The election outcome of Delhi was largely along the lines predicted by the majority of the exit polls. The Aam Aadmi Party (AAP) swept 62 out of the 70 seats in the Delhi assembly with the BJP taking the other 8 seats. For the second year in a row, the Congress party drew a blank with more than 90% of its candidates losing their deposit. The markets were expected to react negatively to the loss of the NDA but the market had already factored in the results based on the exit polls. The Nifty and the Sensex were sharply up on Tuesday even as the counting pointed towards a decisive win for the AAP.
Rating agency, Moody’s, has downgraded the rating outlook of IndusInd Bank, which had been under asset quality stress for the last few quarters. However, the rating of IndusInd Bank at Baa-3 / P-3 has been affirmed by Moody’s. However the outlook has been downgraded from “Stable” to “Negative”. The Baa3 rating already denotes the lowest rating in the investment grade and the negative outlook sounds a warning to the bank and to its customers that the risk of a rating downgrade is real. IndusInd has had some serious asset quality problems in the last few quarters due to dubious exposures.
With most banks cutting their deposit rates, there is a renewed interest among investors to buy the RBI 7.75% taxable bonds which come with a sovereign guarantee of the government of India. These 7.75% bonds will be taxable and have a lock-in period of 7 years. The bonds have a cumulative and non-cumulative interest option. While these 7.75% bonds are available to domestic investors, NRIs are not allowed to invest in these bonds. These bonds have a face value of Rs.100 and investments can be done in multiples of 10 bonds, with no upper limit. This is likely to be a good option for conservative investors.
There seems to be little respite for IDBI Bank and the results for the Dec-19 quarter continued to deteriorate. The bank posted a net loss of Rs.5763 crore for the Dec-19 quarter. This loss was largely due to a hit of Rs.6273 crore taken by the bank in this quarter for exercising the option of paying lower taxes as applicable to corporate. This marks the 13th straight quarter of losses for IDBI Bank. Gross NPAs of IDBI Bank had a slightly improvement from 29.67% to 28.72%, but still remains precarious high. Some of the recent stressed accounts include Dewan Housing and Jain Irrigation.
According to a recent report put out by ICRA, the total INVITs to hit the market could cross Rs.200,000 crore in the next five years. It may be recollected that INVITs are pass through SPVs which hold a diversified portfolio of infrastructure assets and pass on the regular income and the sale profits to the investor via distribution. Large infrastructure projects can use the INVIT route to separate asset ownership from asset operation and enhance their ROI. Some of the major industries where INVIT issues are expected include roads, telecom fibre, power generation and power transmission. However, the big challenge post the budget 2020 is to keep the investors interested in INVITs, especially after the mandatory tax on dividends declared by equities and all pass-through securities.
The much awaited SBI Cards IPO is expected to hit the markets towards the last week of February. Currently, SBI holds 76% in SBI Cards with Carlyle group holding the balance. The issue size will be around Rs.9000 to Rs.10,000 crore. Apart from SBI and Carlyle offering part of their stake, the IPO will also include a fresh issue of shares to the public. This deal will not only provide a currency to SBI to partially monetize its assets, but will also be the first credit card unit being listed in India. For SBI, this allows them to free up resources for their banking operations and enhance profitability in the process.
