Tag: Business news

SBI Cards IPO: Sound fundamentals but macros remain a challenge, say brokerages

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

The country’s largest public-sector lender State Bank of India (SBI) has filed an initial draft with Security and Exchange Board of India (Sebi) to sell up to 4 percent stake in its credit card venture, SBI Cards and Payments Services (SBI Cards). The IPO is expected to be around Rs 9,000-9,600 crore in size and as per reports, it is likely to hit the market this month.

The share sale is poised to become the fifth-largest IPO in the country after Coal India, Reliance Power, GIC Re and Oil and Natural Gas Corp (ONGC) and will help the parent, SBI, raise funds to boost credit growth. For FY19-20, it is likely to be the largest IPO.

SBI, which holds a 74 percent stake in the unit, along with private equity firm Carlyle Group, which holds the rest 26 percent through its subsidiary CA Rover Holdings, will together sell 13 crore shares or 14 percent of the company through the IPO. While Carlyle is looking to sell a 10 percent stake via the IPO, SBI would sell a 4 percent stake in the company.

Valuations

Given the higher share of the offer for sale (OFS), it seems that the IPO is primarily to unlock value for the existing investors (SBI and Carlyle) and also to provide an opportunity for non-promoters to invest in a direct play on India’s rising consumerism and digitisation story, said Emkay in a report.

“For SBI, the IPO would imply a value of Rs 37 per share (post discount), which is higher than Street estimates, adding Rs 15 to the target price for SBI (Rs 350),” it added.

READ MORE: SBI Cards IPO: 10 vital facts about India’s credit card market that the draft prospectus reveals

Meanwhile, according to Ambit, expected valuations of the IPO are at 83 percent premium to average valuation of high growth and/or high RoE lenders like HDFC Bank, Bajaj Finance, Bandhan Bank, AU Finance and Aavas Financiers.

However, unlike other lenders, SBI Cards is a mono-line business with no optionality to get into other businesses given parent SBI’s presence in other businesses, it noted. It added that this lack of optionality means that the company is exposed to vagaries of credit card business compared to other lenders and hence should also be a factor determining valuations.

“The valuation benchmarking for SBI Cards becomes difficult due to a lack of strict comparable players. The credit card business comes under the normal operations for most of the banks,” Ambit further explained.

As per Emkay, key risks include regulatory risk on merchant discount rates (MDR)/Interchange fees, higher capital requirement and rising asset-quality risk given weakening macros/employment rates.

Ambit further noted that while asset quality has held up till now, a slowing economy and job growth can lead to an increase in NPAs, in line with global experience.

Credit Card Industry

As per the Ambit report, SBI Cards HAS an 18 percent market share in the number of outstanding credit cards as of September 2019 and 17 percent/18 percent share the number of credit card transactions/value of credit card transactions in 1HFY20. The market share of SBI in most of these parameters has increased over the years making SBI the second biggest credit card issuer in India after HDFC Bank.

It added that low penetration in SBI customer base plus strong distribution means SBI Cards’ card base can grow at 23 percent CAGR over FY19-24. Increased focus on EMI products can lead to loan book growing at an even faster pace at 46 percent CAGR during this period, the report stated.

Emkay believes that that SBI Cards operating as a separate entity with strong systems/team in place given its earlier tie-up with General Electric
(GE) and still, sub-par penetration in its captive Banca customers offer significant potential in terms of scaling up the card base amid the Indian consumers’ increasing predilection for credit cards.

With a card base of 9.5 million as of September 2019 and growing at 35 percent Y-o-Y since FY15, it has claimed a market share of 18 percent versus 15 percent in FY15. Growth in outstanding card receivables/loan book is also higher at 41 percent YoY over FY15-19 to Rs 23,000 crore.

For India as a whole, Emkay believes that India remains a long-term consumption story although it has slowed down a bit in the recent past amid the economic slowdown, with the share of discretionary spending on the rise indicating a gradual but steady change in the consumption pattern.

India’s credit card industry is set to witness 23 percent CAGR over FY19-24E to $47 billion as per CRISIL. However, despite growing at such a faster pace, it will still be significantly small compared with other global players

Thus, the brokerage expects credit card growth in India has a long way to go and we expect intense competition among players. However, the card industry will have to endure the incoming asset-quality risk given weak economic trends and unemployment rate which could derail the card industry’s dream run, it added.

Disclaimer: CNBCTV18.com advises users to check with certified experts before taking any investment decisions

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Opening Bell: Sensex rises over 200 points, Nifty above 12,090; Yes Bank surges 6%

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Indian shares opened higher on Wednesday, tracking gains in Asian peers as more upbeat signals from US-China trade talks fanned hopes of an imminent end to tariff hostilities.

At 9:33 am, the Sensex was trading 240.46 points higher at 41,061, while the Nifty50 index was trading 67 points higher at 12,105.

Among broader markets, Nifty Midcap and Nifty Smallcap indices were trading over 0.4 percent and 0.2 percent, respectively.

Yes Bank, Eicher Motors, Tata Motors, UPL, and Maruti were the top gainers on Nifty, while Cipla, Zee, BPCL, Coal India, and Dr Reddy’s led the losses.

All sectoral indices except Nifty Media were positive at the opening. Nifty Auto rose the most, up 1.5 percent while Nifty IT and Nifty Metal added around 0.5 percent each. All banking and financial indices were also up. The Nifty PSU Bank index advanced 0.7 percent, while Nifty Bank gained 0. percent. Meanwhile, Nifty Media fell 0.6 percent at opening.

Yes Bank rose 6 percent after the company said that a board meeting will be held on November 29 to discuss and consider raising of funds by issue of equity or equity-linked securities through permissible modes, subject to necessary shareholders or regulatory approvals, as applicable.

Cipla was under pressure, down 2 percent, after the US FDA issued 4 observations to Patalganga Plant.

Globally, the Wall Street indices rose to fresh record closing highs on Tuesday and stoked confidence in early Asian trade with MSCI’s broadest index of Asia-Pacific shares outside Japan up 0.14 percent. Australian shares added 0.46 percent and Japan’s Nikkei rose 0.41 percent.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

CNBC-TV18 Market Highlights: Sensex, Nifty end at record closing highs led by banks, auto stocks; Yes Bank surges 8%

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Indian shares ended higher on Wednesday, with both Sensex and Nifty at their record closing highs led by gains in banking, auto, metal, and IT stocks, ahead of November F&O expiry due tomorrow.  The Sensex ended 199 points higher at new closing high of 41,021, as against its previous high of 40,889 hit on November 25, while Nifty also settled 63 points higher to its new closing high of 12,101 as against its previous closing high of 12,088 hit on June 3.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Out of 85 IPOs listed between FY17 to FY19, only 58 gained on listing day: KPMG report

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Initial public offerings (IPOs) have been an effective way to raise funds. A recent report by KPMG identifies various trends in the IPOs of FY17, FY18 and FY19.

According to the report, a total of 18 companies were listed in FY19 including 5 public sector undertakings (PSUs). These 18 companies, cumulatively raised Rs 19,900 crore. Against this, the 41 companies listed in FY18, raised over Rs 76,200 crore and the 26 companies listed in FY17 raised Rs 28,400 crore.

The funds raised in FY19 and FY17 were lower by 74 percent and 63 percent respectively as compared to FY18. FY18 and FY17 were amongst the best years for IPOs in India.

“In terms of funds raised, the largest two listings of FY18 were in the financial services sector, particularly the insurance sector. These two companies together accounted for over 27 percent of the funds raised during the year. The same pattern was visible in FY17 as well, where the two largest listings, accounting for 32 percent of the total funds raised during the year, belonged to the Financial Services sector,” said the report.

It also noted that although insurance companies have been the biggest participants in terms of funds raised during FY18 and FY17, three out of the six insurance IPOs declined by 8.3 percent on an average, on listing day.

Listing Day Performance

The average listing day return of the 18 companies listed in FY19 was a meagre 2 percent as against 21 percent for the 41 companies listed in FY18 and 20 percent for the 26 companies listed in FY17, the report quoted.

Out of the 85 IPOs from FY17 to FY19, 58 ended the listing day at a premium to their offer prices, out of which 40 generated double-digit returns. Of these 40, two companies in FY19 delivered 20 percent plus listing day return compared to 15 companies in FY18 and 10 companies in FY17.

One company ended the listing day at its offer price and of the 26 companies from FY17 to FY19 which delivered negative returns, seven companies delivered double-digit negative returns.

Sector-Wise Performance

Out of the nine sectors that saw more than two listings during the three financial years, the personal and household goods sector generated the highest listing day return of 72.1 percent, followed by construction and material at 18.1 percent, as per the KPMG report. It added that the sector at the bottom was clothing and apparels with a negative 2.1 percent return.

“Out of the 26 companies that yielded negative listing day returns, seven were from financial services and four each from industrials, manufacturing, and metals, construction and material and TMT sectors,” it stated.

Subscription

IPOs with smaller issue size, in general, saw greater subscription by amount compared to IPOs with larger issue size, according to the report. The 10 IPOs that had the highest subscription to funds raised ratio, were all below Rs 600 crore.

Performance on the basis of the size of the offering

FY18 was the year of large IPOs. Not only was the average offering size in FY18 higher by about 70 percent compared to FY17 and 68 percent compared to FY19, but the three largest IPOs in FY18 also raised more capital than all the IPOs in FY17 and FY19, individually, the report calculated.

The global consultancy firm noted that the top five IPOs in FY19 in terms of size of the offering returned an average of 11 percent as compared to the negative 9.5 percent return of the smallest five IPOs of the year.

While in FY18, the five largest IPOs returned a meagre 1.8 percent on listing day compared to 75.2 percent returned by the bottom five companies. The corresponding figures for FY17 were 30.7 percent on a listing day, on average, for the top five compared to 1.3 percent for the bottom five.

Sectorial View

It also noted that FY19 witnessed a slowdown in the listing space, compared to the two preceding years. Of the 18 listings during the year, the top three sectors in terms of a number of listings were financial services, construction and materials, and hospitality with five, three and two listings, respectively.

As per the report, the financial services sector leading the pack, raised Rs 11,000 crore constituting 55 percent of the total funds raised during the year. The top three sectors constituted 56 percent of the listings, raising 73 percent of the year’s total funds raised.

Financial services was again the frontrunner amongst the sectors during FY18 with a total of 12 listings, followed by construction and materials at six and industrials, manufacturing and metals at five.

In FY 18 also, the companies in the financial services sector raised the maximum capital at Rs 54,600 crore or around 72 percent of the total funds raised during the period, with the help of listings of the companies in the insurance space. These three sectors together accounted for 56 percent of the listings and around 84 percent of the funds raised.

The report further added that though the distribution was relatively less concentrated in FY17, the pattern was repeated. The top three sectors included financial Services with six, followed by TMT with five and Healthcare with three listings.

Together, those companies accounted for 54 percent of the listings with 71 percent of the total funds raised. Financial services alone accounted for over 51 percent of the funds raised, it quoted.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Tamil Nadu woman selling Rs 1 idli gets LPG connection after Anand Mahindra’s tweet

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

The indomitable spirit of an 80-year-old woman from Tamil Nadu’s Coimbatore district who sells idlis at just one rupee each has melted the hearts of many including those in the corridors of power as she has got an LPG connection within a day of a video depicting her hardship going viral.

The story of Kamalathal spread like wildfire on social media after Mahindra Group Chairman Anand Mahindra tweeted a video showing her preparing idlis in her humble cottage.

“One of those humbling stories that make you wonder if everything you do is even a fraction as impactful as the work of people like Kamalathal. I notice she still uses a wood-burning stove. If anyone knows her I’d be happy to ‘invest’ in her business & buy her an LPG fuelled stove,” he wrote in the caption on Tuesday.

However, the government came forward to issue her an LPG connection, with Union Minister for Petroleum and Natural Gas and Steel Dharmendra Pradhan playing a pro-active role.

“Salute the spirit and commitment of Kamalathal. Glad to have helped her through local OMC officers in getting LPG connection,” Pradhan said in a tweet on Wednesday.

“This is superb. Thank you Bharat Gas Coimbatore for giving this gift of health to Kamalathal. As I have already stated, I am happy to support her continuing costs of using LPG…And thank you @dpradhanbjp for your concern and thoughtfulness,” Mahindra said.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Google to pay 1 billion euro fine to end French tax fraud probe

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Google will pay almost one billion euros to France to close a fiscal dispute over alleged corporate tax fraud recorded between 2011 and 2014.

“We have put an end to the tax and related disputes we had had in France for many years,” Google said in a statement, Efe news reported on Thursday.

“These agreements include a payment of 500 million euros announced on Thursday by a French court, as well as an amount of 465 million euros in additional taxes that we have agreed to pay,” the tech giant added.

The payment of the fine will put an end to a four-year probe.

The French Treasury accused the tech giant, which has headquarters in Ireland, of fiscal engineering to avoid paying taxes in France.

The French Financial Prosecutor’s Office launched an investigation into Google’s accounts in June 2015 after the Treasury alleged the company had not paid corporate income tax over four years.

Google has used a legal loophole in the past to avoid paying hefty tax fees in European countries by having staff in Dublin close all sales contracts.

The Paris Court of Appeal added in a statement that the agreed convention allows closing the criminal proceeding against Google that could result from a tax inspection.

In statements to the website of the newspaper “Le Figaro”, the French finance minister, Gérald Darmanin, said that the figure was “a record” and that it resembled what the government had claimed back from Google.

“It is a historic settlement both for our public finances and because it marks the end of an era,” Darmanin said.

Darmanin said that the same firmness shown with the internet giant can be applied to other companies and revealed that they are in negotiations with some of them, “large and small, digital or not.”

“What is clear is that the dispute we have just closed will undoubtedly establish jurisprudence and clarify the whole world for the future,” he said.

In a statement, he considered the agreement “historic” because “it marks the end of an era.”

Justice minister Nicole Belloubet said that the resolution of this case would not have been possible without the adoption of new rules in the fight against fraud.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Indiabulls Housing dips 7% on reports of PIL over alleged financial irregularities

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Indiabulls Housing Finance hit its 52-week low, falling over 7 percent, on Friday after reports claimed a public interest litigation (PIL) was filed against the company and its promoters in Delhi High Court on allegation of siphoning off funds.

The stock fell as much as 7.3 percent to hit its 52-week low of Rs 415 per share on the BSE. At 9:20 AM, the stock was trading 5 percent lower at Rs 425 as compared to a 0.45 percent or 164 points rise in the BSE Sensex at 36,808.

The PIL before Delhi HC seeks Special Investigation Team (SIT)-led investigation into the alleged violations and offences. It also alleges inaction by regulators such as Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Serious Fraud Investigation Office (SFIO), Registrar of Companies (ROC), and National Housing Bank (NHB), Kamini Jaiswal, Supreme Court lawyer, told CNBC-TV18.

The PIL seeks directions to MCA to authorise SFIO probe into alleged financial irregularities. It also seeks directions to RBI, SEBI to investigate the alleged irregularities and take necessary actions, she added.

In a BSE filing regarding the PIL, the company said that the petition hasn’t yet been filed in the High Court as per the website records of Delhi High Court, but has been leaked in the social media with malicious intent and vested interests to create turbulence in the stock price of the company and fulfill ulterior motives.

“Instead of going to the right forums of various regulatory agencies and making the complaint, the petitioners have deliberately chosen the route of PIL to attract attention and play into the hands of blackmailers and corporate rivals at a sensitive time of merger process of Indiabulls Housing Finance and Laxmi Vilas Bank,” the company said.

For the past 3 months, the company is undergoing various inspections and scrutiny of all the different regulators as a part of the merger process and is determined to fight out the petitioners in the court, it clarified.

Also, track all live market action on CNBC-TV18 Market Blog

Disclaimer: CNBCTV18.com advises users to check with certified experts before taking any investment decisions

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

US trade representative confirms ministerial level China trade talks in ‘coming weeks’

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin spoke with Chinese Vice Premier Liu He and agreed to hold ministerial-level trade talks in Washington “in the coming weeks,” a USTR spokesman said late on Wednesday.

“They agreed to hold meetings at the ministerial level in Washington in the coming weeks,” USTR spokesman Jeff Emerson said in an emailed statement.

“In advance of these discussions, deputy-level meetings will take place in mid-September to lay the ground work for meaningful progress.”

Earlier, China’s commerce ministry said that the top trade negotiators for the two countries agreed during the call to hold talks in early October in Washington.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

With easy money around, tech entrepreneurs turn risk-averse

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

NR Narayana Murthy launched Infosys in 1981 with six other colleagues on a mere $250 borrowed from his wife.

The tiny sum kept the company going for some time but the hunger and animal spirit in him did not die. “We stayed in very inexpensive hotels… we didn’t have any cars, sometimes we took buses, sometimes we walked. It was tough,” Murthy said once.

A story of struggles and extraordinary persistence, it took a lot of patience for Murthy to create what Infosys is today — a giant tech powerhouse.

Although there is no doubt that the current Indian tech startup ecosystem has witnessed a dramatic rise amid fast adoption of emerging technologies, do we witness the same exuberance of animal spirit among young entrepreneurs?

The country added 1,200 new technology startups in 2018 as against 1,000 in 2017, and the momentum has not dipped in the first half of 2019.

The momentum is on simply because of easy funding route amid scores of venture capitalists and angel investors lining up to put their money in the growing breed of fintech, agritech and healthtech startups.

The funding in the Indian tech startups hit $5.85 billion in the first half of 2019, according to DataLabs by Inc42.

However, the easy funding route has killed the passion to go beyond the obvious and take big risks among young entrepreneurs who are often accused of copying Silicon Valley ideas and replicate those in the Indian market, feel experts.

“As India’s middle class grows, startup entrepreneurs focused on solving consumer challenges are benefiting from the fresh green shoots of easy capital availability,” said Prabhu Ram, Head, Industry Intelligence Group (IIG), CyberMedia Research (CMR).

The advent of large investors with deep financial pockets and stamina for big bets, and the heft to play kingmaker is changing the nature of startup scene.

“In comparison, the earliest wave of Indian entrepreneurs took big risks, with no easy access to capital, and navigating large swathes of information gaps, with no clear trajectory to the market, to finally see market success,” Ram told IANS.

Apple co-founder Steve Wozniak who visited India last year, categorically said that he does not see big advances in tech companies in the country.

Speaking at the an industry event in New Delhi, ‘Woz” said: “What is the biggest tech company here, Infosys maybe? The culture here is one of success based upon academic excellence, studying, learning, practising and having a good job and a great life”.

One can be optimistic on the booming tech scene in India now but this may not be the case tomorrow as big risk-taking capacity appears to be dying.

A report by IBM Institute for Business Value and Oxford Economics found that 90 percent of Indian startups fail within the first five years and the main reason is lack of innovation.

The IT industry’s apex body Nasscom is also “cautiously optimistic” about the year ahead, considering macro-economic factors and various geopolitical “uncertainties” such as India-China and India-US trade relations.

The success stories of tech startups will remain confined to India without global footprint as, according to “Woz”, “I do not believe there will be any big tech company or breakthrough in India similar to Google, Facebook or Apple”.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Here’s why Moody’s downgraded long-term rating of Indiabulls Housing Finance

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Global rating agency Moody’s Investors Service (Moody’s) on Wednesday downgraded Indiabulls Housing Finance Limited’s (IBH) long term corporate family rating to Ba2 from Ba1, citing renewed pressure on the cost and availability of funds.

The credit rating agency also changed the outlook to negative from stable and added that it does not expect the rating to go up over the next 12-18 months as it believes the tight funding conditions may persist for some time.

“The downgrade reflects renewed pressure on the cost and availability of funds for IBH and certain other finance companies in India. This presents a more challenging external environment than Moody’s had anticipated,” the agency said in a report.

The stock has fallen 35 percent in 2019 and 57 percent in the last 1 year.

The agency also lowered IBH’s foreign-currency senior secured rating to Ba2 from Ba1, foreign- and local- currency senior secured MTN program ratings to (P)Ba2 from (P)Ba1.

According to Moody’s, the company’s incremental cost of funding rose 45 basis points (bps) quarter-on-quarter during June 2019, while the company’s balance sheet declined by 7 percent in the same period.

“This rise in funding costs was a key driver for the 28 bps decline in spreads in the same period, although profitability remains comparatively strong relative to its peer group,” it noted.

Moody’s said that the rating downgrade also factors in decline in asset quality during the June quarter, wherein stage 3 loans went up by 57 percent on a quarter-on-quarter basis, albeit from a low base.

It also cautioned that the rating could be downgraded in case of the following scenarios. Firstly, if the company is forced to shrink its core business because of impediments on funding, which would impact its overall franchise including by way of lowering profitability; secondly, if there is further meaningful deterioration in asset quality and lastly, if there is a reduction in either the quantity or quality of liquid assets that it is currently holding.

On the positive side, Moody’s said that liquid assets of Indiabulls Housing Finance remain high, at around 24 percent of its balance sheet at the end of June 2019.

“This continues to be a key positive credit driver as it allows the company to be able to withstand some period of impaired access to funding. As interest rates on high quality liquid assets have declined, the company’s strategy of holding a relatively high pool of liquid assets — a positive rating factor — has become costlier, presenting a drag on earnings due to negative carry,” it said.

Earlier in April 2019, the company had announced a plan to merge with Lakshmi Vilas Bank, a small bank, and thus get converted into a bank. This merger proposal is now awaiting regulatory approval from RBI. “If approved and consummated, it would be a significant credit positive event for the company,” said Moody’s.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow