Midnight News – June 3rd 2020

unnamed Midnight News   June 3rd 2020

The government launched 3 special incentive schemes for the manufacture of electronics and mobiles with a total outlay of Rs.50,000 crore. There will be 3 incentives for manufacturers viz. Production linked incentives, Component manufacturing scheme and Electronic manufacturing clusters. The stated amount with be the overall allocation for all the 3 schemes with the Production linked scheme getting an outlay of Rs.41,000 crore. The scheme is targeted at mobile phones and specified electronic components. The plan will take electronic manufacture to Rs.8 trillion and create 10 lakh jobs.

Uday Kotak reduced his stake in Kotak Mahindra Bank by 2.9% to 26.1% as stipulated by the RBI. However, as per the term sheet, he cannot sell any more shares for the next two months. Uday Kotak sold a total of 56 million shares of Kotak Bank for a total consideration of Rs.6900 crore. The deal was struck at Rs.1240/share. Some of the marquee institutional investors included University of California, Oppenheimer Fund, JP Morgan, SBI MF, Aditya Birla MF, Canada Pensions etc. The voting rights of Uday Kotak had already been capped at 15% effective from April 2020. The stock closed sharply higher.

CRISIL expects the revenues of FMCG companies in India to de-grow at 2-3% in the fiscal year 2020-21. The earlier estimate was of 10% positive growth. That would mean a huge growth loss for FMCG companies. This is largely on account of the huge production disruption caused by COVID-19. While the hit on top line will be inevitable according to CRISIL, the profits may actually look better due to softer input prices. While FMCG companies are getting back to full production right away, the sales are likely to be tepid as the COVID-19 has also had an impact on jobs and incomes; especially rural demand.

A day after Moody’s downgraded India’s sovereign ratings to Baa3, it also downgraded a slew of banks and financials on the back of tepid growth in loans and rising incidence of NPAs. Moody’s downgraded SBI, HDFC Bank and EXIM Bank from Baa2 to Baa3 with negative outlook, implying that further downgrades were not ruled out. Most of the other banks got to retain their ratings. However, oil companies like ONGC, IOCL, BPCL, Oil India and Petronet LNG. In addition, Moody’s also downgraded the ratings of TCS and Infosys to negative on the back of weak tech spending expected this year.

A SEBI report has pointed out that it was not just India but 21 other nations that have also been downgraded in the light of the COVID-19 induced slowdown. Traditionally, emerging market (EM) economies have always been more vulnerable to rating downgrades. This time around it has been no different. As per the SBI report, weak growth impulses combined with the risk of higher borrowings had led to the downgrade of India’s sovereign rating. Normally, developed economies tend to be more resilient as a result of which EMs and developing nations bear the brunt of the downgrade. However, in the Indian context the downgrade does not have any implication for the government as India does not borrowing in foreign currency. Corporate borrowings could get hit, but India is certainly not alone

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