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Should You Buy The TCS Stock Post Results?

Personal Finance

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Valuations factor in performance

According to Motilal Oswal Institutional Equities the current market price of TCS factors in all the things, which has led to the broking firm giving a neutral rating on the stock.

“Tata Consultancy Services (TCS) reported revenue growth of 2.4% QoQ CC in 1QFY22, below our estimate of 3.6%. This was primarily due to sharp degrowth in its India business (-14.1% QoQ) on account of the second COVID wave.

Excluding the impact in regional markets, core business growth of 4.1% QoQ CC was broadly in-line. The EBIT margin at 25.5% (marginally above our estimates) declined 130bp QoQ, primarily due to annual wage hikes (170bp impact),” the broking firm has said.

Spending environment remains positive

Spending environment remains positive

According to Motilal Oswal Institutional Equities, the consistent performance from TCS, post the initial phase of the COVID pandemic, indicates continued strength in the tech spending environment, along with its ability to capture outsized market share.

“Management commentary on enterprise demand, especially cloud, implies a positive outlook for peers as well. We see LTM attrition increasing 140bp QoQ as an indication of elevated supply constraints in the industry and expect this to be visible in TCS’ peers as well. Additionally, the company’s hiring streak has continued (the highest ever net employee additions of 20.4k QoQ / 65.3k YoY), indicating a robust demand environment. It further instills the confidence that this trend would persist,” the broking firm has said.

Neutral rating

Neutral rating

Motilal Oswal has accorded a neutral rating to the stock price of TCS. “We have marginally changed our EPS estimates. While we continue to be positive on the company, we remain Neutral on the stock given the elevated multiples. Our target price of Rs 3,400 implies 27x FY23E EPS,” the broking firm has said.

Disclaimer

Disclaimer

The above report is for informational purposes only. Any losses caused as a result of a choice based on the preceding content are not the responsibility of the author or Greynium Information Technologies. As a result, investors should proceed with care, as markets have risen dramatically. Please seek the advice of a professional expert.



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Ethereum, Dogecoin and Polkadot shed upto 7%, BFSI News, ET BFSI

Banking & Finance

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New Delhi: Major Cryptocurrencies were trading lower on Friday in the crypto market. The digital token market has turned jitter ever since Beijing’s regulatory crackdown. The crypto market tanked as much as 7 per cent from the previous day, with all top-10 digital currencies trading lower at 9.30 hours IST.

The past 24 hours witnessed quite a sell-off across the cryptocurrency spectrum. Multiple factors contributed to this profit booking. Barclays in the UK stopped its customers from depositing money into crypto exchanges.

Global Financial institution, Bank of America Corp. created a new team dedicated to researching cryptocurrencies, marking Wall Street’s latest push to capitalize on investors’ frenzy for digital assets. Alkesh Shah will lead the effort, which will also cover technologies tied to digital currencies.

” As per the technical indicators, the long positions on Bitcoin started dropping. It was just a matter of time before the markets witnessed a sell-off. Polkadot, Solana remained subdued as they tanked by almost 8%. Bitcoin’s downside was a bit capped and is currently hovering around the $33,000 mark.” said Edul Patel, CEO and Co-founder of Mudrex.

Back home, Many cryptocurrency traders, shut out of the Indian crypto market by local banks, are now being restrained from buying virtual currencies from overseas markets.

India’s largest private sector bank ICICI is telling customers remitting funds to invest abroad to give a declaration that the money will not be used to buy Bitcoin or other cryptocurrencies.

Crypto Cart: Quick Glance (Source: coinmarketcap.com, data as of 09.30 hours, IST on July 09, 2021)

Crypto Price % change
Bitcoin $32,975.24 -1.17%
Ethereum $2,120.97 – 6.07%
Tether $1 – 0.10%
Binance Coin $308.79 – 4.13%
Cardano $1.32 – 4.80%
XRP $0.6155 – 3.52%
Dogecoin $0.2034 – 7.23%
USD Coin $1 – 0.08%
Polkadot $15.37 – 4.95%
Uniswap $20.76 -2.11%

Note: Price change in last 24 hours

Tech View by ZebPay Trade Desk
Bitcoin is likely to move out of its seven-week trading range of $30,000 to $40,000. Analysts believe that several indicators tracking the cyclical nature of price volatility suggest that a big move is on the horizon. Bollinger bandwidth, which is a measure of volatility, and is calculated by dividing the spread between its band, by the 20-day average of the asset’s price, has declined to a 2 month low of 0.15.

BTC saw similar action in December and April after the bandwidth fell to 0.15, and during both periods major movement was seen. Bollinger analysis places volatility bands 2 standard deviations away from either side of the 20-day price average. BTC has witnessed this phenomenon repeatedly in the past too, when it saw big moves during the 2017 bull run, namely when each time the bandwidth fell to 0.15.

The upside is likely to play out, above the 50-day moving average (MA) resistance, which currently sits at $36,000 levels. Most analysts believe that BTC has factored in most, if not all of the negative news during the May sell-off when the price fell from $60,000 to $30,000. Hence, the downside, if any, is likely to be fairly limited.

Time is in UTC and the daily time frame is 12:00 AM – 12: 00 PM UTC

(Views and recommendations given in this section are the analysts’ own and do not represent those of ETMarkets.com. Please consult your financial adviser before taking any position in the asset/s mentioned.)



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BofA debuts cryptocurrencies research team led by Alkesh Shah, BFSI News, ET BFSI

Banking & Finance

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Bank of America Corp. created a new team dedicated to researching cryptocurrencies, marking Wall Street’s latest push to capitalize on investors’ frenzy for digital assets.

Alkesh Shah will lead the effort, which will also cover technologies tied to digital currencies, and report to Michael Maras, who leads fixed-income, currencies and commodities research globally, according to an internal memo seen by Bloomberg. A spokeswoman for the firm confirmed the contents of the memo, declining to comment further.

“Cryptocurrencies and digital assets constitute one of the fastest growing emerging technology ecosystems,” Candace Browning, head of global research for Bank of America, said in the memo. “We are uniquely positioned to provide thought leadership due to our strong industry research analysis, market-leading global payments platform and our blockchain expertise.”

Banks have been increasingly looking to expand into the wild world of cryptocurrencies, with many pushing to offer wealth-management products or custody services for the asset class. Some banks, including JPMorgan Chase & Co. and Goldman Sachs Group Inc., have begun offering crypto-futures trading.

Shah joined Bank of America in 2013 after stints at Morgan Stanley and Lehman Brothers Holdings Inc. and previously led Bank of America’s global technology specialist team. Mamta Jain and Andrew Moss will also join the lender’s research arm as part of the changes and continue to report to Shah, Browning said in the memo.



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India’s risk-averse lenders are emerging as one of the biggest hurdles to its recovery, BFSI News, ET BFSI

Banking & Finance

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India’s risk-averse lenders are emerging as one of the biggest hurdles to the speed of the nation’s recovery from the pandemic-induced downturn, as they hold back credit when the economy needs it the most.

Loans to companies and individuals has been growing at a subdued 5.5%-6% in recent months, which is half the pace seen before the pandemic struck, Reserve Bank of India data shows. The nation’s biggest lender State Bank of India wants to nearly double its credit growth rate to 10% in the year started April 1, but is willing to miss the goal.

“It is a very fragile situation,” Dinesh Khara, chairman of SBI, said after reporting earnings for the fiscal year ended March. The bank would not “compromise” on asset quality to achieve targets, he said.

Khara’s comments underline the biggest obstacle to both credit off-take and economic growth, pegged at 9.5% this year, already reduced from the central bank’s previous forecast of 10.5% and following an unprecedented contraction last year. Banks’ risk aversion — or the fear of soured loans jumping in a tough economic environment — could slow the economy’s recovery further, according to analysts, including those at the RBI.

“Credit is a necessary and probably most important ingredient for economic growth,” according to S. S. Mundra, a former deputy governor of RBI, who estimated that the multiplier effect of credit on nominal gross domestic product growth is 1.6 times.

It doesn’t help India’s case that it’s already home to one of the biggest piles of soured loans among major economies. And add to that a crisis in the shadow banking sector, which culminated in the rescue of two lenders and bankruptcy of two more over the past couple of years.

Corporate willingness for new investments is low, according to the Centre for Monitoring Indian Economy Pvt., with capital expenditure declining. While companies have posted bumper profits mostly on the back of widespread cost cutting, most have used the extra funds generated to pay down bank loans.

India’s risk-averse lenders are emerging as one of the biggest hurdles to its recovery

According to research from SBI, where economists analyzed the top 15 sectors and a thousand listed companies, more than 1.7 trillion rupees ($22.8 billion) worth of debt was pared last year. Refineries, steel, fertilizers, mining and mineral products as well as textile companies alone reduced debt by more than 1.5 trillion rupees, with the trend continuing this year, the bank’s chief economist Soumya Kanti Ghosh wrote recently.

“Any meaningful recovery beyond a 10% growth in credit demand will require a substantial turn in the private capex cycle, which still seems sometime away as corporates are focused on deleveraging,” said Teresa John, economist at Nirmal Bang Equities Pvt. in Mumbai. She forecasts GDP growth of 7% this year, which is at the lower end of a Bloomberg survey with consensus at 9.2%.

What Bloomberg Economics Says…
“A further slump in credit growth means that the RBI is likely to allow some more time for credit recovery to take shape before its begins to unwind its stimulus measures.”

— Abhishek Gupta, India economist

Consumers too are repairing their finances, which bodes ill for overall demand for goods and services as well as retail loans, and in turn economic growth. The current recovery is likely to be less steep than the bounce that unfolded in late 2020 and early 2021, according to analysts at S&P Global Ratings.

“Households are running down savings,” the S&P analysts wrote. “A desire to rebuild their cash holding may delay spending even as the economy reopens.”

And while Covid-19 relief measures may provide banks some reprieve, the need to raise capital will remain high once virus related stress start to emerge on their balance sheets.

“Indian banks’ challenges posed by the coronavirus pandemic have increased due to a virulent second wave,” Fitch Ratings’ Saswata Guha and Prakash Pandey said this week, as they cut India’s growth forecast by 280 basis points to 10%. That underlines “our belief that renewed restrictions have slowed recovery efforts and left banks with a moderately worse outlook for business and revenue generation.”



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Loan growth shows virus leaving deep scars on India’s economy, BFSI News, ET BFSI

Banking & Finance

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India’s risk-averse lenders are emerging as one of the biggest hurdles to the speed of the nation’s recovery from the pandemic-induced downturn, as they hold back credit when the economy needs it the most.

Loans to companies and individuals has been growing at a subdued 5.5%-6% in recent months, which is half the pace seen before the pandemic struck, Reserve Bank of India data shows. The nation’s biggest lender State Bank of India wants to nearly double its credit growth rate to 10% in the year started April 1, but is willing to miss the goal.

“It is a very fragile situation,” Dinesh Khara, chairman of SBI, said after reporting earnings for the fiscal year ended March. The bank would not “compromise” on asset quality to achieve targets, he said.

Khara’s comments underline the biggest obstacle to both credit off-take and economic growth, pegged at 9.5% this year, already reduced from the central bank’s previous forecast of 10.5% and following an unprecedented contraction last year. Banks’ risk aversion — or the fear of soured loans jumping in a tough economic environment — could slow the economy’s recovery further, according to analysts, including those at the RBI.

“Credit is a necessary and probably most important ingredient for economic growth,” according to S. S. Mundra, a former deputy governor of RBI, who estimated that the multiplier effect of credit on nominal gross domestic product growth is 1.6 times.

It doesn’t help India’s case that it’s already home to one of the biggest piles of soured loans among major economies. And add to that a crisis in the shadow banking sector, which culminated in the rescue of two lenders and bankruptcy of two more over the past couple of years.

The RBI expects banks’ bad-loan ratio to rise to 9.8% by the end of this financial year from 7.48% a year ago.

Sluggish Capex
While banks are dithering on loans on the one hand, companies are pushing back investment plans amid lack of demand on the other.

Corporate willingness for new investments is low, according to the Centre for Monitoring Indian Economy Pvt., with capital expenditure declining. While companies have posted bumper profits mostly on the back of widespread cost cutting, most have used the extra funds generated to pay down bank loans.
Loan growth shows virus leaving deep scars on India’s economy
According to research from SBI, where economists analyzed the top 15 sectors and a thousand listed companies, more than 1.7 trillion rupees ($22.8 billion) worth of debt was pared last year. Refineries, steel, fertilizers, mining and mineral products as well as textile companies alone reduced debt by more than 1.5 trillion rupees, with the trend continuing this year, the bank’s chief economist Soumya Kanti Ghosh wrote recently.

“Any meaningful recovery beyond a 10% growth in credit demand will require a substantial turn in the private capex cycle, which still seems sometime away as corporates are focused on deleveraging,” said Teresa John, economist at Nirmal Bang Equities Pvt. in Mumbai. She forecasts GDP growth of 7% this year, which is at the lower end of a Bloomberg survey with consensus at 9.2%.

What Bloomberg Economics Says…
“A further slump in credit growth means that the RBI is likely to allow some more time for credit recovery to take shape before its begins to unwind its stimulus measures.”

— Abhishek Gupta, India economist

Consumers too are repairing their finances, which bodes ill for overall demand for goods and services as well as retail loans, and in turn economic growth. The current recovery is likely to be less steep than the bounce that unfolded in late 2020 and early 2021, according to analysts at S&P Global Ratings.

“Households are running down savings,” the S&P analysts wrote. “A desire to rebuild their cash holding may delay spending even as the economy reopens.”

And while Covid-19 relief measures may provide banks some reprieve, the need to raise capital will remain high once virus related stress start to emerge on their balance sheets.

“Indian banks’ challenges posed by the coronavirus pandemic have increased due to a virulent second wave,” Fitch Ratings’ Saswata Guha and Prakash Pandey said this week, as they cut India’s growth forecast by 280 basis points to 10%. That underlines “our belief that renewed restrictions have slowed recovery efforts and left banks with a moderately worse outlook for business and revenue generation.”



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4 Best Performing Floater Funds To Start SIP In 2021

Personal Finance

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HDFC Floater Rate Debt Fund Direct Plan Growth

This fund was launched in January 2013 by the fund house HDFC Mutual Fund. HDFC Floating Rate Debt Fund Direct Plan has a one-year growth rate of 6.30 percent. According to Value Research statistics, it has generated 8.36 percent average yearly returns since its inception. Axis Bank Ltd., Embassy Office Parks REIT, Canara Bank, Gujarat State, Muthoot Finance Ltd., and the Reserve Bank of India are the fund’s top holdings.

The fund’s expense ratio is 0.23 percent, and its debt sector allocation is allocated across financial, energy, sovereign, construction, and others. The fund presently has Rs 17,250 Cr in assets under management (AUM), and the latest NAV as of July 8, 2021 is Rs 38.91. The fund not only has outstanding stability in terms of generating returns but also has provided good returns in the past, according to the historical performance. SIPs in this fund can be started with a minimum contribution of Rs 1000 and there is no exit load.

ICICI Prudential Floating Interest Fund Direct Plan Growth

ICICI Prudential Floating Interest Fund Direct Plan Growth

This Floater mutual fund scheme was launched in January 2013, by the fund house ICICI Prudential Mutual Fund. ICICI Prudential Floating Interest Fund Direct Plan -Growth returns over the last year are 6.96 percent, according to Value Research data. Since its inception, it has generated an average yearly return of 8.82 percent. State Bank of India, Gujarat State, Motherson Sumi Systems Ltd., SRF Ltd., Rajasthan State, Embassy Office Parks REIT, and Motherson Sumi Systems Ltd. are the fund’s top holdings.

The expense ratio of the fund is 0.60 percent, and its debt sector allocation is balanced between sovereign, construction, and others. The fund’s current AUM is Rs 12,113 Cr and the latest NAV as of 8 July 2021 is Rs 350.61. The fund does not have an exit load and one can start SIP with Rs 500.

Aditya Birla Sun Life Floating Rate Fund Direct Plan Growth

Aditya Birla Sun Life Floating Rate Fund Direct Plan Growth

Aditya Birla Sun Life Mutual Fund introduced this Floater mutual fund plan in January 2013. Aditya Birla Sun Life Floating Rate Direct Fund’s 1-year growth results are 5.04 percent. According to Value Research statistics, it has produced 8.56 percent average yearly returns since its inception. The fund has a 0.23 percent expense ratio, and its top holdings include Axis Bank Ltd., Aditya Birla Finance Ltd., Haryana State, National Bank For Agriculture & Rural Development, Sikka Ports and Terminals Ltd., Indian Oil Corporation Ltd., and Nabha Power Ltd.

The debt sector allocation of the fund is categorized into financial, energy, sovereign, and others. The fund’s current AUM is Rs 14,324 Cr, and the latest NAV is Rs 274.88 as of July 8, 2021. There is no exit load on the fund, and one may begin SIP with as little as Rs 1000.

Nippon India Floating Rate Fund Direct Growth

Nippon India Floating Rate Fund Direct Growth

The fund house Nippon India Mutual Fund introduced this Floater mutual fund product in January 2013. The 1-year returns for Nippon India Floating Rate Fund Direct-Growth are 5.82 percent. According to Value Research, it has achieved 8.59 percent average yearly returns since its inception. The fund’s major holdings are GOI, Rural Electrification Corporation Ltd., Madhya Pradesh State, Tata Capital Housing Finance Ltd., State Bank of India, LIC Housing Finance Ltd., Reliance Industries Ltd., Axis Bank Ltd., HDFC Ltd, and National Bank For Agriculture & Rural Development.

The fund has an expense ratio of 0.24%. The fund’s debt sector allocation is segmented into engineering, financial, energy, sovereign, and others. As of July 8, 2021, the fund’s current AUM is Rs 15,676 Cr, and the latest NAV is Rs 36.60. The fund has no exit load, and one may start a SIP with as low as Rs 100.

Best Performing Floater Funds In 2021

Best Performing Floater Funds In 2021

Here are the best performing floater funds in 2021 based on past returns and ratings.

Funds 1-Year Returns 3-Year Returns 5- Year Returns Rating
HDFC Floater Rate Debt Fund Direct Plan Growth 6.30% 8.05% 7.80% 4 star by Morningstar
ICICI Prudential Floating Interest Fund Direct Plan Growth 6.96% 8.52% 8.31% 5 star by Morningstar
Aditya Birla Sun Life Floating Rate Fund Direct Plan Growth 5.04% 7.89% 7.85% 5 star by Morningstar
Nippon India Floating Rate Fund Direct Growth 5.82% 9.01% 8.10% 5 star by Morningstar

Should you invest?

Should you invest?

Starting from March 2021 till now, floater debt funds have done really well, the reason behind this is floater rate funds invest in AAA-rated instruments and they have given average returns of 7 to 8 percent in the last 1 to 3 years. Floater funds are diversified with fixed-coupon bonds and derivative instruments, which means that in the current environment, these funds can provide high returns in the short term, as this category has gained popularity in recent months.

Because the funds primarily invest in floating-rate securities, the return on floater funds would rise if there is a surge in interest rates. As interest rates are projected to steadily rise in the coming months, investors may invest in floater funds for short to medium term. Investors seeking consistent returns can consider investing in ultra-short term or liquid funds of this category, but keeping default or credit risk in consideration.

Disclaimer

Disclaimer

The views and investment tips expressed by authors or employees of Greynium Information Technologies, should not be construed as investment advise to buy or sell stocks, gold, currency or other commodities. Investors should certainly not take any trading and investment decision based only on information discussed on GoodReturns.in We are not a qualified financial advisor and any information herein is not investment advice. It is informational in nature. All readers and investors should note that neither Greynium nor the author of the articles, would be responsible for any decision taken based on these articles. Please do consult a professional advisor. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and authors do not accept culpability for losses and/or damages arising based on information in GoodReturns.in



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RBI advises banks to shift away from LIBOR to alternative reference rates

Banking & Finance

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The Reserve Bank of India (RBI) has encouraged banks and financial institutions to cease entering into new financial contracts that reference LIBOR as a benchmark as soon as practicable and and in any case by December 31, 2021.

The central bank also advised banks and financial institutions to encourage their customers to cease entering into new London Interbank Offered Rate (LIBOR) referenced contracts.

Instead of LIBOR, the central bank asked them to use any widely accepted alternative reference rates (ARR).

This directive has been issued to ensure orderly, safe and sound LIBOR transition and considering customer protection, reputational and litigation risks involved, the RBI said in a circular.

LIBOR has been used in the global financial system as one of the benchmarks for a large volume and broad range of financial products and contracts.

According to a 2014 Financial Stability Board report, the cases of attempted market manipulation and false reporting of global reference rates, together with the post (global financial)-crisis decline in liquidity in interbank unsecured funding markets, have undermined confidence in the reliability and robustness of existing interbank benchmark interest rates.

The “Roadmap for LIBOR Transition” comes in the aforementioned context.

Comprehensive review

The RBI wants banks/financial institutions to undertake a comprehensive review of all direct and indirect LIBOR exposures and put in place a framework to mitigate risks arising from such exposures on account of transitional issues including valuation and contractual clauses.

They may also put in place the necessary infrastructure to be able to offer products referencing the ARR.

The central bank underscored that continued efforts to sensitise clients about the transition as well as the methodology and convention changes involved in the alternatives to LIBOR will be critical in this context.

While certain US dollar LIBOR settings will continue to be published till June 30, 2023, the RBI observed that the extension of the timeline for cessation is primarily aimed at ensuring roll-off of US dollar LIBOR-linked legacy contracts, and not to encourage continued reliance on LIBOR.

“It is, therefore, expected that contracts referencing LIBOR may generally be undertaken after December 31, 2021, only for the purpose of managing risks arising out of LIBOR contracts (e.g. hedging contracts, novation, market-making in support of client activity, etc.), contracted on or before December 31, 2021,” it added.

MIFOR

RBI said banks are also encouraged to cease using the Mumbai Interbank Forward Outright Rate (MIFOR), published by the Financial Benchmarks India (FBIL), which references the LIBOR as soon as practicable and in any event by December 31, 2021.

FBIL has started publishing daily adjusted MIFOR rates from June 15, 2021 and modified MIFOR rates from June 30, 2021 which can be used for legacy contracts and fresh contracts respectively.

Banks may trade in MIFOR after December 31, 2021 only for certain specific purposes such as transactions executed to support risk management activities such as hedging, required participation in central counterparty procedures (including transactions for hedging the consequent MIFOR exposure), market-making in support of client activities or novation of MIFOR transactions in respect of transactions executed on or before December 31, 2021.

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Average ticket size of AePS transactions rising: Rapipay Fintech

Banking & Finance

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The average transaction size for Aadhaar Enabled Payment System has increased in recent months along with the volume of transactions on the platform with greater adoption.

“The average ticket size of AePS transactions has increased from ₹2,500 to ₹2,900 in the last two quarters, showing increasing trust and usage of AePS in India, especially in the rural markets,” said Yogendra Kashyap, MD and Founder, RapiPay Fintech.

Monthly data from the National Payments Corporation of India had revealed that AePS transactions in June stood at 8.75 crore in volume and ₹24,667.8 crore in value. In contrast, there were 8.42 crore transactions worth ₹24,619.24 crore in May on the platform.

Daily AePS transactions in July have also remained high. On July 6, there were 31.7 lakh AePS transactions amounting to ₹854.95 crore.

Rapipay reported an 18 per cent increase in AePS transactions in June this year compared to May.

Kashyap attributed this growth to reopening of markets and movement of people in June after lockdown restrictions were eased.

“This gave required impetus to businesses across industries and hence cash withdrawal requirement in both urban and rural markets increased,” he said.

Rapipay also reported an eight per cent increase in overall cash out transactions from AePS and Micro ATMs in the first quarter of the fiscal as against the fourth quarter of 2020-21.

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Top banks eye overseas AT1 bond sale as domestic investors turn wary, BFSI News, ET BFSI

Banking & Finance

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As mutual funds turn wary of AT1 bonds, banks are looking overseas to raise capital through the instrument.

Five top lenders, including HDFC Bank, Axis Bank and State Bank of India, are looking to raise up to $2 billion overseas in the next few months through Additional Tier I (AT1) as they anticipate an increase in credit demand.

State Bank of India, plans to raise upto Rs 14,000 crore through additional tier-I bonds (AT1 bonds) in the current financial year (FY22) to enhance capital adequacy profile.

The Central Board approved the capital raise by way of issuance of Basel lll-compliant debt instruments in rupee and/or US dollar in FY22, the bank said last month.

Canara Bank is planning to raise up to Rs 3,400 crore in capital by issuing fresh AT1 bonds.

These bonds are expected to offer yields between 4 per cent and 5 per cent. Covering currency risks, the total cost may go up to 9 per cent.

AT1 bonds

AT1 bonds, also known as perpetual bonds, add to a bank’s capital base and allow a lender to meet fund adequacy thresholds set by regulators. Such securities do not have any fixed maturity but generally have a five-year call option, giving defined exit routes to investors. These papers are always rated one or two notches below the same issuer’s

general corporate rating. Domestic investors, including mutual funds, are wary of AT1 bonds after Yes Bank wrote off over Rs 8,000 crore of such bonds during its bailout in 2020.

State Bank of India was the only bank from the country to raise AT1 bonds overseas in 2016. Five-year call options on that series of AT1 bonds could be exercised this year.

Between FY18 and FY21, perpetual bond sales by banks have nearly halved to Rs 18,772 crore from Rs 34,860 crore three years ago. In FY22, AT1 bond sales have so far been negligible.

Sebi directive

Capital market regulator Sebi has eased the valuation rule pertaining to perpetual bonds in March last year.

The move came after the finance ministry asked the Securities and Exchange Board of India (Sebi) to withdraw its directive to mutual fund houses to treat additional tier-I (AT-1) bonds as having maturity of 100 years as it could disrupt the market and impact capital-raising by banks.

Sebi said the deemed residual maturity of Basel III AT-1 bonds will be 10 years until 31 March, 2022, and would be increased to 20 and 30 years over the subsequent six-month period.

From April 1, 2023, onwards, the residual maturity of AT-1 bonds will become 100 years from the date of issuance of the bonds.

In addition, Sebi said that deemed residual maturity of Basel III Tier 2 bonds would be considered 10 years or contractual maturity, whichever is earlier, until March 2022. After that, it will be in accordance with the contractual maturity.

AT-1 bonds are considered perpetual in nature, similar to equity shares as per the Basel III guidelines. They form part of the tier-I capital of banks.



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Global banks include Zoom in their apps for business communications, BFSI News, ET BFSI

Banking & Finance

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BFSI companies, which have been operating out of employee homes during the pandemic, are tying up with Zoom as they aggressively adopt virtual communication models.

“A few big global banks have already entered into this collaborative model with Zoom. HSBC UK has expanded its use of video appointments using Zoom. The customers can get mortgage advice, upload any supportive evidence onto the system, and take out a mortgage via this collaborative technology,” Harry Moseley, CIO, Zoom, told ETBFSI.

In a deal between Goldman Sachs Japan and SoftBank group, the Goldman Sachs group set up a framework to coordinate with a 60 member sales team via Zoom.Stressing on the importance of Zoom in banking communications, Moseley said, “If I am selling banking products to you, if I am talking to you about portfolio or investment strategies, etc., the natural tendency of people is to express their positive or negative sentiment. These nonverbal cues are super important.”

Collaborative models

BFSI companies are investing in partnerships and collaborative models involving new tech to stay relevant in a rapidly evolving space. Embedding the Zoom elements in banking, financial services, and insurance apps can help in enhanced customer interaction, Moseley said.

“Financial services in general look forward to reducing the friction to connect with their clients. With virtual communications, they have seen an uptick in volumes and uptick in interactions, and an uptick in a sort of ability to connect with clients,” Moseley said.

Changing work structure

The BFSI sector has been aggressive in adopting digitization. Given the pandemic, they are looking for more collaborations and capabilities in the virtual environment.

“Organisations today need to rethink the whole office structure. Offices need to be collaborative and physically safe. There should be inclusivity, collaboration and safety in the work environment,” Moseley said. “Work is not a place. Work is something we do,” he said.

Zoom has more than 300 million users and can accommodate 50,000 people at a time.



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