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Autos to log double-digit volume decline: ICRA

‘Good recovery expected only in FY22’

The Indian automobile sector is expected to log double-digit decline in volumes in the current year across all vehicle segments, except tractors, with good recovery expected only in FY22, as per rating agency ICRA.

“The volumes in the automotive industry have been pushed back by almost over 10 years,” said ICRA.

“The FY21 volumes are expected to be down for light commercial vehicles (LCVs) by 17-20%, medium and heavy commercial vehicles (MHCVs) by 35-40%, passenger vehicles (PVs) by 22-25% and two-wheelers by 16-18%. The auto component industry (including tyres), whose prospects are tied to the automotive sector, is estimated to contract by 14% to 18% in FY21.”

For PV segment it said since the fortunes are tied with GDP growth rates and overall consumer sentiments, which are currently at historic lows, it is expected to witness “strong double-digit growth (>15%)” only in FY2022 after decline of 17.9% in FY2020 and 22%-25% in FY2021.

“The GDP is expected to decline by 11% in FY2021; this will trickle down into lower demand for the automotive industry in general (except tractors),” it said.

The fall in demand, it added, is also reflected in capacity utilisation which is likely to dip below 45% in FY2021, from 50-55% in FY2020. “We expect capex cut by 35-40% during FY2021-FY2022, and incremental investments will be primarily towards new product development and platform improvisation.”

“The rural market will be the key driver of volume in FY21 which will benefit entry level cars and UV. Buyers may opt for 2W or used cars to avoid public transport…The luxury car segment will witness a decline of over 40% in the current financial year,” said Ashish Modani, V-P,, ICRA.

On the Commercial Vehicle (CV) segment, ICRA said while retail sales are reviving, it remains a far cry from pre-Covid levels. As against a monthly sales of over 80,000 units reported prior to the pandemic, CV retail sales trended at less than 40,000 units in September 2020, even after four months of sequential improvement.

“As for the outlook, the M&HCVs and Buses segment…will grow by 40-45% in FY2022, while LCVs will… grow by 15-20%…Given current liquidity constraints and bleak demand, OEMs are curtailing capex spends; from Rs 67 bn in FY2020, it is expected to fall significantly to Rs 24 bn in FY2021 and 21% in FY2022.

As far as tractors are concerned, ICRA revised the earlier growth forecast of 2-4% to 7-9% in FY2021. It said that while uncertainty continues to exist in relation to pandemic, farm sentiments are expected to remain healthy aided by government focus on procurement, healthy monsoon precipitation and a resulting favourable kharif crop outlook.

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‘Cash-for-LTC a big blow to tourism’

Consumer durables see positive signs

While the tourism sector has termed Finance Minister Nirmala Sitharaman’s cash-for-LTC announcement a ‘major blow’ to the sector, the consumer durables sector has welcomed it along with the festival advance scheme, calling these a boost to consumer sentiment and economic activity. However, experts warn that this ‘boost’ is likely to be temporary and the measures may be inadequate to sustain demand.

The Federation of Associations in Indian Tourism and Hospitality (FAITH) said the government’s move to redirect LTC funds to consumer goods was a “vote of no-confidence” for the sector, which is among the worst-hit by COVID-19. After eight months of almost zero tourism activity, the industry was expecting the festive season to give the sector a boost. However, the government’s decision is likely to sap funds that could have gone into travel, FAITH said.

“The government’s move is contrary to our suggestions where we demanded that LTAs be used to incentivise travel. But the government announcement will discourage travel as even those who have savings would like to encash their LTAs,” said Jyoti Mayal of the Travel Agents Association of India (TAAI). An industry source however, said there will be no material impact on the industry as the LTA money would not have come to the travel industry in any significant way before March 2020. FAITH added that since this is a four-year block scheme, it will also cut away funds for future travel demand for the next year.

On the other hand, Kamal Nandi, president, Consumer Electronics and Appliances Manufacturers Association (CEAMA), and Business Head & EVP, Godrej Appliances said, “The special festival advance schemes will provide more liquidity to the customers for discretionary spends. With the upcoming festive season, this will augur well for the consumer durables segment.”

‘Not sustainable’

Edelweiss Research said in a note that the overall fiscal outgo owing to these measures amounts to ₹400-500 billion (0.2-0.3% of GDP). However, this is not a fresh fiscal expansion as the government is sticking to its existing borrowing programme. “Therefore, while the measures could support sentiments and demand during the immediate festive season, they may be inadequate to boost aggregate demand sustainably… more [is] needed for sustained recovery,” it added.

Aditi Nayar, principal economist, ICRA, said she anticipated the announcement to result in a temporary boost to consumer sentiment and economic activity, with sharper pick-up in festive season sales that would “subsequently fizzle out”.

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Oil prices continue decline as US producers ramp up production after Hurricane Delta

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SINGAPORE - Oil prices dropped for a second straight session on Monday as U.S. producers began restoring output after Hurricane Delta weakened, while a strike that had affected production in Norway came to an end.

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Brent crude LCOc1 for December fell 55 cents, or 1.3%, to $42.30 a barrel by 0023 GMT and U.S. West Texas Intermediate CLc1 for November was at $40.08 a barrel, down 52 cents, or 1.3%.

Front-month prices for both contracts gained more than 9% last week, the biggest weekly rise for Brent since June, but fell on Friday after Norwegian oil firms struck a wage bargain with labour union officials, resolving a strike that threatened to cut the country’s oil and gas output by close to 25%.

HURRICANE DELTA ROILS OIL RIGS, SQUEEZES GASOLINE PRICES

“We had good support for both Brent and West Texas on the back of some supply concerns,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney.

“Given that the hurricane season in the U.S. has just started, there’s potential for that to keep prices firm.”

The Well-Safe Guardian plug and abandonment rig, operated by Well-Safe Solutions Ltd, stands in the Port of Cromarty Firth during sunrise in Cromarty, U.K., on Tuesday, June 23, 2020. Oil headed for a weekly decline — only the second since April —

In the United States, Hurricane Delta, which dealt the greatest blow to U.S. offshore Gulf of Mexico energy production in 15 years, was downgraded to a post-tropical cyclone by Sunday.

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Workers headed back to production platforms on Sunday while Total SA TOTF.PA continued restarting its 225,500 barrel-per-day Port Arthur, Texas, refinery on Sunday.

However, Colonial Pipeline, the largest oil products pipeline in the United States, shut its main distillate fuel line after the hurricane disrupted power, the company said on Sunday.

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Morgan Stanley To Acquire Eaton Vance For About $7 Bln – Quick Facts

Morgan Stanley (MS) will acquire Eaton Vance Corp. (EV) for an equity value of about $7 billion, the two companies said Thursday. Shares of Eaton Vance are gaining about 43 percent in pre-market activity following the news.

Eaton Vance is a provider of investment strategies and wealth management solutions with over $500 billion in assets under management or AUM.

According to Morgan Stanley, the acquisition advances its strategic transformation with three businesses of scale: Institutional Securities, Wealth Management and Investment Management.

The companies expect the acquisition to close in the second quarter of 2021. Following the acquisition, Morgan Stanley Investment Management or MSIM will be a leading asset manager with about $1.2 trillion of AUM and over $5 billion of combined revenues.

Under the terms of the merger deal, Eaton Vance shareholders will receive $28.25 per share in cash and 0.5833x of Morgan Stanley common stock for a total consideration of about $56.50 per share.

Based on the $56.50 per share, the aggregate consideration paid to holders of Eaton Vance’s common stock will consist of about 50 percent cash and 50 percent Morgan Stanley common stock.

In addition, the merger deal contains an election procedure that will allow each Eaton Vance shareholder to seek all cash or all stock, subject to a proration and adjustment mechanism.

Eaton Vance common shareholders will also receive a one-time special cash dividend of $4.25 per share to be paid pre-closing by the company to its common shareholders from existing balance sheet resources.

“This transaction further advances our strategic transformation by continuing to add more fee-based revenues to complement our world-class investment banking and institutional securities franchise. With the addition of Eaton Vance, Morgan Stanley will oversee $4.4 trillion of client assets and AUM across its Wealth Management and Investment Management segments,” said James Gorman, Chairman and Chief Executive Officer of Morgan Stanley.

Morgan Stanley noted that the combination will better position it to generate attractive financial returns through increased scale, improved distribution, cost savings of $150 million or 4 percent of MSIM and Eaton Vance expenses, and revenue opportunities.

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Government appoints Dinesh Kumar Khara as SBI chairman

The new SBI chairman will have a tough task ahead as the banking sector is going through a major crisis due to the COVID-19 pandemic.

The government on Tuesday appointed SBI’s senior-most Managing Director Dinesh Kumar Khara as the chairman of the the country’s largest lender.

He replaces Rajnish Kumar, who completed his three-year term on Tuesday.

The central government appoints Dinesh Kumar Khara as chairman of State Bank of India (SBI) for a period of three years with effect from the date of his taking over charge of the post on or after October 7, 2020 or until further orders, whichever is earlier, according to a notification issued by the Finance Ministry.

Last month, the Banks Board Bureau (BBB) had recommended Mr. Khara as the next chairman of SBI.

As per convention, the SBI chairman is appointed from a pool of serving managing directors at the bank.

Interestingly, Mr. Khara was among the contenders for the chairman’s post in 2017 as well.

Mr. Khara was appointed as managing director of SBI in August 2016 for a three-year term. He got a two-year extension in 2019 after review of his performance.

An alumnus of the Faculty of Management Studies, Delhi University, Khara heads the Global Banking division of SBI. He holds a board-level position and supervises the businesses of SBI’s non-banking subsidiaries.

Prior to being appointed managing director, he was the MD and CEO of SBI Funds Management Pvt Limited (SBIMF).

Mr. Khara, who joined SBI in 1984 as a Probationary Officer, was instrumental in merging five associate banks and Bharatiya Mahila Bank with SBI effective April 2017.

The new SBI chairman will have a tough task ahead as the banking sector is going through a major crisis due to the COVID-19 pandemic.

As on June 30, SBI had made total provisions of Rs 3,000 crore to cover potential COVID-19 losses. Gross non-performing asset (NPA) ratio of 5.44 per cent was lower than 6.15 per cent in the March quarter.

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Your jobs, increments, bonuses are secure: CEO Aditya Puri to HDFC Bank employees

Mr. Puri said the bank is doing well, has sufficient capital and does not have any strain in the loans that it has made

HDFC Bank Managing Director and Chief Executive Officer Aditya Puri has assured employees of the country’s largest private sector lender that their jobs and bonuses are secure.

Even as the COVID-19 pandemic rages on, Mr. Puri, who retires later this month, said the bank is doing well, has sufficient capital and does not have any strain in the loans that it has made. He also hinted that the bank may post a strong set of quarterly numbers in the recently ended July-September period and quarters ahead as well.

The COVID-19 pandemic has resulted in job losses, especially in the organised sectors, as businesses suffered due to economic activity coming to a halt in lockdowns. HDFC Bank and its private sector competitors have met hikes and bonuses commitments since the start of the pandemic.

“Not only are your jobs secure, your increment is also secure. Your bonus and your promotion are secure,” Mr. Puri told over 1.15 lakh employees of the bank, in a video message last week.

Mr. Puri, who has led the bank for over 25 years since its inception, said he is giving the assurance on behalf of the management team including his successor Sashidhar Jagdishan.

“The bank is doing well. We have all the capital that we need. Our portfolio is not under strain. We are aggressively using our distribution and technology advantage,” he said.

He urged employees to work as a team, follow the vision the lender has set out for itself and beat competition.

Mr. Puri was speaking ahead of the launch of festive offers by the lender in its second edition.

Competing banks have also launched similar aggressive offerings, eyeing larger share of transactions amid slowing consumption.

He said the bank has not accepted defeat in the face of the coronavirus outbreak and delivered good results for two quarters, and added that projections for the upcoming quarters also say the same.

Asking the employees to share messages about the festive offers on their social media handles and promised a 10-minute video chat with the employee securing the highest number of ‘likes’ on a post.

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Paytm CEO rallies app operators against Google over Play Store’s billing mandate

Paytm founder and CEO Vijay Shekhar Sharma doubled down in his bid to rally Indian app operators against Google over the U.S. company’s requirement that apps use the Play Store’s billing system for in-app purchases of digital goods, by firing a salvo on Twitter.

“Be the app that, you want to see in the world. Condition: If only Google let’s you be,” Mr. Sharma tweeted on Friday.

Last month, Google had briefly removed Paytm from its Play Store citing a violation of its policy on gambling. Paytm had at the time called upon the Indian start-up ecosystem and developers to “think the bigger question”. “As a start-up, we are running law-abiding businesses and building for India. Google and its employees are making policies which are over and above the laws of our country, and are arbitrarily implementing them,” it had said.

Several Indian start-ups have been exercised over Google’s notification on applications needing to mandatorily use Google Play’s billing system as the method of payment for access to features or services, including any digital content or goods.

Earlier this week, senior representatives from almost a dozen start-ups joined a call to discuss ways to deal with Google’s alleged ‘dominance’, including setting up an alternative to Google Play Store and seeking government intervention.

Industry body IAMAI, which counts Google as a member, had also in a recent statement suggested a meeting of founders, a community that it said was ‘on fire’ at Google’s announcement.

“Just because Google owns the gate and the gateway to the digital ecosystem of this country, they should not act arbitrarily and enforce their rules and regulations which are contrary to our country’s laws,” Vishwas Patel, founder, CCAvenues and chairman, Payments Council Of India, had said.

“Also, they cannot force Indian apps developers / owners selling digital services to compulsorily use the Google billing and payment system and charge 30% MDR,” he added.

“Prima facie, Google’s announcement even if legal is certainly not innocuous,” IAMAI had said in its statement. “For many founders of Indian start-ups this brings back fears of the not so old deeply problematic revenue share model between VAS service providers and telcos. Telcos took up to 70% revenue share from VAS companies on the pretext of discovery, marketing, collection. In India, 98% of people use mobile Internet, more than 90% of people use Android phones which gives Google control over many layers between customers and their service providers,” the industry body had said.

Google clarified on its blog that all apps distributed on Google Play offering in-app purchases of digital goods had always needed to use Google Play’s billing system. It added that less than 3% of developers with apps on Play sold digital goods over the last 12 months, and of this 3%, the vast majority (nearly 97%) already used Google Play’s billing. For those few developers who needed to update their apps, they would have until September 30, 2021, to make those changes. New apps submitted after January 20, 2021, would need to be in compliance, it said.

“We only collect a service fee if the developer charges users to download their app or they sell in-app digital items, and we think that is fair. Not only does this approach allow us to continuously reinvest in the platform, this business model aligns our success directly with the success of developers,” the U.S. firm added.

“As an open ecosystem, most Android devices come pre-installed with more than one store — and users can install others. Android provides developers the freedom and flexibility to distribute apps through other Android app stores, directly via websites, or device preloads, all without using Google Play’s billing system,” the Internet company said.

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