Serial Entrepreneur Bhargav Marepally, CEO of GSS Infotech Limited, and Prabhu Antony, co-founder of Hong Kong-based financial institution Sett & Lucas have raised USD 200 million ( ~INR 1400 Crores) in a SPAC (special purpose acquisition company), StoneBridge Acquisition Corporation (SBAC) through an IPO in the US. SBAC aims to complete its target acquisition within 12-16 months. The company plans to target the “new economy sectors,” which include consumer technology, communications, software, SaaS, fintech, media sectors, and renewables. Its focus is on businesses in the Asia Pacific region, with a special emphasis on India, especially those with enterprise values between $1 billion and $1.5 billion.
The SPAC aims to acquire its target in the next 12-16 months and has a special emphasis on Indian new-age tech companies with an enterprise valuation of $1 billion to $1.5 billion.Bhargav, CEO & Director of SBAC says, “Our plan is to actively involve with companies that have immense scope for growth that are actively looking for growth capital to expand in the Asia Pacific region. In particular, we will be looking at companies in India that have the potential to drive transformational change” He also adds “Our board and management team bring in deep expertise in the new economy sectors, cross border M&A, business development prospects that will help us get to a suitable target quickly while allowing the target to leverage our expertise for expansion and growth across geographies.”
Prabhu Antony -President, CFO, and Co-founder of Stonebridge Acquisition Corporation says “The 400M strong Indian middle class presents a great opportunity for D2C and B2B business models. For firms with global aspirations, the US capital market listing presents a great opportunity. We barely have 20 firms public listed from India compared to over 200 firms from China. This SPAC provides a first-of-its-kind opportunity to correct this listing disparity. Wall Street thinks the time is right for India”.
There could be a significant impact on the profitability of the Indian banking system as the inflation data for May and June 2021 breached the Reserve Bank of India’s (RBI) target corridor, in turn exerting pressure on the long-term yield curve, according to India Ratings and Research (Ind-Ra).
Retail inflation remained above the monetary policy committee’s upper threshold of 6 per cent for the second successive month in June at 6.26 per cent against 6.30 per cent in May.
A 100 basis points (bps) upward shift in the yield curve could impact the pre-provisioning operating profit (PPOP) of public sector banks (PSBs) by 8 per cent and that of private banks by 3.2 per cent, Ankit Jain, Senior Analyst, Ind-Ra, said in a note.
The impact on the overall banking system, could be 5.8 per cent. One basis point is equal to one-hundredth of a percentage point.
Ind-Ra assessed that the 100 bps movement in the yield curve would impact the common equity tier 1 of PSBs by 28 bps and that of private banks by 13 bps; while for the overall banking system, the impact could be 22 bps year-on-year (yoy).
The note said this has been taken on a post-tax basis, without considering the banks’ ability to reclassify their trading book and a likely partial offset from lower pension costs.
Three cycles of yield curve expansion
On analysing the past interest rate cycles, Ind-Ra has observed there have been three cycles of a yield curve expansion FY05 onwards, showing a strong inverse correlation between treasury income and interest rate movement.
Furthermore, the sensitivity seen for PSBs was much higher than that for private banks.
Ind-Ra said during the first cycle, treasury income contribution to PPOP reduced to 3.4 per cent in FY07 from 21.3 per cent in FY05, while it reduced to 3.2 per cent in FY12 from 15.3 per cent in FY10 in the second cycle and to 5.6 per cent in FY19 from 22.5 per cent in FY18 during the third cycle.
Also, the sensitivity was similar for private banks; however, the volatility in PPOP and PAT (profit after tax) was limited due to a lower share of trading book than that for PSBs till FY14 and stronger operating profit buffers.
Nonetheless, private banks were also impacted in the FY18-FY19 cycle during which the treasury income fell to 3.3 per cent from 9.7 per cent of PPOP and to 9.3 per cent from 25.8 per cent of PAT.
Muted credit offtake
With the credit offtake remaining muted since FY17, banks have been maintaining a balance between holding higher statutory liquidity ratio (SLR) and carrying interest rate risk, also taking on risk by giving out loans in a falling interest rate environment, the note said.
Post the first covid wave, the RBI further extended the dispensation of allowing banks to hold more than 25 per cent of their total investments under the held for trading investment category, subject to them holding up to 22 per cent in the form of SLR (statutory liquidity ratio) securities, it added.
While the limit for holding SLR securities had already been increased to 22 per cent from 19.5 per cent earlier, the RBI in its February Monetary Policy Committee meet has further extended the window for these holdings till March 2023 and a phased wind down thereafter by December 2023.
HDFC Ltd Chairman Deepak Parekh on Tuesday expressed confidence that the country’s macroeconomic fundamentals are strong and recovery is underway.
“Owing to the second wave, the Indian economy is likely to mirror a similar trend seen in 2020-21, where the first half of the financial year is weaker and the second half is significantly stronger,” Parekh said at the annual general meeting of HDFC Ltd.
However, while parameters such as foreign exchange reserves and capital markets are strong, he underlined that key laggard remains overall credit growth which continues to remain tepid.
Parekh also said the inherent demand for home loans continues to be strong and even in commercial real estate, most companies have not given up on their office space in the pandemic.
He also noted that there are segments of real estate with immense potential to grow.
“With the e-commerce boom, demand for real estate is coming from warehousing and fulfilment centres,” he said, adding that with the build-up of digital infrastructure, demand for data centres have increased.
The demand for housing has also continued to be strong after the easing of the national lockdown and was for both affordable housing and high-end properties.
“Asset quality has been challenging for non-individual loans at a systemic level. the corporation has always been prudent in identifying loans where there could be stress and has adequately provided for such loans,” Parekh further said.
ICICI Bank today announced the launch of a co-branded credit card with Hindustan Petroleum Corporation Limited (HPCL) to enable users to get benefits and reward points for using multiple credit cards in one. Named ‘ICICI Bank HPCL Super Saver Credit Card’, it is powered by VISA and offers benefits to customers on their everyday spends on fuel as well as other categories including electricity and mobile, departmental stores like Big Bazaar and D-Mart, and e-commerce portals, among others.
Sudipta Roy, Head, Unsecured Assets, ICICI Bank said, “We are delighted to partner with HPCL to launch the ‘ICICI Bank HPCL Super Saver Credit Card’. Typically, similar credit cards offer accelerated benefits on spends in one category. This card breaks that barrier as it enables customers to save on every transaction that they make. This truly makes the card a ‘super star’ of savings,”
HPCL Executive Director, Retail, S K Suri, said “HPCL is very happy to partner with ICICI Bank to launch ‘ICICI Bank HPCL Super Saver Credit Card’ with unique offerings and rewards to enhance customer experience. This credit card will help in promoting the digital payment ecosystem at retail outlets and meet the expectations of the customers with its innovative offerings. The customer will also get additional loyalty points when they use this card on our HP Pay App.”
Customers can apply for the ‘ICICI Bank HPCL Super Saver Credit Card’ through the Bank’s internet banking platform or the mobile banking app, iMobile Pay. They get a digital card in a 100% contactless and paperless manner. Further, customers can manage their transaction settings and credit limit conveniently on the iMobile Pay app.
Additionally, they can upgrade their existing ICICI Bank credit card to ‘ICICI Bank HPCL Super Saver Credit Card’ using iMobile Pay and internet banking. The PAYBACK points are credited to the customer’s PAYBACK account which is auto-created at the time of issuance of the card. Customers can then redeem these points as per their choice on the PAYBACK website, ‘HP Pay’ app, or at PAYBACK partners stores/website. They can also redeem the PAYBACK points for purchasing fuel at HPCL retail outlets.
Amid the rising furore over huge haircuts taken by lenders in high-value resolutions under the Insolvency and Bankruptcy Code, the government has said that financial creditors, including banks, realised Rs 2.45 lakh crore from approved resolution plans for 394 corporate insolvency resolution cases under the Insolvency and Bankruptcy Code as on June 30.
Of which Rs 2.37 lakh crore came through approved resolution plans of top 100 CIRPs, which is over 36 per cent of the admitted claims.
About 4,540 cases were admitted for the corporate insolvency resolution process under IBC until June 30, 2021.
About 240 companies liquidated till December 2020 had outstanding claims of Rs 33,086 crore, while their assets were valued at Rs 1,099 crore. Overall, banks recovered Rs 14.18 lakh crore during the last three fiscals, raising the percentage of recovery to their gross NPA from 13.1 per cent in FY18 to 15.1 per cent in FY19. However, the recovery ratio has dropped 12.8 per cent in FY21 from 15.8 per cent in FY20 in the backdrop of the pandemic.
Recovery rate
The recovery rate of IBC has fallen to 39.3% as of March 2021 from 46% as of March 2020. Of the total outstanding amount of Rs 1.32 lakh crore, only around Rs 25,944 crore was recovered in fiscal 2021, or a rate of 19.7%.
There has been a delay in the liquidation of companies. As of December 2020, around 69% of the liquidations were going on for more than one year, while in the case of 26% of companies the process was on for more than two years.
Economic downturn
With huge capacity unutilised in the economy, companies are not looking to add more capacity, which is impacting the sale process at IBC. Barring sectors like steel where the product cycle has seen a turnaround, assets in other sectors such as textiles are not seeing much interest. While steel assets such as Essar Steel and Bhushan Steel were snapped up, those such as Alok Textiles were sold for much less.
The pandemic has increased operational challenges for the various parties involved in a CIRP, which resulted in limited cases yielding a resolution plan. The suspension of new proceedings under the IBC for the entire FY21 resulted in a sharp slowdown in the resolution process.
The slow judicial process in India allows the resolution processes to drag on, this was the same reason for slow recovery under SICA or RBBD.
Litigations by promoters not wanting to let the company out of their hands is also delaying the IBC process.
Lenders wanting to avoid delay in the recovery process and erosion of value are striking settlement deals with promoters, which defeats the purpose of the legislation.
Fiscal 2022 hopes
Financial creditors could realise about Rs 55,000 crore to Rs 60,000 crore in FY2022 through successful resolution plans from the IBC, estimates rating agency Icra. The higher realisation by the financial creditors would depend on the successful resolution of 8-9 big-ticket accounts, with more than 20% of estimated realisation for the year could be from these alone.
State Bank of India and HDFC Bank have opposed the Supreme Court order that had said the Reserve Bank of India can divulge inspection reports of commercial banks through Right To Information applications. The court has kept the hearing for Thursday. The RBI had allowed making such reports public following a Supreme Court order in 2015. Then, it was agreed that the entire report would not be made public, but the relevant portions on bad debts, and borrowers etc.
However, even such information can disclose much information about the borrowers, which violates various client confidentiality clauses of banks, the lenders argue.
The SC verdict in April
In a major blow to banks, the Supreme Court in April this year had refused to recall its 2015 judgment, which had held that the RBI will have to provide information about the banks and financial institutions (FIs) regulated by it under the transparency law.
Several FIs and banks, including the Canara Bank, the Bank of Baroda, the UCO Bank and the Kotak Mahindra Bank had filed applications in the top court seeking a recall of the 2015 judgment in the Jayantilal N Mistry case, saying the verdict had far-reaching consequences and moreover, they were directly and substantially affected by it.
The banks had contended that the pleas for a recall of the judgment, instead of a review, is “maintainable” as there was a violation of the principles of natural justice in view of the fact that they were neither parties to the matter nor heard.
“A close scrutiny of the applications for a recall makes it clear that in substance, the applicants are seeking a review of the judgment in Jayantilal N Mistry. Therefore, we are of the considered opinion that these applications are not maintainable,” a bench of justices L Nageswara Rao and Vineet Saran said.
The order, written by Justice Rao, said in the instant case, the dispute relates to information to be provided by the Reserve Bank of India (RBI) under the Right to Information Act (RTI) and though the information pertained to banks, it was the decision of the RBI that was in challenge and decided by this court.
The RBI stance
The RBI in 2019 has declined to share details of banks inspection reports citing a section of the transparency law that exempts public authority from disclosing information that may prejudicially affect sovereignty, security or economic interests of the country.
Replying to an RTI query, the central bank also said furnishing the requested information will disproportionately divert the resources of the public authority.
The Reserve Bank of India (RBI) was asked to provide copies of all the annual financial inspection reports, concurrent audit or inspection reports carried out between 2007 and 2015 on foreign currency derivative contracts sold by the 19 banks that were earlier penalised by it.
“The requested information pertains to inspection reports of 19 banks for a period of eight years from April 1, 2007 to March 31, 2015. Therefore the total number of reports would be 152 (one report per bank for 19 banks for eight years i.e. 152).
“Furnishing the requested information will disproportionately divert the resources of the public authority,” the RBI said in reply to the RTI query filed by S Dhananjayan.
Banks will remain shut in Jammu and Srinagar on 22 July as well to observe Eid-Ul-Azha. Image: Reuters
Bakri Eid Bank Holiday 2021: Most of the banks in India will remain closed on 21 July 2021, on account of Bakra Eid. Only the gazetted holidays are observed by banks all over the country. The Reserve Bank of India (RBI) has categorised holidays under three categories — Holiday under Negotiable Instruments Act; Holiday under Negotiable Instruments Act and Real-Time Gross Settlement Holiday; and Banks’ Closing of Accounts. Banks will remain shut in Jammu and Srinagar on 22 July as well to observe Eid-Ul-Azha. According to the list of holidays notified by RBI, there are state-specific holidays for different occasions.
Banks to remain functional in these cities on Bakra Eid 2021
On account of Bakra Eid (Id-Ul-Zuha) (Eid-UI-Adha), banks in most of the states across the country will remain shut on July 21, except in cities such as Aizawl, Bhubaneswar, Gangtok, Kochi, and Thiruvananthapuram. Even as banks will remain shut on Wednesday, customers can avail online services. Moreover, mobile and internet banking will remain operational.
Banks to remain shut for up to 5 days this month
21 July 2021: Bakra Eid, Id-Ul-Zuha, Eid-UI-Adha 22 July 2021: Eid-Ul-Azha (Only in Jammu and Srinagar) 24 July 2021: Fourth Saturday 25 July 2021: Weekly off (Sunday) 31 July 2021: Ker Puja (Only in Agartala)
Including 21 July 2021 off, banks in many cities will remain closed for up to 5 days for the remainder of July month. Banks in Jammu and Srinagar will also remain closed on 22 July on account of Eid-Ul-Azha, according to RBI notification. This week, banks across the country will remain closed on 24-25 July, on account of the fourth Saturday and weekly off. All the public and private sector banks across the country observe holidays on the second and fourth Saturdays of every month, along with a weekly holiday on Sunday. There is a state-specific bank holiday on the last day of July, i.e 31st July 2021 in Agartala on account of Ker Puja.
Suryoday Small Finance Bank (SSFB) will step up focus on cost management, recovery and serving existing customers well amid the pandemic. Business growth will necessarily follow as a result of this, according to Baskar Babu R, MD & CEO.
In an interaction with BusinessLine, Babu said his bank continues to maintain substantially high liquidity and capital adequacy. So, it will be ready to accelerate lending when green shoots become visible. Excerpts
Do customers in the microfinance and small business loan segments continue to face strain in loan repayment?
As things open up, customers are coming back into the loan repayment track. So, in the current economic cycle, if a customer pays two out of every four instalments, he is considered a good customer. Among our delinquent customers in March 2021, about 76 per cent of them paid an instalment at least in one of the two months — February or March.
Moratorium did a very good thing for the customers as they did not feel that they were defaulting. And co-incidentally because of regulatory and government support, the credit flow continues to the microfinance segment.
In the small business segment, the bounce back usually is much swifter. They start putting their skills/competencies to work. For many such businesses, it is the time value of money
When do you expect lending operations to get normalised?
Given that we have come out of the pandemic, we were far more confident that we will be able to weather the second wave. As we started moving towards normalcy, about 80-85 per cent of the customers started displaying good (repayment) behaviour. We will have to go back to reconnect with the rest.
When it comes to lending a helping hand to customers facing incipient stress, the focus is to do restructuring in a meaningful manner for them to overcome the pain. This will reduce NPAs.
If a third wave does not hit us badly, it will be back to business as usual. We will get closer to normalcy by September.
Will you tweak the way you are doing business in the light of the experience gained from the pandemic?
When it comes to business model, the way in which we will tweak it will be in terms of enhancing our product lines as our customers graduate (from small ticket microfinance loans to bigger loans)…about 5-6 per cent of our total customer base of 1.5 million will be requiring a home loan in the next 12 months.
Given that people are increasingly dipping into their deposits to meet emergency health expenses, how will you ensure that deposits don’t haemorrhage?
Even low-income households are looking at health insurance as a key product. It is no more a product which has to be sold. People realise the importance of having a meaningful insurance cover.
We are planning to roll out a product for a particular savings account variant, whereby the customer will get a complimentary top-up insurance cover of up to ₹40 lakh in the first year….The middle class usually have a health insurance cover or can manage an expense of, say, ₹4-5 lakh. But when a large one-off expense arises, it becomes very difficult to manage. So, we are trying to work out a value-added product.
Two years back, we gave a sachet insurance product to our microfinance customers to cover the losses arising from natural calamities. For a ₹50 premium for two years, the product covered any damage to goods and property up to ₹50,000. We don’t get any commission for this. It is just an add-on product. The penetration is pretty good at about 70 per cent.
CSB Bank, having a strong presence in Kerala, Tamil Nadu & Karnataka is looking to expand its presence in the areas which have a significant opportunity to tap SME and LAP business.
Shyam Mani, Head – NRI & SME, CSB Bank in a conversation with ETBFSI talks about how they’ve drawn their strategy to expand in the key SME hubs and extend credit and strengthen LAP portfolio.
Shyam Mani, Head – SME, NRI Banking, CSB Bank
As of June 30, 2021 the bank’s gross advances increased 23.71% to Rs 14,146 crore as against Rs 11,434.65 crore as of 30 June, 2020. Further its advances against Gold and Gold Jewellery accounts for 39.71% of the gross advances totaling to Rs 5,617.68 crore (increased by 46.16% on a Y-o-Y basis) as of June 30, 2021. Hub & Spoke Model for SMEs
The bank is tapping SMEs with a turnover of Rs 250 crore and below excluding export turnover and up to ticket size of Rs 50 crore maximum. It has set up exclusive teams primarily to focus on leveraging existing branch distribution channels.
Mani said, “We have created a hub and spoke model and identified 42 key hub branches (or SME branches) and linked to 220 respective spoke branches, and the strategy is centered around the businesses in these specific catchments. Currently, we might not have large books in these areas but do have our presence like for e.g. Peenya, Bommanahalli in Bangalore and other SME markets like Delhi, Mumbai, etc.”
The demography in these branches are SME or business-led and where the bank’s SME assets will reside. Post identifying these areas they moved their key resources with teams working on relationship management and acquiring business and other team taking care of the portfolio. These branches are the bank’s primary funnel for our SME business.
He adds, “Beyond branch networks we also work with state bodies and industry associations. In each of these hubs, we have drawn connections to funnel for business. So the idea has been to identify and set-up distribution followed by prioritising our product offerings which are segment and ticket-size specific.”
The bank is creating scorecards by mapping segment, ticket size, and different parameters along with bureau checks to make quicker decisions. It also intends to simplify the process through technology and go maximum paperless as it progresses.
“Once all processes are in place from distribution to product offering to simple processes at par with peer banks, we are looking to complete the entire cycle of requirement of SME customers and build a good portfolio,” he added.
Mani has also observed that a lot of businesses are coming to India from different countries and is seeing an uptake in export-oriented businesses like auto ancillaries, engineering goods, etc. These companies are running with double shifts and are the ones who have built capacity and have large export orders.
Mani said, “We are focusing on recession-proof sectors and are particular about the sector we want to capture. Food-processing, healthcare, pharmaceuticals, engineering works, and specific markets which have export orders are some of the key sectors we are looking at. We don’t restrict our lending to top branches only, if there’s a requirement and an opportunity for a specific economy, we are able to take on their requirements as a lot of processes are centralised.” Expanding LAP Business
CSB Bank is looking to strengthen their LAP offering by focusing on Top 10 cities to start with and do LAP business even within their SME presence.
Mani said, “Bombay, Delhi, Pune, Ahmedabad, Bangalore, Hyderabad, Chennai, Kochi, and Coimbatore are key markets for our LAP business. Within these markets, we have picked up top 60 branches having exclusive teams focusing on LAP disbursements on retail and large ticket size in parallel with SME business.”
He adds, “It’s an opportunity for us as we find a lot of NBFC business is moving into banks in terms of balance transfer because of two key reasons, one is pricing, and second, customer convenience. We are particular in handpicking cities because while our predominant distribution is in Kerala and Tamilnadu, nationally LAP is a potential business irrespective of your book size and distribution.”
The bank takes a combination of internal rating & external rating to take the credit calls.
He explains that they have to be careful of real estate prices and the stability of the market. “We are conscious about it and keep tracking the market from a risk perspective and have tied up with industry experts to gather inputs on market trends and take calls on industry and location-specific details,” he concluded.
Having said that, you can never get the perfect mutual fund over a long period as market dynamics change quickly. For example, a top performing fund today may no longer be a top performing fund, a couple of years from now. Let’s say that a fund reaped the benefits of heavily investing into banking stocks a year back, but, 2 years from now economic growth takes a hard landing. The fund will start underpeforming as banking stocks start falling. Similarly, if a fund has heavily invested in IT on hopes of a sharp turnaround in US economic activity, should the economic activity falter, we could see IT stocks take a knock. The fund performance really depends on which way the top 10 stocks of the portfolio are skewed. In any case, we give you two investment ideas, to invest through SIPs.
Axis Bluechip Fund
We are suggesting Axis Bluechip Fund, because this fund has been rated 5-star by Crisil, Morningstar and Value Research. We have seen this rating being there for some years now, which makes it a relatively consistent performer over the years.
We have been emphasizing for some time now, that investors should only invest through the SIP route. It makes no sense to invest large amounts, when the Sensex is at 53,000 points. In any case, Axis Bluechip Fund has given a returns of 40% in 1-year, while the 3 and 5 year returns are pegged at 14% and 16% respectively. An SIP in Axis Bluechip Fund can commence with a sum of Rs 500 every month, while the initial amount for beginning and investment is Rs 1,000. Axis Bluechip Fund is a largecap fund and when the markets at a record, no investment expert would want to recommend a small cap fund. With assets under management of Rs 28,333 crores, Axis Bluechip Fund is not a small fund in terms of assets under management.
Edelweiss Large & Mid Cap Fund
This fund has been another decent performer over the years, with a 5-star rating from CRISIL. Unlike Axis Bluechip Fund, the assets under management are not large, with a smaller size of just Rs 833 crores. Smaller size funds maybe more nimble that way, in the sense when you want to quickly churn your portfolio it becomes easy for the fund manager.
This fund was launched way back in 2007 and since then has given a returns of almost 12% on an annualized basis since its launch.
Edelweiss Large & Mid Cap Fund has exposure to stocks like Infosys, ICICI Bank, HDFC Bank, State Bank of India and Reliance Industries. This is the trend in most of the funds, where the above stocks have to almost always be there.
An SIP in the fund can commence with a sum of Rs 500 every month. Please be informed that a 5-star rating does not guarantee returns and we are just highlighting what some of the agencies have given. However, it has been noticed over the years, that long term investors have reaped good gains from investing over a long period of time, including by way of SIP investment.
Disclaimer
Mutual Fund investments are risky and investors are advised to invest only if they are able to take losses. Neither the author, nor Greynium Information Technologies would be responsible for any losses incurred based on the above article.
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