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Outcome of the Telecom Committee Meeting

Outcome of the Telecom Committee Meeting
by 5paisa Research Team 08/09/2021

There were major expectations that the Cabinet Meeting on Telecom on 08 September would be a game changer. However, the meeting started at 11 am on Wednesday but did not discuss any of the contentious issues like relief package for Vodafone, change in methodology of AGR computation, deferral of spectrum fees payment etc. The I&B Minister, Anurag Thakur, merely said that the issue was not discussed.

 

In a way, it is disappointing for telecom stocks, especially Vodafone Idea. It is struggling with its mounting losses, falling customer base and a huge outstanding liability of Rs.180,000 crore. Most of this is owed to the government in the form of Annual Gross Revenue (AGR) dues and spectrum fees payable.

 

The last relief for telecom players was when outstanding AGR dues were defrayed over 10 years in equal instalments. Here were some key expectations that telecom companies had from the Cabinet Committee on Telecom.

 

• There were expectations of rationalization of telecom license fees so as to reduce the prospective burden on telcos.

 

• It was hoped that the AGR definition would be tweaked to exclude non-telecom revenues sources to give relief to telecom companies.

 

• Telecom players were expecting a moratorium of another 2 years on AGR pay-outs, but markets are unsure how attractive it would be with interest implications.

 

• There were hopes that government would intervene to bail-out Vodafone, which is stuck with debt of Rs.180,000 crore and huge accumulated losses that have wiped out their net worth.

 

• The street was expecting that part of the debts of Vodafone Idea would be converted into equity so that the government becomes a partner in the rescue.

Anurag Thakur has been non-committal on whether this would be taken up for discussion next week. Any worsening of the situation at Vodafone Idea would not only lead to loss of jobs, but also a huge dent on banks that guaranteed most of the statutory payables.

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LIC IPO - Government appoints Investment bankers

LIC IPO Investment bankers
IPO
by 5paisa Research Team 08/09/2021

The government has taken an important step towards the LIC IPO. On 08 September, the DIPAM secretary, Tuhin Pandey, announced the list of investment bankers managing the LIC IPO. A total of 16 merchant bankers had made presentations on 15-July to the government for managing the LIC IPO and out of them 10 have been shortlisted for the job. The government is yet to announce specifics of BRLMs and advisors to the issue.

The Department of Investment and Public Asset management (DIPAM) has appointed 5 global investment banks and 5 Indian investment banks.

The 5 global investment banks include

     1. Goldman Sachs

     2.Citigroup

     3. JP Morgan

     4. BOFA Securities

     5. Nomura

 

The 5 Indian investment bankers to the issue include:

   1.  SBI Caps

   2.  JM Financial

   3.  Axis Capital

   4.  ICICI Securities

   5.  Kotak Mahindra Capital.

 

Apart from appointing the investment bankers, DIPAM has invited applications for appointment of legal advisors to the issue. KFintech Private Limited , formerly Karvy Computershare, has been appointed as the registrar to the issue. Milliman Advisors LLP is already acting as the actuarial advisors and they are in the process of arriving at the embedded value of LIC. The issue is slated in the Mar-22 quarter.

While FDI up to 74% in life insurance is permitted under the automatic route, that is not applicable to LIC as it is governed by the LIC Act. The IPO is also likely to permit foreign investors to invest up to 20% via the IPO route. The Cabinet Committee on Economic Affairs has already cleared the issue.

Read: New rules for Insurance Sector

The success of the LIC IPO is crucial to the success of the government’s Rs.175,000 crore disinvestment target in FY22. Till date, divestments have only collected Rs.8,368 crore this fiscal. The government may sell 5% to 10% in LIC and the size of the IPO could vary from Rs.75,000 crore to Rs.100,000 crore and will be the biggest in Indian IPO history.

 

LIO IPO Storyline:

1.  Did the LIC IPO just get the Government Stamp of Approval

2. LIC IPO gets once step closer to becoming reality

3. Life Insurance Corporation LIC - IPO Update

4. LIC may split its proposed IPO into 2 tranches
 

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SAIL to Double Steel Capacity to 50 MTPA by 2030

SAIL to Double Steel Capacity to 50 MTPA by 2030
by 5paisa Research Team 08/09/2021

Steel Authority of India Limited (SAIL) has laid out an elaborate plan to double its steel manufacturing capacity from the current 23 million tonnes per annum (MTPA) to over 50 MTPA  by 2030. This phase of expansion will begin from 2023-24, after the ongoing expansion program is completed.

 

SAIL Plant

Current Capacity

Phase 1

Phase 2

Capacity by 2030

Durgapur

2.50 MTPA

7.50 MTPA

Nil

7.50 MTPA

Rourkela

3.70 MTPA

8.80 MTPA

Nil

8.80 MTPA

Bokaro

4.60 MTPA

9.50 MTPA

Nil

9.50 MTPA

Burnpur IISCO

2.50 MTPA

3.00 MTPA

7.50 MTPA

7.50 MTPA

Bhilai

7.00 MTPA

Nil

14.00 MTPA

14.00 MTPA

Others

3.00 MTPA

Nil

Nil

3.00 MTPA

 

The capacity expansion across the various plants of SAIL will be spread over two phases. While Durgapur, Rourkela and Bokaro will see capacity expansion in Phase 1, Bhilai will see capacity expansion in Phase 2. The IISCO plant in Burnpur will expand capacity in both the phases. Once the two phases of expansion are completed, the total capacity of SAIL will grow from the current 23 MTPA to 50 MTPA by year 2030.

The total expansion program will entail an investment of Rs.150,000 crore. SAIL has already procured a 30-year mining lease for iron ore in Rajasthan’s Bhilwara district to ensure steady supply of iron ore for steel production. This expansion is part of the National Steel Policy 2017, which had envisaged India’s steel output to grow 3-fold to 300 MTPA by the year 2030 with SAIL having one-sixth market share.

Steel companies have been in a structural rally in the last one year as is evident from the stock prices which have grown multi-fold. There has been a massive demand for steel coming domestically and from abroad. The global steel shortage has also ensured that steel prices remain buoyant on the London Metals Exchange (LME). The expansion seeks to make the best of this robust demand.
 

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5 Mantras To Know When You Are Saving For A Downpayment

5 Mantras To Know When You Are Saving For A Downpayment
by 5paisa Research Team 08/09/2021

5 Mantras To Know When You Are Saving For A Downpayment

 

 Start Early: Most people start saving only a couple years before they decide that they want to buy a house. The key to making the saving process easier is to start early and allow your savings to grow before you ‘need’ to buy a house. This will allow you to go at a slower pace and save smaller amounts of money each month towards the same and not pressurize you into changing your lifestyle significantly or become a burden.

 Budgeting: The first step is to sit down with your income and expenses and figure out in what range you could buy a house and what kind of down payment you could afford. It is essential to go over the expenses that you are currently incurring and see where you could cut down and save money. Set a realistic budget for the future and try to stick to it. Ensure that you put aside a portion of your income towards saving for the down payment each month.

 Discipline yourself by automating your savings: If you are not the kind of person that could be disciplined about saving, then consider automating them. Decide how much you would like to save each month and set up an automated transfer of that amount to a savings account at the start of each month or start Systematic Investment Plan (SIP) in a mutual fund scheme of your choice. This will make saving and investing a habit.

 Make the most of your savings: Consider maximizing your savings by starting an SIP in an equity mutual fund. Since equities are best if you have an investment time frame of more than 5 years, it is always best that you start this as early as possible. An SIP will not only automate your savings and inculcate discipline, it will also help you reap the benefits of equity investing while smoothening some of the volatility associated with equity markets.

 You also have to pay interest: When you are looking to buy a house, the down-payment is not the only thing you need to consider. You also need to consider the monthly instalments that you pay for your home loan. You must ensure that you always have savings in a liquid investment that can take care of at least one year of home loan instalments.

 

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RBI Removes UCO Bank from PCA Framework

RBI removes UCO Bank from PCA framework
by 5paisa Research Team 08/09/2021

In a significant boost for UCO Bank, the RBI has decided to move UCO Bank out of the Prompt Corrective Action (PCA) framework. UCO Bank had been brought under PCA framework in 2017 after its financials showed a lot of stress. Its net NPAs had gone as high as 8.57% and that is a typical basket case for a bank to be put under PCA.

The PCA framework puts severe restrictions on the operations of the bank so as to limit the risk burgeoning. For example, banks under the PCA framework are constrained from expanding their loan books. They are also not allowed to undertake any fresh recruitments nor pay any bonuses to the senior managerial staff. Such banks also face severe restrictions on branch network expansion and are also restricted from paying dividends to shareholders.

The decision to remove UCO Bank from the PCA framework was taken after there was a significant improvement in its financials for the Mar-21 fiscal. In addition, UCO Bank has also given an undertaking to the government that it would meet all the criterial to remain outside the PCA framework. 

UCO Bank’s net NPAs have fallen from 8.57% in Mar-17 to 3.94% as of Mar-21. In addition, the capital adequacy ratio at 14.24% was comfortable with 85% accounted for by Tier-1 capital. In the light of these systemic improvements in numbers, RBI has decided to remove UCO Bank from the PCA framework.

Apart from having a positive impact on the stock price, the removal from PCA framework will benefit in other ways too. Now, UCO Bank can once again start to expand its branch network in an aggressive manner. The bank can also pay dividends to shareholders and look for fresh senior talent. UCO Bank has been aggressive in offering one-stop services to customers, like through its recent tie-up with Fisdom for wealth management. Exiting from the PCA should help UCO Bank generate better ROI per customer.

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5 Mantras To Know About Fundamental Analysis

5 Mantras To Know About Fundamental Analysis
by 5paisa Research Team 08/09/2021

5 Mantras To Know About Fundamental Analysis

 

 Intrinsic Value: The main goal of fundamental analysis is to evaluate a company’s financials and arrive at a number that can tell you what each share of the company should be worth. The value of the company divided by the number of outstanding shares is the intrinsic per share value of the company. This price is then compared with the market price of the share to determine if the stock is undervalued or overvalued.

 Top-Down vs. Bottom-Up: The top-down approach to investing starts with macro variables such as GDP and economy and works its way down to the company level. Whereas, in Bottom-down investing, analysis is done from the company or sector level.

 Quantitative & Qualitative: Fundamental analysis looks primarily at quantitative data such as numbers and company financials. But there is also focus on qualitative data, such as the quality of management, quality of the product or service offered by the company, and other such factors.

 Long-term Outlook: Fundamental analysis is generally used to determine investments that are more long term in nature. It allows investors to find companies that are good investments from a value and growth perspective. It is ideal for investors using the buy and hold strategy and for value investors.

 Procedure: Fundamental analysis starts with reading the company’s annual reports, understanding its business, and identifying growth factors. Then, it moves on to understanding financial statements like the P&L account, Balance Sheet, and Cash flow statements. Based on this, analysts can assume a growth rate to forecast future earnings. Then these future earnings are discounted back to the present and combined to arrive at the value of the company. Several financial ratios such as P/E, P/S and P/B ratios are calculated and compared to peers, industry average, and the firm’s own historical average to determine whether the prevailing market price is overvaluing or undervaluing the company.