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Oct 26, 2017 01:24 PM IST IST | Source: Moneycontrol.com
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highlights
Fitch Ratings says, bank recap may make fiscal deficit target hard to achieve
The massive Rs 2.11 lakh crore capital infusion in public sector banks may make the 3.2% fiscal deficit target for 2017-18 difficult to achieve if two-thirds of the planned recapitalisation bonds are issued by the government, Fitch Ratings said. The announcement made on Tuesday "is a significant change from the drip-feed approach pursued over the last few years and should help address the capital shortages that are a major negative influence on the viability ratings of the banks," it said. Of the total Rs 2.11 lakh crore, Rs 1.35 lakh crore would be in the form of recapitalisation bonds, while the rest would involve a combination of already announced budgetary support and capital raisings by the banks themselves from the capital markets.
"The recapitalisation plans could make this target more difficult to achieve if recapitalisation bonds are to be issued by the central government, which might mean expenditure cuts elsewhere. Recapitalisation bonds would still imply contingent liabilities for the government if they are instead issued by quasi-government institutions. The USD 21 billion of planned issuance is equivalent to 0.9% of GDP," it said. The rating agency however said the additional pressure on fiscal balances could be more than offset by the beneficial impact recapitalisation may have in eventually helping to return the banking sector to health, which would support the longer-term economic outlook and reduce uncertainty.
NLC India, formerly known as Neyveli Lignite Corporation, has come out with an offer for sale (OFS) where in the government is selling its 5% stake. The OFS is worth participating in light of the attractive valuations it is offering, reports Moneycontrol Research’s Jitendra Kumar Gupta. Interestingly, retail investors will be allotted shares at 3.5% discount or at Rs 90.7 per share as against the offer price of Rs 94 a share.
At the discounted price the stock is valued at 6.3 times earnings and 1.3 times book value of FY17, which is cheap considering NLC is an integrated player generating about Rs 1,000 crore of annual cash from operations. Among power utilities, the state-owned NLC has a much better balance sheet. In FY17, the company reported a debt-to-equity of 1.3 times and interest coverage ratio in excess of 20 times, which is quite healthy for any company. Not just financial leverage, the operating business is equally strong. The company has consistently maintained its operating margins in the range of 40% and last year reported return on equity in excess of 20%.
L&T construction arm bags orders worth Rs 3,551cr
Larsen & Toubro’s (L&T) construction arm has won orders worth Rs 3,551 crore across business segments. In a filing to BSE, the engineering and construction major said its transportation infrastructure and water effluent treatment segments have jointly bagged orders worth Rs 1,123 crore in the domestic market. Apart from the joint order, transportation infrastructure and water effluent treatment business have also received orders worth Rs 777 crore and Rs 572 crore, respectively. Its building and factories divisions have won orders worth Rs 866 crore for design and construction of 22 tower, while smart world and communication business vertical has got an order worth Rs 213 crore in Gujarat. Shares of the company were trading at Rs 1,220.90 apiece, up 1.37% from its previous close on the BSE.
North Korea diplomat says take atmospheric nuclear test threat 'literally'
The recent warning from North Korea’s foreign minister of a possible atmospheric nuclear test over the Pacific Ocean should be taken literally, a senior North Korean official told CNN in an interview aired on Wednesday. “The foreign minister is very well aware of the intentions of our supreme leader, so I think you should take his words literally,” Ri Yong Pil, a senior diplomat in North Korea’s Foreign Ministry, said. North Korea "has always brought its words into action," Ri said, visibly angry.
Speaking on a visit to New York for the United Nations General Assembly last month, Ri Yong Ho, the Foreign Minister, raised the possibility that North Korea could test a powerful hydrogen bomb over the Pacific Ocean. The threat came hours after US President Donald Trump threatened to "totally destroy" North Korea in a speech to the UN. (Photo courtesy: New York Times)
One investment bank is urging investors to prepare for the US economy to roll over as early as 2018, reports CNBC. "The US economy will in all likelihood slow down substantially: there is a limit to the rise in the participation rate and the employment rate; real wages are slowing down," wrote Patrick Artus, Chief Economist at Natixis. "Investors should therefore prepare for the consequences." Consequences of this slowdown, notes Artus, include a brief rise in interest rates, a market sell-off and a depreciating dollar. Natixis is a French corporate and investment bank headquartered in Paris. Natixis Global Asset Management oversees roughly $950 billion.
Goldman Sachs says bank capitalisation could lead to RBI hiking rates
On Tuesday, the Union Cabinet approved a recapitalisation plan worth Rs 2.11 lakh crore for state-run banks to boost flagging economic growth and increase bank credit flow. This measure is likely bearish for short term rates, and makes Reserve Bank of India (RBI) to hike rates, reports MoneyLife.
In the report, Goldman Sachs, said, "All else equal, the measures announced on Tuesday are likely bearish for short-term rates, as they make the RBI more likely to hike rates sooner than market expectations, should growth momentum improve substantially, reducing economy-wide slack, and core inflation inch higher. We currently forecast that the RBI will hike rates three times by the end of 2018, an outcome that is not fully priced in by the market."
Fitch Ratings says, bank recap may make fiscal deficit target hard to achieve
The massive Rs 2.11 lakh crore capital infusion in public sector banks may make the 3.2% fiscal deficit target for 2017-18 difficult to achieve if two-thirds of the planned recapitalisation bonds are issued by the government, Fitch Ratings said. The announcement made on Tuesday "is a significant change from the drip-feed approach pursued over the last few years and should help address the capital shortages that are a major negative influence on the viability ratings of the banks," it said. Of the total Rs 2.11 lakh crore, Rs 1.35 lakh crore would be in the form of recapitalisation bonds, while the rest would involve a combination of already announced budgetary support and capital raisings by the banks themselves from the capital markets.
"The recapitalisation plans could make this target more difficult to achieve if recapitalisation bonds are to be issued by the central government, which might mean expenditure cuts elsewhere. Recapitalisation bonds would still imply contingent liabilities for the government if they are instead issued by quasi-government institutions. The USD 21 billion of planned issuance is equivalent to 0.9% of GDP," it said. The rating agency however said the additional pressure on fiscal balances could be more than offset by the beneficial impact recapitalisation may have in eventually helping to return the banking sector to health, which would support the longer-term economic outlook and reduce uncertainty.
Top Headlines
1. North Korea diplomat says take atmospheric nuclear test threat 'literally', reports CNN
2. Goldman Sachs says bank capitalisation could lead to RBI hiking rates, reports MoneyLife
3. Fitch Ratings says, bank recap may make fiscal deficit target hard to achieve, reports PTI
4. L&T construction arm bags orders worth Rs 3,551cr
To ensure compliance with anti-money laundering rules, BSE today asked its brokers to submit details about preparedness for furnishing Aadhaar details of their clients by month-end, reports PTI.
This follows the government's amending in June the Prevention of Money Laundering (Maintenance of Records) Rules with regard to collection of Aadhaar number from clients.
In a circular, BSE has asked its stock brokers to submit a report with details about their preparedness, number of active clients and the number of clients who have complied with submitting Aadhar numbers.
"Members are requested to submit/update the details by October 31, 2017," BSE (formerly known as Bombay Stock Exchange) said.
The Glaxosmithkline Pharmaceuticals scrip is up close to 3% after the company’s net profit rose 31.84% to Rs 130.32 crore in the quarter ended September 2017 as against Rs 98.85 crore during the previous quarter ended September 2016. Sales rose 4.65% to Rs 836.26 crore in the quarter ended September 2017 as against Rs 799.12 crore during the previous quarter ended September 2016.
PNB Housing Finance scrip is 2.42% after the company reported strong Q2 number for the quarter ended September 2017. Its net profit rose 51% at Rs 208 crore while the company's total income for the quarter under review stood at Rs 1,316 crore, up from Rs 970 crore in the year-ago period.
Prime Minister Narendra Modi inaugurated the International Conference on Consumer Protection for East, South & South-East Asian Countries in New Delhi, reports The Financial Express. While addressing the gathering, Modi said, “This conference is important because it seeks to discuss how we understand and try to fulfil the aspirations of the consumers.” Consumer protection in an inseparable part of governance, he stated. “Our Vedas have an extensive mention of consumer protection. New consumer protection act is being made, consumer empowerment will be a major part of it and guidelines on misleading ads will be stricter.”
While talking about his vision for new India, Modi said, “In our vision for a new India, we want to move ahead from only consumer protection towards best consumer practices and consumer prosperity. The focus is on consumer empowerment and ensuring consumer faces no difficulties. The government’s priority to consumer protection is in line with our resolve of New India, we’ll change it to consumer prosperity on our way ahead.”
Adopt a Heritage programme: Taj Mahal fails to find any takers
The Union Tourism Ministry on Wednesday announced the first list of 14 heritage sites that are to be 'adopted' by private groups under the 'Adopt a Heritage' programme, according to a report by The Times of India. Interestingly, the Taj Mahal did not find any takers. The heritage monuments taken up for 'adoption' by private groups include Delhi's Qutub Minar, Jantar Mantar, Purana Qila, Safdarjung's Tomb and Agrasen ki Baoli, Odisha's Sun Temple, Ratnagiri monuments and the Rajarani temple, the ruins of Hampi in Karnataka, the Leh Palace and Stok Kangri in Jammu & Kashmir, Anjanta and Ellora caves in Maharashtra, Mattancherry Place in Kochi, Gangotri Temple and the Gomukh trail in Uttarakhand.
Pakistan court issues arrest warrant for Nawaz Sharif in Panama Papers case
A Pakistani court on Thursday issued arrest warrants for ousted Prime Minister Nawaz Sharif in two cases of corruption spiralling from the Panama Papers leak, reports AFP. Sharif is currently in London with his wife Kulsoom as she undergoes cancer treatment, and has not returned to Pakistan since he was indicted in the corruption allegations earlier this month, despite reports he would do so.
"The accountability court issued bailable warrants for the former prime minister in two cases of alleged corruption today and adjourned (the) hearing until November 3," one of his defence lawyers, Zafir Khan said. In late July, the Supreme Court sacked Sharif following an investigation into corruption allegations against his family, making him the 15th premier in Pakistan's 70-year history to be ousted before completing a full term.
Srei Equipment Finance board clears Rs 2,000 cr IPO plan
Srei Infrastructure Finance said the board of its wholly-owned subsidiary Srei Equipment Finance (SEFL) has approved raising up to Rs 2,000 crore through an initial public offer (IPO). "The Board of Directors of SEFL ... has approved, subject to approval of its shareholders, marketing conditions and receipt of requisite approvals from statutory and other authorities, an IPO of its equity shares by way of issue of fresh equity shares up to Rs 2,000 crore," the company said in a regulatory filing. The SEFL's board also approved participation by the existing shareholders of Srei Infrastructure Finance in relation to such number of equity shares held by it which are eligible for offer for sale. Shares of Srei Infrastructure Finance were trading 1.12% lower at Rs 119.70 on the BSE.
The BSE Sensex fell by 79 points to trade below the 33,000 level in a volatile trade following profit booking in telecom, FMCG, finance, banking and consumer durables sectors ahead of expiry of October derivative contracts later today. The 30-share Sensex resumed lower at 33,025.17 and hovered in a range of 33,074.91 and 32,835.06 in morning trade. While, the NSE 50-share Nifty was trading flat, down by 8.80, or 0.09 per cent to 10,286.55.
Among secondary indices, the S&P BSE Mid-Cap index rose 0.25% and the S&P BSE Small-Cap index gained 0.49%. Both the indices outperformed the Sensex. Major losers were ICICI Bank 2.5%, HDFC 2.24%, Power Grid Corporation of India 1.9%, Dr Reddy Laboratories 1.08%, Hindustan Unilever 1.01% and Tata Motors DVR 0.72%. However, Larsen & Toubro rose 2.7% followed by Cipla 2.05%, Kotak Mahindra Bank 1.21% and Axis Bank 1.05%.
Reliance Nippon Life Asset Management, India's third largest mutual fund company, could be a unique play in a highly under-penetrated mutual fund market, reports Moneycontrol Research’s Krishna Karwa. The ratio of India's equity assets under management (AUM) to GDP is only 3% as against the global average of 30%. Barring the initial expenses, mutual fund/asset management businesses are primarily asset light in nature with the ability to generate positive cash flows over a period of time. Being a highly scalable business, Reliance Nippon, with AUM exceeding Rs 3.5 lakh crore and market share of 11.5%, is poised to do well on the back of high margins, strong brand value, and robust returns on equity. At the upper end of the price band (Rs 252 per share), the issue is valued at 5.7 times price to FY18 projected book value. Though Reliance Nippon has no listed peers, given its growth trajectory and consistent return ratios, the valuation looks reasonable.
NLC India, formerly known as Neyveli Lignite Corporation, has come out with an offer for sale (OFS) where in the government is selling its 5% stake. The OFS is worth participating in light of the attractive valuations it is offering, reports Moneycontrol Research’s Jitendra Kumar Gupta. Interestingly, retail investors will be allotted shares at 3.5% discount or at Rs 90.7 per share as against the offer price of Rs 94 a share.
At the discounted price the stock is valued at 6.3 times earnings and 1.3 times book value of FY17, which is cheap considering NLC is an integrated player generating about Rs 1,000 crore of annual cash from operations. Among power utilities, the state-owned NLC has a much better balance sheet. In FY17, the company reported a debt-to-equity of 1.3 times and interest coverage ratio in excess of 20 times, which is quite healthy for any company. Not just financial leverage, the operating business is equally strong. The company has consistently maintained its operating margins in the range of 40% and last year reported return on equity in excess of 20%.
KEC International bags orders worth Rs 1,931cr, stock up close to 3%
Engineering, procurement and construction major KEC International has won new orders worth Rs 1,931 crore. The company has secured a new order of Rs 1,756 crore, the company said in a BSE filing. Its transmission and distribution business won orders worth Rs 1,756 crore across India, SAARC, West Asia, Africa and the Americas, it added. The cable business secured orders worth Rs 112 crore while the railways and solar businesses received orders worth Rs 54 crore and Rs 9 crore, respectively. KEC International, an RPG Group firm, is a global infrastructure EPC major. It has presence in power transmission and distribution, cables, railways, water, renewables and civil. Shares of the company were trading 2.84% higher at Rs 295.40 on the BSE.
Rahul Gandhi takes another jibe at the Narendra Modi government, says economy has gone into ICU due to the Goods & Services Tax.
Japan will propose a strategic dialogue among leaders of the United States, India and Australia, aiming at counteracting China’s expansion under its “Belt and Road” policy, Foreign Minister Taro Kono told the Nikkei business daily. The proposal is for the leaders of the four nations to promote free trade and defence cooperation across the land and sea to Southeast, South and Central Asia, and beyond to West Asia and Africa, Kono said.
Honda to launch 6 new models in India in 3 years
Japanese auto major Honda Motor Co on Thursday said it will launch six new models in India in the next three years to enhance its position in the market there. The company, however, said there will not be any hybrid or electric vehicle models in the upcoming line up, as it awaits clarity on government policy regarding electric mobility."We have six big launches coming up in the next three years in India ... It will not include any battery vehicles," Honda Motor Co CEO Takahiro Hachigo said.
All these new models will be assembled at the company's two plants in India but did not divulge details of segments where these models would be present. When asked about the absence of hybrids from the line up, he said, "When it comes to India we still don't know if hybrids segment will grow or how the electric vehicles will grow. We need to study government policy to understand more." The advantages of hybrids, however, is that they can use existing infrastructure, Hachigo added.
Swaraj seeks information from UP govt on Swiss couple attack report
External Affairs Minister Sushma Swaraj on Thursday sought information from the Uttar Pradesh government on a news report of a young Swiss couple being attacked by a group of youths in the Fatehpur Sikri on Sunday, reports PTI. She also said that her ofice will reach out to the couple. "I have just seen this. I have asked for a report from the state government. My officers will reach them in the hospital," Swaraj tweeted.
According to the report, a couple from Lausanne in Switzerland was chased and attacked with stones and sticks by a group of youths in the Fatehpur Sikri on Sunday, leaving them battered and bruised. Quentin Jeremy Clerc, 24, who came to India on September 30 with his girlfriend Marie Droz, also 24, was quoted as saying that they were strolling near the railway station at the Fatehpur Sikri after a day in Agra when the group started following them and later attacked. The couple said as they lay on the ground bloodied and bruised, bystanders began taking videos of them on their mobile phones, according to the report.
An Indian soldier, who had crossed over to Pakistan during the surgical strikes last year and was handed over to India in January by that country, has been found guilty by an Army court which has recommended nearly three months imprisonment for him, reports PTI. Official sources said the Army court sentenced Chandu Babulal Chavan to nearly three months in prison but the quantum of punishment is yet to be approved by appropriate authorities.
Sepoy Babulal Chavan was tried by a General Court Martial and he has pleaded guilty, they said. He can appeal against his sentence. Chavan, posted with 37 Rashtriya Rifles, had mistakenly crossed the boundary in Kashmir hours after India's surgical strikes on terrorist bases across the LoC in September last year. In January, he was handed over to India by Pakistan.
L&T construction arm bags orders worth Rs 3,551cr
Larsen & Toubro’s (L&T) construction arm has won orders worth Rs 3,551 crore across business segments. In a filing to BSE, the engineering and construction major said its transportation infrastructure and water effluent treatment segments have jointly bagged orders worth Rs 1,123 crore in the domestic market. Apart from the joint order, transportation infrastructure and water effluent treatment business have also received orders worth Rs 777 crore and Rs 572 crore, respectively. Its building and factories divisions have won orders worth Rs 866 crore for design and construction of 22 tower, while smart world and communication business vertical has got an order worth Rs 213 crore in Gujarat. Shares of the company were trading at Rs 1,220.90 apiece, up 1.37% from its previous close on the BSE.
Uttar Pradesh Chief Minister Yogi Adityanath will visit the Taj Mahal on Thursday against the backdrop of various controversial statements made by some BJP leaders and ministers against the 17th century monument, reports PTI. Over 14,000 policemen have been deployed across the city for the security of Adityanath, who arrived here early this morning. Adityanath will be the first BJP Chief Minister of UP to visit the monument of love.
According to his programme, Adityanath will stay for half an hour at the graves of Shah Jahan and Mumtaz Mahal and visit the Shah Jahan park nearby. The chief minister will inspect various places along the way, inside and outside the monument. He will also lay foundation for the development of a tourist pathway from the Taj Mahal to the Agra Fort. He will also run a mega cleanliness campaign along with 500 BJP activists and social workers around the west gate of the Taj Mahal. (Picture courtesy: PTI)
Trump rips Clinton over dossier alleging Russian ties, says it's a 'disgrace'
US President Donald Trump has slammed his Democratic presidential rival Hillary Clinton after news reports appeared that her campaign had funded research that resulted in a dossier which contained allegations that he had links with the Russians, reports PTI. "It's a disgrace. It's a very sad commentary on politics in this country," Trump told reporters at the White House on Wednesday. First reported by The Washington Post, the dossier prepared by former British intelligence officer Christopher Steele and Fusion GPS has now has become a central focus of ongoing congressional probes into Russian election interference during the 2016 general election.
The Bank of Japan should not be overly criticised for failing to achieve its inflation target as its ultra-easy monetary policy has helped the economy and created jobs, an economic adviser to Premier Shinzo Abe said on Thursday. “The reason we need an inflation target is because it is easier to achieve the basic needs” of the population, such as low unemployment, by setting one, Koichi Hamada said.
“It is wrong to over-criticise the monetary authorities for not achieving their inflation target,” Hamada, cabinet adviser and emeritus professor of economics at Yale University, told Reuters. The comments by Hamada, considered among architects of the premier’s “Abenomics” stimulus policies, underscore a growing view among analysts and government officials that the BoJ should not be so concerned about meeting its price target quickly.
Shares of Kotak Mahindra Bank are trading close to a percent lower despite the bank reporting a profit of Rs 1,440.68 crore, up 20% from Rs1,202.40 crore a year ago. Net interest income (NII) or the core income a bank earns by giving loans increased 16% to Rs 2,312.66 crore versus Rs 1,995.36 crore last year. Other income increased 14.77% to Rs 953.88 crore from Rs 831.11 crore in the same period last year. Asset quality of the bank improved. As a percentage of total loans, gross non-performing assets (NPAs) fell to 2.47% as compared to 2.58% in the previous quarter and 2.49% in the year-ago quarter. Net NPAs were at 1.26% in the September quarter compared to 1.25% in the previous quarter and 1.2% in the same quarter last year.