Highlights of RBI Monetary Policy - October 2021

Highlights of the October 2021 Monetary Policy
by 5paisa Research Team 08/10/2021

On 08-Oct, the monetary policy maintained status quo on repo rates and reverse repo rates. It looked like the RBI and the Monetary Policy Committed (MPC) did not want to upset the applecart at a time when Evergrande and US inflation were posing huge global systemic risks.

Highlights of the Monetary Policy Announcement

1) RBI has maintained the repo rate at 4% and the reverse repo rate at 3.35%. This reiterates RBI’s commitment to keep rates low till there is sustainable growth visible in the economy. This also keeps the bank rate / MSF rate at 4.25%.

2) Investment banks like Citi had suggested that RBI may look to hike reverse repo rate by 15-20 bps as a signal of liquidity tightening. However, in the light of the uncertainty caused by Evergrande and US inflation, the MPC has desisted from any changes.

3) The MPC was unanimous about holding rates but not unanimous about the accommodative monetary stance. Jayanth Varma, an MPC member, objected to giving guarantees on accommodation, but as a majority vote, it stays for now.

4) For full year FY22, the RBI has consistently maintained its GDP estimate at 9.5%. It expects front ending of growth since the much-feared lag effect of COVID 2.0 did not happen. 

5) For the full year FY22, the estimate for CPI inflation has bene cut by 40 bps from 5.7% to 5.3%. However, this is still 20 bps above the Jun-21 levels. This is on the back of better than expected Kharif output this year and improving capacity utilization in industry.

Important policy measures announced by the RBI

The development policy measures are normally an adjunct to the main policy, but are increasingly seeing a lot of important announcements.

a) Small Finance banks or SFBs are playing an important role in last mile credit delivery. Hence, the on-tap LTRO scheme of Rs10,000cr for SFBs has been extended from Oct-21 to Dec-21. This could be extended further to boost last-mile delivery.

b) In a country like India with a lot of bandwidth disparities, RBI has allowed digital transaction in offline mode. In addition, the RBI also enhanced IMPS (Immediate Money Payment) limit per transaction from Rs2 lakhs to Rs5 lakhs.

c) Banks are currently allowed to on-lend priority sector credit via NBFCs. However, that was time-bound till 30 September this year. Now, RBI has decided to extend the facility till 31-Mar-2022.

d) With the rising credit clout and the systemic risk posed by NBFCs, RBI proposed Internal Ombudsman Service for NBFCs. This already exists for banks. This will empower NBFCs to handle and control customer grievances more efficiently.

The policy has largely been about status quo. While we await the minutes on 22-Oct, action points are expected only in the December policy.

Also Read:-

Highlights of RBI Monetary Policy and Market Performance

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Piramal to Hive Off Pharma and Focus on Financial Services

Piramal to Hive Off Pharma and Focus on Financial Services
by 5paisa Research Team 08/10/2021

The board of Piramal Enterprises approved a composite scheme of arrangement under which the pharma business of the Piramal group would be hived off into a separate company and would also be listed. The core Piramal Enterprises will only house the financial services business of Piramal Group.

According to Piramal, this is likely to simplify the corporate structure of the business and also create demarcated pockets of value. The risks, investments and ROI of the pharma and the financial business are totally different and hence keeping them under the same roof created distorted perceptions of risk and returns.

Under the scheme of arrangement, the pharma business of the Piramal group would get vertically demerged from PEL. The existing shareholders of Piramal Enterprises will get 4 shares of Piramal Pharma for every 1 share of Piramal Enterprises held by them. They will also continue to hold the PEL shares, albeit it would pertain to the downsized business.

Post the deal, Piramal Pharma will become one of the largest listed pharma companies in India and would compete with the larger names in India like Sun Pharma, Reddy Labs, Cipla and Divi’s Laboratories. Piramal Enterprises will be one of the largest fund-based NBFCs in India with substantial presence in retail and wholesale financing.

Perhaps, the DHFL deal was the trigger

Less than a fortnight earlier, PEL had completed formalities under the NCLT formula and taken full control of Dewan Housing and Finance Ltd. PEL had paid a total consideration of Rs.38,000 crore for controlling stake in DHFL. Here is how DHFL will position PEL in the top league of NBFC companies in India.

Firstly, the DFHL acquisition will take the retail wholesale mix to 50:50. The next step will be to take it to 75:25 in favour of retail and in this journey, the DHFL acquisition will be critical. DHFL gives tremendous reach to PEL with the addition of 301 branches, in addition to its existing 14 branches. 

This could also set the tone for the long-term bank license plans. Ajay Piramal had planned an entry into banking via the deal between IDFC bank and Shriram Group, which did not materialize. The decision to hive off pharma allows PEL to sharpen its focus on financial services.

Also Read:-

Will DHFL Shares Be Delisted After Being Acquired by the Piramal Group?

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Zee Gets Reprieve as NCLAT Offers More Time

Zee Gets Reprieve as NCLAT Offers More Time
by 5paisa Research Team 08/10/2021

On Thursday, the NCLT Appellate Tribunal (NCLAT) gave a reprieve to Zee by giving them more time to respond to the EGM demand raised by Invesco Fund and OFI Global China Fund.

Here is a quick time line of key events in the Zee-Invesco case and how it panned out since 11-September.

1) On 11-Sep Invesco Fund and OFI Global China Fund call for the removal of Punit Goenka from the post of MD & CEO. They also called for the removal of two directors of Zee; Ashok Kurien and Manish Chokhani. Ashok and Manish have resigned from the board.

2) Not only did Punit Goenka (son of Subhash Chandra) continue at the helm, he also stitched a deal with Sony Pictures for a merged entity in which Sony Pictures will have 53% and Zee Entertainment will have 47%. Punit was to continue for 5-year term.

Check - What does the Zee merger with Sony mean

3) Invesco was unhappy with the deal as it would dilute their stake. Post-merger, Invesco Fund will see its holding fall from 17.88% to 8.40%. During the same period, the ownership of Zee promoters will go up from 3.44% to 4% due to non-compete clause.

4) Invesco asked the Zee board to summon an EGM immediately so that the issue of Punit Goenka continuing at the helm could be discussed as well as taking a fresh view on the merger. Invesco also wanted to induct 6 of its nominees as directors in Zee.

Check - Invesco Approaches NCLT to Call EGM for Change of Zee Board

5) Zee refused to call the EGM and underlined that any changes in the management of Zee will require prior approval of the I&B Ministry.

6) With the NCLT asking Zee to file a response to Invesco’s EGM request in 36 hours, Zee approached the NCLAT under the pretext that such a short time was against the principles of natural justice.

7) After hearing the submissions, NCLAT did come to the conclusion that the NCLT had erred in not giving enough time to Zee for filing a response. That comes as a major reprieve for Zee Entertainment.

Zee is also a case of how promoters need a new strategy in such conflicts with large institutional shareholders. The entire chronology of events above happened in less than 4 weeks indicating how busy a week it has been for Zee and for Invesco too.

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NCLT Instructs Zee Entertainment Board to Call for EGM

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Paytm Taps Sovereign Wealth Funds as Anchor ahead of IPO

Paytm Taps Sovereign Wealth Funds as Anchor ahead of IPO
by 5paisa Research Team 08/10/2021

Paytm may be a household name in India across urban and rural centres. But they have a huge challenge on hand and that is to get their Rs.16,600 crore IPO oversubscribed. The size of the issue is too large and the stakes are too high, so obviously Paytm is plugging all the missing links to ensure a smooth IPO process.

While Paytm has filed for its Rs.16,600 crore IPO, the SEBI approval is yet to come in. The Paytm IPO will consist of Rs.8,300 crore of fresh issue and another Rs.8,300 crore by way of offer for sale or OFS. At Rs.16,600 crore, Paytm will be the largest IPO in Indian history, beating the Rs.15,000 crore raised by Coal India in 2010. The IPO would be smaller than LIC.

Check - LIC to File for its IPO in November 2021

Currently, Paytm is in talks with marquee SWF investors like the Abu Dhabi Investment Authority (ADIA), GIC of Singapore, Canadian Pension Fund etc. Even before the anchor placement, Paytm may look at a sizable pre-IPO placement of around Rs.2,000 crore. The eventual IPO size will be reduced to the extent of pre-IPO placement.

In addition, Paytm has also been tapping into some large institutional investors like Nomura of Japan and Blackrock of the US for participating in the Paytm pre-IPO placement as well as the anchor placement. Considering the size of the issue, Paytm may look at institutional participation to a much larger extent to see the issue through comfortably.

The big difference between a pre-IPO placement and an anchor investment is that the anchor investment has a lock-in period of just 30 days. Also, in the case of the anchor investor, there is no price discount and it is at the same rate as the IPO. As per extant rules, the anchor investor can be offered up to 60% of the institutional quote for the IPO.

The eventual pricing would depend on the valuation arrived at, although informal estimates peg the valuation of Paytm at between $22 billion and $25 billion at the time of the IPO. Paytm is owned by One-97 Communications.

Read More:-

8 Interesting facts about Paytm that you must know ahead of the IPO

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TCS Share Q2 Results

TCS Reports 29% Growth in Net Profit at Rs.9,653 Crore
by 5paisa Research Team 08/10/2021

It was another robust quarter for TCS, India’s largest and most valuable software company and the second most valuable company on the stock exchange after RIL. TCS reported 16.77% growth in total sales at Rs.46,867 crore for the Sep-21 quarter. The sales were also higher on a sequential basis, albeit at a more moderate level of 3.21%. There was all-round growth seen across all verticals of the company.

Here is a gist of the top line, bottom line and margin numbers for Sep-21 quarter:







Rs in Crore






Total Income (Rs cr)

₹ 46,867

₹ 40,135


₹ 45,411


Operating Profit (Rs cr)

₹ 12,000

₹ 10,515


₹ 11,588


Net Profit (Rs cr)

₹ 9,653

₹ 7,504


₹ 9,031








Diluted EPS (Rs)

₹ 26.02

₹ 19.93


₹ 24.35








Net Margins






Data Source: Company Filings

Here are some of the highlights of the results announced by TCS for the Sep-21 quarter.

A) North America has driven TCS top line not only in terms of volumes but also in terms growth, showing 17.4% YoY growth in constant currency terms.

B) Among other markets, while UK grew by 15.6%, continental Europe grew at 13.5% yoy. Among the emerging markets, India showed the best growth traction at 20.6%.

C) Growth was a lot more decisive in terms of specific verticals. Manufacturing led the way at 21.7%, followed by life sciences growing 19% and retail at 18.4%. The BFSI growth at 17% is less of a trigger to growth compared to other verticals. 

D) Operating margins or OPM remained steady at 25.6%, but was certainly slightly lower by 60 bps on a yoy basis. The net margins crossed 20% for the first time in the last few quarters. 

E) The premium client segment of $100 million plus continues to be the high profile focus area for this business. TCS added 5 clients in the $100 million plus bulge bracket and also enjoyed a healthy net cash from operations at 103% of net income. 

Unlike the other IT companies like Infosys, Wipro and HCL Tech; TCS does not provide guidance on earnings. But it is one more quarter of top line and bottom line surprising on the upside.

Also Read:- 

TCS crosses $200 billion market capitalization

TCS Share Q1 Results

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Reliance to Acquire Stakes in Sterling & Wilson Solar

Reliance to Acquire Stakes in Sterling & Wilson Solar
by 5paisa Research Team 11/10/2021

Reliance New Energy is already getting aggressive in its latest domain of green energy. A day after the company had picked up 100% in Norwegian REC Solar Holdings for $771 million, it announced an important acquisition in India. Reliance New Energy signed a deal to buy 40% of Sterling & Wilson Solar for a total consideration of Rs.2,850 crore.

The purchase will be made by Reliance New Energy via a combination of preferential offer and an open offer to shareholders. In the first phase, Reliance New Energy will acquire 15% by way of preferential allotment of 2.93 crore equity shares. In addition, it will also buy 25.9% in Sterling & Wilson via open offer to shareholders taking total holding to above 40%. 

Reliance is expected to pay approximately Rs.2,850 crore for the overall stake. Sterling & Wilson Solar (SWSL) is owned by Shapoorji Pallonji group, which had been looking to hive off some of its interests in various businesses to raise the much needed cash to address its immediate liquidity crunch. It also had some recent defaults on its loans.

The Shapoorji Pallonji group has diversified interests across businesses but its predominant construction business had been badly hit by the pandemic. The liquidity situation at the Pallonji group had worsened after their fallout with the Tata Group over the removal of Cyrus Mistry from the chairmanship of Tata Sons in October 2016.

SWSL is a global end-to-end pure play on the solar energy business. SWSL is into engineering, procurement and construction of solar plants. It has a strong franchise in project design and execution; managing all aspects of the project design ranging from concept to commissioning. For Reliance group, with its aggressive green energy plans, this would be one more inorganic fit into its overall business model.

Market expert are also hinting that this could be the beginning of a closer association between two large business groups viz. the Reliance group and the Shapoorji Pallonji group. For a long time, the Tata group and the Pallonji group had very closer relations and were virtually synonymous with each other. After the fallout, the Pallonji group may be looking to spread its business bets and this deal surely fits into that logic.

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Highlights of Reliance AGM - 2021