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Thursday, January 23, 2020

economic news of india - world economic news - economics news for students - indian economy news

economic news of india - world economic news - economics news for students - indian economy news


KM Birla's worst fear about Vodafone Idea may be coming true

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KOLKATA: Any steps taken by the government towards a financial bailout of Vodafone Idea (VIL) ultimately won't be enough for the struggling telco to compete effectively against Reliance Jio Infocomm and Bharti Airtel, analysts said."The government will find it too expensive to provide a large enough fix needed to prop up VIL for anything other than the medium-term," Deutsche Bank said in a note seen by ET.The German investment bank said, "The Aditya Birla Group (one of VIL's co-promoters) may even consider getting Vodafone Idea to go into bankruptcy on the chance that it may be able to repurchase the rump of the business."It added that this was an "ambiguous area" with the government wanting to avoid promoters buying assets of their failed companies for fear of regulatory arbitrage, even though when it comes to self-declared bankruptcies, the rules are not entirely clear.Vodafone Idea faces over Rs 53,000 crore in AGR-related statutory dues, and its chairman Kumar Mangalam Birla has said the company will shut down without government or judicial relief.According to Deutsche Bank, Vodafone Idea needs more large price hikes, considerable government relief and its market share holding fairly firm to survive. "But we believe it will get two out of these three (requirements) at best, which won't be enough."Under the circumstances, analysts see telecom market leader Jio pushing for market share gains and aggressive customer additions in a sector rapidly evolving into a private duopoly over the next 9-12 months.CLSA estimates Jio's operating income doubling in two years to Rs 52,400 crore by when its mobile user base is also slated to swell to 500 million, propelled by a mix of tariff hikes and accelerated market share gains."Jio's Ebitda to double by FY22 to Rs 52,400 crore ($7.4 billion) and pegs the enterprise value of its mobile business at $66 billion," the brokerage said.Jio added 14.8 million customers in the fiscal third quarter, and its user base stood at 370 million at the end of December.Analysts expect Jio's 35% tariff hike last month to start driving revenue growth for the telco by the fiscal fourth quarter, and its average revenue per user (APRU) — a key performance metric — is estimated to jump over 31% to ?168 by FY22 from Rs 128 reported in the October-December period, FY20.CLSA estimates 60% of Jio's revenue growth to be led by the tariff hikes and the balance 40% by market share gains.Morgan Stanley said Jio, with its low 4G network utilisation and large spectrum footprint, can also potentially on board a large base of subscribers if the telecom industry consolidates into a two-player market.Deutsche Bank said Jio should also be able to increase its spectrum share afford-ably in the upcoming 5G auction, especially with at least one of its competitors (read: VIL) in financial peril".

Bad credit singes India's biggest debt buyer

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MUMBAI: Life Insurance Corp, India's biggest buyer of debt, has seen Rs 11,000 crore of bonds slide into defaults in the first half of FY20, with rating companies downgrading to junk the papers of DHFL, Reliance Capital, Reliance Home Finance, and Sintex Industries. LIC made provisions for its investments of Rs 6,500 crore in DHFL across life and pension funds, and these papers were downgraded to default in June. Its exposure of Rs 4,000 crore to Reliance Capital turned NPA for lenders in September 2019.LIC had in the past taken exposure to many companies facing insolvency proceedings. These included Alok Industries, ABG Shipyard, Amtek Auto, Mandhana Industries, Jaypee Infratech, Jyoti Structures, Rainbow Papers, and Orchid Pharma.The total debt book of LIC was Rs 4 lakh crore: With assets under management of Rs 30 lakh crore, LIC is the largest domestic institutional investor.Overall, Rs 22,553 crore worth of assets were downgraded during the September quarter, of which Rs 4,300 crore was downgraded to sub investment grade or junk by rating companies. These included investments in Reliance Capital from pension and life funds. 73569973 LIC's gross NPAs reduced to 6.15 per cent in FY19 from 6.23 per cent. It made higher provisions for bad loans, leading to a decline in its net NPAs – to 0.27 per cent from 1.82 per cent. NPA as on March 31, 2019 was Rs 24,777 crore. It has exposure of Rs 3,250 crore to Indiabulls Housing Finance, which was downgraded from AAA to AA+, exposure of Rs 1,500 crore to Piramal Capital and Housing, which was downgraded from AA+ to AA, and around Rs 6,000 crore in Yes Bank.LIC has raised provision toward doubtful assets by 25 per cent to Rs 25,000 crore for the last financial year after reviewing the quality and performance of investments in real estate, loans and other assets. Over the last few years, LIC has seen its exposures to stressed companies, such as ABG Shipyard, Amtek Auto and Jaypee Group, turn bad. These borrowers were among the first to be referred to the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code.

How AirAsia landed in a laundering air pocket

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NEW DELHI: The Enforcement Directorate (ED) has summoned afresh Tony Fernandes and other top executives of Malaysia-based AirAsia Bhd as well as R Venkataramanan, former director of AirAsia India, over allegations of money laundering. The agency has asked Venkataramanan to appear before it on February 10, said people aware of the matter.Venkataramanan was the Tata Sons nominee on the board of AirAsia India, a joint venture between the two entities. He stepped down as managing trustee of the Tata Trusts in March last year and later exited AirAsia India. Venkataramanan didn't respond to queries.AirAsia boss Fernandes has been summoned on February 5 while former deputy group CEO Tharumalingam Kanagalingam, also known as Bo Lingam, has been asked to appear on February 3, after both failed to do so on January 20, said people with direct knowledge of the matter.They couldn't be immediately reached for comment. The airline has previously denied any wrongdoing. 73569696 Directors InvolvedFernandes and other top managers of AirAsia are being investigated by the Central Bureau of Investigation on charges of criminal conspiracy under the Prevention of Corruption Act. CBI registered a first information report (FIR) in May 2018 after the ED filed the money laundering case.The CBI said in the FIR that the directors were involved in wrongdoing. "The shareholders and Indian partners at the joint venture, including the board members, were not only aware of these intentions but also consciously violated the then FIPB (Foreign Investment Promotion Board) norms," the FIR said.The role of some bureaucrats has also come under the CBI's scanner. "Source information" meetings with government servants were arranged by lobbyists hired by Fernandes and kickbacks running into crores of rupees were paid, according to the FIR. The CBI alleges that a conspiracy was hatched to get the so-called 5/20 rule amended during the second term (2009-14) of the Congressled United Progressive Alliance (UPA) government. At the time, Indian carriers could only fly overseas if they had been operating for five years and had 20 planes. The 5/20 rule was relaxed in June 2016, scrapping the five-year requirement.AirAsia applied to the FIPB in February 2013 and received formal approval in April 2013, despite irregularities in its application, the CBI has said. The FIPB ignored the violation of foreign direct investment (FDI) norms, as AirAsia India was indirectly controlled and operated by the Malaysia-based AirAsia. The rules stipulate that domestic carriers have to be controlled locally.The said arrangement (company structure) was formalised on April 17, 2013, indirectly making AirAsia India a "de-facto subsidiary rather than a joint venture," CBI said. The company denied the accusations in a 2018 press statement."AirAsia India Ltd (AAIL) refutes any wrongdoing and is cooperating with all regulators and agencies to present the correct facts," it said. In its FIR, the CBI has also named Rajender Dubey, director of Singapore-based HNR Trading Pvt Ltd; Sunil Kapur, chairman, Total Food Services, Mumbai; Deepak Talwar, principal and founder, DTA Consulting, New Delhi; and HNR Trading as alleged lobbyists who used their influence to try and get the 5/20 rule relaxed before the general elections of 2014.

Niti Aayog seeks Cabinet nod for battery push

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NEW DELHI: The Niti Aayog has sought Cabinet approval for a proposal to build up to 10 large factories that would get subsidies to produce lithium-ion batteries used in electric vehicles. Once it gets the nod, the Aayog will invite bids for setting up these gigafactories, with a total capacity of 50 Gigawatt hours (GWh), over 10 years, a senior government official told ET.The projects would cost as much as $5 billion (Rs 35,500 crore).The move is part of an effort to push use of EVs, for which high battery cost is a big hurdle. The batteries, currently being imported, account for more than half the cost of an EV and local manufacturing could help bring this down.The finance ministry has already okayed the Aayog's proposal to offer Rs 700 crore a year in subsidies to battery makers, starting 2022.73569432 Policy for GigafactoriesThe official told ET that the Aayog, which moved a Cabinet note on the proposal, had also put in place a policy framework for setting up gigafactories after extensive stakeholder consultation. This proposed policy framework would soon be taken to the Cabinet."Faster rollout of battery manufacturing in India is a prerequisite for successful electric vehicle mission," the official said.According to the official, the proposed battery policy is output-based rather than input-based, with subsidy linked to the capacity creation committed and the level of indigenisation. Thus, companies will be eligible for subsidy from the government if they achieve 60% indigenisation by 2025, when they are expected to attain full-scale production.As per the proposal, battery manufacturers will be allowed to avail of entire depreciation in one go. Besides, duty-free imports of lithium, iron and cobalt will be allowed to power the advanced cell chemistry in place of the traditional lead batteries.Any new technology that evolves over the next 10 years will also be eligible for subsidy.The government is eyeing a minimum factory size of 5 GWh, which means a maximum of 10 players would be allowed through a competitive bidding process to set up shop in India. Typically, a gigafactory with 10 GWh capacity requires an investment of $1 billion.

Ikea may entice with malls next to its big stores

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NEW DELHI: Ikea, the world's largest furniture retailer that opened its first India store in Hyderabad in 2018, may now foray into developing shopping malls along with flagship outlets, two people familiar with the development said.Ikea is exploring possibilities of building shopping malls and entertainment facilities next to some of its upcoming standalone stores, or developing multi-storey shopping centres with Ikea as an anchor store, depending on land availability, they said. The company will lease out mall space to other brands and retailers.Ikea's sister concern Ingka Centres (formerly Ikea Centres) owns 44 such 'retail parks' in Europe, China and Russia.73570329 "Ingka Centres is interested in developing similar retail parks here," one of the persons said. "This (India) is a market they want to explore as India has a huge potential for retail."India's $792-billion retail market is expected to grow 12-14% over the next three years to more than $1 trillion, according to Care Ratings.The other person said Ingka Centres would explore possibility of developing its first retail park in Gurgaon where the Swedish furniture and home products retailer purchased a 10-acre land for Rs 842 crore in 2018, in the single-largest property auction for the Haryana Urban Development Authority. Ikea has yet to start construction at the site. "Ikea's plan is to develop it into a retail destination with its store as anchor and other retailers and restaurants to give a composite retail experience," the person said.Ikea did not respond to questions regarding its possible foray into mall development in India.

NBCC eyes stress fund to finish 3 Amrapali projects

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NEW DELHI: State-run NBCC (India) is keen on getting the government's stress fund to complete three of the 16 projects of the Amrapali Group. The fund is being offered by the central government for stalled housing projects.The builder has identified three projects that are net worth positive and has written to the court receiver for funding. The cost for completion of these projects is about Rs 600 crore.About a year ago, the Supreme Court had asked NBCC to complete 16 projects of the Amrapali Group. It has completed work on two of those, which will be handover soon to the court receiver. It has issued tender for completion of work on seven stuck projects."A meeting was held with the court receiver on January 9, where possibility of getting stress fund for net worth positive project was discussed. We identified Platinum & Titanium, Heart Beat-1 and Heart Beat-2 as net worth positive and will call the tender of these projects," said an official aware of the development.NBCC has shared the details with the court receiver and has also said that Platinum and Titanium require urgent rectification work. It has also shared the funding pattern and cash flow.The projects that the Supreme Court has asked NBCC to take over at Noida and Greater Noida are expected to cost Rs 8,361 crore to complete.

SBI Cards in for a bumper IPO going by grey market swipes

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SBI Cards & Payments Services is trading at a Rs 200-250 premium in the grey market ahead of its proposed share sale in February, said three dealers involved in such trades. The company is likely to be valued at Rs 57,000-60,000 crore in the initial public offering."There is lot of demand for unlisted shares as the theme is driven by the Indian consumption story," said Abhenav Khettry, the managing director of financial services advisory firm Vyana Wealth. "Investors realise that it's a huge business opportunity considering that SBI Cards' play is in a niche segment."SBI Cards is billed as a proxy to high-margin credit card business. It is the only standalone company focused entirely on cards business — other issuers like HDFC Bank and ICICI Bank have their cards operations as part of the banking business. The exclusive focus on the unsecured cards business, however, increases the risk for SBI Cards from defaults by individuals.Typically, grey market trades happen just ahead of the launch of a share sale. The IPO is aimed at raising Rs 9,500 crore and traders expect the price band around Rs 600-700 apiece. Those who bet on the premium in the grey market expect the price to gain Rs 200-250 once the shares start trading in the secondary market. "SBI Cards would be a logical bet as there are no competitors per se. This in turn is driving the premium up," said a trader. There is high demand from wealthy individuals, local brokerages in these trades. 73570353 "There are some trades happening at a premium of Rs 230 and Rs 240, which are popular levels for SBI Cards," the person said.But dealers said the scrip was over-priced and was trading 12 times its price-to-book.SBI's plastic cards arm is estimated to have a base of 9.5 million, making it the second largest card issuer after HDFC Bank, as per an ET report in November. India's credit card spending grew at an annualised rate of 35.6 per cent in the last three years, while credit card outstanding rose 25.6 per cent, data from the RBI show.SBI Cards commands a relatively strong return on assets of 5.5 per cent, driven by better fees and low credit costs. The industry average for the cards business stands at 3.5 per cent. SBI Cards has not seen its return on equity (RoE) dip below 25 per cent in the past 6-7 years and has averaged around 30 per cent RoE during that time.As per a report published by brokerage Emkay Global, India's credit card market has more than doubled over the past four years in terms of number of cards to 53 million, but remains significantly underpenetrated at four cards per 100 people. The statistics in other developing or developed economies is 30.

'Even bailout attempt won’t help Voda Idea compete with peers'

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KOLKATA: Any steps taken by the government towards a financial bailout of Vodafone Idea (VIL) ultimately won't be enough for the struggling telco to compete effectively against Reliance Jio Infocomm and Bharti Airtel, analysts said."The government will find it too expensive to provide a large enough fix needed to prop up VIL for anything other than the medium-term," Deutsche Bank said in a note seen by ET.The German investment bank said, "The Aditya Birla Group (one of VIL's co-promoters) may even consider getting Vodafone Idea to go into bankruptcy on the chance that it may be able to repurchase the rump of the business."It added that this was an "ambiguous area" with the government wanting to avoid promoters buying assets of their failed companies for fear of regulatory arbitrage, even though when it comes to self-declared bankruptcies, the rules are not entirely clear.Vodafone Idea faces over Rs 53,000 crore in AGR-related statutory dues, and its chairman Kumar Mangalam Birla has said the company will shut down without government or judicial relief.According to Deutsche Bank, Vodafone Idea needs more large price hikes, considerable government relief and its market share holding fairly firm to survive. "But we believe it will get two out of these three (requirements) at best, which won't be enough."Under the circumstances, analysts see telecom market leader Jio pushing for market share gains and aggressive customer additions in a sector rapidly evolving into a private duopoly over the next 9-12 months.CLSA estimates Jio's operating income doubling in two years to Rs 52,400 crore by when its mobile user base is also slated to swell to 500 million, propelled by a mix of tariff hikes and accelerated market share gains."Jio's Ebitda to double by FY22 to Rs 52,400 crore ($7.4 billion) and pegs the enterprise value of its mobile business at $66 billion," the brokerage said.Jio added 14.8 million customers in the fiscal third quarter, and its user base stood at 370 million at the end of December.Analysts expect Jio's 35% tariff hike last month to start driving revenue growth for the telco by the fiscal fourth quarter, and its average revenue per user (APRU) — a key performance metric — is estimated to jump over 31% to ?168 by FY22 from Rs 128 reported in the October-December period, FY20.CLSA estimates 60% of Jio's revenue growth to be led by the tariff hikes and the balance 40% by market share gains.Morgan Stanley said Jio, with its low 4G network utilisation and large spectrum footprint, can also potentially on board a large base of subscribers if the telecom industry consolidates into a two-player market.Deutsche Bank said Jio should also be able to increase its spectrum share afford-ably in the upcoming 5G auction, especially with at least one of its competitors (read: VIL) in financial peril".

GoDaddy plans India data centre to tap local customers

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MUMBAI: US-headquartered internet domain registrar and web hosting company, GoDaddy may look to open data centres in India to be closer to its local customers. The company's data centers are currently located in Singapore. "We don't have a stated plan yet but we may look at opening an Indian data centre to be closer to customers in India. Some customers prefer local presence," said Nikhil Arora, managing director, GoDaddy India.The focus on a local data centre stems from the fact that roughly 50% of the company's new customers are coming from Tier 2 and Tier 3 cities. "We are focusing on becoming the trusted partners of influencers and professionals like web designers. A web designer has an average of 20 to 30 customers," Arora said. The company plans to make an aggressive push in these markets in the coming year too by tapping into influencers like web designers who are relied upon by small businesses and entrepreneurs. GoDaddy will manage their online branding and come out with India-specific web hosting packages The Indian business' profit has doubled over the last three years and it houses 1,000 employees locally. The company currently has over 40% market share in the .IN domain according to the National Internet Exchange of India and over a million customers in the country.In the past, cyber crime police in a few states in India have expressed concerns over delays in receiving information from large internet companies such as GoDaddy on individuals and companies involved in cyber crime. Speaking on the company's stand on data protection, Arora said, "Data protection, security and privacy are important issues for us, and we've always taken a serious approach to protective measures, which will continue to be at the core of our decision making today and in the future."

69% of routine work currently done by managers will be completely automated by 2024: Gartner

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Artificial intelligence (AI) and emerging technologies such as virtual personal assistants and chatbots will replace almost 69% of the manager's workload by 2024, according to research and advisory company Gartner."The role of manager will see a complete overhaul in the next four years," said Helen Poitevin, research vice-president at Gartner. "Currently, managers often need to spend time filling in forms, updating information and approving workflows. By using AI to automate these tasks, they can spend less time managing transactions and can invest more time on learning, performance management and goal setting."AI and emerging technologies will change the role of the manager and will allow employees to extend their degree of responsibility and influence, without taking on management tasks, according to a report entitled "Predicts 2020: AI and the Future of Work". Application leaders focused on innovation and AI are now accountable for improving worker experience, developing worker skills and building organizational competency in responsible use of AI."Application leaders will need to support a gradual transition to increased automation of management tasks as this functionality becomes increasingly available across more enterprise applications," said Poitevin.Nearly 75% of heads of recruiting reported that talent shortages will have a major effect on their organizations, according to Gartner estimates. Enterprises have been experiencing critical talent shortage for several years. Organizations need to consider people with disabilities, an untapped pool of critically skilled talent. Today, AI and other emerging technologies are making work more accessible for employees with disabilities.Gartner estimates that organizations actively employing people with disabilities have 89% higher retention rates, a 72% increase in employee productivity and a 29% increase in profitability.By 2023, the number of people with disabilities employed will triple, due to AI and emerging technologies reducing barriers to access."Some organizations are successfully using AI to make work accessible for those with special needs," said Poitevin. "Restaurants are piloting AI robotics technology that enables paralyzed employees to control robotic waiters remotely. With technologies like braille-readers and virtual reality, organizations are more open to opportunities to employ a diverse workforce."By 2022, organizations that do not employ people with disabilities will fall behind their competitors, said the estimates.