Weekly Capsule (Jul 20 – Jul 24)

weekly cap 1 Weekly Capsule (Jul 20 – Jul 24)

News Announcement

Impact Analysis

  • Government screens 11 transaction advisors for proposed LIC IPO
  • This is the first step to appoint the book running lead managers for the proposed Rs.1 trillion LIC IPO
  • The success of the LIC IPO is an important assumption if India has to get close to its Rs.2.20 trillion divestment target
  • Rossari Biotech gets a stellar listing at 70% premium to issue price
  • Post the listing, the stock of Rossari continued to rally due to the heavy oversubscription of 79 times
  • Rossari is predominantly a specialty chemicals company with just about 10% revenues from animal healthcare
  • Record exports of iron and steel to China saves the day in Jun-20
  • On YOY basis, iron and steel exports to China spurted from $35 million to an all-time high of $524 million in June
  • The overall exports to China, Vietnam and Taiwan doubled to $1.32 billion in Jun-20 on a YOY basis
  • Muthoot Finance likely to get added to the MSCI India index shortly
  • With the latest 71% rally this year, the market cap of Muthoot Finance has crossed $7 billion, the MSCI minimum size
  • With gold-backed loans, Muthoot hardly has any bad loan problems and is likely to attract a lot of FPI interest
  • Mindspace Business Parks raises Rs.1519 crore from anchor investors
  • The Mindspace REITs IPO is expected later next week and will only be the second REITs after Embassy to list post its IPO
  • Mindspace has nearly 77% of its commercial franchise spread across the two cities of Mumbai and Hyderabad
  • SEBI directs NSDL and CDSL to capture and record all encumbrances
  • Currently, it is the promoters who voluntarily disclose the details of encumbrances on their shareholdings
  • This has led to delay in disclosure of material information about shares pledged or under lien, leading to problems
  • RBI Financial Stability Report hints at jump in gross NPAs to 14.7%
  • This is part of the RBI stress test and this could be the worst case scenario post COVID resulting in large scale defaults
  • This could be a serious issue for the banks as it would translate into a spike of 600 basis points in GNPAs
  • Reliance touched a record market cap of Rs.14.50 trillion during the week
  • This included an additional market cap of Rs.52,000 crore from the value of the partly paid rights shares that are traded
  • Even otherwise, the combination of stake monetization and move towards zero-debt has spurred interest in RIL
  • Biocon reports 28% fall in profits to Rs.149 crore in Jun-20 quarter
  • On the business front, the bio-similar business reported a 60% growth on a YOY basis, making it the most lucrative
  • Even the fall in profits may be taken as a positive as lower profits were largely driven by higher R&D spending
  • NFRA bans former partner of Deloitte, Udayan Sen, for 7 years
  • This is the first such long term ban announced by the NFRA which regulates the capital markets and the audit profession
  • The order pertains to negligence shown by Sen while auditing the books of IL&FS and will be effective from Aug 01
  • Rallis, a Tata Chemicals subsidiary, posts 53% profit growth
  • The profits were driven by a 13.5% growth in the domestic crop care and agrochemicals business
  • The agri related businesses have been doing extremely well even in the slowdown, as rural economy is less impacted
  • Air India goes aggressive on cutting employee costs amidst COVID-19
  • Air India has offered leave without pay to a section of employees for a period ranging up to 2-5 years
  • In addition, the allowances and other perks for all levels of employees has been cut across the board
  • Asian Paints reports a sharp fall in net profits in the Jun-20 quarter
  • This 67% fall in profits was largely driven by the lag effect of the lockdown and the sharp fall in paint demand
  • However, the management has averred that the decorative paints segment has seen a sharp recovery since June
  • Reliance Jio gains subscribers in April even as Bharti and Idea lose out
  • Vodafone Idea lost 4.2 million subscribers and Bharti Airtel 5.2 million while Jio gained 1.6 million subscribers in April 2020
  • The market share in the telecom business stood at Reliance Jio (33.85%), Bharti (28.06%) and Vodafone Idea (27.37%)
  • Nippon Mutual Fund to be hit by downgrade of Morgan Credits
  • Morgan Credits, the investment vehicle of Rana Kapoor, has been downgraded to “D” due to liquidity constraints
  • Nippon Mutual Fund has an exposure of Rs.106 crore to the bonds issued by Morgan, which may have to be written off
  • Google Pay declares it does not require RBI payment gateway authorization
  • Google has clarified to the High Court that GPAY is only a facilitator and not a payment services provider
  • Google Pay just provides the API, which hooks on to the bank account via authorization, but does not have wallet services
  • Flipkart acquires the wholesale business of Wal-Mart in India
  • This could be the first step to expand the wholesale franchise of Wal-Mart and tap the lucrative Kirana segment
  • This would put Flipkart in direct competition with Reliance Retail, which is also foraying into digital marketplaces
  • Nomura projects 6.1% contraction in Indian GDP in FY21
  • Nomura has pointed that the high frequency data points towards structural damage to the Indian economy
  • Nomura has also warned that inflation could spike during the year and that could be an added challenge for the economy
  • NCDEX launches options on goods in rapeseed, wheat and maize
  • This is a major departure since currently commodity bourses only offer options on futures, not on spot commodities
  • It will provide a more symmetric form of commodity hedging for clients as compared to the options on futures
  • NSE and BSE to shift to upfront margin collections from August 01
  • Brokers will have to substantially scale down on the leverage offered and that could impact intraday trading volumes
  • Intraday trading accounts for nearly 80% of daily volumes and we could see overall volumes getting compressed
  • CAMS gets SEBI approval for its proposed Rs.1600 crore IPO
  • It will be an offer for sale (OFS) wherein NSE and Warburg Pincus will scale down their stake in CAMS
  • With the problems surrounding Karvy, it is clearly CAMS that has benefited substantially in the last one year

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