"The law condemns and punishes
only actions within certain definite and narrow limits; it thereby justifies,
in a way, all similar actions that lie outside those limits."
-
Leo Tolstoy (Russian, 1828-1910)
Word for the day
Quidnunc (n)
Person who is eager to know
the latest news and gossip; a gossip or busybody.
(Source: Dictionary.com)
Malice towards
none
Though the flyers must be
loving it, but is the price war in skies really good for the health of the
sector?
Couple of more Kingfishers
and the rest will kill the pessangers.
Weather is turning cold and windy
The infrastructure project lender IDFC has taken lead in
implementing the latest RBI mandate for more effective handling of financially
stressed infra assets. It has evicted the extant management of a Chhattisgarh
based power producer SV Power which had repeatedly defaulted on its debt
obligations.
In my view, it is a strong message to the delinquent companies and
defaulting managements. A similar action in time could perhaps saved Kingfisher
Airlines and other businesses in similar financial conditions.
It could be a potent deterrent for promoters who are chronic
defaulter and have been taking advantage of the lenient enforcement norms in
past many decades. Some steel producers, for example, have availed a corporate
debt restructuring (CDR) package virtually in all business cycles.
However, by no means this would be sufficient measure, without a
stringent project monitoring, money laundering regulation and fast track
criminal prosecution of willful defaulters, this practice may only solve a part
of the problem.
A suitable bankruptcy law that allows rehabilitation/closure of
genuinely failed businesses without any stigma to the promoter of the project
could help early detection and cure of financial stress.
It is an unproven but widely acknowledged theory that many
unscrupulous promoters use a variety of means to escalate the cost of the
project and virtually manage to get away with little or no equity contribution
of their own. In such circumstances their personal stakes in the subject
project are minimalistic. While they stand to gain most from the success of the
project, they have little to lose in case the project runs into rough weather.
A large number of stressed road projects under PPP regime and
power/steel plants based on captive mine allocations could be provide useful
case studies to evaluate this proposition.
The bankruptcy and banking regulations therefore must be supplemented
by a strong criminal prosecution regime for such unscrupulous businessmen.
The report of Nomura India about their trip in Europe to market
Indian financial sector stocks makes some interesting reading. As per the
report there was very little interest in PSU banks, expect SBI, amongst
European investors. Investors were relatively more comfortable playing cyclical
recovery cycle through private banks like Axis/Yes. It is generally felt that
smaller PSU banks will find raising capital (for BASEL compliance) very
difficult and there is little clarity as to see how they will break the vicious
cycle.
German 10yr bond yields have touched 1% mark for the first time
after September 2014. Gold, US yields and USD have also shown soft trend in
recent weeks. No one is rushing to safe havens for now.
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