Month: July 2021

Banks disburse over Rs 2 lakh crore under ECLGS till mid-July, BFSI News, ET BFSI

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NEW DELHI: Nearly 17 months after the launch of the Emergency Credit Line Guarantee Scheme (ECLGS), banks have sanctioned Rs 2.76 lakh crore, with disbursals adding up to Rs 2.14 lakh crore till mid-July. Similarly, the PM SVANidhi scheme, providing loans of up to Rs 10,000 to street vendors, has seen flows of a little over Rs 2,500 crore to 25 lakh vendors, although the internal target was more ambitious, with banks nudged to give loans.

Although the government has announced an increase in the ECLGS limit from Rs 3 lakh crore to Rs 4.5 lakh crore, officials do not expect a major surge, amid demands that eligibility norms be eased to enable more small businesses to use the window. When the scheme was announced last year, it was meant for micro, small and medium enterprises (MSMEs), but the scope was enlarged later as the demand was not sufficient.

Up to July 2, a little less than 1.1 crore MSME borrowers have been provided guarantee-based support amounting to Rs 1.65 lakh crore, which translates into an average ticket size of Rs 1.5 lakh. Under the originally announced scheme, MSMEs that had loans of up to Rs 50 crore at the end of February 2020 were eligible even with past dues of up to 60 days. MSME industry groups say that the conditions are such that it is difficult for businesses to get a loan. “The requirements were such that only a certain set of entities with existing loans were eligible. Now banks are reluctant to lend. The government should have dropped the condition of prior credit because we are seeing cash flows being disrupted for a lot of MSME units,” said Animesh Saxena, president of Federation of Indian Micro and Small & Medium Enterprises (FISME).

Recently, the parliamentary standing committee on industry noted that there is a huge gap between sanctions and disbursals as banks feared defaults in the wake of the second wave.



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New IDBI owners may get RBI road map to cut stake, BFSI News, ET BFSI

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NEW DELHI: The Reserve Bank of India (RBI) is expected to provide a road map to the new owners of IDBI Bank for reducing their stake as the government seeks to sell its equity, along with shares held by Life Insurance Corporation (LIC) of India, by the end of the current fiscal year.

Although the RBI has not firmed up its views on new licensing norms for private banks, announcement of the new structure may help generate more interest in the lender, which the Centre has been seeking to reposition for two decades but with little success.

In the past, the RBI had indicated that the government’s stake sale and announcement of the new norms were not linked. Sources, however, said that the government has been in dialogue with the RBI on stake sale and the regulator was aware of the need to provide a road map for comfort to potential buyers.

The current guidelines stipulate 40% minimum shareholding in terms of the paid up capital or voting rights. Over 10 years, this needs to be diluted to 20-30% and further reduced to 15-26% between 12 and 15 years, depending on the licence vintage. An internal group set up by the RBI had proposed reworking these, apart from allowing corporate houses into the space.

Many of the bidders may seek clarity on these aspects. Recently, the department of investment and public asset management had said that the government and LIC would decide on the extent of stake sale during the process of finalising the deal.

Although private investors are keen that the government holds no stake, something that NITI Aayog too had noted in some of its recommendations, government sources said, the idea was to leave it to bidders to decide the best course of action. “Someone may want majority control, while someone may like to do with a lower stake. Let the bidders decide,” said a source.

The government currently holds 45.5% in the financial institution-turned-universal bank with LIC’s shareholding pegged at 49.2%. On Friday, the bank’s share rose 0.4% to close at Rs 37.9 on BSE but is still lower than LIC’s acquisition price. LIC had acquired shares in IDBI Bank in three tranches.



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Mastercard submits new audit to India after ban over data handling, BFSI News, ET BFSI

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Mastercard has submitted a new audit report to India’s central bank, it told Reuters, as it seeks to overturn a ban on card issuance linked to concerns over the U.S. giant’s handling of data processed abroad.

The Reserve Bank of India (RBI) on July 14 sent panic-waves through Indian banking partners by announcing a ban, effective from July 22, to prevent the U.S. giant from issuing new cards. It cited non-compliance with 2018 rules that required it to store payments data only in India.

The RBI imposed the ban after deciding a “system audit report” submitted by Mastercard’s auditor Deloitte in April was unsatisfactory, three sources familiar with its decision-making said, asking not to be named because of the sensitivity of the issue. Two of the sources said the RBI was reviewing the new report.

In a statement to Reuters, Mastercard said Deloitte performed a “supplemental audit” and a new report was submitted on July 20 to the RBI, six days after the ban was announced.

“We look forward to continuing our conversations with the RBI and reinforcing how seriously we take our obligations. We are hopeful that this latest filing provides the assurances required to address their concerns,” it said.

Deloitte declined to comment, citing confidentiality obligations. The RBI did not respond to a request for comment.

The sources said the RBI was concerned Deloitte’s audit did not clearly state how long Mastercard took to purge Indians’ card data that is processed abroad before being stored locally.

India’s 2018 rules do not restrict where the data is processed, but for “unfettered supervisory access”, the RBI mandates that within a day the data – including transaction details and amount – should be stored domestically.

Mastercard in 2018 said it had started storing data at a facility in India’s western city of Pune to comply. But it still processes a part of each Indian transaction through data centres abroad, and later transfers and stores that data in Pune, one of the sources said.

The RBI has given no details beyond a seven-line statement announcing the ban. The details of RBI’s concern with Deloitte’s submissions have not previously been reported.

American Express, whose Indian presence is much smaller than that of Mastercard and Visa, has also has been banned from issuing new cards since April for violating the 2018 rules.

A fourth person with direct knowledge of the matter said the RBI had given Mastercard multiple extensions to submit clarifications and RBI only issued the ban when Mastercard asked for more time when an extension to July 9 lapsed.

Mastercard did not comment on the extension and the situation in Pune.



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8 Personal Finance Changes To Come Into Effect From August 2021

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1. NACH will enable you to get salary and other credits even on banking holidays:

National Automated Clearing House will now be available 24*7 irrespective of the bank holiday or weekend and hence people will be able to get their salary, pension as well as other debits in relation to various investments can be made even on bank holiday. In the current regime, NACH is only available on the bank working days.

2. ATM transactions to become expensive:

2. ATM transactions to become expensive:

The banks as per the recent ruling of the Reserve Bank of India may increase the interchange charge at ATMs by as much as Rs. 2. The interbank charge can be increased from Rs. 15 to Rs. 17 in respect of financial transactions as well as to Rs. 6 from Rs. 5 for non-financial transactions. This interbank fee is charged by banks to merchants that process payments using the debit or credit card.

3. Free ATM transactions capped:

3. Free ATM transactions capped:

From one’s own bank’s ATM, the number of free ATM transactions have been capped at 5. At other bank’s ATM, the number of free ATM transactions vary depending on the city, in case of a metro city the free transactions allowed using other bank’s ATM is 3 and that at a non-metro city is decided at 5.

4. Loan and fixed deposit rates may see a change:

4. Loan and fixed deposit rates may see a change:

As growth is on the radar of the RBI and the centre, it is unlikely that the interest rates shall be tinkered with in the upcoming monetary policy scheduled from August 4-August 7, nonetheless nothing can be said with certainty till we get to hear the policy statement by the RBI’s Governor.

5. ICICI Bank's new rules on ATM transactions as well as chequebook:

5. ICICI Bank’s new rules on ATM transactions as well as chequebook:

For up to 4 transactions, ICICI Bank charges no fee and post this on each of the transaction there shall be levied a fee of Rs. 150 after the free limit is exhausted. In a year, one can avail ICICI Bank’s cheque book with 25 leaflets for free but thereafter for every cheque book with 10 leafs there shall be a charge of Rs. 20.

6. LPG prices may be revised:

6. LPG prices may be revised:

LPG prices are revised on a month on month basis and it is likely that LPG cooking gas rates may trend higher in the new month.

7. Form 15CA/15CB filing deadline extended:

7. Form 15CA/15CB filing deadline extended:

Amid the coronavirus pandemic, the CBDT has allowed relief to taxpayers and extended the deadline for filing form 15CA/15CB, the deadline of which is ending on August 15. Form 15CA/Form 15CB are the IT department mandated filing requirement for any foreign remittances made.

8. Penalty on self assessment tax on dues over Rs. 1 lakh shall apply from August

8. Penalty on self assessment tax on dues over Rs. 1 lakh shall apply from August

Even as the centre extended a host of relief in tax compliance, a release in May provided that if an individual’s tax dues after considering TDS deduction and advance tax dues are over Rs. 1 lakh for the financial year 2021 then payment needs to be tendered on or before July 31, 2021. Failing which there will be levied a penalty at the rate 1% per month from August 2021 as per section 234A of the Income Tax Act 1961.

In case of senior citizens who are not needed to pay advance tax and if they happen to pay any tax before such deadline i.e. July 31, 2021 then such a payment shall be deemed as advance tax payment. And now if because of it, the final liability is less than Rs. 1 lakh then penal interest shall not be levied under section 234A.

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Infrastructure Funds Stood Second In Performance After Tech Funds: Top Infra Funds In India To Start SIP

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1. Quant Infrastructure Direct Plan:

Value Research and Morning Star has accorded this sectoral or thematic fund a 5-Star rating. NAV of the fund as on July30 is 18.331 and the fund in comparison to category average carries a higher expense ratio of 2.15%. Fund size of the mutual fund scheme is Rs. 42.67 crore as of June 30, 2021.

The scheme by Quant Mutual fund came into existence in 2013 and since then has given a return of over 15%. Benchmark of the fund is Nifty Infrastructure TRI. The risk-o-meter defines it to be placed in the high risk category.

Minimum SIP investment in the fund can be made for Rs. 1000. In a 1-year timeframe, the fund has provided outstanding return of 122.95%.

SIP of Rs. 10000 started 3 years ago, accumulating to an investment of Rs. 3.6 lakh is now worth Rs. 7.21 lakh.

Top holdings of the fund include Union Bank, Vedanta, ICICI Bank, Coal India, Bharti Airtel, Tata Steel, India Cements, L&T among others.

The fund is being managed by Ankit A Pande since May 2020.

2. Invesco India Infrastructure Fund - Direct Plan - Growth:

2. Invesco India Infrastructure Fund – Direct Plan – Growth:

This fund enjoys the highest rating by all 3 major rating agencies i.e. 5 Star rated fund by CRISIL, Value Research as well as Morning Star. The fund’s assets under management are at a good Rs. 179 crore and also its expense ratio is slightly above the category average at 1.46%.

In a 1-year time frame, this fund has underperformed the BSE India Infrastructure Index TRI and provided a return of 76.7%. The fund came into being in the year 2013 and since then has offered a return of over 18%.

Exit load applies in the scheme and is as following;

For units in excess of 10% of the investment,1% will be charged for redemption within 365 days

Note SIP in the fund can be started for as less as Rs. 500 and for lump sum investment one needs to shell out Rs. 1000.

Top holdings of the fund are L&T, Indraprastha Gas, Ultratech Cement, Bharat Electronic, KNR Constructions among others.

The fund is being managed by Amit Nigam since September 2020.

Top Rated and Top performing Infrastructure Mutual funds:

Top Rated and Top performing Infrastructure Mutual funds:

Infrastructure Mutual funds Annualised SIP 1-year return SIP 3-year return SIP 5-year return Rating
Quant Infrastructure Direct Plan 120.21% 50.99% 30.65% 5-Star by Value Research and Morning Star
Invesco India Infrastructure Fund – Direct Plan – Growth:
88.79% 36.85% 23.43% 5-Star by CRISIL, Value Research and Morning Star

Points to remember when investing in sectoral funds like infrastructure

Points to remember when investing in sectoral funds like infrastructure

This is a wholly equity oriented scheme and that too concentrated around a particular sector and hence highly risky bet. To reduce the risk as well as lessen the impact of volatility one needs to be investing in these funds for a minimum of 5 years time horizon to reap optimal gains. and that is the main reason for their high risk. For an aggressive investor class person even allocation of not over 10% into this asset category is suggested.

Disclaimer:

Disclaimer:

Mutual funds are risky and the theme based funds are the riskiest, so do take in professional help. Further all the investments listed out on GoodReturns.in should not be taken as investment advice.

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Auction of five-year G-Secs devolves on primary dealers

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The auction of the five-year Government Security (G-Sec) devolved on primary dealers (PDs) on Friday to the tune of 68 per cent of the notified amount, indicating the central bank’s discomfort with market players bid to buy the paper at lower price.

The auction of the remaining three securities sailed through. At the auction of the G-Sec/GS 2026 (coupon rate: 5.63 per cent), against the notified amount of ₹11,000 crore, the RBI devolved ₹7,465 crore on PDs.

The cut-off price on the aforementioned GS was lower at ₹99.53 (previous closing price: ₹99.62) and yield was higher at 5.7433 per cent (5.7210 per cent), respectively. Bond yields and prices are inversely related and move in opposite directions.

In the secondary market, this paper closed about six paise higher vis-a-vis the auction cut-off, with the yield thawing about 2 basis points.

The government raised ₹5,000 crore (including ₹1,000 crore greenshoe amount) via auction of the Floating Rate Bond maturing in 2033; ₹12,000 crore (including ₹2,000 crore greenshoe amount) via auction of GS 2035 (6.64 per cent); and ₹7,000 crore via auction of GS 2050 (6.67 per cent.

The price of the benchmark 10-year G-Sec maturing in 2031 (6.10 per cent) declined about 5 paise to close at ₹99.23 (₹99.28), with its yield rising about a basis point to 6.20 per cent.

Madan Sabnavis, Chief Economist, CARE Ratings, observed: “The government was able to raise ₹35,000 crore with the additional greenshoe option of ₹3,000 crore being accepted for 2 of the 4 papers that were issued. However, for the 5-year 5.63 per cent 2026 paper, which went with a cut-off 5.74 per cent, ₹7,465 crore devolved on the PDs.”

Sabnavis emphasised that the devolvement on PDs again today is reflective of the difference in market expectations on cut-offs and implied yields.

With this devolvement, the total devolvement so far this year is around ₹75,800 crore, while total issuances have been ₹4.96-lakh crore, he added.

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2 Stocks To Buy By ICICI Direct For Gains Up To 14%

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1. Tech Mahindra:

While making the recommendation, the IT company traded at a price of Rs. 1216 and the target suggested by the brokerage is Rs. 1385. Further the brokerage suggest to place a stop loss of Rs. 1090. From the recommended levels, the upside or the returns for the investor shall be to the tune of 14%. Note

Tech Mahindra is a USD 5.1 billion company offering and capitalizing on advanced technologies such as 5G, Blockchain, Cybersecurity, Artificial Intelligence, and more, to enable end-to-end digital transformation for global customers.

Despite outperformance of the IT sector as a whole, within the IT large cap space, Tech Mahindra has underperformed and the brokerage firm backed by heavy research expects Tech Mahindra to soon catch up pace.

Technical indicators

The scrip has moved out of 6 months healthy consolidation that suggests of an upward move and

acceleration of momentum. We expect the stock to head towards Rs. 1385 as it is an equal to November-December rally (Rs. 780- 1082) as measured from recent breakout level of Rs. 1082. The stock has immediate support around Rs. 1090 as it is 80% retracement of recent up move (Rs. 1048-1237). Among oscillators, MACD is in rising trajectory, thus validating positive bias in the stock, added the brokerage firm.

Positives for Tech Mahindra as cited by the brokerage include:

1)The company holds a leadership position in communication vertical, which will make it a key beneficiary of vendor consolidation in the segment, 2) key beneficiary of opportunities in 5G, 3) in enterprise segment the company will be a beneficiary of digital acceleration, 4) improving deal wins, healthy deal pipeline & healthy traction in large deals and 5) consistent cash flow and healthy dividend payout

“We believe its leadership in communication vertical will make it a key beneficiary of vendor consolidation in the segment. It would also benefit from 5G opportunities. The enterprise segment will also benefit from improved digital traction, success in large deals. Hence, we remain positive on the stock”, added the brokerage.

Financials: For the Q1Fy22 period, the firm’s PAT has improved sequentially by 25% to Rs. 1353 crore. Consolidated revenues have also increased on a QoQ basis to Rs. 10,198 crore. Also for the reported quarter, Tech Mahindra raked in deal wins worth $815 million.

Market cap Rs. 1,19,241 cr
Total debt Rs. 1661.8 cr
Cash and investment Rs. 12497.1 crore
52week H/L 1237/643
Equity capital 437 cr
Face value Rs. 5
Target price Rs. 1385
Last traded price Rs. 1209.55

2. Steel Authority of India:

2. Steel Authority of India:

For the Steel major, the ICICI Direct is bullish and sees an upside of 13% i.e Rs. 149 from the recommended price level of Rs. 132. Stop loss suggested for the scrip is Rs. 118.

About SAIL: The Maharatna company is a leading steel producer in India. SAIL is into producing iron and steel at five integrated plants and three special steel plants, located principally in the eastern and central regions of India. Its proximity to its source of raw materials location serves as a major advantage.

Technicals: ICICI Direct is of the view that after a breather of 2.5 months, the stock of SAIL is resolving out of healthy base formation thereby, offering fresh entry opportunity. The stock price took almost 3 months to retrace just 38% of its preceding seven week’s rally (April-May 2021) indicating robust price structure, elevated buying demand. Now the consolidation has established into a triangular continuance pattern.

The stock may in coming months challenge life highs of Rs. 151.Among oscillators RSI has generated cross over above nine period average suggesting further positive momentum, added the brokerage.

Key Triggers for the scrip of SAIL

-Captive supply of iron ore aids in keeping SAIL’s overall raw material costs under check.

– The relatively firm trend in steel prices augurs well for SAIL

– During Q4FY21, SAIL logged perationally steady set of numbers. For Q4FY21, SAIL’s sales volume was at 4.35 million tonne (MT), up 16% YoY. For the quarter, standalone operations reported topline of Rs. 23286 crore which was up 44% YoY & 17% QoQ. Standalone EBITDA for the quarter stood at Rs. 6153 crore up 21% QoQ, while the EBITDA/tonne for the quarter under review stood at Rs. 14145/tonne, as compared to EBITDA/tonne of Rs.12089/tonne in Q3FY21. The ensuing standalone PAT for Q4FY21 stood at Rs. 3444 crore

• Net debt has been lowered by Rs. 16100 crore in FY21.

What should investors do?

ICICI Direct has suggested a buy on the scrip of SAIL for a target price of Rs. 149 and further advised investors to book 50% profits in the stock at 140.80 (Return 7%) and trail stop loss for remaining position to 131.50.

Market cap Rs. 56,343 cr
Total debt Rs. 35,576 crore
Cash and investment Rs. 680 crore
52week H/L 151/32
Equity capital 4131 crore
Face value Rs. 10
Target price Rs. 149
Last traded price Rs. 142.05 ( price at recommendation- Rs. 132)

Disclaimer:

Disclaimer:

Stock market investment is risky. Any investment ideas listed out on GoodReturns.in should not be construed as investment recommendation. Please do seek professional help before any investment decision.

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Cholamandalam Investment and Finance Q1 profit falls 24%

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Cholamandalam Investment and Finance Company, on Friday, reported a 24 per cent decline in standalone net profit for the first quarter at ₹326.80 crore.

The Murugappa Group company reported a standalone net profit at ₹430.93 crore during corresponding quarter in the previous year.

The lender said many of its borrowers and staff were impacted by the second wave of the pandemic.

“This resulted in a setback in performance in Q1 on the disbursements and collections front. Collections also suffered, resulting in an increase in Stage 3 assets from 3.96 per cent to 6.79 per cent,” it added.

The restructuring option (with asset classification benefit extended by the RBI under Restructuring 2.0) stood at 3.86 per cent of the book as of June 2021.

“Chola has witnessed a recovery in disbursements and collections during the latter part of June 2021, post-relaxation of State-wise lockdowns. We expect a gradual revival in subsequent quarters in FY22 with normalisation and rollbacks of accounts, which moved to higher buckets,” said the company.

Total income on a standalone basis grew to ₹2,467 crore (₹2,114 crore) during Q1 FY22.

Disbursements on a year-on-year basis grew by 1 per cent to ₹3,635 crore (₹3,589 crore) during the June quarter affected by localised lockdown due to the second wave of Covid-19. The total AUM of the lender grew by 7 per cent year-on-year to ₹75,763 crore (₹70,826 crore) as of June 2021.

The company continues to hold a strong liquidity position with ₹7,917 crore as cash balance as of June 2021, with a total liquidity position of ₹16,417 crore (including undrawn sanctioned lines), says a release.

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Shriram Transport Finance Q1 drops 47%

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Shriram Transport Finance Company (STFC) reported a 47 per cent year-on-year (y-o-y) drop in first quarter standalone net profit at ₹170 crore due to increased provisions towards impaired loans and rise in employee benefit expenses.

The company, which is a leading player in the pre-owned commercial vehicle financing segment, had reported a net profit of ₹320 crore in the year-ago quarter.

Interest income was up 9 per cent y-o-y to ₹4,479 crore (₹4,103 crore in the year-ago quarter).

During the reporting quarter, STFC made a net gain on “derecognition of financial instruments under amortised cost category” amounting to ₹101 crore (nil in the year-ago period).

Finance costs were up 10 per cent y-o-y at ₹2,498 crore (₹2,267 crore).

Net interest income (difference between interest earned and interest expended) rose 14 per cent y-o-y to ₹2,107.45 crore (₹1,842.54 crore).

Provisions made towards impairment on financial instruments rose 35 per cent y-o-y to ₹1,440 crore (₹1,065 crore). During the reporting quartet, the company considered an additional ECL provision of ₹261 crore on loans on account of Covid.

The company invoked resolution plan to relieve Covid 2.0 pandemic-related stress of eligible borrowers worth ₹1,434.14 crore. Of this, as on June 30, 2021, it restructured loans of 10,257 eligible borrowers accounts worth ₹342.53 crore.

Gross Stage 3 assets (which are considered credit-impaired) rose about 8 per cent y-o-y to ₹9,658 crore (₹8,931 crore).

As of June-end 2021, assets under management were up 6.75 per cent y-o-y to ₹1,19,301 crore (₹1,11,756 crore as of June-end 2020).

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Equitas Small Finance Bank’s Q1 net profit drops 79%

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Equitas Small Finance Bank has reported a 79 per cent drop in net profit to ₹11.93 crore in the first quarter as against a net of ₹57.67 crore for the same quarter last year. The bank said the Profit After Tax was affected due to provisions made on restructured accounts.

The Bank has restructured loans amounting to ₹400.48 crore as of June 30, 2021; ₹496.52 crore in July 2021 and has made a provision of ₹110.51 crore against these restructuring under Resolution Framework 2.0

“The Bank primarily caters to small retailers and transporters engaged in daily use products. During the quarter due to lockdowns and other Covid related restrictions, cash flows of these small retailers had been significantly impacted,” said PN Vasudevan, MD and CEO of Equitas Small Finance Bank.

Net Interest Income for Q1FY22 stood at ₹461 crore (₹404 crore) while net interest margin stood at 7.87 per cent. Total income of the bank grew by 23 per cent to ₹922.59 crore ( ₹750.96 crore).

Total advances as of Q1FY22 stood at ₹17,837 crore, growing at 15 per cent Y-o-Y while deposits (excluding CDs) stood at ₹17,021 crore with a Y-o-Y growth rate of 48 per cent.

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