FMCG major Hindustan Unilever (HUL) reported resilient volume growth in a tough environment. However, a substantial increase in promotional activity severely constrained profit growth. Our concerns on weak rural demand and disruptive pricing action are playing out, and will cap earnings growth in the near-to-medium term, in our view. However, expectations are largely reflecting this and we see limited downside from here. Maintain Hold.

Q2FY16 below expectations: HUL’s Q2FY16 revenues grew c.4% y-o-y, slightly below forecast.

Margins expanded c.40bps y-o-y, below estimates mainly led by profit decline in soaps & detergents (S&D) and beverages. Personal product revenues grew 9% y-o-y (in-line) while margins were better than expected. Overall, operating profits grew at a muted pace of c.7% y-o-y (-3.4% vs est).

Muted demand; resilient volume growth: HUL’s underlying volumes grew c.7% y-o-y in a subdued consumption environment. Rural demand has slowed down in recent times and is now growing at the same pace as urban. We cut our FY16e-18e est by c.1-4% as we factor in 2Q16, and the prolonged nature of the slowdown.

Limited margin gains: We have been skeptical of commodity benefits for HUL, due to the risk of disruptive pricing action and rise in promotional spends. These concerns are playing out, as seen in the muted margin gains in 2Q16.

The company stepped up both media spends and promotional activity, particularly in the S&D category. We slightly lower our Ebitda margin est. by c.40bps for FY16e and maintain our FY17e/18e est.

Valuation/Risks

We cut our EPS est. by c.4-6% as we incorporate the changes above and raise tax rates as indicated by the management. We roll forward our P/E based TP which now stands at Rs 818/ share (35x 1-year fwd earnings). While our concerns on the business are playing out, we believe expectations now largely reflect this. Consensus earnings have come off in recent months and we see limited downside from here. Maintain Hold.

Risks: Swift demand revival on the upside and severe pricing deterioration on the downside.

The change in guard at SpiceJet has been a blessing as the new promoter, Ajay Singh, seems to have pushed all the right buttons, piloting the airline’s course correction.

We recently met SpiceJet management to gain insights into the genesis of the recent crisis the airline had to battle, wherein consumer confidence as well as the brand took a severe beating. The change in guard has been a blessing as the new promoter (Ajay Singh) seems to have pushed all the right buttons, piloting the airline’s course correction.

This, further bolstered by favourable market conditions (robust demand, benign ATF prices) led to the once beleaguered SpiceJet clocking profits for two consecutive quarters. While the airline is firmly on course to return to normalcy, management is now sharpening focus on growth.

What went wrong?

Winter (peak season for airlines) 2014 was the coldest ever for SpiceJet as heightened flight cancellations—triggered by serious liquidity constraints—severely eroded consumer confidence, leading to the airline ceding significant ground to competition. Aggressive fare discounting strategy to prop up utilisation and legacy accumulated losses came to haunt the company, rendering recapitalisation imperative even as incremental capital was hard to come by.

The only option left was to rationalise fleet size by prematurely terminating a few aircraft leases, severely denting operations.

The turnaround: Changing hands for good

In Q4FY15, Ajay Singh, one of the airline’s founder members and reputed for a hands-on approach, took over ownership and control of SpiceJet from the erstwhile promoters. With recapitalisation, the company undertook a few prudent measures—settled outstanding dues, renegotiated contracts, optimised aircraft utilisation and revenue maximisation. These have restored operational reliability and helped regain customer confidence, evident in its gradually making good the lost market share.

Outlook: Focus shifting to growth; ‘NOT RATED’

SpiceJet has managed to discharge a significant portion of its liabilities and pare payables from ~Rs 18 bn to ~Rs 11 bn. Further, conducive macroeconomic milieu has helped the new promoter turn around the airline—reported two consecutive quarters of profits: Rs 225 mn in Q4FY15 and Rs 718 mn in Q1FY16. Though Q2 is a seasonally weak quarter, management is confident of a robust Q3, given the initial pre-booking trend ahead of the peak festive season. With the airline returning to normalcy, management has now shifted focus to growth. The stock is ‘NOT RATED’.

For the upcoming winter schedule, SpiceJet is adding six more aircraft, which will help it operate 291 daily flights from the current 250 flights across the country. With the airline now returning to normalcy, management is now clearly shifting focus to growth.

National Stock Exchange (NSE) has seen significant changes at senior level in the past one year as it seeks to enhance its functional capabilities.

The exchange appointed Mukesh Agarwal from Crisil early this year as the new chief executive for India Index Services & Products (IISL), replacing R Sundararaman, who had resigned late last year.

The bourse has also appointed new heads for its technology (Sankarson Banerjee), corporate finance, secretarial as well as clearing and settlement (Natrajan Ramaswamy) departments.

Besides, various functional heads have been recruited by the NSE for listing as well as international business.

An NSE official said the revamp is part of the exchange’s efforts “to enhance capabilities and widen the skill-set among its senior team”.

Without naming other appointments, the official also said it got a new head for corporate finance, who earlier worked with Raymond.

The exchange has also filled up secretarial post with an executive who has earlier worked for Deutsche Bank.

When contacted, an NSE spokesperson said these changes, including the exits and appointments, have taken place broadly in the past one year.

Interestingly, the NSE’s new head of clearing and settlement earlier worked for the Competition Commission.

Quantum MF and Reliance MF are already off the block, which offer e-KYC (Know Your Customer) that allows first-time investors to fill a simple form and complete the formalities in a paperless manner. Others are likely to follow suit. (Image courtesy: SBI)

To make it easier for investors to buy or sell mutual fund products, fund houses are offering an electronic, or e-KYC, initiative to first-time investors.

This new service will help investors buy or sell mutual fund (MF) products in a simpler and faster way.

Quantum MF and Reliance MF are already off the block, which offer e-KYC (Know Your Customer) that allows first-time investors to fill a simple form and complete the formalities in a paperless manner. Others are likely to follow suit.

After completing the KYC formalities, fund houses schedule a video conference with the investor over Internet to do an in-person verification (IPV). Once the IPV is done, fund houses send a confirmation.

“e-KYC will make investment simpler and faster. The new measure will attract retail investors in a big way,” Quantum MF Chief Executive Jimmy Patel said.

Currently, lengthy paperwork for the KYC process demands several documents to be submitted as proof, which takes a lot of time.

Furthermore, fund houses are in discussions with markets regulator Sebi to allow investors to invest in mutual fund products by using the Aadhaar number.

Besides, they met with Infosys co-founder and former UIDAI chief Nandan Nilekani last week in this regard.

Not just that, fund houses are taking several steps to raise their share through this route. They have been tapping social media platforms like WhatsApp and Facebook and a host of other calling and messaging apps to facilitate transactions in MF products.

Capital market regulator Sebi has ordered attachment of bank and demat accounts of one Shyama Prasad Murarka to recover dues of over Rs 77 lakh for violation of norms.

Exercising its powers to recover penalties from defaulters, the Securities and Exchange Board of India (Sebi) has ordered attachment of bank and demat accounts of Murarka to recover dues worth Rs 77,29,736.

The pending dues include fine imposed on him along with interest, charges, expenses and other costs.

The penalty was imposed on Murarka for violating various capital market regulations.

In attachment orders dated October 16, Sebi has directed banks to attach all accounts including lockers held by him.

Similarly, the regulator has directed depositories — NSDL and CDSL — to attach all demat accounts of the defaulter.

The watchdog has also asked for various details of the accounts held by him, including account statements.

The markets regulator has been given powers to attach properties and bank accounts, among other things, of persons and entities which have failed to comply with directions involving payment of penalties and other dues.