Today's top business news: Singapore's DBS completes takeover of Lakshmi Vilas Bank, gold set for worst month in 4 years on vaccine hopes, Q2 manufacturing rebound puzzles economists, and more

The broader NSE Nifty rose 128.70 points or 1% to close above the 13,000-mark for the first time at 13,055.15.   | Photo Credit: PTI

The stock bourses are closed today on account of Gurunanak Jayanti. The currency and debt markets are closed today.

Join us as we follow the top business news through the day.

4:30 PM

Bitcoin close to new all-time high

4:00 PM

Unilateralism is hurting global economy, says Prabhu

India’s Sherpa to the G7 and G20 Suresh Prabhu has said that the growing tendency among nations to frame inward-looking policies and spurn multilateralism is a recipe for a greater disaster for the global economy that is already hobbled by the COVID-19 pandemic.

Mr. Prabhu said it was imperative that Italy, Indonesia and India, which will be assuming the G20 Presidency over the next three years, impress upon other G20 members, the need to revive multilateralism in order to boost prospects of meeting the world’s immediate challenges of providing COVID-19 vaccines universally along with healthcare coverage, reviving the global economy and mitigating climate change.

“The global economy is under threat — now clearly because of the pandemic — but it was already slowing down before that. Denial of multilateralism is also one of the reasons economies slowed down more,” Mr. Prabhu said at a conference hosted by RIS and the CII titled ‘Future Roadmap for Global Economic Recovery: Reflections on G20 Riyadh Summit and Beyond’.

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3:30 PM

COVID-19 impact: Office space leasing by co-working players to fall 58% in 2020, says report

Another niche sector that has been hit hard by the pandemic-induced lockdown.

PTI reports: "Leasing of office space by co-working players is expected to fall 58 per cent year-on-year to 3.4 million sq ft in 2020 across six major cities due to lower demand of flexible spaces from corporates, according to property consultant Savills India. In 2019, the co-working operators had leased 8.1 million sq ft office space across six major cities -- Delhi-NCR, Mumbai, Bengaluru, Hyderabad, Chennai and Pune.

In its report, Savills said it “expects 3.4 million sq ft of take-up by coworking players in 2020, recording an 11 per cent share of the total office leasing activity”.

The overall leasing activity is expected to reduce significantly in 2020 as against 2019, owing to delayed decision making by the occupiers, the consultant said but expected the numbers to increase steadily over the next two years.

As per the data, leasing of office space by co-working players in Bengaluru is estimated to fall at 1.1 million sq ft in 2020 from 2.3 million sq ft last year.

In Hyderabad, it is likely to drop to 1.1 million sq ft this year from 2.1 million sq ft.

The Delhi-NCR market will see co-working players leasing at 0.2 million sq ft in 2020 as against 1.5 million sq ft last year.

Leasing of office space by co-working segment in Pune and Mumbai is estimated to drop to 0.4 million sq ft during this year. Pune witnessed 1 million sq ft and Mumbai 0.6 million sq ft absorption in 2019.

In Chennai, 0.2 million sq ft is expected to be leased by co-working segment this year as against 0.6 million sq ft in 2019.

However, Savills India estimated the leasing activity by co-working operators to increase 42 per cent to reach 4.9 million sq ft in 2021 over 2020.

The share of coworking space take-up in overall office leasing activity is poised to rebound to about 15 per cent share in 2021, similar to the 2019 level.

In the year 2022, the number is expected to witness a further 25 per cent annual growth and register leasing activity of 6.1 million sq ft.

“Over the years, shared office space has emerged as a separate asset class, bringing significant cost-advantages to occupiers,” Savills India MD, Research and Consulting, Arvind Nandan said.

At a juncture when co-working spaces were seeing strong growth, the outbreak of COVID-19 has changed the rules with social distancing and de-densification of workspace becoming imperative, Naveen Nandwani, Managing Director - Commercial Advisory & Transactions, Savills India said.

“However, we believe that flexible workspaces will reinvent and reposition themselves, emerging stronger on the other side of the pandemic,” Nandwani added.

UK-based Savills began its India operations in early 2016."

3:00 pm

Banks in India to see capital decline over 2 years without fresh infusion: Moody’s

Another reminder of the sorry state of Indian banks.

PTI reports: "Moody’s Investors Service on Monday said the bank capital will moderately fall in emerging Asia over the next two years, with India seeing larger capital decline without further infusion.

In a report, Moody’s said the uncertain trajectory of asset quality is one of the biggest threats for emerging market banks, as operating conditions remain challenging amid the current COVID pandemic.

The 2021 outlook for banks in emerging markets is negative, while the outlook for insurers is stable, it said.

“In the Asia Pacific region, banks’ rising nonperforming loans and insurers’ volatile investment portfolios are in focus. Capital will moderately fall in emerging Asia over the next two years, and banks in India and Sri Lanka will post larger capital declines without public or private injections,” Moody’s said.

It said non-performing loans (NPLs) will rise most for banks in India and Thailand because of the greater shock to their economies and historically poor performance of certain loan types.

In India, stress among non-bank financial institutions will also curtail their capacity to lend, Moody’s noted.

“Profit growth will be modest because of low-interest rate and subdued lending, but lower loan volumes should aid capital,” Moody’s Managing Director Celina Vansetti-Hutchins said in the ‘Emerging Markets Financial Institutions Outlook’ report."

2:30 PM

Flipkart readies for wedding furniture sales

E-tailer Flipkart said it noticed a spurt in furniture searches during the October-November period as against the same period last year.

The company saw an increase by 1.5-2 times in search of furniture items across verticals during the past few months compared to the same period last year, it said on Monday.

“While this trend is visible across cities, tier-III cities are witnessing over 2x jump in searches over last year, in continuation of a trend seen post-COVID as an increasing number of consumers from smaller cities shop online,” said Nishant Gupta, Senior Director, Furniture and BGMH, Flipkart.

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2:00 PM

Singapore's DBS says has completed takeover of Lakshmi Vilas Bank

Takeover of the trouble lender is complete now.

Reuters reports: "Singapore's DBS Group said on Monday it had completed its takeover of distressed Lakshmi Vilas Bank, helping it shift from a largely digital presence in India to having hundreds of branches.

The 94-year old Chennai-based private bank was folded into DBS's Indian subsidiary at the request of the Reserve Bank of India which cited a serious deterioration in its finances.

Southeast Asia's largest lender, which will pump in 25 billion rupees ($338 million) into its India unit, until recently had just over 30 branches in India but has now added more than 550 and 900-plus ATMs.

Rebranding of LVB branches has begun and ATM screens have also been reconfigured to reflect DBS's logo, according to a source familiar with the matter who added the exercise is likely to be completed within a week.

The source declined to be identified as the information was not public. DBS India did not immediately respond to a request seeking comment on the rebranding.

DBS confirmed it will continue to employ some 4,000 LVB staff.

The takeover has, however, not been smooth sailing for LVB bondholders, after the lender was asked by the central bank last week to completely write down Basel III-compliant tier 2 bonds worth 3.20 billion rupees.

“RBI has set a precedence with the proposed write off as it first time a Tier II bond is being written off,” said Anil Gupta, an analyst at credit rating agency ICRA."

1:00 PM

RBI policy, global trends to drive mkts in holiday-shortened week: Analysts

What factors could drive markets for the rest of the week after they opened following the long weekend?

PTI reports: "Macroeconomic data, auto sales numbers and the RBI policy to be released this week would be among the driving factors for stock markets in the holiday-shortened week, say analysts.

Stock markets would remain closed on Monday for ‘Gurunanak Jayanti’

“Going ahead, the overall structure of the market remains positive, but intermittent profit-booking cannot be ruled out given the sharp rally in the past few weeks. Globally, investors would watch out for Joe Biden transition and developments over stimulus announcement from the new US government.

“On the domestic side, market would react to the better-than-expected September quarter GDP data. Auto companies would be in focus as November sales data would start coming from Tuesday. Banks and financial stocks would be in focus as RBI’s monetary policy is scheduled on Friday,” said Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd.

India’s economy recovered faster than expected in the September quarter as a pick-up in manufacturing helped GDP clock a lower contraction of 7.5 per cent and held out hopes for further improvement on consumer demand bouncing back.

Vinod Nair, Head of Research at Geojit Financial services said, “Markets are awaiting outcome of major events like RBI policy meeting, release of manufacturing and services PMI data which will be decisive factors this week.”

During the last week, the Sensex advanced 267.47 points or 0.60 per cent.

“RBI’s MPC meeting is scheduled this week. Markets are expected to enter a holiday mood with no major directional move in the weeks to come,” said Nirali Shah, Senior Research Analyst, Samco Securities.

“Markets will first react to the GDP numbers. Besides, auto sales numbers and upcoming RBI policy meet would be on their radar,” Ajit Mishra, VP - Research, Religare Broking Ltd said.

Participants would also track development related to coronavirus vaccine."

12:30 PM

Don’t harm the goose that lays the golden egg

The Life Insurance Corporation of India (LIC) is the backbone of the Indian economy. Just as Lord Sri Krishna, holding the Govardhana Hill, saved the entire Gokulam, the LIC holds the umbrella to protect the Indian economy from any onslaught, whatsoever.

This is not a euphemism but the stark reality. In such a situation, what are the reasons the government feels it needs an IPO by the premier insurer? In the words of the Finance Minister: to give access to capital, unlock the embedded value of LIC, provide retail investors with a pie in the profit of LIC and bring additional discipline in the organisation. Let’s delve deeper into these areas.

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12:00 PM

Paytm Money to facilitate investments in IPO, aims for 8-10% applications mkt share

An interesting new foray by the payments company.

PTI reports: "Fintech major Paytm on Monday said its wholly-owned subsidiary Paytm Money will now facilitate investments in Initial Public Offers (IPOs).

The move is aimed at benefiting retail investors with wealth creation opportunities, as they will be able to seamlessly apply and join the growth story of rapidly expanding companies, a statement said.

The company has made the process of IPO application completely digital and simple for retail investors to apply for public offers, and will continue to add new tech-savvy features for enhanced user experience, it added.

The company is aiming to capture “8 to 10 per cent of applications market share in the first year of launch”, the statement said.

Paytm Money has enabled investors to instantly apply for all the latest IPOs via UPI ID, linked to their bank accounts to quickly complete the application process. The platform offers an interface to make changes, cancel or reapply the bidding application within the IPO window.

“The Indian start-up ecosystem has a growing appetite for entering the capital market, now more companies want to raise capital from a broader set of investors with a public listing. Likewise, investors are also increasingly willing to diversify their portfolio,” Paytm Money CEO Varun Sridhar said.

This presents a big opportunity and the company intends to make the process more accessible to citizens, he added.

“In the near future, we plan to launch IPO funding, derivatives trading, margin finance and a host of other value-adding features to make investing seamless and convenient. This is aligned with our mission to drive financial inclusion across the country,” he said.

According to an analysis of data available with the stock exchanges, 12 initial public offerings (IPOs) in 2020 so far raised around Rs 25,000 crore, significantly higher than Rs 12,362 crore mopped up through 16 initial share-sales in the entire 2019. This figure could rise further as Burger King’s Rs 810-crore initial share-sale is scheduled to open on December 2."

11:30 AM

Gold falls, set for worst month in 4 years on vaccine hopes

The bull run in gold comes to an end.

Reuters reports: "Gold slipped on Monday as upbeat equities fuelled by optimism over a coronavirus vaccine-led economic rebound offset a weaker dollar, putting the bullion on course for its worst month in four years.

Spot gold fell 0.3% to $1,782.72 per ounce by 0049 GMT. U.S. gold futures was down 0.1% at $1,778.10. Gold is down 5.1% in November, as growing optimism over a COVID-19 vaccine and greater U.S. political stability under Joe Biden's incoming administration sparked a sell-off in the metal and favoured traditionally riskier assets.

Vaccine optimism and bets for more monetary easing ahead of testimony in Congress from U.S. Federal Reserve Chairman Jerome Powell this week, helped to push the dollar to a more than two-year low and boosted world shares.

U.S. health authorities will hold an emergency meeting to recommend a coronavirus vaccine for healthcare professionals and people in long-term care facilities, while Britain is set to approve BioNTech SE and Pfizer Inc's COVID-19 vaccine.

Although U.S. President Donald Trump pledged to continue his legal fight to overturn the Nov. 3 election results, his comments in a Fox News telephone interview suggested he was growing resigned to his Democratic opponent moving into the White House on Jan. 20.

Face-to-face negotiations between the UK and the European Union over a trade deal restarted on Saturday, in a last-ditch attempt to find agreement with just five weeks to go before their current relationship ends. * Gold is used as a hedge against inflation, political and economic uncertainties.

Physical gold demand in India remained healthy as a drop in prices to a near five-month low encouraged retail consumers and jewellers to raise purchases amid wedding season. * Silver fell 0.9% to $22.50 per ounce, while platinum rose 0.1% to $964.71 and palladium was up 0.1% at $2,426.31."

11:00 AM

Deadliest week of the pandemic

10:40 AM

U.S. second biggest FDI source for India during April-September 2020

The U.S. has emerged as the second biggest source of foreign direct investment (FDI) into India, replacing Mauritius, during the first half of the current financial year, according to data of the Commerce and Industry Ministry.

During April-September 2020, India attracted FDI worth $7.12 billion from the U.S. and $2 billion from Mauritius, which slipped to fourth position, the DPIIT (Department for Promotion of Industry and Internal Trade) data showed.

Mauritius was the second biggest FDI source during the same period previous year. The U.S. was the fourth biggest investor during that period.

Singapore with $8.30 billion foreign inflows continued to be the top source of FDI for India in April-September 2020-21. The country has received $2.1 billion inflows from Cayman Isands.

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10:20 AM

Q2 manufacturing rebound puzzles economists

The turnaround in India’s manufacturing sector, which rebounded from a 39.3% contraction in GVA (gross value added) in the April-June quarter to clock 0.6% growth in the second quarter, has left economists scrambling to reconcile conflicting data from the government as they try to come to terms with the latest GDP estimates that suggest the economy fared better-than-expected.

India’s GDP contracted by 7.5% over the July-September period, as per official data released on Friday, beating most estimates, including a ‘nowcast’ in the RBI’s November monthly bulletin that projected an 8.6% decline in the last quarter .

While services continued to suffer from the COVID-19 pandemic’s impact, the industrial sector’s contraction narrowed to just 2.1% in the second quarter, after shrinking by a steep 38% in the preceding three-month period. Most of these gains were attributable to the improved performance of the manufacturing sector.

“Though the whole press release [on GDP estimates] is full of surprising numbers, the most astonishing number is the positive growth in manufacturing,” SBI group’s chief economic advisor Soumya Kanti Ghosh observed in a research report titled ‘Q2 GDP shows surprising resilience: Is it good enough to last?’. “Despite being the worst affected sector in Q1 due to the lockdown, it is quite puzzling how manufacturing turned itself around,” he wrote.

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10:00 AM

Battle of the billionaires: Bezos, Ambani gun for India retail supremacy

An analysis of the battle between the business giants.


Reuters reports: "Jeff Bezos and Mukesh Ambani, two of the world's richest men, face a turning point in a battle for preeminence in India's booming, nearly trillion-dollar retail market.

The outcome of a legal dispute which has embroiled the billionaires' Amazon.com and Reliance Industries Ltd empires - where a court ruling is imminent - may shape India's retail landscape for years to come.

The winner in the fight for Future Retail Ltd, Amazon's estranged local partner, will get pole position in the race to meet the daily needs of more than a billion people.

Accusations of insider trading and contractual breaches, as well as nationalistic cries to keep the U.S. giant at bay, mark the high-stakes fight, which has snowballed from what began as a dispute between Amazon and Future.

If Amazon succeeds, it may slow Reliance's plans to expand its e-commerce and brick-and-mortar operations. If Amazon loses, its hopes of expanding its interests in India's second-largest retailer and cashing in on its key grocery supply chain will be dashed, industry insiders say.

Amazon is trying to stop Reliance's $3.4 billion purchase of Future Group's retail assets. The U.S. company, which won an injunction from an arbitrator to block the Reliance-Future deal, accuses its partner of breaching some pre-existing agreements, misleading the public and insider trading. Future denies the allegations.

Amazon, Reliance and Future did not respond to requests for comment.

Bezos's behemoth is a formidable foe, but Ambani has a history as a disrupter. He has shaken foreign telecom firms by offering dirt-cheap data. Industry executives see his e-commerce plans as a threat for Amazon and Walmart Inc's Flipkart.

“If Reliance moves faster and faster, obviously it'll become very difficult for anyone else to gain,” said Himanshu Bajaj, head of consulting firm Kearney's India retail practice.

Reliance, seeking to expand its JioMart e-commerce business, this month completed a $6.4 billion fund-raising by selling a stake in its retail arm to such investors as Silver Lake Partners and KKR & Co.

India's retail market will grow 46% over the next four years to an annual $1.3 trillion, reckons Forrester Research. The key battle is over groceries, expected to be worth around $740 billion a year by 2024.

Founded by Kishore Biyani, dubbed India's retail king, Future transformed the country's retailing in recent decades, before COVID-19 hit the business so hard this year that Biyani was forced to find a new buyer.

Around 1,300 of Future's more than 1,700 retail outlets in 400 cities sell groceries. Its budget supermarkets cater to middle-class shoppers, while its upmarket stores offer products like imported cheese and fresh guacamole, relatively rare in India's retail landscape.

That makes Future a prized asset for both Reliance and Amazon.

Reliance and Future dominate the market, with the next competitor, Avenue Supermarts Ltd's DMart, having just 220 outlets in around 70 cities.

While Reliance boasts around 11,000 retail stores, just 800 of those offer food and groceries, UBS estimates. Future's retail assets would nearly triple Reliance's footprint in the grocery segment and boost its e-commerce plans, said Forrester analyst Satish Meena.

Amazon sees Future as a long-term play to optimise its supply chain for grocery delivery, an area where it has lagged, Meena said.

“Grocery is the category in which you fight,” he said, while losing Future to Reliance would “slow Amazon”.

Amazon, Future and Reliance this month hired some of India's top lawyers, who argued at length before a New Delhi judge. She is expected to decide soon whether to restrain Amazon from approaching regulators to block the Future-Reliance deal.

Amid heated legal arguments and patriotic appeals, Future's lawyer attacked Amazon as “Big Brother” in America, arguing Future faces bankruptcy if the Reliance deal fails.

“Please don't allow this American giant to kill Future,” the lawyer urged the judge."

9:30 AM

Watch | What is a moratorium?

On November 17, the Centre, acting on the recommendation of the Reserve Bank of India, imposed a moratorium on Lakshmi Vilas Bank for a period of 30 days.

The 94-year-old bank has been struggling with losses for three years.

What is a moratorium?

The RBI has the power to ask the government to have a moratorium placed on a bank’s operations for a specified period of time. Under such a moratorium, depositors will not be able to withdraw funds at will.

Usually, there is a ceiling that limits the amount of money that can be withdrawn by the bank’s customers.

In the case of Lakshmi Vilas Bank, depositors cannot withdraw more than ₹25,000 during the one-month moratorium period.

 

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Printable version | Jan 26, 2021 6:22:35 PM | https://www.thehindu.com/business/businesslive-30-november-2020/article33209878.ece

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