BQuick On Nov. 6: Top 10 Stories In Under 10 Minutes

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

1. Cabinet Approves Special Fund For Stalled Housing Projects

Finance Minister Nirmala Sitharaman today announced that the Union Cabinet has approved setting up a dedicated fund for funding affordable and middle-income housing projects that are stalled.

The announcement of setting up the fund was made earlier by Sitharaman in September. Today, the cabinet has approved it—with a few tweaks.

• The key change is the eligibility criteria of stalled projects. Earlier, the projects that were non-performing assets or admitted to the NCLT were not eligible. This clause has now been removed, Sitharaman said.
• The funds received from the corpus can not be used to repay prior dues to banks, Sitharaman said.
• The special window will be structured as an alternative investment fund which will pool all investments, where the government will put Rs 10,000 crore.
• Institutions like State Bank of India and Life Insurance Corporation among others will make further contributions. The corpus, for now, will be Rs 25,000 crore.

Watch Sitharaman’s press conference here.

2. Tata Steel Struggles, Cipla Shines

Tata Steel Ltd.’s quarterly profit rose more than expected due to a one-time tax gain. Still, its revenue and operating profit hit multi-quarter lows as steel prices fell and costs rose.

• Net profit rose 15.9 percent over last year to Rs 4,144.7 crore, aided by a one-time tax gain of Rs 4,233 crore.
• Revenue fell 15.4 percent to Rs 34,579.2 crore—a six-quarter low.
• Operating profit declined 56.6 percent to Rs 3,819.6 crore—the lowest in eleven quarters.

The steelmaker’s persisting woes meant its debt reduction plans also hit a bump.

Cipla Ltd.’s quarterly profit surpassed analysts’ estimates as sales in India and the U.S. rose.

• Net profit jumped 25 percent year-on-year to Rs 471 crore.
• Revenue rose 9 percent to Rs 4,395 crore.
• The U.S. arm’s revenue grew 25 percent over last year to $135 million.

Operational metrics, too, beat street expectations.

3. Even God Cannot Change Infosys’ Numbers: Nilekani

Amid a string of whistleblower complaints over two years, Infosys Ltd.’s Chairman Nandan Nilekani said the company is taking all these seriously and all aspects of allegations will be probed.

• Infosys acted responsibly in responding to complaints, Nilekani told analysts and investors in a webcast, adding that the company’s response to allegations has been in accordance with the U.S. and Indian laws.
• The Infosys co-founder also defended the firm’s internal processes.

Here are the highlights from Infosys’ analysts meet.

4. Sensex Resumes Record Climb

Indian equity benchmark S&P BSE Sensex resumed its rise after a one-day blip and closed at a fresh record high.

• The 31-share index rose 0.55 percent to close at 40,469.78.
• The NSE Nifty 50 rose 0.41 percent to end at 11,966.05.
• The broader markets represented by the NSE Nifty 500 Index rose 0.28 percent.
• Eight out of 11 sectoral gauges compiled by NSE ended higher, led by the NSE Nifty Realty Index’s 2.3 percent gain.
• On the flipside, the NSE Nifty PSU Bank Index was the top sectoral loser, down 0.9 percent.

Follow the day’s trading action here.

Watch | Morgan Stanley’s Jonathan Garner on why Indian economy may rebound next year.

5. The Big Call: A Bubble In Quality?

Select quality stocks are in a bubble zone and could give zero or negative returns over the next few years, writes the team at Sunil Singhania-founded Abakkus Manager LLP.

• Contrary to the perception of high growth in expensive companies, a majority of companies in our study have grown below the nominal GDP growth rate since FY10.
• Most of these companies might not be able to sustain their bubble-like valuations.
• In fact, the basket other than these is becoming more attractive.

As the economy normalises, a much higher return can be expected from the other basket.

6. Moody’s Places Yes Bank Under Ratings Watch

Moody’s placed Yes Bank Ltd.’s credit rating under review for a potential downgrade due to the bank’s weak financial position and exposure to stressed borrowers.

• The rating agency said that Yes Bank’s asset quality has substantially deteriorated with gross non-performing loans rising to 7.6 percent at the end of September 2019 from 3.2 percent at the end of March 2019.
• With around Rs 31,400 crore worth of loans and investments made by the bank rated below the investment grade level, the rating agency expects about 30-40 percent of the loans and investments
• There are significant execution risks around the timing, price and regulatory approvals required and an inability to raise the planned equity capital will negatively impact Yes Bank’s credit profile and ratings, according to the rating agency.

Moody's has also placed some credit ratings of Yes Bank’s IFSC Banking Unit Branch under review.

7. Short-Term Corporate Bond Yields Tumble

Yields on AAA-rated and AA-rated corporate bonds have fallen sharply since last Thursday. The average yield on AAA-rated corporate bonds for a three-year duration has fallen below 7 percent for the first time since April 2009. At present, it stands at 6.8 percent.

• The Indian banking system continues to be flush with liquidity, in stark contrast to conditions that prevailed through most of last year.
• The surplus liquidity has started to seep through to the cost of corporate funding at least for high-rated firms borrowing from the bond markets, even though a wider decline in borrowing costs remains elusive.
• Data from the Bloomberg Intelligence Banking Liquidity Index shows that the system is currently running a surplus of over Rs 2.8 lakh crore. The system has seen surplus liquidity for most of this year and this surplus has widened in the last two months.

Get the complete picture of how corporate bonds in India are performing.

8. Jaypee Infratech Resolution Now Has A Deadline

The Supreme Court on Wednesday directed the resolution process for debt-laden Jaypee Infratech Ltd. to be completed within 90 days even as the apex court ordered fresh round of bids for the third time.

• The top court also asked the committee of creditors to only consider bids by Suraksha Realty Ltd. and NBCC (India) Ltd.
• Both bidders have 45 days to submit their revised offers and the CoC will take a call on the submitted bids in the next 45 days.

Jaiprakash Associates, the parent, will not be allowed to participate in the insolvency process.

9. Competition Hots Up For Biocon

The U.S. drug regulator has approved the third biosimilar for a key drug to fight infection from chemotherapy. And that may toughen competition for Biocon Ltd. in one of the biggest markets for Indian pharmaceutical companies.

• Sandoz in a media statement said it has received the U.S. Food and Drug Administration’s approval for Ziextenzo—a biosimilar of Amgen’s Neulasta (pegfilgrastim) that’s used to lower the incidence of infection, manifested by low white blood cell count and associated with fever in patients with non-myeloid cancer.
• The subsidiary of Novartis had resubmitted the biologics licence application to the U.S. FDA in April 2019 after receiving a complete response letter—issued if the regulator determines it won’t approve the drug application in its present form for one or more reasons—in 2016.
• Sandoz has been selling Ziextenzo in Europe since last year and it intends to launch the drug in the U.S. “as soon as possible this year”.

Here’s how the market for the Neulasta biosimilar has evolved.

10. Was India Right To Quit RCEP?

Global trade and domestic policy experts interpret what this move means for India going forward, and whether it was an opportunity missed.

• We can’t compete with [Chinese] subsidies which are mostly hidden, says Jayant Dasgupta, Former Ambassador to the WTO.
• This decision is going to cement the global belief that India is a difficult country to do trade with, says Richard Rossow of CSIS.
• How is it that every other RCEP member was satisfied, save India, asks trade law expert Raj Bhala.

What’s really going on is good old fashioned protectionist politics, Bhala adds.