Category: Business

REUTERS

The All India Online Vendors Association alleges that Amazon India’s wholesale arm buys goods in bulk from manufacturers and sells them at a loss to sellers such as Cloudtail.

A group of more than 2,000 online sellers has filed an antitrust case against Amazon in India, alleging the U.S. company favours some retailers whose online discounts drive independent vendors out of business, a legal filing seen by Reuters showed.

The case presents a new regulatory challenge for Amazon in India, where it has committed $6.5 billion in investment but is battling a complex regulatory environment.

In January, the Competition Commission of India (CCI) had ordered an investigation of Amazon and rival Flipkart, owned by Walmart, over alleged violations of competition law and certain discounting practices, which Amazon is challenging, according to court filings.

In the latest case, the All India Online Vendors Association, members of which sell goods on Amazon and Flipkart, allege Amazon engages in unfair business practices. The group alleges that Amazon India’s wholesale arm buys goods in bulk from manufacturers and sells them at a loss to sellers such as Cloudtail. Such sellers then offer goods on Amazon.in at big discounts.

“This anti-competitive arrangement … is causing foreclosure of competition by driving independent sellers out of the market,” the group alleged in its Aug. 10 filing at CCI, seen by Reuters.

Amazon said in a statement it complies with all laws and its India website is a pure third-party marketplace where sellers have discretion to decide product prices. Amazon’s statement also said its wholesale unit allows businesses to buy products and anyone can register on it.

A Cloudtail spokeswoman said it was in “compliance with all applicable laws in its operations.”

Filings and details of cases reviewed by the CCI are not made public. In the coming weeks, the CCI will review the case and could decide to launch a wider investigation or dismiss it. The CCI did not respond to a request for comment.

Chanakya Basa, a lawyer for the sellers group, confirmed the case filing with the CCI but declined to elaborate.

Regulations allow Amazon to operate an e-commerce marketplace where sellers can list goods for a fee. India tightened regulations last year to deter steep discounts, but small sellers still say Amazon uses complex business structures to bypass restrictions, an allegation the company denies.

The latest case filing, running to more than 700 pages, includes screenshots of product listings on Amazon’s website that showed some products, including groceries and detergents, discounted by between 8% to 45% compared with retail prices visible on the e-commerce website.

The seller group also alleges that Amazon charges lower fees to selected sellers, which effectively makes it difficult for independent online retailers to compete on its website.

Cloudtail, one of Amazon’s biggest India sellers, pays a fee to Amazon of 6.3% for electronic products, while independent sellers pay roughly 28.1%, the group alleged in its filing.

Amazon says it provides an e-commerce platform in India to more than 650,000 sellers.

PTI

Mumbai: The rupee pared its early gains to settle almost flat at 74.33 against the US dollar on Tuesday, tracking muted domestic equities.

Analysts said the rupee closed steady due to suspected intervention by the RBI amid forex inflows and positive global cues.

At the interbank forex market, the domestic unit witnessed highly volatile trade. It opened on a strong note at 74.17, but lost ground during the day and finally ended at 74.33 against the greenback, down 1 paisa over its previous close of 74.32 against the American currency. The rupee had surged to a five-month high on Monday on capital inflows.

During the day, the local unit witnessed an intra-day high of 74.17 and a low of 74.51 against the US dollar.

“The Indian rupee ended little changed against the dollar on Tuesday as suspected central bank intervention in the spot market offset the impact of positive regional cues and persistent greenback inflows,” said Sriram Iyer, Senior Research Analyst, Reliance Securities.

According to Iyer, news of a potential coronavirus treatment and indications that the phase-one US-China trade deal remained on course supported risk sentiment in the region.

Moreover, Asian currencies were higher and lent support. The onshore Chinese Yuan strengthened to near 6.90 to the dollar.

Traders now await Federal Reserve Chairman Jerome Powell’s speech at the annual Jackson Hole summit on Thursday for further cues.

Meanwhile, the Reserve Bank of India said it will conduct simultaneous purchase and sale of government securities under Open Market Operations (OMO) for an aggregate amount of Rs 20,000 crore in two tranches.

The auction will be in held in two tranches of Rs 10,000 crore each and will be conducted on August 27 and September 3, 2020, the RBI said in a statement.

“We see the rupee to remain range bound following sharp up-move on the back of foreign fund inflows yesterday. Tone remain bullish on easy liquidity and optimism about COVID-19 vaccine. From the domestic economic data points, we also see fast recovery in high frequency indicators, better monsoon progress,” HDFC Securities Deputy Head Retail Research Devarsh Vakil said.

Vakil further said that “in near term, rupee expected to trade with positive bias and we could see level below 73.80 a dollar. The bullish trend in rupee will negate only above 75 and strength above 73.80 opens for 73.36 a dollar, 50 Week Simple moving average”.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.12 per cent down at 93.18.

On the domestic equity market front, key stock indices Sensex and Nifty extended gains for the third day. The 30-share BSE benchmark Sensex closed 44.80 points or 0.12 per cent higher at 38,843.88. The NSE Nifty inched up 5.80 points or 0.05 per cent to close at 11,472.25.

Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 219.07 crore on Monday, according to provisional exchange data.

Brent crude futures, the global oil benchmark, rose 0.27 per cent to USD 45.25 per barrel.

PTI

New Delhi: The government has extended by two months the deadline for placing bids for Air India till October 30 as the COVID-19 fallout has disrupted economic activity globally.

The process of stake sale in the national carrier was initiated on January 27. This is the fourth extension given by the government for putting in bids.

Issuing a corrigendum to the Expression of Interest (EoI) for sale of Air India, the Department of Investment and Public Asset Management said the deadline has been extended in view of the “request received from the IBs (interested bidders) in view of the prevailing situation arising out of COVID-19”.

While issuing the EoI in January, the last date for bids was kept at March 17, which was later extended to April 30. This was further extended till June 30, and again till August 31.

Also the date for intimation to qualified interested bidders (QIB) has been extended by over two months till November 20, the DIPAM said in the corrigendum posted on its website.

PTI

New Delhi: Gold prices declined by Rs 557 to Rs 52,350 per 10 gram in the national capital on Tuesday, according to HDFC Securities.

Silver prices also tumbled Rs 1,606 to Rs 66,736 per kg from its previous close of Rs 68,342 per kg.

In the previous trade, gold had closed at Rs 52,907 per 10 gram.

Spot gold prices for 24 carat in Delhi continued to decline and fell by Rs 557 amid stronger rupee, HDFC Securities Senior Analyst (Commodities) Tapan Patel said.

The rupee pared its early gains and settled for the day on a flat note at 74.33 against the US dollar on Tuesday, tracking muted domestic equities.

In the international market, gold was quoting marginally higher at USD 1,930 per ounce, while silver was flat at USD 26.45 per ounce.

“Gold prices traded steady on weaker dollar and worries over rising virus cases in Asia and Europe. However, positive sentiments over signs of resumption in the US-China trade talks kept upside limited in the prices,” Patel added.

Navneet Damani, VP Commodities Research, Motilal Oswal Financial Services said, “Gold prices had recouped some of the losses in yesterday’s session although it failed to show strength and edged lower. Movement in dollar and hopes for coronavirus treatment is responsible for the volatility in precious metal.

PTI

New Delhi: As many as five large banks, including SBI, PNB and BoB, are likely to sell shares to institutional investors in the second half of this fiscal as they look to shore up their capital base amid the coronavirus pandemic impacting the economy.

Qualified Institutional Placement (QIP) would be the most preferred way and public sector banks are likely to take a call on taking this route after finalisation of their second quarter results, merchant banking sources said.

According to the sources, banks would get a better picture about their Non-Performing Assets (NPAs), one-time loan restructuring and consequent ratings latest by the end of October.

Subsequently, banks can start the process of deciding the time, quantum, appointment of merchant bankers and other formalities, the sources said.

Four to five large banks like State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda (BoB) and Union Bank of India would look at raising capital towards the end of third quarter or during the fourth quarter of this fiscal, they added.

Further, the sources said these banks have to plan capital raising in such a manner that there is no crowd out of liquidity and enough space is available to both domestic and global investors to participate in various QIPs.

PNB has already expressed its intent to hit capital markets in the fourth quarter this fiscal to raise funds to help meet growth needs and regulatory requirements.

“We will be planning (capital raising) somewhere around the end of third quarter or beginning of fourth quarter. By this time, we would have declared two quarterly balance sheet of the amalgamated entities,” PNB Managing Director S S Mallikarjuna Rao told PTI in June.

It is to be noted that private sector banks, including ICICI Bank, Axis Bank and Kotak Mahindra Bank, have already mobilised capital thr0ugh QIPs in the last three months.

In a precursor to capital raising exercise, most of the public sector bankshave already got shareholders’ approval for raising capital through a mix of debt and equity route in the current fiscal.

For example, shareholders of SBI have given approval for raising Rs 20,000 crore through public issue or private placement of shares while PNB has received shareholders’ nod for mopping up Rs 7,000 crore.

BoB and Union Bank of India too have approvals from their respective shareholders for raising Rs 9,000 crore and Rs 6,800 crore, respectively, by way of common equity capital through various modes, including QIP.

During the current fiscal, banks might be required to raise capital based on the assumptions of growth in Risk Weighted Assets (RWA) and ploughing back of profits.

As far as raising capital through Tier I and Tier II bonds are concerned, SBI recently raised Rs 8,931 crore by issuing Basel III-compliant bonds to investors.

PNB garnered Rs 994 crore by issuing Basel III-compliant bonds on private placement basis while BoB raised Rs 981 crore by issuing additional tier-1 bonds.

The combined entity will have a market share of 8.7% on pro-forma basis.

A billboard of ICICI Lombard General Insurance company in Mumbai. File | Photo Credit: Reuters

The Board of Directors of ICICI Lombard General Insurance Company Ltd and Bharti AXA General Insurance Company Ltd at their respective meetings on Friday approved entering into definitive agreements for demerger of Bharti AXA’s non-life insurance business into ICICI Lombard through a Scheme of Arrangement.

Based on the share exchange ratio recommended by independent valuers and accepted by the respective boards the shareholders of Bharti AXA shall receive 2 shares of ICICI Lombard for every 115 shares of Bharti AXA held by them as on the date on which the Scheme of Arrangement is approved by the Board of Directors of ICICI Lombard and Bharti AXA.

The combined entity will have a market share of 8.7% on pro-forma basis.

Through this proposed transaction, ICICI Lombard will augment its distribution strength with Bharti AXA’s existing distribution partnerships.

The closing of the proposed transaction is subject to various conditions precedent, including regulatory approvals from the Insurance Regulatory and Development Authority of India, Competition Commission of India, SEBI, Stock Exchanges, RBI, NCLT and approval of shareholders of both companies.

When the scheme becomes effective, the non-life insurance business will be demerged from Bharti AXA into ICICI Lombard, the companies said in a statement.

Bhargav Dasgupta, MD and CEO, ICICI Lombard General Insurance said, “This is a landmark step in the journey of ICICI Lombard and we are confident that this transaction would be value accretive for our shareholders.”

“We would also like to reassure Bharti AXA’s policyholders and channel partners of seamless business continuity and maintaining highest standards of customer service,” he said.

Rakesh Bharti Mittal, Chairman, Bharti AXA General Insurance said, “Over the past few years, our business demonstrated consistent growth, forged productive partnerships and increased the distribution footprint significantly.”

“We are confident that the proposed amalgamation of our business with ICICI Lombard will bring greater business synergies and create value for all stakeholders,” he said.

With inputs from The Hindu

Seeing infra revival: Srinivasaraghavan

Demand for financing purchases of construction equipment and small commercial vehicles (CVs) has seen an improvement in recent months, said T.T. Srinivasaraghavan, MD, Sundaram Finance Ltd. “We are seeing demand for construction equipment going up in several States,” Mr. Srinivasaraghavan told The Hindu.

Building blocks: A lot of infrastructure projects are coming back on track, says Sundaram Finance’s MD | AFP

“Our disbursements for construction equipment exceeded our disbursements on commercial vehicles. It is almost unreal,” he added. “A lot of projects are coming back on track. The government seems to be committed to infrastructure spending, primarily on roads. The small CV segment too has been robust.”

The lender’s total disbursements slumped 79% to ₹929 crore during the quarter ended June. Of this, disbursements to the construction equipment segment accounted for 22.4%, while that to the tractor segment was 24%. In the first quarter of the previous financial year, these two segments had accounted for 10.7% and 5.1% of the ₹4,414 crore in disbursements, respectively. Disbursements for CVs accounted for a mere 26% of the total in the last quarter, compared to 57.4% a year earlier.

Asked as to by when he expected clarity to emerge on the way forward in the wake of the COVID-19 pandemic, he said, “December, I feel, is a good timeline to aim for; by that time, hopefully, we should have some relief from the pandemic and something will happen to mitigate this. Only then will we know how deep and serious this is. Right now, it is surreal.”

‘Excess capacity’

Mr. Srinivasaraghavan also pointed out that the broader CV segment, an indicator of an economy’s health, was still not out of the woods.

Asked if he expected potential replacement demand for CVs kicking in any time soon, he said, “Excess capacity that has built up is very significant and therefore the corner that you speak of is still further away than all of us would like. I don’t see revival any time this financial year. Activity is still reviving very slowly. For the existing capacity to get soaked up, it will take another six months.”

With inputs from The Hindu

PTI

The Union govt. has emphasised on providing tax related services to taxpayers without any hassles during COVID-19 pandemic and to that end has been clearing up pending tax refunds.

The Central Board of Direct Taxes is the apex decision-making body in direct tax matters, administers personal income tax and corporate tax. Photograph used for representational purposes only

The Income Tax department on Friday said it has issued refunds worth ₹88,652 crore to over 24 lakh taxpayers so far this fiscal.

The government has emphasised on providing tax related services to taxpayers without any hassles during COVID-19 pandemic and to that end has been clearing up pending tax refunds.

This include personal income tax (PIT) refunds amounting to ₹28,180 crore issued to over 23.05 lakh taxpayers and corporate tax refunds amounting to ₹60,472 crore to over 1.58 lakh taxpayers during this period.

“CBDT has, so far, issued refunds of over ₹88,652 crore to more than 24.64 lakh taxpayers from 1st April, 2020 onwards. Income tax refunds of ₹28,180 crore have been issued in 23,05,726 cases & corporate tax refunds of ₹60,472 crore have been issued in 1,58,280 cases,” the Income Tax department tweeted.

The Central Board of Direct Taxes (CBDT) is the apex decision-making body in direct tax matters, administers personal income tax and corporate tax.

Asset quality to deteriorate, driven by non-performing loans of MSMEs.

A sharp slowdown in India’s economic growth exacerbated by the COVID-19 outbreak will hurt public sector banks’ (PSBs) asset quality, and result in sharp increases in credit costs, hurting profitability, according to Moody’s Investors Service.

Red flag: NPLs and credit costs will rise in the next two years, depleting PSBs’ capital buffers. | Photo Credit: V. Sreenivasa Murthy

This will lead to a depletion of the already weak capital buffers of the PSBs, it wrote in a report.

“We estimate the PSBs will need ₹1.9-₹2.1 trillion ($25-$28 billion) in external capital over the next two years to restore their loss- absorbing buffers. The most likely source of capital to plug the capital shortfalls will be government support, despite the completion of a large recapitalisation by the government several months ago,” it said. The banks’ asset quality will deteriorate, led by retail and small business loans. “We expect the Indian economy will contract sharply in fiscal year ending March 2021 before returning to growth, though modestly, in the next fiscal,” it said.

As a result, formation of new non-performing loans (NPLs) will accelerate substantially, driven by retail and micro, small and medium enterprises (MSME) segments.

Although the one-time loan restructuring allowed by the RBI will prevent a sudden rise in NPLs, NPLs and credit costs will increase in the next two years, hurting PSBs’ already weak profitability and depleting their capitalisation, it said. It said the banks will face large capital shortfalls again as credit costs will rise. Of the estimated about ₹2.0 trillion required in the next two years, PSBs will need about ₹1.0 trillion to build loan-loss provisions to about 70% of NPLs, which will leave them with enough capacity to grow loans at 8%-10% annually, faster than the 4% in March 2021.

With a capital infusion of this magnitude, banks would also be able to maintain capitalization at levels comparable to those of similarly rated peers globally, with Common Equity Tier 1 (CET1) ratios of at least 10%, it said.

Moody’s said to ensure financial stability, the government will continue to provide capital support for PSBs.

Stating that uncertainty surrounding India’s economic recovery as well as the ongoing clean-up of balance sheets were making it difficult for most PSBs to raise equity capital from markets, Moody’s said adding the PSBs will continue to need support from the government to plug their capital shortfalls.

“We expect the government to infuse fresh funds into them as it has done in the past. If PSBs”, which dominate the banking system, in India, fail to function properly in the absence of state capital support, India the country will face a deepening credit crunch, hampering its economic recovery,” Moody’s added.

With inputs from The Hindu

High inflation unlikely to decline materially: SBI economists

PTI

The Reserve Bank is at the end of its rate-cut cycle as inflation is unlikely to decline materially from the current level, and the onus of economic recovery has now shifted to the government, economists at SBI said.

The comments come a day after the release of the minutes of the latest meeting of the RBI’s Monetary Policy Committee, where high inflation was cited as the prime reason for the unanimous decision to hold rates. The Reserve Bank of India (RBI) had cut rates by 1.15% in two moves since the onset of the pandemic in March this year in order to push economic growth, but surprised many by holding rates at the August review as inflation overshot its target.

“Fiscal policy should play a decisive role, if we have to nurture any hopes of a fast-paced recovery,” economists at the SBI said.

“We now believe that we are at the end of the rate-cut cycle and expectations of large rate cuts must be anchored as inflation is unlikely to decline materially from current level,” the SBI economists said, hinting at best there can be a 0.25% more of rate cuts in the offing.

If RBI continues with unconventional policy measures, it would help the financial markets because it has been significantly able to reduce the long and variable lags of monetary policy through successes like fastest rate transmission and restoring financial stability, it said.

With no rate cuts on the table, the other monetary policy alternative could be to reduce the width of the asymmetric policy corridor or increase in reverse repo rate when the pandemic subsides, they opined.

The economists said they feel inflation — which came at 6.9% for July — could be sticky because their estimates show the large procurement by the government may have resulted in 0.35-0.40% upward impact.

The supply chain disruptions are showing no signs of abating and have played a spoilsport across several states, they added.

The economists also endorsed the Monetary Policy Committee’s call for a change in computing inflation to a practice adopted by developed markets.

“We plead with the National Statistical Office (NSO) to fix the broken CPI methodology that is playing havoc with policy decisions.

“The minutes of the MPC meeting make a forceful case for shifting to a chain-based price index for measuring price level, as is the practice in most developed countries given the change in consumer preferences,” they said.