Credit Line Guarantee & More

Good morning, folks. As Amitabh Bachchan gets discharged from hospital after testing covid negative, let’s take that as a good omen to start yet another week under the shadow of coronavirus.

MAIN STORIES

More eligibility for ECLGS

Listening to industry inputs, the government has widened the eligibility definition for possible borrowers in the Emergency Credit Line Guarantee Scheme (ECLGS) at both ends. So now it can include individuals like lawyers, CAs as well as other business owners also. On the other end of the spectrum, the Rs. 100 Crore limit for a company turnover has been increased to Rs. 250 Crores. The maximum loan amount has also been doubled from Rs. 5 Crores to Rs. 10 Crores.

What is this alphabet soup anyway? Coming to ECLGS, the scheme was introduced as a 3-lakh crore weight in the Rs. 20 Lakh Crore stimulus package announced by the Finance Minister in May. As per the scheme, the government guaranteed these loans in an effort to reduce the risk for the loans which were averse to lending in this risky environment. Under this scheme, companies with an outstanding loan amount of up to Rs. 25 Crores could borrow upto 20% for their working capital requirements at a lower interest rate capped at 9.25%. Federal Bank website does a wonderful job of addressing all questions on this front.

How has the scheme been doing so far? In the latest update, Department of Financial Services revealed that Rs. 1.37 lakh or almost 46% of the quota had been sanctioned (to about 40 lakh accounts) of which Rs. 87,000 Crores had been disbursed. With the new move, it is expected that another Rs. 1 Lakh crore will become eligible to be sanctioned. Private banks have been sanctioning much higher amounts, about 5.6 times that of state-owned banks per loan account.

Core sector output report card for June

Yes, today’s Scribe is too economic-y. But, sometimes, especially in these times, it becomes important to understand some such movements around us. On Friday, Commerce Ministry released the June data for the eight core industry output which makes up about 40% of the broader Index of Industrial Production or IIP which is seen as a barometer of economic activity.  

What’s the report looking like? We are not out of the woods yet. For the fourth consecutive month, this index of eight core sectors showed a contraction, albeit of about 15% as compared to last year. Of the eight sectors – coal, crude oil, natural gas, refinery products, steel, fertilisers, cement and electricity – fertilisers was the only kid to pass the June exam whereas the rest of the class failed.

Silver lining: The contraction for this index was far higher in April-May period at about 30%. So, while lockdown has started being lifted which shows in the reduction of contraction to 15%, clearly economic activity has not started full steam. Although, the worry is that July has also seen quite a few localised lockdowns anew. The second aspect to see hope in is the fact that the fertiliser output grew. The hope of rural sector revival might really play out.

Big oil companies redefine quarterly loss

With most of the world under lockdown or atleast limited mobility, oil companies have been facing a time unseen in modern history. Be it the point when oil prices went negative in April 2020, or oil waiting behind the wings in offshore tankers for it’s time to bask in the glory of fueling the economy or Russia and OPEC struggling to agree on the right amount to produce, oil has seen it all in these few months.

Come to the point: The point here being that the Big Oil companies were anyway expected to announce tattered earnings. But market watchers did not expect it to be this much of a nightmare. While Shell results were more palatable, Exxon with a loss of $1.1 Billion and Chevron at $8.1 billion left investors shell-shocked although Exxon still chose to announce a fairly large 8.3% dividend! As per a Yahoo finance report, US oil industry has seen 100,000 jobs slashed since February. So yes, the point is Big Oil companies are epitomising the economic impact of this coronavirus crisis.

What’s the crystal ball saying? While oil prices did revive a bit, even now they are trading at about 30% below last years’ prices and demand is obviously far below the current norm. The jury is out on whether oil has crossed over it’s peak to look for greener pastures in cleaner, sustainable sources of energy. With various corporates announcing their pledge towards carbon neutrality, and Joe Biden also announcing it as a part of his Green plan, oil companies may just have to change their stripes.

IN SNIPPETS

Smartphone imports zoom up: In the environment clamouring to go vocal for local comes news that smartphone imports soared to a 3-year high in June, nearly six times from May. Of course, there were quite a few reasons to it including lockdown hampering production, delayed import of inputs and pent-up demand.

SBI claims to be covid-proof: Announcing an 81% growth in profits on the back of a stake sale in insurance arm and a drop in moratorium book from 23% to 9%, State Bank of India chairman Rajnish Kumar seemed to be in a mood for topical humor as he quipped that the bank was asymptomatic for now.

Tata motors woes speeding up: Tata Motors announced a loss of Rs. 8443.98 for Q1 with revenues from operations almost slashed to half at Rs. 31,983 Crores. Being a value buy poster boy, the stock had gained 38% in the quarter after the March crash, but it looks likely that some stock dumping may happen.

Australia breaks news with Google and Facebook: In a global first, Australia intends to make Google and Facebook pay media outlets akin-to-royalty for monetising the news they produce on own platforms and aggregation mechanisms. While Google released a statement about how the proposed rule ignores the clicks sent to the said news portals, proponents hailed this as a boundary wall for independent journalism.

Coronavirus comes handy in Hongkong: Using coronavirus as a shield, the Hongkong government announced postponement of elections by a year. Predictably the pro-democracy government smells a rat.

MARKET PULSE

The month of July proved to be another golden period for the Indian equities markets. Clearly, investors and traders were expecting a bigger jolt to earnings than the cards that the companies opened while declaring Q1 results.

WILD CARD

Taking things a notch too far, Amul has now launched Haldi Ice cream. You read that right. That yellow colour in the ice cream is not kesar or saffron but turmeric in a bid to provide it’s antibiotic qualities in a more palatable manner. As imaginable, it found a few takers and a few naysayers on Twitter. Will you be running out to buy yourself a scoop?

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