A crane stands silhouetted at sunrise on a construction site in South Korea. (Photographer: SeongJoon Cho/Bloomberg)  

BQuick On Feb. 4: Top 10 News Stories In Under 10 Minutes 

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

1. Are Essel Group’s MF And NBFC Lenders Living In Denial?

On Sunday, a clutch of mutual funds and non banking finance companies gave Subhash Chandra a longer rope to hang them with. They agreed to not trigger a default on the Rs 11,500+ crore he’s borrowed from them even if the value of the collateral underlying the loans drops further. Shockingly, they also agreed to standstill if an actual default takes place, writes Menaka Doshi.

  • Value of shares in Zee and Dish TV that Chandra had pledged to borrow thousands of crores to fund privately-owned infrastructure projects has fallen substantially.
  • And yet the lenders have agreed to standstill. For eight months. There is also no mention of Chandra adding to the collateral.

It seems these lenders have learnt nothing from a decade of similar such behaviour by India's banks.

Also read: Mutual Funds Give Essel Group Free Pass On Share Fall, Debt Default

2. Money For Farmers = More Biscuit Sales

The makers of biscuits and staples stand to gain the most from the government’s direct income transfer to small and marginal farmers even as consumer goods companies said it’s unlikely to spur any big-ticket spending.

  • The interim budget proposed a direct income transfer of Rs 6,000 a year to farmers with less than 2 hectares—more than 85 percent of farm holdings in the country—as disinflation in food prices has led to an agrarian distress.
  • “Chai-biscuit is like a breakfast staple for farmers from this (low) income group,” Kamal Agarwal, executive director of Haldiram’s Food International Ltd. told BloombergQuint.
  • Nearly 60 percent of consumption for the category of households that will benefit from the prime minister’s scheme is contributed by food, according to National Sample Survey Organisation’s report for 2012.

Here’s why biscuit sales will retain their crunch.

3. Coal India’s Rs 1,050-Crore Buyback

Coal India Ltd. will repurchase up to Rs 1,050 crore worth of shares at a time the government is looking to collect Rs 5,000 crore through buyback offers of state-run companies.

  • The world’s largest coal producer will repurchase up to 4.46 crore shares, or 0.72 percent stake, at Rs 235 apiece, according to its exchange filing.
  • It set Feb. 15 as the record or cut-off date to ascertain which shareholders will be eligible.
  • The state-run miner also said its trading window will remain closed till Feb. 6 to comply with the norms of the Securities and Exchange Board of India with respect to the buyback.

Coal India will raise about Rs 1,065 crore by selling shares to its subsidiaries.

4. Nifty Ekes Out Gains, Dow Drops

Indian equity benchmarks rallied in the last hour after a topsy-turvy trade and extended gains for the third day.

  • The S&P BSE Sensex jumped over 350 points from day's low to end at 36,582.
  • The NSE Nifty 50 Index ended at 10,912.25, up 0.17 percent.
  • Seven out of 11 sectoral gauges compiled by NSE fell, led by the NSE Nifty Pharma Index's 1.76 percent decline.
  • NSE Nifty Private Bank Index was the top sectoral gainer with a 0.38 percent rise.

Follow the day’s trading action here.

U.S. stocks drifted mostly lower and the dollar rose as investors awaited fresh catalysts after digesting solid American economic data on Friday and inconclusive trade talks in Washington.

  • The Dow and S&P 500 opened lower, while the Nasdaq was little changed after U.S. President Donald Trump over the weekend told CBS that trade talks with Beijing are “doing very well” and sounded confident an agreement with North Korea was on the horizon.
  • Brent crude erased gains after earlier touching an intraday high for 2019.

Get your daily dose of global markets here.

5. DHFL Not Out Of The Woods

Shares of Dewan Housing Finance Ltd. snapped a five-day losing streak to end 3.9 percent higher today as the management tried to allay investor concerns. Kapil Wadhawan, chairman and managing director, in an interview with BloombergQuint, defended lending to group companies and denied allegations of any wrongdoing.

However, there are still some concerns

  • Still, at least two fund managers told BloombergQuint—requesting anonymity as they aren’t allowed to speak to the media— that the sentiment against the mortgage lender is very strong and might take time to turn around even if it sells more stake in other businesses.
  • The money lent to companies with low net worth against higher collateral, even if permitted by law, appears risky. Senior executives at other mortgage lenders told BloombergQuint requesting anonymity that they found the structure unusual. Wadhawan couldn't explain that.

The asset sales by the group aren’t enough to pull the mortgage lender out of the liquidity crunch.

6. Please Welcome The LIC (IDBI) Bank

LIC — Life Insurance Corporation of India — is among a handful of brands ubiquitous to India. It has more than 11,000 branch offices. About 2 lakh employees and more than 20 lakh agents. It has consistently been ranked as one of India’s most valuable brands. And now LIC has a bank, which may bear its name.

  • On Monday, IDBI Bank Ltd. said that it has sought approval from the Reserve Bank of India for a name change.
  • This, after LIC completed the acquisition of majority equity in the erstwhile development lender.
  • The bank has suggested two options to the regulator: LIC IDBI Bank or LIC Bank.

The lender may also shed its tag of a public sector bank.

7. Bhushan Power & Steel Promoter’s Last Ditch Effort

The promoter of Bhushan Power & Steel Ltd. made a last ditch effort to settle more than Rs 47,000-crore dues to financial creditors under Section 12A of the Insolvency and Bankruptcy Code.

  • Promoter Sanjay Singhal offered to convert the entire debt of Bhushan Power & Steel into cumulative redeemable preference shares, which will allow for repayment over 17 years, according to a letter addressed to the committee of creditors last week.
  • The offer comes at the final stage of resolution for the beleaguered steelmaker under IBC.

The Bhushan Power & Steel’s creditors will meet next week.

Also read: IBC: NCLAT Allows JSW Steel’s Revised Bid For Bhushan Power & Steel

8. Indian Banks’ $7 Billion Phone Bill

For a capital-starved economy, India shows little urgency to extricate good money stuck in failed businesses, writes Andy Mukherjee.

  • That was going to change after the adoption of a modern bankruptcy regime in May 2016.
  • Legal improvements notwithstanding, the culture of extending the life of bad loans to big businesses and pretending nothing is wrong with them is proving too hard to end.
  • After more than a year and a half of kicking the can down the road, Reliance Communications is filing for bankruptcy.
  • Even in March 2017, when RCom owed creditors $7 billion, it was clear that tycoon Anil Ambani’s telecom venture stood no chance in a crowded field against elder brother Mukesh Ambani’s shiny new 4G carrier, Reliance Jio Infocomm Ltd., and its offer of cheap data and free voice calls.

RCom’s insolvency filing shows how fruitless the out-of-court process has been.

9. Monetary Policy: If Not Cut Now, When?

The Reserve Bank of India should be seen to follow the rule that it has set for itself. Otherwise, the very credibility of the model stands to suffer, write Abheek Barua and Tushar Arora.

  • Good monetary policy is about nimbleness, not adherence to a strict choreography of rituals.
  • We have consciously chosen headline CPI as our target, not core inflation.
  • For the RBI, it would be difficult to justify a decision that ignores the target and focuses instead on a component of it.

There are consequences of being late.

10. CBI Vs Kolkata Police: Constitutional Questions

On Feb. 5, the Supreme Court will hear an application and contempt petition by the Central Bureau of Investigation in relation to the ongoing tussle between the agency and the West Bengal government.

Here are some of the legal issues that the Supreme Court will have to consider when looking at this matter.

  • Did CBI have to take consent of West Bengal government to operate?
  • Does the CBI need a warrant to enter Rajeev Kumar’s home and question him?
  • Are there grounds for imposition of President’s Rule in West Bengal?

Here are the facts of the case.