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Afghanistan central banker flees as currency drops to record low

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Afghanistan’s central bank governor departed the country as Taliban fighters took control of the capital, with the rising political turmoil pushing the nation’s currency to a record low.

The Afghani fell 1.7 per cent Tuesday to 83.5013 per dollar, a fourth day of decline, according to data compiled by Bloomberg. The central bank was told there would be no more dollar shipments on Friday, which curtailed its ability to supply currency and led to more panic, Governor Ajmal Ahmady wrote in a Twitter thread.

The governor got on a military plane at the airport where thousands sought to leave as the Taliban’s rapid territorial advance led to the collapse of the government. There was no evacuation plan, and President Ashraf Ghani’s departure without creating a transitional government contributed to the chaos, Ahmady wrote.

Also read: MEA sets up Afghanistan cell to coordinate repatriation

“Currency spiked from a stable 81 to almost 100 then back to 86,” the central banker wrote. “I held meetings on Saturday to reassure banks and money exchangers to calm them down.”

On Sunday, the governor left the central bank and went to the airport where he saw other government leaders. More than 300 passengers were packed into his flight, though it had no fuel or pilot, he wrote. “It did not have to end this way. I am disgusted by the lack of any planning by Afghan leadership,” he wrote.

The turmoil in Afghanistan spilled over into markets in Pakistan. Sovereign dollar bonds due 2031 for Pakistan dropped 1.8 cents on Monday, the biggest decline since the government priced the notes in March. Pakistani dollar bonds were the biggest losers in Asia on Monday, according to a Bloomberg Barclays index. The notes rose 0.2 cents on the dollar on Tuesday to 100.5 cents.

Also read: US President says he stands ‘squarely behind his decision’ to withdraw troops from Afghanistan

Investors are concerned over any impact on law and order in Pakistan, and whether “global forces will try to isolate Pakistan” due to its alleged support of the Taliban, said Abdul Kadir Hussain, the head of fixed-income asset management at Dubai-based Arqaam Capital.

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ICICI Securities Is Bullish On These 2 Mid Cap Stocks With Potential Returns Up To 27%

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Buy TCNS Clothing with potential upside of 27%

TCNS Clothing, founded in 1997, is a Mid Cap company in the Apparels sector with a market capitalization of Rs 3,484.02 crore.

According to ICICI Securities, through its three popular homegrown brands, TCNS has emerged as the market leader in the women’s ethnic area, thanks to its multi-distribution channel approach and robust supply chain infrastructure.

ICICI Securities sees an upside of 27% in the stock of TCNS Clothing to Rs 700, from the current market price of Rs 553.

“Since our initiation report, the stock price has appreciated by ~38%. We maintain BUY rating on the stock with an unchanged target price. We value TCNS at Rs 700 i.e. 35x FY23E EPS”, the brokerage said in its research report.

Key triggers for future price-performance:

  • In FY22, there will be a healthy store addition pipeline with the opening of 60+ additional stores on a net basis (40+ stores have already been inked).
  • Continues to expand its omni distribution channel by introducing new business models such as a third-party market place and developing ‘online-first’ product lines.
  • Creating a new integrated warehouse to improve supply chain efficiency and scale up B2C delivery (to be set up by December 2021)
  • 15 existing stores were upgraded and expanded at favourable long-term leases in prominent malls and high streets.
  • Increasing focus on network expansion in tier III/IV cities, mostly through a franchisee-led strategy.

Buy KNR Constructions, Says ICICI Securities

Buy KNR Constructions, Says ICICI Securities

KNR Constructions Ltd., founded in 1995, is a Mid Cap business in the Infrastructure sector with a market capitalization of Rs 8,361.10 crore.

According to broking fir, ICICI securities, irrigation, and urban water infrastructure management are two areas where the organization has a strong presence. Over the last three years, the company has reported a 24.5 percent revenue CAGR and has regularly delivered an industry-leading operating margin of 20%. Prudent management, no net debt, and strong return ratios (RoCE: >23%)

ICICI Securities sees an upside of 20% in the stock of KNR Constructions to Rs 340, from the current market price of Rs 284.

“KNR’s share price has grown at 33% CAGR over the past five years. We maintain our BUY rating on the company. We value KNR at Rs 340/share,” ICICI Securities said in its report.

Key triggers for future price-performance:

  • KNR is anticipated to be one of the biggest beneficiaries of the growing road and irrigation sectors (Jal Jeevan Mission)
  • Strong order book position, receipt of assigned dates in a majority of its projects, and execution pick-up will result in an 18.8% topline CAGR in FY21-23E.
  • The operating margin is expected to remain high due to a price escalation clause in the road agreement and higher profits at irrigation projects.
  • Asset-light strategy utilising monetisation to generate additional cash flows

ICICI Securities Is Bullish On These 2 Mid Cap Stocks With Potential Returns Up To 27%

ICICI Securities Is Bullish On These 2 Mid Cap Stocks With Potential Returns Up To 27%

Stock Name Recommendation Target Price Current Market Price Potential Gain
KNR Constructions BUY 340 284 20%
TCNS Clothing BUY 700 553 27%

Disclaimer

Disclaimer

Investors should not make any trading or investment decisions solely based on the information presented in this article. We are not a licensed financial counsellors, and the information provided here does not constitute investment advice. It is a piece of information extracted from ICICI Securities brokerage report. Please seek the advice of an expert. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates, the author, and the brokerage firm take no responsibility for losses or damages resulting from the information in this article.



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BoM tops PSU banks in terms of loan, saving deposit growth in Q1, BFSI News, ET BFSI

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New Delhi: State-owned Bank of Maharashtra (BoM) has emerged as the top performer among public sector lenders in terms of loan and savings deposit growth during the first quarter of the current financial year. The Pune-headquartered lender recorded 14.46 per cent increase in gross advances at Rs 1,10,592 lakh crore in April-June period of 2021-22, as per the published data of BoM.

It was followed by Punjab & Sind Bank which posted 10.13 per cent growth in advances with aggregate loans at Rs 67,933 crore at the end of June 2021.

When it came to deposit mobilisation, BoM with nearly 14 per cent growth was a notch behind Punjab and Sind Bank, while the country’s largest lender State Bank of India recorded 8.82 per cent rise.

However, in absolute terms SBI’s deposit base was 21 times higher at Rs 37.20 lakh crore as against Rs 1.74 lakh crore of BoM.

Current Account Savings Account (CASA) for BoM saw 22 per cent rise, the highest among the public sector lenders, during the quarter.

As a result, CASA was 53 per cent or Rs 92,491 crore of the total liability of the bank.

Total business of BoM increased 14.17 per cent to Rs 2.85 lakh crore at the end of June 2021.

For the first quarter, BoM’s standalone net profit more than doubled to Rs 208 crore as against Rs 101 crore in the same period a year ago.

The bank’s asset quality improved significantly as the gross bad loans or gross non-performing assets (NPAs) dipped to 6.35 per cent of gross advances by the end of June 2021 as against 10.93 per cent by the end of first quarter of the previous fiscal.

In absolute terms, gross bad loans stood at Rs 7,022 crore at the end of June 2021, lower than Rs 10,558.53 crore recorded in the same period a year ago.

Net NPAs nearly halved to 2.22 per cent (Rs 2,352.75 crore) from 4.10 per cent (Rs 3,677.39 crore).



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Microfinance captains expect a turnaround during festive season, BFSI News, ET BFSI

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Microfinance loan repayment has risen sharply to about 90% on an average by the end of July from a low of 65-75% in May-June with economic recovery and the number of Covid-19 cases coming down. Industry captains expect business to be back to full swing not before the third quarter as the impact of the second wave is still being felt while the sectoral loan volume shrunk 14% in the April-June period.

“We are expecting recovery around the Durga Puja season. This is the time when business grows. But if the third wave comes, the recovery may be delayed by another quarter,” said Chandra Shekhar Ghosh, managing director at Bandhan Bank, the country’s largest microfinance lender. About 60% of Bandhan’s loan assets are unsecured micro loans.

The largest NBFC-MFI CreditAccess Grameen in terms of loan outstanding said its collection efficiency improved to 91% (excluding arrears payment) in July compared with 81% in June. The same parameter for Ujjivan Small Finance Bank improved to 93% in July from 78% in June. It was 79% as against 70% for Suryoday Small Finance Bank.

Bandhan Bank’s collection efficiency in micro loans was 77% in June.

All microfinance lenders have collectively disbursed Rs 25,820 crore in the June quarter, which was 14% lower than in the March quarter, according to data collated by Sa-Dhan, the oldest microfinance industry association.

Lenders across the board have raised their respective loan provisions in the June quarter to cover the possible future credit risk and took a hit on their profitability.

“We expect business — both in terms of loan disbursement and repayment – to be back to March level (pre-second wave level) by September,” Satin Creditcare Network chairman HP Singh said.

The sector’s gross loan outstanding fell 14% to Rs 2,14,528 crore from Rs 2,49,333 crore three months back.

“We have seen a recovery in microfinance operations since July,” said P Satish, executive director at Sa-Dhan.

A third wave, if it comes, can create further disruptions.

“Just about when we were coming out of the impact of Covid-19, the second wave struck. Though we had higher disbursement during the first quarter of the current fiscal compared to the same period of previous fiscal, business of the sector faced major challenges with full and partial lockdowns. Small MFIs bore the major brunt as access to funds from banks was restrained,” Satish said.



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HDFC Bank’s AT1 bonds get Moody’s Ba3 rating, BFSI News, ET BFSI

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MUMBAI: HDFC Bank‘s proposed Additional Tier 1 (AT1) bonds have been rated Ba3, three notches below their deposit ratings by Moody’s, with limited likelihood of any rating upgrade in the next 12-18 months due to possible weakness in sovereign rating and the likelihood of rising bad assets in the Indian financial system.

The bank will be the first private sector lender to offer those quasi-equity securities offshore if it finally launches the overseas sale that is expected to open for subscription in the next 7 days.

HDFC Bank will likely set a benchmark for many other local lenders including Union Bank of India, State Bank of India and Axis Bank.

S&P is also expected to come out with a similar rating grade for HDFC Bank’s AT1 series.

The initial guidance is likely to be less than 4 per cent, although it could finally settle anything between 3.5 per cent and 4 per cent, said people familiar with the matter. The size of the issue is expected to be in the range of $500 million to $1 billion depending on investor demand, ET reported on July 29.

“Roadshows have just begun across the world,” one of the persons cited above said.

In between, there were hard negotiations for the pricing particularly after a Thai bank raised AT1 at about 4 per cent two weeks ago.

The borrower is actually looking for 3.5 per cent, which looks tough. Still, there will be good demand for any paper series, branded with the HDFC mark, dealers said.

HDFC Bank and individual investment bankers could not be contacted immediately for comments.

Nearly a dozen banks have been appointed to help the proposed bond sale. Those banks include Barclays, Bank of America, Citi, HSBC, JP Morgan, Standard Chartered, MUFG, Sofgen, BNP Paribas and Morgan Stanley.

AT1, also known as perpetual bonds, add to banks’ capital base unlike perpetual papers issued by any corporate. Such securities do not have any fixed maturity but generally have a five-year call option that allows an exit route for investors.

“The Ba3 (hyb) rating is three notches below HDFC Bank’s baa3 Baseline Credit Assessment (BCA) and Adjusted BCA, reflecting the probability of impairment associated with non-cumulative coupon suspension, as well as the likelihood of high loss severity when the bank reaches the point of non-viability,” Moody’s said in a report Monday.

The principal and any accrued but unpaid distributions on these capital securities would be written down, partially or in full, if HDFC Bank’s common equity tier 1 (CET1) ratio is at or below 5.5 per cent any time prior to 1 October 2021, and 6.125 per cent from and including 1st October, 2021.

In such a scenario, the write-down may be temporary, and the amount could be reinstated subject to the Reserve Bank of India‘s (RBI) conditions, Moody’s said.

“A lowering of HDFC Bank’s BCA (Baseline Credit Assessment) will lead to a rating downgrade of the proposed AT1 securities,” Moody’s added.



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Citibank granted IFSCA licence to set up banking unit at GIFT City, BFSI News, ET BFSI

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GIC had set up its international operations in Dubai in 2007 and had been providing reinsurance to the African continent.

Ahmedabad: US-headquartered Citibank NA has received the regulatory approval to open a banking unit at India’s only International Financial Services Centre at Gandhinagar, to carry out offshore transactions, said sources privy to the development.

This has paved the way for the first US bank to set up a branch at the Gujarat Finance Tec-City (GIFT City). “We issued a licence to Citibank on Monday to set up its IFSC banking unit at GIFT,” confirmed Dipesh Shah, development head, International Financial Services Centres Authority, the unified regulator for development and regulation of financial products, financial services and financial institutions at IFSCs.

Citibank will service both Indian and global customers from its IFSC branch. The new IFSC unit aims to undertake credit business such as execution of foreign currency loans and external commercial borrowings, working capital loans including trade finance facilities, payment/remittance as well as treasury business including borrowing and deposits, said sources.

Last year, Citibank received in-principle nod from the Reserve Bank of India for the banking unit after which it was awaiting the final nod from IFSCA to start operations.

Recently, Deutsche Bank, a global bank with presence in over 70 countries, became the first German bank to set up its IFSC banking unit at GIFT IFSC. “Global banks are finding the IFSC a great strategic opportunity to serve international clients at a very competitive cost. The IFSC is fast emerging as the preferred gateway for international financial services and is enabling many new business opportunities for global investors,” said Shah.

Leading Indian and foreign banks such as HSBC, Standard Chartered, Barclays, State Bank of India, Bank of Baroda, ICICI Bank, Axis Bank, Kotak Mahindra Bank and HDFC, among others are already operating from GIFT IFSC.



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Tamil Nadu FICCI Chairman, BFSI News, ET BFSI

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It is estimated that in the first phase of the lockdown, the revenue shortfall was over 44% in Tamil Nadu’s Micro, Small & Medium Enterprises (MSME) sector and the extension of the lockdown could increase the revenue loss to 60%, said Dr. GSK Velu, Chairman FICCI TN State and Trivitron Healthcare Chairman & Managing Director.

He said the state has more than 6.89 lakh registered enterprises, accounting for 15% of the total MSMEs in the country and went on to add that the MSMEs in Tamil Nadu are caught in a peculiar situation.

“Apart from resulting in a severe shortage of working capital, the Covid-19 crisis had caused delays in payment, labour shortages, and disruptions in the supply chain,” he explained.

Velu said that the growth of healthcare manufacturing is very important for India’s economic development.He said the Indian healthcare sector is full of opportunities for medical devices and the diagnostic industry and Trivitron is one of the leading destinations that offer advanced healthcare devices, products, and facilities catering to a greater proportion of the population around the globe at the best cost without compromising the quality. The company focuses on “Make in India” which will accelerate the growth of the country’s manufacturing sector.

“Manufacturing will help in operational excellence, provide large-scale employment and this initiative will also enable a significant section of the population to get jobs and move out of poverty.

He said that through the Atmanirbhar Bharat Abhiyan, some favourable domestic manufacturing encouragement policies of the government, the domestic manufacturers stepped forward to make India self-reliant on medical devices.

“Not only Trivitron, as a medical device manufacturer but the whole industry and customers will get more relaxation and it will surely give a boost to manufacture indigenous medical devices. GST exemption is nothing but an incentive and reward for Indian manufacturers/Importers.” Velu said.

While speaking about the impact that Covid-19 has had on the lab testing industry at large, he said that the pandemic threw up a host of challenges.

“In the first phase of Covid-19, the only way to fight it is via boosting the testing, whereas in the second phase we got the vaccine to fight the Covid-19, but still the labs were on the front foot to diagnose the disease through RT-PCR and Antibody tests. So, lab testing has become very essential as we have experienced the need for more labs during the two waves. Trivitron has sold 55+ million Covid tests in the country,” he said.

He went on to add that the company is looking to increase its product lines by adding more products and technologies and is facilitating the development of custom-tailored products for developed, developing, and underdeveloped economies. Further, he said talks are on to cover the entire MENA region, which shall establish Trivitron as the only Health technology organization of Indian origin to cater to every country in the Gulf and Africa.



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SBI announces fees waiver, lower rates to commemorate Independence Day, BFSI News, ET BFSI

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State Bank of India announced concessional interest rates, waiver of processing charges on loans and higher deposit rates on specific tenures to commemorate India’s 75th Independence day.

SBI said it will waive processing fees for its car loan customers, and has offered up to 90% on-road financing for their car loans. Customers applying for a car loan through the bank’s YONO app will get a special interest concession of 25 basis points (bps). YONO users can avail car loans at an interest rate starting at 7.5 per cent per annum, the bank said.

Customers looking for gold loans will get a 75 basis point reduction in the interest rates at 7.50%. One basis points is 0.01 percentage point. No processing fees will be charged for customers applying for gold loans through the YONO app.

The bank had announced a waiver on processing fees on home loans till August 31, 2021. Its home loan starts at 6.70% per annum.

There will be no processing fees charged on personal and pension loan customers.

Frontline healthcare workers will get a 50 basis point concession on personal loans, which will soon be available for application under car and gold loans as well.

SBI is also introducing a ‘platinum term deposits’ for retail depositors giving customers an additional interest rate of up to 15 bps on term deposits for 75 days, 75 weeks, and 75 months tenors starting August 15, 2021 to September 14, 2021.

“We believe that these offerings will help customers to save more on their loans and at the same time add value to their festive celebrations,” the bank’s managing director for retail and digital banking C S Setty said in a release.



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Sa-Dhan, BFSI News, ET BFSI

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Mumbai, Aug 16 (PTI) The microfinance industry’s gross loan portfolio (GLP) marginally declined by around 4 per cent to Rs 2,14,528 crore as of June 30 this year, against Rs 2,24,205 crore as of June 20, 2020, according to a report by Sa-Dhan. Sa-Dhan is an RBI recognised self-regulatory organisation for microfinance institutions.

Despite the ongoing pandemic, the sector witnessed disbursement of Rs 25,820 crore by all lenders, though a quarter-on-quarter GLP was down 14 per cent, the quarter 1 report on the microfinance sector released by Sa-Dhan on Monday showed.

As of March 31, 2021, the GLP stood at Rs 2,49,333 crore.

On a year-on-year basis, while banks witnessed around four per cent growth in GLP, small finance banks (SFBs) saw a decline of around 14 per cent.

The highest growth in terms of GLP (y-o-y) belonged to the not-for-profit (NFP) MFIs, which clocked around 15 per cent growth, the report showed.

NBFCs witnessed around a 22 per cent decline in their GLP and NBFC-MFIs saw a dip of around 5 per cent.

“Just about when we were coming out of the impact of COVID-19, the second wave struck. Though we had higher disbursement during Q1 of the current fiscal compared to the same period of previous fiscal, the business of the sector faced major challenges with full and partial lockdowns,” Sa-Dhan’s executive director P Satish said in the report.

Small MFIs bore the major brunt as access to funds from banks was restrained, he said.

However, there has been a recovery in microfinance operations since July, Satish said.

The report said the top five states in terms of GLP are West Bengal, Tamil Nadu, Bihar, Karnataka and Uttar Pradesh.

It said there are 14 states/UTs (Lakshadweep, Kerala, Assam, Andaman & Nicobar Islands, Manipur, Meghalaya, Chhattisgarh, Mizoram, Karnataka, West Bengal, Tamil Nadu, Madhya Pradesh, Pondicherry and Nagaland) with a portfolio at risk (PAR) 30+ value higher than the industry average of 17.16 per cent.

Sa-Dhan has 229 members reaching out to 33 states/UTs and 593 districts. It includes SHG promoting institutions, MFIs (for-profit and not for profit), banks, rating agencies, and capacity building institutions.



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Gold loan business shines as economic stress grows amid pandemic, BFSI News, ET BFSI

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If you have noticed retail shops and restaurants closing down in your locality and brightly lit jeweller’s shop opening in its place off late, there is a business booming in the middle of the pandemic.

While it is not about people flocking to buy gold, but pawning and selling gold in the time of widespread economic distress brought about by Covid.

It’s not just the local jewellers that are expanding, but the organised ones are on growth mode too.

What gives?

RBI data showed that at the end of FY21, the total value of gold loans outstanding was nearly Rs 60,500 crore — up 82% on the year.

Loan demand has picked up from the beginning of July as Covid-19 cases are declining and economic activities are on the upswing with many states easing restrictions. Gold loan non-banking finance companies (NBFCs) said customer walk-ins have increased during the month.

The average ticket size of loans that customers are opting for is Rs 55,000-60,000, which are rising for many lenders, showing growing signs of distress.

Gold loan NBFCs are seeing more competition in the gold loan business in the current financial year as the special allowance given by the Reserve Bank of India to banks to take an LTV (loan-to-value) exposure against gold loan was valid till March 31, 2021. Banks had witnessed a significant growth in gold loan business due to this special allowance. On the contrary, gold loan NBFCs are allowed an LTV exposure of 75%.

Gold auctions

Mannapuram Finance auctioned Rs 404 crore in the fourth quarter, which shot up to Rs 1,500 crore in the June quarter. The auctions happen when borrowers are unable to redeem their gold and the lenders auction it to recover their loans. Mannapuram had auctioned just Rs 8 crore worth of the yellow metal in the first three quarters of FY21.

Manappuram Finance sees business picking up in the second quarter of the fiscal with the gradual unlocking of the economy. It sees a slight decline in the portfolio in the first quarter before the pick-up.

The expansion

Muthoot FinCorp has expanded its physical network by more than 100 new branches, mainly in the north, east and west regions of India, most of which were in rural and semi-urban areas. The NBFC had opened 70 branches in FY20.

Muthoot’s gold asset under management (AUM) grew at a compound annual growth rate of 12% between FY15 and FY20. In FY21, the portfolio grew 27%.

Pune-based Bajaj Finance has increased its gold loan branches from 480 to 700 in the last financial year and plans to add 100 plus branches this fiscal.

Its loan book grew 52% last year to Rs 2,300 crore while it saw an increase in ticket sizes from Rs 75,000 to Rs 85,000 last year.

Bengaluru-based Rupeek Fintech Private Ltd’s disbursals grew 2.5 times during the calendar year 2020. It has added its presence in 17 more cities, from 10 at the end of 2019.

Shriram City Union Finance is also looking to ramp up its gold financing business this financial year, changing its strategy of focusing on other loan portfolios.



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