Daily Market Update – OCT 30TH 2020

unnamed Daily Market Update   OCT 30TH 2020

India’s fiscal deficit in the first half of the fiscal year ending Sep-20 has already touched 115% of the full year target. Against the full year target of Rs.7,92,000  crore, the government fiscal deficit had already crossed Rs.9,13,000 crore by September. With another six months still to go, it looks the combination of weak revenues and higher spending could take the overall central fiscal deficit closer to 7% of GDP as against the initial budgeted target of 3.5% of GDP. Higher fiscal deficit means higher borrowings. However, this has been a problem with economies around the world as they try to boost GDP growth..

Vodafone Idea has reported losses of Rs.7,218 crore for the September quarter on the back of lower provisioning. However, the revenues for the quarter were absolutely flat and the company continued to see consistent loss of customers in the 4G space and that has been hitting its growth in a big way. It may be recollected that Vodafone had posted a net loss of Rs.50,921 crore in the Sep-19 quarter but that was because it had take a provision of Rs.25,677 crore towards AGR and spectrum charges payable. Now the Supreme Court has given Vodafone 10 years time to defray the  AGR charges but it still entails outflows of Rs.5,000 crore annually. Towards this end, the company has implemented a cost cutting plan to save Rs.4,200 crore of OPEX annually. But the real worry is loss of customers to competition.

Amazon has informed SEBI and the stock exchanges about the decision of the Singapore arbitrator‘s interim judgment staying the proposed merger deal between Reliance Industries and the Future group. Amazon has also provided the regulator and the exchanges with a copy of the interim order. Amazon had approached the Singapore arbitrator on the grounds that, as an existing indirect investor in Future Enterprises via Future Coupons, Amazon had the right of first refusal. A couple of months, the Future group had entered into a deal to sell all retail and wholesale units to Reliance Retail for Rs.24,700 crore.

One of the biggest results of the season, Reliance Industries is expected to be announced on 30 October. Like in the previous quarter, the performance and the growth of the telecom and retail business is expected to be robust while the core business of oil refining and petchem is expected to remain tepid. In the last few months, the company has managed to sell a substantial stake in its digital and retail ventures to a slew of foreign PE funds and strategic investors. It has now broadly divided the group in 3 parts consisting of the digital properties, retail initiatives and traditional oil-to-chemicals or O2C.

Bharat Petroleum saw a 58% jump in its net profits in the Sep-20 quarter to Rs2590 crore on the back of healthy refining margins and also inventory valuation. In the previous quarter, the company had witnessed inventory valuation losses due to tepid crude prices but that has recovered with crude holding above $40/bbl in the Brent market. Similarly, the gross refining margin or GRM benchmark in Singapore has also moved up from extremely low levels and that has helped BPCL. This is one of the companies that are slated for a total government stake sale as part of the disinvestment process.

In a bid to quickly monetize their holding in Air India, the government has once again relaxed bidding norms. Apart from extending the deadline for submitting bids from October 30 to December 14, the bidders can now also quote based on enterprise value or EV rather than equity value.  The aviation minister confirmed this would attract bidders since they used debt amount as the minimum bid till date. EV includes the equity, debt and the cash in the books of the company. The only condition laid by the government is that any willing bidder will have to pay 15% of the quoted amount as an upfront amount. The buyer will have to take over Rs.23,285 crore of debt of Air India, where the government guarantee will be withdrawn post sale. The debt will be priced by the market. Tatas are leading in the race.

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