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Banks with 95% cards implement RBI order on recurring payments, BFSI News, ET BFSI

Banking & Finance

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MUMBAI: A month after the RBI’s fresh rules on mandates for recurring card payments kicked in, banks accounting for over 95% of credit cards in the market are compliant with the new system. Over 20 lakh e-mandates have been registered by cardholders with a host of merchants.

According to payment industry sources, the banks whose credit cards are eligible for new standing payment mandate include SBI, Axis Bank, HDFC Bank, Yes Bank, American Express, Bank of India, Bank of Baroda, ICICI Bank, HSBC, RBL Bank, IndusInd Bank and Kotak Mahindra Bank. Several banks have enabled the mandate for both debit cards as well as credit cards.

Automatic recurring payments also require the merchant to be on-boarded to the new e-mandate framework. The compliant businesses include most of the OTT (over-the-top) streaming platforms, private life & general insurance companies, global IT giants like Google, Facebook, Microsoft and McAfee, as well as some edtech companies.

Interestingly, Indian cardholders who have registered with overseas service providers, having payment gateways abroad, are not subject to the new rules. This is because the RBI has no jurisdiction to impose second-factor authentication in those markets. It is up to the customer to disable international transactions on their cards.

What has facilitated the fast on-boarding of merchants is IT solutions like SI Hub developed by BillDesk and Mandate HQ developed by Razorpay. However, some domestic banks like Canara Bank & Punjab National Bank and Standard Chartered Bank were until last week in the process of making the necessary system changes.

According to the sources, card-based recurring transactions are 2.5% in terms of the number of transactions and 1.5% in terms of the value of the total card payments done in the country. On average, approximately 75% of domestic recurring transactions are of values of up to Rs 5,000. The corresponding figure for cross-border recurring transactions is approximately 85%.



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Private banks’ net profit up 26% as economic revival kicks in, BFSI News, ET BFSI

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The net profit of private banks rose 26 per cent year on year in the July-September 2021 quarter and 21.9 per cent sequentially over March-June 2021 (Q1), as the pandemic ebbed and economic recovery has taken hold.

The 12 private lenders posted a collective net profit of Rs 21,965 crore during the second quarter.

Provisions and contingencies of the lenders that have declared results fell both 22 per cent year on year and 30.2 per cent quarter on quarter to Rs 12,805 crore. The provisions include those for one time restructuring of loans announced by the RBI in May.

Net interest income was up 10.8 per cent y-o-y and 2.5 per cent sequentially. Other income rose 15.7 per cent to Rs 22,638 crore.

Gross non-performing assets grew 1.1% to Rs 1.73 lakh crore y-o-y, but fell 3.5 per cent sequentially from about Rs 1.8 lakh crore in the June quarter.

Net NPAs rose by 27.5 per cent y-o-y to Rs 42,895 crore, but fell sequentially by 7.3 per cent from Rs 46,280 crore in June 2021.

ICICI Bank

ICICI Bank posted a higher-than-expected 29.6% on-year rise in net profit to Rs 5510 crore in July-September, which was highest in the bank’s history. As the bank maintained 17% growth in advances, and further improved on net interest income and margins, asset quality ratios provided additional support to the bottomline by keeping provision costs low.

Axis Bank

Axis Bank reported an over 86% year-on-year rise in net profit to Rs 3130 crore for the September quarter, benefiting from an improvement in asset quality, which led to a fall in provisioning. The bank expects consumer and business confidence to continue to trend upward in Oct-Mar on the back of a rise in vaccination coverage and as the economy opens up, pent-up demand and spends materialise.

Federal Bank

Federal Bank posted a higher than expected net profit of Rs 460 crore in the September quarter, led by a fall in overall provisions as the lender reported improvements in asset quality. The bank’s net profit rose 49.6 per cent on year, and 25.3 per cent on quarter. This was supported by a faster-than-industry credit growth that fuelled a rise in core ratios such as net interest income and net interest margins.

YES Bank

Yes Bank’s net profit jumped 74 per cent year-on-year in the September quarter to Rs 230 crore on the back of a sharp fall in provisioning. Going ahead, a sharp reduction in overdue loans and sustained momentum in loan recoveries and upgrades augurs well for the overall asset quality of the bank.

RBL Bank

RBL Bank posted a 78.6 per cent on-year fall in net profit for the September quarter at Rs 30 crore due to higher provisions amid an increase in bad loans. For April-June, the private sector lender had reported a net loss of Rs 460 crore. Slippages, gross non-performing assets ratios, and provisions had peaked in the reporting quarter, and the lender was on track to see growth, the bank said.



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Axis AMC raises Rs 400 crore via Growth Avenues AIF-I, BFSI News, ET BFSI

Personal Finance

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Axis Asset Management Company, an arm of private sector lender Axis Bank, has raised around Rs 400 crore through first close of Axis Growth Avenues AIF-I, aiming to fund ideas with deep technology as their USP. The asset management company is aiming to raise a total of Rs 1,000 crore through the close-ended fund, including a greenshoe option of Rs 500 crore. It is confident of completing the entire fundraising in this quarter, based on response and commitments from investors.

The fund has achieved the first close with investments from family offices, high networth individuals (HNIs) and non-resident Indians (NRIs). The fund will be investing primarily in mid-to-late stage technology-enabled companies with scaleable business models and a favourable risk-return profile. The sector-agnostic fund will be investing in companies catering to latent demands with multiyear growth potential and differentiated business model.

Axis Growth Avenues AIF-I will be exploring both primary and secondary investment opportunities with the proposed portfolio size of eight to 10 companies, with deal size ranging from Rs 25 crore to Rs 100 crore each.

The AMC has a strong pipeline of investments and expects to start deploying funds from the AIF soon. “The strong response that we are receiving for the Axis Growth Avenues AIF-I, reflects the confidence investors and partners have in us, as well as the potential of this segment. It will be our endeavour to ensure we deploy this money in companies that offer exciting long term growth opportunities and are aligned with our investment philosophy,” said Chandresh Nigam, chief executive, Axis AMC.

Total fund term will be five years from its final closing and may be extended for two additional periods of one year each. The AIF is looking to capitalise on innovation and growth in the economy and to invest in companies that are benefiting from these trends. It will be primarily focused on investing in fintech, technology, ecommerce and edtech.



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2 Nifty Stocks That Motilal Oswal Has A Buy Call On

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Strong order book for L&T

According to Motilal Oswal L&T’s order book grew 11% YoY to Rs 3.3 trillion, with the order book/revenue ratio at 3.2 times.

The international business formed 23% of order book. In terms of clientele, the central/state government formed 10%/33%, PSUs 42%, and the private sector 15% of the company’s total order book.

“L&T has indicated that the bid pipeline remains strong, with the overall pipeline for the remainder of the year standing at Rs 6.8 trillion (+12% YoY). The Infrastructure sector’s prospects stood at Rs 5.3 trillion, while the Hydrocarbon segment’s prospects improved to Rs 1.2 trillion (80% of the prospective business is from the Middle East). The strong bid pipeline is encouraging, although a faster conversion to final awarding holds the key to the company meeting the guidance of a low-to-mid-teen growth in order inflow,” the brokerage has said.

Buy L&T for a price target of Rs 2,285

Buy L&T for a price target of Rs 2,285

According to Motilal Oswal After adjusting for the subsidiaries’ valuation (Rs 1,070 per shares), the core E&C business trades at an FY22/FY23E PE multiple of 15.0x/12.9x v/s the historical one-year forward average PE multiple of 22 times.

“Should the stock revert to its historical average trading multiple of 22 times, our target price for the stock will increase to Rs 2,285. Larsen and Toubro remains the best play on the capital expenditure cycle in India. Maintain Buy,” Motilal Oswal has said.

The shares of L&T last closed at Rs 1767 on the NSE.

Buy Maruti Suzuki

Buy Maruti Suzuki

Motilal Oswal has set a price target of Rs 8,450 on the stock of Maruti as against the current market price of Rs 7,456. “Demand outlook remains good, with an improvement in both inquiries and bookings. Rural India is doing better and now constitutes over 43% of volume. It has an order backlog of 200k units due to a shortage of semiconductors,” the brokerage has said.

According to Motilal Oswal, precious metal prices have seen some softening, but will benefit in coming quarters due to the lag effect.

Valuation and view on Maruti Suzuki

Valuation and view on Maruti Suzuki

Strong demand, softening commodity inflation, and improving chip shortage supports a margin recovery.

“We expect a recovery in 2HFY22 in both market share and margin, led by a favorable product lifecycle, operating leverage, and mix as well as price action/cost-cutting,” the brokerage has said.

“The stock trades at 59.1x/25.7x FY22E/FY23E consolidated EPS. We maintain our Buy rating with a target price of Rs 8,450 per share (27x Sep’23E consolidated EPS),” the brokerage has added.

Disclaimer

Disclaimer

The above stocks are picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.



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1 Electricals, 1 Sugar Stock To Buy For Substantial Gains In 1 Year As Suggested By ICICI Direct

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1. Dixon Technologies:

About the stock: Dixon Technologies is India’s leading electronic manufacturing

(EMS) provider and one of the largest beneficiaries of the government’s PLI scheme.

• Dixon operates in both original equipment manufacturing (OEM) and original design manufacturing (ODM)

• Revenue growth witnessed in the Q2 quarter of FY22, though the delay in price hike weighed on gross margins. Revenue increased but EBITDA and gross margin registered a decline. Profitability also rose YoY by 20 percent to Rs. 63 crore.

• Strong RoE, RoCE at around 20%, 24%, respectively (three year’s average).

Investors given the huge momentum in stock which has gained 9 times over the past 4 years are suggested to buy in the stock, valuing it at Rs. 5990 i.e. 51x P/E on FY24E EPS. This means an upside of 20 percent from current price level of Rs. 4993.55.

Key triggers for future price performance:

• Indian EMS industry is valued at $23.5 billion. Dixon currently has a market share of 3-4%, which leaves opportunity to expand and grow

• Domestic mobile production is set to grow 5x to Rs. 10.5 lakh crore by FY26 under PLI scheme. Dixon is one of the main beneficiaries

• New segments such as electronics/IT products, telecom products and LED lights & AC component will drive future revenue for Dixon.

Alternate Stock Idea: Other than Dixon, ICICI Direct also like Havells in our coverage

• Trigger for Havells’ future revenue growth would be a revival in Lloyds revenues and improvement in margin

• BUY with a target price of Rs. 1545.

2. Dalmia Bharat Sugar:

2. Dalmia Bharat Sugar:

For this sugar manufacturer, ICICI Direct has set a target price of Rs. 610, implying return potential of 54.7 percent from current price of Rs. 394.3.

The company is being deemed to deliver consistent performance and is close to reach net debt free status.

Key takeaways about the company

• The company is expanding its sugarcane & molasses and grain based annual distillery capacity from current 8.5 crore litre to 21 crore litre, which would be completed in a phased manner by December 2022

Q2FY22 Results: Owing to higher exports the company delivered steady set of numbers. Sales came in flat on a year basis, EBITDA too saw a marginal decline and PAT rose over 6 percent YoY helped by lower reduced interest expense

Brokerage’s expectation on the stock going ahead

“We expect 2.5x increase in distillery volumes to boost earnings with CAGR of 16.1% during FY21-24E. We maintain our BUY rating on the stock

Target Price and Valuation: We value the stock at | 610, ascribing a multiple of 14x FY23 earnings”, adds the report.

Key triggers for future price performance:

• DBS is fastest in utilising B-heavy, sugarcane juice & grain route to produce ethanol. Distillery volumes to grow 2.5x to 21 crore litre by FY24

• The company been aggressive in exporting sugar & utilising higher global white sugar prices. Freight cost is much lower given its proximity to ports

• With the increasing profitability & reduction in sugar inventories, DBS would be generating cumulative free cash flow of Rs. 626 crore in the next three

years despite around Rs.700 crore capex

Alternate Stock Idea: The company is also bullish on Balrampur Chini. The company is second largest and one of the most efficient sugar companies in India. Along with sugarcane juice, B-heavy, the company is

also utilising grain based ethanol to leverage the ethanol opportunity in India. We value the stock at Rs. 515/share with a BUY recommendation”, adds the report.

Disclaimer:

Disclaimer:

The two scrips mentioned here are taken from the report ICICI Direct and readers should not construe them as recommendation to buy into these stocks. Stock market investment is risky. Please do your own study and analysis.

GoodReturns.in



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4 Big IPOs Lined Up For November 2021

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Planning

oi-Roshni Agarwal

|

IPOs are attracting all classes of investors alike, while the chase for the fashion e-tailer was defined to be fashionable, Policybazaar IPO is said to have garnered huge anchor investor interest alike. Amid fantabulous frenzy for IPOs, here are the IPOs lined up for November 2021:

4 Big IPOs Lined Up For November 2021

4 Big IPOs Lined Up For November 2021

1. Paytm:

The company backed by China’s Alibaba will open up a huge Rs. 18300 crore IPO on November. Considering the upper end of the price band of Rs. 2150, the company will rank among the country’s top 50 companies’ by market capitalisation, surpassing the valuations of established companies’ such as NTPC among others. The company’s losses reduced for the June period owing to cost control on marketing as well as payment processing charges.

2. Policybazaar:

The fintech company with 2 platforms mainly Policybazaar and another Paisabazaar is slated to come up with an IPO on November 1. The Rs. 5709 crore IPO will include a
fresh issue of Rs. 3,759 crore and an offer for sale of Rs. 1,959 crore by its existing shareholders. The prime revenue source for the company is as commission which is obtained on selling policies from insurers.

3. SJS Enterprises:

Decorative aesthetics supplier SJS Enterprises is also set to launch its IPO on November 1 to raise a total of Rs. 800 crore via a complete OFS. The 2 stakeholders diluting stake are Evergraph and KA Joseph who will be offloading shares worth Rs. 710 and Rs. 90 crore, respectively.

The industries catered to by the company range from commercial vehicles, medical devices, farm equipment and sanitary ware industries. The company’s manufacturing facilities are located in Bengaluru and Pune.

4. Sapphire Foods:

Sapphire Foods will launch its IPO on November 9, 2021 and this will also be entirely an OFS for 1,75,69,941 equity shares being offloaded by investors and promoters.

Promoters – QSR Management Trust will sell 8.5 lakh equity shares, and Sapphire Foods Mauritius will offload 55.69 lakh equity shares through offer for sale. Further, WWD Ruby will sell 48.46 lakh equity shares, Amethyst 39.61 lakh shares, and AAJV Investment Trust will offload 80,169 equity shares.Other investors, Edelweiss Crossover Opportunities Fund and Edelweiss Crossover Opportunities Fund – Series II will sell 16.15 lakh equity shares and 6.46 lakh equity shares, respectively, via OFS.
The company is among one of the YUM’s franchisee operator. The company’s ownership is into food outlets including KFC, Pizza Hut and Taco Bell. The major stake in the firm of 45.52 percent is held by Sapphire Foods Mauritius while 5.83 percent is owned by QSR Management Trust.



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To ease lending, FinMin moves to boost bankers’ morale, growth

Banking & Finance

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In a move aimed at lifting the morale of public sector banks, the Finance Ministry has issued broad guidelines on staff accountability for NPA accounts up to ₹50 crore.

Banks have been advised to revise their staff accountability policies based on the new guidelines and get their respective boards to approve the new procedures.

The move, which comes at a time when there is a need to push credit growth in the banking system, is expected to tackle the fear among bankers to take lending decisions, given that the bank NPAs are a politically volatile issue.

 

Track record of officials

Under the new guidelines, PSBs have been tasked to complete the staff accountability exercise within six months from the date of classification of the account as NPA.

Further, depending on the business size of the banks, threshold limits have been advised for scrutiny of the accountability by the Chief Vigilance Officer (CVO). Past track record of the officials in appraisal/sanction/monitoring will also be given due weightage.

Previously, the staff accountability exercise was carried out in respect of all accounts that turn into NPAs. Now banks have been allowed to, with the approval of their board, decide on a threshold of ₹10 lakh or ₹20 lakh depending on their business size for the need to examine the staff accountability aspect.

The latest move could help restart credit growth and encourage bankers to start taking decisions now that there is an assurance that all bonafide business decisions will be protected, said a banking industry official. Credit growth in the banking system has averaged 6-8 per cent in the last few years and has been affected even more due to the pandemic in the last 18 months.

Policy makers need to introspect as to why credit growth is lower than the nominal GDP growth of 8-9 per cent clocked in recent years (before impact of pandemic), say economy watchers.

Restructuring window

Credit growth in the economy and banking system almost came to a grinding halt after the RBI removed the window of restructuring (which allegedly enabled evergreening of loans and hid the true picture of the asset quality) and the quantum of NPAs in the system ballooned to ₹8-9-lakh crore.

Allegations of “phone banking” too brought down the morale and confidence of bankers.

A chunk of the NPAs figured in the accounts up to ₹50 crore and it is here that bankers have, in the last few years, stopped taking decisions, lest they be questioned in the future, sources in the banking industry said. Also, different PSBs are following different procedures for conducting staff accountability exercises.

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IBA welcomes proposed staff accountability norms

Banking & Finance

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Our Bureau The Finance ministry’s decision to ask Public Sector Banks (PSBs) to complete staff accountability exercise within six months from the date of classification of an account as a non-performing asset (NPA), will boost the morale of employees, according to the Indian Banks’ Association (IBA).

PSBs have been asked to implement the directives with effect from April 1, 2022 for accounts turning NPA on or after this date. Banks have been advised to revise their Staff Accountability Policies based on these broad guidelines and frame the procedures with approval of the respective boards. At present, different Banks are following different procedures for conducting staff accountability exercise. Also, staff accountability exercise is being carried out in respect of all accounts which turn NPA.

‘Strain on resources’

“This approach not only adversely affects staff morale but also puts a huge strain on the bank’s resources. While punitive action need to be taken against the officers having malafide intent/involvement, it is essential to ensure that bonafide mistakes are dealt with compassion,” per the IBA statement. The Association noted that at a time when the country is in need of an economic boost, slow credit delivery to industries due to the fear of implication, is a matter of concern and needs urgent address.

It emphasised that there is a need to protect people taking bonafide business decisions in this competitive environment.

‘Protect bonafide action’

Banks with the approval of their Board may decide on threshold of ₹10 lakh or ₹20 lakh depending on their business size for the need of examining the aspect of staff accountability, IBA said.

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Ujjivan Financial Service okays amalgamation with Ujjivan SFB

Banking & Finance

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The board of Ujjivan Financial Services has approved the amalgamation of the company with its subsidiary, Ujjivan Small Finance Bank, to meet the minimum public shareholding norms of SEBI.

Ujjivan Finance Services currently holds 83.32 per cent of the total paid-up equity share capital of Ujjivan SFB.

“Accordingly, the scheme, if implemented, will result in increase in shareholding of public shareholders of the Transferee Company from 16.68 per cent to 100 per cent, subject to receipt of requisite approvals,” said Ujjivan Financial Services in a stock exchange filing.

SEBI, RBI approval

The scheme of amalgamation is subject to approval from the Reserve Bank of India, SEBI, NCLT and public shareholders of the company.

Under RBI norms, the promoter’s minimum initial contribution to the paid-up equity capital of SFB should be at least 40 per cent, which shall be locked in for a period of five years from the date of commencement of operations of SFB. Further, if the promoters’ initial shareholding in SFB is in excess of 40 per cent, then it has to be brought down to 40 per cent within five years from the date of commencement of operations of SFB.

In the case of Ujjivan SFB, the five-year period expires on January 31, 2022, and the proposed amalgamation among other business objectives and benefits will enable it to ensure the compliance, added Ujjivan Financial Services.

“The amalgamation is in line with the conditions prescribed in the SFB guidelines and will result in the formation of a larger and stronger entity having greater capacity for conducting its operations more efficiently and competitively; the amalgamation will avoid operational inefficiency in the group by operating one listed entity and create synergies,” said Ujjivan.

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Benchmark yield can breach the 6.4% mark

Banking & Finance

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The bond market continues to wait for the much needed support from the central bank even as yields nudged the 6.4 percent-mark again this week. The benchmark yield closed the week at 6.39 per cent, up four basis points from the previous week.

One of the two contributing factors to the rising yields — the US treasury yields — did soften this week. The 10-year US treasury yield came down all the way to 1.55 per cent last week from 1.64 per cent the week before. However, crude prices, that have been keeping pressure on the domestic bond yields, continued to remain at the higher levels last week. Brent price crossed $86/barrel before closing the week near the $84/barrel mark.

Higher cut-off

Moreover, the cut-off rate on the variable rate reverse repo auctions continues to remain high. The central bank conducted a seven-day VRRR auction wherein the cut-off came in at 3.99 per cent. Earlier this month, the cut-off on a seven-day VRRR auction had come in at 3.61 per cent. The RBI has also announced a 28-day VRRR auction next week, indicating a higher tenor. Market participants say although the central bank’s stance on liquidity was made clear during the monetary policy and a hike in quantum was expected, an increased tenor does not help under the current market conditions where nothing is helping the yields.

Vijay Sharma, Senior Executive Vice-President at PNB Gilts opines that the RBI’s support to bond market is missing currently. “Recently, there was an announcement for VRRR auction that had a higher tenor of 28 days. All this seems to indicate that the central bank is still not uncomfortable with the current level of yields. The market has lost its momentum and till the point in time that you see a helping hand from the RBI, you may continue to see the yields at these levels. The market did attempt a recovery but lost its mojo quickly. With each and every day that the central bank is delaying its comeback, the chances of 6.4 per cent level on the benchmark yield getting breached are increasing. The only thing that was finding some sort of favour from the market was the floating rate bonds. With the central bank conducting a massive switch auction, even the demand for FRBs have taken a hit,” he said.

Next week, bond markets across the world will be keenly eyeing the US Fed meet where it is expected to announce unwinding of its bond-buying programme.

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