Success in my Habit
Saturday, April 8, 2017
India to soon start auction process for commercial coal mines
Consumption-linked sectors drove rating upgrades in FY17: Crisil
Consumption was aided by monsoon, implementation of the Seventh Pay Commission and One Rank One Pension (OROP) recommendations but demonetisation became a dampener towards the end of calendar 2016, especially for rural consumption, the rating agency said in a report, Round-up Fiscal 2017.
Demonetisation also slowed down the pace of upgrades of consumption-linked sectors, it added.
According to the Crisil report, the pace of downgrades declined in the metals sector due to stabilization in prices, policy support in the form of anti-dumping duty and minimum import price and gradual improvement in demand from affordable housing, urban infrastructure and railways.
The rating agency’s upgrade rate moderated to 9.4% in FY17 from 11.3% in FY16, while the downgrade rate declined to 7.7% from 8.4% in the period. Crisil’s rating portfolio for fiscal year 2017 saw 1,335 upgrades compared to 1,092 downgrades in FY17.
“This helped the credit ratio hold above 1 time in fiscal 2017 at 1.22 times—or quite similar to 1.29 times in fiscal 2016,” Crisil said.
It added that the credit quality of corporate India is gradually recovering but underpinning remains fragile still. In fiscal year 2017, debt-weighted credit ratio—the ratio of debt held by firms whose debt ratings have been upgraded against that of firms whose ratings have been downgraded—improved to a five-year high of 0.88 time, against 0.31 time in 2015-16, Crisil said.
The rating agency also said that almost half of rating actions were because of financial profile reasons as almost three-fourths of rating actions in fiscal year 2017 were in the sub-investment grade (“BB” or lower).
The financial reasons for upgrade were better liquidity and improvement in capital structure, while business reasons were mainly robust demand growth and improvement in operating margins.
“Firms upgraded in fiscal 2017 continued to display distinctly better profile compared with those downgraded. Upgraded firms in general had higher profitability, lower indebtedness and better working capital management,” it added.
Liquidity was the key financial reason for more than a third of the downgrades, stemming from lower cash accrual and higher bank limit utilisation. “Weak demand, pressures on operating profitability, and elongated working capital cycle were the main business reasons for downgrades,” Crisil said.
Meanwhile, CARE Ratings said that in March 2017, its Ratings Debt Quality Index (CDQI) saw the largest decline in FY17 to 89.81, influenced primarily by a few downgrades in “AAA” and “A” category ratings. CDQI denotes the quality of debt that can be interpreted over time and juxtaposed with other developments in the financial sector. “Currently, the volume of debt of the sample companies stands at Rs29.53 lakh crore in March 2017,” CARE Ratings said in a note.
UK exchequer chancellor Hammond urges strong ties with India in fintech
Hammond is on a three-day tour called FinTech Trade Mission to India to engage in dialogue with the Indian finance ministry, financial regulators and other industry bodies in order to strengthen UK’s e-conomic and trading relations with the country.
“The vote for the UK to leave the EU was clear. It reflected a desire for Britain to make its own decisions and to determine its own destiny. But it wasn’t a vote for isolation…British companies have invested more in India since 2000 than the United States or any other European nation has done. And investment from UK companies accounts for 1 in 20 Indian jobs in the organised private sector. Indian companies, meanwhile, invest more in Britain than in the rest of the EU put together,” Hammond said while speaking at a conference in Mumbai.
Hammond said Indian companies such as the Tata Group are among the biggest employers in the UK, transforming British businesses with their focused management and long-term investments.
“In the last year we’ve seen the creation of a whole new market, with the world’s first masala bonds issued in London – raising over $1.5 billion. To date, almost 80% of all masala bonds have been issued in London. And we will see even more, very soon from the Indian Renewable Energy Development Agency and the National Highways Authority of India…the UK and India can collaborate to our mutual advantage – in FinTech,” said Hammond.
There are at least 15 India-headquartered banks which are engaged in international banking businesses in the UK. On the other hand, there are several British financial services firms that are present in India’s insurance, asset management, fintech and banking industries.
Hammond hinted that strengthening ties with UK may fulfil India’s appetite for investments, particularly in infrastructure.
“India has 220 million active smartphone users–over three times the entire UK population. What’s more, India’s demonetisation programme means its financial services sector is undergoing a significant transformation…New fintech payment firms, small finance lenders, and insurance players are entering the market. These firms will be crucial in helping the RBI achieve its target of 90% of the population having access to banking services by 2034,” said Hammond.
Tuesday, April 4, 2017
RIL gets green nod for Rs 13,250cr Dahej unit expansion project
The Mukesh Ambani-led firm wants to expand its Dahej facility located in Bharuch district in view of erratic supply of feed stock, change in the government's policy to prioritise domestic supply over industrial sector, adequate supply of Shale gas ethane from the US, besides meeting demand-supply gap of petrochemicals in India.
"Based on the recommendations of the Expert Appraisal Committee (Industry), the Environment Ministry has given the environmental clearance for RIL's expansion project yesterday," a senior government official said.
The green nod to the proposed project, which will be carried out within the existing plant area of 700 hectare, is subject to some conditions, the official said.
The estimated cost of the project is Rs 13,250 crore. A budget of Rs 400 crore will be kept aside for environment protection and conservation.
The fuel used for the proposed project would largely be ethane, lean gas and off gas. The power required for the project will be met from the existing captive power plant.
As per the proposal, RIL Dahej facility presently utilises a mixture of ethane and propane to produce downstream products and by-products.
Dahej facility proposes to modify its feedstock ratio of ethane and propane in the gas cracker plant owing to the availability of shale gas ethane imported from the US.
This change in feedstock mixture will result in higher production of ethylene.
The RIL's proposal also include setting up of new plants including Chlorinated Poly Vinyl Chloride (CPVC), Vinyl Chloride Monomer (VCM), Poly Vinyl Chloride (PVC) and a dedicated Ethane storage tank. LUX MR
Car majors hit top gear in last lap of FY17
The sector sold over three million units in FY17, a milestone. In FY16, 2.78 million units were sold. India, the fifth-largest passenger vehicle market globally (cars, vans and utility vehicles), had registered a volume growth of about nine per cent in FY17.
Prime Minister Narendra Modi had announced demonetisation of old Rs 500 and Rs 1,000 notes on November 8, 2016, sucking out about 86 per cent of the currency in circulation and hitting demand. Car volumes started recovering in January this year.
The country’s largest carmaker Maruti Suzuki reported a domestic sale of 127,695 vehicles, growing at 7.4 per cent over March 2016. The growth was led by the compact and utility vehicle segment. In FY17, domestic volume of the company stood at 1.44 million, up 10.6 per cent from the previous year.
R S Kalsi, executive director (marketing and sales) at Maruti, said, “Demand for the company’s products remains strong and it continues to see healthy orders for products such as Brezza and Baleno.”
Korean carmaker Hyundai, the second-largest player in the Indian market, reported a growth of 8.6 per cent in March. Rakesh Srivastava, senior vice-president (sales and marketing), said three products — Grand i10, Elite i20 and Creta — drove the March numbers, which stood at 44,757 vehicles. For the entire year, the company sold a record 0.5 million vehicles in the country, growing at more than five per cent.
Utility vehicle major M&M is yet to announce its March numbers. However, it is learnt to be the only player in the list of top five to have shown a decline. The company’s volume is estimated to have declined around six per cent to 25,352 units last month. M&M, the third-largest player in the domestic market, has not seen a single month of growth since demonetisation.
Its full-year performance is also impacted and volume growth has been flat.
Tata Motors has reported a strong volume growth of 82 per cent for March. The company sold 15,433 vehicles in the domestic market during March. Its volume growth in FY17 was 22 per cent.
Mayank Pareek, president of the company’s passenger vehicle business unit, said the demand remained high for Tiago and Hexa. Tata Motors launched a compact sedan Tigor on Wednesday and anticipates stronger growth ahead.
Japanese auto major Honda, which occupies the fifth position in the domestic market, has started seeing growth after a long gap on account of two new products — the new Honda City and the WRV.
Its Japanese peer Toyota has shown a much stronger performance with 80 per cent growth last month. N Raja, director and senior vice-president (sales and marketing), said Toyota is riding on two products — Innova Crysta and Fortuner. Launched almost a year ago, Crysta still commands a waiting of one month.
Renault, which has seen a strong growth in past many months owing to Kwid, is apparently seeing a base effect. Its volume in March declined close to two per cent. A healthy double-digit growth was also posted by Ford, Nissan and Volkswagen.
Amit Kaushik, managing director for the Detroit-based automobile consultancy Urban Science in India, said volumes were being driven by positive sentiments, new launches and favourable interest rates.
“Apprehensions of price increase in the new financial year have also triggered purchases,” he added.
Monday, April 3, 2017
OMCs to invest ~90,000 cr on fuel upgrade
“The oil companies have spent more than Rs 28,000 crore after 2010 which is in addition to Rs 35,000 crore that was already spent till 2010. They will further spend Rs 28,000 crore by 2020 for meeting the BS-VI specifications which will take the total investment to Rs 90,000 crore only on fuel upgradation programme itself," said K D Tripathi, secretary, ministry of Petroleum and Natural Gas at the launching of BS-IV grade fuels across the country.
“Our fuel quality standards have been gradually tightened since the mid 90’s. Investing on fuel quality improvement was critical to the success of the vehicular emissions programme. Our refineries have achieved the target with the introduction of advanced technologies with significant capital expenditure”, he added.
It may be noted that the fuel upgradation programme took off with the notification of vehicular emission norms for new vehicles in 1991. BS 2000 (Bharat Stage 1) vehicle emission norms were introduced for new vehicles from April 2000 and this was followed by BS-II emission norms for new cars in Delhi from 2000 and extended to the other metros in 2001. BS- III was implemented in phases during 2005-2010. The current BS-IV fuel with 50 ppm sulphur was introduced in year and today, it covered the entire country.
However, the government, in 2016, has decided to meet the international best practices to leapfrog directly to BS-VI norms by skipping BS-V altogether by April 1, 2020.
There are about 23 oil refineries in India with a combined capacity of 230 million tonnes per annum.
“Today, we begin a new era of clean transportation fuels that will benefit 1.25 billion citizens of our country by substantially reducing pollution levels in our cities," Dharmendra Pradhan, minister of state for Petroleum and Natural Gas said.
He also complimented the OMCs- Indian Oil Corporation Ltd (IOCL), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation (HPCL) for working in unison to launch the BS-IV grade fuels as per the schedule.
India adds record 5,400MW wind power in 2016-17
“This year’s achievement surpassed the previous higher capacity addition of 3,423MW achieved in the previous year,” the ministry of new renewable energy said a statement on Sunday.
Of about 50,018MW of installed renewable power across the country, over 55% is wind power.
In India, which is the biggest greenhouse gas emitter after the US and China, renewable energy currently accounts for about 16% of the total installed capacity of 315,426MW.
During 2016-17, the leading states in the wind power capacity addition were Andhra Pradesh at 2,190MW, followed by Gujarat at 1,275MW and Karnataka at 882MW.
In addition, Madhya Pradesh, Rajasthan, Tamil Nadu, Maharashtra, Telangana and Kerala reported 357MW, 288MW, 262MW, 118MW, 23MW and 8MW wind power capacity addition respectively during the same period.
At the Paris Climate Summit in December, India promised to achieve 175GW of renewable energy capacity by 2022. This includes 60GW from wind power, 100GW from solar power, 10GW from biomass and 5GW from small hydro projects.
It also promised to achieve 40% of its electricity generation capacity from non-fossil fuel based energy resources by 2030.
In the last couple of years, India has not only seen record low tariffs for solar power but wind power too has seen a significant drop in tariffs. In February, solar power tariffs hit a record low of Rs2.97 per kilowatt hour (kWh)and wind power tariff reached Rs3.46 kWh.
Even though wind leads India’s renewable power sector, it has huge growth potential. According to government estimates, the onshore wind power potential alone is about 302GW. But there are several problems plaguing the sector.
For instance, the government has been concerned about squatters blocking good wind potential sites, inordinate delays in signing of power purchase agreements, timely payments and distribution firms shying away from procuring electricity generated from wind energy projects. In January, the ministry held a meeting with the states to sort out these issues.
The ministry has also taken several other policy initiatives, including introducing bidding in the wind energy sector and drafting a wind-solar hybrid policy.
It has also come out with a ‘National Offshore Wind Energy Policy’, aiming to harness wind power along India’s 7,600 km coastline. Preliminary estimates show the Gujarat coastline has the potential to generate around 106,000MW of offshore wind energy and Tamil Nadu about 60,000MW.
RBI increases FPI limits in govt bonds by Rs170 billion
India needs Rs43 trillion of investment in infrastructure over next 5 years: Jaitley
Speaking at the inauguration of the 2nd annual meeting of New Development Bank by the five member BRICS (Brazil-Russia-India-China-South Africa) countries, Jaitley said in emerging markets and developing economies (EMDEs), the overall growth is picking up, although growth prospects diverge across countries. “But there are newer challenges, most notably a possible shift towards inward-looking policy platforms and protectionism, a sharper than expected tightening in global financial conditions that could interact with balance sheet weaknesses in parts of the euro area and increased geopolitical tensions, including unpredictable economic policy of USA,” he saids.
Amidst the challenges, Jaitley said lie the opportunities with the estimated unmet demand for infrastructure investment in emerging market and developing economies (EMDEs) is gargantuan, estimated at above $1 trillion a year by the World Bank. “Most importantly, the EMDEs need to carry out this huge investment in a sustainable manner. The established MDBs are now capital constrained, and with their over emphasis on processes, are unable to meet this financing challenge. A Bank like the NDB is well poised to step into the void,” he added.
Chinese finance minister Xiao Jie speaking at the event said BRICS countries should work towards reforming the global economic system since voice of the emerging economies that contribute 80% of global growth remains “gravely inadequate” in multilateral institutions.
Jaitley said India has proposed projects worth about $2 billion for NDB funding, which he hopes will be taken up by the Board expeditiously. “We shall work with the NDB to develop a strong shelf of projects in specific areas such as Smart Cities, renewable energy, urban transport, including Metro Railways, clean coal technology, solid waste management and urban water supply,” he added.
In the annual meeting, the five member board of governors will deliberate on Bank’s strategy for the next 5 years, including issues such as the Bank’s capital, loan portfolio and expansion of Membership. “The uniqueness of NDB should lie in faster loan appraisal, a lean organizational structure resulting in lower cost of loans, a variety of financing instruments, including local currency financing, adoption of country system whenever possible and flexibility in responding to the needs of the clients. These are the elements which would make NDB truly a “new” institution, and make it distinct from older MDBs (multilateral development banks),” Jailey said.
India to grow at 7.7% in 2018 in face of newer global challenges: Jaitley
Addressing the second annual meeting of the New Development Bank (NDB) in Delhi, Jaitley said a possible shift towards inward-looking policies and protectionism and a sharper than expected tightening in global financial conditions, the crisis in Europe and increased geopolitical tensions, posed a challenge to the emerging economies.
Citing the projections of International Monetary Fund, Jaitley said India’s GDP growth in 2016 would be 6.6%, while the same would be 7.2% and 7.7% in 2017 and 2018 respectively. The IMF projections for 2017 and 2018 corresponds with India’s financial years (April-March) 2017-18 and 2018-19.
India’s stats office, CSO, has estimated economic growth to slow to 7.1% in 2016-17 from 7.9% in the previous year. The government’s Economic Survey projects the GDP growth at 6.75-7.5% in 2017-18.
“We have successfully implemented a slew of reform measures,” Jaitley said listing out the demonetisation drive, passage of crucial bills in Lok Sabha to roll out the Goods and Services Tax, the Insolvency and Bankruptcy law, and relaxing foreign investment rules.
Jaitley said India wants $2 billion loans for various projects from the NDB, earlier called BRICS Bank as it set up by the emerging nations India, China, Brazil, Russia and South Africa.
“India has a huge unmet need for investment in infrastructure, estimated to the tune of Rs 43 lakh crore (about $646 billion) over the next five years,” he said.
About 70% of the funds will be required in the power, roads and urban infrastructure sectors, he said.
”This offers an enormous opportunity to an Institution like NDB, whose core mandate is sustainable infrastructure development. We shall work with the NDB to develop a strong shelf of projects in specific areas such as Smart Cities, renewable energy, urban transport, including Metro Railways, clean coal technology, solid waste management and urban water supply,” he summed up.
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