Some Points Mentioned by Deepak Parekh (HDFC) in his Webinar:
1.) This is Human Economic Financial (HEF) crisis . Completely different from the one we had in 2008. It will take at least 9 months to recover fully from it.
2.) Banks to be on a tighter leash. Your Bank Sanction letter doesn’t matter now, only the amount in your account does. Banks are going to revise your sanctions and make drastic reductions if they see credit risk.
3.) The billion-dollar startup valuations will be challenged, burning cash will be frowned upon. It will be a tough time for start-ups to raise cash.
4.) It’s time to plan for the Future, Look for opportunities and learn from these drawbacks. Eg given of HDFC where a team looks after the present planning. Another dedicated to future disruption and plans.
5.) Make time for yourself. Learn new things. Spend time with the young and old. You will be surprised to learn so much from them.
6.) Leverage is a double-edged sword. It can lift you or bring you down.
7.) Restarting Manufacturing is going to be difficult. As the Labour force will be forced to choose between Fear of Life or Livelihood. To manage this the Labour has to be incentivized to return, Management has guaranteed them the security of life, food and stay if required. They should be your first priority. Management has to become more prudent by Cutting Costs, downsizing, No increments /bonus. Getting cash flow back should be first priority.
8.) Consumer credit has to increase and Per capita income also. India is very low on it.
9.) Public And Private partnerships can work. Example of YES Bank given, even though Yes Bank was a competitor we didn’t allow it to fail and its repercussions would have been more damaging. It was not right of PSU banks to take over the problems of Private banks. Along with a few private banks, We decided to come together with SBI and help Yes bank. Yes, the bank had foreign banks /Funds showing interest. But the Govt said it’s an Indian problem, let Indian banks solve it. We should have stepped up did the same for PMC Bank and IL&FS. Things would have different then
10.) RBI should come forward and purchase Corporate debt papers. This is a common practice by the central banks across the world. NBFC should be regulated more. If required new licenses should be stopped. Banks have an exposure of 12 Lakh crore to these companies.
11.) Force Majeure – We having been hearing this term a lot these days. It was brought up in a Govt gazette couple of weeks back regarding payment to its vendors. Now a lot of companies including many Large companies are taking advantage of this and trying to skip on their lease’s, payment to vendors, etc. This should be used only when they are absolutely not in a situation to pay, not because you can. As this can have a ripple effect on the economy.
12.) Equity Markets have been hit badly and will return. Only 2% of equity investors in India, compared to 40-60 % in some countries. MF penetration also very low at 12% compared to 62% global. If MF participation is doubled, will make a huge difference in markets. First-time investors should be encouraged to invest in equity through MF as it’s less risky. Large companies within 24-48 Hrs get QIP from foreign funds. They should be encouraged to raise more money from the public.
13.) McKinsey report states that between 2018-22 a billion people in the world will be of middle-class category out of that 650 million will be in Asia and out of that 318 million will be from India. India will become huge in consumption numbers. Financial savings have decreased due to increased consumer spending.
Top 3 things on my Mind
a) The financial sector should be strong or else the economy will collapse – NBFC Should be regulated.
b) The Poor should be supported more and steps to be taken for them too brought out of poverty. In any crisis, they are the first affected and last to recover. They are the backbone of the nation.
c) Simply the rules for investment and remove complicated tax rules. Expect govt to come with a stimulus scheme on Monday. We have given some recommendations.