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Banks, NBFCs slip up to 5% after Altico Capital misses interest payment

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With markets facing headwinds, hold on to good stocks even when they fall


Shares of banks and non-banking financial companies (NBFCs) dropped up to 5 per cent in the morning deals on Friday, a day after Altico Capital India, a lender to real estate companies, said it has defaulted on interest payments to Mashreq Bank of Dubai.


An interest payment of Rs 19.97 crore was due on September 12, according to a regulatory filing with the BSE. This payment is now in default. The principal amount for the external commercial borrowing on which Altico Capital has defaulted stands at Rs 340 crore, the filing said.



Altico further said that its failure to repay the amounts may result in an acceleration of interest repayment / redemption obligations in respect of non-convertible debt securities issued by the company and may trigger a default in their timely repayments.

“We are evaluating options for resolving the liquidity crisis and will be engaging in discussions with various stakeholders for the same,” the company said.


The default by Altico comes after a rating downgrade by India Ratings and the resignation of its chairperson and independent director Naina Lal Kidwai, former head of HSBC India, earlier this month.


On September 3, India Ratings and Research downgraded Altico Capital’s long-term issuer rating to “IND A+” from “IND AA-” and short-term issuer rating to “IND A1″ from “IND A1+”, with a negative outlook.


“The operating environment for real estate players has become extremely challenging, with the tepid sales velocity of residential units, especially in the mid and higher ticket segments, and the funding crunch faced by the sector, given the heightened risk aversion of lenders. Dampening of sales has been higher for Tier II and Tier III developers (excluding the top 15 developers for the industry), who are the target customers for NBFCs. The tightened liquidity has also resulted in shrinkage of borrowing options for the developers, leading to lower portfolio churn, and hence, increased challenges on asset quality,” India Ratings had said in the note.


The ratings agency added that Altico’s loan book is concentrated, given the high single party exposures. The top ten individual exposures accounted for 39 per cent of the loan book (90 per cent of the net worth) and the top 10 group exposures accounted for 60 per cent of the loan book (139 per cent of net worth) at end-FY19. With this high concentration, the impact could be disproportionate in the event of any major defaults, the press release added.


At 10:25 am, the Nifty PSU Bank index was trading 2.50 per cent lower at 2,442.95 levels with all the 12 constituents declining. Bank of Baroda, Union Bank, Canara Bank, and Bank of India slipped in the range of 3-4 per cent. Among private banks, YES Bank tumbled 5 per cent, while IDFC First Bank and RBL Bank shed up to 3 per cent.


In NBFC space, Edelweiss Financial Services was trading over 3 per cent lower, followed by Mahindra & Mahindra Financial Services (down 2.95 per cent) and Power Finance Corporation (down 2 per cent).


In comparison, the Nifty50 index was ruling at 10,964 levels, down 19 points or 0.17 per cent.

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Top 1,000 listed firms may see tax savings of Rs 37k cr on tax cut: Crisil

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Corporation tax: FY17 might see 1-1.5% cut


CRISIL Research on Sunday said top 1,000 listed companies could see tax savings of Rs 37,000 crore on account of the corporate tax cut.


“Over the past few days, a slew of measures have been introduced to address the slowdown in the Indian economy. Friday’s announcement, however, is the most material…Our analysis indicates these 1,000 companies could see tax savings of Rs 37,000 crore, or nearly a fourth of the total savings anticipated by the government,” it said in a statement.



The drop in tax rate would now bring India at par with most Asian economies, it added.


“CRISIL Research’s analysis of nearly 1,000 companies — spread across 80+ sectors such that they cover more than 70 per cent of NSE’s market capitalisation — indicates that effective tax rates had risen over the past 5 years,” it said.


These companies, including oil & gas and financial services, account for nearly a third of the tax paid by India Inc.


“These estimates are based on profit before tax for fiscal 2019. Given that we expect 5-6 per cent growth in India Inc revenues and Ebitda (earnings before interest, tax, depreciation and amortisation) for this fiscal, the savings could end up a tad higher,” it added.


In a major fiscal booster, the government on Friday slashed effective corporate tax to 25.17 per cent, inclusive of all cess and surcharges for domestic companies.

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Onion shoots up to Rs 70-80 per kg; Centre considers imposing stock limits

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The Centre is mulling imposing stock limits on onion traders as the retail prices of the key kitchen staple have shot up to Rs 70-80 per kg in the national capital and other parts of the country owing to supply disruption in the wake of excess monsoon rains in the major growing states, according to sources.


As per the data maintained by the consumer affairs ministry, retail onion prices rose to Rs 57/kg in Delhi, Rs 56/kg in Mumbai, Rs 48/kg in Kolkata and Rs 34/kg in Chennai last week. The prices were quoted at Rs 60/kg in Gurgoan and Jammu during the same period.



However, trade data showed retail onion prices skyrocketing to Rs 70-80 per kg towards the end of the last week from Rs 50-60/kg in the previous week.


Onion prices are on the rise despite several measures taken by the central government to boost supply.


“The government has taken several measures in the last few weeks to improve the domestic supply and check further increase in prices of onion. However, retail prices have suddenly shot up in the last 2-3 days because of supply disruption due to excess rains in the growing states,” a source told PTI.


It is a short-term supply disruption and if the situation does not normalise in the next 2-3 days and prices rise, then the government may consider seriously imposing stock holding limits on onion traders, the source said.


According to the Met Department, main onion producing regions especially Maharasthra, Karnataka, Andhra Pradesh, Gujarat, eastern Rajasthan and western Madhya Pradesh have received excess monsoon rainfalls in the last two days.


Right now, stored onions are sold in most parts of the country as fresh kharif (summer) crop will hit the market from November onwards, traders said.


Traders further said that there is enough supply of stored onion of the previous year’s crop in the country but its transportation has been affected because of heavy rains.


Much of the onion is stored in Maharashtra, where rains disrupted the transport of the kitchen staple to other parts of the country, said a wholesale trader from Lasalgoan in Maharasthra, Asia’s largest onion market.


At wholesale market of Lasalgoan, onion prices rose to Rs 45/kg last week, when compared with less than Rs 10/kg in the year-ago period.


The Centre has taken several measures to arrest the prices of onion in Delhi and other parts of the country. It is offloading onion from its buffer stock through agencies like Nafed and NCCF which are selling at around Rs 22/kg and state-run Mother Dairy at Rs 23.90 per kg in the national capital

The state governments have been asked to boost supply in their states lifting central buffer stock. Some states like Delhi, Tripura and Andhra Pradesh have shown interest so far.


The centre has a buffer stock of 56,000 tonnes of onion, of which 16,000 tonnes has been offloaded so far. In Delhi, 200 tonnes a day is being offloaded.


Besides, the Centre has discouraged export of onion by increasing the minimum export price and withdrawing incentives. It is also cracking down on blackmarketeers.


Besides rains, prices are under pressure on likely fall in kharif production of this year owing to less planted area under onion on account of excess rains, the sources added.

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FPIs withdraw Rs 4,193 crore from capital markets in September so far

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Foreign investors have pulled out a net sum of Rs 4,193 crore from the Indian capital markets in September so far, but the trend is expected to reverse on the back of fiscal relief measures announced by the government, experts said.


The Centre on Friday slashed corporate tax rates by around 10 percentage points and said the enhanced tax surcharge will not to apply on capital gains arising from sale of any security including derivatives in the hands of FPIs.



“The measures will act as a catalyst for supporting the slowing investment rate, boost corporate earnings, improve aggregate demand as corporates pass on some of the benefits to consumers and attract FPI flows into India,” said Vijay Chandok, MD and CEO, ICICI Securities.


According to latest depositories data, foreign portfolio investors (FPI) withdrew a net amount of Rs 5,577.99 crore from equities while infusing Rs 1,384.81 crore into the debt segment. This translates into a cumulative net outflow of Rs 4,193.18 crore between September 3-20.


Prior to this, FPIs had pulled out a net Rs 5,920.02 crore in August and Rs 2,985.88 crore in July from the domestic capital markets (both equity and debt).


“FPI outflows which have sustained after the budget are likely to reverse after the new big bang announcements by the Finance Minister. The fact that FPIs continued to sell even after the reversal of the surcharge imposed on FPIs, indicated that they were selling because of the slowdown and the poor prospects for corporate profitability.


“These concerns are no longer valid as the reforms can boost investment, growth and corporate profits. FPIs have to return,” said V K Vijayakumar, chief investment strategist at Geojit Financial Services.


Stating the reasons for FPI outflows, Ajit Mishra, VP Research at Religare Broking, said “apart from the signs of economic slowdown, valuation discomfort kept uneasiness in FPI intact. However, the announcements from Finance Minister have the potential to revive their sentiments.”

Going forward, “political stability will act as an added advantage for India among other high yield economies. Fiscal stimulus by way of tax rate cuts and removal of surcharge from capital gains on sale of shares should also help in attracting both foreign portfolio and direct investment,” said Vinod Karki, Head – Strategy at ICICI Securities.

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