BQuick On July 26: Top 10 Stories In Under 10 Minutes

Here is a roundup of the day’s top stories in brief.

1. Earnings: Maruti Suzuki, Bajaj Auto, JSW Steel

Maruti Suzuki India Ltd.’s profit fell in the June quarter as buyers continued to stay away amid a consumption slowdown. Still, it beat estimates.

• Net profit of India’s largest carmaker fell 27 percent year-on-year to Rs 1,436 crore.
• Revenue declined 12 percent to Rs 19,720 crore.
• Sales volumes contracted 18 percent—the worst in at least five quarters.

This was the fourth quarter of declining auto sales for Maruti Suzuki.

Bajaj Auto Ltd.’s first-quarter profit met estimates even as raw materials expenses rose.

• Net profit rose nearly 1 percent year-on-year to Rs 1,125.70 crore.
• Revenue rose 3.8 percent to Rs 7,755.8 crore.
• Operating margin narrowed 250 basis points to 15.5 percent.

Here's what may have helped the automaker report a marginal increase in revenue.

JSW Steel Ltd.’s first-quarter profit more than halved as its operating margin dropped.

• Net profit fell 56 percent year-on-year to Rs 1,028 crore.
• Operating profit tumbled 27 percent to Rs 3,716 crore.
• Operating margin narrowed 620 basis points to 18.7 percent.
• JSW Steel is seeking to raise as much as $1 billion from the global market as it reported profit more than halved from a year earlier on weak prices and higher raw material costs.

This comes at a time domestic steelmakers are staring at twin headwinds.

2. Anil Agarwal’s Anglo American Exit And Vedanta’s Profit Drop

It once looked like Anil Agarwal could shake up the mining industry by amassing the biggest stake in Anglo American Plc. But in the end the Indian tycoon’s lack of financial firepower forced him to unwind his investment.

• For two years, Agarwal kept insiders and Anglo executives guessing about why the billionaire decided to take a position in the London mining giant.
• The deal -- structured in a complex way as to giving voting rights but not much exposure to the shares -- seemed to make sense only if Agarwal planned to push for a major change, like a takeover or breakup.
• In the end, he decided to do neither. On Thursday evening, Agarwal, one of India’s richest men, announced that he was exiting his investment because his returns were “achieved even sooner than expected,” according to a statement released by his holding company Volcan Investments Ltd.

Agarwal will likely make about $500 million from his investment.

Vedanta Ltd.’s profit fell further in the June quarter of 2019-20 as the prolonged shutdown of its key copper plant in Tamil Nadu and lower commodity prices continued to impact business.

• Net profit fell 11.9 percent over last year to Rs 1,351 crore.
• Revenue declined 3.7 percent to Rs 21,374 crore.
• Operating margin narrowed 360 basis points to 24.3 percent.

Vedanta has planned a capex of Rs 55,000 crore to increase production by 50 percent across verticals.

3. Another Weekly Loss For Nifty

Indian equity benchmarks extended declines for the third consecutive week, their longest weekly losing since the end of January.

• The S&P BSE Sensex ended 1 percent lower this week to close at 37,882.79.
• The NSE Nifty 50 lost 1.1 percent to close at 11,284.30.
• The benchmark indices halted their six-day losing streak on Friday. The 31-share index and the 50-stock index closed 0.14 percent and 0.29 percent higher respectively today.
• Ten out of 11 sectoral gauges compiled by NSE ended higher.

Follow the day’s trading action here.

Technology shares led U.S. stocks higher after Alphabet posted strong results and a larger-than-forecast increase in gross domestic product failed to deter expectations that the Federal Reserve will cut rates next week. The euro traded near a two-year low.

• The S&P 500 Index gained 0.5 percent to 3,019.39 as of 9:57 a.m. New York time.
• The Dow Jones Industrial Average climbed 0.2 percent to 27,197.18.
• The Stoxx Europe 600 Index increased 0.3 percent to 390.75.

Get your fix of global markets action here.

4. Cut The C.R.A.P.

The state of the economy is of little consequence to a churn in the markets, but valuation is paramount, according to Ravi Dharamshi.

• “The reason why markets might turn, despite the economy doing badly, is that we will hit such a trough in valuations that people will stop thinking about the next six months and start thinking about the next three to five years,” said the founder of portfolio manager ValueQuest Investment Advisors.
• The trigger for a market recovery will be around a big event—local or global, said Dharamshi. Predicting such an event is difficult but it is unlikely to happen in a hurry, he said.
• In such unpredictable times, he advised investors to cut C.R.A.P. in the portfolio.

Find out what C.R.A.P. stands for, according to Dharamshi.

5. Pay TV User Pie Shrinks By A Third

Mapping only paid subscribers, new rules that make users pay for only what they view, and a cheap data boom have shrunk India’s television pie—by nearly a third.

• The nation has 116.3 million active pay TV subscribers of cable and direct-to-home services as of April 1, according to data shared by TRAI on its website.
• The regulator has changed norms to only count paid users with set-top boxes, instead of the earlier practice of including anyone who recharged once in 120 days.
• The new method of mapping lopped off 31 percent pay TV users from last year’s overall base of 170.5 million.

Effectively, there are 54 million fewer paid television users than what the industry thought.

6. A New Process To Appoint Independent Directors?

Recent corporate governance scandals in India have prompted the government to consider measures to strengthen board independence. One way of doing that is to ensure independent directors are truly independent. Hence, the government is mulling giving more powers to minority shareholders for appointment of independent directors on company boards.

• The Ministry of Corporate Affairs is considering a dual voting system in which the election of an independent director must be approved by public shareholders, a senior government official told BloombergQuint requesting anonymity.
• The official cited a similar practice being followed in the U.K.
• As per the U.K. listing requirements, in the case of companies with a controlling shareholder (more than 30 percent voting power), the election or re-election of an independent director has to be approved by shareholders and independent shareholders.
• If both the sets of shareholders don’t approve the director appointment and the company remains desirous of appointing that person, it must propose another resolution after 90 days.

Here’s what the prevalent system is and how it may change.

7. Companies Law May Be Amended—Here’s What To Look For

To ensure more accountability and better enforcement, the government has proposed several amendments to the Companies Act, 2013.

• The changes seek to replace previous ordinances—issued in November last year and January, February this year—and add provisions to strengthen the corporate governance norms.
• The major changes include a tweak to the CSR norms for companies, new penalties for non-compliance and additional grounds for disqualifying a director.

BloombergQuint explains the seven key proposed changes to watch out for.

8. Shaktikanta Das Has A Suggestion For The IMF

Reserve Bank of India Governor Shaktikanta Das said the International Monetary Fund mustn’t allow the U.S. to bilaterally label countries as “currency manipulators”.

• The IMF is the only organisation with the authority to give such labels, Das said in his speech at the launch of a book on India’s relations with the fund over 25 years by V Srinivas.
• “A question that crops up is why has labelling become a bilateral prerogative when a multilateral institutional architecture exists for the purpose?” he questioned.
• Given this multilateral framework, the overlay of bilateral labelling raises questions, including the role of the IMF itself, he said.

The nature of shocks faced by these emerging economies, according to Das, have moved from balance of payment strains to full-blown economic crises.

8. Ritesh Agarwal’s $2 Billion (Y)OYO Spin

• Going all-in with borrowed billions!
• Leverage = thrill or kill?
• Softbank’s concealed hand?

Venture Capital investor Sarbvir Singh decodes the biggest move by an Indian startup founder.

10. Karnataka Gets A New Chief Minister

Bharatiya Janata Party’s BS Yediyurappa was as sworn as the chief minister of Karnataka for a fourth time on Friday in a sudden twist to the protracted high political drama in the state with a big challenge to manage numbers staring him in the face.

• Yediyurappa alone took the oath, succeeding HD Kumaraswamy three days after the Congress-Janata Das (Secular) coalition government crumbled under the weight of a rebellion by a big chunk of its lawmakers, when it lost the motion of confidence in the state assembly.
• Governor Vajubhai Vala administered the oath of office and secrecy to the 76-year old Yediyurappa, who is credited with leading the BJP to its first ever government in the south in 2008.

Yediyurappa has reverted to the earlier English spelling of his name, apparently influenced by numerology.