BACK PAGE, P20 EFE, P10 INTERNATIONAL, P3 PhonePe banking on new revenue streams Handset makers focus on long-lasting batteries Michelle Obama blasts Trump at Harris rally FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOL NO. XXXVII 160, 20 PAGES, `12.00 P U B L I S H E D F R O M : A H M E D A B A D , B E N G A L U R U , C H A N D I G A R H , C H E N N A I , H Y D E R A B A D , K O C H I , K O L K ATA , L U C K N O W, M U M B A I , N E W D E L H I , P U N E PM TO INAUGURATE FIRST PVT MILITARY AIRCRAFT FACTORY PRIME MINISTER NARENDRA Modi and his Spanish counterpart Pedro Sanchez will inaugurate India’s first private military aircraft production plant in Vadodara in Gujarat on Monday, reports Shubhajit Roy. ■ PAGE 18 EXPLAINER Why there’s no end to airline bomb hoaxes ■ PAGE 4 -9.5 NILESH SHAH, MD, KOTAK MAHINDRA AMC RETURNS FROM INDICES IN SAMVAT 2081 WILL BE LESS THAN HALF OF 2080... EARNINGS NOW HAVE TO START CATCHING UP WITH VALUATIONS WE EXPECT RETURNS ACROSS DEBT, EQUITY AND GOLD TO CONVERGE TO A NARROW RANGE SHANKAR SHARMA, FOUNDER, GQUANT INVESTECH WE ARE IN FIFTH YEAR OF A BULL MARKET, SO A COOLING-OFF PERIOD IS DUE...IT MAY BE STARTING Prudential, calls for a cautious investment approach as current market valuations are elevated, driven by overly optimistic domestic sentiment. Investor sentiment during Samvat 2080, which ends this week, was bullish for the most part. However, the markets have lost momentum over the past month. Since September 27, the Sensex has lost 7.5% with more MANUFACTURING PUSH than `40 lakh crore of investor wealth wiped out. Shah says while India’s longterm growth story is intact, green shoots in consumption as well as private investment don’t seem to be sustaining. “We expect returns across debt, equity, and gold to converge to a narrow range.” Holland says, “Earnings have to start catching up with valuations now. You’ve seen that in this Oct Sep Aug Jul Jun 2024 Source: NSDL SANKARAN NAREN, ED AND CIO, ICICI PRUDENTIAL ALTHOUGH INDIA’S MACROS LOOK ROBUST, CURRENT MARKET VALUATIONS ARE ELEVATED, DRIVEN BY OVERLY OPTIMISTIC DOMESTIC SENTIMENT FE BUREAU New Delhi, October 27 Total expenditure THE INCREASE IN costs of a host of items, including commodity price spikeandrisingemployeeexpenses, hasdentedtheoperatingmarginsof companies at a time when revenue growth has been muted. For a group of 424 companies (excluding banks, financials and oil marketing companies) that have announcedresultsforQ2FY25,revenuesgrewatamodest6%year-onyear (y-o-y). At the same time, the total expenditure went up by 7% leadingtoafallinoperatingmargins of about 80 basis points (bps) y-o-y. Further, thanks to an 11% rise in interestcosts,netprofitswere up only 4% y-o-y. At Havells, employee costs increased by 26% y-o-y due to an increase in manpower and salary hikes while spends on advertising shot up by 53% y-o-y ahead of the festive season. The firm also invested in newdistribution and sales channels. At Hindustan Unilever, the adjusted gross margins contracted 125 bps y-o-y due to volatility in pricesofcommodities—thepricesof palm oil and tea rose 10% and 25% y-o-y.At Indigo,the total expenses — aircraftfuel,rentals,repairandmaintenanceandairportcharges—inthe Septemberquarterincreasedby22% 4 Q3 9 7 Q4 FY24 2 7 Q3 Q4 FY24 OPM (bps, chg y-o-y) Q1 Q3 Q4 Q1 Q2 FY24 FY25 (% chg, y-o-y) 10 Continued on Page 18 RM to sales (bps, chg y-o-y) Q3 Q4 Q1 Q2 FY24 $500-bn y-o-y while the revenue fromoperationswentup by 13.6%. The airline posted a surprise consolidated loss of `987 crore in Q2FY25, the first quarterly loss in twoyears. At Colgate, the gross margins contracted 23 bps y-o-y and the operating margin by 206 bps y-o-y largely due to higher advertising and promotions, even as raw material prices were benign.The rise in advertising andpromotionswascloseto100bps y-o-y.Thisdampenedmarginswhich contracted by120 bpsy-o-y. REVIEW Continued on Page 5 Wary of ‘bad IPO’, Swiggy again cuts valuation In the next leg,the government is expected to extend the DLI scheme to largercompanies so that more IPs can be generated.Firms such as L&TSemiconductorTechnologies and NXP, among others, have expressed interest in the scheme.Thereisalsoaplantoincreasetheoutlay of the scheme. FOOD DELIVERY GIANT Swiggy hasslasheditsIPOvaluationagain, to$11.3billion,25%belowtheinitial goal of $15 billion, as market volatility and the lacklustre debut of Hyundai India weigh on sentiment,two sources said on Sunday. BlackRock and Canada Pension PlanInvestmentBoard(CPPIB)will invest in the $1.4-billion IPO, whichwillbethecountry’ssecondbiggeststockofferingthisyear,the sourcestoldReuters.Swiggy,Blackrock and CPPIB did not immediately respond to requests for comment outside business hours. Indian shares have fallen for four weeks in a row, the longest suchlosingrunsinceAugust2023, with the benchmark Nifty 50 index down more than 8% from record highs hit on September 27, due to persistent foreign selling. Continued on Page 18 Continued on Page 5 electronics manufacturing ■ Semiconductor incentive scheme has outlay of `76,000cr & `1,000cr is reserved for design-linked incentives ■ Ministry has set a target of funding 100 startups under incentive scheme ■ Government also provides deploymentlinked incentives to startups RENTALS SHOOT UP AS FIRMS, CONSULATES RETURN Nariman Point gets a new lease of life RAGHAVENDRA KAMATH Mumbai, October 27 RECENT DEALS IT MAY NOT be the bustling central business district it oncewas but Nariman Point is getting a new life. With a clutch of companies, law firms, foreign consulates and consultancies setting up theiroffices here, lease rentals have moved up. This has whetted the appetite of property agents who believe the rentals could climb all the way to over `1,090 per square feet, virtually doubling from the current levels of about `570 per sq ft. To be sure, rentals in the tony Bandra Kurla Complex (BKC) have hit `1,000 per sq ft but companies seem to be re-discovering the benefits — and charm — of being located in Nariman Point.The better connectivity with the 10.58-km Coastal Road and Metro 3 between Seepz and Colaba is a big draw. BetweenJanuaryandSeptember,leases for 40,000 sq ft of office space have been signed and this doesn’t include leases that have been renewed. Property consultant Cushman andWakefieldexpects thiscould go up to 60,000 sq ft before the year is out. Tenant Building name Jefferies India Express Towers* Area (in sq ft) 16,276 The Boston Consulting Group Nariman Bhavan* 12,542 228 7,442 410 12,688 247 3,470 NA The Federal Republic of Germany Hoechst House* The Consulate General Of China Nairman Bhavan* CJS Speciality Chemicals Bajaj Bhavan ■ Property agents expect rentals to rise to `1,090 per sq ft Rent** 303 ■ 40,000 sq ft of office space leased during Jan-Sept period Nariman Point**per sq ft/month; Source: Industry Compare that with just 17,000 sq ft of leases that were closed out in 2023. This demand forworkplaces has driven up rentals by 8-10% in the past one year. They’re ruling at nearly`570 persq ft having surpassed rentals in the central business districts of both Bengaluru,where it is about `353 persq ft,and the National Capital region,where it is about `430 persq ft, property consultant Knight Frank said. FY25 All companies excluding banks and financials and excluding HPCL, BPCL,IOC Source: Capitaline ADITYA KALRA New Delhi, October 27 ■ Government has set a target of 7 Q1 Q2 FY25 RESULTS results season. If you miss, the fall in prices is very hard.” Sharma pointed out that typically bull markets usually end in the fifth or sixth year, or at least, take a reasonable breather.“We are in the fifth year of a bull market, so simply, statistically, a coolingoff period is due, and we may well be starting that now,” he said. 6 Q2 FY25 18 ANDREW HOLLAND, CEO, AVENDUS CAPITAL ALTERNATE STRATEGIES May Apr 2023 2024 Up to October 24, 2024 Most startups fail to light up chip design segment THE MAJORITY OF startups have failed to light up the chip design space. Of the roughly 60proposalssubmittedtotheministryofelectronics and IT (MeitY) by these companies to get the benefit of subsidies under the designlinked incentive (DLI) scheme, only 14 have been able to make the cut.The ministryhas set itself a target of funding 100 startups. Again,ofthese14,only5-6startupsincluding Mindgrove Technologies and Aheesa Digital,havebeenableto securefabrication orders for their design prototype. MeitY officials attributed the poor strike rate to many startups being basically into designing and the fact that their designs have not been approved by companies which are making products. Further, it seems that most of them lack a fixed client base.Theyhave also probably been unable to get external funding support from venture capitalists (VCs) and other investors. “It is an irony that India has 20% of the world’schipdesignengineers,butithardlyhas anyintellectual property(IP) of its own,which is key for the country to become a product nation and reach the target of $500 billion in electronics manufacturing,”an official said. 1.4 5.9 24,180.80 Oct 25, 2024 IF SAMVAT 2080 was for the most part all about swinging of the bat in a typical T20 game, the new year starting this Friday is expected to be like a classic Test match where the scoring rate will slow down considerably. Adding to the uncertainties of a tricky pitch will be a host of factors ranging from risks to earnings growth, weak consumption, global conflicts and foreign funds moving money to China. That mood is reflected in the unanimous verdict of India’s money managers and market mavens: Returns in Samvat 2081, they believe, will be modest. While Nilesh Shah, managing director at Kotak Mahindra AMC, advises investors to moderate return expectations significantly, Andrew Holland, CEO of Avendus Capital Alternate Strategies, says returns from the benchmark indices will be about 10% in Samvat 2081, less than half of that in Samvat 2080. Others agree. Shankar Sharma, founder, GQuant Investech, believes the rally, which is in its fifth year, is likely to take a breather. And Sankaran Naren, ED and CIO, ICICI JATIN GROVER New Delhi, October 27 -0.8 -3 3.1 3.3 40 -3.1 0.5 Nov 12, 2023 VIVEK KUMAR M & JOYDEEP GHOSH Mumbai, October 27 3.7 106 2.3 7 (% chg, y-o-y) -166 (All time high) Net sales -78 Sept 9, 2024 Nifty 19,525.55 FPI flows (in $ billion) COST SIDE STORY 195 A MIXED TREND 26,216.05 424 select firms see revenues grow at just 6% in Q2FY25 24 THE URBAN DEMAND for fast-moving consumer goods (FMCG) is slowing after months of sustained growth, CEOs of top firms have said in their Q2 commentary, reports Viveat Susan Pinto. ■ PAGE 4 A SMART RALLY Mar SLOWING URBAN DEMAND HURTS FMCG GROWTH Concern over earnings growth,weak demand & geopolitical conflicts Feb INDIA IS LIKELY to press for enhanced funding commitments by the rich world at the UN Climate Change Conference, or COP29, scheduled in Baku, Azerbaijan next month, reports Arunima Bharadwaj. ■ PAGE 2 Jan COP29: INDIATO PUSH FOR MORE CLIMATE FUNDS Dec NEWS Rising costs dent India Inc margins Market gurus see muted returns in Samvat 2081 Nov IN THE -38 BENGALURU, MONDAY, OCTOBER 28, 2024 SanjayDutt,MD and CEO ofTata Realty & Infrastructure,said some companies are locating their offices in Nariman Point as they need to be close to their corporate clients, BSE and government offices.“Also seniorbankers and CXOs have clients and a social network there so they live in South Mumbai,” he said. Continued on Page 5 BENGALURU