Aarti Industries Ltd Q1 FY23 Result Updates.

Economy, Market News, Markets - May 6, 2020

Investors get relief with standardized digital KYC process

Investors get relief with standardized digital KYC process

Know Your Customer (KYC) process generally contain heaps of paper work regarding customer identity and customer acceptance policy. All this makes the KYC process very lengthy and tedious. However, e-KYC is the option available to users but, for e-KYC stock brokers and various online mutual fund platforms didn’t have any standardized or unique set of procedures. E.g. In Person Verification (IPV) is completed by allowing customers by sending their recorded video to the concerned broker while some send their representative to the client’s home for the completion of In Person Verification (IPV).

New standard and unique procedure for Digital KYC:

Due to the unusual wake of Covid-19, the Indian government and Securities Exchange Board of India (SEBI) came up with standard and unique procedure for Know Your Customer (KYC). Media reports noted that Securities Exchange Board of India (SEBI) fetched responses from various brokers about how the KYC process is executed presently and then they released new standardized norms of how digital KYC should be executed.

Details regarding Aadhar based KYC:

A notification was published by Finance ministry of India on 22nd April 2020, regarding KYC process to be completely digitized for transactions through some institutions. Notification states that 9 institution’s viz. Link Intime India Pvt Ltd, CDSL Ventures Ltd, Bombay Stock Exchange (BSE), CAMS Investor Services Pvt Ltd, Central Depository Services (India) Ltd, and National Stock Exchange (NSE) can now undertake Aadhar based e-KYC. Notification noted that all the 9 institutions follow all the standards of privacy and security under the Aadhaar Act 2016.

Details regarding Online KYC:

Securities Exchange Board of India (SEBI), clarified the KYC process and its functioning. SEBI notified various online services that Mediators can practice for completion of KYC process.

Some of online KYC are followed:

Aadhaar eSign

Aadhaar eSign is the method recommended by government, in which we can digitally sign a document using Aadhaar. It will be equivalent to the normal sign we do, i.e. physical sign using pen. This will be completed using One-Time Password (OTP).

Digilocker

Digilocker is an initiative of Central government. It allows an individual to store their personal documents online using cloud storage provided by Digilocker. It provides free upload of documents up to 1 GB. Users can store their PAN card, Driving Licence and other important documents. Digilocker is fully secured, while creating an account. The 12 digit Aadhaar number is compulsory and further every time you login to Digilocker, a 4 digit One-Time Password (OTP) will be sent on the linked mobile number with Aadhaar. Digilocker allows you to sign digitally through their platform. Securities Exchange Board of India (SEBI), allowed verification of documents for KYC process using Digilocker. Documents uploaded on Digilocker can be treated as original documents.

In Person Verification (IPV)

In Person Verification (IPV) can be done effortlessly by using mediator’s portal or application. For IPV, a representative from the mediators can connect client through video call and ask some relevant questions. Investor can complete their In Person Verification (IPV) by presenting their original documents on video call.

The complete procedure of KYC:

The complete KYC procedure will be executed online as per SEBI norms by using broker’s application and online portals. They can cross verify clients by name and all the personal details uploaded by them on Digilocker with digital sign. IPV using video call will ensure all the proofs provided by client are genuine. Aadhaar authentication will be done by the Unique Identification Authority of India (UIDAI) whereas PAN authentication will be done by the database available in Income tax department.

Provision made to check the authentication of bank account is very simple. ₹1 will be deposited in a client’s bank account to verify all the details. This is termed as “Penny Drop” mechanism. Once all the verification is done, clients can download all the documents, do E-Sign on each document and upload it back to the portal. Another way customer can follow is to print all the documents, sign them, and upload the scan copy of it in the portal. Due to all this new measures started by government, investing online is an easy-going task.

Pre-GST CENVAT credit available till 30th June revised

0 Comment

GST 2.0 Boost: Investment Opportunities in Automobiles and Consumer Durables

Economy - May 6, 2020

Pre-GST CENVAT credit available till 30th June revised

On Tuesday, Delhi’s High Court allowed people enlisted under the Goods and Services Tax to claim outstanding CENVAT credits from the pre-GST system before 30 June, 2020. The advantage of the transitional credit will extend for a term of three years, which is the duration laid down in the Limitation Act. Businesses with pre-GST tax credits will be entitled to claim them by 30 June of this year. The Delhi High Court rejected the arguments of the revenue department that they should have been considered within three months of introduction of the indirect taxation system.

Timeline and benefits:

Abhishek Rastogi, partner of Khaitan & Co., refers to Rule 117 of the CGST Act, which placed a time limit of 90 days to claim a transitional CENVAT credit. The court concluded that the deadline laid down in the law was clear and not compulsory. At a virtual hearing, the court concluded that a timeframe of three years will be available to claim these credits under the terms of the Limitation Act. By filing the TRAN-1 form, taxpayers were permitted to bear input tax credits from the excise and service tax system, under the GST Act. Even though the first cutoff time terminated in September 2017, a few augmentations were given by the Government until December 27, 2017.

Taxpayers were permitted to claim due till 31 March 2020 that were unable to do so due to technical issues. The Court also said that the three-year extension will apply not only to the applicant but also to all persons with CENVAT credit until 30 June 2017. According to market analysts, there are as many as 10,000 such entities. Rastogi claimed that Rule 117 of the CGST Act is unfair, unlawful, and in breach of the right to equality established in Section 14 of the country’s constitution. It is to the point that it places a time limit on the allocation of tax benefits from the existing indirect tax system. Although, Rule 117 of the GST Act requires a time limit to obtain a refund. Taxpayers protested in court that an input tax credit was a privilege and not a tax compromise.

Relief to taxpayers:

At the simulated hearing conducted today by the Delhi High Court, it was specifically mentioned that the specified time limit would not apply because it is a directory and not a compulsory one. The court also ruled that the prolonged duration of three years would refer not only to petitioners but also to all those petitioners who are experiencing problems with transitional credits. The Government has ensured since the launch of the GST that an enormous amount of transitional credit has been misused. An examination of almost Rs 2 lakh crore of transitional credits was announced before the underlying cutoff time was completed by the indirect tax department.

Cryptocurrency EOS dips by 11%

0 Comment

RBI Lowers CPI Inflation Forecast to 3.7% for FY26 Amid Stable Price Outlook

Economy - May 5, 2020

RBI to make TLTRO more effective

RBI to make TLTRO more effective

The RBI is expected to take steps in order to make the Targeted Long Term Repo Operations (TLTRO) more effective so it solves the liquidity crisis of NBFCs. The RBI Governor Shaktikanta Das said that it promises the representatives of NBFCs sector and microfinance sectors that they are working on strengthening the mechanism of TLTRO.

The meeting and discussions:

As per the statement given by RBI, the meeting was held with the representatives of NBFCs and micro financial institutions to discuss the issues regarding unavailability of liquidity from the banks and the extension of loan moratorium. In the meeting, it was requested to shift the loan moratorium period from March-to-May and April-to-June since the repayments from the customers are already collected for the month of March.

The suggestions given by Sa-dhan:

Sa-dhan, the micro lenders association suggested that there should be a direct lending given by the RBI to small and medium financial institutions to sustain the liquidity crisis faced by them. It has also requested for a relaxation in the norms relating to asset classifications for the next 3 months i.e. up to 30th September 2020.

The representatives of NBFC sector for the meeting were Ramesh Iyer, the chairman and TT Srinivasaraghavan, the director of Finance Industry Development Council (FIDC). The chairman Manoj Nambiar and CEO Harsh Shrivastava, the co chairperson K Paul Thomas and executive director P Satish of Sa-dhan attended the meeting as the representatives for the microfinance sector.

TLTRO can inject liquidity for smaller NBFCs:

Some of the industrial leaders said that TLTRO, which has been created by the RBI to solve the problem of illiquidity cannot be accessed by the smaller firms. RBI said that the banks can borrow and invest at least 50% of it in securities issued by microfinance sectors and NBFCs.

The first auction of Rs 25,000 crores had bid just above 50% because the banks were not willing to invest in smaller firms. The RBI identified the reason for such uninterested response and is taking necessary steps to solve it.

Problems of NBFCs & MFIs:

P Satish said to the media that NBFCs and MFIs have started operations on Monday and many of them are finding it difficult to have funds for salary payments and other operational expenses. Nearly 24% of the NBFCs have only received the payment from lenders in the lock down period. If the moratorium is not extended by the SIDBI, Mudra and SBI, it would cause a huge problem since they have a vast exposure to small and medium-sized MFIs.

Cryptocurrency EOS dips by 11%

0 Comment

Economy, Market News, Markets - May 4, 2020

Jio Platforms acquire investment from Silver Lake

Jio Platforms acquire investment from Silver Lake

After the announcement of Facebook-Jio deal worth $5.7 billion a few weeks ago, Silver Lake, a technology investment firm is to invest $750 million (Rs. 5,655.75 crores) in telecommunications giant Jio Platforms Ltd. The investment is for 1.15% stake of the company at an equity value of Rs.4.90 lakh crores.

The Deal:

As per the deal announced by Reliance Industries Limited and Jio Platforms Limited, Silver Lake will invest $750 million in Jio platforms. This investment represents an equity value of Rs 4.9 lakh crores of Jio platforms and takes Jio’s enterprise value to Rs. 5.15 lakh crores. It represents 12.5% premium to the valuation of the investment made by Facebook which bought 9.99% of Jio Platforms Ltd.

Reliance Industries’ wholly owned subsidiary, Jio Platforms mainly focuses on next generation technologies. Reliance Jio Infocomm is a wholly owned subsidiary of Jio Platforms Limited which offers voice over LTE on its 4G network. The regulatory and customary approvals for the transaction are yet to be received. The financial advisor of Reliance Industries was Morgan Stanley. The legal counsel were ASB & partners and Davis Polk and Wardwell.

Statements by the CEO:

Reliance Industries Chairman and MD, Mukesh Ambani said that Silver Lake is one of the best technology and Finance firm. RIL is delighted and encourages such global technology relationships which will help them to transform the Indian Digital Society.

The Co-CEO and Managing partner of Silver Lake, Egon Durban said that Jio Platforms has great potential and has the power to bring low-cost Digital services to their customers and also to the small businesses population.

How will this deal help the economy?

Jio platforms stated that the COVID-19 pandemic has caused several economic disruptions globally and in India. This partnership with one of the the best technology investors, Silver Lake will have a significant role in revitalization of the Indian economy. The investment by Silver Lake will further help Jio in developing the world class digital platform it has built, powered by Broadband connectivity, Smart Devices, IoT, Blockchain technologies, etc.

Silver Lake is a technology investment firm with over 43 billion combined AUM and committed capital. They have nearly 100 investment and operating professionals worldwide. On 30th April 2020 while announcing its quarterly and annual financial results Reliance Industries said that it will achieve zero net debt status. The company has received proposals from other strategic and financial investors for a similar sized investments. They will announce it the coming months.

India may cap stimulus package to protect credit rating

0 Comment

Economy, Market News, Markets - May 2, 2020

India may cap stimulus package to protect credit rating

What does Sovereign Credit Rating Interpret?

Sovereign Credit Rating refers to the evaluation of debt paying capacity of a country based on their previous credibility of how previous debt is settled off. Sovereign Credit Rating are published by credit rating agencies. They are estimated by credit rating agencies like Standard & Poor’s (S&P), Moody’s, Fitch Ratings.

Importance of sustaining decent Sovereign Credit Rating:

For all developing countries, it is vital to maintain a decent Sovereign Credit Rating for overall growth of the economy. Decent Sovereign Credit Rating will aid to attract Foreign Direct Investment in the country.

Sovereign Credit Rating of India:

In the preceding year, Sovereign Credit Rating of India by Moody’s was negative, but afterwards they revised it to stable. Previously, Fitch Ratings forecasted growth rate of India will slow down its pace to 4.6% in the end of FY20 as compared to growth rate of 6.8% in FY19.

Regulating Indian Sovereign Credit Rating:

The Indian Government has limited the comprehensive spending on the unexpected spread of COVID-19 to ₹4.5 lakh crore. Additionally, they mentioned its important to have a detailed check on Indian Sovereign Credit Rating for safeguarding the economy.

Credit rating agencies stared demotion in their rating have been started in many countries. Thus different Credit rating agencies warned India if government tries to spend excess funds to curb the spread of COVID-19 virus. It may degrade the fiscal outlook of the country. In mid-March, the government disbursed ₹1.7 lakh crore to fight against the pandemic.

Major concern of everyone, is the Indian economy is stable?

A recent survey conducted by Federation of Indian Chambers Of Commerce & Industry (FICCI) and Dhruva advisors shows that businesses in India may slack their position in the market in near future. FICCI stated that responses from the survey highlights that the government should immediately come up with revival plans especially in Industry sector.

All the small and large companies are on pay cut including the prime minister and the president. Many SME’s gave up their office space due to pilling of a huge amount of rent and to keep control on their expenditures.

0 Comment

Infosys to LTIMindtree: IT Stocks Climb on Fed Relief

Economy, Market News, Markets - May 2, 2020

SEBI demands info on unlisted bonds

SEBI demands info on unlisted bonds

The SEBI has asked the mutual fund industry to share information pertaining to the holdings in unlisted bonds. These are securities which cannot be traded in the Indian bond market. This is due to the corona virus outbreak which has froze the entire bond market, It has made the fund managers unable to sell or pledge their funds.

Data to be submitted to SEBI:

SEBI has asked the mutual fund industry to provide details regarding the assets under management of holding unlisted NCD schemes. Adding to it, the details of investments in unlisted bonds and the share in such bonds.

Extending the deadline:

SEBI has directed the mutual fund industry to decrease the investment in unlisted NCDs to 15% by the end of March and to 10% by the end of June 2020. Looking into the current scenario of the mutual fund industry, SEBI has increased the deadline by 6 months. In the month of October, the mutual fund industry was prohibited from investing in unlisted bonds by SEBI. This led to illiquidity of unlisted commercial papers and unlisted NCDs in securities.

Shut down of 6 debt funds by Franklin Templeton:

Recently, Franklin Templeton shut down 6 debt funds which comprised nearly 32% of the total value of unlisted papers. SEBI has asked the Association of Mutual Funds in India to give the details regarding the total portfolio’s investment breakup in such unlisted NCD schemes. It must include the residual maturity of listed and unlisted bonds and the details regarding other listed securities.

An industry person said to the media that some of the listed bonds are illiquid in the current market. SEBI will probably scrutinize the level of risk and stress the system if the redemption continues. These are particularly related to the mid sized companies with unlisted NCDs. It is because the terms and conditions are not easily available for such unlisted papers.

Friday’s deadline:

The deadline given by the SEBI to fund houses was Friday. A source said to the media that Friday was a bank holiday and the stock exchanges were closed. Hence, they didn’t expect an email from SEBI asking for the data. Many funds have been redeemed leading to an increase in the bond yields. Many mutual fund industries have asked banks to avail loans to increase the liquidity position. The fund industries would generally take an overdraft facility from banks to meet their cash flow needs.

Losses borne by AMCs when funds are borrowed:

A fund manager said that whenever the mutual fund schemes borrow, they have to pay interest to the extent of average portfolio yield. Mostly the borrowings are higher than portfolio yields and the difference is to be borne by the Asset Management Company. 20% of its AUM can be borrowed by the mutual fund schemes.

0 Comment

Giva Raises Fresh Capital to Strengthen Jewelry Business, Valued at ₹3,950 Crore

Business, Economy - May 1, 2020

New FDI rules not for Taiwan inflows

New FDI rules not for Taiwan inflows

In a developing country like India, the existence of Foreign Direct Investment (FDI) is requisite for the growth of economy. Total Foreign Direct Investment in India from year 2000-2019 is US $658,893 million. In the wake of the Covid-19 outbreak, many cosmopolitan investor’s are trying to gain an undue advantage by acquiring Indian companies. To keep a tight rein on this, the government announced new FDI rules.

New norms by Indian Government on FDI:

The new rules announced by Indian government stated that there will be a comprehensive look over in any acquisition or takeover executed in India on Indian Companies. Once the government approves and sanctions, then only the further process can be implemented. This new norms of FDI will be pertinent for all the countries sharing boundaries with India viz. Bhutan, China, and others. Government officials noted the new norms announced by FDI will not be relevant for Taiwan. Smooth flow of operation between Taiwan and India will be continued with no barriers.

India – Taiwan Relationship:

Major chunk of money invested by Taiwan in India exists in sectors like Infrastructure and Energy. India and Taiwan have established a robust economic relation since decades. Approximately 100 Taiwanese companies are doing business in India. The relation between India and Taiwan was established in 1995, since then we hold a powerful relationship with Taiwan. The big question arises, Can’t Taiwan is easily influenced by China with their decisions on Foreign Direct Investment?. Media reports noted that in coming weeks government may clear all the queries on new FDI norms.

Amazon Pay Later introduced in India

0 Comment

IREDA Bonds Gain Tax Benefits to Promote Green Energy

Economy, Equities - May 1, 2020

Government may issue tax-free bonds

Government may issue tax-free bonds

Over the past weeks, the COVID-19 pandemic has emerged as a significant global challenge inducing turmoil in the economies. This outbreak is having a severe impact on people, economy and business. Countries are battling and taking every possible measure to combat the spread of corona virus. One of which is the lock down strategy. Lock down is the last resort and has actually helped to save lives. Along with this, it has invited a huge fiscal gap. This fiscal gap will broaden itself once the lock down is lifted. Lock down has hit the earning and spending cycle at an individual level, which will greatly impact future tax collections.

Government to raise funds:

Government plans to raise short term funds to fulfill temporary need. They plan to raise this money from the RBI through ways and means advances (WMA). Finance ministry suggested the issue of tax-free bonds. Under this, they plan to raise Rs 10,000 crore by giving multiple installments to ensure its success.. However, Rs 10,000 crore may not be sufficient enough for the anticipated immediate expenses.

It is yet under discussion, as to whether bonds should be sold by a direct public issue or issued via a public sector company. Historically, tax free bonds was sold by National Thermal Power Corporation Limited (NTPC), Rural Electrification Corporation (REC) and Power Finance Corporation (PFC). Further, discussions as to how many number of installments should be provided and other terms and conditions are in process. As per the prevailing marginal tax rates, calculation shows that 5.5%, 10-year tax free sovereign instrument will effectively cost 7.7%.

Good news for the retail investors:

Looking at the current scenario, if these bonds are kept open for retail savers and corporations, they will willingly opt for parking their hard earned money into these bonds. After the news of Franklin Templeton freezing 6 of their plans, investors have fear carved in their minds with respect to safe keeping and growth of their capital.

Government will issue these tax free bonds to raise funds for specific purposes. Generally, the funds are raised from debt market by the Central government in the form of weekly securities auctioned by the Central bank. In contrast to last FY target of Rs 4.74 lakh crore, borrowing target of FY21 is marked at a net amount of Rs 5.11 lakh crore.

If retail investors get a chance to participate, this scenario will be the first of its kind and create history. Issuing tax-free bonds to retail savers and corporations will provide them a window of safer investment. At the same time, raising money through these government instruments will over populate the market and increase rates. The CARE estimates reveal that until today, the lock down would have sucked a huge chunk of Rs 1 lakh crore of GST monthly collections.

Gold set for best month in 4 years

0 Comment

Why gold funds saw a record weekly inflow — and what it signals for Indian investors

Commodities, Economy, Market News, Markets - May 1, 2020

Gold set for best month in 4 years

Gold set for best month in 4 years

On 30th April, the gold prices had a surge, en routing to its best month in the last 4 years. This is because of the increase in expectations about the monetary ease provided by the central banks and the continuous stress over the global recession which increased the demand. Spot gold showed a surge of 0.2% at $1,713.75 per ounce by. The US gold futures showed an increase of 1.1% to $1,732.10 per ounce.

How the gold prices surged?

Eugen Weinberg, the Commerzbank analyst stated the immense monetary support received at the movement is helping gold. Regardless of the increasing risk appetite, the gold prices stayed above $1700 ounce even though it has faced pressure from the equity markets. Carlo Alberto De Casa, Kashif analyst of Activtrades said to the media that the investors will remain confident about quick solutions for the coronavirus. The central banks will be forced to print a large amount of money leading to hyperinflation in such economic turmoil.

Interest rates:

United States Federal Reserve preserved the interest rates and it should be left unchanged for sometime. The unexpected monetary influence provided by both the European Central Bank and the Federal Reserve will probably increase the demand for gold in the future.

Over the last six weeks, the European Central Bank left the interest rates unchanged after revealing various stimulus measures including a plan to buy 1.1 trillion euros worth of debt this year. The Federal Reserve kept the interest rates near zero on April 29. They also promised to extend the emergency series of measures needed to help the battered and bruised economy.

In the first quarter, the US economy contracted at its shortest pace since the Great Recession. In the second quarter, it is likely to show a more sharper contraction. The Bullion showed an increase of more than 9% in the last month. It is boosted by several stimulus measures from the central banks to handle damage caused from the corona virus outbreak. The unchanged lower interest rates will reduce the alternative cost of holding non yielding gold. It is always considered as a risk against inflation and canker currency.

Amazon Pay Later introduced in India

0 Comment

India's Insurance Sector Booms Amid Rising Demand

Economy, Market News, Markets - April 30, 2020

Mutual fund industry in crisis due to pandemic

Mutual fund industry in crisis due to pandemic

The COVID-19 pandemic has hit nearly all sectors of businesses, people, economy, trade and the financial system worldwide. Mutual fund industry has been adversely affected due to corona virus. All mutual fund investors have incurred huge losses in NAVs, specially those investing into categories of equity related mutual fund schemes.

Nearly 20 categories of mutual funds viz. energy funds, International funds, banking funds, large cap funds, mid cap funds, dividend yield funds, PSU funds, infrastructure funds, etc. are some of the mutual fund schemes that have faced losses tremendously in the last month. The energy sector saw a downfall of 20.08% in the last month. It was followed by the International funds category which dipped to 20.07%. The banking sector funds also had a downfall not only because of the corona virus threat but also because of the non performing assets crisis. The gold funds category is the only sector which has given positive returns in the last month.

Winding of 6 mutual fund schemes by Franklin Templeton:

Franklin Templeton, the leading global investment management company announced the winding up of 6 mutual fund schemes on 23rd April, 2020.

Fear of Investors:

All these issues have led to fear in the minds of investors making them pull out Rs. 9,000 crores out of the credit risk mutual fund schemes. As per the data collected by Pulse Labs, the asset under management of these mutual funds have dropped by 19%.

A lot of tension can be seen in the credit risk fund category because of the redemption and unavailability of liquid underlying assets. The HDFC credit risk fund has the highest loss in comparison with other credit risk funds. The asset under management of the credit risk funds show the tremendous depth in comparison to the last month.

Lakshmi Iyer, chief investment officer of debt, Kotak Mutual Funds said to the media that without even considering the quality of the portfolio, investors have started redeeming the money from the funds. One of the ICICI Prudential spokesperson said to the media that the company assures the portfolio is well differentiated on the asset side and liability side.

RBI’s help:

RBI has recently announced rupees 50,000 crore special liquidity funds for Mutual Funds. This was announced after the winding up of 6 mutual fund schemes by Franklin Templeton. It is a measure taken by RBI to calm down the investors and reduce their panic by providing a guarantee of having adequate liquidity to meet the redemption. These funds can be borrowed by the companies from banks at a repo rate of 4.4% for 90 days. The Targeted Long Term Repo Operations is to help several financial services companies to manage their cash flow problems amid COVID-19 outbreak.

Industry bodies urge government to create funds for startups

0 Comment