Govt prepares bailout for steel sector

Steel secretary Aruna Sundararajan says steel and finance ministries are working on a package for the steel sector that will be finalized in next two months

(From left to right) Coal secretary Anil Swarup, economic affairs secretary Shaktikanta Das, telecom secretary J.S. Deepak, steel secretary Aruna Sundararajan and NHAI chief Raghav Chandra at CNBC-TV18-Mint’s ‘The Infra Ministerial’ event in Delhi on Monday. 

New Delhi: The government is readying a financial package to help revive the steel sector and also prevent bank loans advanced to steel firms from turning bad.

The steel and finance ministries are working on a package for the steel sector that will be finalized in the next two months, steel secretary Aruna Sundararajan said.

A number of options are being considered, including bringing in international investors to invest in domestic steel companies, Sundararajan said at a CNBC TV18-Mint event on Monday.

“There are a broad range of proposals that include banks taking certain equity as redeemable preference shares and then giving the companies enough time to redeem them. There are other proposals, where we are looking at bringing in financial investors who can hold some of these stakes for a period of time, and then when the company comes back to health, they can disinvest,” Sundararajan said.

“We are also looking at bringing in certain external or international investors who can pump in fresh equity into these companies. There has been a fair degree of interest from international investors,” she added.

The government’s move comes after similar efforts in the roads and power sectors. And it comes even as the banking system faces considerable stress from non-performing assets.

Rating agency Crisil Ltd estimates that the significant stress in the corporate loan book of the state-run banks could result in weak assets ballooning to Rs.7.1 trillion by 31 March 2017, or 11.3% of the total loan book, from around Rs.4 trillion as on 31 March 2015, or 7.2% of the loan book.

“Over the next few quarters, Crisil expects slippages to NPAs to remain high, driven by stretched cash flows of highly leveraged corporates (mainly in the vulnerable sectors such as infrastructure, metals and real estate), continued proactive recognition of stressed assets by banks, and limited ability of banks in the current environment to recover from exposures to large corporates that have slipped into NPAs,” a 10 March report by the agency said.

Sundararajan pointed out the government had already started taking steps to ease the troubles faced by the steel industry.

“The biggest support that the steel industry has been asking is for the minimum import price. Already, even though it is early days yet since it was announced, we are seeing a much better sentiment in the market. Prices are going up and banks and companies’ financial health is improving,” she said.

The government last month announced a minimum import price on 173 steel products for a period of six months to protect the domestic industry from cheap Chinese imports.

“There are companies that are over-leveraged. Those kinds of companies have to bring in some kind of discipline. For others, we are looking at what can be done in terms of a broad financial package. We are in consultation with the department of financial services,” said Sundararajan.

Steel industry executives welcomed government’s announcement that it is preparing a financial package for the sector.

The sector has been hit by a combination of adverse factors, including poor demand, a slump in prices, competition from cheaper imports and delays in project execution.

Seshagiri Rao, group chief financial officer of JSW Steel Ltd, admitted that the sector was in a lot of stress and that the balance sheets of several steel makers were over-leveraged.

Any financial package would support the recovery of the steel industry, Rao said.

“There is still debt overhang on steel companies,” said Vimal Bhandari, chief executive officer and managing director of IndostarCapital Finance Pvt. Ltd.

He said the government could infuse equity into stressed companies and encash it after they turn around, and so could bankers. “At the end of the day, steel companies have created quality assets,” he said.

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New milestone: National Payments Corporation of India gets 1,000 banks on its network

MUMBAI: National Payments Corporation of India (NPCI), the domestic umbrella organisation for all retail payments system, have attained a milestone as about 1,000 banks have joined its centralised network christened as National Automated Clearing House (NACH) system that helps processing bulk payments. 

"With 1000 plus member bank participants now, we are well poised to support government's efforts for modernising payment standards and digitising money transfers," said A P Hota, MD & CEO, NPCI. "It is expected to cover the entire core banking enabled bank branches spread across the country." 

NACH is also helping the government to implement Direct Benefit Transfers (DBT) schemes. It covers schemes like MNREGA, social security pension, old age pension, LPG subsidy. 

NACH is a centralised system launched with an aim to consolidate multiple ECS (Electronic Clearing Service) systems running across the country in a decentralised manner, NPCI said in a release. 

It is a web based solution which facilitates interbank, high volume, electronic transactions that are repetitive and periodic in nature. "With 1000 plus banks already in a network, it would now be simpler to cover all these banks for all services....for optimum utilisation of the network already created," said Hota. 

It empowers banks, financial, corporate and government institutions for making bulk transactions towards distribution of subsidies, dividends, interest, salary, pension, NPCI said. 

Transactions towards collection of payments pertaining to telephone, electricity, water, loans, investments in mutual funds, insurance premium are also processed through NACH.

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India an increasing source of talent for Princeton: Christopher Eisgruber

Princeton University president Christopher Eisgruber speaks about varsity’s India engagement and fund-raising plans

Princeton University president Christopher Eisgruber says India is a growing source of talent for the institute, both in terms of students and faculty. On a recent visit to New Delhi, Eisgruber spoke about Princeton’s India engagement, fund-raising plans and harnessing the alumni network. Edited excerpts from an interview:

What brings you to India?

I am here to increase connections with India. India is an increasing source of talent for us—both students and faculty. We want to come here and form partnerships to solve global problems—problems existing in the US, India or elsewhere. We want to do this not by opening centres and campuses but by facilitating networks between people and faculty and finding a way for our researchers.

We don’t count the number of agreements. The admission applications are growing (from India) though we are a small university in terms of the total number of students—we have just 5,200 undergraduate students and 2,600 graduate students, most of them at the doctoral level. India is the fourth largest source of foreign students in our university. There are 55 Indian passport holders at the undergraduate level and 75 graduate students. This is a significant jump when you compare it with the situation some years back. This number will continue to grow.

CHRISTOPHER EISGRUBER, 54Eisgruber is the 20th president of Princeton University. Before that, he was the provost of the varsity. A constitutional expert and advocate of liberal arts, he was a Rhodes scholar at Oxford and is a law degree holder from Chicago University.

We also run a programme in Varanasi, in which some of our undergraduate students come here to do service work for a year before returning to Princeton. Several of our faculty members are doing research in India. One of our professors, Angus Deaton, who has been awarded the Nobel Prize in economics, has worked in India on research projects to do with well-being and health sectors.

You are an advocate of liberal arts education. In Delhi, you interacted with Ashoka University. What’s the merit of liberal arts in current times?

Liberal arts is fundamental to what Princeton is. We have a great strength in social science, engineering, etc. This liberal arts tradition is part of our DNA. I am not an authority particularly on India, but can say that liberal arts prepare you to meet the challenges of the future.

Yale University president Peter Salovey and you managed the finance of your respective universities during the economic slowdown as provosts. Both of you are now presidents. So, are Ivy League varsities indicative of a trend—manage finances better to grow?

I know Peter well (smiles). What is gratifying is that even during the downturn, our alumni were forthcoming and generous. We give significant financial aid to our students and even during tough years, we continued to do so despite our endowment corpus dropping. Nearly 60% of our students receive financial aid from us.

What’s the health of your endowment corpus, and how are your fund-raising plans shaping up?

We are always raising funds. Because we believe by investing in the extraordinary talents of our campus, we can produce returns for society. We recently said that we want to grow our undergraduate student strength.

But aren’t your endowments giving you good returns?

Since 2000, including the economic downturn years, we have had 10% return compounding, including those tough years when endowments dropped by 25%. A 10% compounding is a pretty strong return from our endowment investments. One Bloomberg report spoke about six-month returns, but we invest for the long term, not for six months; and six-month returns do not dictate our budget.

Our endowment spending is relatively low—4.1% (annually)—and we are thinking whether we should be spending more from it because the returns on endowment are so strong. The overall endowment size is over $20 billion.

As provost, you successfully raised $1.88 billion. What’s your next fund-raising target and where does India feature?

Yes, you are right and the credit goes to my president under whom I worked as provost... We may go for another round of fund-raising, but when I won’t be able tell you now. At least 60% of our past students received financial assistance and that amount is equal to the tuition fee. So, most of the students are getting education for whom tuition fees is zero, low or there is some other aid. Our alumni are grateful and that’s why they return that in some form or the other. At least 61% of our ex-students contribute to the university. We will undertake a fresh fund-raising campaign for our new initiatives.

Would you put a number to that plan?

Let me say that universities often get too obsessed with numbers. Our job is to maximize the mission (of good education), not maximize profit. Maximizing revenue is a mistake.

Mistake by Princeton too?

I don’t know. I belive we are very disciplined. You spoke about $1.88 billion, but if you look at what some peers are doing, the numbers are gigantic.

Are you looking to harness your alumni network in India?

Yes, we are now working on it.

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The bond market’s ‘Thank You’ note to the government

 Bond yields fall to the lowest in 32 months

The 10-year yield opened at 7.488% and touched a low of 7.477%, a level last seen on 11 July 2013. Photo: Pradeep Gaur/Mint

Mumbai: If the bond markets can be unforgiving when faced with poor fiscal and economic policies, it can be equally gracious to a fiscally and economically prudent approach.

The sharp fall in bond yields since the budget and the change in mood in the bond markets vindicates this. Traders, who were sulking in fear of a slippage in fiscal deficit targets, are now feeling some spring cheer in the hope that the government decision to remain on the path of fiscal consolidation will be backed by at least a 25 basis point (bps) cut in rates by the Reserve Bank of India (RBI). Some are even expecting a 50 bps cut. One basis point is 0.01%.

The government’s decision to cut small savings rate on Friday—a decision that many thought was too politically difficult to take—has only added to the excitement in the air. The government also announced its borrowing plan on Friday, which held no surprises.

In response, this morning the benchmark 10-year bond yield has fallen to a 32-month low.

The 10-year yield opened at 7.488% and touched a low of 7.477%, a level last seen on 11 July 2013. At 9.30am, the 10-year yield was trading at 7.478%, down from its Friday’s close of 7.52%. Since 26 February, the Friday before the budget, the bond yield has fallen by over 30 bps.

“Post-budget cheer in bonds is likely to get further short-term boost as the government recalibrated small savings rates, essentially passing the baton to the RBI. We expect benchmark 10-year yield to remain around 7.4-7.6% in 1HFY17 as the market appears to have already priced in at least 25 bps rate cut in the coming months. We pencil in 50 bps rate cuts in CY2016,” wrote Madhavi Arora, economist at Kotak Economic Research, in a note on Saturday.

Indranil Pan, chief economist at IDFC Bank, agreed with that view.

“The government’s gross and net borrowings in H1FY17 are projected at Rs.3.55 trillion and Rs.2.48 trillion, respectively. The net borrowing is 14% higher than H1FY16 due to higher redemptions in H1FY16 at Rs.1.3 trillion compared with Rs.1.07 trillion in H1FY17. Net borrowing in April and May is Rs.164 billion and Rs.540 billion, respectively, compared with Rs.480 billion and Rs.771 billion during the same months in the previous year. In addition to this, with the government reducing small savings rates across the spectrum, the interest rates offered by commercial banks should also head lower. Hence, we now see 10-year benchmark yield coming off to 7.25-7.50% in FY17, compared with our earlier range of 7.35-7.55%,” said Pan in his note on Saturday.

Given the pace of the rally in bond markets, a note of caution is warranted.

A section of the market seems to be expecting either a 50 bps cut from the RBI in its April policy or at least a far more dovish tone than the RBI has so far maintained.

A reminder to this section of the market that while the RBI may take comfort from the fiscal discipline shown by the government, inflation indicators will remain prime to its interest rate policy. In this context, it is important to remember that while inflation in the past year has undershot the RBI’s targets, the central bank will now be setting policies keeping its goal of bringing inflation down to 5% by March 2017.

Given that the benefits from lower global commodity prices are already in the inflation data and that the system has the impact of the pay commission to deal with, the RBI may continue to tread with its customary caution.

Sun Capital

Coming soon: a market for packaged air

Mumbai, March 21:  

There are many who believe, that a day will come when we pay for even the air we breathe. Probably that day has already dawned upon us. Today, consumer goods major RB announced the launch of Dettol Air Protect mask. The brand been exclusively launched on Amazon for Rs.699 and will soon be available in other e-commerce sites, according to a company statement.

The timing of the product launch could not be better, as a large part of the country gears up for Holi bonfires that are expected to send air pollution levels soaring high. Arjun Purkayastha, Marketing Director, Dettol, developing markets at RB, said: “The risk from air pollution is very real and getting worse by the day. While we all work towards a longer term goal of reducing pollution, it is also important to protect ourselves from its adverse impact on a daily basis.”

In Mumbai and Delhi, the severe air pollution in recent months is still fresh in public memory.

The Air Quality Index in Mumbai was still in a poor shape, according to data by SAFAR-MoES-IITM-IMD on Monday. Particulate matter (or small airborne particles) is among the most detrimental of these pollutants. Studies link it with increased rates of chronic bronchitis, lung cancer and heart disease.

Air pollution can potentially cause some dangerous allergies as well, including coughing, rhinitis and asthma. Citing a WHO report the company statement says, 13 of the 20 most polluted cities in the world are in India.

Growing demand

Saurabh Srivastava, Director Category Management - FMCG, Amazon India, said: “Customers today are very health conscious and we are witnessing an increase in demand for such products on our Health & Personal Care store." The e-tailing giant already sells a variety of air-filters and anti-pollution masks.

One such offering from innovation giant 3M retails for Rs. 125 on Amazon against the marked price of Rs.300. The Dettol Air Mask claims to protect from PM 2.5, bacteria, dust and even pollen. It is mean for daily use when there is haze, dust or pollution. The product comes with two replaceable filters for added protection.

Marketing consultants, however, told BusinessLine that the price tag might relegate the product to a niche. Another issue that could play a spoiler is the consumer behaviour in India where a majority of the population still believes in washing and re-using things. In this case, the product filters may not be as effective, if they are washed.

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Godrej Properties raises $275 m for new fund

Teams up with Dutch pension manager APG for its GRIP II capital pool

Mumbai, March 21:  

Real estate developer Godrej Properties has raised Rs. 1,900 crore (about $275 million) with Dutch pension fund asset manager APG Asset Management NV as lead investor for its Godrej Residential Investment Programme II (GRIP II).

The Mumbai-based developer, an arm of the Godrej group, has created a dedicated real estate fund management business in India and Singapore –– Godrej Fund Management (GFM) — which will advise investors in the new fund.

Godrej Properties will hold a 20 per cent stake in GRIP II, according to a press release.

GRIP II will help attract long-term equity investors for real estate development across the country, Pirojsha Godrej, Managing Director & CEO, Godrej Properties, was quoted as saying. The new pool of capital will be invested in residential projects. GRIP II is a follow-on to the $200-million residential development platform that GPL had set up with an APG-led investor consortium in 2012.

Karan Bolaria has been appointed GFM’s head and will be responsible for both residential investment programmes as well as other strategic moves that the subsidiary might make.

APG and GPL pioneered the joint venture approach in the Indian private real estate market in 2012 with GRIP I, a structure that has since been followed by other foreign institutional investors and Indian developers.  

Sachin Doshi, Managing Director and Head of Private Real Estate Investments, Asia Pacific at APG, said, “Our strategy of partnering with only the best local operators has allowed us to succeed in a complex market like residential development in India. In spite of a general slowdown in the asset class in the country over the last three years, our partnership projects have sold well, which is a testament to our partner’s execution capability and brand strength.”

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Godrej Properties raises $275 mn for its real estate fund management business

Godrej Properties said it has created a separate real estate fund management business in India and Singapore and the capital has been raised through this

In 2012, Godrej Properties and an APG-led investor consortium struck a partnership, one of the first of its kind, to jointly invest Rs.770 crore in residential projects. 

Bengaluru: Godrej Properties Ltd on Monday said it has raised $275 million for Godrej Residential Investment Program II (GRIP-II) with Dutch pension fund asset manager APG Asset Management NV as the lead investor.

The Mumbai-based developer said it has created a separate real estate fund management business in India and Singapore—Godrej Fund Management (GFM)—and the capital has been raised through this. The new pool of capital will invest in residential projects.

Karan Bolaria has been appointed to head GFM and will be responsible for managing both series of the residential investment programmes as well as any future strategies that GFM will undertake.

In 2012, Godrej Properties and an APG-led investor consortium struck a partnership, one of the first of its kind, to jointly invest Rs.770 crore in residential projects. Last year in July, Godrej Properties and APG, through their joint investment and development venture, bought 18 acres of land from realty firm Puravankara Projects Ltd, off Kanakpura Road in Bengaluru, with which the corpus was fully deployed.

GRIP-II is a follow-on residential development platform, where GFM will advise on investments with Godrej Properties in India. The latter will hold a 20% stake in the second platform. “The new GRIP II platform in partnership with APG will help us attract high quality long-term equity investors to partner with us in our developments across India. This fits well with our strategy of deepening our presence across the country’s leading real estate markets while maintaining a capital-light development strategy,” said Pirojsha Godrej, managing director and chief executive, Godrej Properties.

“Our strategy of partnering with only the best local operators has allowed us to succeed in a complex market like residential development in India. In spite of a general slowdown in the asset class in the country over the last three years, our partnership projects have sold well, which is a testament to our partner’s execution capability and brand strength. We look forward to deepening the collaboration between our groups and supporting Godrej Fund Management,” said Sachin Doshi, managing director and head of private real estate investments, Asia Pacific, at APG.

Godrej Properties Ltd rose as much as 3% to Rs.290.70, while India’s benchmark Sensex index rose 0.44% to 25,063.43 points.

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