BS: Indian Overseas Bank eyes turnaround in September quarter of 2019-20

20 March 2019: Indian Overseas Bank (IOB) has said it will turn around by reporting profits from the second quarter of the 2019-20 financial year. The announcement comes against the backdrop of an increased number of branches reporting profit, a drop in new slippages and a good pace of non-performing asset (NPA) recoveries, among other factors.
 
R Subramaniakumar, MD & CEO of Indian Overseas Bank, who is spearheading the transformation, said that he was confident of the bank exiting from the Reserve Bank of India’s (RBI’s) Prompt Corrective Action (PCA) framework and reporting profit by the second quarter of FY20.
 
He noted that the bank’s operating profit stood at Rs 1,466 crore for the December quarter of 2018-19, against Rs 685 crore in the same quarter the previous year, showing growth of 114.11 per cent. Operating profit for the first nine months of 2018-19 stood at Rs 3,902 crore, a growth rate of 56.10 per cent year-on-year. Operating profit has improved without much expansion in topline growth.
 
The bank’s net loss stood at Rs 346 crore for Q3 of 2018-19, against a loss of Rs 971 crore during the December quarter of 2017-18, a reduction of 64 per cent. One of the key reasons for the fall in loss is profitability is performace at unit-level branches. The number of loss-making branches, at 184 (or 5.6 per cent of total 3,284 braches) as on March 16, 2019, is down from 718, or 21.1 per cent of 3,397 branches as on December 31, 2018.
 
IOB’s cost-to-income ratio stood lower at 42.05 per cent and 44.95 per cent for Q3 of 2018-19 and 9 months of the financial year, respectively. Its other income grew by 41.91 per cent for Q3 of 2018-19 over the same quarter the previous year and it saw a growth rate of 19.18 per cent for the first nine months of 2018-19 compared with the same period the previous year.
 
“Fresh credit disbursement of the bank is to the extent of recovery of Rs 10,660 crore. As such, the bank is able to maintain its interest income,” said Kumar, adding that risk-weight assets to advances stood at 83.06 per cent and credit-risk-weight assets to advances ends at 64.26 per cent.
 
The bank is hopeful that it could bring down its NPAs to Rs 24,000 crore in the next six months from Rs 35,000 crore at present. Around 72 per cent of the NPA is under the corporate sector, of which recovery is expected from six to seven accounts under the National Company Law Tribunal resolution to the extent of Rs 2,500-3,000 crore. IOB also approved settlements worth Rs 2,700 crore to accounts.
 
On the other side, the bank has started controlling fresh slippages, which was around Rs 1,000 crore, against Rs 1,500-2,000 crore earlier. In the past two months alone, the bank has managed to do a cash recovery of Rs 1,000 crore.
 
NPA slippages have been continuously reduced and the bank has achieved the status of high recovery than slippages at present. Gross NPAs and net NPAs have been consistently coming down since Q2 of FY18 (except Q4 of FY18 due to RBI-revised guidelines on restructure accounts). Besides monitoring and strengthening in the field of recovery of NPAs, the bank used technology in an effective way.
 
Strong NPA database with appropriate analytical tools integrated with CBS has helped the bank manage the NPAs.
 
The entire OTS (One Time Settlement) process has been automated for standardised compliance of non-discretionary and non-discriminatory OTS policy of the bank. This doubled the number of OTS settlements in the current year over the previous year, said Kumar.

The Business Standard reported

BS: Speculations rife over Indian suitor for Jet Air

20 March 2019: High-level officials from the government, the public sector banks and the Prime Minister’s Office (PMO) met Finance Minister Arun Jaitley here on Wednesday to discuss the future of financially-troubled Jet Airways in the backdrop of speculations that an Indian suitor is being searched to save the beleaguered carrier.

Speculations have been building up ever since the airline’s partner Etihad apparently refused to inject any more funds into Jet Airways, leaving just the public sector banks and the National Investment and Infrastructure Fund (NIIF) as the only viable creditors for the airline.

In fact, the Gulf carrier has expressed its wish to walk out of the venture and is said to be looking for buyers from among financial institutions.

According to industry observers, a third alternative of roping in a major Indian player is also being looked at. However, the prospective names are just in the realm of speculation at present. 

Sources said Air India, Tata Group or SpiceJet’s Ajay Singh might be among the contenders.

However, Air India could not be entrusted with such a responsibility due to its own financial difficulties or even the Tata Group, which has already invested in two airline ventures — Vistara and AirAsia India — leaving only Singh, who has been credited with the turnaround of SpiceJet from a brink of collapse.

The markets took notice of the buzz around Singh with shares of SpiceJet surging intra-day over 20 per cent to settle 16.38 per cent up at Rs 91.65 apeice on the BSE on Wednesday.

Singh has served on board of the Delhi Transport Corporation in 1996. Two-years later, he joined Pramod Mahajan, then I&B minister, as an officer on special duty (OSD). He has also been credited with coining the BJP’s 2014 campaign slogan, “Abki baar Modi sarkar”.

Speculations sprouted after the PMO on Wednesday marked its direct involvement in the matter as Principal Secretary Nripendra Mishra, along with SBI Chairman Rajnish Kumar and Civil Aviation Secretary Pradeep Singh Kharola, met the Finance Minister to work out a revival plan through state-owned banks for the near-grounded airline.

Mishra’s participation in the discussion to revive an airline could be seen in the context of general elections when the government would not want job losses, airfare hikes and loss to lenders who are striving to recover non-performing assets.

Meanwhile, according to a source in a bank, which too has lent to the airline, the revival plan for Jet Airways through a change in management is imminent, but details are still being worked out. The SBI Chairman nearly echoed that when asked if a new player is in the offing. “No possibility is ruled out,” Kumar said.

Kumar also discarded the efforts to put the airline under insolvency, saying for the service industry, resolutions under the Insolvency and Bankruptcy Code (IBC) is near impossible, making it clear that Jet is not heading towards the National Company Law Tribunal (NCLT) anytime soon as lenders fear doing so would make it impossible to recover dues. Jet has a debt of Rs 9,000 crore to the banks.

“Airline is a service industry and the IBC is the last option here as under the IBC, resolution for an airline is nearly impossible. Going to the IBC will mean grounding the airline. We have not reached the point where we can give up. The IBC is the last option in the recovery process,” Kumar said.

The SBI, lead lender of a consortium that extended loans to Jet, almost hinted that but for few issues the package to rescue the airline is ready. “Extensive work has been done by the lenders in the last five months. There are few issues. We will sort them out soon,” Kumar said hinting at an early resolution.

The SBI Chairman said all efforts should be made to keep Jet afloat. The sector needed competition as air fares have shot up because of the grounding of MAX and Jet Airways planes, he added. 

The lead banker also refuted any charge of being directed by the Finance Ministry to bailout Jet Airways.”No direction has come from the government. We are bankers and it is in our commercial interests. It is our duty to keep the government informed,” Kumar said, adding the government is the most important stakeholder in the process. 

“All stakeholders, including the government, are of the view till the time all hopes are not lost, efforts should be made to keep the airline going,” he said.

On the reports that Etihad, a 24 per cent partner of Jet Airways, is seeking to exit the airline, Kumar said nothing conclusive has come from the foreign partner and dialogue with it is on. 

This comes amid reports that with a formal offer to the SBI, Etihad wants to sell the lender its Jet stake and take over its liabilities in the form of a guarantee.

On an immediate basis, lenders are expected to give Rs 750 crore to Jet Airways, which would come by pledging the airline’s stake in Jet Privilege with banks. Sources said the Punjab National Bank (PNB) could be the lender in question. 

Etihad was also to infuse Rs 1,600-1,900 crore for a stake of 24.9 per cent, just below the 25 per cent threshold to avoid an open offer. Lenders are expected to infuse Rs 1,000 crore and take 29.5 per cent stake, according to banking sources.

There are reports of Naresh Goyal, founder-promoter of Jet, being in talks with Qatar Airways for a possible investment with Goyal as the minority investor, a pre-condition put forward by Etihad.

The pilots’ union of Jet Airways had on Tuesday threatened to stop flying from April 1 if clarity on the resolution plan is not brought to their notice by March 31.

According to the Directorate General of Civil Aviation (DGCA), only 41 Jet Airways aircraft are available for operation and there may be “further attrition” of flights “in the coming weeks”.

The Business Standard reported

TOI: Statutory dues of companies are operational debt: NCLAT

20 March 2019: The NCLAT Wednesday held that statutory liability, including income tax and value added tax dues, of debt-ridden companies are ‘operational debt’, which will now allow the concerned revenue departments to be treated as operational creditors.

A two-member NCLAT bench headed by Chairman Justice S J Mukhopadhaya held that Central or State Tax Departments such as – Income Tax Department, Sales Tax Departments and Local Authority, entitled for dues are ‘operational creditors’ under the Insolvency & Bankruptcy Code.

“We hold that all statutory dues including income tax, Value Added Tax etc come within the meaning of Operational Debt. “For the said very reason, we also hold that income tax department of the central government and the sales tax Departments of the state Governments and local authority, which are entitled for dues arising out of the existing law are ‘Operational Creditor’ within the meaning of Section 5(20) of the I&B Code’,” said the appellate tribunal.

The National Company Law Appellate Tribunal (NCLAT) order came over a four petitions filed by the Income Tax department, Sales Tax Department, Maharashtra, where question as whether statutory dues come under the definition of the operational debt and if yes, then can they be treated as operational creditors of the company.

Counsel appearing for respective companies has contended before the NCLAT that Income Tax cannot be in the nature of operational debt as it refers to the claim in respect of goods or services, including employment or a debt in respect of repayment of dues of the central, state government or local authorities.

However, Income Tax department and Sales Tax Department, Maharashtra contended that operational debt also included debts arising under any law payable to the central and state government.

Consenting to it, the NCLAT said that goods and services including employment are required to keep a company, a corporate debtor, operational as a going concern. “If the Company (Corporate Debtor’) is operational and remains a going concern, only in such case, the statutory liability, such as payment of Income Tax, Value Added Tax etc, will arise,” the NCLAT said.

“As the ‘Income Tax’, ‘Value Added Tax’ and other statutory dues arising out of the existing law, arises when the Company is operational, we hold such statutory dues has direct nexus with operation of the Company,” it added. KRH BAL

The Times of India reported

RT: State Bank of India chairman says bankruptcy last option for Jet Airways

20 March 2019: State Bank of India’s head told reporters on Wednesday that putting Jet Airways into bankruptcy is the “last option” for lenders and that they are making every effort to keep the airline flying. 

“We believe that it is in everybody’s interest that Jet Airways continues to fly,” the SBI chairman, Rajnish Kumar, told reporters after a meeting with government officials, adding that placing Jet into bankruptcy would mean grounding the airline. 

Kumar said that talks with Abu Dhabi-based carrier Etihad, Jet’s largest shareholder, to secure a rescue deal are ongoing. 

There is also the possibility of bringing in a new investor, he said. Kumar also said that any decision taken to rescue Jet is a commercial one and is not at the direction of the Indian government. 

The 25-year-old airline has defaulted on loans after racking up over $1 billion in debt, and owes money to banks, suppliers, pilots and lessors – some of whom have started terminating their lease deals with the carrier. 

The government has asked state-run banks to rescue Jet Airways without pushing it into bankruptcy, two people within the administration have told Reuters. 

Reuter’s reported

FE: NCLAT directs Essar Steel creditors to reconsider distribution of ArcelorMittal’s funds

20 March 2019: The NCLAT Wednesday asked the resolution professional of Essar Steel to call a fresh meeting of CoC to discuss distribution of Rs 42,000 crore coming from ArcelorMittal’s resolution plan.

A two-member bench headed by Justice S J Mukhopadhaya has asked to reconsider distribution of the funds between financial and operational creditors of Essar Steel in the meeting.

Meanwhile, the appellate tribunal also said that the March 8 order of the National company Law Tribunal (NCLT) Ahmedabad-bench approving ArcelorMittal plan in ‘letter and spirit’.

“The resolution professional (RP) may call for the meeting of the Committee of Creditors for reconsideration of distribution of funds,” the bench said.

The NCLAT was hearing an urgent application moved by Standard Charted bank, an operational creditor of the company. The appellate tribunal has directed to list the matter on March 27 for next hearing.

Standard Chartered moved the National company Law Appellate Tribunal (NCLAT) against the plan as its counsel contended that the bank was being given only 1.7 per cent of its total dues on Essar Steel, while other financial creditors, forming part of the Committee of Creditors (CoC), were getting over 85 per cent of their dues.

ArcelorMittal’s resolution proposal provides financial creditors Rs 41,987 crore out of their total dues of Rs 49,395 crore. Operational creditors, under the plan, would get just Rs 214 crore against the outstanding of Rs 4,976 crore.

If the ArcelorMittal plan is implemented, Standard Chartered will only get Rs 60 crore against its claims of Rs 3,187 crore from Essar Steel.

Essar Steel owns a 10-million-tonne steel mill at Hazira in Gujarat. This was was among the first 12 cases selected by the Reserve Bank of India to be resolved under the Insolvency and Bankruptcy Code (IBC).

The Financial Express reported

CNBCTV18: Goyal meets Qatar Airways CEO, other potential investors in Dubai

20 March 2019: Jet Airways chairman Naresh Goyal has recently met Qatar Airways CEO Akbar Al Baker, sources told CNBC-TV18, adding that the former is currently in Dubai and meeting other potential investors.

Goyal is not expected to be back in India before April, added the sources.

Rajnish Kumar, chairman, State Bank of India, on Wednesday said the lenders will make every effort to keep Jet Airways flying and all stakeholders are in the unanimous view that the airline is a good aviation property.

Kumar met finance minister Arun Jaitley along with aviation secretary Pradip Singh Kharola and Nripendra Misra, principal secretary to Prime Minister.

“An effort has been made by lenders to keep the airline running in the interest of all stakeholders and resolution plan for Jet Airways was almost ready but there is some delay,” said Rajnish Kumar, chairman, State Bank of India.

On Etihad, he said the lenders are interested in Jet Airways and dialogue with the UAE-based airline is still on.

On insolvency and bankruptcy code (IBC), the SBI chairman said it is the last option for Jet Airways and the bankruptcy law is nearly impossible for an industry like this.

Earlier, multiple sources told CNBC-TV18 that Jet Airways lenders are discussing replacing Etihad Airways with a new investor after the Abu Dhabi-based airline offered to sell its stake in the beleaguered airline. The new investor is likely to be an investment fund, added the sources.

Etihad holds 24 percent stake in Jet Airways and was widely expected to be a major helping hand for the beleaguered airline. The airline had asked for interim funding support of Rs 750 crore from Etihad to continue operations. However, the board meeting of Etihad on the matter was inconclusive.

Jet has been frequently grounding planes as it is unable to pay the dues to its lessors and is currently operating around 35 planes. The airline’s operations from Mumbai to Manchester and Hong Kong will likely be suspended from March 23.

Jet has more than Rs 8,000 crore in debt and is looking for urgent liquidity infusion to pay its pilots, engineers and make payments to its lessors.

CNBCTV18 reported

ET: Reliance Communications moves NCLAT to stop permit cancellation

20 March 2019: Reliance Communications has moved the National Company Law Appellate Tribunal, asking it to direct the telecom department not to cancel its mobile permits for missing a spectrum payment. The Anil Ambani-led telco is said to have also sought the appellate tribunal’s intervention to ensure that the government does not invoke RCom’s bank guarantees, citing an NCLAT order dated February 4 to that effect.

The Department of Telecommunications had issued a notice to RCom, asking why its licences shouldn’t be cancelled after defaulting on a Rs 21 crore spectrum payment due on March 13.

The development comes a day after Reliance Industries chairman Mukesh Ambani saved his younger brother Anil from imprisonment by helping him to clear Rs 580 crore of dues to Ericsson before a Supreme Court-set deadline of March 19.

Separately, State Bank of India, the principal lender to debt-laden RCom, is said to have also written to DoT, citing the NCLAT’s February order barring the invocation of RCom’s bank guarantees.

However, the department is learnt to have said that the NCLAT order does not apply in this case since “RCom is no longer in the picture as the matter is between the government (read: DoT) and SBI, which is the guarantor of the RCom’s spectrum dues,” a person with direct knowledge of the matter said.

RCom’s March 13 spectrum payment deadline included a 10-day grace period. A telco has 20 days to respond to a show-cause notice.

Failure to pay DoT may lead to the withdrawal of airwaves against which payment is due. In RCom’s case, it’s 4G airwaves in the 800 MHz band in Mumbai, purchased in 2015 and used by Reliance Jio Infocomm under a spectrumsharing pact.

RCom, weighed down by debt of some Rs 46,000 crore, is due to pay another instalment of Rs 281 crore in April for spectrum in the 800 MHz band bought from Sistema Shyam Teleservices in eight circles.

At press time, RCom and SBI did not reply to ET’s queries.

RCom had approached the NCLAT to withdraw an appeal it had filed for a stay order on an insolvency petition granted by the dedicated bankruptcy court last year. In February, the appellate tribunal said the company, guarantors or third parties should not invoke any guarantee or mortgage any instrument without the court’s permission until further orders.

DoT also has Rs 2,000 crore of bank guarantees of RCom, which it hasn’t returned. ET reported earlier that DoT planned to appeal in the Supreme Court against the Telecom Disputes Settlement & Appellate Tribunal’s recent order to return the bank guarantees worth Rs 2,000 crore given by RCom towards one-time spectrum charges.

The Economic Times reported

FE: Bhushan Power operational creditors oppose CoC-approved plan

20 March 2019: Operational creditors (OCs) to Bhushan Power and Steel (BPSL) on Tuesday raised objections over the committee of creditors (CoC)-approved plan before the National Company Law Tribunal (NCLT), terming it as “discriminatory”. The CoC had in August last year approved JSW Steel’s `19,700-crore plan for BPSL.

Counsel appearing on behalf of the OCs before the principal bench of the adjudicating authority also alleged that they were never given a copy of the resolution plan. The counsel also raised objection to the distinction made among the OCs.

The NCLT bench, headed by its president Justice MM Kumar, has scheduled the matter for further hearing on March 25.

The NCLT has been hearing the matter for approval of JSW Steel’s plan on a daily basis. It has been directed by the National Company Law Appellate Tribunal (NCLAT) to decide on JSW Steel’s bid for the company by March 31.

In the next scheduled hearing, the NCLT is expected to complete hearing the OCs and may also start hearing objections raised by BPSL’s erstwhile promoters.

JSW Steel has offered to pay `19,350 crore to the financial creditors of the debt-ridden BPSL implying a near 60% haircut for lenders. Apart from this, the Sajan-Jindal promoted company has offered to pay operational creditors a sum of `350 crore against their admitted claims of `733 crore.

BPSL was admitted by the New Delhi bench of the NCLT on July 26, 2017 for the initiation of the corporate insolvency resolution process (CIRP), on the plea of Punjab National Bank.

A clutch of 34 financial creditors have claimed `47,303 crore from the company, as on January 3, 2019, of which, the RP has admitted claims worth `47,150 crore.

Operational creditors, totalling 1,778, have claimed `2,320 crore from Bhushan Power and Steel though the admitted amount is `733 crore.

The Financial Express reported