Daily Market Update

unnamed Daily Market Update


US law firm Rosen plans to file a lawsuit against HDFC Bank for misleading investors with inadequate information and causing huge losses to equity investors. HDFC Bank ADRs are traded on the NYSE and hence it automatically comes under SEC regulations. Earlier, a bunch of US lawyers had tried to bring a similar class action lawsuit against Infosys also but it had little grounds to support and was dismissed. Such cases are normally very hard to prove and is used more as a pressure tactic by the lawyers. The bank has already dismissed the lawsuit as frivolous. This suit is based on a complaint by Experian.

Samsung plans to manufacture mobile phones worth Rs.370,000 crore in India under the Production Linked Incentive or PLI scheme over the next five years. The phones will be priced at approximately Rs.15,000 per unit. This $50 billion plan is the biggest Make in India commitment made by any global company till date. Apart from Samsung, other key global players like Wistron, Pegatron, Foxconn and Hon Hai are also in the fray to shift their manufacturing substantially from China to India. The government has estimated that total mobile phones worth Rs.11 trillion will be made in India in 5 years.

The Supreme Court has asked the government of India to clarity why Jio should not be asked to pay the outstanding AGR dues of RCOM. Reliance Jio is currently earning revenues by sharing RCOM’s spectrum. The SC has asked the DOT to furnish year-wise dues of RCOM and that will be crucial in the court’s final verdict on the AGR case. The Jio side was represented by Harish Salve and he argued that Reliance Jio had not acquired any spectrum from RCOM, nor was it involved in any proceedings under the IBC Act. The earlier deal between RCOM and Reliance had not actually materialized.

Embassy and Indiabulls Real Estate are expected to shortly finalize their merger deal. The valuation and swap ratio is expected to be announced soon based on which the deal will go ahead. Embassy group will merge realty assets spread across 62 million SFT with Indiabulls Real Estate. Post the amalgamation, Indiabulls will entirely exit the real estate business. Embassy will convert the merged entity into the execution arm of the Embassy group and this company will seed assets for the Embassy Blackstone REIT. Post the deal, the share of Sameer Gahlaut in the merged entity will reduce to less than 10%.

The problems with IL&FS audit appear to be far from over. Now, the NFRA has found some serious deficiencies in the audit conducted by BSR of its financial services entity. The NFRA has, therefore, refused to approve the re-appointment of BSR as the auditors. BSR is an affiliate of KPMG. NFRA pointed out that while BSR provided audit services, KPMG provided other financial services in gross violation of the need to keep an arm’s length relationship between audit and consultancy. In FY-18, the IL&FS subsidiary IFIN had reported net profits of Rs.201 crore which was inflation due to non-provision for impairment of asset value and by valuing derivatives assets at unjustified valuations. However, BSR had chosen to turn a blind eye to this lapse, although its eventual impact was almost Rs.609 crore.

The US has tightened restrictions on China and has added another 30 affiliates of Huawei to its black list. This order comes a couple of days after Trump ordered ByteDance to exit from its US Tik Tok holding altogether. Washington is trying to push its allies around the world to get tough on China. Now Huawei will not be able to procure chips and semi-conductors without a special license. After the initial ban, Huawei had chosen to route transactions through connected third parties but these links had been established and now the US has blacklisted the linked firms too. This has been spooking world markets.

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