Teji Mandi: Three things investors should know on November 30, 2020
Teji Mandi

India open for direct Free Trade Agreements:

Commerce and Industry Minister Piyush Goyal says India is open for business. India wants to sign Free Trade agreements directly with other countries. He wants countries that have transparent trading mechanisms and business systems in place.

India's decided to opt-out of the Regional Comprehensive Economic Partnership (RCEP) recently. India's concerns included

- Negative trade balance with countries like Japan and South Korea

- Decline in industrial manufacturing such as electronics and light manufacturing

- Former FTAs have led to an unchecked flow of Chinese products in the country

But, according to critics, there are many downsides of staying out of the agreement

- Staying out of the deal limits India's ability to shape global trade architecture

- Loses the opportunities for Indian firms to take part in global value chains.

- Loses out on opportunities in foreign investments as a result of the deal

It is positive that India wants to take its destiny in its own hands by staying our of the RCEP. Yet, India misses out on the opportunity to shape global trade architecture. Which do you think is better for India?

Lenders not enthused with DHFL bids:

The lenders of DHFL have started the bidding process from the scratch again and asked the participants to submit fresh bids. So far, Adani Group, Oaktree Capital, Piramal Group, and SC Lowy in DHFL.

The banks are disappointed with the quote they have received and want fresh bids to get maximum value to recover their dues. Almost all the major banks of India have got it wrong in DHFL and have exposure to the housing lender. Excluding interest accrued, the State Bank of India owes around Rs 10,000 crore. Bank of India around Rs 4,125 crore, Canara Bank Rs 2,681 crore, NHB Rs 2,434 crore, Union Bank of India Rs 2,378 crore, Syndicate Bank Rs 2,229 crore and Bank of Baroda Rs 2,075 crore. Indian Bank has an exposure of Rs 1,552 crore, Central Bank Rs 1,389 crore, IDBI Bank Rs 999 crore, and HDFC Bank Rs 361 crore.

The lenders have all the right reasons to be disappointed with the bid that they have received. Around Rs 90,000 crore of the banks is at stake and the highest bid from Adani is around Rs 33,000 crore.

In this situation, the lenders are staring at a huge loss. Hence, they are hoping the current optimistic sentiment in the market will help in deriving a larger value from DHFL.

Big relief for CGDs:

City Gas Distribution (CGD) companies have received major relief from the regulator.

The CGD stocks like Indraprastha Gas and Mahanagar Gas rose 10-14% last Friday as fresh rules would not translate into the heightened competition as initially feared by investors.

Under the new policy, third party open access has been allowed for new CNG stations. However, existing dealerships and franchisees of authorized CGD companies are kept out of its ambit. The new policy suggests that the regulator is not in favor of increasing the number of competitors.

New policy announcements are likely to remove the major worries over the increasing competition in the market. It is a major positive for stocks like IGL and MGL.

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