Stock Market Investment Shot, 5th August 2022

In a recent research report, SBI has pegged India’s fiscal deficit for FY23 at 6.5%. This is just about 10 bps higher than the budget estimates. As of the end of the first quarter, the fiscal deficit had already touched 21.2% of the full year target. Tax revenues have been robust on higher economic activity and better levels of compliance. SBI has also raised the current account deficit target for FY23 to 3.7% of GDP, which is not surprising considering that the economy has seen its trade deficit cross $100 billion in first 4 months.

Adani Enterprises, the incubating holding company of the Adani group, will acquire the toll roads of Macquarie Asia Infrastructure Fund in Andhra Pradesh and Gujarat for Rs3,110 crore. ARTL, a unit of Adani Enterprises, will buy Macquarie’s 56.8% stake in Gujarat Road and Infrastructure Company and its 100% stake in Swarna Toll way. The transaction is expected to be closed by September 2022. While Swarna has 2 stretches of toll roads in Andhra Pradesh, GRICL has two stretches of toll roads in the state of Gujarat.

SEBI appointed Chokshi & Chokshi to conduct a forensic audit of the financial statements of Future Retail Ltd (FRL). SEBI believes that FRL may have dealt in a manner detrimental to the interest of investors. They will audit the accounts for FY20, FY21 and FY22. It may be recollected that, last year, the Insolvency and Bankruptcy Code (IBC) proceedings were invoked against FRL after repeated defaults.
Future Group owes its 26 lenders over Rs15,000 crore and IBC was the only option after the deal with RRVL did not go through.

Ivanhoe, the real estate arm of Canadian Pension Fund, sold 70.29 lakh shares of Macrotech Developers on 04th August for Rs736 crore. Ivanhoe sold 43,84,464 shares on NSE and 26,44,464 shares on BSE, representing 1.5% stake in the company. The average price ranged between Rs1,047 and Rs1,048. Prior to the deal, Ivanhoe held 2.13% stake in Macrotech. The identity of the buyers were not known. This is the second big stake sale this week after Uber Holdings sold Zomato worth Rs3,087 crore on Wednesday.

RBI has clarified that premature redemption under the Gold Monetisation Scheme (GMS) would only be payable in Indian rupees and depositors would have the option to opt for physical gold only on maturity.
The purpose of the Gold Monetisation Scheme (GMS) 2015 was to mobilise idle gold held by households and institutions. By putting such idle gold to productive use, India could save billions in forex to import gold. Medium term bonds are for 5-7 years and long term bonds under GMS are for 10-12 years.

Paytm may have to take a hit of Rs400 crore on revenues and Rs500 crore on EBITDA if it cuts rentals to zero on all of its sound devices for merchants. Despite the recent rally, Macquarie remains pessimistic on Paytm with target price of Rs450. This may be triggered by the fact that Paytm was facing a tough fight from PhonePe. The impact would be 8% on revenues and 20% on EBITDA. The big challenge for Paytm came after PhonePe launched the soundbox at a monthly rental of Rs49 and upfront cost of just Rs1.

Gas Authority of India (GAIL) reported 51% spike in net profits for the June 2022 quarter at Rs3,251 crore on the back of record margins from gas marketing. However, profits were slightly lower on
sequential basis. Sales turnover more than doubled to Rs38,033 crore in the June 2022 quarter. The positive results were mainly on account of increased gas marketing and transmission volumes, better marketing spread and higher product prices. In Q1FY23, GAIL incurred total CAPEX of Rs1,975 crore pipelines and petchem.

Britannia Industries reported 13.2% lower net profits at Rs335.74 crore, well short of the street poll. Total revenues were up 8.74% at Rs3,701 crore for the June 2022 quarter. The profit pressure came from a 15% to 20% spike in the prices of key inputs like wheat and industrial fuel. Gross margin declined by 169 bps yoy to 36.1%. Gross margins were also 123 bps lower on a sequential basis. Volumes declined 2% against expectations of 4% growth. Going ahead, lower inflation is likely to be a key driver of profits for Britannia.