Top 1000 Companies Financial Review For FY 24

Methodology

Presented herewith is the vital financial data of the top 1,000 companies by market capitalisation. This is in response to requests from our valued reader-investors for financial data and keeping our promise, we have laid out the relevant data that covers 24 sectors in an easily readable format. We are sure that the financial data by sectors along with the detailed view on sector dynamics will be an interesting read for you! We have sourced our financial data from Ace Equity. Please note that our list of the top 1,000 only includes companies that have reported their FY24 numbers as of June 4, 2024. We have also taken into consideration companies having year ending as of June, September and December, and clubbed them into fiscal year 2024 to maintain consistency.

Compiled by - Abhishek Wani, Ashwin Urkude, Aniket Gogate, Gyanesh Patodiya, Gaurav Taparia, Kamal Mansuriya, Manoj Reddy Sama, Praveenkumar Yadav, Pushkar Shinde, Siddharth Mane, Vaishnavi Chauhan and Vishwesh Sanas.[EasyDNNnews:PaidContentStart]

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Agriculture Sector

Food Aplenty Despite Challenges

When India became an independent nation 75 years ago, agriculture was the driver of the economy, contributing more than half of the nation’s GDP. Today, India remains one of the world’s largest and most diversified food producers, with agriculture accounting for more than 20 per cent of India’s income and remaining a central part of the economy. India’s agriculture sector boasts the second-largest agricultural land area in the world, generating employment for about half of the country’s population.

The country has the largest area planted for wheat, rice, millet and cotton, and is the largest producer of milk, coconuts, black tea, ginger, turmeric, pulses and spices in the world. It is also the second-largest producer of fruits, vegetables, tea, farmed fish, cotton, sugarcane, wheat, rice and cashew nuts. The country accounts for 10 per cent and 24 per cent of the world’s fruit and milk production, respectively.

The rise of agricultural technology in India has been fuelled by increased farmer awareness and rising internet and smartphone penetration in rural areas. Popular agricultural technology initiatives include ITC’s e-Choupal and ITCMAARS, SBI’s YONO Krishi and Mahindra’s digital platform for tractor rental.

The Government of India’s pilot schemes, such as soil health cards, digitally enabled direct benefit transfer and the national agriculture market, show its interest in the agricultural technology sector. Policies like the Pradhan Mantri Fasal Bima Yojana (PMFBY), which has become the largest crop insurance scheme in the world, and the introduction of 100 per cent neem-coated urea have resulted in a rise in urea production to 310 lakh metric tonnes from 225 lakh metric tonnes in 2014.

Financials

As of June 2024, the overall market capitalisation of agricultural stocks stood at ₹1.70 lakh crore, with Tata Consumer Products Ltd. holding a 61 per cent share. On a YoY basis from FY23 to FY24, Balarampur Chini Mills Ltd. showed strong financial performance, with sales, operating profit and net profit growth rates of 19.89 per cent, 68.07 per cent and 78.90 per cent, respectively. Bombay Burmah Trading Corporation Ltd saw triple-digit growth in profit after tax (PAT) in FY24 on a YoY basis.

Shree Renuka Sugar Ltd. and CCL Products (India) Ltd. experienced double-digit revenue and operating profit growth. The overall sales for FY24 marginally declined by (-) 0.64 per cent on a YoY basis, while PAT across the industry’s companies increased by 13.07 per cent on a YoY basis. All companies, except Andrew Yule and Company Ltd., were profitable at the operating level during FY24. Ten companies across the industry reported YoY growth in sales in FY24.

Within the industry, tea and coffee contribute 66 per cent of total market capitalisation, followed by sugar at 25 per cent and agriculture at 5 per cent.

Outlook

In rapidly advancing economies like India, nurturing the agricultural sector holds equal importance alongside the transformation of industries and digital infrastructure. According to a McKinsey report, agriculture could contribute around USD 600 billion to India’s GDP by 2030, an increase of 50 per cent over its contribution in 2020.

Efforts to usher in a new dimension of agricultural development must focus on enhancing the competitiveness of the sector by improving productivity, enabling value-addition, effectively linking farmers to markets, and promoting regenerative agriculture. Due to El Nino and La Nina, crop patterns have been affected, leading to volatile agricultural commodity pricing. However, the development of cold storage facilities would help manage supplies and store surpluses in a dynamic environment. The sugar industry is expected to benefit from an increase in the minimum support price (MSP) to the range of ₹40-41 per kg from October 2024.

The continuation of the ethanol policy and achievement of ethanol blending with fuel targets may create opportunities for the sugar industry in the coming years. The rising global awareness of millet-based food and a shift towards healthier dietary habits present potential for India’s agriculture sector. As the largest producer of millet, India has a significant role to play in this trend. Additionally, organic farmland in India covers around 59.1 lakh hectares. With rising consumption levels, the sector has an optimistic future.

Automobile & Ancillaries Sector

Moving into Top Gear

The Indian automobile industry has long been a reliable indicator of the country’s economic health, playing a crucial role in macroeconomic expansion and technological advancement. Dominated by the two-wheelers segment due to a growing middle class and a significant young population, the sector has witnessed substantial growth. The increasing interest of companies in rural markets has further fuelled this expansion.

In FY24, the Indian automobile industry posted 12.5 per cent growth, with total units reaching 23,853,463 compared to 21,204,846 units in FY23, according to the Society of Indian Automobile Manufacturers (SIAM). The passenger vehicle (PV) segment saw wholesale dispatches to dealers grow by over 8 per cent to 4,218,746 units from 3,890,114 units in FY23. The utility vehicle (UV) segment led this growth with a 26 per cent increase, reaching 2,520,691 units compared to 2,003,718 units in FY23. Two-wheeler wholesales also grew by over 13 per cent, totalling 17,974,365 units compared to 15,862,771 units in FY23.

However, commercial vehicle sales saw only a marginal increase of 0.6 per cent, with 967,878 units sold compared to 962,468 units in FY23. According to NITI Aayog and the Rocky Mountain Institute (RMI), India’s electric vehicle (EV) finance industry is projected to reach USD 50 billion (₹3.7 lakh crore) by 2030.

With several automakers investing heavily in various segments, India is on track to become the largest EV market by 2030, with a total investment opportunity exceeding USD 200 billion over the next 8-10 years. The Indian government has implemented several initiatives to encourage growth and foreign investment in the automobile sector. Key measures include allowing 100 per cent FDI under the automatic route and extending the Production Linked Incentive (PLI) scheme for automobile and automotive components by one year.

In January 2024, the Ministry of Heavy Industries (MHI) revealed plans to launch a new scheme to incentivise electric vehicle purchases and improve charging infrastructure. This aligns with the Interim Union Budget’s focus on eco-friendly transportation, with an allocation of USD 321.5 million (₹2,671.33 crore) for 2024-25. Under the second phase of the FAME India Scheme, a subsidy amounting to USD 6,968 million (₹5,790 crore) was awarded to EV manufacturers for the sale of 1,341,459 electric vehicles until January 31, 2024.

Financials

The financial performance of the Indian automobile and ancillary sector has been robust. The 85 companies in this sector recorded an average sales growth of 13.5 per cent for FY24, with an average operating margin of 28.8 per cent. The top five companies in the sector reported 17.7 per cent sales growth for FY24, with an average operating margin of 21.6 per cent, a 387 basis point increase from FY23. The average PAT margin for these top players stood at 12.8 per cent in FY24, up 200 basis points from FY23. Tata Motors’ net profit surged to ₹37,764.33 crore in FY24 from ₹479.20 crore in FY23, with revenue from operations growing by 27 per cent to ₹4.35 lakh crore.

Maruti Suzuki reported 19.9 per cent growth in net sales to ₹134,937.8 crore for the year ended March 31, with an 8.6 per cent increase in total sales to 2,135,323 vehicles. The company remained the top exporter of passenger vehicles for the third consecutive year. Mahindra & Mahindra recorded a consolidated PAT of ₹11,269 crore in FY24, up 25 per cent, with significant operating performance across multiple businesses. The automobile segment experienced profit growth of 2.5 times.

Outlook

The Indian automobile industry’s future looks promising, driven by factors such as the availability of skilled labour at low cost, robust research and development centres, and low-cost steel production. The sector offers substantial investment opportunities and provides direct and indirect employment to both skilled and unskilled labour. The EV industry alone is expected to create five crore jobs by 2030. To address the industry’s needs, the Ministry of Heavy Industries has extended the PLI scheme for automobile and automotive components.

This has attracted proposed investments of USD 8.1 billion (₹67,690 crore) against the target estimate of USD 5.1 billion (₹42,500 crore) over five years. By December 31, 2023, USD 1.6 billion (₹13,037 crore) had already been invested. In summary, the Indian automobile industry is on a robust growth path, supported by government initiatives, strong financial performance, and a positive outlook driven by technological advancements and increasing market demand.

Banking Sector

Surpassing the Targets

In FY24, the Indian banking sector surpassed the ₹3 lakh crore profit mark for the first time, supported by high credit growth, healthy fee income growth, and low credit costs. The GDP growth rate in FY24 exceeded estimates, growing at 8.2 per cent year-over-year (YoY). The banks remained well-capitalised, with 33 out of 35 banks having a capital-to-risk-weighted assets ratio (CRAR) of over 15 per cent, well above the 9 per cent regulatory requirement. The Reserve Bank of India (RBI) maintained a status quo on rates for the eighth consecutive time in June 2024’s Monetary Policy Committee (MPC) meeting.

It has forecasted GDP growth at 7.2 per cent for FY25. Notably, the MPC’s voting pattern on rate cuts has changed, with two out of six members voting in favour of a rate cut in June due to easing inflation compared to only one member in the previous meeting. This suggests the possibility of a rate cut in H2FY25. Inflation appears to be easing, with India’s retail inflation at its lowest in a year at 4.75 per cent in May 2024, and CPI inflation moderating to 4.8 per cent in April 2024 from 4.9 per cent in March and 5.1 per cent in February.

According to a BCG report on Indian banking, digital payments have surged substantially, with UPI transactions growing by 57 per cent YoY. There has been a significant shift from debit card to credit card usage, with credit card transactions doubling over the last three years and debit card transactions declining by 43 per cent YoY. S & P Global Ratings has revised its rating outlook on six Indian banks from ‘stable’ to ‘positive’, including HDFC Bank, State Bank of India, Axis Bank, ICICI Bank, Kotak Mahindra Bank and Indian Bank.

Financials

As of June 2024, the total market capitalisation of the banking sector is around ₹38.48 lakh crore. The top 10 banks account for over 87.5 per cent of this market capitalisation, with HDFC Bank leading with a 23 per cent share. The sector experienced tremendous growth, with total deposits at ₹204 lakh crore (13 per cent YoY growth, the highest in the last 10 years) and total net advances at ₹163.4 lakh crore (15 per cent YoY growth). Profitability also improved, with PAT growing to ₹3.2 lakh crore (29 per cent YoY), total income reaching ₹21.6 lakh crore, and net interest income at ₹7.8 lakh crore in FY24. All 24 banks reported double-digit growth in revenue, operating profit and net profit in FY24 YoY, except UCO Bank, which reported negative net profit growth. Axis Bank and PNB Bank reported triple-digit growth in operating profit and net profit. Eight out of 24 banks reported revenue of over ₹1 lakh crore in FY24.

Outlook

The GDP forecast for FY25 is in the 6.2-7 per cent range, and India’s good economic growth prospects will continue to support the asset quality of the banks. However, the banking sector faces a severe liquidity crunch, the highest in five years. India is transitioning from a nation of savers to investors, causing banks to face stiff competition not only from each other but also from mutual funds and other asset classes. S&P Global Ratings expects India’s banks to maintain strong financial performance over the next 12-24 months, predicting weak loans to decline to about 3 per cent of the gross loans by the end of FY25.

SBI’s chairman has advocated for tax relief on banks’ interest income in the upcoming budget, benefiting both banks and depositors. The ₹1 lakh crore interest-free loans for 50 years, aimed at fostering technology-driven growth and innovation in the financial technology sector, will continue in July’s full budget to boost banking technology. Artificial intelligence (AI) and blockchain are revolutionising Indian banking, offering AI-tailored financial products and services for enhanced efficiency and accountability.

Generative AI is particularly impactful, in identifying new customer segments, creating innovative financial products, and crafting realistic stress-testing scenarios. However, adopting new technology poses challenges due to stringent regulatory compliance for customer safeguards. Recent actions against Kotak Mahindra Bank and HDFC Bank emphasise the importance of addressing discrepancies in digital banking. Additionally, tighter regulations on personal loans and project finance in FY25 could hinder growth. Despite challenges, India’s banking system continues to benefit from strong economic growth and structural improvements, resulting in healthier balance sheets and increased resilience.
 

Capital Goods

Long-Term Growth Assured

India’s capital goods sector is poised for significant growth driven by substantial investments in infrastructure and the expanding power transmission and distribution network. This sector spans multiple industries, including engineering, construction and consumer goods, with a specific focus on heavy electrical and power equipment, earthmoving and mining machinery and process plant equipment.

Exports in heavy electrical and power equipment, earthmoving and mining machinery and process plant equipment collectively constitute 85 per cent of India’s total capital goods exports, highlighting its strong international competitiveness. Looking forward, the sector has ambitious targets for 2025, aiming for a production size of USD 112 billion.

The electrical equipment industry, encompassing generation and transmission and distribution equipment, is set to achieve USD 100 billion, while the transmission and distribution equipment segment targets USD 75 billion by 2025. These targets underscore the sector’s pivotal role in India’s industrial growth and economic development, bolstered by ongoing infrastructure investments and policy support aimed at fostering domestic manufacturing and global competitiveness.

Financials

As of FY24, 65 companies tracked in Capital Good sector have a total market capitalisation of ₹7,23,320.39 crore. Sales for FY24 reached ₹2,60,744.14 crore, marking a notable median year-on-year growth of 12.70 per cent from ₹2,33,406.34 crore in FY23. The operating profit for FY24 rose to ₹46,592.30 crore, up 19.79 per cent from ₹36,829.01 crore in FY23.

The sector’s operating profit margin went up by 209 basis points from 15.78 per cent in FY23 to 17.87 per cent in FY24. Similarly, profit after tax increased to ₹28,166.08 crore, reflecting an 18.80 per cent growth from ₹23,850.15 crore in the previous fiscal year. The PAT margin also grew for the sector by 58 basis points for FY24.

Outlook

The outlook for India’s capital goods sector remains promising, underpinned by sustained government and private sector investments in infrastructure and related industries. The government’s continued focus on capital expenditure, particularly in infrastructure, is expected to drive growth across the capital goods sector. This is evident from increasing capacity utilisation levels in the private sector and significant investment announcements across various industries, including power, automotive, semiconductors, batteries and electronics.

Post-election, markets welcome policy continuity and growthoriented strategies, bolstered by RBI's surplus transfer for capital expenditure, ensuring stability and investor confidence, further strengthening the outlook. Key initiatives such as the Production Linked Incentive scheme and efforts towards self-reliance in manufacturing are set to continue, providing a supportive environment for the sector.

In line with this, the NDA 3.0 government has begun work on the National Capital Goods Policy 2025 initiative. This initiative aims to address the shortcomings of the Capital Goods Policy 2016 and will position India as a global leader in capital goods. The Ministry of Heavy Industries has established a task force comprising 17 industry bodies and 15 ministries. This task force will focus on promoting manufacturing in various sectors, including defence, railways and steel, and explore new areas like automation, robotics, artificial intelligence and the Internet of Things.

The industry has proposed a new policy emphasising machinery crucial for energy transition, with a potential USD 120 trillion opportunity. This focused approach could significantly elevate India’s manufacturing GDP and exports, aiming to reduce heavy imports and position India as a major exporter. The revival of the capital investment cycle is working in favour of these stocks. Data for the top sectors indicates significant growth for capital goods, with market capitalisation rising from ₹1,34,396 crore in April 2024 to ₹1,52,850 crore in May 2024.

This represents a month-on-month increase of ₹18,454 crore or 13.73 per cent. In the wake of stable governance and ongoing economic policies, the focus on development in the sector remains steadfast, strengthening prospects for industrial and engineering companies. The Interim Union Budget’s continued emphasis on capital expenditure is anticipated to foster healthy growth, particularly in crucial segments like roads, railways, airports, seaports, waterways and logistics.
 

Chemical Sector

On a High-Growth Trajectory

The Indian chemical sector is a major contributor to the nation’s economic engine, contributing 7 per cent to the GDP. Encompassing a diverse range of products – from bulk chemicals and fertilisers to speciality chemicals, petrochemicals and polymers – the industry caters to various downstream sectors. The future of the Indian chemical sector appears bright, with estimates projecting a growth trajectory reaching USD 300 billion by 2025 and a staggering USD 1 trillion by 2040. This remarkable growth surge is fuelled by several key factors.

A burgeoning domestic market driven by a growing middle class with increasing disposable incomes is a significant growth trigger. This expanding consumer base translates to a heightened demand for various chemical-intensive products, encompassing pharmaceuticals, personal care items and construction materials. India’s youthful demographics further amplify this growth potential, presenting a vast and untapped market for the chemical industry.

Beyond domestic consumption, the China + 1 strategy is presenting a strategic opportunity for Indian chemical manufacturers. This global trend, which encourages diversification of sourcing beyond China, opens doors for Indian companies to capture a larger market share. The Indian government is further bolstering this opportunity through supportive policies like the Production Linked Incentive (PLI) scheme. This scheme aims to attract investments and incentivise domestic production, fostering a more robust and self-sufficient chemical industry.

However, the growth path is not without its challenges. A major hurdle for the Indian chemical sector is its high dependence on imports for critical raw materials. This vulnerability to price fluctuations and supply chain disruptions can significantly impact production costs and overall profitability. Additionally, the Indian chemical sector faces stiff competition from established players, particularly China.

To stay ahead of the curve, continuous innovation and cost-optimisation strategies are crucial for Indian companies. Another challenge comes in the form of increasingly stringent environmental regulations. While these regulations are necessary for sustainable development, they can also translate to higher production costs for chemical companies. To navigate this challenge, significant investments in clean technologies and environmentally responsible manufacturing processes will be necessary

Financials

For the fiscal year 2024, all the listed companies generated net sales of ₹4,52,351.34 crore, which was down by 12 per cent compared to ₹5,11,280.20 crore in FY23. Among the listed peers, UPL, Asian Paints and National Fertilizers clocked the highest sales. However, most of these companies posted a decline in sales. The operating profits of all the listed companies stood at ₹64,951.52 crore with a YoY decline of 19 per cent from ₹80,134.16 crore. The net profit came at ₹29,054.43 crore in FY24, down by 37 per cent YoY from ₹46,267.79 crore in FY23. This was mainly due to price erosion and strong competition from China.

Outlook

The global chemical industry experienced a slowdown in 2023, primarily due to destocking and other macroeconomic factors. However, a gradual recovery is anticipated in 2024, with India emerging as a potential frontrunner in this growth. Europe’s production outages, logistical challenges and energy inflation squeezed the profit margins for their speciality chemical producers. This has created a golden opportunity for Indian chemical companies. Their lower production costs make them more competitive, potentially attracting new orders and even production shifts from Europe to Asia.

Indian firms, especially those with integrated operations or niche markets, are well-positioned to gain a significant market share. The fiscal 2025 is expected to be a story of monetisation and restocking as volume traction improves across multiple end markets. However, uncertainties regarding pricing dynamics and competition remain. After a tough reset from the highs of fiscal 2023, Indian chemicals are expected to revert back to growth in fiscal 2025. Easing destocking intensity, stabilisation in price declines, pockets of restocking, increased competitive pressures and monetisation were the key messages out of earnings.

Recovery acceleration is still pegged for the second half of the next fiscal, especially for agrochemicals. While there is cautiousness on speciality chemicals, refiners, gas utilities and select commodity chemicals are preferred. Meanwhile, the near-term outlook for the agrochemical segment remains cautious due to high inventories of generic products globally. A rebound is expected in the second half of the current fiscal year. This recovery will likely be driven by factors like lower exports and gradual inventory liquidation across the global supply chain.

Looking at the long-term horizon, the Indian chemical sector exhibits a positive outlook. The government’s focus on import substitution, coupled with rising domestic demand and an increasingly export-oriented industry, is likely to propel the sector on a high-growth trajectory. Strategic initiatives like the PLI scheme and a focus on innovation will further empower Indian chemical companies to compete effectively in the global arena. In short, with chemicals becoming a mainstay product in the evolving lifestyle of Indians, the industry is bound to take a big leap forward.

Construction Materials Sector

Urbanisation Triggers Tremendous Growth

India’s construction material sector is a cornerstone of the nation’s economic growth, propelling infrastructure development and generating significant employment. The Indian construction material sector plays a pivotal role in fuelling the nation’s infrastructure boom. Rising urbanisation drive and real estate growth along with increasing disposable income are the main reasons for the surge in construction materials in India. In the Interim Union Budget 2024-25, capital investment outlay for infrastructure has been increased by 11.1 per cent to ₹11.11 lakh crore (USD 133.86 billion), which would be 3.4 per cent of the GDP.

The Smart Cities Mission and Housing for All programmes have benefited from these initiatives. The Smart City project is aiming to build 100 smart cities. In the Interim Union Budget FY24-25, it was mentioned that the Pradhan Mantri Awas Yojana (Grameen) is close to achieving the target of 3 crore houses, with an additional 2 crore targeted for the next five years. India is urbanising rapidly. By 2036, its towns and cities will be home to 600 million people or 40 per cent of the population, up from 31 per cent in 2011 with urban areas contributing almost 70 per cent to the GDP.

In India, the real estate sector is the second-highest employment generator after the agriculture sector. The real estate sector in India is expected to reach USD 1 trillion in market size by 2030, up from USD 200 billion in 2021, and contribute 13 per cent to the country’s GDP by 2025. The Indian construction material market is a diverse landscape, with various segments catering to different construction needs.

Here’s a breakdown of the major segments:

Cement - The undisputed king, cement accounts for the largest market share, playing a dominant role due to its crucial contribution to major construction projects. India is the second-largest producer of cement in the world. In 2023, the market size of India’s cement industry reached 3.96 billion tonnes and is expected to touch 5.99 billion tonnes by 2032, exhibiting a CAGR of 4.7 per cent during 2024-32.

Aggregates - Sand, gravel and crushed stones, collectively termed aggregates, are essential for creating concrete and are a significant segment of the market. The aggregates market is projected to register a CAGR of more than 6 per cent till 2029 from 2023. Steel: A vital material for structural support, steel plays a crucial role in construction, especially in high-rise buildings and bridges.

Ceramics, Sanitary ware and Marble - The India ceramic tiles market size is estimated at USD 9.20 billion in 2024 and is expected to reach USD 17.36 billion by 2029, growing at a CAGR of 13.54 per cent. The sanitary ware market size is estimated at USD 53.59 billion in 2024 and is expected to reach USD 74.80 billion by 2029, growing at a CAGR of 6.89 per cent. The marble market size is estimated at USD 20.81 billion in 2024 and is expected to reach USD 26.07 billion by 2029.

Timber - Though facing competition from alternative materials, timber remains a popular choice for furniture, doors and framing, particularly in residential construction.

Emerging Segments - The market is witnessing a rise in demand for new-age materials like prefabricated elements, ready-mixed concrete, and sustainable materials like fly ash bricks and recycled steel.

Financials

For the fiscal year 2024, the top two listed companies by market capitalisation from every industry of construction material generated net sales of ₹124,888.28 crore, up by 2.63 per cent compared to ₹121,682.76 crore in FY23. The operating profit stood at ₹24,421.79 crore with YoY growth of 19.95 per cent from ₹20,360.60 crore. The net profit came at ₹13,394.87 crore in FY24, up by 34.06 per cent YoY from ₹9,951.92 crore in FY23. Among the listed peers, mostly all the cement industry stocks clocked robust net profit growth along with ceramics, sanitary ware and marble stocks that showed an increase in PAT.

Outlook

The Indian construction material sector is poised for robust growth, driven by government initiatives, rising disposable income, and the burgeoning real estate sector. The adoption of sustainable practices and technological advancements will further propel this growth. India’s construction material sector stands tall as a key driver of the nation.

Consumer Durables

A Rising Demand Curve

The consumer durables industry is categorised primarily into two segments by product categories: major appliances and small domestic appliances. Major appliances, or white goods, include items like washing machines, televisions, refrigerators and air conditioners. Small domestic appliances encompass kitchen and cooking appliances such as mixer grinders, cookers, ovens and toasters. These also comprise household electrical appliances such as fans, lights, cables and wires, switches and switchgear, water heaters, kitchen appliances, and other small domestic appliances such as pumps, irons, etc.

The consumer durables market in India has shown remarkable growth from FY18 to FY23, reaching a market size of ₹1.3 lakh crore in FY23. Projections indicate that it will expand at around 14 per cent CAGR until FY28E. This surge is fuelled by increased rural consumption, shorter replacement cycles, and greater retail penetration. Factors such as changing consumer preferences and lifestyle patterns, rising disposable incomes, discounts, availability of easy finance, and a greater emphasis on convenience, comfort and energy efficiency have shaped consumer-buying behaviour.

The Indian government has also supported the industry by implementing several initiatives under the Production Linked Incentive (PLI) scheme to promote the manufacturing and consumption of home appliances through campaigns like ‘Make in India’ and programmes like the Bureau of Energy Efficiency (BEE) star rating to encourage the production of energy-efficient appliances. The demand for consumer durables in India is poised for significant growth, driven by several key factors. The booming middle class is a primary driver, with the World Economic Forum projecting a 2.8-fold increase in households earning over ₹550,000 per year and a 3.6-fold increase in those earning over ₹2.7 million per year.

Financials

As of June 2024, the overall market capitalisation of major consumer durable companies (18 companies) stood at ₹1.53 lakh crore. On a YoY basis between FY23 to FY24, these companies did not show much strong financial performance, with sales, operating profit and net profit growing at an average of 8.9 per cent, 15.3 per cent and 52.74 per cent, respectively. Nonetheless, the bottom line is inflated due to better profit growth posted by IFB Industries and Eureka Forbes. Their profit saw triple-digit growth in FY24 on a YoY basis along with Voltas. On a median basis, the profit growth was at 3.2 per cent on a yearly basis.

There were seven companies out of 18 companies that posted negative profit growth. These were mostly domestic appliance companies that saw negative growth in their net profit. Better growth in operating profit was due to stable raw material prices. Meanwhile, the prices of key input materials (copper, aluminium, etc.) have corrected significantly in the postpandemic period. Within the fourth quarter of FY24, the average LME spot copper prices were down by 5 per cent YoY, while the average aluminium spot prices are down 7 per cent YoY. Stable raw material prices and improving operating leverage helped toward an improvement in margins.

Outlook

The low ownership rates of essential appliances like air conditioners, washing machines and personal computers, particularly in rural areas, indicate a vast untapped market. Product upgrades and shorter replacement cycles will further fuel demand, as consumers transition from feature phones to smartphones, standard TVs to smart TVs, and semi-automatic to fully automatic washing machines. The growing need for multiple units of certain products, such as TVs and fans, will also bolster sales. Moreover, the durable goods sector demonstrates high resilience, supported by factors such as low ticket prices, the work-from-home trend, rising temperatures, and a reduction in other non-essential spending.

This combination of economic growth, rising incomes, and changing consumer behaviours suggests a robust outlook for the consumer durables market in India. We believe that the demand will further accelerate now that a stable government is back in place. The availability of consumer finance and cash-back offers draws consumers towards premium products. It has been seen that premium brands continue to garner market share. The emphasis on premium quality is clearly visible in product categories such as refrigerators, RACs and fans. Therefore, we believe such companies may perform better than others except for kitchen appliances that are yet to see a recovery in sales.

Electricals Industry

Painting a Promising Picture

The electrical industry is projected to reach a whopping USD 520 billion by 2025, driven by a surge in demand for electronic products – expected to hit USD 400 billion by 2025, up from USD 33 billion just a few years ago (FY20). This growth isn’t new – the market size has been steadily increasing, with a 14 per cent compound annual growth rate (CAGR) from 2016 to 2019. Even more impressive, the electronics system market is expected to more than double in size by 2025, reaching USD 160 billion. India is also actively working to reduce its reliance on imported electronics. While imports were high in FY23 (USD 73.46 billion), exports were on the rise (USD 22.68 billion in FY23).

Further, they continue to climb (USD 15.48 billion for the first half of FY24). Looking within the industry, the design segment is a bright spot. Growing at over 20 per cent annually, it is expected to make up an even larger share (27 per cent) of the market by 2025, up from 22 per cent in FY19. This indicates a growing domestic capability for designing electronic products. Overall, India’s electronics manufacturing industry is on a promising trajectory. With a booming domestic market, a growing design sector, and a push towards reducing reliance on imports, the future looks bright for this key sector.

Financials

India’s cable and electronics sector witnessed a mixed performance in FY24. Leading companies like Polycab India (highest market capitalisation at ₹43,109.86 crore) thrived, experiencing significant growth in both sales (up to 27.87 per cent) and profits (up to 36.63 per cent) compared to FY23. This positive trend extends to other major players like KEI Industries and Finolex Cables, indicating a potential upswing for the industry. However, the performance wasn’t uniform.

Some companies such as Universal Cables and Diamond Power Infrastructure faced declining sales and profits. This suggests pockets of struggle within the sector, possibly due to companyspecific factors or niche market variations. Despite the mixed bag, the strong performance of leading companies paints a promising outlook for the cable and electronics industry in India. It’s important to note that this is a limited snapshot, and a more thorough analysis would involve examining additional financial metrics and industry-specific nuances.

Outlook

Fuelled by a growing middle class, rising disposable incomes and falling electronics prices, India is experiencing a surge in demand for electronic devices. With this spike in demand for electronic products, the electronics system design and manufacturing (ESDM) sector in India is expected to reach ~USD 220 billion by 2025, expanding at a 16.1 per cent CAGR between 2019 and 2025. India has a goal of producing 1 billion mobile handsets worth USD 190 billion by 2025, with 600 million handsets worth USD 110 billion targeted for exports. The ESDM sector was valued at USD 90 billion in FY19 and is segmented into electronics systems (78 per cent) and electronics design. According to the India Electronics and Semiconductor Association, more than 90 per cent of semiconductor companies globally have their research and development centres in India. The semiconductor research and development generates about USD 2.5 billion in revenue and 6 lakh jobs in India. This growth is driven by a two-pronged approach: a rise in localised component sourcing and the growing presence of technology giants like Apple, Samsung and Lenovo.

Apple’s planned USD 40 billion investment and Samsung’s move to manufacture laptops in India exemplify this trend. This influx of global players, coupled with government initiatives like production incentives, is creating a massive opportunity for Indian EMS companies. The total addressable market is expected to reach USD 100 billion by FY27 as finished goods imports decline and domestic component production ramps up. This digital revolution is propelling the domestic ESDM sector toward a projected value of USD 220 billion by 2025.

The government is actively supporting this growth with initiatives like Make in India and Digital India, aiming to not only meet the domestic demand but also transform India into a major electronics exporter. India has a talent pool for chip design and a strong base of research and development centres for global semiconductor companies. With a target of USD 120 billion in electronics exports by 2026, India is well on its way to becoming a leading player in the global electronics market. However, a trade gap persists as imports of electronics goods still significantly outweigh exports.

Financial Services

High Potential for Wealth Generation

India’s financial sector is highly diverse and rapidly expanding, marked by strong growth from existing financial services firms and the entry of new entities. This sector includes insurance companies, non-banking financial companies (NBFCs), mutual funds, insurance and other smaller financial entities. Artificial intelligence (AI) and advanced technology have revolutionised the financial sector, ushering in significant changes and opportunities. Companies are rapidly integrating AI to enhance efficiency, accuracy and customer experience. This transformation is enabling more personalised services, automation of complex tasks, and an improvement in data analysis.

AI applications in finance include fraud detection, risk management, customer service and investment advisory. AI algorithms can identify suspicious activities in real time, assess credit risks accurately, and provide instant customer support through chatbots and virtual assistants. The financial sector’s inclusion of AI and other technologies is driving growth and innovation, creating new business models, streamlining operations, and increasing profitability. This shift is paving the way for a dynamic and promising future for the industry.

Financials

NBFCs in India have seen substantial growth, becoming a key player in the country’s financial landscape. This sector, encompassing housing finance, microfinance and consumer finance, has expanded due to factors like a growing middle class, improved financial inclusion, and supportive policy measures. Furthermore, there is an emphasis on the importance of digital tools in areas like collections, fraud management, and cyber and data security within the NBFCs. This addresses the challenges faced by the sector and proposes strategies to thrive in India’s competitive financial environment.

In terms of market capitalisation, Bajaj Finance Ltd. stands out as a leading company. In the fiscal year 2023-24, it achieved top-line revenue of ₹53,895.39 crore, marking a significant growth of 30.19 per cent on a yearly basis. Meanwhile, its bottom line for the same period reached ₹14,443.53 crore, reflecting an increase of 25.51 per cent. In the Small-Cap NBFC sector, Spandana Sphoorty Financial Ltd. stands out for its remarkable financial performance and innovative business ventures. Specialising in microfinance, the company provides small, unsecured loans to low-income customers in semi-urban and rural areas.

In the fiscal year 2023-24, Spandana Sphoorty reported a staggering growth of 3,940.02 per cent in net profit, reaching ₹500.72 crore. India ranks as the fifth-largest life insurance market among emerging economies, with an impressive annual growth rate of 32-34 per cent in the last few years. Life Insurance Corporation of India (LIC) stands out with a market capitalisation of ₹338,166 crore. The company had a mixed performance in FY24, with its net profit increasing slightly by 2.36 per cent to ₹36,844.37 crore. Similarly, ICICI Prudential Life Insurance Company Ltd. also experienced mixed results with a decline in its top line. However, its PAT saw a substantial growth of 33.89 per cent. Overall, in insurance, we have observed mixed performances.

Outlook

India’s financial services industry has experienced significant growth in recent years, a trend that is expected to continue. The country’s insurance market is anticipated to grow to USD 250 billion by 2025, offering an opportunity for an additional USD 78 billion in life insurance premiums from 2020 to 2030. In 2023, the government revamped the credit guarantee scheme, infusing USD 1.08 billion into the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to provide MSMEs with greater access to collateral-free loans. To boost the insurance industry, the government has implemented several initiatives.

The Interim Union Budget for 2024-25 focuses on enhancing value-addition in agriculture and boosting farmers’ income, including financial aid and crop insurance for millions of farmers. The Union Budget 2023-24 proposes limiting Income Tax exemptions on high-value life insurance policies and targeting policies with premiums up to ₹5 lakhs for tax exemption.

The Pradhan Mantri Fasal Bima Yojana (PMFBY) has significantly increased premium income for crop insurance, while the Ayushman Bharat (Pradhan Mantri Jan Arogya Yojana) (AB PMJAY) provides health coverage of ₹5 lakhs (USD 6,075) per family per year for hospitalisation. With the future potential of the Indian financial system, bolstered by technology and AI, and the rising scope of financial technology, the outlook for financial and insurance companies appears strong. Government initiatives are further boosting business, which will lead to the sector’s growth.
 

FMCG Sector

Focusing on Rural Markets

The Indian fast-moving consumer goods (FMCG) sector, the fourth-largest in the country, is a key driver of economic growth, consumption and job creation. Within the sector, household and personal care products contribute a significant 50 per cent share, followed by food and beverages at 31 per cent and healthcare at 19 per cent. Despite facing challenges like inflation, raw material cost and fluctuating weather patterns in FY24, the industry has witnessed a decent performance, driven by consumer demand, emphasis on premium products and rising product prices.

Urban India currently contributes around 65 per cent of the total FMCG revenue, while rural markets hold immense potential with a 35 per cent share. Good harvests, normal monsoon and government spending are expected to boost rural demand recovery in FY25, presenting a significant growth opportunity. The companies are actively focusing on expanding distribution networks and marketing strategies in rural areas to tap into this rising disposable income and growing aspirations.

Several key trends are shaping the future of the FMCG sector in India. Premium quality is a significant driver, with consumers increasingly opting for superior products that promote sustainable living, cater to specific needs, and enhance their shopping experience. Sustainable living is becoming a priority for both consumers and companies, with a growing demand for eco-friendly products and responsible sourcing practices. Healthy living is also a focus, with consumers seeking out products that contribute to their overall well-being.

Financials

The top 10 companies in terms of market capitalisation have reported sales growth of 4.286 per cent in FY24 on average. The operating profit rose 6.992 per cent on average while the net profit declined by 15.60 per cent on average. ITC Limited appears to be in the strongest financial condition with the highest sales of ₹76,275 crore and a net profit of ₹20,723 crore. HUL is in the second-highest position with sales of ₹61,896 crore but a lower net profit of ₹10,282 crore compared to ITC.

Expecting a gradual improvement in FMCG demand, HUL is planning for a low single-digit price increase in the second half of the financial year. The company is also targeting a 23-24 per cent EBITDA margin band, with a focus on maintaining current levels in the short term and modest margin improvement in the medium to long term. Varun Beverages Limited has reported ₹16,042 crore in sales and a healthy operating profit of ₹3,712 crore with a net profit of ₹2,102 crore. The company is expecting favourable operating and financial leverage in CY25.

Britannia Industries Limited reported sales of ₹16,546 crore, which grew by 1.51 per cent and operating profit growth of 11.07 per cent. The company reported a 7.72 per cent decline in profit on a YoY basis. Britannia Industries is aiming for double-digit volume growth in FY25, expecting a rebound in consumer demand. Godrej Consumer Products Limited posted sales of ₹13,974 crore, which grew by 4.94 per cent on a YoY basis, while it posted a net loss of ₹560 crore in FY24.

Outlook

The Indian FMCG sector is on the path to recovery, although a full bounce-back, particularly in rural areas, might take some time. There are positive signs though. Inflation is easing, the upcoming Rabi harvest looks good, government spending is rising, and the monsoon rains are expected to be normal. All this should put more money in the consumers’ pockets and boost spending. Softening raw material prices like palm oil, PET and wheat will improve margins for FMCG companies in the coming quarters. If they pass on these savings to customers, we could see higher sales volume.

However, companies might also use some of these gains in advertising to drive long-term volume growth, potentially impacting margins in the short term. Additionally, they are expected to reinvest in new product launches. Overall, the outlook for FMCG in India remains positive. We can expect gradual improvement fuelled by good monsoons, rising disposable income and increasing consumption. Companies are focusing on strategies to win over rural customers and improve margins through cost-efficiency and volume growth. Rural markets are expected to be a key driver of this growth.

Healthcare Sector

Maintaining Profitable Fitness

Healthcare has emerged as one of India’s most expansive and significant sectors, both in terms of revenue and jobs. It includes hospitals, medical devices, clinical trials, outsourcing, telemedicine, medical tourism, health insurance and medical equipment. India’s healthcare system has two main parts: public and private. The public healthcare system, run by the government, focuses on basic healthcare services through primary healthcare centres (PHCs) in rural areas and offers limited secondary and tertiary care in key cities.

On the other hand, the private sector provides most of the secondary, tertiary and advanced care, with a strong presence in major cities and smaller urban areas. India’s strength in healthcare comes from its large number of well-trained medical professionals. The country is also more cost-effective compared to others in Asia and the West. Surgery in India costs about one-tenth of what it does in the US or Western Europe. This low cost has boosted medical tourism, attracting patients from around the world. Additionally, India has become a hub for research and development for international companies due to the relatively low cost of clinical research.

Financials

Over the past year, the S & P BSE Healthcare index has exhibited remarkable growth, surging by 47 per cent. Sun Pharmaceutical Industries Ltd., a market leader in terms of market capitalisation, reported revenue of ₹47,758.45 crore, an 8.82 per cent increase from the previous year. The company’s net profit stood at ₹9,648.44 crore in FY24, growing by 12.70 per cent. Looking ahead, Sun Pharmaceutical Industries expects high single-digit growth in its consolidated revenue for FY25. The company plans to invest in several businesses this year and allocate 8-10 per cent of sales for research and development investments next year.

Lupin Limited, with a market capitalisation of ₹29,477.18 crore, has significantly outperformed its peers. The company reported a remarkable 332 per cent increase in net profit, reaching ₹1,935.57 crore in FY24. Lupin’s US business maintained strong performance, generating over USD 200 million in revenue. Additionally, the company acquired two established brands from Sanofi for Europe and Canada. Lupin is focusing on developing and manufacturing biosimilars, and building a portfolio for long-term benefits. The company is also investing around ₹450-500 crore in infrastructure for biosimilars.

On the flip side, Divi’s Laboratories Ltd. has posted a mixed performance. Its total sales increased slightly by 1 per cent, but net profit dropped by 12.25 per cent due to pricing constraints in the generic business segment. Despite these challenges, the company is exploring new projects and opportunities. It has completed regulatory submissions for future generics in various countries and is planning a long-term supply agreement with a multinational corporation. Additionally, Divi’s Laboratories is working on new technologies like flow chemistry, mechanochemistry and microwave technology to enhance cost efficiency and support green chemistry initiatives.

Outlook

India’s healthcare sector is highly diversified and presents numerous opportunities across various areas, including providers, payers and medical technology. With increasing competition, businesses are exploring new trends and dynamics that can positively impact their operations. Several growth drivers are propelling this sector forward. Robotic process automation (RPA) is improving the efficiency of the healthcare workforce, reducing costs and creating value. Additionally, the burden of non-communicable diseases (NCDs) is significant, accounting for 50 per cent of the disease burden and 60 per cent of all deaths in India.

This shifting disease burden underscores the need for continued advancements and investments in healthcare. The Interim Union Budget for 2024-25 allocated substantial resources to the healthcare sector. The Ministry of Health and Family Welfare received ₹90,659 crore (USD 10.93 billion), a 1.69 per cent increase from the previous year’s allocation of ₹89,155 crore (USD 10.75 billion). Key allocations include ₹2,400 crore (USD 0.29 billion) for the Pradhan Mantri Swasthya Suraksha Yojana (PMSSY), ₹5,016 crore (USD 0.60 billion) for human resources for health and medical education, ₹38,183 crore (USD 4.60 billion) for the National Health Mission and ₹7,500 crore (USD 0.90 billion) for Ayushman Bharat – Pradhan Mantri Jan Arogya Yojana (AB-PMJAY).

These investments reflect the government’s commitment to strengthening the healthcare system and addressing the evolving health needs of the population. Furthermore, after examining various companies and government initiatives, it is evident that the healthcare sector is poised for growth in the near future. This favourable environment is likely to boost business activities, leading to increased sales and profits. Consequently, we can expect a positive movement in the share prices of healthcare stocks.

Hospitality Sector

On the Move

FY 2023-24 was a year of record results and growth for the tourism industry, driven by favourable demographics, increasing employment, higher disposable incomes of a young middle class, robust domestic demand, increased investments and improving infrastructure and connectivity. The Ministry of Tourism of the Government of India initiated several schemes such as Swadesh Darshan, PRASHAD, UDAN and Dekho Apna Desh to promote domestic travel. As many as 50 tourist destinations are in the pipeline for being developed to provide a wholesome tourism experience under the Swadesh Darshan scheme.

Similarly, the PRASHAD scheme aims at the development of select pilgrimage destinations in the country. Additionally, several states of India have also undertaken initiatives and investments to promote local tourism. The government’s electronic visa facility now covers practically all the countries of the world, including foreign nationals of 166 countries, and is valid for entry at 28 designated airports and five designated seaports of India. India’s remarkable economic growth, coupled with transformative changes, has had a positive impact on the tourism and hospitality sectors, ushering in a golden era.

Financials

The Indian Hotels Company Ltd. (IHCL) has the highest market capitalisation of ₹84,172.76 crore among the companies listed in the table. The company’s sales increased 16.50 per cent from ₹5,809.91 crore in FY23 to ₹6,768.75 crore in FY24. IHCL’s profit before tax (PAT) also grew by 23.69 per cent, from ₹1,201.59 crore to ₹1,483.46 crore during the same period. EIH Ltd. and Chalet Hotels Ltd. also showed significant growth in their PAT between FY23 and FY24. EIH Ltd.’s PAT grew by 89.85 per cent from ₹339.17 crore to ₹643.90 crore, while Chalet Hotels Ltd.’s PAT increased by 51.77 per cent from ₹183.29 crore to ₹278.18 crore.

However, Restaurant Brands Asia Ltd. and Barbeque-Nation Hospitality Ltd. witnessed a decline in PAT. Restaurant brand Asia Ltd.’s PAT dropped from (₹241.80) crore to (₹236.74) crore, while Barbeque-Nation Hospitality’s PAT declined by 158.36 per cent from ₹19.15 crore to (₹11.18) crore. Sales for Thomas Cook (India) Ltd. increased significantly by 44.61 per cent from ₹5,047.67 crore to ₹7,299.35 crore between FY23 and FY24. The company’s PAT also increased by 136.82 per cent from ₹10.37 crore to ₹247.10 crore during the same period.

Outlook

The Indian hospitality industry is poised for remarkable growth driven by long-term demand. The notable drivers of this growth include (a) improved connectivity with new airports and national highways across the country, (b) an increase in business travel led by buoyant economic conditions, new convention centres and global capability centres, and (c) recovery of foreign tourist arrivals, additional middle-income households and a clearly visible trend of stress on premium quality leading to higher demand for leisure destinations.

The advent of spiritual tourism, weddings in India, a resurgent MICE (meetings, incentives, conferences and exhibitions) tourism surrounding recent and upcoming convention centres and growing wildlife tourism have given rise to new destinations and circuits providing a strong impetus to growth. Continuing infrastructure development projects within the country, growth in air and railway passenger traffic and growth in demand are expected to provide a long and sustainable upward cycle for hospitality in India. Growth in the demand for branded rooms is expected to outpace growth in the supply of those rooms.

A report from Horwath HTL estimates growth in all-India demand at 10.6 per cent till 2027, with growth in key leisure markets at 13.3 per cent. Supply, on the other hand, is estimated to grow at 8 per cent with 60 per cent of the supply outside the top 10 destinations – (Source: Horwath HTL and UBS Global Research). While challenges such as inflation and geopolitical tensions persist, proactive government support and policies, alongside a renewed focus on sustainability, are likely to bolster the sector’s resilience and foster sustainable growth in the coming fiscal year.

Growth in India’s services sector and higher disposable income of people working in it referred to as ‘affluent India’, are also expected to increase the demand for holidays. Companies like Indian Hotels Company and Lemon Tree Hotels are adding new hotels, mostly through management contracts. IHCL signed three new hotels in May alone, while LTH added two hotels. Royal Orchid also joined the party, opening another hotel in May. This rapid growth in rooms under their control positions these established hospitality companies for strong future earnings as they will have more properties to manage and earn from.

Information Technology

Witnessing a Slow Turn

The information technology (IT) and business process management (BPM) sector has emerged as a major driver of growth for the Indian economy, playing a crucial role in boosting the country’s GDP and enhancing public welfare. Contributing 7.5 per cent to the nation’s GDP in FY23, it is projected to increase its contribution to 10 per cent by 2025. India dominates the global sourcing landscape with 57 per cent share of total sourcing globally, and the sector accounts for 38 per cent of the country’s total services exports.

Additionally, 60 per cent of the firms worldwide, with a majority of them on the Forbes 500 list, utilise India for their testing services. India is a top choice for establishing global capability centres (GCCs), with over 1,580 GCCs currently in the country and a talent pool exceeding 1.66 million. By 2025, more than 45 new data centres are expected to be set up. Additionally, there are 286.94 million registered users on DigiLocker in India. India’s technology industry’s revenue reached USD 253.9 billion at the end of the 2024 fiscal year, growing at a slower year-on-year rate of 3.8 per cent.

According to the Annual Strategic Review report by the National Association of Software and Service Companies, India’s IT exports grew by 3.3 per cent in constant currency, reaching USD 199 billion in FY24. This growth rate is significantly lower than 11.4 per cent recorded the previous year, marking one of the lowest growth rates in the industry’s history. Between April 2000 and December 2023, the computer software and hardware sectors attracted an FDI equity inflow of USD 98.32 billion.

Financials

The top three companies in the sector by market capitalisation and revenues are Tata Consultancy Services (TCS), Infosys and Wipro, in that order. Overall, the sector reported moderate 16.93 per cent, with a median of 11.23 per cent among the 65 companies considered for analysis. However, the top three IT companies have underperformed relative to these benchmarks, failing to match the average and median growth rates of the industry.

In terms of profitability, the industry saw an average operating profit increase of 29.34 per cent compared to the previous year, with a median increase of 20.21 per cent. The average change in net profit stood at an impressive 84.57 per cent, while the median was significantly lower at 20.15 per cent. This substantial disparity between the average and median increase in change in net profit highlights the performance variation within the industry. This variation is largely due to a few standout companies, such as Info Edge and 63 Moons Technologies, which have reported change in net profit exceeding 1,000 per cent.

These outliers have significantly skewed the average figures, creating a notable difference between the average and median of change in net profit. The three major software service exporters – TCS, Infosys and Wipro – reported a combined decline of 63,759 in their headcount numbers during FY24. These IT giants also noted a sequential decrease in attrition rates, highlighting employment and hiring trends due to weak global demand and reduced discretionary spending. Notably, this growth in FY24, experiencing an average revenue growth of marks the first time in their history that these companies have experienced a full-year drop in headcount.

Outlook

A new wave of dynamism in technology is compelling the industry to develop AI strategies to stay competitive. In FY 2024, IT companies witnessed generative AI beginning to reshape the sector. The marketplace is rapidly evolving, marked by intense competition in traditional services and the rise of new players specialising in niche technologies. Clients and prospective clients of IT firms are encountering transformative business opportunities driven by advancements in software and computing technologies. These organisations face the challenge of quickly reinventing their processes and systems to keep pace with the AI era.

Despite these advancements, the global IT services industry remains highly fragmented, with even the largest providers holding only a single-digit market share. A look at the trend reveals that companies will have a rise in short-term cost and AI will require significant investments in research, development and talent acquisition. There is growing potential for mergers and acquisitions as larger IT firms look to acquire smaller players with niche AI expertise. Market volatility is expected as new AI players emerge. Investors will reward IT firms with clear AI strategies and a history of innovation.

Infrastructure

Marching Towards Global Standards

India’s infrastructure sector is on the edge of significant growth, driven by substantial investments and ambitious government initiatives. The government has allocated ₹11.11 lakh crore to the infrastructure sector for FY25, representing 3.4 per cent of the GDP. The National Infrastructure Pipeline (NIP) project, launched in 2020, aims to invest ₹111 lakh crore between 2020 and 2025, averaging nearly ₹22 lakh crore annually. This ambitious plan prioritises sustainable development and improved connectivity across various sub-sectors.

These sub-sectors include energy, roads, railways and urban development. From 2014-15 (FY15) to 2022-23 (FY23), the length of national highways increased from 98,000 kilometres to 145,000 kilometres, cargo traffic at major ports rose from 581 million tonnes to 784 million tonnes, and the electrified rail route expanded from 22,224 kilometres (FY15) to 50,394 kilometres (2021-22). The aviation sector has also witnessed remarkable growth, with the number of airports doubling from FY15 to FY23.

The need for sustainable infrastructure solutions is a key driver. The development of infrastructure will also contribute to the government’s Smart Cities programme with connectivity and housing being a part of the overall growth plan.

This includes increasing the use of renewable energy sources, expanding the road network for better physical connectivity, and catering to the rising demand for residential and commercial real estate. Policymakers are actively involved, implementing regular interventions that are attracting investor interest. As a result, private players in the infrastructure sector are experiencing healthy credit risk profiles, with stronger execution and funding capabilities.

Financials

According to data from 33 companies across the infrastructure sector, the industry has demonstrated robust performance in recent years. As of FY24, the sector’s total market capitalisation stands at ₹6,76,640.86 crore, underscoring its substantial presence in the Indian economy. Sales for FY24 reached ₹4,24,607.59 crore, marking a notable year-on-year growth of 17.18 per cent from ₹3,62,365.47 crore in FY23. The operating profit for FY24 rose to ₹46,592.30 crore, up 19.79 per cent from ₹36,829.01 crore in FY23.

The operating profit margin increased by 209 basis points from 15.78 per cent in FY23 to 17.87 per cent in FY24. Similarly, profit after tax (PAT) increased to ₹28,166.08 crore, reflecting an 18.80 per cent growth from ₹19,763.23 crore in the previous fiscal year. PAT margin growth remained flat in FY24.

Outlook

The future of India’s infrastructure sector is bright, with planned investments amounting to USD 1.4 trillion by 2025. The government’s ambitious NIP programme aims to inject massive capital into various sub-sectors, fostering associated industries, job creation and overall economic stimulation. The surge in infrastructure development will focus on creating sustainable infrastructure, adding green power to the energy mix, and improving physical connectivity through a denser road network.

The key focus areas include the expansion of public digital infrastructure, clean and renewable energy projects, and resilient urban infrastructure. Policy continuity and growthoriented policies post-election are perceived positively by the markets, ensuring stability and reinforcing investor confidence. The airport infrastructure sector is a standout performer, growing at twice the rate of the GDP. This has attracted investor interest, with many seeking direct involvement in the sector’s growth story. Another significant trend is energy transition, which refers to the shift towards sustainable sources of energy production, transportation and use. Additionally, the government’s proposed capital expenditure emphasises the renewable energy and road sectors, reflecting the bulk of current transactions and investment activities.

This highlights the importance of maintaining a diversified focus across sectors to ensure balanced growth and sustainability. The government has launched a pipeline of 53 projects valued at ₹2.2 trillion to be bid under the buildoperate-transfer (BOT) model, which, along with private participation, is expected to meet the highway-awarding target. Despite challenges like the NPA crisis from the previously awarded projects, the government has amended clauses in its model concession agreement to attract private investment and boost sector confidence.

Metal & Mining

Boosting the National Economy

The iron and steel industry in India stands as a powerhouse in the global market, currently positioned as the second-largest steel producer worldwide with an installed capacity of 161.3 million tonnes (MT) in FY23. The country also ranks as the second-largest consumer of finished steel, with a consumption of 120 MT in the same fiscal year. The Industry in India contributes around 2 per cent of the Gross Domestic Product (GDP). The industry is crucial to sectors such as infrastructure, real estate and automobiles, benefiting from the domestic availability of raw materials like iron ore and cost-effective labour.

In recent years, the industry has seen substantial growth, driven by rising domestic demand and government investments in infrastructure. Domestic crude steel production has grown at a compound annual growth rate (CAGR) of 3.3 per cent over the past five years, reaching 126.3 MT in FY23. Finished steel production has also increased, growing at a CAGR of 4.8 per cent to 122.3 MT in FY23, supported by strong demand in the domestic market.

Despite global challenges, including the Russia-Ukraine war and inflationary pressures, the Indian steel industry has demonstrated resilience. The National Steel Policy 2017 aims to boost production capacity to 300 MT by FY31 to meet the projected demand of 230 MT. The per capita finished steel consumption in India, currently at 81.1 kg, is expected to rise significantly, driven by economic growth and infrastructure development.

Moreover, India’s steel exports, although impacted by recent geopolitical tensions and government policies, have shown potential with a notable increase in production capacity. With major players like Tata Steel, JSW Steel, and Hindalco at the forefront, the industry is well-positioned for continued growth and to play a pivotal role in India’s economic future.

Financials

The Indian iron and steel industry has exhibited a mixed performance in the fiscal year 2024 (FY24) compared to the previous year. JSW Steel, one of the leading steel producers in the country, has reported a strong performance in FY24. The company's sales increased by 3.99 per cent, while its operating profit and net profit witnessed significant jumps of 49.36 per cent and 120.95 per cent, respectively, compared to the previous year. This growth can be attributed to JSW Steel's focus on value-added products and higher exports, which helped offset the impact of lower domestic demand and rising input costs.

In contrast, Tata Steel, another major player in the industry, faced challenges during the same period. The company's sales declined by 6.60 per cent, and its operating profit and net profit dropped by 27.67 per cent and 160.08 per cent, respectively. The weak demand in both domestic and international markets, coupled with higher input costs, weighed heavily on Tata Steel's financial performance.

The non-ferrous metal companies in the industry also experienced a mixed performance. Hindustan Zinc saw a decline in its sales, operating profit, and net profit by 17.64 per cent, 22.00 per cent, and 26.18 per cent, respectively. Similarly, Vedanta reported a 3.74 per cent decrease in sales, a 1.27 per cent increase in operating profit, and a 48.04 per cent drop in net profit. The performance of other steel companies, such as Jindal Steel & Power, Steel Authority of India, and APL Apollo Tubes, was also varied, with some reporting growth in sales and profitability, while others faced a decline.

Overall, the Indian iron and steel industry navigated through challenges in FY24, including a slowdown in demand, higher input costs, and global economic uncertainties.

Outlook

India’s steel consumption is projected to grow by 9-11 per cent year-on-year in FY24, driven by demand from construction, real estate, railways, roads, capital goods and consumer durables. By FY26, consumption is expected to reach 151-155 MT, with a CAGR of 7-8 per cent. This growth will be fuelled by increased construction activities, sustained momentum in real estate and automobiles, and government investments in infrastructure.

Government initiatives such as the increase in capital expenditure for infrastructure to ₹14.91 lakh crore in the Union Budget 2023-24, a ₹2.93 lakh crore capital outlay for Indian Railways, and the Production Linked Incentive (PLI) scheme for specialty steel are expected to boost domestic steel demand. The Domestically Manufactured Iron and Steel Products (DMISP) Policy also benefits the industry by giving preference to domestically produced materials in government tenders.

India’s vast coastline supports exports and imports, making it a leading country in the global steel industry. However, challenges include high logistics costs due to a skewed inter-modal mix towards road transport and infrastructure constraints. The government is addressing these challenges through the Steel Scrap Recycling Policy, the PLI scheme, and measures to ensure raw material security. Overall, the outlook for the Indian iron and steel industry remains cautiously optimistic, with the sector expected to significantly contribute to the country’s future economic growth.

Logistics, Ports & Shipping Industry

Sailing on Smooth Waters

In the fiscal year 2023-24, major ports in India handled over 819.3 million tonnes of cargo, showing a year-onyear growth of 5 per cent from 783.5 MMT in FY23. Non-major ports also saw a significant increase in capacity, rising to 721.05 MMT in FY24 from 416.97 MMT in FY14. India is strategically located on global shipping routes, with a coastline of approximately 7,517 km. As of 2021, India commanded over 30 per cent of the global market share in the ship-breaking industry, boasting the largest ship-breaking facility in the world at Alang in Gujarat.

To support the shipping and port industry, the government has introduced various incentives, both fiscal and non-fiscal, for enterprises involved in developing, maintaining and operating ports, inland waterways and shipbuilding. The Maritime India Vision 2030, launched in 2021, outlines over 150 initiatives to strengthen the Indian maritime sector. Another key initiative is the Sagar Mala Programme, introduced in 2017, which aims for port-led development and the growth of logistics-intensive industries. The programme plans to invest USD 123 billion across 415 projects.

The logistics sector in India experienced growth in FY24, driven by increased mobility, stable domestic consumption and strong investment demand. Certain factors like improved e-commerce sales, the government’s focus on infrastructure projects and the expanding rural market boosted road logistics’ demand. However, challenges such as high inflation, rising interest rates and uncertain global demand impacted domestic demand. The sector faced difficulties in passing on increased operating costs due to stiff competition, thereby affecting the profit margins.

Financials

An analysis of the top 20 companies in the ports, shipping, and logistics sector reveals mixed performance in FY24 compared to FY23. While the ports and shipping sector showed growth in financial metrics, most logistics companies witnessed a fall in financial metrics. The aggregate revenue for FY24 reached ₹96,112.9 crore, slightly higher than ₹95,509.9 crore in FY23. The operating profit increased by 12.4 per cent from ₹27,270.4 crore to ₹30,653.20 crore, while profit after tax rose by 24.1 per cent from ₹11,727.9 crore to ₹14,558.2 crore.

Adani Ports contributed significantly to these results, with sales growth of 28.1 per cent, operating profit up by 19.1 per cent and net profit soaring by 50.3 per cent. Gujarat Pipavav Port Ltd. saw moderate growth, with sales up by 7.8 per cent, operating profit increasing by 17.1 per cent and net profit rising by 6.2 per cent. Aegis Logistics Ltd. experienced a sharp sales decline of 18.3 per cent but its operating profit and net profit grew by 29.5 per cent and 31.6 per cent, respectively.

Container Corporation of India Ltd. recorded mid-single-digit growth in all metrics – sales (5.9 per cent), operating profit (6.8 per cent) and net profit (5.0 per cent). Seamac Ltd. emerged as a top performer with a remarkable sales growth of 66.8 per cent and substantial increase in operating profit and profit after tax of 84.7 per cent and 259.5 per cent. Delhivery Ltd. saw a 12.7 per cent rise in sales and has improved its operating profit and profit after tax by 495 per cent and 74.4 per cent. Some of the underperformers from this sector included Mahindra Logistics, Allcargo Logistics, Navkar Corporation and Blue Dart.

Outlook

The Sagar Mala Programme and Maritime India Vision initiatives aim to unlock additional potential, including generating USD 2.7 billion in annual revenue from existing assets and creating 2 million direct and indirect jobs by 2030. The Indian port industry looks promising, supported by 100 per cent FDI allowed under both government and automatic routes. The Global Maritime India Summit 2023 attracted ₹10 lakh crore in investment, marking a significant step towards the ‘Amrit Kaal Vision 2047’, which targets ₹80 trillion in investment. This increase in investments and cargo volume is a testament to the bright future that lies ahead for India’s port industry.

The Indian logistics industry is set for robust growth, driven by a thriving e-commerce market and technological advancements. The sector is expected to account for 14.4 per cent of India’s GDP at the end of FY24. Urbanisation, rising consumer demand, better infrastructure and narrowing of the spending gaps between rural and urban areas, along with the importance of Tier II and Tier III cities, are the key growth drivers.

Employing 22 million people, the logistics industry serves as the backbone for various businesses. Valued at USD 250 billion in 2021, it is projected to grow to USD 380 billion by 2025, with a healthy annual growth rate of 10-12 per cent. With the government’s focus on improving infrastructure and the rise of e-commerce, the logistics sector is expected to be a major driver of economic growth in India.

Media & Entertainment Industry

Driven by Robust Demand

The Indian entertainment and media industry is one of the country’s fastest-growing sectors, showcasing a highly competitive landscape with over 40 diverse content providers. This vibrant industry encompasses various segments, including television, radio, print, films, digital advertising, music, out-of-home (OOH) advertising, animation and VFX, gaming and live events. The industry’s growth trajectory is impressive, with expectations of 9.7 per cent annual revenue increase, aiming to reach USD 73.6 billion by 2027.

The video OTT market, dominated by major players like Amazon Prime Video, Netflix, and Disney + Hotstar, is set to double its revenue from USD 1.8 billion in 2022 to USD 3.5 billion by 2027. India has an estimated 481 million OTT users and 101.8 million active paid subscriptions. India stands out as the world’s largest mobile gaming market in terms of app downloads. Transaction-based game revenues surged significantly, and the sector is projected to grow by 20 per cent annually to reach ₹231 billion by FY25.

The country boasts the largest fantasy sports market globally, with a user base of 180 million, and the industry is expected to grow at a CAGR of 33 per cent, reaching ₹25,300 crore by FY27. Over the past five years, Indian gaming has attracted USD 2.8 billion in funding from domestic and global investors, marking a 380 per cent increase from 2019 and a 23 per cent rise from 2020. Notably, India has produced three gaming unicorns: Game 24 x 7, Dream 11 and Mobile Premier League. Meanwhile, the Indian government has implemented various initiatives to bolster the entertainment and media industry.

These measures include digitising the cable distribution sector to attract greater institutional funding and increasing the FDI limit from 74 per cent to 100 per cent in cable and direct-tohome (DTH) satellite platforms. Additionally, granting industry status to the film industry has facilitated easier access to institutional finance. The Ministry of Information and Broadcasting has established the Film Facilitation Office (FFO) as a single-window clearance and facilitation point for producers and production companies, assisting them in obtaining requisite filming permissions.

The ministry also merged its film media units into one corporation in December 2020, promoting the convergence of activities and resources for better coordination and efficiency. The Indian government is setting up a National Animation, Visual Effects, Gaming and Comic (AVGC) Centre of Excellence in collaboration with IIT Bombay. Karnataka and Telangana have introduced dedicated state-level AVGC policies, and an AVGC Task Force is being established to fully realise the sector’s potential.

Financials

The financial performance of the Indian entertainment and media industry reflects its robust growth. Among 20 companies under coverage, the average sales change for FY24 was 11.43 per cent compared to FY23. The top five industry leaders by market capitalisation saw revenue growth of 27 per cent for FY24 compared to FY23. The average operating profit for the top five companies stood at 31 per cent for FY24, albeit a slight decline of 36 basis points from FY23. The average PAT margin for the top five was 13.42 per cent for FY24. PVR Inox exhibited the highest revenue growth among industry leaders, with a 62.82 per cent increase in FY24, reaching ₹6,107 crore.

The company’s average ticket price was ₹233, and the average spend on food and beverages was ₹129 in Q4FY24. Additionally, PVR Inox opened 33 new screens across six properties in Q4FY24. Network TV18 followed with a 49.4 per cent revenue growth in FY24, amounting to ₹9,297 crore. This growth was driven by its sports and movie segments, with Jio Cinema emerging as the fastest-growing platform in the country

Outlook

The Indian media and entertainment industry is poised for continued impressive growth, outpacing the global average. This growth can be attributed to rising incomes, increasing internet penetration, and a significant push toward digital adoption. The industry is expected to benefit from the burgeoning retail advertisement market, driven by new entrants in the food and beverages segment, the growing popularity of e-commerce, and domestic companies exploring new opportunities.

India’s rural regions are anticipated to be the next growth frontier, supported by the country’s adoption of 5G and future planning for 6G. This digital push, especially in rural areas, offers advertisers and publishers immense opportunities to capture untapped markets, driving the growth of India’s media and entertainment industry forward. In conclusion, the Indian entertainment and media industry is on a remarkable growth path, supported by government initiatives, robust financial performance, and a promising outlook. The industry's future looks exceptionally bright with continuous digital advancements and increasing market penetration.

Oil & Gas Industry

Driven by Growing Demand

The oil and gas sector is among the eight core industries in India. It plays a major role in influencing decision-making for all the other important sections of the economy. India’s economic growth is closely related to its energy demand and therefore the need for oil and gas is projected to increase, thereby making the sector quite conducive for investment. Global oil markets are gradually recalibrating after three turbulent years in which they were upended first by the coronavirus pandemic and then by Russia’s invasion of Ukraine.

Further, the Israel-Gaza conflict sowed instability in the Middle East. India is a net importer of oil and gas, but it has significant domestic reserves of both commodities. The industry is responsible for a substantial portion of India’s GDP and provides employment to millions of people. The energy landscape continues to be shaped largely by four disruptors: geopolitical factors, macroeconomic variables such as high interest rates and rising materials costs, evolving policies and regulations, and the emergence of new technologies.

These disruptors can significantly impact demand, supply, and trade and investment within the crude oil and natural gas industry. According to the International Energy Agency’s June 2024 report, the world oil demand growth continues to slow down with 2024 gains now seen at 960 kb per day, which is 100 kb per day below last month’s forecast. As per the Organization for Economic Cooperation and Development (OECD), weak deliveries pushed global demand into a narrow year-over-year contraction in March.

The subpar growth of 1 million barrels per day in 2025 will be held back by a muted economy and accelerating clean energy technology deployment. Gasoline demand will be disproportionately impacted as electric vehicles (EVs) progressively replace vehicles with internal combustion engines (ICE). About 80 per cent of the 3 million barrels per day 2022-2028 oil demand growth is estimated to be displaced by vehicle electrification.

Preliminary, albeit incomplete, data shows the oil stocks rising by 48.2 million barrels last month, led by the United States and China. The increase comes on top of a 19.3 million barrel build-up in April when on-land stocks surged by 83.5 million barrels after eight months of draws. Oil on water plunged by 64.2 million barrels, however partly reversing the 112.6 million barrels increase seen over the previous two months. The OECD industry inventories rose in April by 32.1 million barrels, largely in line with seasonal trends, but remained 94.7 million barrels below the five-year average.

Financials

For the fiscal year 2024, the top 10 listed companies by market capitalisation generated net sales of ₹36,15,649.63 crore, up by 3.43 per cent compared to ₹34,95,654.07 crore in FY23. Operating profit stood at ₹470,970.09 crore with YoY growth of 57.34 per cent from ₹299,325.29 crore. Net profit came at ₹228,935.69 crore in FY24, up by 83.39 per cent YoY from ₹124,837.32 crore in FY23. Among the listed peers, BPCL, HP, ONGC and IOCL clocked robust net profit growth driven by increasing demand.

Outlook

In terms of barrels, India’s oil consumption is forecast to rise from 4.05 MBPD in FY22 to 7.2 MBPD in 2030 and 9.2 MBPD in 2050. Diesel demand in India is expected to double to 163 MT by 2029-30, with diesel and petrol covering 58 per cent of India’s oil demand by 2045. Natural gas consumption is predicted to increase at a CAGR of 12.2 per cent to 550 MCMPD by 2030 from 174 MCMPD in 2021. India is planning to double its oil refining capacity to 450-500 million tonnes by 2030.

According to the India Energy Outlook 2021, primary energy demand is expected to nearly double to 1,123 million tonnes of oil equivalent as India’s gross domestic product (GDP) is expected to increase to USD 8.6 trillion by 2040. India is expected to be one of the largest contributors to non-OECD petroleum consumption growth globally. Given India’s strong economic growth and rising urbanisation, the energy demand is not expected to decrease anytime soon.

This sustained growth trajectory will significantly impact the oil and gas companies operating in the country. As India’s energy demand is anticipated to grow faster than that of all the major global economies, driven by continuous robust economic expansion, oil and gas companies are likely to experience heightened demand for their products and services. Moreover, the country’s share in global primary energy consumption is projected to increase two-fold by 2035.

Plastic Sector

High Potential for Growth

The Indian plastic industry is one of the major players contributing to the nation’s economy. The industry’s journey began in 1957 with the production of polystyrene. Since then, it has witnessed rapid and substantial growth. Currently, the industry has over 2,500 exporters and employs more than 4 million people. With 30,000 processing units, 85-90 per cent of which are small and medium enterprises, the plastic industry is a significant contributor to employment and economic activity. In the financial year 2023-24, India’s plastics exports dropped by 3.5 per cent to USD 11.55 billion from USD 11.96 billion in FY23.

Despite this annual decline, March 2024 saw a 5.6 per cent increase in exports to USD 1.11 billion compared to USD 1.05 billion in March 2023. The overall decline was due to muted global economic conditions, restrictive trade policies and geopolitical tensions affecting international trade. In March 2024, exports of most plastic products such as films, sheets and various industrial applications grew while consumer and house ware products, as well as writing instruments, saw a decrease. Cordage, fishnets and monofilaments experienced a 3.7 per cent increase, reaching USD 26.2 million from USD 25.3 million in March 2023.

However, the overall trade in this category fell by 4.7 per cent in FY24 to USD 259.8 million from USD 272 million the previous year. Floor coverings, leather cloth and laminates posted the highest growth at 19.6 per cent in FY24, increasing to USD 693.7 million from USD 579.9 million. Exports of fibreglass-reinforced plastic (FRP) and composites grew by 12.9 per cent, reaching USD 480.1 million from USD 425.1 million. On the downside, exports of miscellaneous plastic products dropped by 30.8 per cent to USD 715.9 million from USD 1,031.9 million.

These products include items like plastic fasteners, hardware and custom-moulded components. In March 2024, medical plastics such as syringes and catheters saw a 10.4 per cent increase to USD 48.7 million from USD 44.1 million the previous year. Flexible and rigid packaging items also saw a 20.2 per cent rise in exports, driven by higher sales of plastic sacks, bags, caps and closures. Between December 2023 and March 2024, the plastic industry in India saw a notable surge in exports despite the first nine months not being very good. This reflects the sector’s resilience in the last quarter of FY24.

Despite this, the industry faces significant challenges. In FY24, the plastics and linoleum sector’s exports were USD 8.08 billion, lower than the mark of USD 8.6 billion recorded in 2019. Imports are approximately three times the value of exports, highlighting the industry’s reliance on imported raw materials. This dependency underscores the urgent need for substantial investments and reforms to make the sector more self-sufficient and less vulnerable to external supply disruptions.

Financials

To study the financials, we have taken the top 20 companies by market capitalisation in this sector and compared their performance in FY24 and FY23. On the whole, the sector has posted stagnated numbers on an annual basis across the metrics of sales and operating profit. The aggregate top-line of the sector in FY24 reached ₹60,976 crore, slightly lower compared to ₹61,000.3 crore in FY23. However, the operating profit saw a 1.2 per cent increase, reaching ₹8,455.30 crore from ₹8,351.5 crore. The profit after tax grew by 7 per cent from ₹3,678.9 crore to ₹3,937.6 crore. Supreme Industries, a leading plastics product manufacturer, improved its profitability in FY24.

The company’s sales grew by 10.1 per cent while operating profit and net profit increased by 31.2 per cent and 23.6 per cent, respectively. Astral Limited showed a similar trend with sales, operating profit and net profit growing by 9.4 per cent, 14.8 per cent and 18.8 per cent, respectively. Responsive Industries emerged as the top performer, with a sales growth of 11.6 per cent and a staggering increase in operating profit and profit after tax of 107.3 per cent and 559.9 per cent, respectively. Other top performers included Jai Corp Ltd., Finolex Industries, Time Technoplast Ltd., Garware Hi-Tech Films Ltd. and Shaily Engineering Plastics.

Outlook

The Indian plastic industry is projected to grow from ₹3.50 lakh crore in 2022-23 to ₹10 lakh crore in 2027-28. There is potential for India to become a global supplier of plastics, with government and industry collaborating to foster growth and create a sustainable environment. This growth is expected to play a crucial role in helping India achieve its goal of becoming a USD 5 trillion economy. The Indian plastic industry, despite facing challenges, shows promising growth potential. With strategic investments and reforms, it can overcome its current hurdles and contribute significantly to the nation’s economic aspirations.
 

Power Sector

In a Position of Power

The power sector in India is one of the most diverse in the world. Power generation sources range from traditional coal, lignite, natural gas, oil, hydro and nuclear power to feasible non-conventional sources such as wind, solar, agricultural and domestic waste. Electricity demand in the country has grown significantly and is anticipated to grow much further in the coming years. To meet the country’s growing need for power, substantial increases in installed generating capacity are required.

India is the third-largest producer and consumer of electricity worldwide, with an installed power capacity of 444.77 GW as of May 31, 2024. As of December 2023, the installed generation capacity stood at 51 per cent for the private sector, 24 per cent for the central sector and 25 per cent for the state sector. Currently, the country’s power needs are met by fossil fuels out of which coal stands as the primary fuel for power generation, contributing 75.82 per cent to the total capacity generated.

The renewable portfolio including wind, solar and other renewable energy sources contributes around 15 per cent while hydro energy forms 6.37 per cent. Although coal meets around 50 per cent of the country’s primary commercial energy requirements, there are growing concerns about its sustainability from an environmental perspective. In tune with the worldwide evolution in the power sector, India too is shifting its demand-supply equation to renewable sources to become environmentally sustainable.

Financials

For the fiscal year 2024, the top 11 listed companies by market capitalisation generated net sales of ₹413,301.29 crore, up by 7.27 per cent compared to ₹385,277.36 crore in FY23. Among the listed peers, Adani Power, Adani Energy, Tata Power and JSW Energy clocked the highest sales growth driven by increasing power demand. The operating profit stood at ₹169,965.28 crore with a YoY growth of 17.94 per cent from ₹144,134.78 crore. The net profit was ₹69,736.77 crore in FY24, up by 18.54 per cent YoY from ₹58,873.10 crore in FY23.

Outlook

In FY23, India’s per capita electricity consumption stood at 1,255 kWh, which is one-third of the world average and one-fifth of China’s average. The per capita electricity consumption is set for a high-octane growth trajectory in the upcoming year, boosted by the central government’s schemes to prop up last-mile connectivity and the states’ intent to ensure round-the-clock reliable power. As of May 31, 2024, India’s installed renewable energy capacity (including hydro) stood at 201.07 GW, representing 45.20 per cent of the overall installed power capacity.

Solar energy contributed 84.28 GW, followed by 46.42 GW from wind power, 5.01 GW from small hydropower and 46.23 GW from hydropower. India’s power generation witnessed its highest growth rate in over 30 years in FY23, increasing by 6.80 per cent to 1,452.43 billion kilowatt-hours (kWh) as of January 2024. The peak power demand in the country stood at 243.27 GW in January 2024.

In the current decade (2020-29), the Indian electricity sector is likely to witness a major transformation with respect to demand growth, energy mix and market operations. India wants to ensure that everyone has reliable access to sufficient electricity at all times, while also accelerating the clean energy transition by lowering its reliance on dirty fossil fuels and moving toward more environmentally friendly, renewable sources of energy. Future investments will benefit from strong demand fundamentals, policy support and increasing government focus on infrastructure.

The Central Electricity Authority (CEA) estimates India’s power requirement to grow to reach 817 GW by 2030. Also, by 2029-30, CEA estimates that the share of renewable energy generation would increase from 18 per cent to 44 per cent, while that of thermal energy is expected to reduce from 78 per cent to 52 per cent. The government plans to establish a renewable energy capacity of 500 GW by 2030. The Indian power sector is undergoing enormous change, which has changed the industry’s perspective. The future of the power industry in India is bright, and continuous economic expansion is driving electricity demand.

Realty Sector

Rising Skywards

The Indian real estate sector is globally recognised and includes four sub-sectors: housing, retail, hospitality and commercial. Its growth is driven by the expanding corporate environment and the increasing demand for office spaces and urban and semi-urban housing. The construction industry is the third-largest among 14 major sectors in terms of its overall economic impact. In India, real estate is the second-largest employment generator after agriculture. It is anticipated to attract significant non-resident Indian (NRI) investment in both the short and long term, with Bengaluru being the top destination, followed by Ahmedabad, Pune, Chennai, Goa, Delhi and Dehradun.

Financials

There are about 35 companies in the realty sector. Here’s an overview of how some of the major players in this sector have performed in FY24. DLF Limited focuses on colonisation and real estate development, handling all aspects from land acquisition to project construction and marketing. In FY24, the company reported revenue of ₹6,427 crore which grew by 12.86 per cent from ₹5,694.83 crore in FY23, while the EBITDA of the company grew by 29.94 per cent and stood at ₹2,654.94 crore as against ₹2,043.19 crore in FY23. Moreover, the EBITDA margin expanded 543 bps to 41.31 per cent.

Similarly, the net profit of the company jumped by 48.09 per cent and reached ₹1,630.40 crore as compared to ₹1,100.92 crore in FY23. Oberoi Realty Limited is a real estate developer known for premium projects and a strong brand. It focuses on contemporary architecture, quality construction and innovative residential developments, while also engaging in office, retail, hospitality and social infrastructure projects. In FY24, the company reported revenue of ₹4,495.79 crore, which grew by 7.23 per cent from ₹4,192.58 crore in FY23.

The EBITDA of the company grew by 23.53 per cent to ₹2,732.85 crore as against ₹2,212.28 crore in FY23. Moreover, the EBITDA margin expanded 802 bps to 60.79 per cent. Similarly, the net profit of the company surged by 1.16 per cent and reached ₹1,926.60 crore as compared to ₹1,904.55 crore in FY23. Macrotech Developers Limited, one of India’s largest real estate developers, primarily focuses on affordable residential projects and has expanded into logistics, industrial parks and commercial real estate.

In FY24, the company reported revenue of ₹10,316.10 crore which grew by 8.93 per cent from ₹9,470.40 crore in FY23, while the EBITDA of the company grew by 28.02 per cent and stood at ₹2,829.10 crore as against ₹2,209.90 crore in FY23. Moreover, the EBITDA margin expanded 409 bps to 27.42 per cent. Similarly, the net profit of the company jumped by 220.14 per cent and reached ₹1,567.10 crore as compared to ₹489.50 crore in FY23.

Outlook

In FY23, India’s residential property market experienced remarkable growth with home sales reaching an all-time high of ₹3.47 lakh crore (USD 42 billion), a 48 per cent YoY increase. Sales volume also saw a significant rise, with 379,095 units sold, marking a 36 per cent increase. Major urban developers are set to complete approximately 558,000 homes in 2023. The demand for residential properties surged in India’s top eight cities, driven by mid-income, premium and luxury segments, despite challenges such as high mortgage rates and property prices.

India’s retail sector is poised for substantial growth, with nearly 41 million sq. feet of retail space expected to become operational between 2024 and 2028 in the top seven cities, encompassing various stages of development. Gross leasing in these cities reached a record 62.98 million sq. feet in 2023, a 26.4 per cent increase from the previous year, with the December quarter being the busiest on record at 20.94 million sq. feet.

Banking, financial services and insurance (BFSI) firms led leasing activities with a 22 per cent share, followed by technology companies at 21 per cent, engineering and manufacturing at 15 per cent, and flexible space operators at 14 per cent. The demand for data centres will increase by 15-18 million sq. feet by 2025. Office absorption in the top seven cities was 41.97 million sq. feet in 2023. Fresh real estate launches accounted for 41 per cent of the market share in the first quarter of 2023, up from 26 per cent four years ago.

Retail Industry

Slow but Steady

India’s retail sector saw impressive growth in the calendar year 2023, fuelled by strong demand and the completion of new shopping malls in major cities. This positive momentum is expected to continue into calendar year 2024, with both retailers and consumers showing cautious optimism. While Tier I cities will continue to expand, several Tier II markets have also shown significant potential and are becoming attractive destinations for retail development. In fact, the Indian retail industry has become one of the most dynamic and rapidly growing sectors with the influx of numerous new players.

It contributes over 10 per cent to the nation’s gross domestic product (GDP) and provides around 8 per cent of employment. With an estimated market size of about USD 1.1 trillion by 2027, India holds the position of the fifth-largest retail market globally and was ranked 63rd in the World Bank’s Doing Business 2023 report. In the retail sector, home decor and fashion apparel are experiencing consolidation and expansion, with businesses actively seeking growth opportunities in both online and offline formats.

The key growth sectors within retail include athleisure, jewellery stores, food and beverages, and value fashion. Athleisure is particularly popular in Tier I and Tier II cities, while domestic brands are on the rise in the jewellery sector. The food and beverage category is thriving due to the proliferation of new restaurants and cafes in major cities. Value fashion brands like Zudio and Max have achieved significant success, with fashion anchors such as Style Up by Aditya Birla, Style Union, and Intune by Shoppers Stop gaining traction. The alternative entertainment segment is also evolving, with family entertainment centres emerging as popular alternatives to traditional cinema halls.

This shift reflects changing consumer preferences and the growing demand for diverse entertainment options. India is the fifth-largest global destination in terms of retail space. Currently, India is the second-largest internet market, boasting 830 million users, and is on track to become a USD 1 trillion internet economy by 2030. The income growth will transform India from a bottom-of-the-pyramid economy to a truly middle-class-led one, with consumer spending projected to increase from USD 1.5 trillion today to nearly USD 6 trillion by 2030.

Financials

The Indian retail sector’s financials comprise companies from both e-commerce and traditional retail businesses. In FY24, retail companies experienced an average sales growth of 16.78 per cent, while e-commerce companies saw a significant increase of 39.9 per cent, driven largely by the expanding internet economy. In terms of profitability, the operating profit margin for retail companies averaged 15.18 per cent compared to 19.5 per cent for e-commerce companies.

However, this figure is skewed for e-commerce companies due to IndiaMart Internet’s exceptionally high OP margin of 45.29 per cent, while Zomato and FSN E-Commerce reported OP margins of 7.34 per cent and 5.89 per cent, respectively. The average profit margin for companies in the retail sector is around 6.69 per cent. IndiaMart Internet outperformed other companies with a profit margin of 29.9 per cent. Conversely, Aditya Birla Fashion recorded a negative profit margin of (-) 5.35 per cent, the only company in the sector to do so. Trent Fashion and Zomato have reported a 275 per cent and 136 per cent change in net profit from the previous year, respectively.

Outlook

Despite persistent inflation, Indian consumers are expected to maintain a cautiously optimistic approach to spending, especially on non-essential items. While a potential economic slowdown could dampen retail sales growth, the festive season in the latter half of 2024 is likely to offset this impact. Although household spending has remained steady so far, consumers are likely to closely monitor inflation’s effect on product and service prices.

Overall, the retail sector is expected to remain vibrant, with minor obstacles that may slow growth but will not derail its upward trajectory in 2024. Given the periodic fluctuations in retail sales, Indian enterprises must implement a strategic approach to efficiently handle their supply chains. This involves minimising cost impacts and ensuring prompt product delivery. As of now, an increasing number of consumers are shifting to online purchases and this will definitely boost the retail sector.

Telecom Sector

Making Profitable Connections

I ndia is currently the world’s second-largest telecommunications market, with a telephone subscriber base of 1,190.33 million as of December 2023, having shown robust growth over the past decade. The rapidly expanding Indian mobile economy is poised to significantly contribute to the country’s GDP, according to a report by the GSM Association and BCG. The swift growth of India’s telecom sector is driven by the government’s liberal and reformist policies, coupled with strong consumer demand. These policies have facilitated easy access to telecom equipment and established a fair regulatory framework, ensuring affordable telecom services for consumers. The deregulation of FDI norms has also played a crucial role, making the sector one of the fastest growing and a top generator of employment opportunities in the country.

Financials

There are about 15 companies in the telecom sector. Here’s an overview of how some of the major players in this sector have performed in FY24. Bharti Airtel Limited, headquartered in New Delhi, is a leading global telecommunication provider. It offers a diverse range of ICT services across the USA, Europe, Africa, the Middle East, Asia-Pacific, India and SAARC. In FY24 the company reported revenue of ₹149,982.40 crore, which grew by 7.79 per cent from ₹139,144.80 crore in FY23. The EBITDA of the company grew by 10.41 per cent and stood at ₹79,727.20 crore as against ₹72,210.10 crore in FY23.

Moreover, the EBITDA margin expanded 126 bps to 53.16 per cent whereas the net profit of the company declined by 52.40 per cent and reached ₹5,848.60 crore as compared to ₹12,287.40 crore in FY23. Indus Towers Limited, created from the merger of Bharti Infratel and Indus Towers, is one of the world’s largest telecom tower companies. It supports millions of daily communications across India, offering affordable, reliable services to meet the nation’s growing connectivity needs.

In FY24, the company reported revenue of ₹28,600.60 crore, which grew by 0.77 per cent from ₹28,381.80 crore in FY23 while the EBITDA of the company grew by 56.60 per cent and stood at ₹16,046.10 crore as against ₹10,246.40 crore in FY23. Moreover, the EBITDA margin expanded 2,000 bps to 56.10 per cent. Similarly, the net profit of the company jumped by 195.89 per cent and reached ₹6,036.20 crore as compared to ₹2,040 crore in FY23. Tata Communications Limited, a key player in the digital ecosystem, drives the digital economy with services such as IP transmission and managed network connectivity.

It also provides security and business transformation for global enterprises along with internet services for Indian consumers. In FY24, the company reported revenue of ₹20,968.82 crore, which grew by 17.55 per cent from ₹17,838.26 crore in FY23 while the EBITDA of the company declined by 3.61 per cent and stood at ₹4,512.57 crore as against ₹4,681.38 crore in FY23. Moreover, the EBITDA margin contracted 472 bps to 21.52 per cent. Similarly, the net profit of the company plunged by 46.25 per cent and reached ₹949.59 crore as compared to ₹1,766.84 crore in FY23.

Outlook

India is the world’s second-largest telecommunications market, with a total telephone subscriber base of 1,190.33 million as of December 2023. The wireless subscriber base reached 1,158.49 million with leading companies such as Jio (459.81 million subscribers), Bharti Airtel (257.37 million), Vodafone Idea (127.28 million) and BSNL (21.28 million) contributing to this growth. The broadband sector also saw significant growth, with subscriptions increasing from 149.75 million in FY16 to 904.54 million in FY23. Wired broadband subscriptions were 38.35 million, and wireless broadband subscribers stood at 866.19 million by FY24.

As of December 2023, the top broadband service providers included Reliance Jio Infocom with 470.19 million subscribers, followed by Bharti Airtel (264.76 million), Vodafone Idea (127.29 million) and BSNL (25.12 million). The total data consumption reached 7,323,038 GB as of September 2023. Wireless data usage saw a growth rate of 5.9 per cent, with 2G, 3G, 4G and 5G contributing 0.10 per cent, 0.78 per cent, 94.53 per cent and 4.59 per cent, respectively, to the total volume. Over the next five years, increasing mobile phone penetration and decreasing data costs are expected to bring 500 million new internet users online, opening significant business opportunities.

Textile Industry

A Mixed Bag with Bright Prospects

The textile industry is a vital sector in the global economy, with a significant impact on the livelihoods of millions of people worldwide. The global textile market size was valued at USD 1,695.13 billion in 2022 and is expected to grow at a compound annual growth rate (CAGR) of 7.6 per cent from 2023 to 2030. The Indian textiles industry contributes 2.3 per cent to GDP, 13 per cent to industrial production, and 12 per cent to the country's exports. India currently has a 6 per cent market share in the world exports of textiles, making it the third-largest textile exporter globally after China and the US. In India, the textile industry is poised for rapid growth, with a projected CAGR of 10 per cent from 2019-20 to reach USD 190 billion by 2025-26. India’s share in the global trade in textiles and apparel is approximately 4 per cent, making it a significant player in the global market.

India’s textile sector has a rich history, dating back to several centuries. The industry is characterised by its diversity, ranging from traditional hand-spun and hand-woven textiles to sophisticated mills. The fundamental strength of the textile industry in India lies in its strong production base of a wide range of fibres and yarns from natural fibres like cotton, jute, silk and wool to synthetic or man-made fibres like polyester, viscose, nylon and acrylic.

India is the world’s largest producer of cotton, with estimated production standing at 362.18 lakh bales during the cotton season 2021-22. Domestic consumption for the cotton season of 2021-22 is estimated to be 338 lakh bales. Cotton production in India is projected to reach 7.2 million tonnes (about 43 million bales of 170 kg each) by 2030, driven by increasing demand from consumers. To boost the textile sector, the Government of India has taken several initiatives. The key initiatives include the establishment of 75 textile hubs similar to Tiruppur, promoting sustainable textiles through the SusTex project, and setting up a Centre of Excellence for Khadi.

The government has also approved several schemes, including the PM MITRA scheme, the Production-Linked Incentive (PLI) scheme, and the Comprehensive Powerloom Cluster Development Scheme (CPCDS). These initiatives aim to promote the sector, increase employment opportunities and boost exports. The government has also removed anti-dumping duties and extended the Rebate of State and Central Taxes and Levies scheme to make the sector competitive. Additionally, the government has earmarked Rs 1,000 crore for research and development in technical textiles.

Financials

The financial performance of textile companies in FY24 has been a mixed bag, with some companies reporting strong growth while others have struggled. Looking at the sales figures, Vedant Fashions and Raymond have stood out, posting increases of 0.93 per cent and 9.80 per cent, respectively. This is in contrast to companies like Vardhman Textiles and Jindal Worldwide, which saw declines of (-) 6.24 per cent and (-) 12.36 per cent in their sales.

The operating profit performance has followed a similar trend, with Raymond and Welspun Living reporting significant growth of 19.18 per cent and 73.34 per cent, respectively. On the other hand, Alok Industries and Indo Rama Synthetics (India) experienced substantial declines of (-) 660.48 per cent and (-) 149.41 per cent in their operating profits. When it comes to net profit, the divergence in performance is even more pronounced. Raymond and Welspun Living have delivered impressive growth of 205.99 per cent and 232.15 per cent in their net profits.

Conversely, Alok Industries and Indo Rama Synthetics (India) have reported significant losses, with net losses of (-) 845.86 and (-) 203.44, respectively. The overall picture suggests that the textile industry in India has faced challenges in FY24, including a decline in exports and a weak first quarter. However, some companies have managed to navigate these obstacles and emerge stronger, while others have struggled to maintain their profitability. The industry remains optimistic about the future, with hopes of FTAs boosting exports and government support measures providing a lifeline for smaller players.

Outlook

The Indian textile industry is poised for significant growth, driven by strong domestic consumption and export demand. The sector is focusing on technical textiles, which has seen an increase in demand due to the pandemic, and the government is supporting the industry through funding and machinery sponsoring. The retail sector has experienced rapid growth in the past decade with the entry of international players.

The overall Indian textiles market is expected to reach USD 209 billion by 2029, with the technical textiles market also projectedto grow significantly. This growth is expected to be driven by increasing household income, population, and demand from sectors like housing, hospitality, and healthcare. The Ministry of Commerce and Industry has advocated that India should aim to reach USD 100 billion in textile exports by 2030, aided by trade pacts with Australia and the UAE. With a focus on sustainability and technical textiles, the Indian textiles industry looks set for a bright future, fuelled by both local and global demand.

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