RBI's Relief to Realty Sector, Key Q3FY20 Results, and Top Cues in Focus Today

Mon, 10 Feb Pre-Open

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India share markets witnessed selling pressure during closing hours on Friday and ended on a negative note.

At the closing bell on Friday, the BSE Sensex stood lower by 164 points (down 0.4%) and the NSE Nifty stood down by 51 points (down 0.4%).

The BSE Mid Cap index ended up 0.4%, while the BSE Small Cap index stood up by 0.8%.

Stocks in the realty sector and auto sector witnessed huge selling pressure, while healthcare stocks were trading in the green.

December Quarter Results

Market participants were tracking Tata Steel share price, Symphony share price, and ACC share price as these companies announced their December quarter results on Friday.

From the automobile sector, Hero MotoCorp reported 14% year-on-year (YoY) rise in its standalone profit at Rs 8.8 billion for the third quarter ended December 30, 2019.

The company's revenue from operations for the quarter stood at Rs 69.9 billion as compared to Rs 78.6 billion in Q3FY19.

On consolidated basis, the company's revenue and PAT stood at Rs 70.7 billion and Rs 9.1 billion, respectively for the quarter.

The Hero MotoCorp board also announced an interim dividend of Rs 65 per share.

From the pharma sector, Aurobindo Pharma's operational revenues witnessed a strong growth of 11.9% year-on-year (YoY) at Rs 59 billion in December quarter (Q3FY20).

US revenue for Q3FY20 witnessed a growth of 22% YoY to Rs 29.7 billion, accounting for 50.4% of consolidated revenue.

The company's consolidated earnings before interest, tax, depreciation, and amortisation (EBITDA) margin remained stable at 20.5% in Q3FY20. EBITDA grew 11.2% YoY at Rs 12.1 billion.

However, profit after tax (PAT) declined 1% YoY to Rs 7.1 billion, due to higher depreciation.

The company said it has received final approval for 4 abbreviated new drug application (ANDAs) and tentative approval for 1 ANDA from US Food and Drug Administration (USFDA).

The company also declared an interim dividend of Rs 1.75 per equity share.

To know more about the company, you can read Aurobindo Pharma's latest result analysis on our website.

EV Penetration to Remain Under 5% till 2025: ICRA

As per the ratings agency ICRA, electric vehicle (EV) penetration is expected to remain under 5% over the next five years, despite the aggressive policy push and drive by automakers.

The agency has blamed this to the higher vehicle cost due to costly imported batteries, weak public charging infrastructure and inadequate government support. It added being a price sensitive market and the resultant low volume, economies of scale are crucial for an OEM to price its EVs competitively.

It highlighted that the government recently sanctioned 2,636 charging stations, under the Fame 2.0 to incentivize investments in the space, which if fructified, will boost EV acceptance over the long-term.

It asserted that government support remains crucial to support EV growth. Assuming subsidy of Rs 1,50,000/vehicle, even just 1% of total domestic passenger vehicle sales in FY20 will need about Rs 4.5 billion in subsidy support and about Rs 13 billion over next three years.

Further it mentioned that at present, EV subsidy priority is towards commercial fleet/taxi operators and less on personal car buyers.

Also, high upfront cost of an EV and the higher ownership cost are expected to favour traditional fuel-fired vehicles in the medium term, even in the commercial taxi segment.

Besides, note that globally, EV penetration has been enabled by regulatory support and wider availability of charging stations, with the US and China being the best examples, where there is mandatory zero emission rules, and restricted licensing for new petrol/diesel vehicles, respectively.

The recently announced government incentives will give a further boost to EV sales.

As per co-head of research Tanushree Banerjee, electric vehicles are very much on their way to invading Indian roads. The threat of disruption in this era is something you cannot ignore.

Despite the slowdown in the auto sector, the sales volume of EVs are growing at a robust pace.

The coming one year will be a real test for India's auto companies.

It will also tell us if this slowdown is temporary or if there has been a structural change in the sector.

In our view, companies in the sector adapting their business models to the rapidly changing environment will survive and thrive.

We will keep you updated on all the trends shaping up in this space. Stay tuned.

RBI Announces Relief for Real Estate Sector

The Reserve Bank of India (RBI) has allowed all banks and lenders to defer the classification of troubled builder loans as bad for one year, giving the real estate industry more time to restructure them.

RBI governor Shaktikanta Das announced that loans for projects delayed for reasons beyond the control of promoters will be treated as standard loans.

As per reports, the above measure is expected to boost the real estate sector struggling with high inventory, poor prices and incomplete projects. It is also expected to help banks and other lenders to work with the management and promoters to restructure loans.

The RBI statement on the commercial real estate sector was issued along with the bank's sixth bi-monthly monetary policy statement of fiscal 2019-20 of the Monetary Policy Committee. The central bank decided to keep its lending rates unchanged at 5.15%.

Last month, the National Company Law Tribunal ruled that a real-estate developer could not be charged with committing a 'default' under the Insolvency & Bankruptcy Code (IBC) when the possession of a premise is delayed for reasons beyond its control.

The Indian real estate industry has seen a prolong slump for the last four years with several developers struggling with piling debt and slow pace in housing demand.

Last year in November, the government announced plans to set up a Rs 250-billion alternative investment fund (AIF) to provide funds to developers whose projects are more than 60% complete but are stuck for want of money.

Speaking of the real estate sector, note that this is one sector that has tested investor patience over the years. While the sector has seen big moves in the last few years, the downward movement has been equally sharp.

The post demonetisation era has been tough on the sector. Excess inventory, i.e. housing projects stuck for years, has meant homeowners have largely stayed away from any fresh buying in the real estate space.

Also, post the IL&FS crisis, lending to real estate developers has largely dried up. The BSE Realty Index also reflects the same. It was down 31% in 2018.

But is the scenario about to change?

Real Estate - The Sector to Bet on After the Budget?

Here's what Tanushree Banerjee wrote about this in a recent edition of The 5 Minute WrapUp...

• Demonetisation, RERA, and the IL&FS crisis have hit the sector hard.
  
  The BSE Realty Index has had a tough time in the last few years.
  
  But there are signs of a turnaround. The government's Rs 250 billion package was a much need boost for the sector and homebuyers.
  
  A real estate revival is important for the steel, cement, and many other sectors. It is also an important job creator for India's young population.

What would be more interesting is the pickup in consumption once the real estate sector revives.

Once people get their homes, they are likely to spend on tiles, paints, furniture, electronics, pipes, cables, cement, and many other things.

Watch this space for more!

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.

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