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00:00Thanks for tuning in and you know yesterday we were talking about in the last one about
00:17how the market was all about result reactions to a Bharat Forge, to a Hero Motocorp etc.
00:24Today is no different by the way, while the index is down about a third of a percent there
00:28are a clutch of stocks which are reacting to results and reacting well.
00:31So I want to start off by talking about SKF, their quarter 4 numbers, revenues were up
00:36about 10% at 1203 crores, the estimates were 1123, margins up 247 basis points at 17.72%
00:46versus the Bloomberg estimate of 16% and the PAT up 42% at 175 crores versus 123 crores,
00:53the Bloomberg estimate was 137 crores.
00:55Now what is so special about this?
00:57Amongst other things it's the highest PAT number and growth number I think in 13 quarters
01:04for SKF and for reference both margins and PAT growth for Scheffler India which is related
01:14or rather in the same field, their performance was flattish whereas SKF has shown growth.
01:19So because of this I think the street is rewarding what is not a very cheap stock but duly rewarding
01:24the kind of performance that they've come out with which is SKF.
01:28But there is of course a collateral impact on Scheffler which is up 2% but the hero of
01:32that end of the market has to be SKF.
01:36Then we've seen some positive commentary from brokerages on Hero Motocorp results and look
01:41at what's happened to both Hero and TBS, some very strong moves there.
01:47To my mind the large cap story is what's happening to Hero and TBS, TBS is not in the index but
01:52the two wheeler majors, both of them doing what they are doing is a remarkable show.
01:58Maybe Bajaj Auto might also be, at least it started off well and yesterday too Bajaj Auto
02:03did okay.
02:04That also is up about 2.5% but this is a really stellar show by the two wheeler majors in
02:09the session today.
02:10So that's the other aspect that you should watch out for.
02:13Has Bank of Baroda reacted is the question because RBI lifted curves on Bank of Baroda's
02:19Bob World app with immediate effect and that stock is up about a couple of percentage points
02:24as well.
02:26Then look at the numbers of Kirloskar Oil Engines, we'll bring the stock up as well,
02:30it started off very well, has declined a little bit but it was up about 6-7%, currently too
02:35is up about 5% on 1 million shares traded which is actually very high for Kirloskar
02:40Oil usually.
02:41Now why has this happened?
02:42Look at the numbers again, revenues up nearly 20% at 1660 crores versus 1384 and the net
02:51profit up 86%, why?
02:53Because margins are up 450 basis points at 18.23 versus 13.72% and there in the story
03:02lies, EBITDA up 59% but that margin performance extremely solid as a result of which Kirloskar
03:08Oil too has had a very strong quarter, yes, but has also done very well.
03:13Now it's not just about results though and we'll get in Ganesh Ram Jayaraman in just
03:19moments from now to talk about what he makes of the result season and more but it's not
03:24just about results because if you look at what's happened to Manappuram and Muthut today,
03:28that's because of a supposed RBI advisory note to some of these gold loan NBFCs telling
03:34them that they should not to exceed cash disbursement limit, the loan amount in excess
03:40of 20% should not happen, this is various media reports who are suggesting this and
03:46while one of the wire agencies had published this during market hours yesterday and the
03:52stocks had fallen, I think they are taking more cognizance of this today because it's
03:56been widely reported as a result of which both Manappuram and Muthut have corrected
04:00quite strongly in the session today, so watch out for that as well.
04:04In minutes from now I'll also get in my colleague Anushi to talk about Larsen and
04:08Toubro because when you look at the large caps while Hero and TVS are on one side of
04:12the N, L&T is quite on the other side of the N, 3.5% lower for Larsen and Toubro in the
04:17session today, post their guidance numbers and both for order and flow as well as revenue
04:23growth for FY25, so I think therein lies the problem for some of these names.
04:30So that's the first set of stocks.
04:32Now if you just look at what's happened to BSE 500 winners and losers, on the losing
04:37side there is of course Manappuram and Muthut which stand out there and they have certainly
04:41come off, there is Piramal which has also come off not looking great and a couple of
04:46others on the gaining side include Adani Power and Timken, both of which are doing okay in
04:51addition to of course Hero and TVS which have done well but pretty strong gains for Adani
04:57Power as well in the session today.
05:00Now because we said it's earning season, Arvind Textiles came out with numbers with
05:05quarter 4 earnings and while the revenue growth was over 10%, raw material costs did impact
05:11the margins.
05:12Let's hear out the management.
05:15Hello and welcome.
05:16We have with us the management of Arvind Limited to talk to us about the numbers.
05:21You are watching NDTV Profit, I am Harsh Saita.
05:24We have with us Mr. Puneet Lalbhai who is the Vice Chairman at Arvind Limited to talk
05:28to us about the Q4 numbers as well as what one can expect from Q1 as well as FY25 full
05:34year.
05:35Welcome to NDTV Profit, Sir.
05:36Pleasure to be here.
05:37Hi.
05:38So, Sir, first off, let me try and break down this quarter, you know, what's exactly transpiring
05:48with regard to margins and where can one see numbers start to stack up for FY25, what's
05:53the expectation like?
05:56So I think it was a very strong quarter.
05:58We had revenue growth up to about above 10% which is the first quarter in many quarters
06:04where we've seen such growth.
06:07The growth was fueled by both our volume growth in garments and our very good performance
06:13in the advanced materials division.
06:16I feel that the year was a story of two halves.
06:21The first half of the year was very low demand, brands being saddled by inventories, we worked
06:29through all of that and towards the second half of the year demand started reviving.
06:34I believe that going into the next year that better demand scenario is likely to continue.
06:40AMD continues to remain strong.
06:43So we should see some growth over last year overall next year with it being driven by
06:50the same two factors, growth in volumes, especially on the garments front, on the
06:56conventional textiles business and growth in AMD continuing to be strong.
07:03Right, Sir, and with regard to raw material, how's the raw material cost evolution playing
07:08out if you can talk to us about that and set us the context for FY25, how has of course
07:14April already been, but how do you anticipate the numbers shape up in terms of FY25?
07:20Will raw material prices remain benign?
07:23Is that the expectation?
07:25So what we saw last year was dramatic raw material deflation and that led to the top
07:34line on the entire financial year being slightly negative.
07:39I think most of the raw material deflation is behind us now and prices are going to remain
07:46range bound and hopefully reasonably stable.
07:49That is our view at the moment.
07:52So we don't see any raw material link impact on top line going into the new year.
08:03You can, of course, catch this whole conversation on all our digital platforms and channels.
08:08So keep that in mind.
08:11Thanks for tuning into Talking Point, though, and the case for a chat for our guest today
08:17is threefold, as is usually the case.
08:19We, of course, talk about whether Q4 earnings in line thus far have a material impact on
08:25markets or no.
08:27That's the first point.
08:28We, of course, talk about whether falling household savings will keep deposit growth
08:33under check for banks.
08:35Remember, deposit growth has lagged credit growth by a significant margin in the recent
08:40past.
08:41And could consumption be under pressure?
08:44There are green shoots for select rural pockets, companies like Pedilat have spoken about it,
08:49but not everybody is saying the same thing.
08:52Let's ask all of these things to Ganesh Ram Jayaraman.
08:55He's Managing Director and Head of Avendus Park and Institutional Equities, joins us
08:58right now on the show.
08:59Ganesh, I'm good having you.
09:00Thanks for taking the time out.
09:01I hope all is well.
09:02All well, Neeraj.
09:03Thank you.
09:04Good to have you here.
09:05The pleasure is entirely ours, always, Ganesh Ram.
09:09Can I start off by talking about the earning season thus far, Ganesh Ram?
09:12Most notes seem to suggest that as per their estimates, of course, the Sensex and as per
09:16consensus, the Sensex numbers have largely been in line or slightly better.
09:21Have you been okay with the earning season thus far or are you disappointed?
09:27The Nifty stocks are not seeing any downgrades, nor have they seen any material upgrades.
09:32It's hardly a percent here or there.
09:34In fact, for four quarters now, the FY25 earnings estimates haven't changed at all
09:42for the Nifty companies, but the broader universe, we are seeing more downgrades, especially
09:49in sectors like IT or even cement.
09:53We have seen some earnings downgrades for fiscal 25 come, especially after this quarter.
09:59So still, only about a third of our coverage universe results have come so far.
10:06Typically, the later half tends to be more reflective of how things go.
10:12So fingers crossed, but it's been mixed.
10:15So just to put it in a nutshell, IT has seen some downgrades, the capital goods has seen
10:22some upgrades, cement has seen some downgrades so far.
10:25Nifty unchanged, broader universe, some downgrades.
10:55the
11:18growth front from the global businesses or not quite?
11:22Selectively, but not at a broader level.
11:24We have not seen global growth pickup, exports pickup in most categories.
11:30We have seen it in very few, but in most categories, global growth, exports growth, we haven't
11:37seen widespread pickup.
11:39Where we are confident of is private sector CAPEX-led growth picking up next year.
11:47I think that's the most positive, confident signal that we are getting.
11:52And it's not going to be government CAPEX.
11:55It's more going to be private sector CAPEX-led pickup in the coming year.
12:00Property CAPEX-led pickup coming next year.
12:04Those two, we are more confident than we were.
12:07We have been confident for almost 18 months now.
12:11Stocks have done very well, but we still hold on to the view that while stocks have
12:17done well, they are in the expectation of earnings and those earnings will play out
12:21over the next 18 months on private CAPEX.
12:24So some commentary from managements also are indicative of that now.
12:30We have been speaking to some banks also, and we are also, we are seeing some private
12:36sector CAPEX-led sanctions or likely disbursements picking up next year.
12:42So the most positive part of the growth signals for next year is coming from B2B or the private
12:50sector CAPEX-led signals.
12:53That's the most important.
12:55Caution still continues on the consumer side.
12:59We are not seeing a significant, in fact, you are right when you started off saying
13:03rural has started seeing some bit of improvement.
13:06Two-wheeler companies signaling that.
13:08Some FMCG companies are mentioning that.
13:11We are also seeing it on the ground, but urban is slowing down more than we thought.
13:16And our concern remains consumption.
13:20So clearly for us, it's a mixed picture on the broader expectations for next year.
13:27Is this urban consumption slowdown cyclically in nature, Ganesh, also a case of a higher
13:32base or not necessarily so?
13:35No, it's a combination of a few things, Neeraj.
13:38I think what's happened is one of the points that you alluded to, which is the whole savings,
13:44which is in some form linked to consumption, right?
13:48If you look, if you slice through the savings numbers, it's not as if India started suddenly
13:54saving lesser.
13:56It's that net savings, which is net of leverage, which is the concern.
14:01And leverage has gone up and that's actually why we think consumption is also not seeing
14:08fresh legs, which is consumption led by also leverage at the mass consumption level.
14:16We are not seeing that to sustain the way it has over the last, especially since COVID.
14:22And our concern stems from there.
14:25So the two are linked, which is mass consumption in some form linked to savings slowdown.
14:31It has implications for both deposit growth.
14:35It has implications on how lenders will slow down.
14:39It has implications on how consumer related companies, especially urban, especially leveraged
14:46consumption will see moderation and growth expectations going forward.
14:51That is our single biggest key concern that we continue to have.
14:58And Ganesan, just the follow up to that is whether this fall in savings rate keeps deposit
15:06growth muted.
15:08And is that going to be a concern for the banking system?
15:11Because now there has been a number of months that we've seen credit growth or other deposit
15:17growth lag credit growth meaningfully.
15:20What happens in the event that deposit growth stays muted and we see a period of lower interest
15:27rates in the next 12 months, which might lead to even heightened credit growth?
15:34I think that's a very important concern.
15:37We also share that concern.
15:39It's now 24 consecutive months.
15:41In fact, it's the first time ever we can go back data as much as we want, but we have
15:47never seen two consecutive years of absolute credit growth outpacing absolute deposit growth.
15:54And it's illogical, but it's happening.
15:57And that is a very significant concern.
16:01And we think that's reflected in the elevated CD ratios of banks, and that's reflecting
16:08in many banks underperforming.
16:10That will, we think, lead to banks slowing down credit growth, especially consumer lending
16:19segments, which we think can have an impact on volume growth and earnings growth for rest
16:24of the companies into next year.
16:26So very, very important.
16:29And we think important challenge.
16:31And we are very wary about that as well.
16:35That has an impact on, at a broader level, earnings expectations of mid-teens for next
16:41year, because it has not only impact on volume growth, it has an implication on premiumization.
16:48It has an impact on operating leverage.
16:50And at the bottom line level, even a small, maybe even 250 bps to 300 bps lesser credit
16:59growth next year can have a lot more impact on earnings expectations for next year at
17:06a broader level.
17:07That is an important, possibly the most important concern which we will have.
17:13So non-banking impact on earnings, and of course, banking earnings as well, because
17:17if they indeed go slow on credit for consumer credit, that might have an impact on their
17:21earnings, even if it's compensated in part, Ganesham, by the CapEx growth, right?
17:27So would banking earnings also come under cloud?
17:30Yeah, it will, because the lending rates of the corporates are a lot lesser than the
17:36consumer.
17:37So it will have an impact on not only growth for the bank's balance sheets, it will also
17:44have an impact on margins.
17:46And it can have an impact on credit costs as well.
17:50And also some of the new regulations which the Reserve Bank has come up with for banks
17:56can have an impact on treasury gains or credit costs.
18:00So which means earnings growth expectations of most banks can be well below what it has
18:07been over the last 18 months.
18:09And this I'm not even considering the impact of rate cuts.
18:12If rate cuts do come, and I'm not a believer that it will come in the next 6-9 months,
18:17I don't see it in this calendar for sure.
18:19I think it can come in next calendar.
18:22If that comes, and given that repo rate linked loans are almost more than a third of the
18:28overall loans, it can have an impact on yields as well.
18:33That can again have an impact on margins for fiscal 26.
18:36May not be for 25, but for fiscal 26, that can happen.
18:41Hero of the earnings season currently, you could argue is, well, pun intended, hero.
18:47But what I mean to say is that Hero, TVS, autos by and large, have actually had a very
18:53good performance relative to almost everything else, and in absolute terms as well.
18:57Ganesh Ram, you mentioned, I heard you say that two-wheeler commentaries,
19:02speaking of the rural upside.
19:05Is this a net positive for these companies over the slightly medium term?
19:10Because rural has lagged big time.
19:12Does this make the sentiment favorable?
19:14And aside of two-wheelers, autos in general, this earnings season has stood out.
19:19I mean, Bharat Forge, Hero, TVS are all cases in point.
19:22What do you make of these numbers?
19:24Very good.
19:25In fact, two-wheeler companies, what's happening is about six, seven years now, maybe 2017,
19:31we saw the last time sales were good.
19:36And now the replacement cycle of two-wheelers is coming out.
19:41In the sense, there are more vehicles on the road which were sold prior to 2017 or
19:47before than since, which means vehicles are now at an average level, almost 10 years old,
19:53and it leads to replacement cycle.
19:56And that's very, very positive for two-wheeler companies.
20:02And also the electric vehicles, which were taking some bit of market share away, and
20:08those aren't as much as it was over the last two, three years.
20:11So that's also helping the incumbents and the ones we have known for a long time.
20:17So this is in two-wheelers.
20:20Four-wheelers continue to be a challenge on entry level, and the premiumization SUVs,
20:26which have been doing well, that trend is sustaining.
20:29Not much of a change that we are noticing there.
20:32Commercial vehicles, we are very, and we think there is some bit of oversupply, which
20:38has kind of picked up.
20:41Tractors, still not reflecting.
20:44So this broader level rural recovery, I still don't want to, I mean, I've not been a fan
20:51of calling for rural slowdown or no rural recovery, both over the last few years.
20:57Tractor sales were doing well.
20:59E-commerce company sales in rural was doing well.
21:02Cell phone sales in rural continue to do well, even though two-wheeler sales weren't in the
21:07preceding, say, 24, 36 months.
21:10Now, tractor sales isn't doing well, two-wheelers doing well.
21:13So my sense is it's all more, you know, the wallets are beginning to trend differently
21:21than wallets shrinking.
21:23Behavioral patterns are more relevant, spending patterns, and they are not reflective
21:29of, at a broad level, rural recovery or slowdown.
21:32I think we'll keep talking about it at a market level, but I don't think that's really indicative
21:38of how consumers are reacting.
21:42At the end of the day, there are cell phone sales in rural, I mean, phenomenally good.
21:47So I'm not really going by just this narrative on rural slowing down and picking up.
21:54But for sure, we are seeing various pockets of auto sales continuing to do well, and that's
22:03something that we've been expecting, and we are now seeing that play out.
22:09Okay.
22:10Well, we're out of time completely on this leg of Talking Point, unfortunately, today.
22:14Ganesh Ram, thanks for taking the time out and being with us.
22:17We'll look forward to a slightly longer conversation the next time that we speak,
22:20but much appreciate your time today.
22:22Thanks.
22:23Thanks for having me.
22:24The pleasure was entirely ours.
22:26And just before we wrap up Talking Point, look at those flashes on your screen.
22:29Air India Express has given an ultimatum to all employees who are on mass leave to join
22:35duty or else the management may take action.
22:37Remember, this morning we got the news that 25 employees were asked, senior cabin crew
22:44were asked to leave, and that won't be the end of the number.
22:47So there's a serious fight out there.
22:49Let's see which way it takes shape.
22:52But wrap up on this leg.
22:53Thanks so much for tuning in.
22:54Up next is the FNO Show.