Midnight News Update – Nov 10th 2017
In a move that will make it significantly simpler for foreign companies to invest in India, the RBI has made some significant relaxations to the Foreign Exchange Management Act (FEMA). Firstly, the RBI proposes to combine two important components of the legislation viz. LLPs and partnership firms. Also, past violations with respect to FEMA reporting will also be permitted to be resolved by paying a fee. Nearly 7-0% of the cases pending with the RBI pertain to reporting delays and these routine issues will be taken care of without the regulator being involved in the process.
HPCL flattered the street at its net profits grew by 147% for the second quarter at Rs.1735 crore. The higher margins were largely on the back of better refining margins and on inventory gains. The company’s gross refining margin (GRM) per barrel for the quarter shot up to $7.61 from just $3.23 in the corresponding period last year. Even the throughput in the refineries was up by 15%. The only worry for HPCL is that the way crude prices are going up; there is a lingering worry that the government may be forced to once again thrust the subsidy burden partially on these downstream companies.
With prices falling sharply below the Minimum Support Price (MSP), Indian farmers are likely to lose nearly Rs.36,000 crore ($5.5 billion). Farmers are already planning a massive agitation in Delhi. These under-recoveries pertain to 7 major Kharif cereals and pulses including paddy, maize, soybean, groundnut and cotton. This only refers to the loss over the cost of production. If the minimum assured profit of 50% assured by the NDA is taken into account, then the shortfall could be as high as Rs.200,.000 crore. A farm crisis could be tough for the government ahead of an election year.
India Inc’s credit ratio touched a 5-year low of 0.97 in the first half of the current fiscal ended September 2017. The credit ratio represents the ratio of debt upgrades to debt downgrades. The value weighted figure is a lot worse. Debt to the tune of nearly Rs.257,000 crore has been downgraded which is nearly 1.5 times the value of debt that has been upgraded. Apart from subdued earnings, disruptions like demonetization and GST have also been responsible for this debt crisis across India Inc. Capacity utilization is yet to pick up in India and that is what is actually causing this sorry debt situation.
Tata Motors net profits for the second quarter jumped 3-fold as Jaguar Land Rover continued to surprise on the positive side. The consolidated net profit at Rs.2483 crore is nearly 30% higher than the Bloomberg consensus estimates. Even revenues were up by nearly 11.3%, although the net margins at a little over 3.5% left a lot to be desired. The big take away was the 280 basis points expansion in its operating margin to 12.7% for the quarter. Even the Indian operations saw the losses narrowing by nearly 2/3rd compared to the relevant quarter last year. The big push did come from the Jaguar Land Rover unit where the operating margins more than doubled from 5.2% to 11.8%. With a pick-up in China and in Europe, JLR may be looking ahead at a rosier next few quarters.
It has been a day of immense by two powerful nations on both sides of the Atlantic. US markets were spooked after it became clear that the tax concessions proposed by Trump may be delayed even up to 2019. That left the market slightly perturbed and even the IT stocks took a hit. There was a rise in bond yields and a sharp fall in equities in early trades. UK, on the other hand, has been trying hard to woo Saudi Arabia to list Aramco on the London Stock Exchange with a $2 billion loan guarantee. For now it looks like higher oil prices and US tax policy will dominate the headlines.
