BQuick On July 24: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. Major Bureaucratic Reshuffle
The Narendra Modi government announced a major reshuffle of secretary-level bureaucrats.
- The current Economic Affairs Secretary Subhash Chandra Garg has been appointed as the Power Secretary, according to a notification from the Appointments Committee of the Cabinet.
- The current Department of Investment and Public Asset Management Secretary Atanu Chakraborty will replace Garg as the Economic Affairs Secretary.
- Anil Kumar Khachi will take over from Atanu Chakraborty as the secretary in charge of the disinvestment department.
- Guruprasad Mohapatra has been appointed as the secretary in charge of the Department for Promotion of Industry and Internal Trade. He will replace the incumbent Ramesh Abhishek who is set to retire on July 31.
- Anshu Prakash will take over as the Telecom Secretary, replacing Aruna Sundarajan, who is set to retire at the end of this month.
2. Mystery Company Owes Reliance Infra Rs 7,000 Crore
Reliance Infrastructure Ltd. reported its worst quarterly loss ever in the three months ended March. But one more thing stood out in its earnings: a large amount due from a mystery firm.
- The Anil Ambani company, on a standalone basis, had investments and receivables worth Rs 7,083 crore outstanding from an “independent” engineering, procurement and construction firm, according to its stock exchange filing.
- That’s seven times its standalone revenue from operations for entire 2018-19.
- Yet, for reasons not clear Reliance Infra has chosen not to name the EPC company.
A BloombergQuint investigation found several links between the EPC firm and the Ambani group.
3. RIL’s Cash Flow Woes
Reliance Industries Ltd.’s free cash flow fell to its lowest in at least 11 years as its capital expenditure rose and the company took more time to convert investments in inventory into cash.
- The Mukesh Ambani-controlled oil-to-telecom conglomerate’s free cash flow fell to negative Rs 1.10 lakh crore in financial year 2018-19, the worst since at least FY09, according to Reliance Industries’ annual report reviewed by BloombergQuint.
- If the company fails to generate enough cash to repay its debt, it will either have to refinance debt or sell stake in assets to repay the debt.
- Total borrowings up for repayment in FY20 are 7 percent higher than the previous fiscal.
The cash-conversion cycle worsened from 27 days to 8 days.
4. Earnings: Asian Paints, Bharti Infratel
Asian Paints Ltd.’s net profit for the June quarter beat estimates as margin rose and volumes of the decorative business surged.
- Net profit rose 17.5 percent year-on-year to Rs 655 crore.
- “The decorative business segment in India registered a high double-digit volume growth and delivered a strong performance across regions,” Chief Executive Officer KBS Anand said.
- Operating profit rose 24 percent to Rs 1,156 crore.
A change in accounting standards boosted the margin.
Bharti Infratel Ltd.’s revenue in the June-ended quarter rose beating analyst estimates that were expecting a decline.
- Revenue rose 3.1 percent sequentially to 3,711 crore. Analysts had pegged revenue at Rs 3,577 crore.
- Net profit rose over 45.8 percent to Rs 887 crore.
- Operating profit increased 27 percent to Rs 1,895.2 crore.
- The rise in profit and Ebitda was due to some one-off adjustments and a change in accounting standard.
Tenancy ratio declined further to 1.87.
5. Sensex Falls Again, U.S. Stocks Mixed
Indian equity benchmarks extended declines for the fifth consecutive trading session, clocking their longest losing streak in over two months.
- The S&P BSE Sensex closed 0.36 percent or 135 points lower at 37,847.65.
- The NSE Nifty 50 fell 0.53 percent or 60 points to 11,331.05.
- The broader market represented by the NSE Nifty 500 Index fell 0.8 percent.
- The markets are expected to fall 8-10 percent from current levels, according to Narnolia Financial Advisors’ Vineeta Sharma.
- The market breadth was tilted in favour of sellers.
- Nine out of 11 sectoral gauges compiled by NSE ended lower.
Follow the day’s trading action here.
U.S. stocks climbed from the lows of the day as investors mulled weak economic data and mixed corporate results, including an unexpected quarterly loss for Boeing.
- All three of the major American indexes opened lower for the first time this week before the S&P 500 and Nasdaq turned flat in the wake of the U.S. opening an antitrust probe into big technology companies and Caterpillar projected 2019 earnings at the low end of forecasts.
- The dollar declined for the first time in four days ahead of Thursday’s European Central Bank meeting.
- Treasuries advanced along with bonds in Europe.
- Crude oil advanced for a fourth session, trading around $57 a barrel in New York.
Get your daily fix of global markets here.
6. $10-Billion Global Bond Sale In October?
India is considering an option to raise $10 billion in one go from its first overseas bond sale as early as October, people with knowledge of the matter told Bloomberg News.
- The government would prefer to sell yen or euro-denominated debt so as to offer lower yields, the people said, asking not to be identified as the plan is still under discussion.
- A dollar bond isn’t ruled out given there would be more liquidity, while it could also decide to sell the debt in multiple sales over a longer period, they said.
- India is banking on the novelty of a debut offering at a time when investors are desperate for returns as the world’s pile of negative-yielding debt grows to a record $13.4 trillion.
- While Saudi Arabia and Argentina have raised more money in recent years from international bond sales as emerging markets return in popularity, Prime Minister Narendra Modi’s government will be working to a tight timeline.
7. ICRA Downgrades Yes Bank’s Long-Term Rating
Ratings agency ICRA Ltd. has downgraded the long-term credit rating for Yes Bank Ltd., citing increased stress on its loan book and weak capital position.
- The rating agency has cut the rating on nearly Rs 32,000 crore worth of bonds.
- According to ICRA, the downgrade takes into account an increase in the proportion of assets rated BB or below on Yes Bank’s loan book.
- The private sector lender’s gross non-performing assets and BB and below rated exposure increased to Rs 41,558 crore as on June 30 from Rs 30,772 crore as on March 31, the rating agency said.
With the increased stressed portfolio, the credit provisioning is expected to remain high, translating into a moderation in the earnings profile in the near term.ICRA Ratings Report
ICRA also takes into account the moderation in Yes Bank’s core equity Tier-1 capital ratio.
8. IndiGo To Have New Policy For Related Party Deals
The board of InterGlobe Aviation Ltd., has approved a new policy on the related party transactions, amid the IndiGo promoter dispute between Rakesh Gangwal and Rahul Bhatia, people familiar with the matter told PTI on Wednesday.
- The people cited above said the policy on related party transactions was approved by the board unanimously.
- The company's board —which has six members, including Gangwal and Bhatia —met for two days on July 19 and 20.
- The differences between co-promoters Bhatia and Gangwal came into the open earlier this month after Gangwal wrote a letter to the SEBI flagging concerns about alleged corporate governance lapses at InterGlobe Aviation.
- The allegations have been refuted by the Bhatia camp.
Here’s how the airline will handle related party transactions under the new policy.
9. Expect A Lower Salary Hike This Year
India Inc. may offer a double-digit salary hike this year even as salary growth and job creation have turned modest this year, according to TeamLease.
- But the median salary hike this year, the staffing solutions firm said in a report, is expected to be around 10.9 percent from last year’s 11.4 percent.
- “Consolidation is an inevitable consequence of heady growth,” TeamLease’s Co-Founder and Executive Vice President Rituparna Chakraborty was quoted as saying in the report.
- Following the unprecedented rise in increments last year, the job market has let it settle down, she said.
- Salaries rose by a minimum of 10 percent and a maximum of 11 percent in eight out of 17 employment sectors in six of the nine cities surveyed in 2019. That compares with last year’s maximum salary hike of 15 percent.
The analytics-based approach to determining pay has got more pervasive.
10. Facebook To Pay $5 Billion For Privacy Violations
Facebook Inc. agreed to pay a record $5 billion to resolve a U.S. investigation into years of privacy violations, a settlement that increases the board of directors’ responsibility for protecting users’ data while changing little about the company’s lucrative advertising business.
- The agreement, announced Wednesday by the Federal Trade Commission, will for the first time end CEO Mark Zuckerberg’s final authority over privacy decisions, creating an independent privacy committee of directors on the company’s board, according to an FTC statement.
- The accord will also require Facebook to keep a tighter leash on third-party apps, perform regular sweeps for unencrypted passwords and refrain from using telephone numbers obtained for security purposes for advertising.
Still, the agreement does little to alter Facebook’s data collection practices.