BQuick On Sept. 24: Top News Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. Rs 20,000 Crore Merger Plan
India is planning to sell its stake in SJVN Ltd. and Power Finance Corp. to other government-controlled companies in deals that may fetch the federal government about Rs 20,000 crore, helping it to rein in the fiscal deficit amid growing risks of a slippage, people with knowledge of the matter said.
- The government plans to sell its 63.8 percent stake in hydropower producer SJVN to NTPC Ltd., the nation’s largest thermal power producer, to garner about Rs 8,000 crore.
- The other deal being considered will see Rural Electrification Corp. Ltd. buying the federal government’s 65.6 percent ownership in Power Finance Corp. Ltd.
- While helping the government raise resources to meet its budget deficit target, the discussions reflect Prime Minister Narendra Modi’s aim to create larger energy companies through consolidation.
Is this disinvestment by proxy?
2. IndiGo’s Struggle
Even as it expands aggressively, India’s largest airline is struggling to utilise capacity to the fullest.
- The passenger load factor of InterGlobe Aviation Ltd., IndiGo’s parent, declined to an 18-month low in August as it added more seats and introduced air routes.
- A measure of capacity utilisation, the passenger load factor of the airline declined by 590 basis points to 82.8 percent compared with the last month, according to data released by Directorate General of Civil Aviation.
- Passenger growth in the world’s fastest-growing aviation market slowed to 17 percent—the lowest in three months—in a seasonally weak period.
Here’s how IndiGo and its peers fared in August.
3. Indian Markets Extend Decline; U.S. Stocks Fall
Indian equity benchmarks fell for the fifth day in a row dragged by financials and automakers.
- The S&P BSE Sensex Index plunged 1.5 percent or 536 points to 36,305.
- The NSE Nifty 50 Index slumped 1.6 percent or 176 points to 10,967.
- In the last five trading sessions, Sensex and Nifty have tanked over 4.5 percent dragged by financials as there are rising concerns over liquidity after IL&FS defaulted on interest payment of bonds.
- S&P BSE Realty Index was the top loser, while the S&P BSE IT Index was the top gainer.
Follow the day's trading action here.
U.S. stocks fell amid escalating trade tensions with China, while oil climbed and the euro rallied.
- All three major U.S. stock indexes slipped as technology shares continued their underperformance this month. Comcast Corp. plunged after agreeing to buy Sky Plc.
- The euro jumped and the region’s sovereign bonds dropped after European Central Bank President Mario Draghi predicted a pickup in underlying inflation.
- West Texas Intermediate crude climbed 1.8 percent to $72.06 a barrel, approaching the highest in almost four years.
Get your fix of global markets update here.
4. SEBI’s Selloff Scrutiny
India’s market regulator is examining Friday’s sharp moves in shares of Dewan Housing Finance Corp., Yes Bank Ltd. and other lenders for possible trading irregularities, people with knowledge of the matter said.
- The Securities and Exchange Board of India is looking into whether brokers and investors colluded during the sharp selloff and subsequent recovery in financial shares.
- The regulator is examining data from India’s two stock exchanges on which parties were buying and selling financial shares, and on the sequencing of the trades.
SEBI may launch a full investigation if it uncovers evidence of wrongdoing.
5. Hip, Hip, Hooray?
SEBI’s April 10 circular. Backlash. Hope. Relief.
Foreign portfolio investors, non-resident Indians, and overseas citizens of India have lived this reality for the last six months.
- SEBI’s April 10 circular resulted in a backlash from these stakeholders, the promise of revisiting its diktat on know-your-customer requirements and eligibility conditions for FPIs gave them hope, and now, the market regulator’s decision to ease the rules has brought some relief.
- The most critical aspect of the relief is the de-linking of KYC requirements and eligibility conditions, experts told BloombergQuint.
- The beneficial ownership criteria will now apply only for KYC purposes and won’t impact the eligibility of FPIs to invest in India.
Yet, this could become an administrative nightmare.
6. Why It’s No Longer ‘Profit-First’ At Bajaj Auto
Bajaj Auto Ltd. prized its ability to not compromise profits for gaining market share. Nearly eight years ago, Managing Director Rajiv Bajaj said the success of any strategy depends on the profit it generates.
- Once India’s largest two-wheeler maker, Bajaj Auto has been relegated to a distant third spot.
- In the first quarter of FY19, the automaker cut prices of its CT 100 that competes with Hero MotoCorp Ltd.’s CD Dawn. The company also introduced a 110-cc variant of its Discover motorcycle in January as it aggressively looks to boost sales of its economy portfolio. But the sales numbers are not enough to imply that the change in its strategy has started paying off.
- Momentum from any new product or price-cut led initiative has not sustained beyond a few months for Bajaj Auto, according to Chirag Jain, auto analyst at SBI Capital Markets Ltd.
Here’s more on Bajaj Auto’s missteps.
7. India Now Has 100 Million Active Retail Borrowers
The number of active retail lending accounts crossed the 100 million mark for the first time in the April-June 2018 quarter, shows data released by credit bureau TransUnion CIBIL on Monday.
- The increase in retail borrowers comes against the backdrop of a push from banks and non-bank lenders to grow their retail lending books at a time when corporate lending has been slow.
- These entities have not just tried to increase the amount of lending to existing customers but have also continued to grow their pool of borrowers.
- This has reflected in increase in new accounts. The rate of origination of new accounts had risen by 30 percent year-on-year at the end of the first quarter in 2018, showed the report.
Find out more on how Indians are changing their debt-averse attitude.
8. More Time For Tax Return Filings!
The government today extended the deadline for filing income tax returns and the audit report for financial year 2017-18 to Oct. 15.
- The Central Board of Direct Taxes had received representations from stakeholders seeking extension of the last date for filing of returns by taxpayers whose accounts have to be audited.
- However, there shall be no extension of the due date for the purpose of section 234A (Explanation 1) of the I-T Act, 1961 pertaining to interest for defaults in furnishing return, and the assessee shall remain liable for payment of interest as per provisions of section 234A of the act, it added.
Here's more on the extension.
9. India Needs To Stop The IL&FS Rot From Spreading
A tad late, but the message is finally reaching India’s regulators: Infrastructure lender IL&FS is not a business that can be allowed to fail without consequences. An unusual Sunday evening joint statement by the securities regulator and the central bank suggests a much-needed awareness of systemic risks, writes Andy Mukherjee.
- The Indian authorities shouldn’t have waited for a self-fulfilling liquidity crisis to raise its head.
- It was obvious that investors would want to dump mutual funds they believe will now have to write down their IL&FS exposure. Funds, in turn, would have to sell other paper to meet redemption requests.
- As secondary market yields surged for nonbank lenders’ debt, their ability to roll over short-term obligations will be tested, and their equity prices will fall.
- Credit-rating companies, bruised by their inability to see IL&FS defaults coming, won’t want more investor criticism for being late. Hasty downgrades will push up borrowing costs even more.
Here's why IL&FS threatens to be a mini-Lehman moment.
10. Lessons From The RBI-12 Cases
In popular discourse, the measure that has been getting the most attention is the recovery rate. However, it is critical to also understand how these cases have adhered to fundamental Insolvency and Bankruptcy Code premises of a time-bound, and outcome neutral process, write Varun Marwah and Anjali Sharma.
- Is delay past the prescribed 180/270-day timeline the norm?
- How many cases did the contentious Section 29A impact?
- Is there a bias in favor of resolution, against liquidation in the NCLT process?
Here’s why the delays are happening.
11. The Two Sides Of India’s Current Account Deficit Debate
India’s current account deficit is expected to widen to near the perceived red-line of 3 percent of GDP this year. A current account deficit of about 2 percent or lower is seen as comfortable. Anything above that prompts nervousness in the currency markets. That’s exactly what has happened this year with the rupee plunging more than 11 percent and prompting calls for a policy response. So far, that response has come in two forms.
- One, an attempt to draw in more capital to fund the current account and hence improve the balance of payments.
- Two, a discussion around hiking import duties to narrow the trade deficit, which is a part but not the whole of the current account deficit.
- Are these the right policy responses?
Read what Jahanagir Aziz and Saugata Bhattacharya have to say.
12. Ride Hailing Firm Careem Enters India
Careem Networks FZ acquired Indian bus shuttle service app Commut as the Dubai-based ride-hailing firm expands into mass transport.
- Careem acquired the three-year-old Hyderabad-based firm and plans to roll out its bus services across 100 cities, it said in an emailed statement, without providing the deal value.
- Careem will take on Commut’s talent and technology
- Commut’s customers and drivers will become part of local shuttle service provider Shuttl.
All this even as Uber is mulling buying Careem!