Tag: paytm

Categories
Market News Top 10 News

Asian Paints to Invest Rs 960 crore to Expand Gujarat Unit – Top Indian Market News

Asian Paints to invest Rs 960 crore to expand Gujarat unit

Asian Paints Ltd has signed a Memorandum of Understanding (MoU) with the Govt of Gujarat, commencing the proposed expansion of manufacturing capacity at its Ankleshwar unit at a total investment of about Rs 960 crore. The manufacturing capacity of paint will go up from 1.3 lakh kilolitres (KL) to 2.5 lakh KL, and resins and emulsions from 32,000 metric tonnes (MT) to 85,000 MT. The capacity expansion will be completed over the next 2-3 years.

Read more here.

Paytm Payments Bank launches transit cards for metro, bus travel

Paytm Payments Bank Ltd announced the launch of the Paytm Transit Card. The card will take care of users’ everyday needs— from travel in metro, railways, state-owned bus services, toll & parking charges to payments at offline merchant stores, online shopping, and more. The card also enables the withdrawal of money from ATMs. The first phase of the rollout is being launched in collaboration with Hyderabad Metro Rail, Ahmedabad Metro, and the Delhi Airport Express Line.

Read more here.

Man Infra to develop luxury residential project in Tardeo, Mumbai

MICL Properties LLP, a subsidiary of Man Infraconstruction Ltd, is jointly developing an ultra-luxurious residential high-rise tower at Tardeo, Mumbai. The project is expected to generate approximately Rs 3,000 crore over the next 4-5 years. This landmark project will be one of the tallest residential structures in India, with a proposed height of more than 250 meters.

Read more here.

Tata Chemicals in talks to acquire battery business of UK-based Johnson Matthey: Report

According to reports, Tata Chemicals Ltd is in discussions with London-based Johnson Matthey Plc to buy the company’s battery materials business. A deal for the battery materials unit could fetch $500-700 million. The deal will help group company Tata Motors expand its range of electric vehicles (EVs) and secure a cost advantage over rival carmakers in the EV space, as none of them have in-house battery materials manufacturing ability.

Read more here.

Shakti Pumps’ board approves setting up of EV subsidiary

The Board of Directors of Shakti Pumps India Ltd has approved the incorporation of a wholly-owned subsidiary to conduct business in electric vehicle (EV) motors, EV chargers, and EV controllers. Shakti Pumps is a leading manufacturer of submersible pumps for domestic, industrial, horticultural, and agricultural use.

RBI supersedes the board of Reliance Capital, to start resolution process

The Reserve Bank of India (RBI) has superseded the Board of Directors of struggling Reliance Capital Ltd. RBI has also decided to approach the National Company Law Tribunal (NCLT) to kickstart the resolution process. The central bank’s move comes after Reliance Capital defaulted on multiple repayment obligations to its creditors and due to serious corporate governance issues. The non-bank lender fell onto hard times in the aftermath of the collapse of IL&FS in September 2018.

Read more here.

SBI and Capri Global Capital signs MoU to accelerate MSME lending 

State Bank of India (SBI) has entered into a co-lending arrangement with Capri Global Capital Ltd to boost lending to micro, small, and medium enterprises (MSME). This association will offer strategic and customized financing solutions to the underserved MSMEs of India in line with RBI guidelines.

Read more here.

RIL denies any intent to bid for UK telecom group BT

Reliance Industries Ltd (RIL) categorically denied any intent to bid for the UK telecom group, BT (formerly British Telecom). The company dismissed a report titled `Reliance mulling bid for UK’s telco BT Group’ as “completely speculative and baseless”. Reliance’s shares, which rose as much as 3.6% earlier in the day, closed 1.2% higher at Rs 2,441.50.

Read more here.

Ather Energy to set up its 2nd manufacturing facility at Hosur

Hero MotoCorp-backed Ather Energy plans to set up its second manufacturing facility, which will expand its capacity from 1.2 lakh units at present to 4 lakh units. The new facility will come up at Hosur, Tamil Nadu, to cater to the growing demand for its e-two-wheelers 450 X and 450 Plus. Apart from EV manufacturing, the new facility will also focus on lithium-ion batteries, a key focus area for Ather Energy.

Read more here.

LIC gets RBI approval to increase stake in Kotak Mahindra Bank

Life Insurance Corporation (LIC) has received approval from the Reserve Bank of India (RBI) to increase its stake in Kotak Mahindra Bank to 9.99%. Currently, LIC holds a 4.96% stake in the private lender. The approval of the central bank is valid for one year.

Read more here.

Categories
Market News Top 10 News

Paytm’s Net Loss Widens to Rs 473 crore in Q2 – Top Indian Market News

Paytm Q2 Results: Net loss widens to Rs 473 crore 

One97 Communications Ltd, the parent company of Paytm, reported a net loss of Rs 473 crore for the quarter ended September (Q2 FY22). It had posted a net loss of Rs 437 crore in the corresponding quarter last year (Q2 FY21). Its revenue from operations rose 64% YoY to Rs 1,090 crore in Q2 FY22. The company’s expenses grew 37.75% YoY to nearly Rs 1,600 crore during the same period. The Gross Merchandise Value (GMV) stood at 1,95,600 crore in Q2, up 107% YoY.

Read more here.

Need to be proactive in light of new Covid variant, says PM Modi

Amid rising concerns about the new Covid-19 variant Omicron, Prime Minister Narendra Modi on Saturday chaired a meeting with top officials on Covid-19. He stated that citizens need to be proactive in light of the new variant while laying emphasis on precautions to contain the virus.  PM Modi highlighted the need for monitoring all international arrivals, their testing as per guidelines, with a specific focus on countries identified as ‘at risk’.

Read more here.

IndusInd Bank’s Hindujas welcome RBI move to allow promoter holding of up to 26%

The Hinduja Group has welcomed the Reserve Bank of India’s (RBI) move to allow promoter holding of up to 26% in private-sector lenders. IIHL Mauritius, the Hindujas’ entity which is the promoter of IndusInd Bank, had applied to RBI to increase its holding to 26% from the previous cap of 15%. IIHL now awaits operational guidelines as it gives the promoters an opportunity to infuse capital to increase the stake up to 26%. The increased promoter holding will lead to the enhanced financial strength of the bank, and its clients will be protected.

Read more here. 

Bharti Airtel withdraws extra data benefit in-app coupons on certain packs to avoid confusion

Bharti Airtel Ltd has withdrawn certain data benefit coupons it was offering through its app on some of the prepaid plans. This move will help avoid any confusion among consumers about the offerings and comparisons between various plans. The telecom operator had announced 20-25% tariff hikes for various prepaid offerings, including tariffed voice plans, unlimited voice bundles, and data top-ups. The new rates came into effect from Friday.

Read more here.

GHCL signs MoU worth Rs 500 crore with Tamil Nadu govt

GHCL Limited has signed a Memorandum of Understanding (MoU) with the Government of Tamil Nadu for investing Rs 500 crore in the state. As per the agreement, GHCL will set up 40,000 ring spindles in Manaparai in Tiruchirappalli district to produce synthetic and synthetic-blended yarn to cater to the knitting and weaving segments. The company will also install another 40,000 ring spindles with 24 knitting machines in Paravai, Madurai district, to produce 100% cotton yarn and knitted fabrics.

Read more here.

Mahanagar Gas hikes gas prices for third time in six weeks

Mahanagar Gas Ltd has hiked the prices of compressed natural gas (CNG) and piped natural gas (PNG) with effect from Friday. The basic price of CNG was increased by Rs 3.06/kg and domestic PNG by Rs 2.26 per Standard Cubic Meter (SCM) for the Mumbai Metropolitan Region. This is the third price hike in the last six weeks.

Read more here.

Shriram Properties to launch up to Rs 700 crore IPO in December

According to reports, Shriram Properties Ltd is planning a ₹600-700 crore public listing in the second week of December. The company seeks to capitalize on a rebound in demand for residential properties and heightened investor interest in the segment. Bengaluru-based Shriram Properties focuses on mid-income housing projects in south India.

Star Health and Allied Insurance Company Ltd will launch its Rs 7,250 crore IPO on November 30. Tega Industries Ltd, a leading producer of polymer-based mill liners, will open its Rs 620 crore IPO on December 1.

Read more here.

SEBI seeks to ease preferential issue norms

The Securities and Exchange Board of India (SEBI) has proposed a revamp of rules on preferential share offers by relaxing pricing norms and lock-in requirements for promoters. This will make it easier for companies to raise funds through this route. SEBI has also proposed that companies must obtain a valuation report whenever there is a change in control following a preferential allotment of shares to investors.

Read more here.

Categories
Editorial

Why Was The PayTM IPO a Flop Show?

India’s largest IPO in a decade has turned a flop show! One97 Communications Ltd, the parent company of digital payments app PayTM, lost 27% of its share price on the day of its listing. Domestic retail investors had high hopes on the Rs 18,300 crore IPO. Nevertheless, investors were left surprised when the shares were listed at a discount on the stock exchanges. In this piece, we explore the possible causes that led to the failure, and whether the stock has any future investment prospects. 

Offloading By Promoters and Hedge Funds

The company planned to raise a total of Rs 18,300 crore through its IPO, Rs 8300 through a fresh issue (which goes to the company), and Rs 10,000 through an Offer For Sale (which goes to the promoters). The signs of an IPO debacle were pretty much evident at the beginning of the month. The highest number of shares were offloaded by Jack Ma’s Antfin (Netherlands) Holding B.V, Alibaba Group, and SoftBank Group. Other offloaders included some promoters and hedge funds. Hedge funds and Investment funds have an appetite for risk. They generally avoid playing on smooth grounds. Seemingly, the investment, venture capital, and hedge funds tried to take some money home by offloading stakes in the company. This wouldn’t have been the case if the companies saw a greater opportunity in the IPO.

Retail Investor Hype!

On November 3, 2021, the US Fed announced its plans to begin tapering quantitative easing by reducing interest rates and selling government bonds. While the announcement did not trigger a sudden reaction, investors knew it was time to slowly get their hands off high-risk assets, but obviously not the retail investors. Retail investors are individuals like me and you. The IPO was subscribed only 18% on Day 1. The retail segment was subscribed 78%, while the Qualified Institutional Buyers (QIB) and Non-Institutional Investor (NII) segments were subscribed only 2% and 5% respectively. By Day 3, India’s ‘largest’ IPO was subscribed 1.89 times, a small number for the hype around the company. In the end, the Foreign Institutional Investors and Retails investors managed to see the IPO through an oversubscription. 

Bad Timing

Timing is the most crucial element in an IPO. PayTM’s IPO is one of the last few IPOs of this season. The IPO bull run was powered by a rush of liquidity globally through quantitative easing and expansionary fiscal policies by various governments. This sudden rush of liquidity made its way to shares, IPOs, and other high-risk venues. The NIFTY and SENSEX are at an all-time high, and all the available liquidity has already been invested in the markets or IPOs. Almost all of PayTMs peers, despite high valuations, sailed through smoothly and gave investors a bang for the buck. This makes us ask, why did PayTM IPO fail while the IPO of its tech peers like Nykaa and Zomato sailed through smoothly?

We at marketfeed, in our article titled ‘Nykaa IPO: All You Need To Know’, pointed out the following: “The IPOs are coming out all at once with extremely high valuations and buzz in the market. It might leave the market out of liquidity. Nykaa is the first IPO going up in November and might therefore have a first-mover advantage. The company has grown significantly in a very small period, much faster than its other tech-commerce peers.”

The Future

Analysts had already signalled overvaluation for the company. An overvalued IPO can only sustain in a bull run. When the bears kick in, the fall can be bloody. The market has correctly valued the company through the discounted listing, dragging it towards the median valuation. As they say, the market decides its best value. Macquarie (a research firm) has assigned its lowest rating ‘underperform’ to the company. 

Despite being a loss-making company, Paytm has managed to trim its losses and expenses. While the company remains in net loss, its financial growth and stability have been healthy recently. The company does not have one specific listed competitor. It has a competitor in just about every domain it operates. This over-diversification can stunt the growth of the company in parent segments. The Macquarie report has mentioned that the company has ‘too many fingers in too many pies’. 

We are at the peak of the market cycle The flopped PayTM IPO is a red flag for over-valuation. While the company’s promoters made quite some money because of overvaluation, the retail investors suffered. Certain news reports suggest that analysts have advised to ‘sell and book loss’ to those who have received an allotment. It is advised that retail investors perform thorough research and take due caution before making a move.

Categories
Editorial

PayTM IPO Analysis: The Biggest Indian IPO is Here!

India’s largest IPO in a decade is near! One 97 Communications Limited, the parent company of PayTM, is expected to raise Rs 18,300 crore through its IPO next week. This piece covers the company’s financial position and business model.

About PayTM

PayTM is an Indian multinational company that specializes in digital payment systems, e-commerce, and finance. Founded in 2010 in Noida by Vijay Shekhar Sharma with an initial investment of $2 million, the company now holds a valuation of $16 billion or Rs 1.2 lakh crore. The company is backed by investors like Jack Ma’s Ant Group, SoftBank, and even Warren Buffet’s Berkshire Hathaway, to name a few.

Paytm is coming up with what could be known as the biggest IPO in a decade. It plans to raise nearly Rs 18,300 through its public issue. According to the RHP, the company would raise Rs 8,300 through a Fresh Issue and the balance Rs 10,000 through Offer For Sale (OFS). The draft papers had stated that the company had plans to raise Rs 2,000 crore in a pre-IPO placement. However, the plan was later scrapped since Paytm faced disagreements with investors over its valuation. 

Business Model

The company has a payments-led super-app, through which it offers innovative and intuitive digital products and services. It offers consumers a wide selection of payment options on the Paytm app, which include (i) Paytm Payment Instruments, which allow them to use digital wallets, sub-wallets, bank accounts, buy-now-pay-later and wealth management accounts, and (ii) major third-party instruments, such as debit/credit cards and net banking.

Merchants can use in-store and online payment solutions to accept payments through Paytm Payment Instruments as well as major third-party payment methods. To help them acquire and retain customers, and create demand, PayTM offers them services like selling tickets to customers, advertising, mini-app listings, channel, and loyalty solutions.

Paytm offers services to nearly 33.3 crore customers with 2.1 crore merchants on its network, as of March 2021. The company’s Gross Merchandise Value (GMV) stands at Rs 4 lakh crore. GMV refers to the rupee value of total payments made to merchants through transactions through Paytm Payment Instruments or its payment solutions, over a period.

According to a Redseer Report, Paytm has an overall payments transaction volume market share of approximately 40%, and wallet payments transaction market share of 65-70% in India as of FY 2021.

Paytm provides mobile banking services through Paytm Payments Bank, in which it owns a 49% equity stake. It offers a comprehensive suite of digital banking products for individuals, small and medium enterprises, and large corporates including current account, savings account, salary accounts, fixed deposits, and debit cards. As of March 31, 2021, Paytm Payments Banks had 64 million savings accounts, the largest UPI beneficiary bank with a market share of 17.1%.

Paytm also offers wealth management services through the Paytm app and the Paytm Money app. Paytm Payments Bank has launched fixed deposits on the Paytm app in partnership with commercial banks. It also launched Paytm Gold, which allows consumers to purchase gold for as low as Rs 1. Paytm Money offers mutual funds, equity, and derivatives trading through a registered investment advisor (RIA) license and equity broking license from SEBI.

Source:PayTM RHP

Financial Performance

Paytm has three revenue segments— Payment and Financial Services, Commerce and Cloud Services, and Other Income. The maximum revenue contribution is made by the Payments and Financial Services segment. This segment includes wallet payments, Paytm Payments Bank, Paytm Money, Paytm Postpaid, and other financial services. 

Between FY19 and FY21, the contribution of the Commerce and Cloud Services segment has reduced by ~54%. This was mainly due to the disruption caused by the COVID-19 pandemic, which affected the travel, e-commerce, and entertainment business of Paytm. Paytm is a loss-making company. Between FY19 and FY21, the company has managed to limit its losses by ~59%. 

Paytm has also managed to trim down its expenses by ~38%. Most of the company’s expenditure is made on payment processing charges due to high volumes of transactions taking place on the app. In FY21, close to 40% of the total expenses were payment processing charges. Another major expense was ‘Marketing and Promotional Expenses’. Between FY19 and FY21, the company managed to reduce Marketing and Promotional expenses by 84% from Rs 3,408 crore in FY19 to Rs 532 crore. 

Paytm holds a short-term debt of Rs 544.9 crores. 

About the IPO

Paytm plans to use the Rs 8,300 crore that it raises from the IPO as follows:

Growing and strengthening its ecosystem, including through acquisition and retention of consumers and merchants and providing them with greater access to technology and financial services.Rs 4,300 crore
Investing in new business initiatives, acquisitions, and strategic partnerships.Rs 2,000 crore

Paytm hasn’t specified where it will be using the remaining Rs 2,000 crore. 

Chinese mogul Jack Ma’s Antfin (Netherlands) Holding B.V. owns close to 29.6% equity stake in Paytm, the highest in the company. According to SEBI regulatory requirements, no shareholder can hold more than 25% in a ‘professionally managed company’. Since Paytm has decided to list as a professionally managed company, it cannot have a promoter. Antfin will be the largest seller in the IPO. It will be selling shares worth Rs 4,704 crore out of the total OFS of Rs 10,000 crore. Jack Ma’s Alibaba too holds a 7.2% stake in Paytm separately. Other shareholders include Berkshire Hathaway, Elevation Capital, SoftBank, and CEO Vijay Shekhar Sharma. 

According to SEBI regulations, the company needs to offer not less than 75% of the net offer to Qualified Institutional Buyers (QIBs). This will bring down the retail quota from 35% to 10% as is the requirement laid down by SEBI. Therefore, retail investors like you and me have a lesser chance of getting an allotment due to supply-side restraint. 

Despite being a loss-making company, Paytm has managed to trim its losses and expenses. It has diversified its revenue stream, which ensures that impact on one vertical does not affect the other. While the company remains in net loss, its financial growth and stability are healthy. The company does not have one specific listed competitor. It has a competitor in just about every domain it operates. 

What are your views on this IPO? Will you be applying for it? Let us know in the comments section of the marketfeed app.

Categories
Market News Top 10 News

CCI Imposes Rs 200 crore Penalty on Maruti Suzuki – Top Indian Market News

"Bangalore, India - January 29, 2013: Signage at a car showroom belonging to Maruti Suzuki India Ltd. in Bangalore, India. The company is a subsidiary of Japan's Suzuki Motor Corporation, and has been the leader in the Indian car market for two and half decades with a capacity of 1.7 million cars annually."

CCI imposes Rs 200 crore penalty on Maruti Suzuki over dealer discount policy

The Competition Commission of India (CCI) has imposed a penalty of Rs 200 crore on Maruti Suzuki India Ltd for indulging in anti-competitive practices by restricting discounts offered by its dealers. It was revealed that the automaker had employed mystery shopping agencies to ensure no additional discount was offered to customers by its dealerships. 

In 2019, CCI launched an investigation into the allegations that Maruti Suzuki forced its dealers to limit their discounts. An order based on the investigation was released today (August 23), in which the CCI directed Maruti Suzuki to ‘cease and desist’ from indulging in such practices and asked the company to deposit the fine within 60 days.

Read more here.

Infosys CEO meets FM Sitharaman amid persistent tech issues with IT portal 

Union Finance Minister Nirmala Sitharaman met with Infosys CEO Salil Parekh to discuss the critical issue of persistent glitches in the new Income Tax (IT) portal. Since June 8, taxpayers using the e-portal have faced technical glitches, errors, and challenges in accessing it or several functions within the website. According to reports, the FM has demanded that the issues faced by taxpayers on the current functionalities of the IT portal should be resolved by Infosys within September 15, 2021. 

Read more here.

Jio adds 54 lakh subscribers in June; Vodafone Idea loses 43 lakh subscribers

Reliance Jio Infocomm and Bharti Airtel added 54.6 lakh and 38.12 lakh wireless subscribers, respectively, in June 2021. Jio’s total subscriber base rose to 43.6 crore during the same month. Bharti Airtel’s overall mobile user base stood at 35.2 crore at the end of June. Meanwhile, Vodafone Idea (Vi) lost 42.8 lakh subscribers in June, and its user base shrunk to 27.3 crore. The data was released by the Telecom Regulatory Authority of India (TRAI).

Read more here.

HDFC Bank partners with Paytm to offer digital banking services

HDFC Bank has entered into a strategic partnership with Paytm to expand its suite of digital banking services offered to individuals and merchants. The companies will build payment gateway and point-of-sale (PoS) solutions for merchants. Paytm and HDFC Bank will also launch a co-branded PoS product in the retail segment, which Paytm will have the option to offer to its own customer base. They will also look to offer credit products such as Paytm’s Buy Now-Pay Later solution Paytm Postpaid, Eazy EMI, and Flexi Pay.

Read more here.

HCL Tech signs contract with Munich Re for digital workplace services in 40 countries

HCL Technologies Ltd has signed a contract with Germany-based insurer Munich Re to create a next-generation digital workplace for its workforce. The IT major will modernize and standardize workplace services for more than 16,000 employees across 40 countries. HCL Tech will adopt a “glocal” strategy to support Munich Re’s global workforce in multiple languages from near-shore locations.

Read more here. 

SSWL signs MoU with Western Hemisphere for $105 million deal

Steel Strips Wheels Ltd (SSWL) has signed a Memorandum of Understanding (MoU) with Western Hemisphere for an order worth nearly $105 million (~Rs 778 crore). The order includes the supply of steel and aluminium wheels for a minimum period of three years. The supplies of steel wheels will begin from SSWL’s Chennai and Dappar plants by September 2021. Supplies of aluminium wheels from its Mehsana plant will commence from the end of December 2021.

Read more here.

Indian Hotels to raise Rs 3,000 crore via rights issue to meet financing needs

The Board of Directors of Indian Hotels Company Ltd (IHCL) has approved a proposal to raise Rs 3,000 crore through a rights issue. The objective of the issue is to meet the company’s financing needs for capital expenditure, growth plans, and debt repayment. IHCL’s board has also approved the formation of a Committee of Directors to decide the terms and conditions of the rights issue, including details of the issue price, record date, etc. Mumbai-based IHCL is the parent company of Taj Hotels.

Read more here.

Eicher Motors reappoints Siddhartha Lal as Managing Director

Amidst a tussle over remuneration, the Board of Directors of Eicher Motors Ltd has decided to re-appoint Siddhartha Lal as Managing Director (MD) with effect from May 1, 2021. As per reports, Lal’s reappointment as MD was voted down earlier by the shareholders over a 10% hike in his salary proposed amid the Covid-19 pandemic— when the revenue and profit growth of the company has been slow. Eicher Motors’ board will now go back to shareholders for approval through a postal ballot.

Read more here.

RattanIndia Enterprises forms subsidiary for drone business in India

RattanIndia Enterprises will incorporate a wholly-owned subsidiary to kickstart its Unmanned Aerial Vehicle (UAV) drone business operations in India. The company had recently announced a strategic investment in the US-based urban drone logistics platform Matternet. Drone systems have a wide variety of commercial and industrial applications in healthcare and e-commerce logistics, infrastructure monitoring, agriculture, weather monitoring, surveying, etc.

Read more here.

Centre announces Rs 6 lakh crore National Monetisation Plan

The Central government has announced a Rs 6 lakh crore National Monetisation Plan (NMP) for monetising infrastructure assets across key sectors. The plan would cover a wide range of sectors, including road and railway assets, airports, power transmission lines, and gas pipelines. FM Nirmala Sitharaman stated that the assets would not be sold to the private sector but will only be given to them for their better utilisation. 

NMP is in line with Prime Minister Narendra Modi’s strategic divestment policy, under which the state will retain its presence in only a few identified sectors and the rest will be privatized. 

Read more here.

Categories
Market News Top 10 News

DBS Completes Takeover of Lakshmi Vilas Bank – Top Indian Market News

DBS completes takeover of Lakshmi Vilas Bank

Singapore-based DBS Group, on Monday, stated that its Indian subsidiary- DBS Bank India- has completed the takeover of distressed Lakshmi Vilas Bank (LVB). LVB’s banking services have been restored, with all branches, digital channels, and ATMs functioning as usual. The interest rates on savings bank accounts and fixed deposits will remain unchanged until further notice. All employees of LVB will continue in service and are now part of DBS Bank’s workforce. 

Read more here.

Govt likely to spend Rs 18,000 crore on priority vaccination for Covid-19

The Indian Government is likely to spend Rs 18,000 crore for the first phase of priority vaccination for Covid-19. This is according to a report from CNBC-TV18. The projected cost has been estimated by an expert panel comprising of Niti Ayog and Health Ministry officials. Currently, the panel is in the process of identifying 30 crore priority beneficiaries such as health care workers, police, sanitation workers, and the elderly. However, the report also states that these are approximations and the actual cost is yet to be finalised.

Read more here.

Banks in India to see capital decline over two years without fresh infusion: Moody’s

A report from Moody’s Investors Service stated that Indian banks will see a larger capital decline without further infusion, over the next two years. Moody’s says that the uncertain trajectory of asset quality is one of the biggest threats for emerging market banks. The report also states that the 2021 outlook for banks in emerging markets (such as India) is negative.

Read more here.

Hindustan Construction, Vensar JV wins Rs 236 crore railway order

Hindustan Construction Company Ltd, in a joint venture with Vensar Constructions Company Ltd, has bagged two contracts worth Rs 236 crore, from the Northeast Frontier Railway. The companies will construct a portion of the Bairabi-Sairang broad gauge rail line. This is part of the Indian Railways’ plans to improve its network across North-East India. Hindustan Construction’s share in the order is placed at Rs 130 crore.

Read more here.

Shapoorji’s $1.2 billion deal with ADIA on hold over debt issues: Report

The Shapoorji Pallonji Group has kept its logistics venture with Abu Dhabi Investment Authority (ADIA) on hold. According to a report from Business Standard, the reason for keeping the deal on hold is due to debt issues and the ongoing Covid-19 pandemic. The group had planned to launch a $1.2 billion (~Rs 8,874 crore) venture with ADIA to invest in logistic centres in India.

Read more here.

Serum Institute rejects volunteer’s claims of suffering side effects; seeks damages worth Rs 100 crore

The Serum Institute of India (SII) filed a Rs 100 crore defamation case against a Chennai-based volunteer who took part in its ‘Covidshield’ vaccine trials. The volunteer had alleged that the vaccine triggered an adverse reaction, which included neurological impairment. On November 21, the volunteer sent a legal notice and sued SII for Rs 5 crore. SII has denied the allegations and has stated that there was no correlation between the vaccine trial and the medical condition of the volunteer.

Read more here.

Tata Sons may raise stake to over 76% in AirAsia India by end of FY21: Report

As per a report from Business Standard, Tata Sons is planning to gradually raise its stake in AirAsia India to more than 76% by the end of 2020-21. This may allow Malaysia-based AirAsia Group (which holds a 49% stake in the company) to exit its operations from India. The AirAsia Group earlier stated that it was struggling to recover from the Covid-19 impact, and had hinted at exiting its operations in India.

Read more here.

Paytm Money launches IPO investments for retail investors

Paytm’s wholly-owned subsidiary, Paytm Money, will now facilitate investments in Initial Public Offerings (IPOs). It will enable investors to instantly apply for the latest IPOs from their UPI-linked bank accounts and complete the application process in 3-4 days. The company is aiming to capture 8-10% of applications market share in the first year of launch.

Read more here.

IHCL announces expansion in eastern India with Ambuja Neotia Group

Indian Hotels Company Ltd (IHCL) has announced the signing of three hotels in eastern India (two in Kolkata and one in Patna), with the Ambuja Neotia Group. The company’s CEO Puneet Chhatwal stated that 60% of revenue in FY21 is expected to come from its leisure segment. He further stated that IHCL will be present in 9 out of 10 states in the east. IHCL, which runs the Taj group of luxury hotels, is owned by the Tata Group.

Read more here.

Indian Railways record 371% increase in electrification during 2014-2020

Piyush Goyal, the Union Minister of Railways, stated that the electrification of 18,065 km of railway lines has been completed during 2014-2020. There constitutes a 371% increase in electrification, as compared to the period between 2009-2014. The minister also stated that the electrification process will help eliminate pollution, cut down imports of fuel, and save costs.

Read more here.

Categories
Editorial

The UPI Transaction Cap – All You Need To Know

On 5th November, an official notification from the National Payment Corporation of India (NPCI) came as a bitter surprise for digital payment companies. The notice stated that the amount of UPI transactions on third-party applications would be capped at 30%. This would impact firms such as Google Pay and PhonePe, and also consumers like you and me. Let us understand more about why this limit is introduced and what its effects could be.

Why was this Rule Introduced?

Since 2016, India has been seeing a rapid growth of online payment systems. We know that there are many third-party Unified Payments Interface (UPI) apps such as Google Pay, PhonePe, Paytm, and Amazon Pay. These apps dominate the payment services industry. With these apps, we can send or receive money through our bank accounts with great ease. These companies do not charge us for transferring funds, and even provide us with cashback offers as well. Since these apps have a large number of active users, they can be found as a payment option on almost all online platforms.

Source: BloombergQuint

As lockdown restrictions were introduced this year, these UPI apps have reported a sharp increase in its active user base. India’s digital payments ecosystem had registered almost 200 crore monthly transactions through the UPI network in October 2020. At the same time, Google Pay and PhonePe together hold more than 80% of the market share in this industry. In fact, on November 9, the Competition Commission of India (CCI) had ordered a detailed probe against Google Pay. It has been alleged that the company is using unfair anti-competitive practices.

To ensure that these big companies do not control the payments market, NPCI believed that it was time to introduce a strict limit on the number of UPI transactions for each payment app. They have stated that the new rule would create a more competitive market. It would also protect the UPI ecosystem, as it is scaling up at a rapid pace. NPCI has also stated that this limit would bring down transaction risks and failures.

Hence, a 30% cap on the total volume of UPI transactions through third-party app providers (TPAPs) would be imposed from January 2021. The 30% cap will be calculated based on the total volume of transactions processed in UPI during the preceding three months. These companies would get two years to ensure that the new rules are imposed in a phased manner. It would also apply to the new member of the industry- WhatsApp Pay. 

Interestingly, the new limit would not apply to PayTM and Reliance’s Jio Payments Bank. This is because they have payments banking licenses and do not fall under the category of third party apps. If you have noticed, a UPI ID on Google Pay would end with @okicici or @okaxis while it ends with @paytm on PayTM.

How Would it Affect Third-Party Apps?

It is believed that this rule could cause a major effect on the user experience of third-party UPI apps. The main cause of rapid innovations in the UPI platform was only because of the user experience created by Google Pay and PhonePe. If you have noticed, there are options ranging from paying your monthly expenses to even splitting a bill amongst your friends. These are the main features that popularised digital payments in India.

With this new limit, the third-party apps would have to remove small online merchants from their platforms. They would also have to cut back on incentives such as coupons and cashback. These were important features that allowed payment apps to attract more individuals to join the digital movement. More importantly, the number of UPI transactions that an individual can conduct per day would be cut down from these apps. Once the daily limit has been reached, people would have to use less-popular UPI apps to make essential payments. 

“This announcement has come as a surprise and has implications for hundreds of millions of users who use UPI for their daily payments and could impact the further adoption of UPI and the end goal of financial inclusion,”- Sajith Sivanandan, the Business Head at Google Pay India.

The Entry of WhatsApp Pay

Facebook-owned WhatsApp has finally received approval from RBI and NPCI to launch its digital payment platform in India. According to the company’s records, the messaging app has an active user base of almost 40 crore members in our country. This would be a great advantage for the company as it makes its entry into the UPI market. Similar to the existing UPI payment apps, WhatsApp will not be charging a transaction fee. A report from the Times of India suggests that WhatsApp could end up achieving a market share of about 30%. This would automatically lead to a decline in the share of both Google Pay and PhonePe in the UPI industry.

However, they are faced with some major hurdles. Even with such a large user base, the regulators have ensured that WhatsApp Pay will only be launched in a phased manner. What this means is that only 2 crore users will be able to use the platform to conduct transactions in the initial stages. Also, the introduction of the 30% cap would harm the user experience of the app. It seems like the entry of WhatsApp Pay has come at a rather difficult time in this highly competitive industry. 

The Future of UPI in India

The future of payments is digital. India has successfully launched multiple methods (such as NEFT, IMPS, UPI) to support this transformation. According to a report from Crisil in 2019, digital payments in India seem to grow at a CAGR of 12.7%. It may jump to Rs 4,055 lakh crore in FY24 with a five-year CAGR of 20%. Also, the prediction shows that all UPI payments will dominate the payments space with 59% payment transactions. For the first time in India, UPI payments had exceeded ATM cash withdrawals due to lockdown restrictions this year. These are very promising figures that would ultimately help our country to establish a much easier flow of funds.

What we are witnessing now is a complete restructuring of UPI payments. This method was completely free of charge and a much-loved mode of online transactions. Now, banks which offer UPI service in our country have started to charge a specific transaction fee on all UPI transfers. Several banks such as Axis Bank and Kotak Mahindra Bank are already charging Rs 2.5 for amounts of up to Rs 1,000. These charges are levied after a free transaction limit is crossed. So, it would be applicable to all the payment apps we had mentioned earlier.

Even if these small charges are imposed, we could say that the usage of UPI transactions across our country would not decline. It would remain to be one of the most convenient and user-friendly modes of payment for all our needs. Let us look forward to how these payment companies would implement the new rule. Only time will tell if users would react positively to these changes.