IndUS Business Journal

India to recapitalize 13 banks with Rs 22,915 crore

Jul 19, 2016 0

New Delhi- The Ministry of Finance on Tuesday announced the much-awaited capital infusion of Rs 22,915 crore towards the recapitalisation of 13 public sector banks during 2016-17.

The largest amount of Rs 7,575 crore was earmarked for the country’s largest lender, the State Bank of India.

“In line with the announcements made under ‘Indradhanush’ and the Union Budget, the government has undertaken an exercise to assess the capitalisation needs of public sector banks during 2016-17,” a ministry statement said.

“The capital infusion exercise for the current year is based on an assessment of need as calculated from the compounded annual growth rate of credit for the last five years, banks’ projections of credit growth and an objective assessment of the growth potential of each public sector bank.”

Indian Finance Minister Arun Jaitley

Indian Finance Minister Arun Jaitley

Following this assessment, 75 per cent of the amount collected for each bank is being released now to provide liquidity support for lending operations as also to enable banks to raise funds from the market.

The remaining amount, to be released later, is linked to performance, with particular reference to greater efficiency, growth of both credit and deposits and reduction in the cost of operations, the ministry said.

Among others, Indian Overseas Bank will get Rs 3,101 crore, Punjab National Bank Rs 2,816 crore, Bank of India Rs 1,784 crore, Central Bank of India Rs 1,729 crore and Syndicate Bank Rs 1,034 crore.

The ‘Indradhanush’ scheme was announced on the eve of the Independence Day in 2015, covering seven areas — appointments, setting up of a Bank Board Bureau, capitalisation of banks, de-stressing their assets, empowerment, accountability and governance reforms.

The preparations for the first tranche of capital infusion for this fiscal began soon after the state-run banks made presentations to the Finance Ministry on their balance sheets, especially the extent of stressed assets and measures being taken to recover them, officials said.

In his Budget speech this year, Finance Minister Arun Jaitley said that while the problem of stressed assets and bad loans was a “legacy of the past”, the structural issues were already being addressed.

This was because a large portion of bad and doubtful debts were on account of the stress in sectors like power, coal, highways, sugar and steel. He, accordingly, promised adequate infusion of funds.

“To support the banks in these efforts as well as to support credit growth, I have proposed an allocation of Rs 25,000 crore in 2016-17 towards recapitalisation of public sector banks,” Jaitley said.

“If additional capital is required by these banks, we will find the resources for doing so,” he added. “We stand solidly behind these banks.”

In fact, in anticipation of such capital infusion, as also because of the steps being taken by the banks to tackle the debt issue, banking stocks have been on the rise in recent weeks.

Since June 1, the banking index of the Bombay Stock Exchange, in fact, has risen nearly 10 per cent. Some stocks, like those of Punjab National Bank, have flared up by over 50 per cent during the period.

Box: Capital Infusion in Banks

01. Allahabad Bank Rs 44 crore

02. Bank of India Rs 1,784 crore

03. Canara Bank Rs 997 crore

04. Central Bank of India Rs 1,729 crore

05. Corporation Bank Rs 677 crore

06. Dena Bank Rs 594 crore

07. Indian Overseas Bank Rs 3,101 crore

08. Punjab National Bank Rs 2,816 crore

09. State Bank of India Rs 7,575 crore

10. Syndicate Bank Rs 1,034 crore

11. UCO Bank Rs 1,033 crore

12. Union Bank of India Rs 721 crore

13. United Bank of India Rs 810 crore

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Emerging markets, including India, will drive innovation in payments industry

Jul 19, 2016 0

Mumbai– The payments landscape in emerging markets, including India, is expected to transform in the wake of accelerating growth in electronic payments with advent of new and disruptive market players and alternative business models, a PwC report said.

“The growth of economic power within the emerging markets and their potential to leapfrog developments in mature markets will aid the creation of a state-of-the-art payments ecosystem,” multinational accounting firm PricewaterhouseCoopers said in its report.

‘Emerging Markets – Driving the Payments Transformation’ examines the dynamic nature of emerging markets, especially payments, which creates challenges that have never confronted the developed world, but also opens up opportunities for innovation and growth.

Vivek Belgavi

Vivek Belgavi

“Given the underlying infrastructural issues in emerging markets, there needs to be a focus on developing the infrastructure both for issuing and acceptance of payments products and instruments. Alternate payment instruments and modes like mobile wallets, virtual cards and accounts, social media and contactless payments are gaining traction for specific use cases, especially the unbanked customer base, driven by technology, customer needs and declining margin,” said Vivek Belgavi, FinTech Leader, PwC India.

In India, the new payments banks (who cannot lend but can borrow up to a limit) are expected to start operations in 2016. Since their focus will be solely on transactions, they will look at providing seamless transaction options for payments of utility bills, mobile bills, and school or college fees, either electronically or through the banking touch points they create.

At the core of this change will be technology, which in addition to maintaining current standards of reliability, is expected to also reduce transaction times, improve security, increase acceptance channels (especially physical), and – in the case of merchants – lower transaction costs, it said.

“Given the large unbanked population and the growing regulatory agenda to engage these people into the financial system, emerging markets are in a unique position to drive growth in the payments industry,” said Hugh Harley, financial services leader for emerging markets, PwC.

The report said that the payments ecosystem will also be redefined by regulatory interventions, to balance the disruption of alternative payment service providers with the reliability of traditional players.

Noting 85 per cent of the global population resides in emerging markets, it said that customer expectations are driving the change in payments industry in these markets.

“Nearly 90 per cent of people under 30, which account for 75 per cent of the online transactions, reside within the emerging markets. This is favouring the growth of online transactions, which is in turn curtailing the black economy and stimulating economic growth.”

It said though literacy rates and urbanisation are on the rise, access to basic financial services poses a major challenge in these emerging markets, and in response, there has been a rapid expansion of new economically viable technologies and innovations like e-banking and mobile money.

With regulators in emerging markets realising the huge costs, risks and inefficiencies associated with cash transactions and recognising importance of electronic payment methods in promoting access to formal credit and savings instruments, drastic measures like introducing differentiated banking licenses, tax benefits on electronic payments, awareness campaigns are being taken to build a sustainable electronic payments ecosystem, it said. Many governments have opened their markets to non-bank players aimed at furthering financial inclusion, it added.

With the proliferation of smartphones and tablets, which are serving as a convenient, cash free and card-free financial transaction medium, emerging markets are driving the growth in e-commerce spending, and there is a rapid development of new payment concepts based on mobile infrastructure initiated by the online retailers.

“Banking on high customer adoption of these models, this has the potential to displace traditional cash with other electronic modes of payments,” it said. (IANS)

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Central Board of Direct Taxes signs 7 advance pricing agreements to cut tax litigation

Jul 18, 2016 0

New Delhi–In a move designed to reduce tax litigation, the Central Board of Direct Taxes (CBDT) on Monday signed seven more unilateral Advance Pricing Agreements (APAs) with Indian taxpayers.

“With today’s signing, the total number of APAs entered into by the CBDT has reached 77. This includes 3 bilateral APAs and 74 unilateral APAs.

“In the current financial year, a total of 13 Unilateral APAs have been entered into so far,” a Union Finance Ministry statement said here.

The latest APAs signed with taxpayers pertain to various sectors like banking, information technology and automotives.

APAs provide for signing an agreement between a taxpayer and the income tax department on an appropriate transfer pricing methodology for determining the value of assets and taxes on intra-group overseas transactions.

The scheme attempts to provide certainty to taxpayers in the domain of transfer pricing by specifying the methods of pricing and setting the prices of international transactions in advance, the ministry said.

“Since its inception, the APA scheme has attracted tremendous interest from taxpayers that has resulted in more than 700 applications (both unilateral and bilateral) having been filed in just four years,” the statement said.

“The progress of the APA scheme strengthens the government’s mission of fostering a non-adversarial tax regime,” it added.

According to the government, the APA mechanism helps to achieve tax certainty for a period of up to nine years. (IANS)

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Tata STRIVE launches skill development centre in Hyderabad

Jul 18, 2016 0

Hyderabad– The first Tata STRIVE Skill Development Centre (TSSDC) centre was launched here on Monday.

Spread over 17,000 square feet, this state-of-the-art centre will skill youth in Telangana in the BPO, banking, financial services, insurance and retail industries.

Tata STRIVE, an initiative of Tata Community Initiatives Trust, and the first Group CSR programme of the Tata group, addresses the need of skilling youth for employment, entrepreneurship and community enterprise.

K.T. Rama Rao

K.T. Rama Rao

The facility was inaugurated by state Information Technology and Industries Minister K. Taraka Rama Rao along with Madhu Kannan, Member-Group Executive Council, and Group Head for business development and public affairs, Tata Sons, and Anita Rajan, COO, Tata STRIVE and Vice President, Tata Sustainability Group.

With the mission to build capacity to train youth for employment, entrepreneurship and community enterprise, Tata STRIVE transforms youth into an employee/entrepreneur through behaviour change, knowledge acquisition and skill development, said a statement.

Located at Kukatpally, the centre has ten classrooms/labs which can accommodate up to 240 studentsAat any given time. The training programmes range from 6 to16 weeks, and includes on-the-job training. At the end of the course, successful candidates are presented with a certificate, which is recognised by the National Skill Development Corporation (NSDC), and is aligned with various Sector Skill Councils and Tata STRIVE standards. These candidates are also assisted to get livelihood opportunities.

Tata STRIVE is present in 13 Indian states across 70 centres through partner centres as well as Tata STRIVE Skill Development Centres in Mumbai, Hyderabad, Mohali, Pune and Aligarh.

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Chief economic advisor Arvind Subramanian says India an under-performer

Jul 18, 2016 0

New Delhi– Chief Economic Adviser Arvind Subramanian on Monday said that India was an under-performer despite its level of political institutions, adding that an over eight per cent growth was easily doable for the country in medium term.

“India is an under-performer despite the level of its political institutions. The level of political institutions it has compared to other countries, it should support a higher growth,” Subramanian said at a book discussion on “India’s Long Roads – The Search For Prosperity” by author Vijay Joshi.

Arvind Subramanian

Arvind Subramanian

“We are already growing at over seven per cent. Growth of eight per cent or more is eminently doable, subject to the international environment being cooperative,” he added.

For the current fiscal, however, he urged a wait and watch policy, saying “so far the monsoons are good”.

India grew by 7.6 per cent in 2015-16 with the finance ministry hoping for an eight per cent growth in the current fiscal riding on hopes of a good monsoon.

The chief economic adviser said to bring about radical reforms in a “medium large country like India, which is not facing a crisis” is difficult.

“The fact that we are not in a crisis, radical reform becomes difficult. We are hopeful of change. It can come by central government, dynamism of decentralisation and competitive federalism. That’s going to be the way forward for India. My standard is of persistent, encompassing and incremental reform,” he said.

“However, expectations of big bang or radical reforms in India is a historically unreasonable standard as the incentives of reforms are shaped in different ways…for a country like India that is not facing a crisis and is unwieldy with power widely dispersed,” he added.

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Fitch affirms ratings of India’s long term foreign/local currency IDRs

Jul 18, 2016 0

Chennai– Global credit rating agency Fitch Ratings on Monday said it has affirmed India’s long term foreign and local currency issuer default ratings (IDR) at “BBB-“.

According to the rating agency, the outlooks on the long term IDRs are stable.

“The Country Ceiling is affirmed at ‘BBB-‘ and the Short-Term Foreign-Currency IDR at ‘F3’,” Fitch Ratings said in a statement.

As to the rating driver, it said the affirmation of India’s sovereign ratings balances a strong medium term growth outlook and favourable external balances against a weak fiscal position and still difficult business environment.

“However, the latter is likely to gradually improve with implementation and continued broadening of the government’s structural reform agenda,” the agency said.

According to Fitch Ratings, India exhibits one of the highest real gross domestic product (GDP) growth rates in the sovereign space.

“Its five-year average growth is among the 10 highest of all rated sovereigns and the 7.6 per cent real GDP growth in the financial year ended 31 March 2016 (FY16),” the statement said.

Fitch Ratings forecasts real GDP growth to slightly accelerate to 7.7 per cent in FY17 and 7.9 per cent in FY18.

According to Fitch Ratings, the stable outlook reflects its view that upside and downside risks to the ratings are balanced. The main factors that individually or collectively could lead to positive rating action are:

– Fiscal initiatives that would cause the general government debt burden to fall more rapidly than expected in the medium term.

– An improved business environment resulting from implemented reforms and persistently contained inflation, which would support higher private investment and real GDP growth. (IANS)

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Online recruitment in India up 17 percent

Jul 18, 2016 0

New Delhi– The latest Monster Employment Index (MEI) showed the online recruitment activities saw a 17 percent growth over last year, a top company official said on Monday.

“The overall growth rate, even though lower than the past months, has continued to chart a double digit growth with certain occupation groups like healthcare witnessing a steep year-on-year growth of 41 percent,” said Monster.com’s Managing Director (APAC & Middle-East) Sanjay Modi.

Sanjay Modi

Sanjay Modi

With the FDI liberalisation and the cabinet reshuffle, optimism around recovery of the Indian job market can be restored, he said.

The Education sector has been on the centre stage after the slew of initiatives announced by the government during the Union Budget 2016 to improve the state of the sector, the company said in a statement.

This long term view of the education sector witnessed a 65 per cent year-on-year growth in online hiring activities of this sector.

According to the index, there has been a significant slowdown in IT at a 40 percent growth, 22 points lower than in May 2016. This could be attributed to the increasing focus on automation, a statement said.

“This decline could be as a result of the worldwide flat IT spending.”

Despite the impetus on ‘Make in India’, the production and manufacturing sector is down by 14 per cent registered a steepest month-on-month decline among all monitored sectors.

With a 10 percent progress, banking/financial services, insurance continued to grow at a significantly moderated pace, it said.

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Bloomberg Profiles India’s Next Generation of Tycoons Who Are 35 and Under

Jul 18, 2016 0

WALTHAM, MA—Bloomberg, a New York-based financial data and media company recently profiled India’s next generation tycoons, selecting those who are based in India and are 35 and under.

“As India’s richest men hit their 60s and beyond, succession questions about the next generation of tycoons will increasingly emerge in a country where business is still dominated by family-run enterprises,” Bloomberg said in an article published this month.

Isha and Akash Ambani (Photo courtesy: MidDay.com)

Isha and Akash Ambani (Photo courtesy: MidDay.com)

Bloomberg profiled some of young guns of corporate India, selecting those who are 35 and under, based in India, have a public profile, and whose billionaire fathers are valued at more than $2 billion.

“Some have started their own ventures and avoided their fathers’ shadows. Others have pitched their tents inside the family enterprise,” according the Bloomberg article that was written by Bhuma Shrivastava.

Here’s a look at them as reported by Bloomberg:

Isha and Akash Ambani

“Isha and Akash are the 25-year-old, twin brother-and-sister scions of India’s richest man, Mukesh Ambani. They’re being groomed as the future of Reliance Industries Ltd., their father’s $42 billion conglomerate, as the company diversifies beyond energy and refineries into consumer-facing businesses,” reported Bloomberg.

Roshni Nadar Malhotra

Roshni Nadar Malhotra

Roshni Nadar Malhotra

The only daughter of technology billionaire Shiv Nadar, 34-year-old Roshni is chief executive officer and executive director of HCL Corp., the $7 billion holding firm for a group that includes listed HCL Technologies Ltd. and HCL Infosystems Ltd.  Roshni returned to India in 2008 after a stint as a news producer at Sky News U.K. and soon took up the role, according to Bloomberg.

Adar Cyrus Poonawalla

Adar Cyrus Poonawalla (Photo courtesy: Economic Times)

Adar Cyrus Poonawalla (Photo courtesy: Economic Times)

The 35-year-old son of India’s seventh-richest man, Cyrus Poonawalla, is associated with two contrasting superlatives: Asia’s largest vaccine maker and one of India’s largest stud farms, Bloomberg said. After completing undergraduate business management studies at the University of Westminster in the U.K., Adar stepped into his father’s shoes and expanded the Serum Institute of India Ltd.’s operations across 140 countries, making it the third-largest vaccine producer in the world, added Bloomberg.

Kavin Bharti Mittal

Kavin Bharti Mittal (Photo courtesy: Business Standard)

Kavin Bharti Mittal (Photo courtesy: Business Standard)

The 28-year old son of Sunil Bharti Mittal inherited the entrepreneurial bug from his father, who started out at 18 making bicycle crankshafts and importing portable Suzuki generators before creating Bharti Airtel Ltd., India’s top wireless carrier. Kavin, at 20, founded AppSpark to develop applications for the mobile phones. In 2009, AppSpark launched an iPhone application, Movies Now, to help users buy film tickets on the move. In 2012, Kavin set up Hike Messenger, an instant-messaging service similar to WhatsApp. By June 2014, Hike M

Anand Piramal (Photo courtesy: Forbes)

Anand Piramal (Photo courtesy: Forbes)

essenger crossed 20 million users, catapulted by a privacy feature that lets teenagers flirt in private and hide chats from their parents. By then, it had received at least $21 million from Bharti Enterprises Pvt. Ltd. and SoftBank Corp. In August 2014,Tiger Global Management invested $65 million, according to Bloomberg.

Anand Piramal

When the 31-year-old son of billionaire Ajay Piramal joined his father’s group in 2011, he skipped the $4 billion conglomerate’s flagship healthcare, glass making and fund management businesses. Instead he set up Piramal Realty. He focuses only on Mumbai and its outskirts, resisting the temptation among developers of going national and burning cash, according to Bloomberg.

Aalok Shanghvi

The elder of the two Shanghvi siblings, Aalok is as media-shy as his billionaire father and India’s second-richest man, Dilip Shanghvi. His father is a first-generation entrepreneur who started out as a small-time medicine distributor in Kolkata in the 1980s and went on to set up India’s largest drug maker in Sun

Ananyashree Birla (Photo courtesy: Economic Times)

Ananyashree Birla (Photo courtesy: Economic Times)

Pharmaceutical Industries Ltd., which acquired beleaguered peer Ranbaxy Laboratories Ltd. and Israel-based Taro Pharmaceutical Industries Ltd. to create a global generics producer with annual sales of $4.2 billion, Bloomberg reported.

Ananyashree Birla

Billionaire Kumar Mangalam Birla was forced to take over as the Aditya Birla Group chairman in 1995 when he was just 28. His eldest daughter willingly turned entrepreneur when she was 17. In 2013, Ananyashree set up her venture, Svatantra Microfin Pvt. Ltd. to lend tiny loans to rural women for buying sewing machines or starting papadum businesses, according to Bloomberg.

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Sun Pharma gets epilepsy drug licence for US market

Jul 18, 2016 0

Chennai– Sun Pharmaceutical group on Monday announced the licensing of ELEPSIA XR drug by Sun Pharma Advanced Research Company Ltd (SPARC) to a subsidiary of Sun Pharmaceutical Industries Ltd for the US market.

In a statement, Sun Pharma said SPARC will licence ELEPSIA XR (Levetiracetam Extended Release tablets) to a wholly-owned subsidiary for the US market.

Anil Raghavan

Anil Raghavan

SPARC will receive an up-front payment of $10 million from Sun Pharma apart from certain additional milestone payments and defined royalties linked to any future sales of ELEPSIA XR.

According to Sun Pharma, ELEPSIA-XR was approved by US Food and Drug Administration (USFDA) in March 2015.

However, in September 2015, SPARC received a complete response letter (CRL) from the USFDA rescinding its earlier approval, citing that the compliance status of the manufacturing facility, Halol site of Sun Pharma, was not acceptable on the date of approval.

Subsequently Sun Pharma has undertaken a detailed remediation at Halol for restoring GMP – Good Manufacturing Practice, compliance status for the site.

“ELEPSIA XR is designed as a novel once-a-day formulation of Levetiracetam using SPARC’s proprietary Wrap Matrix technology,” Anil Raghavan, CEO, SPARC was quoted as saying in the statement.

It is designed to reduce pill burden and help improve convenience and compliance in these patients.

“If and when the USFDA reapproves the ELEPSIA XR application, Sun Pharma’s significant US presence will help SPARC in commercialising this important product for patients in the US market,” Raghavan added.

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Glenmark to raise $200 million to repay debt

Jul 18, 2016 0

Mumbai– Glenmark Pharmaceuticals Ltd is planning to raise $200 million by issuing USD denominated non-convertible unsecured bonds to repay existing debt, the company said on Monday.

“..subsequent to the rating received by the leading credit agencies in the world that is Standard & Poor’s and Fitch, the company has decided to tap into the international bond market and is planning to raise around $200 million by issuing USD denominated non-convertible unsecured bonds,” the company said in a filing to Bombay Stock Exchange.

“The net proceeds will be used for repaying the existing debt,” it said.

According to the filing, these bonds are planned to be listed on the Singapore Stock Exchange in order to establish the Company’s track record in the globally recognised bond market.

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