Shriram Finance and Cupid In Focus | The SMID Show | NDTV Profit - video Dailymotion

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- What are brokerages saying about #ShriramFinance after its Q3 results? - #Cupid trades lower after Q3 revenue and net profit decline   Hiral Dadia and Hersh Sayta bring you small and midcap stocks to keep up with on 'The SMID Show'. #NDTVProfitLive _______________________________________________________   For more videos subscribe to our channel: https://www.youtube.com/@NDTVProfitIndia Visit NDTV Profit for more news: https://www.ndtvprofit.com/ Don't enter the stock market unaware. Read all Research Reports here: https://www.ndtvprofit.com/research-reports Follow NDTV Profit here Twitter: https://twitter.com/NDTVProfitIndia , https://twitter.com/NDTVProfit LinkedIn: https://www.linkedin.com/company/ndtvprofit Instagram: https://www.instagram.com/ndtvprofit/ #ndtvprofit #stockmarket #news #ndtv #business #finance #mutualfunds #sharemarket Share Market News | NDTV Profit LIVE | NDTV Profit LIVE News | Business News LIVE | Finance News | Mutual Funds | Stocks To Buy | Stock Market LIVE News | Stock Market Latest Updates | Sensex Nifty LIVE | Nifty Sensex LIVE

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00:00 outperforming the benchmark indices. Let's pick up the top gainers and top losers overall

00:06 in terms of Nifty 50, because that's going to be interesting to watch out for. Contribution

00:10 Reliance Industries 58%, L&T, ICICI Bank as well as HDFC Bank, these are the biggest contributors

00:17 to the markets. Though you are seeing some pressure in terms of enforcers, supply is

00:21 under pressure and this is on the back of the commentary that we've heard in the call,

00:24 where two of the product launches that are getting delayed by two to three quarters and

00:29 that is going to be cumbersome. TCS is trading under pressure, ITC ahead of numbers is down

00:35 in trade. Moving on, if you see in terms of Bank Nifty components as well, let's just

00:39 pick up the top five gainers in terms of Bank Nifty as well as the losers as well in terms

00:44 of Bank Nifty. It's only AU Small Finance Bank which is reacting to numbers and is under

00:49 pressure, but apart from that all the others are up and about in trade. Bank of Baroda,

00:53 PNB, IDFC being the top gainers in today's day of trade. Let's pick up the Mid Cap and

00:59 the Small Cap Index, that's what the show is all about as well. Mid Cap 8/10 to 9/10

01:04 of a percent higher, whereas if you see the Small Cap Index as well in trade, almost a

01:08 percent. So, clearly you have the benchmark indices which are outperforming the broader

01:12 markets in today's session. One stock that is in focus in today's day of trade is the

01:17 Sriram Finance. Let's pull up that counter on the screens and see what the stock is doing

01:21 in trade. 3.5% up move and this is mainly in terms of the earnings. If you glance through

01:28 the numbers as well as 17% up move in terms of top line. Asset quality has also improved

01:34 marginally and in terms of the total AUM that has seen a growth of around 21%. YS Chakravarti,

01:41 MD and CEO at Sriram Finance joins us. Mr. Chakravarti, good morning and welcome to the

01:47 show.

01:48 Good morning, Hidayat. Very good morning.

01:51 Mr. Chakravarti, my first question coming to you is overall, in terms of the kind of

01:56 growth that we've seen, what has worked during the quarter and are you expecting this kind

02:01 of performance to continue in the coming quarters?

02:05 I think the major factor is the merger and the expanded reach for certain retail products.

02:15 So at the beginning of the merger, we were guided for about 15% growth, but I think majorly

02:25 the growth also has come. One is because of the strong economy and the second one is also

02:30 because of the retail. We were able to provide the retail products in a lot more offices.

02:37 Basically, Sriram Transport has about 2000 outlets and Sriram City Finance had about

02:44 1000 offices. Now, in about another 1000 Sriram Finance outlets, we are now able to offer

02:51 gold loans, MSME loans, and to an existing Sriram City's two-wheeler customers, also

02:59 personal loans. So you see growth in all these segments, outstripping the growth in the commercial

03:06 vehicle. So I think that's the major reason.

03:11 Right. So when you speak about the effective merger synergies with regards to housing,

03:18 that has crossed 12,000 crore. The product mix has also improved and you have your asset

03:24 quality and return ratios, which are largely stable. Going ahead, then which are the segments

03:30 that will drive growth for the company?

03:34 See, our focus, obviously about 70% of our portfolio is vehicles. We will continue to

03:44 focus on that. Again, in the vehicle portfolio, passenger vehicles could be cars or buses.

03:52 I mean, any passenger transport vehicles would outgrow the commercial vehicle business. Then

03:59 focus on MSME loans to MSMEs and the gold loan. These are the three that will actually

04:06 give us the growth going forward.

04:08 Okay. And apart from that, if you see from the other aspects, your operating and credit

04:16 costs have been higher this time around, and that is something that everyone is watching

04:20 out for. What's the trend looking like going ahead?

04:24 See, probably on an absolute terms, yes, they've gone up. But as a percentage, if you look

04:29 at it as a percentage term, in a percentage term, I think they're trending downwards.

04:35 And we are actually focusing on probably guiding for a small, every quarter, a downward trend.

04:48 It may not be very significant, but it's a steady improvement in delinquency is what

04:54 we are guiding for.

04:56 Okay. And overall, would it be right to say that around 20% AUM growth in 2024, and the

05:03 same thing can be maintained in 2025, or do you think 2025 will be slightly lower?

05:08 No, 2025 will be, we are projecting 15% to 18% growth for the next couple of years.

05:15 Okay. Overall, if you see in terms of the calculated NIMS as a percentage of the AUM,

05:23 that has gone up to around 9.65% on a sequential basis. And there has been a slight moderation

05:29 in yields of around 5 basis points that was offset by a higher decline in the COF by around

05:35 30 basis points. So, overall, if you have to move from here on, what is that number

05:40 expected to look like? And where will you be able to maintain your margins at? Will

05:45 it be in that 8.5% to 9% bracket, or do you think it can go beyond 9%?

05:52 No. To be honest with you, it's very tough now to take it beyond 9%. I think we'll be

05:58 between 8.5% to 9%. It'll be whoring around that. So, I mean, recency is one. I think

06:07 our products now, we have priced them optimally, number one. Number two, the cost of funds

06:13 also depends on cost of funds. If the cost of funds improve, probably we should be able

06:18 to do it better. But as of now, it's 8.5% to 9%.

06:23 Okay. So, when you talk about credit cost as well, where do you think you will be able

06:28 to maintain that? Because it did increase by almost 12 basis points this time around

06:33 consequentially to 2.4%. See, the long-term goal is probably from two

06:39 years is about 2%. And we are confident that we should be able to achieve 2% next financial

06:45 year. Okay. And when you talk about Sriram Housing

06:49 Finance as well, I mean, a good AUM growth over there. Asset quality has also remained

06:56 pretty much pristine this time around. Any thoughts in terms of a capital infusion coming

07:02 in on that front through direct investments or external investors?

07:07 See, if you look at their leverage, in fact, I think they are actually crossing, they've

07:17 already crossed six times. So, they definitely need a capital and probably they would need

07:23 anything above upwards of 1000, 1000,000 crores of capital going forward. So, we are in various,

07:29 I mean, we are actually exploring various options of probably either a capital raise,

07:35 external capital raise for them. Internally, we wouldn't want to put in the entire money.

07:42 So, we are actually exploring options of inviting some private equity guys onto the board and

07:48 we are in those discussions. Nothing is finalized as yet.

07:52 Right. And there would be no thought process to see a complete sale of the subsidiary?

07:57 Too early to think about it. I mean, anything depends on the value that you get, right.

08:05 So it's too early even to… So, tell me one thing, Mr. Chakravarti, if

08:10 we are looking at a capital infusion, however it might be, you know, through a combination

08:15 of external PE funds coming in or a combination of PE as well as internal, how much is the

08:23 need of the subsidiary? How much capital do you think will be needed? And with that capital,

08:30 how much growth are you anticipating? I'll let me put it this way. I think there

08:35 are very few HFCs which are sitting on a 20% capital adequacy, right. Most of them are

08:41 sitting on upwards of 40%, which is also giving them a lot of, you know, end of the day, the

08:48 cost of fund advantage cost. So, I would say a minimum of 1000 crores is what is needed

08:56 in the near term for at least next one and a half, two years, they will need at least

09:00 1000 crores. So, we anticipate them, the company to grow at probably next couple of years at

09:07 30 plus CAGR of AEM. Though they have grown by about 60% this year, that's basically

09:15 because of a small base. But going forward, I think we are projecting a 30-35% of growth

09:21 for the next two years. Okay. And apart from this, if you see in terms

09:26 of the return on asset and ROE, are you expecting any improvement or you think where the company

09:32 is currently is what should be good enough? I think we should be able to do around, reach

09:39 around 3.5% is what we are looking at. Okay. And any pressure on NIMS that you are

09:48 taking into consideration, maybe due to, you know, inability to improve yields or the persistent

09:54 increase in the cost of funds or higher than expected credit cost. If you have to look

09:59 at these three, how big a risk can that be and how much of it are you factoring in?

10:05 See, as of now, I think all the three are behaving, I would say, we are comfortable

10:14 with all the three as of now. Depends on the regulator. And I mean, honestly, I don't anticipate

10:21 any increase in rates going forward. Whatever rates, I think we have seen the upcycle. Hopefully

10:29 next six months, first half, second half of the next year should probably give us some

10:36 relief on the rate front is what I'm anticipating. And the second point is also the recent risk

10:43 weighting, increase in risk weighting on unsecured loans and also has not affected us much. So,

10:51 I don't think there would be any risk on the rate side or on the delinquency side. So,

10:57 I do hope that we are positive that the next two years, the environment would be benign

11:04 and conducive to growth. Right. So, I think this is a good trajectory

11:10 that everyone is watching out for as well. Thank you, Mr. Chakravarti, so much for speaking

11:14 to us at NDTV Profit. And almost a multi-bagger that we are talking to, 92% is the kind of

11:19 returns that we've seen in the last one year with regards to where Sriram Finance goes

11:25 today also the stock is seeing some smart moves. But let's quickly slip into a short

11:28 break. Up next, we will be joined by the management of Cupid to discuss their quarterly numbers

11:35 as well as the fund raise that they are looking at. And this is an absolutely new management

11:40 that we will be speaking to, Managing Director Aditya Halwasia will be joining NDTV Profit.

11:45 Please stay tuned.

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15:12 Welcome back. You are watching the Small and Mid-Cap Show. Let us now move on to Cupid

15:16 that recently reported its third quarter numbers. Overall, if you go to see the revenue, slight

15:22 dip coming in there at 40 crores versus 42 crores on a year-on-year basis. Margins again

15:28 have seen a dip as well at 31.58 versus 32.81 and the profits have seen a dip this time

15:35 around as well. A couple of things that we need to discuss with regards to where Cupid

15:40 is concerned is in terms of the recent land parcel that they have acquired to improve

15:46 capacity. Secondly, the stock split as well as the bonus issue and thirdly, the fund raised

15:52 via preferential warrants. So, lots brewing with the company. Joining us on the show is

15:57 Aditya Helvasia, Managing Director at Cupid. Aditya, good morning and welcome to the show.

16:03 Good morning. Thank you. Thank you for having me on the show.

16:07 Aditya, my first question coming to you is if you see in terms of the third quarter numbers,

16:11 there has been a slight muted move in terms of the top line margins and profitability.

16:16 What's the reason for that?

16:18 So, overall, with our current plant at Cupid Limited, we are seeing a very

16:25 flatwood growth, close to flatwood growth because of the capacities we have installed. Simultaneously,

16:32 the markets we were already targeting prior to the new management taking over, it was

16:37 close to 150 to 160 crores worth of top line. So, these numbers year on year will be improving

16:46 as we bring about capacity expansion plans, which we have via internal approvals and simultaneously

16:54 we'll be also approaching other geographies for our product offerings and primarily in

17:00 female condoms and in IVD test kits.

17:04 Right. Aditya, what is and how has the strategy now changed pre and with the new management?

17:14 Sure. The strategy is to target more geographies, as I mentioned, and just work on getting tenders

17:23 for our international orders for the start and simultaneously get into the domestic market

17:30 in a big way in India. So, we will be liking to get into tendering business for our female

17:37 condoms and IVD test kits in the coming future because the margins over there are much higher

17:42 than male condoms. So, we'll be focusing, we'll be changing our product mix a little

17:48 bit in terms of target, we'll be attributing to them. So, that is a very holistic view.

17:57 Anything particular, please let me know.

17:59 So, Aditya, I understand that you're saying that the margins with regards to female condoms

18:04 is way higher as compared to male condoms, but as a percentage of your capacity, it's

18:09 still a minuscule portion, right? I mean, 480 million is what you produce in terms of

18:14 male condoms, 50 million is still in female condoms. How fast will you be able to change

18:19 that ratio? And if so, what's the target going to look like? How much of your capacity

18:25 will focus on female condoms if that's going to be the growth strategy?

18:30 So, just to give an indication on the revenue contributions, the revenue contributions for

18:35 male condoms as of today is 70%. And for female condoms as of today, it is close to 20%.

18:43 So, that gives an indication on revenue indication. When it comes to EBITDA, we are able to get

18:51 out of the female condoms, we're getting an EBITDA margin of close to 35% from female

18:59 condoms and from male condoms, you're getting close to 18%.

19:03 Correct. So, how, okay. So, let me put it another way. Now, from this, from 70-20, right?

19:11 How is that ratio expected to change? Say, if you have to take the next three years,

19:17 by how much will your female condoms contribute to in terms of revenues? And two, by how much

19:23 will it help you improve your margins?

19:27 So, as we bring about new capacities, we'll be bringing about scale and simultaneously

19:34 the magnitude of female condoms will, the number of female condoms we manufacture and

19:39 sell will increase. The percentage will be close to 25% female condoms and 65% male condoms.

19:46 That is what we're expecting. But the magnitude will increase in a very big way. Male condom

19:52 capacities are expected to increase by 770 million by FY26, FY27. And female condom capacities

20:00 are expected to increase by 75 million in FY26, FY27.

20:08 So, Aditya, the 385 crores that the company is raising through preferential issue of warrants,

20:16 will that be used to increase the capacity? And if so, will that be enough or you will

20:20 have to raise much more?

20:23 As of today, we'll be increasing our capacities organically by, we already have purchased

20:30 a parcel of land close to Mumbai. We'll be increasing our capacities with our internal

20:37 accruals. We have close to 115 crores as of today in our bank. We'll be utilizing that.

20:43 We have utilized close to 10% of that.

20:48 Okay. And with regards to the 385 crores that you are raising, what's going to be the use

20:52 of funds?

20:54 The use of funds are going to be domestic acquisition or cross-border acquisitions.

21:01 Okay. And what segments will you do these acquisitions in?

21:07 As of today, we have little clarity on the segments. We'll be either approaching the

21:16 prophylactic segment or that is the condom segment or the IVD segment or both.

21:22 Okay. And what's the trajectory looking like with regards to closing these acquisitions?

21:27 Will it be done in FY24 itself or will it be in the first half of FY25?

21:35 So, once we proceed with the preferential allotments, it takes a maximum of 18 months

21:43 to get 100% subscription amounts in our accounts to proceed with these acquisitions.

21:52 Okay. So, which means that at least, say, probably by FY26 is when you will be actually

21:59 fulfilling the acquisitions.

22:01 That will be a very comfortable estimate, yes.

22:04 Okay. And with regards to the stock split and bonus issue, what's the rationale by doing both?

22:12 We want shares of Cupid Limited to be more affordable to any prospective investor in the future.

22:21 Okay. And overall, in terms of FY24, taking everything into consideration,

22:28 what's the growth number that you're looking at and how will that improve,

22:33 taking everything that you're doing together with regards to capacity addition,

22:37 the acquisitions that are planned and the change in strategy, how will it improve in FY25?

22:45 By FY25, we'll be executing close to two-fifths of our expansion strategy after getting the land acquisition

22:58 and after installing the factory sheds and the planted machinery.

23:03 We already have a project head and an architecture working on the same.

23:08 So, we could expect a revenue increase of close to 50 to 60 crores comfortably.

23:17 Okay. And…

23:19 By FY25.

23:20 Got it. And in terms of geographies, which are the geographies which contribute maximum to your revenues?

23:27 And two, how much is India currently?

23:29 And as you said, you're looking to increase your domestic coverage as well.

23:34 How will that number increase?

23:38 So, when it comes to our revenue contribution, exports contribute close to 90% of our revenues.

23:48 Domestic contributes 10%.

23:52 And majority of this revenue is tenders, which we participate in government tenders and tenders of NGOs in and out of India.

24:01 Recently, we've been successful in being L1 and L3 in the CMSS tender for distribution of condoms in India.

24:15 Okay. So, how much will that 10% actually then become going ahead?

24:21 Yeah. As of now, I have not mentioned regarding the domestic B2C sales.

24:27 We'll be approaching it from all channels.

24:30 It's very miniscule as of now. We've just started two months ago.

24:33 We'll be seeing compelling numbers in the coming quarters to indicate good growth ahead.

24:41 Right. All right, Aditya. Thank you so much for having this candid chat with us at NDTV Profit.

24:47 Good prospects, good rewards that investors do get as well on the back of the strategy that you're using.

24:53 So, that's the management of Cupid. And clearly, if you see in terms of the stock as well,

24:58 if you pull up a one-year chart, it will give you an indication of the way the stock has moved.

25:03 There you go, almost 580, that's 6.8, that's seven times as the kind of returns that we've seen on this counter in the last one year.

25:12 So, a clear multi-bagger in the offing. But that's all that we have on the show, completely out of time.

25:18 Please stay tuned for more news and updates on NDTV Profit. And this is Hiral Dhadia.

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Shriram Finance and Cupid In Focus | The SMID Show | NDTV Profit

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