BQuick On Feb. 25: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. IL&FS Accounts Won’t Get NPA Tag
The National Company Law Appellate Tribunal has ordered that Infrastructure Leasing and Financial Services and its group companies will not be declared as non performing assets until further orders.
- The order will continue to be in effect even if there is a default, the appellate tribunal said.
- In a short order, which didn’t offer any explanation as to the rationale, the tribunal said that lenders cannot declare any of these accounts as NPAs without prior permission from the NCLAT.
... we make it clear that due to non-payment of dues by the ‘Infrastructure Leasing & Financial Services Limited’ or its entities including the ‘Amber Companies’, no financial institution will declare the accounts of ‘Infrastructure Leasing & Financial Services Limited’ or its entities as ‘NPA’ without prior permission of this Appellate Tribunal.NCLAT Order Dated Feb. 25
The intervention will come as a relief for lenders but dilutes banking regulations.
2. Did Rating Agencies Give Investors Fair Warnings?
Indian lenders and bond-holders have been hit by a series of corporate defaults over the last few years and, as a consequence, credit rating agencies are under scrutiny for not alerting investors in time.
- Despite the fact that credit rating agencies have all the systems and procedures in place they may still fail, said JN Gupta, co-founder and managing director of Stakeholder Empowerment Services.
- The reasons for such failures may range from lack of data availability to competitive pressures.
- To understand past failures, BloombergQuint compiled data of prevailing ratings on large corporate debt just before they went into default.
- This includes companies which were referred by banks for insolvency proceedings in 2017 and more recent defaults like that of Infrastructure Leasing and Financial Services.
The list gives a reasonable view of the track record of rating agencies in foreseeing these defaults.
3. Adani Sweeps Airport Bids In Aviation Foray
The Adani Group emerged as the highest bidder to manage five non-metro airports under a public private partnership with the Airports Authority of India.
- The winning bid will be decided on the basis of the highest monthly per passenger fees quoted by the bidder, according to a media statement by the AAI.
- The fee will be payable to the state-run airports manager.
- The winning bids, according to a PTI report, will be announced on Feb. 28.
Here are the bids for the five airports.
4. Cloudy, With A Chance Of Normal Rain
Indian private weather forecaster Skymet Weather Services Private Ltd. has forecast a more than 50 percent chance of normal monsoon this year.
- “Right now, looking at all the conditions our first guidance for monsoon 2019 is that there is more than 50 percent chance of normal rains,” Jatin Singh, managing director, Skymet, said at a conference in Delhi today.
- “The situation is volatile because El-Nino is fluctuating, but several models are showing that it will devolve.”
- The monsoon is considered ‘normal’ if the average rainfall is between 96 and 104 percent of the long-period average.
There’s only a very small chance of a drought or excess monsoon.
5. Indian Markets Resume Rally
Indian equities advanced, erasing year-to-date losses, amid optimism that government’s proposal to lower taxes on the real estate sector and the start of an income support program for small farmers will help Prime Minister Narendra Modi’s re-election bid.
- S&P BSE Sensex resumed its rally after a one-day blip.
- The 31-share index ended 352 points higher at 36,213.
- The NSE Nifty 50 Index also ended near the day’s high at 10,880.
- Eight out of 11 sectoral gauges compiled by NSE advanced, led by the NSE Nifty Private Bank Index’s 1.1 percent gain.
Follow the day’s trading action here.
6. Fortis Wants Singh Brothers Arrested
Fortis Healthcare Ltd. petitioned India’s market regulator to arrest its founders after the Singh brothers failed to repay Rs 400 crore that the watchdog had found they had fraudulently taken out.
- The company earlier this month had requested SEBI to use its legal authority to recover the money from Malvinder and Shivinder Singh, said Fortis spokesman Ajey Maharaj.
- The regulator in October had ordered the Singhs, formerly controlling shareholders, to return the money, plus interest, within three months.
The petition deepens the legal jeopardy faced by the ex-billionaire brothers.
7. Don’t Ignore The Credit Risk In NBFCs
Have non-banking finance companies been systematically underpricing credit risk? Harsh Vardhan and Rajeswari Sengupta study 21 NBFCs and housing finance companies over 2009-2018.
- Asset-liability management mismatches in the balance sheets are not the only problem in the NBFC business model.
- While lenders to NBFCs kept their credit premium stable, NBFCs themselves started reducing credit premium they were charging customers.
Systematic mispricing of risk could result in solvency issues for the NBFC sector as a whole.
8. E-Wallets: Death By A Thousand KYCs
The fast-approaching March 1 deadline for offline Know-Your-Customer compliance increasingly seems like a cliff’s edge from which e-wallets may not recover, write Vaibhav Kakkar and Puneeth Nagaraj.
- The market share of e-wallets in India is said to have fallen by 40-50 percent from October 2017 to March 2018.
- The regulatory burden imposed by the RBI’s KYC guidelines is widely cited as the cause.
- Media reports suggest that even the biggest e-wallet operators have verified only 70 percent of their user base.
But here’s one readily available solution.
9. Should India Borrow EU’s Rules To Govern Online Platforms?
When All India Online Vendors Association complained to the competition regulator about Flipkart’s preferential treatment to certain sellers, the Competition Commission of India dismissed the allegations saying the marketplace isn’t dominant. And since it isn’t dominant, the question of abuse of dominance doesn’t arise.
- The regulator came to this conclusion for Amazon as well.
- Similar concerns have been raised by the restaurants’ association against food delivery apps Zomato and Swiggy who have been accused of giving preferential treatment to their in-house cloud kitchens.
- Drivers of Ola and Uber too have complained in courts of unreasonable commission cuts and sudden termination.
While India faces a regulatory vaccum, Europe is taking steps to govern trading practices of online platforms.
10. Oscars: ‘Green Book’ Overcomes Outcry
In a Hollywood ending of sorts, the film “Green Book” endured an unusually high degree of controversy to bring home the best picture Oscar at Sunday’s Academy Awards.
- The road-trip/buddy film about pianist Don Shirley and his bodyguard-driver Tony Vallelonga faced criticism from some members of Shirley’s family who said the movie inaccurately portrays their relationship.
- Also, revelations that director Peter Farrelly used to jokingly flash his private parts years ago, and that star Viggo Mortensen used a racial epithet at a press conference, could have killed the movie’s chances of major awards.
- But the crowd-pleasing film, released by Comcast Corp.’s Universal Pictures, continued to win over audiences and members of the Academy, who also recognized the film’s co-writers Vallelonga, Farrelly and Brian Hayes Currie for best original screenplay.
Spike Lee, director of rival nominee “BlacKkKlansman,” said: “The ref made a bad call.”