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10 banks come together to set up Secondary Loan Market Association

August 11, 2021 root Banking & Finance

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Website, logo, launched

SLMA will also develop and promote standard trading, settlement and valuation procedures and practices and rules and timelines for the members for conducting the business and to fix transaction-related charges.

The company’s website and logo were digitally launched on August 11, 2021, by Saurav Sinha, Executive Director, Reserve Bank of India.

Bonding together

Sinha said an active secondary market for loans in India will offer benefits to various stakeholders by way of capital optimisation, liquidity management, risk management, exposure re-balancing and efficient price discovery mechanism.

He observed that since smaller banks are generally constrained for various reasons from participating in large and creditworthy lending exposures at the time of origination, the secondary market can enable them to participate in such exposures at a later stage and the constraints faced under the Large Exposure Framework will be a thing of the past.

Sinha also laid stress on the essential pre-requisites for a vibrant secondary market — an ecosystem of market intermediaries like facility agents, security trustee, arrangers, valuation agencies, etc.

Expanding the spectrum of investors

Ashwini Bhatia, Managing Director, SBI, noted that the conceptualisation and operationalisation of SLMA in a time-bound manner is an appropriate response to the long-felt need for wider participation in the loan market aided by appropriate risk mitigation. It will provide the banks and other participants a window for managing their loan assets portfolio, he added.

Bhatia underscored that presently, the primary and secondary markets are restricted to banks and non-banking finance companies and domestic and foreign investors participate only in distressed debt through Asset Reconstruction Companies.

“As such, there is a felt need to expand the spectrum of investors in the secondary market and Alternative Investment Funds/Mutual funds to invest in the secondary loan market,”he said.

Sanjay Srivastava, Chairman, SLMA, said the secondary market for loans in India will evolve on the strength of a systematic digital loan trading platform, standardisation of documents, active participation by stakeholders and effective price discovery mechanism.

Sunil Mehta, Chief Executive, Indian Banks’ Association (IBA), said currently the IBA is actively working on development of syndicated loan market in India and one of the key success factors for such market will be the parallel development of secondary market for sale of loan.

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Gold Prices might Remain Weak in India in August: Good Buy For Investors

August 11, 2021 root Personal Finance

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Gold price fluctuation chart in India

In India, prices started to fall on a daily basis since 31st July this year. August has seen a consistent fall in the prices. Only on 5th August prices saw Rs. 20 hike than its earlier day in 10 grams gold. Other than that period the gold prices fell sharply.

In Bangalore, the price for 22 carat gold is Rs. 43,350, in Mumbai, it is Rs. 45280, in Kolkata, is watching one of the highest prices at Rs. 45700 and in Delhi, it is selling at Rs. 45500. In most of the cities on 7th August, the gold prices fell around Rs. 1000 per 10 grams. Since then gold rates did not give any sign to be up. On 30th and 31st July, the prices went highest in recent times at Rs. 47380 for 10 grams 22 carat gold.

Why did the rates go down-field?

It all began on Friday last week, as the employment and wages data was out by the labor department in the USA, it showed that the country’s economy is getting better momentum. This triggered investors to think that the US Fed Reserve might taper the stimulus that earlier helped gold to reach higher in 2020. Investors started to fear that the commodities might lose sheen and investors may prefer Government. bonds. This led to international gold prices spiralling downwards, impacting Indian gold rates negatively.

In the global markets, before the employment data, gold was trading at $1816 an ounce, but, in the last 3 trading sessions has now fallen to $1730 an ounce. Interestingly, the CPI data in the US is due later today and if this points to inflation worries, bond yields will rally and push gold prices further lower.

Thus, much of the movement of gold depends on inflation, bond yields, economic growth and movement of the US dollar against a basket of currencies.

Dropping gold rates always creates ground for the investors to put more money in the yellow metal. Additionally, the recently issued sovereign gold bond scheme – V by the RBI is also giving one more opportunity to invest in gold now, at lower prices. No further economic development can keep the gold prices low in August in India.

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RBL Bank empanelled as Agency Bank by RBI

August 11, 2021 root Banking & Finance

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Private sector lender RBL Bank has been empanelled by the Reserve Bank of India (RBI) as an ‘Agency Bank’ to conduct banking business for the Central and State Governments.“The authorisation will enable RBL Bank, to handle a broad range of transactions related to government business, such as distributing subsidies, pension payments, collecting Central and State taxes including income tax, excise duties, customs, GST, stamp duty, registration, value added tax and professional tax, in both online and offline modes,” it said in a statement on Wednesday.

Also read: RBL Bank selects AWS to accelerate AI efforts

The accreditation comes on the heels of the RBI’s guideline authorising scheduled private sector banks as Agency Banks to carry out specific government-related business transactions.

Parool Seth, Head – FIG, Inclusive FI, MNC and New Economy Client Coverage, RBL Bank said, “With the RBI’s accreditation, we will be in a position to offer to the Centre and the State governments, cost and time-efficient best-in-class products and solutions.”

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2 Stocks To Buy From The Midcap Space That Can Yield 32% Gains

August 11, 2021 root Personal Finance

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Whirlpool of India: 32% Gains Possible

Broking firm, Motilal Oswal believes that the stock of Whirlpool of India can hit a target price of Rs 2,650, which means more than 32% gains from the current market price of Rs 2,006.

Whirlpool of India current market price Rs 2006

Target price Rs 2650

Potential profits 32.00%

“While demand has quickly normalized for Consumer Electrical categories, offtake for Durables remained under pressure in 1QFY22. Whirlpool of India first quarter FY22 two-year revenue CAGR of -18% is better than Room AC players in our coverage universe (barring Lloyd’s) and provides us confidence that the company continues to see market share gains rather than general apprehensions of a risk to market share,” the brokerage has said.

Target price of Rs 2,650 on the stock

Unlike peers, Whirlpool of India hasn’t resorted to aggressive cost cutting measures during COVID-19. As the economy recovers from the lockdowns, operating leverage should aid margin normalization by FY24E to 11.3%.

“The impact of commodity price inflation has been higher than our expectation, leading us to cut our FY22E/FY23E EPS by 10% each. Our target price on the stock stands at Rs 2,650 per share (earlier: Rs 2,900 per share) as we roll forward our valuation to Sep’23E EPS, but cut our target P/E to 50 times. We maintain our Buy rating on the stock of Whirlpool of India,” the broking firm has said.

Motherson Sumi: Likely gains of 30% possible on the stock

Motherson Sumi Systems current market price Rs 219

Target price Rs 285

Potential profits 30.00%

Not encouraging financial performance

According to broking firm Motilal Oswal Motherson Sumi 1QFY22 performance was impacted by exogenous factors in all its businesses (COVID in India and supply-side issues in overseas businesses), sharp copper price inflation, and non-recurring expenses at PKC.

“While the near-term outlook is murky due to supply chain uncertainties, Motherson Sumi is well-positioned to benefit from cyclical recovery in its key businesses as well as from the strong order book and improving efficiencies in SMRPBV,” Motilal Oswal has said in its latest report, following the quarterly numbers of the company.

“We cut our FY22E EPS estimates by 8%/3%, factoring in headwinds from the semiconductor shortage as well as copper cost inflation. Maintain Buy, with target price of Rs 285 (Sep’23-based SOTP),” the brokerage has noted.

Disclaimer

Investing in stocks poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage houses are not liable for any losses caused as a result of decisions based on the article. Investors should take care because the markets have hit a new peak. Please consult a registered professional advisor before you take a decision.

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Visible signs of economic revival, says finance ministry, BFSI News, ET BFSI

August 11, 2021 root Personal Finance

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NEW DELHI: There are visible signs of economic rejuvenation since the second half of May, with the second wave of the pandemic abating in most parts of the country and state governments lifting restrictions in phases, a finance ministry report said on Tuesday, while calling for sustaining the vaccination progress and the need for Covid-appropriate behaviour.

“The receding of India’s second wave, along with rapid progress in vaccination, has set the stage to further accelerate economic recovery. The movement of high frequency indicators in July clearly point towards a broad-based economic revival,” said the finance ministry’s monthly economic report for July, adding that these signs resonate with the fact that the economic impact of the second wave is expected to be muted.

It said PMI manufacturing sharply rebounded to be in expansionary zone across output and input sub-components of the index. Marking swift economic recovery, GST collection has reclaimed its Rs 1 lakh crore-plus territory in July, signifying increased business and consumer activity.

Rail freight at 112.7MT in July hit a record for the month and registered 18.3% growth (year-on-year) and13.2% rise compared to pre-Covid July 2019. The surge in economic activity is further corroborated by trends in Kharif sowing, fertiliser sales, power consumption, vehicle registrations, highway toll collections, e-way bills and digital transactions, said the report.

“Latest available data on growth of eight core industries, auto sales, tractor sales, port traffic, air passenger traffic also indicate sequential improvement from the contraction induced by the second wave,” it further added.

“At this juncture, the economy and society are at a crucial inflection point where sustenance of economic recovery, vaccination progress and Covid-19 appropriate behavioural strategies are needed in close synergy with each other.”

It said that having antibodies reduces the probability of acquiring serious illnesses, as is borne by studies. So, any subsequent waves are expected to be mild in terms of severity of disease.

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5 small and midcaps that may give 50% upside in next 2 yrs, BFSI News, ET BFSI

August 11, 2021 root Banking & Finance

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Stocks like JK Cement, Dalmia and Nuvoco Vistas may fall 10% in the near term but could give 50% upside over the next 2 year. Within the financial vertical, AU Bank and Federal Bank are the two names that we would be going with, says Hemang Jani, Equity Strategist & Senior Group VP, MOFSL.

What is your take on financials? Do you think that asset quality fears may come to haunt them a little later?
This space has gone through a lot of pain in the last one year. Initially, when we had the lockdown fears, the entire sector went down and within that sector, the smaller banks and NBFCs went through the maximum pain and after that we have seen a good amount of revival and by and large things are looking much better. What is important to note is that within the universe, there are a few pockets where the outperformance has been huge. Typically, HDFC, Kotak have underperformed and ICICI, Axis and SBI have done better.

My view is that some of the smaller banks like AU and a few other NBFCs seem to be doing well even in the most challenging environment where top notch banks are struggling to grow in terms of the NII and the overall franchise part. In a bull market, one typically tends to look out for some of the more exciting opportunities and within that, AU Bank or Federal Bank would definitely fit in. But a larger allocation of stocks should be in the likes of ICICI Bank, Axis Bank and State Bank of India.

Have you looked at Zomato’s numbers? There’s strong growth, strong revenue momentum and stronger contribution margins and all of this at the peak of the second Covid wave. Is that reason enough for the stock to push up even further?
The reason the Zomato IPO met with so much of success and excitement is definitely because there is a belief in the fact that there is a long runway of growth. The kind of app that they have created and the kind of business model that they are following would really deliver good performance over a period of time. When we look at the numbers, the fact remains that on the topline front, the average order value or the number of orders definitely has an element of momentum and traction and which also indicates that there is a good demand revival.

On the other hand, what really came as a big surprise was that the contribution margin has dropped by 170 bps and that is something that needs to be really checked as to what really is leading to this kind of a compression when there is a very strong growth on orders etc. What remains to be seen is that once offices open up and people go out more, are we going to see this momentum continuing or there is some sort of a cool off? That is something that we will have to watch. I do not think that we should form a view on Zomato by looking at the operating loss or the net loss. As long as the company is delivering on their top revenue and delivery transactions parameters with an eye on margin, the market may find this pretty exciting to get into it.

Give me the name of a small cap or two where you think a 10% downside for technical factors is possible but a 50% upside is also possible in the next two years?
I would be happy to share the midcap names or some of the smallcap names, but we have to be mindful of the fact that given the kind of runup that we have seen and the kind of valuation at which the broader market or midcap stocks are trading, they are almost at par with large caps. With this kind of runup, the volatility or the correction sometimes can surprise us. It may be 10%, it could be little more also and that is something that we will have to bear in mind when we are trying to dabble into the midcap and the small cap names.

So within the broader universe, we are comfortable in the cement sector. Given the kind of visibility that we have on the volume front, the companies on the north and east side of India are extremely well placed. One can look at names like JK Cement and to some extent Dalmia. Somewhere there is going to be a listing of Nuvoco Vistas and we will find that these existing companies are far better placed compared to the newly listed ones and that may create some sort of excitement.

Apart from that there are some of the smaller banks. Banks as a sector remained a bit muted for a long time and we are seeing an uptick and so AU Bank and Federal Bank are the two names within the financial vertical that we would be going with.

What about sugar stocks? After the runup in stock prices, do you believe they can be added afresh or added to the already existing holdings?
We have seen a very strong momentum in the global sugar prices maybe because of some crop failures in major continents like Brazil and some of the south-eastern regions. What remains to be seen when it comes to India is what are the inventory levels and the pricing that one can really expect from where we are right now.

Also we have to bear in mind that an important state like Uttar Pradesh is heading towards elections and the sugar policy and the stance that the government takes also plays an important role from election campaign perspective. It remains to be seen what happens in terms of fresh developments. Some of these commodities are in a strong up move and people may have some allocation for names like Balrampur Chini and some of the major north-based sugar companies. From a tactical point of view, it may make sense to participate in those names.

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YES Bank scouts for investors to set up ARC

August 11, 2021 root Banking & Finance

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Private sector lender YES Bank is moving ahead with plans to set up its own asset reconstruction company (ARC). It has floated an expression of interest (EoI) for potential investors to partner with it in the venture.

“The prospective investor will be the lead partner or sponsor of the ARC, with the bank as the other significant partner/sponsor, for conducting the business of asset reconstruction…,” YES Bank said in a newspaper advertisement.

According to the advertisement, the prospective investor or their sponsors should have minimum assets under management of $5 billion in the immediately preceding completed financial year.

It should also have demonstrated ability to commit funds for investment or deployment in Indian companies or Indian assets of about $0.5 billion.

Also Read: YES Bank, Indiabulls Housing Finance sign co-lending agreement

The potential investor should also have demonstrated global experience of dealing in stressed asset space and established track record of turn around and resolution of distressed assets and non performing loans in the part.

The proposed investor should also meet the “fit and proper” criteria of the Reserve Bank of India.

It has given time till August 31 to potential investors to submit EoIs.

Ernst and Young is the process advisor to YES Bank.

In a previous interview to BusinessLine, Prashant Kumar, Managing Director and CEO, YES Bank had said that the lender had applied to the RBI for setting up an ARC with a controlling stake.

“The RBI is not comfortable with giving a controlling stake to a bank as it would be a moral hazard. Since they have set up a committee to look at the ARC framework, we will wait for the report and then approach the RBI based on the proposal,” he had said in the interview in May this year.

For the quarter ended June 30, 2021, YES Bank reported a 355 per cent jump in its net profit to ₹206.84 crore. Gross NPAs were at 15.6 per cent of gross advances as on June 30, 2021 from 17.3 per cent a year ago.

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Centrum Broking , BFSI News, ET BFSI

August 11, 2021 root Banking & Finance

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Centrum Broking has add call on Ujjivan Small Finance Bank with a target price of Rs 31. The current market price of Ujjivan Small Finance Bank Ltd. is Rs 25.9.

Time period given by analyst is one year when Ujjivan Small Finance Bank Ltd. price can reach defined target. .
Ujjivan Small Finance Bank Ltd., incorporated in the year 2016, is a banking company (having a market cap of Rs 4484.98 Crore).

Financials
For the quarter ended 30-06-2021, the company reported a Standalone Total Income of Rs 716.29 Crore, down -2.56 % from last quarter Total Income of Rs 735.14 Crore and down -7.57 % from last year same quarter Total Income of Rs 774.98 Crore. The bank reported net profit after tax of Rs -233.47 Crore in latest quarter.

Investment Rationale
Provision spike could impact FY22 PAT by 76% while overall stress accretion would lower FY22/23 ABV by 20%/13%. MFI/MSE loan exposure at 80% is affecting Ujjivan, leading to rise in delinquencies and protracted recoveries. Lower multiple to 1.8x FY23ABV (earlier 2.1x), revise TP to Rs31 from Rs42. Change rating from BUY to ADD. Risks: higher provisions.

Promoter/FII Holdings
Promoters held 83.3 per cent stake in the company as of June 30, 2020, while FIIs held 5.1 per cent, DIIs 4.2 per cent and public and others 7.3 per cent.

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Should you invest in the latest Sovereign Gold Bond issue?

August 11, 2021 root Personal Finance

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The latest Sovereign Gold Bond Scheme 2021-22 – Series V is open for subscription until August 13, 2021. The issue price is ₹4,790 per bond (equivalent to one gram of gold). Those applying online and paying digitally get a discount of ₹50 on the issue price.

Why invest?

The 16 per cent fall in gold price in rupee terms since the August 2020 high provides a window of opportunity for investors. Those with a long-term investment horizon can consider buying SGBs in the ongoing issue to add to their long-term gold allocation.

The current SGB issue price of ₹4,790 is lower by ₹17 to ₹99 per bond than in the preceding three issues — one in July and two in May this year. The price is a simple average of the price of gold (999 purity) for the last three business days preceding the subscription period.

Sovereign Gold Bond shines this Akshaya Tritiya

Gold does well when other asset classes such as equity fare poorly and can form part of your portfolio (around 10 per cent) as a hedge against underperformance in other assets. Given that returns from gold can be lumpy — long periods of poor returns followed by short periods of high return, having a longer holding period helps. Over the last 30 years, gold has offered an average 5-year return (CAGR) of 9.4 per cent with the possibility of these returns being negative 13 per cent of the time. Over the same period, the average 7-year gold return (CAGR) has been 9.7 per cent with only 1 per cent possibility of negative returns.

Keep powder dry

However, investors are advised to keep some powder dry for future tranches, which may come at lower prices. The near-term outlook for gold appears weak. The stronger-than-expected US jobs data has fuelled fears of the US Fed unwinding its ultra-loose monetary policy to rein in inflation. A stronger US dollar and rising bond yields are expected to keep gold prices under pressure. As of now, there is another SGB issue opening on August 30.

The brass tacks

SGBs are issued in denominations of one gram of gold and in multiples thereof. You can buy a minimum of 1 gram and up to a maximum of 4 kilograms during a financial year. The limit includes bonds bought in the primary issues as well as those from the secondary market. SGBs can be bought from banks, designated post offices, stockbrokers and the NSE and the BSE.

First tranche of 2015 Sovereign Gold Bonds to be redeemed at ₹4,837 per unit against ₹2,684 issue price

The investment tenure of these bonds is eight years. However, early redemption with the RBI is allowed from the fifth year. For this, you must approach the concerned bank or whoever you bought them from, 30 days before the coupon payment date (half-yearly). While you can also sell the SGBs in the secondary market any time before maturity, the lack of adequate trading volumes can be an impediment.

Those interested in better liquidity must instead consider gold ETFs that can be bought and sold anytime. However, gold ETFs involve an expense ratio while there is no purchase cost for SGBs. Also, the capital gain on SGBs is tax exempt in certain cases.

Returns and taxation

Apart from the possibility of capital gains (appreciation in gold price between the time of purchase and redemption), SGBs offer investors interest of 2.5 per cent per annum on their initial investment. The interest income is taxed at your relevant slab rate.

If you hold the bonds until maturity (eight years), then the capital gain, if any, is exempt from tax. Capital gains on SGBs sold prematurely in the secondary market are taxed at an individual’s income tax slab rate, if held for 36 months or less, and at 20 per cent with indexation benefit if held for more than 36 months.

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Buy These 2 Stocks, Says Sharekhan For 26% Gains & Good Dividend Yields

August 11, 2021 root Personal Finance

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Good potential for the HPCL stock

HPCL current market price Rs 259.25

HPCL target price Rs 325

Potential profits 25.00%

HPCL is one of the top oil marketing companies in the country. Broking firm Sharekhan believes that there is a potential to see an upside of at least 25% in the stock.

Sharekhan expects earnings to recover as volumes revive (petrol/diesel at >105%/91% of pre-COVID level), likely structural improvement in auto fuel margin, cyclical recovery in GRM and inventory gains.

“Commissioning of Mumbai/Vizag refinery in FY22E would drive refinery throughput and FCF,” the brokerage has said.

Re-rating on HPCL possible with BPCL privatization

HPCL reported a Q1FY22 PAT at Rs 1,795 crore (down 41% q-o-q) lagged estimate by 20% as the company reported GRM of &dollar;3.3/bbl and sharply missed estimates.

“The refinery/pipeline throughput was weaker than expected at 2.5 mmt/4.3 mmt, down 42.8%/19% q-o-q. Implied marketing margins rose 7% q-o-q (against an expected q-o-q decline) to Rs. 3,101/tonne led by auto fuel price hikes. Marketing sales volume of 8.8 mmt was in-line; refinery throughput fell due to shutdown for Mumbai refinery,” the brokerage said.

According to Sharekhan, BPCL’s privatisation could re-rate oil marketing company stocks. Apart from this, the stock also has a solid dividend yield.

“Valuation of 4.3x/0.8 FY23E EPS/BV is attractive considering recovery in core earnings, RoE of 20% and dividend yield of 7-8%. We maintain a Buy on HPCL with an unchanged price target of Rs. 340 on the stock,” the brokerage has said.

Buy the stock of KEI Industries for an upside of 26%, says Sharekhan

KEI Industries current market price Rs 718.20

KEI target price Rs 909

Potential profits 26.60%

KEI Industries is a top player in the cable industry business and offers an extensive range of cabling solutions. The company manufactures and markets Extra-High Voltage, Medium Voltage and Low Voltage power cables.

KEI reported better-than-expected performance for Q1 FY22 with revenue/ EBITDA/ net profits at Rs. 1018 crores, Rs 114 crores and Rs 67 crores. The performance was driven by strong growth in cables and stainless steel wire segment.

KEI industries: An upside of 26% on the stock

According to Sharekhan, the stock price of KEI industries can reach a price of Rs 909, which is about 26% higher from the current levels.

“KEI’s outlook is expected to be positive with its diversified user industries, increased focus on retail, high-margin EHV cables, and export sales along with focused industry approach as well as utilisation-driven capex plans which is likely to help in sustaining a strong growth trajectory.

An uptick in housing demand bodes well for KEI Industries given its increased focus on brand building, distribution expansion & increasing B2C sales ahead of proposed entry into FMEG products. The stock is currently trading at a P/E of 16x/14x its FY2023E/FY2024E EPS which leaves further room for upside. Hence, we retain Buy on the stock with a revised price target of Rs. 909,” the brokerage has said.

Disclaimer

Investing in stocks poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage houses are not liable for any losses caused as a result of decisions based on the article. Investors should take care because the markets have hit a new peak. Please consult a registered professional advisor before you take a decision.

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