Author: Ankit Gohel

BPCL falls 3% after hitting 52-week high over government divestment plan

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Shares of Bharat Petroleum Corporation Ltd. (BPCL) fell over 3 percent on Thursday after the government announced a strategic sale of its 53.29 percent stake in the refiner after taking out Numaligarh refinery from its portfolio.

In the opening trade, BPCL shares hit a fresh 52-week high of Rs 549.70 per share on the BSE, rising 0.9 percent from its previous close. However, the stock soon eased gains and fell as much as 3.17 percent to Rs 527.35 per share intraday.

At 10 AM, BPCL’s stock price was trading 2.24 percent lower at Rs 532.25 per share, while the Sensex was up 0.02 percent at 40,660.34.

Union Finance minister Nirmala Sitharaman said that the cabinet approved the divestment of the Indian government’s 53.29 percent stake in BPCL to a strategic investor along with management control.

However, the Numaligarh refinery (of which BPCL owns 61.7 percent and forms 10 percent of its NAV, 14 percent of F21e earnings) and has special excise benefits would be sold to an SOE entity, she added.

BPCL’s stake sale is part of the government’s disinvestment target of Rs 1.05 lakh crore, which also includes divestment of other state-owned companies such as Shipping Corp of India (SCI), THDC India Ltd and North Eastern Electric Power Corp Ltd, and a 30 percent stake sale in Container Corp of India.

Privatisation of BPCL will not just shake up fuel retailing sector long dominated by state-owned firms but also help meet at least a third of the government’s Rs 1.05 lakh crore disinvestment target.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Indian steel industry in crisis, expect govt to intervene: CGS CIMB Securities

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

The Indian steel sector is in a crisis and the government cannot ignore it for too long, according to a CGS CIMB Securities report.

“At the current spot steel prices, even the most efficient companies in the sector in India are in a crisis. The sector’s financial health is important to the banking system too as the proportion of steel in industry credit is 10 percent. Steel sector and the ecosystem is a huge employment generator and GDP contributor too. So, the government can’t ignore the crisis for long in our view,” the research house said.

Globally, contraction in various Purchasing Managers’ Index (PMI) across major countries, Chinese crude steel production at an all-time high, weak exports and insufficient stimulus measures to match strong supply have together resulted in correction of steel prices by approximately 30 percent since 2018 high.

Also, Russian steel companies which are amongst the most profitable in the world, have the ability to undercut prices worsening the situation further.

The research firm expects the government to intervene and help revive the sector as manufacturing has been a key focus for the government and it plans to grow steel capacity to 300 mt by 2030 which requires an investment of $100-150 billion.

The report adds that the minimum import prices (MIP) imposed in 2016 on steel are redundant now and the current basic customs duty of 12.5 percent is ineffective as it is not applicable to free trade agreement (FTA) nations which are exploiting the situation.

Thus, there is a need to review the MIP and FTAs and fix the anomalies, it said.

“The government has been pro-actively addressing stress in various sectors of the economy and we believe steel sector will not be an exception. In the worst case of no government intervention, we expect this crisis to self-correct as the invisible hand of the market to comes into play,” the report said.

It suggests that the Anti-Dumping Duty (ADD) will have to increase by c. $100/ton to $580/ton for hot-rolled coils (HRC) after adjusting for the increase in global raw material prices.

Further, fixing price anomalies will result in higher prices and lower imports into India.

“Pricing tailwind will help boost EBITDA/t, while lower imports will drive market share of domestic companies, both of which will result in higher profits and return ratios,” the report said.

It’s noteworthy, that the steel industry is cyclical in nature and its profitability is closely tied to the global economic cycles which remain a risk on the sector.

Moreover, other risks include oversupply from China, trade wars between prominent countries and any sudden spike in premium coking coal prices that could impact the profitability of the sector adversely.

The brokerage upgraded the sector to an ‘Overweight’ rating and has ‘Add’ ratings on JSW Steel, Tata Steel, JSPL and SAIL.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

RIL rallies 4% intraday after Jio’s stance on tariffs; eyes Rs 10 lakh crore m-cap

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Shares of Reliance Industries  (RIL) surged 4 percent intraday on Wednesday after its telecom arm Reliance Jio said that it will increase tariffs in the next few weeks.

The stock rose as much as 4.1 percent to hit its 52-week high of Rs 1,571.85. It settled the day 2.5 percent higher at Rs 1,547 as compared to a 0.45 percent or 182 points rise in BSE Sensex at 40,651.

The stock has gained over 34 percent on a year-to-date basis while the company’s market-cap has soared to Rs 9.8 lakh crore.

The company said that it is exploring an “appropriate” increase in tariffs to comply with the regulatory regime but added that the spike will be in a manner that does not adversely impact data consumption or growth in digital adoption.

For the quarter ended September, Reliance Industries reported a 18.3 percent YoY rise in consolidated net profit at Rs 11,262 crore while its net revenue grew by 4.8 percent to Rs 163,854 crore driven by robust growth in retail and digital services businesses.

RIL also announced that it will set up a new subsidiary to bring all its digital initiatives under a single entity with an equity infusion of over Rs 1 lakh crore.

Earlier, global investment firm Bank of America Merill Lynch (BofAML) said that RIL could become the first Indian company to reach $200 market cap in 24 months backed by its new commerce venture and fixed broadband business.

According to the brokerage, the stock is likely to receive an additional boost with several initiatives undertaken. New commerce initiative of empowering Kiranas in unorganised retail market by offering MPoS (mobile point-of-sale), entry into SME enterprise space with Microsoft, Jio’s fiber broadband business and digital initiatives such as advertising could push the market capitalisation of the conglomerate to $200 billion, the brokerage said.

Disclaimer: RIL, the promoter of Reliance Jio, also controls Network18, the parent company of CNBCTV18.com.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Corporate employment growth lags GDP growth, service sector the biggest recruiter, says report

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

India’s corporate employment growth has trailed the GDP growth during the last four financial years with service sector being the biggest recruiter, a study by CARE Ratings said.

The service sector has performed better than manufacturing while the financial sector industries doing better in terms of higher recruitment. The IT sector too had an impressive performance, the report added.

The study, based on 1,938 companies spread across various sectors, revealed that aggregate headcount or employment increased at a CAGR of 3.3 percent over a period of four years in 2014-15 and 2018-19.

However, GDP growth during the period was at a CAGR of 7.5 percent.

“Therefore, there is a case that supports the argument that employment growth has not been commensurate with GDP growth with a difference of 4.2 percent in CAGR during this period,” the report noted.

The top 10 sectors covering 895 companies with employment of 4.70 million in 2018-19 accounted for 75 percent of total employment of the sample companies. Further, 42.4 percent share was from three service industries while the balance was from manufacturing (30 percent) and agriculture (3 percent).

At the aggregate level the share of services is around 50 percent.

According to the report, the core industries have witnessed virtually negative growth in headcount, with crude oil segment just about maintaining the employment level, impacted by the slowdown in GDP growth as well as the challenges on the NPA side for banks.

Growth has tended to be negative for power and capital goods and just 0.4 percent for infrastructure.

However, the consumer-oriented industries show a varied pattern. In the case of agricultural and durable goods, there has been a deceleration in employment while there has been an increase for FMCG and textiles albeit at a lower than sample average of 3.3 percent.

“This is reflective of the slow uptick in consumer demand which has affected these industries not just in terms of sales as is evident from financial performance numbers but also a cautious approach to manpower planning,” the report noted.

Among financial sector, the highest growth was in the NBFC segment which has added more from 2016-17 onwards as the sector also witnessed sharp growth in business.

In the non-financial sector segment, the IT and retail industries have registered near or above average growth. But telecom, hospitality and realty have witnessed negative growth reflecting the state of the economy.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Global economy to remain fragile in 2020 as risks to credit conditions rise: Moody’s

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Global credit conditions in 2020 will weaken as a result of growing risks of an economic downturn, trade policy uncertainty and the effects of an unpredictable political and geopolitical environment, said Moody’s Investors Service in a report.

According to the report, the global economy will remain fragile in 2020 after recording the lowest global growth in 2019 since the 2009 recession.

“Overall global growth will remain lacklustre amid a deceleration in the US and China, the main engines of the world’s economic activity,” said Elena Duggar, Moody’s associate managing director.

“Growth in advanced economies will slow toward potential as labour markets continue to tighten, while growth in many emerging market countries will be below average as a result of China’s slowdown and as global trade growth grinds to a halt,” Duggar added.

Global trade tensions and continued protectionist actions will remain a key risk to credit conditions in 2020, testing the strength of consumer confidence in an environment of high political and geopolitical uncertainty.

“Risks will centre around US-China trade disputes, Brexit-related uncertainty and the escalation of other bilateral disputes. At the sector level, spillover effects from trade frictions will drive shifts in global supply chains and weigh on investment decisions,” the global rating agency said.

Further, sporadic episodes of heightened financial market volatility will flare up as long as trade uncertainty lingers.

Although Moody’s does not expect a recession in 2020, recession risks are building amid a backdrop of trade policy uncertainty, unpredictable political and geopolitical environment, and as fiscal and monetary policy space in advanced economies remains limited to prevent a future downturn.

Other risks to the global economy relate to high leverage and the historically high number of debt issuers with weak credit quality accessing the credit markets.

“Recession risks will remain elevated in Europe and the US, while in China domestic rebalancing will continue to create challenges in maintaining the country’s rapid growth,” the report mentioned.

Moody’s expects interest rates to remain low and yield curves to remain flat for several years going forward, with mixed credit effects by sector, “Low rates will keep borrowing costs attractive for sovereigns and companies but will create a difficult operating environment for banks and insurers. Moreover, low rates will also continue to encourage risk-taking as investors reach for yield.”

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Shapoorji Pallonji mulls stake sale in Eureka Forbes

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Forbes & Company Ltd., a subsidiary of Shapoorji Pallonji and Company Pvt Ltd, Tuesday said that it plans to unlock value of subsidiary Eureka Forbes Ltd that may include listing, dilution/sale or combination thereof of Eureka Forbes.

In a regulatory filing, the company announced that its Board has authorised the management of the Company to evaluate a scheme of arrangement and other appropriate mechanisms to enable an eventual listing of Eureka Forbes.

Eureka Forbes’ product portfolio comprises of vacuum cleaners, water purifiers, air purifiers and home security solutions.

“The Board will consider the above when the relevant proposals are placed before it in the near future, but in principle has approved supporting the endeavours of the management in this regard,” the company added.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Tata Steel to cut 3,000 jobs across Europe operations as part of cost-cutting plans

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

India’s largest steel maker Tata Steel has unveiled restructuring and transformation program for its Europe business which includes cost-cutting plans through job cuts with an aim to arrest the decline in profitability.

In a statement issued to exchanges, the steel major said that the programme is needed to ensure the business can thrive despite severe market headwinds which have led to a sharp decline in profitability.

The programme is focused on four areas to improve financial performance that includes lowering employment costs, leading to an estimated reduction in employee numbers of up to 3,000 across Tata Steel Europe’s operations, about two-thirds of which are expected to be office-based (‘white-collar’) roles, the company said.

Increasing sales of higher-value steels by improving product mix and customer focus, efficiency gains by optimising production processes, supported by the application of big data and advanced analytics and reduction of procurement costs through smarter sourcing and strengthening cooperation with companies within the Tata Steel group are other such areas.

“We plan to change how we work together to enable better cooperation and faster decision-making. This will help us become self-sustaining and cash positive in the face of unprecedented severe market conditions, enabling us to lead the way towards a carbon-neutral future,” said Henrik Adam, CEO of Tata Steel in Europe.

Tata Steel highlighted plans to urgently improve its financial performance to make sure the European business becomes self-sustaining and cash positive, while enabling investment to safeguard its long-term future. The plans include a proposed new way of working to boost productivity and reduce bureaucracy as well as a focus on increasing sales of higher-value steel products and solutions, the statement said.

Through its proposed transformation programme, Tata Steel Europe said it is initially targeting a positive cash flow by the end of its financial year 2021. It is also aiming for an EBITDA margin of around 10 percent throughout the market cycle.

Based on full-year 2019 revenue figures, this would equate to 750 million pounds in EBITDA.

“Together with a significant increase in the cost of emission allowances, this has created an urgent need for improvements to the company’s financial performance,” the company said, adding that it will engage with various stakeholders to ensure compliance with all European and national obligations.

According to latest figures, in the first six months of its current financial year starting April 2019, Tata Steel Europe reported a drop of 90 percent in EBITDA to 31 million pounds and revenue stood at 3.25 billion pounds.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Supreme Court Essar Steel judgment favours banks, says Nomura

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

The Supreme Court’s judgement on Essar Steel case that the committee of creditors (CoC) has the discretion to decide on the distribution of proceeds of a bankrupt firm will be positive for banks, brokerage house Nomura has said.

The apex court last week ordered Arcelor Mittal’s Rs 42,000 crore offer to acquire Essar Steel to be distributed according to the resolution plan approved by the CoC in October last year, implying 92 percent of secured financial creditors’ claims being settled.

>> How Supreme Court’s Essar Steel verdict could offer relief to struggling power firms

Restoring the supremacy of financial creditors, the Supreme Court overruled National Company Law Tribunal’s formula of equal distribution among the financial and operational creditors, which violated the commercially accepted norms of lending.

The operational creditors will get Rs 196 crores proposed by Arcelor plus another Rs 1,000 crores later allowed by the creditors’ committee, taking the total repayment to Rs 1,196 crores.

>> PFC will not give loans to discoms until their financial situation improves, says power secretary

According to Nomura, the State Bank of India (SBI) and ICICI Bank will be key beneficiaries from the judgement and the SBI could alone have a recovery of around Rs 12,000 crore.

The other big impact on resolutions going forward is from the apex court making it very clear that NCLT and National Company Law Appellate Tribunal (NCLAT) cannot interfere with the commercial decision of banks, it is simply not in their jurisdiction. This has been a key ask of banks which often had to redraw approved resolution plans because of judicial intervention.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

This is what the finance minister Nirmala Sitharaman replied to an MP on what the government is doing to tackle economic slowdown

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

The Government is taking various measures to increase private consumption and fuel country’s economic growth, finance minister Nirmala Sitharaman said told the Lok Sabha on Monday.

Replying to a question on economic slowdown by Member of Parliament NK Premchandran in the Lok Sabha, Sitharaman in a written statement said that the government has been taking several measures to address moderate levels of fixed investment rate in the economy, plateauing of private consumption rate and a modest export performance, with a view to increasing the GDP growth of the country.

“During the last five years, government has implemented major reforms to build the investment climate in the country for becoming a $5 trillion-dollar economy,” the minister said.

The World Economic Outlook (WEO) of October 2019, projects a significant slowdown in world output and trade in 2019. Yet India, despite some recent deceleration of GDP growth, is still projected by WEO to grow at the fastest rate in 2019-20 among G-20 countries, she noted.

On a question whether the Government has also analysed the impact of implementation of the Goods and Services Tax (GST) on economic slowdown, Sitharaman said that the GST reform stands out as the most important measure for improving ease of doing business in the country.

“Further, in the World Bank’s Ease of Doing Business 2020 Report, India’s ranking improved by 14 positions to 63 in 2019 from 77 in 2018 after GST was implemented in 2017,”the statement by Sitharaman noted.

Regarding the impact of implementation of foreign trade agreements and economic slowdown, she said that the Government publishes an Economic Survey of the country on an annual basis analysing various aspects of the economy including trade agreements and state of the economy.

“Government has also been engaging with various stakeholders to understand their concerns and taking appropriate measures for the economy,” she said.

The minister further chalked out major reforms implemented during the last five years to build the investment climate in the country such as introduction of Insolvency and Bankruptcy Code (IBC), Make in India programme and GST reform.

“Continuous liberalisation has resulted in record and unprecedented inflows of foreign direct investment into the country. And all along government has kept inflation low, fiscal spending disciplined and current account deficit manageable to ensure macroeconomic stability so necessary to sustaining a healthy investment climate in the country,” the statement read.

Moreover, she also pointed out the recent move to reduce corporate tax rate from 30 percent to 22 percent complemented by a cut in the repo rate by 135 basis points during 2019 by the Reserve Bank of India and mandating of banks to link their lending rates with external benchmarks for reducing the cost of capital for investors.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow