Business News at 10:00 am on 2nd April 2023

We begin with India’s mega step in the green energy sector. First Solar Inc. and Avaada Group are among winners of India’s 195 billion rupees ($2.4 billion) in incentives to encourage domestic manufacturing of solar modules. Tempe, Arizona-based First Solar won a government grant of 11.78 billion rupees for its planned 3.4 gigawatt Tamil Nadu plant, which will be a fully integrated facility, Sujoy Ghosh, the company’s India managing director, said by phone. Avaada Group, backed by Thailand’s oil and gas major PTT Pcl, was also awarded a grant, according to its chairman, Vineet Mittal. The company won a production-linked incentive of 9.62 billion rupees for 3 gigawatts of capacity — from wafers to cells and modules, he said, adding the company would consider expanding the project to 5 gigawatts. India plans to more than quadruple its solar generation capacity to 280 gigawatts by 2030, making it an attractive market for module makers. The country has levied import taxes to protect local makers, although it has had to relax a key non-tariff barrier to imports temporarily to prevent a slowdown in project installations. Reliance Industries Ltd., Tata Power Co. and ReNew Energy Global Plc were among other bidders last month for the government aid. There’s no official information yet on other winners.

Moving on. The Supreme Court this week said banks must hear borrowers before classifying an account as ‘fraud’. Declaring an account as fraud has serious consequences for the borrower such as the inability to borrow in future, a bench comprising Chief Justice DY Chandrachud and Justice Hima Kohli observed, upholding a Telangana High Court order. The Telangana HC had in a December 2020 verdict said that the principles of “audi alteram partem” or “hear the other side” must be applied before declaring a borrower as “fraudulent”. This is because declaration of fraud entails civil and legal consequences, which results in blacklisting borrowers from accessing institutional finance, it had said. The ruling was challenged in the Supreme Court. While Monday’s apex court’s judgment is aimed at protecting the interests of borrowers, bankers are still assessing the fine print before deciding their next course of action. However, there is a general consensus that the process of tracking defaulters and giving them time for hearing would delay the process of classifying them as wilful defaulters.

In other news, India’s decision to tax returns from fixed-income mutual funds is set to bolster its lenders’ efforts to lure deposits for financing a resurgent credit growth and boost profits. The nation scrapping tax incentives for some debt mutual funds has paved the way for banks to garner as much as $36 billion in deposits from the asset managers, according to Sunil Mehta, chief executive officer of Indian Banks’ Association, a lenders’ lobbying body. The move comes as a respite for the financiers as the widening gap between credit off-take and deposits has sparked risks of asset-liability mismatches and pushed up funding costs. Rising loan demand from companies and consumers has buoyed annual credit growth to 15.7% as of March, compared to a five-year average of 10.3%, according to Reserve Bank of India data. However, the deposit collection has failed to keep pace and is currently a little more than 10%, pushing bankers to look for ways to lure funds.

Meanwhile, Travel Stays – which operates hospitality tech firm OYO – on Friday pre-filed its Draft Red Herring Prospectus with stock market regulator Sebi, sources said. Sources close to the company told PTI OYO may launch its initial public offering (IPO) around Diwali this year. Unlike the traditional route where companies have to launch the IPO within 12 months from the Sebi approval, or final observation; in the pre-filing route, an IPO can be floated within 18 months from the date of Sebi’s final comments. This route also provides flexibility to change primary issue size by 50 per cent till the Updated Draft Red Herring Prospectus stage. Explaining the rationale for filing through the pre-filing route, a source said, “The market continues to be highly volatile globally and to an extent in India as well. Filing through the pre-filing route will give OYO some leeway on the timing of the listing, as well as on fine-tuning the issue size, basis the market conditions, to between USD 400 to 600 million, all of which will now be a primary issuance, to repay most of its debt. Though for now an issue timing of around Diwali is likely once Sebi approves.” OYO’s last submission to the Securities and Exchange Board of India (Sebi), in November 2022, was of its updated financial results for the first half of financial year 2022-23, claiming that potential investors need to be made aware of the material uptick in its business performance since its initial IPO application in September 2021.