| | | Question of the Week Besides co-founding Edelweiss Finance in 1995 with Rashesh Shah, Venkatchalam Ramaswamy is an early-stage investor in a nutrigenomics startup. Which one? | | |  | | Good Morning | | The News in Summary Edelweiss became the fourth financial firm this year to find itself in the bad books of the Reserve Bank of India (RBI). The regulator placed temporary business restrictions on two of its subsidiaries, including Edelweiss Asset Reconstruction Co. Ltd (EARCL), the main profit-driver. Elsewhere, Wipro faced a rare investor revolt after three-fourths of its public shareholders voted against the hefty cash severance package it gave to sacked CEO Thierry Delaporte. Meanwhile, a proxy advisory firm raised doubts over the proposed demerger of ITC’s hotels business, while Disney’s efforts to sell off its 30% stake in Tata Play appear to be floundering. Finally, another activist investment firm, Snowcap Research, has questioned the financial projections of Adani Green Energy Ltd. | | |  | | | | Edelweiss in Hot Water as RBI Halts Business Over Serious Malpractices  Continuing its crusade against irregularities in the financial services sector, RBI imposed business restrictions on two Edelweiss group entities, after supervisory examinations unearthed several malpractices. The central bank ordered ECL Finance Ltd (ECL) and Edelweiss Asset Reconstruction Co. Ltd (EARCL) to cease and desist from undertaking fresh activity with immediate effect, stating they had entered into “a series of structured transactions for evergreening stressed exposures of ECL”, thereby circumventing applicable regulations. The regulator said ECL had submitted incorrect details of its eligible book debts, and also not complied with its loan-to-value rules for lending against shares. In a stern note, RBI said that EARCL ignored its supervisory letter issued after its previous inspection for 2021-22, and instead of taking meaningful remedial action to rectify the said deficiencies, it resorted to “new ways to circumvent regulations." While RBI has said it will review its business restrictions on the two Edelweiss entities upon satisfactory rectification of its observations, the experience with Paytm Bank, IIFL Finance and JM Financial Products, which were also pulled up for non-compliance, shows that it isn’t likely to lift the ban any time soon. | | | | Wipro’s Public Shareholders Revolt Against $4.3M Severance for Ex-CEO Delaporte  Thierry Delaporte may have walked away with a total salary of ₹167 crore ($20.1 million) for his last year as CEO of Wipro, but the generous farewell has been problematic for the company. More than three-fourths of its public shareholders voted against awarding $4.33 million (Rs 36.15 crore) in cash severance to the man under whose watch the company recorded one of its worst years with declining revenue and profit before he was asked to go. Voting records published on the exchange show that while a 73% promoter holding helped the resolution secure an overall 90% vote in its favour, 78.4% of the public shareholders, including seven large foreign institutional investors, voted against the cash compensation. Large shareholders cited insufficient disclosure, while proxy advisory firm Institutional Investor Advisory Services (IiAS) said, “The rationale for such a large payout for what appear to be obligations born out of basic professionalism is unclear." | | | | | | | | ITC Hotels Spinoff: Proxy Advisors Clash on Shareholder Value  Proxy advisor IiAS has recommended ITC Ltd shareholders to vote against the proposed demerger of its hotel business, stating it neither provides complete value unlocking for shareholders, nor does it materially reduce any capital support responsibilities for the hotel business from ITC. However, three other advisory firms, InGovern Research Services, Institutional Shareholder Services and Stakeholders Empowerment Services (SES) have said minority shareholders are expected to benefit from the move. According to ISS, the demerger will “enable ITC Hotels to operate with an optimal capital structure with the ability to access capital to fund its growth requirements.” It also pointed to the demerged hotel company’s ability to attract the right set of investors, “whose investment strategies are more sharply aligned with that of the hospitality industry." That could be an oblique reference to ITC’s cigarettes business, which has kept most global funds from investing in the company. With a meeting of shareholders of ITC to consider and approve the demerger proposal slated for 6 June, it remains to be seen whose advice shareholders will follow. | | | | Disney's Tata Play Exit Hits a Wall as Tata, Reliance Show No Interest  Walt Disney Co’s desperate efforts to sell off the 30% stake in Tata Play which it inherited as part of its global purchase of Rupert Murdoch’s 21st Century Fox assets, aren’t going anywhere. A report last week that Tata Group had finally agreed to buy Disney’s stake in the DTH arm at a $1-billion valuation seems to have been misplaced. Sources close to the group have confirmed the lack of interest from Tata and also Reliance Industries Ltd, another potential buyer after the merger of its entertainment unit with Disney local unit Disney Star. The US entertainment giant’s stake in Tata Play isn’t part of the proposed $8.5-billion merger deal. That leaves Disney, which wants to exit the non-core distribution business, with a problem. Past efforts, including a planned IPO of Tata Play in 2022 which would have given the company an exit option, haven’t gone far even as the Indian company’s valuation has dropped to around $1 billion from $3 billion in 2019. | | | | This video offers an insight into Disney’s dilemma in India despite its deal with Reliance: | | |  | | | | Activist Firm Snowcap Questions Adani Green's Lofty Valuation Activist investment firm Snowcap Research has come out with a downbeat analysis of Adani Green Energy Ltd. (AGEL), taking into consideration its mixed operational performance, declining project returns, 50GW funding concerns, inflated run-rate EBITDA, and related party merchant power sales. The London-based firm said that ambitious generation predictions and accounting add-backs seemed to inflate Adani Green's run-rate Ebitda, which was concealed from investors. In addition, 81% of the company’s infirm revenues ((bulk of its merchant power sales) were to Adani Enterprises and Adani Energy Solutions. In its presentation dated 30 May, Snowcap concluded that AGEL’s stock “trades at nearly 34x EV/EBITDA (NTM), vs 8-10x for renewable peers implying as much as 90% potential downside to AGEL’s equity value on a multiple basis.” The report, however, did little to dampen investor interest in the company or the group at a time when the boards of two other firms Adani Enterprises and Adani Energy Solutions approved raising Rs 16,600 crore and Rs 12,500 crore respectively by way of issuance of equity shares and other eligible securities. | | | | Last Word After years of struggle, two of Tata Steel’s European units, in the UK and the Netherlands, will start generating operating profits soon, according to the company’s managing director T.V. Narendran. A change in strategy including shutting down the blast furnaces in the UK to make way for electric arc furnaces, while processing crude steel imported from India and the Netherlands, is driving the change in fortunes. A slowdown in domestic demand because of the union elections, and falling steel prices on account of aggressive competition from Chinese manufacturers, have also been hurting Indian steel makers. A turnaround of the European operations, which reported a combined Ebitda loss of almost Rs 650 crore in the January-March period, will help Tata Steel’s bottom line, after their losses dragged the company’s margins down in the March quarter despite robust performance in India. | | | | Answer to the Question Edelweiss co-founder Venkatchalam Ramaswamy is also an investor and a board member in Epigeneres Biotech, a nutrigenomics company that conducts medical screenings for the early detection of cancer. | | | Do you have any questions? Send in your queries to sundeepkkhanna@gmail.com Were you forwarded this email? Did you stumble upon it online? Sign up here. | | Written by Sundeep Khanna. Edited by James Mathew. Produced by Shad Hasnain. Send in your feedback to newsletters@livemint.com. | | | | | Download the Mint app and read premium stories | | | | | | View in Browser | Privacy Policy | Contact us You received this email because you signed up for Mint Top of the Morning or because it is included in your subscription. Copyright © HT Digital Streams. All Rights Reserved | | | | |
