dfa-24-oct

Daily Financial News Analysis – 24th Oct’20 – Free PDF Download

NBFCs Liquidity

  • Non-bank finance companies (NBFCs) have again called on the RBI to give them access to the on-tap TLTRO (targeted long-term repo operations) window.
  • TLTRO provides long-term funds to banks at the policy rate.
  • RBI has provided several tools to prop up bank funding to nonbanks.
  • Particularly, smaller NBFCs are complaining of a persistent lack of liquidity.
  • NBFC lobby group Finance Industry Development Council (FIDC) has urged RBI Governor Shaktikanta Das to direct banks to lend to NBFCs under this scheme to ensure benefits reach a wider segment of borrowers.
  • As per a CARE Ratings analysis, TLTRO 2.0 did not enjoy success as only Rs 12,500 crore out of the announced Rs 50,000 crore was availed of, while the first edition was crowded out by AAA-rated borrowers.

Flipkart – Aditya Birla

  • Flipkart will acquire 7.8% stake in Aditya Birla Fashion and Retail (ABFRL) for ₹1,500 crore.
  • Fashion retail in India is set for robust long-term growth due to strong fundamentals of a large and growing middle class, favourable demographics, rising disposable incomes and aspiration for brands.
  • Flipkart: Through this transaction with ABFRL, we will work towards making available a wide range of products for fashion-conscious consumers across different retail formats across the country.
  • Flipkart’s investment gives ABFRL capital to stay afloat amid a tough period for fashion and apparel retailers hurt by the Covid-19 led lockdown.
  • It also strengthens Flipkart and subsidiary Myntra’s lead in fashion ecommerce, which has become the fastest growing channel for apparel brands.
  • The deal terms provide Flipkart pre-emptive rights, or the right to buy additional shares in any future issuance by ABFRL before they are made available to the general public, and right of first refusal, which comes into effect from the date of allotment of equity shares to Flipkart and is for a period of 1-5 years.

Forensic Audit Disclosure Rule

  • SEBI made it mandatory for listed companies to disclose details of forensic audits immediately after initiation.
  • Once the audit is finished companies are also required to disclose the comments of management on these reports.
  • The move is intended to improve transparency after the regulator observed that companies were not disclosing such information proactively.
  • This, according to Sebi, has created an information asymmetry between company insiders and public shareholders.
  • The National Association of Software and Service Companies (Nasscom), the lobby group for IT companies, shot a letter to the market regulator earlier this week saying that the rules are ‘unprecedented’.
  • It has reasoned that “premature disclosures” related to forensic audits could impact the reputation when investigations show no fraud/wrongdoing.
  • It has also said that news of such audits could “mislead investors” and lead to market capital erosion or cause fluctuation in price or trading patterns in the shares of the company.
  • Nasscom has said that disclosures related to ordering of forensic audit should be limited to audits initiated by the Indian regulatory agencies.
  • Confidential and business sensitive information should also be withheld, it said.

EVs

  • The coronavirus pandemic is expected to delay the penetration of electric vehicles in India.
  • Government’s priority on reviving existing conventional automobile industry shift the focus away from EVs in the interim.
  • Consumers would be wary to buy a costlier EV than an internal combustion engine (ICE) vehicle
  • Original equipment manufacturers (OEMs) would refrain from incurring high Capex
  • This is likely to impact the sales of EVs, which are costlier than an ICE vehicle.

Onions

  • The government has imposed stock limits on onions using the extraordinary provisions of the recently amended essential commodities act and warned traders that it will take strict action against hoarding and black marketing.
  • It is also closely monitoring the price of other commodities as vegetables prices have also risen sharply as the late-season surge in monsoon rain has flooded farms.
  • The government has imposed a limit of 25 tonnes for wholesalers and 2 tonnes for retailers.
  • Essential Commodities Act empowers central government to invoke stock limits under extraordinary circumstances like war, famine, natural calamity or extra ordinary price rise.
  • Retail onion price has risen to ₹55.60 per kg from ₹45.33 last year and the five-year average of ₹25.87 per kg.

Boost Rail Road Connectivity

  • The Centre is mooting construction of rail lines alongside key expressways proposed to be built in the country in a bid to boost connectivity.
  • The ministries of railways and road transport and highways have held meetings to explore how such corridors can be developed.
  • For greenfield expressways, Govt can look at the possibility of rail lines alongside.
  • Five or six upcoming corridors, including Delhi-Amritsar-Katra and Chennai-Bengaluru, have been identified for such works.
  • The projects will help the government save costs on land acquisition for greenfield expressways.

 

 

 

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