RBI May Consider Revising its Feb 12 Circular on Bad Loans, SC Ban on TikTok May Be Lifted, ZestMoney Raises $20m, Blackstone Group to Acquire Majority Stake in Essel Propack et al.

RBI may consider revising its Feb 12 circular on bad loans. SC’s ban will stand lifted if Madras HC fails to decide on the plea of TikTok app against the order by April 24. TikTok owner, ByteDance has been losing over INR4.5cr every day since the ban. ZestMoney raises $20m in Series B funding. Blackstone Group to acquire majority stake in Essel Propack. Ajay Piramal seeks to sell stakes in Shriram Group of Companies.

 

Moving on to the top Business stories of the day. 

 

 RBI 

RBI may consider revising its Feb 12 circular on bad loans. RBI has $43bn in excess capital, as per BofAML. 



Bending Rules: RBI is likely to tweak the much-debated Feb 12 circular to replace the one-day default norm with a grace period of 30 days to identify the early stress of borrowers. 
 

Previously: Under the February 12 circular, even a one-day default on the principal or interest payment, or any other amount, wholly or partly, would lead to banks classifying the account as a special mention account. 
 

Another substantial change will be in the treatment accorded to term loans vis-à-vis revolving facilities such as cash credit.
 

Zoom Out: The SC had struck down the RBI’s February 12 circular last month as ultra vires.
 

The order states that RBI can direct banking institutions to move under the IBC only:

(i) if there is a central government authorisation to do so; and
(ii) that it should be in respect of specific default of specific debtor.

Within this background, one can only hope that authorities concerned will restore public confidence by assigning supremacy to public interest when it comes to regulating banking companies.
 

A deep dive into the new order here.

Treasure Trove: A panel led by ex-RBI Governor Bimal Jalan is likely to identify excess reserves of up to INR3L cr (1.5% of India’s GDP), according to Bank of America Merrill Lynch.
 

The news comes as the Committee prepares to submit its report on the matter of excess reserves with the RBI in the coming weeks.

 

 JIO 

Reliance Jio may be pressurized to raise prices this fiscal.
 

Under Pressure: Reliance Jio may be pressurized to raise prices in this financial year on back of increased spending. Jio stares at a spend of about INR9,000cr a year on its long-term capacity leasing deals with special purpose vehicles (SPVs) created to hold its demerged fibre and towers assets.
 

The news comes soon after Jio reported sluggish Average Revenue Per User. 
 

Why is Reliance Losing Out?: Reliance Jio's EBITDA margin has hovered at c. 39% for six quarters now, despite revenue rising 60% over the same period. Why is operating leverage missing from Reliance Jio financials? Read more here.

 

TIKTOK 

SC’s ban will stand lifted if Madras HC fails to decide on the plea of TikTok app against the order by April 24. TikTok owner, ByteDance has been losing over INR4.5cr every day since the ban. 


 
Fans May Rejoice: As per a bench headed by Chief Justice Ranjan Gogoi, if the Madras High Court fails to decide on the plea of Chinese short video app TikTok against the ban by April 24, then its ban order will stand automatically lifted.

Previous Episode: India banned TikTok on 15 April when the Supreme Court refused to stay an order by the Madras High Court asking the government to ban the app. However, banning or blocking of the apps like TikTok or PUBG, is a rather futile exercise in this age and time. One can always find a way to get around the ban. 
 

I Object, My Lord!: Following this, Bytedance had approached SC, contending that the order was passed without hearing them. It further argued that the mobile platform is an intermediary as per Section 2(w) of the IT Act, and that it cannot be held liable for actions of third parties on the platform. 
 

Bleeding Cash: TikTok owner ByteDance has been bleeding money to the tune of a whopping INR4.5cr every day since the ban was imposed. India accounts for more than 39% of TikTok's 500 million user base. Out of the 188 million new users added in the March quarter, India accounted for 88.6 million.

 

 FUNDING 

ZestMoney raises $20m in Series B funding. Partners with Flipkart to provide EMIs while buying products online.
 

Raising a Fortune: Bengaluru-based fintech Company ZestMoney has raised $20m in its Series B round led by Quona Capital. The round also saw participation from Australian fintech investor, Reinventure, and existing investors Ribbit Capital, Omidyar Network and PayU.

The lending platform had previously raised $6.5m in seed funding in 2017.
 

What's the Plan?: The proceed from the funding is likely to support the company’s expansion plans, broaden technology focus and deepen integration with partner NBFCs and online retailers with whom it offers EMI options to customers. 
 

Teaming Up: ZestMoney has partnered with Flipkart to enable consumers to access finance while buying products online through the platform.
 

ZestMoney which provides check out finance opportunities for consumers will now enable consumers to convert a basket of purchases into equated monthly installments (EMIs) over multiple tenures of three, six, nine or twelve months.
 
A Deal You Cannot Refuse: As a part of the launch offer, Zest Money will allow consumers to access finance options at 0% interest for the tenure of three months.

 

 DEALS 

Blackstone Group to acquire majority stake in Essel Propack. Ajay Piramal seeks to sell stakes in Shriram Group of Companies.

An Agreement: Private Equity firm Blackstone Group has signed a definitive agreement with speciality packaging company Essel Propack’s promoter, Ashok Goel, to buy a 51% stake at INR134 a share.
 

The deal will trigger a mandatory open offer, according to takeover norms of SEBI, requiring Blackstone to purchase an additional 26% stake in Essel Propack. The PE firm has offered to buy the 26% stake at INR139.19 a share.

 
While the sale is expected to complete in the coming months, subject to customary closing conditions and approvals, here’s a look at key synergies from the deal.

This is Not Working Anymore: Ajay Piramal is in talks with Anand Mahindra and others to sell his stake in the Chennai-based Shriram group of companies at a valuation of INR9,000cr.
 

Piramal currently owns 20% in Shriram Capital and 10% each in Shriram Transport Finance and Shriram City Union.

 

(Don't want to miss out on these End Of Day Wrap Ups? Subscribe Now to our No Nonsense Email Digest and get the day's Top 6 Business stories straight to your mailbox.)