RBI MPC & More

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MAIN STORIES

Will they? Won’t they? They didn’t.

These days RBI’s MPC meetings are as awaited as once upon a time rare cricket series were. This time though, there were bonus factors to watch out for. As for the interest rate, in the interest of not giving wind to inflation having cut 115 bps in the last seven months, it was maintained at status quo with repo rate at 4% and reverse repo rate at 3.5%.

The big clincher: While the loan moratorium ends on August 31, listening to a lot of bankers the RBI brought in the loan restructuring program. Banks will now be allowed a one-time change in loan repayment terms, be it through a longer payment period or lower interest rate or even a payment holiday. However, to ensure that this does not become a carpet to brush today’s pain to hit back in the economy’s face in the future it will be monitored by a committee to be headed by veteran banker KV Kamath.

Double bonanza for gold borrowers: With the recent spike in prices, it is already more buck for every gram of gold pledged for a loan. Now, RBI has hiked the loan-to-value from 75% to 90% when borrowed for non-agricultural purposes. The only trouble for lenders is that with such a wafer-thin margin, any drop in prices leads to a higher risk of default. No wonder, Muthoot and Manapurram both slipped by 10% intraday.

Vodafone Idea’s bag of woes

If hat-trick is for three consecutive times, can you call eight consecutive times an octatrick? Because then Vodafone Idea scored an octatrick of declaring quarterly losses, this time with the added event of net worth turning negative.

 Mind boggling numbers: The company posted a gianormous loss of Rs. 25460 Crores. Even setting aside the Rs. 19440 identified to cover for the AGR dues that they owe to the government, the loss is still bigger than the Rs. 4874 Crore declared in the same quarter last year, thanks to a 5.4% decline in revenue from operations. Even with the all-time low subscriber churn of 2%, net subscriber base fell by about 3.8% and average revenue per user or ARPU by almost 6%, from one quarter to the other!

Textbook example of market irrationality: Despite all the bloodshed in it’s balance sheets, Vodafone Idea has seen it’s share price double in three months, beating headline-hogger Reliance Industries too. Why? TBTF. Investors, mostly retail, putting money in this penny stock believe the company is Too Big To Fail and that the government will swing into action to save it from liquidation.

Uber changing stripes

While Indians weren’t much taken by the charms of Uber eats, going by it’s latest quarterly result the food delivery business has been the saving grace for Uber.

What do the numbers tell us? Gross bookings delivered double the revenue in the food delivery business of $6.96 Billion as compared to the $3.05 for their conventional ride hailing business. Even when it came to adjusted net revenue, the delivery business edged out the ride hailing business, delivering $885 million in comparison to $793 million. Clearly, we are still okay sharing a car with strangers but we are hogging all the food possible, delivered by strangers.

Not just food delivery: Uber has demonstrated it means business in ood delivery with it’s $2.65 billion acquisition of close competitor Postmates. If anything, this pandemic has been an enlightenment for Uber leading to more diversification. Recently, it announced it’s entry into the fairly crowded grocery delivery space in the US. In India, it is experimenting with different B2C services like Uber Medic, Uber Essential and Last Mile Delivery.

IN SNIPPETS

Speed bump on the LIC IPO path: As LIC starts showing it’s cards, some concerns emerge. The insurer disclosed a gross NPA of 8.17% at the end of March 2020. Although banks have to be measured on a different scale, this is a higher number by any measure.

Another downward revision, this time for two-wheelers: Conjecture demands that two-wheeler sales lead the economy out of this hole on the back of rural demand revival. ICRA pays no heed and downgrades estimates for sales to decline by 16-18% in FY21.

Services activity far cry from growth mode: Needing passing marks of 50 to move over to growth, in July India’s services business activity index stayed muted at 34.2 in July. There was nothing to look forward to in the report. Job losses? Fastest on record. Sentiment? Negative. V-shaped recovery be damned.

WFH = Video game time: Conventionally a weak quarter, Japanese video game maker Nintendo broke all analyst estimates to report a 428% jump in profits riding on a wave of demand for Switch consoles and the hit title Animal Crossing: New Horizons.

Paper to digital is here to stay: Iconic newspaper The New York Times had a historic quarter where digital revenue exceeded print for the first time ever. While ad revenues remained stressed for both mediums, they added a record 669,000 people looking for a way to stay connected to the world from the comfort of their home.

MARKET PULSE

The market seemed to approve the outcome of RBI MPC meeting to end in green with the lead taken by Infosys, HDFC Bank, TCS and ICICI Bank.

As for gold, nothing new. It continues it’s upward spike.

WILD CARD

Signalling a progressive shift, Pope Francis named six women for the 15-member Council for the Economy at the Vatican, which so far has always been all-men. Not only is it about a more prominent role to women in religion, but it also breaks through the myth of women and money considering the committee handles cash flow for the institute. Now, that’s a rockstar way of getting two birds with one stone.

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