On a day when Fitch downgraded India’s outlook to negative in line with Moody’s, the latter also downgrade the ratings of Tata Motors. Moody’s downgraded the Corporate Family Ratings (CFR) of Tata Motors from Ba3 to B1 and all the ratings which were placed under review were changed to negative. The downgrade reflects the sustained deterioration in the credit profile of Tata Motors and the concern that it will take much longer for the credit profile of Tata Motors to improve to sustainable levels. Moody’s noted that the pandemic had amplified the pressures on Tata Motors India and also JLR.
International broker Macquarie has declared that the concerns over rising NPAs in retail loans may be largely overplayed. This concern has been expressed by analysts that credit profiles could worsen after the EMI moratorium was lifted. Macquarie reported that since the end of May, the total loan book under EMI moratorium had fallen sharply from the erstwhile levels of 30%. In fact, some large HFCs like HDFC have reported that the retail loans under deferral had fallen to as low as 7% by mid June this year. Hence the defaults were expected to be marginal rather than have a drastic impact on the sector.
The government has confirmed to the Supreme Court that 96% of the AGR demand made to the non-telecom PSUs like GAIL, REC and Oil India had been withdrawn. However, the government and the telecom companies still needed to sit with the DOT and agree on a time table for the payment of AGR charges in a staggered manner. As of now the telecom companies like Bharti and Vodafone have disputed the amount of AGR charged and that may have to be resolved separately. The hearing will happen in August and SC has asked the government to finalize the staggered payment schedule by then.
Reliance shares hit a new high after the funds came from the Public Investment Fund (PIF) of Saudi Arabia. The PIF is a sovereign fund of Saudi Arabia and it has infused $1.50 billion to take a 2.32% stake in Jio Platforms. With this stake sale, Reliance has completed selling 24.71% stake in Jio Platforms for a total consideration of Rs.116,000 crore. The non-Facebook portion has valued Jio Platforms at $65 billion overall and this infusion is extremely valuable as RIL targets to become zero net debt company by March 2021. RIL has also realized 25% of the rights proceeds and there are other deals in place.
The Future Group owned by Kishor Biyani is in advanced talks to sell a stake in the Future Group to Reliance Industries. Future group has been struggling for some time now as the combination of lockdown in malls and rising debt has been an overhang on the company. The deal makes sense. Future Retail has 1500 retail stores covering 16 million square feet of retail space while Reliance Retail has 11,784 stores covering 28.7 million square feet. Samara Capital and Premji Finvest already have an equity stake in Future Retail and it also has a partnership with Amazon. The deal could be a breather for the Future group as they have been defaulting on loans. A bailout with a cash rich group like Reliance Industries will not only give them retail heft to take on D-Mart but also a much wider digital reach.
The HDFC AMC share sale via OFS got only 82% subscription from retail investors. However, overall subscription was hardly an issue as the non-retail portion had already been oversubscribed 2.6 times on Wednesday. The two-day OFS came to a close on Thursday with Standard Life offering 2.82% stake in HDFC AMC at a floor price of Rs.2362. This floor price represented a 7% discount to the stock price. In the event of oversubscription, Standard Life had expressed intention to double its stake sale to 5.64% representing 1.20 crore shares of HDFC AMC. HDFC is the majority owner with 52.8% stake.