Research Committee

Crux
The news compendium of
SIBM-B

Crux is a Research Committee endeavor which aims to provide the

students of the institute with weekly updates on the most important
news worldwide. Each news update in the newsletter has been
analyzed by the members of the Research Committee to bring you
the most relevant points related to particular news. Along with the
news updates, it also covers articles on important topics which have
been in news during the week.
With our newsletter series this time, along with the news we are also
providing useful links to allow you to delve into the topic further.

You call it news. We call it a step towards awareness.

 Café Coffee Day Owner Found Dead

 Café Coffee Day owner VG Siddhartha’s body was recovered from Nethravati river 36 hours after he
disappeared. He was son in law of former union home minister of India, SM Krishna.
 The chairman of India’s largest coffee chain jumped to his death, leaving behind a note apologizing for
apparent business troubles and pointing to an income tax officer and a private equity player as sources of
stress.
 In 1993 that he took over his family business of coffee plantations, after realizing the mismatch between
prices Indian farmers were getting and the prices in the international market.
 Over time as he sought to extract more value from the coffee retail business, the idea for coffee shops was
born. Café Coffee Day today runs upwards of 1,700 outlets across India.
 He acquired and started businesses in logistics and real estate, and together with the plantations, coffee
retail, tech holdings and wealth management business, went public in 2015 as a diversified conglomerate.
 At Coffee Day Enterprises, the holding company of VGS’s coffee empire, the stock price did not
appreciate at all since listing in November 2015.
 The shares were sold at `328 a piece in the IPO and listed at Rs 313 on November 2, 2015, but closed at
Rs 270.15 that day.

 For a brief period in the first half of 2018, the share price had crossed the IPO price touching a high of Rs
374.60 on January 22, 2018.
 In Bengaluru, where he was well-known and had deep links with the social, business and political elite,
the development has left the established business community as well as small entrepreneurs shaken.

Reference:
https://economictimes.indiatimes.com/news/company/corporate-trends/vg-siddhartha-the-death-of-an-
entrepreneur/articleshow/70515691.cms
 COMPANIES (AMENDMENT) ACT, 2019

• Companies earning profit > ₹ 5 crore, turnover > ₹ 100 crore or networth > ₹ 500 crore
are required to shell out at least two per cent of their three-year annual average net profit
towards CSR activities
• Any unspent annual CSR funds must be transferred to one of the funds under Schedule 7
of the Act (e.g., PM Relief Fund) within six months of the financial year.
• If the CSR funds are committed to certain ongoing projects, then the unspent funds will
Impact On have to be transferred to an Unspent CSR Account within 30 days of the end of the
CSR financial year, and spent within three years
• Any funds remaining unspent after three years will have to be transferred to one of the
funds under Schedule 7 of the Act
• Any violation may attract a fine between Rs 50,000 and Rs 25,00,000 and every
defaulting officer may be punished with imprisonment of up to three years or fine

• Newly proposed Section 10A makes it makes it mandatory for new companies to file a
To control declaration with the concerned Registrar within 180 days of date of incorporation that
'shell every subscriber to the Memorandum of the company has paid for the shares agreed to be
companies' taken by him
 Non-filing of such a declaration can be a ground for removal of the company from the
register of companies on grounds of non-commencement of business.

• National Financial Reporting Authority can now debar a member or firm from practising as
For auditors a Chartered Accountant for a period between six months to 10 years for proven misconduct

• The power to scrutinize:

-Change in period of financial year for a company associated with a foreign company
Change in -Any alteration in the incorporation document of a public company which has the effect of
approving
converting it to a private company has been shifted from NCLT to Central Government
authority

• the central government or certain shareholders can apply to the NCLT for relief against
mismanagement of the affairs of the company or for reasons such as fraud or negligence.
Bar on
holding • If the NCLT passes an order against the officer, he will not be eligible to hold office in any
office company for five years.
 Cox & Kings crisis to affect travel sector badly

 Cox & Kings has defaulted on commercial paper of Rs 125 crore, the tour operator informed the stock
exchange
 The tour operator has been facing a cash crunch resulting in delays in salaries and vendor payments. The
International Air Transport Association has suspended the company from selling tickets on credit as it
reviews its credit worthiness.
 Cash-strapped Cox & Kings has defaulted on debt obligations worth Rs 325 crore, four times in three
weeks.
 Lenders have revoked part of the promoters’ shares in the company pledges against loans. Its stock has
taken a battering in the markets and it has been downgraded by ratings agencies.

Rating of Cox & kings after cash crunch.

 Because of financial crisis faced by rival firm Cox & Kings, Thomas Cook’s stock has slipped 16 per cent
from the start of the month and ended at Rs 193.60 on BSE.
 The tour operator has been facing a cash crunch leading to loan defaults and this has triggered the closure
of its two business units in UK.

Reference:
https://economictimes.indiatimes.com/industry/services/travel/cox-kings-crisis-to-affect-travel-sector-
badly-thomas-cook/articleshow/70445159.cms
 Resolving IBC Issues
 Insolvency and bankruptcy code, 2016 (referred as IBC) which is considered as the biggest insolvency
reform, is a central Act enacted for reorganization and insolvency resolution of corporate persons,
partnership firms and individuals in a time bound manner.

 The Rajya Sabha on Monday approved amending the three-year-old IBC, providing clarity about
preference to secured lenders over operational creditors and giving lenders explicit authority over
distribution of proceeds of auction of loan defaulting companies.

 IBC currently allows a maximum of 270 days for clearing a resolution plan but amendments mandate a
strict 330 day timeline for insolvency resolution process, including any legal challenges.

 The statutory period of admitting a case is 14 days however out of the 12 big accounts referred to IBC, 5
cases are pending for more than 600 days.

 The bill also provides clarity that the Committee of Creditors may take the decision to liquidate the
corporate debtor any time after constitution of the Committee of Creditors and before preparation of
Information Memorandum.

 The resolution plan shall be binding on all stakeholders including the Central Government, any State
Government or local authority to whom a debt in respect of the payment of the dues may be owed.

 It also provides that the votes of all financial creditors covered under section 21(6A) shall be cast in
accordance with the decision approved by the highest voting share (more than 50 per cent) of financial
creditors on present and voting basis.

Reference:
https://economictimes.indiatimes.com/topic/IBC-Amendment
 Government offers easy credit access to boost growth

 To arrest a slowdown in the economy, finance minister Nirmala Sitharaman on Friday started the process
of rolling out a slew of measures to boost industry’s access to credit, including opening a ₹10,000 crore
liquidity window for home financiers.

 The FM will meet chiefs of public and private sector banks on Monday to discuss credit growth in key
sectors.
 Sitharaman and bank chiefs are expected to discuss priority areas for the banking sector in the coming
months for accelerating gross domestic product growth.

 The minister will also meet representatives of key ministries handling micro, small and medium
enterprises (MSMEs), electronics and information technology, rural development and commerce next
week.

 The main objective is to find ways to implement over 100 recommendations by a panel led by former
Securities and Exchange Board of India chairman U.K. Sinha for improving the competitiveness of the
MSME sector and to enhance the chances of small businesses to access credit.

 The Parliament had recently cleared amendments to the Insolvency and Bankruptcy Code to enable quick
decision-making among creditors of bankrupt companies and to reduce the time lost in litigation, while
rescuing or liquidating such companies.

 It has also announced steps to give relief to farmers by way of income support, and to traders, shop keepers
and the self-employed in terms of pensions.

Reference:

https://www.livemint.com/industry/banking/nirmala-sitharaman-to-boost-access-to-credit-for-industry-
1564749272517.html
 Significance of US Federal Reserve’s rate cut and its impact on India
 The United States Federal Reserve announced a quarter-percentage-point cut in interest rates — the first
rate cut in 11 years.

 What makes this rate-cut action — the first since the global financial crisis broke in 2008 — more
significant is that barely six months previously, the US Fed was on a hawkish rate-hike trajectory, moving
in the direction of bolstering the debt-laden American economy.

 The Fed has cited concerns about the global economy and muted US inflation among the key reasons for
the decision to cut rates, and signaled a readiness to lower borrowing costs further if needed.

 Financial markets had expected the quarter-percentage-point rate cut, which lowered the US central bank’s
benchmark overnight lending rate to a target range of 2%-2.25%

 In a statement issued at the end of its two-day policy meeting, the Fed said it had decided to cut rates “in
light of the implications of global developments for the economic outlook as well as muted inflation
pressures”. Fed Chairman Jerome Powell, however, underlined that the rate cut was merely a “mid-cycle
adjustment to policy”, thus ruling out multiple sequenced cuts in rates.

 Theoretically, a rate cut in the US should be positive for emerging market economies (EMEs), especially
from a debt market perspective. Emerging economies such as India tend to have higher inflation and,
thereby, higher interest rates than those in developed countries such as the US and Europe.

 As a result, FIIs would want to borrow money in the US at low interest rates in dollar terms, and then
invest that money in bonds of emerging countries such as India in rupee terms to earn a higher rate of
interest.

 When the US Fed cuts its interest rates, the difference between the interest rates of the two countries
increases, thus making India more attractive for the currency carry trade.

 A rate cut by the Fed would also mean a greater impetus to growth in the US, which could be positive
news for global growth.

 But this could also translate into more equity investments in the US, which could temper investor
enthusiasm for emerging market economies in a proportionate manner.

 According to analysts, there are also concerns that if Asian emerging market currencies such as the rupee
continue to weaken sharply against the dollar, that may result in central banks such as the RBI turning
more cautious about cutting the policy rate too aggressively.

Reference:
https://indianexpress.com/article/explained/explained-us-federal-reserves-rate-cut-indian-market-5868212/
 News from around the World

 Dow drops 315 points on trade war fears, uncertainty about Fed's next move.

https://www.nbcnews.com/business/markets/dow-drops-315-points-trade-war-fears-uncertainty-about-fed-
n1038696

 For first time since independence from U.K., Hong Kong charges protesters with rioting.

https://www.nbcnews.com/news/world/hong-kong-charges-44-protesters-rioting-n1037111

 Slowdown Blues: 2 lakh auto sector workers lost jobs in last 3 months, says FADA

https://www.businesstoday.in/sectors/auto/slowdown-blues-2-lakh-auto-sector-workers-lost-jobs-in-last-3-

months-fada/story/370505.html

 DHL cautions poor infrastructure at Mumbai airport may risk $5 trillion economy target

https://www.businesstoday.in/current/corporate/dhl-poor-infrastructure-mumbai-airport-5-trillion-dollar-indian-

economy-target/story/370484.html

 FPIs withdraw Rs 2,881 crore from Indian capital markets in just 2 trading sessions in August

https://www.businesstoday.in/latest/trends/fpis-foreign-portfolio-investors-indian-capital-markets-trading-

sessions-august-rupee-dollar/story/370456.html
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