The government on Wednesday laid out a clear and detailed roadmap for the recapitalization of PSU banks. The government has allocated over Rs.88,000 crore for the recapitalization of which nearly Rs.80,000 crore will come in the form of recap bonds. Nearly 70% of the funds will be earmarked for banks like IDBI Bank, Central Bank, Bank of India and IOB that are marked for prompt corrective action (PCA). The balance will be allocated for non-PCA banks led by SBI, PNB and BOB. Banks will have to commit to sell off non-core assets and rationalize global branches to be eligible for the support.
Idea Cellular disappointed the street with its third quarter results with a loss of Rs.1285 crore. For the first 9 months of the fiscal, the net loss of Idea has already crossed Rs.3000 crore. The sharply higher losses were an outcome of lower ARPUs due to competitive pricing pressure and the cut in interconnect fees implemented by the TRAI. Idea’s ARPU fell from Rs.132 in the 2nd quarter to just Rs.114 in the third quarter. That effectively means that in ARPU terms Idea is trailing behind Bharti with an ARPU of Rs.123 and Reliance Jio with an ARPU of Rs.154 in the latest quarter.
Despite rising crude oil prices, Indigo Airlines reported a 56% rise in net profits to Rs.762 crore for the 3rd quarter of the current fiscal. Revenues from operation grew by 23.6% during the year and that broadly matches with the growth in the aviation industry in India. Indigo is already the largest carrier in India by a huge margin and has a market share over 40%. Additionally, the company has managed to consistently improve its revenue per average seat kilometre (RASK) and compared to its cost per average seat kilometre (CASK). That probably explains how Indigo manages its spreads.
According to a report by India Ratings, Indian banks will require another Rs.89,000 crore in provisions while transitioning to the Ind-AS (Indian accounting standards). PSU banks alone will require an additional provision of Rs.63,000 crore which will be equivalent to a write-down of 1.1% of the risk-weighted assets of the bank. India Ratings is assuming a blended haircut of nearly 50% across stage 2 ad stage 3 assets. This is a reasonable assumption considering that it is close to the kind of haircut that ARCs and the NCLT are currently discussing about in the context of rescuing banks.
Sun Pharma believes that the downturn in the generics industry will not last too long and on the positive side it could trigger a process of consolidation in the industry. That will actually be positive for the long term health of the industry. In fact, Sun Pharma expects Indian companies with strong balance sheets to play a key role in the industry consolidation and sees the Indian generic leaders emerging stronger after the period of consolidation is over. What has happened in the last few years has been that generic manufacturers have had to cut prices due to intense competition while the US pharmacy industry is actually consolidating and that has come as a double whammy for the Indian generics industry. The world largest generic player, Teva, is aggressively staff to stay lean and mean in tough times.
UBS chairman, Axel Weber, sees huge potential damage to the price of Bitcoin. Weber strongly believes that increased regulation could result in a sharp drop in the price of Bitcoin. It may be recollected that Bitcoin has already corrected nearly 50% from its peaks touched in December 2017. Weber pointed out that already, two of the largest Bitcoin markets (South Korea and China) have clamped down heavily on Bitcoin exchanges and transactions. Where there seems to be acceptance of Blockchain as a technology for shared databases, the world market is still not comfortable with the idea of crypto currencies.
