Previous Day Market Update
Sensex closed at 55555 up by 225 points
Nifty closed at 16496 up by 45 points
On 23 August, the finance minister announced the National Monetisation Pipeline or NMP where key assets across roads, railways and power sector will be monetized without divesting or giving up ownership. The monetization will be worth Rs.6 trillion by FY25, with Rs.88,200 crore of monetization scheduled for FY22. Overall, NMP will cover 20 asset classes owned by the government. In all the cases, the monetization will pertain to brownfield projects with established revenue models and cash flows.
The Competition Commission of India or CCI has levied a fine of Rs.200 crore on Maruti Suzuki for forcing dealers to limit the discounts offered on cars. This is classified as an anti-competitive practice. These allegations of super-profits were being investigated since 2019. The CCI has asked Maruti to deposit such gains within a time period of 60 days. However, Maruti has in the past explained this practice by the rising cost of inputs in the auto industry. Maruti has already raised prices of cars thrice in calendar year 2021.
Hindalco will strengthen its balance sheet with an earmarked growth capex of $3 billion on consolidated basis over next 5 years. This was confirmed by Kumar Mangalam Birla at the 62nd AGM of Hindalco. A part of the capex will be deployed in Novelis auto-finishing lines expansion in the US and China and rolling and recycling capacity expansion in Brazil. In India, Hindalco is in the midst of a $1 billion expansion of the Utkal alumina project. Hindalco had reported fall in net debt to EBITDA ratio from 3.83X to 2.59X in FY21.
Indian Hotels, owner of the Taj franchise, is planning a Rs.3,000 crore rights issue, one of the biggest fund raising efforts by the Tata Group. This will be used to fund IHCL’s capital expenditure, growth plans as well as debt repayment. Between FY20 and FY21, the net debt of IHCL was up 67% at Rs.3,110 core marking an urgent need to raise equity. The final terms of the rights will be determined in consultant with issue bankers. Taj also plans to expand its portfolio of properties by 36% to 300 properties over next 3-5 years.
After shareholders had rejected the special resolution to reappoint Siddharth Lal as MD and give him a 10% pay hike, the Eicher board has gone ahead and reappointed Lal as MD & CEO for 5 year tenure with a higher pay package. However, the remuneration has been capped at 1.5% of profits. Since the special resolution had been defeated with less than 75% votes, the board will go back to shareholders for fresh approval. The institutional shareholders had objected to a 10% pay hike to Lal in tough pandemic times.
With the RBI lifting card issue restrictions on HDFC Bank, they are planning to go into the market all guns blazing. HDFC Bank plans to issue new cards at the rate of 300,000 per month for next few months and following that it will scale up to 500,000 card issues per month from Feb-22. Due to the ban, its credit card numbers had dropped from 15.38 million to 14.82 million and it plans to recoup this lost space over next 3 quarters. While market share of cards dropped 200 bps to 23.6%, market share of spends was constant.
It was a tough day for Zomato on 23rd August as the stock slumped nearly 9% and wiped out nearly $1.25 billion of investor wealth. That is because, the 1-month lock-in for anchor investors ended on 23rd August. The Zomato IPO had been a mega success with 35X oversubscription and a strong listing, despite being a mega Rs.9,300 crore IPO. However, brokerages continue to be positive with ICICI Securities initiating a buy call on Zomato with target of Rs.120. Zomato is expected to gain from adoption in second rung cities.
Piyush Goyal announced that FDI into India had risen to $12.1 billion in the month of May 2021. Meanwhile, the government was also working towards boosting exports to $400 billion in FY22 and it may not be too far off. In FY21, India received the highest ever FDI flow of $81.72 billion. The May-21 FDI was nearly 203% higher than May-20, but that could be more due to the base effect. Goyal also added that he expects the FDI to growth to a much higher level due to the Make in India and the Atma Nirbhar programs.