BQuick On Jan. 18: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. Sun Pharma’s Whistleblower Woes
Sun Pharmaceutical Industries Ltd. plunged to its lowest point in almost six years after a media report that a new whistle-blower complaint alleging corporate governance lapses has been sent to India’s market regulator.
- Shares of the nation’s largest drugmaker slipped 8.4 percent to close at 390.75 rupees a share -- the lowest level since March 2013.
- The company said in a filing it wasn’t privy to the complaint.
- The nation's largest drugmaker requested the market regulator to examine an alleged second whistleblower complaint filed against the company.
- “There is a great asymmetry in the information circulating between analysts, investors and media leading to intense speculation,” it said in its letter to SEBI.
The allegations involve Rs 5,800 crore of dubious transactions.
2. Exim Bank Needs More Capital
The bad loan mess on the books of India’s listed public sector banks is now well documented. But far lesser attention has been paid to the troubles brewing in another government-owned lender which plays a crucial role in the economy — the Export Import Bank of India or Exim Bank.
- On Wednesday, the government committed to infusing Rs 6,000 crore into the bank over two years and agreed to double its authorised capital to Rs 20,000 crore.
- The decision is intended to help Exim Bank provide for bad loans which, like in the case of other government lenders, have surged. More importantly, it will help the bank correct its leverage ratio.
- The indicator, which reflects a bank’s total assets in relation to total capital, has surged to over 17 times for Exim Bank compared to the regulatory limit of 10 times.
But how did the situation get this bad?
3. A Bet On The Nifty Dropping 50%
An unusual trade is happening in the futures and options market.
- There’s a build-up in open interest—or the number of outstanding contracts—of June 2019 Nifty 50 call options for 5,000 strike.
- Simply put, someone has bought options to buy Nifty 50 at 5,000 points in June. That’s less than half the current value of the benchmark which is trading at more than 10,800 levels.
The build-up in the open interest in the contract is entirely new.
4. Sensex Flat, S&P 500 Rises
Indian equity benchmarks were little changed as gains in Reliance Industries Ltd. were offset by losses in Sun Pharma after another whistle blower complaint surfaced against the company.
- The S&P BSE Sensex rose 13 points to 36,387.
- The NSE Nifty 50 Index was flat at 10,907.
- Reliance Industries was the top Nifty gainer after it rose the most in over three months on profit beat in December quarter.
- Sixteen of 19 sector gauges compiled by BSE ended lower led by the S&P BSE Telecom Index’s 3.83 percent decline.
- On the flipside, S&P BSE Energy index was the top gainer, up 2.7 percent.
Follow the day’s trading action here.
U.S. stocks rose for a fourth day as the latest sign of easing trade tensions reinforced investor confidence heading into the heart of earnings season.
- The S&P 500 was set for its fourth weekly gain, the longest streak since August, after a report saying the U.S. was considering rolling back tariffs on China, which was later denied.
- The dollar gained against the yen and gold slid.
- The 10-year Treasury yield rose for a fifth day in a row to trade around 2.76 percent.
- West Texas Intermediate crude climbed 1.2 percent to $52.67 a barrel, the highest in five weeks.
Get your daily fix of global markets here.
5. Q3 Earnings: Wipro’s Bonus
Wipro Ltd.’s profit for the three months ended December beat estimates.
- Net profit rose 34.9 percent on a sequential basis to Rs 2,544 crore.
- Revenue rose 3.4 percent to Rs 15,059 crore.
- Ebit rose 43 percent to Rs 2,775.7 crore.
- Margin rose 510 basis points to 18.4 percent due to a weaker base last quarter.
- The company also announced a 1:3 bonus share issue.
Here’s how its business units performed.
6. How Reliance Plans To Pare Debt
Reliance Industries Ltd. plans to monetise its tower and fibre assets to reduce a debt of more than Rs 1.7 lakh crore.
- The oil-to-telecom conglomerate, in an analyst meet after announcing December-quarter results, said its telecom arm will look to monetise the assets through a special purpose vehicle where cash flows are predictable.
- Also, Reliance Jio Infocomm Ltd. is open to sharing towers and fibre assets with other telecom operators, it said.
- Reliance Jio has 2.20 lakh towers and nearly 3 lakh kilometres of optical fibre assets.
- The company’s decision to sell its non-core telecom assets is a “game changer”, according to Edelweiss Securities. “A sale would lead to a 33 percent dip in debt,” it said.
- CLSA expects the monetisation to be completed in the first half of 2019.
Rising debt has been an overhang for the company led by India’s richest man.
7. Apollo Hospitals: The Outlier
India’s largest hospital chain is the only stock among listed peers that gained in the last 12 months as operational performance improves and new branches break even.
- Shares of Apollo Hospitals Enterprise Ltd. rose 18 percent compared with the S&P BSE Healthcare Index’s 0.91 percent fall during the period.
- That’s when its peers Fortis Healthcare Ltd., Aster DM Healthcare, Healthcare Global Enterprises Ltd., Narayana Hrudayalaya Ltd. and Shalby Hospitals Ltd. slumped in the range of 2-37 percent, according to Bloomberg.
- Apollo Hospitals managed to improve the efficiency of its incumbent branches over the past few quarters, while its newer units, barring that at Nashik, are operational break even.
That’s only one reason.
8. What Government Can And Can’t Do In Interim Budget 2019
Can the Finance Minister make any significant changes to government policy in the coming interim budget? Former Finance Minister Yashwant Sinha offers an unequivocal “no”. Senior Advocate Arvind Datar points to the distinction between an “interim budget” and a “vote on account”.
There is no Finance Bill in an interim budget. And therefore, the Income Tax Act stands as it is.Yashwant Sinha, Former Finance Minister
If the interim budget is presented before the announcement of dates of the general election, the government is free to announce any policy decisions through it.Arvind Datar, Senior Advocate
Catch the #BQDebate here.
9. Rafale Deal: 'India Bargained Badly'
The focus is back on India’s Rs 59,000-crore purchase of Rafale fighter jets after a report by the Hindu newspaper said the hurried deal led to India paying 41 percent more for the aircraft.
- N Ram, a veteran journalist and the Hindu group chairman, in an article broke down the increase in price of each of the 36 aircraft India bought from France’s Dassault Aviation.
- Ram told BloombergQuint that his findings show that India negotiated poorly with Dassault Aviation, possibly because the Prime Minister had already announced the deal.
Dassault refused to budge on this and it is certainly controversial that the Indian government was not able to prevail. Mr. Modi needs to take responsibility for this.N Ram, Chairman, Hindu Publishing Group
Watch the full interview here.
10. India’s Marathon Economy
It is 6 a.m. on a Sunday and Murlidhar Batra is already warming up alongside 50 others for a 14-kilometre run. He is 58 years old. A year and a half back, a painful cervical condition made even walking difficult. After therapy, a motivated Batra signed up with a local fitness club, which started him off on regular walks and then a dedicated training regimen.
Three 10-km marathons later, Batra has shed five kilograms and his health problems.
- Batra is part of a growing tribe of fitness-conscious Indians taking to long-distance running with the rising popularity of marathons.
- That’s spawned a business ecosystem which, according to Vivek Singh, the head of Procam International that launched the Mumbai Marathon, is now worth $350 million.
- From footwear and apparel brands to wearables and training companies, all sniff an enormous opportunity in a nation where more than half of 1.3-billion population is less than 25 years old.
Brands are seeing many more such opportunities as Indians grow health conscious.