Friday, 22nd April 2022

Reliance Industries is on the threshold of hitting market cap of Rs.19 trillion, or approximately $250 billion. Reliance is already the most valuable company in India in terms of market cap with a huge margin over TCS. On Thursday, the stock of Reliance touched a new high of Rs.2,787. In the last 3 trading sessions, RIL rallied by 10% adding Rs.1.64 trillion to its market cap. Morgan Stanley had recently raised the price target of RIL to Rs.3,253 on new energy boost. They expect the oil and gas prices to fund half of Reliance capex.

Nestle stock slipped 1.12% on Thursday after net profits for the Mar-22 quarter fell 1.2% to Rs.595 crore. Despite the rural headwinds, top line revenues were up 10% at Rs.4,002 crore. The domestic sales were driven by volumes and price but export sales were lower by 1% yoy. Like most of the FMCG companies, Nestle has also been hit sharply by rise in input costs, which has compressed its operating margins. In fact, OPM fell by 200 bps yoy. The management has blamed the rampant input inflation for the lower margins. 

L&T Technology Services (LTTS) reported 34.7% jump in net profits for the Mar-22 quarter at Rs.262 crore. Unlike the other IT companies, LTTS also had impressive constant currency revenue growth of 20%. The revenues in Q4 were up by 22% yoy at Rs.1,756 crore. For the full year, LTTS saw profits grow by 44.27% to Rs.957 crore while the revenues for the full year increased by 20.55% to Rs.6,560 crore. For the fourth quarter ended Mar-22, LTTS reported robust growth across each of its five principal business verticals.

As the mercury soars, India may have to put up with unprecedented power cuts as most of the power plants are facing an acute shortage of coal. India still relies heavily on thermal power and the blackouts have already begun in most states. Already states like Punjab, Uttar Pradesh and Andhra Pradesh have cut power supply for up to 8 hours in a day. While power has been a problem, this appears to be a virtual power crisis in India. This has resulted in a spike in the power costs adding pressure to the input inflation.

After keeping in the backburner for over 2 years, government has decided to take a fresh look at the BPCL privatisation, including revising the terms of sale, if warranted. DIPAM is of the view that valuations and expectations need to revisited due to rampant inflation, geopolitical situation and the hawkish stance of the central banks. Government plans to sell its entire 52.98% stake in BPCL for which just 3 EOIs have been received. Financial bids are to be invited and green energy shift may be one of the issues for debate. 

During the Mar-22 quarter, it looks like retail investors and mutual funds added to their holdings in Paytm. In fact, retail holding in Paytm more than doubled from 3.49% to 7.72%. Paytm shares are down nearly 70% from the IPO price of Rs.2,150. Even institutional investors like CPPIB hiked its stake in Paytm. But, overall FPI holdings in Paytm fell sharply from 9.36% to 4.42%. The top-10 Indian mutual funds have all added to their holdings in Paytm. The company expects to achieve operating EBITDA in next 6 quarters.

In a much awaited move, the government will mostly take a final view on the timing of the LIC IPO over this weekend. The stake sale as per the DRHP was a 5% stake sale entailing the sale of 31.6 crore shares worth Rs.65,000 crore. However, in the changed conditions, LIC may look to either reduce the size of the IPO or even target lower valuations resulting in a larger stake being sold. LIC has time till 12th May to wrap up the LIC IPO, failing which it will have to do a fresh filing with SEBI with fresh actuarial valuation.

During his 2-day visit to India, the UK Prime Minister Boris Johnson has expressed hope that the free trade deal with India would be stitched by the end of 2022. This is likely to boost the bilateral trade between India and UK by billions of dollars. Now that UK has seceded from the EU via BREXIT, India can negotiate separate FTAs with UK. Boris Johnson is also look at India to become a customer of UK’s green technology and the possibility of strengthening services trade. He expects the FTA to double volume of Indo-UK trade.

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