With consumer inflation up to 7.44% for July 2023, the government has a new challenge ahead of the upcoming elections. The government wants to free up nearly $12 billion to battle inflation. The centre needs to contain food and fuel inflation without impacting the fiscal deficit targets. It could be a repeat of last year, when the government had to spend welfare money to reduce inflation and rein in costs. India has a sharply reduced fiscal deficit for this year and is likely to spend about Rs1 trillion to battle inflation.
As per the RBI monthly bulletin, the central bank purchased spot foreign exchange to the tune of $4.50 billion in the month of June 2023. This includes gross purchases of $7.79 billion and gross sales of $3.29 billion. Interestingly, between February and May 2023, the RBI was a net buyers in dollars absorbing close to $16 billion in these 3 months and June is in addition to that. This has led to the forex reserves with the RBI expanding by nearly $33 billion in the first half of calendar 2023. RBI reserves fell sharply in year 2022.
ITC stock has touched a 2-month low with the stock correcting nearly 12% from its peak levels. Most of the investors were unhappy with the demerger of the hotels business. While the demerger could be value accretive, shareholders were unhappy with the fact that shareholders will only get 60% of ITC Hotels with ITC Ltd getting the balance 40% holdings. In addition, ITC will also be charging royalty fees from ITC Hotels for the use of the ITC brand. Investors also felt that the share entitlement ratio of 10:1 was just too low.
ESG (Environment, Social, Governance) funds have had a tough time with pressure on flows. In the June 2023 quarter, the ESG funds saw net outflows of Rs520 crore on top of Rs470 crore withdrawn from ESG funds in the March 2023 quarter. The post pandemic period had seen a sudden rise in demand for ESG funds which had a sustainable focus. However, once the pandemic fears subsided, investors do not appear to be too enthusiastic about such funds. Also, there have been no new launches in the last 24 months.
There will be some changes to the Nifty Next-50 effective from September 29, 2023. A total of 5 stocks will be excluded from the index including ACC Ltd, HDFC AMC, FSN E-Commerce (Nykaa), Indus Towers and Page Industries. As per the Index Maintenance Committee, the stocks to be included in the place of these 5 exiting stocks would be Punjab National Bank, Trent Ltd, Shriram Finance, TVS Motor Company and Zydus Lifesciences. While Nifty 50 remains the same, a slew of other indices has undergone changes.
Cello World has filed DRHP with SEBI for Rs1,750 crore IPO. The entire issue will be an offer for sale by the promoters and early investors in the company. The entire OFS will be through the book building process. The company is into home and kitchen solutions and has also forayed into glassware and opal ware. The issue will be lead managed by Kotak Mahindra Capital, ICICI Securities, IIFL Securities, JM Financial and Motilal Oswal. The company has a total of 13 manufacturing facilities and has highest ROCE among peers.
RBI has rejected the bid by CRED to raise its stake in Newtap Finance Ltd. CRED currently holds 23.6% in Newtap Finance. While CRED is a Fintech company, Newtap Finance Ltd is a registered NBFC and comes under the direct regulation of the RBI. For now, the RBI has returned the application and they will have to offer the necessary clarifications to the RBI, before they can apply again. Newtap Finance Ltd was founded by Kunal Shah, who currently holds balance 76% in the company. Shah had taken over Newtap in 2021.
Amidst various problems in the online business, it emerges that Byju’s is facing problems with its offline tuitions business too. Half of the tuition centre customers of Byju’s have sought a refund in last 2 years. Most people have complained about inadequate teaching depth and questionable practices adopted. However, Byju’s claims to have processed 95% of such requests, although that still does not answer the question on the reasons for a 50% attrition. Recently, Byju’s had suspended all its offline expansion plans.