BQuick On Aug. 13: Top 10 Stories In Under 10 Minutes
Here is a roundup of the day’s top stories in brief.
1. Earnings: Sun Pharma, ONGC
Sun Pharmaceutical Industries Ltd.’s net profit beat the highest analyst estimate in the quarter ended June even as its margin contracted.
- Net profit of India’s largest drugmaker rose 31.2 percent year-on-year to Rs 1,388 crore in the April-June period, according to an exchange filing. That compares with the Rs 1,077-crore consensus estimate of analysts tracked by Bloomberg.
- Higher profit came on the back of a forex gain of Rs 67 crore compared to a loss a year ago. Restructuring of domestic business had hurt the company’s bottom line in the quarter ended March.
- Revenue increased 15.9 percent to Rs 8,374 crore—in line with the Rs 8,120-crore estimate.
Operating margin narrowed 50 basis points to 23 percent.
Oil and Natural Gas Corporation Ltd.’s profit met estimates in the quarter ended June, helped by higher oil and gas prices.
- Net profit rose 46 percent sequentially to Rs 5,904.3 crore in the April-June period, according to an exchange filing. Analyst estimates compiled by BloombergQuint had pegged the bottom line at Rs 6,006 crore.
- Higher profit came as Brent crude oil prices averaged around $68.47 a barrel during the June quarter compared with $63.68 per barrel in the three months ended March 31.
- Gas prices too were higher by 11 percent sequentially at $3.74 per million British thermal unit.
- Revenue fell marginally to Rs 26,554.7 crore—also in line with the Rs 27,397-crore estimate.
- Ebitda rose 22.2 percent to Rs 15,111.9 crore.
Operating margin expanded to 56.9 percent.
Coal India Ltd.’s profit for the first quarter beat estimates.
- Net profit jumped 22.3 percent year-on-year to Rs 4,629.7 crore in the quarter ended June, the world’s largest coal miner said in an exchange filing. That compares with the Rs 4,261-crore consensus estimate of analysts tracked by Bloomberg.
- Revenue rose 3.6 percent to Rs 24,939 crore, in line with analysts’ expectations of Rs 24,843.9 crore.
- The company’s earnings before interest, tax, depreciation and amortisation, or operating profit, rose 17 percent to Rs 6,613 crore—compared with the Rs 6,213.2-crore estimate.
Operating margin expanded 300 basis points to 26.5 percent.
2. Retail Inflation Falls For The First Time In 6 Months
After consistently rising since January this year, retail inflation saw a moderate dip for the first time due to weak demand conditions in the economy.
- Consumer Price Index inflation stood at 3.15 percent in July compared to 3.18 percent in the previous month, according to data released by the Ministry of Statistics and Program Implementation on Tuesday.
- A Bloomberg poll of 40 economists had estimated inflation at 3.09 percent for July 2019.
- Inflation in food and beverages softened while it contracted in fuel and light.
- While inflation fell last year because of declining food prices, the recent moderation is because of slowing demand in rural and urban areas.
Retail inflation continues to remain well within the target of 4 percent.
3. Car Sales Drop Most In Two Decades
India’s auto slowdown continued for a ninth straight month in July as sales of cars and utility vehicles recorded their steepest decline in almost two decades.
- Domestic sales of passenger vehicles fell 30.98 percent year-on-year to 2,00,790 units in July, according to data released by the Society of Indian Automobile Manufacturers.
- That’s the steepest decline since December 2000 when passenger vehicle sales fell 35.22 percent, SIAM data showed.
- “This is the steepest and most engulfing kind of downturn where every segment has been impacted,” Vishnu Mathur, director general of SIAM, told BloombergQuint. “The auto crisis has further deepened in this month.”
Auto sales in India have been falling since the Diwali festival last year.
4. Amazon May Soon Own 10% Of India’s Second-Largest Retailer
Amazon.com Inc. is in late-stage talks to acquire as much as 10 percent of India’s Future Retail Ltd., people familiar with the negotiations told Bloomberg News, as the U.S. company moves to bolster its brick-and-mortar presence in one of the world’s fastest-growing retail markets.
- India’s No. 2 retailer by turnover, Future is seeking a valuation of about Rs 2,000 crore ($281 million) from Amazon for the stake, according to the people, who asked not to be identified as the discussions are private.
- The sale is likely to be routed through a holding company, they said, and will give Amazon the option to buy more shares from Kishore Biyani, Future Retail’s founder and chairman.
- The deal with the Mumbai-based company, which operates its flagship “Big Bazaar” grocery store chain, will give Amazon more exposure to the business after it bought Whole Foods Market Inc. for $13.7 billion in 2017 and secured a foothold in the U.S. food retailing segment.
The proposed investment in Future Retail offers some parallels.
5. Sensex Slumps, U.S. Stocks Surge
Indian stocks dropped on Tuesday, joining a global decline as political unrest in Hong Kong and Argentina added to trade concerns.
- The S&P BSE Sensex declined 1.7 percent to 37,958.16, resuming a downward curve after its first weekly gain in five.
- The drop was the gauge’s steepest in more than a month, data compiled by Bloomberg show.
- The NSE Nifty 50 Index also fell 1.7 percent, although Reliance Industries Ltd. bucked the trend, advancing 9.7 percent after billionaire Mukesh Ambani revealed a plan to sell a stake to Saudi Arabian Oil Co.
Follow the day’s market action here.
U.S. stocks rallied the most in two months and Treasuries tumbled after the Trump administration de-escalated its trade war with China.
- The S&P 500 Index surged as much as 2 percent after trade officials granted a grace period before tariffs take effect on a broad swath of consumer goods Americans shoppers covet at the holidays. Makers and sellers of consumer electronics, toys and apparel led the advance.
- West Texas Intermediate crude rose 2.4 percent to $56.22 a barrel.
- Gold fell 0.6 percent to $1,507.20 an ounce.
Get your daily fix of global markets here.
6. RIL To Turn Into A Holding Company?
Reliance Industries Ltd. will turn largely into a holding company with stakes in different businesses—refining and petrochemical, retail, telecom and media.
- The Mukesh Ambani-controlled conglomerate will be left with only the domestic oil and gas exploration arm in its standalone business, while all the other units will be held through structures similar to subsidiaries.
- That will happen after Saudi Arabian Oil Co. buys 20 percent in RIL’s refining and petrochemical business for an enterprise value of $75 billion, though the exact details aren’t known.
- RIL plans to move the refining and petrochemical assets into a new subsidiary in which Saudi Aramco will be given the 20 percent stake, while the remaining 80 percent will be held by RIL’s current shareholders.
Analysts assign hardly any value to RIL’s domestic oil and gas exploration business.
7. Nifty: Peak Polarisation!
India’s equity benchmark tumbled from its June record but heavyweights have fared better than the Nifty 50.
- After Prime Minister Narendra Modi returned to power with a bigger majority, the Nifty 50 rose and hit an all-time high on June 3.
- But the benchmark has since fallen more than 8 percent amid domestic tax and global trade war worries.
- Still, six of the top 10 shares by weight outperformed the gauge. That’s because investors chased them in the past year on the back of optimism on earnings and return ratios.
If history is anything to go by, constituents outside the top 10 companies by weight on the index may drive the next rally.
8. Insurers Hold Rs 11,800 Crore Downgraded Debt
Bajaj Group’s insurance subsidiary provided for its investments in debt downgraded by ratings agencies, hurting its profit in the quarter ended June 30. But the insurer isn’t alone in having such exposure.
- As many as 49 insurers disclosed a total investment of about Rs 11,800 crore in debt of companies that were downgraded in the second half of 2018-19.
- Of this, Rs 9,320 crore is invested in the paper of just four—Anil Ambani group companies, Dewan Housing Finance Corporation Ltd., Infrastructure Leasing and Financial Services Ltd. and Yes Bank Ltd.
- The downgrades stem from the credit crunch that non-bank lenders faced after a series of defaults by the IL&FS Group. Several mutual funds had to either write down investments or agree to a standstill with controlling shareholders who had pledged shares as a collateral.
Life insurers have greater exposure to such entities compared with general insurers.
9. CSR: High-Level Committee's Recommendations
A government-constituted high-level panel on Tuesday recommended making expenditure on corporate social responsibility tax deductible as well as treat non-compliance with CSR requirements a civil offence under the companies law.
- Under the Companies Act, 2013, certain classes of profitable entities are required to spend at least two percent of their three-year annual average net profit towards CSR in a particular financial year.
- The panel, headed by Corporate Affairs Secretary Injeti Srinivas, has stressed that CSR expenditure should not be treated as a means of resource gap funding for government schemes.
Here are some of the other recommendations.
10. Kashmir Restrictions Will Be Eased Soon: Attorney General
The Supreme Court of India today declined to interfere in the curfew and restrictions imposed in Jammu & Kashmir, observing that the government must be allowed to take steps to restore normalcy in the valley.
- The top court bench of Justice Arun Mishra, Justice MR Shah and Justice Ajay Rastogi was hearing a petition filed by activist Tehseen Poonawalla who sought relaxation of restrictions for the public in J&K.
- Senior Advocate Menaka Guruswamy argued on behalf of the petitioner and cited instances of inconvenience faced by public due to these measures.
- Attorney General of India KK Venugopal who said the restrictions were imposed to maintain law and order and it will be relaxed soon.
Here are the bench’s observations.