Thursday, 10 August 2017

Tata Motors Shares fall 6% to hit Nearly 16-Month low on weak Earnings

Shares of Tata Motors Ltd on Thursday fell as much as 6.1% to hit nearly 16-month low as many brokerages reduced their target price for the stock after the company reported weaker earnings in both Jaguar Land Rover (JLR) and Indian operations.

The stock hit a low of Rs391.25 a share, a level last seen on 24 May 2016. At 10am, the scrip was trading at Rs393.65 on the BSE, down 5.5% from its previous close.

So far this year, it has fallen 16.8%. Tata Motors DVR fell 6.4% to Rs226.90, while India’s benchmark Sensex Index fell 0.42% to 31,665.44 points.

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JLR reported £442 million earnings before interest, tax, depreciation and amortization (Ebitda) in the June quarter, down 34% year-on-year and below brokerage firm Kotak Institutional Equities estimates of 27% due to higher realised forex losses which was at £545 million against the analyst estimates of £314 million.

Ebitda margin declined 460 basis points to 7.9% against the analyst estimates of 13.5%.

On the domestic front, a sharp drop of 34% in medium and heavy commercial vehicle sales led to a loss of Rs466.85 crore for the stand-alone entity against a profit of Rs34 crore a year ago.

“The quarter reflects mounting pressure on JLR’s profitability with limited currency related benefits, elevated discount levels and increasing investments in technologies/products. We believe the pressure points on JLR could continue. This more than offsets the benefits from new product launches in our view,” said IDFC Securities in a note to its investors.


Jaiprakash Associates Shares Soar 217% in 2017, Still Down 92.47% from life Highs

Beleaguered Jaypee Group company stocks are on fire this year. Share prices of Jaiprakash Associates Ltd jumped 217.22%, while shares of group companies Jaypee Infratech Ltd rose 165% and Jaiprakash Power Ventures Ltd gained 72% so far in 2017.

In this period, benchmark indices Sensex and Nifty are up 19.4% and 21%, respectively.

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However, even after steep rise in share prices of these companies, they are far from their respective record highs. For instance, Jaiprakash Associates is still down 92.47% from its record high at Rs340 it touched in 2008.

Similarly, Jaypee Infratech and Jaiprakash Power Ventures are down 80.35% and 95.30% from life highs at Rs100 and Rs144 they hit in 2010 and 2008, respectively.

In 2016, Jaiprakash Associates slipped 32.18%, Jaiprakash Power Ventures fell 43.43% and Jaypee Infratech Ltd lost 42.14% as debts piled on the companies. Lenders have been insisting to sell some of the group’s best assets, and transfer ownership to cut debt.

Now as the group is addressing its debt issue via restructuring and other measures, investors are lapping up shares, analysts said.

“JP Associates is seeing buying interest this year due to massive debt restructuring the company has undertaken but it is yet to be even near its peak,” said an analyst who did not wish to be named.


Copper Futures dip 0.52% on Sluggish Demand

Copper futures were trading lower during the noon trade in the domestic market on Tuesday as speculators offloaded their positions amid sluggish demand at the domestic spot markets. Analysts attributed the fall in copper futures to weak trends at the domestic markets owing to slackened demand from consuming industries coupled with profit-booking.

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At the MCX, cardamom futures for August 2017 contract was trading at Rs 408.40 per kg, down by 0.52 per cent, after opening at Rs 408.20, against a previous close of Rs 410.55. It touched the intra-day low of Rs 407.80


NAFTA won`t Solve Mexico`s slow Growth: Moody`s

Mexico's economy has structural flaws that will not be resolved with the upcoming renegotiation of the North American Free Trade Agreement (NAFTA), credit rating agency Moody's has announced.

Mexico has for years relied on its poorly-paid work force to compete with other economies, and that is part of what is holding the country back, the agency said in a report on Wednesday.

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When Mexico, the US and Canada signed the NAFTA and put it into effect in 1994, the trade deal was expected to help strengthen the Latin American country, "but Mexico has not attained the stellar growth rates that were anticipated from liberalising its economy".

"Mexico has maintained its comparative advantage through negative real wage growth, at the expense of income levels. As a result, instead of converging through trade, wage and productivity, gaps with the US have widened," the report said.

"Successful NAFTA talks alone will not fix structural impediments to Mexico's growth," senior analyst Madhavi Bokil wrote.

Mexico's income gap with its North American neighbours will only get worse unless the country takes steps to address the problem, including tackling its huge informal, or underground economy, according to the report.

The three countries plan to start trade talks in Washington on August 16

SEBI to hear J.Kumar Infraprojects on`shell Company`Classification

The Securities Appellate Tribunal (SAT) on Wednesday asked the securities market regulator SEBI to hear J.Kumar Infraprojects Ltd objecting to being classified as a `shell company', said the company's attorney.

"The company had approached SAT today (Wednesday) against SEBI, NSE and BSE classifying it as a `shell company'. The SAT had asked SEBI to hear the company on Thursday and take a decision, failing which the SAT would decide the company's appeal on merits," Amit Bikram Dey, Attorney for J.Kumar Infraprojects, told IANS over phone from Mumbai.

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He said J.Kumar Infraprojects had made an appeal to SEBI against its order classifying it as a `shell company'.

According to Dey, the action of Securities and Exchange Board of India (SEBI) is a follow-up of a communication from the Ministry of Corporate Affairs listing out several companies as suspected `shell companies'.

Dey said, the SEBI order/circular does not detail any evidence to indicate the companies as `shell companies'.
J.Kumar Infraprojects had listed SEBI and others as respondents in its appeal to SAT.

According to the company, it closed last fiscal with a total income of Rs 1,466.22 crore and a net profit of Rs 105.51 crore. Majority of its clients are government authorities.

Similarly, Prakash Industries Ltd also affected by the SEBI circular has approached SAT for remedy.

The SEBI has imposed trade restrictions on 331 firms which are suspected of being "shell companies".

The aforesaid securities were placed in suspended animation from Tuesday, as exchanges stated that the trade in these stocks shall be permitted only once a month.

Rupee Weakens Against US dollar in Opening Trade

The Indian rupee on Thursday weakened against the US dollar, tracking losses in the local equity and Asian currencies market.

The rupee opened at 63.92 a dollar. At 9.15am, the rupee was trading at 63.97 a dollar, down 0.20% from its Tuesday’s close of 63.84.

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The benchmark Sensex index fell 0.19% or 61.87 points to 31,735.97. So far this year, it has risen over 19.4%.

The 10-year bond yield was at 6.476%, compared to its previous close of 6.466%. Bond yields and prices move in opposite directions.

So far this year, the rupee gained 6.4%, while foreign institutional investors (FIIs) bought $8.98 billion and $18.83 billion in equity and debt markets, respectively.

Bank of India’s Swing to profit in Q1 is but a Brief Relief

The fact that Bank of India swung to a profit in the quarter ended 30 June after being mired in losses for two consecutive quarters was reason enough for the stock to gain nearly 4%. But dig into the details of the bank’s results and the picture gets ugly. Yes, bad loans as a percentage of the loan book have reduced for two consecutive quarters, albeit marginally. Even fresh slippages have dropped to Rs4,037 crore for the June quarter from Rs6,915 crore for the previous quarter. This essentially means that the rate at which loans are turning bad has slowed and even upgrades were better than the previous quarter.


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So why should investors worry? Let us look at what the state-owned lender has in the name of troubled accounts. Bank of India has a total exposure of Rs8,200 crore to 10 of the dozen corporate cases that the Reserve Bank of India (RBI) has asked lenders to refer under the Insolvency and Bankruptcy Code (IBC). A lot depends on an untested resolution process to get this stock of loans to perform. The bank has made 60% of the provisions required for these accounts and will have to make another Rs915 crore worth of provisions spread over three quarters.

Even after dropping for two successive quarters, the gross non-performing asset (NPA) ratio stands at 13.05% of the loan book and the bad loan stock at Rs51,019 crore is not easy to manage. Besides this, the bank has close to Rs11,000 crore of standard restructured accounts that are vulnerable.

But the weakest point for Bank of India is its core income. Net interest income fell 8.72% from a year ago and was down a massive 27% from the previous quarter and the reason is quite obvious. The bank’s loan book didn’t grow at all as its corporate loan portfolio shrunk offsetting the 13% growth in retail. To be fair, this could be by design as the bank wants to increase the share of retail borrowers.