Government of India plans to extend the maturity of its bonds maturing in June 2020 to longer tenures.
The auction for the 8.27% bonds maturing in June will be extended in 3 blocks. Out of the bonds worth
Rs.30,000 crore maturing in June, Rs.4,000 crore worth of bonds will be exchanged for 7.19% bonds
maturing in 2060. The balance Rs.26,000 crore will be split into Rs.13,000 crore bonds bearing coupon of
5.18% maturing in November 2024 and another Rs.13,000 crore bonds bearing coupon of 5.79%
maturing in May 2030. This will amount to an automatic rollover of maturing bonds.
According to estimates by ICRA, the domestic aviation sector will require Rs.35,000 crore by FY23 across
the five major players in the segment including Indigo, Spice Jet, Go Air, Vistara and Air Asia. The
aviation industry debt (excluding Air India) is expected to touch Rs.46,500 crore by March 2022.
However, the aviation industry is expected to register negative growth of (-44%). During the lockdown,
the airline companies are incurring a loss of Rs.90 crore on a daily basis. The profitability of the aviation
industry is also likely to be impacted by the lockdown as fixed costs account for 40% of the costs.
Not just gold, but gold loan companies are also managing to report stellar results in the midst of the
pandemic. Mannapuram reported a 44% spike in net profits at Rs.398 crore for the Mar-20 quarter.
Total revenues were also up by 39% at Rs.1618 crore in the March quarter. Mannapuram had also given
its customers the option of 3-month moratorium. But, generally, the gold lending business has low
levels of risk, especially at a time when gold prices are buoyant. Because of the gold pledge, most gold
loan companies tend to enjoy much lower levels of NPAs compared to its other NBFC counterparts.
The SEBI has directed the exchanges and the depositories to take a lenient approach to companies that
are not able to adhere to the minimum public ownership requirements in the midst of the COVID-19
pandemic. Currently, Indian companies (other than banks) are required to have at least 25% of the total
capital with public shareholders. In the 2019 budget, the government had tried to hike the limit to 35%
but had to eventually drop the idea due to the protests from companies. Till the pandemic is over, the
regulator has asked exchanges to go easy even where companies do not meet the 25% criterion.
The 886 points correction in the Nifty resulted in market cap depletion to the tune of Rs.199,000 crore
in a single day. While the rising cases of COVID-19 and the disappointment over the stimulus package
were key factors, the real big factor that spooked the markets was the Fed Chair warning that the US
recession could be much sharper than originally anticipated. The weak sentiments in the global market
also dented the sentiments in the market. On the Nifty, the biggest losers were the tech stocks which
took cuts across the board. Apart from the US recession warning, there was also a Gartner report which
warned of a 10% cut in tech spending during the year 2020. That hurt the Indian IT companies as most
of them are project based and rely on global IT spending. Healthcare and FMCG were the gainers.
An SBI Research report has warned that the fiscal deficit for FY21 could scale up sharply to 7.9% as the
government spends heavily on stimulating the economy. The original target fiscal deficit for FY21 was
3%, which was later raised to 3.5% in the 2020 Union Budget. But now even that looks set to more than
double. Out of the Rs.20 trillion rescue package, nearly Rs.9.50 trillion will be fiscal measures which the
government needs to provide for. The fiscal deficit is likely to substantially worsen due to the lockdown
and the fall in direct and indirect tax revenues. This could impact sovereign ratings for India.