The finance ministry has started tightening the screws on bank frauds by sending a clear letter to all banks on the NPA front. This missive from the Finance Ministry has come after the former promoter of Bhushan Steel, Neeraj Singal, was arrested for defrauding shareholders. Finance ministry has put the onus on bank heads to check all bad loan accounts above Rs.50 crore for frauds or face penal action. The finance ministry is quite clear that the bank CEOs will have to take more accountability for such wilful frauds committee by promoters and take pre-emptive action in such cases.
One of the largest bond fund managers in the world, PIMCO, has warned of a likely US recession based on US yield curve. Normally an inverted yield curve is seen as a signal of impending recession. PIMCO CIO has given this warning based on the yields spreads between 10-year and 2-year bonds compressing to 23 bps. This spread has fallen from a high of 260 basis points in 2014, indicating a likely US recession in 3 years. When spreads become too narrow they indicate lack of confidence in the distant future which is what economic confidence is all about. PIMCO expects such a situation in next 3 years.
Donald Trump continues to needle the Asian economies with his anti-dumping duties on imports. Now the US has imposed 50% anti-dumping duties on import of metal pipes from India. This anti dumping duty has been specifically imposed on India, China and four other nations. This action is based on a complaint filed by 6 US based pipe manufacturers. This specifically pertains to the large diameter welded pipes used to transport oil, gas and other fluids. Anti dumping duties are specifically imposed when countries deliberately reduce the cost of production to dump at cheaper prices.
Banks have been stalling the reference of JP Associates to the NCLT, but now they may not have much of a choice. JP Associates may be finally forced into bankruptcy under the IBC. Lenders led by ICICI Bank are likely to be forced to invoke the IBC code on JP Associates after an 8 month long wait. RBI has rejected a request by the company to resolve the NPA crisis outside the NCLT process. The proposed sale of land parcels along the Yamuna Expressway did not materialize in the last few months due to objections over the nature of ownership of such properties, leaving the RBI with no other option.
GST launch has spurred demand for warehouses, according to CB Richard Ellis. When the GST was launched last year, the expectation always was that it would lead to a spurt in demand for logistics services as companies ramp up their logistics networks to make them more operationally efficient. Unlike a logistic network based on interstate taxes, the real consideration of logistics networks was likely to shift to more business and efficiency considerations. Now there is confirmation of this trend. According to CBRE, the leasing activity in India’s industrial and logistics space gained by 45% in the first half of 2018. This is largely an outcome of GST implementation which has resulted in all-India distributors centralizing and rationalizing their logistics networks in a big way.
Finally, Jet Airways appears to be taking some serious steps towards assuaging its equity shareholders. Jet Airways is likely to consider cost cuts and a turnaround plan in its August 27th meeting. Interestingly, the company will also announce the quarterly results on August 27th, which was originally supposed to be announced on August 09th. While growth in Aviation is still robust in India, the big challenge for Jet is to bring down its cost per customer and improve spreads. Other airlines like Indigo have managed to be profitable by maintaining their cost structures under a very strict check.
