Automobile Sector is on its Knees 😢
Yesterday’s Market Performance
Nifty: 15582.80 | 147.15 (0.95%)
FIIs net buy: 2412.39 Cr
DAX: 15421.13 | 98.85 (0.64%)
Sensex: 51937.44 | 514.56 (1.00%)
DIIs net buy: 179.78 Cr
FTSE: 7022.61 | 2.94 (0.04%)
In today’s issue, we discuss;
- Industry news- The automobile sector is on its knees due to the second wave (where can you go anywhere, any way!), Gold’s impressive run- riding on the back of Gold Bonds, rising petrol prices taking our breaths away.
- Company News- Vodafone India to raise INR 7,000 Crore, new customer growth coming under threat.
- PNG Housing Finance’s Performance and other financial news.
- Educative concept to help you keep learning.
PNB Housing Finance: 525.65 | 87.60 (20.00%)
- PNB Housing Finance has announced a fundraise of ₹4,000 crores. which will be led by The Carlyle Group and former HDFC Bank CEO Aditya Puri.
- Shares of PNB Housing Finance hit the 20% upper circuit, reacting to the news.
Mahindra & Mahindra: 807.95 | 37.90 (4.48%)
- The net PAT stood at Rs 163 crore against a loss of Rs 3,255 crore in the same period last year. The massive loss of Rs 3,255 crore in March 2020 was due to the write-down of investment in Ssangyong and other international subsidiaries.
- However, the company expects to take at least about 2 years for car sales to equal or beat the pre-covid peak.
Automobile sales are expected to continue their barren run in May, on the back of a second wave and harsh lockdowns across the country 😶
- Double-digit decline (on a comparison to May 19) across all segments.
- States with complete lockdown represent ~50-60% of the overall volume, across segments.
- Agricultural field activities have been classified as essential services, but a harsher (less reported) second wave in rural India has subdued demand for Tractors.
- Passenger Vehicle, 2W & Commercial Vehicle are expected to deliver below-average numbers, with the expectation of a boost in pent-up demand, once there is the partial easing of lockdowns.
Gold continues its impressive run, with Gold Bonds piquing consumer interest 🥇
- Income dipped (partly because of a change in accounting year) with interest income falling by 37% (drop-in G-Sec yields, and Banks in Reverse Repo Mode), expenses dipped (sharp drop in employee costs helping).
- A 59% surge in other income, contributed immensely to the surplus generated (helping the GoI in their budget targets).
- Increased focus towards FX transactions helped, with a future mandate (as per the annual report) to identify new asset classes, new jurisdiction markets for deployment of currency assets for portfolio diversification.
Petrol touches INR 100, Diesel 92 in Mumbai; Damn! Getting way too expensive now? ⛽😣
- Base metals, agro commodities have seen increased demand, and because of supply-side constraints, have recorded higher prices in recent months; Fuel Items & Precious Metals have been relatively subdued in comparison.
- Factors for a spike have ranged from the glut of liquidity (know this right?), faster than expected recovery in global consumption/demand, and a subsequent supply-side mismatch.
Okay! How do I interpret this? (Apart from paying way too much for petrol)😏
- A rise in commodity prices can affect the economy through inflation, foreign trade & investments.
- India is self-sufficient when it comes to Food (we’re a net exporter), and global food inflation has largely not percolated to us.
- Our foreign trade numbers for the last 5 years, across metals & fuel items (largely contributing to our imports), are within permissible numbers, allowing us to maintain the current numbers for a little longer (eventually assuming supply-side issues will dissipate).
Race to the finish line for Vodafone India to raise INR 7,000 crore 💸💸
- VI’s domestic lenders may have to take on additional provisioning to cash the telecom operator, which has struggled to raise fresh capital.
- In September 2020, the company announced plans to raise INR 25,000 crore to pay statutory dues and operational expenses; so far the company has been unable to raise any external capital (Parent entities Vodafone, and Aditya Birla Group have declined to pump in any more capital).
- The company is struggling to service current operations, and with cash in short supply, it has been unable to invest in infrastructure capabilities (read: 4G), new customer growth coming under threat.
Tough. What else I should know? 🤨
- The company has a consolidated debt of INR 1,17,080 Crores, as of December end, with SBI, PNB, IndusInd, ICICI, Yes Bank, IDFC First, and HDFC Bank among the telecoms main lenders.
- Banks had written back provisions in the March quarter, with the company claiming that it was close to announcing a much-needed infusion of capital (seems like these have changed).
- The company was slapped with Adjusted Gross Revenue dues, payable to the Government of India, of INR 50,400 crores, that have a repayment period of 9 years, starting March 2022.
What’s going to happen to my network bro? 😥
- Lack of investment in 4G circles across the country, with rivals Jio & Bharti Airtel in a much stronger position is going to affect Vi’s ability to hold onto its current user base, not to mention arrest a slump in new subscriber addition.
- Tariff hikes seem a long way down the line, especially for Vi, (so you’re good on that front) with Bharti most likely to institute one in FY22 (see our earlier note).
- Plans for the next 12 months, will be expected at Vi investor earnings call in June, but debt repayment and fund-raise will be on the top (obviously right).
What else caught our eye? 👀
Banks and cryptos make a good duo?
- HDFC Bank and SBI have sent official notices to customers warning of curbs including permanent closure of accounts, prohibition of trading, and utilization of credit cards towards digital currency transactions.
- Several other banks including ICICI Bank, Yes Bank, and IndusInd bank have also pulled the plug on business accounts of crypto exchanges, often citing the now-defunct 2018 RBI Circular.
- In response, crypto platform Coinswitch Kuber is assisting its customers with responses, citing the Supreme Court ruling that struck down the RBI Circular, Right to Information reply, and RBI’s Annual Report.
RAW Pressery finds a more economical approach
- Juice maker RAW Pressery was sold to fellow Sequoia firm Wingreens in Feb, for more sustainable and economical business life.
- The brand is leveraging on Wingreens strong network, hitting record sales 2 months post the acquisition, expanding to Kirana stores, and smaller supermarkets in the process.
- A key eye on operations, leveraging on Wingreen’s foresight to contract manufacture instead of running an entire operational unit, has helped RAW Pressery significantly reduce costs.
China announced its newest approach to step a population decline
- Veering away from its current 2 child limit, the Chinese government is now allowing married couples to have 3 children.
- A population decline, not being arrested with the 2 child rule, and accentuated further because of an increased divorce rate (often linked to domestic violence) has meant that the Chinese government has no choice but to act.
- The country has guaranteed some benefits (whatever that is) to encourage its population, including housing and tax benefits, education support, clamping down on dowries, and educate young people on marriage & love (seriously!!).
Toast – Quote of the Day 📜
RBI's Annual Report 🔖 Small-Cap Funds' Big Returns 💸