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

Google looks for multiple solutions to address fee issue

Google plans “different solutions” to address the concerns of the internet startups over the commission it charged on in-app digital subscriptions bought on its Play Store, The Economic Times reported.

Why it’s important: Google is “working globally and locally to figure out those right solutions in the next few months,” Google country head Sanjay Gupta said.
He said India is too diverse a country to have “one big mega solution” for the developer ecosystem.”
India’s internet startups such as Paytm and BharatMatrimony have said that the current fee structure eats into the margins and impacts business revenue.

Last month, Google slashed the commission for in-app digital subscriptions to 15%, with effect from January 1, 2021.

 

Govt to spruce up PLI schemes for electronics companies

The government will review its ambitious production-linked incentive (PLI) schemes on electronic manufacturing, The Economic Times reported.

Why it’s important: The move comes amid increasing concerns that the already lowered target of $250-$300 billion for local production by 2026 may also be tough to achieve.
This is due to the pandemic and policy-related challenges.
The special focus is on the one on IT hardware as the scheme drew a lukewarm response from the companies.
The minister of state for electronics, Rajeev Chandrasekhar, has asked officials to figure out what needs to be done to achieve the set targets by 2026.
MeitY has been asked to especially see if tweaks are needed to make the existing PLI scheme for IT hardware more attractive, or if a new scheme needs to be floated.
The government had set an outlay of Rs 7,325 crore to achieve a total production of Rs 3.26 lakh crore.

However, major companies have committed production worth only Rs 1.60 lakh crore, just about half of the target.

 

Fresh round of bad loans likely if credit moratorium ends

With the one-year moratorium on an emergency credit scheme ending soon, banks and non-banks are concerned that the end to the standstill could give rise to a fresh round of bad loans, The Economic Times reported.

Why it’s important: Lenders think a lot of mid-corporates and MSMEs that had borrowed in anticipation of demand revival could face repayment pressures.
Under the ECLGS scheme to tide over the pandemic, loans are given for a maximum period of four years and a moratorium of one year is applicable only on the principal amount.
Lending institutions feel that troubled borrowers who are still reeling from the impact of the second Covid wave will face the biggest brunt.

According to a CRISIL report, despite benefiting from ECLGS, the MSME segment is likely to see asset quality deteriorate and will require restructuring to manage cash-flow challenges.

Amitabh Chaudhry, MD, Axis Bank, said: “The pain is yet to come because one year of that moratorium ends now; so borrowers have to start repaying principal dues now.”

 

RBI panel suggests reining in digital lending apps

An RBI committee has suggested reining in digital loan apps through a mix of measures, Mint reported.

Why it’s important: The suggestion includes the creation of a nodal agency to verify their credentials and legislation to prevent “illegal lending”.
The focus is on enhancing customer protection and making the digital lending ecosystem safe while encouraging innovation.
It will also maintain a public register of verified apps on its website.

Approximately 1,100 lending apps were available for Indian Android users between 1 January and 28 February. Of these, 600 were illegal, the panel found.

 

Google Pay bets on voice-led payments, drives kirana play

Google Pay is betting big on voice-led payments in India, Mint reported.

Why it’s important: Google thinks that it bolsters its services for Indian kiranas to expand the reach of its platform.
The company will roll out a ‘speech-to-text’ feature for Indian consumers.
Users can use voice commands to input the payee’s bank account numbers in Hindi or English into the app instead of manually typing it.
Google Pay will also launch ‘MyShop’, which will provide merchants quick store builder tools, allowing them to add images, descriptions, catalogues and then share the link across social media.

Google’s arch-rival PhonePe had launched a similar service under its ‘Stores’ offering in the first half of last year.

 

Online-only beauty brands go offline to expand reach

Beauty and personal care brands born on the internet are rapidly setting up retail stores and selling through supermarkets and neighbourhood shops, Mint reported.

Why it’s important: They sense there is a vast potential outside the net world and the offline sales channel would bring in business.
D2C brands want to create the brand experience for their consumers.
D2C brands such as Plum, mCaffeine, Mother Sparsh, MyGlamm and The Man Company, are among the early movers.
mCaffeine plans to get its products to 1,000 stores and eventually scale it to over 10,000 outlets.

MyGlamm opened an experience centre in Mumbai last year. The company’s beauty products currently reach 30,000 outlets.

 

Go Air IPO to open on Dec 8; proceeds to help reduce debt

Go Airlines (India) is looking to raise Rs 3,600 crore from its IPO and planning to launch the share sale by December 8, Business Standard reported.

Why it’s important: The IPO proceeds will be used to retire debt, and pay oil companies and lessors.
The anchor issue will be launched a day earlier on December 7.
The company is strengthening its cost-saving measures and evaluating higher-capacity Airbus A321neo aircraft after posting a Rs 923-crore net loss in the first half of FY22.

The company had initiated wide-ranging cost-saving measures as it positioned itself as an ultra-low-cost airline.

 

‘Fitch assessment based on medium-term debt’

Fitch Ratings Director Asia-Pacific Sovereigns Jeremy Zook in an interview with Business Standard said that the agency’s move to retain India’s ratings at the lowest investment grade and the outlook negative is based on its medium-term debt trajectory and the potential of government policies to reduce it.

What he says: India entered the pandemic from a position of relative fiscal weakness, and with the highest debt/GDP ratio among ‘BBB’ emerging market sovereigns, and had a limited fiscal space from a rating perspective.
Do not expect the banking system to require fresh equity capital to keep the system’s common equity tier1 ratio above the regulatory minimum of 8 per cent until FY25.
Under the stress case scenario, fresh capital of $27 billion would be required.
We expect system credit growth to average 2.7 per cent during FY22-FY25 under the stress case, compared with 6.7 per cent under our base case.
Reform implementation poses a challenge for many sovereigns, as we have seen in India’s case with the agricultural reforms.
However, we view reform prospects positively in India, particularly around the PLI scheme and labour reforms.The cut in excise duties can help to contain inflation.