BQuick On Jan. 22: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. Sajjan Jindal Wants The Ruias To Get Essar Steel Back
Billionaire Sajjan Jindal said the Ruia family should be a given a “fair chance” to take control of insolvent Essar Steel Ltd. despite legal restrictions as the erstwhile promoters are offering to repay the debt in full.
- “They (Ruias) should be given a chance. It is their company, if they’re paying 100 percent of the money, so why not,” Jindal, whose JSW Steel Ltd. had unsuccessfully tried to bid for Essar Steel, said on the sidelines of the World Economic Forum in Davos, Switzerland.
- Jindal said even if the Ruia’s offer is in conflict with bankruptcy law’s provisions, it will be a difficult decision for any judicial system to overlook Rs 12,000 crore of public money coming back.
- That’s not the only reason for Jindal to back the Ruias. The acquisition would give ArcelorMittal, the world's largest steelmaker, an entry into India.
Jindal has also hinted at a partnership with the Ruias.
2. Sun Pharma’s Loan Mystery Revealed
Sun Pharmaceutical Industries Ltd. said its loan to a third party that sparked corporate governance concerns was part of its settlement with Atlas Global Trading after it failed to supply drugs because of U.S. regulator’s restrictions on its Halol plant.
- The liability stems from Dubai-based Atlas Global assuming the damages on account of Protonix patent litigation settlement by Sun Pharma in 2013-14, India’s largest drugmaker said in a filing.
- Aditya Medisales Ltd., the company’s distributor owned by promoter Dilip Shanghvi’s family, will also be merged with a subsidiary, Sun Pharma said.
- It also denied providing any loans or guarantees to Suraksha Realty Ltd., owned by its executive director Sudhir Valia, brother-in-law of controlling shareholder Shanghvi.
Here’s how Sun Pharma responded to the corporate governance concerns.
3. What Top Investors Bet On In The Third Quarter
Nifty 50 tumbled in October as IL&FS crisis sparked a fear in India’s capital markets, aggravating the selloff caused by a rising crude. The benchmark recovered in the next two months but still ended the quarter ended December with a 0.6 percent decline.
Here’s what India’s best-known investors bought and sold during the volatile period:
- Chennai-based Rajiv Khanna, who invests in the name of his wife Dolly Khanna, increased stake in gold lender Muthoot Capital Ltd. and chemicals maker Nocil.
- Ashish Kacholia, known for betting on small caps, continued to back the Indian consumption story by increasing his stake in supermarket chain V2 Retail Ltd.
Find out how Rakesh Jhunjhunwala and Vijay Kedia tweaked their portfolios.
4. Sensex, Nifty Halt Five-Day Rally
Indian equity benchmarks snapped their five-day winning streak paced by losses in Vedanta Ltd., Mahindra & Mahindra Ltd. and Tata Steel Ltd.
- The S&P BSE Sensex fell 0.37 percent or 134 points to 36,445.
- The NSE Nifty 50 Index declined 0.36 percent or 39 points to 10,923.
- Fourteen of 19 sector gauges compiled by BSE ended lower led by the S&P BSE Metal Index's 2.3 percent decline.
- On the flipside, S&P BSE Healthcare Index was the top gainer, up 1.2 percent.
Follow the day’s trading action here.
U.S. stocks opened lower on Tuesday in the wake of a slide in European and Asian shares as a cloudy outlook for trade and growth continued to weigh on risk appetite.
- The S&P 500, Dow and Nasdaq all were weaker a day after American markets were shut for a holiday.
- EBay Inc. bucked the trend, surging in early trading after Elliott Management Corp. sent a letter to its board outlining steps it says are “urgently needed” to boost its value.
- Elsewhere, the pound rose after U.K. data showed the jobs market remains resilient and as Labour leader Jeremy Corbyn backed a plan that could open the door to a second Brexit referendum.
- West Texas Intermediate crude declined 1.1 percent to $52.69 a barrel, the largest drop in more than a week.
Get your daily dose of global markets, here.
5. Why Investors May Have Sent Prabhat Dairy Shares Swinging
Shares of Prabhat Dairy Ltd. swung more than 30 percent in a day after the company said that it will sell its milk-processing business that generates nearly all its revenue to France’s Groupe Lactalis.
- The stock opened about 20 percent higher as the deal was announced before the trading began.
- The initial euphoria died soon and the shares tumbled, closing 15 percent lower by the end of trade.
- That came despite the company saying in its statement that it will share a “substantial portion” of the proceeds with shareholders, besides strengthening its balance sheet.
- The transaction is structured in two parts. Prabhat Dairy will get:
- Rs 1,227 crore for sale of its stake in Sunfresh Agro to the French company.
- Rs 473 crore for transferring its dairy business to Sunfresh Agro on a slump-sale basis.
There’s uncertainty on how the company would reward shareholders.
6. Puneet Dalmia's Pricing Power Expectations
Pricing power is expected to return to cement makers due to strong domestic demand and consolidation in the sector, according to Dalmia Bharat Group’s Puneet Dalmia.
- “Over the last 15 years, prices have grown at 5 percent CAGR (compounded annual growth rate) annually. Over five to six years, however, prices grew at only 2-3 percent. So, there’s a scope to catch up,” Dalmia, managing director of the group, told BloombergQuint on the sidelines of World Economic Forum in Davos.
Even though we see some headwinds for organised real estate demand, it will be more than compensated by affordable housing and infrastructure spending.Puneet Dalmia, MD, Dalmia Bharat Group
- Listing of restructured entity is pending NSE and regulatory approvals.
- Tentatively, it will happen between Jan. 28 and Jan. 31, 2019.
The restructuring will help improve operating margin by at least a 100 basis points.
7. India’s Aviation Slowdown
The number of passengers flying in Indian airlines grew at its slowest pace in at least 16 quarters during the seasonally strong holiday period as carriers hiked prices to offset higher fuel cost and a weaker rupee.
- Passenger growth stood at nearly 12 percent in the three months to December, the lowest since at least the fourth quarter of financial year 2014-15, according to BloombergQuint’s calculations based on the data from Directorate General of Civil Aviation.
- Domestic airlines’ fuel consumption had indicated passenger growth had slowed in the world’s fastest growing aviation market.
- Signs of a slower passenger growth during the holiday period is a concern when airlines are expected to benefit from falling oil prices.
Airlines were also not able to fill up the the seats.
8. Bankers Vs RBI
A directive by the Reserve Bank of India asking banks to start linking floating retail loans to an external benchmark starting April 2019 is facing stiff opposition from the country’s lenders.
- The Indian Banks’ Association is seeking time with Reserve Bank of India Deputy Governor, NS Vishwanathan to ask the regulator to defer the implementation of external benchmark-linked rates on all floating rate retail loans, five bankers in the know told BloombergQuint.
- The association, a lobby body for the sector, has sought a meeting to discuss issues with implementing the new framework, these bankers said.
No one likes change. Least of all India’s bankers.
9. Bezos Vs Ambani
The battle for the Indian consumer was never going to be an all-American affair.
Walmart Inc.’s splashy acquisition last year of Flipkart Online Services Pvt., the homegrown e-tailer giving Amazon.com Inc. a solid run for its money, might have given the impression of a two-horse race. But, billionaire Mukesh Ambani wasn’t going to watch from the sidelines, writes Andy Mukherjee.
- And last week India’s richest man jumped right into the fray.
- Ambani, chairman of the petrochemicals-to-telecom conglomerate Reliance Industries Ltd., has a four-legged plan to connect India’s 30 million small retailers with consumers.
- One, neighborhood marts will be connected to Reliance Retail Ltd.’s footprint of almost 10,000 stores, offering them common inventory-management, billing and tax platforms as well as low-cost payment terminals. That will give the expanded retail network formidable sourcing power.
The second hook is Ambani’s telecom business.
10. ‘Focus On Agriculture As A Single-Point Agenda’
The cycles are repetitive and, by now, familiar.
- An election is approaching and the farm sector needs focus. What should be done to ensure that the nearly 60 percent of Indian population dependent on agriculture is not aggrieved?
- Raising support prices for key crops or waiving farm loans is an easy option. Certainly easier than undertaking structural reforms that may take years to pay dividends. We can do that later.
- But artificially high support prices may also prompt excess production, eventually leading to lower prices and incomes. Which brings the situation full circle and pressure builds to drum up another farm support scheme.
- That’s exactly what is playing out right now, said Jahangir Aziz, head of emerging market economics at JPMogran. A long-time watcher of the Indian economy, Aziz said that a farm support scheme, this time in the form of a cash transfer, cannot be ruled out even if it comes at the expense of fiscal consolidation.
Every time the arguments are exactly the same, which is that we understand there are medium-term structural changes needed but those will take a long time. However, we need immediate relief for the farming community because it is hurting. The same argument will be used again....This time there could be some kind of income transfer rather than high MSPs because they have tried that in past and it didn’t work.Jahangir Aziz, Head-Emerging Market Economics, JPMorgan
A single focus on reform of the agriculture sector is now imperative, said Aziz.