CG Power sacks Gautam Thapar as its chairman with immediate effect

CG Power & Industrial Solutions on Thursday said its board has sacked Gautam Thapar as its chairman with immediate effect after an investigation that unearthed a multi-crore financial scam in the firm.

"In cognizance of the current situation being faced by the company and the recent developments, including disclosures dated August 19, 2019, made by the company, the board of directors... passed by majority consent, have resolved to remove Gautam Thapar as the chairman of the board with immediate effect," CG Power said in a regulatory filing.

CG Power said this decision has been taken in the interests of the company and its stakeholders in discharge of the fiduciary responsibilities of the board.

On August 20, the company had stated that an investigation instituted by its board had found major governance and financial lapses including some assets being provided as collateral and the money from the loans siphoned off by "identified company personnel, both current and past, including certain non-executive directors."

Also, some liabilities and advances to related and unrelated parties had been understated.

While the board had on May 10 sent CEO and Managing Director K N Neelkant on leave, pending an investigation into some "suspect, unauthorised and undisclosed" transaction, Thapar continued as the company chairman.

Thapar has only 8,574 shares out of 62.6 crore shares of the company. Though a founder promoter of CG Power, he lost almost all of his shares after lenders, in past years, invoked pledges he had created to borrow money.

CG Power had stated that the transactions appear to be undertaken in a "seemingly fraudulent manner" and that it would investigate them further.

It had stated that the company's current and past employees, including unnamed non-executive directors and certain key managerial personnel (KMP) provided certain assets of the company as collateral and made the firm a co-borrower or guarantor to obtain loans without due authorisation.

The funds so raised were routed out of the company. This, the company said, had been going on for two years now.

Advances to related and unrelated parties of the company and group may have been potentially understated by Rs 1,990.36 crore and Rs 2,806.63 crore, respectively, as on March 31, 2018, and by Rs 1,479.34 crore and Rs 1,331.47 crore, respectively, as on April 1, 2017, a regulatory filing had said.

According to the filing, recovery of these amounts together with interest will be evaluated with appropriate legal inputs.

Also, total liabilities of the company and group may have been potentially understated by Rs 1,053.54 crore and Rs 1,608.17 crore, respectively, as on March 31, 2018, and by Rs 601.83 crore and Rs 401.83 crore, respectively, as on April 1, 2017, it noted.

These transactions, the filing said, appear to have been carried out by various means, including inappropriate netting off using ostensibly unrelated third parties, routing transactions through subsidiaries, promoter affiliated companies and other connected parties.

The company now plans to conduct a detailed forensic investigation to establish wrongdoing.

Yes Bank owns 12.79 per cent of CG Power, after it had invoked shares pledged by Thapar's Avantha Holdings Ltd in May. Mutual funds such as HDFC Asset Management Co and Aditya Birla Sun Life AMC Ltd as well as Life Insurance Corp (LIC) are shareholders of CG Power.

Shares of CG Power were trading 4.74 per cent higher at Rs 9.95 apiece on BSE.

India unlikely to meet sustainable development goals on health by 2030: CAG

India has a “long way to go” to achieve its target of public health spending, its primary health infrastructure is inadequate, and the country faces a dearth of data to track its progress to achieve the Sustainable Development Goals (SDGs) for health by 2030, the Comptroller and Auditor General (CAG) of India, the government’s auditor, has said.

These gaps “represent risks for the achievement of the key objectives of the 2030 Agenda”, the CAG said in a July 8, 2019, report.

While the health ministry proposed to increase India’s public health expenditure to 2.5% of its gross domestic product (GDP) by 2025, “it has remained within a narrow band of 1.02-1.28% of GDP”, the report said.

For this report, the CAG audited the NITI Aayog, the health ministry, the ministry of statistics and programme implementation, and 14 other ministries for preparedness to achieve SDGs. To analyse states’ performance, seven states--Assam, Chhatitsgarh, Haryana, Kerala, Maharashtra, Uttar Pradesh (UP) and West Bengal--were chosen based on their ranking on various health indices for 2015-16.

The NITI Aayog’s three-year action agenda (2017-2020) envisaged a rise in the Centre’s health budget to Rs 1 lakh crore ($14.5 billion) by 2019-20. But, the allocations have fallen short: India allocated Rs 53,294 crore ($7.7 billion) in 2017-18, Rs 56,045 crore ($8.1 billion) in 2018-19 and Rs 65,038 crore ($9.4 billion) in 2019-20, the report noted.

India’s National Health Policy 2017, framed in line with the SDGs, prescribes increasing the health expenditure of states to more than 8% of their annual budgets by the year 2020, but the seven states evaluated spent between 3.29% and 5.32% for the period of 2012-2017, according to the report.

The National Health Mission--which provides for universal access to equitable, affordable and quality health care services--was conceived as the primary tool to reach health targets: maternal mortality ratio (MMR) of less than 70 deaths per 100,000 live births, neonatal mortality rate (NMR) of 12 deaths per 1,000 live births and under-five mortality rate (U5MR) of 25 deaths per 1,000 live births.

In 2017, India’s MMR was 130 deaths per 100,000 live births, according to Census data, while its NMR was 24 deaths per 1,000 live births and U5MR was 39 deaths per 1,000 live births, as IndiaSpend reported on September 20, 2018.

Yet, allocations to the National Health Mission fell short by 13.6% in 2018-19 compared to the budget projections, according to the CAG’s report.

Source: Report of the Parliamentary Standing Committee, cited in the Comptroller & Auditor General’s report

The standing committee of parliament on health, while examining the allocations, had observed that these shortfalls would affect the strengthening of health facilities.

India’s neonatal mortality rate (24 deaths per 1,000 live births) is higher than the global average (18). Sri Lanka (8), Bangladesh (18) and Nepal (21) are better off despite having lower per capita incomes, as IndiaSpend reported on September 20, 2018.

In 2015, India spend 1% of its GDP on public health, second-lowest in the south east Asia region, according to data cited in the National Health Profile 2018. That same year, Maldives spent 9.4%, Sri Lanka 1.6%, Bhutan 2.5% and Thailand 2.9%.

State spending on health yet to increase

To reach the 2025 target of spending 2.5% of GDP on health, the National Health Policy mandated states to increase their health spending on primary care by at least 10% every year.

In addition, a 4% health and education cess was also proposed which was not implemented.

The Policy, as we said, also prescribes increasing states’ health spending to more than 8% of their annual budgets by the year 2020. Yet, none of the seven states studied for this report by the CAG spent that amount by 2017.

Further, 29% of NHM funds with states were not spent over five years to 2016, as IndiaSpend reported on August 20, 2018.

Health shortages affect progress

Rural India has a shortfall of between 24% and 38% in the number of sub-centres, primary health centres (PHC) and community health centres in 28 states and union territories, data from the CAG’s 2017 audit report on reproductive and child health under the National Rural Health Mission, which seeks to strengthen the delivery of public health services in rural India, showed.

Each PHC with a load of more than 20 deliveries per month needs at least two medical officers, according to Indian Public Health Standards set in 2006. Chhattisgarh has a total of 341 doctors in PHCs, which makes for 0.43 doctor per PHC, lower than required, according to the data cited in the CAG’s report. There were “considerable” human resource shortages in Chhattisgarh and UP, the report said.

UP is one of the worst-performing states in infant and under-five mortality rankings, as IndiaSpend reported on March 16, 2017. While UP has a 30% shortage of PHCs, West Bengal has a shortage of 69%.

With a rural population of 62 million, West Bengal has one PHC for every 68,000 people--less than half the prescribed number of one PHC per 30,000 people.

Health Resources In Select Indian States, 2016-17

State Primary Health Centres Required Primary Health Centres Functioning Shortfall In Primary Health Centres Doctors in Primary Health Centres Average Doctors Per Primary Health Centre

Assam 1112 1014 98 1048 1.03

Chhattisgarh 870 785 85 341 0.43

Haryana 501 366 135 429 1.17

Kerala 1141 849 292 1169 1.38

Maharashtra 2461 1814 647 2929 1.62

Uttar Pradesh 5183 3621 1562 2209 0.61

West Bengal 3046 914 2132 918 1

Source: Report of CAG (No. 25 of 2017)

The population-doctor ratio in India was 11,082:1 in 2017 in government hospitals, 25 times higher than the World Health Organization recommendation of 25 professionals per 10,000 population, as IndiaSpend reported on January 28, 2019.

Dearth of data

The NITI Aayog, the government’s policy think tank and the body responsible for overseeing implementation of SDGs, and the statistics ministry in consultation with the state governments, were to prepare the National Indicator Framework, the backbone for monitoring of SDGs.

However, data for 137 of 306 national indicators were not available for 13 SDG goals, the CAG’s report said.

The framework includes 50 indicators related to health, but data for 23 of these--such as screening for cervical cancer among women and incidence of viral hepatitis--were not available, according to the report.

At both the Centre and the state levels, there was “evidence of insufficient efforts at putting in place a comprehensive indicator framework, identification of data sources, production of disaggregated data” for Goal 3 (good health and well-being), the report said.

“Better measurement, greater evidence and more informed reporting are expanding voter awareness and deepening policy debates,” as IndiaSpend reported on May 15, 2019. “This makes it imperative for central and state governments to improve the quality of public health data.”

Toyota, Suzuki enter into capital alliance amid a shake-up in auto industry

Strengthening their existing collaboration to develop futuristic technologies, Japanese automobile majors Toyota Motor Corp and Suzuki Motor Corp on Wednesday announced a “capital alliance” for equity investment into each other. While Toyota will acquire 4.94 per cent shares of Suzuki, worth $908 million, the latter will make a $454-million investment in the biggest automaker of Japan.

The latest investment comes months after the two companies announced a cross-badging deal under which they would manufacture vehicles for each other in the Indian market. Premium products from the Maruti stable such as the Baleno, Ciaz and Vitara Brezza will be sold under the Toyota brand with small changes. In return, Maruti will get technical know-how, which will help the company develop hybrid and electric cars. With the government giving impetus to cleaner fuel, the industry expects Maruti will have a significant advantage where it can develop such vehicles using Toyota’s research and development prowess.

Using Toyota’s know-how and facilities, Maruti is currently testing around 50 electric vehicle (EV) prototypes in the country.

“We are testing vehicles in different terrains and it will give us a good insight into what kind of EV will be suitable for the Indian market,” said Nikhil Vyas, head, corporate planning at Maruti Suzuki.

After the deal’s announcement on Wednesday, the stock price of Maruti Suzuki (MSIL), which contributes 34 per cent of the consolidated revenue of Suzuki, fell around 3 per cent. Analysts are divided over near-term benefits to Maruti from this partnership.

“Through this crucial capital alliance, we believe MSIL has hedged its need for technology as the sector embraces for disruption through connected, autonomous, shared, electric, considering Toyota’s massive R&D capabilities and current technological know-how. We believe this to be an overall positive for MSIL over the medium- to long-term,” SBI Caps said in a note.

However, some feel that Toyota, currently at seventh position with less than 5 per cent market share, has an upper hand in this partnership. According to them, while EV technology’s adoption for Maruti will take time, the risk of Toyota eating up from Maruti’s gain is higher.

“Toyota will be immensely benefitted from Maruti’s low-cost manufacturing and vast distribution platform in India,” said an industry executive. According to industry estimates, Maruti has around 2,500 dealerships across India as compared to 275 of Toyota Kirloskar.

Through deepening partnership with Maruti, Toyota in India will be able to draw buyers who opt for a pricey Innova or Fortuner model but choose a rival brand for their second or third car, a segment dominated by companies such as Maruti Suzuki. Toyota also wants to learn the art of selling small cars in India from Maruti and train its workers accordingly.

“We can clearly see the rationale behind the association for the Japanese companies and believe it could turn out to be a win-win for both. However, Maruti might need to take up the mythical role of ‘Atlas’ and do the heavy lifting to hold aloft this deal,” ICICI Securities said in a research note on April 16, explaining the partnership. It added risks outweighed potential future technology benefit for Maruti.

A similar alliance that Suzuki tried to form with Volkswagen, under which the German automotive giant had purchased a 19.9 per cent stake in Suzuki to gain benefit in key developing markets such as India, failed.

Maruti Chairman R C Bhargava refused to comment on the impact of the equity partnership.

Punjab Renewable Energy raises private equity investment from Shell

Indian biomass-based energy company Punjab Renewable Energy Systems has raised private equity investment from Shell.

Asset management firm responsibility was the first to invest during the company’s Series-A in September 2013, followed by a Series-B investment from Neev Fund in April 2019. With this follow-on investment by Shell, the company’s Series-B round stands fully subscribed and closed with an investment of Rs 55 crore.

Punjab Renewable is a pioneer in this sector with a good repository of biomass assessment, refined processes for biomass aggregation and logistics, O&M and BOOT contracts with reputed industries as long-te­n­or Steam Purchase Agree­ments (SPA).

Macquarie targets $675-mn bet on green, tech assets to ramp up investment

Australian investment bank Macquarie Group Ltd has targeted A$1 billion ($675.4 million) in its biggest capital raising to ramp up investment and take advantage of expected asset price growth in renewable energy, infrastructure and tech.

The raising comes just three months after Macquarie reported A$5 billion in excess capital, prompting UBS analysts to question the need to sell shares while Goldman Sachs analysts called the exercise a “surprise”.

DSG Consumer raises $65 mn in third fund

Venture capital firm DSG Consumer Partners announced the final close of its third fund at $65 million (Rs 465 crore), overshooting the target of $50 million, founder and managing director Deepak Shahdadpuri told VCCircle. The fund’s anchor investors are Belgian private investment firm Verlinvest SA, a New York headquartered single-family office, a global fund of funds and a Middle East single-family office.

The third fund—DSGCP III—had hit the first close at $30 million in April. The fund will invest between $500,000 and $2 million in seed or Series-A bets in 20-odd consumer brands in India and Southeast Asia.

Lakshmi Vilas Bank MD & CEO Parthasarathi Mukherjee announces resignation

Even as the Reserve Bank of India is yet to take a call on Indiabulls Housing Finance's plans to merge with Lakshmi Vilas Bank, the mid-sized private sector lender on Wednesday announced the resignation of its chief executive officer Parthasarathi Mukherjee.

Mukherjee quit citing personal reasons, the bank informed the bourses late in the evening. Mukherjee, who had served the larger rival Axis Bank before joining the Tamil Nadu based bank in 2015, was given a two-year extension this January.

Moody's downgrades YES Bank's ratings, changes outlook to negative

Moody's Investors Service on Wednesday said it has downgraded Yes Bank's long-term foreign-currency issuer rating and has kept the outlook at negative.

The long-term foreign currency issuer rating has been lowered to non-investment grade Ba3 from Ba1.

Moody's also downgraded the bank's long-term foreign and local currency bank deposit ratings to Ba3 from Ba1, foreign currency senior unsecured MTN program rating to (P)Ba3 from (P)Ba1, and Baseline Credit Assessment (BCA) and adjusted BCA to b1 from ba2.

It said the downgrade is on account of lower than expected amount of capital raised by the lender recently as well as the risk related to substantial decline in its share price.

"The outlook on the bank's ratings, where applicable, is negative. Today's rating action concludes the review for downgrade initiated on June 11, 2019," Moody's said.

The firm said the negative outlook primarily reflects the risk of further deterioration in the bank's solvency, funding or liquidity, as it continues to work through the asset quality issues and rebuilds its loss absorbing buffers.

Fall in share price will challenge the bank's ability to raise sufficient capital to maintain the rating at its previous level, it said.

On August 14, the bank raised Rs 1,930 crore as fresh capital through a qualified institutional placement (QIP).

"On a pro-forma basis, the QIP will moderately improve the bank's reported common equity tier 1 (CET1) ratio as of June 30, 2019 to 8.6 per cent from 8 per cent. Furthermore, Moody's expects the bulk of Yes Bank's operating profits will get consumed by loan loss provisions over the next 12-18 months, and thus not support internal capital generation," it said.

This will leave the bank dependent on external capital raising to improve its loss-absorbing buffers, which in Moody's opinion is becoming more challenging given the substantial decline in its share price.

The private sector lender has witnessed deterioration in its asset quality in the first quarter ended June with gross non-performing assets (NPAs) hitting 5 per cent as against 3.2 per cent by end of March 2019.

Besides, about Rs 10,000 crore worth of loans (about 4 per cent of total loans) remain on a watchlist, which means the bank expects these loans may translate into NPAs over the next 2-3 quarters, Moody's said.

In addition, about Rs 7,500 crore of bond investments (or 10 per cent of its total investment holdings) have experienced rating downgrades in the past quarters.

The bank has also taken some marked-to-market losses on investments that were downgraded.

"Although the bank's funding and liquidity profile has remained broadly stable, it compares weakly to other rated private sector peers in India," it said adding given the negative outlook, an upgrade is unlikely over the next 12-18 months.

"Nevertheless, Moody's could change the ratings outlook to stable if the bank maintains its current asset quality profile, or adequately provides for the stock of stressed assets; or concludes a further material capital raise that strengthens its loss absorbing buffers," it added.

However, if there is a sustained deterioration in the bank's impaired loans or loan-loss reserves or if the rate of new NPAs formation is significantly higher than previously experienced, the bank may face rating downgrade, it added.

Among others, decline in the bank's capital ratios on account of losses or inability to raise external capital as well as funding/liquidity deterioration could also impact the bank negatively.