NEWS HOUR - 30th Oct to 5th Nov 2017 - FINANCE AND INVESTMENT CLUB - IIM ROHTAK

NEWS HOUR 30th Oct– 5th Nov 2017

Weekly News Magazine

GOVERNMENT LIKELY TO ACHIEVE FIS-

CAL DEFICIT TARGET IN FY18

Net tax collections in-

Report by - Rajesh Khanna

creased to INR 5.42

The government is hopeful of achieving its fiscal deficit target of 3.2 per cent of GDP for the first time since 2009 as the budgeted disinvestment is on the way to realize Rs.72500 crore as per the SBI research report. However, there are predictions that government might have a shortfall of revenue receipts up to Rs 1.1 lakh crore in 2017-18 and government may cut around Rs.70000 crore from capital spending and Rs.38000 crore from revenue expenditure to achieve the target.

The fiscal deficit, which is the difference between the volume of government expenditure and revenues, is pegged at Rs 4.99 lakh crore at the end of September’17. This is a decrease of Rs.26000 crore compared to the previous month as per the data of Controller General of Accounts (CGA). The above result is inspired by the increase of the second installment of corporate taxes through which revenue exceeded the total spending in August 2017. However, the fiscal deficit in terms of budget estimate rose to 91.3% compared to 83.9% during the same period of the previous financial year.

The revenue growth is expected to increase its pace as core sector data for September is at a 6-month high which indicates the positive development in the manufacturing sector. Net tax collections increased to Rs 5.42 lakh crore at 44.2% of the total budgeted collection for this financial year compared to 42.5% at the same point last year. Lavasa, a finance secretary, stated that ‘Though environment looks positive, the government would like to remain in its boundaries and won’t look for any relaxation,' making it clear that there is no immediate rethink on fiscal target.

Source : WEB

lakh crore at 44.2% of the total budget compared to 42.5% last year

In This Issue •

Government likely to achieve fiscal deficit target in FY18

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Logistics and warehousing industries attract huge investments

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India’s FDI inflows touch USD 114.4 billion in 2015-2017

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LIC places billion dollar bid on New India Assurance IPO

LOGISTICS AND WAREHOUSING INDUS-

Some key points

TRIES ATTRACT HUGE FUNDING Report by - Shivam Aggarwal

Logistics and warehousing industry is currently observing huge fund inflow from PE firms. The bullish growth in the funds raised can be seen as the positive outcome of improved infrastructure and landmark reforms due to the rollout of GST. Apparently, substantial economic activity due to the e-commerce industry in India has surged the demand for the high-quality logistics and warehousing services with modern and advanced technology. In an attempt to capitalize on the increased demand, logistics and warehousing players are trying every bit to raise funds. The largest capital raiser by far is Indospace; it is backed by $550 million funding from PE firms like Everstone and US-based Realterm, it has already received $300 million of the sanctioned amount. In addition to the private funding, Indospace has created a joint venture with Canada Pension Plan Investment Board (CPPIB), Indospace core, which focuses on acquiring and developing logistics facilities in India. So far it has raised a cumulative corpus of $584 million for Indospace Logistics Park I and Indospace logistics park II. In addition to Indospace, two other logistics company LOGOS India and Milestone capital have seen huge investments. In a quest to develop logistics facilities in the country LOGOS India has raised $400 million from Ivanhoé Cambridge, the real estate subsidiary of Canada’s second largest fund manager CDPQ and Vancouverbased QuadReal Property Group. LOGOS India, a partnership with LOGOS group and Assetz Property Group, is aiming to invest $800 million.

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These industries are observing huge inflows from PE firms

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The largest capital raiser so far is Indospace, which is backed by $550 million from Everstone

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LOGOS India and Milestone Capital have also seen huge inflows with LOGOS alone raising $400 million

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Warehousing space is poised to touch 29 million sq ft by 2020 with an annual growth of 19 per cent

Milestone capital intends to develop five to seven logistics parks spreading across the nation, in the cities of Mumbai, Pune, Chennai, Bengaluru, Ahmedabad, Kolkata, and NCR. To kick-start the ambitious project, Milestone capital plans to launch a warehousing fund with a target of raising Rs 1000 crores. The fund is intended to be used in coming seven years, with a returns target of 12-14 percent over the life of the fund and a gross target IRR of 22-23 percent for its domestic and international investors. The future of the warehousing and the logistics companies seems to be bright as the country witnessed an addition of 10 million sq.ft. of warehousing space in the year 2016 and as the demand from the e-retailing industries is increasing, so the warehousing space is poised to touch 29 million sq.ft. by 2020 with an annual growth of 19 percent.

Source: Web

Some Key Points

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FDI inflow in India has gone up by 40% when compared to 2012-2014

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India has seen multiple reforms in 21 sectors covering about 87 areas of the FDI policy

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Various reforms, higher budgetary allocation and multiple MOUs signed with different countries have lead to increase in the inflow

Source : Web

INDIA’S FDI INFLOWS TOUCH USD 114.4 BILLION IN 2015-2017 Report by - Himanshu Jatale

The latest report by one of the big four accounting firms, KPMG revealed that the Foreign Direct Investment (FDI) equity in India in financial years 2015-16 and 2016-17 had reached $114.4 billion. It has gone up by 40% when compared with $81.8 billion FDI in preceding years 2012-13 and 2013-14. Highest-ever FDI flow of $43.5 billion was accounted in the financial year 2016-17, as said by KPMG and includes $2.5 billion worth of investment announced by UAE investors in October 2017. It consists of $ 1 billion investment by Abu Dhabi Investment Authority, $1 billion by NRI-Emirati Investor’s Group and $462 million by the Lulu Group in Andhra Pradesh.

India has seen multiple reforms in the 21 sectors covering about 87 areas of the FDI policy, by the NDA government. Also, owing to its growing start-up segment India has witnessed an increase in private equity/venture capital investments. According to the report, it received USD 17.6 billion of private equity/venture capital spread across 402 deals, between January and September 2017.

The Asian Development Bank (ADB) said that to sustain the economic growth and lend support to several government flagship programmes, the country’s infrastructure segment requires $5.2 trillion worth of investments. The report stated that infrastructure segment is one of the key drivers of the Indian Economy and currently stands as the third-largest market in Asia. It is expected to reach $6.6 trillion by 2025. At present, this segment contributes about 8% to India’s GDP. Higher budgetary allocation by the government, various reforms, greater funding support from international lending institutions and several MoUs being signed with several countries has led to increased investment in this segment. In the federal budget 2016-17, we saw an increase of 11% from previous year to $9.8 billion in the allocation for national highways and $8.4 billion for the development expenditure of railways.

LIC PLACES BILLION DOLLAR BID ON NEW INDIA ASSURANCE IPO Report by - Ruchit Chaudhary

The initial public offering (IPO) of Rs 9600 crore, which includes a fresh issue of Rs 1920 crore, has been offered by the New India Assurance Co. Ltd (NIA). This IPO has been the second largest this year behind that of General Insurance Corporation of India (GIC). This IPO by NIA was fully subscribed on its first day with the overall subscription being 1.04 times of the initial offer. Out of these subscriptions, Life Insurance Corporation of India (LIC) bid $1 billion (about Rs 6500 crore) on this deal, which led to oversubscription of 2.13 times in the shares set aside for institutional investors on the first day.

Background NIA is one of the five assurance companies that are wholly owned by Government of India. It was founded by Dorabji Tata in 1919 in Mumbai as a private company, but it was later nationalized in 1973. It was originally a subsidiary of GIC before being given autonomy after GIC became a re-insurance company under IRDA. NIA has operations in 28 countries around the world including Australia, Japan, and the UK. The NIA has been the fourth company to release a public IPO in primary markets this year after GIC, ICICI Lombard, and SBI Life Insurance. These offers have come into the market because the insurance sector has been weak this year.

There has been a report that HDFC Standard Life is following suit with its IPO being released on November 7. These IPOs will help in augmenting the capital base of these companies while at the same time improving their solvency margin and solvency ratio.

This IPO release is a part of Government of India’s divestment plan to bring in the private sector into the industries that have been controlled by the government till recently to rejuvenate these industries. The government has already begun this divestment process by clearing IPOs for companies with different backgrounds such as defence (Bharat Dynamics Ltd), power (North Eastern Power Corporation Ltd), steel (MSTC Ltd) and aerospace (Hindustan Aeronautics Ltd). This move will help in generating investments and provide a stable capital base to these companies.

Some key points

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The IPO of INR9600 crore includes a fresh issue of INR1920 crore

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The IPO was fully subscribed on its first day with the overall subscription being times the initial offer.

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The NIA is the fourth company to release a public IPO in primary markets this year after GIC, ICICI Lombard and SBI Life Insurance

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CORRIGENDUM : The article ‘The Economic Stimulation’, published in the edition was written by Vishrut Trivedi.

The name author has been mistakenly cited as Shivam Aggarwal. We regret the inconvenience caused.

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