Stock Market Investment Shot, 12th September 2022

India’s 10 most valuable listed companies added Rs.133,747 crore in market cap last week. The surge was led by TCS, RIL and Infosys. While TCS gained Rs.26,249 crore in market cap, Reliance Industries added Rs.24,805 crore and ICICI Bank added Rs.20,471 crore during the week. Among others, SBI added,
Rs.15,172 crore, Adani Transmission Rs.7,730 crore and HDFC Bank Rs.7,248 crore. Among losers, Hindustan Unilever gave up Rs.3,618 crore in market cap while HDFC fell Rs.2,551 crore. LIC has dropped out of the top-10 list.

The Finance Ministry plans insurance reforms including reduction in minimum capital requirement, so as to increase insurance penetration in India. At 4.20% in 2021, insurance penetration is growing, but way
below Asian and Latin American standards. The minimum capital requirement of Rs.100 crore for setting up an insurance business may be reviewed. Like in the case of banking, IRDAI may look at differentiated
players in insurance too. Government has already eased rules on FDI and private ownership in insurance.

The good news is that in FY21, nearly 19 PSUs turned around from losses to profits. Some of these turn around stories include Chennai Petro, Western Coalfields, National Fertilizers, among others. Out of these 19 turnaround stories, 8 PSU had reported losses for 2 or more consecutive financial years. This was led by higher revenues and better control on expenditure. A total of 255 operating CPSEs reported aggregate revenues of Rs.24.26 trillion. Out of these 255 CPSEs, 177 recorded net profit and 77 recorded net losses.

Reliance Infrastructure has filed an arbitration claim of Rs.13,400 crore connected to the deal to sell its Mumbai power-distribution business to Adani Transmission Ltd. While details are not available at this
point of time, Reliance Infrastructure cited breach in the terms of the December 2017 agreement. As of now, the financial implication could be ascertained and is contingent upon final outcome of arbitration.
Adani has not offered any response to this arbitration claim, so it is not known where the group stands.

EXIM Bank has expressed apprehensions that India’s merchandise exports in Q2 could slow by 3.9% to $114.4 billion on sequential basis. This is likely to be triggered by the global demand slowdown. Q1 saw yoy exports growth of 25%, but that is likely to slow down to 11.4% yoy growth in Q2. Exports could be negatively impacted by soft commodity prices, slowdown in trading partners, inflationary pressures and tight monetary policies. That is also likely to further widen the trade deficit for remaining months of
FY23.

It sounds ironical, but online edtech companies are suddenly discovering the virtues of going offline.
After all, there is nothing like the good old classroom. This new strategy has been in the works for some time. However, after Lido Learning filed for bankruptcy, there is a sense of urgency in the Indian edtech sector. Byju’s has opened 200 tutoring centres and will scale up to 500. Unacademy and Vedantu are adopting the hybrid model too. Edtechs are hoping PE funds will be back with their cheque books, soon enough.

The much talked about Rs.31,000 crore open offer by the Adani Group to buy 26% additional stake in ACC and Ambuja Cements, closed to a dull response on 09th September. In the case of Ambuja, out of the 51.63 crore shares requested, only 6.97 lakh shares (13.5%) were tendered. The Adani had made the open offer for Ambuja at Rs.385 per share, a discount of 15.2% to the closing price on Friday. It remains to be seen what would be the next steps. ACC and Ambuja have combined capacity of 70 million TPA in India.

Former CEA and currently the executive director of IMF, KV Subramanian, has estimated that India’s Q1 GDP may have been about 60 bps higher than the 13.5% growth shown by MOSPI. According to KVS, incorporating high-frequency data like digital transactions, E-way bills and GST collections would give a more representative view of GDP growth. Subramanian things, net of oil impact, the real GDP should have grown closer to 20% in Q1. In the first quarter, real GDP had come in nearly 200-250 bps below
estimates.

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