Proposed PFC, REC merger hits roadblock over violation of RBI norms

The proposed merger of REC with state-owned shadow banking firm Power Finance Corporation has hit a roadblock and is not likely to happen in near future as it would violate Reserve Bank norms on the exposure of non-banking financial companies (NBFCs), according to sources.

As per the Reserve Bank of India's (RBI) norms, debt exposure of an NBFC in a project cannot exceed 25 per cent. The exposure of Power Finance Corporation (PFC) and REC as a merged entity would exceed the limit of 25 per cent in any existing project as the two firms have been financing power sector projects.

After the merger, the new entity will be required to reduce its exposure in a project to 25 per cent which may not be feasible.

"The merger of REC with PFC is unlikely to happen in near future because of RBI norms on exposure of NBFCs. The capacity to finance a project of the merged entity would be halved. As separate entities, they can finance up to 50 per cent in a project which would be reduced to just 25 per cent after the merger," one of the sources said.

In March 2019, PFC had completed acquisition of a majority stake in REC by transferring Rs 14,500 crore to the government with hope of merger of the two firms in 2019-20.

PFC Chairman and Managing Director Rajeev Sharma told PTI, "We have given money to the government. Now, the government would decide about the merger."

At the time of completing the acquisition last year, Sharma had said, "We are hopeful about merger of the two firms (PFC and REC) during 2019-20. We have to get direction from the government in this regard and then we would appoint consultant for the purpose."

According to the sources, PFC has borrowed fund at an interest rate as high as 7.25 per cent for completing this deal while it is rasing money through bonds at a rate as low as 4.25 per cent for funding power sector projects.

The sources said the deal has dented the profitability of PFC as it has to raise funds from the market at higher rates for funding government divestment.

This stake acquisition was in pursuance to the in-principle approval from the Cabinet Committee on Economic Affairs for strategic sale of 52.63 per cent of paid-up equity shareholding of REC held by the government to PFC, along with the transfer of management control.

PFC had acquired 103.94 crore shares constituting 52.63 per cent equity stake held by the government in REC along with the management control at a cash purchase consideration of Rs 14,500 crore. The acquisition price of REC per equity share worked out to Rs 139.50 per piece.

Power Finance Corporation has financed 70 per cent of the deal from the cash inflows from the business and the balance 30 per cent is through debt.

The source also said the merger would also reduce a sense of competition among the executives of two entities and customers would be deprived of benefit of finer lending rates.

Tata Motors posts Q3 net at Rs 1756 cr on strong JLR performance; sales dip

Tata Motors on Thursday posted a consolidated net profit of Rs 1,755.88 crore for the third quarter ended December 31, 2019.

The auto major had reported a net loss of Rs 26,960.8 crore during the October -December period of 2018-19. Total revenue from operations stood at Rs 71,676.07 crore as compared with Rs 76,915.94 crore in the year-ago period, Tata Motors said in a regulatory filing. On a standalone basis, the company posted a net loss of Rs 1,039.51 crore as against a profit of Rs 617.62 crore in the year-ago quarter.

Standalone total revenue stood at Rs 10,842.91 crore as compared with Rs 16,207.67 crore in the same period a year-ago. During the third quarter, the company's standalone wholesales, including exports, declined 24.6 per cent to 1,29,185 units.

Revenues of British arm Jaguar Land Rover increased to 6.4 billion pounds, up 2.8 per cent as compared to same period last fiscal. The brand's total retail sales fell 2.3 per cent during the period under review as against the same period of previous fiscal.ALSO READ: Tata Motors launches EV variant of SUV Nexon, price starts at Rs 13.99 lakhWhile Jaguar Land Rover has continued its turnaround, market decline and BS-VI stock reduction in domestic market has affected company's performance, Tata Motors said.

Jaguar Land Rover continued its turnaround and transformation journey with another quarter of strong delivery. China continues to improve gradually while Project Charge is well ahead of plans having already delivered 2.9 billion pounds so far, it said.

In India, the auto industry continues to be impacted by the general economic slowdown. The profitability was impacted by adverse mix where despite increasing market shares, M&HCV volumes declined, the company said.

"This coupled with proactive system stock reduction of Rs 3,800 crore resulted in loss of operating leverage," it said.

It further said, "Though the near-term market situation is fluid, we are optimistic on the medium term as we launch our exciting BS-VI range of products with our system inventory at a multi-year low. We remain focused on driving our turnaround strategy and transitioning seamlessly to BS-VI."

Shares of Tata Motors on Thursday ended 0.98 per cent lower at Rs 186.20 apiece on the BSE.

Aurobindo's oral solid formulations unit under USFDA scrutiny

The US Food and Drug Administration (US FDA) has escalated the audit observations issued for Unit 7 of Aurobindo Pharma Limited in October, 2019 to the Official Action Indicated (OAI) level in a latest communication to the company.

The latest classification of the audit evaluation indicates the regulatory and/or administrative actions will be recommended against the unit by the US drug regulator based on the objectionable conditions found during the inspection,

Aurobindo's Unit 7 oral solids formulations manufacturing facility located at Polepally in Telangana was issued Form 483 with 7 observations after a CGMP (current good manufacturing practices) inspection was conducted from September 19-27, 2019. Though the company maintained that it was confident of addressing these issues within the stipulated timeline, the OAI classification signals that the issues flagged during the previous inspections remain unresolved.

The company in a filing on Thursday said the OAI classification will not have any material impact on the existing revenues or the supplies to its US business at this juncture. "The company will work closely with the regulator to comprehensively address the issues,"it has added.

The year 2019 was a challenging year for Aurobindo on regulatory compliance front as half a dozen of its manufacturing facilities fell short of the aspects involving compliance parameters or the manufacturing practices prescribed by the US drug regulator. In June, 2019 the company had received a warning letter from the US FDA for Unit 11 active pharmaceutical ingredients (API) manufacturing facility in Srikakulam of Andhra Pradesh for CGMP issues among other things.

University of Illinois offers 'soft-landings' to Indian startups in US

The University of Illinois has offered "soft-landings" to Indian startups in the United States in terms of helping them access expertise, secure mentorship and in "curation and conditioning" aspects.

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Its President Timothy L Killeen lauded the vibrant Indian startup ecosystem and said his university with its experience and being located "at the heart of the market" can offer help to such firms.

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"I think that we can help the Indian startup ecosystem by providing soft-landings, in the United States, where we are at heart of the market, accessing expertise, getting mentoring etc,...," he said.

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"There can be curation aspect which can materially help that innovated ecosystem in India kind of optimise itself; the ideation is there, the hard work is there (by Indian startups), I think some conditioning we can provide with our experience...we can be very helpful for them", Killeen said.

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A delegation of the University, led by Killeen, is currently on a visit to India to strengthen collaboration with several academic institutions and companies, including IIT Delhi and Mumbai, BITS Pilani, L&T, and the Ramaiah Group of Institutions.

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"There is certainly excellence in thinking in these (top higher education) institutions...so hard-working, modest to a fault", he said at a media interaction at the Ramaiah Group of Institutions here.

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"We see untapped potential...almost explosive (in India); India is going to be major contributor to the rest of the century," added Killeen, who has more than three decades of experience as an educator, researcher and administrator in public higher education in the United States.

JLR CEO Ralf Speth to retire Sept; remain on Tata Sons board: Tata Motors

Tata Motors on Thursday announced the retirement of Ralf Speth as Executive Director and Chief Executive Officer of Jaguar Land Rover (JLR) at the end of his contract term in September.

Speth will maintain his relationship with the Tata Motors-owned firm by taking up the role of non-executive vice chairman, N Chandrasekaran, Chairman of Tata Sons, Tata Motors and Jaguar Land Rover, said in a regulatory filing.

Speth will also remain on the board of Tata Sons, he added.

"Professor Sir Ralf Speth has decided to retire from his current role as Executive Director and Chief Executive Officer of JLR at the end of his contract term in September 2020," as per the filing.

"I want to thank Ralf for his passion and commitment over the last 10 years. Ralf developed Jaguar Land Rover from a niche UK centric manufacturer to a respected, technological leading, global premium company," Chandrasekaran said.

"A search committee has been formed which will work with me to identify a suitable successor in the coming months," he said.

"Personally, I am looking forward to new and exciting challenges," Speth said.

The shares of Tata Motors were trading at Rs 189.00 apiece on BSE, up 0.51 per cent from the previous close.

Engineering firms flock to data centre biz, see opportunities worth $2.7 bn

A steady stream of traditional engineering companies is building and maintain data centres, a business projected to grow 8.5 per cent annually.

“Data centres are extremely high on engineering,” said Prasanna Sarambale, chief executive officer for data centre business and group head for business development at Sterling and Wilson. Sarambale expects the business, by the end of this financial year, will clock a turnover of Rs 400 crore annually.

Larsen & Toubro (L&T) and KEC International are two other companies looking at this business. L&T is already executing multiple projects, and KEC International hopes to bag its maiden project soon.

“We are the lowest bidder in a data centre project,” said Vimal Kejriwal, managing director and chief executive officer for KEC International. His company believes data centres are right up its street, as it specialises in civil engineering, cables and smart cities segment.
“It also brings business to our transmission and distribution (T&D) business, as data centres are power intensive,” said Kejriwal.

“The opportunity in building these centres may be around Rs 4000 crore per annum, while it may be Rs1000 crore for the related infrastructure like DG sets. It is a good opportunity for contractual work for building them. The capital goods opportunity, in terms of hardware requirements, is limited for Indian companies, as most of the parts are imported,” said an analyst with a domestic brokerage firm who did not wish to be identified.

Industry data suggests engineering opportunities worth $2.7 billion in data centres and the number is expected to become $ 4 billion by 2024. “We are seeing more competition entering this segment…this is an industry that is flourishing,” said Sarambale.

Capital goods companies an annual turnover of Rs 200 crore from data centres.

Typical of engineering companies, data centres are being targeted for two kinds of opportunities: construction and maintenance. “We have built data centres and handed them over. There are some which are with us on a build operate and maintain basis,” said a person from a major engineering company who did not wish to be identified.

Some others, like ABB India, have spotted potential in servicing these data centres. “Many more global co-location companies are investing and expanding their Indian Business. It is one of the emerging drivers of growth for ABB in India and in the past three years we have witnessed significant traction in the data centers segment,” said CP Vyas, President, Electrification business, ABB India. ABB offers a range of products and solutions to contribute to power availability, reliability and low carbon emissions for data centers.

The ABB executive expects Internet of Things (IOT), artificial intelligence and cloud computing complimented by e-governance, 5G rollout initiatives by the Indian government will create more opportunities. The government’s smart cities initiative is already contributing to the data centres related order-book for various engineering companies. State-sponsored welfare schemes are also expected to contribute to higher demand for centralized data centres.

For companies like Sterling& Wilson alone, order book for data centres stands at Rs 800 crore to Rs 900 crore. The company is also tapping international markets, which contributed 15 to 20 per cent to the segment turnover.

AGR: COAI urges govt to offer telcos 10-15 years for settlement of dues

Industry body COAI is pitching for a 10-15 year payment schedule for telecom companies to pay their past statutory dues, beginning with part-payment upfront and a two-year moratorium.

This formula of easier payment schedule to meet statutory obligations would offer the much-needed reprieve to telcos such as Bharti Airtel and Vodafone Idea, whose combined liabilities after the recent SC verdict run into billions of dollars, according to the Cellular Operators' Association of India (COAI).

COAI Director General Rajan Mathews said the industry requires a debt package for payment of past statutory dues with a two-year moratorium, as in the case of payment made for spectrum bought in auctions.

"Give telecom companies 10-15 years for payment of the full adjusted gross revenue (AGR) dues, a two-year moratorium and an interest rate at interbank borrowing rate levels that is at around 4-5 per cent," Mathews said.

There could be an upfront payment of about 15 per cent, which is equivalent of the principle AGR amounts, he added.

"The government will easily get Rs 15,000-20,000 crore only through upfront payments from large operators," Mathews said.

This will be a "reasonable" payment schedule for the crisis-ridden telecom industry, as it would allow them to invest money into network expansion and new technologies, the COAI said.

Fifteen telecom companies owe the government Rs 92,642 crore in unpaid licence fee and another Rs 55,054 crore in outstanding spectrum usage charges. These liabilities arose after the Supreme Court in October last year held that non-core revenues have to be considered for calculating statutory dues from adjusted gross revenue (AGR).

In the case of Bharti Airtel, the liabilities added up to nearly Rs 35,586 crore, of which Rs 21,682 crore is licence fee and another Rs 13,904.01 crore is the spectrum usage charge dues (not including the dues of Telenor and Tata Teleservices). Vodafone Idea, which is staring at unpaid statutory dues of Rs 53,038 crore, including Rs 24,729 crore of spectrum dues and Rs 28,309 crore in licence fee, has already warned of shutdown if no relief is given.

Bharti Airtel, Vodafone Idea Ltd, and Tata Teleservices have, meanwhile, jointly filed a modification application in the Supreme Court seeking more time to pay the statutory dues.

The fresh plea for relief on the payment schedule came after Supreme Court, earlier this month, dismissed the review petitions filed by telecom companies against the apex court's October 24, 2019, verdict.