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HCL delivers a less than expected result
Business, Equities, Market News - July 13, 2022

HCL delivers a less than expected result.

HCL delivers a less than expected result.

HCL Technologies, an IT major, declared its financial results for the April-June quarter on June 12th. The IT services company posted a 2% rise in net profit YOY at Rs.3,283Cr. and was down 8.6% QOQ, which was expected to be at Rs.3400 Cr.

The revenue stood at Rs. 23,464 Cr., was up by 3.48% QoQ, which was expected to be at Rs. 23600Cr. The dollar revenue for the June quarter grew 15.6% annually, boosted by new deals and growth in the number of customers. HCL Technologies received 7 large service deals and 9 product deals from April to June. The EBIT margins were below expectations and stood at 17%. EBIT for the company was at Rs. 3992 Cr. and was forecasted to be at Rs. 4200 Cr. IT & business revenue rose 2%, whereas R & D services and engineering revenue increased 3.7%. However, revenue from products and platforms fell 5.1% in Q1FY23.The company announced an interim dividend of Rs. 10 per share.

The IT company added 2,089 new employees in this quarter, increasing its headcount to 2,10,966 employees. The firm intends to hire more than 30,000–35,000 employees in FY23. HCL Technologies conducted 2 million hours of training. The company would inform you about its salary hike in the coming weeks as it was effective from July 1.

Many analysts expect the company to improve its growth as there is an optimistic environment for cloud migration and R&D outsourcing. Since there is pressure in the services sector, the margins are a concern. However, if there is optimization in subcontracting costs, better pricing, automation, and improvement in utilization, then the margin will improve. Management expects margins to recover despite salary hikes. The order bookings, robust hiring, client additions, dividend payout, and cash flow conversion remained impressive.

The share price of HCL Technologies touched a new 52-week low today at Rs. 905.2 and is down by 2.46% on the BSE when the market opened. In one month, the stock has dropped by 8%. The share price was down by 5.89% in one year. The market cap of the company is Rs. 2.47Cr. The stock closed at Rs.918 and was down by 9.40 points, or 1.01%.

Stemrobo eyes global expansion, targets to close FY23 with net revenue worth Rs. 70 crores.

Indigo to “rationalise” salaries of technicians following mass sick leave.

Loan growth, higher margins, and lower costs to drive bank bottom lines in Q1.

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Z47 Launches $400M Fund for India's Tech Boom
Editorials, Market News, Markets - July 13, 2022

Euro to decline in parity with US Dollars.

Euro to decline in parity with US Dollars:

On Tuesday, euro reached in parity with US dollars for the first time in 20 years. The currency has been declining consistently amid fear of recession and, threats from Russia to reduce gas supply to Germany and other euro zone countries. The stress on the currency is also beyond the German gas shortage, as there are power cutbacks in France contributing to the decline. This means, there will be requirement of more euros to settle a payment in dollars. The export-oriented manufacturers, automobiles and chemicals sector are benefited the most from the currency decline. There is maximum distress in import-oriented businesses. Europeans tourist have to spend more euros for their trips to US or other nations who have pegged there currency to dollar.  

The impact of falling currency differs in various sector based on their dependence on foreign exchange rates. There will be more requirement of euros, if a business imports raw materials or other products. The goods that are imported in euro zone, only 40% are settled in euro rest is settled in dollars. For instance, oil and gas are imported and paid in dollars, but due to the Ukraine crisis, there was a surge in prices. This results in inflation and slowdown in the economy. A weakening in euro rates can have actual disruptions in costs. On the other hand, if businesses export outside the euro area, they benefit from the fall as prices become more competitive.

There is a boost in exports of European goods and services as the currency falls, making the currency more competitive. However, this won’t have much significance as inflation due to the Ukraine war will diminish all benefits. If there is no slowdown in the economy, they can repay their debt obligations faster and get rid of them. For nations who have issued dollar designated debt, this will increase the cost of debt repayment.

In order to curb inflation and declining exchange rates, ECB (European Central Bank) might raise interest rates more aggressively. If euro depreciates further, there would create difficulty in EBCs efforts to restrain inflation.

 

Indigo to “rationalise” salaries of technicians following mass sick leave.

Loan growth, higher margins, and lower costs to drive bank bottom lines in Q1.

NBFCs and HFCs securitization volumes almost doubled.

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Fiscal Discipline in Focus: Government Plans Deficit Reduction by FY26
Business, Markets - July 12, 2022

NBFCs and HFCs securitization volumes almost doubled.

NBFCs and HFCs securitization volumes almost doubled to Rs. 33,000Cr. in April- June

The securitization volume originated by Non-Banking Financial Companies and Housing Finance Companies has doubled in Q1FY23 to Rs.33000Cr. as per a report, released on Monday. Securitization is the conversion of loans into marketable securities for fulfilling cash requirements to third parties many times described as collateralized Debt Obligations (CDOs).

The growth in volume is witnessed to be double 1.9 times in Q1FY23 compared to RS 17,200Cr. in FY22. During Q1FY21, volumes were significantly affected by pandemic and nationwide lockdown and dropped to Rs. 7,500 Cr. in March 2020. The volumes are forecasted to cross a mark of Rs. 1.5 Lakh Cr. in FY23 if there are no further Covid-19 disruptions in the country. The growth in demand for credit has been picked up which was partly met by loan securitization. Since securitization is one of the key tools for NBFCs and HFCs it will help them to diversify their portfolio and enhance their customer base.

The predominant use of securitization is to transfer the credit risk from one investor to a wide range of investors who can tolerate that risk and thus resulting in financial stability and providing an additional source of funding. Fund repayment has been stable over the past few months with the agency’s rate at 97% in April 2022. The total of Rs. 1,5 lakh crore volume in securitization is expected in FY23 compared to Rs. 1.3Lakh Cr. in FY22. It is done in 2 ways either by Direct Assignment (DA) or by Pass-through Certificate(PTC). In the past, DA has contributed around 60% share and 40% to PTCs. In FY23, DA and PTCs are in line with the past trend.

Securitization has dominated, with approximately 46% volumes followed by vehicle loans with around 26% and microfinance at 11%. Securitization of assets has increased sharply from 46% in Q1FY22 to 70% in Q1FY23. The ease in lockdowns and improvement in efficiency in the collection has majorly given the ease to investors to participate in securitization. Another reason for an increase in volumes is because the microfinance sector has been almost absent from this market and was able to restrict the decline and enhance investor interest in the securitization market.

Brent oil fell over 4% in a week amid economic crisis

Adani group to enter into 5G spectrum

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https://www.equityright.com/rbi-expects-inflation-to-cool-from-october/
Business, Equities, Market News, Markets - July 12, 2022

Adani group to enter into 5G spectrum

Adani group to enter into 5G spectrum:

 Gautam Adani, a led conglomerate to engage in a bidding clash with Reliance & Airtel for 5G spectrum. Adani Group’s entry into the 5G spectrum will result in intensified competition for revenue. Analysts believe Adani Group to engage in a battle for 5G airwaves auction. The auction will be on July 26, in both the coveted but expensive 3.3-3.67 GHz and the cheaper 26 GHz bands. Adani Group as the fourth bidder will increase sell off the spectrum. This will lead to more sales of the spectrum, which is good for the government. The price will rise 10% over the reserve price of Rs.317Cr. a unit.

Adani Group clarifies it doesn’t want to enter the consumer mobility space but would participate in the upcoming auction. Adani Group intends to provide private network solutions with enhanced security at its airports, logistics, power generation, distribution, and manufacturing units. They mentioned their plans align with their recent proposition of increasing the Adani Foundation’s investment in education, skill developments, and healthcare. Despite their current focus being on 5G private captive networks, they would target both 5G airwaves 26 GHz and C-band also called mid-band. As ecosystems are now developed around C-band and not much around 26GHz waves.

Adani telco will include services in automation of factories, remote education centers or remote working facilities, and other 5G storage solutions. Spectrum leasing means one company leasing spectrum from telecoms for a fee to corporates keen to invest in such networks. The large corporates can be setting networks on their own or in a tie-up with a technology company. Adani group will have the facility to serve enterprise offerings which include the private network as a service. The entry of Adani Group could make difficult situations for cash-strapped Vodafone Idea. This would dampen future revenue streams for the current telecom companies. Vodafone Idea may either overbid or miss out on the opportunity to participate in the auction.

The Centre plans 72Ghz worth 4.5 lakh Cr. to be valid for 20 years at the base price in various low bands (600 Mhz, 700 Mhz, 800 Mhz, 900 Mhz, 1800 Mhz, 2100 Mhz, 2300, 2500 Mhz), mid (3.3-3.67 GHz) and high (26 GHz) frequency bands. However, the government expects telecoms to use both mid and high-band spectrum to roll out 5G services.

RBI expects Inflation to cool from October.

TCS profit misses estimates as recession fears hit IT spending.

Avenue Supermarts’ profit jumps 490% to Rs.680Cr. in Q1.

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Shaping the Future: Key Trends in the Hospitality Industry
Business, Editorials - July 11, 2022

Brent oil fell over 4% in a week amid economic crisis

Brent crude fell over 4% in a week amid economic worries; could trade in $98 and $112 range.

Brent crude reported a weekly drop of 4.1% while WTI down by 3.4%, after the first monthly drop since November. Prices fell on Tuesday as Brent’s $10.73 drop was the contract’s third-biggest daily drop since 1988, when it began trading. On 5th July 2022, Brent Crude fell by $10.73, which was the contact’s first monthly drop since November.
Central banks around the world are increasing interest rates to control inflation, raising fears that rising borrowing costs could slowdown growth. While potential lockdown in shanghai due to covid-19 could affect oil demand. The restrictive monetary policy of major economies threatened economic growth. This led to the fall in US oil benchmark, tracking a decline in a commodity markets. There was a rise in oil prices this year by 35%. This is due to the disrupted oil supply due to the war in Ukraine and also the global economic recovery. This also affected the price of natural gas, as it surged upto 17% in US and EU.

An important export route for Kazakh oil is in the risk of being suspended. It demands a Russian court order for it to temporarily shut down. After labour strike ended in Norway, there was a fall in the crude oil prices. The price of natural gas and crude oil also fell as th e Euro record a 20-year low against the US dollar. According to the US non-farm payroll data,in June the economy added more jobs than expected. This is an indication of constant strength of labour market. This gives gives the Federal Reserve ammunition to deliver another 75-basis-point rate hike this month. The US energy firms this week hit the highest since march 2020 by adding two oil rigs, bringing the total to 597. Due to the economic fears the prices of oil fell this week. However, the markets are still indicating bullish signals. The supply tightness is likely to intensify than to ease. The price volatility may continue this week. The western countries has banned oil export from Russia. This have supported prices and sparked a re-routing of flows while the Organization of the Petroleum Exporting Countries (OPEC) and allied producers struggle to deliver on pledged production increases. In this week the Bent crude could trade could trade in $98 and $112 range. This week the rupee will decide the crude movement. .In the domestic market, crude has very good support at Rs 7970.00, sustaining below this can show Rs 7760, while upsides Rs 8390 and Rs 8550 are acting as a resistance.

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Avenue Supermarts’ profit jumps 490% to Rs.680Cr. in Q1.
Equities, Markets, Result Updates - July 11, 2022

Avenue Supermarts’ profit jumps 490% to Rs.680Cr. in Q1.

Avenue Supermarts’ profit jumps 490% to Rs.680Cr. in Q1.

The operator of Dmart stores, Avenue Supermarts declared a PAT of Rs.679.64Cr. in Q1FY23. The company has shown a jump of 490% from to Rs. 680Cr. in Q1 from Rs.115.13Cr. YOY. The growth is however one-sided from a low base effect because of ongoing Covid-19 effects. The firm also recorded a 94% rise in its revenue from operation at 9,806Cr. which was Rs.5,301.74Cr in Q1FY22. EBITDA stood at Rs.1008Cr. which was at 221Cr. in previous year same quarter. EBITDA margin stood at 10.3% in Q1FY23 which was at 4.4% in Q1FY22.

For Q1FY23, Avenue Supermarts reported a consolidated Income of Rs.10067.21Cr. from Rs.8819.02Cr. in the prior year’s corresponding quarter. Net Profit of Rs.642.89 Cr. is recorded in the latest quarter compared to Rs.427Cr. in the previous quarter. The EPS is now at Rs.9.93 which was at Rs.6.59 in March quarter.

Dmart opened 110 new stores in the last three years, one of the largest additions in Q1FY23 and the largest since Q4FY20. They have added a total of 29 stores and are on target to meet 60 additions (over 2020-2022). These stores didn’t operate to their full potential because of the ongoing Covid-19 crisis. As per Noronha, CEO of Avenue Supermarts, the new stores have better design and high capacity to handle large-scale revenue. Since it was the first quarter without any pandemic disruptions, new stores have delivered good results in the current quarter.

Despite decent results, few analysts are bearish on the stock and have given a sell rating.  Due to slowdown in the economy, exchange rates volatility. Avenue Supermarts’ revenue continues to improve; the category sales remain below pre-pandemic levels. Based on the clarification by the managment, we forecast a more significant contribution from apparel & footwear.

The online portal of Avenue Supermarts, DMart-Ready is operational in 12 cities. They are assessing feedback from customers to enhance their quality and presence across the country. There is no additional update on the app.

The stock closed at Rs.3986.85 on Monday, after quarterly results were announced on 9th July 2022. The stock gained 45.15 points and was up by 1.15%. The Market Cap of Avenue Supermarts is at Rs.258213 Cr.

Adani Wilmar enters the coveted large-cap category by AMFI

TCS profit misses estimates as recession fears hit IT spending.

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RBI's Revised Co-Lending Norms Set to Transform NBFC Growth
Business, Expert Views - July 11, 2022

RBI expects Inflation to cool from October.

RBI expects inflation to cool from October:

Inflation in India is expected to slow down from October. The Central bank will minimize its aggressive action to cut down inflation, as per Governor Das.

As per RBI governor Shaktikanta Das, global factors should have more consideration while assessing inflation targets and current developments in Europe. The governor was focused on the importance of monetary policy. It will help in reducing inflation and inflation targets, despite fears that policy tightening could crease economic growth. He also added, after controlling inflation in the second half, there are chances of recession in India.

The Central bank on Friday eased its monetary policy to increase foreign investment and lift foreign exchange reserves. In India, inflation is above RBI’s target since the start of the year. This affected a hike in interest rates by 90 basis points in the last 2 months. All the central banks have been fighting against inflation driven by surging commodity prices, the Russia-Ukraine war, and supply chain disruptions. In June, RBI said expected inflation was at 6.7% and will cool down from October.

The impact of global factors on the domestic economy has increased over past years due to pandemics and war. So there should be greater recognition of global factors in local inflation and economic growth. This requires more coordination among countries to tackle problems. As per International Monetary Fund’s Latest projections, around 77% of countries have reported an increase in inflation, and this number could reach up to 90% in 2022.

Conclusion:

RBI governor suggested that not all tightening sessions have ended in recession.  He even mentioned that these measures won’t last long. The Central Bank and other major banks have revised GDP projections. It indicates a loss of pace in the growth of the economy rather than loss of a level. RBI governor mentioned many times that RBI plans to bring down inflation to 4% with a sensible slowdown in the economy. Inflation has also raised concerns about whether monetary tightening will end in a global recession or if there can be a soft landing. Global factors have difficult policy alternatives between price stability and economic activity.

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Adani Wilmar enters the coveted large-cap category by AMFI

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