Indian Indices Erase Gains; Hero MotoCorp Slips 3% ahead of Q1FY20 Results

Tue, 30 Jul 12:30 pm

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Share markets in India have erased their early morning gains and are presently trading on a flat note.

Sectoral indices are trading on a mixed note with stocks in the metal sector, automobile sector and realty sector witnessing selling pressure, while healthcare stocks are trading in green.

The BSE Sensex is trading up by 33 points, while the NSE Nifty is trading up by 10 points. The BSE Mid Cap index and the BSE Small Cap index are trading down by 0.5 and 0.9%, respectively.

Speaking of the bearish mood in Indian share markets, master trader Vijay Bhambwani talks to us about stocks, gold, silver, interest rates, crude oil, and how this bear market will come to an end.

Market participants are tracking Axis Bank share price, Hero MotoCorp share price, and Tech Mahindra share price as these companies are set to announce their June quarter (Q1FY20) results later today.

You can read our recently released Q1FY20 results: Force Motors, Maruti Suzuki, Vedanta, Tata Motors, Supreme Industries.

In news from the realty sector, country's largest real estate developer by market value, DLF on Monday reported over two-fold jump in its net profit at Rs 4140 million. Net profit in the year-ago period stood at Rs 1724.4 million.

The real estate firm's total income declined 7% to Rs 15,409.5 million during the same period from Rs 16,576.7 million in the corresponding quarter of the previous year.

The company reported an exceptional income of Rs 2,965.1 million, which helped in a significant rise in its net profit. The company's net sales bookings stood at Rs 7050 million in the June quarter.

In a press release, the company said "DLF's promoters infused the last tranche of funds of around Rs 22,500 million into the company in the June quarter. With a total infusion of Rs 1,12,500 million, this is one of the largest infusions by promoters in an Indian company."

In December 2017, the promoters had infused Rs 90,000 million into the company and promised to invest an additional Rs 22,500 million. The fund infusion was made after the promoters sold their entire stake in DLF's rental arm DLF Cyber City Developers Ltd for Rs 1,19,000 million.

The company is also planning to develop 17 million square feet of space in commercial and residential segments.

DLF share price is presently trading down by 1.5%.

Note that, the real estate sector in India has been facing a lot of obstacles lately.

Due to all the headwinds, the number of developers has reduced, and this has created consolidation in the market.

The chart below shows a sharp decline in the number of developers in major Indian cities.

Supply-Side Consolidation in the Real Estate Industry

Typically, such a reduction in investment in an industry, i.e. contraction of supply, paves the way for a recovery of profits.

From a supply perspective, the competitive intensity has reduced due to leveraged balance sheets of many developers.

This, in turn, has resulted in subdued launches and stalling of existing projects, thus overall reducing inventory and consolidation in the sector.

With this, the share of organized market players is expected to go up in the medium to long term.

This is a huge opportunity for long term serious players in the sector.

Moving on, shares of Coffee Day Enterprises hit a lower circuit limit of 20% in early trade today on reports that founder VG Siddhartha has been missing since Monday night.

As per an article in The Economic Times, Siddhartha left in his Innova car towards Mangaluru last night, stopped midway at Ullal bridge, and went missing thereafter. The founder has not been reachable since then.

The circumstances in which he went missing has set off suspicions that he may have taken the extreme step for reasons that are not in the public domain.

Here's an excerpt from the article:

• In an alleged letter, circulating in social media platforms, Siddhartha told the company board on July 27 that his intension was never to cheat or mislead anybody. "I have failed as an entrepreneur. This is my sincere submission. I hope someday you will understand, forgive and pardon me."
  
  There are reports doing the rounds that Siddhartha jumped off a bridge in Ullal. Times of India reported that Mangaluru city police has started granitic search for a person who reportedly jumped off the kilometer-long bridge over the Netravali river at around 9 pm, about 6 km from Mangaluru.

In response, the company issued an update, acknowledging that Siddhartha is missing. It wrote to the exchanges saying "we are taking the help of concerned authorities. Company is professionally managed and led by competent leadership team, which will ensure continuity of business."

As per the alleged letter, Siddhartha wrote that he could not take any more pressure from one of the private equity partners forcing him to buy back shares, a transaction he partially completed six month ago by borrowing a large sum of money from a friend.

The letter also stated that there was a lot of harassment from the previous DG income tax in the form of attaching company's shares on two separate occasions to block out Mindtree deal.

Sical Logistics share price also hit a lower circuit of 20% as Siddhartha holds 0.68% stake in the company. He holds 32.75% stake in Coffee Day Enterprises, out of which he has pledged nearly 71.40%.

Stay tuned for more updates from this space.

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