Q1 Results & More

Good morning, folks! In the Scribe today, we have covered quite a few company results from Q1. Coming out of a day when 8 market big wigs chose to announce it, Tuesday became a day of revelations leading to a lengthy Wednesday Scribe.

MAIN STORIES

Financial sector Q1 report card

For financial sector, the line-up included one bank, two NBFCs and three life insurers. Axis Bank decided to forego immediate market reaction by declaring their result post market hours. The bank declared a Rs. 1,112.17 Crore profit, which is 18.82% lower than that of Q1 last year, on the back of 15.78% hike in provisions YoY. While NII or net interest income showed a healthy 20% growth YoY, operating profit dipped by 1% considering lower fees on some activities. Asset quality showed a remarkable improvement with gross NPA at 4.72% compared to 5.25% last year and even 4.86% last quarter. Like HDFC Bank, they chose not to reveal the details of the moratorium book which is said to have fallen from 28% in March to 9.7% of the book.

How did the Bajaj fin twins fare?  Bajaj Finserv hit it out of the park with a nearly 44% jump in profit YoY and a nearly 6 times jump over last quarter to arrive at a figure of Rs. 1,215 Crore. Clearly the insurance arms have done better for the parent since Bajaj Finance announced a 19% drop in Profit After Tax YoY to a figure of Rs. 962 Crores. Even though total income increased by 14% to Rs. 6,650 Crore, a pre-tax contingency provision of Rs. 1450 Crore balanced that out.

Life insurance Q1 results: On Tuesday, three of the biggest bank life insurers announced their results – SBI Life Insurance, HDFC Life Insurance and ICICI Prudential Life Insurance. While ICICI Pru announced a mere 0.8% growth in profit YoY, SBI and HDFC were close at 5% and 6% respectively. However, only SBI showed a 14% increase in net premium earned with HDFC and ICICI witnessing a drop of about 11%.

Is FMCG a Covid-proof industry?

HUL announced their first quarter results to share a 7.2% YoY standalone profit, supported by a 31.4% sharp drop in marketing costs. We know it is a Covid quarter since the highest demand products included coffee, sanitisers, deep cleaning and Kissan products, with Lifebuoy delivering strong double digit growth across products. Skin care took a hit as lockdown meant a pause on grooming as well.  

Britannia makes HUL looks like a poor cousin: We have been nibbling on a lot of biscuits this lockdown. That and prudent cost cutting helped Britannia post a whopping 118.25% YoY rise in net profit at 542.68 Crores.

Cycle looks to turn for rural: With two years of sluggish growth behind them, rural India looks to buck the trend this year on the back of good timely rainfall, migrants back to the hinterland and the fact that agriculture did not really stop under lockdown. While reports suggest FMCG demand has reached back to 85% of pre-Covid levels, it’s driven by rural areas considering urban is still at about 70%. While the first two months were mostly linked to food consumption, even skin care started picking up in June.

European Union inks a gianormous, generous stimulus package

In the first in-person meeting of the European Union leaders in five months, elbow bumps replaced the hand shakes and air kissing. Although the initial proceedings threatened to derail discussions and seemed to point to a consensus failure, what they arrived to has surprised the world.

Get the deets: Yeah no, we agree. Deets is just not working. While the amount of 750 billion euros would have created shock and awe at any time, billion is the new million in times of corona virus. The most impressive part of the stimulus package is the fact that the amount will be raised by the stronger economies like Germany and France to be given out to weaker, unreformed economies mostly in the South like Italy, Greece and Spain which have also suffered disproportionately in this pandemic. Of this amount, 360 billion euros will be given out as European Union loans to the affected countries while 390 billion euros will be given as grants not expected to be repaid! Sounds like a very Robinhood move, showing that tragedy often brings out the best in humans. Read a detailed telling of the drama and more from the 5-day discussions in this wonderful New York Times article.

Australia refuses to be left behind: It might be geographically distanced, but Australia was very much a part of the stimulus wave yesterday. To fight the worst unemployment rate in 22-years (7.4% in June), the government has announced an extension for a scaled-down version of it’s wage subsidy program JobKeeper to 2021, at a cost of almost $12 Billion. Although a Treasury review of the program warned that it could well become a crutch without which the economy forgets to function.

IN SNIPPETS

Indian aviation poster child shows chinks in armour: Apart from the brawl between the founders, Indigo airlines has often been heralded as a success story in Indian skies. However, news of the CEO Ronojoy Dutta announcing a 10% layoff from the 23000+ staff clearly spells out the universal turbulence for the sector.

Sero survey throws up stunning numbers in Delhi: As per the reports from a serological study conducted with 21,387 samples, 23.48% of the people surveyed showed traces of IgG antibodies which hinted at novel coronavirus exposure. While this number assumes zero bias in the sample and a uniform spread, the numbers are still surprisingly higher than the 1.09% prevalence seen in the pilot serosurvey done in April this year. ICMR intends to follow up with season 2 across the country soon. 

Second stimulus could prove to be long-term detrimental:  A report by Dutch MNC Rabobank has projected that in case India succumbs to peer pressure of announcing a second stimulus package, resultant inflation could well double up and swell to a hefty 12%.

A $10 million rap on the wrist: UBS agreed to cough up $10 million to US SEC on the allegations of wrongfully allocating bonds meant for retail investors to “flippers”. Although there has been no official statement admitting or denying the charge, the bank has agreed to pay.

Dark shadow on great gesture: UK government announced an above inflation pay-hike for 900,000 public sector workers with the highest percentages reserved for teachers and doctors. Sadly though, nurses were left out of this due to a 3-year wage hike given in 2018. No wonder people aren’t really lining up for the approximately 50,000 nursing vacancies across UK.

MARKET PULSE

The Indian markets continued their steady movement in the green. Most investors are hopeful that this ain’t a bear wearing a bull-skin. The indices again witnessed the most euphoric rally in RIL, while Bajaj Finance found itself out of favour, especially over news of Rahul Bajaj stepping down as chairman.

Oil prices rose about 3% to a 4-month high, riding on the 750-billion euphoria wave (Hint: The European stimulus package).

All that glitters is not gold! Silver is having it’s shiny moment with a 2.5% surge on MCX in the Indian markets. Some of the rise can be attributed to the hope that apart from a safe haven, the physical metal will also see heightened interest thanks to a pick-up in industrial activities.

WILD CARD

In some news blossoming half way across the world, Kenyan flower business is picking up. Europe makes up for 70% of Kenya’s cut flower exports. In March, millions of flowers had to be thrown thanks to cancelled weddings. Reports suggest that Kenyan flower demand has bloomed up to a fragrant 85% pre-covid number. Yes, we are aware we took some puns too far in this case.

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