Taste the thunder

Vol. XXXII/23 2017 hurtled to a nail-biting finale as equities surged

Jan 01 – 14, 2018
www.capitalmarket.com and consumer confidence slipped
......................................................................................................................................
At a point well past half time in 2017, it looked as if there were no clouds with silver
Owner : Capital Market Publishers India Pvt. Ltd.
...................................................................................................................................... linings for the economy. Even as the country was recovering from the frenzy of the
Managing Director : Ruby Anand
...................................................................................................................................... recall of high-value notes late previous year, a torrent of reforms swamped industrial
Editor : Mohan Sule activity. MSP, NPAs, MRP and IBC were the acronyms of the year, arousing pas-
......................................................................................................................................
sionate polarization. Developers were put on leash and sick companies cut off from
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...................................................................................................................................... the drip of credit. Signs of Cyclone GST triggered a wave of disruption. An umbrella
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permission is prohibited. burial as the Federal Reserve signalled that the US economy was on a sound footing.
All possible efforts have been made to present factually correct
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errors may have crept in inadvertently or through oversight. panic as the tamed consumer prices strained to break free. The surest sign that the
Though all care is taken in arriving at the recommendations
given in this publication, readers are cautioned that prices of mood was changing from being politically correct to simply being realistic was the
equity shares and debentures may rise or fall in a manner not
foreseen. Readers are advised to take professional advice
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before investing. to weed out fakes and the muted protest to the US Federal Communications
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MOHAN M SULE
Jan 01 – 14, 2018 CAPITAL MARKET 3
ReadersReact
The side-effects
As the goods and services tax
(GST) regime stabilized,
businesses went for restock-
ing of finished goods and raw
material inventories and
gradually got back on
track in the September 2017
quarter (Q2 of FY 2018:
‘Lackluster show’, Dec 04–
17, 2017). The early festive
season acted as trigger for
pre-festive stocking. How-
ever, only a few sectors and
companies benefited.
Deepak Khakhrechi, e-mail
While lower GST rate benefits
had to be passed on fully even
on higher-cost pre-GST
stocks, it was difficult for
companies to fully and
immediately pass on higher
GST rates, pulling down the
profit margins on slower sales.
Umesh Kolithad, e-mail
After a surge in financial
liquidity post the note-ban,
domestic investors are
dumping liquidity in equity
market due to unattractive-
ness of any other investment
avenue. As a result, indices
and select stock prices are
going through the roof even as
Telefolio scrips have a proven
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4 Jan 01 – 14, 2018 CAPITAL MARKET
there is hardly any improve-
ment in corporate earnings.
Tanmay Ganod, e-mail
Problem of bias
There is consensus that mass
consumption items require
moderate rates. Yet, fuels are
heavily taxed both by the
Central and state governments
(Editorial: ‘An uneven field’,
Dec 04–17, 2017). Despite
unanimity on the need for one
rate on the same product, the
disagreement on whether there
should be a single rate has
underscored the fact that tax
payers have to contend with a
field that is not levelled.
Varun Shorke, e-mail
Algo trading gives big-ticket
investors advantage in placing
orders. Despite proportionate
share allotment, the primary
market is rife with instances
of favouritism. The book is
run through big investors to
determine the price range.
Nearly two-thirds of the issue
is assigned to institutional
investors. Though the quota
for small bidders has increased
over the years and a discount
is offered on the cut-off price,
those opting for the lowest
band and minimum quantity
often return empty-handed.
Subham Labadhe, e-mail
Companies have been directed
to get a majority of the small
shareholders on board for
passing resolutions. The
problem is not all the
members of this category hold
equal number of shares. How
a dominant section can
subvert the process has been
displayed during the reverse
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book-building exercise for
delisting. Several companies
prefer to stay put than agree
to the exorbitant demands.
Satyam Vakada, e-mail
Regaining health
The banking sector has exhibited
improved core operating
performance, with controlled
slippages of loans, despite a
challenging economic environ-
ment amid implementation of
the goods and services tax from
the beginning of the quarter
(Banking: ‘Asset quality
stabilizing’, Dec 04–17, 2017).
It showed better pre-provision-
ing profit, with the growth
slowly picking up. The banking
sector’s asset quality is likely
to have almost touched the
bottom, with the pace of
incremental stress addition
showing a sharp decline.
Raman Bujja, e-mail
Still in the woods
Despite recent policy measure
favoring local capital goods
players, the investment
climate continues to be
subdued (Capital Goods: ‘A
double whammy’, Dec 04–17,
2017). The accelerated roll out
of GST, even before the
economy shrugged off from the
impact of demonetization
effected in November 2016,
precipitated the slowdown.
Thus, domestic capex will
continue to be largely driven by
public investment, with little or
no participation from the
private sector in the near term.
Ganesh Killan, e-mail
Sign of hope
The prospects of the cement
sector look bright in the long
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term on expected demand from
the affordable housing and road
construction segments (Cement:
‘One-offs dominate ’, Dec 04–
17, 2017). Demand is likely to
recover after monsoon and as
the teething problems associated
with the implementation of
GST and the Real Estate
(Regulation and Development)
Act, 2016, wears off in the
coming months and sand
availability improves.
Raman Dev, e-mail
Season's greetings
The start of the festive season
saw good revival of sentiment
(Media and Entertainment: ‘Q2
lacks excitement’, Dec 04–17,
2017). There was good growth
in advertisement revenues from
some specific categories such as
mobile, consumer electronics, e-
commerce, retail and lifestyle.
In the print media space, ad
spends by e-commerce,
auto, fashion and apparels
and jewellery brands
were noticeable.
Pushakar T, e-mail
Favorable environment
Festive season sales have been
subdued till now (Automo-
biles: ‘On a steady growth
path’, Dec 04–17, 2017). But a
decent monsoon is expected to
revive rural demand. The
Central Pay Commission pay-
outs helped the industry’s
growth a year ago. States’ pay
commission announcements
(around eight states have
implemented the pay revi-
sions) are helping demand.
Manoj Maharathi, e-mail
Send your feedback to
readersreact@capitalmarket.com
Capitaline CSS database gives
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Inside
13 | In Focus
Banks
Recognition of divergence
NBFCs
Improved performance
PSU Banks
Buyers’ remorse
Graphite electrodes
Turning around
08 | Cover Story
Stocks: Looking ahead
24 | Over The Counter The performance of companies setting goals for the coming years can be measured,
Buying and Selling helping in evaluating the quality of management
IDBI sells Religare Enterprises

27 | Market Watch 80| Apna Money 90 | Capitalaline Corner

Market Report Securing the girl child Power Mech Projects
Soaring temprature Stake surrender Regaining power
Can sale proceeds from property be
Stocks-Large caps
invested in son’s house?
Movers and shakers

69 | Stock Watch
Visaka Industries
Will remain a star perfomer

32 | Corporate Scoreboard
74 | Sector Spotlight
Real Estate
61 | Consolidated Scoreboard
Home-coming 89 | Commodity Watch 63 | Company Index
Roads & Highways Crude Oil 67 | Bulletin
Dull H1, better outlook Volatility here to stay 68 | Watch List

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6 Jan 01 – 14, 2018 CAPITAL MARKET

CoverStory
CoverStory
Stocks
Looking ahead
The performance of companies setting goals for the coming years can be measured,
helping in evaluating the quality of management
Political stability is one of the biggest as-
sets for India’s economy at the moment. The
factor is enabling long-pending reforms. In-
troducing structural changes is essential to
put the economy on a high-growth trajec-
tory. The result will be creation of massive
wealth for investors.
Uncertainties stemming from demon-
etization are largely over. Also, the goods
and services tax (GST), probably the big-
gest economic reform post Independence,
has seen the light of the day and the teeth-
ing problems are fading. Industry is stabi-
lizing as the benefits of a single market are
becoming visible.
Owing to the ban on high-value cur-
rency notes and implementation of GST,
India’s gross domestic product growth
plunged to 5.7% in the first quarter ended
June 2017 over a year ago, a 13-quarter
low. The GDP subsequently recovered to
expand 6.3% in the second quarter ended
September 2017. The Reserve Bank of In-
dia expects the domestic economy to clock
a growth of 6.7% in the fiscal year ending
March 2018 (FY 2018). India reported eco-
nomic growth of 7.1% in FY 2017. In inter-
national comparison, this is a good num-
ber. However, the country needs to grow
close to double digits to lift its large popu-
lation from poverty.
In a major morale boost, international
rating agency Moody’s Investors Service in
November 2017 upgraded India’s sovereign
bonds rating for the first time in nearly 14
years by one notch to Baa2 from Baa3, cit-
ing continued progress on economic and in-
stitutional reform. The agency changed its
rating outlook to stable from positive. Be-
sides, in October 2017, India ranking in the
World Bank’s 2017-18 Ease of Doing Busi-
ness survey improved 30 places to 100.
Over the last one year, interest rates have
declined substantially, offering a cushion to
India Inc at a time when many big compa-
nies are struggling with over-leveraged bal-
ance sheets. Interest rates are likely to re-
main stable. But, from here on, a further
8 Jan 01 – 14, 2018 CAPITAL MARKET
Likely to dissappoint
Infosys is unlikely to meet the target of
achieving revenues of US$ 20 billion by
FY 2020. Consolidated revenues were
around US$ 10.5 billion in FY 2017
Face Value: Rs 5
CMP Rs 1034 as on 26 December 2017. One-year return: 5.22%
S&P BSE Sensex one-year return: 31.79%
meaningful and significant decline in inter-
est rates looks remote, a negative factor for
the economy and the market.
Prices of crude oil have jumped in re-
cent months reacting to political develop-
ments in Saudi Arabia and an unplanned
closure of the pipeline that carries crude
oil from the North Sea to a processing ter-
minal in Scotland. Brent crude touched US$
63.3 per barrel mid-December 2017, a two-
year high.
India is largely dependent on imports
for its crude oil requirement. As such, it will
be a matter of concern if oil moves to a higher
trajectory and remains at an elevated level.
There will be a spike in inflation that will
put the financials of the Central government
under stress. The result could be economic
slowdown, thereby impairing the Central
government’s ability to spend liberally to
lift the economy.
Besides, the Central government might
resort to populism in the near future as less
than one-and-a-half years remain for the
general election. Any adventurism will have
an adverse effect on the fiscal deficit. The
reform process might take a backseat.
The global scenario is unlikely to change
in the calendar year (CY) 2018 compared
Stocks
with CY 2017. Developed countries con-
tinue to face economic stagnation. Going
forward, terrorism and North Korea are
likely to remain trouble spots.
The stock market remained largely buoy-
ant in CY 2017. The S&P BSE Sensex gained
28% in CY 2017 till 26 December. The bench-
mark index surged and recorded an all-time
high of 34,062 in December 2017. Domestic
institutional investors, particularly mutual
funds, have emerged as major buyers in the
market. Mutual funds have received signifi-
cant inflows from retail investors. However,
foreign institutional investors (FIIs) turned
net sellers in CY 2017. Domestic institutional
investors’ cumulative net investment in equi-
ties stood at Rs 87187 crore in CY 2017 till
15 December. In contrast, FIIs net sold Rs
42774 crore in the period.
The market in CY 2017 was driven more
by liquidity than financials. Corporate earn-
ings remained dismal. Leveraged balance
sheets of several large- and mid-sized busi-
ness groups proved to be another drag on
capital investments.
The scenario is unlikely to change in CY
2018 as well. At the current level of 34,011,
the Sensex is expensive at a price to earnings
(P/E) multiple of 24.8 as against the long-
term average of around 18. The index is com-
manding a price to book value (P/BV) of
3.05 times and dividend yield of 1.16%. Simi-
larly, the Nifty is available at P/E of 26.5,
P/BV of 3.5 times and dividend yield of 1.1%.
Dismal corporate earnings have resulted
in expensive valuations. The surge by the
equity market is purely on account of ex-
pansion in P/E, a worrying trend. Corporate
earnings are expected to be better in FY 2019
and beyond. But the improvement is un-
likely to be dramatic to moderate the valua-
tions. Invariably, the market will have to
depend on liquidity to report gain in share-
holders’ wealth.
CY 2017 has proved to be an excellent
year for initial public offerings (IPOs). Sev-
eral companies took advantage of buoyancy
in the secondary market, driven by liquid-
CoverStory
ity. Around Rs 68000 crore were garnered
from the primary market in CY 2017.
The CY 2018 begins with a mixture of
optimism and pessimism. One way to ex-
plore equities is to focus on companies that
have set goals for coming years. The best
part of the investment strategy is that the
performance of companies is measurable
compared with the targets that have been
set, thereby helping in evaluating perfor-
mance of the management and promoters.
Moreover, guidance offers some visibility
to investors and builds a scenario for fu-
ture valuations.
Companies do have their internal tar-
gets for one or two years. It is integral part
of corporate budgeting and planning. Com-
panies sharing their objectives make the
whole process transparent for investors.
Also, the exercise lends accountability,
largely missing in India Inc unlike in the
west, where non-performance results in un-
ceremonious exits.
There is a conflict of interest that should
be kept in mind. Companies obviously want
to keep their market value high. In this en-
deavour, the management has no option but
to make optimistic statements. The factor
needs to be discounted while assessing com-
panies for investment. In the context, inves-
tors can assess the past performance of
management of delivering results.
Companies can be seen talking about
future revenues, market share, product port-
folio, distribution or geographical reach, debt
reduction, divestment of non-core assets and
return on equity.
Capital Market scanned various sources
of information to compile a list of compa-
nies to have disclosed their medium- to long-
term goals. Data was collected from annual
reports, presentations, corporate announce-
ments, news reports, press releases and
media interviews. In certain cases, vision
statements of companies have provided in-
formation about future plans. Largely, com-
panies offering concrete future plans have
been selected. Those making generic state-
ments were removed. Companies that have
gone for IPOs in the recent times were ig-
nored because they tend to talk big to jus-
tify their rich valuations.
Country’s second largest software com-
pany Infosys is unlikely to meet the target
of achieving revenues of US$ 20 billion by
FY 2020. Consolidated revenues were
around US$ 10.5 billion in FY 2017. The
company has witnessed a churn at the top
Jan 01 – 14, 2018 CAPITAL MARKET
Off target
Welspun India in April 2016 had shared
Vision 2020. Due to macroeconomic
and other challenges, the vision has
been deferred by two years
Face Value: Re 1
CMP Rs 76 as on 26 December 2017. One-year return: 23.27%
S&P BSE Mid cap index one-year return: 58.28%
owing to allegation of corporate governance
issues and disconnect between management
and erstwhile promoters on sabbatical.
Also, companies postponing deadlines
are not uncommon. Welspun India in April
2016 had shared Vision 2020 with the share-
holders detailing certain targets. Due to mac-
roeconomic and other challenges, the vision
has been deferred by two years.
Polymer manufacturer Bhansali Engi-
neering Polymers has talked about multiple
goals in the annual report for FY 2017. The
aim is to be the lowest costs well as to be the
largest producer of acrylonitrile butadiene
styrene (ABS) in India by FY 2019. The tar-
get is to achieve over 90% capacity utiliza-
tion from FY 2018 and generate sufficient
internal accrual to fund future expansion
projects without relying on borrowings.
ABS manufacturing capacity is to be
ramped up to 137 kilotonnes per annum
(ktpa) from the current 80 ktpa by Decem-
ber 2018. The expansion will be financed
through internal accruals. There are plans
to establish a port-based greenfield project
of minimum 200 ktpa of ABS capacity by
March 2022. This facility will be located
in Gujarat.
ABS and styrene acrylonitrile resins are
classified as of highly specialized engineering
thermoplastics. Their manufacturing facilities
are located at Abu Road, Rajasthan, and
Satnoor, Madhya Pradesh. Key customers
include HMSI, Maruti Suzuki, Whirlpool,
Samsung, LG, Toyota, M&M, Bajaj Auto and
Godrej group among others. A significant
portion of the raw materials are required to
be imported. Thus, there is risk of price and
currency fluctuations.
Stocks
Titan Company expects to clock rev-
enue of US$ 5 billion by FY 2025 as against
US$ 2 billion in FY 2017. Investment is
being earmarked to ensure growth.
Broadly, the joint venture between the
Tata Group and the Tamil Nadu Industrial
Development Corporation operates in
three business segments of watches (rev-
enue contribution of 16% in FY 2017),
jewelry (81%) and eye-wear (3%).
As many as 1,415 stores are operational
on aggregate retail space of 1.8 million square
feet spread across 266 towns. Also, prod-
ucts are sold through over 11,000 multi-brand
retail outlets. There is presence in 32 coun-
tries with aggregate of 2,264 outlets. Key
brands include Titan (watches and accesso-
ries), Sonata (largest selling watch brand in
India), Fastrack (largest youth brand),
Tanishq (India’s leading jewelry brand) and
Raga (exclusive women’s watch brand).
Luxury brands include Zoya (diamond col-
lection) and Favre-Leuba (watches), while
premium brands include Xylys (watches)
and Nebula (watches).
Indian ethnic wear has been identified as
a new product category. Products such as
sarees, lehengas, yardages, stoles and dupattas
are priced from Rs 2000 to Rs 2.5 lakh under
the Taneira brand. The segment can become
Titan’s fourth lifestyle vertical in future.
Auto component maker Motherson
Sumi Systems is known for carving out
five-year plans. The practice of providing
five-year targets was started in FY 2000.
Importantly, the targets set over the last one-
and-a-half decade have been achieved. IP
modules, door trims and bumpers for pas-
senger cars in Europe and India contribute
around 51% to the top line. Wiring harnesses
for passenger cars in India and for commer-
cial vehicles globally accounts for 27% of
the consolidated revenues. Rear-view mir-
rors comprise 22% of the total sales.
The target is to achieve revenues of US$
18 billion and returns on capital employed
(RoCE) (consolidated) of 40% by FY 2020.
Further, the aim is to pay 40% of consoli-
dated profit as dividend. As per the busi-
ness strategy, 3CX15, no country or cus-
tomer of components should account for
more than 15% of the total revenues. Turn-
over was around US$ 7.4 billion in FY 2017.
The goal is not only to pursue growth but
also improve RoCE.
Among the leading companies by mar-
ket value, ITC’s aspiration is to clock rev-
enues of Rs 1 lakh crore from the new
9
CoverStory Stocks

FMCG businesses. Revenues from the new
FMCG businesses were Rs 14000 crore in
FY 2017. The FMCG business includes
branded packaged foods, personal care
products, education and stationery prod-
ucts, lifestyle retailing, incense sticks and
safety matches. There is presence in 40
FMCG categories, with aggregate 10,000
stock-keeping units. As many as two mil-
lion outlets are served directly.
Aggressive investment is being made in
manufacturing and logistics facilities to grow
the FMCG business. A third company-
owned manufacturing unit was commis-
sioned to cater to the foods and personal-
care products segments. Further, a decision
has been made foray into fruits, vegetables
and other perishables segment. The primary
focus is on growing the non-cigarette busi-
nesses. The non-cigarette segments contrib-
uted 58% to the revenues in FY 2017.
The largest cigarette maker in the coun-
try also operates in the sectors of
paperboards and packaging, agriculture, ho-
tels and information technology. British
American Tobacco held 30% equity stake
and. mutual funds 4.73% in the debt-free
company end September 2017. Bonus
shares were issued in the ratio of 1:2 in FY
2017 and 1:1 in FY 2011.
IndusInd Bank has devised a growth
strategy for FY 2017 to FY 2020, called 4D.
The vision envisages doubling the client base,
loans and profit. The loan growth target has
been set at 25-30% and revenues growth
aimed at higher than the balance-sheet
growth. The current-account-savings-ac-
count ratio should reach 40% and the branch
network touch 2,000 by FY 2020 from 1,250
branches at present. The aim is to double
the customer base to 20 million. The objec-
tive is to report return on asset of 2.4% as
against 1.86% in FY 2017.
The advances base stood at Rs 123181
crore and deposits at Rs 141441 crore end
September 2017. The capital adequacy ra-
tio was 15.63% end September 2017. Large
firms (29%), mid-sized companies (19%)
and small enterprises (12%) accounted for
60% of the loan book end March 2017.
The ongoing merger of micro finance
company Bharat Financial Inclusion (BFIL)
is expected to provide a big boost to the
business base. The shareholders of BFIL will
receive 639 shares of IndusInd for every
1,000 shares of BFIL. BFIL’s business con-
sists of 1408 offices, 6.8 million customers,
15284 employees, a loan book of Rs 9631
crore and total assets of Rs 10170 crore end
June 2017. The merger is expected to be
completed by mid-CY 2018.
Nilkamal is focusing on growing its
mattress business. The plan is to scale up
revenues of the vertical to nearly Rs 200
crore within the next three years from Rs 48
crore in FY 2017. FY 2017 saw efforts to
improve the reach, enhance the product of-
ferings and increase awareness of the
Nilkamal Mattress brand to assist the chan-
nel partners in achieving the twin objectives
of top-line growth and retailer appointment.
Two mattress manufacturing units, one

Opening up the window

Companies do have their internal targets for one or two years and, by sharing their objectives, make the whole process
transparent for investors. Also, the exercise lends accountability
COMPANY CMP MCAP 52-WEEK MF D-E TTM NET SALES TTM APAT P/E P/BV DY
(Rs) (Rs cr) HIGH (Rs) LOW (Rs) (%) RATIO (Rs cr) CHG(%) (Rs cr) CHG(%) RATIO (%)
APL Apollo Tubes 1969.4 4673.4 2027.8 876.0 14.43 0.97 4887.8 24.2 150.4 10.7 31.08 6.06 0.61
Bhansali Engineering Polymers 174.0 2886.8 199.9 21.4 0.22 0.11 787.8 35.3 60.1 204.0 85.11 18.37 0.11
Biocon 539.7 32379.0 548.1 294.0 2.1 0.54 3843.8 5.3 448.9 -13.9 72.13 6.83 0.19
IndusInd Bank 1648.9 98887.4 1818.0 1045.2 12.06 0 15873.2 21.3 3218.9 25.4 34.52 4.88 0
ITC 263.4 321035.7 353.2 222.1 4.73 0 40350.7 6.1 10516.5 7.7 36.23 6.92 2.13
Marico 317.0 40917.5 347.8 238.6 1.55 0.13 5946.3 -1.0 783.5 -0.9 52.22 14.92 1.1
Motherson Sumi Systems 376.2 79190.5 395.0 201.8 6.8 1.3 47918.8 21.9 2349.3 21.5 33.71 9.07 0.35
Nilkamal 1836.1 2739.4 2274.9 1225.0 9.62 0.14 1979.7 7.0 110.7 -0.4 22.43 3.71 0.22
Supreme Industries 1225.3 15564.6 1250.0 844.0 5.34 0.23 4606.8 8.1 398.2 3.1 39.09 9.39 0.24
Titan Company 856.1 76003.4 871.9 307.0 2.74 0.01 14954.6 34.3 935.9 18.8 81.21 17.12 0.3
Adani Transmission 235.6 25911.5 247.8 51.1 0.08 3.13 2920.1 17.8 345.0 -13.1 75.11 8.65 0
Britannia Industries 4744.9 56966.3 4963.7 2776.0 6.39 0.05 9256.2 6.1 908.4 5.7 62.71 19.81 0.46
CCL Products (India) 302.6 4025.4 371.8 250.0 2.23 0.31 1126.7 29.3 141.7 22.2 28.42 6.1 0.83
Finolex Industries 641.0 7954.2 752.8 425.0 8.18 0.08 2981.5 10.4 305.5 11.6 22.78 3.44 1.79
Hatsun Agro Product 841.0 12797.4 970.0 347.8 0.3 2.75 4395.2 16.9 145.5 131.1 87.97 36.65 0.48
Mahanagar Gas 1118.5 11047.8 1345.0 751.3 4.93 0 2094.3 3.3 447.6 25.9 24.68 5.64 1.87
Orient Cement 166.8 3417.7 182.0 115.8 20.77 1.29 2144.2 34.3 53.9 LP 63.42 3.33 0.3
TTK Prestige 7964.4 9199.8 8399.0 5272.2 6.58 0.07 1793.7 15.9 162.8 34.8 56.5 9.92 0.34
Vidhi Specialty Food Ingredients 112.1 559.6 115.9 49.1 0 0.93 219.8 36.3 15.3 -1.5 36.62 7.72 0.71
Welspun India 76.1 7646.0 99.6 60.0 1.37 1.5 5954.7 0.9 515.8 -44.2 14.82 3.07 0.85
CMP (current market price) is closing as on 22 December 2017. Consolidated financials considered wherever available. MF (mutual fund) holding as of September 2017. Debt-to-equity ratio is as of FY 2017.
LP : Loss to profit. P/E : Price to earnings. P/BV : Price to book value. DY : Dividend yield. TTM net sales and TTM APAT (trailing 12-month adjusted profit after tax) is for the period ended September 2017.
Variation in TTM net sales and APAT is over the corresponding previous period. Source: Capitaline Databases

10 Jan 01 – 14, 2018 CAPITAL MARKET

CoverStory Stocks

With some caution

Guidance offers some visibility to investors and builds a scenario for future valuations. But there is a conflict of interest
as management makes optimistic statements. The factor needs to be discounted

COMPANY HIGHLIGHTS
Welspun India One of the world’s leading home textile manufacturers with a diversified brand portfolio and global distribution network has set
multiple goals as part of Vision 2022. The aim is to achieve revenues of US$ 2 billion and emerge debt-free by FY 2022. The
objective is to ensure half of the revenues from branded products as against 16% in FY 2017 and at least 20% revenues from
the domestic market as against mere 5% in FY 2017. Mutual funds held 1.37% stake end September 2017.
Hatsun Agro Product The milk segment, constituting 68% of the revenues in FY 2017, has been notching 18% CAGR over the last five years.
Growth is anticipated at similar levels in the next three financial years owing to deeper penetration into new markets.
Expansion is planned to commensurate with the increased milk-handling facilities. Capacity is to be enhanced by March 2018
with the proposed addition of one milk processing unit at Dharapuram in Tamil Nadu and another in Andhra Pradesh.
TTK Prestige With a range of cookware and kitchen appliances, the plan is to launch 100 new stock-keeping units in FY 2018. Lately, forays
have been into newer product segments adjacent to kitchen appliances such as cleaning solutions, irons, lanterns and water
filters. The clean-home division, launched in April 2016, is expected to contribute 8-10% to the revenues over the next three
years. Growth will be driven new product launches. The country’s first electric mop and a new range of water purifiers were
launched in December 2017. The division reported sales of Rs 13 crore in FY 2017.
Vidhi Specialty Food Ingred The manufacturer of superior synthetic and natural food grade colors aims to achieve turnover of Rs 500 crore by FY 2020
along with improved operating profit margins. Concrete capital expenditure plans include enhancement of existing product lines
and diversification into new products along with backward integration to manufacture two major raw materials. These
investments are expected to boost revenues and the profit margins.
Orient Cement The CK Birla group company aims to achieve cement capacity of 15 million tonnes (mt) by FY 2020. Organic and
inorganic growth opportunities are being explored. The current cement capacity stood at eight mt. A 74% stake was
acquired in CY 2016 in Bhilai Jaypee Cement, with integrated capacity of 2.2 mt and a separate grinding unit in Nigrie, with
capacity of two mt. Thus, the aggregate cement manufacturing capacity is set to increase to 12.2 mt along with entry into
the central and eastern markets of the country.
Mahanagar Gas Plans to add over 656 kilometers of steel and PE pipeline and 96 CNG filling stations over the next five years, involving
substantial investment. The sole authorized distributor of CNG and PNG in Mumbai, its adjoining areas and Raigad has over
21 years of track record in Mumbai. Infrastructure includes 4,838 kilometers of pipeline and 203 CNG filling stations. The aim
is to participate in bidding process to achieve geographical expansion.
Britannia Industries The leading biscuit maker is focusing on increasing the share of premium products, reducing cost and improving distribution
reach. The thrust continues on rural expansion through the rural-preferred dealers program. The program aims to strengthen
and expand the sales and distribution network. In the last three years, direct reach improved 2.3 times. To reduce cost, the
objective is to reduce the distance to market.
Adani Transmission Based on organic and inorganic initiatives, the power distributor wants achieve capacity of 22,000 circuit kilometers (ckm) of
transmission line and asset value of Rs 40000 crore by CY 2022. As much as 2,369 ckm of transmission lines are being
constructed in Rajasthan, Chhattisgarh, Madhya Pradesh, Maharashtra, Bihar and Jharkhand. The GMR group’s transmission
assets in Rajasthan were acquired in FY 2017. Post completion of these initiatives, the network is expected to increase to
10,425 ckm so as to help in achieving the target of 13,000 ckm by CY 2020. High debt, with a debt-to-equity ratio of 3.1 times
and borrowings of Rs 8,974.8 crore end March 2017, is a matter of concern.
Finolex Industries The target is to achieve revenues of US$ 1 billion and double capacity by CY 2020. Among the leading supplier of PVC pipes
and fittings for the agriculture and non-agricultural sectors is expanding the distribution network in the northern and eastern
regions. The current network consists of 18,000 retail touch points. The capacity of PVC pipes and fittings will be increased to
capture expected increase in demand. Also, brand promotion will be undertaken.
CCL Products The established player in the international markets in the traditional spray-dried instant coffee segment has also entered the
freeze-dried coffee segment. A foray was made into the domestic market in FY 2016 to rapidly expand market share. In the
last couple of years, volumes grew 15-20%. In the current fiscal, the volume growth is likely to be around 20-30%. As similar
growth in volumes is expected till FY 2020.
Source: Companies.

at Barjora in West Bengal (eastern market) stream, there is presence in all the four re- market for the vertical. A dealer-distribution
and the other at Bhiwandi in Maharashtra gions of the country. The bubble guard busi- network is being set up.
(western market), commenced operations in ness began in the June 2017 quarter. The The leading maker of molded furniture
October 2017. With these units going on aim is to develop a business-to-business and material handling products has a diver-

Jan 01 – 14, 2018 CAPITAL MARKET 11

CoverStory
sified product profile across various seg-
ments. The customer base comprises house-
holds, industrials and retail buyers. Also,
there is presence in the retail business of
lifestyle furniture, furnishings and acces-
sories under brand @home and Nilkamal
Mattresses. Overall capital expenditure
was Rs 48 crore in the first half of FY 2018
and another Rs 50 crore will be incurred in
the second half.
In a significant morale boost for Biocon,
the US Food and Drug Administration ap-
proved co-developer Mylan’s Ogivri
(trastuzmab-dkst) in December 2017. The
cancer product is the first FDA approved
bio-similar to Herceptin in the US. The busi-
ness opportunity runs into millions of dol-
lars and also provides a stamp of approval
to the research capabilities. In aggregate, the
two partners are exploring business oppor-
tunities worth about US$ 44 billion in the
developed markets in the bio-similars and
bio-logics space.
Among the country’s largest bio-pharma-
ceutical companies serves clients across 120
countries. A range of novel biologics, bio-
similars, differentiated small molecules and
affordable recombinant human insulin and ana-
logs has been developed and marketed. Key
brands include Insugen, Basalog, Canmab,
Biomab-Egfr, Krabeva and Alzumab.
The aim is for revenue of US$ 1 bil-
lion by FY 2019. Turnover was Rs 3891
crore in FY 2017. Broadly, the operations
span four segments of small molecules (ac-
tive pharmaceutical ingredients and generic
formulations), biologics (bio-similars and
novel biologics), branded formulations (for-
mulations business in India and the UAE)
and research services (contract research
and manufacturing).
APL Apollo Tubes has formulated a
long-term growth strategy to meet poten-
tial demand by augmenting capacity of steel
tubes to 2.5 million tonnes (mt) by FY 2020
from the existing 1.3 mt. To achieve the
vision, latest technology will be adopted
and existing production lines modernized
to improve the operating profit margins
(OPM). Also, the target is to become debt-
free and reduce the working capital cycle
by FY 2020. The debt-to-equity ratio stood
at 0.97 times end March 2017. Two new
direct-forming-technology lines were com-
missioned in H1 of FY 2018. The remain-
ing four lines will be established by March
2018. Post complete commissioning will
see the emergence as one of the largest steel
12
To re-invent
APL Apollo Tubes is augmenting
capacity of steel tubes to 2.5 mt
by FY 2020 from the existing 1.3 mt
by adopting latest technology
Face Value: Rs 10
xxxxx
CMP Rs 2008 as on 26 December 2017. One-year return: 128.0%
S&P BSE Mid cap index one-year return: 58.28%
tube manufactures in the world.
The distribution network consists of
625 dealers and 40,000 retailers serving cus-
tomers across 300 towns. To strengthen lo-
cal presence, two warehouses were added in
H1 of FY 2018, taking the total warehouse
count to 28. There is pan India presence,
with units located at Sikandarabad (three
units) in Uttar Pradesh, in Bangalore in
Karnataka, at Raipur in Chattisgarh, at
Hosur in Tamil Nadu and at Murbad in
Maharashtra. The product offering includes
over 400 varieties of MS black pipes, galva-
nized tubes, pre-galvanized tubes, structural
ERW steel tubes and hollow sections.
Supreme Industries processes poly-
mers and resins into finished plastic prod-
ucts. The product portfolio is divided into
five categories of plastic piping (pipes and
fittings), consumer products (plastic
molded furniture), packaging products
(specialty films, protective packaging
products and cross laminated films), in-
dustrial products (industrial components
and material handling) and composite
products (LPG cylinders).
The market share in key product port-
folio is plastic pipes (8.4%), plastic molded
furniture (10.5%), material handling prod-
ucts (13.5%) and protective packaging prod-
ucts (ranging between 17% and 53% depend-
ing on products). There is strategic equity
stake of 29.99% in Supreme Petrochem,
commanding a 2% market share in the global
polystrene market and 60% of domestic in-
stalled capacity.
The existing capacity is to be enhanced
to seven lakh tonnes by FY 2021, involving
capital expenditure of Rs 1200 to 1300 crore.
Stocks
The current plastic processing capacity is
around 3.50 lakh tonnes. Apart from increas-
ing revenue contribution of value-added
products and deepening of the distribution
network, the focus will be on technological
innovation and enhancing the product port-
folio. At present, products are distributed
through 2,950 channel partners. The targets
are CAGR of 12-15% by volumes till FY
2021 and maintain the OPM of 15-15.5%.
By FY2022, Marico aspires to be a lead-
ing emerging market multinational company,
with leadership position in two core catego-
ries of nourishment and male grooming in five
chosen markets in Asia and Africa. The aim is
to achieve volume growth of 8-10% through
investment in core portfolio, new product
launches, distribution expansion, pricing and
cost management. In the process, revenues
are expected to double that of FY 2017 (Rs
5918 crore). There is presence in 25 coun-
tries across emerging markets of Asia and
Africa. Around 30% of the revenues are gen-
erated from international markets.
The operator in the beauty and wellness
space is among the country’s leading con-
sumer products provider, with flagship
brands comprising Parachute, Parachute
Advansed, Saffola, Hair & Care, Nihar, Nihar
Naturals, Livon, Set Wet, Mediker and Re-
vive across product categories of hair and skin
care, edible oils, health foods, male grooming
and fabric care. International brands are lo-
calized considering lifestyle needs.
The dense domestic distribution net-
work reaches all towns with population of
over 10,000. The moderately leveraged com-
pany had a debt-to-equity ratio of 0.13 times
end FY 2017.
Conclusion
Companies that have disclosed targets are
answerable to investors. The accountability
might put pressure on the management to
perform. Some companies might want to
adopt unethical ways to achieve the ambi-
tions. At the same time, having a plan makes
companies transparent and attract more in-
vestors, thereby giving a boost to valuations.
The stock market is at historic peaks.
As such, investors should pay attention to
the discounting. Besides, the economic en-
vironment should be conducive for compa-
nies to reach their objectives. Investors
should also focus on the promoters’ track
record in meeting goals, balance sheet and
industry prospects.
— Venkatesh S
Jan 01 – 14, 2018 CAPITAL MARKET
InFocus
InFocus
Banks
Recognition of divergence
About 75% of the overall annual slippages happened in
H2 of FY 2016, after the RBI undertook an asset quality review
The banking sector fresh slippages of loans
jumped more than two times, with public
sector bank (PSBs) reporting voluminous
fresh non-performing asset (NPA) additions
of Rs 3.63 trillion and private sector banks
(PVBs) posting NPA addition of Rs 0.47
trillion in the financial year ending March
2016 (FY 2016).
More importantly, about 75% of the
overall annual slippages happened in the
second half of FY 2016, after the Reserve
bank of India (RBI) undertook the asset
quality review (AQR) of the banking system
in Q3 of FY 2016 and advised banks to
classify certain weak accounts as bad loans
and make provisions. About 55-65% of the
total slippages in the second half of FY 2016
owed to the implementation of RBI’s AQR.
The corporate lenders mainly faced the brunt
of asset quality woes in FY 2016. Retail
PVBs were better off with lower exposure
to leveraged corporate accounts.
The fresh slippages of loan remained
elevated at Rs 2.59 trillion for PSBs, while
those of PVBs jumped to Rs 0.78 trillion in
FY2017. The slippages continue to be
elevated at Rs 1.48 trillion for PSBs and Rs
0.37 trillion for PVBs in the first half for FY
2018. The subsequent AQRs from the RBI,
continuous slippages of restructured loans,
balance sheet clean-up from banks,
demonetization, government’s loan waivers
for certain segments etc caused further
slippages of loan in FY 2017 and FY 2018.
Meanwhile, the bank-wise risk-based
supervision (RBS) from the RBI, assessing
certain retrospective divergence in the bank’s
asset classification and provisioning relating
to FY2016 caused pressure on banks’ asset
quality and profitability in FY2017. The
RBS for couple of PVBs is completed for
FY 2017, significantly denting their asset
quality in the first half of FY2018. However,
the RBS for many PVBs as well as PSBs is
yet to be completed and may have bearings
on their performance in the first half as well
as second half of FY2018.
The RBI assesses compliance by banks
with extant prudential norms on income
recognition, asset classification and
Jan 01 – 14, 2018 CAPITAL MARKET
Among the 15 PSBs disclosing figures
for divergence, only five PSBs showed gross
NPA divergence above the regulatory
threshold level of 15% in FY2016. However,
PSBs sharply surpassed the threshold level
of 15% for provision divergence to Pat. More
importantly, large PSBs such as State Bank
of India, Bank of Baroda, Bank of India,
Indian Bank, Uco Bank and Union Bank
You, too? indicated that neither additional provisioning
Yes Bank showed gross NPA requirements assessed by the RBI nor the
divergence of four-times, additional gross NPAs identified by RBI
Axis Bank at 131% and exceeded 15% of the published Pat and
Indusind Bank 66% in FY 2016 incremental gross NPAs, respectively,
160 allowing them to escape from disclosing
IndusInd Bank
140 related data.
The gross NPA divergence of 15 PSBs
120
Yes Bank stood at Rs 21136 crore and the net NPA
100 divergence at Rs 14470 crore for FY2016 as
80
against the reported NPAs. The NPA
Axis Bank
divergence led to provisioning divergence of
60 l
S
l
O
l
N
l l
D J'17 F
l l
M
l
A
l
M
l
J
l
J
l
A
l
S
l
O
l
N
l
D
l
Rs 7750 crore. Thus, these 15 PSBs
Base = 100 as on 1 September 2016. underestimated its net losses at Rs 17364 crore
for FY 2016 against the RBI assessment of
provisioning (IRACP) as part of its net losses of Rs 24124 crore adjusting for
supervisory processes. There have been additional provision requirement on account
instances of material divergences in banks’ of NPA divergence.
asset classification and provisioning from The gross NPA divergence among PSBs
the RBI norms, thereby leading to the was the highest at 53% or Rs 3034 crore of
published financial statements not depicting reported incremental slippages for Bank of
a true and fair view of the financial position Maharashtra in FY 2016. IDBI Bank also
of the bank. To ensure greater transparency showed higher NPA divergence of 36% or Rs
and promote better discipline of 6817 crore, followed by Punjab & Sind Bank
compliance with IRACP norms, as per the 27% or Rs 539 crore, Corporation Bank 18%
April 2017 circular, the RBI has decided or Rs 1954 crore, and United Bank of India
that banks shall make suitable disclosures 17% or Rs 840 crore. Apart from these five
when either the additional provisioning PSBs, the gross NPA divergence of the
requirements assessed by the RBI exceed remaining 15 PSBs was below 15% of
15% of the published net profits after tax incremental slippages for FY2016. Thus, the
for the reference period or the additional overall gross NPA divergence for 15 PSBs
gross non-performing assets (NPAs) together at 11% was below RBI 15%
identified by the RBI exceed 15% of the threshold level for FY2016.
published incremental gross NPAs for the However, these 15 PSBs sharply
reference period, or both. underestimated net losses by 39% for FY
As many as 24 banks of the 38 listed 2016 due to higher provisioning divergence.
banks reported gross NPA divergence of Rs Bank of Maharashtra and Oriental Bank of
43546 crore for FY2016. The divergence has Commerce actually dipped into net losses
been adjusted in their financial statements of Rs 405 crore and 238 crore for FY2016
for FY 2017. The net NPA divergence for on account of additional provisioning required
these banks was Rs 31536 in FY2016. for NPA divergence as compared with
Further, the reported provision divergence reported Pat of Rs 101 crore and Rs 156
was Rs 13200 crore, while the reported crore. The losses for Corporation Bank and
profit after tax (Pat) at Rs 7466 crore was United Bank doubled from reported level
overestimated to the extent of Rs 10522 crore for FY2016. Further, Central Bank, IDBI
(notional) for FY 2016. The remaining 14 Bank, Allahabad Bank, Syndicate Bank,
banks have not disclosed the divergence as Indian Overseas Bank, Punjab National
it is below the 15% threshold level of the Bank, and Canara Bank also showed 20-50%
RBI on both NPA as well as provisioning. higher losses adjusting for additional
13
InFocus

Reporting v review
15 PSBs underestimated their net losses at Rs 17364 crore and nine PVBs showed higher gross NPA divergence
of Rs 22410 crore for FY 2016
GNPA (Rs cr) NNPA (Rs cr) PAT (Rs cr) FRESH SLIPPAGES (Rs cr) DIVERGENCE FOR FY2016 (Rs cr)
FY C16 FY 2017 FY 2016 FY 2017 FY 2016 FY 2017 FY 2016 FY 2017 GROSS NPA NET NPA PROVISION ADJ. *PAT
Public Sector
Allahabad Bank 15385 20688 10293 13434 -743 -314 12925 11417 973 715 258 -1001
Andhra Bank 11444 17670 6036 10355 540 174 6332 9410 877 693 184 420
Bank of Maharashtra 10386 17189 6832 11230 101 -1373 5724 9119 3034 3034 505 -405
Canara Bank 31638 34202 20833 21649 -2813 1122 24724 11652 507 30 537 -3350
Central Bank 22721 27251 13242 14218 -1418 -2439 15145 10487 2097 1403 695 -2113
Corporation Bank 14544 17045 9160 11692 -506 561 10582 7762 1954 1246 708 -1024
Dena Bank 8560 12619 5230 7735 -935 -864 6098 6767 311 299 56 -991
IDBI Bank 24875 44753 14643 25206 -3665 -5158 19087 27595 6817 4756 2061 -5013
Indian Overseas Bank 30049 35098 19213 19749 -2897 -3417 20998 13004 818 280 537 -3462
Oriental Bank 14702 22859 9932 14118 156 -1094 10371 12222 1350 1350 394 -238
Punjab & Sind Bank 4229 6298 2949 4375 336 201 1960 2900 539 305 234 102
Punjab National Bank 55818 55370 35423 32702 -3974 1325 42252 22415 138 -623 761 -4735
Syndicate Bank 13832 17609 9015 10411 -1643 359 12201 8138 654 227 427 -2070
United Bank 9471 10952 6111 6592 -282 220 5011 3533 840 590 249 -531
Vijaya Bank 6027 6382 4277 4118 382 750 5836 2893 229 166 145 287
State Bank of India 98173 112343 55807 58277 9951 10484 64198 39071 # # # #
Bank of Baroda 40521 42719 19406 18080 -5396 1383 27828 13312 # # # #
UCO Bank 20908 22541 11444 10703 -2799 -1851 14942 9909 # # # #
Union Bank 24171 33712 14026 18832 1352 555 12953 13244 # # # #
Bank of India 49879 52045 27996 25305 -6089 -1558 38606 20321 # # # #
Indian Bank 8827 9865 5419 5607 711 1406 5712 3331 # # # #
Private Sector
Axis Bank 6088 21280 2522 8627 8224 3679 7241 19858 9478 7163 2315 6688
City Union Bank 512 682 323 408 445 503 429 480 83 67 16 429
ICICI Bank 26721 42552 13297 25451 9726 9801 16711 33547 5105 4034 1071 9026
IndusInd Bank 777 1055 322 439 2286 2868 849 1429 560 316 244 2137
J & K Bank 4369 6000 2164 2425 416 -1632 2383 3278 1884 1366 517 -101
Karur Vysya Bank 511 1484 216 1033 568 606 1133 1331 220 220 106 496
RBL Bank 208 357 124 190 292 446 200 533 339 202 137 203
South Indian Bank 1562 1149 1185 675 333 393 1610 1698 565 379 186 212
Yes Bank 749 2019 284 1072 2539 3330 911 2632 4177 3319 858 1978
Kotak Mahindra Bank 2838 3579 1262 1718 2090 3412 2866 1797 $ $ $ $
HDFC Bank 4393 5886 1320 1844 12296 14550 5713 7126 $ $ $ $
Lakshmi Vilas Bank 391 640 232 418 180 256 197 597 # # # #
Federal Bank 1668 1727 950 941 476 831 1895 1075 # # # #
Dhanlaxmi Bank 459 316 193 166 -209 12 251 155 # # # #
Karnataka Bank 1180 1582 795 975 415 452 1125 1348 # # # #
DCB Bank 197 254 97 124 195 200 225 262 # # # #
IDFC Bank 3058 1542 1139 576 467 1020 3425 981 # # # #
$ No divergence observed. # Figures not disclosed as divergence within threshold limits *Adjusted notional PAT. Source: Capitaline Databases and banks annual reports 2016-17

provisioning compared with reported losses
for FY2016.
Surprisingly, the nine PVBs showed higher
gross NPA divergence of Rs 22410 crore for
FY2016 compared with the divergence of Rs
21136 crore reported by 15 PSBs. The
adjustment of NPA divergence in the FY 2017
financial statements substantially affected the
performance of PVBs in FY 2017. These nine
PVBs reported higher net NPA divergence of
Rs 17066 crore, while the provisioning
divergence was lower at Rs 5450 crore for
FY2016. These PVBs have overestimated Pat
at Rs 24830 crore reported for FY 2016 as
against Rs 21068 crore after adjusting for
additional provisioning.
Among PVBs, Yes Bank surprised by
showing gross NPA divergence of four times
or Rs 4177 crore compared with its reported
fresh slippages of Rs 911 crore for FY 2016.
Further, the NPA divergence was sharply
higher for Axis Bank at 131% or Rs 9478
crore, J&K Bank 79% or Rs 1884 crore and
ICICI Bank 31% or Rs 5105 crore for FY
2016. Among the small PVBs, gross NPA
divergence for RBL Bank was a huge 170%
or Rs 339 crore, Indusind Bank’s was 66%
or Rs 560 crore and South Indian Bank 35%
or Rs 565 crore for FY2016. The gross NPA
divergence of these nine PVBs together was
enormous at 71% of reported incremental
slippages in FY2016. Eight other PVBs did
not disclose any divergence figures, being
comfortably below the RBI threshold limits.
More importantly, HDFC Bank and Kotak
Mahindra Bank indicated that the RBI had

14 Jan 01 – 14, 2018 CAPITAL MARKET

InFocus
Under severe stress
The gross NPA ratio of all SCBs might increase from 10.2% in September 2017 to
10.8% by March 2018 and further to 11.1% by September 2018
As per the financial stability report of
the Reserve Bank of India published in
December 2017, the gross non-
performing advances (NPA) ratio as a
percentage of total net advances of
scheduled commercial banks (SCBs)
increased from 9.6% to 10.2%, and the
net NPAs from 5.5% to 5.7%, whereas
their restructured standard advances
ratio declined from 2.5% to 2% between
March and September 2017. The
stressed advances ratio rose marginally
from 12.1% to 12.2%. Public sector
bank (PSBs) recorded a distinctly higher
net NPA ratio of 7.9%.
The gross NPA ratio of large
borrowers increased from 14.6% to
15.5%. It was up for both PSBs and
private sector bank (PVBs), but
declined for foreign banks. The top 100
large borrowers by outstanding funded
not observed any divergence in their asset
quality classification.
The NPA divergence hurt J&K Bank
sharply as it has moved into net losses of Rs
101 crore after adjusting for additional
provisioning from Pat of Rs 416 crore reported
for FY 2016. Pat of South Indian Bank dipped
a sharp 36% to Rs 212 crore and RBL Bank
by 31% to Rs 203 crore. Despite the steep
NPA divergence, Yes Bank showed only 22%
decline in its Pat to Rs 1978 crore for FY
2016. Further, Pat of Axis Bank fell 13% to
Rs 6688 crore and Karur Vysya Bank 13% to
Rs 496 crore. Notional Pat of ICICI Bank,
Indusind Bank and City Union Bank declined
in the range of 4-7% for FY2016 after
adjusting for additional provisions.
As for the reason for divergence, the
banks have indicated that the classification
of NPAs and provisions were appropriately
done as per the accounting policy and the
relevant guidelines based on the relevant facts
available at the time of finalisation of the
financial statements of FY 2016. However,
the risk-based assessment of the RBI was
carried out in the middle of FY 2017 and the
divergence was possibly due to the
availability of data subsequent to the
finalisation of financial statements, data of
other banks in the consortium available to
the RBI and certain interpretations of the
Jan 01 – 14, 2018 CAPITAL MARKET
in the asset classification and provisioning
for FY2017 for a couple of PVBs mostly
operating in the corporate loan segment.
Yes Bank showed a surge in gross NPA
divergence to Rs 6355.2 crore worth of loans
amounts accounted for 15.5% of credit and additional provision requirement of Rs
and 25% of gross NPAs of SCBs. 1535.9 crore for FY2017. The bank absorbed
All PSBs and some PVBs had a the full impact of the divergence in Q2 of
negative provisioning gap assuming FY2018. Of the NPA divergence, about 81%
benchmark provision coverage at 50%. or Rs 5135.8 of the exposure has been repaid
Negative returns on the assets of under- (Rs 1690.4 crore) or resolved (sold to Asset
provisioned PSBs might hinder their Reconstruction Companies for Rs 461.5 crore)
ability to further build-up their loss and classified as standard (Rs 2983.9 crore)
absorption capacity. on account of their satisfactory conduct. The
Under the baseline scenario, the bank classified the balance 19% or Rs 1219.4-
gross NPA ratio of all SCBs might crore exposure as NPAs mainly contributing
increase from 10.2% in September 2017 to the overall slippages of Rs 1988 crore in
to 10.8% by March 2018 and further to Q2 of FY2018. As per the bank, the 82-basis-
11.1% by September 2018. point (bp) increase in the gross NPA ratio
Under the assumed baseline macro and 52-bps spurt in the net NPA in Q2 of
scenario, six banks have CRAR below FY2018 was mainly on account of divergence
the minimum regulatory level of 9% by of NPAs after RBI’s assessment.
September 2018. Under the severe Axis Bank also disclosed elevated gross
stress scenario, the system-level CRAR NPA divergence of Rs 5633 crore and
declines from 13.5% in September 2017 provisioning divergence of Rs 1316 crore,
to 11.5% by September 2018. causing 24% decline in its Pat to Rs 2794
crore from reported Pat of Rs 3679 crore for
regulations and decisions taken by the joint FY2017. The bank has duly recorded the
lenders’ forum. impact of divergence for FY2017 in the results
The RBI has started to issue bank-wise for the quarter ended September 2017. The
RBS reports for FY2017. It has again pointed RBI asked reclassification of nine consortium
out at certain large retrospective divergence loan accounts with the bank worth Rs 4867
Sector line-up crore as NPAs. The divergence related
accounts will consume 40 bps of credit costs
Total stressed advances of large borrowers
for FY2018. It raised the credit-cost guidance
increased 2.4% and advances to large
to 220-260 bps for FY2018.
special mention accounts 56.5% between
March and September 2017
Conclusion
CREDIT STRESSED The disclosure on RBI’s assessment of banks
SHARE ASSET RATIO* divergence on asset quality classification by
Agriculture 13.8 6.9 Yes Bank and Axis Bank raises concerns for
Industries 36.6 23.9 asset quality pressure on their performance
Mining and quarrying 1.2 27.1 for FY 2018. The NPA divergence has been
Food processing 5.7 24.9 mainly large for PVBs. It will put additional
Textiles 7.3 23.7 pressure on their performance for FY2018.
Paper and paper products 1.2 23.6 Among big PVBs, ICICI Bank is yet to dis-
Chemical and chemical prod 6.2 8.1 close its divergence for FY2017, but has
Rubber, plastic and their prod 1.5 5.1 provided relief indicating that NPA additions
Cement and cement products 2 12.8
for FY2018 will be significantly lower than
Basic metals and metal prod 14.4 44.5
FY2017. As for PSBs, the NPA divergence
Engineering 5.8 31
is not significant. The PSBs have improved
Vehicles, parts & transport equi 2.9 21
their provision coverage ratio to protect them
Gems and Jewellery 2.9 11.7
against any large provisioning divergence.
Construction 3.8 26.7
The banking sector showed higher
Infrastructure 34.1 19.6
slippages in Q1 and Q2 of FY2018. So the
Services 24.6 6.4
Retail 24.3 2.1 surprise slippages relating to RBI assessment
Figures in percentage. * Stressed assets is net NPA plus standard may have already been taken care.
restructured loans of banks
— Vijay Ghutukade
15
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InFocus
InFocus
NBFCs
Improved performance
Better margins, strong loan growth and stable asset
quality in the September 2017 quarter
Increase in revenue growth led by better mar-
gins along with stable credit cost supported
the earnings of non-banking financial compa-
nies (NBFCs) in the quarter ended Septem-
ber 2017 of the financial year ending March
2018 (FY 2018). Profit after tax (Pat) of 71
NBFCs increased at a double-digit pace of
10% to Rs 11806 crore over Q2 of FY 2017,
snapping a decline of the last two straight
quarters. The asset quality improved, reflect-
ing the waning impact of demonetization and
the rollout of the goods and service tax (GST).
NBFCs catering to the auto sector
reported better margins on higher collections
and lower cost of borrowings. Microfinance
institutions (MFIs) recorded a jump in
collection, but high provisioning continued
to hit their bottom lines.
All housing finance companies (HFCs)
have recorded strong earnings growth in Q2
of FY2018. Despite a stable performance,
marginal pressure continued on asset quality.
Disbursements spurted and loan growth rose
to 22% end September 2017 over September
2016. Their margins remained stable,
supported by moderation in borrowing
costs. However, increasing competition from
banks is putting pressure on the margins.
HDFC’s Pat jumped 11% to Rs 2101.12
crore in Q2 of FY2018 over a year ago, driven
by improved revenue growth and lower tax
provisions. The gross non-performing asset
(NPA) level was steady at 1.14% end
September 2017. NPAs of the individual
portfolio were stable at 0.65% and those of
non-individual portfolio stood at 2.18%. Net
loans grew 18% to Rs 324077 crore. The
margins were broadly stable at 3.9% in the
half year ended September 2017.
Dewan Housing Finance
Corporation’s Pat spurted 26% to Rs
293.30 crore, driven by improved margins,
cost-to-income ratio and loan book growth.
The loan portfolio surged 25% to Rs 81390
crore as loan disbursements surged 51% to
Rs 9949.72 crore and sanctions jumped 68%
to Rs 14201.03 crore. There is optimism
of sustaining 30% growth in disbursements
and 20% increase in assets under
management (AUM) in the current fiscal.
18
Gruh Finance maintained robust
earnings performance. Pat increased 25%
to Rs 77.77 crore in Q2 of FY 2018 over a
year ago. The loan book continued to
expand at healthy pace of 18% end
September 2017. Disbursements improved
28% to Rs 1283 crore. The net interest
margins were stable at 4.49%.
LIC Housing Finance’s Pat slipped
Looking up 1% to Rs 489.11 crore as the margins
Manappuram Finance’s consolidated narrowed to 2.38% amid weakening of
AUM was up 3% end September 2017 corporate loan book asset quality. The
over end June 2017, after decline in the margins were affected by reduction in lending
previous three straight quarters rates. The decline in the cost of funds going
125 ahead is expected to support the margins.
110
The gross NPA ratio rose to 0.8% end
September 2017 from 0.72% end June 2017,
95
contributed mainly by increase in non-retail
80 NPAs. The loan portfolio increased at a
Manappuram Fin.
65
healthy pace of 16% to Rs 151417 crore, as
individual loan book increased 14% to Rs
50
l l
J'17
l
F
l
M
l
A
l
M
l
J
l
J
l
A
l
S
l
O
l
N
l
D
l
145486 crore. An overall disbursement
Price on BSE in Rs. growth of around 15% is expected in FY
2018 and better margins in H2 of FY 2018.
The net interest margins (NIMs) were Gold finance companies registered
strong at 3.05% and these are likely to healthy earnings, but showed moderation in
sustain in the 3-3.05% range. loan growth. Manappuram Finance’s
Indiabulls Housing Finance continued consolidated AUM was up 3% to Rs 13723.2
to exhibit strong earnings performance, with crore end September 2017 over end June
Pat spurting 26% to Rs 861.06 crore due to 2017, after consistent decline in the previous
improved asset quality, margins and loans three straight quarters due to demonetization.
growth. Spreads increased to 3.25% in H1 A 20% growth in consolidated AUM is
of FY 2018 from 3.20% in H1 of FY 2017 expected over the next three years, with gold
as the cost of funds eased to 8.11% from loan growth of 15%. The gold loan book
9.05%. The loan portfolio expanded at a expanded 3% to Rs 10761 crore end
robust pace of 33% to Rs 100257 crore over September 2017 over end June 2017. Gold
September 2016. The target is 30% growth holdings rose a marginal 0.7% to 59.8 tonnes
in AUM in FY 2018. The AUM is expected over the June 2017 quarter. The gross NPA
to touch Rs 2 lakh crore by FY 2020. The ratio inclined to 1.2% end September 2017
share of mortgage loans stood at 78% and from 1.1% end June 2017. The non-gold loan
corporate mortgage at 22%. The gross NPA book’s share increased to 21.7% of the
ratio improved to 0.78% from 0.83% at end overall loans end September 2017 from
September 2016. The provision coverage 19.8% end June 2017.
ratio was strong at 157%. Muthoot Finance’s Pat surged 53% to
Repco Home Finance’s Pat improved Rs 454.16 crore, driven by 51% jump in net
22% to Rs 55.87 crore in Q2 of FY2018, interest income (NII) and steep 13%
recovering out of one-off impacts in the percentage point improvement in the cost-
previous quarter. The loan book expanded to-income ratio in Q2 of FY 2018 over Q2 of
10% to Rs 9321 crore from Rs 8469 crore FY 2017. The NIMs substantially improved
end September 2016. With expectation of Rs to 16.55% from 12.29% in Q1 of FY 2018.
1800-crore disbursements in H2 of FY2018, However, the asset quality worsened and the
there is hope of achieving 20% loan growth loan growth moderated to a mere 1% at Rs
in the current fiscal. Spreads are expected to 27608 crore end September 2017 over end
be 3.2-3.3% in FY 2018, while the guidance June 2017. The gross NPAs increased to
is of spreads of 3% for the next three years. 4.56%, mostly on technical grounds, end
The gross NPA ratio was up to 3.4% end September 2017 from 2.25% at end June
September 2017. The objective is to reduce it 2017, due to extended repayment time for
to 2% by end March 2018. six-month tenure loan product customers.
Jan 01 – 14, 2018 CAPITAL MARKET
InFocus
The aim is to achieve loan growth of 10-15%
in the current fiscal year. A bumper show
MFIs exhibited improvement in collections NBFCs’ aggregates revenues were boosted by growth in loans and the margins.
and loan growth, but higher provisions Profit after tax increased at a double-digit pace
remained a major drag on earnings. As per data 1709 (3) 1609 (3) VAR % 1709 (6) 1609 (6) VAR %
from Microfinance Institutions Network, the
Income from operations 56936.38 51290.66 11 110724.81 102920.94 8
aggregate gross loan portfolio of the MFIs grew
Other Income 1162.26 1427.05 -19 2215.26 2285.97 -3
5% to Rs 111539 crore end September 2017
Total Income 58098.64 52717.71 10 112940.07 105206.91 7
over end June 2017. The loan book of NBFC-
Interest Expenses 29938.72 28184.76 6 59184.74 55366.49 7
MFI rose 11% to Rs 38288 crore, with
Other expenses 8062.25 6889.89 17 16471.01 15258.22 8
portfolio at risk at 30 days moderating to
Gross profit 20097.67 17643.06 14 37284.32 34582.20 8
5.41% end September 2017.
Depreciation 221.97 203.93 9 434.49 398.85 9
Bharat Financial Inclusion recorded
Profit before tax and Provisions 19875.70 17439.13 14 36849.83 34183.35 8
Pat of Rs 119.40 crore for the quarter ended
Provisions and write off 3424.64 2276.14 50 7180.20 5531.83 30
September 2017 over end September 2016
Profit before tax 16451.06 15162.99 8 29669.63 28651.52 4
after net losses for the last two quarters. The
Provision for tax 4644.80 4447.35 4 8849.32 8469.39 4
loan book jumped 17% to Rs 10597 crore on
PAT 11806.26 10715.64 10 20820.31 20182.13 3
7% surge in disbursements to Rs 4288 crore.
Figures in Rs crore, data for top 71 NBFCs. Source: Capitaline Databases
The annual loan growth is expected to be
maintained at 40-50%. Gross NPAs fell to from 120-day overdue basis in the previous results ahead of the target period. There is
5.20%, while the net NPA ratio declined to a quarter. The gross NPA ratio under 90-day confidence of delivering 18-20% return on
mere 0.30% end September 2017. overdue basis stood at 12.5% and the net NPA equity by FY 2020 or earlier. A 30% CAGR
Vehicle financiers exhibited healthy ratio at 6.5%, with provision coverage ratio of in disbursements is expected, while the loan
performance in Q2 of FY2018. Shriram 51.1% end September 2017. The cost-to- growth CAGR is expected to be in early 20s
Transport Finance Company reported income ratio, too, improved in Q2 of FY 2018. after sell-down in the next two years.
strong performance for the second straight Shriram City Union Finance’s Pat Reliance Capital’s Pat jumped 39%
quarter, with accelerated 24% growth in declined 3% to Rs 198.3 crore in Q2 of FY2018. to Rs 352 crore in Q2 of FY 2018 over Q2
standalone Pat to Rs 479.11 crore in Q2 of Operating profit grew 19%, but higher loan loss of FY 2017. There are plans to exit all non-
FY2018 over a year ago. The NIMs provision dented the bottom line. Net interest core businesses such as media and
improved to 7.48% from 7.14% in Q2 of income grew on a steady spread of 4.97%, while entertainment and private equity valued at
FY 2017. Loan growth accelerated to 13% the expense ratio was stable. AUM increased Rs 14000-15000 crore in the next 18 months
at Rs 85462.57 crore. A higher loan growth at steady pace of 16% to at Rs 24898 crore. and mostly by March 2018.
of 15% is expected in FY 2018 as against The asset quality was stable. There is Power Finance Corporation’s Pat grew
the earlier estimate of 12-15% growth. The expectation of 18-20% loan growth in H2 of 1% to Rs 1886.59 crore in Q2 of FY 2018
asset quality remained stable, while the net FY2018 and a 20% loan growth in FY 2019. over a year ago, supported by decline in
NPA ratio reduced further to 2.45%. Bajaj Finance’s Pat surged 37% to Rs provisions. There was improvement in the
Cholamandalam Investment and 556.90 in Q2 of FY2018. NII galloped 41% asset quality. Loan assets increased 9% to Rs
Finance Company’s standalone Pat surged to Rs 1958.55 crore. AUM increased 38% to 258050 crore end September 2017. However,
33% to Rs 227.25 crore, with the steep Rs 72139 crore from Rs 52332 crore end spreads declined to 2.52%.
increase in the margins. There was a sharp September 2016. The gross NPA ratio eased Rural Electrification Corporation’s
increase in the NIMs to 9.6% from 8.4% in to 1.68% from 1.7% end June 2017. The net Pat dipped 31% to Rs 1214.66 crore on
Q2 of FY2017, driven by better product mix NPA ratio was down to 0.51% from 0.53%. narrowing of the margins. Provisions were
and lower cost of borrowings. The loan book Loan losses continued to be provided in excess higher. However, the loan book growth was
expanded 13% end September 2017. The of the guidelines of the Reserve Bank of India. strong at 10% to Rs 215845 crore end
expectation is of sustaining the loan book The provisioning coverage ratio rose to 70% September 2017 over a year ago. The gross
growth at 18-20% in the medium term. The end September 2017 from 69% end June NPA ratio was steady at 2.54% and the net
improvement in asset quality in Q2 of FY 2018 2017. Major investments are expected in new NPA ratio at 1.66% end September 2017.
is expected to continue in H2 of FY 2018. product lines and expansion to new locations.
Consolidated Pat of Mahindra and The aim is to reach 2,000 cities in the next Conclusion
Mahindra Financial Services dipped 12% two-three years. NBFCs are likely to sustain the healthy
to Rs 100.68 crore in Q2 of FY 2018 over Q2 L&T Finance Holdings’s consolidated growth momentum due to demand from the
of FY 2017 as elevated credit cost continued Pat surged 45% to Rs 360.24 crore in Q2 of consumers finance, commercial vehicles and
to drag the bottom lines. However, the core FY 2018 over a year ago, driven by consistent affordable housing segments. The tighten-
operating performance was healthy, with acceleration in loan growth, improved cost- ing of NPA classification norms to 90-day
steady loan growth of 14% to Rs 49917.6 to-income ratio and stable asset quality. overdue basis in FY 2018 might cause asset
crore and improved margins of 9.01% in Q2 of Disbursements soared 82%, while the loan quality volatility in H2 of FY 2018. Com-
FY 2018. The NPA recognition norms were book’s growth accelerated at 19% to Rs petition from banks will intensify.
tightened by shifting to 90-day overdue basis 72348 crore. The strategy is delivering — Vijay Ghutukade

Jan 01 – 14, 2018 CAPITAL MARKET 19

InFocus
PSU Banks
Buyers’ remorse
Operational performance will be under close scrutiny after
the rally in stocks post recapitalization
PSU bank (PSB) stocks rallied sharply in
October 2017 after the Central government
announced a mega boost of Rs 2.11 trillion
towards capital infusion including Rs 1.35
trillion of recapitalization bonds. The Nifty
PSU Bank Index soared from a 10-month low
of 2,928 to a near three-year high of 4,335
between 19 and 26 October 2017, a spurt of
48% in around 10 days. The single-session
surge around 20-30% in individual stocks
set the stage up for shift in the mood as in-
vestors eyed an improvement in their pros-
pects and recovery in the domestic economy.
GDP growth ended a five-quarter slide and
bounced back from a three-year low in Q2 of
the fiscal ending March 2018 (FY 2018).
However, the spurt in the stocks
subsided soon. Instead of a steady increase
in the valuations, prices turned lower once
the initial euphoria wore off. The NSE Nifty
PSU Bank index trended down even as the
broad Nifty pushed up to around 10,300 in
the third week of December. The market
seems to be expecting further clarity on the
infusion and eyeing the proceedings against
the top debt defaulters.
Another worrying factor is the
constantly increasing burden of stressed
assets in the banking system. Mid
December 2017, an official update stated
that the gross non-performing assets
(NPAs) of banks crossed Rs 8.50 lakh
crore end of September 2017. Union
Minister of State for Finance Pratap Shukla
informed the Lok Sabha that according to
the Reserve Bank of India (RBI) the growth
in provisions for NPAs of PSBs was 9.5%
in the first half of the current financial year
over FY 2017.
The RBI has issued directions to certain
banks for referring 12 accounts, with fund
and non-fund based outstanding amount
greater than Rs 5000 crore and with 60% or
more classified as NPAs end March 2016 to
initiate insolvency process under the
Insolvency and Bankruptcy Code (IBC),
2016, a bankruptcy law seeking to
consolidate the existing framework by
creating a single law for insolvency and
bankruptcy. These 12 accounts constituted
20
Keeping pace with market
The Nifty PSU Bank Index soared from a
10-month low of 2,928 to a near three-year
high of 4,335 between 19 and 26 October
2017, a spurt of 48% in around 10 days
150
140
Nifty PSU Bank
130
120
110
Nifty 50
100
90 l l l l l l l l l l
J'17 F M A M J J A S O N
Base = 100 as on 2 January 2017.
about 25% of the gross NPAs of the banking
system. In addition to these accounts, the
central bank has also issued directions to
resolve certain other accounts within six
months. Else, insolvency proceedings will
be initiated.
The corrective slide in the Nifty PSU
bank index reflects the waning confidence of
investors in the ability of the RBI to help
the stressed banks in resolving their NPA
problem. The index took a beating in May-
June 2017 and witnessed a similar pattern
in August-September and October-
November, on generally poor earnings and
elevated NPA levels. It was not before the
announcement of capital padding on 19
October that the index managed to find some
stability. The index had tumbled to its lowest
level in the calendar year (CY) 2017 before
the decision by the finance ministry to
support banks. There is a possibility that
the selling might have continued in the
absence of such an announcement.
In May 2017, the Union government
moved an ordinance empowering the central
bank to intervene directly in stressed asset
cases. The current guidelines on restructuring
are under examination for such modifications
as might be necessary to resolve the large
stressed assets in the banking system by
optimizing value. The central bank said
enhanced empowerment will require
coordination with and cooperation from
several stakeholders including banks, asset
reconstruction companies, rating agencies,
Insolvency and Bankruptcy Board of India
and private equity firms.
RBI Governor Urjit Patel, in a speech
on Resolution of Stressed Assets: Towards
the Endgame, on 19 August 2017 noted that
the success and credibility of all the
resolution efforts directed towards stressed
assets will be critically contingent on the
strength of the PSBs’ balance sheets to
absorb the costs. It is clear that PSBs will
need to take haircuts on current exposures
under any resolution plan agreed within or
outside the IBC. Higher provisioning
requirements, on this count as well as other
factors will affect the capital position of
several banks, requiring recapitalization of
PSBs. The finance ministry and the central
bank are in dialogue to prepare a package of
measures to enable PSBs to shore up their
capital in a time-bound manner. As if on cue,
l l l the Central government swung into action
D
after PSBs delivered yet another
disappointing array of earnings for the
September 2017 quarter.
The latest steps to recapitalize banks are
a separate measure than that exists. The
government already has its Indradhanush
scheme in place for shoring up the PSU
banks balance sheets. So far capital of
Rs 51858 crore has been injected into PSBs.
A sum of Rs 22915 crore was allocated to
13 PSBs in FY 2017 under the first tranche
of capital infusion. Of this, Rs 16414 crore
(75%) was infused upfront and the
remaining amount was to be infused based
on the performance of the banks. The
Center proposes to make available
Rs 70000 crore out of budgetary
allocations. Amounts of Rs 25000 crore
each in FY 2016 and FY 2017 and Rs
10000 crore each in FY 2018 and FY 2018-
19 were envisaged.
Institutional assessment is optimistic.
Rating agency Moody’s Investors Service
upgraded India’s sovereign rating from the
lowest investment grade of Baa3 to Baa2, the
first such an update in more than a decade.
The agency noted that recent announcements
of a comprehensive recapitalization of PSBs
and signs of proactive steps towards
resolution of high NPAs through the use of
IBC are beginning to address a key weakness
in India’s sovereign credit profile. While the
capital injection will modestly increase the
government’s debt burden in the near term (by
about 0.8% of GDP over two years), it should
enable banks to move forward with the
Jan 01 – 14, 2018 CAPITAL MARKET
InFocus
resolution of NPAs through comprehensive ends nine trading days post the event date.
Ups and downs
write-downs of impaired loans and increase However, the PSB index extended losses on
lending gradually. Over the medium term, if The Nifty PSU Bank index declined in topping out on 5 May after hitting a two-
met by rising demand for investment and loans, May-June and August-September on poor year high. The index plummeted to test its
the measures will help foster more robust earnings and elevated NPAs but surged 10-month low on 19 October, when the
growth and supporting fiscal consolidation. post 19 October 2017 on recap plan recapitalization plan was laid out.
4200 Applying the same logic in the
Outlook 4000 recapitalization event, the unprecedented
The recent spurt in PSB stock prices and 3800 scale of the support devised in the plan took
the episode in May allowing RBI to inter- 3600 the market by surprise, thereby sending the
vene to resolve stressed assets of banks had 3400 stocks higher at a lightning pace. However,
led to the conclusion that the market is be- 3200 the inability of the index to extend gains
Nifty PSU Bank
having in a cautious manner. The slide in 3000
further limited the upside. The Nifty PSU
these stocks after the frenzy triggered by 2800 l l l l l l l l l l l l l
index hit a near three- year high of 4,335 on
J'17 F M A M J J A S O N D
the recapitalization announcement has been 26 October before easing.
alarming in the sense that it has appeared Surprising results are thrown when the
alongside a gradual increase in headline indi- capital injection for immediate credit creation index is compared with the headline market
ces to their eventual all-time highs. The mar- are likely to get priority, while others shape indices. The Nifty is up 27%, while the PSU
ket, it seems, is unwilling to flock to PSB up to be in a similar position. The effort is banks are up 26.60% in CY 2017 to 21
stocks despite plenty of noise about their expected to bring some market discipline into December. Just before the recap
potential to turn around. a public recapitalization program compared announcement, the PSU banks index was
The inability of the PSB stocks to extend with the past recapitalization programs. down 1%, while the Nifty had gained around
beyond their three-year highs is rather dis- A RBI paper titled, Market Reaction 25% year to date. Clearly, bank stocks ran
appointing, therefore. RBI Governor Urjit to the Banking Regulation (Amendment) way ahead of their underlying strengths and
Patel’s reaction to the recapitalization plan Ordinance, 2017, released in last week of investors are likely to seek a better operating
was extremely optimistic. He noted that for August 2017, stated that stock market’s performance from these counters to justify
the first time in last decade, there is now a reaction has been positive for banks and the valuations.
real chance that all the policy pieces of the their high quality borrowers but negative The RBI’s Financial Stability Report on
jigsaw puzzle will be in place for a for distressed firms, suggestive of the 21 December 2017 turned out to be yet
comprehensive and coherent, rather than potential to rejuvenate the banking sector’s another worrying piece of information for
piece-meal, strategy to address the banking health and to improve capital allocation PSBs. The overall risks to the banking sector
sector challenges. The step has been taken across firms. remained elevated due to asset quality
in a time of sound macroeconomic conditions The paper took into consideration 5 concerns. Credit growth of scheduled
for the economy on other fronts. The May 2017 as the event date for the purpose commercial banks (SCBs) showed an
package will allow for a calibrated approach. of the analysis. The event window around improvement between March and
Banks to have better addressed their balance- which the market response is analyzed starts September 2017. But PSBs continued to lag
sheet issues and are in a position to use fresh nine trading days before the event date and behind their private sector peers. SCBs’
return on assets remained unchanged at
No respite in sight 0.4%, while PSBs continued to record
The gross NPAs all crossed Rs 8.50 lakh crore end September 2017. The growth in provisions negative profitability ratios.
for NPAs of PSBs was 9.5% in H1 of FY 2018 over FY 2017 The earnings for December 2017
quarters will be critical. What might trouble
NET PROFIT (Rs cr) NET NON-PERFORMING ASSETS (%) the market even more are the soaring yields
SEP 2017 JUN 2017MAR 2017 DEC 2016 SEP 2017 JUN 2017MAR 2017 DEC 2016 on government bonds. Rising yields of
State Bank of India 1581.55 2005.53 2814.82 2610 5.43 5.97 3.71 4.24
government securities (g-secs) can hit the
treasury incomes of PSBs. The 10 -ear
Oriental Bank of Comm -1749.9 -486.2 -1218.01 -130.01 9.44 9.56 8.96 9.68
benchmark g-sec yields have hit around
IDBI Bank Ltd -197.84 -853.01 -3199.76 -2254.96 16.06 15.8 13.21 9.61 one-and-a-half year high around 7.20%.
Bank of Baroda 355.36 203.39 154.72 252.67 5.05 5.17 4.72 5.43 The RBI maintaining interest rates
Canara Bank 260.18 251.6 214.18 321.88 7.02 7.09 6.33 6.72 unchanged in its December 2017 meeting
Union Bank of India -1530.72 116.58 108.22 104 6.7 7.47 6.57 6.95 is likely to keep the yields elevated.
Syndicate Bank 105.24 -263.19 103.84 93.56 5.76 6.27 5.21 5.63 Inflation expectations of households
Bank of India 179.07 87.71 -1045.54 101.72 6.47 6.7 6.9 7.09 surveyed by the RBI have already firmed
up. Any increase in food and fuel prices
Allahabad Bank 70.2 28.84 111.16 75.26 8.84 8.96 8.92 8.65
might harden these expectations. This is
Andhra Bank -385.11 40.42 35.12 56.7 7.55 8.09 7.57 6.98
certainly expected to keep the g-sec yields
Punjab National Bank 560.58 343.4 261.9 207.18 8.44 8.67 7.81 9.09 around the present levels.
Source: Capitaline Database — Sachin Dabhade

Jan 01 – 14, 2018 CAPITAL MARKET 21

InFocus
Graphite electrodes
Turning around
The crackdown on polluting industries by China has opened
up a opportunity for the languishing domestic players
Graphite India and HEG stocks moved al-
most in a straight line in the first nine months
of the calendar year (CY) 2017. Graphite
India dropped 42% and HEG 52% from the
day’s high on 13 June 2014 to the closing of
30 March 2016 as they failed to attract any
interest. The past few years have been chal-
lenging for the graphite electrode industry
due to lower demand and realization glo-
bally coupled with oversupply from China.
Suddenly, on 6 January 2017, Graphite
India jumped to close at Rs 78.70 on the
BSE and HEG spurted to Rs 164.10. From
then on, both the stocks continued to move
up. In less than a year, Graphite India surged
799% to Rs 658.85 and HEG 799% to Rs
2011.85. What is the reason for the sudden
interest in the companies?
Graphite India pioneered in India the
manufacture of graphite electrodes as well
as carbon andgraphite specialty products.
HEG has the largest integrated graphite
electrodes plant in the world. Electrodes
are used to make steel and ferro alloys
through electric arc furnaces (EAF). EAF
is environment-friendly compared with
conventional steel production through
induction furnaces prevalent in India
and China.
Recent developments, primarily in China,
have had a positive impact on the graphite
industry. The Chinese government decided
to crack down on 12-15 highly polluting
industries due to serious environmental
concerns. It decided to close down a large
capacity of induction furnaces. In addition,
China also shut down a number of mini blast
furnaces. While no official data is available
Ravi Jhunjhunwala, Chairman and Managing
Director of HEG, believes the shutdown
capacity might be between 100-120 million
tonnes (mt).
The crackdown on polluting industries
resulted in a sudden drop in the export of
steel from China. The country exported
approximately 150 mt per annum of steel in
each of the last couple of years.
China’s export of steel came down 30%
to an annualized level of 82 mt in HI of CY
2017. Exports were down to an annualized
22
Revival of interest
Graphite India surged 799% to Rs 658.85
and HEG 799% to Rs 2011.85, after
moving in a straight line in the first
nine months of CY 2017
1500
1300
1100
900
700
500
300
100
ll l l l l l l l l
J'17 F M A M J J A S
Base = 100 as on 26 December 2016
level of just 53% of CY 2016 by September
2017, the lowest level since February 2014.
The plunge in steel exports from China over
the first nine months of CY 2017 is resulting
in an equivalent additional production of
steel outside of China. Around 45% of the
total world steel outside China is produced
through EAF. As a result, there has been a
sudden increase in demand for electrodes all
over the world.
In addition to exporting finished steel,
China was also sending overseas substantial
quantities of semi-finished steel in the form
of billets. Exports of this item, too, has
also come down sharply in the last few
months. Therefore, more steel is been
produced in those countries that were
importing billets from China. HEG believes
the reduction in billet exports from China is
around 20 mt on an annualized basis. Billets
are primarily produced by countries
prominently using EAF. The development
has further boosted the demand of electrodes
in those countries where electrode
consumption has always been high.
On top, an estimated more than two lakh
tonnes per annum of China’s electrode
capacity has been closed since the beginning
of CY 2017 due to environmental issues. In
the wake of approaching winter months,
closures of some additional steel plants as
well as graphite electrode capacities cannot
be ruled out.
All these have resulted in a shortage of
electrodes not only in China but also in the
rest of the world. China, a large exporter of
low-grade electrodes, has now become a net
importer of all grades of electrodes, thus
vacating some markets for electrodes to other
producers such as HEG and Graphite India.
The graphite industry had hitherto been
passing through a rough period. The western
world had to shut down capacity of around
1.60 lakh tonnes, leading to a large demand-
supply imbalance currently. So while the
world-wide electrode capacity was getting
reduced, there is now a sudden jump in
demand for the item all over the world,
HEG including China.
World steel production in the first nine
months of CY 2017 has gone up 5.6%
compared with the same period in CY 2016,
according to HEG. This is among the highest
Graphite India
percentage of steel growth in the last five-
six years, when the average steel growth in
l l l l
O N D the region was 1.5%. As per the World Steel
Association, the global demand for steel in
CY 2016 was 11,516 mt. It is projected to
rise about 7% to 1,622 mt in CY 2017.
India produces no more than about 100 mt
of steel currently.
Closure of around 1.50 lakh tonnes of
electrode capacity outside of China, closure
of another two lakh tonnes capacity in China,
a sharp reduction of finished steel and billet
exports from China, large closures of steel
capacities in China have thrown the demand-
supply of graphite electrodes off-balance,
leading to.a sharp increase in their spot prices.
Due to the sudden increase in the demand
for electrodes, needle coke availability, the
primary raw material, has become a problem.
The maintenance shutdown of some of the
large refineries, where needle coke is
produced, has coincided with capacity
reduction of steel and billets in China. Due
to excess capacity of needle coke in the
recent past, some of the producers have been
trying to find a new application for the
material in the lithium ion batteries. In the
last couple of years, needle coke has been
successfully used in this application. As part
of needle coke is now being diverted to China
for use in lithium ion batteries, limiting its
availability for the production of electrodes
around the world.
To meet the demand by the steel industry
due to large-scale shutdown of induction and
mini blast furnaces, China is in the process of
installing some large EAF, requiring an
additional 75,000-one lakh tonnes of graphite
Jan 01 – 14, 2018 CAPITAL MARKET
InFocus
electrodes in the next two-three years. they are selling part of production at
The supply gap is likely to widen Coming out of red spot prices, thereby increasing their
further. Against the background, spot Sales of Graphite India jumped 46% and net profit 464% average sales realization. HEG feels old-
prices of electrodes have risen sharply in Q2 of FY 2018 over a year ago, while sales of HEG price sales volumes will keep coming
over the last six months, enabling HEG surged 111% and net profit was Rs 113.66 crore as down in the December 2017 and the
and Graphite India to report healthy against loss in Q2 September 2016 March 2018 quarters, and the share of
result for the second quarter of the 1709(6) 1609(6) VAR.(%) 1703(12) 1603(12) VAR.(%) production at new re prices will increase.
fiscal ending March 2018 (FY 2018). Thus, the realization per tonne will
Sales 614.9 360.19 71 860.04 848.67 1
Net profit of Graphite India jumped improve sequentially.
OPM (%) 34.66 5.97 9.39 13.62
464% to Rs 89.93 crore and sales 45%
OP 213.12 21.52 890 80.74 115.63 -30
to Rs 461.90 crore. HEG recorded a Outlook
Other inc. 3.27 4.63 -29 7.13 4.11 73
net profit of Rs 113.66 crore as against The near-term outlook of the graphite
PBIDT 216.39 26.15 727 87.87 140.57 -37
a loss of Rs 14.09 crore in the second industry is optimistic. Graphite India
PBT 154.31 -39.66 LP -40.77 0.96 -4347
quarter ended September 2016. Sales capacity utilization is expected to soar.
PAT 105.23 -43.06 LP -50.05 -7.55 563
surged 111% to Rs 409.54 crore. Standalone capacity utilization surged
EPS (Rs)* 52.7 -21.6 -12.5 -1.9
Traditionally, a large part of order to 89% in Q2 of FY 2018 as against
* On current equity of Rs 39.96 crore; Face Value: Rs 10. (P): Projections.
book is committed at the beginning of LP: Loss to profit; PL: Profit to loss. &: As per new Indian Accounting 75% in Q2 of FY 2017. Going for-
the year. CY 2017 was no exception. ward, HEG expects to run its opera-
Most of the electrode industry around the producers at current spot prices that differ tion in the current fiscal in the region of 80%-
world had committed a part of their current widely in different parts of the world. 85% of capacity. As both the companies
year production at the previous year’s low Most of Graphite India’s and HEG’s first start selling more electrodes at higher spot
prices by the time the China-led development quarter sales happened at the previous year’s prices in the next few quarters, their perfor-
started getting noticed. But, still, a part of low prices. But, in the second quarter, the mance will only get better.
the quantities are now being sold by all the old price contracts have started depleting and — Harihar Koirala

India's leading fortnightly investment magazine and publisher of electronic database Capitaline,
used extensively by analysts, banks and educational institutions,

requires
Sector and Corporate Research Analysts: Mumbai and Chennai
Candidates must have an aptitude for figures and clear and creative thinking.
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Market Correspondents: Mumbai and Chennai
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and an ability to interact with market and corporate professionals.
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Marketing Executives / Support Executives: All metros
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E-mail : recruit@capitalmarket.com

Jan 01 – 14, 2018 CAPITAL MARKET 23

OverTheCounter
OverTheCounter
Morgan Stanley France SAS sold
Ticker trade
76,035 shares of InterGlobe Aviation to
Companies witnessing big-ticket transactions Societe Generale at Rs 1,169 per share in a
block deal on the BSE on 12 December 2017.
COMPANY CMP M-CAP 52-WEEK (Rs) VARIATION (%) DIVI. P/E RoE
Two promoters of InterGlobe Aviation,
(Rs) (Rs cr) HIGH LOW 15 DAYS 1-YEAR YLD (%) TTM (%) Acquire Services and IGE Mauritius,
Ashiana Housing 182.1 1863.83 250.35 129.2 6.09 32.05 0 23.02 9.76 offloaded 1.11 crore shares, representing
Bharat Financial 996.7 13849.57 1046.5 465.4 -0.29 79.68 0 0 10.73 2.91% of the paid-up capital, via offer for
Bharti Airtel 529.1 211502.44 565 289.25 0.75 80.49 0.39 108.42 3.73 sale (OFS) on the stock exchanges on 13
Colgate-Palm. 1091.3 29681.79 1175.5 861.9 2.02 20.73 1 50.81 50.11 and 14 December 2017.
Eicher Motors 30247.85 82385.1933483.95 20210 4.28 42 0 45.58 49.85 Promoter Samvardhana Motherson
Fortis Health. 142.55 7392.89 230.9 123.4 -2.93 -22.17 0 0 -1.86 International dumped 2.87 crore shares of
HDFC 1708.35 272833.28 1804.5 1197.55 1.85 40.17 0.2 36.86 20.18
Motherson Sumi Systems at Rs 375.02 per
ICICI Bank 316.4 203184.25 332.3 224.45 1.88 37.57 0.9 23.7 10.66
share in a bulk deal on the BSE on 21
IndusInd Bank 1648.85 98887.36 1818 1045.2 -1.36 55.4 0 30.72 15.26
December 2017. Samvardhana Motherson
Infosys 1038.4 238519.78 1045 861.5 3.68 5.4 2.52 17.09 21.41
controlled 34.81% stake end September 2017.
Interglobe Aviat 1180.25 45358.55 1346.35 814 -0.03 42.79 0 19.81 51.03
Promoter Anil Chothmal Patodia bought
ITC 263.35 321035.69 353.2 222.05 0.63 15.89 2.01 30.52 23.45
JK Paper 143.3 2475.62 145 82.85 11.21 69.39 0 11.85 13.39
2.01 lakh shares of The Byke Hospitality
KNR Construct. 308.05 4331.72 313.3 148 9.94 91.28 0 19.71 19.26
at Rs 173.91 per share in a bulk deal on the
Kridhan Infra 118.7 879.47 134.5 47.5 17.18 112.15 0 0 1.11 BSE on 22 December 2017. Patodia held
Larsen & Toubro 1266.65 177461.67 1274 868 3.88 44.33 0 41.23 10.93 3.38% stake end September 2017.
Mercator 36.65 1108.51 55.2 32.75 -0.14 -7.57 0 0 -2.64 Bulk Deals: Morgan Stanley France SAS
Motherson Sumi 376.15 79190.46 395 201.83 1.1 76.79 0 83.59 20.04 sold 23.93 lakh shares of L&T to Societe
NBCC 253.95 22855.5 291.75 143.33 -2.08 70.78 0.31 62.09 21.96 Generale at Rs 1,222.25 per share in a block
Orchid Pharma 18.85 167.7 39.7 16.7 3.86 -32.44 0 0 0 deal on the BSE on 11 December 2017.
Petronet LNG 252.2 37830 275.45 171.75 0.32 39.28 0.62 19.97 23.19 L&T announced on 14 December 2017
Polaris Consulta 385.75 3953.97 394 141.55 5.17 164.67 0 34.14 14.23 that it had successfully commissioned and
Radico Khaitan 279.6 3726.36 309.6 106 -2.75 159.61 0 41.12 8.09 handed over the state-of-the-art 225-
Religare Enterp. 75.75 1351.8 264 34.25 24.59 -70.18 0 0 0 megawatt Sikalbaha combined cycle power
Repro India 801.65 921.6 862.95 381.3 11.47 100.99 0 43.62 -1.5 plant to Bangladesh Power Development
SREI Infra. Fin. 101.05 5083.72 137.7 70.3 0.35 38.42 0 47.89 3.41 Board for commercial operation. Work on
Tara Jewels 16.55 40.75 48.5 16.25 -16.62 -56.5 0 0 -1.74 the Sikalbaha project had started in April
Tata Motors 421.9 134041.63 553 357.95 2.64 -10.17 0 0 0 2015 and the power plant was partly
Team Lease Serv. 2350 4017.74 2375 850 11.36 167.09 0 56.13 16.65 commissioned in open cycle in May 2017.
The Byke Hospi. 173.75 696.7 220.7 150.25 6.6 4.51 0.54 22.25 23.55 Morgan Stanley France SAS offloaded a
Zee Learn 45.25 1470.09 51.35 37.75 4.26 18.15 0.1 34.81 12.84 combined 2.11 crore shares of ICICI Bank
CMP: Current market price as on 22 December 2017. P/E on standalone numbers based on TTM ended September 2017 wherever
data available, RoE: Return on Equity is for the year ended March 2017. at an average price of Rs 303.97 per share in
a series of block deals on the BSE on 15, 18
Buying and selling and 19 December 2017. Societe Generale

IDBI sells Religare Enterprises

Morgan Stanley sheds Petronet LNG, Bharti Airtel, Fortis
Healthcare, Bharat Financial Inclusion and NBCC
Insider Deals: Promoter Abhinav Vinod Vohra
sold 1.12 lakh shares of Repro India to Sonam
Rishabh Parekh at Rs 799 per share in a bulk
deal on the BSE on 18 December 2017. Vohra
owned 1.03% stake end September 2017.
Promoter Kamidi Yashoda sold eight
lakh shares of KNR Constructions at Rs
276.01 per share in a bulk deal on the BSE
on 19 December 2017. On the same day,
Yashoda offloaded eight lakh shares at Rs
276.02 apiece in a bulk deal on the NSE.
Yashoda controlled 6.26% equity end
September 2017.
Promoter Rajeev Vasant Sheth sold 4.66
lakh shares of Tara Jewels at Rs 19.32 per
share in a bulk deal on the NSE on 19
December 2017. He liquidated 3.12 lakh
shares at Rs 18.86 per share in a bulk deal
on the BSE on 20 December 2017. He
disposed of 1.97 lakh shares at Rs 17.12 per
share in a bulk deal on the NSE on 21
December 2017. Sheth disposed of 3.41 lakh
shares of Tara Jewels at Rs 16.86 per share
in a bulk deal on the NSE on 22 December
2017. Sheth controlled 58.9% stake end
September 2017.
was the buyer in these deals.
ICICI Bank’s subsidiary ICICI
Securities has filed a draft red herring
prospectus with Securities and Exchange
Board of India for a public offer of up to
6.44-crore equity shares of face value of Rs 5
each of ICICI Securities, representing
approximately 20% of its equity share
capital, through an OFS of up to 6.44 crore
equity shares by ICICI Bank.
Morgan Stanley offloaded a combined
1.42 crore shares of Bharti Airtel at an
average price of Rs 519.41 per share in a
series of block deals on the BSE on 13, 15,
18 and 19 December 2017. Societe Generale
was the buyer in these deals.
Bharti Airtel through its subsidiaries has
entered into a definitive agreement with
Millicom International Cellular SA. Airtel

24 Jan 01 – 14, 2018 CAPITAL MARKET

OverTheCounter

At stake
Fluctuations in the holdings of big-ticket investors
QUARTERLY HOLDING %
PROMOTERS FIIs MFs / UTI
30 SEP 1730 JUN 2017 31 MAR 17 31 DEC 16 30 SEP 17 30 JUN 17 31 MAR 17 31 DEC 16 30 SEP 17 30 JUN 17 31 MAR 17 31 DEC 16
Ashiana Housing 61.04 61.04 61.04 61.04 12.16 12.3 12.32 12.57 1.24 1.24 1.24 2
Bharat Financial 1.65 1.66 1.66 1.66 68.83 68.33 64.97 66.04 9.64 7.21 7.8 8.89
Bharti Airtel 67.14 67.14 67.14 67.14 16.37 16.16 15.22 15.08 3.4 3.42 3.21 3.36
Colgate-Palm. 51 51 51 51 14.6 15.97 16.25 16.46 4.23 3.47 1.96 1.5
Eicher Motors 50.55 50.56 50.57 50.59 32.09 31.87 32.45 32.52 4.32 4.12 3.89 3.68
Fortis Health. 34.31 42.96 52.3 62.91 33.75 32.65 34.5 25.11 8.54 5.63 0.06 0.04
HDFC 0 0 0 0 75.99 77.55 77.27 76.42 5.71 4.13 3.16 3.38
ICICI Bank 0 0 0 0 34.5 34.94 34.97 35.04 16.96 15.34 15.54 14.97
IndusInd Bank 14.96 14.97 14.98 14.99 43.05 43.1 43.34 43.14 12.06 12.15 11.86 11.93
Infosys 12.75 12.75 12.75 12.75 34.08 37.53 38.31 39.02 10.47 8.95 8.33 7.42
Interglobe Aviat 77.91 77.91 85.86 85.88 10.49 10.93 5.79 6.42 5.71 5.96 2.78 1.63
ITC 0 0 0 0 19.07 19.99 20.04 20.23 4.73 4.22 3.98 3.1
JK Paper 49.95 51.1 50.78 50.78 7.1 7.03 5.15 4.76 0.13 0.05 0.05 0.04
KNR Construct. 57.38 57.38 57.95 58.09 3.26 3.94 4.59 4.48 28.51 28.32 26.98 26.87
Kridhan Infra 60.17 64.46 64.46 64.46 0.51 0.51 1.53 1.53 0 0 0 0
Larsen & Toubro 0 0 0 0 16.88 17.22 17.27 16.3 13.17 12.29 11.5 11.36
Mercator 30.73 34.43 34.32 34.32 20.88 14.42 13.91 14.1 0.02 0.03 0.03 0.06
Motherson Sumi 63.11 63.11 63.11 63.11 19.74 19.99 19.83 19.65 6.8 6.34 6.58 6.53
NBCC 75 75 75 75 5.02 4.75 4.98 3.64 0.84 0.77 0.56 0.7
Orchid Pharma 25.71 25.71 25.72 27.32 0.8 0.97 1.1 1.1 0.01 0.01 0.01 0.01
Petronet LNG 50 50 50 50 21.83 22.33 19.43 21.69 12.71 11.95 7.65 6.28
Polaris Consulta 74.42 74.44 74.5 74.89 6.58 6.79 7.6 8.71 4.06 3.71 2.42 1.95
Radico Khaitan 40.43 40.46 40.46 40.46 18.01 17.86 17.86 18.73 10.73 11.49 11.89 12.81
Religare Enterp. 25.33 50.89 50.93 50.93 10.92 11.18 12.35 12.63 0 0 0 0
Repro India 58.32 61.71 61.71 61.71 8.14 8.08 8.08 7.15 0 0 0 1.28
SREI Infra. Fin. 60.8 60.8 60.8 60.8 14.81 15.47 15.97 13.47 4.76 4.11 1.29 0.97
Tara Jewels 60.03 60.03 60.03 60.11 0 0 0 0 0 0 0 0
Tata Motors 36.37 34.73 34.73 34.73 22.57 23.49 23.24 24.21 5.22 5.32 4.82 4.36
Team Lease Serv. 43.19 43.48 44.91 45.61 21.02 18.32 15.99 17.35 14.77 17.1 17.31 14.34
The Byke Hospi. 45.29 45.29 45.29 45.29 25.6 23.85 9.07 6.19 0 0 0 0
Zee Learn 60.83 60.89 61.15 61.51 17.96 19.73 19.95 22.17 0.18 0.18 0.18 0
Institutional holding in % including both FIIs and domestic institutions

Rwanda will acquire 100% equity interest
in Tigo Rwanda. The acquisition will
position Airtel as a strong number 2 operator
in Rwanda. The consideration for the
transaction is based on 6 x earnings before
interest, tax, depreciation and amortization
multiple, payable over two years.
Morgan Stanley France SAS liquidated
3.62 lakh shares of HDFC to Societe
Generale at Rs 1,698.50 per share in a block
deal on the BSE on 13 December 2017.
HDFC’s board approved raising funds by
issuing equity shares or other permissible
securities up to an aggregate amount not
exceeding Rs 13000 crore. The issue will be
through a preferential issue or qualified
institutions placement basis or through any
other permissible mode or combination.
Morgan Stanley France SAS disposed
of 3.21 lakh shares of Tata Motors to Societe
Generale at Rs 411.25 per share in a block
deal on the BSE on 19 December 2017.
Tata Motors said on 11 December 2017 it
will be increasing prices of its entire passenger
vehicles in the range by up to Rs 25000, starting
January 2018, due to rising input costs.
Morgan Stanley offloaded 62.87 lakh
shares of ITC to Societe Generale at Rs
259.65 per share in a block deal on the BSE
on 13 December 2017.
Morgan Stanley France SAS liquidated
15.84 lakh shares of Infosys to Societe
Generale at Rs 1,012.50 per share in a block
deal on the BSE on 19 December 2017.
Morgan Stanley offloaded a combined
18 lakh shares of Bharat Financial
Inclusion at an average price of Rs 992.58
per share in a series of block deals on the
BSE on 12 and 15 December 2017. Societe
Generale was the buyer in these deals.
Morgan Stanley Mauritius Company held
6.51% stake end September 2017.
The Competition Commission of India
has approved the proposed amalgamation
of Bharat Financial Inclusion (formerly
known as SKS Microfinance) with
IndusInd Bank.
Morgan Stanley France SAS dumped
73.31 lakh shares of NBCC (India) to
Societe Generale at Rs 260.40 per share in a
bulk deal on the BSE on 11 December 2017.
NBCC (India) stated on 12 December
2017 that it had secured new business of
US$23 million for social housing units
in Mauritius.
IDBI Trusteeship Services sold 1.13 crore
shares of Religare Enterprises at Rs 58.51
per share in a bulk deal on the BSE on 14
December 2017. On the same day, India
Horizon Fund bought 71.50 lakh shares at
Rs 58.50 apiece. Bay Capital Advisors
purchased 21.25 lakh shares at Rs 58.50 per
share. IDBI Trusteeship Services held 17.11%

Jan 01 – 14, 2018 CAPITAL MARKET 25

OverTheCounter
and India Horizon Fund owned 5.59% stake
end September 2017. Capital change
Edelweiss Financial Services announced Ownership affected by big deals
on 20 December 2017 that Edelweiss Wealth
AVERAGE VOLUME
Management will acquire Religare’s
securities business including securities and CMP DEAL EQTY CAP. CHNG HAND FORTNIGHT YEARLY
commodities broking, and depository COMPANY (Rs) PRICE(Rs) (%) VOLUME BSE NSE BSE NSE
participant services. Ashiana Housing 182.1 165.79 1.74 1777000 106770 1585951 23427 154378
Societe De Promotion ET De Bharat Financial 996.7 992.58 1.30 1800000 247048 705929 350589 3151501
Participation Pour La Cooperation sold Bharti Airtel 529.1 519.41 0.36 14200000 1717360 6689662 2293681 5255641
12.77 lakh shares of JK Paper at Rs 136.13 Colgate-Palm. 1091.3 1073.85 0.02 65,717 19745 226042 31796 351806
per share in a bulk deal on the NSE on 11 Eicher Motors 30247.85 30900 0.06 14988 6211 39291 5306 40041
December 2017. On the same day, it Fortis Health. 142.55 137.75 2.18 11300000 2128915 9537332 972445 5017728
offloaded 8.81 lakh shares at Rs 136.01 HDFC 1708.35 1698.5 0.02 362000 524245 2426591 209314 2621766
ICICI Bank 316.4 303.97 0.33 21100000 2729767 12877108 1489113 16199610
apiece on the BSE. Societe De Promotion
IndusInd Bank 1648.85 1652 0.01 65000 56405 1426596 96921 1156853
ET De Participation Pour La Cooperation Infosys 1038.4 1012.5 0.07 1584000 333832 3776821 351772 4865811
held 2.25% stake as on 17 October 2017. Interglobe Aviat 1180.25 1169 0.02 76035 36357 603844 47304 527880
Societe Generale disposed of 14.88 lakh ITC 263.35 259.65 0.05 6287000 1173248 9118300 1013545 11793663
shares of Radico Khaitan at Rs 275.05 per JK Paper 143.3 136.13 0.74 1277000 593064 3033957 156208 836814
share in a bulk deal on the NSE on 11 KNR Construct. 308.05 276.01 0.57 800000 133478 418695 51221 133981
December 2017. Kridhan Infra 118.7 92.21 2.70 2000000 1082252 4019984 107372 461130
Morgan Stanley France SAS liquidated Larsen & Toubro 1266.65 1222.25 0.17 2393000 836261 2554936 302831 1712018
28.24 lakh shares of SREI Infrastructure Mercator 36.65 35.02 1.03 3109000 952075 4872479 615260 2495298
Finance to Societe Generale at Rs 100.65 Motherson Sumi 376.15 375.02 1.36 28700000 4874414 3884628 472498 2294884
NBCC 253.95 260.4 0.81 7331000 960091 1649036 257821 1619527
per share in a bulk deal on the BSE on 11
Orchid Pharma 18.85 18.96 1.64 1455000 120585 392298 129925 493714
December 2017.
Petronet LNG 252.2 249.67 1.52 22800000 2521008 3483878 714263 3333386
Morgan Stanley France SAS sold 1.13 Polaris Consulta 385.75 358.68 0.61 622000 71786 330815 47663 221240
crore shares of Fortis Healthcare to Societe Radico Khaitan 279.6 275.05 1.12 1488000 178908 1436320 180108 1117311
Generale at Rs 137.75 per share in a block Religare Enterp. 75.75 58.51 6.33 11300000 2687000 5613868 365209 1373211
deal on the BSE on 12 December 2017. Repro India 801.65 799 0.97 112000 17570 71227 5876 20194
Pensionskasse Des Bundes Publica bought SREI Infra. Fin. 101.05 100.65 0.56 2824000 475449 1692814 351091 2088487
28.60 lakh shares at Rs 135.81 per share in Tara Jewels 16.55 17.76 4.08 1004000 80954 319746 36729 148590
a bulk deal on the NSE on 15 December 2017. Tata Motors 421.9 411.25 0.01 321000 564180 6311097 1102053 6844956
Morgan Stanley owned 5.19% stake end Team Lease Serv. 2350 2145 0.45 76457 10024 22265 3438 20335
September 2017. The Byke Hospi. 173.75 173.91 0.50 201000 53839 66059 48669 111573
Zee Learn 45.25 43.65 7.85 25500000 2812802 1120685 205977 544288
Morgan Stanley offloaded a combined Eqty cap. Chng hand: Equity Capital change hand. CMP: current market price as on 22 December 2017
2.28 crore shares of Petronet LNG at an
average price of Rs 249.67 per share in a share in a bulk deal on the NSE on 18 December Mutual Fund A/C Small and Midcap Fund
series of block deals on the BSE on 12, 18 2017. It offloaded 7.05 lakh shares at Rs 19.37 purchased 17.77 lakh shares at Rs 165.79
and 20 December 2017. Societe Generale per share in a bulk deal on the NSE on 19 per share. Ashish Kacholia held 1.26%,
was the buyer in these deals. December 2017. Serum Institute of India Goldman Sachs India owned 3.02% and Idria
Petronet LNG intimated to the owned 5.21% stake end September 2017. held 4.54% stake end September 2017.
exchanges on 15 December 2017 that it had Swiss Finance Corporation (Mauritius) Government of Singapore mopped up
executed the final agreements to revise the dumped 2.55 crore shares of Zee Learn at 8.95 lakh shares of Kridhan Infra at Rs 92
pricing terms of its 20-year pact with an Rs 43.65 per share in bulk deals on the per share in a bulk deal on the BSE on 18
affiliate of ExxonMobil to import 1.44 BSE on 20 December 2017. UBS Principal December 2017. Mustray Impex & Services
tonnes per annum (tpa) of liquefied natural Capital Asia bought 46.34 lakh shares. liquidated 20 lakh shares at Rs 92.21 apiece.
gas (LNG) from the Gorgon project. The Moon Capital Trading Pte purchased 2.09 Mustray Impex & Services held 4.05% stake
revised pricing is expected to lead to cheaper crore shares. Swiss Finance Corporation end September 2017.
LNG imports as the level of oil indexation (Mauritius) owned 7.89% stake end Kotak Mahindra Asset Management
under the agreement has been reduced to September 2017. Company sold 6.22 lakh shares of Polaris
reflect proximity to the prevailing oil prices. Ashish Ramchandra Kacholia sold 9.10 Consulting & Services at Rs 358.68 per
The company has also agreed to purchase lakh shares of Ashiana Housing at Rs 167 share in a bulk deal on the NSE on 21
an additional quantity of 1.20 tpa of LNG per share in a bulk deal on the NSE on 20 December 2017.
from an affiliate of LNG supplier for the December 2017. Goldman Sachs Emerging Ivory Consultants offloaded 31.09 lakh
Indian markets for 15 years. Market Equity Fund offloaded 9.82 lakh shares of Mercator at Rs 35.02 per share in
Serum Institute of India sold 7.50 lakh shares at Rs 165 apiece. Idria sold 16.83 a bulk deal on the NSE on 21 December 2017.
shares of Orchid Pharma at Rs 18.55 per lakh shares at Rs 165.77 per share. SBI — Compiled by Chaitanya Nallani

26 Jan 01 – 14, 2018 CAPITAL MARKET

MarketWatch
Market Report However, crude oil prices crossing US$

Soaring temprature
67 a barrel, rising domestic inflation and
the impasse between the government and
opposition parties in parliament in the on-
going winter session over the prime
The euphoria post BJP wins in recent state polls and a record- minister’s remarks against his predeces-
hitting streak of US equities is tempered by rising inflation sor Manmohan Singh kept the buoyant
mood under check.
Key indices clocked strong gains and scaled The all-India general inflation based on
fresh record highs on hopes that the ruling Pricing pressure the consumer price index (CPI) surged to
BJP party at the Center, boosted by its WPI stood at 3.93% for November 2017 4.88% in November 2017 compared with
thumping victory in Gujarat and Himachal compared with 3.59% in the October 2017 3.58% in October 2017. The core CPI in-
Pradesh assembly elections, will continue CPI surged to 4.88% in November 2017 flation increased to 4.69% in November
with bold reforms to propel the Indian compared with 3.58% in October 2017 2017 compared with 4.4% in October 2017.
economy. The S&P BSE Sensex crossed the 10550 Inflation based on the wholesale price in-
Nifty 50
34,000-mark and the NSE Nifty breached 10350 dex stood at 3.93% for November 2017
10,500 for the first time in the history on 26 10150 compared with 3.59% for the previous
December 2017. 9950 month and 1.82% for November 2016.
The most recent wins in elections has 9750
S M A Industrial production rose at moderated
0 days
cemented the dominance of BJP in Indian Nifty 20
9550
pace of 2.2% in October 2017 over October
politics and raised its chances to form the 9350
2016, while showing a deceleration in growth
next government at the Center in the calen- 9150 l
O’17
l
N
l
D
l
from 4.1% increase in September 2017.
dar year (CY) 2019 general elections. The Nifty-200-day simple moving average. Provisional direct tax collections up to
Gujarat win holds significance as it is a home November 2017 were up 14.4% to Rs 4.8
state of Prime Minister Narendra Modi, who promise of replicating development at coun- lakh crore over the corresponding period of
had used its economic growth model to gar- try level. A record-hitting streak of the US the previous year. The net direct tax collec-
ner majority in last Lok Sabha elections on equity markets also lifted domestic stocks. tions represent 49% of the total budget esti-
mates of direct taxes for the fiscal year
Domestic flavour Inflows and outflows ending March 2018 (FY 2018).
How the indices moved Net investment in equities and debt by foreign India’s merchandise exports surged
portfolio investors and mutual funds 30.5% to US$26.2 billion in Novem-
VARI (%) ber 2017 over a year ago. Merchan-
EQUITY FPIs (Rs cr) MFs (Rs cr)
NAME 26-DEC-17 PE 15 DAYS YEARLY dise imports increased 19.6% to
S&P BSE Sensex 34010.61 25.09 2.36 31.79
EQUITY DEBT EQUITY DEBT US$40.02 billion. The trade deficit rose
13-12-2017 398.83 -444.89 338.55 -370.65 3.2% to US$13.83 billion in Novem-
S&P BSE 500 14964.43 28.16 3.29 40.72
14-12-2017 464.85 -436.22 191.48 -404.43 ber 2017 from $13.01 billion in No-
S&P BSE 200 4670.35 26.27 3.04 38.03
15-12-2017 -870.05 404.12 703.63 2950.38 vember 2016.
S&P BSE Mid-Cap 17706.94 46.74 4.57 53.9
18-12-2017 118.19 713.83 -827.33 2895.79 Assembly election results of
S&P BSE Small-Cap 19111.8 114.55 5.43 65.49 19-12-2017 -1276.2 -778.3 282.24 1841.53
S&P BSE FMCG 10664.3 42.37 1.4 38.35
Gujarat and Himachal Pradesh on 18
20-12-2017 -1446.26 -280.2 481.21 293.97
S&P BSE BANKEX 29012.38 29.5 1.95 44
December 2017 indicated that the rul-
21-12-2017 -1308.91 177.11 1012.05 -1199.4
ing BJP at the Centre will form gov-
S&P BSE Finance 5835.87 28.86 2.04 48.5 Fortnight* -3919.55 -644.55 2181.83 6007.19
ernments in both the states. BJP won
S&P BSE IT Sector 11142.55 17.68 2.33 13.23 January -1176.6 -2319.19 5233.55 31104.93
February 9902.18 5960.25 2039.55 38829.55
majority in the two states, winning 99
S&P BSE Sensex 34010.61 25.09 2.36 31.79
March 30906 25354.89 4191.55 34894.09 out of 182 seats in Gujarat and 44 out
S&P BSE Energy 4257.32 15.45 2.44 47.35
April 2394.49 20363.75 11244.25 55932.89 of 68 seats in Himachal Pradesh. Hav-
S&P BSE Tech 6333.47 23.44 2.69 19.29
May 7711.41 19154.75 9357.67 9514.37 ing won elections in Gujarat, the home
S&P BSE 500 14964.43 28.16 3.29 40.72
June 3616.82 25685.11 9106.11 12617.91 state of Prime Minister Narendra
S&P BSE Cons Dura 22592.52 48.19 3.34 110.6
July 5160.71 18867.15 11799.85 40387.5 Modi, the BJP has cemented its domi-
S&P BSE Oil&Gas 16568.26 13.84 3.61 41.83
August -12769.7 15446.51 17941.11 36466.82 nance in Indian politics and has im-
S&P BSE Healthcare 14544.18 34.62 3.66 2.45
September -11392.3 1348.89 17456.84 31855.24 proved its chances in the next general
S&P BSE Power 2361.57 21.57 3.83 22.76 October 3055.44 16063.65 9990.5 29088.49 elections in 2019.
S&P BSE Utilities 2275.51 25.18 3.89 33.37 November 19727.65 530.54 12080.1 41978.37 The Asian Development Bank
S&P BSE Telecom 1656.1 -18.65 4.84 53.77 December* -7300.39 1356.23 6113.71 22412.22 (ADB), in a supplement to its Asian
S&P BSE Cap.Good 19213.31 32.7 4.86 43.55 CY 2017* 49,835.76 147812.5 116555 385082.4 Development Outlook Update 2017
S&P BSE Auto 26643.28 29.76 5.37 35.97 CY 2016 18752.88 -43400.9 46849.5 330205.6 report, lowered India’s GDP growth
S&P BSE Industrials 3899.65 42.18 5.43 41.86 CY 2015 18355.58 46920.71 72197.7 433809.6 forecast to 6.7% for the fiscal year
S&P BSE Bas. Material 3510.36 34.98 5.55 61.11 CY 2014 97031.08 158229.7 23421.6 626336.8 ending March 2018 (FY 2018) from
* till 21 December 2017. CY: Calendar year. FPIs: foreign portfolio
S&P BSE Realty 2537.39 72.4 6.29 107.33 investors. MFs: Mutual funds. 7% forecast in the update. Although
S&P BSE Metal 14706.53 28.52 7.51 51.56 the strong manufacturing expansion

Jan 01 – 14, 2018 CAPITAL MARKET 27

MarketWatch

In the limelight
BSE Large caps BSE Mid-caps BSE Small-caps
VARI (%) VARI (%) VARI (%)
NAME 26-DEC-17 PE 15 DAYS YEARLY NAME 26-DEC-17 PE 15 DAYS YEARLY NAME 26-DEC-17 PE 15 DAYS YEARLY
Gainers Gainers Gainers
Hindalco Inds. 268.1 33.21 13.05 76.96 Rel. Comm. 21.33 0 83.4 -35.46 Forbes & Co 4817.9 199.74 84.26 141.07
NHPC Ltd 31.65 14.07 10.47 22.44 Reliance Infra. 540.5 14.24 20.06 21.12 Godawari Power 328.4 35.3 77.37 472.62
Hero Motocorp 3804.65 24.22 10.44 26.64 Reliance Power 43.15 12.16 17.74 9.1 Morepen Labs. 41.55 79.42 66.2 108.79
Vedanta 321.6 9.5 9.72 54.21 Jindal Steel 192.6 0 17.62 194.72 Waterbase* 361.5 62.54 63.35 368.57
Idea Cellular 101.75 0 8.94 46.61 Wockhardt 868 0 16.82 36.61 D B Realty 55.1 0 54.13 51.58
DLF 253.95 154.7 8.57 141.05 GMR Infra. 19.55 0 13.99 72.1 Sreeleathers* 274.6 40.38 49.61 96.14
NMDC 140.15 19.48 7.77 17.67 JSW Energy 91.45 26.82 13.81 64.77 Virtual Global* 1.33 13.3 49.44 -68.63
BPCL 537.45 13.6 7.53 33.78 3M India* 17384.75 75.76 13.2 70.55 Binani Inds 141.95 0 48.33 118.72
Rural Elec.Corp. 157.75 5.16 7.28 34.48 Adani Power 39.25 0 12.95 40.43 Renaissance Jew. 344.4 10.66 47.59 175.52
Siemens 1238.95 77.51 6.87 18.14 SAIL 90.4 0 12.79 88.92 Ester Inds.* 55.05 0 47 47.79
Losers Losers Losers
Godrej Consumer 978.2 50.19 -3.13 37.05 Bank of India 171.65 0 -4.29 65.77 Bombay Rayon 145.25 0 -33.05 3.23
Britannia Inds. 4734.2 62.57 -2.58 68.77 Tata Comm 679.85 9.07 -2.9 12.73 Steel Exchange* 36.5 0 -22.67 -56.34
Tech Mahindra 493.15 15.72 -1.5 6.47 Central Bank 75.15 0 -2.66 -8.19 Visagar Polytex* 1.48 24.67 -22.51 -14.94
Nestle India* 7827.55 68.11 -1.05 34.33 Castrol India* 198.15 31.01 -2.17 10.68 Sh.Global Trad. 3.37 0 -22.17 -5.34
St Bk of India 316.85 0 -0.49 29.8 Union Bank (I) 148 23.16 -2.02 21.21 V B Industries* 94 0 -21.7 -73.52
Motherson Sumi 375.1 33.61 -0.42 83.33 Gillette India* 6832.35 84.8 -1.83 59.44 Balasore Alloys 71.85 7.12 -16.98 49.22
Power Grid Corpn 202.3 14.9 -0.34 13.24 Blue Dart Exp. 4557.55 77.34 -1.58 7.17 Jayaswal Neco 7.55 0 -15.07 6.64
HDFC 1709.1 23.93 -0.08 39.84 P & G Hygiene* 9416.05 68.87 -1.49 39.57 Bank of Maha 22.15 0 -14.81 -22.14
Coal India 263.65 19.67 0.15 -7.51 Apollo Hospitals 1179.2 75.16 -0.97 4.59 Dwarikesh Sugar* 48.9 5.25 -14.29 75.96
Punjab Natl.Bank 174.25 35.76 0.4 51.39 Glaxosmi. Pharma 2421.65 93.11 -0.87 -10.5 Ushdev Intl. 2.2 0 -13.73 -88.75
* PE on standalone basis, others on consolidated basis, * PE on standalone basis, others on consolidated basis, * P/E on standalone basis, others on consolidated basis,
for TTM based on latest results. for TTM based on latest results for TTM based on latest results

helped the economy reverse five consecu- week ended 14 December 2017 was 96%
Commodity flow tive quarters of deceleration in the second of the storage of corresponding period of
Monthly variation : 3.0% quarter of FY 2018, the recovery is more the previous year and 95% of the storage
Yearly variation : 18.5%
Closing price (26 Dec 2017) : US$ 67.02 subdued than assumed earlier due to rising of the average of last 10 years.
68
crude oil prices, soft private investment The GST Council reviewed the progress
growth, and weather-related risks to agri- of readiness of hardware and software re-
66 culture. The tepid growth in the first half quired for the introduction of nationwide e-
Brent crude oil per barrel in US$
of FY 2018, the lingering effects of demon- way Bill System. The system will be rolled
64 etization in November 2016, transitory out on a trial basis latest by 16 January 2018.
challenges of a new tax system will affect Trade and transporters can start using this
62
economic growth in FY 2018. system on a voluntary basis from 16 Janu-
60 l
The growth projection for FY 2019 has ary 2018. The rules for implementation of
l l l l l l l l l l
27 Nov 11 Dec 26 Dec been revised down to 7.3% from 7.4%, the system for inter-state movement of
2017 2017
(+) Appreciation. (-) Depreciation mainly because a faster recovery in crude oil goods on a compulsory basis will be noti-
prices likely in CY 2018 will add fiscal pres- fied from 1 February 2018. As a result, there
sure and because private investment growth will be uniformity across the states for seam-
Exchange equation is expected to remain soft. less inter-state movement of goods.
Monthly variation : -1.1% As per preliminary reports received The merchant discount rate applicable
Yearly variation : -5.7% from the states, the total area sown under on all debit card, Bhim unified payment
Closing price of US$ (26 Dec 2017) : Rs 64.05
rabi crops stood at 546.02 lakh hectares on interface and Aadhaar-enabled payment
63.8
22 December 2017 compared with 544.97 system transactions up to and including a
64.0 lakh hectares this time in the calendar year value of Rs 2000 will be borne by the Cen-
INR/USD
(CY) 2016. tral government for two years from 1 Janu-
64.2
The water storage available in 91 major ary 2018.
64.4 reservoirs of the country for the week ended The Companies (Amendment) Bill,
64.6 14 December 2017 was 94.053 billion cu- 2017, seeking to bring about major changes
bic meters (bcm), 58% of total storage ca- in the Companies Act, 2013, was passed by
64.8 l l
27 Nov
l l l l
11 Dec
l l l l l
26 Dec
pacity of these reservoirs. This percentage a voice vote in the Rajya Sabha on 19 De-
2017 2017 was at 61 for the week ended on 7 Decem- cember 2017. The bill, was adopted by the
(+) Appreciation. (-) Depreciation ber 2017. The level of water storage in the Lok Sabha in July. The amendment seeks to

28 Jan 01 – 14, 2018 CAPITAL MARKET

MarketWatch

Taking off strengthen corporate governance standards,

initiate strict action against defaulting com-
BSE 200 companies hitting life-time highs in the fortnight ended 27 December 2017 panies and help improve ease of doing busi-
STAKE TTM ness in the country.
COMPANY ALL-TIME 52-WEEK PROMO. MF FIIs NPM P/E P/BV The National Highways Authority of
India has created a National Highways In-
HIGH-DATE HIGH (Rs) LOW (Rs) (%) (%) (%) (%) vestment Promotion Cell to attract domes-
Nestle India * 14-12-17 8001 5750 62.76 11.97 1.67 11.55 67.36 21.99 tic and foreign investment for highways
AIA Engineering 18-12-17 1702 1253 61.65 25.99 6.89 18.02 36.55 5.28 projects. The cell will focus on engaging with
global institution investors, construction
Balkrishna Industries * 18-12-17 1285.63 506.8 54.37 18.26 12.25 16.87 31.72 6.35
companies, developers and fund managers
Page Industries * 19-12-17 2577912820.05 49.01 36.16 5.58 12.73 91.4 35.69 for building investor participation in road
infrastructure projects.
TVS Motor Company * 19-12-17 792.85 346 57.4 20.53 8.09 4.53 80.83 16.49
The Central government has set an am-
HDFC Bank * 20-12-17 1905 1169.85 21.02 33.91 9.14 21.47 31.6 5.24 bitious target of construction of 35,000 ki-
Hindustan Unilever * 20-12-17 1366.9 782.95 67.19 13.31 1.69 14.84 67.74 43.47 lometers of national highways in the next
five years involving an investment of Rs 5.35
Mahindra & Mahindra * 20-12-17 785.58 571.03 25.21 34.02 8.05 8.53 27.22 3.12 lakh crore under ‘Bharatmala Pariyojana’.
M& M Financial Services 20-12-17 488.9 244.35 51.2 32.03 8.95 5.82 65.15 3.23 Given the scale of investment required, both
foreign and domestic investment from pub-
Maruti Suzuki India * 20-12-17 10000 5042.5 56.21 25.29 5.98 10.24 49.25 7.86
lic and private sector is pivotal.
Motherson Sumi Systems 20-12-17 395 201.83 63.11 19.74 6.8 4.58 33.01 8.81 The Cabinet Committee on Economic
P I Industries 20-12-17 1003.7 674.15 51.55 16.51 15.46 18.55 28.98 8.18
Affairs approved a new skill development
scheme covering the entire value chain of
The Ramco Cements * 20-12-17 839.95 500 42.75 14.83 15.24 15.41 28.08 4.9 the textile sector excluding spinning and
Titan Company 20-12-17 871.9 307 52.91 21.68 2.74 6.19 80.66 17 weaving in the organized sector from FY
2018 to FY 2020, with an outlay of Rs 1300
Gujarat State Petronet * 22-12-17 235.5 119 37.66 17.48 14.43 50.33 23.64 2.87 crore. The scheme will have National Skill
Manappuram Finance 22-12-17 124.2 57.8 34.45 0 5.25 20.77 13.89 2.79 Qualification Framework-compliant training
courses with funding norms as per the com-
Motilal Oswal Financial 22-12-17 1580 495 70.74 13.51 0.77 19.25 51.73 10.79
mon norms notified by the Ministry of Skill
SRF 22-12-17 1974.95 1420 52.38 19.22 9.44 8.95 25.18 3.34 Development and Entrepreneurship.
Bajaj Auto 26-12-17 3381 2554.55 49.3 16.95 2 17.93 24.8 5.31 The Union cabinet approved the spe-
cial package for employment generation in
City Union Bank * 26-12-17 189 115.77 0 34.15 11.63 16.49 21.96 3.09 leather and footwear sector. The package
Indraprastha Gas * 26-12-17 339 170 45 25.26 9.27 14.77 38.25 7.7 involves implementation of the Central sec-
tor scheme, Indian Footwear, Leather &
Kansai Nerolac Paints * 26-12-17 565 314 74.99 7.04 3.36 12.29 64.39 10.62
Accessories Development Program, with
MRF * 26-12-17 74499 47577.5 27.5 8.16 7.89 7.18 20.78 3.58 an approved expenditure of Rs 2600 crore
over the three financial years from FY 2018
Pidilite Industries 26-12-17 972 568.75 69.59 10.92 3.44 14.78 55.97 12.84
to FY 2020.
Shriram Transport Fin* 26-12-17 1478.95 778 26.08 48.13 4.54 12.59 25.95 2.9 The Union government conducted a
Sun TV Network * 26-12-17 1017.4 458 75 13.42 3.3 38.43 39.08 9.81 study to benchmark the efficiency and pro-
ductivity of major ports to international lev-
Biocon 27-12-17 548.45 294.03 60.67 15.42 2.1 11.68 72.38 6.58 els and improve their efficiency. The
CEAT 27-12-17 2030 1060.3 50.77 25.92 6.58 3.84 33.11 3.23 aim is to modernize and upgrade the infra-
structure by construction of new berths and
Century Textiles & Inds* 27-12-17 1443.05 746 47.75 8.64 13.8 2.98 70.27 6.26
terminals, installation of state-of-the-art
Coromandel Intl 27-12-17 563.45 267.35 61.84 5.64 7.05 6.5 24.13 5.22 equipment and mechanization of cargo-han-
GAIL (India) * 27-12-17 513.85 313.5 54.43 15.64 10.24 7.24 26.63 2.19
dling systems including dredging projects to
accommodate large vessels.
Larsen & Toubro 27-12-17 1275 868 0 16.88 13.17 6.47 23.75 3.47 India currently ranks 60th in the 127
Tata Global Beverages 27-12-17 308.6 116.5 34.45 15.02 10.36 7.22 38.78 2.9 countries on the Global Innovation Index
2017 compared with the 66th rank in CY
Vakrangee 27-12-17 440 131.5 41.59 21.71 0.05 12.88 68.3 19.12 2016. To make India an innovation- driven
Voltas 27-12-17 671.45 301 30.3 20.13 17 9.2 39.2 6.24 economy, Niti Aayog, the Department of
*Results are on standalone basis for others on consolidated basis, for TTM ended 30 September 2017
Industrial Policy and Promotion and the
Confederation of Indian Industry together

Jan 01 – 14, 2018 CAPITAL MARKET 29

MarketWatch
launched a mega initiative, India Innovation
Index, to rank states on innovations through
country’s first online innovation index por-
tal that will capture data on innovation from
all Indian states on innovation and regularly
update it in real time.
Congressional Republicans sent tax-cut
Buoyancy … in direct tax collection ... and exports and imports
Provisional direct tax collections rose India’s merchandise exports surged 30.5%
14.4% to Rs 4.8 lakh crore in November to US$26.2 billion and merchandise
2017 over November 2016, representing 49% imports increased 19.6% to US$40.02
of the total BE of direct taxes for FY 2018 billion in November 2017 over a year ago
17 4400

legislation to President Donald Trump for 16 4350

his signature. The House of Representa- 15 4300

BSE Dollex 30
tives on 20 December 2017 voted for the 14 4250
second time due to a technical irregularity 13
India VIX
4200
after the Senate passed the overhaul. The 12 4150
bill includes a reduction in the corporate
11 l l l l l l l l l l l 4100 l l l l l l l l l l l
tax rate from 35% to 21%. 27 Nov 11 Dec 26 Dec 27 Nov 11 Dec 26 Dec
2017 2017 2017 2017
The US Federal Reserve hiked interest Rise or fall in India VIX depicts increase or decline in volatility Rise or fall in the BSE Dollex 30 depicts firmness or weakness
rates by a quarter point after the conclusion in the near term of the rupee
of its two-day policy meeting on 13 De-
cember 2017 in a move that was widely ex- The existing-home sales in US rose to a reserves that financial institutions park at
pected by market, thereby increasing the 5.81 million seasonally adjusted annual rate the central bank.
central bank’s target range to between 1.25% in November, coming well above expectations. Japanese Prime Minister Shinzo Abe’s
and 1.5%. The Fed also raised the GDP fore- China’s consumer inflation slowed more cabinet endorsed a record US$860-billion
cast from 2.1% to 2.5%. The inflation fore- than expected in November and factory spending budget for FY 2018, highlighting
cast was raised from 1.6% to 1.7%. prices decelerated sharply. The CPI rose his greater emphasis on growth than auster-
The US economy’s pace of growth in 1.7% in November from a year ago com- ity, with aggressive monetary stimulus keep-
the third quarter of CY 2017 was lowered pared with a 1.9% increase in the previous ing borrowing costs low.
slightly to a 3.2% annual rate from 3.3% month and 1.6% in September 2017. Japan’s export growth accelerated
under the final revision to GDP. The The Bank of Japan (BoJ) kept monetary 16.2% in November 2017 over a year ago,
economy expanded at a 3.1% rate in the sec- policy steady despite growing signs of marking a full year of annual gains. The
ond quarter. The US economy added 2.28 strength in the economy. In a widely ex- higher growth was from a 14% increase in
lakh jobs in November. The unemployment pected move, the BoJ maintained the 0.1% the previous month.
rate held steady at 4.1%. interest it charges on a portion of excess Japan’s government revised up its
growth projections for the current and next
Global equity markets fiscal years, forecasting the economy to ex-
pand 1.9% and 1.8%, respectively, on
Returns in local currencies Returns in US dollars steady improvement in domestic demand.
The European Central Bank hiked its
COUNTRY INDEX FORT 1 MNTH 3 MNTHS 1 YEAR FORT 1 MNTH 3 MNTHS 1 YEAR
growth forecasts, but admitted that infla-
Australia ASX 200 1.3 1.5 6.6 7.9 4.0 2.7 2.7 15.9
tion still won’t be on target by CY 2020. In
Brazil Bovespa 3.4 1.4 -0.8 29.8 2.9 -1.6 -6.5 27.7 its final meeting of the year held on 14 De-
China Shanghai Composite 0.2 -1.7 -1.7 6.0 0.9 -1.3 -2.1 12.0 cember 2017, the euro zone’s central bank
France CAC 40 -0.6 -0.5 2.9 10.8 -0.4 -1.6 -0.3 14.9 voted to leave interest rates on hold and
India BSE Sensex 2.1 0.8 5.2 30.3 2.8 1.7 5.4 38.1
repeated its commitment to running an as-
set-purchase stimulus program until at least
India Nifty 2.2 1.0 4.0 31.4 2.9 1.9 4.2 39.3
next September.
Japan Nikkei 225 0.4 1.6 15.0 17.9 0.6 0.0 12.5 22.0 German business confidence fell unexpect-
New Zealand NZX 50 Index 2.0 3.3 8.2 22.1 4.5 5.2 4.1 24.6 edly in December to 117.2 from an upwardly
South Korea KOSPI -1.0 -4.1 2.3 19.9 0.4 -3.5 7.4 33.8 revised reading of 117.6 in November.
United Kingdom FTSE 100 2.7 2.5 5.2 7.4 2.8 2.8 3.7 17.3
Outlook
Germany DAX -0.6 0.1 4.4 14.2 0.0 -0.7 3.4 29.3
The proceeding of ongoing winter session
Russia MICEX -0.1 -2.7 2.4 -3.2 1.5 -2.9 1.0 1.3 of parliament from 15 December till 5 Janu-
UAE ADX General 1.7 1.4 -2.9 -2.0 1.7 1.5 -2.9 -2.0 ary 2018, Q3 result season of India Inc start-
Mexico IPC 1.7 0.9 -3.1 7.1 -1.6 -4.6 -12.5 12.7 ing from the second week of January 2018,
Singapore Straits Times -1.1 -1.6 5.5 17.9 -0.5 -1.6 5.6 26.9 macroeconomic data, investments by FPIs,
the movement of rupee against the dollar
USA Dow Jones 1.7 5.1 11.2 24.2 1.7 5.1 11.2 24.2
and crude oil price trajectory will dictate
USA S&P 500 1.2 3.1 7.3 18.5 1.2 3.1 7.3 18.5
trend on the bourses in the near term.
As on 22 December 2017. Returns in percentage. — Amit Shenai

30 Jan 01 – 14, 2018 CAPITAL MARKET