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RBI & Government meeting ends on a cordial note, NCLT's stand on process versus price, and more

The marathon meeting between the RBI and the Finance Ministry lasted for over 9 hours and the good news for the market was that the meeting ended on a cordial note. The RBI has now agreed to make more finance available to NBFCs to address the liquidity crunch even as there could be some relaxation in lending for PCA banks. Not much was decided on the government dipping into the RBI reserves to the extent of Rs.3.6 trillion, but it has been determined to appoint a committee to study this aspect in greater detail. The markets are likely to welcome this rapprochement on the subject.

Process versus Price - NCLAT chooses Price

The Supreme Court rejected the plea by Dalmia Bharat to annul the sale of Binani Cements to Ultratech and has allowed the transaction to continue. This deal was finally struck by Ultratech of the Aditya Birla Group for a consideration of Rs.7900 crore and will ensure that all the creditors are fully paid off. Dalmia had argued that Ultratech’s bid had come in after the due process. However, since the Committee of Creditors had approved the deal, the SC has upheld the NCLAT order. This deal will raise an interesting question of process versus price in the entire NCLT activity.

More resignations from Yes Bank

Even as Yes Bank scouts for a new CEO to take over from Rana Kapoor from February 01st, there has been a spate of resignations from the board. Earlier Vasanth Gujarati had resigned on objections over the Audit Committee performance even as O.P. Bhatt had left after the Standard Chartered board had raised concerns over conflict of interest. Now another board member, R Chandrasekharan has also resigned from the Board of Yes Bank in what is seen as an outcome of the November 13th board meeting which had discussed, among other things, a total and complete re-haul of the current board.

BREXIT's impact on  the London Stock Exchange

One of the big casualties of the imminent decision on the BREXIT pathway seems to be that the London Stock Exchange (LSE) has shifted its bond trading from London to Italy even before the final decision on BREXIT. The LSE electronic platform trades nearly €13.41 billion worth of bonds on a daily basis. To begin with 20% of the trading has shifted to Milan while the trading in British government bonds will still remain in London. Since UK will no longer be a member of the EU, the ECB wants all European bonds trading to shift out of London. Italian bonds are among the biggest markets in the world.

GAIL seeks rejection of Arcelor Mittal’s bid for Essar Steel

In an extremely interesting move, Gas Authority of India Limited (GAIL) has moved the NCLT to seek rejection of Arcelor Mittal’s bid for Essar Steel. Arcelor Mittal had recently won the bid to take over Essar Steel, which has been deep in debt and marks one of the biggest resolutions within the NCLT. GAIL’s contention is that operational creditors had been entirely left out of the Rs.42,000 crore bid for Essar Steel. Operational creditors will get only 5% of their outstanding while banks will get over 80% of their outstanding loans. It is this disparity that GAIL has been objecting to. GAIL’s contention is that the Arcelor deal was in contravention of Section 30 (2) of the IBC as it totally ignores operational creditors. Essar had made a last ditch effort to retail the company, which the NCLT had struck down.

Reliance Industries plans to expand the capacity at its Jamnagar refinery. The idea would be to boost the oil refining capacity by nearly 50% from the current levels. Oil consumption in the South Asian region has been growing rapidly and RIL wants to make the best of this opportunity. The entire capcity expansion is expected to cost RIL nearly $10 billion. The work on the expansion is expected to start in 2020 and will be timed perfectly to capitalize on the year 2030 target when the total demand in India and the Middle East combined is expected to overtake demand in the EU region.