Not sure why we are fixated on the figure of Rs 4000 Cr. Simply put, On Book Assets of Rs 40,000 Cr (for co-lending AUM of Rs 100,000 Cr) will require an ROA of 10% to generate a profit of Rs 4000 Cr which is absurd.

Let’s look at this from another lens – that of the total pie available to divide. Assuming total loans outstanding of Rs 100,000 Cr in FY27 given out at 8.5% rate of interest (remember, this is the most prime customer out there). Further assuming cost of funds for the partner bank at 6.5% and for Sammaan Capital at 8.5%, the total pie of gross profit available for distribution between the bank and Sammaan is as follows: –

Interest Income – Rs 8500 Cr
Fee Income @ 0.5% (origination of Rs 35,000 Cr) – Rs 175 Cr
Total Income – Rs 8675 Cr

Interest Expense (Bank) – Rs 5200 Cr (6.5% on 80% of AUM)
Interest Expense (NBFC) – Rs 1700 Cr (8.5% on 20% of AUM)
Total Interest Expense – Rs 6900 Cr

Total Gross Profit available for distribution – Rs 1775 Cr. Whichever way you slice it, the total gross profit cannot be more than what the customer pays minus the cost of funds.

1. Hope mgmt. will explain the dynamics of the ONGC order in more detail in the next call. it doesn’t seem like a normal EPC order compared to what they have been doing so far.
2. The big order from Reliance, which they guided to reveal in next few days after the call, hasn’t been received and need to be monitored.

Market may want to see if they getting to the next league of ~100 cr/qtr kind of topline company… If that certainty comes, this may rerate ?

About

Incorporated in 1989, Lotus Chocolates
Ltd manufactures Chocolates, Cocoa
Products and other similar products[1]

Business Overview: [1]
LCL is in the business of sourcing and processing cocoa beans to manufacture chocolates, cocoa products, and cocoa derivatives. Its products are supplied all over the world to chocolate makers and chocolate users, from local bakeries to multi-national companies, etc.

Product Profile: [1]
Chuckles, Supercar, Chco Drops, Choco Bars, Cocoa Powder, Choco Slab, Cocoa Butter, On and On, Hand filled chocolates, Chocolate liquor, also known as cocoa liquor and cocoa mass

Manufacturing Facility: [2][3]
The company has an ISO 9001-2008 and FSSC 22000:2010 (Food Safety Standard Certification by TUV NORD) certified manufacturing unit at Medak in Andhra Pradesh, where it processes cocoa beans into cocoa powder and
cocoa butter, and sells chocolates under the Lotus brand

Clientele: [3]
Amul, Mother Dairy Fruit & Vegetable Pvt Ltd, and Parle Products Pvt Ltd.

Loss: [4][5]
The company generated all its revenue from the sale of cocoa products but reported a loss in FY23

Acquisition: [3][6]
Reliance Consumer Products Ltd (a wholly owned subsidiary of Reliance Retail Ventures Ltd) acquired 51% stake and took control of the company from May 24th, 2023. RCPL made an open offer to their public shareholders, and on April 6th,2023, completed the acquisition of 130 equity shares of company under the open offer. RCPL has also acquired a 100% shareholding of Soubhagya Confectionary Pvt. Ltd for Rs. 18 crs.

Change of KMP: [7][8][9]
a) Mr. Sikander Aman Khullar resigned as Chief Executive
Officer and was replaced by Mr. Sandipan Ghosh on Jan 3rd, 2024
b) Mr. Vivekanand Narayan Prabhu resigned as Chief Financial Officer and was replaced by Mr. S Gautham on July 18, 2023

Risks –

• Intense Competition:
  The Indian chocolate market is dominated by global giants like Cadbury, Nestlé, and Amul, which have greater financial resources, brand recognition, and distribution networks.
• Raw Material Price Volatility:
  Fluctuations in the prices of key ingredients like cocoa, sugar, and dairy products can impact profitability. If Lotus Chocolates cannot pass these cost increases on to consumers, margins could be affected.
• Changing Consumer Preferences:
  If consumer preferences shift towards healthier snacks or low-sugar products, and Lotus Chocolates is slow to adapt, it could lose market share.
• Supply Chain Disruptions:
  Any disruptions in the supply chain due to geopolitical events, transportation issues, or other unforeseen circumstances could affect the availability of raw materials or finished products.
• Economic Slowdowns:
  Economic downturns can reduce discretionary spending, and chocolate, being a non-essential item, might see a drop in demand during such periods.

Q1 FY25 earnings conference call held on August 30, 2024.

1. Q1 FY25 Financial Performance:

   • The company achieved total revenue of INR 38.86 crore, reflecting a 98.17% year-over-year (YoY) growth.
   • EBITDA was INR 4.79 crore, representing a massive 237.05% YoY increase, with the EBITDA margin improving to 12.31%.
   • Profit After Tax (PAT) grew by 248.86%, reaching INR 3.29 crore, with PAT margins expanding to 8.46%.

2. Future Growth Projections:

   • The management expects CAGR in revenue of 57-65% from FY24 to FY26. The EBITDA margin is expected to be in the range of 13-15%.
   • The company’s top-line guidance for FY25 is around INR 400 crore, with a PAT of INR 40 crore.
   • They have already clocked over 85 crores topline in Q2FY24 as on date of this Con-call and expect to cross 100 by the end of the quarter.
   • Key drivers of growth include strategic expansions into sectors like oil and gas exploration, solar energy, and green hydrogen production.

3. New Projects and Expansion:

   • RBM Infracon currently has 16 ongoing projects with a work order value of INR 1,384 crore.
   • They are working with major clients such as Reliance, Adani, Nayara Energy, ReNew Energy, and L&T.
   • They have significant plans to expand into solar and green hydrogen production by the end of 2025, aligning with India’s energy transition goals.
   • The Epitome project, valued at INR 957 crore, is progressing with expected invoicing of INR 60 crore in Q2 FY25.

4. Challenges:

   • Delays in some projects due to heavy rainfall in Gujarat have caused slight extensions in project timelines.
   • However, the management is confident in meeting targets, with no significant penalties or setbacks anticipated.

adding mcap debt/eq
opm amends
OPM last year > OPM preceding year AND
OPM preceding year > OPM 5Year AND
Market Capitalization >200 AND
Market Capitalization <500 AND
Debt to equity <0.5