Daily Financial News Analysis – 4th Sep’20

Table of Contents

PM on Supply Chain

Prime Minister Narendra Modi: global supply chains would not be based just on costs but also on trust and pledged that India stood for political stability, policy continuity and diversity.
Modi, while delivering a special keynote address at US-ISPF US-India Summit 2020, highlighted India’s response to the pandemic and in that context called for diversification of supply chains.
India is also becoming one of the leading attractions for foreign investment.
Be it America or the Gulf, be it Europe or Australia — the world believes in us.
We have received over $20 billion of foreign investment flows during this year.
Google, Amazon and Mubadala Investments have announced long-term plans for India.
You are looking at a young country with 65% of its population below 35 years.
You are looking at an aspirational country that has decided to take the nation to new heights.
This at a time when we mark 75 years of independence.
You are looking at a country with commitment to democracy and diversity.
Aatmanirbhar Bharat is about transforming India from being just a passive market to an active manufacturing hub at the heart of global value chains.
There are tax exemptions to ‘Sovereign Wealth Funds’ and ‘Pension Funds’ for Infrastructure investment.
FDI into India rose by 20% in 2019. This is when global FDI inflows fell by 1%.
Sectors open: coal, mining, railways, defence, space and atomic energy

France coronavirus recovery plan

France has unveiled a 100bn-euro economic stimulus package (“France re-launch“) to help repair the economic damage caused by coronavirus.
President Emmanuel Macron’s government said the investment would include big spending on green energy and transport.
Aimed at reversing rising unemployment, and includes tax cuts for business.
The economy shrank by 13.8% between April and June, the biggest quarterly fall since the Second World War.
€100bn price tag is the equivalent of 4% of France’s annual economic output
The package is almost 4 times bigger than the rescue strategy implemented after the financial crisis of 2008.
About €40bn of the funding will come from the new European Union recovery fund.
About €35bn has been earmarked for projects to make the economy more competitive, and €30bn will be used on greener energy policies.
About €6bn is slated for making public buildings and homes better insulated.
The hydrogen industry, a sector which is receiving huge investment in Germany, will get €2bn.
The money would be spent over the next two years.
The next French presidential election is due to get under way in April 2022.
Economically and socially it is infinitely better to temporarily worsen the pubic finances to invest, re-arm the economy and move forward than to sink into austerity and let unemployment and human drama explode.
Obviously execution will be key to make sure that investment will be well utilised

Kamath Panel

The KV Kamath committee, set to submit its report on loan restructuring to the Reserve Bank of India (RBI) on Friday.
Identified six problem sectors, among them aviation, real estate, automobiles, infrastructure and power.
The committee has suggested solutions for 29 of the 307 sectors it assessed.
The RBI had tasked the committee with giving sector-specific recommendations following its announcement of a one-time loan recast for borrowers hit by the Covid-19 pandemic.
The panel is also said to have suggested that the two-year cutoff for the restructuring will begin after implementation of the resolution plan.
The RBI is expected to announce the loan restructuring guidelines by September 6 once the governor and deputy governors examine the committee’s recommendations.
Once the recommendations are finalised, bank boards will decide on resolution plans.
The Kamath committee will further vet these plans for business loans above ₹1,500 crore on aspects such as financial parameters, strength of promoters and their repayment capacity.
The committee sought inputs from 12 banks that constitute 65% of the banking system as well as the top three rating agencies — Crisil, ICRA and CARE.
The committee also looked at solvency ratios, liquidity parameters, profit margins, debt-servicing capability, risk on long-term loans and potential cash flows before arriving at its final set of recommendations.
India Ratings has said at least ₹2.1lakh crore (1.9% of banking credit) of retail loans, which could turn into NPAs, may undergo restructuring.
On an overall basis, about ₹8.4 lakh crore of total bank credit could be restructured, it said.

Rel Retail

Reliance Retail is in advanced talks with US private equity investor Silver Lake to sell 1.7-1.8% stake for about ₹7,500 crore, in what could be the first such deal by the Mukesh Ambani-owned company to raise funds.
If the deal materialises, it would potentially value Reliance Retail at over ₹4.1lakh crore.
The executives said Ambani wants to raise funds by selling minority stakes in Reliance Retail and is in talks with multiple investors.

SoftBank bid for Tik Tok India

SoftBank Group is exploring assembling a group of bidders for TikTok’s India assets and has been actively looking for local partners.
Over the past month, the Japanese conglomerate, which owns a stake in TikTok’s Chinese parent ByteDance, has held talks with the heads of India’s Reliance Jio Infocomm and Bharti Airtel.
TikTok is considering selling its operations in several countries after local governments shut out the app.

Services Activity Shrinks

The IHS Markit Services Purchasing Managers‘ Index moved up to 41.8 in August from July’s 34.2.
Services activity in India contracted for the sixth consecutive month in August.
Pace of decline slowed as some firms gradually resumed operations with lockdown restrictions easing