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Lenders hit back at Byju's
Byju's has been in the news a lot this week. The Indian edtech giant has been in the spotlight for a number of reasons, including its recent legal battle with its lenders.
In the latest development, Byju's' lenders have hit back at the edtech giant for filing a case against them in New York.
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The lenders said that Byju's case against them is "meritless" and an attempt to evade its obligations, which include making contractually required payments.
This comes a couple of days after Byju's skipped an interest payment and filed a lawsuit against its lenders in the New York Supreme Court, accusing them of being "predatory."
- Byju's has also requested the disqualification of one of its lenders, Redwood
The lender group, which comprises 21 global institutional investors, collectively owns more than 85% of Byju's $1.2 billion term loan, which the edtech startup raised in November 2021.
Catch up quick
Byju's and its lenders have been in a dispute since December 2022. The company had sought easier terms on its $1.2 billion loan and initiated negotiations with the lenders.
- After Byju's failed to meet certain requirements such as providing monthly business updates and appointing a CFO, the lenders accelerated the loan and demanded a prepayment
In May, the lenders sued Byju's Alpha Inc, a wholly-owned subsidiary of Byju's, alleging that it hid $500 million from them. Following this, the lenders scrapped the negotiation talks.
In response, Byju's filed a lawsuit against the lenders in New York. The company is also planning to call a meeting with a broad group of lenders on June 12 to discuss an amendment proposal.
Fintechs cheer RBI's FLDG nod
Founders of lending fintechs and non-banking financial companies (NBFCs) would have slept peacefully last night after the Reserve Bank of India (RBI) finally issued a circular on the much-awaited First Loan Default Guarantee (FLDG) programme.
Driving the news
Yesterday, the RBI approved the FLDG programme, which provided much-needed clarity to fintechs on various matters.
- It sets a cap on the default loss cover, limiting it to 5% of the total loan value.
Additionally, the RBI emphasized that lending firms must provide the guarantee in the form of cash and cash equivalents
“It is a judicious view. The collateral should be safe and liquid, not the other way round,” said Srinath Sridharan, Member, Governance, Fintech Association for Consumer Empowerment (FACE).
Why is this significant?
Before the introduction of digital lending norms, fintechs and banks had independently developed an FLDG model. In this model, fintechs would provide a guarantee to compensate for a certain percentage, often more than 50%, in cases of default within a loan portfolio.
This arrangement was undoubtedly advantageous for banks, as they were protected from defaults since fintechs assumed a portion of the risk. However, the banking regulator expressed discomfort with loan service providers assuming default risk, as they were not directly regulated entities under the RBI's purview.
- The RBI's 5% cap will also help to control and manage the risk of large non-performing assets in tie-ups between lenders and fintechs
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Zomato, Paytm shares rally
In milestone events, Paytm and Zomato were among the first new-age companies to go public in 2021. However, after months of disappointing share performance, investors may finally have something to cheer about.
Driving the news
Zomato's share price hit a one-year high, rising above its listing price of Rs 76, after surging 53% in the past two months. This follows a series of positive developments for the company.
- The recent addition of the stock by Chris Woods of Jefferies to its long portfolio also provided a boost
- At the end of the day's trading session today, Zomato's shares closed at Rs 77.57 apiece
Paytm got the moves too
In a similar move, One97, the parent company of the payments company Paytm, also touched a nine-month high.
- Paytm's shares continued to gain momentum, rising by over 5% today and closing at Rs 814.80
- This increase was primarily driven by analysts at BofA upgrading their ratings for Paytm and highlighting its limited competition
MC Special | Coming soon: Garden Pavilions at Bengaluru's T2
Bangalore International Airport Limited (BIAL) has exciting news for aviation enthusiasts and plane spotters with the construction of two exquisite 'Garden Pavilions' at Terminal 2. The first pavilion is slated for completion by September 1, coinciding with the relocation of all international flight operations to Terminal 2 of the Bengaluru airport.
- Drawing inspiration from the renowned viewing gallery at Singapore's Changi airport, these Garden Pavilions will offer a vantage point for observing planes as they take off and land.
- Additionally, passengers will be treated to a 360-degree panoramic view of the airport
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This week in AI: Navigating job market shifts
Welcome to the weekly wrap-up of the latest developments in the world of artificial intelligence (AI). Let's dive into the highlights.
During his whirlwind tour across the globe, OpenAI Chief Sam Altman made a stop in Delhi, where he emphasized the importance of backing AI research to enhance government services like healthcare.
Meanwhile, the International Monetary Fund's First Deputy Managing Director, Gita Gopinath, raised concerns about substantial disruptions in labour markets resulting from generative AI.
- Gopinath called on policymakers to swiftly develop regulations to govern AI and prepare for potential labour market upheavals
Recognising the need for coordinated action, British Prime Minister Rishi Sunak announced plans for the first-ever global summit on AI. The summit aims to bring together key countries, leading tech companies, and researchers to establish safety measures and guidelines to evaluate and monitor the significant risks associated with AI.
"AI has an incredible potential to transform our lives for the better. But we need to make sure it is developed and used in a way that is safe and secure," said Sunak.
In terms of AI advancements, Google's Bard received two notable updates. The first update enhances Bard's mathematical skills, while the second allows users to directly export Bard's responses to Google Sheets.
- Leveraging a technique called "implicit code execution," Bard can now detect computational prompts and run code in the background
On the creative front, WordPress introduced Jetpack, an AI assistant described as a "creative writing partner." Jetpack's capabilities include generating diverse content on command, significantly reducing the time and effort required for content creation. (Picture credit: DALL.E)
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