WEEKLY-PICK

1. B 2 9 /01/2018 – 02/02/2018

2. Jaiprakash Associates deposits Rs 125 crore with SC registry: Sources Complying with the Supreme Court order, embattled real estate firm Jaiprakash Associates Ltd (JAL) has deposited Rs 125 crore with the Supreme Court registry, sources said. The amount was deposited yesterday, they said. The Supreme Court on December 15 had granted JAL time till January 25, 2018 to deposit Rs 125 crore for safeguarding the interests of hassled home buyers. JAL had deposited Rs 425 crore with the Apex Court registry by December 15, and had to deposit another Rs 125 crore by December 31. It had asked for a two-month extension. A bench comprising Chief Justice Dipak Misra and Justices AM Khanwilkar and DY Chandrachud had considered the statement of senior advocate Mukul Rohatgi and granted time to the firm till January 25. While extending the time to deposit Rs 125 crore till January 25, the top court, by its December 15 order, had also said on failure to deposit the amount Jaypee "shall be liable for contempt of this Court". The amount is part of the Rs 2,000 crore the top court had directed Jaypee Associates to deposit with its registry to pay the home buyers of Jaypee Infratech seeking a refund of their money. The Apex Court at the last hearing held on January 10 had termed the interest of homebuyers as “important” and said JAL will have to deposit money in pursuance of its earlier order. Cautioning against any sale of assets of JIL and JAL, and against merger or de-merger, the Bench had said, “We are only concerned with the deposit of money and any such move (sale or merger, etc) will amount to contempt of court... if anyone does that, then Tihar (jail) is not far from here.” It directed JAL, holding firm of Jaypee Infratech (JIL), to provide details of its housing projects in the country, saying homebuyers should either get their houses or their money back. Contact No. +91-903-977-7700 www.moneyclassicresearch.com

3. A Bench headed by CJI Dipak Misra, however, refused to accord urgent hearing on a plea of the Reserve Bank of India (RBI) seeking its nod to initiate insolvency proceedings before the National Company Law Tribunal against JAL and said it would be dealt with at a later stage.“Lower middle- class homebuyers of JAL cannot be made to run from forum to forum. We want to protect homebuyers,” the Bench had said while refusing urgent hearing on the RBI’s plea. production. The Bench had asked Pawanshree Agrawal, appointed amicus curiae to assist it, to set up a second portal to take note of grievances of the homebuyers, and said the grievance portal be “kept alive”. Earlier, a similar portal was directed to be set up for the homebuyers of JIL. During the hearing, senior advocate Mukul Rohatgi and lawyer Anupam Lal Das, appearing for JAL, said only eight percent of homebuyers have opted for refund of money and 92 percent wanted delivery of their homes. The court also considered the submission of senior advocate Ranjit Kumar, representing eight independent directors of JAL, that they were old and resided in different parts of the country and should be exempted from personal appearance but reiterated its earlier direction that neither would they leave the country without its prior nod, nor would they alienate or create third-party interests in their personal properties. At the last hearing on November 22, the Supreme Court had allowed the parent company of Jaypee Infratech Ltd to deposit Rs 275 crore on that day and another Rs 275 crore by December 31 (Rs 150 crore by December 13, 2017 and Rs 125 crore by December 31, 2017). No specific timeline was given to deposit the remaining Rs 1,450 crore. But the SC order that day did say that “Needless to say that direction for deposit of Rs 2000 crore shall remain as it is. The only indulgence is to pay the same in installments.” Contact No. +91-903-977-7700 www.moneyclassicresearch.com

4. HOT PURSUIT Sale of tobacco in shops selling FMCG items banned in Maharashtra In an order which may not go down well with companies producing goods of common use, the Maharashtra government announced a ban on sale of tobacco at shops that sell chocolates, chips and other edible items, a top FDA official said. The move is aimed at ensuring youngsters do not get addicted to tobacco products, a top Food and Drug Administration (FDA) official said. "Children tend to get influenced a lot by the presence of tobacco and other items while they are out shopping for food items like chocolates and chips," Pallavi Darade, Commissioner, Maharashtra Food and Drug Administration, told reporters here. She said the move followed a directive from the Centre. The Union government had directed state governments to enforce a ban on sale of tobacco at outlets which also sell Fast Moving Consumer Goods (items of general public consumption). Maharashtra, which came out with a notification on January 9, became the first state to enforce the ban, the officer claimed. Several shops sell tobacco and related products as also other FMCG items. Darade, however, did not say how many shops could be affected by the ban. Shops and establishments caught selling both tobacco and FMCG items would face penal action, including cancellation of their licence, up to six months imprisonment, and a fine. The FDA has also extended the ban on scented supari (areca nut) by six months till July 2018, she said. Darade said, at a meeting with Maharashtra's Minister of State for Home, Ranjit Patil, she sought cancellation of registration of vehicles caught ferrying the banned items and cancellation of drivers' licences under the Motor Vehicles Act. She did not elaborate on whether her proposal was accepted. Contact No. +91-903-977-7700 www.moneyclassicresearch.com

5. 100% ethanol-run bikes to be launched this month: Nitin Gadkari Union minister Nitin Gadkari has announced that the market will see the launch of two bikes from two ‘big two-wheeler companies’ that will run on 100 percent ethanol, before end of this month. Ethanol, priced at around Rs 40/litre, is half the price of petrol, which is now being sold at more than Rs 80/litre in Mumbai. The renewable fuel is witnessing a major retail push from the government as it is desperate to reduce the high cost of imported fuel. The ministry of road transport and highways is urging automotive companies to introduce flex engines that can run with ethanol content as high as 100 percent. Automotive manufacturers have been selling E10 cars (10% ethanol, 90% petrol) in India but the government even struggled to meet E5 till 2016. “Flex engines are those which can run on 100 percent petrol and/or 100 percent ethanol. So we will see the launch of two bikes from two big companies by end of this month. Brazil, Canada and US already have the option of ethanol and buyers there have the option of choosing between petrol and ethanol. One tonne of rice straw can produce 280 litre of ethanol," said Gadkari. Gadkari further said that as per a new policy, which was approved by the Cabinet, India could see an increase to the tune of 50 percent in production of ethanol. “We import Rs 7 lakh crore worth of fossil fuel. We have decided that we will make second generation ethanol from cotton stalk, wheat straw, bagasse and bamboo. Petroleum minister Dharmendra Pradhan has been looking into this and made a policy and our Cabinet has approved it. This will result in 50 percent extra production of ethanol in India," added Gadkari. Contact No. +91-903-977-7700 www.moneyclassicresearch.com

6. Brent oil hits $71 for 1st time since 2014 as dollar drops, US stocks decline Brent oil prices hit $71 per barrel on Thursday for the first time since 2014 as the dollar continued to weaken and crude inventories in the United States fell for a 10th straight week amid ongoing supply cutbacks by OPEC and top producer Russia. Brent crude futures, the international benchmark for oil prices, hit a session high of $71.05 per barrel - the highest since early December 2014 - before dipping back to $70.99 by 0440 GMT. That was still up 46 cents, or 0.7 percent from the last close. U.S. West Texas Intermediate (WTI) crude futures climbed to $66.35 per barrel, also the highest level since early December 2014, before dipping to $66.26. That was still up 1 percent from the last settlement. Both crude benchmarks have risen by almost 60 percent since the middle of last year. Price have been supported by supply restrictions led by the Organization of the Petroleum Exporting Countries (OPEC) and Russia, the world's biggest oil producer, which started last year and are set to last throughout 2018. "That (the producer cuts), the U.S.-dollar fall, along with another inventory draw combined to drive (crude) up," said Greg McKenna, chief market strategist at futures brokerage AxiTrader. U.S. crude inventories fell 1.1 million barrels in the week to Jan. 19, to 411.58 million barrels, the Energy Information Administration (EIA) said on Wednesday. That is the lowest seasonal level since 2015 and below the five-year average of about 420 million barrels. In foreign exchange markets, the U.S. dollar hit its lowest level since December 2014 against a basket of other leading currencies. A weakening dollar often results in financial traders taking investments out of currency markets and into commodity futures like crude. Fereidun Fesheraki, chairman of consultancy FACTS Global Energy, told Reuters in Tokyo on Thursday that oil prices could rise further still. "The market is so tight... The problem with this environment is that if you have something in say, Libya, and production goes down by 500,000 barrels (per day)... it (Brent) can easily go to $75 by May," he said. Contact No. +91-903-977-7700 www.moneyclassicresearch.com

7. PSB recapitalisation – who has the last laugh? The government has laid the path for responsive and responsible PSBs (public sector banks), a document which clearly showcases the roadmap to a healthy and robust financial sector with recapitalisation of PSBs as the starting point in this journey. No more universal banking After having learnt a hard lesson of prematurely adopting universal banking (one of the primary reasons for the asset quality mess), the model of lending in future is going to change drastically to expertise-driven banking. Hence, not every bank will do all types of lending. Large project lending requiring specialised underwriting skills is going to be a forte of the few large/specialised banks whereas majority of the surviving mid-sized PSBs will focus on lending to small & medium sized enterprises. Lending will be much more ring-fenced with rigorous due diligence. Loans above Rs 250 crore will be specially monitored with red flags if covenants are breached. In addition the focus areas are going to be facilitating lending to Micro, Small and Medium Enterprises' (MSMEs) through the portal 'Udyami Mitra' launched by SIDBI, deepening financial inclusion and promoting digitisation. Out of the total Rs 2 lakh 11 thousand crore of recapitalisation, government has specified the first tranche of over Rs 1 lakh crore – Rs 8139 crore from gross budgetary support, Rs 10,312 crore from the market and the remaining Rs 88,000 crore through recapitalisation bonds. The recapitalisation bonds will be liquidity neutral. It will be swap transaction whereby PSBs will subscribe to these recapitalisation bonds (that are not going to be a part of their SLR securities) and government in turn will infuse equity capital to these entities. However, the capital is being given to the healthier group for growth and to the others for survival and to give them a “second chance”. In fact, 60% of the capital in the first tranche is going to go to the weaker entities (that are under Prompt & Corrective Action of RBI). The objective is to infuse regulatory capital, strengthen governance and operations. These entities would be subject to close monitoring and would be eligible for capital based on performance. Contact No. +91-903-977-7700 www.moneyclassicresearch.com

8. This should give a decent boost to their capital adequacy. But weighed down by asset quality woes, their ability to participate in the credit market remains a remote possibility. However, the capital will help them comply with the provisioning requirements as bad asset resolution gathers steam. In the past one year, majority of these banks have not participated in disbursing credit and we do not see an imminent recovery, thereby giving the well-capitalised competitors with strong liability an edge. However, the quantum of capital given to IDBI Bank and Bank of India shows government’s serious intention in reviving these entities and a possible move to privatise IDBI at a later stage cannot be ruled out. Government has also decided to infuse more capital to the healthy PSBs as they are likely to take up the baton of growth in the upturn of the credit cycle. Some of the entities like SBI, PNB and Union Bank have raised capital (by way of Qualified Institutional Placement) in recent times and should make good use of the additional support in bringing the requisite risk appetite back. In this group, however, the superior quality of liability will be the key differentiator in winning the market share game as the market has moved to MCLR (marginal cost of lending rate) based lending. In a rising rate regime, cost of funds will be a key differentiator. In addition to recapitalisation, these PSBs will actively pursue possibilities of exiting from non-core businesses and monetising real estates. The government has also reassured depositors that their money is safe and reiterated its commitment to tackle large bad loans through NCLT (national company law tribunal). Unequivocally it is the Indian economy. Through recapitalisation, government has created additional credit off take capacity of more than Rs 5 lakh crore - 6% of outstanding bank credit and 60% of the incremental credit of the past one year. Credit growth has seen a turnaround (11% year on year growth from the lows of 5%). Not just for the demonetisation base, large section of bankers are guiding to a genuine revival. The recap will only bolster this momentum. The capital especially to the banks under PCA will help expedite the resolution process under NCLT as banks would be required to take significant provisioning in the coming few quarters. The momentum in credit growth and resolution of NPA spell good news for well capitalised private entities. In a market that will incrementally chase high quality credit, the strength of the liability franchise will differentiate the men from the boys. CASA (low cost deposits) is no more a forte of the PSBs -many of the well run private sector banks who are already capturing market share aggressively will certainly have the last laugh. Contact No. +91-903-977-7700 www.moneyclassicresearch.com