Adani Group stocks plummet again as MSCI conducts free float review
The stock prices of Adani Group erased nearly all gains in the past two trading sessions after MSCI questioned the uncertain characteristics of some investors in group stocks, which could impact how the index provider calculates the free float in them. MSCI is the world’s leading provider of indices and investors rely on MSCI products to allocate capital. The outcome of the evaluation will be announced today. Depending on the quantum of the reduction in free float, passive funds tracking the MSCI indices will have to prune their exposure to Adani stocks to realign with the new composition of the index.
Why it’s important: The outflows triggered by the MSCI action could range from several million dollars to more than half a billion, depending on the modifications, which will become effective at the end of May. There could be more pain ahead for Adani stocks.
Net profit at Life Insurance Corporation surges 27 times to Rs 6,334.19 crore
State-owned Life Insurance Corporation of India reported a manifold increase in its net profit in the December quarter of 2022-23, aided by a transfer of Rs 5,670 crore from non-participatory to shareholders’ accounts. Net profit stood at Rs 6,334.19 crore, compared with Rs 234.91 crore a year ago. In the nine months to December, profits soared to Rs 22,970 crore, compared with Rs 1,672 crore a year ago. The huge jump was because of the transfer of Rs 19,941 crore to shareholder accounts over the past four quarters.
Why it’s important: There have been concerns over LIC’s exposure to the Adani Group. It has made investments worth over $4 billion, or about 1 per cent of its assets under management, in the beleaguered group. The state-owned insurer has said customers need not worry about the exposure.
Government trims expenditure worth Rs 1.5 lakh crore to meet fiscal deficit target
The central government has carried out an expenditure rationalization exercise of at least Rs 1.5 lakh crore in 2022-23, which has helped it meet the fiscal deficit target of 6.4 per cent of nominal GDP. These savings have come through better monitoring of funds through a single nodal agency dashboard, better scrutiny of schemes like the rural jobs guarantee scheme, weeding out undeserved beneficiaries and duplication, eliminating leakages in food subsidy, and organic savings for schemes where allocated amounts were not used. There has also been savings of Rs 20,000 crore in capital expenditure due to states not being able to avail of the entire Rs 1 lakh crore capex support.
Why it’s important: Expenditure rationalization is an ongoing process, and the single nodal agency dashboard has made it much more efficient by plugging leakages. A lot of the savings has happened on account of the rural jobs guarantee scheme, the government’s largest welfare program.
India’s modified anti-competition law may not allow settlement route to cartels
Business cartels may not be allowed to settle their anti-competitive behavior by negotiating with authorities, as recommended by a parliamentary panel that has examined the Competition Amendment Bill. Before the draft legislation is taken up by parliament for approval, the government plans to make the change and retain the provision to limit negotiated settlements to abuse of dominance cases and anti-competitive agreements barring cartels and collusive behavior like bid rigging.
Why it’s important: Cartelization, where business entities collude to suppress competition, is considered a serious offence. Keeping cartels out of the negotiated settlement route could discourage such behavior.
Finance lobbies request India and European Union to arrive at workable agreement
Banks based in the European Union and with branches in in India may have to drastically reduce their activity, reject clients, and potentially exit if India and Europe do not sort out their differences over regulation of key market institutions, according to a joint letter by half a dozen lobbies representing big-ticket investors, banks, dealers, and fund houses. It was addressed to India’s finance ministry, the European Commission, and regulators. The letter said that it would be difficult to implement a plan B before the end of April, the deadline set by the European Securities and Markets Authority for Indian institutions serving as central counterparties in bond, equity, and derivative trades.
Why it’s important: The standoff between Indian and European authorities stems from the Reserve Bank’s refusal to accept ESMA’s demand to inspect, and even penalize, key Indian central counterparties that absorb clearing and settlement risks in various types of transactions. The central bank says that ESMA has no jurisdiction over CCPs in India.
Capex by centrally run companies touches 76 per cent of Rs 6.6 lakh crore target
The capital expenditure by large central public sector enterprises with a target of Rs 100 crore or more touched 76 per cent of the annual budgeted target of Rs 6.62 lakh crore in the first 10 months of 2022-23. The capex target covers 54 such companies and five departmental arms. By comparison, they could exhaust only 72.56 per cent of the Rs 5.95 lakh crore target during the same period in the previous fiscal year. The capex of these central public-sector firms is over and above the Centre’s capex.
Why it’s important: The encouraging figures indicated that firms run by the central government are taking capital spending seriously. The Centre has been focusing on a capex-led recovery of the economy through the exchequer as investments from the private sector have lagged.
India likely to invite more overseas companies to build domestic semiconductor plants
The central government is likely to invite a second round of applications for semiconductor chip manufacturing in India under the $10 billion incentive package. It is also in advanced talks with four global semiconductor companies to set up fabs, with those having expressed interest including the likes of New York-headquartered GlobalFoundries and a major Korean semiconductor firm. The second round is expected to open as early as mid-March. Last year, India had accepted five proposals for the scheme with the application window closing in February last year.
Why it’s important: The government has launched a major initiative for India to become a hardware manufacturing hub. The massive incentives and the new proposal to invite global majors are part of that.
Zomato’s third-quarter loss widens to Rs 346 crore as demand for food delivery wanes
Food delivery platform Zomato has said its December quarter loss widened more than five times from a year earlier, primarily because of a decline in food ordering after Diwali. Loss surged to Rs 346.6 crore for the third quarter ended December 31 from Rs 63.2 crore a year ago. Revenue grew 75 per cent to Rs 1,948 crore from Rs 1,112 crore a year ago. Gross order value inched up 0.7 per cent sequentially but expanded 21.5 per cent from a year earlier to Rs 6,680 crore.
Why it’s important: There has been an industry-wide slowdown in the food delivery business after the Diwali festive season. Zomato’s instant delivery arm BlinkIt is also putting pressure on profitability.
Potential buyers of Reliance Capital to tweak offer post budget modifications
After the budget removed tax incentives for life insurers, the sale of Reliance Capital’s assets could be unattractive for acquirers. The valuation of listed insurance companies has fallen 3-11 per cent, making bidders like Torrent and the Hinduja group go back to the drawing-board. In the auction held in December last year, Torrent had offered Rs 8,640 crore and the Hinduja group Rs 8,100 crore. But as the Hinduja group increased its bid to Rs 9,000 crore in an all-cash deal, Torrent moved the National Company Law Tribunal, which ruled in its favor.
Why it’s important: The removal of tax incentives for high-value life insurance in the budget have surprised the suitors. Creditors may have to settle for lower recoveries from the bankrupt firm.
Volkswagen Group may launch entry-level electric car in India
The Volkswagen Group may introduce an entry-level electric car in India, which would make it the first European automaker to tap into India’s mass-market electric vehicle segment. The vehicle, which will likely belong to the lowest category, will be manufactured in Spain starting 2025. The electric may be launched in several markets under the Skoda, Cupra and Volkswagen brands. It’s unclear if the car will be made in India as well.
Why it’s important: Sales of electric four-wheelers are yet to pick up momentum in India, unlike the buoyancy in the two-wheeler segment. But more product choices and cheaper prices could change that.
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