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BKT announced a net profit of Rs. 306 crores in Q1 FY23.
Economy, Equities, Market News, Markets - April 29, 2020

Production target makes Coal India stakeholders anxious

Production target makes Coal India stakeholders anxious

Coal India limited (CIL) contributes more than 80% of coal production in India. It is one of the Public Sector Units in India which is into coal mining and refinery. For the financial year 2020-21, CIL was said to produce 710 million tonnes of coal by the coal minister Pralhad Joshi. The COVID-19 pandemic changed the entire scenario. Joshi added that the coal sector was also adversely affected, leading to ample fuel stock and low demand by the power and energy sector. The situation didn’t influence the government to bring down its target of producing 710 million tonne coal. It will help to achieve the goal of producing 1 billion tonne by the year 2023-24.

As on March 31, CIL had a stock of 74 MT. They are required to achieve the target because the government believes that the demand of the energy sector will rise in a few days. Furthermore, there will be low production in the monsoon season. Hence the maximum production will happen at this time, said an official to the media. The CIL stakeholders said that they already have a pile of stock for 30 days. If it produces 710 MT in the financial year 2020-21, it will lead to more pile up of stock, theft, poor quality and environmental pollution. It will further increase the chances of fire break up in the industry.

 

Production target makes CIL stakeholders anxious

The demand for the coal sector would increase after the lock down phase as mentioned by the Union Coal Minister. The minister of railways Mr. Piyush Goyal overlooks India’s opportunity to be a manufacturing hub. By acknowledging both the statements, the shareholders said these things would occur after a gestation period. Even before the pandemic, the situation was not favorable for the power sector due to low demand.

The coal ministry could have kept realistic targets which may help in keeping the coals at exposed seams. As per the demand, the coal could be extracted from the seams. This would lead to increase in the the cost per ton and decrease in the output per man per shift, said the ministry sources.

The shareholders had a counter statement that the coal productions maximum costs is Rs 1,800 per tonne. The wages and salaries paid to the workers constitutes almost half of the operational cost. An increase in the production target would lead to increase in the compensation paid to the workers of the company. The maximum possible stock which can be produced by CIL is 650 MT if the stock pile up of 125 MT is excluded. Any increase in the production will not be feasible as per the shareholders. Meanwhile, CIL has also taken measures to reduce the operational costs by shifting all of its subsidiary marketing counters from cities to subsidiary headquarters. The CIL officials thought that there are chances for a reduced production target for the financial year 2020-21.

 

 

SEBI and RBI review situation after Franklin fiasco

 

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Business, Economy, Market News - April 29, 2020

Mergers and acquisitions to rise post Covid pandemic

Mergers and acquisitions to rise post Covid pandemic

India’s startup sector may see a huge rise in mergers and acquisitions in the next 3-6 months. This can be anticipated as investors and companies expect a year of decreasing revenue and capital. This is caused by the COVID-19 pandemic as the Indian economy is in lockdown. According to investors, bankers and founders, buyouts will mostly take place in the Indian consumer retail, financial and internet sectors.

A lot of acqui-hires, distress sales and stock-led deals are expected to be completed. Bankers have stated that deals are now being accelerated. This was not possible 3 months ago. Venture capital investors have consolidation high up in their wish-list as they want to reduce portfolios. This wish has resulted due to these investors failing to raise money on their own from Limited Partners.

 

Impact of COVID-19:

The co head of digital and technology at Avendus Capital Mr. Karan Sharma stated that this pandemic is an unknown event. But this event will motivate both the entrepreneurs and Venture Capitalists to be a lot more creative and open. The current events have accelerated some of the conversations of mergers and acquisitions. These talks could have developed 2-3 years in the future. But this pandemic has proven to be a catalyst.

The dealmakers have stated that mergers and acquisitions transactions will rise. Investors have been urging portfolio companies to take measures foe extension of capital for atleast 18 months. Consumer facing businesses and high cash-burn entrepreneurs are urged to look for possible openings to merge.

 

Need for Mergers and Acquisitions:

In the April-June quarter, several companies may have zero revenue due to this pandemic. They will need to cover their costs. Fund raising is also postponed and will take more time to complete. Therefore, it makes more sense to merger. It is better to survive and grow rather than competing for the same capital and consumers. The general agreement is the financial services in the lending space are the primary targets for takeovers. Banks may try to acquire assets from fintech or non-fintech de-funded NBFC’s as they look to increase their tech stack. Currently, these assets are available at a discount.

 

Rise in the startup ecosystem:

Traders expect 55% of the Indian startup sector to have a money runaway for more than 11 months. Consolidation within startups have been on the rise in the past two years. Transactions worth $4.9 billion were recorded in the year 2018 and 2019. A total of 259 offers were noted in this two years. This year 27 offers worth $215 million was recorded.

 

 

Airtel signs deal with Nokia as they prepare for 5G era

 

 

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Banking, Economy, Equities, Market News - April 29, 2020

SEBI and RBI review situation after Franklin fiasco

SEBI, RBI review situation after Franklin fiasco

The RBI and SEBI look to determine the damage from Franklin Templeton’s decision. After their decision to close six debt funds, RBI and SEBI look to contain the fallout from this decision. Franklin Templeton’s decision has raised concerns that investors will withdraw from similar categories across the industry.

RBI’s take on Franklin Templeton’s decision:

The RBI may change rules to encourage banks to borrow more. Through the reverse repo window, RBI may limit the amount it absorbs from banks. The amount may be set at Rs. 2 lakh crore. With banks parking Rs 7 lakh crore from reverse repo, RBI believes there is enough liquidity. To deal with liquidity positions and redemption, RBI officials has communicated with fund managers and banks. One of the proposals was to goad banks to purchase bonds of firms that are investment category. The bonds should not be triple-A rated.

SEBI seeks details from mutual funds:

SEBI also needs information from mutual funds regarding liquidity position and extent of redemption from their debt schemes portfolio. Based on current portfolios, SEBI wants to determine whether mutual funds can handle huge redemption. They also want to know the position of mutual funds regarding debt fund liquidity and days required to liquidate holdings. Debt mutual funds capital is estimated at Rs. 12 lakh crore approximately. According to estimations, Franklin Templeton froze about Rs. 55,000 crore of this credit funds.

Mutual funds approach:

To contain the fallout, mutual funds have also sought help from finance ministry and Niti Aayog for measures. RBI believes there is enough liquidity for fund houses and it is only a matter of channelizing it. However, Fund houses desire to have a separate lending window. The reverse repo rate has already been cut down to 3.75%.

On April 24, mutual funds sold a few top-rated securities assuming the pressure of redemption in the coming days. In the bond market, risk aversion led to yields higher than normal by 20-30 points on April 24.

A few of the large mutual funds persuaded SEBI to boost the borrowing limit. This increase is sought due to the COVID-19 pandemic causing financial markets to freeze as there are sharp outflows. These outflows are from different debt products.

Franklin Templeton stop redemptions:

Following the massive outflows in the last 2 months, Franklin Templeton were compelled to stop redemption. Franklin Templeton has mostly low rated papers in the rest of the portfolio. They only have a select number of buyers in the current market. They have also drained the lending limits in these schemes with banks.

RBI’s inquiry:

RBI inquiry to the mutual find industry is to assess the loan amounts taken from banks. They also need information on the ‘lines of credit’ used by asset management companies and the ‘un drawn lines’. These details are required for March 31 and April 24. To meet the other payout and redemption demands, mutual funds are granted to borrow 20% of their capital from banks. If this limit is exhausted, a raise up to 40% is allowed by SEBI based on merit.

Majority of the mutual funds except Franklin Templeton has not even utilized the 20% limit after RBI pumped money. The money was injected through long-term repo operations (LTRO) in to the system in March.

As of April 23, the borrowings of four mutual funds including Franklin Templeton was Rs. 4,427 crore. On March 31, the assets under debt schemes of the mutual fund industry was Rs. 10.3 lakh crore. This figure is 16% less from the earlier month.

 

 

Mergers and Acquisitions may boost in this Covid-hit season

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Bharti Airtel Supercharges 5G FWA Expansion with Ericsson’s Compact Core Technology
Business, Economy - April 29, 2020

Airtel signs deal with Nokia as they prepare for 5G era

Airtel signs ₹7,636 crore deal with Nokia to get ready for 5G era

The high demand and growing usage of internet has made Bharti Airtel to adopt the strategy of signing a deal with Nokia for the 5G era and helping India to further digitize. Bharti Airtel is the leading telecommunications company with their business expanding in 18 countries. Nokia Corporation is the innovative global leader in 5G and is mainly into the business of telecommunications, consumer electronics, etc.

 

Why Airtel signed a deal with Nokia?

Bharti Airtel and Nokia Corporation are coming together to enhance the capacity of 4G network. This will help to prepare for the 5G era. For this, Airtel has signed a $1 billion deal (Rs 7,636 crore) with Nokia Corporation. It is done to meet the increasing demand for high speed data. It will also show the growing consumption of people for broadband. Bharti Airtel’s CTO Randeep Sekhon said to media that there is a need for up-gradation of the transport network to cater the increasing demand of mobile broadband services.

Nokia said to media that this solution can enhance the performance of the existing network of Airtel. It will also help to be ready to cater the future demands. The multi-year agreement is to arrange Nokia’s SRAN solution in India. It will help Airtel in increasing the performance of their existing network in 4G. It will also act as a base for 5G connectivity in India.

 

Benefits of the deal:

By using 5G technology, customers can easily and quickly download heavy contents such as movies and games within a few seconds. The usage of wireless technologies will be increased by 5G. It will act as a backbone for all emerging technologies across all sectors of the economy. According to the report of the panel appointed by the government, by the year 2035, 5G is estimated to create a positive cumulative impact of $1 trillion in India.

 

How this deal will help Airtel and Nokia?

Bharti Airtel’s Managing Director and Chief Executive Officer, Gopal Vittal said the organization always strives to provide best possible services and world class experiences to their customers. From a long time, they have been working with Nokia and will be elated to use Nokia’s products and services further. Nokia’s President and Chief Executive Officer, Rajeev Suri explained the importance of this agreement and how it will help the Airtel customers in India and also in the growth of the economy.

Nokia’s SRAN solution will bring the 2G, 3G and 4G networks under one single platform. It will help in lowering the cost, increasing efficiency and decreasing the network intricacy. The Nokia Corporation will also play an essential role in the installation and maintenance of this project in India.

 

 

SP Infra sells solar-energy assets to KKR

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Business, Economy - April 28, 2020

SP Infra sells solar-energy assets to KKR

SP Infra sells 5 solar-energy assets to KKR for ₹1,554 crore

Shapoorji Pallonji And Company Private Limited is an organization with 18 companies under the group and is in the business of infrastructure, engineering and construction, water energy, real estate and financial services. Their business is expanded to more than 70 countries, has more than 70,000 employees with a turnover of more than $ 5 billion. Shapoorji Pallonji Infrastructure Capital Company Pvt. Ltd. (SP Infra) was established in the year 1997 with the goal of developing and maintaining infrastructure assets which will lead to sustainable development thereby contributing to the economic growth of the nation.

Its key sectors consists of renewable and thermal power projects, ports and terminals, transportation and natural resources. Kohlberg Kravis Roberts is among the top investment firms which aims to generate greater returns by following high standards, hiring quality workers, etc. Shapoorji Pallonji Infrastructure Capital Company Pvt. Ltd. sold off 317 MW solar projects (Maharashtra’s 169 MW & Tamil Nadu’s 148 MW) for Rs. 1,554 crores.

SP Infra sells 5 solar-energy assets to KKR for ₹1,554 crore

Managing Director of SP infra spoke to media that the deal will help the company in maintaining the track record of developing the best quality of infrastructure assets and will further partner with such International investors.The downfall in the real estate market and the economic slow down are some of the reasons of selling the solar energy assets. The low demand in the real estate market resulted in a debt of Rs 9,000 crores. This led the company to list one of its companies named Sterling and Wilson Solar Limited. Sanjay Nayar, Chief Executive Officer of KKR India said to the media that SP infra and SP group are recognized worldwide. They show the best quality of infrastructure assets and energy projects. The company will also help the government in achieving the target of 175GW capacity of renewable energy.

He added that this is the best time to invest in the infrastructure sector in India and prepare the best solar energy solutions. This is because of the increasing demand in the Asia Pacific region. The funds will be used for discovering the new solar energy projects in India and overseas. KKR started investing in the infrastructure sector just a year ago. The first investment was done in India Grid Trust for $ 400 million. Last year SP group sold solar energy assets of 194 MW to Sprng Energy. The watches of SP group said that these dis-investments are done to bring in more capital and are part of the long term strategy adopted in the year 2019.

 

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