Monthly Archives: July 2019

For their part, PSBs are choosing to wait for further guidelines from the regulator before zeroing in on prospective loan pools.

The benefits of the partial credit guarantee scheme for purchases of asset pools by banks from non-banking financial companies (NBFCs) could be limited to housing finance companies (HFCs) and microfinance institutions (MFIs), bankers and industry executives said.

Moreover, banks are expected to be particular about the health of the companies they buy pools from, as the Budget offers the credit guarantee to public sector banks (PSBs) against purchase of only high-rated pooled assets of financially-sound NBFCs.

For their part, PSBs are choosing to wait for further guidelines from the regulator before zeroing in on prospective loan pools. Mrutyunjay Mahapatra, managing director and chief executive officer of Syndicate Bank, told FE, “Operating guidelines will probably come later. The finance minister in her speech did not distinguish between categories of NBFCs. We are generally in the market for housing-loan pools and MSME (micro, small and medium enterprises) pools.”

Researchers at Icra say the credit guarantee scheme is more likely to benefit retail NBFCs with shorter-tenure assets. Supreeta Nijjar, vice-president, financial sector ratings, Icra, said: “These loans could be personal loans, microfinance or even CV (commercial vehicle) loans.”

 https://www.financialexpress.com/industry/banking-finance/partial-credit-guarantee-scheme-unlikely-to-help-stressed-nbfcs/1636011/

This financial year, allocation has been made to the NHAI for major works under the Bharatmala Pariyojana, entrusted to the organisation for execution

 Funds to be raised for the National Highways Authority of India (NHAI) have been hiked by 21 per cent in 2019-20 as the government prepares a blueprint for executing Bharatmala projects in a time-bound manner.

The authority has the approval to raise Rs 75,000 crore during the current year and government support of Rs 36,691 crore has been sanctioned.

In FY19, Rs 62,000 crore, a mix of debt raised from banks, toll revenue, and a road monetisation scheme, was to be raised.

This financial year, allocation has been made to the NHAI for major works under the Bharatmala Pariyojana, entrusted to the organisation for execution. The money will come from the Central Road Infrastructure Fund (CRIF), Permanent Bridges Fee Fund (PBFF), and Monetisation of National Highways Fund (MNHF).

The provision is mainly for expenditure on maintaining national highways is financed from Central Road Infrastructure Fund. The works are executed on agency basis by the Public Works Department of the States, Border Roads Organisation, National Highways & Infrastructure Development Corporation Ltd (NHIDCL) and NHAI.

While the overall allocation for NHAI has seen a rise in the last couple of years, the authority’s IEBR (Internal and Extra Budgetary Resources) has increased. IEBR is essentially is he money raised by the department itself in the form of profit, debt and equity.

In FY18, the NHAI’s IEBR was Rs 50,532.41 crore. It went up to Rs 62,000 crore in FY19 and further up to Rs 75,000 crore in FY20.

The massive expenditure is earmarked mainly for the government’s ambitious Bharatmala programme, which envisages construction of 20,000 km of roads at an estimated investment of Rs 7 trillion.

In the first phase to be undertaken over three-five years, the project would cost Rs 5.5 trillion. The project would be funded through various sources, including Rs 2.09 trillion from the market, Rs 1.06 lakh crore through private investment and Rs 2.19 lakh crore from the central road fund or toll collection.

The average cost of constructing 1 km of road is Rs 13 crore.

Bharatmala is the largest highways project after the National Highway Development Programme (NHDP) which saw the development of about 50,000 km, and aims at improving connectivity in border and other areas.

The project that was first mooted in April 2015 aims to connect Gujarat and Rajasthan, then move to Punjab and cover Jammu & Kashmir, Himachal Pradesh, Uttarakhand followed by Uttar Pradesh and Bihar and further to Sikkim, Assam, Arunachal Pradesh, and right up to the Indo-Myanmar border in Manipur and Mizoram.

The aim is to improve the speed of traffic flow on key corridors by providing uniform four-lane roads between two identified points.

After completion of the first phase of the ongoing Bharatmala programme, the focus would shift towards developing the state road network.

https://www.business-standard.com/article/economy-policy/budget-2019-nhai-fundraising-plan-raised-by-21-to-rs-75-000-crore-119070700864_1.html

The company has appointed Axis Capital as its merchant banker to scout for investors. Last month, the company defaulted twice on its commercial papers

 Promoters of travel firm Cox & Kings, which defaulted twice last month on its commercial papers, have reached out to potential investors to divest stake and raise capital.

Sources told Moneycontrol that the promoters are willing to divest majority stake as they look to correct the cash flow mismatch that had led to the defaults. The two defaults amounted to Rs 200 crore in total.

The company has appointed Axis Capital as its merchant banker.

“The promoters are looking to divest stakes in some of the units, or could sell one or more of their products. While these are initial days, the company has received interest from some of the biggest names in the private equity space,” an executive said.

Promoters, consisting of the Kerkar family, hold 49.8 percent stake in the company. Peter Kerkar is CEO.

One of the units where the promoters could dilute stake is Cox & Kings Global Services: the visa processing arm. Sources said the company could also look to divest its India and international leisure business and also the corporate travel vertical.

The India leisure business includes outbound travel and also the MICE (Meetings, incentives, conferencing, exhibitions) segment.

A well-known brand in the travel space, Cox & Kings has a widespread network across the country, which includes its franchisees, offices and general sales agents.

“The company has a temporary cash flow problem. But getting investors shouldn’t be a problem given its legacy,” said the executive cited above.

When contacted, the company refused to comment.

The defaults

Cox & Kings first defaulted on a payment of Rs 150 crore on June 27. A day later, it defaulted on a payment of Rs 65 crore, of which Rs 15 crore was paid.

The defaults were followed by a series of downgrades by rating agencies. After the second default too, Brickworks and CARE Ratings downgraded several of the company’s instruments.

In a statement to the bourses late on July 2, it accepted that the working capital situation was “stretched in the last few months and was further impacted due to its inability to replace the short-term loans with long term loans/regular working capital lines.”

It added that it is taking “all required measures to resolve the temporary cash flow mismatch,” and will be “approaching its lenders to work out some time bound program to meet this emergency.”

It is yet not known how much the company plans to raise through the stake sale. Neither has a deadline been set, the executive stated.

https://www.moneycontrol.com/news/business/companies/exclusive-cox-kings-promoters-willing-to-divest-majority-stake-to-raise-capital-4179571.html

PNB said Bhushan Power & Steel Ltd misappropriated bank funds and manipulated its books of accounts to raise funds from consortium lender banks

PSU banking major Punjab National Bank (PNB) tanked over 9 percent intraday on July 8 after it detected an alleged fraud of more than Rs 3,800 crore by Bhushan Power & Steel Ltd (BPSL) and reported it to the Reserve Bank of India (RBI).

PNB said Bhushan Power & Steel Ltd misappropriated bank funds and manipulated its books of accounts to raise funds from consortium lender banks.

“On the basis of forensic audit investigation findings and CBI filing FIR, on suo moto basis, against the company and its directors, alleging diversion of funds from banking system, a fraud of Rs 3,805.15 crore is being reported by bank to RBI,” Punjab National Bank (PNB) said in a regulatory filing.

“It has been observed that the company has misappropriated bank funds, manipulated books of accounts to raise funds from consortium lender banks. At present, the case is at NCLT which is in advance stage and the Bank expects good recovery in the account,” PNB added.

PNB said its domestic exposure to Bhushan Power & Steel Ltd (BPSL) stood at Rs 3,191.51 crore and overseas exposure at $49.71 million (approx Rs 345.74 crore) at Dubai branch and $38.51 million (approx. Rs.267.90 crore) at Hong Kong branch.

The stock is already down over 20 percent in the last three months. At 10:30 hours, Punjab National Bank was quoting at Rs 74.30, down Rs 7.45, or 9.11 percent. It has touched an intraday high of Rs 77.85 and an intraday low of Rs 73.30.

https://www.moneycontrol.com/news/business/markets/pnb-tanks-detection-of-fraud-bhushan-power-steel-4180281.html

Cox & Kings had a total debt of Rs 3,238 crore at end of FY19 and this included both short-term and long-term loans

Lenders have turned cautious after Cox & Kings defaulted on commercial paper of Rs 200 crore in the last few days and are looking at ways to address the tour operator’s debt issues.

Cox & Kings continues to be a standard asset, and banks have not yet taken a call on reworking on debt repayment terms and other conditions. But two defaults (of Rs 150 crore and Rs 50 crore) last week have prompted banks to take steps for minimising their exposure.

A senior official said a public sector bank, which is under Prompt Corrective Action (PCA) regime, could not renew working capital facility for the tour operator. “RBI rules on PCA put restrictions on financing corporates whose financial instruments are downgraded. This had a cascading effect and complicated matters and lenders are cautious now,” he said.

Cox & Kings had a total debt of Rs 3,238 crore at end of FY19 and this included both short-term and long-term loans.

The total debt of Cox & Kings as at FY19 stood at Rs 3,238 crores as against Rs 4,014 crores at FY18. The company has been unable to replace its short-term debt with long-term loans, which has impacted its liquidity position.

Salaries and supplier payments have been delayed and International Air Transport Association has also suspended the tour operator from selling tickets under the billing and settlement plan, as it reviews the credit risk. A sister concern eezego1 too has been suspended from selling tickets. “There has been no defaults on airline payments. There are bank guarantees in place. IATA took the decision without any discussion with us and this is unfair,” a company executive complained. Detailed queries sent to Cox and Kings management remained unanswered.

Earlier, Cox & Kings had said it was taking all required measures to “resolve temporary cash flow mismatch. It is evaluating each business and identifying ways to improve operational performance. The company is focusing on cash flow generation from each business and working at the highest priority to free working capital.”

A senior public sector banker said the tour operator was in process of monetising some of its assets. “So far, they have not hung up their boots. If they are able to do monetise assets, it will aid in getting over current resource constraint.”

The defaults have stumped lenders and stock market as the company had reported of a comfortable liquidity position. According to a recent note by CARE Ratings, Cox & Kings had reported cash and bank balances of Rs 1,726 crore in June. Of this, it told CARE, that there was about Rs 1,300 crore, which could be used for debt repayment at any point of time.

Cox and Kings closed 4.86 per cent down at Rs 31.35 per share on BSE.

https://www.business-standard.com/article/companies/lenders-cautious-as-cox-kings-defaults-on-commercial-paper-of-rs-200-cr-119070400035_1.html

The stock opened at Rs 1,180 on the National Stock Exchange, rising 21.2 percent over final issue price of Rs 973

IndiaMART InterMESH, an online marketplace for business products and services, saw a strong listing on July 4. Hefty subscription and positive market mood supported the stock price.

The stock opened at Rs 1,180 on the National Stock Exchange, rising 21.2 percent over the final issue price of Rs 973.

It was trading at Rs 1,221.50 on the BSE, up 25.54 percent while it was quoting at Rs 1,215.50 on the National Stock Exchange, up 24.92 percent at 10:00:45 hours IST.

On volume front, IndiaMART traded with 1.25 lakh shares on the BSE and 12.7 lakh shares on NSE.

The Rs 475-crore issue was subscribed 36.16 times during the IPO period June 24-26.

The IPO was for 48,87,862 equity shares, including anchor portion of 21,95,038 equity shares. It was offered at a price band of Rs 970-973 per share.

https://www.moneycontrol.com/news/business/ipo/strong-listing-indiamart-intermesh-debuts-premium-4168051.html

If the deal goes through, it would be the second biggest merger in the Indian DTH space

Promoters of Dish TV might sell their 58 percent holding in the company to Bharti Airtel’s DTH arm for around Rs 5,000 crore, Business Standard reports.

Airtel Digital TV and private equity firm Warburg Pincus are likely to partner and purchase the Goel family’s stake for Rs 45-50 per share, or between Rs 4,800 crore and Rs 5,300 crore, the report said.

Discussions between Airtel and Dish TV began in March, the report stated. The Goel family had initially quoted Rs 62 per share for the transaction. But the offer price was lowered due to high promoter debt and rising prominence of JioFibre.

If the deal, which is likely to be finalised next month, goes through, it would be the second biggest merger in the Indian direct-to-home (DTH) space. Dish TV will be main brand after the merger.

Moneycontrol could not independently verify the story.

Airtel wants to merge Dish TV with Airtel Digital TV through a share swap after acquiring the former’s promoter stake and making an open offer for a 20 percent stake, the report said.

The Jawahar Goel-controlled Dish TV is facing financial hurdles, with the promoters pledging 94.6 percent of their 58 percent stake. Part of the proceeds raised will be used to repay their debt of over Rs 16,000 crore, the report added.

https://www.moneycontrol.com/news/business/dish-tv-promoters-may-sell-58-stake-to-bharti-airtel-warburg-pincus-for-about-rs-5000cr-4167891.html

The action, however, is based on the deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the banks with their customers, the RBI added.

The Reserve Bank of India (RBI) has imposed a penalty of Rs 1.75 crore on four public-sector banks, including PNB and UCO Bank, for non-compliance with KYC requirement and norms for opening of current accounts. While PNB, Allahabad Bank and UCO Bank have been fined Rs 50 lakh each, a Rs 25-lakh penalty has been imposed on Corporation Bank.

Giving details, the RBI said the penalty has been imposed for non-compliance with certain provisions of directions issued by it on know your customer norms or anti-money laundering standards and opening of current accounts. The action, however, is based on the deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the banks with their customers, the RBI added.

In a stock exchange filing on Tuesday, UCO Bank said, “We inform that the RBI in exercise of powers conferred under Section 47 (A) (1) (c) read with Section section 51 and 46 (4) (1) of the Banking Regulation Act, 1949, has imposed a penalty of Rs 5 million (Rs 50 lakh) on UCO Bank for non-compliance of RBI directives on ‘KYC norms/AML standards/CFT/obligation of banks and financial institutions under PMLA 2002’ and also on ‘opening of current accounts by banks — need for discipline’.”

Similarly, Allahabad Bank, in a stock exchange filing, said the RBI has imposed a penalty of Rs 50 lakh on the bank for non-compliance of the directions issued the by RBI on “KYC norms/AML standards” and “opening of current accounts”.

https://www.financialexpress.com/industry/banking-finance/rbi-fines-pnb-3-other-psbs-for-violation-of-kyc-norms/1626647/