GTBL specializes in manufacturing active pharmaceutical ingredients (APIs), specifically fermentation-based products. The company holds a competitive advantage in this niche, with limited Indian competitors engaged in similar manufacturing processes. The company has exhibited substantial growth, delivering close to 20x returns in the last five years.

Product Profile:

Rifamycin-S:

This is an intermediate for manufacturing drug Rifampicin which is an Anti biotic used for the treatment of several types of bacterial infections, including tuberculosis, Mycobacterium avium complex, leprosy, Legionnaires’ disease, and digestive tract infections

Rifamycin O:

It is an intermediate for manufacturing drug Rifaximin which is an Anti biotic used for the treatment of traveler’s diarrhea, irritable bowel syndrome, and hepatic encephalopathy.

Revenue Breakup by Customer

Growth Drivers for GTBL

Change in Business Model:

GTBL transitioned from a contract manufacturing business to a manufacturing and sales model. This shift has improved margins, thereby increasing profitability. In 2019, their OPM was at around 18%. Currently its at 46%.

Product Diversification 

Company is introducing of 10 to 12 new products in various therapeutic areas, such as cardiac and anti-infectives. This will reduces reliance on two key products, making GTBL a more diversified pharmaceutical company.

Capacity Expansion & Market Expansion:

Investment of approximately 200 crore rupees in upcoming projects, including an R&D lab, API block, and increased fermentation capacity. The company anticipates a growth rate of 25 to 30 percent in the coming years due to these investments.

As part of their future plans , they aim to expand their market presence. They believe that Rifaximin will open up certain parts of Europe in FY24.

Debt Reduction and Financial Health:

Consistent reduction in debt, with the company currently being almost debt-free. Also, company has a robust revenue growth of approximately 31.8 percent over the last five years and the profit grew at a CAGR of about 71%.

Potential Risks

• Dependency on two major clients, Lupin and Optics Laboratories, which accounts for most of their sales.
• Change in CEO with Mr. Jagadish O. Kauiaigi resigning and Mr. Tapas Guha Thakurata assuming the role on January 5, 2023.
• Though company has plans of international expansion, currently company has exposure only to domestic markets.

Financials

5 year view:

For GTBL, we expect a 30% CAGR growth in EPS in the next 5 years.

Key reasons include the strategic investments, such as a new R&D lab, API block, and expanded fermentation capacity. Also company’s shift to a manufacturing and sales model has enhanced margins.

Further the launch of 10 to 12 new pharmaceutical products and targeted market expansion with special focus on exports would drive the growth for the company in the next 5 years.

FIIs/DIIs currently hold no stake in the company and hence more FII/DII investments are expected due to the solid performance of the company which will also aid in its growth.

We estimate the stock to grow by at least 3.3 times or grow by a CAGR of at least 27% in the next 5 years.

Disclaimer: This research is for informational purposes only and does not constitute investment advice. Please do your own due diligence and consult your financial advisor before making any investments.

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In India’s banking landscape, Federal Bank has consistently demonstrated a stable trajectory marked by growth, innovation, and unwavering resilience. Originated in Kerala, the bank’s ambitious expansion strategies spans across the nation, as it strives to solidify its dominance within the banking industry. The bank’s distinctive approach lies in its strategic integration of fintech partnerships and a pronounced focus on secure lending avenues, particularly in the realm of gold loans. Guided by the leadership of CEO Mr. Shyam Srinivasan, Federal Bank has not only achieved commendable financial results, but has also paved the way for sustainable future growth. With its remarkable trajectory and strategic initiatives, the bank emerges as a promising investment prospect in India’s ever-evolving banking landscape.

Branch distribution:

Shareholding Pattern: (June 2023)

Key Ratios:

Capital Adequacy Ratio – 15.77%
Net Interest Margin – 3.16%
Gross NPA – 2.8%
Net NPA – 0.96%
CASA Ratio  ~37%

Growth Drivers for the bank:

Aggressive Branch Expansion:

• With a mission to expand its branch network, Federal Bank plans to open 80-100 branches annually over the next three years, focusing on Gujarat, Maharashtra, Tamil Nadu, and Karnataka.
• This strategy aims to tap into vibrant states, attracting a wealthier customer base and diversifying its regional presence. New branches achieve rapid profitability, indicating effective management and operational efficiency.

Dominance in Remittances:

• Federal Bank holds a 21% share in India’s ₹1,00,000 crore remittance business.
• It’s shifting from small-ticket transactions to larger sizes, particularly targeting eastern and northern India.

Fintech Partnerships:

• Embracing the fintech boom, the bank collaborates with major players, investing in 300-400 APIs.
• This positions Federal Bank as a vital fintech banking platform, with a head start in renewables, infrastructure, and digital ecosystems.

NIM Improvement:

• The bank’s Net Interest Margin (NIM) of 3.16% is projected to reach 3.30% by year-end.
• This growth is driven by credit adjustments, book balance strategies, retail CASA growth, fintech partnerships, and an expanding gold loan portfolio.

Healthy Credit Growth:

• Year-on-year net advances growth is 21%.
• The bank anticipates sustaining ~18-20% credit growth for FY24, reflecting an expanding customer base and strong lending practices.

Raising New Capital:

• Federal Bank aims to secure ₹4,000 crore through preference shares and QIP.
• This capital will aid in its expansion, branch establishment, and potential microfinance acquisitions

Potential Subsidiary Listing:

• FedFina, the bank’s subsidiary, actively considers listing, which can unlock value for the parent company.

Attractive Valuation:

• Federal Bank’s appealing P/B valuation ratio of 1.35 stands out compared to peers (IDFC First – 2.33, AU Small Finance bank-4.53, IndusInd – 2.27).

Financial Performance and key ratios:

10 Year view:

For Federal bank, we see a 13-15% CAGR growth in book value in the next 10 years.

Reasons include the aggressive branch expansion, remittance dominance, fintech partnerships, healthy credit growth etc.

The FII stake in the bank is currently at 26% . More FII inflows are expected due to the solid performance of the bank.

Also India economy is bound to grow rapidly in the next few decades and banking is the backbone of our economy. Federal bank can will capitalize on this growth which will reflect in the books of the bank.

We estimate the stock to grow by at least 5.1  times or grow by a CAGR of at least 17.7 % in the next 10 years.

Disclaimer: This research is for informational purposes only and does not constitute investment advice. Please do your own due diligence and consult your financial advisor before making any investments.

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Ethos is the largest luxury and premium watch retailer in India. They offer a content-led luxury retail experience through both online and physical stores, featuring 60+ premium & luxury watch brands with over 7,000 watch choices. The company also deals with certified pre-owned luxury watches since 2019. With 56 physical retail stores in 22 cities, Ethos provides an Omnichannel experience through its website and social media platforms. Notably, they have recently partnered with Rimowa for luxury luggage and Messika for luxury jewellery retail in India.

Category of Watches:

Image Source: Ethos Annual Report

Top Luxury watch brands:

Key Growth Drivers for Ethos:

1. Rising demand for luxury products: The Indian luxury market is set to expand by 3.5 times by 2030. Also as India’s per capita income and wealth generation increase, more people will have the means to afford luxury goods. This creates a growing market for luxury retailers like Ethos.
2. Thriving Watch business: The Indian Watch Market is projected to register a CAGR of 20.32% between 2023 – 2028 as per Mordor Intelligence.
3. Aggressive Expansion: Ethos plans to add approximately 40 stores over the next two years, expanding its physical retail presence in strategic locations. This increased store footprint is expected to drive revenue growth and market share gain.
4. Expansion of product range: Ethos is planning to diversify its product range, venturing into other luxury goods such as travel accessories and jewellery. This will not only attract a wider customer base but also increase the company’s sales and revenue.
5. Exclusive partnerships and strong brand relationships: Ethos has a strong partnership with over sixty watch brands, more than 35 of which are exclusively available at Ethos. This gives them a unique competitive advantage and helps to attract customers who are seeking exclusive products.
6. Increasing presence in the Certified Pre-Owned (CPO) market: The company’s foray into the pre-owned luxury watches segment can act as a major growth driver. The CPO market is a significant contributor to the luxury industry globally and Ethos, being the only player in this segment in India, is expected to see strong growth.
7. Omnichannel Retail Strategy: Ethos has successfully implemented an omnichannel approach, integrating both physical and digital shopping experiences. This enables them to remain relevant at all touchpoints of a consumer’s journey, enhancing customer engagement and loyalty.
8. Customer Loyalty Program: Ethos’ customer relationship management initiative, Club Echo, fosters customer loyalty and repeat buying. The program’s success in retaining customers highlights the superior consumer experience provided by the company.
9. Growing middle class population:  Growing middle class will have more discretionary money which they will spend on discretionary and luxury products.  India is also home to the third-highest number of billionaires in the world, with a collective net worth of approximately 675 billion dollars.

Financial performance:

Source: Investor Presentation

10 Year view:

• For Ethos Limited, we see a 25% CAGR growth in EPS in the next 10 years.
• Key reasons include rising demand for luxury goods in India, a thriving watch market, Ethos’ aggressive expansion & diversification of product range, exclusive brand partnerships, growing Indian middle class population, HNIs etc.
• India luxury market is projected and reach $200 billion by the end of 2030 (Bain and Company) and hence we can see a lot of FII inflow into the luxury segment in India. Ethos can capitalize on these factors and grow multifold in the next 10 years.

We estimate the stock to grow by at least 7.7 times or grow by a CAGR of at least 22.57 % in the next 10 years.

Disclaimer: This research is for informational purposes only and does not constitute investment advice. Please do your own due diligence and consult your financial advisor before making any investments.

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IDFC First Bank: Fundamentally Strong Bank with Good Growth Prospects

IDFC First Bank, formed by the merger of the former IDFC Bank and Capital First in 2018, is a prominent Indian banking institution. Led by MD/CEO V. Vaidyanathan, it has transitioned from a corporate-focused low NIM bank to a retail-focused high NIM bank. With 641 branches and 719 ATMs across India, the bank is expanding its operations. Under Vaidyanathan’s leadership, it has witnessed significant growth in scaling up digital cash management, trade forex, wealth management etc. IDFC First Bank is well-positioned as a leading player in the Indian banking sector, driven by strong management and a focus on key financial indicators.

Sources of Revenue: (FY23)

The bank has seen a solid growth in Net Interest Income and Fee income compared to the previous financial year. NII has grown by 30.1% while the fee income has grown by 54%.

Key highlights:

1.Stable CASA Ratio:

IDFC First Bank maintains a stable Current Account and Savings Account (CASA) ratio, consistently around 50% which is better than HDFC and ICICI bank who are the top players in the industry.

2. Lower Cost to Income Ratio:

The bank has successfully reduced its cost to income ratio from around 95% in 2019 to approximately 72.5% in FY23.

3. Improved Asset Quality:

IDFC First Bank has experienced significant enhancements in asset quality and client base. Gross and Net NPAs have come down significantly when compared to the last financial year.

4. Enhanced ROE and ROA:

IDFC First Bank has witnessed an impressive increase in return on equity and return on assets. These improvements highlight the bank’s efficient capital utilization and improved profitability.

5. Higher Retail Deposits:

Over the years bank has to moved to a more retail centric approach resulting in lower NPAs.

6. Profit: 

YOY profit has risen by 1575%. (FY22-145 crores, FY23- 2,437 crores)

7. IDFC first bank has an attractive P/B valuation ratio of 2.29 when compared to its peers. (Kotak Mahindra – 3.77, AU Small Finance bank-6.17, IndusInd – 2.13)

8. Loans and Advances saw a 24% growth compared to the last financial year (currently at Rs. 1,60,599 Cr).

9. Higher Net Interest Margin: With interest margins at 6.05%, IDFC First Bank outperforms the likes of HDFC and ICICI. This indicates the bank’s ability to generate higher interest income from lending activities.

10 year view:

For IDFC first bank, we see a 15-17% CAGR growth in book value in the next 10 years.

Reasons include the bank’s solid CASA ratio, increasing NII margin, lower costs and various other solid financial indicators.

The FII stake in the bank is currently at 20% which is very low compared to its peers and hence more FII inflows are expected due to the solid performance of the bank which will also aid in the growth of the bank.

Also India economy is bound to grow rapidly in the next few decades and banking is the backbone of our economy. IDFC First will capitalize on this growth which will reflect in the books of the bank.

We estimate the stock to grow by atleast 7 times or grow by a CAGR of 21.73% in the next 10 years.

Disclaimer: This research is for informational purposes only and does not constitute investment advice. Please do your own due diligence and consult your financial advisor before making any investments.

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Read more about Ethos Ltd: The Luxury Watch Retailer with a Bright Future