Tag: BofAML

Why is Bharti Airtel gaining in this otherwise bearish market?

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

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Shares of Bharti Airtel advanced over 8 percent on Thursday, while the BSE Sensex and NSE’s Nifty 50 were trading nearly 0.7 percent higher. Bharti Airtel’ stock price opened at Rs 323 per share and hit an intraday high of Rs 351.15 per share on the NSE, up 8.3 percent from its previous close.

Brokerages remained positive on the telecom operator despite widening losses in the June quarter. The stock has gained around 16 percent in 2019, despite volatility in markets and multiple headwinds. In comparison, the benchmark indices have turned negative for the year.

For Q1, the telecom operator reported a worse-than-expected quarterly loss of Rs 2,866 crore as compared to a profit of Rs 97.3 crore a year ago. The loss widened as the company lost more customers and spent more to upgrade its 4G network during the quarter. Revenue for Q1 rose 4.7 percent YoY to Rs 20,738 crore.

However, brokerages remained positive on the stock. CLSA has a ‘buy’ call on Airtel, while Morgan Stanley was equal-weight on the stock. Recently BofAML also upgraded the stock to ‘buy’.

CLSA has a ‘buy’ call on the stock but has cut its target to Rs 390 per share from Rs 415 earlier. According to CLSA, Q1 results are a mixed bag, with its Indian operations led by mobile. India mobile revenue growth highlight of results, led by a 5 percent rise in ARPU, it added.

Morgan Stanley is ‘equal-weight’ on the stock with a target of Rs 360 per share. Indian wireless revenue and adjusted EBITDA largely in-line with estimates, it said, adding that 4G subscriber addition momentum was robust with 8.4 million additions in Q1.

Bank of America Merrill Lynch (BofAML) upgraded Bharti Airtel’s rating to ‘buy’ from ‘neutral’ and raised the stock’s target price to Rs 400 per share from Rs 360 earlier. According to the brokerage, post the recent rights offering/Africa IPO, they expect Bharti’s balance sheet to be strengthened and consider it to be in a good position to improve its momentum in the core cellular business. They also find Airtel well-positioned to capitalize on any weakness at Vodafone Idea (VIL) as it focuses on integrating its networks post-merger and expect its market share to remain stable at 30-31 percent from FY20 to FY24.

JM Financial was also positive on the stock. According to the brokerage, Bharti delivered a strong all-round performance in 1QFY20 led by India mobile and DTH.

“Adjusted net loss of Rs 1530 crore was higher than the forecast, because of higher depreciation and FX/derivative losses. Reported Q1 loss was Rs 2950 crore, due to a large exceptional charge of Rs 1590 crore comprising incremental provision towards indemnities given to pre-IPO investors in Africa and IPO expenses. The company delivered a 2.3 percent QoQ growth in mobile revenues, diverging further from Vodafone India and surpassing it to become the second-best telco. Growth was driven entirely by ARPU, fuelled by smartphone upgrades and ARPU up-trading. Q1 should help Bharti stock price reverse some of its recent losses,” the brokerage added.

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

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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

Why BofAML upgraded Bharti Airtel despite intense competition, consolidation in telecom sector

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

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Bank of America Merrill Lynch (BofAML) upgraded Bharti Airtel’s rating to ‘buy’ from ‘neutral’ despite intense competition in the sector from Reliance Jio. It also raised the stock’s target price to Rs 400 per share from Rs 360 earlier.

According to the brokerage, post the recent rights offering/Africa IPO, they expect Bharti’s balance sheet to be strengthened and consider it to be in a good position to improve its momentum in the core cellular business. They also find Airtel well-positioned to capitalize on any weakness at Vodafone Idea (VIL) as it focuses on integrating its networks post-merger and expect its market share to remain stable at 30-31 percent from FY20 to FY24.

Bharti Airtel rose nearly 4 percent in intra-day deals on Tuesday post the upgrade. The stock has risen 16.5 percent in 2019 as compared to around 70 percent fall in Vodafone Idea. Meanwhile, Sensex has gained around 4.5 percent in this period, while, BSE Telecom has plunged 5 percent in 2019.

Recently, Vodafone Idea reported a loss in its Q1 earnings, which dragged the stock to its all-time low of Rs 6.56 per share on BSE. The company has posted net loss at Rs 4,873.9 crore in the Q1FY20 against loss of Rs 4,881.9 crore in the quarter ended March 2019. The revenue fell to Rs 11,269.9 crore in the June quarter as against Rs 11,775 crore in the January-March quarter.

Post the earnings, Jefferies retained its ‘underperform’ rating on Vodafone Idea as it missed on revenues and margins led by downtrading and delayed impact of minimum recharge plan. With balance sheet stretched and capex trailing peers, Jefferies expect a further loss of market share to below 20 percent for Voda Idea in the medium term.

BofAML also considers Vodafone Idea’s Q1 revenue weakness to be a company-specific issue and do not expect Bharti to show any weakness in its 1Q numbers.

Reliance Jio’s (RJIO) launch in FY17 unleashed one of the most brutal price wars in India’s telecom market. Consequently, industry ARPU plunged 38 percent, leading to a total industry size shrinking to Rs 1.4 lakh crore from Rs 1.8 lakh crore.

For the month of May, Jio added 8.2 million subscribers and 8.3 million in June. Meanwhile, Bharti Airtel saw an uptick and added 2.6 million subscribers in May.

BofAML does not expect Bharti to lose material share to Jio in the high margin enterprise business given the sticky nature of business. They consider the telco earnings to be defensive in light of the current slowdown.

“We expect Vodafone Idea’s network to take 8-9 months to stabilize and see room for both Bharti and Jio to gain market share. In our base case, we also do not factor any potential stake sale at its tower-co Bharti Infratel for the next 12 months at least,” they added.

Downside risks for Airtel remain material market share loss to Jio, another
round of tariff cuts and higher broadband/corporate revenue decline led by Jio entry, BofAML noted.

Disclaimer: CNBCTV18.com advises users to check with certified experts before taking any investment decisions

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

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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

Five reasons why BofAML expects RBI to cut rates by another 50 bps by March 2020

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

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Bank of America Merrill Lynch (BofAML) is confident that the Reserve Bank of India will reduce lending rates by another 50 basis points by March 2020 as the investment bank expects the Indian economy to remain weak for the next couple of quarters.

One basis point is a hundredth of a percentage point.

The RBI cut interest rate by 25 bps for the third time in a row in the June monetary policy meeting, changing the stance to ‘accommodative’ from ‘neutral’. In a statement, it said that the Monetary Policy Committee has noted that growth impulses weakened significantly as reflected in a further widening of the output gap compared to the April 2019 policy.

RBI MPC changing its stance to accommodative support BofAML’s 50bps rate cut-by-March call, they added. They also expect Finance minister Nirmala Sitharaman to retain the interim budget’s 3.4 percent of GDP fiscal deficit target in her July 5 budget. Here are 5 reasons why BofAML expects further rate cut:

125 bps of RBI rate cut by March 2020

The investment bank expected 125bp of RBI rate cuts by March 2019 (75bp done) to send a powerful signal for lower yields/lending rates. They expect the RBI MPC to cut 25 bps on August 7 if rains are normal, pause as inflation goes up on base effects in end-2019 and cut again by the first quarter of CY2020.

$35bn of durable liquidity funds 16 percent loan demand

BofAML expects the RBI to continue to infuse durable liquidity of $2-3 billion a month via open market operation and/or FX swaps. Their liquidity model estimates that $35 billion of RBI liquidity ($10.7 billion) will generate sufficient deposits to fund 16 percent loan growth in FY20.

Reverse repo mode assures liquidity in ‘busy’ season

The RBI’s comfort in allowing reverse repo mode in the April-September ‘slack’ season should assure the market of sufficient liquidity in the October-March ‘busy’ season, the report said. A 0.25 percent CRR cut should fund, say, Rs 1500 billion of creditworthy borrowers in case the NBFC situation worsens further, it added.

Lower risk allows lending rate cuts

Yields are coming down with RBI OMO set to clear the G-sec market. The Modi regime has surely demonstrated its commitment to fiscal discipline when it did not compete with Congress’s NYAY plan of 1.9 percent of GDP even in the heat of polls. They expect finance minister Nirmala Sitharaman to retain the interim budget’s 3.4% of GDP fiscal deficit target in the July 5 budget.

Policy measures to de-stress banks will ease lending rates

PSU bank recapitalization, rationalization of Bankruptcy Code through the June 7 NPL circular, deferral of tighter-than-Basel III capital to risk-weighted assets ratio and Indian accounting standards norms will destress banks. They expect the Ministry of Finance to recapitalize PSU banks with $14-42 billion of excess RBI capital to be identified by the Jalan committee.

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

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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

Lok Sabha Election results: BofAML expects 100 bps rate cut by RBI in 2019, recapitalisation of PSU Banks

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

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With Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) set to form government at the centre, Bank of America Merill Lynch (BofAML) said it expects a cut in lending rates, increasing liquidity stimulus, and expansion in GDP (gross domestic product).

Cheering the massive mandate given to Prime Minister Narendra Modi, the Sensex hit 40,000, while the Nifty crossed 12,000-mark intra-day deals on Thursday. However, moving ahead the markets are expected to shift its focus from the poll outcome to macro issues.

“While markets reacted to polls, we see the Indian cycle largely driven by the global cycle than who sits in Delhi,” BofAML said in a report.

The investment bank estimated a 35 basis points (bps) cut in repo rate on June 6 by the Reserve Bank of India (RBI) monetary policy committee (MPC) to support recovery, pull down yields and provide room for further rate cuts in 2019. “A 100 bps cut in 2019 with May inflation tracking a low 3.3 percent,” it said.

One basis point is a hundredth of a percentage point.

“The BJP manifesto has itself committed to stepping up investment by reducing the cost of capital. It presents a roadmap to expand GDP to $5 trillion by 2025 through a step up in infrastructure investment (to 10 percent of GDP from about 4 percent now) by cutting down the cost of capital,” BofAML said in its report.

Along with rate cut, the RBI should continue to inject $2-3 billion of durable liquidity a month to surplus liquidity and the ministry of finance should recapitalise PSU banks with excess RBI capital released by the Jalan report, it added.

A high-level panel led by former RBI governor Bimal Jalan, set up to decide the appropriate capital reserves that the central bank should maintain, is likely to submit its report by June.

The investment bank said it expects the July Budget to observe the 3.4 percent of GDP fiscal deficit target set by interim finance minister Piyush Goyal in February and continue to point out that fiscal deficit cuts have not led to lending rate cuts.

“The Modi government has reiterated its commitment to fiscal prudence by not following the Congress’ universal basic income – NYAY – proposal of a steep 1.9 percent of GDP even in the heat of polls,” it added.

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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

Goldman Sachs sees RBI pausing in rest of 2019, two hikes in 2020

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

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While many analysts expect another rate cut in the June policy, Goldman Sachs Friday said the Reserve Bank is likely to wait to see the impact of the past two consecutive rate actions and assess the macroeconomic factors following general elections and a clearer picture on the monsoons to emerge.

The Wall Street brokerage goes one step further saying it expects two rate hikes in calendar 2020-a 25 bps each in Q1 and in the Q2.

In a 4:2 majority vote, the central bank cut the repo rate to 6 percent from 6.25 citing the need to support growth that has lost the momentum of late in the first bi-monthly monetary policy announced Thursday.

It can be noted that analysts at Japanese brokerage Nomura expect two rate cuts of 25 bps each in June and August, while American brokerage Bank of America Merrill Lynch will wait for the monsoon estimate to come from the Met Department before coming out with a view whether the RBI will cut in June or August.

In the February policy, the RBI had also reduced the repo rate by 0.25 percent to 6.25 percent.

“We do not expect the RBI to change policy rates further in the June review as we expect it to evaluate the effect of its past rate actions, as well as assess any potential changes to other macroeconomic policies following the general elections,” Goldman Sachs said in a report Friday.

The central bank also kept the monetary policy stance at neutral with five of the Monetary Policy Committee (MPC) members voting to maintain the neutral stance.

The report said maintaining the neutral stance, in effect, implies that the MPC does not rule out keeping policy rates constant, or increasing them, if the upside risks to its inflation forecasts materialise.

It sees average headline CPI inflation at 3.4 percent for 2019 and 4 percent in 2020.

“Given that our inflation forecasts remain below 4 percent this year, growth remains below our estimated potential of 7.7 percent, and the US Fed continues to be dovish, we project another rate cut by the RBI by 25 basis points in the Q3 of 2019.

It said in 2020 as growth accelerates, headline inflation begins to pick up, and the Fed begins to increase rates, pressure is likely to build on the RBI to shift back to a tightening mode.

However. the brokerage said there is lesser chance of a 25 bps reduction in the August review, depending on the monsoons.

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

BofAML ups CAD forecast to 2.8% in FY19 on rising crude prices

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

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Expecting oil prices to slide further, Bank of America Merrill Lynch (BofAML) Monday widened its current account deficit (CAD) estimate by 0.20 percent to 2.8 percent of GDP for fiscal year 2018-19.

The widening current account gap is one of the major concerns which is putting pressure on the rupee, which has depreciated 13 percent against dollar this year.

Brent breached the $80 per barrel mark Monday and analysts at the American brokerage said they expect it to go up further to $95 by June 2019, which will put pressure on the current account.

“We raise CAD forecasts by 0.20 percent to 2.8 percent of GDP in FY19 and by 0.10 per cent to 2.9 percent in FY20 with our oil strategists hiking Brent forecasts,”it said.

The country’s CAD widened to $15.8 billion or 2.4 percent of the GDP for the first quarter.

The brokerage added that a foreign currency swap window for oil marketing companies (OMCs), the largest consumer for dollars, is also unlikely to help and voted in favour of tapping into the diaspora by doing a NRI bond issue.

“We do not think it is possible for the RBI to set up a forex swap window to fund oil imports by OMCs with our oil strategists seeing $95 per barrel by June 2019,” it said.

The NRI bonds option has been successfully utilised thrice in past instances of rupee depreciation.

Adverse trade seasonality and the scheduled general elections are other challenges for the country’s external sector, according to the brokerage.

It said it is “scarcely possible” for the RBI to pre-commit to swap $8 billion a month when $25-30 billion of forex intervention would push down forex reserves to the eight-month import cover, on FY20 basis, that it sees as “critical” for rupee stability.

If foreign portfolio flows do not revive and the US-China trade war escalates, the brokerage feels the RBI will have to sell another $10-15 billion by March itself to fund FY19 CAD forecast of 2.8 percent of GDP.

Upping the foreign currency inflow through NRI bonds is also a better option than hiking rates, it said.

In order to stem the rupee depreciation, the brokerage said the government and the apex bank can potentially take measures like hiking rates at the next policy review, operational measures like curtailing net open positions and rebooking of cancelled forwards or hiking the cost of trade finance and also tariff hikes.

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

RBI to raise $30-35 billion via NRI bonds to support rupee: Report

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

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The Reserve Bank of India is expected to $USD 30-35 billion through NRI bonds to support the rupee and offset the slowdown in FPI flows amid rising oil prices, says a report. The FPI inflows to India will be impacted by Chinese firms listing in global benchmark indicies like MSCI, it said.

According to a Bank of America Merrill Lynch (BofAML) report, the listing in benchmark indices will shift up to $100 billion to China market by 2019.

“Our China strategists estimate that possible entry into benchmark indices could push up to $100 billion into the China markets by end-2019,” BofAML said in a research note.

It further said that FPI equity flows to India may slow amid political uncertainty in the run up to the general elections, given rich valuations.

“We grow more confident that the RBI will issue a fourth tranche of NRI bonds to raise, say, $30-35 billion, to offset slowdown in FPI flows on listing of China paper in various benchmark indices at a time of higher oil prices,” the report noted.

NRI bonds are forex deposits raised from non-resident Indians at attractive rates for 3-5 years, with some lock-in and an implicit RBI guarantee.

As per the report, RBI will issue NRI bonds if the global oil prices persist at $70/bbl.

BofAML oil strategists forecast $71.8/bbl for 2018-19 and $75.3/bbl for 2019-20 and accordingly the current account deficit will widen to 2.4% of GDP this fiscal from 0.7% in 2016-17, it noted.

“We think that there is a rising case for issuing NRI bonds. Every NRI bond issuance has been effective in curbing INR volatility,” the report noted.

The report further noted that the RBI is expected to follow an asymmetrical policy of buying forex when the USD weakens and defending Rs 66/USD when it strengthens.

On the rupee, which has been falling against the US dollar, BofAML said its strategists see the Indian currency at Rs 69.75/USD by December. The rupee is currently hovering around Rs 67/USD.

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