Morning Scan: All the big stories to get you started for the day

Morning Scan

1. Petronas unit frontrunner to acquire Brookfield’s part India renewables portfolio 

Gentari, the renewable energy arm of Malaysia’s Petronas, is leading the race for a part of the India renewable portfolio of Brookfield Asset Management, the Economic Times reported. Gentari has conducted due diligence and signed an exclusivity agreement for further negotiations. State-run ONGC is another contender that has completed due diligence. The 2GW renewable portfolio has an estimated enterprise value of $800 million-1 billion (Rs 6,600-8,300 crore).

Why it’s important: Gentari, which operates in India through a local entity, has been aggressively looking for buyout opportunities in the country. Oil firm ONGC has been exploring buyout opportunities in the clean energy space as part of decarbonizing its operations.

2. Hindalco Industries looks to raise $945 million via public listing of Novelis in New York 

Aditya Birla Group’s Hindalco Industries could garner up to $945 million as it is set to list its US subsidiary Novelis on the New York Stock Exchange, offering 45 million shares at $18-21 apiece, the Business Standard reported. Novelis, acquired by Hindalco in 2007 at a valuation of $6 billion, is now valued at $12.6 billion at the listing offered rate.

Why it’s important: It is not clear how Hindalco intends to utilize the money as it has said capital spending in the current financial year will be met solely through internal accruals. The funds will significantly build up its treasury balance for sure.

3. Disney finds it tough going to offload its 30 percent stake in DTH operator Tata Play 

Walt Disney Company has been keen to sell its 30 percent stake in Tata Play (formerly Tata Sky) to joint venture partner Tata Group, but the Tatas have declined to buy, the Mint reported. Bloomberg reported last week that the Tata Group had agreed to buy Disney’s stake in the DTH arm at a valuation of $1 billion. However, sources said neither the Tata group nor Reliance Industries has shown interest in buying. Disney is merging its local unit Disney Star with a Reliance arm.

Why it’s important: Disney is not in the distribution business anywhere but in India and has been wanting to exit repeatedly. The Tata Play stake seems to have become a millstone around its neck.

4. Tata Trusts for first time says shares of group holding company Tata Sons not transferrable 

Tata Trusts has for the first time officially said shares of Tata sons are non-transferable, the Economic times reported. The Trusts, which holds a controlling 66 percent in the group holding company, is worried about possible litigation with lenders over enforcing the security in case the Shapoorji Pallonji Group defaults. Shapoorji Pallonji has pledged its entire 18.5 percent in Tata Sons held through two entities to secure funds from private credit funds such as Ares and Farallon.

Why it’s important: It’s evident that Tata Trusts is edgy over Shapoorji Pallonji’s plans to roll over pledged Tata Sons shares to refinance over $2 billion debt. It is not known whether the shares can be pledged further as enforceability remains uncertain.

5. LIC’s foray into health insurance may intensify competition, lead to sector consolidation 

Life Insurance Corporation of India’s foray into the health insurance segment is expected to heighten competition in the crowded segment and may even trigger some consolidation, the Hindu Businessline reported. LIC’s Medicare expansion is driven by the expectation of the new government approving a proposal for a composite license for large insurers.

Why it’s important: Health is the fastest-growing insurance segment as medical costs have skyrocketed and there’s increased awareness on health coverage. This has led to a surge in premiums that might see a pullback on LIC’s entry.

6. Overseas investors become net buyers of debt securities ahead of index inclusion 

In a turnaround from April’s selling spree, foreign portfolio investors are increasing their holdings in debt securities as the JP Morgan Index inclusion for Indian government bond approaches, the business Standard reported. In May, overseas investors have pumped Rs 7,427 crore into debt securities on a net basis, a significant shift from April, when there was net selling of Rs 11,218 crore.

Why it’s important: The foreign investors could be back in the market because they see chances of making money as yields are expected to cool off during the current financial year. The net increase could be also due to their constant rebalancing of portfolios in emerging markets.

7. Employee stock options are back in favor as public offerings rise and valuations are reset 

The period between January and May has seen 340.5 million shares being allotted through employee stock options to senior and middle managers by 461 listed companies, according to a Mint analysis of data from Capitaline database. The same period last year had seen 253.9 million such allocations by 382 companies.

Why it’s important: Employee stock options are back in vogue. Since the markets are recalibrating share values upwards, Esops are increasingly being seen as a lucrative perk to hire and retain talent.

8. India’s capex outlay may rise by up to 10 percent on robust revenues and record surplus transfer

The Indian government could increase its 2024-25 capital expenditure outlay by 8-10 percent from the Rs 11.11 lakh crore allocated in the vote on account when the full budget is presented because of better-than-expected tax revenue and a record surplus transfer by the Reserve Bank of India to the government, the Economic Times reported.

Why it’s important: The higher state capital spending would continue the government’s public investment-led growth push that would provide support to private investment that is yet to pick up significantly.

9. Auto dealers concerned as searing heat dampens consumers demand for personal vehicles 

Declining footfalls and empty dealerships point to a summer of discontent for India’s automobile industry, as blistering heat takes its toll on showroom visits, test drives and purchases, the Mint reported. Sales in May are sharply down from the previous month as well as the same period a year ago, prompting dealers to offer discounts on popular models and offer doorstep service for test drives.

Why it’s important: The slump could well be a minor blimp as the focus is on the general elections that would dissipate after the results on June 4. There was also a lack of auspicious marriage dates in May that typically drive purchases.

10. International consultancies expand India teams in anticipation of retail and consumer boom 

Major consulting firms are expanding their consumer practice in India in anticipation of a surge in M&As and as growing prosperity in the world’s fifth-largest economy drives demand for consumer goods, the Mint reported. PwC, KPMG, Deloitte and Alvarez & Marsal are actively hiring to bolster their consumer and retail practice, said top executives at these global consulting firms.

Why it’s important: Large consumer companies and retailers are chasing India’s middle-class shoppers by either buying out small firms or partnering with others to grab larger market share. A boom in consultancy services is a natural corollary.