dfa-4-sep

Daily Financial News Analysis – 4th Sep’20 – Free PDF Download

 

PM on Supply Chain

  • Prime Minister Narendra Modi: global supply chains would not be based just on costs but also on trust and pledged that India stood for political stability, policy continuity and diversity.
  • Modi, while delivering a special keynote address at US-ISPF US-India Summit 2020, highlighted India’s response to the pandemic and in that context called for diversification of supply chains.
  • India is also becoming one of the leading attractions for foreign investment.
  • Be it America or the Gulf, be it Europe or Australiathe world believes in us.
  • We have received over $20 billion of foreign investment flows during this year.
  • Google, Amazon and Mubadala Investments have announced long-term plans for India.
  • You are looking at a young country with 65% of its population below 35 years.
  • You are looking at an aspirational country that has decided to take the nation to new heights.
  • This at a time when we mark 75 years of independence.
  • You are looking at a country with commitment to democracy and diversity.
  • Aatmanirbhar Bharat is about transforming India from being just a passive market to an active manufacturing hub at the heart of global value chains.
  • There are tax exemptions to ‘Sovereign Wealth Funds’ and ‘Pension Funds’ for Infrastructure investment.
  • FDI into India rose by 20% in 2019. This is when global FDI inflows fell by 1%.
  • Sectors open: coal, mining, railways, defence, space and atomic energy

France coronavirus recovery plan

  • France has unveiled a 100bn-euro economic stimulus package (“France re-launch“) to help repair the economic damage caused by coronavirus.
  • President Emmanuel Macron’s government said the investment would include big spending on green energy and transport.
  • Aimed at reversing rising unemployment, and includes tax cuts for business.
  • The economy shrank by 13.8% between April and June, the biggest quarterly fall since the Second World War.
  • €100bn price tag is the equivalent of 4% of France’s annual economic output
  • The package is almost 4 times bigger than the rescue strategy implemented after the financial crisis of 2008.
  • About €40bn of the funding will come from the new European Union recovery fund.
  • About €35bn has been earmarked for projects to make the economy more competitive, and €30bn will be used on greener energy policies.
  • About €6bn is slated for making public buildings and homes better insulated.
  • The hydrogen industry, a sector which is receiving huge investment in Germany, will get €2bn.
  • The money would be spent over the next two years.
  • The next French presidential election is due to get under way in April 2022.
  • Economically and socially it is infinitely better to temporarily worsen the pubic finances to invest, re-arm the economy and move forward than to sink into austerity and let unemployment and human drama explode.
  • Obviously execution will be key to make sure that investment will be well utilised

Kamath Panel

  • The KV Kamath committee, set to submit its report on loan restructuring to the Reserve Bank of India (RBI) on Friday.
  • Identified six problem sectors, among them aviation, real estate, automobiles, infrastructure and power.
  • The committee has suggested solutions for 29 of the 307 sectors it assessed.
  • The RBI had tasked the committee with giving sector-specific recommendations following its announcement of a one-time loan recast for borrowers hit by the Covid-19 pandemic.
  • The panel is also said to have suggested that the two-year cutoff for the restructuring will begin after implementation of the resolution plan.
  • The RBI is expected to announce the loan restructuring guidelines by September 6 once the governor and deputy governors examine the committee’s recommendations.
  • Once the recommendations are finalised, bank boards will decide on resolution plans.
  • The Kamath committee will further vet these plans for business loans above ₹1,500 crore on aspects such as financial parameters, strength of promoters and their repayment capacity.
  • The committee sought inputs from 12 banks that constitute 65% of the banking system as well as the top three rating agencies — Crisil, ICRA and CARE.
  • The committee also looked at solvency ratios, liquidity parameters, profit margins, debt-servicing capability, risk on long-term loans and potential cash flows before arriving at its final set of recommendations.
  • India Ratings has said at least ₹2.1lakh crore (1.9% of banking credit) of retail loans, which could turn into NPAs, may undergo restructuring.
  • On an overall basis, about ₹8.4 lakh crore of total bank credit could be restructured, it said.

Rel Retail

  • Reliance Retail is in advanced talks with US private equity investor Silver Lake to sell 1.7-1.8% stake for about ₹7,500 crore, in what could be the first such deal by the Mukesh Ambani-owned company to raise funds.
  • If the deal materialises, it would potentially value Reliance Retail at over ₹4.1lakh crore.
  • The executives said Ambani wants to raise funds by selling minority stakes in Reliance Retail and is in talks with multiple investors.

SoftBank bid for Tik Tok India

  • SoftBank Group is exploring assembling a group of bidders for TikTok’s India assets and has been actively looking for local partners.
  • Over the past month, the Japanese conglomerate, which owns a stake in TikTok’s Chinese parent ByteDance, has held talks with the heads of India’s Reliance Jio Infocomm and Bharti Airtel.
  • TikTok is considering selling its operations in several countries after local governments shut out the app.

Services Activity Shrinks

  • The IHS Markit Services Purchasing ManagersIndex moved up to 41.8 in August from July’s 34.2.
  • Services activity in India contracted for the sixth consecutive month in August.
  • Pace of decline slowed as some firms gradually resumed operations with lockdown restrictions easing

Gita Gopinath

 

 

 

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