Market Outlook: Global Cues to Weigh on Sentiment, Bajaj Housing Finance IPO, and More
Bajaj Housing Finance is engaged in individual home loans, loan against property, lease rental discounting, and developer finance. Nifty snapped three-week winning streak led by global volatility.
Market OutlookGlobal CuesBajaj Housing FinanceIpoCredit Card SpendsUs ElectionsSteel PricesAccReliance IndustriesKalpataru ProjectsReal Estate NewsSep 06, 2024
Meanwhile, stock-specific action may continue, with key support for the index at 24,500 levels where supportive efforts are expected to emerge. Seasonality-wise, September has been a month with elevated volatility both domestically and globally. With Nifty already witnessing a three-week rally, we expect markets to witness bouts of volatility and undergo a short-term corrective phase.
In other news, Bajaj Housing Finance is coming up with an IPO, raising Rs 6,560 crore, comprising a fresh issue of Rs 3,560 crore and OFS of Rs 3,000 crore. Bajaj Housing Finance is engaged in individual home loans (prime category), loan against property, lease rental discounting, and developer finance. With an AUM of Rs 97,071 crore (as of June 2024), Bajaj Finance remains one of the fastest-growing HFCs.
The lender is available at ~3.2x current BV, which seems reasonable given the outlook on growth and sustained profitability. Thus, we remain positive on the future prospects and recommend subscribing for the IPO.
Customer accretion has aided steady growth in credit card spends, and 2HFY25 could witness a gradual revival. In data on credit card for the month of July 2024, credit card spend has witnessed healthy growth at 19.3% YoY to Rs 1.98 lakh crore.
However, this growth is primarily led by customer accretion (16.4% YoY growth), while spends per card have remained slower at 2.5% YoY. An uptick is seen in credit card for smaller transactions, though competition from UPI has limited growth in spends per card.
Within large players (market share at 73.2%), SBI and HDFC Bank have remained relatively slower, with growth in spends at 3.5% and 12.6% respectively, thus resulting in a decline in market share at 15.6% (-30 bps MoM) and 25.7% (-40 bps QoQ). Axis Bank has gained market share (+70 bps MoM) at 11.9%, led by pedaling of customer accretion.
While credit card outstanding has witnessed moderation in growth, it continues to remain ahead of spends at 32.4% YoY (Rs 2,75,601 crore). Asset quality, witnessed hiccups in the past three quarters, remains watchful. Expect 2HFY25 to be better, led by gradual improvement in asset quality, continued steady growth in spends and revolvers, and an uptick in margins amid reversal in interest rate cycle.
The US elections are expected to trigger further volatility, with both candidates announcing their prospective policy routes for the economy. Democrats are promising a less inflationary route for the economy by price control and affordable housing, while Republicans are proposing cutting taxes to 15% amid protectionist trade policies at the cost of higher fiscal deficit.
The domestic steel prices are currently quoting at a three-year low at ~Rs 50,000/tonne (HRC) amid a steep increase in steel imports from China and other ASEAN countries. However, the decline in steel production in China, which was down 9% YoY in July'24, could benefit Indian steel producers by potentially easing the import pressure from China.
The government is considering imposing taxes and duties on imported steel, thereby supporting metal prices, which would relieve domestic steel players by mitigating the impact of rising imports.
Advance Cell Chemistry (ACC) - Reliance Industries emerges as PLI winner with 10 GWh capacity. Reliance Industries Ltd. (RIL) has been awarded a 10 GWh Advanced Chemistry Cell (ACC) battery storage capacity under the PLI scheme, with an incentive outlay of ~Rs 3,620 crore.
Kalpataru Projects (KPIL) is amongst the leading EPC players in infrastructure sectors such as Power T&D, Buildings & Factories, Oil & Gas, Urban Infra, Water, and Railways. With a diversified portfolio, presence over 73 countries, delivering world-class engineering solutions to its clients with an experienced team to successfully deliver complex one-of-a-kind projects.
The company's revenue grew 16.2% CAGR (FY22-24), whereas EBITDA & PAT grew by 25.7% CAGR & 23.4% CAGR respectively over the same period.
Strong visibility in the domestic market across T&D and B&F segment The company has set a target of Rs 23000 crore of order inflows in FY25E, which would be mainly led by T&D and B&F segment.
The government is mulling a proposal to mandate domestic auto OEMs to use 10% of steel metal used in vehicles sold 20 years ago (end of life vehicles at this point in time) in the present production process. This share will progressively increase to 20% and eventually 30% as the scrapping ecosystem gains pace in the country.
This measure shall promote OEM's set up scrapping centers or tie-up with credible names and shall promote a circular economy. It falls under the category of Extended Producers Responsibility (EPR) which is currently being enforced by on sectors such as tires.
The financial impact of the same is difficult to ascertain at this point in time; however, this coupled with discounts on new vehicle purchase against the scrapped vehicles will eventually make vehicle scrappage a reality and shall benefit the industry in the long run (in terms of eventually pick up in new vehicle sales).
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Frequently Asked Questions
What is the market outlook for the week?
The market outlook for the week is expected to be weighed down by global cues, particularly the US recession fears.
What is Bajaj Housing Finance's business?
Bajaj Housing Finance is engaged in individual home loans (prime category), loan against property, lease rental discounting, and developer finance.
What is the impact of US elections on the market?
The US elections are expected to trigger further volatility, with both candidates announcing their prospective policy routes for the economy.
What is the current state of the domestic steel industry?
The domestic steel prices are currently quoting at a three-year low at ~Rs 50,000/tonne (HRC) amid a steep increase in steel imports from China and other ASEAN countries.
What is Kalpataru Projects' business?
Kalpataru Projects (KPIL) is amongst the leading EPC players in infrastructure sectors such as Power T&D, Buildings & Factories, Oil & Gas, Urban Infra, Water, and Railways.
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