Friday, 21 September 2018

9.5 times oversubscribed! GoI gets Rs 466 crores revenue by listing IRCON.

Track laying in progress. Pic for representation only.

The Initial Public Offering (IPO) of CPSE IRCON has been subscribed 9.5 times. In the IRCON IPO, the Government is selling 10.5 percent stake or about 99.05 lakh equity shares, including 5 lakh shares to employees. 

The Government is expected to raise Rs 466 crore from the issue. The issue received bids for 9.4 crore shares against the issue size of 99.05 lakh shares worth Rs 466 Crore.  The segment meant for Qualified Institutional Buyers (QIBs) was subscribed 12 times, Non-Institutional Investors 4.9 times, while the Retail Investors Segment was subscribed over 9 times. Price band for the issue has been fixed at Rs 470-475 per share, with a discount of Rs 10 for Retails Investors and Employees.

IRCON is the second CPSE to launch an IPO in the Current Fiscal besides being the second Railway CPSE to be listed on the stock markets after RITES in June this year.

IRCON International has executed crucial infra projects in India, SAARC and African nations. The company expertise in Railway projects but has been awarded Highway projects in recent times. It has executed ambitious Qazigund Baramulla railway line in Kashmir Valley. IRCON is currently constructing Western Dedicated Freight Corridor in the state of Maharashtra. It has been a pioneer in expanding Indian Railway network to Nepal and Bangladesh. IRCON has completed more than 300 infra projects in India and abroad.

- Chaitanya Kulkarni.

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.

State Bank of Mauritius's India unit to open 6 new branches.


State Bank of Mauritius (SBM) Group has received Reserve Bank of India’s approval to operate in India through a wholly-owned subsidiary route. SBM is the first foreign bank in India to obtain a WOS Licence from the Reserve Bank of India. The bank will soon operate as a banking subsidiary of SBM Group in India under the name of SBM Bank (India) Ltd. This new structure will provide more leeway for SBM in its branch expansion strategy.

Established in 1994 in India, SBM currently operates four branches, namely located in Mumbai, Chennai, Hyderabad and Ramachandrapuram. To capture a wider market and increase its customer base, SBM plans to launch six new branches in Delhi, Bangalore, Kolkata, Pune, Ahmedabad and Jaipur by next year. The bank offers a diverse suite of products and services in the Indian market including deposits, advances, NRI Services, treasury products and trade finance services. It plans to revamp its customer base and solutions offering in line with its growth strategy.

Besides establishing a robust domestic franchise in India, SBM expects to capitalize on its geographic network in East Africa and the Indian Ocean region to add value to customers. It is reckoned that there is growing interest in trade and investment along the India-Africa corridor, where SBM can play an important role in financing and structuring.

“One of the reasons for SBM to start its international footprint in India is because of the strong links that exist between these two countries with around three-quarters of the Mauritian population being of Indian origin. This is a focused effort by SBM to grow its cross-border banking business and widen physical presence in geographies with untapped growth potential for better customer reach. With domestic expansion programme, SBM will continue to grow outside Mauritius.” - Mr Moses Harding John, CEO, India & East Africa, SBM Holdings Ltd.

As per Wholly Owned Subsidiary rules by RBI, the initial minimum paid-up voting equity capital for a WOS shall be Rs. 5 billion. The newly set up WOS of the foreign bank would be required to bring in the entire amount of initial capital upfront, which should be funded by free foreign exchange remittance from its parent. The CEO would be appointed on a full-time basis and should be resident in India. All notifications regarding Basel III have to be followed. RBI also states that at least 25% of branch network should be in Rural areas, this may be on the outskirts of tier 2 city or near State Industrial Zones.

Singapore’s DBS Bank is another lender which is awaiting final approval from the RBI to convert its 12 branches into a wholly owned subsidiary.

Saturday, 4 August 2018

NHAI gets Rs 25,000 crores unsecured loan from State Bank of India

National Highways Authority of India (NHAI) is getting an unsecured loan of Rs 25,000 crore from State Bank of India for 10 years with 3 years of moratorium on repayments. This is the largest amount of loan to have been sanctioned to NHAI in one stroke by any institution. This is also the largest long term unsecured loan sanctioned by SBI at a time to any entity. A MoU in this regard was signed between Nitin Gadkari and Rajnish Kumar, Chairman, SBI was signed and the first tranche of Rs 5,000 was handed over to NHAI.
NHAI had invited an Expression of Interest from Scheduled Commercial Banks to fund Rs. 25000 Crore as an unsecured loan for 10 years with 3 years of moratorium on repayments. In response to this EOI, SBI offered to fund the entire requirement of Rs 25000 Crore based on one month MCLR.
The loan sanctioned by SBI is unsecured. There is no principal repayment liability for an initial three years. After three years, the repayment would be done in 14 equal half yearly instalments. The total loan tenure is 10 years. NHAI can repay/ prepay it at any time without any prepayment penalty.
The total sanctioned amount of Rs 25000 Crore is to be disbursed within 31st March 2019. The rate of interest would be based on one month MCLR. Interest accrued on the amount actually outstanding will be paid on monthly basis. NHAI can draw the amount in any number of tranches, latest by 31st March 2019.
NHAI has traditionally relied on borrowing through long term bonds issued to various investors, including LIC, EPFO and other qualified investors, and Tax-Free bonds and Masala Bond issued in the year 2017. NHAI also plans to raise investment of Rs 13,500 crores through Toll Operate Transfer model.
– Chaitanya Kulkarni
Also published on InfraStory.com

Monday, 16 July 2018

43% surge in Mutual Fund investments for Q1 2018-19 says AMFI.

Bombay Stock Exchange

There has been a historic rise in investments in Mutual Funds according to the data released by Association of Mutual Funds of India. According to the financial market expert, the surge in MF investments can be attributed to the strong performance of Indian market, low paying Fixed Deposit interest rates and the rising awareness among small investors through campaigns like 'Mutual Fund Sahi Hain'.

Investors have pumped Rs 1.4 lakh crore into mutual fund (MF) schemes in April-June quarter this fiscal, a surge of 43 per cent from the year-ago period, driven by strong participation from retail investors. 

According to Association of Mutual Funds of India (Amfi) data, the inflow has also helped in pushing the assets base of the 42-player MF industry to Rs 23.40 lakh crore at the end of June this year, an increase of 20 per cent from Rs 20.40 lakh crore in June-end 2017.

According to the data, investors poured in a net of Rs 1,33,903 crore in MF schemes in the first quarter of the ongoing fiscal, as compared to Rs 93,400 crore in the April-June period of 2017-18. The latest inflow has been mainly driven by contributions from liquid funds and equity schemes. Individually, liquid funds or money market category -- investments in cash assets such as treasury bills, certificates of deposit and commercial paper for shorter horizon -- witnessed an inflow of Rs 1.22 lakh crore. Besides, equity schemes attracted close to Rs 33,000 crore.

The rise in the Mutual Fund market despite the volatility and weaker Rupee suggests that investors are looking for long-term horizon view. The trend is expected to rise further as investors are starting to acknowledge the long-term wealth-creation potential of equities.

Source - IBEF.

Numaligarh Refinery sets up bio-ethanol plant with Finnish, Dutch firms


State-run PSU Numaligarh Refinery Limited has taken a giant step forward by establishing a joint venture, Assam Bio-Refinery Pvt. Limited (ABRPL) with equity participation of M/s Chempolis Oy of Finland and M/s Fortum 3 B.V. of Netherland to build and operate the first of its kind Bio-Refinery in India which would generate renewable green fuel-bioethanol, other valuable chemicals and green power from bamboo biomass.
The joint venture company incorporated on 04th June 2018 has 3 partners with major equity holding of 50% by NRL, 28% by Fortum 3.B.V. Netherland and 22% by Chempolis Oy, Finland.
“NRL’s new venture shall produce 62 million litres of bio-ethanol by using around 0.5 million MT bamboo per annum which is going to be a game changer in terms of additional revenue generation for the bamboo farmers through sustainable cultivation, extraction and transportation of bamboo. It is indeed a historic moment for India’s North East to garner first major foreign direct investment for setting up its first bamboo based Biorefinery” said Mr S.K. Barua, Managing Director, NRL
Bioethanol shall be produced from bamboo as feedstock by using pioneering 3G Formicobio technology by a Finnish technology provider M/s Chempolis Oy with other valuable chemicals and bio-coal. Bio-coal will be used for the production of steam and green power to the bio-refinery.
According to a statement from NRL, the company is implementing India’s first bio-refinery in Assam at an estimated cost of Rs 950 crore which would produce bio-ethanol with co-production of furfural and acetic acid from the locally available non-food biomass feedstock. Bamboo is one of the major non-food biomass resources available abundantly in North East India and is among the fastest growing plants. 49,000 tonnes of BioEthanol produced annually would primarily be used to blend NRL petrol as mandated by the National Policy on Biofuel, with the surplus to be sold to other oil marketing companies. The company added that NRL has already inked MoUs with Nagaland Bamboo Development Agency (NBDA) and Arunachal Pradesh Bamboo Resources Development Agency (APBRDA) last year for sourcing of bamboo for the Bio-Refinery.
The government of India recently stepped up its support for the production of bio-ethanol, most prominently by means of the new bio-ethanol policy for mandatory blending of Ethanol with gasoline up to 10%. The new bio-ethanol policy aims to spur investments for setting up projects with a total production capacity of 1 billion litres of fuel ethanol every year. The policy is also aimed at cutting down the country’s significant energy import dependence as well as meet Nationally Determined Contributions (NDCs) committed to the Paris Agreement on Climate Change.
This project has a clear role in the fight against climate change. It can also have a big positive impact on local communities. It will provide employment opportunities for thousands of people and in the long run, it will help local communities from Assam and Arunachal Pradesh to become self-sustainable and enhance their living standards.
– Chaitanya Kulkarni
Also published on CSRBulletin.com

Thursday, 12 July 2018

State Bank of India plans to raise $750 million via maiden green bonds


India's largest lender, the State Bank of India has announced plans to issue an inaugural USD benchmark green bond in the Reg S market. Green Banking and Sustainability have long been areas of priority for the lender and in an early delineation of this approach, SBI had enunciated its Green Banking Policy a decade back.

Through its inaugural green bonds launch from its London branch, SBI is seeking to raise between USD 500 million (EUR 426m) and USD 750 million.

The transaction will likely consist of two tranches and could open for subscription in the next few days, people aware of the development told the newspaper. The raised funds will be used to support investment in sustainable and climate-friendly projects.

The bank has appointed Bank of America Merrill Lynch, BNP Paribas, Citigroup, Credit Agricole CIB, HSBC, SBICAP and Standard Chartered Bank to manage the issuance. According to Business Standard, bankers will meet with investors this week. As per the Green Bond Framework, the proceeds from the bonds will be invested in research and development of ecological solutions to make this world a better place for our future generations.

The Green Bonds market as per July 2018 stands at $80 billion against $170 billion against the full year of 2017. The estimated investments in Green Bonds stand at $250 billion.

- Chaitanya Kulkarni

Thursday, 5 July 2018

Bank of China to open office in Mumbai

Bank of China office in New York.

Reserve Bank of India has issued scheduled commercial bank license to the Bank of China. Bank of China is one of China's largest banks which is set to open its first branch in Mumbai.

Prime Minister Narendra Modi had made a commitment to Chinese President Xi Jinping to allow Bank of China to set up branches in India when they met on the sidelines of the SCO summit in Chinese city of Qingdao last month. Bank of China will be the second Chinese bank to enter India after Industrial and Commercial Bank of China.

As China’s most internationalised and diversified bank, Bank of China provides a comprehensive range of financial services to customers across the Chinese mainland as well as 51 countries and regions. The Bank’s core business is commercial banking, including corporate banking, personal banking and financial markets services.

"By the end of 2017, Chinese investments into India added up to more than $8 billion, as India has become an important market for infrastructure cooperation among Chinese companies and a major investment destination," Gao Feng, Ministry of Commerce, People's Republic of China.

China had permitted Indian banks to open seven branches in China since 2006. The State Bank of India was the first to start operations in China where it has two branches. The Bank of India, the Bank of Baroda, Canara Bank, ICICI Bank and Axis Bank have one branch each.

- Chaitanya Kulkarni

Wednesday, 4 July 2018

Turnaround Strategy? LIC likely to acquire 51% stake in IDBI Bank.


In a bid to achieve targets in Operation Clean-up, the Ministry of Finance is keen to finalise the acquisition of state-owned IDBI Bank by Life Insurance Corporation of India in three-four months to ensure the lender’s balance-sheet shows an improvement by next fiscal.

The Insurance Regulatory and Development Authority of India (IRDAI) had, on June 29, given a one-time exemption to LIC to acquire a 40 per cent stake in debt-ridden IDBI Bank, taking its total holding in the lender to over 51 per cent. The acquisition will help infuse ₹10,000-13,000 crore in the bank, which had non-performing loans totalling ₹55,588 crore as of March 2018 and is under the RBI’s Prompt Corrective Action.

“IRDAI has already cleared the transaction and other approvals are also in the pipeline. The idea is that before the end of 2018, the transaction should be finalised and it should start showing results by the end of the financial year,” as reported in a corporate announcement page of BSE. The Finance Ministry is already in discussions with IDBI Bank and LIC on the timelines and proposed valuation for the acquisition.

As IDBI Bank is a listed entity, the deal is likely to take place at market value. The boards of IDBI Bank and LIC are, however, expected to come up with a final proposal on the valuation and timeline by the end of this month.

The next step is LIC has to go to its board and inform the board about the conditions under which the approval is given. What we have asked for is: what is going to be their plan for reducing the stake to 15% over a period. The government, which is the promoter of the bank, holds almost 81%. The deal, which will trigger takeover regulations, will also require an approval from the Securities and Exchange Board of India.

Interestingly, as per capital market regulations, any company that acquires 25% stake in a listed entity has to make an open offer to acquire 26% additional stake from public shareholders. SEBI is likely to waive off this requirement as it has previously done before in case for government companies.

The IRDA rules don't permit a single entity to run two separate insurance companies. With this acquisition, IDBI Bank will be a subsidy of LIC. LIC's ambition of getting into banking business may come true as LIC Housing Finance had applied for the banking license in 2014 but failed to receive RBI nod. No clear information regarding the business of IDBI Federal Life Insurance has been decided yet.

Several financial experts have opposed this deal as it needs to bypass Insurance law. The infusion of capital by LIC is a bet on NPA struck IDBI Bank as it is very unlikely to turn around the bank's books in near term.

- Chaitanya Kulkarni

Tuesday, 26 June 2018

#MarketWatch: What next for Manpasand Beverages?

Manpasand Beverages auditor resignation

Over the last few weeks, the Indian stock market has been hit with several shocks. The large caps were affected by rising crude and currency prices. The tumble in the small cap and mid-cap were led by the investor confusion in few selective stocks like Vakrangee, Inox Wind and Manpasand Beverages. Manpasand Beverages through its corporate disclosure declared the announcement of resignation of its statutory auditors M/S Deloitte Haskin & Sells, Vadodara. On the subsequent day, the Board of Directors of Manpasand Beverages appointed M/s Mehra Goel and Co., as their statutory auditor for the year. The newly appointed accounting firm has 13 partners on-board with an operational experience of sixty five years.

Although, there have been many cases of resigning auditors in the recent past. Several misinformed presumptions were disseminated through mainstream and social media which affected investor sentiments at large. Most of them are unsubstantiated rumours that are not based on any factual evidence and a lot of shareholders and investors have been negatively impacted. In fact, according to Prime Database, between January and May 2018, 32 auditors have resigned midterm, while for 2017-18 the number of exits stood at 36. 

Investors should be aware that Deloitte was auditing the financial results of Manpasand Beverages for the last 8 years and had never expressed their concerns on the financial performance of the company. Further, there has been no instance till date where the company has denied disclosure of any financial information. This rumour ride has affected the stocks of the company. Although the investors should prefer official sources of information than media agencies for further investment opportunities.

Manpasand Beverages has been one of the fastest growing listed FMCG companies. The company reported staggering 43.8% rise in net profit of Rs 72.6 crores for the financial year end of 2017. The total income for the same year stood at Rs. 735 crores. For Q3 2017-18, India’s leading fruit drink player, Manpasand Beverages, reported a growth of 64% rise in net profit at Rs 11.9 crores against net profit of Rs 7.2 on Year on Year. 
A 2016 report by Mintel on the global juice market indicates that in India too, packaged juice is likely to grow by taking a share from fresh-squeezed juice and moving into small cities and more rural areas, similar to what is observed globally.

“In India, for example, local fruit juice manufacturer Manpasand Beverages found success focusing on semi-urban and rural markets, where growth is fuelled by rising disposable incomes and a void left by bigger brands that have largely stuck to urban centers,” the Mintel report states. 

Manpasand's healthy market position in the fruit drink segment is underpinned by presence of brand Mango Sip and Fruits Up. The company has made several innovations in the past couple of years, which have enabled it to enter in top 5 players in the mango-based drinks market. In fiscal 2014, it launched the Fruits up brand in the carbonated drink market. The brand grew 71.30% over the past three fiscals and contributed 25% to the company's revenue in fiscal 2017. With network of 4000 distributors across the country and strong presence in Western and northern parts of India, revenue increased significantly over five fiscal through 2017.

The company already has 5 manufacturing units spread in Vadodara, Varanasi and Ambala. Manpasand Beverages plans capex of Rs 600 crores to increase manufacturing capacity with plants at Sri City, Vadodara, Varanasi, and in Khurda, Odisha. The ground-breaking ceremony of upcoming Khurda plant was commenced in the august presence of CM of Odisha, Shri Naveen Patnaik. These four new plants are sure to double the company’s production capacity in the coming months. This shall also help the brand to reach newer markets as the production facilities increase. Manpasand Beverages also plans to enter into new beverage verticals in near future.

What market investors want? Stable outlook, prospective growth and a laborious past for a glorious future. Manpasand Beverages Limited was set up as a proprietorship firm named Manpasand Agro Foods in 1996 in Vadodara, and was reconstituted as a private limited company in fiscal year 2012 and public limited company in fiscal year 2014. Since then it has been expanding its market portfolio. 

Manpasand’s flagship brand, Mango Sip is growing by leaps and bounds and is expected to grow at a CAGR of 33.1% to Rs 1,408 crore by FY20. The recent backlash against carbonated cola drinks especially in the south and the upcoming Sricity facility will help Manpasand acquire southern markets. The Indian Juice market is expected to register compounded annual growth rates (CAGR) of 8% by 2022 to cross Rs. 17,500 crore compared to around Rs. 12,040 crore at present, according to Euromonitor International. The report states that the regional players and start-ups are currently challenging present market leaders by introducing new healthy lines of juices. Over the forecast period, these companies are expected to increase their production capacity and distribution networks to ensure year-round availability, which is likely to affect the current competitive landscape of juice in India.

The Euromonitor International report states that Coca Cola, Parle Agro, PepsiCo and Dabur together account for the vast bulk of juice sales primarily due to their successful portfolios of mango-based drinks. However, companies like Manpasand Beverages and Hector Beverages are quickly gaining market share since the last couple of years. Also, a Motilal Oswal report published in May 2018 suggested that Manpasand Beverages Limited shall see continuous growth in the coming years and would positively impact in its stock value.

Much of the ambiguity around Manpasand Beverages was to do with the fact that the company had not shared a schedule for its Meeting of the Board of Directors of the Company. However, now that the company has informed the bourses that it would convene a board meeting on June 27 to consider and approve audited financial results for Q4 FY2017-18. Soon, after this corporate announcement, the shares of Manpasand Beverages saw an upward trend since the third week of June; further validating the growing positivity about this company in the investor community.

Disclaimer – We have provided all information based on our research and we do not have any holding. Please consult your financial advisor before making any investment decision.

- Chaitanya Kulkarni.

Monday, 25 June 2018

India becomes 69th member of Europe's EBRD Bank

India EBRD bank

India’s membership will pave the way for more joint investment in EBRD regions.

Shareholders of the European Bank for Reconstruction and Development (EBRD) have agreed to India becoming the Bank’s 69th member, setting the stage for an increase in joint investment with Indian companies in the EBRD’s regions.

The Indian government applied for EBRD membership on 18 December 2017, saying the step would benefit both the Bank and India. India will take a shareholding in the EBRD but it will not be a recipient of EBRD financing. The EBRD’s Board of Governors, which represents all of the existing shareholders, voted in favour of India’s application.

With India’s impressive economic growth over the years and enhanced international political profile, it was considered appropriate that India should expand its presence on the global developmental landscape beyond its association with the Multi-lateral Development Banks (MDBs) such as the World Bank, Asian Development Bank and African Development Bank. The decision to join the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (NDB) was taken earlier in this backdrop.

“This is an important step in the relationship between the EBRD and India, allowing us to build further on already very close ties.” – Suma Chakrabarti, President, EBRD.

The EBRD has long worked with top-class Indian companies on investments in the EBRD’s regions, which comprise 38 economies across three continents. The Bank has cooperated with Indian enterprises on joint projects worth nearly €1 billion, including investments with Tata, SREI and Jindal.

Impact:

  • Membership of EBRD would enhance India’s international profile and promote its economic interests. Access to EBRD’s Countries of Operation and sector knowledge.
  • India’s investment opportunities would get a boost.
  • It would increase the scope of cooperation between India and EBRD through co-financing opportunities in manufacturing, services, Information Technology, and Energy.
  • EBRD’s core operations pertain to private sector development in their countries of operation. The membership would help India leverage the technical assistance and sectoral knowledge of the bank for the benefit of the development of private sector.
  • This would contribute to an improved investment climate in the country.
  • The membership of EBRD would enhance the competitive strength of the Indian firms, and provide an enhanced access to international markets in terms of business opportunities, procurement activities, consultancy assignments etc.
  • This would open up new vistas for Indian professionals on the one hand, and give a fillip to Indian exports on the other.
  • Increased economic activities would have the employment generating potential.
  • It would also enable Indian nationals to get the employment opportunity in the Bank.

The total value of joint India-EBRD investments in EBRD economies currently stands at €982 million, with the majority of the transactions in the private sector.

The EBRD also works closely with leading Indian chambers such as the Confederation of Indian Industry, and the Associated Chambers of Commerce and Industry of India. It recently signed a Memorandum of Understanding with the Federation of Indian Chambers of Commerce and Industry.

In 2017, the EBRD signed an accord to strengthen ties with the International Solar Alliance, which was launched during the 2015 UN Climate Change Conference in Paris at the initiative of Indian Prime Minister Narendra Modi and former French President Fran├žois Hollande as a platform for cooperation among solar resource-rich economies.

XX – XX

Also published on InfraStory.com

Thursday, 24 May 2018

HDFC Bank launches Digital Loans against Mutual Funds (LAMF) facility.

HDFC Loan against Mutual Funds

HDFC Bank, India’s leading private sector lender, has launched instant digital loan facility against Mutual Funds. The initiative is an industry first and is a part of HDFC Bank’s on-going digital transformation strategy. Thanks to the internet, banking has become more and more convenient and the future of banking is growing increasingly digital. India has leapfrogged into the era of innovation and Indian banks like HDFC are at the forefront for adopting change.

After the success of Digital Loans against Securities facility, HDFC Bank has now automated the entire process for Digital Loans against Mutual Funds (LAMF). HDFC Bank has partnered with CAMS to provide hassle-free service to its customers.  With LAMF, customers can now pledge mutual fund assets online and get overdraft limit set in their account in under 3 minutes. Customers can now avail of this product through the HDFC Bank website in 3 easy steps.

With this product, customers can leverage their mutual fund (MFs) portfolio to avail funds for any contingencies or emergencies without liquidating their investments or stopping their regular investment plans/SIPs. Digital Loans against Mutual Funds is available for resident Indians and for portfolios that are individual holdings.


One can avail Digital Loan against Mutual Funds (LAMF) through the website of HDFC Bank in 3 easy steps through Net Banking:-

    • Login to myCAMS via HDFC Bank website and select which mutual funds they would like to pledge from their portfolio
    • Click on loan terms and conditions
    • Input one-time password (OTP) and overdraft will be ready to use in their account.

HDFC Bank has collaborated with CAMS, a transfer agent for mutual funds to create a seamless customer experience. It is open to all HDFC Bank customers holding assets in at least one of the ten mutual fund houses registered with the CAMS. These ten fund houses together constitute about 65% of the total assets under management of the industry.

With paper-based loan processing, the customer generally has to wait for 5 to 6 days for loans against mutual funds. Even redemption of mutual funds takes 2 – 3 business days. With Digital LAMF, customers can design their own loan against mutual fund, choosing which assets from their portfolio they would like to pledge, calculate their overdraft limit eligibility against mutual fund, open a current account online instantly and get the money into the account; all in a matter of minutes. Instant loan facility like LAMF can be beneficial during emergencies.

Key benefits of Digital LAMF:

    • Instant availability of money in the account within minutes.
    • Available against both Debt & Equity Mutual Funds
    • Customer retains mutual fund portfolio without liquidation
    • First-time borrowers without a credit history can access loans
    • Interest applied only on amount utilised
    • Available across the country on HDFC Bank website
    • New Loans and Enhancements can be done online.

Mr. Arvind Kapil, Group Head, Unsecured Loans, Home and Mortgage Loans, HDFC Bank at the launch of Digital LAMF
Digital Loan against Mutual Fund is an industry first innovation and takes customer convenience, flexibility and access to greater heights. In emergencies, customers will not be forced to liquidate assets at less than optimal market conditions. They can instead design their own loan to tide over the cash crunch.  We are happy to partner with CAMS on this initiative to provide completely digital access for loans against mutual funds to our customers . With this product, we hope to reach out to customers in the tier 2 and 3 markets and bring them into the digital lending fold. - Mr. Arvind Kapil, Group Head – Unsecured Loans, Home, and Mortgage Loans, HDFC Bank.

The minimum loan amount is fixed at Rs 1 lakh, while there is a limit of Rs 10 lakh for loans on equities and Rs 1 crore for debt mutual funds. HDFC Bank is clocking loan sales of Rs 1,000 crore per month through digital platforms across products and expects it to go up further with the launch of Digital Loans against Mutual Funds.

- Chaitanya Kulkarni.