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Updated: 31 min 25 sec ago

Why India can't afford to let the shadow banking sector fail

31 min 25 sec ago
By Keki MistryFor more than a year, an overwhelming drive seems to be underway to label non-banking financial companies (NBFCs) as anathema to the economy. It’s easy to paint all NBFCs with the same brush, but it can be quite flippant to ignore the contributions they have made in addressing economic demand that has helped in financial inclusion.‘Shadow banking’, a term borrowed from the West, suggests being outside the scope of the financial regulatory system. This is completely untrue for India. It is incorrect to believe that NBFCs and housing finance companies (HFCs) are significantly riskier than banks. Many banks don’t have the wherewithal to cater to the segment that NBFCs are able to reach out to. Many NBFCs specialise in lending in a particular sector, and develop skill sets unique to that customer base. Many unbanked borrowers avail credit from NBFCs and later use their track record to become bankable borrowers.The Infrastructure Leasing & Financial Services (IL&FS) default in September 2018 was not a systemic issue. The pain seen in the broader NBFC sector was largely one of liquidity, and not a solvency crisis. Nonetheless, the IL&FS default created a ‘risk aversion’ in the system. It signalled the end of easy money — that is, using cheaper, shortterm market instruments to fund longer-term assets.Admittedly, perception and liquidity issues have affected NBFCs that, to some extent, have caused the fall in credit to the auto, real estate, agriculture and small and medium enterprises sectors. Many well-managed NBFCs continue to do well, but others are struggling.RBI has strengthened the regulatory framework of NBFCs by introducing a robust liquidity framework, and proposed a liquidity coverage ratio for large NBFCs, which is currently applicable only to banks. RBI could also consider:1. Initiate conversations with senior bankers and provide assurances, so that banks can start feeling more confident of funding NBFCs.2. Examine a roadmap for the merger of NBFCs into banks, with appropriate guidelines to grandfather the existing NBFC balance sheet from maintenance of the cash reserve ratio, statutory liquidity ratio and priority sector lending requirements of a bank.3. Increase the threshold entry level of NBFCs and HFCs by raising the minimum capital requirements. Regulating over 10,000 NBFCs is clearly a very difficult task. NBFCs will have to focus on liability management. Most large NBFCs are well capitalised, but have got exposed due to excessive short-term borrowing.The stronger NBFCs and HFCs have a more diversified funding base. Very few non-bank financial entities have the benefit of retail deposits, a source of stable funding, especially in these times. NBFCs are considering other instruments to raise money, such as masala bonds or external commercial borrowings. In fact, larger NBFCs offering good collaterals are accessing funds from global investors.An alternate source of long-term funding beneficial for the lender is the securitisation of mortgage loans. Securitisation provides much-needed liquidity to the balance sheet of an HFC, as it helps the company to churn its portfolio and make room for fresh assets. According to the International Monetary Fund (IMF), securitisation helps free up capital that allows banks to extend new credit to the economy.Another potential fund source is covered bonds. These are the largest asset class in the European bond market.Covered bonds are held on the balance sheet of the issuer — not in the special purpose vehicle (SPV) — and in an event of the bankruptcy of the issuer, the covered pool is protected and can be claimed by the investor. They also receive a higher credit rating, as they are backed by high-rated pool of assets.From a housing finance perspective, there is a need to ensure that appropriate measures are taken to further develop the corporate bond market. In the current scenario, banks and mutual funds have shown little interest to invest in long-term bonds. Debt financing will be an important source of stable longterm funding.Currently, negative sentiments have percolated to all sectors including housing, particularly high-end housing. Like all asset classes, housing markets go through cycles. Yet, the current issues in the housing sector seem more symptomatic of a cyclical downturn, rather than a deep-rooted structural slowdown. In this context, finance minister Nirmala Sitharaman needs to be congratulated for introducing a Rs 25,000 crore special window to revive stuck projects, subject to certain conditions.There is no substitute for prudent lending. By sacrificing margins or appraisal norms, you can capture all the growth you want. But this kind of growth will not lend to sustained longterm success. By covering a wide spectrum of customised services and innovative products, NBFCs have played an active role in strengthening the economy, and will continue to do so.The writer is vice-chairman-CEO, HDFC
Categories: Business News

Now electricity adds to India's economic woes

31 min 25 sec ago
NEW DELHI: India’s electricity demand fell 13% in October led by a sharp reduction in offtake from the industralised states like Gujarat and Maharashtra, which may indicate a deepening economic slowdown although officials said this was just an aberration.Electricity demand during October this year was down to 98 billion units as against 113 billion units in the same month last year, data available with the Central Electricity Authority (CEA) said. This is the third consecutive month of low power demand which has slowed since August. However, government officials attributed it to late rains and favorable weather conditions.A senior government official said the electricity demand has been low since three months but the demand for the year till date has been up by 2%. “This could just be an aberration. One needs to look at the long term numbers,” the official said.Association of Power Producers director general Ashok Khurana said the slowdown is symptomatic of general economic slowdown and is worst for finances of power discoms as the offtake from subsiding customers has reduced. Most assets in the power sector are already stressed due to non-payment of dues by discoms, lack of fuel, finance and other regulatory approvals.Government data shows that distribution companies dues to power generating companies have increased to Rs 80,260 crore, of which Rs 61,144 crore is overdue.Last week, rating agency Moody’s Investor Service cut the country’s credit rating outlook from stable to negative saying the government has been partly ineffective in addressing economic weakness, leading to rising risks that the growth will remain lower. Core sector data released on Monday showed industrialgrowth shrunk for second straight month in September, contracting by 4.3%, witnessing the steepest fall in nearly eight years since October 2011. The core sectors for the month of September contracted by 5.2% from the 0.5% contraction seen in August and electricity generation by -2% in September against a growth of 8% in same period last year.The reduction in demand this year is unusual in October as the country has been witnessing exceptionally high demand in September-October every year.Last year, the power distribution companies of states like Maharashtra, West Bengal and Bihar placed aggressive buy bids of about Rs 20 per unit on the spot power market. 72013598 The aggressive bids to avoid load shedding led the prices on the exchange peak to ten year high of Rs 18 per unit and the average hovering at Rs 6-8 per unit.“Electricity demand has been increasing in the months of October and September for the past many years. This year’s data has come as a surprise. The demand is way lower than the expectations,” an industry insider said. The CEA data showed that the peak-hour power demand also declined by 5% year-on-year to 165 GW. The power demand in October 2019 in Madhya Pradesh decreased by 26%, Maharashtra by 22% and Karnataka by 25%. Electricity demand in Gujarat was down by 19%, Andhra Pradesh by 16%, Telangana by 16%, the data showed.Barring four states in the country’s north and the east, demand fell across regions, the data showed.
Categories: Business News

'Maha' divorce: How BJP lost its oldest ally

31 min 25 sec ago
NEW DELHI: The BJP on Monday lost its oldest and the only major Hindutva ally as the Shiv Sena, its partner for more than three decades, walked out of the Modi government at the Centre. The decision of the Maharashtra party to snap ties came following years of unease in the alliance and reached a flash point after the recent assembly election results, with the Sena accusing the BJP of breaking "promise" of equal division of power in the state. The BJP has asserted that it had never agreed to share the post of chief minister, as claimed by Sena president Uddhav Thackeray. The divorce between the two parties wedded to the Hindutva ideology finally happened after an acrimonious relationship over the last five years. The first strains in their ties surfaced in the 2014 assembly polls when they fought separately after the Sena's refusal to part with the number of seats the BJP wanted. As Prime Minister Narendra Modi led the BJP to an unprecedented win in the 2014 Lok Sabha polls, it sensed an opening in Maharashtra to oust Sena from the position of senior ally, a position the party founded by Bal Thackeray had enjoyed till his reign. The Sena was forced to become the junior partner as the BJP won 122 seats in the 288-member assembly while it won 63. They joined hands to form the government, with the BJP's Devendra Fadnavis becoming the chief minister. The first and only saffron government in the state earlier between 1995-2000 was headed by Sena leaders. The Sena, however, never reconciled to its reduced status as the lotus bloomed in one local poll after another and the BJP under Modi and its president Amit Shah also became the flag bearer of Hindutva with Thackeray's party following in its shadow. Through its mouthpiece Saamana and sundry leaders Sena kept attacking the Modi government off and on and even blocked its leader Anil Desai from joining as a minister in the Centre. That it was never given portfolios of its choice at either the Centre or the state always remained an irritant for the party. With 18 members in Lok Sabha, the Sena was the biggest NDA constituent after the BJP but its departure will not make any difference to the government's stability as the ruling party alone has 303 MPs in the 543-member House. While on the one hand Sena's severing ties with the NDA underscores the BJP's growing hegemony which forced an avowed secular party like the Congress to mull supporting a strident Hindutva party like the Sena, it also highlights how the ruling party's expansionist drive under Modi and Amit Shah has made its allies of decades uneasy. Bihar Chief Minister Nitish Kumar, who heads the JD(U), hardly shares the same level of warmth with the BJP since his return to the NDA in 2016 that he did when he was part of the saffron alliance for more than 15 years before breaking ties in 2013. Kumar's party has refused to join the Modi government as it believes that it was not offered its due share. Akali Dal- the second oldest BJP ally after the Sena- has often in the past expressed its reservations over its ally's policies. The BJP in the last few years lost a major ally like TDP but also gained a big regional partner like AIADMK and several smaller allies in northeastern states.
Categories: Business News

Sabka Vishwas Scheme: Over Rs 5K cr dues declared

31 min 25 sec ago
NEW DELHI: More than Rs 5,000 crore worth dues have been declared so far under the government's 'Sabka Vishwas Scheme', which is for settling pending disputes of service tax and central excise.The Central Board of Indirect Taxes and Customs (CBIC) has asked its principal chief commissioners to be more proactive in persuading eligible taxpayers to take benefit of 'Sabka Vishwas Scheme'.Finance Minister Nirmala Sitharaman had unveiled the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 with the objective of settling pending disputes of Service Tax and Central Excise in the budget.A mid-term review reveals that a total amount of Rs 5,472 crore inclusive of pre-deposit amount of Rs 4,225 crore has already been declared under the scheme, sources said.Efforts are being made to maximise declarations by December 31, 2019 when the scheme ends.Senior CBIC officials are confident the scheme is likely to gain further momentum in the coming days as taxpayers would not forego this opportunity.It may be noted that while launching the scheme, it was seen that a total Rs 3.6 lakh crore is locked up in 1.83 lakh cases at various quasi-judicial, appellate and judicial forums under Service Tax and Central Excise put together.The CBIC has made it clear that the performance of the field formations would be adjudged in terms of their outreach and ability to persuade the taxpayers to avail the scheme.The Principal Chief Commissioners or Chief Commissioners of CGST, who have the information of eligible taxpayers readily available with them, have been asked to proactively contact these taxpayers numbering about 1.8 lakh, sources said.This includes cases under investigation, adjudication as well as arrears of confirmed demand. These cases invariably drag on for years, burdening the taxpayers especially those in the MSME sector.The introduction of GST which has subsumed these legacy taxes has given an opportunity to the government and also to taxpayers to settle these cases.Official sources said that under this scheme relief is to the tune of 70 per cent of the duty involved if it is Rs 50 lakh or less and that of 50 per cent if it is more than Rs 50 lakhs.This is for cases pending in adjudication or appeal or in investigation and audit in latter cases, the duty involved must be quantified and communicated or admitted by the taxpayer in a statement on or before June 30, 2019.In cases of outstanding arrears of revenue, the relief is 60 per cent of the duty amount if it is Rs 50 lakh or less and 40 per cent if it is more than Rs 50 lakh, officials said.In all cases, there is full waiver of interest and penalty and exemption from prosecution. There are, however, some exclusions such as if the person is convicted in the same case, officials added.
Categories: Business News

Alstom-Railways JV struggles to meet locomotive target

31 min 25 sec ago
NEW DELHI: Alstom SA’s joint venture with the Indian Railways, which has to supply 35 electric locomotives to the national transporter in the current financial year, is struggling to meet deadlines and could be at risk of cancellation, said officials with knowledge of the matter. Alstom hasn’t been able to supply any engines yet, with the locomotives having failed multiple trial runs, they said. “Prima facie, if a design condition is not met and a period (specified for delivery) expires, contract cancellation becomes the automatic route,” said one of the officials, who described the venture as a “failure.”The Electric Locomotive Factory at Madhepura in Bihar was one of the two major locomotive projects awarded in 2015 as part of the Make in India initiative, the second being a joint venture with General Electric (GE). The Rs 20,000 crore Madhepura project was tasked with manufacturing 800 high-powered locomotives in 11years. The joint venture is the largest foreign direct investment (FDI) in the railway sector.The Rs 10,000 crore Marhowra facility, the joint venture with GE, will make 1,000 diesel locomotives in 11years. Indian Railways owns a 26% stake in both, with the overseas partner holding the rest. The French company didn’t respond to queries and neither did Indian Railways. Calls and messages to Railway Board chairman VK Yadav were unanswered. The French company said in March last year that the plant was on schedule.“Alstom announced the completion of its first all-electric locomotive from its state-of-theart locomotive facility at Madhepura in the state of Bihar, on schedule,” it had said in a statement. The locomotive that had been manufactured at the Alstom plant and inaugurated by Prime Minister Narendra Modi is “gathering dust,” said one of the officials. The company is still in the process of making changes to the specifications of the locomotive, said one of the officials cited above. The Research Designs and Standards Organisation (RDSO), part of the railway ministry, conducted two trials of the WAG12 locomotive, according to an official status report—the first on July 23-25 last year and the second on April 10-12 this year.“In both trials, the loco could not pass the laid down criteria,” the report said. “Further modifications in bogie and suspension of loco are also parallely (sic) being done.” One official cast doubt on the Alstom’s expertise. “This is a new design they are working on,” the person said. “I am not sure they (Alstom) have the capability in bogie design.”
Categories: Business News

A paint company has India's slowdown experts baffled

November 11, 2019 - 10:33pm
By Ronojoy MazumdarSurrounded by all the doom and gloom around the Indian consumer sector, a paint producer got so much love from investors that it is now the most expensive stock in the country’s benchmark index.Asian Paints Ltd.’s price-to-earnings ratio of 80.1 makes it the highest valued on the S&P BSE Sensex Index. The paint manufacturer has climbed 29 per cent in the last six months -- when the broader gauge has gained 6.5 per cent -- and has hit a record high in the past month.Investors value its ability to churn out a record profit at a time when management at other consumer-oriented companies have warned of the impact from an economic slowdown. Of the 39 analysts who cover the stock, just four have the equivalent of a sell call. India’s paint industry, which Asian Paints dominates with around 40 per cent market share, has been viewed as a haven.“Asian Paints is likely to keep rising” thanks in large part to double-digit growth in its volume of paint sales, said Abhijeet Kundu, an analyst at Antique Stock Broking Ltd., who estimated the increase to be 15 per cent-17 per cent in the last quarter. “There are very few companies that are growing at that kind of rate.”Asian Paints’s stellar performance is a contrast to its consumer peers. Titan Co Ltd., the country’s biggest jeweler, plunged 10 per cent last week after nearly halving its growth guidance for the second half of the year. Srinivas Phatak, chief financial officer at Hindustan Unilever Ltd., India’s biggest consumer goods company, said “the demand outlook is definitely challenging” in an earnings call last month. 72001630 Consumer businesses are suffering in India as the economic expansion has slowed to a six-year low, exacerbated by a credit crunch amid a shadow banking crisis. Consumers have also tightened their belt as the unemployment rate hit the highest in 45 years. Even the recently concluded festival season doesn’t seem to have lifted spending by much, with shopkeepers reporting a poor show.Defying weakening consumer confidence, Asian Paints’ net income has risen for two straight quarters to a record 8.3 billion rupees ($117 million) in the July-September period. Over the past 10 years, the firm has returned investors almost 1,000 per cent, the third highest among stocks on the Sensex index.To be sure, the company is not totally immune to the economic malaise. Its revenue growth has stalled this year, and an unexpectedly long rainy season also crimped demand. Asian Paints didn’t respond to emails and calls requesting comment.Analysts say the weakness in revenue is due to price cuts and popularity of cheaper products rather than a substantial decline in demand.For bulls, the company also stands out on management track record. Its decades-old tradition of prioritizing corporate governance, rare in a country that’s still dominated by family-run businesses, is valued by long-term investors.Asian Paints is one of the rare companies in India that has always had a genuinely independent board, Saurabh Mukherjea, co-founder and chief investment officer at Marcellus Investment Managers, wrote in his book “The Unusual Billionaires.”“If you want to build an institution where changes in the external or internal environment don’t matter, it has to start at the top with great corporate governance,” said Rakshit Ranjan, co-founder and fund manager at Marcellus. “I don’t think you could find 10 other companies in the country with the same level of corporate governance as Asian Paints.”
Categories: Business News

Stuck in a debt trap? Here's how to get out

November 11, 2019 - 10:33pm
Tony has been careless with his spending habits and landed himself in huge debt that he is unable to pay off now. He has multiple credit cards on which he has touched the maximum credit limits. He has outstanding EMIs on electronics bought. Besides, he has taken some loans from friends too. He has no clear idea about his obligations and makes intermittent repayments as and when he has a surplus. Tony realises he is in trouble but doesnt know how to deal with it.Tony needs to take immediate remedial actions. Being deeply in debt and unable to meet his obligations will not only affect his credit worthiness but also his saving for goals. He needs to make a list of all his debts, including the amount due (minimum amount or EMI due each month) and the lender. Having this information ready will help him plan his repayments better. He will be able to draw his budget in a way so that the minimum monthly obligations on his debts are taken care of and keep the impact on his credit score to the minimum. He will be able to prioritise the repayments keeping the costs in mind. Tony could also consider transferring the balance on his credit cards to a low interest card or to a card that is offering the option of repaying the outstanding balance through EMIs.The next part where Tony will have to exercise discipline and control is his current spending. He must not take on any new debt until his old debts are wiped out. It is important to cut back on all lifestyle and unnecessary expenses in order to repay his debts fast.Tony’s spending and saving plan must be realistic and doable. His repayment plan must not be open-ended and must have an end-date by which he will be debt-free. He must set short-term targets. Achieving them will keep him motivated. Living on a tight budget as he pays off his existing debt should give him the discipline to live within his income and prioritise his spending even after he has eliminated debt from his life.(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)
Categories: Business News

Alliance Air maiden overseas flight begins operations

November 11, 2019 - 10:33pm
CHENNAI: After a 41 year gap Alliance Air on Monday formally commenced its maiden international operations on the Chennai-Jaffna route by launching its thrice a week service.The wholly owned subsidiary of Air India would fly between the two cities on Mondays, Wednesdays and Saturdays.Alliance Air connects 53 destinations within India with 113 destinations per day. Jaffna is the 54th destination for the airline.Commemorating the launch of the service, Governor of the Northern Provincial Council of Sri Lanka Suren Raghavan took part in the journey.The Council website quoted Raghavan as saying he expects the new airport in Jaffna would create new relationships as well as trade links between the two countries.The Chennai-Jaffna flight service has resumed after a gap of 41 years. The flight operations were suspended during the decades old civil war in Sri Lanka.Jaffna International Airport was earlier known as Palaly airport, which was used as a military air base and for domestic flights.Sri Lankan President Sirisena and Prime Minister Ranil Wickremesinghe had formally unveiled a plaque commemorating the inauguration of the airport on October 17.In a statement issued on Monday, Alliance Air said the flight service was special in many ways."Apart from being Alliance Air's maiden international foray, it connects Chennai and Jaffna after a gap of 41 years", the press release said.Flyers coming to Chennai from New Delhi, Coimbatore, Ahmedabad, Mumbai, Dubai, Thiruvananthapuram and Muscat have the option of connecting onwards to Jaffna over Chennai."A proud moment-second airline in Air India group goes global", Air India Chairman and Managing Director Ashwani Lohani said.Ahead of the launch, Alliance Air CEO, C S Subbiah said "it brings us immense pleasure after spearheading efforts connecting unique regional routes within India under UDAN, we are now set to fly international"."This will be the first non-stop service between Chennai and Jaffna" he said.Fares on the Chennai-Jaffna route are priced at Rs 3,990 while on return journey it is at Rs 3,190 plus government taxes.
Categories: Business News

Crisis deepens for India, IIP sees its steepest fall in 8 years

November 11, 2019 - 7:33pm
Showing signs of sluggishness in the economy, industrial production shrank by 4.3 per cent in September, registering the weakest performance in seven years due to output decline in manufacturing, mining and electricity sectors, as per official data released on Monday.According to the Central Statistics Office (CSO) data, 4.3 per cent contraction is the lowest in 2011-12 series of Index of Industrial Production, which was unveiled in May 2017. The IIP had declined by 0.7 per cent in April, 2012.Factory output, measured in terms of Index of Industrial Production (IIP), had expanded by 4.6 per cent in September 2018.According to the data, contraction in IIP was further revised downward to 1.4 per cent in August from 1.1 per cent decline under provisional estimates released last month.During April to September, the IIP growth remained almost flat at 1.3 per cent compared to 5.2 per cent in same period last fiscal.A slowdown was witnessed in the manufacturing sector, which declined by 3.9 per cent in September as compared to 4.8 per cent growth a year ago.The power generation sector output dipped 2.6 per cent in September, compared to 8.2 per cent rise a year ago.Mining output too fell by 8.5 per cent in September as against 0.1 per cent climb in the corresponding month last fiscal.Capital goods production, which is a barometer of investment, declined by 20.7 per cent in September compared to 6.9 per cent hike in the year-ago month.As per use-based classification, the growth rates in September 2019 over September 2018 are (-) 5.1 per cent in primary goods, 7 per cent in intermediate goods and (-) 6.4 per cent in infrastructure/ construction Goods. Consumer durables and consumer non-durables have recorded growth of (-) 9.9 per cent and (-) 0.4 per cent, respectively.In terms of industries, 17 out of 23 industry groups in the manufacturing sector have shown negative growth during September 2019 as compared to the same month last year.The industry group 'manufacture of motor vehicles, trailers and semi-trailers' has shown the highest negative growth of (-) 24.8 per cent followed by (-) 23.6 per cent in furniture and (-) 22.0 per cent in fabricated metal products, except machinery and equipment.On the other hand, manufacturing of wood and products of wood & cork, except furniture; articles of straw and plaiting materials have shown the highest positive growth of 15.5 per cent followed by 9.2 per cent in basic metals.
Categories: Business News

Desi content gives Netflix a 700% boost

November 11, 2019 - 7:33pm
MUMBAI: The Indian unit of Netflix Inc, the world’s largest online video streaming company, grew more than 700% during 2018-19, helped by expanding local content and marketing blitzkrieg that helped bring subscribers.Netflix India reported revenues of Rs. 466.7 crore for FY19 with a net profit of Rs. 5.1 crore, according to its filing with the registrar of companies sourced from Veratech Intelligence. In FY18, Netflix India had a turnover of Rs. 58 crore with Rs. 20 lakh net profit, which reflected financials for seven months starting September last year after the actual transfer to local distribution entity from Singapore. “A combination of factors including original content for India, partnership with Airtel for better access to market and fixing payment issues helped Netflix,” said Mohit Yadav, founder of Veratech. “All this combined with new low cost-based variants for a price-sensitive Indian market is the reason behind Netflix's phenomenal growth.” 72000030 While the California-based company entered India in January 2016 as part of its global rollout, Netflix was registered as a limited liability partnership (LLP) in the country in April 2017 when it started commissioning content.Since the company doesn’t share region wise content cost or amortisation ratio, it is difficult to ascertain operating profitability in the market. Netflix India did not respond to an ET query as of press time Sunday.The number of digital video viewers in India continues to grow as cheap data plans flood a country of 1.3 billion people, say experts. The country currently has more than 300 million online video viewers, and it’s expected to reach 550 million by FY23. There are 39 companies offering video streaming services, up from nine in 2012. Netflix has low digital video viewers in the country compared to rivals due to its relatively high prices and low amount of local-language content. Its monthly subscriptions start at Rs. 500, which doesn’t allow simultaneous viewing. Higher plans (`650 and `800) allow for multiple users and simultaneous viewing.Star India’s streaming platform Hotstar, which controls nearly three fourth of the market, offers a VIP plan for Rs. 365 a year and premium plan at Rs. 999 per year, while Amazon Prime Video has a monthly plan of Rs. 129 and annual of Rs. 999. The entry of Apple TV+ at Rs. 99 per month and launch of Disney+ next week are expected to make India a hotbed for content war.While Netflix doesn’t share subscriber numbers of individual markets, industry estimates put the video streaming service’s Indian subscriber base at 1-1.2 million as of March 2019. The number has increased post July this year when the company launched a mobile only plan at Rs. 199 per month.
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F&O: Option data points to wider range of trading at 11,750-12,200

November 11, 2019 - 7:33pm
By Chandan TapariaNSE Nifty started the week on a negative note and traded with a negative bias in the first half of the session. However, it managed to above hold crucial support of 11,850 and rebounded towards the fag end to close near 11,900. The index consolidated in a narrow range of 75 points and formed a small bodied candle on the daily scale as dips were being bought into while hurdle remains intact at higher levels.The index has been respecting the 11,850 level from the past eight sessions, and now it needs to continue to hold above the same to witness an upmove towards 12,035 and then 12,103. On the downside, supports are seen at the 11,780-11,750 zone.On the monthly options front, Maximum Put open interest was at 11,600 followed by 11,500 strike while maximum Call open interest was at 12,000 followed by 11,800 strike. We have seen Marginal Call writing at 12,200 followed by 12,300 strike while Put Unwinding was seen at all the immediate strike. Options data suggests a broader trading range between 11,750 and 12,200 levels.India VIX moved up by 2.46 per cent to the 16.25 level.Bank Nifty continued its outperformance against the benchmark indices and extended gains towards 31,200. The index formed a bullish candle on the daily scale with gains of more than 350 points as buying interest was seen for most part of the session. It managed to close above its previous swing high and thus gave a breakout from Horizontal trend line on the daily scale. Supports are gradually shifting higher and now it has to continue to hold above 30,800 to witness an upmove towards 31,500 while on the downside, supports are seen at 30,800 and then 30,600.Nifty futures closed flattish at 11,946. Builtup of long positions were seen in Amara Raja Batteries, RBL Bank, Ashok Leyland, Jindal Steel and IGL, while shorts were seen in Equitas, Indigo, Balkrishna Industries, Cipla and Pidilite.(Chandan Taparia is Technical & Derivative Analyst at MOFSL. Investors are advised to consult financial advisers before taking an investment calls based on these observations)
Categories: Business News

In right places and with right cars, there's no slowdown: Sehgal

November 11, 2019 - 7:33pm
All our units are taking these slower times to improve their efficiencies, improve their layouts and redo the machine, says Vivek Chaand Sehgal, Chairman, Motherson Sumi. Excerpts from an interview with ETNOW. Your second quarter numbers have beaten estimates. What in your view are the key positive triggers for the company?I agree with you. There is not one or two headwinds., there are headwinds almost everywhere but Motherson has been winning new orders from almost all geographies and those orders are now coming into production. Hence, you can see overall the revenue has gone up by 6%. Of course, other things have also gone up. PKC, which we took over, has done really well. Their revenues are up. Their profits are up and though SMRPBV faces some continued challenges in the setting up of greenfield plants, overall all have done a phenomenal job and vindicates our statement that the slowdown is there but in the right places, if you have the right cars, there is no slowdown. Talk to us about the working capital management in this quarter as well. Has the slowdown in the EU enhanced working capital needs?You must understand that this is the last year of our five-year plan and we are all focussing on return on capital employed (ROCE). Obviously people are working towards bringing the inventories down and they are taking all the necessary steps, so that we can come up with good gross number at the end of the five-year plan. What is your guidance on growth and margins for the rest of the year? Do you see an improvement in the following quarters?Our teams are working very hard. In fact, the board complimented teams and the associates for the very responsible way of handling costs and the performance of their companies. So, yes, there is going to be a tremendous amount of focus. All the units are taking these slower times to improve their efficiencies, improve their layouts and redo the machine. Everything has been looked into so that we can deliver a better set of numbers. Could you also update us on the progress of the greenfield sides? How long will they continue to be a pain point for the company?These greenfields are all going through a ramp up and that cannot happen overnight. It is not just a switch on or switch off. The last time we had talked to the investors through your channel, we were talking about 600-700 cars per day. Now we are doing about a 1,000 cars per day and the next quarter we will be doing approximately 1,100 to about 1,300 cars per day. There are various combinations and permutations. Various plants are going through various launches and that is good news because these are all the latest cars. They are very strong in their demand and we are maybe a quarter here, quarter there but we are not so worried about it. The whole group has really supported them and is doing a great job. What about Brexit deliberations? Have they had any impact on the business and if so, will there be any long-term impact positive or negative for you?Brexit is a global happening. We as a group or a company are not so much affected by Brexit. Once the terms and conditions of Brexit are known, we will probably be able to guide better but it would be of very little consequence really to Motherson because Britain is a very small portion of our business as of now.
Categories: Business News

Indian firms to delay spend in transformation, total IT spending to reach $94 in 2020: Gartner

November 11, 2019 - 7:33pm
BENGALURU: India’s domestic technology services market is expected to delay in spending for digital transformation owing to slow growth, said IT research firm Gartner. “They (organisations in India) may delay those investments given the environment especially in the manufacturing sector because that is going through a very tough time, customer experience related transformation initiatives can be put on hold or go slow. “It will be harsh to say they are not going to put in money in transformation,” said Arup Roy, vice president, research at Gartner. In a forecast, the IT researcher today said overall IT spending in India would grow 6.6% to reach $94 billion in 2020, from $88.5 billion in 2019. But, this growth would primarily be driven by spending in software. According to Gartner, roughly $17.8 billion of the estimated $94 billion is considered spending in IT services and devices would be $35.4 billion. These two areas are expected to see a delay in discretionary spending or investment in digital transformation. Roy said that compared with other markets globally India happens to be in the second rank only after China and “the market situation is slightly tepid”. He added that the research firm, however, expects revival in spending by organisations soon.“2020 will be a rebound year for India’s IT spending as consumers return to purchasing mobile phones after sitting on the sidelines in 2019,” said John-David Lovelock, vice president, research at Gartner. Gartner said measures such as corporate tax cut has helped in improving the spending and would reflect in 2020. “However, even within the slow economy, businesses showed resilience and continued to invest in IT. In mid-2019, the Indian government introduced corporate tax cuts, along with policies that were aimed at reviving the economy and bolstering consumer spending. As a result, corporate spending in software and services saw an uptick and organizations continued to invest in cloud, analytics, digital and automation,” said Roy.
Categories: Business News

Labour ministry proposes board of vocational training for mine workers

November 11, 2019 - 4:33pm
Labour ministry has suggested setting up of a board of vocational training for training of mine workers as part of the draft mines vocational training rules, 2019. These rules, when effective, will supersede the Mines Vocational Training Rules, 1966.As per the proposal, the board shall consists of the chief inspector of mines, who shall be its chairperson, three members possessing technical qualification in mining or petroleum engineering and having at least twenty years’ practical experience, one each in coal mines, metal mines, and oil mines to represent each sector appointed by the central government.Besides, it will have two members to be appointed by central government possessing technical qualifications in electrical engineering or mechanical engineering or allied engineering and having at least twenty years of practical experience in mines along with two members to be appointed by central government serving in human resource organization and imparting training in different trades of engineering and having at least fifteen years’ of experience serving in such organisation, or serving in an institution imparting education in mining or petroleum engineering at the degree or equivalent level and having twenty years’ of experience.“Every member, other than the chairperson, of the board shall hold office for a period of three years from the date of the notification appointing him a member of the board, or until his successor is appointed and takes charge, whichever is later,” it said.The draft proposes that these rules shall apply to all persons employed or to be employed in a mine and shall apply to every mine under the Mines Act, 1952.Labour ministry has sought opinion from all stakeholders on the draft rules over next three months following which these rules will be notified. However, they would be effective a year later after final notification, it said.
Categories: Business News

L&T bags orders worth Rs 2,500 cr from government entities

November 11, 2019 - 4:33pm
MUMBAI: Larsen & Tourbo has bagged orders totaling Rs 1,000 crore - Rs 2,500 crore, mainly from state and central government entities, the engineering major said Monday. From the Jharkhand government, the company bagged and engineering, procurement and construction (EPC) order from the Jharkhand Urban Infrastructure Development Company for augmenting and strengthening the Dhanbad Urban Water Supply Scheme Phase II under Dhanbad Municipal Corporation.The project is designed to bring drinking water to 4.45 lakh people of Dhanbad city in the state of Jharkhand. In West Bengal, the company got an order from State Project Management Unit for flood protection works and embankment strengthening of Damodar river in East Bardhhaman and Hooghly districts.The company also received orders from two central public sector companies-- BPCL and BHEL. The BPCL job is for construction of stone columns in Krishnapatnam, and the BHEL order entails construction of piles and related civil work for the 2x660 megawatt-STPP coal and ash handling plant at Ennore.In Chennai, L&T bagged one order from Chennai Metro Rail for underground works at Korukkupet station, and another from IndusInd Bank to construct a diaphragm wall for a basement multi-level car park at Teynampet. In its buildings and factories business, L&T said it has received an order for the execution of mechanical works for a cement plant at Kurnool, and some add-on orders for some of its existing projects.
Categories: Business News

Why Vaibhav Sanghavi is ready to bet on small finance banks

November 11, 2019 - 4:33pm
Our broader thesis still remains that the strong guys are going to get stronger and we would probably stick to largecap stocks unless and until we see much broader economic growth, says Vaibhav Sanghavi, Co-Chief Executive Officer, Avendus Capital. Excerpts from an interview with ETNOW. What is your positioning right now? What percentages of your portfolio are you short and long in?Before giving you the current position, let me give you a little perspective on how we changed our position which were pretty negative earlier to something which we are now currently positive about. Post the corporate tax cut, we changed our position from highly hedged to low hedged. By moving down pretty much on the hedged, we want to capture the market move of the extremely positive steps that the government has taken. At this point in time, we are bullish yet and we think that in spite of some amount of consolidation or some amount of short-term correction, we are pretty much bullish on the medium-term perspective from here on. Assuming that you are net long on the market right now, what are the big overweights? Apart from Nifty, are you long in Bank Nifty as well? We have always been speaking about our preference for private banks and those banks which are adequately capitalised with impeccable risk management, a strong management bandwidth and the ability to raise capital. We are very bullish on the whole financial space. They are in a sweet spot to grab all the market share which is left by the weaker players in those segments. So, we have an overweight on financials. Two, we are also positive on consumers - -both staples and discretionary. Those staples valuations are a little rich on a relative basis, but we are still positive on the whole consumer story. Last one year or one-and-a-half years of dull consumer demand does not take away the excellent demographics India has. It is just a matter of time before the pent-up demand in the system comes back and we are bullish on consumers — both staples and discretionary — including autos. Those are the sectors we are positive on and some amount of industrials also form part of the portfolio. How are you positioned on the broader markets? Benchmarks have come back but broader markets are yet to catch up. When do you expect it to happen?It is interesting. The last 7 to 10 days have been better for the broader markets right and after this huge underperformance by the broader market, there is some merit to them performing better in the shorter term. Having said that, our broader thesis still remains that the strong guys are going to get stronger and we would probably stick to largecap stocks unless and until we see much broader economic growth. A GDP print of above 5-5.5% or 6% does not gives us huge amount of confidence to invest in the broader markets. Yes, of course, there can be shorter-term rebound, but we will stick to quality, we will stick to largecaps which are pretty much consistent. How have the flows been to your scheme? Do you see appetite returning among your clients?, Are they doing top ups or are you having meetings with new clients?What we are seeing is basically that the clients want to have those kind of products which suit or which gets adjusted to their product profile and helps achieve their financial goals. Investors are looking for risk adjusted return products and that is why we are getting some sizable kind of interest from the broader clients. We had our first fund in terms of further subscriptions because we had reached the maximum level of investors into our AIFs. Having said that, for a shorter period of time now, we have opened it and we are looking at a very good incremental interest coming into both our products both on an absolute return and enhance return. How do you see this PSU bank pack — the larger ones as well as the small finance part of the financial space?Among the PSU banks, the larger ones are the ones where the PCA restrictions are not there. If we see some amount of NCLT resolution coming through in the short to medium term, then they definitely can have a positive leg-up in terms of price performance. Having said that, I would not pick them as long-term investment bets. These are more short-term bets. For longer-term investment, we want to be in those banks which have the consistent ability to grab market share. We have impeccable risk management systems and a management bandwidth and an ability to raise capital which I just mentioned a while back. We would probably concentrate on them. I am not saying that the PSU banks are bad, but it is just a relative opportunity for us and so that is how we would look at them. In terms of the small finance banks, we are excited about the space and we are closely looking at the investment opportunities coming out from there. What is your position on autos. Do you like it or is it on your avoid list?We like autos and we think that post the fantastic monsoons, the rabi crop might be much better and the rural inflation might come up purely because of food prices would be a positive disposable factor, giving income into the hands of the rural population. We do believe that the pent-up demand in the system may start showing up with the two-wheelers first and then probably flow into the four-wheelers as well. Having said that, we are not very bullish on the CV and the tractor side at this point in time. We are concentrating more on the two-wheelers followed by four-wheelers.
Categories: Business News

Smartphone shipment at 46.6 mn units in Q3, to see mid-to-high single-digit growth in 2019: IDC

November 11, 2019 - 4:33pm
NEW DELHI: India's smartphone market shipped a record 46.6 million units in the third quarter of 2019, up 26.5% on-quarter and 9.3% on-year, as per data from International Data Corporation (IDC) India, driven by multiple online sale festivals, new model launches and price corrections on a few key models by various brands."The continued aggression by the online platforms with attractive cashback and buyback offers as well as affordability schemes like No Cost EMIs and financing options were key in taking the share of the online channel to a record high of 45.4% with YoY growth of 28.3%," said Upasana Joshi, associate research manager IDC India.Xiaomi continued to keep its No 1 position with 27.1% share, followed by Samsung with 18.9%, Vivo at No 3 with 15. 2% share and Realme was at No 4 with 14.3%, and Oppo at No 5 with 11.8% share. Compared to the same quarter last year, the share of other brands has been reduced to less than half from about 30%, showcasing the strengthening grip of the top five players in the Indian market. Samsung was the only player ong top five that lost market share over last year, while Xiaomi recorded its highest shipment ever of about 12.6 million units. The firm highlighted the decline in sales for offline segment of 2.6% on year, as they fell short of the attractive deals that a consumer could grab in the online space and were still dealing with leftover inventory from previous quarters."The offline channel continued to face challenges. Consumer enquiries and footfall were relatively slow at the retail counters through September, compared to the previous years," the firm added. While the low-end price segment of US$200 still accounted for 80% of the overall India smartphone market in the quarter, its share dropped by five percentage points on-year as mid-range segment gained that share to rise to 18.9%, leading to overall increase in average selling price to $159, with 2.7% increase on year. The fastest growing segment in the quarter was US$300-500 with double the shipments on-year as key models like the OnePlus 7, Redmi K20 Pro and vivo V15 Pro had good traction. In the premium (US$500+) segment, Apple continued to dominate with a market share of 51.3% in 3Q19, on the back of affordability offers and price drops on previous generation models like the iPhone XR, iPhone 8 and iPhone 7 (128GB), along with the newly launched iPhone 11/Pro series.The feature phone market, accounting for 43.3% of the total mobile phone shipments, registered a 17.5% on-year decline with shipments of 35.6 million units during the quarter. 4G-enabled feature phones declined 20.3% YoY due to heavy inventory in the channel. The 2/2.5G market also saw a decline of 16.2% in quarter, IDC added.
Categories: Business News

Travis Kalanick is all set to disrupt food delivery in India

November 11, 2019 - 1:31pm
BENGALURU: Uber cofounder Travis Kalanick has discreetly begun building an India team to drive his new venture, City Storage Systems, which runs delivery-only kitchens called CloudKitchens, five people aware of his plans said.The company, which continues to operate on a stealth mode, has started engagements with restaurant chains and real estate developers in Mumbai, as well as begun early discussions with marketplaces including Swiggy, UberEats, and Zomato, these people said. Cloud kitchens are exclusively delivery restaurants without a dine-in facility or walk-in customers.Former TexMex Cuisine India CEO Ashish Saxena is the general manager for Mumbai and has been overseeing operations reporting directly to Kalanick.“India is one of the top in the priority list right now, just given how interesting the market dynamics are with both large companies (Swiggy and Zomato) investing in inducing a food delivery behavioral change in consumers,” said a person directly aware of the matter. “That, given with the lack of restaurants in the country, as well as reasonable real estate rates, makes Travis excited about doubling down his focus on India,” he said.The company is in the process of setting up teams in other cities as well. It will also hire a country head once the business launches and scales. “Mumbai is the first city scheduled to be launched, followed by Bengaluru, Delhi, and Hyderabad,” said this person, adding that operations would go live soon. “Efforts of operations have begun on the acquisition side,” he said.Last week, the Wall Street Journal reported that CloudKitchens had received a $400 million investment from Saudi Arabia's sovereign wealth fund, valuing the startup at around $5 billion. The other market in the pipeline is the Middle East, these people said.All five people ET spoke to requested anonymity given they have signed non-disclosure contractual agreements with the company. An email sent to City Storage Systems did not elicit a response till press time Sunday. 72000349 Kalanick has kept the structure of CloudKitchens similar to Uber’s international expansion strategy, with a general manager heading operations in a city and working closely with the real estate and operations team. While operations will be lean, each city will have a sales, operations, business intelligence, policy and analytics executives, said a person directly working with the team. He added that hardware and software development was based in the US.“They don't just think of themselves as a real estate play … The company's pitch is that they are rethinking the commercial kitchen and how food is prepared,” said a restaurateur who is engaging with the company for setting up kitchens. The larger plan is to make it online ordering, affordable and efficient using technologies like automation, IoT and robotics, as well as help facilitate demand generation through every online ordering platform, consulting, and marketing, a direct source said.Aligning with infrastructure players like CloudKitchens helps brands service on both Swiggy and Zomato without the fear of alignment, restaurateurs said. “It expands our scope of scale,” said the restaurateur cited earlier.Today, a majority of food delivery takes place from dine-in restaurants, but these locations are not optimized for delivery. And, while delivery is an increasing percentage of the business, many operators are forced to trade off the dine-in experience with delivery.To address this market in India, two of India’s largest food delivery companies, Zomato and Swiggy, have set up a kitchen infrastructure business. With a delivery-only kitchen setup, companies can dramatically reduce their real estate and labor costs, while keeping the window of expanding brands and offerings fast.Last month, City Storage Systems bought a small stake in cloud kitchen company Rebel Foods which runs multiple delivery-only brands including Fassos and Oven Story. Rebel is just one of the bets it has taken in India and will not come in the way of its own operation expansion, a person directly aware of the matter said.Kalanick was ousted in 2017 from the US ride-hailing platform he cofounded after a series of scandals, and since then he has quietly been building CloudKitchens. He acquired a majority stake in City Storage Systems for $150 million through his investment fund 10100, which he had set up using the proceeds of his $1.4 billion stock sale from Uber. Headquartered in Los Angeles, CloudKitchens leases real estate, often in distressed locations, and converts those into high-technology kitchen infrastructure buildings.The company, which plans to develop a global footprint, has begun acquisitions in the US and in the UK, Singapore, South Korea, China, and India. Kalanick believes that this business will be bigger than Uber, said sources.
Categories: Business News

The names up for the next RBI deputy guv

November 11, 2019 - 1:31pm
MUMBAI: Ten candidates are understood to have been interviewed last week for the post of deputy governor — vacated by Viral Acharya in charge of the monetary policy department in the Reserve Bank of India. The interview was conducted by the Financial Sector Regulatory Appointment Search Committee (FSRASC) and the final call on the appointment will be made by the Prime Minister’s Office.The post of deputy governor has been lying vacant ever since Acharya stepped down in August this year. According to sources, those shortlisted for the position include: Chetan Ghate, professor at Indian Statistical Institute, Arunish Chawla, joint secretary (department of expenditure), Manoj Govil, principal finance secretary, Kshatrapati Shivaji, executive director, ADB, Sanjeev Sanyal, principal economic adviser, T V Somanathan, additional chief secretary, Tamil Nadu, Michael Patra, RBI executive director, Prachi Mishra, economist at Goldman Sachs. Ghate and Patra participate in the monetary policy committee meetings as members.The FSRASC is headed by the cabinet secretary and shortlists candidates. The final appointment is done by the Central government based on the committee’s recommendations.The committee includes RBI governor Shaktikanta Das and financial services secretary. Incidentally, the FSRASC is also free to identify and recommend anyone even though the person may not have applied.The RBI currently has three deputy governors — N S Vishwanathan, who is serving a one-year extension, B P Kanungo and M K Jain.The deputy governor in charge of monetary policy has traditionally been an external economist. Before Acharya, it was former governor Urjit Patel, who was preceded by Subir Gokarn. Acharya, the youngest deputy governor, quit before his term ended in January to return to New York University Stern School of Business to join in time for the new academic term.??In a speech on the importance of independent regulatory institutions, Acharya had defended the RBI’s autonomy, stating that the Centre would have to face “the wrath of markets” if the autonomy of the central bank was compromised.
Categories: Business News

India's auto sector could see a new investor

November 11, 2019 - 1:31pm
NEW DELHI: China’s largest SUV maker, Great Wall Motors, has registered an Indian subsidiary and is planning to invest close to Rs. 7,000 crore in the country, even as the market is going through one of its worst slowdowns.The Indian subsidiary, Haval Motor India with its office in Gurgaon, was registered before October, which means it won’t be eligible for the low corporate tax rate of 15% (17.01% with surcharge) for new manufacturing units in India announced by the government last month. The company, therefore, is considering setting up another corporate entity here under the name of Great Wall, a person in the know told ET. 72000028 The company has written to the Prime Minister’s Office, seeking an appointment for its chairman Wei Jianjun with Narendra Modi in the first week of next month, the people said. A formal announcement of the India plans may come after this meeting, this person said.Great Wall didn’t respond until press time Sunday to an email seeking comment. The company has been scouting for sites in at least five states — Maharashtra, Gujarat, Karnataka, Andhra Pradesh and Tamil Nadu. Maharashtra has emerged as the strongest contender, followed by Gujarat, the people said. A delegation of Maharashtra industry department officials was in China last week to invite the company to the state, industry insiders told ET.“As of now, the company is looking at both greenfield and brownfield options in Maharashtra. It is considering the land acquired by Chinese truck maker Foton in Chakan near Pune,” one of the people said. General Motor’s Talegaon plant is another facility it is actively considering.Foton had acquired land over three years ago, but since then no progress has been made on its India plans. GM, which has exited the India market 2017, has already sold its Gujarat plant to another Chinese carmaker, SAIC. It still makes cars at Talegaon, Maharashtra, for exports.In fact, the person said Great Wall had signed a memorandum of understanding with GM for the Talegaon plant in September, and if all went well, it could take possession of it by next year May-June. The company was interested in the plant because it would speed up its debut in India to as early as mid-2021. If it decides to go for construction a new factory, the launch could happen only around mid-2022.The Chinese company is looking for fresh concessions from the Maharashtra government as the earlier sops given to GM were utilised by it. Its executives had sought a meeting with the Maharashtra chief minister, but due to the ongoing political impasse in the state following the assembly election, it doesn’t expect it to happen before the end of November.An entry of Great Wall will likely stiffen the competition in the utility vehicle space. SAIC-owned Morris Garages, which launched its mid-size Hector SUV earlier this year, has seen strong demand.
Categories: Business News

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