BQuick On Jan. 16: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. Twist In The Essar Steel Tale
State Bank of India has put on sale its total loans to Essar Steel Ltd. worth Rs 15,431 crore, as per information on its auction website. The sale is open for asset reconstruction companies, non-banking finance companies, banks and financial institutions.
- The minimum reserve price for the loans has been set at Rs 9,587 crore and the bank has disclosed that as per the ArcelorMittal resolution plan, approved by Essar Steel’s committee of creditors, the minimum recovery amount on these loans is Rs 11,313 crore.
- The reserve price has been computed using an 18 percent discount on the minimum recovery amount from the ArcelorMittal plan and pricing in a one-year period for the deal to close, according to the notification put up by India’s largest lender.
There’s also a claw back option by SBI. Here’s what it means.
2. RBI Liberalises ECB Route
The Reserve Bank of India has issued a new framework for External Commercial Borrowings, opening the channel to a wider set of end-users or borrowers.
- List of eligible borrowers has been expanded. All entities eligible to receive foriegn direct investment can borrow under the revised ECB framework.
- All eligible borrowers can now raise ECBs up to $750 million under the automatic route, replacing the existing sector wise limits.
- RBI expanded the list of lenders to any entity in a country compliant with the Financial Action Task Force.
- Minimum maturity period for all ECBs kept at 3 years for all ECBs.
- All-in-cost ceiling retained at 450 basis points over London Inter-bank Offered Rate.
The new framework will come into effect immediately. Here are the other changes.
3. Jet's Turnaround Plan, And Etihad’s Challenges
Jet Airways (India) Ltd. on Wednesday said State Bank of India, along with other lenders and stakeholders, is working on a comprehensive resolution plan to turn around the airline.
- The resolution plan being discussed contemplates equity infusion and consequent changes in the board of directors, the full-service carrier said.
- The Naresh Goyal-led airline must repay lenders nearly Rs 1,700 crore by the end of the current fiscal.
- Etihad may be requested by lenders to step up and increase its stake to 49 percent.
- If Etihad is supposed to infuse funds then, Jet can’t issue more than 5.6 crore equity shares to Etihad. That is because Indian regulations cap airline ownership by foreign operators at 49 percent
But there are other hurdles that Etihad may face.
4. Sensex Flat, S&P 500 Rises
Indian equity benchmarks were little changed as gains in Infosys Ltd., Reliance Industries Ltd. and ICICI Bank Ltd. were offset by losses in HDFC Ltd., ITC Ltd. and Kotak Mahindra Bank Ltd.
- The S&P BSE Sensex Index closed 3 points higher at 36,321.
- The NSE Nifty 50 Index too advanced 3 points to 10,890.
- Twelve of 19 sector gauges compiled by BSE ended higher led by the S&P BSE Oil & Gas Index's 0.7 percent gain.
- On the flip side, S&P BSE Fast Moving Consumer Goods Index was top loser, down 0.7 percent.
Follow the day’s trading action here.
U.S. stocks rose as signs of a better-than-expected start to the earnings season boosted investor confidence in the economy.
- The S&P 500 Index gained for a second day as quarterly reports from Goldman Sachs and Bank of America lifted banking shares, while United Continental Holdings surged after the airline’s earnings blew past expectations.
- The 10-year Treasury yield advanced for a third session, while the dollar advanced against almost all major currencies.
- The pound was little changed against the dollar before a vote on the U.K.’s government.
- West Texas Intermediate crude fell 0.4 percent to $51.89 a barrel.
Get your daily dose of global markets here.
5. Signs Of A Big Shift In India’s Retail Trade
Jagdish Motiram Lilani, a distributor for consumer goods makers for more than three decades, has stopped stocking products of Mondelez Inc. Not that demand for the company’s Bournvita health drink to Oreo biscuits has fallen. But the buying pattern is changing.
- Kirana stores that usually buy from him are switching to Metro Cash & Carry in search of bigger discounts, Lilani told BloombergQuint. And online retailer BigBasket too offers discounts on bulk orders from mom-and-pop outlets, he said.
- Moreover, urban consumers are increasingly buying from supermarkets and hypermarkets, according to Lilani. So demand for small retailers is down, ultimately hurting distributors.
But he is not alone. Distributors account for 90 percent of the FMCG sales. That may be changing now.
6. Angel Tax Relief
The government eased the procedure for startups to seek income tax exemption on investments from angel funds as part of efforts to address concerns of budding entrepreneurs, official sources said.
- Various startup founders recently claimed of receiving notices under Section 56(2) (viib) of the Income Tax Act from the Income Tax Department to pay taxes on angel funds raised by them.
- To seek the exemption, a startup will apply, with all the documents, to the DIPP.
- The application of the recognised startup shall be moved by the department to the Central Board of Direct Taxes with necessary documents.
CBDT has been mandated to grant exemption approval to a startup. Here's more.
7. A Mystery Fit For Sherlock Holmes
Studying and understanding economic data is typically a task best left to economists and their excel spreadsheets. But every now and then (and unfortunately it isn’t that rare in India) economic data throws up a mystery that is fit for sleuths.
- Take CPI inflation data, which showed consumer prices at an 18-month low.
- Yet, healthcare costs saw a sharp jump particularly in rural areas. This, at a time when rural demand conditions are considered to be soft.
- Some economists have theories while others are as confused as the journalists.
- One theory is that the government’s recently-launched health insurance scheme - Ayushman Bharat - may have pushed up healthcare costs.
- Another is that the weaker currency may have pushed up prices of medicines.
But these are all theories. Here’s more on the data mystery.
8. Why Mayawati-Akhilesh Said No To Rahul, And Erred
Mayawati and Akhilesh Yadav say that Congress has been unable to transfer its votes to an alliance partner in Uttar Pradesh. Amitabh Tiwari studies 25 years of electoral data to test that claim.
- The vote blocs of the NDA and the Mahagathbandhan now each account for roughly 50 percent of the UP population.
- What vote-transfer run rate did the JDU-RJD Bihar Mahagathbandhan of 2015 enjoy?
- Will Yadavs and Dalits vote for candidates from the other voter bloc?
Get the most comprehensive study done so far on the impact of UP’s newest alliance, here.
9. An Insider’s Take On The Relationship Between Bureaucracy And Politicians
Anil Swarup, a 38-year civil services veteran, is surprised at the way Alok Verma was removed as the head of the Central Bureau of Investigation since an officer who was considered good suddenly became bad.
- “If you did select somebody who was considered to be good, how does he become so bad to have been kicked out twice?” Swarup said in an interview with BloombergQuint.
- A high-level appointment to a post like director of the CBI is made after a detailed process, he said.
Swarup spoke on how officers can survive the complex relationship between the bureaucracy and the government. Watch the interview.
10. Sunita Williams’ Village Has A Farm Problem
Jhulasan in Gujarat’s Mehsana district, about an hour’s drive north of Ahmedabad, doesn’t betray signs of farm distress. Homes are relatively bigger and roads well paved. A grand temple stands in the central square, partly thanks to generosity of Gujaratis settled abroad. Almost everyone has a relative in the U.S. or Canada, and some of that fortune has trickled back home to the village. Still, most farmers this year filed for government relief after drought damaged crops.
- The village is cleaved—between owners of small and big farms, and access to water sets them apart.
- For the past three years, the canal that fed cotton, wheat, castor and guar bean cultivation has run dry.
- Large farmers pump out groundwater to irrigate fields and share it with smaller ones for a fee.
- This year, even that stopped because of depleting aquifers.
There’s confusion and blame game in Jhulasan. But no relief.