ADVERTISEMENT

BQuick On Jan. 21: Top 10 Stories In Under 10 Minutes

BQuick | Top news, must-read stories and columns – all served up in less than 10 minutes.  

Buildings stand illuminated as dusk falls in Davos, the venue for the World Economic Forum (WEF), in Switzerland (Photographer: Stefan Wermuth/Bloomberg)  
Buildings stand illuminated as dusk falls in Davos, the venue for the World Economic Forum (WEF), in Switzerland (Photographer: Stefan Wermuth/Bloomberg)  

This is a roundup of the day’s top stories in brief.

1. Cash For Farmers, Not Subsidies

India is considering a plan to transfer cash to farmers to ease their financial burden instead of offering subsidies, people with knowledge of the matter told Bloomberg News.

  • Prime Minister Narendra Modi’s government is planning to combine all farm subsidies, including fertilizer costs, and instead pay farmers cash, the people said, asking not to be identified as the discussions aren’t public.
  • The additional cost will be limited to Rs 70,000 crore ($9.8 billion) annually after a full roll-out of the programme, the people said.
  • Finance Minister Arun Jaitley had budgeted Rs 70,100 crore for farm subsidies in the year ending March 31.
  • The plan for the handout comes after the ruling Bharatiya Janata Party was voted out in key state elections last month, forcing Modi to draw up a course correction before federal polls due by May.

The government has already exceeded the annual budget deficit target.

2. India’s World-Beating Growth

India is expected to remain the fastest growing major economy in the world for the next two years even as global growth slows down.

  • That’s according to the International Monetary Fund that sees India’s gross domestic product growing at 7.5 percent in 2019 and 7.7 percent in 2020.
  • The global economy however is expected decelerate to 3.5 percent in 2019 from 3.7 percent last year.

Catch BQ’s coverage of the World Economic Forum in Davos.

3. Sensex Gains Nearly 200 Points

India’s Sensex clocked its longest stretch of gains since Dec. 19 led by a rally in Reliance Industries Ltd., Kotak Mahindra Bank Ltd. and Infosys Ltd.

  • The S&P BSE Sensex rose 0.53 percent or 192 points to 35,579.
  • The NSE Nifty 50 Index climbed 0.50 percent or 55 points to 10,962.
  • Twelve of 19 sector gauges compiled by BSE ended lower led by the S&P BSE Realty Index's 1.2 percent decline.
  • On the flipside, S&P BSE Energy index was top gainer, up 2.7 percent.

Follow the day’s trading action here.

BQuick On Jan. 21: Top 10 Stories In Under 10 Minutes

European stocks and U.S. equity futures slipped on Monday while Asian markets posted modest gains as investors assessed the latest headlines on the economy and trade.

  • The Stoxx Europe 600 Index was on course for its first drop in five days, tracking S&P 500 futures lower on what is a holiday in America.
  • Shares in Tokyo, Hong Kong and Sydney all climbed on lingering optimism for the next round of U.S.-China trade talks, and as data from Beijing helped ease concern of a continued deterioration in the world’s second-largest economy.
  • Not all was sunny, however; Bloomberg reported that the two sides are making little progress on the key issue of intellectual property protection.
  • The Bloomberg Dollar Spot Index increased 0.1 percent, hitting the highest in more than two weeks with its fifth straight advance.
  • Gold fell 0.3 percent to $1,277.91 an ounce, the weakest in more than three weeks.

Get your daily global markets fix here.

Opinion
Why RIL’s Shares Have Returned Best Two-Day Gains In 21 Months

4. Kotak’s Profit Growth At 6-Quarter High

Kotak Mahindra Bank Ltd.’s quarterly profit rose at its fastest pace in six quarters, driven by strong loan growth.

  • Net profit rose 23 percent year-on-year to Rs 1,291 crore in the quarter ended December.
  • Net interest income, or core income, of the bank rose 27 percent to Rs 2,939 crore.
  • Net interest margin expanded to 4.33 percent from 4.2 percent in the previous quarter.
  • The bank’s profit and revenue were aided by a 23 percent rise in total advances.

The Uday Kotak-led bank also improved its bad loan ratio.

5. Most Generous IT Firms

The top five information technology companies by market capitalisation have returned over Rs 1.17 lakh crore to their shareholders through share buyback programmes and dividends from January 2017 to January 2019 so far.

  • Assuming an average exchange rate of Rs 67 per U.S. dollar, this amounts to $17.5 billion.
  • Nearly four-fifths of these payouts have come from the top two companies—Tata Consultancy Services Ltd. and Infosys Ltd.
  • Three of these companies also rewarded investors with bonus shares in the period.
  • Shares of these five IT companies gained in the range on 16-68 percent during the two years.

When buybacks and dividends weren’t enough, bonus shares were also offered.

6. Finally...LIC Gets A Bank!

Life Insurance Corporation of India Ltd. finally owns a bank. Despite much debate over the government’s decision to cede control of IDBI Bank Ltd. to the national insurer, the transaction is now close to completion.

  • IDBI Bank, in a statement issued on Monday, said LIC completed the acquisition of a 51 percent controlling stake in the lender.
  • As such, the bank’s board approved the reclassification of LIC as promoters of IDBI Bank.
  • Also, the bank’s board approved an extension of the tenure of Rakesh Sharma as chief executive officer, it said in a separate notification.

The challenge for LIC now is to ensure the bank has enough capital.

7. L&T To Assess Buyback Options

Larsen & Toubro Ltd. will decide its course of action on the market regulator’s surprise rejection of its share buyback programme after the construction and capital goods firm reports its December quarter earnings on Friday.

  • L&T had proposed to buy back 6.1 crore shares at Rs 1,475 apiece comprising 18.72 percent of the company’s net worth and filed an application with the Securities and Exchange Board of India on Oct. 10, last year.
  • The regulator, however, turned down the buyback proposal, estimated at Rs 9,000 crore, on the ground that its debt-to-equity ratio would rise sharply if it went through.
They [SEBI] have been a bit harsh on this rule...We have very little debt and we run a very tight ship and our results show the results of that.
SN Subrahmanyan, MD & CEO, L&T

The company will now study ways to return cash to shareholders.

8. Promoter Of A Tiny Company Pulled Off What The Ruias Are Trying

In this insolvency fairytale, a charming princess (resolution applicant) tries to save the distressed prince (insolvent company) from the clutches of financial misery. And the stepfather (promoter barred by law from participating in the insolvency) represents the spoke in the wheel attempting to hinder their happy ending. The story is about the insolvency proceedings of SBM Paper Mills Pvt. Ltd. - in which the Mumbai National Company Law Tribunal was asked for three very contradictory rulings:

  • The resolution professional sought approval of the resolution plan submitted by Maharashtra-based flour mill Khandesh Roller Flour Pvt. Ltd. (the resolution applicant). This plan had already been approved by the committee of creditors.
  • The promoter/erstwhile promoter, Satyanarayan Malu, sought withdrawal of the insolvency he himself had initiated on behalf of the company.
  • The resolution applicant sought withdrawal of its resolution plan, after the plan had been negotiated, re-negotiated and accepted by the committee of creditors.

So, who got their happy ending? All of them.

9. India’s Toothless Bankruptcy Code

Errant debtors are forever looking for ways to undermine creditor protection; but when lenders themselves start making a mockery of a fledgling insolvency law, nobody can save it. That’s where India’s two-year-old bankruptcy regime is today, brought to the brink of irrelevance by the strain of resolving its most high-profile case: Essar Steel India Ltd., writes Andy Mukherjee.

  • The billionaire Ruia brothers have used every trick in the book to ensure their prized asset stays in the family.
  • Just as the process was crawling to a conclusion, with the lenders accepting ArcelorMittal’s Rs 42,000 crore bid for the 1 crore tons-a-year steel plant, an unexpected wrinkle has emerged.
  • State Bank of India, the largest creditor, has put its entire Rs 15,400 crore exposure on the block.

This only shows that large Indian family businesses are impossible to dislodge.

10. The Mismatch Between What MPC Says And What RBI Does

The monetary policy stance officially communicated by the Monetary Policy Committee through the statements is often found to be in conflict with the actions taken by the Reserve Bank of India, writes IGIDR’s Rajeswari Sengupta.

  • Statutory liquidity ratio cuts and liquidity injections are tantamount to monetary policy easing, which contradict the ‘calibrated tightening’ stance.
  • The confusion caused by this inconsistency also weakens monetary policy transmission.

This is particularly damaging for a new inflation-targeting regime.