Bajaj Finance vs Indiabulls Housing Finance - An example of very strange Market Logic!!

Recently I got a request to check out Bajaj Finance Ltd. & share my opinion on the same. Hence I first added Bajaj Finance Ltd. to my Easy Results Analysis Database a couple of days back and then tried comparing the numbers with one of my favourites in the Financial sector, i.e. Indiabulls Housing Finance Ltd. And my finding are leading to some very strange conclusion.

Bajaj Finance Ltd. and Indiabulls Housing Finance Ltd., both are Non-Banking Finance Companies (NBFCs), but cater to different categories. While Bajaj Finance Ltd. is primarily into lending for Consumer Durables & Mobiles, and also has some exposure to products like Personal Loans, Business Loans, 2-wheeler Loans, etc. Bajaj Finance has also recently setup a Home Loans subsidiary. Indiabulls Housing Finance Ltd. on the other hand is primarily into Housing Finance & Mortgage Lending. Because of their very diverse primary operating categories, their Loan profiles also differ very widely. The Average Loan size and Average Loan Repayment duration for Bajaj Finance is very small and hence needs to continuously add more & more Loan transactions to keep the momentum going. On the other hand, Indiabulls Housing Finance operates with 50 to 100 times higher Average Loan size and even the repayment tenures are much much longer. Even the Risk Profile is very different in both cases. Bajaj Finance is primarily lending for acquisition of a depreciating asset, while Indiabulls Housing Finance is lending for acquisition of an appreciating asset.

For this comparison, I have considered Total Income, Net Profit & Market Cap figures for both the companies for FY'14, FY'15 & FY'16. This comparison helps us compare their progress over the last 2 fiscal years.


1) Total Income: Indiabulls Housing Finance has managed to maintain it's lead over Bajaj Finance in this parameter over the last 3 fiscals in the range of Rs.1800 to 1900 crores. Even though the gap between the 2 companies has remained similar in Gross terms, it has trimmed to some extent in percentage terms. Bajaj Finance has managed to grow it's Total Income by about 80% between FY'14 and FY'16. On the other hand, Indiabulls Housing Finance has posted a growth of little over 55% during the same period, though on a larger base. As both of them grow in size, their growth rates are expected to moderate going forward, though it will be interesting to monitor the degree of moderation in both cases. At the end of FY'16, Bajaj Finance's Total Income was about 80% of Indiabulls Housing Finance's Total Income.

2) Net Profit: The chart alongside comparing the Net Profits of the two companies looks a bit different than the Total Income comparison chart above. That is because of superior Net Profit margins enjoyed by Indiabulls Housing Finance. Here too Bajaj Finance has certainly managed to grow faster than Indiabulls Housing Finance, though on a smaller base. While the former managed to grow it's Net Profit by 78% in two years, the latter has managed a growth of 50% during the same period. But unlike in case of Total Income, Bajaj Finance's Net Profit forms just about 55% of Indiabulls Housing Finance's Net Profit. It clearly proves the highly superior Net Profit margins Indiabulls Housing Finance has been managing to generate from it's business operations. Lower Net Profit margins for Bajaj Finance are because of multiple factors like higher Sales cost, higher Loan Recovery cost and higher Provisions, as a percentage of it's Total Income.


3) Market Cap: Here is where the Strange Market Logic comes into play. We have clearly seen in the above two comparisons that Bajaj Finance is about 20% smaller than Indiabulls Housing Finance in terms of Total Income and

about 45% smaller in terms of Net Profit. As per normal common sense, even in terms of Market Cap, Bajaj Finance should be somewhere between 55% to 80% of Market Cap of Indiabulls Housing Finance. But here is where the story is completely different. At the end of FY'14 & FY'15, the Market Caps of the two companies were almost equal, which in itself meant that the Market was valuing Bajaj Finance at a higher pedestal than Indiabulls Housing Finance. But over the last 12-15 months, things have gone even more haywire. At the end of FY'16, Bajaj Finance's Market Cap stood nearly 31% higher than that of Indiabulls Housing Finance!!! That means a company whose Net Profit is 55% of the other, is valued 31% higher!!! Isn't this very strange?? Things have got even more strange post 31st March'16. As of yesterday, Bajaj Finance's Market Cap was about 54% higher than Indiabulls Housing Finance!!

At the current price levels, Bajaj Finance is trading at a P/E ratio of about 36 times, whereas the same for Indiabulls Housing Finance is less than 13 times. I think this is extremely irrational and needs to correct over the coming months/quarters. If Bajaj Finance does not manage to accelerate it's growth to much higher levels, then it's P/E ratio needs to come down to under 30 over the next 12 months or so. At the same time, even if Indiabulls Housing Finance manages to maintain it's current growth rates, it's P/E ratio needs to improve to about 18-20 levels over the coming 12 months or so.

Compact Cars - Sales Analysis.

About 14 different Car/SUV manufacturers (or Brands), producing close to a 100 different models, sold about 2.8 million units over the last 12 months. Out of them 13 Brands offers about 41 different models in the Compact Category, which comprises of vehicles under 4000 mm in length and powered by a Petrol engine of < 1200 cc or a Diesel engine of < 1500 cc. This Category was specially created by the Indian Govt. about a decade ago by offering substantial Tax-concessions to vehicles meeting the above mentioned specifications. The year when this concession was announced, only the Hatchback cars or Small Cars belonged to this Category. Tata Motors was the first to launch a Compact Sedan in the form of an Indigo CS, with a shortened boot. The tremendous success of this model pushed even Maruti Suzuki and a few other manufacturers to trim the rear end of their popular Mid-size Sedans in the following years. This trend continues even today when we see Volkswagen recently announcing the launch of it's Ameo compact sedan, which is a shortened Vento!!

Over the last few years we have seen Car manufacturers come up with models specially designed to meet the regulations of the Compact Category and we now have 41 different models involving Hatchbacks, Compact Sedans and even a few Compact SUVs. It was not just about the vehicle's length. Some manufacturers even had to develop new engines to meet the 1200 cc Petrol / 1500 cc Diesel restrictions. Mahindra & Mahindra too, which was primarily into full size SUV & MUV space, created a downsized 1500 cc diesel engine to power it's downsized Xylo (called the Quanto) for it's maiden entry into the Compact Category. This model did not do much for the company. But M&M still launched a brand new Compact SUV, a micro-SUV and a re-designed Quanto last year to increase it's market share in the Compact Category.

The products in the Compact Category now span a price range of Rs.2 lakhs to Rs.10 lakhs, with the Nano, RediGo & Kwid near the lower-end

of the range and cars & SUVs like Polo GT, EcoSport, i20, etc. at the higher-end of the range. It goes without saying that Maruti Suzuki is a dominant player in this Category. This company has a total of 10 different models competing in the Compact Category, with Total Average Quarterly sales of just under 3,00,000 units. The two most popular models in Maruti Suzuki's portfolio are the Alto and the Swift Dzire, which together sell more than India's No.2 manufacturer Hyundai's Total sales in the Compact Category. That is the kind of domination Maruti Suzuki has in the Compact Category. It's market share has comfortably remained over 55% in each of the last 4 quarters, with the highest level achieved being 59.4% in Q3 of last Calendar Year.

Hyundai's Total Average Quarterly sales over the last 4 quarters stood at just under 1,00,000 units, with it's market share in this category hovering around the 18-19% level, the highest level achieved being 20.5% in Q4-CY'15, which included the festive season. The two most popular models from Hyundai's portfolio here are Grand i10 and the i20, which contribute over 70% of the company's Total sales in this Category.

The fastest growing manufacturer in the Compact Category is the Renault-Nissan Alliance, which also includes the Datsun brand. The stupendous growth of this Alliance started with the launch of the Renault Kwid just before the start of the

festive season last year. This model single-handedly brought the Renault-Nissan Alliance from a No.7 position in Q3-CY'15 to a comfortable No.3 position in Q2-CY'16. From sales of about 6700 units in Q3-CY'15 for Renault-Nissan Alliance, it has multiplied over 5 times to reach around 35,500 units in Q2-CY'16, with the Kwid alone contributing close to 25,000 units in the latest quarter. During this period, the market share of the Renault-Nissan Alliance jumped from a meagre 1.4% to a respectable 6.9%. In June'16, the Alliance has launched another potential volume boosting model, the Datsun RediGo. It's impact will be noticeable in the coming quarters.

Tata Motors has seen mixed fortunes during the last 4 quarters. It started with No.4 position & 5.8% market share. Then saw it's sales & market share dip for the next 2 quarters and even lost one position during Q1-CY'16, but has seen a sales & market share bounce back in latest quarter and now Tata Motors is now back to No.4 position in the Compact Category. The recovery in sales in Q2-CY'16 is completely attributable to the Tiago, which was launched in April this year. With 2 more new model launches lined up for the Compact Category from Tata Motors over the next 2-3 quarters, it will be interesting to see how the company manages to build on this sales momentum.

The No.5 position continues to be held by the American auto giant, Ford Motor. This company did not see much change in fortune despite the launch of brand new compact sedan the Figo Aspire in August last year, which was followed by it's hatchback variant Figo in September. The sales of both these models dropped to disappointing levels after the initial couple of months of launch. The company was mainly relying on it's compact SUV model EcoSport to bring in some decent numbers every month. Ford has launched a completely new marketing push for it's models in the month of May this year. The result was immediately visible with a substantial jump in dispatch numbers during June'16. This last-month jump helped Ford to recapture the No.5 position in Q2-CY'16, which it had lost briefly during the previous quarter.

The next in line is India's own SUV maker, M&M. It was virtually non-existent in this category until the launch of the newly developed TUV300 in October'15. It brought in respectable volumes in the initial few months & then the company followed it up with the launch of the micro-SUV model, the KUV100 in January this year. With KUV100 in the picture, the sales of the TUV300 started losing steam. M&M did manage to grab a peak market share of 4.5% and the No.5 position during Q1-CY'16, but is already showing some signs of weakness in sales with market share dropping to 3.8% in the latest quarter. M&M too needs to push it's marketing team to come up with a new aggressive campaign to rekindle the customer interest in it's relatively new models.

Honda has had exactly opposite fortune to that of Renault-Nissan Alliance over the last 4 quarters. From being a comfortable No.3 player with 6.9% market share in Q3-CY'15, Honda has seen its sales & market share drop substantially over the last 3 quarters. The biggest drop coming in the latest quarter, when Honda's market share has fallen to just 2.4% in the Compact Category. One really wonders as to how come a company with a brand name as strong as Honda and equipped with a decent product portfolio, is suffering so badly in the recent months. The company is saying that it has deliberately curtailed dispatches to allow the dealer-level inventory (mainly of Diesel cars) to be cleared first. That means the dispatch numbers in the previous quarters were piling up at the dealer level. Honda has reached this fate despite having launched a brand new Jazz and an updated Amaze last year.

Apart from these 7 manufacturers, Volkswagen, Toyota, Chevrolet & Fiat are also present in this category with 1 or 2 models each. But their combined market share is less than 3% currently. Volkswagen has recently launched the Ameo compact sedan, while Chevrolet too is planning to bring an updated Beat and it's compact sedan version too. Let's see if these new launches help their respective manufacturers to improve their market share to levels worth mentioning in the coming quarters.

Adani Power vs Tata Power vs NTPC

NTPC, Adani Power & Tata Power are three of the biggest Power producers in the country, whose shares are listed on the stock exchanges. NTPC is the public sector behemoth with a current installed capacity of around 47,200 MW. Adani Power comes next with an installed capacity of around 10,500 MW. Tata Power has been overtaken by the much much younger Adani Power last year as it's installed capacity stands at around 9200 MW. While NTPC and Adani Power are pure-play Power Producers, Tata Power is also into Power Distribution and Transmission.

There are quite a few State Electricity Boards who have power generation capacity higher than that of Adani Power, but none of them are investible for the general public. NTPC single-handedly meets nearly a quarter of the country's total power demand. The Private sector currently contributes just about 35% of the country's power requirement, but their contribution is increasing with every passing year as nearly 60-65% of incremental capacity addition is taking place in the private sector. Most of these use the latest technologies, which are more efficient than that used at the older power plants of the public sector units. Over a period of time, even these ageing power units will either have to shut down operations or swap their machinery for the latest technology.

For this comparison, I have considered three important financial parameters of the three companies for the last 4 fiscals, which gives us an idea of the comparative progress made by the three of them.

1) Total Income: Between FY'13 and FY'16, NTPC's Total Income has shown negligible growth. The lowest figure was Rs.75,279 crores in FY'13 and the highest figure was Rs.82,675 crores in FY'15. In FY'16, NTPC's Total Income again dipped below the Rs.80,000 crores mark. That means NTPC's Total Income has grown just about 6-7% over the last 3 fiscals. Tata Power too hasn't done much better with it's Total Income having improved by about 13% over these 3 years and now stands at Rs.37,559 crores. On the other hand, Adani Power, which was a baby in FY'13 with Total Income of just under Rs.7000 crores, has rapidly grown up to touch a figure of Rs.25,402 crores. Most of it's existing capacity was commissioned in these 3 years. I am expecting Adani Power to be on the verge of overtaking Tata Power in Total Income stakes by the end of FY'18 or before.

NTPC did not add much capacity over the recent few years, but it does have some large capacity addition projects under construction since the last 1-2 years, which will be commissioned over the next 1 to 3 years timeframe. Some of these larger projects will enable the company to shut down some of the very-old, inefficient & polluting power plants. Tata Power has announced several small to medium sized renewable energy projects over the recent few quarters, involving Wind & Solar Power. It seems like Tata Power is currently more focused on improving it's Power distribution business in Mumbai & Delhi regions. The Power Distribution business has the potential to generate strong recurring cash profits once it reaches a critical mass.

2) EBITDA: NTPC is again the worst performer here with it's EBITDA down by about 5% over the last 3 fiscals. Still it's worth mentioning that despite being a PSU, it's EBITDA margins are around 25%. Yes, these margins are substantially lower than what most Private sector projects generate after being in operations for more than a couple of years. But the average age of NTPC's assets runs into a couple of decades. Add to that certain PSU-related inefficiencies. And then the 25% EBITDA margin figure starts looking respectable.
Coming to Tata Power, it has seen a substantial jump in EBITDA in FY'16, after it being near-stagnant for 3 years. It's FY'16 EBITDA is nearly 33% higher than FY'13 levels. Tata Power's EBITDA margins currently stand at under 25% levels, but things have been improving over the last 1 year, both on Generation front as well as Distribution side. We could see further noticeable improvement in FY'17.
Use of latest technology is clearly showing in the huge improvement shown by Adani Power's EBITDA numbers over the last 3 years. Eventhough Adani Power's Total Income had jumped about three & half times, it's EBITDA has jumped about 7 to 8 times over the same period. Adani Power's EBITDA margin currently stands at just over 34% and there is scope for some more improvement as some of it's recently commissioned projects reach maturity stage. Adani Power even managed to turnaround the operations of the 1200 MW Udipi Power project (which it acquired from Lanco) within 1 year.

3) Interest Cost: The biggest outgo for any Capital Intensive business after EBITDA is the Interest Cost. The Interest Cost is generally the heaviest in the initial few years post commissioning and gradually reduces as the project matures and starts repaying portions of the debt every year. Here the higher age-profile of NTPC & Tata Power assets becomes their advantage. The annual Interest Cost of both these companies is much lesser than that of Adani Power. Still it is worth noting that NTPC's Interest Cost has been increasing with every year over the last 3 years. From a level of Rs.2481 crores in FY'13, it has increased to Rs.4151 crores in FY'16. That means over the last 3 years, NTPC's EBITDA has come down by about Rs.1000 crores, but it's Interest outgo has increased by about Rs.1700 crores, resulting in reduced Pre-Tax Cash Profits.
Tata Power has done better here. It's Interest outgo saw a jump in FY'14, but has remained steady around the Rs.3500-3600 crores mark. This has resulted in a smart jump in Tata Power's pre-Tax Cash Profit during FY'16 and FY'17 is expected to be even better.
Adani Power being in the commissioning phase of it's different projects over the last 3 years, has seen it's Interest Cost jump from Rs.1703 crores in FY'13 to Rs.5964 crores in FY'16. In fact Adani Power's EBITDA for FY'13 was nearly Rs.550 crores lower than it's Interest cost for that year. But things improved substantially in FY'14 & FY'15 when it's EBITDA was higher than it's Interest outgo by about Rs.700-800 crores each time. During FY'16, the gap between Adani Power's EBITDA and it's Interest cost has jumped to almost Rs.2800 crores. This Cash-Profit comfort is very crucial for Adani Power during it's next phase of growth. I would say that this is the start of Adani Power's golden period. Going forward I am expecting only a moderate increase in Adani Power's Interest Cost with every new project commissioning as the improving Cash Flows from existing projects will help keep the Interest burden in check. This should lead to substantial increase in Cash Profits in the coming couple of years & beyond.

Valuations:

At current levels, NTPC's Market Cap stands at around Rs.1,50,000 crores, while that of Tata Power is close to Rs.20,000 crores and Adani Power's at around Rs.10,000 crores. I am expecting things to change dramatically over the next 5 years. Both Tata Power & Adani Power could see their Market Caps to surge past the Rs.50,000 crores mark during the coming 5 years, i.e. by the end of FY'21. Why am I so confident? Demand for Power is expected to grow at a healthy pace, given that Indian economy has the potential to maintain 7+% annual rate of  growth. With the Govt. aggressively trying to ensure that electricity reaches each & every village and 24x7 Power supply across the country before the end of year 2020, we could very well see Electricity demand grow faster than it has in the past. Adani Power with it's highly efficient power plants will certainly benefit from this expected demand surge. Adani Power itself has set a target of achieving 20,000 MW installed capacity by year 2020, that means approximately double of what it has today. With Govt wanting to setup 100 Smart Cities, there is a possibility of auction of Power Distribution licenses with substantial Private sector participation expected. Here again companies like Adani Power & Tata Power could be beneficiaries. Tata Power's city-level Distribution experience will certainly come in handy here.

In short, there is immense scope for progress for efficient & capable producers as well as service providers. NTPC too will gain from it, but because of it's size & PSU roots, the percentage gain will be much smaller when compared to aggressive & nimble-footed private sector competitors.

Telecom Analysis - Performance of operators in different Circle-Categories.

Indian geographical territory is distributed in 22 different Telecom Circles. And these 22 Circles are then Categorised in 4 sections: Metro Circles, Category-A, B & C circles, depending on their Revenues generating potential. Even the Spectrum Auctions have seen much higher bids for Metro & Category-A circles, compared to Category-B or C circles. Hence it is very interesting to see how different telecom operators are performing in different Circle-Categories.

I have considered Gross Revenue numbers for Top-8 operators only as these operators constitute about 99% of the Industry's Revenues. No.1 being Airtel and No.8 being Telenor. Operators that have been ignored include Jio, MTS, Videocon & Quadrant. Jio is yet to report any noticeable revenues. MTS is on the verge of getting merged with RCom & Videocon has shut down it's operations in most circles recently.

Even though Telenor is the smallest operator amongst the 8 operators I have considered for this analysis, it is small only because of it's 6-circles operation. All other operators have a presence in all 22 circles, excluding Aircel (20 circles) and Tata Tele (19 circles). Telenor commands just 2.3% of Industry's Gross Revenues, but it has managed to be amongst the Top-4 operators in 3 out of it's 6 circles of operation. Telenor commands a very respectable 9.1% market share in circles of UP (E) and UP (W), despite being the last entrant in these circles.

Coming back to Circle-Categories, following is the distribution of the 22 circles in the 4 different Categories:

Metro Circles - Delhi, Mumbai & Kolkata. (Chennai's numbers are included in Tamil Nadu's numbers).

Category-A Circles - Andhra Pradesh, Gujarat, Karnataka, Maharashtra & Tamil Nadu.

Category-B Circles - Haryana, Kerala, Madhya Pradesh, Punjab, Rajasthan, UP (E), UP (W) & West Bengal.

Category-C Circles - Assam, Bihar, Himachal Pradesh, North-East & Orissa.

The Metro Circles contributed 18% of Telecom Industry's Gross Revenues for the March'16 quarter, with Delhi circle being the largest contributor & Kolkata being the smallest contributor. The Metro Circles reported a 7.9% Y-o-Y Growth in Gross Revenues for March'16 quarter. This is the fastest growth reported amongst all 4 Circle-Categories. The strongest growth was reported by MTNL, which posted an unusual & surprise jump in Gross Revenues for March'16 quarter. Whether this was a fluke or not will be known once the June'16 quarter numbers are declared. Apart from MTNL, Airtel was the next fastest with 10.7% Growth. This helped Airtel to increase it's market share in Metro Circles to 27.2% and inch closer to the leader Vodafone, which itself reported a disappointing growth of just 2.8%. Vodafone's market share in Metro Circles dropped by over 1% & now stands at 28.5%. Vodafone has recently launched it's Supernet 4G service in all the 3 Metro circles as a step to protect it's market share. Idea Cellular managed to post Industry-matching growth of 7.9% and maintained it's market share at 10%. Idea has launched it's own 3G network on the recently acquired 900 MHz band in Delhi circle late in 2015 and will now hope to grab some more market share there. Tata Tele lost almost 8% revenues in the Metro Circles, primarily because of lack of 3G/4G service offering. It doesn't even have a GSM service offering in Delhi circle. Tata Tele's CDMA-based photon high-speed service is losing steam in front of strong competition from 3G & 4G networks. Tata Tele has acquired some liberated 850 MHz spectrum last year for Delhi & Mumbai, which can be used for 4G service. But Tata Tele's strategy is still unknown on this front. RCom is the biggest disappointment here. Despite winning a 3G license for both Mumbai & Delhi in the first auctions and shelling out thousands of crores for it, RCom's performance has been extremely dismal. In the March'16 quarter it lost another 2.8% of it's revenues and pulled down it's already-low market share even lower now. Aircel has managed to post a not-so-bad 4.7% growth in revenues in the Metro Circles, possibly partly because of it's 3G-roaming tie-up with RCom.

The Category-A circles contributed the largest chunk of Industry's revenues with 37.5% contribution. It's Y-o-Y Growth for March'16 quarter was a little slower than Metro Circles at 6.6%. An interesting fact is that the Maharashtra&Goa circle (excluding Mumbai) generates more revenue than even Delhi circle. And Tamil Nadu, Karnataka & Andhra Pradesh circles generate more revenues than Mumbai circle, but less than Delhi circle. Airtel is again the biggest gainer here with 10.8% growth, improving it's market share by over 1% to reach 30.9%. Idea was the next biggest gainer with 10.3% growth, taking it's market share to 18.8%. Vodafone still holds No.2 position despite a drop in market share to 20.9% on the back of much slower growth of just 2.9%. With both Airtel & Idea aggressively launching their 4G services in most of these Category-A circles, Vodafone's market share is expected to come under further pressure in coming quarters. BSNL was the next biggest gainer with a smart 8.3% growth, followed by Telenor with a near similar 8.2% growth. Aircel & Tata Tele managed near 1% growth only and saw their market shares erode by a small extent. Here as well RCom saw it's revenues drop by 5% and it now commands less than 4% market share in Category-A circles. Alongwith the Metro circles, the Category-A circles are expected to lead the adoption of 3G & 4G services in the coming quarters. Hence operators with ability to offer good quality 3G & 4G service will certainly gain further ground in these circles.

The Category-B circles generate the 2nd biggest contribution to Industry's revenues with nearly 33% contribution. But with a Y-o-Y growth of 4.5% in March'16 quarter, it is slower than Metro & Category-A circles. The biggest gainer (by a large margin) here is Idea Cellular with 12.6% growth. This has propelled Idea's market share by almost 2% to touch a figure of 26%. Idea is now within 1% of leader Airtel's market share number. Airtel too has managed to increase it's market share to 26.9% on the back of 6.7% growth in revenues. Vodafone is at No.3 and has managed to maintain it's 22.6% market share with a Category-matching 4.4% growth. Both Aircel & Telenor too managed to maintain their market shares at little under 3%, with a near 5% growth in revenues. Tata Tele reported a 1.6% drop in revenues, followed by BSNL, which reported a 6.9% drop in revenues and followed by RCom, which posted a whopping 14.6% drop in revenues. All three of them saw their market shares decline by varying degrees depending on their revenue loss.

Coming to the smallest Category-C circles, which contributed just about 11.6% of Industry's revenues in March'16 quarter. This category too posted just 4.5% growth in revenues. Here the No.1 player is again Airtel, but the strange part is that it's market share of 43.4% is nearly 3 times that of the No.2 player Vodafone's market share of 15.5%. Airtel reported a revenue growth of 8.4% here, which helped it expand it's market share by 1.5% since March'15. Vodafone was the fastest growing operator in these circles with a growth of almost 23%. It improved it's market share by over 2% over the last one year. Idea too reported a very strong growth of 22%, thus improving it's market share to almost 10% now, but is still the No.4 player here. Aircel is No.3 in this category with 12.4% market share, but it's growth rate was slower at 7.4%. BSNL comes next with 8.5% market share, but has lost about 8% of it's revenues. Tata Tele is the smallest operator here with limited presence in Category-C circles. Tata Tele's market share is now even lesser than that of Telenor. While Tata Tele lost 10.5% of it's revenues, Telenor gained 6.1% compared to last year, thus handing over the last position tag to Tata Tele. RCom lost a whopping 43% of it's revenues compared to last year, mainly because of non-renewal of it's 900 MHz spectrum in many Category-C circles.

Summary: 

Idea Cellular has managed to post strong double-digit growth in 3 Categories, excluding the Metro Category. With decent 3G & 4G spectrum portfolio in Category-A & B Circles, Idea Cellular will try to maintain this level of performance in coming quarters. While it will bank on it's strong Brand image & improving coverage to garner more of 2G voice market share in Category-C circles. Airtel has done a decent job everywhere with better than Industry growth in all Circle-Categories. With a super strong spectrum portfolio comprising of 3G & 4G capable frequencies, Airtel's further performance will purely depend on it's network rollout pace & quality of service. Vodafone is clearly the worst performers amongst the incumbents with lower than Industry growth in Top-3 Circle-Categories. Vodafone needs to spend a lot more in the upcoming spectrum auctions to boost it's 3G/4G spectrum portfolio. Vodafone is already on the verge of losing it's No.1 position in Metro circles & No.2 position in Category-A circles. Looking at BSNL's performance, it seems like in the initial phase of it's business revival plans, it is focusing on Category-A circles. It has managed a healthy growth only in this category, while it has reported a decline in the other two categories. Amongst the remaining players, it is only Aircel & Telenor who have managed to post some growth in revenues in all categories they are present in. Aircel is in talks to combine it's operations with RCom's wireless business unit. The only benefit from this combination is larger scale of operations. But RCom is a seriously struggling business unit. Don't know if Aircel will benefit from this merger or not. Telenor too is experiencing sluggishness in it's growth, possibly due to lack of 3G/4G service offerings. It's narrow-band 4G experiment, if successful, might get rolled out across several cities & towns in it's circles of operation in the near future. With it Telenor is able to offer 3G-like speeds at very attractive price points. But sooner rather than later Telenor will need more spectrum to be able to handle more traffic. Hence it might need to get active in the upcoming spectrum auctions.

Eicher Motors Ltd. - Royal Enfield's recent Sales Growth update.

Before you read this post, I would request you to check out my report on this company posted couple of months ago. Here is the link to that report:

Eicher Motors Ltd - Analysis of Royal Enfield sales growth.

Sales of Royal Enfield bikes has remained restricted to a monthly figure of around 50,000 units for the last few months now. Possibly primarily due to capacity limitations. The chart above shows the 3-months moving average of Royal Enfield's monthly sales numbers. We can see the sales plateauing just under the 50,000 units mark for the last 4 months. Once the expanded capacity comes on stream, we will see the sales average breaching past that 50,000 barrier.

One thing that I had mentioned in my report two months ago was that I am expecting Growth rate of Domestic sales to come down substantially from over 50% levels to something closer to 30% by the end of the year. At the same time I was expecting the company to push more volumes into the Export market. Export sales forms just about 2-3% of the company's monthly numbers currently. But the same could be touching 5% by the end of this year and be around 10% by end of 2018. For this to happen, the Export sales should grow at a much faster pace than the company's Domestic sales. I am happy so say that things have already started moving in the direction I had expected. Have a look at the chart below, which shows the progress of Y-o-Y Growth rates of both Domestic & Export sales, again on a 3-months moving average basis.

As we can see, the Y-o-Y Growth rate of Royal Enfield's Domestic sales has sharply come down from 60+% level in March'16 to less than 40% level in June'16. At the same time the Export sales growth rate has improved from about 45% in March'16 to over 80% in June'16. Going forward I am expecting this trend to continue with Export growth to be far higher than Domestic Growth. Since Domestic Sales currently forms about 97% of Royal Enfield's sales, any slowdown in it's growth rate will bring down the over growth rate of the company's Total sales. As I had mentioned in my previous report, even a growth rate of 25 to 30% on such a large base is still very very respectable.