IL&FS expects to address debt of over Rs50,000 crore in FY21
IL&FS Board is hopeful that it will be able to address the targetted debt of over Rs 50,000 crore in the current financial year despite the impact of the pandemic.
 
It is hopeful of achieving the targeted debt resolution of over 50 per cent of the overall debt.
 
In a statement on Saturday, IL&FS said that the aggregate value of debt being addressed is pegged at Rs 56,300 crore, with over Rs 50,000 crore likely to be addressed by March 2021.
 
In July, the company had said it expects to address debt of about Rs 57,240 crore, with around Rs 50,500 crore likely to be addressed by March 2021.
 
The overall debt of the group stood at over Rs 99,000 crore as of October 2018.
 
As per the last update shared in July 2020, the overall debt addressed based on cash balances stood at Rs 17,640 crore.
 
By September 2020, an additional debt of approx. Rs 1,460 crore has been addressed, by way of sale of Education business, recovery from non-IL&FS group entities, increase in cash balances and debt repayment in Green entities, increasing the overall debt addressed based on cash balances to Rs 19,100 crore, it said.
 
The number of entities resolved as of September 2020 stands at 173, half the original number of 347 entities of the IL&FS Group.
 
Elsamex S.A., an IL&FS Group company with 100 step down subsidiaries, was admitted into insolvency during the September 2020 quarter, thus contributing to the substantial reduction in the number of entities of the IL&FS Group.
 
As compared to the previous update, the Rs 7,300 crore shortfall in target for debt addressed by September 2020 is being rolled over for achievement in subsequent quarters, the company said.
 
"The delay has been mainly caused on account of significant impact of Covid-19, which has added time and logistical complexities in the process of completing discussions with stakeholders and in obtaining approvals from lenders, regulators and judicial authorities," it said.
 
As per the revised estimates, Rs 13,200 crore of additional debt is projected to be addressed by December 2020. This includes Rs 8,150 crore resolved through the proposed InvIT for which an 'in-principle' approval from SEBI has been received.
 
Further, resolution of Rs 4,200 crore being achieved through debt restructuring has moved from September 2020 to December 2020. Resolution for Rs 10,000 crore, earlier communicated for achievement in Q3 FY21, is being moved to be achieved in subsequent periods.
 
The New Board of IL&FS has developed a unique "Group resolution framework" that received approval from NCLAT on March 12, 2020. The framework has the potential to form a benchmark for future group insolvencies in the country.
 
The IL&FS New Board has been following a three-pronged strategy -- Resolve, Restructure and Recover -- while adopting an approach of equitable distribution and balancing interests of stakeholders across the IL&FS Group under the IBC and Corporate Finance principles, to resolve the debt of the Group, the statement 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.
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    Electric Vehicle Penetration in India Could Be Delayed; PVs To Be Worst Affected: Report
    The coronavirus (COVID-19) pandemic has delayed penetration of electric vehicles (EVs) in the Indian automobile industry. While low affordability and the government’s priorities on reviving the otherwise suffering auto industry could shift the focus away from EVs in the interim, passenger vehicles (PVs) would face a double whammy as consumers would be wary of buying a costlier EV than an internal combustion engine (ICE) vehicle while original equipment manufacturers (OEMs) would refrain from incurring high capex, says a research note.
     
    In the report, India Ratings and Research (Ind-Ra) says, "Though the EV penetration is likely to be faster in scooters, buses and three wheelers (3W) in the medium term (defined as three to five years), PVs may take longer. We also believe that underlying challenges in the adoption of EVs such as higher battery cost and reliance on imports would prevail in the medium term, and robust government policies would remain key for the development of EVs in the country." 
     
    The agency feels that growth in buses may take a back seat as orders for city buses are largely from state transport undertakings, and state governments are already grappling with a falling GDP (gross domestic product). It says, two wheelers (2W), especially scooters, could see an upside due to the lower pricing delta between an EV and ICE and several models available to consumers. 
     
    According to Ind-Ra, reduced affordability and lower economic activities due to the pandemic could result in the automobile industry recording a decline in sales of over 20% year-on-year (y-o-y) for the second consecutive year in FY20-21. 
     
    "This is likely to impact the sales of EVs which are costlier than an ICE vehicle. Two-wheelers have benefitted from rural demand and shift to personal mobility, and the segment could be the least impacted with regard to electrification due to better pricing and model choices. However, 3W and buses, which have seen higher electrification in 2019, are among the most affected segments in FY20-21 and hence could see a delay in electrification," it added.
     
    Ind-Ra says it believes electrification to be faster in scooters and 3W as the economic viability of an EV is comparable to an ICE vehicle as well as easier home charging options. Scooters are also used as dual vehicles in many households, increasing the inclination for an EV. 
     
    However, it says, electrification is likely to remain low in PVs in the medium term due to the higher cost of an EV model than an ICE model. "While the on-road price of an Ather 450 is around 33% higher than Honda Activa’s, the running cost per kilometre of an EV is fairly lower at 20%-25% than that of an ICE, thus making economic sense for a consumer.
     
    The on-road price of a Hyundai Kona Electric is more than double the cost of a Hyundai Creta, making it fairly expensive for the consumer. Also, the inter-city usage of a PV necessitates a sound charging infrastructure across cities," the ratings agency added.
     
     
    Ind-Ra says, electrification is likely to be highest in buses, due to the highest incentives (41%) being allocated under faster adoption & manufacturing of electric vehicles (FAME) -II scheme as well as the initiatives taken by state governments to electrify bus fleet amid increasing pollution. Moreover, as scooters, 3W and buses are used for intra-city transportation, where the distance covered is shorter, makes charging infrastructure easier to develop and thus makes it more viable for daily usage.
     
    Ind-Ra also expects earlier electrification of commercial fleets of home-based delivery apps (such as Swiggy and Zomato) in 2W and Ola and Uber for PVs, than vehicles for personal use, due to the longer distance travelled on a daily basis making it economically feasible.
     
    However, it says as consumers are shifting away from shared mobility, EV penetration in PVs could face a setback, while increased e-commerce should also help electrification in 3W goods carriers and light commercial vehicles (CVs).
     
    Though most Indian OEMs have a robust balance-sheet, according to the report, past two years of slowdown has forced them to reduce capex requirements (8%-9% of over FY14-15-FY19-20 revenue). 
     
    Historically, OEMs have been incurring higher capex to meet the regulatory requirements including BS-VI (Bharat stage-VI), as well as on new product launches to retain their market share. Amid the current slowdown, OEMs are unlikely to incur aggressive capex over the electric platform.
     
    Ind-Ra says, "Segment-wise, PVs and CVs have seen e-vehicle launches by conventional OEMs; and hence are unlikely to see material progress in FY20-21-FY21-22. In 2W, 3W and buses, newer and smaller players such as Ampere Vehicles Pvt Ltd, Okinawa Autotech Pvt Ltd, Ather Energy Pvt Ltd, Olectra Greentech Ltd, JBM Solaris Electric Vehicles Pvt Ltd have emerged while conventional players are now catching up." 
     
    "Bajaj Auto Ltd and TVS Motors Ltd have just launched their e-2W, while e-3W is yet to be launched over FY20-21-FY21-22. Hero MotoCorp Ltd has acquired a stake of 35% in Ather Energy. We believe that larger OEMs would not incur material capex unless a detailed expansion strategy is laid down by the government. Both OEMs and auto ancillaries would continue to make investment in these small entities or collaborate with a foreign partner," the report says.
     
    According to Ind-Ra, battery remains the most critical component of an EV due to both cost viability (30%-40% of EV cost is of battery) and technological expertise. The battery prices have dropped by around 85% over FY09-10-FY19-20 globally and are likely to decline further with better economies of scale. 
     
    However, prices for Indian markets are higher than global average due to lower volumes. Moreover, in India, the concentration is largely towards small batteries (1-30kWh), while the global average is 60kWh; smaller batteries have a higher per kWh price, it added.
     
     
    The Indian e-PV market is largely dominated by Tata Motors Ltd and Mahindra & Mahindra Ltd, catering to the demand generated under Energy Efficiency Services Ltd. In FY19-20, OEMs such as Hyundai Motor India Ltd and MG Motor India Pvt Ltd have entered Indian market with their EV models. Tesla Inc, the largest EV OEM globally, has announced to enter into the Indian market by FY21-22. With large EV OEMs entering into India, battery pricing should reduce due to their ability to source batteries at competitive rates, the ratings agency added. 
     
    EV components are largely imported except body or chassis. The Indian government has laid out a phased manufacturing programme to promote localisation of EV components. Amid COVID-19, the government has extended the deadline for local manufacturing, to be eligible for incentives under FAME-II scheme, for auto parts such as electronic throttles, motors and compressors to 1 April 2021 from the earlier deadlines ranging between April to October 2020.
     
    However, the ratings agency says, India lacks meaningful resources of lithium and cobalt, which are the key raw materials for a lithium ion battery.
     
    Moreover, significant capital expenditure is required to establish battery manufacturing facilities, undertake research and development and develop required expertise, which is difficult in the current scenario and can only be justified with a larger scale, it added. 
     
    Ind-Ra says it expects that it would be limited to assembling of battery packs in the near to medium term while manufacturing of batteries may take longer.
     
    The other components of EVs could be localised in India as the overall volumes go up. Indian auto ancillaries have made several tie-ups to enter into the EV space. While some of these are also supplying to global EV OEMs, the overall number is fairly small.
     
    Since most of the components for an EV are imported from China, Ind-Ra says supply side risks is high, given the current geopolitical tensions with China.
     
     
    The Indian government has laid out an Rs100 billion outlay over FY19-20-FY21-22 for faster EV adoption under the FAME - II policy. This includes direct subsidies (86% of the total amount) as well as development of charging infrastructure. Additionally, Goods and Services Tax on an EV is 5% compared to 28% for an ICE. 
     
    The government also offers an income tax deduction of Rs150,000 on the interest paid on the purchase of an EV. Certain states in India (such as Delhi) are providing additional incentives. The aforesaid incentives are important to provide the required push to boost EV sales.
     
     
    However, Ind-Ra says, capping of subsidies at a specific vehicle price, which is Rs1.5 million for an e-PV, limits the scope EVs in the premium car segment. "In case of e-2Ws, the FAME-II scheme has a stricter requirement for speed, range and energy, which excludes majority of the models present in the Indian markets. Moreover, the majority of e-2W and 2-3W run on lead acid battery while the subsidies are limited to EVs using lithium ion battery.
     
    Though e-2Ws are gradually transitioning to lithium ion batteries, e-3Ws may take longer due to cost viability," it added.
     
    Ind-Ra says it believes that robust government support is imperative, as could be seen globally, for achieving the target of 30% electrification by 2030. For example, China (over 50% of the global electric fleet) witnessed a subsidy program of over $60 billion during 2009-2019. 
     
    "The Indian subsidy programme of Rs100 billion (equivalent to $1.4 billion) is much smaller than China’s. Moreover, the incentives are capped at 20% of the vehicle cost in India compared to 30%-50% in the initial years in China, and 35% in UK. Thus, it becomes essential for the government to lay down more comprehensive policies, enhance incentives and ensure robust implementation of existing policies to increase EV adoption," the ratings agency says.
     
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    COMMENTS

    veereshmalik

    1 month ago

    One big reason for delay in EV penetration will be the way the subsidy reaches the buyer - amongst other things, it seems you need certification by the local MLA!!

    "when documents are processed by dealers, verification by local MLAs and when the subsidy amount is sent to the bank concerned"

    Why does the local MLA come into the picture for a subsidy???

    https://www.hindustantimes.com/cities/delhi-govt-launches-web-portal-for-e-vehicle-subsidy/story-HBOu156IPTlTYhaxnSS6KJ.html

    Power PPAs Cannot Be Terminated during Insolvency Process: NCLAT
    In a breather for bankrupt power generation companies (gencos), an insolvency tribunal has ruled that going concern status of such companies have to be maintained during the entire resolution process.
     
    The National Company Law Appellate Tribunal (NCLAT) has ruled that power distribution companies or discoms cannot terminate their power purchase agreement (PPA) with insolvent gencos during the entire corporate insolvency resolution process(CIRP).
     
    Upholding an order passed by the Hyderabad bench of the National Company Law Tribunal (NCLT), the NCLAT said that asset classification of a power project includes the generation plant and its PPA and it should be looked together and not in isolation.
     
    So, the moratorium rules under Insolvency and Bankruptcy Code (IBC), where all debt resolution action is suspended during CIRP, would apply to power project as well including the PPA contracts it signed with beneficiaries.
     
    "This asset (PPA) needs to be kept intact and preserved during the process of corporate resolution and liquidation so that the liabilities of creditors and other stakeholders can be taken care of," a two-member bench of the NCLAT led by Justice Jarat Kumar Jain said in their judgment on 20th October.
     
    The ruling came in the CIRP process of Lanco Infratech that is facing liquidation having failed to clear clear dues to creditors including Rs 63crore provided by Yes Bank.
     
    The insolvent entity had signed a PPA with Gujarat Urja Vikas Nigam Limited (GUVNL) in April 2010 for selling power generated from its 5 (mega-watt) solar plant located in the state. But the company was taken insolvency due to default in payment to Yes Bank. While the CIRP process was on, GUVNL moved to terminate the PPA which was objected by Yes Bank as it would have eroded the value of Lanco project even under liquidation.
     
    The NCLAT order will come to the rescue of several power projects that are under different stages of insolvency. Close to 15 coal-fired projects with about 12,000MW capacity are facing insolvency. Several of these projects have PPA with beneficiaries, while other have limited capacity PPAs.
     
    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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