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Dewan Housing Finance Corp Ltd (DHFL) repaid Rs 14,000 crore of debt, sold loans worth Rs 7,400 crore and posted a 52% jump in profit for the quarter ended September that brought a crisis in the non-banking finance companies, triggered by default by systemically important lender IL&amp;FS.

Net profit came in at Rs 439 crore, up from Rs 288 crore in the same quarter of the previous fiscal, DHFL said. Total income rose 32% to Rs 3,468 crore and gross non-performing assets stood at 0.96%. Net interest margin was at 3.15%.

Kapil Wadhawan, chairman and managing director, DHFL, said in a statement, “Over the past few weeks, the financial services sector, specifically non-banking finance companies, witnessed an unexpected, temporary slump and liquidity tightening. DHFL has taken every step towards mitigating these issues. The company has been diligent towards all its repayments and fulfilled every financial obligation. DHFL immediately reiterated its strong positions on credit quality, credit ratings, no asset-liability mismatch, robust asset quality, strong liquidity and the company’s commitment towards all its repayment records.”

Since September 24, 2018, DHFL has repaid liabilities of nearly Rs 14,000 crore, including over Rs 9,000 crore of commercial paper repayments. This repayment target was met by the company through internal liquidity generation and “minimal external borrowings”.

DHFL also said it sold retail housing loans of over Rs 7,400 crore “in a short span of 50 days to eight banks and financial institutions.” Names of these eight banks and financial institutions were not immediately made available by the company.

Assets under management (AUM), too, grew by 38% year on year, touching Rs 1,30,182 crore as on September 30, 2018. They stood at Rs 94,079 crore in the corresponding period of last fiscal.

The mortgage lender, however, clarified that it didn’t default on any bonds or delayed repayment of any liability. Also, the promoters haven’t pledged any shares or availed any loan against share, it said.

NBFC stocks crashed in September, particularly DHFL’s shares that were trading at a high of Rs 678.45 per scrip. They fell as much as 55%. The plunge in company’s shares was triggered when DSP Mutual Fund, which held DHFL’s short-term commercial paper with June maturity, sold it in the market for a substantial discount. This lead to the rumours of a crisis, which affected other housing finance companies as well. The reason behind DSP Mutual Fund’s move was to get liquidity into the company because of their exposure in IL&amp;FS.

On Wednesday, DHFL’s shares closed at Rs 234.90 per unit on BSE, at almost one-third the level that was seen during early September.

The company’s loan book outstanding grew 35% on-year to Rs 1.1 lakh crore at the end of the second quarter. Total loan disbursements increased 39% to Rs 13,870 crore, primarily led by affordable housing segment.

On the subject, Wadhawan said, “During the quarter under review, DHFL maintained robust performance led by loan growth disbursements in the affordable housing segment. Considering that two-thirds of DHFL’s home loan portfolio is retail home loans, wherein our average home loan ticket size is below Rs 11 lakh, DHFL has endeavoured to protect margins at 300 to 305 basis points.”

This article was first published in DNA as <a href="https://www.dnaindia.com/business/report-dhfl-repays-rs-14000-cr-debt-net-profit-rises-52-in-q2-2688044">'DHFL repays Rs 14,000 cr debt, net profit rises 52% in Q2'</a>

Dewan Housing Finance Corp Ltd (DHFL) repaid Rs 14,000 crore of debt, sold loans worth Rs 7,400 crore and posted a 52% jump in profit for the quarter ended September that brought a crisis in the non-banking finance companies.

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DHFL repays Rs.14K cr debt, net profit rises 52% in Q2

Richest Indian realtors have seen their fortunes soaring 27% from the last year, with a hundred individuals having a wealth of Rs 2,36,610 crore. Mangal Prabhat Lodha, who is also a BJP legislator, has overtaken DLF’s Kushal Pal Singh to take the numero uno position.

Interestingly, Kushal Pal Singh doesn’t get a mention in the ‘Grohe Hurun India Real Estate Rich List 2018’ that names the top-100 wealthy Indian developers. Last year, Singh’s fortune stood at Rs 23,460 crore. Whereas, the Lodha Group promoter’s wealth has now jumped to Rs 27,150 crore from Rs 18,610 crore in the last year’s edition, catapulting him to the top spot.

The reason for such a drastic fall in DLF promoter’s wealth has been attributed to him offloading his holdings in the company by way of amalgamation or changes in the shareholding pattern of promoter and promoter group of companies. As an individual, Kushal Pal Singh holds only 0.81% stake in DLF.

His son Rajiv Singh, vice chairman of DLF, who wasn’t in the list last year, now figures as the third-richest realtor with Rs 17,690 crore wealth.

Jitendra Virwani of Embassy Group has climbed a notch higher by securing the second spot. Virwani has a total wealth of Rs 23,160 crore, up from Rs 16,700 crore in 2017.

These three richest developers are followed by Chandru Raheja, CEO of K Raheja Group with Rs 14,420 crore wealth at fourth position and Oberoi Realty’s Vikas Oberoi at fifth rank, holding assets worth Rs 10,980 crore. The sixth spot is shared by brothers Niranjan and Surendra Hiranandani, with a wealth of Rs 7,880 crore each.

Gautam Adani and family, who recently ventured into real estate through Adani Realty and were missing last year in the list, have made their mark in this year’s edition by featuring on the 20th position and having wealth of Rs 2,720 crore.

Commenting on the realty rich list, Anas Rahman Junaid, managing director and chief researcher of Hurun Report India, said, “The combined wealth of top 100 names listed by us in 2018 stands at $32.3 billion or in other words, a billion dollar more than the GDP of Cyprus.”

A glance through the list shows that 59% of the names featured on the list are first-generation entrepreneurs. There are nine women featured on the list - with Renuka Talwar of DLF being the richest and ranked 19. At top among the 10 debutantes in the list is Rameshwar Rao Jupally of My Home Constructions, ranked 14.

The biggest gainers are Manoj Menda and Raj Menda, co-owners of RMZ Corp. Their fortunes have soared 122% in a year. Similarly, Ajay Piramal and family’s wealth increased by 75% to touch Rs 6,380 crore, while Virwani’s wealth saw a growth of 39%. Mumbai has the highest number of rich people from the real estate business with at 35, followed by Delhi with 22 people.

This story first appeared in DNA Money: <a href="https://www.dnaindia.com/business/report-lodha-dethrones-dlf-s-k-p-singh-as-india-s-richest-realtor-2688046">Lodha dethrones DLF chief as India’s richest realtor</a>

&nbsp;

Gautam Adani and family, who recently ventured into real estate through Adani Realty and were missing last year in the list, have made their mark in this year’s edition by featuring on the 20th position and having wealth of Rs 2,720 crore.


MP Lodha pips DLF’s KP Singh to become India’s richest realtor

IL&amp;FS Transportation Networks Ltd (ITNL), which is looking to pare debt, may be left with not a single of the 28 road projects. Even before the crisis at the debt-laden IL&amp;FS Group came to the fore, ITNL was already in discussions to sell five of its road assets.

“Of the 28 road assets that it currently holds, the company has 19 operational assets. Seven of these operational projects are most likely to be bought over by Singapore-based Cube Highways and Infrastructure Pte,” said a source.

It may take a couple of months to formally ink the term sheet after following the due process as laid by National Company Law Tribunal (NCLT).

This leaves ITNL with 12 operational road assets, wherein another bunch of nine is also in the process of due diligence. Different players like National Investment and Infrastructure Fund (NIIF) and US private equity firm KKR &amp; Co are also evaluating to take the pie. Given the initial stage of discussions underway, a formal announcement may be out after four to six months.

Details were not immediately available on which of the projects are being negotiated with Cube Highways and Infrastructure Pte, NIIF and KKR &amp; Company.

The balance three road assets are approaching end of their concession period, thereby making them unattractive for acquisition by any private equity firm or infrastructure company.

From the bag of 28 road projects, five are at different stages of construction. Also, NHAI may terminate the bid awarded to ITNL or IL&amp;FS and put the projects back into bidding.

“This shows that ITNL is insolvent and there will be redundant cash flows. Some months down the line, among the biggest BOT players, ITNL will be a company without any assets with themselves,” the source said.

This article was first published in DNA as <a href="https://www.dnaindia.com/business/report-ilfs-trans-set-to-become-zero-asset-company-2687056">'IL&amp;FS Trans set to become zero asset company'</a>

&nbsp;

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IL&amp;FS Transportation Networks Ltd (ITNL), which is looking to pare debt, may be left with not a single of the 28 road projects.


IL&FS' Transportation Networks may not have single road projects

When Srinath Kapoor booked an apartment in Housing Development Infrastructure Ltd’s (HDIL) Whispering Towers in Mumbai’s eastern suburbs in 2011 and invested over Rs 70 lakh for a 3BHK, his family was planning to settle in Mulund’s serene locality. Nearly a decade later, he is running from pillar to post as the project is stuck half-way. Kapoor has now joined hands with 400-odd fellow home buyers to fight for their long due ‘dream house’.

As the project development dragged, he discovered to his dismay that it was a Slum Rehabilitation Scheme Project, details of which were not revealed to the buyers. There were other discrepancies too in the sale documents inked between the buyers and the developer. “The agreements of various home buyers mentioned different dates of possession for the same building and the same wing. Some had it May 2015, while some others, October 2016, and even, December 2018,” he says.

The project is stalled with no valid explanations given to the irate buyers. As on September 30, the saleable building is only 18% ready and the rehabilitation building, 52% ready.

In the last couple of years, recovery notices were issued twice against the project; the first one by the municipal body for non-payment of taxes and the other by Allahabad Bank as the developer defaulted on the debt servicing. Both the notices were withdrawn later. Though HDIL arrived at a settlement with the bank, dues for Whispering Towers are yet to be paid to the lender. It paid an amount of Rs 34.71 crore to Allahabad Bank for its other project in Palghar, which is facing similar fate.

Only a handful of HDIL’s projects like Meadows at Ekta Nagar in Goregaon and one in Kurla West are actually progressing. All others are either completely at a standstill or going at a snail’s pace.

HDIL has nine residential projects within Mumbai. A couple of quarters ago, that number stood at 11.

Some home buyers have moved Maharashtra Real Estate Regulatory Authority (MahaRERA) against the developer to seek justice. “So many buyers are lining up their petitions with MahaRera. There is unrest among HDIL home buyers,” said an advocate handling real estate-related litigations.

Some others have moved the consumer court while a few others, the Economic Offences Wing (EOW), are seeking to book the realtor for misleading them.

During an analyst call post the financial results, HDIL’s vice chairman and managing director Sarang Wadhawan was reminded of his promise a quarter ago that the construction of Whispering Towers would resume in August. Wadhawan was quick to come up with another deadline of November-end.

Hapless home buyers remain sceptical, given multiple promises and assurances that were never honoured.

The company, which raised debt from Bank of India, Jammu &amp; Kashmir Bank and Union Bank of India, had erred in repayment after promising them a one-time settlement. At the moment, HDIL has paid around 90% of the outstanding — of around Rs 300 crore, to J&amp;K Bank. It has paid Bank of India about Rs 40 crore and has promised to settle the outstanding of around Rs 300 crore in this fiscal. HDIL has various lenders, 26 to be precise.

IPO and Aftermath

In July 2007, HDIL’s initial public offering (IPO) was fully subscribed and the company raised close to Rs 1,500 crore. .

“When Lehman Brothers crisis hit, there were private equity players who had invested in the industry. They needed an exit, so the public sector banks were asked to pitch in. This led to a surge in property prices because the value of the property had to increase in order to give returns,” says a real estate consultant.

Real estate prices in Mumbai went north once again until 2013 only to hit a patch of long stagnancy.

However, during these years, the developers were focusing on either mid-segment or luxury housing projects while HDIL continued its focus on Slum Rehabilitation Authority/Scheme projects. In October 2007, it bagged Mumbai airport slum rehabilitation project.

It had a massive job at hand to clear 276 acre of airport land before October 2010, but went behind the schedule. This, many industry observers say, turned out to be HDIL’s quagmire.

The airport slum rehabilitation project never recovered, and ended with a termination notice in 2014.

“Since the IPO, the cost of funding, too, went up and the cash flows by way of sales weren’t supporting. It soon became very difficult to run the business,” adds a consultant.

An industry insider said HDIL’s land bank was overvalued during the IPO year. “The company spent heavily on land acquisitions after the IPO.”

Wadhawan told DNA Money that the airport slum rehabilitation project virtually punctured his business empire. “It’s still trying to recover from the mess it had got into,” he said.

An industry insider said the airport project not only faced clearance-related challenges but slumlords too, who didn’t budge. “HDIL’s slum rehabilitation projects faced approval-related issues, leading to a downfall.”&nbsp;During the IPO launch, HDIL’s price band offer was between Rs 430-500 and issued at Rs 490 per unit.

The TDR Conundrum

Transferable Development Rights (TDR) is as an important raw material in the real estate industry as it allows the developer to build over and above the permissible Floor Space Index (FSI). Typically, TDRs are given to developers and landowners as a sop in slum rehabilitation projects. Around 70% of HDIL’s residential projects have been slum rehabilitation projects.

“HDIL had a lot of TDR from their slum rehabilitation projects. Later, when the airport slum rehabilitation project got into a limbo. Slum projects undertaken by them, too, got stuck. I haven’t seen them actively coming in the market for the last three-four years. HDIL and a couple of other real estate players in Mumbai sit on most of the TDRs issued in the city,” said the real estate consultant.

According to HDIL’s books, it has TDRs of around a million square feet as of the first quarter of 2018-19, down from the earlier 1.5 million square feet. A big chunk of the TDR got generated from the airport slum rehabilitation project, and a substantial number of units built has been lying vacant.

The company wants to monetise this over the next couple of quarters.

“We are seeing a lot of interest with respect to B2B (business-to-business) transactions, with respect to FSI and TDR sales. TDR is selling in different locations at different prices. It ranges anywhere from Rs 4,000 to Rs 4,500 per square feet going to about Rs 5,000 this quarter (Q2),” Wadhawan said early this week in an earnings call.

Now, HDIL is looking forward to another 2 to 2.5 million square feet of TDRs that it has the potential to generate in the coming years. The lack of clarity in the new development plan (DP) has resulted in the status quo on TDR generation for almost a year. As Mumbai’s development plan has been sanctioned, HDIL has now started moving its TDR files.

Meanwhile, the vacant rehabilitation homes in Kurla are being marketed to the government for other infrastructure and rehabilitation projects. Of around 18,500 rehabilitation tenements it constructed, only around 5,000 got utilised by the government.

A few years ago, when Mumbai Metropolitan Region Development Authority had come out with the sale of their own TDRs, they faced challenges in offloading the same in the open market. Why? “Certain players wanted the market to buy TDR from them instead of MMRDA. There was a price competition,” says an MMRDA official.

This story first appeared in DNA Money: <a href="https://www.dnaindia.com/business/report-how-they-lost-the-plot-2686152">How they lost the plot&nbsp;</a>

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Housing Development Infrastructure Ltd (HDIL), the Mumbai-based real estate developer, which played a risky game of slum development projects and transferable development rights, is now looking at various strategies to pull itself out of the abyss&nbsp;
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Mess at Housing Development Infrastructure Ltd (HDIL) Whispering Towers, Mumbai: blow by blow account

The renewable energy sector, especially solar, could be next in line in becoming a stressed sector, something similar to thermal power. As such, the sector is already facing funding challenges. And to make matter worse safeguard duty, aggressive bidding, high operational cost, cost of funding and other factors like quality of solar module will only hurt returns.

Until now, the renewable energy sector, including solar and wind power, was financed by banks, venture capital funds, among others. However, funds have started to dry up for solar projects, which are put on a bid and where execution is taking place.

Crisil’s Infrastructure Yearbook released last month is categorical in stating that ‘caution is required in solar and wind bidding’.

“Large developers in the renewable energy segment have prioritised building a portfolio over project returns. As a result, solar and wind power have witnessed aggressive bidding. The aggressive bidding risk, when coupled with on-ground variance in wind patterns and irradiance levels, could adversely impact the economics. Moreover, higher-than-anticipated module degradation and delay in payments could also hurt returns,” reads the Infrastructure Yearbook.

Hence, aggressive bidding coupled with a delay in payments by distribution companies could result in significant challenges in terms of servicing debts, especially given the weak financial position of domestic banks. This may also eventually result in an increase in non-performing assets in future. 
Secondly, there have been instances of renegotiations of Letter of Awards, besides cancellation of bid post discovery of tariff at auctions. This had happened last year and continues this year as well.

In the recent past, Uttar Pradesh cancelled a solar tender where the lowest tariff was Rs 3.48 per unit on the ground that the central government was achieving bids at a much lower tariff of Rs 2.44 per unit. “If the bid realised is Rs 3 or above per unit, the government is suspending the project for now citing some reason. This shows that the government wants tariffs to be lower than Rs 3 per unit, but on the other hand overheads like finance cost, safeguard duty levy on imports, operational cost, etc. are also on the rise,” said a Mumbai-based analyst.

Recently, Solar Energy Corporation of India (SECI) partially cancelled a 3 GW tender where the only bidder, who quoted Rs 2.44 per unit, was awarded, while others, with tariffs of Rs 2.71 per unit, were disqualified.

Similarly, Gujarat Urja Vikas Nigam Ltd also scrapped a 500 mw solar auction as the price discovered was higher at Rs 2.98 per unit compared with Rs 2.65 per unit in the previous auction.

“The recent scrapping of solar auctions around tariff concerns can derail the Ministry of New and Renewable Energy’s target to achieve 100 gw of solar capacity by FY 2022. The solar auction target for FY19 could be missed on account of frequent changes in the implementation of safeguard duty, apprehensions about grid connectivity and land acquisition-related bottlenecks. Also, a depreciating rupee compared to the dollar also poses threat to economical solar tariffs,” said Ankur Agrawal, senior analyst, corporates, India Ratings &amp; Research. 
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These developments have lowered the confidence of lenders, thus adversely impacting the market sentiment. With these factors put together, it now becomes challenging for the industry in terms of long-term planning.

“A sense of cautious optimism is spreading across renewable projects, with bidders and lenders going circumspect around the low margin of error owing to a steep fall in tariffs since the start of auction regime,” Agrawal added.

The tariffs reaching the historic low of Rs 2.44 per unit and thereon moving up to Rs 2.70 or 2.80 per unit was primarily due to aggressive bidding done by the companies.

“Anything below Rs 2.70 per unit was always under stress. If you see the overall picture, the awards of projects are slowing down,” Sandeep Upadhyay, managing director and chief executive officer of Centrum Infrastructure Advisory, told DNA Money.

Not all companies in the sector would go kaput, as there are players like ReNew Power which are carrying the project forward by cross-subsidising other projects despite lower or eroding returns in a project or two.

However, there are companies who are also struggling to achieve financial closure, something similar seen in the road sector. While few companies were successful in arranging borrowings for around 8.50% to 9.50%, for others finance cost was higher.

“Achieving financial closure for new renewable projects with highly competitive tariffs and refinancing of existing loans may be a challenge without sponsor backing on account of the low margin for error,” mentioned an India Ratings &amp; Research report.

According to an analyst, there is a certain reluctance by states too on tariff and risk front, apart from the players facing issues with acquisition and transmission.

One of the latest presentation by Vivek Sharma, senior director, Crisil, showed that aggressive bidding also leads to curtailment and renegotiation of Power Purchase Agreements.

Another aspect that is largely untouched till now is quality of modules being procured and installed.

This article first appeared in DNA Money as '<a href="https://www.dnaindia.com/business/report-is-solar-power-on-path-of-becoming-a-stressed-sector-2686121">Is solar becoming a stressed sector?'</a>

The renewable energy sector, especially solar, could be next in line in becoming a stressed sector, something similar to thermal power. As such, the sector is already facing funding challenges.&nbsp;

&nbsp;


Is solar the next thermal? Returns all set to hurt

Mumbai: With the cruise tourism beginning to pick up in the country, the India Cruise Lines Association (InCLA) has approached the Prime Minister’s Office (PMO) seeking certain relaxations including capital subsidy, single window for clearances, tax holidays to develop cruise terminals in more cities, among others.

In a letter to the PMO, InCLA’s convenor Jurgen Bailom highlighted that the cruise tourism sector in India has shown slow but steady growth. Unfortunately, many global companies are now planning to completely move out of India due to the imposition of central taxes and duties not known to the cruising industry globally, and no ‘regulatory’ support.

In order to retain the business and allow cruise tourism grow further, the regulatory framework needs to be in conjunction and synchronised with the global practices and the tax regime should extend certain privileges for international travellers, said InCLA.

“Government grants and a more liberal tax regime - like tax holidays, will lead to boosting the cruise sector as its evident from several other sunrise industries,” reads the letter.

Watch this Zee Business video here:

<iframe allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen="" frameborder="0" height="315" scrolling="no" src="https://www.youtube.com/embed/TCmABmgy6FI" width="100%"></iframe>

Already, Uttar Pradesh and Assam governments have come out with capital subsidies for promoting tourism, including cruise tourism. Now, InCLA wants subsidies to flow only for Indian cruise companies.

The association has identified new locations to expand their business in India. These new locations include Porbandar, Dwarka or Okha, Lakshadweep, Andamans, Pondicherry, Kollam, Vizag, Kolkata, etc. The body also wants the government to develop modern cruise terminals at these locations at par with world-class facilities. Currently, the cruise tourism is largely focussed in cities like Mumbai, Cochin, Goa, Mangalore and Chennai with new terminals being developed in few of these five cities.

The cruise shipping industry has reiterated a lower taxation rate for the industry. It wants it to be reduced to 5% from 18%. InCLA goes on to state that in case of airline tickets, 5% GST is levied for economy class and 12% for other classes, hence 18% is steep for the cruise industry.

The industry also wants 5% GST on the onboard supply of goods and services, which means all the goods stocked from India will attract a blanket 5% GST.

On the entertainment front, the industry is seeking an amendment to the entertainment and gambling laws as currently there have been certain restrictions on gaming, casino operations, entertainment, etc.

“Currently, these services are provided to the cruise passengers while the cruise ship is beyond 12 / 200 nautical miles from the Indian coastline since these entertainment and gambling laws do not tend to apply beyond 12 / 200 nautical miles. However, while the cruise ship is within the Indian territory, cruise liners are unable to provide gaming, entertainment and casino services to the passengers and meet their expectations,” shared a cruise line operator.

If these concessions and relaxation in rules are provided, it may lead to a substantial increase in government revenue. Also, the growth of cruise sector in India would lead to substantial development of the local tourism and other allied sectors like hospitality, transportation, etc..

On an average, a tourist coming to India via a luxury liner spends about $200-300 and a cruise staff spends about $100-150 per port visit. Hence, cruise operations augment business opportunities for transport, hotels, bunkering, etc. to cruise ships. On an average, employment generation on a cruise ship is 1 job for every 3-4 passengers. With India having the potential to cater to 700 cruise ships per year as against 158 handled in 2017, the cruise industry can generate more than 2.5 lakh jobs for 10 lakh cruise passengers.

This article was first published in DNA Money:&nbsp;<a href="https://www.dnaindia.com/business/report-cruise-industry-seeks-government-tailwind-2685417">Cruise sector seeks govt tailwind</a>&nbsp;

With the cruise tourism beginning to pick up in the country, the India Cruise Lines Association (InCLA) has approached the Prime Minister’s Office (PMO) seeking certain relaxations including capital subsidy, single window for clearances, tax holidays to develop cruise terminals in more cities, among others.


This sector can create over 2.5 lakh jobs, ball in Modi govt court

A look into ‘management’ of IL&amp;FS Group’s business by the previous Board has revealed several anomalies. For example, the new Board has discovered that companies in the IL&amp;FS Group have had the “practice of leasing properties owned by select employees (or their relatives) as guest houses of group companies”.

“Even as the new Board is undertaking further reviews of all such arrangements, illustratively, in relation to six such properties that were taken on lease, the monthly lease rent aggregated to Rs 15.1 lakh per month and with a deposit of Rs 2.26 crore. The new Board has initiated steps to terminate such leases,” said ‘Report on Progress and Way Forward’ submitted to National Company Law Tribunal and Ministry of Corporate Affairs.

The report goes on to present other discrepancies too.

There are certain entities which, in practice but not necessarily de jure, may have been considered part of the IL&amp;FS Group for the purposes of funding. For instance, IL&amp;FS Financial Services Ltd (IFIN) has an exposure in excess of Rs 900 crore to companies which are subsidiaries of associates or joint ventures of IL&amp;FS such as HCPL and IL&amp;FS Employee Welfare Trust. These do not get consolidated into the accounts of IL&amp;FS, and at the same time have been treated by the previous management as “internal debt”.

Furthermore, a particular asset of IL&amp;FS Group was transferred from one entity in the group to another entity in the group in June 2017 at a value of Rs 30.8 crore in cash based on an independent, fair valuation, and in just about a year, that is in June 2018, a committee of directors resolved to sell this to a third party at Rs 1 crore.

This means it was sold at a significant discount to the original intra-group purchase price, the reasons for which the recently nominated Board finds are inadequately supported.

“The new set of Board is unable to validate whether due processes and transparency have been followed by the previous management in pursuing various asset monetisation activities,” commented the nominated Board of Directors in their report.

Source: DNA Money

There are certain entities which, in practice but not necessarily de jure, may have been considered part of the IL&amp;FS Group for the purposes of funding. For instance, IL&amp;FS Financial Services Ltd (IFIN) has an exposure in excess of Rs 900 crore to companies which are subsidiaries of associates or joint ventures of IL&amp;FS such as HCPL and IL&amp;FS Employee Welfare Trust.&nbsp;


Shocking details emerge on IL&FS; you will be stunned by the details

Even as the roads and highways sector is keeping an eye on the bumper round of bids to be floated in the next three months, the first half of the current financial year, however, saw just half a dozen projects being bid out by the National Highways Authority of India (NHAI). This is because several companies continue to face challenges in achieving financial closure for their earlier projects even as land acquisitions for projects bid out during the last fiscal are yet to be completed.

“Since April this year, only 400-500 km of bids were awarded by NHAI. A lot many are left to be bid out, especially in a short span as once the general election is announced, no new bids would come out,” said an analyst.

On the matter, Sudhir Hoshing, joint managing director, IRB Infrastructure Developers told DNA Money, “There are two reasons for a regular flow of bids not coming from NHAI. First is that there are lot many projects that are in the process of achieving financial closure. These projects were awarded in the months of February and March 2018. In our case, we achieved financial closure of three Hybrid Annuity Model projects within a month. Possibly, authorities are waiting to see the fate of those projects that are yet to achieve financial closure.”

According to him, the land is still being acquired for the projects that have already been awarded.

“There are projects worth around Rs 70,000 crore that are yet to be awarded. With only three to four months left for the election model code of conduct to set in, it looks tough if NHAI will actually be able to bid out this quantum of projects. But, going by NHAI’s past, the way they had bid as many projects in Q4 FY18, they may repeat the same this time too,” said a road developer requesting anonymity. Roughly, projects involving around 5,500-6,000 km are yet to be awarded by NHAI.

The industry is expecting a slew of bids between mid-December and late January or early February, as the general election announcement during the latter part of the fourth quarter of FY19 will put the bidding cycle to a halt. However, the states of Rajasthan, Madhya Pradesh, Chattisgarh, Mizoram and Telangana, where the election is scheduled between November 12 to December 11, will not have a significant impact on the bidding activity.

Flooding as many road projects once again may further aggravate the funding challenges of the road projects at a juncture when the industry is already facing headwinds, with the latest being the liquidity crisis hitting the non-banking finance companies (NBFCs).&nbsp;“Because of the focus on project completion in the current year, the pace of awarding of projects is likely to slow down. In the first four months of fiscal 2019, NHAI has hardly awarded any projects...

Banks are becoming conservative in lending to private players in the roads and highways sector given the problems players in the infrastructure sector are grappling with,” said Crisil’s latest report on infrastructure.

“The problem is especially acute for mid-sized players who have recently won projects from NHAI. Banks have misgivings about the balance sheet strength of such players and their ability to absorb a financial hit in case the projects are delayed. Banks are also uncomfortable because of wide discrepancies in costs estimated by the bidder and NHAI in a number of cases,” the report said.

As per a source, lenders including banks are giving priority to road projects of the companies having either ‘A’ or above ‘A’ ratings. Those having ratings below ‘A’ are not even considered to be funded, thereby delaying the financial closure process. As a result, bids coming up in next few months may not see aggressive participation by the road developers.

Source: DNA Money

Banks are becoming conservative in lending to private players in the roads and highways sector given the problems players in the infrastructure sector are grappling with,” said Crisil’s latest report on infrastructure.


NHAI hits slowdown; 2 key issues hurting road developers   

The new IL&amp;FS Board submitted progress report and future plan to National Company Law Tribunal (NCLT) on Wednesday stating that the resolution could involve significant capital infusion, divestments and debt restructuring at&nbsp; IL&amp;FS Group, business vertical or platform level and asset level.&nbsp;The report was also submitted to the Ministry of Corporate Affairs (MCA).

&nbsp;“The primary and core problem for the IL&amp;FS Group is excessive leverage, without commensurate asset values or cash flows, from the perspective of both timing and quantum. Thus, the New Board believes that the Final Resolution will inevitably involve substantial deleveraging from the current levels, notwithstanding the various challenges,” the report said.

Such deleveraging will necessarily need to be achieved in an orderly manner, considering the scale and complexity of IL&amp;FS Group, in the absence of which there could be dire impact on asset/ company values, especially at the level of certain key verticals, it said.

Either individually or in a combination, a deleveraging exercise usually involves significant capital infusion either from the existing or new investors, asset monetisation to retire debt and resolution or compromise with the creditors.

Hence, a combination of various options will be chosen to revive the stressed company, it said

&nbsp;At the IL&amp;FS Group level, the resolution is likely to involve capital infusion. At the business vertical or platform level, the&nbsp; resolution may include sale of specific verticals like roads, renewable, real estate and thermal power. At the asset level, the resolution would involve “asset-by-asset solution”.

“Majority of the loan liabilities exist at the operating asset level. However, this option may require liquidation of some businesses or assets that find no meaningful offers from buyers or are significantly unviable,” it said.

The new Board will work towards the final resolution, in stages and parts over a period of six to nine months, and there is a possibility of some early partial resolutions in a timeframe of the next two to three months.&nbsp;However, the early resolutions would be only after NCLT’s approval.

&nbsp;The newly nominated directors and joint financial and transaction advisors have already started receiving enquiries from domestic and global investors for various IL&amp;FS Group assets.

The Board has started considering these proposals for divestments.

On Wednesday, the division bench of NCLT at Mumbai directed Ministry of Corporate Affairs to submit an updated list of nominee directors of not only the group company, but also of all the 346 subsidiaries.&nbsp;

Thus, a list of directors of all the 347 entities will have to be submitted to the NCLT in a fortnight.

Along with this, all the subsidiaries, joint ventures, associate companies, joint control operations, etc, too will have to become party to the ongoing litigation. “All the 346 subsidiaries are respondents and all of them should be made party. Every subsidiary is a different entity,” division bench of NCLT said.

It was also brought to the notice of the court that during FY16, FY17 and FY18 IL&amp;FS Financial Services had outstanding loans of amounts Rs 5,728 crore, Rs 5,127 crore and Rs 5,490 crore in excess of the permissible limit. NCLT, Mumbai has fixed December 3 as the date of hearing.

Meanwhile, the rights issue approved by the previous IL&amp;FS Board that was open during October 5-19 received a subscription of only Rs 5.47 lakh, and that too from few retail shareholders. No institutional shareholders showed interest. As a result, the new Board will now return the subscription money to those applied to the rights issue.

Source: DNA Money

The new Board will work towards the final resolution, in stages and parts over a period of six to nine months, and there is a possibility of some early partial resolutions in a timeframe of the next two to three months.&nbsp;However, the early resolutions would be only after NCLT’s approval.


IL&FS revival: New board submits future plan to NCLT, seeks asset sales, capital infusion

Are cab hailing platforms throwing up unusually high fares for your next ride? Try hiring a self-drive car next time to save a few hundred rupees daily.&nbsp;For example, one-way travel between Sion and Bhayander (in Mumbai) using the ride-hailing platforms cost anywhere above Rs 600. This fare estimate depends on multiple factors of surge pricing which includes traffic congestion, availability of cabs, etc.

However, there have been instances wherein the actual fare has varied from the estimates shown on the mobile application. This primarily is due to congestion faced on the way to an individual’s destination.

“If an individual knows that s/he has an appointment or would be travelling on a particular date at a certain time, one can book a self-drive car, which turns out to be cheaper than Uber and Ola. This is even after factoring in fuel, toll payment and parking charges. Recently, I booked a self-drive car on a couple of occasions and saved a minimum of Rs 600 as compared to the estimates shown on Ola and Uber for having travelled around 70-80 kilometres (km),” said Jignesh Maniar, a self-drive car user.

But why does a self-drive vehicle turn out to be cost-effective as compared to cabs?

“The overall cost of operation for a self-drive car is lesser as compared to those of ride-hailing platforms. There is no cost for a driver in our case, which itself reduces the cost by 30-40%,” replies Greg Moran, co-founder and chief executive officer of Zoomcar, a self-drive company.

Agrees Sakshi Vij, founder and chief executive officer of Myles Cars. “The economics of the set-up is such that it doesn’t include costs for driver and fuel. Approximately, one-third of the cost gets reduced apart from providing flexibility to the individual,” she said.

The ride-hailing platforms also levy a certain percentage of commission ranging between 15%-25% to each of the driver-owners, thereby only adding to the cost.

Those opting for a self-drive vehicle, they do not have to worry about maintenance and insurance costs as they are taken care of by the vehicle providing companies.

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The only catch for opting for a self-drive vehicle is that one should know the travel date and time beforehand as they accept bookings a few hours prior to the time of car needed by an individual. Secondly, self-drive cars aren’t cost-effective for one way travel. “People usually opt for cabs to travel distance in the range of 8-15 or 20 km. Whereas, our vehicles are chosen by people to cover 80-100 km in a day,” Moran told&nbsp; DNA Money.

Source: DNA Money

The ride-hailing platforms also levy a certain percentage of commission ranging between 15%-25% to each of the driver-owners, thereby only adding to the cost.


Opt for self-drive vehicle, it will be cheaper than Ola, Uber cab services 

Mumbai: The ongoing liquidity crisis in the non-banking finance company (NBFC) space may have hit the prospects of small realty players, but bigger entities with deep pockets and better cash flows are unfazed. It has, in fact, opened up a window of opportunity for them to acquire land parcels aggressively. “We will now have a lesser competition to buy land parcels,” says Vikas Oberoi, chairman and managing director of Oberoi Realty.

According to him, they had seen the crisis coming for a long time. However, the financial downturn has hit the market late. “This was waiting to happen. The developers went on buying land parcels. As a result, fly-by-night builders are in a fix. However, unfortunate as it may sound, we are going to benefit. These are times to get good land parcels at a good price and even to face lesser resistance or competition,” adds Oberoi.

Shobhit Agarwal, managing director and chief executive officer of Anarock Capital, the investment banking arm of Anarock Consultancy, said the companies which have reduced their debts and ventured into affordable or mid-income housing segment are likely to benefit as it will help them bargain for a better land parcel.

According to Agarwal, the impact of the liquidity crisis will not be same across the board and most of the heavyweights would now be in a better position to ride the NBFC liquidity storm.

“With most things being unequal in the Indian real estate sector, the impact of this crisis will not be the same across the board,” said Agarwal.

In the highly competitive real estate market, players like Puravankara, DLF, Prestige Group, Oberoi Realty and Godrej Properties will, in fact, emerge stronger as they are better equipped to ride the storm and continue to deliver. Also, large-scale consolidations are already ensuring that only the fittest will survive in the future and this crisis will hasten the process, he added.

While the cost of funding for developers may increase for land acquisitions as NBFC and Commercial Paper funds dry up, a few players will have access to the limited pool of funds available in the market, thereby reducing the number of players going out on a land-buying spree.

Secondly, post the banking system’s freeze on real estate funding due to a rise in non-performing assets, NBFCs and housing finance companies were the sole source of funding for the cash-strapped developers. Now, with NBFCs struggling, loan disbursals to developers have slowed down considerably.

As per a recent HDFC Securities report on real estate, the mortgage rate reversals will impact EMI affordability for the sector. “Luxury demand may see a larger demand destruction as a 100 bps likely increase in mortgage rate (over the next one year) may result in 10-12% increase in property costs. Developers may have to pass on further price discounts to spur demand,” the report said.

“The Rera-led market share gains will help organised developers with stronger balance sheets. The deferred payment plans and interest subvention schemes are also aiding pre-sales for players. Developers will have to focus on affordable luxury projects to drive cash flows,” it added.

Niranjan Hiranandani, national president-NAREDCO &amp; co-founder and managing director of Hiranandani Group, agrees. “Not everybody will benefit from this crisis. There have been consolidation opportunities, which will only increase. It is true that there will be better opportunities for us for land availability, provided we have funds. This is good time for developers having funds to either buy land.”

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Industry experts, however, say that there is a possibility of home buyers facing trouble, especially those who have borrowed money from NBFCs. This may have a cascading effect on the developers.

The ongoing NBFC crisis may have hijacked the real estate growth story over the short to mid-term, say experts. It will not only freeze funds to the real estate sector but also impact private equity (PE) funds flowing into the sector. That is because PE players will become extra cautious in lending to developers, become more selective, and engage in extremely deep due diligence before making any plays in the current market.

“The absence or scarcity of home loans to the home buyer could exacerbate the already protracted slowdown in residential demand in the short to mid-term. All in all, the NBFC crisis has rattled the industry to the core,” Anuj Puri, chairman, Anarock Property Consultants.

The ongoing liquidity crisis in the non-banking finance company (NBFC) space may have hit the prospects of small realty players, but bigger entities with deep pockets and better cash flows are unfazed. It has, in fact, opened up a window of opportunity for them to acquire land parcels aggressively.&nbsp;


Amidst NBFC liquidity crisis, big property firms get better of small ones; 'lesser competition to buy land', says Vikas Oberoi

The cash-strapped Infrastructure Leasing &amp; Financial Services Ltd (IL&amp;FS) continues to err in servicing the debts of various instruments. The troubled company has defaulted at least Rs 450 crore in servicing principal as well as the interest of various borrowings during this month.&nbsp;

With IL&amp;FS Group failing to service debts due to various creditors, the total amount in defaults has reached nearly Rs 4,300 crore.

The latest default is with regards to the interest payout on non-convertible debentures which was due on October 24. On October 20, payment of the principal amount of Rs 54.90 lakh was due for a Letter of Credit.

Similarly, Rs 100.85 crore was due on October 19 towards principal payment of Letter of Credit and Commercial Paper.

According to the disclosures made by IL&amp;FS, the company defaulted on all these payments.

“The default number will keep on increasing every week as there are several payouts lined up every three to four weeks,” said a Mumbai-based analyst.

As per REDD Intelligence, a debt analytics provider, the loans at risk pertaining to the IL&amp;FS Group now stands at Rs 30,000 crore. The group’s total debt stands at Rs 91,000 crore, of which Rs 23,000 crore is unsecured while the rest are secured debts.

“The only immediate solution for the organisation is to monetise its assets to service some of these borrowings or else the default cycle will become a routine affair, which in a way has already started. The unsecured loans and some secured ones will take a hit and may even result in haircuts,” added the analyst tracking IL&amp;FS Group.

However, the percentage of haircuts that the secured and unsecured lenders will be forced to take continues to remain a question. At the moment, there isn’t any clarity on the commencement of its asset monetisation plans. However, this may take a couple of months to commence.

During IL&amp;FS Transportation Networks’ Board meeting on Thursday, the directors discussed divestment of stake in “certain road projects for easing the liquidity concerns and decided to seek assistance from the Financial and Transaction Advisors appointed by IL&amp;FS for the process.”

On Wednesday, Sebi chairman Ajay Tyagi said that failure to monitor the end-use of funds resulted in the recent crisis.

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According to him, “One of the issues that this episode brought out is the inter-connectedness arising as a result of complex corporate subsidiary structures and how the maze of subsidiaries facilitate masking the end use of funds.”

Source: DNA Money

The latest default is with regards to the interest payout on non-convertible debentures which was due on October 24. On October 20, payment of the principal amount of Rs 54.90 lakh was due for a Letter of Credit.


IL&FS crisis: Cash-strapped Group makes fresh Rs 450 cr debt default 

Cochin Shipyard Ltd (CSL) is set to get the lease for Mumbai Port Trust’s (MbPT) Hughes Dry Dock facility as well as four berths at the Indira Dock on Saturday. This will help the Kerala-based shipbuilder to service around 100 more ships every year, apart from spreading its ship repair services beyond South India.

The over-a-century-old Hughes Dry Dock facility and the berths at the Indira Dock at the MbPT premises are being given out to CSL for a period of 29 years. The Cochin-based shipbuilder will provide end-to-end ship repair solution to ship owners and use the berths at the Indira dock for deployment of floating dry dock and afloat repairs.

“MbPT will receive annual fees of approximately Rs 14.80 crore with an annual escalation of 2.5%. There will also be a profit share of 5% on profit after tax for the initial period of four years and 7.50% thereafter,” said Sanjay Bhatia, chairman, MbPT.

A Memorandum of Understanding for the same was inked between both the entities in January this year.

As per the arrangement between the two government-owned firms, services of existing skilled employees of MbPT will continue to be utilised by the CSL by way of deputation to CSL. Hence, there would not be any cut down in manpower at the Mumbai-based port. The leased out facilities will be managed and operated by CSL.

Over the last few years, the MbPT has been focusing more on citizen-related services and recreational facilities inside its port premises. As a result, the direct involvement of the port trust towards core shipping and shipping-related activities has been on a decline. For example, the offshore container terminal has been shelved for Ro-Ro (Roll on-Roll off) terminal.

Secondly, the ship-breaking facility, too, is almost shut. Part of the port land is being opened up for ‘port land development’ project, which would have residential and commercial establishments.

The MbPT is also looking at options to generate revenue by leasing out its assets for ancillary services. For example, it has opened up its vacant land within the port premises for Jawaharlal Nehru Port Trust (JNPT), wherein barge operators will take containers from JN Port to berths at Mumbai Port. For now, New Sewree Warehouse at MbPT, spread over 24,000 square metres, has been earmarked for the project

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According to CSL, the Hughes Dry Dock, as well as four berths at Indira Dock, are likely to be utilised for commercial as well as defence ship repairs. Other than CSL, Mazagon Dock Shipbuilders Ltd and Garden Reach Shipbuilders &amp; Engineers Ltd are also looking to diversify into ship repairs.

Source: DNA Money

Cochin Shipyard Ltd (CSL) is set to get the lease for Mumbai Port Trust’s (MbPT) Hughes Dry Dock facility as well as four berths at the Indira Dock on Saturday.


Cochin Shipyard set to get Mumbai Port boost, service around 100 more ships each year

If funding to the road developers slows down further, the Union government is likely to bid out more projects through engineering, procurement and construction (EPC) route instead of the hybrid annuity model that is being used at present.

Under the EPC model, the financial risk is significantly less for the private players as the government funds the project and provides regulatory clearances.

The private firms execute the project either directly or by subcontracting and have to complete the work within a given timeline.&nbsp;

Nitin Gadkari, minister of road transport and highways said that the lending towards HAM projects is slowing down.

“It is one of the problems we are facing.”

DNA Money had earlier reported that road developers are increasingly facing challenges in getting their projects financed as banks are saddled with a high number of non-performing assets.

The need for financing has become even more crucial with a slew of highway projects lined up under the ambitious Bharatmala Programme.

Earlier this year, IRB Infrastructure Developers’s chairman and managing director Virendra Mhaiskar in an earnings call had said, “It is going to be challenging to fund all the hybrid annuity model projects.”

It has been three years since HAM was brought in as EPC projects faced significant delays and cost escalation, which hurt the margins of road developers.

Even projects under build-operate-transfer were not faring well.

Under HAM, 40% of the project cost is borne by the government (paid across first five years through annual payments/annuity) and the rest can be raised by the contractor via debt or equity.

Moreover, there has been a flood of road HAM projects in a short span of time.

There are a total of 104 road projects, of which 56 are stuck due to the want of financial closure.

In 2016, there were HAM projects worth Rs 7,700 crore.

Now, the same has shot up to Rs 76,500 crore, which is nearly 50% of the overall projects awarded.

Going forward, HAM projects are expected to constitute 60% of the projects awarded by the National Highways Authority of India.

In a recent meeting with the bankers, Gadkari was told that the banking sector is ready to finance road projects, if bid out on EPC mode. Otherwise, it will be difficult to finance the contractors due to certain ‘risks’ involved.

“For the sake of the industry, investment, contractors and job creation within the economy, we are expecting positive support from the bankers. Now they are giving support, but the process is slow. I have met chairmen and managing directors of various banks and I am confident that the situation will improve in due course of time,” the minister said.

Already, several stalled road projects have been revived through various decisions, including fund infusion.

“I am expecting that they (banks) should co-operate. Otherwise, the National Highways Authority of India and we (MoRTH) don’t have any problems. I can raise money from the market, go for EPC mode. I will construct the roads. Through toll-operate-transfer mode (ToT), I will get foreign investment and get my money back. For me, it is a proven track. For the interest of the economy, I am more interested in investment of the stakeholders and contractors,” Gadkari said.

At the moment, the NHAI has come up with second TOT auction with an aim to generate a minimum of Rs 5,362 crore from eight road assets in four states of Rajasthan, Gujarat, Bihar and West Bengal.

Under TOT, in March, NHAI had received the highest bid of Rs 9,681.50 crore from Macquarie Group-Ashoka Buildcon as against the reserved bid price of Rs 6,258 crore to manage 648 km of National Highways in the states of Andhra Pradesh, Odisha and Gujarat. The first bundle of TOT was floated in December 2017.

Source: DNA Money

If funding to the road developers slows down further, the Union government is likely to bid out more projects through engineering, procurement and construction (EPC) route instead of the hybrid annuity model that is being used at present.

&nbsp;


For sake of industry, job creation, Nitin Gadkari says expecting support for road projects from banks

Fuel prices are making record highs almost daily, so are the losses for city bus transportation undertakings. The rising price of diesel is making it difficult for the government city bus transport entities to manage the show while keeping the financial health of the organisation intact. Already all the city bus transport undertakings are bleeding due to various factors - competition from app-based cab services, rising road congestion, increase in fuel prices, reducing ridership, rising administrative cost, etc. “What option do we have? What can we do in case of rising fuel prices?” asked

Surendra Kumar Bagde, general manager, Brihanmumbai Electric Supply &amp; Transport Undertaking (BEST), which runs city bus service in Mumbai. “We have to continue with our daily operations as they are,” he said.

BEST has a fleet of 3,337 buses, of which 1,977 are powered by compressed natural gas (CNG), 1,354 buses use high speed diesel to ferry commuters and the balance six are electric buses. Hence, not the entire fleet of BEST is impacted by the daily price rise. For BEST, increase in each rupee in diesel costs translates into additional annual outgo of around Rs 30 crore.

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Similarly, other fleets are also impacted. For example, Bangalore Metropolitan Transport Corporation (BMTC) is reeling under financial stress, and fuel price hikes are only making the matters worse. This despite it being the best government operated bus system in India. According to BMTC’s managing director V Ponnuraj, in order to maintain operational efficiency along with balancing increasing financial burden, they are looking at rationalising bus schedules and routes as well as continuing to focus on preventive maintenance.

For BEST, the last fare hike was in April this year, but for BMTC it hasn’t been allowed to levy more fares for the last five years.

For an increase of Rs 10 in diesel price, BMTC is incurring an additional expenditure of about Rs 5.6 crore. Thus, the rising expenditures are eating into the revenues. In August this year, BMTC had come up with a proposal to hike bus fares by 15% to 18%, but earlier this month it was reversed by the state government as the increase in tariff was opposed by the passengers.

[[{"fid":"53779","view_mode":"default","type":"media","link_text":null,"attributes":{"height":709,"width":700,"class":"media-element file-default"}}]]

Other transport undertakings, too, are going through challenging times. The immediate options available at hand are increasing revenue through commercial means like advertisement rights, optimisation of bus services during non-peak hours and redeployment of services to ensure more areas are covered and ridership is increased.

In 2013, city bus transport entities which were procuring fuel directly from the oil marketing companies were categorised as ‘bulk consumers’, leading to increase in the then diesel price by Rs 11.50 per litre. As a way out, it temporarily stopped procurement of fuel from the oil marketing companies, and buses used to queue up at fuel stations near the bus depots to save this Rs 11.50 per litre hike or to negate the impact of being ‘bulk consumer’. Then the retail price of per litre of diesel was in the range of Rs 48 to Rs 50 in different cities.

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If the fuel price continues to go north, the last resort would be to pass on the costs to the passengers, say transport experts, as that is the only way left to keep the services running and meeting the rising operational costs.

Source: DNA Money

Fuel prices are making record highs almost daily, so are the losses for city bus transportation undertakings.


Ateeq Shaikh