Tag: ICICI Bank

RBI’s current account rule kicks in, hits small firms, BFSI News, ET BFSI

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Small businessmen and firms are hit as banks rush to meet the July 31, Reserve Bank of India deadline for not opening current account for borrowers who have loans with other banks

Banks are freezing current accounts of firms with more than 10% loans with other banks. Mostly small firms are hit as large corprates have their loans spread across banks.

The circular

In its August 6, 2020, circular, the regulator had mandated that no bank shall open current accounts for customers who have availed credit facilities in the form of CC/OD from the banking system, and all transactions shall be routed through the CC/OD account. The RBI moved was targeted to ensure greater discipline and transparency in the way large borrowers move funds.

Banks can have current accounts for that bank which accounts for at least 10% of its loans, according to RBI rules.

It had said that in the case where a bank’s exposure to a borrower was less than 10% of the banking system’s exposure to that borrower, debits to the CC/OD account can only be for credit to the CC/OD account of that borrower with a bank that has 10% or more of the exposure of the banking system to that borrower.

The circular was to be implemented by January this year. However, with banks dragging their feet, the central bank has imposed July 2021 as a final deadline.

However, small borrowers who use one bank to borrow and another for transactions will no longer be able to do so.

Several entrepreneurs, who do banking with private banks for their superior service, but have loans with public sector banks have been hit by the circular as their accounts are frozen.

Big banks gain

The Reserve Bank of India’s (RBI) insistence on companies opening current accounts with banks is among the factors that have helped large lenders such as HDFC Bank, ICICI Bank and SBI raise their shares of the competitive corporate banking market in 2020, according to a report.

The RBI had come up with the circular that specified which bank can open a current account for a borrower, in order to check any misuse through multiple current accounts.

A fourth of the large and medium corporates said they were banking with at least one among ICICI Bank, Axis Bank and HDFC Bank as against 17 per cent in 2016, it said adding that the private sector banks have grown at over 25 per cent per year.



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Fast growing gold loans turn sour hit by lockdowns, BFSI News, ET BFSI

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High yielding advances against gold jewellery, once the hottest loan product for banks, have turned sour this year as collections are affected due to the lockdown in the first quarter. Kerala-based Federal Bank and CSB Bank, besides large private sector lenders such as ICICI Bank, have seen slippages increase from this portfolio.

Although lenders say the pain is transitory, the second quarter is crucial for this portfolio to not become a big source of NPAs.

Banks for which gold loans contribute substantial amount to their profits, were hit in the first quarter. Out of the Rs 640 crore slippages that Federal Bank saw during the quarter, Rs 86 crore was from gold loans or linked to the product as a result, the bank’s gross NPAs rose to 3.50% of advances, up from 2.96% a year.

Similarly, Federal Bank’s smaller peer CSB Bank’s gross NPAs rose to 4.88% in June 2021 from 3.51% a year earlier due to the rise in NPAs from the gold loan business. Out of the Rs 435 crore of new NPAs during the quarter, Rs 361 crore was from gold loans including reversal of interest for the bank where gold loan makes up 38% of its assets.

Gold loans were the pain point even for larger lenders like ICICI which reported fresh slippages of Rs 6773 crore from its retail book out of which Rs 1123 crore were from such loans.

Analysts said the rise in delinquencies reflects the challenges banks faced in loan collections and also the cash flows issues faced by gold loan borrowers most of whom are micro entrepreneurs.

“There is also the impact of the fall in gold prices since last year which has made lending a little more risky. The fall in gold prices means that the strong growth that we saw in this portfolio last fiscal may slow down this year as banks will be more cautious,” said Prakash Agarwal, head financial institutions at India Ratings & Research.

Gold prices have fallen from a peak of Rs 52,827 per 10 grams in August 2020 to Rs 47,640 per grams now, though it is higher than the Rs 44,739 per 10 grams reported in March 2021. The rise in gold prices had also prompted the Reserve Bank of India to increase the loan to value ratio (LTV) to 90% from 75% in August. The LTV has since been restored to 75% from April.

Bankers however said despite the recent hiccups gold loans continue to be a well performing portfolio which can be built over the long term.

“We still believe in this portfolio and will continue to build it. There is no need for any caution. We are confident that as things improve both demand for loans and recovery of will improve. Already we are seeing an increase in recovery and we continue to expect growth in this fiscal year,” said CVR Rajendran, CEO at CSB Bank.

The growth though is going to be slower than the 61% growth the bank recorded in the fiscal ended March 2021. The banking system itself had recorded a 82% growth in fiscal 2021.

Bankers said the high yields and low risk offered by gold loans make it a winning product. CSB Bank for got a 11.50% quarterly yield in March 2021.

“In good times or bad gold loans are always a good product to have. Out NPAs in the segment is 0.20% which is very low with average loan to value (LTV) of about 80%. The loans at LTV of 93% are in single digits; so it is a very small portion,” said Shyam Srinivasan, CEO at Federal Bank.



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ICICI, Axis and HDFC Bank pick up stake in blockchain start-up

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Private sector lenders including HDFC Bank, ICICI Bank and Axis Bank have picked up a stake in blockchain technology focussed start-up IBBIC Pvt Ltd.

In separate stock exchange filings on Tuesday, HDFC Bank and Axis Bank said they have picked up 50,000 equity shares amounting to 5.55 per cent stake in IBBIC.

HDFC Bank and Axis Bank invested ₹5 lakh each for the shares.

ICICI Bank also said it has subscribed to 49,000 fully paid-up equity shares of face value ₹10 each of IBBIC constituting 5.44 per cent of the issued and paid-up share capital. It paid ₹4.9 lakh for the shares.

IBBIC was incorporated on May 25 this year as a financial technology company with the objective of providing a platform for exploring, building, and implementing distributed ledger technology (DLT) solutions for the Indian financial services sector.

About 15 banks have come together to set up IBBIC, with an aim to expand the use of blockchain application in financial sector transactions.

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Private banks hold on in second Covid wave in Q1, but retail stress grows, BFSI News, ET BFSI

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Private banks have posted first-quarter results that are in line with analyst expectations, less deterioration in asset quality, though they are seeing stress in retail and gold loans.

Axis Bank

Axis Bank’s net profit almost doubled to Rs 21.6b in 1QFY22, with a PPOP of Rs 6420 crore, up 10% YoY. Net interest income grew 11% YoY, while margin fell 10bp QoQ to 3.46% due to interest reversals on slippages, higher liquidity, and change in product mix.

The bank has delivered an in-line performance, even as slippages stood elevated, resulting in a slight deterioration in asset quality. On the business front, loan growth remains flat due to a muted business environment, while margin witnessed a sequential decline. On asset quality, total restructuring stood controlled at 0.44% of loans (including approved, but not implemented). Though slippages could remain elevated in the near term, healthy provision coverage ratio of 70%, coupled with additional provisions buffer of 2%, would likely protect the Balance Sheet against any potential stress.

Kotak Mahindra Bank

Kotak Mahindra Bank reported an in-line core operating performance in a challenging environment, despite muted loan growth across most segments.

Private banks hold on in second Covid wave in Q1, but retail stress grows

Asset quality deteriorated slightly led by the secured Retail segment. Standalone PAT grew 32% but consolidated PAT declined by 3% YoY on account of weaker performance from subsidiaries, mainly Kotak Life and Kotak Prime.

Loan book fell 3% QoQ (up 6.6% YoY) to Rs 2.2 lakh crore, led by a decline across most segments. On the liability front, CASA growth remains steady, driving CASA mix to 60.2% (highest in the industry).

On the asset quality front, slippages stood elevated at Rs 1500 crore (annualized 2.8% of loans) mainly from Tractors, CV/CE, and the Small Commercial segment. GNPA/NNPA ratio rose by 31bp/7bp QoQ to 3.56%/1.28%. The bank carries COVID-related provisions of Rs 1280 crore (0.6% of advances), which remains unchanged.

The bank continues to report steady progress in building a strong liability franchise, with a CASA ratio of an estimated 60% (highest in the industry). Asset quality was affected due to the second Covid wave, which hampered collections, thus driving elevated slippages. The restructured book remains under control ~0.25% of loans. The bank carries Covid-related provisions of Rs 1,280 crore (0.6% of advances).

ICICI Bank

ICICI Bank reported strong earnings performance, led by robust core PPOP, aided by healthy NII growth (5bp NIM expansion). Also, lower provisions drove the earnings. The bank is thus progressing well towards earnings normalization.

Fresh slippages stood elevated at Rs 7,230 crore (annualized 4% of loans), predominantly from the retail/business banking portfolio. However, this was partially compensated by higher recoveries and upgrades. The GNPA/NNPA ratio grew by 19bp/2bp QoQ to 5.15%/1.16%. PCR remains stable at 78.4%, the highest in the industry. Restructured loans stood controlled at 0.7% of loans versus 0.5% in FY21.

ICICI Bank holds Covid related provisions of Rs 6,425 crore (0.9% of loans), despite utilizing provisions of Rs 1050 crore in 1QFY22. It guided at improved asset quality trends mainly from 2HFY22.

Private banks hold on in second Covid wave in Q1, but retail stress grows

The steady mix of the high yielding portfolios such as retail/business banking portfolio, deployment of excess liquidity, and low-cost liability franchise is aiding margin expansion. Covid has disrupted collections, leading to elevated slippages in the retail/business banking portfolio. However, the management is confident of improved asset quality trends over FY22, mainly from 2H onwards. Restructured loans remain under control at 0.7% of loans. Provision coverage remains best in the industry and additional Covid provision buffer (0.9% of loans) provides comfort on normalization in credit cost. We expect RoA/RoE to improve to 1.8%/15.3% for FY23E.

Federal Bank

FB reported a net profit of Rs 370 crore in 1QFY22, led by strong other income (recovery from a written-off account and treasury gains of INR2.6b). It prudently deployed these gains towards provisions, which stood elevated at INR6.4b (63% YoY increase), to further strengthen its Balance Sheet.

The bank posted a moderation in business growth, with loans across most segments declining sequentially. Deposit growth was muted, while the CASA ratio touched ~35% (record high levels). The share of Retail deposits rose to 93% of total deposits. Around 60% of Retail slippages came from the Home loan portfolio, with the rest mainly from the LAP segment.FB expects slippages in FY22 to remain at a similar trajectory as the last two years.

Private banks hold on in second Covid wave in Q1, but retail stress grows
Its restructured book is fully secured. The bank expects LGDs to remain low. Most of its Retail restructured book constitutes Home loans, LAP, etc. Collections efficiency in this portfolio stands at 95%, which is in line with its other portfolio.

FB reported a slight moderation in business growth owing to a challenging environment and lockdowns across several states. However, the bank’s liability franchise remains strong, with Retail deposit mix ~93% and CASA ratio at a record high of 35%. On the asset quality front, slippages stood elevated from the Retail/Agri/SME segments as the second Covid wave has severely affected the Self-employed segment and impacted the rural economy as well. The bank prudently utilised higher treasury gains/one-off recovery from written-off accounts towards provisions to further strengthen its Balance Sheet and stabilise PCR.



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ICICI Bank shares hit 52-week high post Q1 earnings

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New Delhi, July 26 Shares of ICICI Bank on Monday gained over 1 per cent and touched 52-week high on the bourses after the company’s June quarter net profit zoomed 52 per cent. The stock rose by 1.29 per cent to ₹685.40 — its 52-week high — on the BSE. At the NSE, it gained 1.30 per cent to ₹685.45 — its 52-week high.

Profits driven by lower provisions

ICICI Bank’s June quarter net profit zoomed 52 per cent to ₹4,747.42 crore, driven majorly by lower provisions but reported an increase in stress from the retail loans segment.

On a standalone basis, the second-largest private sector lender by assets posted a net profit of ₹4,616.02 crore for the reporting quarter, up by 77 per cent when compared with the national lockdown-hit April-June period of FY21. The earnings were announced on Saturday.

The gross NPAs came at 5.15 per cent against 4.96 per cent in the quarter-ago period and 5.46 per cent in the year-ago period.

Also read: ICICI Bank Q1 net profit zooms 78% to ₹4,616 crore

The provision line saw some activity in the reporting quarter, including a change in accounting norms to be more conservative which led to ₹1,127 crore additional impact and a write-back of ₹1,050 crore from Covid provisions as the bank grew more confident of the overall asset quality situation exiting the quarter with a ₹6,425 crore buffer.

The overall provisions came at ₹2,852 crore, nearly a third of the ₹7,594 crore set aside for the year-ago period despite an increase in the gross non-performing assets (NPA) ratio.

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HDFC Bank’s Puri top earner among bankers in FY21; ICICI Bank’s Bakhshi forgoes salary in COVID year, BFSI News, ET BFSI

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HDFC Bank‘s Aditya Puri emerged as the highest grossing banker among the top three private sector lenders in his retirement year with total emoluments of Rs 13.82 crore. His successor Sashidhar Jagdishan, who took over as the chief executive and managing director of the largest private sector lender on October 27, 2020 grossed a salary of Rs 4.77 crore for the fiscal year, which included payments as a group head till his elevation. Puri’s overall payments included Rs 3.5 crore as post-retirement benefits.

Its immediate rival ICICI Bank‘s MD and CEO Sandeep Bakhshi “voluntarily relinquished” his fixed compensation of basic and supplementary allowances for FY21, which had seen wide-scale impact of the COVID pandemic, as per the second largest lender’s annual report.

Bakhshi, however, did receive allowances and perquisites amounting to Rs 38.38 lakh, the document said, adding he also got Rs 63.60 lakh as performance bonus from ICICI Prudential Life Insurance Company as deferred variable pay for FY17 and FY18.

Amitabh Chaudhry, who has been leading the third largest private sector lender Axis Bank, got paid Rs 6.52 crore, the bank’s annual report said, adding that the top management was not given any salary increment in FY21.

In the case of ICICI Bank, material risk takers including executive directors, chief financial officer and company secretary voluntarily opted for a 10 per cent salary reduction from May 1 in their payments, possibly because of the impact of COVID. Its executive director in-charge of wholesale banking Vishakha Mulye grossed Rs 5.64 crore, as per the annual report.

When compared with the bank’s median salary, the allowances drawn by Jagdishan were the highest at 139 times the median salary of a bank employee, while Chaudhry earned 104 times the median and ICICI Bank executive directors drew 96 times the median salary.

Data available for ‘crorepati’ bankers, or those earning above Rs 8.5 lakh a month, revealed that HDFC Bank had 200 executives in this exclusive club, including key management personnel, serving officials and those who left the lender midway through the fiscal year.

In comparison, Axis Bank had 69 bankers in the category who served throughout the year, while 17 employees who would otherwise have been in the club left it midway through the year, as per the annual report.



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Q1 Performance: ICICI Bank net profit surges 78% to Rs 4,616 crore

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The bank claims to have made higher than required provisioning due to change in policy for non-performing advances.

Private lender ICICI Bank on Saturday reported a 78% year-on-year (y-o-y) jump in its net profit to Rs 4,616 crore during the June quarter (Q1FY22). The bank was able to report a strong bottomline mainly on account of robust net interest income (NII) and lower provisioning. NII of the lender rose 18% y-o-y and 5% quarter-on-quarter (q-o-q) to Rs 10,936 crore. However, provisions fell sharply to Rs 2,852 crore in the reporting quarter, down 62% y-o-y, compared to Rs 7,594 crore in Q1FY21.

Sandeep Batra, executive director, ICICI Bank, said, “The retail disbursements moderated in April and May due to the containment measures in place across various parts of the country.” With the gradual easing of restrictions, disbursements picked up in June and July, he added.

The net interest margins (NIM) of the bank increased 20 basis points (bps) y-o-y and 5 bps sequentially to 3.89%. Although the management did not gave any specific guidance on margins, the lender expects NIMs to maintain the same level in the coming quarters. The asset quality of the lender worsened during the June quarter. Gross non-performing assets (NPAs) ratio of the lender increased 19 basis points (bps) to 5.16%, compared to gross NPAs of 4.96% in the previous quarter.

Similarly, net NPAs ratio increased 2 bps to 1.16% from 1.14% in the March quarter. The gross NPA additions were Rs 7,231 crore in Q1FY22. Recoveries and upgrades of NPAs, excluding write-offs and sale, were Rs 3,627 crore during the June quarter.

As of June 30, the bank had restructured loans worth Rs 3,891 crore under the Reserve Bank of India’s one time restructuring scheme. This included retail loans worth Rs 925 crore and corporate loans worth Rs 2,956 crore. The bank held provisions worth Rs 632.35 crore against these restructured loans.

The bank claims to have made higher than required provisioning due to change in policy for non-performing advances. “The change in policy resulted in higher provision on non-performing advances amounting to Rs 1,127 crore for aligning provisions on outstanding loans to the revised policy,” it said. Based on current assessment of the portfolio, the bank also wrote back Covid-19 provisions amounting to Rs 1,050 crore made in earlier periods.

The non-interest income (excluding treasury income) increased by 56% y-o-y to Rs 3,706 crore. The non-interest income included fee income of Rs 3,219 crore, which grew 53% y-o-y.

Total advances increased by 17% y-o-y to Rs 7.38 lakh crore. The retail loan portfolio grew by 20% y-o-y and comprised 61.4% of the total loan portfolio. 4.0% of total loans at June 30, 2021. The growth in the domestic corporate portfolio was about 11% y-o-y driven by disbursements to higher rated corporates and public sector undertakings across various sectors.

Total deposits increased by 16% y-o-y to Rs 9.26 lakh crore. Average current account deposits increased by 32% y-o-y and average savings account deposits increased by 22% y-o-y in Q1FY22. Similarly, total term deposits increased by 9% to Rs 5.01 lakh crore during the June quarter.

The bank’s capital adequacy ratio remained 19.27%, compared to the minimum regulatory requirements of 11.08%.

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ICICI Bank Q1 net profit zooms 78% to ₹4,616 crore

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Private sector lender ICICI Bank reported a 78 per cent jump in its standalone net profit at ₹4,616 crore in the first quarter ended June 30, 2021, led by robust net interest income and lower provisions.

Its net profit was ₹2,599 crore in the first quarter of last fiscal.

However, the bank reported higher gross non-performing asset (NPA) additions at ₹7,231 crore against ₹1,160 crore in the year ago quarter.

About 94 per cent (or ₹6,773 crore) of the gross NPA additions was on account of retail and business banking. This includes additions of ₹961 crore from Kisan Credit Card portfolio and ₹1,130 crore from jewel loan portfolio. The balance 6 per cent (or ₹458 crore) was on account of corporate and SME portfolio.

The total income fell 6.5 per cent to ₹24,379 crore in the first quarter of the fiscal as against ₹26,067 crore a year ago.

Net interest income increased by 18 per cent year-on-year to ₹10,936 crore in the April to June 2021 quarter from ₹9,280 crore in the first quarter last fiscal.

The net interest margin improved to 3.89 per cent in the first quarter this fiscal compared to 3.69 per cent a year ago.

Other income down 35%

Other income, however, fell by 35 per cent yoy to ₹3,996 crore in the first quarter of the fiscal.

Of this, treasury income was ₹290 crore in the first quarter this fiscal compared to ₹3,763 crore a year ago. “The treasury gain in the first quarter of 2020-21 included gains of ₹3,036 crore from sale of shares of subsidiaries,” ICICI Bank said in a statement on Saturday.

The bank’s provisions fell 62 per cent to ₹2,852 crore in the first quarter of the fiscal as against ₹ 7,594 crore a year ago.

“Based on its current assessment of the portfolio, the bank wrote back Covid-19 provisions amounting to ₹1,050 crore made in earlier periods,” ICICI Bank said.

This reflects the confidence the bank has on the book it has built over the years, said Sandeep Batra, Executive Director, ICICI Bank.

NPAs rise

In absolute terms, gross NPAs rose to ₹43,148 crore as at June-end 2021 against ₹40,386 crore as at June-end 2020.

In the reporting quarter, recoveries and upgrades were higher at ₹3,627 crore (₹757 crore in the year ago quarter).

The gross NPA position as a percentage of gross advances improved to 5.15 per cent as at June-end 2021 against 5.46 per cent as at June-end 2020.

The net NPA position as a percentage of net advances position also improved to 1.16 per cent as at June-end 2021 against 1.23 per cent as at June-end 2020.

As of June 30, 2021, the bank had restructured loans amounting to ₹3,891.15 crore under the RBI’s Resolution Framework of which ₹924.74 crore was retail loans and ₹2,956.05 crore was corporate loans.

Batra said the embargo on MasterCard from acquiring new customers will have zero impact on the bank as it is dominantly working with Visa. It will offer new customers credit cards with Visa.

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Pick up in disbursements, fall in provisions & more, BFSI News, ET BFSI

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NEW DELHI: ICICI Bank‘s 78 per cent profit growth YoY largely met Street expectations. The 18 per cent growth in net interest income was higher than 14-16 per cent growth anticipated by an ETMarkets.com poll. Provisions fell 63 per cent against expectations of an up to 70 per cent drop. Net interest margin (NIM) rose to 3.89 per cent while asset quality, as suggested by gross non-performing assets (NPAs), deteriorated marginally. Here are the key takeaways from the quarterly results:

Profit in line, NII beats expectations
ICICI Bank’s 78 per cent rise in June quarter was largely in line with an ETMarkets.com poll estimate of 77 per cent growth.

The bottonline growth was lower than 260.47 per cent growth in profit the bank reported in March quarter, but higher than 36 per cent profit growth it reported in the year-ago quarter.

NII growth for the quarter at 15-16 per cent beat expectations. Analysts at an ET NOW poll had expected NII growth at 14 per cent.

Disbursements pick up
ICICI Bank said retail disbursements have picked up in June and July after moderating in April and May due to Covid containment measures in place across various parts of the country.

The disbursement levels, it said, recovered to March levels in June, driven by spending in categories like consumer durables, utilities, education, and insurance. Credits received in the overdraft accounts of business banking and SME customers also picked up in June and July after declining in April and May, it said.

Provisions fall, NPA rises marginally
ICICI Bank said it has changed its policy on non-performing loans during the June quarter to make it more conservative. Provisions for the quarter fell 63 per cent to Rs 2,852 crore from Rs 7,594 crore against expectations of up to 70 per cent fall. This could be due to the bank’s policy change, which the bank said resulted in higher provision on non-performing advances amounting to Rs 1,127 crore for aligning provisions on outstanding loans to the revised policy.

Gross non-performing assets, meanwhile, rose to 5.15 per cent against 4.96 per cent in the March quarter and 5.46 per cent in the year-ago quarter.

Recoveries and upgrades of NPAs, excluding write-offs and sale, stood at Rs 3,627 crore. The bank wrote off Rs 1,589 crore worth gross NPAs in June quarter. Excluding NPAs, the total fund-based outstanding to all borrowers under resolution as per the various extant regulations was Rs 4,864 crore or 0.7 per cent of the total loan portfolio.

Uncertainty still looms
In the absence of regulatory dispensations like moratorium on loan repayments and standstill on asset classification, the impact on the quality of the loan portfolio would likely be sharper and earlier during FY22, the bank said.

“The impact, including with respect to credit quality and provisions, of the Covid-19 pandemic on the bank and the group, is uncertain and will depend on the trajectory of the pandemic, progress and effectiveness of the vaccination programme, the effectiveness of current and future steps taken by the government and central bank to mitigate the economic impact,” it said.

Retail loan growth up 20%, SME 43%
Retail loan portfolio comprised 61.4 per cent of the total loan portfolio as of June 30. Including non-fund outstanding, retail accounted for 50.4 per cent of the total portfolio as on June 30.

For the quarter, the credit growth for the retail segment stood at 20 per cent. The business banking portfolio climbed 53 per cent YoY and was 5.4 per cent of total loans on June 30. The SME business, comprising borrowers with a turnover of less than Rs 250 crore, advanced 43 per cent year-on-year and accounted for 4 per cent of total loans as on June 30.

“Growth in the domestic corporate portfolio was about 11 per cent year-on-year, driven by disbursements to higher-rated corporates and public sector undertakings across various sectors. The growth in performing domestic corporate portfolio, excluding the builder portfolio, was 15 per cent year-on-year on June 30, 2021,” it said. Overall, the credit growth was up 20 per cent, while deposit growth rose 16 per cent.

Subsidiaries reported mixed growth
Subsidiaries reported mixed growth. ICICI Securities, on a consolidated basis, saw 61 per cent YoY jump in profit at Rs 311 crore from Rs 193 crore YoY. ICICI Prudential Asset Management Company clocked 48 per cent year-on-year jump in profit at Rs 380 crore compared Rs 257 crore YoY. The profit after tax at ICICI Lombard General Insurance Company fell to Rs 152 crore from Rs 398 crore. Overall, ICICI Bank’s consolidated profit after tax came in at Rs 4,747 crore compared with Rs 4,886 in the March quarter and Rs 3,118 crore in the year-ago quarter.



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Videocon resolution may be back to square one after NCLAT stay, BFSI News, ET BFSI

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After NCLAT stayed the order of the NCLT of Mumbai Bench, the process of Videocon Industries’s liquidation case may start all over again. Legal experts also believe that SBI-led creditors may not do anything but the bid winner Anil Agarwal’s Twin Star may appeal in Supreme Court against the NCLAT order.

“As of now, NCLAT has stayed the order. The creditors (appellant) were possibly challenging the entire bidding approved by NCLT on the grounds that some procedures might not have been followed, opinions not being considered. Now there are high chances that the entire process can restart,” said Vikas Tomar, Partner, Indian Law Partners.

There are 35 financial creditors of Videocon, of which 19 major creditors, including SBI, Union Bank, IDBI, Central Bank, BOB and ICICI Bank approved the resolution, which includes the 95.85% haircut. But three minority shareholders, Bank of Maharashtra, SIDBI and IFCI rejected the resolution on the ground of low resolution and filed an appeal in NCLAT.

Large versus Minority Creditors versus Bidder

The plea of minority shareholders is heard and the whole case will move in a direction to get more benefits for the financial creditors.

“Banks are normally prepared to take a 60-70 per cent haircut on payments if an insolvency process is initiated. The bid was also rejected on the grounds that they should be compensated upfront and in cash rather than through NCDs. Accepting this bid will just increase the banks’ losses, and now their only option is to call for bids from interested parties,” said Sonam Chandwani. Managing Partners, KS Legal and Associates.

The main ground of the minority shareholders was the low resolution amount.

“The large financial creditors like SBI and others may prefer to keep quiet and wait for the court to do its process. But there are high chances that Anil Agarwal’s Twin Star Technologies may appeal in Supreme Court against NCLAT order,” said a legal expert who did not want to be identified.

There were 11 bidders for Videocon but only three had bid for the whole Videocon’s group assets. The majority of them had bid for only a particular division of the company. Hence on one side, there is a big hope that minority shareholders will recover more, but on the other side there the whole process may take a long time.

The Videocon resolution case has been one of the most dramatic in the IBC process. Starting from Chanda Kochchar, former MD and CEO, ICICI Bank losing her job and facing trials with investigative agencies for irregularities in the giving loans to the group, to the fresh challenge to the resolution process, it has been a bumpy road.



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