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PSU bank stocks fall after recapitalisation plan announcement

NEW DELHI: PSU bank stocks fell up to 6 per cent a day after the government said it will infuse Rs 88,139 crore capital in 20 public sector banks (PSBs) before March 31.

Shares of Syndicate Bank tanked 5.82 per cent, Punjab National Bank 5.73 per cent, Bank of Baroda 4.80 per cent, SBI 4.32 per cent and Oriental Bank of Commerce shed 4.28 per cent on BSE.

On similar lines, Allahabad Bank fell 3.21 per cent, Bank of India 2.43 per cent and United Bank of India lost 0.27 per cent.

Meanwhile, IDBI Bank shares rose 1.07 per cent on being allocated the highest capital infusion amount among PSBs.

The government yesterday said it will infuse an unprecedented Rs 88,139 crore capital in 20 public sector banks (PSBs) before March 31 to boost lending and revive growth. It unveiled steps to tackle the bad loan problem which has reached record levels.

The lenders, which include State Bank of India, account for more than two-third of India’s banking assets as well as most of the over Rs 8 lakh crore of non-performing assets (NPAs) or bad loans.

Recap to mitigate PSB risks but NPAS to impact performance: Fitch ratings

NEW DELHI: The government’s Rs 88,139 crore capital infusion in struggling public sector banks (PSBs) should help in part to mitigate risks but resolution of bad assets and continued high credit costs hinder the sector’s near-term performance, Fitch Ratings said on Thursday.

While the capital infusion plan was less than half of its estimate of USD 65 billion needed for the sector, Fitch said yesterday’s announcement will encourage banks to resolve their non-performing loan (NPL) stock faster as improved capital buffers bolster their ability to absorb potential large haircuts.

Also, the additional capital buffers will enhance the banks’ ability to raise equity capital.

In a report released, Fitch said recapitalisation is “short of enabling the banks to meet higher regulatory capital burdens under Basel III in the face of persistent weak earnings.”.

The total amount is around 30 per cent of the state banks’ equity base and is a significant shift away from the earlier drip-feed approach.

“It should go a long way in plugging the capital gap amid expectations of more haircuts and subdued earnings,” it said.

Fitch said the capital infusion will stem the downward pressure on Viability Ratings (VRs), which have been downgraded several times over the last three to four years, and improve their access to capital markets which had been constrained due to poor health and weak valuations.

The decision to front-load around USD 12 billion through recapitalisation bonds would put banks in a slightly better position to absorb losses expected from resolution of NPLs.

The capital infusion “should help in part to mitigate the risks that Indian state banks face on account of weak asset quality and poor earnings,” Fitch said.

But, unwinding of these risks will take some time, “implying that resolution of bad assets and continued high credit costs will hinder the sector’s near-term performance,” Fitch said maintaining its negative sector outlook to reflect these pressures.

It said the average core capitalisation for the state banks would be likely to reflect a cumulative increase of around 140 basis points.

Large, relatively better positioned banks which are most capable of supporting growth, would receive a greater share of this first capital tranche, leading to a varying impact on capitalisation across banks, it said.

TOI budget 2018 analysis: the story of ‘lip service’ to women from Nirbhaya fund to Mahila bank

NEW DELHI: Beyond the obvious of economics and number crunching, the Union Budget is a good platform for the government to showcase its focus areas. The mention of the word ‘women’ in budget speeches since independence is a wonderful case study on the same. Women, as a word, was never really used in budget speeches until in 2008-09, when the then finance minister P Chidambaram mentioned it nine times. But for now, let us fast forward to December 16, 2012 — when the ghastly Nirbhaya gang rape in Delhi’s Munirka shook the nation.

A couple of months later, as Chidambaram, in his second stint as finance minister, read out the 2013-14 budget, the issue was still resonating and he mentioned ‘women’ as many as 24 times. Citing ‘a collective responsibility to ensure the dignity and safety of women’, he set up the ‘Nirbhaya Fund’, allocating Rs 1,000 crore. The Modi government too, since taking over in 2014, has been allocating an equal amount of sum in each budget. However, the apathy lies in the fact that neither of the governments have been able to actually spend the money. In fact, the schemes that the governments devised to use the fund, failed to even take off.

Government may allot Rs 500 crore for sugar development fund in budget

NEW DELHI: The government may marginally raise the corpus for Sugar Development Fund (SDF) to Rs 500 crore in the upcoming Budget for 2018-19. SDF, managed by the food ministry, is used for lending money to mills at lower interest rates. Till last fiscal, the cess – collected from sugar mills – was deposited in it.

When GST kicked in, the sugar cess was scrapped and hence a separate budgetary provision of Rs 496 crore was made for SDF for 2017-18. “Most of the fund allocated for this fiscal under SDF has been utilised. There is a possibility that the budgetary allocation for SDF increase marginally to Rs 500 crore for the next fiscal,” sources said.

It is a revolving fund. If sugar mills clear the loan, the same fund will be used for further lending else the availability of funds will be less, the sources said. SDF was set up in 1982 to provide financial help for development of sugar industry. Since inception, about Rs 7,500 crore has been disbursed to sugar factories.

Indigo Q3 net up over 56% to Rs 762CR

NEW DELHI: Low-cost carrier IndiGo reported a profit of Rs 762 crore in the quarter ended December 31, 2017, up 56.4% compared to Rs 487.3 crore in same period in last financial year. Airline’s president Aditya Ghosh said while it remained “interested in acquiring the international operations of Air India, we will explore the long-haul opportunity with or without AI. In that context, we will start seeking route rights and other necessary regulatory approvals as may be required to operate long-haul flights.”

IndiGo is so far the only player to give a formal expression of interest to the government for AI’s airline business. “While the government has made certain announcements relating to the privatization of Air India, we are still awaiting details of the process,” Ghosh said.

In Q3, IndiGo’s revenue from operations rose 24% to Rs 6,177 crore from Rs 4,986 crore in the same period last year.

The increased profit, Ghosh said,”was due to better revenue management as well as credits received from our manufacturers. We also had several operational milestones during the quarter.


Indian pharma cos get record 300 USFDA generic drug nods in 2017

MUMBAI: Domestic pharma companies received more than 300 approvals in 2017 to launch generic drugs in the US, which is an all-time high. The clearances came despite regulatory pressure from the US Food and Drug Administration (FDA), and unprecedented warning letters issued to the pharma companies’ facilities.

The final approvals for Indian players are up by nearly 43 per cent from 211 in 2016, and corner about 40 per cent of all global filings in the highly lucrative around $70-billion US market. This, even as all drug biggies — including Zydus, Sun Pharma, Dr Reddy’s and Cipla — faced regulatory ire, while some were pulledup for manufacturing lapses by the US regulator during last year.

In terms of each company, Zydus leads with 66 approvals in 2017, followed by Aurobindo (52), Glenmark (18), Lupin (17), Gland Pharma (16) and Cipla (10). Zydus cornered a majority of US filings as its Moraiya facility, which contributes about 60 per cent of US sales, came out from under USFDA scanner in June last year. Sun Pharma remained static at 10 approvals, due to its Halol plant continuing under the regulatory glare.

The US generics market, a key driver of Indian pharma’s growth, has always been a dynamic market. But the pace of change has accelerated in the last few years. The increase in competition and consolidation of distribution channels have led to the US generics business getting commoditised. Price erosion has been at an all-time high and this has impacted operating margins significantly. Major domestic companies earn at least 40 per cent of their overall sales from the US.

To maximise margins, companies are now launching complex generics and speciality products.Glenmark Pharma chairman & MD Glenn Saldanha says, “While the number of ANDA (abbreviated new drug application) approvals continue to remain strong for us, we, however, have begun the process of transitioning the US business to a specialty/innovation business. While the generics business in the US will still grow, the future for us will be in the specialty and innovation business. We plan to file our first specialty NDA in the next few months in the US.”

Rs 88,000 crore bank recap, reforms plan unveiled

NEW DELHI: The government on Wednesday unveiled details of its bank recapitalisation plan with a capital infusion of over Rs 88,000 crore in the current financial year for 20 state-run banks and linked it to a sixpoint reform agenda to restore their health and step up lending to aid growth.

Last year, the government had announced a package to breathe life into ailing PSBs through a Rs 2.11 lakh crore infusion to provide them capital for lending and reviving investment, crucial for job creation in Asia’s third-largest economy.

According to government’s plan, over the next two years it will use recapitalisation bonds worth Rs 1.35 lakh crore. It will also provide support of Rs 18,000 crore and the remaining Rs 58,000 crore will be raised by banks. “We inherited a very major problem and therefore, we have been involved in finding a solution to that problem”, finance minister Arun Jaitley told a news conference. “Our role really is not only to find a solution but also to create an institutional mechanism to make sure that what happened in the past is not repeated. Now the entire objective of this exercise is that the government has the prime responsibility of keeping the public sector banks in good health,” he said.

The capital infusion plans for 2017-18 include Rs 80,000 crore through recapitalisation bonds and Rs 8,139 crore as budgetary support. In addition, the banks will raise Rs 10,312 crore through share sales.

The government expects that the measures undertaken will help additional credit offtake capacity of state-run banks by more than Rs 5 lakh crore. “Each public sector bank (PSB) is an article of faith. All PSBs will be adequately capitalised and enabled to serve people and support inclusive growth,” said Rajiv Kumar, secretary, department of financial services, asserting that no state-run bank will fail.

LIXIL of Japan to invest $65 million in AP

Hyderabad: Japanese building materials and housing equipment manufacturer LIXIL Corporation on Wednesday said it will be investing $65 million in acquiring Hyderabad-based Sentini Group’s sanitaryware arm — Sentini Sanitarywares Pvt Ltd — and upgrading and expanding the latter’s recently established sanitaryware manufacturing facility near Vijayawada in Andhra Pradesh.

This will be LIXIL’s first manufacturing facility in India and will manufacture the group’s Grohe and American Standard brand of ceramics products like basins and WCs not only for the Indian market but for the global markets as well. The facility will provide direct employment to about 400 people.

Post acquisition, Sentini Sanitarywares will be renamed LIXIL India Sanitarywares Private Limited and Sentini Group chairman Seshagiri Rao Tipirneni will continue to be a shareholder and act as advisor to the entity’s board of directors, the company said.According to Lixil India country head Shubhajit Sen, nearly two-thirds of the $65 million went towards acquiring Sentini Sanitarywares and the rest will be pumped into upgrading the facility that has an existing capacity of making 1 million units per annum, Lixil India country head Shubhajit Sen told.

The upgraded facility is expected to become operational by August-September this year, following which the company will look at pumping in additional investment in doubling the plant’s capacity to 2 million units per year. He, however, did not reveal the quantum of investment the expansion will entail.

BoB repositions card arm as non-banking finance co

Mumbai: Bank of Baroda (BoB) has drawn a road map to be among the top three credit card issuers in the country. The state-owned lender — which last year hired Manoj Piplani, head of Barclay’s UK card business — has now repositioned its cards division as a non-banking finance company (NBFC) that will also extend retail loans.

On Wednesday, the bank launched its three cards — Easy, Select and Premier — for different segments with five times rewards. According to the bank’s MD & CEO P S Jayakumar, a former Citibanker, this is part of the bank’s “intense transformation” to become future-ready by filling in white spaces where it was not present. Although BoB did have a credit card base, it had been stagnant for years. The repositioning makes it more relevant to the times and its customers, Jayakumar said.

Although public sector banks account for 80% of the 83 crore debit cards in India, they have little over 20% share of the 3.5 crore credit cards outstanding. SBI, which issues cards through a subsidiary, has 56 lakh of the 73 lakh credit cards issued by PSBs. BoB is the second bank in the country to have a card-issuing subsidiary.

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