UK to Hand­hold Tata Steel Sale

Bri­tain ready to buy up to 25% stake in busi­ness, pro­vide debt re­lief

The Economic Times - - Front Page - Our Bureau

Mum­bai: The UK govern­ment is ready to take a stake of up to 25% in Tata Steel’s UK busi­ness to sup­port its sale and of­fer hun­dreds of mil­lions of pounds in debt re­lief, as it makes a bid to stop Bri­tain’s largest steel­maker from shut­ting down.

The an­nounce­ment is the lat­est in a string of steps taken by govern­ment to sal­vage thou­sands of jobs af­ter Tata Steel put its UK oper­a­tions on block, giv­ing up on ef­forts to re­vive the busi­ness it bought as part of Corus takeover. Pro­vide hy­brid (con­vert­ible debt) or al­ter­na­tive forms of fi­nanc­ing In­ter­ested Par­ties in as­sets: Lib­erty House, Port Tal­bot se­nior mgmt

ET was the first to re­port on Thurs­day that the cen­tral bank was prun­ing the list of 150 ac­counts that lenders must com­pul­so­rily pro­vide.

Bank­ing shares ral­lied sharply on Thurs­day with State Bank of In­dia, ICICI Bank and Axis Bank climb­ing as much as 8%.

RBI’s direc­tive on Wed­nes­day is also seen as an in­di­ca­tion that the cen­tral bank’s bit­ter medicine for lenders is work­ing with many en­trepreneurs get­ting se­ri­ous about ac­cel­er­at­ing as­set sales and re­pay­ing banks for fear of los­ing con­trol, said in­vestors. A Credit Suisse re­port said the bot­tom­ing-out of the steel cy­cle could also boost cor­po­rate lenders.

Pink City Ex­press­way is a three­way joint ven­ture be­tween KMC Con­struc­tions, Emi­rates Trad­ing Agency and IKSHU In­fras­truc­ture, which is build­ing a six-lane high­way be­tween Gur­gaon and Jaipur, ac­cord­ing to the com­pany web­site. The to­tal cost of the project is es­ti­mated at Rs 1896.25 crore with a con­ces­sion pe­riod of 12 years.

Na­gar­juna Oil is build­ing a 6-mil­lion-tonne re­fin­ery in Cud­dalore, Tamil Nadu, at a cost of Rs 11,500 crore, says the group web­site. It plans to ex­pand it to 12 mil­lion tonnes in phase-II of ex­pan­sion.

The to­tal debt for both the com­pa­nies is not known.

“The (RBI) move will give par­tial re­lief to the sec­tor. How­ever, this will add pos­i­tive sen­ti­ments to the mar­kets,” said Gopal Agrawal, chief in­vest­ment of­fi­cer, Mi­rae As­set Global In­vest­ments. “In­vestors should re­main se­lec­tive about stocks, though any re­cov­ery in the econ­omy along with lower in­ter­est rate regime can boost the sec­tor.” The Bankex in­dex, which has been un­der­per­form­ing the broader mar­ket for the best part of the year, is slowly gain­ing ground. On Thurs­day, Bankex was the best per­former, climb­ing 1.95%, while the bench­mark Sen­sex rose 0.14%. ICICI Bank ended 6.26% higher at .₹ 253 while SBI rose 3.68% to .₹ 194. Axis Bank ended 2.08% higher at .₹ 476.

RBI de­cided to ex­empt banks from pro­vid­ing for bad loans in 20 ac­counts af­ter th­ese com­pa­nies be­gan meet­ing pay­ment deadlines and showed they are on track to meet fu­ture dues as well. Some, such as Jaiprakash, are sell­ing as­sets like ce­ment plants and power units to re­duce debt.

In De­cem­ber, RBI forced banks to treat some 150 loan ac­counts, which they were main­tain­ing as stan­dard ac­counts, as bad debt and pro­vide for them. In many cases, the bor­row­ers were pay­ing at the fag end of a quar­ter just to avoid the tag of bad loan, but were fi­nan­cially weak. Some were gam­ing the sys­tem by bor­row­ing from one bank to pay an­other.

“This move is pos­i­tive for the bank­ing sec­tor,” said Parag Jari­wala, vice-pres­i­dent (in­sti­tu­tional re­search) at Reli­gare Cap­i­tal Mar­kets. “In our view, cor­po­rate lenders such as ICICI Bank and State Bank of In­dia will ben­e­fit the most, as they have the high­est ex­po­sure to bor­row­ers such as JP As­so­ci­ates, Es­sar Group, GMR and GVK.” The re­cov­ery in metal prices, es­pe­cially steel, has also boosted bank stocks. “Steel sec­tor ex­po­sure of In­dian banks is high at 60-120% of their net worth, hence a bot­tom­ing-out of steel cy­cle will be a re­lief to cor­po­rate lenders,” said Credit Suisse in a re­port. The bro­ker­age up­graded ICICI Bank to ‘ out­per­form’ from ‘neu­tral’, and also raised the tar­get price to .₹ 295 from .₹ 258. It also in­creased the price tar­get for Axis Bank to .₹ 528 from .₹ 478.

An­a­lysts also ex­pect banks to re­port high trea­sury gains in the March quar­ter since G-sec yields have de­clined by 30 ba­sis points quar­ter-on -quar­ter

HIGH TREA­SURY GAINS

An­a­lysts also ex­pect banks to re­port high trea­sury gains in the March quar­ter since G-sec yields have de­clined by 30 ba­sis points quar­ter-on-quar­ter on ex­pec­ta­tions of rate cut by RBI. Fund man­agers, how­ever, warn that cor­po­rate lenders may con­tinue to face head­winds in com­ing quar­ters. The re­tail seg­ment, though, is ex­pected to grow at a healthy pace and banks with a ma­jor pres­ence here and rel­a­tively lower ex­po­sure to stressed loans, such as HDFC Bank and Ko­tak Bank, would con­tinue to out­per­form peers.

Look­ing to sep­a­rate pen­sion scheme from Tata Steel UK biz

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