Tag: Motilal Oswal

Groww, Upstox, Motilal Oswal to be hit by Sebi’s latest rules on digital gold sale, BFSI News, ET BFSI

Personal Finance

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The National Stock Exchange (NSE) has instructed all members, including stockbrokers and wealth managers, to wind down the sale of digital gold on their platforms by September 10.

This came after capital markets regulator, the Securities and Exchange Board of India (Sebi), flagged such sales as a breach of the Securities Contracts (Regulation) Rules (SCRR), 1957.

The move, ahead of the crucial festive season months when Indian consumers typically become active purchasers, has hit the country’s nascent yet burgeoning digital gold industry.

Investors are worried over its future as well as its legitimacy in the eyes of financial sector regulators, Sebi as well as the Reserve Bank of India.

Sebi’s concerns may have stemmed from potential use of client funds by brokers to buy digital gold which it views as a non-broking business, according to a review of documents and discussions with multiple industry sources.

The lack of regulatory oversight on companies that sell and store physical gold corresponding to the virtual assets being allocated to the end-consumer, is also cause for concern.

“…It has, however, come to the notice of SEBI/Exchange that certain members are providing a platform to their clients for buying and selling of digital gold. SEBI vide a letter dated August 3 has informed the Exchange that the said activity is in contravention of Rule 8 (3) (f) of SCRR, and members should refrain from undertaking any such activities,” a circular issued by NSE on August 10 showed.

According to a source, similar notices have been issued by all leading exchanges in India in recent weeks. ET could not independently verify this.

New age fintech brokers such as Upstox, Groww, Paytm Money as well as traditional brokers such as HDFC Securities and Motilal Oswal offer customers an option to “invest” in digital gold.

These companies have been given time till September 10 to discontinue the product as well as inform consumers about the move, as per the circular, which ET has reviewed.

Uptsox, Groww, NSE and Sebi did not respond to ET’s emails. Spokespersons for Paytm Money and HDFC Securities declined to comment.

The sale of digital gold in India, although a new concept, is “nothing but facilitating the purchase and sale of physical gold through a digital medium, and the ability to hold it digitally,” said Kishore Narne, head of commodities and currencies at Motilal Oswal.

“We understand Sebi’s concerns as it doesn’t fall under its scope of regulation, they have asked all Sebi-regulated entities to refrain from offering such products, and we are honouring it,” Narne said, adding that customers already holding digital gold would not be impacted by the new rules.

The NSE move comes as a jolt to fintech startups that have been building business models around facilitating purchase and sale of gold virtually in partnership with metal and gold firms – Augmont Gold Ltd, MMTC-PAMP India and Digital Gold India.

The business model involves customers being allowed to buy gold for as low as one rupee, as a digital asset. The gold companies then store an equivalent amount of gold in their lockers – against a virtual certificate of purchase.

These companies, though not under the purview of any financial sector regulator, are said to have a self-regulatory audit and diligence mechanism.

The NSE circular is only applicable to members of the NSE, said Renisha Chainani, Head of Research, Augmont Gold.

“This circular has been issued pursuant to some clarifications put by the regulator, Sebi, on NSE members for offering digital gold. All such partners shall work within the framework and guidelines prescribed by Sebi from time to time,” said Chainani.

MMTC and Digital Gold India did not comment.

Non-broking platforms such as PhonePe and Google Pay among others also offer digital gold to customers and are unlikely to be affected by this development.

India’s digital gold market is worth about Rs 5,000 crore annually, according to industry insiders.

The number of users with over Rs 100 balance in digital gold could be in the range of 5-6 million, said Deepak Abbot, the cofounder of Indiagold, a gold loan fintech.

“This could be an early indication that the regulator is looking to come up with regulations for the industry. Currently, these transactions are not under the purview of either Sebi or RBI,” said Abbot.

A senior stock exchange official told ET that brokers cannot offer such unregulated products through their Sebi-registered entity or platform.

“All the listed products are settlement guaranteed and carry a different risk profile. If an investor loses money due to such digital gold, neither the regulator nor the exchanges can be held responsible,” the executive said. “Hence, our action is limited to the extent that you cannot use Sebi-licensed platforms to sell such products.”

A leading securities lawyer who represents the interests of several brokerages said digital gold typically falls in a regulatory grey zone currently and unless Sebi comes out with a set of regulations, brokers cannot sell the products.

“The problem seems to be that some of the fintech players offer digital gold on the same page right next to where they sell mutual funds or listed shares,” the lawyer said. “However, there is no bar on these fintech firms to create a separate legal entity and set up a different page to sell digital gold.”



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HDFC Bank sets ambitious target for card issuance, source says, BFSI News, ET BFSI

Banking & Finance

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India’s most valuable lender HDFC Bank has set out an ambitious plan to more than double monthly card issuance from September after the central bank lifted a temporary ban imposed on HDFC in December, according to a source.

“The sales teams have been asked to meet a target of issuing 500,000 cards a month starting September for the next few months,” said the source with direct knowledge of the matter.

HDFC Bank, which in September 2020 had issued nearly 200,000 cards, did not immediately respond to a request seeking comment.

The latest target is a big jump from a year ago but some analysts said it was achievable given the number of “liability” or savings accounts it has opened this year. Savings account holders are typically sold credit cards and loans by lenders.

“Having added close to 3.65 million liability accounts from Jan 2021 to June 2021, it can easily capture market share in the credit card space,” Macquarie said in a research note.

Earlier the bank said in a regulatory filing that India’s central bank had relaxed restrictions placed on it last year on issuing new credit cards, following outages in the bank’s digital payment services.

The relaxation was welcomed within the company.

“All the preparations and strategising that we have put in place to ‘come back with a bang’ (on credit cards) will now be rolled out,” HDFC Bank Chief Executive Sashidhar Jagdishan said in an internal email to employees, a copy of which was seen by Reuters.

“In the coming months, we will aggressively go to the market with not just our existing suite of credit cards but also new offerings in the form of co-brands and partnership,” Jagdishan said in the email.

With nearly 15 million credit cards in issue, HDFC Bank is the largest lender in the segment with nearly 24% market share. Yet over the last eight months peers such as ICICI Bank and SBI Cards have gained ground.

As of June, ICICI Bank had 11 million credit cards, up from about 10 million in January.

“Lifting of RBI (Reserve Bank of India) restrictions before the festive season augurs well and we expect HDFC bank to turn more aggressive on credit cards over the next few months,” brokerage Motilal Oswal said.

HDFC Bank is the seventh most valuable lender in Asia-Pacific with a market capitalisation of 8.37 trillion rupees ($112.7 billion).



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‘Managing wealth is managing yourself’, says Ashish Shanker of MOPWM

Personal Finance

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A veteran in financial services industry, Ashish Shanker as managing director and chief executive of Motilal Oswal Private Wealth Management (MOPWM) leads a team that advises top corporates/institutions and over 3,000 HNI families. He has played a key role in building the investment, research and advisory platform and creating the proprietary ‘4C fund manager’ framework at the firm. As a captain of ship that advises client assets worth ₹25,000 crore, here is a sneak-peek of how the much sought-after wealth manager tends to his own personal finances.

What does money mean to you?

Money is a means to fulfill needs and desires for self, family and parents. It is a means to an end. You should have enough of it but then the greed for it also can end up destroying us.

What are your top financial goals as an individual?

For any parent, the kid comes first. Providing for my kid is at the top of my mind, so that he has a decent education and he has a decent lifestyle. Then, of course, providing for a high-quality retirement where I don’t have to compromise on lifestyle once I retire. I’m a little bit of a gourmet connoisseur, I like to have my malt as well. There are intermittent goals, such as travel and, at some point, may be housing. I do own a house, but it’s in my hometown (Pune). At some point, if price and wallet permit, buying a house in a Mumbai suburb of my choice is also a goal.

What does your portfolio look like?

Close to 85-90% of my money is invested in equities. All my incremental money also goes in equities. I do not count my PF (provident fund) in this.

My first job was as an equity analyst with a local brokerage firm. Even before that, I fell in love with equities in probably 12th standard. I used to interact with people in my family who were related to stock markets. I’ve been in private wealth firms now for 16 years. Hence, from day one, it’s been equities. Equity investments for me are a combination of stocks and mutual funds. I also hold a lot of my portfolio in ESOPs.

What was your most successful investment? What are the mistakes you’ve made?

All the investments that I made in the late 90s, and mind you I have not sold a single share, have been the most successful in terms of IRR (internal rate of return ). I bought Nestle, ITC etc., but on a very small capital.

I also do remember that I bought a lot of the dot-com stocks which went to zero. My experience has shown that if you buy 20-30 stocks and hold them, the better quality companies more than make up for the duds. So, the lesson I’ve learned is that in equities, patience and longevity beats everything else. It is 90 per cent temperament and 10 per cent skill.

How much emergency funds do you have and where do you keep it?

I’ve always had this principle that you should have at least six months of your expenses as emergency funds. You may call it very inefficient to keep that amount of money idle, but I always have that amount lying in my savings account. Now, there are even savings banks accounts, which give you 6-7 per cent. I tell people that maybe you should have one year’s worth money but six months is good enough for me.

What kind of amount would you require for your retirement?

Ten years back, if you’d asked me, I could have put a number of ₹5 crore. But today, that number doesn’t excite me because my lifestyle has gone up. I have figured it’s a moving target. Today, the target I am looking at is 200-250 times my monthly expenses.

As a private wealth veteran, what is the most important message to people on managing wealth?

As philosophical as it may sound, managing wealth, I believe, is predominantly about managing yourself. If you know your own temperament, you will be a better investor. Also, keeping it simple, and thinking long term is the crux of what I’ve learned in 24 odd years of my career. Ultimately, you are your biggest cash-generating machine. So, invest in yourself as in your career or your training, picking up skills.

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In Covid shadow, bank profits may double on annual basis in Q4, BFSI News, ET BFSI

Banking & Finance

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With the SC lifting freeze of classifying NPAs, the banks are likely to shift focus on recovery efforts and recognise NPAs in the fourth quarter.

“Although overall trends in asset quality have fared better than expectations, led by a sharp improvement in collection efficiency and a lower restructuring book, the recent surge in Covid cases and the fear of a lockdown in key districts keep us watchful on asset quality,” wrote Motilal Oswal analysts in their Q4 earnings preview for the banking sector.

While many banks have already provided for this likely increase and carry additional provision buffers, which should limit the impact on profitability, brokerage sees banks continuing to strengthen their balance sheets and credit cost staying elevated.

“A spate of Covid cases and soft reintroductions of certain government restrictions would likely tip the balance of Q4 provisioning policy in favour of conservatism. Write-backs/ offsets would probably start in earnest in H1FY22, writes Edelweiss Research in a note.

How are private banks likely to fare in Q4?

For private banks, operating profitability is likely to improve while provisions would remain elevated. Motilal estimates private banks to report Pre-provisioning operating profit (PPOP) growth of 19% YoY (+2.7% quarter on quarter) and net profit growth of 108% year on year (+2.2% quarter on quarter) due to a low base in the fourth quarter of FY20. the Motilal Oswal report said. Although credit cost is likely to remain higher, a pick-up in loan growth along with healthy traction in fee income and modest opex would support earnings.

Loan growth is likely to pick up, led by rising consumer demand, particularly in the Retail segment. Even growth in the Corporate segment is recovering, with the focus on lending to highly-rated corporates. Banks, however, remain cautious about growing their unsecured portfolio.

Asset quality would remain under watch as lenders would recognize actual NPAs as the stay on NPA recognition has ended. Though slippages would remain higher, it is likely to moderate on a sequential basis.

Margin to exhibit stable/improving trends

Net interest income (NII) is likely to grow 15% YoY at banks as the cost of funds is likely to remain low, given the excess liquidity in the system. Although negative carry on slippages could impact margins, gradual deployment of excess liquidity and repricing of deposit base would support margins, Motilal said, adding, large banks, with a strong liability franchise, are better placed to tackle margin pressure.

Deposit traction would remain strong, reflecting 12% YoY growth for the system, while many Banks have increased focus on ramping up retail deposits

Public sector banks

PSBs’ earnings to show a healthy pick up as operating metric for PSBs would improve. Within PSBs, the State Bank of India is likely to report a healthy performance supported by the resolution of Bhushan Power & Steel, which would result in healthy recoveries and a seasonally strong quarter on fee income. PSBs are expected to deliver NII/PPOP growth of 27%/16% YoY and PAT growth of 110% year on year on a low base.



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