Weekly Capsule (Mar 26 – Mar 30) and Impact Analysis

SEBI meet focuses on algo trading and on corporate governance report
  • SEBI announced sharing of algo facilities among brokers and free supply of TBT price feeds by exchanges
  • Most of the recommendations of the Uday Kotak Committee on Corporate Governance were accepted by SEBI
Bandhan Bank gets a strong listing, HAL lists at a steep discount
  • The scarcity of private banks ensured that Bandhan Bank got a 33% premium on listing during the week
  • However, HAL which is India’s monopoly in manufacture of fighter aircraft, had a problem of rich valuations
ICICI faces nepotism charge in its Rs.3250 crore loan to Videocon Group
  • The bank has been accused of giving loan to Videocon Group against quid pro quo for the CEO’s family members
  • While ICICI Bank board has denied these allegations, the inquiry is rumoured to be going on at highest levels
Government to sell 76% in Air India and 100% in Air Express subsidiary
  • The big question mark will be the Rs.34,000 crore debt that the acquirer of Air India will have to take on
  • Some Indian airliners have expressed interest in Air India and may looking to bid as part of a global consortium
IDBI raises Rs.4400 crore through the sale of non-core assets
  • This includes the Rs.900 crore sale of its BKC property as well as a minority stake in SIDBI and CCIL
  • IDBI Bank has Gross NPAs to the tune of 22% of the loan book and has been asked by RBI to cut its non-core assets
Bharatmala road project may negatively impact existing toll projects
  • A total of 25 toll roads currently in existence are likely to be impacted by the Bharat Mala (shortest route) project
  • The worry for the RBI is that Indian banks have a total loan exposure of Rs.19,435 crore to these 25 projects
Total funds worth Rs.177,000 crore raised through equities in 2017-18
  • A total of Rs.82,109 crore was raised through main-board IPOs, which is more than 5 time the previous year
  • This all-time record fund raising was led by some aggressive disinvestment and buoyant IPO markets plus QIP appetite
Toyota and Suzuki agree to sell each other’s vehicles in India
  • The alliance will begin with selling the hybrid cars of one another and later will be extended to other cars
  • While Toyota has the image of stability and endurance, Suzuki has an unmatched reach across India
RBI penalizes ICICI Bank Rs.58.9 crore for flouting securities sale norms
  • ICICI Bank was pulled up for flouting norms pertaining to the Held-to-Maturity (HTM) securities sold above limits
  • This penalty comes at a time when the bank is battling image issues over its CEO’s conflict of interest with bank lending
For January, Jio beats other players in 4G download speed; TRAI
  • Reliance Jio’s download speed was more than twice the speed of nearest rival Bharti Airtel
  • Vodafone and India had 4G download speeds that were much lower than Bharti Airtel
Roubini calls for structural reforms if India wants to grow GDP at 8-9%
  • Roubini has warned that rising oil prices globally could create a serious problem of inflation and trade deficit
  • FY18 growth is estimated at 6.6%; nearly 50 basis points lower than the GDP growth achieved in 2016-17
New stressed assets framework to put further pressure on bank profits
  • The new framework will be applicable in the fourth quarter results so be prepared for more pain from banks
  • Apart from higher write-offs (Rs.9.25 trillion expected), the new framework will also entail higher provisioning
Gold shows a positive price run for 3 quarters in succession
  • This is perhaps the best price rally for gold since the last major rally that we saw in the year 2011
  • A more hawkish Fed and global uncertainty over trade wars have contributed to making gold more valuable
Alliance Bernstein pegs ICICI Bank price target at Rs.220
  • Bernstein’s Chugani is the only analyst to have a negative view on ICICI Bank due to serious NPA worries
  • Chugani also believes that the tail risk of the PNB fiasco will have a much larger impact on ICICI Bank and Axis Bank
NCLT advises out-of-court settlement for Binani Cements acquisition
  • Ultratech had made an offer of Rs.7266 crore for Binani Cements outside the purview of NCLT
  • The final deal is substantially better than the last selected bid of Dalmia Cements, which was nearly Rs.900 crore lower
Downstream oil companies correct sharply on subsidy fears
  • With crude oil crossing $70/bbl, the markets are apprehensive that subsidy sharing may be back for downstream oil
  • Oil companies are also disappointed by the debt they will have to take on due to forced cross acquisitions
Indian government cuts H1 borrowing program to Rs.288,000 crore
  • This is nearly 20% lower than the previous year borrowing time table of Rs.357,000 crore in the first half
  • The decision led to a sharp fall in yields by 20 basis points which will be useful in the form of lower provisioning
Forced mergers may now show up in the Indian power sector
  • The government may ask NTPC, REC and PFC to jointly merge stressed power assets into them
  • That may be a bit like throwing bad money after good money, although it will make the NPA position look better
Middle-East uncertainty again takes crude prices beyond $70/bbl mark
  • Saudi Arabia has accused Iran of funding Houthi rebels in Yemen to fire missiles into Saudi Arabia
  • Yemen is a key gateway to the oil trading routes and any disruption could push up oil prices further
Indian farmers could lose nearly Rs.14,500 crore due to low prices
  • This essentially pertains to the low prices (below MSP) that farmers had to accept during the current Rabi season
  • Bumper harvests had led to prices crashing in the Mandis leading to huge losses for farmers
Trade war threats wane during the week but refuse to die down
  • While the market concerns were not there, Chin has already promised to impose retaliatory tariffs on the US
  • The world is worried that any trade war could eventually degenerate into a currency war

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