Greenvissage explains, why is Holcim exiting India and what it means for Cement prices?

Holcim India has announced to exit India. Its decision has surprised the industry as it formed more than 20% of the national capacity and sales volumes. Besides, amongst geographies, India also makes up 23% of the total global capacity of the company and contributes 27% of sales volumes. However, the company has been divesting in several emerging markets, in line with its ‘Strategy 2025 – Accelerating Green Growth’. Holcim is looking to move away from cement production and set up business elsewhere, a sector responsible for significant pollution, and move into innovative and sustainable building solutions. Meanwhile, the race to acquire Holcim’s assets in India has heated up as several companies are looking to acquire Holcim’s 63% stake in Ambuja and 5% stake in ACC. Ambuja also holds another 50% in ACC Cement. Currently, Holcim is in talks with JSW Cement and the Adani Group, for a deal which may amount to USD 10 billion. The prices of cement could see downward pressure, as supply may exceed demand when the new owners of the Holcim’s assets try to leverage and increase the capacities. On the contrary, the cement market is also likely to become concentrated in the hands of a few players, and therefore, oligopolies can keep prices relatively more stable. Indian cement sector has been probed in the past for cartel formations, as the Competition Commission of India (CCI) had levied an INR 6,000 crore fine on 10 companies in 2010 and INR 6,700 on 11 companies in 2016. So, the chances are high that prices would remain stable rather than plummet.

Greenvissage explains, why is gambling becoming a worry for India Inc?

Real Money Games (RMGs) are games in which the players play for a wager. These games make up around 80% of India’s online gaming industry. According to a report by Economic Times, Indian gamers have spent approximately USD 1.73 billion in online sports betting during the year 2021. The experts have drawn concern as the lines between gaming and gambling are becoming a blur. Many critics believe that the RMGs are equivalent to gambling as users are betting money against the happening or non-happening of an event which is not in their control. However, the All India Gaming Federation (AIGF), the self-proclaimed apex body for online skill gaming has argued that there is an element of skill that outweighs the element of chance in these games. Many further argue that even trading in stock markets is a form of betting or a game of chance, if online gaming were being discussed as gambling. The industry is currently unregulated. While the internet is covered under the union list whereby Central Government can make laws, gambling laws are covered under the state list and the states are empowered to regulate the same. Thus, consensus between the central and state government is imperative for policy formulation. Many studies have claimed that online gaming involving wager has driven people into gambling. With no laws in place, the issue seems to be going out of control, in near time.

Greenvissage explains, what borrowers need to do when home loan interest rates are rising?

The interest rates of home loans have begun to rise again. One may expect the interest rates to rise by about 200 basis points (2%) in two years. This is expected to increase the home loan tenure, as the interest burden increases. To ensure home loans don’t become a burden over time, borrowers need to take corrective actions. Firstly, one can opt for refinancing the loan based on a cost-benefit analysis of each option. This can be done by asking the lender to lower the interest rates, by paying a small processing fee, or by transferring the loan to another lender who is offering better terms. However, the latter involves more paperwork and has higher costs. The second option is to increase the EMI. Higher EMIs are equivalent to micro pre-payments whereby the borrowers can bypass the pre-payment charges and also save on interest in the long run, as they repay the loan early. A one-time lump-sum prepayment can also erase the additions in interest. Another option is to systematically prepay 5% of the loan balance every 12 months. Mathematically, this pays off a 20-year loan in around 12 years at a constant interest rate.

Recently, the ‘Uttar Pradesh Investors Summit 3.0’ laid the foundation stone for 1,406 projects worth INR 80,000 crore. This year’s investment is higher than the previous two summits as the state attracted 81 projects worth over INR 61,500 crore in its first summit while 290 projects worth INR 67,000 crore in the second summit. According to the Uttar Pradesh Government, between 2017 and 2021, the state attracted ‘foreign investment commitments’ of INR 1.88 lakh crores. Even PepsiCo, the American snack and beverage company, has chosen Uttar Pradesh for setting up its new plant in India. The company spent over INR 1,000 crores, its largest investment in India, and is further investing INR 200 crores for increasing production. This is unlike the past as Uttar Pradesh hasn’t been an attractive destination for investments. The state boasts a large population – standing higher in the rankings than countries like Brazil, Pakistan, Bangladesh and Russia. The state also has abundant natural resources. However, the state neither has a high per capita income nor high industrial output nor is it located in the coastal region. The literacy rate is low in the state, and thus, crime has been rampant. This hasn’t changed much in recent years and it would take a while for the state to improve on those counts. So why is the state suddenly attracting investments? Political stability. For a state which only once in the past, allowed its Chief Minister to complete the full term of five years (Mayawati in 2012), the current Government has been a major overhaul, as Yogi Adityanath became the only second person to do so. To top of the same, his government has been re-elected with a majority. Change in Governments often leads to changes in policies (and political favours). For companies investing millions and billions, political stability is a must. Business investments take time to reap, and changes in policies can change the forecasted returns or even bring projects to a halt. The stability in Uttar Pradesh politics has increased the confidence of investors. The State Government with support from Central Government has been constructing expressways, subsidising interest and exempting stamp duties. The Uttar Pradesh Government even suspended the labour laws in May 2020 to save businesses from the consequences. However, it’s important to note here that these headlines are about investment commitments and not actual investments. Whether the corporates stick to their commitments or not, only time can tell us!