Bank of India reported a 341% jump in Q3 net profit for the Dec-20 quarter at Rs.610 crore. This was largely on the back of lower provisioning. Total revenues were 7.9% lower at Rs.12,373 crore. The treasury income was up sharply and retail banking income was flat but pressure came from corporate banking income, which was down 34%. OPM tapered from 30.96% to 22.92% on higher employee cost. Gross NPAs were lower at 13.25% but that is small consolation as it is still too high in absolute terms. The annualized ROA at 0.28% is below industry median and capital adequacy at 13.25% is the challenge.
SBI is betting bit time on the home loans business. In the last 10 years, SBI home loan portfolio has grown 7-fold from Rs.89,000 crore to Rs.500,000 crore in 2021. Now SBI plans to build the home loan portfolio to Rs.700,000 crore by 2024 and later to Rs.10 trillion eventually. SBI chairman, Dinesh Khara announced that despite the pressure applied on the realty sector by the pandemic, the home loan business had grown sharply. According to the chairman, SBI has been working simultaneously on digital initiatives and customizing the offerings to individual customers. In fact, the SBI RLMS or Retail Loan Management System provides end-to-end digital solution. In the last quarter, SBI has emerged as India’s largest home loan player. SBI is also looking at the co-lending model specifically for unorganised sector.
Aurobindo Pharma net profits were up 4-fold at Rs.2,946 crore in the Dec-20 quarter on the back of exceptional gains on exceptional gains. The exceptional gain of Rs.2,814 crore came from the disposal of Natrol LLC, Aurobindo’s fully owned step-down subsidiary in the US. The top line growth of 8% in the Dec-20 quarter was driven by 6.8% growth in the US formulations business and 13.2% in European formulations. However, revenues from active pharma ingredients or APIs were lower by 13%. Even as the PAT margins expanded from 11.97% to 46.29%, R&D expenses touched 6.1% of total sales in Q3.
The Finance Minister lived up to her promise to rationalise customs duty on gold and silver to bring prices closer to earlier levels. The base rate of customs duty on gold and silver has been aggressively slashed from 12.5% to 7.5% post budget. The reduction in customs duty for gold and silver as part of Budget 2021, is likely to result in cheaper prices for the precious metals. The net cost will be around 10.75% after cess and applicable social welfare surcharge. India remains one of the largest buyers of gold and this cut will make gold cheaper and give a demand boost. Gold reacted positively to the news.
Hindalco Industries reported Q3 profit growth of 90% at Rs.2,021 crore on inventory efficiencies and robust revenues. Total revenues for Hindalco were up 19.7% at Rs.34,958 crore led by 17% growth I Novelis as shipments touched a record of 933KT. The Indian aluminium business also saw robust growth of 30%. Nearly 80% of the EBITDA contribution of Hindalco came from Novelis and the India aluminium business and the OPM expanded from 7.11% to 10.14% in Dec-20 quarter. The results of discontinued operations were excluded. PAT margins grew from 3.64% in Dec-19 quarter to 5.78% in Dec-20 quarter
In a rather surprising move, Rising Sun Holdings which is controlled by Adar Poonawala, will acquire 60% in Magma Fincorp for a consideration of Rs.3,456 crore. Subsequent to the deal, Rising Sun, becomes the promoter of Magma Fincorp and the company will get rebranded as Poonawala Finance. Magma has an AUM of Rs.15,006 crore as of Dec-20. The post issue preferential allotment will represent 64.68% of the enhanced equity base of Magma. The existing promoters will continue to hold a minority 13.33% in Magma. The net worth post the infusion will increase to Rs.6,300 crore giving heft to the balance sheet. Magma expects to use the capital infusion to improve productivity and operating matrix. The deal will also allow Magma to leverage opportunities and reduce its borrowing costs. It looks like a win-win deal.
