Reliance AGM & More

Good morning, folks! Today the Scribe has a longer update but then when Mukesh bhai pulls off a few magic tricks, there is not much you can leave out. Read, absorb and share.

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The most anticipated AGM pulled a few tricks

Finally, yesterday the most anticipated and hyped Annual General Meeting of Reliance Industries Limited share holders took place. It was one of the few which was an open-to-all considering it was being live streamed on Youtube on various channels. At one point, we were a little unsure of whether we were attending the AGM or a virtual Nasscomm considering the product demos being showcased and video messages from Mark Zuckerberg as well as Sundar Pichai on the same platform.

Some of the biggest announcements: There were a LOT of announcements and product launches in this AGM which simultaneously hosted 3.2 lakh viewers live on Jio Meet but we will limit ourselves to the most important few in the areas of the 3 Reliance hyper engines – Jio, Retail and O2C (Oil to Consumer). One, of the $10 billion committed by Google to the India digitisation fund, 45% or $4.5 Billion of it will find it’s way to Jio Platforms for a 7.7% stake. One of the main strategic innovations as a result will be a super economical smart phone with a vision to technologically empower every Indian. Two, there are a host of innovative products coming up in Jio platforms including a Jio Set top box and Jio glasses. Three, Jio is now ready with a 5G solution which will be tested once the spectrum is available. They also aim to export it once tested and proven on the Indian scale. Four, Jio Mart is now enabled to onboard kirana stores within 48 hours. Five, as part of O2C Ambani announced a launch of a New Energy business with a vision “to make clean and green energy abundantly available at an affordable price to every Indian, every Indian enterprise and every Indian utility”.

Then why did the stock price fall? There are two schools of thought here. One, Mukesh bhai did mention in his speech that the deal with Saudi Aramco has not progressed as per plan and that they would hive off their O2C segment into a separate subsidiary. Once that happens valuations are bound to be lower than the overall enterprise value at which the latest investments have been made. Neither did the final announcement of buying Future Retail come forth. Two, the RIL stock rose by about 16-odd% in the last month as a run-up to the AGM. Now that the AGM is done, there was some profit booking done which brought the share down. Our take? The company has ambitious plans and it might be well worth it to hold on to your stocks for the ride.

Software companies cushion some of the coronavirus hit

Infosys was the third big software company to announce it’s Q1 results and it proved to be a pleasant surprise, bettering analyst estimates. Quite a rarity in times like these. While profit fell by about 1.5%, revenue rose by 1.7% over last quarter, operating profit rose much higher by 8.9% on an expanded margin of 22.7% as compared to 21.2% in the previous quarter. The increased margins were attributed to a few new big deals and aggressive, smart cost cutting measures.

Wipro joined the party: On the same day, competitor Wipro saw it’s prices soar by about 17% in intra-day trade. Wipro was like the kid who everyone expected to fail miserably but ended up showing some promise. Most analyst estimates expected gloomy results. While Wipro didn’t completely disappoint, announcing a 7.5% constant currency revenue decline from last quarter a 1.4% improvement in profit margins got investors queuing up to buy the stock.

Class topper disappoints: Expectations from Infosys and Wipro had also been tempered down thanks to the low expectations set by long-time software hero Tata Consultancy Services. TCS announced it’s result last week to share a 13.8% year-on-year drop in consolidated net profit with a 6.3% drop in constant currency revenue. Management did try to calm ruffled feathers by implying that the worst was behind them.

Joe Biden makes a green promise

Continuing with his overturn-Trump-policies presidential campaign, Joe Biden unveiled an ambitious $2 Trillion Climate change plan. The plan came with built-in twin objectives of carbon-free power generation by 2035 and net-zero emissions for all of America by 2050.

How does he propose to do that in a 4-year term? Sounding eerily like Trump, Biden promised that this plan would come with an added benefit of creating “millions” of jobs. Two main pieces on the plan were electrifying public and private transport and building clean energy infrastructure. The “millions” of jobs are aimed to be created in new electric and hybrid car manufacturing along with the new green infrastructure that is promised. Two main issues seem to crop up here. One, this has to be the first green plan almost promoting more cars. Two, fracking or shale exploration by individuals is a big thing and Camp Biden has been fairly vague and inconsistent on that.

What more is he promising? The Climate Plan spending is part of Biden’s bigger agenda – Build Back Better. While claiming to be different, it still has the same tones of protectionism and getting jobs back to America, a cause that seems to take up greater urgency in the post-covid times. One of the key aspects of the plan is “Buy American” with a $700 billion price tag for procurement and R&D for new technologies. The plan also promises 5 million new job creation and hiking corporate tax back to 28% from the 21% that Republicans brought it down to in 2017.

IN SNIPPETS

Now know what country’s GDP your online shopping boosts: Amazon India has now made it mandatory for sellers to mention country of origin for all their existing and new merchandise by 10th August.

India’s month of trade surplus: June 2020 saw something unique after almost 18 years – a trade surplus of $790 Million for India. Before we start looking at it as a happy trend, note that it is more like Haley’s Comet.  This is a month where exports shrunk by much lesser number of 47.6% while imports dipped by 47.6%.

Oh oyo! Oyo has been in the news for all kinds of reasons. Be it defending cases against signed-up hoteliers in Delhi or in Chennai, be it the change in management partnership for Oyo Townhouses or for the good PR activity of tieing up with Hindustan Unilever for sanitisation measures in their properties. Oyo is doing it all.

Bend it like Goldman: Goldman Sachs beat all analyst expectation with second highest-on record quarterly revenue for April-June 2020 of $13.3 billion. This came on the back of a 150% surge in bond trading revenue and a $6.26 earning per share compared to the expected number of $3.78.

Bank of Japan pauses monetary easing: Using the same words as economists around the world, Bank of Japan expected the economy to recover gradually and steadily with a warning that the outlook was uncertain. With two stimulus package announcements behind them, this policy announcement was more of a status quo.

MARKET PULSE

Even though the market seems to have barely moved at all, these numbers hide a world of action. Reliance Industries gained in the first half while ending at a 4% downside after the AGM. On the other hand, IT stocks rallied with Nifty IT index registering a 5% hike led by 17% jump in Wipro.

WILD CARD

Are you missing the warmth of hugging a loved one or a dear friend or even that pesky colleague whom you now see only in a 2D format? While you are not alone, some people are taking unique action to combat these blues. Israel’s Nature & Park Authority has embarked on a campaign urging people to mask up, go out there and hug a tree. It may not have the warmth of a human but it still acts us a pseudo hug and gets you closer to nature. We give that idea a green thumbs up.

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