OPINION, P8 ECONOMY, P2 EDITORIAL Much better to fix Air India’s future vs probing its past COMPANIES, P6 VIVIAN FERNANDES FINANCIAL INSTABILITY CARMICHAEL PROJECT No one seems to have an answer for what farmers are to do with unproductive animals Aviation minister Raju says all options open for Air India revival Adani strikes deal on royalties payments with Queensland govt KOLKATA, WEDNESDAY, MAY 31, 2017 VOLUME XXVI NO. 179, 40 PAGES, `5.00 AIR SURCHARGE OF `4.00 FOR AGARTALA, `6.00 FOR PORT BLAIR & SILCHAR AND `5.00 FOR GUWAHATI & IMPHAL PUBLISHED FROM: AHMEDABAD, BENGALURU, CHANDIGARH, CHENNAI, HYDERABAD, KOCHI, KOLKATA, LUCKNOW, MUMBAI, NEW DELHI, PUNE WWW.FINANCIALEXPRESS.COM FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE SENSEX: 31159.4 ▲ 50.12 NIFTY: 9,624.55 ▲ 19.65 NIKKEI 225: 19,677.85 ▼ 4.72 HANG SENG: 25,701.63 ▲ 62.36 `/$: 64.67 ▼ 0.17 `/€: 72.11 ▲ 0.05 BRENT: $51.41 ▼ $0.88 GOLD: `28,849 ▲ `3 STRESSED ASSETS With a freer hand, RBI and banks brainstorm on NPAs Discuss top 50 stressed accounts; BR Act amended in May to give RBI more powers FE BUREAU Mumbai, May 30 A new direction German Chancellor Angela Merkel with Prime Minister Narendra Modi in Berlin on Tuesday. Merkel, while restating that Europe needs to strike out on its own including building relations with India and China, softened her stance on the US Reports on Page 2 & 16 Short or long? Why portfolio maturity matters If interest rates remain stuck in a range, shorter maturity bond funds would be more stable in performance and will do better than long bond funds ■ Personal Finance, P15 QuickPicks Make HPCL an arm of ONGC, don’t merge them: Oil ministry TO KEEP the brand names of ONGC and HPCL intact and leverage expertise of both, the government is likely to opt for a subsidiary model wherein the latter will become an arm of the former rather than carry out the proposed merger of the two entities, report Saurabh Kumar and Prasanta Sahu in New Delhi. In a note, the petroleum ministry said: “Core competencies, organisational structures and work cultures of these entities could be quite different, making mergers a tricky affair. However, a subsidiary structure will serve the twin purpose of providing a robust consolidated balance sheet enabling it win major oil deals.” PAGE 2 Laid-off staff asked to raise dispute before Cognizant THE CHENNAI labour commissioner has asked the aggrieved employees impacted by IT services major Cognizant's decision to reduce its headcount to officially raise an industrial dispute before the conciliation officer individually to seek remedy, reports fe Bureau in Chennai. The commissioner said it can be raised under Section 2A of the Industrial Disputes Act, with regard to termination of employees. The communication was addressed to the Forum for IT Employees and New Democratic Labour Front, the two unions spearheading the cause of IT employees. PAGE 7 79.9 40,521 42,719 Bank of Baroda Total of 37 banks 27,721 42,552 ICICI Bank Q4 FY16 Q4 FY17 30,049 35,098 IOB 5,71,329 31,638 34,202 Canara Bank 5.4 7,10,630 24 Bank,Chanda Kochhar,CEO and MD,ICICI Bank,Shikha Sharma, CEO and MD, Axis Bank, Aditya Puri, MD, HDFC Bank, Zarin Daruwala, CEO and MD, Standard Chartered Bank and B Sriram, deputy managing director, State Bank of India (SBI). Last week, the central bank had said “the proper exercise of the enhanced empowerment would require coordinationwith and cooperation from several stakeholders including banks, ARCs, rating agencies, IBBI and PE firms, to which end the Re- 59.2 16.8 8.1 Source: Capitaline serve Bank of India would be holding meetings in the nearfuture with these stakeholders”. Since then, it has met asset reconstruction companies (ARCs) and credit rating agencies. Among the accounts discussed was Videocon Industries, an exposure thatwas recentlydeclared an NPA by public sector lender Dena Bank.According to seniorbankers,the RBI is looking into the exposure owing to a lack of congruity in classification among bankers. While a couple of smaller Research by FE Bureau Bittersweet Sugar mills face margin pressure An 11% hike in cane FRP for 2017-18 will raise sugar mills’ cost by `2,500-2,700 a tonne. While farmers in Maharashtra and Karnataka will benefit, mills’ margins will be squeezed, says ICRA. 300 Apart fromAdvani,Joshi and Bharti, other accused who appeared before the court included BJP MP Vinay Katiyar, Sadhvi Ritambara, Vishnu Hari Dalmiya, Ramjanmabhoomi Trust chief Nritya Gopal Das, Ram Vilas Vedanti,Baikunth Lal Sharma alias Prem Ji, Champat Rai Bansal, Dharma Das and Satish Pradhan.All were named 250 in an FIR filed after the demolition of the Babri Masjid on December 6,1992,for allegedly instigating the mob and conspiracy behind the razing of the disputed structure. Theconspiracychargeagainst Advani and others was dropped by a special CBI court in 2001. FRP raised sharply for 2017-18 `/quintal 200 THE NARENDRA MODI government’s ambitious project to provide pucca houses to all by 2022 may have to be scaled down, as the progress so far has been rather tepid. After a delayed start in November last year, the Pradhan Mantri Awas Yojana (PMAY)-Gramin,the main component of the project, saw construction of just 885 houses in rural areas in FY17, a far cry from the initial target of building 44 lakh houses.The ministry of rural development has now Drought has cut output in FRP-sensitive states (Sugar output in million tonnes) 150 100 2009-10 Sugar year 2017-18 2014-15 2015-16 2016-17 Maharashtra Karnataka Tamil Nadu 129.84 Gujarat AP & Telangana Note: All data are for sugar marketing years that run from October through September Source: ICRA Continued on Page 2 1 cr Houses planned under PMAY-Gramin during the period FY17-FY19 `1,25,000 cr Estimated cost to government (Centre-states ratio 6:4) `15,000 cr Budget outlay by Centre in FY17 REALITY CHECK 16.3 Houses approved for construction under PMAY-Urban between lakh mid-2015 start to March, 2017 extended the deadline for constructing the 44 lakh houses to the end of 2017, but even this 885 Houses built in FY17 after (the delayed) Nov launch; revised target to complete 44 lakh houses by end of 2017, an uphill task Houses built under the scheme till March, 2017 40,917 plan looks very ambitious. Continued on Page 2 ● DELAYED REPAYMENTS Moody’s downgrades RCom as shares slide AGENCIES/FE BUREAU Hong Kong/Mumbai, May 30 MOODY'S INVESTORS SERVICE said late on Tuesday that it has downgraded Reliance Communications. The rating agency in a statement said:“Moody’s Investors Service has downgraded Reliance Communications Limited’s corporate family rating and senior secured bond rating to Caa1 from B2. At the same time, the ratings are under review for further downgrade.” Earlier in the day,as the share continued to fall to newlows — it closed at `20.05 — RCom was downgraded by CARE Ratings. The ratings assigned to the bank loans, NCD issue and short-term debt issue of the company were lowered to CARE D owing to a delay in servicing debt obligations. RCom has delayed the interest as well as principal repayments due on its NCDs and the NCD instalment of `375 crore due on February 7, 2017,was paid on April 10,2017,CARE said in a release. “The company is also currently in discussions with the lenders of its bank facilities for restructuring or refinancing its debt. Should the recast takes place post the payment date,we downgrade our ratings to default,”analysts at the agencysaid. ● OFFICIAL IMD STATEMENT Monsoon makes Kerala landfall RAIN-FED Foodgrains production (million tonnes) Deviation (%) from long period average (LPA)* identified because the information is private. The investment firmwould seek to merge its own finance company,IndoStar Capital Finance, with the Indian lender,the people said. The suitors could present competitionfor FairfaxFinancial Holdings,whichalreadywoncentral bank approval last year for a potential deal. Led by value investor Prem Watsa, Fairfax will enter detailed price negotiations with Catholic Syrian as soon as this week about buying a 51% BATTLE FIELD ■ Everstone will also seek to merge its finance firm with Indian lender ■ Intensifies rivalry for Fairfax, which last year got nod for likely deal ■ Fairfax’s detailed negotiations this week on buying 51% stake stake,the people said. Ahead of talks there is a significant gap between thevaluationsthepartieshaveassignedto Catholic Syrian, a lender headquartered in Thrissur in Kerala withmorethan430branches,according to the people. The bank will start discussions based on an externalvaluationreportestimatingitisworthabout`165to`200 per share, plus a premium of at least 15%,one of the people said. An investor recently bought about a 4% stake in Catholic Syr- 7 265 6 273# 252 253 12 3 14 FY13 FY14 FY15 FY16 FY17 *LPA is calculated on the basis of the average annual rainfall (89 cm) recorded between 1951 and 2000, ± 4% from LPA is considered 'normal' monsoon, #third advance estimate, crop year (July-June) Source: IMD, agriculture ministry, SANDIP DAS New Delhi, May 30 ian at around `160 per share, a premium to the lender’s book value of about `123 per share, the people said. That purchase valued the bank at about `1,296 crore, data compiled by Bloomberg show. Any deal could mark the first time a financial investor takes control of an Indian lender. CatholicSyrianhad`16,220crore of assets at the end of March, according to its financial results. Continued on Page 2 Continued on Page 2 Continued on Page 2 Aion, Everstone vie with Fairfax for Catholic Syrian Bank stake AION CAPITAL PARTNERS, a private equity firm backed by Apollo Global Management, is among suitors that have expressed interest in buying a stake in India’s Catholic Syrian Bank, people familiar with the matter said. Everstone Capital has also approached Catholic Syrian’s board aboutapossibledeal,accordingto the people, who asked not to be Continued on Page 2 THE SOUTHWEST MONSOON hit the Kerala coast on Tuesday, a couple of day earlier than its usual arrival in the first week of June. “Widespread rainfall occurred over Kerala during past two days and 78% of monitoring stations for monsoon onset over Kerala have reported rainfall for the last 48 hours,”the India Meteorological Department (IMD) said in a statement. The department also has noted that conditions are favourable for further advance of the monsoon (June-September) into the remaining parts of Kerala, coastal and south interior Karnataka, parts of Tamil Nadu and some more parts of northeastern states in the next three to four days. The IMD had in its forecast two weeks ago had stated that the monsoon would reach the Kerala coast on May 30 with a model errorof ± 4 days.In its first long-range forecast,the IMD had predicted that 'normal' rainfall this year at 96% of the benchmark long period average (LPA), with a model error of ± 5%.The department is likelyto release its second long-range forecast for the monsoon on June 5. SHOWING INTEREST BLOOMBERG Mumbai/Toronto, May 30 banks have classified the account as an NPA in Q4 FY17, larger banks like SBI and Punjab National Bank are yet to do so, sources said. However, sources added that Videocon has not paid interest even in April and has, therefore, been classified as a bad loan bya majorityof banks. Other top stressed accounts that the central bank is understood to be looking into include those of the Essar Group, Jindal Group, Jaypee Group, Bhushan Steel and Monnet Ispat. The central bank has said it plans to expand the strength and scope of the oversight committees (OC). Currently, there is just one OC that comprises just two members and vets only S4A (scheme for sustainable structuring of stressed assets) proposals. The expanded OC will also vet other debt recast mechanisms. Meanwhile, rating agency S&P on Tuesday said that credit profiles of Indian bankswere unlikely to improve over the next 12 months.In a report titled“No Quick Cure For India’s Banking Blues”,the agencyestimated that the banking sector's total stressed assets will increase to 13-15% of total loans bythe end of March 2018. 257 Slow progress for Centre’s pet housing projects PRASANTA SAHU New Delhi, May 30 255 0.9 0.8 0.5 Senior BJP leader LK Advani being greeted by Uttar Pradesh CM Yogi Adityanath in Lucknow on Tuesday PHOTO: VISHAL SRIVASTAV MISSED TARGETS Special Feature 24,875 44,753 1.1 1.2 1.1 A SPECIAL CBI court in Lucknow on Tuesday charged former deputy PM LK Advani, senior BJP leader Murli Manohar Joshi, Cabinet minister Uma Bharti and others accused of criminal conspiracyfortheirrole in the demolition of the Babri Masjid in Ayodhya in 1992. The court,while granting bail to all the accused on personal bonds of `50,000 each, rejected the discharge petition filed by them and said they will be charged under Section 120B of the Indian Penal Code. As the court proceedings began on Tuesday, the counsel for the 12 accused moved a bail application on their behalf, which the court allowed. The leaders then argued against the framing of charges against them, asserting that they had no role in the razing of the mosque and had,in fact,tried to stop it,but theirdischarge petition was rejected. 4.3 1.2 1.4 1.4 ONLINE FOOD ordering and delivery company Swiggy has raised $80 million — its largest ever tranche of funds — in a Series E round led by South Africa’s Naspers, reports fe Bureau in Bengaluru. With this Swiggy has now raised $155 million in all. The funds will be used to introduce a suite of new product and service offerings and also to double the technology headcount. FE BUREAU Lucknow, May 30 0.8 49,879 52,045 Bank of India WITH THE GOVERNMENT and the central bank both focused on resolving the problem of bad loans on banks’ books, Reserve Bank of India (RBI) deputy governors Viral Acharya and NS Vishwanathan on Tuesday met bank chiefs to discuss the top 50 stressed accounts. In early May, the President had approved an ordinance amending the Banking Regulation (BR) Act, 1949, giving more powers to the RBI to deal with non-performing assets (NPAs). Earlier, the Union Cabinet had approved a proposal to amend Section 35 of the BRAct. Subsequently, the central bank has been meeting stakeholders to deliberate on the way forward. Tuesday's meeting was attended by the heads of nearly 10 banks. Among those present were UdayKotak,executivevicechairman, Kotak Mahindra 14.4 55,818 55,370 PNB 4.9 4.1 2.1 Swiggy raises $80 million from Naspers, others Conspiracy charges against Advani, Joshi, Bharti, others 98,173 1,12,343 4.2 THE MADRAS High Court on Tuesday stayed for four weeks the Centre's notification banning the sale and purchase of cattle for slaughter, and sought its response to PILs that contended the rules should have been approved by Parliament first, reports PTI. The two pleas said the rules were against the Constitution, breached the principle of federalism and were contrary to the Prevention of Cruelty to Animals Act, 1960. AYODHYA CASE IDBI Bank % change (y-o-y) (` crore) State Bank of India 10.5 8.4 IN THE NEWS Madras HC stays ban on cattle sale for slaughter ON BOOKS
The Financial Express (FE) is a business paper that’s closest to the people who are in the business of business. From business policies to market trends to new developments, The Financial Express comes packed with incisive news on every relevant issue.