BQuick On Feb. 17: Top 10 Stories In Under 10 Minutes

This is a roundup of the day’s top stories in brief.

1. Bhushan Power's Past Won’t Haunt JSW Steel

Bhushan Power & Steel Ltd. will be exempt from all criminal investigations after its takeover by JSW Steel Ltd. under the insolvency law, the National Company Law Appellate Tribunal said on Monday.

• JSW Steel had moved the appellate tribunal seeking to extinguish all present and future liabilities on account of criminal investigations against Bhushan Power & Steel, contending that an absence of any such protection would jeopardise the feasibility and viability of its resolution plan.
• The Enforcement Directorate had seized the assets of the insolvent steelmaker.
• The NCLAT order gives the insolvency process much needed certainty, according to said Nilang Desai, partner at law firm AZB & Partners, adding that any criminal liability on an individual in relation to past acts will continue.
• Senior Advocate AS Chandhiok, said the NCLAT’s judgment upholds the position that the Insolvency and Bankruptcy Code prevails over the Prevention of Money Laundering Act.
• “Agencies can probe wrongdoing by erstwhile directors but assets that are part of the resolution process cannot be touched.”

Here’s what the enforcement directorate had argued.

What Bhushan Power & Steel’s Acquisition Will Mean For JSW Steel

• The steelmaker’s capacity is expected to rise to about 26 mtpa, factoring in its 5-mtpa capacity expansion at Dolvi unit and 3.5-mtpa capacity of Bhushan Power & Steel, in the next six-eight months, according to ratings agency ICRA Ltd.
• Brokerages, including Emkay Global, view Bhushan Power & Steel’s takeover as “widely negative”, given JSW Steel’s high debt level when domestic steel prices have already started retreating.

Here’s how much banks stand to recover.

3. SEBI Tightens Norms For Investment Advisers; Tweaks MF, InvIT Rules

The Securities Exchange Board of India announced a slew of decisions at a press conference in Mumbai.

• The markets regulator decided to tighten eligibility norms for investment advisers and decided to introduce an upper limit for their fees.
• The regulator said an individual adviser cannot provide distribution services, while firms would need to segregate advisory and distribution activities at the client level.
• SEBI also decided to allow live testing of new products, services and business models by market players with an aim to facilitate the use of latest fintech innovations in capital markets.

Related Coverage:

• SEBI to amend eligibility norms for InvIT investment managers, fast track issuance
• SEBI to come out with circular to prevent Karvy-like incidents

4. Sensex Slips

Indian equities ended lower for the third consecutive trading session dragged by declines in HDFC Ltd. and Reliance Industries Ltd.

• The S&P BSE Sensex fell 0.49 percent or 202 points to close at 41,055.69.
• The NSE Nifty 50 fell 0.56 percent or 77 points to end at 12,045.80.
• All the 11 sectoral gauges compiled by NSE ended lower, led by the NSE Nifty PSU Bank Index’s 3 percent fall.

Follow the day’s trading action here.

European stocks rose on Monday after Chinese shares advanced with the yuan as investors took encouragement from the Asian country’s pledges to support the second-biggest economy in the face of the coronavirus outbreak.

• Carmakers led the modest gain in the Stoxx Europe 600 Index, while HSBC Holdings Plc jumped before reporting earnings Tuesday.
• U.S. equity-index futures climbed, though Wall Street was shut for a holiday and Treasuries weren’t trading.
• The euro ticked higher after closing at its lowest since early 2017 on Friday. The dollar steadied against a basket of its biggest peers.

Get your daily fix of global markets here.

5. Bids For India’s First Long-Term Repo Exceed Size Eightfold

Investor demand for India’s first long-term repo operation exceeded the funds on offer by nearly eight times, as lenders rushed to borrow cheaply from the Reserve Bank of India.

• The central bank accepted Rs 25,040 crore through auction. Yield on the benchmark 10-year debt was up one basis point at 6.39 percent.
• The central bank received 63 bids worth Rs 1.94-lakh crore, calling the response “highly encouraging.”
• RBI plans to conduct second LTRO auction on Feb. 24.
• Governor Das had announced injecting up to Rs 1-lakh crore through European Central Bank-style LTROs in efforts to prompt banks to lower borrowing costs to support the slowing economy.

‘Getting three-year money at 5.15 percent is a killing’

6. DHFL Receives Interest From At Least 15 Bidders

Lenders to Dewan Housing Finance Corporation Ltd. have received expressions of interest from at least 15 bidders under the insolvency process, two people in the know told BloombergQuint on condition of anonymity.

• The deadline for submitting EoIs ends at midnight on Monday.
• Those interested range from private equity firms to stressed asset investors and domestic non-bank lenders. While have expressed an interest in DHFL’s entire loan portfolio, others have preferred to bid for the safer retail portfolio.
• Bain Capital, Welspun Group, KKR & Co., Asset Reconstruction Company of India Ltd. or Arcil and Oaktree Capital are among those who have submitted bids for the entire DHFL portfolio, the people quoted above said.

Here are the firms that have submitted bids for a part of the portfolio.

7. Borrowing Costs Drop For Piramal Group

Recent moves by Piramal Enterprises Ltd. to raise equity and transfer riskier developer loans off the books of their non-bank finance company are paying dividends.

• After suffering high borrowing costs in the second half of last year, Piramal group firms have started to see relief.
• Data from Bloomberg showed that the credit spread on bonds issued by Pirmal Group firms has reduced.
• The credit spread is the additional interest that investors demand over government bonds, seen as risk-free. The higher the spread, the poorer the risk perception.

Here’s what Piramal Group’s credit spread looks like and its impact.

8. MCA’s Audit Makeover: Perception Vs Reality

The Ministry of Corporate Affairs has brought forward proposals to enhance audit independence and accountability.

BloombergQuint asked auditors if these proposals will address the credibility crisis facing the audit industry.

• The MCA has floated certain ideas such as the number of audits under an audit firm or auditor be reduced or capping the number of partners in a firm. Deloitte India’s PR Ramesh says some of these suggestions will only manage optics.

• Also, the ministry’s proposal said joint audits would be beneficial in reducing the risk of over-familiarity through rotating the allocation of fieldwork between the auditors after a set period. PKF Sridhar & Santhanam’s partner Santhanakrishnan S said one auditor can catch what the other missed in this framework.

Here’s why the auditors think compulsory concurrent audit for listed firms is bad idea.

9. What Happens When Government Acquires Data

Clause 91 of the Personal Data Protection Bill allows the government to acquire data from any corporation. On what terms will it do so, asks Prashant Reddy.

• Is the government required to pay any compensation to the corporation from which it is acquiring data?
• Is data considered to be ‘property’?
• Is a provision like Clause 91 is legal in the context of international law?

Surprisingly, the bill is not the first that allows the government to requisition data for the purpose of governance.

10. What’s Slowdown-Proof? India’s IIMs Maybe

India’s economic slowdown has hurt many. The government’s finances are strapped. Households are watching their consumption. But a small pool of students attending India’s premier business schools appear to have escaped unscathed.

• Around 153 firms participated in the placement process compared to 123 firms last year at the Indian Institute of Management, Ahmedabad. Median salary this year is above Rs 30 lakh per annum for a one-year MBA.
• The companies coming for placements include regular suspects such as Goldman Sachs and McKinsey & Co while the new recruiters this year included Blackstone Group.

IIM-A’s placement chairperson explains the raining offers drawing on game theory.