Page 12 - Banking Finance July 2019

ROUNDUP

India to trade with Nepal via water
Creditors can expect
A clause of the 1991 Indo-Nepal Treaty of Trade and Transit is being amended
100% recoveries under
by the government to explore water routes keeping bet-
IBC, says IBBI chief ter connectivity between the two countries in view, in-
formed an official.
For the purpose of resolving cases of
stressed “The clause in the treaty, that only allows movement by
assets and road and rail from India to Nepal, is being amended. The
non-per- amended clause has been drafted. It will soon see the light
f o r m i n g of day.” Inland Waterways Authority of India (IWAI) chair-
a s s e t s , man Pravir Pandey said.
creditors
“In April, a delegation from customs, the ministry of commerce and MEA vis-
can ex-
ited Nepal. Three water routes have been accepted by both countries,” he
pect 100%
added. The routes are Kolkata-Sahebganj waterway and then to Nepal’s
recoveries Biratnagar by road; Kolkata-Kalughat near Patna by waterway and then to
from their client companies going Birgunj; and Kolkata - Varanasi (waterway) and then to Nepalganj or Mahendra
under the Insolvency and Bankruptcy Nagar.
Code (IBC) process.

“This is because new NPA companies DVR shares with superior rights to be allowed soon
going through the IBC system are ac- SEBI may bring guidelines on differential voting rights (DVR) at its next board
tive businesses,” said MS Sahoo, meeting, new norms for buyback and pledging of
Chairperson of the Insolvency and shares by promoters, informed an inside source. In
Bankruptcy Board of India (IBBI), addition to the superior DVRs and buyback of shares
said. by high debt companies, the two major contentious
issues which have been contentious are high financ-
“We are seeing active companies
ing deals involving loan against shares to promot-
coming to the IBC system and we
ers by mutual funds and NBFCs.
expect 100 per cent recovery for the
DVR shares carry rights disproportionate to their economic ownership. Through
creditors,” he further added. There
its guidelines, SEBI will make an attempt to clarify that DVRs have suitable
are few cases of active businesses
safeguards and minority shareholder are not oppressed by those holding these
where creditors have recovered
instruments a position.
100% due to them, added Sahoo.
Presently, in India, SEBI permits DVR shares with inferior voting rights. How-
“The 43% recovery works out to
ever, experts’ report had suggested allowing DVR shares with superior voting
200 per cent of the liquidation value
rights along with FR. The report had been put out for public comments by SEBI.
means if these resolutions had not
SEBI had floated another consultation paper on buyback policy in the recent
happened the companies would
past, which underscored corporates having to buy back shares may now have
have been liquidated. If you look at
to factor in consolidated group debt in their calculations. However, eruption of
in respect of amount due, it is a hair-
a controversy was seen at the start of this year after Larsen and Toubro re-
cut, but from the perspective of liq-
fused to showcase group-level debt in its numbers during the share buyback
uidation value, it is a bonus for the
programme and kept out high debt numbers of a subsidiary company.
creditors,” said Sahoo.
The buyback of the company was refused by the SEBI but there was no exist-
The credit market will continue ex-
ence of specific rules regarding the same. Thus, the gap will be filled with new
panding as the IBC has strengthened
specific rules on buyback. A SEBI panel is in favour of allowing a 2:1 debt-to-
creditors’ rights, he remarked. Sahoo
equity ratio for all companies on a consolidated basis at the group level for
is hopeful for a credit growth at 15%
buyback of shares except for non-banking finance companies (NBFCs); their
a year and expected more NPAs.
business model of borrowing requires higher leverage.
12 | 2019 | JULY | BANKING FINANCE