Midnight News Update – Jun 29th 2017
Godrej Industries plans to raise Rs.400 crore through the Godrej Agrovet IPO. Godrej Industries currently owns nearly 61% of Godrej Agrovet. Godrej Agrovet is in the business of agri-inputs, animal feeds, palm oil manufacturing, dairy and poultry. Its group company, Godrej & Boyce, also holds nearly 3% stake in Godrej Agrovet. The agri side of the business has been seeing good traction and this could be a right moment for the Godrej group to monetize some of the agri properties that Godrej holds. While details are still awaited, it could be a mix of fresh issue and an offer-for-sale.
There are record bearish bets on oil in the current scenario and that is raising the likelihood of a sharp short-covering rally in oil prices. We have seen this happen many times in the past and the build-up appears to be very familiar this time around. Last week, the short positions went to a high of 169 million barrels, which could mean that even a minor bounce could result in a bout of short covering in oil. In fact, bearish bets on crude oil have touched an all-time high beating the previous occasions in late 2014 and in early 2016 when shorts had touched similar levels. It could be a sweet spot for oil producers.
With the cabinet officially clearing the divestment of Air India, the big question remains as to what is to be done with the massive debt pile and the accumulated losses of Air India. To begin with, the assets of Air India and some of its liabilities will be hived off into a special purpose vehicle (SPV). The carrier currently has debt to the tune of Rs.52,000 crore of which Rs.22,000 crore is in the form of aircraft loans and the balance in the form of working capital loans. Many of its prime properties, if monetized systematically, could go a long way in reducing the net debt of the Air India balance sheet.
The Asian Development Bank (ADB) will be raising nearly Rs.1400 crore through the issue of Rupee-denominated bonds. This represents the third issue by the ADB in the rupee linked bond market. INR bonds do not carry the dollar risk and the confidence of issuing and investing in INR bonds comes from the confidence in the health of the Indian economy and the stability of the Indian Rupee. While these bonds will be denominated in Indian rupees, they will be settled in US$, with the buyer taking the currency risk. Proceeds will be used to boost ADB lending in the Indian economy.
The government on 28th June unveiled a new Hydrocarbon policy covering the fossil fuels space in a much wider context. To begin with, the new policy is likely to open up nearly 2.8 million square KM of sedimentary basins to oil exploration and production. The policy has also proposed creating a National Data Repository which is the big challenge as geological data is currently available for just ½ of the sedimentary basins in India. The whole idea of the policy is to reduce the administrative and regulatory burden on the oil companies so that the ease of doing business can be smoothened. According to Mr. Dharmendra Pradhan, the recent bids for the Discovered Small Fields (DSF) indicated that there is appetite for hydrocarbon properties. The idea is to get closer to self-sufficiency in oil production.
SEBI has allowed NRIs access to the currency derivatives market in India to hedge their investment risk on their rupee investments. This will be in addition to the facility of OTC hedging that is permitted currently. The NRIs will be required to designate the bank to monitor their overall positions in the OTC and the ETD segments combined. NRIs are only permitted to hedge where there is an underlying exposure and they cannot trade naked currency futures or options. The onus will be on the NRI to ensure that all hedges are with an underlying, failing which it could attract stringent penalties.
