Daily Financial News Analysis – 9th Sep’20

Table of Contents

Loan Restructuring Plan

KV Kamath: RBI’s loan restructuring plan will succeed this time
Reason: specific time frame
There is very little scope for misuse by either corporates or banks
Past corporate debt restructuring schemes
To get back to health is in everybody’s interest.
“We have narrowed down on three ratios — solvency, liquidity and coverage. We backtested this by talking to the rating agencies. They also came up with the same set of ratios. So we had clarity that these metrics were correct.”

Goldman Sachs: 14.8% contraction in India’s economy in FY21
Fitch Ratings: 10.5% fall
India Ratings: 11.8% contraction
Fitch Ratings said multiple challenges were holding back the economy, warning of a looming deterioration in asset quality in the financial sector.
Both Fitch and Goldman Sachs have forecast a sharp bounce-back for India in FY22 but attributed this to the lower base of the current fiscal year.
The drop in economic activity has damaged household and corporate income while high inflation has put added strain on home budgets.
The Euro area is seen contracting at 9% for the year compared with an 8% fall earlier on the back of sharper declines expected in the UK (-11.5%), France (-9%), Italy (-10%) and Spain (-13.2%)

The US is to block key exports from China’s Xinjiang region due to allegations that they are produced using forced labour.
Xinjiang’s Uighur Muslims
Cotton & tomato products
A million people have been detained without trial for minor infractions.
Withhold Release Orders which allows it to detain shipments based on suspicions of forced labour involvement.
The law is aimed at combating human trafficking, child labour and other human rights abuses.

Brent crude was down 25 cents, or 0.6%, at $39.53 a barrel by 0455 GMT after dropping more than 5% on Tuesday to fall below $40 a barrel for the first time since June.
U.S. crude was down 28 cents, or 0.8%, at $36.48 a barrel, having fallen nearly 8% in the previous session.
Both major oil benchmarks are trading at around three month lows.
The global health crisis continues to flare unabated with cases rising in India, Great Britain, Spain and several parts of the United States.
China’s factory gate prices fell for a seventh straight month in August although at the slowest annual pace since March, suggesting industries in the world’s second-biggest economy continued their recovery from the coronavirus-induced downturn.

The Cabinet Committee on Economic Affairs has approved Asset Monetization of subsidiaries of Power Grid Corporation of India Limited– POWERGRID through Infrastructure Investment Trust.
It has given approval to POWERGRID to undertake monetization of its Tariff Based Competitive Bidding (TBCB) assets, held in existing Special Purpose Vehicle (SPVs), through Infrastructure Investment Trust (InvIT).
In the first block, POWERGRID would be able to monetize 5 TBCB assets of gross block of 7164 crore rupees.
Based on the experience gained, further monetization shall be carried out in future.
The assets proposed for monetization through InvlT are operational assets proposed to be managed by the existing manpower of POWERGRID already deputed for this purpose and therefore no additional employment generation is envisaged with regard to them.
However, additional employment opportunities are likely in services incidental to InvlT, such as merchant banking, legal advisory, trusteeship, financial and taxation consultancy, valuation, printing, advertisement and in allied activities.
Asset recycling is a key strategy of the Government to release the capital invested in operational assets and the proposed InvIT of POWERGRID would attract both domestic as well as global investors including Sovereign Wealth Funds.
The CAPEX Plan of POWERGRID for next two years 2020-21 and 2021-22 is 20 thousand 500 crore rupees.