The country’s largest lender State Bank of India is working towards launching the next version of its digital lending platform – Yono (You Only Need One App), chairman Dinesh Khara said. Speaking at a banking event organised by industry body IMC, Khara said when the bank initially started Yono, it was thought of as a distribution platform for the retail segment products.
“During the course of the journey, SBI could realise Yono’s potential for international operations, particularly where we have the retail operations. We could visualise its relevance for Yono business also, and now we have started leveraging it for our agriculture segment,” he said.
“Now what we are thinking of is as to how to integrate all these fragmented pieces of Yono and think in terms of something like Yono 2, which is the next version of it. It is something which we are working on and will come out with it and products soon,” Khara said.
As of March 31, 2021, Yono has over 7.96 crore downloads and about 3.71 crore registrations, according to the bank’s annual report for 2020-2021.
The bank has onboarded 40,000 overseas customers on the Yono platform as of end-March 2021, it said. The lender is on course to launch Yono in Singapore, Bahrain, South Africa, and the USA by the end of the financial year 2021-22.
Khara further said that SBI looks at technology from the point of view of having oversight on its operations.
The bank has started leveraging analytics for profiling the customers and to reach out to customers. It is also leveraging analytics for management and mitigation of risks.
Speaking at the event, Yes Bank‘s Managing Director and Chief Executive Officer Prashant Kumar said this is a time where banks need alliances and relationships with technology. It is a time to ride on the core competence of partners to create solutions and collaborations, he said.
Asset Reconstruction Companies were established with the role of providing specialized expertise in management and recovery of non-performing assets (NPA). Ideally, this would allow financial institutions to focus more on optimizing lending instead of difficult recoveries. The high number of NPAs on the balance sheet of Indian banks in the last three years is not fresh news. ARCs are important interventionists and crisis managers who can play a major role in the insolvency and turnaround framework of India. But they are presently like the unetched character of a Bollywood potboiler without the proper chance to shine because the script fails them.
A committee has been set up by RBI to undertake a comprehensive review of and recommend the working of ARCs to meet the growing requirements of the financial sector on April 19, 2021, under the chairmanship of Shri Sudarshan Sen, former Executive Director, RBI. The role of ARCs in relation to NPAs needs to be re-thought allowing legroom for a disruptive role. Just like the Insolvency and Bankruptcy Code led to behavioural change in loan repayments, it is necessary that the market behaviour of banks and ARCs is compulsorily modified for them to think out of the box and allow risk diversification. Some of our recommendations are discussed below.
Objective Valuation of Financial Assets: The price bid by ARCs for NPAs does not reflect the true recoverable value of financial assets generally. Acquisition of assets is known to happen at acutely discounted rates which may not be aligned with the bank’s recoverable value let alone the market value of the financial asset had it not been distressed. There is a need for objective guidelines for the valuation of financial assets and prohibition on acquisitions and sales at overtly discounted values.
Concentration limit on retention of security receipts by banks: After acquiring an NPA, the ARC issues security receipts (SR) redeemable on the resolution of NPA. This mechanism is supposed to create risk spread, allow a diverse class of investors and make NPA a tradeable asset. But 80-90% of the SR are held again by financial institutions. Effectually, NPAs never leave the balance sheet of financial institutions but just re-enter through the backdoor. Financial institutions continue to heavily invest in SR despite substantial disincentives in holding SRs above 50%. It is important to create concentration limits on SR holding of financial institutions creating a compulsion to market SR to a more diverse category of investors.
Separate Regulatory Department and Class of Professionals: Some of the least supervised and audited (regulatory) classes of regulated entities in India include ARCs and credit rating agencies. Although the function of ARCs is distinctly different from banks and NBFCs, they presently come under the same regulatory and supervisory department of RBI which is already understaffed and overworked. It is important to acknowledge ARCs and even NBFC-Factors as a separate class of regulated entities from banks, cooperative banks and NBFCs. The ARC sector also needs specialized professionals to provide thought leadership and out of box thinking on NPA management, asset turnaround, investment banking, and valuation just like insolvency professionals.
Third-party funding of dispute resolution and securitization process: Most of the times banks have to take up litigation or arbitration for enforcement of security interest. Such dispute resolution is part of the NPA resolution process and maybe a high cost for the bank. To allow banks to increase their liquidity when required, ARCs should be allowed to act as third-party funders of the cost of litigation or arbitration in lieu of part or whole of a financial asset as a success fee. This form of funding is already well established in other financially mature jurisdictions like United Kingdom, Singapore, Hong Kong, and the USA.
While revitalizing the ARC industry it is important that enough thought is given to creating mechanisms and processes that allow proper shifting and allocation of risks and responsibilities. Unless the risk of NPA actually does not move out of the balance sheet of banks and there is enough regulatory freedom for ARCs for resolution of stressed assets through innovative and out of box structures, the mechanism for NPA resolution is fraught to be dependent on government rescue which is not feasible in the long run for the economy and the industry.
The blog has been authored by Ajaya Kumar Sahoo, COO, Find friends & Independent Director at PC Financial Services and Kritika Krishnamurthy, Partner BFSI at AK and Partners
DISCLAIMER: The views expressed are solely of the author and ETBFSI.com does not necessarily subscribe to it. ETBFSI.com shall not be responsible for any damage caused to any person/organisation directly or indirectly.
New Delhi: L&T Finance Holdings on Friday reported 20 per cent rise in net profit at Rs 178 crore for June quarter 2021-22, mainly driven by rural demand for farm equipment. The non-banking financial company had registered Rs 148 crore profit in the year-ago period.
LTFH said COVID-related partial lockdowns in April and May had an impact on few businesses during the quarter under review.
However, with gradual unlock of the economy from June, the disbursements bounced back led by faster pick-up in economic activity across farm equipment finance, two-wheeler finance, consumer loans and infrastructure finance.
Due to slower industry pick-up, the micro loans, housing and real estate business saw moderate uptick in collections and disbursements, it said.
Farm equipment finance witnessed 130 per cent growth at Rs 1,357 crore as against Rs 590 crore in the year-ago period.
Infrastructure finance showed robust disbursement momentum post unlock and continued sell-down with Rs 1,480 crore disbursed in the quarter.
The business continues to see robust performance backed by higher sell-down volumes and refinancing, it added.
The company’s gross non-performing assets (NPAs) rose a tad to 5.75 per cent during the quarter as against 5.24 per cent in the year- ago period. Net NPAs or bad loans rose to 2.07 per cent from 1.71 per cent.
From 2018-19, LTFH started building macro-prudential provisions for any unanticipated future events which held the company in good stead.
Continuing this focus, as a prudent measure LTFH created additional provisions of Rs 369 crore in the quarter under review. With this, it is carrying total additional provisions of Rs 1,403 crore (1.75 per cent of standard book), it said.
These provisions are over and above the expected credit losses on NPA and standard asset provisions.
“Despite severe impact of COVID 2.0, the learnings from COVID 1.0 held us in good stead in managing short-term challenges and helped maximise positive impact on business metrics.
“Our Q1FY22 performance reflects the fact that the company has built a sustainable business model, one which will enable it to grow in the medium to long-term while dealing with any short-term challenges (including impact of COVID 2.0),” LTFH Managing Director & CEO Dinanath Dubhashi said.
State-owned Central Bank of India will seek shareholders‘ approval in its ensuing annual general meeting (AGM) next month to set off accumulated loss of over Rs 18,724 crore from the share premium account of the bank. The next AGM is scheduled for August 10, 2021 through audio/video means.
The bank said it will seek shareholders’ consent to set off the accumulated losses of Rs 18,724.22 crore as on March 31, 2021 by utilising the balance standing to the credit of share premium account of the bank as on date to set off and take the same into account during the current financial year 2021-22.
“The bank is of the view that this it the most practical and economically efficient option available to the bank in the present scenario so as to present a true and fair view of the financial position of the bank,” it said in a regulatory filing.
Central Bank of India said the setting off of accumulated loss would benefit the shareholders of the bank as their holding will yield better value. It will also enable the bank to explore opportunities to the benefit of the shareholders of the bank.
It will also put the bank in a better position to achieve its turnaround plans in time-bound manner, the lender said.
Share premium balance is a reserve that can only be used for the defined purposes.
A share premium account reflects the difference between the face value of shares and the subscription price of the shares.
The company is an integrated global pharmaceuticals company having three business segments Pharmaceuticals, Contract Research and Development Services and Proprietary Novel Drugs.
Motilal Oswal Institutional Equities sees a solid upside of almost 30% on the stock of Jubilant Pharmova and has recommended a “buy” on the stock with a price target of Rs 920, against the current market price of Rs 713.
It maybe recalled that the USFDA recently issued an Import Alert at Jubilant Pharmova Roorkee facility, escalating the regulatory concerns at the site. However, Motilal Oswal believes that the company would have minimal impact given that the USFDA has granted exemption to certain products from the Import Alert list, subject to Jubilant Pharmova meeting some conditions.
“We have tweaked our estimates for FY22/FY23E to reflect the impact of the import alert at the Roorkee plant. We expect an 11% CAGR in Radiopharma sales and 8% CAGR in CDMO (adjusted for one-time sales of COVID products in FY21) over FY21-23. Thus, we expect a 10% earnings CAGR over FY21-23. We maintain BUY on the stock, with a target price of Rs 920 (valued at 9x 12M forward EV/EBITDA),” the brokerage has said.
Broking firm, Motilal Oswal also has a buy call on the stock of Coromandel International with a 19% upside on the stock for a target of Rs 1040, against the current market price of Rs 864. The company is India’s second largest Phosphatic fertilizer player, is in the business segments of Fertilisers, Specialty Nutrients etc.
Coromandel International’s key markets are Maharashtra, Telangana, Karnataka, West Bengal, and Odisha and Andhra Pradesh. According to the brokerage the structural story of the company remains intact with regard to increasing awareness among farmers about having balanced nutrients in crops. According to the firm focus to reduce cost of raw materials, launch of 3-4 molecules in the Crop Protection segment, inorganic growth, and focus on profitable growth in the Retail business by reorganizing stores depending on consumption pattern are some of the reasons to buy the stock of Coromandel International.
“We expect a revenue/EBITDA/PAT CAGR of 9%/9%/12% over FY21-23E. We value Coromandel International at 18x FY23E EPS to arrive at our target price of Rs 1,040. We maintain our Buy rating on the stock of Coromandel International,” the brokerage has said.
Cyient
Motilal Oswal has set a 15% upside target on the stock of Cyient as the brokerage sees increasing spends in the ER&D industry and Cyient’s strategy to digest these spends as a supporting factor in the near-to-medium term.
Cyient is engaged with customers across their value chain helping to design, build, operate, and maintain the products and services that make them leaders and respected brands in their industries and markets.
Cyient 1QFY22 revenue de-grew 4% QoQ in USD terms (in line with our estimate). This was led by 20% QoQ decline in the DLM business.
“We raise our estimates on better potential margin performance as the management increases its intake of freshers as well as benefits from operating leverage. We maintain our Buy rating on attractive valuations. Our target multiple of 20x FY23E EPS takes our target price of Rs 1,090/share, implying an upside of 15%,” the brokerage has said.
TCI Express has emerged as one of the leading Indian B2B, surface logistics and express logistics solution providers. The company caters to the five increasingly growing areas across sectors including automotive, pharmaceutical, textiles, engineering, IT hardware and electronics.
The company’s offerings include cold chain express for pharma sector , air express division, customer to customer (C2C) express logistics. The company despite the rising competition has been left unscathed owing to its continuing focus on building its strength in the B2B segment by expansive delivery, focus on SME and MSME, investments into building IT infra etc.
Technicals:
The logistic space has seen strong buying demand in the last one year with most stocks breaking above their long term supply area. TCI Express has been an outperformer within the logistic space maintaining higher peak and higher trough in all time frames. It is currently on the cusp of generating a bullish Flag breakout signalling continuance of the primary up trend and offers fresh entry opportunity. We expect the stock to trade with a positive bias and head towards Rs. 1775 levels as it is the 161.8% external retracement of its last five weeks breather (Rs. 1624-1388).
The stock earlier during May 2021 registered a resolute breakout above a rising supply line joining the highs of CY18 (Rs. 739) and CY20 (| 949) signalling a structural turnaround. It has already taken five weeks to retrace just 38.2% of its preceding four week’s rally (| 940-1624). A shallow retracement highlights a higher base formation and a robust price structure.
Financials:
TCI Express continued to post QoQ recovery in profitability in FY21 (EBITDA margin expansion by 410 bps), in spite of lower operating leverage (volumes down 17% in FY21), as the management employed cost control measures, realisation hikes, passage of crude oil price rise to most of the customers and continued to pick only profitable sales, said the brokerage report.
The management expects the expansion in EBITDA margins to continue from hereon (100 bps each year), aided mainly by volume growth, as it expects the SME sector to bounce back, as the state-wide restrictions due to pandemic subsides, added the research report.
Market capitalisation
Rs. 5894.9
Total debt FY21
Rs. 1 crore
Cash FY21
Rs. 27.2 crore
52 week high/low
1140/511
Equity capital
Rs. 3.8 crore
Face value
Rs. 2
Disclaimer:
Stock market investments are risky. Please do your analysis considering your risk profile and financial goals before betting on any investment product. Greynium, neither the brokerage nor the author will be responsible for any losses made on any investment call taken basis the above report. The above report is taken from ICICI Direct.
Piramal Capital and Housing Finance (PCHFL) wants to have adequate buffers in terms of long-term financing. The company, which has come up with NCD issue of Rs 1,000 crore on July 12, 2021, is a step towards the direction of switching to longer-term borrowing, says Jairam Sridharan, CEO, Piramal Retail Finance to Ankur Mishra in an interview. He also says merger with DHFL is likely to be completed in the next two months, subject to legal outcome of the pending appeals at the court.Edited excerpts:
What is the purpose of the NCD issue? We have been trying to grow our retail lending business for a while. As we start growing and start pressing our accelerators, we want to make sure we have adequate buffers in terms of long-term financing. We will want to change our profile towards more and more longer-term borrowing. So, that is the direction as far as this issue is concerned.
What is the overall capital raising plan for FY22 We have not sought approval of any kind from the board for annual fund raising. What we will continue to do is that we will watch the market. If we find the time is appropriate, there is a need to improve the amount of long-term borrowing we have, we may come into the market. So, it will be more opportunistic. However, as such there is no need to tap the market. Right now, we have not chosen anything particular for a full-year plan.
Has there been a change in business strategy after the second wave of Covid-19? The second wave of Covid-19 had much larger impact in terms of health, but I would say in terms of wealth its impact has been significantly small, compared to the last year. Although, quarterly numbers are still to be out, but unlike the first wave, the situation is a lot different right now. If you look at your local kirana store, local grocery guy, they were all making zero revenue during the first wave, but right now none of them are making zero revenue.
As everyone is open for a little while or they have figured out a delivery-based mechanism or UPI mechanism, so that they are able to keep their business running. All lenders have taken a strong stance suspecting possible losses due to Covid-19, and have made big provisions. What you have seen over past one year is that not much provisions have been used.
The actual losses have been lesser than what people had anticipated. So, we are not changing any business strategy. We will continue to be a secured-focussed lender. Due to the second wave, we are seeing what type of customers are vulnerable, and for someone like us this learning is important. This learning will help us in underwriting.
How much impact do you see in the June quarter (Q1) due to the second wave of Covid-19? I cannot comment on Q1 because we are in the silent period, but I generally say that the second wave has been much shorter. So, for the financial services sector as a whole, the bounce back has been much sharper and quicker than the first Covid wave.
By when do you expect DHFL merger to be closed? The important approvals are already done. The most important approval was from NCLT, which was received in June. We get three months to close the transaction after NCLT approval and one month is already gone. So, over the next two months, hopefully, everything will be done. However, it is hard to be definitive subject to legal outcome due to various appeals at the court.
Of the total loan book of Rs 44,668 crore, wholesale lending remained at Rs 39,365 crore till March 2021. After DHFL merger, what is your target of retail and wholesale mix? In the medium-term, we want to be two-third retail out of the total loan book. Our belief is that with the acquisition of DHFL, as and when it gets consummated, our retail portion is likely to be 40% and may touch around 50% by the end of this year.
In the long run, do you want to convert DHFL merged entity into a bank? I think, the combined lending entity is likely to be in the range of Rs 60,000 crore in terms of the size of balance sheet. It will be a very large entity. However, there is still a headroom for the entity to grow in the NBFC format.
But, in general, it is right that to reach to a certain scale, the ability in the liability side is important. So, to that extent we will be keenly awaiting the results of the recommendations of the internal working group of RBI, and see what are the chances that the regulator later comes up with, in terms of granting bank licences. We are watching it very closely and will take appropriate action at the right time.
Welcome to the refurbished site of the Reserve Bank of India.
The two most important features of the site are: One, in addition to the default site, the refurbished site also has all the information bifurcated functionwise; two, a much improved search – well, at least we think so but you be the judge.
With this makeover, we also take a small step into social media. We will now use Twitter (albeit one way) to send out alerts on the announcements we make and YouTube to place in public domain our press conferences, interviews of our top management, events, such as, town halls and of course, some films aimed at consumer literacy.
The site can be accessed through most browsers and devices; it also meets accessibility standards.
Please save the url of the refurbished site in your favourites as we will give up the existing site shortly and register or re-register yourselves for receiving RSS feeds for uninterrupted alerts from the Reserve Bank.
Do feel free to give us your feedback by clicking on the feedback button on the right hand corner of the refurbished site.
Welcome to the refurbished site of the Reserve Bank of India.
The two most important features of the site are: One, in addition to the default site, the refurbished site also has all the information bifurcated functionwise; two, a much improved search – well, at least we think so but you be the judge.
With this makeover, we also take a small step into social media. We will now use Twitter (albeit one way) to send out alerts on the announcements we make and YouTube to place in public domain our press conferences, interviews of our top management, events, such as, town halls and of course, some films aimed at consumer literacy.
The site can be accessed through most browsers and devices; it also meets accessibility standards.
Please save the url of the refurbished site in your favourites as we will give up the existing site shortly and register or re-register yourselves for receiving RSS feeds for uninterrupted alerts from the Reserve Bank.
Do feel free to give us your feedback by clicking on the feedback button on the right hand corner of the refurbished site.
Financial Express is now on Telegram. 