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LIC registers improved persistency ratio for individual business in FY21

Banking & Finance

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Life Insurance Corporation of India seems to have beaten the odds of the pandemic, with its 13th month persistency for individual business registering improvement in 2020-21.

For the quarter ended March 31, 2021, LIC reported a 13th month persistency of 63 per cent by number of policies and 74 per cent in terms of annualised premium for its individual regular business.

For the full fiscal 2020-21, its 13th month persistency for individual business was 67 per cent by number of policies and 79 per cent by annualised premium.

In contrast, LIC had reported a 13th month persistency of 61 per cent by number of policies and 72 per cent by annualised premium in 2019-20 for individual business.

The IPO bound life insurance behemoth also showed improved persistency ratios for the 61st month in the segment under review.

It was 48 per cent by number of policies and 59 per cent by annualised premium in 2020-21 as against 44 per cent and 54 per cent respectively in 2019-20.

Persistency ratio is an important benchmark for life insurers as it reflects the number of policyholders who paid their renewal premium. It is widely seen as an indicator of the quality of the sale as well as future growth.

This was especially important last fiscal when many insurers had initially announced a drop in persistency levels as customers faced job losses and salary cuts. However, by the end of the fiscal year, most life insurers reported a return in renewals and persistency levels.

Over the last year, LIC had also launched special measures to help customers amidst the pandemic, including a special campaign to revive lapsed individual life cover policies.

Meanwhile, in terms of first year premium this fiscal, LIC has seen better performance compared to last fiscal.

According to IRDAI data, it registered a drop of 12.38 per cent in May 2021 to ₹8,947.64 crore in May 2021, compared to a decline of 24.3 per cent in May 2020.

It registered flat growth in first year premium in the first two months of the fiscal 2021-22 at ₹13,804.40 crore compared to ₹13,793.18 crore in the same period last fiscal.

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How corporates gorged on RBI’s easy money, shunned banks?, BFSI News, ET BFSI

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Corporates took the advantage of liquidity offered by Reserve Bank‘s special liquidity windows to raise funds from the bond market, reducing their dependence on bank loans during the quarter

While the corporate bond market is still dominated by financial companies, non-financial companies have increased borrowing in the last one year.

The corporates tapped the long-term repo operations (LTRO) funds, and targeted LTRO offered by the RBi last year, raising funds for up to three years. Firms raised funds aggressively during the third and fourth quarters of the last year for deleveraging high-cost debt.

The fundraise

Corporates raised Rs 2.1 lakh crore in December ended quarter and Rs 3.1 lakh crore in the fourth quarter from the corporate bond markets. In contrast, the corresponding year-ago figures were Rs 1.5 lakh crore and Rs 1.9 lakh crore, respectively.

Bonds were mostly raised by top-rated companies at 150-200 basis points below bank loans. Most of the debt was raised by government companies as they have top-rated status.

For AAA-rated corporate bonds, the yield was 6.85 per cent in May 2020, which fell to 5.38 per cent in April 2021 and to 5.16 per cent in May 2021.

Debt reduction

The corporate world focused on deleveraging high-cost loans through fundraising via bond issuances despite interest rates at an all-time low. This has led to muted credit growth for banks.

According to data analysis by the SBI research wing, the top 15 sectors with more than 1,000 listed entities reported over Rs 1.7 lakh crore of debt reduction in 2000-21.

Refineries, steel, fertilizers, mining & mineral products, and textile alone reduced debt by more than Rs 1.5 lakh crore during FY21.

Fertilizers, mining and minerals, FMCG, cement products, consumer durables, and capital goods were among the sectors where loan reduction of 20 per cent or more was reported during FY21.

According to data from the Reserve Bank of India, loan growth fell to a 59-year low of 5.6% on year as of March 31. Credit was logging a 6.4% in the previous fiscal.

Low interest rates

As interest rates drop to an all-time low, corporates reduced their loan liabilities to facilitate a lower finance cost, which resulted in the primary issuance of bonds increasing by nine per cent.

The spread of AAA bonds for a 10-year tenor declined from 124 bps in April 2020 to 70 bps in April 2021.

Similarly, the spread for 5 year and 3-year bonds declined from 89 bps and 147 bps in April 2020 to 9 bps and 30 bps in April 2021 respectively.

This trend is continuing in FY22 also.

These companies not only reduced their loan liabilities at lower finance cost but also increased their cash and bank balance by around 35% in March, as compared to March 2020, suggesting a conservative approach to conserve cash during uncertain times.

Corporate willingness for new investments also remains tepid as the economy is still recovering from the second wave.



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3 Sugar Stocks To Buy From ICICI Securities As Companies Seen To Profit From EBP

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Investment

oi-Roshni Agarwal

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In a bid to promote use of cleaner fuel, the government has advanced its ambitious EBP programme to 2025 i.e. 20% ethanol blended petrol and this shall be primarily beneficial to sugar companies in India as sugar companies in the country are also nudged to take on sugar production aggressively, with ethanol being the by-product.

3 Sugar Stocks To Buy From ICICI Securities As Companies Seen To Profit From EBP

3 Sugar Stocks To Buy From ICICI Securities As Companies Seen To Profit From EBP

Few of the short term advantages that the sector saw during the last few years were:

– Introduction of MSP or minimum support price

-Exports incentives for sugar were also introduced- 6 million tonnes of exports allowed in sugar year 2020-21

-Now this long term ethanol blended petrol programme (EBP) has also taken off aggressively say for instance oil marketing companies are procuring ethanol in huge amount i.e. 300 crore litres. Currently for the 10% ethanol blended petrol, the requirement shall be a huge 400 crore litre and for future course i.e. for 15% and 20% blending levels, there has been suggested a clear road-map.

All the companies with a higher capacity in terms of ethanol production will benefit more in comparison to those with sugarcane crushing capacity

Dalmia Bharat Sugar:

With sugar production plants in UP, the company is the largest sugar producing companies in India. The company will double its ethanol production capacity to 15 crore litre per annum. The announcement comes close on the heels of the government’s target of upping ethanol blending to 25% by 2025. As of now ethanol blending in petrol is at 8.5%. Also, the company has benefitted immensely from exports on account of higher global sugar price.

In its May report, the brokerage said “With high global sugar prices, the industry would be able to export 5-6 million tonnes (MT) of sugar in the next sugar season as well. We believe aggressive sugar exports & 3-4 MT of sugar diversion towards ethanol wouldbring down sugar inventories to ~7 MT by September 2022, which would in turn push domestic sugar prices upwards. We believe now market recognises structural earning growth trajectory for sugar companies. Hence, we value the stock at 10x FY23E earnings”.

Balrampur Chini Mills:

Balrampur Chini is the country’s second largest sugar manufacturing company. Their capacity for ethanol production are to be seen between October and December 2022 and given the fact that it is a Greenfield project, the company’s earnings shall be higher in FY24 in comparison to FY23.

Other positives of the company include:

Operating revenues are the highest in the industry at Rs. 1019 crore.

In net profit, the company is the industry leader reporting profit of Rs. 235.5 crore

ICICI Securities has set the price target for the stock at Rs. 385, an upside of over 8 percent.

BCML is the most efficient sugar company with sustainable earnings and strong cash flow generation. We believe the company would increase shareholder’s payout (buybacks, dividend) to ~60% from current 40% payout. “We believe the market recognises the big opportunity in ethanol blending programme and the stock is poised to command better valuation multiples. We value the stock at 10x FY23E earnings with a target price of
Rs. 385 per share (earlier: Rs. 285) and maintain our BUY recommendation”, said the brokerage in its report.

Triveni Engineering:

Triveni Engineering is into sugar production, power co-generation, distillery, industrial gearing, and water treatment solutions. Triveni Engineering & industries (TEIL) is one of top five sugar companies in UP with sugar crushing capacity of 60,500 tonnes per day and distillery capacity of 320 kilolitres per day (KLPD).

The stock of Triven Engineering currently commands a good to expensive valuation and on the financial front has been showing consistency and has good quality management. Return on equity has been strong for the company at 25% in comparison to its peers.

Disclaimer:

Note the listed stocks are taken from the brokerage recommendation. The story is for informational purpose only. The company nor its authors shall be liable for any loss incurred in case the decision on the investment has been taken considering the above story. Please consult investment advisors for any investment calls.

GoodReturns.in



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Post lifting of embargo, HDFC Bank ready to return with a bang in cards segment

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Private sector lender HDFC Bank, which is under an embargo by the Reserve Bank of India for credit card acquisitions and digital launches, is hoping to return with a “bang” and regain its incremental market share in cards.

“We have used the last six month period since December to introspect, reinvigorate and re-engineer for the future. We will use tech and digital to help us continue being dominant in the space and will get back to the market with a bang. We have the entire system ready and charged up,” said Parag Rao, Group Head – Payments, Consumer Finance, Digital Banking and IT, HDFC Bank.

Also read: Standard Life sells ₹6,783 cr worth shares of HDFC Life

He expressed hope that the embargo on the bank would be lifted by the RBI soon and said the lender has been in continuous dialogue with the regulator.

“We have very aggressive plans to get back to the market with a big bang. You will see a significant correction in the incremental marketshare,” Rao told reporters at a virtual press conference.

Laying out future plans for when the embargo will be lifted, he said the bank has a much more wholesome strategy.

“It is not only to regain our (credit cards) number and value market share but also to forge new partnerships, build more scale, introduce newer products and services and continue on our journey of being the dominant payments bank player in the space,” he said.

Also read: HDFC Bank acquires 7.4% stake in Virtuoso Infotech

RBI data reveals that lenders such as ICICI Bank and State Bank of India have seen a sharp rise in acquisition of credit card customers since the embargo on HDFC Bank.

ICICI Bank added over 8.15 lakh new credit card customers between January and April this year.

However, HDFC Bank continues to have the largest credit card customer base with 1.49 crore outstanding credit cards as on April 30, 2021.

Rao said the bank has been using the six month period to work on its technology and digital processes and also has a base of pre-approved customers, who will be offered credit cards when the embargo is lifted.

“Our growth on the liability and asset side has continued. We have acquired a significant number on liability and asset side. Our strategy of 75 per cent to 80 per cent internal customer for card base still continues. We have a large database of customers who have one relationship with the bank. We have pre-approved them, we have primed our channels and have set milestones,” he said.

Also read: Focus is to strengthen internal checks and balances: HDFC Bank MD & CEO

In the interim, HDFC Bank has been working with its existing card customers and engaging them in deeper relationships.

“We saw very good results by refocussing on our customer base. We have a far more engaged portfolio, significant increase in activation,” he said, adding that the lender has also broadened the skills of its sales force and reskilled it.

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Amid worries over demand revival, Axis Bank sees 10 times growth in online shopping fest

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Even as policy makers grapple with ways to revive demand in the pandemic-hit economy, an online sale fest launched by Axis Bank offering 15 per cent discounts is witnessing a 10-times surge in daily volumes, a senior official has said.

The bank is giving its debit and credit card holders a flat 15 per cent cashback on partner e-commerce portals like Flipkart and Amazon as part of the ten-day ‘Grab Deals Fest’ which is on till July 4.

“We are witnessing a 10x jump in overall spends by gross merchandise value (GMV) if I were to compare it with daily average in the month prior to launch and almost similar increase in the number of customers who are availing the offer,” its president and head of digital business and transformation, Sameer Shetty, told PTI.

 

It can be noted that the second wave of the Covid-19 pandemic has hit demand across the economy, with many analysts saying that private consumption has fallen in such a way that even staples have been hit. Even as the lockdown measures get eased, demand will take time to revive as income generation needs to come back first.

Usually, a lot of the e-commerce sales activity happens around the festive season towards the end of the year. There are reports saying the e-commerce players are expecting a subdued activity this year.

Shetty said the bank is witnessing a surge in ordering from urban areas where e-commerce ordering is active but stressed that the ordering is across income segments.

The products ordered can largely be called discretionary items, Shetty said, hinting that the bank’s experience cannot be exactly compared with the macro picture because of a slew of factors like a small set of people in the economy it serves and their background.

The bank launched the offer because it thought that the second wave is now receding and people are coming out of stressful times. The lender’s main focus is making as many customers avail of the offer rather than looking at the GMV, he said, adding that such schemes aim to deepen the connection with customers.

The discounts are shared between the bank and the e-commerce major, Shetty said, maintaining that the bank does not want to do big bang shopping festivals and will continue with such deals regularly.

The response to the current offer is “far beyond” expectations, Shetty said, exuding confidence that by the time the offer ends, the bank would have done significantly better than what it aimed for initially.

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Reserve Bank of India – Press Releases

Press Releases

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I. T-Bill 91 days 182 days 364 days
II. Total Face Value Notified ₹15,000 Crore ₹15,000 Crore ₹6,000 Crore
III. Cut-off Price and Implicit Yield at Cut-Off Price 99.1486
(YTM: 3.4443%)		 98.1789
(YTM: 3.7200%)		 96.2657
(YTM: 3.8898%)
IV. Total Face Value Accepted ₹15,000 Crore ₹15,000 Crore ₹6,000 Crore

Ajit Prasad
Director   

Press Release: 2021-2022/449

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Spocto Solutions plans US foray, eyes buyout in AI space

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Fintech firm Spocto Solutions Pvt Ltd, which helps banks and financial institutions in collections related activities with its digital analytics platform, proposes to enter the US market with an acquisition of a technology firm.

“We are looking at acquiring a tech firm in the US in the area of artificial intelligence over the next 12-18 months” said Sumeet Srivastava, Co-Founder and CEO, Spocto Solutions. “We will be looking for firms in the $8-10 million size. Our books are strong, and we can always raise debt, if required to fund the deal,” he added.

Spocto is in talks with strategist companies to help identify potential target firms in the US. Spocto, Srivastava said, sees an opportunity in the collections and recovery processes of banking in the US, where deployment of technology such as artificial intelligence and machine learning is yet to take place.

Client base

The four-year bootstrapped, profitable fintech firm counts eight of the top 10 private banks in the country among its customer base. Spocto’s digital analytics platform, which supports some 26 regional languages and dialects, is being used by financial institutions for EMI collections and to prevent defaults, Srivastava added.

“We serve the entire retail product portfolio such as credit card and retail loans for the banks. In any given month, close to 15 million borrowers are being touched by our platform on behalf of 10-12 banks and financial institutions,” Srivastava said. Spocto has also approached a public sector bank, which has shown interest in deploying its tech platform.

Further, Spocto has also been helping banks and FIs with EMI collections in the agriculture segment for products such as Kisan Credit Card and small equipment loans. It also expects to start work on the tractor loan segment for a bank soon, Srivastava added.

Besides India, Spocto has an overseas presence in the Middle East, where the company is helping four of the top ten banks in the region with collections. Currently, about 15-20 per cent of Spocto’s revenues come from the Middle East operations. Srivastava did not disclose Spocto’s earnings but said the company charges banks on pay per use or software as a service (SAAS) model.

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Reserve Bank of India – Press Releases

Press Releases

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The Reserve Bank of India has today communicated that the applicable average base rate to be charged by Non-Banking Financial Company – Micro Finance Institutions (NBFC-MFIs) to their borrowers for the quarter beginning July 1, 2021 will be 7.98 per cent.

It may be recalled that the Reserve Bank had, in its circular dated February 7, 2014, issued to NBFC-MFIs regarding pricing of credit, stated that it will, on the last working day of every quarter, advise the average of the base rates of the five largest commercial banks for the purpose of arriving at the interest rates to be charged by NBFC-MFIs to their borrowers in the ensuing quarter.

Ajit Prasad
Director   

Press Release: 2021-2022/448

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SBI: You may incur a fee of Rs 15 plus GST on cash withdrawal at SBI ATMs from tomorrow

Personal Finance

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Planning

oi-Vipul Das

|

Generally known as a zero balance savings account, SBI BSBD (Basic Savings Bank Deposit Account) can be opened by individuals of poorer sections of India with proper KYC documents. SBI Basic Savings Bank Deposit Account comes with a number of perks such as no limit on minimum and maximum balance, basic Rupay ATM-cum-debit card, free NEFT/RTGS service, no account closure charges, no charge for reactivating inactive accounts and so on. SBI, on the other hand, has modified its service charges for cheque book, transfer, certain non-financial transactions, and cash withdrawals from its own ATMs and bank branches. With effect from 1 July 2021, these charges would apply to the SBI BSBD account holders.

You may incur a fee of Rs 15+GST on cash withdrawal at SBI ATMs from tomorrow

Cash withdrawal at SBI ATMs and non-SBI ATMs: According to SBI, BSBD account holders would be eligible for four free cash withdrawals each month at ATMs and bank branches. Every transaction that exceeds the free threshold will be levied a charge of Rs 15 + GST by the bank. This cash withdrawal fee will apply at SBI and non-SBI ATMs.

Cash withdrawal fees at SBI branches: After the first four free cash withdrawals at branch as well as ATM, SBI will recover a service charge of Rs 15 plus GST per transaction, according to the official website of the lender. Non-financial transactions and transfer transactions by BSBD account holders in SBI and non-SBI bank branches would be free of service charge, according to the lender.

In addition, BSBD account holders will enjoy 10 free cheque leaves every financial year from SBI. After the free limit, the bank will incur a fee of Rs 40 plus GST for a 10-leaf cheque book, Rs 75 plus GST for a 25-leaf cheque book, and Rs 50 plus GST for a 10-leaf or part-leaf emergency cheque book. Senior folks, on the other hand, will be excluded from these charges.

Additionally, by keeping the safety of its customers in mind amid the second wave of COVID-19, SBI has also issued contactless service that will help you with your urgent banking needs. On its twitter handle SBI today announced that “Stay safe at home, we are there to serve you. SBI provides you a contactless service that will help you with your urgent banking needs. Call our toll free number 1800 112 211 or 1800 425 3800.”



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Gold Prices See The Highest Monthly Decline In 4 Years: Best Ways To Buy The Yellow Metal

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Investment

oi-Roshni Agarwal

|

Gold prices remained steady in the futures market in line with the international trend. In early trade, gold prices on the MCX quoted at Rs. 46,509 per 10 gm. In fact the monthly fall the precious yellow metal has logged for June month has been the steepest. Internationally the decline has been a staggering 7 percent.

Gold Prices See The Highest Monthly Decline In 4 Years: Best Ways To Buy Gold

Gold Prices See The Highest Monthly Decline In 4 Years: Best Ways To Buy The Yel

As per the Reuters report, the steady fall in the price of gold has been on the back of shift in the US Federal Reserve policy stance to hawkish. In the earlier meet this month, the Fed proposed to begin hiking interest rates as early as 2023 as against the earlier proposed 2024.

Here are the safe and lucrative ways in which investors can bet on gold for a good return:

1. Sovereign Gold Bonds:

The fourth tranche of SGB 2021-22 will open between July 12 and July 16. SGBs can be bought in for a minimum of 1 gm i.e. 1 unit of SGS is equivalent to 1 gm. SGBs are bonds issued by the RBI on behalf of the government of India.

On the basis of the average price of gold in the preceding foztnight, the RBI comes out with the issue price of Soverign gold bonds is decided. It is generally close to the market rates.

SGBs are the safest bet providing investor even with the return of 2.5% interest return per annum which is payable semi-annually. So, this is the only form of gold investment which is interest yielding. Further it is tax exempt, in case the SGBs are held until maturity.

2. Gold ETFs:

The investment in gold as ETF can be highly lucrative if one invests a higher amount and involves in regular trade. Also, these entail a lower cost or expense ratio. Apart from the low cost, one should also consider gold ETFs past performance.

Apart from the investment, this investment can also serve as the collateral and one can secure funds against it if in need.

Further besides the cost associated i.e. payable to the brokerage there is no entry or exit load charges. Also, in the case if Gold ETFs are held for over a year then there is long term capital gains tax on it. But there is no securities, wealth tax or VAT on Gold ETFs.

Outlook for Gold 2021

The pullback in gold has been seen after the Federal Open Market Committee remark which sounded optimistic on the recovery of the US economy.

“Progress on vaccinations has reduced the spread of COVID-19 in the United States. Amid this progress and strong policy support, indicators of economic activity and employment have strengthened,” the statement said.

The gold price sustaining below $1,800 per ounce indicates a “lack of an immediate impetus to buy the yellow metal”, analysts at Canadian bank TD Securities said in a note on Thursday, “as the Fed clarified its reaction function with respect to an upside scenario in inflation, which suggests the Fed isn’t behind the curve by any means.”

The analysts at TD Securities have lowered gold forecast on June 24, expecting prices to drop in the third quarter before turning higher later in the year and into 2022.

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