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Crude Oil Prices Fall on Back of Escalating Tension Between US and China, Reliance Industries Share Price Falls over 10% in Four Days, RBI Warns Finance Commission of Fiscal Slippage et al.

Professor of Financial Economics and Part-time Value Investor, Transfin.
May 9, 2019 2:01 PM 4 min read

Crude oil prices fall on back of escalating tensions between US and China. Reliance Industries share price falls over 10% in four days, loses more than INR96,288cr in market value. Uber expected to price its IPO at or below the midpoint of its expected price range. Disney’s revenue rose to $14.9bn in Q2. 12% increase in the profits of Fox Corp. in Q1.


Moving on to the top Business news of the day.



Patanjali to invest INR600cr from internal accruals to fund Ruchi Soya acquisition. RBI withdraws circular asking banks to reveal their IL&FS exposure. 

At Any Cost: Patanjali Ayurved has proposed to invest INR600cr from its ‘internal accruals’ to help fund its proposed INR4,350cr acquisition of debt-laden Ruchi Soya. 

Patanjali is in talks with banks to help fund a large part of the transaction even as it has so far received commitment for about INR3,900cr. It is also likely to raise INR450cr each through non-convertible debentures and preferential shares.

Stepping Back: The RBI has withdrawn its previous circular asking banks, financial institutions to declare details of their exposure to the Infrastructure Leasing & Financial Services (IL&FS) Group that are bad loans. 

The development comes as the NCLAT has allowed banks to declare the defaulting accounts of IL&FS as non-performing assets (NPAs).

According to the NCLAT order, banks can declare the defaulting accounts of the beleaguered group as NPAs but they cannot start the recovery process and debit money until a resolution for the group is found.



RBI warns Finance Commission of factors that may lead to fiscal slippage.

Slippery Road Ahead: As part of a between the members of the 15th Finance Commission and the RBI, the Central Bank has listed out specific factors that would drive fiscal slippages in the revised estimates of FY2018-19, including farm loan waivers and income support schemes. 
Achilles’ Heel: As per a report published by the National Sample Survey Office, a key database introduced in India’s new GDP series has been found to be riddled with gaps. 21% of companies included in a database underlying India’s GDP numbers were “out of coverage”, implying they were no longer operating. Another 12% could not be traced.
This report has left experts divided and provided ammunition to the Opposition to question the government on the accuracy of the economic data. More on the matter here
Reliance Industries share price falls over 10% in four days, loses more than INR96,288cr in market value. Crude oil prices fall on back of escalating tensions between US and China.
Extending Loses: Shares of Mukesh Ambani-led Reliance Industries extended losses for the fourth straight session on Thursday, declining over 3% on Thursday before closing at INR1,253.15 after global brokerage Morgan Stanley downgraded the stock.

After two years of outperformance, Morgan Stanley has downgraded the stock from ‘overweight’ to ‘equal-weight’ with a price target of INR1,349 per share on back of limited upside and headwinds for RIL's energy business.  
Since May 3, RIL shares have lost 10.8%, taking the overall market capitalisation loss to more than INR96,288cr during this period.
There Is No Free Market for Oil: Oil prices fell on Thursday, on back of escalating trade battle between the United States and China which outweighed the upward pressure from a decline in US inventories of crude.
Brent crude oil futures were at $69.72 a barrel, down 65 cents from their previous settlement and heading for their second consecutive weekly loss.
US West Texas Intermediate (WTI) crude futures were at $61.43 per barrel, down 69 cents and set for a third week of losses.
Uber expected to price its IPO at or below the midpoint of its expected price range.
Dialing Down Expectations: As per reports, ride-hailing platform, Uber is planning to price its public offering at or below the midpoint of its expected price range.
Uber had set a range last month of $44 to $50 a share, and at the midpoint — $47 a share — it would be valued at about $86bn. 
This would be well below the $100bn that Uber had forecast to some of its investors last month. 
Some bankers had floated a potential $120bn valuation for the company. It would still be valued above the $76bn that it was appraised at in its most recent private fund-raising last August.
The rollback in expected valuation is likely to be on back of the recent turbulence in the stock market amid the rising trade tensions between US and China and the cold shoulder that investors have given the shares of Uber’s major ride-hailing rival, Lyft. 
Shattering Dreams: As Uber gears up for IPO, many Indian drivers talk of shattered dreams, after the company slashed incentives by around 30% amidst growing pressure from the US head office to improve financial performance ahead of its IPO. A deep dive into the matter here
Disney’s revenue rose to $14.9bn in Q2. Fox 1reports 2% increase in the profits in Q1.
All is Well: Disney reported a 3% increase in revenue in Q2 to $14.9bn vs last year. The latest figures have major contribution from the returns of “Captain Marvel,"
The company also completed its $71bn purchase of most of 21st Century Fox's assets in March.
More Good News: Fox Corp.’s revenue rose 12% to $2.75bn vs last year, on back of stronger performances in its cable network and broadcast TV segments.
The company, whose businesses include Fox News; the Fox broadcast network and television stations; and Fox Sports, was spun off from 21st Century Fox and began trading as a separate public company in March. Walt Disney had closed its $71.3bn acquisition of the major entertainment assets of the former 21st Century Fox earlier this year.
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