The Enforcement Directorate (ED) is likely to seek immediate confiscation of Nirav Modi’s assets under the Fugitive Offender’s Ordinance. The ED still needs an official declaration of Nirav Modi as a Fugitive Offender; post which it can attach Rs.7000 crore worth of assets of Nirav Modi. The diamond merchant had wilfully defrauded PNB to the tune of $2 billion by bribing the employees of PNB to create fake Letters of Understanding (LOU) favouring PNB. This was used by Nirav Modi to get loans from other banks, which turned bad after Nirav Modi defaulted on his loans. PNB is currently compensating.
The Tax Department has confirmed that it will be selling the shares of Cairn India at an appropriate time to recover the tax dues of Rs.10,247 crore which is currently disputed by Cairn. The Tax Department had since gotten the 9.8% stake transferred to the department and can now sell it subject to permission. While the matter is still sub-judice, the tax department has already said that it will not wait till the conclusion of the case to sell the shares. The tax department has already seized Rs.666 crore worth of dividends due to Cairn and also held up a tax refund of Rs.1594 crore.
Auto ancillary company, Motherson Sumi, will be investing Rs.2000 crore this fiscal towards expanding its capacity to meet its aggressive growth targets for the next five years. Motherson is examining opportunities in the organic and inorganic space to expand its production. Normally, 60-70% of the capital expenditure each year goes towards capacity expansion and only the balance towards replacement. Normally, the fortunes of the company are tied to the auto industry demand since its 100% business comes from auto ancillary supplies in India and abroad.
More analysts are veering around to the view that the MPC may look to hike rates by 25 basis points in June. While inflation in the Kharif season is a concern considering the higher MSP fixed for farmers, the bigger challenge for the RBI is the value of the rupee. The INR has already moved close to its all time low of Rs.68.80 and any breach of the 69/$ level could result in more aggressive selling in the INR. That could also trigger FPI selling in bonds and equities and could have a ripple effect. It is, therefore, possible that the RBI may look to hike rates by 25 bps in the June policy to protect the rupee.
From an FII selling point of view, the month of May has already seen selling to the tune of $4 billion with one more week still to go. The selling has been largely driven by the sharp rise in the price crude, concern over weakening macro fundamentals and the falling value of the rupee. Till date, foreign investors have withdrawn $1 billion from equities and $3 billion from debt. The debt market selling is more worrying because it clearly indicates that there is a risk-off trade at play wherein FIIs are looking to invest in global debt considering the narrowing spread on debt yields. On the macros front, India has already seen its monthly trade deficit touching $15 billion and the current account deficit crossing 2% of GDP. The rising geopolitical tensions between US and North Korea is also spooking investors.
It seems the IPO mania is back on the street with nearly Rs.35,000 crore worth of IPOs lined up for the next few months. Among the IPOs, some of the well known names include IREDA, Rail Vikas Nigam, IRCON, Mazgaon Docks etc. In fact, the Indian Railways is aggressively trying to monetize its assets via IPOs for its various subsidiaries. The year 2017 saw nearly $10 billion raised through IPOs and this year could see a repeat of that feat. IPOs launched in 2015 and 2016 have given phenomenal returns post listing, although high returns have now become much less.
