RBI Cuts Repo Rate, Government Likely to Increase Angel Tax Exemption Limit, Tata Motors Posted Record Loss of $3.8bn in Q3 et al.

RBI cuts repo rate by 25 basis points to 6.25%. Government likely to increase angel tax exemption limit. Tata Motors posted record loss of $3.8bn in Q3. RCom plunged c. 50% as it filed for bankruptcy.

 

Now here's the Breakdown:

 

RBI


RBI cuts repo rate by 25 basis points to 6.25%. RBI Governor stands firm on bad loan recognition rules. Risk weights eased for bank loans to NBFCs. Rate cut may not benefit retail lending immediately. 
 
 

As Per Popular Expectation: RBI on Thursday announced a 25 basis points rate cut to 6.25% in a 4-2 vote, changing its stance to “neutral” from “calibrated tightening” on back of a global economic slowdown, inflation hovering at an 18-month low below the Central Bank’s 4% +/- 2% target, amongst others. This is the first rate cut since August 2017.

 

Taking a U turn: This was the first policy meeting since Shaktikanta Das took over as the Governor, and marks a dramatic shift in RBI’s stance, providing it with more flexibility to meet growth challenges. 

 

Strengthen Private Investment Activity and Buttress Private Consumption: Read the RBI Press Release here. View the MPC conference video here.

 

No Compromise: RBI Governor Shaktikanta Das reiterated his stand on the February 12 RBI circular that tightened bad loan recognition rules. 
 

Background: The circular directed lenders to refer any loan account over INR2,000cr under the Insolvency and Bankruptcy Code (IBC), if it is not resolved within 180 days of default. 

 

Relaxation to NBFCs: The Central Bank eased risk weight for bank loans to Non-Banking Financial Companies (NBFCs), permitting banks to assign risk weights to exposures they have to NBFCs depending on ratings given to them by accredited credit rating agencies (which would be lower than the current 100% risk weight).

Also This: RBI is also likely to harmonise categories of NBFCs and bring asset finance companies, infrastructure finance firms and infrastructure debt funds under one category. This is expected to reduce the complexities arising from multiple categories and provide the NBFCs greater flexibility in their operations.

 

We Regret The Inconvenience Caused: As per a Livemint report, the transmission of cut in policy rates may be a challenge due to margin pressure.

 

Too Little Too Late: The RBI rate cut announced yesterday may augment the current dispensation’s position in the upcoming elections. However, some say that it is too little and too late to be a decisive factor. Read more here.

 

ANGELTAX


Government likely to increase angel tax exemption limit. 
 

Breathe Easy: The government is likely to increase the angel tax exemption limit for startups. As per the new rules, companies whose share premium does not exceed INR25cr (up from the earlier limit of INR10cr) will be exempt from taxation.
 

A formal notification regarding the same is to be released by Monday or later next week. Read this article to know what you can expect from the new regulations. 
 

Tax Terrorism: This development comes in wake of startups being harassed by the IT department, where in some cases it withdrew lakhs from bank accounts of companies such as Travel Khanna and Babygogo on the pretext of angel tax. Read this article to know what we are talking about. 

 

COMPANIES

Tata Motors posted record loss of $3.8bn in Q3. RCom plunged c. 50% as it files for bankruptcy.

 

What Went Down: Tata Motors posted the biggest-ever quarterly loss in Indian corporate history on Thursday as the automobile manufacturer reported a whopping loss of $3.8bn in Q3 on back of lower Jaguar Land Rover sales in China, Brexit woes and an overall weaker business for diesel cars that account for bulk of its sales in Europe.

 

FYI: The loss reported is half of Tata’s current market capitalization of $6.1bn. Let that sink in. 

 

…And We All Fall Down: Shares of Tata Motors tanked over 29% on Friday before closing at INR150.15 (-17.88%) as the news came in. No surprises there!

 

Should You Sell?: Maybe not. See what the experts are saying here.

 

RCom: Anil Ambani’s Reliance Communications fell by over 50% as it filed for bankruptcy on Saturday, unable to sell its spectrum assets to Mukesh Ambani’s Reliance Jio. 

 

Going, Going, Gone: With RCom finally filing for insolvency, the government is staring at a potential loss of spectrum dues worth INR2,900cr. Read this fascinating piece by Bloomberg which discusses how failing to take the initiative before the inevitable bankruptcy of RCom has cost the Indian banks dearly. 

 

JET

Etihad infuses INR252cr in Jet Airways.
 

Etihad injects INR252cr into Jet Airways by pre-purchasing tickets through its loyalty program Jet Privilege.

Jet Continues to Lag: However, the infusion might not be enough to repay Jet’s debts considering that loan repayment for this FY alone exceeds INr1,700cr.

 

Zoom Out: Jet is currently in talks with Etihad for an equity infusion. Etihad, however, has put forward stringent conditions including a price not more than INR150 for each of Jet’s shares.

 

Meanwhile...: Pilots of Jet Airways likely to take a call on the staggered disbursement of their salaries amidst the financial crisis next week. Read more on this here.

 

 

TECH

Germany prohibits Facebook from combining user data from different sources.

 

Facebook Smells Trouble?: Germany’s antitrust regulator has prohibited Facebook from combining user data from different sources without explicit consent. The order applies to data collected by the social media-owned platforms like WhatsApp and Instagram, and also third-party sources that it uses to make its advertising more precise and effective. 
 

The development comes days after Zuckerberg announced plans to integrate Facebook’s three messaging platforms– WhatsApp, Instagram and Facebook Messenger.

 

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