Midnight News Update – Jul 24th 2017
Avenue Supermarts (the owner of the D-Mart brand) reported a 47% rise in Q1 net profits to Rs. 174.77 crore. Total income for the quarter was 36% higher at Rs.3621 crore. The EBITDA margins have fallen marginally by 40% but that is more temporary in nature. The EPS for the quarter works out to Rs.2.80. So at an annualized EPS of Rs.12-13, the stock approximately quotes at a P/E of 70 times rolling earnings, which is among the most expensive in the retail space anywhere in the world. The shares have already appreciated over 200% since the stock listed just about 4 months ago.
Amtek Auto, one of the 12 companies that are under the RBI directed insolvency proceedings, has reported a wider loss for the quarter at Rs.889 crore for the first quarter of the current fiscal compared to a loss of Rs.320 crore in the corresponding period last year. Even revenues for the quarter were down by over 25% at Rs.424 crore. The company reported an exceptional loss of Rs.505 crore in the quarter due to markdown of inventory since it may not be usable in the light of the company’s reduced production capacity currently. EBITDA margins have cracked from 15% to just a tad above 8%.
The CAG has pointed out that 6 major telecom operators had understated revenues by Rs.61,000 crore over a period of 5 years, resulting in short payment of taxes to the tune of Rs.7700 crore to the government of India. Additionally, the CAG has also pointed that an additional sum of Rs.4531 crore was also due from these companies in the form of interest. This was done through accounting adjustments for discounts and commissions paid to distributors as well as through promotional schemes like free talk-time and discounts. Revenue was also netted by revenues from infrastructure sharing.
Mr. Arun Jaitley has pointed out that the combination of demonetization and GST implementation will make cash transactions extremely difficult. This will mean greater compliance and a wider tax net. One of the basic outcomes of these two exercises was greater digitization of money, which in itself has been a corruption compressor. The government has also clamped down on P-Notes which were being used by Indians for round tripping of funds, by making the P-Note norms more stringent and the route more expensive. The result has also been a massive shift of household savings into financial assets.
Having taken over at the helm of Tata Sons, one of the first focus areas for N Chandrasekharan will be prune the Tata portfolio of businesses. While the group has a total revenue base of over $100 billion and a total market cap of nearly $110 billion, the stakes are dominated by just a handful companies like TCS, Tata Motors, Tata Steel and Titan. In fact, almost the entire profitability of the group comes from TCS and the JLR division of Tata Motors. The focus of the Tata Group under Chandra will be to prune the portfolio of businesses, consolidate where it appropriate and focus more on ROI and shareholder value creation. One of the first steps could be to integrate all the IT and technology related initiatives under the TCS banner. Tata Sons has already brought in a high-profile core team for the task.
Oil prices globally made a sharp down move after the OPEC reported that the July supply will be the highest in the year at about 33 million barrels per day (bpd). Both Saudi Arabia and Nigeria are increasing shipments raising fears over a glut in the market. This is already raising questions over the logic of the 1.8 million bpd production that OPEC and Russia have already undertaken. Oil prices have been stuck below the $50/bbl mark due to this oversupply worry. Markets were already under pressure due to the pressure applied by shale supply, where the US has also sharply reduced its break-even level.
