Tata Motors is going all out to woo customers. The company has de­cided that all customer-related con­cerns need to be resolved by the dealer within 24 hours of any com­plaint. Indeed, the management is directly monitoring the complaints. “Starting October 2014, we have noticed that the resolution rate has risen from 13 to 65 per cent as of January, 2015,” says Pareek. The company has also upgraded over 200 showrooms to leverage tech­nology and provide superior after­sales service. With the new ‘Express Service’ programme, the service teams have been able to deliver % vehicles in 90 minutes, says the | company spokesperson. “We have g also introduced a new audit system £ with AC Nielsen for continued tracking and monitoring of the service network. Each service touch point is reviewed at regular inter­vals in the new audit system,” the spokesperson adds.

On the supply side, the company has re-worked the logistics manage­ment system for speedy spare parts delivery. Tata Motors has also beefed up its distribution warehouse net­work – it has added a facility in Pune. Other initiatives include national service camps, mobile service vans, driver training schools and focused service engagements for the fleet service. At the recently concluded nationwide service camp, the com­pany received almost 1.2 lakh vehi­cles for maintenance.

“We are helping our channel partners in enhancing their proc­esses for recruitment, training and retention of employees. We have got new-look dealerships. We are also ensuring extensive training of the staff on the use of technology at the dealerships including video walls and new tablet-based cus­tomer engagement to ensure best- in-class customer experience,” says an official. The company has de­ployed nearly 4,000 new tablets to ensure that the staff is well-geared

to meet customer needs.

Over the last two to three years, the company has slowly tried to lay the foundation of a performance- oriented culture. “We go through the whole process of setting targets and evaluating the performance of individuals. This method is becom­ing more stringent and objective every year. With this process, we continue to strengthen our HR proc­esses and systems to identify, nur­ture and develop internal talent,” says the official.

Meanwhile, Mistry has already given the mandate for finding a CEO for Tata Motors. The company has
had no CEO after Karl Slym. Mistry has led the company in the past one and a half years. Kavil Ramachandran, Professor at the Indian School of Business (ISB), says Mistry has passed many tests since taking over the mantle of the Tata Group. “He has, with quiet confi­dence, led the group through the current turbulence. He seems to be focused on consolidation and selec­tive growth.”

However, putting Tata Motors’ PV business back on track is going to be his acid test. ♦

@nevinjl

 

TOP 5 PLAYERS
“A ARCIL

The oldest ARC set up by leading ^ commercial tfe banks in India Vinayak Bahuguna

Edelweiss ARC L HI

The largest in

terms of AUM fij§§L at T20.000 cr

Siby Antony

Phoenix ARC

Kotak has been working in the distressed space even before the ,

ARC concept               /

came about. ^shwar ^arra Works in the sub-?IOO-cr space; delivers strong returns.

On the 10th of every month, State Bank of India’s headquarters at Nariman Point in South Mumbai plays host to some eager guests. Heads of several of India’s 15 asset reconstruction companies (ARCs) make a beeline to review the ‘for sale’ bad loans that India’s largest bank would be willing to hawk for a price. A similar exer­cise takes place at some of India’s largest banks, though not neces­sarily with such regularity.

Till fairly recently, such meetings were infrequent and resulted in one-off transactions. But, of late, the intensity of deals emerging out of such exchanges is soaring. And that, in turn, is giving rise to an unprecedented boom in India’s distressed assets business. In the first decade of the existence of ARCs, banks sold all of T8 7,049 crore of bad loans for ^19,308 crore. But in the past two years alone, ARCs have bought bad assets worth Tl.02,068 crore for ^43,243 crore. Last year, SBI alone had shed assets worth T12.500 crore, Bank of India T2.844 crore and Central Bank of India Tl,119 crore. These include SBI’s T1.600 crore loan in Bharati Shipyard to Edelweiss ARC, ^900 crore Hotel Leelaventure loan to JM Financial ARC and T1.500 crore loan in Corporate Power to ARCH.

Several factors are driving this flourishing trade in bad assets. But the biggest trigger came in November 2013 when Reserve Bank of India Governor Raghuram Rajan, in a strongly worded exhortation, asked the banking system to clean up its act. “You can put lipstick on a pig but it doesn’t become a princess. So dressing up a loan and showing it as restructured and not provisioning for it when it stops paying, is an issue,” he had said. Until then, scared to bell the cat, banks had been ever-greening their bad loans – and slipping deeper into the abyss. What alarmed Rajan was that the gross and net non-performing assets

 

Asset Reconstruction Companies


Under Rajan’s stewardship, the RBI has announced a host of measures that have fuelled distressed asset sale business. Early last year, the central bank allowed the banks to sell even the loans where the principal or interest was overdue by 60 days rather than 90 days, earlier. In essence, it allowed banks to start selling assets early if they felt the loan was non-redeemable. Other factors are also responsible. ARCS are betting heavily on the proposed new bankruptcy law which will give them a greater leeway (including sale of whole or part of the company and change of management or promoter) to revive the distressed assets. Four, in general, the industry believes that the Indian economy has seen through the worst of the slowdown and things can only look up from here. And, those who have the cash are happy to buy distressed assets since they come at a significant discount to an identical greenfield project.(NPAs) in the banking system had hit an alarming 4.2 per cent and 2.2 per cent, respectively, by September 2013 when Rajan came in, against an average of 2.6 per cent and 1.2 per cent, respectively, between 2009 and 2013.

For over 10 years, it was only ARCIL, backed by SBI and ICICI, which was active in buying loans from its sponsor banks. But a majority of new ARCS have been set up after 2008/09. Among the newest, Edelweiss ARC which was
set up in 2009, has worked up a portfolio of over 120,000 crore. At the second spot is ARCIL with a portfolio o: 111,000 crore. The top five ARCS make for nearly 90 per cent of the accounts under management. Essentially, that means the ARC takes over the asset, or company, and tries to revive it by managing it better, instead of trying to re­cover money by selling off parts of it. Not everybody is chasing assets under management (AUMs) though. “We look at it as an investment business. We are not in the AUY game,” grins Eshwar Karra, CEO of Phoenix ARC, Kotak Group, formed in 2004. Karra deals with only sub-1100- crore loans, with a focus on turning around the companies and sold quickly instead of volumes

The big reason why ARCS remain enthusiastic is because sale of bad loans will only intensify. Banks, after all, are sitting on a pile of bad debts. Of the 170 lakh crore that the banking system has given in advances, nearly 17.7 lakh crore is believed to be classified as ‘stressed assets that have defaulted on their payments. Of this, 13.1 lakh crore is already defined as gross NPAs on which there has been a default. A lot of that is likely to be made available tc ARCS for sale. So, while the banks are being pushed by the regulator to clean up their books, ARCS see an opportunity of making big bucks like their counterpart asset manage­

60 BUSINESS TODAY August 2 2015

goverment companies (AMCs) and hedge funds in the US.

Globally, the distressed assets market began to emerge in the late 80s and early 90s in the US. In fact, most of the modem day private equity firms – KKR, WL Ross and JC Flower – owe their existence to early successes in the dis­tressed assets business. By now, the US is also a major market for the ancillary industry around distressed assets, including trade in bonds of distressed companies and turnaround funds which buy completely broke companies, take over their managements, turn them around and then sell them. In Asia, the distress industry grew post the East Asian currency crisis in the late 90s. Early distress inves­tors, such as Clearwater, Cerberus Capital, GE and Loan Star Funds, have made significant gains from such junk assets. Over the years, hedge funds have become rich and powerful enough to intervene in sovereign debt as Argentina is beginning to discover in the bitter dispute between two New York hedge funds Gramercy Funds Management LLC and Elliott Management Corp. In fact, Elliott even impounded an Argentine Navy vessel for non­payment, while the Argentine President Cristina Fernandez de Kirchner has vowed never to negotiate with the fund calling it “vultures”.


A Hard Job

Despite the enthusiasm around distressed assets, it is not a job for the faint hearted.

ARCs are a breed born out of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act of 2002. The objective, says former finance minister Yashwant Sinha, “was to enable the banks to ac­quire the securities which had been pledged and sell them without the interference of the courts”. Sinha adds: “We did away under this Act with the jurisdic­tion of civil courts and gave a huge power to the banks to deal with the issue of NPAs.”

Not everything has panned out exactly as planned. Several legal and regulatory hurdles have meant that ARCs were unable to exercise the land of freedom to turn around these bad assets. “We have such a decrepit system for enforcing securities. In theory, it should be easier to enforce a pledge to sell a com­pany and kick the management out, but most company managements will not go easily, and buyers don’t want to get into this trouble. He will buy only if you are giving it to him 100 per cent in an uncontentious manner,” says Harsh Pais, Partner, Trilegal, a Delhi-based law firm.

Take the case of Bharati Shipyard. A year after Edelweiss ARC bought Bharati Shipyard’s ^4,570 crore loan from 12 of its 23 bankers, there awaited a surprise. As many as nine winding up petitions appeared out of the blue in the Bombay High Court thwarting the attempts of Edelweiss to turn around the cash-strapped ship building firm. Surprisingly, insurance giant Life Insurance

Tata Motors is going all out to woo customers. The company has de­cided that all customer-related con­cerns need to be resolved by the dealer within 24 hours of any com­plaint. Indeed, the management is directly monitoring the complaints. “Starting October 2014, we have noticed that the resolution rate has risen from 13 to 65 per cent as of January, 2015,” says Pareek. The company has also upgraded over 200 showrooms to leverage tech­nology and provide superior after­sales service. With the new ‘Express Service’ programme, the service teams have been able to deliver % vehicles in 90 minutes, says the | company spokesperson. “We have g also introduced a new audit system £ with AC Nielsen for continued tracking and monitoring of the service network. Each service touch point is reviewed at regular inter­vals in the new audit system,” the spokesperson adds.

On the supply side, the company has re-worked the logistics manage­ment system for speedy spare parts delivery. Tata Motors has also beefed up its distribution warehouse net­work – it has added a facility in Pune. Other initiatives include national service camps, mobile service vans, driver training schools and focused service engagements for the fleet service. At the recently concluded nationwide service camp, the com­pany received almost 1.2 lakh vehi­cles for maintenance.

“We are helping our channel partners in enhancing their proc­esses for recruitment, training and retention of employees. We have got new-look dealerships. We are also ensuring extensive training of the staff on the use of technology at the dealerships including video walls and new tablet-based cus­tomer engagement to ensure best- in-class customer experience,” says an official. The company has de­ployed nearly 4,000 new tablets to ensure that the staff is well-geared

to meet customer needs.

Over the last two to three years, the company has slowly tried to lay the foundation of a performance- oriented culture. “We go through the whole process of setting targets and evaluating the performance of individuals. This method is becom­ing more stringent and objective every year. With this process, we continue to strengthen our HR proc­esses and systems to identify, nur­ture and develop internal talent,” says the official.

Meanwhile, Mistry has already given the mandate for finding a CEO for Tata Motors. The company has
had no CEO after Karl Slym. Mistry has led the company in the past one and a half years. Kavil Ramachandran, Professor at the Indian School of Business (ISB), says Mistry has passed many tests since taking over the mantle of the Tata Group. “He has, with quiet confi­dence, led the group through the current turbulence. He seems to be focused on consolidation and selec­tive growth.”

However, putting Tata Motors’ PV business back on track is going to be his acid test. ♦

@nevinjl

 

TOP 5 PLAYERS
“A ARCIL

The oldest ARC set up by leading ^ commercial tfe banks in India Vinayak Bahuguna

Edelweiss ARC L HI

The largest in

terms of AUM fij§§L at T20.000 cr

Siby Antony

Phoenix ARC

Kotak has been working in the distressed space even before the ,

ARC concept               /

came about. ^shwar ^arra Works in the sub-?IOO-cr space; delivers strong returns.

 

On the 10th of every month, State Bank of India’s headquarters at Nariman Point in South Mumbai plays host to some eager guests. Heads of several of India’s 15 asset reconstruction companies (ARCs) make a beeline to review the ‘for sale’ bad loans that India’s largest bank would be willing to hawk for a price. A similar exer­cise takes place at some of India’s largest banks, though not neces­sarily with such regularity.

Till fairly recently, such meetings were infrequent and resulted in one-off transactions. But, of late, the intensity of deals emerging out of such exchanges is soaring. And that, in turn, is giving rise to an unprecedented boom in India’s distressed assets business. In the first decade of the existence of ARCs, banks sold all of T8 7,049 crore of bad loans for ^19,308 crore. But in the past two years alone, ARCs have bought bad assets worth Tl.02,068 crore for ^43,243 crore. Last year, SBI alone had shed assets worth T12.500 crore, Bank of India T2.844 crore and Central Bank of India Tl,119 crore. These include SBI’s T1.600 crore loan in Bharati Shipyard to Edelweiss ARC, ^900 crore Hotel Leelaventure loan to JM Financial ARC and T1.500 crore loan in Corporate Power to ARCH.

Several factors are driving this flourishing trade in bad assets. But the biggest trigger came in November 2013 when Reserve Bank of India Governor Raghuram Rajan, in a strongly worded exhortation, asked the banking system to clean up its act. “You can put lipstick on a pig but it doesn’t become a princess. So dressing up a loan and showing it as restructured and not provisioning for it when it stops paying, is an issue,” he had said. Until then, scared to bell the cat, banks had been ever-greening their bad loans – and slipping deeper into the abyss. What alarmed Rajan was that the gross and net non-performing assets

 

Asset Reconstruction Companies

(NPAs) in the banking system had hit an alarming 4.2 per cent and 2.2 per cent, respectively, by September 2013 when Rajan came in, against an average of 2.6 per cent and 1.2 per cent, respectively, between 2009 and 2013.

Under Rajan’s stewardship, the RBI has announced a host of measures that have fuelled distressed asset sale business. Early last year, the central bank allowed the banks to sell even the loans where the principal or interest was overdue by 60 days rather than 90 days, earlier. In essence, it allowed banks to start selling assets early if they felt the loan was non-redeemable. Other factors are also responsible. ARCS are betting heavily on the proposed new bankruptcy law which will give them a greater leeway (including sale of whole or part of the company and change of management or promoter) to revive the distressed assets. Four, in general, the industry believes that the Indian economy has seen through the worst of the slowdown and things can only look up from here. And, those who have the cash are happy to buy distressed assets since they come at a significant discount to an identical greenfield project.

For over 10 years, it was only ARCIL, backed by SBI and ICICI, which was active in buying loans from its sponsor banks. But a majority of new ARCS have been set up after 2008/09. Among the newest, Edelweiss ARC which was
set up in 2009, has worked up a portfolio of over 120,000 crore. At the second spot is ARCIL with a portfolio o: 111,000 crore. The top five ARCS make for nearly 90 per cent of the accounts under management. Essentially, that means the ARC takes over the asset, or company, and tries to revive it by managing it better, instead of trying to re­cover money by selling off parts of it. Not everybody is chasing assets under management (AUMs) though. “We look at it as an investment business. We are not in the AUY game,” grins Eshwar Karra, CEO of Phoenix ARC, Kotak Group, formed in 2004. Karra deals with only sub-1100- crore loans, with a focus on turning around the companies and sold quickly instead of volumes

The big reason why ARCS remain enthusiastic is because sale of bad loans will only intensify. Banks, after all, are sitting on a pile of bad debts. Of the 170 lakh crore that the banking system has given in advances, nearly 17.7 lakh crore is believed to be classified as ‘stressed assets that have defaulted on their payments. Of this, 13.1 lakh crore is already defined as gross NPAs on which there has been a default. A lot of that is likely to be made available tc ARCS for sale. So, while the banks are being pushed by the regulator to clean up their books, ARCS see an opportunity of making big bucks like their counterpart asset manage­

 

 

60 BUSINESS TODAY August 2 2015

goverment companies (AMCs) and hedge funds in the US.

Globally, the distressed assets market began to emerge in the late 80s and early 90s in the US. In fact, most of the modem day private equity firms – KKR, WL Ross and JC Flower – owe their existence to early successes in the dis­tressed assets business. By now, the US is also a major market for the ancillary industry around distressed assets, including trade in bonds of distressed companies and turnaround funds which buy completely broke companies, take over their managements, turn them around and then sell them. In Asia, the distress industry grew post the East Asian currency crisis in the late 90s. Early distress inves­tors, such as Clearwater, Cerberus Capital, GE and Loan Star Funds, have made significant gains from such junk assets. Over the years, hedge funds have become rich and powerful enough to intervene in sovereign debt as Argentina is beginning to discover in the bitter dispute between two New York hedge funds Gramercy Funds Management LLC and Elliott Management Corp. In fact, Elliott even impounded an Argentine Navy vessel for non­payment, while the Argentine President Cristina Fernandez de Kirchner has vowed never to negotiate with the fund calling it “vultures”.


A Hard Job

Despite the enthusiasm around distressed assets, it is not a job for the faint hearted.

ARCs are a breed born out of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act of 2002. The objective, says former finance minister Yashwant Sinha, “was to enable the banks to ac­quire the securities which had been pledged and sell them without the interference of the courts”. Sinha adds: “We did away under this Act with the jurisdic­tion of civil courts and gave a huge power to the banks to deal with the issue of NPAs.”

Not everything has panned out exactly as planned. Several legal and regulatory hurdles have meant that ARCs were unable to exercise the land of freedom to turn around these bad assets. “We have such a decrepit system for enforcing securities. In theory, it should be easier to enforce a pledge to sell a com­pany and kick the management out, but most company managements will not go easily, and buyers don’t want to get into this trouble. He will buy only if you are giving it to him 100 per cent in an uncontentious manner,” says Harsh Pais, Partner, Trilegal, a Delhi-based law firm.

Take the case of Bharati Shipyard. A year after Edelweiss ARC bought Bharati Shipyard’s ^4,570 crore loan from 12 of its 23 bankers, there awaited a surprise. As many as nine winding up petitions appeared out of the blue in the Bombay High Court thwarting the attempts of Edelweiss to turn around the cash-strapped ship building firm. Surprisingly, insurance giant Life Insurance.

One thought on “Wooing Customers

  1. Hi, this is a comment.
    To get started with moderating, editing, and deleting comments, please visit the Comments screen in the dashboard.
    Commenter avatars come from Gravatar.

Leave a Comment