Rating agency, Fitch, placed negative outlook on Adani Ports and reiterated its “BBB1” ratings. The stock was down 1% on Tuesday but that can also be attributed to the recent news flows about NSDL freezing the demat accounts of 3 large FPIs with substantial exposure to the Adani group. Currently, Adani Ports is India’s largest commercial port operator with high levels of operational efficiency and 56% sticky cargo. With Rs.5,300 in cash, repaying Rs.1,400 crore in FY22 will not be an issue. Net debt / EBITDAR is the key.
Jubilant Foodworks, the India franchisee for Domino’s Pizza and Dunkin’ Donuts, reported over 3-fold spurt in net profit at Rs.105 crore for the Mar-21 quarter. Revenues were up 14.2% in the Mar-21 quarter at Rs.1,038 crore. One of the key metrics for Jubilant, the same store growth or SSG, stood at a health rate of 11.8%. Delivery and takeaway channels grew by 29% and 77% respectively on yoy basis. Q4 also marked the acquisition of US fast food chain Popeyes and the DP Eurasia master franchise for Domino’s.
India’s 10-year benchmark bond yield bounced sharply to 6.05% after CPI inflation for May-21 came in sharply higher at 6.30%. The RBI has been conducting G-SAPs to keep the yields stable below the 6% mark. Bond traders were worried that the combination of inflation spike, huge borrowing targets recovery in growth could induce the RBI to act earlier than expected on rates. The spurt in inflation also led to a sharp demand for dollars leading to weakening of the rupee. Repo rate hikes may still be some time away.
Indian government aims to double ethanol capacity to achieve the 20% blending target by 2023. This target has been advanced by 7 years from 2030 to 2023. This will also help India reduce carbon emissions by 35% by 2030. To facilitate ethanol distillation capacity aggressively, banks loans are being provided to sugar companies with interest subvention up to 6% borne by the government. Production of fuel-grade ethanol has gone up by 5-fold between 2014 and 2020. India is likely to touch 8.5% blending by Sep-21.
According to a report by Morgan Stanley, Indian companies derived 72% of their revenues from the Indian market. The balance is split between EMs and DMs. Chinese companies are still ahead, deriving 86% of their revenues from the local Chinese markets. Among other large Asian economies, Taiwan, Hong Kong, Saudi Arabia and Singapore derive over 50% of revenues from foreign markets. Taiwan, being a key member of the semiconductor supply chain, derives 27% of their revenues from the American markets.
Coal India will reduce 5% of its manpower each year over next 10 years to cut costs significantly. Coal India employs 2.72 lakh workers with many more persons number working on contract basis. Coal India has about 158 underground mines that account for 43% of the workforce but contribute just 5% to coal production. CIL accounts for over 80% of domestic coal output and it is currently targeting 1 billion tons of coal output by end of FY2024. CIL will save costs through manpower cuts and closure of unviable mines.
It looks like steel and cement companies may be in the thick of capital investments over the next 6-8 years. For example, JSW Steel has put out a capex plan worth Rs.25,000 crore including capacity expansion by 5 MTPA at its Vijayanagar plant. The project cost will be met through a mix of internal accruals and debt. Tata Steel will also spend Rs.11,000 crore on expansion of steel capacity. Among Cement players, Ultratech Cement has Rs.5,000 crore expansion plans this fiscal with cement demand at all-time highs.
JSW Cement entered the construction chemicals segment with the launch of specialized products like ready-mix plaster, waterproofing compounds and floor hardeners. JSW Cement has set up a 0.3-million-ton manufacturing facility in Bellary in Karnataka to produce its construction chemical products. The construction chemicals and dry-mix sectors is estimated at Rs.12,000 crore with demand growing 10% CAGR annually. Product engineered compositions are expected to grow almost 4-fold by the end of FY25.
