Friday, 1st April 2022

The core sector growth for Feb-22 came in at an encouraging level of 5.8%. However, this was largely on account of negative base effect as core sector growth had dipped -3.3% in Feb-21. The bigger concern was the loss of momentum on a MOM basis as core sector growth contracted by 5.3% due to a combination of high crude prices and the Ukraine situation. Among the eight sectors, it was oil refining, steel, natural gas and cement which gave a big push to core sector growth while crude extraction and fertilizes lagged.

With the Rouble peg to gold announced, Putin has been demanding that foreign buyers pay for Russian gas in roubles or in gold or have their supplies cut. This is likely to impact the EU region the most as they rely on Russia for over one-third of their oil and gas needs. This is not something that can be replenished from other sources. This has already resulted in a spike in the cost and electricity across the Europe and UK. Payment in Roubles would also blunt the sanctions imposed by the West on Russia post declaring war.

Ruchi Soya fixed the issue price of its FPO at Rs.650 per share, the upper end of the price band. The issue had closed 3 days back, but the final price could not be fixed till the application withdrawal window was kept open till 31st March. The exchanges have confirmed that a total of 97 lakh bids were withdrawn from the FPO, predominantly from QIB investors. As a result, the oversubscription to the FPO issue eventually fell from 3.60 times to 3.39 times. Due to misleading SMSs, SEBI had ordered for a withdrawal window.

Most analysts have been questioning the rationale of the share swap ratio between Equitas Holdings and Equitas Small Finance Bank. The view was that the transaction was tilted in favour of the much smaller holding company. The ratio is to allot 231 shares of Equitas SFB for every 100 shares of Equitas Holdings. Post-merger, Equitas Holdings will be dissolved. The market cap of Equitas SFB stands at Rs.6,404 crore compared to Rs,3,644 crore for Equitas Holdings. The view is that the allotment swap ratio was skewed.

The government and the RBI have put out the borrowing program for the first half of FY23. The Centre will borrow Rs 8.45 trillion in the first half of FY23, representing nearly 60% of the full year target of Rs.14.31 trillion. The idea of front loading the borrowing program is normally to push capital expenditure which has the potential to will have a multiplier effect. This is higher than the gross borrowing of Rs.12.05 trillion in FY22. The borrowing will be spread across 2, 5, 7, 10, 14, 30 and 40 year securities and FRBs.

In FY22, total investor wealth accretion was to the tune of Rs.59.75 trillion with the Sensex surging 18.29% during the year. This was despite major headwinds like FPI selling, geopolitical tensions, spike in input costs, continuous rising inflation and a hawkish stance from the US Fed. Of course, the market cap is much lower than the peaks attained in late October 2021. Sensex had scaled an all-time high of 62,245 on 19th October last year. The returns on the Nifty were slightly better at 19% for the fiscal year ended Mar-22.

Amidst rising imports and a deepening merchandise trade deficit, India’s current account deficit widened to $23 billion in the Dec-21 quarter. This translates into 2.7% of GDP. The current account deficit stood at $9.9 billion in Sep-21 quarter but the surge in oil prices and a surge in gold imports were the key drivers. The CAD was lower than consensus market estimates. While the pay-outs on interest and dividend has been higher, the services surplus despite growing over last quarter, failed to keep pace with trade deficit.

Yatharth Hospital & Trauma Care Services Ltd has filed draft red herring prospectus with SEBI for its proposed IPO of Rs.610 crore plus OFS. Yatharth operates and manages private hospitals in the Delhi-NCR region. The fresh issue will be worth Rs.610 crore with an additional offer for sale of 65.51 lakh shares, at a price band to be decided later, by promoter entities. Yatharth is also planning a pre-IPO placement of Rs.122 crore, and if successful, final IPO size would be reduced. It will use issue proceeds to reduce debt.

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