BQuick On Jan. 2: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. Swap Ratio For Three-Way Merger
The merger between Bank of Baroda, Dena Bank and Vijaya Bank moved a step closer to completion with the Union Cabinet approving the deal and banks announcing share swap ratio for the transaction.
- For every 1,000 shares of Dena Bank worth Rs 10 each, Bank of Baroda will issue 110 shares of Rs 2 each, the lender said in a stock exchange notice.
- Also, Vijaya Bank’s shareholders will get Bank of Baroda’s 402 shares of Rs 2 each for every 1,000 shares of Rs 10.
- According to BloombergQuint calculations, the swap ratios imply that:
- Dena Bank has been valued at a discount of 27 percent to the current market price.
- Vijaya Bank has been valued at a discount of 6 percent to the current market price.
2. Jet Airways Defaults
Jet Airways India Ltd. has failed to repay its lenders amid ongoing cash crunch and financial stress.
- The company said in an exchange filing that it missed payment of interest and principal installment due on Dec. 31, 2018 to a consortium of Indian banks led by India’s largest lender State Bank of India due to “temporary cashflow mismatch.”
- Jet Airways had earlier mentioned that its liquidity position is stretched, and it has been delaying some payment to vendors and employees. It is the first time that the private carrier has defaulted on a loan repayment.
- The Naresh Goyal-led airline owed as much as Rs 3,364 crore to Indian banks as on Sept. 30 and needs to meet a debt repayment obligation of over Rs 1,500 crore in the current financial year.
3. Indian Markets, U.S. Stocks Tumble
Indian equity benchmarks fell along with the rupee mirroring losses in European and Asian markets after evidence of slowing Chinese growth dashed investor hopes for an upbeat start to 2019.
- The S&P BSE Sensex Index fell 1 percent or 363 points to 35,891.
- The NSE Nifty 50 Index dropped 1.08 percent or 118 points to 10,792.
- All the 11 sector gauges compiled by National Stock Exchange ended lower.
U.S. stocks sank as investors began the new year anxious about the same issues that sent equities to the worst December rout since the Great Depression.
- The latest blow to investor sentiment came from a weakreading on Chinese manufacturing, adding to concern that global growth is slowing.
- The S&P 500 Index slid back toward a bear market, joining a slump in stocks from Asia to Europe.
- Safe havens rallied, with gold, bonds and the yen higher.
- The Bloomberg Dollar Spot Index climbed 0.4 percent, the first advance in a week and the largest increase in more than a week.
- West Texas Intermediate crude dipped 1.6 percent to $44.69 a barrel.
4. RBI Blinks On MSME Debt
Banks and non-bank lenders could restructure up to Rs 10,000 crore in loans to micro, small and medium enterprises without classifying them as bad debt, according to an estimate by rating agency ICRA. This, after the Reserve Bank of India gave in to demands for easier loan restructuring terms for small businesses.
- The ‘one-time’ restructuring scheme announced on Tuesday allows for loan terms — such as interest rates and tenures — to be revised without a change in asset classification from standard to non-performing.
- Known as regulatory forbearance in industry parlance, such restructuring was widely misused for evergreening of bad corporate loans in the 2011-13 period.
- The benefits were withdrawn for large corporate loans in 2015 but have now been brought back for MSME loans up to Rs 25 crore.
5. Manufacturing PMI Dips
India’s manufacturing sector activity slowed down in December from the previous month but remained the second highest in 2018 as companies continued to scale up production and employment in response to strong inflows of new business.
- The Nikkei India Manufacturing Purchasing Managers’ Index fell to 53.2 in December from 54 in November, the highest in 11 months.
- This was, however, the 17th consecutive month that the manufacturing PMI remained above the 50-point mark.
6. Infibeam’s Deal Under The Scanner
Infibeam Avenues Ltd.’s auditor sought a detailed report of a probe into its merger with Avenues India Pvt Ltd. even as corporate governance concerns have destroyed more than three-quarters of online retailer’s market value.
- SRBC & Co LLP, the audit arm of EY India, citing information provided by a third party, had asked the management to conduct an independent investigation into “merger and acquisitions” and other “financial statement-related matters” in the first quarter for financial year 2018-19.
- The company, in its September-quarter earnings filing, said an independent chartered accountant firm investigated the matters and the initial report didn’t contain “any material adverse observation”.
- It’s obvious that the auditor’s concerns stemmed from the merger with Avenues India because the company had only one M&A in FY18.
- Infibeam, in an emailed response to BloombergQuint, also confirmed that its Rs 2,000-crore all-stock deal with the payments gateway was probed.
7. Why Oil Marketers Should Brace For A Loss
Lower crude oil prices and falling refining margins are likely to hurt state-run oil retailers’ earnings in the quarter ended December.
- Brent crude—the Asian benchmark—averaged 9 percent lower and the Singapore gross refining margin fell to its lowest in five years at the end of December, according to data compiled by BloombergQuint.
- With a fall in oil prices and a weaker refining margin, there is a high probability that fuel retailers could suffer a loss in the third quarter, according to Nitin Tiwari, oil and gas analyst at Antique Stock Broking.
- If the market price falls, refiners who bought the existing stock at a higher rate end up selling it cheaper and vice-versa. Brent crude averaged lower at $68.81 a barrel in the quarter ended December over excess supply and tepid demand growth.
8. The Rafale Debate Intensifies
The Indian National Congress demanded answers from Prime Minister Narendra Modi on Goa Chief Minister Manohar Parrikar's purported claim that he had a file on Rafale "lying in his bedroom" and asked if this was the reason why a joint parliamentary committee probe was not being ordered.
- Meanwhile, former Union ministers Yashwant Sinha and Arun Shourie, and advocate Prashant Bhushan moved the Supreme Court, seeking review of its Dec. 14 verdict dismissing all public interest litigations alleging irregularities in the procurement of 36 Rafale jets from France.
- In their review plea, they alleged that the judgment "relied upon patently incorrect claims made by the government in an unsigned note given in a sealed cover" to the apex court.
9. Farm Loan Waivers May Make Booze Costlier
A spate of political promises of waivers on farm-loan repayments in Indian states has an unlikely victim: alcohol companies.
- States are expected to hike taxes on liquor -- one of the top three revenue sources -- as they need to plug the fiscal hole arising from bearing the burden of farm-loan repayments.
- Any rise in tax will impact alcohol demand as companies will have to pass the additional levy to consumers, according to Edelweiss Securities Ltd.
10. Where To Holiday In 2019
This year, treat your travel bucket list like your office to-do list and tackle the timeliest items first.
- That means sailing through Brazil’s jaguar-filled (and newly luxurious) Pantanal while everyone else heads down the Amazon, and skipping overdeveloped Bali in favor of Bodrum, where a five-star-resort renaissance is under way.
- Those are just two of twenty-plus destinations to prioritize in 2019, all chosen by Bloomberg's trend-spotting editors and global correspondents for their so-hot-right-now status.
- Among their draws: skyrocketing cultural cachet, major hotel openings, and new restaurants worth traveling for.