For the September 2022 quarter, India’s current account deficit (CAD) surged to a record $36.4 billion, or 4.4% of GDP. This was largely triggered by a much wider trade deficit. This is higher than the previous record currency account deficit of $31.8 billion in the December 2012 quarter. The CAD for the June 2022 quarter was cut to $18.2 billion as per revised numbers, or just 2.2% of GDP. In comparison, Q2FY23 marks a sharp spike in the CAD. This could take the full year CAD to well above 4%, a concern for the rupee value.
According to the RBI Financial Stability Report (FSR), the higher profitability of banks helped them to boost provisions. This led to the net non-performing assets (NPAs) fall to 1.3% of advances in Q2FY23. The ratio was 0.8% for private banks and 1.8% for public sector banks (PSBs). For Q2FY23, the provision coverage ratio stood at an impressive 71.5%. Even gross NPAs fell below 5% to touch 4.9% after a long gap. Over the next one year, the capital adequacy ratio (CAR) of 46 major banks is projected to slip 90 bps to 14.9%.
Reliance Consumer Products (RCPL), a 100% subsidiary of Reliance Retail Ventures will buy 51% controlling stake in Lotus Chocolate Company for Rs74 crore. This is close to its current market valuations. Post this purchase, RCPL will also make an open offer to buy another 26% from minority shareholders. The capital infused by RCPL will drive growth and expansion of Lotus into a comprehensive confectionery company with an expanded franchise of cocoa, chocolate derivatives and related products on a pan-India basis.
For the Q2FY23, India’s external debt stood at $610.50 billion, marginally lower on a sequential QOQ basis. The ratio of external debt to GDP tapered by 10 basis points to 19.2% QOQ. In Q2FH23, India was helped by valuation gains of $10.6 billion. If the valuation effect was excluded, the external debt ratio would actually have been higher on sequential basis. Not surprisingly, dollar denominated debt was the largest component at 55.5%. This was followed by INR debt at 30.2%. The others were relatively much smaller.
The stock of Shriram Finance (formerly Shriram Transport Finance) fell by 7% on Thursday after additional 174 million equity shares of the company got listed pursuant to composite scheme of arrangement and amalgamation. It may be recollected that Shriram Transport, Shriram City Union and Shriram Capital had been merged into Shriram Finance, leading to expansion of equity base. Post this merger, Shriram Finance has become the largest retail NBFC in India with AUM of Rs1.71 trillion, catering to 6.7 million customers.
The ad-tech company, Brightcom Group may have rallied 2,500% in 2021, but year 2022 was a hard return to reality. With rising corporate governance issues, the stock fell vertically in 2022, wiping gout nearly $1.6 billion in market cap. The stock is already down more than 70% from its peak in 2022. Meanwhile, SEBI has appointed Deloitte India, to conduct a forensic audit of its financials. It is one more classic case of a company rising much faster than fundamentals and then destroying substantial shareholder wealth.
In a first of its kind, SEBI has imposed penalties on DSP AMC and the trustees for absorbing expense ratios of one of its schemes. In the case of DSP Nifty 50 ETF, the AMC charged just 0.07% against the expense ratio of 0.16%. This violated the SEBI circular mandating AMCs to charge all scheme related expenses to the scheme only. DSP has argued that putting the entire TER of 0.16% would have reduced the fund performance in a big way. SEBI allows AMCs to absorb some cost but that cannot exceed 2 basis points.
A day ahead of its IPO, Sah Polymers raised closed to Rs30 crore via anchor book placement to just three anchor investors. The 3 anchor investors were Leading Light Fund VCC, Saint Capital Fund and Maven India Fund. In fact, the three anchor investors absorbed 45% of the entire issue size. The IPO of Sah Petroleum is a small IPO of Rs66.30 crore; entirely by way of fresh issue. The QIBs have a 75% quota, while retail has 10% and HNIs / NIIs 15%. The IPO opens for subscription on December 30th and closes on January 04th.