Samvat 2081: A Test of Investor Resilience

As we enter Samvat 2081, the Indian equity market stands at a critical juncture. The market has grown in size, and domestic money has become a powerful stabilising force, but risks remain. With India’s high valuations, weak earnings and FII outflows, the next year may test the resilience of retail investors. Shashikant Singh takes a closer and comparative look at the scenario to get a sense of what lies ahead 

As we look back from Diwali 2023 to Diwali 2024, the Indian equity market has had a stellar run, barring the past one month. Nifty has surged over 26 per cent during this period, marking it as one of the most exciting years for investors. This remarkable growth was primarily driven by a flood of retail money flowing into the market. Domestic investors, particularly those investing in equity mutual fund schemes, have been pouring in more than ₹20,000 crore every month or nearly USD 3 billion. This robust local support has made the market nearly unstoppable, even as global uncertainties loom large. 

Over the past year, equity indices have exhibited strong performances, in particular the Nifty Power index leading the way with an impressive 79.86 per cent return, driven by a higher demand for energy. The Nifty PSE and Nifty CPSE indices followed closely, with 72.03 per cent and 69.27 per cent returns, respectively, reflecting investor confidence in public sector enterprises. Meanwhile, the real estate sector also saw significant gains with the Nifty Realty index posting 68.34 per cent returns. [EasyDNNnews:PaidContentStart]

Fundamental Strength of India’s Growth Story 

India’s growth story remains one of the brightest globally. The country continues to be the fastest-growing major economy, with multiple engines propelling its momentum. The demographic dividend, coupled with a massive domestic market, strong ‘Make in India’ initiatives, unicorn start-ups, and a surge in infrastructure development, have attracted both local and global attention. These factors have created a unique ecosystem that supports sustained growth, despite the occasional roadblocks. 

India’s GDP growth is projected at 6.8 per cent for FY25 and 6.5 per cent for FY26, making it the fastest-growing major economy in the world during this period. No other major country approaches these figures. India’s projected growth far exceeds that of the other major economies, positioning it as a driving force behind global economic expansion. 

Its growth rates are not only higher than the developed countries but also outshine other large emerging economies, solidifying its role as a leading player in the world economy over the coming years. The current fall in the market is due to following factors: 

Challenges on the Horizon: FII Selling & Valuations - 

While India’s domestic retail investor base has been a significant market force, concerns have arisen, particularly with the large-scale foreign institutional investors (FIIs) selling over the last month. This sell-off is reminiscent of 2008, although today’s base is significantly larger—around three and a half times. FIIs, holding about 15-16 per cent of India’s total market (valued at approximately USD 800 billion), have sold roughly USD 10.3 billion. While this represents less than 2 per cent of their holdings, it has been enough to prompt concerns. The following table gives you a glimpse of previous FIIs outflows and its impact. 

Diwali Portfolio 2023 Review: Outperforming Benchmarks with Standout Performers. 

Continuing our tradition of excellence, the DSIJ Diwali Portfolio for 2023 has not only outperformed but significantly surpassed the BSE Sensex and BSE 500 indices. Leading the charge were standout performers such as Torrent Power, Power Finance Corporation, Ethos, ICICI Bank, Indian Bank, and Mrs. Bector’s Food Specialities, each achieving a target price increase of 40 per cent, far exceeding broader market performance. However, we also had two underperformers, Saksoft and Kolte-Patil Developers, which delivered negative returns and fell short of expectations. Overall, the DSIJ Diwali Portfolio achieved an impressive XIRR of 56.52 per cent, or 58.05 per cent when including dividends, compared to the BSE Sensex and BSE 500 returns of 24.86 per cent and 33.84 per cent respectively. 

After large FII outflows, the market often recovers significantly within 12 months, as seen in most historical events (for example, 127.6 per cent recovery after the global financial crisis and 98.8 per cent recovery post the corona virus pandemic). This indicates that while FII outflows can trigger short-term corrections, the market often rebounds once the immediate risk or fear subsides. Tactically speaking, these foreign investors are merely readjusting their portfolios, driven largely by higher valuations. 

India is currently viewed as being expensive, and there’s no denying that fact. Historically, such high valuations have only been seen twice before— once in 2021 and before that in 2007. The MSCI India index’s forward price-to-earnings (PE) ratio is now at 24 times, significantly higher than the five-year average, with a premium of 70 per cent over the Asia Pacific region. These valuations have left some investors wondering if the market’s recent exuberance has moved too far, too fast. 

Weak Earnings and the Path Forward -
Adding to concerns, India’s corporate earnings have been underwhelming this year. A weak Q1 followed by an ongoing weak Q2 (more on this in one of our special reports on Q2FY25 result analysis) has raised questions about whether a recovery in the second half will materialise. Many brokerages have been lowering their earnings growth estimates for the Nifty, expecting growth between 4-7 per cent, which is a multi-year low. Much will depend on the performance during the festive season—a critical time for consumer-driven sectors. If companies can ride the wave of consumer demand, there may be a much-needed earnings recovery. 

Domestic Flows to the Rescue -
Despite FII outflows, domestic mutual funds have continued to provide solid support. Month-to-date, they have bought almost USD 10 billion worth of equities, nearly matching the USD 10 billion in FII sales. Mutual funds started with cash balances ranging between USD 16 – 18 billion, and with monthly inflows adding to this, domestic investors have effectively cushioned the market from what could have been a deeper correction. 

Setting Realistic Return Expectations -
The last year has undoubtedly been exciting, but it’s important to anchor expectations in reality. While Nifty’s one-year return might be thrilling, the longer-term returns tell a more tempered story. Over the past five years, Nifty has delivered a return of just 15 per cent. Looking further back, the median five-year return over 25 years is about 12 per cent, which is the long-term base rate for India. 

With a large number of new investors entering the market— many with little experience and facing the market’s volatility for the first time—there’s a risk of setting unrealistic expectations. The enthusiasm of recent entrants could quickly turn into disappointment if they expect outsized gains year after year. A more cautious approach, acknowledging that markets move in cycles, may serve them better in the long run, which is healthy for both the market as well as the investors. 

Samvat 2081: What Lies Ahead?
As we enter Samvat 2081, the Indian equity market stands at a critical juncture. The market has grown in size, and domestic money has become a powerful stabilising force, but risks remain. With India’s high valuations, weak earnings and FII outflows, the next year may test the resilience of retail investors. However, with India’s robust growth story, strong domestic support and structural reforms, the long-term outlook remains positive. 

It’s essential for investors to manage their expectations, remain cautious, and avoid euphoria. As the saying goes, “It’s better to lose money early on and learn caution than to get caught in market frenzy.” As we bid farewell to Samvat 2080 and look ahead to Samvat 2081, the question remains: Will the market continue its upward march, or are we in for a period of consolidation? We believe the market will now return to mean and give returns that match the long-term average. 

In the upcoming pages, we present a recommended portfolio of nine stocks with a total investment of ₹10,00,000. To maximize potential returns, we suggest investing in the same proportions as outlined in this model portfolio. 
 

3B Blackbio Dx Ltd   
CMP (₹): 1,360.00 

A Strategy For Fitness 

BSE CODE : 532067
Face Value : (₹)10 52
Wk High/Low : (₹)  1,550 / 660
Mcap Full : ( ₹ Cr.)  1,154.45 

Here is why 

• Strong focus on research and development while developing new products.
• Signing long-term contracts with large customers to provide stability and predictability to the business operations. 
   

3 B BlackBio Dx is engaged in design development, manufacturing and commercialisation of rapid tests, qPCR tests and NGS-based molecular diagnostic kits for reliable testing on patient samples. TRUPCR® is the company’s registered brand name for real-time PCR-based molecular diagnostic kits and TRUNGS® is the company’s registered brand name for NGS-based molecular testing kits. TRURAPID® is the registered brand name for lateral flow assays. 

TRUPCR assays have garnered widespread acceptance in more than 60 countries spanning the UK, Europe, the Middle East, APAC, LATAM and North America, including the United States and Canada. The company also has a representation in India in the field of agriculture business comprising crop protection products and public health products, bio products, micronutrients and mix fertilisers. It is thus well-diversified across various product chains with a leading edge in many of them. 

Financials
In Q1FY25, 3B BlackBio DX posted revenue of ₹19.43 crore, marking a 36.07 per cent increase compared to the previous year’s same quarter. The net profit after tax for Q1FY25 stood at ₹11.30 crore, reflecting a 56.76 per cent increase compared to the same quarter of the previous year. The company’s EBITDA margin (consolidated) stood at 47.30 per cent and the PAT margin stood at 39.17 per cent excluding other income. The company’s molecular diagnostics division has been delivering a 25 per cent increase in its revenue from the past few years. 

Valuation and Outlook With the company signing long-term contracts with large customers, this can be seen as a strategic move to provide stability and predictability to its business operations. By securing commitments for 2-3 years, the company is reducing uncertainty and mitigating risks associated with the fluctuating market conditions. Currently, the company has over 15 contracts already in place from which it is expected to transact business of 20 – 25 per cent for this financial year and the coming years. 

The demand for PCR and real-time PCR molecule molecular diagnostics market is expected to reach a market value of USD 7.5 billion by 2033. Cases of testing infectious diseases have increased due to increased urbanisation, changing food habits and respiratory infections, which have driven the demand for PCR testing. The company is also looking for options to acquire an entity engaged in a similar business area to post inorganic growth. 

It is also deploying some funds in the joint venture created in Manchester, UK, depending on the need. Additionally, the company’s research and development team is currently working on innovative digital PCR technology. This cuttingedge technology enables precise nucleic acid quantification, opening up new possibilities for healthcare and biotechnology applications. By leveraging digital PCR, the company aims to create valuable diagnostic tools that address critical challenges and drive advancements in disease detection, treatment monitoring and research. Digital PCR is expected to be launched by Q3FY25. 

Improvement in the Indian healthcare industry with high demand in medical tourism and compliance with international standards and guidelines will benefit the company in the long term. Additionally, it has expanded into new territories across Europe, Africa, Southeast Asia and the Middle East through strategic partnerships with channel partners. The company’s share is currently trading at a PE of 32.7 times, which is low when compared with its industry PE at 56.8 times. 

The price-to-book value (PBV) of the company is 5.29 times, which is also lower than the industry PBV. It has a healthy interest coverage ratio of 414 times. The PEG ratio of the company is 0.75, which looks attractive. In the last five years, the sales of the company have increased by CAGR of 23 per cent with a profit growth of 31 per cent. The company has also maintained a high ROCE and ROE. Given these parameters, our recommendation is BUY. 

Bharti Airtel Ltd 
CMP (₹): 1,669.00 

Making The Right Connections 

BSE CODE : 532454
Face Value (₹) : 5
52 Wk High/Low (₹) : 1,778.95 / 896.00
Mcap Full ( ₹Cr.) : 9,47,600 

Here is why 

• Bharti Airtel expects its ARPU to grow by 15 per cent in the next 12 months.
• The company is reportedly in talks to acquire Tata Play. The combined entity will dominate the DTH market, securing over 50 per cent market share. 
   

B harti Airtel is one of India’s leading telecommunications companies and ranks as the second-largest telecom service provider in the country. The company offers a wide range of services, such as mobile voice and data, broadband, digital TV, and enterprise solutions. On the India front, Bharti Airtel serves approximately 409 million mobile customers and over 30 million homes. It has 220 million monthly active users on digital platforms and 3,500+ enterprises, holding a 57 per cent market share in mobile services and 16 per cent in enterprise and home solutions. 

Internationally, Bharti Airtel operates in 14 African countries and two in South Asia, reaching over 150 million customers with 3.3 million retail touch-points. Its Airtel Money service has recorded a transaction value of USD 112 billion. The company has invested over ₹1.7 lakh crore in spectrum, supported by seven submarine cables, over 440,000 km of domestic fibre, and 355,000 towers. The company also operates 12 data centres and 120 edge data centres, ensuring reliable connectivity. 

The overall market share of the company is 37.9 per cent, making it the second-largest telecommunications provider in India. The other market shares are: 

The company’s current average revenue per user (ARPU) stands at ₹211, with a CAGR of 70 per cent over the last five years, making it the highest in the industry. The company is targeting an ARPU of ₹300. In the high-end homes segment, the ARPU is ₹1,600, with the highest growth rate of 20 per cent CAGR over the last five years. The mid-market segment contributes the largest share, with 530 million users and an ARPU of ₹230, growing at a CAGR of 8 per cent over the same period. 

Financials In Q1FY25, Bharti Airtel reported revenues of ₹38,506 crore, up 2.8 per cent YoY, with an EBITDA margin of 51.8 per cent, EBIT margin of 24.3 per cent and a net profit of ₹2,925 crore. For Q2FY25, the revenue growth is expected to moderate at 3.7 per cent QoQ and 4.7 per cent YoY. The digital vertical is likely to maintain strong growth momentum while home services is expected to pick up pace as Bharti Airtel expands its fixed wireless access (FWA) business to around 30 cities. 

Valuation and Outlook Bharti Airtel’s non-mobile contribution currently stands at 22 per cent, with the management expecting growth in the coming years. The company is reportedly in talks to acquire Tata Play, which holds a 32.7 per cent market share with 20.77 million subscribers. Airtel Digital TV, with a 28.5 per cent market share, could combine with Tata Play to dominate the DTH market, securing over 50 per cent market share. The telecom industry has benefited from tariff hikes, improving financial health amid ongoing network capex. 

Bharti Airtel is expected to see QoQ growth from rising mobile and digital revenue, a strong service mix and higher ARPU, which is projected to grow by 15 per cent in the next 12 months. With strong customer additions and 2G to 4G conversions, Bharti Airtel is also focusing on rural 5G, currently covering 1.4 lakh villages, with further growth potential in the rural areas. 

We believe Bharti Airtel will continue to gain market share over the next year, driven by healthy margins, stronger subscriber growth, higher 4G and 5G conversions, and minimal capex needs. With a strong digital portfolio and rising per-user data consumption, the company is focused on increasing the ARPU to ₹300. The management is confident of achieving industryleading growth, supported by robust rural penetration and a superior services portfolio. The capex will remain moderate, with Q1FY25 capex at ₹8,007 crore. 

Computer Age Management Services Ltd 
CMP (₹): 4,354.00 

Partner In Progress 

BSE CODE : 543232
Face Value (₹) : 10 52
Wk High/Low (₹) : 4,970 / 2,230
Mcap Full (₹Cr.) : 21,427 

Here is why 

• Rapid retail participation in mutual funds.
• Continuous investments in technology and talent are expected to drive future performance. 
   

The company is a leading mutual funds transfer agency, offering a comprehensive range of services that include investor services, distributor services, and support for asset management companies (AMCs). It is India’s largest registrar and transfer agent for mutual funds, holding a dominant market share of approximately 69 per cent. The company operates on a fee-based model, charging a fixed fee that is tied to the assets under management (AUM) of the mutual fund companies it serves. 

As the AUM of its clients grows, so does the company’s revenue. It currently provides services to nine of the 15 largest mutual funds in the country, and its top 10 mutual fund clients have maintained an average relationship of around 20 years, highlighting its long-standing and trusted partnerships within the industry. With a robust physical network spanning 280 service centres across 25 states and five Union Territories, the company maintains a strong presence throughout India. 

In Q2FY24, the company's revenue mix highlighted a strong reliance on non-mutual fund services, which accounted for 73 per cent of the total revenue. Mutual fund non-assets-based services contributed 14%, while assets-based services within the mutual fund segment comprised 13 per cent. 

Financials In Q1FY25, on a consolidated basis, the company reported revenue of ₹331 crore, representing a 26.8 per cent increase from ₹261 crore in Q1FY24. The EBITDA grew by 36.3 per cent to ₹150 crore, up from ₹110 crore in Q1FY24. Its net profit rose by 40 per cent to ₹107 crore, compared to ₹76 crore in Q1FY24. For FY24, the company’s consolidated results showed revenue of ₹1,137 crore, a 16.9 per cent increase from ₹972 crore in FY23. 

The EBITDA grew by 19.9 per cent to ₹505 crore, up from 421 crore in FY23. Its net profit surged by 23 per cent to ₹351 crore, compared to ₹285 crore in FY23. Furthermore, the company’s key financial metrics include a ROCE of 48.4 per cent, ROE of 39.8 per cent and a PEG ratio of 2.78. In terms of liquidity and solvency, the company has a current ratio of 1.92, an interest coverage ratio of 62 times, and a debt-to-equity ratio of 0.11. 

Valuation and Outlook Rapid rise in retail participation in mutual funds has driven remarkable growth in the industry, leading to historic highs and new milestones. In FY 2024, gross inflows from individual investors reached ₹13 lakh crore, marking a 17 per cent increase compared to FY 2023. This surge in investment is complemented by a significant rise in SIP (systematic investment plan) registrations, which soared to 4.3 crore, reflecting a remarkable 70 per cent growth over the previous fiscal year. 

This robust retail interest highlights the increasing confidence of investors in mutual funds as a viable investment option, contributing to the overall expansion of the financial services landscape. A strategic partnership has been established to rebuild the registrar and transfer agent (RTA) platform, focusing on enhancing efficiency and improving risk management. The project is expected to take 4 – 5 years, featuring phased implementation to facilitate thorough testing at each stage. A new facility was launched and became operational in GIFT City on October 18, 2024, with an expanded staff. 

The company continues to drive the key levers of value creation by focusing on several strategic initiatives. It aims to build depth of expertise through leadership and talent infusion, sustaining its leadership position across various business segments. Additionally, the company seeks to deepen differentiation by introducing first-to-market innovations while ensuring it is future-ready through platform augmentation. These efforts are geared towards accelerating growth momentum and enhancing its overall performance. 

EMS Ltd. 
CMP (₹): 749.00 

Creating Value Out Of Expertise 

BSE CODE : 543983
Face Value (₹) : 10 52
Wk High/Low (₹) : 935/289
Mcap Full (₹Cr.) : 4,135 

Here is why 

• Domain specialisation in handling water treatment processes.
• Government’s focus on wastewater treatment to create more contracts. 
   

EMS provides solutions for sewerage systems, water supply, water and waste treatment plants, electrical transmission, roads, and related services. It also operates and maintains water and wastewater treatment plants and water supply projects for government bodies. The company’s wastewater treatment plants include sewage treatment plants with sewage networks and common effluent treatment plants. The water supply projects involve water treatment plants, pumping stations and pipeline installations for water supply. Additionally, the company manufactures products for its construction projects. 

Most of their sewage treatment plants and common effluent treatment plants follow zero liquid discharge standards, allowing treated water to be reused for gardening, cleaning, cooling and industrial processes. In addition to handling projects on its own, the company also forms joint ventures with other infrastructure and construction firms to bid for and complete projects together. When successful, the company works with its joint venture partner, leveraging technical skills and qualifications to complete the project effectively. 

Financials
In Q1FY25, the company reported its revenue at ₹206.28 crore, which grew by 49 per cent YoY from ₹137.97 crore while sequentially decreasing by around 15 per cent. The PBITD excluding other income jumped by around 55 per cent YoY and stood at ₹50.28 crore from ₹32.22 crore, although sequentially decreasing by almost 25 per cent. The net profit jumped significantly by 63 per cent and stood at ₹37.16 crore compared to ₹22.78 crore during the same quarter of the previous FY, while on a sequential basis it declined by around 22 per cent. The EBITDA margin increased on a sequential basis by 402 bps to 24.37 per cent during the previous quarter. The net profit margin has also increased by almost 910 bps to 18.02 per cent. 

Valuation and Outlook The company anticipates a revenue growth of 25 – 30 per cent for FY25, targeting approximately ₹1,000 crore. It remains committed to maintaining strong profit margins while expanding its order book and exploring new project opportunities. With an unexecuted order book exceeding ₹1,800 crore, the management is confident in sustaining the EBITDA margins between 24 – 26 per cent, focusing on projects that support these margins, especially through the hybrid annuity model. 

To the benefit of the company, the government has launched major wastewater treatment initiatives under programmes like Namami Gange and Swachh Bharat Mission, which aim to reduce water pollution and promote the reuse of water for industrial and agricultural purposes. Additionally, the company has acquired a manufacturing facility in Fatehpur, Uttar Pradesh, to use as collateral for bank financing. The government’s public-private-partnership (PPP) model, particularly with regards to the hybrid annuity model (HAM), has attracted significant investments, and more projects are expected under HAM and EPC. 

Currently, the company is trading at a PE of 26 times while the industry PE stands at 27 times and its three-year median PE is also 27 times. In terms of price-to-book, it is currently at 5.55 times. From a valuation perspective, the company appears fairly valued, considering its niche position and the growth in water and waste management sector. 

In the past, the company also worked on power supply and civil construction projects. Recently, it has built a strong reputation in water supply and treatment, leading to repeat orders from various government departments. The company is focused on maintaining strong profit margins while exploring opportunities in road EPC, without losing focus on the water sector. Going forward, it is expected that the company will benefit from the overall growth of the industry. Given the operational efficiency and the partnership model that it uses to bag contracts, the company is likely to grow at a steady clip. 

Hindustan Petroleum Corporation Ltd. 

CMP (₹): 382.00 

EXPANSION IS THE KEY 

BSE CODE : 500104
Face Value (₹) : 10 52
Wk High/Low (₹) : 457.20 / 159.58
Mcap Full (₹Cr.) : 79,200 

Here is why 

• The company is exploring new business segments.
• With increasing GDP, the demand for petroleum products is on the rise. 
   

Hindustan Petroleum Corporation Limited (HPCL) is a leading oil refining and marketing company in India. ONGC holds a 54.90 per cent equity stake in HPCL, which is the second-largest company in India in both the LPG and retail network sectors. The company has a strong presence in the downstream petroleum sector with refineries, LPG bottling plants, and a vast marketing network of installations, depots and retail outlets. HPCL operates across four key business segments. 

The first is its existing business area, which encompasses the core operations of refining and marketing petroleum products, including motor spirit (MS), high-speed diesel (HSD), autoliquefied petroleum gas (LPG), lubricants, industrial and consumer products, and aviation turbine fuel (ATF). The second segment is the adjacent business area, which consists of associated businesses that extend HPCL’s existing operations, such as roadside amenities, convenience stores, food stalls and car washes at retail outlets. 

The third segment is a new business area, where HPCL is expanding its footprint into sectors like petrochemicals, liquefied natural gas (LNG), logistic services, and retail chains at non-fuel retail locations. Lastly, the emerging business area includes opportunities in future technologies such as hydrogen and fuel cells. HPCL’s current refining capacity represents 13.44 per cent of India’s total refining capacity. Given the expansion projects in the pipeline, this share is expected to reach approximately 16.9 per cent. HPCL holds a 20.29 per cent domestic market share in petroleum products, making it a major player in the downstream sector. 

The company’s total refining capacity, including joint ventures, is 34.5 MMTPA, which is expected to reach 45.3 MMTPA by 2027-28. HPCL boasts the second-largest retail network in India with 22,022 retail outlets as of March 2024. This network is crucial for distributing HPCL’s products to consumers across the country. HPCL is also the second-largest LPG marketer in India, serving over 9.6 crore LPG customers. It owns and operates the second-largest, cross-country product pipeline network in India, spanning over 5,134 km. This network is essential for the efficient transportation of petroleum products. 

Financials In Q1FY25, the company saw a marginal increase in its top-line on a yearly basis. Its long-term debt decreased from ₹14,342 crore in FY 2023-24 to ₹12,661 crore in Q1FY25. The long-term debt equity ratio decreased significantly from 2.80 in FY24 to 0.69 in Q1FY25. This signifies a much healthier financial position with lower reliance on debt financing. HPCL plans to invest a significant ₹77,000 crore (approximately USD 9.3 billion) from FY24 to FY28. This substantial investment demonstrates HPCL’s commitment to growth and expansion across its various business segments. 

Valuation and Outlook India’s economy grew significantly in FY 2023-24, driving the demand for petroleum products. Petrol consumption reached a 10-year high. As the GDP continues to grow, the demand for petroleum products keeps on increasing. HPCL is looking to expand its presence in the overseas markets. The company is investing in renewable energy projects to capitalise on the growing demand for cleaner energy. There is a plan to invest in wind and solar power generation with a target of 10 GW by 2030. 

HPCL is actively expanding in the natural gas sector, including the construction of a 5 MMTPA LNG re-gasification terminal at Chhara Port in Gujarat. The company is currently trading at a PE ratio of 8.94 times, which suggests potential undervaluation compared to the industry average of 13.4 times. Its PEG ratio stands at 0.47 times, highlighting strong growth prospects relative to its price, as values below one typically indicate undervaluation. Additionally, the company has maintained a healthy dividend payout of over 25 per cent, showing a commitment to returning value to shareholders while still supporting growth. 

Jubilant Foodworks Ltd 
CMP (₹): 600.00 

The Right Taste For Growth 

BSE CODE : 533155
Face Value (₹) : 2
52 Wk High/Low (₹) : 715 / 421
Mcap Full (₹Cr.) : 39,251 

Here is why 

• Like-for-like growth to further improve in the quarters ahead.
• The company targets to open 3,000+ Domino’s Pizza stores in India. 
   

Jubilant FoodWorks Limited (JFL) is part of the Jubilant Bhartia Group and is one of India’s largest food service companies. It holds the master franchise rights for two international brands, Domino’s Pizza and Dunkin’ Donuts, addressing two different food market segments. It has recently added Popeyes in its food portfolio. The company has also launched its first home-grown brand – Hong’s Kitchen in the Chinese cuisine segment. In India, it owns 1,928+ stores of Domino’s Pizza across 407 cities, 25 stores of Dunkin’ Donuts and 32 stores of Popeyes. 

It also has 22 stores of its own brand Hong’s Kitchen. The company has 48 Domino’s Pizza stores in Sri Lanka and 17 such stores in Bangladesh. Further, it owns eight supply chain centres and four distribution centres across India to fulfil the raw material demand. In 9MFY24, the company opened 144 stores across its various brands and has partnered with IRCTC to deliver hot pizzas directly to customers’ train seats at selected stations. Orders can be placed through the Domino’s Pizza app, as well as the IRCTC app and website. This service is available at 143 railway stations. 

Financials
In Q1FY25, on a consolidated basis, the company reported revenue of ₹1,933 crore, representing a 44 per cent increase from ₹1,335 crore in Q1FY24. The EBITDA grew by 61 per cent to ₹380 crore, up from ₹235 crore in Q1FY24. The net profit rose by 100 per cent to ₹58 crore, compared to ₹29 crore in Q1FY24. Like-for-like (LFL) growth turned positive in Q4FY24 and rose to 3 per cent in Q1FY25, driven by double-digit growth in delivery. The management expects LFL growth to further improve in the quarters ahead. 

For FY24, the company’s consolidated results showed revenue of ₹5,654 crore, a 9.6 per cent increase from ₹5,158 crore in FY23. The EBITDA grew by 7.7 per cent to ₹1,248 crore, up from ₹1,158 crore in FY23. Its net profit surged by 157 per cent to ₹60.30 crore compared to ₹23.39 crore in FY23. Furthermore, the company’s key financial metrics include a ROCE of 11.2 per cent and ROE of 13.0 per cent. In terms of liquidity and solvency, the company has a current ratio of 0.55, an interest coverage ratio of 1.93 times, and a debt-to-equity ratio of 1.94 times. 

Valuation and Outlook The company has exclusive rights to develop and operate Domino’s Pizza as well as Dunkin Donuts restaurants as well as Popeyes, which was launched in India in January 2022 at Bengaluru. This brand competes with KFC. In February 2024, JFL acquired a 93.92 per cent equity stake in DP Eurasia for approximately ₹1,195 crore for its Turkey, Azerbaijan and Georgia operations, and around `34 crore for its Bangladesh business. The company also owns a home-grown brand, Coffy. 

DP Eurasia, listed on the London Stock Exchange, is an exclusive master franchisee of the Domino’s Pizza brand in Turkey, Azerbaijan and Georgia. As of October 2023, it operates 694 stores (678 in Turkey, 10 in Azerbaijan and six in Georgia) and employs an asset-light model. Acquisition of DP Eurasia (DPEU) has put JFL on track to become a leading emerging markets’ food service company with 3,000 stores across six markets and a portfolio of five brands. JFL is focusing to double up on Domino’s Pizza franchise and scale up Popeyes. 

It targets to open 3,000+ Domino’s Pizza stores in India. After pioneering the 30-minute delivery promise in 2004, JFL introduced a 20-minute delivery promise in Bengaluru in FY23. Additionally, in FY23, the company enrolled over 13.6 million loyalty members for Domino’s Pizza ‘Cheesy Rewards’, which contributed to 45 per cent of the orders in March 2023. The company also launched its first regional menu during the same period. Given the fact that both urban and rural India consumers now favour fast food, the brands owned by the company have the potential to prosper in the coming years. 

Multi Commodity Exchange Of India Ltd. 
CMP (₹): 6,478.00 

The Monopoly Factor 

BSE CODE : 534091
Face Value (₹) : 10 52
Wk High/Low (₹) : 6,808.90 / 2,162.05
Mcap Full (₹Cr.) : 32,956.17 

Here is why 

• Betting on monopoly position 
• Strategic initiatives boost its growth potential 
   

Multi Commodity Exchange of India Limited (MCX) is a commodity derivatives exchange that facilitates online trading of commodity derivatives transactions, thereby providing a platform for price discovery and risk management. It started operations in November 2003 and operates under the regulatory framework of the Securities and Exchange Board of India (SEBI). MCX offers trading in commodity derivative contracts across varied segments. 

This includes bullion, industrial metals, energy and agricultural commodities, as also on indices constituted from these contracts. It is India’s first platform to introduce commodity options and futures contracts on bullion, base metals and energy indices. The exchange has forged strategic alliances with various international exchanges, as well as Indian and international trade associations. 

Financials
In Q2FY25, on a consolidated basis, its revenue increase by 72.96 per cent YoY to ₹285.58 crore compared to ₹165.11 crore from the previous year’s same quarter. On a sequential basis, the revenue increased by 21.85 per cent. The PBIDT excluding other income increased to ₹179.44 crore as compared to negative ₹28.70 crore from the previous year’s same quarter, while sequentially increasing by 35.37 per cent. Its profit after tax (PAT) stood at ₹153.18 crore compared to loss of ₹18.05 crore, while sequentially increasing by 38.54 per cent from ₹110.57 crore. 

The USPs The company’s biggest advantage is its monopoly as it has 95.93 per cent market share. It commanded 95.9 per cent share in the commodity future market in FY24 and controls 100 per cent share in precious metals and stones, 99.61 per cent in energy and 99.80 per cent in base metals with the exception of agriculture commodities where it commands a share of 2.65 per cent. The company is the seventh-largest by the number of contracts trade in commodity derivatives exchange in the world. 

It is the third-largest in commodity options exchange in the world. In 2023, the global commodity derivatives markets saw an increase in trading volumes across all segments, with energy leading the way, followed by agriculture, precious metals and non-precious metals. MCX in its FY24 annual report had said that with the potential boost in commodity demand following an economic upswing, there could be new opportunities for the company to innovate and introduce new derivative products. 

The objective is to fulfil the requirements of stakeholders in both agricultural and non-agricultural commodities. MCX’s strategic direction has increased, given the company’s initiatives such as launching new products like monthly series and index options, enhancing its technology stack, and focusing on boosting institutional participation. Its hedging activity has added a growth trigger over the past one year. MCX plans to grow volumes by launching new products. 

These will include serial contracts, index options, 10 gram monthly gold futures, cotton seed wash oil, crude sunflower oil contracts and many more in the pipeline. After future volumes on these products exceed the volume threshold of ₹1,000 crore, MCX will launch options contracts. The exchange plans to launch new products, including monthly gold options on November 11. This will also include weekly index options and other commodity-related futures and options. 

These offerings could serve as growth catalysts moving forward and the company anticipates that the launches will be accelerated with the arrival of the new CEO. MCX is currently trading at a PE of 98.2 times as against the industry PE of 63.7 times, three-year median PE of 50.2 times and one- year edian PE of 246.8 times. In the last three years, the company has delivered average ROE of 9.14 per cent and ROCE of 11.6 per cent. Taking into account the company’s business and its market, we recommend BUY. 

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