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Of Recapitalisation of PSBs, Q3FY19 Results, Chalet Hotels IPO, and Top Cues in Focus Today
Thu, 31 Jan Pre-Open | Monish Vora, TM Team

Indian share markets ended the day on a flattish note yesterday. Stocks from the metal sector and banking sector witnessed buying interest, while stocks from the telecom sector and energy sector were trading in the red.

At the closing bell yesterday, the BSE Sensex stood lower by 1 point and the NSE Nifty stood flat. The BSE Mid Cap index closed up by 0.2%, while the BSE Small Cap index ended the day up by 0.8%.

Top Stocks in Focus Today

From the automobiles space, Bajaj Auto share price will be in focus today as the company yesterday reported a 16% year-on-year (YoY) rise in net profit at Rs 11 billion for the December quarter.

Total income for the quarter rose 19% YoY to Rs 78.8 billion against Rs 65.9 billion in the same quarter last year.

The company's motorcycle segment recorded 38% growth in volume in the December quarter. This compares with the industry growth of 11%.

Overall share in the domestic motorcycle industry for the company increased to 20.3% against 18.6% in September quarter and 16.3% in the year-ago quarter.

Apart from the above, market participants will also be tracking ICICI Bank share price, JSW Energy share price, and Torrent pharma share price as these companies announced their December quarter results yesterday.

You can also read our recently released Q3FY19 results of other companies here: Reliance Industries, Federal Bank, Infosys, TCS, Trident, HDFC bank, Maruti Suzuki, DHFL, Gruh Finance.

PSBs Need More Fund Infusion for 11% Credit Growth in FY20

In the news from macroeconomic space, as per SBI's Ecowrap report, public sector banks (PSBs) will require fund infusion of another Rs 500 billion in 2019-20 in a bid to help enable credit growth of 11%.

In December 2018, the government enhanced bank recapitalisation outlay from Rs 650 billion to Rs 1,060 billion for the current fiscal. As of December 2018, a total amount of Rs 515.1 billion has been infused into PSBs.

As per the report, government should infuse the promised recapitalisation amount of Rs 544.9 billion (net of promised Rs 1,060 billion) by March 2019. This will act as a big enabler for banks.

The report stated that assuming an 11% credit growth in FY20 with credit risk weighted assets of 70% (RWAs to Gross Advances ratio declined from 80.26% in Sep-17 to 71.20% in Sep-18), PSBs may be requiring around Rs 500 billion growth capital in FY20.

However, it said the same also depends upon some major variables that is alternate long-term investor, recoveries from NCLT, investment environment, out of NCLT settlements, MTM provisioning of investments, additional or provision write-back.

Speaking of recapitalisation of PSBs, we believe that using recapitalisation bonds can only act as a short-term measure to the crisis afflicting Indian public sector banks today.

Such a measure will not address the structural issue in the banking system, i.e. the poor standard of lending and poor governance system.

Here's what our big picture editor, Vivek Kaul, wrote about this in one of his recent articles...

  • If the government bails them around this time around, the banks know that they can count on the government bailing them out the next time around as well. And this means that they can follow fairly loose standards of lending, in order to lend money quickly.

You can read Vivek's entire article here: India's Big Govt is the Main Problem of Public Sector Banks: Recapitalisation, Doesn't Solve That

December Quarter Results from the Banking Space...

Market participants will be tracking Bank of Baroda share price today as the lender yesterday reported results for third quarter ended 31 December 2018.

The bank reported over 4-fold jump in its net profit at Rs 4.7 billion for the quarter under review as compared to Rs 1.1 billion for the same quarter in the previous year.

Total income of the bank increased by 12.2% at Rs 145.6 billion for Q3FY19 as compared Rs 129.8 billion for the corresponding quarter previous year.

Its gross NPA for the October-December quarter of the current fiscal improved to 11.01%, as compared to 11.31% in the same quarter of the previous year.

Besides, the bank's Net non-performing assets (NPA) stood at 4.26% in Q3FY19.

Meanwhile, Axis Bank also reported its quarterly results yesterday. The lender saw over 2-fold jump in its net profit at Rs 16.8 billion for the quarter ended 31 December 2018 as compared to Rs 7.3 billion for the same quarter in the previous year.

Total income increased by 26.7% at Rs 181.3 billion for Q3FY19 as compared Rs 143.1 billion for the corresponding quarter previous year.

The bank's gross NPA for the October-December quarter of the current fiscal increased to 5.75%, as compared to 5.28% in the same quarter of the previous year. Besides, the bank's net NPA stood at 2.36% in Q3FY19.

From the IPO Space...

In the news from the IPO space, the initial public offering (IPO) of Chalet Hotels Ltd made a tepid start on its first day yesterday as institutional and retail investors largely stayed on the sidelines.

The issue received bids for 2.8 million shares, or 6.7% of the 41.3 million shares on offer. Retail investors bid for barely 0.3% of the shares set aside for them while the quota for institutional investors was covered just 1%. The non-institutional book was covered 30%.

Separately, Chatel Hotels raised Rs 4.9 billion (US$69 million) from 27 anchor investors that included Blackrock, Goldman Sachs, Kuwait Investment Authority and HDFC Standard Life Insurance Co. It allotted 17.6 million shares at the upper end of the Rs 275-280 price band.

Chalet Hotels is an owner, developer and asset manager of high-end hotels in key metro cities in India. Its hotel platform comprises five operating hotels, including a hotel with a co-located serviced residence, located in the Mumbai Metropolitan Region, Hyderabad and Bengaluru, representing 2,328 keys, as of 31 March 2018.

The company generally develops its hotels in strategic, high density locations on large land parcels, allowing it to situate a greater number of rooms, as well as provide a wide range of amenities, such as, fine dining and specialty restaurants, large banquet and outdoor spaces.

The company's hotels are branded with globally recognized hospitality brands and are in the luxury-upper upscale and upscale hotel segments.

To know our view on the IPO of Chalet Hotels Ltd, you can read our entire IPO analysis here (subscription required).

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Stock Market Updates

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