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BoB step up on super app play, faces a tough competition, BFSI News, ET BFSI

Banking & Finance

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The race for financial super apps in India is getting hotter.

Bank of Baroda will position its new digital platform bob World as the main bank and all banking channels will be an adjunct to the primary platform. The public sector lender is adopting a strategy similar to SBI, which is working to integrate all services on its Yono platform.

Bank of Baroda MD & CEO Sanjiv Chadha has said that post-pandemic, the bank has seen a surge in digital transactions and twice the number of branch visits are happening on the app. “So rather than being an adjunct to the bank, it will be the bank and the other parts of the lender will become an adjunct. The thought was to enable everything that can be done in the branch within the app,” said Chadha.

Here are other few banks and companies that are building up the super app.

Tata Group

BoB step up on super app play, faces a tough competition

Tata Group is planning to come up with its own super app and bring its various consumer businesses under one digital umbrella and offer a seamless omnichannel experience. It is also making acquisitions such as Bigbasket and 1mg to bolster its digital presence.

“It will be a super app, a lot of apps in apps and so on … We have a very big opportunity … How do we give a simple online experience connecting all of this, and at the same time a beautiful omnichannel experience? That is the vision,” N Chandrasekaran, chairman, Tata Sons had said.

The company is looking to leverage its huge consumer base which is spread across various categories and build a “world-class platform out of India to serve the Indian consumer”.

Tata Group has a host of consumer-facing brands that include grocery items, fashion brands, and electronics brands.

In terms of financial services, Tata Group has an insurance company as well as a consumer finance arm, which can be easily integrated into its super app.

Paytm

BoB step up on super app play, faces a tough competition

Paytm, which lacks services such as ride hailing, food delivery, and online groceries, is the leader in the race at present. The app had 85.49 million monthly active users in March 2020. The company has launched a mini-apps store and partnered with companies like Ola, Domino’s, and Decathlon.

It plans to have a million such apps on its store by 2021. Mini apps are custom-built web apps that give users an app-like experience without needing to download one. The listing and distribution of these mini apps within the Paytm app is free of charge, and users can use the Paytm wallet, Paytm Payments Bank, UPI, or net banking for payments at no charges, and credit cards at a 2% fee. These apps are low-cost and quick to build, using HTML and JavaScript.

The company claims it has 325 million registered wallets, which is higher than the 200 million active UPI handles that have been created in the country.

Now the company has set its sights on using the platform to sell multiple financial services such as digital gold, mutual funds, insurance, and consumer and business loans.

SBI Yono

BoB step up on super app play, faces a tough competition

State Bank of India (SBI) is looking to build its super app Yono into a wider platform that can be used by rival lenders. The bank’s plans to create a platform for Yono that will be integrated with regional rural banks or cooperative banks. The plan is to turn the app into a platform where all banks, including SBI, can offer their products and services. The bank feels that the product will be more valuable to investors once the app is fully built out as a platform.

Yono user base has nearly doubled to 32 million at the end of December 2020 from 17 million a year ago.

SBI disbursed personal loans worth Rs 15,996 crore through more than 1 million Yono loan accounts between April and December 2020. It is now looking to extend it to home loan customers and make the entire process online. It is also planning to go big with its multi-lingual Yono Krishi platform that offers services such as Yono Khata, Yono Bachat, Yono Mitra and Yono Mandi to its farm customers. It wants to expand Yono Business through which it has made it easier for corporate customers to apply for letters of credit and bank guarantees.

Reliance Retail

BoB step up on super app play, faces a tough competition

Reliance Retail Ventures Ltd’s acquisition of a controlling stake in business-to-business (B2B) search engine Just Dial (JD) will provide it with access to a large merchant base for its new commerce platform JioMart. It will also allow it to harness JD’s evolution into a super app that will help book flights, train and bus tickets, cabs and hotel rooms and pay bills, as well as provide other services.

Reliance Retail plans to onboard 10 million merchant partners for its new commerce initiative over the next three years. The acquisition will allow RRVL to leverage JD’s database of 30.4 million business listings and its consumer traffic of 129 million quarterly unique users as on March 31, 2021.

JD’s B2B platform, JD Mart, matches wholesalers and manufacturers with retailers and industrial buyers, according to Credit Suisse.

Also, Facebook and telecom giant Reliance Jio are coming together to figure out the possibility of a super app, similar to the multipurpose Chinese platform WeChat. They are reportedly hoping to develop the app using the WhatsApp platform as well as its huge user base.

The platform would be a place for users to chat, while also letting them shop for groceries from Reliance Retail stores, for clothes and apparel and make digital payments using JioMoney.

WhatsApp

BoB step up on super app play, faces a tough competition

WhatsApp has a vast user base in India, but it has too few services to offer and must build and maintain its fintech muscle. The variety of its product portfolio and the speed of implementation will determine whether it can topple the incumbents in India. It may also have to face regulatory hurdles in India.

Bajaj Finance

BoB step up on super app play, faces a tough competition

Bajaj Finance has recently stepped up its wallet business. Its cross-sell franchise has about 27 million customers with around 70% of all no-cost EMI loans given for offline consumer durable purchases being through it.

Bajaj has recently launched a payments app and looks to be on the way to build a super app. The launch of the digital wallet is part of a broader strategy by the consumer NBFC to expand its digital finance offerings. The company has been rolling out ‘Bajaj Pay’ in phases to expand into the payments segment.



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Airtel to conserve Rs 40,000 crore cash through moratorium, BFSI News, ET BFSI

Personal Finance

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NEW DELHI: A day after the government announced a mega bailout package for the telecom industry, Bharti Airtel chief Sunil Mittal said the company will opt for the four-year moratorium on spectrum and AGR payments, which will help it conserve a cash outgo of Rs 35,000-40,000 crore that would be used for network and other capital expansion programmes.

“Overall cash flows of the government has to be invested back in the country and industry. It has to be utilised. There will be no dividend from this,” said Mittal.

Mittal also pitched greater collaboration between various telecom companies on the front of infrastructure — such as fibre, spectrum and towers — so that a strong network can be built for consumers.

He said he will talk to rivals such as Mukesh Ambani of Reliance Jio, after having initiated dialogue with Vodafone global CEO Nick Read and his Indian partner and industrialist Kumar Mangalam Birla.

“Ambani in his statement yesterday said that it’s time for the industry to come together… and build connectivity network for the digital vision of India. Responding to that statement, I would say, yes, time has come for all of us, the three plus one government operator, to close ranks, and to start to work together, work as Team India, for the telecommunications and digital dream, rather than being fierce competitors. All this while we will compete in the marketplace.”



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Banks call on government to ease pressure on India’s Vodafone Idea, BFSI News, ET BFSI

Banking & Finance

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By Nupur Anand and Aftab Ahmed

MUMBAI: Banks led by State Bank of India (SBI) have called on the Indian government to give debt-laden Vodafone Idea more time to clear its tax dues and spectrum fees, two bankers and a government official familiar with the matter said.

An Indian court last year ordered the mobile carrier, a joint venture between the Indian unit of Britain’s Vodafone Group and Aditya Birla Group’s Idea Cellular, to pay just over $8 billion to the government to settle long-standing dues. Vodafone has a stake of about 44% in the company and Aditya Birla owns nearly 27%.

In June, Vodafone Idea’s then non-executive chairman Kumar Mangalam Birla warned that without a government reprieve the Indian mobile carrier’s “financial situation will drive its operations to an irretrievable point of collapse”.

Vodafone Idea’s gross debt as of June 30 was 1.9 trillion rupees, comprising of deferred spectrum payment obligations of 1.06 trillion rupees and an adjusted gross revenue liability of 621.8 billion rupees, its latest stock exchange filing in June showed.

The adjusted gross revenue is the usage and licensing fee that telecom operators are charged by the Indian government.

The mobile operator also reported that it owes 234 billion Indian rupees ($3.18 billion) to financial institutions.

Senior SBI officials and representatives of the Indian Banks’ Association (IBA) met finance and telecom department officials this month and proposed an immediate breather on the repayment of spectrum dues, the two bankers and the government official, who requested anonymity, told Reuters.

“We’ve had these discussions with the banks but the issue is the finance ministry needs to be comfortable with the measures,” the government official said.

SBI, IBA, and the finance and telecom departments did not respond to Reuters requests seeking comment.

The government is also evaluating whether to take a small stake in financially struggling Vodafone Idea, in order to allay investor concerns regarding the future of the telco.

The company is facing a repayment of 5-10 billion rupees of non-convertible debentures around January, one of the bankers said.

Vodafone Idea declined to comment. Vodafone Group did not immediately reply to an email seeking comment. An Aditya Birla Group spokesman declined to comment.

Vodafone Idea had cash and cash equivalents of 9.2 billion rupees at the end of June, a transcript of a company conference call published on its website said.

“All eyes are on New Delhi right now as banks are getting increasingly nervous,” another banker with exposure to Vodafone Idea said.

The bankers have also proposed providing some relief to Vodafone by restructuring its dues, one government official and two bankers said.

Birla stepped down as chairman early last month after appealing for the government bailout.

The government has been considering a broader package to help a telecom industry disrupted by the 2016 entry of Mukesh Ambani-controlled Reliance Jio, which shook up the market with its free voice and cut-price data plans.



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Mukesh Ambani’s $50 phone can unleash a credit revolution across the globe, BFSI News, ET BFSI

Personal Finance

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A smartphone widely believed to be priced below $50, likely the world’s cheapest, will start selling a week from now. If Mukesh Ambani’s JioPhone Next, an Android device custom-built for India by Alphabet Inc.’s Google, is a hit in the price-conscious market, it will solve one problem for banks while posing another.

With the country’s remaining 300 million feature-phone users going online, there will be a surge of customer data that can stand in for collateral. The question is, how will banks get their hands on it?

An answer has come from iSPIRT, a small band of policy influencers quietly setting up technology standards for India’s digital markets, inducing firms to enter new, open-network markets from online payments to healthcare.

The Bangalore-based group is championing a fresh set of players — account aggregators — to unlock a much sought-after prize: Bringing into the folds of formal credit the 80% of adults in developing countries (40% in rich nations) who don’t borrow money from traditional institutions.

But these people and their micro enterprises are increasingly online thanks to innovations like JioPhone Next. They’re paying rents, rates and utility bills and receiving payments on their smartphones, scattering their footprints all over the internet. Account aggregators will gather those digital crumbs for people to share their own data in a machine-readable format for a bank loan application.

Introducing a layer of consent managers is important. Emerging-market borrowers can have many types of accounts-based relationships. Yet they can be useless to banks if they can’t present a composite picture of their financial lives to access formal loans that get monitored by credit bureaus. More than three-fifths of India’s adult population is either invisible to credit scorers or not considered worth the trouble by standard lending institutions.

In an advanced economy like the U.S., services such as Experian Boost and LenddoScore help narrow the subprime borrowers’ visibility gap by getting them to voluntarily submit their utility or video-streaming bills to demonstrate creditworthiness. But in an emerging market with low financial literacy, banks would rather leave the bottom of the pyramid to lenders who know the borrower in real life or have some social leverage on her — such as micro-finance firms that lend to groups of women.

Conversely, tech platforms, intimately aware of their customers’ online behavior, can match them with loans, collecting fees while leaving risks with the banks. Jack Ma’s Ant Group Co. cornered nearly a fifth of China’s short-term consumer debt before Beijing broke up the game.

Not every country can afford to bring out the heavy artillery against its private sector: Politics wouldn’t allow it. Aggregators can be a much softer tool for keeping the lending market fair, giving banks a reasonable economic chance to compete with data-rich tech giants.

Take JioPhone Next. It will spew out data about a large segment of sparsely banked population. Jio, Ambani’s 4G telecom network, will capture some of it as subscribers of its cheap data plans buy groceries from JioMart, an online partnership with neighborhood stores across India. Google will also get valuable data about users’ location and search queries. Facebook Inc. will exploit its own knowledge, as the social media giant adds to its half-a-billion-strong Indian customer base for WhatsApp and a growing craze for Instagram Reels, a video-sharing platform. Unsurprisingly then, Google wants to influence India’s deposit market, and Facebook is nibbling into the small business loans pie.

When it comes to real-time data, banks can never match the platforms’ clout. But account aggregators’ snapshots can help them catch a break.

Just enough additional data that will tell them if a customer is more creditworthy than suggested by a low (or no) credit score can make a big difference to profit, especially as banks won’t have to pay hefty fees to the likes of Jio, Google or Facebook for their proprietary assessments. By owning and explicitly sharing their data, customers will avoid getting trapped in the tech industry’s biased algorithms. Tiny enterprises will be able to show their cash flows to lenders by pooling everything from tax payments to customer receipts. Once telecom firms come on board, an affordable “buy-now-pay-later” plan on a refrigerator purchase will become possible for a low-income family that pays its phone bills regularly .

Aggregation, being a utility, will be like tap water to platforms’ Evian, and be priced accordingly. Who will own the pipes? Walmart Inc.’s PhonePe, which runs India’s most popular digital wallet, has received an in-principle approval to be an aggregator from the central bank. Eight banks, which between them account for 48% of all accounts in the country, have agreed to use the framework, which went live Thursday.

It’s a good start. Banks desperately need some help to stay in the money game. Or they’ll just go crying to regulators and ask them for special protections against Big Tech. That would hurt experimentation and delay the credit revolution that $50 phones can unleash.



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Govt may have to take the biggest hit if Vodafone Idea fails, BFSI News, ET BFSI

Banking & Finance

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NEW DELHI: With outstanding dues of nearly Rs 1.6 lakh crore in spectrum payments and AGR dues, the government may be the biggest loser in case Vodafone Idea collapses under crippling losses and heavy debt.

The hit for the government just doesn’t stop here. If one adds the outstanding Rs 23,000 crore owed to the banks, the impact could be one of the biggest in corporate history as a large part of the loans (65-70%) is extended by state-run lenders. The banks have further extended guarantees worth thousands of crores to the company, which also run the risk of defaults.

“The telecom department and the national exchequer would lose the most in case of a collapse of Vodafone Idea. The picture looks grim considering the poor recoveries and unrealised outstanding after the collapse of Anil Ambani’s Reliance Communications and Aircel, where too several thousands of crores of rupees remain locked. Taxpayers stand to lose the most,” an analyst with a leading brokerage told TOI.

Cumulatively, the company currently has a debt of Rs 1.8 lakh crore, and has been bleeding financially with losses pegged at Rs 7,000 crore during the March quarter. The debt tops Rs 1.8 lakh crore, according to ICICI Securities. “We see payment of liabilities coming soon, while fund availability remains a challenge,” it said.

According to numbers sourced from various analysts and Vodafone Idea’s financial results, at Rs 107, the company remains precariously placed with the lowest average revenue per user (Arpu) among its peers. Reliance Jio reported Arpu of Rs 138 and Bharti Airtel at Rs 145, though the latter has said time and again that at least Rs 200 Arpu is needed to nurse the capital-intensive sector back to health.

Vodafone Idea’s poor outlook was evident after the SoS calls given by its promoters, who have refused to make any further investments into the company, and are asking the government to support its survival. Goldman Sachs said that it expects capex for Vodafone Idea to remain under pressure, “resulting in continued market share loss”. It said that between December this year and April of 2022, the company has about Rs 22,500 crore of dues (debt, AGR and spectrum) payable.



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KM Birla steps down as non-exec chairman of Voda Idea, BFSI News, ET BFSI

Banking & Finance

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Aditya Birla Group (ABG) chairman Kumar Mangalam Birla has resigned as the non-executive chairman and director of Vodafone Idea (Vi), intensifying the gloom over the cash-strapped telco which has been desperately trying to raise funds and seek government help to survive.

Birla is being replaced by Himanshu Kapania, currently a non-executive director and a former managing director of the erstwhile Idea Cellular before its merger with Vodafone India.

“The Board of Directors of Vodafone Idea Limited, at its meeting held today, have accepted the request of Mr. Kumar Mangalam Birla to step down as Non-Executive Director and Non-Executive Chairman of the Board with effect from close of business hours on 4th August, 2021,” the company said in a notice to stock exchanges on Wednesday.

UK’s Vodafone Group, the co-parent of Vi with a 44.39% stake, declined to comment.

Birla’s announcement – which came after market hours – comes less than two months after he wrote to the government, offering to hand over the group’s 27.66 % stake in Vi to any public sector or domestic financial entity who could keep the company afloat. He had also asserted that without immediate government support, the telco would be driven to an irretrievable point of collapse.

The Vodafone Group didn’t comment on Birla’s letter. But its CEO Nick Read on July 23 – over a month and a half after Birla’s June 7 letter – reiterated UK major’s stance that it won’t infuse any more equity in its Indian JV.

The government hasn’t responded to Birla’s letter. Officials though say that the Centre is preparing a relief package for the telecom sector, which would also benefit Vi. The package could include allowing surrender of spectrum, reduction of bank guarantees, phasing out or reducing levies such as licence fees and spectrum usage charges and prospectively redefine adjusted gross revenue (AGR) to exclude non-telecom items.

Vi’s stock crashed 20% to its 52-week low on Wednesday to Rs 5.94 before ending 18.5% down at Rs 6.03 as investors dumped the company, fearing it is headed for a default and bankruptcy, said market experts. The shares lost Rs 3,936.75 crore in value, a day after losing Rs2,443 crore when the scrip ended 10.3% lower. Contents of the letter were made public on Monday.

Market watchers said the planned relief package won’t address the immediate cash needs of the telco, which is staring at a potential $3.1 billion (Rs 23,500 crore) shortfall in cash flows in FY23, as per Kotak Securities. Vi’s cash balance at March end was Rs 350 crore and its efforts at raising Rs25,000 crore for the last 10 months hasn’t been successful so far.

Birla had taken over as non-executive chairman of Vodafone Idea in August 2018 upon the closure of a $23-billion merger between Idea Cellular and Vodafone India, the telecom unit of Vodafone Group. The merged entity became the country’s largest telco by revenue market share and subscriber share.

But since then, as the two companies worked to integrate the two large telcos, Vodafone Idea rapidly lost both revenue and subscriber market share to rivals Reliance Jio and Bharti Airtel.

Its debt ballooned to Rs1.8 lakh crore in the January-March quarter as it borrowed to buy spectrum and invest in its network, at a time revenue was falling sharply, leading to dwindling cash flows and heavy losses. Vi has never reported a quarterly profit since the merger. Its net loss in the January-March quarter was Rs 6,985.1 crore.

The telco was pushed to the brink after the Supreme Court ruled in September 2019 to widen the definition of AGR to include non-telecom items and left Vi with a statutory bill of over Rs58,000 crore. It has paid Rs7854 crore so far, and all its attempts to reduce the AGR bill by legal means has come to nought.

In his letter, Birla said that over the last year, the telco has made all efforts to improve the operational efficiency of the company through prudent capital spending, manpower restructuring, and other cost cutting steps.

“Despite all that, the financial condition (particularly the liquidity position) of the company has sharply deteriorated,” he said.

Birla had also sought positive actions on long standing requests such as clarity on AGR liability, adequate moratorium on spectrum payments, and a floor price regime for investors to have confidence in the sector to invest in Vi. The letter predated last month’s Supreme Court order which dismissed the plea of Vodafone Idea and other telcos to permit rectification of ‘arithmetical errors’ in the computation of AGR dues.

He added that without backing from the government on the three major issues by July 2021, VIL’s financial situation will drive its operations to an “irretrievable point of collapse”.



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RCom bidding may be back to square one, haircut may exceed 65%, BFSI News, ET BFSI

Banking & Finance

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Lenders of Reliance Communications are staring at lesser recovery prospects as they may have to go for fresh bidding.

They are worried that similar to the Aircel case, the Reserve Bank of India (RBI) is unlikely to permit asset reconstruction firm UVARCL buying RCom’s spectrum and other assets under a resolution plan.

The delay is rapidly eroding the value of the assets, especially spectrum, further depleting the amount the lenders were hoping to recover.

Aircel case

In the Aircel case, RBI denied UVARCL permission to buy Aircel’s assets for flouting norms under the Sarfaesi (Securitisation and Reconstruction of

Financial Assets and Enforcement of Securities Interest) Act. The RBI decision came even after the National Company Law Tribunal (NCLT) had approved the Aircel resolution plan.

According to the Sarfaesi Act, asset reconstruction companies cannot infuse equity into an insolvent company at the resolution stage.

The RCom resolution

RCom’s committee of creditors (CoC) cleared the resolution plan in March 2020, which would have seen UVARCL buy all assets, including spectrum, under RCom and Reliance Telecom, while a Reliance Jio unit was to buy the company’s towers housed under Reliance Infratel.

The plans were filed in the NCLT a few days later.

While the NCLT has cleared the tower sale to Jio, it has not cleared the transfer of the other assets to UVARCL yet. The tower sale, though, has not yet been implemented, with Jio recently approaching the NCLT with fresh concerns. RCom had filed for bankruptcy in 2019.

Under the resolution plan, UVARCL is expected to pick up RCom’s spectrum for Rs 12,760 crore, with the total recovery expected to be in the Rs 20,000-23,000 crore range against claims of Rs 57,382 crore, a roughly 65% haircut for lenders. Jio is to buy the towers for nearly Rs 5,000 crore.

Recovery worries

The IBC process has recently come under criticism after high-profile accounts such as Videocon were sold for near liquidation value and settlement in the case of Siva Industries yielded pittance.

The realisation for financial creditors from IBC declined significantly in FY2021 with a total resolution amount of around Rs 26,000 crore, almost a quarter of the realisations in fiscal 2020.

The pandemic has increased operational challenges for the various parties involved in a CIRP, which resulted in limited cases yielding a resolution plan. The suspension of new proceedings under the IBC for the entire FY21 resulted in a sharp slowdown in the resolution process.

Out of the total 4,300 cases that have been admitted to bankruptcy courts since FY17, only 8% has been resolved and nearly 40% of the cases are still pending. About 30% of the cases have seen liquidation.



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Banks stare at huge telco debt as telecom auction starts, BFSI News, ET BFSI

Banking & Finance

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The much-awaited telecom spectrum auction that starts today is likely to balloon the already bloated debt of telecom companies.

Telecom companies, already saddled with huge debts and pending government dues payments, have raised or are in the process of raising funds ahead of the auction.

The auction

The government proposes to auction around 2,250MHz of the spectrum — worth approximately Rs 3.92 lakh crore at the reserve price — across various bands.

A total of 2251.25 MHz of airwaves, across 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz and 2500 MHz frequency bands have been put on the block. Many brokerages, however, have predicted that more than 80% of the spectrum would remain unsold, and the government to get less than Rs 50,000 crore.

Analysts say the moderate participation would largely be limited to the renewal of the expiries in the 800 MHz and 1800 MHz bands.

Telco debts

While the telecom companies are enjoying the Covid-led upsurge in business, they still grapple with huge debts.

As of September 2020, Bharti Airtel had about Rs 1.29 lakh crore in debt, and Vi about Rs 1.7 lakh crore in net debt and dues to the government. Analysts reckon that this debt may grow hugely after the spectrum auctions. Only Reliance Jio is debt-free.

Vodafone had gross debt of Rs 1,17,370 crore comprising deferred spectrum payment obligations to the government of Rs 94,200 crore and debt from banks and financial institutions of Rs 23,170 crore.

Bharti Airtel Ltd’s net debt, including lease obligations, rose to Rs 1.18 lakh crore compared with nearly Rs 1.13 lakh crore a year ago, according to its annual report for 2019-20.

The extent

Though most of the firms are heavily indebted they need to borrow for these auctions.

However, the banks would be in a quandary as extending more debts when the telcos are not generating much additional cashflows due to pricing constraint would be tricky.

Even at base price, the telcos need about Rs 1 lakh crore with the rest in installments over the next many years, but that upfront payment amount is also huge. To meet the new payment obligations, telco cashflows need to rise, which is a difficult proposition.

Fundraising

However, telcos have raised funds from the debt market too. Airtel has raised $1.25 billion overseas through senior and perpetual bonds, the largest fundraising by any Indian investment-grade issuer since January 2019. The company has priced $750 million worth of senior 10.25-year bonds at a yield of 187.5 basis points for an implied coupon of 3.250%. Vodafone, on the other hand, is looking to raise Rs 25,000 crore and is in talks for it.

The silver lining

The good thing is telco revenues are rising though the pricing power is yet to return.

Bharti Airtel had posted a net profit of Rs 854 crore for the third quarter ended December 2020, compared to Rs 1,035 crore loss a year ago, on the back of improved realisations and the strong customer addition.

Airtel logged its highest-ever consolidated quarterly revenue of Rs 26,518 crore in Q3 FY21, up 24.2% over the year-ago period.

Debt-ridden Vodafone Idea reported narrowing of consolidated loss to Rs 4,532.1 crore in the third quarter ended on December 31, 2020, mainly on account of a one-time gain from stake sale in Indus Towers.



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