Category: Banking & Finance

Induslnd Bank acquires 4.7% in McLeod to recovery dues, BFSI News, ET BFSI

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Kolkata: Private sector lender Induslnd Bank has acquired a 4.7% stake in debt-laden tea maker McLeod Russel India by invoking pledged shares for recovery of its dues.

In the stock exchange filing, the bank said pursuant to invocation of pledge of shares, it acquired 50,00,000 equity shares of McLeod Russel, forming 4.7% of paid-up equity share capital of the borrower company, a part of the financially stressed Williamson Magor group.

“The equity shares of McLeod Russel India held by lchamati Investments were pledged with the bank for securing the outstanding dues of McLeod Russel India (MRIL), the borrower company,” lnduslnd Bank said, adding it invoked the pledged shares for recovery of its dues from MRIL, one of the world’s largest tea producers.

In a major relief to the Khaitans-controlled Williamson Magor group, the National Company Law Tribunal (NCLT) earlier this month has given its approval to withdraw the Corporate Insolvency Resolution Process (CIRP) against McLeod after its promoters reached a settlement with Techno Electric & Engineering, one of its financial creditors.

In June, lnduslnd Bank had acquired 70,67,500 equity shares of McLeod, forming 6.7% of paid-up equity share capital of the borrower company, by invoking pledged shares also for recovery of its dues.

Apart from IndusInd Bank, other financial creditors to the company are Indian Bank, Axis Bank, HDFC Bank, ICICI Bank, State Bank of India, UCO Bank, Punjab National Bank, Yes Bank, RBL Bank and Standard Chartered Bank, among others.

Notably, promoter shareholding in McLeod at the end of the first quarter of this fiscal stood at 10.1%.



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Chinese banks try to calm fears about developer’s debts, BFSI News, ET BFSI

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Seeking to dispel fears of financial turmoil, some Chinese banks are disclosing what they are owed by a real estate developer that is struggling under $310 billion in debt, saying they can cope with a potential default.

The announcements came as Evergrande Group promised to talk with some individual investors who bought its debt while creditors waited to see whether Beijing will intervene to oversee a restructuring to prevent financial disruptions.

Evergrande‘s struggle to meet government-imposed debt limits has prompted fears a default might disrupt the Chinese economy or global financial markets. While ratings agencies say a default appears likely, economists say Beijing can prevent a credit crunch in China but wants to avoid bailing out Evergrande while it tries to force companies to reduce debt levels.

One of Evergrande’s biggest lenders, Zheshang Bank Co. said it is owed 3.8 billion yuan ($588 million) and has “sufficient collateral.”

“The overall risk is controllable,” the bank said in a written answer to questions on a website run by the Shanghai Stock Exchange. It said a “risk situation… will not have a significant impact” on the bank.

Others, including Shanghai Pudong Development Bank Ltd., gave no financial figures but said their lending was small, tied to individual projects and secured by claims to land. The Pudong bank said it was in “close communication” with Evergrande.

Changshu Rural Commercial Bank Co. in the eastern province of Jiangsu said it had 3.9 million yuan ($600,000) in outstanding loans to Evergrande, secured by land. The biggest state-owned commercial lenders including Industrial and Commercial Bank of China Ltd. didn’t respond to questions.

Evergrande was caught by stricter borrowing limits imposed on real estate last year by regulators who are trying to reduce surging debt levels the ruling Communist Party worries might drag on economic growth that already is in long-term decline.

Regulators have yet to say what Beijing might do, but economists say if the ruling party gets involved, it probably will focus on making sure families get apartments they already have paid for, rather than trying to bail out banks or other creditors.

Evergrande is one of China’s biggest private sector conglomerates, with more than 200,000 employees, 1,300 projects in 280 cities and assets of 2.3 trillion yuan ($350 billion). It owes creditors some 2 trillion yuan ($310 billion).

Other major developers such as Vanke Co., state-owned Poly Group and Wanda Group have not reported similar problems. But hundreds of smaller developers have shut down since regulators in 2017 started tightening control over financing.

On Friday, investors in Evergrande debt who gathered at its headquarters in the southern city of Shenzhen said the company agreed to hold a phone meeting with them. Dozens of police officers with six vehicles stood guard outside the building.

Evergrande said earlier it negotiated details of an interest payment due Thursday to banks and other bondholders in China but gave no details.

The company has yet to say whether it will make an $83.5 million payment that was due Thursday on a bond abroad. It has 30 days before it is declared in default, but economists say the company appears to be focused on repaying creditors within China.

Meanwhile, Evergrande is offering to repay some investors in its debt with apartments and other property.

The offer applies to investors who hold a total of about 40 billion yuan ($6 billion) of debt issued by its Evergrande Wealth unit. News reports say they usually are retail customers, employees of Evergrande contractors and the company’s own workforce.

Evergrande said Thursday investors can apply online for available properties.



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Private bank deposits grow at cost of PSBs, now 30.5% of total deposits, BFSI News, ET BFSI

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Share of private sector banks in total bank deposits continued to rise at the cost of public sector banks and stood at 30.5 per cent (29.5 per cent a year ago), accounting for about half of the deposits of financial and non-financial corporations as well as the rest of the world sectors.

Bank deposits grew (y-o-y) by 11.9 per cent during the 2020-21 (8.8 per cent in the previous year) on the back of high growth in current account and savings account (CASA) deposits; the share of CASA deposits increased to 43.7 per cent in March 2021 (41.7 per cent a year ago), according to RBI data.

Private bank deposits grow at cost of PSBs, now 30.5% of total deposits

Households dominate

Among institutional categories, the household sector held 64.1 per cent share in total deposits; individuals, including Hindu Undivided Families (HUFs), were the major constituent of the household sector and contributed 55.8 per cent in aggregate deposits.

Bank deposits of non-financial corporations surged by 18.8 per cent during 2020-21 and their share in total deposits increased to 16.2 per cent in March-2021.

Metropolitan branches of banks, which account for over half of total deposits, accounted for 59.6 per cent of incremental deposits during 2020-21 (43.2 per cent last year).

Three major states (Maharashtra, UP and Karnataka) held one-third of total household sectors’ outstanding deposits and over 40 per cent of its incremental deposits during 2020-21, according to RBI.

Private bank deposits grow at cost of PSBs, now 30.5% of total deposits

Term deposits

With the downward shift in the interest rates on term deposits, the share of term deposits carrying less than 6 per cent interest rate surged to 69.0 per cent in March 2021 from 21.3 per cent a year ago; the interest rate bracket ‘5 to less than 6 per cent had highest concentration (36.8 per cent) of total term deposits.

The majority of term deposits were originally contracted for ‘one year to less than three years’ maturity.

The share of short-term deposits (original maturity of less than one-year) rose to 32.8 per cent (25.4 per cent a year ago); in terms of residual maturity, 75.7 per cent of the term deposits were due for maturity within one year.



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IndusInd Bank buys 4.79 per cent stake McLeod Russel

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lnduslnd Bank on Thursday said that it has acquired a 4.79 per cent stake in debt-laden bulk tea manufacturer McLeod Russel India by invoking pledged shares for recovery of its dues.

“We wish to inform that the bank had today, i.e., September 23, 2021, 23, 2021, pursuant to invocation of pledge of shares, acquired 50,00,000 equity shares of McLeod Russel India Ltd,” the bank said in a regulatory filing to stock exchanges.

The equity shares of McLeod Russel India held by lchamati Investments were pledged with the bank for securing the outstanding dues of Mcleod Russel India (MRIL), the borrower company, lnduslnd Bank said, adding it invoked the pledged shares for recovery of its dues from MRIL.

Liquidity constraints

The 152-year old BM Khaitan group company, McLeod Russel, touted to be one of the largest bulk tea makers in the country, recently came out of the clutches of insolvency following a settlement with its financial creditor Techno Electric & Engineering. The company started facing liquidity issues in early 2018 and the company’s board decided to dispose off some of its estates to repay the debt.

In June, lnduslnd Bank had acquired 70, 67, 500 equity shares of McLeod, forming 6.77 per cent of paid-up equity share capital of the borrower company, by invoking pledged shares also for recovery of its dues.

Some of the other financial creditors to the company include Indian Bank, Axis Bank, HDFC Bank, ICICI Bank, State Bank of India, UCO Bank, Punjab National Bank, Yes Bank, RBL Bank and Standard Chartered Bank .

The promoter shareholding in McLeod at the end of the first quarter this fiscal stood at 10.07 per cent.

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Will RBI announce G-SAP 3.0?

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The Reserve Bank of India (RBI) has given a twist to its Operation Twist exercise, subsuming purchase of longer tenor Government Securities (G-Secs) under the G-Sec Acquisition Programme (G-SAP) 2.0 and simultaneously selling short-term G-Secs under open market operation (OMO).

Under the first such exercise conducted on Thursday, market participants tendered three G-Secs/ GS – 7.17 per cent GS 2028; 6.10 per cent GS 2031; and 6.64 per cent GS 2035 – aggregating ₹78,841 crore against the notified amount of ₹15,000 crore. The RBI purchased G-Secs aggregating ₹15,001 crore.

Simultaneously, the RBI sold three short-tenor G-Secs, all maturing in 2022, but carrying different coupon rates (8.15 per cent, 8.08 per cent and 8.13 per cent) under OMO sale.

Bids received

As against the notified amount of 15,000 crore, the RBI received bids aggregating ₹41,550. It accepted bids aggregating ₹15,000 crore.

Under special OMOs (operation twists) that the RBI usually conducts, the notified amounts for the purchase and sale legs are equal and, therefore, intended to be liquidity neutral. These are aimed at lowering longer-term interest rates, thereby reducing the term premium. Meanwhile, the RBI, on Thursday, said it will conduct the second quarter’s last tranche of G-Sec purchase – 7.26 per cent GS 2029; 6.10 per cent 2031; and 6.64 per cent GS 2035 – under G-SAP 2.0 aggregating ₹15,000 crore on September 30.

Simultaneously, the central bank will sell short-term G-Secs (all maturing in 2022, but carrying different coupon rates – 8.15 per cent, 8.08 per cent and 8.13 per cent – for ₹15,000 crore.

With the last tranche of G-Sec purchase under G-SAP 2.0, the RBI will complete open market purchase of G-Secs aggregating ₹1.20-lakh crore for the second quarter.

Now, all eyes will be on the RBI as to whether it will announce G-SAP 3.0 for the third quarter to infuse liquidity into the banking system so that banks subscribe to G-Sec auctions.

The RBI Governor Shaktikanta Das, in his August 6 statement, said: “It is necessary to have active trading in all segments of the yield curve for its orderly evolution. Our recent G-SAP auctions that have focussed on securities across the maturity spectrum are intended to ensure that all segments of the yield curve remain liquid.

“Furthermore, our options are always open to include both off the run and on the run securities in the G-SAP auctions and operation twist. It is expected that the secondary market volumes would pick up and market participants take positions that lead to two-way movements in yields.”

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Amazon pumps in ₹450 crore into payment unit in India

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Amazon Pay India Private Limited, the online payment business of e-commerce giant Amazon, has raised ₹450 crore from Amazon Corporate Holdings Private Limited, Singapore, and Amazon.com Inc Limited, Mauritius.

According to documents submitted by the payments company to the Ministry of Corporate Affairs, the bulk of the funding have come from Amazon Corporate Holdings Private Limited, Singapore. The documents reviewed by BusinessLine was sourced from Tofler.

For the said equity, the two companies have purchased 45 crore shares at a nominal amount of ₹ 10 each.

In May, BusinessLine had reported that Amazon Pay received fresh funding of ₹225 crore.

Earlier this month, Amazon Pay, which is competing against search-engine giant Google’s payments arm Google Pay said that it had managed to acquire five crore customers in India who are using its UPI platform.

Mahendra Nerurkar, CEO and VP Amazon Pay, claimed that customers are using the Amazon app to pay at 2 crore local shops by scanning any UPI QR code.

“In the last one year, over 75 per cent of our customers using Amazon UPI are from tier-2 and -3 cities, showing the growing reach of UPI,” the company claimed.

Amazon Pay allows its customers to recharge their phone, DTH, send money to contacts, pay salaries to household help, pay for shopping on Amazon.in. It has even extended the services for customers who want to open their fixed deposits.

Also read: Majority of consumers looking to buy 5G compatible smartphones: Amazon survey

Amazon Inc has been pumping money into its Indian entity. Amazon India had raised ₹ 915 crore from its holding company, Amazon Corporate Holdings Private Limited and Amazon.com.incs Limited Company.

Since 2013, Amazon Inc. has committed to invest around $6.5 billion in its Indian operations. In the recent past, Amazon has announced the expansion of its operations network in India. It plans to set up 10 new fulfilment centres, 5 new sortation centres, nearly 200 delivery stations, and over 1 lakh seasonal jobs to help meet customer demand.

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Dispute between Dish TV and Yes Bank escalates over corporate governance, fundraising plans, BFSI News, ET BFSI

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A dispute between Jawahar Goel, promoter of the Indian direct-to-home (DTH) service Dish TV, and Yes Bank over corporate governance and fundraising plans appears to be escalating as both sides have dug in their heels.

Yes Bank is seeking to dissolve the entire board and removal of the promoter family, as the bank is said to be of the view that the board is “functioning in cahoots” with the minority shareholders (that is the promoters), who “should not have representation” on the board, sources close to the bank said.

Yes Bank had sent a notice on September 3 for the removal as well as appointment of certain directors on the board of the company.

On Thursday, the bank called for an extraordinary general meeting of the Dish TV shareholders seeking removal of Goel, chairman and MD as well as other existing directors from the board and induction of 7 new directors.

“Yes Bank is well within its rights,” said an official close to the lender. “It should be a professionally-run board. As the largest shareholder, we have the right to dissolve board and instate a new professional board. The new board members should have requisite experience in the area and the promoter family should no longer exercise any control on the board or the company.”

The official also stated that a forensic audit should also be conducted on Dish TV as Yes Bank fears that several related party transactions have not been revealed, which could burn a hole in Dish TVs books.

Officials close to the private lender say that as the largest shareholder, it has the right to dissolve the existing board and place it with a professional one.

But people close to the company are raising questions on the lenders’ course of action and also whether it’s acting as a shareholder or a lender.

A financial investor close to the promoter family said that Yes Bank has been a lender to Dish TV for more than a decade and has always derived comfort on the business operations and financials from the existing management of Dish TV.

“All loans availed by Dish TV from Yes Bank have been repaid in full. However, now Yes Bank is acting in the capacity of shareholder (by virtue of acquiring shares through invocation of certain pledged shares). Dish TV has never been privy to any such borrowing arrangements and neither Yes Bank informed or took prior permission of Dish before granting such loans to borrower entities,” the investor said.

Email queries sent to Dish TV and Yes Bank remained unanswered till press time.

Earlier this week, Dish TV sought an extension of time for holding the annual general meeting of the company that was scheduled to be held on September 27.

“They (Dish TV) are trying to stall to make sure dubious investments don’t come out to the fore. We haven’t been able to access the books of accounts, nor our queries on several related party transactions been answered, these are all stalling tactics,” the official close to the development said.

However, a person close to Dish TV said that Yes Bank is trying to “derail” the ₹1,000-crore rights issue, as it will dilute the bank’s holding.

“The board of Dish TV had observed that in order to support the expansion of business and meet working capital requirements of the company, and also in view of the requirement to pay the licence fee, it was imperative to raise funds,” the person said.

Incidentally, Dish TV has been trying to raise funds through debt. However, due to low credit rating among other factors, it has not received any positive response from any of the banks.

Also, Dish TV has been witnessing 20-24% annual churn in subscribers, and accordingly, needs to acquire set-top-boxes (STBs) to compensate for the churn by acquiring new customers.

“Since majority of the cash flows of the company have been deployed towards debt reduction (to the tune of ₹2,800 crore in last three years), the company has not been able to spend adequate funds for acquiring new customers, either on STBs or on marketing and promotions, which has resulted in loss of market share,” said the person close to the company. Analysts feel that given the business projections and disruption caused by Covid-19 and OTT players, it is evident that Dish TV will be in need of additional funds to operate the business.

“Equal rights is available to all large and small shareholders of in proportion to their existing shareholding; now Yes Bank has to figure out if they want to act as shareholder or a lender,” the person close to the company said.



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Modan Saha to lead Tata Digital’s fintech play

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Tata Digital Limited, a 100 per cent subsidiary of Tata Sons Private Limited, today announced Modan Saha as CEO – Financial Services at Tata Digital. Modan was the CEO of Tata Strategic Management Group (TSMG). In his role, Modan would be responsible for building the Fintech business portfolio. In addition, he shall guide Strategy and Strategic Investments at Tata Digital.

N. Chandrasekaran, Chairman, Tata Sons, said: “Modan brings deep experience in financial services along with strong strategy capabilities. As a part of the core leadership team at Tata Digital, he will play a key role in building the fintech business and guiding various strategic initiatives. His passion for building new businesses will be very valuable for Tata Digital.”

Saha is a B.Tech from IIT Kharagpur and holds an MBA from IIM Calcutta. He has been with TSMG for over four years, and in his role, has worked on various strategic initiatives, including setting up Tata Digital. Before joining TSMG, Modan spent more than 17 years in the financial services industry in various roles in payments, wealth management, online broking, risk management, strategy, fintech initiatives, and strategic investments.

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There should be banking M&A, we must prepare, BFSI News, ET BFSI

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Deutsche Bank sees the logic that there should be consolidation in the European banking sector and the task in hand is to prepare for that outcome, Chief Financial Officer James von Moltke said on Thursday.

Hewing closely to the German bank‘s standard line on potential mergers, von Moltke told a financial conference hosted by BofA Securities that it should first complete a strategic overhaul before contemplating major deals.

“We see the industry logic that there should be consolidation in European banking,” he said in response to a question.

“It’s something that we see in the future for our company… Our focus on transformation is what we need to do to prepare for that eventuality.”

Deutsche Bank has been repeatedly linked to a possible tie-up with a leading Swiss bank, but Chief Executive Christian Sewing has consistently said that a turnaround plan he launched in 2019 should first bear fruit.

The bank last year posted its first full-year profit since 2014 and got a lift last month from a ratings upgrade by Moody’s.

Von Moltke said that Deutsche’s four business units – asset management and its private, corporate and investment banks – were performing at or ahead of plan. That put it on track to hit a goal of generating revenue of 25 billion euros ($29.3 billion) or more in revenue next year.

Commenting on a U.S. investigation into asset management arm DWS’s use of sustainable investment criteria, von Moltke said that it “stands by its disclosures”.

“We will have to go through the process of those investigations,” he said, adding that he did not see the probe having a measurable impact on Deutsche’s third-quarter results.



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Indel Money plans to raise ₹150 crore via NCDs

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Indel Money plans to raise ₹150 crore of funds through secured and unsecured redeemable non- convertible debentures.

The issue includes a base issue size for ₹75 crore with an option to retain over subscription up to ₹75 crore aggregating up to ₹150 crore.

“The funds raised through this issue will be used for the purpose of onward lending, financing, and for repayment and prepayment of principal and interest on borrowings of the company (at least 75 per cent) and general corporate purposes (maximum of up to 25 per cent),” Indel Money said in a statement on Thursday.

The secured and unsecured NCDs come with the face value of ₹1,000 each. The issue opens on September 23 and closes on October 18 with an option of early closure in case of early over subscription.

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