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Commentary

#Linkfest – Bombay High Court Retires Elder Pharma, Hellish Conditions for Indian NBFCs, Religare Insurance Fraudsters, ‘Mr. Fixit’ Nitin Gadkari, and more

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At Capitalmind Premium, we have a very active Slack channel where we discuss a lot of interesting topics. In there,  a number of interesting links come our way. Here’s the most interesting of such links shared by our members in recent days.

Elder Pharmaceuticals Assets to Go Under the Hammer, to Recover Investor Dues

To anyone who says corporate fixed deposits are safe, point them to Elder Pharmaceuticals. The Bombay High Court has ordered the company to be liquidated, because it didn’t repay its debtors. The court has also appointed its official liquidator for the job. The sad part is, the company’s fixed depositors will be repaid only after the company’s secured creditors and the tax department have recovered their dues. Link

DHFL Demise is a Stark Reminder of Hellish Conditions for Indian NBFCs

Once the rising star of the housing finance space, DHFL descent into oblivion is a stark reminder of how tough it is for NBFCs to do business in India. As funding becomes increasingly constrained, NBFCs have been forced to explore innovative options to raise money, like offshore capital and bond markets. The RBI’s recent rate cut is not expected to help the sector much either, and credit growth in India will remain muted in the near future. Link

Three Indian Oil Marketing Companies Team up to Build World’s Longest Gas Pipeline

IOCL, HPCL, and BPCL have embarked on a plan to lay the world’s longest LPG pipeline in India. The 2747 km LPG pipeline will cost Rs. 10,000 crore to build and will connect Kandla on the west coast, with Gorakhpur in Uttar Pradesh. IOCL will hold a 50% stake in the joint venture, and BPCL and HPCL will hold 25% each. When complete, the pipeline will connect 22 bottling plants across Gujarat, M.P, and UP, with an option to connect an additional 21. Link

Fertilizer Prices in India Set to Rise, Following Hike in Potash Prices

The cost of fertilizers such as diammonium phosphate, muriate of potash, and NPK are set to rise in India, on the back of higher global prices for potash and a weak rupee. Currently, potash prices are hovering at Rs. 19000 per tonne. A year ago, it was Rs. 12000 per tonne. Meanwhile urea prices have remained steady thanks to government control. The price hike couldn’t have come at a worse time, because many Indian farmers are planting crops in a fortnight. Link

Jaguar Land Rover and BMW Team Up to Produce Electric Car Parts

The electric car sector is a tough place to do business. There are a number of players in the segment and the playing field is more or less level. As a result, it is difficult to be viable in the electric car business. But some car markers have found a way to get around this. For instance, Jaguar Land Rover and BMW have decided to work together to produce electric car parts. The joint venture will help the two companies reduce costs, in a business where margins can be very tight. Link

Police Books Religare Insurance CEO and 13 Others for Fake Claim

The Bengaluru Police have failed a case against 14 officials of Religare General Insurance and Diya Healthcare, including the CEO and MD of Religare Insurance Anuj Gulati, for cheating, extortion, making false documents and more. The case was filed on the basis of a complaint registered by a woman, Rathna Bai. She has accused the officials of submitting fake medical bills against her insurance policy and subsequently claiming the proceeds. Due to the aforesaid actions of the accused, Rathna Bai is now unable to get insurance. Police are investigating the same. Link

RBI’s Revised Note on Resolving NPAs Doesn’t Go Down Well With Small Banks

According to a new RBI circular, a resolution plan for NPAs will stand passed, if 75% of creditors by value or 60% by numbers agree to the plan. While the new plan will certainly speed up the debt resolution process, some small banks are not so happy with it. The flipside is, now small parties with lower exposure to an NPA can’t veto the process. Until now, these minority lenders, often small banks, would insist on full repayment, which they can’t do going forward. Link

Bajaj Auto Forays into Electric Scooter Vertical With Urbanite Brand

Bajaj Auto will soon make an entry into the electric scooter business, with its Urbanite brand. The first scooter under the brand will be launched in a few months. The electric vehicle is not the only product under the brand by any means, but it will be the first one. With the electric vehicle portfolio, Bajaj Auto will soon have five verticals under its wing, the others being motorcycles, pro biking, commercial, and exports. Link

Ace Stock Investors Lose their Midas Touch in Recent DHFL Meltdown

Rakesh Jhunjhunwala, the big bull of the Indian stock markets doesn’t make a lot of mistakes. Therefore, when it became known that he held a 3.19 % stake in DHFL by end of March 2019, retail investors were reassured that maybe things weren’t so bad with DHFL after all. But even Mr. Jhunjhunwala had to eat humble pie as DHFL shares fell from Rs. 150 to Rs. 93 in the span of two months. The major reason was DHFL’s failure to pay interest on its debentures. But he is not the only major loser. LIC also held a 3.44% in DHFL by March 2019 end, which was similarly beaten down. Link

The Story of How DHFL Stared Death in the Eye and Survived

DHFL, the beleaguered housing loan company, has been saved from the brink of collapse, thanks to funds from two American investors, Warburg Pincus and The Blackstone group. Warburg Pincus will give DHFL Rs. 1100 crores, while Blackstone will infuse Rs. 2700 crores. In return, DHFL will give the two companies, some of its performing assets. DHFL has also received a term sheet for Rs. 11,000 crores from Oakbridge Capital. Readers will remember how DHFL had defaulted on interest payments on its debentures recently, forcing rating agencies to cut the company’s ratings to ‘Default’. Link

Indiabulls Wants to Get Out of Real Estate Business

Sameer Gehlaut-led Indiabulls Real Estate is set to get out of the real estate business, with the sale of Sameer’s 39.5% stake in the company to the Blackstone Group, for Rs. 2700 crores. After the sale, Indiabulls will shift its focus to the banking/financial services sector, as it attempts to acquire Laxmi Vilas Bank. Blackstone currently owns the largest income-producing real estate portfolio in India. Link

Indian NBFCs Turn to Foreign Shores to Raise Funds

With domestic lenders refusing to part with money, Indian NBFCs are being forced to turn to an unlikely source to raise funds – foreign lenders. These companies managed to raise more than $2 billion in loans and bonds, from foreign lenders, even as they continue to grapple with a serious shortage of funds domestically. But such kinds of debt come at a cost. The interest rates on such debt are 25-50 basis points higher than similar debt, if obtained in India. Link

‘Mr. Fix-it’ Cabinet Nitin Gadkari Promises to Spend Rs. 15 Trillion on Highways

Nitin Gadkari is the NDA government’s go-to-man when it wants to fix something. In a sign of the government’s trust in his abilities, the new NDA government has again installed him the Cabinet Minister for Road Transport and Highways and MSME. And he has not disappointed. Within days of taking charge of the ministries, Nitin Gadkari has promised to spend at least Rs. 15 trillion dollars to build new road infrastructure in the next five years. He has also promised to boost the exports of MSME industries, by focusing on out-of-box solutions. Link

Bombardier Might Sell its Regional Jet Program to Mitsubishi Heavy Electric

According to rumors, Canada’s Bombardier is in talks with Japan’s Mitsubishi Heavy Electric to sell its regional jet program to the latter. Mitsubishi is trying to develop its own regional jet program, but has faced consistent delays. Bombardier is consolidate its business to focus on more profitable sectors, like business jets and rail cars. Moreover, it has no orders for its CRJ regional jet program after 2020. Recently, Bombardier was embroiled in a civil suit with Mitsubishi Heavy Electric after it accused the latter of stealing trade secrets related to its regional jet program. Link

Low Phenol-Acetone Prices Might Stop Deepak Nitrite’s Bull Run

Deepak Nitrite recently commissioned a 200,000 MTPA and 100,000 MTPA factory to produce Phenol and Acetone, respectively. But if the company is dreaming of taking advantage of its enhanced capacity, it may have to wait. Currently, the chemicals are facing weak demand in key overseas markets, which has dropped the spread on these chemicals by up to 42% over the last six months. Meanwhile, other analysts are optimistic about the stock’s future, given the company’s strong return ratios and financial performance. Link