Author: root

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.

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.

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’.

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.