Friday, 14 September 2018

#TheIndianCapitalist: All You Need to Know about the LIC - IDBI Bank Deal

LIC gets 51% stake in IDBI Bank

The much-awaited LIC - IDBI Bank deal has finally received the green light from the apex regulators and the union cabinet. India’s largest insurer, the Life Insurance Corporation (LIC) will now have a controlling stake in the IDBI Bank, one of India’s leading nationalised bank. With a rich legacy of industrial financing for more than 50 years, IDBI was converted into a banking company ie. IDBI Bank Ltd. - to undertake the entire gamut of banking activities across the length and breadth of India. IDBI Bank has serviced millions of Indians through a wide array of banking products and services from its 1900 plus branches and more than 4,000 ATMs.

In August 2018, the Union Cabinet chaired by PM Modi had approved conveying of no objection to the reduction in Government of India shareholding in IDBI Bank to below 50% by dilution. It had also approved the acquisition of controlling stake by LIC as a promoter in the bank through preferential allotment/open offer of equity, and relinquishment of management control by the Government of India in the IDBI Bank.

The approvals on LIC- IDBI Bank deal from Union Cabinet was followed after Securities Exchange Board of India (SEBI) and the Insurance Regulatory and Development Authority of India (IRDAI) go ahead on the same. The IRDAI, in June 2018, gave a one-time exemption to LIC to acquire a 40 per cent stake in the IDBI Bank, taking its total holding in the lender to over 51 per cent.

Financial experts are of an opinion that both LIC and the IDBI Bank would be benefited with this transaction. Both the entities will gain in terms of their reach through extensive customer and network base. LIC will get access to IDBI Bank’s 1.6 crore customers and 1,900 branches to sell its insurance products while IDBI Bank may further earn fees and float income from LIC customers that will boost its income and bring down the cost of funds. Also, the reach of LIC would be beneficial for IDBI Bank to target rural and semi-urban segments. The strong financial backup from the LIC brand would help IDBI Bank in its NPA resolution plan.

LIC – IDBI Bank Deal: The Way Forward

LIC is India’s insurance mammoth. Its brand value is immense; a renowned name for every Indian. One out of six people in India has an LIC policy. With a financial inclusion outlook already being saturated in the urban and semi-urban markets, IDBI Bank could reach rural segment with the reach of insurance agents. The Bank can leverage the bancassurance tie-up with LIC as also augment its ability to market its products and services. Taken together, the LIC home finance and the Bank’s home loan portfolio would be the biggest in the segment for the industry as a whole. This could act as a major growth driver for the Bank and could contribute immensely towards its revenues.

The Reserve Bank of India (RBI) and the Ministry of Finance have shown its strong commitment towards the NPA resolution. Independent media think tanks say that as much as Rs 4 lakh crores of bad loans have returned back to the system because of the new Insolvency and Bankruptcy Code (IBC). RBI is set to refer 12 big NPA accounts to National Company Law Tribunal (NCLT) under the new IBC code. IDBI Bank has received as much as Rs 329 crores as interest income from Bhushan Steel resolution. Media reports suggest that IDBI Bank has also moved to NCLT as a lead banker against Reliance Naval, Lanco Infratech, Jaypee Infratech etc. for bid-based resolution or liquidation for a quick recovery.

Amidst the NPA debate, the financial reports of IDBI Bank shed light on the bank’s lending potential in the long-term horizon. The bank reported an increase in operating profit by 71% to Rs 7907 crores during FY 2018 from Rs 4690 crores in FY2017. Recovery and up gradation improved to Rs. 6,231 crore during FY 2018 from Rs. 4,849 crore during FY 2017. IDBI Bank reported exponential growth in Current Account Savings Account (CASA) deposits and is expected to rise further after the LIC – IDBI Bank transaction.

TheIndianCapitalist.com is of an opinion that the LIC – IDBI Bank deal is a win-win for both the entities. The brand value of LIC and strong lending portfolio of IDBI Bank will create synergy and endless opportunities for millions of MSME lenders and policyholders.


- Chaitanya Kulkarni.

Wednesday, 5 September 2018

Lockheed Martin ties with Tata to manufacture F-16 wings in India.

F-16 on the streets of Turkey during a failed coup.

Tata Advanced Systems Limited (TASL) and Lockheed Martin have entered into an agreement to commence production of F-16 wings in India for export. This strategic initiative positions TASL to become the provider of wings for all future customers and strengthens its role in the F-16 global supply chain.

Production of F-16 wings in India will further strengthen TASL’s capability to address the global aerospace requirement of fighter aircrafts and support ‘Make in India.’ The planned F-16 wing production move to India is not contingent on the Government of India selecting the F-16 for the Indian Air Force.

“We are delighted with the decision made by Lockheed Martin to select Tata Advanced Systems Limited (TASL) for the production of F-16 wings in India. This positions TASL as a global provider of F-16 wings in future. TASL and Lockheed Martin, through a long-standing joint-venture, have been manufacturing airframe components of the C-130J aircraft and S-92 Sikorsky helicopter at the Hyderabad facility. This development now again gives us an excellent opportunity to showcase our technological expertise and advance our capability development, as we reinforce our commitment to both the Indian and global aerospace industry. The production of the F-16 wings in India, for global application, is set to place the country at the centre of the world's largest fighter aircraft ecosystem and make it a preferred destination for aerospace manufacturing.” - Mr Sukaran Singh, CEO & MD, Tata Advanced Systems Limited.

Tata Advanced Systems Limited is a wholly owned subsidiary of Tata Sons, focused on providing integrated solutions for Aerospace, Defence and Homeland Security. TASL has partnered with global OEMs, including Boeing, Airbus Group, Sikorsky Aircraft Corporation, Lockheed Martin Aeronautics, Pilatus Aircraft Ltd, Cobham Mission Equipment, as well as the Government of India’s DRDO. It has capabilities throughout the entire aerospace value chain from design to full aircraft assembly and is well positioned in areas that include missiles, radars, unmanned aerial systems, command and control systems, optronics and homeland security.

Source - Press Release.

Monday, 3 September 2018

Financial Inclusion 2.0: All 1.55 lakh post offices will offer banking services through India Post Payments Bank.


From the Red Fort, PM Modi announced the plans about postal banks across all villages of 715 districts of India in 2014. The much delayed India Post Payments Bank was launched on 1st September in Talkotara Stadium, Delhi in the august presence of PM Modi and Mr Suresh Sethi, MD and CEO, India Post Payments Bank. The function was witnessed at over 3000 locations across the country, which were connected to the main event in Delhi. "Jo Khata Nahi uska bhi toh Khata Hota Hain" said jokingly as PM Modi also become the first bank account holder of India Post Payment Bank.

IPPB has been envisioned as an accessible, affordable and trusted bank for the common man, to help speedily achieve the financial inclusion objectives of the Union Government. It will leverage the vast network of the Department of Posts, which covers every corner of the country with more than 300,000 Postmen and Grameen Dak Sewaks. IPPB will hence significantly augment the reach of the banking sector in India.

The launch of IPPB marks another significant milestone in the Union Government’s endeavour to take the benefits of a rapidly developing India to the remotest corners of our country. On the day of the launch, IPPB will have 650 Branches and 3250 Access Points spread across the country. Simultaneous launch events will be held at these branches and access points. All the 1.55 lakh Post Offices in the country will be linked to the IPPB system by December 2018.

IPPB will offer a range of products such as savings and current accounts, money transfer, direct benefit transfers, bill and utility payments, and enterprise and merchant payments. These products, and related services will be offered across multiple channels (counter services, micro-ATM, mobile banking app, SMS and IVR), using the bank’s state-of-the-art technology platform.

Postmen across India has long been a respected and accepted person in the villages. He said the trust on the postman remains, despite the advent of modern technology. The Government’s approach is to reform existing frameworks and structures, and hence, transform them in accordance with the changing times. There are over 1.5 lakh post offices and over three lakh postmen or “grameen dak sevaks” who are connected to the people of the country. Now they shall be empowered with smartphones and digital devices to provide financial services. - PM Modi.

The Jan Dhan Yojana has opened 32 crores accounts across the country. But in rural areas, people have to travel more than 20km to reach the bank. Since Postal Departments have a wider reach, financial experts are of an opinion that India Post Payment Bank is indeed Financial Inclusion 2.0.

Monday, 27 August 2018

Indian Navy to get 111 utility helicopters at Rs 21,000 crores. DAC approves defence equipments of nearly Rs 46,000 crores.

MH 60 Romeo Naval Utility Helicopters by Sikorsky Lockheed Martin.

The Defence Acquisition Council (DAC), chaired by Raksha Mantri Nirmala Sitharaman, met on 25 Aug 2018 and accorded approval for procurement for the Services amounting to approximately Rs. 46,000 crores.

The Defence Acquisition Council (DAC), in a landmark decision today, approved procurement of 111 Utility Helicopters for the Indian Navy at a cost of over Rs. 21,000 crores.  This is the first project under the MoD’s prestigious Strategic Partnership (SP) Model that aims at providing a significant fillip to the Government’s ‘Make in India’ programme.

SP Model envisages indigenous manufacturing of major defence platforms by an Indian Strategic Partner, who will collaborate with foreign OEM, acquire niche technologies and set up production facilities in the Country. The model has a long-term vision of promoting India as a manufacturing hub for defence equipment thus enhancing self-sufficiency and establishing an industrial and R&D ecosystem, capable of meeting the future requirements of the Armed Forces. The contract when finalised, would result in a vibrant and wide-spread Defence industrial eco-system in the Indian Aviation Sector with the Private Industry and MSMEs as major stakeholders.

The RFI has been floated on the same and it has found that the 111 helicopters will have anti-submarine torpedo aversion capabilities. The new helicopters will be in addition to KA 28 and Dhruv helicopters. As per LiveFistDefence, the likely contenders in the Naval Utility Helicopters fight include the Airbus Helicopters AS565 Panther, Bell 429, Lockheed Martin-Sikorsky S-76D and, perhaps the AgustaWestland AW 109.

In the further quest for modernisation of the Armed forces, the DAC also granted approval to a few other proposals amounting to approximately Rs. 24,879.16 crores, which included approval for procurement of 150 numbers of Indigenously Designed and Developed 155 mm Advanced Towed Artillery Gun Systems for the Indian Army at an approximate cost of Rs 3,364.78 crores. These guns have been indigenously designed & developed by DRDO and will be manufactured by production agencies, as nominated by DRDO. They are likely to be the mainstay of Artillery in the near future. A nod to these major schemes will provide a fillip to the ‘Make in India’ push by the Government, will help create self-reliance in the Country in Defence manufacturing sector and has the potential of making the Defence Industry as a major engine of India’s economic growth.

 To enhance the capability of Navy at sea, approval has also been granted for procurement of Anti-Submarine capable, 24 American MH 60 Multi-Role Helicopters, which are an integral part of the frontline warships like the Aircraft Carriers, destroyers, frigates and corvettes. Availability of MRH with the Navy would plug the existing capability gap.

In addition, procurement of 14 Vertically Launched Short Range Missile Systems was also cleared by the DAC. Of these, 10 systems will be indigenously developed. These systems will boost the self-defence capability of ships against Anti-Ship Missiles.

Source - Ministry of Defence, LiveFist Defence.

Thursday, 23 August 2018

88% of rural households in India has a savings bank accounts says NABARD.


NABARD All India Financial Inclusion Survey (NAFIS), conducted by National Bank for Agriculture and Rural Development (NABARD), revealed that farm households register higher income than the families solely dependent on non-farm livelihood activities in rural areas. The report was released by NITI Aayog Vice Chairman in New Delhi.

The NABARD survey, with the reference year of 2015-16, which covered 40,327 rural households, highlighted that the average annual income of an agricultural household is Rs 1,07,172 compared to Rs 87,228 for families engaged only in non-agricultural activities. The survey defined farm households as families having over Rs 5,000 as the value of produce from agricultural operations in the year preceding the survey. For all rural households, the average annual income stood at Rs 96,708. The 48 percent of the rural families are agricultural households. Apart from assessing the income levels of rural households, the survey mapped aspects like debt, saving, investment, insurance, pension and financial aptitude and behaviour of individuals.

While 88.1 per cent rural households and 55 percent agricultural households reported having a bank account, average savings per annum per household was Rs 17,488. About 26 percent of agricultural households and 25 percent of non-agricultural households were found to have been covered under insurance. Similarly, 20.1 percent agricultural households as against 18.9 percent non-agricultural households have subscribed to pension schemes. The Incidence of Indebtedness (IOI) index, which is a proportion of households having outstanding debt on the date of the survey, was 52.5 percent and 42.8 percent for agricultural and non-agricultural households respectively. All India IOI taking rural households together stood at 47.4 per cent.

Highlights of the Nabard All India Financial Inclusion Survey

Income
  • Agricultural households, which accounted for 48% of rural households, earned Rs 107,172 during 2015-16 from cultivation, livestock, non-farm sector activities and wages/salaries. Thus, farmers’ income grew at a compounded growth rate of 12% per annum compared to Rs 77,112 per annum as per NSSO assessment in 2012-13. The income levels for 19 out of 29 states are above all India average and 15 states recorded annual compound growth of above 10.5% between 2012-13 and 2015-16.
  • Agricultural households earned 34% of their income from cultivation. Wage earnings contributed the same proportion to the income followed by salaries (16%), livestock (8%) and non-farm sector (6%). Other sources accounted for the rest.
  • Non-agricultural households reported average annual income of Rs 87,228 majorly contributed by wages (54%), followed by salaries (32%) and non-farm sector activities (12%). Agricultural households earned 23% more than non-agricultural households.

Savings and Investment
  • 88.1 per cent of the households reported having a bank account.
  • 33% of households reported more than one savings account
  • 26% of HH have women with institutional (including SHG) savings account
  • 55 per cent of agricultural households reported any savings during the last year and of these 53 per cent saved with institutions like banks, post offices and SHGs.
  • Average savings per annum per saver households was reportedly Rs 17,488, of which 95 per cent is with institutional agencies
  • 10.4 per cent of agricultural households also reported investment with the average investment per investing agricultural households was reportedly Rs 62,734.
  • For all investments amounting more than Rs 10,000 in the year, 60% of the amount was funded through borrowings from either institutional or informal sources.

Debt
  • Incidence of Indebtedness (IOI), measured as proportion of households reporting outstanding debt on the date of the survey, is 52.5% for agricultural households and 42.8% non-agricultural households were reportedly indebted at the time of survey.  All India IOI taking all rural households together stands at 47.4%.
  • Average amount of outstanding debt (AOD) for indebted agricultural households is reportedly Rs 1,04,602 as on the date of the survey. Debt outstanding for indebted non-agricultural households is reportedly Rs 76,731. Overall extent of indebtedness taking all households combined is Rs 91,407.
  • 43.5% agricultural households reported to have borrowed any money during last year from some source or the other. 60.4% of them reportedly borrowed from institutional sources exclusively. Further, 30.3% borrowed from only informal sources and 9.2% of agricultural households borrowed from both sources. 56.7% of Non-Agricultural households and 58.6% of all households borrowed from institutional sources during last year.
  • During the year 2015-16, borrowing Agricultural households reportedly availed a loan of Rs 107,083 from various agencies, 72% of which was availed from institutional sources including MFIs and SHGs. 69% of borrowings of all households and 65% of non-agricultural households were from institutional sources.

Insurance and Pension
  • About 26% of agricultural households and 25% of non-agricultural households reported having been covered under one or the other type of insurance.
  • Among agricultural households who reported to have taken any loan for agricultural purposes in the last one year [2015-16] from institutional agencies, 6.9% reported being covered under crop insurance.
  • The coverage under any type of pension was reported to be about 18.9 % for non-agricultural households as against 20.1 % for agricultural households.
  • When assessed for the type of pension received, 32% of all households with senior citizens reported being covered by old age pension.

Read the full report here- https://www.nabard.org/auth/writereaddata/tender/1608180417NABARD-Repo-16_Web_P.pdf

Tuesday, 14 August 2018

Wonder Home Finance commences operations with 29 branches across Rajasthan.

Wonder Home Finance Rajasthan

With 29 branches spread across the big cities and small towns of Rajasthan, Wonder Home Finance Limited has announced its entry into India’s booming retail housing finance business. Wonder Home Finance is a part of RK Group, Rajasthan and India’s well-known business groups. From RK Marble to Wonder Cement and now Wonder Home Finance, RK Group is committed to holistic and transparent business practices. The vision and dedication of its promoters and employees had led to patronage amongst its consumers and business partners. Wonder Home Finance Limited has received final approval from the National Housing Bank to commence its business.

As a part of the first phase of roll-out, Wonder Home Finance will focus on its lending business across the length and breadth of Rajasthan. Currently, the company has 9 branches in Jaipur, Jodhpur, Bikaner, Udaipur, Chittorgarh and Rajsamand region and is in a process to set up 20 more branches across the state of Rajasthan by the end of August 2018. The branch spread will cover almost 70% of service area in Rajasthan state.

Wonder Home Finance will give financial assistance in the range of Rs 5 lakhs to Rs 35 lakhs to the people from lower and middle income strata of the society. The interest for home loans, repair and renovation of homes and construction of homes will be in the range of 11% to 14% with the tenure of 3 years to 20 years. With the focus of last-mile financial inclusion, the facility of home loans can be also availed on Gram Panchayat Properties and for the development of Non-Agriculture land.

In a boost to small businesses and proprietorship, Wonder Home Finance will offer financing at attractive interests. The loan amount ranges from Rs 5 lakhs to Rs 20 lakhs with the maximum loan tenure period of 15 years.

The lending by Wonder Home Finance is envisioned with PM Modi’s vision of ‘Housing for All by 2022’. The Pradhan Mantri Awas Yojana is an initiative by Government of India in which affordable housing will be provided to the poor with a target of building 20 million affordable homes. The scheme also includes an attractive credit linked subsidy on loan interest which aims to help PMAY beneficiaries from lower and middle income group. As per National Housing Bank, beneficiaries from lower and middle income group would be eligible for the interest subsidy at the rate of 6.5% for loan amount upto Rs 6 lakh, 4% for loan upto Rs 9 lakhs and 3% for the loan amount upto Rs 12 lakh. Wonder Home Finance Limited has signed a MoU with National Housing Bank keeping in mind the mission of Pradhan Mantri Awas Yojana which allows beneficiaries to apply for Credit linked subsidy scheme.

“With the launch of Wonder Home Finance Limited, we are confident that we will be able to deliver unified financial services to the people of this country. Our people centric business model and service oriented delivery mechanism will help to create an exceptional experience amongst our target audience. It will further enhance the groups philosophy of perfection and reaching to masses. Also envisaged by our Government’s vision of ‘Housing for all by 2022’, it is a step towards delivering last mile financial services to the people of this country. We are confident of this business proposition which is a unique one in the industry today and it will surely help us to drive the group’s growth to the next level.” - Shri Ashok Patni, Chairman, RK Group.

Wonder Home Finance uses easy, transparent and customer friendly loan processes. The company claims to offer home and business loans with the fastest decision time of 3 days. Convenience and use of technology are among the core values as customers can avail easy financing through the website, mobile app and door step service.

In order to take its financial services business to the highest level, Wonder Home Finance Limited will target to leverage the pedigree and network built by the RK Group. With its Pan-India license, the company plans to expand operations in Gujarat, Madhya Pradesh and Maharashtra in FY 2018-19. The company is confident of building a powerful brand ‘Wonder Home Finance’, which would become a synonym to housing finance segment in the near future.

- Chaitanya Kulkarni

Tuesday, 7 August 2018

NHAI plans to raise Rs 8,000 crores from Toll Operate Transfer model.


National Highways Authority of India (NHAI) has invited bids for Second Bundle of national highways under the TOT(Toll Operate Transfer) model. The bundle consists of 8 stretches of national highways in the states of Rajasthan, Gujarat, Bihar and West Bengal. The total length of the project is 586.5 km. There are 12 Toll Plazas on these 8 road stretches. The Bid Due Date is 5th Nov 2018.

Concessionaires have to quote Bid Concession Fee against NHAI's estimated Initial Estimated Concession Value (IECV) of Rs. 5362 crore. TOT bundle-II also involves an initial construction cost of Rs 929 crore. The total contract period of TOT is for 30 years, which may increase/ decrease by 10/5 years based on an increase/ decrease in traffic. The concessionaire would be required to maintain and operate the stretch during this period.  In Lieu of this, the concessionaire would get the rights to collect user fee for this period, in accordance with prescribed fee rates under NH Fee Rules.

As per Bharatmala, the Ministry of Road Transport and Highways plans to build 34,800km of highways from a budgetary outlay of Rs 5,35,000 crores. These will have 9 greenfield expressways projects including the ambitious Mumbai - Delhi Expressway.

National Highways Authority of India (NHAI) is borrowing from the market through the Internal Extra Budgetary Resources (IEBR) route. In 2017-18, NHAI has raised Rs 8,500 crore from LIC and Rs 10,000 crore from EPFO through taxable bonds. Further, NHAI issued rupee denominated Masala Bonds of Rs 3,000 crores through the London Stock Exchange. 

In addition, NHAI is in the process of raising funds through monetization of operational National Highway assets through the Cabinet approved Toll-Operate-Transfer (TOT) model. It may be recalled that for TOT Bundle-I of 648 km, Macquarie had quoted highest as 1.5 times against the NHAI IECV of approx 1 billion USD (Rs. 6258 crores). The highest bid of Macquarie was approx 1.5 Billion USD (Rs. 9681 crores).

Source - PIB.