Stocks, which opened with minor gains this morning, are trading with gains of over 1.5%.
Facebook is set to buy a 9.9% stake in Jio, in what is said to be one of the largest FDI investments for a minority stake in an Indian company.
Join us as we follow the top business news through the day.
Oil in storage rises to record 3.2 billion barrels
Sensex rallies 743 points on Reliance booster; Nifty tops 9,150
It was a good day for equities today with the benchmark indices that opened flat in the morning making steady gains through the day.
PTI reports: "Equity benchmark Sensex rallied 743 points on Wednesday, buoyed by robust gains in index heavyweight Reliance Industries as it struck a Rs 43,574-crore deal with Facebook, amid positive cues from the global markets.
The 30-share index ended 742.84 points or 2.42 per cent higher at 31,379.55. The wider NSE Nifty surged 205.85 points, or 2.29 per cent, to finish at 9,187.30.
Reliance Industries added more than 350 points to the Sensex by soaring over 10 per cent, after Facebook announced an investment of USD 5.7 billion (Rs 43,574 crore) to buy a 10 per cent stake in Jio Platforms.
This deal makes Facebook the largest minority shareholder in Jio Platforms, which is part of Reliance Industries.
Asian Paints, IndusInd Bank, Nestle India, Maruti, Hero MotoCorp and HUL were also among the gainers, spurting up to 5 per cent.
On the other hand, ONGC, L&T and PowerGrid ended in the red."
Facebook buy in Jio to leverage WhatsApp for transactions between consumer and kirana store
What is the business logic behind the Facebook-Jio deal?
IANS reports: "The equity stake acquisition by Facebook in Reliance Jio will entail leveraging the messenger platform to facilitate new commerce transactions between a consumer and a kirana store.
According to a report by Credit Suisse, the transaction includes leveraging WhatsApp for New Commerce initiative. The announcement includes commencement of a partnership among JioMart (platform of RIL’s New Commerce initiative), Reliance Retail and WhatsApp.
Currently, New Commerce is under purview of Reliance Retail and outside of Jio Platforms. The partnership will entail leveraging the messenger platform to facilitate New Commerce transactions between a consumer and a kirana store.
Credit Suisse said the deal will aid in achieving net debt free by March—2021. As of December 31, 2019, net debt for the group stands at Rs 1,531 billion and with Facebook’s investment, this should put RIL on course to be net debt free by March-2021."
Rupee recovers from all-time low to settle at 76.68 against US dollar
The Indian currency, which hit a new all-time low this morning against the US dollar, managed to stage a late recovery.
PTI reports: "The rupee on Wednesday recovered from record low levels to settle higher by 15 paise at 76.68 (provisional) against the US dollar following gains in domestic stocks and some weakness in the greenback against global currencies.
&bsp; The rupee opened weak at 76.86 at the interbank forex market and then fell further to an all-time low of 76.88 during the day.
Later, the domestic unit recovered the lost ground in line with surging stock markets and finally settled at 76.68, higher by 15 paise over its last close of 76.83 against the US dollar.
Indian stocks were trading higher with the benchmark index Sensex rising by 2.5 per cent or 768 points in the closing session."
OYO announces 4 month paycut in India, some sent on leave
Oyo, the popular hotel-booking site that has been in trouble even before the Covid-19 strike, has begun to cut salaries and furlough employees.
IANS reports: "Hospitality major OYO has announced a reduction in salary of 25 per cent for all its employees in India for April-July 2020 and has also sent some employees on a leave starting May 4, whereby they would get limited benefits.
In a mail written to the employees on Wednesday, Rohit Kapoor, CEO for India and South Asia, OYO, noted the tough times the hospitality sector and the company is going through, and said that although there will be reduction in the fixed compensation, all other benefits will be provided.
“Today, our company is taking a difficult but necessary step for India, whereby we are asking all OYOprenuers to accept a reduction in their fixed compensation by 25 per cent. This will be effective for April-July 2020 payroll. All other benefits and terms of your contract will remain unchanged,” said the email viewed by IANS.
He further said that post the pay cut, the fixed compensation for any employee would not be less than Rs 5 lakhs per annum.
“This ensures a large percentage of our colleagues at lower pay scales see no impact,” Kapoor wrote.
Further, the company has also decided to send some of its employees in India on leave, but with limited benefits starting May 4."
Assam hikes oil prices steeply despite global dip
A litre of fuel went up by almost ₹6 in Assam from Wednesday despite global crude oil prices hitting rock bottom.
The State’s Finance (Taxation) Department issued a notification modifying the rates of tax on diesel and petrol.
The notification by Principal Secretary Samir Kumar Sinha on Tuesday evening said the tax rates had been increased under a relevant section of the Assam Value Added Tax Act, 2003.
A State can impose tax only on fuel and liquor.
Accordingly, the VAT on diesel was modified to “23.66 paise in the rupee or ₹17.45 per litre, whichever is higher” and that of petrol and other motor spirits to “32.66 paise in the rupee or ₹22.63 per litre, whichever is higher”.
Small business credit worth Rs 2.32 lakh crore at highest risk of default: Cibil
Small businesses that operate hand-to-mouth may be the most vulnerable to default in the midst of the ongoing lockdown, according to TransUnion Cibil.
PTI reports: "Small business credit of Rs 2.32 lakh crore is at the highest risk of default, and micro enterprises having loan outstanding of less than Rs 10 lakh are the most vulnerable because of the COVID-19 pandemic, a credit information company said on Wednesday.
It can be noted that ever since the outbreak of the virus infections and the subsequent lockdown that is scheduled to last at least 40 days, concerns are being raised about the financial health of small businesses.
In its study, TransUnion Cibil said, at present, the total outstanding amount of all financiers to small businesses having a credit outstanding of less than Rs 50 crore is Rs 17.94 lakh crore, representing 28 per cent of the total outstanding credit.
The agency said the number of micro, small and medium enterprises (MSMEs) falling in the highest risk bracket of CMR-7 to CMR-10 have outstanding credit balances of Rs 2.32 lakh crore, which is at a higher risk of slipping into becoming a non-performing asset (NPA).
Out of this, the credit to enterprises with less than Rs 10 lakh outstanding alone totals up to Rs 13,600 crore in the overall credit bracketed as the most risky, it said, adding that their overall loan balance is Rs 93,000 crore."
Facebook investment to accelerate Jio’s digital monetisation drive, say analysts
Reliance, which has been on a drive to reduce its huge debt load, may benefit significantly through the Facebook transaction, analysts believe.
PTI reports: "Facebook’s move to pick up about 10 per cent stake in Jio Platforms will accelerate Jio’s digital monetisation drive and put Reliance Industries (RIL) on course to turn net debt-free by March 2021, analysts said on Wednesday.
“RIL had restructured its digital business into one consolidated wholly-owned subsidiary - Jio Platforms - which would host all the digital initiatives of the firm, including Jio digital services (mobile, broadband), apps, tech capabilities (AI, Big Data, IoT) and investments (like Den, Hathway),” Credit Suisse said in a note.
It said that Facebook’s investment into this entity will further Reliance Industries’ digital initiatives and will help in deleveraging.
”...The deal will aid in achieving net debt-free (target) by March 2021. As of December 31, 2019, net debt for the group stands at Rs 1,531 billion (Rs 1.53 lakh crore) and with Facebook’s investment, this should put RIL on course to be net debt free by Mar-2021,” it said.
In similar vein, Bernstein said the partnership is strategic for both companies.
“The investment in Jio is one of the biggest investments Facebook can make. The transaction fits with their recent push to build themselves and experiment more and provides a closed network of 388 million users to test on, proof point around the already announced partnership to build and test a WeChat like app,” it said.
“Facebook has already launched WhatsApp as customer service/social commerce tool in India allowing brands and retails to talk directly to customers/prospects, this can strengthen that offering both for 60 million small merchants on JioMart but also for Reliance Jio itself,” Bernstein added."
NBFCs seek RBI clarification on what constitutes a ‘default’
Non-banking finance companies (NBFCs) are planning to write to the Reserve Bank of India (RBI) seeking clarification on what constitutes a default, as the regulator has mandated additional provision for accounts that are in default.
For such accounts, a 10% provision was mandated, equally spread over to two quarters — January-March and April-June.
“The term default is not defined in the circular and is open to multiple interpretations,” said an official of a large NBFC. A loan can be termed ‘default’ if repayment is due for even one day. According to RBI norms, if repayment is overdue for 0 to 30 days, it is classified under SMA 0 (special mention account), if overdue by 31 to 60 days, it is SMA 1 and if overdue from 61 to 90 days, the account is classified as SMA 2.
Covid-19 bailout is the biggest in history
Indian shares rise over 1% on Reliance jump, stimulus hopes
An update on the benchmark stock indices, which have risen since trading flat this morning.
Reuters reports: "Indian stocks rose on Wednesday, lifted by an 8% surge in Reliance Industries Ltd after Facebook invested in its digital business, while expectations of a fiscal stimulus to combat the coronavirus pandemic bolstered sentiment.
The NSE Nifty 50 index climbed 1.13% to 9,082.9 by 0557 GMT, while the benchmark S&P BSE Sensex gained 1.43% to 31,071.01.
Shares of index heavyweight Reliance Industries rose to a near seven-week high after Facebook bought a 10% stake in the company's digital business for $5.7 billion, a deal that will help the conglomerate cut its huge debt pile.
Financial stocks also provided support, with Kotak Mahindra Bank Ltd and Axis Bank Ltd rising 1.8% and 3.2%, respectively.
Automakers Maruti Suzuki India Ltd and Hero MotoCorp Ltd gained 3.7% and 4.2% respectively, driving the Nifty Auto Index 2.5% higher.
India's cabinet is meeting on Wednesday amid expectations that the government will roll out further measures to help fight the pandemic.
“There is some expectation that the government is going to announce a fiscal stimulus package today,” said Sumit Pokharna, vice-president, Kotak Securities."
NBFCs seek RBI clarification on what constitutes a ‘default’
Non-banking finance companies (NBFCs) are planning to write to the Reserve Bank of India (RBI) seeking clarification on what constitutes a default, as the regulator has mandated additional provision for accounts that are in default.
For such accounts, a 10% provision was mandated, equally spread over to two quarters — January-March and April-June.
“The term default is not defined in the circular and is open to multiple interpretations,” said an official of a large NBFC. A loan can be termed ‘default’ if repayment is due for even one day. According to RBI norms, if repayment is overdue for 0 to 30 days, it is classified under SMA 0 (special mention account), if overdue by 31 to 60 days, it is SMA 1 and if overdue from 61 to 90 days, the account is classified as SMA 2.
ICICI Bank shares extend losses, fall nearly 3% on exposure to Singapore oil trading firm
Amid historic price moves in the oil market, ICICI Bank has acknowledged its exposure to an oil trading firm based in Singapore leading to worries over potential losses.
PTI reports: "Shares of ICICI Bank extended losses on Wednesday and fell nearly 3 per cent in early trade amid concerns over its exposure to a Singapore-based oil trading company.
In a news clarification on Tuesday about its exposure of USD 100 million to Singapore-based Hin Leong Trading Pte, it said, “We confirm that the Bank, in the normal course of its business, has exposure to the borrower group in question“.
The scrip declined 2.57 per cent to Rs 323 at the BSE.
On the National Stock Exchange, it fell 2.65 per cent to Rs 323.05.
The shares of the company had plunged 8.38 per cent on Tuesday to Rs 331.55 on the BSE.
ICICI Bank on Tuesday said it is taking steps to protect its interest regarding its exposure to a Singapore-based oil trading company."
What do negative oil prices mean?
Demand for health insurance picks up 30% post coronavirus spread
The rapid spread of the global pandemic has got many people worried and it shows in the increased demand for health insurance policies.
PTI reports: "The demand for health insurance policies has surged by 30 per cent post the spread of coronavirus pandemic, online insurance aggregator Policybazaar.com said.
There is definitely a very-very significant jump in uptake towards buying insurance because a lot of people who were earlier not buying insurance or procrastinating to buy insurance are now realising what will happen if they get infected with coronavirus, Amit Chhabra, Head- Health Insurance, Policybazaar.com said in an interaction.
“Policybazaar has seen 30 per cent hike for health insurance and around 20 per cent in life insurance after the lockdown,” he said.
Depicting the trend being observed among the young policy enquirers/ buyers, including first-time ones, he said those who used to think that nothing will happen to them or that they can buy it later on, they have been showing keen interest to at least make their families financially secure."
Rupee hits fresh low against the dollar
Manojit Saha reports from Mumbai:
The downward pressure on the rupee continued on Thursday amid heightened global uncertainties emerging from the spread of Covid 19 pandemic and record low crude oil prices as the Indian currency slipped to a fresh low against the dollar.
The rupee opened at 77.90 as compared to the previous close of 76.83 a dollar and slipped to 77.92. The previous record low was hit earlier this month when the rupee hit 76.87 a dollar.
Currency dealers expect the pressure on the rupee to continue till the pandemic peak is reached and the Indian currency to test 77.50 levels.
RIL stocks zoom as FB to invest in Jio Platforms
The Facebook-Jio deal announced this morning has turned investors in Reliance enthusiastic about the transaction.
IANS reports: "Stock prices of Reliance Industries zoomed on Wednesday morning after the company announced that Facebook will invest Rs 43,574 cr in Jio Platforms for a 9.99 per cent Stake.
Jio Platforms is a wholly-owned subsidiary of Reliance Industries.
Accordingly, the company’s stocks at the BSE gained Rs 83.85 or 6.78 per cent to Rs 1.319.90 per share from its previous close.
In the intra-day trade period till now, the stock touched a high of Rs 1,339.20 and a low of Rs 1,300 per share.
On early Wednesday morning, the company announced that social media giant Facebook has entered into binding agreements to invest Rs 43,574 crore into Jio Platforms for a 9.99 per cent stake.
“This investment by Facebook values Jio Platforms at a 4.62 lakh crore pre-money enterprise value ($65.95 billion, assuming a conversion rate of Rs 70 to a US Dollar),” RIL said in a statement."
Facebook picks up 9.99% stake in Jio Platform for ₹43,574 crore
Facebook on Wednesday announced an investment of $5.7 billion (₹43,574 crore) to buy a 10% stake in the firm that houses billionaire Mukesh Ambani’s telecom arm Jio , as the social media giant looks to expand presence in its largest market in terms of subscriber base.
“Today we are announcing a $5.7 billion, or ₹43,574 crore, investment in Jio Platforms Ltd, part of Reliance Industries Ltd, making Facebook its largest minority shareholder,” the company said in a statement.
Facebook said the investment “underscores our commitment to India, and our excitement for the dramatic transformation that Jio has spurred in the country”.
Stocks trade flat
The benchmark indices that opened with minor gains this morning are now trading flat.
The Sensex is down 30 points while the Nifty is trading a little below the 9,000 mark.
Overnight, the Dow Jones lost over 600 points, or 2.67% of its value as oil futures continued to plunge.
Lockdown extension unlikely to contain surge in COVID-19 infections: Fitch Solutions
India's lockdown, which is rated as the strictest in the world, could be extracting a huge economic price without reining in the virus very much.
PTI reports: "India extending the nationwide lockdown by nearly three more weeks to May 3 is unlikely to stem the surge in coronavirus infections and economic and humanitarian crisis will exacerbate due to slow response by the government so far, according to Fitch Solutions.
“We at Fitch Solutions have revised down our forecast for India’s FY2020-21 (April 2020 to March 2021) real GDP growth to 1.8 per cent, from 4.6 per cent previously,” it said in a note on Wednesday.
“The key drivers behind our revision is slow and weak fiscal response and a worsening of the COVID-19 outbreak domestically, which we expect to cause both private consumption and investments to contract,” Fitch Solutions said.
Noting that the COVID-19 outbreak in India has worsened, it said in a span of about three weeks, confirmed cases in the country have ballooned to over 18,000, and deaths were over 500 as of April 20, from 700 cases and 20 deaths at the end of March.
“Even at these numbers, we believe that India is nowhere near the peak of the infection given its large population of 1.3 billion,” it said."
