The Economic Times 1 April 2018

NPAs: After banks, now NBFCs in a Rs 2.2 trillion mess

MUMBAI: Non-banking finance companies and mortgage lenders, which control the lion's share of developer loans, are using all the tricks in the marketing and finance trade books to help realtors still smarting from the pains inflicted by the note-ban, Rera and GST, to sell their inventory so that these lenders secure their monies.According to a recent report, non-banking finance companies and pure-play mortgage lenders have an exposure of a whopping Rs 2.2 trillion of the Rs 4 trillion developer loans market, while commercial banks' exposure is much lower at Rs 1.8 trillion only.These lenders fear that with so little demand in the market that is sitting on nearly 0.5 million units of unsold inventory, the chances of more and more developers going broke and their assets turning dud are higher in near future.It can be noted that the realty sector saw a wave of reforms in recent past, beginning with the note-ban in November 2016, followed by the introduction of the Real Estate Regulatory Act (Rera) and the goods and services tax (GST), which have all badly hit the sector with new project launches and sales declining significantly."NBFCs which have lent to small and mid-sized developers will be in serious recovery mode. We believe that NPAs reported by NBFCs focused on the realty sector will increase in 2018. These lenders may also drive smaller firms to consolidate with reputed developers," Sahil Vora, founder and managing director of realty consultant SILA told PTI.According to a report by property consultant JLL, as many as 440,000 residential units remained unsold across key cities at the end of 2017.The number of unsold ready-to-move-in homes is estimated at 34,700 in the top seven metros of Mumbai, Delhi-NCR, Chennai, Hyderabad, Pune, Bengaluru and Kolkata.According to a recent report by Ambit Capital, the total exposure of lenders to developer financing is Rs 4 trillion, with banks having an exposure of Rs 1.8 trillion and NBFCs and housing finance companies contributing the rest."While banks have been reducing their exposure, NBFCs have significantly increased their exposure to the realty sector backed by benign liquidity and interest rate environment of late. Seasoning and tenure of loans, city- and developer-wise exposures, and yields on loans show NBFCs/HFCs have significantly riskier real estate loan books than banks," Ambit Capital's Pankaj Agarwal said in the report.Some of these NBFCs/HFCs like Piramal Capital and JM Financial among others are also running huge asset liability mismatches to the tune of two years, and rising bond yields can impact their margins further and so will be their asset quality, the report said.Apart from these, Aditya Birla Capital, Edelweiss Capital, HDFC, Indiabulls Housing Finance, DHFL and IIFL, among also have higher exposure to developer loans.Vora further said many firms have also engaged teams into project management and development, and other allied services to help developers to not only to assist in funding those but to also to ensure they achieve sales."Some have even assisted in providing home loans to buyers thus ensuring sales," he added.Saurabh Gupta, vice-president and fund manager at IIFL Real Estate Practice said, "We are always monitoring developers and wherever direct or indirect involvement is required, we have to step in."His company assists developers in various areas like sales, getting them introduced to a sales partner or private wealth partners so that inventory can move."Sometimes we show the developers the market trends so that they can reprice, resize or tweak the product design. Also, sometimes there can be capital engagement wherein the capital market players may suggest an alternative capital structure," said Gupta.This structure, he added, can possibly move from a private equity loan to a construction finance loan or from a periodic EMI loan to a private equity loan where cash-flows are more aligned to an easier repayment structure.Echoing similar views, Amit Goenka of Nisus Finance which is into project finance in the realty space, says NBFCs will have to help realtor drive sales to recover their loans."Advantage of NBFCs is that they can adopt various tools for corporate debt restructuring without resorting to refinancing as they are not under the purview of the regulations that guide the commercial banks."They can buyout inventory and sell them as they are not limited by product structures. NBFCs can thus innovate and come up with practical models to recover their money," he added.

Read More →

Lost in Space: ISRO loses contact with satellite GSAT-6A, trying to establish link

BENGALURU: Two days after India's latest communication satellite with military applications GSAT-6A was launched, the Indian Space Research Organisation (ISRO) today said it had lost contact with it and was making efforts to establish link.The space agency lost communication with the satellite when it attempted to ignite the engine in a third and final move to its desired location after its March 29 textbook launch from the space port of Sriharikota in Andhra Pradesh.The second orbit raising operation of GSAT-6A was successfully carried out on Saturday, but when it was on course to normal operating configuration for the third and final firing scheduled for April 1, communication with the satellite was lost, the space agency said after maintaining unusual silence on the health of the satellite.A satellite is placed in orbit in three phases."Efforts are underway to establish link with the satellite," Bengaluru-headquartered ISRO said on its website.The 2,140-kg GSAT-6A rode piggyback on ISRO's powerful geosynchronous rocket (GSLV-F08) fitted with indigenous cryogenic engine at the third stage and was put into orbit successfully after the launch in what was described by a senior ISRO official as a "magnificent mission".GSAT-6A is aimed at helping in mobile communication even from very remote locations through hand-held ground terminals and is considered a shot in the arm for the armed forces.The space agency's unusual silence regarding the satellite had set off speculation about its health.ISRO, which normally communicates on its website about the orbit raising operations like it did on March 30, following the success of the first orbit raising operation, had not released any update since then.The last update was on March 30, wherein it said, "The first orbit raising operation of GSAT-6A Satellite has been successfully carried out by Liquid Apogee Motor (LAM) Engine firing for 2188 sec from 09:22hr IST on March 30, 2018.""Orbit Determination results from this LAM firing are: apogee X perigee height was changed to 36412 km X 5054 km. Inclination is 11.93 deg. Orbital period is 12hr 45min," it had said.ISRO did not spell out what went wrong.Reports, however, suggest that the glitch was related to the satellite's power system after the second orbit-raising exercise yesterday, following which ISRO's top brass have reportedly gone into a huddle towards setting things right.The orbit raising operation is carried out to hurl the satellite to its space home.GSAT-6A, with a mission life of about 10 years, is designed to provide thrust to mobile communication through multi-beam coverage facility.The satellite is also aimed at providing a platform for developing technologies such as demonstration of 6 m S-Band Unfurlable Antenna, hand-held ground terminals and network management techniques that could be useful in satellite-based mobile communication applications."GSAT-6A is a complement to GSAT6, already in orbit. These two satellites combined will provide a platform for development of advanced technologies," ISRO Chairman K Sivan had said post the launch.This was the first mission for Sivan, who assumed charge of the space agency in January.In August last year, India's mission to launch its backup navigation satellite IRNSS-1H on board PSLV-C39 ended in a failure after a technical fault on the final leg following a perfect launch.ISRO had then said the heat shield had not separated on the final leg of the launch sequence and, as a result, IRNSS-1H had got stuck in the fourth stage of the rocket.

Read More →

Doklam lesson: Army increases strength at India-China-Myanmar tri-junction near Tibet

WALONG (ARUNACHAL PRADESH): Indian troops deployed along the disputed Sino-India border in the Himalayan range of the Arunachal sector have increased their patrolling at a tri-junction of India, China and Myanmar to prevent a repeat of a Doklam-like standoff.Top Army officials told PTI that the tri-junction, located around 50km from Walong, the easternmost town of India near the Tibet region, is extremely important for India to help it maintain its dominance in the nearby mountain passes and other areas."After the Doklam standoff, we have increased our presence on India's side of the tri-junction as it is very important for us from the strategic dimension," a senior Army official said.He said Chinese troops did not enter the Tri-junction too frequently but had developed a road infrastructure near the area which could be advantageous for the mobilisation of army personnel.Walong, situated on the bank of Lohit river, had witnessed the bravery of Indian troops against Chinese aggression during the 1962 war between the two countries.The deepening of military engagement between China and Myanmar was another reason for India ramping up its presence at the tri-junction with thick rainforests on the Himalayan ranges.The official said Myanmarese border guarding forces did not patrol the tri-junction."After the tri-junction in Doklam in the Sikkim sector, this is the most important tri-junction along the Sino-India border," he said.Troops of India and China were locked in a 73-day-long standoff in Doklam from June 16 last year after the Indian side stopped the building of a road in the disputed area by the Chinese Army. The face-off ended on August 28.The area in Doklam where China tried to construct a road is a disputed territory claimed by both China and Bhutan. India sent its troops to stop the Chinese construction activity, saying it could be a threat to its strategic interests in the region.Since the Doklam standoff, India has deployed more troops and increased patrolling along the borders with China in the Tibetan region.Another official said Indian troops have also enhanced their presence in all the areas in the Lohit Valley near the tri-junction."There are 18 mountain passes in the region and we have been carrying out long-range patrols to all these passes regularly," he said.He further said," We have been carrying out war rehearsals regularly. You have to be in an offensive mode to remain in an advantageous position."China has been laying new roads and improving its overall infrastructure along the nearly 4,000km-long border with India.Defence Minister Nirmala Sitharaman said last month that China had undertaken the construction of helipads, sentry posts and trenches for its army personnel near Doklam.Sources said China has been keeping its troops in north Doklam and significantly ramping up its infrastructure in the disputed area.In January, Army Chief Gen. Bipin Rawat had said the time had come for India to shift its focus from its borders with Pakistan to the frontier with China, indicating the seriousness of the situation.

Read More →

Indraprastha Gas raises CNG, domestic PNG prices

NEW DELHI: Indraprastha Gas Ltd has raised the price of compressed natural gas (CNG) by 90 paise per kg and of domestic piped gas by Rs 1.15 per standard cubic meters (SCM) in Delhi after domestic natural gas prices rose in the country. Locally-produced natural gas price has gone up 6% from April 1 in the latest six-monthly revision based on a government-set formula. IGL has also raised rates for CNG by Re 1 per kg in Noida, Greater Noida and Ghaziabad. Prices of piped gas to households in Noida, Greater Noida and Ghaziabad have been raised by Rs 1.20 per SCM."The revision in retail prices of CNG and domestic PNG has been effected after taking into account the overall impact on the cost, as a result of the increase in prices of domestically produced natural gas notified by the government and increase in various operational expenses since the last price revision," IGL said in a statement.

Read More →

Gail arm to invest Rs 3,000 cr in Dabhol terminal to double capacity to 10 mt

The newly-created arm of state-run gas major Gail India, Konkan LNG, will pump in around Rs 3,000 crore to double the capacity at its liquefied natural gas (LNG) terminal at Dabhol in the Konkan region of Maharashtra to 10 million tonne over the next three years.Konkan LNG, a 100 per cent subsidiary of Gail, had on March 30 received the first 1.2 lakh tonne shipment of the 5.8-mt LNG contracted from the first-ever long-term agreement with the US signed way back in 2011 and 2013."We will be investing around Rs 3,000 crore in Dabhol terminal to increase its capacity to 10 million tonne from the present 5 mt, which is also underutilised now due to the terminal not being an all-weather facility."So, to make the Dabhol terminal an all-season facility, first we will invest around Rs 700 crore to complete the abandoned and semi-finished breakwater. Rest of the investment will go into capacity expansion," Gail chairman and managing director BC Tripathi said.Gail created Konkan LNG recently after demerging it from Ratnagiri Gas & Power, which is a three-way joint venture it has with NTPC and Maharashtra SEB. The JV was created to run Dabhol Power which was abandoned by Enron Corporation early 2000 following its global bankruptcy.The entire project will take around three years to complete, and will be executed by Konkan LNG, Tripathi said, adding that work on the breakwater should be begin shortly. Currently the terminal can operate only about eight months in a year due to not having a breakwater."We've finalised the tender for the breakwater which will be floated very soon and hope to begin work before the monsoons at the earliest or soon after the monsoons," petroleum and natural gas minister Dharmendra Pradhan said here on Friday receiving the first shipment of 1.2 lakh tonne LNG from the US.Gail commissioned the Dabhol terminal in 2013 and the US vessel was the 78th berthing, Tripathi said.The company will get 22-24 shipments per annum till the breakwater is built. Once that is done the annual intake will be 80-90 ships.It had in 2011 and 2013 entered into two contracts of 20 years each, to lift 5.8 mt of LNG from the US, which is valued at around USD 32 billion. The gas will come the Dominion Cove Point project in Maryland (signed in 2011) and the Sabine Pass project in Louisiana (agreement signed 2013) from the US.The under-construction breakwater at the Dabhol terminal, was created in FY07 by the original Dabhol power plant promoter Enron Corporation which went bankrupt following which it abandoned the 1,200-mw power plant.The minister had claimed that the country could negotiate "a very competitive price from the US which offers one of the best prices of LNG," without disclosing the average price of the maiden shipment."Pricing is a commercial matter that cannot be publicly discussed. All I can assure you is that we have managed one of the best prices which should help the end-consumers," he told PTI, adding industrial and residential customers in Karnataka, Maharashtra and Gujarat.But it can be noted that when the first shipment was loaded, the crude was trading over USD 81 a barrel, and on the day it arrived it was ruling under USD 70 a barrel. Crude and LNG prices are linked.Pradhan also said the beginning of the oil and gas shipments from the US will boost Indo-US trade and has the potential to raise it by USD 2-3 billion annually, considering massive spike in energy demand, making the country third largest in the world.Indo-US trade has been rising 11.4 per cent on average annually since 2000 when it had stood at a USD 20 billion and crossed USD 126 billion in 2017.It can be noted that Asia is the largest consumer of LNG in the world with around 70 per cent of consumption led by Japan, China and India."Once this pipeline delivery begins, this will connect the state-run gas major's Kochi-Kuttanad- Mangalore-Bengaluru pipeline," Gail said.Describing the arrival of the first shipment and the conclusion of the long-term contract with the US-based Cheniere Inc as "a new beginning in the Indo-US energy partnership and trade," Pradhan said LNG supplies is linked to the Henry Hub index contract and also "will help achieve the vision of moving towards a gas-based economy".The charter-hired vessel MV Meridian Spirit arrived at the Dabhol facility on March 30 after sailing for 24 days.

Read More →

Fearing spike in NPAs, NBFCs & HFCs help realtors sell better

MUMBAI: Non-banking finance companies and mortgage lenders, which control the lion's share of developer loans, are using all the tricks in the marketing and finance trade books to help realtors still smarting from the pains inflicted by the note-ban, Rera and GST, to sell their inventory so that these lenders secure their monies.According to a recent report, non-banking finance companies and pure-play mortgage lenders have an exposure of a whopping Rs 2.2 trillion of the Rs 4 trillion developer loans market, while commercial banks' exposure is much lower at Rs 1.8 trillion only.These lenders fear that with so little demand in the market that is sitting on nearly 0.5 million units of unsold inventory, the chances of more and more developers going broke and their assets turning dud are higher in near future.It can be noted that the realty sector saw a wave of reforms in recent past, beginning with the note-ban in November 2016, followed by the introduction of the Real Estate Regulatory Act (Rera) and the goods and services tax (GST), which have all badly hit the sector with new project launches and sales declining significantly."NBFCs which have lent to small and mid-sized developers will be in serious recovery mode. We believe that NPAs reported by NBFCs focused on the realty sector will increase in 2018. These lenders may also drive smaller firms to consolidate with reputed developers," Sahil Vora, founder and managing director of realty consultant SILA told PTI.According to a report by property consultant JLL, as many as 440,000 residential units remained unsold across key cities at the end of 2017.The number of unsold ready-to-move-in homes is estimated at 34,700 in the top seven metros of Mumbai, Delhi-NCR, Chennai, Hyderabad, Pune, Bengaluru and Kolkata.According to a recent report by Ambit Capital, the total exposure of lenders to developer financing is Rs 4 trillion, with banks having an exposure of Rs 1.8 trillion and NBFCs and housing finance companies contributing the rest."While banks have been reducing their exposure, NBFCs have significantly increased their exposure to the realty sector backed by benign liquidity and interest rate environment of late. Seasoning and tenure of loans, city- and developer-wise exposures, and yields on loans show NBFCs/HFCs have significantly riskier real estate loan books than banks," Ambit Capital's Pankaj Agarwal said in the report.Some of these NBFCs/HFCs like Piramal Capital and JM Financial among others are also running huge asset liability mismatches to the tune of two years, and rising bond yields can impact their margins further and so will be their asset quality, the report said.Apart from these, Aditya Birla Capital, Edelweiss Capital, HDFC, Indiabulls Housing Finance, DHFL and IIFL, among also have higher exposure to developer loans.Vora further said many firms have also engaged teams into project management and development, and other allied services to help developers to not only to assist in funding those but to also to ensure they achieve sales."Some have even assisted in providing home loans to buyers thus ensuring sales," he added.Saurabh Gupta, vice-president and fund manager at IIFL Real Estate Practice said, "We are always monitoring developers and wherever direct or indirect involvement is required, we have to step in."His company assists developers in various areas like sales, getting them introduced to a sales partner or private wealth partners so that inventory can move."Sometimes we show the developers the market trends so that they can reprice, resize or tweak the product design. Also, sometimes there can be capital engagement wherein the capital market players may suggest an alternative capital structure," said Gupta.This structure, he added, can possibly move from a private equity loan to a construction finance loan or from a periodic EMI loan to a private equity loan where cash-flows are more aligned to an easier repayment structure.Echoing similar views, Amit Goenka of Nisus Finance which is into project finance in the realty space, says NBFCs will have to help realtor drive sales to recover their loans."Advantage of NBFCs is that they can adopt various tools for corporate debt restructuring without resorting to refinancing as they are not under the purview of the regulations that guide the commercial banks."They can buyout inventory and sell them as they are not limited by product structures. NBFCs can thus innovate and come up with practical models to recover their money," he added.

Read More →

April Fool's Day: Tech cos pull pranks to grab attention

Tech companies around the world have had a long history of pulling elaborately planned pranks on April Fool's Day, and this year was no different.Right from giants like Google to startups Ola and Droom and even telecom operator Reliance Jio, each sought to pique the consumers' attention by offering scavenger hunts, a fresh news platform, 'Juice' for smartphones and even 'hover' shoes.Google, which has pranked consumers for years with some quirky product teasers ahead of April 1, this time introduced, among others products, -- the 'Bad Joke Detector' for its Files Go app. It is claimed that the feature will identify bad jokes -- using 'a custom-built deep neural network' -- which were sent to users by their friends and family.Handset maker OnePlus shared a video featuring its co-founder Carl Pei, who talks about how the company plans to "re-imagine currency". Towards the end of the video features a gold coin with the OnePlus logo to make it seem much more convincing.Closer home, telecom operator Reliance Jio shared a video of 'Jio Juice' -- a new SIM card that would allow users to charge their phones wirelessly without carrying chargers and heavy power banks. The video has already been viewed over 2,600 times and received more than 2,300 likes. It was also re-tweeted over a thousand times.Uber Eats, the food delivery arm of cab aggregator Uber, offered the world's first anti-ageing ice cream that the company claimed works on eight signs of ageing and asked interested customers to pre-order.Uber's homegrown rival Ola, which pranked customers last year with 'Ola Wheels' for ultra-short commute inside corporate parks, said it was unveiling a hyperlocal news venture ONN.The prank claimed that Ola News Network (ONN) would see over one million of Ola's driver partners across 110 cities double up as on-ground reporters, sharing local city developments in real-time. The campaign has already garnered over 108 million impressions.To help commuters with their traffic woes, online automobile marketplace Droom offered a solution -- Droom Fly. The company claimed that these innovative hover shoes were capable of achieving a top speed of 80 km per hour, can fly up to an altitude of 1,000 feet and possess features like self-balancing, soft cushioning, fast-charging, and a battery life of up to five hours. Straight out of a science fiction bestseller, Droom offered these shoes at an introductory price of Rs 9,999.

Read More →

Govt amends PMLA rules to extend Aadhaar linking date for all financial accounts till after SC order

The finance ministry has amended the Prevention of Money Laundering (Maintenance of Records) Rules, 2005, via a issued notification yesterday, extending the date for submitting Aadhaar by existing account holders to financial entities till a date to be notified after the final judgement in the petition challenging Aadhaar pending before the Supreme Court. This follows the interim order, dated 13th March, 2018 of the SC in the Aadhaar case, which extended the last date for linking Aadhaar with existing bank accounts from 31.03.2018 till the final judgement of the case. As per the existing rules relating to the Prevention of Money Laundering Act, account holders had to submit to specified financial entities their Aadhaar number by March 31, 2018. This essentially implies that submission of Aadhaar number by existing account holders to all financial institutions specified in the PMLA rules stands extended till further orders.According to the rules, in case a client, eligible to be enrolled for Aadhaar and obtain a Permanent Account Number (as specified elsewhere in these rules) does not submit the Aadhaar number or the Permanent Account Number when opening his/her account with a reporting entity, the client shall submit the same within a period of six months from the date of the commencement of the account based relationship. Where the clients, eligible to be enrolled for Aadhaar and obtain the Permanent Account Number, already have an account based relationship with reporting entities the client shall submit the Aadhaar number and Permanent Account Number by March 31, 2018. In case the client fails to submit the Aadhaar number and Permanent Account Number within the aforesaid six months period, the said account shall cease to be operational till the time the Aadhaar number and Permanent Account Number is submitted by the client. Where the client already having an account based relationship with reporting entities prior to date of this notification fails to submit the Aadhaar number and Permanent Account Number by March 31, 2018, the said account shall cease to be operational till the time the Aadhaar number and Permanent Account Number is submitted by the client.The notification issued yesterday states: “In pursuance of clause (a) and clause (c) of sub-rule (17) of rule 9 of the Prevention of Money Laundering (Maintenance of Records) Rules, 2005, the Central Government hereby extends the date of submission of Aadhaar Number, and Permanent Account Number or Form 60 by the clients to the reporting entity till a date to be notified subsequent to pronouncement of final judgement in W.P. (C) 494/2012 etc.”

Read More →
Calendar