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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Adani Energy Solutions Set for Massive Growth: Global Brokerage Predicts 125% Upside

Adani Energy Solutions Limited (AESL) shares surged 3.66% to an intraday high of ₹1,014.90 on September 20, 2024, following a report by global brokerage Cantor Fitzgerald. The firm has projected a massive 125% upside for the stock, with a target price of ₹2,251 per share. The power stock, part of the Adani Group, has already delivered impressive multibagger returns of 353.36% over the past five years, enriching investors with substantial gains.

Bullish on India's Expanding Energy Market
Cantor's research report highlights the growth potential of Adani Energy Solutions, expecting its revenue to grow at a compound annual growth rate (CAGR) of 20% between FY2024 and FY2027. The report lauds AESL's position in India's rapidly expanding energy market, positioning the company as the largest private-sector power transmission and distribution player in the country.

Diversified Portfolio and Future Projects
AESL boasts a diversified portfolio, including transmission and distribution assets, as well as a growing smart metering business. The company is set to complete nine new transmission projects over the next 18-24 months, ensuring steady growth in its core business areas. With an enterprise value of $18.5 billion, Cantor regards AESL as one of the most attractive investment opportunities in the energy sector across the US, Europe, and Asia.

Riding India's Renewable Energy Wave
As India's most populous nation, the demand for electricity is set to soar, driven by the government's significant investment in renewable energy. AESL's infrastructure capabilities for transmitting and distributing electricity, especially from renewable sources, position the company perfectly to capitalize on this increasing demand. The focus on renewable energy is a key factor in Cantor's optimistic outlook for AESL's long-term growth.

Conclusion: A Powerhouse for Investors
With an 'Overweight' rating from Cantor Fitzgerald and significant growth prospects, Adani Energy Solutions is rapidly becoming one of the most attractive investment opportunities in the energy sector. Investors looking for long-term returns may find AESL's growth story irresistible as India's energy needs continue to expand.

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