DHFL’s Imminent Default - III: Are Regulators and the Market Prepared?
Given the life-threatening scenario I have described about Dewan Housing and Finance Ltd (DHFL) here and here, DHFL is forced to take steps to remain solvent. However, these steps are likely to severely impair its operations and profitability as reflected below.
 
STEPS TAKEN
 
1. Stopped Disbursements 
  • The disbursements are down 95% in Q3FY18-19 after the crisis...
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  • Nifty, Sensex showing signs of exhaustion – Wednesday closing report
    We had mentioned in Tuesday’s closing report that bullishness in Nifty, Sensex were continuing. The Indian indices ended lower but off day's low on Wednesday ahead of F&O expiry on May 30. At close, the Sensex was down 247.68 points at 39,502.05, while Nifty was down 67.70 points at 11,861.10. On the NSE, there were 660 advances, 1,082 declines and 359 unchanged. 
     
     
    Among the sectors, except IT (information technology), all other indices are trading in the red led by PSU (public sector undertaking) Bank, infra, auto, metal, energy, FMCG (fast moving consumer goods) and pharma.
     
    Tata Consultancy Services has signed a new strategic partnership with Scandinavia's leading airline, SAS, the flag-carrier of Sweden, Norway and Denmark. TCS shares closed at Rs2,114.20, up 1.95% on the NSE.
     
    TTK Prestige reported that net profit was up 18.4% at Rs43.8 crore versus Rs37 crore and revenue was up 6.8% at Rs444.9 crore versus Rs416.4 crore. Operating profit or EBITDA (earnings before interest, tax, depreciation and amortisation) was up 10.9% at Rs64.1 crore against Rs57.8 crore and tax expense was at Rs21.3 crore versus Rs18.5 crore, year-on-year. TTK Prestige shares closed at Rs7,230.55, down 0.47% on the NSE.
     
    The Q4 consolidated net profit of Adani Enterprises rose 50.5% at Rs283.4 crore against Rs188.3 crore, revenue was up 35.5% at Rs13,236 crore against Rs9,767 crore, year-on-year. One-time loss was at Rs160.5 crore, EBITDA (earnings before interest, tax, depreciation and amortisation) was up at Rs707 crore and margin at 5.3%. Adani Enterprise shares closed at Rs157.00, down 0.41% on the NSE.
     
    Promoter group firm Bharti Telecom reduced their holding to 41.24% and consequently, Bharti Airtel shares closed at Rs338.25, down 2.13% on the NSE.
     
    V-Guard reported Q4 net profits at Rs59.2 crore against Rs27.6 crore. Revenue was up 12.3% at Rs742 crore versus Rs661 crore, year-on-year. V-Guard Industries shares closed at Rs226.90, up 1.43% on the NSE.
     
    Cadila Healthcare shares rose 4% post-announcement of Q4 results. Consolidated net profit was down 22.1% at Rs460 crore, revenue was up 15.3% at Rs3,771.2 crore. Operating profit or EBITDA (earnings before interest, tax, depreciation and amortisation) were down 6.4% at Rs800.6 crore, and the margin was at 21.5%. Cadila Healthcare shares closed at Rs263.10, up 1.88% on the NSE.
     
    RITES Q4 results were announced and the net profit was up 70.2% at Rs132 crore against Rs77.5 crore, revenue up 31.4% at Rs714.3 crore against Rs543.5 crore, year-on-year. RITES shares closed at Rs279.10, up 2.20% on the NSE.
     
    Ipca Labs has doubled its Q4 profit. Net profit has increased to Rs109.5 crore in March quarter in 2019, against Rs51.3 crore in the same period last year and the results were driven by strong operating income. Revenue grew by 6.7% to Rs834 crore. EBITDA (earnings before interest, tax, depreciation and amortisation) shot up 60.7% to Rs174.7 crore and margin expanded 700 bps to 20.9% year-on-year. IPCA Laboratories shares closed at Rs929.30, down 0.25% on the NSE.
     
    Indoco Remedies Q4 results were announced and net profit fell 43.3% to Rs11.6 crore, revenue was down 6.5% at Rs252 crore. Indoco Remedies shares closed at Rs193.75, up 4.50% on the NSE.
     
    Ramco Systems has won the Aviation ERP modernization program from Société Calédonienne de Transports Aériens. Ramco Systems shares closed at Rs201.60, up 5.27% on the NSE.
     
    Havells India Q4 results were announced and net profit was down 8.4% at Rs207 crore, revenue was up 8.6% to Rs2,752 crore. EBITDA (earnings before interest, tax, depreciation and amortisation) were down 9.7% at Rs323 crore, margin was at 11.7%, year-on-year. Havells India shares closed at Rs734.30, up 1.46% on the NSE.
     
    ICICI Lombard General Insurance Company shares gained 2.77% on May 29 after a media report indicated that global private equity player Warburg Pincus has been exploring a stake sale in the company. ICICI Bank shares closed at Rs423.50, down 2.49% on the NSE.
     
    Man Industries shares declined 10%. The carbon steel pipes manufacturer reported dismal numbers for the quarter ended March 2019. Man Industries India shares closed at Rs61.00, down 9.16% on the NSE.
    Shares of Hindustan Copper added more than 3% after the company reported strong earnings in the quarter ended March 2019. Hindustan Copper shares closed at Rs45.80, up 1.22% on the NSE.
     
    Prestige Estates Projects shares have hit their 52-week high. CLSA (formerly, Credit Lyonnais Securities Asia) said that its Prestige's Q4 results were strong both operationally and financially, as pre-sales surged to an 18-quarter high and profits more than doubled quarter-on-quarter. Management said that it was in aggressive mode now as it looked to capitalise on a market upturn as well as industry-wide consolidation. Pre-sales could rise 30% and lease income could grow by 20% in FY20, if the upper end of guidance got hit, according to CLSA. Prestige Estates Projects shares closed at Rs308.00, up 7.84% on the NSE.
     
    The Indian rupee has recovered a bit from its day's low as its trading lower by 18 paise at 69.87 per dollar versus previous close 69.69.
     
    The top gainers and top losers of the major indices are given in the table below:
     
     
    The closing values of the major Asian indices are given in the table below:
     

     

  • User

    Bullishness in Nifty, Sensex Continues – Tuesday closing report
    We had mentioned in Monday’s closing report that Nifty, Sensex continue to remain bullish. The major indices of the Indian stock markets were range-bound on Tuesday and closed with gains over Monday’s close. On the NSE, there were 948 advances, 790 declines and 360 unchanged.
     
    The trends of the major indices in the course of Tuesday’s trading are given in the table below:
     
     
    Indian markets managed to end higher today, posting third straight record closing high. The Sensex ended 66 points higher at 39,749 while Nifty ended marginally higher at 11,928. Banking stocks saw some profit-taking. Gains in heavyweights like RIL (1.2%) and Infosys (2.5%) helped support the benchmark indices. Other top gainers included Yes Bank (4%), Coal India (2.7%), PowerGrid (1.9%), Vedanta (1.7%) and TCS (1%). Midcap and smallcap stocks managed to post some gains. 
     
    Punjab National Bank (PNB) reported Q4 net loss of Rs4,750 crore on lower provisions. PNB’s gross NPAs fell to 15.5% from 18.38%, while net NPAs declined to 6.56% from 11.24%. Net interest margin, a key measure of profitability, rose to 2.45% from 1.90% in the March quarter of 2018. PNB’s gross non-performing assets (NPA) fell to 15.5% from 18.38% while net NPAs declined to 6.56% from 11.24%. The lender’s net interest income grew 37.1% from a year ago to Rs4,200 crore in the March quarter. Net interest margin, a key measure of profitability, rose to 2.45% from 1.90% in the March quarter of 2018. PNB shares closed at Rs86.20, down 3.47% on the BSE.
     
    InterGlobe Aviation Ltd, the operator of IndiGo, said its quarterly profit surged five-fold, beating analysts’ estimates, as yields rose and the airline carried more passengers amid the collapse of rival Jet Airways (India) Ltd following funding woes. Net profit rose to Rs589.59 crore in the quarter ended 31 March from Rs117.64 crore a year earlier, InterGlobe Aviation said. That compares with the Rs378.7 crore average profit estimates compiled by Bloomberg. IndiGo’s March quarter revenue grew 35.5% to Rs8,259.81 crore from Rs6,097.68 crore a year ago. 
     
    Fuel cost during the quarter rose 19% to Rs2,781.28 crore. Indigo said its total debt at the end of the March quarter stood at Rs2,429.2 crore. For the year ended 31 March, the airline reported a profit of Rs157.25 crore compared with Rs2,242.32 crore in the previous year. Revenue rose 24% to Rs29,821.37 crore. InterGlobe Aviation shares closed at Rs1,659.10, down 0.23% on the BSE.
     
    SpiceJet reported a 22% jump in net profit for the March quarter despite grounding of Boeing MAX aircraft. The airline reported a profit of Rs56.3 crore for the quarter ended March 31st, 2019 as against Rs46.2 crore in the same quarter last year. Its capacity (in terms of seat kilometre) was up by 21% while average fare rose 11%. SpiceJet shares closed at Rs148.80, up 2.09% on the BSE.
     
    The Reserve Bank of India (RBI) on 24 May said it planned to implement liquidity coverage ratio (LCR) in a phased manner over four years starting April 2020. Setting aside 60% of NBFCs’ net cash outflows, as envisaged in the initial phase, in so-called high-quality liquid assets such as government securities and cash will prevent them from deploying these funds for lending. 
     
    RBI’s (Reserve Bank of India) draft norms could lead to a credit slowdown for NBFCs (non-banking finance companies) with poor liquidity management, analysts say. Although NBFCs will need to maintain LCR (liquidity coverage ratio) of 60% from April 2020, they will gradually have to move towards 100% LCR by April 2024. Sundaram Finance shares closed at Rs1,508.85%,  up 2.09% on the BSE.
     
    The top gainers and top losers of the major indices are given in the table below:
     
     
    The closing values of the major Asian indices are given in the table below:
     
     
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