NCLT SLAPS RS 1 LAKH FINE
ON CARNIVAL FILMS ENTERTAINMENT FOR GIVING LOAN TO DIRECTORS
The Mumbai bench of National Company Law Tribunal (NCLT) has
slapped a deterrent penalty on Carnival Films Entertainment for giving loans to
its own directors in violation of the Companies Act. A tribunal bench led by
presiding officer MK Shrawat concluded that the Srikant Bhasi-owned Carnival Films—which
operates multiplex and single screen theatres across the country —and its
directors violated Section 185 of Companies Act by granting loans to its
directors in 2014-15. It imposed a fine of 1 lakh as a deterrent for not
repeating the impugned default in future. The Registrar of Companies (RoC) had
reported that Carnival Films had granted loans to its directors without passing
any special resolution during FY2015. We have multiple businesses and 22 group
companies. It was an unintentional error when a loan was given to one of the
entities, said PV Sunil, managing director at Carnival Cinemas. The moment our
auditors informed us that it’s a violation, we approached the NCLT to rectify
the accounts proactively. This is just for rectification of an error, he said.
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FINMIN TO TAKE REVIEW MEET
ON NPA RECOVERY NEXT WEEK
The DFS has set an NPA recovery target of Rs 1.8 lakh crore
for the public sector banks (PSBs) which has to be achieved by March end. The
meeting will be conducted via video-conferencing, said a banking source, adding
that a senior DFS official will review the NPA recovery status of individual
banks and the overall target. Last year, Financial Services Secretary Rajiv
Kumar had said that recoveries of about Rs 1.8 lakh crore were assessed by the
banks which were from the cases under the Insolvency and Bankruptcy Code (IBC)
and those outside it. So far the recovery has been Rs 1.1 lakh crore and the
Essar Steel resolution may still happen, the Finance Ministry hopes.
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LIBERTY GETS 30 DAYS TO
PAY FOR ADHUNIK METALLIKS ACQUISITION
An appellate tribunal has given Liberty House 30 days to make
an upfront payment of Rs 410 crore towards its acquisition of Adhunik
Metalliks. Liberty House has failed to make payments towards its acquisition of
distressed alloy and specialty steel manufacturer after being approved by the
CoC as the highest bidder.
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NUPOWER-VIDEOCON PROBE:
MINISTRY OF CORPORATE AFFAIRS LIKELY TO SUBMIT REPORT SOON
The Mumbai office of the ministry of corporate affairs will
soon submit its report on alleged irregularities found in the functioning of
Deepak Kochhar owned NuPower Renewables (NRL) and VN Dhoot’s Videocon
Industries, people aware of the development told. The agency found over a dozen
violations under the Companies Act and is finalising its recommendations, the
people said. However, Dhoot denied that there were any major irregularities.
Kochhar and Dhoot are being investigated for a quid-pro-quo arrangement in
connection with loans granted by ICICI Bank to Videocon. Kochhar’s wife Chanda
Kochhar, was sacked as CEO and MD of ICICI Bank in January for failing to
disclose any conflict of interest when the loans were sanctioned. In certain
cases, we have found irregularities pertaining to false disclosures regarding
certain transactions. In some cases, financial irregularities were noted. These
amount to prosecution action and we have recommended the same. The final
decision is yet to be taken, one person said. The probe was carried out under
six heads, of which four have been completed and two are almost complete. The
final report with recommendations will be submitted soon to the head office to
take a final call, the person said. According to the person, irregularities
were observed in the conduct of board meetings, while in some of the financial
statements and annual reports submitted, the disclosures were inadequate or
misleading. Some members of the board were suspected to be shadow directors,
the person said. Dhoot said that only some minor, technical irregularities had
been found. They have not found any irregularity as regards to the Companies Act
sections, which carries compulsory prosecution, so there is no question of
prosecution.
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LENDERS SEEK HIGHER
SECURITY COVER TO FUND REALTY PROJECTS
The changing liquidity scenario has prompted private equity
funds and other financiers of real estate developers to modify their structures
of transactions to accommodate higher security covers and collaterals from
builders looking to raise funds. Financiers are now negotiating for additional
cover from promoters as against primary securities and the project’s
receivables that used to be marked as collaterals for the funding. Funds are
seeking more security while financing even joint development agreements (JDAs)
that used to see an easy pass through earlier, given the shared risks and
responsibilities. Most funds are looking to finance established builders with
structured finance that ensures minimum guarantee and downside protection.
Earlier funds were available at 14-15% internal rate of return (IRR), but now
that has gone up to 18% and above. Developers are now willing to take money
even at higher rate of return with downward protection. Now, builders are
chasing funds as there is no cheaper credit available from non-banking finance
companies, said Rajeev Bairathi. Lenders have started demanding additional
security if they are entering a project at its initial stage. This demand is
justified as an initial level risk mitigant towards approval risk, construction
risk or sales risk, said Subhash Udhwani. The demand varies across various
institutions and the additional security is released during the tenure of the
loan in case of good repayment and construction performance.
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COC MAY CONSIDER NCLAT
PLAN FOR ESSAR’S OPERATIONAL CREDITORS
Bankers are likely to consider a suggestion by the National
Company Law Appellate Tribunal to increase the share of operational creditors
in the proceeds from ArcelorMittal’s resolution plan for Essar Steel. The
committee of creditors (CoC) is likely to meet over the weekend to discuss
their next course of action. The decision will be placed before the court in
the next hearing on Monday. According to the proposal submitted by
ArcelorMittal, financial creditors led by State Bank of India will get 92% of
their dues which comes to around Rs 41,987 crore. Operational creditors, under
the plan, would have got just about 5%, or Rs 214 crore, against the
outstanding dues of Rs 4,976 crore. The two-judge bench of NCLAT has asked the
CoC to consider giving operational creditors 10% of the total proceeds. If this
suggestion is accepted, the total amount received by financial creditors would
drop to Rs 37,800 crore.
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NCLAT REFUSES TO DIRECT
SBI TO RELEASE I-T REFUND OF RS 260 CRORE TO RCOM
India’s bankruptcy cases tribunal on Friday refused to direct
State Bank of India (SBI) to release income tax refund of Rs 260 cr to allow
Reliance Communications to repay Swedish telecom maker Ericsson. No direction
can be given to any party to settlement to perform certain duties to ensure
settlement between other parties, said the National Company Law Appellate
Tribunal (NCLAT). Reliance Communications had sought release of tax refunds
from a trust and retention account, but SBI and its other lenders were opposed
to this. Ericsson signed a deal with Reliance Communications in 2014 to manage
and operate its network and last year approached NCLAT over unpaid dues.
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NCLAT RESERVES ORDER IN
RCOM-ERICSSON DUES CASE
The National Company Law Appellate Tribunal reserved Wednesday
its order on a petition by Reliance Communications Ltd (RCom) seeking release
of income tax refunds to clear dues to Swedish telecom equipment maker Ericsson
Inc. Lenders of RCom have opposed the plea, saying that it will lead to outgo
of public money for settling payments of a private party. After hearing both
sides, the NCLAT bench—headed by chairperson S.J Mukhopadhaya—reserved the
order in the case. The chairman said that both the parties should see the
RCom-Ericsson dues case as a resolution process rather than seeing it as a suit
and that the principle of resolution is to save the company so that creditors
get the maximum out of an asset. Mukhopadhyay said that in case liquidation
proceedings are invoked against RCom, then all the creditors—including
Ericsson—will have to pay back the amount that they have received from RCom and
projected valuation of company's asset of ₹38,000 crore may fall to ₹2,000-3,000
crore. Ericsson will get 20-30% from it, he said. The NCLAT bench was hearing
the petition of RCom to release ₹259.22 crore received from
income tax refund from the Trust and Retention Account (TRA) held with the
State Bank of India. All receivables of RCom are deposited in the TRA account
controlled by lenders. Appearing for Anil Ambani-led RCom, senior lawyer Kapil
Sibal appealed for payment to be made to Ericsson from the TRA. Lenders of
RCom, led by State Bank of India, opposed the application of the company. Senior
lawyer Neeraj Kishan Kaul, appearing for SBI, argued for rejection of the
RCom's appeal, contending that it will lead to an outgo of public money for
settling payment of a private party. He said that RCom's asset monetization
deal failed because Reliance Jio Infocomm Ltd refused to take responsibility of
past dues of the Anil Ambani-led firm before the DoT and hence it is not liable
to make payment on behalf of RCom. RCom has been asked by both the Supreme
Court and the NCLAT to pay ₹550 crore to Ericsson. The company has paid ₹118
crore to Ericsson and if it fails to pay the rest of the amount, then RCom
group chairman Anil Ambani may have to face three-month jail-term for contempt
of court. Sibal said if ₹259 crore is released from TRA, RCom will look at raising rest
of the amount to clear all of Ericsson's dues. The Supreme Court has given RCom
time till 19 March to pay out Ericsson.
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NCLAT REFUSES TO STAY NCLT
ORDER TO ARCELORMITTAL'S RS 42K-CR TAKEOVER BID
The National Company Law Appellate Tribunal on Friday refused
to stay a bankruptcy court order approving steel giant ArcelorMittal's Rs
42,000 crore takeover bid for Essar Steel and sought a fresh plan for the
distribution of bid amount between financial and operational creditors of the
debt-laden firm. Essar Steel directors had challenged Ahmedabad-bench of
National Company Law Tribunal's (NCLT) nod to global steel giant ArcelorMittal
SA's bid for the debt-laden company on the plea that their offer of Rs
54,389-crore was superior as it clears 100 per cent outstanding of both
financial and operational creditors. Standard Chartered too moved the NCLAT
against the plan as its counsel contended that the bank was being given only
1.7 per cent of its total dues from Essar Steel while other financial
creditors, forming part of the CoC, were getting over 85 per cent of their
dues. A two-member bench headed by Justice S J Mukhopadhaya refused to stay the
NCLT nod to ArcelorMittal's resolution plan and posted the matter for March 18.
It also asked State Bank of India-led CoC to bring a fresh distribution plan at
the next date of hearing, saying there cannot be any discrimination all are
equal. Making a suggestion, the NCLAT said all operational creditors below Rs 1
crore should get 100 per cent of the dues and so should the employees of Essar
Steel. Only 90 per cent of Rs 42,000 crore should be allowed for financial
creditors. ArcelorMittal's Resolution Proposal involves financial creditors
getting Rs 41,987 crore out of their total dues of Rs 49,395 crore. Operational
creditors, under the plan, would get just Rs 214 crore against the outstanding
of Rs 4,976 crore. ArcelorMittal's Resolution Proposal involves financial
creditors getting Rs 41,987 crore out of their total dues of Rs 49,395 crore.
Operational creditors, under the plan, would get just Rs 214 crore against the
outstanding of Rs 4,976 crore. If the ArcelorMittal plan is implemented,
Standard Chartered will only get Rs 60 crore against its claims of Rs 3,187
crore from Essar Steel. The NCLAT bench asked the Committee of Essar Steel
lenders to come up with a distribution plan by Monday saying it cannot
discriminate on the basis of secured and unsecured creditors. It was of the
view that the Committee of Creditors (CoC) cannot reserve 92 per cent of the
bid amount for financial lenders and leave just 4 per cent for operational
creditors. Operational creditors, it felt, are the oppressed lot and cannot be
handed out just 4 per cent of their outstanding. If CoC doesn't act to clarify
in favour of operational creditors, NCLAT will exercise powers available to it,
the judges said. The CoC, however, opposed proposal to give 10 per cent of the
Rs 42,000 crore bid amount to operational creditors saying they had approved
the ArcelorMittal bid for Essar Steel based on the money secured lenders are
able to recover from the insolvency. Without the recovery for secured lenders,
the CoC wouldn't have approved the plan, the counsel appearing for the
committee said adding it cannot be a lottery system for operational creditors. Financial
creditors would be left with Rs 37,800 crore if 10 per cent is given to
operational creditors. On Thursday, the appellate tribunal had told Essar Steel
Asia Holdings (ESAH) that its Rs 54,389-crore resolution plan would only be
considered only if the entity cleared the Essar's entire bad debt.
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SUN PHARMA AUDITOR FILES
CASE AGAINST MACQUARIE WITH ECONOMIC OFFENCES WING: SOURCES
The Mumbai Police's Economic Offences Wing (EOW) has initiated
an inquiry against Macquarie broking house on the basis of complaint registered
by Sun Pharmaceutical Industries’ auditor Valia & Timbadia. A source in the
department told: The auditor has registered a complaint stating that the
broking house prepared false sale notes and circulated it to their clients,
which impacted the stock price negatively. Elaborating on the same, the source
stated: The auditor moved EOW alleging Macquarie mischievously intended to
profit by issuing a sales note against Sun Pharma. Post this note and
whistleblower letter, the company’s investors incurred heavy losses and the
promoters’ net worth too took a hit. The complainant has pegged the loss at Rs
100 per share, but failed to mention the exact quantum of loss. However, Sun
Pharma's spokesperson said they are unaware of any such complaint and that they
haven't filed a case against Macquarie with the EOW. Confirming receipt of the
complaint two weeks back, another EOW source said, The department is exploring
whether this complaint comes under its jurisdiction. We will seek details from
the Securities and Exchange Board of India (SEBI) as well as trade data from
exchanges. Macquarie, an Australian multinational independent investment bank
and financial services company, questioned corporate governance practices at
Sun Pharma, causing the drugmaker's shares to end at a six-month low on
November 29, 2018. The report, written by a trader, raised concerns over
inadequate disclosures about the company's links with banned traders Ketan
Parekh and Dharmesh Doshi, related transactions, and role of promoter Dilip
Shanghvi's brother-in-law Sudhir Valia, who is a Director in Sun Pharma. It
also raised questions about real estate guarantees provided to Suraksha
Reality.
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RS 210 CRORE OF ARMY
INSURANCE FUNDS SUNK IN IL&FS BONDS
One of the key prongs for the welfare of ex-servicemen -- the
Army Group Insurance Fund (AGIF) -- has exposure to toxic IL&FS bonds
amounting close to Rs 210 crore This means that crores worth of insurance
premiums, covering all ranks from generals to JCOs and jawans, are at risk of
being lost. Recently, officials of the Indian Army met the new board of the
IL&FS seeking a solution of this issue. There are no direct answers on who
will pick up the liability.
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FRESH NPAS TO MODERATE IN
FY'20: ICRA
Fresh NPAs in the banking sector are expected to moderate to
1.9 to 2.4 percent in FY'20, due to aggressive recovery drive and write offs by
banks according to ratings firm Icra. Public sector banks are expected to turn
profitable after four consecutive years of losses. Capital infusion by the
government too will help. The ratings firm has revised the outlook of six
public sector banks of which five are positive revisions. Fresh NPA generation
expected to be 1.9-2.4% for FY20 as compared to an estimated 3.7% for FY19
Adjusted for recoveries, upgrades and write-down, Icra expects gross NPAs of
the banking sector to 8.3 lakh crore or 7.9 per cent for March 2020, as
compared to estimated 9.2 per cent as of March 2019. With capital infusion of
Rs 50,000 crore during the December quarter, net NPAs are expected to fall
further. However, even with the new Bankruptcy law in place, recoveries through
the cases referred to the National Company law Tribunal (NCLT) have not been
very large, it said. But recoveries of around Rs 1.6-Rs1.7 lakh crore from
accounts referred to NCLT amount to 75 to 80 per cent recoveries from these
accounts and this is higher than the provisions made by these banks. Public
sector bank losses estimated at Rs 93,100 crore in FY’19 to be lower than
capital infusion of Rs 1.22 lakh crore. Strong NII Growth, improved treasury
income and stable credit provisions drive improvement in profitability of
private sector banks. Though public sector banks are expected to post losses in
FY’19, they could turnaround in FY’20. ‘In FY’20, with expected credit loss
provisioning we expect 14 public sector banks to be potentially profitable in
our base case scenario. But overall return on assets and return on equity may
remain weak according to Anil Gupta. Decline in credit provisions for Private
banks to drive a sharp growth in their net profits and return on equity for
FY’20 Icra has revised the ratings outlook of four public sector banks from
negative to stable including, Bank of India, Bank of Maharshtra, Punjab
National Bank and Oriental Bank of Commerce. It revised upward, the outlook for
IDBI Bank from negative to ‘Rating watch with developing implications’. While
the outlook for Punjab and Sind Bank was lowered from stable to negative.
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RBI TELLS SC NO CORPORATE
DEBT RESOLUTION PLAN YET DESPITE 180-DAY EXTENSION FOR DEFAULTERS
Defending its controversial February 12 circular, the RBI on
Thursday brought to the Supreme Court’s notice that none of the petitioners
(corporate defaulters) from a variety of industries like power, shipping and
sugar could come up with any resolution plan that could be considered by banks.
It is apparent that they don’t have any resolution plans the RBI said,
referring to the leeway that was available to the firms under the court’s
September 2018 order asking the lenders not to act till further orders. The
circular stipulates a one-day default rule on term loans — borrower missing
repayment even for a day will be treated a defaulter, banks need to finalise a
resolution plan for defaults of over Rs 2,000 crore within the next 180 days,
failing which insolvency process will start. It is noteworthy that the
additional period of 180 days also came to an end on 28.02.2019. Barring 2 or 3
cases which have been resolved and some more cases which have been referred to
the NCLT, the position remains the same, the RBI said. The RBI said it wanted
to address the serious malady of evergreening of stressed accounts being
resorted to by lenders in order to avoid provisioning as well as preserve the
economic value of assets and enable banks to extend a holding hand to various
companies which are under stress. According to the central bank, since stressed
assets and NPAs in the banking system had reached unacceptably high levels, it
was incumbent upon it to take urgent measures for their speedy resolution in
order to improve the financial health of banks. The gross NPAs ratio of banks,
which was 2.35% in March 2011 had increased to 11.46% by March 2018, the RBI told
a bench led by justice RF Nariman. The court reserved its orders. Explaining
the rationale behind the February 12 circular, the RBI argued that instead of
prescribing specific schemes under its extant guidelines flexibility had to be
provided to the banks to restructure their viable but stressed accounts. Senior
counsel Rakesh Dwivedi and counsel Liz Mathews, appearing for RBI, argued that
the circular was in the interest of banking policy, the depositors and public
interest as well as in the interest of national economy. Though banks invoked
strategic debt restructuring in more than 140 cases, they were unable to change
ownership even in a handful of cases, the RBI noted. Under corporate debt
restructuring, out of the total 591 approved cases, only 110 succeeded until
September 2017. Under the scheme for sustainable structuring of stressed assets
(S4A), only 22 cases the restructuring could be implemented from June 2016 to
February 2018. As much as 20 out of these 22 borrowers are in default even on
the restructured debt, the central bank added.
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NCLAT ASKS RUIAS TO FIRST
CLEAR ALL DUES OF NEARLY RS 1.4 LAKH CRORE TO CONSIDER ITS BID FOR ESSAR STEEL
An appellate tribunal told Essar Steel Asia Holdings (ESAH)
that its Rs 54,389-crore resolution plan for Essar Steel would only be
considered if the entity cleared the Essar Group’s entire bad debt That added
another twist to the long-drawn Essar Steel resolution process, which seemed to
have taken a decisive turn after the Ahmedabad bench of the National Company
Law Tribunal (NCLT) approved ArcelorMittal’s Rs 42,000-crore bid for the
company last week. Think of Rs 80,000 crore more, we will make some room for
you, whatever the amount is, said a two-member bench of the National Company
Law Appellate Tribunal (NCLAT) led by justice SJ Mukhopadhaya on Thursday. We
may consider (the ESAH proposal) if (you pay) whatever — Rs 80,000 or Rs 90,000
(crore) — dues you have plus Rs 54,000 crore (for Essar Steel). This suggests
the tribunal may consider letting the Ruias, founders of the Essar Group and
the erstwhile promoters of Essar Steel, enter the race for the latter if ESAH
can come up with about Rs 1.4 lakh crore, which might be difficult. In
addition, the tribunal also asked ArcelorMittal why it should not be paying
more for the asset. The observations came during the hearing of the appeal
filed by ESAH against the NCLT order. However, the NCLT decision approving the
ArcelorMittal deal has also been opposed by lender Standard Chartered Bank,
which called the plan discriminatory and said the entire resolution had been
conducted in a manner contrary to the law. If the ArcelorMittal plan is
implemented, Standard Chartered will only get Rs 60 crore against its claims of
Rs 3,187 crore from Essar Steel. The bench also asked ArcelorMittal why it
should only pay Rs 42,000 crore if the asset’s value exceeds Rs 54,000 crore.
The bid was approved by Essar Steel’s committee of creditors last year. That is
a basic question — if parties are ready to pay Rs 54,000 crore, why don’t you?
justice Mukhopadhaya said.
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INFOTEL OPPOSES
CONSOLIDATION OF VIDEOCON CASES AT NCLT
Infotel Business Solutions, the parent company of Infotel
Broadband, which was sold to Reliance Industries Ltd in 2010, has objected to
the consolidation of insolvency proceedings of Videocon group at the National
Company Law Tribunal (NCLT). Infotel has argued that the proposed consolidation
of insolvency proceedings of 14 Videocon group companies will adversely impact
its rights as a creditor of one of the group companies where it accounts for
40% of total dues and to a similar percentage of voting rights as a member of
the committee of creditors (CoC). When the debt of all 14 companies gets
consolidated, our voting rights in the CoC will fall to 2% because our share in
the consolidated debt will fall proportionately, a spokesperson for Infotel
Business Solutions told. Infotel Business Solutions is a creditor of KAIL Ltd,
one of the Videocon group companies that stood guarantor for loans worth Rs
20,000 crore taken from a consortium of banks by Videocon Industries Ltd, the
group’s flagship. KAIL is also a key company in the insolvency process as it houses
the Videocon brand, according to sources in the know. The NCLT is yet to rule
on SBI’s plea. India is still working on a regime for group restructuring, said
Ashwin Bishnoi, partner at law firm Khaitan & Co. Till the time it
develops, creditors are entitled to argue that their rights could be
compromised by such actions. Videocon Industries was admitted for insolvency
proceedings in June last year while several of its associate companies were
admitted in the subsequent months. Five resolution professionals— KPMG’s Anuj
Jain, PwC’s Mahendra Khandelwal, Divyesh Desai, Dushyant Dave and Avil Menezes—
are currently tasked with overseeing the insolvency process for the various
companies.
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NCLT SEEKS VIEWS ON
STERLING BIOTECH PROMOTERS’ OFFER
The National Company Law Tribunal (NCLT) has directed the
government, regulators, and investigation agencies to clear their stand before
the dedicated bankruptcy court decides on the legality of the one-time
settlement (OTS) offer of the absconding promoters of Sterling Biotech. How the
proposal submitted by the Sandesara Group is accepted by the financial creditor
creates a suspicion when the promoter/director is absconder and ED and CBI is
searching them, said the Mumbai bench of NCLT bench presided over by VP Singh
and Ravikumar Duraisamy. In the background, passing any further order, we would
like to issue notice to central government, enforcement directorate (ED),
Income Tax authorities, CBI, SEBI and RBI, so that if they want to make any
representation, they can make the same before passing any further order. The
tribunal has given two weeks time to the government and various investigation
agencies to file their response. The NCLT will hear the matter further on March
26.
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LIBERTY FALTERS, SUITORS
LINE UP FOR ADHUNIK METALIKS
Adhunik Metaliks is seeing renewed interest from a clutch of
strategic steel players as well as asset reconstruction companies (ARCs), even
as the fate of the company's ongoing resolution process with the winning
bidder, Liberty House, is still to be decided by courts. A person close to the
lenders to Adhunik Metalliks told that Kalyani Steel, Maharashtra Seamless and
Shyam Sel & Power have shown interest in the company that owes Rs 5,371
crore to banks. Maharashtra Seamless was the second highest bidder for the
asset in the first round of bidding. The steelmakers could not be contacted for
comment. Edelweiss ARC is the only one which had bid for Orissa Manganese and
Minerals, another company of the Adhunik group that is facing insolvency
resolution.
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NCLT APPROVES DEMERGER OF
IIFL GROUP INTO 3 ENTITIES
The National Company Law Tribunal (NCLT) has approved the
proposed demerger of Fairfax-backed IIFL Group, which paves the way for listing
of three entities — IIFL Finance, IIFL Wealth and IIFL Securities on the
bourses within 60 days. As per the arrangement, for every seven shares of IIFL
Holdings — the listed company — a shareholder will get seven shares each of
IIFL Finance and IIFL Securities, and one share of IIFL Wealth. As per the
existing shareholding structure, promoters have 28.95 per cent stake in IIFL Holdings,
Fairfax holds 35.3 per cent, FPIs 23.36 per cent and retail 10.38 per cent. At
present, IIFL Holdings’ loans and mortgages business has an asset under
management in excess of Rs 36,000 crore. The company is aiming at a growth of
20-25 per cent in FY19.
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DOT TO INVOKE BANK
GUARANTEES TO RECOVER RCOM’S SPECTRUM DUES
The Department of Telecommunications (DoT) is invoking bank
guarantees to recover Reliance Communications’ (RCom) latest spectrum dues and
is set to issue a notice asking why the airwaves shouldn’t be withdrawn, adding
to the woes of the telco whose chairman Anil Ambani faces jail for not paying a
vendor. The last day of payment of Rs 21 crore was March 13, which included a
grace period of 10 days. We have now asked the related department to send a
show-cause notice to the telco, a DoT official said. A telco is allowed 20 days
to respond to a show-cause notice. Failure to pay the government may ultimately
lead to withdrawal of spectrum against which payment was due, the official
said. In this case, it is the 800 MHz band in Mumbai, purchased in 2015 and
used by Reliance Jio Infocomm under a spectrum sharing pact with RCom. If their
spectrum is withdrawn, there will be no airwaves to sell or trade for RCom,
said the official, who did not want to be identified. According to officials,
RCom, weighed by debt of over Rs 40,000 crore, is due to pay another instalment
of Rs 281 crore in April for spectrum in the 800 MHz band bought from Sistema
Shyam Teleservices in eight circles.
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NCLAT ASKS ARCELORMITTAL
TO CONSIDER REVISING BID FOR ESSAR STEEL
The National Company Law Appellate Tribunal (NCLAT) on
Thursday asked ArcelorMittal to consider revising its Rs 42,000 crore bid for
Essar Steel India Limited (ESIL), while also observing that a window of
opportunity could be provided to the promoters of Essar if they cleared all the
debt related to Essar group. It gave the latter one week time to consider the
same. The Essar promoters, NCLAT Chairperson Justice S J Mukhopadhaya observed,
will have to clear all the debts related to the group, according to a Supreme
Court judgement, to become eligible to bid for Essar Steel again. The NCLAT
will next hear the matter on Friday. On Thursday, the appellate tribunal was
hearing a petition moved by promoters of Essar Steel India against the National
Company Law Tribunal (NCLT) Ahmedabad’s judgment approving ArcelorMittal’s
resolution plan for debt-laden Essar Steel. Three directors of Essar Steel had
mentioned the issue on Monday before a two-judge Bench headed by Chairman
Justice S J Mukhopadhaya, following which the matter was listed for hearing on
Thursday. Apart from the directors, dissenting financial creditor Standard
Chartered Bank (StanChart) had also approached the NCLAT on Monday. During the
hearing on Thursday, Standard Chartered Bank said that it was challenging the
entire corporate insolvency resolution process of Essar Steel as it was flawed.
StanChart had alleged it was being discriminated against by the committee of
creditors (CoC) of Essar Steel as it had been allotted a very less value
against its claim. The allegation was, however, rejected by the CoC, which had
told NCLT-Ahmedabad that the bank was, in fact, getting two times its share.
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GOVERNMENT MAY ORDER
MANAGEMENT CHANGE IN ESSAR STEEL: REPORT
After more than a year, the long-drawn resolution process of
Essar Steel seems to be finally moving towards closure with the Corporate
Affairs Ministry ready to order a change in the management of the insolvent
steel maker. The move comes even as a fresh petition was filed before the
National Company Law Appellate Tribunal (NCLAT) by Essar Steel MD Prashant
Ruia, Essar Group executives, as well as the Standard Chartered Bank, seeking
to set aside the ArcelorMittal's winning bid approved by the Ahmedabad bench of
the NCLT. The resolution plan for Essar Steel, which has been facing bankruptcy
proceedings since August 2017, was approved by the National Company Law
Tribunal (NCLT) last Friday. It accepted ArcelorMittal's Rs. 42,000 crore bid
for the debt-laden steel maker. Official sources said the MCA is waiting for
the written order from the NCLT after which it would approve and order a
management change in Essar Steel. This may take a day or two, said the source.
The legal contentions against the takeover can continue later, said the
official. The NCLAT is set to hear the petitions against ArcelorMittal's
winning bid on Thursday. The appellate court's order is awaited.
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JAYPEE INFRATECH LENDERS
AKS NBCC, SURAKSHA GROUP TO SWEETEN BIDS FOR ACQUIRING BANKRUPTCY-BOUND REALTY
FIRM
Lenders of debt-ridden Jaypee Infratech Thursday asked
state-owned NBCC Ltd and Suraksha Group to sweeten their offers for acquiring
the bankruptcy-bound realty firm, sources said. NBCC, which has the backing of
the government to takeover Jaypee Infratech, is unlikely to increase the offer
of Rs 500 crore capital infusion but is ready to help lenders in monetisation
of the Yamuna Expressway and the land offered by the PSU in its resolution
plan, they said. In a meeting with lenders, the state-owned firm even proposed
that it was ready to work as project management consultant and charge fees for
completing the stalled projects, while lenders could keep control of Jaypee
Infratech, the sources said. A meeting of the Committee of Creditors (CoC) was
held to discuss resolution plans submitted by NBCC and Suraksha Group. The CoC
will soon formally write to both the bidders to submit revised bids based on
the discussions held. In the meeting, NBCC submitted that the company would
complete and deliver stalled projects to homebuyers in three years instead of
the earlier promise of four to five years, sources said. In its resolution plan
submitted last month, NBCC offered 1,400 acre land worth Rs 6,000 crore as well
as Yamuna Expressway to lenders.
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RECALL ₹2,315-CRORE LOANS TO SINGH
BROS: SEBI TO RELIGARE
SEBI has taken note of massive funds diversion by financial
services company Religare Enterprises to its erstwhile promoters Malvinder and
Shivinder Singh. The market regulator on Thursday ordered Religare Finvest and
Religare Enterprises to recall loans worth over ₹2,300 crore that were
diverted to promoters Singh brothers and 21 other entities after finding
preliminary evidence of fund diversions. Religare Finvest is a subsidiary of
Religare Enterprises (REL). At the end of December 2018, the Singh brothers
were among the promoters of REL. It was observed that funds amounting to ₹2,315.09
crore had been diverted from the books of RFL for the utilisation of promoters
and promoter group entities of REL, SEBI said in its order. The regulator has
directed the two companies to initiate steps to recall all the loans amounting
to ₹2,315.09 crore, along with due interest within three months.
Besides, the Singh brothers have been asked not to associate themselves with
the affairs of REL and RFL till further directions. SEBI said prima facie the
role of RFL and REL in the alleged diversion of funds to entities related to
the latter’s promoters — RHC Holding and ANR Securities — for the ultimate
benefit of Shivi Holdings, Malav Holdings, Shivinder Mohan Singh and Malvinder
Mohan Singh has been established. Further, the watchdog noted that
non-disclosure of funds routed by RFL through unrelated entities for the
benefit of promoters and promoter group entities in the books of the company
was to circumvent listing norms.
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COMPANIES SHOULD NOT HAVE
NINE LIVES
Since its enactment in 2016, the Insolvency and Bankruptcy
Code has been the crowning achievement of the NDA government’s reform agenda.
With the Finance Minister quoting recoveries of close to ₹3-lakh
crore due to the IBC there is little doubt that the IBC has helped dent the bad
loan crisis in the country and has had some positive impact on India’s credit
culture. Key to the IBC’s success has been its push towards time-bound
management of distress by relying on the commercial wisdom of the creditors and
other market players. The IBC relies on the committee of creditors (CoC) to
ascertain if a company is viable and if its business should be carried on,
within a defined period of time. The CoC must invite resolution plans, and
approve of a plan that is most feasible. Where the CoC ascertains that the
company is not viable, they need not keep providing the company credit to keep
it running, and may send it to liquidation. This process is aimed at freeing up
capital to finance new businesses. Thus, the IBC process clearly represented a
break from the old insolvency and winding-up processes under the Sick
Industrial Companies Act and the Companies Act where judicial practice was
biased towards keeping even commercially unviable companies running. However,
recent developments suggest that this practice may be making a comeback. While
passing the first amendment to the Code, the Parliament emphasised that the
purpose of the Code is resolution and not liquidation, even though the Code was
drafted to be outcome neutral. Thereafter, two Supreme Court judgments have
declared that liquidation should only be a last resort, and should be avoided.
The NCLAT (National Company Law Appellate Tribunal) has gone a step further,
and has now held that even where a liquidation order is passed the liquidator
must first attempt to revive the company and run it as a going concern before
selling the assets of the company. This means that no matter whether the market
sees value in the company, a long-drawn process to keep the company running at
all costs will be carried on the orders of the NCLTs. The view that liquidation
should be avoided at all costs, and revival must be attempted even after a
liquidation order has been passed emanates from the belief that keeping a
company running will always be the best outcome. In the short-term, one can
appreciate that keeping a company running may appear to be the best outcome
since it saves the jobs of workers, and avoids the impression that banks have
unfairly captured the wealth of the company. However, India’s experience with
the SICA and the Companies Act should make us re-examine this claim. The
practice of exploring revival of the company even after the liquidation order
was passed was common under these regimes. However, where a company is not
economically viable anymore, the value of the assets of the company will erode
while the liquidator keeps attempting to save it as a going concern. Keeping it
running in such a state will only have long-term ill effects. The capital of
banks will remain tied up in subsidising the failure of value-less companies,
and impede their ability to finance viable projects that can provide a higher
number of economically useful jobs. It was to avoid these very consequences
that the IBC explicitly repealed sections of the Companies Act that enabled the
exploration of revival once a liquidation order had been passed (the now
repealed section 289 of the Companies Act, 2013) and inserted prohibitions on
the exploration of another round of resolution once liquidation is ordered
(section 11(d), IBC). The IBC, thus, should not become a mechanism to save
value-less jobs for extended periods of time by avoiding liquidation even when
a company is unviable. Workers’ woes must be dealt with robust social security
schemes, and not by artificially extending the lives of companies that are
better off liquidated.
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STERLING BIOTECH OFFER
SUSPICIOUS, SAYS NCLT
Andhra Bank-led lenders’ plan for a one-time settlement with
Sterling Biotech, whose absconding promoters are under investigation, has
created suspicion observed the National Company Law Tribunal (NCLT). The court
has asked various government investigative agencies to make their
representation on the proposal within seven days. How the proposal submitted by
Sandesara group is accepted by financial creditors creates suspicion, the court
said in its order on March 11. The NCLT has issued notices to the ministry of
corporate affairs, the Enforcement Directorate, income-tax authorities, the
CBI, Sebi and the RBI, in respect of Andhra Bank seeking to withdraw insolvency
proceedings against Sterling Biotech. The promoters of the Gujarat-based firm
Nitin Sandesara and Chetankumar Sandesara have been absconding and are sought
by various investigative agencies, including the CBI and the ED. Andhra Bank,
which is the lead banker to the group, had initiated insolvency proceedings
against the company for failure to repay its dues. However, even as the
insolvency proceedings were under way, the lenders said that they had
considered a one-time settlement which was agreed by over 90% of the lenders
and sought withdrawal of the insolvency proceedings. In their order, members Ravikumar
Duraisamy and V P Singh noted that the resolution professional, appointed by
the court, had asked lenders to provide him with the details of the offer,
sources of funds, the time frame for payments, compliance with the RBI norms
and whether the interest of all stakeholders have been provided for under the
offer. Curiously the offer accepted by the lender was extended by one Farhad
Daruwalla, who had signed on behalf of ‘Sandesara Group’. It was not mentioned
in the proposal whether Daruwalla has been authroised by Sterling Biotech to
submit the proposal. It is also important to point out that the corporate
debtor is Sterling Biotech and no proceedings under IBC has been initiated
against Sandesara group, the court said.
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LONG AND WINDING ROAD
After a long legal slugfest, the insolvency proceedings with
respect to Essar Steel — first admitted under IBC over 580 days ago — made some
headway last week. The National Company Law Tribunal (NCLT) approved
ArcelorMittal’s Rs. 42,00-crore offer to lenders. But with the promoters of
Essar Steel filing an appeal before the National Company Law Appellate Tribunal
(NCLAT) challenging the NCLT order, it looks like there is more legal drama to
come. Essar Steel, which was among the first 12 big defaulters that banks had
sought to resolve under the RBI’s directive in 2017, has seen some high-stakes
legal wrangling, testing various points of law in the Code. This journey has
thrown up chinks in the IBC process; it highlights how interim litigations are
a drag on the 270-day timeline. For instance, Section 29A, introduced to keep
out errant and wilful defaulters from buying back assets, has led to prolonged
litigations questioning the eligibility of bids. While both ArcelorMittal and
Numetal had submitted the resolution plans a little over six months after the
NCLT first admitted the case, the resolution professional had found both to be
ineligible under Section 29A. The case since then has been bounced around in
various courts. It was only in October last year that the Supreme Court cleared
the air and gave one more opportunity to both resolution applicants to pay off
the NPAs of their related corporate debtors and resubmit their resolution
plans. The promoters of Essar Steel had challenged the insolvency proceedings
in January this year under Section 12A of the Code (newly introduced last year)
by offering to pay a full debt settlement of Rs. 54,389 crore, far higher than
ArcelorMittal’s bid. The NCLT had rejected the proposal, stating that under
Section 12A withdrawal from IBC could only be sought by applicants —
financial/operational creditors. This issue of interpretation could stall the
completion of the process. The promoters of Essar Steel have stated that they
will appeal to the NCLAT against the NCLT order on the grounds that their
compelling offer should pass muster under Section 12A. Given that in all recent
cases, including Bhushan Power & Steel, seeking maximum value from
resolution has been accorded priority, how the NCLAT views Ruias’ offer will be
interesting to see. It also needs to be seen if the NCLT’s order that directs
the Committee of Creditors to consider sharing 15 per cent of ArcelorMittal’s
bid with operational creditors goes down well with financial creditors.
Standard Chartered Bank, one of the creditors, will appeal against the NCLT’s
order. This brings us back to the core issue of endless litigations leading to
delays in the IBC process, diluting the intent of the Code. Capping the time
taken for interim litigations is imperative. Above all, the powers-that-be will
have to take an unequivocal stance on late bids derailing timelines.
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ATTORNEY GENERAL BACKS DOT
POWER TO SLAP PENALTY ON 2 TELCOS
In a setback for Bharti Airtel and the Vodafone-Idea, Attorney
General K K Venugopal has backed the power of the telecom department to slap a
Rs 3,050 crore penalty on the mobile operators — recommended by regulator Trai
— over the issue of interconnect provision to Reliance Jio. Also, power of the
regulator in recommending such a penalty have been upheld by the legal adviser
and the joint secretary in the department of telecom, who have said the same
should be imposed immediately to save any losses to the exchequer, official
sources told. The AG was asked whether the department of telecom — that issues
licences to mobile companies — can agree with the views of the regulator and go
ahead with slapping the penalty. AG also refused to draw a parallel to a case
filed in the Tripura High Court by Dishnet Wireless where power of the telecom
department in issuing a penalty had been questioned. A final decision on
imposing the penalty is currently being studied by the interministerial Digital
Communications Commission (DCC), which is expected to conclude the matter soon.
Trai had in October 2016 recommended a penalty of Rs 1,050 crore each on Airtel
and Vodafone India (Rs 50 crore each in 21 telecom circles), and Rs 950 crore
on Idea Cellular (Rs 50 crore each in 19 circles). Vodafone and Idea have since
merged and the new entity faces a penalty of Rs 2,000 crore. While a section of
the telecom department (four members out of a committee of seven) did not agree
with the views of Trai, and said the issue should be dealt with by the Telecom
Disputes Settlement and Appellate Tribunal (TDSAT), three other members had
backed Trai and said the regulator had the power to recommend a financial
penalty. They had agreed with Trai that non-compliance (by Airtel, Vodafone and
Idea) was intentional and had ulterior motive of stifling the competition and
was against the public interest. In its recommendation for penalty, Trai had
also said the older mobile companies had moved with the ulterior motive to
stifle competition, which resulted in a massive depletion in quality of
services on Jio network, causing huge inconvenience to its subscribers, who
failed to connect calls.
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DON’T BRAND A COMPANY
‘SHELL’ WITHOUT PROBE: COURT TO SEBI
SEBI’s drive against the so-called ‘shell’ companies has drawn
judicial flak with the Gauhati HC coming down on the regulator for rushing to
pass ex parte orders in the matter. While the Serious Fraud Investigation
Office (SFIO) had shared a list of suspected firms the court deliberated over
the question whether SEBI was justified in branding Assam Co a ‘shell’ company.
In the opinion of the court, it was not justified either on part of SFIO or
SEBI to treat Assam Co as a shell company straightaway and thereafter initiate
investigation to justify such branding. The principles of natural justice
require that before such branding, the party should be given a notice and
hearing, the court said in its March 7 order, setting aside SEBI’s directive.
One cannot be declared guilty first and thereafter subjected to a trial to
justify or uphold such findings of guilt, the court added. Assam Co produces 11
million kg of tea annually. A ‘shell’ company is usually an inactive company or
a vehicle for various financial manoeuvres or kept dormant for future use in
some capacity. Many companies branded as ‘shell’ got relief from the court
later. An ex parte injunction is mainly a restrain order issued without notice
to the parties involved. Full hearing is held at a later date. Earlier this
week, SAT too directed SEBI to use the ex parte order sparingly and only in
extreme urgent cases. SAT observed that although SEBI was empowered to take
measures as it deemed fit for investor protection under Section 11A/11B, it
does not mean that in every case, an ex parte interim order should be passed on
the pretext of protecting investor interest.
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NCLT APPROVES RIL-JM
FINANCIAL ARC PLAN TO ACQUIRE ALOK INDUSTRIES
The Ahmedabad Bench of the National Company Law Tribunal has
approved the resolution plan of Reliance Industries Ltd (RIL) and JM Financial
Asset Reconstruction Company to acquire Alok Industries. The resolution plan
jointly submitted by Reliance Industries Limited and JM Financial Asset
Reconstruction Company (JMFARC) Ltd for acquisition of Alok Industries Ltd
under the Corporate Insolvency Resolution Process of the Insolvency and
Bankruptcy Code 2016, has been approved by the National Company Law Tribunal by
order dated March 8, 2019, RIL said in a BSE filing. It added that the
implementation of the resolution plan is subject to obtaining necessary
regulatory approvals including approval from the Competition Commission of
India. RIL and JMFARC jointly announced bid to acquire the debt-ridden textile
manufacturer Alok Industries Ltd in April.
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BANKERS DITHER ON TAKING
JET AIRWAYS TO NCLT AS GOVT PUSHES TO KEEP AIRLINE AFLOAT
The government’s unsuccessful effort to disinvest its stake in
Air India notwithstanding, potential funding by the National Investment and
Infrastructure Fund (NIIF) and public sector banks such as the State Bank of
India into cash-strapped Jet Airways is being viewed as an attempt to keep the
private airline afloat ahead of the Lok Sabha polls. According to sources
familiar with the matter, bankers have so far refused to take Jet Airways to
National Company Law Tribunal (NCLT) for resolution under the Insolvency and
Bankruptcy Code, as the government is keen to ensure that the airline does not
go down under. The resolution for the airline would entail state-owned NIIF
infusing funds in Jet Airways in return of equity stake and banks working out
ways to ensure funding for the airline, which includes banks converting their
debt into equity and likely funding support. We have studied a number of
options. Detailed resolution/restructuring plans have been discussed.
Ultimately, it is the lead lender – SBI – which will have to take a call, but
it is clear going to NCLT is not the solution, a senior PSU banker having loan
exposure to the airline said.
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PSBS MAY REPORT NET PROFIT
OF RS 23,000-37,000 CR IN FY20: ICRA
The state run banks are likely to report a profit of Rs
23,000-37,000 crore in the next financial year, with their gross non performing
loans declining to 8.1-8.4 percent by March 2020, says a report. In the last
four years, with large capital infusion from the government, the state-run
banks have been able to recognise and provide for their stressed assets with a
steady decline in their gross NPAs (GNPAs) and net NPAs (NNPAs). It also helped
them in improving their capital ratios which also supported the exit of five
PSBs from prompt corrective action (PCA) framework of the Reserve Bank of
India. PSBs are expected to report net profits of Rs 23,000-37,000 crore during
FY20, after four consecutive years of losses, even though overall profitability
will remain weak with return on net worth (RoNW) of 4-6.3 percent, rating
agency Icra said in a note. It said the GNPAs and NNPAs of PSBs is likely to
decline to 8.1-8.4 percent and 3.5-3.6 percent by March 2020, as against 10.3
percent and 5.3-5.4 percent, estimated for March 2019 and; 10.9 percent and 6.3
percent as on December 31, 2018. The report said with reducing fresh slippages,
the credit provisions are expected to decline, and we expect 14 PSBs in base
case and 11 PSBs in the stress case to report profits during FY20, as compared
to only five PSBs that are likely to report profits in FY19. In the first nine
month of FY19, the net losses stood at Rs 42,900 crore and is expected to
increase to Rs 65,000 crore during FY19 as compared to Rs 85,400 crore during
FY18. The overall fresh slippages for PSBs are estimated to decline to Rs 2.5
trillion (4.5 percent) during FY19 and are expected to decline further to Rs
1.3-1.6 trillion (2.1-2.7 percent) during FY20, the report said. Compared to
PSBs, the performance of the private banks (PVBs) remained strong with
year-on-year growth of 18.7 percent in advances as compared to 4.2 percent for
PSBs as on December 31, 2018, and around 64 percent share in incremental credit
growth during the trailing 12 months (TTM).
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PSBS LIKELY TO RETURN TO
BLACK AS FRESH NPAS EXPECTED TO FALL
Fresh NPAs in the banking sector are expected to moderate to
1.9 per cent to 2.4 per cent in FY20 due to an aggressive recovery drive and
write-offs by banks, ratings firm Icra has said. Public sector banks are
expected to turn profitable after four consecutive years of losses. Capital
infusion by the government too will help. The ratings firm has revised the
outlook of six public sector banks, of which five are positive revisions. Fresh
NPA generation is expected to be 1.9-2.4 per cent for FY20 as compared to an
estimated 3.7 per cent for FY19 adjusted for recoveries, upgrades and
writedown. Icra expects gross NPAs of the banking sector to be 8.3 lakh crore
or 7.9 per cent for March 2020, as compared to the estimated 9.2 per cent as of
March 2019. With capital infusion of Rs 50,000 crore during the December
quarter, net NPAs are expected to fall further. However, even with the new bankruptcy
law in place, recoveries through the National Company Law Tribunal (NCLT) have
not been very large, it said. But recoveries of around Rs 1.6-1.7 lakh crore
from accounts referred to NCLT amount to 75-80 per cent of the recoveries from
these accounts and this is higher than the provisions made by these banks.
Public sector bank losses, estimated at Rs 93,100 crore in FY19, is set to be
lower than the capital infusion of Rs 1.22 lakh crore. Strong NII growth,
improved treasury income and stable credit provisions drive improvement in
profitability of private sector banks. Though public sector banks are expected
to post losses in FY19, they could turn around in FY20. In FY20, with expected
creditloss provisioning, we expect 14 public sector banks to be potentially
profitable in our base case scenario. But, overall return on assets and return
on equity may remain weak, said Anil Gupta. Decline in credit provisions for
private banks to drive a sharp growth in their net profits and return on equity
for FY20.
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EXPORT CREDIT DIPS 45% ON
RISE IN NPAS, REGULATORY REFORMS
According to the latest sectoral credit deployment data of the
RBI, export credit came down 45.5 per cent year-on-year (till January
2018-end). In FY19, there was a decline of 38.1 per cent in export credit.
Export credit, which is on the priority sector lending list of banks, fell from
₹32,100 crore in January 2018 to ₹17,500 crore in January
2019. Interestingly, overall priority sector growth was 9.4 per cent in the
same period, and shows that advances to exporters were last priority. There
have been concerns over the fall in export credit, and the Ministry of
Commerce, in consultation with the RBI, intervened to drive banks to lend more
for exports. Banks blame it on the general macro economic scenario and
increasing NPAs. Last year, GST made an adverse impact and export credit
quality was hit due to problems MSMEs and other exporters faced. So, we need to
have some caution. There has been no improvement till date in repayments, said
a top executive of a public sector bank. Exim Bank’s net loan portfolio has
grown only marginally to ₹107,500 crore as on March 2018, compared to ₹102,600
crore in the previous year. The impact of the new domestic regulatory measures
got reflected in the state of the financial sector, which, in turn, was
mirrored in Exim Bank’s performance, the bank said in its annual report for
2017-18.
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PNB, BOI SAY RECOVERY FROM
ESSAR STEEL RESOLUTION LIKELY IN MARCH
Top lenders involved in Essar Steel debt resolution on March
14 said the final decision and recoveries from the account are likely by the
end of the month. Decisions on Essar Steel have been taken decisively. Hope to
resolve it by March 31 said Sunil Mehta. According to reports, PNB expects to
recover about Rs 2,500 crore from Essar Steel. Dinabandhu Mohapatra, said the
lender is quite hopeful of recovery in Essar Steel. He expects a writeback of more
than Rs 1,800 crore from the account. We are expecting big recoveries. Our
provision coverage ratio is among the highest in the industry at 76.7 percent
and in some cases we have made 100 percent provisions and we are hopeful to
write back directly to our profit, Mohapatra told.
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SBI, ICICI & HDFC BANK
TO COMPLY WITH ADDITIONAL CAPITAL NORMS BY APR 1: RBI
The Reserve Bank on Thursday said SBI, ICICI Bank and HDFC
Bank will have to comply with additional capital requirement norms by April 1
as the banks continue to remain 'too big to fail' lenders referred to as D-SIB
or domestic systemically important bank. SIBs are subjected to higher levels of
supervision so as to prevent disruption in financial services in the event of
any failure. The additional Common Equity Tier 1 (CET1) requirement for D-SIBs
has already been phased-in from April 1, 2016 and will become fully effective
from April 1, 2019. The additional CET1 requirement will be in addition to the
capital conservation buffer, the central bank said. The additional CET1 core
capital requirement in case of the State Bank of India applicable from April 1
has been prescribed at 0.6 per cent of Risk Weighted Assets (RWAs) while for
the other two banks it is 0.4 per cent. The D-SIB framework requires the RBI to
disclose the names of banks designated as D-SIBs starting from 2015 and place
these banks in appropriate buckets depending upon their Systemic Importance
Scores (SISs). Based on the bucket in which a D-SIB is placed, an additional
common equity requirement has to be applied to it. SIBs are seen as 'too big to
fail (TBTF)', creating expectation of government support for them in times of
financial distress. These banks also enjoy certain advantages in funding
markets.
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SEBI TELLS PE AND VC
FUNDS: NO SIDE DEALS WITH BIG INVESTORS
The Securities and Exchange Board of India (Sebi) is asking
these funds, which raise money from the rich and ultra-rich, to stop
discriminating between investors and refrain from adding clauses in the
investment documents that seem to favour certain investors. Since alternative
investment funds or AIFs in regulatory parlance is a pooled vehicle, Sebi believes
that all investors in each class should enjoy uniform terms But fund managers
argue that it may be simplistic to equate PE and VC funds with mutual funds
which attract retail investors. Sebi has been raising an issue with
discretionary terms being offered to some outside investors who co-invest.
While the regulator has its concerns, the industry is trying to put across the
message that these funds effectively raise money through private placement from
sophisticated investors and special rights are given to bring large investors
on board. The practice also helps to split the risk instead of letting risk
concentrate within a fund, said Siddharth Shah. Indeed, ‘side letters’ to cover
some of the differential terms are almost a norm for PE funds globally and,
fund managers think, that if participating investors are aware of the existence
of such rights, the funds should have the flexibility to negotiate certain
commercial terms with large investors as long as the fiduciary duty to each
investor remains intact. The regulator, though in a separate context, is also
insisting on certain uniformity in the fund document Today, the format of the
PPM (private placement memorandum) differs from fund to fund. Sebi wants some
of the key information to be stated upfront, said Shah. The PPM, a confidential
private offering document, is supposed to provide key information to let
investors make an informed decision. Such information could be management and
performance fee structure, risk factors etc. Sebi, sources said, has received
complaints from investors alleging misselling by some funds. However, no
confirmation on this was available from the regulator.
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EDELWEISS SECURITIES PAYS
RS 35 LAKH TO SETTLE CASE WITH SEBI
Edelweiss Securities Wednesday settled a case related to
alleged violation of stock broker regulations with Sebi by paying over Rs 35
lakh towards settlement charges The market regulator had initiated adjudication
proceedings against the firm in November 2016 after it observed that the firm
made proprietary fund pay from client bank accounts and thereby failed to
segregate client funds and own funds. Besides, the firm mapped its own bank
account instead of the client's in the demat accounts, where the securities of
client were kept and did not use the word client in the name of client bank
accounts. Further, there were alleged lapses in the internal control measures
for access to institutional trading desk dealing room operation, Sebi said. By
doing so, the firm allegedly violated provisions of Stock Brokers Regulations.
While the proceedings were pending, the firm filed a plea under the settlement
mechanism without admitting or denying the guilt in August 2018. The company in
its meeting with the regulator's internal committee in December 2018 proposed
to pay Rs 35.31 lakh towards settlement charges. The amount was approved by the
panel of whole-time members of Sebi, the regulator said in a settlement order.
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SEBI SLAPS OVER RS 27 LAKH
FINE ON 5 ENTITIES FOR FRAUDULENT TRADE IN STOCK OPTIONS
Markets regulator Sebi has levied a total penalty of over Rs
27 lakh on five entities for fraudulent and manipulative trading in illiquid
stock options on BSE. The regulator observed that the entities placed buy and
sell orders in a synchronised manner within seconds of each other and reversed
the trades within a short time with wide variation in prices of the trades. The
entities generated trading volumes without any change of beneficial ownership,
thereby creating an appearance of artificial trading, Securities and Exchange
Board of India (Sebi) said. By indulging in such trades, the entities violated
PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) regulations, Sebi
said.
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RBI DIDN’T OBJECT TO
AMENDMENT OF ACT: MIN
The Reserve Bank of India (RBI) has expressed satisfaction
over various measures taken by the state government so far in complying with
all the 19 conditions for the formation of Kerala Bank. The RBI also did not
raise any objection on the amendment of Kerala Cooperative Societies Act, 1969,
changing the two-third majority required for amalgamation and transfer of
assets and liabilities of 14 district cooperative banks and societies to a
simple majority, said a statement issued by state cooperation minister
Kadakampally Surendran. The RBI, in fact, had given the proposed Kerala Bank
approval in principle in October last year, and had set March 31 as the
deadline for complying with the conditions. The minister and a team of
officials met RBI deputy governor N S Viswanathan and executive director Lily
Vadera to apprise them on the progress of the proceedings ‘which are in the final
stages’ and steps taken to comply with RBI’s 19 conditions and three additional
clauses put forth by National Bank for Agriculture and Rural Development
(Nabard), the statement said. The Nabard also didn’t raise any objection on the
amendment of the act and assured to support the RBI stand on the issue, the
statement said. The Nabard has also clarified that its clauses were not
pre-conditions but only certain recommendations on which the state government
could take appropriate measures, the statement said.
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RBI NAMES SBI, ICICI AND
HDFC AS SYSTEMICALLY IMPORTANT BANKS
The Reserve Bank of India (RBI) on Thursday named State Bank
of India (SBI), ICICI Bank and HDFC Bank as Domestic Systemically Important
Banks (D-SIBs), which in other words mean banks that are too big to fail. As
per the norms, these banks will have to set aside more capital for their
continued operation. RBI comes with the list every year since 2015. Inclusion
in D-SIB indicates that failure of any of these banks would have a cascading
effect on Indian financial system. Inclusion in the list gives additional
comfort to investors that these banks won’t be allowed to fail and therefore,
borrowing costs of these banks from the markets are cheaper than their peers.
SBI, being in the third bucket, was setting aside 0.45 per cent of its assets
till 2018-19 as a surcharge. From next year, applicable from April 1, the bank
will have to set aside 0.60 per cent of its risk-weighted assets. The increase
in capital is in a phased manner, with the ultimate aim of providing one full
percentage point extra as capital buffer for D-SIBs. ICICI Bank and HDFC Bank’s
capital requirement rises to 0.20 per cent, from 0.15 per cent now. These two
banks are in the fifth basket, and are considered less important than SBI.
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RBI SAID TO HAVE PUSHED
FOR IDBI BANK BOARD’S INDEPENDENCE BEFORE LIC DEAL
The Reserve Bank of India (RBI) struck down two contentious
amendments proposed by Life Insurance Corporation of India (LIC), in IDBI Bank
Ltd’s articles of association (AoA), before it approved the LIC-IDBI Bank deal
as it wanted the bank’s board to retain its independence, said an IDBI Bank
board member on condition of anonymity. The regulator said LIC should only have
control to the extent of an owner, said the board member. Articles 203 and 204
were earlier proposed by LIC to be incorporated in AoA. However, RBI, under
Section 12B approval, put a condition for deletion of these articles, IDBI Bank
said. Section 12B of The Banking Regulation Act, 1937, deals with regulation of
acquisition of shares or voting rights. IDBI Bank’s AoA showed that a few
articles were introduced on 7 November 2018. Article 203 stipulates that the
bank’s board would not pass any resolution adversely affecting the interests of
LIC without any affirmative vote of LIC. For the purposes of this provision, a
resolution adversely affecting the interests of LIC shall be such resolution,
which is so considered by the board of LIC, the article reads. Experts
indicated this does not allow the board full independence as required in a
listed entity. Some experts said this would have prevented IDBI Bank from
competing with LIC in their loan products or even getting other bancassurance
partners. Bancassurance is an agreement between a bank and an insurance company
to sell insurance products to the bank’s customers. There were restrictions on
the passing of any resolution adversely impacting the interest of LIC and what
is adverse was at LIC’s discretion, said Alipak Banerjee, leader at law firm
Nishith Desai Associates. The Union cabinet had approved the acquisition of
controlling stake by LIC in the state-run bank in August last year. The LIC-IDBI
Bank deal was completed in January 2019. What affects the interests of LIC is a
very broad and vague concept and it is not known if it is in relation to its
investment in IDBI or anything else that LIC might be interested in, said
Vaibhav Kothari. Also, the fact that it is as determined by LIC does take away,
at the minimum, the independence of the board of IDBI to some extent. For every
decision the board of IDBI takes, even for the slightest of the doubts, it will
tend to go back to LIC for their judgement, said Kothari. Another amended
article, Article 204 (1), says that the IDBI Bank board shall constitute a
committee, which shall prepare a quarterly performance report for the review of
the LIC. This shall be based on parameters prescribed by the LIC. Article 204
(2) states that LIC shall preserve the report as confidential and it shall not
be disclosed to anyone except when required by law. It is to be seen if this
passes Sebi’s good governance test, Parekh said.
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FSDC PANEL DISCUSSES WAYS
TO IMPROVE QUALITY OF CREDIT RATINGS
The Sub-Committee of the Financial Stability and Development
Council (FSDC), headed by Reserve Bank of India Governor Shaktikanta Das, on
Thursday discussed ways to address challenges pertaining to the quality of
credit ratings in the wake of the IL&FS defaults crisis. Credit rating
firms, currently regulated by the Securities and Exchange Board of India
(SEBI), had come under sharp criticism from the RBI recently for failing to
identify financial troubles in various companies, especially in the case of
IL&FS, which commanded AAA rating just before it started defaulting. In a
meeting with top credit ratings officials recently, RBI officials had expressed
concerns over the inability of rating agencies’ to assess credit risk and take
timely rating actions. The FSDC panel also discussed interlinkages between
housing finance companies and housing developers. Mortgage sector regulator
National Housing Bank (NHB) had recently proposed to increase the capital
adequacy ratio (CAR) of housing finance companies (HFCs) to 15 per cent in a
phased manner in order to protect them from untoward events which arise as a
result of liquidity risk as well as the credit risk that the HFCs are exposed
to in the normal course of their business. NHB also proposed to bring down
public borrowings to 12 times by March 2022 in a gradual manner from the
existing 16 times of the net owned fund.
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MUTUAL FUNDS COLLECT RS
8,095 CRORE VIA SIP IN FEBRUARY
Mutual funds received Rs 8,095 crore of its assets through SIP
in February 2019, 26 per cent higher year-on-year, shows data from Amfi. Mutual
funds collected Rs 8,064 crore through SIPs in January 2019. Amid global
uncertainty, tension at the border, liquidity tightness and credit events,
retail investor behaviour to stay invested is quite heartening. The continued
healthy confidence that retail investors are showing, as is reflected in rising
number of SIP inflows is laudable. The patience to stay invested amid
uncertainty, will help from the individual long term wealth creation
perspective. Once political uncertainty and liquidity tightness recedes over
the next few months, we expect the inflows in both equity and liquid funds to
strengthen further, says N. S. Venkatesh. Mutual funds currently have about
2.59 crore (25.9 million) SIP accounts through which investors invest in
regularly. Systematic Investment Plan, or SIP as it is commonly known, is an
investment plan (methodology) offered by mutual funds. It allows investors to
invest a fixed amount periodically, say, once a month, instead of making a
lumpsum investment. The SIP instalment amount could be as small as Rs 500 per
month. SIP is similar to a recurring deposit where you deposit a small /fixed
amount every month. AMFI data shows that the MF industry had added about 9.15
lakh SIP accounts each month on an average during the FY 2018-19, with an
average SIP size of about Rs 3,125 per SIP account.
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RBI'S LIQUIDITY GAMBIT MAY
SUCCEED WHERE RATE CUT FAILED: ANALYSTS
The Reserve Bank of India’s $5 billion plan to swap rupees for
dollars with domestic banks will help achieve its twin objectives of pushing
interest rates down while also preventing a sharp appreciation in the rupee,
analysts said on Thursday. In a bid to mop up dollars and pump in rupees, the
RBI said on Wednesday it will conduct its first dollar/rupee buy-sell swap
auction on March 26, analysts said. In order to meet the durable liquidity
needs of the system, the Reserve Bank has decided to inject rupee liquidity for
longer duration through long-term foreign exchange buy/sell swap, the RBI said.
Aside from easing cash conditions in the banking system, the swap would
increase cash available to borrowers during a tight re-election race for Prime
Minister Narendra Modi’s government. This will achieve multiple objectives
including bringing down short-term interest rates for borrowers, helping the
RBI to mop up lump sum amounts of dollars at one go, infusing liquidity and
preventing any sharp appreciation in the rupee in face of a strong pipeline of
flows in the near term, said A. Prasanna. Despite cutting its key policy rate
last month, the RBI has struggled to get banks to reduce lending rates due to
tight cash conditions and high deposit rates.
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BOI TO RAISE RS 400-500 CR
FROM NON-CORE ASSET SALE THIS MONTH
State-run Bank of India on Thursday said it is looking to
raise at least Rs 400-500 crore from sale of a non-core asset by end-March, a
top bank official said. It could be noted that the bank has been looking to
sell its stake in a few non-core assets including Star Union Dai-Ichi Life
Insurance, STCI Finance and Sidbi. Dinabandhu Mohapatra told reporters Thursday
the process to sell non core asset is on and the bank has already floated
request for proposals (RFPs). The lender is examining all the offer it has
received, he said. It will take some time. We are very hopeful of one
transaction will be completed by March-end. We may be able to raise around Rs
400-500 crore, Mohapatra told. He, however, did not disclose the name of the
asset the bank is hopeful to sell by this fiscal-end. Mohapatra said he sees
resolution of debt-ridden Essar Steel in this quarter. The bank is expects a
write back of around Rs 1,800 crore from the Essar Steel account.
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DECISION ON FUNDING TO JET
AIRWAYS TO BE ON COLLECTIVE BASIS, SAYS PNB
State-run Punjab National Bank (PNB) Wednesday said any
decision to provide emergency funds to cash-strapped Jet Airways will be taken
collectively by the lenders and not on a standalone basis. The assertion comes
in the backdrop of media reports that PNB had approved ₹2,050
crore of emergency funding to Jet Airways, for which lenders are considering a
resolution plan under Project Sashakt. The resolution will come with the
participation of the stakeholders and we are working on it, the bank's managing
director and CEO, Sunil Mehta, told. Any emergency funding to Jet Airways will
be part of the resolution package, he said.
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LIFE INSURERS REGISTER 33%
GROWTH IN NEW PREMIUM INCOME AT ₹18,209 CR IN FEB
India's life insurance industry witnessed a rise of 32.7 per
cent in its collective new premium income at ₹18,209.50 crore during
February 2019, data from Irdai showed. The life insurers had collected
first-time premium worth ₹13,724.96 crore in same month a year ago. Insurance behemoth
LIC, which has the largest market share of 66.26 per cent, registered a growth
of 42.2 per cent in its new year premium at ₹12,055.81 crore during the
month, according to Insurance Regulatory and Development Authority of India
(Irdai) data. The rest of the 23 market players in life insurance business
(market share 33.74 per cent) collected premium of ₹6,153.70
crore from new customers, witnessing a rise of 17.25 per cent from a year ago.
Among the private sector insurers, SBI Life's new business premium grew 49 per
cent to ₹1,055.32 crore during the month, ICICI Prudential Life 33.1
per cent to ₹1,039.14 crore and Aditya Birla Sun Life 21.6 per cent to ₹222.26
crore. Aegon Life new business premium jumped 59.3 per cent to ₹48.26
crore, Max Life 23.7 per cent to ₹529.77 crore, and Kotak
Mahindra Life collected new premium of ₹403.01 crore, witnessing
15.25 per cent growth from a year ago. Of the players that registered dip in
their new premium income were HDFC Life at ₹1184.46 crore, down by
0.54 per cent from a year ago; DHFL Pramerica Life at ₹65.01
crore, down 51.7 per cent; Bharti AXA Life at ₹78.62 crore, down 98 per
cent; and Bajaj Allianz Life at ₹328.48 crore, down 11 per
cent. The cumulative new business premium of all the 24 life insurance firms
during April-February 2018-19 rose by 7.60 per cent to ₹1,77,213.57
crore.
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CAPITAL INVESTMENTS FALL
AS INDIA INC. UNDERGOES DEBT DETOX
After the big borrowing binge at the start of the decade, it’s
still the big cleanup season for India’s private firms. That’s the takeaway
from the central bank’s latest study on investments by India Inc., with total
capital expenditure falling for the seventh straight year. Investments for fixed
asset creation more than halved to Rs. 1.49 trillion ($21 billion) in the year
ended March 2018 from Rs. 3.7 trillion seen in the comparable period ended
March 2011, the Reserve Bank of India study shows. India’s corporate sector
witnessed a debt-induced expansion, making the most of a stimulus in the
aftermath of the global financial crisis. When a slowdown followed, companies
sought to deleverage and repair their balance sheets. Several projects turned
sour in the process, forcing Indian banks to write-off loans and end up with
the highest stressed-asset ratio in the world. The year (2017-18) marked the
seventh successive annual contraction in the private corporate sector’s capex
plans, the RBI said in the study. But there’s hope: planned capital spending
for the first half of the current fiscal year showed an improvement over the
previous year’s pipeline.
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LAKSHMI MITTAL VS RUIAS:
STEEL TYCOONS FIGHT OVER $1.5 BN ARBITRATION AWARD
Hide all docs, the email read. In a second message, the
employee urged a colleague to conceal a laptop A squad of lawyers and computer
specialists from ArcelorMittal was at the London offices of a company
controlled by the Ruia family’s Essar Group, as part of efforts to seize assets
relating to a $1.5 billion US arbitration award. And a team working for Essar
scion Prashant Ruia were out to stop them. Lakshmi Mittal has opened a new
front in the UK in a worldwide legal battle with the Ruia family. Set against
the backdrop of an ongoing tussle for an Indian steelmaker, the billionaire has
accused his fellow Indian tycoons of hiding funds through a series of sham
transactions within the Essar Group. So far not one cent of the US award--owed
to ArcelorMittal following the collapse of an iron-ore contract--has been paid.
The case has moved to London, with Mittal, on one side, and Prashant Ruia, the
eldest son of Essar founder Shashi Ruia on the other, awaiting a judge’s ruling
on the legality of the search. The Ruias must have thought they had
successfully hidden behind the battlements, ArcelorMittal’s attorney, Anthony
Peto, said. They felt they were safe: they were not. For ArcelorMittal, Essar’s
Lansdowne House offices may be the key to tracing the group’s assets. That’s
because a company in the building, just minutes from London’s Ritz Hotel, had
acted as a financial controller for various Essar units. Not only was a group
server found on the premises, but company accounts pointing to where the money
had gone. But for Essar, which settled another London lawsuit earlier this year
where creditors sought the seizure of a yacht and an oil refinery, the case is
an example of judicial overreach. A UK court should have no jurisdiction over
an American award against a company incorporated in Mauritius, Essar Steel’s
attorneys argued. This is a case of the English court being asked to act not
just as the world’s policeman, but as its detective agency as well, Essar
Steel’s lawyer Daniel Toledano said. ArcelorMittal’s team faced obstacles from
the start of their search. One employee, Rupal Popat, sent two emails to Sanjiv
Radia urging him to hide documents and a laptop. Radia reprimanded Popat for
sending the email but Popat then sent the second message anyway, Peto said.
Essar Steel’s 2016 filing of its accounts described how the firm reclassified
almost $1.5 billion in assets that put them out of reach of any potential
creditor, Peto said. They couldn’t really cover up the existence of the $1.5
billion lie, he alleged.
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INVESTORS SHOULD FORGET
WHITE NOISE LIKE POLLS, PAD UP FOR BULL RUN: HSBC
Many of the elements required for a sustained bull run are now
in place. Sectors that have done well in past bull markets — such as banks, and
some recent laggards, consumer discretionary, metals, energy and real estate —
look well positioned, the brokerage said in a note authored by analysts Amit
Sachdeva, Anurag Dayal, and Herald Van der Linde. HBSC has analysed key drivers
for Indian equities over the past 20 years and applied it to the current state
of the market. India has seen five bull markets, four bear markets, and six
periods of temporary weakness over the past two decades. Our verdict is that
most of the necessary elements are now in place for the start of a bull run,
says HSBC, which recently upgraded its stance on the Indian markets from
neutral to overweight. Valuations are well within the boundaries of the peaks
and troughs of past bull and bear cycles. The earnings outlook for FY19 and
FY20 is the highest in the region. Macro indicators, such as inflation, GDP
growth, bond yields, and crude oil prices, also paint a positive picture, said
the note. HSBC has listed several reasons behind improved sentiment towards
domestic equities. It says inflation has been persistently low and is expected
to remain stable, which would warrant another rate cut by the Reserve Bank of
India in April. Also, India’s economic growth will remain healthy and among the
fastest in the region. Banks have outperformed almost every time the market has
moved out of a bear market, it says. Besides financials, consumer discretionary
(favoured stocks include Asian Paints, Kajaria Cements and Jubilant Foodworks);
real estate (Godrej Properties and Prestige Estates); consumer staples (Avenue
Supermarts and ITC); and energy (Gail and HPCL) are among the sectors the
brokerage is positive on.
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IL&FS FALLOUT: MFS
JUNK LIQUID FUNDS, ROLL OUT OVERNIGHT SCHEMES
After the default of IL&FS hit liquid schemes, mutual fund
houses are turning toward overnight funds that prove to be less risky. Over the
last six months, since the IL&FS crisis surfaced, 16 fund houses have
sought the Securities and Exchange Board of India’s approval to launch
overnight funds. Typically, large companies park their surplus funds in liquid
schemes, which invest in commercial papers. Generally, investments in
commercial papers are safe but sometimes they are subject to default if
companies fail to make a timely interest payment or principal repayment leading
to credit rating downgrades. ICICI Prudential Mutual Fund and Aditya Birla Sun
Life Mutual Fund have already launched their overnight funds. Overnight funds
invest its assets in CBLO (collateralised borrowing and lending obligations)
and repo/reverse repo instruments that mature in one day, while liquid funds
invest in treasury bills, commercial paper and certificate of deposit that have
a maturity up to 91 days. Overnight funds expose investors neither to credit
risk nor duration risk but yield paltry returns of about 6.4 percent. Liquid
funds do slightly better.
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RBI’S $5 BILLION LIQUIDITY
PLAN IS GUV DAS’ ‘WHATEVER IT TAKES’ MOMENT
‘Unconventional Monetary Policy’ is a product of the Global
Financial Crisis. When time-tested tools like interest rates did not help much
in stabilising financial markets after the Lehman Brothers blow-up, Fed
Chairman Ben Bernanke, a student of the Global Depression, cheer-led
unconventional actions. As the financial crisis triggered numerous actions by
central bankers across the world, one particular promise made the difference
between the survival or the death of financial markets as we knew it –– that of
European Central Bank chief Mario Draghi’s in July 2012. He promised to do
whatever it takes to ensure that the political conglomerate –– the European
Union –– did not collapse because of the economic stress faced by nations on
the fringe, like Greece, Portugal, Italy and Spain. Since the GFC broke out,
the Reserve Bank of India did its own policy tinkering which addressed the
immediate pain but ended up being steroids with negative side-effects like a
pile of bad loans. Although India did not take many unconventional measures
then, it seems to be doing so now. The introduction of the $5 billion Rupee-US
dollar swap as a tool to address liquidity is a first for the RBI and the
market is cheering it. First, for those doubting Thomases who question what an
infusion of $5 billion or Rs 35,000 crore would achieve, it must be said that
it may not just be one and done. There may be a series. In fact, analysts
estimate that there’s room for at least $12 billion of flows if banks decide to
raise capital. Second, it may mellow the critics of the unprecedented bond
purchases through the Open Market Operations which reminded them of those dark
days of monetising government debt. Bond purchases of more than Rs 3 lakh crore
or 71% of net government borrowings in a fiscal, creating base money, should be
worrying. But doing the same with foreign exchange does not tantamount to
monetisation of debt. It could also address the credit spreads. While OMO was
good enough for government bond investors, the lowering of interest rates did
not lead to transmission of rates. But this could achieve that. Non-banking
finance companies (NBFCs) which are being treated as untouchables by the local
market could have a relief with better-rated companies able to raise dollar
funds. Thanks to the central bank’s presence, the forward premium could also
ease making hedging a viable tool. The currency market distortions could also
get adjusted. Foreign exchange reserves draw down was $45 billion during the
past year when the balance of payment deficit is about $13 billion which
reflected that importers were over hedging. From a central bank point of view,
the proportion of domestic to foreign assets in its balance sheet is also a
factor. Domestic assets, which were about 10% of the assets in 2008, is now 31%
which could get adjusted with the swap. Its climb has been sharp since August
when it was 25%. This may well be Governor Shakthikanta Das’ ‘whatever it
takes’ moment. But what about his deputy, Dr Viral Acharya, the former New York
University professor who has produced voluminous work on unconventional
monetary policies in Europe and Japan? It is anybody’s guess. But his thoughts
are available on: Whatever it takes: The Real Effects of Unconventional
Monetary Policy. In essence, Acharya’s research concludes that Draghi’s promise
may have saved the collapse of the European Union but had unintended
consequences on the banking system. Under capitalised banks made poor credit
decisions and weakened the financial system further. Those deserving good
borrowers did not get funding because the banks, in their eagerness to avoid
defaults by weak borrowers, kept ever-greening. So, poor lending turned into
zombie lending distorting markets. Dr Acharya’s prescription was, to capitalize
the banks and lend. Otherwise, it’s throwing good money after bad. Indian
banking has taken baby steps to turn vibrant and process-driven in the past few
years. Be it bankruptcy laws or government’s capital investment in its banks,
there’s some semblance of professional action despite an occasional pull to go
back to the days of crony capitalism.
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SHREE PUSHKAR CHEMICAL
BOARD APPROVES ACQUISITION OF MADHYA BHARAT PHOSPHATES
The Board has also approved a proposal of acquiring an additional
plot of land in MIDC, Lote In continuation of disclosure of the Board meeting
outcome dated 7th February, approving in-principle an investment to the extent
Rs. 30.00 Crore, the Board has in today’s meeting deliberated and approved,
subject to final approval of NCLT, a proposal for acquisition/takeover of 100%
stake in M/s. Madhya Bharat Phosphates Pvt. Ltd, (MBPL) through NCLT under the
Insolvency & Bankruptcy Code 2016 (IBC). The proposal has already been
approved by the Committee of Creditors (COC), as constituted by NCLT, for an
offer price of Rs.19.02 crore and the proposal is under final consideration
before NCLT. The Unit of MBPL located in MP, has two plant at Jhabua and
Deewanganj, has a capacity of manufacture SSP of 1.5 lac MTA and 0.4 Lac MTA
respectively and a Plant for a manufacturer of LABSA.
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GLOBAL BANKING TRADE UNION
MEET IN KERALA CAPITAL FROM SUNDAY
The All India Bank Officers’ Confederation and 'The Global
Labour University' will jointly organise what is being touted as the 'first
global banking trade union convention' for three days here from Sunday. The
main theme of the convention is 'Challenges before the banking sector and trade
union responses,' according to Soumya Datta. Eminent banking trade unionists
from within the country and abroad will take part. Among them are
representatives of the International Labor Organisation as well as economists
and social activists. The convention will seek to understand the global changes
taking place in banking and critically look at the policies propounded by the
Basel Committee, the Financial Stability Board, and the Central Banks. It will
share experiences of different countries and highlight the success stories and
alternatives and seek to debunk the myth that 'if public sector banks do not
perform well, they create huge NPAs,’ Datta said.
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'HIDE ALL DOCUMENTS':
INDIAN STEEL TYCOONS FIGHT OVER $1.5 BILLION
Hide all docs, the email read. In a second message, the
employee urged a colleague to conceal a laptop A squad of lawyers and computer
specialists from ArcelorMittal was at the London offices of a company
controlled by the Ruia family’s Essar Group, as part of efforts to seize assets
relating to a $1.5 billion US arbitration award. And a team working for Essar
scion Prashant Ruia were out to stop them. Lakshmi Mittal has opened a new
front in the U.K. in a worldwide legal battle with the Ruia family. Set against
the backdrop of an ongoing tussle for an Indian steelmaker, the billionaire has
accused his fellow Indian tycoons of hiding funds through a series of sham
transactions within the Essar Group. So far not one cent of the U.S. award --
owed to ArcelorMittal following the collapse of an iron-ore contract -- has
been paid The case has moved to London, with Mittal, on one side, and Prashant
Ruia, the eldest son of Essar founder Shashi Ruia on the other, awaiting a
judge’s ruling on the legality of the search. The Ruias must have thought they
had successfully hidden behind the battlements, ArcelorMittal’s attorney,
Anthony Peto, said at a court hearing last week. They felt they were safe: they
were not. For ArcelorMittal, Essar’s Lansdowne House offices may be the key to
tracing the group’s assets. That’s because a company in the building, just
minutes from London’s Ritz Hotel, had acted as a financial controller for
various Essar units. Not only was a group server found on the premises, but
company accounts pointing to where the money had gone. But for Essar, which
settled another London lawsuit earlier this year where creditors sought the
seizure of a yacht and an oil refinery, the case is an example of judicial
overreach. A U.K. court should have no jurisdiction over an American award
against a company incorporated in Mauritius, Essar Steel’s attorneys argued.
This is a case of the English court being asked to act not just as the world’s
policeman, but as its detective agency as well, Essar Steel’s lawyer Daniel Toledano
said. ArcelorMittal’s team faced obstacles from the start of their search. One
employee, Rupal Popat, sent two emails to Sanjiv Radia urging him to hide
documents and a laptop. Radia reprimanded Popat for sending the email but Popat
then sent the second message anyway, Peto said. Attorneys for Radia and Popat
declined to comment. The employees at Lansdowne House were all dancing to a
tune played by the Ruias, Peto said, arguing that Popat was unlikely to have
acted on her own initiative. In court documents, the British Essar unit sought
to downplay the emails, calling them the work of a junior employee. Essar
Capital Services does not seek -- how could it? -- to excuse those suggestions
which were quite improper, Paul Stanley, a lawyer for the U.K. subsidiary, said
in his submission. Her suggestions were not acted on; documents were produced.
The dispute is taking place alongside a yearlong battle in India, where Lakshmi
Mittal, India’s third-richest man, is nearing a $5.9 billion acquisition of an
insolvent steelmaker formerly owned by the Ruias. The family is still seeking
to challenge the deal in court. Meanwhile the ruling in the Minnesota
arbitration case, which ArcelorMittal is trying to enforce in London, arose out
of a terminated contract to supply iron-ore pellets. But Essar Steel Ltd.,
which had assumed the liabilities of the U.S. contract, has said it couldn’t
pay. It now has less than $2.5 million in assets. One document uncovered in the
U.K. search tells a different story, according to ArcelorMittal’s lawyer. Essar
Steel’s 2016 filing of its accounts described how the firm reclassified almost
$1.5 billion in assets that put them out of reach of any potential creditor,
Peto said. They couldn’t really cover up the existence of the $1.5 billion lie,
he alleged.
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GOOGLE FACES THIRD EU
ANTITRUST FINE NEXT WEEK: SOURCE
Alphabet unit Google is likely to be hit with a third EU
antitrust fine next week related to its AdSense advertising service, a person
familiar with the matter said on Friday, with the sanction expected to be much
smaller than previous fines. The European Commission in 2016 opened a third
case against the world's most popular internet search engine by accusing Google
of preventing third parties using its AdSense product from displaying search
advertisements from Google's competitors. Last year, Vestager slapped a record
4.34 billion euro ($4.91 billion) fine on Google for using its popular Android
mobile operating system to block rivals. That following a 2.4 billion euro fine
imposed on the company in 2017 for blocking rivals of shopping comparison
websites.
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GOOGLE BREAKS WORLD RECORD
BY CALCULATING VALUE OF PI UP TO ASTONISHING 31.4 TRILLION DIGITS
The human race’s relationship with Pi began a long time ago,
estimated anywhere between 1900 to 1600 BC. Ever since then, the quest to know
its true value is on! What is Pi? It is a mathematical constant that starts
with 3.1415 and was originally defined as the ratio of a circle’s circumference
to its diameter. Pi is often used for geometric calculations and is also known
as Archimedes’ Constant. This Archimedes’ Constant has intrigued mathematicians
for several centuries. Ancient Egyptian, Babylonian, Chinese, as well as Indian
mathematicians, strived to calculate its accurate value. On March 14, which is
also celebrated as the World Pi Day, Google says it joined them by releasing
the most accurate value of Pi to date. It has computed Pi to 31.4 trillion
decimal places – 31,415,926,535,897 digits after the decimal, to be precise.
Not just that, this achievement has also broken the last Guinness World
Records, held by Peter Trueb, for calculating the most accurate Pi value by 9
trillion digits. Google says it used y-cruncher, a Pi-benchmark program
developed by Alexander Yee – which computed the value of Pi to 31.4 trillion
decimal places through cloud computing. The entire calculation needed a
whopping 170TB of data to complete. The value was calculated using Google
Cloud’s Compute Engine with 25 nodes and took 121.1 days or around 4 months to
complete. During these four months, Google did not turn off its cloud server,
even for once, to let it finish calculating. Pi Day was first celebrated in
1988 by the physicist Larry Shawand and is celebrated across the world ever
since. While NASA throws a challenge to the scientific community every year –
to solve four problems using Pi, Massachusetts Institute of Technology (MIT)
sends out its application decision letters to selected students on Pi Day.
Princeton University, on the other hand, hosts several events to celebrate Pi
Day and Albert Einstein’s birthday, which is also March 14. So, what’s the most
accurate value of Pi now? It is
3.14159265358979323846264338327950288419716939937510582097494459230781640628620899862803482534211706798214808651328230664709384460955058223172535940812848111745028410270193852110555964462294895493038196442881097566593344612847564823378678316527120190914564856692346034861045432664………….6394399712
5311093276 9814355656 1840037499 3573460992 (the last few digits).
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FACEBOOK, YOUTUBE FACE IRE
OVER LIVE STREAMING OF CHRISTCHURCH ATTACK
Social media platforms including Facebook Inc. are facing
harsher scrutiny after a shooter accused of killing 40 people in two mosques in
New Zealand appeared to livestream the murders over the internet. While
platforms including Twitter and YouTube said they moved fast to remove the
content, users reported it was still widely available hours after being first
uploaded to the alleged shooter’s Facebook account. The video, which shows a
first-person view of the killings in Christchurch, New Zealand, was readily
accessible during and after the attack — as was the suspect’s hate-filled
manifesto. Facebook, YouTube and other social-media platforms are struggling to
scrub offensive content from sites that generate billions of dollars in revenue
from advertisers. In the U.S., those sites also have been criticized for
spreading political misinformation, with Facebook founder Mark Zuckerberg being
called before Congress. Just before the alleged gunman opened fire, he urged
viewers to subscribe to the popular YouTube channel PewDiePie, which itself has
been criticized for posting offensive footage in the past. In response, YouTube
said it’s working vigilantly to remove any violent footage.
#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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