It was a day on which the May inflation and the April IIP came in higher. April IIP at 4.9% was largely supported by cement, automobiles and was backed by a 13% growth in capital goods demand. Both mining and manufacturing grew at 5.2% for April. The MPC concerns on retail inflation turned out to be real as inflation came in sharply higher at 4.87% in May compared to 4.58% in April. This was largely driven higher by higher oil prices and higher food prices, with food inflation moving to 3.1%. With IIP buoyant and inflation moving closer to 5%, the RBI may consider two more rate hikes this year.
Edelweiss Alternate Assets proposes to raise nearly Rs.2000 crore to invest in distressed assets. The issue size will be Rs.1000 crore but the fund will have a greenshoe option of another Rs.1000 crore. In the last few years, Edelweiss has emerged as the largest player in the distressed assets market and is now larger than government owned ARC. Edelweiss is betting big on distressed assets and has been working closely with the PSU banks and the NCLT in helping dispose off some of the distressed assets. The firm has already raised close to $1 billion from global investors.
Adani Group has offered to pay Rs.6000 crore to beleaguered Ruchi Soya, which is currently under bankruptcy proceedings. Adani’s bid of Rs.6000 crore is higher than the Rs.5700 crore bids by Baba Ramdev’s Patanjali group. However, the auction is being conducted under the Swiss Challenge method so Patanjali will have another chance to match the offer. Ruchi Soya owes early Rs.12,000 crore to lenders and this quote will still force the lenders to take a large haircut. While Ruchi Soya does have some marquee brands, it was never able to service the huge debt that it had taken on.
SEBI has constituted an expert committee to explore the possibility of allowing unlisted Indian companies to direct list their shares abroad. At the same time, global companies will also be directly allowed to list in India. Currently, Indian companies can only use the ADR or GDR route to list their shares abroad. It is estimated that the benefits could work both ways. Unlisted companies in the emerging technology frontiers will find it a lot more attractive to list their companies abroad as it will give them a lot more visibility compared to a domestic listing.
With the first attempt to sell Air India coming a cropper, the government is likely to make a second attempt to sell a more meaningful 100% stake in the airline. Originally, the government had insisted on retaining 24% stake in the airline. Air India has been touted as a case study for strategic divestment and hence it has now become a prestige issue for the government of India. The airline has an accumulated debt of $8 billion and continues to make heavy losses for the government each year. Apart from the government refusal to sell 100% stake in Air India, there was also little clarity on how the losses will be distributed and what would be the time table for monetizing the land bank of Air India. The airline is sitting on acres of prime real estate that can be effectively monetized.
Sun Pharma may be able to breathe a sigh of relief as the US FDA cleared its Halol Plant. The US FDA had already issued a “Voluntary Action Initiated” (VAI) certificate to Sun Pharma last week. That is normally a precursor to a finally approval. Halol is the largest facility for Sun Pharma and US continues to be the biggest market for Sun Pharma. That is why the approval became so critical for Sun. It was hardly surprising that pharma stocks have been rallying sharply for the last few days as it is now expected that the US FDA will take a much more lenient approach to Indian pharma companies.
