In this edition, we talk about India’s oil import bill and an experiment that can help keep it under control. We also talk about the quarterly earnings of some of India’s biggest companies, M&A deals and Mankind Pharma’s IPO.
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Earlier this month, the American oil giant Chevron Corp flagged a road trip with three cars from Toyota Motor Corp, the world’s largest automaker. The Camry sedan, the RAV4 compact crossover and the Tundra pickup truck will run from Mississippi through Louisiana before ending their journey in Texas.
Okay, but what does that have to do with those sitting in India? Well, those cars are exactly what India needs. Or rather, the fuel in those cars is exactly what India needs.
You see, those cars are running on petrol that’s blended with 50% renewable content and is 40% less carbon intensive than traditional petrol. So what, you may ask?
Data made public this week showed that India imported 87.3% of the crude oil it consumed in the year through March 2023 and spent a whopping $158 billion in doing so. So, those cars and that fuel are what India may need.
To be sure, those cars and that fuel aren’t coming to India anytime soon. And most people in India perhaps wouldn’t have even heard of Chevron’s experiment—unless, of course, they subscribe to this weekly newsletter.
We are also not saying that the experiment will even succeed or that’s the only way to go forward. All we are saying is that India must reduce its reliance on imported fuel and find as many as alternatives to petrol- and diesel-powered vehicles as possible. So, while Tata Motors, Mahindra & Mahindra as well as Chinese-owned MG Motor and BYD are launching electric vehicles, Japanese automakers Toyota, Honda and Suzuki are focusing on hybrid vehicles.
For now, however, India’s automobile market remains dominated by conventional vehicles. And automakers aren’t really complaining, as sales of passenger vehicles soared almost 27% to 3.9 million units in 2022-23. That helped Maruti Suzuki India Ltd, India’s largest carmaker, to record annual revenue of Rs 1 trillion for the financial year.
Maruti this week also said revenue from operations for the January-March quarter grew 20% year-on-year to Rs 32,048 crore while net profit jumped 43% to Rs 2,623 crore. The company also wants to set up a new factory with a production capacity of 10 lakh cars a year to meet growing demand.
Earnings snapshot
While Maruti had plenty of reasons to smile this week, the quarterly earnings reports of some other companies weren’t that cheerful.
Wipro, India’s third-largest IT services exporter, reported a 0.4% decline in its consolidated net profit for the fourth quarter to Rs 3,075 crore from Rs 3,087 crore a year earlier. Consolidated revenue rose 11.2% to Rs 23,190 crore.
Wipro also cautioned that IT services revenue growth in the current quarter could be just 0.6% as clients lower discretionary spending due to weak economic conditions globally.
Tech Mahindra also disappointed the Street as it reported a 27% drop in Q4 consolidated net profit to Rs 1,125 crore from Rs 1,545 crore a year earlier.
Axis Bank, India’s third-largest private sector lender, reported a standalone loss of Rs 5,728.42 crore for the March quarter. The bank attributed the loss to the cost of buying Citibank’s India consumer business during the quarter. Its net interest income, the difference between interest earned and interest expended, surged 33% year-on-year to Rs 11,742.2 crore while net interest margin improved by 73 basis points to 4.22%.
Meanwhile, FMCG major Nestle India reported a 25% jump in its profit for the March quarter to Rs 737 crore from Rs 590.7 crore a year earlier. Total sales grew 21% to Rs 4,808 crore.
Hindustan Unilever, India’s biggest FMCG company, reported a 13% growth in consolidated net profit for the March quarter to Rs 2,601 crore from Rs 2,307 crore a year earlier. Consolidated sales rose 11% to Rs 14,953 crore.
Deal Street
Overall, Ipca will spend Rs 1,840 crore to buy a 59.38% stake in Unichem if the open offer succeeds.
Godrej Consumer Products Ltd has agreed to acquire the FMCG business of Raymond for Rs 2,825 crore. The deal includes the purchase of Park Avenue and KS deodorants and Kamasutra condoms, helping the Godrej Group company strengthen its portfolio of consumer goods.
For Gautam Singhania-led Raymond, the deal will help it cut debt. Raymond also said it will now focus only on its lifestyle business, which includes its apparel and garment business, and real estate.
Raymond Ltd said it will demerge its lifestyle business into Raymond Consumer Care Ltd to create a separate listed entity. Raymond Ltd will itself be a listed real estate company with investments in engineering and denim businesses.
In another deal, a subsidiary of vaccine king Adar Poonawalla-led Serum Institute of India has decided to double its investment to $300 million (Rs 2,458 crore) in one of Biocon Ltd’s subsidiaries.
The additional investment by Serum Institute of Life Sciences in Biocon Biologics Ltd comes after the two companies scrapped a deal announced in September 2021.
Serum had invested $150 million in Biocon Biologics in November last year. It will now invest an additional $150 million after converting a loan to Biocon Pharma Ltd, a wholly-owned subsidiary of Biocon Ltd, into equity in Biocon Biologics.
There is another deal in the making. Non-bank lender Indostar Capital Finance Ltd said this week it is exploring options to merge its home loan business with the housing finance arm of JM Financial Ltd.
A Big IPO At Last
Moving on from Deal Street to Dalal Street, the initial public offering of Mankind Pharma Ltd was covered 15.32 times at the end of bidding on Thursday. Institutional investors bid 49 times their allotted quota while the portion reserved for high-net-worth individuals was subscribed 3.80 times.
The IPO is entirely an offer for sale by existing shareholders and will fetch them Rs 4,326 crore. This makes it the biggest IPO in India since logistics company’s Delhivery share sale in May 2022 that raised more than Rs 5,000 crore.
But does the oversubscription mean India’s IPO market is showing signs of a revival and you? Probably not just yet. For one, retail investors bid for only 92% of the shares set aside for them, indicating caution at their end.
Moreover, the broader market slowdown is persisting for now. For instance, Mankind is only the sixth company to float an IPO on the main board this year. The other five, including Avalon Technologies and Divgi TorqTransfer, raised a total of just about Rs 1,500 crore in 2023 to date.
Many other companies are sitting on the sidelines as they await a more conducive environment to launch an IPO. And several, such as TVS Supply Chain Solutions Ltd, are now reducing the offer size given the economic uncertainty.
By the way, what about those who invested in big-ticket IPOs last year? Well, if you did invest in IPOs of companies such as Life Insurance Corp and Delhivery, all we can say is better luck next time!
Market Wrap
Benchmark indices gained this week, buoyed by a return of foreign portfolio investors. FPIs have invested almost Rs 7,700 crore in Indian stocks in April, after pumping in Rs 7,900 crore last month, according to NSDL. The 30-script Sensex and the 50-stock Nifty ended about 2% higher this week.
The Nifty stocks that gained the most this week included Tata Consumer, TCS, Britannia, ITC, Nestle India, Bajaj Finance, SBI, Wipro, L&T, Hero MotoCorp, Adani Enterprises, BPCL, Apollo Hospitals, Bharti Airtel, RIL, Kotak Mahindra, Power Grid, Bajaj Auto, ICICI Bank, HCL Technologies, Titan, Infosys, IndusInd Bank, Adani Ports and Asian Paints.
The Nifty stocks that fell the most included YES bank, Maruti Suzuki, Hindustan Unilever, GAIL, Axis Bank, ONGC, Vedanta, Tata Steel, Zee Entertainment and Sun Pharma.
Other headlines
- LTIMindtree Q4 profit flat at Rs 1,114 crore, revenue jumps 22%
- Bank of Maharashtra Q4 net profit climbs 135% to Rs 840 crore
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Shriram Finance Q4 net profit up 18% YoY at Rs 1,288 crore
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SBI Life net profit grows 15% to Rs 777 crore in Q4
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Dalmia Bharat to acquire JP Associates’ select cement, clinker, and power plants
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Chivas Regal maker Pernod Ricard challenges New Delhi city’s license rejection in court
- Game of Thrones to come back in India as Reliance JV Viacom18 strikes a deal with Warner Bros
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Adani Group aims to raise up to $1 billion to finance green projects
That’s all for this week. Until next week, happy investing!
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