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ICICIdirect Research Posted on 09:02am 23-Jun-2020

As per RBI data, credit in the Indian banking sector grew 6.2% to | 102.5 lakh crore for the fortnight ended June 5, 2020...

* Market Outlook

Indian markets are likely to open flat to negative on the back of mixed global cues along with restrictions on working visas by the US and geopolitical tension between India and China. However, global news flows and domestic earning outcome will be key monitorables.


* Markets Yesterday

• Domestic markets ended higher led by gains in financial, pharma and metal stocks despite rising Covid-19 cases

• US markets ended higher amid continued optimism surrounding a quick economic recovery despite rising Covid-19 cases as states reopen


* Key Developments  

 Asian Paints is likely to report flattish sales growth in Q4FY20 at ~| 5407 crore largely due to a washout March owing to Holi and lockdown. However, benign raw material prices are likely to benefit the company in terms of elevated EBITDA margin (up 100 bps YoY to 18.7%). While PBT is likely to remain flat YoY at | 773 crore (due to muted sales growth), PAT may grow 21% YoY to | 588 crore led by corporate tax rate cut in Q4FY20

• We expect Page Industries’ revenues to decline 7.2% YoY to | 564.1 crore mainly owing to a decline in volumes by 9% YoY. We anticipate EBITDA margins will contract sharply by 670 bps YoY to 13.0% (down 330 bps QoQ). We expect PAT to decline 36.5% YoY to | 47.6 crore

• As per media sources, Yes Bank would launch its FPO worth | 15000 crore during the second week of July, which will comprise an anchor investor component of | 4500 crore. Capital raised through this stake sale would help Yes Bank meet its near term payment obligations and would also strengthen its capital adequacy

• Covid-19 breakout and merger process is expected to lead to sluggish business growth for Bank of Baroda. Accordingly, we expect loan growth to stay flat at | 6.8 lakh crore vs. | 6.5 lakh crore in Q3FY20. With margins expected to remain steady at 2.75%, NII is seen at | 7331 crore. The nationwide lockdown could lead GNPA to rise to | 82286 crore with GNPA ratio at 11.38%. Accordingly, credit cost is seen continuing to be elevated at ~69 bps. Such higher provisioning is seen keeping profitability lower at | 365 crore, though in positive territory compared to loss in Q3FY20. Significant exposure to telecom sector, (| 14000 crore) remains a key monitorable

• InfoEdge’s Q4FY20 numbers were below our estimates on all fronts. Revenues grew 10.3% YoY to | 322.8 crore (below our estimate of | 324.1 crore. EBITDA margins fell ~315 bps QoQ to 29.9% (below our estimate of 30.8%). The company plans to raise funds of | 1875 crore through qualified institutional placement route

• Aegis Logistics reported its Q4FY20 results. While consolidated revenues de-grew 33% YoY to | 1242 crore, EBITDA de-grew mere 10% YoY to | 93 crore as EBITDA margins expanded 190 bps to 7.5%, mainly due to 680 bps expansion in the gross margins. Subsequently, PBT came flat at | 86 crore mainly due to higher other income of | 19 crore in Q4FY20 vs. | 4 crore in Q4FY19. However, PAT de-grew 45% to | 34 crore, mainly due to higher tax rate of 46% vs. 19% in Q4FY19

• As per RBI data, credit in the Indian banking sector grew 6.2% to | 102.5 lakh crore for the fortnight ended June 5, 2020 while deposits pace increased to 11.3% to | 139.6 lakh crore during the same period

• India's crude oil processing fell 24.2% to 16.3 MMT in May 2020. However, it increased 7.3% MoM

• The Adani Power board has approved the proposal to delist the company's equity shares from stock exchanges. The company has worked out a floor price of an equity share of | 33.82 and will buy 96.53 crore shares from the public for about | 3,264 crore. The company has a power generation capacity of 12,410 MW across six states in India. Promoters of the company hold 74.9% stake in the company

• Biocon, DKSH have signed an agreement to commercialise Biocon's seven generic formulations in Singapore and Thailand. Under the terms of agreement, DKSH will manage marketing and sales as well as logistics for Biocon’s products in several therapeutic areas, such as cardiology, diabetes, immunology and oncology in these countries

• Fitch Ratings has revised the outlook on Bharti Airtel’s long-term foreign-currency (FC) issuer default rating (IDR) to negative from stable, and affirmed the IDR at 'BBB-'. The negative outlook follows its revision of the outlook on India's long-term foreign- and local-currency IDRs to negative from stable on June 18

• Amul doubled its marketing spends across media during the lockdown in a contrarian call, which helped the brand gain advantage over rivals in terms of sales, brand building, and gaining top of the mind recall. During the 80 days of lockdown, the company’s milk procurement was also up 17% while there was a 30-40% increase in the sale of milk, butter, paneer, and cheese

• Alembic Pharma has got tentative USFDA approval for the generic version of Janssen Pharma's anticoagulant, Xarelto (Rivaroxaban) tablets, 10, 15, 20 mg. The drug had an estimated market size of US$6.1 billion as per IQVIA MAT March 2020

• PNC's share purchase agreement (SPA) with Cube Highways has expired with both parties deciding to terminate the same. It had signed an SPA with Cube Highways & Infrastructure Pte Ltd for sale of 35% stake in Ghaziabad Aligarh road project. The transaction was expected to lead to total cash inflow of | 300 crore to PNC

• L&T Hydrocarbon has signed an MoU with KBR to build modular process plants for refinery and petrochemical projects and to develop business opportunities. L&T Hydrocarbon will exclusively bid for KBR's solid acid alkylation technology (K-SAATTm), solvent de-asphalting technology (ROSE®) and catalytic olefins technology (K-COTTM) for global projects with special emphasis on India, South East Asia, Middle East and Africa

• Maruti Suzuki has launched S-CNG version of S-Presso at prices starting | 4.84 lakh/unit

• Lemon Tree Hotels' subsidiary Fleur Hotels has raised | 175 crore from APG as per earlier announcement. The company has allotted 53,76,340 CCPS to APG, which would be converted into equity at the end of 30 months

• As per media sources, as on June 20, 2020, 12 public sector banks and 16 private Sector banks sanctioned | 75426 crore MSME loans under the government’s emergency credit guarantee scheme out of which 44% has been disbursed so far. In terms of loan breakup, private banks sanctioned | 32687 crore MSME loans while public sector banks sanctioned | 42739 crore MSME loans

• As per media sources, UTI AMC has received Sebi approval to raise | 3000 crore via IPO. The IPO comprises sale of 3.8 crore wherein existing investors viz. SBI, BoB and LIC would dilute 1 crore shares each and T Rowe Price International would offload 38 lakh shares

• As per media sources, overall real estate lending in India declined by 46% with loans sanctioned worth | 1.2 crore in FY20. Total~80% of the total real estate book worth | 8.1 lakh crore has exposure in MMR, NCR and Bengaluru. In terms of lender exposure, 58% was lent by banks followed by NBFC lending at 23%.

• Tata Communications has joined hands with TeleWare, a communications technology business, to provide TeleWare’s mobile voice and SMS recording as part of Tata Communications’ MOVE mobility platform.

• The board of directors of Minda Industries would meet on June 29 to consider fund raising by way of NCD issue and equity rights issue.

• Zee Entertainment’s digital arm Zee5's premium content will be available on a private operator’s broadband platform

• Media reports indicate that the government is considering a proposal to reduce the license fee for fixed line broadband services to households

• Media reports indicate that some of the English entertainment genre channels are likely to go off air as ad revenues are hit due to Covid-19

• As per media reports, ONGC halted operations at two drilling rigs after some employees were infected with Covid-19. However, this has not affected production


* Today's Highlights

Results: Asian Paints, Ador Welding, Berger Paints, Bank of Baroda, Balrampur Chini, DB Corp, EIH Associated Hotels, Indian Bank, Aster DM, Page Industries, GM Breweries, Phillips Carbon Black, Vardhman Textiles