Promising the Skyscrapers: Jaypee's Corporate Debt Burden

There was a showdown yesterday in our neighborhood yesterday. About 4000 homebuyers staged a protest against the Jaypee Group for its failure to deliver their apartments on time.

The anger and rustration of homebuyers is undertandable. Having been promising a "Wish Town" with sprawling lawns, gold courses, playgrounds and various other amenities , and having invested  their life savings to buy a home of their own, they are now being left in the lurch. Apartments that were to be handed over in 2011 are still undelivered. Across the expressway, a vast array of unfinished apartment complexes can be seen on the horizon -- empty shells of brick, cement and concrete, with no sign of life, or work-in-progress.

A number of protests have been taking place from time to time. The last one led to a blokage on the expressway, and this one was aparently triggered by a decision in the High Court. The Allahabad bench of the National Compaly Law Tribunal (NCLT) admitted IDBI bank's insolvency plea pertaining to Jaaypee Infratech. The company had failed to repay a loan of INR 8500 Crores (USD 1.3 billion).

Behind the anger and frustration of the homebuyers is the larger picture of Corporate Debt in India. Thanks to poor internal controls, bad debts in Indian banks has shot up to INR 7,00,000 Crores (USD 109 billion) over the last two years. In order to defaults companies have been on fire sale of assets: Reliance Communications (RCom), which had debts of over Rs 47,000 crore sold its tower business to escape default default, the Ruias have sold their oil refining business to Rosneft, GMR and GVK parts of their airports and power businesses, and Vijay Mallya parts of his liquor businesses that were mortgaged to fund Kingfisher Airlines.

Jaypee group’s debt is over Rs 75,000 crore (USD 11b). So, according a report in the Hindu:

"... the group has agreed to sell its 20mtpa of cement assets to Kumar Birla-led Ultratech for Rs 15,900 crore. This will leave its listed entities with about 6mtpa of cement capacity, three thermal power plants, one hydropower plant, an expressway project and land parcels. It is looking to sell most of these assets at the right price, but buyers are not easy to come by. Aside from selling stake in its land parcels and the Yamuna Express Highway, the group is looking to sell its remaining cement plants for Rs 4,000 crore and its Bina thermal power plant for Rs 3,500 crore. In the last year, the group has defaulted on payment obligations worth $350 million. Analysts say its capacity to service its debt has not improved."

No wonder there are few takers when the Jaypee Group boss, Manoj Gaur, tries to tell the homebuyers that their "investment is safe".

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LINKS & REFERENCES

* (2017) - http://www.hindustantimes.com/noida/noida-authority-jaypee-tell-homebuyers-not-to-panic-assure-their-money-is-safe/story-nYjtbZb1bR6tzfYbZitI2N.html

Jaggi on the slowdown (30may17) https://swarajyamag.com/economy/not-just-demo-pm-modis-black-money-chase-is-x-factor-in-growth-slowdown

(2017, May) Financial Express - http://www.financialexpress.com/industry/banking-finance/demonetisation-impact-bank-npas-mount-to-rs-614872-crore-set-to-rise-further/558916/
- They now constitute 11 per cent of of the gross advances of Public Sector Unit (PSU) banks. In all, the total NPAs including both the public and private sector banks were Rs 697,409cr in December 2016. These figures were compiled by Care Ratings.

 - 31 May - Reliance Defaults -  https://www.bloombergquint.com/markets/2017/05/31/an-ambani-default-won-t-fly
Andy / Bloomberg - http://m.economictimes.com/industry/banking/finance/banking/at-this-rate-fintech-will-slaughter-indias-banks/articleshow/58782969.cms

The Hindu- http://www.thehindu.com/business/Industry/the-biggestever-fire-sale-of-indian-corporate-assets-has-begun-to-tide-over-bad-loans-crisis/article8573163.ece

USB Vulnerability

Ever so often, whenever I pick up a USB memory stick, a certain train of thought crosses my mind.
"Here is a miracle device", I remind myself, "which one of the 6 billion+ across the world, one that has made data-transfer and battery charging so amazingly simple, and yet, contains within it the power to destroy nuclear plants, water and power supply grids and to unleash starvation, misery and death across the world!"

A few years ago, the Economist highlighted positive features of the 'thumb-drive' in an article very aptly titled. "In Praise of the Humble USB". While reading this piece, I was delighted to know that a computer architect of Indian origin,  Ajay Bhatt, had a key role to play in creating this amazing interface, which his parent company, Intel, decided to make 'the cheap USB plug and socket an open standard, available to manufacturers everywhere free of all royalty charges and licensing fees'. This one move destroyed the Firewire standard that had been patronised by Apple, and made USB a de facto standard across the world.

The ease with which the USB drive could be used also made it a handy tool in the hands of spies, spooks and saboteurs. The most famous example of this is the Stuxnet virus which CIA and Mossad used to destroy a thousand centrifuges in Iran. Ever since I heard of this cyber-attack, I have been awed by the sheer scale of destruction that can be unleashed through the USB drives. It also led me to the mistaken belief that the Iranian nuclear program had been irreparably damaged because of Stuxnet.

A recent documentary by Alex Gibney - "Zero Days" - suggests that in the real world, things are not what they seem. In their eagerness and impatience to destroy the Iranian nuclear centrifuges, Mossad apparently changed the codes created by their CIA/NSA collaborators, and released a version that was a lot less subtle, and left behind an electronic trail that was being used against the USA. It seems Iran has now built up one of the largest cyber-armies in the world, one that was behind two major warning attacks: one on the largest oil company in the world, SaudiAramco, destroyed every line of code on 30,000 computers, and then a surge attack on banks in the USA that crippled commercial operations.

As a friend recently pointed out, our biggest vulnerability is that new technology is being built on old systems that were not intended to be on a network. So, by default, we have gaping holes in just about all the things that now run our lives - utility supplies, banking & finance.

Even the ubiquitous USB works on FAT-32 system which has since evolved into exFAT and NTFS. However, the base continues to be FAT32, and as long as this is the case, our systems will continue to be inefficient - and utterly vulnerable.

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LINKS & REFERENCES

* Stuxnet - Alex Gibney's Zero Days - https://youtu.be/AcgUGujn_nY
* FAT32, exFAT and NTFS - http://www.pcworld.com/article/3109559/hardware/why-your-usb-drives-file-format-matters-fat32-vs-exfat-vs-ntfs.html