India CPI inflation for February 2023 came in marginally lower at 6.44%, but still well higher than the RBI outer tolerance limit. Food inflation remained flat at 5.95% while core inflation also stayed sticky at 6.1% for the month. This is most likely to prompt the RBI to hike rates by 25 bps in their forthcoming April 2023 MPC meeting. Withing food basket, the inflation in cereals and spices continued to be high, even as there was pressure on most of the high protein foods. The heat wave has cast a shadow over Rabi crop.
According to the findings of a FICCI survey, the average interest rate paid by manufacturers has gone up to 9.38% the March 2023 quarter. That is 101 bps higher than the sequential quarter and is a clear signal that cost of funds is starting to pinch Indian corporates. In fact, the peak rate at which loans were raised went as high as 15% in some cases. Clearly, the RBI hawkishness is resulting in higher interest costs for Indian corporates. Inflation is persistently high due to a mix of monetary factors as well as fiscal factors.
Shriram Finance plans to raise Rs20,000 crore to fund its growth in the fiscal year FY24. The merged entity plans to grow its AUM by 15% in FY24 to around Rs200,000 crore. Its AUM currently stands at Rs177,000 crore. Shriram will also look to utilise its entire $750 million ECB limit next year. It may be recollected that Shriram Finance was formed last year through the 3-way merger of Shriram Transport Finance, Shriram Capital and Shriram City Union Finance. It targets to keep net interest margins (NIMs) around 8.0%-8.5%.
The largest alternate asset manager in the world, Blackstone, has fully exited Sona BLW Precision, a north based manufacturer of auto components. There were enough buyers to absorb the supply from Blackstone, chief among them being the Government of Singapore. The stake sale raised a total sum of Rs4,917 crore for Blackstone. The deal was done at Rs410/share. The Monetary Authority of Singapore (MAS) and Societe Generale also bought the stock; apart from BNP Paribas Arbitrage and Fidelity Asia.
The 3-year lock in period of Yes Bank for SBI and other banks ended on 13th March 2023. The stock is likely to remain volatile as it adjusts to the supply flow. SBI had held 48% stake in Yes Bank, which is now down to 26%. The 9 entities who had picked up a stake in Yes Bank had been mandated to hold for a minimum period of 3 years. Apart from SBI, HDFC Bank, ICICI Bank, Axis bank Kotak Bank, Bandhan Bank and IDFC Bank are among other holders. YES Bank was profitable from the third quarter of its takeover.
The fall of Silicon Valley Bank (SVB) has put the focus on Indian startups. Several start-ups have put deposits in SVB, or taken loans from SVB or have investments from SVB. Incidentally, SVB has invested in nearly 21 Indian start-ups (as per Tracxn) and this includes big names like Shaadi.com, CarWale, Tutor Vista, Naaptol, Bharat Financial Inclusion, Geodesic, Paytm Mall and Paytm. However, Paytm confirmed that SVB had fully exited its stake in Paytm worth $1.7 billion. Most would be covered by FDIC insurance.
Indian government may see a modest slippage in fiscal deficit for FY23 with finance ministry seeking additional spending through supplementary demands for grants. Nirmal Sitharaman has sought approval for additional spending of Rs2.7 trillion, but the net impact would only be half of that. It remains to be seen how much the fiscal deficit goes beyond its avowed target of 6.4%. Conservative estimates expect the fiscal deficit to get closer to 7%. Pensions and rural telecom services are likely to add to fiscal burden.
SBI Mutual Fund has mobilised Rs3,600 crore in its Dividend Yield New Fund Offer (NFO). This would make SBI the dominant player in the dividend yield funds space with a market share of nearly 25%. It got about 1.23 lakh applications from 70% of pin codes and added nearly 40,000 new investors in the process. The NFO has closed on 06ths March and will reopen for NAV-based subscription and redemption from 17th March 2023. Dividend yield is a small category, with total AUM of Rs13,844 crore with major share to SBI.