Latest news with #JSW-Bhushan
Mint
a day ago
- Business
- Mint
Andy Mukherjee: India's economy needs a revival of ‘animal spirits', not cheaper credit
There's plenty of talk about how India's 600-million-strong workforce gives it a unique edge in the US-China spat over trade and technology. But to be the world's next factory, the most-populous nation will need a strong domestic investment impulse. The data doesn't show any evidence of that. Nor does the response of authorities inspire confidence. When it comes to large long-gestation projects, a handful of tycoons will do the heavy-lifting, and it will take more than cheaper borrowing costs to sway their decisions. Also Read: Domestic private capital plays a key role in financing Indian businesses The private sector's capacity-expansion intentions have fallen to a three-year low. Banks' exposure to industries that used to be some of their biggest borrowers— roads, power, telecommunications, ports, airports, construction, property builders—is down to 11% of their loan book, half what it was a decade ago. Sanjay Malhotra, the new Reserve Bank of India governor, has thrown the kitchen sink at what is basically a problem of comatose animal spirits. Within six months of his appointment, he slashed the benchmark interest rate by 1 percentage point to 5.5% and flooded the banking system with liquidity. He also eased norms for small individual borrowers that rely on microcredit, or loans against gold jewellery. All this will have an indirect effect at best. The real-estate industry may gain as lower mortgage costs entice homebuyers. But a broader investment-led credit cycle continues to elude India. Which is why RBI has now mandated that banks set aside 1% to 1.25% of their loans to unfinished projects to offset any losses. The requirement drops to 0.4% to 1% when assets start generating cash. These norms are more relaxed than last year's draft guidelines. Also Read: The SC's JSW-Bhushan ruling will hit both the IBC and investor confidence But how will funds flow into projects that create new assets when the bottleneck is not in the supply of credit but demand? In October, S&P had predicted an $800 billion tsunami of investment by Indian conglomerates over 10 years, about 40% in new areas like green hydrogen, clean energy, aviation, semiconductors, electric vehicles and data centres. Add the infrastructure needed to sustain these industries, and it would automatically mean a whole lot of new projects, and demand for bank financing tied to future cash flows. But for that, the country's tycoons need to be confident. Among local billionaires, Gautam Adani may still be on track to binge on capital expenditure, despite a US Justice Department indictment. His group would invest $15 billion to $20 billion annually over the next five years, he announced at a shareholders' meeting this week. Rival conglomerates, however, are distracted. Mukesh Ambani has to steady his empire first—and spin off retail and digital services in public markets to unlock value in Reliance. The 157-year-old Tata Group has to sort out a mess at Air India, the struggling airline at the centre of the country's worst passenger jet crash in nearly three decades. Billionaire Sajjan Jindal is embroiled in knotty legal proceedings. The Supreme Court in New Delhi has annulled his JSW Steel purchase of a bankrupt company—four years after he paid creditors $2.7 billion to acquire the unit that's now 13% of his steel revenue. Also Read: Finance in India has a new bogey called private credit So much for the four pillars of the national team. The appetite for credit is subdued even among smaller companies. They are still scarred by the bad-loan crisis that erupted a decade ago. The post-pandemic surge in the revenue of engineering and construction firms—a proxy for new asset creation—has ebbed. This fiscal year's government target for new roads is the smallest since 2018, according to India Ratings. Slow-moving irrigation and drinking-water projects are locking up working capital, while margins are getting squeezed in the construction of factories and buildings. Contractors are, therefore, cautious about borrowing. Then there are heightened global uncertainties. Like their peers elsewhere, business executives are waiting for 9 July, when the Trump administration's pause on reciprocal tariffs will end. If Washington and New Delhi are able to pull off a trade deal ahead of that deadline, Indian exports may avoid a 26% tax in their biggest market. That is when bankers in Mumbai could finally start getting calls for higher working-capital funding limits and new term loans. Until then, private credit will rule. Global asset managers, sovereign wealth funds, insurers and banks have actively been chasing Indian business owners who are looking either to refinance existing loans, pay for acquisitions or preserve their control. What the economy needs, however, is credit that helps create new assets. There's little sign yet of such a virtuous cycle getting started. ©Bloomberg The author is a Bloomberg Opinion columnist covering industrial companies and financial services in Asia.
Mint
30-05-2025
- Business
- Mint
Strong domestic demand, firm steel prices to keep SAIL in focus
After two lacklustre quarters, Steel Authority of India Ltd (SAIL) reported a rebound in performance in the March quarter (Q4FY25), driven by lower raw material costs and improved sales volumes—even as selling prices remained under pressure. SAIL's earnings before interest, tax, depreciation and amortization (Ebitda) stood at ₹3,500 crore in Q4FY25, slightly higher on a year-on-year basis. This marks a turnaround after a 5% decline in Q3 and a steep 40% drop in Q2. The blended realization for the quarter fell 10% from a year earlier to ₹55,000 per tonne. However, the company managed to offset this decline with a 9% rise in sales volumes (excluding volumes sold on behalf of NMDC Steel) and a drop in coking coal prices by about ₹1,500 per tonne. The company sold 0.36 million tonnes (mt) of steel on behalf of NMDC Steel under an agreement that provides for a fixed trading margin. Also read: Govt may harness public sector undertakings to drive green steel consumption Improved margins The company's Ebitda per tonne (adjusted for NMDC volumes) improved to ₹7,000 in Q4, up from ₹4,550 in Q3FY25, though lower than ₹7,620 reported in Q4FY24. Domestic steel prices have been under pressure due to a rise in imports, particularly flat products, which make up 95% of the imported steel. However, prices have started recovering—rising by about ₹3,000 per tonne—after the imposition of a safeguard duty on imports in April. Prices are expected to improve further after the monsoon, according to the company. The global outlook also offers some relief, with the World Steel Association projecting a rebound in consumption in 2025 after three years of decline. For FY25, SAIL's revenue dropped 3% to ₹1.02 trillion due to lower realizations, even though sales volumes rose. Ebitda for the full year declined 4% to ₹10,630 crore. The company has set a sales volume target of 19.2 mt for FY26, up from 17.9 mt in FY25. Also read: JSW-Bhushan case: Time to rewrite India's insolvency code? Operational efficiencies helped SAIL save ₹650 crore in FY25 through measures like reduced fuel consumption and higher throughput at efficient plants. Employee cost also declined during the year, despite a one-off adjustment in Q4, with a reduction in manpower and management expects savings of ₹400-500 crore in FY26. The company's plant-wise earnings reflect the disparity in steel product categories. While Ebit (earnings before interest and taxes) at Bokaro and Rourkela plants—focused on flat products—dropped 66%, Ebit at long-product-focused IISCO and Bhilai plants rose 25%. Capacity expansion plans SAIL aims to increase its total steelmaking capacity to 35 million tonnes per annum (mtpa) by FY31, up from the current 20 mtpa. The first phase of expansion, involving debottlenecking to add 2–3 mtpa, is expected by FY28. Capital expenditure (capex) is budgeted at ₹7,500 crore for FY26, up from ₹6,400 crore in FY25. Peak annual capex could reach ₹10,000 crore in FY28-29, which may put temporary pressure on the balance sheet—similar to the strain seen during the last expansion cycle between 2010 and 2020. SAIL shares have gained about 15% so far in 2025, buoyed by signs of a steel market recovery. Analysts say that trends in steel pricing and volumes will be key to determining future performance. Nuvama Institutional Equities expects the company to deliver 21% CAGR Ebitda growth over FY25–27, supported by stronger prices and lower coking coal costs. Also read: Steel prices climb as 'safeguard' duty looms, user industries warn of cost inflation
Mint
15-05-2025
- Business
- Mint
Hear out the SC on laws and effects
The Supreme Court's decision on Tuesday in a competition-law case is eminently notable. More than a decade after the Competition Commission of India found Schott Glass India guilty of abusing its market dominance, the apex court has put a final stamp on a reversal of that finding, noting firms mustn't be penalized for their size, unless they're shown to have disrupted rivalry in a market. Also Read: A judiciary that refrains from judicial overreach can better serve the cause of justice Doing so could cause economic setbacks, to guard against which the court advocated an 'effects-based" standard of adjudication: 'Heavy-handed enforcement, divorced from market effects, would discourage the long-term capital and expertise the economy urgently needs." Also Read: The SC's JSW-Bhushan ruling will hit both the IBC and investor confidence The bench made this observation in the global context of protectionist walls going up and the 'prudence" needed for India to emerge as a hub for manufacturing, life sciences and tech. That economic value must generally be taken under consideration in legal cases is a powerful argument. Also Read: Complete justice: Article 142 should be invoked only in truly rare cases A counter-argument is that the law might look blurry if rulings are subject to frequent legal relativism. What's clear is that the more context matters, the more we'll need to rely on the wisdom of judges.
Mint
13-05-2025
- Business
- Mint
JSW-Bhushan case: Time to rewrite India's insolvency code?
Few come out smelling of roses from the Supreme Court (SC) ruling that annulled the takeover of Bhushan Power and Steel Ltd (BPSL) by JSW Steel Ltd and ordered BPSL's liquidation, using the SC's special powers to ensure 'complete justice" under Article 142 of India's Constitution. The successful bidder, JSW, the Committee of Creditors (CoC) in charge of BPSL and the Resolution Professional (RP) all came in for criticism from the bench for acts of omission and commission that should have been penalized by the National Company Law Tribunal and its appellate body. The SC's decision was critiqued for its apparent disregard of alternative remedies that would have penalized offenders without severe blows being taken by economic value and the reputation of how India resolves cases of insolvency. Also Read: The SC's JSW-Bhushan ruling will hit both the IBC and investor confidence In all this, it is unclear why the Insolvency and Bankruptcy Board of India (IBBI), the relevant regulator, was not hauled up for ineffective oversight of the resolution process in this case. The BPSL saga began with the Reserve Bank of India forcing various banks to subject 12 big defaulting corporate borrowers to the pathway laid out by the Insolvency and Bankruptcy Code (IBC) in 2016. Whether the entire dozen truly merited it, their lenders were in a better position to judge than the banking regulator, but once banks were pushed, proceedings began in 2017. Eight years later, several cases remain unresolved. Now BPSL, hailed four years ago as an IBC success, joins their stalled ranks. Also Read: Mint Quick Edit | JSW-Bhushan case: Close insolvency process gaps The SC found serious misconduct in the way BPSL's resolution was carried out. While there were two bidders apart from JSW, namely Tata Steel and Liberty Steel, the CoC failed to record their bids, called in only JSW for parleys, and then let JSW alter the terms of its original bid, delay payments and renege on its commitment to pay off operational creditors before financial ones. Also found amiss was the use of certain convertible debentures for payments by JSW, which was held as having failed to carry out its promised equity infusion in BPSL. The SC has shone a light on the acquirer's failings, the CoC's tolerance of these and the RP's violations of IBC norms and IBBI rules. As for JSW's eligibility as an acquirer (or lack thereof), the Enforcement Directorate had challenged the company's bid for BPSL on the ground that both were 'related parties,' as they jointly owned a coal company, and such a deal was disallowed under the IBC. Also Read: Do creditor committees in insolvency cases need an oversight body? Several questions arise. Can insolvency resolution be reformed to guard it from such setbacks? Should we strengthen the current process by making the IBBI a true regulator, rather than a mere framer of bylaws? Or should the IBC-laid process be overhauled to resemble the US model, in which the incumbent management is given a chance (under Chapter 11) to freeze loan-servicing temporarily, while it takes drastic steps to revive the company; and if that fails, it gets liquidated under court supervision. This would do away with the RP's role, which can be dubious. On another plane, if fraud is detected in the award of a highway contract, say, should the judiciary rip up an already built road or let the asset keep generating value while fraudsters are penalized? The answers don't blow in the wind. They must be firmed up and acted upon. Let's resolve bankruptcy cases speedily, for which integrity and efficiency must combine to shuffle poorly used assets into more capable hands when so required. It's a must-have for any dynamic economy.
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Business Standard
07-05-2025
- Business
- Business Standard
CoC to meet on JSW-Bhushan case in 3 days: PNB MD & CEO Ashok Chandra
The Committee of Creditors (CoC), led by Punjab National Bank in the case of Bhushan Power and Steel Ltd (BPSL), will be meeting with other lenders New Delhi Listen to This Article Punjab National Bank (PNB) expects clarity on the JSW-Bhushan development loan account in the next three days, said Managing Director and Chief Executive Officer ASHOK CHANDRA in a video interview with Harsh Kumar. The state-owned lender on Wednesday reported a 51.7 per cent year-on-year (Y-o-Y) increase in its net profit to ₹4,567 crore for the fourth quarter of 2024-25. The net profit was ₹3,010 crore in the year-ago period. Edited excerpts: When is the Committee of Creditors (CoC) meeting scheduled to decide the future course of action in the case? And what would be the provision requirement for PNB due
