Midnight News Update – Aug 31st 2017
The cabinet passed an ordinance enabling the increasing of the cess on luxury cars and SUVs from 15% to 25%. The final decision on the quantum of the increase will reset with the GST Council. The GST had kept the cess at 15% on SUVS and luxury cars which made them cheaper in the post-GST scenario. However, this created a furore as it went against the grain of progressive taxation. With the recent ordinance, most of the luxury cars and SUVs are likely to revert to the pre-GST pricing. Luxury car markets like BMW, Benz, Audi and Range Rover were unhappy with the government move.
L&T is planning its big push into the defence space and will be bidding for contracts worth $28 billion in the next few years. The defence bidding by domestic players was recently opened up in a big way by the Modi government to encourage the “Make in India” idea. L&T will be bidding for the manufacture of submarines and warships. It recently got a massive $700 million order for artillery guns. India has been trying to desperately reduce its dependence on defence imports and that has opened up a huge window of opportunity for companies like L&T. Now L&T expects defence to emerge as a major contributor.
Wipro shareholders have approved the Rs.11,000 crore buyback of shares. The company will purchase up to 34.38 crore shares at a price of Rs.320/share. Wipro is still predominantly by its promoter, Azim Premji. In the last few months, IT majors like TCS, Infosys, HCL Tech, Cognizant and Wipro have all announced buyback plans. Apart from returning the surplus cash with the company to the shareholders, buybacks are also more tax-efficient. Unlike dividends, that now attract 10% additional tax for large shareholders, buybacks offer a better way of rewarding shareholders from the tax point of view.
Markets across Asia and Europe were buoyant on Wednesday after fears of a showdown between North Korea and the US receded. North Korea had aggravated issues recently by firing a ballistic missile over the Japanese airspace and are now threatening to bomb the island of Guam in the Pacific Ocean. The US and South Korea have been conducting military exercises which is intended to serve as a warning for North Korea. The biggest indication of the reduction of geopolitical risk was when gold prices also started subsiding. Nuclear armed North Korea has been a consistent thorn in the flesh of global markets.
IDBI Bank, one of the most distressed PSU banks with Gross NPAs in excess of 24%, now seeks to sell a part of its non-core assets to raise the much needed capital. The bank is currently sitting on bad loans of Rs.50,000 crore and therefore such non-core sales will only partially address the asset quality problem at IDBI Bank. The parent company has identified 5 non-core assets which it will explore hiving off over the next few quarters. These include IDBI Federal Life Insurance, IDBI Asset Management, IDBI Trusteeship Services, National Securities Depository Ltd (NSDL) and NSDL E-Governance Infrastructure. The bank intends to raise close to Rs.5000 crore through the sale of these non-core assets and will help IDBI Bank to shore up its capital base for the time being. The CAR is already low at 11.69%
After the release of the RBI’s first list of 12 names to be referred to the National Company Law Tribunal (NCLT), the RBI has just released the second list of 40 companies. While these companies may not be immediately referred to the NCLT, the lending banks are likely to be given a time frame within which to resolve this issue. Else, these companies will be referred to the NCLT for initiating liquidation proceedings. This list of 40 is expected to include some well known names like Jai Balaji, Jayaswals Neco, Orchid Chemicals, Ruchi Soya, Unity Infra, Uttam Galva, Visa Steel and Videocon Industries etc.
