It is now almost confirmed that government will file the DRHP for LIC IPO next week. Based on the timid disinvestment targets for 2021-22, it looks like government may hive off around 5% stake in LIC for about Rs.65,000 crore. The IPO is expected in March, with listing in the second half of March. It will be the largest ever IPO by a margin and nearly 4 times the size of Paytm; the largest IPO till date. The embedded value of LIC is estimated at around $150 billion, so a 5% stake sale can easily fetch close to Rs.65,000 crore.
There is good news on the job front. According to data put out by the CMIE, unemployment rate witnessed a sharp decline to 6.57% in India for Jan-22. This is the lowest in the last 1 year. Easing of restrictions are leading to a recovery in demand, output and jobs. In Jan-22, unemployment was at a high of 8.16%. The urban unemployment has been consistently higher than rural joblessness. CMIE had pointed that in the rising joblessness in 2021, the worst affected had been women. Jobs are still way below pre-COVID levels.
Dabur India reported 2.19% higher net profits at Rs.504.35 crore for the Dec-21 quarter on a consolidated basis. For the Dec-21 quarter, the revenues from operations were up 7.8% at Rs.2.942 crore. Like most of the FMCG companies, Dabur also felt a squeeze on operating profits on account of rising input costs as well as higher freight and transportation costs. Considering that the input inflation stood at 13%, the results were in line with expectations. Dabur saw top line growth across consumer care, food and retail.
HDFC reported 11% higher net profits in the Dec-21 quarter at Rs.3,261 crore. Net interest income or NII for the quarter was up 5% yoy at Rs.4,284 crore. While the demand for home loans (across affordable homes and high-end homes) remained robust, HDFC took a hit on the asset quality front. The gross NPLs stood at 1.44% in the quarter but was much higher at 5.04% for non-individual borrowers. Amidst the good growth in top line numbers, it is the asset quality issue with builders and developers that is a worry.
Oil prices in the Brent Crude market jumped back to above $90/bbl as OPEC refused to budge from its planned and calibrated increase in supply. Global consumers like the US, Japan and India had been putting pressure on the OPEC Plus to enhance output to regulate prices. For now, OPEC will stick to hiking output by 400,000 bpd from March onwards. It is not just Brent, but even WTI crude is nearing $90/bbl. Since the start of 2022, oil prices are up 15% on supply tightness and geopolitical risk in Ukraine and the Gulf.
Bond market traders are a harried lot. The aggressive Rs.14.9 trillion borrowing program in Budget 2022 is likely to fuel inflation and force the government to raise rates aggressively to contain inflation. Bond traders now fear that the RBI may act sooner rather than later. India is undertaking record borrowings to bankroll the 35% higher capex in FY23 at Rs.7.55 trillion. Hence bond markets are betting that the RBI would set an inflation target of 4% and that would only be possible by the RBI aggressively hiking rates.
Competition in the electrical vehicles (EV) segment is gathering steam as Mahindra is now road-testing its first electric SUV. The new Mahindra electric SUV is expected to be predicated on its existing model of XUV300. That would pit M&M directly in competition with Tata Motors and MG Motors; although the latter caters to the high end segment. Mahindra is likely to get a battery pack between 350 to 380 Volts. In fact, M&M has aggressive plans to launch 8 EVs by 2027. Actual rollout may still happen only in 2023.
PSU oil companies like ONGC and IOC will invest over Rs.111,000 crore in next fiscal to supplement the massive spending programme of the government. The overall capex in FY23 is likely to be pegged at a combined Rs110,000 crore for ONGC, IOCL,BPCL, HPCL and Oil India. In FY23, none of the PSUs are likely to get any fiscal support from the government. While the outlay of ONGC and IOC be will around Rs.30,000 crore, BPCL and HPCL will each spend over Rs.10,000 crore. However, ONGC Videsh is likely to be a drag.