Month: April 2020

Axis Securities rejigs portfolio: Reduces weight in banking stocks, increases RIL weightage to 10%

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

Listen to the Article (6 Minutes)

Sensex and Nifty fell around 20 percent in 2020 as coronavirus crisis led to a market rout for domestic as well as global indices. For India specifically, COVID-19 has hit at a point in time where the economy was anyways going through a cyclical downturn.

Even though the market valuations look attractive, experts have advised caution to get through this volatile period.

Axis Securities, in a recent report, believes that looking at valuation metric alone might not work in this environment as businesses are likely to face liquidity issues due to this crisis. It prefers industry leaders with strong cash flow for the current situation.

“With the steep drop in revenue in H1F21, companies which lack balance sheet resilience (high debt/equity and low cash) are likely to struggle to cover their fixed costs – and risk-averse banks are unlikely to incrementally lend to them. Hence we prefer industry leaders with net cash balance sheet/strong cash flow generating ability,” it noted in the report.

The brokerage has also repositioned its portfolio, in tandem with the current market mood. It noted that Nifty stocks have 82 percent weight in its portfolio, while non-Nifty stocks hold the remaining 18 percent.

The brokerage is now ‘underweight’ on banking and financial stocks and has reduced weightage in the space to 28 percent from 36 percent earlier. It also added that defensive stocks now hold 47 percent of the portfolio. It is ‘overweight’ on telecom, utilities, and pharma space; ‘equal-weight’ on IT and ‘underweight’ on staples.

READ MORE: Chris Wood rejigs India exposure; removes ICICI Bank, HDFC Bank from portfolio

Meanwhile, weight of Reliance Industries stands at 10 percent in its portfolio from 7 percent earlier.

New additions to the portfolio include ACC (2 percent weight), Dr Reddy’s (1.5 percent weight), and Cummins, HPCL, Hero MotoCorp, and Siemens (1 percent weight each).

Exits include Ashok Leyland, Carborundum, Finolex Industries, IPCA Labs, and Security and Intelligence Service (down to nil from 1 percent weight) and Varun Beverages (from 2 percent weight to nil).

The brokerage has also increased weights for Bharti AIrtel (4 percent to 5 percent), ITC (3 percent to 5 percent), Maruti ( 1 percent to 2 percent), NTPC (1 percent to 2 percent), Reliance Industries (7 percent to 10 percent), TCS (4 percent to 5 percent) and Tech Mahindra (1 percent to 2 percent.

Meanwhile, reductions include HDFC Bank, HDFC, HUL, ICICI Bank, L&T, and SBI.

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

Intensive surveillance may slow down spread of coronavirus in Ahmedabad, says city’s Municipal Commissioner

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

Listen to the Article (6 Minutes)

Ahmedabad features on top of the list of 15 districts worst-affected by COVID-19, with one of the highest caseloads. With 2,762 people testing positive for COVID-19, Ahmedabad accounts for 70 percent of the total cases for the state of Gujarat. The city also accounts for 67 percent of Gujarat’s COVID-19 deaths.

City’s Municipal Commissioner Vijay Nehra says intensive surveillance and aggressive testing is what will help Ahmedabad slow down the spread of Coronavirus.

The city has the highest testing rate in the country with 4,150 tests per million being conducted.

However, with a high mortality rate of over 4.7, much higher than national average, the administration is now proactively screening the older people, those with other non-communicable diseases and super-spreaders like vegetable vendors and shopkeepers.

In a conversation with CNBC TV18, Municipal Commissioner Vijay Nehra said the city will partially open up for economic activities like construction work, municipal corporation work and offices that can operate with skeletal staff will be allowed too. “We are trying to find a way to learn to live with the virus.”

Edited excerpts:

Q1: Ahmedabad has seen the steepest death rate, much higher than that of Delhi and Mumbai where cumulative number of cases is large. How is the administration tackling this? Where are we falling short?

Ans: In Ahmedabad we are using strategy of ‘chasing the virus.’ Initially we had a problem with certain sections who were not co-operating, but now we have overcome that problem. We are going ahead with proactively doing intensive surveillance & aggressive testing. Need to identify as many cases as possible and as early as possible, otherwise it stays in the population and spreads.

Today we have reached 4,150 tests per million, that’s 10 times the national average and the highest as compared to any other state in the country. Higher testing has shown large numbers of positive cases in April, which will help me in the month of May to slow down disease spread. The number of days taken for cases to double has gone up from 3 days in April 15, to 5-6 days by 25th April. It is now at 8 day and the efforts are on to push it further to 10-11 days.

Q2: While you are doing aggressive testing proactively, but what explains the high mortality rates are patients reaching the hospital late?

Ans: Most patients were reaching the facilities very late in the diease progression. We had seen deaths happening in 12-24 hours of hospital admissions. Initially minority communities were not co-operating. People from these areas were hesitant in reporting their symptoms and were reaching hospitals late and hence increasing mortality rates. 15-20 days ago, we were facing intimidation and challenges in communicating with minority communities.

Now we have reached out to many groups, involved religious leaders and these groups have also started co-operating. With community consultations have now been able to bridge the gap. We have a tertiary care hospital

Q3: More deaths are in older population and those with co-morbid conditions. What are the strategies for super spreader, older and vulnerable?

Ans: We are following a 3-S strategy – super spreader, slums and senior citizen. We have screened 10,000 super spreaders in last 10 days, of which 2000 were tested for COVID19 and 115 super-spreaders were identified. We have now made masks compulsory for all when they step outside and for shopkeepers. We are distributing free masks to vegetable vendors etc. Any shopkeeper found without a mask will lose his licence for 3 months.

In slums, where 25,000 people live, we have screened all households. 270 people with symptoms were identified and tested and only 1 solitary case was tested positive. We are intensifying our focus on senior citizens above 60 years old and those with co-morbid conditions like diabetes and hypertension. We are now using the databases from pension office and mobile companies to list all people above 60 years and those 40 years and above with underlying conditions.

We are making people aware to keep the older people safe at home.

Q4: Are there special screening efforts for older and those with co-morbid conditions?

Ans: Almost 3000 school teachers are surveying door to door to check on senior citizens. They are assessing their symptoms & identifying if any need medical attention. They are being shifted to hospitals and tested. We have also done screening of those with non-communicable diseases and another list is being created.

Q5: As PM Modi has indicated the fight against COVID-19 will be fought at state and district level and districts will have control over how much lockdown relaxation they provide. Is Ahmedabad prepared to open up the city/district post May 3rd for economic activities?

Ans: Attempt is to balance between economic interests, employment status and livelihood status and COVID fight. Am personally reach out to citizens to explain the need to undergo massive habit change. We are making wearing of masks compulsory and are starting hand washing and no-spitting campaigns. We are trying to find a way to learn to live with the virus.

Q6: May 3rd, the deadline for second phase of lockdown is approaching. What will be the initial economic activities that you will allow in next few days?

Ans: Premature to comment now as situation is changing rapidly on a daily basis. For the first time in last 7 days we have seen a dip in the rate of COVID numbers growing. 10 days ago the rate of growth in number of daily cases was almost 25-30 percent, we have pulled it down to below 10 percent in last week and today it was 6 percent. But we know we can have the spike every now and then and hence will be carefully monitoring how the disease is progressing.

When we have to open up, we will be more comfortable in starting activities where we have control like construction sites, where we can screen workers and there is no inter-mingling with outside population. We can start municipal corporation work like roads, bridges, drainage projects.

There are huge numbers of Municipal Corporation work that is stalled projects, we would like to restart that. We can start offices which can work with skeletal staff, without the need for crowding. Works where we don’t need to transport a large number of people from one area to other.

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

Maharashtra governor writes to EC, seeks MLC polls for 9 seats

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

Listen to the Article (6 Minutes)

Days afer the Maharashtra cabinet recommended to him proposing Chief Minister Uddhav Thackeray’s appointment to the Legislative Council, Governor B S Koshyari on Thursday requested the Election Commission of India (ECI) to declare polls for nine vacant seats of the Upper House of the state Legislature.

A statement from Raj Bhavan said that Koshyari requested the ECI to declare elections to the nine vacant seats of the Maharashtra Legislative Council “at the earliest”.

The governor made the request to the poll watchdog to fill the nine seats that have been lying vacant since April 24, with a view to end the current uncertainty in the State.

In his letter, the governor stated that the Centre has announced many relaxation measures regarding the enforcement of lockdown in the country.

“As such the elections to the Council seats can be held with certain guidelines,” he said in the letter.

Since Uddhav Thackeray is not a member of either house of the State Legislature, he needs to get elected to the the Council before May 27, 2020, the statement said.

The Election Commission had withheld the election process for these nine seats due to the coronavirus crisis.

Thackeray was sworn in as chief minister on November 28, 2019. He has to become a member of the House by May 28 when he completes six months in office. Otherwise he will cease to the chief minister.

The state cabinet had on April 9 recommended Thackeray’s nomination as one of the governor nominees in the Legislative Council.

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

HUL reports 7% decline in volume owing to COVID-19

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

Listen to the Article (6 Minutes)

Consumer goods giant Hindustan Unilever Ltd (HUL) reported a seven percent decline in volume growth for the March quarter, the steepest since demonetisation. The street was expecting a 0-2 percent volume growth.

This decline in volumes comes on the back of the coronavirus outbreak in the country. Owing to the lockdown, stock levels for most of the FMCG companies came down at the retail or trade level.

“India’s FMCG market was slowing down even before COVID-19 hit India. This market slowdown was further accelerated by the lockdown,” said Srinivas Phatak, chief financial officer, HUL.

“Volatility in crude and currency also increased in the period,” added Phatak, as he outlined the challenges faced by the company during the quarter.

Both rural and urban growth too decelerated during the quarter. In January, the management had indicated that the the near term outlook of the market was challenging and rural growth was still at 0.5x urban growth.

Historically for HUL, rural growth has always been 2x urban growth. During this exceptional period, the management said it was difficult to put a number in terms of market growth in the areas.

“If the monsoon lands, well it will augur well for the company. We are confident that the government will support the rural sector,” said Sanjiv Mehta, chairman and managing director, HUL.

When the government first announced the nationwide lockdown, manufacturing activity had come to an absolute standstill for the first few days.

However, companies manufacturing essential goods have worked with local authorities over the last few weeks to scale up production and to manage the supply chain.

HUL’s factories are now operating at a 70-75 percent capacity. The company has been able to scale up manufacturing in segments where there is high demand.

For instance, the company has scaled up manufacturing and capacity in the hand sanitiser space. “We are also into the process of launching many more products in the hygiene category in May and June,” Mehta said.

“Segments like health, hygiene and nutrition are likely to be the categories of the future. Demand patterns are changing, and we are likely to see an upswing in categories like health, hygiene and nutrition. In the near term, we are also likely to see some adverse impact on discretionary categories and out of home channel,” HUL said in a press release.

HUL also said it is systematically reviewing all areas of cash generation and usage and re-evaluating all costs in the prevailing circumstances. The company confirmed that there have been no job losses or pay cuts at present. However, the company may have to revaluate this depending on the situation in the future.

Last week, HUL’s global parent Unilever withdrew its guidance for 2020 owing to the coronavirus outbreak world-over. “The unknown severity and duration of the pandemic, as well as the containment measures that maybe adopted in each country, mean that we cannot reliably assess the impact across our markets and our business,” Unilever said in its financial press release.

HUL also completed the merger of GSK Consumer Healthcare with itself on April 1. Without giving any revenue guidance or financial implications of the deal, the management said the company is optimistic about the medium term potential of the GSK Consumer Healthcare portfolio.

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

Valuation of Indian oil companies: Thoughts after the meltdown in crude prices

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

Listen to the Article (6 Minutes)

Today, we stand at the cusp of history and witness the effect of the oversupply of oil and collapse of its demand, due to COVID-19, on West Texas Intermediate (WTI) crude prices, which for the first time in history have reached a sub-zero value per barrel. The critical aspect of this data is how we interpret the information today.

The meltdown has created a sense of global shock, especially after the agreement of oil production cuts (up to 10 percent or 9.5 MBPD) agreed between key producers, including OPEC and non-OPEC countries. The general expectation was to see a stabilized crude pricing for both producers and consumers.

To put into perspective, the futures prices for the next six settlements of WTI and Brent as observed on April 20, 2020 have been included (in the graph below).

The divergences in futures prices are substantially lower for June 2020 and beyond. However, it’s also a fact that the collapse was not only observed for May 20, 2020 futures (which closes on April 21, 2020) but also for the next six settlement cycles.

Key question: Where do we go from here? And, the answer lies in:

• The current macroeconomic factors affecting crude pricing globally
• The potential impacts on the Indian economy
• The valuations of crude producing and refining companies

Macroeconomics of Crude Oil

To start with, let’s focus on what caused the mayhem on April 20, 2020.
The WTI futures for May 2020 reached a sub-zero level along with Canadian crude for the first time in history. However, the Brent did not correct beyond 10 percent at the lowest point and settled at $25/bbl.

To understand the divergence in pricings, the focus should be on the main differences between the contracts and the supply-demand imbalance impact they create on pricing.

The WTI crude contracts require futures buyers to take delivery in Cushing Oklahoma Storage Facility, which has no storage space available. This has led to contract holders to sell off their May futures as they cannot take physical delivery. For Brent, the delivery can be to offshore locations where storage spaces are still available.

As evident from the chart above, for June 2020 futures and beyond, the current expectation assumes available of storage space and hence, the WTI and Brent futures are converging.

How the Current Crude Prices Affect India

Based on the data available from Petroleum Planning and Analysis Cell — Government of India, the average crude basket price for India declined from $65.50/bbl in December 2019 to $33.36/bbl in March 2020 (as per data published on April 2, 2020).

To showcase the impact of crude price movements on India’s finances, the total production in FY19 was 250 million barrels and the refining capacity in FY20 is 1,709 million barrels.

The crude import bill for FY19 was $112 billion and the estimated bill for FY20 is $105 billlion, with per barrel price estimated to be higher than $60. The low crude prices offer significant savings for India.

If oil prices stay at $30 per barrel, we are looking at a saving of over $50 billion (approximately INR 3,75,000 Crore) in the oil import bill in FY 21, without even considering the reduction in the quantum of oil consumption and imports.

The above data is a good indicator of how recent downward crude price movements will help India during this crucial time of COVID-19.

Fair Valuation of Oil Companies

Oil-producing companies in India will find it tough as the average market estimated cost of production is around $30/bbl. At present pricing curves for global crudes, the entire set of oil producers may go for a revaluation.
It also has an impact on the capital expenditure spending plans for these companies, which in turn will be negative for a few other sectors.

Oil refining companies in India have endured high pricing environments from 2013 to 2015 and became efficient and resilient. The input price variations (of crude) is not linked to direct output prices of petroleum products due to the existing semi administered pricing mechanism in India.

Also, the storage of crude is a big challenge, however, the output storage is relatively simple. So, oil refining companies tend to order more crude during lower prices, process them and store them, which is India’s policy as well.

The volatilities in crude pricing also helped these companies focus more on the storage of their outputs, which will positively impact them in the current situation.

The recent fall in demand due to COVID-19 is affecting refining companies, but assuming consumption will pick up eventually and challenges with oversupply are more permanent, oil refining companies should see a general uptick in gross refining margins and valuation.

-Pratik Sengupta is Director Alternative Asset Advisory, Duff & Phelps. The views expressed are personal

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

Focused on long-term play in India, helping SMBs scale up, says Facebook

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

Listen to the Article (6 Minutes)

Facebook is focused on a long-term play in India and its recent Rs 43,574-crore deal with Reliance Jio is indicative of the company’s commitment to consumers as well as small and medium businesses (SMBs) in the country, its India Managing Director Ajit Mohan said.

Speaking to PTI, Mohan said the company’s efforts are focused on ensuring its platforms — Facebook, WhatsApp and Instagram — are able to connect people and communities amid the coronavirus pandemic as well as remove misinformation that could harm users.

“This investment does indicate Facebook’s commitment to India, we are excited about the country and are really playing for the long term. We see the potential of the country that is in the middle of this massive digital transformation and Facebook’s mission of connecting people and giving people the power to build communities that are material to them comes alive in India,” he said.

Mohan added that Facebook and WhatsApp have their largest communities for these two services in India.

“The fact that we made this announcement in the middle of what is or is close to a global shutdown, defines it. And this is along with our efforts that are focused on how we can help people in partnership with governments in the middle of this outbreak,” he said.

Last week, Facebook announced an investment of USD 5.7 billion (Rs 43,574 crore) in Jio Platforms.

India is among the biggest markets for Facebook where it has 328 million users, while its mobile messaging service WhatsApp has over 400 million users.

Mohan said the Jio deal will strengthen the company’s efforts to help Indian SMBs in their growth trajectory.

He explained that the partnership will work towards reducing friction for consumers and small businesses, connecting them with each other through WhatsApp.

Users will be able to browse through product catalogue and make payment (when WhatsApp Pay is rolled out nationally).

“We’re really exploring a model of potentially commerce on WhatsApp, which also benefits small businesses around the country and for us, it is improving a shopping experience that already exists on WhatsApp today by making it more structured, by making it easy and fundamentally by reducing friction in the process. It will be quite exciting to see if we can scale up that model,” he said.

Mohan added that for small businesses, this is not only a path to digitisation but also to using online tools to make more money every month.

Talking about Facebook’s efforts around COVID-19, Mohan said the US-based company is engaging with state governments, Centre as well as health organisations on designing impactful health campaigns and accurate messaging around the pandemic.

Facebook is also working with eight independent third-party fact-checking entities, covering 11 Indian languages, to identify misinformation around COVID-19.

“We are deeply committed to being an ally for India as the country fights the coronavirus outbreak. We are focussed on connecting people to accurate information from health experts, curb misinformation and support local communities and businesses,” he noted.

In India, the company is also running a coronavirus information centre on Facebook and a WhatsApp Coronavirus Information Hub.

Besides, WhatsApp also has partnerships with the Centre and state governments, while Messenger has a partnership with MyGov India and Health Ministry.

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 says will become net debt free ahead of March 2021 timeline

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

Listen to the Article (6 Minutes)

Reliance Industries today said it is on track for becoming a net debt-free company ahead of its self-set March 2021 timeline.

The company expects to complete a capital raising programme totaling over Rs 1.04 lakh crore by Q1 of the current financial year, the company said in a statement.

“This includes the investment by Facebook in Jio Platforms, the upcoming (Rs 53,125 crore) rights issue and a previous investment by British Petroleum in FY2019-20,” it added.

After declaring its quarterly earnings, the company said it would raise Rs 53,125 crore by selling shares at Rs 1,257.

It further added that the company had also received “similar-sized” interest in Jio Platforms from other global players.

“In addition to the FB investment, the Board was informed that RIL has received strong interest from other strategic and financial investors and is in good shape to announce a similar-sized investment in the coming months.

“With a strong visibility to these equity infusions, the Board was informed that RIL is set to achieve net zero debt status ahead of its own aggressive timeline,” it said.

Last year, the company had a net debt of Rs 1.57 lakh crore, built up as it undertook capital expenditure over the past few years in expanding its telecom and retail ventures, as well as a few projects on the refining side.

The company today declared quarterly revenue of Rs 1.36 lakh crore and adjusted profit of Rs 10,813 crore. Its net profit after accounting for a one-time COVID-related impact stood at Rs 6,546 crore.

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

Zoom misled world with 300-million users claim, corrects ‘oversight’

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

Listen to the Article (6 Minutes)

In a startling revelation, popular video meet app has meekly admitted it does not have over 300 million daily active users (DAUs) but these are actually the numbers of meeting participants.

In a recent blog post, Zoom declared it more than 300 million DAUs users “around the world are using Zoom during this challenging time”.

The California-based company later deleted these references from the original blog post, claiming “300 million daily Zoom meeting participants”.

First caught by The Verge, Zoom has admitted the mistake and posted it on the original blog post.

“This blog originally referred to meeting participants as ‘users’ and ‘people.’ This was an oversight on our part. The blog also correctly used the term participants, but not consistently. The oversight was corrected,” said the company.

Daily meeting participants can be counted multiple times during the video meet call but a DAU is counted once per day, and is used by companies to measure service usage.

“Only counting meeting participants is an easy, somewhat misleading, way to make your platform usage seem larger than it is,” said the report.

Zoom said “this was a genuine oversight on our part”.

In December, Zoom had 10 million daily meeting participants which soared in COVID-19 lockdowns and social distancing times as millions of people stay home.

Other video conferencing apps are fast closing the gap with Zoom.

Inspired by the growing use of its video conferencing app Meet – 30 lakh new users joining the platform daily – Google on Wednesday announced to make its premium video meeting app free for everyone in social distancing times.

Google Meet is currently hosting 3 billion minutes of video meetings and adding roughly 3 million new users every day.

Microsoft’s enterprise communication tool Teams now has more than 75 million daily active users and number of organisations integrating their third-party and line of business apps with Teams has tripled in the past 2 months.

Microsoft saw more than 200 million meeting participants in a single day this month, generating more than 4.1 billion meeting minutes.

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

Domestic air traffic falls 33% in March due to COVID-19 pandemic

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

Listen to the Article (6 Minutes)

Domestic air traffic has fallen by 33.06 percent on year in March 2020 to 77.62 lakh passengers, data from Directorate General of Civil Aviation (DGCA) showed. Domestic air traffic stood at 1.16 crore passengers.

“The passenger load factor in the month of March 2020 has shown sharp decline due to suspension of air operations because of COVID-19 outbreak,” DGCA has noted. It is important to note that domestic passenger flights got suspended on March 25 and are yet to resume.

The passenger load factor or capacity utilisation fell for all airlines in the month of March. SpiceJet’s passenger load factor for March was at 83.7 percent as compared to 93 percent in February and that of IndiGo was at 73.4 percent in March as compared to 88.3 percent in February.

GoAir also saw a steep decline at 78.9 percent as compared to 90.5 percent in February, Air India’s capacity utilisation was at 63.2 percent as compared to 81.9 percent in February and its full-service competitor Vistara was at 66.4 percent in March as compared to 88 percent in February.

As far as market share is concerned, IndiGo maintained the leadership at 48.9 percent, followed by SpiceJet at 16 percent, Air India at 10.8 percent, GoAir at 9.9 percent, AirAsia India at 7.6 percent and Vistara at 5.9 percent.

AirAsia India emerged as the most punctual airline with on-time performance of 83.4 percent, followed by IndiGo at 81.6 percent, GoAir at 78.6 percent and Air India remained the least punctual with an on-time performance of 51 percent.

The on-time performance is calculated at four metro airports of Bengaluru, Mumbai, Delhi and Hyderabad.

It remains to be seen when the flights are resumed as the government is yet to release information in this regard.

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 to hive off Rs 5.7 lakh crore oil-to-chemicals business into separate unit for Aramco stake sale

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

Listen to the Article (6 Minutes)

Reliance Industries Ltd (RIL), India’s largest company, on Thursday said its board has approved hiving off its USD 75 billion worth oil-to-chemicals business into a separate division to enable the sale of 20 per cent stake in the unit to Saudi national oil company Aramco.

The hiving off will be subject to the approval of the National Company Law Tribunal.

After the approval, the oil-to-chemical (O2C) business will become a separate vertical with independent balance sheet just like the conglomerate’s digital arm, Jio Platforms. RIL had organised all its digital businesses including Reliance Jio that has 388 million telecom subscribers, into Jio Platforms. It last week agreed to sell a 9.99 per cent stake in Jio Platforms to Facebook Inc for USD 5.7 billion.

RIL Board “approved a Scheme of Arrangement for transfer of O2C Undertaking of the company to Reliance O2C Ltd as a going concern on slump sale basis for a lump sum consideration equal to the income tax net worth of the O2C Undertaking as on the appointed date of the Scheme,” it said in its fourth-quarter earnings statement.

O2C undertaking of the company comprises entire oil-to-chemicals business of the company consisting of refining, petrochemicals, fuel retail and aviation fuel (majority interest only) and bulk wholesale marketing businesses together with its assets and liabilities.

“The scheme is subject to necessary statutory/regulatory approvals under applicable laws including approval of National Company Law Tribunal,” it added.

In August last year, RIL head Mukesh Ambani had announced initial agreements to sell a 20 per cent stake in the oil-to-chemical business to Saudi Aramco for an asking of USD 15 billion.

The deal covers all of Reliance’s refining and petrochemicals assets as well as the remainder of stake the firm has in fuel retailing business after selling 49 per cent to BP Plc of UK for Rs 7,000 crore.

The deal, which valued the oil-to-chemical business at USD 75 billion, was to close by March 2020 but it is now expected to close within the current calendar year.

Reliance has pivoted away from energy to the new economy. But refining and petrochemicals are cash cows for Reliance and still account for the bulk of its EBITDA.

As part of the August deal, Saudi Aramco will supply 500,000 barrels per day (25 million tonnes a year) of crude on a long-term basis to RIL’s Jamnagar refinery complex (more than a third of the 1.36 million bpd refining capacity).

The deals give Aramco and BP access to the fastest-growing refined fuels market in the world.

Market analyst firm Bernstein in a recent report had stated that it expects RIL to grow their petrochemical and refining business given the secular growth opportunities.

“While bears will argue that Reliance is stepping away from energy to digital, we see this deal as an opportunity to expand the downstream business in India with a solid partnership. For Aramco, the deal provides direct access to what is widely expected to be the fastest-growing refined oil product market over the next 20 years,” it said. “For Reliance, it provides cash to fund the expansion of their digital business and further expansion of downstream capacity with an experienced partner.”

While talks with Aramco continue, the BP deal has been finalised. Reliance’s existing 1,400-odd petrol pumps, as well as 31 aviation fuel stations, will be transferred to the new joint venture where BP will hold 49 per cent equity stake. Reliance will hold the balance 51 per cent in the entity, which aims to expand the retail network to 5,500 petrol pumps in the next five years.

This is the third joint venture between Reliance and BP since 2011.

BP had in 2011 bought 30 per cent stake in 21 oil and gas exploration and production blocks of Reliance for USD 7.2 billion. At that time, another 50:50 joint venture, India Gas Solutions, was set up for sourcing and marketing gas in India.

The country currently has 69,109 petrol pumps, with public sector retailers owning 61,811. PSU retailers have plans to double this network and have already started appointing dealers.

Russia’s Rosneft-backed Nayara Energy, formerly Essar Oil, has 5,702 petrol pumps and has plans to scale them up to more than 7,000 in two-three years.

Royal Dutch Shell has 189 outlets and is slated to add 150-200 more petrol pumps.

BP had in 2016 received a licence from the government to set up 3,500 petrol pumps in India.

French energy giant Total SA too is keen on entering the Indian retail market and has tied up with Adani Group for the same.

The Saudi national oil company, along with its partner UAE’s Abu Dabhi National Oil Co (ADNOC) has taken a 50 per cent stake in a planned USD 60-billion mega refinery-cum-petrochemical complex in Maharashtra by state-owned oil companies, and has a bullish outlook on India’s energy demand and is keen on investing here.

Reliance operates two refineries in Jamnagar, Gujarat, with a total capacity of 68.2 million tonnes per annum.

It plans to expand its only-for-exports special economic zone (SEZ) refining capacity to just over 41 million tonnes from the current 35.2 million tonnes.

Saudi Arabia, on the other hand, is keen to get a foothold in the world’s fastest-growing fuel market to get a captive customer for the crude oil it produces.

Crude oil is the basic raw material for the manufacturing of petrochemicals.

Saudi Aramco is also keen on retailing fuel in India. A refinery in India can also be a base for it to export fuel to deficit countries in Europe and the Americas.

India has a refining capacity of 249.9 million tonnes, which exceeded the demand of 213.7 million tonnes.

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