Teji Mandi: Three things investors should know on February 12, 2021
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Growing rush to buy NBFCs :

Recently a trend is growing fast among India's large business houses and conglomerates. Off late, these billionaires are showing keen interest in buying NBFCs.

We saw Adani and Piramals in a bitter fight to get hold of DHFL where Piramal managed to outbid the other. Now, Adar Poonawalla, chairman of Serem Institute has become the latest industrialist to jump on that bandwagon. Poonawalla has acquired a controlling stake in Magma Fincorp through Rising Sun Holdings. It is a subsidiary of Serem.

There are quite a few reasons behind this trend. One, having an NBFC license allows these companies to offer financing options to their customers. It creates an opportunity for cross-selling and helps in customer retention.

Two, after a long pause post-IL&FS debacle, the NBFCs are returning to normalcy. It offers great earning visibility in the coming few years. And three, NBFCs have seen valuation erosion over the last couple of years. And currently, they are available at very reasonable valuations.

Domestic flight ticket rates set to rise :

The civil aviation ministry has relaxed the upper and lower cap on the fares by up to 30%. It will allow the airlines to charge more from passengers.

For flights with a duration between 90 to 120 minutes, the lower fare cap has been increased to Rs 3,900 from Rs 3,500. And the cap on maximum chargeable fare has been increased to Rs 13,000 from Rs 10,000.

At the same time, capacity restrictions will continue. The airlines are currently allowed to operate only at 80% of their carrying capacity.

At first glance, the relaxation in fare cap is beneficial to the airlines. Usually, January-March is a lean period for them after the festival season. Airlines see a sharp drop in the number of fliers during these months. Given that they are operating only at 80% capacity, the relaxation will benefit airlines in terms of managing free cash flow.

However, aviation Turbine Fuel prices have been on a steady rise and a larger part of this price hike is likely to be used to compensate for that. Hence, a relaxed price cap is unlikely to make any material impact on the aviation industry.

Indian exports improved in January :

India's export rose by 5.37% YoY to USD 27.24 billion in January 2021. It was mainly driven by healthy growth in the pharmaceuticals and engineering sectors.

Among the major export items, drugs and pharmaceuticals (up 16.4%), engineering goods (18.69%), and iron ore (108.66%) gained positive traction. On the other hand readymade garments (-10.73%) and petroleum products (-37.34%) recorded a contraction.

As per the leading trade bodies, the exports are expected to rise further in the coming months. The uncertainty in global markets is subsiding as several countries are moving out from the lockdowns. Vaccination programs are also gaining pace, resulting in renewed confidence.

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