Daily Market Highlights AUG 17

%name Daily Market Highlights AUG 17

WPI inflation also tapered in sync with retail inflation for July. In fact, WPI inflation fell by 91 bps from 12.07% to 11.16% on a sequential basis. However, this was largely tapering of food inflation even as the inflation for manufactured goods and crude oil remained elevated. There was a spike in the prices of basic metals, crude oil, textiles and chemicals. This marks the second consecutive month of cooling of WPI inflation. What is worrying is that the crude inflation was up at 40.3%, despite the recent fall in crude.

Saudi Aramco is in advanced talks for an all-stock deal to buy a stake in the O2C business of Reliance Industries. It is reported that Aramco could be looking at a 20% stake at a ballpark valuation of $25 billion worth of Aramco shares. It is expected that the final deal may happen in the next few weeks. The deal would be unique in that it would mark an alliance between the world’s biggest oil exporter and one of the major consumers of crude oil. Crude prices are up 35% this year at $70/bbl, offering the right timing.

Adani Road Transport, a subsidiary of Adani Enterprises, will be acquiring Maharashtra Border Check Post Network or MBCPNL, a subsidiary of Sadbhav Infrastructure Project. The deal is valued at Rs. 1,680 crore. Adani will acquire 49% in MBCPNL with an option to acquire more. The deal would be subject to lender approval and regulatory clearances. MBCPNL has exclusive fee collection rights over 24 check posts for key traffic routes in and out of the state. Maharashtra accounts for 20% of commercial road traffic in India.

Devyani International, the franchisee for Pizza Hut, KFC and Costa Coffee, listed at a premium of 57% at Rs.141 on 16-Aug. The IPO issue price was Rs.90 per share. While Devyani did hold on above the issue price, the stock tapered towards the end of the day to close with gains of 37%. It may be recollected that the IPO had been subscribed 116.7 times. Devyani is poised to grow in line with the increased demand for food delivery. The other 3 listings of the day; Exxaro Tiles, Windlas and Krsnaa Diagnostics, disappointed.

Ruchi Soya, which was acquired by Patanjali Ayurved from NCLT, got approval to raise funds via a follow-on public offer or FPO. This FPO will be used to pare promoter shareholding and to cut debt. The share sale may happen as early as next week. Ruchi Soya had already filed with SEBI for a proposed Rs.4,300 core FPO. While the pricing is not known, it is likely to be at a steep discount to the market price. Ruchi Soya, which had re-listed at Rs.16 in early 2020, rallied up to Rs.1,535 and the current price is Rs.1,128.

In the midst of the rush for electric vehicles or EVs, the city gas distribution are racing ahead with their expansion plans. While MGL will spend Rs.800 crore and IGL Rs.1,200 crore, Torrent Gas is expected to spend close to Rs.3,500 crore to expand capacity. CGD players are confident that, barring two-wheelers, EVs may really be some time away. In fact, Torrent Gas plans to invest Rs.10,000 crore over next 5 years including Rs.5,000 crore in Tamil Nadu. Maharashtra had taken the lead to launch its dedicated EV policy.

Westlife Development, operator of McDonald’s in West and South India, announced 176% jump in Jun-21 quarter revenues. While this can be attributed to a low base, what is remarkable is the sharp growth in the home delivery and drive-thru channels. Convenience sales grew over 200% yoy. While dine-outs got severely curbed, the big story was the spurt in home delivery. However, Westlife does expect the dine-out experience to revive post-pandemic. They also will gain from a large number of restaurant closures.

India’s plan to develop Open Network for Digital Commerce or ONDC is an open challenge to e-commerce giants Amazon and Flipkart. ONDC is a Commerce Ministry initiative to promote open networks for all aspects of exchange of goods and services over digital and electronic networks. It will be based on open specifications and open network protocols. Drawing an analogy, government expects ONDC to be to e-commerce, what UPI was to digital payments. Under ONDC, digital commerce will not be platform-centric.

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