Monthly Archives: May 2019

NTPC share price jumps after mega Rs 20,000 crore capex plan; should you buy shares?

Shares of state-run electricity major NTPC jumped on Thursday afternoon, after the firm announced a mega capex of Rs 20,000 crore in the financial year.

Shares of state-run electricity major NTPC jumped on Thursday afternoon, after the firm announced a mega capex of Rs 20,000 crore in FY20. NTPC shares gained more than 4.5% to hit the day’s high at Rs 135.95. Notably, the government run power giant has announced that it is eyeing to produce 310 billion units of power and 10.4 million tonne of coal, and spend Rs 20,000 crore on capital expenditure in the current financial year. NTPC has signed a memorandum of understanding (MoU) with the power ministry on various targets to be achieved in 2019-20 on May 23, a company statement said. The firm would also ensure 10.4 million tonne of coal production to strengthen fuel supply to its power stations, compared to 6.8 million tonne in the previous fiscal year.

Also read: Rural sales hit due to income gap, govt must create jobs to solve consumer slowdown: Cargill India INTERVIEW

NTPC further said that it is committed towards enhancing operational efficiency and simultaneously aiming to increase its revenue by 12% by employing measures to strengthen financial performance for the next fiscal year. NTPC has power generation installed capacity of 55,125 MW. In the latest quarter, NTPC has reported a 49% rise in Q4 net profit to Rs 4,350.32 crore, compared to Rs 2,925.59 crore for the year-ago quarter, on the back of lower expenses.

NTPC’s total revenue for the fourth quarter of 2018-19 tumbled to  Rs 22,545.61 crore from Rs 23,617.83 crore in the comparable period last fiscal year. Expenses reduced to Rs 19,008.44 crore for the quarter compared with Rs 20,229.26 crore, in the last year period. NTPC’s board has recommended a final dividend of Rs ­­2.50 per equity share of the face value of Rs 10 each for 2018-19, subject to the approval of shareholders at the annual general meeting scheduled to be held in August 2019.

Taking stock of the reported results, Motilal Oswal said that operations are turning around as availability of coal improves. “Management expects no fuel-related under-recoveries from FY20 (v/s INR8b in FY19), which will likely boost PAT. Under-recoveries on GCV and O&M are well addressed in the tariff regulations 2020-24, which will also support earnings,” said the report.  Motilal Oswal expects capitalization to pick up pace, driving a regulated equity CAGR of 14% over FY19-21. Capitalization will outpace capex, boosting RoE and driving re-rating of the stock, said the research firm. Motilal Oswal has re-iterated ‘Buy’ on the shares with a DCF-based target price of Rs 158 per share

Tata Teleservices (Maharashtra) to raise up to Rs 35,000 crore via equity and debt

While Tata Teleservices did not share details of utilisation of these funds, the company has been exploring various fundraising options to augment the resources of the company.

Tata Teleservices Maharashtra’s net debt at the end of March 31, 2018 stood at Rs 16,104 crore, up from Rs 15,620 crore at the end of March 31, 2017, according to Bloomberg data.

Tata Teleservices (Maharashtra) will be seeking shareholders’ approval to raise additional funds of up to Rs 35,000 crore through a mix of redeemable preference shares to the promoters and/or non-convertible debentures (NCDs). The company’s board of directors approved the proposal on Wednesday.

In a notice sent to stock exchanges, the company said that the board of directors of the company have approved the “raising of additional funds through redeemable preference shares to the promoter/s on preferential basis up to an aggregate amount of Rs 15,000 crore and/or non-convertible debentures in one or more tranches up to an aggregate amount of Rs 20,000 crore”.

While Tata Teleservices did not share details of utilisation of these funds, the company has been exploring various fundraising options to augment the resources of the company.

In August 2018 too, the company’s board had approved the proposal to raise an additional amount not exceeding Rs 20,000 crore through issue of non-cumulative redeemable preference shares and/or issue of NCDs and/or acceptance/availing of inter corporate deposits (ICDs)/loans, subject to the approval of the members of the company.

The company had said that the funds raised through one or more options will be utilised primarily for repayment/prepayment of existing debt/loans of the company, including deferred payment liability to Department of Telecommunications (DoT) for spectrum and/or for redemption of the existing redeemable preference shares issued earlier, after meeting the expenditure related to such issue and for general corporate purposes.

Tata Teleservices Maharashtra’s net debt at the end of March 31, 2018 stood at Rs 16,104 crore, up from Rs 15,620 crore at the end of March 31, 2017, according to Bloomberg data.

It is yet to come out with its annual report for the financial year 2018-2019.

New Strategic Partnership

TCS has signed a new strategic partnership with Scandinavia’s leading airline, SAS, the flag-carrier of Sweden, Norway and Denmark.

The long-term partnership, which started in 2012, included an always-on IT platform and a digital e-commerce platform. TCS also worked with SAS’ Innovation Lab to deliver quality customer service across innovative channels, such as Turi, a new artificial intelligence (AI) -powered personal travel agent chatbot.

SAS’ new partnership with TCS will help provide an improved experience for SAS’ customers. At the same time, the technology platforms TCS will develop with SAS, will help the business to grow and transform effectively. SAS will also use TCS’ automation software ignio to manage its IT operations and drive its data-driven decision-making.

Meeting long-term goals

“Becoming a truly ‘digital-first’ airline is a key part of our long-term strategy,” said Mattias Forsberg, CIO, SAS. “Cloud technology, automation and agile methodologies have a huge role to play in improving the service we provide our customers, and keeping our business performing at its best. TCS has become a vital partner for SAS in our digital transformation journey, and we look forward to working with the TCS team in the years to come,” he said.

“Our new strategic partnership with TCS will help us to realize the potential of technologies such as cloud, AI and automation, which are the key pillars on which our future growth will be based,” he said. “TCS’ cognitive automation software, ignio and Machine First™ Delivery Model will improve customer service, reduce response times for customer queries, and deliver new insights for business decision-making, while providing enhanced levels of stability and security.”

Innovative products

The partnership will also focus on developing new agile ways of working, which will allow SAS to bring innovative products and services to market faster. TCS will work closely with SAS to implement a new enterprise distributed agile model across the entire business and develop a new partnership model based on shared values, enabling the business to deliver industry-first products and services.

“Digital technology presents businesses with huge opportunities for organic growth and improved bottom lines, and this is especially important for the aviation industry, which has historically had to contend with fierce competition and slim margins,” said Avinash Limaye, Country Head, TCS Sweden. “Our Business 4.0™ approach is resonating with customers, in providing a blueprint for how technology can help them evolve more rapidly and capitalise on new market opportunities. We are pleased to extend our partnership with SAS as the business continues on its journey to becoming a world-leading, digital-first airline.”

Company classified as ‘going concern’

The National Company Law Appellate Tribunal (NCLAT) has upheld the decision of the NCLT to liquidate debt-laden Bharati Defence and Infrastructure.

The insolvency court in Mumbai had ordered liquidation of the company after rejecting the resolution plan submitted by Edelweiss Asset Reconstruction Co Ltd, leaving two dozen defence vessels stranded. A clutch of lenders stand to lose ₹11,373.40 crore which the firm owes them.

Going concern

The NCLAT, while upholding the National Company Law Tribunal’s (NCLT) decision, said the company should be classified as a “going concern”. In accounting parlance, a going concern means a company can continue to operate. There are more than 850 employees on the rolls of what was once India’s second biggest private shipyard with a much sought-after licence from the government to build warships.

Earlier, a resolution plan was backed by the Committee of Creditors (CoC) in which Edelweiss ARC had an 82.7 per cent voting share as a financial creditor after taking over debt of ₹6,248.84 crore from some 20 lenders by paying ₹1,813.90 crore.

NCLT apprehensive

NCLT had cast doubts over the genuineness of the plan. “The resolution applicant has not given a practical and viable plan to manage the affairs of the corporate debtor (Bharati). The plan contains a lot of uncertainties, a lot of speculation. The public shareholding in the company would be reduced to a mere 2 per cent from the current substantial level of approximately 60 per cent,” the NCLT had noted.

The NCLT order was challenged on the ground that liquidation order has been passed with “material irregularity” due to fraud committed by the ‘Resolution Professional’.

While NCLAT rejected the challenge, the Tribunal pointed out that considering the national importance attached to product line of the company, the customers, especially Ministry of Defence, Indian Coast Guard, Customs, the order book size, in addition to advances paid by various government departments, Bharati Defence and Infrastructure has been classified as a “going concern”.

Vijay Kumar V Iyer has been appointed as the liquidator and the tribunal has directed that work should be taken from existing employees and workmen.

US stock futures slid and sovereign bonds surged on Friday as investors feared President Donald Trump’s shock move to slap tariffs on Mexico risked tipping the United States, and maybe the whole world, into recession.

The outlook darkened further when a key measure of Chinese manufacturing activity disappointed for May, questioning the effectiveness of Beijing’s stimulus steps.

Markets moved aggressively to price in deeper rate cuts by the Federal Reserve this year, while bond yields touched fresh lows and curves inverted in a warning of recession.

Washington will impose a 5% tariff from June 10, which would then rise steadily to 25% until illegal immigration across the southern border was stopped.

Trump announced the decision on Twitter late Thursday, catching markets completely by surprise and sparking a rush to safe harbours.

“The threat of US tariffs on Mexico to take effect inside two weeks is a sharp blow to investor sentiment,” said Sean Callow, a senior FX analyst at Westpac.

“Mexico is the US’s largest trading partner and a flare-up in trade tensions was definitely not on the market radar,” he added. “This is obviously a major setback for CAD, MXN and the thousands of US businesses that use Mexican-made products.”

Yields on the 10-year Treasury note quickly fell to a fresh 20-month low of 2.18%, while the dollar jumped 1.7% on the Mexican peso. E-Mini futures for the S&P 500 slipped 0.7% and FTSE futures 0.4%.

Asian shares slid at first but soon drew month-end bargain hunting having suffered a torrid few weeks. MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.3%, though it was still down 7.3% for the month.

China’s blue chip index added 0.7%, partly on talk Beijing would now have to ramp up its stimulus measures.

Japan’s Nikkei pared early losses to be off 0.6%, but was still down 6.5% for the month so far.

Investors clearly feared that opening a new front in the trade wars would threaten global and US growth, and pressure central banks everywhere to consider new stimulus.

On Thursday, Federal Reserve Board of Governors Vice Chair Richard Clarida had said the central bank would act if inflation stays too low or global and financial risks endanger the economic outlook.

“What the Clarida’s comments have done is clarify in many people’s minds the answer to the questions of whether low inflation proving more than transitory would itself be enough to get the Fed to ease the answer appears to be ‘yes’,” said Ray Attrill, head of FX strategy at National Australia Bank.

“That served to reinforce prevailing market expectations that the Fed will be easing in the second half of this year.”

Indeed, the case that the inflation slowdown was temporary took a blow when the core personal consumption expenditures index, the Fed’s favoured measure of inflation, was revised down to 1% for the first quarter, from 1.3%.

Trump’s tariff threat only added to the dangers and the market further narrowed the odds on Fed easing this year and next. Futures imply 44 basis points of cuts by year end in the current effective funds rate of 2.38%.

YIELD INVERSION = RECESSION RISK

Bonds extended their bull run with 10-year Treasury yields now down a steep 32 basis points for the month and decisively below the overnight funds rate.

Such an inversion of the yield curve has presaged enough recessions in the past that investors are wagering the Fed will be forced to ease policy just as “insurance”.

Yet Treasuries are hardly alone in rallying, with bond yields across Europe either at or near record lows. Yields in Australia and New Zealand are also hit an all-time trough on expectations of rate cuts there.

Those declines have kept the US dollar relatively attractive from a yield point of view and it was trading near a two-year high against a basket of currencies at 98.119.The euro was huddled at $1.1133, having shed 0.7% for the month. The safe haven yen has been faring better and was holding a small monthly gain on the dollar at 109.33.

Sterling was poised for the biggest monthly drop in a year as the imminent departure of Theresa May as prime minister deepened fears about a chaotic divorce from the European Union.

The pound was last at $1.2611 and nursing a 3.2% loss for the month so far.

In commodity markets, spot gold edged up 0.2% to $1,291.64 per ounce.

Oil prices fell to their lowest in almost three months on fears a global economic slowdown would crimp demand.

US crude was last down 46 cents at $56.13 a barrel, while Brent crude futures lost 63 cents to $66.24.