Vikram Pandit founds new company
Former Citigroup CEO Vikram Pandit has started a new company that will seek significant stakes in established financial services companies.
The new company will be backed by the Comcast-backed investment firm, Atairos Group and is called the Orogen Group.
Pandit worked at Morgan Stanley in 1983 before co-founding a hedge fund called Old Lane Partners, which he sold to Citigroup. He became Chairman and CEO of Citi Alternative Investments, later led Citi's Institutional Clients Group and became CEO of Citigroup in December 2007. He successfully led the company during the financial crisis until he left in October of 2012.
Earlier this month, Anshu Jain, former co-head of Deutsche Bank, along with another partner, is floating a non-bank financial company, or NBFC, that will leverage technology to tap business opportunity in education, housing, and small and medium enterprise segments — all three under-served in India.
IPOs are back in action
According to a report in Quartz India, which obtained the data from PRIME Database, since India’s IPO market took off in 2015 after a long lull, 31 companies have hit the market. What’s interesting is that quite a few of the IPOs are from non-traditional sectors including micro-finance, e-commerce and dairies.
In the last two months, two micro-finance firms launched their public issues and both performed well: Ujjivan and Equitas. Earlier this, Infibeam, an e-commerce firm, got listed. Parag Milk Foods (dairy), and Healthcare Global Enterprises and Thyrocare (Healthcare) also got in 2016.
Disruptions in global markets
Minutes of the Federal Reserve’s April meeting caught Wall Street by surprise. It was revealed that a June rate hike was appropriate given the improvement in the U.S. economy. It weighed on sentiment with commodity stocks performing particularly poorly. Markets across the globe reacted to the news, not just the U.S. stock market.
Oil prices retreated too following indications that the U.S. Federal Reserve could launch another round of rate increases at its next meeting in June. However, due to supply disruptions in Canada and Nigeria oil prices recovered.
China’s economy will be more competitive than India’s
According to an article in Fortune, China’s growth will continue to rival India’s for many years to come. Though in 2015, India’s economy grew more than 7%, faster than China for the first time in decades.
China’s fundamental strengths mean that even if growth slows in the short-term, it will likely keep growing at an annual rate of between 6% and 7%. India will also grow quickly, but is unlikely to perform quite as well. India’s decentralized political system means that no matter how well-meaning, the Modi government cannot achieve change nearly as quickly as the Chinese. Unlike in China, where the central government can push through tough compromises, a noisy collection of interest groups stall many key economic reforms.
Will Raghuram Rajan get a second term?
Raghuram Rajan's first term as the governor of Reserve Bank of India governor comes to an end in a few months.
Subramanian Swamy wrote to the prime minister seeking the termination of the governor’s services. The attack did not go down well with most.
A poll of 43 CEOs across industries by the Economic Times voted overwhelmingly in his favour – 90% to be precise. About 9,000 readers who participated in an ETMarkets.com survey also gave all-round support to Rajan and said he should get a second term as RBI governor. In fact, a petition has been filed on Change.org to request the government to offer Rajan a second term.
Subramanian Swamy is an economist who serves as a member of the Rajya Sabha.
The bad loans saga
Punjab National Bank reported a fourth-quarter net loss of Rs 53.67 billion ($802 million or Rs 5,367 crores) as the bank set aside more funds to cover a jump in bad loans. This is the largest-ever loss reported by a local bank in India.
The losses were for its fiscal fourth quarter to March 31, compared with a net profit of Rs 3.07 billion a year earlier. The loss was the first for the bank since it went public in 2002.
A post in the Wall Street Journal graphically displays how bad things are with Indian banks.
The three charts explain:
- India’s non-performing loan percentage is the highest in Asia at 5.9%, the lowest being Korea at 0.62%. Indian banks need to clean up their bad loans to help lift their profitability and capital ratios and allow them to start lending again.
- Indian banks have the lowest ratio of regulatory tier-1 capital (10%) to risk-weighted assets among peers in other Asian countries. Indonesia is at the other end of the spectrum at 19%.
- Return on assets at Indian banks is second lowest in the region at 0.45%. Japan is the lowest at 0.27% and Indonesia is the highest at 2.25%. This is a measure of profit on the total assets employed by the banks.
However, chairperson of State Bank of India Arundhati Bhattacharya, told CNBC that she does not believe that a banking crisis was unfolding in India.
SBI merger with banks: Not so simple
The mergers of public sector banks are back on the agenda. State Bank of India is to integrate associate banks: State Bank of Mysore, State Bank of Patiala, State Bank of Hyderabad, State Bank of Bikaner and Jaipur, and State Bank of Travancore. In addition, the merger of Bharatiya Mahila Bank was also considered.
According to Moody's Investors Service, as reported by Business Standard, the merger will have limited impact on SBI's credit metrics, given that SBI already fully owns two banks and has a majority stake in the other three. The agency also noted that opposition to the merger by the employee unions also poses considerable risk that potential synergies of the merger may not materialise.
Indian economy on a strong footing
Finance Minister Arun Jaitley has said the Indian economy is likely to register 7.6% growth in 2015-16, notwithstanding contraction of global exports, two consecutive years of poor monsoons and a weak global outlook.
Speaking at a meeting with a group of Executive Directors of the World Bank Group, he said that India's experience of strong economic growth, comfortable price situation, low Current Account Deficit, and adherence to the path of fiscal recovery have projected it as an outpost of opportunity for global investors.
He pointed to the good monsoon forecast, the ongoing reform process, and continuing low oil prices as key drivers of economic growth in the country.
A group of 9 World Bank Executive Directors is currently on an official visit to India as a part of their South Asian Region visit.
Global demand hits auto parts markers
According to a report in the Economic Times, Aisin Seiki, a $32 billion Japanese auto component giant, is expecting to double its revenue from India in the next three years.
The company which has been operational in India since 2012, has two subsidiaries in India: Aisin Automotive Haryana and Aisin Automotive Karnataka.
The Star reports that Lumax Mannoh Allied Technologies Ltd. is planning to tie up with a Malaysian company to establish its third presence in Asean.
Meanwhile, muted global demand affects export-oriented auto ancillaries like Bharat Forge and Mothersome Sumi. The report points to the wide gap between projected and actual revenues of Indian auto parts suppliers.