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

Microsoft checks into OYO with strategic funding

Microsoft has finalised a strategic investment for an undisclosed amount in Oyo Hotels & Homes, The Economic Times reported.

Why it's important: The valuation of the SoftBank-backed hospitality company is now at around $9 billion.
Investment bankers said Oyo could be looking at adding more marquee strategic investors ahead of its IPO.
Microsoft will initially buy a small stake, but it has the option to raise ownership later.

Oyo is likely to use the funding to scale up its technology play and grab more market share.

3 more years likely to sign long-term PPAs for tax sops

The government proposes to extend the compliance timeline for availing of tax benefits being given to large power projects worth ₹1.5 lakh crore under the Mega Power Policy by three years, The Economic Times reported.

Why it's important: The 2009 policy promised exemption of customs duty on equipment and excise duty benefits to 25 power projects of 30,000 MW capacity that sign long-term power purchase deals.
However, given the lack of power procurement tenders from States, the government proposes to extend the deadline to give producers more time for compliance.
If mega status is not accorded to these projects now, their bank guarantees will be forfeited and the projects will also not get the tax exemptions.

Experts said not extending the deadline at this juncture, when the projects are struggling to collect funds to set up emission control systems to meet new norms, would be a double whammy.

Weak households, SMEs may need more stimulus: says Gita Gopinath

IMF chief economist Gita Gopinath draws several positives from India’s policy actions — from free food for the poor to healthcare spending and the RBI’s stance. While responding to The Times of India’s questions over email, she suggests that the government may need to provide a stimulus to vulnerable households, SMEs and step up education and capital expenditure.

What Gita says: Given the ongoing health crisis, fiscal policy should provide agile and flexible policy support to respond to Covid-related developments.
Going forward, additional fiscal stimulus can and should be deployed to support vulnerable households and small- and medium-sized firms and for other priority spending, such as education and support to states for capital spending.
It is important that alongside such support, a credible fiscal consolidation plan for the medium-term is announced as this will reinforce market confidence.
Structural reforms, including in the financial sector, will be needed to boost India’s growth potential.

If our baseline outlook and fiscal policy assumptions for the US are realised, policy rates will likely start rising in late-2022 or early-2023.

Govt readies pension law revamp

The government is ready with amendments to the law to allow the Pension Fund Regulatory & Development Authority (PFRDA) offer more flexibility to subscribers, The Times of India says.

Why it's important: It is important when it comes to withdrawing funds at the time of their retirement, apart from bringing under-regulated superannuation funds within its ambit.

The bill will also delink the National Pension System Trust from the regulator, while ensuring that the FDI is aligned with the one for the insurance sector, which is currently capped at 74%.

Yes Bank grapples with legacy issues of disgraced founder

Two years after Rana Kapoor’s exit, Yes Bank continues to grapple with the legacy of its founder—a plethora of loans given out in an alleged quid pro quo where the bank bypassed institutional credit checks, Mint reported.

Why it's important: Since founder Kapoor’s departure as MD and CEO of Yes Bank, several of these large exposures of the private sector lender have soured.
The chances of recovery in most cases are slim as a large portion of collaterals such as land were grossly inflated in value against the loans given.
Most of these red-flagged accounts are in the bank’s real estate loan portfolio.

The loans were given to finance construction, but the value of the underlying collateral, such as land, was grossly inflated.

Workplaces may soon start buzzing as firms inoculate staff

Unlike their counterparts in Western countries, Indian companies are receiving requests from employees to be allowed to work from office, at least those who are vaccinated, Mint reported.

What it shows: Firms, on the other hand, are mulling whether to reopen offices or wait till the year-end to track a feared third wave of the coronavirus pandemic.
RIL, HUL and L&T, among others, have vaccinated over 90% of their employees.

Companies believe that while the hybrid model has allowed people to find work-life balance, employers have found it challenging to foster innovation, collaboration and sustain an organisation’s culture in a virtual environment.

Rural races ahead of urban on sales of branded goods

Rural India spent heavily on salty snacks, talcum powders, sanitizers, toilet cleaners and insecticides among other fast-moving consumer goods in the 12 months ended 31 May, racing ahead of larger urban markets, Mint reported citing market researcher Kantar.

What it shows: Rural markets outshone urban in both value and volume terms with value growth of 11.6% against 10.2% in urban, and volume growth of 4.4% against 3.3% in urban.
This was helped by fewer mobility restrictions in villages.
In contrast, volumes plunged in the 1urban markets as the spike in covid infections triggered strict closures.
Overall FMCG demand was driven by consumer switching from unbranded to branded foods and consumer movement from cheaper products to more premium brands, lifting demand for packaged foods.

Introduction of new, high-value categories like hand sanitizers or surface cleaners into the consumer purchase basket helped as well.

Shadow banks see stress building up in rural, semi-urban regions

Non-bank financiers operating in India’s rural markets are seeing a spike in delinquencies across loan portfolios, Mint reported.

Why it's important: The second wave had a significant impact as customers struggled with liquidity challenges despite a bumper harvest.
The lockdowns made it impossible for them to sell their entire produce, affecting cash flows and collections in April and May.

Faced with uncertainty, a segment of customers did not repay on time despite having adequate liquidity, choosing to retain the funds instead.

Metals shine as large infra spending fuels demand

The attempt by major economies to spend their way out of a pandemic-induced slowdown, by pouring money into underinvested infrastructure, and a growing commitment to decarbonisation are fuelling a demand for metals not seen in years, Business Standard reported.

Why it's important: The steel production in the first quarter of FY22 was at 27.8 million tonnes, close to the 27.9 million tonnes in Q1 of FY20.
What has put the metals sector in a sweet spot is that current prices of base metals are at a multi-year high.
Base metal prices have rallied significantly.
At present, they are higher than their pre-pandemic levels, mainly because of a strong China demand, along with massive stimulus measures in major economies.
What is driving metals is large infrastructure spending by various governments (which requires a huge amount of steel), and energy transition across the world for decarbonisation.
On the decarbonisation front, the electric vehicle push is spurring a demand for copper.

The use of electrical energy instead of fossil fuels means more use of copper and aluminium.

‘India will see strong flow of foreign capital in clean energy’

International Energy Agency’s Executive Director Fatih Birol in an exclusive interview with Business Standard talks about India’s future in renewable energy.

What he says: If you look at all the power plants installed in the world during last year, 90 percent were renewable, solar and wind.
I would put India in the category of very successful countries in terms of renewable shifts.
Reliance Industries' massive renewable plans last month will not just be a source of inspiration for India, but many other countries globally.
Market dynamics in India is strong with rising electricity demand.I believe that in years to come, there will be a much stronger flow of international capital to India’s clean energy projects.