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Friday, February 14, 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


AGR ruling could kill Vodafone-Idea, spark a bad loan crisis rerun

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MUMBAI: Bankers fear a possible collapse of Vodafone Idea will increase bad loans and spark a rerun of the crisis that gripped the banking sector a few years ago.Bank stocks slumped on Friday after the Supreme Court refused to give relief to telecom companies on adjusted gross revenues (AGR) dues, putting at risk the nearly .Rs 30,000 crore loans to Vodafone Idea, which has repeatedly been saying that its survival will be under threat if the government does not give any relief on payment of past dues. 74144024 Vodafone Idea needs to pay.Rs 53,000 crore to the telecom department (DoT) on AGR dues and there are fears that the company may not be able to pay the full amount. On Friday, Vodafone Idea shares plunged 23% to Rs 3.44.Bankers say the Vodafone Idea account is a standard one as of now and the telco is paying its dues, but lenders, including State Bank of India, have a large exposure through loans and guarantees. These guarantees could come into play if the government invokes them.Brokerage house Macquarie estimates Vodafone Idea debt at Rs 1.26 lakh crore, of which Rs 90,700 crore is in the form of deferred payment liabilities and guarantees towards spectrum charges payable over 16 years.Banks which are struggling with non-performing assets (NPAs) of Reliance Communications and Aircel — two other telcos which are at different stages of resolution at bankruptcy courts — may now have to think of alternatives if Vodafone Idea is unable to pay."I think now they (telcos) have to talk to the government and if it is an order from the honourable Supreme Court, then they will have to comply. We have to talk to them to understand what their plans are and they would have plans, because this is something they might have expected also. So after this order, we will ask them what are their plans to comply with the order, and whatever is the situation we are capable of handling it," SBI chairman Rajnish Kumar told reporters on the sidelines of an event in Bengaluru.SBI's funded exposure to telecom companies is at Rs 29,000 crore, but its largest exposure is to Vodafone Idea with Rs 11,200 crore. Private sector banks led by IndusInd Bank (Rs 5,000 crore) and ICICI Bank (Rs 1,700 crore) are the other major lenders to the beleaguered firm. Among public sector banks, Punjab National Bank has — at Rs 1,000 crore — the second highest exposure to the telco. 74144028 SBI has only provided for Rs 9,000 crore of NPAs from the telecom sector and not provided for loans which are being repaid on time such as the Vodafone Idea account, Kumar said.IDFC First Bank made a 50% provision for its RRs 1,622 crore exposure to this account. "The bank has a legacy exposure of Rs 3,244 crore to this identified telecom company, of which Rs 2,000 crore is in the form of non-convertible debentures and Rs 1,244 crore is in the form of non-funded exposure (bank guarantees) for spectrum," the bank said in its third quarter financial statement on February 4."There has been no payment default so far from this telecom company. However, considering the financial stress in the telecom companies related to payments due to the government, the bank has taken provisioning of 50% of total exposure towards this identified telecom company which is in financial stress," it added.ICICI Bank has also added Vodafone Idea to the below-investment grade, or BB, book but without any provisions. Telecom makes about 1.8% of ICICI Bank's loans."This is now an issue. It could become a bigger problem going forward especially if the company goes belly up and is dragged to the NCLT. The bank guarantees if invoked will lead to a huge provision impact for banks," a senior public sector bank executive said. Bankers are hoping that the Supreme Court allows companies to pay just the principal amount immediately."The principal amount will be between Rs 7,000 crore and Rs 10,000 crore. It is the compounded interest of the 14 years which is the problem. Hopefully telecom companies will get more time to pay the whole amount if they pay the principal, that is the only hope," said a senior private sector bank executive.

UK Court pulls up Anil Ambani for RCom breach

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NEW DELHI: A court in London has ruled that if there is irregularity in the conduct of Anil Ambani's companies, it would be a reflection on the chairman as he is fully involved in operations.The court took note of allegations of irregularities and the departure of PwC as auditor of Reliance Capital. PwC had resigned as auditor last June saying it did not get satisfactory answers to its queries, but the company had said nothing was wrong."Mr Howe QC suggested that even if there were some truth in these matters, that is all on the part of the companies; it does not necessarily have any reflection on Mr Ambani. That is hopeless in my judgment," according to the order by Justice Waksman in the case between Industrial and Commercial Bank of China, Mumbai Branch and Anil Dhirubhai Ambani. The recent order has now been uploaded.It said Ambani was actively involved in running companies."It is perfectly clear through all the evidence we have seen that Mr Ambani is not some form of titular chairman who really has nothing to do with these companies. He is extensively and actively involved in them. To suggest that if there were any serious deficiencies in the companies' corporate governance he was not aware of it is wholly unrealistic in my view."Ambani's lawyers had last week told the UK court that business tycoon was not in a position to pay dues worth $680 million to top Chinese banks as his net worth is zero.The Anil Ambani group did not respond to ET's queries.The court did not believe Ambani's assertion that his family would not help him. "I do not accept that the true position now is that all the other members of the family have firmly and irrevocably pulled the shutters down so that no funding would be available from them in the event that monies had to be paid into court," the judge said.Ambani had told the court about the woes of the telecom industry but the judge said this was not the issue before the court."What is an issue is what he says flows from that.First of all, that, as a result of that, he now has a negative net worth and second, that as a result he does not hold any meaningful assets which can be liquidated …," the order said. Ambani said even the money paid to Ericsson was not a gift."He said that, in fact, the payment was made by Reliance Realty Limited on behalf of RCom, and that company had raised the funds by leasing a part of the property that it held to an associate company, Reliance Industries Limited," the order said.The court mentioned a public statement saying: "My sincere and heartfelt thanks to my respected elder brother, Mukesh, and Nita, for standing by me during these trying times and demonstrating the importance of staying true to our strong family values by extending this timely support. I and my family are grateful we have moved beyond the past and are deeply touched with this gesture."The order noted Anil Ambani's response that the statement only captured the gratitude he expressed to his elder brother and his wife."It is not apparent that the press release which I have already quoted is limited in such a way," the order said. Anil Ambani had told the court about his personal income."… in 2018-2019, his income was the equivalent of £12.3 million. A very modest proportion, about £600,000, came from a company called Reliance Infrastructure Limited, for what have been referred to as professional fees; but the rest of it, largely, came from the sale of shares which he held in his brother Mukesh's company, Reliance Industries Limited, which were sold on 6th February 2019." Ambani also shared his "living expenses" with the court.As at the date of this witness statement, that is January this year, he said that his income by way of fees this year will be about £550,000, which Ambani said 'will be used for his day-to-day living expenses'. So far as those living expenses are concerned, they were put elsewhere in the statement of net worth as being in the region of $187,000 a year.

Slump isn't slowing down top carmakers

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MUMBAI | NEW DELHI: The Indian automobile market may be in a prolonged slump but that's not stopping companies from investing millions of dollars in new products as factories run at less than-optimum capacity.Automakers are likely to invest Rs 30,000-35,000 crore, mostly in launching new products as these are a key factor in reviving demand and registering growth. Some of this will go into setting up new capacity as well. Close to two dozen new models will hit the road in the next 12-18 months as passenger vehicle makers hope to generate excitement and revive sentiment.The top three car makers — Maruti Suzuki, Hyundai Motor India and Mahindra & Mahindra — will invest a total Rs 15,000 crore in the next 12-18 months.Maruti Suzuki will be introducing BSVI petrol versions of the Vitara Brezza, S Cross and Ertiga along with a few new-generation products. Hyundai will be launching the new-generation Creta, Elite i20 and Verna facelift in 2020. M&M plans all-new versions of the Thar, Scorpio and XUV 500 in the next 12-18 months."A brand new platform, ground up, costs us between Rs 1,200 crore and Rs 1,500 crore, depending on the installation of capacity," said Mahindra & Mahindra managing director Pawan Goenka."And all three are brand new platforms, so that gives you an idea what the investment would be," he said.Tata Motors will launch top-ofthe-line SUV Gravitas as well as asubcompact SUV based on the H2X concept as well as a few more models to bridge the gaps in its portfolio and address a larger Indian customer base.Maruti Suzuki is confident of the market recovering in the coming quarters and will be starting up its third manufacturing plant in Gujarat, a Rs 5,000-6000 crore project."By the middle of the year, we will start the operation of third factory in Gujarat, plus we have to modify the existing Haryana factory," managing director Kenichi Ayukawa told ET. "Going ahead, hopefully volumes will increase (and) we can fully operate the third line in Gujarat."Mahindra is investing an additional Rs 1,200 crore on its electric vehicle business to compete with Tata Motors, which is readying a portfolio of four-five electric vehicles.The passenger vehicle market has registered a decline of 15% in the April-January period with despatches of 2.38 million units. The top three vehicle makers have forecast single-digit growth in FY21, as the market continues to languish in the negative zone because of rising vehicle prices and slow growth in salaries.SUCCESS STORIESThe success of the Kia Seltos and the MG Hector have shown that Indian buyers will queue up for fresh products with good design and a strong value proposition even in a difficult market environment, said Gaurav Vangaal, associate director, IHS Markit."Product lifecycles are shrinking and novelty wanes quickly, so frequent product upgrades and new launches have become critical for vehicle makers to hold on to market share," Vangaal said.Other notable launches expected during the year include the new-generation Honda City, the Kia Sonet, a sub-4 metre SUV, Renault and Nissan's small SUV, Toyota's re-badged version of the Maruti Suzuki Vitara Brezza and Ertiga, the MG Gloster and another midsize MG SUV to take on the Hyundai Creta.MG Motor India will invest Rs 2,500 crore in the next two years to launch the two new models and expand production capacity at its Halol, Gujarat, plant to achieve annual sales of 100,000 units by 2021."We will launch a high-end sports utility vehicle Gloster in the festive season this year," said MG Motor India president and managing director Rajeev Chaba. "This would be followed by a midsize SUV in 2021. With these products, we aim to sell 100,000 vehicles annually in 2021."A subsidiary of China's largest car maker, MG intends to double sales volumes to 200,000 units by 2023.

What Airtel will face if Vodafone falls prey to AGR

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KOLKATA: Bharti Airtel stands to lose if Vodafone Idea (VIL) collapses under the weight of its adjusted gross revenue (AGR) dues of more than Rs 53,000 crore, said a few analysts. Their view is contrary to the widespread belief that the Sunil Mittal-owned operator would gain in a two-private player market.Without VIL, Bharti Airtel would lose out on benefits of shared towers infrastructure, which could lead to an increase of at least 15% in network and customer servicing costs and hinder its ability to offer affordable tariffs to consumers in future, said the analysts.Bharti Airtel, they said, would also be without a trusted partner, if Vodafone Idea exits, in combating a challenging regulatory environment, especially when facing a strong adversary like Reliance Jio Infocomm, the new telecom market leader. Bharti Airtel chief executive Gopal Vittal recently said it is important that VIL survives and India remains a three-player market."Bharti may have a tough time continuing its low-cost model if VIL breathes its last," said SBICap Securities research head Rajiv Sharma, adding that "creation of tower companies such as Indus has helped both incumbent telcos get external capital to fund their own capex." The shared infrastructure model has helped Bharti Airtel and VIL offer lower tariffs to consumers, said Sharma. ET's email queries to Bharti Airtel were unanswered till press time.Nitin Soni, director (corporates) at global rating agency Fitch said VIL's exit from the sector could "lead to cost increases for Airtel in future tower contracts, assuming the pending Bharti Infratel-Indus merger goes through and Bharti deconsolidates the merged towers entity." However, Soni said, "Benefits of potential customer gains for Airtel if VIL exits, would more than offset likely cost increases in future tower contracts." Sharma disagreed, saying, "Airtel may indeed gain 40% of Vodafone Idea's customers if the latter shuts down, but it would miss a partner to echo its voice on regulatory issues, which may possibly be worrying Bharti."

Lenders set to recover 43.1% from insolvency proceedings

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NEW DELHI: Successful resolutions of corporate insolvency proceedings till the end of 2019 are set to result in recoveries of Rs 1.52 lakh crore for lenders, averaging 43.1% of their admitted claims of Rs 3.52 lakh crore, according to data released by the Insolvency and Bankruptcy Board of India (IBBI).Resolutions in the quarter through December 2019, however, yielded only around 12.2%, or about Rs 2,879 crore, of the admitted claims of Rs 23,668 crore. In the preceding quarter, lenders recovered around 34.4% of their total claims of Rs 78,592 crore.Many of the large cases have already been resolved and the smaller companies that are undergoing resolution process are finding fewer suitors, said experts, explaining the reason for the fall in recoveries."Trends suggest that there are lower recoveries in smaller cases, where there are not many takers for stranded business assets. With many of the larger cases beings resolved or near resolution, we are likely to see lower average recoveries for lenders going forward," said an industry watcher, who wished to remain anonymous.The Reserve Bank of India had initially referred 12 large nonperforming accounts with outstanding claims of Rs 3.45 lakh crore to be resolved under the Insolvency and Bankruptcy Code.Seven of these cases have ended with the approval of resolution plans, while in two cases the bankruptcy court has ordered liquidation. Three other cases are currently undergoing the insolvency resolution process.A total of 190 corporate insolvency proceedings since the IBC came into force have ended with successful resolution plans till December 31, 2019. However, in 57.7% of the proceedings, or 780 cases, the court has ordered liquidation of the corporate debtors' assets.The IBBI newsletter noted that about 72.5% of the cases that ended with liquidation orders were earlier under the Board of Industrial and Financial Reconstruction regime. "The economic value in most of these CDs (corporate debtors) had already eroded before they were admitted into CIRP (corporate insolvency resolution process," the IBBI release said.Separately, 579 voluntary liquidation proceedings have been initiated by corporate debtors till the end of 2019.

Bharti Airtel faces high costs, isolation if Vodafone Idea exits

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KOLKATA: Bharti Airtel stands to lose if Vodafone Idea (VIL) collapses under the weight of its adjusted gross revenue (AGR) dues of more than Rs 53,000 crore, said a few analysts. Their view is contrary to the widespread belief that the Sunil Mittal-owned operator would gain in a two-private player market.Without VIL, Bharti Airtel would lose out on benefits of shared towers infrastructure, which could lead to an increase of at least 15% in network and customer servicing costs and hinder its ability to offer affordable tariffs to consumers in future, said the analysts.Bharti Airtel, they said, would also be without a trusted partner, if Vodafone Idea exits, in combating a challenging regulatory environment, especially when facing a strong adversary like Reliance Jio Infocomm, the new telecom market leader. Bharti Airtel chief executive Gopal Vittal recently said it is important that VIL survives and India remains a three-player market."Bharti may have a tough time continuing its low-cost model if VIL breathes its last," said SBICap Securities research head Rajiv Sharma, adding that "creation of tower companies such as Indus has helped both incumbent telcos get external capital to fund their own capex." The shared infrastructure model has helped Bharti Airtel and VIL offer lower tariffs to consumers, said Sharma. ET's email queries to Bharti Airtel were unanswered till press time.Nitin Soni, director (corporates) at global rating agency Fitch said VIL's exit from the sector could "lead to cost increases for Airtel in future tower contracts, assuming the pending Bharti Infratel-Indus merger goes through and Bharti deconsolidates the merged towers entity." However, Soni said, "Benefits of potential customer gains for Airtel if VIL exits, would more than offset likely cost increases in future tower contracts." Sharma disagreed, saying, "Airtel may indeed gain 40% of Vodafone Idea's customers if the latter shuts down, but it would miss a partner to echo its voice on regulatory issues, which may possibly be worrying Bharti."

Indian market is not cheap, but it offers great growth potential

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The investing community in India is a bit worried about the slowdown which we are grappling with and whether the government efforts are enough or not. A large part of the Indian markets are still struggling and are away from the all-time highs unlike the benchmarks. How are you analysing the Indian markets from your vantage point?The Indian markets are part of the global economy and there have been some negative waves for the past year or so. You have had the trade war which certainly affected China a great deal, but China is so big that a slow China affects India and other emerging markets. The other thing you have had recently is the coronavirus outbreak which has also set back China and the effects on India are also quite pronounced. In the short term, there are negative effects. The trade war appears to have settled down. With interest rates coming down and some green shoots emerging in the economy, I think you are in for better times it needs patience on the part of industries. You have seen the emerging market landscape for a very long time based out of the US. Can you say what we used to be a couple of decades back and where we are right now? What is the outlook from here on if one really takes a portfolio view of three to five years and beyond? Would equities remain the top performing asset class?I think so because interest rates globally have come down and so bonds are not as attractive for a long term investor. If you are in the US, a 10-year bond is giving you about 1.6%, in Europe it is negative, and India has also come down substantially. I know people have been complaining about their fixed deposits coming down, so my general sense is equities will be the favoured asset class and the key thing with equities is long term investing. I tell my clients do not put money in the market unless you have 3-5 years of minimum view if not more and then you can reap the rewards of a good economy. In the last two years, Indian markets have gone through a decent bout of correction. The credit markets were also destabilised for reasons of their own. How are you analysing the steps which the government, the policy makers, RBI, have taken to help stabilise the market?The economic measures which have been taken have been pro-business -- the cut in corporate tax rates, the regulations, the ease of doing business. The key thing is India is operating at a globally competitive market. We are not the only one. Every country is looking for foreign investment but in general, many of the indicators are looking much better today than ever before. I think we are within a secular growth rate for the Indian economy. How are you analysing the way China issues are panning out? First it was the slowdown induced from the trade war with US, now it is a slowdown induced by shutdowns because of the Wuhan virus. That continues to remain a big headwind for the global economy. How serious is it in your view?It is serious. The coronavirus outbreak is serious though it appears to be waning a bit. The markets are telling you not to worry. The markets sometimes are early indicators of whether this is going to have a major impact. Hopefully, within a few weeks or months, this virus will go away to a large extent. China in addition to the trade war has been hit by a double whammy but on the monetary side, they have lowered the cost of money, have pumped in a lot of additional reserves and that is going to help their overall economy. The liquidity picture in China is incredible. Not just in China, over the past six months, we have had 72 interest rate cuts around the world. No country wants a recession. How do you analyse the valuations of Indian equities? Some people call it polarised because only a clutch of stocks are doing well, while broader markets are still slumbering. What is your thought?My general view is if you get good GDP growth, that will translate to good earnings per share growth of Indian companies. Typically, it is a factor of three. If you get GDP growth of 5%, you are likely to get about 15% EPS growth. India is not cheap by any measure if you look at present day valuation, but look at potential growth prospects. If you can say give a reasonable growth rate for the next three years or five years, then the markets look quite appealing. For a long term investor, I advise my clients that when they are investing in emerging markets, they cannot hope for a short-term hit. You make it lucky once in a while but the key thing is to look at it as a durable asset class. Do you think India can really benefit out of what is happening in China because there is talk of a lot of manufacturing capabilities moving out of China towards India. How successful are we in grabbing that opportunity? What are your thoughts on this?China is the manufacturing floor of the entire world. It is amazing how much is made in China. So, certainly companies in the west want to diversify their holdings. You know their supply chain and also not just in China but also other countries like Vietnam, Indonesia are benefiting. India has a unique opportunity to show off what India can do for manufacturing to the western world. When you migrated to US from India 30 years ago, the Nifty was not there. Sensex was just being set up. Where do you think our capital markets have the potential to go in the next 30 years? Can we grow at the same pace -- 14-15% compounding average?I would not be surprised. The GDP growth is a combination of population growth and productivity growth. India has got probably the youngest population of the world. With 65% of the people being under 35, in the number of people using cell phones, India is ahead of the west. Indian consumers are more savvy about social networking and cellphone use and I am incredibly impressed by that. I think they can leapfrog development. It does not have to go at the same pace. The other thing is India's value added services are going up. A lot of research is being done in India and for the first time risk taking people want to make money and wealth creation is not a bad word. When I was growing up in the 70s, it was not fashionable to be a businessman and now it is a cool thing to be a businessman. Well that is correct. Our Indian entire ecosystem for startups and entrepreneurs is a very buzzing one as well, apart from of course the stock market.I think the future of India lies with the young people in India and if you believe them, we will have a very bright future.

F&O: Options signal Nifty50 range in 12,000-12,300 zone

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By Chandan Taparia NSE Nifty remained in a consolidative mood this week, as it traded in a 250-point range between 12,000 and 12,250 levels. The index managed to hold its support at 12,000, but followup buying was missing at higher levels, as it failed to hold above 12,250, and closed on a flattish note for the week. The index formed a Doji candle on the weekly scale and a bearish candle on the daily chart, which indicates a tug of war between the bull and bears, with some supply at higher levels. At the current juncture, Nifty has got stuck in a range, and till the time it holds above 12,000, we may see ongoing optimism with consolidative move towards 12,250. On the options front, maximum Put open interest was at 12,000 followed by 11,800 strike, while maximum Call OI stood at 12,500 followed by 12,400 strike. Call writing was mainly seen at 12,200 followed by 12,300 strike, while Put unwinding was seen at all the immediate strikes. Options data indicates an immediate trading range between 12,000 and 12,300 levels. India VIX moved up by 1.83 per cent to 13.61. Bank Nifty has witnessed profit booking in the last two trading sessions, as it failed to surpass the immediate hurdle at 31,750, and corrected around 900 points in two days. It formed a bearish candle on daily as well as on weekly scales, and drifted below its 50-DEMA. The index underperformed benchmark Nifty and got stuck in a broader trading range with limited upside. Now, it has to continue to hold above 30,500 to witness an upmove towards 31,500 and then 31,750, while on the downside, major support is seen at 30,200. Nifty futures fell 0.37 per cent to 12,129. Long builtup was seen in Mindtree, Bharti Airtel, SRF, Shriram Transport Finance Company and Indigo, while shorts were seen in Bharti Infratel, IGL, Indusind Bank, Gail and Eicher Motors.(Chandan Taparia is Technical & Derivative Analyst at MOFSL. Investors are advised to consult financial advisers before taking an investment calls based on these observations)

IIM Bangalore students bag 147 offers from consulting firms

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NEW DELHI: Consulting firms have given out the maximum offers at the final placement process at Indian Institute of Management (IIM) Bangalore with a total of 147 offers. In all, 428 students have received 518 offers at this B-school over 3 days of lateral and final recruitment drive."Prominent domestic and international recruiters participated in the final placements which resulted in premium jobs for the students. There was a 6.14% increase in the total number of jobs offered compared to the previous year," U Dinesh Kumar, Chair, Career Development Services, IIM Bangalore, said.Among the consulting companies were Accenture (26 offers), followed by The Boston Consulting Group (23 offers). Other top recruiters included Bain & Company (20), Kearney (15), McKinsey & Co (14), GEP Consulting (7), Strategy& (5), Alvarez & Marsal (5) and EY-Parthenon (1). In addition, there were 27 offers in the technology consulting domain with PricewaterhouseCoopers making the maximum of 12 offers.Prominent recruiters in the information technology and IT product management domain, who made 38 offers are Microsoft IDC (10), TCS (6), Razorpay (3), Sprinklr (3), Amagi Labs (2), Browserstack (2), Byju's (2), Cisco (2), Infoedge (2), Moonfrog (2), Tech Mahindra (2), Google (1) and ValueLabs (1). The 32 offers made in the fast-growing E-commerce space included Amazon (20), Flipkart (4), Paytm (4) and Prione (4).There were 42 offers overall in the finance domain with companies like Goldman Sachs making maximum of 8 offers followed by Avendus Capital (5), JP Morgan (5) and Allianz Benelux (3).