Mid, smallcaps buck the trend

Tue, 4 Jun Closing

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Profit booking in banking, auto and commodity stocks led key indices in Indian equity markets to shed all gains and move below the dotted line in the final hour of trade. The BSE Healthcare and FMCG indices were the only ones to end in the positive. While the BSE Sensex closed lower by 65 points, the NSE-Nifty closed lower by 20 points. The BSE Mid Cap index and the BSE Small Cap index, however, bucked the trend and closed higher by 0.2% each.

As regards global markets, Asian indices closed lower today while European indices have opened higher. The rupee was trading at Rs 56.5 to the dollar at the time of writing.

As per a business daily Hindalco Industries is reportedly planning to raise Rs 50 bn to refinance its debt. Of total, the company will raise Rs 20 bn via bond issue in FY14. Further, the company will take a loan of Rs 30 bn. At the end of March 2013, the company's net debt stood at Rs 130 bn. Hindalco's standalone topline for the full year suffered a small 2% decline. Both aluminium as well as the copper segment of the company contributed to this fall. It should be noted that FY13 wasn't a particularly good year for both the commodities as their LME prices saw a decline over the previous year. Besides aluminium also saw production disruption during the first half which affected volumes. On the margins front, the standalone aluminium segment of the company fared even worse, as the segment PBIT fell by a significant 49% YoY. Besides both lower volumes and realizations, what also affected the PBIT were significantly higher operating costs.

State-run Power Finance Corporation (PFC) is reportedly planning to purchase a stake in the 1,320 mw coal-based power plant, which is owned jointly by Hyderabad-based companies - NCC and Gayatri Projects. It has decided to buy 10-15% stake for Rs 2 bn in the NCC-Gayatri project that is being set up at a total cost of Rs 70 bn at Nellore district of Andhra Pradesh. The entity is a lender to the project with an exposure of Rs 17 bn of debt.

Notably, PFC's asset quality has proved to be impeccable over the years vis-a-vis the industry levels and it continues to be so despite all odds. This can be attributed to the company's endeavors to focus on recoveries and repayments considering the fact that the company's loans are guarded by government guarantees and escrow mechanism. Furthermore, the company is constantly taking efforts to de-risk its asset portfolio. Consequently, PFC's gross NPAs have reduced to 0.7% as at the end of March 2013, from 1.04% a year ago. This was backed by the enhanced recovery rate at 99.4%. It is worth noting that PFC has observed no slippages to NPAs in the last 3 quarters of FY13. It has not restructured any SEB (State Electricity Board) debt as such.