Reliance completed its 41st AGM and made some significant announcements and statements during the AGM. According to Mr. Mukesh Ambani, consumer business (including Jio) will be contributing as much as oil and petrochemicals to the company’s business during this Golden Decade. Jio has already clocked 21.5 crore subscribers and is now the second largest telecom player in the mobile space after Bharti Airtel. During the AGM, Mr. Ambani also outlined the grand plan to focus on its fibre net strategy wherein millions of small businesses will be given access to low cost and high quality broadband.
It appears like the Indian government may finally be getting the upper hand vis-à-vis Vijay Mallya in the loan default case. UK Court allows Indian banks to seize Vijay Mallya’s UK assets. This could be a big blow to Mallya as well as to other high profile businessmen like Nirav Modi and Gitanjali’s Choksi who have absconded abroad after defaulting on bank loans in India. In the last few years, several high profile including businessmen have absconded abroad after having defaulted on large loans in India. India had already issued an Interpol alert for wilful defaulters like Nirav Modi.
The woes of the Indian rupee continued on Thursday. Rupee fell to a fresh low of Rs.68.95/$. There was visible pressure on the rupee from banks and importers looking to hedge their dollar exposures. Analysts and forex traders are already betting on the INR crossing the Rs.70/$ mark. The psychological 69 level is likely to test the central bank support. In the last few days, the RBI has held on to the level by selling dollars, although it is still not clear how long they will continue the support. A weak rupee could make imports more expensive and create a challenge for corporate dollar loans.
After a long gap, India once again saw raising of funds through the Masala Bonds route. IIFL Finance raises Rs.325 crore from CDC via Masala Bonds. While these funds will help IIFL Finance to grow its loan book, it will also mark CDC’s first investment in Masala Bonds. Masala bonds had become quite popular before there were allegations of companies using their own group companies abroad to raise the Masala Bonds and route funds back into India. Masala bonds are rupee bonds issued abroad with the currency risk built in. At a macro level, there is no risk of currency depreciation in these bonds.
After a couple of really bad quarters, PNB may have finally had some room to cheer. PNB recovered Rs.8450 crore from stressed assets in June 2018 as part of the NCLT process. This recovery was led by the recovery of loans from Bhushan and Electrosteel where deals were closed under the NCLT. The CEO is confident of a bounce back in next 6 months. PNB had to take a massive $2 billion hit on its books after Nirav Modi had defaulted on loans that he had borrowed using fake LOCs issued by some unscrupulous officers of the Mumbai branch of PNB. LOCs are letters of comfort based on which other banks lend money to companies in foreign currency. When the Nirav Modi scam came to light, PNB was compelled to make good the losses to other banks that had lent based on these LOCs.
The 6th of July is a crucial day for the US-China tariff war. The US tariffs on China will officially kick in on 6th of July midnight. It remains to be seen whether the due date is postponed or Trump chooses to continue with the tariffs. If the tariffs continue then American products could face tariffs to the tune of $50 billion from other nations including China, India and the EU. Global markets are slightly jittery ahead of the 6th July deadline when the Chinese tariffs kick in. China has promised to retaliate with counter tariffs and it could just become a currency war.
