BQuick On Oct. 1: Top 10 Stories In Under 10 Minutes
Here is a roundup of the day’s top stories in brief.
1. Slowdown Hits GST Collection
The goods and services tax collection for August fell to its lowest in 19 months amid slowing consumption in the economy.
- GST paid for August—collected in September—stood at Rs 91,916 crore, according to a statement by the Ministry of Finance.
- That compares with Rs 98,202 crore in July and Rs 1.02 lakh crore collected in June.
- It’s about a 3 percent drop over the year-ago period.
- This comes after India’s gross domestic product grew 5 percent in April-June 2019, the slowest pace in six years.
Here is what experts are attributing this sharp fall in GST collections to.
2. Mahindra, Ford Join Hands
Mahindra & Mahindra Ltd. and Ford Motor Company Inc. have partnered to develop, market and distribute vehicles in India and other high-growth emerging markets around the world.
- Mahindra will own a 51 percent controlling stake in the joint venture and Ford will own the remaining 49 percent, the Indian automaker said in an exchange filing.
- The JV will be formed by Mahindra investing around $100 million, or Rs 650 crore, to acquire 51 percent stake in Ardour Automotive Pvt. Ltd., a wholly owned subsidiary of Ford, Managing Director Pawan Goenka said in a press conference in Mumbai.
- Ardour Automotive will in turn acquire the automotive business of Ford India Pvt. Ltd., another wholly owned subsidiary of Ford.
The joint venture will sell Ford vehicles in India, and Ford and Mahindra branded vehicles in other markets.
3. IL&FS Resolution: Uday Kotak Confident Of 50% Recovery
Uday Kotak, the government-appointed chairman of Infrastructure Leasing & Financial Services Group said that the infrastructure conglomerate is likely to recover at least 50 percent of the Rs 98,000 crore in debt by 2020.
- The group has received binding bids worth about Rs 12,850 crore for 10 of its road assets, Kotak said at a press briefing in Mumbai.
- Rs 9,500 crore worth of binding bids have been submitted to the committee of creditors, while Rs 5,100 crore has been successfully restructured, he added.
- The group has received Rs 600 crore worth of binding bids for assets in the education business, Rs 1,600 crore worth binding bids for its Chinese road asset and over Rs 30,000 crore of value has already been received or resolved.
- Vineet Nayyar, who is the vice chairman of the board, said that scam-hit Satyam Computers Ltd., which later got rebranded as Tech Mahindra Ltd., had better controls than IL&FS.
I worked for Satyam for about 10 years after Satyam went bust. Even there, there were far better controls than I have seen here (IL&FS). In fact, Satyam was in many ways a very very well managed company as compared to here.Vineet Nayyar, Vice Chairman, IL&FS
4. Sensex Pares Losses, U.S. Stocks Slip
Indian stocks fell as investors assessed heightened risks among the nation’s non-banking finance companies, which could lead to a fresh credit crunch.
- The S&P BSE Sensex index tumbled 740 points - the most in about a month, before paring losses to 362 points.
- The NSE Nifty 50 index closed 1 percent lower at 11,359 after news of alleged fraud at a cooperative bank and lending curbs on Lakshmi Vilas Bank Ltd. in the last few days reignited concerns over the health of India’s financial sector.
- The declines in markets are technical in nature rather than fundamental, according to Deven Choksey of KRChoksey Investment Managers.
- Banking shares were among the worst hit as the selloff in Yes Bank Ltd. deepened. The private lender fell over 25 percent today.
- IndusInd Bank Ltd. too hit a multi-year low after falling over 14 percent but then recovering to close 6.3 percent lower.
- RBL Bank Ltd. closed 8.7 percent lower as shares fell due to its exposure to Indiabulls Group. The bank clarified that the exposure is “very tiny”.
Follow the day’s trading action here.
U.S. stocks fell, while Treasuries rose after a key gauge of manufacturing posted the weakest reading since the end of the last recession.
- The S&P 500 declined for the third time in four sessions, erasing an earlier advance of more than 0.5 percent, after the Institute for Supply Management’s factory index slipped to the lowest since June 2009.
- The dollar trimmed its earlier advance against major peers.
- Gold turned higher along with the yen.
- West Texas Intermediate crude gained 0.4 percent to $54.29 a barrel.
Get your daily fix of global markets here.
5. Indiabulls Under The Scanner
India’s Ministry of Corporate Affairs has been investigating three Indiabulls Group companies since about a year and will submit its final report by the end of October, people familiar with the matter told Bloomberg News.
- Indiabulls Housing Finance Ltd., Indiabulls Ventures Ltd., Indiabulls Real Estate Ltd. are being probed for potential wrongdoing by the Registrar of Companies, which is part of the ministry, the people said, asking not to be identified as the details are private.
- Indiabulls has disclosed in court documents that the Ministry is inspecting its books, a representative for the company said.
- Separately, Indiabulls Housing Finance has also been seeking an early court hearing on allegations of fraud and misappropriation against Indiabulls and Lakshmi Vilas Bank, with which it has sought approval to merge.
Read more on Indiabulls’ probe here.
6. No Festive Revival Yet For Automakers
Auto sales remained grim during September ahead of the keenly watched festive season which may be key to revival of the sector's fortunes. Heavy discounting towards the end of the month failed to prop up vehicles sales.
- Maruti Suzuki India Ltd.’s total sales fell 24.4 percent year-on-year to 1.22 lakh units in September, but rose sequentially from 1.06 lakh units in August.
- Tata Motors Ltd. reported a 50 percent decline in its domestic sales to 32,376 units.
- Royal Enfield sales fell 17 percent to 59,500 units.
- Ashok Leyland Ltd.’s sales fell 55 percent to 8,780 units.
- Bajaj Auto Ltd.'s sales dropped 20 percent, year-on-year, marking a bigger slump than it had seen the previous month.
Follow the monthly auto sales performance here.
7. Corporate Debt Is Turning Sour Again
High debt leverages among Indian corporates coupled with an economic slowdown, governance and liquidity issues have led to a larger quantum of debt rating downgrades in the first half of this year compared to the past.
- Debt worth Rs 1.38 lakh crore was downgraded in the first half of the current financial year, according to rating agency Crisil’s semi-annual credit quality report.
- The quantum of debt downgraded jumped sharply compared to Rs 39,000 crore in the first half of FY19.
- It was also the highest value of downgrades recorded in any half year since FY16, when the Reserve Bank of India initiated an asset quality review of Indian lenders.
The most common reason for debt downgrades was...
8. Zomato Revenue Jumps Nearly Fourfold
Zomato’s revenue jumped nearly fourfold in the first half of the current financial year as it onboarded more restaurants and greater number of customers ordered food on its platform.
- The food ordering company said in a statement today its revenue in the April-September period rose to $205 million from $63 million over last year.
- The company, while not providing details of its losses, said its Ebitda loss fell by nearly 40 percent in the same period.
- The company said its monthly burn rate—that includes cash spent on offers and discounts—is down by nearly 60 percent in the first half of FY20.
- Zomato, which claims to be present in 500 Indian cities, said the number of orders on its platform rose by nearly 290 percent over last year to 214 million in first half of FY20, netting gross sales of $821 million.
It said the number of active restaurants on its platform rose nearly fourfold.
9. How To Manage A Downturn HUL Style
Ask India’s largest consumer goods company, Hindustan Unilever Ltd., how it fights a an economic slowdown and the response you’ll get is—WIMI, CCBT, C4G and maybe a few more such acronyms.
- For the uninitiated, they stand for Winning In Many Indias, Country Category Business Teams, Connected For Growth—essentially, they are all multi-year, organisation-wide, transformational programmes that are focused on localisation, category-centricity and delegated decision-making.
- So, how does HUL measure the success or benefits of such efforts in countering a downturn in demand/sales growth?
- Srinivas Phatak, the company’s executive director and chief financial officer, points to Central India.
Central India was the new branch that we created. That’s been our fastest-growing branch with this WIMI and CCBT focus for four years now. I don’t need any other metric when that’s my fastest-growing branch.Srinivas Pathak, ED and CFO, HUL
Here are the four steps of preparation that HUL follows to make sure downturns don’t hit them that hard.
10. Monsoon’s Late Surge Helps, But Floods Hurt Crop Prospects
How the 2019 monsoon went from severe deficiency to the highest since 1994. Former Agriculture Secretary Siraj Hussain details the impact this will have on crop production across the country.
- It was a worrisome situation and it was feared that Kharif production may be much lower than in 2018.
- Then, September received unusually heavy rains, touching 151 percent of the long-period average.
- But, prolonged rainfall will delay harvesting and procurement of paddy as well as other crops.
Here’s why the planning for Kharif 2020 must begin now.