Do it yourself

One thing that the prime minister Narendra Modi is well known for is his business friendliness. At the core of the famous Gujarat Model, that shot Mr. Modi to the national and international scene, was his claim of making Gujarat the most business-friendly state in India. He is also often accused by the opposition parties for unduly favoring the large corporate at the expense of micro and small enterprises and middle-class households. In the past ten years, the policies followed by the PM Modi led central governments have stayed true to his reputation. For example— ·          The effective tax rates of the corporate sector have been reduced. This has resulted in the aggregate tax collection from individual taxpayers to rise higher than the tax paid by corporations. ·          It is widely believed that the demonetization of high value currency notes and the implementation of GST have also adversely affe...

Making IBC little more pragmatic Last week while on a visit to Mumbai, I noticed few aircrafts belonging to the now defunct Jet Airways parked on the airport. The aircrafts had gathered lot of dust and pigeon crap. I believe it's more than a year since these aircrafts must have been parked there. The owner/lessee of these aircraft owes billions of rupees to various lenders and operational creditors. The company is undergoing the bankruptcy proceedings and apparently so far no buyer has shown any interest in acquiring the company. I wonder, why the bankruptcy procedure be made little pragmatic! I feel one of the key purposes of the bankruptcy process must be to minimize the losses to the lenders and operational creditors. If these aircrafts that are lying idle were leased to other airlines till the completion of IBC process, at least some money could have been recovered. Or at least, Jet Airways could have been saved from incurring parking charges (which it can neve...

The recent order of the Supreme Court may finally end one of the ugliest chapters in the corporate history of independent India. With sale of Essar Steel Limited to ArcelorMittal S. A., the new paradigms in the Indian corporate business and financial market spheres that had been taking shape since past few years may get formalized and gain wider acceptance. The businessmen shall accept that they may no longer remain in control of their businesses if they fail in honoring their debt commitments; and shareholders shall realize that if lenders of a business lose money, nothing shall be left for the equity shareholders. There is a lesson for the small investors who buy stocks of defaulter companies because they are trading at very low price. Under the new paradigm the equity shareholders should expect to get anything only and only if the lenders are able to realize full value of their loans. The theoretical definition of equity shares (Upon liquidation of a business, the e...