Blog for Stock tips, Equity tips, Commodity tips, Forex tips: Sharetipsinfo.com

Keeping with the rising momentum in economic activity, the bank credit expansion was broad-based, posting double-digit annual growth in June 2022 in metropolitan, urban, semi-urban and rural areas in the country, showed Reserve Bank of India data.

RBI data showed the metropolitan regions saw maximum acceleration with year-on-year (YoY) credit growth vaulting from 2.7 per cent in June 2021 to 13.2 per cent in June 2022. It should be kept in mind that the second wave of Covid-19 pandemic hit the economic activity in April-June 2021 (Q1FY22).

The urban region saw the growth rising to 18.4 per cent in June 2022 from 10 per cent a year ago. The semi-urban areas showed an increase from 12.3 per cent in June 2021 to 15.3 per cent. In contrast, the pace of credit offtake in rural areas moderated to 11.6 per cent YoY in June 2022 from 12.8 per cent a year ago.

Also Read: Listed private non-finance companies log 41% sales growth in Q1FY23: RBI

The similar growth trend (double-digit YoY) was evident across all the bank groups — (public sector banks, private banks, foreign banks, Regional Rural Banks (RRBs) and Small Finance Banks (SFBs). The experience was no different for all the regions of the country (central, eastern, north-eastern, northern, southern and western), RBI said.

However, the story on fund raising by banks was different. The aggregate deposit growth (y-o-y) has remained in the range 9.5-10.2 per cent during the last five quarters.

The metropolitan branches continue to account for over half of the bank deposits and their share increased marginally over the last one year, RBI said.

The share of current account and savings account (CASA) deposits in total deposits has been increasing over the last three years. The share of CASA money which was 42 per cent in June 2020, rose to 43.8 per cent in June 2021 and further to 44.5 per cent in June 2022.

As credit growth is outpacing deposit growth in the recent period, credit-deposit (C-D) ratio has been on the rise in June 2022. The C-D ratio stood at 73.5 per cent at all-India level in June 2022 (70.5 per cent a year ago) and 86.2 per cent for metropolitan branches of banks (84.3 per cent a year ago), it added.

Refugees can be a source of prosperity in any nation where they take refuge. Illegal migrants can also bring prosperity to local communities in nations that they migrate to as well as to countries which they leave behind.

India knows this from its long experience throughout history. So does the United States, where millions of illegal immigrants do not live under the radar, or in squalid detention camps, but are productive contributors to economic activity in towns and cities from coast to coast. South Korea knows this only too well, and the Gulf countries acknowledge this as much. 

Therefore, last fortnight’s debate about the fate of a relatively small number — by global refugee standards — of Rohingya refugees in Delhi is in the realm of make-believe, unreal, and even delusional.

It is now forgotten in the wake of the first ‘oil shock’ which transformed Gulf countries beyond recognition into El Dorados in the 1970s, the flood of illegal migrants who flocked there, risking their lives in small boats across the ocean, were from India. They were needed in those desert kingdoms and the sultanates and the sheikhdoms to build those nations into prosperous, modern societies that they are today.

In turn, their remittances lifted millions of families from poverty in India, which was then under severe economic stagnation, and heavy joblessness. Through the 1970s, ’80s, and ’90s, the benevolent rulers in the Gulf repeatedly gave amnesty to these illegal migrants from India. They were not put in detention camps and very few of those who arrived illegally were shipped back to India. For the most part, they were Hindus. Historical memory of this Indian experience was completely missing from all the debates about Rohingyas in India.

Go to Ontario or British Columbia today, and entire townships of Punjabis who arrived in Canada following Operation Bluestar as refugees have sprung up in and around Toronto or Vancouver. These one-time refugees have not only prospered as individuals and families, they continue to do so through successive generations. The industrious Sikhs among them, who fled India decades ago alleging persecution, have created thriving local economies in those towns. Canada’s famously liberal ethos has enabled them to be elected to Parliament and become federal ministers in Ottawa and in several Canadian provinces. This Indian experience was also missing from the recent debates about Rohingyas living in Delhi.

It is true that such refugee populations and illegal migrant and immigrant communities can be fertile recruiting grounds for countries which practice terror as State policy, and for non-State organisations which implement such policies through acts of terrorism. It is also part of South Asia’s historical experience that Khalistanis found willing perpetrators of heinous terror acts — including passenger aircraft bombings — among refugees in Canada who came from Punjab. When civil war was raging in Sri Lanka, overseas Tamil Tiger outfits in Greater Toronto resorted to extortion from both Sinhala and Tamil businesses in their strongholds in the Ontario province. These have been documented in Canada’s official evidentiary hearings.

Fortunately, this does not appear to have happened with Rohingyas in Delhi, who were at the centre of the recent controversy. News reports from Rajasthan, Haryana, Delhi, and Kashmir have also discounted threats of terrorism from such people, who are fleeing persecution back in their home province of Rakhine in Myanmar. In Rajasthan, there is only one case against Rohingyas, which relates to a sexual assault on one of their own. In the hotbed of terrorism in Jammu and Kashmir, the Rohingyas are only minding their business of survival.

The reality is that illegal migration and refugee exodus the world over are there to stay. They cannot be wished away by speeches in parliaments or Houses of Congress, which are often laced with bravado — or by tweets in today’s digital environment. Otherwise, the office of the United Nations High Commissioner for Refugees (UNHCR), the global refugee agency formed 72 years ago, would have been disbanded long ago.

India has reservations about the UNHCR, which have a historical context, reinforced by New Delhi’s refugee experience during the 1971 war for the creation of Bangladesh. If India becomes the $5-trillion economy, which it aspires to be, illegal migration inward is certain to increase. As the political and economic environment worsens all around in India’s neighbourhood — Sri Lanka, Nepal, Myanmar, and Maldives are apt examples — refugees can be expected to be a growing headache for the ministries of home and external affairs in New Delhi. The resources of intelligence and security agencies will be stretched.

Like the US, India has a long history of giving opportunities to refugees to prosper, and in assimilating illegal immigrants, who mostly improve their lot, having got a second chance in life, as it were, by moving to India. The demographic changes in the Northeast are proof of the latter.

Only five years ago, Hindus, Jews, and Christians came together at the Consulate General of India in New York to celebrate a moving cinematic tribute to the generosity of what is now Gujarat and Maharashtra in offering refuge to 1,000 Jewish and Christian children from Poland. At the National Day reception at the residence of the South Korean Ambassador in New Delhi, one frequently encountered Koreans who spoke fluent Hindi. These were prisoners of war from the Korean conflict in the 1950s, and their children. They opted to move to India permanently when the armistice talks stalemated in 1953. Their stories of how Jawaharlal Nehru took a personal interest in their welfare for years after they made this country their home tell of an India which welcomed outsiders in need of succour.

According to a study by EY and CII titled “India: The next global SaaS capital”, India is poised to become the next SaaS capital over the next few years, mainly driven by small and medium businesses with a focus on large enterprises.

The report also stated that according to industry estimates, the market is expected to reach $20-25 billion by 2025 from $4-7 billion in 2020.

“Macro-economic environment notwithstanding, the funding activity in the first two quarters of this year surpassed the funding activity in 2021 – which was a breakout year with over $4.3 bn in funding for SaaS start-ups”, said Nitin Bhatt, Technology Sector Leader at EY.

Almost 50% of SaaS providers interviewed in the study stated that driving higher awareness for SaaS products continues to be a prerequisite for customer acquisition, EY said in a statement.

“As entrepreneurs double down on scaling their ventures, they would do well to sharpen the focus on account centricity, customer success and partner with educational institutions and the government to build a SaaS talent pipeline and continue investing in product functionality and innovation”, added Bhatt.

Compared to only 1 SaaS unicorn in 2018, India now has a total of 18, taking the third spot among the largest SaaS ecosystems in the world. The study also highlights that India more than doubled the number of its SaaS companies in 2021 in contrast to 2019. Further, funding has increased from $2.6 billion to $6 billion in the span of these two years, stated EY.

In 1994, Jeff Bezos founded Amazon, a virtual bookstore that would grow to become the world's biggest e-retailer. When he set out to realise his vision, who are the first people he looked for?

On August 22 that year, Jeff Bezos, who is now the world's second-richest person, posted a job advertisement for "extremely talented C/C++/Unix developers" to help pioneer commerce on the Internet.

Considering what Bezos was building, the job demands were high.

"You must have experience designing and building large and complex (yet maintainable) systems,and you should be able to do so in about one-third the time that most competent people think possible,"the posting said.

It required candidates to have a Bachelor's, Master's or doctorate degree in computer science.

"Top-notch communication skills are essential," Bezos wrote. "Familiarity with web servers and HTML would be helpful but is not necessary."

The posting said candidates should be willing to relocate to Seattle area, where Amazon was founded.

Bezos promised to cover moving costs of successful candidates and provide them equity ownership. "We are an equal opportunity employer," the posting said.

The job ad, shared on Twitter by TV personality Jon Erlichman, gathered over 9,000 likes.

"Nowadays all the stuff around the actual job description is longer than the job description itself," one user commented on his tweet.

Another wrote: "The meaningful equity ownership was probably indeed meaningful later on."

In the years since its foundation, Amazon grew tremendously, emerging as one of the five American tech giants alongside Apple, Microsoft, Alphabet and Meta.

But it has sparked criticism for its poor treatment of workers -- making them work in gruelling and unsafe conditions.

To bring about uniformity in fertiliser brands across the country, the government today issued an order directing all companies to sell their products under a single brand name of ‘Bharat’.

Following the order, all fertiliser bags, whether containing urea or di-ammonium phosphate (DAP) or muriate of ootash (MOP) or NPK will sport the brand name as ‘Bharat Urea’, ‘Bharat DAP’, ‘Bharat MOP’ and ‘Bharat NPK’ irrespective of the company that manufacturers it, whether in the public or the private sector.

The order has drawn adverse reactions from fertiliser companies, claiming it will ‘kill their brand value and market differentiation’

The order also stated that the single brand name and the logo of Pradhan Mantri Bhartiya Janurvarak Pariyojana (PMBJP), the scheme under which the Central government grants subsidy annually to the fertiliser, companies will have to be displayed on the bags.

“The company name can be mentioned in a very small portion of the total packaging,” a senior industry official said.

He said the move could harm the fertiliser companies as brands apart from being product differentiator also helps in building an image of the firm while going into the farmers’ fields.

“Fertiliser companies do a lot of extension activities such as field-level demonstrations, crop surveys etc, where their brands are displayed prominently and it also helps in reaching out to the farmers. All this will now stop,” the official said.

The order, meanwhile, said that fertiliser companies will not be allowed to procure old designed bags from September 15 and the new system will come into place from October 2, 2022. The companies have been given time till December 12 to exhaust all their old designed bags from the market.

India’s business and consumption activity showed conflicting signs of recovery in July as elevated inflation, rising borrowing costs and fears of a global slowdown weighed on Asia’s third-largest economy.

Demand for Indian goods and services softened, a cross-section of high-frequency indicators compiled by Bloomberg News showed. The needle on a dial measuring so-called animal spirits, however, remained steady at 5 last month as the gauge uses a three-month weighted average to smooth out volatility in the single month readings.

The Reserve Bank of India, which has raised interest rates by a total of 140 basis points in three moves this year, has signaled future tightening would be calibrated to ensure there isn’t a massive slowdown in the economy, and sees price pressures moderating from its recent peak. A pulse-check of the economy is due next week, with gross domestic product data for the April-June quarter likely to show a double-digit growth, reflecting demand thanks to a wider reopening from the pandemic.

Purchasing managers’ surveys showed India’s services activity in July falling to the lowest level in four months on weaker sales growth and elevated inflation. While domestic demand for Indian services remained steady, international demand worsened, offsetting gains in the manufacturing sector that expanded to the highest level in eight months.

Moderation in business outlook in services pulled down the S&P Global India Composite PMI Index to 56.6 in July, from 58.2 a month earlier.

Exports

Trade deficit widened to a fresh record of almost $30 billion as exports growth slowed to a 17-month low led by weak global demand and a levy on outbound shipments of fuel, which makes up more than 15% of India’s exports.

Imports stayed near the record-high levels due to a weaker rupee, which was one of the worst performing Asian currencies in the last three months. Crude, which comprises about one-third of India’s imports, and coal with an 8% share, primarily contributed to the rise in inbound shipments.

Consumer Activity

Passenger vehicle sales rose for a second-straight month helped by a broad-based recovery in all segments, including two-wheelers. While supply issues due to semiconductor shortage are easing, automakers cautioned that costlier loans could crimp demand for new vehicles.

Bank credit continued to grow despite higher interest rates, rising the most in more than three years to 14.5% at the end of July. Liquidity in the banking system continued to remain in surplus.ustrial Activity

Among signs of industrial activity, factory output as well as core sector signaled moderation in June as electricity consumption and coal production slowed down with the onset of monsoons. The year-on-year growth in Index of Industrial Production eased to 12.3% from a one-year high in May. The growth of eight key infrastructure industries also dropped to 12.8 from 19.3% in the previous month. Both the data are published with a one-month lag.

Indian companies not in financial services can now directly invest in financial-services firms abroad, such as brokerages, asset management funds, and credit cards under the automatic route. Banks and insurance firms have been kept out of this. Earlier, such investment was prohibited.

This is according to the new overseas direct investment (ODI) regulations notified by the finance ministry on Monday. They are aimed at easing rules for domestic firms that want to invest abroad. The move could open the door for many companies that want to do so.A company can now invest four times its profit if it has been profitable for three years. “Enabling Indian entities not engaged in financial activities to invest in financial services will improve the available avenues to deploy surplus funds. In addition to this it will also enable them to diversify in other jurisdictions,” said Moin Ladha, partner, Khaitan & Co.

An entity not in insurance can invest overseas in general and health insurance if such a business supports the core activity of the Indian outfit.

The same relaxation has been given for investment in GIFT City, where an entity not in financial services can invest in a foreign outfit registered with the International Financial Services Centres Authority.

“Opening up financial services for investment by non-financial entities and the relaxation provided for investment in GIFT City will create new opportunities for funds and fintech start-ups controlled from India,” said Bhavin Shah, partner, PwC.

The issue of control

The regime has defined “control”. Holding less than 10 per cent in an overseas entity is, inter alia, not considered “control” but has been put under portfolio investment and permitted.

Earlier, there was no threshold for investment in the unlisted space.

The rules also exempt entities from the mandatory reporting requirement except in the case of equity capital in a foreign unlisted company. The reporting requirement had earlier led to compliance challenges, particularly because financial investors did not have the right to seek information from the target firm overseas, Ladha pointed out.

In the case of equity capital, the foreign entity’s annual performance report, certified by a statutory auditor, has to be submitted every year by December 31. Additionally, overseas direct investment has been given more flexibility by expanding the scope of the automatic route.

Issuing corporate guarantees to or on behalf of a second or the next-level step-down subsidiary (SDS) of an Indian entity does not require the Reserve Bank of India’s approval. It is now under the automatic route.

Similarly, acquiring equity capital in a foreign entity on a deferred-payment basis or any disinvestment involving write-offs beyond specified limits does not require approval.

Other than these, the new regime has introduced the concept of “strategic sector”, which gives the government the powers to permit overseas investment in excess of the limits prescribed under the rules.

“The strategic sector shall include energy, natural resources and such other sectors as may be decided by the government from time to time in view of the evolving business requirements,” it said. Besides, the new regulations have removed the cap for money remitted abroad. Earlier it was $1 billion per year or 400 per cent of the net worth. However, the percentage criterion remains unchanged.

Earlier, the RBI was of the view that money transferred overseas through the ODI route could be used only for bona fide purposes.

Easing investment route

• FinMin notification eases compliance, streamlines foreign investment structure
• Allows portfolio investment in unlisted companies
• Sets 10% threshold for investment in unlisted foreign companies
• Defines control, disinvestment to ease compliance
• Eases reporting requirement, except equity capital in unlisted foreign entity
• Introduces strategic sectors such as energy and natural resources
• Allows certain investments under automatic route, which were earlier through approval route

Indian billionaire Gautam Adani’s ports-to-power conglomerate is “deeply overleveraged,” with the group investing aggressively across existing as well as new businesses, predominantly funded with debt, CreditSights, a Fitch Group unit, said in a report.

The aggressive expansion pursued by the Adani Group, led by Asia’s richest person, has put pressure on its credit metrics and cash flow, CreditSights said in the report Tuesday, adding that “in the worst-case scenario” it may spiral into a debt trap and possibly a default.

“We see little evidence of promoter equity capital injections into the group companies, which we feel is needed to reduce leverage in their stretched balance sheets,” the agency said, referring to fund infusions from the Adani Group’s founders, known as “promoters” in India.

A representative for the Adani Group didn’t immediately respond to a request for comment on the report. All seven listed Adani firms declined by 2% to 7% in trading Tuesday.

CreditSights’ report comes after a big few years for Adani, who’s been on a rapid diversification spree, expanding an empire centered on ports and coal mining to include airports, data centers and cement as well as green energy. The group recently pledged to plow $70 billion into renewable projects. These moves have not only boosted Adani’s stature in India, but his fortune, with his net worth surging past $135 billion this year. He’s also increasingly moving into spheres dominated by the man he replaced as Asia’s richest man, compatriot Mukesh Ambani of Reliance Industries Ltd.

Also read: Adani Group gets Sebi approval for $3.8 billion open offer for Ambuja, ACC

The report puts a spotlight on the multiple fault lines that may impede Adani’s ambitions and the stratospheric surge in the shares of his firms. CreditSights’ analysts, however, said they draw “comfort” from the group’s strong relationships with banks as well as the administration of Indian Prime Minister Narendra Modi.

Some other highlights from the report, authored by CreditSights Lakshmanan R, Rohan Kapur and Jonathan Tan:

• The Adani Group is entering new and unrelated businesses, which are highly capital intensive, raising concerns over execution oversight
• Potential strong competition between the group and Ambani’s Reliance to achieve market dominance could lead to “imprudent financial decisions”
• Adani Group is also exposed to moderate levels of governance and ESG risks
• The group has a “strong track record of churning out strong and stable companies” through its flagship, Adani Enterprises Ltd., and has built a portfolio of “stable infrastructure assets tied to the healthy functioning” of the Indian economy
• Its founder “enjoys a strong relationship” with the Modi government and has benefited from “policy tailwinds”

• CreditSights remain “cautiously watchful” of the group’s growing appetite for expansion, which is largely debt-funded

A self-made billionaire who started his business as an agri-trading firm in late 1980s, Adani has also been a busy dealmaker this year. Adani Group acquired the Haifa port in Israel in July for $1.2 billion and Swiss firm Holcim’s Indian cement units for $10.5 billion in May, besides almost three dozen big and small acquisitions. It’s also expanding into media, health care and digital services.

The group owns India’s largest private sector port operator, coal miner, city gas distributor and airport operator and is aiming to create the world’s largest renewable power generator.

‘Pull All Stops’

Investors have cheered the tycoon’s ability to rapidly scale up his businesses, spurring massive share rallies in Adani firms even during the pandemic, when most businesses suffered. Adani Enterprises and Adani Green Energy Ltd. have surged more than 1,300% since the beginning of 2020. Adani Total Gas Ltd. has rallied about 1,900% and Adani Transmission Ltd. over 900%, while the benchmark S&P BSE Sensex surged almost 42% over this period.

But it’s this breakneck growth that’s making credit watchers, including CreditSights, uneasy. The research firm acknowledges that the Adani founding family’s status as a majority shareholder in most of their listed group companies means they will go all out to support them.

The family’s “entire fortune and reputation is tied to the Adani Group companies,” it said. “Having such major ‘skin in the game’ could imply that the family would pull all stops to avoid default in any of the entities, since any material liquidity or solvency issue in one company would likely have a contagion effect on the valuation of the remaining companies too.”