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

SBFC Finance Limited is a non-deposit taking non-banking finance company (“NBFC-ND-SI”) offering Secured MSME Loans and Loans against Gold, with a majority of its borrowers being entrepreneurs, small business owners, self-employed individuals, salaried and working-class individuals.

• Among MSME-focused NBFCs in India, SBFC has one of the highest assets under management (“AUM”) growth, at a CAGR of 44% in the period from Fiscal 2019 to Fiscal 2023.
• The company has a diversified pan-India presence, with an extensive network in its target customer segment. As of March 31, 2023, it has an expansive footprint in 120 cities, spanning 16 Indian states and two union territories, with 152 branches.

• The Company’s complete portfolio of loans has in-house origination and benefits from its risk management framework. Leveraging its significant operational experience, it has set up stringent credit quality checks and customised operating procedures that exist at each stage for comprehensive risk management.
• The company primarily focus on small enterprise borrowers, whose monthly income is up to ₹ 0.15 million, with a demonstrable track record of servicing loans such as gold loans, loans for two-wheeler vehicles and have a CIBIL score above 700 at the time of origination.
• SBFC source customers directly through its sales team of 1,911 employees as of March 31, 2023, and has adopted a direct sourcing model through branch-led local marketing efforts, repeat customers or through walk-ins, which has helped it to maintain contact with customers and establish strong relationships with them.
• The company has also created an onground collections infrastructure that is extensive, to ensure that it maintain a high asset quality.

KEY MANAGERIAL PERSONNEL    

1. Neeraj Swaroop is an Independent Director and Chairperson of the Board. He has been associated with the Company since November 21, 2017. Prior to joining this Company, he was associated with Pond’s (India) Limited, Bank of America, HDFC Bank Limited, Standard Chartered Bank and Singapore Exchange Limited
2. Aseem Dhru is the Managing Director and Chief Executive Officer of the Company. He has over 25 years of experience in the banking industry and has been associated with the Company since September 28, 2017.
3. Narayan Barasia, is the Chief Financial Officer of the Company. In his current role, he is responsible for financial management, accounts, tax, treasury, secretarial and legal matters. He has more than two decades of experience.
4. Jay Mistry, is the Company Secretary and Compliance Officer of the Company. In his current role, he is responsible for secretarial and regulatory compliance of the Company. He has more than five years of experience in securities and corporate laws, and corporate compliances.
5. Mahesh Dayani, is chief business officer of the company. He has over 22 years of experience across wholesale and retail banking.
6. Saiprashant Menon is the chief collection officer of the company.He has more than 21 years of experience in collections.

COMPETITIVE STRENGTHS

• Diversified pan-India presence with an extensive network to cater the target customer segment.
• 100% in-house sourcing, leading to favourable business outcomes.
• Comprehensive credit assessment, underwriting and risk management framework.
• Extensive on-ground collections infrastructure leading to maintenance of asset quality.
• Healthy liability franchise with low cost of funds.
• Consistent financial performance backed by profitable growth
• Experienced, cycle-tested and professional management team

KEY STRATEGIES

• Leverage pan-India network to deepen its penetration in the target customer segment.
• Expand its product portfolio through offering affordable housing finance.
• Diversify its source of borrowings and improve operating leverage.

KEY CONCERNS

• It require substantial capital for its business and any disruption in its sources of capital could have an adverse effect on the business.
• Their business is particularly vulnerable to interest rate risk, and volatility in interest rates for both lending and treasury operations, could have an adverse effect on it.
• Inability to compete effectively in an increasingly competitive industry may adversely affect its net interest margins, income and market share.
• Any downgrade in its credit ratings could increase borrowing costs.
• Risk arising from collateral for its portfolio.

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

FINANCIALS (RESTATED CONSOLIDATED)

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‍OUTLOOK & VALUATION:

SBFC is a well-established company with consistent financial performance and a stable asset quality; it is showing growing AUM and a decline in its NPAs. It has a diversified presence across India, and its access to diversified funding sources is a key contributor to its growth. However, there are a few risks as well. SBFC is dependent on a few key customers. Secondly, The company is also exposed to fluctuations in the price of securities it takes as collateral for loans. Additionally, an increase in interest rates could pose a challenge for the company. Nevertheless, the Issue looks fairly priced, and after considering all these factors, we believe that investors may consider to apply for this IPO.

Disclaimer: The content provided above is for informational and educational purposes only. It does not constitute or imply a recommendation to engage in any securities transactions or investment strategies. We do not provide personalized advice or determine suitability for individuals' financial needs. Please conduct your own analysis and consider your personal circumstances before making any investment decisions.

कीमती धातुओं में इस सप्ताह भी ब्याज दरों में बढ़ोतरी की सम्भावना के बीच, कीमतों में बिकवाली का दबाव देखा गया। दुनिया की सबसे बड़ी अर्थव्यवस्था में मजबूती और मुद्रास्फीति में बढ़ोतरी निवेशकों को वैश्विक ब्याज दरों के दायरे पर पुनःविचार करने के लिए बाध्य कर रहा है। ग्लोबल बॉन्ड मार्केट में बिकवाली के कारण अमेरिकी बेंचमार्क ट्रेज़री यील्ड 2007 के स्तरों के करीब जबकि यूके में बांड यील्ड 2008 के उच्च स्तरों के करीब पहुंच गई है। दरसल, पिछले सप्ताह फेड के मीटिंग मिनट्स जारी हुए जिसमे स्पष्ट हुआ है की फेड के ज़्यादातर सदस्य आगे भी ब्याज दर बढ़ोतरी के पक्ष में है, जिससे बांड यील्ड में बढ़ोतरी देखने को मिल रही और इसके सपोर्ट से अमेरिकी डॉलर इंडेक्स मजबूत हुआ है। मजबूत बांड यील्ड से डॉलर 83.1 रुपये हो गया है जिससे घरेलु बाज़ार में सोने में कॉमेक्स वायदा की तुलना में कम गिरावट रही।अमेरिकी डॉलर के मुकाबले रुपये के मूल्य में गिरावट के प्रमुख कारणों में से एक 10-वर्षीय भारत सरकार बांड और अमेरिकी सरकार बांड के बीच कम होती स्प्रेड है। भारत और अमेरिका में बॉन्ड यील्ड स्प्रेड 2007 के बाद न्यूनतम स्तरों पर है। एमसीएक्स सोने में लगातार तीसरे सप्ताह भी गिरावट रही है और अक्टूबर वायदा सोने में पिछले सप्ताह 0.90 प्रतिशत की गिरावट दर्ज की गई है और भाव 58375 रुपये प्रति दस ग्राम के स्तरों पर पहुंच गए है। हालांकि एमसीएक्स में सितम्बर वायदा चांदी में पिछले सप्ताह मामूली बढ़ोतरी दर्ज की गई है।

तकनिकी विश्लेषण : इस सप्ताह कीमती धातुओं के भाव दबाव में रहने की सम्भावना है। एमसीएक्स अक्टूबर वायदा सोने में सपोर्ट 57000 रुपये पर है और रेजिस्टेंस 59000 रुपये पर है। सितम्बर वायदा चांदी में सपोर्ट 68000 रुपये पर है और रेजिस्टेंस 71500  रुपये पर है।

Introduction

Bond futures—a financial instrument that’s widely used by investors, traders, and institutions to hedge against interest rate risks or speculate on the future movements of bond prices. If you’re new to bond futures, don’t worry! We’ll break down the concept in simple terms and help you understand how they work, why they’re used, and their potential benefits.

What are Bond Futures?

Bond futures are standardized contracts that allow investors to buy or sell a bond at a predetermined price on a future date. These contracts are traded on exchanges, and they derive their value from an underlying bond, often a government bond like the Indian Government Securities (G-Secs).

For example, if you buy a bond future contract, you’re agreeing to purchase a specific bond at a set price on a set date in the future. This allows you to lock in the bond’s price today, regardless of future market fluctuations.

Why Do Investors Use Bond Futures?

1. Hedging Interest Rate Risk: One of the primary uses of bond futures is to hedge against interest rate fluctuations. Since bond prices are inversely related to interest rates, investors use bond futures to protect themselves from potential losses due to rising interest rates.
2. Speculation: Traders also use bond futures to speculate on the direction of interest rates. For instance, if a trader believes that interest rates will rise, they might sell bond futures, anticipating that bond prices will fall.
3. Leverage: Bond futures allow investors to gain exposure to bonds without having to pay the full price upfront. This leverage can amplify both potential gains and losses.

How Do Bond Futures Work?

Here’s a simple example to illustrate how bond futures work:

• Assume you are an investor who believes that interest rates will drop in the next three months. You buy a bond future contract at a price of ₹1,000.
• If interest rates do drop, the price of the bond in the market increases, say to ₹1,050. You can now sell your bond future contract at this higher price, making a profit of ₹50 per contract.
• However, if interest rates rise instead, and the bond price drops to ₹950, you would incur a loss if you decide to sell the contract.

Benefits of Bond Futures

1. Risk Management: Bond futures are an excellent tool for managing interest rate risk. By locking in prices, investors can protect their portfolios from unfavorable market movements.
2. Liquidity: Bond futures are traded on exchanges, making them highly liquid. This allows investors to enter and exit positions with ease.
3. Transparency: Since bond futures are traded on regulated exchanges, they offer a transparent pricing mechanism, ensuring fair value transactions.

Examples of Bond Futures in the Indian Market

• NSE Bond Futures: The National Stock Exchange (NSE) in India offers bond futures contracts based on government securities. These contracts allow investors to hedge their positions or take speculative bets on the movement of government bond yields.
• 10-Year G-Sec Futures: A popular bond future in India is based on the 10-year government bond. Investors use this contract to hedge against long-term interest rate movements.

Risks and Considerations

1. Leverage Risk: While leverage can magnify gains, it can also magnify losses. Investors must be cautious when using leverage in bond futures trading.
2. Market Risk: The value of bond futures is affected by changes in interest rates and bond prices. Unexpected market movements can lead to significant losses.
3. Complexity: Bond futures can be complex instruments, requiring a solid understanding of interest rates, bond pricing, and market dynamics.

Conclusion

Bond futures are powerful tools for managing interest rate risks and speculating on bond price movements. They offer benefits such as risk management, liquidity, and transparency but also come with risks like leverage and market volatility. 

1. Definition:

LTP, or Last Traded Price, is the price at which the most recent trade of a stock or security occurred. Think of it as the latest snapshot of a stock's value on the market. For instance, if you're looking at the stock of Reliance Industries, the LTP is the price at which the last trade of Reliance shares was executed.

2. Importance:

The LTP is crucial for investors because it represents the current market value of a stock. It reflects the most recent transaction and provides insight into how the market views that security at this very moment. For example, if the LTP of HDFC Bank is ₹1,500, this is the price at which the last trade happened, indicating the latest sentiment and valuation for HDFC Bank shares.

3. How It Works:

LTP is updated in real-time or at short intervals on stock exchanges. Every time a trade is executed, the LTP is refreshed to reflect the new transaction price. This means that if you check the LTP of Infosys now, it might be different from what it was a few minutes ago due to ongoing trades.

4. Usage:

Traders and investors use LTP to make informed decisions about buying or selling stocks. If you see that the LTP of Tata Motors has increased from ₹400 to ₹420, it may indicate that the stock is trending upwards, which could influence your decision to buy or sell. Essentially, LTP helps you gauge the current market conditions and decide your next move.

5. Example:

Let’s say the LTP of ICICI Bank is ₹800. This means the most recent trade was executed at ₹800 per share. If previously the price was ₹780, the new LTP suggests that the stock has seen a recent rise in value. This change can signal various things, such as positive news about the company or general market trends.

6. Difference from Other Prices:

• LTP vs. Bid Price: The bid price is the highest price a buyer is willing to pay for a stock. For example, if you see a bid price of ₹795 for State Bank of India, it means buyers are willing to pay up to ₹795. In contrast, LTP is the price at which the most recent trade occurred, which could be higher or lower than the bid price.
• LTP vs. Ask Price: The ask price is the lowest price a seller is willing to accept for a stock. If the ask price for Bharti Airtel is ₹805, it means sellers are willing to accept at least ₹805. The LTP, however, reflects the price at which the last trade happened, which might be close to or different from the ask price.

Understanding LTP helps investors stay updated about the latest trading activity and make better investment decisions. By keeping track of the LTP of various stocks like SBI, Infosys, or Tata Motors, you can get a clearer picture of market trends and the current value of your investments.

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An Initial Public Offer (IPO) marks a pivotal moment for a privately held company as it ventures into the public market, offering its shares to the general public for the first time. This transition requires meticulous planning and preparation. A critical element that contributes to the triumph of an IPO is the involvement of Anchor Investors. This blog will delve into the significant role these institutional investors play in the IPO process.

What are Anchor Investors?

Anchor Investors refer to prominent institutional investors such as investment banks, mutual funds, pension funds, insurance companies, and other significant players. They play a vital role by making substantial investments in an IPO, aiming to provide stability to the stock price and inspire confidence among potential investors.

Role of Anchor Investors in an IPO:

Providing Stability to Stock Price:

• Anchor Investors' substantial investment in the IPO stabilizes the stock price during its initial listing phase.
• This stability instills confidence in other investors and encourages them to participate in the IPO.

Offering Validation:

• The presence of Anchor Investors sends a strong signal that the company is financially sound and possesses promising prospects.
• Their investment serves as an endorsement of the company's future potential, attracting more investors to participate in the IPO.

Building Credibility:

• Anchor Investors' extensive experience and expertise in investing lend credibility to the company.
• Their participation boosts investors' confidence, positioning the company as an attractive investment opportunity.

Improving Allocation:

• Anchor Investors typically receive a preferential allocation of shares in the IPO.
• This strategic allocation enhances the overall distribution of shares, mitigates the risk of oversubscription, and fosters market stability.

Providing Liquidity:

• The investment from Anchor Investors ensures sufficient demand for the stock, preventing excessive falls in the stock price.
• This liquidity attracts more investors to participate in the IPO, allowing the company to raise the necessary capital.

Offering Support:

• Beyond the IPO, Anchor Investors continue to hold their shares even during challenging times.
• Their unwavering support sustains confidence among other investors and contributes to the company's ongoing financial stability.

In conclusion, Anchor Investors play an indispensable role in the triumph of an IPO. Their significant investment imparts stability to the stock price, enhances the company's credibility, and entices more investors to partake in the IPO. Furthermore, their ongoing support contributes to the company's continued financial stability. For companies planning an IPO, understanding and seeking the support of Anchor Investors is pivotal to navigating this transformative process successfully.

The US dollar plays a significant role in shaping the global economy, and its influence on the Indian economy is no exception. The strength or weakness of the dollar can have a wide range of effects on various sectors in India, including trade, investment, inflation, and even individual finances. In this blog, we will explore how the fluctuations in the US dollar affect India in simple terms.

1. Impact on Imports and Exports

India trades extensively with other countries, and most international transactions, especially for oil and other critical imports, are done in US dollars. Here's how the dollar's value affects trade:

• Imports: When the US dollar strengthens (becomes more expensive in comparison to the Indian rupee), the cost of importing goods like crude oil, machinery, and electronics rises. Since India is a net importer of goods, a strong dollar makes it more expensive for companies and, ultimately, consumers. This leads to higher prices for petrol, diesel, and even everyday items.
• Exports: On the other hand, when the dollar is strong, Indian exports become cheaper for foreign buyers. This can benefit sectors like IT, textiles, and manufacturing as their goods and services become more competitive internationally. A weak rupee helps boost exports, contributing positively to the economy.

2. Foreign Investments

The US dollar has a direct impact on foreign investments, especially Foreign Direct Investment (FDI) and Foreign Institutional Investment (FII):

• Strong Dollar and Investments: When the US dollar strengthens, investors may find investing in US assets more attractive, resulting in a potential outflow of capital from emerging markets like India. Foreign institutional investors (FIIs) often withdraw money from Indian markets to invest in US assets, impacting India's stock markets negatively.
• Weak Dollar and Investments: Conversely, when the dollar weakens, foreign investors may be encouraged to put their money into high-growth emerging markets like India, boosting Indian stocks and currency.

3. Impact on Inflation

The value of the US dollar can also directly impact inflation in India:

• Higher Import Costs: As mentioned earlier, a stronger US dollar makes imports costlier. Since India imports large quantities of oil, this leads to increased transportation and manufacturing costs, which are then passed on to consumers in the form of higher prices for goods and services. This results in inflation, where the overall cost of living increases.
• Lower Inflation: If the US dollar weakens, the cost of imports goes down, and inflationary pressures ease. However, the reverse can happen if the rupee strengthens significantly against the dollar.

4. Debt and Borrowing

India, like many countries, borrows from foreign lenders, and much of this debt is in US dollars:

• Stronger Dollar, Higher Debt: When the dollar appreciates, the burden of repaying loans in dollars becomes heavier for the Indian government and corporations that have borrowed in foreign currencies. This puts additional pressure on the country’s finances and can lead to higher interest rates domestically.
• Weaker Dollar, Lower Debt: A weaker dollar reduces the repayment burden, freeing up more resources for domestic investments and growth.

5. Effect on Forex Reserves

India maintains a reserve of foreign currencies, including the US dollar, to manage currency stability and meet international obligations. The strength of the dollar affects these reserves:

• Higher Reserves: When the US dollar strengthens, India’s reserves (held in dollars) gain value in rupee terms, which can be beneficial for currency stability.
• Lower Reserves: If the dollar weakens, the value of India’s forex reserves decreases, which may affect the ability of the central bank to stabilize the rupee or meet its international obligations.

6. Tourism and Overseas Education

Changes in the dollar’s value can also impact Indian travelers and students:

• Expensive Trips Abroad: When the US dollar is strong, it becomes more expensive for Indian tourists to travel to the US or other countries where the dollar is the preferred currency. Similarly, students studying abroad may find their expenses rising, as tuition fees, accommodation, and living costs become more expensive.
• Cheaper Travel and Education: On the other hand, a weaker dollar can reduce the cost of overseas travel and education, making it easier for Indians to afford international experiences.

7. Remittances

India is one of the largest recipients of remittances (money sent back home by Indians working abroad). The value of the dollar affects the value of these remittances:

• Stronger Dollar, More Money: When the dollar strengthens, Indians receiving remittances in US dollars benefit because they receive more money when converting to rupees. This provides extra financial support for families in India.
• Weaker Dollar, Less Money: If the dollar weakens, the value of remittances decreases, leading to reduced financial inflows for Indian households.

Conclusion

The US dollar’s fluctuations have a wide-reaching impact on various aspects of the Indian economy, from trade and investment to inflation and personal finances. A strong dollar can lead to higher costs for imports and debt repayment, while benefiting exports and remittances. On the flip side, a weaker dollar can reduce inflationary pressures and encourage foreign investment. Understanding these dynamics is key to grasping how India’s economy is interconnected with global financial markets, particularly through the US dollar.

By keeping an eye on the dollar's movements, businesses, investors, and even individuals can better navigate the changing economic landscape and make smart decisions.

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