Friday, 18 March 2016

SKS Microfinance raises Rs 214 crore through securitisation deal

In the current fiscal, the company has raised Rs 1,781.82 crore through securitisation.

SKS Microfinance has said it has raised Rs 214.61 crore through a securitisation deal.
In a BSE filing, SKS Microfinance said it has "on March 16, 2016, completed the sixth securitisation transaction during 2015-16 for a pool value of Rs 214.61 crore." With this transaction, the total sum of securitisation completed during the current fiscal (year-to-date) is Rs 1,781.82 crore, it said.
The entire pool qualifies for Priority Sector treatment as per the Reserve Bank of India's Priority Sector lending guidelines.
"The pool has been rated AA (SO) by a leading rating agency, signifying a 'high degree of safety regarding timely servicing of financial obligations'. Such instruments carry a very low credit risk," it added.
On the BSE, the company's stock was trading at Rs 528.30, up Rs 4.90 or 0.94%.

TPG Capital said to vie for stake in IDBI Bank

TPG would like to invest $1 billion annually in India over the next three years if it can find the right investments, says co-founder Jim Coulter


IDBI Bank is seeking to bolster its balance sheet after recording bad debts that totaled 8.94% of its loans at the end of December. 
TPG Capital is among investors vying to acquire a stake in Indian state-owned lender IDBI Bank Ltd, people with knowledge of the matter said.
The lender has reached out to potential investors including private equity firms and multilateral institutions, one of the people said, asking not to be identified as the information is private. A formal process for the stake sale hasn’t started yet, according to the people.
IDBI Bank is seeking to bolster its balance sheet after recording bad debts that totaled 8.94% of its loans at the end of December. TPG would like to invest $1 billion annually in India over the next three years if it can find the right investments, co-founder Jim Coulter said in a Wednesday interview.
Shares of IDBI Bank rose as much as 3.2% on Thursday toRs.67.75. It was trading up 1.2% to Rs.66.45 at 3:21 pm in Mumbai.
The Indian lender appointed advisers including Bank of America Corp., Citigroup Inc. and Credit Suisse Group AG to arrange a share sale of as much as Rs.3,770 crore, people with knowledge of the matter said earlier. IDBI Bank has approached the World Bank’s International Finance Corp. about a potential investment, the people said at the time.
TPG declined to comment in an e-mail, while IDBI Bank chief financial officer N.S. Venkatesh said he couldn’t comment.
IDBI Bank won government approval in December to sell stock to institutional investors. The Indian government owns 80.2% of the bank, according to exchange filings.

TPG in 2004 considered acquiring Global Trust Bank Ltd, a lender based in south India, through its affiliate fund Newbridge Capital, one of the people said. Later that year, Global Trust Bank was ordered to cease business and merged with state-run Oriental Bank of Commerce after bad loans depleted its capital.

Govt clarifies safe harbour norms for offshore funds

Buyout firms will not benefit.
Reuters
rupee
The government has clarified the so-called ‘safe harbour’ norms for offshore funds in a move that benefits the private equity and venture capital industry.

The Central Board of Direct Taxes (CBDT), in a notification earlier this week, introduced a look-through provision to determine the number of investors in a fund to qualify for the safe harbour and stipulated 18 months’ time for new funds to satisfy the norms.
It said an approval committee that is being formed will determine the eligibility of the managers of offshore funds to avail safe harbour benefits. Those who want to avail such relaxations need to apply to this committee.
The notification makes it clear that the offshore funds that seek to control an Indian business cannot avail safe harbour benefits. For that purpose, it stipulates that funds which have more than 26 per cent voting rights in an Indian company will not be considered for safe harbour provisions.

This means that buyout firms won’t benefit from the government’s move. Also, many large PE deals involve over 26 per cent stake. So this may lead PE firms to make co-investments with limited partners or other PE firms.
While defining the safe harbour norms for an offshore fund, the rule that stipulates a minimum 25 investors has been redefined. A look-through provision has been brought in wherein the rule will be relaxed for funds that have institutional investors with a large number of investors/ limited partners.

"About 85 per cent of the $20 billion of VC/PE investments made in India in 2015 were made by offshore-based asset management companies. For most offshore funds, this move greatly eases doing business from a tax certainty perspective," said Gopal Srinivasan, chairman and managing director at TVS Capital and vice chairman of the Indian Venture Capital Association.

Subramaniam Krishnan, partner, tax and regulatory services, EY, said that while the provisions largely appeal to fund managers of public market-focused foreign institutional investors, PE and VC players will also benefit from these rules.
Industry executives say the government’s move will encourage many Indian fund managers of offshore funds, who were operating out of overseas locations such as Hong Kong and Singapore, to relocate to India.

“Directionally, the issuance of the guidelines by the government is an important step forward in enabling the regime for domestically managing foreign capital, something which countries like Singapore and the UK have done so well,” said Tejas Desai, tax partner for financial services at EY.

“The guidelines provide some important clarifications in relation to the qualifying conditions for the fund like the manner of determining resident Indian ownership and permitting a look-through approach in determining the number of investors in the fund,” he added.
According to Desai, the guidelines provide that the offshore fund can seek a prior confirmation of its eligibility by making an application to the CBDT, something which should give certainty of tax outcome for the fund. 

“Over the long run, this means more opportunities for Indian talent within both domestic and global asset management firms to play an expanded role in managing foreign capital,” 

You can use systematic transfer plans to invest in equity funds

An STP is recommended for transfers from a liquid scheme to an equity scheme, but you can mix and match your STP investments depending on your goals.



One of the ways to invest a lump sum amount in mutual funds is a systematic transfer plan (STP). In this, the money is systematically moved from a liquid fund to a systematic investment plan (SIP) of an equity fund of your choice.
WHAT IS AN STP?
This is a variant of an SIP—an investor invests a lump sum amount in one scheme, usually a low-risk fund (say, a short-term debt or liquid fund) and regularly transfers a pre-defined amount into another scheme, typically an equity fund, which is meant for long-term wealth creation.
The transfer can happen every month on a specified date (some fund houses offer weekly transfers as well). But do keep in mind that both the schemes have to be by the same fund house. For example, if you have a lump sum of Rs.1 lakh, you can invest this in a liquid fund and set up an STP of, say, Rs.5,000, which will gradually transfer your money into an equity fund of the same fund house.
An STP allows you to systematically invest a lump sum into an equity fund, but at the same time earn slightly higher returns on the uninvested portion that is in the liquid or short-term debt fund, instead of being in a savings account. According to Value Research, the average return of liquid funds in the past one-year period has been 7.89% as on 16 March 2016. In comparison, most savings accounts give 4% per annum (some may give 6-7%).
TYPES OF STPS
One of the types is fixed STP where a fixed sum is transferred from one scheme to the other. Then there is capital appreciation STP. However, only a few fund houses offer this. In this, only the returns are invested in the other scheme; the original lump sum stays in the liquid or short-term debt fund. For example, if Rs.10 lakh is invested in a liquid fund that gives a monthly return of Rs.10,000, then only Rs.10,000 will be transferred to an equity fund.
THINGS TO REMEMBER
An STP is recommended for transfers from a liquid scheme to an equity scheme, but you can mix and match your STP investments depending on your goals. For instance, you can put money in an ultra short-term debt fund or a short-term bond fund and then transfer the money to an equity fund. There is no additional cost involved in starting an STP. However, while most liquid funds don’t have exit loads (a charge for redeeming before a defined period), some others like liquid plus funds may have an exit load period.
It is best to finish your STP within a few transfers, say, 6-9 transfers. This is because the initial sum is limited.
To start an STP, fill the required form (which is similar to the form for an SIP). In the form, pick the target scheme, and specify the amount, number of instalments and the frequency.

Thursday, 17 March 2016

Tata group expects Rs2,650 crore revenue from defence, aerospace

Group’s push to grow defence business comes as Narendra Modi government encourages firms to manufacture defence equipment in India.

Defence and aerospace are important growth drivers identified by Tata group chairman Cyrus Mistry and significant investments will be made in these areas, says Mukund Rajan.

Tata Group expects its defence and aerospace business to increase its revenue by 7.5% to Rs.2,650 crore in year to 31 March, said Mukund Rajan, member, group executive council, and the brand custodian of Tata Sons.
The conglomerate’s push to grow its defence business comes as the Narendra Modi government encourages companies to manufacture defence equipment in India—the world’s biggest importer of weapons. India has set an ambitious plan to replace ageing weapon systems and modernize its military.
Defence and aerospace are important growth drivers identified by Tata group chairman Cyrus Mistry and significant investments will be made in these areas, Rajan told reporters in Mumbai on Wednesday.
“In the last five years, revenue from the defence and aerospace business for the group has grown at a compound annual growth rate (CAGR) of 18%,” Rajan said.
Tata group firms engaged in the defence and aerospace sector include Tata Advanced Systems Ltd (TAS) and its subsidiaries, Tata Advanced Materials, Tata Motors Ltd, Tata Power Strategic Engineering Division, TAL Manufacturing Solutions, Tata Technologies, Tata Consultancy Services Ltd, Tata Steel Ltd, and Tata Elxsi Ltd.
Defence has the potential to contribute 15% to Tata Motors’s revenue from the current 3% if the company managed to get the Indian Army’s (futuristic infantry combat vehicle) FICV order, said Vernon Noronha, vice-president of defence and government business at Tata Motors.
FICV is short for Fighting Infantry Combat Vehicle.
The FICV contract, contenders for which include Larsen and Toubro Ltd (L&T), Mahindra and Mahindra, Reliance Defence and Engineering Ltd (formerly Pipavav Defence), and Titagarh Wagons Ltd, could result in orders worth aboutRs.60,000 crore over the next few years.
The order book of TAS stands at Rs.4,500 crore, a majority of which are export orders, said Sukaran Singh, chief executive of Tata Advanced Systems.
It expects to get more orders in the domestic market, he said.
TAS is working on projects including missiles, radars, aerospace and unmanned aerial vehicles and counts companies such as Lockheed Martin Corp., Sikorsky Aircraft Corp., Boeing Co., Pilatus Aircraft Ltd, Cobham, RUAG and Rolls-Royce as its customers.
In November, TAS formed a joint venture with Boeing for making aerostructures for aircraft, deliveries for which will start from 2018.
Tata Motors, in partnership with the Defence Research and Development Organisation, has also designed and developed India’s first amphibious infantry combat vehicle Kestrel.
Last week, the automaker tied up with Bharat Forge and General Dynamics Land Systems to develop FICVs for the Indian armed forces.
Tata Motors has supplied over 100,000 vehicles to the Indian military and paramilitary forces, so far, and expects its future growth to come from combat vehicles, the group’s executives said.
SED, another group company, is planning to invest Rs.700 crore in setting up a defence equipment manufacturing plant in Karnataka, the executives said on Wednesday.
SED plans to double investments at this plant over the next two to three years, they said.
A number of Indian companies have already applied for industrial licences from the ministry of commerce to locally manufacture military equipment, including airplanes and warships.
Apart from the Tata companies, Bharat Forge Ltd, Reliance Industries Ltd, L&T, the Godrej Group and Mahindra Group are currently strengthening their presence in the defence sector.
Anil Ambani’s Reliance Group and Adani Defence Systems and Technologies Ltd have also entered the sector.
India had in 2014 increased its foreign direct investment limit in the defence sector to 49% from 26% earlier.

Banks put up a united front on stressed assets

The message from bankers to the top management of stressed firms was clear: banks are willing to help only if the need is genuine and promoters are doing their bit.


Mumbai: On one side were the bankers—from some of India’s top banks, many state-owned.
On the other side were promoters and CXOs of companies, including some storied ones, that had borrowed money from them and were finding it difficult to pay it back.
Earlier this week, when the two met at State Bank of India’s (SBI’s) headquarters in Mumbai’s Nariman Point, the proceedings were anything but pleasant.
The message, at the end of a series of meetings, was clear: the banks would work in concert; they wanted interest payments to restart; they would help but only if the promoters and management were doing all they could to pay back the money owed by their companies; else, they would take charge.
The banks present included SBI, ICICI Bank Ltd, IDBI Bank Ltd, Punjab National Bank, Central Bank of India, Union Bank of India and Dena Bank.
The companies included Visa Steel Ltd, Uttam Galva Steels Ltd, Adhunik Metaliks Ltd, Aban Offshore Ltd, Bhushan Power & Steel Ltd and Bhushan Steel Ltd.
“We have been patient with a lot of borrowers, but if someone is trying to take advantage of that, we will not shy away from taking them to task,” said a senior banker at a state-owned bank who was present at the meetings. He sought anonymity as the meetings were confidential.
The meetings dovetailed with a massive clean-up of bank balance sheets; the Reserve Bank of India (RBI) has given them a deadline of March 2017 to complete the exercise.
The banking regulator has asked banks to provide for and reclassify stressed assets as part of an asset quality review that took place in December. Banks were asked to make at least half the required provisions in the October-December quarter and the remaining in the fourth quarter of 2015-16 (January-March).
In a report on Wednesday, JP Morgan analysts Seshadri Sen and Dhiren Shah wrote that while aggressive recognition and reclassification of stressed loans was a positive for the banking system, inadequate bank capital and low prices quoted by stressed asset buyers could play spoilsport.
Experts say joint lender meetings with borrowers could prove beneficial.
“When borrowers and all their bankers sit together, the true nature of the stress can be identified. If there are any issues that can be fixed on the bank’s end or even on the borrower’s part, it can be solved. For problems which go beyond these two, banks can always reach out to the government, which seems to be keen on reducing stress in the system,” said Vibha Batra, senior vice-president at rating company Icra Ltd.
According to the banker mentioned above, bankers had previously discussed the need for joint meetings to ensure that all lenders are on the same page.
SBI, being the lead lender in a number of instances, took the lead. The options discussed by the lenders include reclassification of loans to non-performing category, bringing in more promoter equity, working with restructuring and turnaround of firms, invoking lenders’ rights to take over collateral and finally, taking operational control of companies.
“Most borrowers came with an open mind, which made the discussions easier. But there were a few who refused to even turn up. Over the next few days, we will decide on how to move against them,” said a second banker at another state-owned bank who spoke on condition of anonymity.
Bankers warn that given the external environment, it would be too much to expect an immediate improvement in asset quality. Some cases discussed at the meetings involved iron and steel companies, which are not only highly leveraged but are also having to cope with low demand, both domestic and global.
In such cases, lenders say, the best option is to wait it out. “Whether we do it with a new promoter or old is a case-specific decision to take. But we are open to giving time to these borrowers,” said the second banker quoted above.
In some cases, lenders may choose to classify the loans as a non-performing asset (NPA), giving themselves more time to find a resolution, after due provisioning. “If it (the asset) is standard, the timeline is too stringent for any process to take place,” the second banker said.
Once the asset is classified as bad and lenders are convinced that the resolution process will show results, they could allow the company to avail of fresh loans under the current credit limits.
According to Icra’s Batra, in highly leveraged sectors such as steel which are reeling under various pressures, the least that bankers can do is to recognize the stress and provide adequately. “Once banks have adequately provided for these loans, it becomes easier for everyone to identify the issues and evaluate bank balance sheets better,” she said.
The marathon meetings with promoters form part of a larger movement by the banking system to bring problematic borrowers to task.
Apart from this, lenders are also actively trying to find investors who can buy stakes in companies where they have acquired equity control in lieu of debt.
In a 3 March advertisement on its website, SBI asked for expression of interest (EOI) from interested parties that might want to acquire management control of a company which is setting up a 2.51 million tonne per annum integrated steel plant in Bokaro, Jharkhand. The deadline for submission of the EOI is 21 March.
Gross NPAs of 39 listed banks surged to Rs.4.38 trillion in the quarter ended 31 December from Rs.3.4 trillion at the end of the September quarter, according to data collated by corporate database provider Capitaline.
In a statement last week, ratings agency Crisil Ratings said that it expects stressed assets (a sum of gross NPAs and other troubled assets) in the Indian banking system to rise to over Rs.7 trillion (or 11.3% of total loans) by March 2017, from about Rs.4 trillion (7.2% of total loans) as of March 2015.

Cash-starved developers tie up with bigger rivals to fund projects

Large firms step in as development managers for smaller developers in return for a share of revenue and profits.


Aproposed, luxury residential project on south Mumbai’s Hughes Road is finally ready to take off after eight years of waiting for approvals, but developer Rohan Lifescapes is not in a position to execute it.
The 150,000 sq. ft project of Rohan Lifescapes, which at one point had tied up with Trump Organization USA Llc to build a Trump Tower, has now been taken up by Radius Developers. Radius and Rohan Lifescapes have entered into a revenue-sharing partnership, where the former will develop the project.
This is the second project on Hughes Road, where the average property price is Rs.50,000 per sq. ft, which Radius has taken over. The first was another stalled venture by Hubtown Ltd.
Over the past year or so, Rohan Lifescapes, which has 10 ongoing projects spread across south and central Mumbai, has also sold a two-acre land parcel in Worli that it was to develop, and has formed an equal partnership with another firm for a property on Hughes Road.
“The real estate industry is going through a change, and going forward, there will only be a few developers with roles divided amongst them. There will be the ones who can clear the land, get the permissions and then there will be those who have the financial strength and development expertise to execute those,” said Rohan Lifescapes’ chairman Harresh Mehta.
The real estate sector in India, which has witnessed its longest, harshest slowdown that has lasted for more than two years now, is undergoing fundamental changes, property analysts say.
There are around 11,500 real estate firms registered with industry body Confederation of Real Estate Developers Association of India (Credai-National) and there would easily be a few thousand local developers across property markets who aren’t registered.
The sluggish market has led to a goldmine of opportunities for larger developers who are bailing out developers stuck with projects.
“There are way too many developers in the country and that will change,” said Anuj Puri, chairman and country head at property advisory JLL. “There are clear signs of consolidation in the sector where weaker developers, who can’t sell their own projects any more or don’t have the financial strength, are selling their projects or tying up with better, larger developers.”
As sales remained tepid and cash flows uncertain, a number of real estate firms have fallen into a potential debt trap and are borrowing heavily. Developers who banked heavily on valuable land parcels in Mumbai and the National Capital Region (NCR) suddenly found themselves stuck with expensive assets that they didn’t have the ability to develop.
Orbit Corp. Ltd, which at one point of time owned some of the best-located projects in south Mumbai, is now arranging capital to relaunch at least five of them, and looking to strike a partnership with other developers for its large proposed project in Alibaug and another one in Mumbai.
“There is not one project that has been delivered on time in Mumbai, leaving buyers sceptical on making a decision to buy a home,” said Orbit Corp. managing director Pujit Aggarwal.
With the Real Estate (Regulation and Development) Bill, 2013, approved by the Rajya Sabha last week and then by the Lok Sabha on Tuesday, the stage is set for some big reforms in the sector. The real estate bill takes a hard look at the developer community, particularly the ‘fly-by-night’ operators, and demands unprecedented regulation in the sector in the form of financial discipline, transparency and credibility. “The real estate bill asks for financial closures on projects and other reforms that will eventually make it tough for all kinds of developers to survive,” Puri said.
What earlier seemed to be ‘distressed sales’ by specific developers who wanted to monetize their assets, is now becoming a business strategy for many, who know that they can’t survive on their own in the current challenging market conditions.
This has paved the way for new forms of partnership models: development management, joint development and joint ventures to name a few.
Developers such as Godrej Properties Ltd and Tata Housing Development Co. Ltd have tied up with multiple developers in different markets, allowing them to enter into new property markets without buying any land.
In January, Godrej Properties signed a development management agreement with Lotus Greens to build a housing project in Sector 150 of Noida, marking the former’s entry into the Noida market. It has also entered into a joint development agreement with Vihang Group to develop 15 acres of land off Ghodbunder Road in Thane.
Pirojsha Godrej, managing director and chief executive of Godrej Properties, in an interview on 8 February said that it’s not necessarily distressed developers that approach the company. Companies that want help in monetizing their projects faster, with greater value than they can do independently, are also seeking partnerships.
“We are pursuing dozens of such opportunities and at any given point in time, we are discussing with a number of developers,” Godrej said.
Large real estate firms have stepped in as development managers for smaller developers and landowners, in return for a share of the revenue, share in profits or a management fee.

Radius Developers, headed by Sanjay Chhabria, has made multiple acquisitions and struck joint ventures in the past year and a half, partnering with firms such as DB Realty Ltd and Sumer Group in Mumbai.

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