ITC announces demerger of its hotel business, TVS Motors’ Q1 profit zooms & more

NIFTY50: 19,672 ▼ 72 (-0.3%)
SENSEX: 66,384 ▼ 299 (-0.4%)

Hello, friends ! 

What’s in a name? Well, a lot if the name is Twitter. According to its new owner Elon Musk, the world’s largest micro-blogging platform might be rebranded as X. Not just that, even the iconic blue bird logo will be replaced with an X. But why, you ask? Well, that’s as much of a mystery to us as it is to you. In other news, the markets closed in the red again today. More on that later.

• Benchmark indices slipped for the second straight session, with Nifty closing below 19,700
• In all, 24 of the NIFTY50 stocks closed in the red
• International crude oil and gold prices traded lower ahead of US Fed meeting 

Among the NIFTY sectoral indices, Pharma (+0.4%) and Realty (+0.2%) were the top gainers, while FMCG (-1.7%) and Metal (-0.7%) were the top losers.

What’s trending

⭐ ITC plans to demerge its hotel business 

FMCG major ITC has announced that it plans to demerge its hotel business. The demerged subsidiary will be called ITC Hotels, with the parent company holding 40% stake in the new entity, while the remaining 60% will be held by ITC’s shareholders. However, ITC shares fell over 4% intraday after the announcement as investors were disappointed after the company chose to keep 40% stake for itself. The demerger shall be placed for board approval on 14 August 2023.

⭐ TVS Motors’ Q1 profit zooms 

The Chennai-based auto company reported a robust growth in Q1FY24. Its revenues rose 20% YoY to ₹7,218 crore, while its net profit zoomed 46% YoY to ₹468 crore. The two- and three-wheeler maker attributed the strong performance to higher sales, improved margins, cost-saving measures, and a wider product mix.

⭐ SRF posts subdued Q1 results

For Q1FY24, chemicals maker SRF posted a 41% YoY decline in net profit at ₹359.3 crore, down from Rs 632 crore in the year-ago period. Meanwhile, its revenue from operations also dropped 14.3% YoY to ₹3,338 crore. Low sales in the company's chemicals, packaging film as well as technical textiles segments brought the overall revenue down.

⭐ Biocon shares plunge after USFDA observation 

Shares of Biocon declined over 5.5% after the USFDA issued eight observations for the company’s insulin manufacturing facility in Malaysia. As per the company, these observations primarily relate to enhancing operational procedures and strengthening training programs. It aims to address these shortcomings soon.

In Focus

Private banks cash in on the June quarter

Major private sector lenders such as HDFC Bank, ICICI Bank, and Kotak Mahindra Bank reported a robust June quarter. Since 17 July, the day on which HDFC Bank announced its quarterly numbers, these stocks have risen in the range of 2 to 4%, leading to a 2.5% jump in the Bank NIFTY. Here is an in-depth analysis of the Q1 earnings of leading private banks.

NII growth boosts profitability 

All banks reported a substantial rise in their net interest income (NII), which is the difference between the interest income a bank earns from its lending activities and the interest it pays to depositors. HDFC Bank’s NII grew by over 21% YoY to ₹23,599 crore, which boosted its overall net profit to ₹11,951 crore, up nearly 30% YoY.   

Other private lenders like ICICI Bank, Kotak Mahindra Bank and Induslnd Bank reported 38%, 33% and 18% rise in NIIs, respectively, year on year. Meanwhile, their net profits rose in the range of 30% to 50%. The rise in NII is mainly due to higher interest rates after RBI announced multiple interest rate hikes in the last one year. 

Asset quality improves

Besides NII, gross non-performing assets (NPAs) or bad loans also saw improvement. In the case of HDFC Bank, gross NPA was at 1.17% against 1.28% a year ago, while ICICI Bank’s gross NPA was at 2.76%, down 0.64% YoY. Other lenders also reported lower bad loans. Lower NPA numbers indicate improved asset quality, leading to lower loan provisioning and improved profitability.  

Credit demand continue to rise 

Other than this, overall demand for loans and advances continues to trend upward. HDFC Bank’s total advances grew by over 15.8% to ₹16.1 lakh crore, while ICICI Bank’s net domestic advances grew by 20.6% YoY. Other banks also logged double-digit growth in advances. 

On the whole, these quarterly results are positive for the banking sector. However, in the rising interest rate scenario, banks generally hike the loan rate first, leading to higher interest earned. But, deposit rates are increased with lag. Hence in upcoming quarters, interest given out on deposits could be priced higher, which could lower margins.       

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