Bajaj Auto Q2FY25 Financials: Strong Revenue and Profit Growth, Margins Improve

On February 1, 2024, Finance Minister Nirmala Sitharaman unveiled the Interim Budget for the fiscal year 2024–25, outlining the government's vision and strategies to propel India towards sustainable growth. The guiding principle of Reform, Perform, Transform' sets the tone for the budget's comprehensive approach. This analysis explores the key updates, strategies, and financial estimates presented in the budget, emphasizing its focus on four pivotal areas: the poor, youth, women, and farmers.

Economic Overview

The Finance Minister highlighted India's successful navigation of global complexities and challenges, attributing it to structural reforms and pro-people programs. The Finance Minister acknowledged the improved efficiency in savings, credit, and investments, reflecting the strengthening of the financial sector.

Key Updates:

1.Strengthening Defense Sector with Deep Tech

A new scheme was introduced to enhance deep-tech capabilities for the defense sector, aligning with the government's focus on national security and technological advancements.

2.Cervical Cancer Vaccination

The government unveiled plans to prioritize vaccination against cervical cancer for girls aged 9 to 14, demonstrating a commitment to women's health and preventive healthcare measures.

3. Global Affairs and Economic Growth

The Finance Minister acknowledged the complexity of global affairs, citing challenges posed by wars. However, she highlighted India's resilience and successful management, positioning the country for sustained high growth.

Tax Proposals and Reforms:

1.Improving Taxpayer Services

To enhance taxpayer services, the Finance Minister proposed the withdrawal of outstanding direct tax demands up to Rs. 25,000 for years up to 2009-10 and Rs.10,000 for the period from 2010 to 2015, providing relief to around 1 crore taxpayers.

2. Continuation of Tax Rates

The Finance Minister maintained existing tax rates for direct and indirect taxes, including import duties. She addressed expiring tax exemptions for startups and IFSC units, proposing an extension until March 31, 2025, to ensure continuity in taxation.

3. GST Impact

The Finance Minister highlighted the positive impact of GST, reducing the compliance burden on trade and industry. She cited a survey indicating that 94% of industry leaders view the transition to GST as largely positive, benefiting states and consumers.

4.Previous Tax Reforms

The Finance Minister acknowledged the simplification of tax procedures, citing the new tax scheme with no liability for those earning up to Rs. 7 lakh a year. Other reforms included a decrease in corporate tax rates and expedited processing of tax returns.

Budget Estimates:

• 2024-25

- Total receipts (other than borrowings): Rs. 30.80 lakh crores

- Total expenditure: Rs. 47.66 lakh crores

- Tax receipts: Rs. 26.02 lakh crores

- Fiscal deficit estimated at 5.1% of GDP

• ‍Revised Estimates 2023-24

- Revised estimates of total receipts (other than borrowings): Rs. 27.56 lakh crores

- Revised estimates of total expenditure: Rs. 44.90 lakh crores

- Revised fiscal deficit at 5.8% of GDP, reflecting a prudent fiscal approach

Strategic Initiatives:

1. AmritKaal as Karthavya Kaal: The government expressed its commitment to creating a high-growth economy, focusing on milestone-linked reforms by providing a 50-year interest-free loan of Rs.75,000 crore to states.

2. FDI- First Develop India: Highlighting the success of FDI inflow from 2014-23, The Finance Minister emphasized negotiating bilateral treaties with a focus on 'First, Develop India.'

3. Next-Generation Reforms: The Finance Minister announced the government's intent to undertake next-generation reforms, indicating a forward-looking approach to economic development.

Sectoral Initiatives:

1.Railways:Three major railway corridor programs were introduced, aiming to enhance logistics efficiency and safety for passenger trains. Additionally, a significant conversion of rail bogeys to Vande Bharat standards was proposed.

2. Green Energy: Initiatives in green energy included viability gap funding for shore-wind energy, coal gasification and liquification capacity, and mandatory blending of compressed biogas in natural gas for transport and domestic use.

3.E-Vehicle Ecosystem and Bio-Manufacturing: The government pledged to expand and strengthen the e-vehicle sector and launch a scheme for bio-manufacturing to encourage biodegradable materials.

4.Domestic Tourism: Acknowledging the success of G20 events, the government expressed support for developing tourism centers globally, offering long-term interest-free loans to states for this purpose.

Social Initiatives:

1. Societal Changes: A high-powered committee was proposed to review challenges arising from population growth and demographic changes.

2. Empowering Women: The government recognized the role of self-help groups (SHGs) in transforming the rural socio-economic landscape and aimed to honor and raise the target for such groups.

3. Technological Changes: A corpus of Rs. 1 lakh crore was proposed for providing interest-free loans to encourage private sector research and innovation in sunrise domains.

Vision for Viksit Bharat:

The Finance Minister presented a vision for "Viksit Bharat," envisioning a prosperous India in harmony with nature. The Finance Minister emphasized the potential of India to lead global growth, leveraging the demographic dividend, technology, and sustainable practices.

Conclusion:

The Union Budget 2024-25 outlined a holistic vision for India's development, addressing challenges and embracing growth through strategic initiatives, economic reforms, and sectoral allocations. With a focus on fiscal prudence, the budget aims to propel the country towards a sustainable and inclusive future,fostering innovation, and leveraging India's inherent strengths. As the government continues to navigate global complexities, the budget reflects a commitment to building a resilient and vibrant economy, paving the way for a Viksit Bharat.

BLS E-Services Limited is a technology-enabled digital service provider, offering (i) Business correspondent services to major banks in India, (ii) Assisted E-services; and (iii) E-Governance Services at grassroots levels in India. Through its robust network, it provides access points for the delivery of essential public utility services, social welfare schemes, healthcare, financial, educational, agricultural, and banking services for governments (G2C) and businesses (B2B).

OBJECTS OF THE ISSUE

• Strengthening the technology infrastructure to develop new capabilities.
• Funding initiatives for organic growth by setting up of BLS Stores.
• Achieving inorganic growth through acquisitions.

Rahul Sharma

Executive Director and Chief Financial Officer (CFO) of the Company. He was appointed as the Chief Financial Officer of the Company since December 21, 2022. He has been associated with BLS group since the year 2011. He has over 16 years of experience in the field of taxation, finance and accounts.

Shikhar Aggarwal

Chairman and Non-Executive Director of the Company. He has over 6 years of experience in providing technology enabled services to governments and citizens with his association with BLS group of companies since 2016 and is presently, the joint managing director of BLS International Services Limited.

Sanjay Kumar Rawat

Company Secretary & Compliance Officer of the Company since March 14, 2023. He is an associate member of the Institute of Companies Secretaries of India. He has over 12 years of experience in secretarial and legal compliance. Prior to joining this Company, he was associated with Terracis Technologies Limited and TaraSpan Solutions Private Limited.

Lokanath Panda

Chief Operating Officer of the Company with effect from April 12, 2023. He has over 20 years of experience in in the field of payment systems, financial inclusion, citizen services portfolio and expansion of retail channel for other value added services and products. Presently, he is also a whole time director in the Subsidiary i.e., ZMPL.

COMPANY PROFILE

• Through its tech-enabled integrated business model, we provide digital and physical products and services in the G2C, B2C, and B2B categories in semi-urban, rural, and remote areas.
• The Company organizes its business along three primary business segments, (i) Business Correspondents Services; (ii) Assisted E-services; and (iii) E-Governance Services.
• A key stakeholder in each of its business segments are merchants, with whom it collaborate for delivery of its products and services to the citizens.
• Its merchants act as its interface with the consumers and play a critical role in delivering goods and services. Presently, its merchants are organized into two categories i.e. BLS Touchpoints and BLS Stores. As of September 30, 2023, it has 98,034 BLS Touchpoints, which includes 1,016 BLS Stores.

COMPETITIVE STRENGTHS

• Asset light business mode.
• It enables social and financial inclusion in India.
• Multiple cross-selling and up-selling opportunities, network effect, and wide reach for customer acquisition.
• Business model with diverse sources of revenue and negligible customer acquisition and retention costs. Successful track record of the acquisition.
• Experienced senior management.

KEY STRATEGIES

• Strengthening and integrating its technology backbone. Grow its merchants and BLS Stores network.
• Pursue strategic investments and acquisitions to enhance product and service capabilities.
• Leverage existing market position to grow each business segment, with an aim to improve cross-selling results.

KEY CONCERNS

• The Company As a result of its limited operating history, it may not be able to compete successfully, and it may be difficult to evaluate its business and future operating results.
• None of the e-governance projects are awarded to the Company directly. All of its contracts to E- Governance projects are awarded to its Corporate Promoter, BLS International Services Limited. Deterioration in the performance of its Subsidiaries may adversely affect its results of operations. It is dependent on and derives a substantial portion of its revenue from, a single customer, one of the largest PSU Bank.
• The Company provides E-Governance Services only in the states of Punjab, Uttar Pradesh and West Bengal.

COMPARISON WITH LISTED INDUSTRY PEERS (AS ON 31ST MARCH 2023)

FINANCIALS (RESTATED CONSOLIDATED)

OUTLOOK & VALUATION

BLS E Services Limited is a digital service provider, and it could be a beneficiary of digital India initiatives by the government. The company operates on an asset-light business model, has a wide reach for customers, and has a business model with diverse sources of revenue. The company has also reported consistent growth in its financials. A few concerns are that the company has a limited operating history, making it difficult to evaluate its business and growth; secondly, it is dependent on a single customer for major revenue; and third, it has geographical concentration. Finally, it is valued at a P/E of 44x, which seems fairly priced, so considering all the factors, we give a subscribe rating to this.

सोने और चांदी के भाव पिछले सप्ताह सीमित दायरे में कारोबार करते दिखे। भारतीय बाज़ारों में कामकाजी सप्ताह छोटा रहने के कारण भी कीमती धातुओं के भाव में कारोबार सीमित रहा जिससे भाव सीमित दायरे में बने रहे। पिछले सप्ताह अमेरिका और यूरो जोन से जारी हुए मैन्युफैक्चरिंग पीएमआई के आंकड़े अनुमान से बेहतर दर्ज किये गए है, जो इस उम्मीद को बढ़ा रहे है की अमेरिकी मौद्रिक नीति में सख्ती अगले कुछ और महीने तक जारी रहेंगी। 2024 में ब्याज़ दरों में कटौती के बावजूद, उच्च ब्याज दरें बुलियन में तेज़ी सीमित करेगा। अमेरिकी आर्थिक और ब्याज दर पर मिले संकेतों के कारण को सोने की कीमतों में दबाव बन रहा है, जिससे निवेश की मांग कम है, जबकि चीन के अधिक प्रोत्साहन उपायों के बाद चांदी में बढ़त देखि जा रही है। कीमती धातुए इन उम्मीदों से दबाव में है कि फेडरल रिजर्व इस साल की शुरुआत के बजाय बाद में ब्याज दरों में कटौती करेगा। शेयर बाज़ारो में तेज़ी ने भी सोने की मांग को कम कर दिया, क्योंकि निवेशकों ने अधिक जोखिम-भरी और उच्च-उपज वाली संपत्तियों की ओर रुख किया हुआ है। हालांकि, मिडिल-ईस्ट में ख़राब भू-राजनीतिक परस्थिति कीमती धातुओं को निचले स्तरों पर सपोर्ट कर रही है।

तकनिकी विश्लेषण

इस सप्ताह सोने और चांदी की कीमतों में दबाव रह सकता है। एमसीएक्स फ़रवरी वायदा सोने में सपोर्ट 61000 रुपये पर है और रेजिस्टेंस 64000 रुपये पर है। मार्च वायदा चांदी में सपोर्ट 70000 रुपये पर है और रेजिस्टेंस 74000 रुपये पर है।

Nova AgriTech Limited an agri-input manufacturer and it offer soil health management, crop nutrition and crop protection products focused on tech-based farmer driven solution approach, wherein it mainly offer ecologically sustainable and nutritionally balanced products based on its Research and Development.

OBJECTS OF THE ISSUE

• Funding capital expenditure for the expansion.
• Payment of certain outstanding loans of the company.
• General corporate purposes.

KEY MANAGERIAL PERSONNEL

Adabala Seshagiri Rao

Chairperson and Independent Director of the Company. He holds Degree of Bachelor of Science and Degree of Bachelor of Laws from the Andhra University. He has over 35 years of experience in the banking industry. His last employment before retirement was with the Union Bank of India.

Malathi S

Promoter and Executive Director of the Company. She has completed her Bachelor of Commerce from Kakatiya University. She has been associated with the Company since 2011 and oversees the operations of the Company.

Kiran Kumar Atukuri

Promoter and Managing Director of the Company. He has almost two decades of experience. He is the guiding force behind all the corporate decisions and is responsible for the entire business operations specifically manufacturing and sales operations of the Company.

Gunupudi Kamoji Srinivas

Chief Financial Officer – Finance and Account. He holds a degree in Bachelor of Commerce from Andhra University and is a member of the Institute of Chartered Accountants of India. He has 27 years of experience with several organizations.

Neha Soni

Company Secretary of the Company. She holds a degree of Bachelor in Commerce and Bachelor of Law from Devi Ahilya Vishwavidyalya and is a member of the Institute of Company Secretaries of India (“ICSI”). She has 2 years of experience having worked with C.R. Broadcasting Hyderabad Limited as a Company Secretary.

COMPANY PROFILE

• Nova AgriTech manufactures, distributes, and markets a wide range of product categories consisting of (a) soil health management products; (b) crop nutrition products; (c) biostimulant products; (d) biopesticide products (e) Integrated Pest Management products; (f) new technologies; and (g) crop protection products.
• As of November 30, 2023, it has received a total of 720 product registrations comprising 7 registrations in the soil health management category, 176 registrations in the crop nutrition category, 4 registrations in the biopesticide category, 7 registrations under Technical Indigenous Manufacture, and 526 registrations in the crop protection category.
• It has a total dealer network comprising approximately 11,722 dealers out of which approximately 6,769 dealers are active in the current fiscal year and this network is currently spread across 16 states of India.
• The Company intends to import and distribute Technicals, which will be a prominent factor in the growth of the agriculture sector in India in the near future.

COMPETITIVE STRENGTHS

• One-stop solution for soil health management, crop nutrition, biostimulants, biopesticides, Integrated Pest Management (IPM), and crop protection through a diversified branded product portfolio.
• Established a distribution network across various geographies through many dealers. Strengthening farmer outreach through Nova Kisan Seva Kendra.
• Technology-driven product development and marketing. Experienced Management Team and Promoters.
• Well Equipped Research and development facility.

KEY CONCERNS

• The Company is subject to strict technical specifications, quality requirements, regular inspections, and audits by various authorities and/or regulators.
• The business is subject to climatic conditions. Seasonal variations and unfavorable weather patterns may have an adverse effect on its business.
• It may be subject to fluctuations in prices or any unavailability of the raw materials that it uses in its products.
• A substantial part of the revenue generated by the Company is from the jurisdiction of Andhra Pradesh, Karnataka, and Telangana only.
• The company is currently dependent on a single manufacturing unit located in Telangana.

COMPARISON WITH LISTED INDUSTRY PEERS (AS ON 31ST MARCH 2023)

FINANCIALS (RESTATED CONSOLIDATED)

OUTLOOK & VALUATION

Nova Agritech is an agri-input manufacturer that provides a one- stop solution for the health of soil and crops through its diversified branded product portfolio. It has a strong presence across geographies, and its effective marketing strategy positions the company for continued growth.

Nova Agritech's financial performance has been impressive, with consistent growth over the past three years and expansion plans firmly in place.

However, some key risks require consideration. The company's business is inherently linked to climatic conditions and relies on a limited geographical area for the majority of its revenue.

Additionally, the agri-input sector is highly competitive. However, the issue is valued at a P/E of 13.05x, and its RoNW of 38.27% is also attractive, thus considering all the factors we suggest to Apply for this IPO for listing benefits.

सोने पर दबाव मुख्य रूप से इन उम्मीदों के घटने से आया है कि फेड मार्च 2024 तक दरों में कटौती शुरू कर देगा। लंबी अवधि के लिए उच्च ब्याज दरों की सम्भावना ने सोने के लिए निरंतर प्रतिकूल परिस्थितियों की ओर संकेत किया है, जो सोने में निवेश की अवसर लागत को बढ़ाती है। सीएमई के फेडवॉच टूल के मुताबिक मार्च में 25 आधार अंको को कटौती की सम्भावना अब 51.9 प्रतिशत रह गई है, जो पिछले सप्ताह की सम्भावना 70 प्रतिशत से काफी कम हो गई है। पिछले सप्ताह अमेरिका से जारी रिटेल सेल्स और बेरोज़गारी के दावे उम्मीद से बेहतर दर्ज किये गए है जो इस बात की सम्भावना को बढ़ा रहा है की ब्याज दरों में कटौती मार्च महीने में नहीं होगी। हालांकि, पिछले सप्ताह के अंत तक सोने की कीमते 61500 रुपये के निचले स्तरों को छूने के बाद कीमतों में सुधार हुआ और भाव 62050 रुपये प्रति दस ग्राम के स्तरों पर रहे। एमसीएक्स सोने की कीमतों में पिछले सप्ताह 0.5 प्रतिशत और एमसीएक्स चांदी में 1 प्रतिशत की साप्ताहिक गिरावट दर्ज की गई है।

इस सप्ताह यूरोपियन सेंट्रल बैंक, जापान और केनेडा की मौद्रिक नीति, अमेरिका और यूरोप के मैन्युफैक्चरिंग पीएमआई और अमेरिका की जीडीपी, कोर पी सी ई प्राइस इंडेक्स के आंकड़े कीमती धातुओं के लिए महत्वपूर्ण रहेंगे।

तकनिकी विश्लेषण

इस सप्ताह सोने और चांदी की कीमते सीमित दायरे में रह सकती है। एमसीएक्स फ़रवरी वायदा सोने में सपोर्ट 61000 रुपये पर है और रेजिस्टेंस 64000 रुपये पर है। मार्च वायदा चांदी में सपोर्ट 70000 रुपये पर है और रेजिस्टेंस 74000 रुपये पर है।

EPACK Durable Limited is the second largest room air conditioner original design manufacturer (“ODM”) in India in terms of number of units (indoor units + outdoor units) manufactured in Fiscal 2023. Its current product portfolio currently comprises i) Room air conditioners where it designs and manufactures complete RACs. ii) Small domestic appliances. and iii) Components.

OBJECTS OF THE ISSUE

• Funding capital expenditure for the expansion.
• Payment of certain outstanding loans of the company.
• General corporate purposes.

KEY MANAGERIAL PERSONNEL

Bajrang Bothra

Chairman and Whole-time Director on the Board of the Company. He oversees the business operations and management of the Company. He has a master’s degree in commerce from Shri Ram College of Commerce, University of Delhi, Delhi. He has approximately 27 years of experience in the electronics manufacturing sector.

Ajay DD Singhania

Managing Director and Chief Executive Officer of the Company. He has approximately 24 years of experience in the electronics manufacturing sector. He oversees the sales and marketing, production, supply chain management, and R&D departments of the Company.

Rajesh Kumar Mittal

Chief Financial Officer of the Company. He has been associated with the Company since June 8, 2020. He has approximately 25 years of post-qualification work experience in the finance and accounting.

Esha Gupta

Company Secretary and Compliance Officer of the Company. She has been associated with the Company since April 3, 2023. She has approximately 15 years of experience in the secretarial sector.

COMPANY PROFILE

• Since 2003, EPACK has been on a journey of evolution , where it initially started as an OEM for RAC brands.
• Driven by its focus on product development and innovation , it evolved into an ODM partner for RACs for its customers.
• The company also identified the opportunity to increase its value addition in its offerings to customers, and accordingly, started manufacturing various components such as sheet metal, injection moulded, cross-flow fans, and PCBA components.
• In parallel, it capitalized on its existing manufacturing infrastructure to strategically expand its operations in the small domestic appliances (“SDA”) market.
• The Company has dedicated R&D centers in Greater Noida, Bhiwandi, and Dehradun and it has 4 manufacturing facilities in Dehradun and two other facilities as Bhiwandi Manufacturing Facility and the Sri City Manufacturing Facility.
• Its top customers include Blue Star Limited, Daikin Air conditioning India Private Limited, Carrier Midea India Private Limited, Voltas Limited, Havells India Limited, Haier Appliances (India) Private Limited.

COMPETITIVE STRENGTHS

• Long-standing relationships with established customers.
• Among the key manufacturers in the fast-growing RAC and SDA manufacturing industries.
• Advanced vertically integrated manufacturing operations with a product portfolio aimed at capturing the full spectrum of the RAC and SDA value chain.
• Robust product development and design optimization capabilities.
• Experienced Promoters supported by the senior management team.

KEY STRATEGIES

• Expanding its existing product portfolio.
• Continue to drive operational efficiencies through expansion of its integrated manufacturing capabilities and continued investment in its R&D infrastructure.
• Increase wallet share with existing customers and continue to focus to expand its customer base. Further, explore initiatives to strengthen control over its supply chain.

KEY CONCERNS

• A significant portion of the company’s revenue is generated from its top 5 customers.
• The Company’s customers do not make long-term commitments to it and may cancel or change their sourcing requirements.
• Failure to maintain its quality accreditations and certifications may negatively impact its brand and reputation.
• The industry is competitive and company’s inability to compete effectively may adversely affect its business.
• Its RAC business is subject to seasonal variations and cyclicality.

‍

COMPARISON WITH LISTED INDUSTRY PEERS (AS ON 31ST MARCH 2023)

FINANCIALS (RESTATED CONSOLIDATED)

OUTLOOK & VALUATION

EPACK Durable is India's second-largest room air conditioner (RAC) ODM. The company boasts long-standing relationships with top customers, leverages advanced vertically integrated manufacturing and possesses robust product development capabilities. EPACK Durable prioritizes continuous product portfolio expansion. And its consistent financial performance demonstrates operational efficiency and growth potential.

However, some key risks warrant consideration. The company's dependence on a limited number of major customers. Additionally, the RAC industry is highly competitive, and the business experiences seasonal fluctuations.

The issue is fully priced at a P/E valuation of 56.4x; thus, considering all the factors ,we recommend that investors apply for this IPO with a mid- to long-term view. However, they should carefully evaluate their risk tolerance and current market sentiments.