Few Corporate Takers for One Time Debt Restructuring amidst COVID: Report
There are few takers for the One Time Debt Restructuring (OTDR) Scheme announced by the Reserve Bank of India (RBI) in August 2020 for corporate borrowers having an aggregate exposure of greater than Rs25 crore and were under stress due to the coronavirus (COVID-19) pandemic, says a report from ratings agency CRISIL. 
 
"As many as 99% of companies, excluding micro, medium and small enterprises (MSMEs) rated by CRISIL are unlikely to opt for the RBI's OTDR, a preliminary analysis of 3,523 such non-MSME companies indicates. But of the CRISIL sample, only about 1% indicated that they would apply for OTDR. This is despite two-thirds of the rated entities being eligible based on the parameters proposed by the KV Kamath Committee set up by the RBI," the ratings agency says. 
 
According to Subodh Rai, senior director of CRISIL Ratings, improving business sentiment on account of increased economic activity over the past couple of months and expectation of a sharp recovery next fiscal are persuading borrowers to skip OTDR. Another deterrent, he says, is the impact on the borrower's long-term credit history - accounts of those opting for OTDR would be classified as restructured advances by lenders, which could impact their ability to raise debt in future. 
 
Additionally, for about 44% of CRISIL-rated corporates, more than three-fourth of their debt comprises short-term working capital facilities (see chart below). In these cases, availing of OTDR would have negligible benefits, as the resolution plans under this scheme are focused on deferring principal repayment of long-term debt, the ratings agency says.
 
 
CRISIL says, instead of opting for debt recast, such borrowers may prefer to seek additional working capital financing as announced by the RBI under its OVID-19 regulatory package. 
 
Early into the lock-down, 968 companies, or about 27% of the CRISIL sample set, had opted for the moratorium allowed by RBI. As much as 98% of these are not seeking an OTDR for reasons mentioned earlier.
 
 
Sameer Charania, director of CRISIL Ratings says, “The recently announced emergency credit line guarantee scheme (ECLGS) for the health care sector and 26 other stressed sectors, which allows companies to borrow up to 20% of their outstanding dues, will further dissuade borrowers—especially those facing temporary liquidity issues—from opting for debt recast. However, companies that belong to highly impacted sectors such as hotels, retail, real estate, and textiles would still prefer OTDR given their longer business-recovery timelines.”
 
That said, the ratings agency says, these are early days and greater clarity will emerge as we move closer to the regulatory deadline of 31 December 2020, set by RBI for invoking debt restructuring plans. "The number of companies seeking OTDR may increase if sentiment around recovery dampens or Covid-19 afflictions keep increasing, leading to fresh curbs on economic activity," CRISIL added.
  • Like this story? Get our top stories by email.

    User 

    Chinese Huawei sells Honor smartphone business to 'ensure its own survival'
    Struggling to keep its consumer business afloat in the wake of the US sanctions, Chinese conglomerate Huawei on Tuesday announced to sell off its Honor smartphone business assets to China-based Shenzhen Zhixin New Information Technology Co Ltd.
     
    The company said that the sale -- which could be around $15 billion according to multiple reports -- will help Honor's channel sellers and suppliers make it through this difficult time.
     
    Honor smartphones have been hit by US sanctions that prevent Huawei from doing business with the US companies.
     
    "Once the sale is complete, Huawei will not hold any shares or be involved in any business management or decision-making activities in the new Honor company," the company said in a statement.
     
    "Huawei's consumer business has been under tremendous pressure as of late. This has been due to a persistent unavailability of technical elements needed for our mobile phone business," it added.
     
    Huawei said the move has been made by Honor's industry chain to "ensure its own survival".
     
    Over 30 agents and dealers of the Honor brand first proposed this acquisition.
     
    Since its creation in 2013, the Honor brand has focused on the youth market by offering phones in the low- to mid-end price range.
     
    "During these past seven years, Honor has developed into a smartphone brand that ships over 70 million units annually," Huawei said.
     
    In India, Honor recently entered the laptop market and also expanded its wearables portfolio in the country.
     
    According to the Charles Peng, President, Honor India, the company's entry into the India laptop market in August this year has also turned out to be a success.
     
    Launched at Rs 42,990, the company's introductory laptop, Honor MagicBook 15, comes with 8GB RAM, 256GB SSD, a hidden pop-up webcam, 2-in-1 fingerprint power button and a compact 65W fast charger.
     
    "It was sold out within seconds as soon as it went online. Further, we have received encouraging and positive feedback from our consumers who wish to own a PC that fulfills their requirements as well as suits their personality with a premium product at a competitive price," Peng told IANS last month.
     
    "On future prospects, we are confident about our performance in India. We aim to create an intelligent new world for individuals by developing a smart living ecosystem having a diverse product portfolio including smart band, smartwatch, smart audio, laptops, and smartphones," he said.
     
    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.
  • Like this story? Get our top stories by email.

    User 

    COMMENTS

    s5rwav

    2 weeks ago

    On Cyber Security Concern, USA Rightly Banned Huawei Products and it is High Time India also Ban its Prodcts. I am Babubhai Vaghela from Ahmedabad. Thanks.

    BPCL Stake Sale: Several EoIs Received, Giants RIL, Aramco, BP Not in Race
    The much-anticipated privatisation process of the Bharat Petroleum Corporation Ltd (BPCL) completed its first phase on Monday with several suitors submitting 'Expressions of Interest' (EoIs). However, sources said that major energy giants including Reliance Industries Ltd (RIL), Saudi Aramco and UK's BP have not placed bids for the State-run oil major.
     
    The transaction will move to the second stage after scrutiny by the transaction adviser, said a tweet from the Twitter handle of the secretary of the department of investment and public asset management (DIPAM).
     
    "For strategic disinvestment of BPCL, multiple expressions of interest have been received by the Transaction Advisor. The Transaction will move to the second stage after scrutiny by TA," it said.
     
    Finance Minister (FM) Nirmala Sitharaman also said that the BPCL disinvestment process is making progress.
     
    "Strategic disinvestment of BPCL progresses: Now moves to the second stage after multiple expressions of interest have been received," she said in a tweet.
     
    Sources said that three-four bids have come in for the oil giant.
     
    The deadline for submitting the EoIs for privatisation of BPCL closed on Monday and there has so far been a buzz of mixed interest amongst the bidders.
     
    Other global giants such as Total and Russia's Rosneft also have not pitched in the strategic sale of BPCL.
     
    RIL and Abu Dhabi National Oil Company (ADNOC) were expected to submit their bids. While RIL has not put in a bid as per sources, it could not be ascertained whether ADNOC has gone ahead with a bid.
     
    ADNOC already has footprint in India as it is the only overseas company that has crude stored in Indian caverns.
     
    The lack of interest among major players comes on the back of the poor oil demand globally amid the pandemic and low oil prices.
     
    The EoIs came on Monday after four extensions of the deadline for submission of bids.
     
    The Centre has put its entre 52.98% stake in the BPCL on the block.
     
    It proposes to disinvest its entire shareholding in the BPCL comprising 1,14,91,83,592 equity shares held through the ministry of petroleum and natural gas, which constitutes 52.98% of BPCL's equity share capital, along with the transfer of management control to the strategic buyer (except BPCL's equity shareholding of 61.65% in Numaligarh Refinery Limited - NRL - and management control thereon).
     
    The shareholding of the BPCL in the NRL will be transferred to a Central public sector enterprise operating in the oil & gas sector under the ministry and, accordingly, is not a part of the proposed transaction.
     
    The government's stake in BPCL is worth around Rs47,000 crore at BPCL's current share price.
     
    According to an earlier research note by Emkay Global, according to DIPAM's response to PIM queries, interested parties may include global players with limited knowledge on Indian corporate/PSU (public sector undertaking)/accounting/takeover rules as well as parties seeking higher level of clarifications.
     
    "The progress on BPCL's sale is positive for OMCs in terms of deepening deregulation and profitability outlook. Given the tight fiscal situation, disinvestment would be of utmost importance to the government this year," the report said.
     
    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.
  • Like this story? Get our top stories by email.

    User 

    COMMENTS

    s5rwav

    2 weeks ago

    #ROCMumbai: Was #BPCLAGM2020 Really Conducted? If Conducted, Where is the Documentary Evidence of it? How Many Investors of BPCL Asked Questions? Who were the Investors who Asked Questions? Were the Questions Asked by the Investors Replied? Where are the Replies? I am Babubhai Vaghela from Ahmedabad on Whatsapp Number 9409475783. Thanks.

    Muztir6

    2 weeks ago

    Wish your company may flourish day and night than before,yes I too am interested to bye a smart phone of your company,and will purchase one at appropriate time,wish you good luck and success always.

    We are listening!

    Solve the equation and enter in the Captcha field.
      Loading...
    Close

    To continue


    Please
    Sign Up or Sign In
    with

    Email
    Close

    To continue


    Please
    Sign Up or Sign In
    with

    Email

    BUY NOW

    online financial advisory
    Pathbreakers
    Pathbreakers 1 & Pathbreakers 2 contain deep insights, unknown facts and captivating events in the life of 51 top achievers, in their own words.
    online financia advisory
    The Scam
    24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
    Moneylife Online Magazine
    Fiercely independent and pro-consumer information on personal finance
    financial magazines online
    Stockletters in 4 Flavours
    Outstanding research that beats mutual funds year after year
    financial magazines in india
    MAS: Complete Online Financial Advisory
    (Includes Moneylife Online Magazine)
    FREE: Your Complete Family Record Book
    Keep all the Personal and Financial Details of You & Your Family. In One Place So That`s Its Easy for Anyone to Find Anytime
    We promise not to share your email id with anyone