- #Sensex, #Nifty marginally higher
- #TDPower Systems, #LIC, #Airtel in focus
Find out what's happening in trade so far with Hersh Sayta and Smriti Chaudhary on 'Market IQ'. #NDTVProfitLive
- #TDPower Systems, #LIC, #Airtel in focus
Find out what's happening in trade so far with Hersh Sayta and Smriti Chaudhary on 'Market IQ'. #NDTVProfitLive
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TVTranscript
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00:41 Markets trade flat with a positive bias.
00:43 Sensex trades above 72,100, while Nifty
00:47 choppy above 21,800.
00:52 Well, Tata Motors' stock in focus
00:54 jumps over 7% on the back of strong Q3 earnings.
00:57 The company's revenue witnessed a 25% uptick,
01:00 while margins expanded substantially.
01:05 And payday moves continue as stock
01:07 hits lower circuit for the third straight session.
01:10 The company wiped out 20,485 crore rupees market cap
01:15 so far.
01:15 Well, among the stocks in focus, you have State Bank of India
01:20 reported its Q3 numbers on Saturday.
01:23 The bank reported a 35% drop in net profit,
01:26 showing an improvement on the NPA front, though.
01:28 Implementation of the Cashless Everywhere initiative
01:38 may prolong the working capital cycle from 45 days to 60 days.
01:43 That's an NDTV Profit exclusive.
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01:48 Welcome.
02:04 Good afternoon.
02:05 You're watching NDTV Profit.
02:06 I'm Harsh. With me is Smriti.
02:08 Over the next 30 minutes, we'll give you
02:10 all more insights, more IQ.
02:12 And we'll focus on certain specific stocks.
02:14 But first off, let's talk about the markets itself.
02:17 You're seeing the Nifty, which is up around a third of a
02:19 percent, nothing much to complain about.
02:21 You've got the Nifty trading in approximately a 130,
02:25 200-point kind of band.
02:27 And in terms of where the contributories are,
02:31 you have the likes of Tata Motors, which is up 6 and 1/2
02:34 odd percent on the Nifty within the Nifty contributories.
02:37 If we can have the heat map there to give more perspective
02:40 on which are the top buzzers.
02:42 But yeah, there you go.
02:44 You have contributories, Tata Motors, Reliance,
02:47 Coal India, Power Grid.
02:48 Power Grid leading the pack up nearly 4% in trade today.
02:51 And that's a big positive as well.
02:53 In terms of the negatives, you are seeing Bharti Airtel,
02:55 Bajaj Finance, Kotak, UPL, all of which
02:58 are contributing negatively on the Nifty 50.
03:00 In terms of the mid and the small cap indices,
03:03 the broader markets largely outperforming the Nifty in trade
03:06 today.
03:06 That's been the theme, continues to be the theme, 2/3 of a percent
03:09 higher on the mid cap, 1 and 1/2 percent higher
03:12 on the Nifty small cap.
03:14 Let's look at sectors.
03:15 If we can have the sectoral chart in terms
03:18 of sectoral indices, the Nifty Bank absolutely flat.
03:21 But outside of that, the Nifty PSE,
03:23 that's been leading the pack, oil and gas as well,
03:25 Nifty Energy up to 2.4 odd percent.
03:29 You're seeing Nifty Pharma also getting traction,
03:32 good traction today, 2 percent higher on the Nifty Pharma
03:35 as well.
03:36 Nifty Realty gaining around a percent and a half as well.
03:39 So all of those on the positive side.
03:41 On the negative, not much to talk about,
03:43 largely flat with a slight negative bias
03:45 when you're looking at the Nifty FMCG, the Fin Nifty,
03:48 as well as Nifty Consumption.
03:50 So that's the theme, at least at the moment, Smriti.
03:54 Right.
03:54 But the stock in focus today will be TD Power System.
03:58 It came out with its third quarter results yesterday.
04:02 And the net profit jumped 49 percent year on year,
04:07 while the revenue and EBITDA rose about 18 and 19 percent,
04:10 respectively.
04:11 To add more context and to break down these numbers,
04:15 we're now joined by Managing Director of the company,
04:17 Nikhil Kumar.
04:19 Hello and welcome, Nikhil.
04:20 Thank you for taking the time out.
04:23 Thank you.
04:24 Good afternoon.
04:25 Good afternoon.
04:26 So let's start off with the numbers and the guidance
04:30 that you've given.
04:31 You've given a guidance of about 1,000 crore addition
04:34 in the top line for FY24, if I'm not wrong.
04:40 And you've also given, according to your order book,
04:43 it's about 1,147 crore, thereabouts.
04:48 Could you give us a timeline of execution of this order book?
04:53 So the order book would be divided into two parts.
04:56 There's a long-term order that we have for a railway customer
05:00 that's about 450 crore and the balance is our business,
05:04 which is around 700 crore, which will be executed
05:09 in the next 12 months.
05:12 So and the railway order is for four years,
05:15 so it's about 100 crores per year for four years.
05:19 So say about 800 crores will be executed in the next 12 months
05:24 out of the 1,150 crores.
05:27 All right.
05:28 And in this quarter, November, you also
05:31 got a nod to set up a facility in Karnataka.
05:34 Could you tell us when will that begin,
05:39 that the production there will begin,
05:41 and how will it contribute to your top line as well?
05:45 Well, we're adding capacity.
05:47 So we have two plants already near Bangalore,
05:50 and we're putting up a third plant about 70 kilometers away
05:55 from Bangalore, and we're basically adding capacity
06:00 to existing lines.
06:01 We want to take it-- we have capacity right now
06:05 to about 1,300 crores, 1,400 crores.
06:08 Next year, we are already projecting around 1,200.
06:11 So we're coming to the limits of capacity
06:16 with the existing plant.
06:17 But the new plant will be able to go up to 1,800.
06:20 That will go on stream in phases,
06:22 but the first phase will start from Q3 FY24.
06:28 Understood.
06:29 Sorry, FY25.
06:30 Sorry, FY25.
06:30 Sorry, next year.
06:32 Sure, understood, Nikhil.
06:34 Harsh also joining in.
06:35 If I can try and break this down further,
06:37 if I understand correctly, 1,200 crore on the top line front,
06:41 when I'm looking at FY25.
06:45 Thereafter, if I am talking about these new capacities
06:48 being added, so where should top line go by FY26, 27?
06:52 How quickly should it go towards 1,800
06:54 is what I'm trying to understand.
06:56 We have projected an average increase of about 17%,
07:00 18% on the top line for the next few years.
07:03 And we are focusing our business on export,
07:07 which is around 60% of our sales.
07:09 Domestic will be about 40% of our sales.
07:12 And if the margins and net profit
07:15 will grow at a higher rate compared to the sales growth,
07:19 that's because we are also investing
07:21 in not only in the new plant, in a lot of automation.
07:24 And we'll see operational leverage coming in
07:26 from a higher top line.
07:29 So profits will grow faster than top line.
07:34 Understood, got it.
07:35 And therefore, margins should be above the 20% mark
07:38 straight off the bat by FY25?
07:40 Is that fair to say?
07:41 Yeah, a year and year increase, definitely.
07:44 Understood, got it.
07:45 And when it comes to--
07:48 no, sorry, I'm talking about margins, sir.
07:50 So margins will be above the 20% mark, FY25?
07:53 Yeah, the net profit would be increasing more,
07:58 around 20% plus per year for the next few years.
08:01 Understood, yeah, that makes sense.
08:03 And sir, just with regard to the kind of traction
08:06 that's there in the economy, how is the traction currently?
08:11 Of course, power has been a segment
08:13 where there has been plenty of focus.
08:16 And when I'm looking at your order book, of course,
08:18 maybe 40% is railways.
08:20 But outside of that, there are plenty
08:23 of other ancillaries which you are a part of.
08:29 So how is the order book really piling up?
08:31 And how are you expecting that traction going forward?
08:34 The power sector in India is--
08:41 we have a shortage of power.
08:42 And with economic expansion taking place the way it is,
08:46 there's going to be a shortage of power going forward also
08:50 for the next few years.
08:52 So industrial use, industrial capacity expansion
08:55 is always going to be accompanied by a large capital
08:58 power plant, say, in the range from, let's say,
09:00 5 megawatt to, let's say, 100 megawatt.
09:02 And that's the range in which we play.
09:04 We are really in the large industrial capital power plant
09:08 business, where we make generators for steam turbine
09:12 application.
09:14 Internationally, we do a lot of business in hydro.
09:16 We do a lot of business in gas engines, gas turbines.
09:20 And those sectors are driven by other factors.
09:24 There's a shift for more and more renewables
09:26 internationally.
09:28 And gas has also been classified as a renewable source of energy.
09:31 So there's a lot of investment taking place,
09:33 shifting away from coal and nuclear into these sectors.
09:37 So we're seeing a tailwind also coming for us
09:39 from international markets because of the shift
09:43 towards more renewables.
09:44 So in general, both domestic and export,
09:46 we have tailwinds from a macro point of view.
09:50 And that I see at least going forward
09:53 for the next four or five years.
09:55 I see the cycle playing out very positively for us.
09:58 And so thermal, there's a lot more kind of visibility
10:03 in the sense that how much there's
10:05 going to be an increase in the thermal power generation.
10:08 So does that kind of impact your financials,
10:11 thermal versus renewables?
10:15 Our business is industrial captive.
10:17 Let's say there's a cement plant which
10:19 needs a 30 or 40 megawatt capital power
10:22 plant, a single unit.
10:24 That's the kind of business that we are in.
10:26 We're not in the utility sizes, which is, let's say,
10:29 400, 500 megawatt, which would be a typical size
10:32 of a thermal power plant.
10:35 In general, I can say the capacity addition taking place
10:38 in India by large thermal, large nuclear,
10:41 or other renewable sources is not sufficient.
10:45 It's not keeping pace with the demand for power.
10:48 So industrial applications or industry use
10:53 will continue to see shortages.
10:55 And they will continue to invest in capital power plants
10:58 in this foreseeable future in India.
11:01 Sure, sir.
11:02 So trying to understand, where are we on CAPEX?
11:05 Your debt is near zero.
11:10 How much of CAPEX needs to be put up
11:13 over the next couple of years, say, through FY '26?
11:16 And how are you expecting to fund that?
11:20 We have cash in the books around 215 crores.
11:24 We'll be investing over 120 crores in CAPEX, 40 crores
11:27 this year, 80 crores next year.
11:30 And we're not going to take any debt.
11:35 And then after that, we'll have about 20,
11:37 25 crores of maintenance CAPEX per year,
11:40 which will be approximately equal to depreciation.
11:42 So we're not going to stretch ourselves into going into debt.
11:48 And we're going to be conservative
11:49 in how we invest our money.
11:51 There's also going to be cash generation every year.
11:54 This year, we're projecting about 115 crores of net profit.
11:57 So that will replace the money which
12:01 is being invested in CAPEX.
12:03 So we're being pretty conservative with how
12:06 we're looking at our cash.
12:08 Fair point.
12:09 Thank you so much, Nikhil, for joining us
12:11 and for all the comprehensive answers that you gave us.
12:15 But now let's shift focus to Tata Motors.
12:18 It came out with a spectacular set of results.
12:21 And it's up about 7% in trade right now.
12:25 That's on the back of the numbers.
12:28 And the company continued the streak
12:33 of reporting profit for the fifth straight quarter.
12:35 Listen in to what PV Balaji, the CFO,
12:38 had to say regarding the sale outlook for EV and CNG-powered
12:43 models going forward.
12:46 If you would expect EVs, you would
12:47 like to see this cross the 25% to 30%--
12:50 be in the range of 25% to 30%.
12:52 That's what we are targeting as far as FY '25, '26.
12:56 That time frame is for the next one, two years.
12:58 We should see that.
12:59 And the key focus area for that is
13:03 to ensure we develop the market in terms
13:05 of exciting product offerings, more products, more charges,
13:09 more features.
13:11 And that's how we should expect to see the penetration rise.
13:15 All right.
13:16 That was the management of Tata Motors.
13:18 But let's also look at LIC.
13:21 It's up in trade today.
13:22 And, Harsh, tell us, what is the reason behind this kind of jump
13:26 today, about 6.5% there?
13:29 And talk to us a little bit about the valuation
13:32 of the stock as well.
13:33 Well, yes, absolutely, Smriti.
13:34 So today's jump, not really sure,
13:38 because just the way in which the stock has moved
13:40 over the last couple of months, it's
13:42 been a very stellar rally coming in from LIC.
13:47 So I'll talk about the longer-term picture,
13:49 the bigger picture of where LIC is currently at.
13:51 You're looking at valuations now very close to one times
13:56 EV is where the current price to EV is currently at.
14:00 Embedded value is largely the value,
14:02 intrinsic value, or the discounted cash flow value,
14:06 which one takes for insurance companies.
14:08 And LIC is very close to one now.
14:10 You're looking at a peer group, which
14:13 is valued at roughly two to three times price
14:16 to embedded value, so substantially more expensive.
14:19 LIC was listed at 1.1 times.
14:22 So of course, the patient investor
14:24 has just about started making money, Smriti, on LIC.
14:27 And that's one thing to cheer about.
14:29 But the other piece is LIC has taken several initiatives
14:32 since listing, since that 1.1 times price to EV valuation
14:36 that the government gave it, as well as merchant bankers gave
14:38 it, several steps taken.
14:40 One is they're moving more towards non-par.
14:43 They are releasing and launching more products in that space.
14:45 They are pushing more products there.
14:47 What they are also doing is they've
14:49 moved their profitability, their margins,
14:52 as you would call it in insurance,
14:54 more from the sub-10% to the over-15% mark.
14:58 And they're consistently staying there.
14:59 So quite a few positives which seem to be playing out.
15:02 Of course, the low free float is not really helping its case.
15:06 But at least at the moment, LIC on a tear
15:08 over the last couple of months.
15:10 It's nearly doubled.
15:11 And that's a good piece for investors.
15:14 Well, a little bit expensive there, as you mentioned.
15:19 But we'll quickly slip into a short break now.
15:22 But we'll talk about a lot of other stocks
15:25 on the other side.
15:26 Stay tuned.
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18:48 Welcome back.
18:49 You're watching Market IQ on NDTV Profit.
18:52 Let's quickly take it across to Smriti.
18:55 You know, she's got us a preview with regard to Bharti Airtel.
18:58 What can we expect from those numbers?
19:00 Well, you rightly mentioned it's going to come out this evening,
19:04 and we're closely tracking it.
19:06 Now, if you look at the margins, that's
19:08 supposed to be a little capped for the telecom sector,
19:13 specifically Bharti Airtel and Jio,
19:15 which we saw that it was a gap because of 5G spends.
19:18 But that's going to moderate in the next year.
19:21 So this time as well, that's going
19:23 to be a factor, which is why margins will probably
19:26 be flat in the third quarter.
19:28 Another thing that's also kind of restraining the margins
19:33 is the devaluation of the African currency, which is Naira.
19:37 And that's been going on for a couple of quarters as well.
19:40 So that's where we're at on the margin front.
19:42 But if you look at the revenue, that's
19:45 expected to rise about 3.5% to 38,300 crores.
19:49 And if you look at the net profit,
19:51 that may also increase about 36% this quarter,
19:55 around 2,800 crores or thereabouts.
19:58 Now, Bharti Airtel has been gaining subscribers
20:02 as Vodafone IE.Dev's competitor continues to lose.
20:05 So ARPU, the average revenue per user,
20:09 is expected to rise about 1.1% this quarter
20:13 from the previous quarter, around 205 rupees from 203
20:17 rupees.
20:18 So a decent kind of uptick in the ARPU there.
20:21 And the company is targeting about a 500 billion market
20:25 opportunity with its enterprise operations.
20:29 Now, the company also expects 80%
20:32 of corporates that will be using 5G in the next three years.
20:37 So a lot of positive out there for the company as well.
20:40 Understood, Smriti.
20:42 Also, the stock is slightly on the negative side today.
20:49 I've seen a 2.5% fall on Bharti Airtel.
20:51 So somewhat of negativity creeping in over there.
20:54 But on to an NDTV profit exclusive.
20:58 Now, the implementation of the cashless everywhere initiative
21:01 may actually prolong the working capital cycle.
21:04 This is for insurers from 45 days to 60 days.
21:08 We have Monal with us, who's going
21:10 to give us more details and perspective on that one.
21:12 Monal.
21:13 Thanks, Harsh.
21:14 Well, yes, the initiative that was introduced on Jan 25
21:18 is expected to have some impact on the insurer's
21:21 short-term working capital cycle.
21:23 But it's going to have quite an impact on the hospital's front.
21:27 So the idea is that the working capital requirement
21:30 for hospitals may go up to 60 days from currently 45 days.
21:34 And this is based on our conversations
21:36 with certain hospitals and industry specialists.
21:39 So the idea is that there'll be a shift in the pay-a-mix.
21:42 So typically, right now, in insurance and government
21:45 schemes combined, make up for 50% to 70%
21:48 of a hospital's revenue, depending
21:50 on the size of the hospital and the geography.
21:53 This ideally will shift, and there'll
21:55 be a higher dependence on insurance contracts.
21:57 So let's look at the larger numbers.
21:59 If you were to look at the entire health insurance
22:02 claims in FY23, they were close to 71,000 crore rupees.
22:07 Of this, only reimbursement claims,
22:10 which would essentially mean that somebody
22:12 were to avail treatment and then claim
22:14 a reimbursement on the insurer, were close to 25,000 crores.
22:19 Now, if this were to move to cashless,
22:21 you're looking at 25,000 crore rupees
22:24 of working capital that will now be settled based
22:27 on an insurer's settlement cycle period.
22:30 So that's going to be quite an impact.
22:32 And there's another side to it as well.
22:34 There could also be an impact on the RPEB,
22:37 which is the average revenue per occupied bed.
22:41 This would mean that if reimbursement rates are
22:43 favorable, that is, the understanding between
22:47 the hospital and the insurer is favorable,
22:49 it could have a good impact.
22:51 But if there's a further negotiation,
22:54 then it could be a negative.
22:56 Got it.
22:57 Now, let's shift focus to the primary markets.
23:00 My colleague, Sajid Mangat, spoke to the management
23:03 of Rashi Peripherals on their upcoming IPO
23:06 that is set to open for subscription on February 7.
23:10 Listen in to how the board plans
23:12 to use the proceeds from the IPO.
23:15 Our business is a working capital-driven business.
23:18 And 475 crores out of this will be used
23:22 to repay the debt on the books.
23:24 And the balance will be to pay off the creditors.
23:27 So, you know, give me a model of this business,
23:32 because you are into peripherals,
23:34 especially into ICT business, basically,
23:36 one of the leading distributors of ICT in the country.
23:39 So how does the business model work?
23:42 And when you say that it's for working capital requirement,
23:46 where does it come into play?
23:48 Yeah, so I think I'll try to give you a snapshot
23:51 of Rashi Peripherals first.
23:53 So, incepted in the year 1989,
23:55 Rashi Peripherals is now a 34-year-young company.
23:59 We are not only the largest, but also the leading
24:02 and the fastest-growing ICT distributor in the country.
24:06 When you say ICT, basically, it's IT.
24:09 In common parlance, anything that is related to IT
24:12 and IT products.
24:13 Currently, we distribute 52 global marquee brands.
24:17 Some of the big leading names that I can highlight
24:21 is Asus, NVIDIA, Dell, HP, Lenmo, Western Digital.
24:27 These 52 global marquee brands, we are currently distributing
24:31 from our 50 branch offices with warehouse,
24:34 with service center,
24:36 which is an unprecedented infrastructure in India.
24:39 I repeat again that we are the company which has
24:42 50 city presence with office plus warehouse
24:45 plus service center, so that our customer gets
24:48 a 360 degrees experience of pre-sales, sales,
24:52 and the post-sales and warranty cycle as well.
24:55 Rajesh, when you say that you are distributing this,
24:59 it's not just the finished products,
25:00 but also hardware parts, is it?
25:02 Yeah, so there are two parts of the business,
25:05 the verticals we have in the organization.
25:07 One is called the LIT business, where we are more parts
25:12 of products like keyboard, mice, CPU, graphic cards,
25:16 all this, which accounts to 46% of our top line.
25:19 And balance 56% is PES, which is personal devices,
25:24 cloud computing, where more of laptops, servers, storage,
25:28 all these products come.
25:30 You know, Kapil, Rajesh spoke about the products
25:34 which are there and there, but I've seen your peers
25:37 in the industry, whether it's Reddington or Ingram,
25:40 who are the peers for you, they are into mobile distribution
25:43 as well. Why haven't you entered into mobile distribution?
25:45 Yeah, so if you see the landscape of the IT industry
25:48 and the mobile phone, smartphone industry,
25:51 it is an equal size of the business opportunity
25:53 in both these segments.
25:55 That's the size of the volume of both these industries.
25:58 With the working capital-driven organization,
26:00 the intensity of the working capitals is extremely high.
26:05 And with limited raw material of capital that we have,
26:08 we chose to fight our battles in the IT industry
26:11 and become an expert distribution company
26:14 in the field of ITC only.
26:16 Sure, and to understand that whole conversation,
26:20 please head on to our website, ndtvprofit.com,
26:23 where we've uploaded a slice of that entire conversation
26:26 with Rashi Peripherals.
26:27 But with that, we're completely out of time
26:29 on this edition of the show.
26:30 From Smriti, myself, everyone who puts the show together,
26:32 thanks so much for watching.
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