FMCG firms plan to ease traditional distributors’ pain
Packaged grocery and consumer goods companies are planning to launch online-only packs with differential pricing and new terms of trade with better margins for traditional distributors, The Economic Times reported.
Why it’s important: The move is after a new set of deep-pocketed wholesalers disrupt traditional distribution models.
The development comes amid an escalating conflict with traditional distributors who have accused grocery and FMCG companies of selling their products at lower prices to wholesalers such as Reliance Jio-Mart, Metro Cash & Carry and B2B platform Udaan.
The traditional distributors’ cost of doing business has also gone up in terms of salaries, fuel and so on.
The Covid-19 outbreak and resultant lockdowns last year hastened the transition to digitisation and technology in the retail space.
This has led to a significant chunk of consumers permanently switching to online shopping for groceries even for small-ticket items.
RBI weighs bond forwards, reaches out to life insurers
The RBI is understood to be weighing a proposal to allow ‘bond forwards’, The Economic Times reported.
Why it’s important: Bond forwards are a deal under which a financial institution can buy specific government security for a pre-agreed price at a future date.
Insurance companies would find it easier and less risky while planning their investments over the years.
A market for bond forwards would deepen the fixed income market.
Forwards can lower insurers’ risks and it can partly support the financing of fiscal deficit.
RBI: Banks can’t put bad loan recovery in income
The RBI has asked banks to stop including writebacks from recoveries of written-off bad loans as part of their income, The Times of India reported.
Why it’s important: From the third quarter, banks will have to adjust these recoveries against provisions for bad loans in their profit & loss statement.
While this will not make any difference to the overall net profit that a bank reports, it will make the results more transparent.
Although credit growth has been flat for the first half, many banks have reported a big jump in both their interest income as well as in other income.
This was because several large corporate accounts that were declared NPAs and fully provided for in the past saw recoveries.
Premji entities at odds over funding edtech business
The senior leadership of Azim Premji’s foundation and investment arm are divided over funding edtech startups and the effectiveness of for-profit online education, Mint reported.
Why it’s important: At the heart of the disagreements are two investments by PremjiInvest, which manages Premji’s wealth, in edtech startups—Questt in October followed by BrightChamps in November.
Some executives contend that the investments are contrary to the views of the fund’s parent, the Azim Premji Foundation (APF), the country’s largest non-profit with an endowment valued at $43 billion, and Premji’s stated position.
PremjiInvest, which manages assets worth $9 billion, has stayed away from backing for-profit enterprises in the education sector.
The investor’s charter, which sets the framework for capital deployment, also bars any investments in the edtech space, along with investments in tobacco and companies making arms and ammunition.
Railways to tap RLDA for its station development project
Indian Railways will lean on Rail Land Development Authority (RLDA) to execute its ambitious station redevelopment programme, Mint reported.
Why it’s important: The move is ahead of the planned closure of the Indian Railway Stations Development Corp. (IRSDC) that was formed exclusively for this purpose.
Railways, which has already moved about 60 such projects handled by IRSDC to respective zonal railways, will make RLDA the nodal agency to oversee all station redevelopment projects and award contracts.
RLDA is a statutory organisation with complete powers over station development, land monetisation and contract management.
The shuttering of ISRDC will bring more redevelopment projects under its wings.
Omicron, liquidity crunch key risks for equities in 2022
After a stellar run in 2021, with the S&P BSE Sensex and the Nifty50 clocking gains of 20 per cent and 22 per cent, respectively, so far, global equity markets, including India, are gearing up to welcome 2022 on a cautious note, Business Standard reported.
Why it’s important: One reason for this is the Omicron variant of the coronavirus that reportedly makes vaccines less effective.
Inflation is another worry as stickier-than-expected inflation could lead to tighter monetary conditions and increase the risk of a policy error, both of which would be headwinds for global equities.
There could be less room for fiscal stimulus, which has been a support for equities through the Covid-19 crisis.
This is because governments will likely wind down their unprecedented fiscal policy, and there could also be policy gridlock following the US mid-term elections.
Growth in corporate earnings, too, could be at risk in the backdrop of rising input costs and wages.
Video subscribers up over 80% since last year
In 2021, no less than 102 million people subscribed to streaming video services, Business Standard reported.
Why it’s important: This is up from 56 million last year.
Though Netflix has the smallest share of paying subscribers at 5 per cent, it has the highest share of revenues at 29 per cent of the Rs 6,000 crore that subscription-driven video-on-demand, or SvoD, earned in 2021.
On the other hand, advertising-driven video-on-demand services earned Rs 8,100 crore.
YouTube got three-fourth, while broadcaster-owned and other OTTs like MX Player or Disney Star got a fourth.
The streaming world continues to grow and drive changes across all parts of the estimated Rs 90,000 crore video consumption universe including TV, films and OTT.
Life insurers’ new business premium spikes 42%
Life insurers’ new business premium reported stellar performance in November after a poor showing in October, Business Standard reported.
Why it’s important: It is on the back of strong growth in group single premiums for both private insurers and LIC.
In November, 24 life insurers, including LIC, reported NBP to the tune of Rs 27,177 crore, up 42 per cent YoY from the year-ago period.
Private insurers’ NBP rose 58.63 per cent YoY to Rs 11,209.75 crore as group single premiums more than doubled during this period.
Private players saw their individual single premiums rise 32.5 per cent, while individual single premiums, as well as renewable premiums, posted decent growth in the same period.