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FMCGs gear up, IL&FS’ debt recovery and dream quarter for real estate: Three things Teji Mandi investors should know on April 15, 2021

06:50 PM Apr 15, 2021 | Teji Mandi

Are FMCG Sectors In for A Good Run?

If the first COVID-19 wave's experience is any indication, FMCGs can see an increase in activity during the current second COVID-19 wave.

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While consumers are likely to cut back on discretionary spending, demand is likely to increase for staple products. This was the trend during the first lockdown, where consumption of branded FMCG products increased due to the hygiene concerns and trend of home cooking.

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During the lockdown last year, demand for FMCG products like biscuits, confectionaries, and packaged food increased by many folds. As a result, Parle managed to record the highest ever sales of Parle-G in its long history. Britannia also reported record sales of its biscuit products.

This year's trend is likely to repeat itself. Companies must, however, strive to eliminate supply chain-related constraints, which have proven to be major roadblocks.

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IL&FS' Aggressive Debt Recovery

The Uday Kotak-led committee has managed to resolve debt-related issues of IL&FS. The company has so far resolved the debt of Rs 43,000 crore through the sale of assets and other cash receivables.

The company has also increased the debt recovery target to Rs 61,000 crore, up by over Rs 5,000 crore from its earlier estimate of Rs 56,000 crore. The group had overall debt of approx. Rs 99,000 crore, as of October 2018.

The upgrade of Rs 5,000 crore is due to the improved valuations, and better recoveries from non-group exposures. There is no clarity given on the remaining debt of Rs 38,000 crore. But, in all likelihood, the lenders will be forced to take a haircut on that amount.

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Surge in Private Equity Deals in Real Estate

Indian real estate sector witnessed private equity investment of $3.24 billion during the March ending quarter. It is 16x higher compared to $199 million in the same quarter last year.

Leading real estate agency Knight Frank India said that in value terms, March quarter investments were nearly 80% of that witnessed in full-year 2020 and around 48% of the full year 2019.

Majorly two reasons could be attributed to this surge in momentum. Firstly, there was a strong deal pipeline that was pending due to the lockdown. A few of the deals from this pipeline could have spilt over to the March quarter. Secondly, investor confidence could have risen due to the abating COVID-19 wave.

However, this rising sentiment is certainly going to be tested in the first half of FY22 under the impact of the second COVID-19 wave.

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