Addressing the plenary session of the World Economic Forum at Davos, Switzerland; Mr. Modi estimated that India would be a $5 trillion economy by 2025 implying an annual nominal growth of over 10% annually. Modi also underlined that India had abolished over 1400 archaic laws in the last 3 years and that India was headed towards becoming the third largest consumer market in the world. The PM also indirectly hinted at the risks of a policy like “America First”, which had the potential to rupture the free flow of international trade and services. It was also an invite for the world to invest in India.
ONGC has already secured a credit facility of $2.38 billion from 3 banks to part finance its buyout of 51.11% government stake in HPCL at a price of $5.8 billion. The ONGC has actually paid a premium to the market price of HPCL. PNB, Bank of India and Axis Bank were the co-financiers for the loan. ONGC has cash reserves to the tune of $2 billion and is also looking to sell part of its stake in IOCL and GAIL to finance the purchase of HPCL. ONGC’s stake in IOCL and GAIL put together is worth a little less than $5 billion and a part sale of stake should be enough to fund the gap.
Indiabulls Housing Finance continued its consistent performance with net profits growing 55% in the third quarter at Rs.1167 crore. Its revenues were higher by 36% at Rs.4105 crore. Gross NPAs at 0.77% and net NPAs at 0.21% give Indiabulls the luxury of having one of the lowest stressed asset levels in the housing finance business. The company has an aggressive borrowing limit of up to Rs.28,000 crore for the year and will also be looking to expand its book exponentially. HFCs are anyways in a sweet spot with the government focus on rural and low cost housing.
JSW Steel may be looking at taking a stake in Monnet Ispat and Bhushan Steel although it may not be looking at a majority stake in these companies. Sajjan Jindal underlined that they would be standalone investments and Jindal group will look at a full-fledged merger only after the operations had turned around and started making operational profits. Currently, insolvency proceedings are going on against both Monnet and Bhushan in the NCLT. India’s steel consumption is likely to increase three fold by 2030 and most of the steel players are preparing themselves through inorganic acquisitions.
Speaking on the sidelines of the World Economic Forum in Davos, Uday Kotak underlined that allowing 100% foreign ownership in Indian banks may not be a great idea at this point of time. These comments were made by Kotak in the aftermath of Mr. Modi’s intention of raising the foreign capital limit in private banks from 74% to 100%. According to Kotak, the big worry for India is the current account deficit which persisted even when oil was at $40/bbl. This year the CAD could touch 2% of GDP and that is a worrying sign. Instead of giving away full control of mission critical banks to foreign owners, Kotak feels the focus should be on catalyzing the investment cycle turnaround and in developing domestic competitiveness. Kotak, however, warned that markets could be in bubble territory.
In what will go down as another day of market records, the Nifty decisively crossed and settled above the 11,000 mark. Apart from the positive vibes generated by Davos, there are also hints that earnings for this quarter may show a turnaround across the board. It was not just the large cap Nifty but also the mid cap index which rallied over 1% during the day. The rally was largely driven by metals, oil & gas and banking with FMCG continuing to chip in with some useful contributions. There is a huge optimism built around the outcome of Davos and the possibility of a consumer demand oriented Union Budget.
