Bad debts at PNB have certainly taken a big hit in the aftermath of the Nirav Modi default. In the last 10 months, the gross NPAs of PNB have grown by 28% largely led by the default by Nirav Modi and his gang. Wilful defaults amounted to over Rs.15,100 crore in the fourth quarter. Some of the big wilful defaulters of PNB include Kingfisher Airlines, Arvind Remedies, Kudos Chemie, VMC Systems and Indu Projects. PNB also has a major exposure to Winsome Diamonds and Zoom Developers and in both the cases the promoters have absconded abroad. Next quarter could be interesting for PNB.
NCLT has suggested that the IBBI review the insolvency code regulations thoroughly. This was necessitated in the light of the Liberty bid for Bhushan Steel and the Ultratech bid for Binani Cements. In both the cases the NCLT had to accede to bids outside the standard bidding process as it more lucrative for the lenders. Some of the changes may include factoring in the demands of the operational creditors, bringing greater transparency into the process, making the entire NCLT more time bound etc. The principle will continue to be to ensure the best price to the stakeholders of the defaulter.
Coal India boosted supplies to power plants by a whopping 14% during the month of April 2018 to 40.31 million tonnes. While the total coal stocks at power plants were at around 7 million tonnes last year, they are up to 16 million tonnes this year. The average rake loading per day has also gone up substantially in the last one year with the able cooperation of the Indian Railways. Coal India has already improved its strike rate to 245 rakes per day and the target is to touch 500 rakes per day by next year. The idea is to reduce the fuel shortage from 30% currently to zero by next year.
The Telecom Ministry may soon decide on Idea Cellular’s 100% FDI infusion proposal. Currently, 49% FDI in telecom can come through the automatic route while 100% FDI requires prior approval. This move assumes significance as Idea and Vodafone are soon to merge to create the largest telecom operator in India. The combined entity will have a market value of $23 billion and a 35% share of the telecom market in India. In case of telecom, the concerned ministry is competent to take the final decision on the FDI under the automatic route.
FPI outflows during the month of April touched a 16-month high of Rs.15,500 crore. While Rs.10,000 crore was pulled out of the debt markets, the balance 5,500 crore was pulled out of the equity markets. The last time that the markets had seen a large outflow to the tune of Rs.27,000 crore was in December 2016; in the immediate aftermath of the demonetization announced by the government of India. One of the key reasons for these outflows has been the heightened risk aversion among global investors which is evident from the sharp outflows from debt. With the US Fed adopting a hawkish approach, the impact is likely to be felt on emerging markets as FPIs could prefer the relative safety of US and European bonds. FPIs have also been worried about the rising crude oil prices in the recent past.
The government is likely to keep the rate of interest on EPF static at the current rate of 8.55%. While there have been calls for reducing the rate to eliminate yield curve distortion, the government may have desisted from a further rate cut for 2 reasons. Firstly, the RBI may be looking to hike rates by 25-50 basis points this year if the Fed gets too hawkish. Secondly, with 5 crore EPF subscribers, the government may not want to upset the applecart in a year with crucial state elections and a national election coming up next year. At 8.55%, the EPF rate is already at a 5-year low (the lowest since 2012).
