SP Group Archives

Here are some of the major updates that could move the markets tomorrow:

RBI keeps repo rate unchanged at 6.5%

The Reserve Bank of India (RBI) has kept the repo rate unchanged at 6.5%. The RBI’s Monetary Policy Committee (MPC) unanimously decided to maintain the repo rate at its current level, with a majority of five out of six members focusing on “withdrawal of accommodation” to align inflation with the target while supporting growth. RBI expects GDP to grow 6.5% in the current financial year. Retail inflation is expected to moderate to 5.2% in FY24. The repo rate has been raised by 250 basis points (bps) in the last 11 months, starting from May 2022.

[The repo rate is the key lending rate through which the RBI lends money to commercial banks against government securities.]

Read more here.

SP Group looks to raise $1.75 billion against Tata stake

Shapoorji Pallonji (SP) Group is reportedly in talks with lenders to raise $1.75 billion by pledging half of its stake in Tata Sons. The funds raised would be used to repay part of SP Group’s debt obligations and inject cash into its operating companies. The group has already pledged close to 9% of its 18.37% stake in Tata Sons. If the latest transaction goes through, its entire stake (valued at around Rs 94,000 crore) would be pledged to lenders, including foreign banks and overseas hedge and credit funds.

Read more here.

HPCL may soon launch ethanol cooking stoves

Hindustan Petroleum Corporation (HPCL), in collaboration with the Indian Institute of Technology (IIT) Guwahati, has developed a cooking stove that runs on bio-ethanol, a green fuel produced by the fermentation of sugar or food grains. HPCL is planning a pilot launch of the ethanol-fueled stove soon and the introduction of ethanol ATMs where users can procure ethanol in canisters for the stove. These ATMs may be positioned at HPCL’s retail outlets, as per industry executives familiar with the development.

Read more here.

Tata Steel saw record operational performance in FY23

Tata Steel achieved a record operational performance in the last financial year, producing 19.87 million tonnes (MT) of steel compared to 19.06 MT in the previous year. Sales also increased to 18.87 MT from 18.27 MT. Despite facing challenges, the company’s CEO & MD, T V Narendran, attributed the success to a strong marketing network and agile business model. In the January-March period, Tata Steel India’s production rose to 5.15 million tonnes from 4.90 million tonnes in the same period the previous year.

Read more here.

General insurance industry premium grows 16% in FY23

The general insurance industry in India grew at a healthy pace of 16% in FY23, with total premiums reaching Rs 2,56,920 crore. The standalone health insurance sector also showed robust growth with premium growth of 26% to reach Rs 26,242 crore. ICICI Lombard’s premium grew by 17% for FY23, while New India Assurance’s growth was 6% due to sluggish performance in the first half of the year. Star Health Insurance reported premium growth of 11% in March and 13% for the year.

Promoter group companies fully repaid loan against shares: Jindal Steel & Power

Jindal Steel and Power Ltd’s (JSPL) promoter group companies have fully repaid all outstanding loans against shares of the company. The promoter group companies, namely OPJ Trading Pvt Ltd, Opelina Sustainable Services Pvt Ltd, and Gagan Infraenergy Ltd, have paid off the loan liabilities, resulting in the loan against share (LAS) for the Naveen Jindal group now standing at Nil. This repayment is part of JSPL’s deleveraging strategy.

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Rail Vikas Nigam Ltd emerges as lowest bidder for Mumbai Metro project worth Rs 380 crore

Rail Vikas Nigam Limited (RVNL) has emerged as the lowest bidder (L1) for a Mumbai Metro project worth Rs 378.2 crore. RVNL has been selected for the design, manufacture, supply, installation, testing, and commissioning of various systems including substations, cabling, and overhead catenary system for Mumbai Metro line 2B of MMRDA (Mumbai Metropolitan Region Development Authority).

Read more here.

Mazagon Dock Shipbuilders’ turnover jumps 32% in 2022-23

Mazagon Dock Shipbuilders has reported a 32% increase in revenue from operations in the financial year 2022-23, reaching Rs 7,547 crore. It is one of the few shipyards in India capable of building Destroyers and Conventional Submarines. The company’s primary customers are the Indian Navy and the Indian Coast Guard, and it has delivered several major warships in the past.

Read more here.

Religare Enterprises to acquire MyInsuranceClub to expand offerings

Religare Enterprises Limited (REL) has signed a Share Purchase Agreement to acquire MyInsuranceClub (MIC), an insurance web aggregator, from iGear Holdings Private Ltd. This acquisition is part of REL’s strategy to democratize the insurance business in India and expand its offerings in the insurance distribution space. MyInsuranceClub is the first IRDAI-approved web insurance distribution and comparison platform.

Read more here.

Cyrus Mistry Ratan Tata’s Blue Eyed Boy

Ratan Tata had immense faith in Cyrus Mistry. In fact, it was him who declared Mistry as his successor as Chairman of Tata Sons in 2013. Shortly after he was appointed as chairman, many of his business decisions did not go down well with Ratan Tata. Tata felt that many of Mistry’s decisions were against the ethics and morals of the company and that some of his decisions didn’t do justice to the Tata name. After all, Tatas are admired for their ethics.

Ratan Tata earlier offered Mistry to resign voluntarily, he even asked his close confidante Nitin Nohria, also the Dean of Havard Business School and Director at Tata Sons, to convince Mistry to resign voluntarily. Mistry failed to comply. He was voted out as chairman by the Tata Sons Board on 24 October 2016. Thereafter he was voted out of every possible board, making the bitterness between Ratan Tata and Cyrus evident.

Why does SP Group want to Sell Off Their Stake?

SP Group hasn’t done very well in the past few years. The company has accumulated a lot of debt. The company works mostly in the real estate and infrastructure sector which hasn’t performed well over the past year. When COVID struck, the situation worsened. SP Group currently owes debt worth Rs 28,000 crores.

In the past, SP Group has already pledged a few its shares in Tata Sons to raise a capital close to Rs 1,437 crores. However, SP Group missed the deadline for payment.
This was worth worrying for many at Tata Sons.

Tata’s Worry

While SP Group still owed the debt, it decided to raise capital by pledging shares it has in Tata Sons. They wanted to raise money to finance themselves by keeping Tata Sons shares as collateral. In case SP Group fails to pay, the shares might be transferred to the creditor. This did not go down well with Ratan Tata since he did not want Tata Sons’ shares to go into the hands of an unfriendly investor.

Tata Sons Board approached the Supreme Court. The plea was to restrict the SP Group promoters from raising capital by pledging their shares in Tata Sons. Their plea was that under the company’s articles of association (AoA), the board of Tata Sons has the first right to buy the shares at fair market value. The move shattered SP Group’s hope of raising the capital of Rs 3,750 crores from Canadian Investor Brookefield as well.

Coming To A Common Ground

Recently, SP Group confirmed their intentions of selling their complete 18.4% stake in Tata Sons. SP Group said in an official statement: “a separation from the Tata Group is necessary due to the potential impact this continuing litigation could have on livelihoods and the economy”.

The best-case scenario for SP Group would be to get a fair value for its stake in the Tata’s in order to get their company out of a liquidity crisis. The value of the 18.4% stake which SP Group has in Tata Sons is 1.78 lakh crores or $24 Billion. Such a big amount may not be covered at one-go but in parts, a proposed by Tata Sons.

Apart from a few companies like TCS, none of the Tata Companies have faired well this quarter owing to the COVID-19 pandemic. For Tata Sons, the problem of arranging funds and deciding on the fair value of the purchase still remains. Tata has set up a team for contingency fund planning, which shall decide on how to arrange funds to buy out the stake owned by the Mistrys.

TCS’s buyback has given Tata Sons some relief. Tata Consultancy Services’ buyback of shares has infused close to Rs.11,000 crores in Tata Sons. This gives Tata some liquidity to begin the acquisition in parts if it decides to do so.

Also recently, there were unconfirmed reports about Walmart investing around $25 Million into Tata Group’s proposed ‘super app’, which will bring all of Tata’s Retail channels under a single app. The amount to be invested by Walmart and the amount which Tata shall give to SP Group is a close figure… What do you think is cooking up?