Monday, 21 May 2018

Cleaning India's bank mess - NPA of Rs 1,00,000 crore may find resolution.


With the debacle of the UPA regime, the people of India were expecting a cleaner, fair and sustainable banking systems. Four years passed, our bank's NPA issues are still haunting us. The Q4 results of all major banks reported a higher NPA growth. Fraudsters like Nirav Modi and Mehul Choksi have fled to Hong Kong duping Punjab National Bank, India's second-largest lender of approx Rs 11,000 crores. India's fight in the courts of Hong Kong, UK and other thug-friendly nations have regularly failed in the past. But, not all is gloomy and scary. The major chunks of NPA by companies operating in steel, cement and infrastructure sector are nearing resolution.

Just days before, Tata Group acquired a controlling stake of 72.65 percent in the debt-ridden Bhushan Steel Ltd for around Rs 36,000 crore will help in cleansing the banking system as well as boost lenders profitability. The consortium of state-run banks had the largest exposure to scam-ridden Bhushan Steel.

Of the total exposure to Bhushan Steel, the Punjab National Bank had set aside Rs 1,542 crore as provisions. “While the bank will recover Rs 3,050 crore of the outstanding amount, it will also be able to write off Rs 807.5 crore from the provision it had held for this NPA,” a PNB official said in an interview published by ET. Also, lenders, including PNB, will continue to own 12% in the acquired entity, giving it the opportunity to cash out later when the valuation of the company goes up, the banker added. The State of Bank is likely to get Rs 6,000 crore along with the shares of the entity. Bank of India reported that it would be able to recover Rs 1993 crore from the first successful NCLT recovery of 12 large NPAs.

Last year in June, RBI's internal advisory committee identified 12 accounts, each having more than Rs 5,000 crore of outstanding loans and accounting for 25 percent of total NPAs of banks. Following the RBI's advisory, banks referred Bhushan Steel Ltd, Bhushan Power & Steel Ltd, Essar Steel Ltd, Jaypee Infratech Ltd, Lanco Infratech Ltd, Monnet Ispat & Energy Ltd, Jyoti Structures Ltd, Electrosteel Steels Ltd, Amtek Auto Ltd, Era Infra Engineering Ltd, Alok Industries Ltd and ABG Shipyard Ltd to NCLT. These accounts together have a total outstanding loan of Rs 1.75 lakh crores.

For the acquisition of Essar Steel with NPA of Rs 49,000 crores, Numetal and Arcelor Mittal are having tough competition in the NCLT courts. Bloomberg reported that VTB backed Numetal has made a bid of Rs 37,000 crores in the second round of bidding. ArcelorMittal is understood to have made an upfront offer of Rs 30,500 crore and pledged another Rs 8,000 crore in the form of capital infusion into Essar Steel. It is expected that NCLT may approve the better deal by mid-June 2018.

Lanco Infratech owes INR 45,000 crore to a group of lenders, including ICICI Bank with the exposure of Rs. 7,380 crore and IDBI Bank at Rs 3,680 crore. Thriveni Earthmovers is said to have offered INR 1,400 crore in cash and liability for INR 38,000 crore of debt at the subsidiary level. The bid failed as the company couldn't get creditors vote. It is understood that Lanco Infratech has filed for liquidation.

With the successful resolution of Bhushan Steel, the finance ministry expects that the NPAs of 12 large companies would be cleared in near future and banks would get minimum Rs 1 lakh crore for further lending. Along with clearing NPAs, India's banks need to implement effective credit control mechanism which would result in greater transparency and sustainable financial modelling.

- Chaitanya Kulkarni.

Monday, 14 May 2018

Dubai's Relam Investment pumps $250- 300 million in India.


Relam Investment LLC, a new international joint venture formed by UAE-based Vault Investment and Vietnamese MIG Holding officially made entry into Indian markets. The company, headquartered in Dubai is set to focus on investments across multiple sectors including real estate, technology, energy, oil & gas, trading, healthcare, F&B, retail and agriculture. The company looks to invest USD 250-300 million in the Indian market with an initial focus on real estate and technology.

The company announced two new technology-led investment projects. The first would serve the real estate sector through the crowdfunding platform and the second, a trade hub platform, which will move small and medium enterprises into a different paradigm. Relam Investment LLC has allocated an investment portfolio of $50million to fund companies innovating in emerging technology like blockchain, AI, Big Data and another $200 million into the real estate sector, where India stands as one of its main hubs.

Relam Investment LLC also signed a cooperation agreement with RRP S4E Innovation Pvt. Ltd in order to set up renewable energy plants using CIGS, one of the most cutting-edge Nanotechnologies in the renewable domain. The partnership will also lead to setting up of a unique Electro-Optics park, as a part of its programme.

“The partnership between the two companies will bring together proven expertise into multiple sectors, which we aim to replicate in the Indian market. Our strategy is aligned with Dubai’s vision for globalized growth via effective investments. India is a developing region and its ‘Made in India’ project has made the country a global hub for investments. Through Relam Investment LLC, we aim to give a boost to the Indian start-up ecosystem.” - Sultan Ali Rashed Lootah, Chairman & MD, Relam Investment LLC.

Apart from India, Relam Investment LLC will focus its operations in the UAE, Vietnam, GCC countries, United Kingdom, Turkey, South East Asia and Egypt in the initial years, before expanding to other countries and regions around the world.

Source - Press Release.

Thursday, 10 May 2018

Walmart - Flipkart deal: India's largest FDI investment

India's largest FDI investment

Walmart-Flipkart deal at $20.8 billion is largest FDI investment in India after Essar Oil stake sale to Rosneft - Trafigura at $12.9 billion.

India's leading e-commerce giant has been sold to America's leading e-commerce giant, Walmart. Walmart had been keen to enter India's booming demand-driven market. Some analyst thank the change in government policy. Just a month back, the cabinet approved 100% FDI in Single brand retail. Walmart has been thinking of India as its next market since then. The Walmart - Flipkart deal of $20.8 billion has surprised many including its rival Amazon.

Walmart announced it has signed definitive agreements to become the largest shareholder in Flipkart. The press release says that the investment will help accelerate Flipkart’s customer-focused mission to transform commerce in India through technology and underscores Walmart’s commitment to sustained job creation and investment in India, one of the largest and fastest-growing economies in the world.

Walmart had already entered India's retail market by joining hands with Bharti. They operate 21 cash and carry stores in 9 states of India. The joint company Bharti-Walmart failed to make an impact in the grocery mall business which is ruled by Big Bazaar, D-Mart, Reliance, Tata and the Godrej. Whereas, India's e-commerce market had only three major players namely Amazon, Flipkart, and Snapdeal.

Subject to regulatory approval in India, Walmart will pay approximately $16 billion for an initial stake of approximately 77 percent in Flipkart, formally Flipkart Private Limited. The remainder of the business will be held by some of Flipkart’s existing shareholders, including Flipkart co-founder Binny Bansal, Tencent Holdings Limited, Tiger Global Management LLC and Microsoft Corp. While the immediate focus will be on serving customers and growing the business, Walmart supports Flipkart’s ambition to list on financial market's in future. The deal bids a good-bye to Flipkart founder Sachin Bansal.

Founded in 2007, Flipkart has led India’s eCommerce revolution. The company has grown rapidly and earned customer trust, leveraging a powerful technology foundation, including artificial intelligence, and emerging as a leader in electronics, large appliances, mobile and fashion and apparel. In a market where Walmart expects eCommerce to grow at four times the rate of overall retail, and with well-known platforms such as Myntra, Jabong and PhonePe, Flipkart is uniquely positioned to leverage its integrated ecosystem, which is defined by localized service, deep insights into Indian customers and a best-in-class supply chain. Flipkart’s supply chain arm, eKart, serves more than 800 cities, making 500,000 deliveries daily.

In the fiscal year ended March 31, Flipkart recorded GMV of $7.5 billion and net sales of $4.6 billion representing more than 50 percent year-over-year growth in both cases. With the investment, Flipkart will leverage Walmart’s omni-channel retail expertise, grocery and general merchandise supply-chain knowledge and financial strength, while Flipkart’s talent, technology, customer insights and agile and innovative culture will benefit Walmart in India and across the globe.

Walmart’s investment includes $2 billion of new equity funding, which will help Flipkart accelerate growth in the future. The Flipkart investment transforms Walmart’s position in a country with more than 1.3 billion people, strong GDP growth, a growing middle class and significant runway for smartphone, internet and eCommerce penetration. Now, America's rivals will fight in Indian markets, largely benefitting the final consumers and the retailers.

- Chaitanya Kulkarni

Source: Flipkart, Walmart.

Tuesday, 8 May 2018

BHEL bags contract for Nepal’s largest hydroelectric power project

Hydro electric power project

State-run PSU Bharat Heavy Electric Limited has bagged an order to build the largest hydro electric power project in neighbouring Nepal. This prestigious order is a testimony to BHEL’s proven technological prowess in executing power projects of this magnitude. The order will also provide a fillip to the company’s focus on globalization as a driver for growth.

BHEL bag 900 MW hydro electric power project in Sankhuwasaba, Nepal

Amidst stiff international competition, BHEL has secured a prestigious order for executing 900 MW Arun-3 Hydroelectric Project from SJVN Arun-3 Power Development Company (SAPDC), Nepal. Notably, once completed, this will be the largest Hydropower project in Nepal. Located in the Sankhuwasabha district, this project will substantially enhance Nepal’s present installed power capacity and will contribute significantly to Nepal’s vision of utilising its vast Hydro potential for accelerated economic development.

The total contract value of Arun 3 project is pegged at Rs 536 crores. The order envisages design, engineering, manufacturing, supply, erection and commissioning of Electro-Mechanical equipment involving the supply of four Vertical Francis Turbines and Generator sets, each rated 225 MW.

The cumulative installed capacity of power plants overseas with BHEL supplied equipment stands at close to 11 GW. Continuing its focus on globalization, BHEL has achieved consistent growth in its exports.

Recently, BHEL also secured maiden export orders from Benin, Togo, Chile and Estonia, expanding its global footprints to 83 countries across all the six continents. A major highlight of recent past was the receipt of an export order valued at US$1.5 billion for setting up 1320 MW (2x660 MW) Maitree Super Thermal Power Project in Bangladesh. BHEL is currently executing hydro projects of over 2,700 MW capacity in the country and 2,940 MW in Bhutan which are under various stages of implementation, demonstrating our commitment to promote clean and renewable energy in India and in subcontinent around India.

Arun 3 mega hydro power plant has to be constructed within 5 years.

As per the tender contract, the Turbines, Generators, Generator Transformers, Control System, Bus ducts and other associated equipment will be manufactured at BHEL’s manufacturing units in Bhopal, Bangalore, Rudrapur, Jhansi etc. Erection and Commissioning will be undertaken by BHEL’s Power Sector Northern Region and 400 KV GIS will be executed by Transmission Business Group, Noida. The construction period of the project is 60 months from the date of awarding the contract.

BHEL has so far bagged orders for more than 500 hydroelectric generating sets cumulatively of various ratings in India and abroad, with a capacity of more than 30,000 MW. Out of these, equipment for about 6,600 MW generating capacity is for overseas projects. BHEL’s hydro plants are successfully and efficiently performing in India and across the world, including at Afghanistan, Azerbaijan, Bhutan, Malaysia, New Zealand, Nepal, Rwanda, Taiwan, Tajikistan, Thailand and Vietnam.


Hydro power projects like these would help Nepal – the land of rivers become a power surplus state. India and Nepal mutually signed power trade agreements in October 2014. The agreement aims to enhance friendly relations and mutual trust between Nepal and India through increased cooperation in the field of transmission interconnection, grid connectivity and power trade. It facilitates government, public and private enterprises in planning and construction of interconnection facilities and power trade.

- Chaitanya Kulkarni

Saturday, 5 May 2018

Sindhudurg Airport to be operational by Q3 2018.

Parule Chipi Airport Konkan

The much-awaited Parule Chipi International Airport in Sindhudurg area of Konkan in Maharashtra is expected to be operational by Ganeshotsav festival. The airport is being constructed by IRB Sindhudurg Airport Pvt. Ltd. on a design-build-finance-operate-transfer (DBFOT) basis for the Maharashtra Industrial Development Corporation (MIDC). Sindhudurg airport will have a 2500-meter runway which has provision for future development. The airport will be built at an approximate cost of 520 crores.

Sindhudurg airport will have the capacity to handle 200 departing and 200 passengers arriving during peak hours with expansion facilities to serve up to 400 departing and 400 arriving passengers without additional construction. Although the airport will be serving domestic travellers it will be equipped with facilities to serve International charter flights.

The upcoming Sindhudurg airport is in the vicinity of Tarkarli Beach. Tarkarli beach which also has a Maharashtra Tourism Development Corporation resort is known for its pristine virgin beaches, corals, water sports and dolphin rides. The upcoming airport is expected to boost tourism in the region. But, Sindhudurg airport will face tough competition from India's second largest proposed airport in Mopa in North Goa.

Agreement for construction of the airport has already been signed between Maharashtra Industrial Development Corporation (MIDC) and IRB Sindhudurg airport Pvt. Ltd. in 2009. The Ministry of Civil Aviation has given in-principle approval and environmental clearance has also been granted by the Ministry of Environment and Forest.

Construction of taxi way, apron and isolation bay has been completed and work on the airfield ground lighting in on. Construction of passenger terminal building, ATC tower and technical building is on in full swing. Construction of other ancillary buildings is in progress and will be completed on time.

An airport in Sindhudurg was necessary in order to provide better connectivity to the Konkan region of Maharashtra, parts of Goa, North Karnataka and Western Maharashtra. At present the state of Maharashtra has three functional international and 13 domestic airports. Sindhudurg may have direct connectivity to Mumbai, Pune, Nagpur, Ahmedabad and Delhi. The route was also added in Phase 2 of UDAN scheme.

- Chaitanya Kulkarni.