Midnight News Update – Sep 12th 2017
IndusInd Bank and Bharat Financial confirmed that they are in advanced talks to consider a possible merger. The deal is likely to happen through a stock swap and the ratio is likely to be 1 share of IndusInd swapped for 1.75 shares of Bharat Financial. As a result of the merger, Bharat Financial will become a part of IndusInd and will get access to the sizable balance sheet of IndusInd Bank. On the other hand, IndusInd gets a ready access to the rural and semi-urban markets of Bharat Financial as well as its ultra-retail deposit base. Analysts expect the merger to be a win-win for both the parties.
ITC CEO, Sanjiv Puri, has confirmed that ITC will be investing nearly Rs.25,000 crore across over 65 projects which include infrastructure, manufacturing and digital capabilities. Most of these investments will happen in the non-tobacco segment which currently contributes 42% of the total revenues, although a much smaller share of the net profits. In the post-GST scenario, ITC will also be investing in revamping its logistics networks. The company had been in the news recently after filing an Rs.1000 crore defamation suit against IIAS, a proxy advisory firm, for allegedly making defamatory statements.
The Supreme Court has come down hard on Jaypee Infratech which has been in the eye of the storm for not completing some of its marquee projects. The court has asked Jaypee Infratech to either refund all the money with interest or to give ready possession to the buyers. As a safety cover, the company has also been asked to deposit Rs.2000 crore as an interim resolution and the directors have been barred from leaving the country without the permission of the Court. Since Jaypee is an NCLT case, the issue of priority comes up. Chidambaram has argued that buyers should get priority over banks.
There is good news on the Direct Tax Collections front. Direct tax collections are up by 17.5% for the April-August period compared to the similar period last year. While corporate taxes were up by 5%, personal income tax collections were up by 16%. This includes just the first instalment of advance tax and a clearer picture will emerge once the second and third instalments of advance tax also come up. The demonetization exercise was expected to widen and broaden the tax net and increase tax collections. The actual impact will be known once the full year data comes in.
With the commodity prices having rallies sharply in the current year, there are worries being expressed that the rally may be over. However, experts like David Lennox are of the view that the commodity rally may be far from over. There was some tapering of the commodity rally but Lennox believes that it was only a temporary halt to the rally as there are fundamental reasons to drive commodity prices upwards. According to Lennox, the big push may come from higher consumption and stocking demand from China. In addition, Chinese Railways plans to spend nearly $400 billion on infrastructure and that is also likely to keep demand for commodities buoyant. There is still not clarity on Trump’s proposed $1 trillion in infrastructure. If that were to materialize then commodities could get into a secular uptrend.
China has now put the onus of addressing the North Korea problem on China. This assumes importance considering that Trump has been regularly calling upon China to put curbs on North Korea as they both happen to be close allies. The problem for the US has got compounded as the US now comes within range of the nuclear missiles of North Korea including the island of Guam. Kim Jong’s nuclear arsenal has been created with the help of China and Russia and he is unlikely to give up his nuclear ambitions. Japan, the US and South Korea are likely to be the most vulnerable to any attack.
