June 2021 – Page 61 – IFSCCodeof.in

NPS Has Given 60% Returns In 1-Year, Should You Invest?

June 14, 2021 root Personal Finance

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NPS Tier-1 Returns

LIC Pension Fund has generated the highest returns in the Tier 1 Account of NPS, with 59.56 per cent, followed by ICICI Pru Pension Fund with 59.47 per cent and UTI Retirement Solutions with 58.91 per cent. Tier 1 of the NPS is a basic account and only after establishing a Tier 1 account you can initiate a Tier 2 account. Individuals of all backgrounds are welcome to establish an NPS Tier-1 account. NPS Tier 1 contributions are tax-deductible up to Rs 1.5 lakh under Section 80 C and an additional deduction of Rs 50,000 under Section 80 CCD (1B) of the Income Tax Act of 1961. The NPS Tier 1 account has a lock-in period of 60 years. So, based on this and the previous year’s performance of NPS Tier-1, which is shown in the table below, you may place your bet.

Scheme E Tier-I
Pension Funds	AUM In Rs (Cr)	NAV	1 year returns	3 year returns	5 year returns
Aditya Birla Sun Life Pension Management Ltd.	134.3	16.6096	50.99%	13.06%	NA
HDFC Pension Management Co. Ltd.	8,020.07	30.9763	57.37%	14.61%	15.32%
ICICI Pru. Pension Fund Mgmt Co. Ltd.	3,358.17	40.8469	59.47%	13.81%	13.96%
Kotak Mahindra Pension Fund Ltd.	657.44	37.457	55.53%	13.44%	13.93%
LIC Pension Fund Ltd.	1,657.48	25.8288	59.56%	12.63%	12.78%
SBI Pension Funds Pvt. Ltd	6,218.67	34.0406	53.49%	12.80%	13.52%
UTI Retirement Solutions Ltd.	960.36	40.3413	58.91%	13.30%	14.04%
Benchmark Return as on 04/06/2021			59.35%	14.78%	15.08%
Source: NPS Trust

NPS Tier-II Returns

Tier II of the NPS is a voluntary account or add-on account, whereas Tier I is compulsory to open. These accounts will have a three-year lock-in term. The NPS Tier II Account Scheme E has produced double-digit returns over the last year. Tier 2 accounts have no lock-in period. Tier-II accounts are open to all Indian citizens. Additionally, the scheme provides no tax breaks to the private sector or self-employed persons. A government employee, on the other hand, can claim tax deductions of Rs 1.5 lakhs under Section 80C if the account is opened for a lock-in period of 3 years. Check out the following NPS Tier II Account Scheme E returns as of June 4, 2021:

Scheme E Tier-II
Pension Funds	AUM In Rs (Cr)	NAV	1 year returns	3 year returns	5 year returns
Aditya Birla Sun Life Pension Management Ltd.	13.32	16.5238	51.01%	12.99%	NA
HDFC Pension Management Co. Ltd.	368.1	26.742	57.26%	14.51%	15.36%
ICICI Pru. Pension Fund Mgmt Co. Ltd.	170.61	32.3085	59.43%	13.92%	14.05%
Kotak Mahindra Pension Fund Ltd.	47.01	32.9585	54.78%	13.25%	13.78%
LIC Pension Fund Ltd.	65.7	21.5965	59.76%	12.84%	12.77%
SBI Pension Funds Pvt. Ltd	250.1	31.4896	54.24%	12.92%	13.60%
UTI Retirement Solutions Ltd.	49.02	33.1986	60.43%	13.88%	14.36%
Benchmark Return as on 04/06/2021			59.35%	14.78%	15.08%
Source: NPS Trust

Should you invest?

Because it is a long-term strategy, you must register an NPS account in your working years or as soon as possible in order to get the entire scheme benefits when you retire. The risk element related to NPS is one of its most critical characteristics as it enables allocation to equities, government bonds, and corporate bonds. Once you retire, you can withdraw a portion of your pension fund as a lump sum, and the remainder can be used to purchase an annuity in order to get monthly pension benefits which are only determined by the outcome of your NPS investments or pension funds.

Over the last year, the equity market’s returns have been driven by strong gains in equity, as a result, the performance has benefited the National Pension System’s (NPS) equity scheme, Scheme E, tremendously. And by considering the long-term nature of NPS investments, we would suggest those investors to invest in NPS Tier 1 scheme who are ready to lock-in their investment and have higher exposure to equities. That being said, past performance should not be the only justification to invest in NPS. Allocation to equities can be a good bet for retirement savings since it helps you overcome inflation over time, but only if you are a conservative investor. But those with a risk-averse attitude can still stick to EPF, PPF, SCSS and PMVVY to create a secure retirement corpus.

Disclaimer

The views and investment tips expressed by authors or employees of Greynium Information Technologies, should not be construed as investment advise to buy or sell stocks, gold, currency or other commodities. Investors should certainly not take any trading and investment decision based only on information discussed on GoodReturns.in We are not a qualified financial advisor and any information herein is not investment advice. It is informational in nature. All readers and investors should note that neither Greynium nor the author of the articles, would be responsible for any decision taken based on these articles. Please do consult a professional advisor. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and authors do not accept culpability for losses and/or damages arising based on information in GoodReturns.in

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3 Stocks To Buy Today From Motilal Oswal

June 14, 2021 root Personal Finance

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SAIL

The firm is bullish on the stock of Steel Authority of India and sees good traction going ahead. It has suggested to buy the stock of SAIL for long term with a price target of Rs 185.

According to it, SAIL a government majority owned company continues to reap the benefits of higher steel prices as 4QFY21 and EBITDA grew 21% QoQ, despite a wage revision impact.

“In the absence of significant capex, net debt declined further to Rs 366 billion (v/s Rs 538 billion in March’20).

With steel prices at a record high, SAIL is poised to post its best ever EBITDA/t of Rs 20,000 in 1QFY22. We upgrade our FY22E/FY23E EBITDA estimate by 71%/33% to factor in higher steel prices, and estimate a further Rs 102 billion (Rs 25/share) fall in net debt to Rs 265 billion (1 times EBITDA) in FY22E. We expect dividend payout to be strong at Rs 10 per share in FY22E (7.5% yield), based on an expected 25% payout ratio. Reiterate Buy wih a target price of Rs 185 per share,” the brokerage firm has said. The shares of SAIL were last seen at Rs 136.35

SUN TV Network

SUN TV Network is another stock that broking firm Motilal Oswal has recommended to buy. The company is a leading player in programme and broadcasting.

The firms sees subscription revenue expected to grow in the double digits in FY22E, led by digitization trends, along with a rise in OTT subscriptions. Viewership trends are yet to see a steady uptick.

“Plans to launch new TV shows and movies and a Marathi channel in FY22 have been delayed given the second COVID wave. However, the most concerning factor is the delayed OTT investment – besides monetizing the existing library, the company has not made any material inroads in the space. Furthermore, it has curbed the dividend payout to just Rs 5 per share, the lowest since FY10. Sun TV trades at FY22E/FY23E P/E of 14.1x/12.9x. We value the stock at FY23E price to earnings of 15 times to arrive at target Price of Rs 620. Maintain Buy,” the broking firm has said.

Sun TV Network shares were last seen trading at Rs 517.50 on the NSE.

LUPIN – Motilal Adopts Neutral Stance

Lupin recently received a warning letter from the US health regulator for its Somerset facility in the US.

According to Motilal Oswal, although regulatory issues persist at select sites, we expect a 35% earnings CAGR over FY21-23E, led by a 19%/14% sales compounded annua growth rate in the US/Domestic Formulation (DF) market, supported by 400 basis points margin expansion.

“This is attributable to potential inhaler launches, increased traction in existing commercialized niche products, and a better outlook for the DF segment. We value LPC at 25 times 12 month forward earnings to arrive at our price target of Rs 1,32 per share. We maintain Neutral as the current valuation adequately factors in potential earnings growth over the next two years and thus provides a limited upside from current levels,” the brokerage has said.

LUPIN shares were last seen trading at Rs 1,189 today.

Disclaimer

The above mentioned stocks have been picked from brokerage reports. The author, the brokerage or Greynium Information Technologies do not take any responsibility for losses that maybe incurred. The above article is for informational purposes only.

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IPO pie set to grow bigger as over a dozen financial services players line up Rs 55,000 crore issues, BFSI News, ET BFSI

June 14, 2021 root Personal Finance

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MUMBAI: With payments major Paytm‘s board reportedly approving a bumper share sale plan running north of Rs 22,000 crore, the IPO market is set for a big days as over a dozen financial services players, including fintechs, are set to mop up over Rs 55,000 crore this fiscal from the market, according to investment bankers.

With more than a dozen insurance, asset management, commercial banking, non-banks, microfinance, housing finance and payment bank players already filing draft documents with the market regulator Sebi for public offerings, the financial services sector is set to dominate the primary issues or initial public offerings (IPOs) over the coming months.

Some of those who have already filed the draft red herring prospectus (DRHPs) with the Sebi include Aadhar Housing Finance (Rs 7,500 crore), Policy Bazaar (Rs 4,000 crore), Aptus Housing Finance (Rs 3,000 crore), Star Health Insurance (Rs 2,000 crore), Aditya Birla Sun Life AMC (Rs 1,500-2,000 crore) Arohan Financial Services (Rs 1,800 crore), Fusion Microfinance (Rs 1,700 crore), Fincare Small Finance Bank (Rs 1,330 crore), Tamilnad Mercantile Bank (Rs 1,000-1,300 crore), Medi Assist (Rs 840 crore) and Jana Small Finance Bank (Rs 700 crore), among others.

And the board of the biggest payments bank Paytm has reportedly cleared an over Rs 22,000 crore IPO. Together, these financial services companies are set to garner around Rs 55,000 crore from the public.

If materialised, the Paytm issue will be the largest IPO ever in the country, eclipsing the hitherto largest issue — the Rs 15,000-crore share sale by the government in national miner Coal India in October 2010, says investment bankers seeking not to be quoted.

Investment bankers and analysts consider the IPO boom to be reflective of the ongoing bull run and thus advice retail investors to be cautious while parking money in new companies.

V K Vijayakumar, chief investment strategist at Geojit Financial Services in Kochi, said the performance of the IPO market usually has a strong correlation to the performance of the secondary market.

“If the stock market is bullish, it attracts a large number of investors into IPOs. Particularly, new investors lured by high potential profits, get attracted to new offers and the IPO market has always done well during market booms, Vijayakumar told .

Rupen Rajguru, head of equity investments and strategy at global wealth management firm Julius Baer in Mumbai, concurs and cautions retail investors to study the valuations very carefully before investing as the market is a but over-heated now.

“The current IPO market buoyancy is expected to continue into the next few quarters. IPOs are in fact playing on the financialisation of savings theme, which is a big structural shift in the country,” Rajguru told .

He said Julius Baer at the global level is “bullish on India as it considers it to be one of the preferred emerging markets after China”.

Though stating that the present bull market provides a favourable setting for IPOs, Vijayakumar also cautioned retail investors to be careful while applying for IPOs as some of the recent IPOs got listed at a huge discount to the tune of 30-40 per cent below the issue price. Kalyan Jewellers and Suryoday Small Finance Bank are even now quoting at a discount to the issue price, he said.

“Promoters and merchant bakers have a responsibility to price the issue reasonably to leave something on the table for retail investors. Aggressive pricing will be damaging to all,” Vijayakumar warned.

Pointing out that even good issues will be impacted by an adverse market, he said since markets are overvalued now, there is a possibility of a sharp correction. If IPOs are to sail through even under difficult market conditions, the pricing has to be right, he said.

Apart from traditional financial services players, several digital payment and fintech players are also planning to tap the IPO market.

Digital payments major Paytm’s board has approved a proposal to raise over Rs 22,000 crore from IPO, while online insurance platform Policy Bazaar is also looking to float a Rs 4,000-crore offering, industry sources said.

Two small finance banks — Jana SFB and Fincare SFB — have also filed their draft papers with the markets watchdog. While Fincare is planning to mop up Rs 1,330 crore through public offering, Jana is looking to raise around Rs 700 crore.

Aditya Birla Sun Life AMC, the largest non-bank sponsored AMC, is looking to go public with Rs 1,500-2,000 crore offering. With an AUM of Rs 2.7 lakh crore, this is among the top five asset managers and will become the fourth AMC to get traded on the domestic bourses.

From the insurance sector, there are two IPOs – Westbridge Capital and billionaire investor Rakesh Jhunjhunwala-backed Star Health & Allied Insurance, and the largest health benefits administrator Bengaluru-based Medi Assist TPA.

Medi Assist filed IPO papers last month to raise around Rs 840 crore and it will be the first IPO by an insurance TPA (third-party administrator), while Star Health is firming up a Rs 2,000 crore issue.

Private equity firm Blackstone-backed Aadhar Housing Finance and Chennai-based Aptus Housing Finance are also looking to raise Rs 7,500 crore and Rs 3,000 crore respectively through IPOs.

Microfinance players like Arohan Financial Services, Fusion Microfinance and digital debt platform Northern Arc are also looking to hit the IPO market.

The southern Tamil Nadu-based old generation private sector lender Tamilnad Mercantile Bank is also planning a Rs 1,000-crore issue before the end of the calendar year, according to sources.

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Raghuram Rajan says privatisation is a blunder; Rajnish Kumar cites failures in private banks, BFSI News, ET BFSI

June 14, 2021 root Banking & Finance

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As the government speeds up on privatisation of public sector entities, industry mavens are not sure about the move. Former RBI chairman Raghuram Rajan spoke against privatisation while Rajnish Kumar former chairman of SBI has said that there are failures in private banks as well.

The government has made it clear that it doesn’t want to have more than five entities in any business. That’s a strategic decision that the government has taken recently. But the government has been talking about reducing its stake in PSBs for a long time. It merged 10 PSBs into 4. There are many recommendations for the government to reduce its stake in banks to only 51%. The idea is this will give enough funds to the government and the banks will also become more professionalised. But while the government is thinking of divesting its stake, Raghuram Rajan believes that it has not benefited the developed countries like the US.

“Time has come to recognise the crucial sectors of the country to be preserved. The Indian government is trying hard to sell the public sector banks to corporate hands which is a grave concern for an economy like India. Time is to understand Privatization is a blunder,” Raghuram Rajan, former Governor RBI and IMF Chief Economist, tweeted.

Time has come to recognise the crucial sectors of the country to be preserved. The Indian govt is trying hard to se… https://t.co/qbBJOivVDw

— Raghuram Rajan (@RaghuramRRajan) 1623573476000

Rajan was replying to US President Joe Biden’s tweet on the divestment of government companies.

The developed countries like the US too are finding it difficult to create jobs after disinvesting heavily. Biden tweeted about his focus on creating government jobs.

“After decades of disinvestment, our roads, bridges, and water systems are crumbling. We must pass the American Jobs Plan. Together, we will rebuild our country’s infrastructure and create millions of good-paying union jobs in the process,”

After decades of disinvestment, our roads, bridges, and water systems are crumbling.We must pass the American Job… https://t.co/M0XjQVGRH1

— Joe Biden (@JoeBiden) 1622914606000

This is not the first time Rajan made his viewpoint clear on privatisation. In an interview with PTI in March, he said, “I think it would be a colossal mistake to sell the banks to industrial houses. It will also be politically infeasible to sell any decent-sized bank to foreign banks,”

Bank employees’ associations and federations are already opposing the bank privatisation decision and held the 3-4 day strike very recently.

In an interaction with ETBFSI, Rajnish Kumar, former Chairman of SBI presented a different view to this discussion. He said if the government’s agenda is to bring governance then the government should change the ownership. “If the government wants to improve only the governance they can shift the ownership of the PSBs to RBI. And the issue would have been resolved. RBI would become the sole regulator and banks would achieve similar results,” said Kumar.

He also added, “The major issue is how long should the government capitalise the PSBs. And the government’s policy is also that it doesn’t want more than four entities in non-strategic sectors. There can be a question whether private banks perform better? But there is not an easy answer to this because there are failures in private banks as well.”

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Wall Street asks if Bitcoin can ever replace fiat currencies, BFSI News, ET BFSI

June 14, 2021 root Personal Finance

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By Sydney Maki and Vildana Hajric

El Salvador’s bold move to accept Bitcoin as legal tender has Wall Street once again wondering whether a cryptocurrency could really ever replace the old-school dollar.

It’s a question that appeared, at least to some, to already be nearly answered after a handful of trailblazing companies — including Tesla Inc., MicroStrategy Inc. and Square Inc. — incorporated Bitcoin into their balance sheets without igniting a broader corporate revolution. Now, the focus is turning to governments.

El Salvador, which started using the U.S. dollar as its currency more than 20 years ago, last week became the first country in the world to pass legislation allowing use of Bitcoin in any transaction. President Nayib Bukele says the point is to counter the fact that relatively few citizens have bank accounts and to cut the cost of sending remittances, or money that workers ship back to their families in El Salvador from other countries.

Some observers wonder whether a bigger movement is afoot: replacing a conventional currency — the dollar, the titan of global commerce and finance — on a national scale and then beyond.

The answer, at least for Julian Sawyer, chief executive officer of Bitstamp, one of the world’s longest-running crypto exchanges, is not quite yet.

“There’s been a lot of people who have sat in the crypto world who’ve said, ‘Oh, crypto is going to take over the world and traditional banks and central banks will go away,’” he said in a telephone interview from London. “That’s not going to happen.”

While the technology itself may be used increasingly in the behind-the-scenes plumbing of financial services, such as money being sent across borders, Sawyer said Bitcoin is still too volatile to fully replace the dollar, though it may become part of the mix.

“Will there still be the dollar? Yes,” he said. “Will there still be Visa and Mastercard? Absolutely. It will just be we’ll have alternatives for using plastic, or paper, or coins or checks.”

El Salvador’s central bank president also said on state television that Bitcoin would not replace the greenback in the nation.

The dollar is stable, especially when compared with Bitcoin’s explosive price moves. And whereas the dollar usually fluctuates for mundane reasons, crypto can be swayed by tweets, memes and Elon Musk — not a great fit for a national or global currency. Bitcoin quadrupled last year, while the Bloomberg Dollar Spot Index slipped 5.5% — a fairly big number for the greenback. Since mid-April, Bitcoin has lost nearly half of its value.

Bank of America Corp. research shows Bitcoin is about four times as volatile as the Brazilian real and Turkish lira — and neither of those is anyone’s model of stability.

“Bitcoin injects extra volatility,” which is counterproductive for countries looking for stability, said Marc Chandler, chief market strategist at Bannockburn Global Forex. “Why do countries peg their currency to another currency or have a currency board or have a dollarized economy? It’s because their currency has become too volatile or lost credence in the market and become out of control, very inflationary.”

Test Case
That doesn’t mean other countries won’t look to El Salvador as a test case for what can happen, especially those that benefit from remittance flows or have central banks already researching or piloting cryptocurrencies of their own.

“Countries can’t just look away from this option now,” said Valkyrie Investments CEO Leah Wald, who previously worked for the World Bank. “For the longevity and health and well-being of Bitcoin, and the Bitcoin network, this is the dawn of a new day.”

Nations from Haiti to Guatemala, South Sudan and Liberia could be next to adopt Bitcoin given their dependence on remittance inflows, high poverty and low financial inclusion, according to Rahul Shah, Tellimer Ltd.’s head of financials equity research.

Other dollarized economies — those, like El Salvador, that are based on the greenback — are also candidates to officially adopt Bitcoin and become less dependent on the Federal Reserve and U.S. policies.

“It potentially gives the ability to not be as beholden to the dollar over the long term, and be more independent of the existing financial system,” said Brad Bechtel, global head of currencies at Jefferies. “Once you see one country go that way, it wouldn’t surprise me to see more.”

Ecuador, which has been dollarized for two decades, could also consider Bitcoin, said Emily Weis, a global macro strategist at State Street Corp. Colombia and Mexico, meanwhile, would risk disrupting their local currencies, even if they have large remittances and crypto interest among the local populations, she said.

“Many EM populations already have an affinity for cryptocurrencies given capital controls, fragile local market dynamics, and volatility of local currencies,” Weis said.

There’s also the related business opportunities: El Salvador’s Bukele, for example, is using the new law as a way to stoke interest in mining Bitcoin in the coastal country. He ordered the president of the state-owned geothermal electric company to make plans to offer greener mining facilities.

“All it takes is one small domino and eventually it can create real change,” said Alex Tapscott of Ninepoint Partners LP, which has a Bitcoin ETF in Canada.

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More US finance giants tiptoe into crypto assets, BFSI News, ET BFSI

June 14, 2021 root Personal Finance

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NEW YORK: Investing in bitcoin and other digital currencies remains a risky game where the rules could change significantly, but the payoff could be big.

In response to this dilemma, several leading US financial heavyweights are staying on the sidelines, while an increasing number are proceeding cautiously into the growing world of crypto assets.

“My own personal advice to people: Stay away from it,” JPMorgan Chase Chief Executive Jamie Dimon said recently, before adding, “That does not mean the clients don’t want it.”

JPMorgan, the biggest US bank by assets, is currently assessing how it can help clients transact in cryptocurrency, Dimon said last month at the bank’s annual meeting.

Formerly something of an investment sideshow dominated by computer geeks, cryptocurrencies are sparking greater interest among mainstream investors after a big jump in bitcoin prices in 2020 and early 2021.

On Thursday, the venerable giant State Street announced the creation of a new digital finance division.

On Wednesday, the head of online trading firm Interactive Brokers vowed to establish online trading of cryptocurrencies on the platform by the end of the summer.

Like its rivals Charles Schwab and Fidelity, Interactive Brokers does not now offer bitcoin trading on its platform, although it does give clients the option to invest in some assets that include cryptocurrencies or bitcoin futures.

Investors who want to trade bitcoin can currently turn to Robinhood or the cryptocurrency specialist Coinbase.

ForUsAll, a platform that manages retirement accounts for small businesses, on Monday announced an agreement with Coinbase that allows clients to invest up to five percent of their balances in cryptocurrencies.

Investment bank Morgan Stanley in March said it would allow wealthier clients to invest in bitcoin funds, while Goldman Sachs recently established a team dedicated to trading cryptocurrencies.

The chief executives of Wells Fargo, Citigroup and Bank of America said at a congressional hearing in late May that they are approaching the cryptocurrency landscape with caution.

Fidelity Investments, which established a digital assets division in 2018 to execute cryptocurrency trades for hedge funds and other institutional investors, filed papers with US securities regulators for a bitcoin exchange traded fund (ETF).

The move could potentially expand cryptocurrency investments to a broader range of individual investors.

Tougher rules ahead?
Still, many financial players are reluctant to dive into an investment realm associated with black markets that has sparked interest from US and global regulators.

There is also remarkable volatility, with bitcoin beginning 2021 at around $30,000 and hitting $63,000 in April before falling back to $34,000 in June.

“Speculators and those suffering from FOMO (the ‘fear of missing out’) will surely continue to flock to cryptos in the hopes of achieving huge returns,” said Ian Gendler of research firm Value Line.

But Gendler urges clients to avoid cryptocurrency investments, citing the elevated risk and the lack of a tangible asset compared with putting money into commodities or a company. Bitcoin and other digital money is also not backed by governments, he noted.

“Cryptocurrencies are only worth what the next investor is willing to pay,” he said.

Still, many in finance do not see cryptocurrency as a transient phenomenon.

“We do believe bitcoin, and more broadly crypto assets, are a new and emerging asset class that will likely be here to stay,” said Chris Kuiper, vice president at CFRA Research.

CFRA expects “the large banks as well as smaller financial institutions to continue to adopt them, particularly as the infrastructure and legal/regulatory framework continues to be built out,” Kuiper added.

The Basel Committee, which coordinates regulation among central banks, this week proposed new rules that would require banks to set aside capital for cryptocurrency investments.

Gary Gensler, the new head of the Securities and Exchange Commission, has also said he wants to bolster protections for cryptocurrency investors, telling CNBC that such investors “don’t have full protections that they have in the equity markets or in the commodity futures market.”

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Bank of Maharashtra plans to raise up to Rs 2,000 crore through QIP, BFSI News, ET BFSI

June 14, 2021 root Banking & Finance

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MUMBAI: State-run Bank of Maharashtra is looking to raise up to Rs 2,000 crore through qualified institutional placement (QIP) route before July-end, its Managing Director and CEO A S Rajeev said. In April this year, the Pune-based lender had received board approval to raise Rs 5,000 crore by way of QIP/rights issue/ preferential issue or by issuing Basel III bonds.

“We are planning to raise around Rs 2,000 crore equity through QIP immediately. The process has already started and we will raise it before July-end,” Rajeev told in an interaction.

The base size of the issue is Rs 1,000 crore and it has a greenshoe option of another Rs 1,000 crore, he said.

Following this equity raise, the government’s holding in the bank will reduce to below 85 per cent from 94 per cent currently, and the capital adequacy ratio will improve to 17-18 per cent from around 14.49 per cent as of March 31, 2021, Rajeev said.

This fund will be deployed for expansion of the loan book, which the bank is looking to grow by 16-18 per cent to around Rs 1.25 lakh crore in this fiscal from Rs 1.08 lakh crore as of March 31, 2021, he said.

Of the total loan book of the bank at present, the share of corporate loans is 37 per cent and of retail, agriculture and MSME (RAM) segment is 63 per cent, he said adding, “We want the ratio of RAM to the corporate segment to be 65:35 during the current fiscal.”

The bank is envisaging a 20-25 per cent growth in the retail, agriculture and MSME (RAM) segment this year.

The lender’s corporate loan size is close to Rs 40,000 crore and it is targeting to grow it by another Rs 10,000 crore in this financial year. It has a sanction pipeline of Rs 25,000 crore in the corporate and MSME segments for the current fiscal, he said.

“We have churned our portfolio with improvement in the share of lending to better-rated corporates. This will minimise the delinquencies and attract lower capital requirement,” Rajeev added.

In the corporate segment, the bank will continue lending to better-rated corporates, including sunrise sectors such as infrastructure, pharmaceuticals and FMCG, he said.

Under the government’s Emergency Credit Line Guarantee Scheme (ECLGS), the bank’s total disbursement, so far, is around Rs 2,100 crore, and it plans to lend another Rs 500 crore this year.

Rajeev said the bank’s exposure to the healthcare sector is Rs 2,000-2,400 crore, which is 2 per cent of the total advances portfolio. In April and May, it had already disbursed over Rs 225 crore to the sector.

“We intend to double our portfolio under the healthcare sector and make it 4 per cent of our total advances portfolio during the current fiscal. We have also come out with two to three products in tune with the RBI policy,” he said.

Last month, the RBI had announced an on-tap term liquidity facility of Rs 50,000 crore under which banks can provide fresh lending support to a wide range of entities from the healthcare segment.

The government has also announced ECLGS 4.0, under which a 100 per cent guarantee cover to loans up to Rs 2 crore will be provided to hospitals, nursing homes, clinics, medical colleges for setting up on-site oxygen generation plants.

Rajeev further said since the exit from the RBI’s prompt corrective action (PCA) framework in January 2019, the lender has taken several steps to strengthen its balance sheet, which has resulted in a significant improvement in all its financial parameters.

“We have been successful in registering profits quarter on quarter since March 2019. Our net profit rose 41.39 per cent to Rs 550 crore during FY21 from Rs 389 crore in FY20. Operating profit also rose 39 per cent to Rs 3,958 crore in FY21 from Rs 2,847 crore last year,” he said.

The bank’s CASA (Current Account and Savings Account) improved to 54 per cent as of March 31, 2021, which according to Rajeev is one of the best in the banking industry.

The bank has also managed to bring its gross non-performing assets to 7.23 per cent as of March 31, 2021, from 18.64 per cent in September 2018, when it was under PCA. Net NPAs stood at 2.48 per cent as of March 31, 2021.

At present, market capitalisation of the bank stands at Rs 17,500 crore against Rs 3,948 crore as of March 2019, he said.

In FY22, the bank is targeting to bring down gross NPA to below 6 per cent and net NPA to below 2 per cent. Net interest margins (NIM) will remain above 3 per cent in this fiscal, he said.

It has set a recovery and upgradation target of Rs 2,500-2,600 crore during the current year. The lender is also expecting Rs 500 crore recovery from written-off accounts in this fiscal, Rajeev said.

The lender is looking at opening 200 banking outlets with a hub and spoke model in this fiscal, he added.

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Pvt ARCs moving to retail loans as national bad bank nearing reality, BFSI News, ET BFSI

June 14, 2021 root Banking & Finance

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With RBI-mandated loan restructuring and moratoriums ebbing the tide of bad loans among corporates, ARCs have been banking on retail loans to drive business in the pandemic-hit FY21 and player like Edelweiss ARC expects the industry-wide retail assets under management to hit nearly half of the overall pie.

The Rs 1.5-lakh-crore asset reconstruction market comprises over a dozen players led by Edelweiss ARC that controls over 30 per cent of the market, and the soon-to-be operationalised national bad bank, to be funded mostly by public sector banks and guaranteed by the government, will add to the clutter of the market and has private players fearing the government guarantee unlevelling their fields.

The pandemic-hit FY21 has seen tepid overall growth for asset reconstruction companies (ARCs), but retail loan portfolio grew faster adding at least 25 per cent more to the assets under management (AUM).

According to industry players, lenders like HDFC Bank, Indusind Bank, IDBI Bank, Federal Bank and non-banks like Bajaj Finance among others have been aggressively selling their stressed retail books — auto, home and personal loans as well credit cards dues to ARCs like Edelweiss, Phoenix ARC run by Kotak Mahindra Bank, JM Financial and Reliance ARC among others since the past few years.

While Reliance ARC snaps up only retail loans, for Phoenix ARC comprises 20 per cent of its Rs 8,500-crore total book/AUM.

Rashesh Shah, chairman and chief executive of Edelweiss Financial Services Group whose ARC arm sits over an AUM of Rs 40,8000 crore, and has made a recovery of Rs 5,400 crore in FY21 from 179 accounts, sees over the next two years around 50 per cent of overall ARC assets coming in from retail loans.

The retail portfolio of Edelweiss ARC is around 10 per cent now, but it will be “deleveraging the corporate portfolio and focusing on retail going forward, while at the industry level it’s about 20 per cent. But I see this touching almost half of the market over the next two years”, Shah told over the weekend.

Going forward, focus will be more on snapping up retail loans as it gives higher margins and better recovery rates, Shah added.

“For the past two years retail NPAs have been rising, while corporate NPAs coming down due to the moratorium and restructuring allowed by the Reserve Bank. This has seen interest rising among ARCs for retail assets,” Sanjay Tibrewala, the chief executive of Phoenix ARC, which is among the top five players, told on Sunday.

Tibrewala said their retail portfolio accounts for 20 per cent of the AUM of Rs 8,500 crore, and which grew marginally last year, while the overall retail assets for the industry jumped by 25 per cent.

On why the industry is snapping up more retail assets despite it being a high cost business, Tibrewala said it’s because of better margins and higher recovery levels.

Shah said that so far his group’s ARC business has been very good with strong margins, better recoveries/collections, which stood at Rs 5,400 crore in FY21 from across 179 accounts.

“Going forward, we will focus more on recoveries and when it comes to buying assets the focus will be retail portfolios. Over the past few years, retail has been growing very big, and I see it taking up half the market,” Shah said, adding they entered this space only three years ago.

He further said since then Edelweiss added 200-strong team to man the retail portfolio as its more people intensive.

On the asset purchase side Shah noted that on average their acquisition cost varies from 60 to 70 paise and sometimes they also go for profit sharing with lender/seller.

Shah is driving retail as it’s more predictable when it comes to recoveries.

An industry expert also opined that ARCs which focus on retail portfolio may be better placed to cushion the impact of the national bad bank on their business, as the proposed national ARC will primarily be dealing with large chunky loans of Rs 500 crore and above and that too mostly from public sector banks which have the highest bad loans piles.

So to secure their business, it makes better sense for ARCs to focus on retail loans as it offers better margins and faster resolution too, he adds.

However, Tibrewala does not see the retail book growing too big for too long as once the pandemic situation normalises, he sees large corporate books coming up for sale.

“We have been in retail segment for many years but do not see faster growth for retail once pandemic related restrictions and benefits normalise, and corporate accounts come back to the markets again,” Tibrewala said.

The national bad bank, he said, will leave the field “uneven for private players like us due to the proposal of government guarantee. However, it can be one area for sourcing assets for us. We are actively looking at assets”.

Edelweiss ARC closed FY21 with a revenue of Rs 340 crore of which Rs 79 crore came in Q4 and earned a Rs 186 crore net profit for the year and Rs 45 crore for Q4. It has comfortable liquidity position of Rs 540 crore as of end March.

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