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BUSINESS AND ECONOMY - March 2019

Mar 2019

Mar 31, 2019

GSP Withdrawal by the U.S.

  • The move by the United States (U.S.) to terminate India's designation as beneficiary developing country under the Generalized System of Preferences (GSP) programme because it no longer complied with the statutory eligibility criteria is likely to affect plastic exports from India.
  • At the Plastic Export Promotion Council (Plexconcil), an analysis was conducted and found that in India's case, the GSP concessions extended by the U.S. amounted to a duty reduction of $30 million per annum on imports of plastic products worth $600 million for the period January to December 2018.
  • Some of the product segments which may face a decline in exports to U.S. due to withdrawal of GSP concessions include plastics raw materials, consumer and houseware items and polyester films.

Cardif Sells Shares in SBI Life Insurance

  • BNP Paribas Cardif, the foreign partner of SBI Life Insurance, sold 5 crore shares of the company for Rs. 2,889 crore. The share sale was undertaken at average price of Rs. 577.93 per equity share. Meanwhile, Canada Pension Plan Investment Board has bought 2 crore shares at an average price of Rs. 577.50 per share. The transactions were carried out as bulk deal from one investor to another.

India's Forex Reserves Up

  • India's foreign exchange (forex) reserves increased by $1.02 billion during the week ended March 22.
  • According to the Reserve Bank of India (RBI)'s weekly statistical supplement, the overall forex reserves rose to $406.66 billion from $405.63 billion reported for the week ended March 15.
  • India's forex reserves comprise Foreign Currency Assets (FCAs), gold reserves, Special Drawing Rights (SDRs) and India's reserve position with the International Monetary Fund (IMF).

More Looks to Scale up Operations

  • Aditya Birla Group's retail chain 'More' plans to invest about Rs. 1,000 crore to scale up its operations in the next five years. The retail chain, in which U.S.-based e-commerce major Amazon and Samara Capital jointly invested about Rs. 4,200 crore last year, also expects its turnover to grow threefolds in five years. The company has about 600 supermarkets and 20 hypermarkets.

Iran Seeks Improved Trade Ties with India

  • Amid U.S. sanctions, Iran is exploring ways to increase its bilateral trade with India, including expanding banking channels.
  • Only one bank (UCO Bank) has business relationship with Iran.
  • According to Hamid Reza Fouladgar, head of the seven-member Parliamentary delegation from Iran, there is need to sign free trade agreements with India to reduce customs and tariffs on both sides to improve bilateral trade.
  • The volume of trade between Iran and India stands between $10 billion and $13 billion.

NTPC to Set up Floating Solar Power Plant

  • The National Thermal Power Corporation (NTPC) is setting up a 25 MW floating solar power plant in its water storage reservoir here as part of its diversification into the solar segment. Group general manager of NTPC's Simhadri plant, A. R. Maiti, said that it was also setting up a flue-gas desulphurisation plant.

Mar 30, 2019

L&T to Focus on Going Digital and Automation

  • As per reports, engineering and construction major Larsen & Toubro (L&T) plans to transform itself into a digital and automation powerhouse.
  • The $18-billion firm launched L&T-Nxt, a new vertical to focus on artificial intelligence (AI), IoT (Internet of things), virtual reality, augmented reality, geo-spatial solutions and cyber security and leverage the experience that L&T has garnered over the decades.

PNB to Part-sell Stake

  • PNB has entered into agreements in relation to two independent transactions for sale of 1,08,91,733 equity shares held in PNB Housing Finance (PNBHF) to General Atlantic Group at Rs. 850 per share for Rs. 925.80 crore, and the same number of shares to VardePartners for Rs. 925.80 crore, PNB said in a regulatory filing.
  • State-owned Punjab National Bank (PNB) would partially sell its stake in PNB Housing Finance to global private equity firm General Atlantic Group and alternative investment firm Varde Partners for Rs. 1,851.6 crore.
  • As per PNB, these transactions are subject to satisfaction of customary conditions and post these transactions, it would continue to hold strategic stake of 19.78% of the paid-up capital of the housing finance subsidiary.

Growth Rate Highest Since Liberalisation

  • According to Chief Economic Adviser Krishnamurthy Subramanian, the average growth rate of 7.5% achieved in the last five years is the highest for any government since liberalisation, despite global headwinds.

Interest Rate on Small Savings Remains Same

  • The government has left unchanged the interest rates on small savings schemes for the first quarter of the financial year 2019-20.
  • The Public Provident Fund and the National Savings Certificate will continue to yield an interest rate of 8%. The Kisan Vikas Patra will have an interest rate of 7.7%. The interest rate for the five-year Senior Citizens Savings Scheme will remain at 8.7%, and that on on savings deposits will remain at 4%. The Sukanya Samriddhi Yojana accounts will continue to offer an 8.5% interest rate. Term deposits of 1-5 years will yield an interest rate in the range of 7-7.8%.

Mar 29, 2019

Daimler and Geely Team Up

  • German car maker Daimler and China's Geely announced plans for a new venture to develop and produce the next generation of electric Smart cars in China.
  • Both firms will share the company equally under the terms of the plan to be finalised by the end of the year. The first new vehicles are set to go on sale worldwide by 2022.

Bandhan Bank to Open more Branches

  • Bandhan Bank opened a branch at Burrabazar in Kolkata. The private sector lender plans to open five more to take the count to 986 by March 31. Its total number of banking outlets would be 4,000 by the end of this month from 3,014 now. The bank has presence across 34 of the 36 states and union territories.

Infosys to Buy Stake in Stater N.V.

  • Infosys will acquire 75% of the shareholding in Stater N.V. a wholly owned subsidiary of ABN AMRO Bank N.V. that offers pure-play, end-to-end mortgage administration services in the Netherlands, Belgium and Germany. ABN AMRO will continue to hold the remaining 25% of the shareholding.
  • India`s second-biggest IT services company, Infosys Ltd said that it would buy controlling stake in ABN AMRO Group's mortgage administration services arm Stater N.V.
  • The transaction is expected to close during the first quarter of fiscal 2020, subject to customary closing conditions, Infosys added.
  • ABN AMRO is the third largest bank in the Netherlands headquartered in Amsterdam.

Mar 28, 2019

Largest Power Storage System in Asia

  • In a bid to reduce energy demand and provide emergency backup power to trains in Japan, Tesla has claimed to develop its largest power storage system in Asia.
  • According to Tesla, it has installed a bank of 42 Powerpacks at a train station in Japan`s Osaka that can provide sufficient backup power to safely move a train and its passengers to the nearest station in the event of a power outage.
  • Launched in partnership with Kintetsu, a railway operator in Japan`s Osaka, the new Tesla Powerpack system is a fully integrated, AC-connected energy storage system that can connect to a building or utility network. The system contains 16 individual battery pods, each with an isolated DC-DC converter.

Vedanta Finds Oil

  • Anil Agarwal-led Vedanta Limited has discovered oil in the Krishna Godavari basin on India's east coast.
  • The company has notified the management committee, Directorate General of Hydrocarbons and Ministry of Petroleum and Natural Gas of an oil discovery in the second exploratory well H2, located in block KG-OSN-2009/3, Krishna-Godavari Basin, east coast of India.
  • Vedanta Limited holds 100% participating interest in the block.

Tata Enters Airports Business with stake in GMR

  • Tata group and two foreign entities have agreed to invest Rs. 8,000 crore in GMR Infrastructure Ltd's airports business, bypassing an unwritten industry practice that discourages companies owning airlines from operating airports.
  • GMR announced that Tata group, Singapore's sovereign wealth fund GIC and Hong Kong-based SSG Capital Management will co-invest in its airports business in the ratio of 44:33:22. Out of the total investment, Rs. 1,000 crore will come as equity infusion into GMR Airports Ltd (GAL), which will be used to retire the airport operator's debt. The three investors will use the remaining Rs. 7,000 crore to buy GAL shares from parent GMR Infrastructure and its units, which will also be used to pare debt. After this, the total debt of GMR Infrastructure will reduce to Rs. 12,000 crore.
  • Post the deal, GMR Infrastructure and its units will hold about 54% stake in the airports business.

Cabinet Okays Additional NCLAT Posts

  • Six additional posts of judicial and technical members will be created in the National Company Law Appellate Tribunal (NCLAT), with the Cabinet approving a proposal.
  • The tribunal hears appeals against rulings of the National Company Law Tribunal (NCLT).
  • The Cabinet cleared a proposal for creation of three additional posts each for judicial members and technical members in the NCLAT, according to an official release. The new posts would ensure meeting the mandate provided to NCLAT by the Finance Act, 2017, the Companies Act, the Insolvency and Bankruptcy Code, 2016 and the time frame provided for disposal of cases.

Deposits Ordinance Does not Cover Gold Schemes

  • The Centre's recent ordinance banning unregulated monthly deposit schemes will not affect the ongoing monthly schemes operated by jewellery and chit fund firms, said tax practitioners.
  • Called the 'Banning of Unregulated Deposit Scheme Ordinance', it was promulugated by President Ram Nath Kovind during the last week of February 2019 to save gullible investors from losing money to Ponzi and fake deposit schemes. The ordinance makes such unregulated deposit schemes punishable, among other things.
  • This ordinance is meant to take on fraudulent individuals and unregistered partnership firms from accepting deposits or services from gullible investors either in the form of advance or loan with or without interest. This would also include monthly chits and Diwali gift schemes among others.

Unitech Sells Power Transmission Business

  • Crisis-hit realty firm Unitech Ltd said that the company has sold its power transmission business to Sterling and Wilson for Rs. 100 crore.
  • Unitech Power Transmission is engaged in the business of manufacturing and installation of power transmission lines.
  • Unitech said it has entered into a share purchase agreement with Sterling and Wilson Pvt Ltd to sell entire issued and paid-up share capital of Unitech Power Transmission Ltd.
  • The Supreme Court had also allowed Unitech to sell stake in its wholly owned subsidiary Unitech Power Transmission Ltd.

SEBI Exempts Government from Open Offer

  • SEBI exempted the government from making an open offer for the shareholders of Punjab National Bank but directed reduction in non-public shareholding in the lender post capital infusion.
  • In February, PNB filed an application on behalf of the Centre seeking exemption from open offer requirement under takeover regulations. After capital infusion, the government's stake in PNB would rise by 5.19% to 75.41%.
  • Under SEBI norms, entities are required to make an open offer if their shareholding goes beyond a certain threshold. Against this backdrop the bank sought SEBI's exemption from the open offer requirement for the government.
  • According to SEBI, there would be no change in control of the bank pursuant to the proposed acquisition as the change would only be in the quantum of shares held by the government.

Pact to Ease U.S. Firms' Compliance

  • This Agreement for Exchange of CbC Reports, along with the Bilateral Competent Authority Arrangement between the two competent authorities, will enable both the countries to automatically exchange CbC reports filed by the ultimate parent entities of multinational enterprises (MNE) in the respective jurisdictions, pertaining to the years commencing on or after January 1, 2016.
  • India and the U.S. signed an inter-government agreement for the automatic exchange of country-by-country (CbC) reports, which will reduce the compliance burden for Indian subsidiary companies of U.S. parent companies. This is a key step in making India compliant with the Base Erosion and Profit Shifting (BEPS) project, of which it is an active participant.

Forbes' Billionaires List 2019

  • Five Indian expats in UAE have been named in the Forbes' billionaires list for 2019. The combined worth of the five expats, including three from Kerala, is a whopping USD 15.1 billion (Rs 1.04 trillion).
  • The five expats are: Prominent retail business tycoon MA Yusuff Ali, next in the list is Micky Jagtiani, owner of the Dubai-based Landmark retail stores Group, B. R. Shetty is third in the list, Sunny Varkey, education entrepreneur and philanthropist from Kerala, is the fourth, PNC Menon, an Omani property developer hailing from Thrissur in Kerala is the fifth.

NRIs Can Take Part in Rupee Rate Derivatives

  • The Reserve Bank of India allowed non-resident Indians (NRIs) to participate in rupee interest rate derivatives segment with a view to deepen the rupee interest rate swap (IRS) market.
  • The non-residents can undertake rupee interest rate derivative transactions on recognised stock exchanges, electronic trading platforms and over the counter markets (OTCs).
  • As per RBI, these directions shall come into force with immediate effect.
  • A non-resident will be allowed to undertake transactions in the rupee interest rate derivatives markets to hedge an exposure to rupee interest rate risk and other specified purposes.

Mar 27, 2019

Government Stake in Coal India Reduces

  •  The government has pared its holding in Coal India Ltd to 72.33 per cent in the current fiscal from 78.5 per cent in 2017-18.
  • Following the recent buy back of 0.72 per cent of shares, the promoters (government) holding is now at 72.33 per cent.
  • The FIs stake in the miner stood at 18.63 per cent, followed by FIIs at 6.3 per cent. Public shareholding was at just 2.74 percent.
  • In the 2018-19 fiscal, the government has received in excess of Rs. 18,000 crore by twin dividends and stake sale by various modes like public offer and ETFs.

RBI Slaps Penalty on PNB

  •  The RBI has slapped a penalty of Rs. 2 crore on Punjab National Bank (PNB) for non-compliance of regulatory directions with regard to SWIFT operations.
  • SWIFT is a global messaging software used for transactions by financial entities.
  • The massive Rs. 14,000-crore fraud perpetrated by billionaire jeweller Nirav Modi and his uncle Mehul Choksi at the PNB was a case of misuse of this messsaging software.
  • Earlier this year, the Reserve Bank had imposed penalties worth Rs 71 crore on 36 public, private and foreign banks for non-compliance with various directions on time-bound implementation and strengthening of SWIFT operations.
  • However, the list did not include PNB.

RBI Receives Aggressive Bids

  •  As per data released by the central bank, the first dollar-rupee buy/sell swap auction by Reserve Bank of India, which was aimed at infusing primary liquidity, saw aggressive bidding by banks.
  • RBI received $16.31 billion in bids for the auction for a notified amount of $5 billion. In turn, RBI infused Rs. 34,561 crore rupee liquidity.
  • Participants said that the auction was successful as RBI got bids three times more than what it had intended to purchase, adding that both domestic and foreign banks participated in the auction.

Tata Power Inks Pact to Sell EEPL

  •  Tata Power's arm Coastal Gujarat Power inked a share sale pact to sell its 100 per cent stake in Energy Eastern to Trust Energy Resources for USD 10.19 million.
  • Coastal Gujarat Power Limited (CGPL), a wholly owned subsidiary of the Company has signed a Share Purchase Agreement (SPA) with Trust Energy Resources Pte Ltd (TERPL), another wholly owned subsidiary of the company to sell its 100 per cent equity stake in Energy Eastern Pte Ltd (EEPL) a wholly owned subsidiary of the CGPL.
  • According to the statement this transaction is expected to be completed by March 31, 2019. Trust Energy Resources is a wholly-owned subsidiary of the company.
  • The transaction will fall within related party transactions and is done at arms length basis.

L&T makes an open offer to buy stake in Mindtree

  •  Engineering and construction major Larsen and Toubro (L&T) made an open offer to acquire up to 5.13 crore equity shares of Mindtree, representing 31% of the voting share capital, for Rs. 980 a share or Rs. 5,030 crore.
  • As per the terms of the offer, L&T does not have any intention to dispose-off or otherwise encumber any assets or investments of Mindtree or any of its subsidiaries, through sale, lease, encumbrance, reconstruction, restructuring or otherwise, other than in the ordinary course of business.
  • Earlier, L&T had agreed to buy 20.32% stake in Mindtree for Rs. 3,269 crore from Indian coffee baron V.G. Siddhartha.
  • L&T had also placed an order with its broker for an on-market purchase of up to 15% of Mindtree's shares at Rs. 980 a share. 
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