India's real GDP for Q1FY2022 improved to 20.1% year-on-year on a low base. However, a boost to sustainable growth recovery is taking shape at several levels in the economy. It won't be an exaggeration to say that rural demand has meaningfully improved. Even the cyclical industries are anticipated to lead growth. Potential risks for growth recovery remain in the form of new virus variants outbreak and expediating inflation rate. The last year and a half have changed the business scenarios in many sectors. The organized retail industry has started doing well. Simultaneously IT and IT-related services companies' businesses are blossoming. While going through the retail and IT universe, we discovered two companies that can deliver better in a short to medium time frame.
1. Avenue Supermarts Ltd (NS: AVEU )
Radhakishan Damani founded Avenue Supermart is popularly known as D-Mart. It is a chain of hypermarkets. It is a one-stop supermarket chain that offers a wide range of personal and home care products, groceries, and apparel. D-Mart has a presence in 11 states and one union territory. The chain operates on a business-to-consumer (B2C) model where goods are directly sold from manufacturer to end-user. The retail market is poised to grow by about 13% in the next five years. As an organized retail player, D- Mart could get a larger market share. A good discount policy separates the company from its competitors, where the company sells essential goods at a deep discount which their competitor cannot match. They have a prompt payment policy to their suppliers wherein they clear their dues within 7-10 days. The company saves a considerable amount in rental costs as most stores operate on their property. The initial investments are also low as most of their stores are not in prime areas.
Over the last five years, the company has delivered extraordinary sales growth of 31% CAGR and profit growth of 43.78%. It reported a net profit of Rs 115 crore for Q1FY2022, up 132% compared to Rs 50 crore in Q1FY2021. Key technical indicators such as momentum, MACD, 20-day/50-day/100-day EMA indicate a 'buy on the stock. Mutual funds have marginally upped their holding in June 2021 quarter.
2. Tanla Solutions Ltd (NS: TNSL )
Tanla platforms Ltd provides end-to-end solutions to the telecom sector, software development, and maintenance service. Telecom infrastructure solutions have been at the core of the company's operation. Tanla is one of India's few companies to focus on integrated solutions and products for the wireless world. The communication platform as a service (CPaaS) industry in India is expected to grow many folds in three to five years. The Covid-19 crisis has led to the digitalization of activities like e-commerce and business transactions. It has resulted in a surge in demand for CPaaS. The company is the undisputed leader in the Indian enterprise messaging services market, with over 30% market share. It has a client base of more than 1,300 enterprise customers. Plus, it has at least 6 out of 10 customers across major industries like e-commerce, BFSI, DTH, Social media, etc. Tanla added more than 250 clients in FY2021 and did a solid job in cross-selling and up-selling new products to its existing clients. The company acquired Karix—a market leader in the Indian CPaaS space, and, marketing automation company—Gamooga to expand its services.
The company reported a total income of Rs 630.68 crores for Q1FY2022 compared to Rs 468.77 crore during Q1FY2021, a rise of 34.5% year-on-year. The net profit grew 32.9% from Rs 78.6 crore to Rs 104.48 crores during the comparison period. What is noteworthy is a 1.07% rise in promoters' stake in June 2021 quarter. Even FIIs/FPIs and MFs stake increased 1.14% and 0.04% respectively in the quarter.
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