BQuick On May 2: Top 10 Stories In Under 10 Minutes
Introducing Election Soundtrack, a daily podcast that’ll get you up to speed with everything that you need to know about Elections 2019.
Here is a roundup of the day’s top stories in brief.
1. For Anil Ambani, It’s Trouble On The Left, Trouble On The Right
Troubles for the Reliance Anil Dhirubhai Ambani Group have spread beyond the conglomerate’s beleaguered telecom firm, with rating agencies downgrading two financial services firms run by the group and creditors starting to sell shares of other group companies pledged with them.
- Last weekend, Care Ratings assigned a ‘D’ or default rating to Reliance Home Finance Ltd. and Reliance Commercial Finance Ltd. citing delays in repayment of bank debt.
- The group acknowledged that there had been “minor delays”.
- In explaining the downgrades, Care Ratings highlighted that the group’s asset monetisation plans are taking longer than anticipated.
These delays have increased the inherent risk in equity-backed bonds issued by Anil Ambani group firms.
Reliance Mutual Fund and SBI Mutual Fund account for bulk of the exposure among six asset managers holding Rs 2,570 crore worth of debt of two Anil Ambani group-controlled non-bank lenders that were downgraded by rating agencies.
- Reliance Mutual Fund, in a media statement, said it has an exposure of Rs 535 crore and Rs 1,083 crore to the non-convertible debentures of Reliance Commercial Finance and Reliance Home Finance, respectively.
- About 10 percent of its 166 fixed income and hybrid schemes have an exposure to the two companies.
Here are the mutual funds with exposure to Anil Ambani group's downgraded NBFCs
2. Standard Life To Sell More Stake In HDFC Life
Standard Life Aberdeen Plc’s Mauritius arm plans to sell another 1.78 percent stake in HDFC Life Insurance Company Ltd.
- The investment firm will sell up to 3.6 crore shares at a floor price of Rs 390 apiece—a discount of about 7 percent to current market price—through an offer-for-sale.
- The offer will open for non-retail investors on May 3 and for retail investors on May 6.
- After the transaction, the promoter’s stake in the insurance company will fall to 22.88 percent from 24.66 percent.
- If the offer is fully subscribed, Standard Life would raise around Rs 1,400 crore.
This comes nearly two months after the investment company sold 3.47 percent stake.
3. Hero Moto, Tata Motors Struggle
India's automobile industry continued to face challenges in April as consumer demand remains muted.
- Bajaj Auto Ltd.'s total sales rose a 2 percent to 4.23 lakh vehicles.
- Hero MotoCorp sold 5,74,366 units in April 2019— which is 17.2 percent lower than the year-ago period.
- Mahindra & Mahindra Ltd.'s auto sales fell 9 percent to 43,721 units.
- Tata Motors Ltd. sold 42,577 units last month, a fall of 20 percent from the year-ago period.
- TVS Motor Company Ltd. sold 3.18 lakh units last month, an increase of 5 percent.
Catch the detailed breakup of April auto sales here.
4. Banks Can Tag IL&FS Accounts As NPA
The National Company Law Appellate Tribunal on Thursday allowed the banks to declare the accounts of IL&FS and its subsidiaries that have defaulted on payments as non-performing assets.
- A bench headed by Justice SJ Mukhopadhaya lifted the embargo on the banks to declare the accounts as bad loans.
- However, the appellate tribunal has also clarified that banks cannot initiate recovery process and debit money.
- The NCLAT had in February prohibited banks from recognising any IL&FS group accounts as NPAs without first seeking approval from the tribunal.
The bench observed that lenders must not withdraw support till resolution is found.
5. Nifty Drops, U.S. Stocks Rise
Indian equity benchmarks ended with minor losses on a volatile day after the gains in HDFC Bank Ltd. and Reliance Industries Ltd. were pressured by the losses in Infosys Ltd. and ICICI Bank Ltd.
- The S&P BSE Sensex ended 0.13 percent or 50 points lower at 38,981.
- The NSE Nifty 50 ended at 11,724, down 0.2 percent.
- The broader market index represented by the NSE Nifty 500 Index ended 0.28 percent lower.
- Eight out of 11 sectoral gauges compiled by NSE fell, led by the NSE Nifty IT Index’s 1.8 percent fall.
Follow the day’s trading action here.
U.S. stocks rose in the wake of the Federal Reserve’s decision as traders awaited Friday’s jobs report.
- The S&P 500 Index increased 0.1 percent to 2,926 as of 9:51 a.m. New York time.
- The Stoxx Europe 600 Index sank 0.4 percent.
- The MSCI Asia Pacific Index decreased less than 0.05 percent to 162.
Get your fix of global markets action here.
6. Indian Firms Get Hungry For Foreign Debt
The approvals sought from the Reserve Bank of India to raise foreign debt or external commercial borrowings surged in March, showed data released by the central bank.
- Apart from one-off approvals linked to stressed asset investments, large corporates took advantage of a turn in the global interest rate scenario and a fall in hedging costs in the domestic market.
- The data for external commercial borrowing approvals shows that firms took approvals for $12.18 billion in foreign currency borrowings.
- Of this, $7.69 billion was under the approval route, while the remaining came under the automatic route.
The largest approval was sought by ArcelorMittal India, likely for the acquisition of Essar Steel.
7. Vikram Limaye Sees The Bright Side
The head of National Stock Exchange of India Ltd. is happy that the bourse was exonerated of allegations of fraud even as the regulator imposed a penalty and barred it from the securities market for six months for allowing preferential access to some high-frequency traders.
- “The matter was pending for some time and it’s important to at least have the understanding of what are the boundaries of the investigation, and its results,” Vikram Limaye, managing director and chief executive officer of NSE, said in an interview with BloombergQuint.
I’m happy that there is finality and conclusion.Vikram Limaye, MD and CEO, NSE Ltd.
- NSE’s governing board will decide what to do next based on legal advice, Limaye said. The board, which meets this week, will discuss the order, he said.
Watch the full interview with Limaye on NSE’s next steps after the SEBI order.
8. Jet's Negative Net Worth Challenge
The top lender of ailing Jet Airways India Ltd. said the burden of reversing the grounded carrier’s negative net worth before it can fly again is the biggest challenge for any potential investor.
- “Liabilities and losses are considerable,” Rajnish Kumar, chairman of State Bank of India, said in an interview with Bloomberg Television on Thursday.
- “All these past liabilities and then, profitably, can they fly in future? These are some of the considerations which are weighing upon the minds of the potential investors,” Kumar noted.
- The lenders, to which the airline owes more than $1 billion, have yet to take a call on how much debt will be forgiven, he said.
Watch the entire interview here.
9. Raghuram Rajan: Treat Workers Like Shareholders
Once again, we’re debating the purpose of corporations. On one side, progressives such as Senator Elizabeth Warren argue that companies must also accept broad social responsibilities such as paying attractive wages and protecting the environment. On the other side are many who continue to believe that “the principal objective of a business enterprise is to generate economic returns to its owners”, writes Raghuram Rajan.
- Exhortations for corporations to do much more will get louder in advance of the 2020 presidential election, and the silent resistance will increase proportionately.
- I believe there’s a middle path. While corporations cannot, and should not, take on responsibilities that are properly those of the government or the local community, they can do better for themselves and for society by explicitly identifying core stakeholders — financial investors, no doubt, but also workers, customers and suppliers who make significant investments in the business — and publicly committing to enhance their collective value.
In these populist times, corporate boards can also then avoid unnecessary political flak by identifying core stakeholders.
10. Fantasy Sports, Real Stakes
A cheap data boom, affordable smartphones and Indians' craze for cricket is turning into a pot of gold for fantasy gaming firms in India. At the forefront, is Dream11—valued at over $1 billion—with over 55 million users.
- The entire online gaming market is also growing. The revenues nearly doubled over four years to Rs 4,300 crore in the fiscal ended March 2018.
- And they involve serious money.
- While users can play free, entry fee on a paid game could be as low as Rs 10, and the total prize pool can range from just a few hundred rupees to as high as Rs 10 crore.
Read how fantasy gaming skirted India's betting ban, gained investor confidence and got sports fanatics hooked on to their platforms.