The beleaguered sugar industry suffering from a glut of supply may have something to smile about. The high margin ethanol business has bailed out the sugar industry for the latest fiscal. With the sugar industry again seeing record output in the last sugar season, higher ratio of ethanol blending may have come to their rescue in a big way. The ethanol distilling business contributes about 10-12% of their revenues but in the last fiscal has contributed to nearly 50% of their overall profits. This performance was triggered by a rise in procurement price for alternate fuel and has benefited sugar companies.
For the likes of IOCL, BPCL and HPCL the debt levels are back to the heady days of 2014 when crude was quoting at above $100/bbl. In fact, total debt of downstream oil companies touches a 5-year high of Rs.162,000 crore combined even as the accretion for the March quarter alone amounted to over Rs.36,400 crore. The rise in debt is due to higher capital spending and also due to delays in subsidy payment to the tune of Rs.33,900 crore. In 2014, the combined debt had touched Rs.176,000 crore when Crude was above $100/bbl. Crude is quoting at less than $70/bbl currently.
Foreign direct investments may have taken a marginal hit in the last year but the coming quarters could be critical. Economic weakness and election uncertainty led to fall in FDI in FY19; first time in 6 years. Foreign Direct Investments (FDI), which had seen a surge after the “Make in India” initiatives of the government, saw negative growth in the latest fiscal, although equity inflows were down by just 1% at $44.36 billion. Singapore replaced Mauritius as the top source of FDI. Most investments have been waiting on the sidelines to observe the fourth quarter GDP growth numbers, expected at around 6%.
Nifty and Sensex close at all time highs on Tuesday. In fact, the Nifty and the Sensex turned positive in the last hour of trade despite the A/D ratio remaining in favour of the declining stocks. The Nifty is just shy of the psychological mark of 12,000 and the Sensex is just short of the 40,000 mark. The VIX has now settled around the 16 mark despite the banking stocks being under pressure on Tuesday. Most experts are of the view that the markets may really need a very strong trigger to breach above the psychological levels and that could come in the form of a reforms push or a kind of a dream budget.
Global stocks were hit by trade worries and Italian budget intransigence, despite a strong start on Tuesday. The uncertainty over the trade war between the US and China continued to take its toll on global markets as US Treasury yields hit its lowest level since October 2017. The Nationalists had limited gains in the EU elections and Italy, has been locked in a spending dispute with the EU. In the meanwhile, UK and the EU may be readying for a face-off as the EU ruled out any renegotiation of the BREXIT deal agreed to by Theresa May. It may be recollected that May had agreed to officially step down on June 07th. In the last few days, concerns have been rising that Boris Johnson could trigger a major confrontation with the EU bloc, worsening the fallout for UK in terms of overall economic costs.
SEBI has mandated quick disclosure of bond defaults but left out bank loans from the ambit, as it was largely outside their purview. In a move that was long expected, the regulator SEBI has mandated that any default in bonds or debentures issued by corporates and NBFCs will have to be disclosed immediately. In fact, in the case of debentures, the regulator has put the onus on the debenture trustee to disclosure such details on its website. In the past, this had not been extended to bank loans due to logistical reasons and regulatory purview, and that exemption continues.
