Morning Scan: All the big stories to get you started for the day

Hasty withdrawal of easy policy can undo gains: RBI Governor

Any hasty withdrawal from the present monetary policy accommodation can potentially undo all the gains that have been achieved after the devastating COVID-19 pandemic, RBI Governor Shaktikanta Das told Business Standard in an exclusive interview.

Governor Speaks: Inflation is showing signs of stickiness, but it is only a “transitory hump” that should moderate in the third quarter.

Therefore, the monetary policy committee is more inclined to look through the perk-up in prices, as “growth is the main challenge” for now.

Inflation scenario: The RBI is still very watchful about the inflation scenario, but is taking comfort in the 2 6 percent range allowed by the flexible inflation targeting regime.

Ultimately, the aim of the central bank is to ensure that inflationary expectations remain firmly anchored at around 4 percent.

Growth rate projection: RBI is confident of his 9.5 percent growth rate projection for this fiscal.

“The second wave of COVID-19 is behind us, and high speed indicators point to a pickup in economic activities, though it’s a long shot to reach the pre-pandemic level of growth.”

No major US Fed influence: Notwithstanding the monetary policy tightening guidance given by the US Federal Reserve, India´s own monetary policy will be driven by domestic considerations.

 

Tata nod not needed to pledge shares: SP Group

Shapoorji Pallonji (SP) Group does not need the Tata group´s permission to pledge a part of its 18.5 percent stake in Tata Sons, said a top executive of SP Group, reports Business Standard.

Why it’s important: Its stake is worth Rs 2.4 trillion and its immediate fund requirement is just Rs 5,000 crore to pay Indian lenders, in keeping with the onetime restructuring of the debt proposal.

The Supreme Court has not issued any order to the effect that SP Group´s stake cannot be pledged.
The Tatas have not filed any review petition either, said the executive.
The group has not asked the Tatas for permission to pledge its stake.
None of the banks has any objection to the pledge.

The sale of Eureka Forbes will be finalised in the next 45 days and banks will be repaid on time.

 

Top banks plan to raise $2 billion abroad to meet credit demand

Five top lenders in the country are seeking to collectively raise up to $2 billion overseas in the next few months through Additional Tier I (AT1) bonds, The Economic Times reports.

Why it’s important: It will bolster their capital bases ahead of an anticipated increase in credit demand.

Mutual funds, once major buyers of such AT1 bonds, are lukewarm about this quasi-equity asset class.
It is after the banking regulator last year ordered that these instruments be written off in Yes Bank’s state-sponsored bailout.

The overseas market is far deeper than the Indian market for AT1 papers.

Who they are: Axis and HDFC Bank likely to be first to start AT1 bond sales to beef up capital bases.

ICICI and BoB are said to be in talks with i-bankers.

SBI may also tap the route.

 

India set to rebound more strongly than forecast

Rob Subbaraman, head of global macro research at Nomura, in an interview with The Economic Times said inflation is one of the biggest macro risks for the global markets including India.

What he says: If the US Federal Reserve takes another step to be more hawkish going ahead, it will not be a good sign for emerging markets.

The dollar is unlikely to strengthen too much more.

Outlook for India is very bullish.

Nomura expects the Indian economy to rebound more strongly than the consensus forecast.
The next thing to watch for is RBI monetary policy normalisation.
Inflation is probably one of the biggest macro risks right now for the market.
The thing about India is inflation is sticky, inflation expectations are quite high.
The central bank will have to start to pivot away from growth and more to inflation.

If oil prices keep rising sharply from here, it can be quite dangerous for India.

 

Amid muted demand at home, exports offer relief to auto companies

For the two-wheeler industry, India is the biggest market worldwide, reports The Economic Times.

Why it’s important: Two-wheeler exports for five months were equivalent to the total domestic sales for the first time in many years.

As the markets in Latin America, Africa and South-East Asia remained largely unaffected, exports from India zoomed.
Now, the home market isn’t firing on all cylinders, but several countries in Africa and Latin America are buying bikes — made in Maharashtra, Haryana, or Tamil Nadu.
Two-wheeler exports almost doubled and garnered a turnover of $1.1billion in the first five months of 2021 — making up for almost 63 percent of last year's business.

Similar is the case with car and truck makers.

 

Adani arm in talks with global lenders to raise over $1 billion

Adani Airport Holdings, which will formally own a majority in Mumbai International Airport, is now in talks with a global consortium of foreign lenders, including Standard Chartered, Barclays, Deutsche, JP Morgan to raise more than $1 billion in offshore loans, The Economic Times reports.

Why it’s important: The Adani Group firm plans to refinance its debt at lower rates with overseas funds.

Proceeds will be used to repay existing local top-ranked public and private banks.
The total debt of MIAL taken over by Adani was Rs 11,139 crore as of March.

Of that, Adani is aiming to refinance Rs 8,250 crore (about $1.1 billion), a move that will reduce funding costs by at least 1 percentage point on a fully hedged basis.

 

PEs eye investment in Vodafone Idea assets

TPG Capital, Apollo Global and Carlyle Group are among private equity giants in early talks with Vodafone Idea Ltd to invest in the company’s optic fibre and data centre assets worth around $1 billion, said a Mint report.

Why it’s important: Since Vodafone Idea will continue to use the optic fibre infrastructure, the deals will likely happen on a sale-and-leaseback basis.

The fibre assets, fixed broadband and data centre businesses have an immense growth potential since telecom and internet penetration is rapidly increasing.

Vodafone Idea, which is burdened by liabilities of Rs 1.8 trillion, including immediately payable adjusted gross revenue dues, has so far failed to secure investments either as direct equity or hybrid debt.

 

GST officials tap radio frequency data to detect tax evasion, fraud

Goods and Services Tax authorities have started detecting instances of tax evasion by identifying mismatches between electronic permits issued for transporting goods and the data from radio frequency tags that commercial vehicles use to pass through toll plazas, says a Mint report.

Why it’s important: The development is a major milestone in tax administration as it gives greater precision to government efforts to check evasion.

Officials have unearthed several cases of tax-evading rackets.

RFID Tags: E-way bills were integrated with the radio frequency identification tags in January this year.

This helps in cross-verifying the details of vehicle movement specified in the e-way bill with their physical movement and detect mismatches.

It also helps genuine goods transporters as officials tend to focus on cases flagged in their IT system rather than suspecting all taxpayers.

 

Hospitality firms do brisk business amid influx of tourists

Hospitality firms across segments are witnessing a surge in demand, says Mint.

Why it’s important: The flip side of the alarming rush by tourists to popular destinations is the flouting of COVID-19 protocols.

However, for hospitality firms, the tourist influx has come as a respite after losing two consecutive peak summer seasons to COVID-19 restrictions in 2020 and 2021.

The easing of state-level restrictions, including removal of the requirement for RT-PCR tests, has boosted traveller confidence, already high because of the vaccination drive.

As restrictions continue to ease, domestic tourism will continue to bring relief to business, with demand mainly stemming from road trips to local destinations, staycations and workcations.

 

PharmEasy set to buy Aknamed in a deal worth Rs 1,200-1,300 cr

Online pharmacy PharmEasy is close to buying healthcare supply chain startup Akna Medical Pvt. Ltd (Aknamed) for Rs 1,200-1,300 crore, a Mint report said.

Why it’s important: It’s within a month of announcing the acquisition of listed diagnostics firm Thyrocare Technologies Ltd for Rs 4,546 crore.

Aknamed offers procurement solutions to hospital chains and mid-sized standalone hospitals using its in-house technology and analytics tool SmartBUY.The acquisition is expected to broaden PharmEasy’s offerings before its planned IPO.