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IIFL Samasta MD says plan to raise 140-150 bln rupees via debt in FY25

Informist, Monday, Dec 4, 2023 By Asmita Patil MUMBAI - IIFL Samasta Finance, a subsidiary of IIFL Finance, plans to raise 140-150 bln rupees through debt instruments in the year starting April, Managing Director and Chief Executive Officer Venkatesh N. said. "Given the business growth, we should be requiring around 14,000-15,000 crore (140-150 bln rupees)," Venkatesh told Informist on the sidelines of a press conference to announce the company's maiden public issue of non-convertible debentures. The micro-finance institution, which has raised around 50 bln rupees so far in the current financial year through debt, will raise another 50 bln rupees in Oct-Mar, Venkatesh said. Of the total funds to be raised in 2024-25, the lender plans to raise up to 10-15 bln rupees through offshore loans, Venkatesh said. "There's a lot of appetite in the Asian market but interest rates over there are also a little higher. We have started the work, we will keep things ready and when it's favorable we will take it up," Venkatesh said. IIFL Samasta Finance's parent IIFL Finance recently raised $50 mln through its maiden yen-denominated loan. "As of now we have around 60% (of borrowing) from banks, we eventually want to bring it down," Venkatesh said. The company also plans to raise around 20-30 bln rupees through another tranche of public issue of debentures in 2024-25, Venkatesh said. The company's maiden public issue of debentures, worth up to 10 bln rupees, opened for subscription today. The debentures, maturing in 24, 36, and 60 months, carry coupon in the range of 9.21-10.50%. IIFL Samasta Finance's loan assets under management stood at 121.96 bln rupees as of Sep 30. The company's loan book is expected to grow by 30% in 2024-25, Venkatesh said. The company's overall cost of borrowing is currently around 10.4%, and plans to bring it down to 9.8% in the next financial year, Venkatesh said. Shares of IIFL Finance today closed 3.3% higher at 632.45 rupees on the National Stock Exchange.  End Informist Media Tel +91 (22) 6985-4000  Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved

Ambuja Cements to take over Sanghi Industries next week, sources say

Informist, Friday, Dec 1, 2023 By Sunil Raghu AHMEDABAD – The Adani Group is set to take over all the manufacturing and marketing operations of Sanghi Industries Ltd next week, three officials aware of the development said. On Aug 3, the Adani Group had announced that Ambuja Cements Ltd would acquire 56.74% stake in Sanghi Industries at an enterprise value of 50 bln rupees. Ambuja Cements was to acquire the stake from promoters Ravi Sanghi and family at 114.22 rupees per share. Through Ambuja Cements, the Adani Group has also acquired an additional 26% stake in Sanghi Industries through an open offer at 114.22 rupees a share. For this, it shelled out 7.67 bln rupees. Post the completion of the deal, the Adani Group would hold 82.74% stake in Sanghi Industries. "They (Adani group) are about to transfer the second tranche of payment, about 15 bln rupees, in an escrow account in a day or two," a senior official involved with the transaction told Informist. In the first tranche, Adani Group had lent 3 bln rupees as an unsecured inter-corporate deposit to Sanghi Industries to keep the cement plant of the company operational, the company official said. "The final tranche of 17 bln rupees of payment would be between the promoters, which can take place later after the takeover of operations by the Adani Group is complete," the official added. Sanghi Industries has clinker capacity of 6.6 mln tn per annum, cement capacity of 6.1 mln tn per annum, and limestone reserves of 1 bln tn. Its unit at Sanghipuram in Kutch, Gujarat, is the country's largest single-location cement and clinker unit by capacity. The unit also has a captive jetty and a 130-MW captive power plant. It has a network of 850 dealers, with presence in Gujarat, Madhya Pradesh, Rajasthan, Maharashtra, and Kerala. While the Adani Group has carried out the takeover through Ambuja Cements Ltd, it plans to sell cement from the Sanghipuram plant under the ACC brand, another cement company that the group had acquired. ACC does not have a substantial presence in the 25-28-mln-tn-per-annum Gujarat cement market. Ambuja Cements has 8-10% market share, with a better presence in the eastern part of Gujarat. Sanghi Cement, on the other hand, has a sizeable presence in the western part of the state — Saurashtra and Kutch regions — owing to the proximity of its manufacturing plant. "The back-end technical teams and systems for the takeover are in place and even cement bags with branding of ACC have been kept ready at the Sanghipuram cement plant," the Sanghi Industries official said. The Adani Group has already announced it plans to increase cement capacity at Sanghipuram, Kutch, to 15 mln tn per annum over the next two years. It also plans to expand the captive port to handle vessel sizes of 20,000 deadweight tonnage, from 4,000 deadweight tonnage currently, by way of dredging, according to company officials. The Adani Group has also announced that bulk terminals and grind units would be created along the western coast to enable the movement of clinker and cement through the sea route at the lowest possible cost. Today, shares of Sanghi Industries ended locked in the 5% upper circuit at 127.30 rupees, and those of Ambuja Cements closed 0.6% higher at 442 rupees. Shares of ACC Ltd closed 1.3% higher at 1900.25 rupees on the National Stock Exchange.  End Informist Media Tel +91 (22) 6985-4000 Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved

No mention of census yr in Fin Commission terms, fin min source says

Informist, Thursday, Nov 30, 2023 By Krity Ambey NEW DELHI – The terms of reference for the 16th Finance Commission have not mentioned any census year, which will form the basis for the commission's recommendation on devolution of taxes to states, a finance ministry official said. "It is a strange situation where we did not mention any population census in the ToR (Terms of Reference)," the official told Informist. The Cabinet approved the terms of reference for the 16th Finance Commission on Tuesday, the government said on Wednesday, without giving the details of the approved terms. In the terms of reference for the 15th Finance Commission, the government had said that the commission will use the census for 2011 instead of the earlier practice of using the 1971 census. All the finance commissions since the 6th Finance Commission have used the 1971 census. For the 16th Finance Commission, the 2021 census would have been used had it not been hindered by the COVID-19 pandemic, the official said. "Given a scenario where latest census is still not available, it has to be seen which census will be taken." The final decision on reference census may be taken later when the commission is constituted, the official said. The government is in the process of constituting the 16th Finance Commission that will submit its report on the layout of Centre-state financial relations for five years starting 2026-27 (Apr-Mar), by Oct 31, 2025. The decision to use the 2011 census for the 15th Finance Commission was controversial as many states in south India said they have been punished for controlling population. The 15th Finance Commission gave its recommendations on tax devolution based on the 2011 population data with 15% weight on the parameter of population of the states and 12.5% weight on demographic performance criterion. Other parameters included income distance, area, forest and ecology and tax and fiscal efforts.  End   Informist Media Tel +91 (11) 4220-1000 Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved.

NABARD plans 100-bln-rupee issue of 10-year infra bonds Dec, sources say

Informist, Friday, Nov 24, 2023 By Subhana Shaikh MUMBAI – National Bank for Agriculture and Rural Development is looking at raising around 100 bln rupees through infrastructure bonds, sources familiar with the development told Informist. "It is a big-sized issue…the amount would be something around 10,000 crores (100 bln rupees), and we have heard that they might come next month," a source in the know said. A source involved in the transaction said, "Yes, they are planning to raise it, but the quantum has not been decided yet and are still in talks with investors and after that they will decide." In the past, NABARD has raised funds by issuing government serviced and social sector bonds, this infrastructure bond offering would be the first of its kind for the frequent issuer, sources said. "Earlier, they used to issue such special types of bonds with the government's permission, but this one would be the first of its kind," the source said, adding that the maturity of the bond may not be more than 10 years. NABARD's proposed issue comes at a time when several companies and banks are lining up infrastructure bonds in view of buoyant economic activity and strong credit off-take. "They have a lot of infrastructure financing, and they are seeing a pickup there and hence, planning for an infra bond issuance," the source said. In September, NABARD Chairman Shaji K.V. had said that there is a need to raise funds through infrastructure bonds. "We want to have longer-term bonds, we want to issue infrastructure bonds because we are one of the major players in the rural infrastructure space, and we want to support that. We are planning, but we have not arrived at a definite timeline yet," he had told Informist on the sidelines of its maiden social sector bonds. NABARD had then raised 10.41 bln rupees against 30 bln rupees it had set out to borrow through India's first-ever social sector bonds maturing in five years at a coupon of 7.63%. In September, Shaji had also said that NABARD is planning to raise funds through green bonds in the current financial year. Market participants said NABARD is looking to raise around 50 bln rupees through green bonds, of five-year maturity, in 2023-24 (Apr-Mar). Other major players such as National Bank for Financing Infrastructure and Development, or NaBFID, DME Development and India Infrastructure Finance Co Ltd are also likely to line up bond issuances. "Yes, they (NaBFID) are planning to issue another tranche. They could hit the market by second of third week of December," another source said. However, some market participants said the development finance institution could tap the primary market in the next quarter owing to lower disbursements. In June, when the infrastructure lender raised 100 bln rupees through 10-year bonds at 7.43%, NaBFID Managing Director Rajkiran Rai G. had said the company was planning its next bond offering of up to 100 bln rupees in Oct-Dec. End Informist Media Tel +91 (22) 6985-4000  Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved

Want to be profitable for some quarters before IPO, says BankBazaar CEO

Informist, Thursday, Nov 23, 2023 --BankBazaar CEO: Want to be profitable for some qtrs before IPO --CONTEXT: BankBazaar CEO Shetty on sidelines of FIBAC 2023 EXCLUSIVE --BankBazaar CEO: Would like to file draft papers for IPO in 2024 --BankBazaar CEO: Too early to say if we will turn profitable FY24 --BankBazaar CEO: Confident revenue will reach 2.5 bln rupees FY24 --BankBazaar CEO: Confident of 50% revenue growth FY24 --BankBazaar CEO: No need to raise fresh capital right now --Bank Bazaar CEO:Low customer acquisition costs key to profitability  By Shubham Rana MUMBAI – Before BankBazaar goes public, the company wants to be profitable for some quarters, Chief Executive Officer Adhil Shetty said today, adding that the financial technology platform would like to file the draft red herring prospectus for an initial public offering in 2024. "We would like to file DRHP (draft red herring prospectus) in 2024, and we are very, very close to profitability and our aspiration as a company is to go public." Shetty spoke to Informist on the sidelines of the banking conference organised by the Federation of Indian Chambers of Commerce and Industry and the Indian Banks' Association. He said the company hopes to turn profitable in 2023-24 (Apr-Mar), but it is too early to say if this will be achievable. The company is, however, moving in the direction of profitability with revenue growing around 50% in Apr-Sep along with a fall in losses. "We are looking at 240-250 crore (2.4-2.5 bln) rupees in revenue this FY (2023-24) and I think we will get there," Shetty said. "The trending numbers for H1 (Apr-Sep) are good enough. Apr-Jun revenue was up 50% and Jul-Sep growth has been good as well." On the company's plans to raise capital before going public, Shetty said that there is no need for BankBazaar to raise capital as things stand, but is open to discussions if it finds the right partner that can support the intial public offering plans. "We are in a position to grow without depending on external capital...external capital will be nice to have but don't need it right now," Shetty said. While speaking at the conference on the topic of fintechs, Shetty said that low customer acquisition costs are key to profitability for a financial technology company.  End   Informist Media Tel +91 (22) 6985-4000 Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved.

Informist Poll

RBI Policy: Poll shows MPC to stand pat on repo rate, raise GDP forecast

Informist, Monday, Dec 4, 2023 Team Informist NEW DELHI/MUMBAI – The market is unanimous that the Reserve Bank of India's Monetary Policy Committee will keep the policy repo rate and policy stance unchanged for a fifth consecutive time at the outcome of its meeting on Friday, even though higher food prices pose an upside risk to inflation. All 25 respondents in an Informist poll of economists, treasury heads, and analysts expect the rate-setting panel to keep the repo rate unchanged at 6.50% and maintain the 'withdrawal of accommodation' stance at the end of its three-day meeting on Friday. The MPC has stood pat on interest rates since April after raising the repo rate by 250 basis points between May 2022 and February. INFORMIST POLL While the rate-setting panel will draw comfort from October's inflation print, which saw India's headline CPI inflation moderating to below 5%, poll respondents say the committee will be cautious as a persistent rise in onion prices may push inflation prints closer to 6% over the next two months. "Inflation outlook faces risks from food prices due to weather issues and headline inflation is likely to remain above 5% till Apr-Jun, higher than the (RBI's) 4% target,” said Gaura Sen Gupta, economist, IDFC FIRST Bank. “Focus will remain on ensuring inflation moderates towards the 4% target on a durable basis.” Last month, RBI Governor Shaktikanta Das said that even as CPI inflation had eased significantly along with a moderation in core inflation, "recurring and overlapping" food price shocks pose a risk to the headline print. Most poll respondents expect the RBI to revise its 2023-24 (Apr-Mar) GDP forecast higher by up to 30 basis points from the current projection of 6.5?ter the GDP grew at a robust 7.6% in Jul-Sep. As strong economic data allay the central bank’s concerns about growth and give it more room to focus on inflation, analysts expect the rate-setting panel to strike a hawkish tone. “The macro environment of resilient growth, anchored core inflation but high food inflation creates the setting for an extended pause," economists at Nomura said. "However, we believe the RBI will persist with its hawkish talk (emphasising that it is serious about the 4% target) and walk (via tighter liquidity).” However, if growth falls below the RBI's projection of 6.5% and headline inflation trends closer to core in Jul-Dec 2024, then the policy bias should gradually shift towards easing, Nomura said. With the US Federal Reserve widely expected to start its rate-cutting cycle in March, most poll participants see the Monetary Policy Committee starting doing likewise from the second half of 2024.  Fed fund futures traders are now pricing in a 60% chance of a rate cut by the Fed in March, compared with 21% just over a week ago, according to the CME's FedWatch tool. India was already going to be one of the last major emerging market economies to kick off its easing cycle, but when rate cuts do begin next year, they will be deeper in India than in most other economies, a report by Capital Economics said. The market will be hoping that the RBI governor gives some clarity on his comments in October on open market operation sales. At the previous policy meeting, Das had surprised everyone by saying the central bank may have to consider open market sales of government bonds to drain liquidity through the auction route. Economists at Barclays believe the RBI will want to keep the weighted average call rate above the repo rate consistently to facilitate faster transmission from the short end of the curve. They do not think the RBI is looking to tighten liquidity excessively, lest it hinder growth. "We think the bank will likely want to avoid a relapse of the WACR (weighted average call rate) below/ around the repo rate due to excess liquidity conditions, which implies it will continue to conduct two-way operations as needed," Barclays said in a report. Following are the expectations of respondents on the rate action and policy stance by the Monetary Policy Committee on Dec 8: ORGANISATION REPO RATE EXPECTATION POLICY STANCE EXPECTATION Anand Rathi Global Unchanged Withdrawal of accommodation Axis Mutual Fund Unchanged Withdrawal of accommodation Barclays Unchanged Withdrawal of accommodation Capital Economics Unchanged -- CRISIL Unchanged Withdrawal of accommodation Deutsche Bank Unchanged Withdrawal of accommodation Emkay Global Financial Services Unchanged Withdrawal of accommodation Equirus Capital Unchanged Withdrawal of accommodation Federal Bank Unchanged Withdrawal of accommodation HDFC Bank Unchanged Withdrawal of accommodation ICICI Bank Unchanged Withdrawal of accommodation ICICI Securities Primary Dealership Unchanged Withdrawal of accommodation ICRA Unchanged Withdrawal of accommodation IDFC FIRST Bank Unchanged Withdrawal of accommodation India First Life Unchanged Withdrawal of accommodation Karur Vyasa Bank Unchanged Withdrawal of accommodation Kotak Mahindra Bank Unchanged Withdrawal of accommodation Moody's Analytics Unchanged -- Nomura Unchanged -- PNB Gilts Unchanged Withdrawal of accommodation Quantum Mutual Fund Unchanged -- Standard Chartered Bank Unchanged Withdrawal of accommodation State Bank of India Unchanged -- STCI Primary Dealership Unchanged Withdrawal of accommodation YES Bank Unchanged Withdrawal of accommodation End Informist Media Tel +91 (22) 6985-4000 /+91 (11) 4220-1000 Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved

Yield on 10-year gilt seen easing to 7.23?c-end

Informist, Monday, Dec 4, 2023 By Nishat Anjum and Aaryan Khanna MUMBAI – The yield on the 10-year government bond is expected to fall by the end of the month because of positive global cues, with a few hiccups on the domestic front setting a floor for yields, market participants said. According to the median of estimates of 17 money managers, treasury heads, and economists polled by Informist, the yield on the 10-year benchmark 7.18%, 2033 bond at the end of the month is seen at 7.23%, against 7.28% on Nov 30. Today, the bond ended at 7.27%. INFORMIST POLL An easing rate view in the world's largest economy has given comfort to investors in both the US and India, pulling down US Treasury yields sharply from 16-year highs hit in October. Various US Federal Reserve officials, including Chair Jerome Powell, have hinted that rates have peaked in the US. This has led to Fed fund future traders betting on rate cuts as early as March. US rate futures on Friday priced in a 53.4% chance of a rate cut by the March meeting, according to the CME's FedWatch tool. By the May meeting, only 13% of the traders expect rates to remain unchanged. Further hints about a potential pivot are expected at the upcoming Federal Open Market Committee meeting, scheduled on Dec 12-13. The current federal funds target range is 5.25-5.50%, which has remained unchanged since its July policy decision. Close to 98% of Fed funds futures traders expect a status quo policy. Another comfort on the global front is the fall in crude oil prices, participants said. Unlike in November, uncertainty over oil prices due to geopolitical tension in West Asia and supply cuts have eased, with crude prices falling below the psychologically crucial level of $80 per barrel. A rise in crude oil prices increases the risk of imported inflation. Last week, the Organization of the Petroleum Exporting Countries and its allies agreed to extend the voluntary oil output cuts announced earlier this year, but the quantum fell short of market expectations, pulling crude futures down by more than 2%. Today, Brent crude for February delivery fell as low as $77.66 a bbl, from $81.06 per bbl at close of the Indian market on Friday. The easing of rate view in the US has cemented the view that the Reserve Bank of India's Monetary Policy Committee is also done with rate hikes. In the upcoming three-day meeting, starting Wednesday, the panel is expected to maintain status quo as well. Currently, the repo rate stands at 6.50%, with the policy stance of "withdrawal of accommodation". Respondents to the Informist poll do not expect the RBI to go ahead with the open market operation - sales via auction in December, which would keep upward pressure on bond yields in check. After the policy meeting in October, bond yields had surged on the fears of OMO sale auctions, and further clarity is expected from the central bank at this meeting. This month, market participants do not see liquidity in the banking system to be in surplus sustainably, dealers said. This, in turn, has led to bets of the central bank not conducting OMO sale auction. Even as the 7.68%, 2023 bond matures on Dec 15, which would add 788.34 bln rupees to banking system liquidity, it would be offset by outflows on account of advance tax payment for the December quarter, respondents said. If the central bank does not mention OMO auctions in the upcoming policy, that may spur additional gilt buys and pull yields slightly lower, respondents said. "The RBI's policy announcements are typically applicable from one meeting to the next," said Vikas Goel, managing director and chief executive officer of PNB Gilts, a primary dealership. "Unless the governor reiterates it (OMO sales via auction), the timing for that has expired." Despite positive cues globally and back home, the fall in bond yields may be limited as there are concerns over bond supply pressures and an uptick in CPI inflation. The rise in the quantum of state government loans in this quarter has weighed on gilts, as investors increasingly opted for state loans with a lucrative yield spread. This hampered the demand for gilts. In the last auction on Tuesday, 17 states raised 358 bln rupees through bond sales, against the 295 bln rupees notified in the indicative calendar for Oct-Dec's borrowing. So far in the December quarter, states have borrowed 1.78 trln rupees via bonds, against the indicated amount of 1.51 trln rupees. The CPI inflation print for November is seen near 6%, and is another factor why yields are not seen lower at year-end. The data is scheduled for release on Dec 12. The CPI inflation reading for December is expected to top the RBI's 2-6% comfort band. Though both readings are factored in, they make a case for delaying any potential rate cuts the rate-setting panel would consider, which makes it difficult for the 10-year yield to fall below 7.20%, respondents said. "If you can get yield on cash for close to 8%, then investing in government securities needs to be compensated in some way, and if you are not going to get that in yield, you should get that in price," said R. Sivakumar, head – fixed income at Axis Mutual Fund. "The price action is getting delayed as the RBI is remaining hawkish on that front." One of the seasonal factors that is likely to play out is diminished activity in the secondary market as foreign banks and investors close their books at the year-end. Under the general category and fully accessible route, investors bought 618 bln rupees of government bonds in November, according to data with Clearing Corp of India. These flows are likely to dry up during December, with further inflows on account of India's inclusion in JP Morgan's emerging market debt index likely only in Jan-Mar, respondents said. Following are the estimates for yield levels/range in percentage for the 10-year benchmark bond at the end of December: Institution Yield on 10-year benchmark bond Anand Rathi Global Finance 7.20-7.25% Axis Mutual Fund 7.20-7.25% Bank of Baroda 7.25-7.35% DCB Bank 7.20% Federal Bank 7.15-7.35% HDFC Bank 7.25-7.35% IndiaFirst Life Insurance 7.25-7.40% ICICI Securities Primary Dealership 7.20% Kotak Mahindra Bank 7.27-7.30% Karur Vysya Bank 7.25-7.30% PNB Gilts 7.20-7.25% South Indian Bank 7.20% Standard Chartered 7.00% State-owned bank 7.20-7.25% State-owned bank 7.23% Sundaram Mutual Fund 7.20-7.30% Tata Mutual Fund 7.20-7.27% End Informist Media Tel +91 (22) 6985-4000 Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved

Rupee seen tad up at 83.25/$1 December-end as dollar weakens

Informist, Friday, Dec 1, 2023 By Kabir Sharma and Pratiksha MUMBAI/NEW DELHI – The rupee is seen rising slightly in December due to broad weakness in the dollar as the US Federal Reserve is widely expected to start cutting interest rates in the first half of 2024. However, strong demand for the greenback from importers is widely expected to stand in the way of any sharp gains for the Indian currency. The median of an Informist poll of 19 respondents from banks, corporates and brokerages showed the rupee may settle at 83.25 a dollar by the end of December, as against 83.40 at the end of November. Of these, only eight poll participants expect the Indian currency to appreciate   beyond 83.20 a dollar.  The ranges provided by most poll respondents for the Indian currency suggest that the Indian unit will continue to witness low volatility during the last month of the year.  The dollar index, which measures the strength of the greenback against a basket of six major currencies, fell over 3% in November after lower-than-expected US inflation in October reinforced expectations that the US Federal Reserve may be done raising interest rates. The US CPI was at 3.2% in October, against expectations of 3.3%, according to economists surveyed by Dow Jones. Sequentially, the index was flat, against an expected rise of 0.1%. The key economic data and recent comments by Fed officials also fuelled bets that the US Fed may start cutting interest rates by mid-2024. Almost 47% of Fed fund futures traders expect the first rate cut in the world's largest economy by March, according to the CME Group's FedWatch Tool. However, just like last month, aggressive demand for dollars by oil marketing companies and other importers may keep the rupee from notching up its gains, market participants said.  "So crude is supporting the rupee but overall the trade deficit is there for India, so even crude at these levels will not be able to keep the bill of imports at the lower end," said a dealer with a large state-owned oil company.  India's merchandise imports rose to an all-time high of $65.03 bln in October, driving up the country's trade deficit to a record $31.46 bln.   Market participants expect domestic demand to remain resilient going ahead. India's GDP grew sharply higher than expected at 7.6% in Jul-Sep.  Moreover, foreign portfolio investors typically withdraw funds from emerging markets in December to book profits at the end of the calendar year. This may also weigh on the local currency, according to market players.  Meanwhile, the Reserve Bank of India may continue to prevent the rupee from a runaway depreciation. However, market participants said that the recent movement in the Indian unit suggests that the central bank may be looking at a slow and gradual depreciation in the currency.  "The resistance levels have further shifted to 83.35-83.40 in November as the RBI now permits the rupee to lean towards the depreciating side, taking into account the banking system's liquidity at a 5-year low. Consequently, they are less able to easily sell dollars and buy rupee," said Amit Pabari, managing director, CR Forex.  Market participants said that crude oil prices may consolidate from here on, and may not be a point of concern this month.  On Thursday, the Organization of the Petroleum Exporting Countries and allies agreed to extend the voluntary oil output cuts announced earlier this year, but the quantum fell short of market expectations, pulling crude futures down by over 2%. Saudi Arabia, Russia, and other members of OPEC, who pump more than 40% of the world's oil, agreed to voluntary output cuts of 2.2 mln barrels per day for Jan-Mar of 2024. However, at least 1.3 mln bpd of those cuts were an extension of the voluntary curbs that Saudi Arabia and Russia already had in place, according to Reuters. Markets had expected an additional cut of 2 mln bpd. In December, market participants look forward to the US non-farm payroll and inflation data, both of which are scheduled to be released before the Federal Open Market Committee's meeting on Dec 12-13.  "We have the NFP data, which will set the tone for how the situation could be if it is sharp on the upside, then the US CPI, followed by the FOMC," said Upasna Bhardwaj, chief economist at Kotak Mahindra Bank. "If the commentary is hawkish then we can see rupee going to 83.40, but if they follow the same tone as other officials have lately, markets have priced that in," she said. POLL DETAILS Participant Dec-end Mar-end CR Forex  83.05-83.10 81.50-83.50 DBS Bank India 83.00 82.70 DCB Bank 83.00-83.50 82.75-83.50 Edelweiss Securities 83.50 84.00 Emkay Global Financial Services 83.30 83.15 Finrex Treasury Advisors LLP 83.00 82.50 HDFC Bank 83.00 84.00 Karur Vysya Bank 83.60 83.80-84.00 Kotak Mahindra Bank  83.20-83.40 83.50 Large Corporate 82.80-83.50 82.40-84.50 Large Engineering Co 83.75 84.00 Large State-owned oil Co 83.60 – Mecklai Financial Services  83.00-83.40 82.50 Reliance Securities  83.00-83.50 – Shinhan Bank India 83.20-83.70 82.80-83.80 SMC Securities 83.60-83.80 82.00-84.00 South Indian Bank 83.00-83.50 – Standard Chartered Bank 83.50 – Vrajlal Thakker & co 83.05 83.44 Median 83.25 83.30 End Informist Media Tel +91 (22) 6985-4000  Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved

India Jul-Sep GDP growth seen at 6.8% vs 7.8% Apr-Jun

Informist, Friday, Nov 24, 2023 By Shubham Rana NEW DELHI – India's GDP growth is likely to have eased to 6.8% in the September quarter from a four-quarter high of 7.8% in Apr-Jun, as the statistical effect of a low base normalises, according to a poll of 21 economists by Informist. India's GDP grew 6.2% in Jul-Sep last year, and 7.2% in the year ended March. According to the poll, growth in gross value added in Jul-Sep is also seen falling to 6.8% from 7.8% a quarter ago. The National Statistical Office is scheduled to release GDP data for the quarter ended September at 1730 IST on Nov 30. Even as GDP growth is seen easing from the previous quarter, economists expect the underlying growth trends to have been robust during Jul-Sep, led by the services sector and high capital expenditure by the central and state governments. At the projected 6.8%, GDP growth in Jul-Sep would be 30 basis points higher than the Reserve Bank of India's projection for the quarter. The S&P Global services purchasing managers' index averaged 61.6 in Jul-Sep, higher than 55.7 in the corresponding period of last year and 60.6 in Apr-Jun. Services exports in the quarter ended September were at $83.38 bln, up 8.7% from Jul-Sep 2022. "Underlying growth trends continue to look robust in India, with activity underpinned by domestic consumption, high levels of state-led capex, and strong growth in the utilities sectors," Barclays said in a report. The Centre's capital expenditure during Jul-Sep rose 26.4% from the year-ago period. Capital spending by states has also picked up this year. Industrial growth is also expected to have picked up in the quarter ended September, economists said. The Index of Industrial Production rose 6.0% in Jul-Sep from 4.5% in Apr-Jun, while India's manufacturing PMI averaged 57.9 in Jul-Sep, unchanged from Apr-Jun, and higher than 55.9 in Jul-Sep. "High-frequency data suggests that the momentum of construction activity remained healthy in Q2 FY2024 (Jul-Sep), with the sub-par rainfall resulting in relatively lower disruptions in the quarter vis--vis what was typically seen in the past," ICRA said in a report. Growth in the agriculture sector is seen subdued, with economists expecting agriculture GVA growth to be in the range of 2.0-3% in Jul-Sep, the least in at least four quarters, due to a lower-than-normal monsoon.  Following are the estimates of respondents on GDP growth in Jul-Sep: Organisation Jul-Sep GDP Growth Estimate (in %) STCI Primary Dealer 6.1 Societe Generale 6.4 CareEdge 6.5 QuantEco Research 6.5 Motilal Oswal Financial Services 6.6 Bank of Baroda 6.7 IDFC FIRST Bank 6.7 YES Bank 6.7 Barclays 6.8 Capital Economics 6.8 Deutsche Bank 6.8 HDFC Bank 6.8   ICICI Securities Primary Dealership   6.9 India Ratings 6.9 Equirus Securities 7 ICRA 7 Kotak Mahindra Bank 7 State Bank Of India 7 Nomura 7.1 Emkay Financial Services 7.2 Standard Chartered 7.2 End Informist Media Tel +91 (11) 4220-1000 Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved

September IIP growth seen easing to 7.5% from 10.3% in August

Informist, Thursday, Nov 9, 2023 By Shubham Rana NEW DELHI – Growth in India's industrial output is likely to have moderated to 7.5% in September from a 14-month-high of 10.3% a month before, mainly due to the statistical effect of a higher base, according to an Informist poll of 18 economists. The industrial growth was 3.3% in September last year. The National Statistical Office will detail the Index of Industrial Production for September at 1730 IST on Friday. Projections by economists for industrial growth in September ranged from 5.8% to 11.5%. The base effect is such that, even if the index remains unchanged in September from a month ago, industrial production will moderate to 8.4%. Factory output had risen 1.7% sequentially in September last year, higher than the historical average, as activity had picked up due to the festival season, economists said. The festival season is delayed this year with Diwali being celebrated on Nov 12 compared with Oct 24 last year. In the last 11 years, factory output on an average has risen 0.8% sequentially in September. An industrial growth of 7.5% would mean a sequential decline of 0.9% in September, reflecting the delayed festival season.   Notwithstanding the moderation in growth, industrial activity remained strong, economists said. The August print was also pushed up by lower-than-normal rainfall. "Seasonality did not play out in August because it was the driest August in 100 years," said Anubhuti Sahay, head of South Asia economics research at Standard Chartered. "In September, some seasonality played out, but overall economic activity remains strong." Most high-frequency indicators showed robust growth in September, even as they moderated compared to the previous month. The output of India's eight core industries, which account for over 40% of the total weight of the Index of Industrial Production, fell to a four-month low of 8.1% in September from 12.5% in August. E-way bills generated rose 9.5% on year to 92.02 mln in September, but were lower than 93.44 mln generated in August. The manufacturing Purchasing Managers' Index fell to a five-month low of 57.5 in September from 58.6 in August, but remained firmly above the long-run average of 53.9. Following is a summary of estimates for IIP growth in September: Organisation     Forecast for September growth (in %)     HDFC Bank     5.8     Bank of Baroda     6.5     ICICI Bank     6.6     YES Bank     6.6     DBS Bank     6.8     State Bank Of India     6.8     IndiaRatings     7.0     Motilal Oswal Financial Services     7.3     IDFC FIRST Bank     7.5     QuantEco Research     7.5     IndusInd Bank     7.6     Standard Chartered     7.7     ICICI Securities Primary Dealership     7.9     CRISIL     8.0     ICRA     8.0     CareEdge     8.5     Kotak Mahindra Bank     10.5     Moody's Analytics     11.5 End Informist Media Tel +91 (11) 4220-1000 Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved

Nifty 50 set for recovery in Nov but caution remains

Informist, Monday, Nov 6, 2023 By Anshul Choudhary and Apoorva Choubey MUMBAI – After a rout in October, Indian equities are set to claw back some gains this month because risk appetite around the world seems to be returning as a result of the US Federal Reserve's recent comments being less hawkish than expected. The underlying outlook for Indian stocks remains quite bullish due to a resilient domestic economy and the fact that India Inc's earnings growth for Jul-Sep has been largely strong, said market participants. Growing Narrative That Fed's Interest Rate Hikes May Be Over And That The US Economy Will Do Better Than Expected Is likely To Nudge foreign Investors To Turn Less Bearish On Domestic Equities However, the recovery in equities in November is likely to be limited as equity investors, especially foreign fund managers, could be in a wait-and-watch mode, given the widespread concerns over global macroeconomic headwinds and geopolitical tensions, they said.  For November, the 50-stock index is expected to find support at 18800 points and face resistance at 19500-19600 points, according to the median of projections of 15 brokerages. Today, the benchmark index closed at 19411.75 points. India's headline indices fell 2.8% in October, as tensions in West Asia, the increasing worry that interest rates would remain high for longer, rising US bond yields, and appreciation of the dollar prompted foreign investors to net sell shares worth about $2.7 bln during the month.  The 10-year US Treasury bond yield rose to over 5% last month, leading to outflows from all major emerging markets, which India wasn't insulated from. However, the narrative in global financial markets took a turn after the Fed decided to stand pat on interest rates and the US central bank's assessment of the strength of the US economy and trends in core inflation fanned hopes that the rate tightening cycle in the world's largest economy may be nearing an end.  "They (investors) have clearly ruled out a rate hike in the US in a sense...which is visible in gains in markets," said Vijayakumar, chief investment strategist at Geojit Financial Services.   Moreover, the GDP growth of 4.9% in the US shows that the economy is still resilient, which has now led to the perception that the US will not face a recession in 2024, unless there are external shocks, he added. Morgan Stanley's global research desk also believes that financial markets are now pricing in only a slowdown in the US, rather than a recession that was projected earlier.  "We have maintained our view that the US economy avoids recession but slows as monetary policy restrains demand, and yet so far you have to squint to see the slowing," the brokerage said in a report this weekend. Post the Fed's decision on Wednesday, the 10-year treasury yield fell 31 basis points in three days, settling at 4.57% on Friday. Lower yields in the US bode well for India as high US bond yields make emerging markets less attractive to foreign investors. This growing narrative that US Fed's interest rate hikes may be over and that the US economy will do better than expected is likely to nudge foreign investors to turn less bearish on domestic equities and reduce the pace of selling this month, analysts and market experts said. Growing clarity about the impact of geopolitical tensions in West Asia will also underpin equities in the next few weeks, they said. "The intensity of selling by foreign investors may come down as they become more confident that the war (Israel-Hamas war) will not escalate into other territories," said Narendra Solanki, head of equity research at Anand Rathi Share & Stock Brokers. Geojit Financial's Vijayakumar believes the Israel-Hamas war is not expected to lead to any sharp rise in crude oil prices for now. "Markets are not pricing in an escalation in war in the Middle East (West Asia)," he said, while also adding a word of caution that markets may change their stance if other countries in the region, such as Iran, get involved. Analysts believe there is only a feeble possibility of other countries getting directly involved in the war due to the presence of the US military in the region. This confidence was somewhat visible in the slight decline in crude oil prices in the past two weeks. Brent Crude Oil futures fell for the second consecutive week, falling nearly 8% in two weeks.  Despite the growing optimism about interest rates not being tightened more in the US, there are plenty of those who believe Indian stock valuations are still vulnerable to high interest rates, as investment cycles by governments and companies could get delayed due to high finance costs while sticky inflation in some countries is starting to impact consumer demand.  "Impact of hardened interest rates in the US is yet to be fully seen, which will be felt when corporates and banks come to refinance their debts next year," said Christy Mathai, equity fund manager at Quantum Mutual Fund. While sharp credit growth for banks and recovery in earnings of consumer focussed companies during Jul-Sep has underscored equity investors' faith in the domestic economy, expensive valuations will keep equity returns muted, especially in the mid- and small-cap segment, said analysts.   "Post earnings, mid- and small- caps are largely still expensive and these stocks might remain sideways for sometime," said Mathai. "Although, there are some opportunities in small finance bank and chemical space (in the broader market)."    Another sign that caution is still prevailing in the market is the addition of short positions by foreign investors in index futures of the November derivatives series.  Moreover, technical analysts are still pegging the strongest support for the Nifty 50 at 18800 points, which implies that the support has not inched higher despite the recent recovery in the index. In October, the benchmark had fallen to its lowest level in over three months to 18837.85 points. The current support level is 3.2% lower than today's close while the upper band of the resistance zone is 1% higher than that. End Informist Media Tel +91 (22) 6985-4000 Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved

Deep Dives

Large offerings from pvt cos push up Nov corporate bond supply

nformist, Monday, Dec 4, 2023 By Subhana Shaikh MUMBAI – Fundraising through corporate bonds on a private placement basis jumped over twofold from a month ago in November on the back of big ticket offerings from large-sized private players.   Companies raised 991.68 bln rupees in November through the placement of 242 bonds compared with 405 bln rupees mobilised through 208 bonds in October, data compiled by Informist and from the National Securities Depository showed. On a year-on-year basis, fundraising through the route rose 25%. DEEP-DIVE Issuances had dropped significantly in October as several big-ticket issuers shied from the market because of a rise in borrowing costs. "Due to the (RBI monetary) policy, market levels were not stabilised and corporates shied away from the debt market, but in November, levels stabilised and a large deal by RIL (Reliance Industries) got oversubscribed, so that provided some boost to the market," said Venkatakrishnan Srinivasan, founder of Rockfort Fincap. Private corporates, state-owned entities and banks accounted for a major share of the total issuances in November. While public sector companies--the most frequent issuers in the corporate bond market--contributed just 23% of the total fundraising in November, private companies accounted for 34% of the total fundraising, according to data compiled by Informist. Banks formed a mere 15% of the total quantum of funds raised. India's largest conglomerate, Reliance Industries, was the biggest borrower last month, raising a whopping 200 bln rupees through 10-year bonds at a coupon of 7.79%. The issue was fully subscribed. The longest tenure last month was by GMR Goa International Airport. The private sector player raised 24.75 bln rupees through bonds maturing on Sep 27, 2043. Among private players, Titan Co and Larsen and Toubro raised 25 bln rupees and 35 bln rupees, respectively, through two series each. Last month saw the offering of government-guaranteed bonds, with Mahangar Telephone Nigam raising 25.7 bln rupees by issuing bonds maturing in 10 years. REC was the biggest issuer among state-owned entities, borrowing over 100 bln rupees through four batches of bond offerings, followed by Small Industries Development Bank of India, which raised 48.87 bln rupees through five-year bonds. Power Finance Corp raised 26.25 bln rupees through 10-year papers, while Indian Railway Finance Corp borrowed 24 bln rupees through papers maturing in three years. Banks, which had kept to the sidelines in October, tapped the bond market last month. State Bank of India raised 100 bln rupees through tier-II bonds maturing in 15 years and Canara Bank borrowed 50 bln rupees through 10-year infrastructure bonds. Among housing finance companies, LIC Housing Finance tapped the bond market to raise 20 bln rupees by re-issuing its May 2033 bond. Other housing financiers such as Shriram Housing Finance, Piramal Capital and Housing Finance and Aditya Birla Housing Finance also hit the market. The Reserve Bank of India's move to increase risk weights on personal loans by banks and non-banking financial companies by 25% to 125% and also increasing the risk weight on credit exposure of banks to NBFCs by 25% also prompted NBFCs to tap the primary market. "Another thing was negative liquidity, which also pushed the borrowers, especially when banks were being selective in lending. So, then they were looking for alternative options. Also, there was ample appetite for long-term bonds last month," Srinivasan said. Liquidity in the banking system was in a deficit of 487.55 bln rupees as on Nov 30, as against 1.06 trln rupees at the start of the month.  During the month, yields on corporate bonds maturing in 3-5 years issued by the benchmark National Bank for Agriculture and Rural Development rose 3-4 basis points, while those on 10 year bonds were largely steady. According to money managers, a few mutual funds were said to have been selling corporate bonds in the secondary market as they made space for the fresh supply.  End Informist Media Tel +91 (22) 6985-4000 Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved

Nifty 50 eyes new highs December as macros improve, short bets fall

Informist, Friday, Dec 1, 2023 By Apoorva Choubey  MUMBAI - Improving risk appetite across global markets and covering of short positions by institutional investors suggest that the Nifty 50 could inch higher in the December derivatives series, sustaining a recent uptrend that has helped the benchmark index reclaim the crucial 20000-mark and scale fresh highs, analysts said. Appetite for global equities improved over the last fortnight as weaker-than-expected inflation and slowing growth in the US, world's largest economy, fanned hope among market participants that the US Federal Reserve could start cutting interest rates in the first half of 2024. These hopes translated into a fall in Treasury yields as well as the dollar index, thereby improving the outlook for quality emerging markets such as India, several market participants said.  TREND As a result, foreign investors pumped $2.3 bln into Indian equities during November. India's headline index gained 6.8% during the November derivatives series, which expired on Thursday. However, mid- and small-cap stocks stole the show, with the Nifty Midcap 150 and Nifty SmallCap 250 indices gaining a massive 12.6% and 14.4%, respectively. These gains were also underpinned by the fact that foreign and domestic institutional investors rushed to square off their outstanding short positions in index futures and some specific stocks, as the global risk aversion started abating, brokerages said. Currently, the net short positions of FPIs in index futures outnumber their long bets by 57,000 contracts, Nuvama Institutional Equities said in a report. FPIs, who form one of the largest categories of investors in the Indian derivatives market, were most bearish in November in the last nine months. Their net short positions outpaced long ones by 152,000 contracts at the start of the November series. Moreover, such investors have turned bullish on stock futures. Their net long positions in single stock futures were at 70,000 contracts, compared with net short positions of 136,000 contracts last month.  "I anticipate the Nifty index to trade within a range with a good chance of Nifty index making a new high in the next few days...stocks are poised for continued success," Abhilash Pagaria, head of alternative and quantitative research at Nuvama Institutional, said in the report.  Given the covering of short positions, the rollover count was lower than usual but the open interest in the Nifty 50's futures is still strong, remaining close to the average of the last three months, according to analysts. Rollovers to the Nifty 50's December futures were at 73% at expiry, higher than the three-month average of 79%, brokerage JM Financial Institutional Equities said.  For the December series, the index is likely to test 20500 points while strong support is seen at 19800 points, according to brokerage ICICIdirect. Today, the index closed at its highest ever closing level of 20267.90 points, up 0.7% from the previous day.   However, a few market participants believe that the gains seen this week make a case for equities investors to maintain a bit of caution, ahead of key events lined up during the month. The aggressive number of long positions held by high net worth individual investors is also a risk, as they could unwind these at the slightest hint of negative news, and trigger an immediate crash in small- and mid-cap stocks, cautioned some analysts. In what can be seen as a sense of caution among some participants, the 19000 strike put option of the Nifty 50's monthly contracts still has the highest open interest. On the call side, the 21000 strike has the maximum number of open positions.  The December series will be an event-heavy one, with local state elections results, Reserve Bank of India's monetary policy review, and the US Fed's interest rate decision scheduled to be detailed over the next few weeks. The year-end holiday season may also induce volatility in the absence of liquidity, warned brokerage IIFL Securities.  End Informist Media Tel +91 (22) 6985-4000  Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved

Tata Tech valuation zooms post IPO, but can growth keep pace?

Informist, Friday, Dec 1, 2023 By Akshata Gorde MUMBAI – Investors' faith in the Tata brand, a decent valuation, and robust market sentiment helped Tata Technologies post the highest listing gains for any initial public offer since November 2021, but the question now is whether the company's growth can keep pace with investors' expectations, as evident in the now expensive valuation.  Shares of the engineering and digital transformation services provider listed at 1,200 rupees on Thursday, a premium of 140% to the issue price of 500 rupees. While listing gains were expected, the rise was much higher than the grey market premium of 83%, which implied listing at 915 rupees. The Company's Shares Had Listed At 1,200 Rupees On Thursday, A Premium Of 140% To The Issue Price Of 500 Rupees. "While a decent gain was expected, today's (Thursday) listing did exceed our expectations...hard to put a number, but Street surely expected a solid listing for Tata Technologies," one of the book-running lead managers said, asking not to be identified. The euphoria around Tata Technologies' initial public offering – it was the first Tata group company to have gone public in nearly two decades – pushed the stock further up after listing to hit a high of 1,400 rupees, up 180% from the issue price. The stock finally closed at 1,313 rupees on Thursday, up 163% from the IPO price. The overall market sentiment also played a role in the bumper listing, as the Nifty 50 rose to over 20100 points on Thursday amid an improving macroeconomic outlook and good corporate earnings, technical analysts said. Almost all analysts had recommended subscribing to the IPO, betting on the company's brand name, valuations, and automotive expertise, which led to the IPO being subscribed 69.43 times. With the issue price at the higher end of the price band of 475-500 rupees apiece, Tata Technologies raised 30.43 bln rupees through an offer for sale by promoter Tata Motors and investors Alpha TC Holdings and Tata Capital Growth Fund 1. The last time an IPO generated this kind of returns was in November 2021, when Latent View Analytics Ltd and Sigachi Industries Ltd posted listing gains of 148% and 270%, respectively. VALUATION After the spike on day one, the stock has become expensive compared to the "reasonable or cheap" value set by the company and book-running lead managers, according to several analysts. However, a few analysts consider the current valuation as fairly in line with peers such as L&T Technologies Services Ltd, KPIT Technologies Ltd, Cyient, and Tata Elxsi Ltd.  "The 500-rupee valuation was cheap compared to peers and now the valuation is fair," said Omkar Tansale, senior research analyst at Axis Securities Ltd. "Don't think people will book profit or anything and the stock won't go below 1,000 rupees," he added. At the issue price of 500 rupees, the price-to-earnings multiple was 28 for the current financial year, assuming the company will double the 8.67 per share earnings it clocked for Apr-Sep. At the listing price of 1,200 rupees, the PE multiple becomes 69 and at Thursday's closing price of 1,313 rupees, the PE multiple rises to 76. Both are sharply higher than the PE multiple of any company on the Nifty IT index; indeed, the highest forward PE for a company in the index is 38, for L&T Tech. When asked whether Tata Technologies' growth will be able to justify the expensive valuation, Sumit Pokharna, vice-president of research at Kotak Securities Ltd, said, "Let's put it this way. KPIT Technologies, which is growing at a much faster pace compared to others, is also very expensive, and so we have a 'sell' rating on the stock." He also said that most growth opportunities for Tata Technologies had already been factored into the stock price. Echoing this, Rajat Sharma, founder and chief executive officer of portfolio management services firm Sana Securities, said in a report, "As a long-term investor, if you get the allotment in the IPO, it would be safe to sell the stock and re-enter at a lower level in a few months when the frenzy around this sector settles down." Today, shares of Tata Technologies opened higher but fell soon after to trade 6.7% lower at 1,225.25 rupees on the National Stock Exchange at 1415 IST. RISKS AHEAD The "fear of missing out" among investors might act as a temporary tailwind for the stock in the near term, but chances of cannibalisation or overlap with Tata Elxsi, and concentration of revenue from Tata Motors and Jaguar Land Rover may be concerns in the long term, several analysts said. Tata Elxsi, also from the Tata group, is a design and technology consulting company that offers product design and engineering services across industries such as automotive, media, and communications, while Tata Technologies provides product development and digital solutions to original equipment manufacturers, resulting in a possible overlap of customers.  Another worrying factor for analysts is the high client concentration risk, with Tata Motors and Jaguar Land Rover, its "anchor clients", contributing almost 38% to the total revenue and 46% to the services segment in Apr-Sep. The company's services segment contributed nearly 79% to the total revenue for Apr-Sep. The revenue concentration risk runs deeper than the dependence on the Tata group. As much as 57% of the company's Apr-Sep total revenue, and 71% of the services segment revenue came from only the top five clients. However, one positive is that the engineering research and development segment has been growing at a compounded annual rate of around 12% over the past five years, and is expected to grow at 14-17% over the next decade, said Rajat Sharma of Sana Securities. During 2022-23 (Apr-Mar), Tata Technologies' revenue rose 25% over the previous financial year, lower than the 27-38% growth registered by Tata Elxsi, Cyient, and KPIT Technologies, but higher than the 22% growth seen by L&T Tech. The growth in Tata Technologies' profit after tax was the strongest among its peers at 43%, the next best being KPIT Tech's 39%. The company has shown improvement in the first half of the ongoing financial year ending March, with revenue growth of 34% on year at 25.26 bln rupees and a 35% increase in profit after tax at 3.52 bln rupees. Tata Technologies, which has both services and technology solutions as business lines, had posted revenue of 41.14 bln rupees and a profit after tax of 6.24 bln rupees for 2022-23.  End Informist Media Tel +91 (22) 6985-4000 Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved

Blockbuster Jul-Sep GDP numbers brighten FY24 growth outlook

Informist, Friday, Dec 1, 2023 By Shubham Rana NEW DELHI – The spectacular growth in India's GDP in Jul-Sep surprised even the most optimistic of forecasters, so much so that economists now project the growth for the full year ending March to be closer to 7.0%, sharply higher than estimated earlier. India's GDP grew at a robust 7.6% in the second quarter of the financial year, driven by double-digit growth in industry. The GDP growth in Jul-Sep was higher than 6.2% a year ago, but marginally lower than 7.8% recorded in Apr-Jun. To Put Into Perspective How Big The Surprise Is, The Growth Figure For Jul-Sep Was 110 Basis Points Higher Than The Reserve Bank Of India's Estimate Of 6.5%. To put into perspective how big the surprise is, the growth figure for Jul-Sep was 110 basis points higher than the Reserve Bank of India's estimate of 6.5%. It was also 80 bps higher than the consensus estimate and 40 bps above the highest estimate of 7.2% in the Informist poll. RBI Governor Shaktikanta Das in October said looking at the momentum in economic activity, the GDP data for Jul-Sep was expected to surprise on the upside. But even the central bank would not have expected such a sharp jump. Economists now expect GDP growth in 2023-24 to be higher than their previous estimates, with revisions ranging from 20 bps to close to 100 bps. After the release of GDP numbers for Apr-Jun, the GDP growth for 2023-24 was seen at 6.1?cording to an Informist poll. Now, most economists expect growth to be higher than the RBI's current estimate of 6.5%. "The GDP print has surprised on the upside for three consecutive quarters, indicating underlying strength in certain pockets of the economy," Morgan Stanley, which revised up its GDP growth forecast for 2023-24 by 50 bps to 6.9%, said in a research report. Nomura, which had earlier projected India's GDP growth in 2023-24 at 5.9%, now expects it at 6.7%. Emkay Global Financial Services, too, has revised its full year growth estimate to 6.6% from the 5.7% projected at the beginning of the year. Economists now expect the RBI to revise its GDP growth projection higher by around 20-30 bps. India's GDP has grown 7.7% in Apr-Sep. Even if the growth in the remaining two quarters is in line with the RBI's estimates of 6.0% and 5.7% for Oct-Dec and Jan-Mar, respectively, the full-year figure will be around 6.8%. Some economists even expect the 2023-24 GDP growth to be higher than 7.0%. "With 7.7% real GDP growth in H1 FY24 (Apr-Sep), the overall growth for full fiscal would be around 7.0% (assuming 6.0-6.2% growth in H2). Though there are chances that it may cross the 7.0% mark in FY24," Soumya Kanti Ghosh, group chief economic adviser, State Bank of India said in a report. GROWTH DRIVERS Growth in Jul-Sep was mainly driven by broad-based growth in industry, with the sector growing at a nine-quarter high of 13.2%. Within industry, manufacturing growth was 13.9%, the highest since Apr-Jun 2021-22, and construction grew at a five-quarter high of 13.3%. Mining grew at an eight quarter high of 10.0% in Jul-Sep, and power and gas grew at a five-quarter high of 10.1%. On the expenditure side, gross fixed capital formation led the charge with a five-quarter high growth of 11.0% in Jul-Sep. The sharp jump in fixed capital formation can be attributed to robust capital expenditure by the government. The Centre's capital expenditure during Jul-Sep rose 26.4% from the year-ago period. Capital formation was supported by growth in government consumption expenditure in Jul-Sep at 12.4%, a 10-quarter high. "Overall, headline GDP has surprised positively, but the government appears to be in the driver’s seat – both for consumption and investment. Private consumption and private capex remain weak, in our view," economists at Nomura said in a report. For the second half of the financial year ending March, growth is expected to slow down, as is reflected from the RBI's quarterly GDP growth projections, as the favourable base effect fades away and external headwinds dominate, economists said. "While growth has turned out to be stronger than expected in 2023 and Apr-Sep, we expect the momentum to moderate in Oct-Mar and 2024 due to the lagged impact of monetary policy tightening, intensification of a global growth slowdown, the fading of domestic pent-up demand, and possible weather-related adverse factors," Kaushik Das, chief economist, India and South Asia, Deutsche Bank, said in a report. Growth momentum is also expected to moderate as companies’ profit growth is seen slowing down because of a rise in input cost pressures, and high food inflation with CPI inflation seen closer to 6% in November and December. But economic momentum has held up well in the current quarter as well, thanks mainly to the festival demand, which may push the full year growth rate closer to 7%, economists said. "Economic activity indicators for Oct-Dec so far signal that growth has held up during this festive season. While optically H2 FY24 (Oct-Mar) prints are expected to be lower than H1 as the favourable base effect impact fades, on a sequential basis we see an increase in H2," HDFC Bank said in a report. Economists at HDFC Bank expect GDP to grow at 6.8% in 2023-24.   Monthly indicators show that Oct-Dec is off to a strong start. Goods and services tax collections, e-way bill generation and core sector growth all point to a robust quarter. End Informist Media Tel +91 (11) 4220-1000 Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved

FOCUS: Renewed FPI buys, better macro outlook to push Nifty 50 higher

Informist, Thursday, Nov 30, 2023 By Neeshita Beura and Anshul Choudhary MUMBAI – The benchmark Nifty 50 index, which crossed the psychological barrier of 20000 points on Wednesday, is likely to rise further as market participants expect foreign portfolio investors to continue buying Indian equities despite the expensive valuations. While participants are certain the index will set new highs in the near to medium term, they are unwilling to set a target given that the calendar year is drawing to a close and the general election is due next year. The 5% rise in the Nifty 50 in November was driven by a confluence of macroeconomic and technical factors, according to analysts. International crude oil prices cooled, US Treasury yields came down as inflation in the US eased, and fear of the US Federal Reserve raising interest rates further receded. US inflation rose 3.2% in October, slower than the 3.7% rise recorded in September. The fall in US Treasury yields has made Indian equities attractive once again for foreign investors. Geopolitical concerns have also eased after the truce, temporary as yet, in the war between Israel and Hamas. Besides, the recent earnings season has boosted confidence in the economy and the prospects of the corporate sector. The comments by the Fed after its policy meeting earlier this month were perceived as less hawkish than expected, prompting several market participants to believe that the US central bank is done with raising interest rates. The impact of this was visible immediately: the widely tracked Dow Jones Industrial Average rose over 7% in November. This also boded well for the Indian market. "If US inflation continues to decline, FPIs will continue buying Indian equities," said Vijayakumar, chief investment strategist at Geojit Financial Services. The yield on the 10-year benchmark US Treasury bond, which had risen to nearly 5% in October, has since fallen and was at 4.3% on Tuesday, reflecting the perception that the Fed's rate hikes may be over. The rise in the Nifty 50 in November came after FPIs resumed buying Indian stocks. They had been net sellers in the previous two months, offloading Indian stocks and buying US bonds to benefit from the higher yields. A rising dollar, the likelihood of a slowdown in global growth, and heightened geopolitical tensions triggered the flight to safer assets from emerging markets. FPIs, which sold shares worth $2.37 bln in September and $2.66 bln in October, resumed buying Indian equities in November. As of Tuesday, they had bought equities worth $614.19 mln. "We see Nifty (50) sustaining the uptrend, with the index moving towards 21000-21500 by March," said Hitesh Jain, strategist, institutional equities research, at YES Securities (India) Ltd. The fall in Indian inflation has enhanced investors’ risk appetite, according to analysts. In addition to easing US bond yields, lower inflation in India, and robust corporate earnings, the inclusion of Indian bonds in JPMorgan's Global Bond Index has had a positive impact on the outlook for the Indian equity markets as this will increase the visibility and attractiveness of India to global investors. Vinit Bolinjkar, head of research at Ventura Securities Ltd, said the inclusion of Indian bonds in the JPMorgan index will increase the flow of foreign investment into India, improve liquidity, reduce borrowing costs, and strengthen the rupee. VALUATIONS NO DETERRENT Market participants said valuations of Indian equities have and will continue to be on the higher side, but this won’t deter investors. The optimism is attributed to the country’s strong growth story, resilient corporate earnings and domestic consumption, and the improved global economic outlook. Among sectors, participants believe automobiles and information technology are fairly valued. While automobile stocks seem attractive given improving demand and the government's focus on electric vehicles, IT stock valuations are justified by digitisation of the Indian economy and growing demand for IT services from Indian companies, analysts said. Pankaj Pandey, head of retail research at ICICI Securities Ltd, said large-cap stocks are more attractive even now because they have not seen much price appreciation. India’s anticipated high growth over the next decade, constant foreign inflows, and robust domestic consumption support the current rally, said Nikunj Saraf, vice-president at Choice Wealth Pvt Ltd. Saraf said the outperformance of mid- and small-cap stocks since April, coupled with substantial mutual fund inflows into these segments, has played a pivotal role in the broader market rally. Participants now believe the general election, due in Apr-May, will decide the direction of the market. Investors will be wary of any sign that may point to a setback for the ruling Bharatiya Janata Party. Elections create uncertainty and volatility in the market as investors are unsure about the policies of the new government. This uncertainty leads to increased trading activity and volatility. While political observers expect the ruling party to win the election, any negative surprise could trigger a fall in the Nifty 50. "The upcoming elections add another layer of intrigue, with historical data indicating an average return of 6% in the month before elections and 29.1% in the year leading up to them," said Saraf. Jain of YES Securities said that more than the Interim Budget for 2024-25 (Apr-Mar), participants will be keen to see how the new government lays out the budgetary framework for the next five years. Budgets have a direct impact on specific sectors or industries, depending on the allocation of funds and tax policies. "The market's reaction to a budget is often immediate, as investors assess the potential impact on corporate profits, economic growth, and government debt levels," said Bolinjkar.  End   Informist Media Tel +91 (22) 6985-4000 Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved.

Consensus on deepening output cuts may elude OPEC at Thu meet

Informist, Wednesday, Nov 29, 2023 By Sayantan Sarkar MUMBAI – The Organization of the Petroleum Exporting Countries will try its luck once again to balance the oil market and keep prices at desired levels when its members and allies hold a virtual meeting on Thursday, which was initially scheduled on Sunday. But the cartel may find it difficult to come to a consensus about deepening output cuts. "This postponement indicates difficulties within the OPEC+ group to reach an agreement to cut production," Rystad Energy's Vice President Jorge Leon said in an email commentary. Leon said meetings had been postponed before, but not by as much as four days. Some Experts Believe OPEC May Agree To Slightly Reduce Production Levels Given That An Oversupply Looms In The First Quarter Of 2024. "Therefore, reaching a new agreement to cut production will prove to be challenging," Leon said. Brent crude oil prices have been hovering around the $80-per-barrel mark, and had even fallen below the mark on Tuesday. The fluctuations in prices indicate that the market remains cautious ahead of the ministerial meeting of OPEC and its allies. Some experts believe that OPEC may agree to slightly reduce production levels given that an oversupply looms in the first quarter of 2024. "I expect OPEC+ to aim to lower its production by 0.5-1.0 million b/d (bbl per day) from current levels, at least through Q1, though for impact, it may announce a deal for all of 2024, subject to review, if the reduction is substantial," said Vandana Hari, founder and chief executive officer of Singapore-based energy intelligence company Vanda Insights. Hari said the cartel must compare the 2024 production cut target with the current output levels to calculate the new reductions. "It would not be right to add it to the May 2023 or November 2022 rounds of cuts as the overall OPEC+ baseline is changing, and those cuts were not fully delivered," she said. A number of African countries, including Angola and Nigeria, want their production quotas to be raised. However, Saudi Arabia is not satisfied with the production level of some countries. This has fuelled doubts about Saudi Arabia's willingness to leave its voluntary production cuts in place beyond the end of the year, and whether an agreement can be reached to reduce production. Saudi Arabia's crude oil breakeven price is $86 per bbl, according to the International Monetary Fund. Rystad Energy's analysis suggests that the kingpin of OPEC will need to keep compromising on market share until June to achieve that price level. OPEC and its allies have been reducing production by nearly 5 mln bbl per day since July, which includes a voluntary cut of 1 mln bpd by Saudi Arabia, which is expected to expire at the end of 2023. Commerzbank AG believes that Saudi Arabia is more than likely to continue with its voluntary cut in Jan-Mar. "The only question is whether the cartel will be able to agree on any cuts that go beyond this. This would indeed reduce the risk of an oversupply in the first quarter," Barbara Lambrecht, commodity analyst at Commerzbank, said in a note. "If Saudi Arabia extends voluntary cuts until April 2024 and then gradually unwinds them, oil price would average $96 per barrel in 2024," Rystad Energy's Leon said in a commentary. On the other hand, if Riyadh does not extend the cuts beyond 2023, prices are likely to average $80 a bbl throughout next year, he said. Recent trends have shown that OPEC is reaching the limits of its power with regard to influencing the global crude oil market. The cartel's efforts to shore up oil prices a couple of times earlier this year have not yielded desired results. Barring the momentary rally, crude oil has not been able to sustain the gains chalked up after reduction in output quotas. In April, OPEC had announced voluntary output cuts by its members, amounting to 1.66 mln bpd, on top of 2 mln bpd reductions from late 2022. Brent prices had risen by $9 to $87 per bbl in April, before quickly falling back below $80 a bbl. It was only a month ago that crude prices rose close to the $100-per-bbl mark, and there were expectations that they would breach the psychologically-crucial barrier after the surprise attack by Palestine militant group Hamas on Israel. However, prices fell sharply due to concerns about poor demand from China, the biggest importer of crude, and as the war between Hamas and Israel did not escalate to other oil producing regions in West Asia as was expected. At the time of writing, the price of West Texas Intermediate crude on New York Mercantile Exchange was $77.61 per bbl, while that of Brent oil on Intercontinental Exchange was $82.59 a bbl, both up by over 1?ch. Gnanasekar Thiagarajan, head of trading and hedging strategies at Kaleesuwari Intercontinental, a Singapore-based company, said that OPEC may not take a drastic decision on Thursday given that the weakening of the dollar is likely to support prices of commodities. The dollar index has fallen sharply to 102.88 from 107 at the start of the month. "I hope Thursday's meeting is not cancelled due to further disagreements in the cartel," Thiagarajan said.  End Informist Media Tel +91 (22) 6985-4000 Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved


Nomura Sribalasundaram says India gilts not a top pick

Informist, Monday, Dec 4, 2023 By Aaryan Khanna and Nishat Anjum NEW DELHI/MUMBAI - Nomura has a positive bias on India's interest rate markets, but it is "certainly not" a top pick for it, with bonds in Indonesia and South Korea providing a better opportunity in the region, according to the brokerage's Emerging Markets – Asia Rates Strategist Nathan Sribalasundaram. "We don't see a clear rationale to get long on IGBs (Indian government bonds) to play for an RBI (Reserve Bank of India) rate-cutting cycle in the next few months or a quarter," Sribalasundaram told Informist in an interview on Friday. He recommended India's seven-year government bond to clients just last week, but the expected returns pale in comparison to returns on government bonds in other economies that seem closer to a rate cut cycle. "I think domestic factors, like the growth and inflation dynamics of India are not giving a huge amount of catalyst to India bonds," he said. India's gilts have underperformed more than expected over the last month, which the strategist considers an opportunity to stock up on bonds. Since overnight indexed swap rates have already reacted to the sharp fall in US Treasury yields since October, he expects the 10-year bond's spread over the five-year OIS rate to narrow slightly heading into 2024. On Friday, the five-year swap rate ended at 6.54%, while the benchmark 10-year bond closed at 7.29%. This makes a spread of 75 basis points between the instruments, which Sribalasundaram termed "neutral-ish" and "not very exciting". Regardless, the undeniable tailwind to India's rates market is the inclusion of the country's government bonds on global bond indices, which should begin driving inflows into India's government bonds in Jan-Mar, he said. India will be included in JPMorgan's Global Bond Index – Emerging Markets suite on Jun 28, with a 1% weight increase over a 10-month period. Sribalasundaram expects the bulk of the anticipated $23 bln of inflows into India's gilts from the index inclusion to arrive over the course of 2024. By the middle of Jul-Sep, the yield on the benchmark 10-year bond should fall to the range of 6.50-6.75%, as inflows from foreign investors hit the market in an environment in which the RBI is cutting rates, the strategist said. Nomura is one of the few securities firms that expect a rate cut in India before the US; most other analysts predict that the Monetary Policy Committee's rate actions will follow the US Federal Reserve's cuts. "We still do expect RBI to cut before the US Federal Reserve and still expect the quantum to be meaningful in terms of 100-basis-point rate cuts by the RBI in 2024-25 (Apr-Mar)," Sribalasundaram said. Nomura's economists expect rate cuts in India to start in August, against September for the US. As for expectations from the RBI's policy review this week, Sribalasundaram awaits more clarity from the central bank on its plan for conducting open market bond sales through auctions, something the RBI has said it would consider to curb liquidity.   Following are edited excerpts from the interview on Sribalasundaram's views on a breadth of issues relating to Indian financial markets: Q. When do you expect rate cuts in India? Now that bets on the March/May cuts in the US are firming up, does that change the timeline of rate cuts here? A. On a top-level view, our US economists have pushed down the first Fed rate cut till September 2024, so that's a pushback by a few months. But I do think the path in 2024 may not be as clear as the market is suggesting. The market is certainly bullish on the timing and quantum of rate cuts in the US. For India, the resilience in the economy that we have seen, especially in something like GDP growth (released) yesterday (Thursday) and the resilience of the global economy does mean that our economists have already pushed back the India rate cut to August 2024. So, we still do expect the RBI to cut before the US Federal Reserve, and still expect the quantum to be meaningful in terms of 100 basis points rate cuts by the RBI in 2024-25 (Apr-Mar). Q. The RBI has brought out surprises in each of the last two policies. Anything offbeat on your radar to look out for at the upcoming policy? A. I was certainly surprised. As you mentioned, the two surprises were the ICRR (incremental cash reserve ratio) and the threat of OMO (open market operation) sales. I think that the message is probably quite clear from the RBI — that they want to maintain the hawkish bias. I mean, we've certainly had inflation risks surprise us on various occasions in India. And certainly, I don't think we're quite out of the woods yet in terms of CPI, maybe hitting closer to the top end of the band again; there were several such months in 2023. So, the inflation risks are still there. I think in terms of expecting another surprise, it's always hard to pick and choose what could be announced. Certainly, we should expect more continuation or more clarity on OMO sales announcement, as this was announced at the last policy meeting, and nothing has been undertaken since the meeting. Now, my personal view has been that from a liquidity perspective, liquidity was never expected to get into a meaningful surplus, which would require the RBI to conduct OMO sales. And I still don't see that happening, even into the next couple of months. So, the need for OMO sales is not necessarily present in our view from a liquidity perspective. But I think one thing that has clearly cropped up on the radar for the RBI and some market participants is probably the skewness in liquidity. We know that the RBI has held meetings with several large banks in India to discuss this. If you look at the data, we do see there's often a large amount of liquidity placed on the floor at the SDF (standing deposit facility) and obviously, the borrowing amount on the MSF (marginal standing facility) is still quite high. This year, the weighted average call rate has been around the 6.80% level for some time now, and MIBOR is 6.90%. So, we're clearly above the top end of the band, for which the RBI may need to offer some guidance, or offer some perspective on why they think this is, and if there are any measures to possibly counter that. Q. You've given a blow-by-blow breakdown of the liquidity situation until December. What is your view on liquidity beyond this quarter? A. As a broad view for Jan-Mar, I will break it down into various components. And yes, we don't necessarily have the data on the state bond calendar, but we have the G-sec calendar, and I think we can make a fair assumption of where we think the T-bill calendar would come as well. So, there's still going to be a liquidity drain from the borrowing side, from the central government. I think a lot will depend on how quickly the government is able to pick up its spending into the end of the financial year. Seasonally, we normally see a bit of a pickup, especially in February and March, which is a bit of liquidity addition on that front. I think the big unknown comes from the dollar side and the RBI's FX assets policy. But the house view is that we are probably a little bit in the 'soft-on-the-dollar' camp into Jan-Mar, so from the dollar selling perspective, it is probably less. And then, another tailwind is also the JP Morgan index inclusion, which is scheduled for the end of June next year. We have seen a bit of FPI buying in IGB (Indian government bonds) over the past month per se. But our view is that these flows do pick up, especially in what we do next year. The RBI is likely to use that opportunity to build back some reserves and inject rupee liquidity in that period as well. So, I think we are going to get a little bit tighter on liquidity in Jan-Mar just because of the natural drivers, but the offset is coming from the asset side and RBI building back reserves. However, it's not as if we see liquidity getting back into a meaningful surplus over the next couple of quarters. Q. The liquidity deficit in the banking system has driven up yields on all market instruments. With inflows expected to start from January, is there potential for money market instruments to ease out? A. Yeah, I think it will probably be in a bit of a range, especially on things like the one-year T-bill or even some CDs. I think we are in a fairly tight range for the next few months. I think it's by design. This tightening of money market rates is by design of the RBI. They suddenly wanted to push up the interbank rate from the 6.50% repo rate to the upper end of the corridor through the liquidity channel. They're being very clear that they are using the liquidity channel to counter the higher inflation and prospects of higher inflation. So, like I say, we're not out of the woods yet, and food inflation seems to just surprise us in India. As of now, it's probably too early to expect the RBI to let its guard down and guide the money market rates lower. Q. You recommended a reverse bond swap trade in five-year instruments. Now that it has paid off handsomely, what is next for spreads? A. These current levels of spreads are probably a little bit neutral-ish. I think, around this mid-set of 70 to 80 basis points on five-year swap spreads is probably the middle of the range, and does nothing too exciting. I guess a lot primarily depends on the US side, on global rates. The OIS curve has exhibited a much higher beta or correlation to the US rates in the IGB curve. With the growth and inflation dynamics that India currently possesses, the catalysts or the cues are being taken a lot more from the global side than the local economy. So this bet, I would say, is a lot dependent on the US side. Heading into next year, there's something that we have been thinking about, a bit of a compression back again, with a bit of an outperformance of IGBs. A lot of that is predicated on the index inclusion and the FPI flow. So, if we do start to see the FPI flow pick up, especially in Jan-Jun, we do expect the IGB to have a positive tailwind from this and be relatively supported. One other thing – over the past six weeks since the last policy, the IGB curve has also been kind of sitting on tenterhooks; I would say this threat of OMO sales seems to have lingered over the bond market for the past six weeks. There was a lot of speculation that as soon as liquidity was nearing a surplus, the RBI would announce something. It hasn't happened yet, but it certainly lingered over the bond market and probably contributed to the recent underperformance of the IGB curve, or maybe lack of participation in the IGB curve over the past month or so, when swaps have been rallying quite significantly. Q. In the OIS curve, the one-year contract still does not factor in a rate cut for the next 12 months. When do you see that happening? Would it be when the overnight MIBOR finally eases, once we see the FPI flows coming in? A. I think there's a little bit of liquidity easing priced in the one-year part of the curve, but we're not expecting much in terms of rate cuts just yet. I think a lot of it depends on the incoming data. I think it's hard to kind of choreograph and say how the RBI is going to unwind this liquidity tightness that they've engineered. Certainly, it doesn't feel like the steps will be super-crystal clear. It feels like we'll have to make that decision as and when the data come in. So, I think if we continue to see more inflation relatively range-bound in this 4-4.5?nd, we see headline inflation come off again from this high 5?ck down to 5%, then we can take comfort on the inflation side. But I think the real trigger will be when we start to see some impact on the growth side in India – whether that's coming from the external factors of the global growth slowdown, or when we start to see a bit of domestic issues start to have an impact as well. Q. You've avoided recommending India's bonds. What are the challenges you see right now on the domestic front impeding their performance? A. Last Friday (Nov 24), we put on our long recommendation on the seven-year IGB. I think domestic factors such as growth and inflation dynamics of India are not giving a huge amount of catalyst to India's bonds. We don't see a clear rationale to get long IGBs to play for an RBI rate-cutting cycle in the next few months or a quarter. I think the local dynamics that matter the most are the OMO risk from the RBI, and then the index inclusion flows – they're more global, but certainly a factor that influence IGBs. As we head into 2024, we are close to the General Elections in May 2024. So, there is some kind of thought on the impact on market players from this. Then finally, we have had various regulation changes. It may impact upon curves. Just a few months ago, we had the removal of the HTM limit from the RBI. As recently as a couple of weeks ago, we've had risk-weight asset changes on lending to NBFCs and retail unsecured lending. All of these are local factors that are probably impacting the demand side in the IGB equation. Q. So what will need to change? Is it the growth-inflation dynamics? Are those the things that will need to change for you to recommend other segments of India bonds? A. I think if one wanted to shift to a shorter part of the curve, say the five-year or even sub-five-year, I think the catalyst really has to come more from growth, even growth over inflation. Predominantly, if the growth side of India is showing some signs of a slowdown...I guess this year, this narrative of 'India resilience' is taking a bit of a hit. As I said, I think core inflation is giving comfort to the RBI. And we have seen the RBI cut rates when inflation is still above this 4% target. So, it's not as if it's a very hard core inflation target. So, we really need to see the growth slowdown. And I guess markets are seeing that — the data that's coming out for India continues to show strength on the GDP side for now. Q. How attractive do India's bonds look against emerging markets - Asia peers? A. In comparison to EM Asia, we see it as okay. It's certainly not one of our top picks. Our top picks, we tend to prefer places like Indonesian government bonds, which seem to have a bit more of a risk premia that can be unwound. Maybe, cuts by some central banks would be a little bit easier or forthcoming. So, BI (Bank Indonesia) may be cutting before RBI. Then places like Korea, which has probably taken rates to a higher level, against places like India. It has fewer fiscal risks than somewhere like India. And again, a bit of a tailwind from a possible index inclusion for Korea. It (India) doesn't stand as one of our top picks in terms of duration exposure in EM Asia. But that being said, we do have a positive bias on India. And, as and when we do get a little bit more courage on the growth side, probably as a market we could look to increase exposure. Q. Is India's underperformance against US yields an opportunity to buy, or is it a warning sign to stay away from the India rates market? A. Clearly, we're taking the side that it's probably an opportunity to buy, where we've got a bit long on IGB, though it's not a particularly top pick for us. So, even our target for the seven-year expects the 7.30% yield to go to 7.10%. It's not as if we're expecting a 50-basis-point or a 100-basis-point move - the same quantum as the US. Looking at the US-India spread, we saw pressure on US rates in Q3 (Jul-Sep) and early part of Q4 (Oct-Dec). India bonds were outperforming, and the spread had meaningfully compressed in that period. So, expecting a widening of the spread when US yields come down is logical and explainable. There's also a bit of policy divergence. By all accounts, we do think that US policy is in a relatively restrictive place at 5.5% (the Fed funds rate). Then there is India the current juncture, we certainly didn't hike as much as the US did, so we can probably debate how restrictive or not India's policy is at this juncture. Certainly, once we do expect the rate cutting cycle to begin in both of these markets, we would expect the quantum to be a lot less from the RBI than, say, the FOMC. I guess a bit of underperformance is warranted compared to the US. Though in our view, the underperformance has underperformed too much in the past one month. If we look at IGBs, they are relatively flat compared to the moving treasuries. A lot plays into that, the RBI's hawkishness and the threat of OMO sales, and then the lingering market fears we spoke about. So, that underperformance or that premium that had been built into the IGB can come out especially as we head into year-end, and we don't see any OMO sales pretty close. Q. We had a question just for perspective, though it isn't your area of expertise. How do India bonds compare to those in Latin America in the EM space, which have reacted much better to the recent fall in US yields? A. I can't specifically talk on the Latin American economy. That's outside the coverage area for me. Though in a broad picture, the feedback we have is that Asia is not necessarily a top pick in the EM pecking order. There are similar dynamics as I explained to the US and India - a lot of the LatAm central banks were much quicker or earlier in the hiking cycle, inflation rates were going up after the COVID pandemic, and suddenly, some of those central banks have already started cutting rates as well. Whereas most Asian central banks are still kind of in this long, hawkish pause period for now. And again, the level of restriction was also different - Asia had a very mild hiking cycle in comparison to the LatAm region. The scope for the yield rally is less in Asia. That being said, something that we have talked about a little bit is probably, while the scope of rate cuts may be less in Asia, this stability, or the low volatility environment that Asia does tend to offer is probably an attractive feature or characteristic of the market. As we see in India, bond yields seem to have relatively low volatility trading. It seems like the INR, it's in a very narrow range. Asia does have its place in a global EM portfolio and India is included in that. And while it may not be a top performer in terms of absolute return, it's resilient and the low volatility offers a good characteristic for a certain type of EM investor looking for more steady investment than the volatility that comes with some of the LatAm curves. Q. In this backdrop, even if we see some passive flows because of the inclusion in the JPMorgan index, do you think active funds will give us a miss? A. No, I don't think so. We need to separate the active element compared to just the bulk element. What I mean by that is, we are entering the index. That's going to mean we're going to have a 10% weight on the index. So, it's not like an active portfolio manager is going to run 10% underweight on India bonds. There's certainly got to be at least some allocation - like an underweight, maybe 2,3,4 percent, but it means that at least we need to get to that 6-7% allocation first before we start thinking about underweight or overweight of the India bond in comparison. The way I'm thinking about it is like - let's not miss the forest for the trees. We first need to just get the allocation to India coming into the economy as it in a staggered approach, and then the deviation from the index weight is the secondary factor. So currently, we do expect a large bulk of FPI flow coming in next year from the JP Morgan inclusion. Q. Once the FPI flows start, do you see the 10-year IGB yield falling below 7% even as the RBI is likely to keep the liquidity quite tight? A. Into Jan-Mar, it's probably a bit more of a range-bound move. Our target is like 7.1% for mid-January. The seven-year and the 10-year tenures are yielding roughly the same. I get into Apr-Jun and Jul-Sep though, FPIs and the environment where the RBI is cutting rates then certainly, we can easily get down to below 7%. So, I think for the middle of Jul-Sep next year, we're looking for a move to 6.50-6.75% on India 10-year. Q. Has your expectation of the quantum of inflows due to the JP Morgan index inclusion changed? There's a lot of speculation about the Bloomberg global aggregate inclusion in the Indian bond market. When do you expect further developments on that front, and do you expect inclusion on Bloomberg as well? A. We are more positive on FPI flows just given the JPMorgan inclusion. I think that is a fairly strong and positive tailwind. As I said, we expect some front-loading in Jan-Mar, and over the course of 2024, we should expect the bulk of that $23 bln to come into the Indian markets. Now, in terms of the Bloomberg index, there's clearly been a lot of speculation. Normally, just looking historically, the results of the review will come out sometime in Jan-Mar. There certainly has been some speculation around an earlier announcement if India is to be included...we've seen plenty of press reports on that. I don't think we have a particular edge on whether that's going to happen or not. But the likelihood of Bloomberg, the way I think about it is - look, the positive tailwind is probably already there from JP Morgan flows. If Bloomberg comes, that just adds to the tailwind. Now, clearly, the path to Bloomberg is slow, it is also quite sizable. It's probably in the $15 bln-$20 bln range, we should expect. But there are a few caveats on both sides of that. This is a global aggregate index, not an emerging market bond index like the JP Morgan one. So, the weighting would be a lot, lot smaller in the global aggregate index, rather than the 10% in JP Morgan. The willingness of the fund managers to have a higher deviation or limited exposure to India is much's probably a bit harder to predict the amount of flows and the timing of the flow. While we may not be certain, as I said, the tailwind is already there from JP Morgan and if Bloomberg comes as well, and it just further adds to FPI flow and that should come into India next year. Q. Debt fund heads in India can't stop recommending long-term bonds. Do you expect that to pay off in the next 12 months, or is that trade too crowded? And, in the meantime, is there an opportunity to make money against that trade? A. There are a few factors here, I guess. First, I'd say a bigger picture – we've definitely seen an improvement, or a structural change in the demand for long-end IGBs over the past two to three years in India. A lot of that has come from the volume growth that we're seeing from the various products that have come on the opposite side, spurring demand for these long-term IGBs. And I'm not sure that tailwind particularly goes away. This is probably a more structural change in the Indian market, which has seen demand for long-term bonds persist for some time. And certainly the government and the RBI have already reacted to this by the introduction of the 50-year IGB as recently as last month. So, that is a structural change for me that probably ultimately warrants a flatter yield curve in 10s-30s (spreads of 30-year over 10-year bonds) , 10s-40s (spreads of 40-year over 10-year bonds) than what we would have had five years ago. That being said, the investor choice at the long end is probably causing a little bit more strain. The other kind of asset class to compete with this is probably states' bonds. What we're certainly seen is a pick-up in the issuance in the state bond space, certainly over the past few weeks and in the past couple of months. The way we are tracking it, if we look at the auction amount compared to the calendar amount, the fiscal year's Q3 (Oct-Dec) average is running at 120%. And that compares to Q1 (Apr-Jun) and Q2 (Jul-Sep) at around 80%. Certainly, the supply side of state bonds which impacts the bond decision-making process is a bit of a headwind that I guess fund managers need to be a little bit cautious about. In the near term, I'm a little bit cautious on the long end, but more medium-term. If we are heading for a lower rates environment, then on a total return basis, the long end of the data probably does offer a decent attractiveness in terms of investable opportunity. Q. So, where would you take a steepener on the curve right now? If you had to make a choice, where would you bet on the widening between short-term and long-term yields on the curve? A. I don't have a particularly strong view on that. Throughout 2023, we've tried to create a play. Whether that's 5s-10s (spreads of 10-year over 5-year bonds) or even something different, the trick hasn't particularly worked. And I guess it goes back to that structural trend change that we've seen in terms of demand so far. I don't have a high conviction view that the India curve is going to meaningfully steepen over the next few weeks or months. As we get to the precipice of the RBI cutting cycle, we can see the curve steepen just because we'll see an outperformance at the front end, as liquidity increases and yields come down. Then the bull-steepening scenario becomes a lot more clear than now, when we were now expecting a natural steepening without a big movement in terms of the yield curve.  End Informist Media Tel +91 (22) 6985-4000 Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved

HDFC Life's Padalkar eyes ideal product mix in medium term

Informist, Friday, Dec 1, 2023 By Subhana Shaikh and Richard Fargose MUMBAI – Known to have one of the most balanced and diversified product baskets in the industry, HDFC Life Insurance Co Ltd is looking to further build on these parameters that would ultimately help the private sector insurer boost its margins and growth over the medium term. "My ideal product mix would be non-participating savings policies around 35-40%, participating about 30-35%. I would want unit-linked insurance plans at a company level to be under 30% and closer to 25% and the rest would be in term insurance," Managing Director and Chief Executive Officer Vibha Padalkar in an interview to Informist. The share of unit-linked policies in Apr-Sep was 28% of the life insurer's total product mix, while the share of non-participating products was at 28%. Participating products' share was at 30% and annuity and non-participating protection contributed 8% and 6%, respectively. Unlike a participating insurance policy, a non-participating policy does not pay out any bonuses or dividends based on the insurer's profits. However, these life insurance plans do give guaranteed benefits on maturity. A better product mix, including higher protection and annuity, could further enhance the scope for margins over the next few years, Padalkar said. She expects retail term insurance products to be at about 9-10% in the medium term, as against 5-6% now. For the current financial year ending March, Padalkar sees the company's new business margin at a level similar to last year's and expects to slightly higher at 28% in 2024-25 on the back of a favourable regulatory environment. In 2022-23, HDFC's new business margins were at 27.6%. The value of new business--a measure of profitability of the new business written in a period--came in at 14.11 bln rupees in Apr-Sep, clocking 10% on-year growth. To a query on the government's decision to tax income from life insurance policies, excluding unit-linked insurance plans, Padalkar said it had dented the topline of HDFC Life by 10-12%. However, the life insurer has started covering that lost ground, she said.  Following are edited excerpts from the interview that covered subjects including regulatory aspects and the insurer's financials: Q. After the merger with Exide Life Insurance, you reached margin neutrality quite quickly. What are the challenges that you face in this segment? What kind of trajectory do you foresee for the current financial year and the next? A. This year, we have said we will hold margins versus last year, including Exide Life, which was low single-digit. That means erstwhile HDFC Life's margins continue to grow well. Exide Life has been a drag because of lack of scale... but as we progress from low single digits, we are getting towards the low double digits and then converging towards HDFC Life margin. That will happen perhaps another year down the line when that convergence starts happening. Holding margins is not an easy outcome because the government stripped exemption of tax relief on policies above 500,000 rupees. That it is not an easy deliverable because we have the capacity for 17-20% business growth. For the financial year starting Apr 1, it should move upwards slightly to 28%, given things are fine on the regulatory front. Q. Are non-participating policies at product level seeing any margin pressure because of spread compression? A. Not so much because of the spread compression, but pressure because of the 500,000 rupees tax exemptions. As long as other products, such as in financial services, also get compressed, there might be a little bit of timing difference, but eventually, the spreads all converge.  I firmly believe that this is a matter of time. Yes, there will be a little bit of going slow today... but we have to be patient because the core proposition has not changed.  Q. HDFC Life has always had a balanced and diversified product mix. Do you expect non-participating policies to disrupt that mix? Is that a challenge? A. Maybe in the short term, a little bit of reduction in non-participating policies, but if you look at the first half of the current financial year, we ended non-participating at 28%, which is fairly respectable. While in the short run that could be the case, by that I mean a couple of quarters, but in the longer term, if you look at more normalisation in the next financial year and thereafter, I firmly believe that non-participating policies will have their rightful place under the sun. Q. How is HDFC Life coping with the challenges after the government removed the exemption of tax relief on maturity proceeds of policies with more than 500,000 rupees annual premium? How much has it affected the company's business? A. A lot of interaction happened at the time when the changes were made to explain to the government... we have been increasingly engaging as a sector with the government and the government has called us along with our regulator to present to them all the things that we are doing. That dialogue has started happening. It has impacted the sector and us. Fortunately for us, we have grown faster than the sector. Above 500,000 rupees ticket size, we have seen de-growth as I'm sure our peers also, but, below 500,000 rupees, I am happy to share that the growth has been there. Below 500,000 rupees have grown in double digits, but above 500,000 rupees has shown de-growth. The good news is, we can slowly see the higher ticket demand also coming back, and I had an unwavering belief that people will make rational decisions in the longer term. We are beginning to pick up larger ticket sizes, even 1 crore (10 mln rupees) ticket sizes. Overall, we had 10-12% impact, but now we have started covering that lost ground. Q. In the first half of the current financial year, bancassurance contributed 65% of HDFC Life's channel mix. Are there any plans to bring that number down and increase the dependence on other channels? A. We are channel agnostic. I want my proprietary channel to initially be about one-fourth of my business in the medium term, over the next five years. We are on track and will continue to grow faster. This year might be a bit of an aberration, but it will continue to grow faster from next year and so the share will grow. Having said that on bancassurance, we continue to tie up with new partnerships so that, in a way, it is not depending on only one bank. In five years, agency channels will be one-third of our business, bancassurance should be about 45% of the business, and the rest will be through direct channels and online intermediaries. HDFC Bank contributes about 80% to our overall business. HDFC Bank has been more unit-linked insurance plans heavy because of the kind of customer base that they have. But other bancassurance relationships--whether its YES Bank, IDFC First Bank and Bandhan Bank--are not so unit-linked insurance plan heavy. Q. What is the product mix that you are looking at? A. My ideal product mix would be, non-participating savings around 35-40%, participating at about 30-35%. I would want unit-linked insurance plans at a company level to be under 30% and closer to 25% and the rest would be in term insurance. I would like to see term insurance or retail term to be in double digits around 9-10% in the medium term. Over the next four-five years, we really need to aspire to get there. Today, the term insurance product is about 5-6%. Q. What is the value of new business growth outlook? Would you continue to stick to your guidance? What is the outlook for the current financial year and the next? A. We expect our VNB (value of new business) growth to be in line with APE (annual premium equivalent) growth. We are on track to achieve mid-teen APE growth excluding excess 1,000-1,100 crore (10-11 bln rupees) budget impact for full year. We definitely have the capacity for higher growth, but we will not cut down on investments as the larger goal is to deliver sustainable, profitable growth, that is, double all the key metrics every year. VNB growth will be supported largely by topline growth and gradual margin expansion over the medium term. There is further scope to enhance margins through better product mix (higher protection, annuity, riders) and operating leverage (higher scale) playing out over the next few years. Q. What is your annual premium equivalent outlook for the current financial year? A. We have said mid-teens around 11-13%. We should be back to doubling the growth every four-five years that we have delivered so far. We should get back on track. So that translates to 17-18% of APE (annual premium equivalent) growth. Q. It's been a year since Exide Life merger. How are the business operations going on? Are you seeing the full effect of the merger on your operations? A. It has been successful in every way. It has been more of an operational merger than worrying about something we didn't know. In terms of our top line synergies, tier-II and tier-III markets and also agency channels have been well met because that part of the agency channels, which we call a variable agency model, was much bigger than our agency, and it was going to add about one-third of additional business to our existing agency model. To give you one data point, our tier-II and tier-III shares have grown in the first half of the year, two times what tier-I has grown. Q. Insurance Regulatory and Development Authority of India has been proposing unified licences for insurance business. How do you see this affecting the industry? A. It has been one of our ideas also. If we look at the development and penetration committee report which I chaired, we did put that down in the report. If you look at insurance, it is fairly under-penetrated. We need to expand the pie. Same thing with health insurance if you look at the penetration of health insurance, it's less than 1%. At least life insurance is three times as much. We firmly believe that the more people, the more companies that are able to sell health insurance and solutions to the average Indian, the better it is than just the re-division of the pie. Let's look at it worldwide. Health sits closer with life than it sits with motors. We are artificially splitting it up into different regulations. I'm not mandating it. Whoever wants to do it, can do it. Let's see, maybe open it up for three years or five years. If it doesn't work, take it back. Q. Insurance companies have been served notices for huge Goods and Services Tax payouts, especially on the commissions paid. What is your view, and how are you contesting the same? A. The point here is that there has been no loss of GST revenue for the government. When I talk about HDFC Life, a payment has been made and services have been rendered on which GST has been collected and paid to the government. It's a moot point, going forward. Q. Life insurance companies have started investing in illiquid and private credit. Mutual fund investors have burnt their hands on this in the past. What gives you the comfort to invest and do you feel insurance companies have the necessary framework to assess, measure and monitor such credit risk? A. Each investment will have to follow the principles of asset liability mismatch. One is the credit worthiness of the investee company that one has to undertake with the utmost care and diligence. Second, IRDAI has limits. It is restricted to less than 5%. Thirdly, not each one of them will be bad because the horizons of mutual funds might be different to the horizon of life insurance companies.  I won't say everything is wrong, but the stock pick has to be creditworthy, there has to be pedigree in terms of who you are investing in. For example, the government's 50-year bond, we would love even longer tenure bonds because growth of long-term guarantees is on the back of good quality government. That actually, we want more, and we will consume more of. Q. Insurance companies have huge forward rate agreement trades outstanding. Do you see any potential risk, including regulatory, in such transactions?  A. On interest rates, yes, but not on the credit, because if you look at the sensitivity to our embedded value, we are locked in. So, neither do we make a profit, nor do we make loss... it really depends on the asset liability matching, and how you are locked in, because your FRAs (forward rate agreements) could contract, while guarantees, you give a much higher level of guarantee, and we try to stay away from that. We really don't know the kind of hedging risks, how people are doing in our industry, but I'm sure the regulators have oversight of that.  Q. Investment risk-return environment is changing fast. Do you expect any changes with respect to investment guidelines from IRDAI? A. In the context of the risk-based framework, it's actually there in the insurance bill, wherein we have asked that, as a sector, we should be allowed to invest in insurance technology subsidiaries. That has not come through yet because the bill has not been tabled in Parliament. I think that will open up a lot of opportunities and adjacency and that is the right way and how I can do that through a technology platform. Today, we can't do any of that. With finance technology companies or an insured tech subsidiary, we'll be able to do that. I would love it to be sooner, but pragmatically, it may probably come after elections. Q. What is the broad asset allocation for equity versus debt? How much flow do you see going into each of these segments in Jan-Mar? A. In terms of our AUM (assets under management), the debt to equity ratio was at 68:32 as on Sep depends on how each segment grows. But yes, given that unit linked insurance plans will be about 25% of our business and non-participating savings and participating will be the majority of our business, yes, more flows will come into debt. Q. You said you are in partnerships with several fintech companies. With fintechs not falling under the Reserve Bank of India's purview and with so much scrutiny around them after recent regulations on personal loans, is there any hesitation or risk towards partnering up with these companies?  A. No, we will not have any tie-ups just for the sake of it. One is that we only cover life, and we don't cover the credit even if a fintech goes belly up. We are very focused on KYC (Know Your Customer). We absolutely make it non-negotiable to say that we will carry on with the partner, but beyond that point, we are not afraid to walk away. We'd rather grow in a sensible manner doing the KYC checks and ensure that the partner is equally focused. Q. Are there any talks happening with the regulator on climate risk norms? Any guidelines expected from IRDAI on the same? A. They are working with all of us and a fair bit of brainstorming is happening. They also scrutinise our business sustainability reports as well as on the disclosures, at least for the listed companies. A lot of conversations are happening, and I would expect something (guidelines) like that to happen.  End Informist Media Tel +91 (22) 6985-4000  Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved

BJP's Modi guarantee packs a punch in Hindi heartland

Informist, Sunday, Dec 3, 2023 By Anindya Thakuria NEW DELHI - Long before the first vote was cast in the Assembly elections in four states, or even the first nomination was filed, the Bharatiya Janata Party decided to make the election about its tallest leader, Prime Minister Narendra Modi. And it paid off. Making a state election all about the national leader is a bit of a risky bet. The plan had earlier failed in Bihar and West Bengal, but it paid off handsomely in this round, and it could not have come at a better time for the party that rules the Centre – in the last round of state polls before the big General Election.  As of 1930 IST, the BJP had won 120 out of 230 seats in Madhya Pradesh and was leading in another 44, while the Congress had secured 35 seats and was leading in another 30. In Rajasthan, the BJP had crossed the halfway mark with 114 of the 199 seats where polls were held, and it was leading in one more. The Congress had won 67 and was leading in two seats in Rajasthan. In the 90-member Chhattisgarh Assembly, the BJP had won 32 seats and was leading in 22 others, whereas the Congress had won 18 and was leading in 17. In Telangana, the sole southern state where elections were held in this round, the Congress had won 56 seats in the 119 member Assembly and was leading in another eight. The incumbent Bharat Rashtra Samithi has won 32 seats, and was leading in another seven. The BJP and the All India Majlis-e-Ittehadul Muslimeen are on course to win eight and seven seats, respectively. Assembly elections were also held in the northeastern state of Mizoram in this round, but votes will be counted on Monday. The Madhya Pradesh, Rajasthan, Chhattisgarh and Telangana elections were no cake walks for the BJP. In fact, in the run-up to the polls, many political observers were giving the Congress party an edge in at least Chhattisgarh, if not in all the three northern states. The actual results turned out to be anything but that. Most exit polls had also predicted a far tighter race.  MODI MAGIC If nothing else, today's results once again prove Prime Minister Modi's ability to determine election outcomes when he seeks votes to enable him to fulfil his vision for the country. The voters obliged.  Throughout his campaigning, the prime minister was vocal about the "Modi guarantee", which meant he was guaranteeing that the nation would remain on the path of development due to his policy continuation. After today's outcome, party stalwarts, including Madhya Pradesh Chief Minister Shivraj Singh Chouhan and Rajasthan's former chief minister Vasundhara Raje, gave him the credit for the victory. Modi's appeal to the voters was never ever in doubt, as crowds flocked in wherever he went, and people voted for him en masse in the Lok Sabha polls. But there was one doubt: can he cause turnarounds in Assembly polls in states where the BJP faced firmly rooted Opposition parties, and in the case of Madhya Pradesh – also an unfavourable strong anti-incumbency factor? After today, the answer to that question is a resounding "yes", at least in the north. Telangana was an altogether different ballgame for the party.    The prime minister's appeal in state elections in south India is yet to be proven. However, given a much higher representation of the northern states in Parliament, only set to increase post the delimitation of 2026, the party does not appear to face any significant challenges in the near future when it comes to retaining the fort in Delhi. For the Congress, today's results will be disappointing in more ways than one. While the party managed to avert drawing a blank by getting consolation from Telangana, it once again crumbled in the region that matters the most electorally - north India. No party has ever won a Lok Sabha election without doing well in the broader Hindi-speaking belt, as these states send a chunk of the lawmkers to the Lower House. The Congress party has miserably failed in the Hindi-speaking belt in the last two General Elections. Among the Hindi-speaking states, while in Uttar Pradesh and Bihar, there are multiple active players, such as the Samajwadi Party, Rashtriya Janata Dal and Janata Dal (United), the three northern states that voted last month, the elections were a straight fight between the two national parties. SIGN OF TIMES? Although this Nov-Dec cycle of state elections is often dubbed the 'semi-final' before the Lok Sabha elections that follow in four-five months' time, it is worthwhile to remember that the General Election results do not always follow the pattern established in these polls. In 2003, the BJP had swept these three states, only to fall considerably short in the Lok Sabha polls that were held next year. A very similar script played out in 2018, when the Congress did a clean sweep even though the party put up a poor show in these very states six months later in the Lok Sabha. On the other hand, the results of the 2008 and 2013 Assembly polls in these states were much in line with the Lok Sabha results that followed in 2009 and 2014. For the Congress, the problem may be exacerbated by the fact that it practically threw everything it had at the BJP. Yet Modi's party remained unscathed. The BJP in the last 10 years has already proved itself to be impervious to backlash from questionable major policy decisions, such as demonetisation or the hastily-imposed COVID lockdown. This time around, the Congress had hoped to capitalise on its promise to hold a nationwide caste census and ensure adequate representation to every caste, an idea Prime Minister Modi had vigorously attacked. In the end, it looks like voters sided with Modi's vision for the states.  Even more worrisome for the party will be its failure to forge any meaningful alliances on the ground, even after the launch of the Indian National Developmental Inclusive Alliance, with so much fanfare in July. So far the alliance, despite announcements of seat sharing pacts and tie-ups, has failed to find its feet. And with the Congress' dismal show today, its role as the senior partner in the alliance may become questionable. Winning elections in India involves converting support into votes and then converting those votes into seats. The 40% votes that Congress has won in Chhattisgarh, Madhya Pradesh and Rajasthan may give them the hope that all is not lost. However, unlike other Opposition parties, it will not be judged on the basis of winning a bunch of seats and a state election here and there, and would rather be evaluated for its ability to take on Modi's electoral juggernaut. Something it seems incapable of right now.  End     Informist Media Tel +91 (11) 4220-1000 Send comments to © Informist Media Pvt. Ltd. 2023. All rights reserved.

PM Modi launches ‘Green Credit Initiative’ at the UN climate talks, proposes to host 2028 edition

Dubai, Dec 1 (PTI) Asserting that the world does not have much time to correct the mistakes of the last century, Prime Minister Narendra Modi on Friday announced a ‘Green Credit Initiative’ focused on creating carbon sinks through people's participation and also proposed to host the UN climate conference in 2028, or COP33, in India. Addressing the high-level segment for heads of state and governments during the UN climate conference (COP28) here, Modi called for a pro-planet proactive and positive initiative and said the Green Credits Initiative goes beyond the commercial mindset associated with carbon credits. "It focuses on creating carbon sinks through people's participation and I invite all of you to join this initiative," he said, stressing that the world does not have much time to correct the mistakes of the last century. This initiative is similar to the Green Credit Programme, notified domestically in October. It is an innovative market-based mechanism designed to reward voluntary environmental actions in different sectors by individuals, communities and the private sector. Asserting that India has presented a great example to the world of striking balance between development and environment conservation, the Prime Minister said, India is among the only few countries in the world on track to achieve its Nationally Determined Contributions or the national action plans to restrict global warming to 1.5 degrees Celsius, the guardrail to avoid worsening of the impact of the changing climate. Modi was the only leader to join COP28 President Sultan Al Jaber on the stage along with the UN Climate Change Executive Secretary Simon Steill at the opening plenary. "Over the past century, a small section of humanity has indiscriminately exploited nature. However, the entire humanity is paying the price for this, especially people living in the Global South," he said. "Thinking only about our own interests will only lead the world into darkness," the prime minister added. Modi’s statement came in the context that the poor and developing nations bear the brunt of extreme climate events such as floods, droughts, heat/cold waves as a result of changing climate due to historic carbon emissions by the richer countries that have led to increased global warming. The Prime Minister called for maintaining a balance between mitigation and adaptation and said that energy transition across the world must be “just and inclusive.” He also called rich countries to transfer technologies to help developing nations combat climate change. Modi has been championing the Lifestyle for Environment (LiFE movement), which he had announced at the Glasgow COP in 2021), urging countries to adopt planet-friendly living practices and move away from deeply consumerist behaviour. Citing a study by the International Energy Agency, Modi said, “This approach (LiFE) can reduce carbon emissions by 2 billion tonnes.” He called on the countries to work together and be decisive against the climate crisis. "We shall cooperate with each other and shall support each other. We need to give all developing countries our fair share in the global carbon budget," Modi said. If India's proposal to host COP33 is accepted, it would be the next big global conference in the country after the G20 Summit earlier this year. India hosted COP8 in New Delhi in 2002 where countries adopted the Delhi Ministerial Declaration which called for efforts by developed countries to transfer technology and minimise the impact of climate change on developing countries. Climate science defines carbon budget as the amount of greenhouse gases that can be emitted for a given level of global warming (1.5 degrees Celsius in this case). Developed countries have already consumed more than 80 per cent of the global carbon budget, leaving developing and poor countries with very little carbon space for the future. Modi highlighted that India is home to 17 per cent of the world's population, but its share of global carbon emissions is less than 4 per cent. "India is one of the very few economies in the world that is on track to achieve its NDC targets," he said. India achieved its emissions intensity-related targets 11 years ahead of the committed time frame and non-fossil fuel targets nine years ahead of schedule. "And India did not just stop there, we remain ambitious," he said. The country aims to reduce emissions intensity of gross domestic product by 45 per cent by 2030 from 2005 levels and achieve 50 per cent cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030. It has also committed to become a net zero economy by 2070. As part of its G20 Presidency this year, India drew consensus from the world’s major economies for a Green Development Pact seeking to balance development and the environment. The Pact shifted the conversations from the billions to the trillions needed for the energy transition. It noted that developing countries will need USD 5.8-5.9 trillion in the pre-2030 period, particularly to implement their NDCs. PTI

GST collections jump 15 pc to Rs 1.68 lakh cr in Nov

New Delhi, Dec 1 (PTI) GST collections jumped 15 per cent to nearly Rs 1.68 lakh crore in November on increased domestic activity and festive season buying, the finance ministry said on Friday. Goods and Services Tax (GST) mop-up was over Rs 1.45 lakh crore in November 2022. "The gross GST revenue collected in the month of November 2023 is Rs 1,67,929 crore, out of which CGST is Rs 30,420 crore, SGST is Rs 38,226 crore, IGST is Rs 87,009 crore (including Rs 39,198 crore collected on import of goods) and cess is Rs 12,274 crore (including Rs 1,036 crore collected on import of goods)," the ministry said in a statement.? The November 2023 collections are, however, lower than Rs 1.72 lakh crore mopped up in October -- the second-highest collection ever since the GST rollout.? Revenues for November 2023 are 15 per cent higher than the GST revenues in the same month last year and the highest for any month year-on-year during 2023-24, up to November 2023, the ministry said. The gross GST collection till November in the current fiscal is Rs 13,32,440 crore, averaging Rs 1.66 lakh crore per month. The collection is 11.9 per cent higher than the gross GST collection in the same period last year (Rs 11,90,920 crore, averaging Rs 1.49 lakh crore per month). It is the sixth time that the gross GST collection has crossed the Rs 1.60 lakh crore mark in the current fiscal.? EY Tax Partner Saurabh Agarwal said the higher GST revenues are primarily due to increased domestic activity, the festive season last month and increased tax administration.? "The numbers can be said to be an indicator of a stable Indian economy as we see a 20 per cent increase in domestic transactions compared to the same month last year," he said.? Increased GST collections in Arunachal Pradesh, Nagaland, Mizoram, Tripura, Ladakh, etc indicate a rise in consumption in these parts of the country, Agarwal added.? During the month, revenues from domestic transactions (including import of services) are 20 per cent higher than revenues from these sources during the same month last year. Icra Chief Economist Aditi Nayar said, "We expect CGST collections to modestly exceed the budget estimates". Deloitte India Partner MS Mani said the collections averaging Rs.1.66 lakh crore per month in the current fiscal reflect the inherent growth in production and consumption as they are a good barometer of the state of the economy.? "Significant efforts made by the tax authorities to improve compliance and deter evasion are also resulting in more businesses coming under the GST net. It is heartening the see that the major producing and consuming states depict a growth exceeding 16 per cent compared to the same period last year," Mani said. PTI

SEBI Watch: Proposal on delisting needs more thought, not just data

Informist, Wednesday, Nov 29, 2023 By Rajesh Gajra MUMBAI – At Saturday's board meeting, the Securities and Exchange Board of India did not take a call on the proposal regarding companies' delisting, citing the need to study more data. A go-ahead to the proposal could well take the market back by two decades. The main change proposed has the effect of stripping minority shareholders of their key role in determining the exit price at which companies can voluntarily delist. Currently, public shareholders determine the exit price through the reverse book building mechanism. Under the new proposal before the regulator, promoters or acquirers of a company would get an option to delist the company through a fixed price mechanism at a price above the floor price. The fixed and floor price will be as per a new specified criteria. The proposal, if approved, would take the market back by two decades, when voluntary delisting was possible only through a fixed price mechanism. At a press conference after Saturday’s meeting, SEBI Chairperson Madhabi Puri said the board wanted a thorough analysis of data from delisting applications by companies over the past few years. This was a wise thing to do. The current impression in the corporate world is that the exit price arrived at by the public shareholders in reverse book building is much higher than warranted and expensive for the promoters or acquirers seeking to delist the company. As a consequence, de-listings are not successful or are not being attempted at all. This in turn, elicits the argument that the high exit price unfairly restricts the right of promoters or acquirers to freely exit the listed equity marketplace. Buch has, in earlier interactions with the media, expressed keenness to provide promoters or acquirers an ease of exit on the premise that this will attract more unlisted companies into the listed marketplace. But what was left unaddressed by the chairperson was the dilutory effect this would have on the right of public shareholders to a fair exit price. The reverse book building mechanism was introduced in 2003 mainly because of the concerns that companies, particularly multinationals, were delisting from the Indian equity market for suspect reasons and without giving a fair exit price to minority shareholders. These concerns were also raised then by the finance ministry in the parliamentary standing committee on finance. The general argument was also that such a delisting process hits the depth and liquidity of the market, resulting in a loss of investment opportunities for investors. Till the introduction of the reverse book building mechanism in 2003, delisting was possible only through a fixed price mechanism. In a delisting reverse book building a participating shareholder quotes his offer price during the tendering period on an electronically-linked transparent facility arranged by the promoters through an agreement with a stock exchange. The investor's quoted offer has to be a price above the floor price calculated as per the takeover regulation's clause on offer price. This discovered price is the one at which the promoter can acquire shares tendered at that price and below, provided that the total acquired shares constitute 90% of company's paid-up share capital. The fixed price delisting proposal emanated from a public consultation paper issued by SEBI in August. In that paper, it was argued that there was increased volatility and speculative trading in the shares of a company immediately after the announcement of a delisting. But beyond a cursory noting of such trading, the consultation paper did not provide any data. It is surprising that the stock market regulator, which has vast investigative and enforcement powers under the Securities and Exchange Board of India Act, is unable to take action against operators in the market supposedly rigging the reverse book building mechanism in cases of delisting. SEBI has been active in bringing to book operators accused of rigging the price in the secondary market, and there is no reason why it cannot deal in the same manner with those accused of rigging the reverse book building process of delisting. The SEBI chief had earlier alleged operators were acquiring shares of companies following the announcement of board meeting to decide on the delisting proposal with the intention of quoting very high prices during the tendering period in the reverse book building process. While the operators appeared to be rigging the exit prices up, it was not an open and shut case in terms of whether extant norms were being breached and action could be taken against them. The SEBI chief has, however, used the assumption of operators rigging the reverse book building process of delisting to strongly argue in favour of giving companies the right to exit via a fixed price, if they so choose. Balancing the interests of the minority shareholders and that of the promoters or acquirers is key to the delisting process and to an efficient, transparent, and trusted marketplace. If exit prices are being illegally manipulated, then SEBI needs to take action against the perpetrators. If the illegality cannot be established, then the exit price must be accepted as legitimate, and not viewed with suspicion. SEBI must endeavour to bring order to the reverse book building mechanism if there is an issue with it. After all, it has access to stock exchange trading data and the names of the investors who bought shares of companies immediately after their delisting proposals became known. It can check the offer price these investors have sought in the reverse book building process and establish any wrong-doing and take suitable action. The shareholder-discovered exit price has to be free from manipulation and this onus is on the market regulator. If SEBI takes action in a few cases, it will have a salutary effect on the market and market participants and prevent such price rigging. This, in turn, will instil greater confidence in the promoters or large controlling shareholders of companies seeking delisting. A reversal to the fixed price mechanism, which is what almost all companies will opt for given a choice, will dilute the confidence of the public and minority shareholders in the stock market and in the regulator. Such a fall in investor confidence will not help SEBI achieve the goal of attracting more companies to the listed marketplace. Indeed, it will be detrimental for this goal. Such a fall in confidence also won't serve the objective of ease of doing business that the SEBI chief is very keen on achieving. Lastly, SEBI would do well to remember that one of its key mandates is to safeguard the interest of investors, and facilitating ease of doing business cannot override these main objectives. It would also do well to remember which way the dice is usually loaded between the promoters, who no doubt create enormous shareholder value, and shareholders, who support such value creation by investing their hard-earned monies but who are, more often than not, left holding the can. 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