Tata Sons’ chief ethics officer Mukund Rajan resigns

Tata Sons on Thursday issued a statement announcing the exit of Mukund Rajan, chief ethics officer of the group, citing “personal reasons”, and ending days of speculations.
“He will be evaluating entrepreneurial pursuits in the coming months,” the statement said. A spokesperson said Rajan’s last day at Tata Sons, where he has worked since the 1990s, will be March 31.
This, however, added a new twist to the battle for acquisition of the fibre assets of Tata Teleservices (TTSL). On December 7 last year, a consortium led by Rajan had made an offer of $1.2 billion for the business. If the deal went through Rajan would be the firm’s non-executive chairman.
The only contender for the acquisition was Tata Communications (TCL). Rajan’s consortium has not got any response from Tata Sons, said sources. Now, questions are being raised as to whether the deal would still be on the table or not.
Neither the Tata group nor Rajan commented on it, but sources said the offer could not be valid indefinitely. Sources in the know also said a decision on the fibre assets would take between four and six months. There were concerns about the new leadership. US investment company TPG would be only a financial investor if the Rajan-led consortium acquires it.
TCL had experience in running such a business and is best poised to take over the assets. TTSL is non-listed and does not need to go through a bidding process.

There have been previous attempts to shut down TTSL’s operations as well.
Officials from the department of telecommunications (DoT) said when the Tata group wanted to shut down TTSL they had said they wanted to merge it with TCL, the erstwhile VSNL. DoT owns a 26 per cent stake in TCL. The relationship between TTSL and TCL was one of cooperation. While TCL provided data and voice to 3,000 corporate clients, TTSL provided back-end services.
TTSL has a long-distance fibre network of 100,000 km and 25,000 km additional fibre in 40 cities. TCL, too, has a substantial long-distance fibre network. Thus, the acquisition would make sense of TCL.
Sources said the consortium has said it would ensure the employees would be retained. It would also honour the demarcation of business.
TCL would have to find ways to finance it. One way to do so would be take on more debt. It already has about Rs 92,136 million on its books, and it could go up substantially if it wanted to finance its offer through lending.
A fresh equity infusion by the Tata group could dilute the government state. Apart from the acquisition cost, it will need another Rs 3,000 crore to augment infrastructure.
The group took a major hit while selling TTSL’s mobile service business to Airtel, virtually free. They have already paid back loan of Rs 180 billion.

Tata Sons’ chief ethics officer Mukund Rajan resigns

In battle for control of Fortis Healthcare, it is advantage shareholders

The brewing war between Manipal Health Enterprises-TPG Capital combine and IHH Healthcare for control of Fortis Healthcare would be advantageous for Fortis’s shareholders as both parties are aggressively trying to raise their stakes in the company.
According to sources, both Manipal-TPG and IHH are eyeing a controlling stake in the company, which is likely to lead to two simultaneous open offers. Sources said both suitors would try to come up with premium offers to attract investors.
Lawyers said this was an example of a hostile takeover where both investors could make competitive open offers to reach a reasonable shareholding in the company. In such cases, a voluntary open offer is the way out for companies, wherein they will have to buy at least a 26 per cent stake in the company as part of the takeover code. A 26 per cent shareholding will automatically trigger the mandatory open offer for another 20 per cent of the company’s capital.
Both suitors are already in talks with existing institutional investors to acquire as much stake as possible after which they will make a voluntary open offer.
The last time such a bidding war took place was in the case of Kalindee Rail Nirman Engineers where Texmaco Rail and Jupiter Metal were locked in a battle for control. Texmaco managed to win control after Jupiter Metal bailed out. Interestingly, the premium for acquisition went as high as 40 per cent of the market price. In 2015, Deepak Fertilisers had made a hostile attempt to acquire Mangalore Chemicals & Fertilizers, but backed out after the acquisition cost became expensive when promoter Vijay Mallya and Saroj Poddar made a counter-offer.
“Investors will get a good deal in such a scenario as both parties are competing against each other to attract investors. However, the size of the open offer needs to be seen because if either party fails to gain control, it will have to continue in the company as an ordinary shareholder,” said an investment banker who did not wish to be named.
The shares of Fortis closed 0.91 per cent higher at Rs 160.2 per share on the BSE on Thursday. In the last month, the hospital chain’s shares have gained 16 per cent.
However, in terms of wresting control of the company, there could still be a stalemate due to the regulatory framework.

According to takeover regulations, an entity is said to be in control of a company when it has powers to appoint and remove the board of directors through an ordinary resolution. Such powers can be attained only when a company manages to own over a 50 per cent stake in the company. But in the case of Fortis, crossing the halfway mark looks challenging.
According to regulatory filings by Fortis, YES Bank and Axis Bank together own a 25 per cent stake in the company while mutual funds and foreign institutions own another 40 per cent stake. Retail investors own 7.1 per cent and the rest is distributed among high net worth individuals (HNIs) and corporate bodies.
Market investors Radhakishan Damani and Rakesh Jhunjhunwala together hold about a 1.5 per cent stake in Fortis Healthcare. Damani had picked up a 0.5 per cent stake in the company in January. Since the margin of difference is expected to be low, the role of Damani and Jhunjhunwala could be crucial. Also, many HNIs and retail investors are likely to follow in their footsteps.
Fortis has become a professionally managed company after YES Bank and Axis Bank revoked the shares pledged by its promoters. The Delhi High Court unencumbered assets of erstwhile promoters Malvinder and Shivinder Singh to execute the Rs 35 billion arbitral award that Daiichi Sankyo won in Singapore. As a result, these shares can now be transferred. Due to these legal contentions, the original promoters resigned from the Fortis board, which is likely to now culminate in a potential takeover war. An email sent to TPG Capital remained unanswered.

In battle for control of Fortis Healthcare, it is advantage shareholders

MARKETS LIVE: Sensex slips at open, Nifty below 10,350; banks extend losses

Benchmark indices opened lower following Asian stocks that were on the defensive on Friday as worries over the US investigation into the Trump Organization tested investor nerves, already frayed by fears US tariffs could hurt the global economy and trigger a trade war.

MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.2 per cent in early trade. Japan’s Nikkei was down 0.3 per cent.


Back home, The YSR Congress Party on Thursday moved a no-confidence motion in the Lok Sabha against the Narendra Modi government. The no-confidence motion can be accepted only if it has the support of at least 50 members in the House. The YSR Congress has nine MPs in the Lok Sabha. It has appealed to other opposition parties to support the motion. If accepted, it will be the first no-confidence motion moved, the first of this government’s tenure.

Meanwhile, India’s trade deficit narrowed to $12 billion in February, its lowest in five months, amid concern that a global trade war could hit its exports because of US President Donald Trump’s decision to hike import taxes on steel and aluminum.

Government is worried that its exports could be hit in the coming months by Trump’s decision to impose tariffs of 25 per cent on steel and 10 per cent on aluminum.

MARKETS LIVE: Sensex slips at open, Nifty below 10,350; banks extend losses

Alarm bells in BJP after UP bypoll defeat; talk of alliance in Opposition

The defeat of the Bharatiya Janata Party in all six Lok Sabha seats where by-elections were held this year has sounded alarm bells in the party in Uttar Pradesh ahead of the 2019 Parliamentary polls, while stoking speculation about the Opposition stitching an alliance together to take the BJP on after tasting success in the recent bypolls.

The BJP failed to break the jinx of repeated failures in Parliamentary by-elections in 2018 when it was defeated yesterday in Gorakhpur, the bastion of Chief Minister Yogi Adityanath, and Phulpur, earlier held by deputy Chief Minister Keshav Prasad Maurya.


The ruling party’s candidates in the two constituencies lost to the Samajwadi Party (SP), triggering a debate on whether political outfits opposed to the BJP could forge a mega alliance before the 2019 Lok Sabha polls.

ALSO READ: UP bypoll fallout: BJP withdraws two candidates for Rajya Sabha elections
The SP, supported by the BSP, romped home in the bypolls.

SP’s Pravin Nishad defeated Upendra Dutt Shukla of the BJP by 21,961 votes in Gorakhpur, a seat which had been with the BJP since 1989. Nagendra Pratap Singh Patel of SP cornered the Phulpur seat, drubbing the saffron party’s Kaushalendra Singh Patel by 59,460 votes.

As the results of the two by-election were declared yesterday, Adityanath said there was a “lesson” to be learnt from the outcome, and cited over-confidence and the inability to understand the implications of the pact between SP and BSP as the prime reasons for the BJP’s defeat.

ALSO READ: After by-poll loss, BJP leader Giriraj says Araria will become ‘terror hub’
UP Congress spokesperson Ashok Singh told PTI the outcome had brightened the prospects of the formation of a “maha gathbandhan” (grand alliance) ahead of the 2019 polls to defeat the saffron party.

“We will ponder seriously about a larger alliance keeping the next Lok Sabha polls in mind,” he said.

The Congress had contested the 2017 UP Assembly polls jointly with the SP and might want to tackle the polls together next year, too, another senior party leader told PTI, requesting that he not be named.

ALSO READ: UP bypoll result fallout: Yogi miffed with babus, mass transfers in offing
The outcome of the March 11 bypolls has sparked talk in political circles about a continuing pact between the SP and the BSP — once bitter critics in Uttar Pradesh.

SP chief Akhilesh Yadav thanked BSP head Maywati, his former arch-rival, for the support the Bahujan Samaj Party gave the SP candidates in the by-elections.

“Foremost I want to thank BSP leader Mayawati for her and her party’s support in this important fight,” he told the media yesterday.

Though he did not take any questions on prospects of an alliance in the next Lok Sabha polls, saying that all he wanted to do for the present was thank the parties which had helped SP in its “grand” victory, there is conjecture about the parties coming together to fight the BJP.

The prospect of an anti-BJP alliance meeting with electoral success was also highlighted in Bihar, where Lalu Prasad’s RJD retained the Araria Lok Sabha seat. Its nominee Sarfaraz Alam beat the BJP’s Pradeep Kumar Singh by over 60,000 votes, dealing a blow to the JD(U)-BJP alliance, which went to the hustings for the first time after Nitish Kumar returned to the NDA fold last July.

There is growing concern in the BJP which has lost all the Lok Sabha by-elections held in 2018.

“This defeat is definitely an unexpected one,” said UP BJP spokesperson Rakesh Tripathi.

He said the possible causes would be analysed at length.

“There were some shortcomings which will be reviewed at the micro-level,” he said.

Another senior UP BJP leader said the results had sounded “alarm bells” in the party.

Apart from Gorakhpur and Phulpur (UP) and Araria (Bihar), the party was defeated in the bypolls in Ajmer and Alwar (Rajasthan) and Uluberia (West Bengal).

In Rajasthan, both the seats were won by the Congress — Raghu Sharma in Ajmer and Karan Singh Yadav in Alwar.

The BJP was defeated in Uluberia, too, with the seat going to Sajda Ahmed of the Trinamool Congress.

Wednesday’s shocker for the BJP came days after its surprise win in three northeastern states, including Tripura, where it scripted history, demolishing the Left citadel of 25 years and forming its first government in the state. Together with its regional allies, the BJP also formed its governments in Nagaland and Meghalaya.

A consolidation of OBC, Dalit and Muslim votes powered SP candidates to victory in Gorakhpur, a seat represented by Adityanath for five successive terms, and Phulpur, which elected Maurya in the 2014 Lok Sabha polls.

The two leaders had won their seats by margins of over 3 lakh votes, with Phulpur going to the BJP for the first time.

In the 2014 Lok Sabha elections, Maurya defeated his SP rival Dharam Raj Singh Patel by a record margin of 3.08 lakh votes, while Aditynath bagged Gorakhpur, defeating SP’s Rajmati Nishad by 3,12,783 votes.


Alarm bells in BJP after UP bypoll defeat; talk of alliance in Opposition

Global trade war: India’s export promotion schemes challenged by US at WTO

The Trump administration in the US has challenged India’s export promotion schemes at the World Trade Organization (WTO). India has promised to fight back the charge that it was misusing export subsidies and is set to reply within the next 60 days according to WTO rules.
US Trade Representative (USTR) Robert Lighthizer’s office announced early Thursday that the US has requested dispute settlement consultations with India at the WTO over Merchandise Exports from India Scheme and Export Oriented Units Scheme among others. Similar action has been initiated over sectoral schemes including Electronics Hardware Technology Parks Scheme, special economic zones and the Export Promotion Capital Goods Scheme.
“These subsidies provide benefits to Indian exporters that allow them to sell their goods more cheaply to the detriment of American workers and manufacturers,” the USTR said. It has also cornered India at the multilateral platform, stating WTO rules prohibit nations from providing export subsidies. However, India is set to argue that the law invoked by the US — the Agreement on Subsidies and Countervailing Measures (ASCM) — allows it a window of eight years to phase out these subsidies.
The central issue
graph Developed nations including the US have long argued that export subsidies provide unfair competitive advantage to recipients, pointing out that WTO rules prohibit them. The ASCM aims to gradually lower and finally prohibit export subsidies provided by nations so that global trade becomes equitable.
However, a limited exception to this rule is for specified developing countries that may continue to provide export subsidies temporarily until they reach a defined economic benchmark of a $1000 per capita income. India was initially within this group, but was informed last year by the WTO secretariat in a report that it had crossed the threshold back in 2015.

The US now points to this fact as proof of India knowingly bending the rules to bulk up its exports by continuously expanding export promotion schemes.
“The article 27 of the agreement also provides for special and differential treatment. At the time the agreement came into force, developing countries who were above the threshold were provided with a period of eight years in order to bring down their export subsidies. We had clearly assumed that the same period of eight years is available to countries, as and when they cross the threshold,” Commerce Secretary Rita Teaotia said on Thursday. “India has submitted a paper to the negotiating group on rules to this effect every year since then”, she added.
The US also refers to official figures by India saying that “thousands of Indian companies are receiving benefits totaling over $7 billion annually from these programs.’’ It further adds that exports from Special Economic Zones increased over 6,000 per cent from 2000 to 2017. Teaotia said India would ask the US how it reached such a figure.
The larger game
However, experts caution that the US has its sights on a much larger target. “The US is playing a far larger game whereby it is on one hand petitioning the Dispute Settlement Body while also single-handedly and consistently blocking the appointment of judges to the seven-member panel. Currently, three members have retired and a fourth is set to retire,” senior trade expert and Jawaharlal Nehru University professor Biswajit Dhar said. India had repeatedly raised this issue during the last ministerial conference of the WTO at Buenos Aires in Argentina, with Commerce and Industry Minister Suresh Prabhu urging swift action to resolve the impasse.
While the US focused on China for the larger part of Trump’s first year in office, India has been a target in the recent past. Trump voiced his disappointment against “unfair” treatment of American exports to the country even as India enjoys free access to the US market.
“This is part of a larger plan to destabilise the WTO structure and force India and other nations to come into a bilateral agreement with the United States,” Abhijit Das, head of the Centre for WTO Studies, said.

Global trade war: India’s export promotion schemes challenged by US at WTO

Aircraft grounding: IndiGo, GoAir to cancel more than 600 flights

The grounding of planes due to engine malfunction have led IndiGo and GoAir to cancel around 620 flights this month. IndiGo has decided to cancel around 480; the rest are of Go Air.
The airlines will give passengers an option to choose an alternate flight or get a full refund.
IndiGo and GoAir cancelled around 70 and 55 flights on Wednesday and Thursday. The passengers who were affected were accommodated in another airline. “We have around 16 departure daily on Delhi-Mumbai route. If two flights are cancelled, we have a network to accommodate the passengers on other flights,” said a senior IndiGo official.
The Directorate General of Civil Aviation (DGCA) on Monday grounded 11 Airbus A320 neo aircraft due to recurring malfunctions in their engines. Of the 11 aircraft, eight belong to IndiGo and three to GoAir. The malfunction has occurred with sub-population of engines manufactured by Pratt and Whitney (PW).

The problem stems from a component that can show early signs of wear and is located in an area that must withstand high pressure.
According to the information given on airline’s website, IndiGo has cancelled almost 488 flights from March 15 to March 31. IndiGo will not operate 36 flights between March 15 and March 21.
Another 18 daily flights would remain cancelled between March 22 and March 24. Around 16 daily flights would remain cancelled between March 25 and March 31, according to the airline. This takes the total number of cancelled flights to 488 till March 31.
GoAir has decided to cancel138 flights between March 15 and March 22, according to the airline.
The revised schedule of Wadia group-promoted GoAir showed that the airline has cancelled seven daily flights to 10 destinations between March 16 and March 24, apart from cancelling six services per week between March 15 and March 22. A total of 138 flights stand cancelled.
The airlines has mentioned that the passengers can choose for an alternate flight and also refund would be offered to the passengers.
While an IndiGo spokesperson told PTI the airline follows all the guidelines according to the relevant provisions of the applicable regulations, to the same query, a GoAir spokesperson said, “We follow the process as specified by DGCA in its CAR (Civil Aviation Requirement). The same has also been published on our website.”
The DGCA stipulates certain norms to be followed in case of cancelled flights and in the current situation, the grounding of a total of 11 A320 neos, powered by faulty P&W engines have been done after the regulator’s directive. While IndiGo and GoAir have a total of 45 A320 neo planes with P&W engines, 14 of them are on the ground.


Aircraft grounding: IndiGo, GoAir to cancel more than 600 flights

PSBs plan tighter lending norms for corporate loans above Rs 2.5 billion

Public sector banks (PSBs) will discourage multiple banking arrangements for companies with exposure of more than Rs 2.5 billion in the banking system and will move all such loans under the consortium of banks for better monitoring.
“In case of multiple banking arrangements there is no discipline. There will, preferably, be consortium lending for loans above Rs 2.5 billion,” M S Sastry, deputy managing director and chief risk officer, State Bank of India, said on Thursday.
All chief technology officers, chief risk officers and executive directors of PSBs met in New Delhi for a three-day workshop from March 12 to prepare a road map that banks can follow to strengthen their risk mechanism systems.
The banks will need approval from their respective boards and implement the measures agreed upon. These include strengthening information technology systems in three to six months.
The workshop was organised after the department of financial services asked banks to submit a report on how to strengthen risk management in the aftermath of Rs 129-billion letters of undertaking scam at Punjab National Bank.
ALSO READ: Nirav Modi fraud: Public sector banks expect PNB to honour LoUs
Existing accounts with exposure of above Rs 2.5 billion will also be moved to consortium lending, Sastry said.
Companies take loans from separate banks with different credit limits. Though the credit limits will remain the same, a consortium of lenders will be formed for better control and coordination.
“In a multiple-bank arrangement, banks are not aware of the transactions that take place between the borrower and other lenders. Under a consortium, the control will be better. All the loans will progressively be brought under consortium and we feel genuine borrowers will have no issue with such an arrangement,” said an executive director of a PSB present at the workshop.
The executive added there will be common documentation, same collateral and more financial control over transactions under consortium lending.
There will be a common loan document with standard covenants to be followed for consortiums and the cash management facility will be entrusted upon one bank in the consortium.

Earlier this year, the government had said that the number of lenders under consortium will significantly reduce from 20-22 banks to a maximum 10 banks for effective coordination between banks.
PSBs have decided to further tighten lending to corporates by asking promoters to give equity upfront and assessing the quality of equity by verifying the loss absorption capacity of firms.
ALSO READ: Except for PNB, no unauthorised LoUs issued by PSBs: SBI official
PSBs will also deter from funding the interest during the construction period.
The Reserve Bank of India (RBI) has allowed banks to fund project cost overruns without treating such loans as “restructured assets”. Banks fund additional interest during construction that may arise due to delay in completion of a project.
State-owned banks will organise branch-level risk awareness workshops to create awareness among employees. The bank staff will be encouraged to do whistleblowing in case they observe any wrongdoing. “Staff awareness will go a long way in strengthening risk management in banks,” Sastry said.
Banks will strengthen their ‘know your employees’ systems by monitoring behaviour of all staff through a centralised IT process. “This will work by taking feedback about staff in key roles from bank branch managers,” said a bank executive.
ALSO READ: ‘RBI to be Neelakantha’: Urjit on Nirav Modi PNB fraud; top 10 developments
PSBs further decided to strengthen their IT systems, including integration of core banking system (CBS) with SWIFT by April 30. Two executives at PNB’s Brady House branch in Mumbai were able to bypass the system by issuing fraudulent letters of undertaking as the bank’s CBS and SWIFT were not integrated.
A senior bank executive said that only three-four out of 21 PSBs have fully integrated SBS with SWIFT at present. “We are confident that both the systems will be integrated by all banks by April 30,” Sastry said. The banks will restrict SWIFT transactions during business hours of the branch and the reconciliation process of a bank’s foreign branch account, known as Nostro account, will be done thoroughly. Further, each bank will establish Onsite Cyber Security Operation Centre (C-SOC) to monitor all the IT systems. The banks will also bring all software applications under the control of corporate centre of their IT department to ensure there is no misuse of system.

PSBs plan tighter lending norms for corporate loans above Rs 2.5 billion