Midnight News – May 07th, 2020

unnamed Midnight News – May 07th, 2020


Yes Bank reported a net profit of Rs.2629 crore for the March quarter but that was largely due to an extraordinary income of Rs.6297 crore on account of the Tier-1 bond write-down. If this item was excluded, Yes Bank would have reported a loss of Rs.3668 crore for the quarter. The gross NPAs of the bank spiked sharply from 3.22% to 16.80% YOY, on the back of under-reporting of NPAs in the past. That is still better than the 18.87% gross NPAs reported for the December quarter. Net NPAs also spiked to 5.06%. In March, Yes Bank board was superseded by the RBI and SBI became the majority owner.

The impact of the Coronavirus pandemic was most visible in the equity volumes dipping by 14% in the month of April. The number of equity trades on the NSE fell from 42 crore in March to 36 crore in the month of April 2020. The number of shares traded on the NSE actually fell by 27% during the month. A similar fall was seen in the BSE also. However, the average trade size increased on the NSE and the BSE indicating that the retail investor had reduced market activity. Ironically, the lower volumes in the market happened in a month when the Nifty was actually up by over 15%, supported by banks.

State Bank of India has decided to extend the loan moratorium for NBFCs and MFIs for another 3 months beyond May 31, when the moratorium expires. Between CRISIL rated NBFCs and MFIs, they jointly owe Rs.200,000 crore to the banks. However, such extension of moratorium will only be done in the event of the NBFC having genuine cash flow problems. With SBI taking the lead, other commercial banks are also expected to follow suit. In the last few years, bank funding has become the biggest source of liquidity for non banking finance companies (NBFCs) and also for micro finance institutions (MFIs).

It was a crash in services like never before based on the PMI-Services index for India. After PMI Manufacturing disappointed at just 27, the PMI Services came in at an incredibly low 5.4. Normally, the level of 50 is the cut-off for PMI and anything above 50 is considered an expansion and below 50 is considered contraction. But PMI-Services of 5.4 are the lowest reported anywhere in the world and literally represent an economy on standstill mode. In terms of GDP implication, this indicates that GDP for April actually contracted by 15%, something that could leave a deep imprint on full year GDP.

After showing some promise on Tuesday, oil was back to its falling ways on Wednesday. Brent Crude which had almost doubled from the lows of $16/bbl on the back of growth pick-up and supply cut hopes, once again fell below $30/bbl on Wednesday. This fall in price was largely led by the oil price glut in the market. The US inventories continued to pile and with the US likely to run out of storage by next month, the pressure on oil prices remained high. WTI Crude was also down to $23/bbl. The total supply cut is expected to be closer to 15-20 million barrels in May but even that will just about help manage to balance the demand. Despite some economies starting to open up, the demand for fuel is expected to take quite some time to get back to normal levels. OPEC alone will cut 9.7 million bpd of crude supply.

HDFC will issue bonds worth Rs.5000 crore on private placement basis to meet its capital requirements. The issue size will be Rs.2500 crore with a greenshoe option to retain another Rs.2500 crore in the event of oversubscription. The bonds will mature in December 2021 and will carry a coupon rate of 7.06%. HDFC looks to systematically augment its long term resources so that it is well positioned to capitalize on a revival in the economy. HDFC has been one of the NBFCs that have a huge chunk of bonds maturing in the next few months but cash flows and access to funds have never been a problem for HDFC.

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