According to a report brought out by ICRA, the total banking credit provisions for the year 2018 is likely to be higher by 30% at Rs.260,000 crore. This sharply higher provisioning will be necessitated by the passage of the Insolvency and Bankruptcy Code (IBC) which is going to require sharply higher provisions in case of companies that are identified as fragile by the RBI. With total loans of Rs.300,000 crore likely to be resolved through the IBC mode, the total provisions may be as high as 85-90% in most of the cases. This is likely to sharply impair PSU banking performance in the coming few quarters.

The China Development Bank has sent a liquidation too RCOM following their default in the foreign currency loan in the current month. RCOM has debt to the tune of Rs.45,000 crore in their books of which a substantial portion has been borrowed in the form of loans from the China Development Bank. The debt problems at RCOM were supposed to improve substantially after the proposed merger with Aircel as well as the sale of the towers business to Brookfield. However, with both the deals falling through, the creditors really do not see any options other than pushing for liquidation of the company.

Fund raising via the debt route fell by 37% to just Rs.44,000 crore for the month of October 2017.  This takes the debt fund raising for the first 7 months to Rs.3.68 trillion. In the whole of the previous fiscal Indian corporates had raised nearly Rs.6.40 trillion and we may end up lower this financial year. Both in terms of number of issues and in terms of fund raised, the number was sharply lower in the month of October. Part of the reason for this slowdown in debt fund raising can be attributed to the robust equity markets which has resulted in more funds being raised through the IPO route.

Total GST collections for the month of October 2017 came in sharply lower by 10% at Rs.83,346 crore. The lower collection in GST can be attributed to the cut in GST rates during the month of October.  It may be recollected that in its last meeting, the GST Council had cut the rates of GST of 75% of the products from the peak rate of 28% to 18%. The reduction could also be attributed to the fact that the input tax credit (ITC) on GST paid in the first few months was actually claimed in the last month leading to this sharp fall in GST collections. The GST Council had projected a fall in GST collections for this month.

While October exports fell by nearly -1.3%, the real reason appears to have been with the delay in GST refunds for exporters. While exporters are free from tax, exporters pay tax on items imported and later claim it as credit. According to trade estimates, export credit refunds to the tune of nearly $7.7 billion is pending to be paid to exporters and that is seriously crunching the working capital situation for exporters leading to this negative growth in exports.  According to representatives of the export hub in Tirupur in Tamil Nadu, nearly 10,000 workers have been asked to go and the situation could only worsen. The worst hit by GST has been the small and medium sized enterprises which constitute nearly 75% of the overall export basket for India.  Worse still, they are also outside the normal credit environment.

L&T is undertaking a major restructuring of its business lines. It plans to sell off its electrical manufacturing unit and its road assets and use the proceeds to invest more into technology related services. The electrical unit is valued at nearly $2 billion and Schneider Electric is a likely to contender for the business. In the IT space, L&T will take on established rivals like TCS and Infosys but L&T fancies its chances at a time when the underlying DNA of the IT industry is shifting more towards digital globally.  L&T will be looking at opportunities in Social Media, Mobility, Analytics and cloud solutions.