect this will remain good
08:59 in short to long term time frame.
09:03 - Right, Rajesh, could you give us an idea
09:05 about whether or not you guys will be cashflow positive,
09:09 net cashflow positive by the end of the year?
09:11 And I ask you because I want also a little bit of a backdrop
09:15 in terms of the capital expenditure
09:16 that you have in fact planned for this particular year,
09:19 your view on both these aspects.
09:23 - So overall we are already a cash positive company.
09:27 If we just particularly see our FMG,
09:29 of course we are having some losses in that.
09:31 But at company level already we have positive cash flows
09:34 and we have planned capex of 500 crores in this two years,
09:39 which is FY '24 and '25.
09:41 And this all will be made through our internal accounts.
09:44 And this is going as per our planning
09:46 and we have enough cash in hand.
09:51 - Right, what's the plan with regards to the FMG segment
09:54 because that's still around 11% contribution
09:57 to your revenues.
09:58 So overall the plan there
10:00 and in terms of capacity utilization,
10:03 where does it stand for both the segments
10:04 and how are you looking to scale?
10:07 - So FMG again, our base is a little bit smaller
10:10 in compared to others,
10:11 but still we are going 20% in this year also,
10:14 where industry is going only 8%.
10:16 And even going forward also,
10:19 backed by our R&D and new product introduction in market,
10:23 we are quite hopeful to achieve the growth
10:25 of more than 20% at least in coming next two years.
10:29 So FMG will be like mostly in next year,
10:33 it will be a bit positive in FY '25.
10:37 And if you see capacity utilization,
10:39 already we have very good capacity utilization
10:41 in our cable, wire and cable business,
10:43 where in wire we are at 65 to 70%.
10:47 In cable we are at 80 to 90% capacity utilization,
10:51 which is quite healthy looking to the product mix
10:53 and industry standards.
10:56 - Okay, Rajesh, we leave it at that.
10:57 Thank you so much for joining us
10:58 and taking us through the quarter's numbers,
11:00 as well as the outlook.
11:02 Well, that's the management of our cable
11:04 telling us about all that is in store,
11:07 not only for the quarter,
11:08 but also for the upcoming year.
11:10 And with that, we slip into a short break,
11:12 but on the other side, we talk about stocks and a lot more.
11:14 Stay tuned in.
11:15 (upbeat music)
11:19 (upbeat music)
11:33 (upbeat music)
11:35 (upbeat music)
11:38 (upbeat music)
11:40 (upbeat music)
11:47 (upbeat music)
11:55 (upbeat music)
12:07 (upbeat music)
12:09 (upbeat music)
12:19 (upbeat music)
12:27 (upbeat music)
12:37 (upbeat music)
12:40 (upbeat music)
12:47 (upbeat music)
12:54 (upbeat music)
13:05 (upbeat music)
13:08 (upbeat music)
13:18 (upbeat music)
13:27 (upbeat music)
13:29 (upbeat music)
13:56 (upbeat music)
13:58 (upbeat music)
14:16 (upbeat music)
14:19 (upbeat music)
14:32 (upbeat music)
14:35 (upbeat music)
14:50 (upbeat music)
15:02 (upbeat music)
15:04 (upbeat music)
15:08 - Welcome back, you're watching Hot Money.
15:19 Now, a couple of stocks that we will be discussing
15:21 in today's day is Bajaj Finance, ITC,
15:25 as well as Orchid Pharma.
15:26 And you have some updates that we will take you through
15:28 with regards to where the ZSony merger goes.
15:31 Let me welcome in our guest as well,
15:32 Sharmila Joshi joins in to give us her view
15:35 with regards to all these counters.
15:38 But let's start with Bajaj Finance.
15:41 They did come out with their Q3 numbers.
15:44 Now, they've reported a jump in terms of profitability
15:46 as well as the top line.
15:48 However, the asset quality has actually worsened.
15:52 Harsh joins us with the key takeaways.
15:54 Harsh, what have you been picking up
15:56 with regards to Bajaj Finance,
15:57 which is causing this kind of pressure?
16:01 - Well, yes, it's predominantly asset quality here,
16:04 as you correctly pointed out.
16:05 And within that asset quality, within the products,
16:08 it's the B2C, which is causing some amount of pressure,
16:11 especially on the rural side of things.
16:13 So where your loan losses are concerned,
16:15 they've gone up by around 20 odd percent
16:17 on a sequential basis, and that too on a low base of Q1.
16:21 So Q2 saw an uptick over Q1,
16:25 and now we've seen how Q3 has played out,
16:29 an uptick over Q2 as well.
16:32 And within rural, of course,
16:34 what Bajaj Finance has done is
16:36 they've calibrated growth in this quarter.
16:38 So growth in rural has come down,
16:40 is what they're suggesting.
16:41 But overall, within the other products,
16:44 as well as within the new products launched,
16:46 growth is extremely solid,
16:48 is the commentary that's come through.
16:49 And they're expecting that to continue.
16:52 On the urban B2C side of things as well,
16:55 there's been a bit of a slip-up.
16:56 Now, of course, the management continue to suggest
17:00 that it's basically a normalizing of credit costs
17:04 that's been happening off a low base.
17:06 And when they're comparing that to pre-COVID levels,
17:09 it's largely still below pre-COVID levels.
17:12 So they're not suggesting any concern
17:14 on the urban B2C side.
17:16 But again, they've calibrated growth there as well.
17:18 So the sense is it's asset quality that's in focus,
17:21 what markets are really focusing on.
17:24 What brokerages have done is they've toned down
17:26 some of their expectations by 1% to 2%.
17:28 They've cut target prices.
17:29 We've seen across brokerages largely,
17:32 they've just got target price by 1% to 2%.
17:34 And because they're seeing that slight spike
17:36 in loan loss provisions, they've cut on their PAT,
17:39 which has basically led to a reduction
17:42 with regard to the target prices.
17:44 But otherwise, it's a buy overweight kind of rating
17:46 that we've seen.
17:48 - Right, so that's with regards to Bajaj Finance.
17:50 In fact, Finca will be reporting numbers
17:51 as well today, Sharmila.
17:53 How are you looking at Bajaj Finance
17:54 and in turn, Finca that will be reporting numbers today?
17:58 - Well, I think what we were listening to just now,
18:02 I think that is the key takeaway for the entire banking
18:06 and related numbers that we've seen.
18:08 I think ever since HDSC bank numbers came out,
18:11 market has been very nimb focused
18:13 and it has been focused on what the cost of loans are
18:16 and how your growth is going to be going ahead.
18:20 Because I think there was a sense that perhaps
18:23 from a valuation perspective, a lot of these stocks
18:26 were trading on the higher side.
18:27 And if you perceive for any reason
18:29 that growth is going to slow down,
18:30 then this kind of correction
18:33 is what we've seen across the space.
18:36 Having said that, I think that the kind of numbers
18:38 that Bajaj Finance has given are pretty good.
18:42 And yes, they did have concern over,
18:45 RBI raising concerns over those two cards
18:47 and they have said that they are going to write
18:50 to the apex body about that.
18:51 So all things considered,
18:52 I think if you ever been wanting to buy the stock
18:55 and been holding yourself back
18:57 because the valuations look stretched,
18:58 I think this could give you an opportunity
19:00 to enter the stock.
19:01 So it's a stock I like, but yes, I take the market's view is,
19:05 I completely stand by that,
19:07 that you really need to be focused
19:10 on what growth is going to be ahead and at what cost.
19:14 Right, so that's with regards to Bajaj Finance.
19:17 Let's just quickly pull up a Zee Entertainment
19:19 on the screens now.
19:20 The shareholders pre has actually prompted NCLT
19:25 hearing for the merger execution
19:28 and NCLT has gone ahead and now rejected
19:31 Sony's argument on the MCA clause.
19:35 What NCLT is saying is that they take responsibility
19:38 for deciding the clause satisfaction so far.
19:42 These are a few of the lines that we are picking up so far
19:44 in terms of where the Zee Sony saga is concerned.
19:47 In fact, there is a special hearing in Singapore,
19:51 tomorrow as well.
19:53 So that's one of the reasons why the stock
19:55 was seeing some smart moves.
19:56 If we can just pull up our intraday chart
19:58 of Zee Entertainment to see,
20:00 because the stock was up seven, seven and a half percent,
20:02 some bit of cooling off has come in on that one as well.
20:06 So that's with regards to where Zee Entertainment goes
20:09 and a couple of lines with regards
20:11 to where the EFTA trade talks go.
20:13 The sources are indicating so far that,
20:17 I mean, you'll see this,
20:18 that the EFTA trade talks will be concluded soon
20:21 and they are aimed at prompting manufacturing domestically.
20:25 Now the talks include ways to enable Swiss companies
20:29 to manufacture in India.
20:32 This is gonna be interesting with regards
20:33 to where the trade talks are concerned,
20:35 absolutely from here on Agam.
20:37 - Right.
20:38 Well, that's of course several updates coming in from there,
20:41 but another update coming in from the pharma space
20:44 from a relatively smaller pharma name,
20:46 and that's Orchid Pharma,
20:48 which has in fact hit an upper circuit
20:50 after its new antibiotics drug gets authorization
20:55 from the European medicine agencies.
20:57 Well, we have Varsha to explain to us
21:00 what the implications of this approval
21:03 is for the company, Varsha.
21:05 - Hello guys.
21:06 So we've just received an exchange filing
21:08 wherein European medicine agency has recommended
21:12 granting marketing authorization
21:14 for a product called Exbleefib.
21:16 Now this is used to treat adult
21:19 with urinary tract infection and hospital-based pneumonia.
21:23 Now if you see the overall effectiveness of this product
21:26 is 79% versus 58% of the other product
21:29 that is currently into the market.
21:31 Now how does this benefit Orchid Pharma
21:33 as this novel antibiotic product is made by Orchid Pharma
21:38 and if you see companies expecting global commercialization
21:42 by FY25 and also company holds marketing rights in India
21:46 and worldwide royalty sales right.
21:49 Also if you see, they expect this royalty revenue
21:52 to directly flow into their bottom line
21:55 and Alkera Therapeutic, which company is in partnership with
21:58 has completed phase three trial in US and EU
22:02 and they are expecting approval in the current year of FY24.
22:07 - Varsha, thank you so much for getting us that update.
22:10 Sharmila, do you track Orchid Pharma
22:12 even if it's not on your radar, your view
22:15 and perhaps some opportunities in the sector?
22:17 - Well, you know, of course I think the news is good
22:21 but again the numbers were good
22:23 and it has a stock that is, I think over the last four
22:26 or five years, really rewarded investors well.
22:29 Having said all that, I think the valuations
22:31 look a tad expensive at this point in time.
22:33 So you know, that's the only caveat I think
22:35 if you buy at this level then you should,
22:37 anyway it's on a circuit.
22:39 So today is not a recommended day
22:41 but when sort of the stocks is open for trading again
22:46 you can take a view but bear in mind
22:49 that the valuations are high
22:50 and the news of course, as was spoken just now,
22:54 I mean, you know, discussed just now,
22:56 this obviously is good news for the company
22:58 and given that it's not a very large company,
23:01 this could be significant.
23:02 - Right, well, we've run out of time
23:05 on this particular segment.
23:06 So I'm gonna take a moment to thank Sharmila
23:08 for joining us and discussing that short list of stocks
23:12 that we've had but we also slip into a short break
23:15 and on the other side, we get you another management.
23:18 Stay tuned to NDTV Profit.
23:20 (upbeat music)
23:23 (upbeat music)
23:25 (upbeat music)
23:28 (upbeat music)
23:30 (upbeat music)
23:38 (upbeat music)
23:40 (upbeat music)
23:48 (upbeat music)
23:56 (upbeat music)
24:04 (upbeat music)
24:06 (upbeat music)
24:15 (upbeat music)
24:30 (upbeat music)
24:33 (upbeat music)
24:58 (upbeat music)
25:01 (upbeat music)
25:14 (upbeat music)
25:29 (upbeat music)
25:32 (upbeat music)
25:44 (upbeat music)
25:57 (upbeat music)
25:59 (upbeat music)
26:08 - Welcome back.
26:18 Well, Mahindra Logistics also came out
26:20 with their third quarter earnings.
26:21 The company's revenue went up by as much as 5%
26:24 but their EBITDA margins declined.
26:26 We spoke to the management about the quarter gone by
26:30 and also the pressure on operating margins.
26:33 Here's a slice of that conversation, listen in.
26:35 - The losses were largely because last quarter,
26:40 we did not, last year we did not have the impact
26:42 of the Ibego acquisition.
26:44 And that essentially was the large data
26:48 in terms of earnings.
26:49 In that quarter, we reported, you know,
26:53 33 crores of losses in the acquisition of,
26:57 in the business where, which is the express business
27:00 which was acquired from Ibego.
27:02 And excluding that, our earnings were actually pretty stable.
27:06 We saw some impact in our core 3PL business
27:09 because of seasonal patterns and new project launches.
27:13 And most of the other businesses actually showed
27:16 improvements on a year-on-year basis.
27:19 So, you know, it's really one big challenge
27:22 in which we have, from an earnings perspective,
27:24 which impacted that.
27:26 - Okay, but on the cost side also,
27:28 seemingly there was a little bit of pressure.
27:29 Is that right to assume?
27:31 And can you talk about some of those pressures
27:33 panning forward as well?
27:35 - Sure, I think the 3PL business really saw
27:39 even more than some seasonal impact.
27:42 We did see, you know, during the festive season,
27:44 we normally see an increase in labor price,
27:46 labor charges or labor costs.
27:48 And we did see a sharp spike during this quarter
27:51 on account of that.
27:55 We also had several new projects which got launched
27:58 towards the end of the quarter.
27:59 And we had a soft-top cost,
28:01 which are on account of those new launches.
28:03 You know, excluding those, things were generally,
28:06 there were no real cost challenges.
28:08 Those will tail off in this quarter.
28:10 They are more a one-time or a quarterly phenomenon
28:13 rather than a continuing phenomenon.
28:16 - Well, and on that note, it's a wrap on this edition
28:19 of Hot Money, but on the other side,
28:20 we'll get you a lot more.
28:21 Stay tuned to NDTV Profit, and we'll keep bringing you more.
28:25 (upbeat music)
28:28 (upbeat music)
28:30 (upbeat music)
28:42 (upbeat music)
28:44 (upbeat music)
29:11 (upbeat music)
29:13 (upbeat music)
29:23 (upbeat music)
29:34 (upbeat music)
29:37 (upbeat music)
29:46 (upbeat music)
29:57 (upbeat music)
29:59 (upbeat music)
30:25 (upbeat music)
30:27 (upbeat music)
30:50 (upbeat music)
30:53 - Well, thanks for tuning into this special show,
31:00 Budget 2024, the takeoff.
31:02 In all our conversations from Monday,
31:06 we're talking about this week
31:08 as arguably being the most important week for risk assets
31:12 because it's the week of Fed speak,
31:14 and it's the week of budget, and in India in particular,
31:17 while the question mark remains about
31:19 whether this is a vote on account,
31:20 if the 2019 experience is anything to go by,
31:23 this may be a lot more than that.
31:25 Who better to put all of this into perspective,
31:27 and the budget math into perspective
31:29 than Pranjal Bhandari of HSBC.
31:31 Incidentally, HSBC has also come out
31:33 with India's first flash PMI numbers,
31:35 so we'll talk a bit about that as well.
31:37 But Pranjal, great having you.
31:38 Thanks for taking the time out.
31:40 I'm just trying to understand whether you believe
31:43 that this could be a budget
31:44 which could dwell a lot more on fiscal consolidation,
31:48 and therefore, do we see some moderation
31:50 in the impetus that the government has hitherto given
31:55 in the past few budgets,
31:56 predominantly on infrastructure and CapEx,
31:58 but maybe to some other areas as well?
32:01 Yes, I think I agree with you there,
32:03 but it's in line with what the government
32:06 has been talking about in the last couple of years.
32:08 It's not just something only for this year.
32:11 I think the general sense of this government
32:13 is not focusing on the volume of spend,
32:16 but the quality of spend.
32:18 So our sense is that they'll bring down the fiscal deficit
32:21 in line with the consolidation path this year
32:24 and then next year again,
32:25 and overall, they'll bring down the overall expenditure as well.
32:28 But within that overall expenditure pie,
32:30 they'll improve the quality of spend,
32:32 moving away from current expenditure
32:35 more towards capital expenditure.
32:37 I think that has been a theme of this government
32:39 and it'll continue to be so.
32:41 Fiscal discipline, fiscal consolidation,
32:43 but high quality of spend.
32:45 Okay.
32:46 Pranjal, when the last budget came out,
32:48 I remember you were amongst the first ones
32:50 to talk about this quality of spend,
32:52 about the fact that the government has not doled out freebies,
32:55 but instead spent money
32:57 where it still benefits the rural household,
32:59 but results in CapEx.
33:00 So my question is,
33:01 will we see moderation of any key capital expenditure,
33:07 nation-building-related themes,
33:09 or do you think both can happen parallelly?
33:12 Because I was trying to think of avenues for revenues
33:15 and tax revenues being there, yes,
33:17 but disinvestment revenues have largely been absent in this fiscal.
33:21 So how does it augur for FY24?
33:24 And will there be some material references made to FY25 numbers,
33:28 or do you reckon the best will be kept for July?
33:33 Well, look, my sense is that whatever budget we get on the 1st of February
33:37 is largely the budget for the year.
33:40 You know, I don't really foresee too many changes
33:43 when we see another budget in June-July.
33:45 And the big reason for that is that there are very limited contours
33:48 that the central government has to fiddle with.
33:51 It has to bring down its fiscal deficit from 5.9% in FY24
33:55 to 4.5% by FY26.
33:58 This is the middle year,
33:59 so it will bring it down to perhaps 5.3% of GDP.
34:02 So when you're bringing down the fiscal deficit,
34:04 you don't have space to do too much extra spending here or there.
34:07 My general sense is that in FY24,
34:10 CAPEX spend was 3% of GDP.
34:12 In FY25 also, it will stay about 3% of GDP.
34:16 So unchanged capital thrust.
34:18 In rupee terms, there could be some increase.
34:20 So from 9 trillion to 10 trillion rupees,
34:23 you know, between FY24 and FY25,
34:25 which is about a 10.5% year-on-year increase.
34:29 So this is still a very good number at a time,
34:31 you know, when fiscal deficit is coming down,
34:33 even though it's not as good as the last few years
34:36 we've been seeing, closer to 30% year-on-year growth in CAPEX.
34:39 So I would say they'll maintain CAPEX thrust,
34:41 but they can't accelerate it at a time of fiscal consolidation.
34:45 But I just want to take a step back here.
34:47 Actually, the real story of FY24 wasn't central government doing CAPEX.
34:52 The real story was state governments doing CAPEX.
34:54 And a lot of people miss that out.
34:56 You know, state governments,
34:57 which were literally not spending, you know,
34:59 in the pandemic and the one or two years after pandemic,
35:03 suddenly started spending in FY24.
35:05 And CAPEX spend rose 45% year-on-year.
35:10 Very strong numbers.
35:11 And I think that has been a huge source of growth,
35:14 particularly construction jobs,
35:17 particularly rural demand over the last 12 months.
35:20 So we should always think of CAPEX as center plus state combined.
35:24 And if you combine the two, my sense is we are at our best
35:27 in terms of growth rate right now.
35:29 Next year, the growth may not be as high,
35:32 but in terms of percent of GDP, the thrust will be maintained.
35:35 Got it. And absolute numbers also might look okay.
35:37 Okay, Prajal, maybe I thrust a few things that were top of my mind at you at the start.
35:42 Let's try and understand what is it that you are watching out for the most
35:46 when it comes to Feb 1st.
35:49 Well, a lot of things as in, of course, the fiscal consolidation path.
35:53 Still, there are, you know, pockets who say that there will be some slippage
35:57 because this is a pre-election year. That is not our base case.
36:00 But you know, again, we'll have to watch out for that.
36:02 That how well the government sticks to its 5.9 for FY 24.
36:06 And next year, does it really bring it down to 5.3?
36:09 Or does it go with slightly higher fiscal deficit like 5.5?
36:13 So I think one would be this. The second,
36:15 which I think the bond markets will be really focused on,
36:18 is the amount of borrowing that the central government will do.
36:21 See, if you're going to bring down the fiscal deficit,
36:23 then you're borrowing also, you know, should come off.
36:26 And if it comes off in a meaningful way,
36:28 then I think that would be very positive for the bond market.
36:31 So my sense is bond market is thinking about a 15.2 trillion borrowing in FY 25.
36:37 If it's any number which is lower than 15.2 trillion,
36:40 and there are some ways that can happen, you know,
36:42 if RBI and the government do switches,
36:45 then I can then be extremely positive for the bond market.
36:47 I think that's something we want to hear about. And the third is CapEx.
36:52 You know, the BE, the budget estimate for FY 24 was 10 trillion.
36:57 We think they'll end the year slightly lower at 9 trillion.
37:00 What is the BE going to be for, you know, FY 25?
37:04 So, you know, I look out for these three.
37:06 But again, I think we have to also look at state governments,
37:10 and I'm sure we can talk about it later.
37:12 We have to look at what RBI will do, you know, after the budget is over.
37:16 Yeah, so I'll come to the RBI in a moment, as you said,
37:18 but since you've dwelt upon the state government part a couple of times already,
37:22 I'm just trying to understand in terms of numbers,
37:25 you laid out the broad-based numbers,
37:27 but is this something that came as a bit of a surprise to you as well?
37:31 Because as you said, post-COVID, there's a bit of a pause.
37:33 And does this, in some sense, Pranjal, give a bit of a leeway to the central government in its budget?
37:39 Because hitherto, the hope was that, okay, post the central government doing the CapEx,
37:44 private CapEx hopefully will pick up its mantle.
37:47 While that didn't happen, if the state government CapEx is very high,
37:51 in some sense, does that come at a bit of a helping hand to the central government
37:56 when it makes the budgetary allocations?
37:59 Absolutely. As in, if you look at only the central government,
38:03 you know, then increasing CapEx by about 20-25% year-on-year in FY20-4 was meaningful,
38:10 but maybe it would not have been meaningful enough if you think about the backdrop.
38:14 The backdrop was an early New Year. The rains were not good.
38:18 Rural crop production wasn't very good. Rural incomes were not very good.
38:23 And I think the fact that the state government zoomed in with such huge CapEx spending,
38:28 provided all of this construction activity around the country that many rural Indians,
38:33 who were not able to make much money out of like sewing activity,
38:36 actually just took off for the construction sector. And you can track this data.
38:40 The Aadhaar Enabled Payment System, AAPS, tracks rural remittances from urban India to rural India.
38:46 And that has soared, you know, quite meaningfully from September onwards.
38:50 So there has been some helping hand to rural incomes on the back of, you know, this CapEx,
38:56 which is an ideal thing for a pre-election year.
39:00 So this has been a good backdrop. And I think that is one of the things which has not put so much of pressure
39:05 on the central government to do some rural solve, you know, to do some rural scheme.
39:10 True, we may find some small scheme announced on 1st of February,
39:13 but my sense is that it's not like, you know, a government that is dealing with rural distress in a big way.
39:18 Yeah. OK, so two questions that I'm trying to think, which one should I ask first?
39:23 OK, let me ask this rural question first, because the last time that we spoke,
39:26 you mentioned that at the margin in some parameters,
39:31 you had started to see some positivity in the rural income/rural spend, as the case may be.
39:38 And it was not all bad at the rural end, the way the market was perceiving.
39:42 I believe this was a conversation that we had sometime in November, Pranjul, if I'm not wrong,
39:45 or maybe early December. I would love to understand from you this belief that some quarters have
39:50 that the government will have to or will go ahead and do some spends on the rural side.
39:57 They shied away from it in the last budget. Do they really need to?
40:00 Or do you believe that rural by itself is showing a bit of a negative effect?