Indian banks are now largely relying on certificates of deposits of CDs a funding option. The funds are available at fairly low rates in the money market so the banks do not have to raise the rates of interest paid on the deposits. In just August 2022, private and PSU banks raised nearly Rs30,000 crore via CDs with tenures ranging from 2 months to one year. One year CDs are costing around 6.60% to 6.74%, which is very competitive. The buyers are largely debt funds looking to park surplus short term money
profitably.
Infosys has been facing falling operating margins for some time and now the response is visible. Infosys scaled back the average variable pay-out to about 70% for employees amidst a squeeze in margins. Even TCS has delayed payment of variable compensation to conserve liquidity. For now, this only pertains to the June quarter. Margins at Infosys have down from 25% to 21% amidst rising employee and travel costs. Earlier, even Wipro had held back the payment of variable pay-outs to employees due to margin
pressure.
The beleaguered Future Retail received claims of Rs21,057 crore from 33 financial creditors as part of the corporate insolvency resolution process (CIRP). Claims worth Rs17,511 crore have been verified by the resolution professional while the balance Rs3,546 crore is yet to be verified. The consortium of banks has made the biggest claim. Apart from the banks, the other creditors to have submitted claims are Bank of New York Mellon and Axis Trustee Services. Operational creditors have sent claims worth
Rs265 crore.
Indian auto component companies reported combined turnover of Rs4.20 trillion for fiscal year 2021-22. That is nearly 23% higher on yoy basis. Auto components are the ancillary products that go into the manufacture of automobiles. Fasteners, transmissions, lamps, forgings etc are some of the popular auto components. Total auto component exports for FY22 stood at Rs1.41 trillion, or 33.5% of the total output. India also is a major importer of auto components with China and Germany being the biggest suppliers.
On Monday, the price of Brent crude fell sharply on fears of aggressive US interest rate hikes after the Fed minutes hinted at a long battle against inflation. Oil fell on fears that persistent hawkish policy could push the world economy into a recession. Brent Crude futures fell 4.1% on Monday to close at $92.73/bbl while the WTI crude also fell by 4.1% to $87/bbl. The Chinese central bank has cut the benchmark lending rates as part of measures to revive an economy and rescue China from the property
crisis. Oil is an overhang.
Indian rupee once again came under pressure on Monday after the slide in the Chines Yuan led to the rupee also falling hard. The Yuan has depleted after the PBOC cut rates to boost the economy. The rupee was trading at 79.86/$, pretty close to the psychological 80/$ mark. The dollar index (DXY) at 108.29 is very close to its 20 year peak. The combination of a strong dollar and a weak Yuan could push the rupee beyond 80/$. The dollar has been appreciating aggressively in the last few weeks due to Fed hawkishness.
With a view to ensuring robust foreign capital flows into India, the government and the RBI are implementing a slew of measures, including an amendment to the FEMA rules. The regulatory framework for overseas investment is being largely simplified to align it with the new rule book. Foreign flows are a must if India has to fund its budget gap and also ensure that the rupee does not fall to sharply. Existing holders of foreign equity will be allowed to also subscribe to the rights issues. Outflows may be capped.
Bank of Baroda plans to raise debt capital of Rs2,500 crore through the issue of Additional Tier 1 bonds (AT! Bonds). It may be done in a single tranche or in multiple tranches. AT1 bonds are a type of perpetual debt instrument and help to augment core capital of the bank. AT1 bonds being perpetual in
nature, offer higher returns to investors but entail a higher risk too. The bank can even stop paying interest on these bonds if the capital ratios of the bank fall below a threshold. The bank can also write down these bonds.