In its July 26, 2023 Fed meeting, the FOMC hiked the rates by another 25 bps to the range of 5.25%-5.50%. This is the highest level of Fed rates since 2001. However, the Fed chair made two statements, that were interesting. Firstly, he said that inflation had not been fully conquered. At the same time, he also added that rate hikes for the rest of the year would only be taken up if absolutely justified. That has been now interpreted by many analysts and economists as a signal that the US Fed may be done with its rate hikes.
Blackrock, which was the erstwhile foreign partner of DSP Mutual Fund, has decided to come back into the Indian AMC business in a tie-up with Jio Financial. It may be recollected that, only last week, JFS was hived off from Reliance Industries into a separate unit. JFS and Blackrock will invest $150 million into the joint venture. They plan to jointly offer tech-enabled, affordable, and innovative financial solutions for the millions of investors in India. Jio Blackrock is conceived and designed as a digital first solution provider.
Mahindra & Mahindra has picked up a 3.53% stake in RBL Bank for $51 million. M&M may look go raising its stake in RBL Bank. However, under the extant RBI regulations, no private invest9or can buy more than 10% in a scheduled bank, so M&M will have to keep its stake under that limit. M&M already has a strong footprint in the NBFC space through its group company, M&M Financial Services Ltd. However, many of the industrial companies continue to be barred from owning banks in India due to conflict of interests.
Piramal Enterprises, the NBFC company of the Piramal group, plans to buy back about 8% of its total paid up capital. Reacting to this news, the stock rallied 9% on July 26, 2023. The board meeting is scheduled on July 28, 2023; wherein the company is expected to announced the buyback plan along with the results for Q1FY24. Analysts believe that the buyback should put the cash to good use in cutting back the large equity size and improving the return on equity (ROE). Buybacks are normally value accretive for investors.
BPCL surprised the street with net profits of Rs10,644 crore in Q1FY24 compared to a net loss in the year ago period. In the year ago quarter, BPCL and other oil marketing companies (OMCs) had come under immense pressure due to rising crude prices and the government not allowing the OMCs to pass on the higher input costs to the customers in the form of higher petrol and diesel prices. Now, with crude back under $80/bbl, BPCL finds its financials in a sweet spot. However, the net sales were down yoy and QOQ.
India’s most valuable finance company, Bajaj Finance, reported a 32% growth in profits at Rs3,437 crore on the back of healthy growth in net interest income (NII). The NII for the quarter expanded by 26% yoy to Rs8,398 crore, even as cost of funds went up slightly by 22 bps to 7.61%. its capital adequacy ratio at 24.61% us relatively comfortable. There was also a sharp spike of 32% in the assets under management at Rs2.7 trillion as of the end of June quarter. However, loan loss provisions were higher at Rs995 crore.
Asirvad Microfinance is likely to shortly hit the IPO market with a new issue of Rs1,500 crore. Asirvad Microfinance is a unit of Manappuram Finance, which largely specializes in gold loans. The business model of Asirvad allows for much shorter turnaround time of even 3 days to 6 days. In fact, Manappuram had acquired this microfinance company only in 2015. JM Financial and Kotak Mahindra Capital are likely to be the book running lead managers to the issue. It has a total of 3.34 million borrowers as of March 2023.
With the chorus against the 28% GST on gaming reaching a crescendo, the GST Council has decided to convene a special meeting of the GST Council to debate on this particular topic. The meeting would be held virtually. In its 50th GST Council Meet, it was decided to impose GST of 28% on online gaming, horse racing and casinos. The objections are not just to the rate of tax imposed but also to the methodology of calculating the value base for taxation. GST of 28% is normally imposed on luxury products and sin items.