Reliance Retail Registers Net Profit of ₹2,836 Crore in Q2, Revenue at ₹76,302 Crore

Reliance Retail Ventures Limited (RRVL) reported its financial results for the second quarter (Q2) of the fiscal year 2024-25 (FY25). The company achieved a net profit of ₹2,836 crore on a revenue of ₹76,302 crore. However, this marked a 1.1% decline compared to the same period last year, primarily due to softer demand in the Fashion and Lifestyle (F&L) segment and strategic adjustments in the B2B business.

Focus on Streamlined Operations

The dip in revenue is attributed to the company's focus on streamlining its operations and a measured approach to its B2B business, which was aimed at improving margins. Despite the revenue decline, Reliance Retail managed to increase its Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) slightly by 0.3% year-on-year (YoY) to ₹5,850 crore. EBITDA from core operations saw a growth of 1%, reaching ₹5,675 crore, and operational margins improved by 40 basis points, standing at 8.5%.

Expansion and Depreciation

Reliance Retail expanded its footprint by adding 464 new stores during the quarter, bringing the total to 18,946 stores. The retail giant now operates across 79.4 million square feet of retail space. The company also recorded over 297 million footfalls in Q2 FY25, showing a 14% YoY increase. Depreciation expenses for the quarter amounted to ₹1,420 crore, reflecting a 1.5% YoY increase due to accelerated depreciation on stores that were closed.

Continued Investment in Technology and Infrastructure

Isha M. Ambani, Executive Director of Reliance Retail Ventures, emphasized the company's commitment to building a strong foundation for future growth through continued investments in technology and infrastructure. "We continue to strengthen our customer proposition with innovative products that span everyday essentials to premium offerings," she said.

Digital and New Commerce Initiatives

The company has been scaling up its Digital Commerce and New Commerce initiatives, which contributed 17% to overall revenue. With a registered customer base of 327 million, Reliance Retail remains one of the most preferred retailers in India. JioMart, the company's e-commerce platform, showed strong growth in non-grocery categories, with the average order value (AOV) doubling YoY. The seller base also expanded by 46%, with a 13% increase in product range.

Growth in Consumer Electronics and Service Expansion

Reliance's digital electronics stores under the consumer electronics division performed well, surpassing 650 outlets across the country. The company attributed a 60% YoY revenue increase to the "Digital India" campaign, which promoted consumer electronics. Additionally, the on-demand service resQ expanded its presence to 150 cities, with service volumes increasing by 28% YoY.

Challenges in Fashion and Lifestyle Segment

The Fashion and Lifestyle segment faced challenges due to weaker demand, but Reliance Retail focused on product innovation and customer engagement to counter this. The company launched exclusive partnerships, including one with Delta Galil to expand lingerie and activewear offerings, and introduced the ASOS brand in India. AJIO, the company's fashion e-commerce platform, gained 1.8 million new customers and expanded its product catalog by 25%, introducing new brands like H&M, Timberland, and ASOS. Additionally, the youth-centric brand Yousta crossed 50 stores within its first year.

Strong Performance in Grocery Division

The grocery segment continued its steady growth, driven by Smart Bazaar and Smart store formats. Key categories like confectioneries and snacks saw a 30% YoY growth, fruits grew by 26%, and apparel by 49%. The company also reported its highest-ever single-day sales on Independence Day during the "Full Paisa Vasool Sale."

Continued Growth in New Commerce for Grocery

Reliance Retail's Grocery New Commerce business, particularly the Metro format, continued to grow, deepening its engagement with trader and HoReCa (Hotels, Restaurants, and Caterers) segments. Marketing campaigns such as "Freedom Sales" and "Mehangai Se Azadi" contributed to the division's growth. JioMart, the quick commerce vertical, also expanded significantly, with a notable increase in non-grocery categories, especially consumer electronics. The platform's AOV doubled YoY, driven by a broader seller base and product offerings.

Conclusion

Despite a slight dip in revenue, Reliance Retail has shown resilience and a strategic approach to growth. By expanding its physical store network, investing in technology, and scaling up its digital and new commerce channels, the company continues to strengthen its market leadership. With strong growth across multiple segments and a focus on customer-centric innovations, Reliance Retail is well-positioned for future expansion.

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SEBI's ASBA-like Mechanism to Benefit Investors but Impact Broking Firms' Income

The Securities and Exchange Board of India (SEBI) has introduced a new mechanism for the secondary markets that could significantly impact the income of broking firms while offering benefits to investors. On September 30, 2024, SEBI approved a new rule requiring Qualified Stock Brokers (QSBs) — the largest brokers based on client funds and trading volumes — to provide either an ASBA-like facility or a 3-in-1 trading account to their clients by February 1, 2025.

Impact on Broking Firms' Revenue

This decision is expected to hit broking firms' profitability. Currently, brokers hold client funds, earning interest from this float. With the new ASBA-like mechanism, clients' funds will stay blocked in their bank accounts until trade execution, meaning brokers will no longer have access to these funds. As a result, the ancillary income generated from holding client funds will significantly reduce.

Industry experts suggest that the new regulation may reduce brokers' overall revenue by 15-25% initially, and an additional 15-25% loss is expected when the ASBA-like facility becomes mandatory. This combined revenue hit could lead to a 30-50% decline in income for some brokers.

Benefits to Investors

While broking firms may face challenges, investors will benefit from the new system. The ASBA-like mechanism ensures that clients retain their funds in their bank accounts until the moment of trade, allowing them to earn interest on the blocked amount. According to SEBI, this change could generate Rs 2,800 crore annually in savings for investors, based on the interest accrued on cash collateral held by brokers.

Options for Clients

Clients of QSBs will have the choice to either adopt the ASBA-like facility or continue with the traditional method of transferring funds to the broker's account. However, the move towards the ASBA-like mechanism may result in higher service costs for brokers, as they will need to invest in new technologies to implement this system.

Conclusion

While SEBI's new regulations aim to enhance investor protection and benefits, broking firms are likely to face considerable revenue challenges. The full impact of these changes will be felt in the next fiscal year, with many brokers potentially losing a significant portion of their income.

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F&O Trading Losses in FY24: SEBI Data Reveals Majority of Traders, Whether 'New' or 'Regular', Incurred Losses

Key Highlights from SEBI Data:

• New Traders in FY24: 42 lakh new Futures and Options (F&O) traders entered the market during FY24. These new traders, defined by SEBI as those who placed their first trades within the last three years, accounted for nearly half of all traders in the fiscal year.

• Significant Losses for New Traders: According to SEBI's data, a staggering 92.1% of these new traders suffered losses, averaging a net loss of approximately ₹46,000 per trader in FY24.

• Losses Not Limited to New Traders: While new traders incurred losses, experienced or "Regular Traders" were not exempt. SEBI defines regular traders as those who have been active in F&O trading for three consecutive years (FY22 to FY24). In FY24, about 88% of regular traders faced losses, averaging a substantial ₹1.50 lakh per person.

• Deepening Losses Amid Market Highs: Despite the broader markets reaching new highs during the fiscal year, the data showed that loss-making traders experienced deeper losses compared to the profits of those who did make money. On average, loss-making traders suffered a loss of ₹1.20 lakh per person, while profit-making traders earned ₹1.03 lakh per person.

• Cost of Transactions: Another significant factor adding to traders' woes was the cost of transactions. SEBI's study showed that traders who incurred losses faced a higher transaction cost relative to their losses. Losing traders bore about 27% of their transaction costs on top of their net losses, while profitable traders incurred approximately 22% of transaction costs as a percentage of their gross profits.

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Analysis of SEBI's Findings:

The data highlights a key trend in F&O trading: whether a trader is new or experienced, the derivative market has been unforgiving, with most participants ending up in the red. While many new traders are drawn to the market with hopes of quick profits, the reality revealed by SEBI is that only a small fraction manage to consistently earn a profit, and even those who do often face high transaction costs.

The losses of new traders, who accounted for a significant portion of the market, could be attributed to factors such as lack of experience, high transaction costs, and the complexities of F&O trading, which is often dominated by more seasoned investors or institutional players. The heavier losses for regular traders suggest that even those with experience are not immune to the challenges of F&O markets, where volatility and leverage can lead to significant financial setbacks.

Implications for Retail Investors:

For retail investors considering entering the F&O market, SEBI's data serves as a cautionary tale. The high percentage of loss-making traders underlines the risks inherent in F&O trading, which may not be suitable for all investors. Additionally, the report suggests that traders should be mindful of transaction costs, which can further erode their returns, especially for those already facing losses.

Conclusion:

SEBI's data on F&O trading in FY24 offers a sobering reminder of the challenges faced by traders, particularly new entrants. The high percentage of loss-making traders and the significant financial losses incurred indicate that caution, experience, and careful risk management are critical for anyone participating in these markets.

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Jyothy Labs Expands with Strategic Quiclo Acquisition: Shares Surge 2%

Jyothy Labs saw its stock rise 2% to ₹556 in early trading on September 20, 2024, following the acquisition of the Hyderabad-based laundry service brand Quiclo, owned by Smartwash Solutions Private Limited. The deal, valued at ₹70 lakh plus taxes, is expected to bolster Jyothy Labs' footprint in the laundry and dry-cleaning services sector, particularly in Hyderabad.

Strengthening Presence in Laundry Services
This strategic acquisition includes Quiclo's software and customer database, allowing Jyothy Labs to expand its customer base and enhance its operations in the laundry services space. The company's laundry and dry-cleaning unit in Hyderabad has already commenced commercial operations, adding to its growing portfolio of services.

Growth and Profitability
Jyothy Labs recently reported a 5.7% rise in net profit for the first quarter of FY25, posting ₹101.7 crore compared to ₹96.3 crore in the same period last year. The company remains optimistic about the growth prospects, particularly with the expected uptick in rural demand, driven by a favorable monsoon season.

Focus on Rural Distribution and E-commerce
The management is sharpening its focus on rural markets, improving distribution channels, and introducing new product categories to meet diverse consumer needs. There is also a concentrated effort on increasing Jyothy Labs' presence across e-commerce platforms, boosting both visibility and sales.

Investor Sentiment
At 11:16 AM on September 20, shares of Jyothy Labs were trading at ₹550 on the NSE, reflecting a 25% rally over the past three months. Investors are optimistic about the company's future growth, thanks to its recent strategic moves and strong operating performance.

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Market Movers: Top 10 Stocks That Defined September 17

On September 17, 2024, the Indian stock market saw a mixed bag of gainers and losers. Sensex and Nifty ended the session with slight gains, powered by telecom, banking, and construction stocks, while metal stocks faced declines. A total of 1,712 stocks advanced, 2,237 declined, and 109 remained unchanged, as per BSE data. Here's a detailed look at the top 10 stocks that saw the most movement:

1. Bajaj Housing Finance
   CMP: ₹181.5 per share
   Bajaj Housing Finance continued its stellar post-IPO performance, with shares hitting the upper circuit and surging by 10%. The stock, which debuted at ₹165, saw a 135% rise from its IPO price of ₹70. Investors remain bullish, extending its rally.

2. IGL
   CMP: ₹547 per share
   Shares of Indraprastha Gas Limited rose over 3% following an upgrade to 'buy' by UBS, which also hiked the target price. The stock rallied further due to strong volume growth prospects.

3. DCX Systems
   CMP: ₹347 per share
   DCX Systems surged to an upper circuit of 5% after announcing that its wholly-owned subsidiary had been granted an industrial license. This was seen as a key growth catalyst for the company.

4. Suzlon Energy
   CMP: ₹81 per share
   After delivering multi-bagger returns of 110% in just three months, Suzlon Energy saw a 4% dip due to profit booking. Despite the correction, the stock is still up 115% for the year.

5. SpiceJet
   CMP: ₹72 per share
   SpiceJet shares dropped nearly 7%, as investors booked profits following the stock's recent rally. The decline comes after the airline opened a Qualified Institutional Placement (QIP) to raise ₹3,000 crore at a floor price of ₹64.79 per share.

6. Geojit Financial
   CMP: ₹155 per share
   Geojit Financial's stock slumped by over 8%, even as the company's Rights Issue Committee is set to meet on September 19 to finalize key details about its upcoming rights issue, including the price and entitlement ratio.

7. Reliance Infrastructure
   CMP: ₹235 per share
   Shares jumped over 9% after the company announced a board meeting to discuss raising long-term funds. The stock surged despite no specific details about the mode or amount of fundraising.

8. Firstsource Solutions
   CMP: ₹308 per share
   The stock climbed by 3% following the announcement of a new partnership with Microsoft. The collaboration aims to deliver cutting-edge digital transformation services, boosting investor sentiment.

9. Ola Electric Mobility
   CMP: ₹118 per share
   Ola Electric Mobility saw its stock hit the upper circuit, rising by 10%, fueled by bullish calls from Bank of America and Goldman Sachs. The stock's growth outlook remains strong, with positive coverage from major global brokerages.

10. MGL (Mahanagar Gas Limited)
    CMP: ₹1,901 per share
    MGL shares rallied by almost 5% after UBS upgraded its rating to 'buy' and increased the target price, citing strong volume growth prospects.

This list highlights the stocks that captured the most attention on September 17, with notable performances from Bajaj Housing Finance and Ola Electric Mobility leading the gains, while profit-booking hit Suzlon Energy and SpiceJet.

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Bears Reclaim Market as Nifty Dips Below 25,200: Sensex Falls 203 Points

In a reversal of fortunes, Indian benchmark indices ended the day in the red, with the Nifty breaking its 14-day winning streak and closing below 25,200. The Sensex dropped by 203 points, reflecting a widespread decline across most sectors except for realty, FMCG, and pharma.

 

Market Summary:

·         Sensex: Down 203 points, closing at 82,352.64 (0.25% decline)

·         Nifty 50: Down 81.10 points, closing at 25,198.70 (0.32% decline)

 

Market Performance:

Indian markets mirrored global trends, starting the day with a gap-down and remaining in negative territory throughout most of the session. Despite some afternoon recovery, the indices finished lower.

 

Top gainers on the Nifty included Asian Paints, Grasim Industries, HUL, Apollo Hospitals, and Sun Pharma. Conversely, Wipro, Coal India, ONGC, Hindalco Industries, and M&M were among the biggest losers.

 

Sectoral Trends:

·         Gainers: FMCG, realty, and pharma sectors saw a 0.5% rise each.

·         Decliners: Auto, bank, energy, IT, and metal sectors were down between 0.4% and 1%.

 

Technical Analysis:

According to Rupak De, Senior Technical Analyst at LKP Securities, the Nifty has broken its upward trend, finding initial support at the historical swing high. The index might consolidate between 25,080 and 25,250, with a potential drop below 25,080 signaling further corrections.

 

Ajit Mishra, SVP of Research at Religare Broking, notes that the market's loss of nearly half a percent was driven by weak global cues. Despite selective buying in heavyweight stocks trimming some losses, the overall trend remains mixed. Mishra suggests maintaining focus on stock selection and trade management, with a strong support zone for the Nifty at 24,850-25,000.

 

Outlook for September 5:

·         Nifty 50: Potential consolidation between 25,080 and 25,250, with significant support at 25,000.

·         Sensex: Monitoring for further developments amid global market pressures.

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Godrej Industries Hits Fresh All-Time High with a 7% Surge on Heavy Trading Volumes

Godrej Industries witnessed a significant surge of 7% in trading on September 3, setting a new all-time high. The stock saw over 12 lakh shares being traded on the bourses, marking a 300% increase compared to its one-month daily average of four lakh shares.

 

Stock Performance on NSE

As of 2:00 PM, Godrej Industries shares were quoted at Rs 1,138 per share on the NSE, reflecting a 7.2% increase from the previous session's closing price.

 

Valuation Insights by ICICI Securities

ICICI Securities highlighted that Godrej Industries generates substantial value from its listed subsidiaries and associates, including Godrej Consumer, Godrej Properties, and Godrej Agrovet. Based on the brokerage's target prices for these subsidiaries and a 55% holding company (holdco) discount, Godrej Industries' value is estimated to be Rs 1,260 per share.

 

Current Trading Position

Despite the significant uptrend, ICICI Securities noted that the stock trades at a 62% discount to the combined market value of its subsidiaries and associates. They believe the subsidiaries and associates are poised to benefit from a recovery in the end-user industries.

 

Technical Analysis and Investor Advisory

A R Ramachandran, an Independent Research Analyst, pointed out that while Godrej Industries is showing bullish momentum, the stock is also extremely overbought on daily charts. He advises investors to consider booking profits as a daily close below the support level of Rs 1,067 could lead to a short-term target of Rs 859.

 

One-Year Stock Performance

Over the past year, Godrej Industries shares have surged by over 100%, doubling the wealth of its investors. In comparison, the benchmark Nifty 50 index has gained around 30% during the same period.

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