Net surplus liquidity approaches zero as short-term rates zoom
The weighted average rate in the interbank call market, where banks lend and borrow amongst themselves, was at 5.61 percent on Monday compared with 5.17 percent on Thursday and 5.20 percent on Friday, reflecting a surge. The spike in overnight lending rates reflected the near-total erosion in systemic surplus, from about Rs 8 lakh crore a year ago to within touching distance of a deficit.
Why it’s important: The erosion of surplus liquidity hamstrings the central bank’s market intervention to stop volatility in the rupee. The Reserve Bank may have to rethink its approach towards the currency markets and liquidity management.
Private sector capex rose 9% in 2021-22 but lagged pre-pandemic growth
Corporate India’s investment in assets like plants, equipment, land, buildings, and acquisitions grew 9.1 percent on an annualized basis in 2021-22, faster than 7.4 percent growth in capex in the preceding year. The combined cumulative investment in fixed assets, or gross block, rose to Rs 72.5 lakh crore by the end of 2021-22, up from Rs 66.43 lakh crore a year ago and Rs 53.64 lakh crore at the end of 2018-19.
Why it’s important: The average capex growth in the past couple of years has been significantly slower than that during the preceding two years in the pre-pandemic period. Companies seem to be reluctant to make new investment till the economic momentum picks up further.
Local lenders rush to fund Vedanta semiconductor factory in Gujarat
Multiple domestic banks have expressed interest in funding the Vedanta group’s proposed Rs 1.54 lakh crore semiconductor plant in Gujarat. The company has held back formal talks till a detailed project report is prepared. On 13 September, Vedanta announced plans to build a semiconductor fabrication unit, a display fabrication unit, and a semiconductor assembling and testing unit in Gujarat in partnership with Taiwanese electronics manufacturer Foxconn.
Why it’s important: The project finance opportunity will be lucrative for banks. It could involve external commercial borrowings as well.
NPCI may delay timeline to limit market share of firms in UPI ecosystem
The National Payments Corporation of India, which runs the Unified Payments Interface digital ecosystem, is in discussions with the government and industry stakeholders on the implications of delaying its implementation timeline for limiting the market share of players. This follows a request from PhonePe to defer the January 2023 deadline by at least three years. Google Pay has also had consultations with NPCI regarding an extension.
Why it’s important: On average, PhonePe and Google Pay have about 80 percent share on UPI each month. The NPCI has set a limit of 30 percent market share for any digital payment entity.
Market regulator for stricter framework to identify beneficial owners of FPIs
The Securities and Exchange Board of India is considering a stricter framework for identifying beneficial owners of foreign portfolio investment in India. The regulator is studying the viability and impact of lowering the threshold for such owners for providing additional information. Obtaining beneficial owners data can help the regulator understand if the fund is adequately broad-based or is being controlled by nefarious entities.
Why it’s important: A stricter framework would lead to more transparency and ensure genuine foreign capital is accessing the market. At the same time, lowering the threshold could face pushback from the industry as it would translate into much more paperwork and impact several FPIs.
Top management exits and reduced profitability raise concerns at Wipro
Wipro chief executive Thierry Delaporte is struggling to build a stable leadership team amid concerns of slowing growth and squeezed profitability, leading to concerns that last year’s industry leading growth was a fluke. Four executives overseeing business in four nations have left Wipro in the past month. Wipro’s operating margin shrank from 19.2 percent at the end of June 2020 to 15 percent at the end of June.
Why it’s important: Wipro has said it expects to grow in double digits in the current financial years. But there are now concerns that the CEO tough management style could spell trouble ahead.
Adani targets doubling cement capacity at ACC and Ambuja by 2030
The Adani group, the new owner of Ambuja Cements and ACC, is looking to double the cement manufacturing capacity of the two firms by 2030 to 140 million tons per year. The Group is infusing Rs 20,000 crore into Ambuja Cements through a preferential allotment of shares.
Why it’s important: The proposed capacity addition will place Adani close to market leader UltraTech Cement. This presage heightened competition in the sector.
Manipal group in advanced talks to purchase AMRI Hospital
The Manipal Group is in advanced discussions with the Emami Group to buy the AMRI hospital chain at an enterprise value of around Rs 1,500 crore. A deal is likely to be announced soon. Emami’s AMRI Hospitals has three super specialty hospitals in Kolkata and a fourth one in Bhubaneswar. The chain has a capacity of 1,200 beds across the four hospitals.
Why it’s important: As the pandemic recedes, there has been a rebound in more patients, making hospitals attractive to investors. There also seems to be consolidation in the space as bigger hospital operators buy out smaller chains.
KKR, Baring and Temasek in race to purchase stake in Manipal Hospital
Buyout entities like KKR &Co, Baring Private Equity Asia and Temasek Holdings are in talks to buy a 21.5 percent stake in Manipal Hospitals. Existing investor TPG Capital Management is looking to sell a seven-year-old investment. The fresh talks with global investors were started after TPG’s attempts to sell the shares back to Manipal’s Pai family didn’t fructify.
Why it’s important: The proposed transaction is expected to value the hospital chain at around Rs 30,000 crore. It could be a precursor to Manipal’s proposed public issue expected in 2023-24.
Open Network for Digital Commerce to publish draft framework for dispute resolution
The Open Network for Digital Commerce will publish its draft framework for dispute resolution in two weeks. The online dispute resolution will be handled by a third party that will review the digital trail left behind by individual orders and take a call. Consumers will be able to track the status of complaints, how many are resolved, and will be involved in the final rating of merchants on the network.
Why it’s important: ONDC is seeking to boost consumer trust in the ambitious initiative that is slated to go live later this month.
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