SEBI to allow soon mutual funds sale on e-commerce platforms

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SEBI Chairman, U K Sinha said sale of mutual funds on e-commerce platforms could become effective in a month, a move which will help deepen the respective market. He said sale of mutual funds on e-commerce platforms could become effective in a month, a move which will help deepen the respective market. The markets regulator has set up a committee under Infosys co-founder Nandan Nilekani to deliberate ways in which electronic means can be used better for sale of mutual funds (MF).

The committee is also working to make sale of mutual funds possible on e-commerce platforms, the SEBI Chairman said. “My guess is that in the next one month, this will be done (permitting sale of mutual funds on e-commerce websites),” he said while speaking to media on the sidelines of the launch of Bandhan Bank’s 600th branch.

According to Sinha, mutual fund growth in the country has been “very good” and that an ever-growing number of consumers flock to e-commerce websites for shopping. “However, electronic means are not used as well as they should have been and the growth is not happening using such means. We have some experts deliberating on how the electronic means can be used better,” Sinha said.

Targeting the young and educated people with high salaries and disposable income, Sinha said, the move would help them invest easily. “If these people are doing e-shopping, and they know financial markets, then they should also invest in MFs and that is the direction in which we are thinking,” the SEBI Chairman said.

On listing of start-ups, Sinha said it will take its own time. “Important thing to note is that the regulations are in place. If there is a company under pressure, there is alternative before the company to raise(funds),” Sinha noted, adding that the markets regulator was in dialogue with start-ups related to the issue.

Sinha also noted that some start-ups have raised issues concerning taxation but the same is beyond the jurisdiction of SEBI. On initial public offers (IPOs), the SEBI chief said that the pipeline by companies for the coming year is “very healthy”. “You might have noticed that the time taken by SEBI in providing its observations, has come down substantially. Earlier, matters went up to one year, now it is three months on an average for IPOs.”

Sinha noted that SEBI had allowed Rs 60,000 crore worth of IPOs in 2013-14, but the promoters had decided to withdraw the offers implying lack of desire to make investments. “In 2014-15 we saw around Rs 9,500 crore worth of IPOs and this year already Rs 18,000 crore has been garnered through IPOs, while the pipeline going forward is very healthy”, Sinha said.

Source: http://yourstory.com/2015/12/sebi-mutual-funds-e-commerce/

RBI sets up helpline for startups on fund-raising

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With startups raising funds from a variety of offshore sources, including individuals, private equity players and crowdsourcing, the RBI has set up a dedicated helpline for advice on cross-border remittances which are subject to guidelines issued under the foreign exchange management act.

 

Although businesses are supposed to know the law before they raise capital, many of the startups are being promoted by very young and inexperienced individuals. Moreover, the amount raised by some of them run into only a few lakhs, making it difficult for them to hire law firms.

 

The helpline is actually an email ID (helpstartup@rbi.org.in) through which RBI will respond to queries. The central bank said that it will offer guidance/assistance to them for undertaking cross-border transactions within the ambit of the regulatory framework.

 

“While seeking guidance, the enterprises should provide complete information to the RBI and mention the specific issues on which they need guidance in relation to the Foreign Exchange Management regulations. This would enable the personnel attending the helpline to offer timely and effective information.”

 

In his Independence Day speech, Prime Minister Narendra Modi had announced that government would take measures to promote startups in the country. Since then, the government has sought inputs from investors like SoftBank president Nikesh Arora and Snapdeal CEO Kunal Bahl and former Infosys director Mohandas Pai. The department of industrial policy and promotion had drawn up an action plan to address concerns of entrepreneurs. One of the issues raised was the cumbersome process in complying with the Foreign Exchange Management Act (FEMA) documentation.

 

Startups usually undertake a wide range of cross-border transactions including those related to investment. Cross-border transactions of resident Indians are subject to the regulatory regime provided by the Foreign Exchange Management Act, 1999.

 

Source: http://timesofindia.indiatimes.com/business/india-business/RBI-sets-up-helpline-for-startups-on-fund-raising/articleshow/50290682.cms

Banks on takeover drive of defaulting companies

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Banks are taking over companies under the strategic debt restructuring (SDR) scheme and forcing defaulters to sell assets.

On November 30, banks announced the conversion of Rs 15,000 crore of Gammon India’s loans into equity. On the same day, they informed Hyderabad-based road developer IVRCL that they were converting Rs 7,500 crore of loans into equity.

On Thursday, Electrosteel Steels said its board of directors would meet on December 8 to take on record an SDR package. The Kolkata-based Electrosteel Steels owes banks Rs  9,500 crore.

Banks have also invoked SDR against Lanco Teesta Hydro Power, VISA Steel, Jyoti Structures, Monnet Ispat and Energy.

The SDR scheme was cleared by the Reserve Bank of India in June. The scheme was introduced because banks felt the corporate debt restructuring (CDR) scheme failed to help them recover their money. The CDR cell had approved restructuring loans worth Rs 4 lakh crore till March this year. Under the SDR scheme, banks convert loans into equity and can change the management of the company.

“Banks are not in a mood to listen to borrowers. That is why we are selling our assets in India and abroad to avoid the SDR scheme,” said the promoter of a large corporate group who did not wish to be named. With SDR as a stick,  banks have also put defaulters on notice that if they are unable repay loans by selling assets then they will do it for them. This has expedited the sale of assets by many debt-laden groups.

Banks on takeover drive of defaulting companies

Essar Steel announced on November 8 it had appointed SBI Caps and ICICI Securities to sell stakes in the company. This was apart from its own plans to sell assets worth Rs 11,200 crore by March 2016.  “The promoters will infuse another Rs 1,500 crore into the company in 2015-16,” Firdose Vandrevala, executive vice-chairman, Essar Steel, had said in a recent interview.

Soon after selling its two telecom circles to Idea Cellular, Videocon Industries said it would sell telecom assets, including spectrum, worth Rs 14,000 crore to bring down its Rs  39,000 crore net debt.

The Anil Ambani-owned Reliance Infrastructure said it would sell its cement assets and 11 road projects to cut its  Rs 25,000 crore debt. On Friday, another Ambani company Reliance Communications announced its plans to sell its telecom tower company to private equity firms, Tillman Global and TPG to reduce its debt.   Hyderabad based GMR and GVK are also taking steps to raise funds. On Friday, GMR announced that it is raising $300 million by way of a foreign currency convertible bond.  Similarly, GVK is planning to get an investor for its airport arm. Most debt-heavy companies have been battered on the stock exchanges as investors fear asset sales will pull down future sales and profits.

Banks have also been aggressive with Vijay Mallya, chairman of the UB Group who defaulted on Rs  7,000 crore of loans taken by Kingfisher Airlines and have declared him as a defaulter.

Source: http://www.business-standard.com/article/finance/with-sdr-teeth-banks-move-to-take-over-defaulting-firms-115120400289_1.html

$2 trillion rated debt under risk due to environment issues: Moody’s

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Aside from these legacy issues, the underlying asset trend for Indian banks will be stable because of a generally supportive operating environment, said Moody’s Vice President.

Many sectors, other than power and coal, face environmental risks that could translate into credit risk, according to Moody’s Investor Service. These include automobiles, oil & gas, mining, steel, and commodity chemicals. Moody’s has identified 11 sectors with around $2 trillion in rated debt as having credit exposure to environmental risks in the next five years.

At the same time, 57 sectors, representing $59 trillion of rated debt, are considered low risk, with environmental risks unlikely to materially impact credit quality. While some like telecommunication operate with fundamentally low exposure to environmental risks, others such as banks and insurance companies, have business diversity to mitigate their current exposures.

Unregulated power generators, which do not receive the benefits of cost recovery from their customers, coal mining and coal terminals, are the most exposed. Moody’s has developed a heat map that qualitatively scores the relative exposure of 86 sectors globally to environmental risks, in terms of both the materiality and timing of any likely credit effects. The amount of rated debt covered by this sector review is $67.9 trillion.

Environmental risks have been classified into two broad categories — the effects of environmental hazards, and the consequences of regulation designed to prevent or reduce those hazards.

Another set of 18 sectors, accounting for $7 trillion in rated debt, face environmental risks that could be material, but over five or more years. In this “emerging, moderate risk” category are developing economy sovereign and regional governments, integrated oil & gas companies and regulated power generation utilities. These have a clear exposure to environmental risks that could affect their credit quality. However, it is less certain that the identified risks will develop in a way to impact credit ratings for most issuers in these sectors.

“The longer runway to respond to risks could provide time to implement policy changes, adjust business models or financial profiles, or develop technological or lower-cost solutions, mitigating the impact of such risks,” said the report.

Sovereigns with developing economy as well as regional and local governments face increasing infrastructure challenges to manage environmental risks from water shortages, pollution or natural disasters. Unlike the overall scores, the sub-category scores were assessed based on the sector’s general level of exposure to that particular environmental risk, rather than any potential to affect ratings.

Source: http://www.business-standard.com/article/economy-policy/2-trillion-rated-debt-under-risk-due-to-environment-issues-moody-s-115113000680_1.html

Yes Bank invokes United Breweries’ shares worth Rs 778 cr

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Private sector lender Yes Bank has invoked 3.02 percent stake of United Breweries , pledged by McDowell Holdings, a unit of Vijay Mallya-led UB Group, by selling shares worth Rs 778 crore.

 

The move comes after State Bank of India (SBI) declared Mallya, Kingfisher Airlines and its holding company United Breweries Holdings, as willful defaulters for defaults on nearly Rs 7,000-crore loans to the long-grounded carrier.

 

In a notification to exchanges, United Breweries said that Yes Bank has invoked a total of 79.81 lakh shares, amounting to 3.02 percent stake. These shares were pledged by McDowell Holdings.

 

At Friday’s closing price of Rs 974.80 apiece, the shares sale of United Breweries is valued at Rs 778 crore.

 

Yes bank has invoked the stake “to secure loans given to group companies.”

 

Currently, Mallya and his family members hold 34.04 percent stake in United Breweries through various companies and 15.57 percent of stake was pledged with various financial institutions.

 

Now, Heineken is the largest shareholder of United Breweries with 42.22 percent stake.

 

Last week, Yes Bank had sold 4.25 lakh shares of United Breweries, India’s largest brewer that makes Kingfisher Beer, for Rs 39.48 crore through an open market transaction. These shares were purchased by Heineken International BV, the maker of Heineken beer.

 

Meanwhile, the 17 lenders to the airline had said they will e-auction the assets of the grounded airline, in their latest bid to part recover their dues of around Rs 7,000 crore and accrued interest on the principal, that has not been serviced since January 2013.

 

The airline, owned by flamboyant liquor baron Mallya, had taken Rs 6,900 crore from a consortium of 17-lenders, led by SBI, in early 2010 after a second debt restructuring for the airline.

 

United Brewerie stock price On November 30, 2015, United Breweries closed at Rs 952.05, down Rs 22.75, or 2.33 percent. The 52-week high of the share was Rs 1225.00 and the 52-week low was Rs 732.05.

 

The company’s trailing 12-month (TTM) EPS was at Rs 9.80 per share as per the quarter ended September 2015. The stock’s price-to-earnings (P/E) ratio was 97.15. The latest book value of the company is Rs 69.95 per share. At current value, the price-to-book value of the company is 13.61.
Source: http://www.moneycontrol.com/news/business/yes-bank-invokes-united-breweries-shares-worth-rs-778-cr_4373361.html

Foreign banks buy up bulk of Indian state government debt

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Offshore units of Nomura, Standard Chartered and Bank of America Merrill Lynch bought about Rs 3,000 crore of the Rs 3,500 crore on offer. (Photo: Reuters)

Three banks snapped up almost 90 percent of bonds sold by Indian states to foreigners, and turned them into derivatives, raising the prospect of more volatility in one of Asia’s best performing debt markets.

Several market participants involved in the sale said offshore units of Nomura, Standard Chartered (STAN.L) and Bank of America Merrill Lynch (BAC.N) bought about 30 billion rupees ($451 million) of the 35 billion rupees on offer in October, the first window for foreigners to buy in.

Much of that debt was then sold for a hefty fee as derivatives known as total return swaps to offshore clients keen for the bonds’ higher yields, compared with India’s already popular sovereign debt, and with similar guarantees.

In contrast, traditional buyers of the illiquid bonds are state banks, who hold the debt to maturity.

When contacted by Reuters, the three banks declined to comment.

India has been one of the most resilient emerging markets, with foreign buyers taking up about $9.7 billion of debt this calendar year, nearly exhausting available limits on sovereign debt purchases.

Those purchases have helped domestic debt return 7.8 percent so far this year, the highest in Asia, according to HSBC.

Given that appetite and a need to expand its investor base, India let foreigners buy state bonds and also relaxed the investment ceiling in government bonds by around 56 billion rupees in September: the first step in a gradual opening.

“The main objective of (Reserve Bank of India) in opening these limits is to attract diverse and new sets of investors to the Indian bond market,” said a senior foreign bank treasury official based in Mumbai.

“But if eventually the FII (offshore) units of the foreign banks in India get to corner the limits, elbowing out the long term investors, then that leaves open a big risk of these trades unwinding and disrupting the Indian debt market.”

India’s central bank has sought to discourage “bond tourists”, favouring what it calls “real” investors, who would not flit in and out of the market.

Although currency and market risks have been passed on to other buyers, a sharp sell-off could see these investors re-selling the derivatives back to the banks and forcing them to swap the debt or sell at a discount.

But with foreigners owning only 4 percent of Indian government debt versus 47 percent in Indonesia, for example – the impact of even a significant sell-off would likely be muted.

“We are less concerned as the liquidity in IGBs is one of the highest in the region, and foreign positioning remains a very low component of the outstanding market,” said Rohit Arora, interest rate strategist at Barclays in Singapore, referring to Indian government bonds.

The next window for foreigners to buy state government debt is on Jan. 1.

($1 = 66.450 Indian rupees)

(Writing by Clara Ferreira Marques; Editing by Rafael Nam and Jacqueline Wong)

 

RBI allows foreign currency-rupee swap transactions

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RBI said that such swap transactions could be undertaken by the MFI/IFI concerned on a back-to-back basis with an authorised dealers (AD) Category-I bank in India

The Reserve Bank of India (RBI) on Thursday allowed residents having a long-term foreign currency liability to enter into foreign currency-rupee swaps with multilateral or international financial institutions (MFI/IFI) in which the government of India is a shareholding member, subject to certain conditions.

RBI said that such swap transactions could be undertaken by the MFI/IFI concerned on a back-to-back basis with an authorised dealers (AD) Category-I bank in India. The tenure of such swaps should be at least three years, according to a notification issued by the central bank.

In the event of a default by the resident borrower on its swap obligations, the MFI/IFI concerned will have to bring in foreign currency funds to meet its corresponding liabilities to the counter-party AD Cat-I bank in India, the central bank said.

The AD Cat-I bank will have to report the FCY-INR swaps transactions entered into with the MFIs/IFIs on a back-to-back basis to CCIL reporting platform, including the details of the foreign currency borrower. Furthermore, the banks will have to bring the contents of this circular to the notice of their constituents and customers concerned.