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S&P Global Ratings on Monday revised down its estimate for India’s economic growth in the next two financial years as high interest rate and lower fiscal impulse temper urban demand.

In an update to its economic forecast for Asia-Pacific economies after US election results, the rating agency projected a 6.7 per cent GDP growth rate in 2025-26 financial year (April 2025 to March 2026) and 6.8 per cent in the following fiscal year, down from 6.9 per cent and 7 per cent, respectively in previous projections.

For FY25, S&P Global pegged GDP growth rate at 6.8 per cent.

“In India we see GDP growth easing to 6.8 per cent this fiscal year as high interest rates and a lower fiscal impulse temper urban demand. While purchasing manager indices (PMIs) remain convincingly in the expansion zone, other high-frequency indicators indicate some transitory softening of growth momentum due to the hit to the construction sector in the September quarter,” it said.

The agency expects India’s GDP to grow at 7 per cent in FY28.

S&P retained its growth projection for China at 4.8 per cent in 2024 but cut next year’s forecast to 4.1 per cent from 4.3 per cent earlier and to 3.8 per cent in 2026 from the previous estimate of 4.5 per cent.

“The impending change in the US administration will be challenging for China and the rest of Asia-Pacific. US tariff increases have become more likely, especially on China, and possible changes in the US macro picture are leading to different interest rate expectations,” said the report titled ‘Economic Outlook Asia-Pacific Q1 2025: US Trade Shift Blurs The Horizon’.

Louis Kuijs, S&P Global Ratings Asia-Pacific Chief Economist, said rising risks are blurring the economic outlook for Asia-Pacific in the first quarter of 2025.”While much of the region should be able to continue to grow solidly, central banks will probably remain cautious by not reducing their policy rates too fast.” China’s stimulus measures should support growth, but S&P expected its economy to be hit by US trade tariffs on its exports.

The Asia-Pacific growth will be impeded by slower global demand and US trade policy. But lower interest rates and inflation should ease their drag on spending power.

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Zomato has posted impressive stock price gains, with the company’s shares rallying 41% in the last six months and over 128% year-to-date (YTD). This growth has been driven by steady expansion in its core food delivery business and strong demand in its quick commerce division, Blinkit.

Shares of Zomato, the food delivery aggregator, surged 6.35% in early morning trade on Monday, November 25 to their 6-week high of ₹273 apiece as the company is set to enter the BSE Sensex index, replacing JSW Steel. The company will become the first new-age tech stock to enter the 30-share frontline index.

Asia Index Private Ltd, a subsidiary of BSE, announced the reconstitution on Friday post-market hours. The changes will take effect on December 23, 2024, the Asia Index announced. Companies are added or removed from the Sensex based on their average six-month float-adjusted market capitalisation.

The BSE Sensex includes 30 large, well-established companies across key sectors, serving as both a benchmark and an investable index.

In another development, the company announced on Saturday that its shareholders have approved a proposal to raise capital through a qualified institutional placement. Last month, the board had approved a fundraise of up to ₹8,500 crore via this method to strengthen its cash balance following the recent acquisition of the movie and events ticketing businesses of digital payments firm Paytm.

Stock up 128% in 2024

Zomato has posted impressive stock price gains, with the company’s shares rallying 41% in the last six months and over 128% year-to-date (YTD). This growth has been driven by steady expansion in its core food delivery business and strong demand in its quick commerce division, Blinkit.

Additionally, several brokerages have raised their target prices for the stock, citing robust potential in both the food delivery and quick commerce sectors, which has also led to a sharp rise in the stock’s value. Japanese brokerage firm Nomura noted in its latest report that the company’s growth has significant room to accelerate, raising its target price from ₹280 to ₹320 while maintaining a “buy” rating.

Given the low penetration levels and increasing market acceptance in India, Zomato’s quick-commerce business is focusing on expanding store density in existing markets. The company plans to increase its store count by approximately 4X, aiming for 2,000 stores by December 2026, according to Nomura.

Earlier in September, global brokerage firm JP Morgan raised its target price for the stock from ₹208 to ₹340 per share, maintaining its “overweight” rating.

Looking at its financial performance, the company reported a consolidated net profit of ₹176 crore in Q2FY25, up from ₹36 crore in the same quarter last fiscal. Consolidated revenue from operations stood at ₹4,799 crore, compared to ₹2,848 crore in the year-ago period.

The company added 152 new “dark stores—distribution” centres—during the quarter, the highest number added in any single quarter, bringing the total store count to 791.

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EQWIRES RESEARCH ANALYST

Exchange: NSE | Sector: Automobiles – Two-Wheelers

Report Date: November 05, 2024

1. Executive Summary

Hero MotoCorp Limited (HEROMOTOCO) is the largest two-wheeler manufacturer in the world, with an unparalleled dominance in the Indian market. With a strategic push into electric vehicles (EVs) through its Vida brand and continued strength in commuter motorcycles, the company is well-positioned for future growth. This report delves into Hero MotoCorp’s financial performance, industry trends, valuation, and technical analysis, providing actionable insights for investors.

Investment Rating: BUY

Target Price: ₹5,030

Current Market Price (CMP): ₹4,835

Stop Loss: ₹4,720

2. Company Overview

Hero MotoCorp was established in 1984 and has grown into the most recognized two-wheeler brand globally. Known for affordability and fuel efficiency, Hero’s models like Splendor, HF Deluxe, and Passion dominate India’s mass-market segment. The company is also making strides in the electric vehicle market, signaling its adaptability to evolving industry trends.

Key Statistics:

Market Share: ~35% in India (Two-wheelers)

Installed Capacity: Over 11 million units annually

Global Reach: 40+ countries across Asia, Africa, and South America

EV Segment: Launched Vida V1 series, with plans to expand product offerings by 2025

3. Financial Performance

Q2 FY2024 Highlights:

Metric Q2 FY2024 YoY Growth QoQ Growth

Revenue ₹9,950 Cr +7% +4%

Net Profit ₹1,015 Cr +5% +2%

EBITDA Margin 12.5% +40 bps Flat

Earnings Per Share ₹50.4 +6% +3%

Hero MotoCorp’s profitability has remained stable despite headwinds like rising input costs. The company’s focus on cost efficiency and product mix optimization has supported margin expansion.

4. Industry Overview

4.1. Indian Two-Wheeler Market:

India is the world’s largest two-wheeler market, driven by affordability, rural penetration, and convenience in congested urban areas. The market is transitioning rapidly toward electric two-wheelers due to government incentives under FAME-II and rising fuel costs.

4.2. Electric Vehicle (EV) Opportunity:

Hero has committed significant resources to EV development, competing with players like Bajaj, TVS, and startups like Ola Electric. Its Vida brand targets urban commuters and eco-conscious consumers.

4.3. Macro Trends:

Urbanization and Income Growth: Boost demand for premium two-wheelers.

Government Push for Electrification: Incentives and infrastructure support the EV ecosystem.

Commodity Cost Trends: Steel and aluminum prices are stabilizing, aiding margin recovery.

5. Key Strengths

5.1. Market Leadership:

Hero’s iconic brands dominate entry-level motorcycles, a segment that accounts for 50% of two-wheeler sales in India.

5.2. Strong Financials:

Hero’s low debt levels (D/E: 0.03) and robust cash reserves position it well for future growth.

5.3. Rural Penetration:

Over 60% of Hero’s sales come from rural areas, where its affordable and reliable products are trusted.

5.4. Electric Vehicle Strategy:

Hero’s EV launch under the Vida series is gaining traction. The company plans significant capacity expansions and R&D investments in the EV space.

6. Risks

6.1. Rising Competition:

Startups like Ola Electric and Ather Energy, along with incumbents like Bajaj and TVS, are increasing competition in the EV segment.

6.2. Dependence on Domestic Market:

Over 90% of sales are from India, making Hero vulnerable to local economic shocks.

6.3. Commodity Price Volatility:

Rising costs of steel, aluminum, and rubber could pressure margins.

7. Valuation

Metric HEROMOTOCO Peers Avg.

P/E Ratio 23 45

EV/EBITDA 14.7x 14.9x

Dividend Yield 4.0% 2.8%

ROE         22% 18%

Hero is attractively valued compared to peers, with a strong dividend yield and healthy ROE.

8. Technical Analysis

1-Year Chart:

Below is the 1-year price chart of HEROMOTOCO.

Key Observations:

Stock trade on a support level

Support Levels: 4675-4740 Support zone.

Resistance Levels: 5060-5150 Resistance zone.

Indicators: RSI at 30, near oversold zone.

9. Strategic Initiatives

EV Expansion: Hero is setting up EV-specific plants and plans to launch 5 new models by 2026.

Export Growth: Aggressive expansion in Africa and Latin America to reduce domestic dependency.

Tech Partnerships: Collaborations with Gogoro for battery swapping technology.

10. Chart

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Ola Electric, mired in controversies amid a government probe and mounting losses, is set to lay off at least 500 employees as part of a restructuring exercise.

Ola Electric, mired in controversies amid a government probe and mounting losses, is set to lay off at least 500 employees as part of a restructuring exercise.

The Bhavish Aggarwal-led electric vehicle (EV) company is trying to boost its operational efficiency by reducing redundancies and “drive profitability”, according to multiple reports. The restructuring exercise will impact employees from several departments, the reports added.

According to an Inc42 report, citing sources, “the aim is to cut expenses to drive profitability and improve margins. There’s no set time period for the completion of the exercise”.

Ola Electric did not immediately comment on layoffs.

The company reported a 43 per cent increase in net loss at ₹ 495 crore in the July-September period (Q2 FY25), from ₹ 347 crore in the previous quarter (Q1 FY25).

The electric two-wheeler company also saw its revenue slump 26.1 per cent to ₹ 1,214 crore (on-quarter) from ₹ 1,644 crore in the first quarter of this fiscal. The net loss, however, narrowed on a year-on-year basis.

In the post-quarterly earnings call, Aggarwal said the company’s operating expenses had decreased quarter-on-quarter and that the company will focus on cost efficiencies.

“As we continue to scale distribution, revenue will keep growing while the operating expenses are likely to remain flat or even decline over the next few quarters,” Aggarwal added.

The company also saw its market share plunge to 33 per cent in Q2, down from 49 per cent in the previous quarter.

According to experts, increased competition and service network challenges have impacted Ola Electric’s market dominance.

The shares of Ola Electric continue to slide, more than ₹ 38,000 crore worth of investors’ money has been eroded in the company’s stock in just a couple of months.

On Friday, the company’s share was hovering around ₹ 67 apiece, way below its market debut price of ₹ 76 and more than 56 per cent down from its all-time high of ₹ 157.40.

The market cap had reached an all-time high of around ₹ 69,000 crore, which has come down to around ₹ 31,000 crore.

Several Ola Electric customers have reported problems with software, battery and jammed tyres. The Central Consumer Protection Authority (CCPA) has also ordered a comprehensive probe into the EV company over its consumer complaint redressal practices.

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Shares of Praj Industries were in demand on Friday, November 22, 2024 as the scrip rallied 11.23 per cent to hit an intraday high of Rs 751.85 per share.  

The rise in the Praj Industries scrip came after the company said that it is expecting to triple its revenues by 2030, during a press conference. Moreover, Praj Industries is eying opportunities in multiple sectors including sustainable aviation fuel (SAF), biopolymers and the energy transition & climate actions (ETCA). 

Dr Pramod Chaudhari said, “The energy transition & climate actions (ETCA) sector which has a global potential and contains segments like blue and green hydrogen, green ammonia and west to energy solutions is expected to drive the growth. Globally, the energy majors are likely to invest close to Rs 25 lakh crore in the clean energy sector by 2030, whereas the traditional oil and gas market will continue to attract new investments to the tune of Rs 21 lakh crore in the next 10 years’ time on the global front.”

“This will lead to the significant demand for modularisation solutions for setting up plants in the above-mentioned sectors. To cater to this demand, Praj has developed strong engineering capabilities in modularisation and has set up a dedicated advanced manufacturing facility at Mangalore in Karnataka with an investment of about Rs 400 crore. Spread across 123 acres of land, this plant can deliver revenues in the range of Rs 2,000-2,500 crore annually at the optimum level,” Chaudhari added 

According to Ghanshyam Deshpande, president of technology and engineering at Praj Industries, the CORSIA agreement for the use of Sustainable Aviation Fuel (SAF) has opened a door to the new opportunities for the company as India has set the target of blending 1 per cent by 2027 and 2 per cent by 2028. Whereas, the EU and USA has kept the SAF blending target of 6 per cent and 10 per cent respectively. 

“India’s first commercial passenger flight powered by indigenously produced SAF from sugarcane molasses successfully flew from Pune to New Delhi. Air Asia, Praj Industries and Indian Oil Limited (IOL) came together for this successful attempt,” Deshpande added. 

Meanwhile, Atul Mulay, president of Bioenergy at Praj Industries said, “The current revenues of Praj are close to Rs 3,400 crore annually, and we have a goal to reach Rs 10,000 crore by the year 2030. Currently, the share of exports is around 29 per cent; going forward, we are looking at increasing it to 50 per cent by 2030.” 

Praj Industries is an industrial biotechnology company with a legacy spanning four decades. Committed to advancing environmental sustainability, energy solutions, and the agri-process sector, Praj has built an impressive global presence with over 1,000 customer references in more than 100 countries across all continents.

At the core of its contributions to the global bioeconomy are its flagship platforms, BioMobility and Bio-Prism. The BioMobility platform delivers cutting-edge technology solutions for renewable transportation fuels, promoting sustainable decarbonization through a circular bioeconomy. Meanwhile, the Bio-Prism portfolio encompasses innovative technologies for producing renewable chemicals and materials, driving sustainability and reimagining nature’s potential. These advancements are powered by Praj Matrix, the company’s state-of-the-art R&D facility, which serves as the foundation of its clean energy initiatives.  

Praj’s diversified offerings include Bio-energy solutions, critical process equipment and modularisation, breweries, zero liquid discharge systems, and high-purity water systems, reinforcing its position as a leader in sustainable industrial biotechnology.

The market capitalisation of Praj Industries is Rs 13,455.12 crore, according to BSE. The company falls under the BSE 500 category.  

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