Weekly News Roundup at 10:00 am on 27th July, 2024

Let’s begin – The first Budget of the Modi 3.0 regime bore the imprint of policy continuity, and balanced growth impulses with tenacious fiscal consolidation, even as it used the resultant limited means to address the concerns around social and economic equity. Finance minister Nirmala Sitharaman’s speech left no trace of an acknowledged intent for course correction, or a big shift away from a growth model driven by public capital expenditure that seems to have almost run its course. Hopes are still largely pinned on Corporate India taking the baton, sooner than later. Nonetheless, the Budget gave greater thrust to provide “opportunities” for the “small” among the economic actors. It rolled out a clutch of initiatives to boost job creation and skilling.

Up next – In line with industry expectations, Budget 2024 has paved the way for adoption of energy storage solutions while promoting nuclear energy. Finance minister Nirmala Sitharaman announced the removal of import duties on 25 critical minerals and reduced the basic customs duty on two of these. This will provide a major fillip to processing and refining of such minerals and help secure their availability for sectors like nuclear energy, renewable energy, space, defence and telecommunications, she said. However, in view of sufficient domestic manufacturing capacity, the Budget has imposed a customs duty of 10% on solar glass and 5% on tinned copper interconnect to make cells or modules with effect from October 1.

Moving on – Kotak Mahindra Bank is planning to increase its branch count by 80% to around 3,500 in the next five years, as the lenders looks to expand presence across the country. The country’s fourth-largest lender plans to add approximately 1,500 branches to its current network, which currently stands at around 1,965. The lender added 168 branches in the previous financial year, and aims to open 200-250 branches annually over the next five years. The bank will add up to 200 branches in the current fiscal, around 20% higher than fresh branch additions in 2023-24. The total branch count stood at 1,948 as on March 31 this year. Around 45% of branches are located in metros.

In another development – HDFC Bank is aiming to lower its credit-deposit ratio from 104% as quickly as possible, said MD & CEO Sashidhar Jagdishan in an analyst call. In an analyst call post the bank’s June quarter results, Jagdishan said, Quote, We have not received any regulatory prescription (from the Reserve Bank of India), but the thought process is that we will try and get this done as quickly as possible and still maintain the objective of profitable growth, unquote. The country’s largest private bank’s overall advances grew at 53% year-on-year to Rs 24.86 trillion whereas deposits grew 24% to Rs 23.79 trillion in the June quarter, thereby leading to credit exceeding deposit growth. Sequentially, deposits growth fell 7%.

Meanwhile – Reliance Retail, the country’s largest organised retailer, has added 30 Metro Cash & Carry outlets in the April-June quarter as the company rapidly expands the footprint of the organised wholesaler. Metro Cash & Carry — part of the grocery new commerce or B2B division — was acquired for Rs 2,850 crore in December 2022 with 31 outlets in 21 cities. It now has over 200 stores in 180 cities, the company said in its latest investor presentation. B2B customers — mainly kiranas, merchants and small retailers — can use the Metro B2B app or visit stores to place orders, industry sources said.

In other news – The 5% duty cut on imported mobile phones announced in the Budget may not make higher-end products such as the iPhone Pro models cheaper in India than in countries such as Singapore, Japan and Dubai, but the price gap will surely come down, analysts said. The same applies broadly to Samsung’s flip or foldable phones and Google’s Pixel phones. This, said analysts, is because of a weaker rupee versus the US dollar, higher taxes despite the duty reduction, and the companies concerned preferring to increase channel commissions rather than going for price reduction on a large scale. The higher-end brands of Apple, Samsung or Google are not known to play the price card, but are known for their premium-ness, they said.

Lastly – Startup employees will not be subjected to higher tax incidence as a result of the changes in the provision related to taxation of buyback of shares announced in the Union Budget. From October 1, share buyback by companies will be treated like dividend income with tax payable by recipient investors rather than the companies. However, analysts and tax experts said that startups usually do not buyback their shares as large, listed companies do. Instead, in their case share transfer takes place to either the promoters or new investors or entities. As such, liquidation of Esops will continue to be treated as secondary sale and taxed at applicable long-term capital gains tax rate, which has now been raised to 12.5% from the earlier 10%.