SUPREME COURT DISMISSES ERICSSON CONTEMPT PLEA AGAINST SBI IN
RCOM CASE
The Supreme Court
dismissed Ericsson’s contempt petition against State Bank of India (SBI)
chairman on grounds that Reliance Communications’ (RCom) failure to pay the
Swedish telecom gear maker is independent of sale of assets overlooked by the
Joint Lenders Forum. We may point out that the contempt petition against the
Chairman of SBI would not lie inasmuch as the Ericsson transaction and the sale
of assets by the Joint Lenders’ Forum are completely independent of each other,
said the apex court on Wednesday. Ericsson in February had filed a contempt of
court petition against SBI chairman in the SC for not fulfilling its assurance
of settling RCom’s dues to the telecom equipment maker as the lead banker. The
apex court on Wednesday rejected Ericsson’s statement that all respondents in
contempt petition were responsible in handing over Rs 550 crore worth of dues
to Ericsson is patently incorrect inasmuch as respondent no. 4 (SBI) has
nothing to do with this amount of INR 550 crore which had to be paid over to
Ericsson only by the three Reliance Companies. The contempt petition against
the Chairman of SBI is, therefore, dismissed, said SC in its order.
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MAPLETREE MOVES NCLT AGAINST FALCON TYRES' LENDERS OVER ITS
RESOLUTION PLAN
Mapletree Leather Goods,
the sole resolution applicant for the Ruia Group-owned Falcon Tyres, which is
currently undergoing insolvency proceedings under the Bengaluru bench of the
NCLT, has accused Edelweiss Asset Reconstruction Company, among other lenders,
of acting contrary to the provisions of the Insolvency and Bankruptcy Code
(IBC) by rejecting its resolution plan. In a petition to the NCLT, Mapletree
alleged that its proposed resolution plan of Rs 310, which was modified in
December last year, after the Committee of Creditors (CoC) of Falcon Tyres
raised objections, was rejected despite it being the sole applicant to save
Falcon Tyres from liquidation. Edelweiss, which took this Ruia Group company in
NCLT, is the largest lender in Falcon Tyres after it took over loans from
various financial institutions of Rs 20 crore and has around 85 per cent voting
share in the CoC. The applicant (Mapletree) informing that they are open to
discussions on the terms of the resolution plan and further requested not to
initiate liquidation proceedings the petition filed by Mapletree said. It also
claimed that its offer was superior than the liquidation value of Falcon Tyres
and its plan included a working capital infusion of around Rs 150 crore. It
will also seek advisory from industry professionals as well as retired judge
from the Supreme Court or the High Court to monitor compliance and technical
collaborations. Nevertheless, Mapletree has approached the NCLT asking it to
order the lenders to consider its proposal.
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TRIBUNAL ADMITS RS 2.81 LAKH CLAIM UNDER INSOLVENCY CODE
The National Company Law
Tribunal (NCLT) has admitted an insolvency petition against a Chandrapur-based
company over a liability of Rs 2.81 lakh. It is among the smallest amounts, so
far, for which a case has been fought under the Insolvency and Bankruptcy Code
(IBC) 2016, said insolvency practitioners. Even as IBC 2016 has set the
threshold limit of dues for which a petition can be admitted at Rs 1 lakh,
rarely has a case been filed for such an amount, said professionals. The lease
agreement, which called for payment of rent, also included a compensation
amount of Rs 65,000 per month The compensation was part of the resignation deal
by the Popats. The case was filed after the cheques for the compensation amount
bounced with a note that the account was closed. As the duo filed a petition in
NCLT, the company argued that the amount was pending due to a civil dispute.
Citing a civil suit filed against the Popat family, the company said that the
payment was stopped as there was a dispute over maintenance of the rented
building. The Popats were supposed to carry out repairs and ensure
uninterrupted water supply to the leased premises, and hence the payment was
stopped. The NCLT has observed on this that there is no correlation between the
rent and compensation amount to be paid for quitting. Since there is no dispute
over the said amount, the petition can be admitted. Manoj Jain, a chartered
accountant from Mumbai, has been appointed as the resolution professional, who
will be taking over in a day or two, said Archan Popat. Jain said he has also
come across another case where a petition was admitted for unpaid salary of Rs 1.20
lakh. However, cases for small amount are rare.
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VEDANTA SAYS NO REVISED BID FOR ESSAR STEEL
The talks between
billionaire Anil Agarwal-owned Vedanta and JSW Steel for submitting a higher
joint bid for the stressed Essar Steel asset seem to have not taken off. According
to sources, Vedanta was in talks with JSW Steel the past few weeks to increase
its bid from Rs. 36,000 crore to Rs. 48,000 crore with both companies
contributing Rs. 24,000 crore each. This was seen as an effort to compete with
ArcelorMittal’s bid of Rs. 43,000 crore, which has been approved by the
Committee of Creditors and is pending before the National Company Law Tribunal
(NCLT) for final approval. Vedanta on Tuesday said, it categorically confirms
that it is not in the process of submitting any revised bid for Essar Steel and
as a policy we do not comment on market speculation.
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RCOM ASKS LENDERS TO ALLOW RELEASE OF RS 260 CRORE DIRECTLY TO
ERICSSON
Reliance Communications
(RCom) said on Thursday it has urged its lenders to allow release of Rs 260
crore ($36.55 million) directly to telecom equipment maker Ericsson. RCom said
it had received the sum as income tax refunds and is lying in its bank account.
The Supreme Court on Wednesday found Anil Ambani, chairman of debt-laden
Reliance Communications, guilty of contempt of court for wilfully failing to
pay Rs 550 crore to Ericsson.
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FINANCE MINISTRY EXPECTS NPA RECOVERY OF RS 1.80 LAKH CRORE IN
FY19
With two major cases at
the final stage of resolution, the Finance Ministry expects bad loan recoveries
to touch Rs 1.80 lakh crore during the current fiscal. So far, banks have
recovered Rs 1 lakh crore under the Insolvency and Bankruptcy Code (IBC). The
recovery is expected to touch Rs 1.80 lakh crore by March 2019 with some of the
resolutions at the final stage, Rajiv Kumar said. Lenders are expecting to
recover almost Rs 52,000 crore loan in case of Essar Steel while Rs 18,000
crore from Bhushan Power & Steel Ltd. Besides, the NCLT is expected to
finalise corporate insolvency resolution process of several stressed assets
including Videocon Group, Monnet Ispat, Amtek Auto and Ruchi Soya. According to
estimates, the IBC has helped address stressed assets worth approximately Rs 3
lakh crore -- directly or indirectly -- since the new law came into force in
December 2016. In 2018, insolvency proceedings against some companies including
Bhushan Steel, ElectroSteel Steel, Binani Cement were almost completed and the
new management from their successful bidders -- Tata Steel, Vedanta group and
Adity Birla-led UltraTech, respectively -- have taken over the management
control of the stressed assets. When asked about his outlook for public sector
banks in the current January-March quarter, Kumar said it is very positive.
Banks have posted a combined profit in the last quarter, he said, adding,
provisioning by and large is over and resolution in the current quarter would
add recoveries.
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FACING LIQUIDATION, UNITY SEEKS TO EXIT CEMENT ROAD PROJECT
Facing liquidation,
Mumbai’s Unity Infraprojects Private Limited has sought an early exit from the
cement road project phase I in which it was to construct 30 roads. The company
has written to the Nagpur Municipal Corporation (NMC) that it will complete the
ongoing works on eight roads and skip nine other stretches It has so far
constructed 12 roads over eight years with one sector dropped from the contract
earlier. Unity was to complete the entire project by 2013. Sources in Unity and
NMC told that the Mumbai bench of National Company Law Tribunal (NCLT) has
declared the company insolvent It is facing liquidation. Also, the company is
controlled by a Resolution Professional since the last few months. Therefore,
Unity cannot fulfil the contract, said the sources. NMC chief engineer Ulhas
Debadwar will take a decision on this and put up a proposal before municipal
commissioner Abhijit Bangar and standing committee for a final decision.
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ANIL AMBANI COMPANIES' STAND IS AN 'ATTEMPT TO MISLEAD, SMACKS
DECEIT': HC
The Bombay High Court on
Thursday refused to give any respite to the companies of Anil Ambani-led
Reliance Group, which had sought compensation alleging misconduct in sale of
their pledged shares by Edelweiss group companies. The high court not only
refused to grant an interim relief but also described the group’s stand as
deceitful and misleading. The court is yet to give its final judgment and has
deemed its views as prima facie. On the Anil Ambani group companies’ argument
that they had not been given adequate notice before the pledged shares were
sold, the court observed: It is rather strange that such an argument is made by
plaintiffs. When the contract was entered into, plaintiffs found one business
day notice to be reasonable. Therefore, stand of plaintiffs’ smacks of deceit.
Plaintiffs attempt is to mislead. At no point after the occurrence of events of
default, did plaintiffs ask for increasing the notice period, the court said.
The court further said, Plaintiffs don't pay default interest, don't top up the
security ratio, don't even tell defendants how they are going to make good,
don't even reply to letters from plaintiffs and now take a mendacious stand
that notice period in the contract was not reasonable. The court also said
there was no case of fiduciary obligations being breached by Edelweiss group
companies in selling pledged shares. The court asked the Reliance group
companies’ counsel Aspi Chinoy, what is the breach of contract or which are the
provisions of the agreements that plaintiffs are alleging defendants committed
to breach. I find nothing wrong in what defendants did, Justice KR Shriram, who
presided over the proceedings, said. Denying any interim relief to Reliance
group companies, Justice KR Shriram said, defendants cannot be stopped from
exercising their rights under the contract and applicable law. The court
observed that as plaintiffs have not yet proved that the damages suffered by
them, this cannot be a reason for stopping defendants from taking further
action on the pledged shares.
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L&T ASKS SEBI TO RECONSIDER ITS RS 9,000-CRORE SHARE
BUYBACK PLAN
Engineering and
construction giant Larsen & Toubro (L&T) has asked the Securities and
Exchange Board of India (Sebi) to reconsider its proposal for its Rs 9,000
crore share buyback said two people familiar with the development. The market
watchdog had shot down L&T’s plan last month. The capital market regulator
had rejected the proposal on the grounds that the group's consolidated debt to
equity ratio would cross two times the paid-up capital and reserves after the
completion of the share buyback programme. The move had sparked debate in the
market on whether Sebi erred in its judgment to shoot down the proposal,
prompting the group to file a review application with the regulator. If there
is an error on the part of the regulator, the entity can always point out the
error and ask the regulator to review its previous position, said Sandeep
Parekh, founder, Finsec Law Advisors. If it is still aggrieved, then it has the
option of going to the Securities Appellate Tribunal (SAT). L&T decided to
approach Sebi again instead of appealing to SAT because it wants to complete
the buyback within one year from the date of the announcement, said one of the
people quoted above. The company had announced the buyback plan on August 23,
2018. Sebi has written saying they don’t approve the buyback as they see it. We
are evaluating various options. The reason for rejecting is that they included
the financial subsidiary. It’s a bit harsh. We are studying it and will decide
what has to be done, SN Subrahmanyan had told.
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SEBI EXEMPTS COAL INDIA FOR ITS BUYBACK PROGRAMME
Sebi Wednesday exempted
state-owned Coal India from complying with regulations with regard to its
proposed buyback programme for 4.46 crore shares. Coal India had filed an
application on February 12 with the Securities and Exchange Board of India
(Sebi) seeking exemption from the strict enforcement of the buyback norms. The
application has been necessitated on account of the transfer of 4,46,80,850
equity shares of Coal India which were held by the promoter (government), to
the asset management company of the Bharat 22 ETF in the month of February,
according to a Sebi order. The promoter (Government of India) said additional
offering period of Bharat 22 ETF was opened and closed on February 14, 2019. It
is noted that the proposed transfer equity shares by the promoters will occur
during the period between the date of passing the resolution of the board of
directors approving the offer of a buyback of securities of the company (i.e.
February 4, 2019) and the closure of such offer, Coal India said. Under buyback
regulations, it imposes an obligation on the company to ensure that its
promoters do not deal in the shares of the company in the stock exchange or
off-market including inter-transfer of shares among themselves during the
period from the date of passing the resolution of the board of directors till
closing of the buyback offer. On February 4, Coal India's board had approved
the buyback of 4.46 crore equity shares, representing about 9.86 per cent
(stand-alone basis) of an aggregate of fully paid-up equity capital at a price
of Rs 235 per equity share for an aggregate consideration of Rs 1,050 crore.
The PSU in its application said that in the proposed buyback, 15 per cent of
the number of equities will be reserved for small shareholders which will
benefit a larger number of such small shareholders.
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SEBI EXEMPTS 2 FAMILY TRUSTS RELATED TO NAVKAR CORPORATION
FROM MAKING OPEN OFFER
Market regulator Sebi on
Wednesday exempted two private family trusts related to the promoter group of
Navkar Corporation Limited from the obligation of making an open offer
following its proposed acquisition of 31.4 per cent stake in the firm.
Nemichand Mehta Family Trust and Shailaja Mehta Family Trust had sought
exemption from the obligation of making open offer post acquisition of certain
number of shares in Navkar Corporation. Under the proposed acquisition, both
trusts would be acquiring a total of 31.4 per cent equity shares of Navkar from
the company's promoter Nemichand Mehta and Shailaja Mehta who are also trustees
of both Mehta Family trusts. In an order, Sebi has granted exemption to both
the trusts from making the open offer, saying the proposed acquisition would
take place pursuant to a private family arrangement intended for succession and
welfare of the promoter Mehta Family.
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SEBI FINES 2 ENTITIES RS 10 LAKH FOR FRAUDULENT TRADE IN BSE
STOCK OPTIONS
Market watchdog Sebi on Wednesday
imposed a total penalty of Rs 10 lakh on two companies for carrying out
fraudulent trade in the illiquid stock options segment of BSE. Securities and
Exchange Board of India (Sebi), during an investigation between April 2014 to
September 2015, found that 81.38 per cent of all the trades executed in stock
options of the exchange were non-genuine and led to creation of artificial
volume. In a separate order, the regulator fined proprietor of Investor Gala
Research Laboratories, Prachi Gupta, Rs 5 lakh for carrying out investment
advisory activities without obtaining requisite registrations from Sebi.
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CCI CLEARS JOHNSON CONTROLS' POWER SOLUTIONS BIZ ACQUISITION
BY BROOKFIELD, CDPQ
The Competition Commission
of India (CCI) Wednesday said it has approved the USD 13.2-billion deal to
acquire global power solutions business of Johnson Controls International by
Brookfield and CDPQ. The deal, which was finalised in November 2018, involves
selling of automotive battery-making business of Johnson Controls to
Brookfield, CDPQ Fund and CDP. The CCI in a tweet said it approves acquisition
of the global power solutions business of Johnson Controls International by
Brookfield and CDPQ. CDPQ Fund and CDP are wholly owned subsidiaries of
Canada-based CDPQ pension fund. Both entities do not have any direct presence
in India, according to the notice seeking approval to the deal. Brookfield is a
leading global alternative asset manager with over USD 330 billion in assets
under management, while CDPQ is a long-term institutional investor that manages
funds primarily for public and parapublic pension and insurance plans,
according to the competition watchdog.
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NO MORE TRYSTS WITH EXCHANGE BUSINESS: JIGNESH SHAH
Having burnt his fingers
in the National Spot Exchange Ltd (NSEL), its founder and current 'mentor' of
'63 Moons Technologies' (formerly Financial Technologies) Jignesh Shah said he
would not invest any more in stock or commodity exchanges Shah said his current
target is to recover the money of the company from the defaulters and mentoring
new talent in his company 63 Moons. On being asked about plans for fresh
investments in the exchange business after the NSEL issue gets resolved, he
said: We will recover (money) in the (NSEL) exchange business and then will say
'Sayonara' (Japanese for goodbye), permanently. He also denied getting into
exchanges globally. Shah had launched the Multi-Commodity Exchange (MCX) in
2003 and NSEL, India's first electronic spot commodity exchange in 2008. He
eventually also launched trading exchanges in six other countries. In 2013, his
fortune started to take a downturn after a scam worth Rs 5,600 crore came to
light at the NSEL following which Shah had to lose all the exchanges he had
developed. He also has served over 100 days in jail. Shah, however, describes
the incident as an accident and says there was a deliberate attempt to ruin the
company by not going after the real culprits, which, according to him, included
defaulters and brokers, among others. Citing a report by the Serious Fraud
Investigation Office (SFIO), he said the NSEL scam had much to do with the
defaulting brokers, traders and the executive management of the spot exchange,
rather than Shah himself. The company on Monday said has also served legal
notices to former Finance Minister P Chidambaram, and then Chairman of Forward
Markets Commission, Ramesh Abhishek, and former Additional Secretary, Finance K
P Krishnan informing them that 63 Moons would move to the court seeking damages
worth Rs 10,000 crore. Shah was of the view that they played proactive roles in
perpetrating the crisis, destroying the exchange ecosystem to favour the
competitor -- the National Stock Exchange (NSE) -- which resulted in huge
losses to shareholders of 63 Moons Technologies and loss of employment. Shah
said that the alleged Rs 5,600 crore scam could have been solved much earlier,
if the FMC had acted in time. On the future prospects of 63 moons, the company
he is currently mentoring, he was optimistic of its revival and said that it is
a technology company, which will remain focused on innovation, in areas such as
Artificial Intelligence and Internet of Things. If Japan can develop after the
Hiroshima and Nagasaki bombings, then 63 moons can also grow. It's very clear
we will innovate, but yes, at the same time, the system should support us, and
even if they don't support, we will grow.
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JIO ADDED 8.56 MILLION USERS IN DECEMBER; VODAIDEA, AIRTEL
LOSE USERS
Reliance Jio Infocomm
outgunned older incumbent carriers by adding 8.56 million mobile phone users in
December, taking its subscriber base past 280 million, while Vodafone Idea and
Bharti Airtel lost customers triggered by the early effects of their minimum
recharge plans aimed to weed out non-revenue generating users. Market leader
Vodafone Idea and second-largest, Bharti Airtel lost 2.33 million and 1.5
million customers respectively, according to latest subscriber data put out by
the telecom regulator. Mukesh Ambani-controlled Jio widened its customer market
share to 23.82% (23.17%) over the previous month, while VIL and Airtel’s
narrowed to 35.61% (35.94%) and 28.93% (29.17%) respectively, Trai data showed.
VIL, though, retained its position as India’s biggest telco with 418.74 million
customers, while Airtel’s dipped to nearly 340.26 million, end-December.
State-run Bharat Sanchar Nigam’s (BSNL’s) reported 5,52,855 customer additions,
that marginally increased its market share to 9.73% (9.71%) over the previous
month. Visitor Location Register, a key metric reflecting the number of active
users on a mobile network, indicated that 93.33% of the subscribers were active
for VIL, 98.68% for Bharti Airtel and 83.59% for Jio. Data collated by the
telecom regulator showed the total number of mobile and landline subscribers in
India rose 0.35% to 1.197 billion at the end of December from end-November.
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USER BASE FOR 2G, 3G SHRINKING AS UPWARDLY MOBILE TAKE TO 4G
The 2G user base, although
still in a majority, is dwindling rapidly as consumers get hooked to data,
galvanising 4G customer additions for all the major telcos over the past year.
Experts predict that even 3G is expected to fade away making way for 4G to be
the only standard in India in two years. The 2G subscriber base, which
accounted for over 70% of India’s mobile users just over a year ago, shrank to
under 58% in November 2018 and analysts expect them to completely disappear by
2021. In contrast, the combined 4G user base of Vodafone Idea (VIL), Bharti
Airtel and Reliance Jio Infocomm jumped almost 85% to 432.5 million on January
1 from a year earlier. Mukesh Ambani-led Jio, which only has 4G users, reported
a 75% jump in customer base at 280.1 million, accounting for about 65% of the
total. VIL’s and Airtel’s 2G user base shrank 11% and 22.5% to 279.3 million
and 176.71 million, respectively, in this period. This was driven by a blend of
falling 4G smartphone prices, dirt cheap data rates and the continuing
popularity of Jio’s cheap VoLTE feature phone called JioPhone, which is
inducing droves of folks at the lower end of the mobile turf to embrace fast
broadband and go 4G, analysts and experts said. We estimate India’s entire
mobile population to go 4G in two years given the wealth of affordable
smartphones in the market coupled with the fact that data rates at a GB a day
for $1.4 (Rs 100) are perhaps the cheapest anywhere in the world, a scenario
also complimented by availability of rich online content, Nitin Soni, told. The
increasing inflow of 4G smartphones amid the steady fadeout of pure 3G devices
and the inability to replicate a 4G-grade video experience on 3G have also
driven the upgrade, Sanjay Kapoor said. India’s mobile broadband subscribers
(comprising 3G and 4G users) accounted for 42.2% of the total in November 2018
from 28.6% in November 2017, according to data from the regulator. This implies
the national 2G user base has effectively shrunk from 71.4% of the total mobile
subscriber base to 57.8% during this period, said Sanjesh Jain, a telecom
research analyst at ICICI Securities.
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MUKESH AMBANI’S RIL WORLD’S 6TH FASTEST GROWING RETAILER;
BEATS JEFF BEZOS’ AMAZON, NIKE
Mukesh Ambani’s Reliance
Industries Ltd has set another record by ranking as the sixth fastest growing
retail company in the world on a list released by Deloitte, beating global
giants such as Amazon, GS Retail, Nike and others. American grocery firm
Albertsons Companies topped the list, followed by Chinese retailer Vipshop. RIL
has also featured among the top 100 ‘global retailing powers’ — a list of 250
large global retail companies. RIL ranks 94 on global retailing powers list,
outranking 156 global giants, including the likes of Metro Inc, Staples, Next
and others. US-based Walmart tops the global retailing powers list.
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GOVERNMENT TO UPGRADE MCA21 SYSTEM; SEEKS APPLICATIONS FROM
SERVICE PROVIDERS
The government has sought
applications from service providers to develop as well as operate the upgraded
version of MCA21 system, which is used mainly for submitting filings under the
companies law. The MCA21 system, which comes under the corporate affairs
ministry, was started in 2006 and currently, the second version is operational.
The ministry is the regulator for all companies and LLPs (Limited Liability
Partnerships) registered and operating in the country. Besides, it is
responsible for administration of a wide range of statutes concerning
insolvency and liquidation of corporates and promoting fair competition, among
others. In a communication, the ministry said it intends to select an IT
service provider to design, develop, implement, operate and maintain the next
version of MCA21 system ie MCA21 v3. MCA21 is not only working as a service
delivery platform but is also assisting the ministry in undertaking its
regulatory and enforcement functions, effectively maintaining databases, timely
data dissemination, and efficiently redressing stakeholders' grievances, as per
the communication. Entities can buy the Request for Proposal (RFP) from the
ministry starting February 21 and a pre-bid meeting would be held on March 5,
according to the communication posted on the ministry's website. The bids can
be submitted till April 10.
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BANK BALANCE SHEETS ARE ON THE MEND, BUT FULL RECOVERY IS
STILL SOME TIME AWAY
Bank balance sheets are on
the mend and the proof of this is the reduction in the toxic loan pile, as well
as a slower rate of bad loan accretion. The hope of healthier balance sheets
has made investors friendlier towards bank stocks too with the Nifty Bank index
outperforming the Nifty 500 index by more than 10% in the past one year. At
first look, the December quarter (Q3) results had some good news. Bad loans, as
a percentage of total advances on a net basis, have come down sequentially for
30 of the 39 listed banks. Provision coverage ratios have been ramped up,
especially by the most-hit public sector banks. The gross bad loan stock has
reduced by more than ₹30,000 crore from the previous quarter, but the net bad loan
stock has decreased even more, by as much as ₹45,000 crore. But here is
exactly where the trouble begins. How have banks been able to reduce their
toxic asset pile? The answer to that question is not very encouraging. A sample
of 12 banks across public and private sectors, which includes most big lenders,
shows that they have brought down toxic assets by writing off dud loans and not
just because borrowers have begun paying back. A Kotak Institutional Equities
research note shows that for the December quarter, 12 lenders wrote off nearly ₹33,000
crore worth of loans, or roughly 2.7% of their advances To be sure, write-offs
don’t mean the end of the loan contract, as lenders continue to chase these
borrowers for recovery. But historically, recovery from written-off accounts
are abysmally low. Of course, it would be unfair to ignore the fact that
recoveries and upgrades together totalled 3.7% of advances of these banks,
higher than the write-offs. That’s an improvement of over 1.9 percentage points
from a year ago. Dig deeper, and it is evident that upgrades and recoveries
have bunched up as a handful of large accounts got resolved through the
Insolvency and Bankruptcy Code (IBC). Lenders are dependent disproportionately
on IBC for recoveries But the code is far from being effective, considering
that out of 1,484 cases admitted since it came into effect, only 79 have been
resolved with resolution plans approved as of December. Of the 12 large cases
that the regulator told banks to refer to IBC, resolution is under way in only
four.
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RBI GOVERNOR DAS, BANKERS MAY NOT BE ON SAME PAGE OVER PASSING
RATE CUTS
Reserve Bank of India
(RBI) Governor Shaktikanta Das will meet bank chiefs on Thursday to impress
upon the need to improve transmission within the confines of it being a
business decision. However, certain indicators suggest that bankers won’t be
wrong in disagreeing with Das on the all-important rates issue. So far, only
State Bank of India (SBI) has reduced its home loan rates (up to Rs 30 lakh) by
only five basis points (bps) after the policy rate cut of 25 bps on February 7.
High credit deposit (CD) ratio, with incremental ratio over 100 (indicating
credit disbursement is more than deposit mobilisation) leaves banks with no
room to cut deposit rate. They cannot cut lending rates without cutting deposit
rates Even when deposit rates are pared, because of their fixed nature, the
cost of deposit doesn’t come down readily. Contrary to that, the lending rate
cut immediately translates into hit on profitability. Pallab Mahapatra, said
his bank’s marginal cost-based lending rate (MCLR) for one year and deposit
rates are already lower than many large banks. For reducing loan rates further,
the bank will have to cut deposit rates further, which would make the bank
vulnerable to poaching for deposits from competing banks. And this, therefore,
makes transmission a challenge. The system liquidity was running a deficit of
more than Rs 1 trillion as on Tuesday, having improved from Rs 1.13 trillion on
February 18. This is despite RBI’s bond purchases from the secondary market
reaching about Rs 2.7 trillion. The liquidity deficit will only increase with
tax-related outflow from companies in the coming days. Liquidity is leaking
from other channels also, for example, high currency in circulation (CIC) in an
election year, said a senior economist.
Latest data shows currency
in circulation, as on February 15, was at Rs 21.06 trillion, compared with pre-demonetisation
level of Rs 17.97 trillion. The growth in CIC on a year-on year basis was 18.4
per cent, much higher than the normal 13-14 per cent even in busy periods.
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STRAPPED PROMOTERS IN TALKS TO CASH OUT OF DEWAN HOUSING
FINANCE
The promoters of Dewan
Housing Finance Corp Ltd (DHFL), gripped by a liquidity crisis amid allegations
of financial irregularities, have mandated Barclays Group Plc and NM Rothschild
to run a formal process to find a buyer. Holding company Wadhawan Global
Capital has initiated talks with more than a dozen financial and strategic
investors in India and abroad to sell a controlling stake, said people with knowledge
of the matter. Private equity funds including Blackstone Group, KKR & Co
and Baring Private Equity (Asia) besides strategic investors such as Hero Group
and Piramal Group have been sounded out for a potential sale. Fullerton India,
promoted by Singaporean sovereign fund Temasek Holdings, is another potential
strategic investor that has been targeted, said the persons. Blackstone
acquired Aadhar Housing from DHFL a few weeks ago, while Hero and Baring were
in the final fray for the same asset. Wadhawan Global Capital’s 39.21% stake in
DHFL is valued at Rs 1,600 crore, sharply down from its peak of Rs 8,515 crore
last year. The talks are in initial stages. However, the group needs to get
some tough decisions to get out from the current crisis. Bankers have been
mandated to find a suitable buyer and the process is on, said one of the
sources. It would be tough to predict how long it would take. But the deal is
on. Notwithstanding the decline in deal activity in the second half of 2018
following the liquidity issues faced by the NBFC sector, financial services
continued to be the top sector receiving $7.5 billion in investments across 141
deals, a 6% increase over 2017.
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TECHNOLOGY GIANTS HAVE NO BUSINESS IN BANKING: UDAY KOTAK
Uday Kotak opined that
technology majors like Google and Facebook should not be allowed to become
banks as they don't like to be regulated. He said banking is a business with a
high degree of leverage involving public trust and continues to be synonymous
with safety. If a Google or a Facebook ever decided to be a bank, we have a
problem. They don't want to be as regulated as we are, Kotak, who heads Kotak
Mahindra Bank said. The comments come amid an aggressive play and keen interest
by the global tech giants like Google with its payment platform Google Pay in
the domestic financial sector, especially through payment services offerings.
Kotak said banks work at a leverage of 10:1 wherein they lend out Rs 10 for
every rupee of capital which they have. It is a high risk business, but
perceived to be safe, Kotak said, stressing banks have no choice but to manage
the risks well. He also hinted that young people are a bit adventurous with
their investments and often put money into risky bets. But fortunately, a large
pot of money is with the old people who allocate the resources very
judiciously. Kotak advised young fintech players and startups to enter the fray
assuming that they will fail, as 99 percent of new entities fail. It shook us
out of our slumber, he said, adding this had the his bank soon launching the
8/11 account opening drive which gave it good business as it helped address the
opportunities in the mass segment from the earlier mass premium segment.
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DOMESTIC AIR PASSENGER TRAFFIC RISES 9.1% IN JANUARY
Domestic air passenger
traffic rose 9.1% in January, with the country's airlines carrying 125.08 lakh
passengers during the month, according to DGCA data released on Wednesday.
Domestic air passenger traffic in January last year was 114.65 lakh. The market
share of no-frills airline IndiGo for January fell to 42.5 per cent and that of
national carrier Air India dropped to 12.2 per cent, showed the latest data by
the aviation regulator. In December last year, IndiGo's market share was 43.2%
while Air India's market share was 12.4 per cent. The January data of the
Directorate General of Civil Aviation (DGCA) showed that the market share of
SpiceJet, Jet Airways, GoAir, Air Asia, Vistara stood at 13.3 per cent, 11.9
per cent, 8.7 per cent, 5.3 per cent and 3.8 per cent, respectively.
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IRDAI SPELLS OUT DRAFT NORMS OF STANDARD MEDICLAIM POLICY
A uniform health insurance
product, to be called a standard Mediclaim Policy offering basic cover will be
available for all soon. According to the draft guidelines issued by the
Insurance Regulatory and Development Authority of India (IRDAI), the product
will have the basic mandatory covers and no additional or add-on covers will be
allowed. The minimum basic sum insured under the standard product shall be Rs
50,000, with a maximum limit of Rs 10 lakh. The product would have lifelong
renewability option for those in the age group of 18 and 65. Dependents and
children will be covered up to 25 years. The proposed product will cover
hospitalisation expenses, including intensive care unit, treatment of cataract,
dental treatment necessitated by injury, plastic surgery due to disease or
injury, and domiciliary hospitalisation. The minimum 24-hour hospitalisation norm
will not apply when the treatment does not require hospitalisation.
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ODISHA GOVERNMENT LAUNCHES 18 PROJECTS WORTH ₹2,196 CRORE
Odisha Chief Minister
Naveen Patnaik, on Tuesday, performed the groundbreaking-cum-inauguration
ceremony for 18 industrial units, totalling an investment of ₹2,196.30
crore. The projects are expected to create employment opportunities for 3,465
people Commitments for the majority of investments were made during the
biennial investor summit ‘Make-in-Odisha’ last November. According to the Chief
Minister, the State government’s vision is to become the ‘manufacturing hub of
the East’. GO-SWIFT, the State’s online single-window portal, has received 600
industrial project applications in over 14 months, a release issued by the
Industries Department quoted him as saying. According to the release, the food
processing sector received a significant boost with six projects with
investments totalling over ₹670 crore.
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WALMART CEO UNFAZED BY NEW E-COMMERCE LAW; HOPEFUL OF FUTURE
WITH FLIPKART
Walmart, the world’s
largest retailer, on Tuesday said it was disappointed with the recent change in
law and lack of consultation with regard to the new e-commerce regulations in
India. But, it was confident of the long-term prospects of its India unit, Flipkart.
The Bentonville-headquartered company, which announced its 2018-19 (Walmart
follows the February-January financial year) results on Tuesday, got a major
leg up from Flipkart in its gross sales, despite divestment of its Brazilian
unit. However, its operating income and profitability took a hit due to
continued investment in its Indian subsidiary. The change in e-commerce policy
came into effect from February 1. It bars e-commerce companies from selling
products through firms in which they have a stake. Companies operating in this
space also cannot earn more than 25 per cent of total revenue from a single
platform. McMillon, however, said the new regulations have not shaken Walmart’s
confidence and excitement about Flipkart’s long-term prospects as the business
has behaved in line with their expectations. The company, he said, remained
optimistic about India’s e-commerce opportunity, given the size of the market,
the low penetration in the retail channel, and the pace at which it was
growing. We hope to work with the government for pro-growth policies that can
allow this nascent industry and the domestic manufacturers, farmers, and
suppliers to benefit from it, said McMillon.
#For Source of Information copy and paste the heading in google.
Thanks & Regards,
CS Meetesh Shiroya
Thanks & Regards,
CS Meetesh Shiroya
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