Shriram Transport proposes to raise Rs.5,000 crore via 9.40% bonds. Shriram Transport will use the funds for business expansion as the company expects strong demand for loans in the aftermath of a strong monsoon estimate put out by the Met Department. The stock of Shriram Transport has performed quite well after the abortive bid to merge the company with IDFC was called off. With the merger called, Shriram has managed to come into its own and focus on its future growth. It has a very strong franchise in the Southern parts of India, especially in small ticket loans.
The Financial Stability Report (FSR) put out by the RBI has estimated that the Gross NPAs of the banking system may touch 12.20% by March 2019. This is sharply higher than the Gross NPA of 11.6% in March 2018. One of the reasons for this sharp rise in NPAs is due to stricter provisioning norms announced by the RBI. Only power companies have been exempted from these strict provisioning norms. Most PSU banks are already under Prompt Corrective Action (PCA), which means that even their ability to grow their way out of trouble is extremely limited.
Mutual fund house, Mirae AMC, sees a huge opportunity in global healthcare. Currently, the global healthcare industry is worth $7 trillion and is growing at 5% per annum. That is great news for generic drug makers like Lupin, Sun Pharma and others in India. Most of the generic Indian drug makers have been under trouble due to the pressure of greater competition and thinner margins. With the US FDA also tightening the screws on scrutiny, domestic pharma was having a tough time. However, the worst may be over on that front and the opportunity may not beckon.
Indian PSU steel major, SAIL, may focus more on high margin products going ahead. These are the cold products compared to the hot rolled products. Typically, in the steel industry the structurals are the higher margin products. SAIL has traditionally got a lower valuation in the steel industry due to its product mix which leaned more towards the lower end of the value spectrum. Once the capex is completed, SAIL’s share of high margin products will double from 7% to 14% and will be tilted more towards home appliances and infrastructure. That should help valuations and sentiments.
India’s absconding businessman, Vijay Mallya, agrees to sell assets worth $2 billion to settle his banking dues. While Mallya had proposed a haircut on the loans given by banks to Kingfisher before absconding to England, banks had refused to bite the bait. However, most banks realized that the assets hypothecated with the banks were not worth their weight on paper. Most often, such assets were intangible assets which had little value after the company filed for bankruptcy. The real story appears to be that Mallya may be desperate to unfreeze his assets in India. These assets are currently frozen by the courts in India and he will require prior approval from courts to sell and settle the debt of Kingfisher Airlines. It is not clear whether the banks will bite the bait this time around.
Cement maker Ultratech and Oil India were among the key gainers in trading on Tuesday. The buying interest came after Morgan Stanley reported that cement prices in North India had risen by 5-15 per bag. Ultratech was the big gainer on the Index with a strong presence pan-India. Ultratech is also the major contender for the acquisition of Binani Cements. Oil India prices appreciated after a hydrocarbon discovery in the Krishna Godavari (KG) Basin in the state of Andhra Pradesh. Most upstream oil companies in India have corrected sharply on the back of subsidy fears.
