Tag: shares

Hedge fund fallout wipes over $9 bn from market value of Credit Suisse, Nomura, BFSI News, ET BFSI

Banking & Finance

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LONDON: Shares in Nomura and Credit Suisse fell further on Wednesday, with a collective $9 billion wiped off their market value so far this week as the banks braced for big losses from the blow-up of US-based hedge fund Archegos Capital.

Credit Suisse and Nomura were slower than rivals to cut their exposure to Archegos, a family office run by former Tiger Asia manager Bill Hwang. Global lenders that acted as brokers for Archegos may have to write down more $6 billion after the fund defaulted on payments, Reuters has reported.

Credit Suisse shares fell 4% on Wednesday, bringing this week’s decline to nearly 20%. Already under pressure from its exposure to failed supply chain finance firm Greensill, Credit Suisse’s plans to buy back shares and pay dividends this year could now be at risk, analysts said.

The bank’s market capitalisation has shrunk by five billion Swiss francs since Friday to 25.57 billion Swiss francs ($27.12 billion). Sources estimate Credit Suisse’s losses may total $5 billion but the bank declined to comment.

UBS analysts said “a lot of unanswered questions” remained, referring to Credit Suisse’s involvement first in Greensill and now the US-based hedge fund.

“Outflows? P&L impact? Insurance coverage? Quality of underlying assets? Litigation? Developments around involved partners? Reputational impact? Impact on strategy?” they wrote.

Meanwhile Nomura which has warned of a $2 billion hit from Archegos, fell a further 2.9% following a 0.8% fall on Japanese stock markets on Wednesday. Its market capitalisation has dropped from 2.3 trillion yen ($20.81 billion) to 1.88 trillion yen since Friday, Refinitiv data shows.

Ratings agencies added to the pressure as Moody’s slashed its outlook on Nomura to “negative”, citing potential deficiencies in its risk management process.

Fitch placed Nomura’s viability ratings on “negative watch” citing the potential for material losses arising from transactions with a US client in one of its US subsidiaries as well as questions over the adequacy of Nomura’s controls.

Meanwhile, in derivatives markets the cost of insuring exposure to Credit Suisse and Nomura rose.

Credit Suisse five-year credit defaults swaps (CDS) were trading at 73 basis points, the highest in a year and up 17 bps from Friday’s close, IHS Markit data showed.

That implies a cost of 73,000 Swiss francs a year to insure exposure to 10 million francs worth of Credit Suisse debt for a five-year period.

Nomura CDS were at 52 bps, versus 41 bps on Friday.



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All you need to know about Suryoday SFB IPO, BFSI News, ET BFSI

Personal Finance

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The Suryoday Small Finance Bank IPO is now open and live till March 19, with a price band of ₹303-305. Each lot consists of 49 shares. A total of 1.9 crore shares are available for subscription in the IPO. 50% of the issue is reserved for qualified institutional buyers (QIB), 15% for non-institutional bidders and the remaining 35% for retail investors. Employees of the bank will have 5 lakh shares reserved for them, issued at a discount of Rs 30 per share.

The bank is among the leading SFBs in India in terms of Net Interest Margins, Return on Assets, Yields and deposit growth and had the lowest Cost-to-Income ratio among SFBs in India in Fiscal 2020.

Suryoday SFB‘s purpose against launching its IPO
The proceeds of the IPO are proposed to be used for boosting the bank’s Tier-1 capital base to meet future capital requirements. Tier-1 capital refers to the core capital of a bank that consists of equity shares and retained earnings.

According to the bank’s red herring prospectus, the fund-raising will help Suryoday Small Finance Bank to augment its capital base. As of December 31, the bank’s capital adequacy ratio stood at 41.17%, where Tier-1 capital constituted 34.3% reported by The Quint.

Further, small finance banks are required to list within three years of reaching a net worth of Rs 500 crore, as per the Reserve Bank of India (RBI) guidelines governing these lenders. The bank had crossed the milestone in November 2017, making it necessary to list by November 2020.

The bank had applied to the RBI for an extension of timeline for listing till May 31, 2021. However, the RBI rejected the request and asked it to complete its listing at the earliest, according to the prospectus.

Business of Suryoday Small Finance Bank
SSFB received the small finance bank licence from the RBI in 2016. Prior to that SSFB operated as a NBFC and offered small ticket-size loans to women from weaker sections of the society. SSFB serves customers in the unbanked and underbanked categories. It has been serving these segments for over a decade now

SSFB currently provides a wide range of products and services, including housing loans, commercial vehicle loans, micro business loans, unsecured micro and small enterprise loans, among others.

As of December 31, 2020, SSFB’s customer base was 1.44 million and its employee base comprised 4,770 employees and it operated 554 Banking Outlets including 153 Unbanked Rural Centres.



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RBL Bank MD and CEO sells 14.4 lakh shares of lender

Banking & Finance

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Private sector lender RBL Bank said its Managing Director and CEO, Vishwavir Ahuja, has sold 14.4 lakh shares of the lender between February 19 and 25 for about ₹35.07 crore..

In a regulatory filing, the bank said this transaction was “as per the pre-clearance taken” by Ahuja.

RBL Bank MD sells 18.92 lakh shares for ₹38.52 crore

According to the extract of intimation by Ahuja to the bank’s Compliance Officer, the sale of shares was to finance the purchase of a family house.

“The sale proceeds shall be utilised primarily to purchase and build a family home and take care of other family commitments. This is a very essential and much delayed imperative for the family’s well-being,” Ahuja said in the intimation, which was included in the bank’s regulatory filing.

Vishwavir Ahuja re-appointed as RBL Bank chief

“The sale represents approximately 17 per cent of my and my family’s total holdings and we will continue to retain approximately 70 lakh shares of RBL Bank, almost 70 per cent of my peak holdings since joining the Bank in 2010,” Ahuja further said, adding that the sale of shares is purely for personal and family reasons.

Strong growth prospects

The completion of the property transaction may require him to sell another three per cent to four per cent of his holdings over the next few months, he said.

Ahuja reiterated his commitment to RBL Bank and said the lender has strong growth prospects over the next several years, “especially in areas in which we have significant market share and have chosen to scale up.”

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PhonePe launches ESOPs worth $200 m for its employees

Banking & Finance

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PhonePe to launch ESOPs for its 2,200 employees. The $200 million Stock Option Plan gives every PhonePe employee the chance to own a part of the company and benefit from its success. Mobile Premier League, Wakefit, ShareChat and Licious are some of the other start-ups which have recently announced ESOPs.

Manmeet Sandhu, Chief People Officer, PhonePe said, “The PhonePe Stock Option Plan is a core component of our compensation philosophy crafted to encourage collaboration, long-term focus and organisation-first thinking. PhonePe is on a mission to use technology as a transformational force that is making financial inclusion real for every Indian. We believe when money and services flow freely, everyone progresses.”

“By having ESOPs at a minimum of $5000 for all levels, we enable every employee in the organisation to participate in the wealth generation opportunity they have helped create — Karte Ja, Badhte Ja. As roles become more senior, ESOPs are a part of the annual compensation for employees, translating into a larger component of their compensation being tied to the organisation’s success. This encourages everyone to put the organisation first. The organisation’s success is their success,” Sandhu said.

PhonePe had just under 500 employees who were under the ESOPs plan as of December 2020. In an interaction with BusinessLine in December 2020, Sameer Nigam, founder and CEO of PhonePe said, back in the day, all employees were shareholders. My father worked at Larsen & Toubro and a significant part of the company was owned by the employees. In the start-up sector, young people have done really well for themselves but its been concentrated on the tech and business side of the functions. I think by ensuring that all our customer service agents and all our sales force last-mile employees will also get to participate in the wealth creation is a bit of a paradigm change in a good way as it is more participative. I’m excited about somebody in my sales team in Bhopal who has 3.5-4 lakhs worth of equity see it double in the next few years – that’s a game changer. With this, I hope attrition will go down on those functions.

 

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What is Tax Collection at Source (TCS)? Here’s a primer

Personal Finance

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There are certain new tax collection at source (TCS) rules that came into force from October 1, 2020 under the Income Tax Act 1961. While many of these provisions relate to goods and services, there are some that directly impact individuals. Before we get into how these provisions impact you, let us understand the ‘what’ and ‘how’ of TCS.

What is TCS?

Tax collection at source is the Income Tax Department’s way of sifting out certain high-value transactions under section 206C of the Income Tax Act. Transactions such as purchase of car for an amount exceeding ₹10 lakh, foreign currency remittances, and sale of goods above ₹50 lakh, among others, come under the ambit of TCS provisions.

How is TCS collected?

TCS is calculated on transactions beyond a certain threshold. Once these transactions breach that threshold, TCS is calculated on the value of the transaction. This amount is added to the transaction value and collected from the buyer or service recipient by the seller or service provider.

If the TCS to be collected is 1 per cent of a car purchased worth ₹15 lakh, then the TCS amount would be ₹15,000. You will have to pay ₹15,15,000 to the car dealer you have purchased the vehicle from.

The TCS amount will be recorded against the Permanent Account Number or PAN of the income tax assessee. This amount will be knocked off against the income tax liability of the assessee, if any, for the financial year in which the TCS was collected. Essentially, your tax outgo will reduce by the amount of TCS just like it does with tax deducted at source (TDS).

Changes from October 2020

The new amendments to the TCS provisions are relevant for those who make purchases in foreign currency, foreign currency remittances, purchase of an overseas tour package in foreign currency from a foreign tour operator, and invest in shares abroad. All these come under Reserve Bank of India’s Liberalised Remittance Scheme (LRS) that allows Indians to remit up to $2,50,000 a year abroad.

From October 1, 2020, while making purchases in foreign currency online through your debit card, credit card, or through online banking, tax will be collected at source by your bank or credit card company at 5 per cent of the value of the transaction on amounts exceeding ₹7 lakh a year. This is over and above any transaction fees that might be collected by the bank or credit card company. In case such aggregate purchases in a financial year are above ₹7 lakh, then TCS provisions will apply to the amount in excess of ₹7 lakh. This limit will be applied for transactions undertaken with an individual bank or credit card company.

For example, if you have made purchases online worth ₹15 lakh, then the TCS will not be applicable till the aggregate purchases cross ₹7 lakh. For each purchase above ₹7 lakh, TCS will be applicable. In case you have made three purchases above the threshold of ₹3 lakh, ₹3 lakh, and ₹2 lakh, then TCS on these transactions will be ₹15,000, ₹15,000 and ₹10,000. These TCS amounts will be billed to your account or credit card statement.

Then there is remittance of foreign currency for the purpose of education. The threshold for TCS applicability remains the same (above ₹7 lakh) and the rate of TCS is 5 per cent of the amount exceeding ₹7 lakh. However, there is a difference in the rate of TCS for foreign remittance for education purposes made by obtaining a loan and one made from own funds. TCS on foreign currency remittances above ₹7 lakh made for education by obtaining a loan (proofs will be demanded by the bank) will be at 0.5 per cent.

Investors who make investment in shares abroad by using the LRS will also be covered by the new TCS provisions. While making investments in shares abroad, the aggregate foreign remittance amount exceeding ₹7 lakh will be liable to TCS. The intermediary that allows you to make such investments will charge you the TCS once the total investment exceeds ₹7 lakh in a financial year.

Any other foreign currency remittance made under LRS will also be covered by the TCS provisions and the threshold limits of ₹7 lakh will apply. The TCS will be collected at 5 per cent of the value of remittance above ₹7 lakh.

For financial year 2020-21, the calculation of aggregate foreign currency remittance above ₹7 lakh will be considered from October 1, 2020 onwards only, and not for the entire financial year. From April 1, 2021 onwards, the TCS provisions will apply for the full financial year.

In case of a foreign currency remittance made for purchase of overseas tour package, there is no threshold limit of aggregate remittances of ₹7 lakh. Any such foreign currency remittance for purchase of an overseas tour package will be liable for TCS of 5 per cent.

In case the remitter of foreign exchange does not produce PAN, or the bank account does not have the PAN registered against it, TCS will be calculated at 10 per cent of the remittance amount.

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