BQuick On Jan. 27: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. Easy Money Cheer For Some Borrowers
An extended period of surplus liquidity has driven down the cost of short-term borrowings for companies perceived to be safe in an environment ridden with risk.
- The large amount of money chasing relatively few firms has led to a distortion in the market, where short-term borrowing costs for some have fallen below the Reserve Bank of India’s policy repo rate.
- The liquidity surplus of Rs 2-3 lakh crore meant that borrowing costs for a few corporates have been closer to the reverse repo rate of 4.9 percent.
- Data from the RBI showed that the lower end of the range at which commercial paper for short-term borrowings was issued remained below 5 percent for three months between October and December.
Which companies are the lucky ones to see their borrowing cost come down?
2. Air India Stake Sale: What’s Different This Time?
Having failed to draw buyers for India’s most ambitious privatisation effort in 2018, the Modi administration sweetened the terms in its fresh bid to sell debt-laden Air India by easing eligibility criteria and allowing sale and leaseback of aircraft.
- It comes more than a year after not even a single buyer bid for Air India, the nation’s third-largest carrier by market share, that has nearly $8 billion in debt.
- Interested investors have to submit their interest by March 17 and EY is the transaction adviser.
- To make Air India more lucrative this time, the government has invited bids for its entire stake in Air India, including a 100 percent ownership in overseas budget carrier Air India Express Ltd. and a 50 percent stake in ground handling unit Air India SATS Airport Services Pvt. Ltd.
Besides, even the debt transfer is lower. Here’s how the government has changed the terms from the last time.
3. Dr. Reddy’s Surprise Loss; HDFC, IndiGo: Profits Spike
Dr. Reddy’s Laboratories Ltd. posted a surprise loss in the quarter ended December on account of impairment costs.
- The drugmaker’s loss stood at Rs 570 crore in the October-December period against a profit of Rs 485 crore a year ago, according to an exchange filing. A consensus of analysts tracked by Bloomberg had estimated a Rs 492-crore profit.
- Total impairment charge stood at Rs 1,320 crore during the quarter—Rs 1,113.7 crore towards the generic of Nuvaring (a vaginal ring to prevent pregnancy) and Rs 206.3 crore towards other product related intangibles.
- Revenue, however, rose 14 percent to Rs 4,384 crore.
Its operational performance beat estimates.
Housing Development Finance Corporation Ltd.’s quarterly profit beat analysts’ estimates aided by a one-time fair value gain resulting from the merger of its arm, Gruh Finance Ltd., with Bandhan Bank Ltd.
- Profit rose 3.96 times year-on-year to Rs 8,372.49 crore in quarter ended December.
- During the quarter, HDFC accounted for a fair value gain of Rs 9,020 crore on conversion of its shareholding in Gruh Finance to shareholding in Bandhan Bank.
- Core net interest income, excluding rental fee and other income, rose 13.6 percent to Rs 2,957.8 crore.
- Net interest margin for the nine-month period ended December 2019 widened to 3.3 percent from 3.08 percent over last year.
Here’s how profit rose so sharply.
InterGlobe Aviation Ltd.’s quarterly profit rose, beating estimates, on better yields and higher passenger growth.
- Profit of the operator of India’s largest airline, IndiGo, rose 2.6 times year-on-year to Rs 490 crore.
- Yields—a measure of average fare per passenger per kilometre—rose to Rs 3.9 per kilometre from Rs 3.8 a year ago.
- Higher passenger load factor—a measure of seat occupancy—and lower fuel prices also aided the carrier’s bottom line.
Revenue growth was at a five-quarter low.
4. Sensex’s Worst Fall In Three Weeks, U.S. Stocks Tumble
Indian indices registered their steepest fall in three weeks, led by the declines in HDFC Bank Ltd., HDFC Ltd. and Reliance Industries Ltd.
- The S&P BSE Sensex fell 1.1 percent, or 458 points, the most since Jan. 6, to 41,155.12.
- The NSE Nifty 50 fell 1.06 percent to 12,119.
- The broader markets represented by the NSE Nifty 500 Index fell 0.83 percent.
- The market breadth was tilted in favour of sellers.
- Ten out of 11 sectoral gauges compiled by NSE ended lower.
Follow the day’s trading action here.
Global stocks plunged and bonds rallied as intensifying concern over the impact of the deadly coronavirus roiled global markets.
- The S&P 500 Index slid the most in almost four months, with technology shares from Nvidia Corp. to Apple Inc. leading the drop.
- Treasury 10-year yields fell to the lowest level since October, while the dollar rose against most major currencies.
- The Swiss franc, the Japanese yen and gold paced gains in haven assets. The offshore yuan slid.
- Oil slipped more than 2 percent to $52.84 a barrel.
Get your daily fix of global markets here.
5. New Bank Of Baroda CEO Expects Merger Pains To Abate Next Fiscal
Bank of Baroda, India’s second-largest public sector lender, saw its loan book grow by less than 1 percent year-on-year in the quarter ended Dec. 31, well below the 7-8 percent growth in banking sector credit.
- This sub-par performance in lending, according to the bank’s new Chief Executive Officer Sanjiv Chadha, was largely because of the ongoing merger between Bank of Baroda, Dena Bank, and Vijaya Bank.
- The merger, which was announced in October 2018 and became official in April 2019, is still pending completion on the ground level.
- Chadha, whose appointment was announced just a week ago, explained that the corporate loan books of the three banks are now completely merged and are operating on the same technology platform.
- This should allow the bank to begin growing its loan book once again while maintaining control over asset quality.
Watch the full interview with the new Bank of Baroda chief where he explains why the macroeconomic climate is making loan growth difficult.
6. DHFL Promoter Kapil Wadhawan Arrested
The Enforcement Directorate has arrested the Chairman and Managing Director of Dewan Housing Finance Ltd., Kapil Wadhawan, in connection with its money laundering probe against dead gangster Iqbal Mirchi and others, officials said on Monday.
- They said Wadhawan has been arrested under the Prevention of Money Laundering Act as he was allegedly not cooperating in the probe.
- The case relates to Mirchi's Mumbai properties, which have been called as proceeds of crime by the Enforcement Directorate.
- Three such properties were sold to Sunblink, the company linked to Wadhawan brothers Kapil and Dheeraj.
The agency was probing Mirchi and his connections for illegal dealings in Mumbai real estate.
7. Maruti Suzuki Hikes Car Prices
India's largest carmaker Maruti Suzuki India Ltd. on Monday said it has increased prices of select models by up to Rs 10,000 to offset the impact of rising input costs.
- The price change varies across models and ranges up to 4.7 percent (ex-showroom Delhi) and are effective from Jan. 27.
- The price of entry-level model Alto range has gone up in the range of Rs 6,000-9,000, S-Presso between Rs 1,500 to 8,000, WagonR between Rs 1,500 and Rs 4,000.
Find out price change of other Maruti Suzuki models here.
8. What Top Brokerages Expect From Budget 2020
Most analysts expect the government to spend more on infrastructure even as they cautioned that the task of reviving the sluggish economy, while maintaining fiscal discipline, is going to be difficult.
Several brokerages said they expect some relief on the personal income tax front to boost consumption.
- Ambit expects an increase in exemption limit should be expected on the personal income tax front.
- Barclays expects the government to set an even larger target of Rs 1.25 lakh crore for divestment of assets in FY20-21.
- CLSA predicts higher exemption for housing and the rollback of the long-term capital gains tax.
Here’s a look at what other brokerages expect from Budget 2020.
9. The Race To Stop The Coronavirus
In early January, doctors in Wuhan, a transportation and tech hub in central China, worked frantically to save the life of a 61-year-old man infected with a new and unknown virus. As January draws to a close, the virus, a strain of the coronavirus family of pathogens, has spread to four continents.
- Coronaviruses are known for infecting primarily bats, pigs and other animals and also for their ability to migrate from animals to humans—and also from one human to another.
- Coronaviruses, named for crown-like spikes on their surfaces, can mutate readily after jumping to human hosts.
- China’s top decision-making body has taken charge of the crisis, appointing a special team to oversee everything from organising medical care to scientific research in a bid to control an epidemic that’s killed at least 80 people and sickened more than 2,700 worldwide.
Read the story behind the race to contain China’s killer bug.
10. Smart TV Wars!
Xiaomi Corp. upstaged Japanese and South Korean consumer electronics giants to become India’s largest smart TV brand. As cheap data fuels demand for connected devices, a compatriot is catching up, increasing Chinese dominance.
- Since entering India in 2016, TCL Corp., the world’s second-biggest maker of TVs, threatens to overtake Japan’s Sony Corp. and is not too far from Samsung Electronics Co. Ltd. and LG Electronics Inc. in the smart TV market.
- In 2019, 15 million TV units were sold in the country, and 45-50 percent of those were devices that can access the internet to stream content from services such as Netflix and Amazon Prime Video.
- TCL’s overall share in the Indian market stands at 6 percent and it aims to boost it to 11 percent by the end of 2020.
Read more about why smart TVs are getting so popular even among the price-conscious buyers.