In a significant progress on the assurance of minimum support price (MSP) for Kharif crops, the government is to announce support prices for paddy, ragi among others. In the Union Budget, the government had assured an MSP of 150% of the cost of production in case of Kharif crops. The government has committed to double farm incomes by 2022 and farmers are facing the brunt of having to sell below the MSP in many cases. After the poor showing by the ruling party in rural Gujarat, the government may not want any delays on this issue ahead of crucial elections in MP and Rajasthan.
Dena Bank has been under Prompt Correction Action (PCA) of the RBI for quite a few months now and one of the requirements of the PCA is for banks to hive off their non-core assets to monetize their assets to the extent possible Dena Bank will be selling stake in 3 entities including SIDBI, where Dena Bank holds a stake. In addition, it will also sell its stake in NSDL and in NSDL e-Governance. Dena Bank is plagued with high levels of gross NPAs and the whole idea of PCA is to force these stressed banks with restrictions on branch expansion, senior executive compensation and unrelated stakes.
The Supreme Court of India has refused to overturn a ban imposed by the RBI on lenders from dealing in crypto currencies. With the SC bank it looks like it is the end of the road for crypto currencies in India. It may be recollected that these crypto currencies are based on a technology called Blockchain. While the Indian government is very keen to apply the Blockchain technology for maintenance of government data and land records, the FM has already clarified that they are not very keen to accept crypto currencies as alternate to fiat currencies. Interestingly, Japan is one of the nations that is bullish on cryptos.
The Tata Group may be looking to combine its various food businesses under a single head. The Tatas have food businesses under Tata Coffee, Tata Global and also parts of the business like lentils and salt are residing in Tata Chemicals. In fact, the Tata group under Mr. Chandrasekharan has been looking at ways and means of rationalizing its group businesses and get better synergies by combining businesses like food, retailing and defence which is currently spread across various group companies. This restructuring is also expected to unlock value and is top on Chandra’s agenda for the group.
With the merger of Idea and Vodafone delayed due to the outstanding dues of Rs.4700 crore payable by Vodafone to the government of India towards spectrum charges. When Vodafone had consolidated its group businesses, it was required to pay Rs.6700 crore as it share of spectrum fees. However, it had only paid Rs.2000 crore at that point of time to go ahead with the merger. The Telecom department has refused to allow Vodafone to go ahead with the merger unless that due is settled, which means the merger will have to actually wait for some more time. The worry is also that the merged entity with loans of over Rs.1 trillion will have a Net Debt / EBITDA ratio closer to 6.8, which is higher than what is permitted under the current rules for approval of such mergers. Looks like some more time still!
J P Morgan has warned that a full-fledged trade war between the US and China could trigger a chain of Chinese defaults. China currently runs a trade surplus of $376 billion with the US and its newly introduced tariffs on Chinese imports will kick in on July 06th. We could see retaliatory tariffs from China immediately after that as trade tariffs on $36 billion worth of Chinese imports start off on 6th July. But JPM believes that there is too much at stake for China corporates and any spiral reaction could led to a spate of defaults by Chinese companies as existing loans will be hard to service. Watch out!
