Modi Sarkar 2.0 to Push for Minimum Government, Maximum Governance, Ather Energy Raises $51m, Fiat Chrysler Renault Merger Stirs Criticism and Other Top Business News Today

Narendra Modi Sarkar expected to reform the bureaucracy during its second term. Govt likely to wait for Q2 results to announce bank recapitalization. Ather Energy raises $51m in its latest round of funding. IndiGo, SpiceJet, Vistara and other rivals shine on back of Jet Airways crisis. Uber riders in the US and Canada with low ratings may be booted from the app. Fiat Chrysler-Renault merger stirs criticism in France. SBI to cash in on the NBFC crisis, set to build its mortgage and small business loan book as the non-banks are forced to pull back. SFIO investigates why questions raised by a junior analyst at a rating agency about financial irregularities at IL&FS were ignored.

 

Moving on to the top Business news today:

 

 MODI 2.0 

Narendra Modi Sarkar expected to reform the bureaucracy during its second term. Govt likely to wait for Q2 results to announce bank recapitalization.
 

“Minimum Government, Maximum Governance”: Narendra Modi in his second term as the Prime Minister of India is expected to deliver on his promise of “minimum government, maximum governance”, by pruning multiple administrative departments.
 

As per reports, Modi is expected to merge departments such as Department of Public Enterprises, Department of Land Resources with other relevant ministries. He may also create umbrella energy and infrastructure ministries merging a number of ministries together for better synergy.
 

The Modi government may also be forced to fill up a large number of government vacancies, thus further bloating the bureaucracy.
 

Not So Soon: As per the Ministry of Finance, the newly-elected government will wait for the Q2 results to announce any bank recapitalization plans. 
 

The previous government has already completed the mega-bank recapitalization of INR2.11tr, which it had announced in October 2017. 
 

The government meanwhile expects three to four banks to come out of prompt corrective action framework (PCA) which puts restrictions on big-ticket lending, dividend payouts and branch expansion.
 

There are currently five banks under the framework. Five banks have been able to come out of the framework with the help of government’s capital.
 

Moreover, the state-run lenders have recovered more than INR1L cr in FY19 through the resolution of bad loans. Further recovery from the resolution of bad assets will help the banks in raising capital and lessening their need for government’s capital.

 

 BANKING 

 
SBI to cash in on the NBFC crisis, set to build its mortgage and small business loan book as the non-banks are forced to pull back. SFIO investigates why questions raised by a junior analyst at a rating agency about financial irregularities at IL&FS were ignored
 
 
Cashing In: The State Bank of India is set to cash in on the NBFC crisis, as it seeks to build its mortgage and small business loan book, which had been a focus for the NBFCs before the crisis erupted.
 
 
Stressed: NBFCs in India have been under pressure since last year, when a series of defaults by Infrastructure Leasing & Financial Services had forced the shadow banks to sell assets and restrict new loans.
 
 
This has given state-owned lenders an opportunity to claw back market share they have lost over the past decade.
 
 
Under the Scanner: As per this report, the Ministry of Corporate Affairs (MCA) and the new board at IL&FS are investigating why questions raised by a junior analyst at a rating agency about financial irregularities at the infrastructure financier were ignored by the top management.
 
 
Four credit rating agencies - Care Ratings, ICRA, India Ratings and Brickwork Ratings, are being probed in this regard.  
 
 
One of the four agencies had earlier raised a red flag about the group’s elevated leverage but citing the company’s track record in the infrastructure sector, it had retained the investment grade.
 
 
Red Flags: In another such instance, a junior analyst did alert his seniors about the situation, but the seniors overlooked the warning. 
 
 
The four credit rating agencies have been found to be in violation of the provisions of Section 36 of the Companies Act, which pertains to penalties for fraudulently inducing people to invest. 
 
 
SFIO is investigating whether rating agencies, entrusted with the responsibility of qualifying and grading the creditworthiness of borrowers, have knowingly suppressed information. 
 
  
 RENAULT 
 
 
Fiat Chrysler-Renault merger stirs criticism in France.

 
Under Fire: Fiat Chrysler’s proposal to merge with Renault to form the third largest automaker by production (after Volkswagen and Toyota) is facing criticism in France. The French state and labour unions (who command 6 out of 17 votes on the automaker’s board) has raised questions regarding the proposed merger and whether the plan would undervalue Renault and put jobs at risk.

 
Renault’s board will vote early next week whether to enter exclusive talks with Fiat Chrysler. To complete the deal, both companies would need to convince these parties that a merger doesn’t threaten Renault’s status as a symbol of national industry.

 
The Fiat-Renault Merger: Understanding the pitfalls and potential profits of the  Fiat-Renault merger plan. More on this here.

 

 INDIA 


IndiGo, SpiceJet, Vistara and other rivals shine on back of Jet Airways crisis.

 
Make Hay While the Sun Shines: Rivals of Jet Airways seem to be rather thrivingfollowing the grounding of the private carrier on back of severe cash crunch. 
 
  • Jet Airways carried 17.06 lakh passengers in January 2019 (including JetLite). In March 2019 (the last full month of operations for them) it only carried 6.71 lakh passengers. Meanwhile, GoAir, which flew 10.88 lakh passengers in January was able to carry 11.9 Lakh passengers in April 2019.

 

  • Along similar lines, wilth slots of Jet up for redistribution, IndiGo increased capacity from Mumbai’s Terminal 2 and Delhi’s Terminal 2.

 

  • SpiceJet has inducted 30 Boeing 737 MAX aircraft belonging to Jet Airways on short term leases of 12-24 months.

 

  • The premium carrier, Vistara was also able to benefit from the crisis at Jet Airways as the corporate travellers who want to fly a full-service airline shifted to Vistara.

 

The Indian airlines carried 10.96 million passengers during April 2019, a 4% drop from April 2018.
 

No Sweat Over Jet: However, as per official statistics, if Jet Airways, which ceased operations on April 18, were to be taken out of the equation, the number of Indian passengers carried by airlines grew 13% during the period.
 
 
Here’s a deep dive into how the Indian aviation sector has been doing without Jet. 
 
  
 TECH 

 
Uber riders in the US and Canada with low ratings may be booted from the app. Ather Energy raises $51m in its latest round of funding.
 
 
Respect – A Two-Way Street: Uber recently announced a policy change in the US and Canada, which stated that riders who exhibit rude behaviour (like leaving trash in the car or asking the driver to speed) will suffer the risk of getting booted from the app. The policy change has already been enacted in Australia, New Zealand, and India. 
 
 
Riders with low ratings will be given notices that they might lose access to the service, and tips on how to improve their ratings. The change is meant to ensure that riders are held equally as accountable as the drivers are. 
 
 
Big Plans: Bengaluru-based electric scooter maker, Ather Energy raised $51m in its latest round of funding led by Sachin Bansal’s $32m investment. Hero MotoCorp converted its convertible debt of $19m, and InnoVen Capital extended a $8m venture debt as part of this round as well. 
 
 
The company plans to utilise this fund to expand capacity to 25000 units per annum and add 3-4 cities in the short-term to expand the business. 
 

 

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