Bengaluru: The board of Flipkart has approved a plan to repurchase employee stock options in a move that could benefit close to 6,000 current and former employees at India’s largest online retailer, according to two people familiar with the development. The share buyback plan marks the largest such programme till date in the Indian startup sector and offers stakeholders the biggest opportunity, so far, to liquidate their holdings in the country’s most valuable startup.
“The overall corpus reserved for buyback of shares from employees is over $100 million,” said one of the people cited above.
The development comes after Flipkart successfully raised about $4 billion in financing this year from investors such as Japan’s SoftBank Corporation and Chinese internet conglomerate Tencent.
Besides Flipkart, employees of subsidiaries like online fashion retailer Myntra and payments unit PhonePe will also be a part of the repurchase programme which is expected to close by December, sources said.
Employees will be allowed to sell a certain percentage of their vested shares under the programme, and a few senior former employees of the company could make “tens of crores”, people aware of the plans told ET.
The floor capital adequacy level for a bank is the ratio of different kinds of bank capital (equity, free reserves, secondary bonds etc.) to its risk-weighted assets. Since a ‘default rating’ on a loan would sharply raise the risk weight attached to the loan in question, a downgrade would thus lower the capital adequacy ratio of a bank – an event that would require a bank to arrange more capital to sustain the same level of business.
Unlike a default on bond — which investors immediately get a whiff of — news of a loan default rarely leaks out. Banks categorise a loan as non-performing asset (NPA) three months after a default. If a borrower services the loan after a few weeks of delay, it is not reflected on lenders’ books as the loan is regularised within the 90-day window. Only when a borrower fails to repay within 90 days, analysts and investors come to know about a corporate default and classification of the loan as NPA.
Banks had told agencies that initial default or delay is common among borrowers and reporting each non-payment of interest or principal or even processing fee could cause a downgrade of several loans. Also, since many of these payments happen after some delay (but before 90 days), a default tag would not only trigger hardship for the borrower but also stress capital levels of banks.
Indeed, banks had refused to share information on loan default even with rating agencies. The issue came to the fore in May 2017 when Sebi asked rating agencies to explain what lead to the downgrade of Reliance Communications’ debt securities and loans by several swift notches. Sebi had then wanted to know whether investors of RCom securities could have been alerted with an early rating action.
RCAP EXPOSURE TO RCOM
With RCom calling off its merger with Aircel, some of the rating agencies will soon ask Reliance Capital to spell out its exposure to the group’s debt-laden telecom company. While the RCap’s exposure to RCom is small compared to the former’s net worth, rating agencies are likely to seek information and finances as of September 30.
The rating on RCap papers is currently on ‘credit watch with developing implications’.
No comments:
Post a Comment