Shares of Mahindra & Mahindra Financial Services (MMFSL) were up 12 per cent to Rs 234 on Monday after the company said its board approved a 1:1 rights issue at Rs 50 per share, amounting to Rs 3,089 crore. The record date for the same is July 23, 2020. The rights issue will open on July 28 and close on August 11, 2020. The full amount of the issue price will be payable on application.
Kindly refer to the glossary section at the end in order to understand the concept of rights issue in a better way
MMFSL has reported more than two-fold jump in standalone net profit to Rs 156 crore in the quarter ending June helped by cost rationalisation measures and lower funding cost. It had reported a profit after tax of Rs 68 crore in the same quarter of last year.
“The increase in profit was due to cost rationalisation, reduction in the overall cost of borrowing and also rise in NPAs was not high,” Mahindra Finance vice-chairman and Managing Director Ramesh Iyer said.
“We have seen a revival in tractor demand and sales of three-wheeler goods carriers. We feel that rural sentiments are turning positive as monsoon is on time and widespread, excellent harvest and good support price and due to various government initiatives,” Iyer said.
In conclusion, the company expects an increase in demand and financing for pre-owned vehicles, Agri machinery (tractors) and small vehicles going ahead.
Glossary
Rights Issue: The idea behind a rights issue is to raise fresh capital. However, instead of going public, the company approaches its existing shareholders Think about the rights issue as a second IPO but for a select group of people (existing shareholders). The rights issue could be an indication of promising new development in the company. The shareholders can subscribe to the rights issue in the proportion of their shareholding. For example, 1:2 rights issue means for every 2 shares a shareholder owns, he can subscribe to 1 additional share. Needless to say, the new shares under the rights issue will be issued at a lower price than what prevails in the markets.
One of the few sectors that didn’t face the wrath of COVID apart from Pharma and Logistics is the IT Sector. Since the IT sector has the advantage of remote work policy, increase digital footprint in the market and e-commerce flourishing the IT sector has outperformed expectations. Let’s have a detailed analysis of the impact of COVID-19 on the IT sector and the opportunities that lie ahead.
How did the IT Sector manage to get back on its feet?
The Government announced a nationwide lockdown on 25th March 2020 across all states in India. The lockdown came as a sudden blow. Since it left many across the nation unemployed, stranded or despaired. The supply chain became dysfunctional. The Law Enforcement across the nation was a hotchpotch. Cash Flows became disrupted as companies across the world defaulted on payments, especially to IT companies where foreign companies outsourced their work to in India. However, this blow was temporary because of the suddenness and uncertainty of COVID.
The IT sector did not take much time to get back on its feet, as the rules for lockdown became more defined, the necessity for eCommerce increased and work-from-home became the norm. Likewise, Meetings and Online classes happened on platforms like Google Meet and Zoom. Moreover, Business communication platforms like Slack gained momentum as well.
Infosys announced in its 39th Annual General Meeting that it was considering a hybrid work-from-home model in the future. Wherein a part of its employees would be working from home permanently and the rest from office.
Colleges and Academic Institutions started investing in online platforms to conduct classes as universities and schools across the globe remained closed. As internet traffic started to increase companies found it necessary to expand their virtual presence. Companies of all sectors all across the world had just one saviour keeping things going , that was the IT sector. Companies started investing in IT Infrastructure to accommodate their increasing online traffic.
How has the IT performed in Q1?
Info Edge (India) Ltd.
NIIT Technologies Ltd.
MindTree Ltd.
TECH M
Wipro Ltd.
Net Profit QoQ Growth %
199.39%
-3.35%
3.30%
-34.71%
2.75%
Net Profit Quarterly YoY Growth% (Between Q1FY20 and Q1FY21)
8.7%
13.01%
129.77%
-37.7%
0.19%
Source:TrendLyne
HCL Technologies Ltd.
Infosys Ltd.
Larsen & Toubro Info..
TCS
MphasiS Ltd.
Net Profit QoQ Growth %
-7.47%
-1.45%
-2.60%
-12.90%
20.31%
Net Profit Quarterly YoY Growth% (Between Q1FY20 and Q1FY21)
31.61%
12.36%
17.06%
-13.54%
32.72%
Source:TrendLyne
As expected most players in the IT have declared a decreased quarterly revenue growth(QoQ) and decreased quarterly profit growth(QoQ). This, however, shouldn’t be misinterpreted as the performance for NIFTY YoY is marginally high. ManyForce Majeureclauses were triggered which affected the cash flows and balance sheet of many IT players with regards to pending projects.
“We expect Tier-1 IT companies to report a revenue decline in the range of 5-8 per cent QoQ in constant currency (CC) terms. This, coupled with a cross-currency headwind of 30-60 bps, will further negatively impact dollar revenue growth,” said ICICI Securities.
Tech Mahindra, Wipro and HCL Technologies are likely to see around 8-9 percent sequential fall in the topline but L&T Infotech may be best among them as well as midcaps, reporting 4.5-5 percent decline in revenue QoQ, according to MoneyControl.
To sum it up, the IT sector managed to save itself from a greater fall but there was a noticeable loss of revenue and profits.
What is the Good, Bad and Ugly for the IT sector?
Good
Work from home means decreased fixed costs
Remote work policy promoted by many companies
Plenty of potential post-COVID-19 once market recovery begins.
COVID has given a boost to E-Commerce bridging the gap between Retailers and Customers.
The E-Commerce growth boosts prospects in IT, Logistics, Transport and Auto Industry.
As Force Majeure clause implementation increases, there is a lot of credit default and rise in bad debts with respect to minor IT contracts. However, the Tier-1 companies remain safe because of Higher Cash Reserves
SMEs are impacted the most due to high credit dependency, reduced sub-contracting demand from foreign companies and leveraged projects are impacted the most.
Ugly
Mass Layoffs across the world has shaken the IT industry. Companies like Cognizant made mass layoffs, benching almost 18000 staff in Karnataka.
The US H1B visa ban prospects for projects in the US remain bleak.
Startups with conventional themes were forced to shut shop.
With this, the future prospects for short and medium-term investments remain volatile. In order to book profits in the market, it is necessary to recognize a suitable entry point. Health agencies across the world are fearing the second wave of coronavirus. However, with the preparation done in the first wave, it can be expected that the second wave may not impact the IT sector after all. Companies have already begun with the human trails of the vaccines. There is substantial optimism that the vaccine might be our very soon. If the vaccine indeed does come out you can expect a fair recovery in broad markets and a rally in the IT Sector as well.
Before talking about Yes Bank’s FPO, writing about what exactly an FPO is very important. FPO is an abbreviated form of Follow-On Public Offer. When an entity which is already a public listed company, decides to offer more shares to the general public, it is called an FPO.
It is different from Initial Public Offer, which takes into account only the private companies who are issuing shares for the very first time. Companies use FPO to raise more funds to run their business. Not only start-ups but sometimes, mature companies also look out for money and this issue an FPO.
Yes Bank raises Rs. 14,267 crore
Yes Bank wished to raise funds worth Rs. 15,000 crore but their FPO closed with only 95% subscription. Thus, the bank fell short of its target and raised Rs. 14,267 crore. HNIs and retail investors showed little interest in this FPO whereas Institutional investors drove the overall subscription up. Shares reserved for them alone were oversubscribed 1.9 times.
Few of the Institutional investors that took part are State Bank of India, Life Insurance Corp of India, Exodus Capital, Wellington Capital, Jane Street Capital, IFFCO Tokio General Insurance, Bajaj Allianz, HDFC Life and Punjab National Bank.
Other than institutional investors, shares reserved for high net-worth individuals, retail investors and employees were undersubscribed by huge margins (63%, 47% and 23% respectively). With the closure of FPO, Yes Bank’s share went up by 2.9 per cent to Rs. 19.8.
PTC India (formerly Power Trading Corporation of India) has revived plans to sell its controlling stake in its NBFC arm PTC India Financial Services (PFS), according to an official disclosure to the stock exchanges. The Delhi-headquartered firm, which is backed by NTPC, Power Grid Corporation and Power Finance Corporation, has invited potential suitors or investors to submit their expression of interest by July 31.
PFS stock skyrocketed by a whopping 10% on Sensex as it has clocked the upper circuit limit of Rs. 15.07 per piece on the index. The parent company stock has also advanced by over 6% on Sensex with a high of Rs. 51.25 per piece before correcting.
PTC India Financial Services is an infrastructure finance company, is engaged in the business of making investments in, and providing financing solutions to companies with projects in the power sector and related areas across the entire energy value chain. The firm offers debt financing, fee-based services and also equity investments for both greenfield and brownfield projects.
PTS has been bleeding its parent company out with ever-increasing debt, decreasing net profit year-on-year and the recent NBFC crisis has put a huge dent on PTC India’s balance sheet. The management of the company feels that the private sector is better equipped to deal with such problems. The company had announced its plans to divest the financial services arm in August last year. PTC India currently holds a 64.99 per cent stake in PTC India Financial Services and at current market capitalisation the value of the majority stake is around Rs. 572 crore
“Subsequent to delays on account of the ongoing Covid-19 pandemic, requisite internal approvals have been received to reinitiate the process of exploring opportunities for monetizing the company’s investment in PFS. In this behalf, it has been decided to undertake steps for inviting potential purchaser(s)/ investor(s) to submit their respective interest for the same,” the company statement said.
The last day of submission of interest by a bidder is July 31.
One sector which is getting most of the attention during the pandemic is the Pharma sector. The investors are keeping a track of which companies are moving in the direction of developing a COVID 19 vaccine. It is highly expected that the stocks of Pharma companies may provide good returns to the investor in the foreseeable future.
Granules India released their Q1 results for this financial year. The bottom line (net profit) increased by 34% to take the net profits at Rs 111.44 crore for the quarter which ended on 30th June 2020. Consolidated revenue worth Rs 735.59 crore was registered as compared to Rs 595.27 crore for the same period a year ago.
EBITDA or earnings before interest, taxes, depreciation, and amortization tells about the operating profitability and is one of the important financial measures for any company. This measure grew by more than 50% in this quarter.
Their results were welcomed positively by the market as their share price went up by 8%. Also, Granules have declared its first interim dividend of 25 paise per share which will boost earnings of shareholders, both in the form of a rise in share price and the dividend offered.
About Granules India
Hyderabad based drug firm, Granules India, is a vertically integrated pharmaceutical manufacturing company which has the vision to become a global leader in its domain. It was set up in 1984 and took only three years to become the second Indian company to export pharmaceutical products to the U.S.
They manufacture products across Active Pharmaceutical Ingredient (APIs), Pharmaceutical Formulation Intermediates (PFIs) and Finished Dosages (FDs). Few of the core products which the company manufactures are Paracetamol, Guaifenesin, Metformin and Ibuprofen.
What led to strong Q1 results?
Granules India was able to register this growth due to the robust increase in production and demand. The resumption of Paracetamol exports has boosted revenue growth in the last quarter. This quarter Granules Pharmaceutical Inc (GPI) launched two products: Colchicine tablets and Butalbital APAP caffeine tablets. These new products have been well received by the consumer. Also, the expansion of the market share of the existing products has contributed to higher revenues for the manufacturing company this quarter.
“This is the result of operational excellence and a vigilant watch over our margins through optimisation of the product mix and by increased capacities and optimal capacity utilisation.” – Granules India Chairman and MD Krishna Prasad Chigurupati
The street will be eagerly waiting for the results of other pharma companies who has seen a surge in demand in recent times.
Private sector lender HDFC Bank on Saturday reported a 19.6% year-on-year (y-o-y) rise in net profit to ₹6,659 crores for the three months to June owing to a rise in net interest income (NII) and lower tax outgo. The net interest income of HDFC – the difference between interest earned and interested expended – grew 17.8% y-o-y to ₹15,665.4 crores. The net interest margin of HDFC — a key measure of profitability – stood at 4.3%, unchanged from the same period last year.
However, non-interest income fell considerably to Rs 4,075.31 crore in the quarter ended June 2020, down 18 per cent YoY largely due to lower fees & commissions (dipped 37 per cent).
Kindly refer to the Glossary section at the end to understand the banking jargon in an easy way
Key Highlights of Quarter 1 :
Bank’s asset quality improved in the June quarter with gross bad loan ratio declining 4 basis points year-on-year to 1.36%
Net NPA ratio was also down 10 bps to 0.33% in Q1 FY21
The bank’s total advances were at ₹10.03 trillion in Q1 of FY21, an increase of 20.9% over the same period last year
The domestic retail loans grew 7.2% and domestic wholesale loans grew 37.6%, it said, adding that the domestic loan mix between retail and wholesale was 48:52
Total deposits stood at ₹11.89 trillion, an increase of 24.6% over 30 June last year
Its current and savings account (CASA) deposits grew 26% with savings account deposits at ₹3.27 trillion and current account deposits at ₹1.5 trillion
CASA deposits now comprise 40.1% of total deposits as of 30 June 2020
“The continued slowdown in economic activity has led to a decrease in retail loan origination, sale of third party products, use of credit and debit cards by customers, efficiency in collection efforts and waivers of certain fees,” it said in a statement on Saturday, adding that as a result, fees and other income were lower by approximately ₹ 2,000 crore
On Friday, HDFC Bank shares had ended 3.46 per cent higher at Rs 1,099.15 apiece on the BSE, outperforming the benchmark Sensex index which climbed up 1.50 per cent.
In conclusion, reporting of a 20% profit increase comes at a time when the company is looking for replacements for its rockstar CEO Mr. Aditya Puri who is set to retire, which brings hope and positive sentiments for the market.
Glossary
Net Interest Income: represents the difference in the interest earned from a bank’s lending activities to its customers and the interest paid to account holders or depositors, if we give a loan of Rs. 100 to a borrower at 7% interest and then someone deposits Rs. 100 with the bank at an interest rate of 4%. Then the remaining 3% is called Net Interest Income.
Net Interest Margin: It is arrived at by dividing Net Interest Income with the Average income earned from interest producing assets such as loans given out to borrowers.
Non Performing Assets(NPA): they are assets for which interest is overdue for more than 90 days. It includes sub-standard assets, doubtful assets and loss assets – all these three assets combined. In other words, they are bad loans for which interest has not been realized for more than 90 days
Current and Savings account (CASA): is the amount of money that gets deposited in the Current and Savings Accounts of bank customers. The bank pays very low or no interest for deposits in current accounts whereas the deposits in Savings Accounts receives slightly higher interest rates. It is the cheapest and major source of funds for banks. This fund source is in turn used to distribute Home Loans, Personal Loans etc
Britannia Industries Ltd.(BIL) reported consolidated Net Profit year-on-year growth of 117% at Rs. 546 crores for the Quarter ended on June 2020. Consolidated revenue growth increased by 26% for the Quarter at Rs. 3384 crores. India’s largest biscuit maker doubled the net profit of Rs. 248.64 crores in the corresponding quarter last year despite nationwide lockdown due to COVID-19 pandemic.
The FMCG major said that as soon as the lockdowns eased the company focused on bringing back the supply chains and distribution channels to pre-COVID-19 levels. Subsequently, they increased their rural and hinterland reach when the lockdown restrictions were eased. During this period, launching innovative products such as ‘Winkin Cow Lassi’ and a Rs. 5 Layer Cake also helped in expanding their reach and delivering a healthy profitable growth.
“Given the dynamic nature of the pandemic & associated uncertainty, we were quick to resort to cost efficiencies through the extraction of supply chain efficiencies, reduction in wastages and fixed costs leverage. We also rationalized the media spends considering the constraints of inventories due to higher market demand. These measures helped us improve the shape of our business and record a massive increase in operating profit during the quarter,” Varun Berry, Managing Director said.
The above measures helped in recording a massive 670 bps increase in operating profit. The Wadia Group Company expects the prices to be stable going forward given the positive view on monsoon and harvesting period.
Reliance Industries(RIL) held its first-ever Virtual AGM on Wednesday. It was a much anticipated AGM considering the $20 Billion fundraiser for its telecom arm Jio, so much so that RIL shares soared north of 2% the morning of the AGM. Between Mid-June and the AGM, the share price of Reliance appreciated by almost 15.8 per cent, such was the optimism for the AGM.
What followed the AGM was a fall of about 8% in its share price. It cost Mukesh Ambani $2.5 Billion and his 6th richest-man status. The fall also cost investors Rs. 1.26 Lakh Crores. One of the chief reasons for the fall in the share price is attributed to a lack of insight into other entities of Reliance Industries such as Petroleum. Likewise, the analysts and market watchers say the reason is the stalling of the much anticipated Saudi-Aramco deal, wherein it was expected to sell 20% stake of its Oil and Petroleum business to the multinational petroleum and natural gas player. This was due to slumped crude oil demand and consumption because of the COVID-19 pandemic outbreak. The deal was valued at around $15 Billion.
The AGM, on the other hand, showed extremely insightful propositions in the AGM keeping the long term prospects of investment tidy. This AGM was set apart from the previous ones considering that it focused on reduced dependence on China for 5G spectrum which is expected to be up and running by 2024-25 according to the Chairman and MD Mukesh Ambani. The AGM also included Facebook founder Mark Zuckerberg and Google CEO Sundar Pichai
Here are some useful insights into Reliance Industries’ AGM 2020:
Reliance Industries had a plethora of positive insights, one such being the Rs 33,737 cr investment of Google for 7.7% stake in Jio.
Reliance is now a net-debt free company ahead of its expected schedule.
Ambani introduced its own homegrown cloud video conferencing app JioMeet.
What caused a stir was the announcement of Jio pitching for 5G spectrum in the near future. Likewise, this is a welcomed decision as it dilutes the ambition of Chinese Multi-National Huawei in the wake of the recent political stir between India and China. In addition, they announced that the trail run should start by year-end, following which 5G services would be launched.
JioTV Plus. It is an OTT content aggregator pitching in content from other OTT platforms Netflix, Amazon Prime, JioCinema, Voot, Zee5, SonyLiv, JioSaavn, Disney Hotstar, and YouTube.
JioGlass. JioGlass is a mixed reality solution featuring AR and other Audio Visual Capabilities. However, the AGM did not reveal many technical details on Jio Glass.
JioMart’s tie-up with Whatsapp. JioMart the companies’ retail wing announced a collaboration with Whatsapp and its inclusion of local convenience stores as well.
It announced Embibe, its online education platform.
RIL is the first Indian Company to cross 1 Lakh crore consolidated EBITDA.
It is the highest payer of customs and excise of Rs 21,660 crore and the highest payer of GST and VAT 69,372 crore.
Times are tough because of the pandemic. Firstly, with rising unemployment, reduced production and decreased demand for crude oil, Reliance’s Q1 performance is still commendable. Above all Reliance perfectly monetized in the crisis through JioMart, JioMeet and Embibe as well. Secondly, the support of Google(Sundar Pichai) and Facebook(Mark Zuckerberg) feeds the long term sentiment of promoters and investors. The short slip in the price can be attributed to rising volatility and you can soon expect a high recovery in the share price as well.
The AGR saga continues and its next hearing will be on 30th July. This story of Adjusted Gross Revenue from telecom sector has been continuing for the past 16 years.
Supreme Court’s order of October 2019, widened the definition of AGR to include non-core items. Companies like Airtel, Vodafone and others missed the apex court’s deadline of 23rd January to make payments.
After SC’s decision, the Department of Telecommunication estimated that Vodafone Idea owes Rs 58,254 crore and Bharti Airtel owes Rs 43,980 crore. Out of this amount, Vodafone Idea and Bharti Airtel have paid Rs 6,354 crore and Rs 18,004 crore respectively.
Both the telecom companies have stated that, currently, they are not in a position to pay statutory dues anymore. Therefore, they have asked for a period of 20 years and offered to pay in a staggered form during that timeline. Supreme Court didn’t accept this plan but have asked the telecoms to present a detailed roadmap of the payment timeline.
Vodafone Idea has voiced their concerns with the decision. They have already warned that they will be forced to shut their shops in the country if asked to pay their dues without being in instalments.
Telecom experts believe that while Bharti Airtel can manage to clear the dues, Vodafone Idea’s financial position looks uncertain.
Cadila Healthcare stock price gained over 4% during the day before closing at Rs 377.60 after its Chairman Pankaj Patel announced that they aim to complete late-stage trials for its coronavirus vaccine candidate ‘ZyCov-D’ by March 2021. Cadila will start production of 100 million doses of potential Covid19 vaccine annually after Phase 3 trial concludes successfully.
The Phase 1 trial will begin this month on over 1,000 patients across multiple sites according to the company Chairman. In addition to starting clinical trials, it is also planning to produce up to 400,000 doses of the drug Remdesivir after it showed positive results in treating patients with COVID-19. Zydus Cadila aims to fulfill India’s Remdesivir requirements before accepting export orders after it wins regulatory approval to make it in India. It had received approval from COFEPRIS(Medical regulatory body of Mexican government) to conduct clinical trials in Mexico with ‘PegiHepTM’ to evaluate safety, efficacy and tolerability in patients with COVID-19.
In conclusion, Cadila is hopeful that it will be able to complete the clinical trials by March 2021 and possesses the ability to mass-produce the vaccine
IT firm HCL Technologies, on July 17, posted its Q1 results for the financial year 20-21. HCL recorded a 8.6% YoY increase in revenues for the quarter ending June. Consolidated net profits expanded by 31.7% to reach Rs. 2925 crore from Rs. 2220 crore recorded in Q1 of the previous financial year.
When compared to the previous quarter (Q4 FY20), both, revenues and net income have seen a fall of 4% and 7.3% respectively.
HCL Technologies was the 4th IT giant to announce its result. As we saw, TCS posted negative results and started the results season on a low. But Wipro and Infosys posted profits that beat street estimates by a huge margin. Now that Wipro and Infosys has set high standards, Wipro’s result looks average,
According to the company’s President and CEO C Vijayakumar, the company has been adversely hit by the lockdown this quarter. This has contributed to decreasing their revenues. HCL is helping its clients to embrace this new normal and work on digital transformation. Therefore, he is hopeful of things to be changing for better in the foreseeable future.
Also, the IT major firm has announced a dividend of Rs. 2 per share for the shareholders.
Roshni Nadar Malhotra will be appointed as the chairperson of Board and company from Friday. She will be replacing her father Shiv Nadar who will continue to be the Managing Director of the company with designation as Chief Strategy Officer.
Petronet LNG Limited (PLL), the pioneer and the largest LNG infrastructure company of India is exploring opportunities to facilitate LNG dispensing infrastructure across the country on major national highways. The Company has invited OMCs, CGD entities or any interested parties to partner up for this project.
What this means
Petroleum Natural Gas Regulatory Board (PNGRB) in its public notice earlier this week had announced that any entity can set up an LNG station in any geographical area (GA) or anywhere else, even if it is not the authorised entity for that GA. Petronet’s move is subsequent to the said announcement. In an effort to promote LNG as a cleaner, greener, and economic automotive fuel for Medium and Heavy Commercial Vehicles, PLL has already launched its first commercially registered LNG buses and LNG dispensing stations at its Dahej and Kochi Terminals. PLL is also developing LNG dispensing infrastructure along Delhi-Mumbai highway and has already floated a tender. With this clarification of the PNGRB, PLL is encouraged to develop LNG dispensing infrastructure across the country and might be planning for an expansionary move. It is expected that PLL will soon be coming out with the finer details of the partnerships in the coming weeks.
