Inability to raise money for future unidentifiable acquisitions would impact capital raising plans of some unicorns, experts said after SEBI announced new IPO norms.
Yash Ashar, Partner and Head, Capital Markets, Cyril Amarchand Mangaldas, said the companies impacted are particularly those which may not have any other use of capital and where the existing shareholders are not keen to sell.
SEBI, at its recently-concluded last board meeting for 2021, among other proposals, made certain changes to the issue structure of an IPO in India. These include restricting the quantum of issue proceeds a company can use for unidentified inorganic growth, as well as restricting the number of shares that can be offered by selling shareholders and increasing the lock up of shares subscribed by anchor investors.
"Inability to raise money for future unidentifiable acquisitions would impact capital raising plans of some unicorns, particularly where such companies may not have any other use of capital and where existing shareholders are not keen to sell," Ashar said.
Ashar said large amount of flexibility to use funds is a hallmark of those listing their equity shares on international stock exchanges, and investors vote with their feet when they are not happy with the use of such funds, including any new acquisition which they don't like.
These amendments are mainly a reaction to several IPOs earlier this year and follow after consultation papers were issued by SEBI. These proposed changes to the law could have long-term impact, he added.
"The regulator could have prescribed additional and more detailed continuous disclosures and monitoring, keeping in mind the existing requirements, including shareholder approval for proposed acquisitions. These changes may impact the plans of the issuers planning to list on Indian stock exchanges," Ashar said.
SEBI has prescribed changes in the Draft Red Herring Prospectus (DRHP) filed on or after notification in the Official Gazette.
In the conditions for objects of the issue, it said where the issuer company in its offer documents sets out an object for future inorganic growth but has not identified any acquisition or investment target, the amount for such objects and the amount for general corporate purpose (GCP) shall not exceed 35 per cent of the total amount being raised.
The amount so earmarked for such objects where the issuer company has not identified acquisition or investment target, as mentioned in objects of the issue in the draft offer document and the offer document, shall not exceed 25 per cent of the amount being raised by the issuer.
Axis Bank on Monday said it will raise up to Rs 5,000 crore by issuing bonds.
In April this, the board of directors of Axis Bank had authorised it to borrow/raise funds in Indian currency/foreign currency by issue of debt instruments, perpetual debt instruments, AT 1 bonds, infrastructure bonds and Tier II capital bonds among others up to an amount of Rs 35,000 crore.
"We now wish to inform you that the bank proposes to raise funds by issuing senior unsecured taxable redeemable non- convertible debentures of Rs 10 lakh each for cash at par with base issue size of Rs 2,000 crore and green-shoe option to retain over-subscription of Rs 3,000 crore thereby aggregating up to Rs 5,000 crore," Axis Bank said in a regulatory filing.
Stock of Axis Bank traded at Rs 663.25 apiece on the BSE, down by 3.74 per cent from previous close.
Prime Minister Narendra Modi on Thursday said that Centre's banking reforms during the past six-to-seven years have supported the sector in "every way".
Addressing a conference themed 'Creating Synergies for Seamless Credit Flow and Economic Growth', he said these reforms have improved banking sector's overall health, because of which it is in a "very strong" position today.
"We addressed the problem of 'NPAs', recapitalised banks and increased their strength. We brought reforms like IBC, reformed many laws and empowered debt recovery tribunal. A dedicated 'Stressed Asset Management Vertical' was also formed in the country during the Covid-19 period," he said.
"Indian banks are strong enough to play a major role in imparting fresh energy to the country's economy, for giving a big push and making India self-reliant."
Addressing the gathering via video link, he said this is the time for the sector to support wealth creators and job creators.
"It is the need of the hour that now the banks of India work proactively to bolster the wealth sheet of the country along with their balance sheets," he said.
Additionally, he mentioned that the steps taken in the recent past have created a strong capital base for the banks.
Furthermore, he pointed out that banks' sufficient liquidity and no backlog for provisioning of 'NPAs' -- which is at the lowest in the last five years have led to the upgrading of outlook for the Indian banks by the international agencies.
Also, banks have a crucial role to play in making the recently announced production-linked incentive (PLI) projects viable through their support and expertise, he added.
Recently, 'PLI' schemes were announced to incentivise select sectors in increasing their capacity manifold and helping them become competitive globally.
Gross non-performing assets (NPAs) of banks will rise to 8-9 per cent this fiscal, well below the peak of 11.2 per cent seen at the end of fiscal, ratings agency Crisil said in a report.
The Covid-19 relief measures such as the restructuring dispensation, and the Emergency Credit Line Guarantee Scheme (ECLGS) will help limit the rise, the report added.
With 2 per cent of bank credit expected under restructuring by the end of this fiscal, stressed assets-comprising gross NPAs and loan book under restructuring-should touch 10-11 per cent.
Krishnan Sitaraman, Senior Director and Deputy Chief Ratings Officer, CRISIL Ratings, said: "The retail and MSME segments, which together form 40 per cent of bank credit, are expected to see higher accretion of NPAs and stressed assets this time around. Stressed assets in these segments are seen rising to 4-5 per cent and 17-18 per cent, respectively, by this fiscal end. The numbers would have trended even higher but for write-offs, primarily in the unsecured segment."
The retail segment, which had a relatively stable run over the past decade, has been singed by the pandemic, with salaried and self-employed borrowers alike facing significant income challenges and higher medical expenses, especially in the second wave.
Thus, in a first-of-its-kind move, the Reserve Bank of India (RBI) introduced loan restructuring for retail borrowers to help them tide over the situation. This followed a six-month moratorium permitted by lenders last fiscal.
Despite the measures, CRISIL Ratings believes stressed assets in the retail segment will rise to 4-5 per cent by the end of this fiscal from 3 per cent last fiscal. While home loans, the largest segment, will be the least impacted, unsecured loans are expected to bear the brunt of the pandemic.
The MSME segment, despite benefiting from ECLGS and the recent limit enhancement and tenure extension, is likely to see asset quality deteriorate and will require restructuring to manage cash-flow challenges. In fact, restructuring is expected to be the highest for this segment, at 4-5 per cent of the loan book, leading to a jump in stressed assets to 17-18 per cent by this fiscal end from 14 per cent last fiscal, Crisil said.
The corporate segment, though, is expected to be far more resilient. A large part of the stress in the corporate portfolio had already been recognised during the asset quality review initiated five years ago. That, coupled with the secular deleveraging trend, has strengthened the balance sheets of corporates, and enabled them to tide over the pandemic relatively unscathed compared with retail and MSME borrowers. This is evident from restructuring of only 1 per cent in the segment. Consequently, corporate stressed assets are expected to remain range-bound at 9-10 per cent this fiscal.
The rural segment, which was hit harder during the second wave of the pandemic, has also seen a strong recovery. Therefore, stressed assets in the agriculture segment are expected to remain relatively stable.
Subha Sri Narayanan, Director, CRISIL Ratings, said: "While the performance of the restructured portfolio will definitely need close monitoring, the slippages from the restructured book are expected to be lower this time. Restructuring under various schemes in the past focussed on larger exposures and primarily involved extension of maturity without any material haircuts, resulting in high subsequent slippages. This time, the entry barriers for restructuring are more stringent. Also, recent trends indicate that a reasonable proportion of borrowers, primarily on the retail side, have started making additional payments as their cash flows improve, despite having availed of restructuring. MSMEs, however, may take longer to stabilise and we remain watchful."
The estimates of CRISIL Ratings are predicated on a base-case scenario of 9.5 per cent GDP growth this fiscal and continued improvement in corporate credit quality.
A virulent third wave and significant deceleration in demand growth could pose significant downside risks to these estimates. On the other hand, operationalisation of the National Asset Reconstruction Company Ltd by the end of this fiscal and the expected first-round sale of Rs 90,000 crore NPAs could lead to lower reported gross NPAs.
Reserve Bank of India (RBI) has relaxed the restrictions on HDFC Bank and allowed the lender to issue new credit cards.
However, the restrictions on all new launches of the digital business generating activities planned under 'Digital 2.0' will continue till further review by RBI.
"The RBI vide its letter dated August 17, 2021 has relaxed the restriction placed on sourcing of new credit cards. The Board of Directors of the bank has taken note of the said RBI letter," HDFC Bank said in a regulatory filing.
The bank said that it will continue to engage with RBI and ensure compliance on all parameters.
In December 2020, RBI directed asked HDFC Bank to temporarily stop all launches of the 'Digital Business generating activities and sourcing of new credit card customers on certain incidents of outages in the Internet banking, mobile banking and payment utilities of the bank over the past two years.
Shares of the bank surged on the back of the relaxation. Around 10.45 a.m., its shares on the BSE were trading at Rs 1,541.80, higher by Rs 26.95 or 1.78 per cent from its previous close.
Online insurance marketplace Policybazaar has filed a draft red herring prospectus with the Securities Exchange Board of India for an initial public offering to raise Rs 6,017.50 crore from the market.
With this, Policybazaar joins a growing number of Indian startups looking to raise funds from the capital markets to support the country's booming digital economy.
The IPO will be undertaken by PB Fintech Ltd, the parent of Policybazaar. The issue comprises fresh issue of Rs 3,750 crore worth of equity shares and an offer for sale of Rs 2,267.50 crore by existing shareholders and promoters.
The OFS will see sale of up to Rs 1,875 crore worth of shares by SVF Python II (Cayman) and up to Rs 392.50 crore by others.
The company also proposes to raise Rs 750 crore through placement of shares before the IPO. Information regarding this has already been shared by the company with the regulator.
A major chunk of money raised through the IPO will be used for expansion of the company's operations and for furthering growth plans. Reports suggest that Policybazaar is seeking a valuation of $5.5-6 billion.
Policybazaar is backed by investors such as Softbank, Temasek, Info Edge, Tiger Global Management and Tencent Holdings Ltd., was founded in 2008 to tap vast under-served Indian insurance market.
It's IPO follows good response received by another Indian startup Zomato. This IPO received overwhelming response from the market that has seen its shares jump over 80 per cent.
Policybazaar works on the business model that provides its customers choice of policies at different price points and helps them in making an informed decision on insurance.
The success of this IPO is expected to open the floodgates for similar entities to tap the market.
Kotak Mahindra and Morgan Stanley are the global coordinators for PB Fintech's IPO. Other bookrunners include Citigroup, ICICI Securities, HDFC Bank, IIFL Securities and Jefferies.
Another great disruption in the monetary world.
Crypto currency is very common word for the last few years and Bitcoin has been the most famous brand in this sector. While writing this article news popped up that Amazon was going to accept Bitcoin as payment for its e commerce transactions. This announcement is going to be the game changer for the Bitcoin as Amazon platform is selling almost everything which a common man needs. It means alone Amazon etc E Commerce companies can give lot of sustainability to the Bitcoin which in turn will nudge people to have faith and confidence in using Bitcoin etc as transactional currency instead of keeping them merely an investment instruments due to increase in their exchange rates vis a vis to Dollar. Now Govt must intervene so that Amazon cannot declare such parallel currency to become common man’s obsession or possession.
The crypto currencies do not have any regulators and guarantors for their values in denominations. This is the biggest drawback and insecurity for their holders and investors. Despite this, crypto currencies are getting public support because of their universal acceptability and escape opportunities from the currency conversion charges to be paid by buyers of different currencies. Since crypto currencies can straightway be stored in digital wallets and paid globally without carrying them physically, they have been very convenient and less costly currencies to visitors going abroad.
The biggest danger emerging from the crypto currencies is that enforcement agencies do not have any control whether Bitcoin etc. have been earned legally or paid legally for the valid transactions, globally. That is the reason crypto currencies are the favourites of underworld to do all kinds of transactions and storing the money digitally. Since crypto currencies are based on block chain technology, there is nil possibility of tinkering them from inside at software level but they are vulnerable to be stolen if the security passwords of wallets are stolen are cracked etc.
There is hardly any mechanism to trace and track those (Crypto currencies) or seize them as per the norms of criminal jurisprudence along with jurisdictional boundaries as they can be globally shifted without any checks and balances. The crypto currencies may be very easy to use but they have lots of national security and safety of public money concerns as they cannot be considered to be equivalent to the legal tenders which national currencies are mandated to have.
To respond to the growing demand of crypto currencies, India too has planned its own digital currency. Digital currency is the digital version of actual currency that can be stored in digital wallets as cash and can be spent like normal rupees etc. The national digital currency is different from digital transaction and crypto currency. The benefit of this is that the cost printing notes is nil but there is a requirement of robust technology with back end monitoring of the trails of digital currency. Besides, the digital currency can be monitored from the back end on the basis it’s digital footprints and trails to keep a watch on the illegal transactions and other criminal issues. Thus tracking of digital currency is easier than paper currency which make it more secure than paper currency if taken or stolen illegally. Besides, this can be easily loaded in wallets either through virtual ATMs or through various banking apps etc.
Once we have uploaded the digital cash, we can use it for any valid transaction more securely than cash, cheques or drafts. The instant transferability etc. are its super virtues. It is safer to carry and no fakers can fake it also. So the problem of counterfeit currency is also solved with the inception of digital currency. Of course, the digital currency will definitely be based on the block chain technology to give it the best cyber safety features. I think that except for low denomination notes, all big notes can be digitised. The Reserve Bank of India may issue digital currency using the block chain technology with unique codes and denominations, transferable to anywhere, maintaining the nuances of collaterals as it does with regard to legal tender.
The issue of cheque books and drafts etc can become irrelevant as these digital currencies will be more safe and user friendly with regard to banks, payers and payees. In the back end, these digital currencies will have complete movement trails from origin to exact locations, bringing more precision in the banking processes and law enforcement agencies, tracking the routes of illegal or criminally taken away money. So the cost cuts in the printing of currencies, clear trails for money tracking, with no possibility of counterfeits and customer and bank friendly digital currencies are the future. Here I would like to point out that digital currency should not be confused with digital transactions we do. Even today we do digital transactions but they are co terminus to paper money. Digital currency itself is an asset and currency both. It can be digitally transacted in much safer way as its back end trail of denominations and mobilities are far more traceable in real time or on post facto basis.
Once state actors come with their digital currencies, I am sure that crypto currencies will not be required and its illegality must be declared. It can further be enacted that transacting with crypto currencies are illegal as they are neither backed by legal tender nor guaranteed by the sovereign. This will finish these crypto currencies being a hot cake for the underworld or tax evaders.
The digital currency should start initially in higher denominations in parallel to the paper currency. Once people become educated and user friendly, it can replace the large segment of paper currency with digital currency. The uploading and down loading of digital currencies can be designed in way without compromising the safety features. I think that it will disrupt the business of ATMs drastically, perhaps they may not be required at all. This will save huge costs for banks from running and maintaining ATMs. Besides, banks may save lot of money with regard to staff etc. for counting and transporting the paper currencies, printing cheque books and drafts including their clearances which may be instant with the digital currency, being verified simultaneously.
(The writer is M N Tiwari, IPS)
Customers of HDFC Bank have been facing issues with the bank's mobile banking application during the day.
In a tweet, the bank has said that it is looking into the matter on priority and urged the customers to used net banking to complete their transactions.
"We are experiencing some issues on the MobileBanking App. We are looking into this on priority and will update shortly. Customers are requested to please use NetBanking to complete their transaction. Regret the inconvenience caused. Thank you," the bank said in tweet.
Several users took to social media to complain regarding the issues faced on the app.
According to 'Downdetector', the issues surged around 10.45 a.m. and people are still facing problems.
This is yet another glitch after customers faced issues in net banking and mobile app in March.
In November last year, a major outage occurred in the bank's internet banking and payment system on due to a power failure in the primary data centre, following which the Reserve Bank of India (RBI) in December asked the bank to temporarily stop all launches of the digital business generating activities and sourcing of new credit card customers.
In February, the RBI appointed an external professional IT firm to carry out a special audit of the entire IT infrastructure of HDFC Bank following the outage.
The Basel Committee on Banking Supervision, said on Thursday that cryptoassets such as Bitcoin pose additional and higher risks to banks and would be subject to a new conservative prudential treatment.
Cryptoassets are seen as a risk to financial stability because of their potential for money laundering and wild swings in prices that could lead to defaults and saddle banks with huge losses.
Under new prudential norms banks would be required to set aside more capital for covering the risk of any cryptoassets that they hold. This is required to safeguard depositors and other senior creditors of the banks to a loss that could occur due to a sudden crash in the prices of these assets which happens quite often.
The Reserve Bank of India has also flagged the high risk that the banking system faces due to the widely fluctuating prices of these digital currencies. The RBI had in fact banned cryptocurrencies but then the Supreme Court had intervened to allow limited use of these assets. The Basel committee's proposals come as a shot in the arm for the RBI as the government is working on legislation to ban these riskydigital currencies.
The Basel Committee on Banking Supervision (BCBS) is the primary global standard setter for the prudential regulation of banks and provides a forum for regular cooperation on banking supervisory matters. Its 45 members comprise central banks and bank supervisors from 28 jurisdictions.
The Basel Committee on Banking Supervision has issued a public consultation on preliminary proposals for the prudential treatment of banks' cryptoasset exposures.
"While banks' exposures to cryptoassets are currently limited, the continued growth and innovation in cryptoassets and related services, coupled with the heightened interest of some banks, could increase global financial stability concerns and risks to the banking system in the absence of a specified prudential treatment," the Basel committee said in a press statement issued on Thursday.
Given the rapidly evolving nature of this asset class, the Committee believes that policy development for cryptoasset exposures is likely to involve more than one consultation, the committee added.
The Committee welcomes comments on the proposals, which should be submitted here by 10 September 2021. All submissions will be published on the BIS website unless a respondent specifically requests confidential treatment.
Bitcoin prices jumped from about $10,000 last September to as high as $63,000 in mid-April. However, in the past month, prices have collapsed, falling back to $37,000, on the back of tougher regulatory scrutiny in China and Elon Musk's criticism of Bitcoin's high energy cost. Earlier Bitcoin prices had suddenly skyrocketed because Elon Musk invested $1.5 billion in the cryptocurrency through his electric car company Tesla Inc, and said Bitcoin would soon be accepted for payments.
However, Microsoft founder Bill Gates "sincere advice" to potential investors at the time was : "Unless you are as rich as Elon Musk you should not go in for buying Bitcoin."
Similarly, Warren Buffet, known as the most successful investor of all times, has serious reservations about Bitcoin. He believes that Bitcoin has no underlying value and has referred to it as "rat poison squared" and has said he won't ever buy the cryptocurrency. "I don't have any cryptocurrency and I never will," Buffett had said on CNBC.
Private life insurer Bajaj Allianz Life has declared bonuses amounting to Rs 1,156 crore to its policyholders. This includes a special one-time bonus of Rs 315 crore, which is over and above the regular bonus.
The company aims to ensure there is adequate support, in these unprecedented times, to its customers in achieving their life goals, the insurer said in a statement.
These bonuses are funded from the profits generated by the company's participating policyholders' funds for the year FY 2020-21. This move is expected to benefit nearly 12 lakh (11,99,612) policyholders, who have stayed invested and entrusted their faith in the company.
This is the 20th consecutive year the Company has declared a bonus and delivered long term value to policyholders.
The bonus declared by the company is for the policies of all par products, which are in-force for full sum assured as on March 31, 2021, and for which customers are paying premiums regularly. The one-off special bonus and the regular reversionary bonus are payable at the time of maturity or death of the policyholder.
Bajaj Allianz Life Insurance Managing Director and Chief Executive Officer Tarun Chugh said: "Our employees and our customers' Life Goals continue to be our key priorities as we collectively move ahead in these tough times. We want to assure each of them, especially our customers that we will stay by their side, and assure the best of our services and unwavering support towards keeping their Life Goals on track. We are sure that this one-off special bonus will not only make our customers happy, but will encourage several of our customers to stay invested in their Life Goals."
( Coursety IANS )
Equity shares of Dewan Housing Finance Corporation Ltd will be delisted from the stock exchanges going ahead, as part of the resolution plan of Piramal Capital & Housing Finance Ltd.
On Monday, the Mumbai bench of NCLT had approved the resolution plan of the Piramal Enterprises' subsidiary.
"As part of the Resolution Plan, the equity shares of the Company are proposed to be delisted. Appropriate disclosures in terms of Regulation 3(3) of the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009, shall be made following receipt of the copy of the Order by the National Company Law Tribunal approving the Resolution Plan," DHFL said in a regulatory filing.
The approval came after the National Company Law Appellate Tribunal (NCLAT) on May 25 stayed the NCLT order directing DHFL's Committee of Creditors (CoC) to consider the settlement of its former promoter Kapil Wadhawan.
Piramal Group turned out to the successful bidder for the bankrupt Dewan Housing Finance Corporation Ltd (DHFL) in January, but in a strange turn of events, the Mumbai-bench of NCLT on May 19 asked the lenders of the bankrupt DHFL to consider Wadhawan's settlement offer the settlement offer of former promoter Kapil Wadhawan.
Shares of DHFL hit the 10 per cent upper circuit on Tuesday. Around 10 a.m., its shares on the BSE were at Rs 22.85, higher by Rs 2.05 or 9.86 per cent from its previous close.