Bank of Baroda Q1 Net Beats Estimates, Shares Rise

Bank of Baroda on Thursday reported a 23 per cent annual decline in its net profit for the April-June quarter on higher provisions for bad loans. But its net profit was better than the Street's estimates.

Bank of Baroda's net profit came in at Rs 1,052 crore in Q1, against Rs 1,362 crore in the corresponding quarter of last fiscal. As per Bloomberg's consensus brokers estimate, its net profit was seen at Rs 901 crore.

Its net interest income (NII), which is the excess of interest earned over interest expended, increased 4 per cent annually to Rs 3,460 crore against Rs 3,328 crore.

The public sector lender also witnessed deterioration in its asset quality in the June quarter. Its gross nonperforming assets (GNPA) increased to 4.13 per cent of total advances against 3.72 per cent sequentially. Its net nonperforming assets increased 18 basis points to 2.07 per cent sequentially.

On an absolute basis, Bank of Baroda's GNPA stood at Rs 17,274 crore against Rs 16,261 crore in the March quarter.

Bank of Baroda made a total provision of Rs 600 crore in the Q1 against Rs 527 crore year-on-year, an annual increase of 14 per cent.

Banking analysts Hemindra Hazari said Bank of Baroda's Q1 earnings are better than estimates but asset quality remains a concern.
As of 11.33 a.m., Bank of Baroda shares traded 3.4 per cent higher at Rs 158.25 compared to 0.92 per cent gain in the benchmark Bank Nifty.

Feeder Funds a key strategy to draw Southeast Asian Assets: Cerulli

Foreign managers looking to penetrate Southeast Asia for now, especially those without any onshore presence in the region, will likely see the most success by employing the feeder funds or funds-of-funds route, despite the launch of the ASEAN Collective Investment Scheme framework.

Cerulli expects that the side that stands to benefit more from the Mutual Recognition of Funds (MRF) scheme between China and Hong Kong will be China.
 
Foreign managers looking to penetrate Southeast Asia for now, especially those without any onshore presence in the region, will likely see the most success by employing the feeder funds or funds-of-funds route, despite the launch of the ASEAN Collective Investment Scheme framework.
 
Cerulli believes there is a host of reasons for this, ranging from the fact that managers are comfortable with existing fund structures which already provide a good range of investment products, to distribution issues in the domestic markets.
 
Recent developments also lend support, as Thailand registered strong growth in feeder fund assets in the first five months of 2015--assets under management (AUM) grew by 33% during the period to reach a combined size of US$7.8 billion. Equity feeder funds have been the key driver of the surge in feeder fund assets, growing by 69% to more than US$4.9 billion by the end of May.
 
Within the broader feeder fund space, there is no doubt that big names are the top choices for master funds. Even without an onshore office, firms like BlackRock and State Street Global Advisors have amassed assets exceeding US$1 billion in AUM across both Malaysia and Thailand. This AUM is even larger than some of the onshore fund houses, and point to strong penetration in these markets from an offshore perspective.
 
Ultimately, an important element for success within the feeder fund business lies in securing a strong local partner, regardless of whether one is a global or boutique offshore fund house. This means working with a local partner that has strong distribution capabilities.

ARC's suggestions sought by RBI for NPA revival

The cap has to be below 50% as per the ARC demand which could not be changed by the RBI. The issue is due to be taken up with the government since it needed to be amended in the Sarfaesi Act.

Banks need to find measures in order to price bad loans in a realistic way, said RBI governor Raghuram Rajan in a meeting at RBI’s office, attended by bankers, ARCs and PE chiefs, including Sanjay Nayar of KKR and Renuka Ramnath of Multiples Alternate Asset Management.

The governor sought suggestions from rom asset reconstruction companies (ARCs) and private equity (PE) firms on reviving stressed assets.

The cap has to be below 50% as per the ARC demand which could not be changed by the RBI. The issue is due to be taken up with the government since it needed to be amended in the Sarfaesi Act, said a Financial Express report.

Earlier in a report, the ARCs had mentioned that buying stressed assets would not be possible unless they are permitted to raise funds from various avenues.

The capital base of all ARCs is  Rs 3,000 crore, whereas the total bad loans in the public sector banks (PSBs) are around Rs 2.67 lakh crore. Owing to deficient sophistication required by domestic players to understand risks and opportunities in the asset reconstruction sector, raising local capital is difficult, said Vinayak Bahuguna, Arcil MD and CEO, in the FE report.

Vedanta Turns Flat After Rising 2%, Q1 Net Meets Estimates

Shares of Vedanta Limited rose as much 2 per cent on Thursday but gave up most of the early gains in later trade. The mining and energy company, which has been hit by a slump in crude prices and mining bans in key producing states, posted a consolidated net profit of Rs 866 crore for its fiscal first quarter to June 30.

The net profit was in line with estimates.

That compared with a profit of Rs 376 crore in the same period last year, which was hurt by a one-time charge of Rs 2,128 crore. Excluding the impact of one-off charge, the company's first-quarter profit was 35.4 per cent lower than a year earlier.

Consolidated net sales fell marginally to Rs 16,952 crore in the June quarter from Rs 17,056 crore a year earlier at Vedanta, which has interests in oil and gas, iron ore, zinc, copper, power and aluminium.

Chief Executive Tom Albanese said on a conference call Vedanta was hoping to get approvals as early as next month to restart a few mines in Goa and was positioned to restart mining at a rate of 5.5 million tonnes a year.

He said the current low international prices coupled with royalties and export taxes were challenging and the company would look to sell as much ore as it could to domestic mills.

Essar Oil Gets Stock Exchange Nod for Delisting

 Essar Oil has received approvals from the National Stock Exchange (NSE) and the BSE (Bombay Stock Exchange) to delist its shares, its managing director and CEO L K Gupta said on Wednesday.

Delisting the company would give promoter Ruia brothers - Shashikant and Ravikant - greater flexibility and less regulatory scrutiny while selling a stake in the refiner.

"NSE and BSE approval have now been received. The promoters will now have to make announcement and reverse book building start," he told PTI from Mumbai.

The entire process to delist shares may take up to 2 months, he said.

Essar Oil had earlier this year signed a non-binding term sheet for sale of up to 49 per cent stake in the company to Russian oil firm Rosneft for an undisclosed amount.

Mr Gupta said the Rosneft deal was conditional upon various factors such as due diligence, determination of the transaction price, execution of definitive transaction documents and receipt of requisite approvals.

He did not give a timeframe for concluding the deal.

Essar Oil's board had approved the delistng plan a year back but the proposal was put on hold in November, 2014 after capital market regulator Securities and Exchange Board of India (Sebi) asked for a halt.

The firm's UK-based parent Essar Energy delisted its shares from the London Stock Exchange in June last year. Essar Energy holds 71.22 per cent in Essar Oil.

Essar Oil will make an offer to buy back 137 million shares, or a 27.53 per cent stake, held by the public and other non-promoters.

Under Sebi's new delisting rules, a firm wanting to delist has to ensure that its promoter shareholding reaches at least 90 per cent after acquiring shares from the public, or if at least 25 per cent of the public shareholders tender their shares in a reverse book-building process.

This is Ruia brothers' second attempt to delist Essar Oil after their failed attempt in 2007. Essar Energy Holdings Ltd's January 2007 plan to delist the company in order to gain higher "flexibility in the operations and management of the company" failed due to protest from minority shareholders.

Essar Oil operates a 20 million tons oil refinery at Vadinar in Gujarat. The refinery, the second biggest unit in the country, has a complexity of 11.8, among most complex refineries globally, enabling it to earn higher margins.        

Asian Shares, US Dollar Move Higher on Federal Reserve Optimism

Hong Kong: Asian stocks tiptoed higher on Thursday and the dollar consolidated recent gains after the US Federal Reserve painted a relatively bright picture of the world's biggest economy, but a deepening sell-off in commodities kept gains in check.

Prospects of stronger US growth in coming months lifted Asian stocks in early trade, with Japan's Nikkei up 1.2 per cent and Australian shares adding 0.7 per cent. But South Korean shares fell 0.7 per cent.

A dollar-denominated index of Asia-Pacific shares outside Japan rose 0.4 percent after Chinese stocks had a quiet opening.

Gains were muted before the earnings season kicks off in full throttle next week, when companies are broadly expected to post disappointing results on the back of weak economic data in recent months, particularly for trade.

Gavekal strategists noted that Asia's trade performance had been disappointing in recent months. After a two-year post-crisis rebound in 2010-2011, export growth in the region has slowed to an annual average of 7.5 percent in U.S. dollar terms and 6 percent in volume terms this year compared to U.S. dollar growth rates of 30 percent in the years before the crisis.

"The markets still think that the world's economy remains fragile, given a fall in Chinese shares and commodity prices. The Fed surely doesn't want to screw up its exit from zero rates by hastily moving and hitting already fragile commodities market and the world economy," said Tohru Yamamoto, chief fixed income strategist at Daiwa Securities.

Subdued external demand is expected to weigh on corporate earnings, with CLSA strategists expecting first-half earnings growth at Hong Kong and Chinese companies to be weak and guidance for the third quarter unlikely to be better.

Chinese equities are already a third lower than their June highs.

On Wall Street, U.S. stocks rose broadly on the Fed's optimism and strong corporate earnings, with the S&P 500 rising 0.7 percent to 2,108.57.

After a two-day policy meeting, Fed officials said they felt the economy had overcome a first-quarter slowdown and was "expanding moderately", leaving the door open for an interest rate increase in coming months.

Commodities extended their decline, with copper, considered a bellwether for global economic activity, trading near a six-year low at $5,322 a tonne.

The broad Thomson Reuters CRB commodities index also hit a six-year low.

Oil prices, smarting from supply concerns due to rising U.S. shale oil output and an easing of sanction on Iran, rose after weekly data showed an unexpectedly large drawdown in U.S. crude inventories.

Front-month Brent crude futures rose overnight to settle at $53.38 a barrel, recovering from Tuesday's six-month low of $52.28.

In the currency market, the dollar index rose to 97.160, having rebounded from Monday's two-week low of 96.288.

The euro fell 0.2 percent to $1.0964, near its lowest level of the week. In recent weeks, the euro has tended to fall when risk appetite is strong as it is used as a funding currency for investment in risk assets.

The dollar rose about 0.1 percent in early Asian trade to 124.075 yen, hitting its highest level so far this week. 

Sensex Likely to Open Higher on Positive Global Cues

9:00 a.m.: Rupee opens lower at 63.96 per dollar against Wednesday's close of 63.91.

8:45 a.m.: Infra companies will be in limelight today as the Cabinet on Wednesday approved creation of a Rs 20,000-crore National Investment and Infrastructure Fund (NIIF), a sort of sovereign fund, for development of infrastructure projects, including the stalled ones.

8:30 a.m.: Below are the stocks which will be in focus today:

Nestle: Nestle came out with its first quarter numbers post the market hours on Wednesday. Nestle posted loss of Rs 64.4 crore compared to profit of Rs 287.8 crore, its sales fell to Rs 1,957 crore compared to Rs 2,432 crore during the same quarter last year.

NHPC: NHPC reported net profit of Rs 762.2 crore compared to Rs 616 crore (YoY).

Wabco India: Wabco India posted good set of first quarter numbers. Wabco's revenues came in at Rs 385 crore compared to Rs 323 crore. Its net profit rose 55 per cent to Rs 47.5 crore.

Blue Dart: Blue Dart's net profit jumped 35 per cent to Rs 46 crore and its sales advanced 17.6 per cent to Rs 620 crore.

8:15 a.m.: On the policy front, the cabinet on Wednesday cleared the amendments to the Goods and Services Tax Bill to compensate states for revenue loss for five years.

8:10 a.m.: Foreign institutional investors sold shares worth Rs 186.24 crore on Thursday while the domestic institutional investors purchased shares worth Rs 642.69 crore.

8:00 a.m.: Derivative contracts for the month of July will expire today. Analysts say that there could be some volatility in the markets due to the expiration of July futures and options contracts.

7:50 a.m.: The Sensex and Nifty are likely to open higher tracking positive global cues. The SGX Nifty was also indicating a positive start for the Indian markets. The Nifty futures contract traded on the Singapore Stock Exchange was up 0.2 per cent or 15 points at 8,395.

Meanwhile, the Asian markets were trading with a positive bias after U.S. Federal Reserve said it saw the economy and jobs continuing to strengthen, helping lift the dollar as traders bet that higher U.S. interest rates were around the corner.

FOMC's brief policy statement, at the end of a two-day meeting, gave no fresh sign of their thinking on when they will embark on an expected series of rate increases.

Reacting to this development, Japan's Nikkei advanced 1.4 per cent, Hong Kong's Hang Seng jumped 0.7 per cent and Shanghai Composite was up 0.2 per cent.

Overnight, the US stocks finished stronger on Wednesday after the Federal Reserve said the economy and job market continued to strengthen and left its key interest rate unchanged.

The Dow Jones industrial average rose 0.69 per cent to end at 17,751.39. The S&P 500 gained 0.73 per cent to 2,108.57 and the Nasdaq Composite added 0.44 per cent to finish at 5,111.73.