QBiz: Govt May Restart Economic Activity in ‘Green Zones’ & More
Catch all the top business headlines here.
1. Govt May Start Economic Activity in 'Green Zones'
Even as the country awaited a formal announcement by Prime Minister Narendra Modi to extend the nationwide lockdown, Telangana became the fourth state to extend it till 30 April. The current phase of lockdown ends on Tuesday.
The health ministry data revealed that coronavirus (COVID-19) has claimed 273 lives in India as the number of cases climbed to 8,447 by Sunday. There were over 900 new cases, it said.
According to finance ministry sources, the PM might address the nation once the Centre shapes the contours of the plan to revive economic activity in a phased manner. The Centre is keen to restart economic activity in ‘green zones’, or areas with a low incidence of COVID-19 cases.
Some of the states showed how a less than total lockdown is likely to be enforced, with the Delhi government categorising COVID-19 areas, depending on the intensity of the spread, as red, orange, and green.
(Source: Business Standard)
2. States to Borrow More, at Higher Cost
State governments could become a lot more indebted in FY21 as they borrow at a faster rate than the Centre, marring their recent track-record of being less profligate. Several states are now asking for FRBM forbearance, allowing them to raise the deficit level to as much as 5 percent. The combined fiscal deficit of states in FY20 is estimated to have been higher than 2.6 percent of the GDP.
Some are not only scaling up their borrowings but are also seriously front-loading them, as the COVID-19 pandemic compels them to step up healthcare, welfare and development expenditure, at a time when their revenue flows are drying up.
Hard-pressed, some states are even disregarding the exorbitant costs such fund-raising entails, in a clearly risk-averse, jittery market. While the announced indicative schedule for SDLs in the April-December FY21 and April-June periods suggest a front-loading bias, actual auctions could prove to be even more frequent and adventurous.
(Source: Financial Express)
3. Will Infosys Break Its Tradition of Annual Revenue Guidance?
By this time of the year, many investors and analysts start dissecting the annual results and revenue forecast of Infosys Ltd. But this time around, there is no news of when earnings will be announced.
The Bengaluru-based company lost the bellwether tag to Tata Consultancy Services Ltd (TCS) long ago, owing to a leadership crisis in the past decade. Still, the fact that it provides an annual revenue guidance, while TCS doesn’t, makes its results announcement an eagerly anticipated affair.
When Infosys is eventually ready to announce its March quarter earnings, it will in all likelihood at least temporarily discontinue its practice of giving an annual revenue forecast.
This is simply because the spread of COVID-19 has caused an unprecedented level of uncertainty across industries globally. With clients themselves not in any position to forecast revenues and profits, it will be foolhardy for a services vendor to stick its neck out.
4. Horticulture Pile-Up: Farmers’ Losses Seen at Rs 15000 Cr
The pile-up of harvested or un-harvested perishables may have caused farmers a loss of around Rs 15,000 crore. Market arrivals of fruits and vegetables have sharply fallen since the imposition of the lockdown (see chart), and if it is extended by another month, losses could swell to Rs 40,000-Rs 50,000 crore, if not more, traders and economists say.
“Farm-gate prices of perishables have fallen as the supply chain has been disrupted with trucks not plying. Also, all shops are closed, so there is no demand for products like milk, poultry and egg. The major problem is while farmers are unable to get values for their crops, at consumers’ end, prices have not declined,” noted economist Ashok Gulati observed.
(Source: Financial Express)
5. RBI to Tighten Private Banks' Succession Planning With Stricter Timeline
The Reserve Bank of India (RBI) may stipulate stricter timelines to identify the managing director (MD) and chief executive officer (CEO)-designates in private banks and for them to settle down in their new roles. Extensions for current corner-room occupants could be linked to how robust the succession planning at the banks they helm is.
Corner-room aspirants’ ‘demonstrable record of running significant commercial operations’, their board experience, and contribution to its deliberations will be key factors which could be taken into account by the central bank when evaluating candidature.
The onus on the nomination and remuneration committee of banks is set to go up, even as private bank boards will have to engage deeper in succession planning.
(Source: Business Standard)
6. Stimulus Needed for Quick Revival of Economy: Maruti’s Bhargava
India needs a fiscal stimulus to ride out the crisis caused by COVID-19, Maruti Suzuki India Ltd chairman RC Bhargava said, as he joined a chorus of business leaders and economists calling for the government to announce a fiscal package to support businesses and create jobs.
Bhargava said that the government should make consumer products more affordable as he hinted at tax cuts on automobiles. He said also that the Suzuki Motor Corp. unit will decide on its future investment plans (capex) after studying the demand for its cars in the future.
India’s largest carmaker is meanwhile witnessing an increasing number of queries online for its vehicles, Bhargava said, underscoring pent up demand for entry-level or affordable hatchbacks in the domestic market.
7. Top 10 Firms Add Over Rs 4 Lakh Cr in M-Cap; RIL Sparkles
The 10 most valued domestic firms together added a whopping Rs 4,04,068.05 crore in market valuation last week, with RIL and HDFC Bank leading the gains.
During the last holiday-shortened week, the Sensex rallied 3,568.67 points or 12.93 percent. The market capitalisation of Reliance Industries Limited zoomed Rs 89,383.67 crore to Rs 7,72,883.49 crore, the most among the top-10 firms.
HDFC Bank’s valuation soared Rs 60,754.82 crore to reach Rs 5,06,820.17 crore and that of Hindustan Unilever Limited (HUL) jumped Rs 47,485.86 crore to Rs 5,13,695.88 crore. The market cap of Tata Consultancy Services (TCS) climbed Rs 41,839.09 crore to Rs 6,62,633.62 crore and that of ICICI Bank advanced Rs 36,352.48 crore to Rs 2,21,789.30 crore.
8. Working Capital Woes Add to Lockdown Pain for Cash Starved Companies
Every time Anjani Mandal, chief executive of Fortigo Network Logistics, looks at the company’s cash flow forecasts, he worries a little more. Since the lockdown started last month, customer payments have been hard to come by.
Mandal has been struggling to manage spiralling receivables. He knows that cash is oxygen for his business, a logistics service provider with annual sales of close to Rs 250 crore.
“Several customer organizations do not have online bill processing systems in place and, as a result, our outstanding dues have grown substantially," Mandal said. “Our payment cycle has stretched from the usual 60 days to 85."
With the lockdown now almost certain to be extended, companies are increasingly finding it hard to raise cash to pay employees and spend on other necessities.
9. With SBI Saying ‘No’, Banks Divided on Relief to NBFCs
The banking industry is split in the middle in offering moratorium on payments to the Non-Banking Finance Companies with one group extending the regulator blessed facility, while the other dragging its feet on whether to do so or not, said industry participants.
Some private and foreign banks have come forward to give forbearance on repayments till 31 May, but the state-run banks haven’t moved so far, and even those which did so are rowing back on the granted moratorium, said people who did not want to be identified for fear of reprisal.
Banks’ hesitation appears to be following the State Bank of India’s decision not to grant or keep the NBFC segment out of the moratorium, said the bankers.
(Source: The Economic Times)
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