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Q2-FY23 INFOSYS

Q2 performance was strong with year-on-year growth at 18.8% and sequential growth at 4% in constant currency. Growth in constant currency in the first half of financial year ‘23 was 20.1%, compared to first half of financial year ’22. This momentum is accompanied by a strong pipeline of large deals and the highest large deal value in the last seven quarters of $2.7 billion. 54% of this was net new. Digital revenues are at 61.8% of our overall revenue and grew 31.2% in the quarter in constant currency terms. In Q2, our cloud revenue was larger than $1 billion, showing tremendous strength of our cloud services, especially our industry-leading Cobalt capabilities. A European telecommunications company is closely engaging with us to accelerate their business growth and prepare for a digital future. In aviation, Giant is working with us to digitally advance the engineering of their product development and emerging aircraft programs. Fast-growing logistics company is working with us to secure their cloud environment and build greater resilience into their operations. Operating margin expansion of 150 basis points. The operating margin for the quarter was 21.5%. This would because of cost efficiencies, optimization in large deals and currency benefits. Our H1 operating margins are 20.7%. Our attrition has now been decreasing for the past three quarters, including this Q2. on a quarterly annualized basis. While the overall demand environment continued to be healthy, as reflected in broad-based growth and robust large deal pipeline, we also see signs of cautious behavior by clients due to macro concerns. Apart from slowness in the mortgage segment of Financial Services and the retail industry segment we talked about last quarter, we see emerging concerns in high-tech and telecom industry segments in the form of reduced spend, especially towards discretionary programs. In keeping with our capital allocation policy, the Board has announced a share buyback 1850 & dividend Rs 16.5 pershare. Our H1 performance of 20% growth in constant currency and robust large deal signings in Q2 give us the confidence to change our revenue growth guidance, which was at 14% to 16% earlier to 15% to 16%, even as we are seeing emerging concerns that we talked about earlier. Margin guidance for financial year ‘23 only for this year to 21% to 22%, which was earlier 21% to 23%. We anticipate we'll be at the lower end of this range. Nilanjan Roy Q2 revenues grew by 18.8% year-on-year and 4% sequentially in constant currency terms. All business segments and geos grew in double-digits year-on-year in constant currency. North America grew by 15.6%, Europe by 28.5%, manufacturing by 45%, EURS by 24.3%, communication by 18.4% and retail by 15.4%. Digital revenues constitute 61.8% of total revenues and grew by 31.2% year-on-year in constant currency. Revenue growth was 20.1% in constant currency terms in H1 ‘23 over H1 ’22. Number of $50 million clients increased by 15 to 77, while number of $100 million clients increased by four to 39. Number of $300 million clients increased to five from two in the quarter two last year, reflecting our strong ability to mine top clients by providing them multiple services. Employee counts increased by approximately 10,000 to 345,000. Utilization, excluding trainees, was 83.6%. On-site effort mix remained flattish at 24.4%. Quarterly annualized voluntary attrition came down further by another 2.5% during the quarter. This is also reflecting -- starting to reflect in reduction in our LTM attrition numbers, which reduced to 27.1%, compared to 28.4% in Q1. We expect attrition to reduce further in the coming quarters. Q2 operating margin stood at 21.5%, an increase of 150 basis points Q-on-Q. The major components of the Q-on-Q margin movements were as follows. The margin tailwind comprising of 70 basis points comprising of rupee depreciation, partially offset by cross currency; 90 basis points from cost optimization, including large deal optimization; RPP increase, et cetera., partially offset by lower utilization, 40 basis points from reduction in subcon spend, these were offset by headwinds of approximately 40 basis points from compensation-related increases and impact. Q2 EPS grew by 11.5% in rupee terms on a year-on-year basis. Our balance sheet continues to remain strong and debt-free. Consolidated cash and investments were $4.8 billion at the end of the quarter. Free cash flow for the quarter was $589 million, client conversion of 79% of net profit. Free cash flow generation is typically low in Q2, due to higher tax payouts in both India and the U.S. ROE increased by 1% year-on-year to 30.8%. Yield on cash balances increased to 5.8% in Q2. DSO increased by two days sequentially to 65, reflecting higher billing done during the quarter. Coming to segmental performance. We signed 27 large deals in Q2 with a TCV of $2.74 billion, with 54% net new. Five large deals were in financial services, four each in retail, communication, energy utility, resources and services and high-tech segments, three in manufacturing, two in life sciences and one in other vertical. Region-wise, 18 were in the Americas, six in Europe, one in India and two in the rest of the world. Growth in Financial Services and acceleration in cloud adoption in the FS sector and are working with many of our clients in cloud migration, cloud management and other cloud-related platform deals. Ssome pockets of slowdown in different cycles, especially for fashion apparel retail and general merchandisers. Energy, Utility, Resources & Services segment reported robust and steady growth. Manufacturing segment growth continues to remain strong and broad-based along with steady flow of new deals. we have been ranked as leader in 19 ratings in the areas of public cloud, SaaS, design experience, automation and data and analytics. We remain committed to maximizing our total shareholder returns and in line with the capital allocation policy of returning 85% of free cash over the period. The board has recommended the following, an interim dividend of INR16.50 per share for FY ‘23 versus INR15 per share for FY ’22. This is a 10% increase in dividends per share. Buyback of equity shares of up to INR9,300 crores through open market route post approval of shareholders at a maximum buyback price of INR 1850. We believe our progressive caption allocation policy continues to provide predictability to our shareholders. Question-and-Answer Session We have a very strong internal cost program which we and the team have put in place and that will continue to give us benefit. James Friedman The revenue per full-time employee, it looks like it's trended lower for multiple quarters now ? Nilanjan Roy The revenue per employee is across the entire headcount of the company and we have put so many freshers in -- both in our training programs in Mysore and on the bench, so just to get a mathematical number around revenue per employee is not indicating anything about pricing really. 65% odd of our revenues are in dollars, 35% are in currency outside dollar than those have depreciated, so this is pure metric, we will also automatically come down.

V-Guard Q1FY23

 Business Overview 

- Company has reported robust performance during the period.

- This growth was mostly with strong supported growth from Electrical and Consumer Durables segment.

- In ECD, fans and water heaters had good demand due to seasonality.

- This cycle is expected to continue in upcoming period.

- During the quarter, there was strong contribution from both south and non-south markets.

- In terms of key margins, they did faced some pressures due to commodity price inflation.

- With Rise in their consumer durables cost all steps were been taken to hedge its effect. 

- In water heater, the company did loose their market share few periods back but they have regained their share and are growing due to their upgradation.

- In their pump business, there has been an constant price increase due to passing the cost to customer.

- Now as the margins are improving, they expect a reversal in this business segment.

Financials:

- On YoY levels company has reported strong performance during the period.

- Their gross margins did faced some hit due to pricing pressures but are been taken cared off.

- Company has also taken many cost effective measures towards controlled and effective spending.

- Their CFO generations stood strong due to improved working capital positioning.

- Under their fan space, the premium vs economy mix is around 40 to 50 in premium and rest in economy.

- They expect premium stake to increase.

- They have normalized their adv spending to 2% levels.

- On product likes copper, there was a significant price drop seen which affected their wire margins and expect this to be their in Q2 as well.

- At present, many product prices have seen a reduction from their peak.

- On products pricing, those which are left to come down might make them suffer till Q3 but post their they expect a comfortable levels.

- Looking at their business cycles they are focused towards maintain less inventory avoiding additional costs.

- Leading to better cash flows for more opportunities in the market. 

Investments:

- Company did made an investment in auto tech company to improve their supply chain.

- The company did incur 6.5 crores for 26% investments.

- In stabilizer space, there is huge growth pipe for them.

- In inverter and battery business, 2 new factories are been planned to set up, which will improve their gain from 3% market to bigger number in times to come.

- The transaction lead to 74% at start and remaining 26% post 5 years.

- This company is focused towards manufacturing switch gears and supply.

Asian Paint Q1FY23.

Asian Paint Q1FY23. 

STRONG SHOW

NET PROFIT up 80 % AT 1036 CR (YOY), up 18.5 %(QOQ)

REVENUE UP 55 % AT 8,578 CR (YOY), Up 8.9 % (QOQ)

EBITDA UP 70% At 1,555 CR (YOY) up 8 % (QOQ)

EBITDA MARGINS AT 18.1 % V 16.4 % (YOY), 18.3 % (QOQ)

EPS: 10.60 Vs. 5.93 (YoY) Vs. 8.87 (QoQ

Highlights: 

Sales for Bath Fittings business increases by 120.1% to ₹ 117.99 crores from ₹ 53.61 crores in the corresponding period of previous year. PBDIT for Bath Fittings business increases to ₹ 4.21 crores as against a loss of ₹ 1.04 crores in the last year.

Sales for Kitchens business increases by 68.3% to ₹ 109.04 crores from ₹ 64.79 crores in the corresponding period of previous year. PBDIT loss for Kitchen business reduced to ₹ 4.00 crores as against a loss of ₹ 5.38 crores in the last year.

Economic crisis in Sri Lanka led to currency devaluation resulting in recognition of an exceptional item of ₹ 24.21 crores towards exchange loss arising on foreign currency obligations of Causeway Paints Lanka (Pvt.) Limited (Causeway Paints) for the quarter June 2022.

View: Result is overall good and strong despite crude negative impact and highly volatile in this quarter topline and bottom line increased in QoQ since YoY is not much comparable due to strong second wave of Covid in April to June 2021 previous financial year.

Asian paint is now diversified their business as well for Paint segment to Home accessories segment viz. highly margin business bath fittings as well as Kitchen business etc. “The domestic decorative business experienced good consumer demand and recorded stellar revenue growth.

For the quarter. The volume growth registered in the quarter is one of the highest in the last six quarters. The business also registered robust 4-year compounded growth in volume and value terms.

The Auto OE and the General Industrial Coatings business delivered a sturdy growth trajectory.

Management comments:

We continued to make further inroads in our Home Décor business, proliferating its product & service offerings.

The International business also delivered a good double digit revenue growth for the quarter despite multiple headwinds across key geographies. While the persistent inflationary environment continued to impact the gross margins,

We delivered healthy operating margins with strong push on the premium & luxury offerings and driving further operational efficiencies across businesses.”, said Amit Syngle, Managing Director & CEO of Asian Paints Limited.

Reliance Industries Q1 FY23 Results

Reliance Retail

Q1 FY2022-23 Reliance Retail Gross Revenue for the quarter was ₹58,554 crore ($7.4 billion), higher by 51.9% YOY.

Q1 FY2022-23 Reliance Retail EBITDA for the quarter was ₹3,837 crore ($486 million), higher by 97.7% YOY

Q1 FY22-23 Reliance Retail witnessed its first quarter without any operating disruptions since the onset of COVID; Footfalls surpassed pre-COVID levels as consumers return

Q1 FY2022-23 Reliance Retail crossed a milestone of 200 million registered customers. The registered customer base stood at 208 million at the end of the quarter, up 29% YoY

Q1 FY2022-23 Reliance Retail opened 720 stores in the quarter, taking the total count to 15,916 stores with an area of 43.2 million sq ft covering all corners of the country

Q1 FY2022-23 Reliance Retail bolstered its supply chain capabilities with addition of 79 warehousing and fulfillment locations measuring 3.3 million sq ft of space during the quarter

Q1 FY2022-23 Reliance Retail Digital Commerce daily orders stood 66% up YoY; New Commerce merchant base stood 3x over last year.

Q1 FY2022-23 Reliance Retail added over 17,000 jobs during the quarter; The total employee count stands at ~3,79,000.

Jio - 

ARPU - 

Q4FY22 - Rs 167.6 | 

Q1FY23 - Rs 175

Customer base - 

Q4FY22 - 41 Cr 

Q1FY23 - 42 Cr

Reliance Jio Total customer base as on 30th June 2022 of 419.9 million

• Total data traffic was 25.9 billion GB during the quarter; 27.2% growth Y-o-Y

• Total voice traffic was 1.25 trillion minutes during the quarter; 17.2% growth Y-o-Y

How Reliance Earns Money 📊

• Oil to chemicals 60.2%

• Retail 21.8%

• Digital Services 10.6%

• Others 5.7%

• Oil to Gas 1.3%

• Financial Services 0.1%

HDFC Q1 FY23 Earning Summary

 Loan Growth:-

Overall loan growth at 20.3%

1. Retail Loan growth made a sharp comeback to grow at 21.7%

2. Rural Banking grew at 28.9%

3. Corporate loans grew by 15.7%

Retail loan growth is steadily picking up again for HDFC Bank

Net Interest Margin(NIM) Compression:-

The NIMs had fallen to an all-time low of 4% but have now recovered to 4.2%.

The retail book constitutes just 39% of the total loans

The rapid growth in the wholesale loan book came at a lower margin

Deposit growth:-

Deposits grew at 19.2% with CASA ratio at 45.8%.

The bank continues to gain market share in deposits.

Bank is slowly hiking the deposit rates

Asset Quality:-

Gross NPAs at 1.28% vs 1.17%

The rise in the NPA is due NPAs due to agricultural loans 

Slippages ex of this remains at 38bps

The bank remains is adequately provisioned and remains in a strong position to push loan growth.

Capital Adequacy:-

The Bank is sitting on a Capital Adequacy of 18.

TIER-1 Capital Adequacy at 16.5

The bank is adequately capitalized for no

To fund the merger and meet the regulatory framework the Bank will need to raise capital in the future.

Aggressive Branch expansion:-

The Bank opened 36 branches in the last quarter.

250 branches are already in the works

The bank envisions to be 1-2 km of clients rather than the current 5-6 Km

This could inflate costs in the near term and needs to be monitored.

HDB Financial:-

COVID-19 had a severe impact on HDB financial

The pain is now beginning to ease out.

The revenues grew by 13%

PAT showed at 441cr against 88cr

Slippages are continuing to ease.

Merger Hangover:-

As HDFC gets merged with HDFC Bank RBI has approved the scheme of arrangement.

However the RBI has not commented on the dispensation on SLR,CRR sought by the bank.

Without the dispensation, the ROE of the Bank will take a hit in the near term.

So How is the result then?

The result is very stable.

Nothing to complain about.

1. Asset quality is stabilizing

2. Retail Loan growth is coming back

3. Bank is strongly capitalized to take advantage of future growth opportunities.

As the credit cycle continues to move up banks like HDFC Bank will be a major beneficiaries.

In view of the merger, the hangover on the stock may mean the stock may continue to underperform.

However, the business is on an upward trajectory.

Disclaimer:-

This is my study. Not an Investment Advise. Please consult your own investment advisor before investing.

RELAXO Q4 Earning call/Transcript update

1. Revenue during the quarter was affected due to disruption caused by Omicron variant of COVID, GST rate hike from 5% to 12% w.e.f. January ‘22 on footwear priced below Rs. 1,000 and subdued demand due to high inflation.
2. Our EBITDA margin for the quarter is 15.9%.
3. Our profit after tax is Rs. 63 crores for the quarter as compared to Rs. 102 crores in the corresponding period of previous year.
4. For FY2022 our revenues stood at Rs. 2,653 crores as compared to the Rs. 2,359 crores which is a growth of 12% year-on-year.
5. Our EBITDA margin for the year is 15.7%. The decline in EBITDA margin is mainly on account of increase in raw material prices and normalization of selling, marketing and administrative expenses in FY22 as compared to FY21.
6. At the end of March 31st, 2022, we have 394 exclusive brand outlets which contributed around 7% of our FY22 revenue. Export crossed Rs. 100 crores mark and is picking up with opening of market and its contribution is more than 4% of revenue of FY2022.
7. Price increase, because this full year was lot of inflation, raw material prices went up. Price increase was in the range of 25% across all the categories, in few categories more and few categories less. it's a mix of raw material and GST.
8. Yes, Sparx brand has done very well in e-commerce platform and we can see the growth rate was more than 40% in e-commerce platform. There is a traction of a sports shoe selling more on e-com.
9. Total exposure of online as a channel for us were last year around 10%, now it is 11.5%.
10. Inventory is the major reason for working capital disturbance in this year and there are two reasons, one there was pressure upon the sale and second because the cost of goods has also increased, even raw material also. We were carrying little more inventory just to be more cautious about the future price increase, so inventory has increased in the balance sheet.
11. This year being a little tough year comparatively and FY21 was a best year but if we compare FY20 the margins are definitely achievable, and we intend to. We can say, FY20 was 17% margin and this year we achieved lower than that, so definitely we intend and it's possible also.
12. We are doing Hawai and Bahamas come under Hawai division. That is around 25% and Flite is 37.5% and similarly Sparx is 37.5%.
13. Within Sparx 50% were sandals and the rest 40% were the closed toes, has that portfolio changed in terms of the mix? Gaurav Dua: Yes, it has changed now. It is 60% shoes and 40% sandal as athleisure growing tremendously.
14. There is a good demand in athleisure and sportswear. That e-commerce is growing much faster because of India becoming more fit and demand of these products going high.
15. We have around 650 to 680 distributors and online contribute around 11.5% of our sales, 7% is contributed by retail and 4% by exports.
16. We don't have any intent to spend in south but definitely we are expanding our capacity in north where we have our own set up. So, we are integrating our backend operations and for that we are working. This year also we have intent to spend around INR 100 crores, so it will add to the backend operations mainly.
17. Already we have reached the capacity of 10 lakhs pairs per day and utilization is around 65% and within this category we are focusing to free some capacity of whatever is required in shoe division.
18. So overall maximum inventory related to FG (Finished Goods) because most of the materials we keep around 50 to 60 days inventory in the system but this time it was little higher. Average we keep around 40 days but this time it is higher. So, in percentage term you can say around one-third, around 30% will be raw material and rest is WIP and FG.
19. MRP it’s a 25% increase on a YOY basis and this includes the GST increase also from 5% to 12%,
20. The price increase has happened more in Hawai Slippers, Bahamas, and Flite EVA because they are having high content of polymers which became very expensive.
21. Sustainable working capital, if it’s 3 months things are workable smoothly, 3-3.5 months maximum. If I look 7-8 years where it was 2 months. Now we have shifted to 3 months kind of working capital. Sushil Batra: Because this shoe category is growing much faster. It's a high value item, so it's lead time is much more, and we have to give little more credit to trade also because it is high value item. So that’s why it is increasing and moreover the raw material prices have also gone up like anything. So overall in value term it is definitely putting pressure upon the working capital side.
22. We are always expensive than unorganized. You cannot compare brand with unorganized. It's very difficult because they do pricing on daily basis, so we do not do. If you're talking about Aqualite, so 5% to 10% cheaper is relaxo.
23. As everybody knows that digital is growing and e-commerce is the fastest growing category in footwear. 11% to 15% in one year will be difficult but we are definitely having high aspirations and we will grow to a good number. But it’s difficult to say right now if it will become 11% to 15% in just 1 year.
24. Volume generally we don't share but overall, Yes, maximum, Contribution comes from Hawai, Hawai is including Bahamas also and second is the Flite and last is Sparx.
25. If you talk about online, in Sparx 60% is shoes and 40% is sandals even in online. So, majority of sales are coming more than Rs. 500 MRP in online. In our Sparx brand, online contribution is more than 25%.
26. Our major sales come from North India that is around 50% and then 18% comes from East, same West 18% and around 13% from South.
27. Around 2 years ago our distributor count was around 800 and today it has come down to around 650. Why has the distributor count reduced over the last few years? Gaurav Dua: We want quality distributors so less than Rs. 10 lakh sales per month was cut. So, they were many in numbers. So, we have cut down the tail. We are focusing on the cost of reaching them it was not viable. We are focusing on good number of distributors who are doing more than Rs. 10 lakhs per month. That is how we decided. It was a tail. We have to cut the tail.
28. The distributors and retailers are very cautious because of so many changes in MRPs. So, they're keeping less stocks.
29. Over all category of Hawai and EVA, it is actually gone down because this year the market has opened up and outdoor people have started to be in the market. So, closed footwear is doing good and chappals and these things have gone down and at the same time because of high inflation, buying power of these masses has gone down. So, they're trying to hold on to their old slipper also and so delaying their purchase.
30. Whether we've lost market share to any competitor, unlisted competitor, maybe somebody who's come from the South for instance? Ramesh Kumar Dua: No, that's not there.
31. 20% in closed footwear, 80% in open footwear and last time it was 15-85.
32. Rural we are feeling more pinch, there's more pressure in the rural side of India. Urban still there is a movement but in rural India they are not able to absorb the inflation or price hikes.
33. We started with Udaan and Ajio, but our contribution is quite less. It is less than 1% you can say that. So, it's a new channel for us. The problem with them is that they are playing a discounting game which we do not want to disrupt the market. We are cautiously watching them and going forward then we'll see how we have to do business.
34. One of your competitors’ books double-digit revenues through these channels in the sports category. So, do we sell directly to them or we'll sell them through a distributor channel? Gaurav Dua: Through our distributor.
35. Sometimes we have to first protect our market share and top line and we have to keep our pricing very competitive so that we are there. Once the things settle down then you can always have your better pricing and margins also.
36. It's very important we have the market share; we cannot lose our shelf space. We have to be there in the minds of the consumer always, that is of prime importance. Once we are always there and everything else will only then follow. If we lose our market share, then what are we left with.
37. Competition is from unorganized also and organized also but we have to always remain competitive on all fronts. We can't just look down upon anybody lightly. Gaurav Dua: They were selling before, now also. So listing and non-listing does not make any difference Ramesh Kumar Dua: They were always in the system. They will remain always in the system.
38. Ramesh ji, my biggest concern is succession plan for Relaxo? Is this something that is actively discussed in the company or is this something that the board is discussing? What are your personal thoughts on this? 
39. Ramesh Kumar Dua: That thing is in process. We are serious on it, but we can't divulge beyond anything now.