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OIL DRIVING INFLATION UP AROUND THE WORLD: RBI STATE OF THE ECONOMY REPORT
Crude oil prices increased by 67.2 per cent in 2021, following a decline of 32.8
per cent in 2020.
* January 18, 2022, 08:31 IST
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New Delhi: The rapid surge in energy prices, apart from the higher rates in
commodity and food, were a key driver of inflation in 2021 not just in India but
around the world, the Reserve Bank of India (RBI) said in its just released
State of the Economy report.
"Crude oil prices increased by 67.2 per cent in 2021, following a decline of
32.8 per cent in 2020. Natural gas prices registered a near three-fold increase
in 2021, with prices in Europe rising steeply to record highs in December 2021,"
the bank said.
The robust import demand of the country was driven by petroleum products, gold
and electronic goods while the imports of coal, coke and briquettes recorded a
sequential deceleration during December 2021.
The report, part of the RBI's January bulletin, also said retail selling prices
of petrol and diesel in the four major metros remained unchanged in January so
far while LPG and kerosene prices also remained steady in the first half of
January (Table 3).
Overall, the last month was marked by an increase in mobility, increased fuel
consumption, with the consumption of petrol surpassing pre-pandemic levels.
Also, aviation turbine fuel (ATF) and diesel consumption exhibited sequential
improvement though ATF still remains below the pre-pandemic levels.
At the same time, domestic air passenger footfalls exhibited signs of moderation
in early-January, reversing the gradual uptick since June 2021.
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THIS IS THE BEST TIME TO INVEST IN INDIA: PM TO INVESTORS AT DAVOS
The PM said that in the last year, more than 25,000 compliances have been
reduced and India has also de-regulated several sectors, including drones, space
and geo-spatial mapping.
* ET Bureau
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Prime Minister Narendra Modi said this is the best time to invest in India,
emphasising that the country's commitment to deep economic reforms, among other
factors, makes it the most attractive investment destination.
Delivering the 'State of the World' special address at the World Economic
Forum's virtual 'Davos Agenda' on Monday, the PM listed the reforms undertaken
by his government to solve the issue of retrospective tax in the country,
improve ease of doing business, lower corporate taxes and reduce compliances.
"Today India is encouraging ease of doing business and reducing government
interference. By simplifying and lowering corporate tax rates, we have made them
most competitive," said Modi. "This is the best time to invest in India."
The PM called for a coordinated global response to cryptocurrencies.
He said there was a time when India was known for 'licence raj', when most
sectors were controlled by the government. "I understand the challenges
businesses faced in India. We're constantly trying to remove those challenges,"
he said.
The PM said that in the last year, more than 25,000 compliances have been
reduced and India has also de-regulated several sectors, including drones, space
and geo-spatial mapping.
Commitment to Deep Reforms
India has also introduced big reforms in the IT sector and BPO-related outdated
telecom regulations, he said.
"By making improvements in retrospective taxation, India has restored the trust
of the business community," said Modi. "India's commitment to deep economic
reforms is another big reason that makes India the most attractive investment
destination."
He reiterated that India is committed to emerge as a reliable partner in the
global supply chain and is making inroads with many countries through free trade
agreements.
Compared to a mere 100 startups in 2014, India has more than 60,000 startups
today, out of which 80 are unicorns and more than 40 unicorns emerged in 2021
itself, he said.
Citing physical and digital infrastructure, the PM said more than 600,000
villages are being connected with optical fibre and $1.3 trillion investment is
being made in connectivity infrastructure.
"We have set a target to generate $80 billion through innovative financing tools
like asset monetisation and also started the Gati-Shakti national master plan to
bring all stakeholders for development on one platform," said Modi.
India is not only focusing on aatmanirbharta (self-reliance) but also
incentivising investment and production, said the PM.
India is moving ahead with the 'Make in India' and 'Make for the World' mantra,
said Modi. He said production-linked incentive schemes worth $26 billion have
been approved by the government for 14 sectors.
Amid the Covid-19 pandemic, India saved many lives by supplying essential
medicines and vaccines while following its vision of 'One Earth, One Health',
Modi said, adding that today India is the third largest pharmaceutical producer
and is a pharmacy to the world.
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INDIA'S AGGREGATE DEMAND CONDITIONS REMAIN RESILIENT DESPITE OMICRON, SAYS RBI
India's economic recovery has met headwinds from a rapid rise in Covid-19
infections due to the Omicron variant but aggregate demand conditions remain
resilient, the Reserve Bank of India (RBI) said in its monthly bulletin on
Monday.
* Reuters
Click Here to Read This Story
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MUMBAI: India's economic recovery has met headwinds from a rapid rise in
Covid-19 infections due to the Omicron variant but aggregate demand conditions
remain resilient, the Reserve Bank of India (RBI) said in its monthly bulletin
on Monday.
"The path of the recovery in India as in the rest of the global economy
encountered headwinds from a rapid surge in infections due to Omicron," the RBI
wrote.
However, due to upbeat consumer and business confidence and an uptick in bank
credit, demand conditions have stayed resilient while on the supply front the
sowing of winter crops has exceeded last year's levels and normal acreage.
"Manufacturing and several categories of services remain in expansion. More
recently, expectations that Omicron may turn out to be more of a flash flood
than a wave have brightened near-term prospects," RBI said.
India's Covid-19 infections rose by 258,089 in the past 24 hours, a day after
hitting an eight-month peak, the health ministry said on Monday, taking the
tally to 37.38 million.
The central bank said the resurgence of Covid-19 and emergence of new variants
pose a major risk to near-term global economic prospects. It said inflation
continues to mount across geographies amidst disruptions in production, supply
chains and transportation.
"Consequently, the divergence between monetary policy stances across
jurisdictions has widened," RBI added.
"There are indications that supply chain disruptions and shipping costs are
slowly easing, although the waning of inflation may take longer. This provides a
window of opportunity to focus all energies on accelerating and broadening the
global recovery".
Retail inflation in India, buoyed by rising prices of food and manufactured
items, rose 5.59% in December from a year earlier and compared with 4.91% the
previous month, data last week showed.
RBI said food inflation and its volatility remains a challenge and it would
require supply side interventions such as higher public investment, storage
infrastructure and promotion of food processing.
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FRANKLIN TEMPLETON APPROACHES GLOBAL ASSET BUYERS TO SELL VI PAPERS
The fund house is said to have already written down the full value of an
estimated portfolio of about Rs 1,250 crore of Vi papers before any redemption.
The value to those securities became nil after being separated from other
financially stable portfolios.
* Saikat Das
* ET Bureau
Click Here to Read This Story
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Franklin Templeton Mutual Fund has approached at least three global distressed
asset buyers - SSG Capital, Varde Partners and Farallon Capital - offering to
sell Vodafone Idea’s (Vi) outstanding bonds, people familiar with the matter
told ET.
The fund house is said to have already written down the full value of an
estimated portfolio of about Rs 1,250 crore of Vi papers before any redemption.
The value to those securities became nil after being separated from other
financially stable portfolios.
Those papers have been downgraded to the ‘junk’ category but not 'default'.
To be sure, Vi has been serving interest payments or repayments on those bonds
on time without any delay.
About five months ago, local credit rating company CARE cut Vi’s rating to B-,
deeper into the junk or high-yield category. It placed it under “credit watch
with negative implications”.
Improvement of the overall financial risk profile of the company on a sustained
basis could lead to a positive rating action/upgrade, CARE Ratings said.
Franklin Templeton, SSG and Farallon did not respond to ET’s queries. Varde
Partners declined to comment.
“The fund house has nothing to lose as Vi’s bond portfolio value is zero on its
books. If it manages to sell, there will be additional gains,” said one of the
persons cited above.
In the past two weeks, revival prospects of India’s only loss-making private
telecom carrier have brightened.
Last week, the company said it would opt for converting the interest on spectrum
and adjusted gross revenue (AGR) outstanding into equity, which would see the
government become the largest shareholder with 35.8% stake. If the conversion
goes through, UK-based Vodafone group will hold 28.5% with 17.8% held by
Kumarmangalam Birla-owned Aditya Birla group. They currently own 44.39% and
27.66% shares, respectively, in Vi.
However, New Delhi is not expected to be involved in the company’s policy
decisions.
The government's potential stake in cash strapped Vodafone Idea (Vi) is credit
positive from an investor’s point of view, indicating that the telco would be in
a better position to raise funds, brightening the prospects for its long-term
survival.
“We are evaluating proposals of buying Vodafone Idea bonds from the secondary
market,” said the India head of a global distressed fund.
Nippon India and UTI are the other two fund houses that currently hold Vi debt
securities, valued as per standard parameters published by local rating
companies including Crisil and ICRA. Market valuations of the exposures were Rs
47.87 crore and Rs 149.74 crore, respectively, as on December 31, 2021, show
data from Value Research.
Vi has already cleared a Rs 1,500-crore instalment toward redemption of bonds
early January and will pay the remaining Rs 3,000 crore in three tranches of Rs
2,000 crore, Rs 500 crore and Rs 500 crore through January-February 2022,
according to disclosures in its latest annual report.
Vi has raised an estimated Rs 5,000 crore via short-term loans from a clutch of
lenders led by State Bank of India and others, ET reported on January 11. It
plans to use the proceeds to repay existing debt obligations.
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SEBI OVERHAULS PREFERENTIAL ALLOTMENT RULES
Sebi has said any preferential issue resulting in a change in control or
allotment of more than a 5 per cent stake will require a valuation report from a
registered valuer.
* PTI
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New Delhi, Capital markets regulator Sebi has relaxed pricing norms and lock-in
requirements to make it easier for companies to raise funds through preferential
allotment of shares. Also, the regulator has allowed pledging of shares allotted
to promoter or promoter group under preferential issue during the lock-in
period, according to a notification.
In addition, Sebi has said any preferential issue resulting in a change in
control or allotment of more than a 5 per cent stake will require a valuation
report from a registered valuer.
Moreover, any preferential issue allotment resulting in a change in control will
be required to provide a reasoned recommendation from a committee of independent
directors along with their comments on all aspects of preferential issuance,
including pricing.
Further, the voting pattern of the committee needs to be disclosed to
shareholders or the public.
This comes against the backdrop of PNB Housing Finance's proposed allotment of
preference shares to US-based Carlyle Group and a clutch of other investors
hitting a roadblock.
Sebi had questioned PNB Housing Finance's rationale behind the fixing of the
issue price, among other aspects, in that deal that was later shelved.
To this effect, the regulator has amended ICDR (Issue of Capital Disclosure
Requirements) rules.
To determine the floor price for frequently traded security, Sebi said the floor
price for the preferential issue should be higher of 90/10 trading days'
volume-weighted average price (VWAP) of the scrip preceding the relevant date.
For infrequently traded security, Sebi said a valuation report by a registered
independent valuer will be required.
At present, the pricing formula in a preferential allotment is the VWAP of the
last two weeks or the last 26 weeks, whichever is higher. In the wake of the
coronavirus pandemic, a temporary relaxation for pricing was allowed to make
preferential allotment by using 12 weeks' VWAP.
Such a relaxation was applicable for the preferential issues made between July
1, 2020 and December 31, 2020.
In addition, the regulator relaxed lock-in provisions for a preferential issue
to promoters and non-promoters.
For promoters, Sebi said the lock-in requirement for allotment up to 20 per cent
of the post issue paid-up capital has been reduced to 18 months from the
existing 3 years.
The lock-in requirement for allotment exceeding 20 per cent of the post issue
paid-up capital has been cut to 6 months from the existing 1 year.
For non-promoters, the lock-in requirement for allotments shall be reduced from
the requirement of 1 year to 6 months, Sebi said.
"Lock-in requirements for an allottee who has become a promoter due to change in
control consequent to the preferential issue shall be the same as those
applicable to the promoters and promoter group," the notification issued on
January 14 noted.
The regulator said promoters have been permitted to pledge the shares locked-in
following a preferential issue provided if the pledge of such securities is one
of the terms of sanction of the loan granted by a financial institution.
Further, the loan is to be sanctioned to the issuer company or its subsidiaries
for financing objects of the preferential issue, Sebi said.
The regulator also said that consideration for a preferential issue, "other than
cash" would be permitted only for share swaps backed by a valuation report from
an independent registered valuer. The issuer company will have to necessarily
apply for in-principle approval from stock exchanges on the same day as the date
of dispatch of notice for AGM or EGM to the shareholder.
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INDIA'S ECONOMY SET TO IMPROVE OVER NEXT 12 MONTHS: PWC ANNUAL GLOBAL CEO SURVEY
India's economic growth is all set to improve over the next 12 months despite
the coronavirus pandemic-related problems and global headwinds, says the PwC
Annual Global CEO Survey.
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New Delhi, Jan 17, India's economic growth is all set to improve over the next
12 months despite the coronavirus pandemic-related problems and global
headwinds, says the PwC Annual Global CEO Survey. The findings are based on a
survey by the global consultancy that covered 4,446 CEOs in 89 countries and
territories, including 77 from India, in October and November of 2021.
Despite a variety of headwinds, most notably those related to the ongoing
pandemic, CEOs in India are significantly optimistic about the prospects for a
stronger economy in the coming year, as per the survey released on Monday.
"99 per cent of CEOs in India believe India's economic growth will improve over
the next 12 months, with 94 per cent of India CEOs being optimistic about global
economic growth improving over the next 12 months as against 77 per cent of
global CEOs," it said.
When it comes to the revenue prospects of their own companies, 98 per cent of
CEOs are confident about growth during the same time period.
While for the most part, CEOs globally are at least as optimistic as they were
last year about the prospects for economic growth in 2022, the optimism of India
CEOs, up from 88 per cent last year, stands out at 94 per cent.
Sanjeev Krishan, Chairman of PwC in India, said that while Omicron has cast a
shadow and CEOs are focused on the health and safety of their employees at the
moment, their confidence and optimism over the past one year is a testimony to
the resilience of Indian companies.
The vigour with which most Indian business leaders took the challenges brought
in by the pandemic head on, coupled with the will to emerge stronger in the face
of adversity, has led to sustained growth for businesses in India, he said.
"Perhaps owing to the futuristic groundwork done during the difficult times, 97
per cent of India CEOs are confident about their own company's prospects for
revenue growth not only in the near term but also over the next three years," he
said.
Last year, 70 per cent of India CEOs viewed the pandemic as a top threat to
growth while 62 per cent considered cyber threats as an impediment to growth.
This year, 15 per cent of CEOs in India are apprehensive about cyber risks
hindering their company's ability to raise capital.
"India CEOs also agree that cyber risks could cause severe revenue disruptions,
with 64 per cent of respondents fearing a breach could hinder sales of products
or services. Besides business disruptions, 47 per cent of chief executives
believe cyber threats could impede their ability to develop products and
services," the survey said.
Further, it said that among the India companies that participated in the survey,
27 per cent already have a net-zero commitment (22 per cent globally) in place,
40 per cent are in the process of developing and articulating their commitments
(29 per cent globally), and only 30 per cent have neither made nor are in the
process of making any net-zero commitment (globally 44 per cent).
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50 MORE IN WINGS TO BE UNICORNS; OVER 100 STARTUPS WITH OVER $1 BN VALUATIONS BY
2022-END: REPORT
India has 50 startups with the potential to achieve the coveted 'unicorn' status
in 2022 and by the end of the year, the list of the new-age companies valued at
over USD 1 billion will be at least 100, a report by a consultancy firm said on
Monday. In its list of 50 potential unicorns, it placed companies like Khatabook
among the candidates because of their history of having raised over USD 100
million to date.
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Mumbai, Jan 17 (PTI) India has 50 startups with the potential to achieve the
coveted 'unicorn' status in 2022 and by the end of the year, the list of the
new-age companies valued at over USD 1 billion will be at least 100, a report by
a consultancy firm said on Monday. In 2021, which witnessed a huge spike in
company valuations in the listed and unlisted space driven by ample liquidity,
according to some watchers, India added 43 startups to the list and the number
of unicorns shot up to 68 by the end of the year.
Over USD 10 billion was invested in the Indian startup ecosystem in the
October-December quarter alone, according to the report by PwC India.
"We can see that the base of the companies in the growth stage and late-stage
deals have improved significantly in CY21, depicting a stronger base of
companies having the potential to reach unicorn status," the firm's partner for
deals and startups Amit Nawka said.
He added that market sentiments are placed favourably towards startups, and when
coupled with the large base of startups, the number of unicorns will go "well
beyond" 100 by the end of 2022.
A December 2021 report by the Hurun Research Institute had said India is the
third-largest home for unicorns globally but trails the US and China by a wide
margin.
The PwC report said USD 35 billion were raised by Indian startups in over 1,000
rounds of funding in 2021, which was 1.5 times higher than the previous year.
Edtech, software as a service and fintech sectors witnessed the highest
activity.
Growth and late-stage deals comprised 85 per cent of the total funding attracted
by the startups in 2021.
Bengaluru and the National Capital Region (NCR) witnessed nearly three-fourths
of the total funding by venture capital and private equity funds, it said.
In its list of 50 potential unicorns, it placed companies like Khatabook,
Whatfix, Practo, Ninjacart, Inshorts, Ecom Express, Pepperfry and Livspace as
among the candidates because of their history of having raised over USD 100
million to date.
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SEBI TIGHTENS RULES GOVERNING UTILISATION OF IPO PROCEEDS
The regulator has prescribed certain conditions for offer-for-sale (OFS) to the
public in an IPO, where draft papers are filed by an issuer without a track
record.
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New Delhi, Tightening rules for initial public offering (IPO), Sebi has put a
cap on the usage of the issue proceeds for unidentified future acquisitions and
restricted the number of shares that can be offered by significant shareholders.
Also, the regulator has extended anchor investors' lock-in period to 90 days and
now, funds reserved for general corporate purposes will be monitored by credit
rating agencies, according to a notification issued on January 14.
Further, Sebi has revised the allocation methodology for non-institutional
investors (NIIs).
To give effect to these, Sebi has amended various aspects of the regulatory
framework under the ICDR (Issue of Capital and Disclosure Requirements)
Regulations.
This comes amid a slew of new-age technology companies filing draft papers with
Sebi to raise funds through initial public offerings (IPOs).
The regulator said that if a company in its offer documents sets out an object
for future inorganic growth but has not identified any acquisition or investment
target, the amount for such objects and amount for the general corporate purpose
(GCP) will not exceed 35 per cent of the total amount being raised.
It is seen that lately, in some of the draft offer documents, new-age technology
companies are proposing to raise fresh funds for objects where the object is
termed as 'funding of inorganic growth initiatives' without giving details.
"The amount so earmarked for such objects where the issuer company has not
identified acquisition or investment target, as mentioned in objects of the
issue in the draft offer document... shall not exceed 25 per cent of the amount
being raised by the issuer," Sebi said.
However, such limits will not apply, if the proposed acquisition or strategic
investment object has been identified and suitable specific disclosures are made
at the time of filing of the offer document.
Experts believe that the inability to mobilise money for future unidentifiable
acquisitions will impact the fundraising plans of some unicorns, particularly
where such firms may not have any other use of capital and where existing
shareholders are not keen to sell.
In addition, Sebi said the amount raised for general corporate purposes will be
brought under monitoring and the utilisation of the same will be disclosed in
the monitoring agency report.
The report will be placed before the audit committee for consideration "on a
quarterly basis" instead of "on an annual basis".
Credit rating agencies (CRAs) registered with the Sebi will be permitted to act
as a monitoring agency instead of scheduled commercial banks and public
financial institutions.
Such monitoring will continue till 100 per cent instead of 95 per cent
utilisation of the issue proceeds as at present, Sebi said.
The regulator has prescribed certain conditions for offer-for-sale (OFS) to the
public in an IPO, where draft papers are filed by an issuer without a track
record.
Under this, Sebi said shareholders with more than a 20 per cent stake in the
company before the IPO will be allowed to sell up to 50 per cent of their shares
in the OFS.
Further, investors with less than a 20 per cent stake in a firm before the
initial share-sale will be able to sell only 10 per cent of their shares in the
OFS.
With regard to the lock-in period for anchor investors, Sebi said existing
lock-in of 30 days will continue for 50 per cent of the portion allocated to
anchor investors and for the remaining portion, lock-in of 90 days from the date
of allotment will be applicable for all issues opening on or after April 1,
2022.
In case of book-built issues, Sebi said a minimum price band of at least 105 per
cent of the floor price will be applicable for all issues opening on or after
notification in the official gazette.
For book-built issues opening on or after April 1, 2022, Sebi said one-third of
the portion available to NIIs will be reserved for applicants with an
application size of more than Rs 2 lakh and up to Rs 10 lakh.
Further, two-thirds of the portion available to NIIs will be reserved for
applicants with an application size of more than Rs 10 lakh.
Allotment of securities in the case of NII category will be on 'draw of lots',
as is currently applicable for the retail investor category.
The amendment comes after the board of Sebi approved proposals in this regard in
its meeting last month.
It came against the backdrop of 63 companies raising a record amount of Rs 1.2
lakh crore through initial share-sales in 2021.
This was way higher than Rs 26,611 crore raised by 15 companies through initial
share sales in the entire 2020 and nearly double the previous best of Rs 68,827
crore by 36 companies in 2017.
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CREDIT SUISSE CHAIRMAN QUITS OVER COVID-19 BREACHES IN LATEST SETBACK
Credit Suisse Chairman Antonio Horta-Osorio has resigned after flouting Covid-19
quarantine rules, the bank said on Monday, raising questions over the embattled
lender's new strategy as it tries to recover from a string of scandals.
* Reuters
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SINGAPORE: Credit Suisse Chairman Antonio Horta-Osorio has resigned after
flouting Covid-19 quarantine rules, the bank said on Monday, raising questions
over the embattled lender's new strategy as it tries to recover from a string of
scandals.
The abrupt move comes less than a year after Horta-Osorio was brought in to
clean up Switzerland's No.2 bank's corporate culture marred by its involvement
with collapsed investment firm Archegos and insolvent supply chain finance firm
Greensill Capital.
However, the Portuguese banker's personal conduct has since come under scrutiny,
with reports he breached Covid-19 quarantine rules twice in 2021.
"I regret that a number of my personal actions have led to difficulties for the
bank and compromised my ability to represent the bank internally and
externally," Horta-Osorio said in a statement issued by Switzerland's No. 2
bank.
"I therefore believe that my resignation is in the interest of the bank and its
stakeholders at this crucial time," he said.
The bank said Horta-Osorio resigned following an investigation commissioned by
the board.
In December, Reuters reported that a preliminary internal bank investigation had
found that Horta-Osorio attended the Wimbledon tennis finals in London in July
without following Britain's quarantine rules.
Horta-Osorio also broke Covid-19 rules on a visit to Switzerland in November by
leaving the country during a 10-day quarantine period, the bank said in
December.
In late December, David Herro, deputy chairman at Harris, the third biggest
investor in Credit Suisse, said Horta-Osorio retained his absolute support.
Credit Suisse, which announced a new strategy in November aimed at curbing a
freewheeling culture that has cost it billions, said board member Axel Lehmann
had taken over as chairman with immediate effect.
The bank said Lehmann, the board and the executive board would continue to
implement Credit Suisse's strategy.
Lehmann spent over a decade at rival UBS, where his roles included helming the
Swiss personal and corporate banking unit of the bank after a nearly two decade
stint at Zurich Insurance Group.
Horta-Osorio's sudden exit demoralised staff, with some questioning what was
next for the bank.
"What a waste and again we make the headlines for the wrong reason," a senior
Credit Suisse private banker said on condition of anonymity as he was not
allowed to speak to media.
"In between we froze for one year waiting for the new strategy from the new
man!" he said.
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CHINA'S ECONOMY GROWS 8.1% IN 2021, SLOWS IN SECOND HALF
In the final three months of 2021, the world's second-largest economy expanded
at a 4% annual pace, government data showed Monday. That is down from the
previous quarter's 4.9% and an eye-popping 18.3% in January-March.
* AP
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China's economy grew by 8.1% in 2021 after an abrupt slowdown in the second half
that is prompting suggestions Beijing needs to shore up slumping growth.
In the final three months of 2021, the world's second-largest economy expanded
at a 4% annual pace, government data showed Monday. That is down from the
previous quarter's 4.9% and an eye-popping 18.3% in January-March.
Activity slumped under pressure from Beijing on the real estate industry, a key
growth driver, to cut debt levels that Chinese leaders worry are dangerously
high.
That has prompted suggestions Beijing may need to cut interest rates or pump
money into the economy through more public works construction.
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