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RCap insolvency: Will creditors lose out in the resolution?


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Reliance Capital’s resolution has received tepid response as only four firms have made financial bids for the entire company, including its subsidiaries, under the insolvency process. IndusInd, Torrent, Oaktree Capital Management, and B-Right Realestate have submitted bids in the range of just Rs 4,000 crore. When the resolution process began, over 50 firms had submitted Expression of Interest for various assets, but only a handful of bidders were engaged. The bids have to be approved by a lender’s committee.

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Lukewarm response for RCap asset: 1) IndusInd, Torrent, Oaktree Capital Management, and B-Right Realestate placed bids


2) All bids were placed in the range of Rs 4,000 crore.

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The process for asset sale of debt-ridden Anil Ambani’s Reliance Capital had kick-started in November last year, when the Reserve Bank of India (RBI) superseded its board for payment defaults and initiated bankruptcy proceedings. Y Nageshwara Rao was appointed administrator for the corporate insolvency resolution process. After Srei Group’s shadow banking arm and DHFL, Reliance Capital is the third NBFC to go under insolvency under IBC.

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Reliance Capital has a consolidated debt of about Rs 50,000 crore. But to expedite the sale process, the lenders hived off two entities of RCap — Reliance Commercial Finance and — into a trust for a separate resolution process. It was done so that the bidders don’t deal with debt of these two entities, which is around Rs 25,000 crore.




Secured creditors have claimed Rs 22,122 crore and unsecured creditors around Rs 3,212 crore after the company was sent to insolvency. Major lenders include Life Insurance Corporation, YES Bank among others.

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Reliance Capital’s lenders had offered two options to all the bidders. Under the first option, had to bid for Reliance Capital as a whole, including its subsidiary . Under the option-2, bidders have the freedom to bid separately for individual arms of Reliance Capital. Due to a tepid response from the bidders, the lenders earlier had to extend the timeline for submission of bids and the resolution process several times. The deadline for completion of the corporate insolvency resolution process of the company is November 1, 2022.

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Reliance Capital’s eight businesses were on the block for bidding including general insurance, securities and asset reconstruction businesses. Under the second option, Reliance Capital’s general insurance received bids from Piramal Group, Zurich Insurance Group, and Advent International. While, the company’s ARC business got bids from Jindal Steel & Power and UV Asset Reconstruction Company, Choice Equity, Global Fincap, and Grand Bhawan have placed bids for other assets of Reliance Capital.

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Please include the byte: Ashvin Parekh, Managing Director, Ashvin Parekh Advisory Services LLP says, the bids for Reliance Capital assets were on the lower side. Lenders have few options left before approving the bids.

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But the poor response indicates that lenders are in for massive haircuts. It also showcases bidders’ concerns, especially over equity of Reliance General Insurance, held by IDBI Trusteeship on the behalf of Credit Suisse. IDBI Trusteeship has refused to release these shares for the ongoing NCLT led resolution process. The condition to make all-cash bids also proved a hindrance in the resolution process


Mukesh Chand, Senior Counsel, Economic Laws Practice says the committee of creditors will likely negotiate with proposed bidders. CoC will try and work out a best possible resolution plan with the bidders. If viable options don’t come out in negotiation process, big haircut is on the cards.




As the bids are placed, the ball is in the lender’s court now. They have to take a call on the value of bids and evaluate other options, including negotiating a better deal with the proposed bidders. Whatever may be the case, it is in the creditors’ best interest to complete the resolution within the stipulated time and not drag the process further

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Distress of vulnerable | The Indian Express


After contracting in 2020-21, the Indian economy rebounded sharply in 2021-22, ending the year 1.5 per cent above its pre-pandemic level. This year the Reserve Bank of India expects it to grow at 7.2 per cent, making India one of the fastest growing economies in the world during this period. But the recovery from the pandemic lows has been anything but even. Beyond the headline numbers, there are indicators of the unabated pain stemming from the pandemic and the continuing distress in parts of the economy.

One possible indication of the scale of the distress comes from data on households/individuals who have worked under MGNREGA. In 2019-20, the year prior to the pandemic, 7.88 crore individuals worked under the scheme. In 2020-21, the first year of the pandemic, this number rose to 11.19 crore. While in the subsequent year it dipped to 10.62 crore, the number of individuals working under the scheme remained considerably higher than in the pre-pandemic period. In fact, so far this year, 6.29 crore individuals have already worked under the scheme as compared to 6.21 crore in the entire year of 2014-15. This growing reliance on MGNREGA likely indicates that other more remunerative employment opportunities remain limited. Another pointer to the economic distress at the lower end of the income distribution scale comes from the National Crime Records Bureau report — there has been a rise in suicides by daily wage earners and in 2021, daily wage earners accounted for a fourth of suicides in the country. As this paper has also reported, in 2021-22 over 2.3 crore life insurance policies were surrendered way ahead of their maturity by policy holders — this was more than thrice the number of policies surrendered the previous year. Other indicators point to subdued household purchasing power. As per data from SIAM, in 2021-22, sales of two-wheelers were lower than their 2019-20 levels by almost a quarter. Similarly, as per CRISIL, sales of cars priced below Rs 10 lakh grew by a mere 7 per cent in 2021-22, while those priced above Rs 10 lakh (the premium segment) grew by 38 per cent.

The bigger picture that emerges is one of pain at the lower and middle levels of income distribution. As policymakers navigate the tumultuous global macroeconomic environment, they must be mindful of the highly uneven nature of the recovery, and take measures to address the distress of the most vulnerable.





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LIC Housing Finance, Bajaj Housing Finance hike lending rates by 0.5%



Mortgage lenders Bajaj Housing and on Monday announced a 0.50 per cent hike each in their .


The revisions come amid a rising interest rates scenario, which has seen the hiking its key lending rate by 1.40 per cent since May to tame .


Bajaj Housing hiked its rate by 0.50 per cent, and the lowest priced product for the salaried and professional applicants will be 7.70 per cent now, as per an official statement.


Despite the latest hike, the company claimed to be offering loans at competitive rates compared to most of its peers.


has increased its prime lending rate (LHPLR) by 0.50 per cent and the new interest rates on home loans will now start from 8 per cent as against 7.50 per cent previously.


The company’s chief executive and managing director Y Viswanatha Gowd said the RBI’s decision to hike the repo rate by 0.50 per cent has caused “minimum fluctuation” in monthly instalments or tenure of home loans and exuded confidence that demand for housing will remain robust.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)



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Are Indian stock markets turning domestic?



When the global headwinds became stronger and foreign investors started losing faith in Indian equity markets, it’s the domestic investors who filled the void. Their belief in India’s growth story, and in its strong economic fundamentals appeared unshakable.


A research report by Morgan Stanley says that since 2015, the holdings of foreign portfolio investors (FPI), in a sample of 75 Indian companies, have declined about 230 basis points (bps) to 24.8 per cent, while domestic mutual funds (MFs) have increased their stake by 580 bps to 9.5 per cent and individual investors by 157 bps to 9 per cent in the same period.





The selling has been brutal since October last year. During the nine-month period since October, the investors net sold equities worth Rs 2.56 trillion, owing to a series of factors including geopolitical uncertainties and tightening monetary policy across central banks. In the June month alone, FPIs pulled out over Rs 50,000 crore, making it the worst sell-off in nearly two years. However, the tide turned in July as foreign investors turned net buyers, investing Rs 5,000 crore in Indian .


But the FPIs selling in the recent past cannot be the only reason why domestic investors came out on top. Let us take a larger sample. That of 1,770 NSE-listed companies for which the shareholding patterns are available.


So, in these companies, the share of domestic institutional investors (DIIs) along with retail and high networth individual (HNI) investors in the NSE-listed companies reached an all-time high of 23.53 per cent as of June end, according to data from primeinfobase. Domestic investors include domestic institutions such as mutual funds, insurance companies and pension funds etc.


The share of mutual fund holdings in Indian companies climbed to 7.75% in FY22 from 4.99% in FY17, while that of insurance companies and institutional investor LIC has declined during the same period.


The massive inflow of retail investors into the equity via Systematic Investment Plan or SIP and other routes has also contributed to the rise of domestic investments. According to the data available, there are about 55.5 million mutual fund SIP accounts through which investors regularly invest. Since FY17, SIP contributions have nearly tripled to Rs 1.24 trillion as of FY22.


The SIPs’ assets under management (AUM) climbed to Rs 5.76 lakh crore at the end of FY22, growing over 30 per cent annually in the last five years, according to data from Association of Mutual Funds in India. Retail investors total ownership in stocks climbed to 7.42% at the end of FY22 from 6.79% in FY17.


In addition, India’s pension fund EPF investments since 2015 in equities have ensured steady inflows into the . The EPFO had invested around Rs 1.23 trillion in exchange-traded funds (ETF) as of FY21. It has also invested in a pool of public sector companies over the years.


So, will this trend sustain? And is it a good sign that markets are not too dependent on foreign investors, who were once touted to be the “price setters”? Given their growing clout, Morgan Stanley has even handed over the tag to domestic investors.


Experts say that FIIs’ shareholding in Indian companies will rise over a period of time, given their relative under-allocation to India. At the same time, domestic investors’ shareholding will continue to remain strong. And it all bodes well for the market.

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RBI dividend to Centre slashed by 70% in FY22


MUMBAI: The Reserve Bank of India board on Friday approved a dividend of Rs 30,307 crore to the government for 2021-22, marking a nearly 70% decline in the payout from last year’s Rs 99,122 crore.
The lower dividend comes on the back of a lower realisation from the disinvestment of the government’s shares in LIC. Over the last few years, the RBI’s large surplus transfers have helped the government meet its higher spending requirements. While the Centre will see an increase in expenditure commitments during the current financial year too as subsidies are projected to rise, it will have to depend on tax revenues to bridge the gap.
There have been multiple factors driving down the surplus this year. A major cost for the RBI was the interest that is paid to banks on money that they parked with it under the liquidity adjustment facility. The central bank has been paying thousands of crores to banks after impounding the surplus liquidity it had pumped into banks in the wake of the Covid pandemic.
The RBI has also taken a hit on its foreign investment as the value of debt securities fell due to the rise in interest rates. It has also had to spend over $40 billion of its reserves to stem volatility in the market and will need to set aside more money to replenish reserves.
“The board approved the transfer of Rs 30,307 crore as surplus to the central government for the accounting year 2021-22 while deciding to maintain the contingency risk buffer at 5.50%,” the RBI said in a statement.
“For the year, the government is targeting around Rs 74,000 crore as dividend from RBI, public sector banks and other financial institutions. This will mean that a large part of the profit of PSBs and FIs will have to be transferred to make good this number or else there will be a slippage,” said Madan Sabnavis, chief economist, Bank of Baroda.
Last year’s dividend of Rs 99,122 crore was higher than expected as it was for only nine months (July 2020 to March 2021). From FY21, the government had decided to align the RBI’s accounting year with the government’s financial year. Earlier, RBI had a July-June accounting year.
The RBI, in its release, said that the board also reviewed the current economic situation, global and domestic challenges and the impact of recent geopolitical developments. “The board also discussed the working of the RBI during the year April 2021-March 2022 and approved the annual report and accounts for the accounting year 2021-22,” the statement said.
Bankers do not rule out the possibility of another interim dividend. “The RBI’s earnings increase during market volatility. The dollars sold by the central bank during the current financial year, when the rupee breached 77 levels, would have earned it a large profit,” said a treasury head with a private bank.





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Amid Speculations On RBI’s Rate Hike, Money Managers Look For Safer Bets


Speculations have grown over RBI mulling hiking key rates

A hawkish pivot by the Reserve Bank of India (RBI) has money managers scurrying to find safer bets while bracing for potentially the steepest rate hikes in Asia.

The dilemma faced by Indian investors as they try to gauge the impact of the rate hike cycle isn’t different from what their global peers face while trying to predict the fallout from the most aggressive Federal Reserve tightening in decades. RBI may start raising rates as soon as next month. 

Yields have risen, and stocks pared gains since the Reserve Bank of India shifted focus to inflation from growth in April and indirectly tightened policy by introducing a higher floor interest rate. Here is how some of India’s top fund managers are positioning.

Government Over Corporate Paper

Debt managers prefer government bonds over corporate papers, as the sharp spread compression makes sovereign securities a better bet, said Lakshmi Iyer, chief investment officer (debt) at Kotak Mahindra Asset Management Company.

The yield spread between three-year government papers and similar top-rated company bonds had turned negative in April from around 87 basis points in August, according to Bloomberg data. The spread was at 31 basis points on Monday.

The lucrative spot on the steepening yield curve is the four-five year segment, said Suyash Choudhary, head of fixed-income at IDFC Asset Management Ltd. The longer-tenor papers are avoided as the bond supply premium is not fully factored in, he said. 

Add Short Carry Assets

Hoarding cash in these uncertain times will weigh on the portfolio’s overall performance. Fund managers say they’re adding short carry trades to boost overall returns without piling on risks.

Attractive carry and roll down benefits make top-rated corporate papers of less than three-year maturity a good bet, according to Murthy Nagarajan, head of fixed-income at Tata Asset Management Pvt. Carry is the difference between the yield on the bond and the cost of borrowing, with gains coming in when yields dip in line with time left to maturity.

Buy Growth and Bank Stocks

While consumption-focused stocks will do well for the time being, businesses that could benefit from an uptick in capital expenditure could do better, said Mrinal Singh, chief executive and chief investment officer at InCred Asset Management. 

Rush to Floaters 

Money managers are adding floating-rate notes because they act as a hedge in a rising rate environment with the coupon moving in line with market benchmarks. Issuers have done 28 floater deals so far this year, the most ever since 2005, Bloomberg-compiled data show.

Floaters are a good hedge in a tightening cycle, said Mahendra Jajoo, chief investment officer for fixed income at Mirae Asset Investment Managers Pvt., though he warned that the sales momentum may not continue because the instruments risk higher costs for issuers if yields increase sharply.



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Cost of war | The Indian Express


The macroeconomic environment has changed considerably from the time Finance Minister Nirmala Sitharaman presented the Union budget, and the RBI released its inflation forecast for the upcoming fiscal year. On Thursday, crude oil prices hovered around $120 a barrel for the first time in years. While prices have moderated mildly thereafter, for the Indian economy which imports around 80 per cent of its requirements, higher crude oil prices will have adverse consequences. Higher prices will impact growth, will be inflationary, and will exert upward pressure on the current account and fiscal deficit. Considering that crude oil prices are currently significantly higher than those factored in the Union budget and the RBI’s calculations, navigating this uncertain economic environment will require deft management by monetary and fiscal authorities.

Since November last year, when the price of the Indian crude oil basket stood at $80.64, oil marketing companies have refrained from revising pump prices, even though global prices have been on the rise. But, once the assembly elections are concluded, fuel prices at the pump are likely to be hiked. However, steep hikes will be needed — as per a report by ICICI securities, a Rs 12 per litre hike will be needed just to break even. This will be inflationary. Needless to say, fuel price hikes will upend the central bank’s optimistic assessment of the inflation trajectory. As per RBI’s recent assessment, inflation was expected to trend down from 5.7 per cent in the fourth quarter of 2021-22 to just under 5 per cent in the first half of 2022-23. This will complicate the choices before the monetary policy committee. Higher prices will also reduce discretionary spending by households. Governments may respond by lowering fuel taxes to absorb part of the burden. However, this will weigh down their revenues and spending. Thus, growth will thus take a hit. Higher oil prices will also push up imports, increasing the current account deficit at a time when global financial conditions are tightening. Recent data shows that the merchandise trade deficit has already widened to $21.2 billion in February, up from $17.9 billion, with much of the surge driven by oil. The rupee is already coming under pressure. This will only add to the inflationary pressures.

The indirect consequences of the deterioration in the economic environment are also beginning to show. There are reports that LIC’s initial public offering may be postponed to the next financial year due to prevailing market uncertainty. While the full effects of the oil price shock will be visible with a lag, when taken together with the third wave of the pandemic, it suggests further downside risks to economic growth in the fourth quarter, which as per the National Statistical Office’s latest estimate was already expected to slow down to 4.8 per cent from 5.4 per cent in the previous quarter.





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Rupee sinks 109 paise, worst in Asia; RBI intervenes to reduce volatility



The tumbled the most in eight months on Thursday as the dollar strengthened against major global currencies after Russia invaded Ukraine, sending crude oil prices over $100 per barrel.


Several banks started buying dollars on behalf of oil-marketing companies as Brent crude surged past the $100-mark, further weighing down the Indian currency. The fell 1.4 per cent against the greenback, or 109 paise. The currency closed the day at 75.65 to a dollar – its lowest since December 20, 2021.


“The fell sharply in Thursday’s session as tensions between Russia and Ukraine reached boiling point. Reports of Russia invading Ukraine upset the overall market sentiment and led to weakness in riskier assets as well. Safe-haven assets like gold, silver, and the Japanese yen induced buying interest,” said Gaurang Somaiya, foreign exchange (forex) and bullion analyst, Motilal Oswal Financial Services.


According to currency dealers, the rupee gained against the dollar in recent weeks due to positive sentiment as some of the initial public offerings of Indian companies, including the country’s largest insurer Life Insurance Corporation of India, were scheduled to hit the market in March.




Currency dealers said since the rupee was appreciating in recent times, a steep fall was inevitable when a risk-averse situation arises. After Thursday’s fall, the rupee is the worst-performing currency in Asia in 2022, barring the Japanese yen.


Dealers said the central bank intervened in early trades to reduce volatility rather than reverse the trend after the rupee opened weak at 75.15. The Reserve Bank of India (RBI) always maintains that it intervenes in the currency markets to reduce volatility and not to target any level.


“As soon as the rupee opened, the came in. In such instances, the usually comes in not to reverse the trend but to slow things down. There is no point working against the market forces when the forces are so strong,” said Imran Kazi, vice-president–risk advisory, Mecklai Financial Services.


“If tensions continue for some days, things could get worse for the rupee. It can breach 76 to a dollar and even reach 76.3-76.4 per dollar levels,” said Kazi, adding, “No other economic factor will now be looked at… only how the war pans out,” indicating the geopolitical situation could be the only driving force for the rupee in the near term.






“More updates on the escalation between the two nations could keep the rupee weighed down. We expect the spot dollar-rupee to trade with a positive bias and quote in the range of 75.5-76.2,” said Somaiya.


The only silver lining for the currency is if the Organization of the Petroleum Exporting Countries decides to step up oil production, bringing down crude oil prices from the present-day levels. Oil prices surged past $100 per barrel on Thursday for the first time since 2014. High oil prices weigh on domestic currency since India imports more than 80 per cent of its oil requirements.


India’s macroeconomic fundamentals are much stronger than 2013-14 when the US Federal Reserve’s taper tantrums led to a currency crisis. The current account deficit at 1.3 per cent of gross domestic product is within manageable limits. In addition, the country has around $630 billion of forex reserves that can cover at least 15 months of imports.

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Explained: Who is eligible for the LIC IPO discount?


NEW DELHI: The government-owned Life Insurance Corporation of India’s initial public offering (IPO) could be launched as early as next month. The initial public offering of over 31.6 crore shares or 5 per cent government stake would be the country’s biggest yet.
According to the LIC DRHP which was submitted to market regulator Sebi on Sunday, of the total shares offered via the IPO, up to 10% would be reserved for LIC policyholders. Further, policyholders and employees will receive a discount over the floor price, but the discount percentage is yet to be decided.
Portion reserved for retail investors:
LIC has reserved up to 35 per cent of its total IPO size for retail investors as per the draft papers, which means one could see the opening of several demat accounts as the government is expecting a lot of retail participation for the IPO.
Portion reserved for Staff, Policyholders
The draft prospectus specifies the portion reserved for employees will not exceed 5 per cent of post-offer equity share capital and may be offered at a discount. The portion reserved for policyholders will not exceed 10 per cent of the size and may also be offered at a discount. The intention behind the discounts is to encourage participation of the common man.
Portion Reserved for Anchor Investors, QIB, NII
The company will reserve 50 per cent of LIC IPO for For the Qualified Institutional Buyers (QIB). Qualified Institutional Buyers are those institutional investors who are generally perceived to possess expertise and the financial muscle to evaluate and invest in the capital market such as mutual funds, foreign institional investors, venture capital funds, provident funds etc. They have to be registered with Sebi.
The Non-Institutional Investors (NII) quota was fixed at 15 per cent. The institutions that want to subscribe for more than Rs 2 lakh are called non-institutional investors. The difference between a QII and an NII is that the latter does not have to register with SEBI.
About 60 per cent of qualified institutional bidders portion may be allocated to anchor investors on a discretionary basis. As per the filing, if there is under-subscription for the anchor investor portion, the remaining equity shares shall be added to the net QIB portion. Any QII, who makes an application of over Rs 10 crore, is an anchor investor. Such investors typically bring in other investors as well. Bidding for anchor investors will open one working day before the bid/ offer opening date and allocation for them will be completed within the anchor investor bid / offer period. One-third of the anchor investor portion will be reserved for domestic mutual funds.
Who qualifies for the discount?
All policies other than group policies qualify for Bidding in the Policyholder Reservation Portion. Only LIC policyholders are eligible to bid under the Policyholder Reservation Portion. However, one can apply as a RIB or Non-Institutional Bidder, but they cannot avail the discount. LIC boasts of nearly 29 crore policyholders.
Eligible policies?
All policies that have not exited LIC’s records by way of maturity, surrender or by way of death of the policyholder are eligible for policyholder reservation. Also, all policies other than group policies qualify for Bidding in the Policyholder Reservation Portion.
But, what if you have submitted proposal papers before the date of DRHP, but received policy later?
You will not be eligible then. LIC says the policy should have been issued on or before the date of the prospectus (13 February) and should not have exited by way of surrender, maturity or death claim on the bid or offer opening date.
How much is the discount?
The government is yet to decide that. Eligible Policyholder(s) are offered a discount of Rs Z per Equity Share. In case, the Offer Price (the price at which shares are allotted to retail and other investors) is Rs X, Eligible Policyholder(s) will be allotted Equity Shares at ₹(X-Z)per Equity Share. For example, if the issue price is Rs 2,000 and policyholders get a discount of 10%, then he will get the share at Rs 1800.
What is the maximum allocation to a policyholder?
As per the draft prospectus, the total value of allocation to an eligible policyholder cannot exceed Rs 2 lakh after discount. Such investors can bid under the ‘Policyholder Reservation Portion’ through the applications supported by blocked amount (ASBA) and the UPI mechanism.
However, eligible Policyholder(s) can also apply for Equity Shares under the RIB category or Non-Institutional Bidders category for an additional amount of upto Rs 200,000(net of Policyholder Discount)and more than Rs 200,000(net of Policyholder Discount),respectively.
Are joint life policy holders also eligible for the discount?
If you own a joint policy of LIC, then only one of the policy members can apply under the ‘Policyholder Reservation Portion’ category and avail the discount too. The PAN number of the applicant bidding in the offer (you or your spouse) needs to be updated while linking the PAN. Also, the policy member applying for the IPO has to have a demat account in his/ her name and in case the demat account is joint, the applicant needs to be the first /primary holder of the demat account.
Can NRIs avail the discount for policyholders?
While non-resident Indians (NRIs) are eligible to invest in IPOs in India, this category is not eligible under the ‘Policyholder Reservation Portion’. So, NRIs holding an LIC policy will have to apply under the retail category.
Who else is not eligible?
The spouse of an annuity policyholder (now deceased) who is currently receiving annuities is not eligible to apply for the LIC’s equity shares in the offer.
A nominee under a policy issued by the Corporation, is not eligible to Bid for the Equity Shares under his name. only the Eligible Policyholder(s) is eligible to Bid under the Policyholder Reservation Portion.
What benefits to employees get? LIC has extended reservations to its employees in the offer.
But if the employee also holds an LIC policy?
In this instance, an individual can apply under employee, policyholder and retail portions.
“Application made in the Policyholder Reservation Portion and Employee Reservation Portion category would be considered as valid Bids and not rejected. However, applications made in the Retail Portionand Non-Institutional Portion would be considered as multiple Bids and both the Bids will be rejected,” said LIC.





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For more information call us at 9891563359.
We are a group of best insurance advisors in Delhi. We are experts in LIC and have received number of awards.
If you are near Delhi or Rohini or Pitampura Contact Us Here