Daily Market Update – Oct 27th 2020

unnamed Daily Market Update   Oct 27th 2020

 

Aditya Puri handed over charge to Sasidhar Jagdishan on 26 October, bringing an end to an illustrious 26-year career. Puri has been with HDFC bank since its day of inception and built it to become one of the most formidable banks in India and also the most valuable bank in terms of market capitalization. HDFC makes more profits than all the PSU banks put together and its market value is also more than all the PSU banks put together. The legacy that Puri built at HDFC Bank was based on low cost deposits, rigorous credit appraisal, asset quality focus and a relentless thrust on growth with profitability and ROE.

Even as the stock of Reliance cracked on Monday after Amazon won a favorable ruling to put the Future Group / RIL deal on hole, Future has shrugged it off saying that there is no such deal with Amazon. In fact, Amazon had approached the Singapore Arbitration court to stop RIL from acquiring Future Group because as a shareholder in Future Coupons, Amazon had the right of first refusal. However, Future group has denied any such clause in their agreement that called for any such right of first refusal and confirmed that their deal to sell stake to Reliance was well and truly on. The only worry for the markets is that if the stand-off between Reliance and Amazon continues for more time, the biggest loser in the process would be minority shareholders of Future and would push Future group into financial problems.

Aurobindo will sell Natrol to a Private Equity firm for a consideration of $550 million. Natrol LLC is a subsidiary of Aurobindo, USA and the said PE fund is Blue Mountain. Natrol LLC had annual sales of $157 million in the full year and this money would be used by Aurobindo to defray part of its debt to lenders. Aurobindo has had one of the best pipelines in the Indian pharma industry and this sale will allow the company to re-allocate its resources in favour of more productive avenues by reducing their debt. Blue Mountain will also be able to invest more into Natrol to create a better business proposition.

The Shapoorji Pallonji group is expected to file settlement terms on exit from Tata Sons in the Supreme Court. It may be recollected that after the Tata group had blocked the pledge of Tata Sons shares by the Pallonji group, the patriarch of the group had expressed his intention to exit Tata Sons completely by selling their 18.6% stake. This would result in an adjournment of the ongoing hearing of the case between the Tata Group and the SP group. Pallonji group has pegged the value of their stake at Rs.180,000 crore and there could be a Supreme Court appointed independent valuer for the exercise.

Paytm has recently launched exchange traded funds or ETFs in their Paytm platform. Paytm now targets up to 100,000 ETF investors on their platform in the next year or so. The entry levels into ETFs are the lowest in the financial services industry. For example, the minimum ticket size is Rs.16 for equity ETFs, Rs.44 for gold ETFs and Rs.120 for Nifty ETFs. This is the lowest denomination you will get to invest in ETFs anywhere in India. In India there are a total of 69 ETFs across various categories including stocks, gold, indices and debt. Participants will be allowed to place the order and also see the status online.

Speaking at the India Energy Forum, Prime Minister Modi underlined that India would drive the demand for hydrocarbons in the coming years. Mr. Modi added that the COVID-19 pandemic had destroyed oil demand by almost one-third and that had forced global companies to put off their investment plans. However, the PM pointed out that India could see energy consumption double in the coming years. India has already extended the target for renewable energy to 450 GW by the year 2030. Modi hastened to add that while the endeavour will be to improve the contribution of gas in the overall energy mix of Indian consumers, the effort to expand extraction and refining will continue in full swing. By 2025, India wants to expand the refining capacity in India from 250 million tonnes to a formidable 450 million tons.

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