CORPORATE UPDATES 30.03.2019

SEBI COMES OUT WITH PROCEDURE, FORMATS FOR LIMITED REVIEW, AUDIT REPORTS

Sebi Friday came out with procedure and formats to be followed for limited review and audit report of listed entities This would be also applicable for entities whose accounts are to be consolidated with the listed entity. The markets watchdog had decided to amendments in regulations for group audit after taking into consideration recommendations made by Uday Kotak-led panel on corporate governance. A new sub-regulation has been inserted in LODR (Listing Obligation and Disclosures Requirements) norms. It requires the statutory auditor of a listed entity to undertake a limited review of the audit of all the entities/ companies whose accounts are to be consolidated with the listed entity as per AS (Accounting Standard) 21. This has to be done in accordance with guidelines issued by the board. On Friday, Sebi issued a new format for limited review reports and audit reports. The new provision would come into effect from April 1, 2019, Sebi said in a circular. Insurance companies would follow formats as prescribed by insurance sector regulator IRDA, as per the circular. The new formats would be applicable for all listed entities whose equity shares and convertible securities are listed on a recognised stock exchange and the statutory auditors of such entities. It would also have to be followed by all entities whose accounts are to be consolidated with the listed entity and the statutory auditors of entities whose accounts are to be consolidated with the listed entity. The Institute of Chartered Accountants of India (ICAI) may consider issuing necessary guidance to Chartered Accountants ensure compliance with the circular, Sebi said.

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NCLAT SEEKS DETAILS OF IL&FS DUES

The National Company Law Appellate Tribunal (NCLAT) Friday asked the newly-appointed board of debt-ridden IL&FS to submit details of the group's dues. A two-member bench headed by Chairman Justice S J Mukhopadhaya also clarified that there was no stay on the government to proceed with the resolution plan for IL&FS companies. During the proceedings, the bench said that whatsoever step is taken by the newly-appointed board and the government for resolution of IL&FS and its over 300 group companies would have to be passed by the appellate tribunal. The NCLAT has listed the matter for next hearing on April 8. The bench also said it would hear the banking regulator RBI on moratorium against IL&FS group companies at the next hearing.

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MORE THAN 14,000 SHELL FIRMS STRUCK OFF RECORDS IN JANUARY, SHOWS DATA

As many as 14,848 registered Indian companies were found defunct or were struck off official records in January, data released by the ministry of corporate affairs (MCA) showed, amid a government crack down on money laundering and tax evasion. The total number of companies registered with the Registrar of Companies (RoC) at the end of January was 1.85 million. Of this, 670,318 companies were closed. Within the overarching ‘closed’ category, 622,087 companies were either defunct or struck off under Section 248 of the Companies Act in January, compared to 607,239 in December, 2018. Data showed that of the 670,318 closed companies 10,640 were dissolved or liquidated, 22,531 were merged or amalgamated, 10,086 were converted into limited liability partnerships (Llps) and 4,794 were converted into Llps and dissolved. The rest were either defunct or struck off the rolls. Over 61% of the 1,850,860 registered companies were active at the end of January. Active companies are those that do not engage in fraudulent or illegal business, and carry on daily business operations or economic activity, while keeping a record of their financial statements. As many as 12,464 companies were registered in January, of which 12,459 were non-government entities, while the remaining five companies were government entities, according to the data. State-wise, Maharashtra was in lead with 2,310 firms registered in January, followed by Delhi, UP, Karnataka and Tamil Nadu. in terms of the spread of economic activity, 32,628 companies were involved in agriculture and allied activities, and 739,649 in services such as real estate, trading, finance and insurance.

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300,000 COMPANIES UNDER THE TAX SCANNER FOR MONEY LAUNDERING

The Central Board of Direct Taxes (CBDT) has directed income-tax (I-T) officials to verify bank transactions of companies struck off from the records of the Registrar of Companies (RoC), specifically during demonetisation. The move will bring 300,000 companies struck off by the RoC for not filing their statutory returns under the tax scanner. On Thursday, the CBDT issued a directive to senior I-T officials, asking them to examine possible misuse of such companies for money laundering activities. The board desires that the tax authorities verify deposits/withdrawals from bank accounts of such companies during the process of striking down and just before that, especially during demonetisation, the CBDT office said. Further, it said in cases of detection of unusual transactions and beneficiaries, appropriate action may be taken, according to the provisions of the I-T Act. Accordingly, the tax department will seek restoration of such struck-off companies by filing an appeal before the National Company Law Tribunal (NCLT). The I-T department suspects that many of these companies abused their corporate structure by creating multi-layering during demonetisation for cash deposits. The I-T probe also reveals that many individuals had used these firms for siphoning money or converting undisclosed cash into legitimate money after the currency purge. The apex body wants this exercise of verification to be completed in a time-bound manner and positive cases be brought to the notice of the board. If such transactions are detected in a particular company, we should bring it to the notice of the RoC within one month, so that objections may be filed against the proposal to strike off a company, the CBDT had added. Sources say that the department suspects Rs100 billion has been laundered through such firms during the note-ban period. The official data says that 35,000 companies deposited and withdrew cash worth over Rs 170 billion after the note ban, through about 60,000 bank accounts. It was noticed that the accounts that had negligible balance on November 8, 2016, have seen significant cash deposits and withdrawal during this period.

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DEADLINE FOR NORMS ON RELATED-PARTY PAYMENTS TO COMPANIES DEFERRED

SEBI on Wednesday differed implementation of a provision that required companies to seek shareholder approval for material payments made to related parties for brand usage or royalty, by three months to June 30. The decision was taken at SEBI’s board meeting held on Wednesday. Such payments are considered material if they exceed 2 per cent of the annual consolidated turnover of the listed company in the financial year, SEBI said. The provision was scheduled to come into effect from April 1. SEBI said it had deferred the implementation of this provision, in view of the representations received. The regulator also approved the proposal for undertaking a public consultation process to amend the SEBI (Self Regulatory Organisations) Regulations, 2004. Such amendments are with the objective of defining the SRO, rationalising the process of recognition and strengthening the role of such organisations in the securities market, SEBI said. Stock broker associations have made representation to SEBI for being appointed as SRO. In an event held this year, former SEBI chairman M Damodaran had said that SROs’ initiatives have not succeeded in the past and building blocks need to be put in place before it is approved. The SEBI budget for financial year 2019-20 was approved by the board on Wednesday.

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SEBI ASKS MUTUAL FUNDS TO DISCLOSE DETAILS OF PROMOTER FUNDING

The Securities and Exchange Board of India (Sebi) has asked mutual fund (MF) houses to share details of all the exposures where promoters have got funding by placing their shares as collateral or through other complex structures, latest by March 31 In an e-mail sent to MFs, the regulator has asked MFs to disclose the details so that it can assess how large is the quantum of such exposures held by MFs to these structures, which have come under pressure due to sharp erosion in value of the promoter shares. Sources suggest that Sebi is concerned with the low cover taken by MFs on such structures. The regulator wants MFs to have adequate cover to deal with the associated risks, as the underlying is exposed to daily stock market movement. According to industry sources, in some cases, the fund houses have taken exposure to entities with less than two times the share cover. This is lower than what the Reserve Bank of India (RBI) stipulates for non-banking financial companies (NBFCs) that lend against shares. The RBI stipulates that all NBFCs with more than Rs 100 crore asset size need to maintain a loan-to-value (LTV) of 50 per cent where listed shares are placed as collateral. An LTV of 50 per cent means that for a Rs 50,000 loan, the market value of the collateral shares needs to be Rs 1 lakh. This translates into two times the share cover. According to some estimates, MFs have an exposure of at least Rs 23,000 crore to such structures. The MF industry officials say the inherent risk in such structures comes from the fact that there is no underlying cash flow.

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RCOM AGAINST CLOSING INSOLVENCY PLEA, ERICSSON WANTS IT WITHDRAWN

The RCom-Ericsson spat continued in the Supreme Court with the Swedish company insisting it should be allowed to close insolvency proceedings initiated against RCom in the National Company Law Tribunal (NCLT) as it has already got its dues, but RCom resisted the move. This prompted a top court bench led by Justice RF Nariman to issue notices to both sides, asking them to present their legal position on whether insolvency proceedings should go on or not against RCom in the NCLT by way of written submissions with a week each. The bench, which also comprises Justice Vineet Saran, will then adjudicate on the legality of the case. RCom paid off Rs 580 crore in dues to Ericsson at the last moment, narrowly averting the possibility of its chairman Anil Ambani landing in jail. Rohtagi suggested that anyone who moved NCLT did not have a right to withdraw. That would be subject to lenders agreeing to the move. Instead, Rohatgi asked the bench to quash all proceedings in the top court and let the matter go on in the NCLT. But the bench said it could not prima facie quash proceedings in the face of Section 12A of the IBC, which allows for withdrawal in the NCLT. The bench then adjourned the case for two weeks. Sources said Ericsson doesn’t want to pursue insolvency proceedings as continuing with it would entail paying the resolution professional when there was no need for it.

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NCLT SEES VIOLATION OF SEC 29(A) IN STERLING BIOTECH CASE

The National Company Law Tribunal (NCLT) in the Sterling Biotech case for the second time has questioned the motive of lenders, led by Andhra Bank to withdraw their bankruptcy application and to choose a one-time settlement with the absconding promoters of Sterling Biotech. The tribunal has also questioned the source of funds which the lenders of the defaulting company have agreed to accept as the one-time settlement (OTS) on behalf of the promoter. Sec 29(A) of the Insolvency and Bankruptcy Code (IBC) bars re-entry of the promoter in to the resolution scene on any form. This is the second time the appellate tribunal has questioned the motive of banks that have accepted an OTS offered by promoters, Nitin Jayantilal Sandesara and family. They have offered Rs 3,100 crore of repayments by June 2019. At the earlier hearing of March 11, the tribunal had questioned the one-time settlement by absconding promoters, for a loan of Rs 7,500 crore excluding interest and penalties from a group of lenders led by Andhra Bank, while Sandesara group owes over Rs 15,000 crore to lenders. The case will be next heard on April 26.

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IBC PROCEEDINGS OF RCOM TO BE DELAYED FURTHER AS APEX COURT ADJOURNS HEARING

The Insolvency and Bankruptcy (IBC) proceedings of telecom operator Reliance Communications (RCom) is expected to be delayed further as the Supreme Court has adjourned hearing its application by two weeks. The adjournment is also likely to impact RCom’s ongoing proceedings before the National Company Law Appellate Tribunal (NCLAT), with the next hearing slated for April 8. The overall process of IBC re-initiation is also likely to be delayed by four weeks sources close to the development told. On Thursday, the apex court heard a petition filed by RCom before the NCLAT on May 20, 2018, to withdraw earlier, wherein it sought that the company should not be sent to IBC.

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NCLT READS INSOLVENCY RULES AT ORCHID PHARMA'S PROMOTER GROUP FIRM

The insolvency resolution procedure will be applied on Orchid Healthcare, a promoter group company of Chennai-based Orchid Pharma, which is already under this procedure. The order, from the bench of the National Company Law Tribunal, was in response to a petition from IDBI Bank. It had loaned Rs 191 crore in July 2014 to Orchid Pharma, for which Orchid Healthcare was guarantor. The bank's dues, by July 2018, were Rs 215.7 crore (a consortium of 24 banks had lent a total of about Rs 3,200 crore to the drug maker). With the borrower not repaying and also under the Corporate Insolvency Resolution Procedure, the petition from IDBI asked that this be also initiated on Orchid Heal­thcare. Noting there was no objection from the company, the tribunal's bench of B S V Prakash Kumar and S Vijayaraghavan has agreed to the request. And, appointed an interim Resolution Profes­sional. Orchid Healthcare has 22.64 per cent stake in Orchid Pharma, the biggest shareholder in the promoter group, as on end-December, according to the BSE. Orchid Pharma has been under financial stress for some years. The NCLT appointed an IRP for it with effect from mid-August 2017, on a petition from an operational creditor, Lakshmi Vilas Bank.

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ORCHID PHARMA’S PROMOTER FIRM TOO GOES UNDER RESOLUTION PROCESS

The Chennai bench of the National Company Law Tribunal (NCLT) has ordered commencement of corporate insolvency resolution process (CIRP) against Orchid Healthcare Private, a promoter group company of Orchid Pharma, which is under resolution process and is in the process of scouting for suitors The NCLT ordered CIRP against Orchid Healthcare on a petition filed by IDBI Bank, which pointed out the company (corporate debtor) defaulted in repaying the loan amount of Rs 215.74 crore availed by Orchid Pharma (principal borrower) as on July 1, 2018, despite the corporate guarantee being invoked against the corporate debtor. According to the NCLT order, Orchid Pharma availed loan of Rs 191.24 crore for which the corporate debtor stood as guarantor. Since the principal borrower had not paid the loan amount and gone under CIRP, the IDBI Bank has initiated the proceedings. Considering the request of the bank, and noting that there had been no objection from the company, the NCLT bench of BSV Prakash Kumar, member (judicial), S Vijayaraghavan, member (technical), ordered initiation of CIRP and appointed an interim resolution professional. Orchid Healthcare has 22.64 % stake in Orchid Pharma, and is the major shareholder in the promoter group, as on December 31, 2018, according to BSE. Orchid had a total debt of around Rs 3,200 crore from a slew of banks. Orchid Pharma, which has been into manufacturing, marketing and research of pharmaceutical products, had been under financial stress for a few years now and the NCLT had ordered CIRP with effect from August 17, 2017 on a petition filed by an operational creditor, Laksmi Vilas Bank. It may be recalled that the resolution professional of Orchid Pharma had called for fresh expressions of interest (EoIs) from potential investors for submitting resolution plan for the company, following Chennai NCLT annulling the approved resolution plan of US-based lngen Capital Group and ordering fresh corporate insolvency resolution process. The NCLT declared invalid the approved resolution plan by Ingen as the company had failed to bring in the promised money even after the stipulated time and despite the bench giving it an option to pay one third of the amount to take the proceedings further. The resolution plan by Ingen Capital Group was approved by the NCLT on September 17, 2018, after the committee of creditors had cleared it. As per the resolution plan, which was for Rs 1,490 crore, Ingen was to infuse Rs 1,060 crore within five days of the plan approval.

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NCLT ISSUES NOTICE ON A PETITION SEEKING INVESTIGATION INTO THE AFFAIRS OF TRAVEL FOOD SERVICES PRIVATE LIMITED

The National Company Law Tribunal, Chandigarh has issued notice on a complaint seeking investigation into the affairs of Travel Food Services Pvt. Ltd. (TFS), and few of its subsidiary Companies on the Complaint filed by one M/s Buddy (Mumbai) Duty Free Services Pvt. Ltd (Buddy). TFS was recently in news for bagging three awards for The Irish House at Terminal 3, IGIA, Delhi Airport, and its in-house concepts – Dilli Streat and Raildhaba. Travel Food Services (TFS) is India’s leading travel F&B and Retail Company, with more than 300 outlets across travel-hubs including Airports, Railway Stations and Highways spread across 19 cities. Buddy represented by PSL Advocates and Solicitors through its Founder & Managing Partner Mr. Sandeep Bajaj and Partner Mr. Soayib Qureshi has filed a petition before the NCLT Chandigarh under section 213 (b) of the Companies Act, 2013. It has alleged fraud running into crores of rupees by Travel Food Services. Sources have confirmed pendency of certain shareholder disputes between Buddy and Amit Arora who is said to be closely associated with the Travel Food Services group, which has given rise to the said complaint. Buddy has made serious allegations of fraud and siphoning of underlining assets of companies by TFS. The NCLT Chandigarh has directed Travel Food Services, its directors and few subsidiary companies to file the responses to the complaint filed by Buddy.

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LENDERS ASK FOR FRESH ROUND OF BIDDING FOR AMTEK AUTO AT NCLAT

Lenders of Amtek Auto Thursday sought permission from the NCLAT to conduct a second round of bidding for the debt-ridden auto component maker after the highest bidder UK-based Liberty House backed out. The Committee of Creditors (CoC) led by Corporation Bank informed the National Company Law Appellate Tribunal (NCLAT) that the second highest bidder Deccan Value Investors LP is also considering to submit a revised offer. However, an NCLAT bench headed by Chairman Justice S J Mukhopadhaya said it would like to hear Deccan Value Investors and Amtek Auto's former promoters on the matter. NCLAT listed the matter for next hearing on April 22 and said CoC would not approve any other plan in between. It also said the Resolution Professional (RP) will continue to function and would ensure that the company remains a going concern.

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ESSAR STEEL COC MAY VOTE AGAINST HIGHER PAYMENTS TO STANCHART

The CoC doesn’t want the plan changed as suggested by the National Company Law Appellate Tribunal (NCLAT) because this will eat into their own payouts. Lenders could file a caveat in the Supreme Court if the NCLAT doesn’t budge on its proposal, said the people cited above. The CoC led by State Bank of India (SBI) is slated to meet on Friday to vote on whether operational creditors will get a bigger amount as proposed by the NCLAT. Also on the agenda is a vote on whether Standard Chartered will be given a share on a par with other lenders. Operational creditors and what to do with Standard Chartered’s dues are two issues in front of the CoC. It is unlikely that lenders will agree to give more because the amount the NCLAT has asked is too much, said one of the persons cited above. We may have to file a review in Supreme Court if the NCLAT sticks to its suggestion. According to the proposal submitted by AreclorMittal, financial creditors led by SBI will get 92% of their dues, which comes to around Rs 41,987 crore of a total Rs 49,395 crore. Operational creditors will get just 5% or Rs 214 crore against the outstanding Rs 4,976 crore.

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AMRAPALI GROUP DIVERTED RS 3,000 CRORE OF HOMEBUYERS' MONEY: AUDITORS TO SC

Seven months after the Supreme Court ordered a forensic audit of Amrapali group to track misuse of homebuyers' money the final report said illegal diversion of over Rs 3,000 crore led to the financial collapse of the group, leaving thousands of investors stranded. The auditors, Ravi Bhatia and Pawan Aggarwal, filed a voluminous report running into more than 2,000 pages in the SC. They said the group set up more than 100 shell companies in the names of its officials, including one in which a peon was inducted in a senior position, to divert money which was used for personal gain of directors, officials and their relatives. The report made it evident that the collapse of the Amrapali group was not due to a change in market conditions or investment decisions gone bad but because of the wilful criminal actions of the group's proprietors. The court had directed a forensic audit in September last year. Justice Arun Mishra, who along with Justice UU Lalit is hearing the plea of thousands of homebuyers, informed their lawyer ML Lahoti on Thursday that the auditors had filed their report and the court would examine it on April 9. The court's apprehension that the group siphoned off homebuyer money proved correct with the forensic report finding documentary evidence to show that funds were transferred to more than 100 shell companies outside Amrapali group through dubious transactions. The money was invested in mutual funds, LIC policies and for expansion of business other than construction activity.

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CORPORATE AFFAIRS MINISTRY PROPOSES PROSECUTION OF COS OWNED BY DEEPAK KOCHHAR, VN DHOOT

The Mumbai regional office of Ministry of Corporate Affairs (MCA) has recommended prosecution action against companies owned by Deepak Kochhar, the husband of former ICICI Bank CEO Chanda Kochhar, and Videocon chairman VN Dhoot. This, after the department found instances of what an internal report describes as deliberate acts of omission and concealment of facts. The report clams that some financial statements and certificate were false or omitted certain material facts. An official familiar with the report said that the MCA has found that the actions of the firms were violative of sections 447, 448 and 449 of the Companies Act, which basically deal with punishment of fraud. Irregularities were observed in the conduct of board meeting. 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, all these amount of prosecution under certain sections of the Companies Act and the same has been recommended, said the official. He was referring to alleged action of Deepak Kochhar's companies as well as Videocon. Any prosecution, if that were to happen, could be carried out by the Serious Frauds Investigation Office (SFIO). A final decision will be taken by the parent ministry in Delhi. During the probe, MCA's Mumbai office recorded the statement of the Chanda Kochhar. The sources cited say that Chanda Kochhar denied any knowledge of the affairs of her husband’s company. Adopting the same line of defence as when she was questioned by the Enforcement Directorate (ED) (probing her role in a alleged money laundering case), Chanda Kochhar told the MCA that the decision to grant the loans to the two companies was taken by the bank's sanctioning committee and wasn’t her individual decision. The MCA probe focused on a number of investments in Deepak Kochhar companies. These investments are at the heart of probes by multiple agencies.

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SETBACK FOR ANRAK AS HC ALLOWS SBI TO GO AHEAD WITH INSOLVENCY PROCESS

In a major setback to Anrak Aluminium company, the Telangana high court on Thursday allowed an appeal filed by RBI and allowed SBI authorities to drag the company to the insolvency process at National Company Law Tribunal, Hyderabad. A bench of Justice Raghavendra Singh Chauhan and Justice T Amarnath Goud pronounced this order after hearing a writ appeal filed by RBI challening the order of a single judge who found fault with an RBI circular and also with SBI for initiating insolvency process even after agreeing to settle for the company’s one-time settlement offer of Rs 1,275 crore. The company took loans from a consortium of banks headed by SBI and the total dues stand at a staggering Rs 3,000 crore. Anrak company, a joint venture firm floated by Penna industrial group and Ras Al Khaima of the United Arab Emirates, was supposed to set up an aluminium plant in Vizag Agency area with the help of raw bauxite supplied from AP Mineral Development Corporation. Following resistance from tribals, then AP government cancelled the agreement to supply bauxite to Anrak. The single judge found fault with SBI mainly on this ground that when the state government had failed to fulfil its commitment, it may not be fair to blame the company. RBI counsel S Niranjan Reddy, however, said that mere reference to NCLT would not harm the company and the tribunal-appointed resolution professional could suggest a resolution plan that may include restructuring of the company. Appearing for Anrak, senior counsel Raghunandan Rao told the bench that nothing would remain in their hands if the NCLT admits the plea and commences the insolvency resolution process and the bank may not get even the amount that was assured by them. We agreed for a settlement of Rs 1,275 crore and have already paid Rs 400 crore. We would pay the remaining amount by the end of March, he said. The bench did not agree with the company’s arguments. The bench, however, suspended its judgement for a period of one month to enable the company to avail itself of legal remedies.

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CENTRE SEEKS PSUS’ HELP TO MEET FY19 REVENUE TARGETS

It’s the public sector to the rescue as the government races to meet its revenue and fiscal deficit estimates for FY19. The revenue authorities have dialled banks asking them to deposit tax deducted for March, that would ordinarily be paid to the government in April, in the current month itself. Such revenue along with some savings on the expenditure front may help the government meet the fiscal deficit target of 3.4% of GDP Banks have been requested to deposit tax deducted in March it self, said an official privy to the communication sent to public sector banks. Tax authorities are making efforts to ensure that at least the original budget estimate is achieved. Tax revenues are unlikely to meet the revised estimates, which was raised for the direct taxes to Rs 12 lakh crore from Rs 11.50 lakh crore. Goods and Services Tax (GST) estimate was lowered Rs 1 lakh crore to Rs 6.43 lakh crore. Revised customs and excise duty collections are pegged at Rs 1.30 lakh crore and Rs 2.59 lakh crore, respectively as per the revised estimates. The government was hopeful of meeting the revised direct taxes collection target, but it seems to be an uphill task, according to another official. The government is eyeing non-tax revenues such as dividends from public sector units to make up for the shortfall from the tax revenues as also savings on the expenditure side from some ministries. Some entities like Coal India, ONGC and IOC have already paid interim dividend. Subhash Chandra Garg on Friday had said fiscal deficit target of 3.4% for 2018-19 would be met as shortfall in indirect tax collection would be compensated by lower expenditure. I am very confident (of meeting fiscal deficit target of 3.4 per cent for 2018-19), Garg had said. On the whole, we should be where we are, he had said.

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DELHI COPS REGISTER CASE AGAINST FORTIS' SINGH BROTHERS FOR SIPHONING FUNDS

The Economic Offences Wing (EOW) of the Delhi Police has registered a case against the former promoters of Fortis group Malvinder Mohan Singh and his younger brother Shivinder Mohan Singh, former Religare Enterprises Chairman and Managing Director (CMD) Sunil Godhwani, and N K Ghosal, an associate of the younger brother, on a complaint made by Religare Finvest Limited. The First Information Report (FIR) has been filed following a criminal complaint made by Religare Finvest on December 20 in which it had alleged that the Singh brothers, Godhwani, and others had cheated the company of nearly Rs 700 crore. Religare Finvest is a subsidiary of Religare Enterprises Limited (REL), which was controlled by the Singh brothers until February 2018. The complaint by Religare Finvest was filed after the company conducted an independent forensic audit was conducted by the new board after the exit of the two brothers in February. The company said it had also conducted internal enquiries to ascertain as to why it was in a poor financial condition after the resignation of Singh brothers from the board. Internal inquiries showed that poor financial health of Religare Finvest was to a large extent on account of wilful default on significant unsecured loans defined for internal purposes as corporate loan book by borrower entities either related, controlled or associated with the promoters, Religare Finvest said in the FIR. The loans, the company said, were given at a non-arms-length basis, which is in violation of corporate governance norms, as well as, other regulations for Non-Banking Financial Companies prescribed by the Reserve Bank of India. In the complaint, Religare Finvest has also said that the Singh brothers and others had cheated the company through misappropriation, siphoning and diversion of funds through a labyrinth of financial transactions. Calling it a well thought out and organised criminal conspiracy by which a financial scam of huge magnitude has been effected by the Malvinder, Shivinder and others, Religare Finvest said that they had also siphoned off funds from its parent REL. REL had also filed a separate complaint against Singh brothers and Godhwani with the Ministry of Corporate Affairs under the Companies Act. REL had made the complaint with the EOW of Delhi Police following an observation made by the Delhi High Court. During a hearing on Daiichi Sankyo's plea for payment of Rs 3500 crore arbitration award due to them against the Singh brothers, Justice Rajiv Shakdher had observed that if REL was serious about the allegations of defrauding against the former promoters of the company, it should file a police complaint about the same. Religare moved court, alleging that the Singh brothers, in their capacity as promoters of Religare Enterprises, had siphoned off money from the company by issuing non-convertible redeemable preference share (NCRPS) for themselves and later redeeming them. About Rs 425 crore had been siphoned off by the two brothers, Religare had said in its petition. The relationship between the two brothers, which had been deteriorating for a while, took a plunge for the worst after allegations of fund diversion from the Fortis group came to light. The two brothers came to blows in December and accused each the other of physical assault.

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NEED TO REINVENT NITI AAYOG, SAYS FORMER RBI GOVERNOR YV REDDY

The Niti Aayog suffers from a wide mandate and diffused focus and there is a need to reinvent the organisation in the context of fiscal federalism, former RBI Governor Y V Reddy said. There is a need to upgrade the Niti Aayog and empower it to perform functions of Centre and state coordination, he said. Now, there is an institutional vacuum in regard to non-finance commission transfers in terms of expenditure. Each ministry has its own centrally sponsored schemes. So, there are no coordinated discussions between the Centre and the state on the developmental thrust, Y V Reddy told. G R Reddy, the authors noted that the Niti Aayog should ideally be the focal point for all transfers from the Centre and states outside the recommendations of the Finance Commission. As a continuing body, it could also ensure implementation of the Finance Commission's recommendations. In order to achieve this, it requires significant technical support from experts and at the same time substantial political support, he said. The erstwhile Planning Commission played a crucial role in fiscal federalism, he said. It is advisable to specify the tasks of Niti Aayog that are most relevant for Centre-State relations: identifying the sectors in state that should be eligible for grants from the Union; indicating criteria for inter-state distribution; helping design schemes with appropriate flexibility accorded to states regarding implementation; and identifying and providing areas specific grants, he said. He said, wisdom lies in refocussing the scope of the Finance Commission to maintain the trust of all in the institution as the pillar of fiscal federalism.

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SC REFUSES TO STAY MERGER OF VIJAYA, DENA BANKS WITH BANK OF BARODA

Clearing decks for the scheduled merger of three public sector lenders - Vijaya Bank, Dena Bank and Bank of Baroda - the Supreme Court on Thursday refused to stay the amalgamation The top court dismissed the applications filed by several bank officers' associations for staying the merger, effective April 1. The proposed amalgamation will make Bank of Baroda, which will merge the other two lenders with itself, the second largest public sector bank after State Bank of India in place of Punjab National Bank. A bench of Justices R F Nariman and Vineet Sharan said, all interlocutory applications seeking stay are dismissed At the outset, senior advocate Shyam Divan, appearing for bank officers associations, said that there were several flaws in the decision taken for merger of three banks as there was no effective consultation or concurrence with the Reserve Bank of India on the issue. He said that even the board of directors of the banks were not adequately constituted to take a decision of merger like this. The board of directors should have been informed and given time to contemplate on the proposed merger of the banks but every thing happened on January 2, Divan said. He said that the board of directors passed a resolution on January 2, cabinet approved the decision on the same date and even the gazette notification was issued on the same day. The bench asked Divan how is he affected by the decision of merger of the banks. He said that employees will suffer due to the merger as there will be an aspect of redundancy. Senior advocate Mukul Rohatgi, appearing for Bank of Baroda, said the merger was done within the statutory framework and all requisite procedure was duly followed. All the banks in question are public sector banks and as far as employees are concerned, under the scheme their terms and conditions of employment will remain the same. They are not affected at all. It was a policy decision that two weaker banks join one stronger bank, he said. He said that as far as effective consultation with RBI is concerned, the process had started way back in September 17, 2018. Solicitor General Tushar Mehta, appearing for Union of India also opposed the plea of bank officers and said it was a purely an economic policy decision taken by the government for which detailed consultation has taken place. He said three committees were constituted Parliament was informed and the RBI was consulted after which in principle consent was given. Everything was done in a purely transparent manner and this is an economic policy decision taken by the government, he said. The bench then said it is rejecting all the applications seeking immediate stay of the decision to merge the three banks.

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AWAITING SEBI APPROVAL FOR COMPLETION OF MERGER WITH GRUH FINANCE, SAYS BANDHAN BANK

Private sector lender Bandhan Bank on Thursday said it's waiting for Securities and Exchange Board of India (Sebi) approval for completion of the merger with Gruh Finance, which it acquired in January. Chandra Shekhar Ghosh, said, There is a huge scope for growth in that space as around 106 million families still remain eligible for getting micro-credit. The main chunk of growth comes from new customer acquisition. The aim is to attract new customers who aren’t getting credit from the formal sector. As part of the deal, Bandhan Bank has to transfer 14.9 percent stake to HDFC for merging Gruh with itself. The deal will allow Bandhan Bank's promoter Bandhan Financial Holdings to come down to about 61 per cent from about 82 percent, and HDFC to hold around 15 percent in the merged entity from about 57 percent in Gruh. The swap ratio for the amalgamation will be 568 shares of Bandhan Bank for every 1,000 shares of Gruh Finance.

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SEBI SLAPS RS 35 LAKH FINE ON VAISHNAVI GOLD, DIRECTORS FOR NOT FURNISHING INFO, DISCLOSURE LAPSES

Sebi on Thursday imposed penalties totalling Rs 35 lakh on Vaishnavi Gold, (formerly Master Multi Tech) and its two directors for multiple violations including lapses in making appropriate disclosures. Apart from the firm, the market regulator fined its managing director (MD) MJVVD Prakash and director Jyotsana Lakshmi. During an investigation covering the period between April 2010 and December 2010, the regulator noted that there was a change in the shareholding of the directors in the company. Following the change in holding pattern, Sebi sought documents from the firm and its MD to ascertain the change in shareholding. However, the firm and the MD failed to reply or to provide the requisite information, Sebi said. If a person fails to comply with the summonses of investigation authority he is liable for penalty under Sebi Act, it said. In a separate order, Sebi noted that Master Multi Tech (MMT) allotted over one crore equity shares to the shareholders of Tanmai Jewells in lieu of close to 70 lakh shares held in Tanmai by MMT. The allotment of shares of MMT to the promoter group of Tanmai included allotment 34.68 per cent share capital of MMT to Prakash and 22.32 per cent to Jyotsana Lakshmi. The increase in the shareholdings of Prakash and Jyotsana in the scrip, triggers the disclosure requirement to be made in terms of SAST Regulations, 1997, Sebi said. The directors however failed to make disclosure under relevant provisions of the Substantial Acquisition of Shares and Takeover (SAST) Regulations.

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GDR MANIPULATION: SEBI SLAPS RS 30 LAKH PENALTY ON SYBLY INDUSTRIES DIRECTORS

Markets regulator Sebi has slapped a total fine of Rs 30 lakh on three directors of Sybly Industries in a matter related to manipulation in issuance of global depository receipts (GDRs). The directors -- Satya Prakash Mittal, Mahendra Kumar Gupta and Subodh Kumar Goel -- have been fined for acting as party to the fraudulent scheme, Sebi said in three separate orders on Wednesday. The orders came following a probe conducted by the regulator to investigate irregularities in the company's allotment of 1.51 million GDR amounting to USD 6.99 million on the Luxembourg Stock Exchange in June 2008. The entire 1.51 million GDR were subscribed by only one entity, Vintage FZE (now known as Alta Vista International FZE) upon obtaining loan from European American Investment Bank (EURAM). Sebi noted that Vintage would not have been able to subscribe the GDR issue had Sybly not given such security towards the loan taken by Vintage. The orders further note that the arrangement of loan and pledge agreement, which resulted in the subscription of GDR issue of Sybly was not disclosed to the stock exchange in a true and complete manner but was reported as misleading news to the stock exchange. Sebi said: the Noticee by approving the aforesaid board resolution in the board meeting held on March 31, 2008, and which subsequently led to execution of the pledge agreement has acted as a party to the fraudulent scheme.

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PE, VC INVESTMENT IN INDIA AT $20.5 BN IN 2018: REPORT

Private equity (PE) and venture capital (VC) investments in the country stood at USD 20.5 billion across 786 transactions in 2018 on account of tech-enabled start-ups, e-commerce and information technology-enabled services, according to a report by Grant Thornton. The funding in 2018 was the same as the investment in the preceding year, the assurance, tax and advisory firm said. The top trending themes during the year were revival of start-ups, continued uptick in control deals and larger bets, and increased focus of sovereign wealth funds towards Indian assets. Start-ups accounted for 59 per cent of the total PE investments recorded in 2018 by values and 26 per cent by volume, said Vrinda Mathur. In terms of the size of investments, the sharp increase in the PE and VC funding was due to 47 deals valued at USD 100 million or greater, including six deals worth over USD 500 million. Big-ticket investments were driven by complex deal structures, PE-backed merger and acquisition, later-stage funding and the inflated start-up valuations, it said. Further, the report said it is not unusual to witness high levels of public spending in election years and it may push investments in rural and infrastructure-related sectors in the near term. The core sectors may not get impacted as most mid-market investments take a long-term bet on growth potential, the report said. Consequently, PE deal volumes are expected to pick up in the second half of the year with 2020 expected to be the year of the highest volumes of PE investments. The report focuses on the PE and VC industry in India and has been produced in association with the Indian Private Equity and Venture Capital Association (IVCA), an organisation that works towards promotion of PE and VC firms.

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FIVE PSU LENDERS GET CAPITAL INFUSION OF RS 21,428 CRORE FROM GOVERNMENT

Five state-owned banks, including PNB, Bank of Baroda and Union Bank, Thursday received shareholders' approval for capital infusion to the tune of Rs 21,428 crore in lieu of preferential allotment of shares to the government. This capital infusion is for the current fiscal ending March 31, 2019. Punjab National Bank (PNB) in a regulatory filing said that an extraordinary general meeting of shareholders was held on March 28 for obtaining shareholders' approval to issue and allot 80,20,63,535 equity shares at a premium of Rs 71.66 per share amounting up to Rs 5,908 crore on preferential basis to the government. Bank of Baroda said the finance ministry informed about its decision to infuse capital of Rs 5,042 crore in the bank. The capital infusion will be by way of preferential allotment of equity shares (special securities/bonds) of the bank during 2018-19, as government's investment, Bank of Baroda said. Union Bank said: The Committee of Directors for Raising of Capital Funds (CDRCF) of the bank at its meeting held on Thursday considered and approved the allotment of 52,15,62,658 equity shares at an issue price of Rs 78.84 aggregating to Rs 4,111.99 to government in accordance with the applicable provisions. The board of the Chennai-headquartered Indian Overseas Bank (IOB) in an extraordinary general meeting decided to to allot preferential shares to government to get capital infusion of Rs 3,806 crore. The Board for Issue of Equity Share Capital at its meeting held today has issued and allotted 269,54,67,422 equity shares at an issue price of Rs 14.12 per equity share (including premium of Rs 4.12 per equity share) to government by way of preferential allotment, IOB said. Central Bank of India allotted 68,72,48,322 equity shares at Rs 37.25 aggregating upto Rs 2,560 crore. With this allotment, shareholding of government has increased from 89.40 per cent to 91.20, said Central Bank of India.

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PNB REJECTS MEHUL CHOKSI’S ALLEGATION OF FILING ‘MALICIOUS CASE’

Punjab National Bank (PNB) has rejected fugitive billionaire Mehul Choksi’s allegation that the bank’s chairman Sunil Mehta instigated PNB executives and created a malicious case against his company Gitanjali Gems Ltd and him without any tangible proof. All action taken by the bank against those involved in the fraud is as per the rules and regulations defined by law and is without any prejudice, a PNB spokesperson said on Thursday. The diamantaire, who is absconding, is a co-accused in the ₹13,500-crore PNB fraud along with his nephew Nirav Modi.

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SEBI IMPOSES RS 50 LAKH FINE ON TWO PERSONS FOR FRAUDULENT TRADE

Sebi conducted an investigation for the period between October 2013 and December 2014 regarding trades carried out in the scrip of the firm. The probe found that the individuals -- Kalpana Dharmesh Chheda and Utkarsh Dharmesh Chheda -- indulged in several trades with small volumes at prices above the last traded price (LTP). This led to creation of misleading appearance of trading and manipulated the price of the scrip, resulting in higher price with each trade. The trades executed by the Noticees were fraudulent, manipulative and designed to inflate the scrip price to sell at a later opportune time and make wrongful gains, Sebi said in an order. By carrying out such trades, the individuals have violated provisions of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) norms, it said. Accordingly, the regulator levied a fine of Rs 45 lakh on Kalpana Dharmesh Chheda and Rs 5 lakh on Utkarsh Dharmesh Chheda. In a separate order, Sebi slapped a total fine of Rs 7 lakh on the investment advisor of CIG Realty Fund, Unitech Advisors and five individuals for violating Venture Capital Fund (VCF) norms.

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SEBI’S FINAL ORDER IN THE NSE CO-LOCATION SCAM EXPECTED SOON

PALAK SHAH SEBI’s final verdict in the preferential access scandal involving the NSE co-location servers is expected in a fortnight sources close to the developments told. This month, the regulator concluded its hearing of the parties involved, cross-examination and inspection of documents. Work on the final order is now on, the sources said. The hearing in the matter started in December 2018.bSEBI has deliberated over data or information sharing by the exchange with certain entities and the verdict may have a special mention of the issue, the sources said. The preferential-access scandal involved various aspects including first login to co-location servers by certain brokers, use of dark fibre cable network and sharing of data and information without adequate monitoring and rules of its end use. SEBI had detailed in its show-cause notice (SCN) as to how a how Delhi-based broker OPG Securities got preferential access to trading systems, and managed to dictate terms at the exchange. The SCNs also highlighted how another firm, Sampark Infotainment, which later handed over its infrastructure at the NSE to RCom, allegedly manipulated the ‘Dark Fiber’ connectivity at the NSE.

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LENDERS SEE GLOBAL SLOWDOWN, VOLATILE RUPEE, NPAS AS KEY RISKS TO GROWTH

With the accretion of non-performing assets (NPAs) slowing down and growth picking up banks are looking at resumption of capital expenditure on the private side. P.S. Jayakumar, said, As far as growth is concerned, it will be a lot of the same we saw last year. One of which is the infrastructure spending that the states and centre are doing. Growth continues to come from consumption driven expenses and the focus on growth in retail segment remains. With all of this, I’d still think a 12-15% of domestic credit growth is likely. As far as capital is concerned, PSU (public sector) banks have to get used to the idea that they have to get capital. We have some runway left. By the third quarter of 2019-20, we would be able to raise money from public markets. V. Vaidyanathan, agreed, saying that large corporate credit demand is set to pick up in the coming months, If you see the structure of Indian corporate credit, close to ₹40 lakh crore is large corporate credit. If you see the small entrepreneur credit, it is close to ₹8 lakh crore. Micro entrepreneur credit is ₹7 lakh crore, mini entrepreneur credit is ₹2 lakh crore and nano entrepreneurial credit is ₹75,000 crore. With the ability of digitization in India, that is completely inverted which is why we are seeing small corporate credit growing at 15-19% per annum and large corporate credit growing at 5% last year. In the next three-four years, large corporate credit will start growing again, investment demand will be back. Together as an ecosystem, it is set for growth. While the growth momentum continues, the banking sector is beset with challenges and banks are looking to minimize the risks. Zarin Daruwala, said, Risks I would split between global and domestic risks. Globally, slowdown is happening. We see a lot of trade tensions. If you look at the domestic side, you see volatility on rupee-dollar side. Clients, exporters are seeing the volatility. The second biggest risk is oil. One dollar of increase in oil per barrel is $1 billion trade deficit. Clearly, some of the risks are something banks can look towards mitigating. I think the RBI (Reserve Bank of India) window which has come up of $5 billion has helped to bring down the rupee-dollar premia and it’s a great time for importers to be hedging. Even as digitization has helped improve the credit monitoring, banks are pinning their hopes on the Insolvency and Bankruptcy Code (IBC) to improve the repayment culture among large borrowers. Rajkiran Rai G., said, When we talk of NPA customers, there are two categories—customers who have resources to pay and customers who have real difficulties. What IBC addressed is the first category. The 12th February circular, which forced banks to declare a company as an NPA even if there is a one-day default, also addressed that. The CRILC (Central Repository of Information on Large Credits) database, where we started reporting one-day default, has put a lot of sense in corporates who were using this 90-day window to handle their treasury better. The pain was always on me. That has changed with IBC and 12th February circular. The second category (of customers) who have real difficulty may (be due to) from external reasons like regulators, land issues, currency risk and internal risk. They are not able to raise enough capital. They need to be addressed differently. We are on the way to creating a public credit registry. It’s only the execution risks. Ecosystem is evolving, banks are also evolving. We will see qualitative credit growth.

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LIQUIDITY CRISIS MAY NOT POSE A RISK FOR LONG-TERM PROGRESS OF NBFCS

The non-banking financial sector presents many opportunities for growth in the long run despite hurdles in the short term, experts at a panel discussion said. Sabharwal said: Though we debate about growth rate and its pace, we’re still growing at 7-7.5% which means the credit market is growing at 15-20%, which is not bad at all compared to other economies of our size. I think the focus is now on how to maintain or improve your margins when there is so much competition and how you balance out risk and return. Companies must ensure net interest margins remain steady, if not improve. In the census statistics, from 2001-11, the number of towns increased from 1,500 to 7,000, that means more and more smaller towns are coming into commercial activity and the moment you provide infrastructure, there’s going to be a lot of activity, in manufacturing, trading, transportation, etc. There is a huge opportunity for growth in smaller towns to suit a particular culture and behaviour; that is important; the informal economy is becoming formal. By definition, you say the informal economy consists of smaller enterprises and even the government is acknowledging that now only 25-30% of their lending is through banks. So, the opportunity to grow in this segment is huge. However, growth continued to come from tier-II and tier-III cities as demand for homes came from end-users rather than investors. Sah also pointed out that housing finance companies have improved post the slowdown due to demonetization but have not reached the kind of growth seen prior to the note ban. The growth levels have to be commensurate with the opportunity available. That is a big challenge for all housing finance companies, to be able to take on those opportunities, Sah said.

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BRITISH AIRWAYS, PHILIPS, OTHERS WANT A SAY IN IL&FS RESOLUTION PLAN

British Airways, Postal Life Insurance and Philips India are among the about 100 entities that have sought to be part of the resolution process of Infrastructure Leasing & Financial Services as financial creditors. The companies said that their provident funds have invested in the bankrupt IL&FS and contend that they stand to suffer grave injury, which would be detrimental to public interest if they were excluded from the process. Around 100 intervening petitions have been filed in the National Companies Law Appellate Tribunal to allow them to be party in the IL&FS case, said a person in know of the matter. These are PF accounts of Philips India, SAS employee provident fund trust, British Airways Cabin Crew Pension Fund, PLC staff fund and superannuation fund. PF investments are unsecured and these investors want to be part of the resolution process as financial creditors to protect their company’s and their employees’ interests in these companies. Provident funds of companies are estimated to have invested Rs 15,000-20,000 crore in IL&FS group entities. The government superseded the IL&FS board on October 1 and appointed new members after the company, with a debt of Rs 91,000 crore, defaulted on loan payments. IL&FS has since put its group assets on sale, including energy and road projects, to monetise the investments and repay their creditors. Postal Life Insurance said in its petition that it had subscribed to the nonconvertible debentures of IL&FS and its group companies. If the intervener is not impleaded or allowed to intervene in the present proceedings, then the applicant will suffer irreparable harm and grave injury, being detrimental to the public interest at large, Postal Life said.

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ICEX GETS SEBI APPROVAL TO LAUNCH BASMATI CONTRACTS

The Indian Commodity Exchange (ICEX) has received approval from the Securities & Exchange Board of India to launch basmati paddy 1121 contracts The exchange may launch the contract in May, with delivery in June. The economic utility of this product is very high to the rice-processing trade like millers and tillers and exporters. They usually have a holding period of five months to a year for basmati rice and any price volatility impacts them badly, Sanjit Prasad, told. This variety of rice is not covered under the minimum support price. Hence, an electronic trading platform lends itself to a fair and transparent price-discovery process, keeping in mind the demand and supply forces of the commodity. The commodity exhibits very high price volatility, up to 70 per cent, annually. Iran is the largest buyer of the basmati 1121 variety from India. We have seen that sudden policy changes of the US regarding Iran made this commodity vulnerable to volatility, putting the rice processing and exporting industry to huge risk. With the introduction of futures contracts, the trade will be able to hedge the risk, said Prasad, chief executive of ICEX. Domestic consumption of this commodity is also witnessing high growth. The exchange has been working on this for over a year and has been in touch with several market participants to understand the contours of the contract. The physical market size of basmati paddy 1121 is around 10 million tonnes and the estimated value is about +36,000 crore. The delivery centre is Karnal, Prasad said. ICEX expects 1 per cent of the Rs 36,000-crore physical market to use the price hedging on its platform in the first year. The basmati rice industry is on the verge of clocking its highest-ever exports of Rs 30,000 crore in fiscal 2019.

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PNB SELLS 13.01% STAKE IN HOUSING FINANCE ARM FOR ₹1851.60 CR

Punjab National Bank (PNB) has sold 13.01 per cent stake in PNB Housing Ltd (PNBHF) to General Atlantic Group and VardePartners for ₹1851.60 crore. The new investors picked up about 6.50 per cent stake each in the housing finance company by investing ₹925.80 crore. PNB, in a stock exchange notice, said that it sold 1,08,91,733 equity shares each in PNBHF to General Atlantic Group and VardePartners at ₹850 per share. The transactions are subject to satisfaction of customary conditions, including receipt of applicable regulatory approvals. Post these transactions, PNB would continue to hold strategic stake of 19.78 per cent of the paid-up capital of PNBHF (as on 31 December 2018) and shall continue as a promoter and strategic shareholder of PNBHF, the notice said.

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BANKS REPORT BETTER NON-PERFORMING LOAN RATIO: FITCH

The Indian banking sector's non-performing loan (NPL) ratio for the nine months to December 2018 fell to 10.8 per cent from 11.5 per cent at fiscal year end 2018, according to Fitch Ratings' estimate. Lower fresh slippages and better recoveries helped reduce absolute non-performing loans across several banks, the global financial research agency said. Fitch Ratings, however, added that the provisioning pressures persisted with 14 out of 21 state-run banks reporting losses. Mid-sized or small state-run banks were the most affected as credit costs, despite some moderation, exceeded their weak income buffers. Complex legal proceedings have led to delays in the resolution of certain large NPLs among the system's $150 billion in NPLs (FY18), stretching recoveries well beyond the stipulated timeframe of 270 days, the agency said. There has also been increasing pressure from farm loans due to a weak monsoon and loan waivers, and small and medium-sized enterprises (SMEs), it noted. In January 2019, banks were allowed a one-time restructuring of SME loans under Rs 250 million. Fitch said, it is unlikely to materially boost credit growth as banks still have to meet a 0.625 per cent capital conservation buffer in FY20 while negotiating more provisions. Fitch estimates that Indian banks will require an additional $23 billion by FY20 to sufficiently meet minimum Basel III capital standards, achieve 65 per cent NPL cover and pursue low double-digit loan growth, it added. However, the agency is hopeful of large NPL resolution in 2019. Higher recoveries are probable in 2019 as pending cases that are well beyond the 180-day timeframe (50 per cent of total) are more likely to see some resolution during the year, the credit rating agency said. The focus is on the Reserve Bank of India's first list of 12 large NPL accounts, which constitutes one-third of the current NPL base. Four accounts were resolved in 2018 with an average 50 per cent recovery rate. Among the potential risks, Fitch said real-estate loans may be a casualty if the current risk aversion towards non-bank financial institutions persists. The liquidity squeeze -- following the default of a large non-bank in September 2018 -- has eased, but rollover risk for real-estate borrowers persists as they have been heavily funded by non-banks in recent years, Fitch said. Non-banks depend on banks and the debt market for their funding and account for 7 per cent of total banking-sector loans.

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NOT A LOST BATTLE YET: WITH PEACE OFFER, A MINDTREE CO-FOUNDER HOPES TO TURN THE TIDE

Mindtree promoters are not fighting a lost battle Krishnakumar Natarajan insisted even as he held out a fresh olive branch to Larsen & Toubro. Natarajan said Mindtree was open to reaching a 'middle ground' with L&T by way of a talk. Natarajan's conciliatory note comes a day after Mindtree constituted a high-level panel to evaluate the 'unsolicited' offer and scrapped its share buyback plan. This is widely being seen as a significant break in weeks of sustained hostility. The change in Mindtree's stance comes after a period of continued tirade against 'usurper' L&T and its hostile takeover bid. The battle has just began and it's too premature to say what will eventually happen, Natarajan said when asked if the cause was already lost. He explained why more than the bid itself he finds fault with the timing of it. The time L&T chose for its bid is worrisome, he said. Mindtree did all the early work, suffered low margins for years and now it's poised to clock top-shelf growth in the next couple of years, is how Natarajan put in perspective the high stakes involved. The focus now is on safeguarding the interests of employees and customers, Natarajan said. He, however, underlined the importance of remaining optimistic and practical, saying that crying over the past is pointless. There is nothing wrong in monetising his stake. But he can't sell the company; he has a fiduciary responsibility. What Siddhartha has done is not illegal, but is is fair practice, asked Natarajan. Mindtree is now prepared for not just one eventuality but a set of eventualities, he said.

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INDIA'S CASE ON CRYPTOCURRENCY BAN LACKS TRANSPARENCY: EXPERTS

The case on cryptocurrency ban set to be heard in Supreme Court on Friday lacks transparency, people aware of the matter told. Industry experts have said that the government did not adequately invite recommendations or hold consultations with stakeholders in the cryptocurrency or blockchain sector which is still in a nascent stage. Last month, the apex court had given a four-week deadline to the government to roll out a regulatory policy on the cryptocurrency ban. As the case tied all the participants - RBI, Internet, Mobile Association of India and Union of India - together, the industry sentiment is that if the policy fails to take a stand, the Supreme Court will depend on inputs from Internet and Mobile Association of India (IAMAI) and RBI on the ongoing crypto ban. While India has a cryptocurrency userbase of approximately 5-6 million, according to industry experts, many venture-backed crypto companies have already moved out of the country or shut shop after the Supreme Court's ruling in 2018. Apart from a few conversations with IAMAI, the government had invited Nishith Desai Associates to represent its independent report which was submitted to Subhash Chandra Garg panel. No concrete consultations were held while the report was being drafted. The committee did not have any representation from the industry and didn't understand the challenges or the innovation capabilities of the crypto industry, said Nischal Shetty. The global market for cryptocurrency was valued at $574.3 million in the year 2017 and is expected to be worth $6702.1 million by the end of 2025. The overall market is estimated to grow at a CAGR of 31.3% during the assessment period 2017 to 2025, according to a report by Transparency Market Research.

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DIGIT INSURANCE ADDS 20 LAKH USERS

Digit Insurance has added over 20 lakh customers in a span of 16 months Terming this a milestone achievement, Kamesh Goyal, said, Our mission to simplify insurance for people by making the process simple, and bringing real benefits has taken us to where we are today. The company has closed over 30,000 claims this March with 92 per cent claim settlement ratio for private cars (own damage), 91 per cent for two-wheelers (own damage), 99.5 per cent for domestic travel, 97 per cent for mobile, and 93 per cent for international travel between April 2018 and February 2019.

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PFC COMPLETES REC ACQUISITION, PAYS RS 14,500 CR TO GOVERNMENT

State-owned Power Finance Corporation (PFC) on Thursday completed the acquisition of majority stake in REC Ltd by transferring Rs 14,500 crore to the government, an official said. The transaction has helped the government meet its disinvestment target of Rs 80,000 crore for the current financial year. The entire consideration of Rs 14,500 crore for acquiring 52.63 per cent equity of the Government of India in REC is paid by PFC through RTGS (real-time gross settlement) mode this morning, the official told. The official said PFC Chairman and Managing Director Rajeev Sharma handed over the RTGS advice to Power Secretary A K Bhalla on Thursday to complete the acquisition. The money has been transferred into the government's account online.

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BANDHAN BANK-GRUH FINANCE MERGER TO GIVE A BIG PUSH TO AFFORDABLE HOUSING

Private sector Bandhan Bank is expecting to give a big push to the affordable housing sector after completion of its merger with Gruh Finance, Chandra Sekhar Ghosh said. Ghosh told on Thursday said that the merger process, which has already got the approval from the Reserve Bank of India (RBI), was expected to be completed by December. We have got the approval from the RBI. Now we are awaiting permission from the SEBI after which we will approach the NCLT, Ghosh said. He said the entire process is expected to be over by the end of this year, after which the bank will give a big push to the affordable housing sector.

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          COC SELLS MOSER BAER'S 60,000 SQ METERS LAND

Following the order of liquidation of Moser Baer India by National Company Law Tribunal (NCLT), New Delhi, committee of creditors of the company (CoC) sold its 60,000 sq meters land at Surajpur in Greater Noida West for Rs 72 crore to Sawasdee Group through auctioning. Sawasdee Group, formally known as Galaxy Group, has been developing residential and commercial projects in Greater Noida (West). Moser Baer India was one of the leading names amongst the suppliers of CDs and other storage devices globally. Due to financial crisis in Moser Baer, NCLT ordered its liquidation and the land was put to auction. Moser Baer was promoted by Deepak Puri. The company defaulted on payment of Rs 3,462.4 crore towards secured financial creditors.

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SHIP-BUILDING INDUSTRY SEEKS QUASHING OF RBI CIRCULAR TO SURVIVE

Ship-building companies have petitioned the Supreme Court that the industry can survive only if the February 12 circular of the Reserve Bank of India (RBI) is quashed and set aside The association said the threshold of 100 per cent approval of lenders be reduced to 50.1 per cent in value terms and the timeline of 180 days as mandated be increased to a period of at least 365 days or higher from the date of judgement. The RBI has clarified that the approval threshold requirement of 100 per cent lenders is mis-conceived. Even if a miniscule of lenders objects, a borrower may work out separately with that lender, it said. The RBI posted that 180 days is a reasonable period for achieving implementation of a resolution plan and the circular is generic and sector-agnostic. And a 180-day window is provided only to find a financial resolution plan for the stress faced by the borrowers and not for resolution of sectoral issues. The industry further presented a study by the IGIDR and the Insolvency and Bankruptcy Boar which stated that there is a lack of resolution plans. It asserted that resolution outside NCLT will maximise value for lenders as compared to the process under the Insolvency and Bankruptcy Code (IBC). The SAI, which said the ship-building is a strategic sector, wants the circular be made applicable to all those who are governed or regulated under the RBI Act including NBFCs and ARCs.

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SALE PROCEEDS OF MALLYA’S 74 LAKH SHARES IN UB TO BE DEPOSITED IN ESCROW A/C

The proceeds of the sale of 74 lakh shares of United Breweries Holdings Ltd (UBHL) amounting to Rs 1,008 crore by Bengaluru-based Debt Recovery Tribunal will be deposited in an escrow account with DRT According to two senior legal officials close to the development, since banks had lent money against corporate and personal guarantees provided by UBHL and Vijay Mallya, technically banks were defined as unsecured financial creditors. Multiple claimants of the assets of Vijay Mallya and intervention pleas filed by them will lead to a long wait ahead, with no clarity yet on how the liquidation proceeds will be restored. In such circumstances, the proceeds from the sale of shares will be distributed under the provisions of the Companies Act and not under Recovery Of Money Under The Recovery Of Debts Due To Banks And Financial Institution (RDDBFI) Act, said one of the persons quoted above. Due to this peculiar situation, first sovereign dues including the service tax and income tax will be paid, then secured creditors will get their due and banks will be in the queue just like other unsecured lenders, the person added. While another person involved in the matter said that there were several claimants, including relatives of Vijay Mallya, in the case of immovable properties and titles are not clear in such cases, which will lead to long drawn legal battle to sell such assets and recover from it as well. Also, Advait M Sethna, special counsel for the service tax department in a case against Mallya, said that, the overall impact of confiscation of Mallya’s properties under the newly enacted Fugitive Economic Offenders Act by the Enforcement Directorate (ED) will also have a bearing on these proceedings, in light of which the court may be persuaded to take a holistic view of the entire matter. ED has secured custody of four crore unpledged shares, constituting about 15.2% stake, owned by Mallya in India’s largest beer maker. The shares were transferred to ED by the Stock Holding Corporation of India under the Prevention of Money Laundering Act (PMLA), two people with knowledge of the plan said. The remaining 27 lakh shares are expected to be transferred soon. According to the Act, after an order of confiscation, all rights and title in such property stay with the central government. However, other claims of statutory liabilities like tax or government dues would have priority over charge holders. We are confused at the moment and hope some clarity emerges. Also, this is the first time the PMLA has been enacted and debtors being tried, he said. Heineken, a majority shareholder at United Breweries, is in touch with banks and regulators over the issue, a senior official said.

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SEBI WANTS SAFETY-FIRST, CONTINGENCY PLANS IN PLACE FOR MF INVESTORS

The Securities and Exchange Board of India (Sebi) has shot a six-point letter to mutual funds (MFs) to ensure that unitholders' interests are not getting compromised due to rise 'complex' debt investments of MFs to promoter entities. The regulator has directed the MF trustees, To review the risk management policy of the MF including the aspects like cap on such exposure (exposure to promoter entities), adequate cover, legal risk, market risk, liquidity risk, etc. to ascertain that the interest of unitholders are protected at all points of time. The market regulator has asked MF trustees to have a report ready by end of this month, which reviews total exposure through such structures during the last two years i.e. from January, 2017 onwards including outstanding exposure as on date. According to sources, the regulator wants to know whether MFs have proper contingency plans in place as despite being debt instruments, volatility in equity markets has a bearing on the credit quality of these exposures. According to a recent note by CRISIL, around 90 per cent of the rated pledge debt of Rs 38,000 crore had cover of less than two-times – even as low as 1.2 or 1.3 times. This is lower than what the Reserve Bank of India (RBI) stipulates for non-banking financial companies (NBFCs) that lend against shares. The RBI stipulates that all NBFCs with more than Rs 100 crore asset size need to maintain a loan-to-value (LTV) of 50 per cent where listed shares are placed as collateral. An LTV of 50 per cent means that for a Rs 50,000 loan, the market value of the collateral shares needs to be Rs 1 lakh. This translates into two times share cover. The CRISIL note points out that low equity cover heightens the risks for MFs and other investors as unlike NBFCs and banks, they don't have enough capital buffers. Considering high equity volatility, low covers of 1.2 or 1.3-times may not be able to provide adequate cushion and avert a default on the debt. While NBFCs and banks have capital cushion to absorb risks as per regulatory capital adequacy norms, others do not have any such leeway, the note read.

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NSEL INVESTORS APPEAL TO PMO, CORPORATE AFFAIRS MINISTRY TO FAST TRACK CASE, HELP SETTLE DUES

Investors of National Spot Exchange Limited (NSEL) have approached the Prime Minister’s Office and Ministry of Corporate Affairs’ minister PP Chaudhary highlighting the delay in the case and recovery of their dues Investors wrote to the PM, and Chaudhary, raising 10 questions with respect to allegations against 63 Moons (the erstwhile FTIL). The investors association wrote an email a week ahead of the implementation of the model code of conduct. NSEL investors received only Rs 65 crore of the recovery amount in the six years since the scam broke out on July 31, 2013. The total claim is for Rs 5,600 crore. As the affected group of investors, we have always been reaching out to officers of the State and Central Government to highlight the delays in the recovery process caused by both the Government, and its arms and agencies, said the investors, part of NSEL Aggrieved and Recovery Association. Investors pointed out in their email that even after six years there was no clarity about the Settlement Guarantee Fund that was to help them get their dues. The investors association raised questions such as, where did Rs 800 crore plus of Settlement Guarantee Fund of NSEL disappear just before the scam was exposed in July 2013? Who had hired NSEL management and kept them in charge since 2009 despite continuing and multiple irregularities, defaults and violations? Who appointed Mr Shankarlal Guru as the Chairman of NSEL, when his son-in-law Nilesh Patel was one of the largest defaulters on NSE? They also questioned why ex-director and Jignesh Shah’s close confidante, Joseph Massey was running away from the police. Investors also expressed their annoyance over transfer of Rs 31 crore received from NAFED to 63 Moons Why did NSEL clandestinely transfer Rs 31 crore that it received from NAFED to FTIL instead of distributing it to investors? FTIL later tendered an unequivocal and unconditional apology to Bombay High Court for taking this money. The investor association said, The Ministry of Corporate Affairs is not pursuing the matters sincerely. The merger of NSEL with its parent company FTIL has been confirmed by the Hon'ble Bombay High Court in December 2017, the writ petition was filed in November 2014. Against the order of the High Court, FTIL has filed SLP in Supreme Court since February 2018. But the matter is not being heard even now and the ASG representing the Union of India has been allowing adjournments to FTIL. The association praised the decision of the former chairman of Forward Market Commission Ramesh Abhishek and said, All the decisions of FMC were justiciable and could be and were challenged in the High Court and even the Supreme Court. No relief was granted to FTIL, clearly demonstrating that courts did not find anything wrong with the Not Fit and Proper order of FMC. If there was any bias or any prejudice, the courts would have clearly seen through.

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FOREX RESERVE CONTINUES TO SWELL, HITS $406.7 BILLION

India's foreign exchange reserves continued to surge for the third week in a row, adding $1.029 billion at $406.667 billion in the week to March 22, according to the Reserve Bank data. Forex reserves had increased by $3.6 billion to $405.6 billion in the previous reporting week driven by an increase in foreign currency assets. For the reporting week, foreign currency assets -- a major component of the overall reserves -- increased by $1.031 billion to $378.805 billion, the RBI said Friday. Gold reserves were unchanged at $23.408 billion in the reporting week, according to data from the central bank. The special drawing rights with the International Monetary Fund dipped by $0.7 million to $1.460 billion. The country's reserve position with the Fund, too, came down marginally by $1.5 million to $2.993 billion, the apex bank said.

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IRDAI KEEPS THIRD PARTY MOTOR INSURANCE RATES UNCHANGED FOR NEW FISCAL

In what has come as relief for motor insurance holders, annual premium rates increase for third party motor insurance policies have been put on hold for the next financial year for now. The insurance regulator said that insurers will continue to charge the rates currently being charged for Motor Third Party Liability Insurance Cover from April 1, 2019 until further orders. The annual increase depends on the vehicle type and engine capacity and it goes up by 10-20% every year. Third party insurance policies are mandatory by law. It pays for financial liabilities borne by vehicle owner in case of mishap. The insurance regulator has been raising insurance premium so that the prices are actuarially at par with the loss ratio of the industry.

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INVESTOR WEALTH ZOOMS RS 8.83 LAKH CRORE IN FY19

Investors' wealth zoomed Rs 8.83 lakh crore during 2018-19 fiscal driven by a rally in the broader market where the BSE benchmark jumped over 17 per cent. Led by the rally in stocks, the market capitalisation (m-cap) of BSE-listed companies rose by Rs 8,83,714.01 crore to Rs 1,51,08,711.01 crore. Investors' wealth had surged Rs 20.70 lakh crore during 2017-18 fiscal.

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GOVT RAISES H1 BORROWING PLAN TO RS 4.42 LAKH CRORE AMID TEPID EARNINGS, AS REPAYMENTS WEIGH

Amid tepid revenue collection, the government will borrow Rs 4.42 lakh crore in the first half of FY20 which is 62.3% of the budgeted borrowing of Rs 7.1 lakh crore for the whole year ending March 2020, Subhash Chandra Garg, said. According to Garg, the government will borrow Rs 17,000 crore via GILT every week for 26 weeks in the first half of the next fiscal. The high borrowing for FY20 is due to repayment obligations, Garg said. There is a repayment liability of Rs 1.02 lakh crore for the first half and Rs 1.35 lakh crore is for the second half, and the rest is net-borrowing. The government will borrow at 8.8% in 1-4 year bucket in Apr-Sep of FY20. It will borrow treasury bills of Rs 20,000 crore via treasury bills every week in the first quarter of FY20.  The government will soon announce a 7-year benchmark paper It will also announce a switch calendar on the third Monday of every month. The GILT buyback will most likely happen in October-March. The government has also extended the maturity bracket for GILT to 15-24 years from 15-19 years.

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INDIA INC’S OVERSEAS BORROWINGS FALL; OIL INDIA, INDIAN OIL MAJOR BORROWERS OF FOREIGN FUNDS IN FEB

India Inc’s borrowings from foreign markets fell to USD 2.81 billion in February, down by 9 per cent as compared to the year-ago month, data from the Reserve Bank of India showed Friday. The domestic firms had raised as much as $3.1 billion through the external commercial borrowing (ECB) route in the corresponding month of 2018. No firms tapped the rupee-denominated bonds route to borrow capital from foreign markets during February. The entire fund mop-up during the month was done through the automatic route of ECB, showed the RBI data. Among the major borrowers were Oil India Ltd (USD 550 million for overseas investment), Indian Oil Corporation (USD 400 million as working capital loan), Shriram Transport Finance Company (USD 400 million for sub-lending) and Mahindra & Mahindra Financial Services (USD 300 million for sub-lending). Tata Capital Housing Finance raised USD 200 million for on-lending, HPCL Rajasthan Refinery USD 140.71 million for new project investment, and Barclays Global Services Centre Pvt Ltd USD 130.11 million for new project.

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INDIA INC. TO WITNESS SLUMP IN Q4 REVENUE GROWTH, SAYS CRISIL

Revenue growth is likely to halve in the fourth quarter for India Inc. due to slump in commodity prices, according to Crisil Research. However, fall in input costs will shore up profitability of end-user industries. Crisil pegged the year-on-year corporate revenue growth for the current quarter at 8-9%, down sharply from the average of 16.5% in the previous three quarters. The plunge would be led by key commodities such as steel products, aluminium, natural gas and petrochemicals, which had softened significantly, impacting realisations, the report said. The forecast is based on Crisil Research’s analysis of 354 companies, which account for 67% of the market capitalisation of the National Stock Exchange, excluding banking, financial services and insurance (BFSI) and oil sectors. Prasad Koparkar, said: Sectors linked to commodities and infrastructure had been supporting revenue growth for the past few quarters. However, this trend has reversed in the fourth quarter. Steel, aluminium, natural gas and petrochemicals are expected to witness lower realisations, and sectors such as construction and capital goods are also likely to grow slower. Additionally, automobiles, one of the key sectors driven by consumption spending, continues to reel under demand slowdown given higher cost of ownership and new axle norms, among other factors.

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SC POSTPONES CRYPTO BAN CASE HEARING TO JULY

The case on cryptocurrency ban which was scheduled to be heard in the Supreme Court, has been postponed to the second week of July at the request of the government’s counsel. Last month, the apex court had given a four-week deadline to the government to roll out a regulatory policy on the cryptocurrency ban. The case has tied all the participants - RBI, Internet, Mobile Association of India and Union of India which is yet to submit its report on the regulation. The case is crucial because many of the venture-backed crypto companies have already moved out of the country or shut shop after the Supreme Court's ruling in 2018.

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FACEBOOK TO BACK WOMEN-LED AI STARTUPS

Facebook will back women-led Artificial Intelligence (AI) startups, offer 100 scholarships for projects in AI and introduce an innovation accelerator focused on AI for social good. ‘Women in AI’ Hackathons aimes at encouraging women developers and women-led start-ups focused on AI. Facebook will conduct application-based AI trainings under the Facebook Hubs program, to startups in 20 locations. It aims at helping startups scale their businesses, and will host mentor hours and workshops.

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Thanks & Regards,
CS Meetesh Shiroya