HIMADRI SPECIALITY CHEMICAL LTD - Q2 FY18

Himadri Speciality Chemical Ltd, largest coal tar pitch manufacturer in India, reported spectacular second quarter numbers on the back of strong revenue growth. Revenue or Income From Operations  rose 22% YOY and stood at Rs. 4680 Mn compared to Rs. 3823 Mn in the corresponding September quarter previous year.  EBDITA was reported at Rs. 1045 Mn compared to Rs. 576 Mn rising 82% or 1.8 times on yearly basis. Profit After Tax multiplied 3 times YOY from Rs. 190 Mn to Rs. 512 Mn in the current September quarter. Operating Expenditure jumped 12% YOY from Rs. 3266 Mn to Rs. 3654 Mn in the current Q2 FY18. On sequential basis, operating expenditure declined 9%. As a result EBDITA margin jumped phenomenally by 728 basis points YOY and 213 basis points sequentially. One basis point is 0.01%. Net Profit Margin followed suit rising 595 basis points YOY and 98 basis points on quarterly basis. Though Depreciation expenditure is stable at around Rs. 79 Mn, interest expenditure constituting 40% of the total PAT or net profit is a concern area. Interest expense was reported at Rs. 208 Mn against Rs. 188 Mn same period previous year, rising 10% YOY. Taxation too has jumped 139% YOY at Rs. 246 Mn in Q2 FY18. Himadari Chemicals has maintained its profitability momentum through higher revenue growth and controlled operating cost structure. The company has also rationalized its debt and repaid about Rs. 400 Mn over the previous 4 years. Himadari Chemicals has lined up huge capex plans to set up a manufacturing facility of Advance Carbon Material in West Bengal with annual capacity of 20,000 MT and also new line of carbon black with additional annual capacity of 30,000 MT. The total cost of combined capacity expansion would be around Rs. 6280 Mn.

Himadari Chemicals Ltd, is the largest coal tar pitch manufacturer in India. The company is a carbon specialist developing coal tar by-products and addressing needs of growing industries such as aluminium, graphite, infrastructure, lithium ion batteries and Tyre. About 98% of its revenues come from carbon material & chemicals segment which have risen 23% YOY. Carbon revenues stood at Rs. 4626 Mn against Rs. 3766 Mn corresponding period previous year. The other segment, Power contributed just 2% in the current quarter and was almost stagnant at Rs. 105 Mn. Strong capex plans, specialized core product profile and high growth opportunities in sunrise industry such as lithium-ion battery will lead to strong and sustainable growth for the company in the long run. We recommend BUY for the medium & long term with target price of Rs. 252. 

Disclaimer                                       

                                      

The information and opinions contained in the research reports have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. The research report does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Clients should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, if appropriate, seek professional advice, including but not limited to tax advice. The reports do not take into account the particular investment objectives, financial situations, risk profile or needs of individual clients. The user assumes the entire risk of any use made of this information. This report is not to be relied upon in substitution for the exercise of independent judgment.

The price and value of investments referred to in this research and the income from them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur.

Research data and reports published/ emailed/ text messaged via Short Messaging Services, Online Messengers, WhatsApp etc/transmitted through mobile application/s, including but not limited to FLIP™, Video Widget, telephony networks, print or electronic media and or those made available/uploaded on social networking sites (e.g. Facebook, Twitter, LinkedIn etc) is for informational purposes only. The reports are provided for assistance and are not intended to be and must not alone be taken as the basis for an investment decision. The user assumes the entire risk of any use made of this information. Though disseminated to clients simultaneously, not all clients may receive the reports at the same time. We will not treat recipients as clients by virtue of their receiving this report.

The reports include projections, forecasts and other predictive statements which represent our assumptions and expectations in the light of currently available information. These projections and forecasts are based on industry trends, circumstances and factors which involve risks, variables and uncertainties. The actual performance of the companies represented in the report may vary from those projected.

The opinions expressed in the reports are subject to change but we have no obligation to tell our clients when our opinions or recommendations change. The reports are non-inclusive and do not consider all the information that the recipients may consider material to investments.

We shall not be in any way responsible for any indirect, special or consequential damages that may arise to any person from any inadvertent error in the information contained in the reports nor do they take guarantee or assume liability for any omissions of the information contained therein. Information contained therein cannot be the basis for any claim, demand or cause of action. These data, reports and information do not constitute scientific publication and do not carry any evidentiary value whatsoever.

The user should consult their own advisors to determine the merits and risks of investment and also read the Risk Disclosure Documents for Capital Markets and Derivative Segments as prescribed by Securities and Exchange Board of India before investing in the Indian Markets. The securities discussed in this report may not be suitable for all investors. Investors must make their own investment decision based on their own investment objectives, goals and financial position and based on their own analysis. Prospective investors and others are cautioned that any forward-looking statements, if any, are not predictions and may be subject to change without notice.

This report may provide the addresses of, or contain hyperlinks to websites. Except to the extent to which the report refers to material we take no responsibility whatsoever for the contents therein. Such addresses or hyperlinks are provided solely for your convenience and information and the content of the linked site does not in any way form part of this report. Accessing such website or following such link through this report shall be at your own risk.

The author of this Research Report accepts no liability and will not in any way be responsible for the contents of this report or for any losses, costs, expenses, charges, including notional losses/lost opportunities incurred by a recipient as a result of acting or non-acting on any information/material contained in the report. This is not an offer to sell or a solicitation to buy any securities or an attempt to influence the opinion or behavior of investors or recipients or provide any investment/tax advice. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.

EXIDE INDUSTRIES LTD RESEARCH REPORT - Q2 FY18

WHEELS INDIA LTD - Q2 FY18

Wheels India Ltd reported robust yearly numbers for second quarter FY18 on the back of higher revenue and strong operational efficiency. Revenue rose 3% YOY from Rs. 5886 Mn in Q2 FY17 to Rs. 6048 Mn in the current quarter. EBDITA was on a strong footing, rising 16% YOY and 9% sequentially. EBDITA was reported at Rs. 523 Mn against Rs. 451 Mn same period previous year. PAT stood at Rs. 264 Mn compared to Rs. 124 Mn in Q2 FY17. PAT zoomed 113% YOY and 103% QOQ impacted by exceptional item of Rs. 125 Mn in the current September quarter. Exceptional item represents slump sale of its passenger car steel wheel business to its subsidiary WCWL. WIL Car Wheels Ltd (WCWL) is a joint venture between Wheels India and Topy Industries, leading Japanese car wheel manufacturer. In this respect, Profit before exceptional item would be a better measure of profitability which has grown 37% YOY and 20% sequentially. Profit before exceptional item & Tax stood at Rs. 238 Mn for the quarter against Rs. 173 Mn corresponding quarter previous year. Strong revenue & other income growth and higher operational efficiency as operating cost grew just 2% YOY has led to strong EBDITA margins for the quarter. EBDITA Margin stood at 8.65% rising 99 basis points YOY and 81 basis points sequentially. One basis point is one 0.01%. Net Profit Margin was reported at 4.36% compared to 2.11% same period previous year. Other Income stood at Rs. 19.40 Mn multiplying 3 times YOY and rising 39% QOQ in the current September quarter. 

Wheels India is a leading manufacturer of steel wheels for passenger cars, utility vehicles, trucks, buses, tractors & construction equipment. Apart from wheels other company divisions are air suspension, energy equipment & heavy engineering division. The company has a diversified customer base with over 40 customers spread globally such as Japan, Korea, US,  Brazil, China to name a few. About 80% of the business comes from domestic Indian market. The company has manufacturing plants at Padi, Rampur, Sriprambudur and Pant Nagar with annual capacity of 10 million wheels. We recommend BUY for the stock for medium & long term investment with a target price of Rs. 2055. 

Disclaimer                                       

                                      

The information and opinions contained in the research reports have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. The research report does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Clients should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, if appropriate, seek professional advice, including but not limited to tax advice. The reports do not take into account the particular investment objectives, financial situations, risk profile or needs of individual clients. The user assumes the entire risk of any use made of this information. This report is not to be relied upon in substitution for the exercise of independent judgment.

The price and value of investments referred to in this research and the income from them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur.

Research data and reports published/ emailed/ text messaged via Short Messaging Services, Online Messengers, WhatsApp etc/transmitted through mobile application/s, including but not limited to FLIP™, Video Widget, telephony networks, print or electronic media and or those made available/uploaded on social networking sites (e.g. Facebook, Twitter, LinkedIn etc) is for informational purposes only. The reports are provided for assistance and are not intended to be and must not alone be taken as the basis for an investment decision. The user assumes the entire risk of any use made of this information. Though disseminated to clients simultaneously, not all clients may receive the reports at the same time. We will not treat recipients as clients by virtue of their receiving this report.

The reports include projections, forecasts and other predictive statements which represent our assumptions and expectations in the light of currently available information. These projections and forecasts are based on industry trends, circumstances and factors which involve risks, variables and uncertainties. The actual performance of the companies represented in the report may vary from those projected.

The opinions expressed in the reports are subject to change but we have no obligation to tell our clients when our opinions or recommendations change. The reports are non-inclusive and do not consider all the information that the recipients may consider material to investments.

We shall not be in any way responsible for any indirect, special or consequential damages that may arise to any person from any inadvertent error in the information contained in the reports nor do they take guarantee or assume liability for any omissions of the information contained therein. Information contained therein cannot be the basis for any claim, demand or cause of action. These data, reports and information do not constitute scientific publication and do not carry any evidentiary value whatsoever.

The user should consult their own advisors to determine the merits and risks of investment and also read the Risk Disclosure Documents for Capital Markets and Derivative Segments as prescribed by Securities and Exchange Board of India before investing in the Indian Markets. The securities discussed in this report may not be suitable for all investors. Investors must make their own investment decision based on their own investment objectives, goals and financial position and based on their own analysis. Prospective investors and others are cautioned that any forward-looking statements, if any, are not predictions and may be subject to change without notice.

This report may provide the addresses of, or contain hyperlinks to websites. Except to the extent to which the report refers to material we take no responsibility whatsoever for the contents therein. Such addresses or hyperlinks are provided solely for your convenience and information and the content of the linked site does not in any way form part of this report. Accessing such website or following such link through this report shall be at your own risk.

The author of this Research Report accepts no liability and will not in any way be responsible for the contents of this report or for any losses, costs, expenses, charges, including notional losses/lost opportunities incurred by a recipient as a result of acting or non-acting on any information/material contained in the report. This is not an offer to sell or a solicitation to buy any securities or an attempt to influence the opinion or behavior of investors or recipients or provide any investment/tax advice. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.

NATCO PHARMA LTD – Q2 FY18

NATCO PHARMA LTD posted strong yearly numbers for the second quarter FY18. Profit After Tax & EBDITA rose in double digits even with Revenue skidding 9% YOY. Revenue was reported at Rs. 4267 Mn in the current quarter against Rs. 4679 Mn corresponding period previous year with sequential de-growth of 4%. Though sequential growth has been in the negative both for PAT & EBDITA by 10% & 9% respectively, the company has geared itself by controlling operating expenditure & taxation, improving other income & curtailing interest costs. On yearly basis, PAT continued with its growth march moving 27% higher compared to corresponding September quarter previous year. PAT stood at Rs.844 Mn against Rs 662 Mn in Q2 FY17. EBDITA was strong & stable with 18% growth and was reported at Rs. 1274 Mn against Rs. 1080 Mn corresponding quarter previous year. Profit Before Tax jumped 20% yearly and taxation declined 3% YOY buffeting quarterly bottom-line. Profit Before Tax grew to Rs. 1072 Mn in the current quarter from Rs. 897 Mn in Q2 FY17. Other Income soared 72% YOY and was reported at Rs. 55 Mn compared to Rs. 32 Mn same period previous year. Sequential growth was also high at 62% in the current September quarter FY18.

Formulations business contributing 85% of total revenues de-grew by about 4% at Rs. 3403 Mn in the current quarter as exports, Oncology revenues & 3^rd party miscellaneous income declined by 50%, 16% & 21%YOY respectively. API revenues were impacted by domestic income which fell 19% whereas exports jumped 41% YOY. NATCO Pharma has maintained its growth momentum by controlling its operating expenditure which has declined 16% YOY. Operating expenditure stood at Rs.3048 Mn in Q2 FY18 vis-à-vis Rs. 3631 Mn in Q2 FY17.  Interest or finance expenditure also declined 70% YOY supporting the quarterly profitability. As a result both EBDITA & Net Profit Margins jumped phenomenally YOY. EBDITA & Net Profit Margins stood at 29.86% & 19.78% improving by 678 & 563 basis points YOY respectively in the current quarter. Natco Pharma is expected to bounce back on revenue front and improve its profitability and growth prospects further in the coming quarters. We recommend BUY for the stock for medium & long term with a target price of Rs. 1165.

Disclaimer                                       

                                      

The information and opinions contained in the research reports have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. The research report does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Clients should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, if appropriate, seek professional advice, including but not limited to tax advice. The reports do not take into account the particular investment objectives, financial situations, risk profile or needs of individual clients. The user assumes the entire risk of any use made of this information. This report is not to be relied upon in substitution for the exercise of independent judgment.

The price and value of investments referred to in this research and the income from them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur.

Research data and reports published/ emailed/ text messaged via Short Messaging Services, Online Messengers, WhatsApp etc/transmitted through mobile application/s, including but not limited to FLIP™, Video Widget, telephony networks, print or electronic media and or those made available/uploaded on social networking sites (e.g. Facebook, Twitter, LinkedIn etc) is for informational purposes only. The reports are provided for assistance and are not intended to be and must not alone be taken as the basis for an investment decision. The user assumes the entire risk of any use made of this information. Though disseminated to clients simultaneously, not all clients may receive the reports at the same time. We will not treat recipients as clients by virtue of their receiving this report.

The reports include projections, forecasts and other predictive statements which represent our assumptions and expectations in the light of currently available information. These projections and forecasts are based on industry trends, circumstances and factors which involve risks, variables and uncertainties. The actual performance of the companies represented in the report may vary from those projected.

The opinions expressed in the reports are subject to change but we have no obligation to tell our clients when our opinions or recommendations change. The reports are non-inclusive and do not consider all the information that the recipients may consider material to investments.

We shall not be in any way responsible for any indirect, special or consequential damages that may arise to any person from any inadvertent error in the information contained in the reports nor do they take guarantee or assume liability for any omissions of the information contained therein. Information contained therein cannot be the basis for any claim, demand or cause of action. These data, reports and information do not constitute scientific publication and do not carry any evidentiary value whatsoever.

The user should consult their own advisors to determine the merits and risks of investment and also read the Risk Disclosure Documents for Capital Markets and Derivative Segments as prescribed by Securities and Exchange Board of India before investing in the Indian Markets. The securities discussed in this report may not be suitable for all investors. Investors must make their own investment decision based on their own investment objectives, goals and financial position and based on their own analysis. Prospective investors and others are cautioned that any forward-looking statements, if any, are not predictions and may be subject to change without notice.

This report may provide the addresses of, or contain hyperlinks to websites. Except to the extent to which the report refers to material we take no responsibility whatsoever for the contents therein. Such addresses or hyperlinks are provided solely for your convenience and information and the content of the linked site does not in any way form part of this report. Accessing such website or following such link through this report shall be at your own risk.

The author of this Research Report accepts no liability and will not in any way be responsible for the contents of this report or for any losses, costs, expenses, charges, including notional losses/lost opportunities incurred by a recipient as a result of acting or non-acting on any information/material contained in the report. This is not an offer to sell or a solicitation to buy any securities or an attempt to influence the opinion or behavior of investors or recipients or provide any investment/tax advice. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.

HDFC BANK LTD - RESEARCH REPORT - Q2 FY18

POWER GRID CORPORATION OF INDIA LTD  - Q2 FY18

Power Grid Corporation Of India reported strong double digit growth for the second quarter FY18 as Revenue/Income from operations and PAT moved at 16% & 14% respectively YOY. Income from Operations stood at Rs. 72528 Mn in Q2 FY18 compared to Rs. 62549 Mn in the same period previous year. Profit After Tax rose to Rs. 21410 Mn in the current quarter from Rs. 18720 Mn in the same quarter previous year. Earnings before Depreciation Interest & Tax jumped 15% YOY and stood at Rs. 67146 Mn in the current quarter against Rs. 58295 Mn same period previous year. Sequential growth was just 1% for revenues where as Net Profit and EBDITA jumped 4% & 5% respectively in the Q2 FY18. Other income grew at 6% from Rs 2253 Mn to Rs. 2397 Mn in the present September quarter. Operating cost for the quarter stood at Rs. 7780 Mn in the current quarter against Rs. 6507 Mn corresponding quarter previous year rising 20% YOY but declined 21% sequentially. As a result EBDITA Margin declined 62 basis points on yearly basis at 92.58% but jumped 334 basis points sequentially in the September quarter. Net Profit Margin stood at 29.52% declining 41 basis points YOY whereas quarterly jump was 94 basis points.  One basis point is 0.01%.  

The company has three main revenue segments, Transmission, Consultancy and Telecom. Transmission & Telecom segments performed well growing 16% & 21% respectively YOY. Sequential growth was reported at 2% & 10% respectively in the current quarter. Consultancy segment which gave strong performance in the previous June quarter declined 45% quarterly and 25% on yearly basis. Consultancy & Telecom business constitute 2% each of revenues whereas Transmission, core business of the company accounts for about 96% of total revenues. Power Grid Corporation of India transmits more than 45% of power generated in India. Though major revenue driver is transmission business, company is leveraging its electricity network topology to form optic fiber network for long distance telecommunication network. Power Grid Corporation Of India has further diversified its revenue basket by providing consultancy services to State owned Utilities, private utilities, government departments etc. In the present scenario with government reforms giving huge fillip to power & infrastructure, Electric Utilities sector stands to gain in the long run. Thus we are bullish on the stock for medium and long term with a target price of Rs. 310.       

Disclaimer                                       

                                      

The information and opinions contained in the research reports have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. The research report does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Clients should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, if appropriate, seek professional advice, including but not limited to tax advice. The reports do not take into account the particular investment objectives, financial situations, risk profile or needs of individual clients. The user assumes the entire risk of any use made of this information. This report is not to be relied upon in substitution for the exercise of independent judgment.

The price and value of investments referred to in this research and the income from them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur.

Research data and reports published/ emailed/ text messaged via Short Messaging Services, Online Messengers, WhatsApp etc/transmitted through mobile application/s, including but not limited to FLIP™, Video Widget, telephony networks, print or electronic media and or those made available/uploaded on social networking sites (e.g. Facebook, Twitter, LinkedIn etc) is for informational purposes only. The reports are provided for assistance and are not intended to be and must not alone be taken as the basis for an investment decision. The user assumes the entire risk of any use made of this information. Though disseminated to clients simultaneously, not all clients may receive the reports at the same time. We will not treat recipients as clients by virtue of their receiving this report.

The reports include projections, forecasts and other predictive statements which represent our assumptions and expectations in the light of currently available information. These projections and forecasts are based on industry trends, circumstances and factors which involve risks, variables and uncertainties. The actual performance of the companies represented in the report may vary from those projected.

The opinions expressed in the reports are subject to change but we have no obligation to tell our clients when our opinions or recommendations change. The reports are non-inclusive and do not consider all the information that the recipients may consider material to investments.

We shall not be in any way responsible for any indirect, special or consequential damages that may arise to any person from any inadvertent error in the information contained in the reports nor do they take guarantee or assume liability for any omissions of the information contained therein. Information contained therein cannot be the basis for any claim, demand or cause of action. These data, reports and information do not constitute scientific publication and do not carry any evidentiary value whatsoever.

The user should consult their own advisors to determine the merits and risks of investment and also read the Risk Disclosure Documents for Capital Markets and Derivative Segments as prescribed by Securities and Exchange Board of India before investing in the Indian Markets. The securities discussed in this report may not be suitable for all investors. Investors must make their own investment decision based on their own investment objectives, goals and financial position and based on their own analysis. Prospective investors and others are cautioned that any forward-looking statements, if any, are not predictions and may be subject to change without notice.

This report may provide the addresses of, or contain hyperlinks to websites. Except to the extent to which the report refers to material we take no responsibility whatsoever for the contents therein. Such addresses or hyperlinks are provided solely for your convenience and information and the content of the linked site does not in any way form part of this report. Accessing such website or following such link through this report shall be at your own risk.

The author of this Research Report accepts no liability and will not in any way be responsible for the contents of this report or for any losses, costs, expenses, charges, including notional losses/lost opportunities incurred by a recipient as a result of acting or non-acting on any information/material contained in the report. This is not an offer to sell or a solicitation to buy any securities or an attempt to influence the opinion or behavior of investors or recipients or provide any investment/tax advice. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

PSU BANK RECAPITALIZATION IN INDIA: NOTHING FISCAL ABOUT IT

Indian stock markets were definitely not expecting a ‘Bahubali katappa Climax’ from the North Block on 25^th October. After so many annual budgetary allocations, our 38 listed commercial banks reported 34% rise in bad loans YOY in June quarter FY18. State Bank of India tops the chart for the highest NPAs for the Public Sector Undertaking (PSU) banks and ICICI Bank is there for company for Private sector. The total bad loans for banking industry have crossed Rs 8 Lakh Crore by this June 2017. Our North Block (Finance Ministry) had no other option but to recapitalize PSU Banks leaning on this double edged sword of slow credit growth and lower profitability. But ‘Unprecedented’ was the wrong word used by the media for this BOND RECAP program. It could have been, ‘Banks Are Forever’, ‘Licensed To Live’ or ‘Bond of Solace’. May be the media was so taken up by the intricracies of the bank recap or rehab program that it lost its usual satirical humor.  

PSU Bank Recapitalization - You Only Live Twice

Retail in the form of home loan, vehicle loan, credit card etc has become a panacea for private banks. This retail therapy has led to double digit growth for private bankers over the past few years. The PSU banks muddled with infrastructure and real estate loans started late and as such lost out on both interest income growth and profitability. With slowdown, loan approvals thinned and asset quality worsened. Non Performing Assets hopped out of every nook & corner of banking vicinity during the asset quality review initiated by RBI in January 2016. Basel III norms were either low or unfeasible for a number of PSU/government banks.  So this recapitalization was long due and expected by the banking sector and there is nothing Unprecedented about it. This scheme had already been applied in the 90s. Under this current Rs. 2.11 trillion package, Rs. 1.35 trillion will be in the form of recap bonds and the remaining Rs 76000 crore through budget allocation and fund raising.

Bonding PSU Convalescence

Bond, I mean the financial instrument is once again ready to rescue the world, this time the Indian banking sector. Bonds will be issued by the Indian Government and bought by the PSU Banks utilizing their large cash deposits garnered during demonetization. The Indian Government will then utilize these cash reserves to shore up equity capital of PSU Banks and fulfill Basel III norms by 2019. Does this entail to Financial Engineering as hyped by the media. In actual terms it is just hard core commonsense. It has nothing to do with the nuances of financial engineering. The government had to shore up bank equity without giving bailout packages like its western counterparts and disturbing its fiscal statement and there was no other way to make that happen. So the Indian Government turned out to be smarter than the analysts and financial pundits were left gaping and had to tutor themselves before explaining this ‘Financial Engineered Arrangement’ on their respective channels  next morning.

Short Term Panacea or New Dawn For PSU Banking Sector

Though this seems to be a short term arrangement, the government has neither disturbed its fiscal maths nor distorted market yields through borrowings. As per International Monetary Fund (IMF) rules, recapitalization bonds are below the line and only interest paid on these bonds will have to be taken into account. The Financial system remains undisturbed helping the banking sector to strengthen its balance sheet, use some capital for provisions and the remaining to reactivate their lending process.  

On 26^th October, the PSU stock Index skyrocketed with the hope of a new era where competition rules would be re-written and banking behemoths like State Bank Of India, Bank Of Baroda & Punjab National Bank hope to attain alacrity matching every step with the likes of HDFC, IndusInd or Kotak Mahindra Bank. Though the time frame for recapitalization programs is spread over two years, the clear light of daybreak is already visible.