Here is a list of lemons (troubled assets) held by debt schemes of various Mutual Funds -
Qualification - at least 3 lemons post Aug 2018
1. BoI AXA - 6
a) Sintex
b) DHFL
c) Kwality
d) ILFS
e) Coffee Day
f) Avantha Holdings
Thread (1/10)
2. Reliance Nippon - 6
a) ZEE LAS
b) DHFL
c) Morgan Credit (Yes Bank promoter)
d) Reliance Commercial Finance (ADAG)
e) Reliance Home Finance (ADAG)
f) Avantha Realty
(2/10)
3. Birla Sunlife - 5
a) ZEE LAS
b) Wadhawan Global (DHFL Promoter)
c) ILFS Tamil Nadu Power
d) Jharkhand Road Project (ILFS)
e) ILFS Education
(3/10)
4. Franklin Templeton - 5
a) ZEE LAS
b) Wadhawan Global (DHFL Promoter)
c) Reliance Infra (ADAG)
d) Reliance Big (ADAG)
e) Yes Capital (Yes Bank Promoter)
(4/10)
5. DSP - 5
a) ILFS Energy Development
b) ILFS Transportation
c) DHFL
d) Sintex
e) Coffee Day Natural Resources
(5/10)
6. Pramerica - 5
a) ZEE LAS
b) DHFL
c) Reliance Big (ADAG)
d) Business Broadcast (ADAG)
e) Reliance Commercial Finance (ADAG)
(6/10)
7. Invesco - 4
a) ILFS Transportation
b) DHFL
c) Sintex (ADAG)
d) Business Broadcast (ADAG)
(7/10)
8. UTI - 3
a) Jorbat Shillong - ILFS
b) DHFL
c) Business Broadcast (ADAG)
(8/10)
9. Kotak - 3
a) ILFS
b) ZEE LAS
c) DHFL
(9/10)
10. L&T - 3
a) DHFL
b) Reliance Broadcast (ADAG)
c) Business Broadcast (ADAG)
* Please do let me know if I have omitted or added something by mistake.
(10/10)
Most equity analysts I have interacted with till date had little understanding of debt beyond leverage ratios. As a result, they are not able to fully comprehend the risks associated with debt. Here are a few lessons for equity analysts. 1/11
1. Unviable promoter level debt would adversely impact the operating company eventually. A promoter who is financially cornered will always look for ways to squeeze money out from the operating company. Some of these desprate measures could well be unscrupulous. 2/11
2. A debt-stressed company drains out healthier companies of the group. It is rare that a promoter lets go of a company easily. He tries hard to support the weaker entity through the resources of stronger entities (via ICDs, guarantees etc.) thereby jeopardising the later. 3/11
12 things to remember while buying Life Insurance:
1. Take term plan and not an endowment plan. The insurance cover is higher for a term plan for the same premium. However, you do not get maturity benefits in term plan. Remember, you are buying Insurance and not a FD. 1/9
2. Take your plan from an insurance company that is expected to survive 20-30 years. Insurance is used over long periods and therefore it is necessary to choose a company that has a size/ networth for a long life (what an irony!). Don't look beyond LIC, SBI, ICICI and HDFC. 2/9
3. Take adequate cover - If you think Rs. 2 Cr is a good enough cover for you; wait; increase your cover to Rs. 5 Cr. Inflation levels are high in India and money loses its value very fast. Remember how valuable Rs. 1 lakh were 20 years back. 3/9
Microfinance Institutions on the brink...yet again!!
The microfinance industry in India could never really recover from the Andhra crisis of 2009-10. Just when things start to normalise, a new crisis rocks the boat. There has been no respite. Thread 1/11
From inept legislation to demonetisation, from political interference to religious diktats and from frauds to natural calamities, Microfinance Institutions (MFIs) have been battered by every risk possible. The latest in this series of pitfalls is the Corona lock-down. 2/11
Following is why I feel it's the biggest threat ever:
1) Collections have come to a grinding halt - The loan collections have largely been in cash. The lock-down has severely impaired collection efforts as the mobility of collection agents and borrowers is restricted. 3/11
Recently, Standard & Poor (S&P) warned that India's SR will be downgraded if the country's economic growth does not recover. Bond yields spiked soon after the S&P red flag. Here's why India should take the warning seriously. Thread 1/11
SRs of 3 agencies - S&P, Moody's and Fitch are considered important. Currently, India is rated BBB- (Stable) by S&P, Baa2 (Negative) by Moody's and BBB- (Stable) by Fitch. Simply put, India is barely investment grade as per S&P and Fitch and a notch better as per Moody's. 2/11
Following are the reasons why SRs are important and why India should heed S&P's warning.
1. There is a clear correlation between bond yields/ spreads and SRs i.e. a poor SR could increase the cost of borrowings of Government as well as corporates. 3/11
A letter from Sterling Wilson Solar Ltd. (SWSL) dated Nov 14, informing the exchanges about the extension of debt repayment deadline granted to promoters (Shapoorji Pallonji Company Pvt. Ltd. - SPCPL & K. Daruvala) has created widespread panic. 1/14
As at Aug 19, other companies of the promoters owed Rs. 2,563 crore to SWSL. SWSL, in Aug 19, was IPO bound and the promoters, in the red herring prospectus, promised to pay off the entire debt owed to SWSL, within 90 days, from the IPO proceeds. 2/14
The SWSL IPO was entirely an offer for sale i.e. the IPO was meant only to dilute the promoters' shareholding and no IPO proceeds went to SWSL. The IPO was under subscribed (92%) yet the promoters managed to raise ~Rs. 2,850 crore. 3/14
Insolvency & Bankruptcy Code (IBC): The story so far
IBC was enacted in Dec 2016, with the objective of ensuring speedy resolutions of NPAs. It was hailed as one of the most landmark reforms in India. This post is an attempt to understand if this code lived up to its promise.1/9
Till June, 2019, 2162 cases have been admitted. Of these, 174 have been closed on appeal or review or settled; 101 have been withdrawn; 475 have ended in liquidation and 120 received an approval of resolution plans. 1292 cases are pending. 2/9
The 120 closed cases have yielded resolution worth ~Rs. 1,08,070 crore as against total admitted claims of ~Rs. 2,52,577 crore i.e. the recovery rate was 43%. The liquidation value of these assets was merely 23% of the claims. So, IBC yielded a better than expected recovery. 3/9