After 3 days of correction, the Nifty finally had a positive respite on Wednesday. Nifty bounced 78 points to 10,225 levels on weak crude oil prices globally and a stronger rupee. With the Brent Crude losing $10/bbl from its peak levels, markets breathed a sigh of relief on Wednesday. The Advance / Decline ratio was also favourable at 31:19. Oil stocks like HPCL and IOCL were among the major gainers even as stocks like Hindustan Unilever and Asian Paints gained as lower crude prices promised to bring down their input costs. Globally cues, however, continued to remain weak on Wednesday.
The big dilemma for PCA banks appears to be what to do with deposits if they cannot lend. Considering this challenge, government has called for greater flexibility in the RBI’s PCA framework. Prompt corrective action (PCA) is made applicable by RBI to banks that have weak asset quality metrics. A PCA bank is not permitted to take up fresh lending or any major change in management or managerial compensation. While the government has called for flexibility, RBI deputy governor Dr. Viral Acharya has emphasised the need to be rigid if PCA has to be really effective for Indian banking.
If airlines are under extreme pressure then the leader cannot be far behind. Indigo Airlines reported its first quarterly loss since its listing. Indigo reported a net loss of Rs.652 crore for the September quarter, its first loss since the stock was listed 3 years back. Indigo is the largest airline operator in India with a market share of nearly 42% and has also enjoyed a comfortable spread between its RASK and CASK. However, higher ATF prices and pricing pressure due to competition have queered the pitch for Indigo Airlines. Financially, Indigo continues to be much sounder than Jet Airways.
Bharti finally gets a stamp of approval for its Africa business after six reputed investors including Temasek of Singapore and Softbank of Japan agreed to infuse $1.25 billion into Bharti Africa operations. Bharti Airtel shot up by 15% after this news was out. Bharti had been looking to monetize its African assets and these anchor investors will lend a lot of credibility to their African IPO, which is being planned at a future date. Bharti had made a foray into Africa via Zain in the year 2007 at the peak of the market. Despite teething problems, the Africa business has show good growth and profit traction.
It could be interesting to watch as some of the marquee global brands are going into the hands of domestic Indian companies. Cadilla group of Ahmadabad will buy part of the India business of Kraft Heinz of the US. Kraft Heinz plans to sell a portfolio of some of its popular brands like Complan and Glucon-D to the Cadilla group. In fact, Zydus Cadilla and Cadilla Healthcare will jointly buy these assets of Kraft Heinz for a consideration of $628 million. Complan and Horlicks had been losing market share to Pediasure in the last few years due to its lower sugar content. Glaxo, the manufacturer of Horlicks, has also been struggling with its food business in the light of the fast growing demand and price sensitive market. For Cadilla, it will mean a big investment but also an entry into the food products market.
Wipro missed street estimates with 14% fall in profits at Rs.1,889 crore. Even as the net sales showed an 8.32% jump to Rs.14,541 crore, it was the sharp fall in profits that was disappointing. Most of the challenges for Wipro came on the operating costs front as the EBIT margins fell sharply in the quarter from 17.4% to 14.6% this year. Wipro is already focusing extensively on automation to reduce their overall operating cost. Wipro had been stuck with its predominant focus on telecom and BFSI for a very long time. Unlike TCS, Wipro has been a little late in the fast growing digital game.
