BQuick On July 31: Top 10 Stories In Under 10 Minutes
Here is a roundup of the day’s top stories in brief.
1. Zee Promoter Divests Up To One-Third Stake To Foreign Fund
Subhash Chandra’s Essel Group agreed to sell stake in Zee Entertainment Enterprises Ltd. to Invesco Oppenheimer, helping promoters of India’s largest broadcaster repay lenders.
- Invesco Oppenheimer Developing Markets Fund will acquire up to 11 percent stake in Zee from its promoters for up to Rs 4,224 crore, according to an exchange filing.
- Oppenheimer Fund already owns 7.74 percent stake in Zee. The deal could increase its stake in the broadcaster to over 18 percent.
- Depending on the final number of shares acquired, the deal price could yield a 10.5 percent or more premium to Wednesday’s closing price of Rs 361 per share.
Zee wanted a strategic investor for half of its stake. But that couldn't happen because...
2. Fiscal Deficit Rises, Core Sector Growth Slows
India’s fiscal deficit crossed 60 percent of the full-year target in June.
- The gap between the government’s revenue and expenditure rose to Rs 4.32 lakh crore at the end of June, according to Controller General of Accounts’ data.
- That’s 61.4 percent of the budget estimate of Rs 7.03 lakh crore for 2019-20.
- The fiscal deficit, however, was narrower than in June last year when it stood at 68.7 percent of the FY19 target.
Revenue receipts nearly doubled since May.
Growth in India’s core infrastructure sector, which comprises output of coal, crude oil, cement and electricity among others, slowed to a more than four-year low in June.
- The index of eight core industries grew 0.2 percent, data released by the trade ministry showed.
- That’s the slowest pace of expansion since April 2015, when output contracted 0.5 percent.
- The overall output was weighed down by contraction in crude oil, natural gas, petroleum refinery products and cement production.
3. Earnings: Eicher Motors, Indian Oil, UPL
Eicher Motors Ltd.’s profit fell in the quarter ended June as margin contracted amid the worst auto slowdown in a decade.
- Net profit declined 21.6 percent year-on-year to Rs 451.8 crore.
- Revenue of the two-wheeler maker, too, fell 6.5 percent to Rs 2,381.9 crore.
- Operating profit declined 24.1 percent to Rs 614.5 crore.
Indian Oil Corporation Ltd.’s first-quarter profit fell but beat analysts’ estimates.
- Net profit declined 41 percent quarter-on-quarter to Rs 3,596 crore.
- That compares with the Rs 2,370-crore consensus estimate of analysts tracked by Bloomberg.
- Revenue rose 4.2 percent to Rs 1,31,512 crore.
Better-than-expected performance came from an improvement in gross refining margin.
UPL Ltd.’s profit missed estimates in the June quarter because of an exceptional loss and higher depreciation and finance costs.
- Net profit of the agrochemical company stood at Rs 178 crore in the April-June period.
- UPL suffered an exceptional loss of Rs 72 crore due to costs related to acquisition of Arysta Lifesciences Ltd., among others.
- Revenue stood at Rs 7,906 crore—in-line with estimates.
4. VG Siddhartha’s Debt Trap
VG Siddhartha, founder of India’s biggest coffee chain, has died. The Coffee Day Enterprises Ltd. chairman’s body was found on Wednesday in the Netravati river in Dakshina Kannada district of Karnataka after 36 hours of intense search, officials said.
- Coffee Day Enterprises has named Independent Director SV Ranganath as interim chairman after Siddhartha’s death.
- The company board, where Siddhartha's wife Malavika Hegde is also a director, met on Wednesday to put in place a working structure of the company.
Here are other decisions that the board has taken.
Siddhartha had sold his stake in software services provider Mindtree Ltd. earlier this year to repay debt. But that would have helped cover only a third of his and Coffee Day Group’s liabilities.
- The total debt is around Rs 10,000 crore, according to filings with stock exchanges and the Ministry of Corporate Affairs analysed by BloombergQuint.
- A third of that came from private companies owned by Siddhartha.
- The remaining two-thirds of the burden is on the books of the Coffee Day Enterprises.
BloombergQuint puts the pieces together on Siddhartha’s debt picture.
5. Worst July In 17 Years
Indian equity benchmarks clocked their work July since 2002.
- The S&P BSE Sensex fell 4.9 percent this month to end the month at 37,481.12.
- The NSE Nifty 50 closed nearly 6 percent lower at 11,118.
- The broader market represented by the NSE Nifty 500 fell nearly 6.5 percent.
- The benchmark indices halted a two-day fall.
- The 31-share index closed 0.22 percent higher and the 50-stock index closed 0.29 percent higher.
- Eight out of 11 sectoral gauges compiled by National Stock Exchange ended higher.
Follow the day’s trading action here.
U.S. Stocks Mixed; Dollar Declines Ahead Of Fed
U.S. stocks fluctuated as investors digested earnings and the end of the most recent trade talks with China.
- The S&P 500 struggled for direction as weakness in consumer stocks helped counter tech gains fuelled in large part by Apple Inc. after the company lifted its forecast.
- The end of negotiations between Chinese and American officials without much of a sign of headway also weighed on sentiment, but the two sides did agree to continue discussions.
- The dollar weakened against major peers and 10-year Treasuries traded around 2.04 percent as markets readied for the Fed’s anticipated rate cut Wednesday.
- West Texas oil rose above $58 a barrel.
Get your daily fix of global markets here.
6. No Respite For Automakers
Car and two-wheeler sales declined again in seasonally weak July, according to a BloombergQuint survey of 10 large automobile dealers, suggesting consumption and discretionary spending hasn’t revived.
- Inventory levels of two-wheelers remains higher than that of cars, the survey revealed.
- India is in the midst of an auto sector slowdown that started around the Diwali festive season last year. That forced automakers to lay off workers and shut showrooms across the country.
- With slowing sales, auto dealers are finding it difficult to deal with banks, according to Nikunj Sanghi, managing director at JS Fourwheel Motors Pvt. Ltd.
Sales could decline by at least 15-20 percent over the previous year in July, a large automobile dealer said. Here’s why.
7. India’s Idle EVs Offered To Taxi Fleets
India’s Energy Efficiency Services Ltd., responsible for replacing the state’s vehicles with new-energy cars, is seeking to lease electric vehicles to cab companies amid delays integrating them into government fleets.
- EESL has made offers to lease EVs to Ola Cabs, a Softbank Group Corp.-backed ride-hailing service, and Indian taxi firm Meru Cabs, and plans to reach out as well to Uber Technologies Inc., according to Managing Director Saurabh Kumar.
- EESL already signed an agreement earlier this month with electric taxi startup Blu-Smart Mobility for 500 electric cars, he said.
The taxi companies would also be able to use the agency’s charging network.
8. It’s Getting Costlier To Borrow For Sunil Mittal
Bharti Airtel Ltd.’s cost of borrowing rose even as promoters infused funds in the telecom operator.
- Billionaire Sunil Mittal-controlled wireless carrier’s term loan and commercial paper borrowings, which carry a relatively higher rate of interest than most other debt, increased as of March over a year earlier, according to its annual report for 2018-19.
- This could be because of short-term loans taken ahead of fundraising, said Rajiv Sharma co-head of institutional equity research at SBICAP Securities.
- But Bharti Airtel’s total interest costs could fall in the ongoing financial year as it would have used proceeds from rights issue and the initial public offering of Airtel Africa to repay debt, he said.
The free cash flow of Bharti Airtel’s Indian mobile operations has been falling.
9. Cabinet Nod For More Judges In Supreme Court
The Cabinet approved increasing the strength of Supreme Court judges to 33 from 30, Union Minister Prakash Javadekar said.
- Once Parliament gives approval to the bill, the apex court will have a sanctioned strength of 34, including the CJI.
- The move also comes against the backdrop of rising cases in the top court which stand at nearly 60,000.
- The decision of the cabinet came days after Chief Justice of India Ranjan Gogoi wrote to Prime Minister Narendra Modi to increase the number of judges in the top court.
Here’s how the paucity of judges hurt India’s legal system.
The government on Wednesday hiked the subsidy on non-urea fertilisers to make available farm nutrients at affordable prices to farmers, a move that would cost the exchequer Rs 22,875.50 crore in this fiscal year.
- The subsidy for nitrogen has been fixed at Rs 18.90 per kilogram.
- Subsidy for phosphorous has been set at Rs 15.11 per kg.
- Subsidy for potash will be Rs 11.12 per kg and sulphur Rs 3.56 per kg.
This will help in promoting balanced use of fertilisers.
10. Five Biases To Shed When Investing
Biases are inevitable hurdles in making decisions, and awareness of bias is an important step, a check box that you are not falling into a trap, writes Radhika Gupta.
- Always view returns as an outcome of an investment journey and not a decision-making driver.
- Ask yourself the three reasons to invest in a fund – besides making a quick check on its past performance!
- Ask difficult questions that no one is asking, and don’t invest till you find the answers!
Before ‘when’ and ‘what’, ask yourself “why am I investing?”