The Chatter: RBI, Tata Steel, M&M & More
Q1 FY27 | Edition #74
Welcome to the 74th 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 5 companies across 4 industries, along with a keynote address by Rohit Jain, Deputy Governor, RBI.
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.
Regulator
Reserve Bank of India
Metals
Tata Steel
Automobile
Mahindra & Mahindra
Eicher Motors
Software Services
Hexaware Technologies
Healthcare
Laurus Labs
Rohit Jain on Building Deep and Resilient Financial Markets for a Viksit Bharat | Reserve Bank of India
The Reserve Bank of India (RBI) is India’s central bank and apex financial regulator. In this address delivered at the Financial Institutions Leadership Conference, RBI Deputy Governor Rohit Jain outlines a strategic blueprint for “Building Deep and Resilient Financial Markets for a Viksit Bharat.” He highlights why India must transition beyond bank-led lending toward deep corporate bond, term-money, and credit derivative markets, calling on financial institutions to move from mere market scale to true operational depth and liquidity.
The regulator highlights that the traditional bank-reliant funding model is insufficient for India’s long-term infrastructure and manufacturing goals. This signals a strategic push to deepen bond markets and reduce the burden on bank balance sheets.
“India has traditionally relied on a bank-led financing model. That model has served the economy well. However, the scale, tenor and diversity of financing required for Viksit Bharat cannot be met through bank balance sheets alone. It will require a stronger complement of market-based finance—government and corporate bond markets for long-duration capital, and deeper foreign exchange and derivative markets for pricing and distributing risk.”
— Rohit Jain, Deputy Governor, RBI
Household savings are increasingly moving away from traditional bank deposits and into market-linked investment products. This trend provides a more diverse and stable pool of capital for long-term domestic investments.
“Alongside bank deposits, a growing pool of household savings is being channelled through insurance, pensions, mutual funds and other market-linked instruments. Well-functioning financial markets can connect these long-term savings with long-term investment needs. This is where different segments of the market perform complementary functions.”
— Rohit Jain, Deputy Governor, RBI
The central bank believes that robust financial infrastructure must be established in advance of economic growth rather than as a reaction to it. Investors should expect continued regulatory focus on improving market depth and liquidity over the coming years.
“In sum, the financial markets required by a developed economy must be built before the economy reaches developed status—not afterwards. This will require more than an increase in issuance or trading volumes. It brings me to my second proposition: moving from scale to depth.”
— Rohit Jain, Deputy Governor, RBI
The RBI identifies the lack of liquidity in term money markets as a barrier to accurate interest rate pricing. New guidelines aim to fix this, which will help banks and corporations better manage their financial risks.
“Beyond the overnight segment, however, term activity remains modest. A deeper term money market would strengthen benchmark formation, improve the pricing of financial instruments and support more effective management of interest-rate risk. In view of this, the RBI has recently issued guidelines to further expand participation in the term money market.”
— Rohit Jain, Deputy Governor, RBI
The Deputy Governor emphasises that high issuance of bonds is not enough if there is no active secondary market for trading. Improving liquidity will lower costs for investors and make the corporate bond market more resilient.
“Secondary-market liquidity gives investors greater confidence that they can adjust their exposures when required. It improves price discovery, reduces the cost of entry and exit, and can support participation by a wider range of issuers and investors. Put simply, issuance creates financial assets; liquidity helps create a market around them.”
— Rohit Jain, Deputy Governor, RBI
The central bank is introducing new derivative tools like Credit Default Swaps and Total Return Swaps to help institutions manage risk. This expansion of the credit market toolkit allows for better distribution of risk across the financial system.
“RBI’s recent reforms covering the introduction of Total Return Swaps, Futures on credit indices and extended Credit Default Swaps (CDS) mark an important step in deepening India’s credit derivative market by enhancing risk transfer, improving price discovery, and broadening the toolkit available for efficient credit risk management. The aim should not be to replicate every instrument available in other jurisdictions.”
— Rohit Jain, Deputy Governor, RBI
The Deputy Governor cautions that complex financial products must be sold responsibly to avoid damaging market confidence. This focus on product suitability and transparency is intended to prevent systemic losses for smaller market participants.
“Past episodes involving the sale of exotic derivative products to smaller enterprises demonstrated how quickly losses on poorly understood products can undermine confidence—not only in the product, but also in the institution offering it and in the market itself. Product innovation must, therefore, be accompanied by appropriate suitability and risk-assessment processes, transparent disclosure, fair pricing and the capacity of users to understand and manage the exposures they assume.”
— Rohit Jain, Deputy Governor, RBI
The regulator defines a healthy market as one that remains functional even during periods of extreme volatility. For investors, this means the focus is on maintaining liquidity rather than preventing all price fluctuations.
“The resilience of a market is ultimately tested when conditions become difficult. A deep market is not one in which prices never move sharply, or participants never incur losses. It is one in which credible prices continue to emerge, transactions remain possible, and risks can be transferred without disorderly disruption.”
— Rohit Jain, Deputy Governor, RBI
The central bank notes that regulation alone cannot provide liquidity without active commitment from financial institutions. Banks are expected to invest more in market-making and risk-management capabilities to support broader market health.
“Liquidity cannot be created through regulation, nor can participation be mandated into becoming meaningful. Market institutions must invest in the capabilities required to quote prices, assess risks, manage inventories and remain active across market conditions.”
— Rohit Jain, Deputy Governor, RBI
The RBI’s long-term vision involves creating a financial ecosystem that can efficiently turn domestic savings into productive investments. Success depends on maintaining investor confidence through both stable and volatile market cycles.
“To conclude, as India moves towards 2047, we must build markets that are equal to the scale of its ambitions. They must channel savings into productive investment, enable risks to be priced and distributed efficiently, and serve businesses and investors with transparency and fairness. Above all, they must command confidence—not only when conditions are favourable, but also when markets are tested.”
— Rohit Jain, Deputy Governor, RBI
Tata Steel | Large Cap | Metals
Tata Steel Limited is one of the largest steel producers in the world, with integrated operations spanning iron ore mining, steel manufacturing, and downstream value-added products. Headquartered in India, the company operates major primary production hubs in India and Europe, catering to automotive, infrastructure, construction, and consumer goods markets. The company benefits from significant backward integration through captive iron ore mines in India, positioning it among the lowest-cost steel makers globally.
The current fiscal year is free from major maintenance interruptions, allowing for a significant jump in production capacity. This provides a clear window for investors to see higher output before further maintenance begins next year.
“In the next financial year, we have a blast furnace relining again in another blast furnace in Jamshedpur, so we lose some volumes there. But this year is a clean year that’s why this year we expect volumes to be about 2 million tons higher than the previous year.”
— T. V. Narendran, MD & CEO
Falling steel prices are expected to put pressure on profit margins per ton in the immediate future. However, the company plans to offset this by selling a higher volume of products to keep total profits growing.
“The margins in India will get compressed a bit because we expect steel prices to be about ₹1,500 per ton lower in Q2 compared to Q1. So, we will see a margin compression, but because the volumes in Q2 will be much higher than Q1, we expect the rupees crore to be higher because the volumes will make up.”
— T. V. Narendran, MD & CEO
The company is shifting its strategic focus toward finished and semi-finished steel products rather than just raw steel. This move into downstream markets is intended to capture higher profits and create a more diversified business model.
“We believe that the value capture opportunity lies more in midstream and downstream than in upstream. And that’s why, while we will have the optionality to build upstream, we will have a better balance between downstream growth and upstream growth going forward.”
— T. V. Narendran, MD & CEO
By selling branded steel products directly to consumers, the company is able to maintain more stable profits regardless of global market price swings. This brand strength acts as a shield against the typical volatility of the commodities industry.
“In some sense, the stickiness of our margins is reflective of the fact that we have a fairly strong downstream presence and a very good franchise with products like Tata Tiscon, Tata Steelium, Tata Astrum, etc. So, that’s why in India we are consistently able to deliver good numbers irrespective of whether the steel price is going up or going down.”
— T. V. Narendran, MD & CEO
Management is maintaining a stable debt profile and does not expect to borrow excessively for upcoming projects. This suggests a disciplined approach to capital allocation while funding expansion through their own cash flow.
“So, the net debt to equity—you know, we are forecasting it to be in the 2.3 to 2.5 range. We are at 2.3 already, and we’ll be at that level. I think we are comfortable that the internal cash that we generate is good enough to take care of all the capex that we have planned.”
— T. V. Narendran, MD & CEO
Geopolitical tensions in the Middle East significantly increased operational costs during the quarter. Despite this massive headwind, internal efficiency measures helped the company maintain its financial resilience.
“The West Asia crisis, I think, hit us by about ₹1,200 crore in the quarter. So, these numbers have been delivered despite that, largely because of a lot of cost takeout actions that we’ve done over the years.”
— T. V. Narendran, MD & CEO
Mahindra & Mahindra | Large Cap | Automobile
Mahindra & Mahindra Limited is one of India’s largest automotive manufacturers and the world’s largest tractor manufacturer by volume. Headquartered in Mumbai, the company is a market leader in utility vehicles, tractors, and agricultural mechanisation. Its businesses span passenger and commercial vehicles, internal combustion and electric mobility, farm equipment, and financial services.
Management is highlighting a significant jump in profitability despite facing a difficult global environment. This suggests the company has strong operational control and can protect its bottom line even during tough periods.
“With the performance that our teams have driven at a 34% increase in profit year-over-year, I would not use benign words for it. It is clearly a very resilient and strong performance in a quarter that has been tough, but a lot of credit to our teams to work through that and be able to deliver these results.”
— Dr. Anish Shah, MD & Group CEO
The company has raised prices to offset the rising costs of raw materials like steel and rubber. Management believes these price hikes are enough to keep profit margins stable even if commodity prices fluctuate.
“I think we should be able to solve most of it. We did see commodity prices coming down late in June. They’ve gone up a little after that as well. But based on where we stand right now, we feel fairly comfortable, and with the price hikes taken, I think we’ve solved for it.”
— Dr. Anish Shah, MD & Group CEO
Management believes the business is now more resilient to weather changes than it was in previous years. This reduced sensitivity to monsoons makes the company’s earnings more predictable and less risky.
“We feel that monsoons are much better than what had been outlined a couple of months ago. It remains to be seen how monsoons continue, but there isn’t as much impact from a monsoon now as compared to what it was, let’s say, five or seven years ago. So, sometimes you feel a lot of this is overblown.”
— Dr. Anish Shah, MD & Group CEO
The company is currently producing as many SUVs as it can, but supply chain and labor issues are limiting even higher growth. Investors should monitor how quickly these production bottlenecks are cleared to unlock more revenue.
“We are at capacity at this point. We do see some challenges from time to time with labor shortages that we saw a couple of months ago and a potential supply issue as well. So, those brought down a little production that we could have delivered otherwise with an increase in capacity.”
— Dr. Anish Shah, MD & Group CEO
Management is planning for a future where electric vehicles are profitable without relying on government subsidies. They believe achieving larger production scale will naturally drive down costs and protect margins.
“Government incentives cannot last forever; it should not last forever. The incentive is there for the transition from ICE to EV, and as scale comes in, profitability for companies will improve. As profitability for companies improves, the government incentive should start dialing down.”
— Dr. Anish Shah, MD & Group CEO
The success of electric three-wheelers proves that EV segments can remain viable even after government aid is removed. This gives management confidence that their passenger EV business will eventually reach the same level of self-sustaining growth.
“Let me then go to the electric three-wheeler story, because in electric three-wheelers, the industry is at 40% penetration, and there we had incentives for FAME I and FAME II which have gone away. With that as well, with scale coming in, that transition has been very strong, and that’s a great case study across the world for a government giving a subsidy, helping transition the industry to electric, and then that subsidy coming down and not being required anymore.”
— Dr. Anish Shah, MD & Group CEO
Eicher Motors | Large Cap | Auto Manufacturers
Eicher Motors Limited is a leading Indian multinational automotive company and the listed parent of Royal Enfield, a global leader in middleweight motorcycles (250cc–750cc). The company also operates VE Commercial Vehicles (VECV), a strategic joint venture with Sweden’s Volvo Group that manufactures Eicher trucks and buses, Volvo trucks, and small commercial vehicles. Headquartered in New Delhi, Eicher Motors maintains a dominant market share in premium leisure motorcycling and plays a pivotal role in modernising commercial transportation across India and global markets.
Management is committing significant capital to build a new factory in Andhra Pradesh to significantly increase production capacity by 2030. This long-term investment shows the board’s high confidence in the future global demand for Royal Enfield motorcycles.
“Today, the board has approved an investment of ₹1,225 crore for Phase 1 of the greenfield expansion at Kadapa, which at full utilization can produce an additional 4.5 lakh motorcycles per year. The above capacity addition is expected to be completed during financial year 2029-30.”
— B. Govindarajan, Managing Director, EML and CEO of Royal Enfield
Despite dozens of new competitors entering the motorcycle market, Royal Enfield has maintained a dominant share as the overall segment has expanded. This demonstrates the strong brand power and customer loyalty that keeps the company ahead of its rivals.
“In the last three years what has happened: the middleweight segment in India grew from 70,000 units per month to 1.2 lakh per month, with about 20-plus launches taking place in this middleweight during this time. What has happened for Royal Enfield? When the base for the middleweight was 70,000 per month, Royal Enfield was about 61,000 per month; now that the base is almost about 1.2 lakh per month, Royal Enfield is almost about 1.01 lakh per month.”
— B. Govindarajan, Managing Director, EML and CEO of Royal Enfield
Rising costs for raw materials like steel and aluminium hit the company’s profit margins this quarter. Management is responding by redesigning parts and finding efficiencies to help protect the bottom line from these inflationary pressures.
“In the quarter, we’ve had a net impact of about 4% to 4.5% on account of the increase in input cost of commodities as well as some of the processes involved. We’ve also had some value engineering benefits which have come in, about 0.4%, and we continue to look at advancing value engineering programs as well as cost reduction programs.”
— Vidya Srinivasan, Chief Financial Officer
The company is making significant money from non-vehicle sources like repairs, clothing, and add-on parts. This is a high-margin recurring revenue stream that makes the overall business more stable and less dependent only on new bike sales.
“Beyond that, about 0.6% is on account of an increase in revenue from allied businesses, which is also about 15% of revenues now—including spare parts, service income, accessories, apparel, etc. We’ve seen almost 20% growth in service job cards in Q1 compared to last year; we are averaging about 9 lakh service jobs per month, which is a huge growth driver.”
— Vidya Srinivasan, Chief Financial Officer
The joint venture with Volvo has successfully entered the small truck market, which includes a notable portion of electric models. This diversification into smaller vehicles allows the company to compete in a high-volume market segment they previously did not address.
“Our entry into the small commercial vehicle segment has begun well with 1,041 Pro2000 trucks delivered, including 172 electric vehicles. This product range opens an important new avenue for future growth in the large and growing SCV segment.”
— Vinod Aggarwal, MD and CEO of VECV
Management is planning to set up a local assembly plant in Indonesia to avoid import restrictions and tap into a massive market. If successful, this could provide a significant new source of international volume and revenue growth.
“So now we have identified an assembler in Indonesia and are seriously considering establishing a CKD operating plant out of Indonesia. That decision will be taken during this quarter.”
— B. Govindarajan, Managing Director, EML and CEO of Royal Enfield
Hexaware Technologies | Mid Cap | IT Services
Hexaware Technologies Limited is a global digital and technology services company specialising in AI-led transformation, cloud computing, application management, automation, and business process outsourcing. Headquartered in Navi Mumbai, India, the company serves enterprise clients across key industry verticals, including banking, financial services, healthcare, insurance, manufacturing, and travel. Hexaware leverages automated delivery frameworks and AI capabilities to modernise legacy IT systems and optimise operational efficiency.
Management has officially lowered its annual growth expectations to reflect recent macro headwinds and project delays. The revised target requires a steady quarterly growth rate that management believes is achievable given the current deal pipeline.
“We guided down. We said we will now do a midpoint of 6.5%—6% to 7%, midpoint of 6.5%. For doing that, we just need a CQGR of 2.7%, and we are very confident of doing that.”
— R. Srikrishna, Chief Executive Officer and Executive Director
Execution timelines for several major contracts have slipped by a few months, delaying the realisation of expected revenue. Investors should note that while the business is being won, the conversion to billable work is slower than initially forecasted.
“In addition to that, there are at least four deals that we won in Q1 and Q2 where the ramp-up should have been complete by now. The good news is the ramp-ups have started in some cases or are due to start later in Q3. So, they’re all happening, but there’s a right shift of two or three months, and we felt like it’s better to be conservative because we don’t have much runway.”
— R. Srikrishna, Chief Executive Officer and Executive Director
Hexaware is confirming its earlier view that AI is causing a net reduction in project pricing across the industry. This structural shift means the company must find higher volumes of work just to maintain flat revenue as traditional tasks become cheaper.
“We were amongst the first companies, right early this year, to say—at that time the commentary was still mixed from the industry that demand will outstrip the deflation—we said there will be net deflation this year. And it is happening. I think that we had accounted for—maybe there’s a little more than what we had accounted for—but we had planned for some refresh.”
— R. Srikrishna, Chief Executive Officer and Executive Director
Clients are increasingly weighing the cost of automated computing power against the cost of human staff when setting budgets. This shift in spending could fundamentally alter the margins and labour-intensive business model of traditional IT firms.
“The bigger issue is how much money is going to go to tokens and how much money is going to go to human labour. That factor, I think, has a bigger impact on decision-making and budget allocations to our industry than any other factor.”
— R. Srikrishna, Chief Executive Officer and Executive Director
Growth is highly uneven across different business lines, with manufacturing showing strong momentum while professional services struggle. Diversification is proving critical as double-digit gains in some areas are being offset by declines in others.
“I mean, if you look at even our quarter numbers, Hi-Tech and manufacturing are actually growing in the high teens, and they could be in that range when they finish the year. Banking was double-digit, and FS / PS was actually negative growth for us—but it could improve a bit.”
— R. Srikrishna, Chief Executive Officer and Executive Director
AI has rapidly moved from a peripheral topic to a core component of every single client negotiation and contract. For investors, this signals that traditional IT services no longer exist in isolation and AI proficiency is now the minimum requirement.
“Virtually 100% of new deals are, in some way or the other, influenced or impacted by it. Virtually 100%. Any single deal we do, either incremental business with customers or new client proposals, are based on fully baking in the value of AI.”
— R. Srikrishna, Chief Executive Officer and Executive Director
Laurus Labs | Mid Cap | Pharmaceuticals
Laurus Labs Limited is a leading Indian pharmaceutical company operating globally across Active Pharmaceutical Ingredients (APIs), Formulations (FDFs), Custom Synthesis (CDMO), and Biotechnology. Headquartered in Hyderabad, the company is a global leader in anti-retroviral (ARV) APIs and is expanding aggressively into high-growth areas such as oncology, biologics, gene therapy, and antibody-drug conjugates (ADCs) through strong in-house R&D and strategic manufacturing partnerships.
Expansion in the CDMO business and higher plant utilisation drove a sharp rise in quarterly profits. This suggests the business is becoming more efficient and less dependent on its legacy segments.
“The primary reason is our revenues from the CDMO business grew significantly. Second, we also did very well in our efforts in both APIs, and our capacity utilisation also increased. So there was the operational leverage.”
— Dr. Satyanarayana Chava, Founder & CEO
Profitability reached new highs with gross margins hitting 63% and EBITDA margins nearing the 32% mark. This margin expansion signals a shift toward higher-value products and improved pricing power.
“One is our gross margin went up from 59% to almost 63% compared year-on-year. EBITDA went up significantly, almost 7 percentage points. We are now close to 32% EBITDA.”
— Dr. Satyanarayana Chava, Founder & CEO
Management is guiding for a sustained gross margin above 60% and EBITDA margins above 30% for the full year. This level of confidence suggests that recent operational improvements are structural rather than temporary.
“What we can say, and also we are confident, is we will maintain 60% plus gross margin and 30% plus percentage of EBITDA margin for the entire financial year.”
— Dr. Satyanarayana Chava, Founder & CEO
Revenue from anti-retroviral drugs is expected to stabilise at around ₹2,700 crore while its share of total revenue shrinks. This diversification reduces the company’s concentration risk and dependence on a single therapy area.
“We are still confident that this therapy will be anywhere between ₹2,600 to ₹2,800 crore in the next several years to come. It used to be the primary revenue contributor for our company. The absolute value remained very stable with a little growth, but percentage contribution-wise, it is coming down because our other divisions are growing.”
— Dr. Satyanarayana Chava, Founder & CEO
A massive ₹2,000 crore investment plan for the current year will be funded mostly by internal cash flows rather than heavy borrowing. Maintaining a low debt-to-EBITDA ratio while expanding shows a strong and disciplined balance sheet.
“This year, we expect to invest over ₹2,000 crore in capex spanning small molecule APIs, drug product, and also in bio, and also in antibody-drug conjugates. We will raise some additional debt, but most of the capex will be done through internal accruals. Even if we raise a little bit of debt to fund our capex, our net debt by EBITDA will be very comfortable.”
— Dr. Satyanarayana Chava, Founder & CEO
With only 5% of total revenue coming from the US generic market, the company is relatively shielded from potential US trade policy changes. This low exposure mitigates risks associated with geopolitical shifts or new pharmaceutical tariffs.
“See, currently, our pharma sales coming from generic supplies to the US market are around 5% of our total revenues. And it is too early to comment on how much that will be added. We are not highly dependent on sales of FDFs into the US market.”
— Dr. Satyanarayana Chava, Founder & CEO
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Quotes in this newsletter were curated by Shahid.
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.
I was pretty confused about my investment in Tata Steel and Hexaware recently, but I guess I landed at the right place. The insights on Hexaware’s visibility on core operational growth and Tata Steel’s focus on high-margin India operations over global headwind noise.
Keep up the good work Zerodha