Daily Market Update – Feb 10th 2021

unnamed Daily Market Update   Feb 10th 2021

Central Bank India reported flat net profits of Rs.165 crore for the Dec-20 quarter despite 10% fall in total revenues at Rs.6,584 crore. CBI saw flat treasury income but retail lending income was down as was corporate lending. Interest income fell with lower rates. Despite a 30% fall in the operating profits yoy, Central Bank managed flat PAT growth on lower loan loss provisions which fell 40% to Rs.765 crore. Gross NPAs were lower at 16.3% but still too high in absolute terms. ROA at 0.19% is below the normal benchmark of around 0.55% for banks. The real worry for CBI is capital adequacy at just about 12.39%.

Supreme Court has given its approval to the mechanism proposed by SBI MF to distribute Rs.9,122 crore to unit holders of the 6 debt funds of Franklin Templeton which were shut down in late April 2020. This is as per the court order post the unit holder approval. SEBI was also in loop in framing the mechanism. Now Templeton will assist SBI MF in disbursing the said cash to unit holders. It may be recollected that in its 02-Feb order, Supreme Court had ordered the distributed. Templeton has confirmed that as on 29-Jan, the 6 schemes had combined cash of Rs.14,391 crore from maturities, pre-payments, and coupons after partly repaying the borrowings that the fund had undertaken when it was up against a liquidity crisis. The current sum would still entail a haircut to the total outstanding amount of Rs.26,000 crore.

Life insurers recorded 3.7% growth in new business premiums or NBP to Rs.21,389 crore in Jan-21 after 2 consecutive months of falling NBP. This is notwithstanding LIC reporting 2% fall in NBP in Jan-21. That was because the 23 private insurers saw 15.3% growth in NBP in Jan-21. NBP growth had fallen to negative in the months of November and December last year due to a high base. Most leading private insures like ICICI Prudential, SBI Life, HDFC Life and Max Life saw double-digit growth in NBP in Jan-21. For the first 10 months of FY21, NBP of life insurers contracted 1.17% to Rs.212,000 crore on YOY basis.

Berger Paints reported 50.7% growth in PAT at Rs.275 crore largely due to tweaking the working capital favourably and reducing the funds locked up in the working capital cycle. Revenues were up 24.9% at Rs.2,118 crore. Berger saw sharp pick-up in its high-margin decorative paints business with its recent focus gravitating towards home solutions. Berger saw its operating margins expand from 14.62% in Dec-19 quarter to 17.19% in Dec-20. The operational leverage combined with lower interest costs resulted in the growth in PAT. PAT margins improved from 10.75% in Dec-19 quarter to 12.97% in Dec-20 quarter.

The RBI will target buying sovereign bonds worth Rs.300,000 crore or nearly $41 billion to cap the benchmark yields at about 6%. The RBI has already completed purchase of Rs.250,000 crore of net debt in the first 10 months. The idea is to shrink the spread between the 10-year bond yield and the repo rate to 150 bps from the normal 200 bps spread. This is done as part of Operation Twist and will help the yield curve to flatten. The RBI was protecting the 6% yield-level, before the aggressive fiscal deficit target was announced in the budget. Benchmark 10-year yields had surged 17 bps after the Budget.

Tata Steel registered a sharp turnaround in performance in the Dec-20 quarter as it reported a net profit of Rs.3,678 crore in the Dec-20 quarter as against a net loss of Rs-1,029 crore in Dec-19 quarter. In the latest quarter, sales revenues were up 11.47% at Rs.39,594 crore. This was led by recovery in global steel demand and prices. Apart from Tata Steel India, recent NCLT buys like Tata Steel BSL and Tata Steel Long Products also showed good traction. Even, Tata Steel Europe put up a good show. The OPM expanded four-fold from 4.51% to 18.16% in Dec-20 quarter triggered by savings in input costs. Tata Steel had also taken an exceptional one-time charge of Rs.2,798 crore in the Dec-19 quarter on account of discontinued operations. PAT margins also turned positive at 9.29% in the quarter ended Dec-20.

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