Bandhan Bank appoints lead managers for proposed IPO (BL, BS 13.09.17)
The board of Kolkata-based Bandhan Bank has appointed Goldman Sachs Group Inc, JPMorgan Chase & Co, Axis Bank Ltd, JM Financial Ltd and Kotak Mahindra Bank as lead managers to manage its proposed initial public offering. Kotak Mahindra Bank will act as the left lead in the issue. The final decision on the proposed IPO will be subject to all regulatory approvals. According to CS Ghosh, MD and CEO, Bandhan Bank, the size of the issue, its timing and other related aspects will be finalised in the due course. Bandhan is the first microfinance institution to receive universal banking licence in 2015. The RBI’s guidelines mandates the bank to get itself listed within a span of three years from the commencement of banking operations. “We are comfortable on the capital front but the RBI requires us to be listed within three years of commencement of operations so we are working towards it,” Ghosh said. The bank’s capital adequacy ratio stood at 26% as on June 30. This is well above the RBI’s required limit of 13%, he said. Ghosh had earlier said that while the bank had initiated the process of IPO, there was no hard and fast rule that the IPO has to hit the capital market by August next year. “It can be one or two months here and there,” he had said on the sidelines of the bank’s second anniversary celebration last month. Having commenced its operations with 501 branches and 2,022 doorstep service centres or banking outlets, the bank has scaled it up to 840 branches and 2,444 banking outlets in the last two years. Total deposits stand at ₹24,500 Cr; while advances are at ₹21,335 Cr. Nearly 90% of its business comes from the micro-credit segment.
'Indian banks' capital needs fall due to asset rationalisation, weak credit growth' (BL, BS 13.09.17)
Fitch Ratings has said that the capital needs of Indian banks have fallen from its previous estimate of $90 billion to $65 billion, largely as a result of asset rationalisation and weaker-than-expected loan growth. Indian banks are likely to require around $65 billion of additional capital to meet new Basel III capital standards that will be fully implemented by the financial year ending March 2019 (FY19), as per the credit rating agency's latest estimates. Fitch assessed that though capital needs have fallen, state-run banks, which account for 95% of the estimated shortage, have limited options to raise the capital they still require. Prospects for internal capital generation are weak and low investor confidence impedes access to the equity capital market, it added. Access to the Additional Tier 1 (AT1) capital market has improved in recent months, reflecting state support to help state banks avoid missing coupon payments, but around two-thirds of the capital shortage is in the form of common equity Tier 1 (CET1). The agency observed that weak capital positions have a major negative influence on Indian banks' Viability Ratings, which will come under more pressure if the problem is not addressed. "State banks are likely to be dependent on the state to meet core capital requirements. The government is committed to investing only another $3 billion in fresh equity for 21 state banks over FY18 and FY19, having already provided most of the originally budgeted $11 billion," the agency said. Fitch believes the government will have to pump in more than double, even on a bare minimum basis (excluding buffers), if it is to raise loan growth, address weak provision cover, and aid in effective non-performing loan (NPL) resolution - the gross NPL ratio reached 9.7% in FY17, up from 7.8% in FY16. NPL resolution process being led by the RBI could potentially release capital if recovery rates are as high as banks and the government are hoping for, the agency said.
J&K Bank cuts interest rate on savings account to 3.5% (BL 13.09.17)
Jammu and Kashmir Bank (J&K Bank) has lowered the interest rate on its savings bank accounts by 0.50% to 3.50% with effect from 12thSeptember, following the industry trend. “The bank has revised the interest rate on savings bank deposit accounts with effect from September 12, 2017. The revised interest rate on domestic/NRO/NRE rupee savings bank deposits is revised to 3.5% per annum from 4% per annum,” the bank said in a regulatory filing. The interest rate cut primarily began with industry leader SBI slashing it 0.50% to 3.50% for deposits up to Rs. 1 Cr on July 31 this year. So far, nearly two-dozen banks, both public and private, have cut interest rates on various quantums on deposits they pay to customers. Shares of J&K Bank traded 2.7% up at Rs. 81.70 on BSE.
Shortage of insolvency professionals may be a challenge (BL 13.09.17)
Ever since the RBI identified 12 big defaulters — accounting for a fourth of the system’s bad loans — for insolvency under the bankruptcy code, the focus has been on such large accounts. But the bad loan menace does not stop with large defaulters alone. Given that a default of just more than Rs. 1 lakh can trigger insolvency under the IBC, the large number of smaller bad loan accounts that could enter the system in the coming months, present a huge challenge for the existing structure. Currently there are around 900 registered insolvency professionals (IPs). About 260 cases have so far been approved by the NCLT for resolution. Given that these are mainly larger accounts that have been pushed forth for resolution by lenders and the regulator, the existing number of IPs may grossly fall short of the requirement, when large number of small value accounts come up for resolution. Also, the pace at which fresh cases are being filed has been increasing significantly over the past few months. Over the last month alone, around 100 new cases have been approved by the NCLT. According to the latest data (as of September 2016) available with the RBI on the loans outstanding of banks according to credit limit size, while high value ticket loans — of above Rs. 100 Cr — constitute 30% of the total loans by value, they are only minuscule in number (less than 1%). Nearly 70% of the total loan accounts pertain to loans with credit limit of Rs. 25,000 to Rs. 5 lakh. Assuming that bad loans in the system mirror the same trend in terms of value and number of accounts, lack of sufficient number of resources in terms of IPs, benches, judicial members, technical members at NCLT— is a cause for worry. “Even if these cases are small in value, they can be as complex as or more than some of the larger accounts. The limited number of resources to handle such cases is one of the pressing challenges for the IBC currently,” says V Srinivasa Raghavan, Partner, IndusLaw.
PSU bank merger should follow balance sheet clean-up: Raghuram Rajan (BS 13.09.17)
Mergers of PSU banks should be done only after balance sheets are cleaned up and these are nursed back to health with adequate capitalisation, said former RBI governor Raghuram Rajan. "I would say restore the banks to health, get active board composed of professionals. There has been a steady attempt to professionalise banks and remove political hacks. Once we have done that, I think there will be an ideal situation for merger," he said. He was responding to a question on the government's push for consolidating public sector banks with an aim to create fewer and larger banks. Rajan also suggested that decisions need to be made by those who understand the banking system rather than necessarily by bureaucrats. "It seems to me that cleaning up has been postponed for one reason or the other. We are in a reasonable position to do it. We need to actually achieve it and put the capital that is necessary to recapitalise the banks where it is needed and after it seems that some of the (merger) decisions can be made," he added. The statement assumes significance as the government recently initiated the process of second round of consolidation in public sector banks by constituting an Alternative Mechanism to oversee proposals of amalgamation. Pointing out that going forward, the merger would not be as easy as SBI that had few teething issues, Rajan said "you would be merging banks with fairly different culture, fairly different orientation, system and region". "To that extent, you have to be careful about time it will take and what the merger would add in terms of value. Merger requires a fair amount of cultural focus because you are merging banks which have different cultures," he said. "There are personnel problems like who becomes the boss, who becomes the subordinates. For example, if you are merging two forex units, then who becomes the boss? So, all these issues come to the fore. It occupies enormous amount of the management's time," the ex-governor pointed out.
State Bank of India to unveil Project Lotus (FE 13.09.17)
A superstore that gives you exclusive deals when you shop for shoes or smartphones. Lets you check out homes within your budget. Saves you interest even if you pay for a purchase in instalments. And lets you sell shares or cherry-pick a mutual fund scheme. In addition to helping you keep track of your spends. That’s the new digital platform from SBI — code-named Project Lotus — to be unveiled both as a website and an app. What will be unique about the portal is the large universe of retailers and the wide range of goods and services that customers will have access to. And also the easy payment terms, sans interest if the e-retailer is willing. The country’s largest lender is hoping Project Lotus — which promises to take care of practically every consumer need online — will help it not just add but also retain customers, especially among the younger generation. The idea is to be able to track both spends and investments closely and present customers with suitable products and services, thereby converting searches into transactions. Supported by a technological backbone from IBM, the product comprises a digital bank that offers an entire suite of services and the superstore which allows you to shop from close to 300 e-retailers and merchants with offers tailor-made for a consumer. For instance, if a customer sets his sights on a smartphone on an e-commerce site, he can pay for it in instalments but may not need to fork out an interest component. If the e-retailer is willing to fund the purchase without charging the customer interest, it’s because the customer has been directed to its site by SBI. Also, there’s greater comfort in dealing with an SBI customer. The bank is relying on data gleaned from the financial behaviour of consumers. The website/app will also make product recommendations and offers suitable for them.
Fearing NPAs, banks shun renewable energy companies (FE 13.09.17)
Lenders are worried about the drop in tariff in the renewable power sector and are increasingly becoming more cautious in lending to the sector on fears their loans could turn into non-performing assets (NPAs), bankers said. The tariff for renewable energy like solar power and wind power has fallen drastically in the recent years, hurting the finances of renewable energy companies. Bankers are worried that these companies might not be able to service their loans, given that their earnings have been squeezed. Weak financial health of state-owned power distribution companies, the key customers of most of the renewable projects, is another key concern since it often leads to delays in payments. The solar power tariff in has fallen to Rs 2.4 per kilowatt hours in 2017, from around Rs 12 per kilowatt hours in 2012, while wind power tariff has fallen to Rs 3.46 kilowatt hours from as high as Rs 5.9 kilowatt hours earlier. “We are very cautious on the renewable sector and we have stopped disbursing new loans to the renewable energy companies,” a senior official at the SBI said. “There is a chance of the existing loans to the sector turning into NPAs. The next round of NPAs will come from this sector.” The official said that the overall power sector is likely to be under pressure for at least the next two years. As of June 30, the SBI’s outstanding to the power sector was Rs 1.71 lakh Cr, about 10.170% of the total outstanding, data from the latest analyst presentation showed. For the bank, 95% of its corporate slippages is from the watch list. As of June, the amount outstanding to the power sector was 10,531 Cr in the bank’s watch list. “The caution is not uncalled for. The renewable companies have been bidding very aggressively. Due diligence is required even for the future bids,” said Vivek Sharma, senior director, CRISIL Infrastructure Advisory.
10 million Sign up for Paytm Payments Bank (ET 13.09.17)
About 10 million people have signed up for bank accounts during the beta launch of Paytm Payments Bank. Payments company Paytm had launched its payments bank on its mobile app in beta mode two weeks ago. Paytm Payments Bank was launched in May with a branch in Noida, and the company had said it will expand to 31 branches and 3,000 customer service points in the first year. The sign-ups for bank accounts, however, are a fraction of Paytm's total of over 200 million wallet customers, a landmark that the company crossed earlier this year. The company said it has not been pushing for signups among its customers aggressively. “Paytm customers are already using Paytm Wallet of Paytm Payments Bank. We have not pushed consumer beta for our savings account sign up aggressively, and 10 million organic sign ups without any marketing on a limited rollout is a very encouraging response,“ said Renu Satti, CEO of Paytm Payments Bank. The company said the average deposit in a savings account was higher compared with that in a wallet account. “Customers are gradually exploring the convenience and benefit of their savings account with Paytm Payments Bank and we expect deposits to increase in future,“ Satti said.
Capitalisation Bonds May be Floated to Support PSBs (ET 13.09.17)
The government is exploring the sale of capitalisation bonds to meet the burgeoning capital requirements of state-run lenders, mostly the weaker ones that are finding it difficult to raise resources from the market. “We are looking at a host of strategies to strengthen PSBs (public sector banks) and this (is) one of them,” said a senior finance ministry official. The lenders are also expected to raise money from the markets on their own, he said. Against an estimated capital requirement of 1.8 lakh Cr, the government is providing 70,000 Cr until FY19. The banks are supposed to raise the remaining 1.1 lakh Cr from the market. The government can't afford to splurge as it's committed to keeping the fiscal deficit at 3.2% of GDP in FY18 and at 3% in the following year. On the other hand, “the government is fully committed to capitalise state-run banks,“ said the official cited above, adding that discussions were at an early stage and the interest rate and tenor are still to be worked out.
IIP rises only 1.2%, food inflation at 5-month high (BL, BS, FE, ET 13.09.17)
The data on the Index of Industrial Production (IIP) and consumer price index (CPI)-based inflation, released were more bad news for the Narendra Modi government, after growth of gross domestic product (GDP) crashed to its lowest in its tenure last week. The IIP data showed that economic activity was yet to pick up. Food items becoming more expensive and some services turning pricier because of the goods and services tax (GST) meant CPI-based inflation remained high. In July, the IIP grew by only 1.2% over the same month last year, recovering slightly from a contraction of 0.1% in June. The GST was rolled out on July 1; the fall in the IIP was because of pre-GST destocking. The July figures — lowest in 20 months, if June figures are excluded — showed industrial recovery was still a far cry. Capital goods output continued to contract in every month of the current financial year (FY18), showing weak investment in the country. However, the rate of decline fell to 1% in July from 6.8% in June and 1.38% in May. The silver lining is that economists expect industrial recovery to gain momentum as the GST stabilises. The CPI-based inflation rate, on the other hand, rose to a five-month high at 3.36% in August from 2.36% in the previous month, as food items, particularly vegetables, became more expensive. In the past three months, vegetable prices had fallen. The GST has also made some services, such as health, transportation and communication, recreation and amusement inflationary. This means chances of the RBI cutting the repo rate next month are bleak.
‘Push manufacturing to boost GDP’ (BL 13.09.17)
The government needs to focus on ways to push the growth of manufacturing sector if it wants to maintain a sustained GDP growth of 9-10% per year, a study by Assocham-EY said. The report said that although implementation of the Goods and Services Tax (GST) has addressed several regulatory issues, state governments need to resolve issues like bureaucratic obstacles, obstructive regulations and policies to boost manufacturing sector. “If India has to maintain a sustained GDP growth of 9-10% per annum, it is crucial that the manufacturing sector grows steadily at 14-15% per annum over the next three decades,” it said. It suggested that States should focus on those industries where it has a competitive edge over others in terms of raw material availability, demand, logistics and skilled manpower.
Investments contract in first 4 months of FY18 (BS 13.09.17)
An investment revival looks increasingly unlikely in the immediate future. The capital goods segment in the Index of Industrial Production (IIP), a proxy for investment demand, has contracted for four straight consecutive months, showed the latest data. Since September last year, it has contracted every month, barring two. Of the principal drivers of capital expenditure (capex), only the central government seems to be doing the heavy lifting. Central government capex has grown at a robust 33.4% in the first four months of the current financial year (FY18). But this has been offset by a fall in state governments’ capex. An analysis of 10 state governments’ spending pattern shows that these states, put together, have spent only a mere 19.8% of their capex budget in the first four months of FY18, lower than their spending over the same period last year. The combined budgetary allocation for capex of these states is a staggering Rs 2.5 lakh Cr in FY18, as opposed to the Centre’s allocation of Rs 3.09 lakh Cr. “The slowdown in revenue expenditure growth and contraction in capex revealed by the provisional fiscal data (for Q1 FY18) for 12 states released by the Comptroller and Auditor General of India (CAG), is likely to have partly offset the positive impact of the front-loading of the central government’s expenditure in that quarter,” says Aditi Nayar, principal economist, Icra. Principal among the laggards are the states of Uttar Pradesh and Punjab. As against a capital outlay of Rs 53,257 Cr, Uttar Pradesh has spent only 6.2%, or Rs 3,293 Cr, till July. Similarly, Punjab has spent only 9% of its budgetary allocation. Some economists have attributed this pattern to the elections in these states, which would imply that capital spending by these and other states should ramp up in the coming months. But given the pressures that some of these states face on account of their Ujwal Discom Assurance Yojana (UDAY) obligations as well as their farm loan waivers, it is difficult to say for sure.
Gujarat sees highest share of private investment in 2016-17: RBI (BS 13.09.17)
Gujarat accounted for the highest share in total cost of private corporate investment for financial year 2016-17, according to a study by the RBI. Gujarat made up 22.7% of the aggregate investment, followed by Maharashtra at 8.6%, the study, part of the RBI’s monthly bulletin for September, said. Andhra Pradesh, which held the highest share at 12.3% in FY16, saw its share drop to 8.2%. Data for the past five years showed 62% of the projects were predominantly taken up in Gujarat, Odisha, Maharashtra, Andhra Pradesh, Chhattisgarh, Madhya Pradesh and Karnataka. The share of “multi state” projects halved in the recent period, probably reflecting the bottlenecks in obtaining clearances from multiple state authorities. “The near-term outlook for new investment in the Indian economy appears to be improving, as reflected in continued intentions to commission projects in power and construction sectors, in the first half of 2017-18. FDI (foreign direct investment) and private placement of debt has gained momentum and should boost financing of capex in the year,” the central bank said. The total cost of projects almost doubled to Rs 1,82,800 Cr in FY17, from Rs 91,800 Cr in FY16. The RBI estimates planned capital expenditure to amount to Rs 69,400 Cr, in FY18, a slight improvement over the past year. An additional Rs 85,400 Cr worth of capex would have to come from new investment intentions to match the level estimated for FY17. The central bank expects the investment climate to improve in the subsequent quarters, in view of business sentiment regarding the goods and services tax (GST) and FDI, despite the seasonal drop in the first quarter of new project announcements.
Change in agro-credit approach needed, says Ex-RBI deputy governor Mundra (BS 13.09.17)
S S Mundra, former deputy governor of the RBI said public sector banks (PSBs) need to take a focused approach towards long-term agricultural credit and attempts must be made to finance the entire agro-value chain if India wants to improve the current state of affairs in this sector. “Attempts must be made to target the entire agricultural value chain financing, rather than on a solo level. Measures like Kisan Credit Card, agri-insurance, e-connectivity and others are incremental in nature and are not game changers,” Mundra said. According to Mundra, the agro sector is plagued with lack of new capital formation, as the share of long-term credit declined to 32% in 2013-14, from 74% in 1990-91. The north and south zones together account for 62% of the agro-credit, with the southern region alone accounting for 41% of the total disbursement. Also, the credit in the sector is heavily concentrated, as only 15 districts of the total 600 districts in the country accounted for 21% of the total credit. “Some elucidation is needed to explain this concentration,” he said. Mudra asked the PSBs to take a ‘hard look at their approach’ in rural areas. He said the banks and the country’s policy framework needed to be friendlier towards micro, small and medium enterprises. This sector has the potential to create jobs at a time when it is estimated that around 69% of the current jobs in India might be lost on account of automation.
By-products of note ban may be more valuable: Mundra (BL 13.09.17)
The ‘by-products’ of demonetisation could turn out to be more ‘valuable’ than the main purpose behind the move, former RBI Deputy Governor SS Mundra said. The key ‘by-products’ of demonetisation include digitisation, better tax compliance and bringing in more resources into the formal economy, Mundra said. Drawing a comparison between demonetisation and the manufacturing sector, Mundra said, “In case of certain manufacturing industry we see that the by-products are more valuable than the main products. This can be compared to demonetisation.” Elaborating his point further, he said, while it was expected that a good portion of money might not come back into the banking system post demonetisation, that did not happen. “But what is more significant is that the money has come back into the formal system,” he said. The RBI had, in its annual report 2016-17, released on August 30, said that nearly 99% of the currency scrapped during demonetisation in November last year have returned to the banking system. According to Mundra, the Indian economy is currently growing below its potential and closing the negative gap should be a priority. Talking about a model for growth, he said, “We would do well to aspire for a growth model which predominantly focuses on domestic manufacturing and global service delivery, which would be much more sustainable.” The asset quality problems can be ascribed primarily to four factors including environmental factors, corporate imprudence, corporate misdemeanors and banks’ failings, he said. Nearly 50% of the restructured advances have slipped into the NPA category signifying that such restructuring had not been realistic or underlying causes of stress have either persisted or aggravated, he pointed out.
Bill to double gratuity ceiling to Rs. 20 lakh gets green signal (BL 13.09.17)
The Union Cabinet approved an amendment Bill that seeks to double the gratuity ceiling to Rs. 20 lakh from Rs. 10 lakh for employees in the private and public sector, as well as autonomous organisations, brining it on a par with Central government employees. The Cabinet also gave its approval for introduction of the Payment of Gratuity (Amendment) Bill, 2017 in Parliament that seeks to amend the Payment of Gratuity Act, 1972, which applies to establishments employing 10 or more persons. “The amendment will put the maximum limit of gratuity of employees of the private sector as well as public undertakings and autonomous organisations under the government who are not covered under Central Civil Services (Pension) Rules, at par with central government employees, which is Rs. 20 lakh,” an official release said. Before implementation of the 7th Central Pay Commission, the ceiling under Civil Services (Pension) Rules, 1972, was Rs. 10 lakh. Considering inflation and wage increase even in the case of employees engaged in the private sector, the government is of the view that the entitlement of gratuity should be revised for employees who are covered under the Payment of Gratuity Act, 1972, which applies to establishments employing 10 or more persons, an official release said. However, industry representatives did not sound too upbeat. Anshul Prakash, Partner, Khaitan & Co, said while the move was good from an employee’s perspective, the “industry would be impacted if this proposal becomes the law.”
Kotak Mahindra Asset sees one more rate cut by RBI after GDP miss (FE 13.09.17)
The RBI will have scope to cut benchmark interest rates once again as growth in Asia’s third-largest economy slows and consumer-price gains stay within the central bank’s target range, according to Kotak Mahindra Asset Management Co. “You have a confluence of favorable CPI, lower GDP growth and a necessity to keep rates stable with easing bias,” said Lakshmi Iyer, the Mumbai-based chief investment officer for debt at the money manager. “The scope for one rate cut by March 2018 is definitely there.” Calls for further monetary easing have resurfaced after data on Aug. 31 showed that economic growth in the April-June quarter was the slowest since 2014. The RBI last cut the key repurchase rate to 6% on Aug. 2 and signaled that its future moves will depend on how the inflation data pans out. That saw the benchmark sovereign bonds post their first monthly decline since April. Consumer prices probably rose 3.24% in August from a year earlier, according to the median estimate in a Bloomberg survey of economists before an official report due later Tuesday. That’d be faster than July’s 2.36% pace, but within the RBI’s projected range of 2% to 3.5% for the April-September period. “Neither from the demand side, nor the supply side could one be led to believe that inflation can skyrocket from current levels,” said Iyer of Kotak Mahindra Asset, which oversaw 1.01 trillion rupees ($15.8 billion) at the end of June.
Niti Aayog CEO Amitabh Kant for 10-fold rise in advances and deposit caps for OTP-based accounts (FE, ET 13.09.17)
Niti Aayog chief executive Amitabh Kant said the Reserve Bank should go for a ten-fold increase in the deposit and advances caps on accounts opened through OTP-based eKYC. Such a liberalisation in the caps will help deepen the cashless or digital journey, he said. “To my mind the proposal to push OTP-based ekyc is high (priority). For deposit accounts, the present limit is Rs 1 lakh. I think we should increase it to about Rs 10 lakh. For loan accounts, the existing limit is Rs 60,000, my view is that it should be raised to Rs 6 lakh,” Kant said. In order to bring customers on board faster as part of the financial inclusion agenda, the RBI had allowed for the one time password (OTP) based electronic know your customer (e-KYC) of accounts, but set certain caps on the transactions which go through such accounts. Identifying this as an impediment in the growth of the cashless agenda, Kant said more reforms are needed on this with priority. “There is a need to allow the OTP-based eKYC for credit cards as well,” he said. He asked the RBI to also allow for digital signatures on loan documents, saying the central bank is yet to come up with an express notification on it despite the Government of India taking a decision to allow it. Apart from that there is also the “challenge” of allowing digitally signed mandates for repayment of loans which needs to be looked into, Kant pointed out.
Arohan Financial to raise Rs. 1,000 Cr through IPO (BL 13.09.17)
Kolkata-based NBFC microfinance provider Arohan Financial Services Ltd is looking to tap the capital market through an initial public offering. According to Manoj Kumar Nambiar, MD, Arohan, the company, which is part of the Aavishkaar-Intellecap group, will look to raise about Rs. 1,000 Cr through the IPO. It has already initiated talks with merchant bankers for the same. “We are looking at an IPO in the next 18-24 months. We are focusing on building the foundation for our next phase of growth. The IPO will help bring in the capital required for the company’s future growth,” Nambiar said. Since the beginning of the calendar year 2017, Arohan raised nearly Rs. 155 Cr from existing as well as new investors, to help keep the company well capitalised and fund its growth plans. The promoter companies Aavishkaar-Intellecap together hold a 32% stake in Arohan. Some of the investors in the company include Tano Capital, Intellecash, Aavishkar Goodwell, Maj Invest, Aavishkaar Venture Management Services, Michael and Susan Dell Foundation and India Financial Inclusion Fund. “These investors would typically look to invest, grow and invest and IPO will provide the necessary liquidity,” he said.
India Inc’s investment overseas down 15% to $1.34 bn in August (BL, BS, FE 13.09.17)
India Inc’s foreign direct investment (FDI) fell by about 15% to USD 1.34 billion in last month, according to the Reserve Bank data. The overseas investment by Indian companies in August last year ago stood at USD 1.57 billion. The foreign investments were also down sequentially when compared with USD 1.77 billion July this year, showed the Outward Foreign Direct Investment (OFDI) data of RBI. The investment break-up included USD 944.14 million in the form of guarantees issued, USD 184.44 million and loan and USD 210.68 million as equity infusion. Among major investors, Wipro Ltd invested USD 500 million in a wholly owned unit in the US and Sintex–BAPL Ltd invested USD 102.50 million in a joint venture in Netherlands. Tata Communications invested USD 78.75 million in a wholly owned subsidiary in Singapore and ONGC Videsh Ltd invested USD 55.54 million in various joint ventures in Myanmar, Russia and Vietnam.
After Jaypee Infra homebuyers, those at Amrapali set to take this tough action (FE 13.09.17)
Following in the footsteps of Jaypee Infratech homebuyers, buyers of Amrapali’s Silicon City project are now planning to move the Supreme Court after the National Company Law Tribunal (NCLT) bench in Delhi ordered initiation of insolvency proceedings against the company on a plea by Bank of Baroda last week. “We have no other option… We are in touch with some lawyers and very soon we will be filing a petition in the Supreme Court,” Surendra Jain, vice-president of Amrapali Silicon City Flat Owners Welfare Society, said. The tribunal has appointed Rajesh Samson of Deloitte as the interim resolution professional (IRP) in this case. The IRP will invite claims from creditors to the company and prepare a resolution plan within the time frame stipulated under the Insolvency and Bankruptcy Code, 2016 (IBC). In this project alone, the realtor has an outstanding due of 56 Cr as the principal amount only to Bank of Baroda. Other lenders to the realtor are Oriental Bank of Commerce and Bank of Maharashtra. In total, the realtor has to pay back Rs 156 Cr to the banks for the project. Over and above this, it owes Noida Authority Rs 550 Cr. JP Morgan gave it a credit of 150 Cr as well. Bank of Baroda has initiated insolvency proceedings against the realtor as it had allegedly not paid dues to the bank for more than a year. The panic over the situation comes from the fact that under the Insolvency Code, once the resolution and liquidation process is completed, a portion of the proceeds goes towards recovering liquidation costs. It is followed by the payments to workers, employees and the banks and financial institutions involved in the projects, after which the government dues are settled. It is only then the homebuyers are taken into consideration.
PhonePe says it Floored BHIM in Aug UPI Transfers (ET 13.09.17)
Flipkart-owned PhonePe, the largest user of Unified Payments Interface (UPI), said it overtook the government's Bharat Interface for Mobile or BHIM app with a 45% share of the total transactions in August. The company said PhonePe more than doubled the number of UPI transactions to 7.47 million in August from 3.5 million in May and its share rose steadily from 39% in July and 36% in June. PhonePe CEO Sameer Nigam said that the upcoming next version of UPI will enable several new features and drive usage further. The company is on an overdrive to sign on new merchants, both offline and online, ahead of the festive season which is just round the corner, Nigam said. “We have already integrated around 30 of the top 100 online merchants on the PhonePe app and in the offline space we are going live in 15 pan-India chains this quarter,“ he said. Online firms such as FreshMenu, RailYatri, AbhiBus, Box8 and TicketNew have integrated with PhonePe while offline players such as Apollo Pharmacy, Barista, Spencer's Retail and Café Coffee Day are offering PhonePe as a payment option. “The bulk of our merchant transactions are through UPI,“ said Nigam.
Borrowing Costs Set to Rise for Companies (ET 13.09.17)
Short-term borrowing costs for Indian companies may rise in lock-step with money-market rates, as advance tax payments and the Central bank's bond sale programmes reduce the cash availability by more than 1 lakh Cr. In the past week, benchmark bond yields increased about nine basis points. The weighted average interbank call rate, an overnight interest rate at which banks lend to one another, has risen about 14 basis points since the beginning of the month. The inter-bank call money rate may rise by 5-10 basis points while the benchmark bond yield may increase further by a few basis points, a dealer said. “We expect the liquidity surplus to tighten further this week on the back of advance tax outflows, OMO (Open Market Operation) sale and heavy auctions of Gsec, SDL and Tbills against limited inflows,“ Kotak Mahindra Bank said in an economic research report. Surplus liquidity is estimated to be at 1.52 lakh Cr by the end of this week compared with about 2.80 lakh Cr last week. “The liquidity has tightened to an extent impacting money market rates in the last few days,“ said Ajay Manglunia, executive vice-president at Edelweiss Financial Services. “Sudden outflows have helped bring down the cash in the system. Corporates would be paying a bit more on their market borrowings as they raise resources by tapping the debt market.“
Over 100,000 shell firm directors disqualified for five years (BL, BS 13.09.17)
In a fresh crackdown, the Ministry of Corporate Affairs has disqualified 106,578 directors for their association with shell firms. This comes just a few days after bank accounts of around 200,000 shell companies were frozen. The directors identified for disqualification would not only be debarred from their respective boards but also from other companies for five years. It is learnt that more directors are under the scanner. Last Wednesday, the ministry had said a decision had been taken to blacklist 300,000 directors of shell firms. The ministry has said action would also be taken against some members of the Institute of Chartered Accountants of India (ICAI), Institute of Company Secretaries of India (ICSI), and other associations involved with these shell companies. These institutions have been told that they are being monitored. A source at ICAI told that the association has identified 26 CAs and is gathering more evidence against them.
Private placement of corporate bonds hits record Rs 2.73L cr in April-August (FE 13.09.17)
Private placement of corporate bonds hit a record high of Rs 2.73 lakh Cr in the first five months of fiscal year 2018, according to the data from the Securities and Exchange Board of India (Sebi). Compared with this, firms and banks had issued bonds worth Rs 2.42 lakh Cr in the same period last year. This is a 12.8% rise in issuances compared with last year. The highest issuance this fiscal took place in June, amounting to Rs 75,337.32 Cr, while August saw issuances at Rs 51,552.13 Cr. Firms are increasingly turning towards the corporate bond and commercial paper market for their borrowing requirements with a fall in yields. This is because money markets and debt markets are considerably more efficient when it comes to rate transmissions than banks. Indeed, rates in the commercial paper market had started to fall two weeks before the credit policy on August 2, while having already factored in a 25 basis points cut in the repo. Compared with this, banks have been taking relatively longer to pass on the rate cut in their lending rates and even when that transmission happens, it is partial. Ajay Manglunia, EVP at Edelweiss Securities, points out that a lot of corporates are coming to the bond market considering the efficiency of rate transmission here compared to the banks in a falling interest rate regime.
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