The RBI in its last credit policy for the fiscal year 2019-20 maintained status quo on the repo rates at 5.15%. This retains the reverse repo rate at 4.90% and the bank rate at 5.40%. This status quo on rates was largely along expected lines after the CPI inflation touched a high of 7.35% for December and is expected to remain elevated for the month of January too. However, the Monetary Policy Committee maintained the stance of the monetary policy at “Accommodative”, hinting that the RBI would be open to maintain a dovish rates policy till the time growth in IIP and GDP picked up in a sustainable manner.
The monetary policy announced on 06th February had two very specific and positive announcements for the real estate sector, which led to a temporary upward rating of the sector. Firstly, the RBI announced that banks and lenders to the real estate developers need not immediately downgrade the bonds or loans of these developers if the stress was due to genuine business reasons. In addition, the RBI also announced that banks will be allowed to deduct the loans given to select sectors like autos, residential construction and MSMEs from their NDTL (net demand and term liabilities) for CRR calculation.
Emami is to sell its cement business to Nuvoco Vistas, the cement manufacturing arm of Nirma Ltd for a consideration of Rs.5500 crore. Emami will be divesting its 100% equity in the company to Nuvoco. Emami Cements has a net debt of Rs.2500 crore and additional loans against shares of Rs.1000 crore and they will make a profit on sale even after considering these costs. This move is part of Emami’s overall plan to cut debt at the group level. Apart from Nuvoco, other players like Shree Cements, Dalmia Bharat, Ultratech and Ambuja Cements were also in the fray to buy the stake in Nuvoco.
The IMF has estimated that the Arab Gulf states may lose substantial part of their financial wealth in the next 15 years. The Gulf States currently account for 20% of the world oil supply and their net financial wealth is estimated at $2 trillion. This wealth depletion, according to the IMF, is likely to be driven by weak oil prices and their inability to ramp up non-oil revenues. Most of the Gulf States have spent billions of dollars on welfare by leveraging their oil revenues. IMF estimates that global oil demand could peak by 2040 and if these nations are not able to fix fiscal issues, wealth depletion would accelerate.
In what could be a relief for the Tata Group and Bharti Airtel, the government has finally approved the merger of the mobile business of Tata Teleservices with Bharti Airtel. This will allow Tata Tele to demerge its consumer telephony business and merge it into Bharti Airtel. The announcement of the deal had been first made by Bharti Airtel in July last year. The deal had gotten delayed because the DOT had challenged the deal on the grounds that Tata Tele had outstanding AGR and other dues to the DOT. The deal entails absorption of 19 telecom circles, of which 17 circles are under TTSL and another 2 are under Tata Teleservices Maharashtra. Bharti will also take over a small portion of the unpaid spectrum liability of Tata Tele. The deal gives Airtel additional 178.5 MHz spectrum in the exclusive 4G bands.
Nippon India Mutual Fund has taken IRDA (the insurance regulator) to SAT challenging IRDA’s order that the pledge off shares of Reliance General Insurance with the fund house was in violation of the law. IRDA has contended that this pledge amounts to ownership of insurance company shares by the MF shareholders, which is against the extant laws. Nippon Fund has, however, contended that the pledge was purely created to protect the interests of the investors and unit holders of the AMC. IRDA had issued an ex-parte order to the effect, which is issued without giving the aggrieved party a hearing.
