Boeing raises 20-year forecast for China aircraft demand despite pandemic

 BEIJING/SYDNEY (Reuters) - Boeing Co on Thursday raised its rolling forecast for China's aircraft demand for the next 20 years, making the country a bright spot in the aviation market even as COVID-19 decimates global deliveries over the next few years.

Chinese airlines will need 8,600 new airplanes through 2039, 6.3% higher than Boeing's previous prediction of 8,090 planes last year. Those would be worth $1.4 trillion based on list prices, the U.S. planemaker said in a statement.

In October, Boeing cut its 20-year forecast for global airplane demand due to the COVID-19 pandemic.

"While COVID-19 has severely impacted every passenger market worldwide, China's fundamental growth drivers remain resilient and robust," said Richard Wynne, managing director, China Marketing, Boeing Commercial Airplanes.

"Not only has China's recovery from COVID-19 outpaced the rest of the world, but also continued government investments toward improving and expanding its transportation infrastructure, large regional traffic flows, and a flourishing domestic market mean this region of the world will thrive."

China's domestic aviation market has rebounded to pre-COVID levels but as international travel remains effectively shut down, Chinese airlines have been pushing back deliveries.

Boeing and its European rival, Airbus SE , have been jostling to increase market share in China, but they also face rising competition from state-owned planemaker Commercial Aircraft Corporation of China (COMAC).

COMAC has been steadily delivering its regional ARJ21 to customers throughout the pandemic and its narrowbody C919, which is still in flight testing phase, is expected to obtain an airworthiness certificate from China's aviation regulator next year.

The regulator has declined to lay out a timeline for the return of the grounded Boeing 737 MAX even though the United States is expected to approve its return to the skies as early as next week.

Boeing projected a need for 6,450 new single-aisle airplanes over the next 20 years, while China's widebody fleet will require 1,590 new planes, accounting for 18% of the total deliveries, which fell from a year ago due to anticipation of a slower recovery in global long-haul traffic.

 

Zydus completes phase 2 clinical trial in Covid patients with bio-therapy

 Drug firm Zydus Cadila on Thursday said

it has successfully completed a phase 2 clinical trial In COVID-19 patients with its biological therapy, 'PegiHep', and it will now begin phase 3 clinical trial.

In a regulatory filing, Zydus Cadila said "it has successfully completed a phase 2 clinical trial in COVID-19 patients with its biological therapy, Pegylated Interferon alpha-2b, 'PegiHep'... Based upon the results from its Phase 2 study, Zydus Cadila now plans to conduct a phase 3 clinical trial in India".

Zydus Cadila, whichis a part of the Cadila Healthcare group,said Pegylated Interferon alpha 2b significantly increased viral reduction and reduced the need for supplemental oxygen in moderate COVID-19 patients.

"We continue to look at possible treatment options that are safe and efficacious in the treatment and management of COVID-19. Pegylated Interferon alpha-2b has shown the potential to reduce virus titres when given earlier in the disease and we will like to explore this biological option further. We are hopeful of reinforcing our treatment options to fight COVID-19," Sharvil Patel, Managing Director, Cadila Healthcare Ltd said.

Pegylated Interferon alpha-2b is not a new therapy. The product was first approved internationally in 2001 and is also included in WHO's Essential Medicines List.

Zydus Cadila said its Pegylated Interferon alpha-2b, PegiHep, was originally approved for Hepatitis C and was launched in the Indian market in 2011.

Since then safe and efficacious drug use for this product has been demonstrated in thousands of patients, the company added.

Zydus Cadila said it had conducted this study on the approval from the Drugs Controller General of India (DCGI) to investigate the role of Pegylated Interferon alpha-2b for COVID 19. The company is also conducting a similar phase 2 trial in Mexico.

The company is also working with the US Food and Drug Administration (USFDA) to open an Investigational New Drug (IND) application for Pegylated Interferon alpha-2b in order to initiate appropriate clinical trials in the US.

PE/VCs pumped in $8.4 billion in Oct 2020, growth of 163% over Oct 19

 Private Equity/ Venture Capital investments in October 2020 stood at $8.4 billion as compared to $3.2 billion in October 2019, up by 163 per cent. In terms of deal value, October 2020 has been the best month ever for PE/VC investments. The significant jump in PE/VC investments was primarily on account of investments worth $3.3 billion made in Reliance Retail Ventures and investments in commercial real estate projects worth $3.6 billion announced by Blackstone and Brookfield.

According to the IVCA-EY report, October 2020 recorded nine large deals (value greater than $100 million) worth $7.6 billion compared to five large deals worth $2.2 billion in October 2019 and seven large deals worth $3.4 billion in September 2020.

The largest deals in October 2020 saw Brookfield acquire 12.5 million square feet of commercial space from RMZ Corp including its shared working space COWrks followed by Blackstone buying the rental income assets of Prestige Group for $1.6 billion. In addition, Reliance Retail Ventures received five large investments from a group of PE investors aggregating $3.3 billion.

Vivek Soni, Partner and National Leader Private Equity Services, EY said, October 2020 has been the best month so far with PE/VC investments exceeding $8.4 billion. This spike is primarily due to a couple of large $1 billion plus deals in the commercial real estate sector and the continuing inflow of PE investments into entities of the Reliance Group ($3.3 billion received by Reliance Retail Ventures in October 2020).

Year to date, 2020 has recorded $37.5 billion in PE/VC investments, just 5% below the numbers recorded last year for the same period. However, investments in Reliance Group entities account for 40% of these investments. Excluding this outlier, YTD PE/VC investments are 43% lower than the same period, last year.

From a sector point of view, real estate has emerged as the top sector with US$3.7 billion in investments across six deals, accounting for 44% of all investments in October 2020 and greater than investments received by the sector in the past 14 months combined on account of the two large deals mentioned above. Retail and consumer products was next in line with US$3.3 billion invested across seven deals followed by pharmaceuticals with US$706 million invested across four deals and financial services with US$297 million invested across 11 deals.

Exit activity continued to remain muted with October 2020 recording US$288 million in exits, mainly supported by deal activity in the open market segment. If the recovery in the capital markets becomes broader and mid-cap / small indices inch further upwards, we can expect to see a pickup in PE-backed IPOs and open market exit of PE positions in listed companies.

While the domestic economy has seen demand picking up to pre-Covid levels in some sectors helped by the festive season and pent-up demand, we are still not out of the woods as yet. Notwithstanding the investor thumbs up to the US election results, there are still concerns on global growth outlook especially with countries in the European region going into second round of lockdowns.

"We expect Indian PE/VC investing activity to remain circumspect and overweight towards larger transactions involving high quality assets in select sectorsm” said Soni.

In October 2020, buyouts was the largest deal segment with $4.4 billion recorded across eight deals (US$500 million across five deals in October 2019) mainly on account of the two large deals in the commercial real estate space noted above. Growth investments recorded $3.6 billion across 13 deals ($1.7 billion in October 2019). Start-ups recorded $318 million in investments across 58 deals ($655 million across 61 deals in October 2019).

Australian conversational AI agency Versa forms a joint venture with Mogae

 Marketing firm Mogaé has announced that it entered into a joint venture with Australia's independent voice and digital agency, Versa. The agency will launch in India on Diwali and go live commercially from early 2021, Mogaé said in a press release.

The 50/50 joint venture will help Melbourne-headquartered Versa enter Indian market to capitalise on demand for specialised conversational strategy and design in a market with a population of more than 1.3 billion people, it said in a statement. India already has an installed base of nearly a billion mobile phones, making it a lucrative market to expand operations.

Mogaé's co-founder Tanya Goyal will be Versa India's chairperson, the release said. "It is an exciting time for voice and conversational AI in India, and we look forward to helping established and well-known Indian brands embrace these emerging technologies for the Indian market,” she said.

Versa's Global Chief Executive Officer Kath Blackham said the expansion would create opportunities for the Australian business to establish operations conversational AI expertise in multi-lingual India, where budget speakers like Amazon Alexa and mobile Google Assistants are already popular.

The venture will utilise Versa's resources from Australia, the United States and Singapore along with its India-based resources, which include sales team and P&L capabilities. A top flight management team has been put in place in Mumbai and Delhi, the statement said.

ITC, Emami see uptick in discretionary consumer spend in September quarter

 Four months into “unlocking India”, consumer spending in discretionary and out-of-home (OOH) segment is bouncing back while the first signs of moderation for essentials are showing up.

Fast-moving consumer goods (FMCG) companies like ITC and Emami have seen a change in consumer trend during the September quarter over the April-June period when consumers were stocking up on staples or rushing to buy hand sanitisers to keep the Covid-19 pandemic at bay. Four months since then, the demand for essentials is still robust, but the frenzy is dying down; simultaneously, the discretionary segment – which was in the dumps – is making a comeback.

For ITC, snacks have regained traction; deodorants, confectionery and juices have seen sequential improvement, though still significantly below pre-Covid levels. In Q1, ITC’s discretionary and OOH segment – that accounts for 25 per cent of the non-cigarettes FMCG portfolio – saw a 25 per cent decline, which came down to two per cent in Q2.

An ITC spokesperson said, “The economy continues to unlock with more easing of restrictions, including the recent relaxations on opening up of restaurants, HoReCas (hotels/restaurants/catering), cinema halls, offices and suburban transport and increase in the operating hours for various commercial establishments. All of these are positively impacting mobility. Further, with the onset of the festival season backed by good agricultural output, consumer’s propensity to spend is positively impacted.”

“This augurs well for discretionary and out of home consumption categories. ITC continues to witness an uptick across snacks, juices, ready to eat/cook products and agarbattis,” he added.

It’s not just ITC, Emami, too, is seeing an uptick in demand for its discretionary range, which is primarily the men’s range under Fair & Handsome. Emami director, Mohan Goenka, said the men’s range under Fair & Handsome has seen significant recovery.

“The men’s range had declined by almost 70 per cent in the first quarter; the decline came down to 25 per cent in the second quarter. Since September-October, the men’s range is showing signs of growth,” he added.

“The trend is on the right path.

Discretionary spend is coming up. It’s not like what it was and is still subdued, but we are on the right track,” Goenka added.

As consumers rejig their basket of products, essentials are seeing some moderation. ITC saw a growth of 34 per cent in its essentials portfolio in the first quarter, in the second quarter, the growth was 25 per cent. The essentials portfolio – that comprise staples, convenience foods, health & hygiene products – accounts for 75 per cent of its non-cigarettes FMCG offerings.

Some of ITC’s brands – like Savlon and Nimyle – have grown significantly during the pandemic. Savlon, in fact, is set to clock in an annual consumer spend of Rs 1,000 crore, a four-fold jump from the spend in the last financial year.

Around 70 products were launched by ITC in the first half of the financial year. “We continue to see a strong performance across the essential portfolio led by instant noodles, staples and matches etc,” said a company spokesperson.

He added that ITC’s health and hygiene portfolio continued to witness robust offtake backed by Savlon’s multiple new launches gaining good consumer acceptance. “The sanitisers segment has seen a plethora of new launches by both national and local players with the consumption trend remaining intact,” the spokesperson said.

However, with Covid recoveries rising, the mad rush for sanitisers could be seeing some abatement. Goenka said that sanitiser sales had come down by more than half. Emami launched sanitiser under the BoroPlus brand during the pandemic.

However, Goenka explained that while sanitiser sales were down, the hygiene portfolio was going strong. Emami's healthcare and hygiene portfolio range contributed to 47 per cent of sales and grew by 44 per cent in the September quarter.

Escorts rallies 5%, hits record high on healthy outlook in current fiscal

 Shares of Escorts moved higher by 5 per cent to Rs 1,350, also its fresh record high, in the intra-day trade on the BSE on Monday on expectation of better-than-expected demand for tractors in the domestic market in the current fiscal. This demand improvment, analysts say, could translate into good revenue growth for the company.

The stock surpassed its previous high of Rs 1,343, touched on September 30, 2020. In the past one year, it has zoomed 106 per cent as compared to a 5.3 per cent rise in the S&P BSE Sensex.

Escorts' management stated that the overall rural sentiment is positive because of the record output of Rabi crop along with better realization, strong Kharif sowing season and easy availability of retail finance. Furthermore, the management expects demand momentum to continue with supply chain issues ironing out. Besides, the current inventory at channel level is very low and re-stocking will also aid in volume growth in the coming quarters.

"Expanding market presence across domestic and international markets, combined with enhanced product offerings in its three core businesses would be the key driver for medium to long term growth. Outlook for the construction equipment (CE) business is also improving with ramp up in infra activities. Improving cost structure in the construction equipment business, better traction in the high-margin railway business, are likely to help to protect margins. No major capex in the near-term and purchase of stake by Kubota will improve cash flows and strengthen its Balance Sheet," analysts at Dolat Capital said in September quarter result update.

"The company's domestic market share increased to 11.6 per cent in fiscal 2020 from 10.8 per cent in fiscal 2018. Overall, Escorts revenues are expected to register 5-6 per cent growth in fiscal 2021, and 8-10 per cent over the medium term with steady growth across business segments," Crisil said in recent rationale.

Performance of Escorts' tractor business is closely correlated to economic activity in rural markets and its performance has benefitted from higher rural demand for tractors.

"The rural demand continues to remain positive led by lower base of last year, pent-up demand from Covid-19 related lockdowns, timely and widespread monsoon, record Rabi crop production, early Kharif sowing and good availability of retail finance. That said, material increase in covid-19 afflictions in rural markets and its impact on economic activity, and tractor demand will remain a key monitorable," the rating agency said.

IndusInd Bank hits over seven-month high; advances 33% in 6 days

 Shares of IndusInd Bank hit an over seven-month high of Rs 777.80, up 5 per cent on the BSE on Monday. The stock of the private sector lender was trading higher for the six straight trading session and has rallied 33 per cent during the period. It was quoting at its highest level since March 13, 2020.

In the September quarter (Q2FY21), the overall asset quality performance of IndusInd Bank was encouraging as gross non-performing assets (NPA) and net NPA ratio declined by 32 bps and 34 bps to 2.21 per cent and 0.52 per cent, respectively. Much of it may be attributed to the bank’s recent practice of recognising the asset quality pain upfront. Provisioning cost rose by 166 per cent year-on-year (YoY) to Rs 1,964 crore in Q2.

Net interest income or NII grew by 13 per cent year-on-year (down one per cent sequentially) and net profit fell by a whopping 53 per cent over last year.

“Post balance sheet realignment, the management is geared to pedal growth ahead with a focus on certain segments. Thus, we expect business momentum to pick from here on with operational parameters expected to show improvement. Improving collection efficiency and ample provision buffer is expected to arrest volatility in earnings but return ratios are seen improving gradually to 9.3 per cent in FY22E. Further, the quantum of advances to be restructured remains key monitorable. Therefore, until clarity emerges on asset quality front, we maintain our HOLD rating,” ICICI Securities said in result update.

“The credit growth remained subdued, but deposits have bounced back strongly after a scare in Q4. After dragging its feet for long, IndusInd Bank has made additional Covid-19-related floating provisions of Rs 950 crore, with the cumulative provisioning buffer now at a reasonable level of Rs 2,150 crore (1.1 per cent of loans), still lower than larger peers like ICICI/Axis. Management’s focus on building a granular retail portfolio is long-term positive but needs to manage asset quality, given elevated risk environment amid Covid-19-led disruption,” analysts at Emkay Global Financial Services said in result update.