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

Shriram Group closing in on merger

Shriram Group has revived its plans to restructure its various financial services businesses, including lending and insurance, The Economic Times reported.

Why it’s important: The plan is to collapse its two listed units, Shriram Transport Finance Co and Shriram City Union Finance Ltd, to merge into one and reverse merging the holding company into it.
It is also planning to hive off insurance into a separate entity.
However, the group denied any such development, calling it speculation.
The sources told ET that Morgan Stanley and ICICI Securities are advising Shriram Capital, the unlisted holding company of the group.

The proposed reorganisation, if approved by a majority of minority shareholders and regulators, will lead to a simplified corporate structure and allow its investors— billionaire Ajay Piramal and TPG Capital —an exit from the privately held entity.

Bad loan recoveries register a huge jump in Q2

All major banks in the country have reported a sharp increase in bad loan recoveries in the second quarter, The Economic Times reported.

Why it’s important: This is mainly due to the improvement in retail collections that had fallen sharply in Q1 because of the second wave of COVID-19.
The better recoveries are pointing towards an improving consumer sentiment.
This will also be a start of better asset quality for banks in the immediate future.

Large corporate bad loans and retail payments were hit due to the COVID-19 second wave.

 

Sales of hygiene products fall as COVID-19 cases dip

Some of the major companies who were making immunity enhancing, health and hygiene products are planning either exiting or scaling down output as their sales have slumped, The Economic Times reported.

Why it’s important: The move is amid the lower COVID-19 infections and increased vaccination.
Dabur, Parle Products and Emami have already exited the hand sanitiser segment.
Emami is now withdrawing from the home hygiene segment with products such as disinfectant floor cleaner, surface sanitiser and dish wash gel after their sales dropped significantly in the quarter ended September.
The business has become negligible for hand sanitisers and hand wash.

Mohan Goenka, director at Emami, said: “Consumers are getting back to pre-COVID-19 lifestyle, proving false all predictions made during COVID-19 that these products will continue to do well even when the pandemic moderates.”

 

TVS plans to raise up to $500 million for EV unit

India’s third-largest two-wheeler maker TVS Motor is in consultation with several private equity investors to raise $300-500 million for its electric vehicle unit, The Economic Times reported.

Why it’s important: The move will make the company valuation at around $3.5-4 billion.
TVS had already carved out a subsidiary for electric vehicles, saying that it will give it “scale and flexibility” to expand the EV business.

TVS is seeking to raise funds from pure financial investors and has no plans to onboard strategic investors.

 

India likely to get $1 bn FII boost after MSCI index revamp

The country may see foreign fund inflows of more than $1 billion into equities after the semi-annual index review by MSCI, Mint reported.

Why it’s important: The MSCI index review will be announced on Friday and it takes effect on December 1.
An analysis by Edelweiss Alternative Research says six stocks are expected to be included in the MSCI Standard index, and two are likely to be removed.
It expects the inclusion of Tata Power Ltd, leading to an inflow of $240 million, SRF Ltd ($231 million), Mphasis Ltd ($208 million), Godrej Properties Ltd ($201 million), Mindtree Ltd ($200 million), IRCTC Ltd ($171 million) and newly listed Zomato Ltd ($153 million).
The exit of Ipca Laboratories Ltd and REC Ltd may see an outflow of $109 million and $101 million.

FIIs sold a net of $1.21 billion in Indian stocks in October while they are net buyers of Indian equities worth $7.35 billion this year.

 

Amazon infuses Rs 1,000 crore into digital payments unit

Amazon.com Inc. has infused Rs 1,000 crore into Amazon Pay, the digital payments and financial services unit of Amazon India, Mint reported.

Why it’s important: This is part of an intensifying battle with Walmart-owned Flipkart in India’s booming online retail market.
Singapore-based Amazon Corporate Holdings Pvt. Ltd has infused close to Rs 999.90 crore in Amazon Pay as part of the fundraising.
The latest fundraise follows Amazon Pay raising Rs 450 crore ahead of the Diwali season sales from its US parent to compete.

Amazon Pay hit 50 million users in India, leveraging a unified payments interface on its platform.

 

Demand for laptops, PCs may ease as offices, schools reopen

The rising demand for personal computers in the past year with the onset of the pandemic is coming down, Mint reported.

Why it’s important: The main reason for the drop in sales is due to the reopening of schools and offices.
Consumers are likely to buy fewer laptops and tablets this year compared to last year when there was a mad rush to purchase computers as schools went online and people worked remotely.
The huge rush also caused the worst chip shortage in years.

Companies account for 45-50 percent of all PC purchases, with individual consumers making up the rest.

 

SpiceJet introduces EMI scheme to buy tickets

SpiceJet announced a tie-up with fintech company Capital Float to enable passengers to pay for their tickets in EMIs, Business Standard reported.

Why it’s important: The move will benefit particularly those who do not have credit cards.
No interest will be levied if a customer opts for an EMI period of three months.
In case a customer chooses six, nine or 12 months’ duration, then the rate of interest payable will be 24 percent per annum on a declining balance basis.

The ‘book now, pay later’ scheme may be a first for an airline, though banks and other travel sites offer such schemes.

 

Overseas funds seek margin payment for IPOs

Overseas funds have sought relaxations in IPO payment rules from Sebi, Business Standard reported.

Why it’s important: Foreign portfolio investors want the Sebi to allow them to apply for IPOs, with a margin payment of 10-25 percent.
They say the current framework is restrictive, limits their capital allocation, and exposes them to greater foreign exchange risk.
Now, all investors are required to have the full application amount in their bank at the time of applying for IPO.
Often, this amount is 100x more than the actual allotment they get.

In the case of FPIs, this requires hedging and frequent repatriation of funds, pushing up their cost of investing.

 

7bcm of LNG strategic reserves may rein in fuel price volatility

The volatility in the fuel market induced by the COVID-19 pandemic has prompted India to look at strategic reserves for its LNG market, Business Standard reported.

Why it’s important: The country would need around 7 to 8 billion cubic metres (bcm) of reserves to successfully mitigate price volatility.
But the lower share of natural gas in the country’s energy mix could put a question mark on the viability of such reserves.
Now, gas barely contributes 6 percent to the country’s primary fuel basket.
India is projected to increase the share of natural gas in its energy mix from the existing 6-7 percent to 15 percent by 2030.
India would need strategic natural gas reserves to meet 20 percent of the total requirement.
Gas reserves can be handy for power and fertiliser among other industries.Strategic gas storage once complete can also boost gas pipeline utility.