RBI approves extension of Air India loan tenures

Under the Rs18,000 crore Corporate Debt Restructuring proposal, the lenders would extend the tenure of Rs11,000 crore short-term loans into long term loans of 15 years and convert Rs7,000 crore debt into equity

Mumbai/New Delhi: Cash-strapped Air India on Thursday got a boost with Reserve Bank of India (RBI) approving extension of its loan tenures from 10 to 15 years, reports PTI.

“Yes, RBI has cleared our loan restructuring proposal today,” an Air India official told PTI in Mumbai, but refused to elaborate.

He said RBI has approved extension of the loan tenures to 15 years from 10 years.

The decision, which would considerably ease the debt servicing burden of the troubled airline, was taken at a meeting that was attended by officials of the RBI, Air India and SBI Caps which has submitted the debt restructuring proposal.

When contacted, RBI spokesperson confirmed the meeting but refused to elaborate any further.

Under the Rs18,000 crore Corporate Debt Restructuring (CDR) proposal, the lenders would extend the tenure of Rs11,000 crore short-term loans into long term loans of 15 years and convert Rs7,000 crore debt into equity.

In Delhi, official sources said discussions with RBI were being carried out on various issues including on Air India’s balance sheet, financial position and future projects.

The beleaguered national carrier has accumulated debt of over Rs64,000 crore from 14 lenders which, under the aegis of SBI Caps, had submitted a restructuring proposal to RBI seeking its permission to extend the loan tenures, among other issues.

Out of this, over Rs22,000 crore are accumulated losses while Rs40,000 crore amounted to the loans taken for aircraft acquisition.

A Group of Ministers (GoM) had recently asked AI to get the debt recast proposal cleared by RBI within this month itself.

“We will go to RBI in a week to get their views on financial restructuring, after which there will be another GoM meet. Thereafter, the Cabinet will decide the matter of equity infusion of Rs6,600 crore,” civil aviation minister Vayalar Ravi had said after the 28th October meeting.


Cabinet clears FDI in multi-brand retail

Thursday’s decision was interpreted as a major signal from the government of its intention to go ahead with key reforms negating an image of policy paralysis

New Delhi: In a major decision, the government on Thursday approved 51% foreign direct investment (FDI) in multi-brand retail paving the way for global giants like Wal-Mart to open mega stores in cities with population of over one million, reports PTI.

The nod from the Cabinet came in spite of opposition from key ally Trinamool Congress (TC) at a meeting chaired by prime minister Manmohan Singh, who was strongly in favour of the move.

Railway minister Dinesh Trivedi (TC) registered his opposition and was told by commerce and industry minister Anand Sharma that he has discussed the issue with his party chief and eastern state West Bengal chief minister Mamata Banerjee.

Sources said that finance minister Pranab Mukherjee supported the proposal saying it would strengthen the rural infrastructure.

Thursday’s decision was interpreted as a major signal from the government of its intention to go ahead with key reforms negating an image of policy paralysis.

The decision will be a game-changer for the estimated $590 billion (Rs29.50 lakh crore) retail market dominated by neighbourhood stores.

Industry, domestic and global players, welcomed the government decision.

The Cabinet also decided to remove the 51% cap on FDI in single brand format under which companies in food, lifestyle and sports business run stores, sources said.

Owners of brands like Adidas, Gucci, Hermes, LVMH and Costa Coffee can have full ownership of business in India.

In the wake of apprehensions that the decision would impact farmers and kirana shops, tough riders have been imposed on the entry of multi-national companies in 53 cities with population of over one million.

The big retailers would bring in minimum investment of $100 million, of which half should be in the back-end infrastructure like cold chains, processing and packaging.

These players would have to source at least 30% of manufactured and processed products from small-scale units.

Battling near double digit inflation, government has been trying to build a consensus on the issue for the last 17 months, contending the entry of multi-national companies (MNCs) in retail would contain inflation.

Considering space constraint in big cities, stores can come up within 10 km of 53 cities with one million population.

Hailing the move, India Inc said the move would help bring in the much needed capital for the sector.

“It is a win-win situation for everyone. With the amount of money to be invested in back-end, supply chain and farm sector will benefit,” Future Group chief executive officer Kishore Biyani said.

Industry body Confederation of Indian Industry (CII) said it strongly supports the introduction of FDI in multi-brand retail as it would benefit consumers, producers (farmers), small and medium enterprises and generate significant employment.

“This would open up enormous opportunities in India for expansion of organised retail and allow substantial investment in the back-end infrastructure like cold chains, warehousing, logistics and expansion of contract farming,” CII president B Muthuraman said in a statement.

While welcoming the government’s decision, industry chamber FICCI president Harsh Mariwala said this is just the first step.

“Seeds have been sown but the fruits will be seen only if other policy initiatives are implemented immediately like adoption of Model APMC Act by all the states, and timely implementation of GST, etc,” he added.

Asked if the decision will affect existing partnerships between Indian and foreign retailers, Reliance Retail Lifestyle president Bijou Kurien said: “As far as Reliance’s existing partnerships are concerned with international brands (in the single brand space), there will be no change.

“And in case of multi-brand, we have learnt a lot in the last five years and are very confident of continuing on our own without partnering with a foreign player.”

Wal-Mart, which has a partnership with Bharti Enterprises for wholesale cash and carry, said it will have to study the policy changes in details.

“We will need to study the conditions and the finer details of the new policy and the impact that it will have on our ability to do business in India,” Wal-Mart India president Raj Jain said.

The decision will positively impact the Indian market and its people and will also contribute toward India’s image as a one of the world’s fastest growing economies and a welcoming destination for international businesses, he added.

Benetton India MD Sanjeev Mohanty said: “We are operating over 425 franchise outlets here and will continue to expand in the same way irrespective of regulatory framework and the amount of FDI allowed in single brand.”

Confederation of All India Traders (CAIT), however, criticised the move terming it as ‘unfortunate’ and will prove to be much detrimental to Indian economy and trade.

“The decision smacks of the unflinching love of the government towards the domestic corporates and MNCs. It can be termed as a bailout package for the domestic corporate houses,” CAIT secretary general Praveen Khandelwal said.

Retailers Association of India CEO Kumar Rajagopalan, however, welcomed it saying:”The decision has come at a time when the consumers are feeling the pinch of inflation and retailers are looking for funds for expansion.”

There are a host of global brands, including Adidas, Reebok, Gucci, LVMH, Hermes, Zara, Mango, Jimmy Choo, Salvatore Ferragamo, Jimmy Choo, Hamleys (toys), Marks & Spencer, OVS and Benetton, in India.

According to FICCI estimates, the Indian retail market is estimated to be around $600 billion, with the organised sector accounting for about 5%.


SEBI fixes Rs5 crore floor for anchor investors in public issues

The SEBI board today mandated listed entities to submit business responsibility reports (BRRs), as a part of their annual reports. It has also decided to specify a maximum tenure of 12 months for warrants issued along with public/rights issue of securities to avoid the possible misuse

Looking to further deepen the primary market, regulator Securities and Exchange Board of India (SEBI) today fixed the floor for allotment of equity shares to anchor investors under public issues at Rs5 crore.

The SEBI board of directors, which met in Mumbai today, also fixed a maximum tenure of 12 months for warrants that are issued alongside a public or rights issue of securities to avoid possible misuse.

“To make the concept (of anchor investor) more effective, it has been decided to prescribe a minimum allotment size of Rs5 crore and maximum number of anchor investors, slab-wise,” SEBI said in a statement after the board meeting.

Anchor investors buy shares of a company before the launch of a public issue. The concept of anchor investors (AIs) was introduced by SEBI in June 2009, as a class of committed investors who can be relied upon to anchor an issue of capital in all market conditions, adverse or otherwise, it said.

“It has been decided to specify a maximum tenure of 12 months for warrants issued along with public/rights issue of securities to avoid possible misuse. The issuer would also be required to provide disclosures about utilisation of funds so raised, both in the offer document, as well as on a continuous basis,” SEBI said.

Presently, regulations are silent on the tenure of warrants offered alongside public and rights issues.

The market regulator has said that listed entities have to submit ‘Business Responsibility Reports’ as part of their annual reports, describing measures taken by them along the key principles envisaged in the ‘National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business’ framed by the ministry of corporate affairs.

This has been done in order to assess the fulfilment of the environmental, social and governance responsibilities of listed entities.

“To begin with, the requirement will be applicable to the top 100 companies in terms of market capitalisation and would be extended to other companies in a phased manner,” the statement said.

The regulator has also decided to have a separate set of disclosure norms for funds.

“Considering the constraints in disclosure by investee companies regarding funds (such as venture capital funds, etc), which are shown as one of the promoters of such investee companies, it has been decided to specify a separate set of disclosures for them,” it said.

The board meeting also approved amendment to its rules to increase the net worth requirement of Debenture Trustees to Rs2 crore from Rs1 crore earlier.


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