Fuel subsidy helps HPCL beat Street Estimates – Positive in short to medium term for HPCL
HPCL reported a better than expected fourth quarter net profit of Rs 4,6.1 bn after it got lumpsum fuel subsidy, beating street estimates of Rs 31.7-34.6 bn but was lower than Rs 76.8 bn net profit in the same period a year ago. The company lost Rs 91.8 bn on selling diesel, domestic LPG and Kerosene at government controlled rates in Q4.
Against this, it got Rs 56.7 bn assistance from the upstream firms and Rs 69.4 bn in cash subsidy from the government. The cash subsidy was to cover for losses HPCL had incurred in previous quarters as well. In the full year, the company got Rs 152.1 bn in cash subsidy and Rs 167.7 bn in assistance from upstream firms, leaving Rs 4.8 bn uncovered loss. The company earned USD 4.66 on turning every barrel of crude oil into fuel as compared to USD 3.71 a barrel gross refining margin (GRM).We believe the stock will react positive in short to medium term.
Nation Economy News
Finance ministry to introduce a framework that will allow 49% investment in most sectors
The finance ministry is scripting a liberal foreign investment policy framework that will allow at least 49% investment in all sectors, barring a few strategic ones, as part of plans to stimulate overseas interest and help lift the economy out of a prolonged slump. Moreover, the ministry will propose that the minimum 49% investment is allowed through the automatic route, without requiring time-consuming government approval, based on the argument that Indian-owned and controlled companies should not face undue scrutiny.
Commerce ministry seeks SEZ tax withdrawal, duty cut for sectors with high export potential
The commerce ministry will push for withdrawal of taxes on Special Economic Zones and duty cut for sectors with high export potential as part of a crisp five-point budgetary proposal it will make to the finance ministry. Commerce secretary Rajeev Kher met with various export promotion councils where he made it clear that only a limited set of demands will be presented to the finance ministry to boost exports.
World Economy News
Japan April Retail Sales Tumble 4.4%
Retail sales in Japan contracted 4.4% on year in April, coming in at 11.01 trillion yen. That was shy of forecasts for a contraction of 3.3% following the 11.0% spike in the previous month. Analysts say that the drop was not unexpected, and it follows the enactment of the sales tax hike at the beginning of the month – as consumers tried to get in major purchases before the tax increase went into effect.
German May Unemployment Rises Unexpectedly
Confounding expectations, German unemployment increased for the first time in six months in May, it is largely due to weather related factors. The number of people out of work increased by around 24,000 to 2.91 million in May, the Federal Labor Agency reported. This was the first increase in six months and confounded expectations for a decline of 15,000.