Auto PLI and Telecom Reforms - A key announcement

PLI Scheme to Boost India’s EV Dream

 
Government of India today declared a new production-linked scheme (PLI) worth Rs. 26,000 crore for the auto sector to boost the production of hydrogen fuel vehicles and electric vehicles. The PLI scheme will generate 7.5 lakh jobs in the auto sector.
 
The PLI scheme for the auto sector is part of the overall PLI schemes announced for 13 sectors in the budget 2021–22, with an outlay of Rs. 1.97 lakh crore.
 
The auto segments covered under the current PLI scheme include automatic transmission assembly sensors, collision warning system, tyre pressure monitoring system, automatic braking, adaptive front lighting, supercapacitors, sensors, sunroofs, and electronic power system.
 

 
Last year, the government announced the automobile and auto components sector scheme, with an outlay of Rs. 57,043 crore, for a period of five years. The cabinet reduced that scheme to Rs. 25,938 crore to focus on electric vehicles and hydrogen fuel vehicles.
 
The current PLI scheme, along with the already launched PLI schemes for Advanced Chemistry Cell (Rs, 18,100 crore) and FAME (Rs 10,000 crore), will help India to transform its transportation system to rely more on environmentally cleaner and efficient Electric Vehicles (EV).
 

Relief Package for Telecom Industry and its Implications

 
In a bid to provide relief to the stressed Indian telecom sector, the union cabinet announced the much-awaited moratorium on payment of spectrum dues by telecom companies. The package would relieve telecom companies of their long outstanding dues, including a four-year moratorium on pay- ment on spectrum installment due in April 2022 and the discontinuation of spectrum usage charges. The sector also gets an option to convert these dues into equity.
 
The telecom companies, including Bharti Airtel, Vodafone Idea, and Reliance Communications, owed around Rs. 92,000 crore to the government as license fees and Rs. 41,000 crore as spectrum usage fees.
 
Vodafone Idea Limited, created from the merger of Birla’s Idea Cellular Ltd and British telecom’s Vodafone India unit, has to pay Rs. 50,399.63 crore in statutory dues dating back over many years
 

 
Apart from the above relief package, the cabinet cleared some major decisions regarding spectrum allocation and FDI.
 

• Spectrum sharing has been made free, and auction will happen in Q4 FY22

 

• 100% FDI in the telecom sector is approved via automatic route is approved by the cabinet

 

• Spectrum payment can be made in 30 years instead of 20 years, a big relief for the sector

 

• Also, non-telecom revenue will not be included in the AGR definition, retrospectively

Companies in Focus

 
SBI, IndusInd Bank, IDFC First, Yes Bank, and PNB, among others, have loan exposures to Vodafone Idea Ltd.
 

SBI Bank

 
SBI has the highest exposure to the company of Rs. 11,000 crore, but the stated amount is just 0.5% of its loan book.
 

Disclaimer: This is for information purposes only and should not be construed as a buy/sell recommendation. Past performance never guarantees future results
 

IDFC First bank

 
IDFC First Bank has an exposure of around Rs. 3,244 crore to the stressed telecom company, around 3% of its loan book and 16.1% of its net worth. However, out of the above dues, Rs. 2,000 crore is funded, and Rs. 1,244 crore is unfunded.
IDFC Bank has marked the account as a stressed account and has made provisions worth Rs. 487 crore (15%) against the outstanding exposure of Rs. 3,244 crore.
 

Disclaimer: This is for information purposes only and should not be construed as a buy/sell recommendation. Past performance never guarantees future results.

IndusInd Bank

 
IndusInd Bank has around Rs. 3,500 crore exposure to Vodafone Idea Limited, which is around 1.7% of its loan book and 7.9% of its net worth. Funded exposure is around Rs. 1,000 crore and the remaining is unfunded.
 

Disclaimer: This is for information purposes only and should not be construed as a buy/sell recommendation. Past performance never guarantees future results.

‘Bad Bank’ proposal could see Rs. 31,000 crore in Governments guarantee

 
The union Cabinet may soon clear a proposal to provide government guarantee to security receipts issued by the NARCL as part of bad loans. Indian Banking Association has pegged the Government guarantee to be around Rs. 31,000 crore.
 
The proposed bad bank or NARCL will pay up to 15% of the agreed value in cash and the remaining 85% would be in government-guarantee receipts. This provision will be invoked if there is a loss against the threshold value.