Lakshmi Vilas Bank Fiasco, TCS Buyback Plan, and Top Buzzing Stocks Today

Fri, 20 Nov Pre-Open

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Indian share markets snapped their 4-day winning streak and ended deep in the red yesterday.

After opening the day on a negative note tracking weak global cues, benchmark indices hit record highs in mid-session yesterday. However, huge selling pressure was seen during closing hours and Indian share markets ended on a negative note.

At the closing bell yesterday, the BSE Sensex stood lower by 580 points.

Meanwhile, the NSE Nifty ended down by 167 points.

SBI was the top loser in NSE. Meanwhile, the top gainers in NSE were Power Grid and ITC.

The BSE Mid Cap index ended down by 0.7%. The BSE Small Cap index ended on a flat note.

On the sectoral front, banking stocks and finance stocks were among the hardest hit. The Nifty Bank index tumbled over 850 points, or nearly 3%, after the Supreme Court deferred the hearing in the interest waiver case till next week.

Gold prices were trading down by 0.6% at Rs 50,008 per 10 grams at the time of closing stock market hours yesterday.

To know more about gold, you can check out our detailed article on gold investing here: How to Invest in Gold?

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Top Stocks in Focus Today

Mahindra & Mahindra will be among the buzzing stocks today.

Mahindra & Mahindra (M&M) is planning to list 10 of its units in the next 2-7 years as it looks to increase shareholders' return on equity.

The 10 units identified by M&M include cleantech firm Mahindra Susten, diesel generator maker Mahindra Powerol, electrical steel processor Mahindra Accelo, and supply-chain consultant Bristlecone.

Classic Legends, the maker of Jawa Motorcycles; Mahindra Electric Mobility, the maker of the electric vehicles; and used-car seller First Choice Wheels are also among the 10 companies that will sell shares to the public for the first time.

The company expects 2-3 businesses to IPO in the next 2-3 years, some to go public in 3-5 years and others in 5-7 years.

Vedanta share price will also be in focus today as the group confirmed putting in a preliminary expression of interest (EoI) for buying government's stake in Bharat Petroleum Corp (BPCL).

As per media reports, Vedanta's interest in India's second largest fuel retailer is because of synergies with its existing oil and gas business. The government is selling its entire 52.98% stake in BPCL and last date of putting EoI was November 16.

Market participants will also track Titan share price.

The Tata group company said it saw good traction across all its businesses in the festive season and its jewellery business witnessed a "mid-teens" growth from Dussehra till Diwali.

Titan said its watches and wearables business also did good business during the festive season with recovery close to last year levels.

Lakshmi Vilas Bank Fiasco: Merger with DBS to be Completed Before Deadline

RBI appointed administrator on November 18 assured depositors of the Lakshmi Vilas Bank that their money is safe and the proposed merger with the Singaporean lender DBS will be completed before the deadline.

He also said that the bank has the complete backing of the regulator to ensure that there is no cash shortfall.

Earlier this week, the central government decided to place the private lender under moratorium till December 16, 2020, based on an application made by the Reserve Bank of India. The move was announced through an order issued by the Ministry of Finance.

The bank will not be allowed to make payments exceeding Rs 25,000 to any creditors without prior approval from the RBI.

The Reserve Bank of India, in consultation with the Central government, has superseded the board of directors of the private lender for a period of 30 days owing to a serious deterioration in the financial position of the bank. TN Manoharan, former non-executive chairman of Canara Bank has been appointed as the administrator.

Reacting to the above news, shares of Lakshmi Vilas Bank tanked 20% earlier this week.

Speaking of Lakshmi Vilas Bank, if there is any private sector bank that has severely underperformed in the last two years, it has to be Lakshmi Vilas Bank.

Back in May 2019, we wrote an article around how we avoided a 60% loss in Lakshmi Vilas Bank.

Here's an excerpt from the article:

• LVB had an interesting story.
  
  The bank had a new management team in place. The bank was shedding its old image to bring out a new look.
  
  The new management had a clear vision and set several goals. These included deposit and loan growth targets, CASA (current account saving account) ratio targets, a focus on retail loans, and the reduction in cost-to-income ratio.
  
  So far so good.
  
  But the bank had its own legacy issues. These were rising bad loans, a weak balance sheet with a poor capital adequacy ratio (CAR).
  
  The falling CAR was a concern.
  
  The CAR is the ratio of a bank's capital in relation to its risk-weighted assets and current liabilities. The RBI has set the minimum CAR at 9% for all banks.
  
  A ratio below 9% indicates the bank does not have enough capital to expand its operations. It ensures that banks don't expand their business without having adequate capital.
  
  On one hand, LVB had bad loan issues and on the other, it badly needed capital to shore up its CAR.

If you look at the shareholding pattern of LVB during the 2-year time frame between May 2017 to May 2019, retail investors have increased by 15%. The number of shares owned by them increased by 24%.

A typical example of retail investors catching a falling knife!

You can also read out latest Profit Hunter issue on the above fiasco here: Lesson for Investors from the Lakshmi Vilas Bank Fiasco

TCS Shareholders Approve Rs 160 Billion Share Buyback Plan

India's largest IT services firm Tata Consultancy Services (TCS) said its shareholders approved a Rs 160 billion share buyback plan.

Last month, the company's board of directors had approved a proposal to buy back up to 53.3 million equity shares of the company for an aggregate amount of up to Rs 160 billion.

The voting, which started on October 20 and ended on November 18, saw 99.6% of the votes being cast in favour of the buyback offer.

There was 100% voting in favour of the proposal by the promoters, 98.1% by public institutional shareholders and 98.4% by other shareholders.

CEO and Managing Director of TCS, Rajesh Gopinathan had earlier said the company is focused on its policy to return capital to shareholders.

In 2017 and 2018, the company had conducted a similar share purchase exercise.

TCS' smaller rival Wipro has also announced an up to Rs 95 billion share buyback plan at Rs 400 per equity share.

We will keep you updated on all the news from this space. Stay tuned.

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

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