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India's Insurance Sector Booms Amid Rising Demand
Business, Economy - April 30, 2020

Industry bodies urge government to create fund for startups

Industry bodies urge government to create fund for startups

 

In January 2016, Start-Up India initiative was launched by the government of India to encourage young entrepreneurs in the country. The main objective of this initiative is to transform India into a Start-up nation. India is a highly diverse country with 28 states and 8 union territories. This diversity has the aid to build opportunities to cross learn from each other. Now, there are more than 14,600 start-ups in the country with 231 angel investors and 8 angel networks. India is now the 3rd largest unicorn community and has 16 high valued start-up companies. This community has an overall valuation of $58 billion. They have raised more than $17.27 billion funds.

Government measures:

Various measures are taken to encourage the entrepreneurs like reduction in patent registration fees, improved bankruptcy code to ensure 90 day exit window, freedom from inspection and tax for first 3 years, schemes to provide IPR protection to start-ups.

Start-up association of India:

Start-up association of India asked the government to create 25,000 crore funds and keep the start-up India fund as a priority as liquidity crisis may arise due to the COVID-19 pandemic. This start-up industry was founded in 2017 altogether by the entrepreneurs to help start-ups in India in all the sectors and stages of maturity. This association connect start-up to the policy makers and investors so that broad network is created. Due to the COVID-19 pandemic, start-ups play a vital role especially tech start-ups. Since digital platforms are used for all purposes they play an important role.

The association includes top entrepreneurs of India Mart, Make My Trip, Info Edge and Venture Gurukool. They collectively suggested that funds can be registered as an Alternative Investment category-II Fund, with the National Investment and Infrastructure Fund, managed by professional fund managers. They also said that 10,000 crore funds which is under SIDBI, can be allocated for the start-ups.

Why fund is required?

Recently because of the COVID-19 breakdown, whole country has been affected socially and economically. This breakdown has directly affected the start-ups too as start-up companies are most vulnerable. Other reasons like sudden decline in productivity, supply chain breakdown, closing down the premises have also affected the performance of start-ups. On the other side, government is also taking measures to help start-ups such as extending the period for paying taxes, allocating the funds for labourers and workers. Not just the government but private companies have also taken initiative.

Facebook announced to offer $100 million in cash as well as credit to small businesses where Facebook operates. Citibank has offered assistance to the small businesses by waiving their fees and penalties. Many tech companies are also playing a major role as due to the lock down, digital platform are the ultimate saviors for the country. Tech companies like Microsoft, Google, Zoom and Cisco have offered their services for free to businesses conducting meeting, conferences online.

 

 

Just dial announces buyback of shares

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Visteon Invests $10M in India's Camera Manufacturing!
Equities, Market News, Markets - April 30, 2020

Just dial announces buyback of shares

Just dial announces buyback of shares

 

In the meeting held on 30th April 2020, the Board of Directors of Just dial Ltd. company approved the plan of buying back 31,42,857 equity shares (i.e. 4.84% of the paid up equity capital) at the market value per share of Rs. 700. The total amount of buyback of shares aggregates to Rs 220 crores which is nearly 24% of the total paid up equity capital including the reserves and surplus.

Buyback is a process of repurchasing the shares of the company. It is done by paying the market value of shares to the shareholders and reacquiring the shares of the company.

Just dial, incorporated in 1993 provides digital platform to search for different types of services under one single platform.

Share price movement of Just Dial Ltd:

The share price of Just Dial on NSE today was closed around Rs. 404.90 with the surge of 3.82%. While on BSE, it is Rs 406.00, up 4.16% at 16:15pm (IST) at market close. 

Just Dial’s financial performance:

In the financial year 2020-21, Just Dial Limited had a total income of Rs 984.46 crores. It reported a Profit After Tax of Rs. 206.8 crores and had an annualized earnings per share of Rs. 31.93.

 

 

RBI introduces Operation Twist

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Banking, Economy - April 30, 2020

RBI introduces Operation Twist

RBI bond introduces Operation Twist

 

The Reserve Bank of India (RBI) came up with a bond-swapping programme and coined it as Operation Twist. RBI had announced that it would conduct a synchronous buying and selling option under the Open market operations (OMO). So, an OMO of ₹10,000 Crores each was held on 27 April, 2020. The RBI mentioned that the 10,000 Crores amount will be made up of purchase of long term securities having tenure of 6 to10 years.

The sale amount of 10,000 Crores will be made up by selling short term securities having maturity dates like June 2020, October 2020 and April 2021. Short term further having two categories of cash management bills, one of 77 days and another of 84 days and two treasury bills of 182 and 364 days respectively. These short term bills are being put on sale by the RBI keeping in mind the interim cash mismatches the government is facing recently due to economic difficulties the pandemic has produced.

Auction result reveals that the cut-off yields on which the RBI bought securities was much higher than secondary market.

To illustrate:

1) 7.26% Government security (G-sec) 2029 which had secondary market return of 6.38% was bought at 6.4%.

2) 7.59% G-sec 2026 was bought at 5.9% versus the secondary market that gave 5.8%.

Under this programme, the aggregate amount of Face Value (FV) notified by RBI was 10,000 crores, against which the participants offered a total amount of 64,746 crores . RBI received bids that were six times more than the FV of the bonds. On the other hand, bids received for the sale of securities were nearly five times than the offer, which amounted to nearly ₹50,260 Crores. The near term paper was giving lower yield than normal. The Operation Twist further aggravated the same.

 

When and why does the Central Bank conduct an OMO?

Generally, the OMO sales are undertaken when the RBI wants to take out excess liquidity from the system. Whereas, OMO purchases are done to infuse instant money into the market. Recently, RBI was seen carrying out these operations to balance the sovereign yield curve. Particularly, ensuring lower returns at the shorter end of the curve.

Referring to the auction results, Naveen Singh, senior VP, ICICI Securities Primary Dealership says since RBI could buy securities at higher percentages, this believably implies that the banks are interested to book profit on the stock.

The Stocks which were held previously for maturity were made available for sale. Inversely, the cut-off rates on the sale of near-term paper was lower than prevailing market rates. For example, the 364-day T- bill was auctioned at 3.9%, when the market rate stood 4.074%. Distinctly, the RBI is desirous to lower the interest rates at the shorter end. This move is taken to enable an economic comeback against the upset which the pandemic has produced.

 

 

MSME seek fiscal aid amid crisis

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Equity Right
Business, Economy - April 30, 2020

MSME seek fiscal aid amid crisis

MSME seek fiscal aid amid crisis

 

The COVID-19 pandemic has affected nearly all areas and sectors of businesses, people, economy, trade and the financial system worldwide. The finance minister Nirmala Sitharaman announced $ 22.3 billion funds to help the poor people striving for all the necessities during this lock-down period. The biggest effect of covid-19 pandemic is on the Micro Small and Medium Enterprises (MSMEs) exporters. This is because this sector constitutes nearly 45% of the total outbound shipments. It also contributes nearly 25% to the GDP of the country.

 

MSME’s problems:

The CEO of one of the MSME, Anntech Offshore Engineering Pvt. Ltd. Ashokan Puthenpurackal said to the media that the major clients are refusing to make payments to the company. Thus impacting the cash flow of the company. All the small mid-sized and large companies are trying to borrow credit from banks and other financial institutions, calls for tax deferrals to ensure a continuous flow of operations and to maintain stability in the economy. The decreasing cash flow with no financial support will lead the company to lay off of its employees.

The government is trying to provide incentives to the most affected sectors like hospitality, tourism, etc. and is also planning for tax deferral payments. The other countries are trying to help the companies by providing Bank guarantees and fiscal support of at least 30% of the GDP. In India, it is less than 1% of the GDP. Experts say that the government should provide support of at least $8 trillion.

 

RBI’s support:

The RBI has headed to provide support for the economy but the governor Shaktikanta Das explained the significance of fiscal measures during this pandemic situation. The condition will continue to be unstable and there will be an increase in the NPAs, insolvencies, unemployment problems, etc. The Indian Government has not announced any special packages for the MSME sector but is now concerned mainly for the people of the country and to control the number of COVID patients.

Any chaotic and constant measures announced will lead to increase in the fiscal debt. Before taking any measure/decision, the government has to look into all the aspects and their impact on the people. The Central Government is also planning to provide $39 billion of loans to MSMEs. It will help to recover the businesses thereby helping to revive the economy. This proffer can be used by the firms to borrow 2/10th of their credit limit. It will also have a fund to pay for defaults, if any. The government is considering the problems of the manufacturing units who are struggling to operate their business amid lock-down.

 

 

Real estate sees investment growth in 2019

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Economy, Real Estate, Real Estate News - April 30, 2020

Real estate sees investment growth in 2019

Real estate sees investment growth in 2019

 

Real estate market witnessed an increase by 27% in investment during the year 2019. This increase is due to the Real estate sector now being transparent in operation and money-making. Many foreign investors and domestic investors have a great interest and belief and have invested in this sector in hope of making profits. Also, many government policies played a key role in helping this sector escalate.

 

Real estate witnessed a record of $6 billion during the financial year 2019. Investment compared to last year was $4.76 billion which has now increased by 27% to reach a record high of $6 billion. Major investment was 10% in hotel, 40% in office and development sites by 41%. Cities with high investment rates are Bangalore, Mumbai, Delhi, Hyderabad, Ahmedabad, Kolkata, etc. There were many steps taken by Government to increase the liquidity of cash to create interest for the investors. Major contributors were foreign investors with 65%. On the other hand, domestic players were 35%. Hotels saw a 10% increase compared to 2018 report and development sites saw 5% growth compared to 2018. India is a hub for many developed countries searching land, warehousing, and office space. Quick urbanization looks good for this part. Interest for private properties has flooded because of expanding urbanization and rising family unit pay.

 

Real estate sees growth in investment in 2019

India is among the top 10 Real estate markets globally. Government allows 100% FDI inflow in this sector. They have also passed a scheme which states 60 million houses are to be built by 2022 where 40 million are in rural region and 20 million are in urban region. Government is aiming to build 100 smart cities which will help to reduce number of people migrating to urban areas. Relaxation in certain norms has helped to elevate this sector. Key drives to increase are easy finance, increase in population, rapid urbanization, increase in the income of people, increase in economy, growth in tourism and policy support by Government.

 

As of now, COVID-19 is affecting various sectors all over country due to lock-down. There is a 20% decline in Real estate. Due to low-income and decrease in spending power of people there will be a decline in sale. COVID-19 pandemic may have serious declining impact in the present year. Quick urbanization looks good for the part. As per the Government, the sector will witness a $1.3 trillion investment by 2025. The increasing young population of India will help in building education space. The healthcare space is expected to grow to $372 billion by 2022. With an increase in number of tourists, there will be increase in number of guest houses and service apartments. Also, increase in demand for hotels industry is expected to increase up to $15.3 million by 2025.

 

 

Lenders seek replacements for debt schemes

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Easing of risk weights on loans given to MFIs and NBFCs
Economy, Market News, Markets - April 30, 2020

Lenders seek replacements for debt schemes

Lenders seek replacements for debt schemes

Debt mutual funds are the funds which are invested in instruments like treasury bills, certificate of deposits and c-papers. This instruments have fixed interest earnings with fixed tenure. Although, this interest is fixed for throughout the period of investment on the underlying asset. The main goal is to collect wealth through the interest earned and increase the overall investment value. Best debt scheme is decided on the basis of the credit rating given to them. If the credit rating is high. it means debt security have higher chances of paying the interest and principle during the time of maturity.

Debt schemes are usually taken by the investors and high network individual (HNI). They are risk averse and not ready to invest in equities. They choose debt funds according to their requirement for short to medium term. While investing in any scheme, investor considers points like what is the objective of funds? In which category this funds fall, how much risk is involved. Factors like cost, investment horizon and financial goal is also considered. Debt funds are evaluated on the factors like fund history, fund returns and ratios like financial ratios and expense ratios. Some best performing debt funds are SBI magnum constant maturity fund, ICICI prudential constant maturity gilt fund, UTI gilt fund, Axis banking and PSU debt fund and Kotak dynamic debt fund.

 

Franklin Templeton’s decision:

Franklin Templeton is one of the biggest mutual fund house and stands in 9th position in the country. They have recently announced that they are winding up the their 6 debt schemes. They are credit risk fund, duration fund, dynamic accrual fund, short term income plan, ultrashort bond fund and income opportunities fund. If valued altogether, this 6 schemes hold around 30,000 core asset of investors. After these scheme got windup, investors who had invested in this scheme cannot withdraw their cash on the basis of the asset they have put and their money is locked.

 

Liquidity concerns:

After Franklin Templeton scraped six debt schemes, liquidity became the main concern for the financial institution. Therefore they have asked investors and HNI’s who have borrowed fund from the banks and other financial institution to bring additional margins in debt mutual fund. This also includes franklin Templeton’s schemes. Investors and promoters have invested money in these schemes to raise money so that they can invest in the market or any other short term scheme to meet their short term capital requirement. Many high network individuals have borrowed money from NBFCs and bank to invest in the mutual funds. They are giving more than 8% returns and are more risky.

 

 

How will businesses survive social distancing?

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Equity Right
Business - April 30, 2020

How will businesses survive social distancing?

How will businesses survive social distancing?

India is a firm believer of unity. In the wake of Covid-19 outbreak, upholding social distancing is the requisite act to follow. In India, most of the businesses are done because of the good relationship maintained with their clients and all other stakeholders. Personal connections and physical interactions are valued at its peak. Current scenario of the country has almost all the companies shift to work from home model. This work from home model has created a buzz in the country, and a 100% absence of personal connection among all the stakeholders.

 

Importance of IT department:

This pandemic situation has abruptly provided utmost importance to the IT department. IT department is working immensely to give the best service to their clients. But there are many untraceable problems which may come in their way. Problems such as, how the productivity and efficiency of an employee can be traced? How impactful this can be while delivering the services to the clients? All this factors will be a foremost concern for all the companies. Inherently, there are many difficulties faced in maintaining social distancing and organizing businesses online. However, doing the businesses online can be proved a hectic task as most of the businesses will use the Cloud based operations and day by day their services are more perilous and unsecure.

 

Threats faced by businesses:

Media reports states that Cloud based operations have many threats like security problems This can cause a major problem to the companies as their crucial information and company secrets are at risk. Organizations are facing dilemma to find the exact match between “least cost” and “Best service offered” to the clients. IT department is the key to all the problems. Software’s which ensures highest security, developing a program which will assemble maximum data and ensuring data safety and transferability are the need of several companies. Developing this kind of software can be a trump card for the developers. Such software can be constructed using DevOps and DevSecOps.

The current situation is an enormous opportunity for the companies to study the market in a hasty manner. Every department in an organization is crucial and has its own advantage for the benefits of the company. Analyzing and forecasting data can help companies to mark a competitive advantage.

Learning from the crisis:

It is very important for all the companies to break the previous working pattern and construct themselves as per the situation demands. Now, it’s time to share the maximum knowledge a person possesses at any level of hierarchy with their subordinates. It will help the company gain maximum profit and expand business. Another vital aim that companies should not forget is that to keep the cost under control and boost the revenue. Customer satisfaction should be the priority. Otherwise it will just take few minutes for a customer to change their source where they are beneficial the most.

But a big question arises, will all these activities continue once we pull through this pandemic? Well, once all the things get restored hope, everything will bounce to as we expect.

 

 

Effects of Covid-19 on cryptocurrency market

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Equity Right
Currency, Economy, Market News - April 29, 2020

Effects of Covid-19 on cryptocurrency market

Effects of Covid-19 on cryptocurrency market

Cryptocurrency is a digital currency secured by cryptography which is not issued by banks or governments. In other words, a virtual currency which doesn’t have any physical embodiment is called cryptocurrency. Bitcoins(BTC), Litecoin(LTC), Ripple(XRP) Ethereum(ETH), Bitcoin cash, Ethereum classic, Zcash(ZEC) are some of the types of cryptocurrencies. In the present scenario, the COVID-19 pandemic has affected nearly all areas of businesses, people, economy, trade and the financial system worldwide.

 

Impact of COVID-19:

But at the same time, the COVID-19 pandemic has also helped the world to connect digitally for different reasons like work, purchase of goods, health, etc. One of the most propelling and safe investments was gold but when a liquidity crisis occurs, investments in gold are not up to the mark and fail to generate profits. Here comes the role of cryptocurrencies. The COVID-19 pandemic has caused the physical paper money usage to be minimized to control the spread of corona virus. This is because the virus stays on the objects for a longer time period. Cryptocurrencies acts as a solution to this problem.

 

Benefits of Cryptocurrency:

Cryptocurrency gives the freedom of converting it into money without any manipulation on behalf of the banks and other financial institutions. Cryptocurrencies have made transactions faster by helping the trade system to be efficient. Using the traditional method for transferring funds overseas nearly takes 3 to 5 days. With cryptocurrencies, the transactions can be done in a much shorter time period.

The block-chain technology used in cryptocurrency can serve as a solution in different ways. It can track the supply chain of medical and pharmaceutical products which are considered as essential goods. It can also be used for tracking the amounts received as donations for the cause of corona virus, for tracking the proximity of virus, etc

 

Opportunities brought by Cryptocurrency:

Cryptocurrencies can bring out new growth opportunities for emerging economy like India and also for developed countries. This is because cryptocurrencies provides faster payments between countries with no transfer fees or remittance charges. The stock prices have been hit tremendously and other investment avenues have also seen a downfall due to this outbreak. Investors are looking for much safer investment options in the long run.

Secondly, the growth in the usage of Fintech applications have made many companies to become curious. It could easily adapt to the new working conditions as they are using digital money for payments which has reduced the use of virus infected currencies. It acts as one of the best currencies developed so far and is one of the best alternative for fiat currencies. In future, the value of cryptocurrencies is likely to grow thus helping to be a digitalised paperless economy.

 

 

Production target makes Coal India stakeholders anxious

 

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Economy, Equities, Market News, Markets - April 29, 2020

Production target makes Coal India stakeholders anxious

Production target makes Coal India stakeholders anxious

Coal India limited (CIL) contributes more than 80% of coal production in India. It is one of the Public Sector Units in India which is into coal mining and refinery. For the financial year 2020-21, CIL was said to produce 710 million tonnes of coal by the coal minister Pralhad Joshi. The COVID-19 pandemic changed the entire scenario. Joshi added that the coal sector was also adversely affected, leading to ample fuel stock and low demand by the power and energy sector. The situation didn’t influence the government to bring down its target of producing 710 million tonne coal. It will help to achieve the goal of producing 1 billion tonne by the year 2023-24.

As on March 31, CIL had a stock of 74 MT. They are required to achieve the target because the government believes that the demand of the energy sector will rise in a few days. Furthermore, there will be low production in the monsoon season. Hence the maximum production will happen at this time, said an official to the media. The CIL stakeholders said that they already have a pile of stock for 30 days. If it produces 710 MT in the financial year 2020-21, it will lead to more pile up of stock, theft, poor quality and environmental pollution. It will further increase the chances of fire break up in the industry.

 

Production target makes CIL stakeholders anxious

The demand for the coal sector would increase after the lock down phase as mentioned by the Union Coal Minister. The minister of railways Mr. Piyush Goyal overlooks India’s opportunity to be a manufacturing hub. By acknowledging both the statements, the shareholders said these things would occur after a gestation period. Even before the pandemic, the situation was not favorable for the power sector due to low demand.

The coal ministry could have kept realistic targets which may help in keeping the coals at exposed seams. As per the demand, the coal could be extracted from the seams. This would lead to increase in the the cost per ton and decrease in the output per man per shift, said the ministry sources.

The shareholders had a counter statement that the coal productions maximum costs is Rs 1,800 per tonne. The wages and salaries paid to the workers constitutes almost half of the operational cost. An increase in the production target would lead to increase in the compensation paid to the workers of the company. The maximum possible stock which can be produced by CIL is 650 MT if the stock pile up of 125 MT is excluded. Any increase in the production will not be feasible as per the shareholders. Meanwhile, CIL has also taken measures to reduce the operational costs by shifting all of its subsidiary marketing counters from cities to subsidiary headquarters. The CIL officials thought that there are chances for a reduced production target for the financial year 2020-21.

 

 

SEBI and RBI review situation after Franklin fiasco

 

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Equity Right
Business, Economy, Market News - April 29, 2020

Mergers and acquisitions to rise post Covid pandemic

Mergers and acquisitions to rise post Covid pandemic

India’s startup sector may see a huge rise in mergers and acquisitions in the next 3-6 months. This can be anticipated as investors and companies expect a year of decreasing revenue and capital. This is caused by the COVID-19 pandemic as the Indian economy is in lockdown. According to investors, bankers and founders, buyouts will mostly take place in the Indian consumer retail, financial and internet sectors.

A lot of acqui-hires, distress sales and stock-led deals are expected to be completed. Bankers have stated that deals are now being accelerated. This was not possible 3 months ago. Venture capital investors have consolidation high up in their wish-list as they want to reduce portfolios. This wish has resulted due to these investors failing to raise money on their own from Limited Partners.

 

Impact of COVID-19:

The co head of digital and technology at Avendus Capital Mr. Karan Sharma stated that this pandemic is an unknown event. But this event will motivate both the entrepreneurs and Venture Capitalists to be a lot more creative and open. The current events have accelerated some of the conversations of mergers and acquisitions. These talks could have developed 2-3 years in the future. But this pandemic has proven to be a catalyst.

The dealmakers have stated that mergers and acquisitions transactions will rise. Investors have been urging portfolio companies to take measures foe extension of capital for atleast 18 months. Consumer facing businesses and high cash-burn entrepreneurs are urged to look for possible openings to merge.

 

Need for Mergers and Acquisitions:

In the April-June quarter, several companies may have zero revenue due to this pandemic. They will need to cover their costs. Fund raising is also postponed and will take more time to complete. Therefore, it makes more sense to merger. It is better to survive and grow rather than competing for the same capital and consumers. The general agreement is the financial services in the lending space are the primary targets for takeovers. Banks may try to acquire assets from fintech or non-fintech de-funded NBFC’s as they look to increase their tech stack. Currently, these assets are available at a discount.

 

Rise in the startup ecosystem:

Traders expect 55% of the Indian startup sector to have a money runaway for more than 11 months. Consolidation within startups have been on the rise in the past two years. Transactions worth $4.9 billion were recorded in the year 2018 and 2019. A total of 259 offers were noted in this two years. This year 27 offers worth $215 million was recorded.

 

 

Airtel signs deal with Nokia as they prepare for 5G era

 

 

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