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Sebi seeks details of investments by NRIs, overseas Indians in FPIs

November 23, 2020 - 8:12am
Mumbai: The Securities & Exchange Board of India (Sebi) is assessing whether curbs on foreign portfolio investors (FPIs) running on money from non-resident Indians (NRIs) would hurt the market.In an email on November 18, the capital market regulator has asked financial institutions which act as custodians of FPIs to identify the offshore funds where NRIs, overseas citizens of India (OCIs) as well as resident Indians (RIs) are investors; and, the number of FPIs where such investors are in majority.FPIs were earlier told by Sebi to bring down the aggregate contribution of NRIs, OCIs, and RIs to below 50% by December 31, 2020. Also, the share of a single NRI or OCI or RI cannot exceed 25% of the corpus of a fund. (Resident Indians can also invest in certain FPIs by transferring money under RBI’s liberalized remittance scheme)A week ago an industry body representing NRI investors, and managers of funds backed by NRIs and persons of Indian origin requested the government and the regulator to end the restrictions. “Under the circumstances, Sebi is trying to get a sense on the quantum of NRI investments, the number of funds dominated by NRIs, and whether redemptions could impact the market in any significant way,” said a senior broker.However, the custodians and their FPI clients are unsure how to respond to the recent query from Sebi. “Custodians do not compile investor data based on residency or citizenship. So, custodians will have to ask the information from respective FPIs, who in turn will have to reach out to their clients. In cases where NRIs/OCIs are investing through a private bank, the bank will have to share the names of the ultimate beneficial owners,” said a fund administrator. “It’s not normal practice to ask for such investor level information unless there is an investigation,” he said.“Also, the regulator wants to know to what extent NRIs and OCIs are investing through large, mainstream FPIs which are not dominated by NRIs. If Sebi figures out that NRI and OCI investment is widely dispersed and coming through a large number of FPIs, they will retain the restrictions on NRI investment,” said a fund official.Typically, custodians — as required under India’s anti-money laundering law — maintain information on beneficial owners (BOs) of a fund. BOs are investors having 25% or more share of the fund. An investor can be a BO even with lesser contribution if it controls the asset management company of the fund or has a say in decision making and key appointment. The BO threshold contribution is 10% is the fund is based out of a high-risk jurisdiction.79358266However, many NRIs may remain below BO threshold level — either unwittingly, due to the size of their investments, or deliberately to stay below the radar. India-dedicated funds which tap the Indian diaspora will have the information on NRI/OCI investments, but other FPIs do not collect such data as they do not ask for such information from investors. Now all FPIs, as per the Sebi’s email, have to specify how many NRIs have invested in the fund. “Most custodians don’t have the data. So, many are giving incomplete or dated info,” said a source.The 25% /50% rule owes its origin to concerns about fund round-tripping and money laundering. Earlier, Sebi used to insist that FPIs should be broad-based: minimum 20 investors, with no investor having more than 20% share. This rule has been done away with.
Categories: Business News

Lifestyle International sales grow 10% in FY20 to Rs 9,239 crore

November 23, 2020 - 2:10am
Mumbai: Sales at Lifestyle International, the company that runs an eponymous department chain in India, grew 10 per cent in FY20 to Rs 9,239 crore, nearly double than the combined sales of its immediate rivals Shoppers Stop (SSL) and Future Lifestyle.According to financials sourced from data insights firm Altinfo, Lifestyle International is also the most profitable retail chain in the country within the apparel and lifestyle industry with a net profit of Rs 370 crore, although the bottom-line shrank 15 per cent from the year ago.The retailer said it registered strong revenue growth across all its retail formats in the first three quarters of FY20. “Starting August, as lockdown was gradually lifted across the country, the company has recorded strong recovery, with a positive momentum during the festive period of Dussehra to Diwali. The business recovery across all our formats continues to be ahead of the market.Our long-term strategic growth plans remain intact, said Shital Mehta, managing director at Lifestyle International.” Lifestyle’s performance was ahead of other apparel chains such as Aditya Birla Fashion and Retail that grew 8 per cent to Rs 8,743 crore, and Shoppers Stop that reported flat growth to Rs 4,385 crore. Retailers including Shoppers Stop and Lifestyle laid off more than 2,000 employees over the past seven months due to declining sales and bleak demand outlook.
Categories: Business News

View: New 'capital-based’ licensing regime for private banks can be real private-public partnership

November 23, 2020 - 2:10am
The Reserve Bank of India (RBI)’s ‘Report of the Internal Working Group to Review Extant Ownership Guidelines and Corporate Structure for Indian Private Sector Banks’ (bit.ly/38ZZihs), released on November 20, emphasises ‘capital-based’ licensing of private banks. This is a move in the right direction.Both theory and evidence reveal that compared to real sector business units, banks are more vulnerable to contagious shocks, the impact of which is much more pervasive and pernicious. Three new-generation banks — Times Bank, Bank of Punjab and Centurion Bank — which were established during the 1990s, were to be soon deregistered because their losses couldn’t be cushioned by their thin capital base. So, capital, especially equity capital, plays a crucial role of loss absorbency in banks. Capital-based licensing also complements capital-based regulation and supervision (read: Basel 3) by the central bank, which is the order of the day worldwide.While PSBs are being consolidated to provide a chunk of India’s capital requirement, their efforts need to be supplemented by resources from private banks. Except for two in the private sector — ICICI Bank and HDFC Bank — the remaining new-generation banks aren’t big enough to meet the capital challenge. So, the report has stressed on the entry of ‘big’ private banks by recommending Rs 1,000 crore as the initial paid-up voting equity capital. These banks are likely to be tech-intensive and staffed with specialised and experienced personnel, the starting cost of which would be undoubtedly high.Moreover, the initial capitalisation partly neutralises the rise in inflation between 2013, when the last guidelines were issued, and 2020. During this period, the GDP deflator rose by 22%. Also, public recapitalisation of PSBs is hamstrung by budgetary constraints, besides being globally disfavoured. Status quo in initial lock-in requirements, combined with disallowance of pledge of shares by promoters during the lock-in period, will enthuse only genuine players to enter the turf.The report is flexible as to dilution of promoter shareholding, and simplifies non-promoter shareholding. The proposed licensing norms allow large corporates and industrial houses. As in the last round, many applicants, including large ones, were not allotted licences. So, there is pent-up demand and several aspirants are likely. While well-governed corporates are preferred, RBI should be extra-cautious while allowing NBFCs. Many of them, although big and RBI-regulated or supervised, have remained amorphous and opaque.That the report has kept unchanged the corporate structure as ‘nonoperative financial holding company’, as well as the ‘fit and proper’ criteria for major shareholders, reflects pragmatism.One of the objectives of allowing new-generation private banks was to enhance competitive efficiency of PSBs. The objective has been accomplished to a large extent. More private banks should have a ‘tonic effect’ on the entire banking sector. However, this would necessitate RBI to bolster its regulation and supervision, both on- and off-site, especially with regard to firewalling of different business arms of the corporates joining the banking turf.Against the backdrop of low interest rates on deposits (both nominal and real) and increasing financial disintermediation, the new private banks may, unlike PSBs, find attracting ‘low-cost’ and ‘stable’ deposits somewhat difficult. The report doesn’t favour too many banks to work under too many regulatory regimes.Thus, it provides an easy exit route for the payments banks via conversion into small finance bank (SFBs). By the same logic, it would not be inappropriate to consider winding up the regional rural banks (RRBs) and local area banks (LABs), which have lost much of their relevance today in the face of growing fintech companies and microfinance institutions (MFIs), which seem relatively more active in rural/semi-urban areas.Finally, more private banking will make shareholder and depositor discipline more imperative.(The writer is former senior economist, State Bank of India)
Categories: Business News

2nd largest Apple supplier rolls out India plan

November 22, 2020 - 11:10pm
The board of Pegatron, Apple’s second largest contract manufacturer, has approved an initial investment of $150 million (Rs 1100 crore) for building manufacturing facilities in India, its top executive has said. Pegatron’s factory in India is expected to start production in the second half of next year or in early 2022 and the company plans to make more investments in India over the next two years, CEO Liao Syh-jang had said in an investor conference last week. The details were reported in the Taiwanese local media. Pegatron and Apple didn’t respond to ET’s emailed queries. The Taipei-headquartered iPhone assembler, which registered its India subsidiary in July this year, said that due to the pandemic, it has been harder for Pegatron staff to visit India, resulting in delays. Pegatron, along with other two Apple suppliers Foxconn and Wistron, has been cleared to avail sops under the central government’s production-linked incentive (PLI) scheme which kick started on August 1, 2020. Under the scheme, Apple has committed to locally produce devices worth around $50 billion over five years, a bulk of which will be for exports. Of the three, only Pegatron doesn’t have operations in India so far, and will start availing of the incentives under the PLI scheme only from April 1, 2021. In fact, the company started business operations in India this September with the appointment of statutory auditors and remittance of Rs 1 crore towards initial subscription of equity shares. Apple though has placed Pegatron on probation for violating its supplier code of conduct involving student workers at Pegatron factories in China. The CEO has said that the company will not let something like this happen again. Government officials in India though say that the development may not derail the Taiwanese vendor’s plans in India, ET had reported. Apple, on its part, is heavily investing in local assembly of iPhones in India as it diversifies outside of China amid heightened US-China tensions. Electronics and IT minister Ravi Shankar Prasad had said at an event last week that Apple has shifted nine of its operating units from China to India during the Covid period. According to data from Counterpoint Research, Apple’s domestic production until September 2020 was 1.2 million units and is inching closer to last year’s total production of 1.4 million units, despite a 45-day shutdown of factories due to the pandemic. Around 42% of it assembled in India is sold locally, and the rest is exported. Apple has also been having among its strongest years in recent times, despite the pandemic. According to CyberMedia Research, Apple recorded the highest ever quarterly shipments - close to 700,000 units - in the July-September period and is positioned for aggressive growth in Q4 as well with a strong lineup of iPhone 12 series, 11 series and iPhone SE. The Cupertino-based giant has also ramped up its exports this year (via Foxconn and Wistron) - which grew from 50% to 58% - as the two manufacturers ramped up capacity in order to meet the 60% PLI target for exports, data showed. As for Pegatron, it must individually produce handsets worth Rs 4000 crore in its first year which begins in March 2021 under the PLI scheme. “Targets are easily achievable if they are able to start production next year but if it is stretched till 2022, they will have to convey this to the government and reach a middle ground, I think,” a senior executive in a mobile manufacturing firm said.
Categories: Business News

Long and short of markets: Is 'mutual funds sahi hai' slogan losing shine & other top reads

November 22, 2020 - 11:10pm
Looking at the dismal returns of actively managed equity funds at a time when the market is at a record high, one can't help but recall the wisdom of the legendry American investor John C Bogle, who once said, "Don't look for the needle in the haystack. Just buy the haystack!" A plain vanilla index fund might have given you better returns than actively managed funds. PMSes, the favourite option of the richie rich, are meanwhile beating every other product. Read this and more in this weekend’s edition of 'Long and Short of Markets'.Are mutual funds really sahi hai?Despite a nerve-racking rally in headline indices since their March lows, most equity mutual funds, including the top performing largecap funds, delivered just 10-13 per cent returns over a 5-year period. At a time when index funds are having a dream run, here is a fund manager's outlook on the performance of actively managed funds. >>> Who's generating alpha for the richAlthough beyond the reach of the ‘aam aadmi investor’, PMSes have been money spinners in recent times. The best of these PMSes are clocking 5-7 per cent a month, as against 3-4 per cent of benchmark returns for the same period. Here is a list of alpha generator stocks PMSes rode their profits on. >>> Flood alert!The overall FPI inflows in November so far is just Rs 400 crore short of the August figure of Rs 49,879 crore. Read here on how FPIs are bullish on Indian equities pumping multi-billion dollars in every quarter post the March lows. >>>LVB’s ‘once bitten, twice shy’ lessonFinancial stocks don’t work like cyclicals, says this market veteran. Financial stocks work on faith and unlike the cyclicals, where cheaper stocks boom with the cycle, cheaper financial stocks don’t behave similarly, he says. Here is more on what the veteran has to say about taking home a lesson on investing in financials and other cheaper stocks. >>>Bitcoin mania ragesDespite being volatile and opaque, crypto currencies are gaining traction in India and across the world as many institutional investors are joining the bandwagon. Read here for more on bitcoin’s outlook after touching all-time high and crypto market undercurrent as well. >>>
Categories: Business News

A herculean effort to resuscitate MAX jet

November 22, 2020 - 8:10pm
The future of Boeing Co's freshly approved 737 MAX is in the hands of nearly 700 workers toiling behind the gray doors of a three-bay hangar at a desert airport in Washington state.Inside, over an endless 24-hour loop, 737 MAX planes are rolled in for maintenance, and upgrades of software and systems as mandated by the U.S. Federal Aviation Administration in this week's order lifting a flight ban imposed after two crashes, the airport's director said.In front, workers in bright yellow vests inspect the roughly 240 jets stored in giant grids at Grant County International Airport in Moses Lake - more than half of an inventory worth about $16 billion, according to investment firm Jefferies.Analysts say clearing the logjam of up to 450 stored jets in total is crucial before Boeing can resume meaningful production of its traditional cash cow - a task complicated by the fact that buyers have in some cases walked away during the grounding.While parked on the tarmac, each jet is fitted with red engine and wheel covers, a windshield screen to block out the sun, and a small generator powering cycles of fresh air and electricity through its systems - the aviation equivalent of life support."It's an enormous undertaking," the airport's director, Rich Muller, told Reuters. "But this go-ahead from the FAA has given them a real shot in the arm. It's really energized everyone."The work at Moses Lake is a cornerstone of a global logistical and financial strategy under way at Boeing to clear a backlog of more than 800 mothballed 737 MAX jets. About 450 are Boeing property, and a further 387 were in airline service before the FAA's grounding order in March 2019.Across the globe, Boeing teams are hammering out delivery schedules - and financial terms - with airlines who last year had to scale back schedules and fly aging jetliners because they lacked the aircraft to meet strong demand as the MAX grounding dragged on longer than airline and Boeing executives expected.But the jet is returning at a time when the coronavirus pandemic has hammered demand for air travel and new jets. Boeing also faces new European trade tariffs and palpable mistrust of one of the most scrutinized brands in aviation."Airlines and the supply chain do not see major deliveries until 2022," said Arndt Schoenemann, managing director of supplier Liebherr-Aerospace Lindenberg. "Right now, COVID is the biggest problem for the industry."A Boeing spokesman declined to comment beyond listing preparation steps before 737 MAXs go to customers, which include installing a flight control software upgrade to deal with a system tied to both crashes, separating wiring bundles that posed a potential safety hazard, and multiple tests including a test flight before a final FAA inspection.WHITE TAILSAirlines say it will take about two weeks to ready each plane for service with maintenance and software upgrades factored in, though Boeing has already deployed teams around the world to help companies get ready.In a visual display of the jet demand slump, workers at Moses Lake on Thursday rolled a 737 MAX "white tail" - a jet without a buyer, or whose buyer has been changed - out of a long row of aircraft awash in the bright liveries of airline customers, ranging from customers American Airlines to Norwegian Air. This week, Norwegian sought bankruptcy protection in Ireland.Reuters counted 12 white tails at Moses Lake on Thursday, though sources say Boeing is worried about 100 such aircraft in inventory, or more.Boeing declined to comment.Jets are also stored at Boeing property in the Seattle area and in San Antonio, Texas.Boeing is in discussions with several airlines, including Southwest, Delta and Alaska, hoping to stimulate demand for the jet. Deals are expected to include significant discounts, industry sources have said. But analysts caution cutting prices too far could upset other customers.A fire sale could also depress resale values of such single-aisle jets - the cornerstone of a complex system of financing that has attracted capital to the industry, powered by relatively strong returns on planes which are seen as mobile real estate.To kickstart the recovery of the MAX and contain any fallout to the jet's valuation while offering aggressive discounts to find new homes, Boeing is expected to line up a handful of large deals with marquee customers who will put them in long service.The 737 MAX 8 has a list price of $122 million but the market long ago abandoned published prices as competition heated up. Most jets are privately sold well over 50% below the list price and the new MAX discount may be more, jet traders said.Slowing the recovery, the FAA, which has faced accusations of being too close to Boeing in the past, has said it plans in-person inspections of each of the 450 planes, which could take at least a year to complete, prolonging the jets' deliveries.Grant County International has been a strategically important asset for Boeing at least since the 1960s, and every MAX built in the Seattle area is flown there for touch-and-go landings or other tests.The airport and abutting Boeing property has absorbed nearly 700 employees and contractors to aid the ungrounding effort, up from only a handful, Muller said.Meanwhile, Boeing is paying some $51,000 per plane a month to park its MAXs, he added.
Categories: Business News

India's manufacturing poised to witness recovery in July-September quarter: Survey

November 22, 2020 - 8:10pm
New Delhi: India's manufacturing sector is poised to witness recovery in the July-September quarter, even as hiring outlook for the segment remains bleak, according to a survey. Industry body FICCI's latest quarterly survey on manufacturing points towards recovery of the manufacturing sector in the second quarter ended September as compared to the previous quarter, with a rise in percentage of respondents reporting higher production. The proportion of respondents reporting higher output during July-September rose to 24 per cent, as compared to 10 per cent in the previous quarter. Besides, the percentage of respondents expecting low or same production is 74 per cent in the second quarter which was 90 per cent in the first quarter of 2020-21. However, hiring outlook for the sector, though improving slightly, shows a bleak picture as 80 per cent of the respondents mentioned that they are not likely to hire additional workforce in the next three months. "This presents slightly improved situation in the hiring scenario as compared to the previous quarter Q-1 of 2020-21, where 85 per cent of the respondents were not in favour of hiring additional workforce," FICCI said. Moreover, the average interest rate paid by manufacturers has reduced slightly to 9.2 per cent per annum as against 9.4 per cent per annum during the last quarter and the highest rate is reported to be 12.5 per cent. The recent cuts in repo rate by the RBI has not led to a consequential reduction in the lending rate as reported by 55 per cent of the respondents, found the survey. Based on expectations in different sectors, all the sectors except medical devices are likely to register low growth in Q-2 2020-21. The primary reason for such depressed expectations seems to be the imposition of lockdown, subdued demand, restricted exports and other guidelines in place as a response towards COVID-19 outbreak. The survey covered wide areas of relevance for manufacturing like exports, capacity utilisation, ongoing restrictions, availability of labour/workforce and others. In many of these areas there are signs of operations inching towards normal and in coming months could see better performance. The survey assessed the sentiments of manufacturers for July-September 2020-21 for 12 major sectors namely automotive, capital goods, cement and ceramics, chemicals, fertilizers and pharmaceuticals, electronics & electricals, leather and footwear, medical devices, metal & metal products, paper products, textiles, textile machinery, and miscellaneous. Responses were drawn from over 300 manufacturing units from both large and SME segments with a combined annual turnover of around Rs 3 lakh crore. The survey showed that overall capacity utilisation in manufacturing has risen to 65 per cent as compared to 61.5 per cent in Q4 2019-20. The future investment outlook, however, is subdued as only 18 per cent respondents reported plans for capacity additions for the next six months as compared to 22 per cent in the previous quarter, the survey revealed. High raw material prices, high cost of finance, shortage of skilled labour and working capital, high logistics cost, low domestic and global demand due to imposition of lockdown across several countries, lack of financial assistance, are some of the major constraints affecting expansion plans of the respondents. Significantly, the percentage of respondents expecting increase in exports in July-September has increased substantially to 24 per cent when compared to the previous quarter, wherein merely 8 per cent respondents were expecting a rise in exports. Also, 19 per cent are expecting exports to continue to be on same path as that of same quarter last year, the survey noted.Untitled Carousel 79290265 79342425 79349454 79182711
Categories: Business News

Could Covid vaccine be a catalyst for reversal of equity factors that perform best?

November 22, 2020 - 8:10pm
By Michael P. ReganThe sun was just rising over New York on Nov. 9 when an announcement from Pfizer Inc. set in motion what would be one of this year’s heaviest days of volume in the US stock market -- and one of the most shocking sessions in recent memory for the quants who trade in it.The surprising success rate of a coronavirus vaccine trial from Pfizer and its partner triggered a massive reaction in stocks. For investors who carve the equity market into assorted characteristics that drive the performance of share prices, it looked like this: Factors such as momentum and growth that had helped lead this year’s rally were crashing, while under-performing groups like value and small caps were soaring. Could the vaccine be a complete game changer -- the catalyst to start a reversal in the types of equity factors that perform the best?Not so fast, says an executive at one of the most-influential companies in this realm of investing. Yes: certain factors did play a role in the massive outperformance of small caps that day. But contrary to popular belief, none of them were the “size factor,” the one everyone believed was driving the surge in smaller companies, according to Roman Kouzmenko, executive director of core equity research at MSCI Inc. Likewise, the value factor had little to do with a surge in a gauge of value stocks.“The simplest explanation isn’t always the right one,” he wrote in a blog post describing his analysis of small caps, which used equity risk models and other analytical tools.With the MSCI USA Small-Cap Index up more than 3% and the S&P Small Cap 600 Index jumping almost 5% in the session after Pfizer’s announcement, the simplest explanation would be that the size factor was suddenly back in vogue.79352829Yet Kouzmenko determined the rally in MSCI’s small-cap guage was owed to other factors also exhibited by the group, such as that they are riskier, less-profitable and lower-quality stocks that tend to move up and down more than the market. And they are not typically among the momentum factor that was suddenly out of favor that day. The outperformance in the MSCI USA Enhanced Value Index was also a result of what he calls a negative exposure to momentum.Unintended Exposures“A rules-based, cap-weighted index construction, while having a number of benefits, may result in unintended factor exposures that can suddenly matter a lot when these factors have unusually large movements,” Kouzmenko said in an email.There is a lot of soul searching going on in the world of factor investing these days, as stories pile up about quantitative funds getting burned as they struggle to navigate through 2020’s wild market swings and ever-shifting expectations for the path of the pandemic and American politics.With year-end approaching, timing bets on future leadership is perilous amid the competing newsflow of positive vaccine developments and a raging virus that’s forcing the return to lockdown type of conditions in the U.S. and Europe.“In the last six weeks, it’s been nearly impossible to capture a single theme and ride it because the market’s flipping back and forth,” said Jonathan Golub, chief U.S. equity strategist at Credit Suisse Group. “That tends to be extremely frustrating for investors with a short-term focus.”Ultimately, the performance of factors this year, indeed most years, is driven primarily by sentiment and the level of risk-taking that the collective market wants to take, according to John Kolovos, chief technical strategist at Macro Risk Advisors.Yet the economic and market environment of 2020 is such a unique scenario that old playbooks haven’t always been applicable. That’s especially true for the popular momentum factor, which bets that stocks that have performed especially well will continue to do so and those that have been lagging will keep on lagging. Historically, the momentum factor tended to do well in both bull and in bear markets but almost always crashed coming out of major market bottoms, according to Kolovos.“This time around, however, the momentum factor did not crash coming out of the Covid bear market, instead, it continued to perform well,” he said. With little clarity toward the path of the virus and eventual rollout out of a vaccine, “people stuck with that they knew about fundamentally, and that was technology, discretionary and communication -- the momentum winners.”Transient FactorsOne legacy of 2020 may be a larger focus in factor research on the sudden emergence of transient trends that influence returns. At MSCI, the creator of indexes tracked by many factor-based exchange-traded funds, Kouzmenko and colleagues are on the hunt for ways to incorporate these temporary drivers of return. For example: trying to measure how exactly Covid affected certain stocks or how companies’ ability to adapt to a remote workforce helps drive their share-price performance.MSCI is in the early stage of research to detect new themes as they emerge and and turn them into factors using machine learning and natural language processing techniques, Kouzmenko said.What factors will carry the baton going forward is obviously what matters the most to investors at the moment. At Credit Suisse, Golub’s research has identified a handful of key factors that have worked the best this year – across all industries, and not just the stay-at-home names in big tech and internet businesses. They include high gross margins, strong sales growth, high return on assets and low levels of leverage. Golub shorthands that group of characteristics as “quality growth.”While these attributes may take a back seat to more cyclical and value-oriented stocks for the rest of the year, Golub believes the factors should reassert themselves in the market leadership eventually.“There’s no such thing as evergreen,” he said. “But right now, I would say that you’re as close to evergreen as you’re going to get with quality growth.”
Categories: Business News

Cognizant to drive more gender and racial diversity initiatives in the coming year: CEO Brian Humphries

November 22, 2020 - 8:10pm
MUMBAI: IT services provider Cognizant’s initiatives in diversity and inclusion next year will include appointment of more women in leadership roles and inclusion of people of various ethnicities and backgrounds, according to its chief executive, Brian Humphries.Women make up about 35% of New Jersey-headquartered Cognizant’s 283,100-strong global workforce. However, not many women are in senior leadership positions and this would be a focus area, said Humphries at an analyst web conference on Friday.He was speaking to the Phil Fersht, CEO of the global research consultancy HFS.“We have a 100,000 female associates in Cognizant, but to be very honest, a lot of that is at the lower levels of the pyramid. That’s not acceptable,” he said.Cognizant will be rolling out diversity targets from next year, he said. “We are rolling out in the coming year diversity targets for an executive committee and their operating rules below them. We are continuing to add much more EC (executive council) member sponsorship and what we call ERG (employee resource groups) groups. We have added two in the last few months – Pan Asian ERG and Disability Person ERG as well,” said Humphries.Recently, the company appointed Becky Schmitt as chief people officer, Shameka Young as global head, diversity & inclusion, and Ursula Morgenstern as the president of global growth markets.“I am trying to also start by leading by example at the top of the company, with diversity not just in terms of male and female but also sexual orientation, nationalities and backgrounds,” he said.On whether the focus on racial and gender justice, which dominated headlines in 2020, will continue, Humphries said the movements had ushered in change across companies permanently. “I think it’s permanent. Companies, vendors like Cognizant are speaking more openly about it, about their expectations for us to show up as a global company, to show up as a representative of society,” said Humphries.India’s largest technology exporter Tata Consultancy Services is also working to increase the number of female leaders at the top. In an interview with ET earlier, chief leadership & diversity officer Ritu Anand had said TCS is looking to increase the proportion of women holding managerial positions and that it was a board-level priority for the company.India Inc’s spending on gender diversity has increased to 32% in 2019 from 23% in 2016, according to a recent study released by Avtar Group and Working Mother Media. The study said that on average, the percentage of women hired increased from 31% in 2016 to 37% in 2020. During the same period, the percentage of companies having formal programmes to identify and recruit women who had taken career breaks also increased to 65% from 30%.
Categories: Business News

First leg of Kochi-Bengaluru Gail pipeline to be ready by Jan

November 22, 2020 - 5:09pm
Mumbai: National gas major Gail India, which completed the Kochi-Mangalore gas pipeline last week after long delays, is hopeful of completing the first leg of the Kochi-Bengaluru line in January, a senior company official said. The first leg of the 620-km-long Kochi-Bengaluru gas pipeline begins from Kuttanad in Palakkad and extends up to Valayar, which is on the Kerala-Tamil Nadu border. The work on this 95-km line is progressing at a frenetic pace, the official said. "We have laid the pipes and pressure testing is being done on the 95-km long Kuttanad-Valayar stretch. We hope to complete it by January," P Murugesan, executive director in-charge of the southern region at Gail, told from Bengaluru over the weekend. Once testing is over, the pipeline will supply natural gas to Palakkad town as well as to Kanjikode and other industrial estates in the district, he said. The Kochi-Bengaluru line was also announced along with the Kochi-Mangalore line that is now awaiting official commissioning, but got inordinately delayed due to public and political pressure which held back land acquisition for long.The project was initially expected to cost Rs 2,500 crore but the cost is set to escalate due to the delays and after the management agreed to pay higher compensation to farmers for the land. While the Kuttanad-Palakkad stretch will be completed anytime from now, the line will go live up to up to Valayar by January and in Coimbatore by March, which is 280-km long, he said. The line passes through seven districts in Tamil Nadu--Coimbatore, Erode, Salem, Tirupur, Krishnagiri, Dharmagiri and Hosur. While the Krishnagiri stretch is almost complete, the work on the Valayar-Coimbatore leg is also on, Murugesan said. When asked about likely opposition to the project and the resultant delays, he expressed hope that work will resume at full speed now as there is complete backing by the state government and farmers are likely to give up their land for higher price being offered now. He also pointed to the success of the project in Kerala which was also delayed for long due to the same reasons and was resolved by offering higher prices. Murugesan also said now the Tamil Nadu government is very serious about completing the project and has appointed nodal revenue officers in each of the seven districts for regular monitoring and coordination. On November 16, Murugesan had told that the Kochi-Mangalore line was finally ready for commissioning after completing testing of a 540-metre stretch across the Chandragiri river in Kasargod on November 14, which took them nearly eight months to complete due to the geological complexities. The 444-km long Kochi-Mangalore pipeline was launched in 2009 at an estimated cost of Rs 2,915 crore, and was to be commissioned in 2014. But opposition on safety and commercial grounds wherein the land price was the main hurdle, both from political parties and the public, ensured that the project lingered on. This led to the project cost nearly doubling to over Rs 5,750 crore. Kuttanad is the main junction for both the projects as from here the line bifurcates to Mangalore and Bengaluru. The first phase of the Kochi project was commissioned in August 2013 with industrial supplies and domestic supplies in the Kochi metropolitan region from February 2016 by Adani Gas. Today the pipeline supplies 3.8 million cubic meters of gas every day in and around Kochi, while Mangalore has demand for 2.5 million cubic meters per day, Murugesan said. The pipeline is a big boost to the struggling Kochi LNT Terminal of Petronet which has an annual capacity of 5 million tonne but 90 per cent of it has been idling for want of demand, and Murugesan said with the commissioning of the Kochi-Mangalore line the capacity ulitisation of the terminal will go up to 25-30 per cent.
Categories: Business News

RBI buying dollars to absorb surge in foreign fund flows

November 22, 2020 - 5:09pm
By Abhishek GoenkaIn the holiday-shortened last week, the rupee made a hazy start at 74.44 and weakened towards 74.63. This weakness was primarily due to aggressive dollar buying by nationalized banks along with ongoing fears related to Covid-19.Markets were initially euphoric on the announcement of two vaccines which boosted the sentiments. This euphoria has been slowly fading away as the vaccines have its own set of logistical requirements of transportation, preservation, and distribution.Towards the end of the week, USDINR changed its direction and appreciated towards 74.10, closing the week at 74.16 due to broad dollar weakness and suspected foreign inflows. US Dollar Index weakened throughout the week on reports that US Senate Republican leaders have agreed to resume negotiations on another coronavirus stimulus package.In a bid to prevent the rupee’s appreciation, the Reserve Bank of India (RBI) has been regularly buying dollars, absorbing the surge in foreign fund flows. Foreign equity inflows this month rose to Rs 49426 crore while forex reserves swelled by $4.277 billion to a lifetime high of $572.771 billion. It looks like the central bank is not in the mood to allow USDINR to appreciate sharply.In the coming days, the rupee is expected to weaken slightly considering the new restrictions imposed in Mumbai along with other parts of India. Moreover, global equities too look dim on the back of weak global cues due to rising coronavirus infections in the western world and on-off stimulus talks. On the flipside, a lot of inflows and IPOs are expected to grace the markets. Data shows that compared to other emerging markets, India was the only economy that received positive net inflows for Rs 10,107 crore over the 12-month period from October 2019 to September 2020. This trend is expected to continue as the Indian equity market has recovered as one of the fastest compared to other global markets.USDINR is expected to trade within a range of 73.50 – 75.00 levels. On the upside, break of 74.95 could push it to 75.40 level. On the down side, a break below 74.00 could push the currency towards 73.80.(The author is Founder and CEO, IFA Global. Views are his own)
Categories: Business News

AITUC raises objections to 12-hr work rule

November 22, 2020 - 2:09pm
The All India Trade Union Congress has asked the government to immediately withdraw its proposal of 12 hours of factory work time proposed in the draft rules of the Code on Occupational Safety, Health and Working Conditions (OSH&WC), saying it is in contravention of the ILO Convention to which India is a signatory.“AITUC is shocked at the audacity of this government in suggesting a 12 hour shift in spite of the recent Supreme Court judgment striking down a similar provision introduced by the Gujarat BJP government,” the central trade union said in a statement on Sunday. “It is also a contravention of the very first ILO Convention (Hours of Work Industry Convention, 1919 (No. C001), ratified by the government and which is currently in force,” it added.AITUC also alleged that the government got the three codes passed ‘undemocratically’ in Parliament in the September session in the absence of the members of the opposition. “Going by this experience, this 45 day consultation exercise over the three Codes may also be just an eyewash,” it added. According to AITUC, there are many other draft rules which, in absence of any inspection, will only add to the resolve of the working class to further intensify the efforts for the nationwide strike on November 26. The 10 central trade unions have called for a nationwide strike on November 26 against the unilateral policies of the government, which they term as anti-worker and pro-corporates.The labour ministry had on Friday made public the draft rules under the OSH&WC Code proposing to cap the number of working hours in an establishment at 12 in a day – higher than the current 10.5 – and 48 in a week. The proposal is in line with recent moves by some states to extend the daily working hours to 12.The draft rules also provide for a single licence for contractors and staffing firms, allowing them to operate across India with one registration as against multiple state or location-specific registrations. It prohibits the hiring of contract labour for core activities, which will be defined by the appropriate government and may include work of perennial nature.“The period of work of a worker shall be so arranged that inclusive of his intervals for rest, it shall not spread over for more than 12 hours in a day,” the ministry had said, while capping the total work hours permitted in a week at 48.The ministry has sought views of stakeholders on the draft, seeking to operationalise the Code on Occupational Safety, Health and Working Conditions over the next 45 days, following which the rules will be finalised.
Categories: Business News

Bank of Maharashtra expects only Rs 1,000-1,500 crore loan book to be restructured

November 22, 2020 - 2:09pm
MUMBAI: State-run Bank of Maharashtra is expecting only Rs 1,000 to 1,500 crore of its total advances to come up for one-time restructuring under the Reserve Bank of India's scheme before December 31, its managing director and CEO A S Rajeev said. The lender had earlier estimated around Rs 3,000-4,000 crore from its moratorium book to come under one-time restructuring. However, over a period of time the moratorium book itself came down drastically from 27 per cent in March to 15-16 per cent (Rs 14,000-15,000 crore) as of end August, he said. "We had earlier expected that 15-20 per cent of the total moratorium book will go for restructuring. But now we think only Rs 1,000-1,500 crore from our total advances will come up for restructuring," Rajeev told . The bank's total advances stood at Rs 1,03,408 crore as on September 30, 2020. In August, the Reserve Bank of India had announced one-time restructuring for personal and corporate borrowers affected by COVID-19 related stress. Under the scheme, the resolution has to be invoked by December 31, 2020. So far, the lender has restructured 800 small accounts, including MSMEs, worth Rs 40 crore, under the scheme. "There are one or two bigger accounts worth Rs 150-200 crore in the pipeline (for restructuring). These are consortium lending accounts and the decision on restructuring will be taken by respective leaders," he said. In the quarter ended September 30, 2020, the Pune-based bank reported a 13.44 per cent growth in its standalone profit after tax at Rs 130 crore as against Rs 115 crore in the same quarter of the previous fiscal. On a consolidated basis, its net profit stood at Rs 130.44 crore in the second quarter of FY21, compared to Rs 115.15 crore last year in the same quarter. The growth in profit was on account of higher net interest income, lower bad loan provisioning and reduction in operating expenses. "Last (Q2FY21) quarter was comparatively very good. I am sure that our numbers would be better in the next quarter as compared to the September quarter because we have already made provisioning of more than Rs 1,000 crore related to COVID or for any kind of emergency," Rajeev said. The lender does not foresee any issue in terms of provisioning till March 31, 2021. During the first half of the current fiscal, the lender's recoveries stood at Rs 678 crore and it expects to recover another Rs 1,000 crore during the second half, Rajeev said. In the April-September period, the bank settled worth Rs 225-250 crore of accounts under its one-time settlement schemes (OTS) and has recovered almost 60 per cent from those accounts. It expects some more recoveries from such accounts before March 31, 2021. In the second half, it expects around Rs 250 crore to Rs 300 crore settlement under OTS. The lender's gross NPA reduced to 8.81 per cent in the September quarter from 16.86 per cent last year. Net NPA declined to 3.30 per cent as against 5.48 per cent in the same quarter of the previous fiscal. Rajeev said he expects gross NPA to be below 8 per cent and net NPA lower than three per cent by March-end. He sees an addition of not more than Rs 500-600 crore in NPAs each in Q3 and Q4 of the current fiscal. In the first half, the bank's deposits grew at 12.15 per cent year-on-year and advances at 13 per cent during the first half and it expects the same trend in the second half also. "We are of the view that the total deposits may grow at around 12-14 per cent and advances may grow at 14-16 per cent in the second half," he said. Capital adequacy of the bank stood at 13.18 per cent with common equity tier 1 ratio of 10.31 per cent as on end-September. It has already received board approval for raising Rs 3,000 crore, which includes Rs 2,000 crore through equity and Rs 1,000 crore from bonds. "We may raise funds through bonds (AT1 and tier II) during the second half in various tranches. We don't have AT1 bonds at present so we will raise Rs 400-500 crore of such bonds. We will also raise Rs 400-500 crore tier II bonds, if required. With this our capital adequacy position will be above 14 per cent for the current year," Rajeev said adding that the decision on raising equity capital will be taken in the next year. He said the bank may not require any capital infusion from the government in this fiscal. The lender has also entered into the credit card business and has already issued close to 5,000 cards. It is looking to expand its base into the segment from the fourth quarter of the current fiscal, Rajeev added.
Categories: Business News

Relaxo Footwears to set up new facility at Rs 150 cr investment this fiscal

November 22, 2020 - 2:09pm
Relaxo Footwears Ltd plans to invest Rs 150 crore in the current fiscal to set up a new manufacturing facility amid growing demand for open footwears such as slippers and sandals in the backdrop of the COVID-19 pandemic. "Demand for open footwears is going up due to the COVID-19 pandemic. We are trying to increase production to meet that demand. We have planned investment of Rs 150 crore this financial year. Majority of this amount will go for setting up a new manufacturing facility in Bhiwadi," Relaxo Footwears Managing Director Ramesh Kumar Dua told. Relaxo Footwears, whose key brands include Sparx, Flite, Bahamas and School Mate, said open footwears account for about 80 per cent of its total turnover. The Delhi-based firm said demand for closed footwears has been affected but it expects its pick-up going forward due to the onset of winter. Dua said Relaxo Footwears is looking at achieving 90 per cent of last financial year's turnover in the current fiscal. "Our first quarter revenue was affected due to nationwide lockdown. Second quarter onwards sales started picking up led by demand for open footwears. We are looking at achieving 90 per cent of last financial year's turnover in the current fiscal," he added. Relaxo Footwears had reported a net profit of Rs 226.25 crore and revenue from operations of Rs 2,410.48 crore in the previous financial year. Asked if the company is planning any price increase of its products, Dua said: "Raw material prices are benign right now..Prices (of raw materials) are looking up from January onwards. We will review cost pressures at the end of December and take a call whether to hike prices of our products or not." The company has eight manufacturing units and has presence in 20 countries and exports account for 4 per cent of its total turnover.
Categories: Business News

Snowman Logistics, LVB, SpiceJet, Gland Pharma among top names that buzzed last week

November 22, 2020 - 2:09pm
Gland Pharma made a strong debut on bourses during the week gone by, while aviation major SpiceJet and telecom player Vodafone Idea advanced up to 32 per cent. On the other hand, private lender Lakshmi Vilas Bank cracked more than 40 per cent after the government placed the bank under a one-month moratorium.Overall, heavy buying in Bajaj Finserv, Mahindra & Mahindra, Tata Steel, Bajaj Finance, Larsen & Toubro and Kotak Mahindra Bank took the benchmark equity indices higher for the third straight week. The 30-share BSE Sensex advanced 439 points to 43,882 for the week ended November 20. Likewise, the 50-share Nifty index gained 139 points to 12,859.Market participants stood upbeat on Covid-19 vaccine announcements amid robust inflows by foreign institutional investors.Below are the top stocks that created a buzz on Dalal Street through the week.Gland PharmaShares of Gland Pharma made a stellar debut on bourses on Friday, settling nearly 22 per cent higher at Rs 1,828 compared to its issue price of Rs 1,500. The scrip listed at Rs 1,710 on the NSE.Bharti Infratel, Vodafone IdeaShares of Vodafone Idea (VI) and Bharti Infratel hogged the limelight on Friday on completion of the Bharti Infratel and Indus Towers merger deal. VI gained 15 per cent to Rs 10.04 on November 20 from Rs 8.72 on November 13. Likewise, Bharti Infratel gained nearly 21 per cent to Rs 218.50 during the same period.Snowman LogisticsCold chain logistics firm Snowman Logistics rallied 41 per cent last week amid reports that extremely low temperature of minus 70 degrees Celsius is required for storing a potential Covid-19 vaccine developed by Pfizer. Shares of the company jumped to Rs 64.45 on November 20 from Rs 45.75 on November 13.Tata MotorsShares of Tata Motors climbed over 15 per cent after a report suggested that the carmaker has seen healthy demand for a range of vehicles during the festive season. ET NOW, quoting sources, said bookings for Tata Motors increased by 95 per cent and that of retail sales were up 90 per cent when compared with the festive season of last year. Shares of the auto major gained 15.48 per cent to Rs 169 during the week. On the other hand, Tata Motors- DVR gained 17.65 per cent to Rs 72.65.Top BSE500 gainers and losersAs many as 27 stocks from the BSE500 pack scaled fresh highs during the week gone by. They included Adani Gas, Adani Green, Kotak Mahindra Bank, Info Edge, Capri Global Capital, Supreme Industries, Escorts, Havells India, Jubilant FoodWorks, SRF, Vaibhav Global, HDFC Bank, HDFC Life, Linde India and UltraTech Cement. With a rally of over 42 per cent, Adani Gas emerged as top gainers in the BSE500 index. It was followed by Wockhardt (up 35 per cent), SpiceJet (up 34 per cent), The Jammu & Kashmir Bank (up 33.50 per cent) and Graphite India (up 31 per cent). On the other hand, Himadri Speciality Chemical, Alok Industries, Amber Enterprises, PVR and Piramal Enterprises declined between 5-15 per cent.SpiceJetShares of SpiceJet climbed nearly 32 per cent after HSBC upgraded the aviation player to 'buy' and also raised its target price sharply to Rs 80 from Rs 26.50 as survival risk abated and second-quarter result came in better than expected. The brokerage said SpiceJet's shares have suffered mainly due to questions around its survival but now that risk is coming down as the return of Boeing 737 Max gets closer. The scrip advanced to 72.75 from Rs 54.45.Lakshmi Vilas BankThe government on Tuesday placed LVB under a one-month moratorium, superseded its board and capped withdrawals at Rs 25,000 per depositor. Reacting on the development, shares of the lender closed 42 per cent down at Rs 9 against Rs 15.60 last week.Larsen & ToubroShares of Larsen & Toubro (L&T) gained nearly 8 per cent after the company’s construction and mining equipment business secured its biggest-ever order to supply 46 units of Komatsu Mining Equipment from Tata Steel, the company said in a regulatory filing. The scrip jumped 7.68 per cent to Rs 1,132 for the week ended November 20.
Categories: Business News

Govt plans 10% stake sale in Mishra Dhatu via offer for sale

November 22, 2020 - 2:09pm
NEW DELHI: The government is planning to sell up to 10 per cent stake in defence PSU Mishra Dhatu Nigam Ltd (MIDHANI) in the current fiscal ending March, an official said. The company got listed on stock exchanges in April 2018 and the government had raised Rs 438 crore by selling 26 per cent stake through IPO.The official said that with the opening of space sector to foreign investment and bringing defence sector under automatic route for 74 per cent foreign direct investment (FDI), MIDHANI shares are expected to attract investors. MIDHANI manufactures special steel and super alloys for use in defence, nuclear and space sectors. "We are looking at up to 10 per cent stake dilution via offer for sale," the official said. Shares of MIDHANI closed at Rs 193.50 apiece on the BSE on Friday. At the current market price, the government can raise about Rs 360 crore by selling 10 per cent stake in the company.The official further said that with big ticket divestment plans hit by the Covid-19 pandemic, the government is readying public sector companies for minority stake sale in the remaining months of current fiscal.So far this fiscal, the government has raised Rs 6,138 crore by selling minority stake in Hindustan Aeronautics Ltd and Bharat Dynamics Ltd through offer for sale so far this year. The government also divested 15.2 per cent in Mazagon Dock Shipbuilders Ltd through an initial public offering.The government has set a Rs 2.1 lakh crore disinvestment target in current fiscal. This includes Rs 1.20 lakh crore through CPSE stake dilution and Rs 90,000 crore through stake sale in financial institutions -- more than four times what it raised last financial year.
Categories: Business News

Petrol, diesel prices rise for 3rd straight day

November 22, 2020 - 11:09am
NEW DELHI: Petrol price on Sunday was hiked by 8 paise per litre and diesel by 19 paise, the third straight day of increase in rates as the firming international oil rates broke a nearly two-month-long hiatus in price revision. Petrol price in Delhi was hiked to Rs 81.46 per litre from Rs 81.38, according to a price notification from oil marketing companies. Diesel rates went up from Rs 70.88 to Rs 71.07 per litre. State-owned fuel retailers started raising fuel prices from Friday. In three days, petrol price has gone up by 40 paise and diesel rates have risen by 61 paise per litre. Petrol prices had been static since September 22, and diesel rates hadn't changed since October 2. Public sector oil marketing companies - Indian Oil Corporation, Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporation Ltd - revise rates of petrol and diesel daily based on benchmark international oil price and foreign exchange rate. They have, however, resorted to calibrating the rates since the pandemic broke out to avoid volatility in retail prices. The 58-day hiatus in petrol price revision and 48-day status quo on diesel rates was preceded by no change in rates between June 30 and August 15, and an 85-day status quo between March 17 and June 6. In Mumbai, the petrol price on Sunday was raised to Rs 88.16 per litre, from Rs 88.09, while diesel rates went up from Rs 77.34 to Rs 77.54. Rates vary from state to state depending on the incidence of local sales tax or VAT.
Categories: Business News

Five of top 10 cos lose Rs 1,07,160 cr in m-cap; RIL top laggard

November 22, 2020 - 11:09am
NEW DELHI: Five of the 10 most valued domestic firms suffered a combined loss of Rs 1,07,160 crore in market valuation last week, with Reliance Industries Ltd (RIL) emerging as the biggest loser.Tata Consultancy Services Ltd (TCS), HUL, Infosys Ltd and ICICI Bank Ltd were the other bluechip firms that witnessed a drop in their market capitalisation (m-cap) last week. However, HDFC Bank, HDFC Ltd, Bajaj Finance Ltd and Bharti Airtel finished with gains.RIL's valuation tumbled Rs 69,378.51 crore to Rs 12,84,246.18 crore.The m-cap of TCS plummeted Rs 4,165.14 crore to Rs 9,97,984.24 crore and that of Hindustan Unilever Ltd (HUL) dropped by Rs 16,211.94 crore to Rs 4,98,011.94 crore.The market valuation of Infosys fell Rs 12,948.61 crore to Rs 4,69,834.44 crore and that of ICICI Bank declined Rs 4,455.8 crore to Rs 3,31,315.58 crore.On the other hand, HDFC Bank added Rs 18,827.94 crore to its valuation at Rs 7,72,853.69 crore.HDFC's valuation rose by Rs 3,938.48 crore to Rs 4,19,699.86 crore and that of Kotak Mahindra Bank jumped Rs 23,445.93 crore to Rs 3,73,947.2 crore.The market valuation of Bajaj Finance advanced by Rs 20,747.08 crore to Rs 2,84,285.64 crore and that of Bharti Airtel Ltd rose by Rs 1,145.67 crore to Rs 2,63,776.2 crore.RIL led the chart of top-10 valued companies, followed by TCS, HDFC Bank, HUL, Infosys, HDFC, Kotak Mahindra Bank, ICICI Bank, Bajaj Finance and Bharti Airtel Ltd.
Categories: Business News

China set to eclipse America as world’s biggest oil refiner

November 22, 2020 - 11:09am
By Saket Sundria, Gerson Freitas Jr. and Rachel GrahamEarlier this month, Royal Dutch Shell Plc pulled the plug on its Convent refinery in Louisiana. Unlike many oil refineries shut in recent years, Convent was far from obsolete: it’s fairly big by U.S. standards and sophisticated enough to turn a wide range of crude oils into high-value fuels. Yet Shell, the world’s third-biggest oil major, wanted to radically reduce refining capacity and couldn’t find a buyer.As Convent’s 700 workers found out they were out of a job, their counterparts on the other side of Pacific were firing up a new unit at Rongsheng Petrochemical’s giant Zhejiang complex in northeast China. It’s just one of at least four projects underway in the country, totaling 1.2 million barrels a day of crude-processing capacity, equivalent to the U.K.’s entire fleet.The Covid crisis has hastened a seismic shift in the global refining industry as demand for plastics and fuels grows in China and the rest of Asia, where economies are quickly rebounding from the pandemic. In contrast, refineries in the U.S and Europe are grappling with a deeper economic crisis while the transition away from fossil fuels dims the long-term outlook for oil demand.America has been top of the refining pack since the start of the oil age in the mid-nineteenth century, but China will dethrone the U.S. as early as next year, according to the International Energy Agency. In 1967, the year Convent opened, the U.S. had 35 times the refining capacity of China.The rise of China’s refining industry, combined with several large new plants in India and the Middle East, is reverberating through the global energy system. Oil exporters are selling more crude to Asia and less to long-standing customers in North America and Europe. And as they add capacity, China’s refiners are becoming a growing force in international markets for gasoline, diesel and other fuels. That’s even putting pressure on older plants in other parts of Asia: Shell also announced this month that they will halve capacity at their Singapore refinery.See also: Europe Accelerates Electric-Car Shift With Subsidies, BansThere are parallels with China’s growing dominance of the global steel industry in the early part of this century, when China built a clutch of massive, modern mills. Designed to meet burgeoning domestic demand, they also made China a force in the export market, squeezing higher-cost producers in Europe, North America and other parts of Asia and forcing the closure of older, inefficient plants. 79348135“China is going to put another million barrels a day or more on the table in the next few years,” Steve Sawyer, director of refining at industry consultant Facts Global Energy, or FGE, said in an interview. “China will overtake the U.S. probably in the next year or two.”Asia RisingBut while capacity will rise is China, India and the Middle East, oil demand may take years to fully recover from the damage inflicted by the coronavirus. That will push a few million barrels a day more of refining capacity out of business, on top of a record 1.7 million barrels a day of processing capacity already mothballed this year. More than half of these closures have been in the U.S., according to the IEA.About two thirds of European refiners aren’t making enough money in fuel production to cover their costs, said Hedi Grati, head of Europe-CIS refining research at IHS Markit. Europe still needs to reduce its daily processing capacity by a further 1.7 million barrels in five years.“There is more to come,” Sawyer said, anticipating the closure of another 2 million barrels a day of refining capacity through next year.Chinese refining capacity has nearly tripled since the turn of the millennium as it tried to keep pace with the rapid growth of diesel and gasoline consumption. The country’s crude processing capacity is expected to climb to 1 billion tons a year, or 20 million barrels per day, by 2025 from 17.5 million barrels at the end of this year, according to China National Petroleum Corp.’s Economics & Technology Research Institute.India is also boosting its processing capability by more than half to 8 million barrels a day by 2025, including a new 1.2 million barrels per day mega project. Middle Eastern producers are adding to the spree, building new units with at least two projects totaling more than a million barrels a day that are set to start operations next year.Plastic DrivenOne of the key drivers of new projects is growing demand for the petrochemicals used to make plastics. More than half of the refining capacity that comes on stream from 2019 to 2027 will be added in Asia and 70% to 80% of this will be plastics-focused, according to industry consultant Wood Mackenzie.The popularity of integrated refineries in Asia is being driven by the region’s relatively fast economic growth rates and the fact that it’s still a net importer of feedstocks like naphtha, ethylene and propylene as well as liquefied petroleum gas, used to make various types of plastic. The U.S. is a major supplier of naphtha and LPG to Asia.These new massive and integrated plants make life tougher for their smaller rivals, who lack their scale, flexibility to switch between fuels and ability to process dirtier, cheaper crudes.The refineries being closed tend to be relatively small, not very sophisticated and typically built in the 1960s, according to Alan Gelder, vice president of refining and oil markets at Wood Mackenzie. He sees excess capacity of around 3 million barrels a day. “For them to survive, they will need to export more products as their regional demand falls, but unfortunately they’re not very competitive, which means they’re likely to close.”Demand TrapGlobal oil consumption is on track to slump by an unprecedented 8.8 million barrels a day this year, averaging 91.3 million a day, according to the IEA, which expects less than two-thirds of this lost demand to recover next year.Some refineries were set to shutter even before the pandemic hit, as a global crude distillation capacity of about 102 million barrels a day far outweighed the 84 million barrels of refined products demand in 2019, according to the IEA. The demand destruction due to Covid-19 pushed several refineries over the brink.“What was expected to be a long, slow adjustment has become an abrupt shock,” said Rob Smith, director at IHS Markit.Adding to the pain of refiners in the U.S. are regulations pushing for biofuels. That encouraged some refiners to repurpose their plants for producing biofuels.Even China may be getting ahead of itself. Capacity additions are outpacing its demand growth. An oil products oversupply in the country may reach 1.4 million barrels a day in 2025, according to CNPC. Even as new refineries are built, China’s demand growth may peak by 2025 and then slow as the country begins its long transition toward carbon neutrality.“In an environment where the world has already got enough refining capacity, if you build more in one part of the world, you need to shut something down in another part of the world to maintain the balance,” FGE’s Sawyer said. “That’s the sort of environment that we are currently in and are likely to be in for the next 4-5 years at least.”--With assistance from Javier Blas.
Categories: Business News

G20 : PM Modi calls for new Global Index

November 22, 2020 - 2:05am
NEW DELHI : PM Narendra Modi on Saturday called for a new Global Index for the Post-Corona World that comprises four key elements – creation of a vast Talent Pool; ensuring that Technology reaches all segments of the society; Transparency in systems of governance; and dealing with Mother Earth with a spirit of Trusteeship. Based on this, the G20 can lay the foundation of a new world. The PM addressing the G-20 Summit termed the COVID-19 pandemic as an important turning point in history of humanity and the biggest challenge the world is facing since the World War II. He called for decisive action by G20, not limited to economic recovery, jobs and trade, but to focus on preserving Planet Earth noting that all of us are trustees of humanity’s future. The Summit, which saw participation of respective Heads of State/ Government of 19 member countries, EU, other invited countries and international organizations, was conducted in virtual format in view of the COVID-19 pandemic.The Summit under Saudi Presidency centered on the theme "Realizing Opportunities of 21st Century for All” which has assumed greater importance in the wake of the ongoing COVID-19 pandemic. The agenda of the Summit is spread out over two days with two sessions focused on overcoming the pandemic, economic recovery and restoring jobs, and building an inclusive, sustainable and resilient future. There are also side events planned on the two days on pandemic preparedness and on safeguarding the planet. Modi also underscored that in the past few decades, while there has been an emphasis on Capital and Finance, the time has come to focus on Multi-Skilling and Re-skilling to create a vast Human Talent Pool. This would not only enhance dignity of citizens but would make our citizens more resilient to face crises. He also said that any assessment of new technology should be based on its impact on Ease of Living and Quality of Life.He called for greater Transparency in governance systems which will inspire citizens to deal with shared challenges and enhance their confidence. He also said that dealing with environment and nature as trustees rather than owners will inspire us towards a Holistic and Healthy Life Style, a principle whose benchmark could be a Per Capita Carbon Footprint.Noting that ‘Work from Anywhere’ is a new normal in the post-COVID world, the Indian PM also suggested creation of a G20 Virtual Secretariat as a follow up and documentation repository.The 15th G20 Leaders’ Summit would continue on 22 November 2020 culminating in the adoption of the Leaders’ Declaration and with Saudi Arabia passing on the Presidency to Italy.
Categories: Business News

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