BQuick On Feb. 8: Top 10 Stories In Under 10 Minutes

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

1. YV Reddy Speaks Out

There is an unwritten, unsaid tradition among the small community of former Reserve Bank of India governors. They will speak most sparingly on issues the RBI may be dealing with in the present to ensure they don’t muddy the waters for the person occupying the governor’s office at the time.

On Friday, Yaga Venugopal Reddy decided it was time to speak up.

• While delivering the Kale Memorial Lecture 2018 at Pune’s Gokhale Institute of Politics and Economics, Reddy shared his thoughts on issues that led to months of friction between the RBI and the government and finally ended in the resignation of former governor Urjit Patel.
• The issues relating to capital framework, the regulatory relaxations and the role and composition of (RBI) board will have a lasting impact on RBI, Reddy cautioned.

Here's more from his hard-hitting speech.

2. Earnings: Tata Steel, M&M, BPCL

Tata Steel Ltd.’s quarterly profit rose as the steelmaker’s increased capacity from domestic acquisitions aided its earnings.

• Net profit rose 76.5 percent over last year to Rs 2,284 crore.
• Revenue rose 23.2 percent to Rs 41,220 crore.
• Operating profit increased 18 percent to Rs 6,723.4 crore.
• Tata Steel has been divesting stake in its foreign businesses to move back focus on the domestic market.

Bhushan Steel acquisition helped improve production and sales volume.

Mahindra & Mahindra Ltd.’s profit surpassed estimates even as higher input costs squeezed the automaker’s margin.

• Net profit rose 7 percent year-on-year to Rs 1,396 crore.
• Revenue rose 12 percent to Rs 12,892 crore, also higher than the Rs 13,108 crore estimate.

But the company cautioned against escalation of trade tensions and tightening financial conditions.

Bharat Petroleum Corporation Ltd. reported a surprise profit in the December quarter even as operating margin fell.

• Net profit declined close to 60 percent sequentially to Rs 495.1 crore.
• Analysts were expecting a loss of Rs 14 crore.

The company also declared an interim dividend of Rs 11 per share.

3. Midcap Blues

Portfolio managers started 2019 with losses as the midcap rout that began last year showed no signs of abating.

• India’s top 50 portfolio managers with Rs 1,01,270 crore worth of investments—close to 90 percent of assets managed by such firms—saw the value of their holdings decline 4 percent month-on-month on an average in January, according to data compiled by BloombergQuint from disclosures made to the market regulator.
• All the top 15 portfolio managers lost money in January.
• The midcap rout led to some portfolio managers losing up to 10 percent in January.

Here’s the complete list of outperformers and underperformers.

5. Equity MF Inflows Fall To Lowest In Two Years

Inflows into equity mutual funds, including equity-linked savings schemes, fell to their lowest in 24 months in January due to mixed domestic and global cues, weak investor sentiment and changes in mutual fund regulation.

• Equity inflows declined 6.8 percent over the previous month to Rs 6,158 crore in January, according to data released by the Association of Mutual Funds in India.
• That’s the third straight monthly decline.
• The drop in equity inflows was due to various factors. “Uncertainty ahead of the upcoming general election along with global factors such as U.S.-China trade war, movement in crude oil prices and fears of a global economic slowdown are weighing on equity inflows,” said NS Venkatesh, chief executive officer, AMFI.

Income funds posted positive inflows for the first time since April.

6. Anil Ambani Group Vs L&T Finance, Edelweiss

Anil Ambani’s Reliance Group blamed L&T Finance Ltd. and Edelweiss Group for the 55 percent drop in market capitalisation of group companies in four trading days, alleging that the sale of pledged shares by the non-bank lenders was “illegal, motivated and unwarranted”.

• Creditors, including L&T Finance and Edelweiss, sold 31.9 crore pledged shares of four companies—Reliance Power Ltd., Reliance Infrastructure Ltd., Reliance Communications Ltd. and Reliance Capital Ltd., according to exchange filings.
• That led to a 3-8 percentage-point reduction in founders’ stakes in these firms.
• The sale followed a slide in shares of Reliance Communications as the company decided to voluntarily approach the insolvency court after failing to get the government’s nod to sell spectrum and towers to Reliance Jio Infocomm Ltd. to pare debt.

Both Edelweiss Group and L&T Finance refuted the allegations.

7. How India’s Largest NBFCs Fared Amidst Crisis

BloombergQuint compiled data on credit supply from the top ten NBFCs and housing finance companies. Some of these firms reported data of actual disbursements for the quarter while others reported their outstanding loan books, which would also include the impact on any loan portfolio sales.

• Of the five companies that showed loan book growth, two — Shriram Transport Finance Co. Ltd. and Indiabulls Housing Finance Co. Ltd — saw a sequential decline in their respective loan books.
• Bajaj Finance Ltd, Mahindra and Mahindra Financial Services Ltd and Housing Development Finance Corporation Ltd continued to lend at a decent pace.
• The fall of the once AAA-rated Infrastructure Leasing and Financial Services Ltd. in September 2018 led to a drying up of liquidity, particularly for the country’s non-bank lenders.

Read this to get a clear picture of credit flow.

8. Panel May Suggest 5% GST On Under-Construction Homes

A ministerial panel tasked with exploring ways to provide GST relief to the real estate sector may suggest lowering tax on under-construction homes to 5 percent, according to a senior government official.

• The goods and services tax rate on under-construction affordable homes may be lowered to 3 percent, the official said.
• But developers won’t be allowed to claim input tax credit, the official added.
• Currently, under-construction properties are taxed at 12 percent, while affordable housing projects attract 8 percent GST and developers are allowed to claim credit on taxes paid on inputs. Ready-to-move-in properties don’t attract GST.
• Gujarat Deputy Chief Minister Nitin Patel, the chair of the panel, said the committee will submit its report in two days.

The GST Council will then take a final decision.

9. Gas Trading Hub? Years Away

India plans to set up a gas trading hub to sell the fuel at market-determined prices as it looks to move away from dirtier alternatives. That still may take years.

• The government, which announced its plan in 2017, itself admitted as much.
• A precise timeline couldn’t be indicated for the project—which involves advanced infrastructure such as pipeline networks, regasification and storage capacities—due to administrative, operational and legal issues, Union minister for Petroleum and Natural Gas Dharmendra Pradhan said in a reply to Parliament in December.

The industry isn’t ready for it either.

10. Rahul Gandhi Vs Narendra Modi

Congress President Rahul Gandhi slammed Prime Minister Narendra Modi over his Rafale deal pricing, alleging that he was “directly involved and stole money.”

• On the basis of a report published in The Hindu, Rahul said that “parallel discussions” were being conducted by the Prime Minister’s Office with the French side over Rafale deal.
• Defence Minister Nirmala Sitharaman dismissed the media report on the Rafale jet deal as "flogging a dead horse" and accused Gandhi and the Opposition of playing into the hands of multinational companies and vested interests.

It's "black and white" that Modi is involved, said Gandhi.