MC: Edelweiss group acquires Navayuga group’s road assets in north-east India for $150 million

7 June 2020: The Edelweiss group, on June 7, announced the buyout of two annuity road assets in north- east India from engineering and core infrastructure player Navayuga Engineering ,the flagship entity of the Hyderabad based Navayuga group which is in deleveraging mode.
“The buyout has been struck for an enterprise value of nearly $150 million,” a source with knowledge of the matter told Moneycontrol. The transaction is one of the first infrastructure deals to be closed during the ongoing lockdown.

With the government’s thrust on boosting economic activity in north- east India, The Dhola and Dibang roads are of strategic importance as they ensure seamless all-weather connectivity between north- east and the rest of India. The Dhola bridge – the country’s longest river bridge, inaugurated by Prime Minister Narendra Modi in 2018 has opened new doors for economic development to both the states of Assam and Arunachal Pradesh.
The assets, namely Navayuga Dhola Infra Projects Limited (in Assam) and Navayuga Dibang Infra Projects Private Limited (in Arunachal Pradesh) have been acquired by the Edelweiss Group’s alternative investment fund Edelweiss Infrastructure Yield Plus and its portfolio company Sekura Roads Ltd.

Edelweiss Infrastructure Yield Plus which was floated two years back has gradually emerged as one of the most active domestic acquirers in the infra segment and now manages assets worth $1.5 billion. It competes with the likes of IndiGrid, Cube Highways and funds like GIC, KKR & Actis.
The fund is present in the transmission, road/highways and renewable energy segment and looks at helping Indian infrastructure companies to recycle their capital and focus on their core construction business. In June 2019, it acquired two transmission assets from Essel Infra and in January 2020, it acquired a 74 percent stake in French gas and power utility Engie’s solar assets in India.

Edelweiss Alternative Asset Advisors which manages Edelweiss Infrastructure Yield Plus has an AuM of over Rs. 28,000 crores. It focuses on providing long term growth capital to corporates. “Acquiring operating infrastructure assets provides impetus to the revival of the sector by helping construction companies to release capital and de-lever, enabling them to commence new projects which contribute to nation building and is becoming the core model to meet India’s infrastructure capital requirement,” said Hemant Daga, Deputy CEO – Edelweiss Global Investment Advisory

“We are happy to see the acquisition of these high-quality road assets to the Sekura Roads portfolio. This is in line with our strategy of investing in Infrastructure assets which can deliver predictable long-term yield to our investors. We now have a healthy portfolio of operating transmission and operating annuity road assets,” said Subahoo Chordia, Head of Edelweiss Infrastructure Yield Plus.

Chordia was previously associated with the group’s investment banking business and has spent two decades in the infrastructure sector.
Sachin Bhansali, CFO – Navayuga group, added “Navayuga group is looking to de-leverage its balance sheet and asset monetization is a critical component. This transaction will significantly ease out the debt position of the group and help free up cash.”

Source: moneycontrol

ET: Banks seek RBI nod to recast Rs 3 lakh crore loans minus downgrade

3 June 2020: Indian lenders have asked the central bank to allow them to restructure loans worth about Rs 3 lakh crore given to hospitality, aviation and commercial property companies without downgrading these assets on their books. These sectors are among the worst-hit by the Covid-19 pandemic and subsequent lockdown.

At the end of April, banks had an exposure of Rs 2.3 lakh crore to commercial realty, Rs 45,862 crore to hospitality businesses, and over Rs 30,000 crore to aviation firms. Banks have told the Reserve Bank of India (RBI) that without the restructuring relief, nonperforming assets (NPA) on their balance sheets will surge.

A similar request was made by the heads of state-run lenders during their meeting with the finance minister two weeks ago.

“We are in talks with RBI to extend help to worst-hit sectors. We see huge slippages in aviation, hospitality and commercial realty if restructuring benefits are not extended to past loans,” said a banker aware of the talks between banks and RBI.

Indian carriers are currently facing their worst crisis in history and have been in a no-revenue situation for two months due to the lockdown. With only a limited resumption of domestic operations late last month, bankers believe that airlines will not be able to service debt, leading to high slippages.

Rating agency ICRA has estimated that the aviation industry will need funding of nearly Rs 35,000 crore in the next three years.

In the hospitality industry, several hotels might shut permanently. The commercial real estate sector is also facing demand destruction, with experts projecting a 25 per cent fall in space rentals or purchases.

Rating agency Crisil has predicted India’s growth will contract 5 per cent in fiscal 2021 because of the pandemic and lockdown with a contraction of 25 per cent in the first quarter. According to Crisil, NPAs are set to swell to nearly 11.5 per cent of the total credit in the banking system from 9 per cent now. The rise in bad loans could bring with it capital requirements of $25-50 billion over two years for lenders, a large part of which is expected to fund provisions, as per a Fitch Ratings estimate.

Source: Economic Times

LM: Future group likely to sell in-house brands in bid to repay lenders

2 June 2020: Kishore Biyani’s Future group plans to sell some of its in-house brands as the retail-focused group faces pressure from lenders to reduce debt, two people aware of the development said.

Some of the prominent in-house brands of the cash-strapped group include Cover Story under its apparel retail business Future Lifestyle Fashion Ltd and Tasty Treat under its snacks unit Future Consumer Ltd. The group is planning to unlock value in some of these in-house brands, the people cited above said on condition of anonymity.

“A lot of their in-house brands generate strong revenues and have great brand recall. So these are assets that the group thinks can be leveraged to help it reduce debt of group companies,” one of the two people cited above said, adding that the group is in the process of hiring investment banks to manage the sale of these brands.

In a recent report, credit rating agency Care Ratings also said Future Lifestyle Fashion is exploring various options to tide over debt issues, including selling some of its brands.

“Future Lifestyle has availed moratorium on payments as allowed by RBI, sought additional working capital limits, undertaken initiatives to rationalize costs, including but not limiting to closure of non-profitable stores, migrate from fixed rental model to a revenue sharing one and plans to divest one of its investee brands to augment its cash flows in the near to medium term,” the rating agency said.

An email sent to a spokesperson at Future group remained unanswered.

The plan to sell some in-house brands is part of a larger effort to resolve the group’s balance sheet stress.

The Future group is also seeking buyers for its stake in an insurance joint venture, and several investors have shown interest in the group’s flagship Future Retail, which houses the BigBazaar chain of stores.

Recently, Future Retail said it will raise as much as ₹650 crore by selling non-convertible debentures to replace high-cost debt. The group’s stake in its supply chain business has also been put on the block as part of these efforts.

Biyani’s debt-related woes surfaced in March when shares of his listed firms crashed, triggering a rating downgrade of the promoter holding company and invocation of pledged shares by lenders.

On 4 May, Icra downgraded Future Corporate Resources, a promoter group entity, to D, after it defaulted on coupon payments. “The firms informed it has sought a moratorium on payments from investors; however, the same has not been approved,” Icra said. “Despite monetisation of investments, total group debt has increased as on 31 December 2019…total debt at the group’s listed firms rose to ₹12,778 crore as on 30 September 2019 from ₹10,951 crore as on 31 March 2019.”

Source: LiveMint

ET: No IBC and Covid NPAs coming, PSBs may sell Rs 20k-cr bad loans

2 June 2020: An estimated Rs 20,000 crore worth of bad loans from state-run banks are up for sale to asset reconstruction companies as banks prepare for a fire sale due to suspension of the bankruptcy law which has blurred the recovery horizon, said bankers familiar with the development. Many banks are looking to sell large exposures to Reliance Communications, Reliance Naval, Videocon Industries, and Amtek Auto that have been a drag for more than two years, they said asking not to be identified.

Banks are looking to sell these loans to avoid higher provisioning requirements on NCLT accounts as resolution dates get longer due to the government’s decision to suspend the bankruptcy law. These banks are yet to come out with a formal list of loans on sale as back channel talks with asset reconstruction companies are ongoing.

“We are talking to ARCs regarding some of our large exposures, depending on the feedback and interest for these loans we will prepare a final list of bad loans on sale,” said a PSU banker. Finance minister Nirmala Sitharaman last month suspended the application of bankruptcy law for any defaults associated with Covid-19 inflicted pain. The Reserve Bank of India has provided a six-month repayment moratorium, in two stages, that is available till August 31.

Another CEO said that with Covid set to increase their NPA burden, they were looking at selling past bad loans to avoid higher provisioning. “We have made adequate provisions for these loans, depending on the response from ARCs we hope we can take write-back provisions in the upcoming quarters,” he said. In the past too, several banks have sold defaulter loans such as Essar Steel and Bhushan Power and Steel due to delays in bankruptcy proceedings. Axis BankNSE -1.18 % too put up loans worth Rs 435 crore on the block, a big chunk of which was to small and medium enterprises.

Indian banks have been saddled with bad loans of over Rs 9 lakh crore, nearly 9.5% of the banking system loans. This is estimated to rise to 11.5% due to shutdown of businesses. The Covid-19 pandemic has also worsened the backlog of cases at bankruptcy tribunals across the country. At the end of March, the National Company Law Tribunal had admitted 3,774 companies to be tried under the bankruptcy law. Of them, 738 cases had exceeded the 270-day resolution timeline while another 494 cases were being heard for more than 180 days.

Source: The Economic Times

BS: Covid-19 related provisioning knocks off 45% of top private banks’ profits

31 May 2020: A look at Q4FY20 numbers of top private-sector banks such as HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra Bank and IndusInd Bank, shows that Covid-19 related provisioning has dented their profits.

On a cumulative basis, Covid-19-related provisioning at Rs 8,678 crore has shaved off 45 per cent of their pre-tax profit. In other words, had these banks not made the provisions, their combined reported pre-tax profit of Rs 10,792 crore would have stood at Rs 19,740 crore.

Due to a likely deterioration in borrowers’ credit profile, banks were mandated to make provisions in Q4. The Reserve Bank of India (RBI) had earlier announced a 3-month moratorium for repayments due between March to May (now extended to August) and had asked banks to provide at least 10 per cent for such accounts, which were overdue as of March 1, 2020 and have availed moratorium.

Many of these banks have made a higher provisioning based on their own assessment of the impact due to the moratorium following the Covid-19 outbreak and subsequent lockdown. According to data, Axis Bank and ICICI Bank consumed 37-59 per cent of their operating profit for Covid-19 provisioning, while the figure is 24 per cent in case of Kotak Mahindra Bank and 10-12 per cent for IndusInd Bank and HDFC Bank. As a proportion of advances, the Covid-19 provisioning of these lenders stood at 14-61 basis points in Q4.

“Banks have taken prudent step by making provisioning towards Covid-19, which had sharp impact on their bottom-line,” said Anil Gupta, head of financial sector ratings at ICRA. He, however, believes that the provisioning pain would remain elevated in the coming quarters and its impact on banks’ earnings could widen. This is due to uncertainty on the stress that could emerge because of the lockdown’s impact on borrowers’ ability to repay loans as well as the moratorium by the regulator. Banks’ loan book under the moratorium is expected to grow in the coming quarters, as borrowers may choose to conserve liquidity (cash) amid rising uncertainties.

Prakash Aggarwal, head-financial sector ratings, at India Ratings, shares a similar view. According to him, “While the proactive provisioning by banks is in the right direction, more will be needed given the way the pandemic is moving and the extension of the moratorium.”

Analysts at Edelweiss estimate that banks like Axis Bank, Kotak Mahindra Bank and ICICI Bank have 25-30 per cent of their loan book under the moratorium.

In the present situation, when income levels of individuals are getting impacted, either through salary cuts, or job losses, and a rating downgrade of key industries/companies is likely, concerns on asset quality are justifiable.

Credit Suisse also recently increased its credit cost estimates by 20-60 per cent for banks, due to lockdown and moratorium extension.

The silver lining, however, is that private banks have higher and relatively better provision coverage ratio, say experts. The foreign brokerage estimates that Indian banks would need to raise $20 billion in the next 12 months, of which $13 billion would be required by public-sector banks.

Against this backdrop, the position of public-sector banks’ moratorium book, provisioning for Covid-19 stress and management commentary would be critical.

Source: Business Standard

LM: Govt may need to pump ₹1.5 lakh crore into PSU banks

28 May 2020: India may need to inject up to 1.5 trillion rupees ($19.81 billion) into its state-owned lenders as their pile of soured assets is expected to double during the coronavirus pandemic, three government and banking sources told Reuters.

The government initially considered a budget of around 250 billion rupees for bank recapitalisations but that has risen significantly, a senior government source with direct knowledge of the matter said, with loan defaults likely to rise as businesses take a severe hit from nationwide lockdowns to tackle the coronavirus.

“The situation is very grim,” the source said, adding that banks would require fresh funds soon.

All the sources asked not to be identified as the discussions are private. India’s finance ministry did not respond to a request for comment during working hours on Wednesday.

The capital plans were still being discussed and a final decision could be taken in the second half of the fiscal year, a second government source said. India’s fiscal year runs from April 1.

Indian banks were already saddled with 9.35 trillion rupees of non-performing assets at the end of September 2019, or roughly 9.1% of their total assets at the time.

Reuters reported earlier this month that bad loans would likely rise to 18-20% of total assets by the end of the fiscal year next March, as 20-25% of outstanding loans are considered at risk of default.

A nationwide lockdown entering its third month is expected to lead to a contraction in economic growth in the current financial year, according to several global rating agencies, which have also changed their outlook on the banking sector to negative. Economic recovery is likely to take a long time.

One banking source said it was unlikely the federal government would be able to fund the entire capital injection itself and may rely on indirect measures such as issuing bonds as a means of recapitalisation, a method which it has used previously.

“The amount could also be partly funded through monetisation of the fiscal deficit by the central bank,” the first government source said, adding that finance ministry officials were in talks with the Reserve Bank of India (RBI).

The RBI did not respond to a request for comment.

The government has already pumped in 3.5 trillion rupees to shore up state-owned banks in the last five years. India’s federal budget in February for the 2020-21 financial year made no provision for further capital injections, with lenders encouraged to tap capital markets to raise money instead.

Despite a fall in new loans being made because of the crisis, a senior Indian banker said that the government wanted the banking sector to maintain lending growth of at least 6-7% for this financial year to boost the economy, but raising money from capital markets wasn’t easy in the current environment.

“There will be a ripple effect of the slowing economy that banks will feel and we will need capital to sustain and grow,” he said.

Source: Live Mint

TNIE: Patanjali Ayurved to raise Rs 250 crore through debentures

27 May 2020: Baba Ramdev-led Patanjali Ayurved plans to issue debentures worth Rs 250 crore that will be used to meet its working capital requirements and strengthen supply chain network. This would be the first-ever issuance of debentures by the Haridwar-based firm, which has emerged as one of the leading companies in the FMCG segment in recent years.

The non-convertible debentures (NCDs) will carry a coupon rate of 10.10 per cent with a tenure of three years. The maturity date is May 28, 2023. According to information, the bidding date would start on May 28 for NCDs, which would be listed on the stock exchanges and are redeemable.

“In this pandemic, demand for Ayurveda-based products, which help in boosting immunity, along with other products has gone up by three-folds. That has put constraints in our supply chain, right from manufacturing to distribution. We are raising this (fund) to strengthen this one (supply chain), so that we can smoothen our process from manufacturing to distribution,” Patanjali spokesperson SK Tijarawala told PTI.

The debenture has been rated as AA by Brickwork. Recently, several companies have announced plans to raise money from the market through debentures, as they are facing a liquidity crunch. Companies also need money to meet the costs involved in resuming their production capacity and augmenting their supply pipelines.

In December last year, the Haridwar-based group had completed the acquisition of bankrupt Ruchi Soya for Rs 4,350 crore, maker of soya food brand Nutrela through an insolvency process.

Patanjali won the bid to acquire Ruchi Soya after Adani Wilmar, which sells edible oil under the Fortune brand, withdrew from the race citing significant delays in resolution process that led to deterioration of assets.

Source: The New Indian Express

FE:Orchid Pharma resolution: Banks will be able to show recovery in Q4

2 April 2020: Lenders to Orchid Pharma have received close to Rs 1,100 crore from Gurgaon-based Dhanuka Laboratories on the last working day of the financial year 2020, sources close to development told FE. The monitoring committee attached to the insolvency process of Orchid Pharma implemented the resolution plan on March 31.

This implies around 32% recovery for banks against total exposure of Rs 3,299 crore to Orchid Pharma. The development on late evening of March 31 also marks significance as banks will be able to show recovery on their books in the March quarter.

According to sources, lead creditor State Bank of India (SBI) has in all likelyhood received Rs 130 crore, Bank of India Rs 101 crore, Allahabad Bank Rs 81 crore, Andhra Bank Rs 74 crore, Punjab National Bank (PNB) Rs 70 crore and Union Bank of India Rs 62 crore from the resolution of Orchid Pharma.

The lenders will also receive 4,08,164 equity shares of Orchid Pharma at Rs 10 each. There will also be issue of 0% non-convertible, non-marketable, cumulative redeemable debentures of value of Rs 3,650 crore to a special purpose vehicle created by Dhanuka Laboratories, as a part of the resolution plan.

The National Company Law Tribunal (NCLT), Chennai, had approved Dhanuka’s resolution plan on June 25, 2019, for Orchid Pharma after earlier approved bidder — Ingen Capital — refused to pay money for the company. However, trouble started for the company when the National Company Law Appellate Tribunal (NCLAT) in its November 13, 2019, judgement had set aside the Chennai NCLT’s order that approved the resolution plan by Dhanuka, on the ground that the amount offered in favour of stakeholders including the financial creditors and the operational creditors, was less than the liquidation value.

Lead creditor SBI had later filed the appeal before the Supreme Court seeking setting aside the NCLAT order, alleging that the appellate tribunal erred in overriding the commercial wisdom of the CoC.

Finally, a Supreme Court bench of Justices Rohinton Fali Nariman and S Ravindra Bhat, on February 28, 2020, set aside the judgement of the NCLAT, in view of its recent judgement where it had categorically held that no provision in the Insolvency and Bankruptcy Code (IBC) or regulations had been brought to the court’s notice, under which the bid of any resolution applicant has to match the liquidation value arrived at in the manner provided in the relevant regulations.

The Financial Express reported

FE: DHFL claims cross Rs 1 lakh crore

24 March 2020: The amount claimed by creditors of troubled Dewan Housing Finance Corporation (DHFL) has crossed Rs 1 lakh crore, sources told FE. The sources added that 70,913 creditors “have claimed Rs 1,00,064 crore from DHFL till now.” Financial creditors, including bondholders, have claimed Rs 86,469 crore from DHFL.

India’s largest lender State Bank of India, including SBI Singapore, is the lead creditor with a claim of Rs 10,083 crore, followed by Bank of India, which has claimed Rs 4,126 crore. Canara Bank has claimed Rs 2,682 crore, National Housing Bank (NHB) has claimed Rs 2,434 crore, Union Bank of India `2,378 crore and Syndicate Bank Rs 2,229 crore, among other lenders.

The total amount also includes claims of Rs 2,500 crore from promoter entity of Wadhawan Global Capital (WGC). The claim relates to the exercising of a put option by Wadhawan Global Capital (WGC) and was filed by Dheeraj Wadhawan on behalf of the group company.

The troubled lender is undergoing a resolution process under the Insolvency and Bankruptcy Code, 2016, after the Mumbai bench of the National Company Law Tribunal (NCLT) admitted the case on December 2, 2019. DHFL is evaluating expression of interests received for the company. FE reported earlier that lenders discussed the revised evaluation matrix of bidders in the CoC meeting held on March 12. During the meeting, it was decided that 5% more weightage will be given to net present value (NPV) compared with the previous plan. The new evaluation criteria gives 40% weightage to NPV, 30% weightage to cash upfront, 10% for capital infusion, 5% to equity stake and remaining 15% evaluation will be done based on qualitative parameters.

FE has learned that 24 applicants have submitted expressions of interest (EoIs) for DHFL. The company had given the option to bidders to bid for the whole company or in parts. Under Option I, suitors were invited to submit EoIs for the entire business of DHFL. Under Option II, prospective resolution applicants were invited to submit EoIs for one or more groups or a combination of any assets in isolation across different groups of DHFL. The bids for the bankrupt mortgage lender are to be invited across three areas – retail, non-retail and slum rehabilitation authority (SRA) loans.

Source: Financial Express reported

LM: Lenders set terms for DHFL liquidation after big loss

23 Jan 2020: Indian lenders set preliminary terms for companies wishing to bid for Dewan Housing Finance Corp.’s assets, people with knowledge of the matter said, as the nation’s bankruptcy courts attempts to resolve its first shadow bank insolvency.

The assets have been divided into three groups — mortgages, loans to builders of government-assisted housing, and project financing, the people said, asking not to be identified because the discussions are private. They have set minimum net worth and asset requirements for the bidders in each category, the people added.

The debt resolution process for Dewan Housing is being closely watched because it’s likely to create a precedent for other shadow lenders affected by the crisis which broke out in 2018 with a series of defaults at a major infrastructure lender. Dewan Housing, which has a market capitalization of ₹500 crore ($70 million), reported a ₹6,640 crore loss for the quarter ended Sept. 30 late on Wednesday.

Dewan was one of the worst affected by the crisis, prompting the Reserve Bank of India (RBI) to take over management of the company in November and start bankruptcy proceedings. Representatives at Dewan and Union Bank of India, which is leading the creditor’s group, didn’t immediately respond to emails seeking comment.

Bidders for the mortgage loans will need a minimum net worth of ₹3,500 crore and ₹10,000 crore of assets under management, the people said. While investors for the builder’s loans taken out under the government’s slum rehabilitation program require net worth of ₹500 crore and assets under management of ₹1,000 crore, one of the people said.

For project loans, the requirement is ₹1,000 crore of net worth and ₹4,000 of assets under management, the person added.

The decision was taken at a lenders meeting last week, at which advisory firm Grant Thornton was appointed to conduct an audit of Dewan’s transactions, the people said. The lenders also appointed real estate specialists JLL India and RBSA Advisors to value Dewan’s assets and give them an assessment of the losses they are likely to face, the person added.

Dewan Housing has about ₹3,800 crore in outstanding inter corporate deposits, the company said in a filing Wednesday, adding that it’s uncertain the amount can be recovered. It has set aside ₹2,400 crore as provisions to cover this.

“The company is undergoing substantial financial stress since second half of the previous financial year,” Dewan Housing said. “As a result, the company’s ability to raise funds has been substantially impaired and the business has been brought to a standstill.”

Source: Live Mint