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Teji Mandi: Three things investors should know on November 26, 2020

03:51 PM Nov 26, 2020 | Teji Mandi

Tata group gearing up for further re-jig:

The Tata Group is looking to continue with its strategy to further consolidate its group companies. The group is said to be considering a possible merger of its health services (Tata Health app), e-commerce (Tata Cliq), ready-to-eat food (Tata Q), and digital classroom content (Tata ClassEdge) businesses with sister Tata companies having a play in similar categories.

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Such consolidation will help these ventures to achieve better synergy and maximize their potential.

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Tata Group has been in a consolidation mode since N Chandrasekaran has taken over as the group chairman. Under his efforts, the group has also identified 10 different verticles and looking to recast its businesses accordingly. These verticles are IT, steel, automotive, consumer & retail, infrastructure, financial services, defence, travel & tourism, telecom & media, and trading & investment.

Looking at the maximum potential synergy between the group businesses we estimate that Tata Cliq could be brought under Tata Digital. Likewise, Tata Health could be clubbed with the group’s new healthcare arm, Tata Medical and Diagnostics. Tata Q, the ready-to-eat food brand, could be brought under Tata Consumer Products.

Bank credit growth stays moderate:

Bank credit growth decelerated to 5.8% in the September quarter from 8.9% in the year-ago period, according to the RBI data.

The deceleration was seen across all the geographical verticals. The rural market outperformed with a credit growth of 11.2% during the quarter. Yet, it was still down from 14.8% YoY. Credit growth in the urban market was at 8.7% vs 9.9%. The metropolitan market was the hardest hit at 3.6% vs 7.2% a year ago.

The deceleration in credit growth was in expected lines as banks opted to preserve liquidity and went slow on fresh disbursals, citing the pandemic. Degrowth in metropolitan markets was also expected but such sharp deceleration has come as a surprise.

However, the impact of the pandemic on asset quality across the banking sector has been far less than initially feared. In this backdrop, the commentary has turned positive across most banks, and credit growth is being expected to pick up in the remaining quarters of the year.

India extends the suspension on international flights:

The Directorate General of Civil Aviation (DGCA) has extended the suspension of international commercial flights till December 31. The DGCA said select international flights on limited routes will continue to run as per the specific approvals.

The government has established air bubbles with several countries to cater to the emergency needs of the passengers. Under this, select airlines from both countries are being allowed to operate a limited number of flights

The extension was being expected, given that India is staring at the second wave of Covid cases. The Indian airline industry has a very insignificant presence on international routes. Hence, we don't see much of a negative impact of this development.

However, the market will keenly observe the developments on the domestic front. The market has just started to pick up post lockdown and if DGCA is forced to put fresh curbs on domestic flights, it would be a real dampener.

Also Read: Teji Mandi: Why is work from home not here to stay? A human, social and economical perspective

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