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Ani
@anavrta
, 19 tweets, 7 min read Read on Twitter
Borrowing rates for most developers have surged to the highest in more than a decade, in some cases about 20%.

Mortgage lenders struggling to roll over debt amid downgrades in their credit ratings.

Limited disbursals from committed Pre-sanctioned limits

livemint.com/industry/banki…
Tough time to be a lender.

Even tougher to be a Regulator!

RBI can at most ensure systemic liquidity remains well provided.

How can the RBI enforce last mile liquidity which has dried up due to loss of risk appetite among lenders amidst defaults/rating downgrades?
Real Estate and Real Estate Funding has been one of the least transparent and complex areas of Indian lending.

Disclosures by Dewan Housing, a AAA rated entity Jan-19, highlight the sources or risk aversion among banks/investors towards NBFCs and Real Estate financing at large.
Procedural Lapses and Documentation Deficiencies have resulted in ambiguity in the “end use monitoring of the funds loaned”.

Brings into question the value of loan assets residing in the balance sheet.
Unpaid “inter corporate deposits” getting converted into “secured loans” which were to be bridge financing.

Documentation Deficiencies - Part 2

Corporate Governance Question Marks
Management hopes, erm “believes”, Assets of ~Rs.208bn (Project/Mortgage loans) would face no enforceability challenges.

Documentation Deficiencies - Part 3
Repayments from Developers recognised as Revenue, but not banked! 😐

Bankers/ Investors begin to wonder - How reliable are the reported financials? Can we take decisions based on such financials with questionable revenue and cash position? 🤔
Capital is the raw material in lending business and the ability to roll over the capital determines the growth and well... the existence of a lending entity.

Management is honest to question the ability of the company to continue as a going concern.
With business restructuring imminent and inevitable, an ~8% markdown in assets to facilitate monetisation raises further questions.

What are the implicit assumptions and the rationale for the a markdown? Does this capture or are further markdowns in store?
“Deficiencies identified in historical data” which are constraining the roll out of the Expected Credit Loss Model.

More questions added to the entire historical lending premise and reported financials?
Quasi AQR report from NHB for FY18, a year before the stress emerged, deems the correct Capital Adequacy Ratio as 10.24% (v/s the reported 15.3%)!!!
Risk averness led constrained last mile liquidity to the Real Estate ecosystem has its origins in Credit Risks.

The clean up of the ecosystem will continue, but the budget proposal of credit guarantee upto 10% first loss can help clear the credit thaw & isolate problem entities.
RBI Residential Asset Price Survey

Mumbai remains the least affordable city in India.
Knight Frank: The mood of residential realty in Mumbai continues to be somber and withdrawn.

Unsold inventory across top eight cities recorded a decline of 9% in 1H 2019.

Mumbai was the only market to record an increase in inventory overhang of 14%.

thehindubusinessline.com/news/real-esta…
Omkar Developers cans its biggest slum redevelopment

More than 80 slum redevelopment projects are stuck in the city as some or other the activist has instigated the public.

dnaindia.com/mumbai/report-…
Countering the stand of companies that homebuyers should not be part of proceedings under IBC, Govt said providing alternative remedy to them under a separate law does not violate any constitutional provisions.

Sought dismissal of all the petitions

timesofindia.indiatimes.com/city/delhi/law…
PropEquity: Real Estate Distress due to

1. Financial distress of small developers;
2. Lack of execution capability;
3. Inventory Oversupply;
4. Excessive land banking;
5 Poor understanding of demand supply;
6. Unjustified price appreciation

economictimes.indiatimes.com/industry/servi…
How India’s tallest building ended as an unfinished construction site

Bets on expensive property go bad in downturn, scaring off buyers/choking credit.

Real Estate Debt: Developers collectively owe about Rs2.5tn ($37bn) to the non-bank financial sector.

amp.ft.com/content/9f67b9…
Another Real Estate NBFC defaults despite being well capitalized + Low NPAs + strong pedigree of financial sponsors.

Peak risk aversion among lenders impairing rollovers for RE-NBFCs.

Focused on lending to mid-income residential/ Commercial RE projects across Tier-1 cities.
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More from @anavrta see all

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Ani
@anavrta
Your savings lie in 2 bank acs - Bank B (for contingencies) & in Bank A (for daily expenses).

Due to an externality, you estimate that your expenses > than income + Bank A savings.

You have surplus savings in Bank B.

Will it be a good move to transfer the surplus from B to A?
In absence of this transfer, you may have to borrow to meet the expenses for the contingency.

Would it not be preferable to minimize increasing the debt burden when surplus savings can help partly meet the contingency?

That essentially is what’s happening with RBI transfer.
1. On behalf of We The People, Government manages the Public Exchequer. (Bank A)

2. Government (We The People) is the shareholder of RBI (Bank B)

3. Transferring Surplus from Bank B to Bank A does not alter claim of We The People.

4. It is an accounting entry for WTP!
Read 8 tweets
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Ani
@anavrta
Dr. Urjit Patel’s presentation at Stanford is an extremely detailed and thoughtful analysis of Indian Banking.

Provisioning policy of Indian Banks has long been at odds with the Loss Given Defaults of lenders.

From Subbaro to Patel, all governors have called for this correction
Dr. Patel has dispassionately analyzed why Indian Banks have been structurally challenged.

He rightly calls out the failures on part of key stakeholders: Banks, RBI and Government.

The analysis has been broken down into Pre 2014 and Post 2014.

The buck stops with Pre 2014 Govt
The Post 2014 Analysis makes for an insightful read to understand the building blocks of the measures taken to structurally rebuild Indian Banking.

Interesting to note the challenges in the systematic turnaround despite the Legislative, Regulatory and Financial interventions.
Read 8 tweets

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Funter
@Funter21510910
There have been a flurry of public issue of NCDs lately. These issues are primarily from NBFCs who are finding it tough to raise funds though banks and MFs. Here, I explain why the public issue NCDs are not in the interest of retail investors. Thread (1/9)
A) There is a common misconception that public issue NCDs are akin to Fixed Deposits (FDs). FDs of PSU banks are covered under the umbrella limit of 1 lakh deposit insurance. NCDs are not. A case in point is the expected loss to retail investors in DHFL public issue NCDs. 2/9
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Gaurav
@Gaurav1105
1. NBFCs grew fast, led by retail loans, Bingeing on cheap money. This in turn created a virtuous cycle -as numbers kept growing, so did cheap credit. While ~11,400 NBFCs operate in India, the top 400 —primarily backed by banks and fin. companies— control 90% of the sector’s AUM.
2. Between FY13-17, nearly $57B flew into Indian bond & liquid funds, resulting in wholesale borrowing rates fall to as low as 6-7% around mid-2017.
Interestingly, the flow of cheap money changed the funding mix of NBFCs over the decade and re-adjustment became more pronounced...
3. ..during the last five years. Bank funding (as %) went down and market borrowing (as %) went up. Low rates resulted in NBFCs borrowing significantly from wholesale market, mutual funds, banks, etc. and lending it primarily for retail loans.
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Garrett Wollman
@garrett_wollman
Well, I should be getting ready to do a trainer ride this evening, but I went to the @MBTA board meeting this morning, so I'm going to spend time I should be exercising writing this recap instead. There were two meetings earlier this month I did not attend for lack of interest.
This is the first meeting with a full board since the appointment of former director @spoftak to be the new MBTA general manager. Gov. Baker secretly appointed Chrystal Kornegay, executive director of MassHousing, to the board on Friday, and she was formally introduced today.
There is as yet no press release announcing her appointment on mbta.com, which seems a serious oversight. I'm not press so I don't know if any sort of statement went out on embargo. Director Kornegay did not ask any questions today so I have time to learn her name.
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Millennial Macro
@MillennialMacro
#demographics #militaries #economies #currencies
#USA
- Best demographics
- Largest military
- Largest economy
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- Liquid financial markets
- Open capital account
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- Best geography
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- Not trade dependent
#USA
Top trade partners as of 30 June 2018:
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The next 10 years could result in the below:
- Mexico (25%)
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- Great Britain (4%)
#USA
Bring the manufacturing (jobs) home while negatively impacting China's economy.
forbes.com/sites/kenrapoz…
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Ezra Zuckerman Sivan
@ewzucker
In light of several “bad peer review" shared on twitter recently, I thought I’d share one of my stories. It is long (buckle up!) but I think instructive for what it reveals about the logic of the system. (It might also be a "bad author" story...)

Here goes:
More than a decade ago, a colleague & I were struggling to publish a paper we thought was pathbreaking. Versions of it were rejected by two major journals. We were frustrated we weren’t...
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