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Government unlikely to sell wheat in open market for now, says source

Informist, Wednesday, May 31, 2023 By Arunima Bharadwaj and Priyansh Verma NEW DELHI - The government is unlikely to sell wheat under the open market sales scheme for now, a senior official in the Department of Food and Public Distribution said.  "There is no such situation that requires government to do open market sales immediately," the official told Informist. "But whenever any of the two situations arises – either huge stocks with the government or high wheat prices rise – the government can do open market sales of wheat."  In Feb-Mar, Food Corp Of India Sold 3.38 mln tn Of Wheat Under The Open Market Sale Scheme To Cool Rising Prices Of Wheat. The government uses tools such as the open market sales scheme to regulate market prices and supply of key commodities, including wheat. Under the scheme, Food Corp of India sells food grains to bulk consumers and private traders at a pre-determined price in the open market. As of now, the government has procured 26.2 mln tn of wheat, against an estimated target of 34.2 mln tn.  "We have sufficient quantity of wheat to distribute under the PDS (public distribution system). However, if a farmer comes to sell stocks, we will procure it," the official said. Wheat stocks in the central pool were at 29.0 mln tn as on May 1, marginally lower than 30.3 mln tn a year ago. In Feb-Mar, Food Corp of India sold 3.38 mln tn of wheat under the open market sale scheme to cool rising prices of wheat.  Wheat is currently being sold at 2,050-2,100 rupees per 100 kg in the benchmark markets of Kota in Rajasthan, lower than the minimum support price of 2,125 rupees, Kota-based trader Aniket Mehta said. The government has pegged wheat output in the current crop year ending June at a record 112.7 mln tn, up 4.6% from 107.7 mln tn in 2021-22.  End Informist Media Tel +91 (11) 4220-1000 Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved.

NCC aims 20% growth in FY24 topline on strong order book

Informist, Tuesday, May 30, 2023 --NCC official: Expect FY24 net profit to grow 35% on year  --FY24 revenue growth aim backed by robust order book --Plan to secure new orders worth 250 bln rupees FY24 --Order book execution to aid FY24 revenue, profit aim --FY24 EBITDA margins seen similar to FY23 --Low input costs to aid EBITDA margin boost FY24 By Narayana Krishna HYDERABAD - Infrastructure developer NCC Ltd is aiming to clock 20% year-on-year growth in its revenue for the current financial year ending March, aided by a robust order book and strong order execution, K. Vijay Kumar, the company's vice president-finance, told Informist. The company expects a 50-basis-point on-year improvement in its net profit margin for 2023-24 (Apr-Mar), while the bottomline is expected to grow 35% on year, the NCC official said. For 2022-23, NCC had reported a 16% on-year growth in its net profit at 5.69 bln rupees on a revenue of 133.51 bln rupees, up 34% on year. The company's EBITDA margin in the financial year ended Mar 31 rose to 10.6% against 8.2% in 2021-22, mainly aided by softening of raw material prices, Kumar said. The company is expecting similar margins with an upward positive bias for 2023-24. Kumar said the current environment is conducive to the infrastructure sector and the company is confident of securing new orders worth about 250 bln rupees in the current financial year. For 2022-23, NCC had secured new orders worth 258.95 bln rupees, and its total order book as on Mar 31 was at 502.44 bln rupees, executable in 2-3 years.   The company is expecting strong order inflows from affordable housing projects, government projects like Jal Jeevan Mission, and electrification and tunnelling for road projects. Ahead of the upcoming general elections in 2024, the government is likely to make more number of announcements compared to previous years, the official said. NCC undertakes road development projects, executes irrigation projects and has interests in segments like building construction and mine development. The company is actively working on retiring its gross debt, which is at 9.83 bln rupees as on Mar 31. The company incurred a finance cost of 5.1 bln rupees for 2022-23, an increase of 11% on year. The company expects to generate revenues from settlement of an ongoing arbitration case with Sembcorp group and from proceeds of the sale of its land parcel in Visakhapatnam to GRPL Housing Ltd. This will help NCC to repay at least 2 bln rupees of its gross debt this year, Kumar said. The official said the company has clocked 17 bln rupees of revenue from the Pachhwara North Coal Block mine, where the NCC-led consortium is a mine development operator. It plans to take this number to 30 bln rupees over the years, he added. At 1431 IST, shares of NCC traded 1.25% lower at 114.30 rupees on the National Stock Exchange.  End Informist Media Tel +91 (22) 6985-4000 Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved

NMDC to seek coal ministry help to secure land for mining in Jharkhand

Informist, Tuesday, May 30, 2023 --Source: NMDC, coal min officials to meet soon over Jharkhand mines -–NMDC aims to start coal mining at Tokisud in FY25 By Narayana Krishna HYDERABAD - Public sector mining major NMDC Ltd plans to seek the coal ministry's help to acquire land for mining in the Tokisud north and Rohne coal blocks in Jharkhand, a senior official of the company told Informist. In the next few days, a delegation from the company plans to meet senior officials from the Union coal ministry, including the coal secretary, the official said. The company has faced issues related to land ownership, as some private land also falls under these mining areas.  The Tokisud north block, spread over 570 ha, was earlier allocated to GVK Group, which failed to start mining operations due to legal issues around the land marked for mining. Subsequently, the coal ministry took back the block and allocated it to NMDC, but the legal issues remained unresolved. At least 50-75 ha of land is under litigation related to local tribal laws, the official said, adding that the Rohne block, which is spread over 1,200 ha, is also facing similar issues. The two blocks are located within 20 km of each other in Hazaribagh district. NMDC is likely to seek the coal ministry's help to enforce the Coal Bearing Areas (Acquisition and Development) Act, 1957, which makes it easy to earmark land with coal reserves and use it for mining. This could also help avoid legal challenges to an extent and resolve the issues in commencing mining operations, the official explained. NMDC has already secured all regulatory approvals to begin mining in the Tokisud block, and is in the process of doing so for the Rohne block. If all issues are resolved, the company plans to begin coal mining in Tokisud in 2024-25 (Apr-Mar), though mining at Rohne may take some more time, the official said. While the Rohne coal block has about 191 mln tn of coal and coking coal reserves, the company had announced it would produce 8 mln tn a year, once it starts operations. At Tokisud, which has thermal coal reserves of about 52 mln tn, the company aims to produce about 2.3 mln tn a year. NMDC, India's largest iron ore producer, has obtained coal blocks as part of its long-term strategy to get into other minerals. At 1320 IST, shares of NMDC were at 107.40 rupees on the National Stock Exchange, up 0.5%.  End Informist Media Tel +91 (22) 6985-4000 Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved

India, ASEAN ministers may review trade pact in Aug-Sep, says source

Informist, Tuesday, May 30, 2023 --Govt source: India-ASEAN agreed on scope of trade pact review --Aim to improve India-ASEAN export complementarity By Krity Ambey NEW DELHI – India is likely to hold a ministerial meeting with the Association of Southeast Asian Nations in Aug-Sep to review the free trade agreement between the trading partners, a commerce ministry official said. The Government Had announced A Review Of The Free Trade Agreement with The Regional Bloc After the Agreement Completed 10 Years. The Scope Of The Review has Been Decided by All The Trading Partners "The export complementarity between India and ASEAN has deteriorated, we aim to address that (through the review process)," the official told Informist. In a trade agreement, the export structure of trading partners usually becomes similar over a period of time due to high intra-regional trade and the export complementarity goes down, the official said. Complementarity measures the degree to which the export pattern of one country matches the import pattern of another. A high degree of complementarity indicates a more successful trade arrangement. India and ASEAN had signed the free trade agreement in 2009, which came into effect on Jan 1, 2010. The regional bloc of ASEAN includes Vietnam, Indonesia, Thailand, Singapore, Malaysia, the Philippines, Myanmar, Cambodia, Brunei and Laos. The government had announced a review of the free trade agreement with the regional bloc after the agreement completed 10 years. The scope of the review has been decided by all the trading partners, the official said. "Some tariff lines are not included under the agreement, so they are not free. We will also look to explore those lines in the FTA review meet," the official said. India and ASEAN aim to increase overall trade to $200 bln by 2025 from $131.57 bln in 2022-23 (Apr-Mar). The total trade with ASEAN in 2022-23 comprised $44.00 bln of exports, more than double the $18.11 bln before signing of the pact in 2009-10. Imports, on the other hand, more than tripled to $87.57 bln from $26.79 bln.  The total trade between India and ASEAN nations has increased substantially since the signing of the trade deal, but primarily on account of imports. The trade deficit with ASEAN has expanded more than five-fold to $43.57 bln in 2022-23 from $8.68 bln in 2009-10. Non-tariff barriers have also posed difficulty in trade with ASEAN. During the COVID-19 pandemic, India had to deal with several restrictions on export of agricultural and auto products to ASEAN due to concerns about presence of the virus in the packaging.  End Informist Media Tel +91 (11) 4220-1000 Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved

PFRDA source says 3 states exited pension plan but still contributing

Informist, Tuesday, May 30, 2023 --PFRDA source says 5 states notified exiting National Pension System --PFRDA source: 3 states that exited pension plan still contributing --Rajasthan halted national pension plan payment mid-FY23 --Jharkhand halted national pension plan contribution Apr --States' total natl pension plan AUM 4.75 trln rupees By Priyasmita Dutta, Priyansh Verma, and Sagar Sen NEW DELHI - Five states have issued a notification to pull out of the National Pension System, though three of them--Punjab, Chhattisgarh, and Himachal Pradesh--continue to contribute to the scheme irrespective of the on-paper withdrawal, an official in the Pension Fund Regulatory and Development Authority said. "The contribution from these three states to the National Pension System has come for the month of April," the official told Informist. Rajasthan had discontinued contribution in mid-2022-23 (Apr-Mar) and Jharkhand stopped paying from Apr 1, the official said. The government had introduced the defined-contribution National Pension System from Jan 1, 2004, replacing the defined benefit pension scheme. All states, except Tamil Nadu and West Bengal, had joined the new plan. Under the Old Pension Scheme, government employees who have completed at least 10 years of service receive a monthly guaranteed pension based on their last drawn basic salary and the years of service. In this, the employees do not need to make a contribution. The National Pension System is a market-linked annuity scheme where an individual can invest a regular amount during employment and receive an annuity when they retire. Under the National Pension System, the state government employees make a monthly contribution at the rate of 14% of their salary to the pension fund, and a matching contribution is paid by the state government. The system is being administered and regulated by Pension Fund Regulatory and Development Authority. The pension system is mandatory for central government employees, while others can join it voluntarily. The total contribution by the five states that have announced withdrawal from the National Pension System was 1.04 trln rupees as on May 27, according to official data. Himachal Pradesh has contributed 110 bln rupees, Chhattisgarh 190 bln rupees, Punjab 220 bln rupees, Rajasthan 400 bln rupees and Jharkhand 120 bln rupees to the scheme as on May 27. The National Pension System's total corpus from all the states and union territories was at 4.75 trln rupees as on May 27.  With many states announcing their intention to withdraw from the National Pension System, the Centre has set up a committee under Finance Secretary T.V. Somanathan to review the system. The committee will study whether changes are required in the framework and suggest ways to improve pension benefits.  End Informist Media Tel +91 (11) 4220-1000 Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved.

Finolex Cables CFO says to up presence in home appliances to de-risk business

Informist, Monday, May 29, 2023 By Avishek Rakshit KOLKATA – Finolex Cables Ltd is planning to expand its presence in the small home appliances and luminaires segments in a bid to de-risk the company from its high dependency on the cables and wire business and help improve gross margins. “Our market share in the small home appliances market is currently below 1% but in the next five years, we hope to bag a market share anywhere between 8-10%,” the company’s Chief Financial Officer Mahesh Viswanathan told Informist. The electrical cables business, which currently accounts for more than 80% of Finolex's annual revenue, is expected to come down to 60-65% in the next 4-5 years due to higher income from new businesses like home appliances, luminaries, fibre optic and others. Finolex is planning to roll out 2-3 new products in home appliances and luminaires this year with electric fans and smart appliances being some of the focus areas. Some products are currently undergoing testing and some are in the conceptual stage. The range of appliances will comprise both entry-level and premium products, Viswanathan said. Recently Finolex had forayed into steam and dry irons, fans, water heaters, switches, switchgear, lighting, and room heaters. “We will continue to rely on third-party manufacturing while owning the patents for the products, but get into own manufacturing with own plant once we achieve some scale in the next 2-3 years,” Viswanathan said. “Investment for the plant will not be a problem, and we already have land banks in Gujarat and Maharashtra.” The company has 25-30 acres of land in Gujarat alone and some land in Maharashtra in Pune near its existing factory. The company was hoping to start manufacturing fans in the current financial year when it was hoping to achieve considerable sales volume, but it got delayed due to changes in energy efficiency norms which impacted sales. “Last financial year, we sold half a million fans and this financial year, we hope to see a 50% growth,” Viswanathan said. “We are also planning to roll out 2-3 new models of brushless direct current fans in the luxury segment this year.” Finolex’s decision to de-risk itself from the electrical cables business comes in the wake of the volatility in global copper and other raw material prices. As the company’s portfolio is heavily skewed towards electrical wires, where copper is the key raw material, the company is exposed towards market volatility. Small appliances and smart products not only help the company reduce its dependency on cable business, but also helps to improve gross margins. “We currently have a gross margin of 22% but once the diversification drive goes according to the plan, we can see gross margins increasing to 24-25% in the next five-six years,” he said. Finolex will first focus on strengthening its hold in the Indian market in home appliances and luminaries and then consider exports as most countries will have their own energy efficiency norms and guidelines which will need tweaking products. At 1255 IST, shares of Finolex Cables were trading 5.1% down at 799.95 rupees on the National Stock Exchange.  End Informist Media Tel +91 (22) 6985-4000 Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved.

Informist Poll

Crude oil seen down in May as recession fears spook market

Informist, Friday, May 5, 2023 By Afra Abubacker and Arunima Bharadwaj MUMBAI/NEW DELHI - Crude oil prices are seen retreating this month from the highs touched in April due to concerns over demand amid fears of recession in the US and a patchy economic recovery in China.  Last month, an unexpected production cut by the Organization of the Petroleum Exporting Countries and its allies boosted prices, with WTI crude surging to a five-month high of $83.53 per bbl on Apr 12. On NYMEX, Prices Are Seen At $68-$82 Per Bbl This Month And On MCX At 5,800-6,600 Rupees Per Barrel However, the momentum lost steam due to concern over turmoil in the US banking sector and rising interest rates, that are expected to raise borrowing costs of consumers and weigh on demand.  On the Multi Commodity Exchange of India, crude oil futures are seen at 5,800-6,600 rupees per barrel this month, according to the median of estimates of nine brokerage firms polled by Informist. On the New York Mercantile Exchange, prices are seen at $68-$82 per bbl. Currently, the most-active June crude oil contract on NYMEX is at $69.55 per bbl and the May crude oil contract on the MCX is at 5,687 rupees. On Thursday, prices had plunged to a six-week low after the US Federal Reserve raised its benchmark interest rate by 25 basis points.  Further, China's manufacturing activity showed the first contraction since December as it unexpectedly fell to 49.2 in April, against the estimated 51.4 and 51.9 in the previous month.  Analysts expect downside bias in crude prices amid the rate hike-induced economic pain and debt ceiling issues in the US, along with broad risk-off sentiment and weak macroeconomic cues from China. Crude oil prices are seen in lower range and the short-term trend remains moderately bearish, Saumil Gandhi, senior analyst at HDFC Securities, said in a note.  Although Russian exports rose above 4 mln barrels per day in April dulling the impact of OPEC output cuts, the recent escalation in tensions between Russia and Ukraine brought back supply concerns. Moscow had earlier this year decided to cut production of oil and restrict supply to countries that have imposed sanctions on it. But, recent data showed supply from Russia has only increased as it continues to export higher volumes to support its beleaguered economy.   Further, a likely disruption in supply in Iran and tight US crude stockpiles are likely to limit the fall in crude prices. The Energy Information Administration reported that crude inventory in the US fell for a third week by 1.3 mln barrels in the week ended Apr 28. The fall in prices is also likely to be cushioned by discounted buying as prices are ruling at multi-month lows.  Though summer demand in the US is likely to offer support, weak refining margins globally indicate that demand for oil products is subdued. The market is finding its way amid mixed cues. However, they are weighing more on the bearish side, said Shweta Shah, energy analyst at Motilal Oswal Financial Services. Following is a summary of the poll by Informist on crude prices in May and details of the estimates by respondents, in alphabetical order: Brokerages     MCX Price   (Rupees per barrel)     NYMEX Price   ($ per barrel)     Finlit Consulting Pvt Ltd     6,000-6,600     71-81     HDFC Securities     5,980-6,545     68-84     ICICI Securities     5,800-6,850     71-82     Kedia Comtrade     5,600-6,700     67-83     Kotak Securities     5,000-6,850     57-84     LKP Securities     5,450-6,300     64-74     Motilal Oswal Financial Services      5,800-6,850     70-79     Prithvi Finmart     5,800-6,550     70-82     Reliance Securities     5,700-6,400     67-78     Median     5,800-6,600     68-82                                                                                   End Informist Media Tel +91 (22) 6985-4000  Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved.

Economic uncertainties to keep gold volatile in May

Informist, Friday, May 5, 2023 By Sandeep Sinha MUMBAI – Gold prices are likely to be volatile this month, as a continued impasse over the debt ceiling in the US, concerns about the health of US regional banks, and fear of a global recession pose uncertainties for the market. In April, the yellow metal delivered 1.5% on-month returns on COMEX and 0.9% on the Multi Commodity Exchange, after rising over 7% in March, as the appetite for riskier assets improved.  In April, The Yellow Metal Delivered 1.5% On-month Returns On COMEX And 0.9% On The Multi Commodity Exchange With inflation staying above the comfort levels of major central banks, they have not yet hinted at interest rate cuts later in the year, and this may continue to exert pressure on gold prices. The US Federal Open Market Committee increased key interest rates by 25 basis points to 5.00-5.25% on Wednesday and the European Central Bank hiked its rate by the same quantum a day later, which lowers the appeal of non-yielding assets such as gold. "Gold is expected to trade in a wide range this month as myriad of factors are at play currently," said Praveen Singh, associate vice-president, fundamental currencies and commodities at Sharekhan by BNP Paribas. "The dominant factors include the US Federal Reserve's monetary policy stance (whether a pause or data-based decision for June and upcoming meetings), stances of European Central Bank and Bank of England, banking concerns as the US regional banks come under pressure, status of the US economy as the economy is giving mostly mixed signals and possible risk aversion in the market." Saumil Gandhi, senior analyst – commodities at HDFC Securities, said, "We expect short- to medium-term gold price to remain an attractive investment option among investors and gold prices continue to be influenced by various macro forces ranging from inflation data, lingering banking crisis, recession fear, dollar weakness, and falling Treasury yields." On the MCX, gold futures are seen at 58,787.60-61,600.93 rupees per 10 gm this month, according to the average of the estimates of 15 brokerage firms polled by Informist. On the COMEX, prices are seen at $1,946.50-$2,052.28 an ounce. On Thursday, gold prices hit fresh lifetime highs, both on MCX and COMEX. At 1315 IST, the most-active June gold contract on the MCX was at 61,340 rupees per 10 gm and the same-month contract on the COMEX was at $2,048.30 an ounce. Gains in the dollar index may also exert pressure on gold prices. The index, which has fallen 11.6% from the two-decade high of 114.74 touched on Sep 28, may see some technical rebound from lower levels. "Looking ahead, the dollar index is likely to continue finding resistance around 102.70-103.10 zone and break below 100.80 would extend the decline towards lower support at 99.60-99.40 band. Meanwhile, higher (trendline) resistance is seen around 104.30-104.50 zone," Motilal Oswal Financial Services said in a research note. Weakening demand in top consumers China and India due to record high prices, and a slowdown in central bank purchases, with Russian and Turkish central banks selling their reserves, also exerted pressure on prices.  The prospect of the El Nino weather phenomenon during the second half of monsoon season this year threatens agricultural income and, consequently, demand in rural India, which accounts for 60% of gold and silver demand in the country. In Jan-Mar, India's gold imports fell 29% on year to 112 tn and local prices are trading at a discount of $14 per ounce to the landed cost, Metal Focus said in its latest report Globally, demand for gold fell 13% on year to 1,081 tn in the March quarter due to weak demand from India, a fall in global electronic sales, and outflows from exchange-traded funds, the World Gold Council said in its Gold Demand Trends report today. Demand for gold in India slipped 17% on year to 112.5 tn in Jan-Mar, as record high domestic prices hit demand for jewellery, the report said. According to CME FedWatch tool, markets are pricing in a 93% chance of a pause in rates by the US Fed in its June meeting. Data on US non-farm payrolls, consumer price index, and core personal consumption expenditure will be tracked for clarity on the monetary policy stance of the Federal Reserve. Investors will also await the Bank of England's decision on interest rates, and data on Eurozone GDP and CPI inflation, which will lend direction to gold prices. "While the market awaits data or developments that support or alter the current rate trajectory, the short-term path for gold is likely to remain choppy, especially if inflation concerns return to challenge the mentioned rate cut expectations," Ole Hansen, head of commodity strategy at Saxo Bank, said in a research note. Following is a summary of the poll by Informist on gold prices in May and details of estimates by respondents, in alphabetical order: ANALYSTS/TRADERS     DOMESTIC PRICE (rupees per 10 gm)     INTERNATIONAL PRICE ($ per ounce)       AngelOne     60,000-63,200         1,857-2,085     Augmont Gold For All     59,600-61300     1,970-2,045     Finlit Consulting Pvt Ltd     58,800-61,200     1,880-2,070     Geojit Financial Services     57,200-61,500     1,880-2,070     HDFC Securities       60,700-63,200        1,965-2,119     ICICI Securities       58,600-61,200         1,950-2,060     Kedia Comtrade     59,084-61,264     1,940-2,030     Kotak Services     60,230-61,150     1,994-2,048     LKP Securities     59,000-61600     1,970-2,060     Mehta Securities     58,200-61,500     1,940-2,050     Motilal Oswal Financial Services     58,000-61,000           Prithvi Finmart     58,800-60,500     1,940-2,035     Reliance Securities     58,400-61,000        1,945-2,040     Sharekhan by BNP Paribas           1,970-2,050     SMC Global Securities     59,200-60,500     1,965-2,010     Umedmal Tilokchand Zaveri     57,200-64,000     --     Average     58,630-62,222         1,953.9-2,106.8 End Informist Media Tel +91 (22) 6985-4000 Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved.

Worsening macros to keep Indian equities lacklustre in May

Informist, Wednesday, May 3, 2023 By Apoorva Choubey  MUMBAI – Indian equities are likely to take a breather in May as risk appetite around the world has weakened again due to worries about an intensifying slowdown in the global economy, sustained issues in the US banking sector, and cautious commentary from a few major domestic companies. After four months of tepid movement, the Nifty 50 rose 4% in April, making India one of the best performing stock markets in the world for the month. These gains were supported by incremental investments by foreign fund managers amid signs of resilience in the domestic economy and stock valuations of some companies turning attractive. May, however, could turn out to be a lacklustre month for Indian equities as both institutional and retail investors are expected to wait for key events to unfold, including the US Federal Reserve's monetary policy review, quarterly earnings of companies, and latest updates by meteorological agencies on the forecast for monsoon rains this year. In a poll of 14 brokerage houses conducted by Informist, participants differed in their views about the equity market's direction in May. The poll signals a wide range of over 1,000 points for the movement in the Nifty 50 index. The index will find strong support in the 17700-17800-point zone and then at 17500 points, the poll showed. It will face stiff resistance at 18500 points. Today, the index ended a six-session rising run and fell 0.3% to 18090 points. The weakness was in line with global equities, which fell ahead of the outcome of the Fed's meeting later today. While financial markets expect a 25-basis-point rate hike by the US central bank, the focus will be on where the Fed sees rates going through the year, analysts said. "…the market is more interested in the Fed's future actions, and a hint of a pause in rate hikes would delight investors," Sunil Damania, chief investment officer at advisory firm Markets Mojo, said in a note titled 'Can the April rally sustain?'  On the other hand, another rate hike signal could dampen market sentiment, he said. Damania believes the fresh crises in the US banking sector, such as that at First Republic Bank, and emerging problems in the commercial real estate sector in the world's largest economy are worrisome, and will be closely monitored by investors in the coming weeks. Compounding the problem for investors is slowing growth in major economies such as the US and China, rising unemployment and high interest rates, all of which point to corporate profitability suffering for more months than earlier anticipated, noted the chief dealer at a Mumbai-based mutual fund house. "The ongoing Jan-Mar earnings season has failed to impress equity investors, with net profit growth being restricted to low single digits on an average," the chief dealer said. The commentary from companies hasn't been encouraging either. India's largest listed consumer staples company, Hindustan Unilever Ltd, witnessed tepid volume growth in the March quarter despite reducing product prices. The company has said the near-term operating environment is expected to remain volatile.  ICICI Bank Ltd, one of the country's largest private sector lenders, has warned that net interest margins have peaked and will moderate hereon.  Maruti Suzuki India Ltd, the largest carmaker in the country, hasn't provided visibility for the growth expected in the full year, and has predicted that Apr-Jun will be challenging.  Adding more uncertainty to the murky outlook for equities is the prospect of the El Nino weather phenomenon. The El Nino is a climate pattern marked by an unusual warming of surface waters in the Pacific Ocean. In India and its neighbourhood, this is associated with deficit rainfall and droughts.  The Indian Meteorological Department expects moderate El Nino conditions in the latter half of the southwest monsoon season. Thus, the short-term outlook for Indian equities is uncertain and the movement in benchmark indices could be choppy in May, analysts say. Investors will closely watch the movement in bond yields, the rupee, and crude oil prices to gauge the risk-reward equation of being invested in shares, they say. Despite the challenging environment, what will ensure that there isn't a big correction in equities is the strong conviction in India's long-term growth prospects, analysts say. Moreover, Indian shares have underperformed global counterparts for the past six months or so, which means several stocks are available at reasonable valuations. The Nifty 50 is trading at a valuation close to its historical average, noted brokerage house IDBI Capital. The movement in the equity market is likely to be stock-specific in the coming weeks because of the earnings season but overall, no major correction is expected, said Ratnesh Goyal, senior technical and derivative analyst at Arihant Capital Markets. If a major correction occurs, it would be a great opportunity to buy domestic shares, he believes.  Following are the support and resistance levels for the Nifty 50 for May, based on inputs from 14 brokerage houses:  Brokerage house Support Resistance 5Paisa Capital  17800;17900 18300;18500 Angel One 17800 18400;18500 Anand Rathi Shares & Stocks 17500;17800 18500 Arihant Capital Markets 17700 18600 Ashika Institutional Broking 17500 18700 Axis Securities 17500; 17800 18500;18800 Choice Broking  17800 18400 DBS Cholamandalam Securities 17700 18500 ICICI Securities 17700;17800 18500 Lakshmishree Investment and Securities 17800 18340 Motilal Oswal Financial Services 17850 18500 Nirmal Bang Institutional Equities 17500 18650 NVS Brokerage 17800;18000 18500 Religare Broking 17700 18800 End  Informist Media Tel +91 (11) 4220-1000 Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved.

Ten-year gilt seen at 7.11% May-end as yields bottom out

Informist, Wednesday, May 3, 2023 By Anjali and Aaryan Khanna NEW DELHI - The 10-year gilt yield is likely to be largely unchanged at the end of May in the face of mounting supply pressures, as positive sentiment has already played out in the market in April when yields tumbled, pricing in eventual cuts in the policy rate. According to the median of an Informist poll of 15 treasury heads, economists, and analysts, the yield on the 10-year benchmark 7.26%, 2033 bond at the end of this month is seen at 7.11%, against 7.12% at April end. On Tuesday, the 2033 bond ended at a yield of 7.09%. Most Respondents Said The 10-year Yield Has Bottomed Out Near The Key 7.10% Mark, With any Cut In Interest Rates Still Distant The 10-year benchmark yield fell 20 basis points last month after the Monetary Policy Committee decided to keep key rates unchanged at its meeting on Apr 6, against expectations of a final rate hike of 25 basis points. With the Reserve Bank of India's rate-setting panel opting to pause its rate hike cycle that began last May, traders stocked up on gilts betting that the committee's next action would be a rate cut. However, most respondents said the 10-year yield has bottomed out near the key 7.10% mark, with any cut in interest rates still distant. Current yield levels have already factored in lower inflation and a moderation of growth, and market players will have to wait for domestic data to trend towards its assumptions before adding to their portfolios. Consequently, enthusiasm and appetite for gilts may wane in May, with heavy supply lined up, respondents said. The government is scheduled to sell 1.36 trln rupees worth of gilts in May. "In absence of a data surprise, it's local supply-demand dynamics that will lend direction to yields," said Churchil Bhatt, executive vice president at Kotak Life Insurance Co. "Yields have fallen a lot in anticipation of rate cuts. Going forward, we may need at least a promise, if not an actual rate action, in order to see further meaningful downside in yields." After some widening of spreads between long- and short-term yields in April, this "steepening" of the yield curve may continue in May if supply pressures play out, respondents said. A majority of the government's 8.88-trln-rupee gross bond issuance in Apr-Sep is by way of bonds maturing over 14 years, with the 10-year gilt accounting for 20.5% of supply. In contrast, the three-year gilt and the five-year gilt make up for merely 18.0% of the supply in the first half. Demand from insurance companies, which would make up a large portion of the demand for long-term bonds, remains unclear. Despite a month of supply behind it, the market does not have too much visibility of demand from insurance companies in 2023-24 (Apr-Mar). These firms were expected to deploy the funds they had received in a bumper March ahead of the end of the financial year, respondents said. The month of May may see less volatility with no major data releases scheduled, except for the CPI inflation print on May 12, which is expected to be benign due to the statistical effect of a favourable base. Other than that, traders will look forward towards updated monsoon forecasts near the end of May, which are considered more accurate and have drawn the attention of MPC member Jayanth Varma.  Concerns abound of the El Nino phenomenon that may result in below-average monsoon rains in India this year. Private agency Skymet has already forecast a below-average monsoon, but government forecaster India Meteorological Department still expects average rainfall for the season. "The data is not changing much, either on global or domestic front," Naveen Singh, head of trading at ICICI Securities Primary Dealership said. "If the news around monsoon is also not encouraging, if monsoon is erratic, then food prices will go up and then inflation would be affected too." Amid a lack of significant domestic cues, global cues are expected to be the deciding factor in May, respondents said. The US Federal Open Market Committee is seen increasing benchmark rates by 25 basis points later today, that will most likely bring to an end an aggressive rate hike cycle. The US rate-setting panel has already raised its policy rate by 475 bps since March 2022. While the rate increase is expected, US Federal Reserve Chair Jerome Powell's comments immediately after the decision will hold the key to the direction Indian gilts take. Traders back home keenly await a signal from the Fed that rate hikes are at an end, and seek guidance for a rate cut in the US. That is seen as a precursor for domestic rate cuts, and may open the floodgates to another buying spree and the 10-year gilt yield falling to 7% or under, respondents said. Following are estimates for the yield levels/range in percentage for the 10-year benchmark bond at the end of May: Institution     Yield on 10-year benchmark bond   Baroda BNP Paribas Mutual Fund  7.15-7.20% Federal Bank 7.10-7.20% HDFC Bank 7.10% ICICI Bank 7.05% ICICI Securities Primary Dealership  7.20% Karur Vysya Bank 7.18-7.20% Kotak Mahindra Life Insurance Company  7.20% Kotak Mahindra Bank 7.25-7.45% PNB Gilts 7.08-7.13% Private Bank 7.10-7.15% PSU Bank 7.10% Shriram Life Insurance Company  7.05-7.15% STCI Primary Dealer  7.00% Tata Mutual Fund 7.05-7.15% YES Bank 7.02-7.03% End Informist Media Tel +91 (11) 4220-1000 Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved.

Passenger cars, CVs to drive earnings of auto companies

Informist, Monday, Apr 24, 2023 By Darshan Nakhwa MUMBAI – Most automobile manufacturers are expected to report robust growth in earnings for the March quarter over the year-ago period, but may see some moderation on a sequential basis, with Maruti Suzuki India Ltd, Tata Motors Ltd and Ashok Leyland Ltd being the outliers.  The improved on-year performance is likely to be driven by price hikes, lower input costs, wedding and festival season demand, and pre-buying ahead of the implementation of the second phase of Bharat Stage-6 norms. A year ago, supply chain issues and relatively higher raw material prices had taken a toll on volumes.   YEARLY GROWTH According to the average of estimates compiled by Informist, the cumulative net profit of automobile manufacturers is expected to have more than doubled on year in Jan-Mar, and sales are seen increasing 27%. The optimism around net profit largely stems from expectations of Tata Motors reporting a consolidated net profit for the second consecutive quarter.   Among the various segments, passenger vehicle and commercial vehicle manufacturers are seen outpacing the earnings of two-wheeler companies. In Jan-Mar, total passenger vehicle dispatches surged 10.8% on year, driven by 19.6% growth in sales of sports utility vehicles, even as compact car sales rose just 1.6%. In 2022-23 (Apr-Mar), demand for SUVs in India increased, steered by urban buyers. However, sales of compact cars moderated due to sluggish rural demand, higher interest rates, inflation, and price hikes. Among passenger vehicle makers, Tata Motors Ltd is expected to earn a profit on the back of strong growth in sales of passenger vehicles and Jaguar Land Rover models, as well as due to lower prices of raw materials compared to a year ago. Maruti Suzuki India Ltd, India's largest carmaker, is seen posting the second-highest growth in earnings driven by its SUV push in 2022-23, even as its compact car sales moderated during the quarter. Maruti Suzuki India's SUV offerings include Brezza, Grand Vitara, Jimny, and Fronx.  Among various categories, sales volumes of commercial vehicles surged 7% on year in Jan-Mar, driven by the government's infrastructure development push, replacement demand, and pre-buying ahead of the implementation of phase-2 of BS-6. Within commercial vehicles, dispatches of medium and heavy commercial vehicles jumped 18.3%, while volumes of light commercial vehicles — which are used for last-mile delivery by e-commerce firms — were flat. Companies such as Ashok Leyland Ltd and Tata Motors Ltd, which have higher volumes of medium and heavy commercial vehicles compared to light commercial ones, are expected to post significant earnings growth, according to analysts.   In the two-wheelers category, companies with robust domestic dispatches are likely to report strong earnings growth compared to export-centric companies, said analysts. Hero MotoCorp Ltd and Eicher Motors Ltd are seen driving growth in this category, while export-centric manufacturer Bajaj Auto Ltd is likely to see some moderation. During Jan-Mar, total two-wheeler dispatches declined close to 5% to 4.30 mln units, dragged down by a whopping 36.4% drop in exports compared to 6.3% on-year growth domestic volumes. Domestic dispatches have seen moderation due to rising inflation and higher interest rates. SEQUENTIAL DROP  On a sequential basis, the cumulative net profit of automobile manufacturers is seen improving 21.2%, compared to 12.3% growth in revenues. This growth is likely to be driven by Maruti Suzuki India, Tata Motors and Ashok Leyland, according to analysts.  In the passenger vehicles segment, Maruti Suzuki India and Tata Motors are expected to report a strong sequential performance due to volume growth and higher realisation. On the commercial vehicle front, the Tata Group company and Ashok Leyland are seen reporting robust earnings compared to peers.  In the two-wheeler segment, most manufacturers are expected to report a muted sequential performance on account of reduction in volumes due to lower exports and sluggish rural demand. While Bajaj Auto's sequential earnings are likely to be impacted the most, Hero MotoCorp is seen delivering a decent performance led by slightly higher dispatches than in the previous quarter.  MARGIN EXPANSION For most companies, earnings before interest, tax, depreciation and amortisation margins are seen expanding, both on year and sequentially, due to a richer product mix, price hikes, lower raw material costs, and better operating leverage, analysts said. According to Axis Securities, Ashok Leyland is likely to post the highest sequential margin expansion of 220 basis points due to higher tonnage sales, operating leverage, and the benefit of lower steel prices. It will be followed by Maruti Suzuki India, with margin expansion of 65 bps on a higher share of SUVs in total sales. As the benefit of a correction in commodity prices is reflected with a lag of a quarter, the correction in steel and aluminium prices in Oct-Dec is likely to be seen in this quarter's earnings, said Axis Securities.  Most companies hiked prices in the range of 1.5-2.0% during the quarter, which is expected to aid their margins, said Elara Capital.  In Jan-Mar, prices of major commodities increased marginally from the lows witnessed during the previous quarter. OUTLOOK  Most brokerage firms have maintained a positive outlook on the sector for 2023-24 despite expectations of some moderation in sales volumes. In 2022-23, companies benefited from a combination of pent-up demand and a low base, which was reflected in their earnings. However, the impact from price increases due to regulatory changes, higher interest rates, inflation, rising fuel costs, and the El-Nino weather phenomenon are likely to act as headwinds for the sector in 2023-24. The El-Nino, which is likely to impact rainfall during the monsoon, will be a key monitorable for the two-wheeler and tractor segments, said Axis Securities. While the government's push to develop infrastructure will act as a tailwind for the commercial vehicles industry, new launches in the SUV category are likely to drive passenger vehicles sales, it said. Following are the details of earnings estimates for nine automobile companies for Jan-Mar, collected from eight brokerage firms: Company   Sales    PAT   Sales   PAT   Sales   PAT   EBITDA  Result date    No. of brokerages    polled      -------Average------- ----(Y-o-Y)----- ----(Q-o-Q)---- Mln Rupees           ------Mln Rupees----- -----------% Change------------          Ashok Leyland  117,328.6 8,088 35 -10 31 124 12,469.5 -- 8 Bajaj Auto  84,174.9 14,170.4 8.9 -3.5 -6.9 -4.9 15,748.4 Apr 25 8 Eicher Motors + 36,773.6 7,884.4 17.1 29.2 0.3 6.4 8,922.6 -- 8 Escorts Kubota  21,859.7 1,901 16.9 -6 -3.4 2 2,003.3 May 10 3 Hero MotoCorp  82,939 7,459.9 11.7 18.9 3.3 4.9 10,058.6 May 4 8 Maruti Suzuki India  325,464.2 26,317.7 27.6 43.1 16.9 11.9 34,377.2 Apr 26 8 Mahindra & Mahindra  220,576.7 17,649.3 28.8 36.6 1.9 15.5 28,253.8 -- 6 Tata Motors + 1,042,360 42,506.7 33.9 NA 18.7 43.7 130,140.5 May 12 6 TVS Motor Co  65,589 3,511.8 18.6 27.9 0.2 -0.4 6,594.2 May 4 6 Total 1,997,065.7 1,29,489.2 27.2 109.5 12.3 21.2 2,48,568.2 -- -- Note: + Consolidated Figure Y-o-Y: Year-on-Year Q-o-Q: Quarter-on-Quarter N.A.: Not Available Rs: Rupees Estimates from: Axis Securities, Elara Capital, ICICI Research, ICICI Securities, Kotak Institutional Equities, Nirmal Bang Equities, Nuvama Wealth Management, Prabhudas Lilladher.  End Informist Media Tel +91 (22) 6985-4000 Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved.

Nifty 200 companies' profit seen low amid subdued sales

Informist, Friday, Apr 21, 2023 By Rajesh Gajra MUMBAI – Operating in the shadow of weak macros worldwide and collapse of some banks in the US, Indian companies from the Nifty 200 universe are likely to have found the going challenging in the March quarter. Most companies in the Nifty 200 pack are likely to have seen demand slowing down, prices under pressure, and profits contracting or subdued. In Jan-Mar, the total of net profit of Nifty 200 companies is likely to have gone up by 8% on year while the aggregate revenue from operations is estimated to have increased 11%, according to an average of estimates by 18 brokerage firms. Sequentially, the Nifty 200 companies are likely to have recorded an 18% rise in net profit even as revenue is expected to be up by just 3%. These estimates by analysts of major brokerage firms point to a depressing scenario by and large with exceptions to the trend being select oil and gas companies, hotels, banks, and companies from travel and tourism, and automobile sectors. TURBULENCE Even though there are mixed views on the quantum of drag corporate profits would have come under in Jan-Mar, the fact that they would likely be far away from robust is not disputed by any analyst. According to brokerage Nuvama Institutional Equities, if oil and marketing companies are removed from the list, the story would largely be same–earnings under duress. "Metals and cement are likely to post another quarter of contraction, and apart from them, profits are likely to slow down for industrials, and remain weak for durables," the brokerage said in its Jan-Mar earnings preview of companies from its coverage universe. This turbulence is also visible in the analyst estimates compiled by Informist for Nifty 200 companies. Seven metal companies, for instance, are seen reporting a 7% on-year fall in their aggregate topline. Their aggregate net profit is seen diving 56% on year. Worst affected among the metal companies as per the estimates are heavyweights like Tata Steel Ltd, Vedanta Ltd, and Hindalco Industries Ltd. Brokerage Axis Securities counts weak selling prices, reset of annual contracts during the quarter, and the fear of a slowdown in world economies as the factors afflicting the metal sector's earnings performance in Jan-Mar. Cement companies' topline is not seen hit but their bottomline is seen sharply lower. The aggregate sales estimates for seven cement companies are seen rising 14% on year while the net profit is likely to fall 27%. Brokerage ICICI Direct expects aggregate volume of cement companies in its universe to register a 9.3% on-year increase in Jan-Mar but the sales realisation is seen affected by just 2% increase in cement prices. Different factors pulling engineering and capital goods companies in the March quarter would have likely led to a mixed performance among them. While Larsen & Toubro Ltd and Hindustan Aeronautics Ltd are seen reporting revenue growth in low single-digit numbers, Cummins India Ltd and Honeywell Automation Ltd are seen posting revenue growth on year in the 23-25% range. On the aggregate, seven companies from the sector are likely to have recorded a revenue increase of 7% on year and flat on quarter. Even finance companies are likely to have followed the same path. The bottomlines of Bajaj Finance Ltd, Bajaj Finserv Ltd, L&T Finance Holdings, and Shriram Finance Ltd are seen rising 21-61% on year while those of Life Insurance Corporation of India, LIC Housing Finance Ltd, Muthoot Finance Ltd, and SBI Cards and Payment Services Ltd, are seen in the red. On the aggregate, their bottomline growth would likely come in at 6% while topline growth will likely have been double of that. The sector's margins outlook for the March quarter by some analysts is upbeat. Brokerage Prabhudas Lilladher sees them as stable "as strong disbursements and yield transmission cushion rising cost of funds." STANDING OUT Automobile sector companies in Nifty 200 are seen reporting strong earnings numbers. The aggregate sales of 18 companies from the sector would likely have gone up by 27% on year and their aggregate net profit nearly doubled. "The Indian automobile sector has seen a significant demand improvement (during Jan-Mar) with most categories witnessing encouraging traction on a YoY (on year) basis, led by double-digit volume growth, in the PV/CV (passenger and commercial vehicles) segment," said Axis Securities. Fast moving consumer goods sector would likely have seen consumer demand become circumspect in the rising inflation environment, but would still manage to post reasonable growth numbers. The aggregate sales of 14 FMCG companies are likely to rise 11% on year and net profit is seen rising 14% on year. However, sequentially, the earnings are expected to disappoint with the sales up by just 2% and net profit down by 3%. The decent earnings numbers of the sector would be influenced by heavyweight Hindustan Unilever Ltd whose sales is estimated to rise 16% on year and net profit seen up 11%. Sequentially, HUL's sales are seen up by just 2% and net profit up by just 3%. Banks will likely to fare better than their peers from non-banking financial sector with a 33% on-year jump in aggregate net profit of 16 banks from the Nifty 200. THE ROAD AHEAD Analysts are sure that 2023-24 (Apr-Mar) will pan out differently compared with 2022-23 but differ on the contours. Nuvama Institutional Equities sees a risk to consensus expectation among analysts of a strong profit growth in 2023-24. Demand deterioration is broadening from exports to some segments of domestic consumption, and this shall eventually weigh on credit growth and capital expenditure by companies, it said. Axis Securities said it will be keenly watching management commentaries on demand and margins outlook for next one year. Analysts expect inflationary pressures to affect consumer durable companies. Although automobiles demand is seen continuing to be decent, there are uncertainties on consumer spending if the inflation increases. Challenges are seen subsisting for metals, cement and chemicals sectors while there will likely be a diverse trend in companies in capital goods, pharma, and oil and gas sectors. Following are the Jan-Mar consensus earnings estimates of companies that constitute the National Stock Exchange's Nifty 200 index. These estimates are based on reports compiled by Informist Media from 18 brokerage houses. Company name   Sales        PAT   Sales     PAT   Sales     PAT     EBITDA   Result    No. of    ——Average——- —–(Y-o-Y)—– —–(Q-o-Q)—– Mln Rupees     date   brokerages    —–Mln Rupees—– ————–% Change————–         polled AUTO                   Apollo Tyres + 62,275 3,388 12 199 (3) 16 9,500      — 5 Ashok Leyland 117,329 8,088 35 (10) 31 124 12,470      — 8 Bajaj Auto 84,175 14,170 9 (4) (7) (5) 15,748 Apr 25 8 Balkrishna Industries 22,749 2,449 (4) (34) 6 146 4,301      — 5 Bharat Forge 25,372 2,676 52 2 30 (7) 5,359      — 6 Bosch 39,528 4,601 19 31 8 44 6,171 May 10 1 Eicher Motors + 36,774 7,884 17 29 0 6 8,923      — 8 Escorts Kubota 21,860 1,901 17 (6) (3) 2 2,003 May 10 3 Hero MotoCorp 82,939 7,460 12 19 3 5 10,059 May 4 8 M&M 220,577 17,649 29 37 2 16 28,254      — 6 Maruti Suzuki 325,464 26,318 28 43 17 12 34,377 Apr 26 8 Motherson Sumi Wiring India  18,058 1,327 9 186 8 25 2,119      — 2 MRF 57,978 2,585 11 65 5 53 6,724      — 2 Samvardhana Motherson International + 207,586 5,525 23 354 4 22 16,981 May 26 4 Sona Blw Precision Forgings + 7,293 1,118 33 7 8 4 1,971      — 1 Tata Motors + 1,042,360 42,507 34     N.A. 19 44 130,141 May 12 6 Tube Investments of India +      N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A.      — 0 TVS Motor Co 65,589 3,512 19 28 0 (0) 6,594 May 4 6 Total 2,437,904 153,158 27 99 12 22                           Aviation                   Interglobe Aviation 138,358 6,272 73     N.A. (7) (56) 56,058      — 5 Total 138,358 6,272 73     N.A. (7) (56)                           BANK                   AU Small Finance Bank* 11,930 3,893 27 13 3 (1)      N.A. Apr 25 7 AXIS Bank* 120,432 10,040 37 (76) 5 (83)      N.A. Apr 27 11 Bandhan Bank* 22,695 7,954 (11) (58) 9 174      N.A.      — 7 Bank of Baroda* 112,957 40,662 31 129 4 6      N.A.      — 8 Bank Of India*      N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A.      — 0 Canara Bank* 89,636 31,117 28 87 4 8      N.A.      — 3 Federal Bank* 20,245 8,275 33 53 3 3      N.A. May 5 10 ICICI Bank* 171,380 90,166 36 28 4 8      N.A. Apr 22 11 IDFC First Bank* 34,785 6,589 30 92 6 9      N.A. Apr 29 5 Indian Bank *  56,627 15,152 33 54 3 9      N.A.      — 3 IndusInd Bank* 47,355 20,290 19 49 5 4      N.A. Apr 24 11 Kotak Mahindra* 59,516 29,664 32 7 5 6      N.A. Apr 29 10 Punjab National Bank* 92,917 10,734 27 433 1     N.A.      N.A.      — 7 SBI* 394,480 151,410 26 66 4 7      N.A.      — 11 Union Bank Of India* 90,279 22,662 33 57 5 1      N.A.      — 3 YES Bank* 20,051 2,768 10 (25) 2 437      N.A. Apr 22 2 Total 1,345,285 451,376 29 33 4 14                           CEMENT                   ACC + 47,044 2,921 9 (26) 4 158 5,399 Apr 27 7 Ambuja Cements  41,925 4,816 7 (3) 2 31 7,636 May 2 7 Dalmia Bharat + 38,800 3,904 15 47 16 91 8,024 Apr 25 4 Grasim Industries 65,138 3,437 2 (68) 5 34 7,247      — 2 Ramco Cements 21,617 880 27 (29) 9 31 3,088      — 4 Shree Cement 45,924 4,689 12 (27) 13 69 9,380      — 7 UltraTech Cement  185,264 17,350 22 (29) 23 75 32,526 Apr 28 5 Total 445,711 37,996 14 (30) 13 67                           CHEMICAL                   Astral + 15,362 1,584 10 12 21 70 2,476      — 3 Coromandel International + 55,021 3,295 30 14 (34) (37) 5,242      — 2 Deepak Nitrite 19,283 2,317 157 62 136 105 3,464      — 2 Gujarat Fluorochemicals +  14,323 3,099 33 40 1 (6) 4,738      — 3 Navin Fluorine International 6,022 1,158 51 47 42 42 1,727 May 13 3 PI Industries 16,299 3,050 21 49 4 (14) 4,019      — 4 Tata Chemicals + 38,911 4,739 12 2 (6) 19 9,159      — 2 UPL + 173,103 15,233 9 10 27 40 38,603      — 3 Total 338,323 34,474 19 18 7 16                           CONSUMER ELECTRICAL                   Voltas + 29,602 1,714 12 (6) 49     N.A. 2,352 Apr 26 5 Whirlpool of India 17,530 1,083 9 36 50 908 1,565      — 3 Total 47,132 2,797 11 7 49     N.A.                           DIVERSIFIED                   Adani Enterprises +      N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A.      — 0 Total      N.A.      N.A.     N.A.     N.A.     N.A.     N.A.                           ELECTRICAL                   Adani Power +      N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A.      — 0 Bharat Electronics 65,198 11,115 5 (3) 61 86 15,531      — 4 Crompton Greaves Consumer Electricals 16,876 1,124 10 (38) 33 33 1,955      — 4 Dixon Technologies (India) +  29,671 604 0 (4) 23 16 1,284      — 3 Havells India 49,147 3,451 11 (2) 19 22 5,083 May 3 5 Polycab India + 42,671 3,799 7 18 15 6 5,212      — 3 Total 203,562 20,093 7 (3) 31 46                           ENGINEERING – CAPITAL GOODS                 BHEL 89,810 3,700 18 (59) 82 19 7,720      — 3 CG Power and Industrial Solutions + 17,123 1,607 14 44 (4) (29) 2,266 May 8 1 Cummins India 18,323 2,578 25 36 (15) (28) 2,953      — 4 Honeywell Automation India 8,249 850 23 17 (19) (20) 992      — 2 Hindustan Aeronautics 120,543 29,108 4 (6) 113 152 32,446      — 2 L&T + 547,685 41,612 4 15 18 63 65,791      — 4 Siemens 42,765 3,947 25 20 19 (10) 5,203      — 4 Total 844,497 83,401 7 0 29 62                           FINANCE                   Aditya Birla Capital      N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A.      — 0 Bajaj Finance +* 67,878 29,337 41 21 15 (1)      N.A. Apr 26 5 Bajaj Finserv +*      N.A. 17,073     N.A. 27     N.A. (4)      N.A. Apr 27 1 Bajaj Holdings & Investment*+      N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A. Apr 27 0 Cholamandalam Investment and Finance * 17,666 7,296 (60) 6 11 7      N.A. May 3 6 HDFC Asset Management Co* 5,904 3,610 14 5 6 (2) 4,204 Apr 25 4 HDFC Life Insurance Co#      N.A. 3,917     N.A. 10     N.A. 24      N.A. Apr 26 2 HDFC* 50,187 38,038 9 3 4 3      N.A. May 4 7 Indian Railway Finance Corp *       N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A.      — 0 L&T Finance Holdings *+ 19,426 4,861 25 51 1 7      N.A. Apr 28 3 LIC Housing Finance* 17,094 8,501 4 (24) 6 77      N.A.      — 4 Life Insurance Corporation of India *      N.A. 8,794     N.A. (63)     N.A. (86)      N.A.      — 1 M&M Financial Svcs* 16,526 6,275 10 4 2 (0)      N.A. Apr 28 5 Max Financial Services*      N.A. 2,655     N.A.     N.A.     N.A. 4,872      N.A. May 12 1 Muthoot Finance* 17,951 9,422 4 (2) 5 4      N.A.      — 6 One 97 Communications + 24,303 (3,073) 58     N.A. 18     N.A. (2,480)      — 1 PB Fintech +      N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A.      — 0 Poonawalla Fincorp + 3,325 1,507 (35) 26 (52) (17)      N.A. Apr 26 1 Power Finance Corp*      N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A.      — 0 REC*      N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A.      — 0 SBI Cards And Payment Services 11,296 5,774 13 (1) (1) 13      N.A.      — 5 SBI Life Insurance Co#      N.A. 7,320     N.A. 9     N.A. 141      N.A. Apr 26 2 Shriram Finance* 43,395 18,154 72 67 7 2      N.A.      — 4 Total 294,952 171,503 12 6 6 (20)                           FMCG                   Britannia Industries + 40,279 4,949 15 30 (2) (47) 7,133      — 6 Colgate Palmolive 13,428 2,852 4 (12) 5 17 4,150      — 7 Dabur India + 23,365 3,580 (7) 22 (23) (25) 4,499 May 4 7 Godrej Consumer + 32,114 4,373 11 20 (10) (20) 5,986      — 4 Hindustan Unilever  153,291 25,779 16 11 2 3 36,573 Apr 27 7 ITC 167,768 48,998 9 17 4 (3) 62,495      — 7 Jubilant Foodworks 12,861 665 11 (43) (2) (25) 2,181      — 6 Marico + 22,180 2,748 3 9 (10) (16) 3,868 May 5 6 Nestle India 44,787 6,849 13 15 6 9 8,719 Apr 25 7 Procter Gamble Hygiene      N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A.      — 0 Tata Consumer Products + 34,986 2,403 10 10 1 (34) 4,671 Apr 25 5 United Breweries 18,133 1,198 6 (26) 13     N.A. 1,989      — 2 United Spirits 23,834 1,767 (2) 30 (14) 60 2,904      — 3 Varun Beverages + 36,038 3,832 27 51 63 413 7,416 May 2 6 Total 623,063 109,992 11 14 2 (3)                           HEALTHCARE                   Apollo Hospitals + 43,756 1,989 23 121 3 30 5,306      — 4 Fortis Healthcare + 16,224 1,372 18 703 4 6 2,995      — 2 Max Healthcare Institute + 15,015 2,828 60 129 32 27 4,171      — 2 Total 74,994 6,188 28 168 8 22                           HOTELS                   Devyani International +  7,543 359 28 (53) (5) (50) 1,490      — 4 Indian Hotels Co + 15,620 2,887 79 289 (7) (25) 5,030      — 3 Total 23,163 3,246 58 116 (6) (29)                           IT                   Coforge + 21,706 2,622 25 26 6 15 4,003 Apr 27 10 HCL Tech + 266,406 38,335 18 7 (0) (6) 57,470 Apr 20 13 Info Edge India 5,669 1,878 24 56 2     N.A. 2,148      — 3 LTIMindtree + 88,448 11,763 106 85 3 18 15,667 Apr 27 13 L&T Technology Services + 20,729 3,072 18 17 1 1 4,417 Apr 26 7 Mphasis + 35,188 4,153 7 6 0 1 6,179 Apr 27 7 Oracle Financial Services Software + 22,670 2,790 78 (42) 56 (36) 3,550 Apr 26 1 Persistent Systems + 22,497 2,729 37 36 4 15 4,158 Apr 24 7 Tata Elxsi 8,480 1,940 24 21 4 (0)      N.A.      — 1 Tech Mahindra + 138,308 13,080 14 (13) 1 1 20,379 Apr 27 13 Wipro + 235,299 31,673 13 3 1 4 44,677 Apr 27 12 Total 865,399 114,037 22 7 2 2                           LOGISTICS                   Container Corp 20,523 2,874 0 12 3 (3) 4,559      — 5 Delhivery + 16,690 (119) (19)     N.A. (8)     N.A. 2,643      — 4 Total 37,213 2,755 (10) 101 (2) 173                           MEDIA                   Sun TV Network 8,361 3,899 0 (4) (2) (6) 5,242      — 4 Zee Entertainment + 20,337 840 (12) (54) (4) 245 2,084      — 6 Total 28,697 4,738 (9) (19) (3) 8                           METAL                   Hindalco Industries + 556,299 20,994 (0) (45) 5 54 52,364      — 5 Hindustan Zinc 86,466 23,969 0 (18) 13 11 41,178 Apr 21 2 Jindal Steel & Power + 131,069 11,365 (9) (25) 5 119 76,848      — 4 JSW Steel + 451,834 20,115 (2) (38) 17 311 64,533 May 19 5 Steel Authority of India 294,127 13,363 (4) (45) 17 188 34,862      — 6 Tata Steel + 598,143 8,979 (13) (91) 5     N.A. 56,612 May 2 6 Vedanta + 340,548 30,724 (13) (47) 1 25 85,493      — 2 Total 2,458,486 129,508 (7) (56) 8 148                           OIL & GAS                   Adani Total Gas+      N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A.      — 0 Adani Wilmar + 160,117 3,021 970 29 937 23 5,924      — 1 BPCL 1,131,713 50,547 9 112 (5) 158 79,836      — 8 GAIL  312,204 12,095 16 (55) (12) 392 17,469      — 8 Gujarat Gas 37,666 2,796 (19) (37) (1) (25) 4,617      — 7 Hindustan Petroleum 1,024,832 22,027 5 23 (6) 1,177 40,266      — 7 Indian Oil Corp 1,859,654 62,828 5 4 (9) 1,302 105,283      — 8 Indraprastha Gas 36,920 3,738 53 3 (1) 34 5,205      — 8 NMDC  57,280 16,090 (15) (11) 54 81 20,765      — 4 Oil India 54,605 16,472 22 1 2 (6) 26,857      — 5 ONGC 361,570 107,649 5 22 (6) (3) 197,499      — 7 Petronet LNG 148,321 8,427 33 12 (6) (29) 12,765      — 6 Reliance Ind + 2,163,849 174,049 4 7 (0) 10 370,504 Apr 21 6 Total 7,348,730 479,737 8 11 (3) 40                           PAINT                   Asian Paints + 87,575 11,395 11 34 2 6 17,029 May 11 7 Berger Paints India + 78,998 2,342 261 6 193 17 3,853      — 4 Pidilite Industries + 27,764 3,252 11 28 (7) 7 4,999 May 8 5 Total 194,337 16,989 54 28 36 8                           PHARMA                   Abbott India 13,870 2,540 11 20 5 3 3,210      — 1 Alkem Laboratories + 28,401 3,102 14 188 (7) (32) 4,438      — 2 Aurobindo Pharma + 63,686 5,370 10 (32) (0) 9 10,031      — 4 Biocon + 36,327 1,495 51 (37) 24     N.A. 8,302      — 3 Cipla + 56,264 6,290 8 74 (2) (40) 10,852 May 12 5 Divi's Laboratories 18,105 3,452 (27) (61) 7 11 5,002      — 3 Dr Lal Pathlabs + 5,150 635 6 4 5 20 1,266      — 2 Dr. Reddy's Lab + 61,491 9,746 13 905 (9) (22) 15,583 May 10 5 Gland Pharma + 9,874 2,409 (10) (16) 5 4 3,029      — 3 IPCA Laboratories 14,608 1,030 25 (7) 2 (14) 1,980      — 2 Laurus Labs + 15,265 2,043 7 (11) (1) 1 3,728 Apr 27 1 Lupin + 42,233 1,896 9     N.A. (1) 24 5,141      — 5 Piramal Enterprises +       N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A.      — 0 Sun Pharma + 108,366 18,399 15     N.A. (2) (16) 27,397      — 4 Syngene International      N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A. Apr 26 0 Torrent Pharma + 24,406 3,217 16     N.A. (1) 33 7,244      — 4 Zydus Lifesciences + 37,122 5,592 (4) 68 (15) (10) 8,687      — 4 Total 535,166 67,214 10 697 (2) (11)                           PORT                   Adani Ports and SEZ + 49,091 15,789 28 54 3 20 30,128      — 2 Total 49,091 15,789 28 54 3 20                           POWER & ENERGY                   ABB India 22,815 1,580 17 (58) (5) (48) 1,998 May 3 5 Adani Green Energy +      N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A.      — 0 Adani Transmission +      N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A.      — 0 Coal India + 294,726 51,627 (2) (23) (9) (33) 65,076      — 4 JSW Energy + 23,631 2,989 (3) (78) 5 66 7,420      — 2 NHPC 16,540 5,769 10 3 (27) (26) 7,555      — 2 NTPC  404,559 48,619 23 (14) (2) 9 120,452      — 4 Power Grid 116,099 40,260 14 (7) 8 9 101,889      — 4 Tata Power + 144,259 10,921 21 117 2 16 20,801 May 4 3 Torrent Power + 50,539 6,739 35     N.A. (22) (2) 13,588      — 1 Total 1,073,167 168,503 13 (11) (4) (11)                           REALTY                   DLF + 14,043 3,998 (9) (1) (6) (23) 3,977      — 2 Godrej Properties + 9,809 3,288 (26) 26 400 460 2,777      — 2 Oberoi Realty + 11,392 3,833 38 65 (30) (45) 5,029      — 2 Prestige Estates + 24,086 1,820 0 (81) 4 42 6,061      — 2 Total 59,329 12,937 (3) (30) 5 (8)                           RETAIL                   Aditya Birla Fashion 27,351 (1,215) 25     N.A. (19)     N.A. 2,617      — 5 Avenue Supermarts 106,323 5,008 24 7 (6) (22) 8,235      — 6 Bata India 7,735 582 16 (7) (14) (30) 1,709      — 4 FSN E-Commerce Ventures + 12,940 (4) 33     N.A. (12)     N.A. 667      — 2 Page Industries 11,580 1,306 4 (31) (5) 6 2,026      — 5 Titan Co 89,789 7,210 33 47 (14) (24) 10,632 May 3 5 Trent 20,236 638 71 (15) (7) (60) 2,288 Apr 27 5 Zomato + 21,225 (3,466) 75     N.A. 9     N.A. (3,519)      — 3 Total 297,181 10,058 31 2 (9) (40)                           TELECOM                   Bharti Airtel + 356,309 24,966 13 24 (0) 57 183,234      — 6 Indus Tower + 67,894 12,105 (5) (34) 0     N.A. 34,967 Apr 26 2 Tata Teleservices (Maharashtra)       N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A. Apr 24 0 Vodafone Idea + 105,616 (79,877) 3     N.A. (0)     N.A. 41,625      — 4 Total 529,819 (42,806) 8     N.A. (0)     N.A.                           TEXTILE                   SRF + 37,007 5,421 6 (10) 10 6 9,073      — 4 Trident      N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A.      — 0 Total 37,007 5,421 6 (10) 10 6                           TRAVEL & TOURISM                   IRCTC 9,680 2,638 40 23 5 3 3,433      — 2 Total 9,680 2,638 40 23 5 3                           Grand Total 20,340,246 2,068,013 11 8 3 17         EARNINGS DECLARED SO FAR Company name     Sales      Informist       PAT      Informist       EPS   Result          estimates       estimates      (in Rs)     Date HDFC Bank* 233,518 236,380 120,475 121,300 21.49 Apr 15 ICICI Lombard General Insurance Co# 40,473     N.A. 4,370 3,490 8.89 Apr 18 Infosys + 374,410 388,607 61,280 66,459 14.77 Apr 13 TCS + 591,620 594,728 113,920 115,402 31.14 Apr 12 Tata Communications + 45,687 45,836 3,260 3,343 11.44 Apr 19 Note:      + Consolidated Figure      * Net interest Income      # Net premium income      Y-o-Y: Year-on-Year      Q-o-Q: Quarter-on-Quarter N.A.: Not Available      Rs: Rupees        Estimates from: Anand Rathi Share and Stock Brokers Ltd, Axis Securities, BNP Paribas, Elara Capital, Emkay Global Financial Services Ltd, HDFC Securities Ltd, ICICI Research, ICICI Securities Ltd, IDBI Capital Market Services Ltd, Jefferies Group, Kotak Institutional Equities, Motilal Oswal Securities Ltd, Nirmal Bang Equities Pvt Ltd, Nuvama Wealth Management Ltd, PhillipCapital (India) Pvt Ltd, Prabhudas Lilladher Pvt Ltd, Sharekhan Ltd and YES Securities (India) Ltd. End Informist Media Tel +91 (22) 6985-4000 Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved.

Deep Dives

TREND: Low market volume may continue to hit CDSL's topline in FY24

Informist, Wednesday, May 31, 2023 By Rajesh Gajra MUMBAI – Transaction charges are the primary revenue source of depository companies and a rise in volumes in the equity market increases their income from this subhead. The story was, however, different for them in the last financial year. Low retail participation led to the reduction in overall volume, which hit the financial performance of Central Depository Services Ltd, and this trend is likely to continue. "There is a 31% reduction in the year-on-year delivery volume across that's why there has been a lower transaction revenue," Nehal Vora, managing director and chief executive officer of CDSL, told Informist in a post-earnings investor call earlier this month when asked about the decline in the March quarter. Data from the National Stock Exchange too confirmed a downward trend, with delivery volume falling 7.5% in 2022-23 (Apr-Mar). The trend seems to continue in the current financial year with the April delivery volume down 23.2% from the previous month. CDSL's standalone revenue in the March quarter was down nearly 17% on quarter to 982 mln rupees primarily due to a 23?ll in transaction charges income to 330 mln rupees. For the full year, standalone revenue rose 8.6% to 4.51 bln rupees but transaction charges income fell 20.3% to 1.59 bln rupees, while the revenue share from this subhead contracted sharply to 35% from 48%. The financial performance of unlisted National Securities Depository Ltd too paints a similar picture with the standalone revenue in the March quarter falling 14% sequentially to 930 mln rupees. NSDL does not provide a break-up of its revenue but like CDSL, transaction charges and issuer charges together make up for a bulk. The two depositories impose a transaction charge on a demat account holder every time there is a debit. Investor's demat account is debited when he has sold shares, and he has to effect the delivery at the time of settlement. "It is basically a slab wise approach so a person who is a frequent user of the system has to pay a per debit lower charge as compared to infrequent user of our system, so it ranges from 5.50 rupees per debit to 4.25 rupees per debit depending on the number of transactions which you are doing," said Vora. This makes the transaction charges growth dependent on volume growth in the cash market trades on BSE and NSE. According to Jimeet Modi, founder & CEO of Samco Securities, trading volume in the stock market is directly proportional to black swan events like COVID in 2020-21. "If there are no black swan events this year (2023-24) then the trading volume would be normalised and average, and at this point in time we believe that it would be flattish as compared to FY23," he said. Sahaj Agrawal, head of research - derivatives at Kotak Securities, said that volumes are a function of market sentiment and cash volumes dipped in recent times on the back of many market impacting events such as interest rate scenario, inflation, and geopolitical developments. ICICI Securities in a recent research report also highlighted that decline in market volume would remain a key downside risk for CDSL. Lower retail participation is one of the primary reasons behind the declining trend in trading and delivery volume in the equity market. Vora told investors and analysts in the post-earning call that retail market participation was muted in 2022-23 as compared to the previous year. The hit on earnings on the two depositories' topline was, however, buffered by the jump in annual issuer charges in 2022-23. According to Jimeet Modi this may have been aided by a new regulatory rule requiring all unlisted companies to dematerialise their securities leading to increase in issuer clients of the two depositories. In the case of CDSL, the income from annual issuer charges jumped nearly 60% to 1.84 bln rupees in 2022-23, and its share in total standalone revenue expanded sharply to 41% from 28%. The interesting facet of this was issuer charges' revenue share overtook that of transaction charges in 2022-23. OPERATIONAL PERFORMANCE The declining trend in volumes is slowing down the earnings growth of the two depositories. The operating profit and margin performance of the two depositories have also weakened due to sluggish revenue and higher costs. CDSL's standalone operating profit, as denoted by the profit before other income, depreciation, and finance costs, fell 22% on quarter and 16% on year to 560 mln rupees in Jan-Mar. Margin contracted to 57% from 61.2% in previous quarter and 66.5% a year ago. In 2022-23, the operating profit of CDSL declined 5.4% to 2.67 bln rupees while margin contracted sharply to 59.2% from 68% in 2021-22. NSDL's profitability trajectory was, however, different. Its operating profit increased 9.5% to 2.06 bln rupees. But there was a small contraction in the operating margin to 50.3% from 50.9%. Going ahead the depositories' financials would continue to be dependent on the stock market trading activity. And for that to happen, investors should see value emerging in equities, Agrawal said.  End Informist Media Tel +91 (22) 6985-4000 Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved

FOCUS: HC ruling on faceless tax assessment may increase litigation

Informist, Wednesday, May 31, 2023 By Surya Tripathi  NEW DELHI – The Delhi High Court's ruling last week that a tax assessee has no fundamental or vested legal right to be assessed by a faceless assessing officer and the discretion to transfer a case lies with the central government may lead to increased litigation, according to tax experts and lawyers. A division Bench of Justice Manmohan and Justice Dinesh Kumar Sharma gave the ruling in a batch of petitions by Congress leaders Sonia Gandhi, Rahul Gandhi and Priyanka Gandhi, and the Aam Aadmi Party, challenging the tax authorities' decision to transfer their tax assessments to the central circle. Section 127 Of The Income Tax Act Says That An Income Tax Commissioner May Transfer A Case From An Income Tax Officer After Giving The Assessee A Reasonable Opportunity Of Being Heard. Noting that the transfer of tax assessment was done according to law, the high court upheld the decision of income tax authorities. Assessments of five charitable trusts associated with the Gandhi family--Sanjay Gandhi Memorial Trust, Jawahar Bhawan Trust, Rajiv Gandhi Foundation, Rajiv Gandhi Charitable Trust, and Young Indian--were also transferred to the central circle. The Gandhis had opposed the move by the tax authorities, saying the transfer of an assessment to the central circle of the income tax department could only be done in cases of search and seizure. Siddharth Joshi, a senior associate with SKV Law Offices, said the judgement will have an impact on tax litigations as the power under Section 127 has been predominantly expanded and the applicability of faceless assessment and appeals has been minimised by subjecting it to the discretion of the Central government. Section 127 of the Income Tax Act says that an income tax commissioner may transfer a case from an income tax officer after giving the assessee a reasonable opportunity of being heard. Since the high court has now expanded the definition of Article 127, the government has got a go ahead in its discretion to transfer such cases. The result is that more and more litigation will follow as there would be no set criteria to measure the government's discretion. Adithya Reddy, an international tax advisor based in New York, said the recent high court judgement on transfer of faceless income tax assessments under Section 127 of the Income Tax Act was controversial because the court ruled that the petitioners do not have any fundamental or vested legal right to be assessed by a faceless assessing officer. Reddy said that although the Income Tax Department's arguments that there is no vested legal right for a faceless assessment are constitutional, there appears to be some irregularity in its intentions and approach, which could lead to future litigation.  There are apprehensions about giving the power to transfer such cases because of possible misuse of power by the government against its critics. There have been instances of the government launching investigations into alleged tax evasion against those who have been critical. Earlier this year, the tax authorities conducted searches in the offices of BBC, weeks after it aired a documentary in the UK that was critical of Prime Minister Narendra Modi.  Reddy feels that the government should issue a clarification to resolve the issue once and for all, so that the taxpayer has clarity.  The judgement would increase tax litigations as the high courts will restrain from entertaining the writ petitions filed by assesses challenging the transfer order passed under Section 127 of the Income Tax Act, said Joshi. Sandeep Bajaj, the managing partner of PSL Advocates & Solicitors, said that allowing personal hearing only at the discretion of the Chief Commissioner or the Director General of the Income Tax, hampers the assessee's right of personal hearing in contradiction to the legal principle of "audi alteram partem" which means listen to the other side. Bajaj said that there has been a plethora of orders that ruled against the violation of principle of natural justice. In the case of Lemon Tree Hotels Ltd vs National Faceless Assessment Centre Delhi, 2021, the court set aside the order of the assessment officer because the assessee had sought a personal hearing but it was not granted to him, added Bajaj. Bajaj feels that in reference to Section 127, there remains a doubt about the court's interpretation. There are also contrary views of different high courts that require that the assessee must be given reasons in a comprehensive manner, said Bajaj. Whenever there is an open interpretation to a law, the litigation around such interpretation increases, which ultimately leaves it to the Supreme Court to decide. Pallav Pradyumn Narang, partner at CNK, feels that the ruling will be undoubtedly challenged in the highest court of the land and in all likelihood the final answer may lie with the Supreme Court.  End Informist Media Tel +91 (11) 4220-1000 Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved

TREND: Rising mercury may make June quarter a breeze for AC companies

Informist, Tuesday, May 23, 2023 By Neeshita Beura MUMBAI – The peak summer season, which started in April, is expected to result in a surge in sales of air conditioners and room coolers, and this is likely to be reflected in industry players' revenue for the June quarter. Historically, sales of white goods peak from March till June. In 2022, the industry witnessed record sales of 1.5 mln room air conditioners in April, said Shashi Arora, president and chief operating officer, cooling and purifications appliances group at Blue Star Ltd. The Mumbai-based company has a 13.5% market share in the air conditioner business in the country. This Year, Unseasonal Rains In March Dampened The Demand For White Goods This year, however, unseasonal rains in March dampened the demand for white goods. "In March, the Indian room AC industry witnessed a double-digit de-growth in both volume and value, as per a third-party industry report," Pradeep Bakshi, managing director and chief executive officer of Voltas Ltd, said in a statement. Soaring temperatures across the country are now expected to lead to a revival in demand for white goods. "With the heat wave witnessed across states such as Gujarat, Uttar Pradesh, Punjab, Haryana, Maharashtra, Bihar, Jharkhand, West Bengal, and Odisha in the first fortnight of April, it is expected that air conditioner and room cooler sales would be high this year as well," Blue Star said. The company, whose room air conditioner business grew more than 35% in the summer of 2022, expects to see record sales this summer season as well, given the tropical nature of the country, a harsh summer, and a higher density of concrete housing in urban areas. In the company's Jan-Mar post-earnings call, Managing Director B. Thiagarajan said he expected the white goods market to grow at least 20% from January to June. It could even grow beyond 25%, given that temperatures in Delhi could shoot up from May 7 till Jun 15, according to forecasts. However, industry players are aware that any unexpected rain will impact the sale of air conditioners. INPUT COSTS, A PAIN POINT In 2022-23 (Apr-Mar), air conditioner makers were hit by high costs of raw material such as steel, copper and plastics. They believe the volatility will continue in the current fiscal year as well. Blue Star attributed the volatility in commodity prices to "disruptions in the global supply chain of these commodities". Apart from that, an adverse foreign exchange rate – currently over 82 rupees a dollar – has impacted prices of imported raw materials. Ocean freight, too, was impacted due to COVID-19 restrictions in China and Russia's invasion of Ukraine. Blue Star said it continues to maintain its profitability margins through total cost management and other cost-reducing initiatives. The company's revenue for the quarter ended March rose 16.4% on year to 26.24 bln rupees. Voltas, another major player, said the consumer durables industry has witnessed multiple double-digit price hikes in the last two financial years. Regardless, the company ensured it didn't pass on the full extent of the hikes in raw material prices to consumers. It has also introduced various offers such as equated monthly instalment options to make purchases convenient for customers. Voltas has a 21.9% share in the Indian air conditioner market. The company's revenue rose 10.9% on year to 29.57 bln rupees in Jan-Mar. However, its net profit for the period fell 21.2% on year to 1.44 bln rupees due to provisions made on delayed collection in the international project business, according to a press release shared by the company. At 1224 IST, shares of Blue Star traded 0.1% lower at 1,411 rupees, while those of Voltas were up 0.1% at 811 rupees.  End Informist Media Tel +91 (22) 6985-4000 Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved.

TREND: Withdrawal of 2,000-rupee banknotes may reduce CD issuances

Informist, Tuesday, May 23, 2023 By Vishal Sangani MUMBAI – The Reserve Bank of India's decision to withdraw 2,000-rupee denomination banknotes may lead to a fall in issuances of certificates of deposit as the surge in deposits and liquidity will help banks meet their funding needs, market participants said. In a surprise move, the central bank on Friday announced the withdrawal of 2,000-rupee denomination banknotes from circulation by Sep 30. Public can deposit these banknotes into their bank accounts or exchange them into banknotes of other denominations at any bank branch starting today. In 2022-23 (Apr-Mar), Banks Issued CDs Worth 7.19 Trln Rupees, More Than Two And A Half Times The 2.79 Trln Rupees Of CDs Issued In 2021-22. Banknotes of denomination 2,000 rupees account for 10.8% of the notes in circulation, or 3.62 trln rupees. Even if 30% of this ends up as deposits, the incremental deposits on account of the withdrawal alone will be nearly 1.1 trln rupees. Most market participants see a gradual increase in deposits over the next four months, which will help banks meet their funding requirements. Usually, banks depend on deposits and CDs to meet their short-term credit requirement and also for asset liability management. Market participants expect bank deposits to increase by 1.5-2.5 trln rupees by Sep 30. The liquidity in the banking system might gradually increase by 500 bln-1.50 trln rupees by the end of September. "Rollover and fresh of issuances of CDs might slow down due to surge in bank deposits and liquidity," a dealer from a state-owned bank said. In 2022-23 (Apr-Mar), banks issued CDs worth 7.19 trln rupees, more than two and a half times the 2.79 trln rupees of CDs issued in 2021-22. This sharp rise was primarily on account of higher credit offtake this year, as well as lower liquidity in the banking system. CDs worth 4.31 trln rupees are scheduled for redemption in 2023-24, as per data compiled by Informist. "We expect bank deposit growth to pick up, as part of these notes are deposited back with banks, as these were not being used for transactions. On our estimates, bank deposit growth may pick up from 10.4% year-on-year in early May to around 10.7% by September, implying additional deposit accretion of 1.2 trln rupees," Nomura Group said in a research report. As on May 5, banks' total deposits stood at 184.35 trln rupees, up 10.4% on year. "The banking system liquidity was already in surplus at the end of April. The addition of 1.0-1.8 trln rupees over a period of four months (June to September) will inject significant short-term liquidity into the banking sector over the next two quarters and is likely to reduce the banking sector’s dependence on short-term CDs in the near term to some extent," CareEdge said. However, with rates softening, some bank dealers and fund managers said they do not see much impact on CD issuances. "I don't see too much of an impact because this is not withdrawal of a legal tender...It is just being conveyed that the currency in circulation is going to stop, and the RBI is encouraging people to change it," a debt fund manager with a mid-sized mutual fund house said. "We will continue to see active issuance, especially now that rates have softened so much," a dealer from a big state-owned said. Fresh issuances of short-term papers by banks may also decline due to moderation in credit growth this financial year, dealers said. At a post-earnings call last week, State Bank of India Chairman Dinesh Khara said that going forward, the bank expects to see some moderation in credit growth. Market participant expect bank credit to grow 11-14% in the current financial year, against 15% in 2022-23. According to the latest data by the RBI, advances by banks grew 15.5% on year to 139.55 trln rupees in the fortnight ended May 5. Going forward, issuances of CDs will depend on how much of the 2,000-rupee banknotes will get deposited and stay with banks, and how the RBI maintains liquidity in the banking system. INTEREST RATES After the RBI's surprise announcement, borrowing costs in the short-term debt market fell by 5-10 basis points on Monday. "Rates have come done in anticipation of deposits increasing with banks. I personally feel that it may go towards consumption and the deposits may increase by probably August, September," said a dealer from a state-owned bank. Since last week, rates on short-term debt papers are down 35-40 bps in the primary market after the RBI injected liquidity in the banking system through a 14-day variable rate repo auction. Rates on three-month CPs issued by non-banking finance companies were down at 7.05-7.20% on Monday from 7.15-7.25% on Friday, while rates on papers of manufacturing companies fell by 10 bps to 6.90-7.10%. Rates on three-month CDs declined to 6.80-7.00% from 6.85-7.05% on Friday. Banks borrowed 467.90 bln rupees from the 14-day variable rate repo auction for 500 bln rupees. The RBI had announced the auction after money market participants had asked Fixed Income Money Market and Derivatives Association of India to petition the central bank to infuse liquidity through variable rate repo operations as overnight cost of funding had become uncomfortably high. Liquidity in the banking system is currently estimated to be in a surplus of 474.84 bln rupees, down from 934.61 bln rupees on Monday. The surplus narrowed due to outflows on account of tax payments and repayment of government bonds. "For a pretty long period, we were seeing overnight rate is well beyond the upper end of the corridor liquidity corridor. I think since RBI has infused liquidity that there is some bit of rally. Now, we have this currency thing," a debt fund manager with a mid-sized mutual fund house said. Market participants also see liquidity improving further on higher-than-expected dividend payout by the central bank to the government. The RBI's central board of directors on Friday approved the transfer of 874.16 bln rupees as surplus to the central government for 2022-23. The Budget for the current financial year pegged the surplus transfer from the RBI and dividend from state-owned financial institutions at 480 bln rupees. The government has already got 129.30 bln rupees from dividend by state-owned banks, according to announcement made by banks, taking the total from the RBI and state-owned banks to a little over 1 trln rupees. Market participants expect rates on short-term debt papers to stay in a narrow range in the coming days. "Overall, compared to last week, the rates are going to stay at this level," a dealer from a state-owned bank said.  End Informist Media Tel +91 (22) 6985-4000 Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved.

TREND: Exposure cap concerns hit MF demand for HDFC short-term bonds

Informist, Friday, May 19, 2023 By Asmita Patil MUMBAI – The heavy supply of bonds from Housing Development Finance Corp Ltd has adversely affected appetite for its short-term papers as investors, particularly mutual funds, walk a tightrope to lock in higher rates without breaching exposure limit. HDFC has been on a borrowing spree ahead of its proposed merger with HDFC Bank. In the year ended March, the housing finance company raised a total of 784.14 bln rupees through 11 bonds, according to data from the National Securities Depository Ltd. Of this amount, 643.02 bln rupees were raised through seven bonds maturing in 10 years. So far in the current financial year, HDFC has raised another 210.05 bln rupees through issuance of three bonds. On Wednesday, Informist reported that HDFC plans to raise at least 35 bln rupees through 10-year bonds next week. The mortgage lender is facing a challenge in garnering demand in the three- and five-year segments of corporate bonds, where mutual funds mostly invest, primarily because of exposure limits and the likely classification of its debt after the merger with HDFC Bank. According to Securities and Exchange Board of India regulations, mutual fund schemes cannot invest more than 10% of their net assets in debt and money market securities rated "AAA" issued by a single company. The investment limits can be extended by a further 2% with the approval of the board of the asset management company. SEBI has also specified that exposure of a debt scheme of a mutual fund to a particular sector, barring investments in certificates of deposit, collateralised borrowing-and-lending obligation, government securities, Treasury bills, short-term deposits of scheduled commercial banks, and "AAA"-rated securities issued by public financial institutions and public-sector banks, should not exceed 20% of the scheme's net assets. Exposure to the financial services sector can be extended by a further 10% of the net assets of the scheme by increasing investment in housing finance companies. This is where the classification of the debt comes into play. Marzban Irani, chief investment officer for debt at LIC Mutual Fund, explained that after the merger HDFC bonds are likely to move from the category of housing finance company to non-banking finance company for mutual funds. For the insurance industry, HDFC bonds are currently classified as infrastructure and there is no clarity on what the classification will be after the merger. So, until the relevant sectoral regulators clarify the debt's classification or whether there will be a grandfather clause, even insurance firms may go slow on investing in the bonds and "demand will be skewed", he said. Uncertainty over the categorisation of HDFC debt under regulatory norms has already led market participants to SEBI's door for clarification. According to sources, HDFC has also approached the regulators but has not got any response so far. "Till the effective date of merger, I don't see any (clarification) coming up," a source aware of the matter said. An analysis of HDFC's recent bond offerings shows that issuances in the 10-year segment are getting swiftly absorbed owing to wider market participation and enticing rates, but not so much in the shorter-term segments. At the beginning of the current financial year, HDFC raised only 30.05 bln rupees through bonds maturing in slightly less than two years when it was aiming for 70 bln rupees. On Monday, the lender raised 30 bln rupees through five-year bonds as against its plan to raise 80 bln rupees. In contrast, the housing financier raised 150 bln rupees through bonds maturing in 10 years at a coupon of 7.80% in May. Market participants believe HDFC's issuances will sail through if it taps the market in the long-term segment, as investor appetite remains intact for long-term papers. "When interest rates are likely to trend lower, long-term investors are preferring to invest in 10-year bonds over three- or five-year bonds," said Deepak Agrawal, chief investment officer at Kotak Mahindra Mutual Fund. So next week, HDFC plans to raise funds through bonds maturing in 10 years that carry a put option at the end of three years from the date of allotment. In late March, the lender's board had approved borrowing up to 570 bln rupees through bonds. Seeing recent developments, the company plans to raise at most 100 bln rupees more from the corporate bond market by the end of June, the source quoted earlier said.  End Informist Media Tel +91 (22) 6985-4000 Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved.

TREND: Pulses' prices seen rising on concern about supply, El Nino

Informist, Friday, May 19, 2023 By Priyansh Verma and Arunima Bharadwaj NEW DELHI – The low availability of pulses, primarily tur, in the domestic markets and concern about El Nino are likely to put upward pressure on domestic prices, industry players said. Traders and experts believe the wholesale prices of pulses are likely to move up in the coming months owing to supply constraints. Urad Prices, too, Have Been Rising. The Pulse Was Sold At 9,370 Rupees Per 100 Kg In Key Market Of Latur In Maharashtra, Sharply Higher Than The Minimum Support Price Of 6,600 Rupees Tur is sold at 9,450 rupees per 100 kg in benchmark market of Akola in Maharashtra, way above the minimum support price of 6,600 rupees per 100 kg. The current spot price at Akola is 51% higher than 6,250 rupees a year ago, according to Informist data. Considering that the new crop will only start arriving after kharif season and looking at the low supply of tur, prices are expected to touch the level of 9,600-9,800 rupees per 100 kg by the end of June, said a commodity analyst. The usual arrival of the crop around this time of the year is 25,000 bags (1 bag = 100 kg), said Laxmi Narayan, an Akola-based trader. "However, we are receiving arrivals of only 2,500 bags." One of the main reasons for the lower availability is the sharp decline in output in the current crop year ending June. According to the agriculture ministry estimates, tur output in 2022-23 crop year (Jul-Jun) is projected to decline 13.1% on year to 3.67 mln tn. Market participants, however, project the actual tur output this year to be even lower at 3.0 mln tn. Tur accounts for about 50% of India's pulses production during the kharif season. The agriculture ministry has projected India's overall pulses production in 2022-23 at 27.81 mln tn, up 1.9% on year from 27.30 mln tn last year. Besides tur, urad production is also projected to decline this year. According to the ministry estimate, urad output in 2022-23 is estimated at 2.68 mln tn, down 3.4% from 2.78 mln tn a year ago. Urad prices, too, have been rising. The pulse was sold at 9,370 rupees per 100 kg in key market of Latur in Maharashtra, sharply higher than the minimum support price of 6,600 rupees, traders said. Urad prices are expected to rise by 500 rupees per 100 kg by June end, according to a commodity research company. Among other pulses, prices of moong and masur are expected to remain stable for the coming months with marginal movement, traders said. Moong is presently being sold at 7,000-8,500 rupees per 100 kg at Rajkot in Gujarat and masur at 5,350-5,400 rupees per 100 kg at Lalitpur market in Uttar Pradesh. An uptick in prices of pulses is likely to put upside pressure on CPI inflation, which fell below the 5% mark for the first time since November 2021, in April. Data released last week showed, India's CPI inflation moderated to an 18-month low of 4.70% in April from 5.66% in March. The decline in the headline print was mainly due to the statistical effect of high base. The pulses and products' index, carrying a weight of 2.38% in CPI rose 1.3% on a month-on-month basis in April. The inflation rate of the index was at an 18-month high of 5.28% in April, reflecting increasing of price pressures. The upward pressure on prices seems to be continuing in May as well. According to the Department of Consumer Affairs data, tur prices have so far averaged 10,824 rupees per 100 kg in May, up 1.6% month-on-month and urad prices have averaged 9,868 rupees per 100 kg, up 0.9% on month. "A 1% increase in pulses prices tends to increase headline CPI 0.02 percentage points," IDFC FIRST Bank's Economist Gaura Sen Gupta said. "Rising inflation in pulses is largely seen in tur dal," said Prithviraj Srinivas, chief economist at Axis Capital. "In the past, shortfall in pulses, like in 2019-20, led to a 39% year-on-year increase in imports and a 16.5% year-on-year increase in prices." Imports of pulses, in value terms, were up 64% year-on-year in April. With prices on the rise, the government today issued an advisory asking importers not to hold stock of tur and urad beyond 30 days from the date of customs clearance. "Looking ahead, inflation in pulses is expected to peak by the end of the June quarter at 14-15% year-on-year if prices hold at current levels," Srinivas said. Experts are also worried about the possibility of below normal monsoon due to El-Nino conditions, affecting kharif pulses production. "Area under tur and urad this year is expected to increase due to high prices of the two pulses in the domestic market presently," said a Delhi-based commodity analyst. However, if the monsoon is below normal, productivity is likely to be affected, the analyst said. India Meteorological Department has projected southwest monsoon rainfall to be normal this year at 96% of the long period average though a moderate El-Nino is likely to develop in the second half of the season. El Nino, an abnormal warming of surface ocean temperatures in the eastern tropical Pacific, is usually associated with lower rainfall in India. "Even as pulses inflation is higher compared to last year, there is scope for prices to rise in case we have poor monsoon given these are mainly grown in parts of country that are less insulated from spell of bad rains," said Abhishek Upadhyay, senior economist, ICICI Securities Primary Dealership.  End Informist Media Tel +91 (11) 4220-1000 Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved