Specialist in Indian Banking and Economic Research

Hemindra Hazari

In a little-publicised step, the Securities and Exchange Board of India (SEBI) has directed the first 1,000 companies by market capitalisation on the Indian bourses to disclose voluminous information in their <a href="https://www.sebi.gov.in/media/press-releases/may-2021/sebi-issues-circular-on-business-responsibility-and-sustainability-reporting-by-listed-entities-_50097.html" target="_blank" rel="noopener">business responsibility and sustainability</a> reporting. For FY2022 this is voluntary, but from FY2023 it is to be mandatory. This largely non-financial data may provide significant insights into large cap companies’ impact on the welfare of stakeholders (communities, employees, customers and channel partners) and the environment.Since 2012 the SEBI had mandated the disclosure of a Business Responsibility Report containing Environment, Social and Governance (ESG) parameters; however, the data was not standardised. The recent SEBI directive will standardise the data, facilitating its aggregation and its comparison across companies and industries. Even though they may not appear to be directly relevant to shareholders, these disclosures will shed light on how other stakeholders’ concerns are being addressed; and that can be relevant to the shareholders as well over the medium term. For the private sector banking and financial intermediaries, this data will reveal the near absence of trade unionism amongst their employees, and the high turnover of staff, especially at the lower levels. This turnover at the branches engaged in retail banking appears to be on account of ambitious sales targets set by the management. Such issues have typically been ignored by institutional investors, and indeed they often applaud such a policy, as it restrict wages and delivers higher profits.The disclosures stipulated by SEBI will also cover how the communities, customers, channel partners and employees view the company. Will this mean that companies will not be able to focus solely on shareholder interest, but will also have to pay attention to stakeholders’ concerns? In some cases, anti-corporate campaigners (representing workers, project-affected communities, or consumers) may find in such reports revelations that are embarrassing to the firm.The media and sell-side research have not reacted to these new requirements, as the disclosures are mainly non-financial. However, analysing and aggregating the data will provide valuable insights into companies and industries. In future, the cost of compliance for companies will increase. They will have to create separate departments, or outsource the function, in order to manage the voluminous data. It yet has to be seen how far the corporate sector cooperates, and the quality of the data provided. Nevertheless the step is likely to be helpful for understanding some aspects of the dynamics of corporate businesses in India.

In a little-publicised step, the Securities and Exchange Board of India (SEBI) has directed the first 1,000 companies by market capitalisation on the Indian bourses to disclose voluminous information in their business responsibility and sustainability reporting. For FY2022 this is voluntary, but from FY2023 it is to be mandatory. This largely non-financial data may provide significant insights into large cap companies’ impact on the welfare of stakeholders (communities, employees, customers and channel partners) and the environment.Since 2012 the SEBI had mandated the disclosure of a Business Responsibility Report containing Environment, Social and Governance (ESG) parameters; however, the data was not standardised. The recent SEBI directive will standardise the data, facilitating its aggregation and its comparison across companies and industries. Even though they may not appear to be directly relevant to shareholders, these disclosures will shed light on how other stakeholders’ concerns are being addressed; and that can be relevant to the shareholders as well over the medium term. For the private sector banking and financial intermediaries, this data will reveal the near absence of trade unionism amongst their employees, and the high turnover of staff, especially at the lower levels. This turnover at the branches engaged in retail banking appears to be on account of ambitious sales targets set by the management. Such issues have typically been ignored by institutional investors, and indeed they often applaud such a policy, as it restrict wages and delivers higher profits.The disclosures stipulated by SEBI will also cover how the communities, customers, channel partners and employees view the company. Will this mean that companies will not be able to focus solely on shareholder interest, but will also have to pay attention to stakeholders’ concerns? In some cases, anti-corporate campaigners (representing workers, project-affected communities, or consumers) may find in such reports revelations that are embarrassing to the firm.The media and sell-side research have not reacted to these new requirements, as the disclosures are mainly non-financial. However, analysing and aggregating the data will provide valuable insights into companies and industries. In future, the cost of compliance for companies will increase. They will have to create separate departments, or outsource the function, in order to manage the voluminous data. It yet has to be seen how far the corporate sector cooperates, and the quality of the data provided. Nevertheless the step is likely to be helpful for understanding some aspects of the dynamics of corporate businesses in India.

Newly Mandated Disclosures for India’s Top Corporates May Yield a Gold Mine of Information

Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Thematic (Sector/Industry)

*Adding To The Confusion Again: Just when we thought Indian banking couldn’t get any muddier, the Reserve Bank of India (RBI) released its Report of the Internal Working Group (IWG) to Review Extant Ownership Guidelines and Corporate Structure for Indian Private Sector Banks which convened on June 12, 2020; and*Proposed Changes: The IWG has proposed: a) a higher promoter stake cap of 26% (from 15% currently); b) harmonization of corporate structures to non-operative financial holding companies (NOFHC); c) large corporates can be given a banking license subject to conditions and checks; and d) large non-bank financial companies (NBFCs) with assets greater than INR 500 bn can be considered for a banking license.

*Adding To The Confusion Again: Just when we thought Indian banking couldn’t get any muddier, the Reserve Bank of India (RBI) released its Report of the Internal Working Group (IWG) to Review Extant Ownership Guidelines and Corporate Structure for Indian Private Sector Banks which convened on June 12, 2020; and*Proposed Changes: The IWG has proposed: a) a higher promoter stake cap of 26% (from 15% currently); b) harmonization of corporate structures to non-operative financial holding companies (NOFHC); c) large corporates can be given a banking license subject to conditions and checks; and d) large non-bank financial companies (NBFCs) with assets greater than INR 500 bn can be considered for a banking license.

Reserve Bank of India – How Simple Becomes Really Complicated

*Improving NBFC Liquidity: The several year long negative spiral in the Non-bank Financial Company (NBFCs) sector, seems to have reversed - at least in the short-term. In addition to the Reserve Bank of India (RBI) and Ministry of Finance throwing the kitchen sink at the NBFCs, we are witnessing the segment’s improving loan collection data, lower moratoriums, and potentially even capital raises to fill balance sheet voids; and*Rewarded For Good Behavior: The RBI has recently laid out conditions for the eligibility of NBFCs/Housing Finance Companies (HFC)/Micro Finance (MFI) for the special liquidity scheme that will purchase commercial paper and negotiable CDs from NBFCs and HFCs with maturities of less than three months. The catch being if you couldn’t earn money in the best of times. we are ending your existence as an NBFC.

*Improving NBFC Liquidity: The several year long negative spiral in the Non-bank Financial Company (NBFCs) sector, seems to have reversed - at least in the short-term. In addition to the Reserve Bank of India (RBI) and Ministry of Finance throwing the kitchen sink at the NBFCs, we are witnessing the segment’s improving loan collection data, lower moratoriums, and potentially even capital raises to fill balance sheet voids; and*Rewarded For Good Behavior: The RBI has recently laid out conditions for the eligibility of NBFCs/Housing Finance Companies (HFC)/Micro Finance (MFI) for the special liquidity scheme that will purchase commercial paper and negotiable CDs from NBFCs and HFCs with maturities of less than three months. The catch being if you couldn’t earn money in the best of times. we are ending your existence as an NBFC.

Reserve Bank of India – Finally Getting One Right

Equity Bottom-Up

PNB Housing Finance Ltd / Equity Bottom-Up

* Losses Begin: PNB Housing Finance (PNBHOUSI.IN) [PNBHF] reported FY 4Q20 losses of INR 2.4 bn – declining 202.2% linked quarter and missing consensus altogether. Excluding non-operating gains, PNBHF’s FY 4Q20 performance was even weaker with a loss of INR 3.1 bn versus positive core operating income of INR 1.0 bn in FY 3Q20. Unsurprisingly, the weaker credit portfolio eroded profitability as loss provisions increased INR 5.7 bn (317.5%) linked quarter;*Accelerating Loan Problems: Linked quarter net new NPL growth of INR 10.7 bn linked quarter which amounts to an annualized 353.4%. By our calculation, PNBHF remains under-provided for at FY 4Q20 by INR 36.1 bn (1.2x BV) or over 100% of its current market-cap – intimating that PNBHF may actually be technically insolvent. PNBHF is in some serious need of help from its parent Punjab National Bank (PNB.IN) – who is challenged in its own right; and *Too Little Too Late: PNBHF has contracted its loan portfolio for two consecutive quarters due to leverage constraints while credit quality is accelerating at a pace that management seemingly cannot keep pace with which will continue to erode its capital base. Without a parent company that an ability to act a as a source of strength, the PNBHF Board has approved of up to an INR 17 bn capital raise. Our numbers would suggest that the Board think about doubling its proposal.

* Losses Begin: PNB Housing Finance (PNBHOUSI.IN) [PNBHF] reported FY 4Q20 losses of INR 2.4 bn – declining 202.2% linked quarter and missing consensus altogether. Excluding non-operating gains, PNBHF’s FY 4Q20 performance was even weaker with a loss of INR 3.1 bn versus positive core operating income of INR 1.0 bn in FY 3Q20. Unsurprisingly, the weaker credit portfolio eroded profitability as loss provisions increased INR 5.7 bn (317.5%) linked quarter;*Accelerating Loan Problems: Linked quarter net new NPL growth of INR 10.7 bn linked quarter which amounts to an annualized 353.4%. By our calculation, PNBHF remains under-provided for at FY 4Q20 by INR 36.1 bn (1.2x BV) or over 100% of its current market-cap – intimating that PNBHF may actually be technically insolvent. PNBHF is in some serious need of help from its parent Punjab National Bank (PNB.IN) – who is challenged in its own right; and *Too Little Too Late: PNBHF has contracted its loan portfolio for two consecutive quarters due to leverage constraints while credit quality is accelerating at a pace that management seemingly cannot keep pace with which will continue to erode its capital base. Without a parent company that an ability to act a as a source of strength, the PNBHF Board has approved of up to an INR 17 bn capital raise. Our numbers would suggest that the Board think about doubling its proposal.

Asia-Focused Industry Research, Speeda Research

Speeda

Asia-Focused Industry Research

Speeda Research

Speeda Research analysts cover China, Japan, India and SEA on the latest trends and topics. We have analysts of diverse nationalities who are able to access information in their respective local languages to provide customers with comprehensive reports. With access to private company data in these regions, Speeda Research is also able to provide insights into niche sectors which are not usually covered by other parties. We are also able to undertake ad hoc company and industry research reports.

With the urban population set to double to 814 million by 2050, India faces numerous challenges in providing housing to the masses. The Pradhan Mantri Awas Yojana (PMAY) was introduced by the Modi government to allay these issues by providing urban housing for all by 2022. While we dig deeper into the scheme we will also analyse some of the industries within that will gain from this program.

With the urban population set to double to 814 million by 2050, India faces numerous challenges in providing housing to the masses. The Pradhan Mantri Awas Yojana (PMAY) was introduced by the Modi government to allay these issues by providing urban housing for all by 2022. While we dig deeper into the scheme we will also analyse some of the industries within that will gain from this program.

Housing for All Scheme: Growth Story for Cement and Prefab Manufacturers?

India

Housing Development & Infrastructure Limited is real estate development company. The Company's services include residential, commercial, and retail real estate development.

Housing Development & Infrastructure (HDIL IN)

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Housing Development & Infrastructure (HDIL IN)

Newly Mandated Disclosures for India’s Top Corporates May Yield a Gold Mine of Information

It is true that the explosion of ESG funds worldwide has not so far resulted in an improvement in ESG itself, but at least SEBI’s move may provide...

Hemindra Hazari

Reserve Bank of India – How Simple Becomes Really Complicated

RESERVE BANK OF INDIA: New Just when we thought Indian banking couldn’t get any muddier, the Reserve Bank of India (RBI) released its Report of the...

Thomas J. Monaco

Reserve Bank of India – Finally Getting One Right

*Improving NBFC Liquidity: The several year long negative spiral in the Non-bank Financial Company (NBFCs) sector, seems to have reversed - at...

Thomas J. Monaco

PNB Housing Finance – Lost Cause

* Losses Begin: PNB Housing Finance (PNBHOUSI.IN) [PNBHF] reported FY 4Q20 losses of INR 2.4 bn – declining 202.2% linked quarter and missing...

Thomas J. Monaco

Housing for All Scheme: Growth Story for Cement and Prefab Manufacturers?

With the urban population set to double to 814 million by 2050, India faces numerous challenges in providing housing to the masses. The Pradhan...

Speeda Research

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)