Photo of Subhojit Sadhu

Partner in the Projects and Project Finance practice at the Mumbai office of Cyril Amarchand Mangaldas, Subhojit has a wide range of experience in banking, projects, project financing, structured financing and debt restructuring across various sectors including Solar, Wind, Road, Thermal, Oil & Gas, Transmission, Real Estate, Ports, Hydro, Warehousing, Aviation, Automobile. He can be reached at subhojit.sadhu@cyrilshroff.com

Battling Covid -19 and Liquidity– The twin crisis of NBFC sector

While the health crisis has brought the country to its knees, the fatal blow seems to be coming our way from the economic effects of the Covid-19 pandemic. The exposure of the severely-stressed para banking industry to risky segments in these times has made it even more vulnerable to an economic slowdown.[1] With its asset quality deteriorating at an increasing rate, the liquidity in para banking industry has been squeezed off to its last drops.

The impact of the liquidity crisis across various classes of non-banking financial companies (“NBFCs”) may be analysed vis-à-vis the exposure it has towards the borrower segments whose economic activities have been severely impacted.  With the economic and consumption activities a bust in sectors such as real estate and micro-finance, the NBFCs with loan exposures in the said sectors will be hit the worst in the wave of this global pandemic. The increasing loan losses and inaccessibility to new capital is likely to exacerbate the liquidity stress.
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How special are “special equities”- Analysis of invocation of bank guarantee during COVID-19

A pandemic, of the nature which affects the world today, has not visited us during the lifetime of any of us and, hopefully, would not visit us hereinafter either. The devastation, human, economic, social and political, that has resulted as a consequence thereof, is unprecedented. The measures, to which the executive administration has had to resort, to somehow contain the fury of the pandemic, are equally unprecedented. The situation of nationwide lockdown, in which we find ourselves today, has never, earlier, been imposed on the country. The imposition of the lockdown was by way of a sudden and emergent measure, of which no advance knowledge could be credited to the petitioner – or, indeed, to anyone else.” – C. Hari Shankar, J., April 20, 2020.

The above quote aptly sums up the current situation globally and domestically. The COVID-19 outbreak has created a void in terms of performance of commercial contracts and has in many cases left the parties on edge. Through this article, we aim to provide an insight into the orders passed by the judiciary during COVID-19, dealing with an otherwise settled issue i.e. the invocation of bank guarantee.
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Asset Classification - Be-hold

With the outbreak of the COVID-19 pandemic and the consequential countrywide lockdown, economic activities of almost all corporates, except those falling under essential services, have witnessed an unprecedented slowdown. As a result, cashflows and debt servicing capabilities of most borrowers have been seriously impacted, necessitating the Reserve Bank of India (“RBI”) to intervene and introduce a regulatory framework, enabling lenders to provide much needed relief to their borrowers.

This blog analyses the relaxation of the asset classification norms to be followed by a bank, with respect to a term loan[1] on account of the measures introduced by the RBI on March 27 and April 17, 2020 and related judicial pronouncements.
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Covid-19 - Flight Plan for Indian Aviation Industry

Covid-19 crisis has severely impacted almost all industries but disruptions in the airline industry is so profound that it is assumed to be greater than the combined crises of 9/11 and the 2008 global financial put together. The Government of India (acting through DGCA) (“GoI”) has vide its (i) order dated March 23, 2020 passed under Section 88(1) of the Aircraft Act, 1934; and (ii) orders dated March 26, 2020 and April 14, 2020 directed inter alia all aircraft operators to suspend the operations of all the domestic flights and all scheduled international commercial passenger services until May 3, 2020. The forward air travel bookings are far outweighed by the cancellations. Air travel demand is drying up in ways that are unprecedented with no semblance of normalcy on the horizon. For an industry which is already stressed, Covid-19 has only accelerated the process of bankruptcy filing by several companies (like Virgin Australia and Air Mauritius). Those airline companies which are still in business have also suffered misfortunes as coronavirus-forced lockdowns have kept their fleets grounded. Per the market sources, apart from the pay cut, several airline companies (Indigo, Go Airlines) have also taken other cost cutting measures including furloughs.
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The idea of Mumbai Metro - Is the world developing or dying?

The Mumbai metro project (“Metro Project”) was conceptualised to develop an efficient and sustainable urban transport system in the financial capital of the country, involving  a significant investment of USD 2,500 million.[1] Every day some 80,00,000 commuters use the city’s suburban rail system, enabled through more than 2,800 trains a day. The network is severely overcrowded during peak hours when the number of passengers exceed the network’s carrying capacity by more than four times, leading to numerous safety hazards.[2]

Last year witnessed a massive protest for saving the Aarey milk colony located in suburban Goregaon (“Aarey’), a green belt with over 5,00,000 trees, a rarity in the concrete city. The construction of a metro car depot on the flood plains of the Mithi river at Aarey for expansion of metro services in the city received much wrath from environment activists, citizens and even courts for cutting down 2,600 trees overnight. While there is a stay on cutting more trees until the matter is sub-judice, the construction work of the Metro Project was not stopped, until the outbreak of a worldwide pandemic, COVID-19 or Coronavirus.
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 Toll Operate and Transfer model - NHAI

With a view to monetise the operational national highways, the National Highway Authority of India (NHAI) introduced the Toll Operate and Transfer (TOT) model for partnership with private developers in the road sector. Under this model, NHAI passes on the toll collection rights and operation and maintenance obligations for 30 years to the private developer against payment of upfront, one-time, lump sum concession fees quoted by the private developer as part of the comprehensive bidding process. Projects under this model are awarded as a bundle of operational national highways, which allows the investor to offset the risks of one project against another. Since existing and operational roads are auctioned under the TOT model, it does not need developers with construction skills to participate.
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