Stock Market Investment Shot – 28th July 2022

India’s 5G spectrum auctions have been extended by one more day after the government had garnered a total of Rs1.49 trillion worth of bids in the first two days. The second day was relatively tepid as the big telecom guns had already put in bids worth Rs1.45 trillion on Day-1 itself. Reportedly, all the bands have seen strong demand. Jio may have reportedly bid for the highest spectrum worth Rs80,100 crore followed by Bharti Airtel at Rs45,000 crore and Vodafone Idea Rs18,400 crore. Adani restricted to 26 GHz spectrum.

For the first quarter ended June 2022, Maruti Suzuki reported standalone net profits of Rs1,013 crore. While yoy comparisons are not meaningful due to the shutdowns last year, the sequential profits were sharply lower compared to Rs1,839 crore in Q4FY22. Maruti sold a total of 467,931 units of vehicles in Q1FY23 compared to 353,616 units sold last year. Standalone revenues at Rs26,500 crore was up 49.1% yoy. Maruti reported record exports of 69,437 units in the quarter. The company missed street
estimates.

Private equity is gradually looking beyond traditional digital franchises. ASG Eye Hospitals (a leading eye care chain in India) announced an investment of Rs1,500 crore from PE investors; General Atlantic and
Kedaara Capital. This is the largest fund raising by a specialist eye care outfit in India. ASG Eye Hospitals has ambitions of becoming one of Asia’s leading eye hospital chains. The transaction will provide an exit for Investcorp, which entered in 2017. ASG doubled number of hospitals and tripled revenues since 2017.

Bajaj Finance reported record net profits for the June 2022 quarter at Rs2,596 crore, up nearly 2.5x yoy.
The profit growth was catalysed by brisk loan book growth. For Q1FY23, revenues were up 38% at Rs9,283 crore. Bajaj Finance had 6.03 crore active customers as of June 2022, up 20% yoy. Interest income grew 33% yoy at Rs7,920 crore. The big triggers came from a 60% growth in the new loans
booked and a 30% growth in the AUM to Rs2.04 trillion. Gross NPAs fell yoy from 2.96% to 1.25% in the June 2022 quarter.

The Union Cabinet approved an additional investment of $1.6 billion by BPCL in a Brazilian oil block. The block is likely to start production from FY27 onwards. Over the last 2 years, the government had been trying to sell its 52.98% stake in BPCL, but earlier this year it had shelved divestment plans for BPCL. While BPCL has a 40% stake in the oil block, Petrobras of Brazil holds the balance 60% and also operates the block. BPCL had bid for the block along with Videocon, but had to take it over after the latter’s
insolvency.

The saga of losses continues at Tata Motors as it reported a net loss of Rs5,007 crore for the June 2022 quarter. This is higher than the losses made in the June 2021 quarter. For Q1FY23, Tata Motors reported 8% higher revenues at Rs71,935 crore. Company is confident that cooling commodity prices should boost margins. The good news was the sequential easing of semiconductor shortages. It raised prices of CVs and PVs twice since April 2022, but despite that the company felt the pinch of a 26% jump in cost of
materials.

After hiking rates by 150 bps in 2022, the US Fed is all set to raise rates by another 200 bps in the next 4 months, with a hike of 75 bps to 100 bps coming on 27th July itself. Effectively, that would tantamount to an overall rate hike of 350 bps in the year 2022 itself, indicating substantially front-loading. Thanks to so much hawkishness, the dollar index (DXY) has rallied by 10% since the start of 2022 and looks poised to scale higher amidst hawkishness. Risk aversion and trade currency preference is driving dollar demand.

Directorate General of Civil Aviation (DGCA) instructed SpiceJet to run at 50% capacity till they fully sort out the safety issues. The DGCA noted that there had been poor internal safety oversight and inadequate maintenance actions. DGCA expressed concern that SpiceJet had not paid suppliers and was operating on cash-and-carry basis. A show cause has also been issued to SpiceJet to explain such lapses. In the last few weeks, there have been too many snags in its domestic and international flights, raising safety concerns.