Business News at 09:30 am on 20th November 2023

After the success of digital public infrastructure such as Aadhaar, UPI, DigiLocker, etc, the government is planning a homegrown Internet of Things stack based on open-source tools and software. The plan is to come up with a low-cost and secured solution. This solution will help startups and other small companies to seamlessly integrate and group the technologies used in the connectivity of devices with data management as well as storage requirements. The idea to build an indigenous IoT stack was floated at a recent meeting between officials from the ministry of electronics and IT, the department of telecommunications and industry executives. Officials said that it is crucial for the country to have its own IoT standards so that it can build a homegrown inclusive data economy.
In some more industry news, The number of cases admitted for the Corporate Insolvency Resolution Process declined marginally in the second quarter of this fiscal to 232 cases as against 247 in Q1, according to the latest data from the Insolvency and Bankruptcy Board of India. Total ongoing insolvency cases reached 2,001 as of September, while the number of closed cases stood at 5,057. Of the total admitted cases as of the second quarter, 38% were from the manufacturing sectors, 21% from real estate, 12% from construction and 10% from retail and wholesale trade. Kotak Institutional Equities in a report on insolvency resolution said that the liquidation remains the most common path of closure for cases under the insolvency resolution process.
On to economy. The Directorate General of GST Intelligence is understood to be sending notices to various real estate companies, demanding that GST be paid for a clutch of transactions among group companies or joint venture partners. The move is seen as part of a strategy to widen the tax net for the sector. Fees for management services and royalty charged for use of brand names are among the services that the DGGI finds taxable at 18%, the GST slab for most services. These intra-group and intra-JV transactions are common among large real estate firms, as part of their operational strategies, and cash management and joint venture arrangements. Tax experts are divided on the legal tenability of the current set of tax demands.
Meanwhile, the government is staring at a huge surplus of rice stocks by the end of current procurement season 2023-24, that is October-September, if steps to offload grain are not initiated soon. This could jack up the food subsidy expenditure, given the rising costs of grains storage and potential losses from damages. As per the projection, the rice stocks held by the Food Corporation of India are likely to be more than twice the buffer by the end of current season due to robust procurement by agencies and high opening stocks. Currently FCI has 19.44 MT of rice, against the buffer of 7.61 MT for January 1. This excludes 23 MT of grain that is to be received from the millers.
Moving on. At a time when top IT companies are seeing a reduction in their net headcount, there is a divergence between tech workers and their sales counterparts when it comes to the rate of headcount drop. While large IT companies saw tech workers’ numbers fall faster, their sales employees’ headcount reduced at a slower pace and in some cases grew, in the first half of FY24. For instance, during March-ending quarter of FY23, Infosys had 324,816 software employees. At the end of Q2 FY24, the number was down 4.4% to 310,375. In contrast, during the same period, sales headcount fell by just 0.15% — from 18,418 during March quarter to 18,389 during the September quarter.
Over to banking. Fintechs may witness a slowdown in loan disbursals as the cost of customer acquisition will rise as a result of the recent Reserve Bank of India norms on consumer loans and bank credit to non-bank lenders. This is because the requirement to maintain higher risk weights for certain loan segments will hamper the ability of their lending partners to provide capital at a low cost, say experts. Ranadurjay Talukdar, Partner and Payments Sector Leader, EY India said that some of the increase in cost of capital will be passed on to end borrowers, which might make digital lending products less attractive and push consumers to informal lending channels. In recent months, RBI has, advised lenders to strengthen internal surveillance mechanisms.
Lastly, let’s look at the stocks you need to watch out. These include Axis Bank, Bajaj Finance, Adani Power, IndusInd Bank, and L&T among others. The Reserve Bank of India’s directive has led Bajaj Finance, a leading NBFC, to temporarily halt the issuance of ‘Existing Member Identification’ cards to new customers. On the other hand, SBI Cards anticipates a 400 basis points decline in capital adequacy, attributed to the Reserve Bank of India’s revised credit risk weights.