The massive Rs.9894 crore loss reported by Tata Motors in the Mar-20 quarter has set in a motion a series of restructuring moves. The immediate priority for Tata Motors is to make JLR more assets light and also reduce the cost and the debt levels of the group to more manageable levels. Towards this end, Tata Motors will cut 1100 jobs at JLR and also defer some its investment plans. With a demand collapse, the first priority is to pare debt to the extent possible. It is undertaking an internal restructuring that will pare its Rs.48,000 crore debt, save Rs.6000 crore and also free up cash to the tune of Rs.1500 crore.
The caravan of interest buyers in Jio Platforms just seems to continue. The latest entrant in the Jio bandwagon is the Public Investment Fund of Saudi Arabia, which will invest $1.50 billion for a 2.33% stake in Jio Platforms. Like the other PE and sovereign fund deals, PIB investment also values Jio Platforms around $65 billion. RIL had been in talks with PIB for the last few weeks. With this sale, RIL has managed to monetize 24.71% stake in Jio Platforms and there is not much room left for the 26% mark. With this deal, RIL has now raised over Rs.115,000 crore by monetizing 24.71% stake in Jio Platforms.
The Indian snacks industry could see sales loss of Rs.35,000 crore due to the impact of the lockdown, according to industry officials. Most manufacturers of sweets and namkeens have drastically reduced their production due to supply chain constraints as well as the shortage of labour. The snacks industry has an annual turnover of Rs.100,000 crore and in FY21 this is expected to fall to Rs.65,000 crore. Health concerns post the COVID-19 has also created a major barrier for the demand for such eatables. The lockdown also led to massive wastage. This sector is likely to hit jobs badly in the current fiscal.
One of the outcomes of the COVID-19 syndrome is that Indian IT companies have become more frugal in terms of dividend payment. In FY20, the dividend payouts of all IT firms barring TCS had fallen and this is likely to fall lower in FY21 as IT companies strive hard to conserve cash. Most CFOs have admitted that a 7% fall in IT spending as projected by Gartner could force IT companies to cut down on cash burn. That would mean that any buybacks may also be ruled out for the time being. Most IT companies may be looking to use cash for strategic acquisitions to buy growth in a tough market; which is a good sign.
While foreign portfolio investors (FPIs) are heavily selling Indian bonds, they seem to be reallocating these funds to buying bonds in other Asian markets. In the month of May, FPIs sold Indian bonds to the tune of $3.04 billion, as fears over the health of the banking system and a sharply higher fiscal deficit spooked investors. During May 2020, FPIs bought $3.12 billion of bonds across South Korea, Malaysia and Indonesia betting on as sharp South East Asian recovery. The pitch for India also got queered by Moody’s downgrading India’s sovereign rating and also its outlook. Now, all the 3 principal global rating agencies have put India just one notch above speculative grade. This downgrade automatically forces realignment of bond portfolios in favour of countries with a better rating in the EM universe.
With the national Coronavirus count rising much faster, there have been apprehensions that state governments may revoke Unlock1.0. Tamil Nadu has already taken the lead and declared complete lockdown in Chennai and 3 neighbouring districts till 30 June. These include the districts of Chengalpet, Kancheepuram and Tiruvallur. In India, states like Maharashtra, Gujarat, Delhi and Tamil Nadu have been the worst impacted. Ironically, these are also the most industrialized states and any extension of the lockdown in these states would mean that economic de-growth could continue for a longer period.