BQuick On Jan. 22: 10 Stories In Under 10 Minutes

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

1. Pawan Goenka Is Optimistic And M&M’s Internal Forecasts Show Why

Mahindra & Mahindra Ltd. has increased its internal volumes forecast three times in the current quarter, said Pawan Goenka, as a sign of an expected recovery in the industry.

• “Not a huge number, but this is an increase of three times where a few months ago it was a decrease of three times. That’s what is giving me optimism,” the Managing Director at the automobile and tractor maker said in an interview with BloombergQuint on the sidelines of the World Economic Forum in Davos, Switzerland.
• Goenka expects the company and its peers to see a “slow climb”.

Watch the full interview here where Goenka explains why he thinks FY21 will be better for all automakers.

2. Ajay Piramal, Anand Mahindra And Ken Rogoff At Davos 2020

Almost two-thirds of Piramal Enterprises Ltd.’s loan book is exposed to the beleaguered real estate sector. Yet, only 1 percent of its assets has turned bad.

• That, according to Ajay Piramal, is because of the company’s efforts to ensure that its borrowers don’t face insolvency proceedings. “The way we’ve structured the loans is such that they are by and large IBC-proof,” the chairman of the Piramal Group told BloombergQuint on the sidelines of the annual meeting of the World Economic Forum in Davos, Switzerland.
• Piramal said that the company cut down lending from the June-ended quarter of FY20 and it's wholesale loan book came down over time.
• The firm also made sure to only fund the “top” developers.

Read more on how Piramal aims to bring down the cost of funding and future inorganic growth plans.

Anand Mahindra, chairman of Mahindra & Mahindra Ltd., said the Indian economy has been going through a ‘detoxification’ process.

• “The prime minister has been quite obsessed about the kind of growth he wants: transparent, free of corruption and any rent-seeking,” Mahindra told Bloomberg’s Tom Keene at the World Economic Forum’s annual meeting in Davos, Switzerland.
• Mahindra remains confident that the recent slew of measures taken by the Modi government will lead to a “happy ending” for the India story.

Here’s why Mahindra thinks India’s growth story is like a blockbuster movie.

India and China are set to see divergent growth paths in the coming decade.

• That’s according to Kenneth Rogoff, professor of Economics and Public Policy at Harvard University, who said the country’s fundamentals—a young population and fast-growing cities—make for an optimistic outlook.
• “India has the potential to grow at 7-8 percent for a long time. China does not. India has a young population, it has a lot of potential in its infrastructure, to catch up. China is at the other end of the curve. It is reaching the end of the line,” he told BloombergQuint.

See what Rogoff thinks of Narendra Modi’s economic policies.

3. A New Hurdle Pops Up For DHFL

More than 250 fixed depositors of Dewan Housing Finance Corporation Ltd. have moved the Supreme Court challenging the decision to restart lending at the beleaguered housing finance company, two people aware of the matter told BloombergQuint.

• The retail fixed depositors are arguing that their dues should be paid before the company starts lending again, the people said on the condition of anonymity.
• The petition was filed last week, and the apex judicial body is set to hear the case on Thursday.
• R Subramania Kumar, the Reserve Bank of India-appointed administrator for DHFL, declined to comment on the developments.

Here’s why legal experts think treating one class of creditors preferentially may open another box of challenges.

4. How L&T, Axis Bank, Asian Paints Fared In Q3

Larsen & Toubro Ltd.’s quarterly profit met estimates even as order execution remained muted amid state elections and a slowing economy.

• Net profit rose 15 percent over last year to Rs 2,352 crore in the quarter ended December.
• Revenue rose 6 percent year-on-year to Rs 36,243 crore.
• Margin expanded 50 basis points to 11.4 percent.

Still, L&T maintained the order inflow guidance at 10-12 percent for the year.

Axis Bank Ltd.’s quarterly profit missed analysts’ estimates on the back of higher operating expenses, driven by an increase in staff costs.

• Net profit rose 5 percent over the previous year to Rs 1,757 crore.
• Pre-provisioning operating profit rose nearly 4 percent to Rs 5,742.69 crore.
• The lender’s bad loan ratios remained steady over the quarter but slippages rose.

One reason for the lower-than-expected profit was higher staff costs.

Asian Paints Ltd.’s net profit rose for the quarter ended December, matching street estimates on lower input costs.

• The paintmaker’s net profit jumped 20 percent to Rs 764 crore.
• Revenue rose 3 percent on a yearly basis to Rs 5,420 crore.
• Ebitda rose 8 percent on a yearly basis to Rs 1,189 crore.

The greater-than-expected operating margin surprised the street.

5. Nifty’s Longest Losing Streak In Over Three Months

Indian stocks declined for the fourth consecutive trading session and registered their longest losing streak in since Oct. 7, 2019.

• The NSE Nifty 50 fell for the fourth consecutive trading session and declined 0.52 percent to close at 12,106.90.
• The S&P BSE Sensex declined for the third consecutive trading session and fell 0.5 percent to end at 41,115.38.
• The broader markets represented by the NSE Nifty 500 Index fell 0.41 percent.
• The market breadth was tilted in favour of sellers.
• Eight out of 11 sectoral gauges compiled by NSE ended lower.

Follow the day’s trading action here.

The Indian stock market is set to see billions of dollars of inflows after a policy tweak comes into effect on April 1, analysts predict.

• The nation will increase the foreign portfolio investment limit in a company from the current 24 percent to a higher threshold set for its sector.
• In addition to the expected inflows from active asset managers, the move could trigger net investments of between $2 billion and $2.5 billion to Indian equities from passive funds, according to estimates from Target Investing and Morgan Stanley.

The change will likely increase India’s weighting in the MSCI Emerging Markets.

6. Modi’s Triple Challenge

The triple challenge before the government is to present a budget that will help regain investor, business and consumer confidence, according to Nandita Parker, founder of Karma Capital Management.

• “India used to be at the top of the totem pole of emerging markets when it came to attractiveness. Even though today it seems like distant memory, I think there’s a lot that can be done to regain that top spot,” Parker, who also founded Asset Managers Roundtable of India, told BloombergQuint in an interview.
• Parker had suggestions that could help the government regain the confidence.
• Besides concerns over taxation, regulation, overregulation, micromanagement and uncertainty flagged by others, Parker said one of the things that her firms keep hearing from companies and businesses is that the government needs to pay its bills.

Here’s what Parker suggested as a measure for boosting foreign portfolio investments.

7. Shriram Capital Halts Three-Way Merger

Shriram Capital Ltd. has held off a plan to merge with its shadow lending arms after the Reserve Bank of India requested the group to cut its stake in its insurance business, according to people familiar with the matter.

• The unlisted Shriram Capital, which counts billionaire Ajay Piramal and private equity firm TPG Capital as investors, was planning to combine with its publicly traded units Shriram Transport Finance Co. and Shriram City Union Finance Ltd.
• The proposal would have effectively turned the merged entity into a shadow lender along with a 77 percent stake in life and general ventures.
• The central bank was concerned because insurance business isn’t typically the remit of a non-bank financier, said the people, who asked not to be identified as the discussions were private.

RBI has recommended NBFCs including Shriram to lower their holdings in insurers to 50 percent or below, the people said.

8. Budget 2020 — Improving The Tax Environment

Often, tax rate cuts are regarded as tax reforms. True tax reforms also need to encompass several other issues, write Dinesh Kanabar and Saurabh Shah, and point to...

• Dispute resolution through settlement mechanisms.
• Rationalisation of tax rates.
• Consistency in tax administration.
• Improving accountability.

Here’s how they suggest the four changes be made.

9. Supreme Court Refers Anti-CAA Pleas To Larger Bench

India’s top court has deferred a hearing on cases challenging the constitutional validity of a new law that introduced religion-based criteria for citizenship, sparking a month of often violent protests across the country.

• A three-judge panel headed by Chief Justice of India SA Bobde on Wednesday said a larger constitution bench would consider requests to stop Prime Minister Narendra Modi’s government from implementing the Citizenship Amendment Act.
• The case will be heard again in five weeks, the court said without giving a date.
• India’s Attorney General KK Venugopal told the court the government was opposed to a stay of the act or postponing the process of preparing National Population Register.

At stake is the secular fabric of the Indian constitution and democracy, according to critics of the new law.

10. India Falls In Democracy Rankings

India, Singapore and Hong Kong have all dropped in a new ranking of democracies around the world, with violent protests and threats to civil liberties challenging freedoms across Asia.

• The Economist Intelligence Unit’s 2019 Democracy Index, which provides an annual comparative analysis of political systems across 165 countries and two territories, said the past year was the bleakest for democracies since the research firm began compiling the list in 2006.
• India, the world’s largest democracy, dropped 10 places to 51 as a result of declining civil liberties, the group said.
• The administration of Prime Minister Narendra Modi has been criticized by rights groups and western governments after shutting off the internet and mobile phone networks and detaining opposition politicians in Kashmir.

India’s score was its worst since EIU’s records began and has fallen gradually since Modi was elected in 2014.