Below is a shortlist of all the important articles from newspapers.
Distressed hotels pin hopes on travel revival
The Federation of Hotel & Restaurant Associations of India (FHRAI) says 40% of hotels and restaurants have closed permanently during the pandemic, says The Times of India. Industry tracker STR’s data shows 270 branded hotels (20,000 rooms) have temporarily stopped operations in India.
Why it is important: “The number of establishments shutting down would have gone up by another 10-20% due to the second wave. Most don’t have working capital and loans from risk-averse banks are hard to come by,” FHRAI’s Pradeep Shetty said.
Job losses and pay cuts have hit this industry badly. 25-33% people employed in the sector have lost jobs.
The hope: Industry ‘survivors’ are pinning their hopes on the revival in travel seen after the waning of the second Covid wave and praying there is no third wave.
Vacation-starved Indians have started driving to nearby leisure destinations.
Big chains like Tata group’s Taj, Oberoi and ITC Hotels also have their fingers crossed as they had depleted significant reserves to survive the pandemic and need to replenish the same for future shocks.
CSB Bank tightens gold loan policy after NPAs
Fairfax-backed CSB Bank has tweaked its gold loan policy, says The Times of India.
Why it is important: It has been the mainstay of its low-risk lending model.
According to the bank, relaxing the loan-to-value ratio for these loans to 90% was a mistake.
It has triggered auctions and resulted in the portfolio, registering some nonperforming assets (NPAs).
Says CSB Bank MD & CEO C V R Rajendran: “One mistake was that when the RBI said you can lend up to 90% of the value of gold, we should not have followed that as a price fall can wipe out the margin and require us to call for additional margin.”
E-commerce norms on global lines says government
The government has drawn upon the evolving global architecture while drafting the proposed e-commerce rules, report The Times of India.
Why it is important: The plan is based on the need to enhance the enforcement powers to catch up with the EU and countries like the US, Australia, Japan, and Singapore, which have strict regulations to rein in errant players.
The consumer affairs department’s move also follows concerns within the government that the actions of e-tailers were not in sync with the regulatory prescription, an issue on which the domestic traders lobby has been vocal.
Top CEOs seek large fiscal stimulus or tax sops to jumpstart economy
India’s top CEOs called for a large fiscal stimulus or tax incentives from the government, a survey by The Economic Times showed.
What’s their concern: Many industry captains still wary of the third wave, looking at rapid vaccination to cut the risk.
They expressed concern about a modest economic recovery in the next two quarters through many see a swift recovery in their own sectors.
Majority said that demand for their goods or services had been impacted adversely by the pandemic’s second wave.
What they say:
Keki Mistry, CEO of HDFC: “I personally expect the economy to bounce back as the effects of the second wave continue to subside. The Indian economy in my view will recover briskly and mirror its performance from last September.”
Axis Bank CEO Amitabh Chaudhry: "It will take time for confidence to be boosted to pre-pandemic levels and the economic recovery is tied to the pace at which we get jabs for everyone".
Navnath Vhatte, CEO, Vedanta ESL Steel: “Announcing large infrastructure projects and giving incentives to sectors such as construction, manufacturing, automobiles, and services can help restore growth.”
Ant Group may hit a bump after IPOs of Paytm, Zomato
Jack Ma’s Ant Group may not be able to participate freely in corporate actions such as rights and bonus issues by Paytm and Zomato after they list, says The Economic Times.
Why it’s so: This is because of the curbs on Chinese FDI introduced by the Indian government last year.
Lawyers and tax experts say the rules clearly specify that any new shares being allotted to investors coming from countries sharing land borders with India will need a government security clearance.
Until now, the challenge did not arise since both the entities were unlisted and bonus or rights offerings by such companies are rare.
Unlisted companies with foreign shareholders typically opt for preferential allotments or share splits since tax and other rules are easier to comply with, rather than bonus or rights offers.
Ant Group owns 16.65% of Zomato through two entities. Ant Group holds 30.33% of Paytm and is the largest shareholder.
Bankruptcy professionals getting an ethics code
The frontline regulator for India’s new-age bankruptcy professionals is drafting a four-point plan, reports The Economic Times.
Why it is important: It includes setting limits on the number of permissible assignments for each executive and crafting a bespoke package for MSMEs.
To quicken the process of loan resolutions amid an anticipated surge in delinquencies due to the pandemic.
The four concerns:
On enhancing the role of small-sized Ips.
Response of insolvency regime to Covid.
Clarifying roles of IPs in respect of pre pack framework for MSMEs.
And creating a code of ethics for professional members.
India Inc can now claim a deduction for Covid support
India Inc will be able to claim deduction on financial support provided to employees and their families for medical expenses or ex-gratia payments in the event of death due to Covid-19, reports The Economic Times.
Why it is important: The move relieves employers from the obligation of tax withholding compliance.
In the absence of this clarification, amounts spent or reimbursed on medical treatment of Covid-19 could have been taxable as employment income in the hands of the employees and subject to withholding of tax.
The clarification was required on the issue of deduction to avoid litigation.
Industry bodies and tax practitioners had also highlighted the issue in representations to the government.
During the second Covid-19 wave, several companies provided support for a single aspect or in combination, such as medicines, doctors’ consultations online, oxygen cylinders, concentrators, free vaccinations, interest-free loans, or payment for isolation requirements such as hotel bills.
Debt at 58.8% of GDP as economy shrinks
India’s debt soared to 58.8% of the gross domestic product in the fiscal year ended March from 51.6% a year ago, Mint reports citing government data.
Why it is so: The economic contraction forced the government to borrow a record amount to meet a revenue shortfall.
Why it is important: It prompts experts to raise concerns over debt sustainability in the medium term.
The fiscal deficit widened to 9.2% of GDP in FY21 from 4.6% of GDP a year ago as revenue receipts contracted 3%, with the economy shrinking 7.3%.
The contraction, the steepest in independent India, is ascribed to the disruption in economic activities caused by the first wave of the pandemic.
Lenders pin hopes on pent-up loan demand
Bankers anticipate stronger credit growth in the coming quarters, Mint reports.
Why it is important: They hope that pent-up demand built up over months of pandemic-induced lockdowns will drive spending on goods and services.
Their projections also ride on vaccine optimism although less than 5% of Indians have received both the jabs.
While a lot depends on whether a third wave of the pandemic hits India and how it pans out, lenders are near certain a credit pickup is on the cards.
However, demand for corporate loans is not expected to gain traction anytime soon.
It is retail loans that will be at the forefront of credit growth.
Food subsidy bill hits record high of ₹5 trillion in 2020-21
India’s revised food subsidy bill for 2020-21 has hit a record high of nearly ₹5 trillion, says Hindustan Times.
Why it is important: It is largely because the Union government has paid off a “majority of longstanding debt arrears” of the Food Corporation of India (FCI) amounting to more than ₹2 trillion.
This is part of a broader policy to eliminate hidden subsidies by accounting for them in the fiscal deficit.
Till last year, FCI’s massive loans to finance distribution of subsidized ration were sourced from the National Small Savings Fund. These borrowings were part of “extra-budgetary resources”, literally outside the budget.
Hence, they did not reflect in the fiscal deficit, which is the shortfall in the government’s earnings compared to what it spends.
A larger fiscal deficit means the government is saddled with loans.
Govt moves ahead with a plan to amend Indian Forest Act
The ministry of environment, forest, and climate change has invited bids from consulting agencies, firms, joint ventures, and consortiums, in an attempt to amend the Indian Forest Act, 1927, says Hindustan Times.
Why it is important: Any amendment to IFA is significant because it deals with the regulation of transit of forest produce and the regulation of reserved forests, protected forests and forestland that is not under government control. It also deals with various forest offences and penalties.
The amendment to the colonial-era Indian Forest Act will focus on de-clogging of the criminal justice system, and promoting public and private participation in ushering in ease of doing business.
The other stated objectives of the amendment include the removal of difficulties in the trade of forest products; and encouraging the private sector, civil society, and individuals to take up tree planting on non-forest lands.
Govt dials investors ahead of LIC´s IPO
The government has reached out to investors to apprise them about LIC’s growth and prospects as it prepares for the country’s largest IPO, says Business Standard.
Why it is important: Preliminary presentations have been made to inform investors on how the organisation is being restructured ahead of the IPO, along with its financials, so that the IPO process can be hastened once its embedded value is derived.
More consultations to be held once LIC’s embedded value is derived.
Embedded value of LIC is expected to be derived by July-August.
IPO launch being targeted for the last quarter of this fiscal year.
Expect low single-digit return over 12 months´
Mahesh Nandurkar, Managing Director at Jefferies, tells Business Standard in an interview that helped by a low base, corporate earnings growth this year should be strong, about 30 per cent for the Nifty, but that’s already factored in by the markets.
What he says: I don´t think there´s a bubble.
In the Indian context, our favourite ´Bond YieldEarnings Yield´ valuation metric, is close to historical averages.
This implies that there´s no major market euphoria as such.
But yes, we need to be aware that this high liquidity induced low yields will not remain at this level forever.
Foreign investors are willing to look through the near-term weakness in the economy and focus on the expected economic growth recovery.
India´s macro appears solid in the context of the expected pickup in the housing market, which is likely to drive economic growth improvement.
For EM markets to perform, we need the dollar to remain stable to weak.
Given the high fiscal deficit and excess liquidity in the US, currency trends should remain supportive.
Most experts see inflation as transitory.
Our 12-month Nifty target is 16,300 and we expect low single-digit returns from the market over the next 12 months.
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