Midnight News Update – Jun 23rd 2017
Even as the RBI has commenced the IBC process, the lending banks led by SBI have taken 3 steel companies to the National Company Law Tribunal (NCLT). Banks have referred Essar Steel, Electrosteel Castings and Bhushan Steel to the NCLT for further insolvency action under the Insolvency & Bankruptcy Code (IBC). These three companies have nearly Rs.100,000 crore worth of loans that have turned bad. The next big challenge for the banks will be to protect the value of these assets to ensure that the haircuts are at the bare minimum level possible. This will be a real test case for the IBC implementation.
Vishal Sikka of Infosys has confirmed that the Indian IT industry may not be overly dependent on the issue of H1-B visas. Currently, Infosys employs nearly 2 lakh people while TCS employs almost 4 lakh. Hence Sikka appears to be confident that the impact of the Trump ban on Indian IT will be limited. He believes that the current environment offers a great opportunity for Indian companies to add new products to their portfolio like IOT, artificial intelligence and other digital products. The latest NASSCOM outlook for the IT industry has already spoken about how Indian IT is adjusting to the digital era.
After Brent Crude touched a 10-month low on the back of excess supplies, there was a sharp bounce in oil prices from lower levels on the back of value buying and short covering by traders. Over the last 6 months since the OPEC started its 1.8 million bpd cut in oil production, the oil prices have failed to hold up as a glut of supply from the US and Libya have depressed prices. Of late, the crisis in Qatar is also an indication that the OPEC supply pact may find it hard to sustain. Most analysts are viewing this bounce as temporary as the economics of oil still indicate a further downturn in prices.
The RBI has given a deadline of 6 months to banks to resolve the 55 stressed accounts or permit them to face the IBC. This is part of the overall strategy to rein in the rising NPAs in the banking system. The RBI has already put 12 accounts with NPAs in excess of Rs.5000 crore on the IBC radar and this includes some marquee names in steel and infrastructure. In addition, the RBI has also referred 43 more such cases where IBC action could be initiated if the solution is not forthcoming within 180 days. If there is no viable resolution plan within 6 months, then these cases will be automatically referred to the IBC.
NASSCOM in its annual outlook for the IT and BPO sector for the financial year 2017-18 has painted a very tepid picture. Exports are expected to grow at the rate of 7-8% for the full year while the domestic business is expected to grow at around 11-12%. For IT, it is the exports that make up a chunk of its overall revenues at approximately $155 billion per year. The NASSCOM has identified the digital avenues as the big growth areas as traditional spending in BFSI and telecom verticals appears to be drifting down. The new areas identified by NASSCOM include SaaS, artificial intelligence, IOT, analytics and cloud solutions. The NASSCOM does believe that the H1-B visa issue could be a temporary dampener for the IT sector as the adjustment for the IT companies to the new order will take some time.
IHH Healthcare of Malaysia has affirmed that it is not close to concluding any deal with Fortis Healthcare to buyout the latter’s healthcare business. IHH was apparently in talks with the Singh brothers for the stake purchase but had apparently pulled out after the experience that Dai-Ichi of Japan had with the Ranbaxy acquisition. The Singh Brothers have been looking to raise funds to the tune of nearly Rs.5000 crore to repay debts in RHC Holdings. The Singh Brothers have also sold a stake in Religare Wealth and are looking to sell a stake in other group companies to monetize some of its assets.
