Oil prices once again started their upward move on Wednesday scaling back to the $96/bbl mark as the Ukraine situation continue to be tense. The risk of supply disruptions due to a like war between Russia and Ukraine now looks like a distinct possibility. Robust fuel demand is only adding to the problems of oil prices. On Monday, Moscow had announced a partial pullback of troops from Ukraine. However, NATO confirmed there was no de-escalation and that Russia was continuing its military build-up on the border.
The minutes of the Fed meeting (25-26 January) was released by the Fed on 16-February, after the routine 3-weeks gap. While the US Fed has almost confirmed the first rate hike coming in March 2022, there is an important caveat too. The Fed has clarified that decisions would be made on a meeting-by-meeting analysis of data only. However, experts concur that the rate hikes would be quicker and sharper than during the last rate hike in 2015. This would be followed by the winding down of $9 trillion bond portfolio.
Tata group will invest in new aircraft and technologies to make Air India a world-class airline. In addition, it will also undertake organisational redesign of Air India. These were confirmed by Tata Sons chairman, N Chandrasekharan, in his address to the Air India employees. Tatas had just completed the takeover of Air India last month and now the former CEO of Turkish Airlines has also been appointed the CEO of Air India. Air India will ensure focus on customer service, feet upgrades and a massive network expansion.
Infosys, India’s second largest IT company by revenues, market and exports; plans to hire over 55,000 fresh graduates from campuses in FY23. This will enable Infosys to chart a proper glide path for their future career growth. Salil Parekh underlined that while opportunities for freshers will be huge, the onus will be on them to learn new skills at shorter durations. It is planning to close with a slightly smaller number in FY22. Infosys targets 20% higher annual revenues in FY22; opening up a big growth opportunity.
From 25-February, government plans to start roadshows with investors for strategic disinvestment of IDBI Bank. Both the central government and LIC will look to hive off their stake in IDBI Bank. This will be the first ever strategic disinvestment of a public sector lender. Amidst pandemic fears, roadshows are likely to be held virtually. DIPAM and KPMG will manage the roadshows. While government will sell its 45.48% shareholding in IDBI Bank, LIC will sell its 49.24% holding. There is possibility of retaining 26% in the bank.
Moody’s changed the outlook of Vedanta Resources, the parent company of Vedanta Ltd, from “stable” to “negative” due to the near-term refinancing requirements amid tight liquidity. However, the ratings have been maintained at “B2” corporate family rating (CFR) and B3 rating on senior unsecured notes. There has been a sustained delay in refinancing its upcoming debt maturities with long-term funding, which has raised concerns for Moody’s. More than half of its total debt is likely to fall due in next 2 years.
LIC is looking to raise Rs.65,400 crore ($8.7 billion) via its IPO. This would be an offer for sale (OFS) where the government will tender part of its holdings. This will be just enough to cover disinvestment shortfall of Rs.65,000 crore for FY22 and reach its revised target of Rs.78,000 crore. The government plans to run the IPO from Mar-10 to Mar-14 at price band of Rs.2,000-Rs.2,100. This will depend on regulatory approvals and market conditions and is yet to be confirmed. Anchor allocation will be Rs.16,940 crore.
A closer reading of the LIC draft red herring prospectus reveals that the insurer is battling the government in a slew of courts over demands to pay Rs.74,895 crore in retrospective taxes. The majority of Rs.72,762 crore of pending cases pertain to direct tax demands. That remains a significant risk factor for LIC ahead of its IPO. Most of these pertain to allegations by the tax department about under-reporting of income over several years. LIC has not made any provisions for these disputed amounts and could impact value.