Green Cos May Slip into Red if Forced to Cut Tariffs: Banks
Lenders to renewable projects wary of rise in NPAs if original power pacts reworked
New Delhi: Banks have redflagged the threat of renewable energy plants becoming nonperforming assets if states continue to arm-twist project developers to cut tariffs for old contracts that were signed when costs were higher.
In an August 9 letter to the secretary, ministry of power, the Indian Banks’ Association has urged prompt intervention on behalf of the developers and cautioned the government that such actions by state distribution companies (discoms) would discourage do- Indian Banks’ Association has written to power ministry to stop state power regulators & discoms from renegotiating wind & solar tariffs IBA fears loans to wind and solar developers will turn into NPAs if tariffs are revised downwards mestic and foreign investors as well as lenders in the sector. ET had on August 7 reported that the IBA may seek the Centre’s immediate intervention in the issue.
The stock market regulator is of the view that anti-competitive behaviour in the ratings industry could be detrimental to the creation of adequate checks and balances, said people directly familiar with its thinking. CARE Ratings has a diversified shareholder base with no single identifiable promoter as multiple investors have stakes in the company.
Life Insurance Corp was the largest investor with a 9.79% stake in the company as on June 30, according to stock exchange filings. Publicly traded Crisil is majorityowned by global ratings agency Standard & Poor’s.
A Crisil-CARE combination could lead to the duo capturing as much as 65% share of the ratings market, according to estimates by ET.
Crisil, ICRA and CARE collectively account for close to 85% of the revenue market share of the ratings business. ICRA is majority-owned by Moody’s. Fitch-owned India Ratings & Research, Brickwork Ratings, Smera Ratings and Infomerics Valuation and Ratings control about 15% market share among themselves.
“The transaction also has implications for minority shareholders as they may invest in the company hoping for the possibility of a takeover, which is why it is important that Crisil’s intent is made clear,” said an executive at a rival rating agency. The CARE stock surged 16% on the day Crisil announced it had purchased Canara Bank’s stake in the company through block deals.
In 2014, Baring PE Asia had emerged as the sole bidder for a controlling stake in CARE. Principal shareholders led by state-run lenders IDBI Bank, Canara Bank and State Bank of India along with a few others had put up a 45% stake in the company for sale earlier that year. But the process stalled as only a single bid was received. In December 2012, CARE raised Rs 540 crore through its IPO, which was over-subscribed nearly 41 times. Prior to that, it was treated almost as a public enterprise with a group of state-run banks led by IDBI and financial institutions holding a 60% stake in it.
LIC was the largest investor with a 9.79% stake in the co as on June 30