Titan managed to beat street expectations and reported 21% growth

The Ministry of Corporate Affairs has stipulated that start-ups can now issue shares to employees up to 10 years from the date of incorporation as against 5 years previously. Startups are also allowed to issue sweat equity up to 15% of the paid-up capital of the company. In addition, the MCA has also done away with the provision that a company that placed debentures must set aside a reserve each year. This relief on the creation of a debenture reserve will also apply to companies that are already listed. The idea of this amendment is to give a boost to the start-up system in India to catalyze the “Make in India” plan. Titan managed to beat street expectations and reported 21% growth in net profits at Rs.516 crore for the Mar-20 quarter. However, total revenues fell 5.5% to Rs.4469 crore. The profits were protected via better management of costs. The performance of Titan was exceedingly strong in January and February but it got affected by the COVID-19 lockdown in the second half of March. The combination of high gold prices and the forced lockdown led to a tapering of jewelry demand which impacted Titan numbers. Watches continued to be its principal business followed close behind by jewelry retail. The World Bank has painted a bleak picture of the world economy in general and the Indian economy in particular. It has predicted Indian GDP to contract by 3.2% in the fiscal year 2021 as the lag effect of the COVID-19 lockdown will ensure that growth does not return in a hurry. However, the World Bank is still positive about the Indian economy bouncing back in FY22. World Bank has also projected that global GDP could contract by 5.2% in calendar 2020 due to the larger supply chain and trade effects of the global lockdown. In fact, per capita GDP is expected to contract at its sharpest since World War II. India’s tax to GDP ratio for FY20 touched a multi-decade low of just 9.88%. This was driven by a sharp fall in GST, customs, and corporation tax. The ratio of tax to GDP was at 10.97% in FY19 and at 11.22% in FY20. The slump in economic activity since the last week of March would imply that the impact could only get deeper in the fiscal year 2021. The irony is that tax revenues will have to grow at over 21% YOY to be able to achieve the tax revenue target of the government for FY21. The last time the tax to GDP ratio had gone so low was as far back as 2005. This has been largely driven by the tax cuts of 2019. With Reliance having raised close to Rs.1 trillion via placement of shares in Jio Platforms, it may look like the stock is poised for further gains. After all, the company is on the way to becoming zero net-debt by Mar-21 and that would only enhance valuations due to low financial risk. However, analysts do see some medium-term headwinds for Reliance Industries. Many analysts are wary that the proposed joint deal between Jio and Facebook could run into rough weather with regulators as well as the Competition Commission. There are also larger worries of a slowdown in its highly lucrative refining and petchem business, which has been the group’s cash cow. With weak oil demand, RIL could get hurt by record low
levels of gross refining margins (GRM) as well as low crude prices. That remains a key risk factor. IndusInd is still in a dialogue with the RBI to allow its promoters (Hinduja Group) to enhance their stake in the bank to 26%. Considering the weak price performance, RBI has been unwilling to give the Hindujas permission to increase its stake. As of now, Hindujas will only look to raise their stake marginally from 14.68% to the statutory limit of 15%. Hindujas have been asking for relaxation on the lines granted to Uday Kotak. The stock has been celebrating in the last few days. However, the stock has fallen by over 85% over the last one year, worsening the fall after the moratorium on Yes Bank.