APL Apollo Tubes gains 3%, hits 52-week high on strong Q3 sales volume

Shares of APL Apollo Tubes hit a 52-week high of Rs 1,939, up 3 per cent, on the BSE on Wednesday after the company reported a strong 53 per cent year on year (YoY) jump in sales volume in October – December quarter (Q3FY20).

"The company registered a strong sales volume of 480,225 million tonne per annum (MTPA) in Q3FY20, higher by 52.6 per cent YoY from 314,707 MTPA in Q3FY19. The growth was led by strong demand across product categories,” APL Apollo Tubes said in a press release. 

The company is engaged in branded building material steel products. It operates 11 manufacturing facilities with a total capacity of 2.55 million MTPA.

Since November 8, the stock has outperformed the market by surging 35 per cent after reporting healthy volume growth of 20 per cent during July-September quarter (Q2FY20) led by robust demand in the hollow sections segment, DFT pipes, pre-galvanized tubes (GP) among others. In comparison, the S&P BSE Sensex was up 2 per cent during the same period.

The company’s net revenue, however, decreased by 2 per cent YoY to Rs 1,652 crore, while Ebitda (earnings before interest, tax, depreciation and amortization) declined 12 per cent to Rs 76 crore during the quarter.

Going forward, with focused branding approach and innovative product portfolio, the management believes, the company is well positioned to benefit from the recovery in the operating environment and looks forward to delivering healthy results in the upcoming quarters.

The management also expects the company’s profitability to improve Q3FY20 onwards. Overall, the company remains confident of delivering a sales volume growth of 20 per cent CAGR in FY20 & FY21.

Park Hotels files draft papers with Sebi for IPO to raise up to Rs 1000 cr

Apeejay Surrendra Park Hotels has filed draft papers with markets regulator Sebi for its proposed initial public offering to raise up to Rs 1,000 crore.

The IPO comprises a fresh issue of up to Rs 400 crore and an offer-for-sale (OFS) of up to Rs 600 crore.

The amount to be raised through OFS comprises up to Rs 125.4 crore by promoter selling shareholder, up to Rs 354.9 crore by Apeejay Pvt Ltd, up to Rs 84.7 crore by Apeejay House Pvt Ltd and Rs 34.9 crore by investor selling shareholders, according to the draft red herring prospectus (DRHP).

The company proposes to utilise the net proceeds towards repayment/prepayment of certain borrowings availed and for general corporate purposes.

The book running lead managers to the offer are ICICI Securities, Axis Capital and JM Financial.

The shares of the company are proposed to be listed on the BSE and NSE.

The company has presence in Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, Delhi-NCR as well as in other major cities such as Coimbatore, Jaipur, Jodhpur, Jammu, Navi Mumbai, Raipur and Visakhapatnam, the DRHP stated.

The hospitality company has pioneered the concept of luxury boutique hotel in India under "THE PARK" brand. The company is part of the Apeejay Surrendra group, a leading Indian conglomerate.

The group's business is spread across industries such as hospitality, shipping, tea, real estate, retail brands such as Oxford bookstores, and education.

Sugar stocks in a sweet spot; Dwarikesh, Shree Renuka surge over 12%

Shares of sugar companies continued to advance and rallied up to 17 per cent on the BSE on Wednesday on expectations of earnings improvement as lower cane crushing, and, subsequent decline in sugar production.

Dwarikesh Sugar Industries, Shree Renuka Sugars, Magadh Sugar & Energy, Rajshree Sugars & Chemicals and Dalmia Bharat Sugar and Industries rallied in the range of 10 per cent to 17 per cent.

Avadh Sugar & Energy, Uttam Sugar Mills, Dhampur Sugar Mills and EID Parry were up in the range of 5 per cent to 8 per cent on the BSE. In comparison, the S&P BSE Sensex was up 0.19 per cent at 41,331 points at 02:14 pm.

Among individual stocks, Dwarikesh Sugar Industries soared 15 per cent to Rs 38.25, surging 23 per cent in the past two days on the back of an over five-fold jump in trading volumes. A combined 9.8 million shares changed hands on the counter on the NSE and BSE till 02:19 pm.

Indian Sugar Mills Association (ISMA) in its latest press release said all- India sugar production is down 35 per cent year-on- year (YoY) at 4.58 million tonne as on 15 December. The industry body has projected this year’s sugar output at 26.0-26.5 million tonne, which is lower by 7.0 million tonne YoY.

Shares of Balrampur Chini Mills hit an over 13-year high today. The stock was up 3 per cent at Rs 188, its highest level since May 2006 on the BSE.

“Sugar production in the upcoming season is now estimated to decline due to lower cane acreage in some parts of the country. So while the sugar inventory in India remains high, the demand-supply scenario is expected to be more balanced going forward. This combined with various initiatives such as incentives on exports recently announced will lead to an overall improved operating environment in the coming quarters,” the management of Balrampur Chini Mills said while announcing Q2 results on November 11, 2019.

"With regards to exports, millers have signed contracts for about 2.0 million tonne of sugar to date and another 3.0 million tonne are likely in the upcoming months. Thus, lower cane production, higher diversion to ethanol and a pickup in exports should lead to lower inventory levels in India by the end of the season", analysts at Elara Capital said in a sector update.

COMPANY LATEST 1-WEEK BEFORE GAIN(%)

DWARIKESH SUGAR 37.45 27.25 37.4

DALMIA BHARAT 116.95 86.50 35.2

KM SUGAR MILLS 7.98 6.37 25.3

SH.RENUKA SUGAR 9.33 7.58 23.1

AVADH SUGAR 302.00 250.45 20.6

RAJSHREE SUGARS 21.05 17.50 20.3

SIR SHADI LAL 33.60 28.25 18.9

MAWANA SUGARS 37.95 31.95 18.8

UTTAM SUG.MILLS 115.65 97.60 18.5

MAGADH SUGAR 117.45 99.20 18.4

GAYATRI SUGARS 0.92 0.78 18.0

KCP SUGAR &INDS. 15.03 12.79 17.5

SAKTHI SUGARS 9.75 8.30 17.5

BAJAJ HINDUSTHAN 7.29 6.21 17.4

DCM SHRIRAM INDS 172.00 148.15 16.1

DHAMPUR SUGAR 240.50 208.85 15.2

TRIVEN.ENGG.IND. 73.20 65.10 12.4

INDIAN SUCROSE 17.85 16.00 11.6

SIMBHAOLI SUGAR 6.66 6.00 11.0

UGAR SUGAR WORKS 14.14 12.78 10.6

IL&FS is a test case for group resolution, says Uday Kotak

The new board of Infrastructure Leasing and Financial Services (IL&FS) expects to recover close to 50 per cent of the firm’s overall debt, which stands at above Rs 94,000 crore.

It also expects to complete the resolution process by July 2020 by paring a significant portion of the debt.

The board, led by Uday Kotak, managing director and chief executive officer of Kotak Mahindra Bank, has taken a series of steps including “resolution, restructuring, and recovery” to pare debt in the absence of any requisite legal framework for group-level resolution under the Insolvency and Bankruptcy Code (IBC).

Kotak, in his address to shareholders of IL&FS in the annual general meeting on Tuesday, said: “IL&FS Group had emerged a test case on group-wide resolution of stressed assets.”

The IL&FS group’s stake in seven wind power special purpose vehicles (SPVs) has been sold for nearly Rs 4,300 crore, covering 100 per cent of entity-level debt and including equity value of nearly Rs 590 crore.

Further, it has received binding bids for a Chinese road asset, which will resolve nearly Rs 1,600 crore of debt and an add Rs 980 crore to the shareholding entity’s equity value.

In addition, binding bids have come for 10 road assets. Five assets — with combined financial debt of Rs 9,500 crore — have been referred to the respective creditor committees for the next step.

The board is also setting up an Infrastructure Investment Trust (InvIT) for nine road assets, with total financial debt of more than Rs 11,000 crore. It has also received confirmation from the Gujarat government regarding purchase of its stake in GIFTCL, which will ease debt by Rs 1,200 crore.

It has also sold real estate assets that it held, for Rs 3,500 crore, and accumulated a cash reserve of Rs 6,500 crore with nearly 87 per cent of the cash reserve parked in instruments like fixed deposits and money market mutual funds.

Finally, the board reduced the wage bill by 48 per cent and operating expenses by 42 per cent (annualised basis), between October 31, 2018 and October 31, 2019. Of the 55 entities classified as “green”, 40 have been regularly servicing debt to the tune of Rs 7,200 crore.

The board is in talks with concession authorities to expedite the release of claims in excess of Rs 5,000 crore, filed by IL&FS Transportation Networks.

RBI says UCBs with deposits of over Rs 100 cr should be run professionally

The Reserve Bank of India (RBI) on Tuesday said urban cooperative banks (UCB) with deposit size of Rs 100 crore and above should have a professionally run board of management, and CEO appointments would be subject to the RBI’s nod.
“The BoM (board of management) shall comprise persons with special knowledge and practical experience in banking, to facilitate professional management and focused attention to banking-related activities of the UCBs through appropriate amendments to their bye-laws, in accordance with the enclosed guidelines following the due process,” the RBI said.
It added that the board of directors of UCBs should also carry out a process of due diligence to determine the suitability of the person for appointment as the member of the management. This should be “based on qualification, expertise, track record, integrity and other ‘fit and proper’ criteria”.
This brings UCB regulations in line with other scheduled commercial banks, for whom the ‘fit and proper’ criterion is applied. The RBI had said such criterion would apply for UCBs too, and having a board of management would be mandatory “for allowing such banks to expand their area of operation and open new branches”.
These UCBs must obtain prior approval of the RBI for appointing the CEO.
“In this connection, it is advised that scheduled UCBs shall approach the Department of Regulation of Reserve Bank for approval, at least three months prior to the end of tenure of the incumbent CEO,” the RBI said.
The UCBs should also submit annual returns furnishing details of the members of the BoM, as of December 31 each year. UCBs with deposit size of less than Rs 100 crore may continue with their usual practice, but “for having good governance practices, such banks may also constitute BoM, if they so desire,” the central bank added.
The RBI has been tightening norms for UCBs after the recent scam in Punjab and Maharashtra Cooperative Bank (PMC).
On Monday, the RBI had released draft guidelines that mandated UCBs to lend 75 per cent of their loans to the priority sector, ensure they have half their loans of ticket size below Rs 25 lakh, and increase the single and group borrower exposure to a maximum of 10 per cent and 25 per cent of the core capital, respectively.

Hero Electric delays Rs 700 cr investment by a yr after failure of FAME II

Leading electric two-wheeler maker Hero Electric has put on hold investment of up to Rs 700 crore by a year with the sector taking a nosedive as FAME II, scheme aimed to promote electric vehicles, has failed to deliver, according to a top company official.

Calling for a complete revamp of the policy, the company wants the government to include low speed two-wheelers for subsidy arguing that for mass adoption of electric vehicles (EVs) in India these cost effective vehicles are critical.

"From an industry standpoint, there was a certain trajectory which was going on when we had FAME I. With the coming in of FAME II, whatever be the logic and reason, the manner in which FAME II was introduced, the whole industry took a downturn and now the industry is recovering from that," Hero Electric Managing Director Naveen Munjal told PTI.

As per Society of Manufacturers of Electric Vehicle (SMEV), sales of FAME II qualified electric two-wheelers in April-December 2019 period stood at just 3,000 units as against 48,671 units in the year-ago period when FAME I was in place, a decline of 93.84 per cent.

Under FAME I, low speed two-wheelers with top speed of up to 25km/hr had qualified for incentives of up to Rs 17,000 and Rs 22,000 for high speed ones.

However, under FAME II, which came into effect from April 1, 2019, electric two-wheeler are mandated to have a minimum range of 80 km per charge and minimum top speed of 40 kmph to qualify for an incentive of Rs 20,000.

CRISIL had predicted that more than 95 per cent of the electric two-wheeler models produced earlier would not be eligible for incentive under FAME-II.

When asked about the impact on the company's future investments, Munjal said, "we had to push back the plans. Fund raise has been pushed back to next year, so are the investments."

Earlier in August 2019, the company had said it was looking to invest around Rs 700 crore in the next three years to ramp up production capacity of its electric scooters to 500,000 units annually from about 100,000 units. It was looking to raise fund for the same by roping external investors.

Munjal said the company lost four months in the beginning of the year on completely homologating products for FAME II.

"It has taken a lot of time. Technically, one year is almost wiped out from our balance sheet," Munjal said, adding it made no sense to go ahead with investments as the company had to first get the products out of the door.

He, however, said the company is now getting back on track and has started working on capacity increase, "which we should have done six months back".

Calling for a total re-look at FAME II, Munjal said, "FAME II has not delivered for sure... The policy has to be completely changed. If the industry has to pick up then it has to be from ground-up. What we have been saying is that it has to be the low-speed vehicles, which have to be targeted for masses."

Arguing that 95 per cent of electric two-wheelers is low-speed in India, he said, "If you have to really make this (EV) industry work, you have to focus at the base of the pyramid and the base is the low-speed. Everything else can ride on top of it, we are not saying you dissuade others."

He cited examples of Europe, China, US and Japan, where low speed electric two-wheelers are supported by the government for mass adoption.

"When we look at electric two-wheeler mobility around the world, it is all low-speed," he said adding efficiencies are at only at a particular speed band in electric two-wheelers and high speed EVs are expensive thereby making it unsuitable for a "price sensitive" market like India.

India Ratings estimates fiscal deficit of states to touch 3% of GDP

India Ratings has estimated that the aggregate fiscal deficit of states would touch 3 per cent of the gross domestic product (GDP) in the current fiscal year, against 2.6 pegged in the Budget Estimates. The deficit had stood at 2.9 per cent in FY19.

This fiscal slippage will originate from a decline in tax revenue, a lower nominal GDP and higher expenditure, it said. In aggregate, states have budgeted total revenues to grow by 10.2 per cent to Rs 30.97 trillion in FY20, India Ratings Chief Economist Devendra Pant said. Tax revenue growth was assumed to grow 11.5 per cent to Rs 22.15 trillion in the year.

States’ tax collections fall under three different revenue heads — states’ own tax revenue (SOTR); share in central taxes and grants.

SOTR remains the dominant contributor to the state revenues with 44.0 per cent share in the total budgeted revenue in FY20, followed by states’ share in central taxes at 27.5 per cent.

State GST is part of SOTR. Under the GST regime, states are assured of at least 14 per cent annual growth in SGST collections and entitled for compensation from the Centre, if their SGST collections growth is less than this on the base year of 2015-16.

Twelve states have not budgeted for compensation cess from the Centre in FY20. However, they may witness lower SGST collection than budgeted due to slowdown.