Year 2022 may not have been great for equity markets, but IPOs have given 50% returns on an average. Sensex returns in this period were just 1.6%. In 2022, year-to-date, 51 IPOs raised Rs38,155 crore; spread across 8 big ticket IPOs including the Rs20,500 crore LIC IPO. The fund raising in 2022 has been less than one-third of 2021, but we still have more than 3 months to go. In 2022, 40% of IPOs gave negative returns 45% gave over 20% returns, while 20% gave over 100% returns. Adani Wilmar was the star IPO of 2022.
Tata Group’s FMCG ambitions were always well known and now they are chasing inorganic stories. In the latest development, Tatas have initiated talks with Bisleri International for a stake in the packaged water company. Tata Consumer Products already sells mineral water under the Himalayan brand. In FY21, the Indian bottled water market was valued at $2.43 billion and projected to grow at 13.5% CAGR. It is a play on increasing disposable income, rising health and hygiene awareness plus increasing product
innovation.
After the Jefferies report cautioning about India’s falling forex reserves, several economists also warned that the recent fall in forex reserves may not be healthy. In the last 1 year, the forex reserves have fallen from $647 billion to $553 billion as the RBI has aggressively tried to defend the rupee even as Fed stays hawkish. That has meant, despite RBI selling dollars, the rupee has continued to weaken. To add to the woes, oil prices are high, imports are rising, exports are tepid and foreign portfolio flows have been
erratic.
As the proposed merger between Sony Pictures and Zee Entertainment ran into trouble with CCI, both are contemplating concessions. The will offer pricing discounts to ease concerns of sheer dominance in the media business post the merger. CCI had raised concerns over substantial market share of the merged entity. They have also agreed to form and operate independent advertising verticals to allay concerns of arm twisting. IF CCI is not convinced with remedies, the matter goes to Phase 2 for detailed
investigation.
The index of industrial output (IIP) for July 2022 came in sharply lower at 2.4% yoy, compared to 12.7% in June 2022. Manufacturing growth dipped to just 3.2% while electricity grew 2.3% and mining output contracted by -3.3% in July 2022. In terms of user industries analysis, capital goods production recorded 5.8% growth while consumer non-durables recorded negative growth. July marked the lowest IIP growth since April. In addition, the final revision of IIP growth for April 2022 pegged it 44 bps lower at just 6.66%.
After falling to 6.71% in July 2022, CPI inflation bounced back to 7% in August. Bloomberg estimates had already pegged CPI inflation closer to 6.9%. Energy inflation tapered in line with global prices, but food inflation gained traction amidst lower than expected Kharif output. This would persuade the RBI for another rate hike when it meets later this month. RBI has already hiked repo rates by 140 bps from 4% to 5.4% in last four months. Recently, government had imposed 20% export duty on rice to curb the exports.
The government is planning a rescue package for the oil marketing companies and may pay Rs20,000 crore as relief to compensate them for losses. In Q1FY23, the 3 OMCs reported net losses of over Rs20,000 crore as they sold petrol and diesel at their pumps at less than landed cost to keep inflation in check. This would escalate the oil subsidy bill by nearly 4 times the budgetary estimate. The same is true of LPG, where import prices are up 303% in last 2 years but retail prices are up just 28%, leaving a yawning gap.
Vedanta has selected Gujarat as the location for its semiconductor project; a joint venture with Foxconn of Taiwan. The project will be located near the city of Ahmedabad. A detailed announcement is expected this week along with a formal signing of MOU. Incidentally, Maharashtra, Telangana and
Karnataka had also been in the reckoning for the Vedanta-Foxconn mega project. India’s chip market is estimated to reach $63 billion by 2026 from $15 billion in 2020. Vedanta is betting heavily on chips for its future growth.