Midnight News Update – Aug 09th 2017
With its latest Gold Bond Scheme, the RBI has already collected close to Rs.6030 crore. In the latest issue of the Gold Bonds Scheme, the government has increased the annual investment limit in gold bonds from 500 grams to 4 KG. The idea was to entice more large investors to participate as many investors had complained that the blanket limit of 500 grams per annum was too low. Gold Bonds offer a good route to make your idle funds work as they also pay 2.5% interest on the deposit. In addition, any appreciation in the price of gold is your capital gain. When redeemed, they are tax free.
The Nifty and the Sensex corrected sharply on Tuesday after the regulator decided to clamp down on nearly 330 listed companies which SEBI suspects to be merely shell companies. Shell companies are created with the pure intention of routing funds and laundering them under a corporate banner. The order hit the mid-cap stocks the most as these companies were most vulnerable to these round tripping allegations. The impact on large cap companies was not too steep. SEBI has been cooperating with the RBI and the government in getting to the bottom of the generation and perpetuation of black money.
Tata Sons chief, N Chandrasekharan, has highlighted that the big worry for the Tata group was the massive debt burden of Tata Steel to the tune of nearly Rs.83,000 crore. The company had taken on huge debt for the acquisition of Corus in 2007 and the slowdown in the European operations was proving to be a drag on the performance of Tata Steel. Chandra also dismissed allegations that Tata Steel had overpaid for the Corus purchase and instead blamed the slowdown in the steel sector globally. The steel sector has been of late enjoying a favourable regulatory support from the government.
The supply cuts initiated by Saudi Arabia and the OPEC nations do not seem to be working as the prices of crude have once again fallen below the $50/bbl mark. Now Saudi Arabia wants to voluntary make a huge difference to the OPEC supply. Saudi has decided to cut its global oil supply by as much as 520,000 barrels per day. In fact, Saudi Aramco proposes to cut supply to most Asian consumers by up to 10%. Over the last few years, the OPEC has lost its clout as its share has fallen from 55% to 37%. The supply shortfall created by OPEC and Russia is being filled up by the US, Nigeria and Libya.
Bajaj Auto signed a non-equity tie up with Triumph International of the UK. They will jointly manufacture leisure motorcycles in the 450-600CC range. This is a highly lucrative and fast growing segment which is dominated by the likes of BMW, Harley Davidson and Eicher. Bajaj has been losing market share in India consistently. While 50% of the revenues of Bajaj Auto come from exports, it has now fallen to fourth position in the domestic market after Hero Moto, Honda and TVS Motors. This move will help Bajaj regain some of its panache in the two-wheeler market. Bajaj will use its economical manufacturing model for the Triumph bikes. Bajaj Auto bikes will focus on the entry segment, KTM on the mid segment while Triumph motorcycles will focus on the premium two-wheeler segment.
Reliance Industries is planning to refinance a large chunk of its $12 billion worth of debt that is maturing in the next 2-3 years. The company may be selling bonds to repay this debt. The debt of RIL has increased substantially in the last few years as it has invested over $25 billon into its Jio telecom business. While Jio has already disrupted the telecom sector, its viability and ROI is yet to be seen and assessed. RIL bonds globally get a much better valuation compared to other companies and that has induced the company to roll over the debt rather than pay it off.
