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Thursday, September 11, 2014

Sell-off in CIL, ONGC, NHPC may fetch record Rs 46,000cr

Coal India Alone May Match '12-13 Divestment Gains
The government on Wednesday kicked off the most ambitious disinvestment programme ever, aiming to mop up a record Rs 46,000 crore by selling shares in blue-chip public sector companies-Coal India, ONGC and National Hydroelectric Power Corporation (NHPC).

While the exact dates are yet to be finalized, SAIL's disinvestment, which was cleared earlier, is likely later this month, with a 10% stake sale in Coal India expected around Diwali.The energy behemoth will help the government raise around Rs 23,600 crore based on its current share price. If prices hold, this sale alone could match the best ever disinvestment receip ts of Rs 23,957 crore in 2012-13, when the government had sold shares of NTPC and NMDC, among others.

ONGC, where the govern ment can garner close to Rs 19,000 crore via a 5% sale, is expected later in the year as the Centre is awaiting clarity on gas prices before the issue, sources in the government told TOI. Somewhere during the course of the year, it will also sell 11.3% in NHPC which, going by current price, will help generate around Rs 3,100 crore.

Apart from helping improve the government's fiscal health, the issues come with the additional attraction of a higher quota for retail investors as 20% of the sale in case of offer-for-sale, or auction through stock exchanges, will be set aside for small investors.Now, market regulator Sebi has provided additional flexibility for these issues. There are several other companies, such as BHEL, Power Finance Corporation and REC, which are also on the disinvestment department's radar but their stake sale has not been cleared by the cabinet committee on economic affairs. Then, there is Axis Bank, where the government is looking to sell shares held by the Specified Undertaking of the erstwhile UTI, although ITC and L&T, two other prominent stocks, are being retained. The government holds these shares after it cleared all liabilities of UTI. Further, the Centre is looking to offload its remaining shares in Hindustan Zinc and Balco, which had been sold to Anil Agarwal's Sterlite Industries during the Atal Bihari Vajpayee government's term.

Finance minister Arun Jaitley -who attended Wednesday's cabinet meeting within hours of being discharged from hospital -has budgeted for disinvestment receipts of over Rs 58,000 crore during the current fiscal. Going by current trends, he appears to be on course to meet the target.

Tuesday, September 9, 2014

Wilful defaulter tag for entire group if 1 firm defaults: RBI

In a move that will put intense pressure on businessmen whose companies default in future, the Reserve Bank of India (RBI) has tightened wilful defaulter norms and said failure of a company to repay could result in other group units and the management being termed wilful defaulters. SBI notice to Mallya, P 25 This cross default condition will apply if the delinquent borrower has raised funds on the strength of the balance sheet of other group companies. Banks have also been told to recover from perso nal guarantees provided by promoters even without exhausting other avenues.

"In cases where guarantees furnished by group companies on behalf of the wilfully defaulting units are not honoured when invoked by the banks, such group companies should also be reckoned as wilful defaulters," the RBI said.

The new norms appear to be a fallout of cases like Kingfisher Airlines where despite having a promoter guarantee and the presence of cash-rich companies in the group, lenders are finding it a challenge to raise funds.

Close to 5% of loans in the Indian banking system are in default while another 5% are under stress and have been provided some leeway in repayment under a restructuring programme. Private bank chiefs can work till 70 I n a move that will give HDFC Bank chief Aditya Puri and IndusInd Bank MD Romesh Sobti many more years at the helm, the RBI has said bank chiefs and full-time directors can stay on till 70. An RBI panel had recommended the retirement age of 65 earlier this year. The revised guidelines however will not be of much help to banks in recovering from existing borrowers like KFA. "It is clarified that this would apply only prospectively and not to cases where guarantees were taken prior to this circular. Banks may ensure that this position is made known to all prospective guarantors at the time of accepting guarantees," the RBI said in its circular.

Clarifying on its earlier norms the RBI had said the defaulting 'unit' appearing therein would include individuals, juristic persons and all other forms of business enterprises, whether incorporated or not.

"In case of business enterprises (other than companies), banks may also report the names of those persons who are in charge and responsible for the management of the affairs of the business enterprise," the RBI said.

The new norms come less than a week after the RBI governor Raghuram Rajan told investors at a Citi conference in Boston that the wilful defaulter tag is a powerful weapon in the hands of creditors for resolving distressed assets and it shuts out all credit from the financial system for a borrower.

Rajan has been personally taking stock of the bad loans in the banking sector and has called for detailed lists of large defaulters.

In some cases the RBI has discovered that multiple banks have advanced funds without knowing each others exposure to the borrower.

Last year the RBI had made it mandatory for lenders to obtain personal guarantees of the promoter at the time of restructuring the loan. This was to ensure that the promoters had adequate 'skin in the game' while getting a project back on the rails.

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