Companies & Sectors
Credit quality of capital goods companies weakening: CRISIL

Majority of working capital requirement of capital goods companies is met through delayed payments to suppliers or high-cost short-term debt, resulting in weaker credit ratings

 

Mumbai: Credit quality of the players in the capital goods sector has come under tremendous strain with working capital requirements touching a five-year high due to deferment of large capital investment plans during the past fiscal, says a report by CRISIL.

The CRISIL study, after analyzing 50 capital goods companies also points out that high inventory and delay in payments by customers are leading to tight liquidity situation.

"Project deferment by customers resulted in a 15% decline in order inflows for capital goods entities in 2011-12 over the previous year. The reasons for deferment in projects include demand slowdown, increase in project costs and interest rates and lower cash flows," CRISIL senior director Nagarajan Narasimhan said.

He also said working capital requirement of banks have reached five year high.

Referring to tight liquidity situation of capital goods firms, the report said majority of working capital requirement is met through delayed payments to suppliers or high-cost short-term debt, resulting in weaker credit ratings.

Also, high interest rate regime has increased the cost of funds for these companies, impacting the credit quality.

"We have either downgraded the ratings or revised the outlook to 'negative' of 117 capital goods entities in 2011-12, representing a fifth of the agency's total downgrades or revisions in outlook to 'negative' during the year.

"We believe the revenue growth and profitability of capital goods entities will further slacken in 2012-13, resulting in sustained pressure on their credit quality," CRISIL director Anuj Sethi said.
 

User

RBI sets up panel for strengthening rural credit

The panel headed by NABARD Chairman Prakash Bakshi will review existing credit structure and also explore ways to strengthen cooperative credit architecture in rural areas


Mumbai: The Reserve Bank of India (RBI) has constituted a committee to suggest ways to strengthen the rural cooperative credit structure in the country, reports PTI.
 
The panel headed by NABARD Chairman Prakash Bakshi will review the existing Short Term Cooperative Credit Structure (STCCS), focusing on structural constraints in rural credit delivery system.
 
It will also explore ways to strengthen the rural cooperative credit architecture.
 
The seven-member panel will make an in-depth analysis of the STCCS and examine various alternatives with a view to reducing the cost of credit, the RBI said in a release.
 
It will also look at the feasibility of setting up of a two-tier STCCS as against the existing three-tier structure.
 
STCCS target the credit requirement of the small and marginal farmers in the country.
 
"The Committee will submit its report within three months from the date of its first meeting," it said.
 
According to terms of reference, the committee will mainly assess the role played by state and district cooperative banks in fulfilling the requirement of agriculture credit.
 
It will identify cooperative banks that may not be sustainable in the long run even if some of them have met the diluted licensing criteria for the time being, the release said.
 
It will also suggest pro-active measures needed to be taken by cooperative banks, government, and the RBI, it added.

User

India, Monaco ink tax information exchange agreement

Under the agreement with Monaco, there is a specific provision for providing banking and ownership information and the requesting state has to provide some minimum details

 

New Delhi: India has entered into an agreement with Monaco for exchange of information that will allow the two countries to check tax evasion and money laundering, reports PTI.

"Government of India and Government of Principality of Monaco have signed a Tax Information Exchange Agreement (TIEA) yesterday," an official statement said today.

This is the ninth TIEA being signed by India.

Under the agreement with Monaco, there is a specific provision for providing banking and ownership information and the requesting state has to provide some minimum details about the information requested.

"Information must be foreseeably relevant to the administration and enforcement of the domestic laws of the contracting Parties concerning taxes and tax matters covered by the agreement," the statement said.

However, information is to be treated as secret and can be disclosed to only specified person or authorities, which are tax authorities or the authorities concerned with the determination of tax appeal, it added.

The agreement was signed by the Minister of State for Finance SS Palanimanickam from Indian side and Counsellor of Government for Finances and Economy Marco Piccinini from Monaco's side.
 

User

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)