Stock Market Investment Shot, 29th May 2023

ICICI Bank board has approved raising its stake in ICICI Lombard General Insurance from 48.02% to 52.02% in multiple tranches. The first tranche of 2.5% will be acquired in September 2024. Banks can either hold below 30% or above 50% in an insurance venture. In the case of ICICI bank, it had originally planned to cut its stake in ICICI Lombard to below 30% but later changed its strategy to increase its holdings above 50%. In April 2023, HDFC got approval to raise stake in the life and general insurance vertical above 50%.

Germany is officially into recession and this is likely to impact Indian exports to Germany, especially in sectors like chemicals, machinery, apparel and electrical. Germany is the fourth largest economy in the world and it saw its GDP fall by 0.3% in the March quarter after falling 0.5% in December 2022. It would be defined as recession due to two quarters of negative growth. Around 4.4% India’s total exports were to Germany, but focussed principally in sectors like organic chemicals, machinery electronics and apparel.

Foreign Portfolio Investors (FPIs) infused Rs37,316 crore or a tad over $4.5 billion up to 26th May, with 3 more trading session to go. This is the highest single month net inflow from FPIs in the last 6 months. In the coming week, the resolution on the US debt ceiling and good domestic macro data will hold the key to sustained FPI flows. With the RBI already taking a pause on rate hikes and the Fed also hinting at a pause in June, the equity markets have been happy. Also, the Q4 results have been better than expected.

According to a recent study by PWC, the volume of UPI (unified payment interface) transactions is likely to touch 1 billion per day by the end of FY27. UPI will account for 90% of retail digital payments in India by 2027, as per the report. In FY23, UPI accounted for 75% of the retail digital volumes. At a macro level, the Indian digital payments market has steadily grown at 50% CAGR in the last 6 years and is likely to grow 4-fold in the next 4 years. In FY23, UPI recorded 83.7 billion transactions, or 22.9 crore transactions a day.

Sun Pharma proposes to fully buy out Israel-based Taro Pharma, through a reverse triangular merger. Sun Pharma has already issued a letter to the Taro board with a non-binding proposal to acquire all of the outstanding ordinary shares at $38 per share in cash. Sun Pharma already owns 78.48% in Taro. The deal will be under the Israeli Companies Law 1999, which permits such reverse triangular mergers. The price offered by Sun Pharma represents a 41.5% premium over Taro’s average closing price over last 60 days.

Vodafone Idea is moving at a frenetic pace to raise fresh funds and is also in talks with banks to enhance limits. This has gathered pace after the government converted Rs16,133 crore of interest dues into equity stake. Promoters have already invested and are also likely to bring in more funds. Meanwhile, the centre has expressed concerns over the delay in raising funds as the largest shareholder in Vodafone Idea. In the latest quarter ended March 2023, Vodafone Idea cut its losses but also lost market share to Jio and Airtel.

There finally appears to be a deal on the debt ceiling front between the Republicans and the Democrats, but the details are still awaited. There has been some compromise from both ends. The Republicans have agreed to enhance the debt ceiling and the Democrats have agreed to time-bound spending cuts. Broadly, the solution includes suspending the debt limit through January 2025, hold non-defence spending flat in 2024 and increase it by just 1% in 2025. The legislation has to be passed before the June 05th deadline.

Reliance Consumer Products, the FMCG arm of Reliance Retail, entered the western snacking segment with the launch of Alan Bugles corn chips in India. Alan Bugles is a global popular brand from General Mills. This will give a tough fight to Pepsi and ITC, in that segment. The price point has been fixed at Rs10 to make it a mass product. RCPL already sells beverages, biscuits, edible oils, pulses, grains, soaps, and detergents in the Indian market. Pillsbury, Crocker, and Haagen-Dazs are some of its other popular brands.

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