Market Commentary
3QFY26 saw a significant improvement in earnings growth (adjusted for the Labour Code one-off impact) across all our portfolios. The Good & Clean Midcap Portfolio and Micro Marvels portfolio reported a strong comeback in YoY earnings growth at 32% and 36% in 3QFY26 vs -2% and 13% in 2QFY26; The Coffee Can portfolio reported 11% YoY earnings growth in 3QFY26 vs 15% in 2QFY26, excluding Bharti Airtel Limited, where earnings growth moderated to -1% in 3QFY26 vs 65% in 2QFY26 led by higher depreciation in its African operation (EBITDA growth though was strong at 55% YoY in 3QFY26 vs 35% in 2QFY26).
Moreover, broader markets also showed strong recovery in earnings, with Nifty 50, Nifty Mid Cap 100, Nifty Small Cap 100 and NSE 500 indices reporting strong YoY earnings growth of 7%, 9%, 16% and 11% in 3QFY26 vs 5%, 26%,7% and 10% in 2QFY26. For FY27, consensus, as per Bloomberg, expects strong, broad-based double-digit earnings growth across all the afore mentioned indices. As a result, we believe it’s a good time to look at India, given its underperformance versus emerging-market peers in FY25 and FY26TD, alongside a strong rebound in earnings growth in FY27.
Valuations have also corrected, with India’s premium to emerging markets has fallen to 14%, last seen in FY21. Lastly, amid geopolitical tensions, India appears relatively well-positioned, given its neutral stance on the ongoing Middle Eastern crisis, a domestically oriented economy, and a sound fiscal position. We urge investors to optimize the current market weakness to their advantage.
Ambit Coffee Can Portfolio
Ambit Coffee Can Portfolio delivered a 9% FYTD return, outperforming the benchmark Nifty 50 Index by ~75 bps. On the earnings front, the strategy delivered revenue/EBITDA/PAT growth of 19%/20%/8% on a YoY basis in 3QFY26, vs 9%/6%/5% for Nifty 50 companies. Lenskart Solutions Limited and Zydus Wellness Limited led the earnings growth and Hitachi Energy India Limited companies, which delivered an impressive YoY PAT growth of 6975%/445%/130% respectively. The detractors to the portfolio were ABB India Limited/Intergloble Aviation Limited/LG Electronics Limited delivering YoY PAT growth of -7%/-38%/-49% respectively.
|
|
Revenue |
EBITDA |
PAT |
|
Portfolio with Adjusted PAT** (excluding Bharti Airtel Limited) |
19% |
20% |
9% |
|
Portfolio (excluding Bharti Airtel Limited) |
19% |
20% |
-1% |
|
Median with Adjusted PAT** |
16% |
26% |
17% |
|
Nifty 50 |
9% |
6% |
5% |
**Adjusted PAT is calculated excluding the Labour Code impact.
Note: Calculation is as per the simple average of absolute Revenue/EBITDA/PAT for all companies.
Source: Ambit Asset Management
Top 3 and Bottom 3 Performers:
|
Top 3 Contributors |
PAT % |
|
Lenskart Solutions Limited |
6975% |
|
Zydus Wellness Limited |
445% |
|
Hitachi Energy India Limited |
130% |
Source: Ambit Asset Management
Lenskart Solutions Limited
- Lenskart delivered healthy revenue growth of 37% YoY (vs. 24% YoY in 2Q) to INR 23.1bn (+7.5% QoQ).
- It was volume-driven growth.
- Volume grew 30% YoY to INR 8.9mn (+20% YoY in 2Q), while implied ASP rose ~7% YoY to INR 2,593 (vs. ~3% YoY in 2Q). It has added 195 net new stores (India: 169, International: 26) during the quarter (up 22% YoY), bringing the total store count to 3,144.
- Pre-IND AS EBITDA jumped ~3.4x YoY to INR 2.65bn, with margin expanding ~680 bp YoY to 11.5% (+40 bp QoQ).
Zydus Wellness Limited
- Zydus Wellness’ (Zydus) consolidated sales grew 109% YoY to INR 9.6bn in3QFY26. Volumes, excluding the newly acquired Comfort Click (CC) business, grew in double digits.
- Management said that demand is steady, aided by a strong revival in rural demand, which continues to outpace urban demand.
- Consolidated EBITDA rose to INR 610mn from INR 148mn in 3QFY25. However, higher-than-expected depreciation and interest costs (acquisitions related), coupled with a seasonally weak organic quarter, led to a reported loss of INR 399mn.
- Zydus has guided for an organic EBITDA margin of 16-17%. CC EBITDA margin is expected to remain at 14-15%.
Hitachi Energy India Limited
- Strong performance led by operating efficiency. India's energy transition, coupled with grid modernization, is driving results.
- Massive order backlog, exports opening further and better project mix along with service revenue enabled these results.
|
Top 3 Detractors |
PAT % |
|
ABB India Limited |
-7% |
|
Interglobe Aviation Limited |
-38% |
|
LG Electronics Limited |
-49% |
Source: Ambit Asset Management
ABB India Limited
- Highest revenues were met with divergence in margins. OPM declined due to rising input costs, labor expense and project mix.
- Robotics & Discrete Automation and Motion remained the primary growth engines, while the Process Automation segment saw more subdued performance.
Interglobe Aviation Limited
- While the airline flew more passengers and earned more revenue than ever before, its bottom line was severely bruised by a "perfect storm" of one-time costs and the aftermath of a major operational crisis.
- Despite high demand, passenger yields (revenue per km) remained flat or slightly soft as competition intensified on popular routes.
- Worst of Aircraft On Ground issues related to engine supply is stabilizing, though lease costs for replacement "wet-lease" aircraft continue to eat into margins.
LG Electronics India Limited
- Q3FY26 print was weaker-than-expected as its performance was marred by post-festive seasonality and weaker trade/ consumer offtake.
- LG deliberately avoided price discounting to protect brand positioning, thereby reducing margins. EBITDAM dipped by ~350 bps YoY owing to higher commodity prices and discounts passed on to the channel; this was much better vs peers given superior premium mix.
|
Q3FY26 Change (%) |
|||
|
Company |
Revenue |
EBITDA |
PAT* |
|
Lenskart Solutions Ltd |
38% |
119% |
6975% |
|
Zydus Wellness Ltd |
109% |
312% |
445% |
|
Hitachi Energy India Ltd |
28% |
514% |
130% |
|
Eternal Ltd |
202% |
127% |
73% |
|
Asahi India Glass Ltd |
12% |
43% |
52% |
|
Ashok Leyland Ltd |
22% |
27% |
45% |
|
Ultratech Cement Ltd |
23% |
19% |
31% |
|
Eicher Motors Ltd |
22% |
30% |
27% |
|
Britannia Industries Ltd |
8% |
22% |
26% |
|
Pidilite Industries Ltd |
10% |
19% |
21% |
|
ZF Commercial Vehicle Control Systems India Ltd |
11% |
11% |
17% |
|
HDFC Bank Ltd |
6% |
8% |
16% |
|
Tata Consultancy Services Ltd |
5% |
12% |
13% |
|
KFin Technologies Ltd |
28% |
16% |
11% |
|
Kotak Mahindra Bank Ltd |
6% |
8% |
10% |
|
Bajaj Finserv Ltd |
24% |
26% |
8% |
|
Abbott India Ltd |
7% |
6% |
4% |
|
HDFC Life Insurance Company Ltd |
72% |
-1% |
1% |
|
Bharti Airtel Ltd |
20% |
55% |
-1% |
|
ICICI Bank Ltd |
8% |
3% |
-3% |
|
ABB India Ltd |
5% |
26% |
-7% |
|
Interglobe Aviation Ltd |
6% |
12% |
-38% |
|
LG Electronics India Ltd |
-6% |
-42% |
-49% |
*Adjusted PAT is calculated excluding the Labour Code impact.
Note: Calculation is as per the simple average of absolute revenue/EBITDA/PAT for all companies.
Source: Ambit Asset Management
We expect the strategy's earnings growth to pick up as the discretionary businesses recover. Steady compounders and proven franchisees will continue to demonstrate resilience despite inflationary pressures in Q4FY26.
On valuations, the portfolio is valued at 43x Q3FY26 TTM vs Nifty 50 valued at 21x. The portfolio delivered an earnings growth of 8%.
Ambit Good & Clean Midcap Portfolio
Ambit Good and Clean Midcap Portfolio delivered 9.4% FYTD, underperforming the benchmark Nifty Midcap 150 Index by ~550 bps.
On the earnings front, the strategy delivered Revenue/EBITDA/PAT growth of 15%/28%/32% on a YoY basis in 3QFY26 vs 11%/13%/ 16% for benchmark companies.
The earnings growth was led by Tata Steel Limited, Bharat Heavy Electricals Limited, and One97 Communications Limited, which delivered impressive YoY PAT growth of 926%, 228%, and 214%, respectively. The detractors to the portfolio were The Federal Bank Limited, Manappuram Finance Limited and Timken India with the companies delivering YoY PAT growth of 9%, -16%, and -27% respectively.
|
|
Revenue |
EBITDA |
PAT |
|
Portfolio with Adjusted PAT** |
15% |
28% |
32% |
|
Portfolio |
15% |
28% |
20% |
|
Median with Adjusted PAT** |
16% |
26% |
30% |
|
Nifty Midcap 150 |
11% |
13% |
16% |
** Adjusted PAT is calculated excluding the Labour Code impact.
Note: Calculation is as per the simple average of absolute revenue/EBITDA/PAT for all companies.
Source: Ambit Asset Management
Top 3 and Bottom 3 Performers:
|
Top 3 Contributors |
PAT % |
|
Tata Steel Limited |
926% |
|
Bharat Heavy Electricals Limited |
228% |
|
One 97 Communications Limited |
214% |
Source: Ambit Asset Management
Tata Steel Limited
- Tata Steel reported a significant surge in profitability primarily driven by record volumes in its India operations and a successful cost-optimization program.
- Domestic operations achieved "best-ever" quarterly deliveries, crossing the 6 million tonne mark for the first time (+14% YoY).
- EU - Netherlands - reported a 3x jump in Operating profits, whereas the UK curtailed losses as the unit transitioned to an electric arc furnace.
Bharat Heavy Electricals Limited
- BHEL's Q3 FY26 results underscore a significant operational turnaround, with the company finally translating its massive order book into tangible bottom-line growth.
- While the top-line growth was steady, the real story lies in the tripling of profits and massive margin expansion.
- With India's renewed focus on coal-based power to meet peak demand, BHEL is the primary beneficiary of the new Power Super-Cycle.
One 97 Communications Limited
- One97 Communications (PayTM) delivered healthy growth in the Dec '25 quarter, with GMV up 23% YoY and revenues rising 20%, driven by strong financial services performance.
- Despite a slight QoQ dip in contribution margin due to a higher share of loans on DLG (directly guaranteed) and new lending partners, the company consolidated costs with a 35% QoQ drop in operating expenses, aiding profitability.
|
Top 3 Detractors |
PAT % |
|
Federal Bank Limited |
9% |
|
Manappuram Finance Limited |
-16% |
|
Timken India Limited |
-27% |
Source: Ambit Asset Management
The Federal Bank Limited
- Despite a 12 bps QoQ NIM expansion and strong 19% YoY core fee income growth, the bottom line was moderated by steady operating expenses incurred to build CASA (C:I remained high at 54%).
- The bottom line was moderated by steady operating expenses incurred to build CASA (C:I remained high at 54%). and expand product suites, preventing the full translation of top-line strength into higher profit growth.
Manappuram Finance Limited
- Strategically cutting gold loan yields to ~18.3% to align with peers and gain market share, reflected in a sharp NIM compression (down 350 bps YoY) as a near-term trade-off.
- Simultaneously, the new leadership is tightening credit underwriting and upgrading technology to stabilize elevated stress in the non-gold book (Auto, MSME, MFI), which has been dragging earnings.
Timken India Limited
- Slower than expected ramp-up of the CRB+SRB (Cylindrical Roller Bearings, Spherical Roller Bearings) facility.
- Gross Margin contracted by ~350 bps YoY due to a higher share of traded goods and lower rail contribution(high - margin business).
|
Q3FY26 Change (%) |
|||
|
Company |
Revenue |
EBITDA |
PAT* |
|
Tata Steel Ltd |
6% |
34% |
982% |
|
Bharat Heavy Electricals Ltd |
16% |
145% |
228% |
|
One97 Communications Ltd |
-16% |
1182% |
214% |
|
Multi Commodity Exchange Of India Ltd |
121% |
156% |
151% |
|
Hindustan Copper Ltd |
110% |
125% |
148% |
|
Lupin Ltd |
24% |
62% |
75% |
|
TVS Motor Company Ltd |
37% |
51% |
59% |
|
Asahi India Glass Ltd |
12% |
43% |
52% |
|
Tata Consumer Products Ltd |
15% |
28% |
50% |
|
Trent Ltd |
16% |
27% |
42% |
|
Aegis Logistics Ltd |
1% |
27% |
40% |
|
Mahindra & Mahindra Ltd |
26% |
27% |
36% |
|
Aditya Birla Capital Ltd |
27% |
23% |
35% |
|
Shriram Finance Ltd |
18% |
14% |
31% |
|
AU Small Finance Bank Ltd |
5% |
3% |
30% |
|
Canara Bank |
1% |
16% |
26% |
|
State Bank Of India |
9% |
40% |
25% |
|
Bharat Electronics Ltd |
24% |
83% |
21% |
|
International Gemmological Institute (India) Ltd |
21% |
26% |
18% |
|
City Union Bank Ltd |
28% |
18% |
17% |
|
Cholamandalam Investment and Finance Company Ltd |
24% |
19% |
14% |
|
The Phoenix Mills Ltd |
15% |
20% |
11% |
|
Axis Bank Ltd |
24% |
26% |
10% |
|
The Federal Bank Ltd |
9% |
10% |
9% |
|
Mphasis Ltd |
12% |
24% |
9% |
|
Manappuram Finance Ltd |
7% |
3% |
-16% |
|
Timken India Ltd |
14% |
-6% |
-27% |
|
PI Industries Ltd |
-28% |
-41% |
-41% |
*Adjusted PAT is calculated excluding the Labour Code impact.
*Calculation is as per the simple average of absolute revenue/EBITDA/PAT for all companies.
Source: Ambit Asset Management
We expect the earnings growth of the strategy in Q4FY26 to be led by higher growth in financials. New economy stocks, energy transition and commodity proxies will witness earnings acceleration as realizations and execution improve.
On valuations, the portfolio is attractively valued at 30.5x Q3FY26 TTM vs Nifty Midcap 150 Index valued at 31.9x. The portfolio delivered a strong earnings growth of 32%
Ambit Micro Marvels Portfolio
Ambit Micro Marvels delivered an 8.7% YTD return, underperforming the Nifty Microcap 250 by 770 bps.
On the earnings front, the strategy delivered Revenue/EBITDA/PAT growth of 12%/22%/36% on a YoY basis in 3QFY26 vs 9%/10%/ 18% for benchmark companies.
The earnings growth was led by Globus Spirits Limited, Rajratan Global Wire Limited, and Macpower CNC Limited, which delivered impressive YoY PAT growth of 7643%, 122%, and 119%, respectively. The detractors to the portfolio were Insecticides India Limited, The Foods and Inns Limited and ICE Make Refrigeration Limited with the companies delivering YoY PAT growth of -40%, -46%, and -48%, respectively.
MM’s earnings growth is superior to its peers in 3QFY26 on a YoY basis
|
Index |
Revenue |
EBITDA |
PAT |
|
Portfolio with Adjusted PAT** |
12% |
22% |
36% |
|
Portfolio |
12% |
22% |
24% |
|
Median with Adjusted PAT** |
14% |
19% |
31% |
|
750-1000 |
9% |
10% |
18% |
|
1001-1250 |
12% |
14% |
-9% |
** Adjusted PAT is calculated excluding the Labour Code impact.
Note: Calculation is as per the simple average of absolute revenue/EBITDA/PAT for all companies.
Source: Ambit Asset Management
Top 3 and Bottom 3 Performers:
|
Top 3 Contributors |
PAT % |
|
Globus Spirits Limited |
7303% |
|
Rajratan Global Wire Limited |
122% |
|
Macpower CNC Machines Ltd |
119% |
Source: Ambit Asset Management
Globus Spirits Limited
- - 4.5% EBITDA margin in Q3FY26 for P&A; strong growth in UP compensated for the slowdown in Delhi.
- R&O segment, which saw stable margins of 17.8%
- EBITDA/litre in the manufacturing segment improved 40% QoQ to 7.49.
Rajratan Global Wire Limited
- Chennai volumes increased to 5438 tonnes (14% QoQ increase), and the plant is now operating at 70% capacity utilization.
- Volumes increased 29% YoY as the company looked to gain market share from Bansal Wires, and as a result, had to cut prices, which reflected in a reduction in standalone realization to INR 84.6/kg.
- Thailand subsidiary continued operating at elevated realizations of INR 84.6/kg, due to better contracts with OEMs.
Macpower CNC Limited
- 119% profit growth was on account of a low base - since Q3FY25 had bank realization issues for payments which have since been resolved.
- High share of revenue from NEXA has kept the realizations elevated at INR 20 lakh.
|
Top 3 Detractors |
PAT % |
|
Insecticides India Limited |
-40% |
|
Foods & Inns Limited |
-46% |
|
Ice Make Refrigeration Limited |
-48% |
Source: Ambit Asset Management
Insecticides India Limited
- Gross Margins fell by 370 bps YoY – driven by a higher B2B mix and industry - led pressure on B2C margins.
- Though PAT fell 40%, it is not too relevant since it is a small contributor to the year's profits.
Foods and Inns Limited
- Sales tonnage was flat due to deferred orders from US customers amidst tariff uncertainty, though no orders were cancelled.
- GP per tonne fell 7% YoY due to some tariff impact.
Ice Make Refrigeration Limited
- Revenue declined, given the impact of the GST transition; all footwear companies like Bata and Relaxo reported weak results. GM was impacted by discounts in July and August due to weak demand from the heavy monsoon.
- GST has been cut to 5% from 12% in the category below INR 2,500 per pair. This should boost sales as ~70% of Khadim's portfolio is in this range.
- GM should improve to 50-52% in FY27, led by the GST cut, leading to higher demand for premium products within value retailers.
|
Q3FY26 Change (%) |
|||
|
Company |
Revenue |
EBITDA |
PAT* |
|
Globus Spirits Ltd |
19% |
148% |
7303% |
|
Rajratan Global Wire Ltd |
38% |
54% |
122% |
|
Macpower CNC Machines Ltd |
43% |
107% |
119% |
|
TeamLease Services Ltd |
3% |
21% |
70% |
|
Menon Bearings Ltd |
32% |
48% |
69% |
|
Mayur Uniquoters Ltd |
14% |
19% |
66% |
|
Venus Pipes & Tubes Ltd |
28% |
32% |
46% |
|
Entero Healthcare Solutions Ltd |
26% |
36% |
43% |
|
Khadim India Ltd |
-22% |
-31% |
41% |
|
Landmark Cars Ltd |
13% |
11% |
37% |
|
Bajaj Healthcare Ltd |
31% |
42% |
34% |
|
Cantabil Retail India Ltd |
19% |
31% |
31% |
|
Shivalik Bimetal Controls Ltd |
9% |
31% |
29% |
|
Eveready Industries India Ltd |
10% |
13% |
28% |
|
Platinum Industries Ltd |
33% |
19% |
13% |
|
Mold-Tek Packaging Ltd |
4% |
14% |
6% |
|
Ddev Plastiks Industries Ltd |
11% |
7% |
3% |
|
Sanstar Ltd |
-9% |
-11% |
-4% |
|
Dollar Industries Ltd |
2% |
-7% |
-12% |
|
Thejo Engineering Ltd |
20% |
-24% |
-20% |
|
Insecticides (India) Ltd |
8% |
-11% |
-40% |
|
Foods & Inns Ltd |
-21% |
-9% |
-46% |
|
Ice Make Refrigeration Ltd |
39% |
49% |
-48% |
*Adjusted PAT is calculated excluding the Labour Code impact.
*Calculation is as per the simple average of absolute revenue/EBITDA/PAT for all companies.
Source: Ambit Asset Management
We expect the earnings growth of the strategy in Q4FY26 to be led by (a) the India-US trade agreement, which caps tariffs at 18%, and is positive both for trade flows and investor sentiment. (b) The announcement of the India – EU FTA provides structural, long-term tailwinds across sectors by enhancing export competitiveness and market access.
Additionally, the GST rate cut announced on September 22nd is expected to stimulate consumption, with the benefits likely to be reflected more meaningfully in earnings over the next few quarters.
On valuations, the portfolio is valued at 26x Q3FY26 TTM vs Nifty Microcap 250 Index valued at 21.8x. The portfolio has delivered strong profit growth of 36%.
We remain optimistic about performance in the coming quarters, supported by a confluence of favorable macro developments.
Conclusion:
We believe it is a good time to increase allocations to the Indian markets, given relative underperformance to its emerging markets peers in FY26TD and significant recovery in earnings growth expected in FY27 across Nifty 50, Nifty Midcap, Nifty Small cap and Nifty Microcap indices. Whilst the persisting middle Eastern crisis is a headwind, India seems to be insulated given its neutral stance.
