The Economic Times - Mumbai, 11/18/2019 Cropped page Page: 10

10!THE ECONOMIC TIMES | MUMBAI | MONDAY | 18 NOVEMBER 2019 | WWW.ECONOMICTIMES.COMFinance & Commodities

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Did You Know?

Camilla Sutton climbed through the ranks to become global head of for-

eign exchange at Scotiabank in Toronto. Along the way, she put up with being asked if she ought to travel while she had small children at home and being mis-taken for a junior employee. And then there was the day when she was the only woman in a top-level meeting, yet again. Like many other women in the $6.6-trillion a day currency mar-ket, Sutton eventually left trad-ing. She now works for a com-pany aiming to improve gender diversity. “Very senior women in the industry are going to be the only woman at the table at every table they’re sitting at,” Sutton said. “It becomes very tiring and exhausting for wom-en who are at senior levels with-in the industry to continually be faced with the everyday micro-aggressions.” —Bloomberg

Women Desert Trading Floors as Bias Blocks Path to Management

$1.84 BILLION

INDIA’S GOLD IMPORTS IN OCTOBER

Harald Malmgren@HalsrethinkWas surprised by apparent bewilderment of Fed dealing with continuing short term dollar funding inadequacy, huge “not QE” response, con-fusing narrative for hike,then three cuts, stating “US econo-my in good place”, market belief “whatever it takes” in play

AGRI COMMODITIES INDEX UP 0.27%

Edible Oil, Cereal Prices RiseThe Agriwatch Agri Commodities Index gained 0.27% to 118.01 during the week ended Nov 16 from 117.69 the previous week led by higher prices of edible oils, cereals, spices and pulses. The gains were partly offset by de-clines in cotton, onion & potato and sugar prices. The base for the Index and all sub-Indices is 2014 (= 100). Six of the nine commodity group sub-Indices and 18 of the 29 individual commodity sub-Indices that constitute the In-dex ended the week higher. The commodity group sub-Index values and their weekly changes are: Cereals: 118.73 (+0.32%), Pulses: 138.46 (+1.24%), Potato & Onion: 170.42 (-6.10%), Edible Oils: 116.98 (+1.98%), Oilseeds: 110.37 (+0.28%), Spices: 153.24 (+6.56%), Sweeteners: 105.85 (-0.56%), Fi-bres: 99.41 (-3.14%) and Other Non-Food Articles: 87.56 (+1.38%). Further details can be viewed on the ET website and on Agriwatch.com.

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pecting $2-3 billion global inflowsto own local stressed assets an-nually from now,” he said.

In the past five years, estimated$3 billion international moneyhas flowed into domestic stressedassets.

“Essar judgement clearly de-marcates limits of judicial inter-ference over the proceedings re-sulting into more certainty andconclusiveness,” said Shiju P Vee-til, senior partner, IndiaLaw LLP.“This will attract serious foreignplayers towards the distressed as-set.” “Excessive judicial interfe-rence significantly impaired in-solvency proceedings,” he added.

The latest Supreme Court ver-dict is said to have lessened legalwrangling between creditors andexpected to accelerate resolu-tions. The Committee of Cred-itors’ authority is also establish-

Saikat Das & Indulal PM

Mumbai: The Supreme Courtjudgement in favour of theworld’s top steel maker Arcelor-Mittal taking control of debt-rid-den Essar Steel is expected to pro-vide a new lease of life for India’sdistressed asset market with anestimated annual fund flow of $3billion, bankers and analystssaid.

International investors werewatching this case, which nowsets a benchmark for New Delhi’sfight against bad loans and thejudgement clearly lifted global in-vestor sentiment, they said.

“While international buyers arelined up, the sellers should nowcome up,” said Jayesh Mehta,country treasurer, Bank of Amer-ica.

“With the Essar Steel judgmentout, it has now become easier fordistress asset transactions to hap-pen. Now, it needs to be seen howbanks open up to sell their stickyassets,” he said.

The verdict from the top courtwill also provide much-awaitedrelief to lenders, who are staringat one of the largest cases of baddebt issues of the world in recenttimes. “The Essar mandate clear-ly has lifted investment senti-ment for global investors seekingopportunities in India,” saidRashesh Shah, CEO, Edelweissgroup that runs a stressed assetfund of $1.3 billion. “We are ex-

ed. The Ruias-promoted EssarSteel was admitted to the Nation-al Company Law Tribunal, Ah-medabad, in August 2017. It wasunder prolonged litigation andwell past the government’s be-spoke deadline of 330 days.

“The Essar judgement has up-held the sanctity of a capitalstructure,” said Rahul Chawla,managing director at DeutscheBank. “The IBC (Insolvency andBankruptcy Code) law and itsconstituent authority have beenreaffirmed. Both these will give

belief in and robustness to thelaw and buyers of distressed pa-per will now have more courageto bid.”

Earlier in the year, DeutscheBank AG set up a unit in India tobuy and reorganise soured debt.

“If the secondary task force rec-ommendations for broad basinginvestors that can buy INR dis-tressed paper can be implement-ed quickly, then market transac-tions will increase,” said Chaw-la. A task force appointed by theReserve Bank of India proposed

a self-regulatory body to de-velop suitablebenchmarks fortrading corporateloans in the second-ary market. Such expected bout

of fund flowswould also

give oppor-tunitiesfor localexperts

dealing with soured debt.“The business of non-perform-

ing assets needs both capital andthe ability to resolve bad loans,”said Shah from Edelweiss.

India is facing one of the worstbad loan mess in the world asmore than 2.4% of total loans inIndia’s banking system may beunder stress on top of the 9.6%bad debt ratio as of June, thehighest among major econo-mies, according to Credit Suisseestimates.

Essar Order a Breather for 535 CorpDebtors Facing Liquidation by Dec

Shilpy.Sinha@timesgroup.com

Mumbai: The Supreme Courtjudgement on Essar Steel hascome as a breather for 535 othercorporate debtors facing liqui-dation by December. These com-panies had crossed 270 daysdeadline for a resolution underthe Insolvency and BankruptcyCode (IBC). While the time limitfor resolution is 330 days, if debtsare not resolved within thistimeframe, the only option left isliquidation. Under the new rul-ing, NCLT can grant an exten-sion.

Under IBC, initially proceed-ings had to finish within 270 daysfor the resolution of insolvency

Under the SC ruling,NCLT can grant anextension for debtorsfacing liquidation

DHFL Staresat InsolvencyProceedings

further delay, theymay shift to other crops like chanaand wheat, which need less water,and hence acreage for jeera will bereduced despite a good monsoon,’’said Dipak Parikh, partner, KanuKrishna Corporation, an exporter.

Last year, the crop was around600,000 tonnes and this time the in-dustry was expecting a bumperoutput as rains have been good inproducing states. The next crop

harvest is likely to take place onlyin March, a delay of one month, Pa-rikh said. Export demand has beenhit by the disabling of benefits un-der merchandise export from In-dia scheme (MEIS) from August.

“We used to get as much as 7% dis-count under the scheme till Au-gust. We enter into export dealsconsidering that. But when thegovernment stops it, we can’t with-draw from the export deals as we

are already committed. As a re-sult, our margins are hit,’’ saidShailesh Shah, director of Jabs In-ternational, another exporter. Thefutures prices at National Com-modity and Derivatives Exchange(Ncdex) have dropped to .̀162 perkg from around .̀168 per kg lastmonth. As jeera prices have comedown globally, India is well placedto ship more quantities. India hasbecome the major supplier global-ly with its competitors Syria andTurkey reaping a poor crop. Chinahas been buying heavily from In-dia this year. Its imports have beengoing directly instead of throughVietnam, like earlier.

The All India Spices ExportersForum has made several represen-tations to the Centre on MEIS andit reckons that exporters will loseheavily if the benefits are not al-lowed in full from August.

India Well-placed to Ship Jeera butDenial of Export Sops Hits Traders

Krishnakumar.PK@timesgroup.com

Kochi: Hit by thewithdrawal of ex-port benefits, Indianspice traders nowfear a shortfall in newjeera crop as incessantrains have delayed sow-ing.

Jeera is the second largestexported spice from India earning.̀ 2,000 crore annually. Normally,the sowing of jeera starts after Di-wali, in the main growing areas ofGujarat and Rajasthan. But it hasbeen delayed by rains and is likelyto get into full swing towards theend of this month or in December.

“Jeera as a crop needs less mois-ture and so the farmers have notbeen able to start sowing. If there is

Lagarde Takesthe Lead asCentral BanksCome to Fore

Bloomberg

London: Central bankers in the US andEurope will come under the microscopethis week, giving traders an insight intotheir policy plans going into 2020.

Christine Lagarde is set to deliver herfirst major speech as European CentralBank (ECB) president on Friday, with in-vestors on the lookout for clues of herpolicy initiatives and communicationstyle. That comes a day after the ECB re-leases accounts of the final meeting un-der her predecessor Mario Draghi,when the Governing Council was reco-

vering from an unprece-dented spat.

Meanwhile, the US Fed-eral Reserve will publishminutes from the Octo-ber meeting that saw itcut rates and signal itseasing plans were now onhold. With progress onthe first stage of a poten-tial US-China trade dealshifting on a near-dailybasis, parts of any out-look contained in the re-lease may be outdated,meaning speeches from

Fed officials may give more relevant pol-icy signals. “The biggest challenge forboth Lagarde and Powell is not econom-ic, it’s political. For Lagarde, with ECBfirepower all but exhausted, the job is toconvince euro zone finance ministers toopen their wallets. For Powell, it’s dodg-ing presidential tweets and hoping for atrade truce. With growth holding up,both have a moment to marshal theirforces,” said Tom Orlik, chief econo-mists, Bloomberg Economics.

It’s the last full week before theThanksgiving holiday in the US, so inaddition to October’s minutes, there’salso a final rush of Fed speeches beforeofficials leave for vacation and a quietperiod proceeding the final meeting ofthe year. Cleveland Fed president Lo-retta Mester, New York Fed presidentJohn Williams and Minneapolis FedPresident Neel Kashkari are all due tospeak in a week that otherwise sees fewmajor economics data releases.

As trade negotiations rumble on,Wednesday also sees the latest Demo-cratic debate, which could generatemore news on how candidates view theeconomy and trade.

US Fed willpublishminutes fromOct meetingthat saw it cutrates andsignal itseasing planswere now onhold

also be protected under GI.Accordingly, the Tea Board tooksteps to register these two varie-ties under GI,” Kaushik Basu,secretary, Darjeeling Tea Associ-ation (DTA), told ET.

The Tea Board is the registeredproprietor of GI for Darjeelingtea. Geographical indicationsmean indications which identify aproduct as originating from the

territory of a member, or a regionor locality in that territory, wherea given quality, reputation orother characteristic of the prod-

terminal buds with rich pu-bescence of tea shoots are merelydried in natural sunlight. Thisallows the buds to retain thecovering of velvety silver colour.

Darjeeling white tea brews havea pale yellow/light translucentcolour and has a slightly sweetflavour with no ‘grassy’ under-tones sometimes associated withgreen tea.

Basu said white tea is a pre-ferred choice among tea connois-seurs, both in India and abroad,and that is why these teas fetchpremium prices. Darjeeling whitetea has good demand in the US andEuropean Union. The annualestimated production of Dar-jeeling white tea is one lakh kg.

The DTA secretary said that theyhave also initiated steps to regis-ter both Darjeeling white andgreen teas under Protected Ge-ographical Indication (PGI) forthe world markets.

He further said that the demand

for Darjeeling green tea is in-creasing because of its healthvalues. “Apparently, Darjeelinggreen teas taste better than othergreen teas. Darjeeling green teasare less oxidised teas.”

The annualproduction ofDarjeeling greentea is 1million kg.The 87 tea estatesin Darjeelinghills annuallyproduce 8.5million kg ofteas.

Industry ob-servers feel thatthe GI regis-

tration will help to protect theauthenticity of Darjeeling whiteand green teas. “But there needs tobe a strong monitoring to see thatGI is not misused by unscrupu-lous traders. Nepal tea has alreadyaffected Darjeeling tea trade alot,” they said.

uct is essentially attribut-able to its geographical

origin. Darjeeling white tea has a

unique aroma. While the leavesused for making black tea undergowithering and oxidation, thoseused for making white tea do notface any withering and oxidation.In other words, white tea under-goes minimum processing and the

Darjeeling Green, White Teas Get GI BackingTeas sold as Darjeeling white and green teas without GI will not be considered authentic

Sutanuka.Ghosal@timesgroup.com

Kolkata: Darjeeling green andwhite teas, whose price variesfrom .̀ 3,000 -.̀10,000 per kg, havereceived Geographical Indication(GI) tag for the domestic market,which will put to rest any doubtabout their authenticity andquality.

Both these premium teas havebeen registered as a GI in thecountry with effect from October24, 2019, which means that any teassold as Darjeeling white and greenteas in the domestic market with-out GI will not be consideredauthentic teas. “Darjeeling blacktea is already registered as GI.Since the demand for Darjeelingwhite and green teas is increasingin the domestic market, wethought that these two varieties

The Essar mandate clearly has lifted investment sentiment for global investors

seeking opportunities in India. We are expecting $2-3 billion global inflows to own local stressed assets annually from nowRASHESH SHAH, CEO, Edelweiss group

In the past five years, estimated $3-billion international funds have flowed into domestic stressed assets

Latest SC verdict is said to have short-ened legal wranglingamong creditors and expected to acceler-ate resolutions

India is facing one of the worst bad loan mess in the worldas more than 2.4% of total loans in India’s banking system may be under stress

NEW LEASE OF LIFE

ESSAR STEEL RESOLUTION Benchmark SC verdict to provide relief to lenders, comfort investors

Global Investors may Makea Beeline for Bad Loans

Under IBC, initially proceedings had to finish within 270 days

In Sept 2019, it was extended to 330 days due to litigations

Amended maxi-mum resolution time limit of 330 days included liti-gation period to en-sure that RPs take timely steps

SC said only in exceptional cases, the time can be extended and the general rule of 330 days as the outer limit stays

TIMELINE REVISION

and bankruptcy cases afterwhich liquidation shall be in-voked. In September 2019, thedeadline was extended to 330days as most cases had breachedthe 270 days owing to delays dueto litigations. Now, the mandato-ry deadline of 330 days has beendone away. There are 1497 casespending under IBC. Of these, 535cases have crossed more than 270days. Amendment of Section 12brought in August said that ifcases are not resolved within 330days, it will go for liquidation.

The amended maximum resolu-tion time limit of 330 days includ-ed litigation period to ensure thatresolution professionals and theadjudicating authority take

timely steps to complete the proc-ess. The SC has struck the man-

datory part, andruled that in ex-ceptional cases,the time can beextended and thegeneral rule of330 days as theouter limit stays.

“By Decemberall these 535cases would have

crossed additional 90 days over270 days and forced into liquida-tion,” said Hari Hara Mishra.“Forced liquidation is likely to bestopped by this Supreme Courtjudgement. There is fresh breath-er for companies completing 330

days in December quarter.”“This judgment will shape up

the future resolution process in-cluding the cases where 330 or ad-ditional 90 days were over orabout to get over, as the SupremeCourt has struck down the man-datory effect under the amend-ment and NCLT and NCLAT canexercise their discretion to givefurther extension according tothe parameters set in the judg-ment,” said Ashish Pyasi, associ-ate part-ner, Dhirand DhirAssoci-ates.

Story So Far

Govt notified the IBC Rules, 2019, to provide

a generic framework for insolvency and

liquidation proceedings of systemically important financial service providers

other than banks

Most banks have started making provision on their

exposure to DHFL

ICA, proposed by the DHFL management, involves

lenders taking equity stake in the company

RBI has allowed banks, asset reconstruction

companies to be part of ICA

Shilpy.Sinha@timesgroup.com

Mumbai: If creditors are unableto sign on a resolution plan forDHFL by January 7, the regulatoror the government can initiatebankruptcy and insolvency pro-ceedings under Section 227 of thebankruptcy code, which got noti-fied on Friday.

The government notified the In-solvency and Bankruptcy Rules,2019, to provide a generic frame-work for insolvency and liquida-tion proceedings of systemicallyimportant financial service pro-viders, other than banks.

“If the creditors are unable tosign on the resolution before Ja-nuary 7, the government or theregulator can initiate insolvencyproceedings under Section 227,”said a senior banker. In Octoberlast year, the government had su-perseded the IL&FS board to takeover the company, which had de-faulted on payments.

In the case of DHFL, bankerswant mutual funds on board to en-

sure that no enti-ty takes a unilat-eral decision. Ofthe about .̀1 lakhcrore exposureto the bankingsector, 38% is inthe form of bankloans while therest throughdebt markets,mutual funds,

insurance companies and depos-its. Most banks have started mak-ing provision on their exposure toDHFL. While banks and non-banking finance companies(NBFCs) have signed the pro-posed resolution, some mutualfunds have had reservations.

Reliance AMC, Edelweiss, UttarPradesh State Power Corporationand the insurance society ownedby Indian Air Force employeeshad moved the Bombay HighCourt to recover their dues, butthe court has restrained DHFLfrom making payments to anycreditors.

The inter-creditor agreement,proposed by the DHFL manage-ment, involves lenders taking eq-uity stake in the company. Theresolution plan allows lenders toconvert debt to equity and sincedebt holders like mutual fundsare also creditors, it is importantthat they are on board, otherwisethe whole process could be stalled.

RBI has allowed banks, asset re-construction companies to bepart of ICA. Mutual funds, whichare also prominent lenders tomany firms, are regulated by Sebiand the market regulator’s viewson certain aspects of the resolu-tion proposed by banks are differ-ent from that of RBI. This is lead-

ing to delay in resolution and areunable to work out a commonground to rescue a defaultingfirm.

The terms of the ICA, if signedby the lenders, is not binding onfunds and other lenders such asinsurers. The proposed resolu-tion in case of DHFL says that alllenders acknowledge and agreethat from time to time certainbanks, NBFCs, other financial in-stitutions and asset reconstruct-ion companies may sign an agree-ment and shall be bound by theterms of this agreement as a‘lender’ and shall acquire and as-sume the same rights and obliga-tions.

According to DHFL’s repaymentplan, cash proceeds from loan as-sets will be used to repay cred-itors. The first category of debtworth over .̀ 34,800 crore will be re-paid through inflows from thecompany’s retail loans, where theprojected cash inflow stands atover .̀ 52,600 crore by financialyear 2034-35. Bondholders have.̀ 41,000 crore exposure to DHFLand banks have .̀ 27,527 crore.

THE CONDITION Future depends on creditors’ability to sign on a resolution by January 7

According toDHFL’srepaymentplan, cashproceedsfrom loanassets will beused to repaycreditors

Jeera is the second largest exported spice from India earning ̀ 2,000 cr annually

Export demand has been hit by the disabling of benefits under MEIS from August

China has been buying heavily from India this year

SELF GOAL?

Last year, the crop was around 600,000

TONNES

1MILLION KGDarjeeling green tea’s

annual production

8.5 MILLION KG Annual tea production

by 87 estates in Darjeeling hills

Both the premium teas were registered as a GI in the country, effective Oct 24

Darjeeling white tea has good demand in the US and European Union.

FRESH AND HONEST

The demandfor Darjeelinggreen tea isincreasingbecause of itshealth values:Kaushik Basuof DarjeelingTeaAssociation

Forcedliquidation islikely to bestopped bythis SupremeCourtjudgement:an analyst

CCI NG 3.7 Product: ETMumbaiBS PubDate: 18-11-2019 Zone: MumbaiCity Edition: 1 Page: ETMCMP10 User: sandesh.pingale Time: 11-17-2019 23:17 Color: CMYK

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