BQuick On Aug. 6: Top 10 Stories In Under 10 Minutes

Here is a roundup of the day’s top stories in brief.

1. RIL, BP Expand Partnership

Reliance Industries Ltd. said it would form a new joint venture with British oil-and-gas explorer BP Plc. to expand retailing of fuels in India.

• The Mukesh Ambani-owned company said it would hold 51 percent stake in the new venture, with BP holding the remaining share.
• The venture will also take over Reliance’s auto fuel network in India and its aviation fuel business.
• RIL said it expected the final agreements for the venture to be reached this year and the transaction to be completed in the first half of next year, subject to regulatory and other approvals.

Mobile fueling units, packaged fuel and home delivery are potential offerings of the venture.

2. NSE, SGX Get Regulatory Approval

The National Stock Exchange and its Singapore counterpart received regulatory approvals for a trading link through the international finance hub in Gujarat to help overseas investors hedge risks in one of Asia’s largest market.

• India’s largest bourse and Singapore Exchange, earlier this year, had submitted a joint proposal to their respective regulators on an NSE-International Financial Services Centre-SGX Connect model that aims to bring together trading of Nifty products in the Gujarat International Finance Tec-City.
• This proposal has now received the regulatory dispensation, according to a media statement.
• The Connect model is subject to relevant local authorities’ approval.

SGX and NSE will try to make the model operational before 2020-end.

3. A Moratorium And No Haircut—DHFL’s Plan

Dewan Housing Finance Corporation Ltd. has submitted a draft debt resolution plan as the beleaguered home financier struggles to repay lenders.

• As part of the plan, the company is seeking a moratorium on repayments and fresh funds from banks and the National Housing Bank to restart lending activities, according to an exchange filing.
• The plan does not include any haircut for lenders, the company said.

The DHFL draft resolution plan includes breaking up the company’s loan book into three parts.

Meanwhile, Deloitte Haskins & Sells LLP quit as the statutory auditor of DHFL citing doubts about the mortgage lender’s ability to stay as a “going concern”.

• Deloitte cited discussion with Kapil Wadhawan, chairman and managing director of DHFL, on July 29, and referred to the matters it stated in the “disclaimer of opinion” to the financial statement for the year ended March 31, 2019, according to the Aug. 2 resignation letter filed with the Ministry of Corporate Affairs.
• “Our firm’s policy on client acceptance and continuation do not permit us to continue as statutory auditors of the company,” Deloitte said.

Deloitte has raised significant doubts about the company.

4. Why Gangwal Won’t Vote For 10-Member IndiGo Board

Rakesh Gangwal, co-promoter of InterGlobe Aviation Ltd., said he is unable to support the special resolution for expanding the company’s board to 10 members in its present form as it will lead to a large governance loophole in favour of Rahul Bhatia-controlled InterGlobe Aviation Enterprises Group.

• A special resolution requires 75 percent of shareholders to vote in its favour. Gangwal has 37 percent stake in the company, which puts the resolution at risk.
• In a letter to the board of directors, Gangwal said while the board has agreed on all contractual language for the new related party transaction policy and the board size composition, the sequence of the adoption of these policies, as suggested by Bhatia, will benefit the IGE Group in terms of corporate governance.
• The RPT policy, too, has not been formally approved by the board, which may lead to its dilution once the IGE Group gets an upper hand, he said.

Here’s what Gangwal suggested the board should do instead.

At the same time, the company reported a drop in its related party transactions in the year ended March 2019.

• The parent of India’s largest airline IndiGo transacts with several firms owned by or connected to Rahul Bhatia for services ranging from ticketing to crew accommodation to simulation training.
• Value of these related-party transactions dropped to Rs 203 crore in 2018-19 from Rs 315 crore a year ago, according to the company’s annual reports.

The major reason of this decline was...

5. Earnings: Titan, Indiabulls Housing Finance

Titan Company Ltd.'s profit for the first quarter missed estimates due to overseas investments and wage settlements.

• Net profit rose 6.2 percent year-on-year to Rs 371 crore, lower than the Rs 416-crore estimate.
• Revenue rose 14.4 percent to Rs 4,939 crore.
• The jewellery business—which generates over 80 percent revenue—grew 13.3 percent.

Here’s what the management said about the slower profit growth.

Indiabulls Housing Finance Ltd.’s profit fell, missing estimates, in the June quarter as asset quality worsened.

• Net profit declined 24 percent year-on-year to Rs 801 crore.
• Revenue fell 12 percent to Rs 1,522 crore.
• Net interest income, or the core income from operations, dropped 12.7 percent to Rs 1,475 crore.
• Gross non-performing asset ratio rose to 1.47 percent from 0.88 percent.

Loan book fell 10 percent during the quarter.

6. Nifty Snaps Losing Streak, U.S. Stocks Pare Gains

Indian equity benchmarks rebounded from more than five-month low, led by the gains in Housing Development Finance Corporation Ltd. and ICICI Bank Ltd.

• The S&P BSE Sensex ended 277 points or 0.75 percent higher at 36,976.85.
• The NSE Nifty 50 ended at 10,948.25, up 0.79 percent.
• The broader market represented by the NSE Nifty 500 Index rose 0.98 percent.
• Nine out of 11 sectoral gauges compiled by National Stock Exchange ended higher.

Follow the day’s trading action here.

U.S. and European shares edged higher, clawing back some of their recent losses after China moved to stabilise its currency.

• But gains were muted as investors weighed the outlook for trade tensions in the world’s two largest economies.
• The S&P 500 Index rose as much as 1 percent before paring the advance as the session wore on, while the Stoxx Europe 600 eked out a small increase.
• The dollar steadied and gold held near a six-year high as China fixed the yuan at stronger than 7 per dollar, the level that spurred a global sell-off Monday.
• Treasuries gave back some of yesterday’s surge, when they reached the most extreme yield-curve inversion since the lead-up to the 2008 financial crisis.

Get your daily fix of global markets here.

8. Indian Ports Are Shipping More Again

Indian ports handled more cargo in July over last year after two consecutive months of decline.

• Volume growth at the ports rose by over 3 percent in July, investment banker Goldman Sachs Group Inc. said in a report, led by iron ore, fertiliser and other cargo.
• Some of these positives were offset by negative trends in coal- and oil and gas-related product volumes.
• Ports across the country handled 593.7 lakh tonnes of cargo in July.
• Container volumes, which contribute nearly 22 percent to overall volumes, grew 6.5 percent year-on-year.

That augurs well for these stocks.

9. Yet Another Rate Cut?

With growth weakening and inflation under control, India’s monetary policy committee is widely expected to cut interest rates for a fourth time this year.

• Almost all of the 36 economists polled by Bloomberg forecast a 25-basis-point cut when the committee delivers its decision on Wednesday.
• This would take the benchmark repo rate down to 5.50 percent—the lowest in nearly a decade.
• The 100 basis points in rate cuts announced this year also marks the steepest reduction in interest rates in recent years, with the exception of the period after the global financial crisis.

The likely rate cut on Wednesday may not be the last in the cycle. Here are charts that explain why.