Insolvency Law–Operation clean-up | Business Standard Editorials

The insolvency and Bankruptcy Code, which gained momentum in 2017-18, is one of the most important regulations in India’s corporate history. The new law sent a clear message to defaulting promoters: pay up or lose control of your companies. In 2017, the Reserve Bank of India identified 40 companies and directed banks to refer them to the National Company Law Tribunal for bankruptcy proceedings. Some large cases such as Bhushan Steel and Monnet Ispat have been resolved, while Essar Steel and Bhushan Power & Steel will soon see closure. With many cases ending up at the appellate tribunal and even the Supreme Court, the process has seen some delay but the broad direction is encouraging.

The combined revenues of BS 1000 companies was up 11.5 per cent last fiscal to reach Rs 67.8 trillion, while their combined net profit was down 4.9 per cent to around Rs 3.6 trillion. Aggregate profitability was impacted by large losses at the bankrupt companies and telecom firms. Mid- and small-sized companies continued to do better than their larger peers in FY18 — the median BS 1000 company’s revenue of around Rs 1,600 crore (against average revenues of around Rs 6,850 crore) grew 11.9 per cent while its net profit was up 21.2 per cent.

Going forward, the World Bank predicts global growth slowing from three per cent in 2018 to 2.9 per cent in 2019.

With elections around the corner at home, a lot will depend on the next government’s first steps. Consumption remains strong in India but infrastructure spending and an improvement in the capex cycle remain crucial for broad-based growth. The World Bank’s forecast of India’s GDP growth at 7.5 per cent in 2019-20, from 7.3 per cent this financial year, is encouraging.

There is a major change that has taken place in the stock market’s perception of businesses, with firms having fewer assets commanding record valuations, while those with large assets have low market capitalisation. Our cover story captures this polarisation.

Companies are also taking to technology in different ways to reduce costs and improve customer experience. Read our story in the pages that follow.

BS 1000 is also about celebrating success. An eminent jury of five top decision-makers, led by Aditya Birla Group Chairman Kumar Mangalam Birla, selected the winners of the Business Standard Awards for corporate excellence in 2018. Read about the outstanding success stories.

via Operation clean-up | Business Standard Editorials

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