Lower interest rates also boost consumer spending, as individuals pay less on their loans and have more disposable income to purchase goods and services.
The RBI has held the repo rate steady at 6.5% for a while now. However, with inflation pressures easing, rate cuts could be on the horizon.
Growth stocks, particularly those with strong expansion potential, stand to benefit the most from a low-interest-rate environment. Reduced borrowing costs allow these companies to scale faster and make substantial investments aimed at achieving higher future profits. These companies often rely heavily on debt to fuel their growth.
With a potential shift in monetary policy by the RBI, it’s worth examining the top growth stocks in India and their positioning for 2025. These stocks are filtered using Equitymaster’s Powerful Stock Screener.
#1 Swiggy Ltd
Founded in 2014, Swiggy Ltd is a leading online food delivery and hyperlocal commerce platform in India. Its unified app offers services such as food delivery, quick commerce, and supply chain solutions, underscoring its consumer-first approach and diversified business model.
Swiggy is currently expanding its quick commerce segment, Instamart, which delivers groceries through an expanding network of dark stores. By 2025, the company plans to double its dark store area to meet growing demand. Swiggy has also introduced “Swiggy Bolt,” a rapid last-mile delivery service, and is exploring new partnerships and advertising streams to enhance profitability.
In Q2FY25 (July-September), Swiggy reported a gross order value (GOV) of ₹113 billion, with food delivery witnessing 5.6% quarter-on-quarter growth. While Swiggy remains a loss-making entity, it reduced its consolidated adjusted Ebitda loss by 30%, signalling improving margins.
A potential RBI rate cut could work in Swiggy’s favour by reducing borrowing costs, supporting its ambitious expansion projects, and improving profitability. As consumer spending rises in a more accommodative monetary environment, Swiggy’s diversified services and strong market presence could position it for significant growth.
Swiggy and Zomato remain dominant players in the food delivery industry, both poised to benefit from a declining interest rate environment. Their strong expansion plans align well with this trend, but investors should also consider the intensifying competition in the quick commerce space, with Amazon being the latest entrant in India’s market.
#2 Bajaj Housing Finance Ltd
Bajaj Housing Finance Ltd (BHFL), a subsidiary of Bajaj Finance Ltd, stands out as one of India’s leading housing finance companies. It provides a range of loan products, including home purchase loans, property renovation financing, and developer financing, catering to both individual and business clients.
The company emphasizes low-risk lending and maintaining robust asset quality, supported by its expansive branch network across the country. BHFL continues to diversify its offerings, focusing on growing its home loan segment while introducing new products like insurance. Looking ahead, the company aims to strengthen its presence in affordable housing and expand its assets under management (AUM).
A key differentiator for BHFL is its innovative use of technology, enabling it to identify and address customer needs efficiently. This allows the company to expedite loan processing, giving it a competitive edge in the market.
The recently concluded IPO by the Bajaj group has infused additional capital, further bolstering BHFL’s ability to expand its operations and scale its business.
BHFL has delivered strong financial performance, with a 26% year-on-year growth in AUM and consistent profitability. It has maintained low non-performing assets (NPA) and demonstrated improved operational efficiency. The company’s average loan-to-value (LTV) ratio of 69% is among the highest in the sector, and its average loan ticket size of ₹4.6 million as of June surpasses that of many peers.
The recent reduction in interest rates creates a favourable environment for BHFL. Lower borrowing costs not only make loans more affordable for customers but also drive increased demand, positioning the company well for future growth.
Founded in 1993, Dixon Technologies (India) Ltd. is a leading Electronics Manufacturing Services (EMS) company specializing in consumer electronics, home appliances, lighting, mobile phones, and security systems. It operates through both the Original Equipment Manufacturer (OEM) and Original Design Manufacturer (ODM) models, offering a wide product range that spans mobile phones, lighting products, and home appliances.
Dixon is actively expanding its manufacturing capabilities, with recent milestones including the commencement of Google Pixel smartphone production through its unit, Padget Electronics, and the launch of a refrigerator manufacturing facility. The company is also focused on increasing its mobile production capacity and forging partnerships in emerging product categories such as wearables and IT hardware.
The company’s financial performance underscores its strong growth trajectory. In the September quarter, Dixon reported a 133% year-on-year surge in revenue and a 265% jump in profit after tax. The mobile phone segment, a key revenue driver, witnessed a remarkable 235% growth. Despite facing challenges in the LED TV segment, a healthy order book positions Dixon for sustained growth.
Interest rate cuts could play a pivotal role in Dixon’s future plans. Lower borrowing costs would support the company’s significant capital expenditure and debt repayment strategies, enabling it to accelerate investments in expanding production capacities and exploring new markets.
Additionally, Dixon is venturing into the electric vehicle (EV) space, focusing on electronic modules, PCB assembly, and open-cell manufacturing, further diversifying its portfolio and positioning itself for future opportunities.
#4 Trent Ltd
Trent Ltd, a Tata Group company, is a prominent player in India’s retail industry, with a diverse portfolio spanning fashion, food, and grocery segments. Operating over 875 stores nationwide, the company showcases a strong presence through brands like Westside, Zudio, and Star Bazaar, offering products ranging from apparel to groceries.
Trent is undergoing rapid expansion, particularly in its value fashion segment through Zudio, while also launching new initiatives such as its lab-grown diamond brand, Pome. The company’s growth strategy centres on aggressive store rollouts in both fashion and grocery verticals, alongside enhanced sustainability efforts focusing on resource efficiency and renewable energy.
Financially, Trent has delivered strong results, reporting a 49% year-on-year increase in profit and a 39.4% rise in revenues for Q2FY25. The company’s focus on scalability, driven by Zudio’s aggressive expansion, continues to be a key growth driver.
In the evolving macroeconomic environment, potential interest rate cuts could provide a tailwind for retail businesses like Trent. Lower rates typically boost disposable income and consumer confidence, driving higher footfall in stores and increased spending.
With its robust expansion plans and strong brand portfolio, Trent is well-positioned to capitalize on these favourable conditions and sustain its revenue growth trajectory.
#5 Adani Green Energy Ltd
Adani Green Energy Ltd (AGEL) is a leader in India’s renewable energy sector, specializing in solar and wind power generation. As part of the Adani Group, AGEL is the largest renewable energy producer in the country, with an operational capacity of 11.2 GW and ambitious projects such as the world’s largest renewable energy plant in Khavda, Gujarat.
The company aims to expand its capacity to 50 GW by 2030, leveraging a diversified mix of solar, wind, and hybrid power solutions. AGEL is also exploring innovative projects, including hydro pumped storage systems, to enhance its renewable portfolio.
In FY24, AGEL added 2.8 GW of renewable capacity and strengthened its pipeline with strategic agreements to supply solar power to major corporate clients like Google. The company’s financial performance has been robust, with a 20% year-on-year rise in revenue from power supply and a significant increase in energy sales.
Looking ahead, AGEL plans to add 6 GW of renewable capacity in FY25, supported by its focus on scaling operations and improving project efficiency.
Interest rate cuts could be a game-changer for AGEL, reducing the cost of capital for its large-scale, capital-intensive projects. Lower borrowing costs would enable the company to accelerate expansion, enhance project development, and improve returns on investment. Additionally, it would allow AGEL to refinance its debt at more favourable rates, easing financial pressures.
Debt management remains a critical focus for AGEL. The company, historically reliant on debt to fund its capital expenditure, has significantly improved its debt-to-equity ratio, reducing it from 37.1x in March 2022 to 6.9x in March 2024. AGEL plans to repay ₹146.9 billion in debt and refinance ₹89 billion for capex in the second half of FY25.
However, retail investors should exercise caution when considering AGEL. The Adani Group’s corporate governance practices have faced scrutiny, raising concerns about transparency and accountability. For investors, these issues add a layer of risk to an otherwise promising renewable energy play.
Snapshot of growth stocks on Equitymaster Screener
Here’s a table showing the above companies on various important parameters:
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Conclusion
Interest rate cuts by the Reserve Bank of India could unlock significant growth opportunities across key sectors of the economy.
Lower borrowing costs would enable companies to invest in expansion, adopt new technologies, and drive innovation, potentially leading to higher stock valuations. Sectors like technology, housing, retail, and renewable energy, which are particularly sensitive to interest rate fluctuations, are poised to benefit the most.
That said, investors must remain vigilant, closely monitoring the operational performance of these growth-focused companies, their scalability, and the effectiveness of their strategic initiatives.
Equally important is evaluating corporate governance standards as a critical aspect of due diligence before making investment decisions.
By staying informed and adopting a proactive approach, investors can capitalize on these opportunities while effectively managing the associated risks.
Happy Investing.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com
