QBiz: Rajan Blames Economy for Bad Loans, Real Estate Bill an Act 

Catch the top business stories from across the newspapers. 

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Business
5 min read
New real estate bill aims at standardisation in business practices and transactions. (Photo: iStock)

1. Real Estate Bill Is an Act Now, May Protect Home Buyers: ET

The Real Estate (Regulation and Development) Bill, 2016, became an Act on 1 May, kick-starting the process of making rules as well as putting in place institutional infrastructure to protect the interests of home buyers in India.

While acknowledging that the act is a positive development, property experts quoted in the Economic Times say that the new rules should address problems faced by builders in getting sanctions and approvals in a timely manner.

The Ministry of Housing & Urban Poverty Alleviation notified 69 of the Act’s 92 sections that come into force from 1 May.

2. Rajan Blames ‘Economic Downturn’ for Bad Loans at PSU Banks: Livemint

Reserve Bank of India (RBI) governor Raghuram Rajan has put the blame on “overall economic downturn”, among other reasons, in his submission to the key parliamentary panel, reports Livemint. He was asked to explain the “real causes” of ballooning bad loans at public sector banks.

Congress leader KV Thomas-led public accounts committee (PAC), whose term ended on Saturday, has examined Rajan’s response but can ask the RBI governor to appear before it in future once it is reconstituted, officials were quoted here.

Various public sector banks may also be asked to appear before the panel again to explain their position. The parliamentary panel had suo motu decided to examine the non-performing assets (NPAs) of the public sector banks, which touched Rs 3.61 trillion at the end of December 2015.

3. Vodafone Gears up for Rs 16,500-cr IPO, Names Bankers: BS

Vodafone, the country’s second largest mobile operator, has appointed six bankers to raise about $2.5 billion (Rs 16,500 crore) through an initial public offering this year, which could well make it the country’s largest IPO in rupee terms.

Sources said Deutsche Bank, HSBC and ICICI Securities would be the book-running lead managers while Bank of America Merrill Lynch (BofAML), UBS and Kotak Securities would be the global coordinators for the offering.
Business Standard Report
“It is expected to be a combination of offer-for-sale and issuance of fresh equity,” said an investment banker aware of the development. “The issue is targeted for the last quarter of 2016,” he added. The parent will dilute about 10 percent of its equity in Vodafone India.

4. Punjab May Get Centre’s Support for Agri Dues: BS

Public sector banks (PSBs) to which Punjab owes Rs 12,000 crore may not have to provision for these because the loans are apparently backed by sovereign guarantee.

The central government, according to a Business Standard report, is likely to tell the Reserve Bank of India (RBI) that state-owned banks will not need to provision for the dues extended to Punjab for its food procurement programme, as they will get absorbed.

For the long term, the Centre would also speed up the process of online tracking and procurement of food grain by the Food Corporation of India (FCI), to avoid the kind of controversies that cropped up with Punjab.

5. Tata Power Set to Buy Welspun’s Wind, Solar Assets Valued at $1.45 Billion: ET

Tata Power looks set to acquire the renewable energy assets of the diversified Welspun Group, valuing the 1,152 MW portfolio of operational and almost ready solar and wind farms at close to $1.45 billion inclusive of debt, reports Economic Times.

Negotiations are said to be in the final stages and a definitive share sale agreement is expected in the next two-three weeks, concluding what will be the largest buyout in the sector if it goes through.

The Tata offer has trumped the closest competing proposal from a consortium of IDFC Private Equity and Finnish clean energy multinational Fortum by at least 15-20 percent, the report adds.

6. The Swing Factor in GDP Growth: HBL

Are India’s monsoon rains critical to its stock markets? One would certainly think so, from the 1,000-point rally in the BSE Sensex after the IMD forecast an above-normal monsoon for 2016 on 12 April.

Is this just a knee-jerk reaction or do rains really make a difference to economic growth, rural consumption and inflation — the parameters that matter to India Inc?

In the last 15 years, India has had three drought years — 2002, 2009 and 2015, when annual rainfall was 15-20 percent below par and all of them saw sluggish agri output. In FY03, agri GDP contracted by 6.6 percent, in FY10, it expanded by 0.8 percent and for FY16 we are staring at a tiny 1.1 per ent growth. Years of bountiful monsoons such as 2003, 2005 and 2010 have also seen agri GDP expanding by leaps and bounds.
The Hindu Business Line Report
...if the 2016 monsoons do turn out to be bountiful and agri growth rebounds to 4-5 percent levels (the base effect will help too), that could mean a direct kicker of 0.60 to 0.75 percentage points to the GDP. 

7. India Inc Generous With Dividends in Tough Times: BS

Despite tough times, India Inc has been generous in giving dividends, dipping into earnings and even reserves to satiate shareholders.

Equity dividend paid by the country’s top listed companies has more than tripled in the past five years, despite only a 50 percent increase in their combined net profit during the period, reports Business Standard.

The sample comprises 144 companies, which have declared their results for the fourth quarter of the financial year ending March 2016.

These companies will pay Rs 61,087 crore in equity dividends to their shareholders for FY16, an increase of 19.2 percent year-on-year compared to Rs 51,262 crore in FY15.

8. Banks’ NPA Problem Not Over Till the Fat Lady Sings: Livemint

When quarter after quarter the majority of large listed companies are posting poor financial results, how can private sector lenders who too lent to these firms be out of trouble, asks this special Livemint report.

To be sure, the market has always had lingering concerns on the asset quality of some lenders such as ICICI Bank and Axis Bank even when they were doing well in other yardsticks such as credit growth or margins or net profit growth. That’s why these two banks had traded at a good discount to HDFC Bank, which has predominantly retail loans in its portfolio. 
Livemint Report
Some of these fears have come true in recent times. For Axis Bank, gross bad loans rose 36.7 percent to Rs 6,087 crore in the six months ended 31 March. For ICICI Bank, bad loans have risen by almost two-thirds in the same period to Rs 26,221 crore. And investors have shown their displeasure by beating down share prices more than the benchmark Bankex since the company reported its September quarter earnings. Axis Bank has lost 10 percent of its value and ICICI Bank almost 20 percent.

9. PF Interest Rate Hike Pales Before Double-Digit Returns From NPS: ET

If the 5 basis point hike in interest rate of the Employees’ Provident Fund (EPF) made subscribers smile, those covered by the New Pension System (NPS) must be laughing.

According to Economic Times, most NPS investors earned double-digit returns in the past 3-5 years. Central and state government employees covered by the scheme earned between 9.3 percent and 10.15 percent during this period.

The performance of individual schemes is not very helpful because NPS investors put money in a combination of funds.

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