The First Forum is an initiative that focuses on covering the latest happenings going around in the world in a brief format. This is in lieu with the importance of catching up with these events in this fast-changing world.
In this Thirty-Ninth Edition of The First Forum we would be covering the following:
1. Business
2. Economics
3. Finance

(By Mehak Gupta , Nikunj Gulati and Kanika Meena)

Business

Yatra Online terminates merger pact with US-based Ebix Inc
Online travel company Yatra Online Inc said it is terminating pending merger agreement with the US-based software firm Ebix Inc and has filed litigation seeking substantial damages from Ebix over breaches of the agreement. Ebix Inc had signed an agreement to acquire Yatra Online Inc, the parent company of online travel firm Yatra.com, for an enterprise value of USD 337.8 million (over Rs 2,300 crore) in 2019. Read MoreYatra Online Inc seeks to hold Ebix accountable for breaches of its representations, warranties, and covenants in the merger agreement and an ancillary extension agreement, and seeks substantial damages, the statement added. Gurugram-based Yatra.com is a major player in the online travel sector and provides services including domestic and international air ticketing, hotel bookings, homestays, holiday packages, bus ticketing, rail ticketing, activities, and ancillary services.

ISRO signs MoU with ARIES for cooperation in Space Situational Awareness, Astrophysics
The Indian Space Research Organization (ISRO) has entered into an agreement with Aryabhatta Research Institute of Observational Sciences (ARIES) for cooperation in the field of Space Situational Awareness (SSA) and Astrophysics. Space objects orbital tracking, analysis, and space weather studies are important aspects in Space Situational Awareness and Management to safeguard Indian space assets from critical conjunction threats from space debris, ISRO said. Read MoreFuture endeavors in space exploration depend on R&D in Astrophysics, solar sciences, and space environment, it said, adding that self-reliance in these areas is key to the progress of the Indian space arena. This MoU will pave the way for future collaborations between ISRO and ARIES in establishing optical telescope observational facilities for space object tracking, R&D studies in space weather, astrophysics, and Near-Earth Object (NEO), it further noted.

RIL raises over Rs 1 trillion in 6 weeks, sells a 19.9% stake in Jio Platforms
RIL, India’s most valuable firm, has sold 19.9% in Jio to six marquee foreign investors — Facebook, Silver Lake, Vista Equity Partners, General Atlantic, KKR, and Mubadala — raising Rs 92,202 crore, and Rs 13,281 crore coming as the first tranche of the rights issue, totaling Rs 1.05 trillion. With the stake sale of 1.85% to Mubadala Investment Company and an additional 0.93% to Silver Lake in its digital services subsidiary on Friday, Reliance Industries’ (RIL’s) fundraising in the past six weeks from foreign investors in the telecom business and the first tranche of the rights issue has surpassed the Rs 1-trillion mark. Read MoreIn terms of equity fundraising, it is a record for a single company, and the number is also higher than what initial public offerings (IPOs) or disinvestments have ever raised in a single year. The Mukesh Ambani-led company plans to reduce debt with the proceeds from the stake sale. The amount raised betters the funds raised through IPOs in its best year and is much more than what the government manages in a fiscal year as part of its disinvestment program.

India Inc takes a cautious approach to COVID disclosures mandated by Sebi
In a circular dated May 20, the Securities and Exchange Board of India (SEBI) had directed the listed companies to evaluate Covid-19 impact on profitability, liquidity position, assets, capital and finance resources. However, Corporate India is going slow on this COVID-related disclosure mandated by Sebi. At least 25 companies across sectors have come out with disclosures in separate filings to the stock exchanges, but they have given a general business update, without specifying the financial impact of the coronavirus crisis on their operations. Read MoreCorporate lawyers, however, point out the circular is worded as an “advisory”. The listed entities are encouraged to assess the impact of Covid-19 to the extent possible and consider disclosing the material information. The companies said that it is difficult for them to assess the impact. Most firms do expect their operating margins to be under pressure in the April-June period, with some expecting a fall in revenue.

SBI pre-tax profit sees a 10-fold jump to Rs 4,970 cr in Q4; stock rises 7.9%
State Bank of India (SBI), posted an over tenfold rise in profit before tax (PBT) to Rs 4,970 crore for the quarter ended March 2020 i.e Q4FY20. The jump was mainly due to a decline in provisions and contingencies, and a one-time gain of Rs 2,731 crore arising from the sale of some stake in subsidiary SBI Cards & Payment Services. The lender had posted a PBT of Rs 431.20 crore in Q4 FY19. Read MoreThough the performance was lower than expected, the positive commentary by the management helped the SBI stock close 7.9% higher at Rs 187.8 per share on the Bombay Stock Exchange (BSE). On an annual basis as well, both PBT and net profit are the highest ever the lender has reported.

Economics

India rating downgraded by Moody’s
Recently, rating agency Moody’s Investors Service downgraded India’s sovereign ratings from Baa2 to Baa3. It is the lowest investment grade in Moody’s rating ladder. This means India is just one notch above the non- investment grade or junk grade. Moody’s had upgraded the country’s rating to Baa2 in November 2017. Read MoreThe agency which had upgraded India in 2017 after 14 years, endorsing the policy change agenda of the Narendra Modi government, made it clear that the latest downgrade was not driven by the impact of COVID-19 pandemic but due to weak implementation of reform measures. The rating agency cited slow reform momentum, constrained policy effectiveness, and slower growth compared to India’s potential among the reasons for the downgrade. A Finance Ministry official downplayed the demotion to the lowest grade, pointing out that “35 countries have been downgraded, this is their view.”

African American economic gap remains despite US expansion
The mass protests in the wake of George Floyd who was killed in police custody in Minneapolis, sparking nationwide protests that call for the end to police brutality against black citizens. Racial discrimination not only limits to this but Africa-American also suffer from a large economic gap compared with the rest of the country when it comes to wealth, income, and wages, even after the longest US expansion on record and despite record-high pre-pandemic stock markets. Read MorePresident Donald Trump touted his record, saying he had done “more” for them “than any president since Abraham Lincoln”, citing a scheme to foster investment in low-income neighbourhoods, the passage of criminal justice reform, and low unemployment, poverty and crime. According to a report by the Brookings Institution, the net worth of a white family is 10 times that of a black household as African American households are still disproportionately reliant on low wage labor.

Lockdown flattened the wrong curve – the GDP curve: Rajiv Bajaj
In a conversation with Rahul Gandhi, Industrialist Rajiv Bajaj said that the nationwide lockdown implemented to curb the spread of the Covid-19 pandemic has decimated the economy. He questioned the decisions to manage the corona pandemic and urged the PM to build confidence among people to retrieve the situation post-lockdown as hard lockdown has created a fear among people that corona infection is fatal. Talking about the lockdown, he said India ended up with the “worst of both worlds” as it followed western nations such as Italy, France, Spain, UK and the U.S. Read More“On one hand, a porous lockdown makes sure that the virus will still exist and as you said, it is still waiting to hit you when you will unlock. So, you have not solved that problem. But you have definitely decimated the economy. You flattened the wrong curve. It is not the infection curve, it is the GDP curve,” he observed. He strongly urged the government to offer stimulus to generate demand and cited the examples of Japan and the U.S., where each person was offered $1,000.

Planters seek a moratorium on Natural Rubber imports
The United Planters Association of Southern India (UPASI) sought an immediate moratorium on the import of Natural Rubber (NR) for a minimum period of two years. The spread of COVID-19 pandemic and the consequent lockdown turned out to be a double whammy as NR production came to a grinding halt and the present situation is threatening the existence of the sector. The NR sector has been in a crisis due to the fall in prices over the last eight years. Read MoreThe prices have been far below production cost, the reason being an unrestricted surge in cheap imports into the country from South-East Asian regions, UPASI president AL RM Nagappan said in a letter to the Union Commerce and Industry and Railways Minister Piyush Goyal. Also, he requested the government to introduce safeguard duty on NR import for three years.

Government freezes new schemes for a year
The Expenditure department in the Finance Ministry has directed all ministries and departments to suspend spending on new schemes for a year, in a move to tighten spending amid rising cases of coronavirus except the special package related to coronavirus or attempts to battle the pandemic. Schemes which have been approved under Budget 2020 will also remain suspended for the time being as the government is dealing with huge financial crunch pressure. Read MoreThe government has also suspended all new schemes up to 500 crores which already had been approved by ministries, would also be suspended in the current financial year. There is unprecedented demand for public financial resources due to COVID-19 and resources need to be used prudently as per emerging and changing priorities. Hence, schemes announced under Atmanirbhar Bharat Abhiyan and Pradhan Mantri Garib Kalyan Package will be the only exceptions and will be initiated and continued in FY21.

Finance

SBI plans to raise up to $1.5 billion via overseas bonds in FY21
The country’s biggest lender, State Bank of India will be considering raising funds in single or multiple tranches of up to $1.5 billion.  The executive committee of the central board will meet on June 11 to examine the status and decide on fundraising plans. The bank said it will raise the funds during 2020-21 through a public offer, a private placement of senior secured notes in the US dollar, or any other convertible currency. Read MoreIn March, SBI had raised $100 million via Floating Rate Notes (green bonds) at a coupon of 3-month London Inter-bank offered rate (LIBOR), plus 80 bps. The government has not allocated any capital to state-run banks in this year’s Budget. FM Nirmala Sitharaman had said banks will be encouraged to tap markets to raise capital on their own.

RBI’s Rs 500 crore fund to help small towns go digital
The Reserve Bank of India (RBI) has set up a Payment Infrastructure Development Fund (PIDF) with a corpus of Rs 500 crore, for promoting digital payments and deployment of points of sale (PoS) infrastructure both physical and digital in small towns and north-eastern states. Read MoreThe RBI will make an initial contribution of Rs 250 crore to the PIDF covering half of the fund and the rest to cover operational costs would be financed by card-issuing banks and card networks. The RBI will contribute to yearly shortfalls, if necessary. The fund will be governed through an advisory council and managed by the RBI.

US Development Bank to invest $350 million in India
The US International Development Finance Corporation (DFC) has sanctioned to invest $350 million in India to support multiple projects in the country’s financial services sector, health infrastructure, food security space, and renewable energy. It is part of the $1 billion investments that will advance development in Africa, Latin America, the Indo-Pacific, and emerging markets globally.Read More DFC has included $219.3 million for the development of solar power projects in India which includes loans to Paryapt Solar Energy Private Ltd, Sitara Solar Energy Private Ltd, and ReNew Power. DFC has also allocated different amounts for increasing access to education, scaling up high-impact businesses, empowering smallholder dairy farmers, and various others.

Canara bank cuts in repo-linked lending rate by 40bps
State-owned Bengaluru-based Canara Bank has announced a reduction in its repo-linked lending rate (RLLR) by 40 basis points (bps) to 6.90% and Marginal Cost of Funds based Lending Rate (MCLR) by 20 basis points to 7.65%. The revised lending rates will be effective from June 7, the bank said. All new retail loans (housing, education, vehicle), credit to MSMEs are linked to RLLR. Read MoreRecently, some other lenders, including Punjab National Bank, Bank of India, and UCO Bank, also slashed their lending rates linked to repo rate by 40 bps. The reduction in RLLR and MCLR will help to bring down the burden on borrowers.

US stock indexes jump as report shows a surprise drop in unemployment in May
US stock index futures sharply extended gains on Friday after a monthly employment report from the Labour Department showed an unexpected rise in jobs and the rate of unemployment dropped rather than rose as had been feared. In May 2.5 million jobs were added and the unemployment rate fell to 13.3% last month from 14.7% in April. Read MoreThe Dow Jones Industrial Average rose 891.6 points or 3.39%, the S&P 500 gained 87.41 points or 2.81% while the Nasdaq Composite added 207.37 points, or 2.16%, just shy of a record high. This shows that an American economy is pulling out of the brink as states loosen restrictions and supporting a stock market rebound.

Get The Connectere directly in your E-mail inbox !

Enter your email address to subscribe to The Connectere and receive notifications of our new content on your E-Mail