Despite FIIs' massive selling this year, markets are still trading at lifetime highs thanks to retailers' participation. The SIP Book is now over 20,000 crore and continues to grow.
Welcome to Sixth Newsletter of WII
DVR Share getting delisted
Tata Motors, a leading player in the Indian automotive industry, is embarking on a significant restructuring of its capital framework. The company has unveiled plans to eliminate its DVR (Differential Voting Rights) shares and introduce ordinary shares in a 10:7 ratio, offering a 23% premium to existing DVR shareholders.
This strategic move is part of Tata Motors' overarching strategy to simplify its capital structure and bring it in line with industry standards. The restructuring initiative will result in a 4.2% reduction in the company's outstanding shares, benefiting shareholders across the board. By transitioning from DVR shares to ordinary shares, Tata Motors aims to enhance its financial performance and operational efficiency.
The market has responded positively to Tata Motors' decision to convert DVR shares to ordinary shares, with a noticeable uptick in the company's stock prices. In its recent financial report, Tata Motors posted a robust net profit of Rs 3,203 crore for the June quarter, demonstrating substantial growth in revenue and EBITDA.
The restructuring process is anticipated to span 12-15 months, underscoring Tata Motor’s dedication to delivering sustained value to its shareholders and optimizing its operational structure.
This restructuring endeavor marks a pivotal moment for Tata Motors as it strives to streamline its shareholding framework, align shareholder interests, and fortify its financial standing. The company's commitment to establishing a more transparent and equitable capital structure underscores its long-term vision for growth and sustainability in the competitive automotive sector.
RBI Tightens Project Finance Regulations
The Reserve Bank of India (RBI) has introduced proposed stricter project finance regulations that will affect top Non-Banking Financial Company (NBFC) Public Sector Undertakings (PSUs) such as PFC, REC, and IREDA.
The draft proposal aims to improve the resilience and stability of the lending environment by aligning prudential frameworks for lenders involved in project finance. These changes include more stringent lending criteria, increased standard asset provisioning, and a phased implementation process, impacting lenders within consortia and necessitating financial closure before fund disbursement.
Under the proposed regulations, projects with aggregate exposure up to ₹15 billion must meet a minimum exposure threshold of 10% and provide evidence of a documented construction completion date before receiving funds. The heightened standard asset provisioning requirements may lead to additional provisions for banks, potentially affecting their Common Equity Tier 1 (CET1) ratios. For NBFCs like REC, PFC, and IREDA, the impact may vary, potentially resulting in decreased capital ratios and valuation multiples.
The RBI's proposal also includes raising standard asset provisioning to 1-5% of loans from the current 0.4%, with a phased implementation strategy. These new regulations could result in higher interest rates for project finance loans and impact the profitability of project financiers, prompting them to bolster their capital to meet regulatory standards.
In essence, the RBI's proposed stricter project finance regulations aim to fortify the lending landscape, enhance risk management practices, and ensure the stability of lenders engaged in project finance, particularly affecting NBFCs and PSUs like PFC, REC, and IREDA.
Auto Sector on 5th Gear
India's automobile retail sales witnessed a significant surge in April 2024, with a 27% increase compared to the same period in the previous year. This growth was observed across various vehicle segments, with passenger vehicle retail sales rising by 16% to 335,123 units.
Two-wheeler sales experienced an impressive 33.2% growth, totaling 1,643,510 units. Commercial vehicle sales saw a modest increase of 2.3%, amounting to 90,707 units, while three-wheeler sales grew by 9.3%, reaching 80,105 units. Tractor sales also showed a slight uptick of 1.4%, reaching 56,625 units.
Several factors contributed to this robust performance, including improved vehicle availability, stable fuel prices, positive monsoon forecasts, strong festive demand, and the introduction of new models across the two-wheeler and passenger vehicle segments. These factors helped boost overall industry demand and consumer sentiment.
The industry is not without its challenges, as election-related uncertainties, financial constraints, regional issues like water scarcity, and overcapacity in the commercial vehicle segment continue to pose concerns. Additionally, discounting in the passenger vehicle segment could potentially impact profitability.
Despite these challenges, the industry remains cautiously optimistic about the near-term outlook, as it navigates the dynamic market conditions. The growth in retail sales is expected to continue, driven by the ongoing demand for vehicles and the industry's efforts to adapt to changing market conditions.
PMI In Focus
India's manufacturing sector experienced a modest deceleration in its growth momentum during April, as evidenced by the HSBC India Manufacturing Purchasing Managers' Index (PMI) slipping to 55.7 from March's reading of 56.7.
While this marginal decline was notable, the index remained firmly entrenched above the crucial 50-point mark, which separates expansion from contraction, thereby signaling an ongoing, albeit slightly moderated, phase of growth in the manufacturing industry.
The April PMI data points to a scenario where the manufacturing sector, while exhibiting signs of a mild slowdown, continues to operate in an expansionary territory. The dip in the index, though perceptible, does not necessarily imply a contraction but rather a tempering in the pace of growth.
Factors such as a decrease in new orders and production levels contributed to this moderation, yet the sector's performance continues to outshine the long-term average, underscoring its underlying resilience and overall robustness.
Despite the temporary challenges faced by the manufacturing sector, as reflected in the April PMI figures, the overall outlook remains positive. While the growth rate has moderated slightly, the sector's performance remains strong compared to historical trends, suggesting that the industry is well-positioned for sustained expansion and stability in the near future.
The data serves as a testament to the manufacturing sector's ability to navigate through transient headwinds and maintain its trajectory of growth.
FIIs Share Falling
Mutual fund investments in NSE-listed companies have surged to a new peak, marking a significant milestone in the financial landscape. In the March quarter of 2024, the holdings of domestic mutual funds in NSE-listed firms reached 8.92%, up from 8.81% in the previous quarter, fueled by substantial net inflows totaling ₹81,539 crore.
Concurrently, domestic institutional investors (DIIs) saw their stake in NSE-listed companies rise to 16.05%, a slight increase from 15.96%, with net inflows amounting to ₹1.08 lakh crore.
In contrast, foreign institutional investors (FIIs) experienced a decline, with their share dropping to a 11-year low of 17.68%, down by 51 basis points from the preceding quarter. This shift has led to a narrowing gap between DII and FII holdings, with DIIs now trailing FIIs by just 9.23%.
The evolving trend suggests a move towards self-reliance in the Indian markets, with DIIs poised to potentially surpass FIIs in the upcoming quarters. The decreasing disparity between FII and DII holdings, reaching an all-time low, indicates a changing dynamic in the investment landscape.
Pranav Haldea, Managing Director of PRIME Database Group, anticipates DIIs overtaking FIIs in the near future, reflecting a significant transformation in the investment scenario in India. This shift underscores the growing influence and confidence of domestic investors in the Indian market ecosystem.
Quick View👀
Reserve Bank of India repurchases government bonds worth Rs.10,512 crore.
Asian Paints announced its Q4 financial results, posting a net profit of Rs 1,257 crore, a 2% rise.
TVS Motor Company's fourth-quarter results showed a 15.14% year-over-year increase in consolidated net profit, reaching Rs.387 crore.
Indian Overseas Bank (IOB) recorded a 24% year-on-year increase in net profit for the fourth quarter of fiscal year 2023, reaching Rs 808 crore.
Punjab National Bank (PNB) Q4 result has announced a remarkable 160% increase in its net profit reaching Rs.3,010.27 crore.
L&T Q4 result has seen a 10% increase in net profit, reaching Rs.4,396 crore, and a 15% rise in revenue.
Tata Power's Q4 results, including a 11% PAT increase at Rs.1,046 crore on higher revenues.
Hero MotoCorp Q4 results, the profit has surged by 18% year-on-year to reach Rs.1,016 crore.
Canara Bank Q4 Results: Profit jumps 18% YoY to Rs.3,757 crore.
Muthoot Finance has raised $650 million through US dollar bonds with a 7.1250% coupon rate and a 3.75 year maturity.
Happy Investing😊
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