Infosys reported a surprisingly robust 11.3% growth in net profits for Q2FY23 at Rs6,021 crore. Infy raised its revenue guidance for FY23 to 15-16%. The icing on the cake was the announcement of a Rs9,300 crore buyback by the company at a price of Rs1,850 per share. That is a 30% premium to the CMP. Revenues were also sharply higher by 23.4% yoy at Rs36,538 crore in Q2FY23. Its total contract value (TCV) for Q2 at $2.7 billion was impressive. The concern was that the attrition rate at 27.1% is still too high for comfort.
US consumer inflation for September 2022 came in at 8.2%. It has fallen 90 bps from the peak level of June 2022, but has now remained above 8% for 7 months in succession. With core inflation at 6.6% at a 40 year high, it is almost inevitable that the Fed would persist with 75 bps rate hike in November 2022 and a likely 50 bps in December. On MOM basis, the high frequency prices were up 0.4%. Gasoline index came down yoy, but even within the energy index, the spike in electricity and natural gas, offset the gains.
It is not uncommon for an Indian company to have ratings at par with India’s sovereign ratings. However, India may soon have the first Indian company with a rating above sovereign rating. No prizes for guessing, the company is from the Adani group. The name is yet to be announced but Adani Green Energy and Adani Transmission already have ratings that are at par with sovereign ratings. Generally, the companies are rated at par or below the sovereign ratings. RIL was rated higher last year, but it is fairly global in its reach.
Start-up funding is suffering according to a report by PWC India with funding touching a 2 year low of $2.7 billion in September 2022 quarter. During this quarter, only 2 companies made the Unicorn grade. Even in the global context, the Unicorns are not from data and digital but from the SAAS space. The good news is that the early stage funding has actually improved although other forms of funding have tapered. VCs want to first see how the start-ups deploy all the capital they have raised, before committing fresh funds.
BOFA Securities cut its Nifty target by 1,000 points from 18,500 to 17,500 for December 2022. It has put the blame on weakening macros for this downward revision. Rupee depreciation is also likely to make investors cautious. Additional risks include higher crude oil prices and a delayed recovery in China. BOFA sees a 50 bps upside risk to the current account deficit and a 40 bps upside risk to the fiscal deficit. It also expects pressure on the Q2FY23 corporate results due to profit de-growth amid sharply rising input costs.
Reliance Industries is in talks to acquire the wholesale operation of Metro AG in India. Metro of Germany is planning to exit the Indian retail space. Apparently, the only company left in the fray is Reliance group. Reliance wants to use the Metro franchise to push its cash-and-carry business. The outfit could be valued at nearly $1.2 billion, even as more details of the deal are awaited. Metro entered Indian market in 2003 and it currently operates 31 wholesale distribution centres across India, catering to institutional clients.
If there is one overhang for the FMCG companies in the coming quarters, it could be the sluggish rural demand combined with steep inflation. While FMCG companies are likely to report revenue growth, the profit growth is likely to take a hit amidst rising operating costs. Most of the large FMCG players rely on rural demand for over half of their top line. HUL and GCPL have taken the lead to cut prices as competition from unorganized sector and grammage reduction were eating away the sales of organized FMCG players.
Sterling & Wilson Renewable Energy (SWRE) bagged a Rs2,212 crore order from NTPC Renewable Energy Ltd for its proposed solar PV project. SWRE was the lowest bidder for the 1,255 MWAC solar project in the state of Gujarat. For SWRE, the project scope includes design, engineering, supply, construction, erection, testing and commissioning. it will be topped with 3-year operation and maintenance (O&M) contract. The company is part of the Shapoorji Pallonji group, with substantial interests in construction.