India Ratings has highlighted that the lockdown and the impact on business could escalate the stressed assets of banks. India Ratings estimates that nearly Rs.550,000 crore worth of slippages could show up in the fiscal year 2020-21. Nearly 40% of these slippages are expected to come from non-corporate exposures; with a lot of pressure coming from retail and MSME loans. The outstanding gross bad loans could increase from Rs.9 trillion to over Rs.14 trillion. In the industrial segment, the pressure is expected to come from power, infra, construction, hospitality, steel, telecom and realty companies.
Despite airlines being allowed to ply from the end of May, airline CEOs are not too confident on any positive turnaround. Former CEO of Indigo, Aditya Ghosh, has highlighted that airline companies will require relief on fixed costs, concessions on airport charges, navigation charges and taxes to be able to pull out of the crisis. Ghosh also pointed out that the fare caps proposed by the government would be a major pain point for the airline companies. Most airlines have been shut for last 60 days and will be asked to adhere to strict protocols on social distancing. Flying to metros is likely to be permitted.
Most domestic funds rushed to buy into RIL and Bharti Airtel during the month of February. These two have been the star performers on the Nifty. While RIL has benefited from its zero-debt plans, Bharti Airtel has turned around its telecom business. It has also gotten over the AGR uncertainty and seen a sharp spike in its ARPUs in April. On the negative side, mutual funds have been moving out of L&T and private banks. Most private banks have come under a cloud in the last few months after retail consumer loans came under a major cloud due to the risk of job losses and falling income levels in coming months.
One of the most powerful Chinese search engines, Baidu, which has enjoyed the fruits of a US listing for a long time, now proposes to delist itself from NASDAQ. This comes in the aftermath of the US Senate passing a law authorising exchanges to delist (read Chinese) companies where the ownership structure is not too clear. This was a direct retaliation to US allegations that China had been responsible for the global spread of the Coronavirus. Some of the Chinese tech giants like Alibaba, Baidu and Tencent have benefited substantially from the US listing, but may not look to list at an exchange closer to home.
Ultratech may have reported optically good numbers for the Mar-20 quarter but the stock has lagged other cement stocks and there has been a method to the madness. On a YOY basis, the volumes of Ultratech fell by 16% due to lower capacity utilization at its plants in central India. Its predominant exposure to the Mumbai and Gujarat markets also weighed against the company. Ultratech’s volume decline has been the sharpest among the large cement stocks. Apart from the lower volumes, Ultratech also had the lowest growth in EBITDA. While Shree Cements led the pack with 35% growth in EBITDA, even ACC and Ambuja saw EBITDA growing by 27%. In the case of Ultratech, the EBITDA growth was just about 14%. The good news is that Ultratech is gradually getting out of its massive debt pile.
Coronavirus showed few signs of abating with the global afflictions crossing 5.1 million and casualties more than 3.31 lakhs. US leads with pack with over 1.7 million afflictions and close to 96,000 deaths. In terms of number of afflictions, Russia and Brazil are at the second and third place. However, in terms of casualties, UK, Italy, France and Spain are behind the US. Brazil has seen nearly 20,000 casualties and is growing rapidly. India has crossed 1.1 lakh afflictions with over 3,500 casualties. The big challenge is to prevent a second round of pandemic once the lockdown is lifted across most parts of the world.