Indian Economy: News and Discussion

Haldilal

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Writing off means letting go off the money. Accepting it in the balance sheet that this money will not come back. Lost to the last rupee. NPA provisioning has already been done by banks so they have already bled. Writing off at this stage will not make them bloodier.
Ya'll Nibbiars your post is totally Ingorning the Recoverable Asset's.
 

indus

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Ya'll Nibbiars your post is totally Ingorning the Recoverable Asset's.
By definition write off is the money lost forever. Non recoverable.
For ex, in case of videocon

Videocon insolvency: Creditors to take 96% haircut on dues; NCLT requests increase in pay-out
"Out of total claim amount of Rs 71,433.75 crore, claims admitted are for Rs 64,838.63 crore and the plan is approved for an amount of only Rs 2,962.02 crore, which is only 4.15 per cent of the total outstanding claim amount and the total hair cut to all the creditors is 95.85 per cent," the NCLT observed.
https://telecom.economictimes.india...es-nclt-requests-increase-in-pay-out/83563312
 

Haldilal

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By definition write off is the money lost forever. Non recoverable.
For ex, in case of videocon

Videocon insolvency: Creditors to take 96% haircut on dues; NCLT requests increase in pay-out
"Out of total claim amount of Rs 71,433.75 crore, claims admitted are for Rs 64,838.63 crore and the plan is approved for an amount of only Rs 2,962.02 crore, which is only 4.15 per cent of the total outstanding claim amount and the total hair cut to all the creditors is 95.85 per cent," the NCLT observed.
https://telecom.economictimes.india...es-nclt-requests-increase-in-pay-out/83563312
Ya'll Nibbiars I am talking about the process before that not after that and in which condition.
 

another_armchair

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Writing off means letting go off the money. Accepting it in the balance sheet that this money will not come back. Lost to the last rupee. NPA provisioning has already been done by banks so they have already bled. Writing off at this stage will not make them bloodier.
Writing off doesn't prevent the bank from continuing with its recovery process.

Some of them write it off their books and sell a part of it to ARC's.

Haircut is a mild way of losing inches from where you wouldn't want to and there is zero chance of recovery.

Please correct me if I am wrong.
 

Haldilal

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Writing off doesn't prevent the bank from continuing with its recovery process.

Some of them write it off their books and sell a part of it to ARC's.

Haircut is a mild way of losing inches from where you wouldn't want to and there is zero chance of recovery.
Ya’ll Nibbiars the Videocon sales has been stayed.
 

Haldilal

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Yeah.. lets see what they manage to salvage. Looks like GoI is expecting a backlash with murmurs getting louder against haircuts and IBC... a PIL is likely in the works. Let's see how much muck they dig up.
Ya'll Nibbiars the Bank of Maharashtra lead this.

Bank of Maharashtra, among the three lenders that moved an appeals court against Vedanta group firm’s resolution plan for Videocon Group, feels that the resolution value is too low, its. The Bank have gone to the National Company Law Appellate Tribunal NCLAT basically because of the low resolution value and have taken it up with the court. Based on the court’s prudence, we will go ahead with that.
 

Haldilal

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Ya'll Nibbiars Beware of the Digital Dabba Trading's.
 

indus

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Writing off doesn't prevent the bank from continuing with its recovery process.

Some of them write it off their books and sell a part of it to ARC's.

Haircut is a mild way of losing inches from where you wouldn't want to and there is zero chance of recovery.

Please correct me if I am wrong.
That is called provisioning in accounting parlance. If a debt is not squared off by 31st March and you have to file company s accounts, you have to put it somewhere or you wont be able to close the books. So banks enter the debt as lost for the present time, show the loss in the balance sheet but keep that money as future recoverable. Till that time the keep fighting the borrower for recovery of their dues. Through courts, arbitration, nclt or whatever. But if the bad debt/npa is non recoverable, it is finally written off, meaning the entry is permanently settled to zero and not considered as future recoverable anymore. Then there is no point in continuing with recovery process as things have to end somewhere. They cant go on forever.
 

Haldilal

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Ya'll Nibbiars there is a haircut but it is not 95 per cent, it is around 50-55 per cent. The biggest catch, which everyone is failing to understand is that despite the claim of oil and gas being included in the said amount, the said investment of VIL in oil and gas assets, which are worth around Rs 15,000 crore, is not forming part of the acquisition by Vedanta group. The Twin Star Technologies Rs 2,962 crore bid, which was approved by NCLT on June 9, includes a cash infusion to the outstanding loan and equity of around 8 per cent which may value around Rs 5,000 crore in the next 5 years considering the intrinsic valuation of the real estate, valuation of brand "Videocon" and other brands together with already installed capacities of consumer electronics and home appliances.

The So, in nutshell, banks are likely to recover around Rs 7,962 crore, which translates to around 28 per cent of the loan stated above. Had it not been The Chinese Virus pandemic, this recovery could per cent much. The Banks have kept aside oil assets owned by Videocon Indistries Limited, which are worth around Rs 15,000 crore, and the same is being disposed of by undertaking separate corporate insolvency resolution process in respect of the same.

The said oil and gas business has garnered huge expression of interest from domestic and international players. Thus, the proceeds on consolidated basis are expected to be around Rs 22,962 crore as against. Thus, the recovery is expected to be around 45 per cent and not 5 per cent as alleged. The Videocon Industries and its 12 group companies had a total admitted claims of Rs 64,838.63 crore. And The Earlier this week, the bankruptcy and insolvency appellate tribunal NCLAT had the takeover bid by Anil Agarwal's Twin Star Technologies for Videocon Industries along with its 12 group firms, over the plea filed by two dissented creditors Bank of Maharashtra and IFCI Ltd. The National Company Law Appellate Tribunal NCLAT stayed the order passed by the Mumbai bench of NCLT approving the resolution plan on June 9 and directed to maintain status quo ante as before passing of the order, till the next date of hearing.

The Videocon Industries and its 12 group Companie's had a total admitted claims of Rs 64,838.63 crore. The Earlier this week, the bankruptcy and insolvency appellate tribunal NCLAT had the takeover bid by Anil Agarwal's Twin Star Technologie's for Videocon Industries along with its 12 group firms, over the plea filed by two dissented creditors - Bank of Maharashtra and IFCI Ltd. The National Company Law Appellate Tribunal (NCLAT) stayed the order passed by the Mumbai bench of NCLT approving the resolution plan on June 9 and directed to maintain "status quo ante" as before passing of the order, till the next date of hearing. And It has also directed the resolution professional of the company will continue to manage the Videocon Group companies.

Earlier, in its 47-page-long judgement, NCLT while approving Anil Agarwal's Twin Star Technologies' Rs 2,962.02 crore-bid had observed creditors of debt-ridden Videocon Industries Ltd will be taking nearly 96 per cent haircut on their loans and the bidder is "paying almost nothing.

The NCLT had observed that the resolution plan is giving 99.28 per cent to the operational creditors, which it sarcastically hinted to be as a "Haircut or Tonsure, Total Shave". It has requested the Committee of Creditors CoC and Twin Star Technologies to increase the pay-out amount to these Operational Creditors as they are getting only 0.72 per cent of their admitted claim amount.
 
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Knowitall

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So what happens when a entity is unable or unwilling to pay back it's loans.

Do the bank just write it off and the chapter is closed or the money is recovered from the govt treasury?
 

HitmanBlood

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If he is successful with imports why even bother to setup a factory. Keep importing stuff and save coast on local manufacturing. This is exactly what smartphone manufacturers were doing until recently.

Also GoI isn't inviting companies to manufacture goods for Indian markets only. They are free to export to anywhere they want, With very little export duty.

Asian companies invest in a country to create a market where American companies invest to capture a market. There is a great example of Suzuki. They started manufacturing in India when there was almost no demand for cars. India didn't even have proper highways when Suzuki were selling their 800s. Look at Indian auto market today. They took the greatest risk and received greatest reward.

If Tesla properly studies Indian market and starts manufacturing some India specific electric car below 20 lacs it will easily be successful. Ofcourse he doesn't want to do that. Thats too much work and too much risk. He just wants to sell one size fits all approach in an already established market so he can easily print money on day one.

This is one of the reasons why Japanese, Korean and nowadays Chinese companies are beating American companies.
 

FalconSlayers

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If he is successful with imports why even bother to setup a factory. Keep importing stuff and save coast on local manufacturing. This is exactly what smartphone manufacturers were doing until recently.

Also GoI isn't inviting companies to manufacture goods for Indian markets only. They are free to export to anywhere they want, With very little export duty.

Asian companies invest in a country to create a marker where American companies invest to capture a market. There is a great example of Suzuki. They started manufacturing in India when there was almost no demand for cars. India didn't even have proper highways when Suzuki were selling their 800s. Look at Indian auto market today. They took the greatest risk and received greatest reward.

If Tesla properly studies Indian market and starts manufacturing some India specific electric car below 20 lacs it will easily be successful. Ofcourse he doesn't want to do that. Thats too much work and too much risk. He just wants to sell one size fits all approach in an already established market so he can easily print money on day one.

This is one of the reasons why Japanese, Korean and nowadays Chinese companies are beating American companies.
They knew that when they create employment it will rise income, it will further create a customer base. And ever increasing.
 

Haldilal

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So what happens when a entity is unable or unwilling to pay back it's loans.

Do the bank just write it off and the chapter is closed or the money is recovered from the govt treasury?
Ya'll Nibbiars And in the Case of the PSU's GOI bailout and Capital Infusion's.
 

Knowitall

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Ya'll Nibbiars And in the Case of the PSU's GOI bailout and Capital Infusion's.
Yes I get that but what if it is a private entity does the govt pay in that case too.

Also this means that the govt is using it's own sources of income that is tax and profitable psu's income to write of loans?

Correct me if I am wrong.
 

Haldilal

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Yes I get that but what if it is a private entity does the govt pay in that case too.

Also this means that the govt is using it's own sources of income that is tax and profitable psu's income to write of loans?

Correct me if I am wrong.
Ya'll Nibbiars if big yes and then it sell it's.
 

Haldilal

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Basically if the loan amount is big the govt pays it I get that part irrespective of whether it's private or govt.

But what do you mean by sell?
Ya'll Nibbiars GOI will infuse capital against shares of the Private bank in the Bailout's and later will sell it's stakes.
 

Knowitall

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Ya'll Nibbiars GOI will infuse capital against shares of the Private bank in the Bailout's and later will sell it's stakes.
Damn so if the company or the loan is big enough or it is a PSU the govt is forced to spend money to bail it out. Such a waste of funds overall.
 

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