Stock Market Investment Shot, 11th August 2022

RBI released guidelines for digital lending including rules for eligibility and for loans and data collection. Digital lenders are either regulated,authorized or non-regulated by the RBI. The digital lending guidelines apply to the first category only. For instance, such regulated entities can only disburse loans and get repaid between bank accounts of borrower and the regulated entity without any pass-through. Fees to LSPs will be paid directly by the RE. Credit limit can only be hiked with borrower consent. Data must be need based.

The Union Ministry of Civil Aviation has confirmed that the limits on domestic airfares will be removed from 31st August after almost 27 months. Since the stabilization has set into airline flows, the free pricing will allow the airlines to charge for higher ATF prices, if necessary. Currently airlines cannot charge fliers less than Rs2,900 and more than Rs8,800 for domestic flights under 40 minutes. While the lower caps were meant to protect financially weaker airlines, the upper caps protected passengers from
surge fares.

For the June 2022 quarter, Coal India reported 179% higher net profits at Rs8,833 crore. Revenues for the Q1FY23 stood 39% higher at Rs35,092 crore. Coal India was able to fetch Rs4,340 per tonne from e-auction of coal and it sold nearly 21 million tonne via e-auction route in the June quarter. The total output of Coal India for the June 2022 quarter increased by 28.9% at 159.75 million tonne (MT) on a yoy basis. Currently, Coal India accounts for over 80% of domestic coal output and is eying one billion tonnes output by FY24.

ICRA, part of Moody’s, warned that nearly 100 Indian companies with debt of Rs35,000 crore may be downgraded after RBI tightened rating methodologies. Some of the sectors likely to feel the pain include power, healthcare, engineering and infrastructure. Many companies could see downgrades of up to 2 notches in their ratings. This would mean; Indian banks will have to set aside Rs400 crore as additional capital especially if ratings are lower. Rating agencies can now consider only explicit guarantees for debt.

Hindalco reported 47.7% higher net profits for June 2022 quarter at Rs4,119 crore on strong operational efficiencies. That is 50% higher than analyst estimates. Sales revenues for the quarter were higher by 40% yoy at Rs58,020 crore. Aluminium prices surged higher yoy. However, Hindalco is up against supply chain constraints like lower output in Europe and soaring energy costs. Copper revenues rose 48% at Rs10,529 crore. Novelis sales were up 32% and net income was $307 million. Net debt fell 19% to Rs42,193 crore.

JSW Neo Energy, a unit of JSW Energy, will buy a portfolio of 1.75 GW of renewable assets from Mytrah Energy for Rs10,530 crore. While the transaction is subject to CCI approval, it will be the largest acquisition by JSW Energy. This acquisition will take JSW Energy’s operational generation capacity 35% higher to 6.53 GW. Nearly, 2.5 GW of under-construction wind and hydro projects will also be commissioned in phases over next 24 months. This will help JSW Energy achieve its renewable capacity
target of 10 GW by FY25.

Eveready Industries, the battery maker which had been recently acquired by the Burmans of Dabur, hit a 5-month high of Rs367.70. Eveready surged nearly 7% in last 2 days on hopes of better business outlook.
Eveready is a household name in batteries and flashlights with over 50% market share in India. In Q1FY23, Eveready reported 18% higher sales on the back of volume growth in a tough market. EBITDA margins contracted, but that was expected. The markets are betting on the change in management at the top.

Sugar stocks fell over 7% on Wednesday as Balrampur Chini and Renuka slipped. Sugar companies saw pressure on sales in the June quarter while EBITDA margins have fallen sharply on the back of higher costs. Sugar mills are already facing problems after the cane prices were again hiked this year. A big challenge in the quarter was lower sugarcane yields. Also, fixed overheads could not be fully absorbed due to lower crushing days. The Red Rot disease had also impacted the sugarcane availability in the catchment areas.

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