Archives of “corporate sector” Tag

A downgrade of India’s sovereign rating outlook would pose fresh challenges to corporate sector-Standard Chartered

-S&P still has a negative outlook on India’s sovereign rating. If GDP growth is not revived, India risks falling into a cycle of low growth and high debt. Regulations such as the Statutory Liquidity Ratio (SLR), which requires the banking system to invest 23% of its net demand and time liabilities (NDTLs) in government securities, provide an assured source of funding for government debt. Almost 98% of government debt is funded domestically.

-Thus, while a rating downgrade would not affect the funding of government debt, it would become more expensive. The corporate sector could suffer more as raising debt became both challenging and expensive.

Japan’s banks lower sights as Abenomics squeezes JGB trading

Shinzo Abe’s expansionary economic policies may be bolstering Japan’s global manufacturing groups, but the country’s biggest banks are suffering an Abenomics ordeal.

The three biggest Japanese lenders – Mitsubishi UFJ, Mizuho and Sumitomo Mitsui – on Wednesday forecast lower profits for the financial year to next March, as the aggressive monetary easing promoted by the prime minister and his central bank governor, Haruhiko Kuroda, pushes them out of the relatively lucrative government bond (JGB) market.

 Banks have for years counted on income from JGB trading to supplement the poorly paid business of lending to companies. Japan’s corporate sector is flush with cash and – given the country’s weak growth – has little need for new factories or equipment in any case. When companies do turn to banks for funds, it is at rates so low as to make the loans barely profitable. Read More  

GOVT TO DROP 26% PROFIT SHARING CLAUSE FROM MINING BILL

COAL INDIAA Parliamentary panel on Tuesday recommended that the controversial 26 per cent profit sharing clause in the Mining Bill be dropped from the proposed legislation. The move, if accepted by the Government, would go a long way in reducing the financial burden on various mining companies like Coal India Ltd (CIL).

The Parliamentary Standing Committee on Coal and Steel in its report on the Mines & Minerals (Regulation and Development) Bill 2011 or MMDR Bill, which was tabled in Parliament, suggested that the clause – under which coal and lignite companies are to share their profits from mining activities with local communities affected by their operations – be removed and instead the companies should contribute an amount equal to the royalty paid to state governments during the fiscal.

“The Committee recommends that in case of coal and lignite, the mechanism for payment to District Mineral Foundation on the basis of royalty paid during the financial year may be worked out instead of an amount equal to 26 per cent of the profit and amendment be made in the relevant Clause as proposed by the Ministry of Coal,” the panel said in response to the much in the news clause, which had also created a lot of resentment within the corporate sector. Read More  

Europe’s top 1,000 nonfinancial companies have over €1 trillion in cash in 2013

Europe’s nonfinancial companies have over €1 trillion on their balance sheets in cash and equivalents (as measured over the last 12 months to Jan. 10, 2013). In real terms – – adjusted for EU-27 inflation  – – the aggregate cash balance has retreated from 2010’s peak (€1,056bn). This is still 21% higher than the cyclical trough in 2008 and, at face value, a €1 trillion cash-pile suggests significant financial firepower at the disposal of Europe’s corporate sector.

Using Standard & Poor’s Capital IQ data analysts calculated [pdf] aggregate cash trends (see chart 1) for Europe’s 1,000 largest nonfinancial companies in terms of total debt outstanding – – a universe they call the Europe Debt 1000. This includes both publically listed companies and private companies with public debt, and constituents are recalibrated annually. Read More  

Non-corporates should get preference in bank licences: C Rangarajan, PMEAC chairman

The Reserve Bank should give preference to the non-corporate sector for new bank licences, Prime Minister’s Economic Advisory Council ChairmanC Rangarajan said. 

“It is possible for the Reserve Bank to start with initially non-corporate business and find out whether there are suitable applicants and thereafter proceed to look at the other applicants,” he said in an interview. 

The RBI is in the process of finalising the guidelines for giving new bank licences after Parliament approved Banking Laws (Amendment) Bill last month. 

The central bank, Rangarajan said, “should look at various types of financial institutions that are available currently and decide”. 

“…. many of the strong private sector banks today have been at one time or other in the financial system. They can look at it first and look at the other later on,” he said.  Read More  

India GDP may’ve grown 5.5%: Moody’s

Rating agency Moody’s today said Indian economy is expected to have grown by little more than 5.5 per cent in last quarter, and an initial spike in investor sentiment after recent reforms has faded and the “reality of India’s deep-seated structural problems” has begun to set in.

The reforms proposed by the government may help reduce thekey risks facing the economy but cannot lift the near-term outlook, Moody’s said, while adding that the economy is growing well below its long-term potential.

It, however, said that the growth rate could be near the bottom of its current downward cycle.

The country’s GDP numbers for July-September quarter is scheduled to be announced next week on November 30.

Moody’s said that the growth rate for that quarter could be “a little more than 5.5 per cent year-on-year, roughly the same as in the first two quarters (of calendar year 2012) but substantially below where GDP was 12 months ago.” Read More  

External debt rises USD 40 bn in 2011-12

Country’s external debt rose by USD 39.9 billion during the one-year period ending March 2012 to USD 345.8 billion on account of higher commercial borrowings and rise in non-resident Indian deposit.

India’s external debt stock at end-March 2012 stood at USD 345.8 billion, increasing by USD 39.9 billion (13.0 per cent), the finance ministry said in a statement.

At the end of March 2011, the external debt, which indicates liability of residents of a country to non-residents, was USD 305.9 billion.

“The rise could be attributed mainly to increase in commercial borrowings, short-term debt, and non-resident Indian deposits,” the statement added.

At the end of March, the share of commercial borrowings in total external debt stock stood at 30.2 per cent, followed by short-term debt (22.6 per cent), NRI deposits (16.9 per cent) and multilateral debt (14.6 per cent).

“Though the rising shares of components namely ECB are in line with the broad policy orientation of the Indian economy (that has emphasised attracting foreign savings into the economy over the past few decades), these developments signal heightened exposure of the domestic corporate sector to external shocks, including adverse exchange rate movements,” the statement said. Read More