Yes Bank's QIP, Q1FY20 Results, and Top Stocks in Focus Today

Tue, 13 Aug Pre-Open

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Stock markets in India traded on a volatile note last week. The week saw some major developments from the government revoking article 370 to the RBI announcing a rate cut.

Indian markets have been at the receiving end of a barrage of negative news and a positive counter to tip the scales is crucial.

The ongoing trade war between the US and China made things worse.

However, optimism returned to Dalal Street on Thursday due to calm in global finance and news reports of the Finance Ministry making a positive announcement on tax issues pertaining to equity markets.

On Friday, Indian share markets continued to trade in the green during closing hours today and ended their trading session on a positive note. Gains were seen ahead of Finance Minister Nirmala Sitharam's meet with capital market representatives including foreign portfolio investors, NBFCs and mutual funds to deliberate upon the issues plaguing the economy and sagging industrial growth.

At the closing bell on Friday, the BSE Sensex stood higher by 254 points (up 0.7%) and the NSE Nifty closed higher by 77 points (up 0.7%).

The BSE Mid Cap index ended up by 0.6%, while the BSE Small Cap index ended up by 0.9%.

On the sectoral front, gains were seen in the auto sector, finance sector, and energy sector.

Top Stocks in Focus Today

Suzlon Energy share price will be in focus today as a report on Friday suggested that the troubled wind-turbine maker has offered to repay about Rs 85 billion to lenders as part of a bad-debt-resolution plan.

Market participants will also be tracking Cadila Healthcare share price, BHEL share price, and MRF share price as these companies announced their June quarter (Q1FY20) on Friday.

You can read our recently released Q1FY20 results here: Tata Steel, Cummins India, Sonata Software, HCL Technologies, Siemens.

From the Results Corner...

State-run GAIL reported 2.2% year-on-year (YoY) jump in its net profit at Rs 12.8 billion for the June quarter.

Revenue for the quarter advanced 5.9% YoY to Rs 183.1 billion, while other income stood at Rs 1.5 billion compared with Rs 8.6 billion in March quarter and Rs 1.1 billion in the year-ago period.

Going by the segments, the company reported a drop in revenues in LPG and petrochemicals segment. Revenue was up for natural gas, natural gas marketing and LPG, and Liquid Hydrocarbons segments.

The company said that the Petroleum and Natural Gas Regulatory Board (PNGRB) has issued various provisional transportation tariff orders in respect to natural gas pipeline tariff.

Some of these orders have been contested by the company with Appellate Tribunal for Electricity (APTEL), which were remanded back by APTEL to PNGRB for review.

Moving on, Page Industries witnessed selling pressure on Friday as the company reported poor numbers in the quarter ended June 2019.

The company reported a 11% fall in its net profit at Rs 1,106 million against Rs 1,244 million, while revenues grew 2.4% YoY at Rs 8,350 million against Rs 8,153 million.

Earnings before interest, tax, depreciation and amortization (EBITDA) fell to Rs 1,866 million, and margins contracted to 22.3%.

The company's board has declared an interim dividend of Rs 51 per equity share.

On the back of poor results, Credit Suisse cut the company's target to Rs 15,000 per share and also maintained an underperform rating.

Yes Bank Launches QIP to Raise US$ 285 Million

In news from the banking sector, Yes Bank has embarked on a plan to generate US$ 285 million by selling shares through a qualified institutional placement (QIP). The sale to institutional investors opened on Thursday evening.

The bank has set a floor price of Rs 87.9 per share for the issue, with a proposed discount of not more than 5%, depending on demand from investors in India and aboard.

Local investment banks JM Financial and Motilal Oswal as well as Hong Kong-based CLSA are managers to the sale. The issue is likely to stay open through the night to attract interest from investors in Europe and the US.

The private lender in a notice to the exchanges said that a committee will meet on August 16 to consider and approve the issue price and final discount.

As per an article in The Economic Times, the bank had originally intended to raise as much as US$ 1billion. However, it had imposed a restriction on the maximum dilution, setting it at 10% of the paid-up equity capital.

Here's an excerpt from the article:

• Since Yes Bank's market cap has fallen to about Rs 200 billion, it cannot raise more than Rs 25 billion on the expanded equity base.
  
  The aggregate amount raised shall not result in increase of the issued and subscribed equity share capital of the bank by more than 10% of the then issued and subscribed equity shares of the bank.

In the June quarter, the bank's core Tier I capital ratio declined to 8%, close to the minimum regulatory requirement of 7.375% for the year ended March 2019 and 8% for that ending in March 2020.

The private lender had to set aside Rs 11.9 billion as market provision on bonds issued by Dewan Housing Finance Corporation (DHFL) and the Anil Ambani-led Reliance Group, which were both outside the bank's Rs 100 billion watch list, raising concerns about the bank's asset quality guidance.

The bank will seek separate approval from the board and shareholders for the second tranche that will be raised through a combination of rights and fresh shares. Sources said that the second round of fund raising of an additional Rs 100 billion is likely to be through a rights issue.

How this development pans out remains to be seen. Meanwhile, we will keep you updated on all the news from this space.

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

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