Here is a roundup of the day’s top stories in brief.
1. L&T’s Profit Dips; SBI Gets A One-Time Boost
Larsen & Toubro Ltd. reported a decline in quarterly profit even it bagged higher amount of orders in a quarter hit by the Covid-19 pandemic across the globe.
- Net profit fell 6.5% year-on-year to Rs 3,197 crore.
- Revenue rose 2% over last year to Rs 44,245 crore.
- Order inflows rose 5% to Rs 57,785 crore.
However, the conglomerate missed its full-year guidance as the lockdown hurt execution of projects.
State Bank of India’s quarterly profit quadrupled, aided by weak profitability in the year-ago quarter and proceeds from a stake sale in its payments subsidiary.
- Net profit rose to Rs 3,580.8 crore compared with Rs 838.4 crore a year ago.
- This includes a one-time benefit of Rs 2,731 crore from sale of stake in SBI Cards & Payment Systems.
- Net interest income fell less than a percent year-on-year to Rs 22,766 crore.
Find out the management’s view on the impact of the loan moratoriums being offered due to the lockdown.
2. IBC Suspension: Ordinance Issued
India has suspended initiation of fresh insolvency proceedings for a period of six months to shield companies impacted by the outbreak of Covid-19.
- The ordinance, issued today, allows the government to extend the suspension up to one year.
- The ordinance applies to defaults arising on or after March 25, 2020.
- The ordinance says that no application can be filed by an operational creditor, financial creditor or by the corporate debtor voluntarily under Sec. 7, 9 and 10 of the Insolvency Code.
- It also perpetually prohibits initiation of insolvency proceedings on account of default committed by the company during the suspension period.
- The ordinance clarifies that the suspension will not apply for defaults committed prior to March 25.
- It has also said that resolution professionals will be barred from initiating fraudulent trading or wrongful trading application against directors of companies where the IBC process is suspended.
The government listed several factors in the Ordinance for suspension of the Code.
3. MPC’s Stark Warnings
India’s six member Monetary Policy Committee warned about the grave implication of the Covid-19 crisis on the Indian economy, as it proceeded to cut its policy repo rate again by 40 basis points to 4% at its second emergency meeting on May 22. Minutes of the meeting were released on Friday.
- The minutes mirrored the downbeat mood prevailing in the economy with committee members choosing to replace their cautiously worded commentary with stark warnings of a “meltdown in demand”, “destruction of economic activity”, “huge negative growth” in the first quarter of the current financial year, and the “deleterious” impact the Covid-19 crisis is having on the Indian economy.
- While committee members acknowledged that easier monetary policy may not have an immediate positive impact, they felt it necessary to reinforce their commitment to supporting a revival in the economy and ensuring comfortable financial conditions.
Find out what each MPC member said about the outlook and policy action that could be taken.
4. Privatisation And Austerity: How India’s Dealing With Virus-Marred Fiscal
India is hopeful of privatising three state-owned entities that it failed to sell last fiscal, despite the economic disruption caused by the Covid-19 pandemic.
- The government plans to sell its stake in Bharat Petroleum Corporation. Ltd., Container Corporation of India Ltd., and Shipping Corporation of India Ltd. to generate revenue as market sentiment is expected to return to normalcy in about two months, a government official told BloombergQuint on the condition of anonymity.
- It has already postponed the deadline for submitting expressions of interest for divesting its stake in BPCL, India’s second-largest fuel retailer, from June 13 to July 31.
- If successful, it will fetch the government a chunk of its divestment target, the official said.
Increased interest by institutional investors in the logistics sector over the years is expected to help privatisation of Concor.
India asked government departments to not initiate any new public-funded schemes in the ongoing fiscal, besides those announced in the Rs 20-lakh-crore post-pandemic financial package.
- The move was prompted by the need for prudent utilisation of public resources in accordance with change in priorities due to the Covid-19 pandemic, according to an office memorandum by the Ministry of Finance.
- According to the memo, no new scheme or sub-scheme, under any administrative ministry, including proposals by Standing Finance Committees or Expenditure Finance Commissions should be initiated in the ongoing financial year.
- The initiation of new schemes approved in 2020-21, by any ministry, will remain suspended till March 31, 2021 or till further orders, it said.
The government also aims to cut spending on items that have low multiplier effect on the economy.
5. Nifty Rises; U.S. Stocks Get Jobs Boost
Indian equity markets gained for the second successive week, extending their rebound from the lows made in March.
- The S&P BSE Sensex ended Friday's trading session with gains of 0.9% at 34,287 while the NSE Nifty 50 ended at 10,142, rising 1.1%.
- The Nifty Bank outperformed the benchmarks in today's trading session.
- For the week, the Sensex and Nifty ended with gains of 5.75% and 5.85% respectively.
Follow the day’s trading action here.
U.S. stocks jumped and Treasuries fell after a better-than-forecast jobs report bolstered expectations for the economy to roar back from coronavirus lockdowns.
- The S&P 500 Index’s gains topped 2% as it headed for a third weekly advance while 10-year Treasury yields rose past 0.9%.
- Oil jumped, gold fell and the dollar held at a three-month low following data that showed unemployment fell in May and nonfarm payrolls increased by 2.5 million.
- The tech-heavy Nasdaq 100 underperformed, signaling that investors are rotating away from the beneficiaries of the stay-at-home economy and into shares that will do well when more normal activity resumes.
Get your daily fix of global markets here.
6. Ambani Ropes In Abu Dhabi’s Sovereign Wealth Fund
Mubadala Investment Co. will invest Rs 9,094 crore in Jio Platforms Ltd., the sixth investor in less than two months to bet on Reliance Industries Ltd.’s telecom and digital asset, boosting the efforts of Asia’s richest man to cut debt at his conglomerate.
- The sovereign investor managing a global portfolio for the Government of Abu Dhabi will subscribe to fresh shares equivalent to a 1.85% stake in the subsidiary of India’s most d company, according to a company statement.
- The valuations are similar to at which Facebook Inc, private equity firms Silver Lake, Vista Equity Partners and KKR & Co. and growth equity firm General Atlantic invested in Jio Platforms.
- Together, these six investors have invested close to Rs 87,655 crore in Jio Platforms.
Find out what the ownership structure of Jio Platforms will look like after the investment.
7. Hindujas Face RBI Resistance
India’s central bank pushed back on the billionaire Hinduja brothers’ plan to raise stake in IndusInd Bank Ltd., which has lost more than 70% of its market this year, people familiar with the matter told Bloomberg News.
- The Reserve Bank of India has conveyed the decision to the IndusInd founders Srichand and Gopichand Hinduja, the people said, asking not to be named as the information is not public.
- The brothers had applied to the central bank for approval to raise their stake in the lender to 26% from less than 15%, the bank said in an exchange filing in April.
IndusInd Bank was the worst-hit member of the country’s benchmark index this year.
8. Hexaware Looks To Go Private
Shares of Hexaware Technologies Ltd. hit the upper circuit Friday after the information technology company said its board will meet on June 12 to discuss the proposal of voluntary delisting of its equity shares.
- HT Global IT Solutions Holdings Ltd., which owns 62.4% in Hexaware and is Baring Private Equity Asia’s investment holding vehicle, will consider an indicative offer price of Rs 285 apiece at which the promoter would be willing to accept shares in order to delist the company from the bourses, according to an exchange filing.
- That’s close to a 10% premium to Hexaware’s closing price on Thursday. The company is listed on both BSE Ltd. and National Stock Exchange of India Ltd.
The company will appoint a merchant banker registered with SEBI to carry out due diligence.
9. Will Telecom ARPUs Rise Again?
The cost that each customer pays for wireless data and call services in India will rise as operators won’t make fresh investments until they start earning more, according to industry veteran Sanjay Kapoor.
- India has about 2 lakh 4G sites or signal hubs, according to Kapoor, former chief executive officer of Bharti Airtel Ltd.
- That compares with 20 lakh in China, he said, adding that the golden mean or ideal requirement for India is much higher.
- That would require higher investments from an industry that saw its debt mount and profit tumble, driving many out of business.
Watch the full interview where Kapoor explains why just raising tariffs is not enough.
Related Coverage
- Asia’s richest man takes on comeback kid after wireless war.
- Bharti Airtel shares may double in three years, Jefferies says.
10. India Adds Almost 10,000 Covid-19 Cases
India added nearly 10,000 fresh cases in a day, taking the total tally to over 2.26 lakh cases, just two days away from the scheduled “unlocking” of the economy.
- The country's total tally stood at 2,26,770, as of 8 a.m., according to the health ministry's update.
- This includes 1,09,462 who've recovered and 6,348 deaths.
- India added 9,851 new cases over 24 hours. More than 5,300 patients recovered.
- India, having already surpassed France and Germany in number of confirmed cases, is likely to surpass Italy in a day if it continues adding new cases at the same pace.
Track news and developments around the Covid-19 pandemic in India here.
Sun Pharma Starts Trials For Plant-Based Covid-19 Drug
Sun Pharmaceutical Industries Ltd. has launched clinical trials of a plant-derived drug it’s developing to treat Covid-19, joining the race to find an effective treatment for the disease that’s killed almost 4 lakh people worldwide.
- India’s largest drugmaker will commence Phase II trials on 210 patients across 12 centres in India and the results are expected by October, according to an exchange filing Friday.
- The therapy, AQCH, was initially developed to treat dengue but has “shown broad antiviral effect” in laboratory tests against the coronavirus, the company said in the filing.
This is the first phytopharmaceutical -- or plant-based -- drug permitted for a clinical trials by the Indian drug regulator to fight Covid-19.
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