📰Earnings Are In, And...

Hello. 183 companies, including 37 of the Nifty 50 companies, reported earnings in the last week. We’ll investigate what happened, and then close with Gupshup, a round-up of the most important headlines.

Also, our Future of India event will be moved from November 7 to February to accommodate events relating to the U.S. presidential election that week. All ticket holders will be contacted directly in the coming days with the option to get a full refund or transfer their ticket. More details will be announced as they come.

BTW: Former Indian Prime Minister Rajiv Gandhi had originally planned to stay out of the family business of politics. What was his first career path? (Answer at bottom)

Markets

Read here for an appendix on the above.

Analysis

Earnings Are In, Shares Are Flat

Around 183 companies have reported earnings in the past week, with another hundred set to release results in the next two weeks. This includes 37 of the 50 firms in the Nifty50, though investors will have to wait until November for Adani's performance update. While many earnings have remained flat, some key trends are emerging. Slowing global demand has weighed on industries like commodity exporters and refiners, which rely heavily on international growth. In contrast, tech continues to expand, driven by increasing domestic adoption and strong foreign investment. However, inflation has squeezed margins across the board, particularly for companies with significant input costs.

Overall, stocks dipped slightly: the NSE Nifty 50 slipped 0.29 percent to close at 24,781, while the BSE Sensex ended 0.09 percent lower at 81,151.

Commodities The Oil and Gas sector reported flat revenue but falling profit due to compressed margins. Reliance Industries — India’s largest oil & gas producer — saw its net profit fall 3 percent y-o-y. MRPL, a subsidiary of the Oil & Natural Gas Corporation — the largest government-owned oil company, reported a net loss of $6.97 billion compared with a $10 billion profit in the previous year. This is driven by declining refinery margins, as petroleum prices remain flat and crude prices have edged up slightly from previous quarters. Additionally, slowing international demand from China and other APAC countries, coupled with reduced global output, has contributed to the pressure.

Infrastructure players in cement like Ultratech, India’s largest cement supplier, also saw a slowdown with profit falling 36 percent and revenue dropping 2 percent. Higher input costs caused EBITDA to fall far more than revenue (down 18 percent y-o-y). Overall, pricing power in the cement industry declined, despite sales volume growth of 3 percent domestically and 40 percent internationally. The strong international figures, however, are primarily due to Indian companies expanding overseas rather than an increase in demand.

Adani is announcing results in a few weeks in November but is projected to have a more bullish outlook due to the overweight reliance on larger corporations for government contracts. 

TMT and Logistics In the telecom sector, Reliance Jio — India’s largest telecom company by fixed-line operation market share — posted robust growth with a 17.7 percent y-o-y increase in revenue, attributed to rising data consumption and new tariff structures. Profit grew by 23 percent to $777.8 million (₹65.4 billion).

The IT sector saw a mixed bag of results, with giants like Wipro and Infosys showing signs of slowed revenue growth. Wipro revenue fell by 1 percent while Infosys profit grew by 5.1 percent. Both companies missed analyst growth expectations.

Mahindra Logistics, a logistics and mobility solutions provider, posted a sharp decline in net profits, dropping 54 percent y-o-y due to higher operational costs and subdued demand, indicating strain in the supply chain and logistics industry.

Financials Financial companies outperformed in net income growth despite rising costs. HDFC saw its interest income increase by 10 percent, with deposits growing by 15 percent, leading to a 6 percent y-o-y net income gain. Similarly, Kotak Mahindra expanded its unsecured and secured loan portfolios, though credit costs rose by 67 basis points, and its net interest margin slipped by 11 basis points. Both Kotak Mahindra and RBL Bank faced loan slippage, mainly from credit cards and microloans, which caused a decline in their loan book values. Overall, lending activity remained strong, but signs of economic tightening are emerging as bad loans begin to erode lending value.

Macro

• RBI expects festive demand in India to help revive growth prospects which currently are threatened by geopolitics. The Central Bank also expects government spending and rural demand to bring back economic growth which has shown signs of slowing down compared to early 2024.

• The US import surge shows the durability of global Asian trade. LA-Long Beach is going to break the 2Q21 record set for cargo post this peak busy season. Economists see fears of tariffs causing pre-shipping and overall resilience in India and other APAC countries. (BBG)

Equities

• PhonePe, backed by Walmart, sees revenue surge by 74 percent. Revenue is now $602 million (Rs. 50.6 billion) and net losses dropped by 28 percent. PhonePe is meant to disrupt India’s UPI market which lets users make payments instantly by linking banks with fintech similar to Apple Pay or Venmo. PhonePe boasts 530 million users with 200 million being recurring. (BusinessLine)

Alts

• Green hydrogen prices are expected to start coming down soon. Hydrogen made with renewable power is selling for less than that with natural gas. Green hydrogen has always been a tool to reduce energy costs but has historically cost $3-7 per kilo plus storage costs, but India is on track to reduce the price to $1.50 in 2030. Several privates are being subsidized to help this transformation such as Hygenco. (BBG)  

• Indian startups are plugging gaps in Indian hospitals from AI beds to remote ICUs. Dozens of healthcare startups are developing solutions to hospitals but also remote care in terms of gathering patient data or assigning prescriptions. Investors have poured in $3.7 billion and Bain expects this landscape to be worth $60 billion by 2028. (Economic Times) 

• Cerberus sees exuberance in the Indian private credit market due to weak lending standards. Similar to SamCap’s analysis on the fast-growing space, international lender Cerberus sees weaker structuring and covenants resulting in less safe investments being made.

Policy

• China and India end a border impasse ahead of the Xi-Modi summit. Foreign Minister Jaishankar said an agreement was reached to allow border patrolling early Monday morning. The border situation is returning back to 2020 levels before the skirmishes caused the area to close down. Modi and Xi will have bilateral talks for the first time in years during the BRICs meeting in Russia. (BBG) 

• Kashmir and Jammu have seen major attacks on migrant workers since polls, plus several infrastructure attacks. The Indian Express reported that a housing camp for construction workers was attacked; the workers were building a key tunnel project for tourists in the region. The victims number 7 killed and 5 injured including a mix of local and non-locals. The polls resulted in an alliance between a local party and the Indian National Congress in opposition to the BJP. 

• In light of recent violence, Modi touts stability before Maharashtra and Jharkhand votes. The BJP recently won Haryana which harkened back to Modi’s original call for stability and continuance following a nail-biting victory to clinch prime ministership again in June. Upcoming elections are important to cementing wins in India’s financial capital of Mumbai and the resource-rich state of Jharkhand. (BBG) 

Oh, and former PM Rajiv Gandhi originally trained to be a pilot and flew for Indian Airlines; he was apolitical while his mother was India’s prime minister and his brother served in parliament. After his brother passed away, his mother encouraged him to run for his seat. He succeeded his mother as India’s sixth prime minister after her assassination.

See you next week.

Disclaimer: This is not financial advice or recommendation for any investment. The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.

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