Early bird results show sharp moderation in second quarter earnings
The early-bird results of firms in the September quarter suggest a slowdown in corporate earnings though revenues continue to grow in high double digits. The combined net profit of 441 early bird companies rose 5.8 percent on an annualized basis, growing at the slowest pace in the past nine quarters, according to a Business Standard analysis. The combined net profit of the same firms increased 27.4 percent year-on-year in the first quarter and 21.9 percent in the second quarter of the last financial year. Operating margin in the second quarter at 26.7 percent of revenues was the lowest in the past 10 quarters while net profit margin was lowest in nine quarter at 9.9 percent.
Why it’s important: The fiscal second quarter results may indicate the end of the post-pandemic boom in margins due to the combined effect of higher inflation, high credit growth and currency depreciation.
Highway authority’s investment trust to raise Rs 5,000 crore from market
The infrastructure investment trust of the National Highways Authority of India will tap the capital markets again in February to raise nearly Rs 5,000 crore to fund road projects. In the third round of fundraising, the National Highways Infra Trust will let retail investors become equity partners in infrastructure projects such as roads for the first time. The proposed fundraising round will be much bigger than the second round, when the trust raised close to Rs 2,700 crore.
Why it’s important: Retail investors are currently not allowed to invest in these trusts that pool money and invest in assets that provide steady cash flows over time. The latest development could provide a new investment pathway for small investors.
Telecom regulator to continue with existing provisions, may get penal powers later
The central government will continue with the existing provisions of the Trai Act, communications minister Ashwini Vaishnaw said in an interview. The government also planned to further empower the Telecom Regulatory Authority of India with penal powers in the coming years, the minister said. The newly notified IT rules notified were primarily aimed at protecting users as social media platforms were not investing enough in safeguarding them from online harm, he said.
Why it’s important: The government’s assurances could soothe concerns over dilution of powers voiced by the telecom regulator. The proposed grievance redressal panels have on the other hand raised concerns over higher government say over social media posts.
Industry suggests easier rules for foreign investment to boost electronics sector
A study by the Confederation of Indian Industry and National Council of Applied Economic Research has suggested softening rules to allow investment from neighboring countries amid shifting of the electronics manufacturing ecosystem to the country as many firms adopt a China+1 strategy. In 2020, Indian made prior government approval mandatory for foreign direct investment from countries sharing a land border with India, irrespective of sectoral caps to curb opportunistic takeovers of domestic firms during the Covid-19 pandemic.
Why it’s important: India is an attractive destination among many Asian firms looking to diversify their supply chain. In such a scenario, it might make sense to tone down the clause to invite investments from neighboring nations.
Time for India to make passenger aircraft as aviation sector expands, says Prime Minister
India would soon be manufacturing big passenger aircraft that would proudly bear the Made in India tag, Prime Minister Narendra Modi said while laying the foundation stone of the Tata-Airbus C-295 aircraft manufacturing facility at Vadodara in Gujarat. The Rs 22,000-crore project is seen as a huge win for Gujarat.
Why it’s important: India is expected to require more than 2,000 aircraft in the next 15 years as its aviation sector expands rapidly. A plane manufacturing factory in the country could bring down costs considerably.
Commercial banks looking to raise deposits could lose out to markets
Banks scouting for more customer deposits face increasing competition from equity and debt markets as investors put in money mutual funds for higher returns. Since the beginning of 2015-16 and till September, total bank deposits grew by Rs 77 lakh crore, out of which fixed deposits have increased Rs 66 lakh crore, according to research by the Bank of Baroa. In the same period, mutual fund assets on a net basis jumped by Rs 26.1 lakh crore, most of it in equity funds, which increased by Rs 10.8 lakh crore, while debt funds saw a slower expansion of Rs 4.8 lakh crore.
Why it’s important: Bank deposits have yielded negative returns after adjusting for inflation. As a result, middle-class savers have gravitated towards the higher returns provided by mutual funds. Unless bank interest rates rise substantially, the trend will only strengthen in the near term.
Mehli Mistry, close to Ratan Tata, inducted on boards of two largest Tata trusts
Mehli Mistry, one of the directors of the M. Pallonji Group seen to be a close associate of chairman Ratan Tata, has been inducted on the boards of two of the largest Tata trusts, which together own 66 percent of Tata Sons. N Srinath, chief executive of Tata Trusts, have retired 30 months after he assumed the position but not person has been shortlisted to replace him yet.
Why it’s important: Mehli Mistry is the estranged first cousin of late Cyrus Mistry, who was ousted as chairman of Tata Sons. His induction provides an indication on how Rata Tata is entrusting close allies to manage affairs at India’s largest philanthropic institutions.
Next year’s central government budget to project optimistic rise in revenues
The central government is likely to project a much more optimistic net tax revenue estimates for 2023-24 in its upcoming budget compared with the conservative estimates in the previous iterations. For 2022-23, net tax revenue budget estimate is Rs 19.35 lakh crore, about 9.6 percent higher than the revised estimate of Rs 17.65 lakh crore. Net tax revenue for 2021-22 was higher than budgeted and the same is expected for the current financial years.
Why it’s important: The current and preceding years saw more conservative revenue growth projections, giving policymakers a fiscal cushion. The government may want to increase welfare spendings ahead of the 2024 parliamentary elections.
Electric two-wheeler sale rises to year’s highest on festive demand
Electric two-wheeler registrations in the festive month of October have hit a record for 2022 at 68,324 vehicles, an increase of 29 percent over the preceding month. Electric two-wheelers now account for around 4 percent of total two-wheeler registrations in India between January and October.
Why it’s important: This could be the inflexion point that electric vehicles makers have been waiting for in India. The mobility transition has begun in real earnest despite teething problems.
Indus wants Vodafone Idea’s stock to stabilize above Rs 10 before equity conversion
Indus Towers has said that the Department of Telecommunications can convert Vodafone Idea’s accrued interest on deferred adjusted gross revenue-related dues into equity only after the stressed telecom provider’s stock price stabilizes above the par value of Rs 10, according to company law provisions. The equity conversion, which will give the government a 33 percent stake, is vital for the telco to conclude its much-delayed Rs 20,000 crore fundraise via debt and equity.
Why it’s important: The equity conversion has been pending since the beginning of 2022. It’s natural for potential investors to wait for clarity on this issue. The operator also needs cash urgently to clear vendor dues.
