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

The Economic Times - - Front Page - Kaavya.Chan­drasekaran @times­

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

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