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Fertiliser manufacturers’ credit metrics to improve in FY22: Ind-Ra

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Fertiliser manufacturers’ credit metrics will improve in the upcoming fiscal given the strong likelihood subsidy backlog clearance post allocation of an additional subsidy in the revised estimate (RE) of FY21, India Ratings and Research said in a report.

As per the report, the grant of an additional Rs 626 billion fertiliser subsidy in the revised estimate (RE) of FY21.

Consequently, the rating agency said “Will substantially reduce working capital debt and interest expenses.”

“This would also encourage the industry players to increase capital intensity to further improve their operating efficiencies,” the report said.

“Urea manufacturers would specifically benefit as their share of subsidy is generally 70 per cent of the revenues as opposed to 30 per cent for nitrogen-phosphate-potash (NPK) manufacturers.”

The report cited that subsidy budget estimate (BE) for FY22 is 11.5 per cent higher at Rs 795 billion than the FY21 BE of Rs 713 billion, the urea subsidy BE has been increased by 22.9 per cent to Rs 588 billion and the NPK subsidy BE has been reduced by 11.7 per cent to Rs 208 billion.

“Ind-Ra estimates the fertiliser sector debt to be in the range of Rs 535 billion- Rs 565 billion at FYE20, up from around INR495 billion in FY17. The debt is primarily working capital in nature and corresponds to an increase in subsidy receivables outstanding to Rs 470 billion – Rs 495 billion in FY20 from about Rs 455 billion in FY17.”

“The subsidy receivables contribute 85-90 per cent to the sector level debt. Accordingly, the sector’s net leverage was high at around 6.6x in FY20 (FY19: 6.5x) and interest coverage was modest at 2.2x (2.1x).”

However, the additional subsidy allocation is likely to substantially increase the sector’s cash flow from operations and free cash flows in FY22 from estimated Rs 55 billion and negative Rs 4 billion, respectively, in FY20.

“Ind-Ra does not expect any significant capex in the industry, other than for urea efficiency improvement for some players and regular maintenance and upgradation capex, in the near term.”

Accordingly, Ind-Ra estimated that clearance of full subsidy backlogs in FY22 would result in the sectoral net leverage declining to around 2x and interest coverage to moving upwards of 5x.

Furthermore, the resultant savings in interest expense are likely to improve return on equity for sector entities especially urea manufacturers up to double digits from the current range of 4-7 per cent.

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SpiceJet plane lands in Mumbai with cracked outer windshield

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A SpiceJet flight landed safely in Mumbai with its outer windshield of the cockpit cracked, an airline spokesperson said on Monday.

The incident took place on SpiceJet flight SG-3324 operating from Kandla (Gujarat) to Mumbai by a turboprop Q400 aircraft.

At around 23,000 feet height, the outer pane of the windshield on the co-pilot’s side cracked but the cabin pressurisation was observed to be normal.

The flight landed safely at Chhatrapati Shivaji Maharaj International Airport later, said the spokesperson, but the cause of the accident – the second on Monday for the low-cost carrier – is not clear yet.

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Nepal’s economy not like Sri Lanka’s, but can go that way: Former central bank Guv

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Dipendra Bahadur Chhetri, the former Governor of Nepal Rastra Bank (NRB), has said that the situation of Nepal’s economy is not like that of Sri Lanka.

However, if the political rights are given to the wrong persons like in Sri Lanka, there is a possibility of Nepal becoming the next Sri Lanka, he said, Republica reported.

Speaking at an interaction programme on the current economic situation in Nepal held in Kathmandu, Chhetri said the present situation in Sri Lanka is due to arbitrary tax rates imposed by the same family as the president, prime minister and finance minister.

He also mentioned that Nepal should not be associated with Sri Lanka as it has just held local elections and is now preparing to hold federal and provincial elections, Republica reported.

Similarly, the former central bank Governor said that Nepal’s foreign exchange reserves, SDRs and gold in foreign currency accounted for seven months of imports to meet the growing imports and consumption of petroleum products.

Likewise, he doubted that the forthcoming monetary policy to be introduced by the NRB would be as extensive as in the past. He said that the loans given by the banks to expand the capacity of the industry were used for import.

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Turkey increases minimum wage amid soaring inflation, currency volatility

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Turkish President Recep Tayyip Erdogan announced that the country’s minimum wage would be hiked up in the face of soaring inflation and volatile currency rates.

“The minimum wage will be 5,500 Turkish liras ($328) with an interim increase of 30 percent, effective immediately starting on July 1,” Erdogan said.

At the beginning of this year, the government increased the monthly minimum wage by 50 per cent to alleviate the financial burden on workers, reports Xinhua news agency.

Turkey has long been struggling against ever-increasing inflation.

In June, the total losses of the Turkish lira against the US dollar amounted to almost 100 per cent in one year.

Erdogan has long been focusing on a low-interest policy to increase exports and production for a stabilised lira, asking for patience from his voters.

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