Good morning, folks. Today is one blockbuster day in the markets with 10 companies lined up to show their Q1 report cards. Let the reports begin.
Staggered repayment plan for telecom companies
On Monday, the Supreme Court allowed for a staggered payment of AGR dues by telecom companies, putting an end to any debate for re-calculation of the amount. However, unlike the 20-year timeline proposed by the companies, a shorter timeline is to be resolved with the next hearing on the matter to be on 10th August. Even the details of insolvent companies, the likes of Reliance Comm and Aircel were asked for, considering in total they owe Rs. 40,000 Crores in AGR dues.
Flashback: While the only matter in contention is currently the repayment plan and timeline, for almost fifteen years the battle was on a different issue altogether. A share of the AGR or Adjusted Gross Revenue is what the telcos were to pay the government instead of a heavy duty licence fee. However, while the DoT (Department of Telecom) suggested all telecom and non-telecom revenue was to be considered, the telecom companies hung on to the claim that only telecom revenues should be counted. In October 2019, the Supreme Court brought and end to the debate by siding with DoT. Watch this wonderful video that gives a good idea of the twists and turns in the case.
Implication: While the Supreme Court has now allowed for a staggered repayment plan, the burden of the amount remains heaviest on Vodafone Idea who has till date paid up Rs. 7854 Crores out of it’s due of almost Rs. 58,000 Crores. In this difficult capex heavy business, unless this AGR issue gets resolved we could well be headed towards a duopoly with just Jio and Bharti Airtel playing the market.
HDFC Bank comes out strong
Amid worries that banks will feel the stress of the economy, HDFC Bank was happy to prove the naysayers wrong. Announcing a 20% rise in profit year-on-year, the bank also admitted to a slight increase to 1.36% for it’s gross NPA or Non-performing assets. Most of the loan growth was attributed to corporate seeing a 37.6% jump, with the retail lagging much behind at 7.2% growth. However, before you pledge all your fortune to buying HDFC Bank shares, know that the moratorium details are still under wraps and we may not know the extent of their troubled borrowers.
Fulfilling capital requirements: The bank board also approved a Rs. 50,000 crore fund raise through bonds. This is pretty much in line with quite a few banks beefing up their liquidity for what could be difficult times ahead once the moratorium is lifted in September.
That’s just the good: HDFC Bank was in news for other reasons too. For the past 4 years, ended December 2019, senior executives at the car loans department had been forcibly bundling a GPS device adding the cost of Rs. 18000 – Rs. 19500, into the loan disbursal. Not only is it against ethics considering some customers were threatened non-sanction of the loan, this could well breach regulatory issues of combining financial and non-financial sales.
Make way for the… Ant
Snubbing the US is now becoming a habit for the Chinese. Foregoing NYSE, Jack Ma’s Ant Group plans simultaneous IPOs in Shanghai’s Star market and the Hongkong Stock Exchange. This promises to be the financial blockbuster of the year considering Alibaba even after 6 years, remains the second biggest IPO in history. The valuation being seeked? At least 200 unicorns, I mean $200 Billion.
Origins: In 2010 the mobile payment company Alipay was broken off from parent Alibaba. After Alipay, there was expansion into into wealth management and consumer credit although foray into in-house investment products like money market funds drew regulatory flak. But, Ant financial really came in by 2014 when six businesses were merged into one unit of which Alibaba acquired a 33% stake last year.
Ant financial to Ant group: Last month, to signal a wider approach, Ant group dropped financial from it’s name. They are looking at clawing back some of the share eaten by food delivery giant Meituan Dianping and Tencent holdings (parent of WeChat). If the group’s new CEO Simon Hu has his way, then Ant group will be more of a tech company and into almost everything from groceries to hotel bookings to loan applications. He also aims to have 80% revenue come in from small merchants and finance firms who use the platform. You know what they say about ants… You may not even know as they slowly push and work their way through.
Corona vaccine dream holds promise of coming true: In some uplifting news, a coronavirus vaccine developed by University of Oxford in collaboration with Astra Zeneca shown promise of working safely, although further trial results are awaited. Astra Zeneca has gone about building partnerships across the world for quick transmission and manufacturing. Dangling hope to the world, along with expressing potential timeline for first dose delivery of September for home country UK.
20% target achieved: Amazon India announced that with 60,000 exporters the Global Selling Program (GSP) has crossed $2 Billion cumulative sales. Started in 2015 enabling Indian exporters to sell through 15 global Amazon sites, this GSP milestone is on the path to a target of $10 billion cumulative sales by 2025.
Debt to GDP hitting high notes: As per a report by SBI Economic Research, India’s debt to GDP ratio could well hit 87% in FY21. However, as an olive branch it said that there was no question of the country’s ability to repay the steadily mounting debt.
WTO reality show: In a high-stakes battle, eight candidates from across the world have made 15-minute presentations followed by 75-minute grilling sessions to a 164-member state committee. They are out there to win the title of the next head of World Trade Organisation, which will see a change of guard starting September this year.
Chevron gets Noble… for $5 Billion: One of the many industries that coronavirus has not been kind to is energy, especially the smaller players. Hence, the big getting bigger is playing out with the likes of Chevron buying Houston-based Noble Energy for an enterprise value of $13 Billion, accounting for the debt. In return, one of the key benefits they get is access to proven reserves in offshore assets in Israel.
Indian markets continued to be in the green, with financials and IT leading the way. While HDFC Bank saw buying on the back of their stupendous results, Mahindra & Mahindra Financial services ended at 10% higher with news of approval on a 1:1 rights issue. Telecom stocks were also jubilant after the Supreme Court’s order to allow staggered repayment.
While the lockdown has earlier seen a swarm of photos of nature reclaiming public spaces, this one was quite a sight. Twitter was abuzz yesterday with pictures of a rare yellow turtle rescued by villagers in Odisha’s Balasore district. However, rather than a new, rare species it was more of a case of albino disease.