Within the mutual fund space, the one space that has been attracting a lot of interest is arbitrage funds. In the September quarter, the equity funds accounted for nearly 78% of all flows. Within the equity category, the broad-based funds and the arbitrage funds shared the spoils. Now, arbitrage funds may be classified as hybrid funds by AMFI, but the CBDT classifies arbitrage funds as equity funds for tax purposes. However, in reality, the growth of arbitrage funds has been at the cost of liquid funds due to the equity tax benefits.
Tata Power reported strong growth in its core business as net profits grew 9% year over year to Rs 1,017.41 crore for Q2 FY24. Top-line revenues were up 13% at Rs 16,030 crore in the quarter. While the domestic business contributed 84% to the profits, the remaining 16% came from the overseas business. Tata Power has seen a lot of positive traction in new business initiatives like greenfield solar cell and module manufacturing, as well as other recent additions. Net debt to EBITDA of Tata Power improved in Q2 FY24 to 2.65X from 2.73X.
Vedanta is currently in talks to raise up to $2.5 billion, or around Rs 22,000 crore, to pay off its debt to the overseas bond holders. Vedanta Resources is also looking to sell a stake in its India unit, Vedanta India Ltd., to raise funds for the same. The fund-raising will happen via preference shares issued by the parent company. Vedanta Resources PLC, the parent of the Vedanta group, has debt servicing of $2 billion in 2924 and another $1.8 billion in the next two years. Refinancing this debt is the top priority for Vedanta.
One of India’s largest food aggregators, Swiggy, is going all out for a 2024 IPO and has apparently also appointed 7 investment bankers to act as BRLMs. Kotak Mahindra Capital, Citi, and JP Morgan are among the names that have been picked up. The IPO size is expected to be around $1 billion. In its last fund-raising, Swiggy had been assigned an enterprise valuation of $10.2 billion. Subsequently, there were a slew of downgrades followed by upgrades. The recent rally in Zomato stock price should help Swiggy IPO.
Pidilite, the manufacturer of the famed Fevicol brand, plans to foray into the NBFC business and build its credit portfolio. Most of the credit will be in the form of small retail loans. Towards this end, Pidilite is likely to acquire a controlling stake in Pargro Investments Private Limited, which currently belongs to the owner family of Pidilite. Pidilite plans to invest an additional Rs100 crore into the NBFC business. Pidilite expects that such a lending business would also synchronize with its core business model and ecosystem.
Oil India reported an 80% drop in net profits to Rs 2,363 crore due to a one-time charge. This one-time charge pertained to ongoing litigation pertaining to service tax demand by the states of Assam, Rajasthan, and Arunachal Pradesh. However, if you leave this exceptional loss aside, the profits from the crude oil vertical actually grew by 42% year over year. Revenues for the quarter were up 2.4% to Rs 5,913 crore. While Oil India has contested these service tax demands, the provision for such outflows is more of an abundant caution.
The government may have estimated a dividend from CPSEs of Rs 43,000 crore for FY24, but the actual numbers are likely to be closer to Rs 63,000 crore. This is partially likely to fill up the shortfall in disinvestment flows for FY24. The big dividend pay-outs came from the National Investment & Infrastructure Fund (Rs3,031 crore), IOCL (Rs2,182 crore), Powergrid (Rs1,701 crore), Coal India (Rs1,556 crore), and NTPC (Rs1,487 crore). If the revised estimates are achieved, it would be higher than the Rs59,000 crore receipts reported in FY23.
According to an FE poll, the CPI inflation for October 2023 (which will be announced on Monday) is likely to come in at a 5-month low of 4.8%. For the RBI, the good news will be that it will be just 80 bps short of the target. This will also be sharply lower than the year-ago inflation of 6.77%, so even the base effect should help. Food inflation is expected to fall further, from 6.56% to 6.05%. While fuel inflation is likely to remain high, on the back of elevated crude prices, residual core inflation is likely to stay at 4.5%.