Economic downturn raises default risks, puts stimulus package in focus

Company News

Investors are awaiting stimulus measures from the Indian government as a gloomy economic outlook adds to mounting credit market woes and raises fears defaults will spread.
The government is planning measures to boost the economy and may announce some steps this week to help demand for housing, automobiles, and to spur small businesses, an official said on Friday.
Credit profiles of the nation’s companies worsened to a 19-month low in July, according to a Care Ratings index that tracks 1,601 local firms.
The credit market has been stung by a yearlong shadow banking crisis that started with shock defaults last year by IL&FS group.
Government measures to kick-start the economy may help investors regain confidence after other missed payments by firms including non-bank financier Dewan Housing Finance Corp., travel planner Cox & Kings Ltd. and wind-turbine maker Suzlon Energy Ltd.
India’s central bank cut its benchmark interest rate last week for the fourth time in 2019. Reserve Bank of India also lowered its economic growth forecast for the year to March 31 to 6.9 per cent from its 7 per cent forecast in June.
“The problem in the economy is lack of demand, which can’t be addressed by RBI’s rate cuts,” said Madan Sabnavis, chief economist at Care Ratings. “Quality of debt in the country has definitely gone down.

 Indian companies will remain under pressure in the coming months,” if further measures are not taken, he said....Read More

Cash-strapped DHFL seeks Rs 15,000-crore immediate funding from banks

Company News

Troubled mortgage lender Dewan Housing Finance (DHFL) has sought Rs 15,000-crore immediate funding from banks for on-lending to retail customers as well as to project developers, say sources.
Last week, the nearly crippled company had submitted a draft resolution plan to lenders which are yet to be approved by them.
"The company has asked for an additional funding of Rs 15,000 crore. The money will be used to fund viable projects that are stuck due to lack of money," said one of the sources.When contacted, a DHFL spokesperson said it did not have any comment to offer apart from what it has informed the stock exchanges last week on the draft resolution plan.
Under the draft resolution plan, the company has asked for funds from banks/NHB for restarting retail funding which was stopped after liquidity crisis hit it late year.According to sources, the decision on any additional or the quantum of funding will be taken only after due deliberations by lenders.
The beleaguered home financier, which has defaulted on multiple times on payment to bondholders since June owes close to Rs 90,000 crore to banks, the National Housing Bank (NHB) and other creditors.Last month, lenders had signed an inter-creditor agreement (ICA), as mandated by the Reserve Bank in the new NPA resolution/recognition framework effective June 7.

 However, the company had said one of its debenture - trustees Catalyst Trusteeship Servicesis in the process of seeking consent from the debenture holders to be a party to the ICA.In a separate filing to exchanges on August 8, the company said it may not be able to meet its financial obligations in the near future."Given the ongoing discussions on the resolution plan with the lenders who have signed the ICA, we believe that our payment obligations falling due in the immediate future...Read More