Last year, zero-coupon bonds or deep discount bonds was a favourite instrument of the Indian government to recapitalize the banks, as it did not create immediate liability. However, after the concerns expressed by the RBI, the government may choose to avoid the zero-coupon bond route to further recapitalise PSU banks. Now the government plans to revert to using coupon bonds to recapitalize the PSU banks. Typically, due to budget constraints, the government last year relied heavily on ZCBs for bank recapitalization. These special securities have a tenure of 10-15 years. They are issued at a discount and redeemed at par value.
Tata Sons may file an injunction to protect its future right of any pre-emptive purchase of its shares, in case shares, were pledged by the Pallonji Group. The Supreme Court judgment on Friday was favourable for the Tatas, but the legal team of the Tata Group is worried about whether this Supreme Court judgment has also legitimized the pledge of Tata Sons shares by SP group. The court dismissed all allegations made by Cyrus Mistry against the Tatas. However, it also dismissed all interim applications, including the SP Group application seeking separation of its ownership interests in Tata Sons as well as an application filed by the Tatas seeking to restrain SP Group from pledging or transferring shares. Since the dismissal of all interim applications enables the SP group to pledge shares of Tata Sons, the Tatas may file an injunction.
A total of 7 out of the 10 most valuable companies listed on the NSE by market cap saw value erosion to the tune of Rs.1.08 trillion. Reliance Industries alone accounted for nearly half these losses. That was not surprising considering that Sensex had lost 850 points during the week. Reliance Industries lost market value to the tune of Rs.55,565 crore while Bajaj Finance plunged Rs.16,198 crore and SBI Rs.12,494 crore. Other losers included Kotak Bank Rs.11,682 crore, ICICI Bank Rs.5,468 crore and Infosys Rs.3,752 crore. There were minor gains from TCS to the tune of Rs.1,813 crore and Hindustan Unilever of Rs.364 crore.
The Chief Economic Adviser appears to be confident about the disinvestment target of Rs.175,000 crore in FY22 and expects it to be driven by Rs.100,000 crore LIC IPO. The CEA underlined specifically that BPCL privatisation and LIC listing would be the big bang contributors. While LIC would contribute Rs.1 trillion, the 52.98% stake sale in BPCL is expected to bring in close to Rs.70,000 crore. On the LIC front, the basic amendments to the LIC Act are done and approved. The government had set a target of Rs. 210,000 crore divestment target in FY21, but that was an exceptional year marred largely by the lag effect of COVID-19.
Global PE giant, Actis, will invest $850 million to build two green energy platforms in India. While one of them will connect to its grid-connected solar and wind power parks, the other will be for its commercial and industrial segment. The investments are expected to be made from the Actis Energy 5 LP fund. Most of the global PE names are increasingly betting on the renewable energy space and India is seen as leading this energy revolution in the coming years. In addition, Actis will also operate its renewable and road assets through Actis Long Life Infrastructure Fund, which is a yield based fund from the Actis stable.
Ministry of Defence has reportedly resisted defence privatization plans on national security grounds. MOD has written to the prime minister suggesting that all government-owned firms dealing with defence production remain under government control. The MOD noted that the private defence industry may not have evolved enough to match the needs of the armed forces and it could lead to time and cost overruns. They also flagged the risk of private sector monopolies that could compromise national security. Among the state-owned defence PSUs, the government intends to cut its stake in BEML from 54% to 28%. MOD wants to keep HAL, BEL, MDNL and BDL under state control due to the absence of competition. They are also averse to divesting Mazagon and other shipyards as they are critical for creating the Blue Water Indian Navy.