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IDFC Ltd is likely to announce the sale of its mutual fund business on Wednesday evening after the Board’s approval, sources aware of the development said.

According to media reports, a consortium led by Bandhan Financial Holdings is leading the race to acquire IDFC AMC.

Singapore’s sovereign wealth fund GIC, private equity player ChrysCapital are some of the partners of the consortium. Bandhan Financial is also the holding company of Kolkata-based private sector lender Bandhan Bank. The deal will allow the Bandhan group to enter India’s growing mutual fund business which currently manages Rs 38 trillion of assets.

IDFC Limited and IDFC Financial Holding Company Limited in its board meeting in September 2021 approved the divestment of its mutual fund (MF) business.

IDFC MF with assets under management (AUM) of over Rs 1.21 trillion as in the Jan-March quarter is one of the top ten players in the MF industry.

IDFC announced the sale of its MF business after the company faced shareholders' ire on delay in divestments and mergers.

In the last financial year, the fund house saw its profit after tax at Rs 144 crore compared to Rs 79.4 crore in FY20. Typically, deals in MFs take place between 5-7 per cent of the AUM. In many cases, valuations can increase if the fund house has a good amount of equity assets.

"The investors presentation of IDFC Limited shows that total income of IDFC AMC stood at Rs 108.4 crore for Q3FY22 as against Rs 100.7 crore in Q3FY21, a growth of 7.6 per cent. While profit after tax surged by 12.8 per cent to Rs 46.1 crore in the third quarter of last fiscal compared to Rs 40.8 crore in Q3FY21."

Also Read:- Services PMI rises to 53.6 in March on lifting of COVID restrictions

India's services activity improved in March, with the S&P Global India Services Purchasing Managers' Index (PMI) rising to a three-month high of 53.6 from 51.8 in February.

A reading above 50 indicates expansion in activity, while a sub-50 print is a sign of contraction.

IHS Markit - the  compiler of the PMI - completed its merger with S&P Global on Febraury 28, leading to the renaming of the PMI for India as well as some other countries.

"Buoyed by the relaxation of COVID-19 restrictions, consumers were eager to go out and spend. Service providers recorded the fastest upturn in new business in 2022 so far, with an equal outcome seen for business activity," noted Pollyanna De Lima, economics associate director at S&P Global.

While the rise in new work in March was characterised as "solid", it was driven by the domestic market, with new business from abroad declining. Worryingly, the fall in new business from abroad was the fastest since September 2021.

The real concern, however, were prices.

The increase in costs in March was the most in 11 years, with service providers experiencing higher chemical, fuel, raw material, retail, transportation, and vegetable costs.

"Inflation risks continued to curb business optimism regarding growth prospects, with sentiment among services companies remaining subdued by historical standards. This lack of confidence in the outlook also meant that employment continued to fall in March," De Lima added.

Service sector jobs fell again in March even as the PMI increased to the highest in three months. However, the loss of service sector jobs in March was "only marginal".

While some companies passed on the the higher costs to consumers, on the whole, the increase in prices paid by consumers was "moderate and broadly in line with its long-run average" as price hikes were capped by the need to obtain new work, according to anecdotal evidence.

Like the services PMI, the composite PMI for March also rose to a three-month high of 54.3. Data released on April 4 showed the S&P Global India Manufacturing PMI declined to 54.0 in March from 54.9 in February.

Climate tech is increasingly being seen as an exciting opportunity in the world of technology startups and venture capital, globally and in India. But it is not the first time that startups focused on climate and the environment are getting this attention. Over a decade ago, between 2006 and 2011, venture capitalists and PE investors poured in billions into ‘clean tech’ startups. But they never really saw the returns they were expecting. Hence, the question being asked today, and rightly so, is: is the climate tech opportunity real this time around?

Yes, the fundamentals and macro trends clearly suggest that the climate tech story will be significantly different this time. We are now seeing a unique confluence of trends in favour of climate tech. What are those key factors and macro trends?

One, the massive rise in climate-related disasters has had a significant economic and political impact. Droughts, floods, pollution, disrupted crop patterns, rise in ocean levels, destruction of bio-diversity, among other things, have been clearly destroying livelihoods, and imposing significant economic costs on nations. Two, national and international commitments to achieve net zero emissions are broadly starting to align, even if significant differences still remain. India notably also committed to achieving net zero by 2070.

Admittedly, both these factors were true earlier as well: climate-related disasters have been occurring for a long time now, and governments have claimed to be re-committed to sustainability. Yet, it is also clear that on both fronts, the ante has been upped — by nature on one hand, and by governments and non-state actors globally on the other.

Three, significant technological breakthroughs in recent years offer the biggest hope that climate tech could actually change the game this time around. Renewable energy production — especially of solar energy — has become cost effective and in many cases cheaper than fossil fuel-driven energy production. This hard economic reality is most likely to push up renewable energy production.

Also Read: AirAsia resumes flights between India and Malaysia, Thailand

AirAsia on Wednesday said it is resuming flights connecting India with Malaysia and Thailand from this month. After two years of coronavirus-induced suspension, India resumed regular international flights on March 27.

In a press release, Malaysian carrier AirAsia said flights will gradually resume on six routes between India and Malaysia. While the flights on Bengaluru-Kuala Lumpur and Chennai-Kuala Lumpur routes began on April 1, the flight on the Tiruchirapalli-Kuala Lumpur route began on April 5, it mentioned.

The flights on Kochi-Kuala Lumpur, Kolkata-Kuala Lumpur and Hyderabad-Kuala Lumpur routes will commence from April 18, April 23 and May 1, respectively, it noted. The Malaysian carrier said flights on five India-Thailand routes will begin in May.

The flights on Bengaluru-Bangkok, Chennai-Bangkok, Kolkata-Bangkok, Kochi-Bangkok and Jaipur Bangkok will commence on May 4, May 4, May 2, May 1 and May 1, respectively, it mentioned.

The asset quality of the Indian banking system is set to improve further with its gross non-performing assets (NPAs) estimated to decline to 5.6-5.7 per cent by March 2023 from 6.2-6.3 per cent in March 2022, according to ICRA.

The NPAs will decline to 1.7-1.8 per cent by end of the current financial year (FY23) as against an estimate of 2 per cent by March 2022.

However, the rating agency added a caveat saying the performance of restructured loan book poses uncertainty to asset quality. The Russia-Ukraine conflict poses macro-economic challenges related to cost inflation, higher interest rates, and exchange rate volatility, which could pressurise asset quality, it added.

The credit and other provisions are estimated to dip to 1.3-1.4 per cent of advances in FY23 as against an estimated 1.7-1.8 per cent in FY22, said Anil Gupta, vice president, ICRA.

ICRA expects the outlook for banks to be ‘stable’ in FY23, based on continued improvement in earnings driven by improved credit growth of 8.9-10.2 per cent in FY23 (8.3 per cent for FY22 & 5.5 per cent in FY21) and a decline in credit provisions.

Banking credit growth would come from the non-food segment which continues to be driven by retail and MSME segments, and partially by co-lending arrangements with non-banking finance companies (NBFCs).

The pace of deposit mobilisation is expected to slow down to 7.3-7.9 per cent in FY2023 (8.3 per cent in FY22e & 11.4 per cent in FY21).

Domestic passenger vehicle retail sales in March declined by 4.87 per cent to 2,71,358 units, as compared to the same month last year, automobile dealers' body FADA said on Tuesday. According to the Federation of Automobile Dealers Associations (FADA), PV sales stood at 2,85,240 units in March 2021.

"Passenger vehicles continue to see high demand and long waiting periods as semiconductor availability still remains a challenge, even though supplies slightly improved from previous month," FADA President Vinkesh Gulati noted. The Russia-Ukraine war and China lockdown will further dent supplies and will hit vehicle deliveries, he added.

Two-wheeler sales declined by 4.02 per cent to 11,57,681 units last month, as compared to 12,06,191 units in the year-ago period. "The two-wheeler segment was already a non performer due to rural distress. It saw further dampening due to rise in vehicle ownership cost coupled with rising fuel cost," Gulati stated.

Commercial vehicle sales were up 14.91 per cent to 77,938 units, as compared to 67,828 units in March last year. Three-wheeler sales were also up 26.61 per cent to 48,284 units last month, as compared to 38,135 units in March 2021.

The effect of the HDFC-HDFC Bank merger will be for the bigger space of the Indian financial sector and not just limited to the banking sector. The large finance companies have practically no benefit of regulatory arbitrage. Earlier, such arbitrage between banks and NBFCs was normal.

The logic of the merger is very clear — the cost of borrowing of banks is lower. The finance companies, including housing finance entities, have to rely on wholesale fund-raising from the market or borrowings from banks, both of which are relatively costly. Above a certain size, it becomes difficult to rely solely on the wholesale funding or bank borrowings.

Gradually, it may so happen that the large finance firms may eventually get converted into banks. This would be subject to Reserve Bank of India’s comfort and guidelines because shareholding of many big NBFCs is with large corporations.

The market views that there will be good cost savings and efficiency for the merged entity, especially on the infrastructure side, after witnessing the way share prices of HDFC and HDFC Bank behaved today. I do not see any regulatory issues cropping up for the merger. If there were such concerns, they would not have done it.

Another aspect about the consolidation which we have always been talking about is the need for a few large banks. The HDFC-HDFC Bank merger may trigger further consolidation in the banking sector as some banks may look for scale. In the public sector banking space, I do not think any further mergers can happen. In the private sector, I do not rule out the possibility of such activity. Maybe we are moving towards consolidation in the private sector for scale.

There is a need for India to have fewer large-size institutions, which can be counted amongst global banks. HDFC Bank is already the largest in terms of market capitalization and after the merger, it may be amongst top five-six banks globally. The merger action augments the ability to take big ticket loans and comes at a time when the capital investment is picking up.

There could be niche players supported by a digital backbone. Universal banks like HDFC operate on scale and even the digital platform requires huge investment now. The technology spend for the banks is going up and you need money.

Also Read:-  Fuel prices on April 5: Petrol, diesel prices hiked by 80 paise, total increase stands at Rs 9.20 per litre

India continues to remain the highest receiver of the FDI, and the Indian retail investors have created the capacity to absorb the shock due to outflow of foreign funds from the country’s stock markets, Finance Minister Nirmala Sitharaman told Lok Sabha.

Replying to a question asked by Congress member Shashi Tharoor in Lok Sabha, she said foreign investments have to be gauged, not just by looking at FIIs and FPIs which by very nature depend on the interest rates and they keep on "moving up and down."

"The FIIs and FPIs would come and go. But, today the Indian retail investors have proven that even if they come and go any shock that may come in is now taken care of because of the shock absorbing capacity that the Indian retailers have brought into the Indian market,” she said during Question Hour.

”We in the House should should stand up and appreciate the Indian retailer who has invested a lot of confidence in the markets today in India,” she added.

Pointing out that overseas investors has pulled out over Rs 1.14 lakh crore from the Indian market so far, Tharoor had urged the finance minister to explain the worrying trend of "steadily" declining investment by the foreign investors.

The Congress member had also sought to now from the government as to what measures were being taken to reverse the trend"The FPI and FIIs obvious obviously going to be very typical of their very nature coming and going out. But, what’s there to look at with fairness and objectivity is the inflow of the FDIs which is remaining unabated,” she said in her reply.

"India is the highest receiver of the FDI since before COVID and that continues very much significantly during COVID and subsequently also,” she said.

"It is that which indicates if the money, which is coming in, is staying invested in this country, thereby creating jobs and prospects for us, not by the FIIs and FPIs," she added.

India's largest private lender HDFC Bank will merge with housing finance firm HDFC Ltd, the companies said on Monday.

Shareholders of HDFC Ltd will receive 42 shares of the bank for 25 shares held. Existing shareholders of HDFC Ltd will own 41 per cent of HDFC Bank. Shares held by the housing finance company in the lender will be extinguished, making HDFC Bank a full-fledged public company.

HDFC Bank will be 100 per cent owned by public shareholders. Existing shareholders of HDFC Ltd will own 41 per cent of HDFC Bank. The transaction is expected to be completed in 18 months, subject to regulatory approvals.

“Post the combination, HDFC Bank’s customers will be offered mortgages as a core product in a seamless manner. HDFC Bank will also leverage the long tenor mortgage relationship to offer varied credit and deposit products enabled through better insights through-out the customer life-cycle. This will result in an enhanced value proposition and customer experience for all customers of the combined entity”, said the lender in a statement.

“This is a merger of equals”, said Deepak Parekh, Chairman HDFC Limited. “Over the last few years, various regulations for banks and NBFCs have been harmonised, thereby enabling the potential merger”, he said.

Morgan Stanley India were financial advisors to HDFC Bank and Bank of America Merrill Lynch (BofA) Securities were financial advisors to HDFC Limited for the proposed transaction.

Shares of HDFC Bank and HDFC jumped 9.62 per cent and 13.49 per cent to Rs 1,651.15 and Rs 2,781.55 respectively post the announcement of the amalgamation.

"The proposed transaction ticks all the right boxes in terms of completion of product offerings, product leadership in home loans as with other retail assets products, distribution strength across the country and a customer base that can be leveraged to cross-sell a complete suite of financial products,” said Sashi Jagdishan, chief executive officer (CEO) and managing director of HDFC Bank.

“With the leadership that we have built in housing finance and the deep understanding of the housing market across various economic cycles, this transaction helps in realizing the potential of what HDFC’s housing finance business can achieve by leveraging the distribution and customer base of HDFC Bank,” said Keki M. Mistry, vice chairman and CEO of HDFC Ltd.

Also Read:- Manufacturing PMI declines to 54.0 in March from 54.9 in February