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GNPA for SCBs has been flat in 1HFY20

NNPA for SCBs has declined marginally

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100

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FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20

ARPU (Rs/sub/Month)•

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-

1,000

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8,000

FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21T

Highway Project awarded (Km)

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Drivers of Cement demand in India

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Global oil demand and supply forecast

mmbpd CY14 CY15 CY16 CY17 CY18 CY19 CY20

IEAGlobal supply* 93.6 96.7 96.9 97.4 100.1 NA NAGlobal demand 93.4 95.3 96.5 98.2 99.3 99.8 90.5Demand growth 1.90 1.14 1.74 1.11 0.50 -9.3

EIAGlobal supply 93.8 97.0 97.4 98.1 100.8 100.6 99.4Global demand 93.5 95.3 96.9 98.8 100.0 100.7 95.5

Demand growth 1.8 1.6 1.9 1.2 0.8 -5.2* IEA only forecast non-OPEC supply growth and assume difference between its demand forecast and non-OPEC supply forecast as call on OPEC

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Key trends for Staples:• Rural continues to outpace urban due to (1) good monsoons, (2) higher MSPs, (3) government support, and (4) fewer

lockdowns and demand relocation.

• Downtrading is clearly visible in the market; however, companies which straddle the pricing pyramid or sub-categories whichare relatively cheaper vs. larger categories (for e.g. biscuits within snacking, coconut oil within hair oils etc.) stand to benefitover a longer period in terms of share gains. Most companies have increased focus on LUPs.

• Secondary sales in most cases are tracking in line or ahead of primary sales.

• We are starting to see moderation of strong Q1 trends – reduction in in-home consumption of foods (especially towardsquarter exit – to fully reflect in Q3) and usage of hygiene products (particularly sanitizers, sharp dip QoQ); however, we dosee part of gains from increased penetration for packaged foods, hygiene and health/wellness (particularly immunity) toremain sticky.

• Within channels, modern trade continues to underperform albeit has seen QoQ improvement, CSD remains under pressure,general trade continues to post strong growth and Ecommerce is seeing multi-fold growth for most companies (Covid hasonly helped to accelerate the process); most have embarked on improving digital capabilities.

• Companies are now well prepared in case there is a second round of lockdown and have tied up with alternate suppliers.Most companies are now operating at ~100% production and service levels to retailers are back to pre-Covid levels

• While laws few months were all about reach and gains for organized players (given better distribution/execution), return of alevel-playing field is now pushing companies to increase focus on marketing initiatives (rise in A&P levels), broad-basing theirportfolio production in term of SKUs (playing the full portfolio now vs. sharp focus on SKU optimization in Q1) and push thepedal on innovation again (beyond Covid-led portfolio focus).

• Input cost inflation is starting to inch up again particularly in select inputs. Companies are exploring judicious price hikes in H2

Key trends for Discretionary:• Growth continues to be driven by rural/semi-urban areas; while metros have started to recover, they aren’t yet back

to pre-Covid levels.

• Walk-ins have been improving with conversion rates and average ticket size being higher YoY.

• Festive sales are shaping mixed – (1) Jewelry - high single-digit in October for Titan; albeit management cautioned thiswas partly buoyed by advancement of promotions, (2) Shoppers Stop - Business in the East is already showing signs ofrebound as festive season approaches; less than 25% decline was recorded vs. last year in first two weeks of Octoberand (3) ABFRL indicated that it expects Q3 to reach 70-80% of pre-Covid sales.

• Cost control – Retail companies continue to see gains from rental concessions (most have negotiated concessions tillQ4FY21, albeit pace may narrow as revenues recover). Most companies remain confident of sustaining part ofincremental gains from reduced cost structures in FY22 and achieving superior % margins on similar absoluterevenues achieved in past.

• Store openings – most companies have restarted store expansion and remain optimistic on increasing the pace ofexpansion in H2FY21/FY22.

• Most companies have seen multi-fold increase in ecommerce revenues; focus on Omni-channel presence hasincreased sharply.

• Retail companies have started to liquidate inventory to improve cash conversion and have also selectively takeninventory write-off (has hit GMs) in Q2

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Nov 2020 – Auto volumes chug along in November:

• November wholesale volumes were relatively strong aided by (1) continued robust demand during festiveperiod particularly in PVs, (2) relatively low inventory levels pre-festive and (3) favorable base particularly for2Ws (Diwali in November this year vs. October last year). In terms of segments, (1) PV industry volumes werelikely up 8-10% YoY; Hyundai, M&M, Tata and KIA outperformed; (2) 2W volumes were up 10-15% YoY; Heroand TVS outperformed, while RE lagged; (3) CV volumes were largely flat YoY, but AL and VECV reportedstrong YoY growth in domestic trucks (on very low base though) and (4) Tractor volumes were up 33-55%across listed OEMs.

• We note that 2W OEMs have seen a relatively softer festive period (retail volumes down in mid to high-singledigit YoY) vs. PV OEMs. However, November wholesale volumes for the industry are up 10-15% YoY mainlydue to (1) lower than normal inventory levels at the start of the month and (2) favorable base – last yearfestive period ended in October and Nov volumes were down 14% YoY.

• Wholesale dispatches in December are likely to be lower for 2Ws where festive retail growth has beenrelatively weak and inventory might be slightly higher. PVs might see decent demand prior to productionmodel-year change.

Nov 2020 volumes:

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