BQuick On Jan. 9: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. Sun-Aditya Medisales-Shanghvi Nexus
In December a whistleblower letter and a brokerage sales note cast several doubts about disclosure and corporate governance standards at Sun Pharmaceutical Industries Ltd. Among those is the relationship between its Promoter and Managing Director Dilip Shanghvi and one of the company’s key distributors – Aditya Medisales Ltd.
A BloombergQuint investigation shows this relationship went back several years and ought to have been disclosed much earlier than it has been.
- Most of Sun Pharma’s drugs are distributed by privately held Aditya Medisales. And its no small business.
- Shanghvi has indirectly owned it probably since 2006. Yet, it was only disclosed a related party 11 years later.
2. Will Snapdeal’s Shrink-To-Survive Plan Work?
Snapdeal tottered through months of uncertainty before the online retailer called off sale talks with bigger homegrown peer Flipkart in July 2017. Japanese investment firm SoftBank—which owned stakes in both—wanted the competitors to merge to take on Amazon.com Inc. That didn’t happen, and Flipkart was eventually acquired by the U.S. retail giant Walmart Inc. for around $16 billion.
- Going by just numbers, the strategy Bahl dubbed Snapdeal 2.0 at least helped him curtail losses.
- That came after Snapdeal slashed expenses by reducing promotions and laid off staff to cut costs.
- It’s now leaner with a focus on tier-2 and smaller cities.
3. Sensex’s Four-Day Streak; Dow Rises
India’s Sensex rose for the fourth day in a row and clocked its longest winning streak since Dec. 19 led by ITC Ltd., HDFC twins, Axis Bank Ltd. and Infosys Ltd.
- The S&P BSE Sensex Index rose 0.64 percent or 232 points to 36,213.
- The NSE Nifty 50 Index climbed 0.49 percent or 53 points to 10,855.
- Thirteen of 19 sector gauges compiled by the BSE ended higher led by the S&P BSE FMCG Index’s 1.11 percent gain.
- On the flipside, S&P BSE Oil & Gas Index was the top loser, down 1.74 percent.
Stocks rose globally after the U.S. and China concluded three days of trade talks and appeared to be closer to agreement on a number of areas.
- The dollar dipped and Treasuries were steady as investors awaited the release of minutes from the Federal Reserve’s December meeting, which may offer insight into the decision to raise rates and the pace of future hikes.
- The S&P 500 Index was up as energy shares gained with West Texas crude breaking above $50 a barrel.
- And strength in semiconductors helped move the Nasdaq gauges higher.
4. Q3 Earnings: IndusInd Bank's IL&FS Game Plan
IndusInd Bank Ltd. met its third-quarter profit estimates despite making more provisions for its exposure to the IL&FS Group.
- Net profit rose 5.23 percent year-on-year to Rs 985 crore in the October-December period.
- Net interest income, or core income of the bank, rose 21 percent to Rs 2,288 crore.
- The bank maintained the IL&FS group account as “standard”, Managing Director Ramesh Sobti said. The bank had earlier disclosed that they have an exposure of Rs 3,000 crore towards IL&FS.
5. What To Expect From Q3 Earnings
Lower prices of crude and commodities, a fluctuating rupee and weaker-than-expected festive sales are among the factors that will impact India Inc.'s third-quarter earnings.
Here are the key trends to look for:
- Correction in global commodities will dent earnings of oil and metal stocks.
- Average rupee move expected to be a tailwind for information technology, pharma sectors.
- Monthly auto sales have shown weakness.
- Corporate-facing banks and government-owned lenders may outperform; non-bank financial companies may lag.
6. ‘Double-Digit Percentage’ Drop For Nifty In First Half Of 2019?
The party’s over for Indian equities, with stocks headed for another tough year as a shrinking global cash pool dims prospects of an improving economy and expected recovery in company earnings boosting stocks, according to Bank of America Merrill Lynch.
- “Imagine you are at a New Year party and happy to find out that there’s more room to dance but suddenly you realize that’s because everyone is leaving and the music has stopped,” Sanjay Mookim, BofAML’s India equity strategist, said at his office in Mumbai.
- “Indian equities are somewhat like that at the moment,” he said.
- Still, purchasing by local funds made India the best-performing equity market in Asia last year, outperforming even the U.S. and the MSCI emerging markets index in local currency terms.
7. Yes Bank Identifies CEO Candidates
The board of Yes Bank Ltd. said it has selected potential candidates to replace Founder and Chief Executive Officer Rana Kapoor, without naming the people.
- On the recommendation of the search and selection committee, the board finalised names of potential candidates for the position of managing director and chief executive officer, the private lender said in its filing.
- The company will submit an application to the Reserve Bank of India on Jan. 10 seeking approval for the appointment of the new MD and CEO, and make requisite disclosures to stock exchanges once its gets the RBI’s nod.
8. Indians Falling Out Of Love With FDs?
Fixed deposits have been the ‘park it and leave it’ option for many Indians who wanted to earn a return on their surplus cash without taking on any substantial risk. They offer safety and predictability.
- But the preference for bank fixed deposits is on the wane, with many customers choosing to hold their money in savings bank accounts for consumption or invest it in mutual funds.
- While fixed deposits, broadly known as term deposits in industry parlance, still form a majority of the deposit base of banks, their share has been declining.
- The latest round of basic statistical returns of banks, released by the Reserve Bank of India last week, shows that the share of fixed deposits fell to 57.7 percent in 2017-18 compared to 58.6 percent in the previous year.
9. CAG Pulls Up Modi Government
India’s national auditor flagged off the government’s increasing use of financing outside the budget, a practice that allows it to overshoot expenditure while maintaining the budget deficit targets.
- “The government has increasingly resorted to off-budget financing for revenue as well as capital spending,” the Comptroller and Auditor General said in its report on compliance with the Fiscal Responsibility and Budget Management Act tabled in Parliament on Tuesday.
In terms of revenue spending, off-budget financing was used for covering deferring fertiliser arrears/bills through special banking arrangements; food subsidy bills/arrears of FCI (Food Corporation of India) through borrowings and for implementation of irrigation scheme (Accelerated Irrigation Benefit Programme) through borrowings by NABARD under the Long-Term Irrigation Fund.CAG Report
10. The $1-Billion Air India Target
The government is eyeing around $1 billion from the sale of national carrier Air India in the next financial year, a government official told PTI.
- The government will initiate the process of strategic disinvestment of Air India in the second half of 2019-20 and in between it would work towards selling some of its subsidiaries and monetise assets.
- After a botched attempt to sell Air India in May last year, an Arun Jaitley-led panel in June decided to scrap the stake sale plan for the time being.
- It was decided to infuse more funds into the carrier and cut down debt by raising resources by selling land assets and other subsidiaries.