Gold steady as inflation woes offset firmer dollar, yields, BFSI News, ET BFSI

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Gold prices steadied on Tuesday, after rallying to a five-month peak in the previous session, as concerns over broadening inflationary risks kept bullion’s safe-haven appeal intact in the face of a stronger U.S. dollar and elevated bond yields.

FUNDAMENTALS

* Spot gold was flat at $1,862.81 per ounce, as of 0140 GMT. U.S. gold futures were also flat at $1,866.80.

* Richmond Federal Reserve President Thomas Barkin said on Monday the U.S. Fed will not hesitate to raise interest rates if it concludes high inflation threatens to persist, but that central bank should wait to gauge if inflation and labor shortages prove to be more long-lasting.

* Rate hikes tend to weigh on gold as higher interest rates raise the non-yielding metal’s opportunity cost.

* Bank of England Governor Andrew Bailey said he was very uneasy about the inflation outlook and that his vote to keep interest rates on hold earlier this month, which shocked financial markets, had been a very close call.

* Tightening monetary policy now to rein in inflation could choke off the euro zone’s recovery, European Central Bank President Christine Lagarde said on Monday, pushing back on calls and market bets for tighter policy.

* Pressuring bullion, the dollar index held close to a 16-month high and benchmark U.S. 10-year Treasury yields were near a three-week peak.

* A stronger dollar makes gold more expensive for buyers holding other currencies, while higher yields increase the metal’s opportunity cost.

* Speculators raised their net long gold futures and options positions to 146,319 in the week ended Nov. 9, the U.S. Commodity Futures Trading Commission (CFTC) said on Monday.

* Spot silver was steady at $25.04 per ounce. Platinum fell 0.1% to $1,085.54 and palladium dropped 0.6% to $2,142.19.

DATA/EVENTS (GMT) 0700 UK ILO Unemployment Rate Sept 1000 EU GDP Flash Estimate QQ, YY Q3 1330 US Retail Sales MM Oct 1415 US Industrial Production MM Oct



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Buy This Metal Stock For 42% Upside Says IDBI Capital

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Q2FY22 results of Tata Steel

According to the brokerage “Tata Steel’s Q2FY22 EBITDA was slightly below our estimate. India sales volumes increased by 11% QoQ to 4.58 mn tonnes and India operations EBITDA/t declined 10% QoQ to Rs29,256 due to rising coking coal costs.”

IDBI Capital has said that “Nevertheless, European operations EBITDA/t increased 136% QoQ to Rs15,609 led by inventory gain and higher prices despite lower deliveries. Consolidated net debt fell Rs51 bn QoQ to Rs689 bn ($2 bn deleveraging is likely in FY22 despite growth CAPEX given upswing in steel cycle).”

Key highlights and investment rationale for Tata Steel according to IDBI Capital

Key highlights and investment rationale for Tata Steel according to IDBI Capital

European business financial performance stellar: European EBITDA increased 2.2x QoQ to Rs33 bn despite flattish sales volumes of 2.1 mn tonnes. Tata Steel SEA registered an increase of 12% QoQ EBITDA to Rs4 bn (EBITDA/t of Rs7,244). However, Tata Steel Long Products EBITDA declined by 45% QoQ to Rs3 bn (EBITDA/t of Rs18,010) due to a sharp increase in raw material cost.

Free cash flows strong; expansion on track: Despite working capital increase of Rs38 bn and CAPEX of Rs21 bn, its free cash flow was strong at Rs39 bn in Q2FY22. Its 5 mtpa expansion continues to progress well while it has fast-tracked a 6 mtpa pellet plant. Total CAPEX outlay for FY22 is likely at Rs100-120 bn.

Outlook: After a strong profitability performance in H1FY22, we expect H2FY22 to be stronger for Tata Steel India operations as Chinese steel curbs are likely to keep steel prices firm. Also, we believe strong profitability and restructuring at its European operations will lead to a further fall in net debt over FY22-FY24 even though Tata Steel will continue to pursue growth CAPEX in India. Hence, we maintain our BUY rating on the stock.

Buy Tata Steel with a target price of Rs 1,825

Buy Tata Steel with a target price of Rs 1,825

IDBI Capital has said in its research report that “We introduce FY24 estimates in this report and roll over our valuation to FY24 estimates. We raise our FY22/FY23 EBITDA estimates by 10%/15% given firm steel prices which we expect to sustain over the coming one year. We raise our SOTP-based target price to Rs1,825 (earlier Rs1,735) and maintain our BUY rating on the stock.”

Disclaimer

Disclaimer

This stock is picked from the brokerage report of IDBI Capital. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.



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Bankers plan to seek safeguards against undue vigilance action, BFSI News, ET BFSI

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Bankers will seek a more robust framework for protecting them from any undue vigilance action in bona fide commercial decisions at a stakeholder conference on November 17-18 organised by the government to address issues relating to credit flow into different sectors of the economy.

Industry chambers and financial institutions, including non-banking financial companies (NBFCs), have been invited to the conference.

A senior bank executive told ET that a representation had been made to the finance ministry on this count.

Besides the finance ministry, senior officials from other ministries will also be a part of this stakeholder conference and provide insights to projects in the pipeline in their respective areas. Finance minister Nirmala Sitharaman will meet bankers, including from the private sector, financial institutions and other stakeholders at the two-day meeting.

“We want bankers to be protected under Section 197 of The Code of Criminal Procedure (CrPC) and bring them on a par with other government officials,” the bank executive said. “We will bring this to the attention of the finance minister.”

Under Section 197, a court cannot take cognisance of a criminal charge against a public servant unless there is prior sanction from the competent authority to prosecute him.

The move comes in the backdrop of Rajasthan police arresting former State Bank of India chairman Pratip Chaudhuri in relation to a complaint by a loan defaulter.

The government had, recently, issued a circular that laid down the standard operating procedure for processing cases under Section 17A of the Prevention of Corruption Act. As per the guidelines, any police inquiry on decisions taken by public servants in discharge of their duties need prior nod from the competent authority.

“These guidelines were flouted and hence it is necessary that a more robust framework should be put in place,” said another bank executive.

Last month, the finance ministry had advised state-run lenders to adopt broad guidelines on ‘Staff Accountability Framework for NPA Accounts up to ₹50 crore (Other than Fraud Cases)’. The new guidelines are aimed to protect bank staff taking commercial decisions as well as to ensure faster dispensation of vigilance cases while taking into account employees’ past track record.



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Deutsche Bank CEO calls on central banks to fight inflation, BFSI News, ET BFSI

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Central bankers must change course to fight accelerating inflation, Deutsche Bank Chief Executive Officer Christian Sewing said on Monday.

Sewing, speaking at a banking conference, said he didn’t share the opinion of central bankers that inflation increases were temporary.

“I think monetary policy must take countermeasures here – and sooner rather than later,” Sewing said.

“The supposed panacea of recent years – low interest rates with seemingly stable prices – has lost its effect, and now we are struggling with the side effects,” he said.

(Reporting by Tom Sims and Frank Siebelt Editing by Paul Carrel)

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World Bank and ADB launches ‘WePOWER India’ to increase women workforce in energy sector, BFSI News, ET BFSI

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The WePOWER India Partnership Forum, held through a virtual platform on November 9, 2021, launched the efforts to scale up the South Asia Women in Power Sector Professional Network (WePOWER) in India.

This important initiative was attended by 168 key energy sector stakeholders. The event was organized by the World Bank and Asian Development Bank in association with the India Smart Grid Forum (ISGF).

India is significantly investing in clean energy, grid modernization, and digitalisation of its utilities. Consequently, job profiles in the Indian energy sector are evolving with more emphasis on Information and Communications Technology (ICT) and renewable energy solutions. There is a growing demand for skilled human resources to fill these new green jobs. Women can help to fill this skills gap required for the energy transition. However, the participation of women in the energy sector remains very low. To address this, the energy sector must attract, develop and retain talented women professionals.

The World Bank is committed to promoting gender equality in the Indian electricity sector. Towards this goal, the World Bank, in collaboration with the Asian Development Bank, launched the WePOWER in February 2019. WePOWER is a network of 28 energy sector utilities and organizations committed to implementing systematic and incremental gender activities to support workforce participation of women in energy projects and utilities, and promote normative change for women and girls in Science Technology, Engineering, and Math (STEM) education.

The launch ceremony was preceded over by the Vishal Kapoor, Joint Secretary – Distribution, Ministry of Power, Govt of India; Junaid Kamal Ahmad, Country Director, World Bank; and Reji Kumar Pillai, President, India Smart Grid Forum (ISGF); Among other dignitaries were Guangzhe Chen, Regional Director for Infrastructure, South Asia, World Bank; Takeo Konishi, Country Director, ADB; and Reena Suri, Executive Director, ISGF.

Vishal Kapoor, Joint Secretary – Distribution, Ministry of Power, Govt of India mentioned that the Ministry of Power recognises that “Women will be needed to fill the increasing talent demand in the power sector, and their participation in technical and professional roles can contribute greatly to the sector’s effectiveness” and “Indian power sector has made progresses in terms of diversifying the work place and increasing women’s participations, including in leadership positions.”

He added, “In a survey of 28 Indian DISCOMs it was found that 4/5th of them have at least one female at top positions. This represents the growth of women’s participation in power sector”

A panel discussion on Expanding Job Opportunities in India’s Clean Energy Transition’ was moderated by Simon J Stolp, Practice Manager, South Asia Energy, World Bank, with eminent panelists from the Indian power sector such as Dr Tripta Thakur, Director General, National Power Training Institute; Sanjay Banga, President, The Tata Power Company Limited; Dr Praveen Saxena, Chief Executive Officer, Skill Council for Green Jobs; Gargi Chatterjea, Executive Director, CESC Limited; and Dr Rashi Gupta, Founder & Managing Director, Vision Mechatronics Pvt. Ltd; The panel of eminent speakers shared their views on how a diverse talent pool can be mobilized to accelerate India’s clean energy transition.

Pradeep Perera, Officer-in-Charge, Energy Division, South Asia Regional Department provided the key takeaways and concluding remarks.

Tripta Thakur, Director General, NPTI said that the government and NPTI recognises the need to bring more skilled women into the power sector, and NPTI is working with various stakeholders on developing training modules best suited to achieve this goal.

Rashi Gupta, Founder & Managing Director, Vision Mechatronics Pvt. Ltd mentioned that “Not only Electricity but Human Energy needs to capitalised for women empowerment and transformation”.

Overall, the stakeholders agreed that initiatives like WePOWER are important to attracting and retaining more women in the energy sector. The initiative received a lot of appreciation, positive feedback, and interest from the participating energy sector professionals. In the coming months, WePOWER will host in-depth meetings with prominent stakeholders from the sector to take forward the agenda of increasing women’s participation in the power sector.

This story is provided by PRNewswire. will not be responsible in any way for the content of this article. (ANI/PRNewswire)



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Reserve Bank of India – Press Releases

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As announced in the ‘Statement on Developmental and Regulatory Policies’ issued as part of the Monetary Policy statement dated October 8, 2021, the Reserve Bank, in exercise of the powers conferred under Section 45 (L) read with 45 (M) of the Reserve Bank of India Act, 1934, has directed Deposit-taking NBFCs (NBFCs-D) with 10 or more branches and Non-Deposit taking NBFCs (NBFCs-ND) with asset size of Rs.5,000 crore and above having public customer interface to appoint Internal Ombudsman (IO) at the apex of their internal grievance redress mechanism within a period of six months from the date of issue of the direction, except for certain type of NBFCs as mentioned in para 2. The direction covers, inter-alia, the appointment/tenure, role and responsibilities, procedural guidelines, and oversight mechanism for the IO. All complaints that are partly or wholly rejected by the NBFC will be reviewed by the IO before the final decision of the NBFC is conveyed to the complainant. The IO will not entertain any complainants directly from members of public.

2. NBFCs not having public customer interface and certain types of NBFCs, viz., stand-alone Primary Dealers (PDs), NBFC – Infrastructure Finance Companies (NBFC-IFCs), Core Investment Companies (CICs), Infrastructure Debt Fund – Non-Banking Financial Companies (IDF-NBFCs), Non-Banking Financial Company – Account Aggregators (NBFC-AAs), NBFCs under Corporate Insolvency Resolution Process, NBFCs in liquidation and NBFCs having only captive customers have been excluded from the requirement to appoint IOs.

3. The implementation of the IO mechanism will be monitored by the NBFC’s internal audit system apart from regulatory oversight by RBI.

(Yogesh Dayal)     
Chief General Manager

Press Release: 2021-2022/1198

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SFBs report fall in Q2 PAT as asset quality worsens

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AU Small Finance Bank said its average collection efficiency in Q2FY22 stood at 109%, at pre-Covid levels.

By Piyush Shukla

Small finance banks (SFBs) reported a 13-60% year-on-year decline in their net profit for the July-September (Q2FY22) quarter owing to deterioration in the asset quality.

AU Small Finance Bank, which had gross advances of Rs 36,405 crore as on September end, reported a net profit of Rs 279 crore, lower 13% than the previous year. The lender’s gross non-performing asset ratio (GNPA) stood at 3.16%, higher than 1.54% a year ago. In absolute terms, gross bad loans rose to Rs 1,151 crore, compared with Rs 423 crore from a year ago.

Equitas SFB reported a 60% year-on-year plunge in its net profit for Q2 at Rs 41 crore due to deteriorating asset quality and subsequent higher provisions. The lender’s GNPA ratio rose 234 basis points on year to 4.82%. Net NPA ratio was higher at 2.46%, against 1.13% a year ago. Due to higher bad loans, total provisions other than tax and contingencies rose to Rs 137.81 crore, higher by 84.4%.

Equitas said its July-September bottomline was affected on account of higher provisions for restructured assets. The bank carries Rs 196-crore provisions towards restructured loan book of Rs 1,401 crore.

Ujjivan Small Finance Bank reported a net loss of Rs 274 crore in the reporting quarter on account of higher provisions. It had reported a net profit of Rs 96 crore a year ago. As on September 30, Ujjivan’s GNPA ratio stood at 11.80%, sharply higher than 0.98% a year ago and 9.79% as on June end. “We have done major restructuring and taken accelerated credit provisions during the quarter. We believe, subject to potential third wave of Covid, our GNPA has peaked and will gradually reduce hereon,” said Martin PS, officer on special duty, in a post-earnings release.

Suryoday SFB reported a net loss of Rs 1.9 crore owing to higher provisions. The lender’s gross bad loan ratio rose 796 basis points on year to 10.21%. Subsequently, its provisions rose over six folds to Rs 97.3 crore.

Asset quality outlook

Even as SFBs reported deteriorating asset quality in Q2, trends in collections show that the same may improve in the second half of current financial year. AU Small Finance Bank said its average collection efficiency in Q2FY22 stood at 109%, at pre-Covid levels.

“While the overall GNPA remained steady compared to the first quarter, there was improved collection efficiency, leading to reduction in overdue cases between 1 and 90 days. And with X-bucket collection efficiency coming back to the pre-Covid level, we expect to reach steady state operating level shortly,” said PN Vasudevan, MD and CEO at Equitas Small Finance Bank, in a post-earnings release.

In a recent conversation with FE, Carol Furtado, chief operating officer at Ujjivan SFB, said, “Collections have picked up well. We are focused on reducing the PAR (portfolio at risk) flow to higher buckets, collections from restructured and NPA pool, further increasing overall collections. With this context, we believe things in H2 (Oct-March) would be better on the credit quality front.”

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Reserve Bank of India – Press Releases

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The Reserve Bank of India today released the November 2021 issue of its monthly Bulletin. The Bulletin includes five speeches, four articles and current statistics.

The four articles are: I. State of the Economy; II. Is the Phillips Curve in India Dead, Inert and Stirring to Life or Alive and Well?; III. Uncertainty and Disagreement among Professional Macroeconomic Forecasters; and IV. Changing Tides in the Indian Money Market.

I. State of the Economy

The global economic outlook remains shrouded in uncertainty with headwinds from multiple fronts. In India, the recovery gained strength though the speed and pace of improvement remains uneven across different sectors of the economy. Indicators of aggregate demand posit a brighter near-term outlook than before. On the supply side, the Rabi season has set in early on a positive note on the back of a record Kharif harvest and manufacturing is showing improvement in overall operating conditions, while services are in strong expansion mode. Overall monetary and credit conditions stay conducive for a durable economic recovery to take root.

II. Is the Phillips Curve in India Dead, Inert and Stirring to Life or Alive and Well?

The post-Global Financial Crisis period has seen a plethora of literature on the “health” of the most cited macroeconomic relationship –the Phillips Curve. Adding more essence to this heated global debate, this article examines the existence of the Phillips Curve in India by examining its time-variation and convexity. The findings from this paper confirm the existence of a convex Philips Curve relationship in India, though alive but stirring to life and convalescing from a period of flattening, which lasted for more than six years.

III. Uncertainty and Disagreement among Professional Macroeconomic Forecasters

This article analyses the responses received in the Reserve Bank’s bimonthly survey of professional forecasters (SPF) on major macroeconomic variables. The forecasts of output growth and inflation, particularly for 2020-21, were characterised by high uncertainty in the wake of the Covid-19 pandemic. The article dives into the fluctuations in short-term forecasts during the pandemic.

Highlights

  • The pandemic led to massive disruption in global as well as domestic economy causing uncertainty as reflected in large swings in forecasts of growth and inflation for 2020-21.

  • The pandemic induced lockdowns led to significant downward revision in the growth forecast for 2020-21 and subsequent gradual opening up of the economy led to improvement in the growth outlook.

  • Disagreement among the forecasters was high at the onset of the pandemic and generally moderated subsequently. Uncertainty of forecasts exhibited similar pattern as disagreement and declined with shorter forecast horizon.

  • The analysis portrays the existence of a significant association between uncertainty and disagreement; however, disagreement may not be a good proxy for uncertainty.

IV. Changing Tides in the Indian Money Market

Money market provides short-term capital to a wide class of financial entities and plays a key role in the transmission of monetary policy. This article reviews the important segments of the Indian money market in terms of volume, rate, microstructure, and dispersion of rates for the period from January-2016 to March-2021.

Highlights

  • The overnight money market volatility, in terms of volume-weighted rates, increased after the declaration of Covid-19 pandemic, and peaked in March-2020. The volatility declined subsequently. A shift away from the unsecured segment to secured segments was also witnessed after the declaration of the Covid-19 pandemic.

  • A study of the intraday market activity and network structure of the call money segment suggests increased portfolio diversification after the onset of the pandemic.

  • The constructed dispersion index (covering six segments of the money market), that serves as an empirical gauge of pass-through efficiency, suggests a frictionless market with efficient pass-through for the period from January-2020 to February-2020.

The dispersion index that peaked in March-2020 showed a decreasing trend at the end of the sample period considered. The sector-specific, institution-specific and instrument-specific liquidity measures undertaken by the Reserve Bank in the recent times have resulted in the stabilisation of the money market with the market adapting to the new normal.

Ajit Prasad           
Director, (Communications)

Press Release: 2021-2022/1197

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Buy Hero Motocorp For 16% Upside: IDBI Capital

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Hero Motocorp Q2FY22 results:

As per the brokerage the company’s earnings have been above its expectations on all of the parameters because of higher sales as well as operating margins. On the medium term basis, the management holds a promising outlook on volume growth because of:

1. Rural economic rebound owing to good and well spread monsoon

2. Distribution network re-opening in urban areas.

Q2FY22 Result Highlights: During Q2FY22, the company’s sales declined by 9.8% YoY to

Rs.84.5bn, driven by 19.9% YoY volume decline and 12.6% increase in average realizations. EBITDA margins during the quarter contracted by

112bps YoY to 12.6%. PAT declined by 16.7% QoQ to Rs.7.9bn.

Investment Rationale:

Investment Rationale:

Volume estimates have been lowered by the brokerage considering weak business situation:

To factor in soft business environment, we have lowered our volume estimates by 10.9% and 9.8% for FY22 and FY23 respectively. We have revised our PAT estimates downward by 16.4%/12.4% for FY22 and FY23 respectively.

Valuations of Hero Motocorp attractive:

The company has recommended a ‘Buy’ on the scrip of Hero Motocorp as the brokerage expects the auto major to report 9.5% volume CAGR and 16.7%

PAT CAGR over FY22-24E. At CMP of Rs2683, the stock is quoting at PE of 11xFY24 earnings, adjusted to associate values. “We rate the stock as BUY with new price target of Rs. 3,127 (13xFY24E earnings + Rs198 Associate Value).

Highlights of earnings call:

Highlights of earnings call:

On new launches as well as other developments:

– During the review period, the company unveiled ‘Xtec’ motorcycle and new sophisticated Edge 125 focusing on premiumization. Retail sales have also initiated in the key Mexican market.

– The company’s accessories and spares parts division during the period accounted for revenue of Rs. 11.4 billion, registering a decent growth of 40% YoY.

– The company’s intent to boost up its accessories portfolio in the premium range shall also led of growth in the segment.

– The other operating income saw a good boost both YoY and sequentially to Rs. 2230 million during the review period versus Rs. 1870 million and Rs. 1100 million, respectively.

On Electric Vehicle (EV) launch and future outlook:

On Electric Vehicle (EV) launch and future outlook:

– The company’s electric vehicle is to be launched before the end of the fiscal year 2022. The project is at presently in advanced stages and implemented at the company’s Chittoor facility in AP. “The plant will have an integrated ecosystem for Battery Pack Manufacturing and Testing, Vehicle Assembly and Vehicle End of Line Testing (EOL)”, adds the report.

– “The EV penetration in next 2 years will be driven by scooters with the current battery technology compared to Motorcycle segment”, added the management.

– On the future growth, as per the Management, unit of economics and company’s collaborations will lead to growth along with cost elements in focus.

Disclaimer:

Disclaimer:

This stock is picked from the brokerage report of IDBI Capital. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.



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