Greenvissage explains, why are corporate borrowing becoming a concern amid inflation?
According to the CareEdge report, bank credit has increased by INR 14.1 lakh crore over the past 12 months. The outstanding liquidity surplus has fallen from INR 4.3 lakh crore to INR 3.3 lakh crore in merely two weeks, from June 3 to June 17. Several prominent business houses of India have taken a considerable amount of debt including Tata Group with a total debt of INR 2.89 lakh crore, Reliance Industries with INR 2.66 lakh crore, Aditya Birla Group with INR 2.29 lakh crore, L&T with INR 1.62 lakh crore, Mahindra Group INR 0.74 lakh crore, and Bajaj Group INR 0.61 lakh crore. Meanwhile, inflation in India has remained above the Reserve Bank of India (RBI)’s tolerance level for five straight months now. In May, retail inflation went up to 7.05%, 75% higher than RBI’s medium-term target of 4%. The surge in inflation had forced the central bank to raise the interest rates twice from 4% to 4.9%. Now, to meet the working capital requirements, Indian companies are heavily borrowing more than before. These borrowings have increased even when the interest rates are moving upward. Working capital borrowings are short-term and already attract higher interest rates than long-term borrowings.
Greenvissage explains, why is Google pouring money into Indian telecom?
Since 2020, Google has poured USD 4.5 billion into Reliance’s Jio Platforms and USD 1 billion into India’s second-largest telecom provider Bharti Airtel as part of its USD 10 billion India Digitization fund. The outpour of money into Indian telecom companies comes as a surprise, however, Google has its motives to do so. India is the second-largest smartphone market in the world, however, the smartphone penetration still stands at 40%. This is where Google, which already holds 95% of India’s mobile phone market through the Android OS, sees a bigger market and new opportunities to seize. Partnering with the telecom players allows Google to lead users to Google-led platforms. Google has already launched a 4G smartphone called JioPhone Next with Reliance, and the company is looking to strike a similar deal with Airtel. The telecom investments also allow the company to leverage India’s growing public cloud market where Google Cloud is looking to expand its existing 10% market share. Google is also looking to tap the 58 million MSMEs in the country to undergo a digital transformation.
Greenvissage explains, why experts are trusting auto and finance stocks amid global uncertainty?
Indian stock markets are facing their worst burnt, amid global uncertainty, inflation woes, rising bond yields, supply chain constraints, and rising interest rates in the US. The stock markets have tumbled in the past weeks and many see a further downside to the same. However, analysts are bullish on two sectors for investors to bet on – finance and automobiles. The finance sector has experienced a major correction while the auto index is outperforming the benchmark Nifty 50 index. Rising interest rates bode well for finance companies as their main source of income is the interest they earn on loans and advances. Borrowers are paying their dues on time, and the demand for loans is surging in the last two months, with the increase in federal rates. Moody’s report has predicted the banking sector to improve its fundamentals led by a decline in loan-loss provisions and increases in net interest margins. Meanwhile, the auto sector’s growth is expected to be fueled by Kharif output leading to an increase in tractor sales. The expected resolution of the chip shortage will also help top original equipment manufacturers (OEMs) to raise their production.
Greenvissage explains, what is LEI code and who needs to apply for it?
The Legal Entity Identifier (LEI) code is a key measure to improve the financial data systems for risk management. LEI code is designed to identify and link parties to financial transactions. The goal is to improve compliance with regulatory reporting requirements. The Global LEI System (GLEIS) was set up to address the global financial crisis. The code is a 20-digit unique code to identify parties to financial transactions and consists of a long alphanumeric code based on the ISO 17442 standard. According to the Reserve Bank of India (RBI), an LEI code is required for all payment transactions (NEFT, RTGS or such other mode) of value INR 50 crore and above. These can be foreign exchange payments, money market payments, vendor payments, intercompany payments, or any other type of payment. An entity seeking an LEI code will be required to register as a user on the LEI website i.e. www.ccilindia-lei.co.in. The LEI is valid for one year from the date of issuance, or the last renewal date. LEI is issued within 3 – 5 working days. Any person who acts in their natural capacity is not required to obtain the LEI code, the compliance applies only to corporates. The LEI retains its validity even if a company moves into another country.
Greenvissage explains, what is Vauld’s business model and why is it in trouble?
Vauld is a Singapore-headquartered crypto company that announced fixed deposits against cryptocurrencies, just the last year. However, now the company has released a statement that it is suspending all withdrawals, deposits, and trading in cryptocurrencies for its users. In October 2021, Vauld advertised automatic crypto investments through fixed deposits with a super-high 12.68% interest rate. The company had used television advertisements and financial influencers on social media to promote its products. The company asked for bitcoins as deposits from its customers for a fixed period and in return, it provided interest on the same. The company then converted the cryptocurrencies into cash and lend them to borrowers at high rates of returns. As collateral they would again accept cryptocurrencies of higher value, such as 150% of the loan value, to ensure the collateral covers the value even if the value of the asset deteriorated significantly. In case the borrower fails to repay the money, the collateral assets would be liquidated i.e. sold and the proceeds would be used to repay the depositors. This is similar to how the bank operates, except that Vauld used cryptocurrencies as collateral assets and as a mode of deposit and lending. However, as expected, the value of cryptocurrencies which dipped significantly last month has led to a collapse of the company’s model and its operations.