Growth in credit demand from industries slowed down to 12.2% in February 2014

The growth in credit demand from industries slowed down to 12.2% to 19,970 crore in the month of February as compared to 18.9% growth in the same month of previous year. Prevailing economic slowdown coupled with political uncertainty associated with an election year have made corporates reluctant to launch any greenfield projects, resulting in declining credit demand from industrial sector. Slow credit flow to industrial sector has been adversely impacting domestic banks which are now pushing retail credit to boost credit growth. High borrowing cost and delays in environmental clearances for industrial and infrastructure projects has forced the big infrastructure players to defer their investment decisions. Indian large infrastructure companies such as HCC, Lanco and Gammon India are struggling with high debt and have restructured them to avoid loan default. The gross non-performing assets (NPAs) of banks would rise to 4.2-4.4% by March, from 4.1% reported in December 2013. Rising NPA levels have become an issue for growth of the banking industry, which is the most dominant segment of the financial sector and plays an important role in the economic development of the country. Banks help to channel savings into investments and encourage economic growth by allocating savings to investments that have potential to yield higher returns. Meanwhile, risk appetite of industrial firms is likely to improve after the formation of new government, which could provide a boost to credit growth.

Sun Pharma to acquire Ranbaxy in $4 billion deal

Sun Pharmaceutical Industries Ltd is to acquire 100 per cent of Ranbaxy Laboratories Ltd in an all-stock transaction, the companies announced on Monday.Their combination would create India’s largest pharmaceutical company and the world’s fifth-largest speciality and generics drugs company, according to a statement from Ranbaxy.The combined entity’s revenues are estimated at $4.2 billion.Ranbaxy shareholders will receive 0.8 shares in Sun Pharma for each Ranbaxy share.

Japan’s pharmaceutical Daiichi Sankyo Co, which has a majority stake in Ranbaxy, would become a significant shareholder of Sun Pharma after the transaction.Daiichi would also have the right to nominate one director to Sun Pharma’s board of directors.Ranbaxy, one of India’s largest drugs majors, has faced a string of problems recently with US drugs authorities.In January, the US Food and Drug Administration banned imports from a Ranbaxy unit in India due to quality control violations.In May 2013, an US subsidiary had to pay the drugs administrator $500 million in penalties for sale of below-quality drugs.