Less than a week after Moody’s had cut its GDP forecast for FY23, it has maintained India’s sovereign rating at Baa3 with Stable outlook. Moody’s has highlighted India’s key strengths like diversified economy, high growth potential, strong external position, and stable government debt as some of the factors that favoured India. Last week, Moody’s had cut India’s GDP estimates for FY23 by 110 bps to 7.7% citing rising interest rates, uneven monsoons and weak global growth. A large domestic market is also a key strength.
Amidst growing concerns over its leverage levels, Adani group has highlighted that it had improved its net debt to operating profit ratio and halved loans from PSBs. In a 15-page response to the CreditSights report, which had first underlined the leverage issue, Adani group pointed out that its net debt to EBITDA ratio had fallen from 7.6X to 3.2X in the last nine years. The group’s gross debt stood at Rs1.88 trillion and net debt at Rs1.61 trillion as of March 2022. Pledged shares of promoters had reduced
sharply over the years.
Vaibhav Gems N Jewellers Ltd, a key south-based jewellery brand, filed its draft red herring prospectus (DRHP) with SEBI for its proposed IPO. The IPO will comprise of a fresh issue of Rs210 crore and an offer for sale of 43 lakh shares by the promoter entity. The company may also consider a pre-IPO placement of Rs40 crore. Fresh issue proceeds will be used to fund 8 new showrooms and inventory purchases. Vaibhav offers a wide range of gold, diamonds, gems, platinum and silver jewellery. FY 22 sales were Rs1,694 crore.
Tyre company stocks rallied 8% on Tuesday with most of the tyre stocks close to their 52-week highs. The rally was on expectations of strong demand and margin expansion. Apollo and Ceat touched their
yearly highs. Tyre industry growth in FY22 was driven by increase in volumes. However, margins have been under pressure due to higher input prices of key raw materials like natural rubber, crude derivatives etc. Tyres are likely to see robust demand from OEM and replacement segments. Exports have been a major driver.
Rating agency, Standard & Poor’s, has underscored that intense competition in the gold loan business could shrink margins of gold finance companies. In India, Muthoot and Manappuram are the leading pure gold finance plays. The strongest competition for the gold finance companies comes from the banks, although most banks prefer to directly fund gold loan companies with back-to-back refinance. However, the risk could be a lot more pronounced for smaller finance companies relying on short term
borrowings.
Tata Sons plans to raise up to $4 billion to infuse fresh capital into Air India to refinance costly debt. The funds will be raised through a mix of equity and hybrid debt. Last year, Tata Sons had acquired Air India at an enterprise value of $2.3 billion. While debt funding should be easier, the tougher part will be to get private equity funds to infuse equity. Airlines are not a preferred investment option for PE funds. Tatas plan to build a consolidated aviation franchise comprising Vistara, Air Asia and Air India under one roof.
As CFOs fight for the extra bit of efficiency, it looks like zero-based budgeting is back in vogue. Zero based budgeting is a bottom-up look at every item from ground zero, rather than taking it as an increment over the previous year. Most companies are now willing to make blunt cost cuts. Companies are looking into areas like operations, real estate, logistics, sales, administration and marketing to trim costs. Some are even going slow on hiring. Globally, GM, HP, Diageo, among others, are latching to the Zero base trend.
Reliance Industries announced the acquisition of a 79.4% stake in US-based SenseHawk Inc for $32 million. SenseHawk is a 4-year old California based start-up developing software tools for the solar energy space. SenseHawk helps companies streamline processes and use automation to manage the
end-to-end solar asset lifecycle. The transaction is subject to regulatory approvals and will be concluded in 2022. Reliance is pivoting its O2C division into a green energy franchise and this inorganic buy fit in
the longer term story.