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Tuesday, January 7, 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


Sensex takes a hit as Iran retaliates with missiles

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Ambani goes on his biggest cash hunt of 2020

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Mumbai: Reliance Industries (RIL) is planning to raise as much as $2 billion (Rs 14,370 crore) via overseas syndicated loans to fund routine capital expenditure in telecommunications and petroleum businesses. This would be among the largest fundraising efforts by an Indian company in fiscal 2020.RIL is in talks with at least a dozen banks including Barclays, Citigroup, JP Morgan, Morgan Stanley and MUFG and plans to launch the formal process to raise funds by mid-February, multiple people with knowledge of the matter told ET. The money could be raised in one or two tranches."Initial talks have started. This fundraising is for the routine capital expenditure and would ideally be completed before fiscal-end," said one of the persons. 73148139 RIL didn't respond till press time Tuesday to an email seeking comment. Banks could not be contacted immediately."The company is holding individual meetings with each investment banker to assess the situation, with more banks likely to join the syndication process," said another person.The offshore loan is expected to be of five-year tenure. It would be priced after adding a spread, or markup, over the London InterBank Offered Rate (LIBOR).De-leveraging balance sheetAlthough the initial price guidance is not yet fixed, the spread is likely to be more than 150 basis points, said a third person involved in the exercise.In June last year, the company raised $1.85 billion of long-term foreign loans also to fund capital expenditure.The fresh fundraising comes at a time when India's largest company by market capitalisation has started de-leveraging its balance sheet by announcing plans to sell stakes in key businesses. The company had announced that it is in talks with Saudi Aramco to sell a 20 per cent stake in its oil and petroleum business while Canadian asset manager Brookfield said it would invest $3.7 billion in its telecom tower business and another $2 billion in gas transportation.Reliance had total debt of Rs 1.5 lakh crore as on March 31, 2019. Chairman Mukesh Ambani assured shareholders in August 2019 that the company would be a zero net-debt firm in 18 months.Indian companies raised a record $30.25 billion via bonds and loans in 2019, tapping relatively cheap offshore credit, according to data compiled by Dealogic. Dollar bond issuances touched $20.88 billion in the past year. Companies also availed of foreign currency loans worth $8.36 billion during the year.

Startups to get their very own Niti Aayog

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NEW DELHI/BENGALURU: Some of the biggest names in India's startup and technology ecosystem will be part of a committee that the government is forming to advise on reforms to further boost the country's fast-growing digital economy and remove longstanding roadblocks.Ride-hailing firm Ola founder Bhavish Aggarwal, ed-tech platform Byju's founder Byju Raveendran, Infosys cofounders Nandan Nilekani and Kris Gopalakrishnan, and a number of global and home-grown venture capital investors, including Siddarth Pai, the founding partner of 3one4 Capital, are expected to be part of the Startup Advisory Council, people who were briefed on the developments told ET.The Council will also be represented by government officials and regulators, they said. "It was felt that there should be a structured way in which the government engages with startups at regular intervals. So, we're arranging the concerned people who deal with startups from the relevant ministries, people from the startup ecosystem — be it entrepreneurs, investors and thought leaders," a senior government official told ET on condition of anonymity.First Meeting Likely Before BudgetAggarwal, Raveendran, Gopalakrishnan and Nilekani did not respond to emails till press time. Pai declined to comment. The decision to create the council was discussed at the 2019 Global Venture Capital Summit, organised by the Department for Promotion of Industry and Internal Trade (DPIIT) and the Goa government last month, one of the people told ET.A number of closed-door meetings were held between industry representatives and policymakers at the second edition of the two-day summit, the sources said, where the industry veterans had listed out their requirements from the lawmakers.ET reported last month that India's private equity and venture capital industry had urged domestic pension funds to allocate 1% of their overall assets to alternative investment funds and proposed the creation of multiple startup-focused fund-of-funds backed by the government, to channel such investments. 73147996 The Indian Venture Capital Association (IVCA), the nodal body representing the sector which mooted the idea, is also seeking tax breaks as incentives to create such pools of domestic capital. The first meeting of the council is expected to take place before the upcoming Union Budget, where issues plaguing the startup sector are likely to be tabled.Key among these will be providing investors exemption from capital gains tax, to promote redeployment of capital into startups and taxing of employee stock ownership plans (Esops) only at the time of sale rather than when the shares are vested.The move to create a Startup Advisory Council is also in sync with the DPIIT's Startup India Vision 2024, which has proposed significant cuts in compliance time for startups and to ease regulatory requirements for entrepreneurs.The vision document also envisages several measures to boost startups, including setting up 500 incubators and accelerators, creating better facilities for debt financing and deploying the entire corpus of Rs 10,000 crore fund-of-funds.ET reported on December 27 that DPIIT was also in talks with the finance and corporate affairs ministries, the Sebi and the RBI over a plethora of regulatory changes covering startups."We are working on regulatory changes that would aim at easier incorporation of a company, easier compliances, reduction of tax compliance to less than one hour per month," DPIIT secretary Guruprasad Mohapatra had told ET at the time.

15,000 staff quit as Axis Bank revamps functions

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MUMBAI: Axis Bank is witnessing a wave of resignations with at least 15,000 people leaving in the past few months, as mid and branch-level executives struggle to cope with the new management's growth drive that's pushing the limits, three people familiar with the matter said.There were some exits at the senior level as well, but most of the resignations were at the branches which are the vital touch points with customers. So, this could hamper its ability to continue growing without hiccups, although the bank says it is also stepping up its pace of hiring. "With the complete overhaul of the way the bank functions, many are left wondering about their roles," said one of the executives, who did not want to be identified. "Many old-timers are feeling a bit of discomfort with the cultural change." Axis Bank admitted that it had seen record resignations in the past few months, but said it had already hired 28,000 people this fiscal year and would hire another 4,000 in the last quarter. The net new hiring for the bank this fiscal year is 12,800. It also has plans to hire 30,000 people in the next two years. The attrition rate at the bank this fiscal year is nearly 19%, compared with an average of about 15%. 73147663 The bank has 72,000 employees. It had an attrition of 11,500 people in the last fiscal year."The bank is expanding fast and this has been a year of large number of new hirings, substantially higher numbers compared to last year both in gross as well as on net basis," executive director Rajesh Dahiya said. "Our employees are our biggest asset and differentiators."Chief executive Amitabh Chaudhry is overhauling the functioning of Axis Bank after the Reserve Bank of India declined another term to his predecessor, Shikha Sharma. The former head of HDFC Life is cutting down on risk taking and has brought in a new bunch of his choice of people to deliver on his strategy.Some of his hires are Deepak Maheshwari, a former banker from HDFC Bank; Neeraj Gambhir from Nomura Securities; Ganesan Sankaran from Federal Bank and Pralay Mondal from Yes Bank, to drive retail business. Rajiv Anand, an executive director, was moved to corporate banking."We have a sharper focus with our GPS'22 (growth, profitability, sustainability) strategy and want to keep building the momentum," said Dahiya. "We believe we are on the right track."The changes led to many exits including the latest one by Jairam Sridharan as the chief financial officer. Before that, Shashikant Rathi, its head of bond trading, and JP Singh from the commercial banking division quit. Cyril Anand, who was the chief risk officer, took the employee retirement option.Under Chaudhry, the bank has seen its reporting structure change. Earlier, most of the business heads reported to executive directors. Now, almost all of them report independently to the CEO.The bank is also going big on automation and making use of artificial intelligence to drive growth, which is making many of the oldtimers uncomfortable. Among the new hiring, the slant is towards engineers rather than bankers.

Nordic countries are the new hotspot for Indian IT

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PUNE: Indian IT services companies are increasingly looking at Nordic countries, with most firms already having a sizeable presence in the region. Over the last few months, Tech Mahindra and Wipro said that they would set up centres in Finland, while HCL Technologies has been present there for a decade now. Infosys, in addition to working with companies in the region, got a foothold in the market through its acquisition of Fluido in 2018.The Nordic countries — Finland, Sweden, Norway, Denmark and Iceland — are largely English speaking, which removes the language barrier that exists in some other countries within continental Europe.Even as they are bound by EU guidelines, these countries are making it easier for foreign nationals to move there, given the shortage of highskilled local talent.73147714 "The Nordic region of Europe is definitely one of the most progressive and innovative regions, with many leading technology companies — including chipmakers, semiconductor, equipment manufacturers and service providers — having their research and development base in the country," said Jagdish Mitra, chief strategy officer, Tech Mahindra. "With such a futuristic communication ecosystem and a high-quality workforce that understands technology, it makes good sense to step-up our presence in the region."L&T Infotech (LTI), a group firm of engineering conglomerate Larsen & Toubro which was set up by two Danish engineers in 1938, looked at this region first when it decided to expand into Europe. "Nordics' IT & BPO services market size is estimated to be over $25 billion, and has a high outsourcing maturity in the region… Our investment and expansion are further driven by the fact that Nordic countries have been at the forefront of innovation," said Sudhir Chaturvedi, president-sales, LTI, which also provides services to the region from its nearshore centre in Poland. LTI recently won a multimillion dollar contract with Hoist Finance AB of Sweden. In recent years, IT sector growth has been led by digital trends like Cloud, AI and automation, and India has emerged as an important source of talent for the region. "Companies have access to the global market beyond just the Nordics. With 5G and 6G connectivity, there's a lot of R&D being done here across industries like telecom and healthcare," said Jukka Holappa, country manager India, Business Finland.Interest in the region started with telecom, but over the last few years it has extended to almost all other industry segments."The Scandinavian strategy of Indian service providers is two-fold. First, increase share of wallet in large accounts where they have footprint but compete with other local and global firms. Second, target new accounts, typically medium size businesses," said Pareekh Jain, founder, Pareekh Jain Consulting.L&T Technology Services (LTTS), for instance, started out working with a few marquee customers in the region, and then scaled it up to multiple accounts. Today, it is the largest pure-play engineering services company in the Nordics belt. Alongside, it has also moved up the value chain, partnering with companies on their digital transformation initiatives.

Fraport makes fresh attempt to exit Delhi Airport consortium

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MUMBAI: German airport developer Fraport AG is making a fresh attempt to exit a GMR Infra-led consortium that runs the Delhi Airport, by selling its 10% stake in it, said two people aware of the talks.The latest round of talks has been on for the last four months. GMR has placed an offer on the table, but Fraport is yet to accept it, said one of the people without elaborating.Fraport has also approached the state-run National Investment and Infrastructure Fund (NIIF) to buy its stake. NIIF, along with Gulf sovereign wealth fund Abu Dhabi Investment Authority (ADIA) and Canada's PSP Investments last year signed a pact with GMR's rival GVK Group to invest Rs 7,614 crore in the latter's airport business.GMR owns 64% in Delhi International Airport Ltd (DIAL), while the Airports Authority of India (AAI) owns 26%. Fraport owns the remaining stake in the consortium.Spokespersons at GMR and Fraport said they wouldn't comment "on speculation". NIIF didn't respond to queries before the story went to press.This is the latest of Fraport's attempts in the last eight years to exit the consortium. Senior executives in the company had publicly announced its intentions of an exit in 2012.There had also been advanced talks for a stake sale in 2016. The attempts to exit were unsuccessful, in some instances over differences in valuation and at others over GMR's own funding problems. Fraport picked up a stake in DIAL in 2006 as part of the consortium that won the award to develop a greenfield airport in Delhi.GMR has the right of first refusal on any exit that Fraport would plan. This means it will need a go ahead for any stake sale."GMR may choose to match a price it gets from any other investor such as NIIF or let Fraport go ahead with its deal," said one of the people cited above.Fraport is the owner and operator of the Frankfurt airport, Germany's biggest. Last year, it sold its 30% stake in the Hannover airport, Germany for 109 million euros.In its AGM in May, company executives gave a guidance of consolidated earnings ranging between ¤420 million to 460 million euros in 2019. It had posted consolidated earnings of ¤506 million in 2018, up 40.6% on the previous year.Fraport's move comes at a time when GMR is awaiting a Rs 8,500-crore investment from the Tata Group, Singaporean sovereign wealth fund GIC and Hong Kong's SSG Capital Management in its airports business.The move hit a hurdle last year on a rule that mandated that an entity owning a stake in an Indian airline can't own more than 10% in a local airport. Tata Sons owns close to half of two Indian carriers Vistara and AirAsia and the earlier proposed 20% stake in GMR's airports business would give it a 12.8% stake in DIAL. Sources have said the Tatas have agreed to taper the shareholding to 15%.

Green shoots are there, but short term a hurdle: Rashesh Shah

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NBFCs cannot offer competition to banks because they have a very different model, said Rashesh Shah, chairman, Edelweiss Group. If NBFCs and banks come together in a collaborative model then there will be a powerful outcome, he said in an interview with Saikat Das. Edited excerpts:Will this year be different for NBFCs from the previous year?Consolidation will mark this calendar year. Last year you learned a lot. Now, it is time to utilise it.But I think the old model of investing money is not going to be the game going forward. You have to be very efficient on capital, focused on partnering with banks. NBFCs cannot be competition to banks because they have a very different model. If NBFCs and banks come together in a collaborative model then there will be a powerful outcome.What is the possibility of economic revival this year?Overall economic outlook is optimistic. If you look at the GST collection of the last couple of months, it has shown a clear improvement.Most of the high frequency data that we are looking at is also showing improvement. Interest rate cuts and the liquidity surplus will likely aid economic recovery this year. Investor mood, too, has also improved.The government's step of corporate tax cut was a big step. The government has also taken a lot of actions in the last three months to move things along. So, the green shoots are there, but the short term is bit of a hurdle. How will rising crude impact our economy?If global crude oil goes above $80 per barrel, then it starts fuelling inflation in India. While we are waiting for another round of rate cuts by the RBI, if the oil prices go up , then the rate cuts may get delayed.RBI did not cut rates because they were worried about the food prices. Oil has a little bit of uptake on inflation, and it will be a worry if the oil price goes up above $80 per barrel.But, it is unlikely to happen.Which is the proxy for economic revival?Two-wheelers and FMCG will take the first leap in the rural area. Urban growth will be [seen in] auto (fourwheelers) and homes. They will be a proxy for growth. Home sales are doing well. Rural demand will be back in a year's time.India will grow well when four segments including two-wheeler, four-wheeler, home sales and FMCG start doing well again. Once this happens, you can say that India is back on track and the consumption engine is moving forward.Are home loan rates attractive enough?We are hoping that the RBI continues with another couple of rate cuts. I think, home loan rates are now at 7.7% (with reference to the SBI mortgage rate). This is the lowest since the last 15 years, except in 2015, when it had touched 7.5%. Lower rates are going to trigger higher home sales this year. If you see, home sales were higher in 2019 compared to a year earlier. The demand-supply in real estate is also stabilising because the sales have been higher than the launches.When will growth come back?I think the industry will come back to growth after FY21. The next financial year will be another year of consolidation and strengthening. Most businesses are not in a hurry to grow. Most smart players are using this period as a time to strengthen, stabilise, restructure, focus on training and invest significantly in technology.I think this is a great way to invest in technology because even the old credit vs the new credit way of approaching credit has all these parameters like partnering with banks. Technology plays a big role in partnering with banks. It matters when you tap new credit opportunities in smaller towns and cities.

Sun, Aurobindo and Dr Reddy’s are CLSA’s top picks in pharma

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Sun Pharmaceutical Industries, Aurobindo Pharma and Dr Reddy's Laboratories are the best ideas for CLSA in the pharmaceutical space in 2020, with the expectation of sustained improvement in earnings trajectory being its basis for being bullish on the sector. The foreign brokerage believes that the sustained growth in earnings in the sector will be led by higher share of the US generics market volume, traction in differentiated products and resilient profitability in India. Moreover, the brokerage believes that the valuations of Indian pharma companies are compelling in the backdrop of an improving earnings outlook. The Nifty Pharma index is down 9% in the last one year period, while the benchmark Nifty has gained 11.6% in the same period. "With sector PE valuations compelling at -1sd (standard deviation), midteens year-on-year earnings growth expectations, positive newsflow on US FDA (US Food and Drug Administration) plant resolution, and success in differentiated products could drive re-rating," said CLSA. Here's what CLSA is saying about its best ideas for 2020 in the pharma space:AUROBINDO PHARMACMP in : Rs 452.45Last one year change : -37.47%CLSA Rating/Target Price : Buy/Rs 600The brokerage likes Aurobindo Pharma for its strong US generics presence and attractive risk to reward, given a price to earnings valuation of 9.3 times FY21 EPS. The brokerage has raised target price on the stock to Rs 600 from Rs 580. The brokerage has estimated a 7% compounded growth in earnings for Aurobindo over FY19-FY22 period (excluding the Sandoz acquisition) and expects margin improvement to be a key area to watch this year. "Aurobindo's strength in manufacturing and backward integration enables it to withstand US competitive pressure. It is targeting niche launches which should enable faster US growth with a stronger margin profile," said CLSA.SUN PHARMACEUTICAL INDUSTRIESCMP in : Rs 446.35Last one year change : 3.8%CLSA Rating/Target Price : Buy/Rs 570The brokerage has rated Sun Pharma as a buy due to its improving US fundamentals, led by monetisation of its speciality pipeline and No. 1 India rank. CLSA has raised target price on the stock to Rs 570 from Rs 540 based on 20 times December 2021 earnings per share (estimated). "The balance sheet remains strong with a net cash position and strong FCF (free cash flow) generation, allowing the company to conclude more deals in the specialty space," said CLSA. The brokerage expects Sun's revenue in the US to show a 6% compounded growth to $1.9 billion over FY19-FY22. "Many steps have been taken to address governance issues. A Sebi inquiry on a whistleblower complaint is ongoing and the outcome will be monitored closely," said CLSA.DR REDDY'S LABORATORIESCMP in : Rs 2884.05Last one year change : 12.8%CLSA Rating/Target Price : Buy/Rs 3450Dr Reddy's business is attractive, considering an increasing focus on India, China and other emerging markets and lower dependence on marquee US products that had been a hindrance due to higher earnings volatility, said CLSA. "We expect the US to show 7% revenue CAGR to $1.1 billionn more than FY19-22, which will depend on approval for Nuvaring in 2HCY20 (July-December) and Copaxone in 1HCY21 (Jan-June, 2021) and a basket of smaller launches (30 planned for FY20). gRevlimid (generic Revlimid) could be an interesting opportunity for Dr Reddy's depending on the litigation outcome," said CLSA. CLSA said classification of injectable facility at Duvvada and reinspection of the Srikakulam API facility by the FDA are key compliance-related triggers. CLSA has raised target price on Dr Reddy's to Rs 3,450 from Rs 3,330.

Nordic countries are the new hotspot for Indian IT

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PUNE: Indian IT services companies are increasingly looking at Nordic countries, with most firms already having a sizeable presence in the region. Over the last few months, Tech Mahindra and Wipro said that they would set up centres in Finland, while HCL Technologies has been present there for a decade now. Infosys, in addition to working with companies in the region, got a foothold in the market through its acquisition of Fluido in 2018.The Nordic countries — Finland, Sweden, Norway, Denmark and Iceland — are largely English speaking, which removes the language barrier that exists in some other countries within continental Europe.Even as they are bound by EU guidelines, these countries are making it easier for foreign nationals to move there, given the shortage of highskilled local talent.73147714 "The Nordic region of Europe is definitely one of the most progressive and innovative regions, with many leading technology companies — including chipmakers, semiconductor, equipment manufacturers and service providers — having their research and development base in the country," said Jagdish Mitra, chief strategy officer, Tech Mahindra. "With such a futuristic communication ecosystem and a high-quality workforce that understands technology, it makes good sense to step-up our presence in the region."L&T Infotech (LTI), a group firm of engineering conglomerate Larsen & Toubro which was set up by two Danish engineers in 1938, looked at this region first when it decided to expand into Europe. "Nordics' IT & BPO services market size is estimated to be over $25 billion, and has a high outsourcing maturity in the region… Our investment and expansion are further driven by the fact that Nordic countries have been at the forefront of innovation," said Sudhir Chaturvedi, president-sales, LTI, which also provides services to the region from its nearshore centre in Poland. LTI recently won a multimillion dollar contract with Hoist Finance AB of Sweden. In recent years, IT sector growth has been led by digital trends like Cloud, AI and automation, and India has emerged as an important source of talent for the region. "Companies have access to the global market beyond just the Nordics. With 5G and 6G connectivity, there's a lot of R&D being done here across industries like telecom and healthcare," said Jukka Holappa, country manager India, Business Finland.Interest in the region started with telecom, but over the last few years it has extended to almost all other industry segments."The Scandinavian strategy of Indian service providers is two-fold. First, increase share of wallet in large accounts where they have footprint but compete with other local and global firms. Second, target new accounts, typically medium size businesses," said Pareekh Jain, founder, Pareekh Jain Consulting.L&T Technology Services (LTTS), for instance, started out working with a few marquee customers in the region, and then scaled it up to multiple accounts. Today, it is the largest pure-play engineering services company in the Nordics belt. Alongside, it has also moved up the value chain, partnering with companies on their digital transformation initiatives.