Ashish Shah is caught in the middle of India’s latest financial crisis. As chief operating officer of Radius Developers, he’s struggling to fund construction of apartment complexes because of a liquidity crunch in the nation’s bloated shadow-banking sector, Bloomberg News reported. “Real estate is a sitting duck,” said Shah. “The timing is very crucial as the slowdown has hit the real estate market quite hard.
Airline bankruptcies have increased this year at the fastest ever rate, led by the collapse of India’s Jet Airways, British travel group Thomas Cook and Avianca of Brazil, according to industry data published on Friday, Reuters reported. “2019 has seen the fastest growth in airline failure in history,” said airline consulting firm IBA, which has tracked plane fleets returned to lessors or administrators by 17 carriers that have gone bust so far this year.
Indian stocks declined amid a global sell-off on deepening concerns over an economic slowdown and domestic worries about the health of the financial sector, Bloomberg News reported. The S&P BSE Sensex declined 0.5% to 38,106.87 as the 3:30 p.m. close in Mumbai, while the NSE Nifty 50 Index slid 0.4%. Renewed doubts about debt and the availability of liquidity for non-bank lenders have helped spark a bearish turn in the market.
The number of Indian real estate companies tipped into insolvency has doubled in less than a year since the collapse of a key shadow bank, an event often compared to the Lehman crisis that squeezed American funding markets a decade ago, Bloomberg News reported. As many as 421 developers entered bankruptcy court by the end of June, up from 209 in September 2018, around the time when the government seized control of Infrastructure Leasing & Financial Services Ltd. The move triggered a credit crunch for smaller financiers and property firms, which depend on funds from shadow lenders.
One of India’s largest private sector lenders slumped by a record in the bond market on Wednesday, as concerns mount over the health of the nation’s finance sector amid a shadow banking crisis, Bloomberg News reported. Dollar bonds of Yes Bank Ltd., which has sizable exposure to the cash-strapped shadow lenders, slumped a record 5.5 cents to 80.9 cents on the dollar on Wednesday, the lowest since the bonds were sold in 2018.
An Indian bank was able to dupe regulators about its growing exposure to a single property developer for at least a decade before the firm filed for insolvency, according to a letter written by the lender’s managing director, who has since been removed, Bloomberg News reported. Punjab & Maharashtra Co-operative Bank Ltd. used “dummy accounts” and other methods to hide its oversized loans to Housing Development & Infrastructure Ltd. from the Reserve Bank of India, Joy Thomas wrote in the letter, a copy of which was seen by Bloomberg News.
India’s Infrastructure Leasing & Financial Services (IL&FS) said on Tuesday it aims to resolve 50% of its debt by March 2020 and had identified resolution plans for all of its 302 entities, Reuters reported. The indebted conglomerate’s non-executive chairman Uday Kotak made the comment a year after the government replaced IL&FS management with a team he leads, following a series of defaults that triggered concerns of a bad debt crisis in India’s shadow banking sector.
In a related story, Bloomberg News reported that four years into one of the biggest, longest unwindings in India’s corporate history, tycoon Anil Ambani found himself in a familiar place Monday: Presenting shareholders with another plan to sell off assets and pay debt. His Reliance Group is planning to pay creditors 150 billion rupees ($2.1 billion) more by March, the embattled executive told investors on Monday in Mumbai. Financial unit Reliance Capital Ltd., whose credit rating was downgraded to default by local firms this month, will exit its lending business, he said.
Mounting debt failures in India have been catching rating companies off guard, underscoring continued challenges a year after the landmark failure of shadow bank IL&FS increased scrutiny of the industry, Bloomberg News reported. Defaults at companies including Dewan Housing Finance Corp., Cox & Kings Ltd. and Altico Capital India Ltd. have occurred even as their long-term ratings indicated very low to moderate risk of non-payment. “Raters have not been able to detect stress in time,” said Ashutosh Khajuria, chief financial officer at Federal Bank Ltd.