Raghuram Rajan expects banks to clean up bad loans by March 2017

Reserve Bank of India Governor
Raghuram Rajan said on Tuesday he
expects bad debt-burdened banks to clean
up their balance sheets by March 2017,
warning the central bank would monitor
whether concessions made to lenders
were being misused.
India’s banks are struggling under $100
billion of stressed loans, choking the
financial system at a time when the
economy needs fresh investment to
galvanise growth. Bank loans are a key
source of financing for the bulk of Indian
firms.
Despite a string of central bank initiatives
to help banks grapple with the bad debts,
lenders have yet to make a dent on the
pile, a burden shouldered mostly by
India’s state-owned lenders, which
account for just over 70 percent of Indian
banking assets. Most saw bad debts
continue to rise in the last quarter.
“I want to put something like March 2017
on the table as when we hope that a full
clean-up will have been done,” Rajan told
reporters following the RBI’s December
monetary policy statement.
Rajan warned on Tuesday that banks
should take advantage of concessions
like 5/25, a provision which allows banks
to refinance loans for infrastructure for up
to 25 years, and the strategic debt
restructuring scheme, which allows debt-
for-equity swaps.
But they should correctly classify debt –
rather than delay recognising a stressed
loan – and not abuse the system.
“We can now be a little more careful
about recognition… Next step is to make
sure that what should be classified as A
is classified as A and not B,” he said.
“We are … looking at how some of these
existing facilities are being used, to make
sure … we are not kicking the can down
the road.”
Rajan gave few details on the much-
needed but ambitious clean-up, which
would involve some of India’s largest and
most troubled firms, largely in sectors hit
by the commodities downturn, including
steel, mining and power.
“It’s a reasonably tall task,” said Ananda
Bhoumik , managing director and chief
analytical officer at Fitch’s Indian affiliate,
India Ratings & Research.
Bhoumik said state-run banks would need
more capital from the government to
increase provisions for bad loans.
“I think what we are all expecting is a
favourable tailwind of the economy and
cashflows in corporates. But the fact
remains the level of leverage is really very
high.”

India to be a $3.5 trillion economy by 2020: Sonal Varma, Nomura

A gradual economic recovery
is under way in India, and the economy
can easily hit the $3.5 trillion mark in
next five years, provided the government
keeps the reform momentum going,
Nomura India Executive Director and India
Economist Sonal Varma said in a webinar
organised by ETMarkets.com on
Thursday.
For India to become a $3.5 trillion
economy, GDP has to grow at 7.5-8 per
cent on a sustainable basis, which is not
that tough, given the reforms roadmap
that the government has. Lower crude oil
prices will help contain inflationary
pressures and fiscal deficit, which will in
turn draw higher foreign direct investment,
she said.
FDI or foreign direct investment is a more
stable form of capital flow, which can
strengthen the fundamentals of any
economy. Data suggests the current
account deficit was financed by FDI flows
this time around, which has put lesser
weight on the government’s balance
sheet, which is a big positive.
“We are already a $2 trillion economy,
growing at a nominal rate of around 11.5
per cent (7.5 per cent real + 4 per cent
inflation ),” Varma said. “It is not a tough
ask. What we need to do is ensure that
policies are enacted that can sustain our
growth at 7.5-8 per cent without
generating inflationary pressures,” she
added.
The green shoots visible right now are FDI
flows and private capex, which are
showing a pickup. Varma said various
stalled projects have been revived, which
is a positive trigger for both the economy
and the markets.
There were less number of stalled
projects in June 2015 compared with the
year ago period. Private capital
expenditure this year is much better than
past two years. Apart from that, the
government has been on a reform
overdrive and has announced various new
projects in chemical products, metals,
electricals, transport services,
construction and real estate segments.
However, business confidence is still
mixed. Although it had improved post
elections in mid-2014, but that tempo
seems to have been lost, the Nomura
economist said.
According to Varma, weak global demand,
especially the slowdown in China, is also
weighing on the market sentiment. A good
budget, clearer signs of domestic growth
recovery and faster reforms can be
positive triggers for the market.
The forthcoming budget will be important
for markets and economy. However,
Varma does not see any populist measure
from the government even though the
outcome of the Bihar elections were not
in line with what most market participants
were hoping for.
What can strain on India’s balance sheet
is impact of the Seventh Pay Commission,
which could be as high as 0.7 per cent of
GDP. The government has to figure out
ways to finance this expenditure. Even
most global credit rating agencies have
voiced their concerns over the same.
The total impact of the pay commission
award is estimated to be Rs 1,02,000
crore, which would be 0.7 per cent of
GDP. Of this, the central government will
have to budget for around 0.5 per cent of
GDP and the rest has to be paid by
railways, Varma said.
Asked about various avenues from which
the government can raise money, she said
it may have to hike the service tax rate
(14.5 to 16 per cent) or/and excise/
custom duties or go for higher asset sales
(not only disinvestment, but also telecom
spectrum).
She said government’s capital expenditure
(as a percentage of GDP) may take a hit
as a result of the pay panel award.
Global rating firm S&P has already
expressed concerns over the slowdown in
the pace of reforms. India’s rating can
come under stress if the government fails
to pursue its reforms agenda and
overshoots the fiscal deficit target, it said.
“We are not expecting any populist
measure in the budget. But credit rating
agencies would want to see the impact of
the Seventh Pay Commission on fiscal
prudent (both centre and states), reforms
outlook (especially GST ) and growth
outlook,” Varma added.
“We are not expecting a downgrade, but
no upgrade either. The outlook is stable
for now,” she said.
US Federal Reserve rate hike:
Commenting on concerns over the
impending rate hike by the US Federal
Reserve, Varma said there might be some
nervousness ahead of the hike, but it
would also clear the uncertainty.
Nomura’s view is that the Fed will hike
rate in December, but the future pace
would be gradual: only two 25bp hikes
throughout 2016. So, the hikes should not
be too disruptive, she said.

India’s QSR market to touch Rs 25,000 crore by 2020: Assocham

The quick service restaurants
(QSR) sector in India is likely to grow
three-fold to Rs 25,000 crore within five
years, says industry body Assocham.
The country’s QSR market, estimated to
be at Rs 8,500 crore currently, is growing
at a compounded annual growth rate (
CAGR ) of 25 per cent, it said.
Entry of various national and international
players in the QSR space has significantly
widened the chain market due to fast
expanding middle class, urbanisation,
youth spending, nuclear families and
better logistics, the analysis showed.
“About 50 per cent of India’s population
eats out at least once in every three
months and eight times in every month in
bustling metros as compared to the US
(14 times), Brazil (11 times), Thailand (10
times) and China (9 times),” Assocham
Secretary General D S Rawat said.
“The QSR segment is expected to witness
increased activity,” he added.
At the city level, a large share of the QSR
market rests in metros and mini metros
due to higher consumption, heightened
consumer awareness, and exposure in key
cities such as Delhi, Mumbai, Bangalore
and Hyderabad.
The QSR format took off in India about 19
years ago with the arrival of McDonald’s
in 1996. Many global brands followed suit
since then, either through company-owned
stores or the franchisee model or a mix of
both.
The chain space is marked by the
presence of more than 120 brands with
more than 4,000 outlets spread across
various cities in India.
By 2020 it is expected that 35 per cent of
India’s population will be in urban areas
by 2020 totalling 52 crore compared to
the current urban population of 34 crore.

The country’s retirement system ranks last in the global pension index in india

The country’s retirement system ranks last
in the global pension index, says a study
by global consulting major Mercer.
Still, the National Pension System (NPS),
which was launched by the government in
June as part of Pradhan Mantri Jan Dhan
Yojana, will help the country improve its
index, the study said.
The country’s index value fell from 43.5
in 2014 to 40.3 in 2015, primarily due to
a recent review conducted by the
economic intelligence unit that showed a
material reduction in its household
savings rate, Melbourne Mercer Global
Pension Index (MMGPI) report said.
Enhanced participation in the National
Pension System will help the country
increase its index value, it added.
Denmark has been rated as the country
with the best retirement system in the
world. Australia, Germany, Japan,
Singapore and the UK have increased
their pension age to offset the increase in
life expectancies.
Now in its seventh year, the MMGPI
measured 25 retirement income systems
against more than 40 indicators, under
the sub-indices of adequacy,
sustainability and integrity.
The report covers close to 60 percent of
the world’s population and suggests how
governments can provide adequate and
sustainable benefits that protect their
citizens, against longevity risk.
The report rated Denmark as the country
with the best retirement system for the
fourth consecutive year in 2015, with an
overall score of 81.7.
However, it said that the Indian retirement
system continues to rank last.

Patanjali enters big retail with Future Group tie-up

Baba Ramdev’s Patanjali
Ayurved has entered into an exclusive
partnership with Future Group to make its
entire range of products available in Big
Bazaar outlets across the country.
Other food-based chains of the country’s
largest retailer such as Easyday, KB’s
Aadhaar and Nilgiris too will subsequently
sell Patanjali products, making them
available in more than 240 cities and
towns in the country, Future Group
founder and CEO Kishore Biyani told a
press conference on Friday.
The two companies are also looking at
forming a manufacturing partnership in
the future.
“Manufacturing is another relationship that
we are exploring,” Biyani said. “We have
our own dairy, rice mill, spice mill and a
lot of other edible product categories.
This gives us a chance to work together
on this relationship,” he said.
Ramdev confirmed “initial talks” on
production partnership. “We have planned
around five units for Patanjali for the
future expansion and wherever possible
we would discuss about this proposition
with Future Group in future,” he said.
“This is just the first step. We will explore
all the available option in the future.”
Under the marketing partnership, Future
Group will set up an office for
collaborating with Patanjali Ayurved in
Rishikesh to develop, market and
distribute these products exclusively in
modern trade. Patanjali products will also
be available at its own retail outlets which
number around 5,000 now.
Biyani is hopeful that Future Group stores
will do a business of Rs 1,000 crore in
20 months with Patanjali, which is
considered the fastest-growing consumer
products company in the country and is
already bigger than rivals such as Emami
and Jyothi Labs.
At the moment Unilever is the biggest
products partner for Future Group,
accounting for business of around Rs
1,300-1,400 crore, said Biyani, adding
that he wants to see Patanjali at the same
level.
The company expects to start with Rs 40
crore per month sales of Patanjali
products, which Biyani expects to go up
to Rs 80 crore in the next 12 months.
He also said that he believes that in
future this association could well become
a case study for the management schools
in the same way as the collaboration
between Procter & Gamble and Walmart in
the Unites States in the 1980s.
Biyani said he expected Patanjali to
become one of the top three FMCG
companies in a couple of years and help
Future Group to add additional one crore
customers.
The group gets around 35 crore footfall
yearly at its stores across the country,
and is expected to clock revenues of Rs
22,000-23,000 crore this fiscal, Biyani
said.
Patanjali Ayurved offers the entire range
of FMCG products in food, staples,
nutrition, hair care, skin care, dental care
and toileteries at a much competitive
price than other brands available in the
market.
Ramdev said Patanjali is expected to
become a Rs 5,000 crore brand by the
end of this financial year. “We will tell you
our plans of 2016-17 later because you
may not be able to believe the numbers
we are anticipating. In the coming five
years Patanjali would be the biggest
consumer brand in the country,” he said.
He also said Patanjali noodles would be
launched by October 15 and it would be
available across the country by the end of
this month.

JK Group to buy Kesoram’s Haridwar tyre unit for Rs 2,200 crore

JK Group will acquire BK
Birla flagship firm Kesoram Industries’
tyre manufacturing plant at Haridwar for
up to Rs 2,200 crore.
JK Tyre and JK Asia Pacific Singapore Pte
Ltd , a wholly- owned subsidiary of the
company, have signed a binding term
sheet with Kesoram Industries Ltd (KIL) to
acquire 100 per cent equity in Cavendish
Industries Ltd (CIL), JK Tyre said in a
statement.
CIL houses a tyre business undertaking
located at Haridwar (Laksar) which
manufactures a range of tyres, tubes and
flaps.
“JK Group has agreed for this acquisition
at an enterprise value not exceeding Rs
2,200 crore, subject to conditions,
wherein JK Tyre will hold the largest
shareholding block and shall have
substantial management control of CIL
with an option to place up to 55 per cent
with its associates/group companies,” the
tyre maker said.
In a separate statement Kesoram
Industries said that it will divest its
subsidiary Cavendish Industries Limited
where it holds 99 per cent shareholding.
The company added the deal would
strengthen the balance sheet of the
company and it also remained committed
to tyre business.
For JK Tyre, the acquisition will provide
further impetus towards ready expansion
in the truck and bus radials segment as
well as its entry into the fast growing two-
and three- wheeler tyre market.
“The transaction is a reflection of the
inherent strength of the company in
undertaking acquisitions with turnaround
potential and successfully delivering
results to all the stakeholders in the
business,” JK Tyre Chairman Raghupati
Singhania said.
The acquisition is proposed to be funded
by a combination of debt and internal
accruals raised by JK Tyre and its other
group entities.
“The financial exposure of JK Tyre in the
acquisition is expected to be of the order
of Rs 450 crore. The final transaction is
expected to consummate over next few
months (subject to various approvals)
with definitive documentation expected to
be executed between the parties in due
course of time,” it added.
JK Group, is one of the leading
conglomerates in India with business
interests in automotive tyres, cement,
paper, auto-components and other
businesses.
The group’s flagship firm, JK Tyre is
among the top three automotive tyre
manufacturers in India with presence in
truck, bus, passenger cars and other
vehicles, having nine manufacturing
plants all over the world.
In 2008, JK Tyre and Industries had
acquired Mexican tyre company Tornel for
Rs 270 crore.

Mutual fund assets set to hit Rs 20 lakh crore by 2018

Mutual fund assets set to hit Rs 20 lakh crore by 2018
Despite the global
headwinds, retail investors are shopping
in a big way via the mutual fund route,
and the industry is set to touch Rs 20
lakh crore asset base in the next three
years.
Total assets under management or AUM
of the mutual fund industry are expected
to cross Rs 20 lakh crore mark by 2018
from Rs 12 lakh crore, or roughly 10 per
cent of India’s GDP , which stands at $2
trillion, according to a report.
Faster growth is backed by factors such
as low penetration, a sound
macroeconomic environment and
favourable demographics, according to a
joint report by EY and Cafemutual.
It is difficult to comment if AUM could
touch the Rs 20 lakh crore mark or not,
but it looks reasonable and very mush
possible, Dinesh Khara, MD & CEO, SBI
Mutual Fund, said on the sidelines of
Cafemutual Confluence 2015.
The India mutual fund industry is in a
sweet spot with all the enabling
ingredients in place. Strong fundamentals
of the economy helped cushion the Indian
financial markets (including mutual funds)
during the global financial crisis.
If we just look at the SIP or systematic
investment plan, which has increased
multiple times, it only shows that
investors are maturing, Anup Bagchi, MD
& CEO, ICICI Securities, said on the
sidelines of the Cafemutual Confluence
2015.
This is evident from the fact that fund
managers continued their shopping spree
in August, purchasing shares worth a
staggering Rs 10,533 crore even though
overseas investors or FIIs pulled out a
record amount of money from the stock
market.
This was the 16th consecutive month
when mutual funds were net buyers of
equities.
Latest data showed fund managers
bought shares worth a net Rs 10,533
crore last month while foreign portfolio
investors (FPIs) took a record Rs 17,434
crore off the table during the period.
This is an all-time high net outflow by
FPIs since 1997, said a PTI report. In
October 2008, FPIs offloaded a net of Rs
15,347 crore from the market in the
aftermath of the Lehman Brothers
collapse, which triggered the global
financial crisis.
Since 2008, AUM of the Indian mutual
fund industry has grown at a CAGR of
16.84 per cent, outpacing the global
average of approximately 8.8 per cent in
the same period, said the report.
The report also highlighted that there lies
a significant opportunity to channel
household savings, which are only at Rs
11.7 lakh crore into capital markets.

Oil and Natural Gas Corp ( ONGC ) has bought a 15 per cent stake in Russia’s second- largest oil field from Rosneft for about $1.35 billion

State-owned Oil and Natural Gas Corp
( ONGC ) has bought a 15 per cent stake in
Russia’s second- largest oil field from
Rosneft for about $1.35 billion.
ONGC Videsh Ltd, the overseas
investment arm of the state explorer,
signed agreements in Moscow to buy 15
per cent stake in the Vankor oil field in
East Siberia, sources said.
The 15 per cent stake will give OVL about
3.5 million metric tonnes of oil a year.
Under the terms of the agreement, OVL
will get two seats on the Board of
Directors of Vankorneft – a Rosneft
subsidiary that operates the Vankor field.
Rosneft will retain full control of
infrastructure of the Vankor cluster, they
said.
Vankor, which started production in 2009,
holds recoverable reserves of about 500
million tonnes.
OVL already has a 20 per cent stake in
the Sakhalin-1 oil and gas field off
Russia’s far eastern coast and owns
Imperial Energy which has fields in
Siberia.

Indian auto industry expected to see value rise to Rs 18.9 lakh crore by 2026

The government and
automobile industry today set an
ambitious target of increasing the value of
output of the sector to up to Rs 18.89
lakh crore and make it among top three
globally in the next decade under the
Automotive Mission Plan (AMP) 2016-26.
The plan, a collective vision of the
government and industry, also aims to
propel the Indian auto sector “to be the
engine of ‘Make in India’ programme,
potentially contributing in excess of 12
per cent of the country’s GDP.
“AMP 2026 envisages that the India
automotive industry will grow 3.5-4 times
in value from its current output of around
Rs 4.64 lakh crore to about Rs
16.16-18.89 lakh crore by 2026,” said a
curtain raiser on AMP 2016-26, which
was released here at the SIAM annual
convention.
Highlighting the significance of the
sector, it said: “Over the next decade, the
Indian automotive sector is likely to
contribute in excess of 12 per cent of the
country’s GDP and comprise more than 40
per cent of its manufacturing sector.”
On job creation, it said: “The potential for
incremental number of both direct and
indirect jobs to be created by the Indian
automotive industry over the next decade
is nearly 65 million.”
This is over and above an additional 25
million jobs created in the previous
decade, it added.
In terms of exports, the AMP 2016-26
envisages Rs 2.95 lakh crore from OEMs
and Rs 4.62 lakh crore from component
shipments.
On emission norms, the plan said there is
a need for a scientific and transparent
study of the causes of air pollution in
Indian cities, suggesting BS V by 2019 for
new models and BS VI by 2023 for four-
wheelers.
On safety regulations, it said the there is
a need for articulating a clear road map
over the next decade that will make Indian
vehicles comply with global standards.
About AMP 2016-26, SIAM past president
and Mahindra and Mahindra Executive
Director Pawan Goenka said: “We believe
that AMP 2026 has visionary targets. It
goes beyond just numbers and focuses
on promoting safe, efficient and
comfortable mobility for every person in
society.”
SIAM President Vikram Kirloskar said:
“Once we have a road map, its easy to go
and use this for all policy purposes for a
long time.”
In the first AMP 2006-16, the auto
industry had achieved a target of
incremental job creation of 25 million
while the country attracted investments
topping the target of Rs 1.55 lakh crore
from global and local OEMs as well as
component makers.

Lisst of companies owned by aditya birla group.

Aditya Birla Group of Companies
Aditya Birla Chemicals (India) Limited
Aditya Birla Chemicals (Thailand)
Limited
Aditya Birla Financial Services Group
(ABFSG)
Birla Sun Life Insurance
Birla Sun Life Asset Management
Company Ltd.
Aditya Birla Finance Limited
Aditya Birla Money Limited
Aditya Birla Insurance Brokers
Aditya Birla Capital Advisors Private
Limited
Aditya Birla Minerals
Aditya Birla Nuvo Limited
Aditya Birla Retail
Aditya Birla Science and Technology
Company Limited
Alexandria Carbon Black Company SAE
Alexandria Fiber Company SAE
Birla Jingwei Fibres Company Limited
Birla Laos Pulp and Plantations
Company Limited
Dahej Harbour & Infrastructure Limited
Hindalco industries
Domsjö Fabriker
Essel Mining and Industries
Grasim Industries Limited
Idea Cellular Limited
Indo Phil Cotton Mills
Indo Phil Textile Mills
Indo Thai Synthetics
Liaoning Birla Carbon Company Limited
Louis Phillipe
Novelis Inc.
Pan Century Surfactants Inc.
Peter England
People
PT Elegant Textile Industry
PT Indo Bharat Rayon
PT Indo Liberty Textiles
PT Indo Raya Kimia
PT Sunrise Bumi Textiles
Swiss Singapore Overseas Enterprises
Pte Limited
Thai Acrylic Fibre
Thai Carbon Black
Thai Rayon
UltraTech Cement Limited
Utkal Alumina International Limited
Pantaloons Fashion & Retail