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Sunday,23-January-2022

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Piramal counters Oaktree’s claims on DHFL bid

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DHFL

The Piramal Group has said its bid for DHFL offers the lenders the highest upfront cash recovery, has the highest score on the COC evaluation matrix, is fully compliant with all regulatory norms, and is fully and immediately implementable.

“We have full faith that the committee of creditors, comprising some of the most reputed financial institutions of our country, will make the fair and just choice in the voting process,” the Piramal Group said in a statement.

It also issued a “Fact vs Fiction in Competing Bidders’ claims”, responding to claims made by another bidder, Oaktree.

Piramal said that Oaktree is bringing in minimal equity into DHFL. “The initial equity being brought in is a mere Rs 1 lakh. There is a promise of Rs 1,000 crore of equity/ NCDs/sub-debt that can be brought in later if required. This wafer-thin equity is supposed to support an entity with a balance sheet that will be around Rs 40,000 crore,” it said.

It is being falsely claimed that an NCD written on such a weakly equitised business, built entirely on a Leveraged Buy Out model, would somehow receive a AAA rating, it added.

“Oaktree claims that they have received ‘preliminary feedback from credit rating agencies’ that their NCD would be assigned a AAA rating. There are 2 serious violations of SEBI norms in this claim: CRAs are not allowed by law to provide any ‘credit opinion’ or have ‘indicative credit rating discussions’,” Piramal said.

“Without a formal rating being published, an issuer is prohibited by law from marketing an instrument to potential subscribers. In other words, till there is a formal rating published, SEBI norms explicitly prohibit the bidder from marketing their NCDs to COC members as something that ‘is likely to be assigned AAA rating’. Oaktree’s claim is in direct violation of these 2 laws of the country,” Piramal said.

The PwC report is a purely mathematical exercise that ‘assumes’ that there will be a AAA rating, and then calculates, with other arbitrary assumptions, what the value of the NCDs would be if this were true. E.g. To arrive at an inflated number, the report arbitrarily increases the discount rate for Piramal NCDs to 15 per cent, it said.

“A serious falsehood is being spread – at some places the competing bidder says they have received feedback from CRAs for AAA rating, at other places they say it is PwC’s assessment that NCDs will get AAA rating – if H2 bidder has not received CRA feedback as claimed in the Resolution Plan then a material information is being misrepresented to COC members. A castle in the air is being falsely marketed as manifest reality,” Piramal said.

Piramal said Oaktree has put forth a generic proposal on the lines of “we will identify an Indian owned and controlled AIF and fund them Rs 1,000 crore and they will own the insurance company”. “No specific AIF has been named. An AIF was named and a letter agreement added as part of the formal bid. But this AIF has since withdrawn in writing.”

“There is no precedent for an AIF being promoter of a Life Insurance company in India. An AIF funded by a foreign entity explicitly for the purposes of buying an insurance stake clearly violates the spirit of Indian laws on ‘Indian owned and controlled’ insurance promoters. In effect, there is no implementable solution that has been identified for the Insurance business. This is acknowledged in as many terms by Oaktree when their letter states they ‘remain available to explore any other legally viable solutions to the satisfaction of the COC’. In other words, there is an intractable legal obstacle to the implementation. And the burden of overcoming this obstacle is being placed on the COC itself!” Piramal said.

Reiterating that Oaktree has offered a mere Rs 1 lakh as committed equity, Piramal said that in contrast, its plan commits Rs 3,8000 crore of equity.

“In addition, we have Rs 16,000 crore of equity in our financial services business available for DHFL, and another Rs 10,000 crore at the PEL level ready to be infused as necessary. The competing bidder’s offer falls short on basic capital adequacy norms laid down by the regulator, and allows them to benefit from the cashflows of DHFL with no skin in the game,” it added.

Business

IBM sells its Watson healthcare assets to Francisco Partners

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IBM has announced to sell healthcare data and analytics assets from the company (currently part of the IBM Watson Health business) to Francisco Partners, a leading global investment firm.

Although financial terms of the transaction were not disclosed but previous reports pegged the value at around $1 billion.

The assets acquired by Francisco Partners include extensive and diverse data sets and products, including Health Insights, MarketScan, Clinical Development, Social Program Management, Micromedex, and imaging software offerings.

The transaction is expected to close in the second quarter of this year, IBM said in a statement late on Friday.

“The agreement with Francisco Partners is a clear next step as IBM becomes even more focused on our platform-based hybrid cloud and AI strategy,” said Tom Rosamilia, Senior Vice President, IBM Software.

“IBM remains committed to Watson, our broader AI business, and to the clients and partners we support in healthcare IT.”

Watson was one of IBM’s highest-profile initiatives in recent years and a big bet on the growing healthcare sector.

IBM currently has a market value of $108 billion, way behind its Cloud-computing rivals like Amazon and Microsoft.

In its fourth quarter, cognitive applications revenue, which includes Watson Health, came to $1.5 billion, a decrease of 2 per cent year over year.

IBM Watson was one of the “strategic imperatives” under former CEO Ginni Rometty.

“We have followed IBM’s journey in healthcare data and analytics for a number of years and have a deep appreciation for its portfolio of innovative healthcare products,” said Ezra Perlman, Co-President at Francisco Partners.

Under the terms of the agreement, the current management team will continue in similar roles in the new standalone company, serving existing clients in life sciences, provider, imaging, payer and employer, and government health and human services sectors.

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Business

Confirm willingness to fund debt owned to lenders: FRL independent directors to Amazon

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Amazon

 Future Retail’s independent directors have asked e-commerce giant Amazon if it is willing to fund Rs 3,500 crore to repay the retail company’s lenders.

Notably, the question to Amazon was posted after the e-commerce giant in an earlier letter to independent directors objected to the sale of Future Retail Ltd (FRL)’s small-format stores.

“FRL is in need for cash infusion urgently in order to repay its lenders. FRL is required to pay its lenders Rs 3,500 crore by January 29, failing which it will be classified as an NPA,” said the letter dated January 21.

“Since you are objecting to the sale of small-format sales, the proceeds of which were to be used to repay lenders and thereby avoid NPA classification, please confirm that you are willing to fund this amount by Monday through an unsecured, long-term loan, subordinated to FRL’s existing lenders or any other mutually suitable and legally acceptable structure.”

Besides, the letter to e-commerce giant said, “If you do so, FRL will use such funds in order to repay FRL’s existing lenders. Alternatively, you are also free to engage with the lenders so that we do not fall foul of our OTR process or obligations.”

Accordingly, the independent directors asked the e-commerce giant to provide the confirmations for such funds by January 22, 2022.

“Once you have provided these confirmations in writing and agree to infuse Rs 3,500 crore in order to repay FRL’s lenders by January 29, 2022, we would be happy to assess a detailed proposal and meet Amazon India Head Abhijeet Muzumdar.”

Furthermore, the letter asked Amazon, “Coming to the specific aspects of your proposal — we note that your letter refers to a potential transaction between Samara Capital and FRL as a ‘solution’.”

“In this regard, you are requested to confirm if Amazon can act on behalf of Samara Capital and has the authority to negotiate and finalise such transaction on its behalf.”

It asked Amazon to confirm the structure for the proposed transaction, and that the Manager of Samara Capital is owned-and-controlled by resident Indians.

“As you know, FRL is in the multi-brand retail sector and FDI in this sector is restricted. You are also aware that Amazon’s transaction in Future Coupons, has resulted in regulatory scrutiny, including by the Competition Commission of India, as well as enquiries by the Enforcement Directorate.”

“It is therefore critical that any investment being proposed is in compliance with all applicable laws, including FDI laws, CCI regulations and SEBI regulations, and that any such transaction should not raise further regulatory scrutiny.”

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Business

Vodafone Idea’s net losses widen YoY in Q3FY22, ARPU improves sequentially

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Telecom service provider Vodafone Idea’s net losses widened year-on-year to Rs 7,230 crore during the Q3FY22.

In the same quarter last fiscal, it was Rs 4,532 crore. In Q2FY22, it was Rs 7,132 crore.

Revenue from operations during the quarter declined to Rs 9,717 from Rs 10,894 crore in the same period in the corresponding fiscal.

However, Average Revenue Per User during the quarter stood at Rs 115, as against Rs 109 in Q2FY22, an increase of 5.2 per cent quarter-on-quarter.

“We remain focused on executing our strategy to improve our competitive position and win in the marketplace. Separately, we have opted for upfront conversion of interest arising from deferment of spectrum and AGR dues into equity,” MD and CEO Ravinder Takkar said.

“Revenue for the quarter was Rs 97.2 billion, a quarter-on-quarter improvement of 3.3 per cent, aided by several tariff interventions including the recent tariff hikes taken by all operators in November 2021.”

The telecom company continued to invest in 4G to increase its coverage and capacity, it said in a statement.

“During the quarter, we added 4,000 4G FDD sites primarily through refarming of 2G/3G spectrum to expand our 4G coverage and capacity as well as continued to upgrade our core and transmission network,” the company said.

In late November 2021, Vofafone Idea, along with Bharti Airtel and Reliance Jio, raised tariffs on prepaid customers by around 20 per cent.

The upward revision in tariffs helped Vodafone Idea in increasing its ARPU by five per cent in Q3FY22, it said.

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