TOP 1000 Companies Economic Review For The First Half of 2022-2023

TOP 1000 Companies Economic Review For The First Half of 2022-2023 

Special Supplement 

Methodology 

We bring you the Vital Financial Data of Top 1,000 companies categorised by market capitalisation, as these are the stocks where liquidity is higher, and they represent a substantial portion of the trade. These companies are then categorised into 24 sectors and sub-sectors to provide you with an insight into the general trend of the financial performance for the first half of FY23. The raw data has been sourced from Accord Fintech Pvt Ltd (Ace Equity). The focus of financial data was more on revenue and profitability as many companies do not provide a balance sheet on a half-yearly basis. We hope that our readers get an overall perspective of the different sectors so that they are able to take stock and sectoral calls effectively! 

Compiled By - Shashikant, Armaan Madhani, Kaustubh Bhosale, Mandar Wagh, Henil Shah, Kiran Shroff , Bhavya Rathod, Shruti Dahiwal, Vishwesh Sanas, Tushar Jain, Praveenkumar Yadav, Prajwal Patil [EasyDNNnews:PaidContentStart]

Interview 

Pawan Kumar Director (Commercial) Indraprastha Gas Limited 

“Policy reforms have been undertaken to attract investments in gas infrastructure” 

What is your outlook on the Indian natural gas industry and the city gas distribution sector?

Let me first highlight the natural gas scenario in India. At present, India is the world’s 13th largest natural gas consumer and fourth-largest LNG importer and the government has a set an ambitious target for natural gas to account for 15 per cent of India’s energy mix, up from 6 per cent in FY15. Natural gas is 50-60 per cent less polluting than coal and is accepted to work as the transition fuel that can get India to its ambitious goal of net-zero emissions by 2070, when the nation aspires to be fully powered by renewable energy. Natural gas demand is expected to grow robustly as policy impetus and rising domestic production, coupled with LNG imports, expand the market from its current levels. 

As per the base case, IEA has projected that the demand for natural gas in the country would nearly double to 320-350 MMSMCD in 2030 from approximately 180 MMSCMD in 2022. Domestic production of natural gas is projected to rise by 50 per cent to 131 MMSCMD in 2030. Gas imports will double to nearly 190 MMSCMD by 2030. As of FY22, fertiliser companies accounted for 30 per cent of the gas consumption of 180 MMSCMD followed by CGD (20 per cent), power producers (15 per cent), refinery and petrochemical companies (14 per cent) and others (21 per cent). By FY30, refinery and petrochemical units will account for 33 per cent, followed by CGD (30 per cent), fertiliser units (17 per cent), power companies (8 per cent) and others (12 per cent). 

Credible information suggests that by February 2026, India will invest Rs 3 lakh crore or USD 40 billion to expand gas infrastructure — pipelines, port-based LNG (liquefied natural gas) re-gasification terminals, city gas distribution (CGD) networks and gas exploration projects. With the aim of increasing the share of natural gas in our energy mix, there is focus on developing natural gas infrastructure and implementing ‘One Nation-One Gas’ grid. It is envisaged to more than double the gas pipeline network from 16,000 km in FY19 to 34,600 km by 2024. The number of LNG import terminals will increase from five in 2016 to 10 by 2024 with capacity expanding from 35 million tonnes per annum (MTPA) to 62 MTPA. Policy reforms have been undertaken to attract investments in gas infrastructure. One of the steps involved is to allow 100 per cent foreign direct investment in infrastructure related to natural gas, LNG re-gasification and exploration and production. Further, India may more than double its exploration area of oil and gas to 0.5 million sq. km by 2025 and to 1 million sq. km by 2030 with a view to increase the domestic output. The government is planning to set up around 5,000 compressed biogas (CBG) plants by 2024 to boost domestic gas production. 

Regulatory impetus in the form of unified tariff regulations for natural gas pipelines, gas exchange regulations, setting up of transmission system operator (TSO) and marketing freedom to producers are the other welcome steps that will greatly support the development of a robust gas market in India. Having said this , there is still a long way to go for India as even now the 6.72 per cent share of gas in India’s primary energy mix is way lower than US (34.82 per cent, 2,279 MMSCMD), Russia (52.31 per cent, 1,126 MMSCMD) and China (8.18 per cent, 906 MMSCMD). Gas accounts for more than 50 per cent of the energy mix of gas-producing countries such as Iran, the UAE and Egypt. 

As far as CGD is concerned, the regulatory push coupled with government policy support for this sector is noticeable and a welcome step for the entire country. Post the 11th round , 297 geographical areas (GAs) covering 98 per cent of the country’s population and 88 per cent area will get access to PNG. Piped natural gas (PNG) connections will increase from 10 million in November 2022 to 60 million in 2030. The number of compressed natural gas (CNG) stations will rise from ~5,000 presently to 10,000 by 2030. More than 40 CGD companies are operational in India as on date against a handful of PSUs a few years back. 

Moreover, priority allocation of domestic gas for the compressed natural gas and domestic piped natural gas (PNG) segments along with a ban on polluting fuels such as furnace oil (FO) and pet coke will push the demand upward. The city gas distribution (CGD) network in India is projected to grow at a CAGR of 10 per cent during 2022-2030. Growth in the country’s CGD market will be reinforced by easy availability and accessibility of cost-competitive natural gas in respect to any other liquid fuel. As per PNGRB estimates, the Indian CGD market is expected to reach 25,570 MMSCM (million metric standard cubic metre) by 2030 against 9,223 MMSCM annual consumption in 2020. 

The CGD sector is expected to witness investments of up to Rs 900 billion in the next seven to eight years as more and more regions of the country are brought under the CGD network. Clearly, the sector provides significant opportunity to all stakeholders including contractors, investors, and equipment, material and technology providers. The PNG segment, particularly the commercial and industrial segment, is expected to see a shift from alternative fuels as well because of better competitiveness in comparison with liquefied petroleum gas and the ban on FO in the many regions due to air pollution concerns. So far the CNG segment is deeply underpenetrated, with less than 10 per cent vehicles currently running on CNG (4 million against 50 million four-wheelers plying on road). 

After implementation of the BS VI emission norms, interest from OEMs, PLI scheme and cost economics have caused a surge in the sale of CNG-driven automobiles. Major car manufacturers like Suzuki India and Tata Motors have increased the number of their CNG variant vehicles in India in recent times. There are nearly two dozen CNG models available now compared to just eight in 2015. In next few years we anticipate that 20-25% vehicles being sold in the country will be CNG-driven. Post lockdown, CGD volumes have witnessed a significant improvement with the easing of restrictions and the volume growth trend across all CGDs is continuing. We are confident that the momentum will continue further. 

In recent developments, the Kirit Parikh Committee has recommended a mechanism of floor and ceiling price for natural gas produced from legacy fields of state-owned producers to moderate input price for CNG and fertiliser, which will further stabilise the volatility in gas cost, particularly for the CGD sector. Further, in order to incentivise additional production from a new well or well intervention in the nomination blocks, the committee has also recommended paying the state-owned producers a premium of 20 per cent over such price for any new gas production they add from old fields. This will encourage growth in domestic production of natural gas in the long run and further strengthen the fundamentals of natural gas industry and the CGD sector in particular in the country. 

Could you throw light on your Q2FY23 financial performance?

The company maintained the growth momentum in spite of several headwinds and posted robust numbers. IGL has also achieved its highest ever sale volume of 8.09 MMSCMD in Q2FY23. In Q2FY23, IGL has achieved net turnover of Rs 3,540 crore as against Rs 1,820 crore in the same quarter of the previous financial year, registering 95 per cent quarter-toquarter growth in revenue. Despite substantial increase in gas cost, profit after tax for Q2FY23 has been at Rs 416 crores as against Rs 401 crore in Q2FY22. Aided by a robust gas sourcing portfolio, we were able to attain targeted per unit metrics and our EBDITA was in the range of Rs 7-8 per scm. During Q2FY23, IGL has added capex of Rs 226 crore in pursuance of its ongoing expansion projects. 

What are your ongoing as well as future capex plans?

We plan to have reach a volume of 10 MMSCMD, 1,000 CNG stations, 10,000 I and C customers and 30 lakh D- PNG customers by 2025. For this we plan to have to invest Rs 1,000-1,200 crore per year in our core CGD assets in the ratio of 60:40 for existing and new geographical areas with IGL in Delhi, UP, Haryana and Rajasthan. Apart from this the other major ongoing capex plans of IGL include: 

•  Venturing into the manufacturing of gas meters, compressors and Type IV cylinders n Setting up of CBG-MSW-based integrated bio CNG plant

•  Setting up of LNG stations n Inorganic growth through acquisition of existing CGD entities

•  Setting up of EV infrastructure (fixed EV chargers and battery swapping facilities)

•  Tie-ups with fleet operators and STUs for long and short haul CNG-based transportation n Setting up of green hydrogen plants. 

The major future diversification plans of IGL include:

•  Venturing into the petrochemicals business n Acquisition or investments in stressed, NCLT, renewable energy company

•  Acquisition or investments in entities involved in the EV sector

•  Green hydrogen generation plant n Tie-up with EV, LNG or CNG-based technology or logistics companies for inter-state transportation

•  Setting up of wayside amenities along with CNG, LNG or EV facilities n Establishing an investment fund for participating in start-ups or innovation-based businesses. 

Can you highlight your key growth triggers for the medium to long term? What are the new strategic and business opportunities that IGL is currently focusing on? 

•  IGL expects to maintain its growth momentum in the medium and long run through:
•  Greater CNG adoption, BS VI retrofitment, new models from OEMs both CV and PV
•  Priority NG allocation to the CCD sector along with stability of gas prices
•  The pandemic has actually acted in our favour as the contact-less delivery of PNG was appreciated in urban centres like Delhi-NCR. Hassle-free, contactless, safer nature of PNG is its USP.
•  Long-term agreement with STUs-DTC, UPSRTC n PLI scheme for CNG automobile sector
•  Opening up of hospitality, tourism and IT sector and offices
•  Ban on older diesel vehicles, policy support with GRAP and CAQM mandate for PNG and CNG.
•  Long haul, interstate transport due to better availability of CNG fuel
•  Higher conversion and CNG vehicle addition of 16,000 per month
•  DG conversion and ban on polluting fuels
•  Market penetration in new GAs of Kanpur, Kaithal and Ajmer to their full potential
•  Inorganic growth through acquisition of existing CGD entities.

LNG plant inspection by Director Commercial at Ajeymeru palra in Ajmer GA 

At the moment, what are your top five strategic priorities?

•  In the existing business environment, the top five strategic priorities of IGL are:
•  Developing a robust gas sourcing portfolio to support volume growth n Balancing CNG ecosystem growth with sustainable shareholder returns
•  Maintaining per unit economics of EBDITA to support capex requirements
•  Expansion of existing CGD footprint through organic and inorganic growth with 20 per cent revenue share
•  Diversification into renewable energy or new businesses outside the CGD sector. 

What is your earnings’ outlook for H1FY23?

H1 marked a robust performance with growth in volume and profits alike. IGL has achieved its highest ever sale volume of 7.99 MMSCMD in the first half of FY22-23. We clocked a net turnover of Rs 6,723 crore as against Rs 3,069 crore in H1FY22, thereby registering 119 per cent growth in revenue YoY. PAT for H1FY23 was at Rs 837 crore as against Rs 645 crore in H1FY22, registering a growth of 30 per cent YoY. This was our highest ever first-half yearly PAT for IGL. Despite substantial increase in input gas cost, IGL has maintained EBIDTA of Rs 1,145 crore in H1FY23 as against Rs 911 crore in H1FY22, thus showing growth of 26 per cent over the previous year’s corresponding period. The company has added capex of Rs 540 crore during the first half of FY 2022-23 in pursuance of its ongoing expansion projects.

Interview 

Expanding and Evolving with the Times 

Rajneesh Bansal
Managing Director, Paul Merchants Limited 

When it comes to financial and travel services, the company banks on its wide network and years of experience to provide the best 

Paul Merchants Ltd. is a public limited company with its scrips listed on the Bombay Stock Exchange (BSE). The company is a large conglomerate and has diversified interests in various fields like foreign exchange, tours, and travels and international money transfer and the group as a whole undertakes gold loan, domestic money transfer, prepaid cards and insurance services. Whether travelling abroad or sending money for overseas education, people need foreign exchange solutions at competitive rates and in the quickest way. As a leading foreign exchange provider in India, Paul Merchants provides complete transparency in all the types of transactions through its trusted network. 

“Many Indians aspire to pursue their education in foreign universities and at Paul Merchants we have made it convenient for them by providing end-to-end services from sending money abroad to booking their tickets or getting an insurance policy. We are the most preferred choice of this segment,” says Rajneesh Bansal, Managing Director, Paul Merchants. For the past three decades, the group has been providing world-class services to its customers across the globe. “Paul Merchants is a firm believer in complete compliance to regulatory framework, which plays a significant role in making customers feel at ease and gives them comfort while availing any services.” 

“Technology has been incorporated into almost every division of our operations, allowing us to develop new solutions that meet the needs of all stakeholders. The organisation always works with the highest standards, cutting-edge technologies and tools in order to develop its processes effectively and efficiently for a better customer experience. The company has an unblemished track record and is the most trusted brand for over 3 million customers,” he adds. “The financial service sector is the most evolving sector and as one of the fastest growing financial companies, we believe that a responsible business must have a self-regulating and corporate governance framework in place to ensure that ethical standards and transparency with consumers and business partners are maintained,” he further states. 

“Whatever we do as a company, our actions will undoubtedly have an impact on all aspects of society, and it is our holy duty to accept responsibility for that impact. Our fundamental strategy for expansion has been to build trust and maintain an unblemished track record. Paul Merchants has always put its customers first, and their confidence in us has allowed us to provide the highest quality services,” Bansal adds. The group has over 175+ branches and more than 1,000 employees spread across the country from Leh to Cochin and has a network of over 8,000 agent partners who help in spreading the company’s wings even to the remotest part of the country. 

“We are committed to on-time service delivery that meets all client requirements. The secret of our success lies in localised and curated services to match customer expectations,” Bansal says. Paul Merchants has over the years evolved through technology adoption and streamlined processes. The group has been working incessantly towards digital transformation of its products and services. “At Paul Merchants Group, many of our services are now digital. Our recent additions include a fully functional payment app, Paulpay, with an integrated Rupay prepaid card, a B2B insurance portal called Coverpay and a fully automated ERP system for foreign exchange business,” Bansal informs. 

The group has its foundation well-rooted with multiple regulatory approvals and licenses which includes an AD-II category license, an NBFC license, Prepaid Instrument License, IRDAI Corporate Agency License, etc. Recently, Paul Merchants Finance got a new core banking system for its gold loan services. This new system will increase the business efficiencies, provide faster services, improve the overall customer experience journey, and will help to improve the speed at which newer products and schemes can be launched. The new system will provide faster processing of loans, payments and data analytics. 

The wide range of products offered by the company makes it a one-stop shop solution for all financial and travel services. It has been a constant endeavour of the company to touch every single section of the society with its CSR programmes. Paul Merchants has made significant contributions towards education, skill development, health care and eradicating hunger and poverty. “The company’s CSR projects greatly influence people’s lives and benefit the general public at large. All of our CSR initiatives are designed to have a broad influence on the community, providing them with the help they need for a better life,” Bansal states.
 

Agriculture

The global pandemic and the subsequent lockdowns have caused a disquieting degree of turmoil and uncertainty in the country. As a result, the year presented a variety of problems for the firms, including significant disruptions in the demand and supply environments. These challenges, however, also proved to be a resilience barometer for different sectors and businesses. While most sectors witnessed a sharp contraction in the output, the agriculture sector was resilient and grew at 3.6 per cent during the year. Agriculture, which accounts for 25 per cent of the nation’s GDP and is a crucial sector of the Indian economy, offers considerable employment possibilities to the rural population, food security for the populace, and as a result, a sizable domestic market for manufactured goods. 

Up to 13 per cent of India’s exports are also accounted for by this sector. Initially agricultural activity was confined to the production of food grains and a few cash crops such as cotton, sugarcane and jute. The agricultural industry has undergone a striking transformation in recent years with a widening variety of products and improvements in technology and infrastructure, including cold storage, refrigerated transportation, packaging, quality control, etc. With the entrance of new technology like IT and biotechnology, this industry is now ready to take a big leap. Agriculture and related industries have had erratic growth over the years. 

Financial Highlights

The total market cap of the industry is ₹ 164,340.99 crore. Companies like Triveni Engineering and Industries, E.I.D. Parry (India) and Tata Coffee have delivered astounding returns on a year-on-year basis. Shree Renuka Sugars, E.I.D Parry (India) and CCL Products (India) delivered the highest net profit of ₹ 4,140 crore, ₹ 18,474 crore and ₹ 1,015 crore, respectively, in the first half of this financial year as compared to the same period last year. The profit after tax (PAT) has been more than 100 per cent. The top companies delivering PAT growth were Triveni Engineering and Industries surging 922 per cent, Tata Coffee soaring 113 per cent and Bannari Amman Sugars zooming 101 per cent. 

Exports and Government Initiatives

Crop yield has increased with the adoption of hybrid seeds and also with increased cultivation of disease and pest-resistant varieties. Agriculture and allied activities recorded a growth rate of 3.9 per cent in FY 2021-22. India’s agricultural and processed food products exports stood at ₹ 49.32 crore in the first quarter of FY 2022-23, up by 14 per cent YoY. Between April 2000 and March 2022, FDI in agriculture services stood at ₹ 21,008 crore. In 2021-22, the sector is estimated to grow at 3.9 per cent, as compared to a 3.3 per cent growth in 2020-21. The government has fairly restricted investment in agriculture but it has allowed 100 per cent FDI in the fertilisers and pesticides sector. 

There have been significant reductions in excise and import duty rates on a number of ingredients used in the production of processed foods. In fact, many processed food items are totally exempt from excise duty now. Additionally, there have been significant reductions in customs fees for machinery, tools, raw materials and intermediates, particularly for exports. In recent years, the government has taken various initiatives to improve the productivity and competitiveness of the sector. These include increasing the availability of credit to farmers, providing improved seeds and fertilisers, and introducing modern agricultural practices. 

The government has also invested in infrastructure development, including irrigation projects and rural roads, in order to improve access to markets. The government has also taken steps to make the sector more competitive, such as opening up the sector to private investment, introducing new technologies and encouraging the use of modern farming techniques. In addition, the government has introduced various subsidies and tax incentives to support the sector. Overall, the Indian agriculture sector has the potential to make a significant contribution to the country’s economic growth. 

Outlook

The Indian agricultural sector is predicted to increase to ₹ 197,732 crore by 2025. The government policies support institutional credit and also through increasing the MSP. The government has also introduced new schemes like Paramparagat Krishi Vikas Yojana, Pradhanmantri Gram Sinchai Yojana and Sansad Adarsh Gram Yojana. The factors improving supply are hybrid and genetically modified seeds and favourable climate for agriculture. Furthermore, a wide variety of crops with advanced mechanisation and irrigational facilities also are adding to the growth of the sector. Likewise, the demand is seen rising due to population and income growth, increasing exports and favourable demographics.
 

Automobile & Ancillaries 

Given the fact that the automobile sector plays a crucial role in both macroeconomic development and technical innovation, the Indian automobile industry has historically been a solid indication of how well the economy is doing. Due to a growing middle-class and a huge chunk of India’s population being young, the two-wheeler sector dominates the market in terms of volume. Furthermore, the increased interest of businesses in investigating rural areas has boosted the sector’s expansion. Commercial vehicle demand is increasing as the logistics and passenger transportation industries grow. 

Future market development is expected to be fuelled by new trends such as vehicle electrification, particularly for threewheelers and compact passenger automobiles. India holds a dominant position in the global heavy vehicle market since it is the world’s largest tractor maker, second-largest bus manufacturer and the third-largest heavy truck manufacturer. In FY22, India’s annual automotive output was 22.93 million vehicles. India is also a significant automobile exporter with high export growth expected in the near future. Furthermore, various government initiatives are projected to position the country as a worldwide leader in the two-wheeler and four-wheeler markets. 

These include the Automotive Mission Plan 2026, scrapping of vehicles policy and Production Linked Incentive scheme. The India passenger vehicle market was valued at USD 32.70 billion in 2021 and is predicted to reach USD 54.84 billion by 2027, representing a compounded annual growth rate (CAGR) of more than 9 per cent between 2022 and 2027. The electric vehicle (EV) industry in India is expected to reach ₹ 50,000 crore (USD 7.09 billion) by 2025. According to research conducted by the Council on Energy, Environment and Water (CEEW) and Centre for Energy Finance, EVs will have a USD 206 billion market opportunity in India by 2030. 

This will demand an expenditure of USD 180 billion in car manufacturing and charging infrastructure. The EV finance sector in India is expected to reach ₹ 3.7 lakh crore (USD 50 billion) by 2030, according to NITI Aayog and the Rocky Mountain Institute (RMI). According to a survey by the India Energy Storage Alliance, the EV market in India is expected to grow at a CAGR of 36 per cent until 2026. Furthermore, the EV battery market is predicted to grow at a CAGR of 30 per cent during the same time period. Except for a few hiccups in the two-wheeler EV market regarding incidents of vehicles catching fire, the sales have been consistently upward. 

Financial Highlights

The overall market capitalisation of automobile and ancillaries sector stood at ₹ 17.11 lakh crore as on December 6, 2022 of which 15.52 per cent is contributed by Maruti Suzuki India and 9.14 per cent by Tata Motors On a YoY basis (H1FY22 to H1FY23), Automotive Axles performed exceptionally well, reporting growth in revenue, operating profit and net profit of 72.87 per cent, 170.41 per cent and 285.3 per cent, respectively. Apart from this, Lumax Industries , JTEKT India , Mahindra and Mahindra and Maruti Suzuki India too clocked tripledigit PAT and double-digit revenue growth. 

Moreover, among 85 companies only 30 per cent companies posted negative PAT growth. Interestingly, around 44 per cent of the companies posted double-digit PAT growth. In terms of revenue, 92 per cent of the automobile and ancillaries’ companies posted double-digit revenue on YoY basis. If we dive deep into the industry scenario, we find that passenger cars contribute up to 25 per cent of the total market capitalisation followed by two and three-wheelers and automotive ancillary sector contributing 18 per cent and 17 per cent, respectively. 

Outlook

The automobile industry is dependent on a variety of variables, including the availability of low-cost skilled labour, strong research and development centres and low-cost steel manufacturing. The sector also offers excellent investment prospects as well as direct and indirect employment to both skilled and unskilled labour. By 2030, the electric car sector is expected to generate five crore jobs. The Indian government introduced the nation’s first double-decker electric bus in Mumbai in August 2022. Looking ahead, the government believes that a major reform of the country’s transportation infrastructure is required. It is developing an integrated EV mobility ecosystem with a low carbon footprint and high passenger density, with a focus on urban transportation reform. 

In response to rising customer demand for greener transportation choices, the government’s strategy and regulations are designed to encourage broader use of electric vehicles. The Indian government anticipates that the vehicle business would receive USD 8-10 billion in domestic and foreign investment by 2023. By 2030, India might be a leader in shared transportation, opening up potential for electric and driverless cars. Indian automakers reported a significant increase in passenger vehicle sales as mid-segment cars and SUVs benefitted from festive demand, while the entry-level category also improved. Furthermore, sales of electric two-wheelers reached an all-time high in October. The year 2023 will see India witness a huge scale-up in the EV sector as more players enter the market. 

Furthermore, start-ups are predicted to lead the race in 2023, with legacy original equipment manufacturers (OEMs) gaining market share in 2024. In addition, two-wheeler sales are predicted to increase by 8 per cent until 2031 with the EV sector accounting for 70 per cent of this increase. As a result of the government’s emphasis on decarbonisation, electric vehicle offerings are expanding and customer acceptance of EVs is growing. OEMs reported subdued wholesale dispatches for November 2022 with a MoM dip observed in all sectors except tractors. The tractor space was a key outperformer in the segment area with positive volume prints in the seasonally poor month – lower double-digit YoY growth. 

Tata Motors in the PV domain, Ashok Leyland in the CV domain and Escorts Limited in the tractors field were notable outperformers within key categories. Vahan registrations totalled 23.8 lakh units in November 2022, up 5 per cent MoM, and averaged at around 135 per cent of the pre-pandemic levels, compared to 129 per cent in October 2022. With a solid order book helped by a flurry of new launches, a healthy replacement demand on the horizon, increased fleet utilisation and profitability, and an oncoming pick-up in sales volume, it is anticipated that the PV and CV space in particular would experience this. With development and longevity in the offering in this market, the tilt towards premium category in the two-wheeler space is anticipated to continue.
 

Banking 

The banking sector in India is well-capitalised and well-regulated. India has far better financial and economic circumstances than any other nation in the world. According to credit, market and liquidity risk studies, Indian banks are have coped well during the global downturn. Innovative banking methods including payments and small financing banks have lately been introduced to the Indian banking industry. Through different programmes like the Pradhan Mantri Jan Dhan Yojana and Post Payment Banks, India has recently concentrated on expanding the scope of its banking system. Such programmes, in addition with important banking sector reforms like digital payments and neo-banking, the growth of Indian NBFCs and fintech, have greatly increased India’s financial inclusion and fuelled the credit cycle in the country. 

In 2022, the total assets of the banking industry (including both public and private sector banks) rose to ₹ 21.9 lakh crore. Credit growth is anticipated to improve by 10 per cent in 2022–2023, which will be a double-digit growth in eight years, according to India Ratings and Research (Ind-Ra). As of June 2022, the number of bank accounts opened has increased as part of the government’s major initiative for financial inclusion, known as the Pradhan Mantri Jan Dhan Yojana (PMJDY). Deposits into Jan Dhan bank accounts totalled ₹ 1.7 lakh crore, reaching 45.6 lakh crore bank accounts. With favourable demographics and rising income levels, India ranks among the top five economies with a GDP of ₹ 28.4 lakh crore (USD 3.46 trillion) in 2021. 

The banking sector will largely benefit from structural economic stability and continued credibility of the monetary policy. The government has smoothly carried out consolidation, lowering the number of public sector banks by eight. To support the maintenance of regulatory capital requirements and financial growth in India, the Government of India would invest ₹ 48,239 crore (USD 6.78 billion) in 12 public sector banks in FY20. The Government of India will invest ₹ 5,042 crore (USD 730.88 million) in Bank of Baroda post its merger with two other public sector lenders, Dena Bank and Vijaya Bank. 

Financial Highlights

The market cap of the banks is around ₹ 36 lakh crore. SBI, HDFC and ICICI banks have delivered the highest PAT and net profit. Equitas Small Finance Bank, The Karnataka Bank, Fino Payments Bank, DCB Bank, Canara Bank, Bank of Maharashtra and UCO Bank have delivered the biggest PAT gain in H1FY22. The Indian banking sector has been surging ahead over the past decade, aided by strong economic growth, rising disposable incomes, increasing consumerism and easier access to credit. During FY16-FY21, bank credit increased at a CAGR of 0.29 per cent. Corporate and retail loan market is expanding. 

Credit growth has been led by the services, real estate, consumer durables and agriculture-related sectors. In March 2022, deposits increased by 8.94 per cent while bank credit increased by 8.59 per cent. According to Fitch, credit growth is expected to hit 10 per cent in 2022-23 which will be doubledigit growth in eight years. As of July 29, 2022 bank credit stood at ₹ 123.69 lakh crore (USD 1,553.23 billion). In 2022, total assets in the public and private banking sectors were ₹ 13,108 crore and ₹ 76.07 lakh crore, respectively. Public sector bank assets accounted for 59.53 per cent of total banking assets in 2022. Public sector banks accounted for over 57 per cent of interest income in 2022. 

The interest income of public banks reached ₹ 7.3 lakh crore in 2022. In 2022, interest income in the private banking sector reached ₹ 4.8 lakh crore. The credit deposit ratio stood at 70.64 per cent as of January 2022. Cross-selling products to existing customers is a common way for major banks to increase revenue. Despite having much lower customer coverage, foreign banks have been able to grow their business. Expansion in unbanked rural areas aids banks in attracting deposits. 

Outlook

Increased infrastructure spending, rapid project execution and ongoing reforms are expected to drive further growth in the banking industry. All of these indications point to the banking industry in India being well-positioned for expansion as rapidly expanding companies look to banks for their credit requirements. Mobile and internet banking services have risen to prominence as a result of technological advancement. The banking industry is focusing more on providing better services to customers and modernising their technological infrastructure in order to improve the overall customer experience and give banks a competitive advantage. 

Access to the banking system has grown throughout time as a result of the government’s persistent efforts to enhance banking technology and promote expansion in unbanked and nonmetropolitan areas. At the same time, despite global turbulences, India’s banking industry has held steady, maintaining public trust over time. The main variables impacting deposit growth are a strong increase in savings rates along with rising levels of disposable income. According to the RBI, the performance of the Indian banking sector improved in FY22, with lenders reporting aggregate profits after two years of losses. As of July 29, 2022, bank deposits were valued at ₹ 169 lakh crore (USD 2.13 trillion), according to the RBI. Significant growth is possible in private sector lending as loan disbursal by private sector banks is expected to increase. 

Banks are increasingly considering consolidation to reap greater benefits such as increased synergy, cost savings from economies of scale, organisational efficiency and risk diversification. India has seen a rise in fintech and micro-financing in recent years. Due to a five-fold growth in digital disbursements, India’s digital lending, which stood at ₹ 6.1 lakh crore in FY18 is anticipated to increase to ₹ 8.2 lakh crore by FY23. Agriculture is the backbone of the livelihood security system of nearly 700 million people in the country and we need to build our food security on the foundation of home-grown food. As Indian agronomist, MS Swaminathan rightly said, “If agriculture goes wrong, nothing else will have a chance to go right”. 
 

Capital Goods 

The capital goods industry is divided into 10 sub-sectors with electrical equipment being the largest, followed by plant equipment and earthmoving and mining machines. The industry includes physical assets that businesses use in the manufacturing process to create goods and services that consumers can use in the future. It accounts for 27 per cent of the total industrial factories and 63 per cent of total foreign collaborations, making it the largest industrial sector in the country. India is considered one of the fastest-growing developing countries and the engineering sector has played a very important role in helping India reach new heights. 

Because the sector is highly correlated with the manufacturing and infrastructure industries, it has increased its strategic significance. The Engineering Export Promotion Council (EEPC) is a body appointed by the Government of India to promote goods and services primarily for export. According to EEPC annual report, India’s overall exports in September 2022 are estimated to be USD 61.10 billion, representing a 10.24 per cent increase over the same period last year, with engineering goods’ exports accounting for USD 14 billion, nearly 23 per cent of the total monthly exports. The S and P Global India Manufacturing PMI for November 2022 rose to a three-month high of 55.7 from 55.3 the previous month, beating market forecasts of 55.0. 

Financial Highlights

The sector has reported a set of positive results. From the mentioned companies, according to half-yearly statements, total net sales for H1FY23 increased by 30.44 per cent compared to H1FY22. Total operating profit for H1FY23 increased to 34.44 per cent when compared to H1FY22. In comparison to H1FY22, when the total net profit was only ₹ 4906 crore, it dramatically increased to ₹ 9597 crore or 94.20 per cent in H1FY23. Now let’s check the top market cap, net sales and net profit companies. 

Siemens holds a market cap of ₹ 98,413.83 crore which makes the company the largest market cap holder in this sector. Siemens is a technology company focused on industry, infrastructure, digital transformation, transport as well as transmission and generation of electrical power. Net sales for H1FY23 stood at ₹ 8,762.1 crore as compared to net sales of ₹ 7,113.9 recorded in H12FY22, growing beyond 23 per cent. The operating profit increased 49 per cent to ₹ 684.2 crore in H1FY23 compared to an operating profit of ₹ 860.5 crore posted for H1FY22. 

Lloyds Steels Industries is planning to spend ₹ 50 crore during FY23/FY24. Such CAPEX is after several years. The company has been delivering revenue on the typically same gross block over the last 5-7 years. The manufacturing sector in India is anticipated to grow more than six times by 2025, reaching USD 1 trillion. In H1FY22, the company achieved net sales of ₹ 12.56 crore, while in H1FY23 it skyrocketed to ₹ 80.35 crore or 540 per cent, which makes this company the highest change in percentage of net sales compared to other mentioned companies. Suzlon Energy , according to its half-yearly financial statements, while the net loss was ₹ 10.04 crore in H1FY22, it increased dramatically to ₹ 13.621 crore or 24,891 per cent in H1FY23, which also makes this company the greatest change in percentage of net profit when compared to the other companies. 

Overlook

Capital goods are long-lasting assets that are used in the production of goods and services. They include all fixed assets such as manufacturing equipment, heavy electrical equipment and vehicles as well as infrastructure. Thus, a train manufacturer is classified as part of the capital goods sector of the economy because its trains are used to transport freight. Similarly, a shipbuilder is a part of the capital goods sector because the ships are used to transport raw materials and finished goods across the ocean. 

Despite adverse economic conditions and a lackluster market throughout the year, investors in the capital goods sector displayed an optimistic attitude as the sectoral index surged 26.32 per cent over the past six months and 17.02 per cent year-to-date. After the July-September quarter (Q2) results, many investors and analysts suggested that electrical capital goods businesses like those of Siemens, Elgi Equipements, Havells India, CG Power and Industrial Solutions and Bharat Electronics will see an 11 per cent revenue CAGR over the next three years. 

The Indian capital goods industry is set to see a significant boost in the near term as global conglomerates implement a China Plus strategy to protect their supply chains even as the government plans a heavy infrastructure and manufacturing push and companies rethink their capex plans. According to global investment bank Credit Suisse, the economic headwinds and commodity price volatility brought on by the Russia-Ukraine war appear to have avoided the investment cycle but momentum must pick up to stay up with cyclical expectations.
 

Chemicals

The chemical industry is a highly skilled and capitalintensive industry. It is an important part of the Indian economy and is growing steadily. Petrochemicals, fertilisers, paints, varnishes, gases, soaps, fragrances, toiletries and medications are examples of basic chemicals and their by-products. Over 80,000 commercial items fall into the various groups that comprise the chemical industry. The sector is critical to meeting India’s basic needs and raising the standard of living. The sector is the foundation for the nation’s industrial and agricultural growth. Many downstream industries, including textile, paper, paint varnish, soap, detergent and pharmaceuticals, are built on its foundation. 

India and China are the world leaders in capital investment intensity in the chemical industry (capex as a percentage of profit). In India, the chemical industry attributed 23.3 per cent of its PAT to capex compared to 32.6 per cent in China. Less than one-fifth of the value added by all other nations was ascribed to capex. Between FY15 and FY20, the aggregate capex incurred by the 31 largest chemical businesses climbed at a 17 per cent CAGR and between FY10 and FY20 at a 9 per cent CAGR. Compared to ₹ 39 billion in FY10, these enterprises spent ₹ 95 billion on capex in FY20. The proportion of capital to revenue in FY20 was 9.6 per cent, the highest in a decade. 

There have been several government initiatives such as:

1. Petroleum, Chemicals and Petrochemical Investment Regions (PCPIRs) — The Indian government wants the PCPIR clusters to be places where investors can find welcoming policies and facilities. PCPIRs have a topnotch infrastructure and provide a vibrant market that aids commercial businesses. Four PCPIRs have been established by the Ministry of Chemicals and Petrochemicals, one in each of the states of Andhra Pradesh, Gujarat, Tamil Nadu and Odisha. An estimated investment of ₹ 7.63 lakh crore is required to fully realise the PCPIRs. 

2. Chemicals Promotion and Development Scheme — In order to support the expansion and development of the chemical and petrochemical industries, the Chemicals Promotion and Development Scheme (CPDS) was created. Its goal is to produce knowledge products through studies, surveys, data banks and promotional materials, etc. and disseminate the knowledge through holding seminars, conferences, exhibitions and other events.

3. Production Linked Incentive (PLI) Scheme — The National Programme on Advanced Chemistry Cell (ACC) battery storage Production Linked Incentive (PLI) Scheme was approved by the Government of India with a budgetary outlay of ₹ 18,100 crore. Its goal is to improve India’s manufacturing capabilities by achieving a manufacturing capacity of 50 Giga Watt hours (GWh) of ACC. The national government is focusing on increasing domestic value-addition in order to achieve this goal while ensuring that India’s levelised battery production costs are competitive on a global scale. The strategy predicts a monetary investment that will support domestic manufacturing, promote the growth of stationary storage and battery storage demand, build a completely domestic supply chain, and attract foreign direct investments to the country. 

Indian chemical exports increased by 106 per cent between 2013–14 and 2021–22. India’s chemical exports increased from USD 14.2 billion in 2013–14 to a record high of USD 29.3 billion in 2021–22. The surge in shipments of organic, inorganic, agrochemical, dyes and dye intermediates and speciality chemicals have contributed to the rise in chemical exports. The ‘Make in India’ campaign has aided India’s chemical sector in becoming a significant player in the world arena and a major exporter for the country. India is the sixth-largest chemical manufacturer in the world and the third-largest in Asia. India is ranked 14th in the world for chemical exports. India currently produces more dye than any other country in the world, and in 2021– 2022 it will export between 16 per cent and 18 per cent of that production. 

India exports dyes to more than 90 different countries. Additionally, India produces more than 50 per cent of the world’s technical-grade pesticides and is the fourth-largest producer of agrochemicals. Agrochemicals make up over 50 per cent of India’s exports to the rest of the world. Between 85 per cent and 90 per cent of all castor oil exports worldwide come from India, which also produces and exports the most castor oil in the world. India exports castor oil to more than 175 nations – the US, China, and rising markets including Turkey, Russia and nations in northeast Asia rank as its top export destinations. 

Trade disagreements have erupted on a global scale, most notably between China, the United States and Western Europ Following the imposition of tariffs by the US on Chinese imports, China retaliated by imposing levies on US goods. As a result, many countries in Western Europe have imposed levies on Chinese products. The US, EU, and Chinese economies would all suffer from tariffs on trade. As a result, many international downstream companies that formerly sourced the majority of their chemical requirements from China may choose to diversify their supply. As a result, Indian firms will have a fantastic opportunity to take advantage of the available market share and maintain their position as industry leaders on a worldwide scale with the support of the Indian government. 

Financial Highlights

To study the financials, we have taken 96 companies in this sector and juxtaposed their performance in H1FY23 with H1FY22. On the whole, the sector has registered robust sequential growth across various parameters such as net sales and other operating income, profit before interest, depreciation and tax (PBIDT) and profit after tax. The aggregate top-line of the sector registered a healthy growth of 41 per cent from ₹ 176,357 crore in H1FY22 to ₹ 248,932 crore in H1FY23. Operating profit (PBIDT) for H1FY23 stood at ₹ 36,249 crore, escalating by 31 per cent from ₹ 27,671.24 crore in H1FY22. 

Profit after tax for the sector increased by 36 per cent from ₹ 16,502.35 crore in H1FY22 to ₹ 22,440.12 crore in H1FY23. In terms of individual company performance in H1FY23, UPL was at the top of the list with the highest sales, PBIDT and profit after tax in H1FY23 reporting ₹ 23,328 crore, ₹ 4,590 and ₹ 1,971 crore, respectively. Asian Paints remained the giant in the paints segment, reporting 34 per cent jump in its top-line from H1FY22 at ₹ 17,009 crore and 54 per cent jump in its profit after tax at ₹ 1,805.01 crore. 

Outlook

With the assistance of the Indian government, the chemical sector in India has experienced enormous growth. The industry has developed over time to become a top-tier, contemporary chemical industry that is prepared to compete globally. This has been accomplished through the development of novel molecules, technological advancements, an improvement in product quality and the introduction of new product profiles. Even in a time of increasing global uncertainty, prospects still have their eye on the sector. Due to global trends affecting the chemical industry, India’s chemical sector may soon have access to promising opportunities. The strategic choice to prioritise and realise its value-creation potential will determine the trajectory of India’s chemical industry and its trade performance in the future. Despite the pandemic crisis, there are several chances for the Indian chemical sector given China’s supply chain disruption and the trade war between the US, Europe and China. Chinese anti-pollution initiatives will also provide better prospects for certain sectors of the Indian chemical industry. 

Construction

The Indian construction industry is widely recognised as one of the most crucial industries for economic success. It ranks third among the 13 major sectors and is the second-largest employment creator after agriculture. The demand for commercial and residential properties determines how rapidly this industry will expand. Due to urbanisation and rising household incomes, demand has risen dramatically. The construction industry encompasses real estate, infrastructure and urban development, as well as services such as water supply, sanitation and transportation. The nearly 250 sub-sectors of the Indian construction industry are connected as a result. 

Considering cement is the single most essential element utilised in all construction, whether it is residential, commercial or infrastructure, our primary focus in this sector will be on cement and construction materials. India is the world’s second-largest cement manufacturer. It makes up more than 7 per cent of the installed capacity worldwide. Due to the government’s emphasis on infrastructure development and rising demand in commercial real estate, India’s cement production expanded at a CAGR of 5.6 per cent between FY16 and FY22, while cement demand is projected to reach 419.92 MT by FY27. 

Over 200 significant cement plants exist in India, 77 of which are located in the states of Andhra Pradesh, Rajasthan and Tamil Nadu. South India accounts for roughly 33 per cent of India’s cement manufacturing capacity, followed by North India, Central and West India and East India. The National Council for Cement and Building Materials and the Cement Manufacturers’ Association (CMA) are some of the major bodies that deal with cement industry activities. The industry also includes businesses that manufacture ceramic, glass, and wood products, all of which have a significant impact on its growth. 

Financial Highlights

To construct a detailed financial picture, we examined the leading companies in each sub-sector, such as cement and construction materials, ceramics, sanitary ware, glass, laminates and wood products, and we compared their performance in H1FY23 with H1FY22. These companies have a combined market capital of ₹ 684,008 crore, of which 30 per cent belongs to Ultratech Cement. While revenue at Ultratech Cement, a major cement manufacturer, soared strongly by about 22 per cent, profit after tax plunged more than 22 per cent. A sizeable portion of the industry’s total market capital is also held by Ambuja Cements and ACC The Indian conglomerate Adani Group acquired the Indian cement operations of Holcim AG, making it the country’s secondlargest cement manufacturer. 

It now owns Holcim AG’s 63.1 per cent stake in Ambuja Cements, which holds a 50.05 per cent interest in ACC and a 4.48 per cent direct stake in the company. Looking at the per cent change in profit margins, almost all cement companies, with the exception of a few, experienced declines despite significant sales growth. As opposed to this, ceramics, sanitary ware, glass and wood products businesses experienced phenomenal growth in their sales and net profits. The best performing companies in terms of net profit growth were AGI Greenpac, Pokarna and Asahi India Glass. 

Outlook

Construction was one of the industries that had to bear the brunt of the pandemic while it was already facing a liquidity crisis. Because of lack of funds, many projects remained unfinished. The pandemic caused havoc along the entire value chain system at all points and scales. The availability of construction materials and price inflation became major issues. Due to lockdowns, a lack of timely execution contributed to cost overruns, significant delays and even project cancellation. In the short to medium term, soaring input costs continue to be a major concern. Companies have, however, been able to partially cool down the effect by passing the costs on to customers. Long-term growth in the industry can further be boosted by input cost normalisation. 

In recognition of the sector’s significance to the growth of the Indian economy, the government is allowing foreign direct investments (FDI) to a greater extent. Consequently, the industry, which is involved in manufacturing cement and gypsum products, received FDI inflows of USD 5.48 billion. 

According to the Union Budget 2022-23, the government increased its infrastructure spending by allocating USD 18.84 billion for railroads and USD 26.74 billion for highways. As many as 11 industrial corridors, the redevelopment of 600 railway stations and the expansion of railway lines are some of the sector’s major growth drivers. 

With a proposed investment of over ₹ 2 lakh crore, the government’s Smart City Project, which intends to create 100 smart cities, presents a great opportunity for construction firms. Up to 8 million households would be selected as a part of the ‘Housing for All’ initiative with the ₹ 48,000 crore set aside for the PM Awas Yojana. The prime minister has launched the Gati Shakti Master Plan to integrate various modes of transportation and accelerate infrastructure development in India. India has a large-scale investment plan through the National Infrastructure Pipeline, which has since climbed from 7,400 to over 9,300 projects. The industry has a bright future ahead of it, especially in light of the sector’s growth drivers and the government’s emphasis.
 

Consumer Durables 

The home appliances and consumer electronics industry are amongst the fastest growing in the Indian market. Improving comfort and décor at home has become the highest priority among the households and the industry is adapting to these changes in consumer behaviour. Long-term prospects for the industry remain positive, supported by a growing working population, higher disposable incomes, easier access to credit, and improving standard of living. Increasing electrification of rural areas along with the rising influence of social media and popularity of online sales is also likely to drive the demand. CRISIL Research estimates the size of India’s consumer durables industry, including large consumer durables, mobile phones and smaller appliances at ~₹ 2.4 trillion as of FY 2021. The industry recorded ~12 per cent CAGR between fiscals 2015 and 2019 backed by increasing disposable incomes, lower penetration, widening product base, competitive pricing, lowering replacement cycles, etc. The industry is expected to log an accelerated 13-15 per cent CAGR during fiscals 2021-2026 to reach ₹ 4.5-5 trillion. Household penetration of consumer durables in India remains much lower than that of many other developed as well as developing nations. 

The Government of India has been proactively promoting electronics manufacturing in India through its policies and incentive schemes, which have allowed manufacturing growth, reduced dependence on imports and promoted exports. As a result, India’s electronics production has doubled in the past five years from ₹ 3.2 trillion in FY16 to ₹ 7.8 trillion in FY21. Many domestic manufacturers are trying to leverage the PLI (Production Linked Incentive) scheme for white goods, which has seen a committed investment of ₹ 5,866 crore. The coming years will also see shifts in consumer behaviour with the rising need for energy-efficient solutions and growing preference for smart IoT products, which will dominate consumer choice. 

Financial Highlights

To study the financials, we have taken the top 22 companies in this sector and juxtaposed their performance in H1FY23 with H1FY22. On the whole, this sector has registered robust sequential growth across parameters such as net sales and other operating income and profit before interest, depreciation and tax i.e. PBIDT. The aggregate top-line of the sector registered a healthy growth of 36.11 per cent from ₹ 30,037.27 crore in H1FY22 to ₹ 40,884.25 crore in H1FY23. Operating profit (PBIDT) for H1FY23 stood at ₹ 2,861.53 crore, escalating by 24.14 per cent from ₹ 2,305.09 crore in H1FY22. Profit after tax for the sector declined by 11.63 per cent from ₹ 1,832.94 crore in H1FY22 to ₹ 1,619.68 crore in H1FY23. In terms of individual company performance in H1FY23, PG Electroplast was the top gainer across the board among its peers, reporting a whopping 2.57 times surge in top-line and profit after tax skyrocketing by 5.55 times. Amber Enterprises and Timex Group India exhibited robust growth in top-line of 99 per cent and 80 per cent, respectively. Bajaj Electricals, Johnson Controls-Hitachi Air Conditioning India, Blue Star and KDDL saw net profit expand by more than 2.5 times during H1FY23. 

Outlook

India has one of the lowest appliance penetration levels in the world. This combined with a powerful demographic dividend and strong GDP growth is expected to drive increasing adoption of appliances and a rapid sales growth in the coming years. Though the first half of FY22 witnessed challenges, demand was seen improving in the latter half with the easing of restrictions, pent-up demand and improving economic conditions. Besides, a shift in consumer behaviour from price consciousness towards technologically advanced products with quality, value proposition and safety aspects have been leading to a rise in demand for premium consumer durable products. 

With premiumisation and price gaps narrowing, a marked shift towards organised brands is taking shape. This shift will continue to weed out unorganised and lower quality players. The top market leaders are key beneficiaries of this shift and have seen their market share rising over the past five years. In addition, organised players’ channel expansion into rural geographies will drive growth and penetration in the medium term. Even though the pandemic disruption has slowed down the pace somewhat over the last two years, higher disposable income and thrust on affordable housing and construction are driving urbanisation and home occupancy, further triggering the demand for various consumer durable products. 

Crude Oil & Gas

The crude oil sector is one of India’s eight core industries, and it has a significant impact on all other important sectors of the economy. Since India’s economic growth is closely correlated with its energy needs, more crude oil is anticipated to be needed, which will make the sector very favorable for investment. As of 2021, India remained the third-largest oil consumer in the world. The latest data released by the petroleum ministry showed India’s crude oil imports increased by 1 per cent in September 2022. Of the total imports in September 2022, crude oil constitutes USD 12.8 billion. Import of crude oil in India increased to 17.95 tons million in October from 16.77 tons million this year. The Indian basket crude price averaged USD 90.71 per barrel during September 2022 as against USD 97.40 per barrel during August 2022 and USD 73.13 per barrel during September 2021. 

OMC’s have underperformed the broader indices by 6-21 per cent since February 22, when oil prices soared, and geopolitical tensions began. China's persistently weak economy, Europe's energy crisis and a strong US dollar are weighing on consumption. The correction in oil prices comes despite some higher demand from China following the easing of restrictions due to the pandemic and the disruption of supply from Russia. The cap will not allow Western companies to insure, finance or transport Russian oil unless the oil is sold for less than USD 60 a barrel and the purpose is not to reduce revenues from Russian oil exports. 

Financial Highlights

The sector has reported a set of positive results. From the mentioned companies, according to half-yearly statements, total net sales for H1FY23 increased by 40 per cent compared to H1FY22. The net operating loss recorded for H1FY23 was 16 per cent when compared to H1FY22. In comparison to H1FY22, when the total net profit was ₹ 77951 crore, it dramatically decreased to ₹ 38689 crore or 50 per cent, in H1FY23. Now let’s check the top market cap, net sales and net profit companies. 

Reliance Industries Ltd holds a market cap of ₹ 18,15,214.70 crore which makes the company the largest market cap holder in the crude oil sector. Reliance Industries Limited is a Fortune 500 company and the largest private sector corporation in India. Net sales for H1FY23 stood at ₹ 4,55,976 crore as compared to the net sales of ₹ 3,18,476 recorded in H1FY22, growing beyond 43 per cent. The company posted a net profit of ₹ 35,095 in H1FY23 as compared to the net profit recorded in H1FY22 which was ₹ 29,283 crore, an increase of 20 per cent. 

Chennai Petroleum Corporation Ltd has a market cap of ₹ 3,248.50 crore. According to half-yearly financial statements, when the net profit was only ₹ 113.16 crore in H1FY22, it increased dramatically to ₹ 2,378.76 crore or 2,002 per cent in H1FY23, which makes this company the greatest changemaker in terms of percentage of net profit when compared to the other companies. Hindustan Oil Exploration Company Ltd has a market cap of ₹ 1,899.68 crore. In H1FY22 the company posted net sales of only ₹ 69.56 crore while in H1FY23 it skyrocketed to ₹ 214 crore or 208 per cent, which makes this company the highest change in percentage of net sales compared to other mentioned companies. 

Indraprastha Gas Ltd (IGL) is one of the leading companies in city gas distribution in Delhi. According to half-yearly consolidated financial statements, the net sales of the company increased by 119.41 per cent in H1FY23 compared to H1FY22. Net Profit in H1FY22 was only ₹ 609.43 crore and increased significantly to ₹ 778.01 crore or 27.66 per cent in H1FY23. 

Outlook

Demand for crude oil in India is expected to double by 2045, reaching 11 million barrels per day. By 2029-30, diesel demand in India is expected to double to 163 MT, with diesel and gasoline accounting for 58 per cent of India’s oil demand by 2045. Natural gas consumption in India is expected to increase by 25 billion cubic meters (BCM), with an annual growth rate of 9 per cent until 2024. According to the IEA (India Energy Outlook 2021), primary energy demand is expected to nearly double to 1,123 million tonnes of oil equivalent by 2040, as India’s GDP rises to USD 8.6 trillion. India’s oil refining capacity was 248.9 MMTPA as of September 2021, making it Asia’s second-largest refiner. Private companies controlled approximately 35 per cent of the total refining capacity. 

India had a crude pipeline network with a capacity of 147.9 MMTPA as of August 1, 2022. India’s crude oil output in April-July 2022 was 9.91 MMT. Sharp oil price correction bodes well for OMCs, as high diesel marketing losses of ₹ 13/ litre in H1FY23 resulted in losses of ₹ 226 billion despite government LPG subsidy support of ₹ 220 billion. This year, the government also announced an excise duty reduction of ₹ 8 per litre of petrol and ₹ 6 per litre of diesel. Greater outputs brought forth by rapid economic growth are driving the demand for oil for transportation and production. 

By FY40, 500 million tonnes of crude oil would be consumed, up from 202.7 million tonnes in FY22, at a CAGR of 5.14 per cent. India’s oil consumption is anticipated to increase from 4.05 MBPD in FY22 to 7.2 MBPD in 2030 measured in barrels. By 2029–2030, diesel demand in India is anticipated to double to 163 MT, and by 2045, diesel and gasoline would account for 58 per cent of the country’s total oil consumption. Given the robust economic growth and expanding urbanization, the demand is not going to abate anytime soon. 

Financial Services 

The financial sector is extremely important to the Indian economy. This industry includes a wide range of businesses, including banks, investment firms, insurance companies, and real estate firms. In India, the financial sector is dominated by commercial banks, which account for more than 64 per cent of the total assets held by the financial system. The government and the Reserve Bank of India (RBI) have taken a number of steps to make it easier for micro, small, and medium enterprises (MSMEs). The Indian financial services industry has expanded dramatically in recent years. This upward trend is expected to continue. The private wealth management industry in India has enormous potential. By 2025, India is expected to have 6.11 lakh HNWIs. This will result in India becoming the world’s fourth-largest private wealth market by 2028. The insurance market in India is expected to reach USD 250 billion by 2025. 

The Association of Mutual Funds in India (AMFI) is targeting a nearly five-fold growth in AUM to ₹ 95 lakh crore (USD 1.47 trillion) and more than three times growth in investor accounts to 130 million by 2025. India’s fintech space is expected to further fuel this growth in various segments. India’s mobile wallet industry is estimated to grow at a compound annual growth rate (CAGR) of 150 per cent to reach USD 4.4 billion by 2022, while mobile wallet transactions will touch ₹ 32 trillion (USD 492.6 billion) during the same period. 

Financial Highlights

The sector has reported a set of positive results. From the mentioned companies, according to half-yearly statements, total net sales for H1FY23 increased by 9 per cent to ₹ 2,52,323.2 crore compared to ₹ 2,31,850.3 in H1FY22. Total operating profit for H1FY23 increased to 16 per cent to ₹ 1,96,643.2 crore when compared to ₹ 1.70,067.8 in H1FY22. In comparison to H1FY22, when the total net profit was only ₹ 46,512.15 crore, it dramatically increased to ₹ 60,591.56 crore or 30 per cent, in H1FY23. Now let’s check the top market cap, net sales and net profit companies. 

Housing Development Finance Corporation Ltd is a major provider of housing finance in India. In the financial sector, this company holds the largest market capitalization of ₹ 4,87,339.7 crore. According to the H1FY23 results announced on the latest basis, net sales and other operating income have gone up 14 per cent in H1FY23 on a YoY basis from ₹ 24,622.66 crore to ₹ 28,058.83 crore. Operating profit has zoomed 17 per cent to ₹ 26,354.65 crore in H1FY23 as compared to ₹ 22,480.49 crore recorded in H1FY22. The half-year results were successful in recording a net profit of ₹ 7477.59 crore or 8 per cent as compared to a net profit of ₹ 6920.14 crore seen in H1FY21. 

UGRO Capital Limited, according to its half-yearly financial statements, while the net sales were only ₹ 111.12 crore in H1FY22, it increased dramatically to ₹ 269.53 crore or 143 per cent in H1FY23, which also makes this company the greatest change in percentage of net profit when compared to the other companies. Indostar Capital Finance Ltd according to its half-yearly financial statements, while the net profit was only ₹ 2.62 crore in H1FY22, it increased dramatically to ₹ 112.53 crore or 4,195 per cent in H1FY23, which also makes this company the greatest change in percentage of net profit when compared to the other companies. 

Outlook

In recent decades, India’s financial sector has faced numerous challenges, including a significant, negative, and persistent credit-to-GDP gap. India Ratings has also raised its credit growth forecast for FY23 to 13 per cent from 10 per cent in FY22. The Indian banking system includes 12 public sector banks, 22 private sector banks, 46 foreign banks, 56 regional rural banks, 1,485 urban cooperative banks and 96,000 rural cooperative banks as well as cooperative credit institutions. In 2022, the total assets of the banking system, comprising both public and private sector banks, reached USD 2.67 trillion. 

The combined assets of the public and private banking industries were USD 1,594.51 billion and USD 925.05 billion, respectively, as of 2022. The number of bank accounts established as part of the government’s major initiative for financial inclusion, the Pradhan Mantri Jan Dhan Yojana (PMJDY), reached 45.60 crore, while deposits in the Jan Dhan bank accounts exceeded ₹ 1.68 trillion (USD 21.56 billion). Between 25 countries, India’s digital payment system has advanced the most, with its prompt payment service (IMPS) being the only one ranked at level five in the quicker payments innovation index (FPII). In recent years, India’s Unified Payments Interface (UPI) has worked to expand its worldwide reach while revolutionising real-time payments. A recent Bain and Company report on ‘Buy Now, Pay Later’ (BNPL) points out, “For businesses in financial services, over the past few years it has been essential to have a fintech strategy. Now it’s also essential for businesses that intersect payments, lending and e-commerce to formulate a BNPL strategy.” According to Statista, “The number of global open banking users is expected to grow at an average annual rate of nearly 50 per cent between 2020 and 2024, with the European market being the largest.” 

FMCG
Fast Moving Consumer Goods

The fast-moving consumer goods (FMCG) sector is India’s fourth-largest sector and comprises three segments – household and personal care, healthcare, and food and beverages – constituting 50 per cent, 31 per cent and 19 per cent share of the sector, respectively. Growing awareness, rising incomes, urbanisation, large working population, easier access and changing lifestyles remain the key growth drivers for the sector. The urban segment is the largest contributor to the overall revenue generated by the FMCG sector in India. However, in the last few years, barring FY22, the FMCG market has grown at a faster pace in rural India compared to urban India. 

Semi-urban and rural segments are growing at a rapid pace and FMCG products account for 50 per cent of the total rural spending. Rural consumption has increased, led by a combination of increasing income and higher aspiration levels. Estimates by Nielsen suggest that rural markets account for more than 60 per cent of our country’s population, but contribute ~40 per cent of FMCG sales. This signals further room for companies to grow in these markets. The consumer products industry in India has seen a remarkable transformation over the last two years with the pandemic acting as an inflection point and giving a fillip to natural healthcare products. 

In FY22, India’s FMCG market grew by only 3 per cent in volumes as the sector witnessed a progressive slowdown in consumption in each quarter with rising inflation levels weighing down the overall sentiment due to geopolitical crisis, disruption in global supply chains, inflation in many key commodities like crude oil derivatives, palm oil and historically peak packaging costs. Meanwhile, pricing growth was in double digits in each of the quarters as companies implemented price hikes to alleviate the severe input cost push. The resulting slowdown was more accentuated in rural markets compared to urban markets. The overall volume decline was spread across categories, but the extent was significantly higher in non-food category as compared to food category. 

Financial Highlights

To study the financials, we have taken the top 51 companies in this sector and compared their performance in H1FY23 with H1FY22. On the whole, this sector has registered phenomenal sequential growth across various parameters such as net sales and other operating income, profit before interest, depreciation and tax i.e. PBIDT and profit after tax. During H1FY23, FMCG major Hindustan Unilever persisted to grow significantly ahead of the market, gaining value and volume market shares. EBITDA margin at 23.11 per cent remained healthy despite unprecedented inflationary headwinds. Similarly, Dabur Limited also continued to demonstrate agility and resilience, delivering steady organic growth in a challenging environment. 

The cigarette-to-hotel-to-FMCG conglomerate ITC reported a robust 28 per cent YoY growth in its consolidated net profit for H1FY23 at ₹ 9,132.57 crore. This was mainly on account of improving demand for its cigarettes and snacks. In Q2FY23 the company’s revenue from its flagship cigarette segment was up by 23.3 per cent on an annual basis to ₹ 6,953.80 crore. The company stated in a filing with the exchange, “Stability in taxes on cigarettes, backed by deterrent actions by enforcement agencies, enabled continued volume recovery from illicit trade.” Travel luggage manufacturers VIP Limited and Safari Industries were among the Top Gainers across the board among their peers. 

They reported a whopping two-fold surge in top-line and profit after tax skyrocketing by 5.3 and 4 times, respectively. The largest operator of quick-service restaurants chain in India, Devyani International delivered a healthy performance across its core brands in H1FY23. The company’s store network continues to expand across metro and non-metro cities. 

Outlook

Despite being one of the fastest growing markets globally for FMCG products, India’s per capita FMCG consumption is still amongst the lowest in the world. Rural markets account for more than 60 per cent of our country’s population and contribute to just about ~40 per cent of FMCG consumption, thus offering significant headroom for growth. Rising affluence, large working population, nuclear family structures, urbanisation and rapidly increasing adoption of technology will positively impact the growth of the sector. With the share of unorganised market in the FMCG sector falling, the organised sector growth is rising with increased level of brand consciousness, augmented by growth in modern retail. 

H1FY23 for the FMCG sector was impaired by elevated raw material prices, weak margins and slowing demand coupled with down-trading in rural markets and moderate growth. However, the worst seems to be in the rear view mirror for the sector and H2FY23 could witness a revival in demand and better revenue growth led by normalcy in festive demand, new product launches and easing raw material inflation. Also, with gradual price cuts on the cards, volume growth particularly from rural markets is expected to bounce back in the second half of the fiscal. 

In the near term, the sector is expected to deliver positive growth driven by highest GDP forecast in the world with price hikes around product categories, volume growth driven by good monsoons as well as revival in demand for discretionary products. Additionally, increase in government expenditures in areas of infrastructure, mobility and connectivity will help boost rural incomes which may contribute to volume growth. As per IBEF, India is likely to be the fifth-largest FMCG market by 2025 and is expected to increase at a CAGR of 14.9 per cent to reach USD 220 billion.
 

Healthcare

The Indian healthcare industry offers enormous economic contribution to the country and is significant to the global healthcare market, coming in at third place globally in terms of production volume and 14th in terms of value. In 60 therapeutic areas, the Indian healthcare industry offers more than 60,000 generic brands. Generic medications, over-the-counter medications, API and bulk drugs, vaccines, contract research and manufacturing, biosimilars and biologics are some of the major segments. India is renowned for generating high-quality generic medications and vaccines at affordable prices. 

India is home to more than 3,000 healthcare companies, a robust network of over 10,000 manufacturing facilities and a pool of highly qualified resources. In the coming 10 years, the domestic market is anticipated to expand by three times, as per the Indian Economic Survey 2021. The domestic market, which was valued at USD 42 billion in 2021, is projected to grow to USD 65 billion by 2024 and then to USD 120-130 billion by 2030. 

The country is the world’s largest volume provider of generic pharmaceuticals, accounting for 20 per cent of all pharmaceutical exports worldwide. India is the world’s 12th largest exporter of medical goods. It supplies more than half of all vaccines manufactured globally, making it the world’s largest vaccine supplier in terms of volume. Major economies recognised India’s vital contribution to the supply of pandemicrelated vaccines, giving it a place of prominence in the global healthcare industry. 

Financial Highlights

For a detailed financial scenario, we examined leading companies in each segment such as hospital and healthcare services, medical equipment and pharmaceuticals and drugs with a comparison of their performances in H1FY23 with H1FY22. These companies have a combined market capital of ₹ 1,353,901 crore, of which 18 per cent belongs to Sun Pharmaceutical Industries, which posted a 12 per cent rise in net sales while seeing robust growth of almost 25 per cent in net profit. 

Max Healthcare Institute led the hospital and healthcare services sector with increase in net profit, registering a 116 per cent surge in H1FY23 as compared to H1FY22. In terms of business efficiency, Natco Pharmaceuticals emerged a champion with net profit growth of approximately 170 per cent. Thyrocare Technologies and Wockhardt were the worst performing companies as regards profitability in the hospital and healthcare services and pharmaceuticals and drugs segments, respectively. Even though they were able to earn sizeable amounts of revenue, the majority of businesses struggled to boost their profit margins over H1FY22 levels. 

Outlook

The pandemic drew everyone’s attention to the necessity for basic medical facilities across the country. It boosted the prominence of the healthcare industry and compelled the government to pay it more attention. Given the industry’s immense potential, the Indian government is making a concerted effort to strengthen it. The Union Budget 2022-23 includes ₹ 3,201 crore for research as well as ₹ 83,000 crore and ₹ 37,000 crore for the Ministry of Health and Family Welfare and the National Health Mission, respectively. The Union Cabinet has approved a change to the current foreign direct investment (FDI) policy in the healthcare industry that will permit FDI up to 100 per cent through the automatic route for medical device production. 

As a result, the Indian healthcare industry received FDI worth USD 19.41 billion between April 2000 and March 2022 and produced USD 15.81 billion trade surplus in FY22. The Department of Pharmaceuticals launched a PLI scheme to boost domestic production by establishing greenfield plants in order to attain self-reliance and reduce import dependency. The National Digital Health Blueprint (NDHB) offers a strategy for establishing the fundamental IT building blocks necessary for the health ecosystem to streamline information flows among ecosystem participants while maintaining the privacy and security of data for citizens. 

The growth of the Indian healthcare industry would be facilitated by an ageing society, surge in diseases, the emergence of pharmacies selling low-cost generic drugs and government missions like the National Health Protection Scheme which strives to provide universal healthcare. In fact, continuous research and development programmes in the healthcare industry to find cures for various ailments is triggering rapid growth along with the expansion of top-grade services offered by medical institutions.
 

Hospitality

The hospitality industry is one of the most profitable, employing more than 8 per cent of the workforce and creating an estimated 15 million jobs in recent years. It is one of the country’s top sectors attracting foreign direct investment. With its ancient culture of welcoming guests with open hands, India has been known as a traditionally hospitable country. Hotels, theme and amusement parks, lodging and boarding are all part of the hospitality industry. The cash registers appear to be ringing in the Indian hospitality industry. In the first quarter of this fiscal year, the majority of companies in the industry reported strong results. In addition, new inventory is being added to the sector. The total number of foreign tourists who visited India during the period of January to July 2022 increased 406.6 per cent to 2,764,975. 

The US contributed the most to FTAs in India during this time with 25.88 per cent, followed by Bangladesh (18.61 per cent), the UK (10.99 per cent) and Australia (5.16 per cent). In Q1FY23, corporate demand and the MICE (meetings, incentives, conferences and exhibitions) segment also jumped on the growth train, while leisure continued to do well. As a result, hotel industry players were able to increase room rates without affecting demand. Average hotel prices were said to have increased by 20–25 per cent in Q1FY23 over the pre– pandemic levels. As a result, revenue increased significantly by over 24 per cent when compared to the pre-pandemic levels. Additionally, the protracted epidemic phase of 18 to 24 months was used by big hotel companies to structurally restructure their cost base and reduce costs. 

Financial Highlights

On the whole, this sector has registered robust sequential growth across parameters such as net sales and other operating income and profit before interest, depreciation and tax i.e. PBIDT. The aggregate top-line of the sector registered a healthy growth of 140 per cent from ₹ 5,546 crore in H1FY22 to ₹ 13,624 crore in H1FY23. Operating profit (PBIDT) for H1FY23 stood at ₹ 2,946 crore, escalating by 1,336 per cent from ₹ 205 crore in H1FY22. Profit after tax for the sector increased by 249 per cent from ₹ -1141 crore in H1FY22 to ₹ 1,705 crore in H1FY23. 

In terms of individual performance, The Indian Hotels Company reported the highest sales in H1FY23, exhibiting a 133 per cent jump from H1FY22 to ₹ 2,498.68 crore while other hotel companies such as EIH and Tata GVK also showed significant growth in the top-line, reporting 144 per cent and 116 per cent, respectively. Imagica World Entertainment showed a massive spike and reported the highest net profit in the segment at ₹ 510 crore. In travel services, Easy Trip planners led the line among its peers, reporting a three times surge in the top-line with a surge in profit after tax at 44 per cent. 

Government Initiatives The Indian government has made a number of actions to turn India into a major international tourism hub after realising the potential of the nation’s tourism sector. The following are some of the significant efforts the Indian government has planned to support the country’s tourist and hospitality industries. In the Union Budget 2022-23: 1. ₹ 2,400 crore has been allocated to the Ministry of Tourism which is 18.42 per cent higher than the allocation for FY 2021-22. 2. ₹ 1,181.30 crore is allocated for the Swadesh Darshan Scheme. 3. In August 2022, Ministry of Tourism sanctioned 76 projects for ₹ 5,399.15 crore under Swadesh Darshan Scheme for development of tourism infrastructure in the country. 

Outlook

Staycations are currently seen as a growing trend. Major hotel chains like Marriott International, IHG Hotels and Resorts and Oberoi Hotels are launching staycation deals that allow visitors to select from a variety of personalised experiences inside the hotel to meet these demands. The travel and tourism sector in India has tremendous growth potential. The sector anticipates the growth of the e-visa programme, which is anticipated to treble foreign tourist arrivals in India. In India, the travel and tourism sector has the potential to grow by 2.5 per cent as a result of increased financial support and affordable healthcare options. 

When it comes to the seasonality of the hotel industry, Q1 and Q2 (April to September) are typically the slowest quarters, while Q3 and Q4 combined (October to March) account for more than 60 per cent of the overall revenue. But given the good performance in the typically poor quarter, peak season in H2FY23 now appears more hopeful. This season will also benefit from the inflow of foreign visitors who typically travel considerable distances to India for vacations. They haven’t yet made a significant contribution to the state of the firm. As a result of this strong tailwind, it is anticipated that room rates will increase slightly more and support high occupancy. 

Infrastructure

India is aiming for an economy of USD 5 trillion by 2025 and infrastructure will play a major role in the development and upliftment of the domestic economy. The Indian economy’s main driver is the infrastructure sector. The government places strong emphasis on this sector because it is crucial to India’s overall growth and because it can help to ensure that world-class infrastructure is built in the nation. Power, bridges, dams, highways and urban infrastructure development are all included in the infrastructure sector. All these collectively act as a catalyst for India’s economic growth. 

The government’s ambitious plans under the Bharatmala Pariyojana programme entails construction of 22 greenfield expressways, including the Delhi-Mumbai expressway, 23 tunnels and bridges and 35 multi-modal logistics parks. Six projects totalling ₹ 41.2 billion and two hybrid annuity model (HAM) projects worth ₹ 30.7 billion were granted by the NHAI in Q2FY23. With this, the NHAI awarded approximately 613 km in H1FY23 with five EPC projects totaling ₹ 48.9 billion and eleven HAM projects totaling ₹ 128.8 billion. 

Eight projects were won at a price that was 8 per cent less than the NHAI cost in H1FY23, while eight other projects were awarded at a price that was 10 per cent more expensive. Later in H2FY23, order momentum is anticipated to increase. Additionally, we anticipate that the NHAI would shorten the financial closure timetable from 150 to 90 days and reduce the HAM project award for a few HAM projects from 40 per cent to 20 per cent. This would assist players with healthy balancesheets and help to lower the intensity of the competition. 

Financial Highlights

GMR Airports Infrastructure Company reported a 76 per cent domestic increase while international footfall was up by 230 per cent at the Delhi and Hyderabad airports YoY in Q2FY23. This represents the fact that the economy has opened up quite well after the pandemic and it is also an indication of how the domestic economy is booming and will contribute to the sector. Larson and Turbo, which is India’s largest infrastructure company by market capitalisation, reported a 22.98 per cent increase in revenues on YoY basis, maintaining margins of about 14.98 per cent. The company’s PAT stood at ₹ 5,112.21 crore on a consolidated basis and was up by 35 per cent. 

Order inflows of the company have gone up by 23 per cent on QoQ basis and on half-yearly basis these went up by 36 per cent. The company order book went up by 13 per cent whereas international orders were about 28 per cent in September 2022. Rail Vikas Nigam Limited, which is engaged in implementing various types of rail infrastructure, reported a 21.94 per cent increase in the revenues of the company with a current order book of ₹ 550 billion that includes 66 projects assigned and 13 projects are won through bidding. The company reported a 27.85 per cent increase in PAT which stood at ₹ 381 crore. 

KNR Constructions, engaged primarily in the construction of roads, bridges, flyovers and irrigation projects, reported 18 per cent growth in revenue YoY which stood at ₹ 1,942.1 crore for the first half of H1FY23. The company also reported one of the best operating margins in Q2FY23 after the pandemic at 24.35 per cent while the PAT grew at 8.79 per cent on QoQ basis. The company has a total order book of ₹ 8,041.5 crore. Most of the projects are from South India. The company recently won a new project which is under the Bharatmala Pariyojana and is worth ₹ 765 crore. Overall, 30 infrastructure companies were analysed which saw an increase in top-line by 19 per cent while the profit in the same period increased by 39.97 per cent. 

Outlook

The infrastructure sector is a key driver for the Indian economy. In other words, the infrastructure sector drives the development of related industries including townships, housing, built-up infrastructure and construction development projects. The Government of India has given a significant push for capital expenditures for key infrastructure sectors. Robust demand, higher investments, attractive opportunities and policy support is good news for this sector that is likely to do better going forward. The forecast for India’s infrastructure during the following 10 years is promising. It is filled with attractive government initiatives and a backlog of large projects. 

These projects are backed by a sizeable amount of capital and financing. There are several schemes that have been announced to drive the sector’s growth. These include the National Infrastructure Pipeline (NIP), the National Monetisation Plan (NMP), Gati Shakti and the National Single Window System (NSWS). In line with the Gati Shakti initiative, the NHAI has undertaken the development of digital infrastructure through laying optical fibre cables across the country starting with Delhi to Mumbai expressway and the Hyderabad to Bangaluru corridor. This initiative will empower the government to provide internet connectivity and boost 5G roll-out across the nation.
 

Iron & Steel 

Iron and steel consumption has been one of the main driving causes behind industrialisation. Steel has long held the top position among metals. Steel is both a raw material and an intermediary product and therefore its production and consumption are commonly used as indicators of a nation’s economic success. India’s steel industry has grown tremendously over the last 10–12 years. While domestic steel demand has surged roughly by 80 per cent since 2008, production has increased by 75 per cent. 

A total of 133.596 MT of crude steel and 120.01 MT of finished steel were produced in FY22, respectively. In FY22, 105.751 MT of finished steel were consumed. India’s finished steel consumption in April 2022 was 9.072 MT. The production of crude steel and finished steel in April to July 2022 was 40.95 MT and 38.55 MT, respectively. In May 2022, the Indian government imposed an export ban on steel and iron ore. With this decision the exports fell. However, in November 2022, the government again notified that there will be no export duty. Currently, the sector is going through a lot of problems with increase in energy prices in Europe, volatility in coking coal prices, weak global prices and China lockdowns. 

Financial Highlights

In the last six months, the S&P BSE Metal has been quite volatile but still grew by 15.14 per cent. The BSE Metal constituents have also been very volatile but the top three companies with market capitalisation are JSW Steel, Coal India and Tata Steel. 

JSW Steel, which is primarily engaged in the business of manufacturing and sale of iron and steel products, reported a net loss in the first half of FY23. The exports fell sharply by 62 per cent YoY, whereas the automotive sector supplies went up by 52 per cent YoY and 9 per cent QoQ. The revenues increased 28.54 per cent YoY to ₹ 78,622 crore. 

Tata Steel has a presence across the entire value chain of steel manufacturing from mining and processing iron ore and coal to producing and distributing finished products. The company’s revenues increased 8 per cent to ₹ 122,640 crore on a consolidated basis on YoY basis. The subdued revenue growth was mainly because of lower volume across geographies and Europe. The raw material cost and price stability has also affected the company’s performance. 

The company’s margins fell by almost 11.55 basis points. Coal India is engaged in mining and production of coal and operates coal washeries. The major consumers of the company are power and steel sectors. Revenues of the company increased by 28.11 per cent YoY but declined -14.97 per cent QoQ. It reported 106.07 per cent increase in net profit YoY but declined -31.58 QoQ. Overall, these 36 companies engaged in the iron and steel business have seen their top-line increasing by 17 per cent while profit in the same period saw a massive fall of 73 per cent due to subdued demand and volatility in raw material prices. 

Outlook

While the exports ban has been rolled back with weak global demand and downward pressure on steel prices, the domestic players will still not benefit from the export ban roll-back. Over a longer time horizon though, the abolition of export duty bodes positive for domestic steel players. Since May 2022 there has been a decline in global steel demand, which has pushed the steel prices lower. Since steel prices are now subdued on the worldwide market, export quantities are most likely to increase significantly only when the prices recover. However, the recent decision to remove the export tax on steel goods does give domestic firms a chance to significantly increase their export volume as and when the market for steel prices strengthens globally. 

Information Technology 

The IT industry in India is the most preferred off-shoring destination across the globe. With more than 51 per cent share, the Indian IT industry accounts for the largest market share in global services’ sourcing industry. In the fiscal year 2022, the IT industry employed over 4.50 lakh employees to touch a total direct employment milestone of 50 lakhs. In terms of private investments, in the first half of 2022, the industry attracted investments of USD 3.96 billion across 121 deals via private equity and venture capital route. In FY22, the IT industry accounted for 7.4 per cent of India’s GDP. Going forward, by 2025, the contribution of the IT industry to India’s GDP is expected to rise to 10 per cent. 

It is estimated that the Indian software product industry shall reach USD 100 billion by 2025. The focus of Indian companies lies on investing internationally to expand their global footprint and enhance their global delivery centres. Looking at policy support, the Indian government has taken some major initiatives for the promotion of the IT and ITeS sector in India. 

The government has allowed up to 100 per cent foreign direct investment (FDI) in data processing, software development and computer consultancy services, software supply services and business and management consultancy services, market research services, technical testing and analysis services under the automatic route. 

In terms of FDI inflow, as per the data released by Department for Promotion of Industry and Internal Trade (DPIIT), the computer software and hardware sectors account for the second-highest FDI inflows. Further, both central as well as state governments in India have taken steps towards developing technology solutions to digitally enable citizen services. The government’s focus areas include cyber security, hyper-scale computing, artificial intelligence and blockchain. As a step in this direction, in September 2021, the Indian government announced a plan to build a cyber lab for the ‘Online Capacity Building Programme on Crime Investigation, Cyber Law and Digital Forensics’ to strengthen cyber security capabilities. 

Recently, Rajeev Chandrasekhar, Minister of State for Electronics and Information Technology and Skill Development and Entrepreneurship, inaugurated the Centre of Excellence for AI, Robotics in Thrissur. During the event, the minister said, “Technology and digitalisation are playing a significant role in the shaping of the economies and trades across the world. India is already taking the lead in that direction and the coming decade will be India’s ‘techade’ full of opportunities for the young Indians.” In the Union Budget 2022-23, the government allocated ₹ 88,567.57 crore (USD 11.58 billion) to the IT and telecom sectors. Further, the government introduced the STP (Software Technology Parks) Scheme, which is a 100 per cent export-oriented scheme for the development and export of computer software, including export of professional services. 

Financial Highlights

For this report we have considered the top 54 companies in terms of market capitalisation to assess the financial performance of the IT industry in H1FY23. The total market capitalisation of these companies is roughly about ₹ 32 lakh crore. The net revenue of the IT industry grew by nearly 21 per cent on YoY basis. However, the operating profits grew by a mere 7 per cent YoY, whereas the PAT exhibited a decline of approximately 8 per cent. Company-wise, in H1FY23, Persistent Systems reported the highest top-line growth of 219 per cent. The PBIDT (excluding other income) grew by 248 per cent YoY, and registered a net profit growth of 185 per cent. The company’s order booking for the quarter ended on September 30, 2022 was at USD 367.8 million in total contract value (TCV) and at USD 271.2 million in annual contract value (ACV). 

Outlook

Q3 sequential revenue-growth performance is expected to be impacted by furloughs, lesser number of working days, softness in select pockets and delay in decision-making due to macro uncertainties. Companies have highlighted the slower decisionmaking by clients amid macro uncertainties which would weigh on discretionary spending and large-deal closures. The technology budget cycle may be elongated this year due to prevailing macro uncertainties. This may weigh on the Q4 revenue growth trajectory. Managements have highlighted pockets of weakness – mortgage, discretionary retail, hi-tech, and communications (particularly network OEMs, media) – which may further intensify with the macro slowdown. The pricing environment remains stable. 

Companies are able to pass on current cost assumptions in new deal pricing. Managements have stated that the price increase is a gradual process, whereas employee-cost inflation is upfront, which has impacted margins in the last few quarters. Attrition has been steadily declining on the back of moderation in growth, expansion in the talent pool with fresher induction and training over the last few quarters, and owing to layoffs or slower hiring by start-ups. EBITM is expected to sustain and improve in H2, bolstered by moderating attrition, higher utilisation, optimising subcontracting costs, flattening employee pyramid, gradual uptick in pricing and rupee depreciation. However, growth moderation and uptick in travel costs would restrict the upside. 

Logistics 

Logistics is an integral activity for economic growth as it involves the management of flow of goods from the place of origination to the place of consumption. The logistics sector in India is estimated at 14 per cent of India’s GDP and is slated to grow at a CAGR of 8-10 per cent over the next five years according to industry reports. It is a highly fragmented sector with more than 90 per cent share of unorganised players. The logistics industry covers all aspects of the supply chain, including order processing, customer service, inventory management and transportation. Other supply chain tasks include purchasing, packing, material handling, distribution of information and maintenance. 

A majority of the logistics industry is driven by logistics solution providers, ports, shipping and courier services. India’s logistics efficiency has increased significantly in recent years and technology-driven integrated solutions and structural reforms are poised to transform an industry that is largely unorganised and is dominated by small and medium-sized businesses that use manual labour and traditional working methods for nearly 80 per cent of their operations. It provides a living for more than 22 million people. The development of the logistics sector is reflected by the fact that India scored 90.3 per cent in the United UNESCAP’s Global Survey on digital and sustainable trade facilitation conducted in 2021. 

Financial Highlights

Container Corporation of India, one of the major logistics companies in India, is engaged in the business of providing inland transportation of containers by rail while also covering the management of ports, air cargo complexes and cold chains. In H1FY23, the company reported net revenue of ₹ 3,980.33 crore compared to ₹ 3,657.14 in H1FY22 – a YoY growth of 9 per cent. Its profit after tax (PAT) grew 18 per cent on YoY basis at ₹ 589.89 crore from ₹ 499.51 crore. Allcargo Logistics is another leading logistics company engaged in providing integrated logistics solutions. The company reported consolidated revenue of ₹ 10,975.11 crore in H1FY23 compared to ₹ 8,427.1 crore in H1FY22, indicating a YoY growth of 30 per cent. Its net profit for H1FY23 stood ₹ 481.84 crore with a YoY growth of 43 per cent as against ₹ 336.19 crore in H1FY22. 

Adani Ports and Special Economic Zone in H1FY23, saw net sales grew by 22 per cent on YoY basis to ₹ 9,848.75 crore from ₹ 8,089.23 crore in H1FY22. PAT increased by 22 per cent from ₹ 2,235.34 crore to ₹ 2,720.92 crore on YoY basis. 

Outlook

On July 7, 2017, the Department of Commerce’s created a logistics division for India and the integrated development of the logistics sector was designated as its responsibility. The division is headed by the Special Secretary to the Government of India, who has been tasked with creating an action plan to speed up the overall development of the logistics industry through policy modifications, process enhancements, the identification of bottlenecks and gaps and the adoption of technology. In total, there are 20 government agencies, 10,000 commodities, 500 certifications, 37 export promotion councils and 40 participating government agencies (PGAs). The government has taken a number of initiatives to promote the logistics industry. A National Logistics Policy is proposed to reduce the logistics cost, which stands at 14 per cent of GDP to 9-10 per cent of GDP. 

The policy takes a broad picture of the sectors while outlining precise action points. The National Grid of Logistics Parks and Terminals is being planned in order to promote intermodal and multimodal logistics parks (MMLPs) as a distinct class of infrastructure and to encourage efforts with a national registry of multimodal facilities to enable price discovery, ensure optimal utilisation and support planned development. Additionally, the government has started to set standards and norms that will be used to advance warehousing. In addition to creating a system for assessing and certifying such warehouses for excellence, the government wants to optimise clearance procedures to make the process of building warehouses more effective.
 

Media and Entertainment 

The media and entertainment sector in India has a sizeable viewership both domestically and abroad. The sector comprises film production and distribution, printing and publishing, TV broadcasting and software production. The sector is renowned for its extraordinarily high volume and growing average revenue per user (ARPU). In comparison to other markets, the media and entertainment sector in India is distinctive. The sector has benefited greatly from the growing availability of fast and affordable internet, rising income and expanding consumer durable purchases. 

The Government of India has taken a number of initiatives, including digitising the cable distribution industry to draw more institutional funding, raising the FDI cap in cable and direct-to-home (DTH) satellite platforms from 74 per cent to 100 per cent and giving the film production, distribution and exhibition sector an industry status to facilitate easy access to institutional financing. The Ministry of Information and Broadcasting has established the Film Facilitation Office (FFO) which serves as a single point of contact for producers and production firms to receive the necessary filming licences. 

Financial Highlights

PVR , India’s largest film exhibition company reported weak performance in H1FY23 with revenue from operations declining 10.01 per cent to ₹ 1,668.12 crore from ₹ 1,853.57 crore from its pre-pandemic level (H1FY20). The company incurred a net loss of ₹ 18.33 crore in H1FY23 compared to prepandemic net profit of ₹ 65.20 crore – a sharp decline of 128 per cent. Similarly, Inox Leisure , which recently announced its merger with PVR , saw decline of 5.58 per cent in its operating revenue to ₹ 956.38 crore from the pre-pandemic revenue of ₹ 1,012.95 crore. 

Sharp top-line and bottom-line declines and slight losses in EBITDA were anticipated for multiplexes as a result of poor box office receipts for blockbuster films. The second quarter was weak due to the failure of big-budget, star-studded films like ‘Lal Singh Chaddha’, ‘Raksha Bandhan’, ‘Shamshera’ and ‘Liger’, among others. Only two films – ‘Brahmastra’ and ‘Thor’ – exceeded ₹ 100 crore during the quarter due to poor movie attendance. 

On the other hand, TV ad volumes climbed 47 per cent during H1FY23 compared to H1FY20 i.e. the pre-pandemic period but YoY growth was only 3 per cent due to the third wave and softer advertising environment. Zee Entertainment Enterprises (ZEEL), one of the largest content providing companies in India, is engaged in the broadcast and digital business, films and music as well as live events. The company reported consolidated revenue of ₹ 3,925.53 crore in H1FY23 compared to ₹ 3,819.03 crore in H1FY22 – a slight increase of 2.78 per cent. However, net profit declined by 53.79 per cent on YoY basis to ₹ 219.41 crore against ₹ 474.86 crore. 

In the printing and publishing segment, high inflation, high newsprint cost and depreciating currency impacted the profitability despite the implementation of cost optimisation measures companies. However, Navneet Education reported excellent financial performance with consolidated revenue of ₹ 1,008.94 crore in H1FY23 compared to ₹ 559.02 crore in H1FY22, indicating a YoY growth of 80 per cent. Net profit for H1FY23 stood at ₹ 181.46 crore with a strong YoY growth of 283 per cent as against ₹ 47.36 crore in H1FY22. Navneet Education, one of the leading publishers in India, is primarily engaged in the publication and trading of education books, reference books, technical and profession-related books. 

Outlook

According to a recent PwC report, India’s media and entertainment sector is expected to generate USD 53.99 billion revenue by 2026. By 2024, it is anticipated that India’s advertising income will total USD 5.42 billion. By 2024, television will make up 40 per cent of the Indian media market while print media (13 per cent), digital advertising (12 per cent), film (9 per cent) and the OTT and gaming industries (8 per cent each) would come in behind. It is expected that India would generate advertising revenue of USD 5.42 billion. The estimated CAGR for the subscription revenue is 2 per cent and it will eventually total USD 4.94 billion.

Plastic Products

India is recognised as one of the major plastic hubs in the world because of its low-cost production, cheap labour, low cost of raw materials and easy availability. Over the last few years, the plastic products’ sector has played a significant role in driving technology and innovation growth in the country as well as adding value to the various manufacturing sectors, including agriculture and FMCG. The potential of the Indian plastic sector has motivated domestic manufacturers to acquire technical expertise, achieve superior quality standards and build further capacities. 

Financial Highlights

To study the financials of the sector, we have taken the top 22 companies in this sector and compared their performance in H1FY23 with H1FY22. On the whole, this sector has registered robust sequential growth across various parameters such as net sales and other operating income, profit before interest, depreciation and tax i.e. PBIDT and profit after tax. The aggregate top-line of the sector registered a healthy growth of 18 per cent from ₹ 27,382.5 crore in H1FY22 to ₹ 32,231.061 crore in H1FY23. However, the PBIDT dropped sharply over the past year. PBIDT for H1FY23 stood at ₹ 3,653.51 crore, declining by 22 per cent from ₹ 4,660.02 crore in H1FY22. Similarly, profit after tax for the sector declined 15 per cent from ₹ 2,720.979 crore in H1FY22 to ₹ 2,307.926 crore in H1FY23. 

In terms of individual company performance, in H1FY23, Kingfa Science and Technology (India), Polyplex Corporation, Xpro India, Mold-Tek Packaging and Supreme Industries were the top gainers, delivering sales growth of 43 per cent, 38 per cent, 35 per cent, 33 per cent and 31 per cent, respectively. Kingfa Science and Technology (India), Polyplex Corporation, Xpro India and Mold-Tek Packaging reported net profit growth of 28 per cent, 44 per cent, 118 per cent and 39 per cent, respectively. However, for Supreme Industries, net profit dropped YoY by 30 per cent. The Indian plastics industry experienced a significant volume rebound in FY22, owing primarily to sustained demand growth. Over the last three decades, India’s consumption of plastic has increased 23-fold to nearly 21 million tonnes. 

Outlook

Currently, India is the third-largest consumer of plastics after China and the United States, accounting for approximately 6 per cent of global consumption. The market is expected to grow from USD 457 billion in 2022 to USD 643 billion in 2029. The Indian government intends to increase economic activity in the plastic industry from USD 37.8 billion to USD 125 billion over the next 4-5 years. Despite supply chain bottlenecks, the country’s plastic exports thrived in FY22, expanding significantly. The Indian plastic pipe and fittings sub-sector is expected to reach ₹ 500-550 billion by 2025, growing at a CAGR of 10 per cent from the current level of ₹ 290-300 billion. 

The primary driver of growth in the piping and fitting subsector is the rapid pace of urbanisation and infrastructure development. The Government of India’s initiative for affordable housing, irrigation sector and focus on rural water management along with higher capex for infrastructure growth continue to be the major drivers for the growth of the PVC pipe sector in the country, particularly for organised players. The Indian plastic packaging market was valued at USD 75 billion in 2020 and is expected to reach USD 204.81 billion by 2025, registering a CAGR of 26.7 per cent during the period of 2020-25. 

Packaging is amongst the high-growth industries in India and the country is becoming a preferred hub for the packaging industry. With the arrival of the pandemic, people have become more conscious of the food products they consume. The food industry has increased its focus towards better and safer packaging for its consumers, resulting in robust demand for packaging material. It has also helped in prolonging the shelf life of many products. Change in consumption patterns and lifestyle, consumer awareness surrounding packaged food and a boom in e-commerce and organised retail is expected to enhance the growth of the plastic packaging sector and per capita consumption in the near future. 

Market growth and diversification are the two factors that have contributed to the rapid strides taken by the Indian plastic sector in recent years. In order to advance the country’s petrochemical technology and promote a research environment essential to the industry, the government has also initiated a programme for establishing centres of excellence. This will assist in promoting and creating new applications for plastics and polymers in the country. Given such initiatives and the promising future of the plastic products sector, one should keep tracking stocks for investment opportunities in this sector. 

Power

India is the third-largest producer and consumer of electricity globally. The power sector is one of the most important sectors that provide support to the infrastructure of a country, thereby providing support to economic development. In India, sources of power range from conventional sources such as coal, lignite, natural gas, oil, hydro and nuclear power to viable non-conventional sources such as wind, solar, and agricultural and domestic waste. As of September end, India has a total installed capacity of 407,798 MW. About 50 per cent of the power generation is contributed by the private sector, 25.7 per cent by the state sector and the rest 24.3 per cent by the central sector. Regarding fuel-wise breakdown, 57.9 per cent comes from fossi fuels and the rest 42.1 per cent from non-fossil fuels. Most of the power generated from fossil fuel is from coal. The government’s focus is driven towards increasing the percentage of power generation from non-fossil fuels. India’s installed renewable energy capacity, including hydro, stood at 161.29 GW, representing 39.91 per cent of the overall installed power capacity. Solar energy is estimated to contribute 57.97 GW, followed by 40.89 GW from wind power, 10.68 GW from biomass, 4.89 GW from small hydropower and 46.85 GW from hydropower. With electricity generation of 430.97 BU in India in the first quarter of FY23, the country witnessed growth of 16.79 per cent YoY. 

Financial Highlights

Analysing 21 public listed power generation companies, we can see that this sector has registered robust sequential growth across various parameters such as net sales and other operating income, profit before interest, depreciation and tax i.e. PBIDT and profit after tax. The aggregate top-line of the sector registered a healthy growth of 34 per cent from ₹ 179,865.131 crore in H1FY22 to ₹ 240,749.936 crore in H1FY23. Torrent Power, BF Utilities, Adani Power, Jaiprakash Power Ventures and Tata Power Company were the top gainers. These companies delivered sales growth of 96 per cent, 84 per cent, 77 per cent, 76 per cent and 44 per cent, respectively. PBIDT for H1FY23 stood at ₹ 75,107.73 crore, an increment of 18 per cent from ₹ 63,768.359 crore in H1FY22. Profit after tax for the sector zoomed by 36.6 per cent from ₹ 19,706.02 crore in H1FY22 to ₹ 26,914.19 crore in H1FY23. For Jaiprakash Power Ventures and Adani Group, net profit jumped more than 10,000 per cent. The net profit increased 1,498 per cent, 1,067 per cent and 71 per cent for BF Utilities, Tata Power and Torrent Power, respectively. 

Outlook

In recent years, hundreds of millions have received electricity connections in the country, and there is an increasing adoption of highly—efficient LED lighting along with a massive expansion in renewable sources of energy, led by solar power. Being an emerging economy, where population, urbanisation and industrialisation are on the rise, India is set to witness a huge demand for power. Also, China’s power crisis in recent times has re-emphasised the importance of switching from non-renewable sources of energy to renewable ones. At present, solar accounts for less than 4 per cent of India’s electricity generation and coal accounts for almost 70 per cent. 

However, the cost-competitiveness edge that solar enjoys over coal is set to increase the share of solar power and decrease the share of coal-generated power in India’s energy mix. Investment in India’s renewable energy sector grew more than 125 per cent YoY to touch a record USD 14.5 billion in FY22. Post this many renewable energy companies are on acquisition and collaboration sprees. In March 2022, Adani Solar and Smart Power India (SPI), a subsidiary of Rockefeller Foundation, signed a non-financial and non-commercial MoU to promote the usage of solar rooftop panels in rural India. 

On the policy front, the government has a wide range of policies in place that aim to bring about a secure and sustainable energy future. For example, under the Union Budget 2022-23, the government announced the issuance of sovereign green bonds, as well as conferring infrastructure status to energy storage systems, including grid-scale battery systems. For FY22-FY23, the government will be spending ₹ 19,500 crore under the PLI scheme to boost manufacturing of high-efficiency solar modules. In order to meet India’s 500 GW renewable energy target and tackle the annual issue of coal demand supply mismatch, the Ministry of Power has identified 81 thermal units which will replace coal with renewable energy generation by 2026. 

The government is committed to implement a ‘rent a roof’ policy for supporting its target of generating 40 GW of power through solar rooftop projects by 2022. It also plans to set up 21 new nuclear power reactors with a total installed capacity of 15,700 MW by 2031. India wants to ensure that everyone has consistent access to adequate electricity at all times, while also accelerating the clean energy transition by shifting away from dirty fossil fuels toward more environmentally friendly, renewable energy sources. Future investments will benefit from strong demand fundamentals, policy support and the government’s increased emphasis on infrastructure. With a sharp focus of the government in this sector and clarity in terms of target, efficient actions and so many policies in place, the future of the power sector looks bright.
 

Realty

The realty sector has shown significant growth recently, especially after the pandemic. Some of the prominent players from this sector such as Godrej properties, Phoenix Mills, Ganesh Housing Corporation, Anant Raj, Arvind Smart Spaces, Elpro International and Marathon Next Gen Realty have shown tremendous growth in net sales in H1FY23 over H1FY22. After the pandemic we have witnessed good growth in residential as well as commercial real estate. The Indian commercial real estate (CRE) office market saw net absorption of 8.7 million square feet in Q3CY22 i.e. July to September 2022 versus 9.6 million square feet in Q2CY22 i.e. April to June 2022. The period of 9MCY22 i.e. January to September 2022 posted net absorption at 24.2 million square feet compared to the pandemicimpacted years of CY20 and CY21, which each saw 20 million square feet of net absorption at the pan-India level. It is anticipated that net absorption will be 31.7 million square feet in CY22E and 33.5 million square feet in CY23E with the Bengaluru market likely to lead the way with annual net absorption of more than 10 million square feet in both years. In the Indian residential real estate post the pandemic, realtors are expecting increased rent and spike in revenue over the coming years. 

However, due to a rise in the raw material prices in H1FY23, decline in the operating profit margins was witnessed on a yearly basis. Companies such as Kolte-Patil Developers and Omaxe Limited saw large decline in profit. The presence of hybrid working models and the overall global macro slowdown may prevent annual net office absorption from reaching the pre-pandemic levels in CY19. Going forward, a focus on micro market portfolios rather than cities will be critical. With headline supply of 133 million square feet anticipated for completion between Q4CY22 to CY24E i.e. October 2022 to December 2024, headline vacancy levels at the pan-India and individual city levels are expected to climb further over the next 24-30 months. 

This is assuming annual net absorption runs between 30 and 35 million square feet. The individual micro markets and Grade A institutional supply in respective cities and micro markets would be prioritised. Rising interest rates coinciding with increased leasing activity is the current trend in this sector. During the pandemic-impacted years of FY21 to FY22, listed REITs in India displayed resiliency with over 100 per cent rental collections despite portfolio occupancies falling by 6-9 per cent over the same period. This was also an era when interest rates in India were at all-time lows and REIT managers took advantage of this opportunity to refinance debt at reduced rates in order to mitigate the impact of dropping occupancies. 

Financial Highlights

In November 2022, the realty index was seen consolidating throughout the month. The mixed global cues of weakening dollar index, positive inflation data and slowing rate hikes ensured that the sector moved choppily for the month. The sector, however, ended in green as concerns about rate hikes seemed to evaporate. The index heavyweights India Bulls Realty and DLF rose 7.5 per cent and 3.3 per cent in the month whereas stocks like Phoenix Mills and Oberoi Realty lost nearly a per cent each. 

Outlook

With interest rates rising globally and in India in FY23, cap rates for Indian office properties may rise to react to higher yield expectations. This rise in interest rates, however, corresponds with a predicted improvement in office leasing and an inflationary impact, resulting in higher market rentals which have remained stagnant for the last 24 months. The near-term distribution yields for Indian REITs over FY23-24E may appear low at 6-7 per cent. With three REIT listings in India, the way is clear for further prospective REIT listings in H2FY23. The scenario is that of 528 million square feet of occupied Grade A office stock in India as of September 22 and global institutional investors continuing to invest in annuity assets. 

Retail

The retail market in India has undergone a major transformation and has witnessed tremendous growth in the last 10 years. India ranks among the best countries to invest in the retail space. Factors that make India so attractive include the second-largest population in the world, a middle income class of ~158 million households increasing urbanisation, rising household incomes, connected rural consumers and increasing consumer spending. The Indian retail market is estimated to reach USD 2 trillion by 2032 while on the other hand the Indian e-commerce industry is expected to cross USD 350 billion by 2030, growing at a CAGR of 23 per cent. 

The retail sector recorded a strong Q1FY23 performance on the back of healthy footfalls surpassing the pre-pandemic levels as it was the first non- disrupted quarter in two years with strong demand owing to consumers refreshing their wardrobes. There was healthy growth momentum sustained in Q2FY23 on the back of end-of-season sales in July and festive demand in the latter period of the quarter i.e. the second half of September. However, August was relatively softer due to no major events while revenue traction improved rapidly from September onwards and continued to be strong in October also. To negate inflationary pressure, retailers across various categories have taken price hikes of 12-15 per cent in recent times. Higher average selling prices did have an impact on volumes for value fashion such as V-Mart. The segments of mid-premium to premium categories (ABFRL, SSL) were more or less insulated. We expect a similar demand trend to continue over the next quarters as well. During the quarter, retailers continued calibrated expansion of their store network with the opening of eight D-Mart stores, 25 Titan’s jewellery stores, 38 Titan Eye Care stores, 12 Zudio stores and 14 V-Mart stores. 

Financial Highights

Titan Limited and ABFRL delivered strong revenue growth. Titan’s has been a secular growth story with consistent market share gains in the jewellery space. Overall, the jewellery segment, including Carat Lane, is expected to register healthy 17 per cent revenue growth with three-year CAGR at 28 per cent in the coming quarters. The growth is impressive considering the previous quarter (Q2FY22) had a high base, which had elements of pent-up demand and spill-over purchases of a pandemicdisrupted Q1FY22. The segment of watches also witnessed strong demand with revenue growth of 20 per cent YoY in Q1FY23 with three-year CAGR at 5 per cent. 

Outlook

Avenue Supermarts’ consolidated revenues may grow 36 per cent YoY with three-year CAGR at 20 per cent in Q3FY23E. Revenue per sq. feet for D-Mart is expected to improve marginally QoQ to ₹ 8,400 but continues to remain below the pre-pandemic levels with Q2FY20 at ₹ 9,100 per sq. feet. Among apparel players, it is expected that Trent and ABFRL will outperform. Trent over the last few quarters has been reporting the industry’s best revenue growth driven by healthy store additions and recovery in same store sales growth. For ABFRL, it is expected that the Pantaloons division may report revenue recovery of 119 per cent of the pre-pandemic levels while lifestyle brands are expected to grow 28 per cent over the Q2FY20 levels. 

Telecom

With a subscriber base of 117 crore as of August 2022, the Indian telecom industry is the second-largest in the world. The industry is divided into the following sub-sectors: infrastructure, equipment, mobile virtual network operators (MNVO), white space spectrum, 5G, telephone service providers and broadband. With the aim of boosting domestic manufacturing, investments, and export of telecom and networking products, the Department of Telecommunications (DoT) announced the Production Linked Incentive (PLI) scheme on February 24, 2021. Small Industries Development Bank of India (SIDBI) was appointed as the Project Management Agency (PMA) for the PLI scheme. 

Coming into effect from April 1, 2021, the PLI scheme has been implemented within the overall financial limits of ₹ 12,195 crore for its implementation over a period of five years. There will be financial allocation of ₹ 1000 crore for the MSME category. While India aims to be a global leader in the telecom industry, one of the key challenges for some telecom industry players are imports of telecom gear from China, which are being routed through other neighbouring nations. These imports do not comply with ‘trusted source rules’ set by TRAI. 

To put this in perspective, the trusted source norms bars telecom networks from procuring any equipment from entities that are not notified as trusted sources by the National Cyber Security Coordinator. In order to curb such imports, the government shall undertake strict probing measures by way of setting up four to five task forces. As per Ashwini Vaishnaw, Union Minister for Communications and IT, respective task forces shall look after the following agendas: n Development of the component ecosystem. n Development of four or five chip sets, then taking those chips from design to production. n Development of highly skilled participants, workers and designers in the telecom sector. n Simplification of testing, certification and costeffectiveness. n Aggregation of demand under various government departments like railways, power and defence, and channelizing it to players who are manufacturing under the PLI scheme. 

Financial Highlights

Looking at the financial performance, in H1FY23, amongst the equipment providers, Affle (India) registered YoY sales growth of 64 per cent, the highest amongst its peers. In contrast, HFCL ’s net revenue slipped by 4 per cent YoY to ₹ 2,224.49 crore. In the telecom service providers group, Hathway Cable and Datacom , an Indian cable television service operator based in Mumbai, registered sales growth of 4 per cent YoY. Telco major Bharti Airtel reported revenue growth of 22 per cent YoY and net profit growth of 167 per cent during the same time period. 

Flagging off the 5G Era Looking at the events that have taken place in telecom industry in the recent past, the 5G spectrum auction and the subsequent rollout of 5G services were the notable ones. The 5G spectrum auction was held in the last week of July 2022. Reliance Jio Infocomm, the telecom arm of RIL, emerged as the top bidder in this auction. It acquired almost half of all the airwaves sold for more than ₹ 88,000 crore. Further, it was also the only one among four applicants to have acquired spectrum in the much coveted 700 MHz band. Bharti Airtel, the second-largest telecom company, spent ₹ 43,084 crore to acquire a total of 19.8 GHz of spectrum in the 900 MHz, 1,800 MHz, 2,100 MHz, 3,300 MHz and 26 GHz bands. The amount spent by Reliance Jio Infocomm is part of ₹ 2 lakh crore capex earmarked for roll-out of 5G services. The remaining amount shall be used for setting up 5G network infrastructure. Like Reliance Jio Infocomm, Bharti Airtel is also focusing on ambitious 5G plans. The latter aims to cover the entire country by end of March 2024. 

Outlook

On October 1, 2022, Prime Minister Narendra Modi launched the 5G telecom services in India, marking a new era in technology. This new technology aims to provide seamless coverage, high data rate, low latency and highly reliable communications system. It is expected that 5G services shall play a huge role in making India a USD 5 trillion economy by 2024-25. According to experts, 5G technology will have a cumulative economic impact of USD 1 trillion by 2035 and between the years 2025 and 2040 it can deliver an additional GDP of USD 150 billion for the country. Further, the establishment of task forces for curbing unauthorised imports shall provide support to the domestic players and strengthen them. This, along with the government’s PLI scheme provides the telecom sector the much-needed support for the industry to prosper.
 

Textiles 

The Indian textile industry is amongst the largest and finest textile industries in the world. With a rich history that can be traced back to the Indus Valley civilisation, each region produces its own distinct textile, for example, Kalamkari textile of Andhra Pradesh, Banarasi silk of Varanasi, Chikankari embroidery of Lucknow, and so on. By providing direct employment to 4.5 crore people, the textile industry is the second-largest employment provider in India after agriculture. At present, the domestic apparel and textile industry in India contributes approximately 2 per cent to the country’s GDP and 7 per cent of industry output in value terms. 

On a global scale, the Indian textile industry accounts for 4 per cent share in total production. The Indian textile industry enjoys abundance of raw materials, presence of complete value chains, competitive manufacturing costs and availability of skilled manpower. Factors like rising per capita income, increasing disposable incomes and enhanced focus on technical textiles are aiding the industry’ growth. On the flip side, the industry faces its fair share of challenges too. The country lacks good infrastructure facilities that, on the contrary, its global counterparts have access to. These infrastructure bottlenecks create an obstacle in attaining the desired capacity and efficiency of production. 

The textile factories in the country continue to remain labour-intensive as opposed to the textile factories abroad that are automated. Looking at the industry dynamics, the Indian textile industry has greatly benefitted from the China Plus One policy of European and US apparel brands, and the ban on Chinese cotton by the US. The shift in sentiment places India in a sweet spot. Analysing the performance of listed textile companies, many of them have delivered multibagger returns to its investors in the last 2-3 years. For instance, shares of KPR Mill appreciated by over 200 per cent since the start of January 2021. Similarly, shares of SEL Manufacturing Company climbed from ₹ 2.43 apiece on January 1, 2021 to ₹ 566.30 on December 5, 2022. 

Coming to the industry growth estimates, as per a report by the Confederation of Indian Industry (CII) and global consulting firm Kearney, by 2026, India’s textile exports are expected to grow by 81 per cent to USD 65 billion from the pre-pandemic level of around USD 36 billion in 2019. With this, it is estimated that the textile industry shall generate 75 lakh to 1 crore employment opportunities. As regards the government’s initiatives pertaining to the industry, the Government of India acknowledges the contributions made by the textile industry to the country’s GDP. It recognises the potential of the industry to create employment opportunities and its role in making India self-reliant. 

The government allows 100 per cent FDI in the sector under the automatic route. Also, in order to attract private equity and employ more people, the central government has introduced various schemes such as the Scheme for Integrated Textile Parks (SITP), Technology Upgradation Fund Scheme (TUFS) and Mega Integrated Textile Region and Apparel (MITRA) Park scheme. The Government of India has earmarked a corpus of ₹ 1,000 crore (USD 127.72 million) dedicated for research and development in the technical textiles sector. 

Under the Union Budget 2022-23, the textile sector was granted total allocation of ₹ 12,382 crore (USD 1.62 billion). Out of this, ₹ 133.83 crore (USD 17.5 million) was allocated to the Textile Cluster Development Scheme, ₹ 100 crore (USD 13.07 million) was allocated for the National Technical Textiles Mission and ₹ 15 crore (USD 1.96 million) each for PM Mega Integrated Textile Region and Apparel Parks scheme and the PLI scheme. The government allocated ₹ 700 crore for Amended Technology Upgradation Scheme (ATUFs) against ₹ 545 crore in the previous year. In the budget, the government strongly emphasised on infrastructure development and research and capacity-building. Also, a proposal was made for setting up of seven mega textiles parks under MITRA and duty reduction on nylon raw materials. An outlay of ₹ 10,683 crore was allocated to the industry under the PLI scheme for boosting India’s manufacturing capabilities and encouraging exports 

Financial Highlights

For this report we have considered the top 37 companies in terms of market capitalisation to assess the financial performance of the textile industry in H1FY23. The total market capitalisation of these companies is roughly about ₹ 2.5 lakh crore. The net sales in the textile industry grew by nearly 25 per cent on YoY basis. However, the operating profits declined by 7 per cent YoY. Subsequently, the PAT exhibited a declined of approximately the same quantum (6.9 per cent). Company-wise, in H1FY23, Swan Energy exhibited the highest top-line growth of 282 per cent. However, profits were marred by a steeper growth in expenses, particularly in the cost of materials consumed. Owing to this, the PBIDT (excluding other income) declined by 79 per cent YoY, and further incurred a net loss of ₹ 107 crore. 

Outlook

The industry has strong support from government via various schemes and initiatives and a strong global demand due to the China Plus One policy. Seeing the future potential, the Indian textile companies have already lined up investments for future capacity expansion. Companies like Trident, KPR Mills, Indo Count, Raymond and Mafatlal have announced significant investments in areas like home textiles, denim and garments. On the other hand, Indian players such as Arvind Mills, Welspun India, Alok Industries and Raymond have established themselves as ‘quality producers’ in the global market. This recognition would further enable India to leverage its position among global retailers. 

Click here to download Vital Financial Data of Top 1,000 companies 

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