Friday, 5th February 2021

Ultratech, India’s largest cement company will be raising a sum of $400 million in the global market through the issue of ESG Bonds or Sustainable Bonds. There are growing concerns over the impact that cement manufacturing has on the environment and this bond issue will help Ultratech party offset such risks. The bonds will have a maturity of 10 years and will be priced at a mark-up to the 10-year treasury benchmark yields. The bond has a clause wherein if Ultratech fails to achieve the target for environment sustainability by the end of the first year, then it will have to pay 25 bps higher interest for next 9 years. 

SBI chairman, Dinesh Khara, has confirmed that the bank would be looking to unlock the value of SBI Mutual Fund and SBI General Insurance in the current financial year. SBI Life is already listed in the Indian bourses. The time may be opportunity because SBI MF has already taken the lead as the largest Indian mutual fund by AUM and has been widening its gap over HDFC MF and ICICI Pru MF in the last few months. HDFC MF managed to get a very robust valuation for its AMC business despite the fund being among the less impressive performers in the market. The idea is that if the sum of parts of SBI is considered then the overall bank valuation may turn out to be quite different. However, for that to happen, the bank will have to give a hint via partial monetization. SBI has monetized life and cards.

SBI reported a small fall in net profit by 4.2% at Rs.6,258 crore due to a spike in provisioning in the quarter. SBI revenues were virtually flat with a growth of about 1.88% at Rs.97,182 crore. SBI reported spike in treasury revenues, flat revenues in retail banking and lower revenues from corporate banking. Operating margin contracted from 21.15% to 19.98% in Dec-20 quarter. The fall in the PAT was on account of the provisions for loan losses spiking nearly 40% to Rs.10,800 crore. Gross NPAs at 4.77% and net NPAs at 1.23% were also sharply lower. Capital adequacy at 14.5% could restrict loan book build-up. 

The NITI Aayog is expected to prepare the next list of divestment candidates in the next few weeks, so as to have a timetable ahead of the new fiscal year. The budget has set a target for divestment at Rs.1.75 trillion, which includes the mega LIC IPO. The FM has already indicated in the budget that some of the big divestment names like LIC, CONCOR, Shipping Corporation and BPCL will only be taken up for disinvestment in the fiscal year 2022. In addition, there is also the grand plan to privatize two PSU banks and one general insurance companies during the next fiscal. Buybacks may take a back seat for PSUs.

NTPC net profits for the Dec-20 quarter were up 15.39% at Rs.3,766 crore as the company got a smart boost from miscellaneous income. Gross revenues were up 3.96% at Rs.24,526 crore for the Dec-20 quarter. Despite power generation tapering, NTPC reported 7.38% rise in operating profits at Rs.5,699 crore. OPM also gained marginally from 20.04% to 20.70% in the Dec-20 quarter. As explained earlier, the boost to net income came from improved operational performance and a 30% spike in other income on a yoy basis. PAT margins improved from 12.33% in the Dec-19 quarter to 13.68% in Dec-20 quarter.

HPCL reported a 3-fold rise in net profits to Rs.2,355 crore in the Dec-20 quarter. However, the total revenues for the quarter fell by 2.9% to Rs.68,659 crore on the back of weak crude prices on a yoy basis. The EBITDA of the company also nearly tripled to Rs.3,302 crore. There was a slight improvement in the gross refining margin or GRM of HPCL during the quarter at $2.35/bbl as compared to #1.85/bbl in the Dec-19 quarter. In addition, the company also benefited from foreign exchange gains to the tune of Rs.870 crore during the quarter. In addition, the rise in crude prices over the last quarter would also mean that the inventory valuation would have favourably impacted the profits of the company. Most oil companies in the current quarter have seen top lines taper but profits have grown on better GRMs.

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