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L&T Q1 net profit falls 79% YoY; order book stands at Rs 3 lakh crore

 

Date : 22/07/2020

L&T's Q1 profit after tax was impacted mainly due to lower revenue, credit provisions in the financial services business and under-recovery of overheads.

Infrastructure major Larsen & Toubro on July 22 reported a consolidated net profit of Rs 303 crore for the quarter ended June 2020, registering a 79 percent decline year-on-year (YoY).

"The consolidated PAT attributable to shareholders of the company, including profits from discontinued business, is Rs 303 crore, reflecting a decline of 79 percent vis-a-vis PAT of Rs 1,473 crore for the corresponding quarter of the previous year," L&T said.

The PAT was impacted mainly due to lower revenue, credit provisions in the financial services business and under-recovery of overheads.

The number, however, beat market estimates as a CNBC-TV18 poll of analysts had estimated the number to the tune

The company's consolidated gross revenue came at Rs 21,260 crore for Q1FY21, registering a YoY decline of 28 percent. A CNBC-TV18 poll had estimated revenue to come at Rs 21,377 crore.

Revenue was impacted by nation-wide lockdown, resulting in halting of manufacturing and construction activities, non-availability of labour and disruptions to the supply chain ecosystem, the company said.

International revenues during the quarter came at Rs 9,497 crore which constituted 45 percent of the total revenue, with an increased composition of the non-cyclical IT&TS segment.

The company's EBITDA came at Rs 1,620.5 crore against the CNBC-TV18 poll of Rs 1,810 crore. The consolidated EBITDA margin came at 7.6 percent against the CNBC-TV18 poll of 9.1 percent.

The company said it earned a total profit after tax (PAT) of Rs 544 crore of which allocation to non-controlling interest is Rs 241 crore.

The company bagged orders worth Rs 23,574 crore at the group level during the quarter ended June 30, 2020, registering a decline of 39 percent, in a quarter characterised by low interest towards fresh investment and deferment of award decisions.

International orders during the quarter at Rs 8,872 crore constituted 38 percent of the total order inflow, L&T said.

The consolidated order book of the group stood at Rs 3,05,083 crore as of June 30, 2020, with an international order book constituting 24 percent of the total order book.

Infrastructure segment secured orders of Rs 11,349 crore, during the quarter ended June 30, 2020, lower by 32 percent compared to the corresponding quarter of the previous year.

Major orders received included a large barrage project, rural water supply schemes, an expressway project and some international orders in power transmission and distribution. International orders at Rs 1,653 crore constituted 15 percent of the total order inflow of the segment during the quarter, mainly from the Middle East region, L&T said.

The order book of this segment stood at Rs 2,21,115 crore as of June 30, 2020, with the international order book constituting 22 percent of the total order book.

Talking about the outlook, the company said that labour availability and productivity, working capital levels, balance sheet health and pick-up in execution pace are constantly monitored.

"The company's focus continues to be on responsible resumption, profitable execution of its large order book with higher operational efficiencies, liquidity management, tight expense control and successfully transitioning to a new work environment," it said.

 

 

Date : 20/07/2020

SBI Cards and Payment Services Q1 net profit up 14% at Rs 393 crore on higher interest income

The SBI promoted company had reported net profit of Rs 346 crore in April-June quarter of the fiscal ended March 2020.

PTI

    

SBI Cards and Payment Services Ltd (SBI Card) on Monday reported 14 percent rise in net profit to Rs 393 crore in the first quarter ended June 30, mainly due to higher interest income.

The SBI promoted company had reported net profit of Rs 346 crore in April-June quarter of the fiscal ended March 2020.

Card spends during the June quarter fell to Rs 19,085 crore as against Rs 30,174 crore in the same period of 2019-20, SBI Card said in a release.

Receivables grew by 10 percent to Rs 23,330 crore from Rs 21,231 crore.

Card-in-force grew by 20 percent to 1.06 crore from 0.88 crore a year ago, while the daily average spends improved to 76.5 percent of pre-COVID levels in June 2020 compared to 54 percent in May this year, it said.

New accounts acquisition improved from 80,000 in May 2020 to 1,81,000 in June 2020; which stands at 57.6 percent of the pre-COVID average daily acquisition, the company said.

Total income of SBI Card during the quarter fell 5 percent to Rs 2,196 crore as against Rs 2,304 crore a year ago.

Segment-wise, the interest income was up 34.6 percent at Rs 1,412 crore, while income from fees and services fell 27.1 percent to Rs 668 crore. Other income slipped to Rs 43 crore from Rs 236 crore in the year-ago period.

SBI Card said the board of directors at a meeting also approved raising of fund by way of issuance of non-convertible debentures (NCDs) aggregating to Rs 1,500 crore in one or more tranches over a period of time.

On asset quality, the company's gross non-performing assets were at 1.35 percent of gross advances as on June 30, 2020 as against 2.68 percent as on June 30, 2019.

The provision coverage ratio was at 68.25 percent as of June-end against 72 percent a year ago.

Total gross advances (credit card receivables) were Rs 23,330 crore by the end of June quarter, an increase of 9.9 percent from Rs 21,231 crore in the sam period last fiscal.

On capital adequacy, SBI Card said, the company's capital to risk ratio consisting of tier I and tier II capital was 24.4 percent compared to 18.9 percent by June 2019, which was higher than the regulatory requirement.

Stock of SBI Card closed 0.48 percent down at Rs 751.80 apiece on BSE

 Date: 16/07/2020 

L&T Finance Q1 profit falls 73% to ₹148 crore on higher provisions

L&T Finance said that it had witnessed a considerable reduction in portfolio under moratorium for retail products from 79% in the March quarter to 44% in the June quarter

Topics

L&T Finance Holdings

L&T Finance Holdings Ltd on Thursday said that its consolidated net profit for the quarter ending 30 June fell 73% to ₹148 crore, largely on incremental provisions taken by the lender to strengthen its balance sheet against the effects of the covid-19 pandemic.

The lender recorded provisions worth Rs577 crore in Q1 FY21. It had recorded a net profit of ₹549 crore for the June quarter last year. Profit was lower than ₹241.90 crore estimated by a Bloomberg poll of 6 analysts.

However, L&T Finance said that it had witnessed a considerable reduction in portfolio under moratorium for retail products from 79% in the March quarter to 44% in the June quarter.

For April-June quarter, retail businesses saw an improvement in the momentum on a month on month basis, the lender said. It financed over 10,000 farm equipment in June, an increase of 19% on a YoY basis. It expects retail disbursements to accelerate in Q2.

Asset quality showed improvement in the June quarter with gross stage 3 assets declining to 5.24% from 5.72% Q1 FY20, while net stage 3 assets reduced to 1.71% from 2.48%.

During the quarter L&T Finance received the first tranche of $ 50 million of the total $ 100 million External Commercial Borrowings(ECB) loan from Asian Infrastructure Investment Bank (AIIB).

"The focus of the quarter was restoring the collection rhythm and maintaining the asset quality, especially through on-field customer outreach in non-containment zones. Enhanced provisioning, stronger risk controls, ample liquidity, along with a resilient business model and the revival seen in the rural economy from June onwards, give us the confidence that we will bounce back faster to the pre-Covid levels than anticipated," said Dinanath Dubhashi, Managing Director & CEO of L&T Finance.

Shares of L&T Finance Holdings Ltd lost 1.73% to close at ₹59.80, while the benchmark index, Sensex gained 1.16% to close at 36,471.68.

 

 

Date: 10/07/2020

Yes Bank AT1 bond write-down: RBI says investors can’t blame regulator after enjoying high returns in good times.In an affidavit filed in Madras High Court, RBI said writing off Yes Bank AT-1 Bonds to ensure that the capital infused by SBI and other investors, should not be diluted.

   

The battle between bond investors and Yes Bank on the issue of the writedown of Additional Tier 1 (AT1) bonds has intensified with more and more investors seeking legal intervention to get their money back.

Several investors have launched lawsuits across the country against the Reserve Bank of India’s (RBI) to write down the bonds as part of a rescue plan of the lender. One of the petitioners happens to be 63 Moons Technologies, formerly known as Financial Technologies (India). The company, founded by Jignesh Shah, filed a petition against RBI, the RBI-appointed administrator of Yes Bank and Yes Bank itself in the Madras High Court.

Now, the RBI has filed a counter-affidavit in response to the petition by 63 Moons Technologies.

AT1 bonds, also called perpetual bonds, are considered quasi-equity instruments and are riskier than Tier 1 bonds. Investors are usually lured by the high interest they offer.

AT1 write-off to ensure capital isn’t diluted

In the counter affidavit, RBI has used strong words discarding the claims by the petitioner.

The RBI has said the action for writing off has been rightly taken under the provisions of the contract between Yes Bank and AT-1 Bondholders and hence, there is no merit in the Petitioners contentions. “The whole purpose of writing-off the AT-1 Bonds is to ensure that the capital infused by the public sector i.e. SBI and other investors should not be diluted. The AT-1 Bonds are a liability and hence, the same should be written off for the effective implementation of the Notified Scheme, which is made in the interest of the general public and to regain the confidence of the depositors,” the RBI said.

The RBI affidavit also said the courts must be slow in interfering and exercising judicial review of the decisions of a private sector bank which are contractual in nature by issuing a writ.

The affidavit also said: “Prior to the advent of the financial difficulties of Yes Bank, the Petitioner and other bondholders of Yes Bank have reaped high financial rewards on the AT-1 Bonds. The Petitioners cannot on one hand enjoy the benefit of a high interest rate/coupon rate by investing in such high-risk instrument and thereafter, in times of such failure, shift the onus of loss upon RBI”.

The RBI’s comments in the affidavit are significant considering that AT1 Bond investors have already an ongoing case in Bombay High Court. The investors, all along, has argued that they were not told the real risks involved in these instruments and total writedown of these bonds is not justifiable.

Misselling part of the petition in Bombay HC

Recently, Axis Trustee, which represents the AT1 bondholders of Yes Bank who lost their investments in the written down perpetual bonds, has made misselling of bonds to retail investors as a part of the petition filed at the Bombay High Court. Bombay High Court last month extended its interim orders on the matter till July 15.

“We have included the alleged misselling of AT1 bonds (by Yes Bank executives) in the complaint. This will be part of the petition when the case comes up next,” said Sanjay Sinha, MD of Axis Trustee to Moneycontrol.

‘Super FDs’

According to at least three such investors that Moneycontrol spoke to, Yes Bank’s executives pitched these bonds as ‘super FDs’ which offer consistent returns and safety of a regular fixed deposit. In most cases, these investors had existing regular fixed deposits in Yes Bank that fetched them a rate of interest of around 8 percent.

 

Yes Bank executives offered 9-9.5 percent return on these bonds and made them transfer substantially high amounts (in some cases Rs 1 crore to Rs 1.5 crore) to these instruments. “This was done without explaining the high risk associated with these bonds, especially the provision that says these bonds will be extinguished and capital foregone in the event of the financial failure of the bank,” said another investor requesting anonymity.

After the bail-out of Yes Bank, some of these retail investors approached the bank only to receive a response that the matter is sub judice. Yes Bank was bailed out by a ban consortium early this year after the RBI prepared a reconstruction scheme for the rescue of the bank.

Yes Bank collapsed due to alleged financial irregularities done by former management. According to experts, prevailing RBI regulations do not bar banks from selling perpetual bonds to retailers, but the rules clearly say that these instruments should not be pitched with fixed deposits as a benchmark. Also, the risks involved in these instruments must be clearly explained to investors, the rules stated.

Yes Bank’s retail AT1 bondholders allege that these norms were not followed by Yes Bank executives while selling these instruments.

After the Yes Bank reconstruction scheme was notified by the government, there was a confusion in the market on March 14 on whether these bonds will be honoured or extinguished as said in the draft reconstruction scheme made public by RBI. But, Yes Bank’s RBI-appointed administrator, Prashant Kumar later clarified that these bonds will be written down fully, as per the agreed reconstruction scheme.

This is because the reconstruction scheme was formed after the RBI invoked Section 45 of the Banking Regulation Act, 1949, which arises when the bank is deemed to be non-viable or approaching non-viability, enabling the write-down of certain Basel III AT1 Bonds.

“In light of the above provisions of the Basel III circular, the Perpetual Subordinated Basel III Compliant Additional Tier I Bonds issued by the bank for an amount of Rs 3,000 crore on December 23, 2016, and the Perpetual Subordinated Basel III Compliant Additional Tier I Bonds issued by the bank for an amount of Rs. 5,415 crore on October 18, 2017, have been fully written down and stand extinguished with immediate effect,” Kumar informed exchanges.

The petitioners have argued that the total write-down of AT1 bonds, treating these instruments below equity is not fair. Bondholders have invested a total of nearly Rs 94,000 crore in AT1 bonds issued by Indian banks, according to rating agency ICRA.

 

Date: 01/07/2020 

H1 2020 review: 3 stocks in BSE500 index double wealth, 17 rise over 50%

In the first half of 2020, only 121 stocks from the S&P BSE 500 index delivered positive returns

Given a choice, most investors would want to skip the year 2020 from their portfolio.

Both Sensex and Nifty50 are down by about 15 percent each so far in the year 2020. Meanwhile, S&P BSE Midcap index fell 11 percent and S&P BSE Smallcap index declined nearly 8 percent.

Broader market has outperformed benchmark indices so far this year. The last six months have been a roller coaster ride for the markets. From record high in January to fall around Union Budget in Feb, and then bear market in Feb-March triggered by COVID-19 outbreak across the world.

Although both Sensex and Nifty have rallied more than 30 percent each from their March lows, thanks to global liquidity, but a bulls market is still far away, caution experts.

In the first half of 2020, only 121 stocks from the S&P BSE 500 index delivered positive returns. Among them, three stocks - Adani Green Energy, Suzlon Energy and GMM Pfaudler - rose more than 100 percent.

 

 

Out of 121 stocks, 17 rallied 50-100% in the first six months of 2020. These include Ajanta Pharma, Vaibhav Global, Dixon Technologies, Bayer CropScience, Granules India, The India Cement and Aurobindo Pharma. 

Most of the stocks are from the small & midcap space which have rallied over 50 percent in the first six months of 2020. The sheer outperformance in these stocks is largely attributed to the catch-up rally in the broader market space, and stock-specific fundamental factors.

“Cash market stocks in mid and small-cap space have always outperformed the indices after a major correction in their prices. So this time is no different. The small and midcaps that made a top in 2018 followed by 2-3 years of major price cuts are now experiencing outperformance,” he said.

Mehta further added that long-term investors should not get carried away by such outperformance and can have exposure to the extent of 20 percent in such small and midcap stocks with balance 80 percent in frontline large caps.

 

Index Performers:

Stocks which Underperformed:

More than 70 percent of the stocks in BSE500 gave negative returns in the last 6 months. And, 18 out of 376 stocks fell more than 50 percent that include names like IndusInd Bank, Future Retail, Repco Home, Lemon Tree, and Raymond.

Although the market has bounced back from the lows recorded on March 24 we are still in a bear market rally. Economists at top global institutions see contractions of 4-5 percent in India’s GDP in 2020 due to lockdown. 

The lockdown has not only impacted the economy but will lead to a big dent in earnings of India Inc. in the upcoming quarters. But, with news of reopening of economy, many stocks have seen a bounce back as well.

Source Moneycontrol.com

Date: 30/062020 

FIIs reduce stake in over 250 firms in past year; what should investors do?

Out of 254 companies, 93 have fallen more than 50 percent in the last one year

Foreign investors who were net sellers in 8 out of the last 12 months have reduced stake in over 250 companies in the 4 quarters of the past year. Although on an overall basis, FIIs were net buyers with little over Rs 5,000 crore, data from AceEquity showed.

Foreign investors' selling decisions could be based on valuations, corporate governance issues, fall in demand, or just profit-taking. Many of the stocks in which FIIs have pulled down their stake are from financials, pharma, capital goods, tourism, and infrastructure companies.

There are as many as 254 companies in which FIIs have reduced their stake, including Sun Pharma, Dabur India, Cipla, HCL Technologies and Jubilant FoodWorks.

Out of 254 companies, 93 have fallen more than 50 percent in the last one year. These include PC Jeweller, Future Retail, Sadbhav Engineering, Cox & Kings, Manpasand Beverages, Magma Fincorp, and Dewan Housing Finance.

“FIIs reduce stakes for many reasons like stretched valuations, bad corporate governance, increasing competition etc. As you pointed out FIIs have reduced stake in many bluechip companies like Jubilant FoodWorks, Nestle India, Alembic Pharma, Cipla, Dabur,” Atish Matlawala, Sr Analyst, SSJ Finance & Securities told Moneycontrol.

“We believe FIIs have sold these companies purely on the basis of valuations and would buy again when valuations become attractive. There are also few companies in the list where the standard of corporate governance is way below par so that could be the reason why FIIs exited the stocks,” he said. 

Note: Here is the list of those 93 stocks. They have fallen more than 50% in the last 1 year

 What should investors do?

There are many small & midcap companies in which FIIs have reduced their stake consistently in the last four quarters. One possible reason as pointed out by analysts is a slowdown in demand and a fall in economic activity.

Small & midcap stocks have been in a bear market since 2018 while benchmark indices entered the bear market only in 2020. However, investors should take note of the list as a reference point to shortlist stocks.

“Apart from FIIs interest, analysing company’s past financial track record, promoter background, balance sheet, cash flows, valuations, and growth prospects are extremely important,” Ajit Mishra, VP Research, Religare Broking told Moneycontrol.

Booking profits or exiting completely from the stocks should be based on doing a proper study of the recent management commentary related to the previous quarter results and future prospects of the business especially during COVID times.

Apart from that, any policy changes in the sector due to COVID could impact the sector and the companies in a negative way. Stock with any kind of corporate governance issues should be altogether avoided, suggest experts.

Which are top buys?

So can we say all stocks in which FIIs have reduced stake are sell? Analysts are of the view that there are select stocks which investors can look at for the long term.

“Keeping purview of COVID-19 and its effects, in my opinion, Polycab India Ltd., Avanti Feeds Ltd., HDFC Life Insurance Co Ltd., and Vinati Organics Ltd. might do well in coming time if investors keep these stocks for a long term,” Gaurav Garg, Head of Research CapitalVia Global Research Limited- Investment Advisor told Moneycontrol.

“Manpasand Beverages Ltd., Jet Airways (India) Ltd., Eveready Industries (India) Ltd., are the stocks which investors should avoid due to challenged corporate governance norms and their own fundamental problems,” he said.

Matlawala of SSJ Finance & Securities said that he would advise investors to stay away from companies like Reliance Capital, Cox & Kings, Manpasand beverages, Dewan Housing, Sintex Plastics, etc which are on the verge of collapse or have already collapsed.

“Companies like Dabur India, Page Industries, Tata Metaliks, 3M India, United breweries, Gillette India, VIP Industries is on our buy list,” he said.

Source (moneycontrol.com)

 Date: 27/062020 

Small & Mid-caps shine! Over 50 stocks in BSE500 rose 10-30% in a week

As many as 55 socks in the S&P BSE 500 index rallied 10-30 percent in a week that includes names like Union Bank of India, SPARC, Hindustan Zinc, ABB India, Glenmark Pharma, etc. among others.

Indian markets which started off on a strong note witnessed some profit-taking towards the close of the week but still benchmark indices managed to close with gains of over 1 percent for the week ended June 26.

The S&P BSE Sensex rose 1.2 percent while the Nifty50 gained 1.3 percent for the week ended June 26 compared with 3.5 percent rally seen in the S&P BSE Mid-cap index, and the S&P BSE Small-cap index closed with gains of 2.8 percent in the same period.

As many as 55 socks in the S&P BSE 500 index rallied 10-30 percent in a week that includes names like Union Bank of India, SPARC, Hindustan Zinc, ABB India, Glenmark Pharma, BHEL, Bandhan Bank, Adani Gas, Indian Bank, IDBI Bank, Future Consumer, and Indian Overseas Bank, etc. among others.

Experts are of the view that small and mid-caps are playing catch-up, but investors should ignore the noise, and stay with quality. Despite the fact that buying is seen in many small and mid-caps, investors should not allocate more than 20 percent of their portfolio.

"Sheer underperformance and the oversold state of small and mid-cap stocks have resulted in outperformance when the market, in general, bounced back from lower levels. Cash market stocks in mid and small-cap space have always outperformed the indices after a major correction in their prices. So this time is no different," Umesh Mehta, Head of Research, Samco Securities told Moneycontrol.

"The small and mid-caps that made a top in 2018 followed by two to three years of major price cuts are now experiencing outperformance. However, long term investors should not get carried away by such outperformance and can have exposure to the extent of 20 percent in such small and mid-cap stocks with balance 80 percent in frontline large caps," he said.