Midnight News Update – Nov 15th 2017
After a gap of nearly 13 months, exports growth fell -1.1% to $23.1 billion for the month of October. The sharp fall in exports was an outcome of the confusions over GST credits for exporters. The negative impact was most visible in labour intensive sectors like leather, garments, gems & jewellery and carpets. Imports for the month of October were up by 7.6% at $37.1 billion in the trade deficit widening to $14 billion. The big pressure on the import bill came from oil imports where the price of Brent Crude has crossed $64/bbl. Rupee may need to weaken further to help the cause of exporters.
The Government of India is now seeking a special dividend from the RBI for recapitalization of banks. The government had promised Rs.2.35 trillion towards the recapitalization of banks, which had actually led to re-rating of banks. For the fiscal year 2016-17 the RBI had lowered its transfer to the government by over 50% to Rs.30,659 crore. The government may be looking to the RBI to contribute towards the bank recapitalization through a special dividend; which will be subject to the resources available with the RBI. The recapitalization bonds are expected to be issued in the first week of December.
Cadilla Healthcare, the second largest Indian pharma company by market capitalization, reported 32% growth in net profits at Rs.503 crore for the second quarter. Total revenues for the quarter were up by 33% at Rs.3234 crore. Interestingly, the company derives 50% of its revenues from the US but reported a 66% growth in its US business at a time when other pharma companies are struggling to cope up with the US markets. During the quarter, the company had launched 4 new products in the US markets. Cadilla also reported stellar performance in its India business, although it is relatively small.
Wholesale inflation (WPI) for October came in at 3.59%, almost at the same level at CPI inflation reported a day ago. This represents a 6-month high for WPI inflation. The key drivers for higher WPI inflation was vegetables and fuel, which is hardly surprising with the Brent Crude quoting at above $64/bbl. However, manufacturing inflation was in negative territory which could be the lag effect of cheap oil dividends that manufacturers have enjoyed for the last 3 years. With the CPI and the WPI inflation showing an upward trajectory, the RBI may be cautious about any rate cuts.
The woes for Sun Pharma almost do not seem to end. During the quarter, Sun Pharma lost exclusivity on a key product in the US with its India plants already constrained from launching new products. The net profit for the second quarter slumped by 59% to Rs.912 crore. During the quarter, US sales fell by 44% reflecting the pressure applied on Sun Pharma by the FDA sanctions. Sun Pharma is already suffering because intense competition among generic players in the US has led to profits plummeting. Revenues for the quarter were also down by 15% at Rs.6600 crore. Since the beginning of 2017, the shares of Sun Pharma have slid by 17% at a time when the index overall is up by 24%. The company’s psoriasis drug has also got delayed, although Mr. Shanghvi expects a turnaround in the next 2 quarters.
With the results season about to end, two companies managed to flatter the street. On the one hand, Bank of Baroda reported better asset quality although profits missed estimates. Net profits were actually down by 35% to Rs.355 crore although GNPA contracted from 11.41% to 11.16%. Another PSU giant, GAIL, beat analyst estimates for the 2nd quarter. Net profits were up by 27.6% at Rs.1309.6 crore, while the revenues were up by 9% at Rs.12,409 crore. The company witnessed robust growth in its 3 key segments viz. transmission, natural gas marketing and the petrochemical business.
