CORPORATE UPDATES 01.05.2019

REGISTERED TRADE UNION CAN FILE INSOLVENCY PETITION AS OPERATIONAL CREDITOR ON BEHALF OF ITS MEMBERS: SC

In a significant ruling, the Supreme Court has held that a registered trade union can maintain a petition as an operational creditor on behalf of its members. The bench allowed the appeal against the National Company Law Appellate Tribunal (NCLAT) order which held that a trade union would not be an operational creditor as no services are rendered by the trade union to the corporate debtor. JK Jute Mill Mazdoor Morcha issued a demand notice on behalf of about 3000 workers under Section 8 of the Insolvency and Bankruptcy Code for outstanding dues of workers. The National Company Law Tribunal (NCLT) dismissed their application. Upholding the NCLT order, the NCLAT observed that stating that each worker may file an individual application before the NCLT. Trade Union Is A 'Person' Under The IBC Code Disagreeing with this approach the bench observed that, a trade union is an entity established under a statute – namely, the Trade Unions Act, and would thus fall within the definition of person under Sections 3(23) of the Code. An operational debt, meaning a claim in respect of employment, could certainly be made by a person duly authorised to make such claim on behalf of a workman, the court said. It further observed: Further, a registered trade union recognised by Section 8 of the Trade Unions Act, makes it clear that it can sue and be sued as a body corporate under Section 13 of that Act. Equally, the general fund of the trade union, which inter alia is from collections from workmen who are its members, can certainly be spent on the conduct of disputes involving a member or members thereof or for 8 the prosecution of a legal proceeding to which the trade union is a party, and which is undertaken for the purpose of protecting the rights arising out of the relation of its members with their employer, which would include wages and other sums due from the employer to workmen. Filing Individual Petitions Would Be Burdensome Referring to provisions of the code, the bench said that a trade union, like a company, trust, partnership, or limited liability partnership, when registered under the Trade Union Act, would be established under that Act in the sense of being governed by that Act. Instead of one consolidated petition by a trade union representing a number of workmen, filing individual petitions would be burdensome as each workman would thereafter have to pay insolvency resolution process costs, costs of the interim resolution professional, costs of appointing valuers, etc. under the provisions of the Code read with Regulations 31 and 33 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. Looked at from any angle, there is no doubt that a registered trade union which is formed for the purpose of regulating the relations between workmen and their employer can maintain a petition as an operational creditor on behalf of its members. We must never forget that procedure is the handmaid of justice, and is meant to serve justice. Setting aside the Tribunals' view, the bench remanded the matter to NCLAT to decide the application on merits and said: What is clear is that the trade union represents its members who are workers, to whom dues may be owed by the employer, which are certainly debts owed for services rendered by each individual workman, who are collectively represented by the trade union. Equally, to state that for each workman there will be a separate cause of action, a separate claim, and a separate date of default would ignore the fact that a joint petition could be filed under Rule 6 read with Form 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, with authority from several workmen to one of them to file such petition on behalf of all.

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IBC REPORT CARD: 53% OF CORPORATE INSOLVENCY PROCESSES COMPLETED

About 13 percent of corporate insolvency resolution processes (CIRPs) until the end of March 2019 were resolved, while 53 percent cases ended in liquidation, according to data from the Insolvency and Bankruptcy Board of India (IBBI). Average realisation by financial creditors as a share of claims was only 43 percent In its report, the IBBI said 359 cases had been admitted for corporate insolvency. Of this, the resolution plan for 14 was approved while 73 went into liquidation in the January-March quarter. The Insolvency and Bankruptcy Code (IBC) was set up to resolve cases of corporate bankruptcy in a timely manner. However, a third of these cases took more than the stipulated 270 days. For 1,143 ongoing resolution cases, the deadline has already been breached Lenders have been forced to sell their stressed exposure to asset reconstruction companies (ARC) due to these delays, and their cash flows have been hit badly. Involved companies, their prospective buyers and creditors want the best deal out of the process, which gets in the way of a timely resolution. Another reason for the delays is different standpoints of the judges of the National Company Law Tribunal (NCLT). The Essar Steel insolvency case has dragged on for over 650 days now and the final result is still nowhere in sight. This delay is reportedly costing the main lender, State Bank of India, Rs 17 crore per day. The NCLT and other appellate tribunals have also been given the responsibility of cases linked to the Companies Act and the Competition Act apart from IBC cases. This crowding may also a reason the process is time-consuming, according to experts. About 150 companies found closure through an appeal process or a review, while close to 91 corporate debtors found closure via withdrawal under Section 12A of IBC. The data also showed that of the 1,858 total cases, 738 cases were introduced to the IBC by the financial creditors and 200 were initiated by corporate debtors.

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IBBI GIVES DEFAULTING PROMOTERS A LAST CHANCE

Promoters — who were forced to cede control of their companies owing to trigger of IBC process — may get a window of opportunity to make a comeback at the liquidation stage, if the Insolvency and Bankruptcy Board of India’s (IBBI) proposed draft regulations on changes in ‘liquidation process’ are anything to go by. Draft regulations allow a ‘corporate debtor’ facing liquidation to file for a ‘compromise or arrangement’ scheme under the Companies Act that would enable the debtor to continue the journey as a going concern. Saurav Kumar, said the draft regulations would potentially allow the promoters to come back into the picture at the liquidation stage. This would be good for the ecosystem and allow for the corporate debtors to file for a compromise and get a real chance to continue as a going concern, he said. Saurabh Singh, a law firm, felt this may perhaps better the situation for promoters who are required to cede control. He, however, added that in any case Section 12 A allows promoter to regain control even during corporate insolvency resolution process (CIRP). So, this should not be a big issue. Globally, everybody including erstwhile promoters are allowed to bid for assets in insolvency, he said. Along with draft regulations on proposed changes, IBBI has come up with a discussion paper on corporate liquidation process that highlights various issues impacting the liquidation process of a company under the IBC. Stakeholders’ and public can send in their comments latest by May 19. The aim of the proposed regulations is to help avoid closure of a viable corporate debtor (CD) or business of the CD and expedite liquidation process, both of which promote the objective of maximising the value of the assets of the CD. The draft regulations have also introduced concepts like stakeholders’ consultation committee for advising the liquidator on sale of assets and/or business. Singh said that formation of stakeholders committee is also step in the right direction, so that unlike in CIRP, other stakeholders like operational creditors have a say from early stage and can be consulted by liquidator before taking critical decisions which can otherwise be prone to litigation. Stipulation of timelines in submission of claims, distribution of sale proceeds recognising priority of charge holders inter-se are also steps which can help in efficient conduct of the liquidation process and brings in the required clarity pre-emptively. Since conciliation is a faster process than arbitration, the discussion paper has suggested that the liquidator may be empowered to provide for conciliation in case of disputes regarding the ownership of assets. The discussion paper has also sought public comments on whether resolution professional (RP) can continue as liquidator. There are views for and against such a move. Those opposed argue that RP has a vested interest in liquidation as he would earn fee as liquidator for years, and, therefore, would not endeavour for a resolution plan. Since he failed as a RP as there was no resolution plan, he should not be the liquidator. However, some others argue that he must be appointed as liquidator except in cases of misconduct. They argue that RP is familiar with CD and has details of the claims and assets and liabilities. It will, therefore, be easier for him/her to run the CD as a going concern and obtain good values from sale, they said.

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MOST CLAIMS LIQUIDATED IN NCLT AMID DELAYS: REPORT

Amid the rising number of cases admitted to the National Company Law Tribunal (NCLT), a Kotak report on Tuesday said that liquidation remained the most favourable closure for all the admitted claims under the insolvency resolution process. The report noted that nearly half of the ongoing cases have crossed 270 days since admission, which reflected poorly on the state of the resolution process in the country. Out of the total registered cases till 4QFY19, 42 per cent were from the manufacturing space and 19 per cent from real estate, renting and business activities, the report said. Liquidation remained the most favourable closure of all admitted claims under the insolvency resolution process with 52 per cent of the closed cases facing liquidation. Out of the 378 liquidated cases, in 64, the resolution value was higher than the liquidation value, it said. Out of 1,143 ongoing processes, 362 cases have passed 270 days since admission, while another 186 cases have crossed 180 days since admission, it added. The report concluded that under such circumstances, the number of cases facing liquidation will see a significant increase in the next few quarters. Besides, the report also noted that based on available data for all 94 cases resolved under the insolvency resolution process till 4QFY19, financial creditors have faced a haircut of 52 per cent on admitted claims.

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NCLAT PREPONES HEARING ON ESSAR STEEL TO MAY 7

The National Company Law Appellate Tribunal (NCLAT) on April 30 preponed its scheduled hearing over the resolution process of debt-ridden firm Essar Steel to May 7. The Committee of Creditors (CoC) of the company had moved an urgent plea to seek an early hearing in this matter. An NCLAT bench headed by Chairman Justice S J Mukhopadhaya on April 30 directed the matter to be listed on May 7. The NCLAT was scheduled to hear the Essar Steel matter on May 13, where operational creditors and other stake holders of Essar Steel have moved over distribution of Rs 42,000 crore coming in from ArcelorMittal. The promoters of the company had also approached the NCLAT, challenging the order of the Ahmedabad bench of the National Company Law Tribunal (NCLT), which had on March 9 approved ArcelorMittal's bid for the company.

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SETBACK FOR ERICSSON AS NCLAT LETS RCOM WITHDRAW PLEA AGAINST INSOLVENCY

The National Company Law Appellate Tribunal (NCLAT) on Tuesday allowed debt-laden Reliance Communications (RCom) to withdraw its petition challenging the National Company Law Tribunal (NCLT) Mumbai’s decision to initiate insolvency against it. RCom had moved the application to withdraw its challenge to the insolvency order after the board of the company had on February 1 decided that it would file for insolvency as all attempts to revive the company had been unsuccessful. The board of the company noted that despite the passage of so much time, the lenders had received zero proceeds from the proposed asset monetisation plans and the overall debt resolution process was yet to make any headway. Following the NCLAT allowing the withdrawal, the insolvency proceedings against RCom will restart in NCLT Mumbai.

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NCLAT PERMITS RCOM’S PLEA TO READMIT INSOLVENCY PROCEEDINGS

The National Company Law Appellate Tribunal (NCLAT) on Tuesday permitted a plea by Reliance Communications (RCom) to readmit insolvency proceedings under the Insolvency and Bankruptcy (IBC) code. The move brings the case back to the National Company Law Tribunal (NCLT), through which the beleaguered telecom major will seek debt resolution. The appellate tribunal, which was hearing the case, also said that the moratorium on RCom’s assets have to be maintained. RCom has sought to continue the insolvency proceedings against the company as it was unable to pay dues to its lenders. Swiss telecom equipment manufacturer Ericsson, which received its dues of ₹550 crore from RCom following a Supreme Court order, had opposed the move.

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HIT BY NCLT DELAYS, BANKS PUT RS 1.3 LAKH CR LOANS ON SALE

Banks showcased Rs 1.31 lakh crore of corporate loans in fiscal 2018-19, forced by delays in resolutions at National Company Law Tribunals (NCLT). Even in cases like textile company Alok Industries where the bidder has been approved, banks want to offload the loans to avoid delays. From the time the case is admitted to the final order from NCLT the average time is 18 months, which many of the large cases are exceeding as litigations are moving to the higher courts like the high courts and also Supreme Court, said a chief executive officer of a leading asset reconstruction company. Even after the final order, it takes another eight months for the money to flow into the books of banks. With Insolvency and Bankruptcy Code (IBC) 2016 failing to get settlements within stipulated timelines, banks are trying hard to sell off the cases, especially those which are in various stages in the bankruptcy courts. NCLT approved the sale of Alok Industries to Reliance Industries and JM Financial ARC this month, though the case was admitted in July 2017. Essar Steel, KS Oil, Gammon India, GTL Infrastructure, Visa Steel, Uttam Galva Steel are some of the companies where the cases have been referred to NCLT but the money is yet to flow back to banks. In the case of Essar Steel, it is over 600 days since it was first referred to the NCLT, and the final word on the case is yet to be heard. The top sellers of the soured corporate debt were the public sector banks. Bank of India put 309 accounts with loans of Rs 37,720 crore, State Bank of India (SBI) put Rs 32,609 crore of loans, Andhra Bank 321 accounts with loans of Rs 12,602 crore, Canara Bank showcased Rs 6,061 crore from 94 accounts, Central Bank Rs 928 crore from 49 accounts and United Bank of India Rs 4,311 crore from 156 accounts. Majority of these accounts are at various stages of resolution in NCLT. Bhushan Power and Steel is another company having protracted innings at the bankruptcy court with the promoter Sanjay Singal trying hard to retain the company. JSW Steel with an offer of Rs 19500 crore was selected as the highest bidder, pipping Tata Steel and Liberty House. Uncertain over how long they will have to wait for the recovery, at least two banks have decided to shed these loans. United Bank of India is trying to auction Rs 883.72 crore of loans that it extended to Bhushan Power and Steel. Central Bank of India also showcased its loan of Rs 1,550 crore to Bhushan Power in the auctions in March 2018. United Bank is also trying to auction off the Rs 753 crore of loans it extended to Alok Industries and the Rs 338 crore extended to Gammon India, which was also showcased in the auctions. In cases where the hope for recovery is almost nil, banks are forced to auction. Bank of India has showcased Rs 1,838.16 crore of its loans to Reliance Communications but failed to get any takers. RCom has Rs 45,000 crore of outstanding to the banks, but it moved the NCLT and filed for bankruptcy, leaving the banks with no option but to sell off the assets.

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IL&FS MUTUAL FUND PAYS RS 314 CRORE TO DEBT FUND INVESTORS

IL&FS Mutual Fund on Tuesday paid Rs 314 crore to investors in one of its infrastructure debt fund, making on-time redemption, according to a release. The money was paid to investors in IL&FS Mutual Fund’s first debt fund series -- IL&FS Infrastructure Debt Fund Series 1-A (IDF Scheme A) -- that is due Tuesday. The five-year close ended scheme was fully funded in April 2014 and had raised Rs 238 crore in assets under management. The scheme redeemed Rs 314 crore to the investors, which was paid out today, IL&FS Infra Asset Management Ltd said in the release. The on-time redemption of money assumes significance as it also comes at a time when there are concerns about exposure of mutual funds to various groups, including crisis-hit IL&FS Group and Essel.

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IL&FS ETHIOPIA EMPLOYEES TO MOVE NCLT OVER PAY DUES

Employees of IL&FS Ltd’s subsidiary in Ethiopia are filing a case with the NCLT in a bid to recover their salary dues. About 44 employees working for ITNL-Elsamex SA have not been paid salaries for several months now. This comes after the cash-strapped company asked the employees to sign a declaration stating that while the company would consider giving an ex-gratia payment on humanitarian grounds, the employees, in turn, would not to claim any other amount from it. All the 44 employees signed the declaration, following which the company released salaries up to August 2018. But now the employees say that they signed the document under duress.

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PNB RECOVERED ₹4,000 CRORE FROM SALE OF STRESSED ASSET IN JANUARY-MARCH 2019

State-owned Punjab National Bank (PNB) recovered ₹4,000 crore from sale of stressed assets in the quarter ended March, Sunil Mehta said on Tuesday. Mehta expects recovery of another ₹3,100 crore through sale of non-core assets in the first quarter of the current financial year 2019-20. Gross recovery for the bank stood at ₹16,608 crore during the first nine months of the financial year 2018-19, according to the bank’s data. PNB has been trying to monetize its non-core assets through a stake sale in its mortgage lending arm PNB Housing Finance and sale of its property in Bhikaji Cama Place in Delhi to preserve its capital, after the lender was hit by ₹14,356 crore fraud, involving diamantaire Nirav Modi in February 2018. The state-owned lender bounced back into black, posting net profit of ₹246.51 crore in the quarter-ended December, after incurring losses in the immediate past three consecutive quarters. Meanwhile, a consortium of lenders, comprising PNB among others and headed by State Bank of India (SBI) is negotiating the stake sale of Jet Airways and a resolution is expected soon, Mehta said.

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SUPREME COURT NEEDS TO PAUSE BEFORE DIRECTING RBI TO MAKE BANK INSPECTION REPORTS PUBLIC

With the Supreme Court coming down hard on RBI for not releasing information on bank inspection reports and for not making the names of loan defaulters’ public, chances are the central bank will have no option but to comply now To an extent, the SC’s impatience is understandable. Gross NPAs of the banking system have ballooned from Rs 1.9 lakh crore in 2013 to Rs 6.1 lakh crore in 2016 and to Rs 10.4 lakh crore in 2018, so when the central bank doesn’t put out the names of defaulters, it looks like it is helping them. Indeed, given how the central bank has been pushing banks to come clean on NPAs, and to pursue defaulters using the new insolvency code, the central bank’s stand on not making the names public makes little sense. In any case, with most of the names of the big defaulters known anyway – the RBI itself directed banks to take action against the top 12 – it makes sense to comply with SC’s directive and make the names public. It is true, as RBI has maintained, that not all defaulters are ‘wilful defaulters’ since, very often, there could be a business failure or there could be matters beyond their control; like, say, the state electricity boards not clearing their dues on time. But, classifying defaulters as NPAs is critical if banks are to create provisions. Also, even if a default is for a genuine reason, if the business needs restructuring, classifying it as an NPA and going to insolvency courts is critical. Also, making lists of defaulters’ public has another salutary impact: it makes it easier for credit-rating agencies to come out with default models that work better. One of the reasons why ratings are more difficult in India is that if loans are ever-greened, as they were in the past, there is no instance of default and so, no model can ever correctly predict default. Ironically, though, SC itself appears to be in two minds on defaults. Its latest direction, giving RBI one more chance to make the names of defaulters’ public suggests the apex court wants to deal harshly with them. Yet, by striking down RBI’s February 12 circular a few weeks ago, it has become easier for defaulters to get away with not repaying bank loans on time; as per the circular, banks had to declare even loans with a one-day default as defaulters and, if no solution was found to the problem within 180 days, the case would automatically be referred to the NCLT under the insolvency code. The second part of the SC directive to RBI pertains to making public – under the Right to Information Act – its inspection reports of various banks. Once again, this is related to the rapid build-up of bad loans and appears a reasonable demand, but disclosing such reports is a double-edged sword. It would certainly be good to know if RBI itself got to know about the problems in bank balance sheets through the annual inspections or whether it, too, was taken in by the window-dressing done by the banks. So, for instance, while the government took stern action against a former PNB head for the Rs 11,300 crore Nirav Modi was able to raise based on what turned out to be fraud guarantees given by PNB’s Brady Road branch, was the central bank able to catch this in its annual inspections? Indeed, if RBI inspections are not able to catch fraud at the banks it inspects – and making public the inspection reports will help settle this question – then the system of oversight needs a complete overhaul. The flipside of this, however, is that if there is a problem in a bank that the inspection report points to, and this report is made public, it can create panic about the solvency of the banks; that is why, in the past, when some banks have been in trouble, the RBI has arranged marriages with stronger banks to ensure the integrity of the banking system is not endangered. The Supreme Court needs to reexamine the issue before issuing a final order.

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GOVERNMENT NOTIFIES TAKING OVER OF NHB FROM RBI

The government has issued a notification taking over the National Housing Bank ( NHB) after buying entire stake for Rs 1,450 crore from the Reserve Bank of India ( RBI). The RBI has exited the NHB, thus making it a fully government-owned entity. The central bank was holding 100 per cent stake in the NHB, the housing finance regulator. The move is part of ending the cross-holding in regulatory institutions and follows the recommendation of Narasimham-II committee report of October 2001 and the RBI's own discussion paper on the same, titled 'Harmonising the Role and Operations of Development Financial Institutions and Banks'. The central government notifies that the subscribed capital of Rs 1,450 crore of the NHB by the RBI, stands transferred to, and vested in the central government upon payment of the face value ofthe subscribed capital, to the RBI, with effect from the 19th day of March, 2019, said the finance ministry notification dated April 29. The Narasimham panel had said the RBI could not own those entities which are regulated by it. The RBI has also divested its shareholding in Nabard. The central bank held 72.5 per cent equity in Nabard worth Rs 1,450 crore, of which 71.5 per cent amounting to Rs 1,430 crore were divested way back in October 2010 and the residual shareholding was divested on February 26, 2019.

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A WOMAN IS EQUAL TO THREE-FOURTHS OF A MAN; UNEQUAL ECONOMIC RIGHTS CAUSE A LOSS OF $160 TRILLION

Although reforms have improved economic inclusion of women, yet gaps remain as women worldwide on an average have only three-quarters of the legal protection than men during their working life, according to a new index released based on a ten-year study by the World Bank recently. This puts constraints on their ability to get jobs or start businesses and make economic decisions best suited for them and their families, said the report. The economic curbs on women range from bans on entering some jobs to a lack of equal pay or freedom from sexual harassment, said report. Previously in 2018, a World Bank report noted that the discriminatory laws between men and women across the world not only curb women’s economic rights, but also cause of loss of as much as $160 trillion in wealth. Given equal opportunities to men and women to reach their full potential, the world would not only be fairer but also be more prosperous, said World Bank Group’s interim president Kristalina Georgieva in a statement. The researchers in the 2019 report have produced an equality index to measure the progress over the last decade, under which they studied laws linked to women’s work and economic freedom, including the right to work in all the same jobs as men and get paid equally, penalties for sexual harassment at work, parental work protections and inheritance rights. While six countries namely Belgium, Denmark, France, Latvia, Luxembourg, and Swede, scored a perfect score of 100 in the index compared to none 10 years ago, 56 countries have made no improvement in equality in the same period, the report noted. Further, the index also pointed out towards wide variations across regions. Moreover, pointing out that a perfect score was no guarantee that rights are being respected, Jacqui Hunt, Europe director of global women’s rights group Equality Now, urged the governments to proactively work in order to fight gender discrimination. Apart from the legal and regulatory reforms, it also emphasised that the governments, civil society, international organizations must work together to achieve the goal.

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TAMIL NADU LAGS BEHIND MP AND UP IN REGISTRATION OF HOUSING PROJECTS UNDER REAL ESTATE ACT, REPORT SAYS

A report by a property consultant has said that Tamil Nadu is lagging behind Madhya Pradesh and Uttar Pradesh in registration of housing projects in the last two years. An analysis by Anarock Property Consultants Pvt Ltd found that 965 have been registered in Tamil Nadu till April since the real estate act came into force in the state. On the flip side, Uttar Pradesh and Madhya Pradesh recorded the registration of 2,612 and 2,163 projects, respectively. The regulating authority for the realty sector was constituted after in Tamil Nadu after the state government notified rules on June 22, 2017. The report further said that Maharashtra is currently the most active state having the highest project registrations with more than 20,718 projects under MahaRERA and nearly 19,699 RERA-registered real estate agents. Project registration in Karnataka currently stands at 2,530. There are 1,342 RERA-registered real estate agents in Karnataka. As many as 538 real estate agents had registered in Tamil Nadu, the report added.

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KOTAK MAHINDRA BANK Q4 NET JUMPS 25% ON STRONG LOAN GROWTH

Private sector lender Kotak Mahindra Bank reported a 25% growth in net profit for the quarter ended March 31, boosted by a strong loan growth. Kotak Mahindra Bank reported a 25% jump in net profit to ₹1,408 crore in the March quarter, as compared to ₹1,124 crore in the same quarter of the previous year. Overall, its loans grew 21% as of end-March. The bank's net interest income jumped to ₹3,048 crore, from ₹2,580 crore a year earlier. The net interest margin also inched higher to 4.48% during the quarter. Other income also rose to ₹1,270 crore in the fourth quarter ended March 31, as compared to ₹1,151 crore a year earlier. Asset quality remained stable, with gross bad loans as a percentage of the total at 2.14% by the end of March, compared with 2.07% in the previous quarter and 2.22% in the same period last year.

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DEBT MUTUAL FUND WOES DEEPEN AFTER ANIL AMBANI GROUPS FIRMS’ DOWNGRADE

Debt funds continue to remain under pressure after Rating agency CARE downgraded the long-term debt facilities of Anil Ambani-led group firms’ Reliance Home Finance and Reliance Commercial Finance to default status. Notably, CARE Ratings has now downgraded long-term bank facilities worth Rs 2,700 crore of Reliance Commercial Finance from CARE BBB+ to Care D. Further, ICRA has also downgraded the rating on Reliance Capital to sub-investment grade. Following the development, Reliance mutual fund said that it will write down the value of holdings in these two entities. The firm has an exposure of Rs 535 crore and Rs 1,083 crore to long-term non-convertible debentures (NCDs) issued by RCFL and RHFL, respectively, and these were held in around 10% of RMF’s total 166 fixed income and hybrid schemes. According to a report by global research firm Credit Suisse, up to 15% of debt mutual funds’ total assets under management are accounted for by four stressed companies – Dewan Housing Finance, Essel group, IL&FS and Anil Ambani group. These four companies together owed a whopping Rs 3.6 lakh crore to lenders as at the end of March 2018. In addition to the MF exposure, the exposure to four stressed groups (Dewan, Essel, IL&FS & ADA Group) for the banks and NBFCs is large, at 1 to 6 per cent of loans and 10-50 per cent of net worth, Credit Suisse said in a report.

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R-CAP LOOKS TO RAISE ₹10,000 CR THROUGH STAKE SALE TO PARE DEBT

Reliance Capital Ltd (R-Cap) has drawn up plans to raise up to ₹10,000 crore through stake sales as the diversified financial services company seeks to cut its debt amid a string of rating downgrades. The Anil Ambani group firm plans to sell up to a 51% stake each in its wholly owned non-banking financial companies—Reliance Home Finance and Reliance Commercial Finance as well as in two media companies—Codemasters and Prime Focus, said Amit Bapna. In addition, it plans to divest as much as a 49% stake in two wholly owned insurance firms—Reliance Insurance and Reliance General Insurance, Bapna said. He said the proposed deals are expected to infuse fresh equity in the company and help reduce the debt at R-Cap. The company had a consolidated debt of ₹49,290 crore as of 30 September. R-Cap has not appointed any investment bank but is in talks with two-three potential buyers, Bapna said, adding the disinvestments will be in addition to the on-going sale of a 43% stake in Reliance Nippon Asset Management Co., which is expected to close in September. It, however, remains to be seen whether R-Cap manages to seal the deals, given the distressed situation in the NBFC sector. Agreed the NBFC crisis is continuing, but we are ceding management control which is attractive to buyers and we are seeing reasonable interest. In NBFCs, we are looking to sell a 51% stake and in insurance, it could be up to 49%. We are willing to remain just a financial investor, Bapna said. Rating agencies CARE Ratings and Icra downgraded papers issued by Reliance Commercial Finance and Reliance Home Finance on 26 April. Icra also downgraded commercial paper issued by R-Cap. These rating actions raised questions on the group’s liquidity situation and ability to service debt. Bapna claims there is a temporary delay in meeting repayments to banks for ₹1,000 crore due to a timing mismatch. The others papers which have been downgraded are nowhere near their maturity, he said. We have short-term and long-term measures to tackle the current concerns. These concerns are not specific to Reliance alone but the entire NBFC sector which is struggling due to lack of bank funding, said Ravindra Rao.

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STANCHART FLAGS TURNAROUND PROGRESS WITH $1 BILLION BUYBACK PLAN

Standard Chartered PLC unveiled plans for an up to $1 billion share buyback, its first such in at least 20 years, and posted a 10 percent rise in quarterly profit, signalling the bank was seeing early success in its turnaround strategy. The buyback announcement sent Hong Kong-listed shares of the bank up more than 7 percent in afternoon trade on Tuesday, while the broader market was down 0.5 percent. The stock was trading 4.8% higher by 0607 GMT. The share repurchase plan comes after StanChart CEO Bill Winters unveiled in February ambitious plans to double return on tangible equity and dividends in three years by cutting $700 million in costs and boosting income. Winters won plaudits from investors for his initial three-year plan that began in June 2015 when he focused on revamping the risk culture, slashing costs and purging bad loans that had accumulated in a post-2008 period of over-aggressive growth. But the CEO then faced a tougher task, as StanChart battled to switch to growth from restructuring at a time when slowing economic growth in core Asian markets, volatile commodities markets and the impact of the U.S. fines hammered profits. We will maintain our strategic investment programme and start to buy back $1 billion of our shares, reflecting our confidence in our ability to execute the strategy and create long-term shareholder value, Winters said in the statement. Pretax profit for StanChart, which focuses on Asia, Africa and the Middle East, grew to $1.38 billion in the January-March period from $1.26 billion a year ago, the London-headquartered bank said.

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INDIA IS YOUTUBE'S FASTEST GROWING MARKET, SAYS SUNDAR PICHAI

India offers great potential for Google-owned YouTube's growth and the latest in the journey is YouTube Music that has been downloaded more than 15 million times in the country, CEO Sundar Pichai has said. Admitting that recent ad product changes in YouTube and Search are hurting its top-line growth, the company sounded bullish on YouTube during its first quarter results on Monday. YouTube Music and YouTube Premium are now available in 43 countries up from five markets at the start of 2018. In mid-March, we launched YouTube Music in India, one of YouTube's fastest growing markets. Since launch, the YouTube Music app has been downloaded more than 15 million times in the country, Pichai told analysts during the company's earnings call. YouTube's ad business, for both brand and direct response campaigns, continues to grow and support our creators, said the Indian-origin CEO. Pichai said he is focused towards sanitising the content on YouTube. Maybe I will start with the YouTube comments. I talked about in the area of content responsibility, we are definitely focused on making sure we are constantly improving how we are handling both in terms of reducing the content and shouldn't be there on the platform.

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Thanks & Regards,
CS Meetesh Shiroya