BQuick On May 16: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. Earnings: Hindalco, Bajaj Finance
Hindalco Industries Ltd.’s operating profit for the quarter ended March declined but surpassed analysts’ estimates due to better-than-expected performance of domestic aluminium division, including Utkal Alumina International Ltd.
- Ebitda fell 4.1 percent year-on-year to Rs 1,733 crore.
- Net profit, including Utkal Alumina unit, too, fell 17.8 percent to Rs 506 crore.
- The company announced a final dividend of Rs 1.20 apiece.
Aluminum business cushioned the results from the fall in copper production.
Bajaj Finance Ltd.’s profit for the quarter ended March surpassed estimates, while its asset quality remained stable.
- Net profit rose 57 percent year-on-year to Rs 1,176 crore.
- Net interest income, or core income, rose 50 percent to Rs 3,395 crore.
- Asset quality remained stable with gross non-performing assets ratio contracting to 1.54 percent from 1.55 percent in the previous quarter.
Assets under management grew 41 percent in the previous fiscal.
2. PNB’s Plan To Sell Stake In Housing Finance Arm Flops
Punjab National Bank informed stock exchanges that it is calling off a deal to sell equity stake in its housing finance arm to Varde Holdings Pte. Ltd. and General Atlantic.
- The deal has been called off after the two sides failed to get Reserve Bank of India approval for certain conditions linked to the transaction.
- In March, PNB had agreed to sell 1.08 crore shares of PNB Housing to Varde Holdings and a similar number to General Atlantic at a price of Rs 850 per share. The deal value stood at Rs 1,850 crore and was intended to help the lender raise capital.
- However, the transaction failed to get all requisite approvals.
- “The transacting parties to the Share Purchase Agreement have not been accorded approval by the Reserve Bank of India for exemption from application of pricing guidelines under the Foreign Exchange Management (Transfer or Issue of Security to a Person Resident Outside India) Regulations, 2017 ("FEMA 20-R"),” said PNB in an exchange notification.
- While it is not clear what specific conditions were not approved by the regulator, the stated regulations deal with pricing of capital instruments.
PNB said that all parties have mutually agreed to terminate the share purchase agreement.
3. NBFCs To Get Chief Risk Officers
Reserve Bank of India has asked every non-banking finance company, with an asset size of over Rs 5,000 crore, to appoint a chief risk officer to better manage risk.
- In a statement, the banking regulator said that these risk officers must be senior officials who are independent, so as to ensure highest standards of risk management.
- The central bank said that CROs must have a fixed tenure, with clearly specified roles and responsibilities.
- These officers can be removed or transferred before completion of their tenure only with the approval of the NBFC’s board.
- The CRO must report only to the managing director and chief executive officer or the risk management committee of the board.
4. Defence Canteens Cutting Back On Consumer Goods
The Canteen Stores Department, among the largest clients for consumer goods makers, saw its growth stagnate.
- Revenue rose by 5 percent on a yearly basis to about Rs 18,900 crore in the year ended March, according to a senior official privy to the numbers—the person didn’t want to be identified as the numbers are not public yet.
- The turnover was led by liquor and auto sales, which together accounted for over half the revenue.
- The non-profit retailer operates 4,500 department stores from Leh, Jammu & Kashmir in the north to Nagercoil, Tamil Nadu in the south. Called defence canteens, the outlets cater to armed forces.
Here’s why growth may have stagnated.
5. JLR’s China Revival Mission
Jaguar Land Rover is battling a saturated market in China as the U.K. premium carmaker attempts to steady a struggling sales operation that triggered a $4 billion writedown in February, Chief Executive Officer Ralf Speth said.
- Manufacturers are “fighting for volume” after the world’s biggest automotive market posted its first annual slide in demand in more than two decades, Speth told Bloomberg News.
- That makes it all the more vital that JLR establish its products at the top end of the market, he said. “We want do it in the premium business way,” he said.
- “The market is going down, but last year the premium market was nevertheless stable.”
- The U.K. maker of sports cars and luxury SUVs is overhauling its Chinese dealer network because it provides insufficient exposure to the country’s biggest cities.
Speth says there’s no quick fix for the issue.
6. Indian Indices, U.S. Stocks Rebound
Indian equity benchmarks registered their best close in nearly three weeks, recovering from Tuesday’s losses. The benchmark indices were led by the gains in Infosys Ltd. and HDFC Bank Ltd.
- The S&P BSE Sensex ended 279 points or 0.75 percent higher at 37,979.
- The NSE Nifty 50 ended at 11,257, up 0.9 percent.
- The broader market index represented by the NSE Nifty 500 Index ended 0.67 percent higher.
- Ten out of 11 sectoral gauges compiled by NSE ended higher.
Follow the day’s trading action here.
The rebound in risk assets from the trade-fomented sell-off continued, with U.S. stocks rising a third day and Treasuries slumping anew even as markets remain susceptible to fresh tariff headlines.
- The S&P 500 headed for the biggest three-day rally in more than a month, boosted in part by solid earnings from Cisco Systems Inc. and Walmart Inc. along with strong housing data.
- Trade tensions remained in the forefront, though, as the Trump administration threatened to blacklist China’s Huawei Technologies Co. and Walmart warned tariffs would lead to higher consumer prices.
- The 10-year yield topped 2.4 percent and the dollar strengthened.
- West Texas Intermediate crude increased 1.6 percent to $63.03 a barrel.
Get your daily fix of global markets here.
7. Tata’s Consumer Business Rejig At Fair Valulation?
Tata Global Beverages Ltd. will purchase the consumer business of Tata Chemicals Ltd. in exchange for shares issued to the chemical company’s shareholders. Since the maker of salt and specialty chemicals has 25.47 crore outstanding shares, the share swap ratio of 1:1.4 means 29.04 crore shares of Tata Global Beverages will be allotted to Tata Chemicals shareholders. Tata Global Beverages’ shares last closed at Rs 199 apiece. That implies an equity value of Rs 5,779 crore for the consumer division of Tata Chemicals.
- HSBC, in a recent report, assigned price-to-earnings multiple of 23 times for Tata Chemicals’ consumer business based on sum-of-the-parts valuation method. At this rate, the equity value of the company’s consumer business works out to Rs 7,867 crore.
- The brokerage, however, said that it was at a significant discount to its Indian peers.
- What that means is the Rs 5,779-crore valuation, based on Wednesday’s closing price, is even lower than HSBC’s discounted value, raising the question if the share-swap deal undervalued Tata Chemicals’ consumer business.
But Tata doesn’t think the valuation is low.
8. Why IndiGo’s Stock Slumped
IndiGo, India’s biggest airline, fell the most in a year amid reports its billionaire founders have hired law firms after differences cropped up between them.
- Rahul Bhatia and Rakesh Gangwal are trying to sort out disagreements about the carrier’s future strategy and clauses in the company’s shareholder agreement, the Economic Times newspaper reported.
- Legal firms Khaitan & Co and J Sagar Associates are working with the founders to find a solution, the newspaper said.
- The growth strategy of the airline “remains unchanged and firmly in place,” Chief Executive Officer Ronojoy Dutta said in an email to employees, which was seen by Bloomberg.
Investors were jittery with the stock falling 9 percent amid a cloudy outlook.
9. Distressed Farmers May Still Vote For Modi
As India’s massive election enters its final stage, Prime Minister Narendra Modi’s bid for re-election will turn on the sentiment of the country’s 26.3 crore farmers who support more than half the population. With crop prices depressed and farmers protesting and even committing suicide in their thousands, his ability to keep this vital section of the electorate on board could depend as much on his appeal to their nationalism as on cash handouts.
- To win over the disgruntled farmers, Modi announced an annual cash payment of Rs 6,000 in three equal installments to as many as 12 crore farmers.
- But it may be the country’s military flare-up with Pakistan that helps buttress the BJP’s rural vote.
- “Modi has given freedom to our commanders in the armed forces to strike the enemy which previous governments never did,” said Omparkash, a grain farmer in Baliar Khurd village in Haryana.
- “The government is not able to fulfill all the promises they had made but they are doing a decent job. Nationalism is important for us.”
There are still some disgruntled farmers who voted for Modi last time, but will not do that again.
10. Swanand Kelkar's Experiments With Digital Minimalism
Do you get a ‘Sunday evening wali gandi feeling’ of having wasted your weekend with too much Instagram, Twitter, Facebook, YouTube and WhatsApp?
Morgan Stanley’s Swanand Kelkar tried everything:
- Switch to feature phone,
- Block apps,
- Limit internet access
Nothing worked until...