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Bengaluru Chennai Coimbatore Hubballi Hyderabad Kochi Kolkata Madurai Malappuram Mangaluru Mumbai Noida Thiruvananthapuram Tiruchirapalli Tirupati Vijayawada Visakhapatnam
TUESDAY • SEPTEMBER 8, 2020
MUMBAI
�10 • Pages 12 • Volume 27 • Number 216
ICICI BANKVIDEOCON LOAN CASE
ED arrests Deepak Kochhar Mumbai, September 7
The Enforcement Directorate has arrested
Deepak Kochhar, husband of Chanda
Kochhar, former ICICI Bank MD & CEO, in the
ICICI BankVideocon loan case. The arrest
was made in Delhi after the ED questioned
him for a few hours. The ED had �led a
criminal case under the Prevention of
Money Laundering Act (PMLA) early last
year against Chanda Kochhar, her husband,
and Venugopal Dhoot of Videocon Group
alleging irregularities in sanction of loans
of �1,875 crore by ICICI Bank. OUR BUREAU
QUICKLY
BIG RETAIL INTEREST
Ashok Soota got an overwhelming
response from retail investors for
the IPO of his Happiest Minds p6
AMAZON’S PRIME CONCERN
The supply chain is not normal yet, and the focus
is now on employee safety and seller support,
says Amazon India’s Manish Tiwary p2
DEFAULT FEAR
Mutual funds are cutting down their
exposure to debt instruments of
nonbanking �nancial companies p6
SURESH P IYENGAR
Mumbai, September 7
State Bank of India has kickstartedthe process of invoking personalguarantees of promoters of defaulting entities by sending a demand notice to recover �12,276crore from Sanjay Singhal, a promoter of Bhushan Power and Steel,who stood guarantee for variousloans taken by the company.
SBI has given Singhal time tillSeptember 14 after which the bankwill start the insolvency resolutionprocess. SBI has issued the noticeunder the Indian Contracts Act,1872 and other applicable provisions relating to liability of theguarantor.
BusinessLine had reported onSeptember 2 that SBI is readying toinvoke personal guarantees of promoters of 40 defaulting entitiesthrough the insolvency process.
Similar proceedingsSources close to the developmentsaid the notice to Singhal is amongthe �rst of the many that will besent out in the coming weeks. Thebank is understood to have initiated similar proceedings againstpromoters of defaulting companies in Chennai and Hyderabad.
In July, the Supreme Court hadasked the Centre to explain whythese guarantees have not been invoked by public sector banks. Thiscame in the wake of a public interest litigation �led in the topcourt asking why �1.8lakhcrore
worth of personal guaranteesgiven by defaulting promoters hadnot been invoked to recover outstandings. The PIL named severalpromoters whose personal guarantees have not been invoked, including Kapil and Dheeraj Wadhwan of
DHFL (�79,344 crore); Venugopaland Rajkumar Dhoot (�22,076crore); Madhusudhan Rao andfamily (�5,253 crore); IVRCL’s Sudhir Reddy (�7,058 crore); and JatinMehta of Winsome Diamonds(�6,185 crore). So far, only SBI has
moved to encash the personalguarantees given by Anil Ambani.
The action against Singhalcomes even as the lenders led by SBIare close to sealing a deal with JSWSteel to sell Bhushan Power andSteel for �19,700 crore. But thistransaction has been held up dueto the ongoing Enforcement Directorate investigations against BPCL’s former promoters.
Vasanth Rajasekaran, Partner,Phoenix Legal, said SBI’s new noticeshould ideally not a�ect the Corporate Insolvency Resolution Process of Bhushan Steel, which hascome to a nearconclusion stage,with JSW Steel emerging thehighest bidder, since the personalguarantees would be in relation tothe personal wealth of Sanjay Singhal and not the assets of BhushanSteel.
Gives Sanjay Singhal
time till Sept 14,
or will initiate
insolvency process
State Bank moves to invoke personalguarantee of Bhushan Power promoter
In a nutshell
■ Fresh notice may cast gloom on insolvency proceedings which are
nearing closure
■ After JSW Steel’s resolution plan is cleared by NCLAT, the debt of all
lenders remains discharged. In the light of
this, SBI notice may not be able to stand the
test of liability of a guarantor under the
Indian Contract Act.
■ Insolvency resolution process for personal guarantors to corporate
debtors is still at a nascent stage
■ The manner in which this case is dealt with will pave the way for
invocation of personal guarantees in the future
WITH �12,276-CRORE NOTICE
SHISHIR SINHA
New Delhi, September 7
The government is likely to movea Bill in the forthcoming monsoon session of Parliament toamend the Life Insurance Corporation (LIC) Act, 1956.
This amendment, being prepared by the Department of Financial Services (DFS), will facilitate the Initial Public O�ering(IPO) of the country’slargest life insurer. Itwill also enhance itspaidup equity capital.
The process to appoint merchantbankers has alreadybeen initiated. According to sources, the DFS isworking on a note to the Cabinet.The Cabinet may also consider atagged proposal to give umbrellaapproval for o�loading up to 25per cent of the LIC equity in several tranches. According tosources, this can help the government approach the market whenrequired to achieve minimumpublic shareholding.
Three objectivesThe government plans to comeout with the IPO during thesecond half of the current �scal.The amendment to the LIC Act isrequired to achieve at least threeobjectives — list the insurer as acorporation and not as a company; expand its paidup capital,and ensure that it continues togive sovereign guarantee to poli
cyholders. Listing the insurer as acorporation and not as companyis key to providing sovereignguarantee; this will be a problemif LIC is under the Companies Act,2013.
The LIC Act envisages that “Thesums assured by all policies issued by the Corporation, including bonuses declared in respectthereof and, subject to the provisions contained in Section 14, theamounts assured by all policies issued by any insurer, the liabilitiesunder which have vested in theCorporation under this Act andall bonuses declared in respectthereof, whether before or after
the appointed day,shall be guaranteedas to payment in cashby the CentralGovernment.”
LIC’s original capital was �5 crore. Thiswas enhanced to�100 crore after the
2011 amendment to the LIC Act.
Minimum public shareholdingThough the government has notdisclosed how much of its shareholding will be o�oadedthrough the IPO, it is expected tobe 10 per cent. Once listed, an entity is required to have at least 25per cent of public shareholding —shares owned by those other thanpromoters — within three years.
The Budget documents showthat the government has set a disinvestment target of �2.1lakhcrore, of which �90,000 crorewould come from the sale ofstakes in IDBI Bank and LIC.
LIC reported a 12.42 per cent increase in total premium incomein 201920 to �3.79lakh croreagainst �3.37lakh crore in 201819.
MONSOON SESSION AGENDA
LIC Act likely to be amendedto facilitate public issue To list as corporation,
ensure no change in
sovereign guarantee
given to policyholders
OUR BUREAUS
New Delhi/ Chennai/Bengaluru, September 7
If the government was measured in resuming Metro rail operations across the country,commuters showed that theycould be no less careful. WhenMetro services eventuallyopened on Monday after �vemonths, albeit in a limited way,the usual rush was missing —be it in Delhi, Lucknow, Chennai or Bengaluru.
Delhi Metro Rail Corporation (DMRC) saw about 7,500passengers travelling in the�rst four hours. Some 2,500passengers used the Metro inLucknow in the �rst few hours.Patronage was marginal inChennai and Bengaluru, too.
“I will wait and watch howmany people use the Metro.Will also look for any surge incases. After all, safety comes�rst,” said a regular DelhiMetro user. “If the safety norms
are strictly followed, then I willconsider using the Metro,” saidanother.
Safety measuresIn Chennai, passengers toldBusinessLine that the crowdwas just a tenth of preCoviddays but they were impressedby the safety measures put inplace. Shanmugasundaram,who travelled from Government Estate Station to Guindy,said: “Temperature checks andhand sanitation were ensuredat the boarding point. Socialdistancing was maintained.There is nothing to worry.” Healso praised the contactlessticketing (QR code scannersand passes instead of tokens).
Metro operators will hopethat such statements will getmore passengers to use theirservices. In preCovid times,Delhi Metro was used by about26 lakh users a day on an aver
age. Restricted operations (notall lines were opened onMonday) and people continuing to work from home alsokept the patronage low on DayOne. But ardent Metro users arealready celebrating.
Said G Anand, a Bengalurubased banker, whose o�ce ison MG Road: “It is a relief. Now, Ican go to the o�ce and returnsafely. Only hassle is that weneed to be early by one hour, soas not to miss the o�cedeadline.”
How well Metro rail operations take o� across the country will entirely depend on adherence to safety measures laiddown by the government.Karnataka Health Minister BSriramulu, who took a Metroride and inspected the protocols put in place by the BMRCL,said it best in a tweet “..... Don’tbe afraid to travel by Metrotrain, but caution is necessary.Our health is in our own hands.In this regard, all travellers arerequired to follow the rules putin place.”
Low traffic on Day One as safety concerns,
limited operations keep commuters away
Metro services back on track, with social distancing and screening
After a 150day pandemictriggered break, the Bangalore Metro resumed services on the Purple Line
on Monday K MURALI KUMAR
OUR BUREAU
Chennai, September 7
With Apple, Samsung, HP andother hardware manufacturers looking to reorganise theirglobal manufacturing facilitiesto reduce their dependence onChina, Tamil Nadu has takenthe lead to woo these playerswith a clear strategy.
Clearly, a lot is at stake. Applealone is looking to invest asmuch as $1 billion through itsvendors — Foxconn and Pegatron — in India. TN wants to capitalise on the fact that Foxconnrecently started manufacturing ‘Made in India’ iPhonesfrom its Sriperumbudur factory, near here, to attract boththe partners of Apple. Samsung, too, has operations in theState, as do HP and Dell.
Recently, TN Chief MinisterEdapaddi K Palaniswami hadwritten personal letters toheads of 13 global electronicsmajors, including Apple CEOTim Cook; Samsung Presidentand CEO Kim Hyun Suk;
Amazon CEO Je� Bezos, and HPPresident and CEO EnriqueLores.
He promised them an attractive investment climateand, on Monday, the government delivered onthat, by releasing a comprehensive ElectronicsHardwareManufacturing Policy2020.
Throughthis policy the State aims to increase Tamil Nadu’s electronicsindustry output to $100 billionby 2025 and the State’s contribution to India’s total electronic exports to 25 per cent.
Attracting global playersThe objective is to transformthe State into an innovativeand a globally competitiveelectronics system design andmanufacturing (ESDM) destin
ation. To attract global ESDMmajors to Tamil Nadu, thepolicy seeks to provide infrastructure and supporting ecosystem to ESDM companies.
Simultaneously, it will incentivisehomegrownstartups inthe ESDM sector, catalysethe growth ofinnovationled enterprises thatmanufacturehardware
products and solutions and develop the semiconductor fabrication (FAB) industry in TamilNadu. With the new policy, theState government aims to attract at least two major FAB investments in the next threeyears.
The policy also seeks to addvalue, especially in focus sectors such as mobile handsets,LED products, fabless chipdesign, PCBs, solar photovol
taic cells, medical electronics,and automotive electronics.
Financial sopsFinancial incentives will beo�ered based on three categories: MSMEs, large — with investments in the range of �200500 crore — and mega — withinvestments in the range of�200500 crore
Financial incentives for largeand mega projects include capital subsidy, subsidy on landlease cost, stamp duty exemption, training subsidy, interestsubsidy, exemption of electricity tax, subsidy for intellectualcapital and enhanced qualitycerti�cation and environmentprotection infrastructure. Also,there will be incentives for EMCclusters and private ESDM parkdevelopers.
Clearances for setting upnew electronics enterprises orexpanding existing ones underthis policy shall be processedvia the single window portal ofguidance.
To woo global giants, TN’s new hardwaremanufacturing policy offers sops, support
SURESH P IYENGAR
Mumbai, September 7
JSW Steel has urged the Supreme Court to pronounce its �nal judgment in the BhushanPower and Steel insolvency caseas it has been waiting for overthree years.
Last Friday, the apex courtgave another two weeks to boththe Enforcement Directorateand BPSL promoter Sanjay Singhal to make their �nal submissions. JSW Steel’s �19,700crorebid to acquire BPSL is hanging�re as the ED had �led a freshplea in the Supreme Court toscrap the sale, �nalised underthe Insolvency and Bankruptcy
Harish Salve was unmuted andheard in another case under thesame judge, he clari�ed that noother lawyer got time for submission in the BPSL case. Following this, the judge agreed tohear the BPSL case again at theend of the day.
The committee of creditor’ssenior counsel Abhishek ManuSinghvi and Salve protestedagainst more time being givenand said the interest of both thebanks and JSW Steel were getting hurt due to delay and thecase being dragged.
The judge, then, halved thetime for fresh submissions totwo weeks, and adjourned thematter.
Code. The ED has argued thatthe National Company Law Appellate Tribunal has no jurisdiction to unfreeze and approvethe sale of an asset attached bythe investigating agency. LastOctober, the ED attached assetsworth over �4,025 crore of BPSLin connection with its moneylaundering probe linked to analleged bank loan fraud by thecompany’s former owners.
When the matter came up forhearing online in the apex courton Friday, ED counsel TusharMehta was granted four weeksto make a submission. Lawyersof other parties were not heardas they were on mute mode.
Later, when JSW Steel counsel
JSW seeks early closure of Bhushan Power case in SC
OUR BUREAU
New Delhi, September 7
India on Monday surpassedBrazil to become the secondworst Covidhit country, withthe total tally surpassing 42lakh, after a record jump of90,802 cases in the last 24hours.
Brazil, till Sunday, had registered around 41.4 lakhcases.
India is now only behindthe US, which has recordednearly 63 lakh Covid19 cases.
According to Health Ministry data, in the last 24 hours,as many as 1,016 Covid19deaths were reported in India,taking the overall toll to71,642. As many as 90,802 newcases were detected.
The total Covid19 tally of42,04,613 includes 8,82,542active cases, 32,50,429 cured/discharged/migrated and71,642 deaths, according tothe Health Ministry.
With over 42 lakhCovid cases, Indiareplaces Brazil as2nd worsthit nation
P MANOJ
Mumbai, September 7
Stateowned Chennai PortTrust is weighing a plan toroll out a special voluntaryretirement scheme for employees, its seventh since1992, as it looks to cuttransaction costs and stay�t in the face of competition from private, mechanised ports in the hinterland.
The board of trustees ofChennai Port Trust will consider the special voluntaryretirement scheme thisweek, a Shipping Ministryo�cial said.
The port trust currentlyhas 3,846 employees on itsrolls and the SVRS is aimedat Class 3 and 4 workerstotalling 3,646 who havecompleted ten years of service or attained 40 years.
Details p8
Chennai PortTrust plans VRS,to target 3,646Class 3/4 staff
OUR BUREAU
Mumbai, September 7
The Reserve Bank of India hasspeci�ed �ve key �nancialparameters that lenders mustconsider before �nalising resolution plans (RP) for eligibleborrowers in 26 sectors, ranging from auto to trading, tomitigate the impact of Covidrelated stress.
The �nancial parameters relating to leverage, liquidityand debt serviceability arebased on the recommendations of the Expert Committee,headed by former ICICI Bankchief KV Kamath, on a ‘Resolution Framework for Covidrelated stress’.
In August, the RBI had permitted onetime restructuringof corporate advances andpersonal loans amid concernsof a spike in bank NPAs due tothe Covid19 pandemic.
Besides auto and trading,the major sectors for whichthe parameters (ceilings orfloors, as the case may be) have
been prescribed include aviation, construction, consumerdurables/FMCG, corporate retail outlets, gems and jewellery, hotel, restaurants, tourism, power, and real estate.
The �ve �nancial parameters are: Total Outside Liabilities (TOL)/Adjusted TangibleNet Worth (ATNW); Total Debt/EBITDA; Current Ratio; DebtService Coverage Ratio (DSCR);and Average DSCR.
Under the RBI’s framework,only borrowers classi�ed asstandard and with arrears ofless than 30 days as on March 1,
2020 are eligible forresolution.
Other sectorsWhere sectorspeci�cthresholds have not been speci�ed, lending institutionsshall make their own internalassessments regarding TOL/ATNW; and Total Debt/EBITDA.
However, the current ratioand the DSCR in all cases shallbe 1.0 and above, and ADSCRshall be 1.2 and above.
The central bank said lending institutions are free to consider other �nancial paramet
ers as well while �nalising theresolution plan apart from themandatory �ve key ratios andthe sectorspeci�c thresholdsprescribed.
Graded approachGiven the varying impact ofthe pandemic on sectors/entities, the RBI said the lending institutions may, at their discretion, adopt a graded approachdepending on the severity ofthe impact on the borrowers,while preparing or implementing the resolution plan.Such an approach may also entail classi�cation of the impact on the borrowers intomild, moderate or severe, asrecommended by theCommittee.
India Ratings has estimatedthat around 7.7 per cent (�8.4lakh crore) of the total bankcredit as at endMarch 2020from corporate and noncorporate segments could get restructured under the Covidresolution framework.
KV Kamath
Rejig of Covid-hit loans: RBI sets 5 key norms forlenders based on Kamath panel recommendations
Financial parameters
■ Total Outside Liabilities/
Adjusted Tangible Net
Worth
■ Total Debt/EBITDA
■ Current Ratio
■ Debt Service Coverage Ratio
■ Average DSCR
ECONOMY
Entire GST shortfall for FY21 will becompensated, says CentreNew Delhi, September 7
States and Union Territories will get full
compensation for the shortfall in GST
collection this year, the Centre reiterated
on Monday. It made it clear that it will be
irrespective of the fact whether the
shortfall is on account of GST
implementation or on account of the Covid
pandemic. “It has never been the stand of
the Union Finance Minister that the loss of
revenue due to Covid would not be
compensated. The Central government
has, time and again, committed that the
entitlement of the States would always be
for full compensation. The entire
compensation on account of the shortfall
in collection of GST will be paid and
honoured,” a senior Finance Ministry
official said.
Total GST revenue shortfall during FY
202021 is estimated at �3lakh crore. Since
collection through the compensation cess
is likely to be �65,000 crore, the net
shortfall could be �2.35lakh crore. Out of
this, based on 10 per cent nominal growth
and other assumptions, the shortfall on
account of GST implementation and
pandemic are �97,000 crore and �1.38lakh
crore, respectively. The Centre has
proposed two options for States – borrow
�97,000 crore through a special window or
borrow the entire �2.35lakh crore from
the open market. OUR BUREAU
Regd. TN/ARD/14/09-11, RNI No. 55320/94
