Quarterly Financial Results

MONEY MATTERS CLUB Presents… July 2019, Edition The Financial Bulletin

FROM THE EDITORS

The Financial Bulletin Money Matters Club IBS, Hyderabad Est..—2005

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Dear Readers, It gives us immense pleasure to come up with the July, 2019 issue of Finance Bulletin successfully.

In this issue, we bring to you the much talked about quarterly results of companies from different industries.

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ICICI Bank Background of the topic: The adversities of ongoing liquidity crunch in banks, increasing non-performing assets and slow Indian economy did not stop ICICI Bank from reporting profits in its quarterly financial results. The ICICI Bank on 27th July 2019 reported a standalone net profit of Rs. 1,908 crores in the June quarter of Financial Year 2019-20.

Major performance indicators: •

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The net interest income (the difference between interest earned and interest paid) rose 27% year on year basis to Rs. 7,737 crore.

The percentage of Gross NPAs declined by 232 basis points to 6.49% and the net NPA ratio declined by 242 basis points to 1.77% from the same period last year.

Average Current Account Savings Account (CASA) deposits increased 12.3% year on year basis.

The bank’s domestic loan book and retail loan book grew by 18% and 22% from the same period last year.

The trend towards digitalization: •

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In April 2019, the bank launched ‘Instant home loan’ scheme under which pre-approved salaried customers of the bank were able to avail loans up to Rs. 1 crore for a tenure of 30 years using internet banking facility.

On 17th April 2019, the private lender announced the launch of ‘Insta auto loan’ scheme which enabled over two million pre-approved customers to avail the final sanction letter of a car loan instantly and digitally up to Rs. 20 lakhs for a tenure of 7 years.

Strategic Moves: On 20th May 2019, the bank entered into an agreement with the BSE to buy a stake in its subsidiary Indian International Exchange (INX) for Rs. 31 crores. On 31st May 2019, INX registered an all-time high with a daily turnover of over Rs. 23,060 crores in its derivative segment. A significant beneficiary of these results was ICICI bank which holds a 9.9 % stake in the concern.

Some Lapses: The fight of ICICI Bank suffered a minor glitch right before its take-off when the company was forced to report a 50 % fall in net profits on account of insolvency of Jet Airways. Apart from this, the bank had to classify fund based exposure of Rs. 276 crore towards Infrastructure Leasing and Financial Services as NPA. A major prestige loss occurred in the later part of June 2019, when the former CEO of the bank, Chanda Kochhar, was caught by the Enforcement Directorate for alleged involvement in money laundering with Videocon promoter, Venugopal Dhoot where ICICI Bank had an exposure of Rs. 1,875 crores.

Larsen & Toubro Introduction: Larsen & Toubro Ltd was incorporated in the year 1946 as a partnership firm founded by two Danish engineers Henning Holk Larsen with Soren Kristian Toubro in Mumbai. Larsen & Toubro is a major technology, engineering, construction, manufacturing, and financial services conglomerate with global operations.

Key Performance Indicators: •

Larsen & Toubro on 23rd July 2019 reported a 21.2% growth and a consolidated profit of Rs. 1,473 crore year-on-year for the first quarter (April-June) of the financial year 2019-20.

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Consolidated gross revenue during the quarter stood at Rs. 29,636 crores achieving YoY growth of 10%. International revenue is about Rs. 9,268 crores constituted 31% of the total revenue.

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L&T maintained its revenue growth guidance at 12-15%, with an order inflow growth forecast of 10-12%.

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Order wins (bid or customer's purchase) in Infrastructure and Power segments were the major contributors to the order inflow during the quarter.

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Infrastructure segment, which contributed nearly 50% to total revenue, registered a 13.8% growth YoY reaching a revenue of Rs. 14,037.6 crore.

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Strong orders from public sector undertakings and the private sector enabled growth during the quarter.

Key highlights from the management: •

A focus on resource augmentation in the budget is expected to enable the government to channelize spending on infrastructure development.

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The company is looking forward to increase investment momentum and sustained growth.

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Initiatives towards improved productivity, cost efficiencies derived from leveraging digital technology, capacity utilization, and capability enhancement are expected to help maximize shareholder returns on a sustainable basis.

Piramal Group Background: Piramal Group is one of India’s largest companies having a presence in Financial Services, Healthcare Information Management and Pharmaceuticals.

46% of the company’s revenue comes from the international market. It made its foray into the financial service sector with Piramal Capital & Housing Finance Limited (PCHFL). It provides end-to-end financing solutions in both wholesale and retail funding opportunities across sectors such as real estate, infrastructure, renewable energy, hospitality, logistics, industrials and auto components etc.

Key Performance Indicators: •

Piramal Enterprise on 6th August 2019 posted a 21% rise in consolidated net profit of Rs. 461 crore for the quarter ending 30th June, 2019. The company had reported a net profit of Rs. 382 crore in the last year.

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The Net sales rose by 21% to Rs. 3,506 crore in the latest quarter as against Rs. 2,902 crore in June quarter 2018-19.

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In the Pharma segment, the revenue grew by 12% to Rs. 1,173 crore, while healthcare insights and analytics revenue rose by 15% to Rs. 319 crore during the quarter.

Reasons for good performance: •

The healthcare Insights & Analytics revenue grew by 15% YoY to Rs. 319 Crore.

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The company successfully cleared 7 regulatory inspections and 41 customer audits during the first quarter of Financial Year 2019-20 thereby building customer trust.

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To focus on its own business, Piramal Group chairman, Mr. Ajay Piramal, exited his stake from Shriram Transport Finance and is further planning to exit from Shriram Capital.

Industry Performance: Cipla has clocked better returns than most of its pharma peers in the past one year by reporting a consolidated net profit of Rs. 447.15 crore for the first quarter of 2019 as against Rs. 445.61 crore in the same quarter of the previous year. Cipla’s competitor Aurobindo Pharma reported a 39.52% rise in consolidated net profit of Rs. 635.68 crore for the first quarter of 2019 as against Rs. 455.59 crore for the same quarter of the previous year. All this was attributable to robust sales in the United States and Europe.

Tata Motors Background of the company Tata Motors Ltd is India's largest Commercial Vehicle (CV) company and fourthlargest Passenger Vehicle (PV) player. Through its subsidiaries and associates, the company has operations in the UK, South Korea, Thailand, and Spain. The business comprises two iconic British brands – Jaguar and Land Rover. Tata Motors markets cars, buses, and trucks in several countries across Europe, Africa, the Middle East, south-east Asia, and South America.

Key Performance indicators •

The company reported a net loss of Rs. 3,680 crores for the first quarter of the Financial Year 2019-20 which nearly doubled from the earlier reported loss of Rs. 1,863 crores for the same period last year.

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The consolidated revenue from operations fell by 8 % on a year on year basis to Rs. 60,830 crores.

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Revenue from passenger vehicle business dropped by 6 % on a year on year to Rs. 3,188 crores.

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Jaguar Land Rover’s revenue fell to Rs. 45,661 crores from Rs. 48,215 crores reported in the same period last year.

Reasons for the downfall •

Weak consumer sentiments, liquidity stress, and the implementation of axle load norms has particularly impacted sales of medium and heavy CVs in the domestic market. Tata Motors indicated that poor freight availability, falling freight rates and the slowdown in infrastructure projects impacted demand.

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Various economic factors like increase in the input costs resulting into increase in prices, liquidity crunch, low credit availability and a one-time payment of insurance premium has taken a toll on customer sentiments which in-turn has affected sales.

Industry performance Domestic passenger vehicle sales at Maruti Suzuki India Ltd., the country’s largest carmaker, fell nearly 37% from last July. Second-ranked Hyundai Motors India Ltd. recorded a 10 % drop while the total sales of Mahindra & Mahindra Ltd. dropped by 16 %.

Conclusion However, there is hope for recovery in PV sales during this festive season. The wholesale dispatches are likely to remain weak for the next 1-2 months and we can expect some signs of recovery from this festive season. The government’s push to recapitalize banks and improve liquidity in NBFCs is positive for the economy and benefits of which will start reflecting in the next few quarters.

Bharti Airtel Background of the company: Bharti Airtel Limited is a leading global telecommunications company with operations in 18 countries across Asia and Africa, headquartered in New Delhi, India. The company ranks amongst the top 3 mobile service providers globally in terms of subscribers. In India, the company's product offerings include 2G, 3G and 4G wireless services, mobile commerce, fixed line services, high-speed home broadband, DTH and enterprise services including national and international long distance services to carriers. In the rest of the geographies, it offers 2G, 3G, 4G wireless services and mobile commerce. Bharti Airtel had over 403 million customers across its operations at the end of March 2019.

Major performance highlights: •

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The company reported a Q1 net loss of Rs. 2,866 crores in the financial year 2019-20 as compared to a profit of Rs. 97 crores in the same period last year.

The company’s consolidated revenue from operations grew 4.7% to Rs.20,738 crores as compared to Rs. 19,799 crores a year ago.

Revenue from the Indian wireless business grew 4.1% year on year to Rs.10,724 crores.

Consolidated mobile data traffic on the network grew 94% on a year on year basis.

Reasons for downfall:

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It planned to offer digital access to books written by Indian and International authors but failed to compete with the likes of Kindle by Amazon.

In April 2019, the Telecom Regulatory Authority of India (TRAI) directed Bharti Airtel to comply with the regulations relating to customer relationship as they were unable to contact the toll-free number of Bharti Telemedia, the DTH arm of Airtel. This led to a downfall in revenues from this business.

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Apart from this, the main reason for the fall is the impact of Jio. Within no time, Jio was able to capture a significant market share owing to the huge capital base which permitted it to burn enough cash to take away the customers from other telecom operators.

Leading Company in Telecom: On 30th June 2019, Reliance Jio reported a Q1 net profit of 46% to Rs. 891 crore. Despite larger consumer base across tariff plans, customer engagement improved with higher data usage of 11.4 GB per user per month and Jio's subscriber base at 331.3 million.

Jio Info Comm. has overtaken rival Bharti Airtel to become the second- largest operator in terms of mobile subscriber base, as per the data from the TRAI.

CBI Involvement CBI after filing the case against Vikram Kothari, his wife and son, and also on some bank officials started its investigation and carried a raid on the home and offices of Our monthly Newsletter– The Financial Vikram Kothari and then arrested Vikram Kothari.

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Analysis

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