Debt ridden Tulip Telecom struggles to pay its employees

28 NOV, 2012, 06.39AM IST, AKANKSHA PRASAD,ET BUREAU 


BANGALORE: Caught in a vicious circle of debt, enterprise telecommunications services company Tulip Telecom is struggling to pay its employees, a far cry from two years ago when founder-chairman Hardeep Singh Bedi was confident of sales touching $1 billion (Rs 5,500 crore) by 2014. 

With analyst estimates for fiscal 2014 sales ranging between 3,000 crore and 3,300 crore, the billion-dollar dreams will have to wait, much like scores of employees in Tulip's Bangalore-based data centre subsidiary who received their August salaries a few days ago and continue to wait for their September and October paychecks. 

"Due to the macro-economic environment and the FCCB payment, there has been a temporary mismatch with respect to our capital, which is being addressed progressively," Tulip said in an emailed statement from its executive director Deepinder Singh Bedi, the chairman's son. 

From around 150 a piece same time last year, Tulip's shares have tumbled to Rs 37.15 at Tuesday's close on the Bombay Stock Exchange, a fall of around 75 per cent over the period. 

Kicking Tulip off balance was the $140 million worth of foreign-currency convertible bonds (FCCBs) issued in 2007 that came up for redemption in August. 
Following the failure to repay bondholders, FITCH Ratings downgraded Tulip's long-term debt to default from junk. 

At the end of September, Tulip had a total debt of Rs 2,400 crore. A little over 90 per cent of shares held by promoters - who own about 68 per cent in the company - is pledged with lenders. 

"Tulip is focused on repay ment of the FCCB as soon as possible," said Bedi. 

"The company is in talks with financial institutions to bridge the FCCB repayment shortfall and has made significant progress in its efforts." 

Tulip claims it has commitments of about $50 million towards fresh issue of bonds and internal accruals of about $72 million. 

But that still leaves a shortfall of some $18 million, which it is hoping to get from banks. 

After defaulting in August, Tulip committed to returning money to bond-holders on September 10, but missed that deadline too after it failed to reach an agreement with banks on financing the shortfall. 

As cash crunch puts Tulip in a tight corner, many senior executives have left the company over the past year. Chief executive Sanjay Jain departed in February, followed by Rahul Ahuja, the then chief financial officer who was yet to complete a year in the company. 

Umesh Garg, who replaced Ahuja, too resigned within six months. 

The struggling data centre subsidiary Tulip Data Center Services also saw a few exits, among them CEO Raj Gopal A S, chief operating officer Kannan Venkatraman and senior vice-president Sujeet Deshpande. 

Early this year, Tulip announced investment of around Rs 900 crore in building the world's fourth-largest data centre in Bangalore, spread across 9 lakh square feet. 

While initial investments were funded through debt, the plan was to subsequently find an equity partner, the search for whom is still ongoing. Revenue from the data centre business has not been as positive as the management or analysts expected.

Rs 2,500 crore bank fraud: CVC examining case against 24 officials

ET :29 NOV, 2012, 08.41PM IST, PTI 



NEW DELHI: The Central Vigilance Commission is examining a reference received from Punjab National bankBSE 2.51 % involving 24 of its officials in an alleged fraud involving over Rs 2,500 crore.

CBI had in April 25, last year registered a case against Directors of a Mumbai-based construction company and others for their alleged involvement in cheating Punjab National Bank (PNB) and causing losses worth several crores.

According to information given by Minister of State for Finance Namo Narain Meena in the Rajya Sabha today, the company has been reportedly sanctioned credit facilities under regular consortium--Rs 2,510 crore--and as China Project consortium -- Rs 410 crore-- with 26 banks, with PNBBSE 2.51 % as lead bank.

"It has been further informed by the CVC that PNB had made reference in September 2012 involving 24 officials, which is under examination in CVC," Meena said.

The exposure of loan on the company in all consortium banks is Rs 2,529.62 crore as on March 31, 2011, the Minister said.

Of these, a highest of Rs 409.97 crore is by PNB, followed by Rs 309.51 crore by UCO bankBSE 2.86 %, Rs 216.64 crore by United Bank of IndiaBSE 10.52 %, Rs 176.72 crore by Union Bank of IndiaBSE 3.61 %, Rs 129.77 crore by State Bank of BikanerBSE 2.44 % and Jaipur, Rs 102.82 crore by Indian Bank and Rs 102.45 crore by Central Bank of IndiaBSE 2.40 % among others.

"Reserve Bank of India (RBI) had reported that the consortium banks had lodged claims with Export Credit Guarantee Corporation of India (ECGC) for the invoked guarantees. ECGC on October 7, 2011 had expressed their inability to consider the claim. The case has been again represented on November 23, 2011.

"A recovery suit before Debt Recovery Tribunal (DRT) was filed on November 5, 2011. The members of the consortium have also initiated recovery proceedings under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002," the Minister said.

In order to make third parties and professionals accountable, who have played a vital role in credit sanction or disbursement or facilitated the perpetration of frauds, Meena said that banks have been advised to report to Indian Banks' Association (IBA).

"IBA in turn will prepare caution lists of such parties for circulation among the banks," he said

Problems pile up for banks as bad loans rise sharply

PTI :BT :19 Nov 2012

In a worsening trend of companies failing to meet their financial obligations, the country's domestic banks have witnessed an increase of up to 85 per cent in their bad loans since the beginning of the current fiscal.

The sharp rise in bad loans for the banks comes at a time when the number of corporate debt restructuring (CDR) cases has also grown to record-high levels.

In the first two quarters of the current fiscal 2012-13, the banks referred a record number of 74 CDR cases, involving a total debt amount of Rs 40,000 crore, for restructuring.

At the same time, at least 35 banks have already reported an increase in their gross NPAs (Non-Performing Advances) from the levels recorded at the end of last fiscal, 2011-12, as per an analysis of the latest quarterly results announced by them.

The increase in gross NPAs has been as high as 60 per cent for lenders like PNB, Allahabad Bank and Lakshmi Vilas Bank, while the surge has been even higher for South Indian Bank (86 per cent) in the first half of current fiscal.

A few others like Bank of India, Indian Overseas Bank and Corporation Bank have also seen their bad loans grow by over 50 per cent in this period.

Collectively, these 35 banks have seen their gross NPAs grow by over 28 per cent or over Rs 32,000 crore in the first half of current fiscal, taking their total bad loans to Rs 1.47 lakh crore as on September 30, 2012, as per an analysis of financial results announced by the listed banks for the first two quarters of the current year.

The analysis does not include the foreign banks and unlisted domestic banks, as their figures were not available.

Incidentally, the collective gross NPA of these 35 banks at the end of first half of 2012-13 is higher than the total gross NPA at the end of last fiscal for the entire banking system, including foreign banks and unlisted domestic banks.

As per RBI data, the gross NPA for all the banks together in the country stood at Rs 1.42 lakh crore at March 31, 2012.
The Reserve Bank recently said the banks need to strengthen their due diligence and credit appraisal system along with overall monitoring mechanism to contain the rising bad assets seen in the banking system.

"Banks need to, not only utilise effectively, the various measures put in place by RBI and the government for the resolution and recovery of bad loans, but also have to strengthen their due diligence, credit appraisal and post-sanction loan monitoring systems to minimise and mitigate the problem of increasing NPAs," the RBI said in its report on 'Trend and Progress of Banking in 2011-12'.

Crisis of confidence hits banks, borrowers

BS :Manojit Saha / Mumbai Nov 21, 2012, 00:52 IST


Bankers say capital not an issue corporate lending is dry due to high interest rates and supply bottlenecks

Last month, senior executives of a foreign bank with significant presence in India met clients from key markets abroad to explain the implications of the reforms announced by the Indian government in early September. What they heard from their clients was simple: while there was a consensus that the announcements helped avert possibilities of a sovereign rating downgrade, hardly did anyone believe there was a realistic chance of these being implemented.

“Growth coming back to seven per cent in the next financial year is highly unlikely. At best, we can say, ‘next year may be better than the current one’. But the worst part is a crisis of confidence,” said a banker who attended the meeting. According to bankers, that precisely is the reason why corporate credit growth continues to remain sluggish. The Reserve Bank of India (RBI) has cut its growth projection for the current financial year to 5.7 per cent in October, from 7.3 per cent projected in April. Credit growth forecast has also been lowered to 16 per cent, compared to the 17 per cent projected earlier. The sluggish loan growth comes amid high interest rates and banks’ increasing reluctance to lend to the so-called stressed sectors such as telecom, steel, infrastructure, construction, and textile, among others. These are the sectors that have seen the sharpest rise in non-performing assets (NPAs)

State Bank of India Chairman Pratip Chaudhuri says the pipeline is almost dry in the commercial lending sector, as the growth outlook looks very slow. This is despite the fact that resources available with banks are adequate. “There are plenty of resources available with the SBI, so increasing the loan growth will not be a problem for us. But we want more cuts in the cash reserve ratio so that funds available for lending increases,” says Chaudhuri.

The country’s largest lender backs that argument with facts. Deposit accretion for SBI was robust in the first half of the current financial year. “We are sitting on deposits worth Rs 70,000 crore to Rs 80,000 crore,” he says, adding that loan growth was to the extent of six-seven per cent during April-October. As corporate demand continues to be sluggish, SBI has focused on beefing its retail portfolio by aggressively cutting interest rates.

State Bank of India Chairman Pratip Chaudhuri says the pipeline is almost dry in the commercial lending sector, as the growth outlook looks very slow. This is despite the fact that resources available with banks are adequate. “There are plenty of resources available with the SBI, so increasing the loan growth will not be a problem for us. But we want more cuts in the cash reserve ratio so that funds available for lending increases,” says Chaudhuri.

The country’s largest lender backs that argument with facts. Deposit accretion for SBI was robust in the first half of the current financial year. “We are sitting on deposits worth Rs 70,000 crore to Rs 80,000 crore,” he says, adding that loan growth was to the extent of six-seven per cent during April-October. As corporate demand continues to be sluggish, SBI has focused on beefing its retail portfolio by aggressively cutting interest rates.








































Chiefs of other public sector banks also say the government has indicated that capital will not be an issue for loan growth, and will ensure that banks are well-capitalised.

Bankers also say the asset quality concerns are being overdone. Listen to HDFC Bank managing director and CEO Aditya Puri: “We don’t need any hysteria on NPAs. While it is okay to raise concern on growing NPAs, we must realise that Indian banks are well capitalised, unlike the failed banking system of developed nations. The banking industry is growing year-on-year at the rate of 17-20 per cent, with healthy balance sheets,” Puri said at a banking conclave in Bhubaneswar in September. The overall consensus is that higher interest rates, which have deterred India Inc. from availing loans from banks, are expected to soften from the next financial year. But what is important is easing the supply bottlenecks to facilitate investment, particularly in the infrastructure sector, so that demand comes back.

“Inflation is a key reason for the high interest rate. Credit flow is muted as investments are not happening. While the interest rate will fall as inflation comes down, what is key is speeding up investments in infrastructure sectors like power and roads. The supply side bottleneck needs to be addressed, like fuel linkages in the power sector. Road projects also need speedy environmental clearances. If infrastructure investment is boosted, it will also have a favourable impact on sectors like steel and cement,” says M D Mallya, chairman and managing director of Bank of Baroda.

Latest data shows growth of credit to the infrastructure sector has fallen sharply to five per cent during the first six months of the financial year, compared to 7.3 per cent during the same period of the previous fiscal. On a year-on-year basis, loan growth to core sector has slowed down to 15 per cent from 20.3 per cent. Loan growth to the telecom sector has fallen in consecutive years (till September).

RBI has also noted that increasing risk aversion has hampered the flow of credit and as a result, banks parked their excess funds in government securities. “In contrast with the overall slowdown observed in the major balance sheet items of banks, growth in investments accelerated during 2011-12, compared with the previous year. This trend partly reflected increase in risk aversion by banks, with a growing preference to park funds in safer instruments, against the backdrop of weak macro-economic outlook as well as rising NPAs,” the central bank said.

With non-food credit declining to 16 per cent for the year till September, compared to 18.7 per cent in the previous year, banks have resorted to investing in safer government bonds, reflected in the rise in the statutory liquidity ratio (SLR) of banks. Bankers say that banks are holding excess SLR of six-seven per cent of their net demand and time liabilities against the mandatory requirement of 23 per cent.

Consumer Disputes Redressal Forum :Railways to pay compensation

 Financial Express :AGENCIES: Nov 20, 2012 at 1608 hrs IST

New Delhi: The Indian Railways Catering and Tourism Corporation (IRCTC) has been asked by a consumer forum here to compensate a woman and her son for harassment they underwent because of relegation of their reservation status due to which they could not travel to Mumbai as planned.

The New Delhi District Consumer Disputes Redressal Forum ordered IRCTC to pay them Rs 5,000 and said it was "obvious" that someone else was accommodated ahead of them.

"It is obvious that line was jumped and in place of waiting list 1 and waiting list 2, some other persons were accommodated, leading to him being pushed down. This is certainly unfair treatment to travelling public, who believe in the system of booking introduced by opposite party (IRCTC).

"We hold the IRCTC responsible for this practice leading to harassment and not explaining its position in court. We direct it to pay Rs 5,000 to complainants together, inclusive of litigation charges," the bench headed by forum's President C K Chaturvedi said.

The forum's order came on a complaint by Delhi resident Rakesh Kumar Jain who had booked tickets on the Garib Rath Express for himself and his mother for travelling to Mumbai on January 30, 2010.

Reservation status at the time of booking had showed he had advanced to waiting list (WL) 34 and 35 from WL 117 and 118 and then it had moved up to WL 1 and 2, Jain had said.

At the last minute the status slid down to WL 46 and 47 without any explanation, he had alleged adding his correspondence to IRCTC did not produce any result.

Mathew Varghese V/S The South Indian Bank Ltd.

A.IR:327/2007

Record of proceedings on 1.11.2012 in  IA No.1527/07 (delay);  No representation for the petitioner .  Petitioner is called absent.

Ld. Counsel Shri Arun Prasad appearing on behalf of Ld. Counsel Shri Girish Kumar for the respondent bank took this tribunal through the averments made by the petitioner in the affidavit and stated that the petitioner has not filed the medical certificate and that from the non filing of the medical certificate it can be inferred that the reason stated in the affidavit cannot be believed.  Ld. Counsel further stated that the reason stated by the petitioner  has not been substantiated by the petitioner and that this tribunal cannot venture to condone the delay when the petitioner himself has chosen not to file the medical certificate. 

 Ld. Counsel further stated that no sufficient cause has been shown by the petitioner for not filing this appeal within the prescribed time and that thereafter the delay has also not been explained.  Ld. Counsel further stated that this petition deserves only a dismissal as the petitioner has filed this petition only to drag on the proceedings and further to delay the recovery of public money and that this tribunal also should take a serious note of the public money involved in this case and prayed that this IA should be dismissed.

Heard the Ld. Counsel for the respondent bank.

It is seen that the petitioner has chosen not to be present in this tribunal to put forth his case.  A perusal of the affidavit filed along with this petition sans the medical certificate drives this tribunal to  come to the conclusion that the illness of the petitioner has not been proved and that therefore the delay has not been properly explained. 

 It is also seen that the petitioner has not repaid public money borrowed by him. 

Therefore for the reason that the delay has not been properly explained and  for the reason that public money has to be recovered this IA is dismissed.

The above Order was passed by the Hon''ble Chair Person of DRAT ,Chennai on 1 st  Nov 2012

Vijay Mallya's last stand : Selling his crown jewel United Spirits

Asha Rai & Boby Kurian, TNN | Nov 10, 2012, 04.41AM IST

BANGALORE/MUMBAI: "I feel sorry for him" or "he has my sympathies" are not the phrases you would ordinarily associate with as flamboyant a person as Vijay Mallya. But, indeed, they cropped up often when talking to a large number of people who have known him personally and professionally for this story.

Sympathy that less than two weeks after publicly, almost defiantly, proclaiming that he would not sell family silver to fund his grounded airline Kingfisher, he had to do precisely that. A sense of sorrow for a man who has been felled by hubris. Or, as an associate memorably put it, through "nasha."

Mallya was always a high-stakes business operator. He built the liquor and beer businesses he inherited from his father, the late Vittal Mallya, at the young age of 28 in 1983, not only into dominant market players in India but in the case of the former into the world's largest drinks company by volume. Much of the growth was fuelled by debt. His heavily leveraged balance sheets would have felled a lesser mortal but Mallya sailed through with minor hiccups though 'Is Mallya broke?' has been a constant refrain among the chatterati and corporate chieftains for two decades now. Alas, a similar tactic did not work in the airline that he launched with much fanfare on his son Sidhartha's 18th birthday in May 2005.

Standing personal guarantee to the debt raised by the airline and pledging much of his stake in other businesses to keep the airline afloat have today pushed him to sell the crown jewel in his portfolio: the liquor company, United Spirits, which has 50% of the Indian market and was the source of Mallya's clout: economic and political, and his flamboyant lifestyle.

"Vijay has an emotional and rational side to him. But somewhere in recent times he lost the sense of proportion allowing the Kingfisher crisis to spiral out of hand. He's extremely passionate about the businesses he built, not that he loved the inherited ones less. That's what made him stick out for a company (KFA) which was beyond any reasonable sense of business," says Ravi Jain, a joint venture partner and former managing director of Mallya's brewing unit, who used to drive Mallya and his ex-wife Sameera around Kolkata in his old fiat car.

Ramesh Vangal, who was outbid by Mallya for Shaw Wallace, believes, "This is the end of an era. He built an enormous business with great potential. Allowing it to fall into the hands of an MNC is a little of a regret. But it's the practical thing to do." Vangal, the former Pepsi senior executive who has interests in the Indian liquor industry, points out, "It's Karma actually. Vijay has seen the best of times. Now he's facing the most challenging. It's part of the circle of which we are all in. We learn as we go around."



Nobody doubts Mallya's intelligence or his ability to build a business or a brand. Especially the latter. Even the ill-starred KFA is a testimony to his brand-building prowess. "He had this terrific grasp of any situation and could talk straight however difficult it was," UB Bhat, a senior executive who worked with him in the 1980s, reminisces how the young Mallya flew into Bangalore from the United States 48 hours after his father's sudden demise. "He was hardly 28 then, and there were whispers that his father's close aides H P Bhagat or Srinivasa Rao could be considered for the role of chairman. He recovered swiftly to take charge of the affairs and went to create a strong corporate identity for the diversified businesses ( Herbertsons, Phipson, Kissan Foods, etc) his father had built. In the process, he brought several chieftains under his direct control just like what Ratan Tata managed within Tata Group," says Bhat, who was involved in organizing Mallya's first marriage to Sameera (formerly Sakina), sometimes doubling up as a priest, at a temple in Goa.

Jain argues, "He would have done this (Diageo) deal in the ordinary course, but now it's unfortunately seen as him being forced to sell the family business. The liquor market is changing and his own operations have become too big for him to manage alone. One can philosophically argue this is the beginning of retirement, and why not? He was at the top of his energy for thirty years."

Mallya's often described by those close to him as proverbially a man with nine lives. He's been in umpteen scrapes before and come out of it. While the general consensus is that his luck finally ran out, there are others who think by doing this deal with Diageo he's actually doing a smart thing, getting the 10th life perhaps.

K P Balasubramaniam, former chairman of Mysore Breweries (now SAB-Miller India) and an old Mallya friend from Bangalore believes, "It's a smart thing he's done. Diageo is a well run, profitable company. His 15% stake will appreciate in value and he will get good dividends. Same is the case with the beer business (where Heineken is the equal owner)."

A sentiment echoed by Kishore Chhabria with whom he settled long-standing disputes recently. Said he, "The good thing about him is that he continues to be lucky. He would have been gone without this deal, but he has pulled it off. A lot of people might say bechara mar gaya but watch out. His 15% stake will be worth far more in three years than 29% he had. This was a pragmatic deal to do. Good for him and good for the industry." Chhabria, the chairman of Allied Blenders & Distillers, the largest Indian-owned spirits company now, added, "I am sure he will enjoy playing the investor role from now on. People move on like the Singh brothers of Ranbaxy. There's no need to be emotional."

And emotional Mallya has never been about business. He's bought and sold businesses whenever he's seen value. He sold Kissan to Hindustan Lever, after dallying with Nestle a bit. Berger Paintswas sold for a huge profit. He offloaded the brilliant portfolio he inherited from his dad - large stakes in Cabdury and Hoechst - saying there were not core to his business.

Nobody also disputes Mallya's generosity, large heartedness to his family and friends. Says a Bangalore corporate chieftain, "He's a very nice guy. Very generous. Never malicious. Unfortunately, a lot of people misuse that. There are lots of people who take advantage of his hospitality, fly in his planes, attend his parties and then snigger behind his back."

His flamboyant lifestyle - close associates say his personal life was never as colourful as made out by the media - the yachts, the planes, the cars, the horses, the girls, the islands, FI and IPL teams, multiple homes - in the end damned him in the public eye.

But all agree that the very expensive lifestyle - an apocryphal story has it that a big, global PE which did a due diligence when it was looking to invest in Kingfisher put the cost of the lifestyle at $60 million annually - would have to be piped down. Perhaps Mallya was readying for such a life with his recent tweets which suggested happiness at his loss of billionaire status.