Tag: IL&FS

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M&M to Invest ₹10,000Cr to Set Up EV Manufacturing Plant – Top Indian Market Updates

Here are some of the major updates that could move the markets tomorrow:

M&M to invest ₹10,000 crore to set up EV manufacturing plant in Pune

Mahindra & Mahindra (M&M) will invest ₹10,000 crore to set up an electric vehicle (EV) manufacturing plant in Pune, Maharashtra. The automaker has received approval to make the investment from Maharashtra Government’s industrial promotion scheme for EVs. The investment will be made over 7-8 years for setting up the manufacturing facility, development, and production of Mahindra’s upcoming Born Electric Vehicles (BEVs).

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HDFC Bank acquires 7.75% stake in Mintoak for ₹31.1 crore

HDFC Bank has acquired a minority stake (7.75%) in Mintoak Innovations Pvt. Ltd for ₹31.1 crore. Mintoak is a fintech start-up that provides a payments-led platform. It offers value-added services to merchants to engage with their customers and for acquirers to enhance their engagement with merchants. The deal is expected to be completed by January 31, 2023.

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Bank of Baroda proposes to sell its majority stake in Nainital Bank

Bank of Baroda (BoB) plans to sell its majority stake in Nainital Bank. The bank’s board of directors has approved the divestment of its majority shareholding in Nainital Bank Ltd (NBL) and authorised the issuance of an advertisement inviting Expressions of Interest (EOI) through a Preliminary Information Memorandum (PIM) from interested parties. BoB currently holds a 98.57% equity share capital of NBL.

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NTPC crosses 1 GW annual capacity mark in renewable energy segment in FY23

NTPC Ltd has crossed 1 gigawatt (GW) annual capacity in the renewable energy (RE) segment by adding 1,075 megawatts (MW) of renewable energy capacity in the current financial year (FY23). The company’s total non-fossil capacity has reached 9.41%. With this, NTPC’s standalone installed and commercial capacity has become 58,041.27 MW. The group installed and commercial capacity of NTPC has become 70,656.27 MW.

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IL&FS resolves debt of ₹56,943 crore; reduces number of entities to 101

IL&FS has resolved its debt of up to ₹56,943 crore by September 30, 2022, through monetization of various assets and reduced the number of entities to 101 from 302. The company, which defaulted on its loan repayment for the first time in September 2018, had to pay back its lenders over ₹90,000 crore at that time. The new board of IL&FS has initiated various measures to reduce debts, which included asset monetisation, debt restructuring, cost optimisation, and liquidity management.

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IRCTC’s revenue ‘reduced drastically’ in 2020-21 due to Covid-related restrictions: Govt

IRCTC’s revenue “reduced drastically” by almost 64% during 2020-21, compared to 2019-20 due to Covid-related travel restrictions, said Railway Minister Ashwini Vaishnaw. He added that the revenue increased gradually after the situation normalised. IRCTC earned ₹2,342.41 crore, which went down to ₹861.64 crore during the Covid-affected 2020-21. In 2021-22, the company earned ₹1,952.30 crore.

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Torrent Pharma partners with Boehringer Ingelheim to co-market diabetes meds

Torrent Pharmaceuticals Ltd has entered into an alliance with Boehringer Ingelheim to co-market medicines used to treat diabetes and cardiovascular diseases. Both companies entered into a partnership for the sales and co-marketing of Empagliflozin and its combinations. This partnership aims to address the dual challenges of type-2 diabetes and heart failure in India.

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NTPC to sell stake in green energy business: Report 

According to reports, NTPC Ltd aims to sell a 20% stake in its green energy business this fiscal year, expecting to raise up to ₹3000 crores ($363.97 million). The deal marks the first green transaction by an Indian state company. It has drawn interest from investors, such as Canada Pension Plan Investment Board (CPPIB), Malaysia’s Petronas, and Brookfield.

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JB Pharma acquires rosuvastatin brand from Glenmark for ₹314 crore

JB Pharma has acquired cardiac brand Razel (rosuvastatin) from Glenmark Pharma for the India and Nepal region for ₹314 crores. The acquisition will be funded through long-term debt and internal accruals. Razel ranks among the top 10 brands in India in the rosuvastatin molecule category, with combined sales of ₹66.1 crore as of the year-ended October 2022 as per IQVIA data.

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WPI Inflation Rises to 8-Year High of 7.39% in March – Top Indian Market News

WPI Inflation rises to 8-year high of 7.39% in March

According to data released by the Ministry of Commerce & Industry, wholesale inflation in India rose to an 8-year high of 7.39% in March. The Wholesale Price Index (WPI) stood at 4.17% in February and 2.51% in January. The prices of crude oil, petroleum products, and basic metals increased substantially in March, as compared to the corresponding month last year. The food articles segment witnessed a 3.24% rise last month. 

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Wipro Q4 Results: Net profit rises 28% YoY to Rs 2,972.3 crore

Wipro Limited reported a 27.78% year-on-year (YoY) increase in consolidated net profit to Rs 2,972.3 crore for the quarter ended March (Q4). On a quarterly basis, net profit has increased marginally by 0.14%. The IT company’s revenue from operations rose 3.4% YoY to Rs 16,245.4 crore during the same period. The firm had closed 12 large deals during the quarter with a total contract value of $1.4 billion (~Rs 10,511 crore). Wipro expects revenues from its IT services to grow 2-4% on a sequential basis in the June quarter (Q1).

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L&T secures contracts worth upto Rs 2,500 crore in Q4

Larsen & Toubro (L&T) Limited said it has bagged significant orders (in the range of Rs 1,000-2,500 crore) in the quarter ended March (Q4). L&T Heavy Engineering secured an order for 12 steam generators for a 3×700 megawatt electrical (MWe) pressurised heavy water reactor. In the area of refinery, petrochemicals, and oil & gas, L&T Heavy Engineering received a critical reactor system package order for Indian Oil Corporation’s petrochemical project.

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Tata Steel unveils multi-million-pound plan for tube making site in UK

Tata Steel Limited unveiled its transformation plans for a steel tube-making site in East Midlands, United Kingdom. Work has commenced at the 150-acre site at Corby, which produces vital steel tube products for sports stadiums, skyscrapers, hospitals, and renewable green energy schemes around the world. Under the transformation plans, manufacturing processes on the site will be brought closer together as part of a 25-million pound scheme.

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Tinplate Company Q4 Results: Net profit rises 107% YoY to Rs 56 crore

Tinplate Company of India reported a 107.04% YoY jump in standalone net profit to Rs 56.15 crore for the quarter ended March (Q4). Its revenue from operations rose 59.82% YoY to Rs 754.97 crore during the same period. The company’s board has recommended a dividend of Rs 2 per share. Tinplate Company manufactures various grades of electrolytic tinplates, tin-free steel sheets, and full hard cold rolled sheets used for metal packaging. It is a subsidiary of Tata Steel.

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Mahindra fails to find buyer for SsangYong Motor; falls in court receivership

The Seoul Bankruptcy Court has put SsangYong Motor under court receivership after its parent company, Mahindra & Mahindra, failed to find a buyer for the insolvent firm. SsangYong had defaulted on a loan payment worth ~Rs 680 crore on December 21, 2020, following which it applied for court receivership. However, the company was given three months to secure funds after saying it was in talks with US-based HAAH Automotive. SsangYong is expected to submit a rehabilitation plan to the court in June 2021.

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NMDC raises lump ore price by Rs 1,100 per tonne

NMDC Limited said it has hiked prices of iron ore with effect from April 14, 2021. The prices of lump ore were increased by 18.80% (or Rs 1,100) to Rs 6,950 per tonne. The prices of iron ore fines jumped 10.96% to Rs 5,060 per tonne. State-owned NMDC is the largest iron ore producer in India. The company presently produces around 35 million tonnes of iron ore from 3 mechanised mines.

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GE Power India to acquire 50% stake in NTPC GE Power Services

The Board of Directors of GE Power India Ltd has approved the acquisition of a 50% stake in NTPC GE Power Services Pvt Limited. The cost of the acquisition is Rs 7.2 crore. GE Power would enter into renovation and modernization of thermal power plants and partner with state-owned NTPC Limited. This investment and joint venture (JV) with NTPC is expected to strengthen GE Power’s portfolio and open avenues for expanded scope of business for future projects.

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RBL Bank partners with Mastercard to offer first-of-a-kind payment functionality

RBL Bank has entered into a partnership with Mastercard to launch a mobile-based consumer-friendly payment solution— the Pay by Bank App, a first-of-its-kind payment functionality in India. The bank’s account holders can enjoy contactless transactions across the world through their mobile banking application both in-store and online. This functionality will be available at all Mastercard accepting merchants that accept contactless and online payments.

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IL&FS addresses debt of Rs 43,000 crore so far

IL&FS said it has addressed aggregate group debt of Rs 43,000 crore till date through the sale of assets and other cash receivables. The crisis-ridden company has also increased the debt recovery target to Rs 61,000 crore. The increased estimate represents the resolution of nearly 62% of overall fund-based and non-fund-based group debt of ~Rs 99,000 crore as of October 2018. IL&FS collapsed around August 2018 when it started defaulting on bonds that came due to investors. 

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PM Modi Reveals Plans to Boost India’s Renewable Energy Sector – Top Indian Market News

PM Modi reveals plans to boost India’s renewable energy sector

During his speech at RE-Invest 2020, Prime Minister Narendra Modi stated that India has huge renewable energy deployment plans for the next decade. These plans will likely generate business opportunities worth $20 billion (~Rs 1.47 lakh crore) per year. He further said that India’s renewable energy capacity is currently the 4th largest in the world. PM Modi has also invited investors and developers to join India’s renewable energy journey.

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India restricts international flights till December 31

The Government of India has extended the ban on scheduled international flights till December 31, amidst the ongoing Covid-19 pandemic. The Directorate General of Civil Aviation (DGCA) has stated that only selected flights will be allowed on a case-to-case basis. The restriction will not apply to international cargo flights. Special international flights under the Vande Bharat Mission will be allowed to operate under ‘air bubble’ agreements with selected countries.

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Bombay High Court refuses to stay merger of Lakshmi Vilas Bank and DBS

A group of promoters of Lakshmi Vilas Bank (LVB) had filed a petition in the Bombay High Court, challenging the merger of LVB with DBS Bank India Ltd. The promoters have initiated legal action against the RBI, the Indian Government, and DBS Bank. The High Court, on Thursday, refused to provide interim relief sought by the promoters to stay the merger. The merger will be effective from November 27. The petition has been placed for hearing on December 14. 

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TVS Automobile Solutions acquires service business of Mahindra First Choice

TVS Automobile Solutions Pvt Ltd (TVS ASPL) has acquired the service business of Mahindra First Choice Services Ltd (MFCSL). MFCSL is a chain of multi-brand car and two-wheeler service workshops and is owned by the Mahindra Group. As part of the transaction, Mahindra & Mahindra Ltd. will secure a minority stake in TVS ASPL.

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Ajanta Pharma announces details of proposed buyback

Ajanta Pharma Ltd. has announced details of activities regarding its share buyback plan. The company will buyback 7.35 lakh equity shares at Rs 1,850 per share. The date of opening of the buyback offer is on December 3. The buyback offer will be closed on December 16. The last date of settlement of bids on the stock exchange will be December 24. 

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Glenmark Pharma gets listed in Dow Jones Sustainability Index for 3rd straight year

Glenmark Pharmaceuticals Ltd. has been listed in the Dow Jones Sustainability Index (DJSI), under the category of emerging markets, for the third consecutive year in a row. DJSI is one of the world’s most widely accepted sustainability benchmarks. It consists of the top-ranked companies in terms of Corporate Sustainability. Glenmark is ranked 13th among global pharmaceutical companies in the DJSI Emerging Markets 2020.

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Tube Investments to raise Rs 350 crore from Azim Premji Trust, SBI Mutual Fund

The Board of Directors of Tube Investment of India Ltd (TIIL) has approved raising Rs 350 crore from the Azim Premji Trust and SBI Mutual Fund. The company will allot shares to both entities on a preferential allotment or private placement basis. Azim Premji Trust will get 27.33 lakh shares worth Rs 200 crore. SBI Mutual Fund’s two schemes- SBI Focused Equity Fund and SBI Magnum Midcap Fund will get 15.03 lakhs share and 5.46 lakh shares worth Rs 110 crore and Rs 40 crore, respectively.

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Laurus Labs acquires 72.55% stake in Richcore Lifesciences

Laurus Labs Ltd. has acquired a 72.55% stake in biotech company Richcore Lifesciences from Eight Roads Ventures and VenturEast. The cost of the acquisition has been estimated at Rs 246.67 crore. Laurus Labs has stated that Richcore Lifesciences will be renamed Laurus Bio Private Ltd, after the successful closure of the transaction.

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IL&FS receives binding offer for its energy advisory business

IL&FS, on Thursday, said that it has received a binding offer for the acquisition of its energy advisory subsidiary- IL&FS Energy Development Company Ltd (IEDCL). The company currently holds a 95.54% stake in IEDCL. The winning bidder would acquire both the assets and liabilities of IEDCL. The bids are open till December 7.

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Meghmani Organics to set up multipurpose plant in Dahej

Meghmani Organics Ltd. has announced that it is planning to set up a multipurpose plant in Dahej at a cost of Rs 310 crore. The plant is expected to be commissioned by the fourth quarter of the financial year 2021-2022. The company also stated that it has commenced commercial production at two of its plants situated in Bharuch, Gujarat.

Angel Broking enables API integration for algo trading

Angel Broking has announced that it has enabled API integration for algorithmic trading, through the launch of SmartAPI. This feature allows its users to execute real-time trades via Angel Broking, while also empowering algorithmic traders to deploy their programs in 5 programming languages. Algorithmic trading (also called automated trading) uses a computer program that follows a defined set of instructions to place a trade.

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Editorial

IL&FS: Reasons behind the crisis

IL&FS Crisis

IL&FS brief

In 1987, Infrastructure Leasing & Financial Services (IL&FS) was incorporated as an initiative to form “RBI registered Core Investment Company”. It is a non-banking finance company (NBFC) which was initially promoted by Central Bank of India, HDFC and Unit Trust of India (UTI). Over the past 30 years, IL&FS has aided in developing some major infra projects around the nation.

Few projects to name are Gujarat International Finance Tech-City (GIFT), Delhi-Noida Toll Bridge, Tripura Power Project and Chennai-Nashri tunnel (India’s longest road tunnel). Currently, Life Insurance Corporation of India, ORIX Corporation and Abu Dhabi Investment Authority (AIDA) are the largest shareholders for the company.

What is the crisis?

IL&FS ran out of cash due to a severe liquidity crunch. This resulted in the company to default on a few payments. They also failed to service its commercial papers (CP). The first hint of downfall in the public domain came in March 2018 when the company postponed a $350 million bonds issuance. During the same month, their consolidated total debt stood at whopping Rs 91,091 crore. IL&FS defaulted on inter-corporate deposits and commercial papers of about Rs 450 crore.

Later that year, IL&FS Financial Services cleared their dues related to Commercial Paper on 31st August, three days after the due date. IL&FS and it’s Financial Services subsidiary had a combined Rs 270 billion of debt rated as junk by CARE Ratings. Soon are the defaults came into the knowledge of the public, rating agency ICRA downgraded their borrowing ratings which came as a huge dent on the lendor’s business image.

The Asset-Liability Mismatch

This was one of the biggest reasons why IL&FS hit rock bottom. The company was borrowing loans in the form of commercial papers. You would be thinking, what are Commercial Papers? CPs are short-term unsecured debt-market instruments. These debt instruments have a maturity period varying from 7 days to one year.

The company was taking short-term debt and using it for financing long-term projects which would give returns only after 5-10 years. With the company’s rapidly depleting cash, they were unable to meet the demand and defaulted on several of its obligations. IL&FS’ leverage ratio jumped from 10.6x in September 2017 to 16.8x as of March 2018. That means, 6.2x jump inside a mere 6 months!

PPP Model Inefficiency and LARR 

The Government of India introduced the Public-private partnership (PPP) model to aid companies for better efficiency and thus better output. With the launch of this model, the company was assured that the government will help them in financing big projects. With this assumption, they invested heavily in infrastructure projects. The company started acquiring lands on a very big scale, took numerous infrastructure projects and financed them.

But the government did not cooperate with the company to the level they expected and launched LARR (land acquisition rehabilitation and resettlement act) in 2013 instead. When LARR was passed, landowners claimed their compensation for the lands which were theirs. With the rules of LARR and no help from the government in this regard, IL&FS has to pay Rs 17 crore plus worth of compensation to the landowners. This resulted in the overshooting of the cost of the projects and future defaults. This gave birth to the huge difference between the estimated cost of the project and the executed cost.

Other Reasons

IL&FS was incorporated as a finance company. Their purview of work was to fund the infra projects. But from 2015 onwards, they started taking ownership of several risky projects. To meet this, they took short-term loans and diverted the funds for long-term applications. This was done to take loans at a cheaper rate as short-term loans incur less rate of interest when compared to long-term loans.

The company was incurring losses and having very poor cash stability from the past 5 years. Yet the remunerations to the top management was not reduced.

IL&FS operates in a very risky business. No return could be derived from the infra projects until it is successfully completed. Yet, the top risk management team did not hold any meeting for over two years.

Going Forward

More than 30 funds across all categories, such as liquid funds, short-term funds, etc. had IL&FS in their portfolio. Inside two weeks short-term scrips of IL&FS were downrated ‘D’ from ‘A4’. This severely affected the fund houses and forced to mark down the value of the schemes. This led to a steep fall in the NAV (Net Asset Value) of these funds. Recently, Franklin Templeton announced the shut down of its six Debt Mutual Funds with Rs.26000 Crore Asset Under Management. IL&FS crisis played a huge role in the liquidity crunch here as well.

IL&FS defaulting was a very big blow for the Indian economy. Even after two years, the country is still feeling the effects of its downfall. The government should aim to make strict laws to be made so that transparency is restored. The auditors also did a terrible job as they failed to detect the fraud numbers behind the company’s financial. They even failed to flag some of the blatant errors. As big the IL&FS mess is, everything cannot be explained in one article. Marketfeed will come up with more pieces on this topic so that the readers can understand the aftermaths of IL&FS blowout in detail. Until next time.