ET: Banks expect Adlabs resolution before Sept outside NCLT

2 July 2019: The Union Bank-led consortium of 13 banks is hopeful of finding a resolution for their Rs 1,100-crore exposure to Adlabs Entertainment before September outside the NCLT either by selling their distressed loans to ARCs or finding an investor, two sources familiar with the development said.

The bankers, however, are more hopeful and keen on selling their loans to asset reconstruction companies, and a loan auction is likely to begin shortly, said the sources.

It can be noted that while Tourism Finance Corporation had moved the Mumbai NCLT last September to recover its Rs 46 crore dues from the company, state-run Corporation Bank had filed for bankruptcy in early June to recover its Rs 80-crore loan. However, the bankruptcy tribunal has not approved both these pleas as 11 other banks are not keen on a bankruptcy process.

This has renewed the hope of other 11 lenders to find a resolution, said a banker. The bankruptcy laws demand 75 percent of the lenders consent for a plea to be admitted for insolvency proceedings.

Apart from Union Bank, Adlabss bankers include Bank of Baroda, Indian Overseas Bank, Bank of India, Central Bank, Syndicate Bank, Punjab & Sindh Bank and Jammu & Kashmir Bank among others.

The lenders to the Manmohan Shetty-owned company that runs the countrys first theme park Imagica near here on the Mumbai-Pune Expressway along with a 5-star hotel are at advanced stage of discussions for an out-of-court settlement, which includes selling their loans to an ARC or finding a financial investor a buyer for a majority stake from the popular Hindi film producer Shetty who owns 32 percent in the firm. The rest of the stakes in the company are with the public.

We are in the process of soliciting consent from other 11 banks to sell our loan exposure collectively to an investor or an ARC, said the banker cited above.

When contacted a senior official at Union Bank, which is the lead lender with an exposure of Rs 240 crore to the company, confirmed to PTI that “they are at an advanced stage of discussions with all interested parties,” but refused to share details.

Adlabs refused to confirm or deny the developments, saying, the management is in active conversation with the lenders to find a resolution outside the bankruptcy tribunal.

There have been reports that asset reconstruction company Arcil has expressed interest in taking over the debt. In fact, Arcil along with its hedge fund partner Avenue Capital has submitted a proposal to the creditors to take over the stressed loans.

Union Bank had in January appointed financial consultant BDO to advice it on the loan sale, while the company has roped in Imap India to advise it on a debt resolution.

Another source said the company is in negotiations with some financial investors led by Shaan Agro & Reality India which already owns a 7.85 percent in Adlabs. Another investor who has shown interest is Catalytic Solutions & Management Services, floated by Ashutosh Maheshwari, who was earlier with Rabobank and Motilal Oswal.

This consortium is keen on rescuing the company, though it isnt yet clear whether it would buy the remaining equity or partner with Shetty for a one-time settlement with creditors, the source said.

Apart from the theme park spread over 130 acres at Khopoli and the 287-key Novotel hotel nearby, Adlabs has a 204-acre land parcel nearby which it has been trying to sell for long but landed in a legal tangle.

The Imagica runs a waterpark, an indoor snow-based theme park and Bollywood theme park apart from rollercoasters. The Novotel hotel is 70 percent-owned by Paris-based hotel chain operator Accor group.

In FY18 it had signed a term sheet with big bull Radhakishan Damanis Bright Star Investments for the hotel, along with a 6.1 acre underlying land and an additional 2.9 acres for over Rs 215 crore, but the deal did not go through as banks refused to give their consent for the deal.

The Adlabs counter closed 2.34 percent up on the BSE at Rs 5.25 as against a 0.33 percent gains on the benchmark.

The Economic Times reported

BS: Jaypee Infra insolvency: NCLAT tells lenders, allottees to appear on Jul 17

2 July 2019: With creditors rejecting NBCC’s bid to acquire Jaypee Infratech, the NCLAT Tuesday directed representatives of banks, allottees and other stakeholders to appear before it on July 17 to consider how the bid could be tweaked for the benefit of home buyers.

The tribunal was informed that in the voting that took place on NBCC’s bid, 34.75 per cent of home buyers voted in favour, 1.44 per cent voted against, whereas 23.8 per cent did not vote.

However, all the 13 banks, which constitute 40.75 per cent of Committee of Creditors (CoC) voted against the bid by the state-run firm to acquire Jaypee Infratech. The voting started on May 31 and concluded on June 10.

Home buyers have nearly 60 per cent voting right in the CoC.

During the hearing on the matter, the three-member bench headed by Justice Chairman S J Mukhopadhyaya said it was not keen on considering Adani Group’s bid at this stage while pulling up the banks for backdoor negotiations with the business conglomerate.

Stressing that the appellate tribunal’s priority is to take care of the interest of the home buyers, the bench asked the representatives of various stakeholders involved to appear before it in the next hearing to find how NBCC’s plans could be altered for the benefit of all, specially the home buyers.

The bench said NBCC is a government company and one can rely on it, adding that it knows “the pain of allottees” and wants to do justice for them.

It asked the banks to nominate a high ranking officer who will negotiate, while asking them to produce a gist of the resolution plan submitted by NBCC and objections they have with regard to the plan.

In its revised offer, NBCC has proposed infusion of Rs 200 crore equity capital, transfer of 950 acres of land worth Rs 5,000 crore to banks and completing construction of flats by July 2023 to settle an outstanding claim of Rs 23,723 crore of financial creditors.

When the bench was informed that Adani has come offering faster construction for home buyers, the bench said it was not keen on considering it at the current stage, while stating that if the company was an interested party it should “intervene” before the appellate tribunal.

Justice Mukhopadhyaya reiterated that in the interest of home buyers, the resolution of Jaypee Infratech will not be allowed to fail and if it was not possible to find a solution through the NBCC bid, then the bench will consider Adani or any other bids.

As many as 13 banks and over 23,000 home buyers have voting rights in the CoC of Jaypee Infratech. Home buyers represent nearly 60 per cent of voting rights, while banks have the rest. For approval of any resolution plan, at least 66 per cent votes should be in favour.

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, home buyers also have voting rights at par with lenders.

The Business Standard reported

BS: SC to hear plea next week on preventing Jaypee Infratech’s liquidation

2 July 2019: The Supreme Court will hear next week a plea seeking that Jaypee Infratech Ltd not be sent into liquidation although the deadline for the corporate insolvency resolution process is over, as it would cause “irreparable loss” to thousands of home buyers.

The apex court had on August 9 last year ordered re-commencement of the resolution process against JIL and barred the firm, its holding company and promoters from participating in the fresh bidding process.

It had also allowed the Reserve Bank of India to direct banks to initiate corporate insolvency resolution proceedings (CIRP) against Jaiprakash Associates Ltd (JAL), the holding company of JIL, under the Insolvency and Bankruptcy Code (IBC).

It said there was “no manner of doubt” that JAL and JIL lacked financial capacity and resources to complete unfinished housing projects in which over 21,000 home buyers had not been given the possession of their flats till then.

A fresh application in the matter came up for hearing on Tuesday before a bench comprising Justices A M Khanwilkar and Dinesh Maheshwari.

The plea, filed by one of the home buyers through advocate Ashwarya Sinha, sought direction that an “independent and thorough forensic audit” of JIL should be conducted from the date of its incorporation.

Referring to the apex court’s last year order, the plea said, “The court had made a conscious effort to avoid liquidation of Jaypee Infratech Limited. However, the events as have unfolded subsequent to the passing of the judgment have frustrated the efforts as made by the court.”

As per apex court’s direction, the 270 days for completion of CIRP have concluded on May 6, it said.

“Till date only two serious bids have been received by the Committee of Creditors. One bid has been submitted by National Buildings Construction Corporation Limited, whereas the other has been submitted by Suraksha ARC. None of the said bids have been accepted by the Committee of Creditors till date,” the plea said, claiming that “threat” of JIL going into liquidation is “turning into a reality with each passing day”.

It said if no resolution plan is accepted till May 6, JIL would “automatically go into liquidation”, leaving thousands of home buyers in lurch and without any remedy.

“Liquidation of the company will only be in the interest of the banks who will be able to recover the money lent by them to the corporate debtor,” it said, adding, “However, the ultimate sufferer of the same will be the home buyers.”

Seeking forensic audit of JIL, the plea alleged that “diversion of funds in the present case is on an even larger scale than that of projects developed by Amrapali Group of Companies.”

“However, without a forensic audit none of the persons responsible for the said diversion will ever be made accountable. Furthermore it will be impossible to bring back the hard earned monies of the home buyers without the said diversion being traced to the ultimate beneficiary,” it said.

The Business Standard reported

BS: Posco inks Rs 5,000 cr MoU to lift one mn tonnes of HR products from Essar

2 July 2019: Posco India has signed an offtake agreement with Essar Steel valued at around Rs 5,000 crore.

Sources said that the agreement was for procuring one million tonne of hot rolled products and it was the fourth such memorandum of understanding signed between the two companies.

Commenting on the MoU, G H Bang, MD, POSCO Maharashtra said, ”We have found Essar Steel to be a very dependable partner to meet our requirements. They are able to meet our stringent quality standards and delivery timelines. I am happy that this partnership has stood the test of time and the bond between the companies has become stronger. The way our partnership has progressed is a showcase story of how an Indian company can support a global company to make ‘ Make in India’ a reality”.

Bang also mentioned that irrespective of the pending matter related to the ownership of Essar Steel, the company had continuously improved its operational and financial performance which is commendable.

Insolvency proceedings against Essar Steel started in August 2017 and the matter is still pending in court though ArcelorMittal’s resolution plan has been approved by the National Company Law Tribunal (NCLT).

Posco’s partnership with Essar Steel started with a trial order of 1,000 tonnes in 2014-15 which was followed up by a bulk order of 10,000 tonnes in 2015-16 and ended the year with a total supply of 62,000 tonnes. The completion of this order finally led to the first MoU in 2015-16 for an order of 650,000 tonnes. The quantity was enhanced the following year to 850,000 tonnes. This were further enhanced to one million tonne in 2017. 

During this period,  16 new grades of steel have been developed for auto and other special applications. 

Essar Steel has been ramping production over the last few years and is currently operating at around 85 per cent. Last year it produced 6.9 million tonnes of crude steel and is expected to cross over seven million tonnes in the current fiscal.

Essar’s revenues grew to Rs 5,545 crore in April-May 2019,  as against Rs 5,106 crore in the same period last year while Ebitda grew by 17 per cent to around Rs 770 crore from Rs 660 crore.

Posco Maharashtra, on the other hand, is a two million tonne unit at Mangaon Maharashtra and is part of the Posco Group, fifth largest steel producer in the world. 

The Business Standard reported

MC: This Jet Airways aircraft lease pits Indian bankruptcy code against international ones

2 July 2019: The aircraft is owned by a leasing company in Delaware, US. Its operator is Jet Airways, which suspended operations in April and is now facing insolvency proceedings. But the plane itself has been seized by Dutch authorities, where a claim has been made on it.

If that is not complicated, the lessor has now put in an application at the Directorate General of Civil Aviation (DGCA), the Indian aviation regulator, to de-register the aircraft.

Once de-registered, the lessor can take the plane out of India and lease it to another airline. But then, will the DGCA allow it?

While it would have been a routine affair earlier, now that Jet Airways is at the National Company Law Tribunal (NCLT), the de-registration may not be immediately possible.

“The NCLT moratorium disallows any recovery of any asset from the company when the resolution process is on,” said a prominent aviation lawyer.

“It is a true conflict of Cape Town treaty Vs India insolvency law Vs Dutch insolvency law,” added the lawyer.

The aircraft

The aircraft in question is the Boeing 777-300ER. While it is owned by Delaware Aircraft lease, the plane was leased by Dublin-based Fleet Ireland Aircraft, and operated by Jet Airways.

The DGCA has already de-registered about 100 Jet Airways’ aircraft. The airline had a fleet of about 120 aircraft before the crisis began and led to the suspension of operations. At present, the lenders have taken it to the NCLT, where the next hearing is slated for July 5.

But even before the airline went to insolvency tribunal in India, bankruptcy proceedings were filed against the company in Dutch courts in May. The courts, which have already declared the Indian airline bankrupt,  want to take possession of the aircraft, sell it and pay off dues to leasing companies and local Jet Airways employees.

The aircraft is parked in Amsterdam’s Schiphol airport.

The aircraft though is said to be financed by EXIM Bank of the US, which wants to repossess its ‘asset’ after Jet Airways defaulted on interest payment. According to the Cape Town treaty, the owner must get the aircraft, in any situation, said the lawyer cited above.

The treaty became effective in 2006, and India is one of the contracting parties. The treaty sets international standards on contracts and leases and offers legal remedies. But it is unclear how it will apply with India’s insolvency and bankruptcy code.

The moot question is this –  Can the DGCA de-register the aircraft when the insolvency proceedings are on in NCLT?

Moneycontrol reported

MC: Wind sector hopes for better times ahead

2 July 2019: In the last two years, only 15 percent of India’s annual installed wind energy manufacturing capacity of 10 gigawatts (GW) has been utilised, according to the Indian Wind Turbine Manufacturer’s Association (IWTMA).

At a recent meet with the Ministry of New & Renewable Energy (MNRE) and the renewable energy sector, members of the wind energy industry raised concerns over the current state of the sector. The low capacity utilisation of wind energy is not sustainable for the sector and has affected 4,000 small and medium enterprises and 2 million jobs, according to chairman of IWTMA, Tulsi Tanti.

“The wind energy sector has been reeling under tremendous pressure and struggling with the transition from feed-in tariff (FiT) to reverse bidding, with tariff cap regime resulting in very low tariff. The tariff discovered is so low that it is neither bankable nor sustainable. Due to this, irrespective of bidding of 17 GW, the actual installation is around 700 MW.” At this rate, achieving the target of 175 GW of energy from renewable sources by 2022 will be a big challenge, noted a press release issued by IWTMA.

Until 2017, wind tariffs were set under the feed-in tariff policy mechanism which offered long-term contracts to renewable energy producers. In February of 2017, the union government moved to a competitive bidding process for wind energy, reverse auction, which dropped the tariffs and impacted the wind energy capacity addition. The Indian government has a target of installing 175 GW of renewable energy by 2022 which includes an allocation of 60 GW from wind.

Majors of the renewable energy sector in India made policy recommendations to the MNRE at the annual meeting, Chintan Baithak, held on May 7, coinciding with the 2019 general elections.

Meeting wind energy targets

There are varied opinions within the wind power industry about meeting the wind energy targets for 2022, as set by the government.

In its outlook for India’s RE sector, Fitch Solutions Macro Research said the country is likely to install 54.7 GW of wind capacity by 2022 against the 60 GW target for energy from wind, set by the government.

However, Vinay Rustagi, the managing director of Bridge to India, a renewable energy consulting firm, explained that their estimate for March 2022 is lower – at 51 GW – effectively meaning an addition of 16 GW in total in the next three years to the current installed wind energy capacity in the country. “There’s already about 11 GW under construction now and a significant uplift in that number is not realistic, given the land and transmission constraints.”

According to D. V. Giri, secretary general, IWTMA, the total installation of wind energy in India as of March 31, 2019, is 35.68 GW. “The total bids awarded by Solar Energy Corporation of India (SECI), National Thermal Power Corporation and state bids are 13,252 MW (13.2 GW). These projects can get commissioned before March 2022 considering 18 months as execution time. As of now, the government plans to announce 10 GW per annum in 2019-20 and 20-21, out of which 15 GW can get announced and awarded up to September 2020 and it can get completed by March 2022. Though this adds up to 64 GW, meeting the target, the plan comes with a lot of ‘ifs and buts’ on land allotment by state governments, connected right of way issues and alignment between developers and Power Grid Corporation of India Limited for connectivity.”

The current figure of installed wind energy will have a capacity addition of 28.2 GW between now and 2022, considering that state bids aren’t forthcoming, and the procurement model is dependent on SECI alone. If one were to work on the probability that around 50 percent of the projects will be commissioned, around 14 GW will be added to the current capacity, totalling 50 GW, said Giri.

However, a senior official of the MNRE, who did not want to be named, said that since the sector has gone through a transition from FiT to competitive bidding last year and added that, “It was very difficult for the states to absorb this in such a short period of time. That is one of the reasons why commissioned projects this year have been lesser than last year. Now, wind is doing well, with some projects being commissioned and others being tendered. For instance, Gujarat’s tender for wind this year has done very well and SECI is coming up with a new project.”

Kasturirangan, chairman, Indian Wind Power Association (IWPA), believes the SECI bid by itself is not going to help in meeting required numbers. “When it comes to bids by SECI, the participation is only for those who install 50 MW and above—as a result, those who meet these numbers participate in the bids. Developers who want to install less than 50 MW, should be given a chance so they can contribute to the generation capacity as well.”

As per SECI’s 2017 call for wind power projects, under the MNRE’s scheme for setting up of 2000 MW ISTS-connected (interstate transmission system) wind power projects for interstate sale of wind power at a reverse auction, eligible bid capacity is a minimum 50 MW and maximum 400 MW by a bidder.

Besides SECI bids, investors who want to install windmills in India must first have the facility, which is not always the case with smaller setups. Also, if a developer is purchasing a higher capacity of 15 MW, the machine manufacturer gives a concession, but not for lower capacities like 2 MW or 4 MW for example. Ever since the SECI bid system has been introduced, regulators peg the bid prices at a low of Rs. 2.40 or Rs. 2.60 per kilowatt-hour.

Kasturirangan recommended that to ensure that developers both big and small are included in the system, a reasonable price must be fixed by the regulator of each state, which is higher than the SECI bid price, which will benefit small developers. He’s positive that India can achieve its target, provided the Ministry takes everyone along, especially those interested in its growth.

Challenges holding back the wind sector

Short-medium term concerns about the growth of the wind energy sector, revolve around the availability of land and transmission infrastructure. In terms of location, wind is more constrained than solar and the best wind sites like Gujarat and Tamil Nadu, are already taken. Going to states other than these, with lower wind resources, increases the cost of power to over Rs. 3.00 per unit. Moreover, in recent months, distribution companies (discoms) are prepared to pay higher prices.

The other challenge facing wind is that its generation profile is more skewed towards night and during monsoon, also periods of low power consumption. This incompatibility with the demand profile is likely to become a major constraint in the future as the focus shifts towards grid stability and meeting peak power demand, stressed Vinay Rustagi. On whether storage of wind energy could be a way out, Rustagi told Mongabay-India that, “Wind can’t be stored. Power can be stored with storage batteries, but that increases the cost very significantly and is currently not seen as viable. However, improvements in technology are expected to make storage acceptable in the next 3 to 5 years.”

Giri adds that the paradigm shift from FiT to e-reverse auction with a tariff cap without any transition period has led to a total collapse of the entire ecosystem. “The biggest challenge is that the manufacturing capacity of 10,000 MW with 80 percent localisation is chasing a market of 1,500 MW or 15 percent utilisation. Currently, the industry is dependent on a single procurement agency of SECI. Also, SECI bids have shut down state procurement, which was once the main market.”

The fall in tariff was forced down in a slow market and has become the benchmark across India. This has led to no procurement by states.

Despite an attempt to re-open old power purchase agreements (PPAs), power has been curtailed during high wind season and there have been tremendous delays in payment by financially strapped distribution companies. Furthermore, the competitive bidding procurement model has led to a total collapse of the small domestic investor whose purchase size is around 5 to 15 MW per annum. In such a scenario, a robust supply chain of the country with over 4,000 small and medium enterprise vendors in the wind energy sector and potential of high job creation has become questionable. Also, frequent changes in policy, non-bankable/ unviable tariff has sent a negative signal to bankers, financial institutions and private equity funds.

Experts from the wind industry have made policy recommendations to the government for a sustainable regime that can boost the sector to meet its targets. Photo by Shankaran Murugan/Wikimedia Commons.

Admitting there are issues which need to be addressed, the MNRE official said, “When it comes to physical financing of wind power projects, earlier, if anyone had money, they could set a couple of windmills and get the required funding. However, owing to competitive bidding now, the size of the tenders has increased significantly. So, financing large-scale projects will need a different kind of financial model. Projects that are 25MW or of lesser capacity are not covered in the competitive bidding guidelines. If something can be done for projects that are of 25MW capacity or lesser, it will create a new market for wind. However, that can be done through FiT or competitive bidding.” This is not yet clear and is an issue that the state regulator will have to take a call on. Also, it is a bit of a challenge as to how we can give the required push to that area, he added.

Kasturirangan believes foreign funds through big IPPs is not enough to take up the installation of wind energy generators. Instead, it should be inclusive growth. “Those who want to generate wind energy and have been pushing the sector for the last 20 years, should be allowed to participate and install windmills, not that those who take foreign funds and put the quantum of megawatts, it is not that they alone who can take the country ahead. We raised this with the MNRE and they assured us of participation, but nothing concrete has happened,” he rued.

Experts hopeful of the way ahead

Following May’s Chintan Baithak meeting between the government and industry, is there a likelihood there may be some change in policy? Rustagi states, “I don’t think there’s a choice. The sector is hurting badly because of issues related to policy, execution and financing. Urgent action is needed to revive investor sentiment and improve processes across the board. At the same time, it’s too early to say how the situation will play out given the political uncertainty.”

Giri believes that state-of-the-art turbines manufactured in India can find acceptance in different geographies of the world to boost exports. “The need of the hour is to increase the export incentive from 3 percent to 10 percent to take care of the disadvantage of freight logistics and inadequate lines of credit.”

The 2018 government order of waiving off inter-state transmission charges up to 2022 has given a boost to the sector and will be focussed in areas where the potential of wind energy is high. Additionally, with the new policy that the MNRE has initiated, of re-instating a solar park as a renewable energy park, will also spur the wind energy in India, the MNRE official said.

Giri, however, is hopeful of the progress of the recommendations noting that even though the meet was held when elections were on, the recommendations made by the industry will be taken up with the new government since it has expressed commitment to targets in onshore and offshore wind. He added that the industry is committed to localisation, but it will be dependent on large capacity addition of around 6 GW per annum and about 1GW to 2 GW of exports.

Multiple procurement models of central and state, open access for inter-state transaction with CTU waiver and uniform wheeling/banking policy can drive capacity addition to greater heights, Giri said on a positive note.

As reported on moneycontrol

ET: SC dismisses DoT’s plea on RCom spectrum case

2 July 2019: The Supreme Court Tuesday dismissed the telecom department’s petition against a tribunal order that had stated that liabilities of past dues related to spectrum usage charges (SUC) rested only with Reliance Communications (RCom) and not the buyer, which in that case was Reliance Jio.

The SC’s verdict comes on the back of a bitter war fought between RCom, Department of Telecommunications (DoT) and Jio on the spectrum deal which never materialised because of lack of consent from the government. The DoT had wanted the buyer -Jio – to agree that it would be responsible for past liabilities of RCom as well when it buys spectrum from the Anil Ambani-led telco. Jio refused to accept DoT’s terms and the deal fell through, forcing RCom to move into insolvency.

The matter was contested in Telecom Dispute Settlement Appellate Tribunal (TDSAT) and the tribunal in February had said that the liability of past dues related to SUC rested only RCom and asked the government to reconsider its refusal to give a no objection certificate (NOC) to the spectrum sale.

DoT moved SC but its plea was dismissed Tuesday.

However, SC’s judgement today may have little impact on RCom’s spectrum sale since the bankrupt telco under a debt of Rs 46,000 crore is in the insolvency court. The reins of the operator are now in the hands of resolution professional (RP), Deloitte.

“Now we may consider to file another application or see what comes out of the resolution since RCom is in insolvency. All creditors will now have to take a haircut,” said a DoT official, who did not want to be named.

RCom’s spectrum – once valued at Rs 7,300 crore – may find few takers during the insolvency process since bidders may prefer to go for a fresh set from the upcoming spectrum auctions to be held later this year than get embroiled in any legal battles with the DoT.

The Economic Times reported

ML: ED attaches properties worth Rs 109 crore of Simbhaoli Sugar

2 July 2019: An ED statement said the properties included land, buildings and plant and machinery of the company situated at Simbhaoli.

It said the attachment was made under the money laundering act.

The agency registered a case on the basis of a FIR filed by the Central Bureau of Investigation against Simbhaoli Sugars Ltd and others for cheating and defrauding the Oriental Bank of Commerce on the pretext of financing sugarcane farmers.

According to the CBI FIR, the company was given a loan of Rs 148.59 crore by the bank to give assistance to 5,762 farmers but the funds were diverted for other purposes.

The ED had searched the offices of the company in Uttar Pradesh’s Noida and Simbhaoli and seized incriminating documents.

During investigation it was revealed that the company was facing a liquidity crunch and approached the bank for loan under the interest subvention scheme of RBI under a tie-up with 5,762 farmers to finance them for pre- and post-harvest.

The agency said the funds meant to be paid by the company to the farmers were not remitted to the accounts of the farmers.

It said that there were serious irregularities in the KYC documents. “The loan then turned NPA with Rs 98.7 crore (principal) outstanding and the bank filed a recovery suit before the debt recovery tribunal (DRT),” it said.

The agency said the loan funds were diverted into other accounts.

“The company thus laundered the funds intended for assistance to the needy farmers, in utter violation of the terms and conditions and the intent of the loan,” it said.

The ED said that instead of settling the entire loan liability, the company again induced the Oriental Bank of Commerce to withdraw the application before the Debts Recovery Tribunal and grant a fresh corporate loan of Rs 110 crore on January 28, 2015 to clear the previous dues.

It said the company again deliberately failed to repay the said corporate loan and at the time of the FIR Rs 109.8 crore were outstanding.

The company offered a One Time Settlement (OTS) amount of Rs 14.69 crore against the entire outstanding.

“This highlights an ingenious modus operandi of money laundering by taking huge loans from banks and later settling them at heavily discounted sums, thereby causing huge wrongful losses to lender banks,” it said.

As reported on moneylife.in

FE: Power play: Discoms to gain as tariffs to soon reflect all costs

1 July 2019: Power regulators in the country may be barred from the practice of not allowing discoms to promptly pass on part of their expenses to consumers. The provision of creating “regulatory assets” — recoverable discom expenses which regulators acknowledge as pass-through costs, but are not immediately built into tariffs — will be scrapped from the tariff policy, official sources said.

While no new regulatory assets will be created, the existing stock — a whopping Rs 1.2 lakh crore at FY19 end — will be cleared over the next 3-5 years through incremental tariff hikes, the sources said.

In a meeting held here on Monday to prepare a “five year vision document” for the electricity sector, power minister RK Singh is learnt to have informed the regulators of the move.

According to an official estimate, discoms lose Rs 22,000-crore revenue annually due to the deferred pass-through of certain expenses.

As FE recently reported, electricity regulators of most major states have either delayed or announced meagre tariff hikes for FY20, despite financial losses of discoms rising 44% annually to Rs 21,658 crore at the end of FY19. As it is, limited or no tariffs hike was proposed by most of the discoms when they filed for tariff revision during the run-up to the Lok Sabha elections. The tariff policy says the facility of regulatory assets “should be done only as a very rare exception in case of natural calamity or force majeure conditions” and no such assets should be created under business as usual conditions.

“Recovery of outstanding Regulatory Assets along with carrying cost of Regulatory Assets should be time-bound and within a period not exceeding seven years,” it adds.

Monday’s decision amounts to making further headway on this front. The other points said to have been discussed in Monday’s meeting were: large scale integration of renewables into the grid, revisiting contractual clauses of existing PPAs and structuring new PPAs to address non-performing asset challenges and financial viability restoration across the electricity value chain. The ministry is also said to have mooted the idea of revisiting contractual clauses of existing PPAs and structuring new PPAs to address the challenge of non-performing assets.

The Financial Express reported

FE: DHFL crisis: Bankers agree to sign inter-creditor pact

2 July 2019: The consortium of lenders to Dewan Housing Finance (DHFL) have decided to sign an inter-creditor agreement (ICA) by the end of this week as the first step towards resolution of the account following a meeting on Monday.

The exposure of banks is close to Rs 45,000 crore, which is nearly half the company’s total outstanding of close to Rs 1 lakh crore. State Bank of India (SBI) is the largest lender to DHFL, with an exposure of nearly Rs 10,000 crore.

At Monday’s meeting, which was called by Union Bank of India, lenders decided that June 29 would be the  ‘reference date’ for DHFL. This essentially means banks have 30 days from then to sign the ICA and decide on the nature and manner of implementation of a resolution plan (RP). Bankers with exposure to the account are expected to sign the ICA by July 5.

“Earlier defaults on the facilities aside, there was a fresh default from DHFL to one of the banks within the consortium, which is why June 29 was decided as the reference date for the account. Nothing concrete on the potential resolution plan was discussed at the meeting. That will be taken up once all banks have signed on,” a banker aware of the developments told FE.

Further discussions on a resolution plan will be held at future meetings, the bankers said. Among the options available to lenders is securitisation of DHFL’s debt.

The RBI’s June 7 circular on ‘Prudential Framework for Resolution of Stressed Assets’ requires bankers to initiate the process of implementing an RP when the borrower is reported to be in default by any of its lenders. The circular mandates that all lenders with exposure to a particular entity enter into an inter-creditor agreement (ICA) during the ‘review period’ to provide for ground rules for finalisation and implementation of the RP.

The circular directs lenders to undertake a prima facie review of the borrower account within thirty days from a default, referred to within the circular as ‘review period’, during which lenders may decide on the resolution strategy, including the nature of the RP, the approach for implementation of the RP, etc.

The lenders may also choose to initiate legal proceedings for insolvency or recovery during this period. The lenders met after the housing finance company defaulted on some of its debt obligations, including earlier last week when it defaulted to a clutch of 12 lenders, managing to make only 40% payment to on unsecured commercial paper or Rs 150 crore out of the outstanding aggregate amount of Rs 375 crore.

Earlier last month, the housing finance company also failed to make interest payment of Rs 850 crore on its non-convertible debentures (NCDs), following which its credit rating was downgraded to default by rating agencies.

The consortium of banks is yet to classify the exposure as NPA. However, their exposure of close to Rs 45,000 crore, about half the company’s total outstanding of close to Rs 1 lakh crore, appears to be in trouble. SBI is the largest lender to DHFL with an exposure of nearly Rs 10,000 crore, the bank told its shareholders during its annual general meeting.

In a note to exchanges on occasion of the latest default, the company said: “Without any recourse to fresh debt funding, a situation exacerbated by multiple rating downgrades, the Company met all its financial obligations through a combination of internal accruals, sell down of its loan assets and monetisation of non-core assets.”

It further stated, “Pursuant to the downgrade by rating agencies expecting a default for the Commercial Papers (CP) much before they had fallen due, the mutual funds had already taken a 100% markdown on their CP investments…The Company is already in the process of selling down its loan assets including wholesale project loans to make good all its obligations and maintain its 100% commitment to all its creditors as it has done since the liquidity crisis started in September 2018.” Only last week, the mortgage firm announced it was deferring the announcement of financial results for the March quarter to 13 July citing ‘certain unforeseen operational engagements, including non-availability of a few directors’. The RBI’s latest Financial Stability Report noted that the failure of a large non-banking financial company could be as bad for the ecosystem as the failure of a big bank.

DHFL has raised funds over the past few months – securitising retail loans worth Rs 30,000 crore. According to reports, the lender also sold Rs 1,375 crore worth of wholesale loans to foreign investment management firm Oaktree, which buys distressed debt at a discount.

The Financial Express reported