According the data furnished by the RBI, nearly 76% of the Rs2,000 banknotes in circulation as on May 19, 2023 worth Rs2.72 trillion were returned to banks; of which 87% were directly deposited in the bank. Only 13% exchanged it for smaller denomination notes. The process went through very smoothly with branches managing the additional pressure quite smoothly. With 3 more months to go for the end of the window, the RBI does not see any challenge in completing the process smoothly. This is part of Clean Note Policy.
UltraTech Cements touched a record high of Rs8,499.70, after the company reported strong sales volume for the June 2023 quarter Q1FY24. Ultratech is the largest Indian cement company in terms of capacity and its current installed capacity at 135 MTPA is nearly twice that of the second largest cement player in India, Adani Cements. For the June quarter, sales volumes were up 19.6% yoy at 29.96 MT. The company’s capacity utilization stood at around 90%, which is considered to be extremely robust for a cement plant.
The PMI manufacturing for June expanded at the second highest pace this year, although the index fell MOM from 58.7 in May to 57.8 in June. However, PMI above 50 is an indication of expansion in output. There was robust demand for goods in domestic and international markets. With the June figures out, the PMI manufacturing has been above 50 for 2 years in succession. Overall demand strength has positively impacted most of the key variables like sales, production, stock building as well as creation of new jobs.
The board of IDFC First Bank and IDFC Ltd approved the amalgamation of IDFC into IDFC Bank. The share swap ratio for the amalgamation will be 155 equity shares of IDFC First Bank for every 100 shares of IDFC Ltd held. Post the merger, the book value per share of the bank will increase 4.9%. IDFC Ltd and IDFC Bank had appointed Axis Capital for the fairness opinion on the share swap ratio. Preparation for the deal have been going on for some time, with the IDFC group hiving off its AMC business to Bandhan AMC recently.
India’s imports of Russian oil scaled another record in June 2023 but India is now nearing the limit of its buying from Russia. Daily volumes have been above 2.2 million bpd for 10th month in a row. Russian oil purchases again exceeded the combined shipments of Saudi Arabia and Iraq. Post the invasion of Ukraine by Russia, India emerged as a key buyer of Russian oil. IOCL has been the biggest buyer of Russian crude in last few months; followed by Reliance Industries. India imported 1.5 million bpd of Urals in June 2023.
As the monsoons progressed, the concerns have been allayed. Rainfall deficiency has fallen from 47% to 10% in the last fortnight. As per IMD, the July rains are expected to be about 100% of LPA. That is critical since 40% of monsoon precipitation occurs in July; the crucial period for sowing kharif crops. While overall Kharif output is expected to be on target, area under paddy is still about 25% lower than last year. The only word of caution is that El Nino conditions are also expected to develop during the month of July 2023.
Indian cement industry is expected to grow volumes by 7-8% in FY24. This is likely to be on the back of a spike in demand from housing and infrastructure sector. In addition, softening input costs may help the cement industry to improve EBITDA by up to 18% to Rs900-950 per MT in FY24.The capacity addition in cement is estimated at 63-69 million MT between FY24 and FY25. Cement companies are also expected to invest Rs1.20 trillion to add 145-155 MT capacity by FY27. The pick up in industrial capex is also helping.
OMCs are likely to turn profitable on fuel marketing in FY24 following big losses in FY23. Fitch expects the demand for petroleum products to grow around 5%, supported by 6-7% growth in GDP. With crude prices averaging below $78/bbl in the Brent market, the unchanged retail fuel prices should help. This will help the OMCs to recoup the losses of FY23 in the first half of FY24 itself. However, the gross refining margins (GRMs) of Indian refiners is expected to moderate in FY24 from record highs of FY23 as conditions ease.