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This is a roundup of the day’s top stories in brief.
1. Jet Airways Looks For A Breather
Jet Airways India Ltd. has approached banks for a moratorium on loans and asked for fresh funds to ease a cash crunch, according to people with direct knowledge of the matter, adding to signs the carrier is sliding deeper into trouble.
- The airline has already grounded about a dozen planes as part of a review of its network aimed at reducing unprofitable domestic routes.
- The Mumbai-based carrier is also studying laying off more employees in non-core areas, the person said.
- The moves show India’s biggest full-service carrier -- unprofitable in nine of the past 11 years -- is struggling for survival as two-cent fares in one of the world’s most expensive places to buy jet fuel negate the gains from a surge in domestic passenger numbers.
2. Kochhar’s Clean Chit Report Withdrawn
One of India’s leading law firms, Cyril Amarchand Mangaldas, has recently withdrawn its investigative report of 2016 that had given Chanda Kochhar a clean chit, according to a person close to the development speaking under the condition of anonymity.
- The law firm was engaged by ICICI Bank Ltd.’s board to investigate allegations of nepotism made by a whistleblower pertaining to loans extended by the bank to Videocon group.
- At the time the law firm had found no evidence to support the whistleblower’s allegations, said the person quoted above, and hence had cleared Kochhar.
- But the law firm subsequently discovered that not all facts had been shared with it and hence recently withdrew the report, the person said.
- When asked to confirm the withdrawal of the report, ICICI Bank told BloombergQuint that due to new developments the law firm said its earlier report would no longer be valid.
3. Earnings Update: HCL Tech, Adani Ports, Bajaj Finance
HCL Technologies Ltd.’s earnings met estimates in the quarter ended September even as its margins remained flat.
- Net profit rose 4.2 percent sequentially to Rs 2,534 crore.
- Revenue in dollar terms rose 2.1 percent to $2,099 million.
- Operating profit rose 2.2 percent to Rs 2,922 crore.
- Margin was flat at 19.7 percent despite the rupee fall.
Bajaj Finance Ltd.’s quarterly profit rose in line with analysts’ estimates even as the financial services provider’s asset quality deteriorated.
- Net profit rose 54 percent year-on-year to Rs 923 crore.
- Net interest income, or the core income from operations, rose 42 percent to Rs 2,729 crore.
- Gross bad loans rose to 1.49 percent from 1.39 percent in the previous quarter.
- The ratio of net bad loans rose to 0.53 percent from 0.44 percent sequentially.
Adani Ports and Special Economic Zone Ltd.’s profit missed estimates after it declined for the fourth straight quarter, in part due to the depreciating rupee.
- Net profit fell 39 percent on a yearly basis to Rs 605 crore.
- Revenue fell 3.62 percent to Rs 2,608.
- Ebitda excluding foreign exchange losses fell 8.5 percent to Rs 1,703 crore.
- Margin without forex loss narrowed to 65.3 percent.
4. Indian Markets At Six-Month Low; U.S. Stocks Fall
Indian equity benchmarks fell for the fourth day in a row to their lowest levels in over six months dragged by information technology and pharmaceutical stocks.
- The S&P BSE Sensex Index fell 0.84 percent or 287 points to 33,847.
- The NSE Nifty 50 Index dropped 0.96 percent or 98 points to 10,147.
- Indian markets are likely to remain weak till expiry of futures and option contracts and rupee has again started to weaken which is also negative for markets, said Avinash Gorakshakar, head of research at Joindre Capital Services.
- S&P BSE IT Index was the top loser while the S&P BSE Realty Index was the top gainer.
U.S. stocks slumped, with the Dow Jones Industrial Average tumbling as much as 447 points, after results from Caterpillar and 3M added to concern that corporate profits have peaked.
- The sell-off in U.S. equities put the S&P 500 Index on track for its 12th loss in 14 days as investors grow concerned that the trade war and rising interest rates have put an end to runaway expansion of corporate profits.
- The Stoxx Europe 600 Index slid to the lowest level since December 2016 and Asian equities teetered on the verge of a bear market.
- The yen, gold and Treasuries all rallied on demand for haven assets.
- West Texas Intermediate crude slumped 2 percent to $67.76 a barrel, the first drop in three days.
5. Why IndusInd Bank’s Investors Are Worried
IndusInd Bank Ltd.’s exposure to troubled shadow lender Infrastructure Leasing & Financial Services Ltd. has investors worried.
- IndusInd Bank had given a bridge loan to the beleaguered infrastructure financier which was to be repaid after a rights issue, the lender said in an analyst call.
- The rights issue was postponed after a slew of defaults led to rating agencies downgrading IL&FS group companies to junk status.
- Meanwhile, the bank said the provision was made on their judgment of a haircut and with the auditor’s consent and added that there isn’t any requirement of a further provisioning now.
6. NBFCs’ Moment Of Reckoning
India’s non-bank financial companies have had a tough few months amid the fallout from defaults by one of their own, conglomerate IL&FS group.
- The financiers must repay about Rs 1.2 lakh crore of commercial paper in October-December, near a record Rs 1.46 lakh crore in August-October, according to data from Securities and Exchange Board of India.
- The timing isn’t ideal. Indian money-market funds popular over lower-yielding savings accounts suffered the worst withdrawals since at least April 2007 last month, after the IL&FS defaults spooked the market.
- Financing costs throughout India’s credit markets have ticked higher, meaning that rolling over all this debt will cost more.
7. What Essar Steel Brings To The Table
ArcelorMittal emerged as the preferred bidder for Essar Steel Ltd., bringing billionaire Lakshmi Mittal a step closer to taking control of one of India’s largest insolvent companies.
- Essar Steel, India’s third-largest steelmaker, has the sole integrated steel mill in the western region with an annual capacity of 10 million tonnes a year, according to data compiled by BloombergQuint.
- The fully integrated facility in Hazira, Gujarat will help ArcelorMittal save costs and give access to dedicated port for easier movement of goods.
- It is the only plant in the world to have three crucial iron-making technologies at a single location—blast furnace, direct reduced iron or midrex, and corex or smelting reduction process.
- Essar also has a wide gamut of products that range from flat steel to higher-margin-value galvanised products.
8. New Indian Unicorns Aren’t Just Copycats
At least five Indian startups have turned unicorns, those which have reached a $1 billion valuation, just in 2018. Four of the five companies target some of India’s fundamental needs in the education, logistics, and lodging industries. And that shows how the new cohort of startups is aimed more squarely at the hundreds of millions of potential users who don’t live in India’s major cities and may not speak much English.
- India’s first generation of internet unicorns adapted business models from abroad. Ride-hailing company Ola looks like Uber, for example; online retailers Snapdeal and recent Walmart acquisition Flipkart, like Amazon.com; digital-wallet leader Paytm, like China’s Alipay.
- The new Indian unicorns are being run more smoothly than their predecessors, says Neha Singh, co-founder of startup tracker Tracxn Technologies Pvt.
- The proliferation of smartphones and cheap data plans throughout India has also helped the companies reach a scale the SoftBanks of the world will notice faster.
9. Ambani Jump-Starts Reliance Jio’s Entry Into Your Homes
Given the huge capital expenditure of wireless expansion, it makes sense for Reliance Industries Ltd. to enter homes by acquiring homes already-wired by Hathway and Den, writes Amit Khanna, former chairman of Reliance Entertainment Ltd. But there are other challenges ahead.
- Once the rollout of 5G is complete in three years, Jio’s own wireless business will cannibalise its wire-line offering.
- Reliance’s basic handicap remains its B2B mindset, despite Mukesh Ambani’s claims to the contrary.
- Data is not the new oil. It’s the analysis of data and its intelligent application, which is.
10. Firecrackers Allowed, With Riders
The Supreme Court today refused to impose a complete ban on manufacture and sale of firecrackers ahead of Diwali but placed restrictions on their use to curb pollution.
- Sale of “safe and green” electronic crackers and firecrackers with low emissions will be allowed, but only through licensed dealers, a bench comprising Justices Ashok Bhushan and AK Sikri ruled.
- It restrained e-commerce websites like Flipkart and Amazon from selling firecrackers which are beyond the permissible limits of emissions and noise pollution.
- Also, the court allowed bursting of firecrackers only between 8 p.m. and 10 p.m. on Diwali and other festivals.
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