India Inc is conducting a fire sale of assets as banks struggle under more than US$190 billion in debt amassed through years of corruption, project delays and economic slowdown.
Indian authorities are trying to clean up tens of billions of dollars of bad loans that are weighing on the country’s banks and affecting the wider economy.
Corporate India is increasingly resorting to selling assets spanning oil blocks, malls, hotels and coal mines to clear these debts as the Reserve Bank of India (RBI) closes in on lenders.
GMR Group, an infrastructure company based in Bangalore, a few weeks ago revealed it was selling its 51 per cent stake in a road project in Karnataka state to help pay off its debts. The New Delhi-based Jindal Steel and Power is seeking to sell a power plant to trim its debt after eight straight quarters of losses, Bloomberg reported.
Essar Group, another debt-laden company controlled by the billionaire Ruia brothers, agreed last year to sell a 98 per cent interest in its Essar Oil unit to a group led by Russia’s Rosneft.
New Delhi this month gave the RBI, under central bank governor Urjit Patel, greater power to deal with the problem of bad loans that banks are grappling with. The finance ministry has estimated that stressed debt in the Indian banking system could amount to more than $190bn.
“The important issue will be to find buyers for these assets,” says V K Vijayakumar, the chief investment strategist at Geojit Financial Services. “There will be buyers for the profitable assets. But finding buyers for the loss-making assets would be challenging in the present difficult business environment.”
The new powers mean that the RBI now has the ability to direct banks to take action against non-performing loans. Amongst other provisions, the central bank is authorised to order lenders to start bankruptcy proceedings if a company defaults. It can also appoint an authority or panel to advise banks on bad debt.
The objective of this act is that the “status quo can’t continue,” Arun Jaitley, India’s finance minister, said last month after the new steps were announced.
He also said that further measures are in the pipeline to tackle the widespread problem of stressed assets in the country and that these measures would be unveiled in due course.
Nitin Balwani, the dean at IFIM Business School in Bangalore, says that authorities in India have been forced to act on realising it was “no longer feasible to sweep the elephant under the carpet”.
“With the RBI and government pressure, the big groups have been trying to limit their exposure to these bad assets and have been selling their operational assets to fund their part of the funding requirements to bring the business back on track.”
He says Indian companies “including Essar and Jindal, to name a few, have been working on restructuring their businesses and selling off a few assets to fund their portion of the commitment. Banks have been pushing these corporate houses and with more teeth to RBI, this is expected to gather pace”.
The Hindu newspaper reported that Reliance Group, led by billionaire Anil Ambani, is selling off thousands of telecommunications towers, while Jaypee Group is selling off cement and power plants, and GMR Group is also offloading some infrastructure assets.
Babu Sivaprakasam, a partner at Economic Laws Practice in Mumbai, says that “the much-awaited action on defaulters by the government and RBI will likely throw the middle and light weights in a tizzy”, but action is necessary given the extent of the problem.
“Distinguishing and treating differently commercial decisions taken in good faith and wilful default and fraudulent practices will bring in much-needed assurance for the banks to be decisive and assist credit off-take as well,” he says. “The oversight committees are anticipated to prod the banks by providing the confidence to move forward.”
Looking at the broader picture in the country, Mr Vijayakumar explains why India’s banks are grappling with such a large burden of bad debt.
“Profligate lending by the banks during the boom years of 2003 to 2007, reckless borrowing by some corporates in segments like steel, power, mining and construction [and] the crash in steel prices following the huge excess capacity in China [have] contributed to the rising non-performing assets burden,” he says.
Other experts add that corruption, a slowdown in global and domestic growth, wilful defaults and delays in approvals for projects have also contributed to the issue.
The steps now being taken by the RBI are broadly positive, Mr Vijayakumar believes.
“Generally, there is a sense of relief since (the) resolution of the problem will contribute substantially to economic growth. This will benefit everyone including the corporate sector.”
Authorities have increasingly been prioritising trying to resolve the issue of stressed assets, which makes it difficult for banks to issue credit and hampers economic growth. Addressing this problem is critical as India aims to boost its economy and create enough jobs for its large, young population.
Public sector banks are the worst affected when it comes to bad debt.
The RBI last year started taking serious action to resolve the problem under Raghuram Rajan, the former governor.
When he was in office, the central bank ordered lenders to clean up their balance sheets and forced them to go through an asset-quality review to disclose their stressed assets.
“Even he could not estimate the problem at hand, as the banks were unwilling to identify and share the right data,” says Mr Balwani. “The bankruptcy and insolvency act, promulgated last year and touted as the panacea to address the NPA [non-performing asset] issue, has not picked up as the cases end up tangled in the legal mess.”
This has forced the government to make greater efforts to manage the problem, he adds.
Meanwhile, the RBI last week put state-owned IDBI Bank under watch as its non-performing assets almost trebled to more than 350bn rupees (Dh20bn) in the two years to December 2016.
IDBI Bank said in a bourse statement that “this action will not have any material impact on the performance of the bank and will contribute to improving the internal controls of the bank and improvement in activities”.
It is anticipated that more public sector banks will be put on the RBI’s watch list, as they report losses and efforts continue to clean up the balance sheets, which in turn will only increase the pressure on India Inc to sell off assets.
business@thenational.ae
Follow The National's Business section on Twitter
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
How to watch Ireland v Pakistan in UAE
When: The one-off Test starts on Friday, May 11
What time: Each day’s play is scheduled to start at 2pm UAE time.
TV: The match will be broadcast on OSN Sports Cricket HD. Subscribers to the channel can also stream the action live on OSN Play.
Our legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants
Tailors and retailers miss out on back-to-school rush
Tailors and retailers across the city said it was an ominous start to what is usually a busy season for sales.
With many parents opting to continue home learning for their children, the usual rush to buy school uniforms was muted this year.
“So far we have taken about 70 to 80 orders for items like shirts and trousers,” said Vikram Attrai, manager at Stallion Bespoke Tailors in Dubai.
“Last year in the same period we had about 200 orders and lots of demand.
“We custom fit uniform pieces and use materials such as cotton, wool and cashmere.
“Depending on size, a white shirt with logo is priced at about Dh100 to Dh150 and shorts, trousers, skirts and dresses cost between Dh150 to Dh250 a piece.”
A spokesman for Threads, a uniform shop based in Times Square Centre Dubai, said customer footfall had slowed down dramatically over the past few months.
“Now parents have the option to keep children doing online learning they don’t need uniforms so it has quietened down.”
Election pledges on migration
CDU: "Now is the time to control the German borders and enforce strict border rejections"
SPD: "Border closures and blanket rejections at internal borders contradict the spirit of a common area of freedom"
THE SCORES
Ireland 125 all out
(20 overs; Stirling 72, Mustafa 4-18)
UAE 125 for 5
(17 overs, Mustafa 39, D’Silva 29, Usman 29)
UAE won by five wickets
The smuggler
Eldarir had arrived at JFK in January 2020 with three suitcases, containing goods he valued at $300, when he was directed to a search area.
Officers found 41 gold artefacts among the bags, including amulets from a funerary set which prepared the deceased for the afterlife.
Also found was a cartouche of a Ptolemaic king on a relief that was originally part of a royal building or temple.
The largest single group of items found in Eldarir’s cases were 400 shabtis, or figurines.
Khouli conviction
Khouli smuggled items into the US by making false declarations to customs about the country of origin and value of the items.
According to Immigration and Customs Enforcement, he provided “false provenances which stated that [two] Egyptian antiquities were part of a collection assembled by Khouli's father in Israel in the 1960s” when in fact “Khouli acquired the Egyptian antiquities from other dealers”.
He was sentenced to one year of probation, six months of home confinement and 200 hours of community service in 2012 after admitting buying and smuggling Egyptian antiquities, including coffins, funerary boats and limestone figures.
For sale
A number of other items said to come from the collection of Ezeldeen Taha Eldarir are currently or recently for sale.
Their provenance is described in near identical terms as the British Museum shabti: bought from Salahaddin Sirmali, "authenticated and appraised" by Hossen Rashed, then imported to the US in 1948.
- An Egyptian Mummy mask dating from 700BC-30BC, is on offer for £11,807 ($15,275) online by a seller in Mexico
- A coffin lid dating back to 664BC-332BC was offered for sale by a Colorado-based art dealer, with a starting price of $65,000
- A shabti that was on sale through a Chicago-based coin dealer, dating from 1567BC-1085BC, is up for $1,950
Killing of Qassem Suleimani
Recipe
Garlicky shrimp in olive oil
Gambas Al Ajillo
Preparation time: 5 to 10 minutes
Cooking time: 5 minutes
Serves 4
Ingredients
180ml extra virgin olive oil; 4 to 5 large cloves of garlic, minced or pureed (or 3 to 4 garlic scapes, roughly chopped); 1 or 2 small hot red chillies, dried (or ¼ teaspoon dried red chilli flakes); 400g raw prawns, deveined, heads removed and tails left intact; a generous splash of sweet chilli vinegar; sea salt flakes for seasoning; a small handful of fresh flat-leaf parsley, roughly chopped
Method
▶ Heat the oil in a terracotta dish or frying pan. Once the oil is sizzling hot, add the garlic and chilli, stirring continuously for about 10 seconds until golden and aromatic.
▶ Add a splash of sweet chilli vinegar and as it vigorously simmers, releasing perfumed aromas, add the prawns and cook, stirring a few times.
▶ Once the prawns turn pink, after 1 or 2 minutes of cooking, remove from the heat and season with sea salt flakes.
▶ Once the prawns are cool enough to eat, scatter with parsley and serve with small forks or toothpicks as the perfect sharing starter. Finish off with crusty bread to soak up all that flavour-infused olive oil.
BIGGEST CYBER SECURITY INCIDENTS IN RECENT TIMES
SolarWinds supply chain attack: Came to light in December 2020 but had taken root for several months, compromising major tech companies, governments and its entities
Microsoft Exchange server exploitation: March 2021; attackers used a vulnerability to steal emails
Kaseya attack: July 2021; ransomware hit perpetrated REvil, resulting in severe downtime for more than 1,000 companies
Log4j breach: December 2021; attackers exploited the Java-written code to inflitrate businesses and governments
UPI facts
More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions
The specs: 2018 Genesis G70
Price, base / as tested: Dh155,000 / Dh205,000
Engine: 3.3-litre, turbocharged V6
Gearbox: Eight-speed automatic
Power: 370hp @ 6,000rpm
Torque: 510Nm @ 1,300rpm
Fuel economy, combined: 10.6L / 100km
MATCH INFO
Uefa Champions League last 16, first leg
Liverpool v Bayern Munich, midnight, Wednesday, BeIN Sports
COMPANY%20PROFILE
%3Cp%3E%3Cstrong%3ECompany%20name%3A%3C%2Fstrong%3E%20Revibe%20%0D%3Cbr%3E%3Cstrong%3EStarted%3A%3C%2Fstrong%3E%202022%0D%3Cbr%3E%3Cstrong%3EFounders%3A%3C%2Fstrong%3E%20Hamza%20Iraqui%20and%20Abdessamad%20Ben%20Zakour%20%0D%3Cbr%3E%3Cstrong%3EBased%3A%3C%2Fstrong%3E%20UAE%20%0D%3Cbr%3E%3Cstrong%3EIndustry%3A%3C%2Fstrong%3E%20Refurbished%20electronics%20%0D%3Cbr%3E%3Cstrong%3EFunds%20raised%20so%20far%3A%3C%2Fstrong%3E%20%2410m%20%0D%3Cbr%3E%3Cstrong%3EInvestors%3A%20%3C%2Fstrong%3EFlat6Labs%2C%20Resonance%20and%20various%20others%0D%3C%2Fp%3E%0A
Roger Federer's 2018 record
Australian Open Champion
Rotterdam Champion
Indian Wells Runner-up
Miami Second round
Stuttgart Champion
Halle Runner-up
Wimbledon Quarter-finals
Cincinnati Runner-up
US Open Fourth round
Shanghai Semi-finals
Basel Champion
Paris Masters Semi-finals
Rocketman
Director: Dexter Fletcher
Starring: Taron Egerton, Richard Madden, Jamie Bell
Rating: 3 out of 5 stars
The%20specs
%3Cp%3E%3Cstrong%3EEngine%3A%20%3C%2Fstrong%3E2.0-litre%204-cyl%20turbo%3Cbr%3E%3Cstrong%3EPower%3A%20%3C%2Fstrong%3E190hp%20at%205%2C600rpm%3Cbr%3E%3Cstrong%3ETorque%3A%20%3C%2Fstrong%3E320Nm%20at%201%2C500-4%2C000rpm%3Cbr%3E%3Cstrong%3ETransmission%3A%20%3C%2Fstrong%3E7-speed%20dual-clutch%20auto%3Cbr%3E%3Cstrong%3EFuel%20consumption%3A%20%3C%2Fstrong%3E10.9L%2F100km%3Cbr%3E%3Cstrong%3EPrice%3A%20%3C%2Fstrong%3EFrom%20Dh119%2C900%3Cbr%3E%3Cstrong%3EOn%20sale%3A%20%3C%2Fstrong%3ENow%3C%2Fp%3E%0A
match info
Chelsea 2
Willian (13'), Ross Barkley (64')
Liverpool 0
The National's picks
4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
8.50pm: Calandogan
9.30pm: Forever Young
Volvo ES90 Specs
Engine: Electric single motor (96kW), twin motor (106kW) and twin motor performance (106kW)
Power: 333hp, 449hp, 680hp
Torque: 480Nm, 670Nm, 870Nm
On sale: Later in 2025 or early 2026, depending on region
Price: Exact regional pricing TBA
