Top 10 biz headlines: Firms may get tax relief, fresh DHFL default & more

From DTC task force recommending slashing of corporate tax to 25% for domestic and foreign firms to DHFL defaulting on financial repayment obligations, here are the top business headlines for Tuesday

1) Direct Tax Code 2.0: Task force for slashing corporate tax rate to 25% for domestic, foreign firms

The Direct Tax Code (DTC) task force, set up to overhaul the 58-year-old Income Tax Act, has recommended a significant increase in the highest income tax slabs, besides slashing the corporate tax rate to an even rate of 25 per cent for both domestic and foreign companies, sources in the know said.  

Income tax payers earning up to Rs 55 lakh per annum may end up with a major tax relief if recommendations to change the tax bracket and rebates are accepted, according to sources. (Read more here) 

2) Time to formally link rates to repo, says RBI Governor Shaktikanta Das 

Reserve Bank of India Governor Shaktikanta Das on Monday said the time had come to formalise the linking of lending rates on new loans to external benchmarks like the repo rate. “We are constantly engaged with banks with regard to faster and greater transmission of the monetary policy rates. Many banks like SBI (State Bank of India) and some others have already linked new loans to the external benchmark (repo rate). I expect the process to become faster,” Das said in his keynote address at the annual banking conference organised by Federation of Indian Chambers of Commerce and Industry and Indian Banks’ Association.

He reiterated his stance that banks needed to cut rates and said the cumulative rate cuts of about 35 basis points in response to the RBI’s 75 basis points cut was not enough. “Today, the economy requires a certain amount of push, not just from the monetary policy but also from its transmission. I think the time has come to formalise this linking of the lending rates on new loans to external benchmarks like the repo rate. We are monitoring the developments in this regard and whatever steps are required in the coming weeks, the RBI will be initiating,” Das said. (Read more here) 

3) NBFCs, HFCs, listed firms no longer need debenture reserve to raise funds

The ministry of corporate affairs (MCA) has removed the requirement for debenture redemption reserves (DDRs) for listed companies, housing finance companies (HFCs) and non-banking financial companies (NBFCs) to reduce the cost of capital, a demand which was on the wish lists of India Inc to the government. The move is also aimed at deepening the bond market.

At present, these companies have to set up a reserve to the tune of 25 per cent of the value of their outstanding debentures for the protection of investors in case of default. (Read more here) 

4) Credit has to expand 18-20% for India to become $5-trn economy  

Achieving the government's goal of making India a $5-trillion economy by 2024, from about $2.7 trillion at present, will require an annual credit growth in the range of 18-20 per cent, the Times of India reported on Tuesday. The report added that last time, this kind of growth was seen following the stimulus in FY11, when bank credit grew 21.5 per cent. 

According to the report, speaking at the Ficci-IBA summit on Monday, MD & CEO of Punjab National Bank and Chairman of the Indian Banks Association, Sunil Mehta, said that to become a $5-trillion economy, the bank credit — which was around Rs 98 trillion at the end of FY19 — would need to grow at 20 per cent. At the same event, BCG MD and Senior Partner Saurabh Tripathi said that bank credit would need to grow 18 per cent for five years. The report added that meanwhile, non-banking financial companies would have to play a significant role as they were emerging as dominant lenders for small & medium enterprises (SMEs), retail and housing. 

5) Incentives needed to turn around auto market fortunes: RC Bhargava

Maruti Suzuki Chairman RC Bhargava said that a lower base and good monsoon rains could help bring growth back to the auto market in the second half of FY20, the Economic Times reported on Tuesday. However, Bhargava added that a meaningful turnaround would hinge on government incentives. 

The chairman of the country's largest carmaker told ET that a revival, in the sense of "positive growth", would start from the third or fourth quarter, partly because of the lower base effect since sales have been falling for months. A pickup in monsoon rains has also kindled expectations of an improvement in rural markets, "but of course, some incentives have to be given to get the industry going", Bhargava told the financial daily. 

6) Cash-strapped DHFL makes fresh default on Rs 1,571-crore bond repayments 

DHFL on Monday said it has defaulted on its financial repayment obligations worth Rs 1,571 crore with regard to issuance of bonds and commercial papers. 

The defaults pertain to three cases with regard to interest payment on non-convertible debentures and commercial papers (CPs), Dewan Housing Finance Corporation Ltd (DHFL) said in a regulatory filing. (Read more here) 

7) Vodafone Idea, Bharti Airtel continue to lose users; Jio adds 8.26 million

The two older telecom majors, Bharti Airtel and Vodafone Idea, continued to lose subscribers — 4.17 million combined — during June, while rival Reliance Jio added 8.26 million users at a steady pace, according to data issued by the Telecom Regulatory Authority of India (Trai).

Vodafone Idea still led in total subscriber tally at 383.4 million, even as its broadband market share and active subscriber base stayed stagnant, followed by Jio with 331.2 million and Airtel with 320.3 million. (Read more here) 

8) H&M inks agreement with Myntra to cash in on online fashion boom

Swedish fashion and apparel brand H&M is tying up with leading fashion retailer Myntra to boost its prospects in the country’s fast-growing online retail space.

After launching its in-house e-commerce portal last year, this is the first such tie-up that the fashion retailer has formed in the country.

According to Fredrik Olsson, managing director at H&M, the company already gets over 15 per cent of its sales from online channel in India, which is higher than its global average. “This is only from our own portal. With the tie-up with Myntra, which holds close to 40 percent share in the online fashion retail market, we expect sales to grow further,” he said. While fashion and lifestyle market in India is estimated to be over Rs 5 trillion, the share of online remains small at close to around 7 per cent. (Read more here) 

9) Essel set to repay MFs Rs 2,600 crore this week

Subhash Chandra's Essel Group will repay around Rs 2,600 crore to mutual funds this week out of the Rs 4,200 crore it raised by selling 11 per cent in Zee Entertainment to Invesco Oppenheimer, the Economic Times reported on Tuesday. A source familiar with the matter told the financial daily that those fund houses from which the Essel promoters had borrowed with Zee shares as collateral would receive this tranche of the payment. 

10) 15 years on, Birla and Lodha still splitting hairs over Priyamvada will

The story has all the makings of a corporate thriller, involving one of the most well-known business families of the country and high courtroom drama. It all began in 2004, when the former chairman of Birla Corporation, Priyamvada Birla, died. A will, dated 1999, emerged, bequeathing her Rs 5,000-crore assets to co-chairman and well-known chartered accountant Rajendra Singh Lodha.

What followed is a decade-and-a-half of legal battle between the Birlas and the Lodhas. It still seems a long way from reaching a conclusion. (Read more here)