Business News

The Reserve Bank of India (RBI) has issued Master Direction to the Asset Reconstruction Companies. An Asset Reconstruction Company (ARC) is a financial institution that buys the Non Performing Assets (NPA) or bad assets from banks and financial institutions so that the latter can clean up their balance sheets."ARCs play a critical role in the resolution of stressed financial assets of banks and financial institutions, thereby enhancing the overall health of the financial system. To ensure prudent and efficient functioning of ARCs and to protect the interest of investors, Reserve Bank of India hereby issues the Master Direction - Reserve Bank of India (Asset Reconstruction companies) Directions, 2024" said a realese by the RBI.According to the directions, to commence the business of securitisation or asset reconstruction, an ARC is required to have a minimum net owned fund (NOF) of Rs 300 crore and thereafter, on an ongoing basis.Additionally, before commencing the business of securitisation or asset reconstruction, an ARC shall apply for registration and obtain a certificate of registration (CoR) from the RBIThe directions also state that no ARC shall invest in land or building, except for investment for its own use up to 10% of its owned funds.Furthermore, ARCs are prohibited from raising money by way of deposit. They are also mandated to maintain a capital adequacy ratio of a minimum of 15% of its total risk-weighted assets.Regarding leadership positions, the directions specify that no person shall continue as MD/ CEO or Whole-time Director (WTD) beyond the age of 70 years. Additionally, the tenure of MD/ CEO or WTD shall not exceed five years at a time, with a maximum tenure of fifteen years continuously.Moreover, ARCs are required to report to the Indian Banks Association (IBA) the details of chartered accountants, advocates, and valuers who have committed serious irregularities in the course of rendering their professional services for inclusion in the IBA database of third-party entities involved in fraud.These directions aim to streamline and regulate the functioning of Asset Reconstruction Companies in India, ensuring transparency, accountability, and integrity in the financial system.In the Union Budget 2021-22, Finance Minister Nirmala Sitharaman announced the setting up of Asset Reconstruction Companies in India to take care of Non-Performing Assets (NPAs) of stressed banks. ARCs in India has been set up by state-owned and private-sector banks. Also, there is no equity contribution from the government.ARCs help banks clean up their balance sheets by acquiring financial assets from banks and financial institutions through auctions or bilateral negotiations. They securitize and reconstruct the assets to bring liquidity into the system.

IT services company Tech Mahindra is expected to see another muted quarter (January-March) as an uncertain macro environment and cautious tech spending might weigh on the numbers.Net profit for the quarter ended March 2024 is likely to fall up to 40% year-on-year (YoY), according to an average estimate of four brokerages.Meanwhile, revenues, both in rupee and constant currency terms, are likely to fall. Analysts peg constant currency revenue growth at -1.4%, while the rupee revenue is likely to fall anywhere between 3-5% YoY.The overall revenue numbers would be a let down due to weakness across communications and enterprise segments.Even though deal wins are likely to be stable in the fourth quarter, they will still be below normal levels.Here's what to expect from Tech Mahindra's Q4Axis SecuritiesWe expect the company to report revenue growth of 0.7% on a QoQ basis. Its margins are likely to expand due to strong growth in volume and reshuffling of the portfolio. Watch out for deal TCVs and pipeline in the communication vertical, pricing scenario, attrition, outlook on growth/margins/DSO days, and commentary on the 5G rollout.NuvamaTechM to report -1.4% quarter-on-quarter decline in CC and -1.0% decline in USD - driven by weakness in the Telecom segment and absence of pass-through revenues. Margins to expand by 200 bps quarter-on-quarter to 7.3%, on the back of the absence of one-off cost. Adjusted margins to remain flat quarter-on-quarter. Deal wins are expected to be stable.Motilal OswalRevenue growth is expected to be muted at 0.7% QoQ CC due to weakness in both CME and Enterprise verticals. Deal wins are likely to be muted due to macro uncertainty.We expect a deal TCV to the tune of $500 million in the fourth quarter. Margins are likely to improve 140 bps quarter-on-quarter, as the impact of cost-control efforts should start becoming visible. Weak growth is likely to keep margins under pressure.The outlook on margin and growth in the CME vertical will be the key monitorables.Kotak Institutional EquitiesWe expect a 1.4% quarter-on-quarter decline in revenue due to weakness across communications and enterprise segments. 4QFY24 EBIT margin segment could improve by 200 bps due to the absence of provisions related to unprofitable contracts. Normalized EBIT margin improvement would be gradual in FY2025E.Deal wins will improve sequentially although they will still be below normalised levels. Weakness is due to weak macro and slow decision-making. We forecast net new TCV of $500-600 million.We expect quarterly financials to have limited sway on stock performance in the near term with focus on details of a turnaround strategy under the current CEO.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)