The ten most valuable companies in India by market cap saw value erosion of Rs.285,252 crore during the week, with Reliance the worst hit. Reliance Industries saw a market cap depletion of Rs.114,768 crore while TCS saw fall of Rs.42,848 crore. Other stocks to fall in the week were; HDFC Bank Rs.36,985 crore, HUVR Rs.20,559 crore, ICICI Bank Rs.16,626 crore, Bharti Airtel Rs.16,092 crore, HDFC Rs.13,924 crore, SBI Rs.10,843 crore and Infosys Rs.10,286 crore. There were no gainers in a week Nifty fell 4% on rate worries.
Foreign portfolio investors (FPIs) withdrew Rs.6,400 crore from Indian equity markets in just 4 trading sessions after the RBI hiked rates by 40 bps. Other headwinds, like crude prices, OPM pressures and US Fed hawkishness also played a part. April was the seventh consecutive month the FPIs were net sellers and May has started off on a negative note. Between Oct-21 and Apr-22, FPIs withdrew Rs.1.65 trillion from Indian equities. In Asia; even Taiwan, South Korea and the Philippines witnessed heavy FPI outflows.
The ownership of global investors in the Nifty 500 companies fell to a multi-year low of 19.5%. It was last seen at 19.3% in early 2019. Last year, the global investor ownership of Indian equities had stood at 21.2% so there is a clear indication of FPIs going light on India. While global investors were cutting their stake in India, domestic funds raised their stakes in Indian stocks, especially in IT and hydrocarbons. The selling by global investors has been largely offset by the aggressive buying by domestic funds and retail investors.
Plans are afoot at DIPAM to invite financial bids for Shipping Corporation of India by Sep-22. However, this will be only after the non-core assets are demerged. These non-core assets that will be hived off include Shipping House in South Mumbai and the Maritime Training Institute in Powai, Mumbai. The non-core assets of SCI are valued at Rs.2,392 crore as per Mar-22 balance sheet. The government owns 63.75% in SCI and wants to hive off their entire stake. This will help boost India’s divestment revenues in FY23.
The Russia Ukraine war has come as a blessing in disguise for Reliance Industries. RIL deferred the annual maintenance work at the refining complex to churn out more diesel and naphtha amidst surging prices. RIL is buying cargoes of oil at discounted rates from Russia ahead of EU sanctions expected. RIL has already minimized feedstock cost by sourcing arbitrage barrels. In a sense cheap oil from Russia has helped India keep inflation in check. Indian refiners have bought more than 40 million barrels of Ural crude from Russia.
Future Enterprises Ltd looks to raise up to Rs.3,000 crore by selling its stake in its insurance business to cut debt. This could still save the company from the insolvency process, but looks a far cry. Last week, FEL closed the sale of 25% stake in Future Generali to joint venture partner, Generali SPA, for Rs.1,266 crore. Post the sale, FEL still holds 24.91% stake in Future Generali JV. If the balance stake is also sold and if its 33.3% stake in Future Generali Life is also sold, it can raise Rs.3,000 crore. It may still be too little, too late.
The government now looks to be keen to cut branches at Central Bank of India to hopefully move it to profits. The bank is under Prompt Corrective Action (PCA) since June 2017 and may soon take a call on the number of branches to shut in FY23. It currently has 4,258 branches. The rationalisation has been done in metropolitan and urban areas. It is the rural and semi-urban branches that are likely to see major cuts in the current fiscal. Central Bank has been under PCA since Mar-17. Such decisions are generally unpopular.
The electricity distribution companies (DISCOMS) owe Rs.1.21 trillion as dues to power producers, up over 4% yoy. The overdue amount in May 2022 increased by 13.4% to Rs.106,951 crore yoy. Amount owed to NTPC stands at Rs.5,073 crore, NPCIL Kudankulam Rs.3,420 crore and DVC Rs.3,399 crore. Among private players, DISCOMS owed Rs.25,285 crore to Adani Power, Rs.5,324 crore to KSK Mahanadi and Rs.5,308 crore to Lalitpur Power, owned by the Bajaj group. Renewable overdue were Rs.20,127 crore in May-22.