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Sunday,16-January-2022

Business

Vodafone Idea could head for bankruptcy

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VODAFONE

Vodafone Idea could be the largest bankruptcy ever in India as the inability to pay dues under the adjusted gross revenue (AGR) may push the Vodafone Plc and Aditya Birla joint venture in that direction.

If the promoters and management of Vodafone Idea file for bankruptcy, it will be an earthquake for India Inc. However, one legal view is that filing under IBC in the NCLT after the Supreme Court order will be to circumvent contempt of court.

Vodafone Idea, promoted by British telecoms giant, Vodafone Plc and Aditya Birla group, has said it will repay some of its obligations under AGR in the next few days. However, it has not disclosed how much the amount will be paid.

“The company is currently assessing the amount that it will be able to pay to Department of Telecommunications (DoT) towards the dues calculated based on AGR, as interpreted by the Hon’ble Supreme Court in its order dated 24 October 2019. The company proposes to pay the amount so assessed in the next few days”, Vodafone said in a regulatory filing.

While the Supreme Court has come down heavily on telcos for non-payment of dues, it is not yet clear how much Vodafone Idea will pay and when. The company owes about Rs 44,000 crore, which is required to be paid before the court’s next hearing on March 17.

In end-December, the company had cash and cash equivalents worth Rs 12,530 crore. The cash in hand for the company will be only one-fourth of the dues payable, making the situation grim and uncertain.

The Modi government’s earlier stance to go easy on telecom operators, Bharti Airtel, Vodafone Idea and Tata Teleservices on adjusted gross revenues (AGR) has once again revived the chants of a ‘suit boot ki sarkar’ and allegations of crony capitalism from the Opposition.

As it turns out, the three parties are also big donors to the BJP as accessed in electoral bonds data, further lending credence to the allegations of crony capitalism by the Opposition.

The Congress had on Saturday alleged a quid pro quo in the decision of the Modi government to allow a breather for telcos. Randeep Singh Surjewala, in-charge, Communications, AICC said in a statement that what is the quid pro quo for Modi government to defer recovery of Rs 1.02 lakh crore from telecom companies as per order dated 23rd January, 2020 over which Supreme Court has now issued contempt and deferment of recovery of Rs.42,000 crore from telecom companies vide Cabinet decision dated 29th November, 2019.

Surjewala also asked as to why Modi government is extorting Rs 1.60 lakh crore from the pockets of 112 crore prepaid cell phone users as tariffs have been raised by 30-40 per cent.

Surjewala also asked if the increase of 40% in cell phone tariff and data usage charge a method to recover Rs 1.02 lakh crore payable by telecom companies from the pockets of ordinary Indians.

On January 23, Surjewala said the Modi government issued an order for not recovering Rs 1.02 lakh crore from telecom companies and not to take any coercive action by stating “not to insist for any payment pursuant to the order passed by Supreme Court and not to take any coercive steps till further orders.”

In 2017-18, for the BJP, 38 per cent of all its donations came from two donors — Prudent Electoral Trust (Rs 154.30 crore) and Ab General Electoral Trust (Rs 12.5 crore).

As per media reports, the BJP raised well over Rs 800 crore between April 1, 2018 and March 31, 2019 before the Lok Sabha elections and the biggest single contribution came from the Tata group backed Progressive Electoral Trust, which donated Rs 356 crore.

Prudent Electoral Trust, predominantly funded by Bharti Airtel, DLF and the Hero group, sent in over Rs 67 crore to the BJP and Rs 39 crore to the Congress in 2018-19. The Aditya Birla General Electoral Trust has sent in over Rs 28 crore to the BJP and they donated Rs 2 crore to the Congress.

Business

Cyclicals to drive Q3FY22 earnings growth: MOFSLA

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Corporate earnings growth for the third quarter of FY22 is expected to be led by cyclical stocks, Motilal Oswal Financial Services (MOSFL) said in a report.

Earnings growth is anticipated to be driven by metals, oil and gas and BFSI (Banking, Financial Services and Insurance) sectors.

In its report, MOSFL said that economic recovery backed by festive demand, higher commodity prices and improvement in asset quality in financials are expected to back this trend.

“There remains a clear divergence in 3QFY22 earnings growth. Global cyclicals, such as oil and gas and metals, continue to drive aggregate earnings growth, while BFSI profits are led by improvements in asset quality and credit growth,” the report said.

“Technology is likely to continue its momentum, propelled by strong revenue growth,” it added.

The auto and cement sectors are anticipated to drag earnings down, led by poor demand and higher commodity prices.

“Consumer, healthcare, capital goods, consumer durables and specialty chemicals are predicted to report single-digit YoY profit growth. Input cost pressures continue to weigh on gross margins for cement, specialty chemicals, autos, consumer staples and durables sectors,” the report said.

The report pointed out that Asian Paints, Bharti Airtel, BPCL, IOC, Tata Steel, JSW Steel, Titan, Hindalco and ONGC have seen an upgrade in their FY22 earnings.

“Companies that have seen downgrades to their FY22E earnings are Tata Motors, Maruti Suzuki, Ultratech Cement, Hero Motors, Shree Cement, Coal India, Axis Bank and HUL,” it said.

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HDFC Bank’s Q3FY22 YoY net profit up 18.1%

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 Lending major HDFC Bank on Saturday reported a year-on-year rise in net profit of 18.1 per cent for the third quarter of FY22.

The bank’s net profit increased to Rs 10,342.2 crore during the period under review over the quarter ended December 31, 2020.

Besides, the bank’s net interest income (income earned less interest expended) for the quarter under review grew by 13 per cent to Rs 18,443.5 crore from Rs 16,317.6 crore for the quarter ended December 31, 2020.

The lender’s net revenues (net interest income plus other income) increased by 12.1 per cent to Rs 26,627 crore from Rs 23,760.8 crore for the quarter ended December 31, 2020.

“Advances grew at 16.5 per cent, reaching new heights driven by relationship management, digital offering and breadth of products. Core net interest margin was at 4.1 per cent. New liability relationships added during the quarter remained at an all-time high,” HDFC Bank said in a statement.

“This continued focus on deposits helped in the maintenance of a healthy liquidity coverage ratio at 123 per cent, well above the regulatory requirement, which positions the bank favourably to capitalise on growth opportunities,” it added.

As per Q3FY22 results, provisions and contingencies for the quarter rose Rs 2,994 crore (consisting of specific loan loss provisions of Rs 1,820.6 crore and general and other provisions of Rs 1,173.4 crore) as against total provisions of Rs 3,414.1 crore for the quarter ended December 31, 2020.

“Total provisions for the current quarter included contingent provisions of approximately Rs 900 crore,” it said.

“The total credit cost ratio was at 0.94 per cent, as compared to 1.30 per cent for the quarter ending September 30, 2021 and 1.25 per cent for the quarter ending December 31, 2020,” it added.

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Lenders expected to exhibit strong Q3FY22 results

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 Listed lenders in India’s equity markets are expected to report ‘optically’ strong earnings growth for Q3FY22, said HDFC Securities in a report.

Accordingly, the brokerage house expects its coverage universe of 23 lenders to report 51 per cent YoY growth during the period under review.

This trend, the report said will come largely on the back of expected normalisation of provisions.

“The pace of collections and recoveries continues to improve, which, concurrent with normalised economic activity, is likely to moderate the stressed pool,” the report said.

“Disbursements are likely to witness healthy growth, driven by seasonal pick-up in retail loans as large corporate Capex remains elusive.”

As per the report, the revival in business momentum is likely to drive a 10.4 per cent YoY loan growth for the brokerage house’s coverage universe, with large private banks and large NBFCs (BAF) continuing to clock market share gains.

“The third wave of the pandemic is unlikely to impact Q3 earnings except in underlying sectors like travel and tourism that are already under stress.”

“However, we expect most lenders to maintain a surplus provisioning buffer for potential asset quality issues. We tweak our FY22E-FY24E forecasts for select lenders to factor in lower credit growth and marginally higher credit costs.”

Besides, HDFC Securities continue to prefer large banks with strong balance sheets and formidable deposit franchises.

Furthermore, it cited that business momentum continues to gather pace.

“In a quarter relatively unaffected by the pandemic and near-normal resumption of economic activity, we expect to see strong sequential growth in disbursements, particularly in retail and SME segments, riding on seasonal and pent- up demand.”

“Provisional filings suggest that banks within our coverage universe continue to gain market share as reflected in loan growth at 12 per cent YoY compared to system-wide YoY credit growth at 7 per cent.”

At present, the brokerage house has 23 lenders in its coverage universe including ICICI Bank, SBI, Bajaj Finance, SBI Cards, and Axis Bank.

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