Daily Financial News Analysis – 9th June’20

Table of Contents

Startups

Startups can now issue stock options to employees for up to 10 years from their incorporation instead of five.
The ministry of corporate affairs notified changes to the definition of a startup in line with the one issued by the Department for Promotion of Industry and Internal Trade in February last year.
As per the notification, startups can issue sweat equity of up to 15% of their paid-up share capital.
The notification amending the Companies (Share Capital and Debentures) Rules, 2014, addressed the long-standing issue of updating the definition of a startup.
In February last year, the DPIIT extended the period during which a company could be considered a startup from five years after incorporation to 10 years.
It also changed the annual turnover ceiling for a company to be defined as a startup to Rs 100 crore from Rs 25 crore.
The ministry removed a provision that required a listed company that has privately placed debentures to invest or deposit a sum equivalent to at least 15% of the amount maturing during the financial year by April 30 each year.

PPE

Sensing an opportunity in crisis, the government has asked industry to prepare for global certification to be able to export Personal Protective Equipment (PPE) once India’s demand for the specialised protective suits, critical for medical personnel dealing with coronavirus cases, is fulfilled.
Officials said while industry is keen to export, they have to be prepared with international certifications and the government would take a decision based on new projections of domestic requirements.

There are functional requirements such as health and safety for which different countries have different criteria.
Manufacturers need a CE marking to be able to export PPEs to the European Union and a certification from the Food and Drug Administration for the US market.
Certification can be done in two ways – either the seller sends the PPE samples to these authorities or these agencies allow their accredited labs in India to certify manufacturers here.

Bharat Bond ETF

Bharat Bond Exchange Traded Fund (ETF), India’s first bond exchange-traded fund, will launch a new fund offer (NFO) in July to raise Rs 14,000 crore in two new series.
The proceeds will be used as additional funding for central public sector undertakings and other government organisations to meet borrowing requirements.
The proposed plan is to raise an initial amount of Rs 3,000 crore with a green shoe option of Rs 11,000 crore based on market demand.
The first launch of Bharat Bond ETF successfully raised over Rs 12,400 crore.
The second set, however, comes at a time when the Covid-19 pandemic is spreading, even as markets have rebounded to levels seen in March, of 34,000 points.
“The competent authority has approved launch of further NFOs in July,” the Department of Investment and Public Asset Management (DIPAM) said in a white paper on Monday.

World Bank on Indian Economy

The World Bank expects India’s economy to contract 3.2% in the current fiscal year, a sharp downgrade from its April projection of 1.5%-2.8% growth, citing stringent lockdown and spill overs from weaker global growth.
The Global Economic Prospects (GEP) report released on Monday said the lockdown would severely curtail activity despite fiscal and monetary stimulus.
Further, weaker global economic performance and balance sheet stress in the financial sector would also weigh on activity.
The latest report expects the economy to make a modest recovery to 3.1% growth in the next fiscal year, in comparison to the 6.1% expansion projected in the January report.
A number of firms including Goldman Sachs and Nomura have projected a contraction of as much as 5% for India in FY21.
The report said the pandemic’s impact would be particularly hard on emerging markets and developing economies (EMDEs) with large informal sectors, like India.
It would “take an especially heavy humanitarian and economic toll on” these economies, it said
The vulnerabilities associated with informality like widespread poverty, deficient public health and medical resources, and weak social safety nets have amplified the economic shock to livelihoods from Covid-19, according to the GEP report.
The World Bank said the swift and massive shock of the coronavirus pandemic and shutdown measures to contain it have plunged the global economy into a severe contraction.
According to the report, 90% of economies would be in recession, higher than levels seen during the Great Depression of the 1930s.

Shortage of workers

Construction and real estate are staring at a worker shortage of 52%, followed by manufacturing at 44% and healthcare and pharmaceuticals at 42%
Companies across industries are facing a huge shortage of blue-collar workers as they gradually resume operations after the lockdown, and many are lining up incentives to woo workers from near and far.
The overall shortfall is estimated at 40-50% over the next few months.
With workers in short supply, firms are going all out to hire people from nearby villages as well as far-off states, offering extra wages, bonus, food, transportation facilities and other support such as providing 15-day isolation facilities for entry into states that require mandatory quarantine.

FDs vs Savings accounts

It no longer pays to keep your money locked up in a bank.
Fixed deposit (FD) rates have plummeted in recent months, with short-term rates now hovering very close to or below savings account rates for some banks.
Surplus liquidity and sluggish credit growth have forced banks to cut rates of both short-term and long-term deposits, and made savers move to riskier instruments such as debt market mutual funds or even equity assets.