Trading of CNX Nifty futures on the Singapore stock exchange indicates that the Nifty could fall 16 points at the opening bell. Asian stocks edged lower today, 9 June 2015.
Foreign portfolio investors (FPIs) sold shares worth a net Rs 749.12 crore yesterday, 8 June 2015, as per provisional data released by the stock exchanges. Domestic institutional investors (DIIs) bought shares worth a net Rs 529.82 crore yesterday, 8 June 2015, as per provisional data.
Bank stocks will be in focus after the Reserve Bank of India (RBI) after trading hours yesterday, 8 June 2015, announced that banks can undertake a Strategic Debt Restructuring (SDR) of a stressed assets by converting loan dues into equity shares. SDR will provide banks with enhanced capabilities to initiate change of ownership in cases of restructuring of accounts where borrower companies are not able to come out of stress due to operational/managerial inefficiencies despite substantial sacrifices made by the lending banks, the RBI said. At the time of initial restructuring, the Joint Lenders' Forum (JLF) must incorporate, in the terms and conditions attached to the restructured loan/s agreed with the borrower, an option to convert the entire loan (including unpaid interest), or part thereof, into shares in the company in the event the borrower is not able to achieve the viability milestones and/or adhere to 'critical conditions' as stipulated in the restructuring package. This should be supported by necessary approvals/authorisations (including special resolution by the shareholders) from the borrower company, as required under extant laws/regulations, to enable the lenders to exercise the option effectively. Restructuring of loans without the required approvals/authorisations for SDR is not permitted. If the borrower is not able to achieve the viability milestones and/or adhere to the 'critical conditions' as stipulated in the restructuring package, the JLF must immediately review the account and examine whether the account will be viable by effecting a change in ownership. If found viable under such examination, the JLF may decide on whether to invoke the SDR, i.e. convert the whole or part of the loan and interest outstanding into equity shares in the borrower company, so as to acquire majority shareholding in the company.
In order to achieve the change in ownership, the lenders under the JLF should collectively become the majority shareholder by conversion of their dues from the borrower into equity, according to the RBI notification. However, the conversion by JLF lenders of their outstanding debt (principal as well as unpaid interest) into equity instruments shall be subject to the member banks' respective total holdings in shares of the company conforming to the statutory limit in terms of Section 19(2) of Banking Regulation Act, 1949. Post the conversion, all lenders under the JLF must collectively hold 51% or more of the equity shares issued by the company. The share price for such conversion of debt into equity will be determined as per a formula prescribed by the RBI.
Provisions of the SDR would also be applicable to the accounts which have been restructured before the date of this circular provided that the necessary enabling clauses are included in the agreement between the banks and borrower, the RBI said.
According to the RBI notification, JLF and lenders should divest their holdings in the equity of the company as soon as possible. On divestment of banks' holding in favour of a new promoter, the asset classification of the account may be upgraded to 'Standard'. However, the quantum of provision held by the bank against the said account as on the date of divestment, which shall not be less than what was held as at the 'reference date', shall not be reversed. At the time of divestment of their holdings to a 'new promoter', banks may refinance the existing debt of the company considering the changed risk profile of the company without treating the exercise as 'restructuring' subject to banks making provision for any diminution in fair value of the existing debt on account of the refinance. Banks may reverse the provision held against the said account only when all the outstanding loan/facilities in the account perform satisfactorily during the 'specified period', i.e. principal and interest on all facilities in the account are serviced as per terms of payment during that period. In case, however, satisfactory performance during the specified period is not evidenced, the asset classification of the restructured account would be governed by the extant IRAC norms as per the repayment schedule that existed as on the reference date, assuming that 'stand-still'/above upgrade in asset classification had not been given. However, in cases where the bank exits the account completely, i.e. no longer has any exposure to the borrower, the provision may be reversed/absorbed as on the date of exit.
Shares of Tata Steel will be in focus. With respect to media report titled Tata Steel, Swansea varsity tie up, Tata Steel after market hours yesterday, 8 June 2015 clarified that the media report is based on a release issued by the company's subsidiary in Europe. It is research related project and has no impact and is not material to the company's operations, Tata Steel said.
A broad based decline was witnessed on the domestic bourses on the first trading session of the week yesterday, 8 June 2015, as an upbeat US jobs report raised expectations of early rate increase by the Federal Reserve. Higher US interest rates will reduce the attraction of riskier emerging-markets assets. The Sensex lost 245.40 points or 0.92% to settle at 26,523.09, its lowest closing level since 20 October 2014.
Asian stocks edged lower today, 9 June 2015. Key benchmark indices in China, Singapore, Taiwan, Hong Kong, Japan and Indonesia fell by 0.08% to 2%. South Korea's Seoul Composite index rose 0.03%.
China's consumer inflation in May was at its weakest level in four months, official data showed today, 9 June 2015. China's consumer price index rose 1.2% in May from a year earlier, slower than a 1.5% year-over-year rise in April, data from the National Bureau of Statistics showed.
US stocks dropped to a two-month low yesterday, 8 June 2015, led by technology shares, while treasuries rose and the dollar fell.
Meanwhile, the Group of Seven leaders (G-7) called for action on Greece as talks between the nation and its creditors continued yesterday, 8 June 2015. Greece deferred a payment to the IMF last week and needs to crack a deal or get another extension before its euro-area bailout package expires on 30 June 2015.
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