Friday, 11th June 2021

As committed in Jun-21 monetary policy, RBI will conduct the third tranche of its open market purchase of G-Sec and state development loans under G-SAP on 17-Jun. G-SAP is short for Government Securities Acquisition Program. In this G-SAP round, RBI will purchase government securities of Rs.40,000 crore inclusive of SDLs worth Rs.10,000 crore. In the first tranche on 15-Apr, RBI bought bonds worth Rs.25,000 crore and Rs.35,000 crore in second tranche on 20-May. RBI will now achieve Q1 target of Rs.1 trillion.

According to an estimate by ICRA, nearly Rs.350,000 crore worth of assets could likely get monetized via instruments like INVITs and REITs in the next one year. Till date, assets worth Rs.210,000 crore have been monetized through INVITs and REITs , with the former having a 64% share. If you look at just the last 2 years, INVIT monetization was worth Rs.85,300 crore while REIT monetization was worth Rs.77,100 crore. 

The good news is that lenders are getting comfortable lending to such structures as it is fully asset backed.

Automobile registrations collapsed across the board in May-21 as retail sales of vehicles came to a grinding halt due to localised lockdowns. If you go by the monthly registration data put out by FADA, sales were down 54.79% sequentially and 70.69% YOY. With the predominant rural markets under the grip of COVID 2.0, any V-shaped recovery looks highly unlikely. Just a handful of manufacturers like Tata Motors, Hero Moto, Renault and Bharat Benz announced financial support for channel partners to boost numbers.

The Board of Directors of Yes Bank approved raising Rs.10,000 crore through the issue of debt securities. These funds are likely to be raised through NCD issues or medium term notes. Yes Bank had a rescue package worked out by SBI last year but that is yet to put the  bank on a high growth path. Currently, Yes Bank urgently needs the funds for operations and also for capital adequacy requirements. Meanwhile, the CBI has filed a Rs.466 crore fraud case against the alleged fraud on Yes Bank by Gautam Thapar of Avantha.

TCS said that it had paid a sum of Rs.33,873 crore to its shareholders via dividends and buybacks in FY21. The buyback pay-out itself was worth Rs.16,000 crore. To quote N Chandrasekharan, TCS returned nearly 95% of the free cash flow to shareholders during the financial year. With a view to rewarding investors, TCS paid out a total dividend of Rs.38 per share during FY21. Business continues to be robust at TCS and with a huge cash stash and limited future investments, TCS has been rewarding shareholders generously..

In the midst of the enthusiasm over the G7 Digital Tax proposal, India may not fully accept the G7’s digital tax design. This requires MNCs to pay taxes in the countries in which they operate. Under the new proposal, the most profitable multinationals with at least 10% profit margin will pay taxes in countries where they operate. Experts feel, India may lose out if the profit allocation is not equivalent to the existing equalization levy. The next step is for the deal to be ratified at the Jul-21 meeting of all the G20 nations.

Crude oil bounced in the week with even the WTI Crude touching a high price of over $70/bbl. Brent got close to $73/bbl despite EIA data showed a surge in gasoline inventory due to weak summer fuel demand. Of late there have been mixed inventory reports from the US with a sharp drop in US crude oil stocks but a sharp rise in gasoline stocks. For India the bigger concern is that any further upside from the current levels would mean another series of price hikes in petrol and diesel, spiking fuel inflation to higher levels.

The partly paid shares of Reliance Industries were relisted on the NSE at a price of Rs.1,572 on 10-Jun. RIL has already received a sum of Rs.13,151 crore as first call on partly paid-up shares, which is part of the rights issue done last year to raise funds to defray debt and make RIL net zero debt. It may be recollected that on 03 Jun 2020, at the peak of the pandemic, RIL had successfully closed its Rs.53,124-crore rights issue amidst an overwhelming response. The rights issue last year had been heavily subscribed 1.57 times.

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