Weekly Round Up – Week 30

  • It is turning out to be a good quarter for Corporate India in terms of financial performance for quarter ended June’16. Most of the companies have reported an improvement in profits. Among the major companies, Maruti Suzuki reported 23% increase in profits to Rs 1,486 crore aided by sales growth of 12%. Both ACC, Ambuja cement, reported sharp increase of more than 75% in profits. For JSW Steel, the increase was phenomenal at 52 times led by 92% increase in EBITDA. Airtel is among the few large corporate recording decline is profits which fell by 30% even though revenues increased by 8%.
  • Within Banking sector, PSBs have largely recorded a decline in profits whereas their private sector counterpart have seen impressive results. Yet, the results are better than that for March’16, when most of them had reported huge losses. PNB reported profits of Rs 306 crore, lower by more than 50% over June’15, yet far better than the loss of more than Rs 5,000 crore in March’16. Yes Bank reports 33% increase in profits.
  • Startups continue to go through the phase of churning with the purchase of Jabong, loss making online fashion retailer, by Myntra. Myntra, itself was bought by Flipkart about two years back and has managed to sustain itself. However, whether the acquisition will be value accretive remains a big question for the parent company, Flipkart, which itself is undergoing a painful restructuring exercise and suffered valuation downgrade over last few quarters.   
  • In an interesting case of legal tangle, Tata Sons fights to honor its commitment to NTT Docomo, the Japanese telecom company. Tata Sons had agreed to buyback the stake from Docomo at a pre-agreed price, which is much higher than the market price. However, RBI has refused permission to do so as the existing Indian laws prohibit such sale/purchase. As an interim measure, the company has agreed to deposit $ 1.2 bn in Delhi High Court. (More on this, later)
  • International – Verizon Communications announced the acquisition of Yahoo!’s core internet business for a consideration of $ 4.8 bn, bringing curtains down on the two decade old company. Yahoo! has been among the pioneers of the internet revolution and its fall, having reached a market capitalization of more than $100 bn, reflects the short life span of web based companies and the vulnerability of their business model.
  • Japanese government continues its battle to pop up the economy with release of $ 265 bn stimulus package, nearly 6% of its GDP. The stimulus would certainly come at the cost of increase in its debt/GDP ratio, another battle, the country had been fighting for long now.

(Image courtesy of ddpavumba at FreeDigitalPhotos.net)

Telecom Sector – The SUC muddle..

Telecom Commission (TC) has proposed to fix spectrum Usage charge (SUC) at minimum 3% of revenue on aggregate basis for all existing spectrum and for all future auctions also, as per various reports. The proposal, if accepted by the cabinet, would bring finality to long pending and complex issue of bringing uniformity in the SUC rates. The … Continue reading Telecom Sector – The SUC muddle..
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Inland Waterways – Tapping the potential..

Maruti Suzuki has signed an agreement to transport cars from Varanasi to Kolkata, lapping up the opportunity to utilise inland waterways within the country. The development, seemingly small but one with a huge potential and like many other initiatives of the government, has the potential to change the landscape of goods transportation within the country. In fact, the ease of transportation and huge benefits arising out of it leaves one wondering why Waterways have not been developed so far..

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Bank Recapitalization – Precursor to consolidation..?!

Government’s decision to recapitalize banks is a prudent move which would reduce considerable stress from the banking sector. Public Sector Banks (PSBs) have been reeling under the load of growing NPAs which has caused significant erosion in their equity base and aversion to lending. While it would help the weaker banks to enhance their capital adequacy … Continue reading Bank Recapitalization – Precursor to consolidation..?!
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HCC – Too old to fail..!

HCC (Hindustan Construction Company) got reprieve from the lenders last week with the invocation of S4A (Scheme for Sustainable Structuring of Stressed Assets) scheme, released by RBI to tide over the bad debt crisis. The invocation of the scheme reflects lenders confidence in the strength of the company. A ninety-year old company should ideally fall in the category of ‘too … Continue reading HCC – Too old to fail..!
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Power Sector Consolidation – The Rationale..

The acquisition of Jaypee’s power unit by JSW Energy, the third for the company in recent past brings back focus on the sector. The sector also saw another big deal, namely Tata Power’s acquisition of Welspun’s renewable assets about a month back. Other than the domestic players, a number of foreign players are also participating in the … Continue reading Power Sector Consolidation – The Rationale..
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Reliance Industries – Beneath the quarterly numbers..

Reliance Industries has posted another good set of numbers with 18% jump in profits for quarter ended June’16, on top of similar 16% jump in the previous quarter. Its core margin remains intact with cost of goods and trade, as a percent of sales coming down from 75% to 70% y-o-y, giving a huge room for … Continue reading Reliance Industries – Beneath the quarterly numbers..
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Weekly Round Up – Week 28

  • The results season for quarter ended June’16 begins. It looks like not-so-good FY17 beginning for IT majors with both Infosys and TCS reporting pressure on margins. While consolidated sales grew by modest 1.2% and 3% on sequential basis, net profit decline by 4.5% and 0.4% respectively. On the other hand, Reliance Industries had a bumper quarter with profits rising by sharp 18% y-o-y, even though net revenue decline by 15% due to lower crude prices. (More on this, later)

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Fertilizer units Revival – A transformational initiative..!

The Cabinet decision yesterday to revive three closed fertilizer units at Sindri (Jharkhand), Gorakhpur (Easter U.P.) and Barauni (Bihar) is a landmark decision being under consideration for almost a decade now. In terms of value, the cash amount involved is little more than the recently announced Ultratech- Jaypee cement deal. The complex decision has involved all the … Continue reading Fertilizer units Revival – A transformational initiative..!
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Ultratech Jaypee deal – Lenders take all..!

The acquisition of Jaiprakash Associate’s Cement business by Ultratech is another important milestone for the Aditya Birla Group which has been consistently expanding its businesses across all segments. The group is among the few who have negotiated the business turbulence of last decade well and could be a textbook case of how ‘slow and steady’ … Continue reading Ultratech Jaypee deal – Lenders take all..!
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