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BUSINESS AND ECONOMY - July 2019

Jul 2019

Jul 21, 2019

YouTube to pay huge fine for violating kids' privacy laws

  •  Google is expected to pay a multimillion dollar penalty from the Federal Trade Commission over its handling of kids' information on its video site YouTube.
  • The FTC was reportedly investigating YouTube for violating a federal law designed to protect kids and their data online. Concerns have been raised about how YouTube collects minors' information and also about comments from paedophiles that have plagued the site. 
  • YouTube reached a settlement with the FTC resolving allegations that the company violated rules about collecting data on and advertising to children. 
  • The settlement resolves a probe into whether the Google video service broke the Children's Online Privacy Protection Act, which makes it illegal to collect information on minors and disclose it to others without parental permission.
  • A group of activists last year asked the FTC to look into the matter.
  • YouTube is considering more changes to how it handles content for kids, according to a different person familiar with the company's discussions
  • One remedy the FTC has discussed is limiting advertising on videos aimed at kids. You-Tube introduced a kids app in 2015, but older children tend to watch the main site, according to a report earlier this year.

Jul 20, 2019

Jio pips Airtel to Become No. 2 by User Base

  •  India's youngest and only profitable telecom operator Reliance Jio Infocomm Ltd has overtaken rival Bharti Airtel to become the second largest operator in terms of subscribers to its mobile phone services, according to data from the Telecom Regulatory Authority of India (Trai).
  • Jio, which entered the sector in September 2016, had 322.98 million users and 27.8% subscriber market share, against Airtel's 320.38 million users and 27.6% market share as of end-May.
  • To be sure, the subscriber numbers include active as well as inactive SIMs. The telecom regulator counts each SIM as a user although there are overlaps.
  • Vodafone Idea, the company born out of a merger between Vodafone India and Idea Cellular, continues to retain the top position with 387.55 million users and a 33.36% subscriber market share.
  • There is, however, a silver lining for Airtel. It held the maximum proportion (99.86%) of active wireless subscribers as against its total wireless subscribers in May.

L&T Finance to Exit Structured Finance Biz

  •  L &T Finance Holding said the company was looking to exit from its Rs. 8,660 crore structured finance and debt capital market (DCM) business.
  • The decision to run down the business comes after in the wake of a mark-to-market hit on account of its exposure to Dewan Housing Finance Ltd. L&T Finance has classified its structured finance and debt capital market as "defocused" book this quarter, while it turns its focuses on infrastructure finance and infra debt fund.
  • The firm has exited from its supply chain finance business. Announcing its first quarter results, the company said its exposure to a specific housing finance company, part of its DCM business, saw a mark down of 50% on overall exposure of Rs. 567 crore.
  • It had to take the MTM hit after ratings of the housing finance company was downgraded.

AB InBev to Sell Aussie Brewer CUB to Asahi

  •  The world's leading brewer, debt-laden AB InBev is selling off its Carlton & United Breweries (CUB) unit in Australia for 16 billion Australian dollars ($11.3 billion) following a failed IPO.
  • It was selling CUB to Japanese group Asahi Holdings in a deal that would also see Asahi acquire Australian distribution rights for AB Inbev brands.
  • AB InBev, a Belgian-Brazilian behemoth that owns brands such as Stella Artois and Budweiser, is saddled with more than $100 billion in debt, part of it stemming from its 2016 acquisition of SABMiller.

Only Digital Payment Allowed on National Highway Tolls

  •  Beginning December 1, 2019, commuters will need to use FASTag to pay toll across national highways in the country, or pay double if they use cash, according to a letter sent by the Union road transport and highways ministry to the National Highway Authority of India (NHAI).
  • FASTag, a radio frequency identification (RFID) sticker typically fixed to a vehicle's windscreen, lets toll booths wirelessly and automatically deduct the fee, thereby not requiring a vehicle to stop.
  • The tags were made mandatory for all new cars sold after December 1, 2017, as a measure to encourage digital payments and free up congestion at toll booths.

Europe's LGT to Invest in Kauvery Hosp

  •  The world's largest family owned asset manager LGT Group, owned by the Princely House of Liechtenstein, is striking the first direct investment in India by picking up a 10% stake in south-based Kauvery Hospitals for Rs 150 crore.
  • Kauvery operates eight hospitals with 1,200-1,300 beds in five locations across Tamil Nadu and seeks to expand into neighbouring states like Karnataka as well, with plans for 2,500 beds over the coming years. But the primary focus of the hospital chain will remain the Tamil Nadu market.
  • The hospital company is already emerging as one of the largest chains in the state with revenues of over Rs 500 crore. It was set up by two doctors — S Chandrakumar and Manivannan Selvaraj — back in 1999.
  • In 2017, serial healthcare services entrepreneur G S K Velu bought a large stake in the company through his family office GSK Ventures. He will continue to hold over 30% after the stake sale to LGT.
  • LGT manages assets totalling $140 billion in private banking and asset management industry.
  • The direct investment by the princely family of the small European state, which backs several high-profile global institutional investors, is significant for Indian private markets.

Jul 19, 2019

SEBI Opposes Proposal to Transfer Surplus Money to CFI

  •  Securities and Exchange Board of India (SEBI) strongly opposed the government's proposal to transfer surplus money to the Consolidated Fund of India (CFI).
  • The capital markets regulator felt that the proposal would result in compromising its autonomy and its ability to function effectively towards the progress and development of the Indian securities market.
  • The government had proposed an amendment to the SEBI Act, which states that the SEBI would constitute a reserve fund and 25% of the annual surplus of the general fund would be put in the reserve fund.
  • Further, the size of such reserve fund cannot exceed the total of annual expenditure of the preceding two financial years.
  • More importantly, the surplus of the general fund, after factoring in all the SEBI expenses and the transfer to the reserve fund, needs to be transferred to the CFI as per amendments proposed in the Finance Bill, 2019.

EU Fines Chipmaker Qualcomm

  •  The EU hit US chip making giant Qualcomm with an antitrust fine of 242 million euros ($271 billion), in another blow against a tech titan that is fighting global competition battles.
  • The fine is the second mega penalty levelled against Qualcomm by Brussels, which already fined the chipmaker 997 million euros in January 2018.
  • Investigation found that Qualcomm abused (its market) dominance between mid-2009 and mid-2011 by engaging in predatory pricing. 

Labour Ministry Rejects Move to Lower EPFO Rate of Interest

  •  The labour ministry rejected the finance ministry's request to reduce the 8.65% interest rate offered in 2018-19 by the Employee Provident Fund Organisation, the government owned pension fund manager, in a move that should bring cheer to 46 million subscribers whose funds are managed by EPFO.
  • As per reports, the labour ministry is of the view that EPFO has sufficient surplus of over Rs. 3,150 crore, mainly earned from investments in exchange traded funds (ETFs).
  • EPFO interest rate is determined by the organisation's Central Board of Trustees (CBT), which does so after assessing the annual returns on the investments.
  • It is the duty of EPFO to pass on the rightful share of the subscribers.
  • EPFO does not take any money from the consolidated fund of the Government of India, and is not obliged to follow the finance ministry's suggestions.

Indiabulls' Insurance Foray

  •  Indiabulls Group's foray into the insurance sector is likely to get delayed as the insurance regulator is scrutinising the merger proposal of its housing finance arm and Lakshmi Vilas Bank (LVB) to understand its implications on the capital position of the group.
  • Indiabulls Life Insurance as well as Indiabulls General Insurance have received the R1 approval — which is the first stage, in-principle approval — from the IRDAI.
  • However, since the LVB merger with Indiabulls Housing Finance was announced after the R1 licence, insurance regulatory sources said the entire proposal needs to be revisited in its wake.

World Bank Drops Plan to Lend Fund for Amravati Project

  •  The World Bank has dropped its plan to extend a loan of $300 million (nearly Rs. 2,065 crore) to Andhra Pradesh for the construction of Amaravati, the new capital city of the state.
  • An indication to this effect was made on the World Bank's website. 
  • The reason for the cancellation of the loan proposal is not known yet.
  • The newly-formed YSR Congress government headed by Chief Minister Y. S. Jagan Mohan Reddy had pushed the Amaravati capital works down in its list of priorities.

Jul 18, 2019

RBI Wants Audit Firm Partners Under Lens

  •  Audit firm partners who are in the midst of any disciplinary proceedings will be barred from signing the balance sheet of any bank or even engage in the audit process.
  • This is the latest directive to banks from the Reserve Bank of India (RBI) which over the last one year has placed significant responsibility on statutory auditors of commercial banks.
  • Thus, even chartered accountant firms which face no ban either from the RBI or the court could be forced to pull out some of their senior partners from playing a role in any bank audit.
  • Amid divergence in asset quality of banks — resulting in higher provisioning numbers, shock waves to investors, and bad press — the central bank has put in place a system to exchange notes with auditors every quarter.
  • In the course of such meetings, RBI officials share their observations on provisioning and other issues which, if necessary, may be incorporated by the auditor in the financial results for the next quarter.

ICICI goes digital 

  •  ICICI Bank has taken to the mobile platform to expand its SME business offering to even non-customers, providing them the facility to get loans sanctioned through a mobile application.
  • The bank's new mobile application InstaBIZ offers current account holders an instant overdraft facility (up to Rs 15 lakh). It also takes applications for business loans, arranges for easy bulk collection and payment of funds through multiple digital modes.
  • The private sector bank has made use of technology to enable small business do an automatic bank reconciliation and undertake all remittances for export and import. ICICI Bank has a loan book of Rs18,500 crore in this segment.

Ebix Acquires Yatra

  •   Ebix Inc., a supplier of on-demand software and e-commerce services has acquired online travel portal Yatra Online Inc., for an enterprise value of $337.8 million, in an all-stock transaction.
  • However, Yatra will continue to be independently run and will retain its brand and status in India. Ebix makes software for the insurance, financial and healthcare industries.
  • Its Indian subsidiary, EbixCash, bought Mumbai-based Mercury Travels and Delhi-based Leisure Corp. in 2018, with an aim to create a travel division focused on luxury, events- and sports-related travellers.
  • Ebix first offered to buy Yatra in March for $337 million, in cash or by stock.
  • The deal marks Ebix's biggest acquisition till date in India.

GIC in Talks to Buy GVK Power's Stake in Hotel Venture with Taj

  •  Government of Singapore Investment Corp (GIC) is in preliminary talks with GVK Power and Infrastructure to acquire its stake in Taj-GVK Hotels and Resorts as the sovereign investment vehicle of the South East Asian country is looking to consolidate its position in the Indian real estate and hospitality space.
  • GIC, which already has an investment platform with Indian Hotels, a Tata Group firm and owner of the Taj, is expected to mandate the Indian partner to run the operations. The Singaporean fund entered the fray after GVK's negotiations with Fairfax for the stake sale didn't gather pace.

Prime Day Sales Create Fresh Record for Amazon

  •  Amazon's two-day extravaganza known as Prime Day was its biggest shopping event ever, with sales surpassing the two key holiday spending days combined.
  • The e-commerce leader said members of its Prime subscription service purchased more than 175 million items throughout the event across 18 countries.
  • Prime Day sales topped the combined total from the two big shopping days in the year-end holiday season, known as Black Friday and Cyber Monday.

Uniqlo to enter India

  •  Japanese apparel retailer Uniqlo announced plans to enter the Indian market and open three stores in the Delhi-NCR region. It has appointed Tomohiko Sei as its first India CEO. 
  • Before taking over the reins of India operations, Sei was the COO of Uniqlo's parent Fast Retailing's Singapore operations and has been with the company for 19 years.
  • This is the first time Uniqlo is setting up multiple stores in its launch market. Uniqlo is the largest of eight brands in the $19-billion Fast Retailing Group, one of the world's largest apparel retail companies. 

India's Newest Tech Unicorn

  •  Billionaire Azim Premji has helped create India's latest tech unicorn: a fast-rising software startup that symbolizes the growing investor interest in the Asian nation's enterprise technology space.
  • Icertis, which competes with SAP SE and Oracle Corp. to help businesses manage contracts in the cloud, has raised $115 million, propelling it to unicorn status as investors flock to enterprise software makers.
  • The advanced-stage funding round in Bellevue, Washington and Pune, India-based Icertis was co-led by Greycroft Partners Llc and Premji-Invest, the fund managed by the family office of Indian tech billionaire Premji.
  • Existing investors including B Capital Group, Eight Roads Ventures and Cross Creek Advisors participated. With this, Icertis has raised over $211 million.
  • The enterprise software segment is heating up as investors from Tiger Global Management to Sequoia and Accel scour the industry for India's next startup giants.
  • Many are expected to be business focused, as the country's talent pool shifts from information technology outsourcing services for global clients toward designing and providing online software.
  • Icertis said it now helps customers worldwide manage over 5.7 million contracts, from supply chain, procurement deals to employee agreements and non disclosure pacts, that have a total value of more than $1 trillion.

L&T Info Buys Lymbyc

  •  L&T Infotech (LTI) has acquired Lymbyc, a Bengaluru firm with capabilities in the advanced analytics space. This is the company's fifth acquisition since going public in 2016.
  • This acquisition would enhance LTI's Mosiac platform with deep learning, natural language processing and visualisation capabilities.
  • This is in line with its five acquisitions entailing a total investment of over $50 million (plus earnouts).
  • The focus is on bringing in specific capabilities or market access, rather than adding to the topline.

Renault Invests for EV Venture in China

  •  Renault SA will invest $144million for a 50% stake in a venture with Jiangling Motors to develop electric vehicles in China, part of a push by the French companyto make further inroads into the world's biggest car market.
  • The Chinese entity was created in 2015 and already holds certificationto manufacture battery-electric passenger cars.

Rural Growth Hits FMCG

  •  The slowdown in fast-moving consumer goods (FMCG) continues to progress with value growth dropping to 10% in the second quarter (April-June, or Q2) of calendar 2019, precariously holding onto a double-digit number.
  • The value growth was 13.4% in the preceding quarter (Q12019) and 10.6% in the comparative quarter (Q2) of 2018.
  • While value growth has come off its peak from 16.2% in Q32018, volume growth, too, has shrunk in a similar manner.
  • Nielsen has also made a downward revision of its forecast. It said FMCG growth for the second half of 2019 stands at 12% as against a prediction of 13-14%.
  • The slowdown is marked by the rural growth decline that has spilled over to Q2 as well. Nielsen said the rural slowdown, which is across zones, is more pronounced in the northern region.
  • Rural India contributes 37% of overall FMCG spends and has historically been growing 3-5% points faster than urban on account of increasing affordability, availability and demand.
  • However, rural growth is slowing down at double the rate of urban in recent quarters. This has brought rural growth closer to urban growth in Q2 '19.

   Allahabad Bank, Punjab & Sind Bank Report Frauds

  •  Allahabad Bank Ltd reported a Rs. 689 crore fraud related to textile company SEL Manufacturing Ltd to the Reserve Bank of India (RBI).
  • The fraud is already being heard by the country's company law tribunal. The bank has made provisions for the bad loan.
  • Meanwhile, Punjab & Sind Bank also said it has reported a Rs.238 crore ($34.58 million) fraud to the Reserve Bank of India, relating to allegations of diversion of funds by the indebted Bhushan Power & Steel Ltd.
  • It has been observed that the company has misappropriated bank funds, manipulated books of accounts to raise funds from consortium lender banks.
  • The case is currently with the country's company law tribunal and the bank expects good recovery.
  • Earlier in July 2019, Allahabad Bank had flagged a $259 million fraud by bankrupt steelmaker Bhushan Power & Steel Ltd.
  • State-run Punjab National Bank Ltd and Punjab & Sind Bank Ltd have also reported similar frauds amounting to more than Rs. 4,000 crore by the steelmaker.

BoB-led Lenders, JBF Ind to Sign Inter-creditor Pact

  •  Lenders led by Bank of Baroda have decided to sign an inter-creditor agreement with Kohlberg Kravis Roberts & Cobacked JBF Industries under a June 7, 2019 circular issued by the Reserve Bank of India.
  • Bank of Baroda had filed an insolvency resolution petition against the maker of polyester-based products at the Ahmedabad bench of the National Company Law Tribunal in September 2019.
  • However, the plea is yet to be admitted by the dedicated bankruptcy court. The tribunal posted the hearing for the case for August 27, 2019.
  • According to the RBI circular, lenders must enter an ICA during the review of the borrower account within 30 days of the first default to any lender.
  • The new framework lays down parameters to be included in the ICA, including decision-making by lenders holding 75% by the value of total outstanding facilities and 60% by number, and protection of dissenting lenders.
  • KKR agreed to invest $150 million for 20% in JBF Industries and its overseas arm JBF Global Pte in July 2015.
  • Subsequently, the company said in an exchange filing in August that KKR Jupiter Advisors, a unit of the PE's credit arm, would acquire 100% of JBF Petrochemicals.

Airtel, Jio Plan HUL Tie-up

  •  Indian telecom giants Bharti Airtel and Reliance Jio are in talks with Hindustan Unilever (HUL) for tie-ups to offer localised discounts on the latter's home and personal care brands through neighbourhood stores.
  • Once finalised, the initiative could be a game changer for the two rival telcos as well as the consumer conglomerate.
  • The telcos will expand beyond time-bound tariff plan oriented content tie-ups to find expand customer base and push them towards higher tariff plans to boost average revenue per customer (ARPU).
  • At the same time, telemapping consumers will give HUL cloud-based analytics for better insight into consumer behavior.
  • The business model chalked out so far will be like this - an Airtel or Jio customer will get higher discount vouchers of HUL products on the mobile app if he/she moves up the tariff plan.
  • These vouchers will be used only in kirana stores and this in turn will help the consumer company to track the kind of products its customers are buying. Tying discounts to tariff plans will work for both parters. 
  • For Bharti Airtel, tapping into the consumer goods space and tying up with kirana stores is a fresh initiative to boost customer stickiness and ARPUs, having mainly focussed on entertainment and sports related content so far. It will then take on Jio head on in terms of connecting to retail consumers.
  • Mukesh Ambani-led Jio has been tying up with kirana stores using point of sale (PoS) terminal, the PoS machine — or card swipe terminal. The company has been talking to other FMCG brands as well for possible tie-ups.
  • HUL has been investing to spot digital trends and drive agility at a time when disruptive technologies are challenging businesses.

EBay Invests in Paytm Mall

  •  US-based online marketplace eBay is picking up a 5.5% stake in Paytm Mall for an undisclosed amount.
  • This marks its third bet on India's e-commerce market over the last decade after backing Snapdeal in 2014 and Flipkart in 2017. The company had entered India by acquiring Baazee back in 2004 for $50 million.
  • The deal size is pegged at a little over $150 million and will value the Noida-based company, backed by China's online commerce giant Alibaba and Japan's SoftBank, at close to $3 billion.
  • The deal with Paytm Mall will help merchants on eBay from across the world sell to consumers in India, helping it start the cross-border trade it had attempted when it sold the India business to Flipkart.
  • But when Walmart acquired 77% stake in Flipkart, eBay launched an India website again, which will continue to function independently after this deal.
  • The cross-border business being driven with eBay could account for 15-20% of Paytm Mall's gross sales in the coming years.

Jalan Panel Moots Transfer of Surplus by RBI in Stages

  •  The Bimal Jalan panel set up to review the economic capital framework of the Reserve Bank of India (RBI) has decided to recommend transfer of excess reserves to the government in a staggered manner over a period of three to five years based on a predetermined formula.
  • The official said the recommendation of the panel for transfer of excess reserves involved both contingency fund as well as revaluation fund.
  • While the currency and gold revaluation reserves of the RBI have more than tripled from Rs. 1.99 lakh crore in FY09 to Rs. 6.92 lakh crore in FY18, the contingency fund has grown 50% during the same period from Rs. 1.53 lakh crore to Rs. 2.32 lakh crore.
  • The government believes the RBI is being too conservative and is sitting on huge reserves and hence part of it should be transferred to the government for more productive use. After things came to a head late in 2018, the RBI set up a committee to review its capital framework.
  • The government has budgeted to receive Rs. 1.06 lakh crore in FY20 from the RBI through dividend even though the central bank has already paid an interim dividend of Rs. 28,000 crore in February 2019.
  • In December 2018, the RBI had set up the Jalan panel. Former deputy governor Rakesh Mohan is the vice-chairman of the panel.
  • Other members include RBI central board directors Bharat Doshi and Sudhir Mankad; deputy governor NS Vishwanathan; and finance secretary Subhash Chandra Garg. The panel later got extensions as it could not resolve differences among members.
  • The committee was mandated to also suggest an adequate level of risk provisioning that the RBI needs to maintain.
  • That apart, any other related matter, including treatment of surplus reserves created out of realized gains, was also come within the ambit of this committee.

Jul 17, 2019

Coca-Cola Announces Leadership Changes

  •  Beverage major Coca-Cola announced leadership changes for its India and South West Asia business unit
  • The company appointed Sarvita Sethi as Vice-President– M&A and New Ventures. She was earlier the Vice President-Finance, India & South West Asia.
  • Harsh Bhutani would take over the position of Vice President – Finance (CFO), Coca-Cola India & South West Asia, effective August 1, 2019.
  • He currently heads the Finance and Business Services verticals for Hindustan Coca-Cola Beverages Pvt Ltd as Executive Director & Chief Financial Officer for over three years.

Nayara Licenses UNIPOL PP Process Technology for Refinery

  •  As part of its $850 million investment in its Vadinar Refinery towards expansion in petrochemicals, Nayara Energy has licensed UNIPOL PP Process Technology from W. R. Grace & Co to produce a broad range of phthalate-free products from the 20 metric million tonnes per annum (MMTPA) refinery.
  • As part of the expansion, Nayara plans to set up up a 4.5 lakh-tonnes a year polypropylene plant.

Suzlon Defaults on Bonds

  •  In a sign of stress widening across India's credit market, Suzlon Energy defaulted on redemption of its foreign currency convertible bonds (FCCBs) worth $172 million, or Rs. 1,200 crore.
  • Suzlon asked bondholders to hold on till the company completes its one-time settlement with banks.
  • However, its settlement with the banks depends upon its plans to sell stake to Canadian investor Brookfield, a move that may see promoters, with 19.8% stake, ceding management control.
  • The company has not made the payment of the principal amount of the outstanding bonds, being $ 172,000,000, which was due on July 16, 2019 in accordance with the terms and conditions of the bonds.
  • The company is working on a holistic solution for its debt and that it continued to be in discussions with various stakeholders in relation to outstanding debt (including the bonds).
  • Brookfield is eyeing a majority stake in the company and discussions are on for a one-time settlement plan with creditors to restructure outstanding bank loans.
  • The firm has an outstanding debt of Rs. 7,761 crore, including FCCBs and working capital debt of Rs. 3,380 crore.

DHFL Presents Debt Recast Plan

  •  Stressed housing finance major Dewan Housing Finance Company (DHFL) has shared its resolution plan with bankers and company sources claim that the lenders are in sync with the plan.
  • The plan will be formally presented to the banks later in July 2019 and to bond-holders on July 25, 2019.
  • In its resolution plan, the housing finance company has proposed that its debt be recast. The cash-strapped lender has a cumulative debt of Rs. 1 lakh crore, of which it owes Rs. 38,000 crore to banks and Rs 34,000 crore to bondholders.
  • As far as repayment to retail investors is concerned, the resolution plan seeks to utilise monthly cashflows of Rs. 2,300 crore it receives in the form of EMIs from consumers to repay the retail investors upon maturity.
  • Lenders have to give their blessing to this proposal. Nearly Rs. 5,000 crore worth of bonds (institutional and retail) are maturing between August and September 2019.
  • Extension of maturity may be sought from institutional bondholders. If bankers agree, the surplus money from this Rs. 2,300 crore could be used to restart lending operations, after the mortgage major has repaid retail investors.
  • DHFL has also sought a moratorium on payments till its cash flows stabilise and operations resume.
  • While it is seeking a moratorium on some part of its debt, it is also asking lenders to allow it to defer payment of the principal.
  • The plan envisages that lenders will maintain the same interest rate on loans at which they were disbursed.
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