The Chatter: Indian Oil, Muthoot, Maruti Suzuki & More
Q1 FY27 | Edition #75
Welcome to the 75th edition of The Chatter — a newsletter where we dig through what India’s biggest companies are saying and bring you the most interesting bits of insight, whether about the business, its sector, or the wider economy. We read every major Indian earnings call and listen to the interviews so you don’t have to.
We’re always eager to improve—please share your ideas on how else we can innovate “The Chatter” format to better serve your needs.
In this edition, we have covered 8 companies across 5 industries.
We want to experiment a bit with The Chatter format. Until now, we covered around 15 companies every week. Going forward, we’ll instead publish three editions a week, with each one covering five to six companies.
The idea is that covering fewer companies in each edition means we can give you quicker and focused context on everything we cover. It would also mean each edition would be less overwhelming.
We’ll experiment with this format for the next few weeks. Let us know what you think about it.
Energy
Indian Oil Corporation Limited
Mahanagar Gas Ltd
Financial Services
Muthoot Finance Ltd
Bajaj Finserv Limited
Aptus Value Housing Finance India Ltd
Automobile
Maruti Suzuki India Ltd
Healthcare
Divi’s Laboratories Ltd
Services
Urban Company Ltd
Energy
Indian Oil Corporation Limited | Large Cap | Oil & Gas - Refining & Marketing
Indian Oil Corporation is India’s largest integrated energy major, operating a massive network of refineries, pipelines, and retail fuel stations across the country. The company is currently diversifying its portfolio by making significant investments in petrochemicals, green hydrogen, and renewable energy to support India’s evolving energy transition.
[Concall]
The company has significantly shifted its sourcing strategy toward spot market purchases and a wider variety of global suppliers to bypass geopolitical disruptions. This flexibility is essential for maintaining consistent refinery operations and managing costs during periods of high global volatility.
“Indian Oil continues to import secure, reliable, and economically competitive crude oil grades from diverse countries while managing the challenges of high market volatility, as well as logistical challenges relating to ships, insurance, freight costs, and other factors. Amid the disruption, we diversified our sourcing by increasing imports from other geographies such as Russia, Venezuela, Brazil, and even African countries, thereby ensuring continuity of crude oil imports to maintain our planned refinery operations. Spot imports for the quarter stood at about 84%, against 51% last year.”
— Anuj Jain, Director - Finance
Global political instability and fluctuating crude prices have put severe pressure on the profit margins for selling fuel at retail stations. While total revenue increased due to higher prices, these external costs ultimately pushed the company into a quarterly loss.
“The reported loss needs to be viewed in the context of heightened geopolitical tensions and ongoing conflicts, which led to significant volatility in international crude and product prices and resulted in considerable pressure on marketing margins on retail fuels, particularly impacting the quarter’s profitability. Revenue from operations during the quarter stood at Rs.2,75,972 crore, against Rs.2,32,855 crore in the immediately preceding quarter of this year. The sequential increase in revenue was mainly driven by higher product prices.”
— Anuj Jain, Director - Finance
Management absorbed some of the rising global oil costs to keep domestic fuel prices stable for consumers. They believe that as global markets stabilize, their strong sales volumes will allow for a fast recovery in profit margins.
“While we responsibly absorbed a portion of international crude price spikes to shield the domestic markets from inflationary pressure, our overall volume footprint remains solid, uniquely positioning us for rapid margin recovery as global energy dynamics normalize and our optimized product mix takes full effect. Talking about the numbers, let me briefly touch upon the major verticals.”
— Nitin Kumar, ED Corporate Finance & Treasury
Several massive expansion projects at key refineries are nearing completion and are expected to go online later this fiscal year. This new capacity will allow the company to process more crude and increase its output of refined products starting in late 2026.
“The major refining and petrochemical expansion projects across Panipat, Barauni, Gujarat, and Paradip are at an advanced stage of execution and are targeted for completion during FY26-27. Phase-wise commissioning of process units, utilities, and offsite facilities is being undertaken in a structured manner to enable progressive capacity build-up and integration. As far as the Panipat refinery expansion is concerned, it is expected to be completed by December 2026, Barauni by December 2026, and Gujarat by November 2026.”
— Nitin Kumar, ED Corporate Finance & Treasury
Management expects the government to provide financial assistance to offset the losses from selling cooking gas at subsidized rates. For investors, this sovereign support is a vital safety net for the company’s cash flow when global prices are high.
“Regarding LPG in particular, we are hopeful that we will receive reasonable support from the Government of India. Based on past experience, we have seen that the government has fully extended support to PSU OMCs. Therefore, based on past practice, we are confident that suitable compensation for LPG under-recoveries will be considered.”
— Nitin Kumar, ED Corporate Finance & Treasury
The company is entering a joint venture to acquire its own shipping vessels to better control its supply chain. Owning transportation assets will help the company manage freight costs and ensure more secure delivery of energy products.
“Under the aegis of the Ministry of Petroleum and Natural Gas (MoPNG) and the Ministry of Shipping, a non-binding MOU was signed on September 19. Under this, Indian Oil will explore procuring four MR vessels to begin with. This is a JV in which we will have other partners, including other oil and gas partners.”
— Anuj Jain, Director - Finance
The company’s debt rose significantly this quarter to cover higher working capital needs caused by expensive oil prices. While the increase is large, management maintains that their strong balance sheet allows them to borrow at favorable interest rates.
“In absolute numbers, my borrowings increased significantly by Rs.31,000 crore in a single quarter. However, because this is not the first time that oil-sector companies have seen such borrowing levels, we have banking arrangements to obtain money from banks at very competitive rates and manage the situation. Nevertheless, the situation becomes very strong in the sense that our borrowing increased by Rs.31,000 crore in a single quarter.”
— Anuj Jain, Director - Finance
Indian Oil is aggressively expanding into the green energy sector with a massive goal of 18 gigawatts of renewable capacity. This transition is intended to future-proof the business as the global economy shifts away from traditional fossil fuels.
“We have a target of 18 gigawatts of renewable power over the next 3-4 years. We have the 100% owned subsidiary company Tera Green, where we are putting in significant effort to commence our renewable operations. Already, 4-5 gigawatts of work is underway at various stages.”
— Anuj Jain, Director - Finance
Mahanagar Gas Ltd. | Mid Cap | Gas Distribution
Mahanagar Gas Limited is a prominent Indian city gas distribution company providing natural gas to Mumbai and its surrounding regions. The company manages an extensive network of pipelines supplying CNG for the transport sector and PNG for domestic, industrial, and commercial users.
[Concall]
Management highlights that while residential and vehicle supply is secured by domestic gas, the industrial segment faces supply cuts and potential price hikes. This prioritization protects core volumes but exposes industrial margins to global price volatility.
“100% of our domestic PNG and DPNG requirements and the major portion of our CNG requirement are sourced from domestically produced natural gas, ensuring uninterrupted supply to our DPNG customers and continued reliable supply to our CNG customers. Gas supplies to industrial and commercial customers are partly curtailed. Prices may be affected due to global indices in the near term.”
— Praveer Kumar Srivastava, Managing Director
The management details a diversified gas sourcing mix with a reliance on multiple price indices beyond regulated domestic gas. This complex sourcing structure means that blended gas costs will fluctuate based on international spot and hub prices.
“At a company level, roughly 30% is available through APM, and nearly 21-22% is available through NWG and pooled gas put together. Roughly 14-15% is through HPHT, and another... Our actual signed contract with respect to Henry Hub was higher, but roughly 21-22% has been received through the HH contract, and the rest is through some small Brent contracts or whatever we could buy through IGX and spot.”
— Rajesh Patel, Chief Financial Officer
Realizations in the non-regulated segments have risen sharply because they are indexed to expensive alternate fuels like LPG and furnace oil. This pricing mechanism allows the company to capture higher margins when global oil prices are elevated.
“In the industrial and commercial segment for this quarter, as you know, we have been pricing our industrial and commercial customers linked to alternate fuel. In the case of commercial customers, it is mainly linked to bulk commercial bottled LPG, and for industrial and commercial customers, it is linked to FO and LDO. Compared to the previous quarter, there was an increase in the range from Rs 27 per cubic meter to almost Rs 32 per cubic meter.”
— Rajesh Patel, Chief Financial Officer
The ongoing West Asian crisis is creating significant uncertainty regarding gas availability and procurement costs. Investors should expect short-term margin volatility until geopolitical tensions stabilize and supply chains normalize.
“Since supply has been impacted, prices and the quantity available have also gone up. It is very difficult to tell you what the margin could be for at least this quarter or going forward unless there is a complete resolution of this conflict in West Asia. However, we have been making an attempt to minimize our weighted average gas cost.”
— Praveer Kumar Srivastava, Managing Director
Management is warning of continued pressure on profitability due to high spot gas prices in the immediate term. This transparency suggests that upcoming quarterly results may reflect higher input costs that aren’t immediately passed to consumers.
“You may see some spike for at least the next 1-2 months. That is the current situation, which you can see in the pricing of JKM and in the spot market. It is very difficult to give a call on margins. They will definitely be under pressure for at least 1-2 months until this crisis is resolved or some settlement happens.”
— Praveer Kumar Srivastava, Managing Director
MGL’s volume growth is primarily driven by the significant cost advantage CNG holds over traditional liquid fuels. Maintaining this price differential is the key strategic priority for ensuring long-term vehicle conversions.
“We have been maintaining some legroom between petrol and diesel prices and CNG prices. As you could see, CNG is roughly 40-45% more competitive compared to petrol and in the range of around 12% compared to diesel. If we maintain that, it should be sufficient to drive our volumes.”
— Praveer Kumar Srivastava, Managing Director
Management believes the threat of electric vehicle (EV) buses is limited to state transport, with private operators likely to stay with CNG due to high capital costs for EVs. This protects a significant portion of MGL’s commercial gas volumes from near-term disruption.
“In the case of private operators, however, there may not be an incentive to adopt EV buses because the capital cost is much higher while revenue remains similar. Unless financing becomes available, which is really difficult for private operators because there is no lifecycle available and financing is obtained at a very high rate, we will not see much penetration among non-STU operator buses.”
— Praveer Kumar Srivastava, Managing Director
Management explains that while priority sector status helps, sourcing from High Pressure High Temperature (HPHT) fields requires competitive bidding. This shift toward market-based gas discovery will likely lead to higher average gas costs for the industry over time.
“HPHT is not allocation-based; you have to bid and buy it. The only point is that CGD gets priority. Whenever a long-term contract is offered for sale by the producer, HPHT is generally the maximum, so it gets apportioned among all the CGDs.”
— Rajesh Patel, Chief Financial Officer
MGL expects a surge in domestic PNG conversions as the government begins mandating the switch from LPG cylinders in gas-equipped buildings. This regulatory push is expected to convert ‘dormant’ connections into active, revenue-generating customers.
“As far as volume growth is concerned, domestic PNG is an area where growth is limited by the population and the number of households in that sector. Almost 50-60% of those connected but not consuming gas will be tapped because there is also pressure from the government, including the threat of bottled LPG supplies being stopped if a building has a gas connection but the residents have not taken it.”
— Praveer Kumar Srivastava, Managing Director
The company is taking a cautious, wait-and-watch approach toward EV initiatives, prioritizing core gas operations for now. This ensures that capital is not wasted on unproven segments before they reach commercial viability.
“You may not see a very sizeable amount of management time and money being invested in this segment for at least the next 3-5 years. However, once we are confident and know that the time has come for it to start operating successfully, we will definitely scale up at that time.”
— Praveer Kumar Srivastava, Managing Director
Management is signaling a shift toward inorganic growth through potential acquisitions as smaller or newer competitors struggle with declining gas allocations. This could provide MGL with a path to expand its geographical footprint beyond its current licensed areas.
“If required, we are open to and may look for opportunities for acquisitions as well. The time is coming when APM is declining substantially. There are new entrants who may have management issues, and new non-gas operators have also entered.”
— Praveer Kumar Srivastava, Managing Director
Financial Services
Muthoot Finance Ltd. | Large Cap | NBFC - Gold Loan
Muthoot Finance is India’s largest gold loan non-banking financial company, specializing in providing short-term loans secured by gold jewelry. The company operates a massive network of over 6,000 branches and has diversified into microfinance, housing finance, and insurance brokerage.
[Concall]
Management views new industry regulations as a favorable shift that will benefit large, organized players. For investors, this suggests that regulatory compliance will act as a competitive moat against smaller, less formal lenders.
The Reserve Bank of India’s April 1, 2026, gold loan guidelines introduced a tiered Loan-to-Value (LTV) structure, a maximum 12-month limit for bullet repayment consumption loans, and mandatory transparency frameworks across all regulated banks and non-banking financial companies.
“To wrap up, we believe that the regulatory changes implemented from April 2026 in the gold loan industry are structural positives. They strbengthen transparency and drive formalization, which favors established, trusted players like Muthoot Finance Ltd.”
— George Alexander Muthoot, Managing Director
The company experienced a sharp decline in its interest yields compared to the previous quarter. This drop reflects a strategic decision to lower interest rates to remain competitive in the current market.
“The yield in Q4 was 20.76%, and this quarter it is 17.93%. I agree that there is a drop in the yield. This is due to a variety of reasons. We have probably also reduced our interest rates in this quarter. The yield has declined because we are giving loans at lower rates as well. Higher rates are also there, and low rates are also there.
So, probably, in this quarter, some of the lower-rate loans would have taken more precedence. Number two, last year, in the third and fourth quarters, when we saw a yield of 20% and so on, it was actually a very good year in which our recoveries were also very good. A lot of loans were also renewed. There were a lot of renewals and rollovers last year, and the interest collections were also very good. That is also one of the reasons for the higher yield. As a steady state, 18% plus or minus, maybe 18% to 18.5%, should be the normal yield that we should be looking at going forward. What we have now is 18%, or 17.93%. Going forward this year also, it should be around 18%. I think that is a decent yield. What we got last year should be considered a one-time windfall. Anyway, we were able to cash in on that and we have received the benefit of it.”
— George Alexander Muthoot, Managing Director
The company is shifting its collection strategy to encourage customers to pay interest at least once every three months. This move aims to align with new regulatory norms and improve the overall quality of interest recognition.
“As you rightly said, we need to retrain our staff and customers to think about paying at least once in a quarter. If not monthly, they should pay once in a quarter. After some time, we are seeing a good response from the customers.”
— George Alexander Muthoot, Managing Director
Management explains that a decrease in gold prices actually results in a higher volume of physical gold being pledged for the same loan value. This mechanic provides a natural buffer for the loan-to-value ratio and asset security.
“If the gold price falls, tonnage will keep increasing because, if somebody wants 1 lakh rupees, earlier they needed to give 10 grams, whereas now they have to give 12 grams. It is as simple as that.”
— Management, Core Team
The company is avoiding high-risk lending products that bypass thorough credit assessment just to offer higher loan-to-value ratios. This conservative approach highlights management’s commitment to maintaining superior asset quality over risky growth.
“We have not launched income-generating loans merely to take advantage of LTV. That may not be the correct approach unless we are able to assess the repayment capacity as well as the end use of the loan. Otherwise, it may lead to problems.”
— Management, Core Team
Management plans to moderate growth in its microfinance subsidiary to prioritize risk management over asset size. This cautious stance protects the group’s balance sheet from the current stress in the unsecured micro-lending sector.
“We will not be aggressive in microfinance. That is the first question and the first answer. Second, we would like to have a very calibrated, less risky portfolio.”
— Management, Core Team
The current lower yields are partly attributed to the interest rebate schemes offered during loan renewals. Investors can anticipate some yield expansion as these loans progress into higher interest slabs over their lifecycle.
“We follow a rebate structure for most of the loans. Many of these loans, because of their ability to roll over, are currently at a lower yield structure. They will probably increase as they migrate to higher levels.”
— Management, Core Team
The CFO indicates that the company’s funding costs have likely bottomed out and could rise depending on central bank actions. This implies that net interest margins will rely more on lending yield stability than on further interest expense savings.
“I am not expecting any reduction in the cost of borrowing. It will mostly remain at these levels. Depending on RBI policies, it might increase.”
— Oommen, CFO
Management clarifies that loan growth is driven by genuine funding needs rather than just changes in gold market valuations. This suggests the business model has structural resilience even during periods of commodity price volatility.
“You saw gold prices coming down while AUM continued to increase. Therefore, business growth is not a function of the gold price.”
— Management, Core Team
Adoption of the high 85% loan-to-value product remains very low, accounting for only a small fraction of disbursements. This indicates that customers are borrowing prudently based on their actual needs rather than maximizing their debt against gold.
“Regarding 85%, it has just started, and it is perhaps 3%-4%. Again, the answer is the same. Everyone does not borrow just because a particular LTV is available.”
— Management, Core Team
Bajaj Finserv Limited | Large Cap | Financial Services
Bajaj Finserv is a diversified financial conglomerate with major holdings in consumer lending, life and general insurance, and asset management. The company operates through a large network of subsidiaries, leveraging technology and a massive customer base to provide integrated financial solutions.
[Concall]
The company is integrating artificial intelligence to drive cost efficiencies and lower its operating expense ratio for its lending arm. This targeted reduction in operating costs should help protect profitability as the company continues to expand its physical branch footprint.
“However, with visibility of green shoots in operating efficiencies due to our AI implementation, the company is confident that the Opex-to-NTI ratio will improve by about 25-40 bps in the current financial year.”
— Ramandeep Singh Sahni, CFO, Bajaj Finserv Ltd.
The digital marketplace business has successfully completed a technology transition that temporarily slowed growth in the previous year. The shift toward trail-based revenue models will create a more stable and predictable income stream for the platform over the long term.
“We are back on the growth trajectory after the planned digital customer journey enhancements that had impacted growth for FY26. Further, some of the revenue structures are now trail-revenue-based, providing stability, predictability, and non-linearity to future revenues.”
— Ramandeep Singh Sahni, CFO, Bajaj Finserv Ltd.
The board has greenlit a plan to enter the reinsurance market, which would expand the group’s insurance footprint. This move represents a strategic vertical integration that could allow the group to capture more value across the insurance value chain.
“We are also happy to confirm that the board of Bajaj Finserv earlier today approved the setting up of a reinsurance company as a natural progression towards further strengthening our insurance capabilities. We will now prepare to seek the necessary regulatory approvals to set up the company.”
— Ramandeep Singh Sahni, CFO, Bajaj Finserv Ltd.
Management is confident that their conservative reserving practices already account for potential increases in motor insurance liability resulting from court rulings. This existing buffer means the company is unlikely to face sudden financial hits that might affect peers with thinner reserves.
“We already have enough of a buffer to absorb any such increase if it does happen subsequently. That is already built into the reserving that we do. If a company does not have enough reserves and those reserves become stressed, then I think people have to hearten it. But for a company like us, our ultimate loss rates take into consideration this kind of extrapolation.”
— Tapan Singhel, MD and CEO, Bajaj General Insurance
Credit quality concerns that plagued the digital lending industry for the last few years are beginning to subside as partners adjust their risk models. Lenders are once again feeling confident enough to grow their volumes on the company’s digital distribution platforms.
“Starting with Bajaj Finance, many lenders have taken appropriate measures. We see that as well. While we have more than 50 lenders on Bajaj Markets, each with a different risk-return equation and, hence, different thresholds, they are generally growing their business and growing their business with Bajaj Markets. We do see that the position has improved.”
— Ashish Panchal, MD and CEO, Bajaj Finserv Direct
The Indian insurance sector is currently in a ‘soft’ cycle where high competition is driving down premiums across major product categories. This pricing environment makes it difficult for the industry to maintain high underwriting profits until the market naturally ‘hardens’ and prices rise.
“If you look at the Indian market, because there were no major catastrophe losses earlier, the market is soft right now. This means pricing is much lower than what average pricing would be. This applies to all lines of business, whether crop, fire, motor, or health.”
— Tapan Singhel, MD and CEO, Bajaj General Insurance
The life insurance unit has successfully diversified its distribution network to reduce its reliance on a few large partners. This structural change makes the business more resilient to potential disruptions or terminations in any single partnership agreement.
“In the last 15 months we have added more than 20 partners. If you go back almost a year or 18 months, at that point we started the journey of de-risking ourselves from depending on a small number of partners. At that time, we had a relatively large set of 2-3 partners that contributed a significant percentage—more than 50% at that time—of our business. That is no longer the case.”
— Tarun Chugh, MD and CEO, Bajaj Life Insurance
The new reinsurance venture will be rolled out in two distinct stages, initially focusing on India before expanding globally. This phased approach allows the group to manage its capital allocation more conservatively as it builds the necessary credit ratings for international scale.
“Phase 1 will largely focus on the domestic market, where we may not need too much capital. Then, in Phase 2, once we obtain the ratings, which will be a 3-year process, we will move into the international market. That is where we will need a large amount of capital.”
— Ramandeep Singh Sahni, CFO, Bajaj Finserv Ltd.
Aptus Value Housing Finance India Ltd. | Mid Cap | Housing Finance
Aptus Value Housing is a retail-focused housing finance company primarily serving low and middle-income self-employed customers in semi-urban and rural markets. The company provides home loans, loans against property, and SME business loans through a growing network across Southern and Western India.
[Concall]
Aptus managed to keep its profit margins stable even after lowering some loan interest rates by reducing its own borrowing costs. This shows management’s ability to balance competitive pricing with efficient treasury operations to protect profitability.
“Our margins remained resilient during the quarter, despite rationalization of pricing in certain loan segments and prudent liability management, including a reduction in the cost of funds. Asset quality remained broadly in line despite continued business growth.”
— M. Anandan, Executive Chairman
Management is aggressively expanding its physical footprint by opening over thirty new branches in a single quarter. This distribution growth, combined with a larger network of sourcing partners, is the primary engine for their projected AUM growth.
“First is branch expansion. We continued to expand our distribution network and, during the quarter, opened 33 branches, taking our total branch network to 322. Next is strengthening customer acquisition. We continue to diversify our sourcing channels through the expansion of our connector network.”
— P. Balaji, Managing Director
The company is planning to diversify its product range beyond traditional housing and SME loans to sustain long-term growth. Investors should watch for the launch of these new products as they could alter the company’s risk-reward profile.
“We are also evaluating opportunities to broaden our lending portfolio beyond home loans and SME loans through the introduction of a new lending product. Together, these pillars continue to strengthen our franchise and position us well to deliver sustainable growth while maintaining our profitability and asset quality.”
— P. Balaji, Managing Director
Strategic price cuts on specific loan sizes have already led to a significant jump in loan volumes for the month of July. This volume growth suggests that the company is successfully trading off some yield to capture higher market share.
“The other factor is that we have calibrated and optimized the lending rate on certain housing loan ticket sizes. That is also likely to provide momentum to growth. That is what has actually happened. If you look at our July 2025 disbursements compared with July 2026 disbursements, July 2026 disbursements were 25% higher.”
— P. Balaji, Managing Director
Aptus is choosing to avoid National Housing Bank (NHB) funding because it can find cheaper capital in the open market and through banks. This demonstrates the company’s strong credit rating and its flexibility to pick the most cost-effective funding sources.
“In the housing finance company, we are able to raise money from banks, through securitization, or through NCDs at 7.8-7.9%. Therefore, it is more prudent to borrow from these sources rather than from NHB. If NHB is able to offer a competitive rate of interest, we will borrow from NHB.”
— P. Balaji, Managing Director
The management sees product diversification as a necessary step to scale the business toward the 50,000 crore AUM milestone. This suggests the company is evolving from a pure-play housing lender into a more comprehensive financial services provider.
“As we look at our next stage of growth, from 15,000 to 25,000 crores or from 25,000 crores to upwards of 50,000 crores or more in size, we feel there is a strong need not only to strengthen our physical, online, and associate distribution, but also to diversify our product range.”
— P. Balaji, Managing Director
While leadership remains stable, the company continues to face high turnover among its ground-level sales and collection staff. Managing this high field-level attrition is a key operational challenge for maintaining consistent growth and credit oversight.
“At the senior level, there is absolutely no attrition. At the middle-management level, it is only around 5-10%. Earlier, field-level attrition was around 50-60%; it has come down to 45%, but it is still high.”
— P. Balaji, Managing Director
Aptus is opting for aggressive loan write-offs rather than just setting aside provisions, which provides them with significant tax advantages. This strategy improves net profit figures while keeping the balance sheet clean of long-overdue loans.
“The tax rate is lower because of the benefits we are receiving from the aggressive write-off policy that we are following. That is the tax benefit we have taken, and that is what has resulted in this. This will continue. Our current cost is largely on account of write-offs rather than provisions.”
— Sanjay Metpalli, Chief Financial Officer
The company’s low debt-to-equity ratio gives it significant bargaining power when negotiating with lenders for fresh capital. This allows Aptus to maintain superior net interest margins even when the broader interest rate environment is challenging.
“Since our leverage is very low, we are able to negotiate with banks and bring them to the pricing and interest rates we want. We can wait and bring lenders in at our terms and at our rates, rather than asking for or offering the rates that banks are asking for.”
— Sanjay Metpalli, Chief Financial Officer
A significant portion of the company’s debt is tied to floating interest rates, making its borrowing costs sensitive to central bank policy changes. However, management believes the overall impact on profitability would be limited and manageable.
“If you look at our total borrowings, 66% is variable and 34% is fixed. Of the 66% that is variable, 25% is linked to the repo rate and 21% is linked to MCLR. Therefore, if there is an increase in the repo rate, there can be some impact.”
— Sanjay Metpalli, Chief Financial Officer
The company is shifting its financial reserves to cover the small segment of loans showing early stress while reducing reserves for healthy loans. This dynamic provisioning reflects a data-driven approach to managing credit risk across different loan buckets.
“Regarding the reduction in Stage 1 provision, the repayment behavior of customers in the Stage 1 category has been very good according to the ECL model. That is why the percentage coverage has reduced from, say, 0.3% to 0.24%. At the same time, we saw some deterioration or an increase in Stage 2 assets, so we increased the provision coverage there.”
— Sanjay Metpalli, Chief Financial Officer
Automobile
Maruti Suzuki India Ltd. | Large Cap | Automobiles
Maruti Suzuki is India’s largest passenger vehicle manufacturer with a dominant presence in the entry-level and SUV segments. The company operates multiple manufacturing facilities in Haryana and Gujarat and leads the country in automotive exports.
[Concall]
The company is seeing a simultaneous surge in both entry-level small cars and premium SUVs. This broad-based demand is helping the company regain lost market share across different price points.
“For Maruti Suzuki India Ltd., small cars have come back with a bang. Our small car sales grew 34% in the quarter year-on-year. And not just small cars; three, SUVs grew by 44.6%, and we are close to SUV leadership in absolute numbers.”
— Rahul Bharti, Chief Investor Relations Officer
Management changed their payment terms to help suppliers survive sudden spikes in raw material costs. While this protected the supply chain, it caused the company to absorb cost increases much faster than usual.
“The sudden and steep increase in commodity and energy prices did create some working capital pressure for several suppliers. To support suppliers and ensure uninterrupted production, the company temporarily revised the settlement cycle for certain commodities, such as aluminum, plastics, and rubber, from a quarterly lag to a monthly lag basis. This was an extraordinary one-time measure taken in response to extraordinary circumstances.”
— Rahul Bharti, Chief Investor Relations Officer
Higher raw material prices and faster payment cycles significantly compressed profit margins this quarter. The company expects margins to improve as they return to their standard quarterly payment schedule.
“Commodity costs had an adverse impact of approximately 300 basis points. Importantly, nearly 110 basis points of this impact was attributable to the temporary change in the commodity settlement cycle from a quarterly lag to a monthly lag basis, which I explained earlier. As conditions normalize, we expect to gradually move back to the quarterly lag settlement cycle over the next few quarters, and hence some of the benefit will flow back.”
— Rahul Bharti, Chief Investor Relations Officer
Maruti now accounts for more than half of all passenger vehicle exports leaving India. This scale provides a significant hedge against domestic market fluctuations and builds global competitiveness.
“The company continued to be India’s leading passenger vehicle exporter and contributed more than 55% of India’s total passenger vehicle exports during the quarter. It is heartening that your company, just one company out of 17 car manufacturers in India, is exporting more cars than the other 16 car manufacturers put together.”
— Rahul Bharti, Chief Investor Relations Officer
The company believes buyer demand is currently stronger than their ability to produce cars. Achieving 10% annual growth will depend entirely on how quickly they can ramp up new factory lines.
“We had mentioned at the beginning of the year that, most likely, our sales this year would be constrained by the supply side rather than the demand side. The demand side seems to be healthy. From a supply-side perspective, we see headroom for about 10% growth.”
— Management, Executive Team
There has been a sharp increase in the number of people buying their very first car. This suggests that the entry-level market, which had been slow for years, is finally recovering strongly.
“Our first-time buyer percentage improved significantly from 51% in Q4 to about 54% in this quarter. It has improved significantly within just one quarter, which can also be corroborated by the steep increase in small car volumes.”
— Management, Executive Team
Prices for key raw materials like aluminum have peaked and are now trending downwards. This decline should lead to lower production costs and better profitability in the second half of the year.
“Aluminum has already started showing a reduction from its peak. From aluminum, we should get a reduction back, since we are following that cycle and also have to correct that cycle. At least for this particular commodity, we should get a reduction back.”
— Management, Executive Team
Management is planning a series of new SUV launches to fill gaps in their current lineup. They are focusing on high-volume models to ensure they get the best return on their investment.
“We will have many more SUVs in the next few years. Obviously, we will target some white spaces where we can achieve good volumes per model. Within the SUV and premium segments, we will have launches.”
— Rahul Bharti, Chief Investor Relations Officer
The company is making a massive 3,900 crore investment to turn its Gujarat facility into a global EV hub. This expansion signals a major shift toward electric vehicle production at a massive scale.
“Yesterday we announced the fourth line at the Hansalpur plant, which makes the Hansalpur plant one of the largest car plants in the world, within the top 10, let me say. This fourth line is predominantly an EV line, and the capex was about 3,900 crores.”
— Rahul Bharti, Chief Investor Relations Officer
Healthcare
Divi’s Laboratories Ltd. | Large Cap | Pharmaceuticals & Biotechnology
Divi’s Laboratories is a leading Indian pharmaceutical company specializing in the manufacture of Active Pharmaceutical Ingredients and Custom Synthesis for global innovators. The company operates massive manufacturing facilities and is heavily backward-integrated to ensure supply chain resilience for its global customer base.
[Concall]
The company is making a major push into the complex peptide market by expanding its manufacturing capacity and technical skills. This long-term investment is aimed at capturing a larger share of high-value projects from global pharmaceutical clients.
“Peptides remain a strategic area of investment for the company. Customer programs continued to progress across multiple stages of development during the quarter. While qualification and validation activities for several peptide fragments are expected to advance over the coming quarters, alongside capacity expansion in both solid-phase and liquid-phase peptide synthesis, we continue to strengthen the process development, analytical, and manufacturing capabilities required for increasingly complex peptide chemistries.”
— Dr. Kiran S Divi, Whole-time Director & CEO
The new Unit 3 facility is taking over early-stage chemical work to free up space in other plants for more complex tasks. This move helps the company produce its own ingredients and use its total manufacturing capacity more effectively.
“The facility is supporting our backward integration strategy through selected key chemistry operations while enabling the phase transfer of manufacturing activities from our existing facilities. This enhances supply assurance for critical intermediates, improves network flexibility, and supports more efficient capacity utilization across our manufacturing operations.”
— Dr. Kiran S Divi, Whole-time Director & CEO
High costs for chemical solvents are currently hurting profit margins due to global shipping and geopolitical issues. Management is negotiating with customers to adjust prices and cover these higher input expenses.
“While prices of certain raw materials moderated during the quarter, solvent costs remained elevated for a significant part of the period. We continue to engage closely with customers to evaluate commercially appropriate mechanisms to mitigate these costs wherever feasible. At the same time, the evolving geopolitical situation in West Asia has introduced additional uncertainty into global supply chains.”
— Ms. Nilima Prasad Divi, Whole-time Director Commercial
Management believes their ability to produce every component of a peptide in-house gives them a massive advantage over competitors. This deep integration makes them a more reliable and cost-effective partner for global drug companies.
“Divi’s is in a unique situation because I think we are the only ones who start from basic raw materials and build our own peptide building blocks. Then we have protected amino acids, we produce dipeptides and tripeptides, and we have moved into fragments. So we have the complete chain of backward integration, which gives us a much better opportunity compared to others.”
— Management, Executive Leadership
Management is now keeping three months of raw materials on hand to avoid factory shutdowns during global trade disruptions. While this requires more cash, it ensures they can always fulfill orders for their customers without delay.
“Around March was when we decided that we would operate on a rolling 3-month basis and secure the material. That is why we have not had any production loss or shipment stoppage in the last few months.”
— Management, Executive Leadership
By manufacturing all basic materials internally, the company can deliver finished drugs faster than most rivals. This speed and reliability are key reasons why global pharmaceutical innovators choose to work with them.
“When we say integrated, we mean that we are backward integrated from basic raw materials. Since all these are manufactured in-house, we have an advantage in supply, which gives us a stronger and faster approach to delivering products. That is why this gives us a competitive edge, along with other advantages, in the global market.”
— Management, Executive Leadership
The company is finalising multi-year supply deals for iodine products used in medical scans. These contracts will provide a steady and significant revenue stream as they scale up over the coming months.
“On iodine-based contrast media, we are in the process of signing long-term contracts with two customers, and these will be for multiple years. Commercialization for one of them has already started, and we will start with the second one in the next few months.”
— Management, Executive Leadership
Services
Urban Company Ltd. | Mid Cap | Consumer Services
Urban Company Ltd. is a leading tech-enabled platform providing professional home services including beauty, cleaning, and maintenance across India and international markets. The company also manufactures smart home products under the Native brand and offers on-demand assistance via the InstaHelp segment.
[Concall]
The core India services business has seen four consecutive quarters of faster growth while simultaneously increasing its profitability margins. This trend suggests the company is successfully scaling its most important segment without having to sacrifice its financial health.
“India consumer services grew 29% in NTV year-on-year to reach 1,056 crores, the first time it crossed 1,000 crores of NTV in a quarter. This is the fourth straight quarter of acceleration, up from 10% at the same time last year to 19%, then 21%, then 26%, and now 29% year-on-year growth. Adjusted EBITDA margin was 6.9% of NTV, up from 5.2% in the same period last year.”
— Abhiraj Singh Bhal, CEO & Co-founder
Operations in the UAE and Singapore have reached a stage where they are growing rapidly and generating profits. This provides the company with a diversified income stream outside of its primary Indian market.
“The second point I want to highlight is that our international businesses are now scaling fast and profitably and will become the second core profit engine of Urban Company Ltd. in the coming periods. NTV grew 76% year-on-year to reach 237 crores. Both the UAE and Singapore delivered profitable growth.”
— Abhiraj Singh Bhal, CEO & Co-founder
Most customers who purchased the company’s water purifiers are returning for filter replacements. This high retention rate creates a predictable and highly profitable recurring revenue model for the product division.
“As our early water purifier cohorts complete their first replacement cycle, about 75% of them are renewing filters through us, which adds a recurring, high-margin revenue stream. Native continues to demonstrate strong growth with improving margins.”
— Abhiraj Singh Bhal, CEO & Co-founder
Management has identified a massive potential market for its high-frequency assistance service in major urban centers. By defining this market size, the company is signaling the scale of its ambition and the reason for its current heavy investment.
“We believe the addressable market in the top 15 cities ranges anywhere from 7,000 to 12,000 crores in NTV. Given the competitive dynamics, we have shared what we can on InstaHelp in the shareholders’ letter and will not go beyond that on this call.”
— Abhiraj Singh Bhal, CEO & Co-founder
The shift toward on-demand service delivery within 60 minutes is significantly changing how customers use the platform. Reducing wait times is expected to lead to higher customer loyalty and more frequent service bookings.
“This has allowed us over the last two quarters to roll out UC Instant, which is basically getting all our core services, whether salon, cleaning, AC repair, electricians, plumbers, carpenters, and others, to users within 30 to 60 minutes. Users no longer have to wait and plan. That further improves word of mouth, usership, user retention, and frequency.”
— Abhiraj Singh Bhal, CEO & Co-founder
Management views the low-margin InstaHelp segment as a strategic tool to keep users engaged with the app every week. This increased frequency makes the platform more central to the customer’s life and protects the higher-margin core business.
“We see our investment in InstaHelp beyond just the ROI from the category itself, because we visualize the category within the larger scheme of the platform that we are building. It is a high-frequency category that allows us to enter the home on a weekly basis rather than on a monthly or quarterly basis, which is the frequency that our core consumer services business enjoys.”
— Abhiraj Singh Bhal, CEO & Co-founder
Management is taking a very long-term view on the profitability of the InstaHelp segment, prioritizing market dominance over immediate returns. Investors should expect continued losses in this specific vertical for several more years.
“We certainly have no intention of making any money from this business over the next 5 years, and our assumption is that this business has to break even by FY31. We would be happy if it gets there.”
— Abhiraj Singh Bhal, CEO & Co-founder
The company has achieved a massive technological shift by using AI to automate nearly all of its software coding. This efficiency allows the company to grow its technology infrastructure without hiring a proportionate number of expensive engineers.
“More than 90-95% of our code is now written by AI, and we are seeing significant leverage in our engineering costs and headcount. All our other teams are also aggressively deploying AI.”
— Management, Urban Company Team
A focus on retraining service professionals has helped the beauty segment grow faster again after a period of slower performance. Improved service quality is proving to be a key driver for customer demand in this competitive vertical.
“The beauty segment has definitely seen a resurgence in growth over the last 2-3 quarters, and we have been working hard to achieve that. One of the things we have done aggressively in this segment is work with our supply side to improve the overall quality of service, including retraining and retooling many of them.”
— Management, Urban Company Team
The Native product brand focuses on high-end, premium goods that target the company’s existing wealthy customer base. By focusing on the luxury end of the market, the company aims to capture higher profits even with lower sales volumes.
“What we are trying to do at Native is serve an underserved market that overlaps with our core users on the Urban Company Ltd. platform and enter categories that have very strong adjacencies to our core services business. It is our view, and a considered view, that a meaningfully larger share of the profit pool sits at the top relative to the revenue.”
— Management, Urban Company Team
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Quotes in this newsletter were curated by Kashish.
Disclaimer: We’ve used AI tools in filtering and cleaning up these quotes so there maybe some mistakes. Now, if you are thinking why we are using AI, please remember that we are just a small team of 5 people running everything you see on Zerodha Markets 😬 So, all the good stuff is human and mistakes are AI.