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Credit growth likely to be muted at 8% this fiscal: ASSOCHAM

MANGALURU: Slowdown in economy coupled with high stress level in the banking sector is expected to restrict credit growth at around 8 per cent during the current fiscal despite government’s thrust on loan expansion, reveals the ASSOCHAM study.

However, this would be slightly better than the five decade low growth of 5.1 per cent in non-food credit recorded for the financial year ended March 2017. Growth in the credit this year would be mainly driven by the retail segment and farm loan. Expansion could also be contributed by the some of industry related to infrastructure segment if they pick up in the second half of the current fiscal.

There could be some uptick in lending towards the micro, small and medium enterprises (MSME) sector with government asking banks to increase their exposure to the sector as they are one of the largest employers.

One of the objectives of the staggering Rs 2.11 lakh crore capital infusion programme announced by the government in October is to enable banks to enhance lending to industry especially MSME by strengthening balance sheets of NPA-ridden public sector banks (PSBs).

Non-performing assets (NPAs) of public sector banks have increased to Rs 7.33 lakh crore as of June 2017, from Rs 2.78 lakh crore in March 2015.

Notably, corporate sector are not getting loans from banks as lenders have become risk averse due to mounting NPAs. To make matter worse, companies with good ratings are tapping market as rates are cheaper in the bond markets.

Only segments which are witnessing healthy growth are personal and agriculture credit with jump of over 10 per cent.

This situation is going to continue more or less the same for the rest of the financial year limiting credit growth between 8 and 9 per cent for the entire fiscal even after taking into account acceleration during second half of the financial year referred as busy credit season, and proposed strengthening of balance sheets of PSBs.

Lok Sabha passes bill for GST cess hike on luxury cars to 25%

NEW DELHI: The Lok Sabha on Wednesday approved a bill to hike cess on luxury vehicles from 15 per cent to 25 per cent with a view to enhance funds to compensate states for revenue loss following the rollout of GST.

The GST (Compensation to States) Amendment Bill, 2017, was passed by the Lower House amid uproar by the opposition over controversial comments made by Union Minister Anant Kumar Hegde on secularism and the Constitution.

The Bill seeks to replace the Ordinance which was issued in September to give effect to the decision of the GST Council. The Ordinance provided for a hike in the GST cess on a range of cars from mid-size to hybrid variants and the luxury ones to 25 per cent.

In reply to a short debate, Finance Minister Arun Jaitley said the funds collected following hike in cess on luxury vehicles will be used to compensate states for revenue loss on account of implementation of the Goods and Services Tax (GST).

He said the GST Council, which comprises state finance ministers, meets every month and takes decision on rationalisation of taxes in the backdrop of revenue collection.

Participating in the discussion, members demanded that the GST rate should be reduced on a variety of items including sanitary napkins, agriculture equipments, handicrafts, handloom items and sports goods. Some members even suggested that there should be single tax slab instead of four.

Coastal units may get budgetary sops for creating 10,000 jobs

NEW DELHI: The government is looking at the option of providing budgetary support to units in proposed coastal employment zones (CEZs) that will create 10,000 jobs over three years and 40,000 in 10 years as the Modi administration looks at spurring job creation ahead of the 2019 elections.

The incentive, part of a package proposed by a panel headed by NITI Aayog CEO Amitabh Kant, has recommended that only two of the four states that have offered land for setting up CEZs — Gujarat, Andhra Pradesh, Maharashtra and Odisha — be selected through a “challenge”.

A budgetary support, which the finance ministry has to agree to, will do away with tax incentives that have become the norm of sorts. The committee said that the budgetary support will be linked to the taxes paid by the unit in the CEZs and it will be equal to 100 per cent of taxes paid during the first seven years. For the eighth to the 10th year, it will vary between 85 per cent and 95 per cent of the taxes paid, sources told TOI.

The support to units will be in addition to the Centre providing Rs 3,000 crore each to the two proposed zones for capital expenditure to create world-class infrastructure, a model that has been adopted for the Delhi-Mumbai Industrial Corridor.

The committee has suggested that special purpose vehicles should be created with the states getting equity shares for the land that they provide. The projects are part of Sagarmala and the finance ministry has been slow in releasing funds, sources said.

Officials, however, said the proposed 10,000 jobs was an ambitious target given that it will only benefit large industries that come into the zones. In addition, they said, monitoring the number of jobs created is a difficult task, as the government faced problems in the past with companies getting similar benefits including temporary employees too in the headcount to qualify for the benefits.

 

India Inc sews deals worth $60 billion in 2017 with big M&AS

NEW DELHI: India Inc is looking at a huge M&A tally of over $60 billion (about Rs 4 lakh crore) for 2017, helped by some marquee domestic deals and rich valuations for various private equity investments.

The need to consolidate in the wake of financial stress, as also for cashing out from valuable businesses to meet debt obligations, will continue to give a further boost to the deal-making activities, experts feel.

Experts believe the new year also looks promising in terms of deals as political stability is in place, economic reforms are on a fast track and broader macro factors are also looking positive, though some pressure may come from stretched valuations and high capital market benchmarks.

According to global consultancy giant Grant Thornton, the overall deal activity — including both M&As (mergers and acquisitions) and PE (private equity) — has been about $59 billion in the January-November period of 2017, a 9 per cent rise from the last year.

The final tally for the year may cross $60 billion.

“Valuations expectations, lack of understanding of regulatory process resulted in decline of the deal volumes and values in 2017,” according to deal-tracking firm Mergermarket India.

It, however, noted that M&As may see a slower pace in 2018, with 2019 being the election year and the growth still looking tepid on the economic front.

According to Amit Khandelwal, Managing Partner, Transactions Advisory Services at EY, the domestic deal activity is expected to dominate the overall M&A landscape going forward, on account of the ongoing consolidation wave across sectors and the resolution of insolvency cases.

In addition, digital disruption and sector convergence will likely support the deal momentum as businesses look to acquire capabilities to gain a competitive edge, Khandelwal said.

Experts believe, start-ups, banking and insurance, e- commerce, manufacturing, pharma, healthcare and biotech will be the key sectors in terms of deal action.

“We consider that manufacturing, pharmaceuticals, healthcare and life sciences, financial services, insurance, renewables, telecom and fintech will attract significant interest,” Aakash Choubey, Partner, Khaitan & Co said, adding several deals will be done out of distressed assets.

EY’s Khandelwal also believes that “with the IBC (Insolvency and Bankruptcy Code) taking effect in 2017, 2018 is expected to see domestic deals emerging from restructuring activities and distressed asset sale.

On the cross-border front, outbound activity is expected to remain “sub-par”, except in sectors such as pharma and technology where Indian players keep looking for additional resources and leading-edge technologies,” he said, while adding that inbound activity can see some traction as global players are trying to expand their presence in India.

Telecom a money guzzler, even tatas had to gift it away: Anil Ambani

MUMBAI: Months after voicing fears of an emerging monopoly in the sector and a forceful shutdown of Reliance Communications’ consumer business, Anil Ambani on Tuesday said telecom has become a money guzzler where only those with deep pockets can survive.

Even the “mighty” house of Tatas had to “gift away” their telecom business (to Airtel), Ambani asserted, sounding bitter about the regulatory framework, saying the long time taken to clear RCom’s merger with Systema Shyam Telecom represents the “unease of doing business”.

“This is a crisis of the wireless telecom sector and it has engulfed many, many people and many, many companies. If it is the mighty house of the Tatas who had to gift their business, then very little has to be said about other corporate groups. The writing was on the wall,” the embattled RCom chairman told reporters here announcing yet another revival plan for his nearly crippled telecom business.

It can be noted that the entry of his elder brother Mukesh’s Reliance Jio which made the largest revenue earner voice calls free and priced data aggressively, has wrecked the financials of every company and resulted in a massive consolidation in the sector with Vodafone and Idea announcing a merger in March to stay floating.

“It’s a clear signal that this is something which is not for 10 players to enjoy. This is more for 2-3-4 players to enjoy and those who have either unlimited money or those who have the ability to raise unlimited amount of money,” Ambani said, without naming any company.

“You really need a pipeline into the RBI’s printing press if you want to be in the wireless business because it is a guzzler of currency, every minute, every hour and every single day,” he added.

After the failure of its debt-reducing plans like sale of the tower unit and a merger with its immediate rival Aircel, RCom was forced to exit the flagship consumer facing business in this November and also charted a future course which will limit its offerings to the enterprise segment going forward.

Ambani, who entered the telecom business in 2002 after inheriting it as part of a truce to the bitter family feud following the death of his father, said the telecom business depends on continuous investments due to changing technologies and also the necessity to take services to newer pockets along with infrastructure development.

“You are on a perpetual treadmill. Capex never ever stops, it is every day. You got to be really geared in terms of your balance sheet, in your cash flow, in financial structure to do that,” he said.

Delhi premium office rentals seventh most expensive in the world: Report

NEW DELHI: New Delhi’s premium office rental prices are the most expensive in India; it is the seventh most expensive in the world and figures among the top 10 premium office rental spaces globally.

This release comes from Jones Lang Lasalle (JLL)’s third edition of Premium Office Rent Tracker (PORT) report based on 54 major office markets globally in 46 cities.

According to the report, the most expensive premium office rent in the world is in Hong Kong, followed by London, New York, Beijing, Tokyo, Shanghai, Delhi, San Francisco and London.

“Delhi’s rents higher than San Francisco, Dubai and Washington DC; Mumbai higher than Los Angeles, Singapore and Paris. Mumbai falls among the top 20 most expensive locations in the world. Mumbai rentals are higher than cities like Los Angeles, Singapore, Paris, Seoul, Sydney, Frankfurt, Chicago and Toronto,” states Ramesh Nair, CEO & Country Head JLL, India.

In a recent report Delhi was ranked 84th in terms of expensive office locations around the world. This report by JLL is specifically based on premium office spaces and clearly shows Delhi more expensive than Mumbai.

Premium office rents refer to the ‘top achievable’ in units over 10,000 square feet in the premium building in the premier office district of each city. In tall buildings, the middle zone is used as the benchmark.

The report excludes rents that represent a premium level paid for a small quantity of space or highly prestigious units where a significant premium applies. Total occupancy costs are calculated by combining the net effective rent with additional costs such as service charges and taxes. The regional average is calculated based on all the total occupancy costs for the 20 tracked markets in Asia Pacific.

JLL finds that regionally, cities across Asia-Pacific are home to the world’s most expensive premium office space at an average of $111 per square foot per year, which is higher than the Americas ($85 psft per year) and EMEA ($78 psft per year).

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