Month: June 2021

PayNearby onboards 10,000 women business correspondents, BFSI News, ET BFSI

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The branchless banking and digital payments network, PayNearby will be onboarding 10,000 women BC Sakhis from Self Help Groups (SHGs) to offer banking services to various Gram Panchayats in Uttar Pradesh.

The company aims to digitize transactions worth ₹1000 crores through the Self Help Group (SHG) ecosystem across Uttar Pradesh, while enabling BC Sakhis to earn additional revenue. PayNearby has entered into a partnership with YES Bank to onboard BC Sakhis across 9 districts in the state across Uttar Pradesh, viz. Badaun, Sitapur, Etah, Ballia, Ghazipur, Behraich, Balrampur, Gonda and Azamgarh.

The business processes and transactions that happen through SHGs are mostly cash-based. As of March 2019, an estimated ₹1,00,000 crore has been transacted within the SHG ecosystem, the bulk of it being in cash. Under the Uttar Pradesh State Rural Livelihood Mission (UPSRLM) program, the Government of Uttar Pradesh (GoUP) has decided to appoint one Business Correspondent (BC) – Sakhi (BC-Sakhi) from the members of the SHGs in each of its 58,000 Gram Panchayats.

The project is aimed at improving banking access in rural UP and enhancing the household income of these women and empowering them. Post the onboarding, PayNearby said it will work on upskilling BC Sakhis on the usage of the digital ecosystem while also providing them digital solutions to further the cause of financial inclusion across the state and bring many to the formal banking fold.

Anand Kumar Bajaj, Founder MD & CEO said, “Our country is going through a digital revolution and it is therefore important that we empower our women to lead this change. While the Business Correspondent model ensures low-cost delivery of accessible banking services to every section of the society, the SHG platform has proven to be pivotal in this task, owing to its comprehensive reach and influence at the community level.”

“The UPSRLM program is an excellent initiative by the government of Uttar Pradesh and PayNearby is extremely honoured to be a facilitator of this program and drive empowerment.” he added.



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Reserve Bank of India – Press Releases

Press Releases

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Auction Results 91 Days 182 Days 364 Days
I. Notified Amount ₹15000 Crore ₹15000 Crore ₹6000 Crore
II. Competitive Bids Received      
(i) Number 107 179 97
(ii) Amount ₹ 51656 Crore ₹ 44896 Crore ₹ 25631.30 Crore
III. Cut-off price / Yield 99.1486 98.1789 96.2657
(YTM: 3.4443%) (YTM: 3.7200%) (YTM: 3.8898%)
IV. Competitive Bids Accepted      
(i) Number 38 67 27
(ii) Amount ₹ 14999.218 Crore ₹ 14993.359 Crore ₹ 5999.878 Crore
V. Partial Allotment Percentage of Competitive Bids 97.29% 99.60% 6.23%
(1 Bid) (7 Bids) (2 Bids)
VI. Weighted Average Price/Yield 99.1508 98.1833 96.2743
(WAY: 3.4353%) (WAY: 3.7108%) (WAY: 3.8805%)
VII. Non-Competitive Bids Received      
(i) Number 3 3 1
(ii) Amount ₹ 2000.782 Crore ₹ 894.391 Crore ₹ 0.122 Crore
VIII. Non-Competitive Bids Accepted      
(i) Number 3 3 1
(ii) Amount ₹ 2000.782 Crore ₹ 894.391 Crore ₹ 0.122 Crore
(iii) Partial Allotment Percentage 100% (0 Bids) 100% (0 Bids) 100% (0 Bids)

Ajit Prasad
Director   

Press Release: 2021-2022/451

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Microfinance loan portfolio grows 11.9% to ₹2,59,377 cr as on March-end: MFIN

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The overall microfinance industry’s gross loan portfolio (GLP) surged by 11.9 per cent to ₹2,59,377 crore as on March 31, 2021 from ₹2,31,787 crore as on March 31, 2020, says a report.

The growth was driven by an addition of four lakh borrowers during the pandemic-struck 12-month period ending March 2021, according to a report – Micrometer, released by Microfinance Institutions Network (MFIN).

Also read: In a boost to MFIs, FM hikes ECLGS limit by ₹1.5-lakh cr

MFIN is an industry association comprising 58 NBFC-MFIs and 39 associates, including banks, small finance banks (SFBs) and NBFCs. As on March 31, 2021, the microfinance industry served 5.93 crore unique borrowers, through 10.83 crore loan accounts, the report said.

It said 13 banks hold the largest share of the portfolio in micro-credit with a total loan outstanding of ₹1,13,271 crore, which is 43.67 per cent of total micro-credit universe.

Non-banking financial companies-microfinance institutions (NBFC-MFIs) are the second-largest provider of micro-credit with a loan amount outstanding of ₹80,549 crore, accounting for 31.05 per cent to total industry portfolio, the report showed.

SFBs have a total loan amount outstanding of ₹41,170 crore with a total share of 15.87 per cent.

NBFCs account for another 8.36 per cent, and other MFIs account for 1.05 per cent of the total microfinance universe, it said.

The report further showed that the gross loan portfolio of NBFC-MFIs increased by 11 per cent to ₹81,475 crore as on March 31, 2021, compared to ₹73,412 crore as on March 31, 2020.

This GLP on NBFC-MFIs includes owned portfolio of ₹68,894 crore and managed portfolio of ₹12,581 crore, it said.

The association said its NBFC-MFI members disbursed ₹57,891 crore of loans in fiscal 2020-21 through 1.70 crore accounts.

Also read: RBI proposes regulatory framework for microlenders

Average loan amount disbursed per account during FY20-21 was ₹35,726, an increase of around 20 per cent in comparison to last financial year, the report said.

During FY2020-21, NBFC-MFIs received a total of ₹40,797 crore in debt funding which is 9.2 per cent higher than in FY2019-20.

Total equity of the NBFC-MFIs grew by 15 per cent to ₹18,663 crore as on March 31, 2021.

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LIC registers improved persistency ratio for individual business in FY21

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Life Insurance Corporation of India seems to have beaten the odds of the pandemic, with its 13th month persistency for individual business registering improvement in 2020-21.

For the quarter ended March 31, 2021, LIC reported a 13th month persistency of 63 per cent by number of policies and 74 per cent in terms of annualised premium for its individual regular business.

For the full fiscal 2020-21, its 13th month persistency for individual business was 67 per cent by number of policies and 79 per cent by annualised premium.

In contrast, LIC had reported a 13th month persistency of 61 per cent by number of policies and 72 per cent by annualised premium in 2019-20 for individual business.

The IPO bound life insurance behemoth also showed improved persistency ratios for the 61st month in the segment under review.

It was 48 per cent by number of policies and 59 per cent by annualised premium in 2020-21 as against 44 per cent and 54 per cent respectively in 2019-20.

Persistency ratio is an important benchmark for life insurers as it reflects the number of policyholders who paid their renewal premium. It is widely seen as an indicator of the quality of the sale as well as future growth.

This was especially important last fiscal when many insurers had initially announced a drop in persistency levels as customers faced job losses and salary cuts. However, by the end of the fiscal year, most life insurers reported a return in renewals and persistency levels.

Over the last year, LIC had also launched special measures to help customers amidst the pandemic, including a special campaign to revive lapsed individual life cover policies.

Meanwhile, in terms of first year premium this fiscal, LIC has seen better performance compared to last fiscal.

According to IRDAI data, it registered a drop of 12.38 per cent in May 2021 to ₹8,947.64 crore in May 2021, compared to a decline of 24.3 per cent in May 2020.

It registered flat growth in first year premium in the first two months of the fiscal 2021-22 at ₹13,804.40 crore compared to ₹13,793.18 crore in the same period last fiscal.

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How corporates gorged on RBI’s easy money, shunned banks?, BFSI News, ET BFSI

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Corporates took the advantage of liquidity offered by Reserve Bank‘s special liquidity windows to raise funds from the bond market, reducing their dependence on bank loans during the quarter

While the corporate bond market is still dominated by financial companies, non-financial companies have increased borrowing in the last one year.

The corporates tapped the long-term repo operations (LTRO) funds, and targeted LTRO offered by the RBi last year, raising funds for up to three years. Firms raised funds aggressively during the third and fourth quarters of the last year for deleveraging high-cost debt.

The fundraise

Corporates raised Rs 2.1 lakh crore in December ended quarter and Rs 3.1 lakh crore in the fourth quarter from the corporate bond markets. In contrast, the corresponding year-ago figures were Rs 1.5 lakh crore and Rs 1.9 lakh crore, respectively.

Bonds were mostly raised by top-rated companies at 150-200 basis points below bank loans. Most of the debt was raised by government companies as they have top-rated status.

For AAA-rated corporate bonds, the yield was 6.85 per cent in May 2020, which fell to 5.38 per cent in April 2021 and to 5.16 per cent in May 2021.

Debt reduction

The corporate world focused on deleveraging high-cost loans through fundraising via bond issuances despite interest rates at an all-time low. This has led to muted credit growth for banks.

According to data analysis by the SBI research wing, the top 15 sectors with more than 1,000 listed entities reported over Rs 1.7 lakh crore of debt reduction in 2000-21.

Refineries, steel, fertilizers, mining & mineral products, and textile alone reduced debt by more than Rs 1.5 lakh crore during FY21.

Fertilizers, mining and minerals, FMCG, cement products, consumer durables, and capital goods were among the sectors where loan reduction of 20 per cent or more was reported during FY21.

According to data from the Reserve Bank of India, loan growth fell to a 59-year low of 5.6% on year as of March 31. Credit was logging a 6.4% in the previous fiscal.

Low interest rates

As interest rates drop to an all-time low, corporates reduced their loan liabilities to facilitate a lower finance cost, which resulted in the primary issuance of bonds increasing by nine per cent.

The spread of AAA bonds for a 10-year tenor declined from 124 bps in April 2020 to 70 bps in April 2021.

Similarly, the spread for 5 year and 3-year bonds declined from 89 bps and 147 bps in April 2020 to 9 bps and 30 bps in April 2021 respectively.

This trend is continuing in FY22 also.

These companies not only reduced their loan liabilities at lower finance cost but also increased their cash and bank balance by around 35% in March, as compared to March 2020, suggesting a conservative approach to conserve cash during uncertain times.

Corporate willingness for new investments also remains tepid as the economy is still recovering from the second wave.



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3 Sugar Stocks To Buy From ICICI Securities As Companies Seen To Profit From EBP

Personal Finance

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Investment

oi-Roshni Agarwal

|

In a bid to promote use of cleaner fuel, the government has advanced its ambitious EBP programme to 2025 i.e. 20% ethanol blended petrol and this shall be primarily beneficial to sugar companies in India as sugar companies in the country are also nudged to take on sugar production aggressively, with ethanol being the by-product.

3 Sugar Stocks To Buy From ICICI Securities As Companies Seen To Profit From EBP

3 Sugar Stocks To Buy From ICICI Securities As Companies Seen To Profit From EBP

Few of the short term advantages that the sector saw during the last few years were:

– Introduction of MSP or minimum support price

-Exports incentives for sugar were also introduced- 6 million tonnes of exports allowed in sugar year 2020-21

-Now this long term ethanol blended petrol programme (EBP) has also taken off aggressively say for instance oil marketing companies are procuring ethanol in huge amount i.e. 300 crore litres. Currently for the 10% ethanol blended petrol, the requirement shall be a huge 400 crore litre and for future course i.e. for 15% and 20% blending levels, there has been suggested a clear road-map.

All the companies with a higher capacity in terms of ethanol production will benefit more in comparison to those with sugarcane crushing capacity

Dalmia Bharat Sugar:

With sugar production plants in UP, the company is the largest sugar producing companies in India. The company will double its ethanol production capacity to 15 crore litre per annum. The announcement comes close on the heels of the government’s target of upping ethanol blending to 25% by 2025. As of now ethanol blending in petrol is at 8.5%. Also, the company has benefitted immensely from exports on account of higher global sugar price.

In its May report, the brokerage said “With high global sugar prices, the industry would be able to export 5-6 million tonnes (MT) of sugar in the next sugar season as well. We believe aggressive sugar exports & 3-4 MT of sugar diversion towards ethanol wouldbring down sugar inventories to ~7 MT by September 2022, which would in turn push domestic sugar prices upwards. We believe now market recognises structural earning growth trajectory for sugar companies. Hence, we value the stock at 10x FY23E earnings”.

Balrampur Chini Mills:

Balrampur Chini is the country’s second largest sugar manufacturing company. Their capacity for ethanol production are to be seen between October and December 2022 and given the fact that it is a Greenfield project, the company’s earnings shall be higher in FY24 in comparison to FY23.

Other positives of the company include:

Operating revenues are the highest in the industry at Rs. 1019 crore.

In net profit, the company is the industry leader reporting profit of Rs. 235.5 crore

ICICI Securities has set the price target for the stock at Rs. 385, an upside of over 8 percent.

BCML is the most efficient sugar company with sustainable earnings and strong cash flow generation. We believe the company would increase shareholder’s payout (buybacks, dividend) to ~60% from current 40% payout. “We believe the market recognises the big opportunity in ethanol blending programme and the stock is poised to command better valuation multiples. We value the stock at 10x FY23E earnings with a target price of
Rs. 385 per share (earlier: Rs. 285) and maintain our BUY recommendation”, said the brokerage in its report.

Triveni Engineering:

Triveni Engineering is into sugar production, power co-generation, distillery, industrial gearing, and water treatment solutions. Triveni Engineering & industries (TEIL) is one of top five sugar companies in UP with sugar crushing capacity of 60,500 tonnes per day and distillery capacity of 320 kilolitres per day (KLPD).

The stock of Triven Engineering currently commands a good to expensive valuation and on the financial front has been showing consistency and has good quality management. Return on equity has been strong for the company at 25% in comparison to its peers.

Disclaimer:

Note the listed stocks are taken from the brokerage recommendation. The story is for informational purpose only. The company nor its authors shall be liable for any loss incurred in case the decision on the investment has been taken considering the above story. Please consult investment advisors for any investment calls.

GoodReturns.in



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Post lifting of embargo, HDFC Bank ready to return with a bang in cards segment

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Private sector lender HDFC Bank, which is under an embargo by the Reserve Bank of India for credit card acquisitions and digital launches, is hoping to return with a “bang” and regain its incremental market share in cards.

“We have used the last six month period since December to introspect, reinvigorate and re-engineer for the future. We will use tech and digital to help us continue being dominant in the space and will get back to the market with a bang. We have the entire system ready and charged up,” said Parag Rao, Group Head – Payments, Consumer Finance, Digital Banking and IT, HDFC Bank.

Also read: Standard Life sells ₹6,783 cr worth shares of HDFC Life

He expressed hope that the embargo on the bank would be lifted by the RBI soon and said the lender has been in continuous dialogue with the regulator.

“We have very aggressive plans to get back to the market with a big bang. You will see a significant correction in the incremental marketshare,” Rao told reporters at a virtual press conference.

Laying out future plans for when the embargo will be lifted, he said the bank has a much more wholesome strategy.

“It is not only to regain our (credit cards) number and value market share but also to forge new partnerships, build more scale, introduce newer products and services and continue on our journey of being the dominant payments bank player in the space,” he said.

Also read: HDFC Bank acquires 7.4% stake in Virtuoso Infotech

RBI data reveals that lenders such as ICICI Bank and State Bank of India have seen a sharp rise in acquisition of credit card customers since the embargo on HDFC Bank.

ICICI Bank added over 8.15 lakh new credit card customers between January and April this year.

However, HDFC Bank continues to have the largest credit card customer base with 1.49 crore outstanding credit cards as on April 30, 2021.

Rao said the bank has been using the six month period to work on its technology and digital processes and also has a base of pre-approved customers, who will be offered credit cards when the embargo is lifted.

“Our growth on the liability and asset side has continued. We have acquired a significant number on liability and asset side. Our strategy of 75 per cent to 80 per cent internal customer for card base still continues. We have a large database of customers who have one relationship with the bank. We have pre-approved them, we have primed our channels and have set milestones,” he said.

Also read: Focus is to strengthen internal checks and balances: HDFC Bank MD & CEO

In the interim, HDFC Bank has been working with its existing card customers and engaging them in deeper relationships.

“We saw very good results by refocussing on our customer base. We have a far more engaged portfolio, significant increase in activation,” he said, adding that the lender has also broadened the skills of its sales force and reskilled it.

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Amid worries over demand revival, Axis Bank sees 10 times growth in online shopping fest

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Even as policy makers grapple with ways to revive demand in the pandemic-hit economy, an online sale fest launched by Axis Bank offering 15 per cent discounts is witnessing a 10-times surge in daily volumes, a senior official has said.

The bank is giving its debit and credit card holders a flat 15 per cent cashback on partner e-commerce portals like Flipkart and Amazon as part of the ten-day ‘Grab Deals Fest’ which is on till July 4.

“We are witnessing a 10x jump in overall spends by gross merchandise value (GMV) if I were to compare it with daily average in the month prior to launch and almost similar increase in the number of customers who are availing the offer,” its president and head of digital business and transformation, Sameer Shetty, told PTI.

 

It can be noted that the second wave of the Covid-19 pandemic has hit demand across the economy, with many analysts saying that private consumption has fallen in such a way that even staples have been hit. Even as the lockdown measures get eased, demand will take time to revive as income generation needs to come back first.

Usually, a lot of the e-commerce sales activity happens around the festive season towards the end of the year. There are reports saying the e-commerce players are expecting a subdued activity this year.

Shetty said the bank is witnessing a surge in ordering from urban areas where e-commerce ordering is active but stressed that the ordering is across income segments.

The products ordered can largely be called discretionary items, Shetty said, hinting that the bank’s experience cannot be exactly compared with the macro picture because of a slew of factors like a small set of people in the economy it serves and their background.

The bank launched the offer because it thought that the second wave is now receding and people are coming out of stressful times. The lender’s main focus is making as many customers avail of the offer rather than looking at the GMV, he said, adding that such schemes aim to deepen the connection with customers.

The discounts are shared between the bank and the e-commerce major, Shetty said, maintaining that the bank does not want to do big bang shopping festivals and will continue with such deals regularly.

The response to the current offer is “far beyond” expectations, Shetty said, exuding confidence that by the time the offer ends, the bank would have done significantly better than what it aimed for initially.

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Reserve Bank of India – Press Releases

Press Releases

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I. T-Bill 91 days 182 days 364 days
II. Total Face Value Notified ₹15,000 Crore ₹15,000 Crore ₹6,000 Crore
III. Cut-off Price and Implicit Yield at Cut-Off Price 99.1486
(YTM: 3.4443%)		 98.1789
(YTM: 3.7200%)		 96.2657
(YTM: 3.8898%)
IV. Total Face Value Accepted ₹15,000 Crore ₹15,000 Crore ₹6,000 Crore

Ajit Prasad
Director   

Press Release: 2021-2022/449

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Spocto Solutions plans US foray, eyes buyout in AI space

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Fintech firm Spocto Solutions Pvt Ltd, which helps banks and financial institutions in collections related activities with its digital analytics platform, proposes to enter the US market with an acquisition of a technology firm.

“We are looking at acquiring a tech firm in the US in the area of artificial intelligence over the next 12-18 months” said Sumeet Srivastava, Co-Founder and CEO, Spocto Solutions. “We will be looking for firms in the $8-10 million size. Our books are strong, and we can always raise debt, if required to fund the deal,” he added.

Spocto is in talks with strategist companies to help identify potential target firms in the US. Spocto, Srivastava said, sees an opportunity in the collections and recovery processes of banking in the US, where deployment of technology such as artificial intelligence and machine learning is yet to take place.

Client base

The four-year bootstrapped, profitable fintech firm counts eight of the top 10 private banks in the country among its customer base. Spocto’s digital analytics platform, which supports some 26 regional languages and dialects, is being used by financial institutions for EMI collections and to prevent defaults, Srivastava added.

“We serve the entire retail product portfolio such as credit card and retail loans for the banks. In any given month, close to 15 million borrowers are being touched by our platform on behalf of 10-12 banks and financial institutions,” Srivastava said. Spocto has also approached a public sector bank, which has shown interest in deploying its tech platform.

Further, Spocto has also been helping banks and FIs with EMI collections in the agriculture segment for products such as Kisan Credit Card and small equipment loans. It also expects to start work on the tractor loan segment for a bank soon, Srivastava added.

Besides India, Spocto has an overseas presence in the Middle East, where the company is helping four of the top ten banks in the region with collections. Currently, about 15-20 per cent of Spocto’s revenues come from the Middle East operations. Srivastava did not disclose Spocto’s earnings but said the company charges banks on pay per use or software as a service (SAAS) model.

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