Mergers and Acquisition Current Affairs - 2020

Cabinet Approval: Capital Infusion in three public sector Units OICL, UIICL and NICL

On February 12, 2020, the Union Cabinet approved on capital infusion in three Public Sector Units namely United India Insurance Company (UIICL), Oriental Insurance Company Limited (OICL) and National Insurance Company Limited (NICL).

Highlights

During the meet the cabinet also approved an immediate release of Rs 2,500 crores in order to address their critical financial position and also regulate their solvency requirements. The capital infusion is aimed at merging the three insurance companies in the future. Merging the companies will improve their operational efficiency and solvency ratio.

The step is being taken to make these companies meet the solvency ratio criteria of IRDA (Insurance Regulatory Development Authority)

Solvency Ratio

The Solvency ratio is the key metric used to measure the ability of an enterprise to meet its debt obligation. It indicates if a company has sufficient cash flow in order to meet its long term and short-term liabilities.

It is the ratio between after-tax net operating income and total debt obligations.

GoM constituted to fast track revival plan of BSNL

On December 27, 2019, GoI constituted a 7-member group of ministers to fast track the implementation of revival plan of BSNL and MTNL. The revival plan includes allocation of 4G spectrum and asset monetization. Earlier, GoI approved the revival plan of merging BSNL and MTNL.

Highlights

The seven-member group of ministers include Defence Minister Raj Nath Singh, Telecom Minister Ravi Shankar Prasad, Finance minister Nirmala Sitaraman, Home Minister Amit Shah, Oil Minister Dharmendra Pradhan and Commerce Minister Piyush Goyal.

The crucial elements of the revival plan include workforce, business viability, monetization, issue of bonds and 4G spectrum allotment. GoI allocated Rs 69,000 crores for reviving BSNL and MTNL. Both the entities have been reporting losses over a decade.

Group of ministers

Group of ministers are appointed by the GoI under Transaction of Business Rules, 1961. According to para 6 (4) of the rules, Ad hoc committees of ministers including GoM sha;; be appointed by standing committee of cabinet, cabinet or by the PM. The GoM do not have decision making powers. They investigate and report to the cabinet. On the other hand, Empowered Group of Ministers (EGoM) can make decisions. They are also formed by GoI.

In 2014, EGoM was dissolved and the changes are still under process.