Month: July 2021

Shriram Transport Finance Q1 net drops 47 per cent to ₹170 cr on higher provisions

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Shriram Transport Finance Company (STFC) on Friday reported a 47 per cent decline in consolidated net profit at ₹170 crore for the June quarter due to accelerated provisions against expected credit loss.

The company had registered a net profit of ₹320 crore in the same quarter a year ago. Compared sequentially, the net was down by 77.5 per cent from ₹755 crore in the March 2021 quarter.

Total income during Q1 FY22, however, was higher at ₹4,651.50 crore from ₹4,144.17 crore in Q1FY21, the company said in a regulatory filing.

Interest income rose to ₹4,479.28 crore from ₹4,102.58 crore.

STFC said certain segments of the company’s business operations were affected due to the prolonged lockdown imposed by state governments to curb COVID-19 infections.

The company has considered additional expected credit loss (ECL) on loans of ₹261 crore during the June quarter.

“As at June 30, 2021, additional ECL provision on loan assets as management overlay on account of Covid-19 stood at ₹2,852.50 crore,” it said.

The assets under management (AUM) stood at ₹1.19 lakh crore by end of June 2021, as against ₹1.12 lakh crore earlier.

The Q1 numbers include the results of STFC, the holding company, and associate firm Shriram Automall India Ltd.

STFC said its board of directors also approved periodical resource mobilisation by issuance of debt securities.

The company plans to issue such instruments on a private placement basis in tranches from August 1 to October 31, 2021, it added.

The flagship company of the Shriram Group, STFC mainly provides finance for commercial vehicle industry. Shriram Transport Finance stock closed 1.38 per cent up at ₹1,391.45 apiece on BSE.

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Bandhan Bank Q1 profit falls 32% on higher provisioning

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Riding on the back of higher provisioning, Bandhan Bank witnessed a 32 per cent decline in net profit at ₹373 crore for the quarter ended June 30, 2021, compared with ₹550 crore in the same period last year.

Provisioning was up by nearly 62 per cent at ₹1,375 crore during the quarter under review against ₹849 crore. The bank has made accelerated provision on NPA accounts of ₹751 crore, resulting in PCR (provision coverage ratio) of 62 per cent against 50 per cent in Q4 FY21.

In addition to this, it is also carrying additional standard assets provision amounting to ₹323 crore and provision on restructured assets amounting to ₹529 crore.

Gross slippages during the quarter was close to ₹1,661 crore; it was 3,500 crore in Q4 of FY21.

Gross non-performing asset (NPA) shot up significantly on a year-on-year basis to ₹6,440 crore (₹1,007 crore). Gross NPA as a percentage of total advances increased to 8.18 per cent (1.43 per cent); net NPAs increased to 3.29 per cent (0.48 per cent).

The bank restructured loans amounting to ₹4,661 crore during the first quarter. The total restructured loan book as on date is ₹5,276 crore.

Collection efficiency

The bank’s overall collection efficiency was at 85 per cent including NPA and 89 per cent excluding NPA during the first quarter of this fiscal.

Collection efficiency in West Bengal and Assam stood at 85 per cent and 67 per cent, respectively, and for the rest of India it stood at 90 per cent.

In West Bengal and Assam, Covid restrictions were imposed starting mid-May and continued till mid-July, which impacted the collection efficiency against the rest of India where withdrawal of restrictions happened post-May, the bank said.

According to Chandra Shekhar Ghosh, Managing Director and CEO of Bandhan Bank, there will be an improvement in collection efficiency, moving forward.

Net interest income was up by 17 per cent at ₹2,114 crore (₹1,811 crore). Non-interest income grew by 38 per cent to ₹533 crore (₹387 crore).

Net interest margin (NIM) increased to 8.5 per cent during the quarter under review as against 8.2 per cent last year.

The bank’s total business (deposits and advances) grew 17 per cent year-on-year to reach ₹1.57-lakh crore as on June 30. The deposit book grew 28 per cent and stands at ₹77,336 crore. The current account and savings account (CASA) book grew by 48 per cent year-on-year, and the CASA ratio now stands at 43 per cent of the overall deposit book. Advances grew by eight per cent at ₹80,128 crore.

“We expect exponential growth (in business) once the situation normalises. The country’s economic growth would be contributed by rural India and we will focus on rural and semi urban regions moving forward,” he said.

Capital adequacy ratio, an indication of the stability of the bank, is at 24.8 per cent, much higher than the regulatory requirement.

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RBI aligns deposit-taking norms for HFCs with NBFCs

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The Reserve Bank of India (RBI) has decided to align the provisions for Housing Finance Companies (HFCs) relating to the rating of deposits taken by them with provisions on the subject prescribed for non-banking finance companies (NBFCs).

Accordingly, the central bank has approved seven Credit Rating Agencies (CRAs) – Crisil, ICRA, CARE Ratings, Fitch Ratings India Pvt Ltd, Brickwork Ratings, Acuite Ratings & Research and Infomerics Valuation and Rating – and their respective minimum investment-grade credit rating.

For example, a HFC’s fixed deposit programme needs to have a minimum investment-grade credit rating of ‘FA-’ from Crisil or ‘MA–’ from ICRA or ‘BBB’ from CARE Ratings.

Crisil’s ‘FA-’ rating indicates that the degree of safety regarding timely payment of interest and principal is satisfactory. Changes in circumstances can affect such issues more than those in the higher-rated categories.

ICRA’s ‘MA-’ rating indicates that the rated deposits programme carries average credit risk.

CARE Ratings ‘BBB’ rating indicates that instruments with this rating are considered to have a moderate degree of safety regarding timely servicing of financial obligations. Such instruments carry moderate credit risk.

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Non-food credit growth of banks a tad lower in June

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Scheduled commercial banks’ non-food credit growth was a shade slower at 5.9 per cent in June 2021 against 6 per cent in June 2020 due to deceleration in credit growth to industry and services sector.

However, credit to agriculture and allied activities and personal loans segments showed accelerated growth.

According to the Reserve Bank of India’s statement on ‘Sectoral Deployment of Bank Credit – June 2021’, credit to agriculture and allied activities continued to perform well, registering an accelerated growth of 11.4 per cent in June compared to 2.4 per cent in June last year

Credit to industry

Credit growth to industry contracted by 0.3 per cent in June 2021 from 2.2 per cent growth in June 2020. Size-wise, credit to medium industries registered a robust growth of 54.6 per cent in June 2021 compared to a contraction of 9.0 per cent a year ago.

Credit growth to micro and small industries accelerated to 6.4 per cent in June compared to a contraction of 2.9 per cent a year ago, while credit to large industries contracted by 3.4 per cent in June compared to a growth of 3.6 per cent a year ago.

The RBI said credit growth to the services sector decelerated to 2.9 per cent in June 2021 from 10.7 per cent in June 2020, mainly due to contraction/ deceleration in credit growth to ‘commercial real estate’, ‘NBFCs’, ‘tourism, hotels and restaurants’.

However, credit to the ‘trade’ segment continued to perform well, registering accelerated growth of 11.1 per cent in June 2021 compared to 8.1 per cent a year ago.

Personal loans registered an accelerated growth of 11.9 per cent in June 2021 compared to 10.4 per cent a year ago, primarily due to accelerated growth in ‘loans against gold jewellery’ and ‘vehicle loans’.

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DHFL plans to start transfer of recovery amount to depositors

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The resolution of mortgage financier Dewan Housing Finance Corporation Ltd (DHFL) seems to be under way, with the company planning to transfer the recovery amount to its depositors.

DHFL has sent messages to fixed deposit and NCD holders, asking them to update their bank account and contact details.

“To ensure receipt of proceeds/ settlement in accordance with the Resolution Plan approved by NCLT, Mumbai Bench vide its order dated June 7, 2021, for your NCD holdings in DHFL, it is important that your latest bank account and contact details are updated in the list of debenture holders,” said DHFL in its communication to NCD holders. It has also sent a similar message to FD holders. Further, in a stock exchange filing, DHFL has said the record date for de-listing NCDs from the stock exchanges has been fixed as July 30.

Many of the FD and NCD holders have expressed concerns about the transfer of funds, pointing out that their petitions challenging the payout of funds are pending in court.

“The matter of distribution of funds is still in appeal and will be decided by the NCLAT,” said Vinay Kumar Mittal, a lead petitioner in the court on behalf of the FD holders of DHFL.

‘Move unacceptable’

FD holder Rommel Rodrigues, who has filed an appeal in the Bombay High Court, said the move by DHFL is unacceptable. “While approving the resolution plan, the NCLT had had said it is subject to all appeals,” he said.

Under the current resolution plan, FD holders will get about ₹1,241 crore, 23 per cent of their admitted claims of about ₹5,400 crore.

NCD holders have been classified in different categories based on their investments, and will also get lesser repayment than their admitted claims.

The National Company Law Appellate Tribunal has refused to stay implementation of Piramal’s resolution plan for DHFL, but is hearing pleas filed by NCD holder 63 Moons Technologies and fixed deposit holders. It has set September 15 as the date for the final hearing on the plea of 63 Moons. In the case of FD holders, it has set September 16 as the next date of hearing.

The NCLT had approved the ₹37,250 crore resolution plan of Piramal Capital and Housing Finance Ltd for DHFL.

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Allow MSMEs to open multiple current accounts in same bank: KCCI President

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The Kanara Chamber of Commerce and Industry (KCCI) has asked the Indian Banks’ Association (IBA) to inform its member banks to permit the MSMEs (micro, small and medium enterprises) to open multiple current accounts with the same bank and to permit opening the collection account with other banks as per RBI’s notification.

In a letter to the Chief Executive of IBA, the President of KCCI, Isaac Vas, said that RBI had imposed certain restrictions for creating bank accounts with multiple banks in order to prevent diversion of funds, via a notification dated August 6, 2020.

Stating that the RBI’s move was in the broader interest of the nation, he said that various banks have gone beyond the RBI’s order and imposed multiple restrictions. “These restrictions are widely felt unwarranted and against the spirit of providing quality service to the business community and hampering the smooth conduct of business operations. Some banks are closing the current account abruptly without giving any notice of intimation,” he said.

Listing out the grievances received from the KCCI members, he said that some banks are not allowing businesses to have a current account and overdraft account in the same branch. Many businesses have established separate current accounts to collect funds from their customers, he said, adding that the banks are mandating to close either of their accounts.

He also said that some business units have branches in multiple locations and maintain separate current accounts in their branch locations. Vas said the banks are not permitting them to have multiple current accounts in different cities.

Alleging unfair trade practices

Vas quoted the RBI’s notification as saying that if the sanctioned amount of loan is less than ₹50 crore, holders can open collection accounts in other banks. “In a few instances, we have observed that the loan sanction limits have been reduced to less than ₹50 crore, only to accommodate this requirement,” he said, adding the banks have retained sanction limit above ₹50 crore, thereby adopting an unfair trade practice.

Vas added that it is customary for MSMEs to maintain a separate current account for online payments to ensure the security and prevent misuse of the funds. Therefore, a separate current account must be permitted for MSMEs who cannot maintain a centralized single overdraft account, he said.

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IPO Investing? Know Advantages And Disadvantages

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Advantages of Initial public offering (IPO)

Companies will obtain significant amounts of capital through an initial public offering (IPO) and subsequent investment rounds to fund general corporate operations, growth possibilities, research and development, marketing, and capital expenditures.

An initial public offering (IPO) is when a firm goes public for the first time. This means that formerly unlisted or private firm shares are now available for trade on markets. It’s a frequent means of acquiring funds for small firms or startups who are trying to expand. An IPO allows a corporation to expand its investor base and raise capital.

Investments in initial public offerings (IPOs) are equity investments. As a result, they have the potential to generate significant long-term profits. The money you’ve saved can help you achieve long-term financial objectives like retirement or home ownership. In the IPO order paper, the price per security issued is explicitly stated. As a result, you get access to the same data as larger investors.

You will have an advantage over other traders and investors who will enter when the stock is launched on the market if you enter early. As previously said, certain companies’ initial public offerings (IPOs) fared exceptionally well in the market and provided outstanding first-day returns.

Disadvantages of Initial Public offering (IPO)

Disadvantages of Initial Public offering (IPO)

The IPO procedure necessitates a significant amount of effort. It has the potential to divert company executives’ attention away from their core business. Profits may suffer as a result. For a better grasp of the complexities of the IPO process, the company should seek advice from investment firms. It’s possible that the company’s owners won’t be able to take many shares for themselves. Investors will perceive a lack of faith in the business if they start selling significant blocks.

The proprietors of the company may potentially lose control of the company. The owners must also be cautious because IPOs make a lot of information about the company’s business and its owners public, which could provide competitors valuable information.

When a corporation decides to go public, there is very little information about it in the public domain. Investing in any company without conducting a thorough investigation might be dangerous. There is a chance that the stock will drop owing to bad performance and poor management. Although IPOs are marketed as a risk-free investment, they are subject to market volatility.

IPOs are regarded as the safest and most advantageous method of investment. However, this is not always the case. IPOs often fail to deliver on their pre-launch promises. IPOs are frequently over-hyped.

Things to check before Investing in an IPO

Things to check before Investing in an IPO

Check Company’s Background

Because the company is preparing for its Initial Public Offering, there will often be no previous data accessible to check your investment selection. The firm that is floating it, on the other hand, does submit a prospectus. Before making a decision about investing in the organization, you must thoroughly examine and understand all of the information presented in it.

Check the Underwriters

The success of the initial public offering is determined by the big broker who is sponsoring the new issue. You might consider investing in such offerings if the underwriters are well-known.

While applying for it, keep in mind that the corporation is not obligated to repay the cash to public investors.

As a result, you must be informed of the potential risks and rewards when investing.



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Shriram Housing Finance Q1 net profit up 82%

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Shriram Housing Finance reported an 81.8 per cent rise in its net profit to ₹10.87 crore for the first quarter of the fiscal as against ₹5.98 crore a year ago.

Its total revenue from operations shot up by 62.4 per cent to ₹115.39 crore in the quarter ended June 30, 2021from ₹71.06 crore a year ago.

Assets Under Management (AUM) grew by 65 per cent to ₹3,910 crore on a year-on-year basis. However, disbursements for the first quarter of the fiscal were subdued at ₹221 crore, impacted by state level lockdowns.

Asset quality improved marginally with gross stage 3 assets declining to 2.32 per cent as on June 30, 2021 compared to 2.34 per cent for same period last year.

“Restructuring has been contained at 1.8 per cent of the book during the second wave of Covid, while in the first wave restructured book was 1.5 per cent,”it said in a statement.

Impairment on financial instruments rose to ₹1.33 crore in the first quarter of the fiscal.

“As the fear of Covid recedes, we will embark on our growth plans and expand our branch network. We also intend to expand ‘Griha Poorti’, our cross sell program through the Shriram City branch network and aim to cover over 170 distribution points of Shriram City by March 2022. This program will strengthen our AUM growth over the next four to six quarters,” said Ravi Subramanian, Managing Director and CEO, Shriram Housing Finance.

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Tech Focused Funds Outperformed Other Sectoral Funds: 3 Best Tech Funds To Start SIP In 2021

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1. ICICI Prudential Technology Direct Plan:

Launched in January 2013, the fund of ICICI Prudential tech oriented fund manages a corpus of Rs. 3494 crore. Expense ratio is the lowest within the category of over 1%. Note the regular plan of the fund is also having a CRISIL 3-Star rating.

The fund has outperformed the benchmark Nifty with returns of 106% in the last one year.

SIP in the fund can be started for minimum Rs. 500 while for lump sum payment one needs to invest Rs. 5000. There applies a load of 1% in case the redemption is made within 15 days of investment.

Top 10 holdings of the fund are Infosys, HCL, Tech Mahindra, Persistent Systems, TCS, IRCTC, Coforge, Wipro,eClerx and Mindtree.

Notably Rs. 10000 SIP in 3 years time has been worth now Rs. 7.72 lakh i.e. the investment of Rs. 3.6 lakh has more than doubled during the timeframe.

2. ABSL Digital India Direct Plan:

2. ABSL Digital India Direct Plan:

The tech fund of Aditya Birla Mutual fund commanding an asset size of Rs. 1662 crore fund of can be invested in through a SIP starting at Rs. 1000. The direct plan of the fund carries an expense ratio of 1.15%. The scheme works to provide capital appreciation to investors by putting money in technology and tech-linked companies. The fund primarily uses the bottom up approach in the selection of stocks and uses a blend of both value and growth to provide growth in capital to investors.

The direct plan of ABSL Tech fund came into being in the year 2013 and since then has offered a return of over 25%.

Top holdings of the fund are Infosys, TCS, Tech Mahindra, HCL, Cyient, Persistent Systems, Just Dial, Bharti Airtel, First Source and Wipro.

SIP started with an amount of Rs. 10000 3 years hence is now valued at Rs. 7.35 lakh, likewise Rs. 1 lakh worth of investment is now worth Rs. 2.39 lakhs.

3. Tata Digital India Fund- Direct :

3. Tata Digital India Fund- Direct :

This tech fund of Tata Mutual fund came into existence in the year 2015 and since then has offered return of over 25%. The fund works to provide capital appreciation by investing atleast 80% of the corpus in listed IT companies in India.

The benchmark of the fund is Nifty and in a 1-year time frame it has beaten the index and provided return of over 90%.

SIP in the fund can be started for as less as Rs. 150 and the fund entails an exit load if the units are redeemed within 30 days of 0.25%.

In a 3-year time period, the investment of Rs. 3.6 lakh (through a SIP of Rs. 10000 per month is now valued at Rs. 7.21 lakh)

Top holdings of the fund are Infosys, Tech Mahindra, TCS, HCL, Persistent Systems, Wipro, Cyient, Birlasoft, Larsen and Toubro Infotech and InfoEdge.

Return of Best Tech funds

Return of Best Tech funds

Technology Focused funds Annualised SIP 1-year return SIP 3-year return SIP 5-year return
ICICI Prudential Technology Direct Plan 97.13% 55.43% 39.27%
ABSL Digital India Direct Plan
91.53% 52.66% 38.12%
Tata Digital Fund-Direct Plan 91.65% 48.81% 36.38%

Why technology focused funds?

Why technology focused funds?

Technology is the foundation of all such advancements including cloud, analytics and blockchain and with time there shall be only advancement going ahead and through multitude deals and venture into various areas, prospects of these IT companies shall only augment. Further to take on international exposure you can take exposure in international fund of funds (FoFs).

Disclaimer:

Disclaimer:

Mutual fund investment is subject to risk and the technology sector fund being concentrated to tech funds is even more riskier and hence the investment options listed out here should not be taken for investment advice.



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DBS Bank and Temasek tie up to roll out debt finance platform, BFSI News, ET BFSI

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DBS Bank has partnered with Temasek to jointly launch a US $500 million growth stage debt financing platform, called EvolutionX Debt Capital (“EvolutionX”). Headquartered in Singapore, EvolutionX will provide non-dilutive financing to growth stage technology-enabled companies across Asia, with a focus on China, India, and Southeast Asia.

This partnership also serves as a natural extension and segue to both DBS’ and Temasek’s existing early-stage debt initiatives and investment activities, bolstering the strength of the extended network and ecosystem through synergies fostered. evolution combines Temasek’s investment expertise and DBS’ global banking networks to leverage and further catalyse the fast growing technology ecosystem in Asia.

The platform will be led by Joint Interim CEOs Amit Sinha, Group Head of Telecoms, Media and Technology, Institutional Banking Group at DBS, and Aftab Mathur, Director, Investment (Innovation) at Temasek, before a full-time CEO is appointed in the next few months.

Tan Su Shan, Group Head of Institutional Banking, DBS said, “The investment in EvolutionX provides an opportunity for us to play an integral role in nurturing and financing the growth of Asia’s future unicorns, while forging partnerships and ecosystem opportunities with these high-growth technology-enabled companies. As a purpose-driven bank, we believe in investing in solutions that democratise financing access to companies of all sizes and stages of development to give them the best opportunity to achieve their endeavours.”

“Growth debt is fast emerging as an alternative source of financing for high-growth technology companies that traditionally only raised equity as a source of capital. Apart from helping founder entrepreneurs avoid dilution of share equity in the company’s initial stages of development, growth debt also serves as a complementary tool to tide these companies, which are often cash strapped, through unexpected market and economic headwinds by extending their cash runway.”

Rohit Sipahimalani, Chief Investment Strategist, Temasek said, “Technology and digitisation will have a pervasive impact across many sectors, and will continue to transform our economies and communities. Temasek believes in the purposeful use of our capital to create and catalyse solutions for gaps we see today, to stimulate innovation and growth for long term, sustainable value.”

“We’re therefore pleased to partner with DBS to provide a meaningful alternative for technology-focused growth companies in Asia that may face debt funding needs between the venture debt and late stage debt financing phases. With EvolutionX, we can help provide companies and entrepreneurs the support they need as they continue to scale and expand.”



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