Companies & Sectors
Powergrid’s FY2016 net profit crosses Rs6,000 crore
Power Grid Corporation of India Ltd (Powergrid), a ‘Navratna’ company and the ‘Central Transmission Utility (CTU)’ of the country, reported a 21% jump in its full year net profit. The company, for the first time, also surpassed a net profit of Rs6,000 crore in a year.
 
For FY2016, Powergrid posted a net profit of Rs6,027 crore over a turnover of Rs21,281 crore for FY 2015-16, registering a growth of about 20% in turnover and 21% in net profit compared to FY 2014-15, on a standalone basis. 
 
For the fourth quarter of FY2016, the company reported a net profit of Rs1,599 crore, a growth of 13% compared with same period a year ago. The company proposed a final dividend of 15.1% in addition to interim dividend of 8.0% (already paid) for the financial year 2015-16. 
 
At present, Powergrid is operating about 129,600 of transmission lines along with 208 Sub-stations with transformation capacity of more than 255,000 MVA. With the use of state-of-the-art maintenance techniques, average availability of transmission system during the year 2015-16 was maintained at 99.72%.
 
The company capitalised assets of about Rs31,800 crore during FY2015-16, which was the highest ever in a year; and incurred a capital expenditure to the tune of Rs22,580 crore during the period.
 

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RBI’s restructuring norms for NBFCs need more clarifications
The Reserve Bank of India (RBI) came out with a notification making amendments in the corporate debt restructuring (CDR) norms for non-banking financial companies (NBFCs) on 26 May 2016. The amendments have been made to the existing set of prudential norms for all the three classes of NBFCs i.e., NBFC-ND-Non SI, NBFC-ND-SI and NBFC-D .
 
While the changes made very relevant, considering the present state of affairs in the country, a need for further clarification is felt at some places. 
 
Say for instance, the framework now provides for a time limit for implementation, which will undoubtedly is a very positive change. Earlier, we have seen several restructuring packages to fail due to delay in the implementation of restructuring packages. The framework however does not talk about the consequences for the failure to implement timely.
 
Further, the provisions relating to restructuring of accounts involving fraud or malfeasance also is a positive change, this may turn out to be revival mechanism for units having merit, which otherwise would have been ignored from restructuring framework.
 
Changes made in the CDR framework
 
There are three main changes in the framework, each of which has been discussed separately.
 
1. Provisions pertaining to special regulatory treatment for asset classification omitted from the framework
 
The CDR framework provided for a special regulatory treatment for the cases of restructuring for their timely implementation. As per para 7 of the CDR framework, where a restructuring was implemented within 120 days from the date of approval of the package or date of receipt of application, as the case may be, the same was eligible for the benefits under the said paragraph, which allowed retention of asset class, i.e., standard asset could be retained as standard and sub-standard/ doubtful could be retained in the same asset category.
 
This benefit was however for only those cases of restructuring that took place before 31 March 2015 and stood unnecessarily thereafter. The RBI has now omitted the said paragraph from the framework.
 
2. Additional conditions for restructuring
Paragraph 8 of the CDR framework provided for addition conditions for restructuring, the amendments includes a few insertions in the conditions for restructuring and they are –
 
i. Time limit for implementation - All restructuring packages will now have to be implemented in a time bound manner. For CDR, joint lenders’ forum (JLF), consortium or multiple banking arrangements (MBA) - within 90 days from the date of approval, for other cases 120 days from the date of receipt of application.
 
ii. Additional contribution by promoters - Promoters to bring in additional funds upfront, which should not be less than the higher of - 20% of NBFCs' sacrifice or 2% of restructured debt. The additional funding need not be only in form of cash but unsecured loans will also do.
 
iii. Others - 
 
a. NBFCs should determine a reasonable time period during which the account is likely to become viable, based on the cash flow and the Techno Economic Viability (TEV) study;
 
b. NBFCs should be satisfied that the post restructuring repayment period is reasonable and commensurate with the estimated cash flows and required DSCR in the account as per their own Board approved policy.
 
c. Due diligence done by NBFCs in assessing the TEV and the viability of the assumptions underlying the restructured repayment terms should be clearly documented.
 
3. Restructuring of cases involving fraud/ malfeasance
Earlier, the CDR framework did not allow restructuring of cases involving fraud or malfeasance, but now the amendments provide for a curve out where cases involving fraud/ malfeasance can also be considered for restructuring provided that existing promoters are replaced by new promoters. Further, where the promoters are changed in accordance with the provisions of Prudential Norms on Change in Ownership of Borrowing Entities (Outside Strategic Debt Restructuring Scheme), the account shall be eligible for the asset classification benefits under the said Prudential Norms.
 
(Abhirup Ghosh is Senior Manager at Vinod Kothari Consultants P Ltd)
 

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USD1 tn extra GDP by 2020 - If all Indians get online
Four of five Indians could afford the internet if data costs fell by 66%, according to a Facebook-commissioned report on Internet access. But Indian telecom operators already run data services at a 11% loss, making cost-cutting difficult.
 
The statistics mean that a data plan currently priced at Rs.100 should not cost more than Rs.34 if India has to make the internet affordable for 80 percent of its population.
 
But the adverse economics imply this cannot happen without intervention from the government - whose Rs.20,000 crore ($2.9 billion) plan to connect each of India’s 250,000 panchayats with broadband by 2018 is three years behind schedule.
 
The internet reached 29% of Indians - 354 million users - in September 2015, IndiaSpend reported. It could rise to 39 percent, or 462 million users, by June 2016.
 
But if it were to reach 100 percent, India’s GDP could be increased by an extra $1 trillion by 2020, according to the Facebook-commissioned report, published this month. To put this in perspective, India’s GDP crossed the $2 trillion mark for the first time in 2014, according to World Bank data.
 
To optimise data costs, the report considered 500 MB data plans, classifying them “affordable” if each cost less than five percent of a person’s monthly income.
 
The report, titled “Connecting the world: Ten mechanisms for global inclusion”, is based on a study done by PricewaterhouseCoopers for Facebook.
 
Internet access drives up GDP
 
The Facebook report said that global GDP could grow by an additional $6.7 trillion by 2020, if the internet reaches every human being. If that happens, the GDP of China and India could reach $2.089 trillion - nearly a third of the hypothetical world output.
 
Also, universal internet access can bring half a billion people worldwide out of poverty, according to the report.
 
High data costs in developing countries
 
However, data costs in India, as in several other developing countries, are a major barrier.
 
While 92% people in South Asia live in range of a 2G network, no more than 17% can afford a 500 MB monthly data plan. Two other regions - sub-Saharan Africa (11%) and Middle East and North Africa (17 percent) - are comparable to South Asia. In contrast, 94% of North Americans can afford such a data plan.
 
“Prices need to drop by close to 70% of today’s average retail price for 80% of the world’s population,” said the report. In Ethiopia, a 500 MB data plan currently costs 50 times what it should for “widespread” internet affordability. (“Widespread” is defined as reaching 80% of citizens.)
 
As it stands currently, only two percent Indians can afford to watch a five-minute standard definition video daily. If you add a two-minute HD video as well, less than one percent can afford it.
 
The report said that in India, “internet usage is growing but many are disengaged and many more remain unconnected”. According to a February survey by the Pew Research Centre, 22% respondents in India said they use the internet “at least occasionally” or have a smartphone.
 
But are lower costs possible?
 
The report cited a JP Morgan analysis to show that Indian data operators make a negative margin of 11% from data sales. Giving examples of other developing countries with negative margins, the report said: “Operators in most of these markets already charge very low prices and have negative margins on data, which makes it difficult for them to cut prices further."
 
Indonesia's negative margin is 197%; in comparison, profit margins in Japan are 46%.
 
In India, nearly 70% of connections are on 2G networks, but these data services are no longer profitable for telecom operators. Bharti Airtel, for instance, needs more than 1,000 rural users per site per month to ensure its 2G data services break even. Providing voice services over 2G is more profitable - the company would need no more than 480 subscribers per site per month to break even.
 
Drawing connections with Zuckerberg’s Internet.org agenda?
 
The study done for Facebook advocates internet access in developing countries, which may be seen as connected to the social media giant’s controversial Internet.org project. The Guardian observed: “The focus on cost reductions (in the report) marries with Facebook’s own Internet.org project, which is aimed at partnering carriers in developing nations to give low-cost internet access.”
 
Internet.org had come under criticism from net neutrality advocates around the world. In India, its platform Free Basics was blocked by the Telecom Regulatory Authority of India (TRAI) in February this year. Founder Mark Zuckerberg had then written: “Connecting India is an important goal we won’t give up on, because more than a billion people in India don’t have access to the internet."
 
According to the study, which echoed Zuckerberg's thoughts, 56% of the world is still not online. Bringing them online would "create millions of new jobs, develop vast new markets, and lift millions out of poverty."
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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