Midnight News Update –June 28, 2017
SBI has initiated liquidation proceedings against 3 more companies viz. Electrosteel, Monnet Ispat and Jyoti Structures. Jyoti is the first power distribution company to be referred to liquidation. The case has been filed against these 3 companies at the National Company Law Tribunal (NCLT). The RBI had initially identified 12 companies for resolution, which accounted for 25% of all the NPAs in the banking system. Recently, the RBI had also suggested higher provisioning for such cases. The actual process of appointing the liquidation representation and then the entire process of liquidation / resolution will be worked out.
Amtek Auto has been one of the stressed groups identified by RBI out of the 12 companies. But the key question is how Amtek got into this mess considering that other auto ancillary companies like Motherson Sumi, Sona Koyo and TVS Srichakra have been among the outperformers in the market. One of the reasons could be that Amtek made some overly expensive acquisitions abroad, which did not shape up as expected. These acquisitions left Amtek with a pile of debt which it could never really service. Amtek owes nearly Rs.10,000 crore to domestic and international lenders.
The pharma sector regulatory in India, NPPA, announced ceiling prices on 761 medicines. While the ceiling is provisional, the NPPA has covered anti-cancer drugs, HIV drugs, diabetes drugs as well as antibiotics. These prices will be notified as the official ceiling price once the GST is notified on July 01st. The NPPA had cut the prices to provide for the beneficial effect of GST. Under GST, the pharma companies will have to watch out for the anti-profiteering clause which requires the pharma companies to pass on all the benefits through reduced GST rates, directly to the end customer.
The European Commission (EC) has imposed a fine of $2.7 billion on Google under the anti-trust rules for abusing its dominant position in the search engine market to get an illegal advantage. Google search engine had market share exceeding 90% in almost all the European markets. The dominant position enabled Google to create barriers to entry as market share and advertisement revenues have a mutually supportive relationship. The penalty has been imposed more for misusing this dominant position in search to benefit its online sales platform. Google has decided to challenge this fine imposed by EC.
A consortium of lenders led by ICICI Bank have agreed to substantially restructure the debt of the Jaiprakash Group. The restructuring will essentially involve the division of Rs.30,000 crore of debt into 3 distinct parts. The advantage for Jaiprakash group is that they are in the process of monetizing nearly Rs.15,000 crore worth of marquee assets in their books. The balance debt of around Rs.16,000 crore will attract a concessional interest rate from the banking consortium. Jaiprakash is the first such case wherein the company’s debt has been clearly broken up and restructured. Jaiprakash is one of the 12 business houses identified by the RBI for speedy resolution. Over the last past couple of years, Jaiprakash has been aggressively selling of its key assets and has halved its debt till date.
Reliance Industries has sought shareholder approval to cap the ownership by any shareholder to just 5%, excepting the promoters. This is necessitated by the RBI regulations pertaining to payment banks and RIL has already taken 70% stake in the Jio payment bank, with the balance 30% coming from SBI. Any shareholder who wants to own more than 5% stock in RIL will have to seek RBI approval. RIL had actually given an undertaking to the RBI to amend its articles to adhere to this stricture by the RBI. LIC is the largest institutional shareholder in RIL with over 8.3% holding.
