BQuick On May 10: Top 10 Stories In Under 10 Minutes
Here is a roundup of the day’s top stories in brief.
1. Etihad Submits Jet Bid
Etihad Airways PJSC has submitted a binding bid for Jet Airways Ltd. under a sale process being conducted by State Bank of India.
- In addition, Jet Airways also received three unsolicited bids, including one from its employees, said a person directly familiar with the matter.
- In an emailed response to BloombergQuint, Etihad said it cannot be expected to do most of the heavy lifting.
Etihad has been working consistently with key stakeholders in India over the past 15 months to help find a solution which would ensure Jet’s return as a viable and competitive Indian airline, and continues to do so.Etihad Airways Statement
- Other shortlisted bidders, including TPG Capital, Indigo Partners and National Infrastructure Investment Fund, did not submit binding bids on Friday.
The deadline to submit bids ended on Friday.
2. SBI Front-Loads Provisions
State Bank of India’s profit missed estimates for the three months ended March as provisions stood at Rs 16,500 crore.
- India’s largest lender reported a net profit of Rs 840 crore compared with a Rs 7,719-crore loss in the same quarter last year.
- “It looks like they have front-loaded their provisions and that has resulted in the net income missing the estimate,” Rati Pandit, analyst at Sunidhi Securities & Finance Ltd. told Bloomberg.
- Provisions nearly doubled to Rs 16,501 crore from around Rs 8,670 crore in the previous quarter.
Chairman Rajnish Kumar said the balance sheet has been fully repaired.
3. L&T’s Operating Margin Slips
Larsen & Toubro Ltd.’s profit for the March-ended period met estimates driven by its infrastructure and hydrocarbon segments.
- Net profit for the three-month period rose 8 percent year-on-year to Rs 3,418 crore.
- Revenue rose 10 percent to Rs 44,934 crore over last year.
- Nearly a third of the company’s orders came from outside India.
Yet, operating margin contracted 80 basis points.
4. Tata Steel’s Europe Plan Thrown Back Into Doubt
The future of Tata Steel Ltd.’s two giant European plants has been thrown into doubt after a long-proposed venture with German rival Thyssenkrupp AG looked at risk of collapsing.
- Tata, which operates the iconic blast furnace at Port Talbot in the U.K. and another big plant in the Netherlands, has been trying to find a solution for its European business since being hit by the 2016 commodity crisis, though many of its troubles stem from before then.
- With a European joint venture now likely to be rejected, it’ll have to find a plan B.
- Thyssenkrupp said Friday that it’s abandoning plans to split itself in two and that it didn’t expect regulators to approve the joint venture with Tata.
- The reaction from shareholders was telling: Thyssenkrupp surged the most on record while Tata slumped as much as 7.7% in Mumbai.
Tata Steel said it’ll keep focusing on improving its European business, while looking for new options that can clear regulatory hurdles.
5. Factory Output At 21-Month Low
Industrial output in India contracted for the first time in 21 months, adding to concerns about slowing growth in the economy. Both capital goods and consumer goods output fell suggesting that the slowdown may be deepening.
- The Index for Industrial Production fell 0.1 percent in March, compared with 5.3 percent in the same month a year ago.
- A month ago in February, IIP had registered a minor growth of 0.1 percent.
- Industrial output growth came in weaker than expected. A Bloomberg poll of 29 economists had forecast IIP growth at 1.2 percent.
- For the full financial year, industrial output grew by 3.6 percent compared to 4.42 percent for FY18.
A slowdown in manufacturing weighed on the industrial production.
6. Stocks Falter In 2019’s Worst Week
Indian equity benchmarks ended lower for the third consecutive week, clocking their worst week in over seven months.
- The S&P BSE Sensex closed 3.9 percent lower this week to end at 37,463.
- The NSE Nifty 50 ended at 11,278, down 3.7 percent.
- The broader market index represented by the NSE Nifty 500 Index closed 3.5 percent lower during the period.
- The benchmark indices extended their fall for the eighth consecutive trading session.
Follow the day’s trading action here.
U.S. stocks extended losses, leaving the S&P 500 poised for its biggest weekly drop this year, after the U.S. decision to slap fresh tariffs on Chinese goods overnight stoked fear that the measures will throttle economic growth and dent corporate profits.
- In Asia, the Shanghai benchmark jumped 3.1 percent as Chinese state-backed funds bought domestic shares. That helped an Asia-Pacific equities gauge toward its first gain of the week.
- The dollar weakened after a report showed inflation rose less than forecast in April.
- West Texas Intermediate was little changed at $61.68 a barrel.
- Uber is indicated to open at $45/$46; the IPO was priced at $45.
Get your daily fix of global markets here.
7. What Foreign Investors Bought And Sold In April
Foreign investors remained net buyers for the third straight month ahead of 2019 election results, marking the longest streak of inflows in nearly two years.
- Overseas investors pumped in over $3 billion into the equity market in April, according to data available on National Securities Depository Ltd.'s website.
- They had infused about $2.4 billion in February and nearly $5 billion in March.
- Foreign institutional investors remained buyers of oil and gas stocks for the fourth straight month, investing nearly 20 percent of the funds—or $610 million. The sector received the highest foreign monthly inflows.
Here’s how other sectors fared.
8. What’s Behind Dr. Reddy’s Stock Gain
Shares of Dr. Reddy’s Laboratories Ltd. returned best gains among peers in the past 12 months as India’s second-largest drugmaker by revenue shook off U.S. regulatory troubles, sold unprofitable portfolios and focused on reviving its domestic business.
- The company’s troubles began at the end of 2015 when the U.S. Food and Drug Administration effectively barred fresh approvals from three of its facilities.
- That came even as Indian pharma companies faced pricing pressure in the U.S., one of their largest markets, hurting their margins.
- Dr. Reddy’s has gained 41 percent in the past 12 months, beating its peers. By comparison, the Nifty Pharma Index rose 3.13 percent during the period.
BloombergQuint analyses what may have led to the change in its fortune.
9. Finance Ministry’s GDP Defence
The Finance Ministry defended the use of ‘out-of-survey’ services companies in calculating the gross domestic product, saying these are engaged in economic activities and cannot be excluded.
- This comes after a technical study on India’s services sector by National Sample Survey Organisation pointed out that 38.7 percent of a sample of 35,456 companies in the services sector were found to be ‘out-of-survey’ when the MCA-21 database was used to compute the GDP data.
- This includes closed, out-of-coverage, non-traceable units, the study said.
- Of the 38.7 percent, ‘out-of-coverage’ enterprises comprise 21.4 percent, the Finance Ministry said in a statement.
- These companies are engaged in some economic activity, possibly in the manufacturing sector, and cannot be classified as ‘out-of-coverage’ enterprises for GDP calculations, or included in the service sector survey, it said.
- Of the balance 17.3 percent ‘out-of-survey’ establishments, 0.9 percent are not considered for GDP estimation and the rest are either closed or non-traceable, it said.
The proportion of closed and non-traceable enterprises has been falling, the ministry said.
10. The Wrong Way To Deal With China
U.S. President Donald Trump has good reason to be skeptical about China's willingness to live up to its commitments in any trade deal. Seasoned foreign business executives on the mainland know that any agreement there represents the start of a bargaining process, not the end. Nor is it uncommon for Chinese officials to unpick terms at the last moment, just as they seem to have done ahead of talks this week in Washington, D.C, writes Andrew Browne.
- The fact remains that imposing more tariffs on the country as the U.S. just has, raising duties on $200 billion worth of Chinese goods to 25 percent, isn’t the way to get Beijing to behave better.
- It’s important for the White House to recognize that even when Chinese negotiators are sincere, they’re often handcuffed by domestic politics.
- The Chinese bureaucracy can be unyielding, and Chinese leaders are powerful but not omnipotent.
China will give ground when it perceives the alternative is too damaging and not from Trump's bullying.