Monthly Archives: June 2019

A majority of Jaypee Infratech’s lenders are understood to have voted against NBCC’s bid but most homebuyers wanted the state-owned company to take over the bankrupt realty firm, sources said.

Bankers had reservations with the NBCC’s bid because of certain concessions sought by the state-owned firm related to future tax liabilities and approval from development authority YEIDA for transfer of land and Yamuna Expressway.

The development comes hours after the National Company Law Appellate Tribunal (NCLAT) on Monday clarified that it has not barred lenders from voting against NBCC’s resolution plan.

While the exact percentage of votes in favour and against the NBCC’s resolution plan was not disclosed due to the order of the NCLAT, sources said the bid possibly has not mustered the requisite nod of two-thirds of lenders and buyers.

The voting result is to be placed before the NCLAT.

In most bankruptcy proceedings, lenders have the right to vote for or against a resolution plan for a debt-laden firm. In the case of realty firms, homebuyers also have voting rights at par with lenders.

As many as 13 banks and over 23,000 homebuyers have voting rights in the committee of creditors (CoC) of Jaypee Infratech. Homebuyers represent 59.26% of voting rights, while banks have the rest. For approval of any resolution plan, at least 66% votes should be in favour.

Earlier on Monday, the NCLAT clarified that it has not barred lenders from voting against NBCC’s resolution plan.

Hearing a batch of applications filed by banks seeking permission to vote against the NBCC bid, the NCLAT said, “We have not said do not vote against. We have said the CoC may not file final report on the decision, if it is rejected”.

The NCLAT also directed interim resolution professional (IRP) Anuj Jain to report the outcome of voting process directly to it.

This is the second round of bidding process to revive Jaypee Infratech, which went into insolvency in August 2017 after the National Company Law Tribunal (NCLT) admitted an application filed by an IDBI Bank-led consortium.

In the first round of insolvency proceedings conducted last year, the `7,350-crore bid of Lakshadweep, part of Suraksha Group, was rejected by lenders. Later in October 2018, the IRP started the second round of bidding process. Last month, the CoC rejected Suraksha Realty’s bid.

On May 30, the CoC decided to put on vote NBCC’s bid even as bankers had reservations against the proposal. The voting process, which started on May 31, concluded on Monday.

Last week, lenders filed a petition before the NCLAT to allow them to vote against NBCC’s bid in an ongoing insolvency process.

A three-member bench headed by chairman Justice S J Mukhopadhaya directed that the voting process should be completed.

“As the voting is on and is likely to be completed on Monday by 5 pm, we are not inclined to pass any order,” said NCLAT in its order earlier on Monday.

During the proceedings, senior advocate Salman Khurshid, who was representing the lenders, informed NCLAT about the conditions put by the NBCC in the resolution plan.

In their plea, lenders sought that secured financial creditors should be permitted to vote against NBCC’s resolution plan or bid. They also pleaded that the IRP and the CoC should be allowed to explore other alternatives such as inviting fresh expression of interest and considering bids that already have been submitted by other companies. The Adani group recently made an unsolicited and non-binding bid to acquire Jaypee Infratech. During the hearing, the appellate tribunal clarified that votes of the absentees would not be counted in the total voting percentage.

“We make it clear that if any of the financial creditors remain absent in voting, their voting percentage shall not be counted for the purpose of counting voting share in terms of decision already passed by this appellate tribunal,” it said.

Further, it directed the IRP to report about the outcome of the order directly to it instead of Allahabad bench of the NCLT, which is supervising insolvency resolution process of Jaypee Infratech.

The NCLAT has also advanced the date of next hearing to July 2 from July 17.

During the proceedings, NCLAT told the lenders that the process must go on as stake of 23,000 flat buyers are concerned.

The appellate tribunal told bankers that Jaypee Infratech is not the owner of the land and has taken it on on lease from the Yamuna Expressway Industrial Development Authority (YEIDA).

“We want a resolution. Somehow it should come,” NCLAT observed.

https://www.financialexpress.com/industry/jaypee-infra-insolvency-lenders-reject-nbcc-bid-key-details/1603664/

FPIs invested $786.72 million into bonds in the first four trading sessions in June, taking the aggregate inflows to over $1.5 billion after the BJP’s win on May 23.

Foreign portfolio investors (FPI) continue to invest in the Indian bond markets after the Lok Sabha election results as they expect favourable economic reforms from the new government. FPIs invested $786.72 million into bonds in the first four trading sessions in June, taking the aggregate inflows to over $1.5 billion after the BJP’s win on May 23.

The benchmark government bond — 7.26% yielding notes maturing in 2029 – rose 10 bps to close at 7.07% on Monday, as the Brent crude oil prices rose to $63.29 bbl (per barrel) from $62.63 bbl the previous day.

The 10-year bond yield fell below 7% for the first time in 18 months and touched a low of 6.93% on June 6 after the Reserve Bank of India (RBI) announced a 25 bps cut in the repo rate, as anticipated by most of the market experts amid the worsening financial situation. The RBI also shifted its stance to accommodative, signaling no more rate hikes soon.

Rupee closed 19 paisa lower at Rs 69.65 on Monday due to the rise in crude oil prices.

“With the rupee being stable against the dollar and with the fear of inflation going away, we can expect the steady inflows in the upcoming sessions also,” said Ajay Manglunia, MD and head – institutional fixed income, JM Financial. US-China trade tensions could influence yields, he added. Bond dealers expect another 10-15 bps drop in yields if the favourable situations persist.

In May, the total inflow from foreign investors was $537 million, while in April, there was an outflow of $1.5 billion from the Indian debt markets. A day after the RBI monetary policy, global funds invested $316.48 million on Friday, which is the highest FPI inflow in debts in a single day in the last 16 trading sessions.

https://www.financialexpress.com/market/fpi-investments-in-bond-market-hit-1-5-billion-after-may-23/1603555/

Car and two-wheeler cos to shut plants for several days this quarter to reduce unsold inventory.

India’s top manufacturers of passenger vehicles and two-wheelers have announced factory shutdowns stretching over several days in the ongoing quarter, which could help them reduce unsold inventory in a weak market but make it tough for the automobile industry to achieve its production and growth targets.

More than half a million passenger vehicles worth $5 billion (nearly Rs 35,000 crore) are lying unsold in dealerships at the beginning of June. In the two-wheeler segment, the number is as high as 3 million, valued at about $2.5 billion.

Seven of the top 10 passenger vehicle makers, including Maruti Suzuki, Tata Motors and Mahindra & Mahindra, have announced plant shutdowns between May and June. While some have completed the process, ongoing or scheduled to happen in the coming days for the others.

“What’s the point in producing and pushing stock when the offtake is weak. We have calibrated our production based on demand in May and we will do so in June too,” said Mayank Pareek, president of the passenger vehicle division at Tata Motors.

According to an analysis by ET, the shutdowns are likely to reduce the industry output by 20-25% in the May-June period, which in turn will ease the pressure on the cramped stockyards at factories as well as dealerships. In fact, the dealers are the worst- hit by the inventory that is as much as 50% more than normal, as they have to pay GST on even the unsold vehicles.

Maruti, Mahindra and Tata Motors suspended production for several days in May. These automakers, along with Honda Cars India, Renault-Nissan Alliance and Skoda Auto, plan another round of shutdowns for four to 10 days this month for scheduled maintenance.

https://economictimes.indiatimes.com/industry/auto/auto-news/auto-companies-slam-brakes-on-production/articleshow/69718548.cms

Lender plans rights issue, FPO as part of fund raising exercise; says it will be requiring capital to meet prescribed capital adequacy ratio on ongoing basis

Central Bank of India (CBI) is planning to raise up to Rs 5,000 crore in the current fiscal through various means, including rights issue and FPO, to meet Basel III norms by March 2020.

The bank will raise capital through follow on public offer, rights issue or qualified institutional placement (QIP) and will seek permission from shareholders in the ensuing annual general meeting to be held on June 28, it said in its annual report 2018-19.

It will create, offer and allot such number of equity shares up to the value of Rs 5,000 crore, whether at a discount or premium to the market price, in one or more tranches, it said.

As per the Basel III regulations, Central Bank said it will be required to maintain minimum common equity tier-I ratio of 5.50 per cent and capital conservation buffer of 2.50 per cent in the form of equity capital, and tier-I ratio of 9.50 per cent and overall CRAR (capital to risk weighted assets ratio) of 11.50 per cent by March 31, 2020.

“The Bank will be requiring capital to meet the prescribed capital adequacy ratio (CAR) on ongoing basis. Therefore, your directors have decided to raise equity capital up to Rs 5,000 crore through various modes such as – Follow-on-Public Issue, Rights Issue, Private Placement including qualified institutions placements,” said the report.

The capital will be utilised for the general business purposes, the bank said.

The lender registered a widening of its net loss at Rs 5,641 crore during 2018-19 as against Rs 5,105 crore in the preceding fiscal due to high level of bad loans and provisions for them.

Whereas, the gross non-performing loans stood at 19.29 per cent at the end of March 2019, the net bad loans ratio stood at 7.73 per cent. In 2017-18, the gross bad loans were 21.48 per cent, while net NPAs were 11.10 per cent.

Total income during 2018-19 also fell to Rs 25,052 crore as compared to Rs 26,659 crore a year ago.

Due to high net NPA and negative return on assets, the RBI had put the lender under its prompt corrective action (PCA) framework in June 2017.

“Bank believes that corrective measures arising out of the PCA will help in improving overall performance of the bank,” it said in the report.

It also said NPA management is the core focus areas and it will cut down bad loans through cash recovery, upgradation, compromise settlement.

It will also employ other recovery measures, including sale of NPA accounts to asset reconstruction companies, resolution through NCLT/IBC, recovery in written-off accounts as well as speeding up recovery process through DRTs in time-bound manner.

“Asset quality continued to be the major concern of the banking industry in general and particularly in the bank for last 3-4 years. By putting concerted efforts, we were able to make cash recovery and upgradation of Rs 5,656 crore in 2018-19 as against Rs 3,122 crore in 2017-18.

“We expect resolution of certain big NPA accounts through National Company Law Tribunal under IBC during 2019-20. We shall continue to have focused efforts to maximise NPA recovery, improve asset quality and earn net profit during the year 2019-20,” Central Bank of India MD and CEO Pallav Mohapatra said.

https://www.business-standard.com/article/companies/central-bank-to-raise-rs-5-000-cr-this-fiscal-to-meet-basel-iii-norms-119060900220_1.html

Only specific solutions to rescue the sector can stem the panic and stop a contagion: Expert

The Reserve Bank of India may have cut interest rates thrice this year, but that’s no respite for NBFCs which are facing crisis of confidence. Cost of funding for a majority of them may be set to jump with more rating downgrades in sight amid no bailout from the RBI.

The Monetary Policy Committee of RBI has cut repo rate by 25 basis points last week and changes its stance on liquidity from neutral to accommodative.

“Due to risk aversion by larger market segment of investors class specially institutional side, credit spread for more leveraged ones and non AAA NBFC may widen and miss the advantage of rate cuts,” said Ajay Manglunia MD and head institutional fixed income at JM Financial Products Limited.

Post rate cut and change of stand from neutral to accommodative, the rates have rallied and yields down by 8-10 bps. This kind of rally may continue and gain moment in down side post budget with improvement in flows from foreign portfolio investors.

RBI has assured of maintaining adequate system liquidity. With 21 basis points decline in the weighted average lending rate on fresh rupee loans since January, the central bank felt monetary policy transmission has been faster than earlier.

“A more focused approach is needed to address issues in NBFC and Housing Finance, failing which transmission of lower rates to end-borrowers may not happen fast enough,” said Mihir Vora, director, Max Life Insurance.

Though no specific measure was announced to provide immediate relief to the troubled NBFC sector, RBI Governor Shaktikanta Das said they will do whatever it takes to ensure financial stability of the system.

“Specific and targeted solutions to rescue these besieged sectors alone can stem the panic and stop a further contagion,” said Ajay Bodke, CEO and Chief Portfolio Manager, Prabhudas Lilladher.

https://economictimes.indiatimes.com/industry/banking/finance/with-more-rating-cuts-in-sight-nbfcs-cost-of-funding-may-rise/articleshow/69718574.cms

Eros Media shares tanked 10 per cent to Rs 40.95 and hit its lower circuit limit.

Shares of Eros International NSE -10.00 % Media hit a fresh all-time low in Monday’s session and looked on course to extend their losing streak into the fourth consecutive session.

The stock tanked 10 per cent to Rs 40.95 and hit its lower circuit limit. In the last four sessions, the stock has come off 38 per cent.

Shares of the company have been falling since last Tuesday. On Wednesday, rating company CARENSE 0.17 % cut its creditworthiness, citing delays or likely defaults in serving debt availed from banks.

CARE lowered the long-term loan facilities to ‘D’ or default from BBB-, a plunge in grades by several notches reminiscent of the sharp downgrades at infrastructure conglomerate IL&FS. The downgrade is likely to hit the company’s fundraising plans.

Even as Eros was making efforts to assuage investor concerns, a US-based forensic financial research firm said much of the receivables that the company had claimed might not be existing, and accused its promoters of engaging in “highly irregular related party transactions” which “appear designed to hide receivables”.

As per an ET report, Hindenburg Research’s June 7 report said the company’s auditors, Grant Thornton, failed to apply “even basic scrutiny to Eros’ financials”, and said “the price of both the BSE and NYSE stock (of the company) to end up worthless, barring some sort of bailout from a friend of Eros’s leadership”.

A Grant Thornton India spokesperson told ET that it was a short seller’s report and that it was examining its contents.

However, Eros chairman Kishore Lulla said there was no truth in the allegations and that the company was seeking advice on legal action against the research firm.

Both Grant Thornton and Lulla said the allegations were similar to those raised in a previous short-seller report and found to be without substance after an investigation.

https://economictimes.indiatimes.com/markets/stocks/news/eros-media-shares-hit-fresh-all-time-low/articleshow/69720831.cms

Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL) will acquire 25% stake each in Indian Oil Corporation’s (IOC’s) LPG pipeline project connecting Kandla in Gujarat with Gorakhpur in UP, ensuring capacity utilisation of the Rs 9,000-crore project aimed at bulk availability of the clean cooking fuel in the heart of the country.

The three state-run companies signed an agreement on Monday for forming a joint venture company to implement the project, proposed in 2016 in anticipation of demand rising due to the Narendra Modi government’s move to rid rural India of smoky kitchens by providing LPG connection free of cost under the Ujjwala scheme.

The Ujjwala scheme has turned the country into the world’s second-largest importer of LPG after China since 2017-18 as demand jumped by 8% due to addition of over seven million poor households to the consumer base since the scheme’s launch in May 2016.

Since India is deficit in LPG and largely depends on its import, the proposed pipeline will ease transportation from the main import terminal and cater to a quarter of the population by feeding 22 bottling plants along its route.

The pipeline will wheel 6 million tonne of LPG from the Kandla import terminal and west coast refineries to the north via Ahmedabad in Gujarat, Ujjain, Bhopal in Madhya Pradesh, Kanpur, Allahabad, Varanasi, and Lucknow in UP.

This will be the country’s longest LPG pipeline. State-owned gas utility GAIL operates a 1,415-km pipeline from Jamnagar in Gujarat to Loni near Delhi, wheeling 2.5 million tonne of the fuel. GAIL also has a 623-km Vizag-Secunderabad pipeline.

https://timesofindia.indiatimes.com/business/india-business/bpcl-hpcl-take-25-each-in-iocs-lpg-pipeline/articleshow/69657739.cms