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Capital Small Finance Bank targeting NIM of over 4% in FY25, says MD

Informist, Monday, May 27, 2024 --Capital Small Finance Bank MD: Aim net interest margin of over 4% in FY25 --To maintain CASA ratio around 38% in FY25 --Plan to add 24–26 branches in FY25 --Aim loan growth of 22-24% in FY25 --Mulling foray into credit card business --To meet universal bank license norms in 12-18 months --To seek authorised dealer-I license FY25 --May tie-up with 1 more general insurance co By Kshipra Petkar and Richard Fargose MUMBAI – Capital Small Finance Bank is targeting a net interest margin of over 4% in the current financial year, Managing Director Sarvjit Samra said. The small finance bank has the legroom to improve its credit-deposit ratio, which will eventually result in higher margin, he said. "There was some concentration in margins last year because of the interest rate regime. More than 50% of our interest rates are on floating rates and the benefit of which has started coming this year. So, this financial year will have a favourable impact on increasing our margins. Margins will definitely go towards the right side of 4%," Samra told Informist. The bank reported a net interest margin of 3.9% in 2023-24 against a guidance of 4.4-4.5%. Capital Small Finance Bank is a retail-led deposit franchise and retail deposits account for 93% of total deposits, according to the bank's investor presentation. In terms of current, savings account deposits, the bank aims to maintain the ratio at 38% in the current financial year, Samra said. The small finance bank, whose headquarters are in Jalandhar, Punjab, plans to add 24–26 branches in the current financial year, mostly outside Punjab. "We are adding a few branches in Jammu. With this, we will be in six states and the union territory of Chandigarh," he said. The bank is targeting a loan growth of 22-24% in 2024-25, sharply higher than the nearly 12% growth achieved in 2023-24. The higher growth is mainly seen from the micro, small and medium enterprises, mortgage and the agriculture segments, Samra said. He, however, expects the share of agriculture segment to come down from the current 37% next year. Samra said the bank is mulling a foray into the credit card business. "We were targeting to reach about 1 mln (bank) customers to start with. There is no immediate plan but we are evaluating all possibilities," he said. The bank currently has 750,000 customers. Samra said the small finance bank will take 12–18 months to meet all the requirements set by the Reserve Bank of India to qualify for the universal bank license. The bank's business model still has enough room to grow and will take a call on applying for a universal licence at an appropriate time, he said. The small finance bank at present does not meet the net non-performing asset ratio target to qualify as a universal bank. "So we are almost there, our net NPA is at 1.4%, and we have been maintaining it through various cycles. It's a journey, and it will take some time, but we are working on the right path," Samra said. The RBI last month notified norms for the transition of small finance banks to universal banks. The performance parameters include reporting a net profit for the last two financial years, and the gross and net non-performing asset ratios must also be below 3% and 1%, respectively, for the two previous financial years. Small finance banks would also require to maintain a minimum capital to risk-weighted assets ratio of 15% to be eligible to apply for universal banking licence. The bank should also have a minimum net worth of 10 bln rupees at the end of the previous quarter. Lastly, the shares of the small finance bank should be listed on a recognised stock exchange. The bank aims to apply for the authorised dealer-I license in the current financial year. "We have still not applied, but we are gearing up for that. It will take some more time. Six months back we were going through the IPO process, and now I think it is the right time to focus on this. We will apply in this current financial year," Samra said. Currently, Capital Small Finance Bank has tie-ups with ICICI Bank and YES Bank to carry out customer remittances. Once the bank gets the licence, the fees charged by these banks to customers and the bank will cease, which will in turn increase the small finance bank's fee-based income. The bank was listed on the exchanges in February. Asked about the lacklustre performance of its shares on the bourses, Samra said that they are also surprised about it, but at the end of the day it is market driven and not in their control. The shares, which were issued at 468 rupees per share in the initial public offering in February, are currently trading at a discount of nearly 30% at 329.50 rupees. "The key drivers will be growth in advances and the increase in CD (credit-to-deposit) ratio, which will have a favourable impact on improving our net interest margins as well as an improvement in our profitability and ROA (return on assets) and as we go on progressing and improving these ratios, I think definitely the market will respect that," Samra said. Samra also said that the bank is on the lookout to tie-up with a general insurance company. Currently, the bank is a corporate agent for Bajaj Allianz General Insurance, HDFC Life Insurance, ICICI Prudential Life Insurance and Max Life Insurance.  End   Informist Media Tel +91 (22) 6985-4000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

INTERVIEW: Apr sunflower oil import down, to rise in May - Sunvin CEO

Informist, Monday, May 27, 2024 --Sunvin Bajoria: Apr sunflower oil price up on low Russian supply --Sunvin's Bajoria: Sunflower oil was costliest edible oil in April --CONTEXT: Sunvin Group CEO Sandeep Bajoria's comments in interview --Sunvin: May sunflower oil import seen 350,000 tn --CONTEXT: India imported 234,801 tn sunflower oil in Apr --Sunvin Bajoria: To seek lifting of ban on CPO, soyoil futures --CONTEXT: India banned palm oil, soyoil futures trade till Dec --Sunvin: Brazil output concern boosts India soymeal export prospects --Sunvin: Argentina output worry lifts India soymeal export prospects --Sunvin: Efforts should be made to increase Indian soybean yield --Sunvin: Oilseed farmers should not depend on govt MSP alone --Sunvin: Govt procured only 20% of rabi mustard arrivals so far --Sunvin: Do not see rice bran oil export ban extending beyond Jul 31 --CONTEXT: Govt banned exports of rice bran oil on Jul 28 last year By Anjali Lavania and Romeo M. Raj MUMBAI – India stepped up its import of soyoil and palm oil at the cost of sunflower in April as it turned expensive due to lower export by Russia, Sandeep Bajoria, chief executive officer of Sunvin Group said. Sunflower oil was the cheapest in the edible oil basket from December to March, he said. However, imports of sunflower are likely to be be higher again in May, as the cargoes contracted earlier when prices were low are arriving during the month. The sunflower oil import in May is likely to rise to around 350,000 tn, from 234,801 tn imported in April. According to the Solvent Extractor's Association of India data, sunflower oil imports in March were 445,723 tn, the highest since November. "For sunflower, the main season is from Sep 15 to May 15, and from May 16 to Sep 14 is the off-season," Bajoria said in an interview with Informist. For the oil year 2023-24 (Nov-Oct), Bajoria estimates a slight dip in edible oil imports to 16.0 mln tn from 16.5 mln tn last year.  On the issue of the ban on derivatives trading of soyoil and palm oil on the National Commodity and Derivatives Exchange, Bajoria said that the Solvent Extractor's Association will seek a revocation of the ban from the new government. The new government should focus on two things--to restart the derivatives trading in soyoil and palm oil and increase the import duty for edible oils as it has been too low for too long.  Below are the edited excerpts of the interview: Q. India's crude palm oil and crude soyoil imports have increased in April, while India’s crude sunflower oil imports have fallen around 6% on year. What led to the fall in sunflower oil imports?   A. Sunflower oil was the cheapest edible oil from December to March. So that's why sunflower imports were very high in those months. Palm oil was the costliest oil, then soyoil and sunflower were the cheapest. But then in March-end, the situation changed. Now, the sunflower became the costliest and palm oil became very cheap. Even soyoil became very cheap. So, India stepped up the import of soyoil and palm oil and reduced the import of sunflower oil. This happened in April.   The prices are also in a very reasonable band. The overall fluctuation in the oil year has been in the range of $150. In palm, it has gone down to $860-$870 per tn, and on upper side, it has gone to $1,000-$1,020 per tn. In soyoil, again it has gone to $860-$870 per tn and on upper side, it has gone to $1,000-$1,030. Sunflower oil has come down to around $890–$900 per tn in this oil year and upper side, it has gone to $1,000-$1,010.   In May, we will have a good amount of palm oil coming together about 800,000-850,000 tn. Soyoil imports in May would be nearly 370,000 tn. In May, sunflower is going to be little high. The reason is earlier contracted cargos coming in May which were of lower prices. So, that is why, May sunflower imports are in the range of about 350,000 tn. So overall May import is pretty significant. Going forward, the palm imports will definitely be 750,000 tn to 800,000 tn each month.    At the end of the current oil year ending in October, the veg oil imports will be something around 16 mln tn, valued at about 15.5 bln dollars. Last year, we imported about 16.5 mln tn.   Palm oil will come about 8.8 mln tn which is lower than previous year by 1.2 mln tn. Soyoil import will be roughly around 3.8 mln tn which will be slightly higher than the previous year. Sunflower oil import will come around 3.4 mln tn which will be higher than the previous year.       Q. In March, crude sunflower oil imports, majorly sourced from the Black Sea region and shipped through the Red Sea, were in a discount against crude palm oil and soyoil, while in April it was the opposite. What factors led to the sudden surge in the prices of sunflower oil?   A. Sunflower oil prices had decreased but again they have gone up. Again now in the last 10-15 days, sunflower oil prices have really shot up. Now today it is about $1,000 per tn because the supply has reduced drastically from Russia and Argentina. The major source of supply in India was Russia and now offers from Russia have reduced because they are also facing off-season.   Sunflower season is from Sep 15 to May 15, and now during off-season, availability of sunflower is going to be affected. We import 350,000 tn of sunflower oil per month. It is going to come down to 200,000 tn per month.   Q. In the edible oil complex, sunflower oil is the only oil traded on the Indian derivatives market. What is your outlook for June crude sunflower oil futures on NCDEX?   A. The June contract of sunflower on NCDEX is trading around 870-875 rupee per 10 kg level. May contract of sunflower oil is trading at 865-870 rupees per 10 kg. I think June contract is not going to go down now and 870 rupees looks like a bottom. In Jul-Aug contract, I believe the prices of sunflower oil can go up to 890-900 rupees.   Q. With respect to the trading ban on soyoil and palm oil on NCDEX, has Sunvin as a group approached the government regarding revocation of the ban?   A. It is unfortunate that the government has banned the soyoil and palm oil. See, we as our own self, we don't write to the government. On behalf of the associations, we are continuously taking up issues with the government. We will be writing immediately after the new government is formed for two things. One is to start the future trading and another we are going to write that import duty needs to be revised upwards because it is too low for too long.   Q. The strikes in Argentina last month by workers in soy-processing plants threatened to paralyse the output in the country. Also, the heavy rains in South American countries like Brazil and Argentina have delayed harvesting. Does it mean an opportunity for India to increase exports of soymeal globally in the coming months?   A. You are right. In Brazil, floods occurred and that's why there is a 3-mln-tn loss of soybean production in the country. Also, in Argentina, the frequent strikes by port workers, factory workers, stevedores are disrupting the logistics of supply, production, and exports. So, this is delaying the whole situation of exports, production and supply there and definitely gives some kind of advantage to India. But still they have a very big crop and they have a large book to sell on the meal. So, it's not a drastic advantage to India.   Q. India has been dependent on imported oil for several years. The government is also talking about the Atmanirbhar policies to increase oil production. But at the same time, the government's policy is to keep the import tariffs very low for edible oil. Don't they contrast with each other?   A. I fully agree with you. This is a contradiction by itself that on one hand, you want farmers to increase oilseed production, they should get a better price, and on other hand, you want consumers to get very cheap oil. You are not able to strike a proper balance between them. Right now, it is skewed towards consumers than farmers. So, our objective of increasing oilseed production is somehow getting compromised.   So, I believe after the elections, the government will let the import duty go high so that farmers get a better price.   Most important is that yields should be increased. We have 1,000 kg per ha yield for soybean in India, while Argentina, Brazil, and the US are having 2,600-3,300 kg per hectare yield. For India, effort needs to be made very strongly to increase the productivity to 1,500-1,800 kg per hectare.   Q. Do you think India’s minimum support price system is effective in boosting oilseed production? Should the government recalibrate its MSP policy?     A. MSP policy is good. It has been there for many years. But, you do not depend only on the government agencies to buy at MSP. You create economy and the ecosystem in such a manner with your policies that market forces themselves pay the MSP.   If market forces are unable to pay, then the government has to ensure that they procure big chunk of a crop at MSP. The government has procured only 20% of the crop at MSP.   I can understand the government's predicament also. That is how to procure full crop at MSP? Where to store it? Where to keep it? How to get money for all this? So, this becomes a massive exercise which is like nearly impossible.   So, the best way is, nowadays, there are so many financial, trade and commerce instruments available. You utilise those and create a proper economic environment. Then, market forces can pay the MSP to the farmer. You have to be realistic while putting the MSP at the same time. We cannot just dictate our own prices in commodities which are fully global.    Another thing what the government can do is, to not procure the crop directly. In the US, this system is there. So, you take an average mandi declared price on that particular day, say 5,700 rupees (per 100 kg). Average price traded in several mandis is 5,000 rupees. So, 700 rupees you just credit in the farmer's account and let private trade buy that at 5,000 rupees and process it and move ahead.   So, the government doesn't need to procure, store and resell all the assets. So, you can do this way because we have now such a good banking and direct benefit transfer schemes.   Q. What happens to the government's finances in that case?   A. It will save lot of money. Because if you procure, store, and if it rots, and then you sell, instead of 700 rupees, you will lose 1,500-2,000 rupees. By this you will get lot of credibility and farmers will be happy. Also, private trade will get a globally competitive price.   Now what happens is whatever the government is procuring, whole stocks go to the government godowns. The industry doesn't get enough seed. It doesn't go to the market. So, all these problems can be avoided by just paying the price difference.   Q. Mustard farmers are having difficulty getting the MSP due to slow procurement by the government agencies. Do you think this will discourage farmers to take up the oilseed cultivation next year?   A. Yes, absolutely, you are right on the point. They were struggling to get MSP and government agencies purchased only 20% of the crop which was coming to the market. So, we are reducing their motivation to plant mustard seed next year. We saw good increase in the crop in the mustard seed from 7.5-8.0 mln tn, we jumped to 12.0 mln tn. If the proper price was given, this could have been 15 mln tn in next 2 years. But with these kinds of prices, the incentive to farmers to grow more is gone.   Q. India has extended the export ban on de-oiled rice bran. The government prohibited the export of de-oiled rice bran on Jul 28 last year, attributing it to high fodder prices. Initially set to last until Mar 31, the prohibition was later extended to Jul 31. How do you view the extension of the policy?   A. See now there is some justice in what the government has done, but not fully. The reason is if you don't pay the proper price for the bran, if you don't allow export, you lose the export market. Traditional buyers will shun you. Then at the same time you are not able to get the proper price for the rice bran. So, there are a lot of issues involved.   But now the government’s full focus is on consumers and the end buyers. So, the government was so inclined to see inflation remaining in a controllable level. That's why they took all these steps which were pretty drastic.   So, although we have not agreed fully with these steps, we have understood the compulsion of the government. That's why we said let the elections get over. So, I don't think it will be extended beyond July. Next government will understand that this need not be extended.   Q. Palm oil futures in Malaysia have been trading at a low level for the week, and may fall further on the back of reduced exports. Malaysia's exports of palm oil in April fell 6.97% on month to 1.23 mln tn, according to data from the Malaysian Palm Oil Board. At what levels do you see the palm oil prices will trade on BMD in the upcoming month?   A. Now palm oil production is rising. So, I don't think there is a cause of concern there. Palm supply is going to be higher. We are importing higher quantity. So, whatever was the problem from January to April, now it's no more there. But one thing we have to realise. We think palm oil is going to be a very cheap oil all the time, that's not the case anymore. This is because palm oil production in Malaysia and Indonesia is not rising. Every year Malaysian production used to rise by 500,000 tn and Indonesian production used to rise by 2 or 3 mln tn. But this year, there is no growth in both.   Then there is a growth in food demand, fuel demand, and biodegradable demand. So, there is always higher demand in palm oil. Earlier, we saw palm oil used to sell at $150-$200 cheaper than soyoil. Those days are gone now. End   Informist Media Tel +91 (22) 6985-4000  Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

INTERVIEW:Ujjivan Small Fin Bank to diversify for universal bk status

Informist, Friday, May 24, 2024 By Priyasmita Dutta and Sagar Sen NEW DELHI – Ujjivan Small Finance Bank plans to diversify its portfolio to meet the Reserve Bank of India's conditions to transition into a universal bank, says Managing Director and Chief Executive Officer Ittira Davis. "There are a whole list of reasons why we should be getting a universal bank licence," Davis tells Informist in an interview. "...there is also a requirement that as a small finance bank we have to write 'small finance bank' under our name. Depositors ask what a small financial bank is...is it different?...what are the implications? As a universal bank, we don't have to write 'small finance bank' under our name. We just call ourselves Ujjivan Bank," he says.  According to the Reserve Bank of India's notification on the voluntary transition of small finance banks to universal banks, those with diversified loan portfolios will be preferred. "The condition of the RRBI says you have to have a diversified portfolio. There is no condition that you have to cut down on microfinance," Davis says. "I think that the word diversification has to be looked at from a broader banking perspective. In particular, we also are not just looking at the asset side. As a bank, we also have a deposit side. And we are well diversified on that, and we provide a lot of services." Davis says that as part of the diversification, the bank aims to increase its secured portfolio to 40% from just over 30%. "We are adding 3-4% every year. So, I think it is not a problem to get to 40%. We have a good housing (portfolio). Last year, our housing grew 45%. That is bigger than the overall loan growth. Overall growth of the assets was 24%. "We believe 40% is a good number. We don't need to go to 50-60?cause we are focused on financial inclusion. So, having a 60-40 mix, we believe is good and once we get there, that's a fairly good diversification on the asset side." Ujjivan Small Finance Bank has met all the conditions to be eligible for a universal bank licence. Some key parameters stated by the RBI are reporting a net profit for the two previous financial years and having gross and net non-performing asset ratios below 3% and 1%, respectively, for the two previous financial years, and a capital-to-risk-weighted assets ratio of 15%. For 2023-24 (Apr-Mar), Ujjivan Small Finance Bank's net profit was 12.82 bln rupees, against 11 bln rupees a year ago. As of Mar 31, the small finance bank's gross and net non-performing asset ratio were 2.1% and 0.3%, respectively, and the capital-to-risk-weighted assets ratio was 24.7%, which meant the bank met all parameters. Davis says the small finance bank may also consider expanding its presence in a few states, especially those where it has just over 5% exposure. "I can tell you that one of the things we may be looking at is, while we say that we are not more than 15% in any state, we may want to increase the number of states where we have 5% or more exposure, assets and liabilities combined," he says. Currently, Tamil Nadu has the highest share of 14.1% in the small finance bank's gross loan book, followed by Karnataka with 13.1% and West Bengal with 11.9%. Ujjivan Small Finance Bank plans to open 50 new branches in the second half of the current financial year, Davis says. Following are edited excerpts from the interview: Q. Recently you said you would transition into a universal bank and that the board would take a call on this. What are some of the benefits you expect from the transition? A. There are a whole list of reasons why we should get a universal bank licence. The first is that capital requirement is lower for a universal bank compared to a small finance bank. The second is that the 'priority sector lending' requirement for a small finance bank is 75%, whereas for a universal bank, it is 40%. Also, 50% of our portfolio as a small finance bank has to be for loans less than 25 months; this condition also goes away as a universal bank. But more than that, there is also a requirement that as a small finance bank we have to write 'small finance bank' under our name. Depositors ask what a small financial bank is...is it different?...what are the implications? As a universal bank, we don't have to write 'small finance bank' under our name. We just call ourselves Ujjivan Bank.    These are important conditions when you look at the marketplace and also the way people look at the placement of funds. Then, there will be other secondary issues that are not that important, but which will also play out in the bigger scheme of things.   Q. The Reserve Bank of India's parameters for small finance banks to secure universal bank status include having a diversified portfolio. Ujjivan has heavy exposure to micro-group loans or microfinance loans. How do you look at diversifying your loan book? A. The condition of the Reserve Bank says you have to have a diversified portfolio. There is no condition that you have to cut down on microfinance. I would like to clarify that diversification in banking has multiple meanings. One of the conditions is a secured and unsecured mix.   The way we can justify diversification is that we are in 26 states. Besides, we also have a range of products. So, this word 'diversification' is not unidimensional; it is a multidimensional approach. The word diversification has to be looked at from a broader banking perspective. And in particular, we also are not just looking at the asset side. As a bank, we also have a deposit side. And, we are well diversified on that, and we provide a lot of services.   Q. But if you have to fit into the RBI's definition of diversification as business diversification, would you like to diversify further and how? A. That is the intention of the board, to review this whole thing and decide as to what sort of strategy will be deployed for diversification. For example, I can tell you that one of the things we may be looking at is, while we say that we are not more than 15% in any state, we may want to increase the number of states where we have 5% or more exposure, assets and liabilities combined. So then, we can say we are present in 10 states with at least more than 5% exposure.   That is one of the things that we have discussed, and we said yes, we should diversify to that extent so that even if the 15% in the top two-three states comes down to 12%, we can add a couple of percentage points, and we will be present in a bigger way in the top 10 states.   The full deployment of diversification will be taken up by the board in the next couple of months, and then, it will decide what we do. But as a strategy, we have already decided that we will bring our secured portfolio up to 40%.   We believe 40% is a good number. We don't need to go to 50-60?cause we are focused on financial inclusion. Financial inclusion adds a larger exposure to the microfinance sector, and we have been in this business for 20 years, first as a non-banking finance company and then as a bank. So we know this segment, and we believe that there is more growth that can come in this segment. Thus, having a 60-40% mix is good and once we get there, that's a fairly good diversification on the asset side.   Q. How much is the secured book right now? You said ideally, you would like to have it at 40% going ahead. A. Now, it is just over 30%.   Q. Do you see any particular challenges in increasing it to 40% in the near future? And what will the trajectory be like? A. We are adding 3-4% every year. So, I think it's not a problem to get to 40. We have a good housing (portfolio). Last year, our housing grew 45%. That is bigger growth than overall. Overall growth in assets was 24%. We have relaunched the micro and small enterprises portfolio, which is again a secured portfolio. So, that will pick up speed this year. And we have also added vehicle finance and gold loans, both of which are secured. They will also start making a contribution. So, getting to 40% in a couple of years shouldn't be a problem as far as we are concerned.   Q. What are the challenges you may face if you do not convert to a universal bank? A. We are already competing against all banks in the deposits business. A customer can deposit with a nationalised bank, they can deposit with a private bank, or they can deposit with us. So, to that extent, we are already competing.   What a universal bank will do is, if we are able to bring down our cost of funds, we will be able to focus the asset business on different segments. We will be able to give better prices. So, there are more opportunities rather than challenges.   Q. Are there any specific strategies you want to implement to bring down your cost of funds? A. Yes, we are all looking at it. Right now, our current account, savings account is 26%. Ideally, we would like to see it moving up to 30%. It is not going to be easy because there is a scramble for funds in the market. But we believe that our focus on micro, small and medium enterprises and growing the net interest margin will be very important because MSME will be added to the current account.   We are also adding some digital and other services that we can give to our customers, which we hope will increase our CASA from 26% to about 30%.   Q. You said in terms of expansion, you would look at increasing your presence in some states. Which states would you focus more on in the next 8-10 months? A. Yes, there are some states where we have exposure of less than 5%. So we will be pushing in that direction – like Uttar Pradesh, Haryana, and Rajasthan. We have fairly good exposure in Tamil Nadu, Karnataka, West Bengal and Maharashtra. Gujarat, Bihar, Uttar Pradesh, Haryana, New Delhi and Rajasthan are the five-six states where we can slowly ensure that the exposure goes beyond 5% so that it is meaningful exposure and the diversification is even more broad-based...that we are not just in four-five states in terms of concentration but spread across maybe 10 states.   Q. By expansion, do you mean opening new branches and hiring people? A. Yes, but actually, during 2023-24, we opened quite a few branches in Uttar Pradesh, Bihar and others. So now, it is a question of using those resources and getting them to use the brick and mortar, services and people there to increase exposure. But it takes a little bit of time for the branch to settle down, break even, and deliver the services. What we are doing this year is trying to focus on the 150 branches we opened in the last two years to provide the full range of services and increase their customer contact to be able to achieve their potential.    We are adding 50 new branches this year and these 50 branches will have to be manned, so to that extent we will have to add some talent and, depending on the strategy that we have in terms of growth, we will add employees. Most of them are in the second half of the year.    Q. Your interest expense was quite high in 2023-24. How do you intend to bring it under control? A. We are waiting for the RBI to start lowering interest rates, but in the interim, while that's not happening, we will have to manage, because even two weeks ago, State Bank of India raised interest rates for its short-term deposits. So, for everybody, it's a very tight market. We did raise interest rates for deposits in March. We'd like to refrain from increasing them further, but if our competition does it, we have to watch carefully. So, the cost of funds is something that is going to remain reasonably high, but our treasury has now come forward with some new ideas in terms of liquidity management. We hope that in the short run, before the interest rate cycle changes, we will be able to see the treasury liquidity management help us contain some of the cost increases on the funding side.  End   Informist Media Tel +91 (11) 4220-1000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Boosting profitability only pending agenda, says YES Bk MD

Informist, Wednesday, May 22, 2024 --YES Bank MD Kumar: Aim to bring profitability on a par with peers --CONTEXT: YES Bank MD Prashant Kumar in interview with Informist --YES Bank MD: Need clarity on RBI's draft project finance norms --YES Bk MD: Project finance norms aim to improve bks' balance sheets --YES Bank MD: Aim to maintain pdt mix of 40% cos, 60% retail, SMEs --YES Bank MD: Target loan growth of 16-17% in FY25 --YES Bank MD: FY25 deposit growth aim tad higher than loan growth --YES Bank MD: Comfortable with credit-to-deposit ratio of 85-90% --YES Bank MD: Credit-to-deposit ratio unlikely to fall below 85% --YES Bank MD: NIM has bottomed out, to improve going forward --YES Bank MD: Taking a pause on branch expansions --YES Bank MD: FY25 bad loan recovery likely to be over 50 bln rupees --YES Bank MD: Current IT infra capable of handling Paytm volumes --YES Bank MD: Allocated 9-10 bln rupees for IT infra in FY25 By Kshipra Petkar and Richard Fargose MUMBAI – With legacy issues mostly addressed, bringing profitability on a par with peers is the only unfinished agenda for YES Bank, according to Managing Director and Chief Executive Officer Prashant Kumar. "That (improving the bank’s profitability) is the only thing left now, which will also happen," Kumar, who took charge at YES Bank following its reconstruction in March 2020, told Informist in an interview. "Everything has its own time. We started almost from a graveyard and the market is expecting us to run a marathon.”   The bank’s operating profit margin was 0.9% in 2022-23, compared with 2.8% at other large and mid-sized private banks, according to YES Bank’s investor presentation.   Kumar said the bank could consider declaring a dividend when it reaches a stage where internal accruals are sufficient to take care of future growth. The bank last declared a dividend in 2019.   Going forward, Kumar aims to maintain the present loan mix. Currently, loans to retail and small and medium enterprises account for 60% of the bank's loan book, while the corporate and mid-corporate segments account for 40%. "We would like to keep this balance going forward," he said. "It means everybody has to grow at the same rate. We are seeing opportunities on the corporate, mid-market, SME and retail side."   Kumar was earlier chief financial officer and deputy managing director at State Bank of India. State Bank of India, which holds 24% in YES Bank, is the bank's single largest shareholder.   The private-sector bank is targeting loan growth of around 16-17% and deposit growth a little higher than 16-17% in 2024-25 (Apr-Mar). Its loan book grew 12.1% and deposits rose 22.6% in 2023-24.   "If you see in 2023-24, our loan growth was somewhere around 13%, but deposit growth was around 22%. So, our growth, even in the last four years, has been higher than industry growth and that's why we are gaining market share," Kumar said.   Despite deposits growing faster than the loan book, Kumar does not see the credit-to-deposit ratio falling below 85%. "85% is something that is good. We are comfortable between 85-90%, but definitely would not go below 85%," he said.   Kumar said the bank's net interest margin has "reached the bottom" and will improve from here on. "NIMs have reached the bottom. Going forward, there will only be improvement," he said. In 2023-24, the bank's net interest margin was at 2.4%, 20 basis points lower than in the previous year.    Asked about possible rate cuts by the Reserve Bank of India, Kumar said 40% of the bank's liabilities are on the corporate side, which are short-term deposits, and deposit repricing happens very fast in this segment. "On the loan side, it depends on what proportion of your loans are linked to the external benchmark. And 40% of our (loan) book is fixed rate, where the rates will not change. So, if the rate of interest comes down, it is good for us," he said.   The bank is "taking a pause" on branch expansion now as it wants to stabilise the 150 branches opened in the past two years, Kumar said. "It's not only to break even, but at least to provide them with sufficient investment. All kinds of assets and products should be available. It means you get the advantage out of those branches,” he said. YES Bank had 1,234 branches as of Mar 31.   Kumar said that though the bank has kept a bad loan recovery target of 50 bln rupees for 2024-25, the actual recovery is likely to be higher. "It (bad loan recovery) may be more, because every year we talk about a target of 50 bln rupees and if you see the last four years, our recoveries were higher than the target," he said.   For recovery from stressed and bad assets, the bank will continue to use a combination of sales to asset reconstruction companies and cash recovery, he said.   On security receipts from the sale of assets to asset recast companies lying in the bank’s balance sheet, Kumar said the net carrying value of the receipts was only 0.54% of the bank’s total loan book and the bank has adequate provisions for that. "So basically, if you see the current security receipt, it would be somewhere around 3,000 crore (30 bln rupees) but the provision is 78%," he said.   On its partnership with Paytm, Kumar said the number of transactions handled by the bank had risen from 3.8 bln to 5 bln per month after the deal. In March, the National Paytments Corp of India announced that YES Bank would act as a merchant acquiring bank for existing and new Unified Payments Interface merchants for One97 Communications Ltd. He also said that the bank’s current information technology infrastructure is sufficient to handle these transaction volumes.   The bank has been allocating around 9-10 bln rupees every year for information technology and will continue to do so in the current financial year as well, he said.    On the RBI's draft norms on project financing, Kumar said it seems like a step to strengthen the balance sheets of lenders. However, the implementation of the norms is something that needs a lot of clarity. "What will be the impact on the customer? How is it going to be operationalised? I think these are the things which have to be seen," he said.   The RBI has proposed to increase the provisioning for project financing to 5% for outstanding exposures during construction as against 0.4% now. The draft guidelines also raise a question of whether banks are the appropriate vehicles to lend to such long-term infrastructure projects when development institutions like National Bank for Financing Infrastructure and Development exist, he said.   "So, it is not like banks are doing it as per their business model, it is because this is also the requirement of the economy. But if there are any alternate mechanisms, I think banks would also be very happy not to finance," Kumar said. "Basically there has to be a clarity whether banks are supposed to do this or not."   On co-lending arrangements between banks and non-bank lenders, Kumar said the regulatory worry seems to be whether banks are compromising underwriting standards for growth. "I think the issue from the regulator’s side is always where banks, just for the growth purpose, compromise their credit underwriting standards. This is what banks should not do."  End   Informist Media Tel +91 (22) 6985-4000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Foreign PDs get past RBI speed bump, prepare for FX ops, say sources

Informist, Friday, May 24, 2024 By Aaryan Khanna NEW DELHI – Foreign-owned standalone primary dealerships have managed to navigate a regulatory speed bump and are now on track to roll out foreign exchange operations, sources familiar with the matter said. Having in-house currency desks would make it easier for the market makers to service foreign clients at a time when the inclusion of India in global bond indices is expected to pull hundreds of new investors into the country's debt market. Earlier attempts by standalone primary dealers to seek expanded authorised dealer licences had been stymied by disagreements with the Reserve Bank of India regarding regulatory scrutiny. Both the frequency and nature of disclosures has been a contentious issue for the three primary dealers with foreign parent institutions – Nomura Fixed Income Securities Pvt Ltd, Morgan Stanley India Primary Dealership Ltd, and Goldman Sachs (India) Capital Markets Pvt Ltd, sources said. Representatives from these organisations have held meetings with RBI officials since at least January to iron out the modalities of the products they can offer, people familiar with the discussions said. While initial rounds of the dialogue were unfavourable for primary dealers, the RBI's latest stance on the proposal has spurred activity on forex operations among these institutions. "The RBI has allowed enough vagueness to allow the primary dealers to decide internally what products to offer," one of the people said. "So it has been a win for them (primary dealers), and people have fast-tracked the development. But internal processes and approvals from global heads could still take time." In October 2022, RBI had allowed standalone primary dealers to offer all foreign exchange market-making facilities and issued norms for the same. The central bank also said that all financial transactions involving the rupee undertaken globally by related entities of the standalone primary dealers should be reported to Clearing Corp of India's trade repository before 1200 IST of the business day following the date of transaction from Jan 1, 2023. Goldman Sachs and Morgan Stanley are leading investment banks in the US, while Nomura is the largest investment bank in Japan. The race among their Indian offshoots is heating up before India's fully accessible route bonds are added to JP Morgan's Government Bond Index – Emerging Markets starting Jun 28. Bloomberg's local currency emerging market index will also include Indian gilts starting Jan 31. By offering market-making services on the forex side, these entities may be able to pick up a sizeable share of offshore investors into India's debt markets by leveraging their relationships in home markets. Primary dealers are non-banking financial companies and have Authorised Dealer Category-III licences from the RBI. They are market-makers in the fixed income market, for both government securities and corporate bonds. Their main activity is gaining interest income on held securities and capital gains from trading fixed income and money market instruments, along with some fee income for underwriting auctions of government paper. In India, there are seven standalone primary dealers, along with 14 integrated primary dealers. After the latest round of talks with the RBI, two of the foreign primary dealerships have begun hiring currency traders and are in the race to be the first to market by June, getting the central bank's authorisation. One of the US-based entities has taken a step back and is not pursuing its forex operations aggressively, the people said. "It has been a stressful time, between the RBI here and then getting clearances from head offices (offshore)," another person aware of the development said. "And while there is no deadline to get it done before Jun 28, it would be nice to capture that market as soon as possible." DOMESTIC PLAYERS Currently, none of the standalone primary dealers in India offers the expanded suite of forex operations. Domestic players were initially ready to pip their foreign counterparts in offering the services, having secured RBI authorisation last year. Moreover, domestic standalone primary dealers have also made efforts to attract foreign investors to onshore markets, including roadshows on India's debt in countries like Singapore. The only listed standalone primary dealer in India, PNB Gilts, had said in an exchange filing in July 2023 that it had received the RBI's authorisation to offer forex services on par with Authorised Dealer Category-I entities. Managing Director and Chief Executive Officer Vikas Goel had said that the primary dealership would aim for a launch of these operations by the end of 2023-24 (Apr-Mar). On May 16, quoting Goel, Informist had exclusively reported that PNB Gilts aims to launch its expanded forex services on Jul 1, after issues with settlement infrastructure delayed the rollout. The business will largely be proprietary in nature at launch, he had said. Another domestic primary dealership is also facing delays with implementing full-fledged forex operations, and has pushed back plans of launching this month, the people aware said. The two other domestic primary dealers are not actively looking to launch foreign exchange operations at the moment, and are likely to take cues from the launch of the larger players in the segment. "The RBI has thrown open the door for primary dealers to remain significant," the first person quoted above said. "But banks are entrenched players and have already poached many of the big investors coming in. Since nobody has been first to market yet, and (bond index) inclusion is only a month away, this foreign exchange play could take a couple of years to mature."  End IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT   Informist Media Tel +91 (11) 4220-1000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

India April gold imports more than double to 40-45 tn, say sources

Informist, Thursday, May 23, 2024 By Sandeep Sinha MUMBAI – Imports of gold in India more than doubled on year to 40-45 tn in April, according to trade and industry sources. The imports rose on the back of a slight correction in prices and fear that the prices would soon go back to the higher levels, they said, adding that jewellers also replenished their inventory to cater to demand for the festival Akshay Tritiya and wedding season. In the year-ago period, the country imported 16.68 tn of gold, according to the commerce ministry data. The trade data released by the commerce ministry showed the value of gold imports in April rose 209% on year to $3.11 bln, up from $1.01 bln in the corresponding period last year. The ministry gives import data only in value terms. In Jan-Apr, the country's gold imports rose over 55% on year to around 215 tn. Imports in the same period last year were 138.1 tn, the government data showed. "The sentiment in the domestic jewellery market got a lift as most buyers who have missed the sharp rally in the gold prices from March, began purchasing gold in anticipation that prices will go much higher," said Kumar Jain of Umedmal Tilokchand Zaveri.  There was a fear in the market that jewellery sales and demand for gold coins may tumble because of the rally in prices of the yellow metal. This even forced many dealers to offer a discount of $30-$35 per oz on domestic prices to attract buyers.  "Rising consumer interest was reflected in the reduced discounts on domestic gold prices in relation to international prices," said Kavita Chacko, research head, India, World Gold Council, in a note. The discount on domestic gold prices in relation to international prices narrowed to $10/oz last month. "Consumers were apparently bringing forward their wedding purchases in anticipation of further price rises in the near future. Demand for bars and coins, particularly among younger age groups, was reportedly robust, reflecting favourable consumer attitudes toward gold as an asset," Chacko said. Data released by the commerce ministry showed that gold imports in Jan-Mar rose 42.4% on year to 172.94 tn. This came on the back of a robust 103.54 tn import in February alone. The imports later fell in March to 33.7 tn, down 45.4% on year, due to a strong carryover stock from the previous month.  "India February imports were very high, more than 100 tonnes, which made possibility of 173 tonnes in Jan-Mar period. February was the month when gold prices were in a range of 62,000-65,000/10 gm before breaking higher to record highs of 74,000 rupees in April. There was a lot of uncertainties around and people were expecting gold prices to go higher in coming months, so a lot of stockist demand from jewellers resulted into higher imports," said Prithviraj Kothari, managing director of RiddiSiddhi Bullions Ltd.   India is the second-largest gold importer after China and imported 734.3 tn gold in 2023, up 3% on year.    However, Chacko said that the likelihood of the continuation of such demand is low with consumers making purchases around festivals. Overall buying activity is expected to be restrained. End US$1 = 83.28 rupees   Informist Media Tel +91 (22) 6985-4000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Informist Poll

Mar IIP growth seen easing to 5.0% from 5.7% in Feb

Informist, Wednesday, May 8, 2024 By Shubham Rana NEW DELHI – Growth in India's industrial production is likely to have eased marginally to 5.0% in March from a four-month high of 5.7% in February, according to the median of estimates of 16 economists in an Informist poll. Industrial output grew 1.9% in March last year. Industrial output, as measured by the Index of Industrial Production, is expected to have fallen in March as most high-frequency indicators have shown a declining trend in output growth. A 5.0% growth in industrial output in March would mean that the overall index may have risen 8.2% from the previous month, lower than the historical average of 9.1%. Industrial activity typically rises in March as it marks the end of the financial year and because it has a higher number of days compared to February. This year, being a leap year, saw February have one extra day of business activity. The growth in output of eight core industries, which account for over 40% of the total weight of the Index of Industrial Production, eased to 5.2% in March from a three-month high of 7.1% in February. Growth in e-way bills generated fell to a three-month low of 13.9% in March from 18.9% in February, while growth in vehicle production declined to 15.8% on year in March from 30.7% a month before. Merchandise exports contracted 0.7% in March compared to a growth of 11.9% in February. However, the manufacturing Purchasing Managers' Index rose sharply in March. The HSBC India Manufacturing Purchasing Managers' Index jumped to a 16-year high of 59.1 in March from 56.9 in February. The National Statistical Office will detail the Index of Industrial Production data for March at 1730 IST on Friday. Following is a summary of the details and estimates of respondents for IIP growth in March, in ascending order: Range of expectations: 1.9-6.8% Mean: 4.9 % Median: 5.0% Mode: 5.2% ORGANISATION IIP GROWTH ESTIMATE Moody's Analytics 1.9% Kotak Mahindra Bank 3.1% IndusInd Bank 4% ICRA 4.5% STCI Primary Dealer 4.5% State Bank Of India 4.6% HDFC Bank 4.7% ANZ Banking Group 5% Capital Economics 5% CareEdge Ratings 5.1% ICICI Securities Primary Dealership 5.2% ICICI Bank 5.2% India Ratings and Research 5.2% QuantEco Research 6.4% Sunidhi Securities 6.72% Motilal Oswal Financial Services 6.8% End   Informist Media Tel +91 (11) 4220-1000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Nifty 50 to inch up in May; elections, earnings eyed

Informist, Tuesday, May 7, 2024 By Anjana Therese Antony MUMBAI – The Nifty 50 looks poised to extend a four-month rally to May on the back of the widespread expectation of political stability after India's ongoing General Election, and the resilience of the domestic economy in the face of global macroeconomic challenges. However, worries over corporate earnings growth not being able to justify expensive valuations will keep the upside in Indian equities capped, believe market experts.  Some analysts continue to believe that the benchmark Nifty 50 will try to breach the psychologically important level of 23000 points again this month. Market participants have been expecting the index to hit this level for the past two months now, but it has failed to do so. For the month of May, the resistance for the benchmark Nifty 50 index is seen at 23062.50 points, according to the median of estimates by 10 brokerage houses polled by Informist. While domestic shares remain attractive for the medium-to-long term, recent gains in certain stocks, which have come in a short period, have led to the perception that valuations are becoming frothy, especially in a few mid- and small-cap stocks. The concerns about steep valuations have prompted fund managers and other investors to routinely book profits, a trend that analysts see continuing this month as well.  Support for the 50-stock index is seen at 22075 points, as per the poll. The index scaled a fresh lifetime high of 22794.70 points on Friday, but ended in the red for the day on "panic selling", according to analysts. It fell for the third straight session today and closed over 140 points, or 0.6%, lower at 22302.50 points.  The Indian market continues to trade at expensive levels, relative to history and bond yields, Kotak Institutional Equities said in a strategy report this week. "Nifty-50 valuations are a lot more palatable though. The broader market valuations are even more expensive, with the expensiveness being inversely proportional to capitalisation, quality and risk," the brokerage added.  Hence, while strong fundamentals will drive share indices higher, periodic corrections are anticipated, analysts said. At the core of this optimism that stock prices will keep rising is the strength of the domestic economy. Recent macroeconomic data, such as slowing domestic inflation, robust GST collections, and robust growth in high frequency indicators like automobile sales, have reinforced the equity market's faith in strong fundamentals for Indian shares.  The strength of the Indian economy is bolstering corporate earnings, which is a key parameter that determines a company's valuations, as per analysts. Motilal Oswal Financial Services said that Jan-Mar results reported so far were in line with expectations and growth was led by domestic cyclical sectors such as automobile, banks, financial services and insurance. In an interim earnings review report, the broking firm said 28 companies in the Nifty 50 index reported 13% on-year growth during the March quarter, beating its expectation of an 8% rise. It also said companies under its coverage, which have reported earnings so far, recorded 5?rnings growth compared to the previous year, slightly higher than the anticipated growth of 3%.  ELECTION VOLATILITY The Indian stock market has shown volatility ahead of elections in the past, with the Nifty 50 and Sensex hitting all-time highs which has been a trend during Lok Sabha elections for the past two times. This is because political stability ensures continuation of policies announced by the same government earlier and investors favour certainty, as it gives visibility for businesses, they said, adding that market participants usually see this as an ideal time to maximise their gains.  "With the BJP (Bharatiya Janata Party) poised to retain power, there may not be much change in the overall fiscal dynamics in the July budget, even as the mix within fiscal could change mildly," Emkay Global Financial Services recently said in its report. It also said the ruling party’s manifesto is broadly focused on macro-financial stability, manufacturing, and infrastructure, "which indicates continuous focus on targeted consolidation in coming years." India VIX, also known as the fear-gauge, rose for the ninth straight session today, hinting at some nervousness ahead of the outcome of the Lok Sabha election, due in early June. It ended nearly 3% higher today at 17.0075. Similar to benchmark equity indices, India VIX has also witnessed volatility historically ahead of elections. While the outcome is expected to be in favour of the Bharatiya Janata Party, there is an emerging concern that lower voter turnout may hurt the ruling party, which some fear will now win lower-than-expected number of seats. The Bharatiya Janata Party-led alliance has set a target to win 400 of the 543 seats in the Lok Sabha polls, higher than the 352 seats it won in 2019.   GLOBAL CUES Though it is widely believed that the conflict in West Asia will not escalate any further, experts also do not rule out the possibilities of some negative surprises that could shake the market. "There can be some Black Swan events, such as overseas risks, that can take place ... like some more attacks in the Middle East," Vinit Bolinjkar, head of research at Ventura Securities, said. The conflict in the region had given a “headache” to equity investors globally and also led to a surge in crude oil prices, igniting supply concerns.  Recently, Monetary Policy Committee external member Jayanth R. Varma had told Informist that muted reaction in crude oil prices makes the current geopolitical situation appear less scary than it was at the time of the Apr 3-5 monetary policy meeting.  However, any fall in the Indian stock market due to global factors such as geopolitical tensions, fluctuation in US bond yields, crude oil prices, or dollar appreciation is considered as a buying opportunity, according to analysts. Also, any spike in crude oil prices post election is expected to be passed on to consumers, which will ensure the rise in price does not affect oil marketing companies, Nishit Master of Axis Securities said.  Brent Crude futures traded on the Intercontinental Exchange, which hit the $90 per barrel mark last month after Israel's missile attack against Iran, opened at $83.72 per barrel today. Further, when asked about the bearishness of foreign investors in the Indian stock market, analysts said the trend will reverse soon, especially as India remains among strong emerging markets. "If interest rates remain higher for longer due to high inflation in the US, I don't think foreign investors will pull money out of the Indian market," Nishit Master, fund manager at Axis Securities, said. "...they (US Fed) slowed down the rate of tapering which actually is bullish for the liquidity in the market," he said.  Market participants are slowly coming to terms with the likelihood of no rate cuts or just one rate cut in the US this year, which is far away from the earlier anticipation of at least four cuts or a trim of at least 75 basis points in 2024. According to the CME FedWatch Tool, 29.2% of Fed Fund Futures traders now price in rate cuts in July, against 31.2% a week ago. In the monetary policy announcement on May 2, the US Federal Reserve said there is a lack of progress towards its objective of maintaining inflation at 2% over the longer run and that it will be inappropriate to reduce the target range until greater confidence on inflation slowdown is gained. In April, foreign investors net sold equities worth $83.28 mln, after buying $4.02-bln worth of equities in March. Foreign investors have net bought shares worth $935.35 mln this year so far, data as on May 3 showed.  SECTORAL VIEWS Information technology sector may remain volatile as experts have a consensus bearish view on companies in this sector. As expensive valuations and unfavourable macroeconomic factors continue to put pressure on information technology stocks, analysts do not see things getting better for the pack in the near term, especially after major industry players posted weak earnings and cut down their revenue guidance for the current financial year. They may remain to be the bellwethers of losses in the near term too. However, Tech Mahindra Ltd was an outperformer in the sector post results, which came up with a three-year growth plan that could help attain a faster revenue growth pace than its peers. Though investors cheered this, many brokerages said they would wait for the new strategy's result to consider any re-rating or changes in outlook. Meanwhile, experts have divided views on banking stocks. Nishit Master of Axis Securities said he is "underweight" on the banking sector due to concerns that margins will be under pressure because cost of funds will increase for banks. "Apart from that, there is some pressure on retail asset quality which also weighs on the sector," he added. On the other hand, some are comfortable with the valuations of these stocks. "Valuations for banks, especially private banks, are attractive compared to other market peers," Neeraj Chadawar, head of research at Axis Securities, said. He added that the sector will be in the limelight as the private capital expenditure cycle will pick up in the second half. Also, woes on deposit growth, which was a major concern in the previous quarter, has now eased to some extent as banks have slowed down on lending, and they garnered more deposits at a higher cost, experts said. The automobile pack, on the other hand, is seeing some inflows on the back of good financial growth figures for the March quarter and robust April sales data, coupled with some traction seen in rural demand trends.  Apart from automobile and select banking stocks, analysts are also bullish about pharmaceuticals due to strong earnings expectations, while a run-up ahead of elections is anticipated in infrastructure, metal, and power stocks.  Some analysts said the upcoming monsoon will determine the trend for fast-moving consumer goods space, which have borne the brunt of weak rains, sales volume, as well as rural demand trends. With various broking firms now expecting the rural demand trend also to revive in the current financial year, there could be buy momentum in the FMCG space in the near term.  Following are the support and resistance levels for the Nifty 50 index for May, based on inputs from 10 brokerage houses: Broking Firm Support 1  Support 2  Resistance 1  Resistance 2  Choice Equity Broking 22200 22000 22800 23000 Indiacharts 22050 21777 23500 24000 NVS Brokerage 22400 22300 22900 23500 Emkay Global Financial Services 22300 21800 22800 23000 Axis Securities 22450 22200 22950 23350 Lakshmishree Investment and Securities 22550 22370 23000 23300 Anand Rathi Shares and Stock Brokers 22000 21750 22800 23000 Way2Wealth Brokers 22200 21900 22800 23200 Globe Capital Market 22000 21800 23000 23200 Acumen Capital Market 22300 -- 22950 23000 End US$1 = 83.50 rupees   Informist Media Tel +91 (22) 6985-4000  Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Nifty 200 cos Jan-Mar earnings to show growth slowdown

Informist, Saturday, Apr 20, 2024 By Anjana Therese Antony MUMBAI - India Inc is set to exhibit a slowdown in earnings for yet another quarter as the weakness in global demand, high interest rates and other macroeconomic challenges will lead to moderation in profit growth of Nifty 200 companies during Jan-Mar.  The cumulative net profit of companies that are a part of the Nifty 200 index is expected to rise nearly 10% on year, according to the average of estimates given by 19 brokerage houses. This is sharply lower than the bottomline growth of nearly 25% witnessed during the December quarter, calculations by Informist showed.  Estimates for 17 companies were not available at the time of writing this report. The projections also exclude companies which have already released their earnings and companies that are expected to report losses in the March quarter or have reported losses last year.  While slowing topline growth across many sectors is a major problem for corporates, their bottomline for Jan-Mar will still grow as some fag-end benefits of lower operating costs could help expand profitability, according to analysts.  "The broad theme of margin expansion driving earnings growth is likely to continue into Jan-Mar, but we expect the pace to slow as the base effect kicks in," Elara Capital said in a preview report.  The profit growth will again be driven by domestic cyclicals, such as banks and engineering goods companies, while commodity-linked sectors, such as metals, energy and chemicals, might remain a drag, the brokerage said.  When it comes to sales growth, the story isn’t rosy either. The cumulative net sales of the same set of Nifty 200 companies may show a rise of 3.2% from a year ago. On a sequential basis, the topline of Nifty 200 companies may rise 2.3% and bottomline may grow nearly 8%.  Despite weak topline growth, 2023-24 (Apr-Mar) has been a good one for corporate profits, owing to margin tailwinds, Nuvama Institutional Equities said in its earnings preview report. "However, margin tailwinds are now fading (resulting in a weak exit) posing risks to 15% FY24-26 consensus EPS (earnings per share) forecasts," the brokerage said, adding that sales growth is a must for companies, going forward.  Nuvama Equities isn’t the only one calling out the need for recovery in topline growth for earnings momentum to sustain.  "As the high base effect kicks in, potential for earnings growth from margin expansion would diminish, necessitating companies to pivot toward revenue growth," Elara Capital said. The commentary from companies' managements on demand revival, especially on the rural side, would be keenly monitored for any early signs of an uptick, it added.  SHOWSTOPPERS, LAGGARDS  Automobile companies may lead the growth again in the March quarter, similar to the trend in the past two quarters. Higher sales volume, better product mix, and raw material price fall-led tailwinds will aid the sector, brokerage Kotak Institutional Equities said in its earnings preview report.  The aggregate net profit of 16 automobile and auto-ancillary companies is expected to grow over 31% on year during the March quarter and net sales may rise 12%. Among these 16, three are expected to report on-year decline in their topline.  Among other outperformers will be private banks and non-banking financial companies. "For banks, NII (net interest income) growth to be strong led by loan growth and NIMs (net interest margin) pressure to ease," IDBI Capital Markets & Securities said in its report. "Deposit growth has increased and asset quality to improve given moderation in slippages," the brokerage added. Meanwhile, public sector banks could see wage cost pressures, as well as on-year decline in their earnings. Out of the 19 banks in the 200-stock index, the cumulative revenue growth of 16 banks is seen at 9% while the net profit should see a 14% rise. Estimates were not available for two banks--Bank of Maharashtra and IDBI Bank-–while writing this report. The net profit estimate of Axis Bank is not included in this analysis as the bank reported a loss in the year-ago period. Sequentially, the topline growth could be 2% and bottomline is seen up 12.3%.  For financial services companies in the Nifty 200 index, the growth is seen even sharper. Their topline may climb 16% while bottomline should see 14% growth. Earnings estimates were not available for eight companies, while One97 Communications was not included as it is seen reporting losses.  Another sector that is seen doing well is pharmaceuticals. Continued strength in the US business, better product mix, new launches and traction across most markets could result in year-on-year gains in companies' net sales, according to brokerages. The aggregate net sales of 16 companies is expected to grow nearly 13% on year, while net profit may rise 51%. Among them, Gland Pharma is the only company that could see a three-digit growth in both its topline and bottomline, while Syngene International Ltd and Biocon Ltd are the only ones that will see bottomline shrink.  Cement companies could also post strong earnings on a weak base. The sector is likely to clock its third consecutive quarter of strong earnings growth after posting an earnings decline for seven quarters, Motilal Oswal Financial Services said in its research report. The six companies in the sector, which are part of the Nifty 200 universe, are expected to report 5% on-year rise in sales and nearly 14% growth in bottomline. On the other hand, fast-moving consumer goods, information technology, metal, and chemical companies, which posted weak earnings in the previous quarter, may not have seen much change in growth trends, said analysts.  The FMCG sector may continue to lag behind amid dampening volume growth, higher commodity prices, and no meaningful improvement in rural demand. "Reviving rural demand is crucial for the FMCG sector, with companies pinning hopes on a favourable monsoon, which could stimulate the rural economy," Elara Securities said in its report. The aggregate net sales of consumer goods companies may fall about 1% from the year-ago period, while net profit could rise by 2%. Sequentially, the figures could decline in low single digits.  IT companies, which have been bearing the brunt of elevated interest rates and lower discretionary spending, may post another quarter of muted financials. Analysts said these companies may see subdued growth and revenue guidance ranges could disappoint at low-to-mid single digits, but anticipate little room for earnings downgrades. Though the industry giant Tata Consultancy Services reported a higher-than-expected consolidated net profit figure for the quarter, investors focused on the management’s comments on how the current financial year is expected to turn out. Oil marketing companies may also join the laggards’ list due to an expected fall in gross refining margins from peak values in the previous year. The price cut in fuels such as petrol and diesel in mid-March, a reduction after almost two years, could also have dented the net profit of these companies by about 4-7%, according to Nirmal Bang Institutional Equities. Thus, state-owned refiners such as Bharat Petroleum Corp Ltd, Hindustan Petroleum Corp Ltd, and Indian Oil Corp are likely to post year-on-year decline in their toplines and bottomlines. The metals and mining pack, too, may join FMCG and IT companies in reporting weak financials due to lower realisations and higher raw material prices, reports said. Investors will closely watch for factors such as the Indian government's stand on rising imports, sustenance of coking coal prices at lower levels, progress on capital expenditure, and demand indicators from China and developed countries, Prabhudas Lilladher said in its report.  Chemical manufacturing players are another group that are likely to report on-year fall in earnings growth on weakness in the agrochemical value chain, persistent pressure on prices, and reduced realisation from Chinese dumping of chemicals. The topline of 10 chemical manufacturing companies in the Nifty 200 index are expected to fall 8% on year and the bottomline is seen down over 7% compared to the previous year. Earnings estimates for Fertilisers and Chemicals Travancore Ltd were not available when the report was written.  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 19 brokerage houses: Company name   Sales        PAT   Sales     PAT   Sales     PAT     EBITDA million rupees Result date Numbers of brokerages polled ------Average------- -----(Y-o-Y)----- -----(Q-o-Q)----- -----Million Rupees----- --------------% Change-------------- AUTO                   Apollo Tyres + 64,459 4,599 3.18 12.08 (2.27) (7.40) 11,276      -- 9 Ashok Leyland 112,456 8,657 (3.27) 15.22 21.27 49.26 14,736      -- 13 Balkrishna Industries 23,766 3,104 2.54 21.45 4.25 0.41 5,567      -- 9 Bharat Forge 28,965 3,703 45.02 51.44 27.97 (1.99) 6,912      -- 9 Bosch 44,411 4,976 9.29 24.72 5.61 (3.95) 6,481 May 24 3 Eicher Motors + 42,367 10,615 11.37 17.21 1.38 6.57 11,350      -- 10 Escorts Kubota 20,609 2,383 (5.59) 28.46 (11.18) (14.07) 2,603 May 9 7 Hero MotoCorp 93,935 10,480 13.08 22.01 (3.40) (2.37) 13,327      -- 11 M&M 241,421 19,943.78 6.76 28.76 (5.85) (18.73) 29,521      -- 9 Maruti Suzuki 388,177 40,812 21.12 55.56 16.54 30.39 50,338 Apr 26 12 MRF 61,637 5,031 7.66 22.52 1.92 (0.96) 10,247      -- 4 Samvardhana Motherson International + 263,340 6,883 17.16 5.25 2.48 27.01 25,242 May 29 6 Sona Blw Precision Forgings + 8,415 1,370 13.10 14.39 8.36 3.26 2,395 Apr 30 7 Tata Motors + 1,206,571 72,562 13.90 34.18 9.12 3.29 175,829 May 10 10 Tube Investments of India + 19,975 3,011 (47.13) (3.44) (52.41) (43.30) 2,530      -- 1 TVS Motor Co 80,207 5,425 21.44 32.24 (2.72) (8.56) 8,894      -- 12 Total 2,700,710 203,555 12.31 31.35 5.77 4.15                           Aviation                   Interglobe Aviation 170,821 18,849 20.63 105.77 (12.18) (37.14) 41,894      -- 6 Total 170,821 18,849 20.63 105.77 (12.18) (37.14)                           BANK                   AU Small Finance Bank* 13,758 3,859 13.40 (9.12) 3.85 2.85      N.A. Apr 24 8 AXIS Bank* 128,563 62,144 9.49     N.A. 2.59 2.36      N.A. Apr 24 11 Bandhan Bank* 26,789 8,830 8.38 9.24 6.08 20.51      N.A.      -- 7 Bank of Baroda* 114,136 45,381.22 (0.96) (4.97) 2.81 (0.90)      N.A.      -- 9 Bank Of India* 56,270 21,750 1.87 61.06 2.99 16.34      N.A.      -- 1 Canara Bank* 92,277 37,781 7.09 19.01 (2.01) 3.34      N.A.      -- 3 Federal Bank* 21,861 9,482 14.50 5.05 2.95 (5.81)      N.A.      -- 12 HDFC Bank* 292,130 177,357 25.10 47.22 2.61 8.33      N.A. Apr 20 12 ICICI Bank* 188,979 102,347 6.97 12.20 1.17 (0.36)      N.A. Apr 27 11 IDFC First Bank* 44,724 7,585 24.35 (5.50) 4.33 5.98      N.A. Apr 27 5 Indian Bank *  59,390 22,142 7.82 52.99 2.15 4.47      N.A.      -- 3 IndusInd Bank* 55,005 23,451 17.80 14.93 3.87 2.06      N.A. Apr 25 12 Kotak Mahindra* 66,727 32,616 9.34 (6.69) 1.82 8.54      N.A. May 4 10 Bank of Maharashtra*      N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A. Apr 25      -- IDBI Bank*      N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A.      --      -- Punjab National Bank* 103,654 29,203 9.12 152.05 0.70 31.38      N.A.      -- 6 SBI* 407,880 134,946 0.98 (19.17) 2.44 47.26      N.A.      -- 11 Union Bank Of India* 92,498 38,599 12.11 38.73 0.89 7.52      N.A.      -- 4 YES Bank* 20,441 3,209.67 (2.91) 58.56 1.35 38.67      N.A. Apr 27 3 Total 1,785,082 698,539 8.75 14.09 2.07 12.29                           CEMENT                   ACC + 51,198 4,746 6.86 101.42 4.18 (11.72) 8,005 Apr 25 14 Ambuja Cements  47,440 5,772 11.46 14.89 6.86 12.37 8,869 May 1 9 Dalmia Bharat + 41,890 2,841 7.08 (51.76) 16.36 8.03 8,141 Apr 24 12 Grasim Industries 62,843 1,419 (5.44) 51.73 (1.81) (39.96) 4,800      -- 5 Shree Cement 49,994 6,121 4.48 12.06 2.01 (16.63) 11,541 May 14 14 UltraTech Cement + 198,423 20,586 6.32 22.10 18.53 15.85 37,078 Apr 29 14 Total 451,787 41,485 4.94 13.57 10.21 2.13                           CHEMICAL                   Asian Paints + 91,005 13,321 3.56 7.94 (0.03) (7.99) 19,439 May 9 11 Astral + 16,215 1,843 7.66 (10.42) 18.34 62.35 2,946      -- 9 Berger Paints India + 26,068 2,335 6.68 25.77 (9.54) (22.06) 4,134      -- 5 Deepak Nitrite 19,811 1,918 147.49 90.75 193.81 157.47 2,916      -- 5 Fertilisers and Chemicals Travancore      N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A.      --      -- PI Industries 20,006 3,849.78 32.81 37.79 16.23 (20.87) 4,905      -- 9 Pidilite Industries + 28,212 4,289 4.91 51.52 (9.87) (15.99) 6,204 May 7 5 SRF + 35,038 3,720 (7.26) (33.86) 14.76 46.79 7,102      -- 8 Tata Chemicals + 35,607 1,817 (19.20) (74.45) (4.54) 14.98 5,206 Apr 29 3 UPL + 119,064 (3,311) (28.14)     N.A. 20.42     N.A. 12,520      -- 8 Total 391,027 33,092 (7.97) (7.10) 9.99 (1.03)                           CONSUMER ELECTRICAL                   Voltas + 37,021 1,958 25.21 36.05 40.99     N.A. 2,534      -- 12 Total 37,021      N.A. 25.21     N.A. 40.99     N.A.                           DEFENCE                   Bharat Dynamics 8,345 1,890 4.54 23.72 38.71 39.96 1,911      -- 1 Mazagon Dock Shipbuilders  + 20,437 3,781 (1.68) 15.91 (13.49) (39.68) 3,044      -- 1 Total 28,782 5,671 0.05 18.41 (2.90) (25.56)                           DIVERSIFIED                   Adani Enterprises +      N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A.      --      -- 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.      --      -- GMR Airports Infrastructure + 21,858 (3,699.00) 15.67     N.A. (1.83)     N.A. 6,692      -- 1 SJVN 5,331 1,697 7.32 1,146.88 (0.64) 25.39 3,424      -- 2 Suzlon Energy + 25,817 2,622 52.40 (6.32) 65.44 29.14      N.A.      -- 1 Bharat Electronics 84,153 13,290 30.34 (2.67) 103.43 48.77 19,367      -- 6 Dixon Technologies (India) +  51,458 1,072 67.87 32.89 6.80 11.12 2,025      -- 8 Havells India 54,977 4,009 13.37 10.82 24.93 39.25 5,481      -- 12 Polycab India + 50,292 4,950 16.32 16.53 15.87 19.89 7,103      -- 8 Total 293,886 27,639 29.03 9.42 33.47 36.23                           ENGINEERING - CAPITAL GOODS                   BHEL 99,415 5,693 20.84 (4.82) 80.63     N.A. 10,226      -- 3 Kalyan Jewellers India+      N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A. May 10      -- CG Power and Industrial Solutions + 21,552 2,242 13.26 (47.38) 8.91 (70.01) 3,169      -- 2 Macrotech Developers + 33,525 5,993 2.98 (19.50) 14.39 19.06 9,283 Apr 24 4 Rail Vikas Nigam 60,173 3,911 5.17 13.27 28.69 19.98 3,731      -- 1 Cummins India 21,675 3,487 12.54 9.47 (14.46) (23.36) 4,012 May 29 7 Hindustan Aeronautics 138,944 23,762 11.20 (16.37) 129.25 89.56 33,544      -- 3 L&T + 655,022 42,637 12.29 6.95 18.82 44.66 73,173      -- 6 Siemens 55,419 5,779 25.94 11.99 26.10 24.70 7,031      -- 7 Total 1,085,725 87,810 12.79 (4.33) 30.49 31.14                           FINANCE                   Aditya Birla Capital      N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A. May 13      -- BSE + 4,877 1,727 88.31 89.41 14.44 59.63      N.A. May 8 2 Bajaj Finance *+ 89,071 38,092 14.62 20.63 16.35 4.68      N.A. Apr 25 8 Bajaj Finserv *+      N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A. Apr 26      -- Bajaj Holdings & Investment*+      N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A. Apr 26      -- Cholamandalam Investment and Finance * 24,719 9,544 40.06 11.91 13.86 8.93      N.A. Apr 30 8 ICICI Prudential Life Insurance Co# 135,624 2,830 7.39 20.47 36.60 24.39      N.A. Apr 23 2 Indian Railway Finance Corp *       N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A.      --      -- L&T Finance Holdings *+ 19,733 6,681 11.75 33.33 1.05 4.36      N.A. Apr 27 5 LIC Housing Finance* 20,622 11,411 3.61 (3.32) (1.67) (1.88)      N.A.      -- 8 Life Insurance Corporation of India #      N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A.      --      -- M&M Financial Svcs* 18,332 7,030 10.44 2.76 3.05 27.17      N.A. Apr 23 8 Max Financial Services*      N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A. May 7      -- One 97 Communications + 18,338 (4,693) (21.45)     N.A. (35.67)     N.A. (4,321)      -- 1 PB Fintech +      N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A.      --      -- Piramal Enterprises +       N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A.      --      -- Poonawalla Fincorp + 5,252 2,679 38.46 35.07 7.03 1.19      N.A. Apr 29 3 Power Finance Corp* 43,086 36,180 23.95 3.60 3.63 7.13      N.A.      -- 1 REC* 48,751 34,203 43.09 13.98 17.39 4.62      N.A.      -- 1 SBI Cards And Payment Services 18,613 5,880 11.32 (1.43) (10.60) 7.08      N.A. Apr 26 6 SBI Life Insurance Co# 237,220 7,239 19.22 (6.82) 6.30 124.99      N.A. Apr 26 1 Shriram Finance* 51,997 19,933 16.96 52.36 2.08 9.62      N.A. Apr 26 6 Total 736,235 183,428 16.03 14.11 9.63 9.14                           FMCG                   Britannia Industries + 41,406 5,449 2.92 (2.46) (2.72) (2.06) 7,896      -- 12 Supreme Industries + 27,531 3,005 5.96 (16.38) 12.41 17.32 4,507 Apr 26 8 Colgate Palmolive 14,775 3,608 9.39 14.10 5.87 9.30 5,085      -- 13 Dabur India + 28,345 3,458 5.85 14.96 (12.92) (32.74) 4,704 May 2 14 Godrej Consumer + 32,999 4,876 3.12 7.83 (9.83) (16.09) 7,264      -- 9 Hindustan Unilever  150,165 24,705 0.83 (3.19) (1.13) (1.93) 34,765 Apr 24 14 ITC 169,521 50,707 3.38 (0.32) 2.84 (9.00) 61,613      -- 13 Jubilant Foodworks 13,209 459 5.48 (3.34) (2.52) (24.63) 2,639 May 22 10 Marico + 22,756 3,229 1.59 6.93 (6.04) (15.69) 4,452 May 6 12 Nestle India 51,538 8,579 6.69 16.46 12.03 30.85 12,578 Apr 25 12 Tata Consumer Products + 39,601 3,662 9.43 36.33 4.11 31.31 5,887 Apr 23 5 United Spirits 26,381 2,217.71 (54.38) 8.71 (62.04) (36.29) 3,558      -- 7 Varun Beverages + 42,797 4,804 8.28 11.96 56.71 264.01 8,903      -- 7 Total 661,024 118,759 (1.07) 2.25 (3.57) (2.56)                           HEALTHCARE                   Apollo Hospitals + 48,930 2,498 13.73 72.87 0.87 1.83 6,263      -- 6 Fortis Healthcare + 17,907 1,685 9.01 27.15 6.61 25.15 3,349      -- 3 Max Healthcare Institute + 17,751 3,559 46.16 41.82 32.97 22.99 4,898      -- 3 Total 84,589 7,742 18.15 46.64 7.55 15.67                           HOTELS                   Indian Hotels Co + 19,331 4,306 18.93 31.16 (1.57) (4.73) 6,995 Apr 24 8 Total 19,331 4,306 18.93 31.16 (1.57) (4.73)                           IT                   Coforge + 23,979 2,682 10.50 133.61 3.21 4.72 4,569 May 2 9 Oracle Financial Services Software +      N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A. Apr 24      -- Tata Technologies + 13,003 1,744     N.A.     N.A. 0.84 2.46 2,353 May 3 1 HCL Tech + 285,932 40,850 7.47 2.56 0.52 (6.09) 62,924 Apr 26 13 Info Edge India 6,062 2,106 7.49 17.70 1.82 (1.37) 2,424      -- 4 LTIMindtree + 89,894 11,490 3.43 3.17 (0.30) (1.70) 15,545 Apr 24 12 L&T Technology Services + 25,313 3,470 6.78 2.03 4.52 3.21 5,121 Apr 25 9 Mphasis + 34,173 3,891.40 1.67 (3.99) 2.38 4.16 6,201 Apr 25 10 KPIT Technologies + 13,103 1,607 28.79 44.03 4.24 3.48 2,676 Apr 29 3 Persistent Systems + 25,808 3,016 14.48 19.91 3.31 5.40 4,641 Apr 21 12 Tata Elxsi 9,276 2,064 10.70 2.41 1.46 (0.03) 2,742 Apr 23 5 Tech Mahindra + 129,826 7,860 (5.36) (29.68) (0.91) 53.99 14,367 Apr 25 13 Total 656,369 80,780 6.57 3.32 0.67 0.64                           LOGISTICS                   Container Corp 23,529 3,546 8.63 27.35 6.70 6.04 5,405      -- 4 Delhivery + 21,056 (365) 13.23     N.A. (4.05)     N.A. 587      -- 5 Total 44,585 3,546 10.75 27.35 1.34 6.04                           MEDIA                   Sun TV Network 8,685 4,167 6.76 13.91 (1.92) (4.72) 5,258      -- 5 Zee Entertainment + 19,793 399 (6.29)     N.A. (3.25) (31.84) 1,354      -- 7 Total 28,478 4,167 (2.66) 13.91 (2.84) (4.72)                           METAL                   Hindalco Industries + 542,016 29,397 (2.96) 21.93 2.64 26.12 65,901 May 24 7 Jindal Steel & Power + 118,696 10,978 (13.31) 137.34 1.44 (43.07) 24,603      -- 7 APL Apollo Tubes +  44,485 1,876 0.39 (7.03) 6.48 13.36 3,077      -- 7 JSW Steel + 443,431 16,536 (4.43) (54.87) 5.73 (31.53) 61,733 May 17 8 Steel Authority of India 269,658 1,844 (7.43) (82.42) 15.51 (44.34) 19,076      -- 9 Tata Steel + 592,724 10,473 (5.86) (38.57) 7.16 104.01 60,684      -- 9 Vedanta + 348,106 15,684 (8.22) (16.62) (2.06) (22.09) 64,460      -- 4 Total 2,359,115 86,789 (5.79) (23.70) 4.93 (10.50)                           OIL & GAS                   Adani Total Gas+      N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A.      --      -- BPCL 1,185,889 60,764 (11.11) (6.20) (8.76) 78.86 97,603      -- 10 GAIL  324,969 26,692 (1.10) 342.28 (5.13) (6.10) 37,235      -- 11 Gujarat Gas 39,983 2,935 (1.85) (20.50) (2.10) 33.21 4,984 May 6 10 Hindustan Petroleum 1,103,518 29,193 (3.58) (9.41) (6.83) 451.84 51,281      -- 11 Indian Oil Corp 2,015,900 90,791 (10.99) (9.74) (9.61) 12.60 165,250 Apr 30 10 Indraprastha Gas 35,604 4,119 (12.34) 24.93 (9.32) 5.07 5,979      -- 11 NMDC  64,703 19,644 10.58 (13.73) 19.60 31.64 25,387      -- 7 Oil India 57,299 15,934 6.22 (10.90) 7.63 0.57 24,185      -- 9 ONGC 345,270 88,083 (4.86)     N.A. (0.75) (7.63) 172,030      -- 10 Patanjali Foods 76,405 2,534 (2.95) (3.91) (3.42) 17.02 3,735      -- 1 Petronet LNG 131,961 9,109 (4.89) 48.29 (10.52) (23.50) 12,410      -- 11 Reliance Ind + 2,372,802 186,281 9.72 (3.48) 4.08 7.90 421,331 Apr 22 9 Total 7,754,302 447,997 (3.18) (1.11) (4.25) 20.45                           PHARMA                   Alkem Laboratories + 31,512 3,660 8.56 415.61 (5.19) (38.49) 4,803      -- 6 Aurobindo Pharma + 73,078 8,366 12.90 65.25 (0.60) (10.64) 15,385      -- 9 Biocon + 38,904 1,374 3.09 (56.12) (1.60) (79.18) 8,037 May 16 6 Cipla + 62,194 8,903 8.37 69.38 (5.82) (15.68) 13,618 May 10 10 Divi's Laboratories 21,086 4,679 10.51 46.68 13.67 30.70 6,058      -- 7 Dr Lal Pathlabs + 5,434 810 10.68 42.86 0.84 (0.37) 1,402      -- 5 Dr. Reddy's Lab + 71,771 12,789 13.65 33.21 (0.83) (7.39) 19,670 May 7 11 Gland Pharma + 15,823 2,446 101.56 210.83 2.40 27.47 3,909      -- 6 IPCA Laboratories 20,351 1,445 45.19 70.38 35.06 5.54 3,134      -- 5 Laurus Labs + 14,751 1,032 6.82 0.21 23.45 345.98 2,928 Apr 25 4 Lupin + 51,098 5,270 15.34 123.34 (1.68) (14.05) 9,907      -- 11 Mankind Pharma + 24,702 4,017 20.34 40.72 (5.25) (11.48) 5,627      -- 3 Sun Pharma + 122,167 23,706 11.77 19.46 (1.32) (6.07) 31,066      -- 9 Syngene International 10,453 1,635 5.12 (13.49) 32.00 63.83 3,255 Apr 24 1 Torrent Pharma + 27,747 4,313 11.39 50.27 1.56 (2.42) 8,918      -- 9 Zydus Lifesciences + 53,187 10,446.71 6.15 252.22 18.06 32.30 15,360      -- 7 Total 644,258 94,892 12.87 50.70 1.74 (8.24)                           PORT                   Adani Ports and SEZ + 70,034 23,474 20.81 102.56 1.20 6.29 43,716      -- 4 JSW Infrastructure + 10,283 3,564     N.A.     N.A. 9.38 42.18 5,366      -- 2 Total 10,283 3,564     N.A.     N.A. 9.38 42.18                           POWER & ENERGY                   ABB India 28,796 3,337 19.42 36.27 4.43 (1.46) 4,020 May 10 7 Adani Green Energy +      N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A.      --      -- Adani Energy Solutions +      N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A.      --      -- Coal India + 365,093 74,167 (4.31) 34.04 0.98 (18.22) 90,068 May 2 6 JSW Energy + 31,196 3,145 16.84 13.85 22.69 (69.20) 12,346      -- 3 NHPC 18,772 5,872 9.30 3.12 10.62 7.53 8,124      -- 3 NTPC  449,882.00 58,177.40 8.88 2.56 14.02 27.25 132,976      -- 5 Power Grid 132,910 43,721 15.63 3.68 24.49 10.12 113,374      -- 5 Tata Power + 149,010 9,379 19.65 20.60 1.71 (1.58) 22,959 May 8 3 Torrent Power + 64,334 5,193 6.55 15.63 1.06 44.30 12,061      -- 2 Total 1,239,992 202,992 6.66 14.43 8.49 (2.55)                           REALTY                   DLF + 21,970 8,088.80 50.88 41.91 44.42 23.19 7,818      -- 5 Godrej Properties + 8,087 3,973 (50.88) (3.60) 144.73 538.03 1,564      -- 4 Oberoi Realty + 12,325 4,546 28.19 (5.35) 16.97 26.22 5,983      -- 6 Prestige Estates + 29,091 2,181 10.54 (53.44) 61.99 87.52 6,514      -- 5 Total 71,472 18,788 6.75 (2.69) 52.03 57.18                           RETAIL                   Aditya Birla Fashion 33,165 (2,582) 25.09     N.A. (5.68)     N.A. 2,552      -- 8 Avenue Supermarts 125,836 5,862 18.78 27.41 (7.29) (15.11) 9,548      -- 6 FSN E-Commerce Ventures + 15,820 124 21.53 412.93 (11.56) (23.60) 923      -- 3 Page Industries 10,844 1,351 11.90 72.41 (11.75) (11.33) 2,102      -- 7 Titan Co 112,422 8,131 31.44 10.78 (12.93) (21.82) 12,554      -- 7 Trent 31,633 1,930 52.29 83.55 (4.50) (43.84) 4,123 Apr 29 6 Zomato + 34,375 1,915 67.20     N.A. 4.55 38.79 1,177      -- 6 Total 364,096 17,398 29.10 26.07 (8.10) (22.43)                           TELECOM                   Bharti Airtel + 386,612 31,662 7.37 5.34 2.01 29.65 189,158      -- 6 Indus Tower + 73,439 14,528 8.75 3.84 2.01 (5.70) 37,011 Apr 30 3 Vodafone Idea + 106,646 (75,997) 1.26     N.A. (0.08)     N.A. 43,915      -- 4 Total 566,696 46,190 6.33 4.86 1.61 15.98                           TRAVEL & TOURISM                   IRCTC 11,348 3,140 17.59 12.61 1.48 4.65 3,952      -- 2 Total 11,348 3,140 17.59 12.61 1.48 4.65                           Grand Total 22,197,014 2,441,116 3.21 9.59 2.31 7.73         EARNINGS DECLARED SO FAR Company Name     Sales Informist estimates      PAT Informist estimates EPS (in Rupees)  Result Date Bajaj Auto 114,847 110,942 19,360 18,796 68.50 Apr 18 HDFC Asset Management Co 6,954 7,284 5,411 4,787 25.26 Apr 19 HDFC Life Insurance Co# 204,881 225,131 4,117 4,197     N.A. Apr 18 ICICI Lombard General Insurance Co# 43,683 43,328 5,195 4,886 10.47 Apr 17 Infosys + 379,230 387,191 79,690 61,908 19.22 Apr 18 Jio Financial Services *+      N.A.      N.A. 3,106     N.A. 0.49 Apr 19 Tata Communications + 56,917 57,152 3,212 3,552 11.27 Apr 17 TCS + 612,370 614,765 124,340 120,193 34.37 Apr 12 Wipro + 222,083 221,413 28,346 27,689 5.41 Apr 19   Notes: + Consolidated Figure * Net interest Income Y-o-Y: Year-on-Year # Net premium income Q-o-Q: Quarter-on-Quarter N.A.: Not Available   Estimates from: Anand Rathi Share and Stock Brokers Ltd, Antique Stock Broking Ltd, Axis Securities Ltd, Centrum Broking Ltd, Elara Securities (India) Pvt Ltd, Emkay Global Financial Services Ltd, HDFC Securities Ltd, ICICI Securities Ltd, IDBI Capital Market Services Ltd, Indsec Securities and Finance Ltd, Kotak Institutional Equities, KR Choksey Research, Motilal Oswal Financial Services Ltd, Nirmal Bang Equities Pvt Ltd, Nomura Equity Research, Nuvama Wealth Management Ltd, Prabhudas Lilladher Pvt Ltd, Sharekhan Ltd and YES Securities (India) Ltd.   End US$1 = 83.47 rupees   Informist Media Tel +91 (22) 6985-4000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved. 

Economists see FY25 CPI inflation at 4.5%

Informist, Tuesday, Apr 16, 2024 By Shubham Rana NEW DELHI – India's headline CPI inflation is expected to cool further to 4.5% in 2024-25 (Apr-Mar) from a four-year low of 5.4% in 2023-24, according to an Informist poll of 17 economists. Inflation is likely to ease on the back of reduction in food inflation and well-behaved core inflation, the economists said. India's retail CPI inflation has been moderating steadily since touching a 15-month high of 7.44% in July 2023. It fell to a 10-month low of 4.85% in March, taking the average for 2023-24 to 5.4%, in line with the Reserve Bank of India's projection in February. The projection by the economists is in line with the RBI’s forecast. The central bank has projected that CPI inflation will average 4.5% in 2024-25, with prints of 4.9% in Apr-Jun, 3.8% in Jul-Sep, 4.6% in Oct-Dec, and 4.5% in Jan-Mar. The economists polled expect retail inflation to remain above the central bank’s medium-term target of 4%, except for Jul-Sep, similar to the RBI’s projections. They see food inflation moderating to 5-6% this year from 7.5% in 2023-24. A lot will depend on how the southwest monsoon pans out. The India Meteorological Department has forecast an above normal monsoon this year as La Nina conditions are set to develop in the second half of the season. According to the agency, rainfall in Jun-Sep is likely to be 106% of the long period average with a model error of plus or minus 5%. This bodes well for food inflation, the economists said. But the weather bureau has also forecast more heat wave days than usual for Apr-Jun. This, the economists said, could lead to a rise in prices of perishable commodities like vegetables. "Heat waves could impart upside risk to domestic food inflation (led largely by higher vegetable and fruit prices due to hotter-than-normal temperatures)," HDFC Bank said in a report last week. According to the bank, a 10% increase in vegetable prices will translate to an increase of around 60 basis points in headline inflation. "Sustained rise in commodity prices and escalation in geopolitical tensions could disrupt global supply chains, leading to elevated input costs (including higher crude oil prices) and an eventual pass through to retail inflation," the bank's report said. Core inflation, which excludes food and fuel items, moderated sharply in 2023-24, averaging 4.4%, against 6.1% the previous year. Core inflation was at 3.3% in March, the lowest print in the current CPI series, which began in January 2012. The economists expect core inflation to stay around the 4% mark this year as well. It is seen muted in Apr-Sep and is expected to rise in Oct-Mar because of an unfavourable base effect, they said. Core inflation can also rise if manufacturing input costs increase on the back of higher global commodity prices, the economists said. With inflation expected to stay above the RBI's target of 4% this year, the central bank will be in no hurry to lower interest rates. Economists now see a shallow rate-cut cycle of 50-75 bps, starting October. Morgan Stanley today said it does not see any rate cut in India in 2024-25. Following is a summary of the poll on CPI inflation in 2024-25, with details of estimates by respondents, in ascending order: Range of expectations: 4.3-4.8% Mean: 4.6% Median: 4.5% Mode: 4.5% ORGANISATION 2024-25 CPI INFLATION ESTIMATE Nomura 4.3% Barclays 4.5% CRISIL 4.5% ICICI Bank 4.5% IDFC FIRST Bank 4.5% Kotak Mahindra Bank 4.5% Morgan Stanley 4.5% Motilal Oswal Financial Services 4.5% QuantEco Research 4.5% Emkay Global Financial Services 4.6% HDFC Bank 4.6% IDBI Bank 4.7% CareEdge 4.8% Equirus Securities 4.8% India Ratings and Research 4.8% Nirmal Bang Institutional Equities 4.8% Bank of Baroda 4.5-5.0% End   Informist Media Tel +91 (11) 4220-1000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Nifty 50 cos' earnings growth to slow down in Jan-Mar

Informist, Friday, Apr 12, 2024 By Anshul Choudhary and Apoorva Choubey MUMBAI – Most companies in the Nifty 50 index are likely to report moderation in net profit for the March quarter as revenue growth remains muted and tailwinds arising out of lower commodity prices, as seen during Apr-Dec, have largely abated. The moderation will throw spotlight on corporate commentary as equity investors want to know how companies plan to navigate through challenges such as persistently high interest rates, subdued global demand, and rising crude oil prices.  For Jan-Mar, the cumulative net profit of 46 companies in the Nifty 50 index is expected to rise 8% on year, according to estimates compiled from 17 brokerage firms. The bottomline growth for the March quarter is expected to be lower than the 12% seen during Oct-Dec and 20% in Apr-Dec. These projections exclude Axis Bank Ltd and Oil and Natural Gas Corp Ltd as they had reported net losses for the corresponding quarter a year ago. In addition, estimates for two Nifty 50 companies – Adani Enterprises Ltd and Bajaj Finserv Ltd – were unavailable at the time of writing this report. Sequentially, the set of 46 companies in the benchmark index are expected to report growth of 9% in net profit for Jan-Mar. The muted growth in the bottomline will be led by domestic cyclical sectors such as banks and automobile, as the Indian economy continues to show resilience in growth, according to analysts. "Domestic cyclicals, as has been the case during the past year, may drive earnings growth in Q4 (Jan-Mar) while commodity-oriented sectors such as metals, energy and chemicals might drag," brokerage Elara Capital said in an earnings preview report. Healthcare, cement and utility companies are likely to post robust year-on-year growth, while consumer staples players may have seen moderate growth, it added. When it comes to revenue growth, a slowdown will be seen across the board, Nuvama Institutional Equities said in a recent report. Excluding Adani Enterprises and Bajaj Finserv, the cumulative revenue for 48 companies in the Nifty 50 index is expected to grow 5% for Jan-Mar. The growth is similar to that seen in the first nine months of 2023-24 as inflation continues to hit rural demand in India, while the global economy is also reeling under certain pressures. Sequentially, the revenue of the 48 companies is seen growing 4%.  With margin tailwinds fading, it is essential for topline growth to recover, or there could be risks to consensus earnings per share forecasts of 15–16% over the next two financial years, Nuvama Institutional Equities warned. When it comes to demand, domestic-oriented sectors could be more vulnerable as consumption and capital expenditure for the private sector remain weak and government spending has also moderated, the brokerage said.  Corporate profits are also at risk from high inflation, particularly in the US, rising crude oil prices, and geopolitical tensions, several analysts said. On Wednesday, US inflation for March came in higher than expectations, fuelling concerns that the US Federal Reserve may have to push its plans of three interest rate cuts of 25 basis points each in 2024. This led to a decline in US equity markets on Wednesday, and pushed yields on US bonds higher. The CME FedWatch tool now shows a 23% probability of an interest rate cut in June by the US Fed, compared with over 50% probability before the inflation data. A high interest rate environment is a deterrent to companies' growth as it leads to higher cost of capital and reduces overall risk-taking in the economy. Prevailing geopolitical tensions in West Asia have raised fresh concerns around disruptions in trade and supply of crude oil. Crude oil futures have already risen above $90 a barrel from the lows of $72 a barrel seen in December. What's more, with the model code of conduct in force for the General Election, analysts expect government orders to come down significantly. This is likely to hurt order inflows of several sectors for Apr-Sep, analysts said. Given that corporate earnings are facing threats on several fronts, the commentary by companies on demand and overall health of the business will assume significance, they added. While predictions of a normal monsoon could help some consumption-oriented sectors, the outlook for other large sectors is still murky, said the head of research at a local brokerage.  SECTORAL TRENDS  Companies that primarily rely on the domestic economy, such as automobiles and financials, are expected to fare better than export-oriented companies such as those operating in the information technology, metals, and chemicals sectors. "Most of the domestic high-frequency indicators have trended higher during the quarter, which is likely to translate into good demand momentum for the domestic corporate segment," Axis Securities said in a note on Wednesday.  Companies in other domestic-focussed sectors such as capital goods and cement are likely to report better earnings, along with those in healthcare and pharmaceuticals, brokerages said. However, within the companies focused on domestic demand, fast-moving consumer goods companies are expected to report muted growth in revenue and net profit. Banks, which have the highest weight in the Nifty 50 index, are set to report 8% and 10% growth in cumulative net profit and net interest income, respectively, during the March quarter. The net profit projection excludes the data of Axis Bank, which had reported a net loss the previous year. The bank is expected to report a net profit for Jan-Mar. Analysts expect pressure on net interest margins to have eased slightly as deposit growth has picked up, though this growth is coming at a higher cost. "We expect banks to report 10-15 bps sequential decline in NIMs, but expect lenders to indicate that we are closer to the end of the deposit re-pricing cycle," Kotak Institutional Equities said in a recent note. Automobile companies, which were among the most sought out stocks last year, are expected to stay on the growth path with slight moderation in earnings. This moderation is due to a high base from a year ago, and as pent-up demand in the sector is fading, Nuvama said. The five automobile companies in the Nifty 50 index are expected to report a cumulative net profit growth of 35% on revenue growth of 15%. Within these, the two-wheeler and passenger vehicle segments are expected to show strong growth which is likely to offset the lower volumes of commercial vehicles and tractors. The earnings are largely led by urban demand with a slight uptick in rural demand as well. In fact, robust urban demand in India is expected to help other companies such as Titan, which is in the business of selling luxury items such as diamonds and gold jewellery. Among others, Larsen & Toubro is expected to benefit from a robust order book and Ultratech Cement is likely to report better earnings due to higher volumes even as they took price cuts during the quarter. The stable prices of generic drugs in the US, along with better demand in domestic markets, has helped companies in the pharmaceutical and healthcare sectors. The four pharmaceutical companies' cumulative net profit growth is seen at 33%, just behind automobiles, while revenue growth is seen at 11%. For Apollo Hospitals Enterprise, the net profit growth is seen even higher at 69%, with revenue growth of 13% on year. On the other hand, rural demand is seen facing the brunt of high inflation, which may lead to muted growth in net profit and revenue for the five FMCG companies in the Nifty 50 index. These companies' cumulative net profit is seen rising a mere 1% on year on revenue growth of 3%. Sequentially, the net profit is seen 3% lower. The two steel companies in the index--Tata Steel Ltd, and JSW Steel Ltd--are seen reporting lower revenue and net profit on year, hurt by lower prices of steel. However, Hindalco Industries is likely to increase its profits on account of stable prices of base metals. Overall, the three companies are expected to post a cumulative decline of 26% in net profit and 5% in revenue. The weak Chinese economy is another pain point for the sector, as it has led to lower demand for metals from China. Meanwhile, lower demand for information technology services from the US and Europe has hurt the growth prospects of IT companies. On top of this, uncertainty around the interest rate trajectory is making it difficult for analysts to assess when the demand will recover for these companies. "Despite robust US real GDP growth in 2023 and what looks likely to be a decent 1QCY24 (Jan-Mar), enterprise clients of Indian IT services firms are yet to open their purses for discretionary spending," Nirmal Bang Institutional Equities had said in a note in March. Moreover, announcements around mega or large deals have been weak since September, it said. Overall, the five IT companies in the Nifty 50 index are likely to report a cumulative net profit growth of 1% on revenue growth of 2%. Sequentially, the net profit is seen growing 4%, while revenue is seen flat. Within these companies, Tech Mahindra and Wipro are expected to post a decline in revenue as well as net profit on year. Index heavyweight Reliance Industries Ltd is expected to report mixed earnings. The company's oil-to-chemicals segment is seen weak due to lower refining margins, while its retail and telecom segments are expected to grow as both businesses attracted new customers. Overall, Reliance Industries' net profit is likely to decline 3% while revenue may grow 10% on year.  Following are the Jan-Mar consensus earnings estimates of companies that constitute the National Stock Exchange's Nifty 50 index. These estimates are based on reports compiled by Informist Media from 17 brokerage houses. Company   Sales        PAT   Sales     PAT   Sales     PAT     EBITDA million rupees Result date Number of brokerages polled ------Average------- -----(Y-o-Y)----- -----(Q-o-Q)----- -----Million rupees----- --------------% Change-------------- AUTO Bajaj Auto 1,11,125 18,516 24.79 29.22 (8.26) (9.32) 22,003 Apr 18 10 Eicher Motors + 42,370 10,618 11.37 17.25 1.39 6.61 11,350      -- 9 Hero MotoCorp 93,992 10,483 13.15 22.04 (3.34) (2.34) 13,327      -- 10 M&M 2,41,107 20,079 6.62 29.63 (5.97) (18.18) 29,521      -- 8 Maruti Suzuki 3,87,651 41,110 20.96 56.69 16.38 31.34 49,690 Apr 26 10 Tata Motors + 12,05,772 72,054 13.82 33.24 9.04 2.57 1,75,259      -- 8 Total 20,82,017 1,72,861 14.64 35.28 6.47 3.38         BANK AXIS Bank * 1,28,347      N.A. 9.30     N.A. 2.41     N.A.      N.A.      -- 9 HDFC Bank * 2,91,988 1,74,318 25.04 44.69 2.55 6.47      N.A. Apr 20 10 ICICI Bank * 1,88,774 1,02,470 6.85 12.33 1.06 (0.24)      N.A. Apr 27 9 Kotak Mahindra * 66,599 32,913 9.13 (5.84) 1.62 9.53      N.A.      -- 8 SBI * 4,07,922 1,33,685 0.99 (19.92) 2.45 45.88      N.A.      -- 9 IndusInd Bank* 55,008 23,344 17.80 14.40 3.87 1.59      N.A.      -- 10 Total 11,38,638 4,66,730 9.56 7.54 2.26 13.53         CEMENT Grasim Industries 62,843 1,419 (5.44) 51.73 (1.81) (39.96) 4,800      -- 5 UltraTech Cement + 1,98,027 20,562 6.11 21.96 18.30 15.71 37,181 Apr 29 12 Total 2,60,869 21,981 3.08 23.52 12.73 9.18         CHEMICAL Asian Paints + 90,703 13,297 3.22 7.74 (0.36) (8.16) 19,439 May 9 10 Total 90,703 13,297 3.22 7.74 (0.36) (8.16)         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.         ENGINEERING - CAPITAL GOODS L&T + 6,56,531 44,310 12.54 11.14 19.09 50.34 74,288      -- 4 Total 6,56,531 44,310 12.54 11.14 19.09 50.34         FINANCE Bajaj Finance +* 87,133 37,686 12.13 19.34 13.82 3.56      N.A. Apr 25 5 Bajaj Finserv +*      N.A.      N.A. N.A. N.A. N.A. N.A.      N.A. Apr 26 1 HDFC Life Insurance Co# 2,27,412 4,394 17.06 22.51 49.27 20.36      N.A. Apr 18 1 Shriram Finance* 51,798 20,261 16.51 54.86 1.69 11.42      N.A. Apr 26 4 SBI Life Insurance Co# 2,37,220 7,239 19.22 (6.82) 6.30 124.99      N.A.      -- 1 Total 6,03,563 69,580 17.10 24.21 19.99 13.25         FMCG Britannia Industries + 41,461 5,444 3.05 (2.54) (2.59) (2.15) 7,895      -- 11 Hindustan Unilever  1,50,359 24,719 0.96 (3.14) (1.00) (1.87) 34,771      -- 12 Nestle India 51,596 8,595 6.81 16.68 12.16 31.10 12,586 Apr 25 11 ITC 1,68,581 50,724 2.81 (0.28) 2.27 (8.97) 61,432      -- 12 Tata Consumer Product + 39,601 3,662 9.43 36.33 4.11 31.31 5,887      -- 5 Total 4,51,598 93,143 3.19 1.21 1.87 (2.79)         HEALTHCARE Apollo Hospitals Enterprise + 48,829 2,447 13.50 69.36 0.67 (0.23) 6,239      -- 4 Total 48,829 2,447 13.50 69.36 0.67 (0.23)         IT HCL Tech + 2,85,211 40,750 7.20 2.31 0.26 (6.32) 62,835 Apr 26 10 Infosys + 3,86,926 61,902 3.34 1.02 (0.33) 1.38 87,076 Apr 18 10 LTIMindtree + 89,973 11,538 3.52 3.60 (0.21) (1.29) 15,587 Apr 24 10 TCS + 6,14,518 1,19,897 3.87 5.25 1.43 8.43 1,67,516 Apr 12 11 Tech Mahindra + 1,29,741 7,783 (5.42) (30.36) (0.97) 52.50 14,428 Apr 25 10 Wipro + 2,21,331 27,662 (4.56) (10.03) (0.32) 2.67 42,698 Apr 19 10 Total 17,27,700 2,69,532 2.35 0.54 0.35 4.12         Jewellery Titan Co 1,12,399 8,205 31.41 11.78 (12.95) (21.11) 12,554      -- 6 Total 1,12,399 8,205 31.41 11.78 (12.95) (21.11)         METAL Hindalco Industries + 5,42,161 29,793 (2.94) 23.57 2.67 27.81 65,944 May 24 5 JSW Steel + 4,41,540 17,572 (4.83) (52.04) 5.28 (27.24) 50,884 May 17 6 Tata Steel + 5,91,914 9,970 (5.99) (41.52) 7.01 94.21 60,640      -- 7 Total 15,75,616 57,335 (4.63) (26.30) 5.00 9.01         OIL & GAS BPCL 11,69,583 60,012 (12.33) (7.36) (10.02) 76.65 97,603      -- 9 ONGC 3,42,925      N.A. (5.51)     N.A. (1.42)     N.A. 1,72,030      -- 9 Reliance Ind + 23,72,802 1,86,281 9.72 (3.48) 4.08 7.90 4,21,331      -- 9 Total 38,85,311 2,46,293 0.66 (4.45) (1.07) 19.20         PHARMA Cipla + 62,302 9,120 8.55 73.50 (5.66) (13.63) 13,829 May 10 8 Divi's Laboratories 20,850 4,638 9.28 45.40 12.40 29.56 5,953      -- 5 Dr. Reddy's Lab + 71,925 12,988 13.89 35.28 (0.61) (5.95) 19,926 May 7 9 Sun Pharma + 1,22,132 23,711 11.73 19.48 (1.35) (6.05) 30,835      -- 7 Total 2,77,208 50,458 11.36 33.16 (1.27) (5.13)         POWER & ENERGY NTPC  4,53,841 58,158 9.84 2.53 15.03 27.21 1,35,779      -- 4 Coal India + 3,64,526 78,128 (4.46) 41.20 0.83 (13.85) 94,469      -- 5 Power Grid 1,34,506 43,498 17.01 3.15 25.98 9.56 1,15,147      -- 4 Total 9,52,873 1,79,783 4.75 16.57 10.43 2.08         TELECOM Bharti Airtel + 3,86,612 31,662 7.37 5.34 2.01 29.65 1,89,158      -- 6 Total 3,86,612 31,662 7.37 5.34 2.01 29.65         PORTS Adani Ports and SEZ + 70,184 23,793 21.07 105.31 1.42 7.74 44,313      -- 3 Total 70,184 23,793 21.07 105.31 1.42 7.74         Nifty Total 1,43,20,650 17,51,408 5.01 7.71 3.71 9.03       Notes: + Consolidated Figure * Net interest Income Y-o-Y: Year-on-Year # Net premium income Q-o-Q: Quarter-on-Quarter N.A.: Not Available Estimates from: Antique Stock Broking Ltd, Axis Securities Ltd, Centrum Broking Ltd, Elara Securities (India) Pvt Ltd, Emkay Global Financial Services Ltd, HDFC Securities Ltd, ICICI Securities Ltd, IDBI Capital Market Services Ltd, Jefferies Group, Kotak Institutional Equities, Motilal Oswal Financial Services Ltd, Nirmal Bang Equities Pvt Ltd, Nomura Equity Research, Nuvama Wealth Management Ltd, Prabhudas Lilladher Pvt Ltd, Sharekhan Ltd and YES Securities (India) Ltd.   End   Informist Media Tel +91 (22) 6985-4000  Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

WPI inflation seen at 3-month high of 0.6% in March

Informist, Wednesday, Apr 10, 2024 By Shubham Rana NEW DELHI – India's WPI inflation is likely to have risen to a three-month high of 0.6% in March after falling to a four-month low of 0.2% in February, according to an Informist poll of 16 economists. In March 2023, WPI inflation was 1.41%. At 0.6%, the overall WPI index will rise 0.5% on a sequential basis in March. In the last 11 years, on an average, the overall index has risen 0.4% in March from the previous month. The commerce and industry ministry is scheduled to release WPI inflation data for March at 1200 IST on Monday. Even though WPI inflation is expected to rise in March, it is still seen below 1% for the 12th consecutive month, primarily on account of disinflation in fuel and manufactured products groups. "Sequentially we expect core inflation to have witnessed a positive momentum for the first time in six months, led by the impact of higher global commodity prices," Kotak Mahindra Bank Chief Economist Upasna Bhardwaj said. Wholesale core inflation fell to a six-month low of (-)1.3% in February. Prices of commodities, including crude oil, rose in March. Brent crude oil prices rose over 6% during the month, while gold prices rose more than 8%. Food prices showed a mixed trend in March. Wholesale prices of tomato and onion fell 3.0% and 0.8%, respectively, compared to the previous month, data collated by the Department of Consumer Affairs shows. Prices of potato, on the other hand, jumped up 7.2% sequentially in March. WPI inflation continues to be sharply below CPI inflation, primarily due to softening of non-food commodity prices that are better captured in the WPI. CPI inflation, which will be released on Friday, is expected to moderate to a five-month low of 4.9% in March from 5.1% in February, according to an Informist poll of 18 economists. "Going ahead, WPI inflation is likely to trend even higher amid adverse base effect and higher commodity prices," Bhardwaj said. The following is a summary of the poll by Informist on WPI inflation in March and the details of estimates by respondents, in ascending order: Range of expectations: 0.0-1.5% Mean: 0.6% Median: 0.6% Mode: 0.4%     ORGANISATION WPI INFLATION ESTIMATE Nirmal Bang Institutional Equities 0% Equirus Securities 0.3% ICICI Securities Primary Dealership 0.4% India Ratings and Research 0.4% Emkay Global Financial Services 0.45% Kotak Mahindra Bank 0.5% Motilal Oswal Financial Services 0.5% ICICI Bank 0.52% Nomura 0.6% STCI Primary Dealer 0.6% YES Bank 0.62% Sunidhi Securities 0.66% CareEdge 0.7% Capital Economics 0.8% ICRA 1.0% Bank of Baroda 1.5%   End   Informist Media Tel +91 (11) 4220-1000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Deep Dives

Inflation well-behaved but risks keep rate cut talk at bay

Informist, Monday, May 13, 2024 By Shubham Rana NEW DELHI – India's headline CPI inflation has been well-behaved for a while now. It has declined for four consecutive months and has now fallen to a 11-month low of 4.83% in April, as was expected, even if the decline from the previous month was only 2 basis points. Couple this with the Reserve Bank of India’s forecast of inflation falling below the 4% target later this year, after nearly five years, and the inflation outlook appears benign. However, several uncertainties remain which make the inflation outlook much hazier than what the headline numbers make it out to be. And policymakers are cognisant of these risks, with members of the Monetary Policy Committee cautious about supply side risks and their ability to undo the gains made in moderating headline inflation. As such, economists continue to push away their expectations of when the MPC will lower interest rates, with some not expecting a rate cut in this entire financial year, which started in April. The biggest risk to the inflation outlook is from food inflation, which rose to a five-month high of 8.70% in April. The food index also rose 0.7% on a month-on-month basis in April, with the upward pressure mainly stemming from vegetables, meat and fish. The vegetable price index rose 1.3% sequentially in April even as vegetable inflation eased to 27.8% from 28.3% in March. The potato price index jumped 19.4% on month in April, while the tomato index was up 1.9% from the previous month. The meat and fish index rose 2.4% in April from the previous month. "The seasonal rise in food prices is preventing a sustained disinflation in headline," Barclays said in a report, adding that the prices of perishable food items will likely rise heading into the summer. With most parts of India facing the brunt of heatwaves this summer, economists fear that higher temperatures have the potential to push up food inflation. Typically, prices of perishable food items, especially those of vegetables, rise more in the summer months. On an average, the vegetable retail price index rises 2.7% on month in May and 7.0% in June, reflecting the seasonality of the supply. Any impact of heatwaves on food prices is expected to be short-lived thanks to monsoon rains, which the India Meteorological Department forecasts will be above normal this year at 106% of the long period average. "The outlook for food inflation has brightened due to anticipations of a normal monsoon, which is expected to bolster agricultural production," CareEdge Ratings said in a report. "However, the temporal and spatial distribution of monsoon would be critical factors to monitor." Another factor which can hinder a moderation in inflation is the ongoing geopolitical tension, which, if it flares up, can lead to supply chain disruptions and a rise in crude oil prices, economists said. While food prices have kept upward pressure on the headline inflation since last year, a big point of comfort has been core inflation, which was at a record low of 3.2% in April. Core inflation, which excludes food and fuel items, has been declining for most of the last 12 months, mainly because of low global commodity prices and subdued demand. But core inflation may not be able to support headline inflation for a sustained period of time as commodity prices rise globally and demand improves, economists said. "Apart from elevated food inflation, incremental risk to inflation stems from the uptick in global commodity prices, especially industrial metals," CareEdge Ratings said in the report. "Industrial metal prices are up around 20% in the past three months. This warrants closer attention as the rise in input prices can be passed on to the consumption basket." International commodity prices have come under some pressure in recent months on account of resilience in global demand and a surge in geopolitical risk premium, QuantEco Research said in a note. "While gold, silver, and ornaments have captured this spillover impact almost instantaneously, the pass-through to other items of inflation would happen with a lag depending upon the import intensity and pricing power, economists at QuantEco noted. According to Bank of Baroda Chief Economist Madan Sabnavis, core inflation "can spring an upward surprise as companies have raised prices of their products. This holds in the consumer goods segment as they have held back price increases for over a year." RBI Governor Shaktikanta Das has flagged the central bank’s commitment to align inflation to the 4% target. "Two years ago, around this time, when CPI inflation had peaked at 7.8 per cent in April 2022, the elephant in the room was inflation," Das had said on Apr 5. "The elephant has now gone out for a walk and appears to be returning to the forest. We would like the elephant to return to the forest and remain there on a durable basis," Das had said while detailing the outcome of the Monetary Policy Committee meeting last month. As uncertainties to the inflation outlook continue to persist, the timeline for an interest rate cut gets pushed further away, economists said. "With continued uncertainty, especially on the risks to the food inflation trajectory after Jul-Sep, the chance of a stance change in the upcoming June 2024 monetary policy review appears rather dim. At best, we foresee 50 bps of rate cuts from the MPC, in Oct-Dec," ratings agency ICRA said in a report. As is the current inflation scenario, economists are certain the MPC will not tinker with either the interest rate or the ‘withdrawal of accommodation’ policy stance when it meets next month.  End   Informist Media Tel +91 (11) 4220-1000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Akshay Tritiya gold sales better than feared; stable prices aid

Informist, Friday, May 10, 2024 By Sandeep Sinha MUMBAI – Jewellers are heaving a sigh of relief as sales of gold and gold jewellery are expected to be much better this Akshay Tritiya than previously feared, despite precious metals prices being at new record highs in the domestic market. The demand is now seen down 10-15% on year as compared with earlier projection of 40-50?ll in volume terms as the yellow metal prices have stabilised around 70,000-71,000 rupees per 10 gm in the domestic market. Buying gold on Akshay Tritiya is considered auspicious as it is believed to bring wealth and prosperity. Akshay Tritiya, which is being celebrated today, is the most significant shopping day across the country.   "We have seen increased enquiries from buyers as 30% of demand is coming for fresh jewellery and the balance from customers exchanging old ornaments for a new design," Kumar Jain, national spokesperson, India Bullion and Jewellers Association, said. This year, a lot of pre-bookings for gold coins and jewellery for delivery on Akshay Tritiya happened during Jan-Feb, when prices were low, around 60,000-62,000 rupees. This is why sales during Akshay Tritiya this year are close to last year's levels despite the high prices, he said.   Overall, gold demand this Akshay Tritiya is likely to be around 15-16 tn against 16-18 tn last year, Jain said.   "Gold is at the centre of celebrations on auspicious occasions in India and millions of consumers celebrate Akshay Tritiya by purchasing gold as it's considered auspicious to buy on this day. Anecdotal feedback from jewellery retailers does indicate robust pre-bookings for the festival. We do anticipate purchases in the form of gold coins, bars, jewellery, and ticket purchases through digital gold buying platforms," Sachin Jain, regional chief executive officer, India, World Gold Council, said.   Many big and small jewellers are offering discounts on making charges and gold rates in order to attract buyers to the showroom. Sellers are also focusing on light-weight jewellery instead of heavy ornaments and offering free silver coins and jewellery and other gifts. Today, the price of 24-carat gold was 73,003 rupees per 10 gm in Mumbai's retail market and 66,875 rupees per 10 gm of 22 carat purity. On the Multi Commodity Exchange of India, the most-active June contract was trading at 72,761 rupees per 10 gm.   The gold rates have stabilised in the past week at 6,600 rupees per gram for 22-carat, and we expect people to take the benefit of this and invest in gold further, said Mitesh Khimji, managing director, Khimji Jewellers. "We are anticipating a bullish response this season, and we hope for a bumper turnout."   Similar to last year, the extreme heatwave in many parts of the country had an impact on demand. "A lot of buyers are likely to visit market in the evening as this year auspicious muhurat starts from 5 am on Friday to 5 am on Saturday. The average ticket is likely to be lower by 10-15%, but it is very difficult to forecast how much overall sales will probably reduce," said Chirag Sheth, principal consultant at Metal Focus.   "We anticipate a surge in consumer enthusiasm during Akshay Tritiya, This is primarily due to its occurrence during the peak wedding season. The sale of gold in value terms is likely to surpass last year's levels due to increased rates, we also foresee an increase in sales volume," Saurabh Gadgil, chairman and managing Director, PNG Jewellers, said. Gold is a reliable store of value and is considered as an auspicious purchase on this day, Gadgil said.   "Gold has been giving 12% compounded annual growth return every year for the last 20 years and it is expected to continue next year, too. Gold surged 18?tween March 1 and April 12, rising around $400 and hitting new all-time high of $2,448/oz on escalating West Asia tensions, the Chinese gold rush, record purchases by central banks, concerns over sticky inflation, soaring US government debt, and continued fiat debasement," Sachin Kothari, director, Augmont Gold For All, said.   We see that the prices are increasing, because of which a lot of people have increased their interest in gold as an investment avenue, Sheth said. "I would be more surprised if people are not selling their gold. It is also pointing to the fact that people expect much higher price," he said.   "The allure of gold as a stable and lucrative investment has been a constant in the financial world, and its performance in recent years has only bolstered this reputation. In 2022 and 2023, gold investors reaped the benefits of double-digit returns, with last year alone yielding an impressive 18% return," Ajay Kedia, director at Kedia Advisory, said.   In the Indian market, which has a deep cultural and economic affinity for gold, the expectations are particularly high. "The recommendation for entry levels around 68,000 rupees per 10 gm with a conservative target of at least 80,000 rupees/10 gm by the coming year, reflects confidence in the metal's enduring value," Kedia said.   Investors have the opportunity to accumulate gold in a systemic investment mode during every dip as long as prices remain above 68,500 rupees per 10 gm, targeting an initial upside potential of 74,000 rupees per 10 gm, followed by 78,000 rupees per 10 gm levels. Conversely, a decisive break below the previous swing low of 65,200 rupees per 10 gm could disrupt the trend, potentially leading gold to retest the 63,300-63,800 rupees per 10 gm range, said Religare Broking in a gold special report 'Akshaya Tritiya 2024'.   "Indian households have a strong cultural affinity for gold, and the appreciation in prices has further strengthened the demand for gold as an investment asset, resulting in increased consumer interest in Gold ETFs. Given the strong cultural connect, any short-term softening of gold prices could see record gold demand this Akshay Tritiya," said WGC India's Jain.  End   US$1 = 83.50 rupees   Informist Media Tel +91 (22) 6985-4000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Corporate bond issuances drop in April as yields rise

Informist, Wednesday, May 8, 2024 By Sachi Pandey and Subhana Shaikh MUMBAI – Fundraising through private placement of corporate bonds slowed down in April as most companies were still charting out their borrowing plans for 2024-25 (Apr-Mar), industry players said. A rise in the cost of borrowing with uncertainty looming over the rate-cut trajectory globally also deterred fresh fundraising by big-ticket issuers. Typically, primary issuances are low in April as companies seek mandatory approvals for their business plans for the new financial year, merchant bankers said. Fundraising through corporate bonds fell to 380.28 bln rupees in April through the placement of 245 bonds, down 28% from 527.76 bln rupees raised in April last year, according to data compiled by Informist. "April is usually a busy month for corporates as they have their board meetings, so issuances are generally low," said Venkatakrishnan Srinivasan, founder of Rockfort Fincap. "Also, last year, HDFC was borrowing heavily after the merger with HDFC Bank and they were borrowing every month. That increased the total amount then, which is missing now." On a month-on-month basis, fundraising slumped over 73% in April. Fundraising through corporate bonds tends to be higher in March as companies rush to the market to complete their borrowing programme ahead of the end of the financial year, merchant bankers said. A rise in yields also capped overall fundraising activity last month. Yields on corporate bonds rose, tracking similar movement in government securities on growing geopolitical tensions in West Asia and global rate-cut expectations being pushed back. Yields on corporate bonds issued by the National Bank for Agriculture and Rural Development maturing in three and five years rose 11-14 basis points in April, while yields on bonds maturing in 10 years rose 4 bps. The yield on the 10-year benchmark government bond rose 7 bps in April. In April, the Reserve Bank of India's Monetary Policy Committee kept interest rates unchanged at 6.50% for the seventh consecutive meeting, in line with the market's expectations. Last week, the US Federal Open Market Committee also kept the federal funds target range unchanged at 5.25-5.50% for the sixth straight meeting. Fed Chair Jerome Powell said the US rate-setting panel's next move is unlikely to be a rate hike, but added that the Fed was prepared to retain the current target federal funds rate for as long as appropriate. Last month, state-owned entities--the most frequent issuers in the bond market--accounted for more than 35% of the total borrowing, and financial institutions accounted for 18%. Big-ticket issuer National Housing Bank was the largest issuer of corporate bonds, raising a total of 50 bln rupees through two issuances. REC came a close second, borrowing 49.43 bln rupees cumulatively by tapping the market three times. India Infrastructure Finance Co and Power Grid Corp of India raised, respectively, 20 bln rupees and 30 bln rupees through long-term bonds. Non-banking finance companies and housing finance companies raised over 68 bln rupees through corporate bonds in April. This came at a time when the RBI has been pushing non-bank lenders to reduce their dependence on banks for borrowing and to diversify their fundraising options. "NBFCs are slowly moving away from bank lending to corporate bond markets," Srinivasan said. "The increase in investor appetite for lower rated bonds is also making issuers tap the bond market regularly. A lot of people are now showing interest in high-yield bonds, maybe above 10-11%, but that is in small quantum." In April, HDB Financial Services raised 20.7 bln rupees through three bonds, followed by Kotak Mahindra Prime borrowing 11.25 bln rupees through three papers. Among home financiers, Bajaj Housing Finance raised 11 bln rupees through two bonds and Can Fin Homes raised 9 bln rupees through a five-year bond. Last month also saw Iinspira Worldcity Projects raising 1 bln rupees at a coupon of 20%. Pharmaceutical companies also featured in the bond market last month, with Matrix Pharma raising a total of 22 bln rupees through four bonds and Mudhra Labs mobilising 8.3 bln rupees through an April 2030 bond.  End   Informist Media Tel +91 (22) 6985-4000  Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Sizzling summer may turn the heat on inflation

Informist, Tuesday, May 7, 2024 By Shubham Rana NEW DELHI - Most parts of India are facing the brunt of summer and there is no respite in sight, with the India Meteorological Department predicting a higher number of heatwave days than normal in May this year. The weather bureau broadly defines a heatwave as a situation where the maximum temperature is more than 4.5-6.4 degrees centigrade higher than normal or when the actual maximum temperature is over 45 degree centigrade. Higher temperatures have the potential to push up inflation, economists warned. India's headline inflation was at a 10-month low of 4.85% in March and economists expect it to stay at a similar level in April. But if heatwaves continue, there is a possibility that food inflation, which is already high, can rise further, economists said. Food inflation, which makes up nearly half of the CPI basket, was at 8.52% in March. "The sharp increase in the frequency of heatwaves is likely to keep the pressure on perishables' inflation," Anubhuti Sahay, head of South Asia economic research at Standard Chartered, said. "Vegetable inflation has been one of the biggest reasons for elevated food inflation. That pressure is unlikely to go away." The inflation in vegetables has stayed in double digits for five consecutive months and was at 28.34% in March. Within vegetables, the inflation in potato, onion and tomato--which account for more than one-third of the total weight of vegetables--were in the range of 33-41% in March. According to data from the Department of Consumer Affairs, prices of potato rose 13.3% on month in April. If vegetable prices surge, they can single-handedly push up headline inflation above the Reserve Bank of India's comfort level of 2-6%, as they did in July last year. CPI inflation had jumped to a 15-month high of 7.44% in July mainly because of a 38.2% jump in the vegetable index. The surge in vegetable prices was led by a 214.3% spike in the tomato index during the month. Apart from vegetables, prices of other perishable items such as fruits and milk also run the risk of spikes amid higher temperatures, economists said. Historically, there has been a positive correlation between the maximum temperature and CPI momentum for fruits, vegetables, milk, along with sugar and pulses at the margin, said Yuvika Singhal, economist at QuantEco Research. "We found out that historically, May is one month where there is a positive significant correlation between temperature and the CPI momentum, not as much in April and June," Singhal said. "In June, the monsoon season starts, there are showers, so the impact could be a little lower. But between April and May, May is the month in which the entire impact of the heat wave is usually felt." "So largely looking at perishables that is fruits, vegetables, and milk, we find that the upside to this year's inflation, given that the IMD is looking at a severe heatwave, which is like at least four to five degrees higher than normal temperature on an average, could translate into 25-30 basis points upside to headline inflation via the perishables route," Singhal said. Most of these items have not yet shown a sharp rise in prices, which is a source of comfort, said Upasna Bhardwaj, chief economist, Kotak Mahindra Bank. "The heatwaves will have a weighing on the upside on some of the important key crops. We do see an upside risk to headline inflation. At the moment, it's still manageable, but it remains a clear risk." The RBI sees headline inflation at 4.5% for the current financial year that started Apr 1. Food inflation has remained the biggest contributor to the headline print. High food inflation has been balanced out by record low core inflation. If food prices rise further, it may take longer for headline inflation to reach the 4% target than currently expected, economists said. What bodes well for food inflation, and in extension to headline inflation, is the expectation of an above-normal monsoon rainfall, economists said. "We may see some spillover on dairy inflation and the winter crop harvest, in case heat waves continue. However, a good monsoon can provide a respite," Sahay said. The IMD has forecast an above normal southwest monsoon rainfall this year at 106% of the long period average. Typically, prices rise more in the summer months, especially those of vegetables. On an average, the vegetable retail price index rises 2.7% on month in May and 7.0% in June. The ongoing heatwaves could also pose a risk to growth, especially in agricultural output. According to Standard Chartered's Sahay, a few sectors--such as electricity, mining, air-conditioners, and cold drinks--can benefit from the higher-than-usual temperatures, but other sectors might stay on the backfoot, Sahay said. The sector that is likely to bear the biggest brunt of the heatwaves is agriculture, said QuantEco's Singhal. "We are not calling for any downside to agri growth largely because the heatwave in Apr-Jun is expected to be followed by an above normal monsoon." "Immediately we don't see an impact on the growth front. Let's see how durable this problem will be," said  Bhardwaj. "If heatwaves result in delays in monsoon and that could have a bearing on the kharif sowing that could spiral into the rural sector getting affected," she said. While temperatures may be high over the next few months, agricultural output is primarily determined by the monsoon and how the temperatures behave during the winter crop, Sahay said. In the near-term, the larger impact of heatwaves would be on inflation, rather than growth.  However, the impact of heatwaves could be temporary, as summer crops account for only a small part of India's total agricultural production. According to agriculture ministry estimates, the summer crop accounted for less than 5% of India's total food grain output in 2022-23 (Jul-Jun). However, the heatwaves can undo the gains made in moderating headline inflation, at least temporarily.  End     Informist Media Tel +91 (11) 4220-1000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

RBI's project finance draft norms may hurt infra growth

Informist, Monday, May 6, 2024 By Richard Fargose MUMBAI – The Reserve Bank of India's draft guidelines on project financing, which proposes significant enhanced provisioning requirements for lenders, may tighten funding towards this segment and dent infrastructure and capital expenditure growth. The RBI's draft circular, issued on Friday, proposes tighter guidelines on project financing under which lenders would have to make provisions of up to 5% of the outstanding exposures during construction, as against 0.4% currently, which would reduce to 2.5% once the asset turns operational. As per the proposed norms, lenders are required to make the 5% provision in a phased manner—-2% in 2024-25 (Apr-Mar), 3.5% in 2025-26 and 5% in 2026-27. Analysts said that as the Indian banks and non-bank lenders have faced large defaults on infrastructure loans in the past, the RBI's proposed guidelines is a pre-emptive step to avoid any repeat of those cases, given the recent spurt in infrastructure spending. "While this is prudent from a risk management perspective, coming from the regulator's experience in the last credit cycle, we believe this can be detrimental to growth in the capital intensive infrastructure sectors in the economy," JM Financial Institutional Securities said in a report. Brokerage firm Macquarie expects that these rules will only further tighten funding towards project finance exposures. The draft guidelines also proposed that no individual lender should have an exposure less than 10% of the aggregate exposure in projects financed under consortium arrangements, where the aggregate exposure of lenders to the project is up to 15 bln rupees. Whereas, this individual exposure floor should be 5% or 1.5 bln rupees, whichever is higher, for projects where the aggregate exposure of lenders is more than 15 bln rupees. "When the government on one hand is trying to promote infrastructure sector funding, it has increased the cost of lending, the cost of operations, because now you will have to provide more capital to lend the same amount of funding," a senior official with a state-owned infrastructure finance company told Informist on the condition of anonymity. "And this is not done progressively. This will put stress on the government to meet (help PSU non-bank lenders') capital adequacy norms," he said. Shares of state-owned non-banking finance companies such as REC Ltd, Power Finance Corp Ltd and IREDA Ltd ended 4-9% lower today as these lenders are more focussed on financing power infrastructure projects. Analysts believe significant increase in provisioning requirements will result in lower returns for lenders in project finance and reduce their incremental appetite for such exposure, if implemented in the current form. Market participants and analysts expect that lenders may request the RBI to review a part of the draft norms. "Risk weight on NBFC (non-bank finance company) funding has been increased, so my bank financing cost already increased by 40-50 basis points. This cost will also be passed on to the borrower. If all the infrastructure projects become unviable, it will create another round of NPAs (non-performing assets) for no reason," a senior official with a state-owned infrastructure finance company said. Macquarie said as private sector banks also carry contingent and floating provisions of around 100 bps of the overall loan portfolio, they may urge the RBI to consider a part of those provisions towards these additional provision requirements.  End   Informist Media Tel +91 (22) 6985-4000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

New RBI norms leave FX F&O hedgers parched for liquidity

Informist, Friday, May 3, 2024 By Pratiksha NEW DELHI – It was only today that the Reserve Bank of India's much-talked about norms on exchange-traded currency derivatives formally came into effect, but nearly a month has passed since the new guidelines caused devastation in the market. The guidelines, which mandated that every trade must be backed by an underlying exposure, essentially made exchange-traded currency futures and options a hedgers-only market and showed the door to speculative traders. It turns out that even the hedgers are hardly any better off, as they are left stranded in a market devoid of liquidity that was earlier provided by the speculators. The RBI's directions, notified on Jan 5, said that traders need to ensure the existence of an underlying exposure that backed long or short positions of up to $100 mln. Though traders are allowed to take such positions without having to establish the existence of the underlying exposure, as has been the case till now, the RBI has now said that they should be in a position to establish the same, if required. Flouting of the norms may be seen as non-compliance under the stringent Foreign Exchange Management Act. Since traders taking positions of up to $100 mln account for almost 70-80% of the volume on the exchange-traded derivatives platform, their exit has left a serious void in the currency futures and options market. Consequently, even those who need to hedge genuine exposures no longer have access to a fully functional market. "If you stop the entry of speculators, arbitrageurs, who are providers or creators of liquidity, even the hedgers who actually want to go and hedge for genuine hedging requirements, how will they hedge without liquidity?" said Ritesh Bhansali, director at Mecklai Financial Services. "You need clean entry and exit without high impact costs. Any illiquid market cannot function effectively." Market participants said that hedging has become more painful in the currency options segment, since proprietary and retail traders were more active in this segment before the RBI norms were announced. According to National Stock Exchange data, open interest currency derivatives futures contracts has fallen to 32,63,467 as on Tuesday, from 52,48,022 as on April 2. Meanwhile, open interest currency derivatives options contracts has fallen to 8,72,412 as on Tuesday, from 69,41,316 as on April 2. "95% volume happens in options on the trading side, and on the futures, it might be 80%. With the churn and no liquidity, volumes in both have dried out, and options is the first casualty," Sajal Gupta, executive director and head of forex and commodities at Nuvama Institutional Desk said. Hedgers accessing the market now bear a higher execution cost because it is tough to find a counterparty at all price points. What is worse, illiquidity begets illiquidity. "Spreads have increased as there are not enough counterparties for a trade and people don't want bad deals. Once all the issues come to the forefront, trading may come down more and then spreads may increase more," said a dealer at a brokerage firm. "Execution costs are higher because of higher spreads. One of my clients had a $10 million position in October executed in just one day. He wants to cut that position but is getting just 30-40 lots at higher spreads to cut it," said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP. Trading activity has taken a hit in the long-term future contracts more as compared to the near-term future contracts, as traders are uncertain about adequate liquidity in the market on a sustained basis. "No trades happen beyond 3 months. For example, the quote for November (futures contract) is 83.91/84.30 (a dollar). Looking at such levels, a person cannot do anything on both sides," Bhansali from Finrex Treasury Advisors LLP said. Poor market liquidity has forced some of the traders with genuine hedging requirements to move to the dollar/rupee forwards market, participants said. Volatility has picked up in the dollar/rupee forwards and spot market since April due to this, according to dealers.  "Corporates have shifted to banks. They have liquidated their positions. They are not doing active ETCD (exchange-traded currency derivatives) now. The impact is evident," Bhansali from Mecklai Financial Services said. Some market participants also flagged that the RBI's death-knell of the currency futures and options market may spur illegal foreign exchange trading activities. "People will now move to illegal platforms or overseas trading platforms to trade FX. If you don't get liquidity and the pricing is lost, then why should even corporates look at this platform?" said Gupta. Average daily turnover for currency futures and options, including notional turnover for currency options, on the National stock exchange was at 103 bln rupees in April, from 780 bln rupees in March, exchange data showed. A section of the market is hopeful that looking at the state of trading in the currency derivatives market, the central bank may take stock of the situation and provide some respite. However, the hopeful lot is a very small chunk, given that RBI Governor Shaktikanta Das at the April post-policy conference, pretty much denied the possibility of a rethink. At the post-policy conference, Das had said the master directions will not be reviewed. "This has been a consistent position and this is a legal requirement as per FEMA (Foreign Exchange Management Act) regulations, so where is the question for review of that?" he said. The question then arises, will the market eventually adjust to the new norms and rebuild itself with just hedgers alone? Unlikely so. The number of transactions backed by genuine exposures will never match up to that of speculative trades. Nor will the spontaneity. Given that India is an emerging market as well as a foreign exchange deficit country structurally, and much of the hedging requirement tends to be against rupee depreciation. Counterparties will always be heavily skewed towards one side of the trade. The RBI's new directives may have been guided by noble considerations of financial stability, but one can't help but wonder if the central bank foresaw the extent of collateral damage.  End   Informist Media Tel +91 (11) 4220-1000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Others

Bond Club: ICICI Bk reclaims top corp bond arranger spot after 6 mos

Informist, Tuesday, May 28, 2024 By Abhinaba Saha and Sachi Pandey MUMBAI – After six months, ICICI Bank reclaimed the spot of top corporate bond arranger in April, mobilising 31.53 bln rupees through 16 deals. Axis Bank, which arranged seven deals worth 18.15 bln rupees, slipped to second position. During the month, Axis Bank solely arranged a deal worth 5 bln rupees for HDB Financial Services while ICICI Bank solely arranged one deal worth 1 bln rupees for Uno Minda.    HDFC Bank retained third spot, managing five deals aggregating to 16.92 bln rupees last month. The bank solely arranged two deals worth 11 bln rupees for Bajaj Housing Finance.   ICICI Securities Primary Dealership secured fourth position in April, managing six bond issuances aggregating to 11.64 bln rupees, including a solely arranged issuance of 5.04 bln rupees for Cholamandalam Investment and Finance Co. PNB Gilts and Trust Investment Advisors each managed nine deals worth 9.66 bln rupees and 6.55 bln rupees, respectively.   Funds raised through corporate bonds fell to 380.28 bln rupees in April, down 73% from March, according to data compiled by Informist. These funds were raised through private placements of 245 bonds.   Primary issuances are typically lower in April as corporations seek necessary approvals for their business plans for the new financial year, according to merchant bankers. However, the funds raised through private placements of corporate bonds in April were 28% lower year-on-year too.   Last month, state-owned entities--the most frequent issuers in the bond market--accounted for more than 35% of the total borrowing, and financial institutions accounted for 18%.   A rise in yields also capped overall fundraising. Yields on corporate bonds rose, following a similar trend in government securities, on rising geopolitical tensions and rate-cut expectations being pushed back globally.   Yields on corporate bonds issued by the National Bank for Agriculture and Rural Development maturing in three and five years rose 11-14 basis points in April, while 10-year maturities increased 4 bps. The yield on the 10-year benchmark government bond rose 7 bps in April.   Following is a list of corporate bond arrangers in order of the quantum arranged in April: ARRANGER ISSUES ARRANGED (SOLELY OR JOINTLY) AMOUNT ARRANGED (IN BLN RUPEES) ICICI BANK 16 31.53 Axis Bank 7 18.15 HDFC BANK 5 16.92 ISEC-PD 6 11.64 PNB GILTS 9 9.66 TRUST INVESTMENT ADVISORS 9 6.55 AK CAPITAL SERVICES 7 5.83 SBI CAPITAL MARKETS 3 3.64 YES BANK 5 3.20 TIPSONS FINANCIAL SERVICES 6 2.65 LKP SECURITIES 5 2.25 OTHERS       268.26* TOTAL 380.28   End   NOTES: * Based on data compiled by Informist from published news reports * May not include all the deals struck during the month/quarter * Banker who arranged highest quantum of deals, irrespective of number of deals, is ranked first * Deals executed directly with investors are not considered   Informist Media Tel +91 (22) 6985-4000  Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Earnings Review: Divi's Labs Jan-Mar PAT 5.3 bln rupees, up 67% YoY

Informist, Saturday, May 25, 2024 --Divi's Labs: Expect double-digit revenue growth in FY25  --Divi's Labs: FY25 capex seen around 15 bln rupees --Divi's Labs: Expect Kakinada plant to begin ops in phases FY25  --CONTEXT: Comments by Divi's Labs management in post-earnings call  --Divi's Labs: Raw material costs stabilised in Jan-Mar  --Divi's Lab: Board reappoints Murali Divi as MD for 5 years  --Divi's Lab FY24 revenue 76.65 bln rupees vs 76.25 bln  --Divi's Lab FY24 net profit 15.76 bln rupees vs 18.08 bln  --Divi's Lab Jan-Mar revenue 22.59 bln rupees vs 19.08 bln  --Divi's Lab Jan-Mar net profit 5.31 bln rupees vs 3.19 bln  --Divi's Lab to pay 30 rupees/share final dividend  --Analysts saw Divi's Lab Jan-Mar net profit 4.68 bln rupees  By Narayana Krishna HYDERABAD - A better than expected recovery in the generic active pharmaceutical ingredients and custom synthesis business led Divi's Laboratories Ltd to report a 66.5% on-year surge in its net profit for Jan-Mar at 5.3 bln rupees. The company's revenue was 22.6 bln rupees, up 18.4% on year. The average of the estimates of seven brokerage firms had pegged a 47% on-year rise in the company's net profit at 4.7 bln rupees, while the net sales were seen up 11% at 21.1 bln rupees.  Sequentially, the company's net profit rose 48.3% and the revenue was up 25%.  Divi's Laboratories makes high-value speciality chemicals and bulk drugs. Recently, it launched contrast media products, which are used in scanning or imaging the human body, mainly for diagnosis purposes. While generic active pharmaceutical ingredients accounted for 49% of the total sales, the custom synthesis segment contributed 51%, the company's management said in a post-earnings conference call. Divi's Labs' earnings before interest, tax, depreciation and amortisation, or EBITDA, margin for Jan-Mar expanded by 611 basis points to 31.74%. The higher share of custom synthesis in overall revenues aided margin growth during the quarter, the management said. Analysts had expected the company's EBITDA margin at 25.9-30.0%. Divi's Labs was earlier known for above 34% margin delivery, and analysts were keenly awaiting when the company would return to those levels. Along with custom synthesis, a better product mix also aided the margin recovery, the management said. However, pricing pressure was seen in the case of some products, and this may have an impact on the overall performance going forward, the company said. The company's total expenses during the quarter rose 8.8% on year to 16.4 bln rupees. Raw material costs were up 14.8% on year at 9.1 bln rupees. Raw material prices were now stabilising, helping the company manage costs, the management said. FY25 CAPEX Divi's Labs expects its capital expenditure in 2024-25 (Apr-Mar) to be around 15 bln rupees, which includes pending capex on the Kakinada plant and 7 bln rupees of capex announced recently for new capacity addition for a client. The company's management said the greenfield project at Kakinada was expected to begin production in the current fiscal year in phases, while the 7-bln-rupee expansion plan for a client is to be completed in 2026-27. For 2023-24, the company's net profit declined 12.8% year-on-year to 15.8 bln rupees, while revenue was up marginally by 0.5% at 76.7 bln rupees. The management said its expects double-digit revenue growth for the current financial year.  The company's board today recommended final dividend of 30 rupees per share. It also approved the appointment of Murali Divi as managing director for another five years. On Friday, shares of Divi's Laboratories ended at 4,122.40 rupees on the National Stock Exchange, up 0.2% over Thursday.  End   Informist Media Tel +91 (22) 6985-4000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Earnings Review: NTPC numbers below view despite one-time income

Informist, Friday, May 24, 2024 By Anjana Therese Antony MUMBAI – The key earnings metrics of NTPC Ltd for Jan-Mar failed to meet the Street's estimates, despite a one-time income of 8.35 bln rupees during the quarter. The net profit declined 2% on year, against the Street's expectation of the metric rising 3%. Revenue also fell short of analysts' estimates, rising only in low single digit from a year ago. NTPC reported a net profit of 55.56 bln rupees for Jan-Mar, short of analysts' estimate of 58.18 bln rupees. Revenue from operations rose nearly 3% on year to 425.32 bln rupees, but was below the consensus estimate of 449.88 bln rupees. On quarter, the net profit grew over 21% and revenue was up nearly 8%. In the Oct-Dec quarter, too, the company's key earnings metrics were below estimates. NTPC's net profit for the December quarter was 45.72 bln rupees, lower than the anticipated 47.6 bln rupees. Revenue from operations at 394.55 bln rupees was also lower than the market's view of 423.49 bln rupees. For the financial year ended March, NTPC's net profit rose over 5% to 180.79 bln rupees, while revenue from operations declined 1% to 1.62 trln rupees. CAPACITY PLANS In a conference call with analysts post-earnings, the company said it has commissioned 3.6 GW of renewable energy projects "as of now". An additional 8.4 GW of renewable energy projects are in various stages of construction. The company also plans to commission 3 GW of renewable energy capacity in the current financial year, 5 GW in the next fiscal, and 8 GW after that, it said. NTPC is also looking at awarding thermal capacity of 15.2 GW in the near future as a part of its energy security plan. This will be in addition to the 9.6 GW capacity that is already under construction for the NTPC Group. CAPEX The company said a syndicated unsecured term loan of "$750 mln was executed under the automatic route of the Reserve Bank of India's external commercial borrowing regulation," the proceeds of which will be utilised towards capital expenditure of ongoing and new capacity addition programmes. In 2023-24 (Apr-Mar), NTPC's capital expenditure was lower at 193.19 bln rupees, compared to 245.91 bln rupees the previous year. The power generation company said it expects NTPC group's capital expenditure to be 350-500 bln rupees in the next 2-3 years. The company's capital expenditure in 2023-24 was 193.19 bln rupees. Shares of NTPC closed higher by 0.7% at 374.95 rupees on the National Stock Exchange. The company announced its earnings after market hours.  End   Informist Media Tel +91 (22) 6985-4000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Earnings Review: Hindalco Jan-Mar EBITDA strong; realisation a worry

Informist, Friday, May 24, 2024 --Hindalco: Jan-Mar consol net profit 31.74 bln rupees --Analysts saw Hindalco Jan-Mar consol net profit 28.91 bln rupees --Hindalco: Jan-Mar consol revenue 559.94 bln rupees --Hindalco: To pay 3.50 rupees a share dividend --Hindalco: Jan-Mar consol net profit 31.74 bln rupees vs 24.11 bln rupees --Hindalco: Jan-Mar consol revenue 559.94 bln rupees vs 558.57 bln rupees --Hindalco: FY24 consol net profit 101.55 bln rupees vs 100.97 bln rupees --Hindalco: FY24 consol revenue 2.160 trln rupees vs 2.232 trln rupees --Hindalco: Jan-Mar consol EBITDA 72.01 bln rupees, up 24% on year --Hindalco: Jan-Mar upstream aluminium EBITDA 27.09 bln rupees --Hindalco: Jan-Mar upstream aluminium EBITDA up 24% on year --Hindalco: Jan-Mar copper EBITDA 7.76 bln rupees, up 30% on year --Hindalco: Jan-Mar Novelis adjusted EBITDA/tn $540, up 25% on year --Hindalco: Consol net debt-to-EBITDA ratio 1.21x as of Mar 31 --Hindalco: Jan-Mar EBITDA driven by lower input costs, higher volume --Hindalco: Jan-Mar upstream aluminium shipment 337,000 tn, up 4% on year --Hindalco: To buy fabrication facility of Home Build Tech --Hindalco: Jan-Mar downstream aluminium shipment 105,000 tn, up 17% --Hindalco: Jan-Mar copper shipment 135,000 tn, up 16% on year --Hindalco: To buy Home Build's fabrication facility for 340 mln rupees --Hindalco: Jan-Mar upstream aluminium EBITDA/tn $967, up 17% on year --Hindalco: See Apr-Jun domestic aluminium output cost 1% lower QoQ --CONTEXT: Hindalco mgmt's comments in post-earnings investor call --Hindalco: To spend 60 bln rupees in capex for India business FY25 --Hindalco: India business net cash 34.39 bln rupees as of Mar 31 --Hindalco: Novelis net debt 359.37 bln rupees as of Mar 31 By Rajesh Gajra MUMBAI – Benign input costs and reasonable increase in sales volume improved the profitability of Hindalco Industries Ltd in the quarter ended March, with the topline and bottomline beating analyst estimates. However, there are concerns over weak sales realisations.   Overseas subsidiary Novelis, which contributes around 62% to Hindalco's consolidated revenue and around 54% to the net profit, continued to report weak numbers. In fact, the 7?ll in Novelis' revenue to $4.08 bln was the main reason why the aluminium and copper manufacturer's revenue was flat at 559.94 bln rupees.   Hindalco's India business, largely comprising the aluminium upstream and downstream segments and the copper segment, reported a 12% increase in revenue to 204.44 bln rupees.   Lower input costs and higher volumes helped improve the company's profitability, with the earnings before interest, tax, depreciation, and amortisation rising 24% on year to 72.01 bln rupees. All segments scored high on profitability. Novelis' EBITDA jumped up 28% on year to $514 mln with the EBITDA per tonne rising 25% to $540. The company's upstream aluminium EBITDA rose 24% on year to 27.09 bln rupees with the EBITDA per tonne rising 17% to $967. The copper segment's EBITDA surged 30% to 7.76 bln rupees.   In a post earnings conference call with analysts today, Hindalco's management said that all input costs were lower in the March quarter compared to the year ago period. The management said that in India, the petroleum coke costs, for instance, were not only down 8% sequentially but were lower by as much as 28% on a year-on-year basis.   As per the company's financial statement, the consolidated cost of materials consumed declined 2.9% to 327.58 bln rupees. The power and fuel expenses declined 5.9% on year to 36.24 bln rupees while other expenses increased 2.5% to 73.97 bln rupees.   The management said that EBITDA of the India business was clearly aided by the lower cost of production in the March quarter. It further expects that the Apr-Jun cost of production in domestic aluminium business to be 1% lower than the March quarter.   In Jan-Mar, Hindalco's consolidated net profit rose 31.6% on year to 31.74 bln rupees, beating analyst estimates of 28.91 bln rupees. The company's consolidated revenue was nearly flat at 559.94 bln rupees.   Hindalco's topline performance in India business in Jan-Mar was mainly driven by volume growth and better realisations in the copper segment. The copper shipment volume rose 16% on year to 135,000 tn and the revenue rose still higher by 20% to 134.24 bln rupees. The upstream aluminium shipment volume rose 4% to 337,000 tn with the revenue increasing 5% to 84.69 bln rupees, while the aluminium downstream segment saw shipment volume rise 17% to 105,000 tn but revenue rising only 7% to 29.20 bln rupees.   DEBT AND LEVERAGE Hindalco's consolidated gross debt increased to 545.01 bln rupees as of Mar 31 from 534.02 bln rupees as of Dec 31. But since the cash balance increased to 229.65 bln rupees from 185.66 bln rupees, the net debt declined to 315.36 bln rupees as of Mar 31 from 348.35 bln rupees.   The management told analysts at the post earnings call that Novelis' net debt was 359.37 bln rupees as of Mar 31 and that the India business had a net cash position of 34.39 bln rupees. The company said the positive net cash position in the India business will get utilised as it aims to incur a capital expenditure of 60 bln rupees in 2024-25. Hindalco's consolidated net profit for the year 2023-24 (Apr-Mar) rose 0.6% to 101.55 bln rupees, even as revenue declined 3.2% to 2.16 trln rupees. The company's board has approved a dividend of 3.50 rupees per share.   Today the company announced the acquisition of the fabrication unit of Home Build Tech for 340 mln rupees in the next 4-6 months. The acquisition, which will be through a special purpose vehicle, is aimed to aid the company in manufacturing fabricated windows and doors and support the retail business of 'Eternia", a downstream brand.   On the National Stock Exchange, shares of Hindalco closed higher by 0.52% at 673.25 rupees.  End   US$1 = 83.10 rupees   Informist Media Tel +91 (22) 6985-4000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

India likely to grow by 7.5 pc in Q1, says article in RBI Bulletin

Mumbai, May 21 (PTI) India is likely to grow by 7.5 per cent in the first quarter of the current financial year, driven by rising aggregate demand and non-food spending in the rural economy, according to an article in the RBI's May Bulletin released on Tuesday. The Indian economy has demonstrated marked resilience in the face of geopolitical headwinds impacting the supply chain, said an article on the state of the economy published in the May Bulletin. "According to the economic activity index (EAI), activity rebounded in April, and early estimates suggest that GDP growth for Q1:2024-25 is likely to remain close to 7.5 per cent," it said. The economic activity index (EAI) was constructed by extracting the common trend underlying twenty-seven high-frequency indicators of economic activity, using a Dynamic Factor Model. EAI was scaled to 100 in February 2020 and 0 in April 2020, the worst affected month due to mobility restrictions. Meanwhile, the government will be releasing the quarterly GDP estimates for January-March, 2024 (Q4 2023-24), and provisional estimates of National Income for the year 2023-24 on May 31. The Indian economy grew 8.2 per cent in the June quarter, 8.1 per cent in the September quarter and 8.4 per cent in the December quarter of 2023-24. The article noted that high-frequency indicators point towards sustained momentum in domestic demand conditions in April 2024. Toll collections increased by 8.6 per cent (y-o-y) in April 2024. Automobile sales increased by 25.4 per cent (y-o-y) in April 2024, led by strong growth in the two-wheelers and three-wheelers segment, while passenger vehicles recorded the highest-ever monthly sales. "There is a growing optimism that India is on the cusp of a long-awaited economic take-off. Recent indicators are pointing to a quickening of the momentum of aggregate demand," said the article, prepared by a team led by Reserve Bank Deputy Governor Michael Debabrata Patra. Non-food spending is being pushed up by the green shoots of rural spending recovery. A modest easing of headline inflation in the reading for April 2024 confirms the expectation that an uneven and lagged pace of alignment with the target is underway. It also noted that for the first time in at least two years, rural demand for fast-moving consumer goods (FMCG) has outpaced urban markets in the quarter just gone by. FMCG volume growth of 6.5 per cent was driven by rural growth of 7.6 per cent relative to urban growth of 5.7 per cent on the back of robust demand for home and personal care products. Turning to private investment, for listed private manufacturing companies, earnings remained the major source of funds during the second half of 2023-24, it said. Results that have been declared by listed corporates so far indicate that they closed the financial year 2023-24 with the highest growth in quarterly revenues registered in January-March 2024. "A modest easing of headline inflation in the reading for April 2024 confirmed our expectation that an uneven pace of alignment with the target is underway," the authors said. The prices of vegetables, cereals, pulses, meat and fish in the food category may keep the headline elevated and closer to 5 per cent in the near term, in line with projections set out in the April Monetary Policy Committee (MPC) resolution in spite of deflation in fuel prices and further softening of core inflation to a new historic low, they said. The central bank, however, said the views expressed in the Bulletin article are of the authors and do not represent the views of the Reserve Bank of India. PTI 

Sebi proposes tweaking rules for buybacks, merchant bankers

New Delhi, May 21 (PTI) To facilitate ease of doing business, capital markets regulator Sebi on Tuesday proposed tweaking norms governing buyback of shares, merchant bankers and bankers to an issue. The proposals are based on recommendations given by a committee chaired by Sebi's former Whole Time Member S K Mohanty. The committee was formed by the markets regulator to review the merchant bankers rule, bankers to an issue and buyback norms from the point of view of facilitating ease of doing business, Sebi said in its consultation paper. The Securities and Exchange Board of India (Sebi) has sought comments from the public till June 11 on the proposals. With regards to buyback norms, the committee has suggested allowing conversion of ESOPs or convertible instruments if the exercise or conversion date falls within the buyback period. Also, it has been suggested to disclose details of outstanding ESOPs and convertible instruments in the public announcement. The current rules prohibit issuing any shares or securities, including bonus shares, until the buyback period ends. On the manner of computation ration, the committee has suggested that if any promoter or member of the promoter group declares upfront they will not participate in the buyback, their shares should not be considered in the entitlement ratio calculation. This increases the entitlement for remaining shareholders. At present, there is no specific method for calculating the entitlement ratio. In respect of reference date for opening buyback offer via stock exchange, it has been suggested that buyback offer should open within four working days from the public announcement date. At present, the offer opens within four working days from the record date. On disclosures in the letter of offer, it has been suggested to include the entitlement ratio for small and general shareholders on the cover page and also provide a link in the letter of offer for shareholders to check their buyback entitlement on the registrar's website. With regards to merchant banker rule, the committee has suggested that the existing requirement to submit statement of responsibility to Sebi at least one month before the opening of the issue can be removed as such responsibilities are already disclosed in the offer document under the ICDR Regulations. In addition, it has been proposed to align underwriting obligations with the current listing framework, requiring subscription prior to the finalization of the basis of allotment instead of current rule that requires merchant bankers acting as underwriters to subscribe to securities within 45 days of receiving intimation. Further, it has been suggested to amend the definition to include securities premium. In addition to existing professional qualification requirements, it has been proposed to allow qualifications from recognized foreign universities or institutions for the applicant. The current rule requires a minimum of two employees with experience in merchant banking. Under the conditions set out for registration of a merchant banker, it has been proposed to eliminate the requirement to inform Sebi about investors' complaints. Also, it has been suggested to replace 'immediately' with 'within seven working days' for informing Sebi about changes. Also, it has been recommended to issue digitally signed e-certificates to merchant bankers. In respect to norms governing Bankers to an Issue (BTIs), the committee has recommended to update the definition to clarify that BTIs can also act in connection with open offers, buybacks, and other transactions as required by Sebi regulations. Also, it suggested introducing a provision stating that no entity can act as a BTI without a certificate of registration from Sebi. PTI