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#Linkfest – India’s Yen Denominated Bonds Conundrum, India is no Currency Manipulator, Coffee Day Promoter Death, Yes Bank QIP, and more.


At Capitalmind Premium, we have a very active Slack channel where we discuss a lot of interesting topics. In there,  a number of interesting links come our way. Here’s the most interesting of such links shared by our members in recent days.

India Fishing in Troubled Waters with Yen Denominated Bonds, Say Analysts

Market observers are saying that India’s attempts to issue yen-denominated foreign bonds may not be as successful as the Indian government anticipates. Mitsubishi UFJ Kokusai Asset Management Co. chief fund manager Kenichi Kurahashi says that the offer may probably have to be revised for several reasons. For one, the proposed debt is half the amount of Samurai bonds sold worldwide last year. Second, Fitch Ratings and S&P Global Ratings have rated India ‘BBB-‘, which is just one grade above junk. Meanwhile, Moody’s has rated India ‘Baa2’, just two grades above non-investment grade. This means the debt will be categorized as sub-standard grade, which might make it illiquid. Link

Govt Develops Cold Feet on Decision to Ban Vehicles Below 150CC

The government has backtracked on its plans to remove petrol-guzzling 150 CC two and three wheelers from the nation’s roads by 2023 and 2025, respectively and replace them with electric vehicles. This occurred on the face of a sustained opposition from auto manufacturers who claimed the move would seriously jeopardize the PM’s ‘Make in India’ mission, while also costing millions of dollars in losses due to obsolescence of installed capacity and associated job losses. Now, the plan will be implemented in a phased manner, with the cities going zero emissions first. Link

German Manufacturing Slumps to Record Low in Seven Years

The German manufacturing industry is in deep trouble, exacerbated by slowing exports. The worst affected industry is the automobile industry, with the blame falling on international trade disputes, falling demand for German-made automobiles, and the uncertainties associated with Brexit. Meanwhile, the German services sector seems to have been largely cushioned by the fall. According to the German government’s estimated, the German economy will grow by 0.5% this year, and will accelerate to 1.5% by next year. Link

RBI Governor Shaktikanta Das Calls Out U.S For Calling India a ‘Currency Manipulator’

RBI governor Shaktikanta Das has called out the U.S regime for terming India a ‘currency manipulator’, saying that it is IMF’s prerogative to regulate exchange rates and not single countries like the U.S. Recently, U.S President Donald Trump had termed India and China as ‘currency manipulators’, pointing to India’s program of buying dollars from the market. The RBI governor went as far as to accuse the U.S of ‘bilateral hegemony’ for making the allegations. He especially singling out the low interest rate regimes in developed countries and added they posed a challenge to developing countries. Link

Government May List 3-4 Regional Rural Banks on the Markets Soon

If the rumor mill is true, the government may be planning to list some 3-4 regional rural banks on the stock market during this fiscal. Currently, the government is in the process of consolidating the RRBs, to bring down their number to 38, from 45. This is being done to help RRBs to optimize their costs and improve their capital base, operating area and exposure. The government has set aside Rs. 235 crores to recapitalize the RRBs in the 2019-20 budget. Once the entire process is complete, the government will identify 4-5 strong RRBs and embark on the listing exercise. Link

The Socialist Hell Called the State Public Sector Enterprise

According to political-economy analyst Shankkar Aiyar, the Indian taxpayer owns the largest number of failing or crumbling PSUs in the world. The condition of state-owned PSUs is even worse. There are 1309 state PSUs in India, of which only 989 are in working condition and even fewer are making profits. In fact, the system is in such a sad state, overall, state PSUs are making a loss of 5 rupees for every rupee that they are earning. Just one state, Uttar Pradesh, has accumulated losses of Rs. 87,187.34 crores from its PSUs until now. Link

RBI Allows Indian Banks to Sell NPAs to Foreign Investors As a One-time Exercise

The RBI has allowed Indian banks to sell their bad loans in the manufacturing and infrastructure sector to foreign investors as a one-time exercise. The loan defaulters can also sell their assets to foreign investors through the External Commercial Borrowing (ECB) mechanism to repay their domestic loans. In addition, Indian corporates can now raise foreign loans for working capital, to repay domestic loans, or for general corporate expenses. Until now, the RBI didn’t allow Indian companies to raise foreign loans to repay domestic ones because the origin of the money would have been difficult to trace. Even now, the loans can be given only by registered lenders. Link

Income Tax Department Says Karnataka Congress Leader Was Responsible for Raids on VG Siddhartha

After VG Siddhartha, the founder of Cafe Coffee Day said he was being ‘harassed’ by the IT department in his suicide note, the IT department has come out and justified its raids on the former by pointing to his close contacts with a Karnataka Congress leader, who is under the IT lens. Raids on the Congress leader had uncovered a paper trial, which led to Cafe Coffee Day. Apparently, VG Siddhartha was using his business network to help the Congress leader convert his black money into white. Link

Gujarat High Court Orders Center to Review Lifting of Anti-dumping Duties on Rubber Chemical Imports

The Gujarat High Court has ordered the center to review its decision to lift the anti-dumping duty on rubber chemicals. The anti-dumping duties were to be lifted in July (it was imposed 10 years ago) to tackle a demand-supply mismatch in rubber chemicals. But the lifting of the ban would have helped Chinese and Korean rubber chemical manufacturers to the detriment of local producers like NOCIL. In fact, NOCIL had appealed to the center that the anti-dumping duties be continued. But the center had rejected the appeal on the grounds that NOCL was exporting rubber chemicals abroad rather than selling them in India, despite profit in the latter, forcing its hand to lift the import duty. Link

Reliance Industries to Sell Private Label Brands Through Local Stores

Reliance Industries is planning to make its private-label brands available in local stores, as it seeks to diversify its business and reduce its dependence on the petrochemical business. These include products across categories such as personal care, staples, food, Until now, these products were sold only through the company’s retail stores. These include brands like Good Life, Enzo, Masti Oye, Mopz, Kaffe, Home One, and Expelz. Reliance Industries expects that its consumer business to contribute as much to its bottom-line as its petrochemical and refining business, by 2025. Link

Yes Bank Bets on $400 Million QIP To Raise it From the Dumps

Cash starved Yes Bank is supposedly in talks with several foreign investors to raise up to $400 million through a QIP. The bank needs the money urgently to replenish its capital and cope with bad loans. The QIP has garnered a lot of interest and at least 4 global funds have shown interest in investing in the bank. The deals with these funds may not fructify, because the success of the deal will depend on the share price offered. The danger is, the QIP may lead to a significant dilution in equity for minority shareholders. Link

Is the Indian Realty Sector Bad Loan Crisis About to Get Worse?

At least that what Vikas Chimakurthy, Chief Investment Officer at Kotak Realty Fund thinks. He says, lenders must recognize bad realty debts immediately and take haircuts on the loans, so that a fresh credit cycle can begin and realty companies can work on reviving their cash flows. He says any delay in doing so will increase the risk of loan defaults by realty companies. Close to 560,000 homes worth an estimated $65 billion dollars are delayed or stuck across India, because of a lack of funds. He added that unless something is done urgently, the situation will become more dangerous by March next year. Link

NDA Govt May List State-owned LIC on the Bourses Soon

The NDA government under Prime Minister Modi is said to be mulling the listing of Life Insurance Corporation of India. State-owned LIC currently has a 74% market share of the life insurance business in India. The rest of the market is divided between 23 private insurance companies. There are two ways of looking at the listing. One, it will open the company to public scrutiny, leading to an increase in efficiency and transparency. Second, it may make it difficult to reduce life insurance premiums, as the company begins to focus on its bottom line. The Department of Investment and Public Asset Management is said to be currently studying the pros and cons of listing LIC and we should see a decision on this soon. Link


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