Financial Derivatives

1. FINANCIAL DERIVATIVES
TOPIC: Impact of COVID on Selected Sectors of Indian Stock Market

2. AUTOMOBILE SECTOR
• Tata Motors on Wednesday reported 81.78 per cent dip in its total sales at 25,047 units in the first quarter ended June 30, 2020.
• The company had sold 1,37,545 units in the April-June quarter of 2019-20.
• Domestic sales of the company stood at 23,845 units in the first quarter of the current fiscal, down 82 per cent from 1,31,879 units in
same period of 2019-20, Tata Motors said in a statement.
• Amidst subdued demand environment, first quarter was marked by successful transition to BS-VI across the range of commercial vehicles.
• There are early recovery signs in a few sectors, and the company looks forward to a gradual pickup in demand on the back of overall
economic recovery while continuing to address the challenges of intermittent demand and supply disruptions from Covid-19.
• The Covid-19 lockdown deeply impacted PV industry sales in the first quarter of 2021 fiscal. After partial sales recovery in May pent up
demand supported a steeper recovery of retail in June," Shailesh Chandra, President, Passenger Vehicles Business Unit, Tata Motors said.

3. • The Covid-19 lockdown deeply impacted PV industry sales in the first quarter of 2021 fiscal. After partial
sales recovery in May pent up demand supported a steeper recovery of retail in June. Owing to the global
pandemic of COVID-19, it was an unprecedented quarter in the company’s history wherein a large part of the
quarter had zero production and zero sales in compliance with a lockdown stipulated by the government.
Production and sales started in a very small way in the month of May.
• Revenues in the quarter plummeted 80% year-on-year to Rs 3,677 crore, missing estimates as volumes sold
were only 76,599 vehicles compared with dispatches of around 1.3-1.5 lakh units a month in normal times.
• The management said that the production in the quarter had been equivalent to just about two weeks’ of
regular working.
• According to several media reports, Maruti’s revenue declined 79.2% to Rs 4,106.5 crore as against ₹ 19,720
crores in June 2019. On Wednesday, the company's scrip on The Bombay Stock Exchange (BSE) was trading
2.2% lower at ₹ 6,142.

4. FMCJ SECTOR
• FMCG major Nestle India NSE 1.81 % on Thursday said the impact of coronavirus pandemic on its business operations has not been
"materially adverse" so far and the company will continue to evaluate the consequences of the health crisis and subsequent lockdown as
the situation evolves. The company also does not see any "specific challenge in terms of its capital or financial resources" or any "significant
deviation in profitability“ according to a regulatory filing.
• It has "strong cash position" and is in a "comfortable liquidity position" to meet its financial commitments.
• While the impact of COVID-19 on the company's business operations has not been materially adverse so far, it is extremely difficult to assess
its impact on near-term and annual results. The company continues to evaluate the impact of COVID-19 as the situation evolves," said
Nestle India.

5. • The situation remains volatile with the trajectory of the virus undetermined, evolving hot-spot geographies, the success
of containment measures uncertain, the severity and duration of resulting economic crisis and the extent of structural
damage unknown.
• The maker of Lux soap, Knorr soups and Bru coffee also said the near-term outlook for the fast-moving consumer goods
sector remains extremely uncertain even as it expressed confidence at medium- and long-term growth prospects.
• The nationwide lockdown imposed to contain the pandemic froze all but essential economic activity, and decimated
consumption in the first two months of the fiscal. While India has started reopening in phases and the government
announced relief packages, the economy is expected to contract for first time in four decades.
• There was no production and shipping in the last seven days of March in India, HUL’s parent Unilever Plc had said at a
recent global conference call with investors, adding that it took the company four to five days to restart its factories in
the country. The Indian facilities, the report said, have ramped up production to 80-90% compared to 70% in April.

6. TELECOM SECTOR
• The COVID-19 of the coronavirus outbreak will have a little impact on the Bharti Airtel’s mobile and other businesses, ICICI Securities said in a
note. It added that with many subscribers at home and working, the telco will rather see a boost in mobile volumes.
• However, the significantly generous allowances in voice and data mean limited benefit. But, crude price and currency volatility do pose risk to
Bharti Airtel.
• The brokerage said that it sees dip in Bharti Airtel’s valuation due to its foreign currency debt in India, but the risk is covered by the benefit
from Airtel Africa’s value accretion. Therefore, on a consolidated basis, rupee deprecation does not impact Bharti Airtel’s fair value.
• It, however, added that AGR dues pose a risk to Bharti Infratel’s fair value if VIL shuts shop, Bharti Airtel’s mobile business may see windfall
gain. Further, we see the company’s cash balance completely protecting it from worst case risk of AGR dues

7. • Vodafone Idea are expected to lose 2 million and 10 million subscribers in the first
quarter, respectively, on account of Covid-19 led disruption, ICICI Securities in a
report on Friday.
• ICICI Securities said that telcos’ ARPUs are likely to be decline sequentially in the
quarter.
• For Vodafone Idea, with sequential ARPU decline of 5% is likely at Rs 115 due and
subscriber churn. “We expect overall revenues to decline 8% QoQ at ₹10,819
crore.”