MP Congress Government reopens the aborted diamond mining chapter ignoring the threat to environment

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When former Madhya Pradesh Chief Minister Shivraj Singh Chouhan had visited the Bunder Diamond Mine area in Chattarpur district

Bhopal: After the previous Madhya Pradesh Bharatiya Janata Party Government had failed to parcel out prime forest land in Chhatarpur district of Madhya Pradesh, which is a Protected Area, to the diamond giant Rio Tinto, mainly due to technical objections raised by senior journalist Lalit Shastri, earlier through the columns of The Asian Age and then through exclusive reports published by Newsroom24x7, the Madhya Pradesh Cabinet, presided by Chief Minister Kamal Nath, has decided to auction 364 hectare of forest land in Chhatarpur for diamond mining.

The aborted Rio Tinto Bunder diamond project camp

The forest area in Chhatarpur, according to the State Government, has an estimated diamond mineral storage of about 34.20 million carats. Its estimated storage value is Rs 60, 000 crores. This is based on the selling price published by IBM.

Two new conditions have been added in the interest of Madhya Pradesh for auctioning the Chhatarpur area for diamond mining. This includes the first auction in Madhya Pradesh and after the first auction the patta or lease holder will be entitled to export and sell it to any body. The Mining Department has been authorized to start the auction process and obtain necessary permissions from the central government.

Here is the link (url) of the satellite map of the now aborted Rio Tinto diamond mining area

(In the map, coordinate C stands for Sagar; A-D is the proposed Rio Tinto diamond mining area and coordinate B is the core of Panna Tiger Reserve. Mark the water channels that criss-cross this area and the land, stretching over a distance of about 60 kms (as the crow flies) between the proposed mining site and one end of Panna Tiger Reserve, is a perfect watershed).

Rio Tinto Bunder project background:

Rio Tinto had submitted the application for prior environmantal clearance and obtaining TOR for Bunder Diamond Mine (a mechanized opencast mine) in a lease area of 954 hectare in Bakswaha Tehsil of Chhatarpur district on April 4, 2012. In its application, the company said: “Whole area, a protected forest land, will be utilized for Mining and related operations, including opencast pit, dumps, reservoir and essential surface infrastructure.” It further said that a reservoir would be constructed outside lease area in forest land for water supply. Existing vegetation would be cleared over most of the area and two local nallas (natural water channels) flowing over mineralised zone would have to be diverted. The diversion will be carried out by impounding it to create water reservoirs for supplying a part of water to project, including the beneficiation plant.

Rio Tinto Exploration India Private Limited had a reconnaissance Permit over an area of 10,000 sq. kms. followed by two prospecting licenses over 45 sq. kms. The proposed lease stretching over 954 hectare was selected from the two prospecting lincences. Madhya Pradesh government had already issued the letter of intent for mining lease.

Rio Tinto Bunder Mining inauguration stone

Check the following for the aborted Rio Tinto move to exploit the Chhatarpur forest area for diamond mining purpose:

  1. Diamond giant Rio Tinto’s Indian connection and questions that need to be addressed
  2. Take Action: Rio Tinto and the Bunder Diamond Mine
  3. Rio Tinto’s Exit from India: Did Tigers Trump Diamonds?
  4. Storm over diamond mining in Panna belt
  5. MP may allow diamond mining near Panna reserve
  6. Please stop Rio Tinto from devastating an eco-fragile zone through commercial mining of diamonds in Chattarpur district of Madhya Pradesh in central India

Fitch downgrades long-term default and viability rating of ICICI and Axis banks

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Mumbai: Fitch Ratings has downgraded ICICI Bank Limited’s Long-Term Issuer Default Rating (IDR) to ‘BB+’ from ‘BBB-‘ and its Viability Rating to ‘bb+’ from ‘bbb-‘. The Outlook on the IDR is Stable. Fitch has also affirmed ICICI’s Support Rating at ‘3’ and Support Rating Floor at ‘BB+’. A full list of rating actions is at the end of this commentary.

Fitch also has downgraded the Long-Term Issuer Default Rating (IDR) and Viability Rating of Axis Bank Ltd. to ‘BB+’ and ‘bb+’, respectively, from ‘BBB-‘ and ‘bbb-‘. The Outlook is Stable. Fitch has also affirmed Axis’s Support Rating and Support Rating Floor at ‘3’ and ‘BB+’, respectively.

The rating actions vis-a-vis ICICI Bank come amid the challenges the bank faces in its operating environment. Fitch lowered its midpoint for India’s operating environment to ‘bb+’ from ‘bbb-‘ following a review of the banking sector’s performance, particularly in the last three years, and its regulatory framework, as well as the outlook in the near term. We also compared India with other sovereign jurisdictions in Asia rated in the ‘BBB’ category including the key metrics of GDP per capita and the ease-of-doing-business ranking. We concluded the sector will perform below the average of its peers over the next one to two years in spite of our expectations of high economic growth and improving business prospects in India. The banks – which remain the biggest credit intermediaries – are positioned to take advantage of this opportunity provided their damaged balance sheets are remediated sustainably with fresh equity that encourages them to support growth in a meaningful way.

Fitch believes the performance of Indian banks should have largely bottomed out, but the sector is still struggling with poor asset quality and weak core capitalisation. We estimate that Indian banks’ impaired-loan ratio declined to an average of 10.8% by 9MFYE19 from 11.5% in the financial year ended March 2018 (FY18), which continues to be high by global standards. Capital buffers are assessed by Fitch as moderate, including for private-sector banks, especially in light of their high impaired-loan ratio, risk appetite and the challenging but competitive operating environment.

The Long-Term IDR on Axis is driven by its Viability Rating, which is the same as its Support Rating Floor. The Stable Outlook on its IDR reflects our expectation of limited downside pressure on the IDR in the foreseeable future.

The bank’s Support Rating of ‘3’ and Support Rating Floor of ‘BB+’ reflect Fitch’s expectation that it is less likely to receive extraordinary state support, if required, than the large state banks (with SRF of BBB-) due to its private ownership. Fitch believes that the sovereign’s constrained finances and the large number of majority government-owned banks that are systemically important and have weak capitalisation means that these banks will have priority in terms of timeliness of government support. The state has a track record of supporting systemically important banks, which we view Axis to be, although Axis has not required support in the past.

VR
The downgrade of Axis’s VR reflects its relatively weak core capitalisation and asset quality, which, despite some improvements in the near term, are not commensurate with Fitch’s expectation of higher rated entities in operating environments viewed as broadly comparable to that facing Indian banks.

Fitch believes that Axis’s core capital ratio is unlikely to meet the threshold for higher-rated banks even if the bank proceeds with the conversion of USD400 million of warrants into equity and fresh equity issuance in the near term. Axis’s Fitch Core Capital ratio of 10.7% and common equity Tier 1 ratio of 11.3% at FYE19 are lower than comparable private banks in India and global benchmarks, which renders Axis vulnerable to shocks or further deterioration in the operating environment.

Axis’s impaired loan ratio improved to 5.8% by FYE19 from 6.8% a year earlier. This compares well against some local private banks, but is still well above Fitch’s expectation for higher rated banks, and we do not expect Axis to reach that level in the near term. Earnings slightly recovered in FY19, but operating profit/risk weighted assets was subdued at 1.3%. We see potential for a stronger earnings recovery in FY20 in line with management’s guidance, but this is likely to entail above-sector growth and potentially higher risk appetite. The risks may be mitigated by the bank’s initiatives in risk management and control.

Axis’s VR also takes into account its retail franchise, which compares well against other Indian banks and reflects its stable funding profile (low-cost deposit ratio of 44% at FYE19).

SENIOR DEBT
Axis’s senior debt ratings have also been downgraded to ‘BB+’ from ‘BBB-‘ in line with the IDR, as the debts represent the bank’s unsecured and unsubordinated obligations.

Rating Sensitivities

IDRA

Axis’s IDR is still driven by its VR. An improvement in the bank’s VR would lead to an equivalent increase in the IDR. However, there is limited downside risk to the IDR in the event of a VR downgrade so long as SRF remains unchanged, implying that our assessment of the sovereign’s ability and propensity to support the bank remains intact.

The IDR is also less sensitive to a downgrade in the sovereign rating as its SRF is lower than the sovereign rating. Similarly, a sovereign rating upgrade would also not lead to an upgrade in the bank’s IDR unless the former coincided with a strengthening of the sovereign’s ability and propensity to support the bank, in Fitch’s view. However, we do not expect that in the near term.

SENIOR DEBT
Any changes in the bank’s IDR would result in equivalent changes in their senior debt ratings.

VR
Further improvement in Axis’s impaired loan ratio and earnings would add stability to its VR. However, the VR may not be upgraded until Fitch is confident that its capital buffer can be sustained at significantly higher levels so that there is more than a moderate cushion against risks common in a challenging operating environment. Substantial injections of fresh equity in the near term will help bolster the capital buffer, providing that it is also accompanied by continued improvement in other areas, such as the impaired loan ratio (to significantly lower than 5%) and profitability, without the bank also increasing its risk appetite.

Axis’s VR, which is below the sovereign rating, would be unaffected by a sovereign downgrade, unless it represented further significant deterioration in the operating environment and there were also lingering pressures on the bank’s financial profile.

SUPPORT RATING AND SUPPORT RATING FLOOR
Any changes to Fitch’s assessment of the government’s propensity and ability to support Axis, based on the bank’s size, systemic importance and ownership, would affect the Support Rating and Support Rating Floor.

Environmental, Social and Governance (ESG) Issues: Axis’s financial transparency is scored ‘4’ on Fitch’s ESG scale. It reflects our view that the quality and frequency of financial reporting and the auditing process have an impact on its VR, which in turn drives the IDR. Axis’s sharp financial deterioration in recent years was driven mainly by regulatory audits that forced the banks in India to recognise non-performing loans (NPLs) after the NPL ratios of banks and the regulator diverged.

CIC orders SEBI to conclude investigation into the Saradha scam in a time-bound manner

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New Delhi: Central Information Commission has directed the Securities & Exchange Board of India (SEBI) to complete the investigation into the matter relating to Saradha Realty India Limited within a time bound manner.

The CIC has also ordered that the appellant, who has sought information under the RTI and is also the complainant in the Saradha case, should be intimated the broad outcome of the proceedings. These should also be put on display on the SEBI website for information of the public at large.

Central Information Commissioner Bimal Julka has noted in his order that the interest of the investors needs to be protected at any
cost.

During the hearing in this matter, it was was argued by the appellant that he had suffered immense financial loss at the hands of Saradha Realty India Ltd. and that he desired to know the time period during which he would be reimbursed the losses incurred by him amounting to about Rs. 13,59,000. A reference was drawn to the decision of the High Court of Allahabad in WP C No. 39410/2018 of 3 December 2018. The High Court had passed an order in this case directing the Commission to consider and decide the Appeal of the Appellant in accordance with law without granting unnecessary adjournment to either of the parties. Therefore, this matter was listed on priority.

In its reply, SEBI submitted that through the adjudication proceedings initiated against Saradha and its Directors through an order of October 16, 2016, a penalty of Rs. 2 crore have been levied under Section 15D and 15HB of SEBI Act, 1992 against the company and its Directors Sudipta Sen, Hemanta Pradhan and Manoj Kumar Nagel.

The prosecution proceedings against Saradha Realty India Ltd. and its Directors are continuing. The recovery proceedings were initiated through recovery certificate no. 677 of 2015 on 4 June 2015 and bank accounts and demat accounts of Saradha Realty India Ltd. were attached through attachment notice no. 2044 and 2045 of 2015.

Indian Pharma growth in domestic market helps to offset pricing pressure in the US

Newsroom24x7 Network

Mumbai/Singapore: Rising revenues in the domestic market helped Indian pharmaceutical companies counterbalance the ongoing pricing pressure on generic drugs in the US in the financial year ended 31 March 2019 (FY19), says Fitch Ratings.

The US and India are the two key markets served by Indian pharmaceutical companies, which sell predominantly generic drugs. Many of the leading pharmaceutical companies – including Glenmark Pharmaceuticals Ltd (BB/Stable), Lupin Limited (Lupin) and Dr Reddy’s Laboratories Ltd (DRL) – reported double-digit growth in their domestic sales, supported by robust growth in chronic categories such as cardiac, anti-diabetics and respiratory, which in turn supported overall industry growth of 11% during FY19.

By contrast, growth in the US market remained subdued for many Indian drug-makers, as consolidation of pharma distributors and a faster pace of approvals of new generic drugs by the US Food and Drug Administration (USFDA) has resulted in continued pressure on generic drug pricing over the last few years. Companies with a solid record of compliance with the current Good Manufacturing Practices (CGMP) of the USFDA – such as Glenmark – have experienced less severe revenue pressure as they managed to avoid regulatory disruption to existing business, and launched new products leveraging on timely approvals from their Abbreviated New Drug Application (ANDA) pipeline. Similarly, the ramp-up of speciality portfolio and generic launches with “First-to-File” exclusivity helped some of the larger companies boost their US revenues in 4QFY19.

Overall, revenue growth was in the mid- to high-single-digits for Glenmark, Lupin and DRL during FY19. There was also healthy growth in Europe and Russia as well as in Active Pharmceutical Ingredient (API) sales. Operating margins were weaker for most companies due to the combined effect of pricing pressure in the US as well as an ongoing focus on R&D spending in order to bolster their presence in novel and speciality drugs.

Earnings commentaries of some of the Indian pharmaceutical companies suggest that pricing pressure in the US has peaked in certain categories as fierce competition has forced some firms to exit. Nonetheless, we believe any improvement in competitive dynamics is unlikely during FY20, in light of the ANDA backlog with the USFDA which is still significant. Fitch expects companies with an appropriate CGMP compliance record to be better placed to mitigate the effect of pricing pressure in the US. We believe Indian drug-makers’ efforts to expand their presence in speciality and novel drugs will help to reduce their dependence on the intensely competitive generic business. However, we do not expect a meaningful shift away from generics during FY20.

We expect continued growth in the domestic market, supported by the government’s focus on enhancing access to healthcare to economically weaker sections of the society. This will help to support overall revenue growth for Indian pharmaceutical companies despite our expectations of continued pricing pressure in the US. We expect margins to trend lower, with the active pursuit of speciality focused R&D programmes.

Fitch believes that Glenmark’s ANDA pipeline will help counterbalance pricing pressure in the US, while growth in India and other geographies will help achieve moderate level of revenue growth and largely stable profitability. Glenmark aims to invest actively in R&D to develop its novel and speciality pipeline. However, we expect no significant impact on credit metrics as the company aims to fund this by disposals of non-core products and by sharing development costs with partners.

Jubilant Pharma Limited (JPL, BB-/Stable) is focused on speciality pharma segments, with a very limited presence in generic formulations. We feel this will help to sustain its operating performance and credit metrics in line with our expectations despite the adverse USFDA developments recently in their generic focused plants in India.