Monday, May 31, 2010

Unilever wants seniors to invest bonus back in company, freezes pay again


Source :31 May 2010, 0238 hrs IST,Kala Vijayraghavan,ET Bureau



MUMBAI: Unilever, the global consumer goods giant, has frozen the base salaries for executive directors and senior management members for the second consecutive year even as it formalises a new plan that will allow managers to invest a chunk of their bonus in company’s stock.

Coined as the ‘Management Co-Investment Plan’, senior Unilever managers worldwide will have the opportunity to invest as much as 60% of their annual cash bonus in Unilever shares and receive a corresponding award of performance shares. The new plan replaces the existing Share Matching Plan and encourages managers to take a greater financial interest in the performance of the company and the value of Unilever shares over the long term.

From 2010, the bonus or the variable pay will be subject to a clawback arrangement in the event of a significant downward revision of results. In clawback, the previously given benefits are taken back due to specially arising circumstances.

The changes are being spearheaded by Paul Polman, who took over as the CEO in January 2009. Polman, the first outsider to become the CEO, was given the task to revive the fortunes of the Anglo-Dutch MNC. One of his first moves was to freeze salaries of senior managers—a decision the company management has extended for the second year.

The proposals, structured as part of Unilever’s `pay for performance’ mantra, have been outlined in the company’s 2010 annual general meeting notice, and are the outcome of a remuneration committee’s findings. The committee reviewed the share-based reward arrangements that apply to executive directors and other executives across Unilever subsidiaries.

With effect from 2010, the shareholding commitment is being increased from 150% to 400% base salary of the chief executive and from 150% to 300% base salary for other executive directors and members of the Unilever executive. Unilever will seek shareholder’s approval to ratify the changes.

A Unilever spokesperson said “The proposed new remuneration policy is aimed at supporting Unilever’s drive for profitable growth and a level of performance amongst the best of our peers. The wider share ownership, and the revised measures for Global Share Incentive Plan (GSIP), will encourage greater commitment, engagement and alignment with our shareholders”.

The performance shares will vest after three years, depending on Unilever’s performance, continued employment and maintenance of the underlying investment. The vesting of 40% of the shares under award has been based on Unilever’s relative total shareholder return (TSR) against a comparator group of 20 other companies.

Mr Polman also issued a warning over the risk of overheating in China and India. “Unilever’s focus of disproportionate attention is India. There is still much to do in India but we are confident we are doing the right things. Local, low cost competition has been winning share at our expense and recently, international branded players have rediscovered the opportunity for growth in India” he said in an analyst presentation post 2010 first quarter results..

Unilever is now upgrading 30% of its portfolio and rolling out the improved mixes faster to other markets, Mr Polman said. The CEO is keen that Hindustan Unilever delivers growth even as rival Procter & Gamble and Nestle step up focus on the fast-growing Indian market. HUL, which once commanded about half the market for many products, is fighting to protect turf from nimbler rivals such as Godrej Consumer and P&G.

Earlier in a chat with ET, Unilever Asia & Africa president Harish Manwani said: “We want to inculcate a performance culture where people should feel rewarded for the results, for what they produce and not for the way they talk or just on account of a good bureaucracy. We want to do away with that and now there is a lot of transparency around in terms of clarity.”

Now withdraw Rs one lakh at ATMs; shop for Rs 1.25 lakh a day


Source :ET :31 May 2010, 0351 hrs IST,PTI


NEW DELHI: Bank customers can soon withdraw up to Rs one lakh in a single day from ATM machines, and can shop for even an higher amount of Rs 1.25 lakh with their debit cards.

Also, as much as Rs three lakh can be transferred in a day to another account through ATMs as also over phone.

The enhanced limits for ATM withdrawals, debit card swiping and fund transfers would save the consumers from running to bank branches, that too within banking hours, for such large transactions. Currently, the maximum the customers of most of the banks can withdraw through ATMs is Rs 50,000 in a day.

While HDFC Bank is allowing these enhanced banking limits to its customers with effect from June 1, other banks might soon follow the suit.

The ATM withdrawal limit for HDFC Bank Imperia Gold Debit Cards now stands increased to Rs 1 lakh, and that for shopping to Rs 1.25 lakh, from Rs 50,000 per day.

Besides, the ATM card and shopping limit for Easy Shop Regular International/ Maestro/ NRO Debit Cards would stand increased to Rs 25,000 and Rs 40,000 respectively, from Rs 15,000 and 25,000 respectively.

The bank is currently in the process of informing its customers about these enhanced debit card limits. Given the competitive nature of the banking business, other banks would have to soon follow HDFC Bank in increasing their own card limits for ATM withdrawals, shopping and fund transfers, a senior official at a rival bank said.

Also the holders of Kid's Advantage Debit Cards can withdraw and shop for Rs 2,500 in a single day, higher from Rs 1,500 and Rs 1,000 currently.

Further, for Women debit Card holders will get to withdraw Rs 25,000 from ATMs from Rs 20,000. Also customers can shop for up to Rs 40,000 crore with debit cards, from the present Rs 30,000.

"The above revised limit are not applicable to the card holders whose current limit are different from the ones stated above and will continue to enjoy their requested/offered limits as sanctioned before," HDFC said.

Realizing the value of your estate

Source : ET :Sumeet Vaid  Friday May 28, 2010, 12:07 PM

 
About Author:

With just over 13 years experience in Wealth Management, business & distribution of financial products, Sumeet Vaid is considered a veteran in the industry.

He is currently the Founder and CEO of Ffreedom Financial Planners, set up in March 2009. Sumeet is a graduate from Delhi University in Industrial Relations and Personnel Management. During his career he has worked with renowned companies like Bajaj Capital, Prudential ICICI, ING Vysya, Optimix, Networth Stock Broking; where he worked at various positions from Sales Manager to National Head, Retail Sales.

He has even worked at top management positions like CMO & CEO.


Your parents always valued only three kinds of investments - bank deposits, gold and real estate. Anything else for them was always risky.  And today, as you go about your finances and investment portfolio, somewhere amidst the equities, insurance policies, mutual funds, ULIPs, etc. many of us have undervalued real estate while creating financial plans and portfolios.

During the steep increase in property prices between 2004 and 2007 I had several clients who would come up to me and tell me, “I want to buy a place too.” They had seen the potential of this asset class to yield returns and provide stability.

For most individuals, especially those employed in the service industry, buying a second house purely for investment is difficult. After all there are several considerations one has to make like – paying the EMI on the second place you buy, additional maintenance charges, taxes and insurance, etc. Secondly, if you are going to buy it for investment, then how long should you hold on it and what is the return that you should expect?

When you are looking to buy into real estate for investment, ensure that you consult with your financial planner on each of these –

Liquidity 


The Achilles’ heel for real estate investments is liquidity. Unlike equities or even mutual funds, real estate investments cannot be realized settled fast. It takes time to find a buyer and complete the transaction. If the seller is in a hurry, then he has to resort to distress selling. Hence, you need to have a balance between your liquid and illiquid investments. 
 

Appreciation 

While property is considered to a safe investment, conduct a proper market study before you decide on the market where you plan to invest. Some markets are likely to appreciate more than others, a study that you can do along with your financial advisor. Before you put in your money, know that you are putting it in the best place. 


Tax benefits 

Like you primary residence, you can write off the EMI that you pay against your income tax returns (up to a specific limit). If you plan it properly, this investment can work as towards both – generating high returns on investment and saving tax outflow. 


Income 

A common practice among people is to rent out property purchased for investment. I have come across several clients who have managed to create a reliable source of income by renting their premises or atleast being able to meet their EMI outflow against the rent that they earn.  


Risk 

Like any asset class, real estate too has its share of risks associated with the investment. You need to consult with your advisor about your exposure to the investment. 


Investment in real estate involves a mix expertise of understanding the market conditions as well as your financial position. If you are buying a property to build your portfolio, get expert advice from your planner to safeguard yourself against possible emergencies. The planner can also help you to diversify your portfolio creating an ideal balance of liquidity and appreciation potential.

Panasonic aims to be Japan No 1 in solar business


Source :31 May 2010, 1300 hrs IST,AGENCIES


TOKYO: Panasonic Corp is banking on the solar-panel business that it gained by acquiring domestic rival Sanyo, aiming for top market share of at least 35 percent in Japan by 2012.

New solar generation products, being offered in Japan starting next month, combine Sanyo Electric Co's solar technology with Panasonic's sales networks in appliances and housing, said Panasonic Executive Vice President Toshihiro Sakamoto.

Panasonic will be able to provide overall energy-saving systems for homes that will include rechargeable batteries, heating and air conditioning, security systems and Net-linking gadgets besides solar panels, which will all be hooked up to each other, he said.

Homes will be able to save on utility costs by selling surplus power from solar power generation systems, and using water heaters at night when utility rates are cheaper, he said.

``You will be living with virtually zero carbon-dioxide emissions through creating, saving, storing and managing energy,'' Sakamoto said in Tokyo.

Panasonic took over Sanyo in December and gained its solar-panel business as well as other businesses such as home appliances and batteries.

Although overlap in consumer electronics in the two companies is being eliminated, Panasonic has much to gain from Sanyo's technological prowess in solar panels and lithium-ion batteries, which are expected to be in stronger demand as the popularity of green vehicles grows.

The Osaka-based maker of Viera plasma panel TVs, has made being environmentally-friendly a major theme in its growth strategy, hoping to become ``the No 1 green innovation company in the electronics industry'' by 2018.

Anil Ambani forms equal joint venture with CBS for small-screen debut


Source :31 May 2010, 0631 hrs IST,Rohini Singh & Sruthijith KK,ET Bureau



NEW DELHI: Billionaire Anil Ambani’s Reliance Media World will form an equal joint venture with iconic American media company CBS Corporation to launch a potentially disruptive network of television channels under the brand BIG CBS, a person familiar with the development said. The companies have reached an agreement on the JV and an announcement is expected to be made this week.

There is no restriction on foreign investment in TV channels, except in news. Reliance Media World is a Mumbai-listed company belonging to the Anil Dhirubhai Ambani Group (ADAG).

The joint venture will start operations from January next year and will launch a slew of channels, starting with those featuring syndicated content from CBS, which owns several hit shows such as NCIS, The Young and the Restless, CSI and America’s Top Model, as well as sitcoms such as Two and a Half Men.

The JV will eventually enter the Hindi general entertainment space, which corners most of the television ad revenues. The company will launch movie channels as well as regional entertainment channels, but won’t enter the news space, the person, who spoke on the condition of anonymity, said.

Reliance Media World operates FM station BIG 92.7. On May 10, the company informed the stock exchanges that it has sought shareholder approval for a change of name to Reliance Broadcast Network to better reflect the upcoming changes in its business. It has also sought permission for an unspecified increase in authorised share capital, an issue of preference shares up to Rs 500 crore, a QIP issue of up to Rs 300 crore, and an issue of securities in the international markets up to Rs 300 crore.

Host of media MNCs in India

For the year ended March 31, Reliance Media World reported a net loss of Rs 76.13 crore while total income was Rs 180 crore. Once the joint venture is finalised, Reliance Media World will continue to run the radio business and will have a 50% interest in the TV broadcast unit.

CBS will join a clutch of multinational media companies with interest in India’s burgeoning media and entertainment space, which has registered strong double-digit growth for several years till last year, and was estimated to be a $12.3-billion (Rs 58,700 crore) industry in 2009 by consultant KPMG.


Other multinational entertainment majors doing business in India include The Walt Disney Co, Bloomberg, Viacom, News Corp, and Time Warner. Several others, such as Reuters and CNBC, have syndication and branding arrangements. Format owners such as Fremantle Media and Endemol have been doing brisk business in recent years, with the popularity of reality shows surging.

However, India has sometimes proved to be a difficult market for global entertainment majors to navigate, with a regulatory environment sensitive to foreign investment, diverse consumers with fickle loyalties to content genres, and a distribution system that can hurt a company’s margins. Viacom’s majority owner, billionaire Sumner Redstone, is also the majority owner of CBS.

Senior ADAG executive Amitabh Jhunjhunwala led the negotiations with CBS executives in New York and Los Angeles last month, the person said. Mr Jhunjhunwala and RMW CEO Tarun Katiyal could not be reached for comment. A spokesperson of ADAG declined comment for this story.

A media buyer, familiar with the development, said ADAG has already started hiring for the new JV and has also commenced discussions with corporate houses and media buying agencies for sponsorships and advertisements. He asked not to be named.

ADAG, which owns the DTH platform BIG TV, had applied for licences to launch about 20 channels in 2008. These included four news channels. While the group had even commenced hiring for some of the channels, this was abruptly shelved as the advertising market shrank following a global economic slowdown.

In all, ADAG has three companies in the media and entertainment space, of which two are listed. Besides Reliance Media World, there is also the similar-sounding Reliance Media Works, also a listed company, that owns the multiplex chain called Big Cinemas and is involved in various parts of the movie-making chain such as pre- and post-production activities. Reliance Media Works also owns TV content production unit BIG Synergy and animation studio Big Animation. Reliance Capital, a financial services major and part of ADAG, is the biggest shareholder in both the listed companies.

An unlisted company, called Reliance Entertainment, owns the production house BIG Pictures and several portals such as gaming platform Zapak.com and social networking site Bigadda.com.

Anil Ambani revealed the true scope of his ambitions in the entertainment space last year, when he acquired a 50% stake in Steven Spielberg’s Hollywood studio DreamWorks. Ambani agreed to invest $825 million to acquire the stake and fund a pipeline of films.

CBS Network’s parent, CBS Corporation, is one of the US’ largest diversified media companies, with revenues of $13 billion during the 2009 financial year.

General Motors may drive in Nano rival with Chinese help



Source :31 May 2010, 0326 hrs IST,Nandini Sen Gupta,ET Bureau




SHANGHAI: General Motors may use its Chinese associations to launch a rival for Tata Nano in India, a top company executive told ET.

“We will look at every market segment and I wouldn’t rule out anything,” said Timothy E Lee, president, GM International Operations, when asked about competing in India’s new entry-level segment.

The US carmaker believes its joint venture with Shanghai Automotive Industry Corporation (SAIC), one of the top three automakers in China, will help it introduce a car to compete with the world’s cheapest car at Rs 1 lakh.

GM’s small cars already in India such as Chevrolet Beat, Spark and Aveo are designed in South Korea, at erstwhile Daewoo Motors.

“When you harvest from your partnerships the collective wisdom of other cultures, it’s incredible what you can do,” Mr Lee said.

This marks a u-turn in the US carmaker’s earlier stand when its global officials indicated that they did not think the Nano segment was viable for the company.

But now GM bets on its China connection to break new grounds. SAIC has already acquired 50% stake in GM India.

The first products from General Motors’ three-way joint venture in China with Wuling and SAIC will be introduced in India end 2011 when it will roll out two minivans — Wuling Rongguang and Sunshine. These will be built at GM India’s Talegaon and Halol plants.

“The portfolio of GM, SAIC and SGMW will be looked at for India,” said Mr Lee.

GM India now has access to the complete portfolio of GM, SAIC as well as the SAIC-GM-Wuling Automobile Company combine to be introduced in the country, said Mr Lee.


This will include several cost-effective products in both passenger and commercial vehicle space from the SAIC-Wuling alliance.

Meanwhile, the Chinese carmakers are happy coming to India with a GM tag.

“We are going to position ourselves as a GM partner in India to create opportunities for everyone,” said Zhu Xiang Jun, executive director at SAIC Motor Corporation.

“These models are not Chinese models but GM’s global models which will be taken to India to create jobs and opportunities,” added Mr Jun.

While GM gives them access to a name that ruled the global automobile market till recently and an established network in India, an equally compelling reason might be India’s sensitivity to Chinese companies.

New Delhi recently told Indian telcos not to place orders with Chinese equipment makers Huawei Technologies and ZTE Corp due to security concerns.

GM officials, however, say that there has been no indication that Indian authorities have a problem with SAIC buying 50% stake in GM India.

“This sector has automatic approval and its not sensitive like telecom,” said P Balendran, spokesman of GM India. “We have had a detailed discussion with Indian officials and they don’t have a problem,” he added.

He said that the architecture for the Wuling products will come from China but they will be made in Halol and Talegaon.

Apart from the Wuling minivans, GM’s Chinese alliance could spawn other products for India including the recently launched Chevy Sail, touted as its first car totally developed at Shanghai GM.

GM officials say the Chinese alliance will help GM India emerge as a volume player in this market quickly.

India among least favorable to SWF investment:Report



 

Source : FC:PTI May 31 2010 , Dubai

India has been placed alongside the US and the UK as the least familiar

and least favourable to sovereign wealth fund (SWF) investment, a new survey has revealed.

According to the Sovereign Brands Survey, conducted by research and communications strategy consultants Hill & Knowlton and Penn Schoen Berland, Egypt, Germany, Brazil and China are among the most familiar and the most favourable.

The survey looks at the factors on which SWFs intended to invest in their country or industries.

Stephen Davie, Hill & Knowlton's head of financial communications in the Middle East, said: "Despite being considered one of the least volatile forms of investment compared to other sources of capital, it is surprising that low familiarity still drives low favourability towards this type of funding.

The survey results show by working on their reputation and by increasing awareness of their SWFs is a key step for Middle East countries looking to open up significant investment opportunities."

The survey identified transparency as essential, 72 per cent citing this as very important, closely followed by accountability (68 per cent) and good governance (65 per cent).

Dubai did not score well on transparency with Western countries only 3 per cent of UK, 9 per cent of the US and 14 per cent of German respondents believing its SWFs to be transparent.

Asian countries had a more positive view with 29 per cent of Chinese and 30 per cent of Indian elites having confidence in Dubai's approach.

Nearly three quarters (73 per cent) of elites would approve of investment coming from Dubai, according to the Sovereign Brands Survey 2010, the most extensive study into the attitudes of global broad elites to sovereign wealth as a concept, the reputation of host nations and sovereign wealth funds (SWFs).

The study interviewed elites in 7 markets on their views of 19 host countries and their SWFs.

Nearly all (98 per cent) of the respondents felt the reputation of the country directly influences the reputation of SWFs.

It also identified that lack of familiarity with SWFs may lead to suspicion about the overall objectives of the funds.

The survey showed that knowledge of Dubai is still low.

When elites were asked whether they thought Dubai shares their values, only 1 per cent of the respondents from Germany believed this to be true, while it was 3 per cent in the UK and 5 per cent in the US, compared with 84 per cent in Egypt.

Most countries have a positive view of investment from Dubai, and when asked about the areas they would like to see Dubai investing, the respondents pointed to construction, leisure and finance.

Joel Levy, Chief Executive Officer, Penn Schoen Berland,EMEA, said: "The economic downturn has created a real opportunity for sovereign wealth funds.

SWF's images are largely determined by country reputation, and despite low familiarity and concerns over transparency, broad elites see SWFs as least likely to have contributed to the recent market turmoil.

This puts sovereign wealth funds in a prime position to consider their positioning and reputation in contrast to other funds and asset classes

India, China firms sign MoUs for expanding cooperation


Source : :PTI May 31 2010 , Shanghai

Business representatives of India and China signed three MoUs today to expand cooperation, under

which leading Indian firms Infosys and Wipro committed to undertake projects in the world's fastest growing economy.

Wipro signed an agreement to set up a hydraulic cylinder manufacturing unit in the eastern Chinese city of Changzou.

The MoU was signed between Harish J Shah, head of Wipro's Global Operations and Shen-Ruiqing, Secretary General of the Standing Committee of the Communist Party of China of Changzou.

Under the agreement, Wipro will set up a plant that will manufacture high pressure precision hydraulic cylinders, and an R&D facility will be established to enable this centre.

Software giant Infosys will set up an education centre at Jiaxing to develop software talent in huge numbers to meet its growing business demand.

The Indian company will train up to 1000 engineering graduates under this agreement, an MoU for which was signed by Rangarajan, COO of Infosys China and Bong Miaohu, the Mayor of Nanhu district.

The agreements were signed during a meeting of business leaders of the two countries here today on the sidelines of President Pratibha Patil's visit to Shanghai.

Chinese electric power company SEPCO has undertaken to develop a 1050 MW coal-based thermal power project in Orissa.

The company, which is already working on the thermal power project, has committed to expand its capacity by adding a 350 MW unit to it.

The agreement to this regard was signed by Wang Lingfang, President of SEPCO Electric Power Construction Corporation from SEPCO's side and K V V Rao, Managing Director of GMRK Energy Limited.

As part of the agreements, the Fudan University in Shanghai agreed to consider to establish an annual Visiting Chair in Humanities and Social Sciences.

The agreement to this effect was signed between the Indian Council of Cultural Relations (ICCR) and Fudan University.

While S Jayshankar, Ambassador of India to China, signed the agreement from the Indian side, Yu Liang Yang, President of the Fudan University sealed it from the Chinese side.

The proposal concerns inviting a Professor from India during a four-month semester of each academic year.

As many as 57 business delegates represented 50 companies including Aargus, GMR, Infosys and Wipro, among others.

The Indian business leaders emphasised the need to have a balanced trade and equidistant trade relationship.

Businessmen from both countries also sought identification of new areas of cooperation

Insurers to call you after policy sales



Soon, life and general insurance companies will have to call up individuals to whom policies are sold by telemarketers to confirm the sale before issuing the policy document.

Insurance Regulatory and Development Authority (Irda) is in the process of formulating telemarketing guidelines, which are expected to be announced by next month, a senior Irda official said.

According to him, the guidelines aim to curb rising cases of mis-selling among life and general insurance companies, where the policy details are not explained to customers before selling. “Often, policies that are sold to people, do not match their requirements and income and they lapse. That is why the rate of policy lapsing is high,” the official said.

The guidelines will ask companies to follow a set format of questions before trying to sell a policy over phone. In case an agent sells a policy personally, the terms and conditions have to be reiterated to the buyer over phone after the application reaches the insurer.

There are three aspects of telemarketing in case of life and general insurance companies. First, when the policy is solicited and the entire process is done over the phone. Second, when an agent has sold a policy, it needs to be reconfirmed with a call. And third, when travel and motor insurance policies are sold bundled with other products such as a credit card or car, the customer has to made fully aware what she is getting into. “We will ask insurance companies to record and preserve call details until the end of the contract,” the official said.

Customers will now be asked about their eligibility, income and needs over the phone again before completing the sales process. Companies such as Aegon Religare Life, Star Union Daiichi Life, among others, are already following the post sale call process. Irda will now make it mandatory for all companies to follow.

Irda is also mulling a proposal to allow only trained personnel to sell insurance policies over phone. “Discussions are on whether to allow only insurance companies and their trained agents to do telemarketing or to allow third parties to do it. In the second case, the telemarketer has to be a trained agent,” official said.

In developed markets such as the US and the UK, telemarketing is prevalent, but the process is not regulated. Irda has requested the South Korean regulator, the only market where telemarketing guidelines are in place, to send its templates for analysis.

UBI looks to enter factoring business


Source : FC: Falaknaaz Syed May 30 2010 , New Delhi

Public sector lender Union Bank of India is working on entering the domestic factoring


The bank is in preliminary talks with foreign players and may consider setting up a subsidiary, instead of a separate division within the bank.

“We will be entering domestic factoring business, which has volumes, and not international factoring. This could be done in a joint venture with a foreign player. The plans are at a drawing board stage and we will take a few months to finalise it, after which we will approach the Reserve Bank of India for a licence. Like other banks, which have set up subsidiaries for factoring, we will also set up a subsidiary,” Union Bank executive director S Raman told Financial Chronicle.

Factoring is a business of managing and financing receivables, designed to improve cash flow of sellers/exporters and cover their risk.

Unlike other financing services, factors do not ask for collateral.

The factor turns the seller’s invoices into cash and advances up to 90 per cent of the invoice value.

This helps sellers as they can have instant access to their earnings and do not have to wait for the usual long period to get paid by buyers.

Sellers will, therefore, have a healthier cash flow, helping them to accelerate growth.

In India, the turnover in factoring business was Rs 25,000 crore in 2009-10. It had a static growth due to the financial crisis.

More than 95 per cent of this turnover was domestic factoring.

The compounded annual growth rate for the factoring business is 30 per cent. Besides government-owned Export Credit Guarantee Corporation, there are several players in the factoring segment, including IFCI Factors, BB Financial Services, Tata Capital, HSBC Factors, Standard Chartered Factors, SBI Global Factors and Canbank Factors.

Zara makes New Delhi its first stop; Mumbai next



Source : FC: Manisha Yadava May 30 2010 , New Delhi

The Euro 11.1-billion Inditex group plans to open Zara stores in all the major Indian cities. The Spanish fashion retailer opened its first Zara store in Delhi’s Select City Walk on Friday.

It plans to open a store in Mumbai’s Palladium mall and in Delhi’s DLF Promenade this year.

“The brand’s expansion would depend on the feedback we get from customers, we also want to open stores in Bangalore, Hyderabad and Chennai very soon. The average size for a Zara store would remain 1,200-1,500 sqm,” chief communication officer, Inditex, Jesus Echevarria said.

Inditex has a 51:49 joint venture with Tata Group's retail arm Trent. Zara is the second Spanish fashion brand to enter India, after Mango. Of late, many international fashion retailers are making a beeline for the country besides the already existing ones — Diesel, Marks & Spencer and Tommy Hilfiger.

Echevarria said the company would ship new clothing designs to its Indian stores within two weeks of manufacturing. “For us, every fashion brand present in the vicinity is a competitor, specially the local brands,” he said.

Foreign audit firms may get full practising rights



Source : FC:Falaknaaz Syed & Ritwik Mukherjee May 30 2010 , New Delhi/Kolkata

Foreign audit firms may soon get full practising rights in India. Recommendations to give them full rights and make them accountable are in the final report on the multi-crore Satyam Computers scam submitted by the Institute of Chartered Accountants of India (ICAI) to the ministry of corporate affairs.

The ministry of corporate affairs, the ministry of commerce and the Reserve Bank of India are examining the ICAI recommendations, minister of corporate affairs Salman Khurshid told Financial Chronicle in an interview.

“ICAI has given us a report on how foreign firms should be brought under the purview of ICAI. They should first be allowed to practise so that they can be made liable. So, we have to work out a system. Discussions are under way. We are talking to the commerce ministry and the RBI on the level of permission that can be given to the foreign firms,” said Khurshid.

Advocating full rights to foreign audit firms, Khurshid said, “If you have to make them liable for negligent practices, you have to first allow them to practise. You can’t have both ways where you prevent them from practising and say that you can be punished. So the whole picture has to be sorted out. We are looking at it.”

A senior ICAI member said the whole idea was to hold someone responsible and bring the right person to book in case of any wrongdoing.

“When the Satyam accounting fraud broke out, the general perception was that PricewaterhouseCoopers (PwC) India was the auditor. But on paper it was Pricewaterhouse Hyderabad or Lovelock & Lewis, which is the Indian associate of Pricewaterhouse and interestingly there was overlapping of partnership. There are individuals who are partners of both PwC India and Lovelock & Lewis. This unnecessarily creates a lot of confusion. Such complications should be done away with," the member said.

At present, foreign firms such as Deloitte, Ernst & Young, PwC, and KPMG have tie-ups with domestic accounting firms. The Indian affiliates of PricewaterhouseCoopers include Pricewaterhouse firms and Lovelock & Lewis, while Deloitte has tie-ups with C C Chokshi, A F Ferguson, Fraser & Ross and S B Billimoria. Similarly, KPMG has a tie-up with BSR, and Ernst & Young has a tie-up with S R Batliboi.

Under the existing World Trade Organisation agreement, India has no obligation to open its market to foreign audit firms. However, in the Doha Rounds, India can agree to open its market to its trade partners.

The role of global audit firms came under scrutiny when two partners of Satyam’s auditor Pricewaterhouse were arrested.

A partner and director of one of the Big Four firms told Financial Chronicle, "I have heard of such a move. In fact, this is a very progressive move. Often some negative perception is being created unnecessarily against Big Four firms. This would also create a level-playing field among audit firms. Those who cannot use the parent company's name while auditing will now be able to use that name. Having said that, I must add that there has to be a rider: partners of the parent firm or the parent firm should not be held responsible for any wrongdoings at the Indian operations’ end. The Indian outfits are accountable anyways."

Apollo to manage Khazanah hospitals



 Source : F C:Sangeetha G. May 30 2010 , Chennai


Apollo Hospitals, in which the Malaysian sovereign fund, Khazanah Nasional, has a little over

12 per cent equity, is taking the association a level higher. It will now participate in the management of hospitals in which Khazanah has equity stakes.

This adds a new dimension to the battle of control over the Singapore-based Parkway.

Khazanah is trying to wrest control of Parkway from Fortis. To that end, it has made an open offer, at a 25 per cent premium over last Thursday’s market price, to take its shareholding above 50 per cent. Apollo tacitly supports the Khazanah campaign.

Suneeta Reddy, Apollo’s executive director of finance, told Financial Chronicle that the higher level of association with Khazanah would not involve any investment commitment from her company.

“But we will leverage synergies in the healthcare services and education ventures of Integrated Health Holding of Khazanah. We will share clinical best practices, participate in the management of hospitals and medical universities owned by them,” she said.

Khazanah has 60 per cent in the Panthai group, which runs nine hospitals in Malaysia. Besides, it owns 70 per cent in International Medical University in Malaysia and 26 per cent in Parkway.

Apollo is also directly associated with Parkway through a joint-venture partnership in Apollo Gleneagles Hospital in Kolkata. It is yet to be seen how Apollo reconciles with the fact that Fortis, which is in control of Parkway after having bought 23.9 per cent equity in the Singapore company for $685 million in March, now faces a challenge from Khazanah.

By virtue of that control, Fortis is in charge of Parkway’s hospital chain with presence in China, Malaysia, Brunei and Singapore. If Khazanah succeeds in wresting control with the help of $835 million offer, many of these hospitals will come under the management of Apollo.

Much depends, though, on how Fortis will handle the Khazanah open offer. It has three options: 1) cash out, 2) stay as a minority shareholder and accept Khazanah’s control of Parkway, and 3) stave off Khazanah by making a counter-offer. So far, it has not indicated which way it will go.

If Fortis opts to stay in Parkway as a minority stakeholder, Khazanah may divest it of its management functions and hand over the running of the hospitals to Apollo. Asked about this possibility, Reddy said it was “premature to comment”.

To a query by Financial Chronicle, a top Fortis official said: “I have no news to give you on Parkway. Wait for developments to unfold”.

Saturday, May 29, 2010

RIL makes fifth oil discovery in Gujarat block

 

SOURCE : PTI May 28 2010 , New Delhi

Reliance Industries on Friday said it has made a fifth oil discovery in a
block in Gujarat, but did not give reserve estimates.

The discovery was made in exploration block CB-ONN-2003/1, which is located in the Cambay Basin at a distance of about 130 km from Ahmedabad, the company said in a statement here.

Reliance had won the block in the fifth round of auction under the New Exploration Licensing Policy (NELP).

Well CB10A-J1 was drilled to a total depth of 1,957 metres in Part A of the block. "Hydrocarbon-bearing zone was identified at a depth of 1,376-1,385.5 metres," it said.

"The well flowed at a rate of 255 barrels of oil per day" during conventional testing of the discovery, the company said.

Well CB10A-J1 was drilled with the objective of exploring the play fairway in the Miocene Basal Sand (MBS) of the Babaguru Formation and Eocence Pays of the Kalol Formation.

"The discovery is significant, as this play fairway is expected to open more oil pool areas, leading to better hydrocarbon potential within the block," Reliance said.

The block covers an area of 635 sq km in two parts, dubbed Part A and Part B. Reliance is the operator of the block with a 100 per cent participating interest.

The company has done 2D seismic surveys over the entire block area, while nearly 80 per cent has been covered with 3D seismic.

"Of the 15 exploratory wells drilled in the block by Reliance so far, 11 are located in Part A and the remaining four in Part B of the block. Reliance is continuing further exploratory drilling efforts in the block," the statement said.

The discovery, named 'Dhirubhai-48', the fifth oil find in the block so far, has been notified to the government of India and to the Director General of the Directorate General of Hydrocarbons. "The potential commercial interest of the discovery is being ascertained through more data gathering and analysis," RIL said.

Can pump in more than $2billion if FDI rules are eased:Bharti Retail



SOURCE : PTI May 28 2010 , patiala

Bharti Enterprises group company Bharti Retail, which is on track to invest USD 2


billion by 2018, today said it may scale up its investment if the government relaxes FDI norms in the retail sector.

"If the rules for the game are changed...We can also revisit our plans," Bharti Enterprises Vice-Chairman and Managing Director Rajan Mittal told PTI when asked if the company would scale up its investments if the FDI norms are further relaxed.

Venting out his frustrations over restrictions on foreign investment in the retail sector, Mittal said a political decision needed to be taken at the earliest, else the country will lose out on getting billions of dollars of foreign funds into the sector.

"If retail is good, please allow FDI in multi-brand retail. If it is bad, let's stop talking about it," he said.

Questioning the rationale of not allowing foreign investment in multi-brand retail under the pretext that organised retail would wipe out small kirana and neighbourhood mom-and-pop stores, he said already big domestic retailers are in market and no such impact has been seen.

"The government has allowed domestic big companies like Bharti, Reliance, Birlas, Spencer group and Kishore Biyani's Future group, these could have also hurt the kirana strores, but that hasn't happened," he added.

Currently, the government allows 51 per cent FDI in single brand retail but none in multi-brand, while 100 per cent in wholesale business.

Mittal said government should immediately consider allowing at least 49 per cent FDI in multi-brand retail if not more, as this sector doesn't pose "any security threat" unlike in telecom and defence.

He, however, said that Bharti Retail, as announced earlier, is on track to invest $ 2 billion by 2018 and would open 150 stores by the end of 2010.

Bharti Retail, currently, operates around 70 outlets of its 'easyday' stores across the country, including six large format 'easyday Market' hyperstores.

In 2007, the company had stated that it envisaged having a pan-India operations with approximately 10 million square feet of retail space cities across with a population of over one million.

It had estimated employing about 60,000 people, including ex-servicemen and women.

Bharti Enterprises has also a joint venture with Walmart, the world largest retailer for cash and carry business and runs the 'Best Price' stores.

Sundaram Fin may not exit gen insurance

 



T T Srinivasaraghavan, managing director of Chennai-based Sundaram Finance Ltd said the company is neither in talks nor approached the regulator to exit its general insurance venture with UK’s RSA Insurance Group Plc. He also said the decision on mutual fund business would be taken in the next two months.

Media reports said Sundaram Finance is exiting its general insurance JV - Royal Sundaram Alliance Insurance Co. Ltd by selling its 74 per cent stake to its foreign partner RSA Insurance Group Plc, which would merge the entity with Reliance General Insurance Co. Ltd and take a 26 per cent stake in the merged entity.

“We have not approached the regulator for the sale and not in talks with anyone,” Srinivasaraghavan said while declaring the company’s fiscal 2010 results.

Meanwhile, the company expects to reach a decision on its mutual fund business with in the next two months.

Sundaram Finance has an asset management business tie up with BNP Paribas. But with BNP Paribas buying some of Fortis Bank’s international operations, including its asset management unit in India, BNP Paribas has to either exit one of the ventures or merge the two businesses.

The regulator bans companies from owning stakes simultaneously in two rival asset managers.

Sundaram BNP Paribas AMC manages assets worth $3 billion, while Fortis’s asset management company has assets worth $2 billion in India.

“The decision should be taken by our partners. We are in negotiations with them, but nothing has been decided and it would be too premature to comment on the outcome. A final decision would be taken in the next two months,” Srinivasaraghvan said.

He also added that whatever might be the outcome, Sundaram Finance is committed to its mutual fund

Friday, May 28, 2010

SUNTV posts Rs 567 cr net profit for FY10


Source :Press Trust of India / Chennai May 28, 2010, 14:05 IST
The Sun Television network today said net profit rose by 29.8 per cent to Rs 567.38 crore for the financial year ended March 31, 2010, in comparison to the previous year.

For the year ended March 31, 2009, the company reported a PAT of Rs 437.11 crore, Sun TV Network said in a filing to the Bombay Stock Exchange.

Total income for the year ended March 31, 2010, grew by 31.70 per cent to Rs 1,437.52 crore in comparison to Rs 1,091.52 crore in the previous year.
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) for FY'10 grew by 43.93 per cent to Rs 1,110.55 crore from Rs 771.59 crore in the previous year.

The board of directors have declared a final dividend, including an interim dividend, of 150 per cent, which amounts to Rs 7.50 per equity share of Rs 5 face value, for the fiscal ended March 31, 2010.

StanChart India $590 mn share sale fully covered


Source :28 May 2010, 1643 hrs IST,REUTERS



MUMBAI: UK bank Standard Chartered's sale of Indian shares worth up to about $590 million was fully covered on its final day of bookbuilding after volatile markets and a new regulation weighed on demand during its first three days.

Standard Chartered's Indian Depositary Receipt (IDR) issue is the first, and the emerging markets-focused bank has said the offering is aimed more at building its brand and presence in its second-largest market than about raising funds.

The offer was being closely tracked by other foreign firms which have large consumer presence in Asia's third-largest economy and may also be considering share issues to raise their profiles.

Investors had bid for 1.28 times the 204 million IDRs on offer to the public as of mid-afternoon, stock exchange data showed, with most bids towards the low end of its 100-115 rupee price range. The public portion of the offer had been only about 11 percent covered at the end of Thursday.

Every 10 IDRs represents one share of Standard Chartered Plc. Based on Thursday's London closing price of 1,682 pence, and the currency conversion, that valued each IDR at about 114 rupees as of Friday morning, towards the high end of the offering's price range.

"The book is building around 104-105 rupees. This is at a substantial discount to the London stock price, which is why we saw good subscription on the last day," said Arun Kejriwal, director of research firm KRIS.

Standard Chartered was selling a total of 240 million IDRs, of which 36 million were allocated to six anchor investors at 104 rupees apiece on Monday. Indian share sales often see few orders until the final day, when investors have a better indication of how the deal will be priced.

A rule requiring institutional investors to pay 100 percent of the value of their share applications, which took effect on May 1, also kept a lid on early demand as big investors did not want to tie up funds sooner than was necessary.

Swiss banks' love for Indian clients no secret, woo back depositors who withdrew funds on fear of action


Source :28 May 2010, 0638 hrs IST,Sugata Ghosh,ET Bureau

MUMBAI: The famously secretive Swiss private banks are trying to persuade Indians to bring back the money they have pulled out from their numbered accounts in these banks.

In the last one year, more than a hundred Indians with secret accounts have shifted money from Switzerland to banks in Dubai Free Trade Zone and Singapore amid fears of regulatory and government action.

“The Swiss banks are now reaching out to these clients to get back the funds they have lost. There’s no estimate of how much money has moved out, but it could be substantial in absolute terms,” said a senior Mumbai-based professional dealing in tax and cross-border transactions.

And interestingly, some of the account holders have moved back money to Swiss banks because of their long relationship with these private wealth managers. “But there’s a difference. The money that’s going back may not be parked in a numbered account. Instead, it could be a corporate deposit,” said a foreign exchange regulations expert who has advised clients on such fund transfers.

Individuals with numbered accounts have become used to a transaction convenience that is absent in most banking services.

While these accounts offer no interest and even charge a fee for holding the money, many depositors prefer them. The client does not have to write a cheque for any transaction, but simply call up a dedicated relationship manager and share a code given by the bank to complete the transaction.

“The manager uses a voice recorder to cross-check that the caller is indeed the holder of the numbered account. A client can call up from anywhere in the world to operate the account,” said a private money manager. According to him, clients draw comfort from the belief that in case of enquiries, the bank will do whatever it takes to protect the account holders’ identities. Till three years ago, these accounts offered an interest of 1-1.25%, but that has now stopped, he said.

It’s learnt that most of the money has been transferred to Dubai, where the transaction is in the nature of a trading receipt with a company set up in the free trade zone.

I-T notice to 50 on German list

The company receives a commission or consultancy fee. After a decent interval, the company in Dubai can open a new account with the Swiss bank to bring back the money. Some have transferred the funds to banks in Singapore, which, bankers say, is becoming the new destination for parking cash.

“Despite the stigma attached to Dubai, many still prefer it to Singapore for tax reasons. Some of the Swiss banks don’t have a branch in Dubai, so they want to get back such deposits. To them it’s free fund,” said the money manager.

Tax professionals as well as bankers know that legal complications make it difficult for governments and regulators to trace such fund flows. For instance, tax authorities have made little headway after Germany handed over names of secret account holders to Indian authorities.

Under Section 147 of the Income-Tax Act, the tax department can ask a person to file a return to take into account the income that has escaped assessment. However, under Section 148, the assessee can ask the department the reasons for reopening the file.
“It’s here that our I-T people will face a problem. Germany, as per the treaty with India, has told Indian authorities not to initiate proceedings against these people unless criminal actions or links are established. So, it would be difficult to pull them up unless the authorities can spot activities such terror funding, drug running, etc. Tax evasion is not a criminal offence,” said an income-tax expert.

So even though the income-tax department has sent notices to some 50 individuals a few months ago, it may end up achieving very little. Till then, the Swiss and other European banks will fish for clients and funds they have lost to other friendly, though less-efficient, offshore centres of the world.

Mukesh Ambani venturing into telecom?

Within days of revoking a non- compete agreement that his group had with his younger brother Anil, RIL Chairman Mukesh Ambani is believed to have held a long-drawn-out discussion with telecom czar Sunil Mittal.

The meeting took place on the day Mukesh Ambani arrived in Delhi on May 26 to attend the Prime Minister's Council on Trade and Industry meeting.

A Reliance Industries spokesperson declined to comment either on the meeting or the discussions held, but a source said CII President Hari S Bhartia was also present.

The two Ambanis on May 23 decided to scrap a non-compete agreement reached by them in January 2006. But, they decided that Mukesh will keep out of gas-based power plants till 2022.

They had also announced that day that they would expeditiously negotiate a gas supply agreement in accordance with the Supreme Court order of May 7.

There is speculation that Mukesh Ambani could venture into the telecom sector soon and sources indicated that he could pick up stake in one of the Indian telecom players, particularly those who acquired licences in 2008.

Sources also said that Mukesh is talking to new licence holders including Videocon, which has pan-India licence and is looking for a partner to bring in capital to roll out services.

Mukesh had overseen setting up of the telecom business in the undivided Reliance empire (under the brand Reliance Infocomm), but the business went to younger brother Anil Ambani when the brothers decided to part ways in June 2005.

Anil has since renamed the telecom venture as Reliance Communications.


Thursday, May 27, 2010

Oil India declares 340 percent dividend


Source:ED:27 May 2010, 1335 hrs IST,AGENCIES



NEW DELHI: The state-owned Oil India Limited (OIL) declared a dividend of 340 percent in its fourth quarter results on Wednesday.

N M Borah, Chairman and Managing Director of OIL announced that the declared dividend is one of the highest declared by the company so far.

"In recognition to the company's excellent performance, the board has declared that the total dividend this year around will be 340 percent, which is the highest dividend declared so far by the company. Out of this, 180 percent was already given as the interim dividend and we are declaring another 160 percent, making that 340 percent, which, as I said, has been the highest so far in the history of our company," said Borah.

The dividend payout of 340 percent was declared after the net profit rose 20.76 percent in the fiscal yearend of March, on account of a production increase, a rise in the realization price and forex earnings.

"The net profit of the company has jumped up and reached a number of Rs 2,610 crores, which implies the growth of 20.76 percent," Borah said.

O. I. L. produced 3.572 million tons of crude oil in 2009/10. There has been a growth rate of three percent in crude oil production and 6.5 percent in natural gas.

Visa, Monitise tie-up to offer financial services on mobile



Global retail electronic payments network Visa and mobile financial services provider Monitise on Wednesday announced the formation of a joint venture that will provide a technology platform for financial institutions and cellular operators in India to offer a range of mobile financial services to consumers.


The new company will combine Visa’s expertise in enabling secure, globally interoperable financial transactions with Monitise’s knowhow in developing mobile financial technology for a broad range of handsets.


The joint venture builds on an existing partnership between Visa and Monitise and will give financial service providers a platform to accelerate the delivery of mobile financial services such as banking, bill payments, mass transit ticketing, mobile top-up and others.


India is world’s second largest mobile market with an estimated 584 million mobile phone subscribers as of March 31.


“Creating this joint venture is a crucial step that can help expand the acceptance of digital currency in India and enable the migration of $700 billion of annual consumer spending from cash to electronic forms of payments,” said Elizabeth Buse, group executive, international, Visa.


She said Visa and Monitise together can provide banks and mobile network operators in India the scale, security and reliability required to make mobile money a reality for consumers.


Monitise chief executive officer Alastair Lukies said: “This exciting extension of our successful partnership with Visa will enable providers of financial services to have a single, secure and convenient link to offer a wide range of services via a mobile device. India’s mobile market offers tremendous growth opportunities for this joint venture and for our customers.”


The joint venture transaction will be undertaken in accordance with applicable laws and is expected to close in June.


Both shareholders will be contributing resources to the joint venture and an outstanding local team of experts in their fields is being put together.

Unit-linked plans: More lip service




Source:Neha Pandey & Shilpy Sinha / Mumbai May 27, 2010, 0:43 IST

The proposal to cap surrender charges may ensure buyers get back some — just some — of their investment.

Last week, the Insurance Regulatory and Development Authority (Irda) put up draft proposals fixing surrender charges for unit-linked insurance plans (Ulips) and the revival period for lapsed polices on its website.


Irda proposed that surrender charges be capped. For policies of less than 10 years, the charges might be capped at 2.5-12.5 per cent of the fund value in the first five years. For policies with tenures of more than 10 years, the charges could be fixed at 2.5-15 per cent of the fund value for the first six years. After the fifth (for policies of less than 10 years) and sixth (for more than 10 years) years, the charges would be zero.

On the face of it, the charges look nominal. But, the operative word here is ‘fund value’. This is to be arrived at after deducting all the costs. According to the draft guidelines, “The surrender value of the policy is the amount remaining in the fund account less applicable surrender charges which is refundable to the policyholder.” That is, surrender value is equal to fund value minus surrender charges.
HIGH COSTS, LOW RETURNS
PREMIUMS: Rs 1 lakh per year; Policy: 10 year
RATE OF RETURN: 10 per cent per annum
Year Total cost*
(Rs)
Fund value
(Rs)
Surrender
charge (%)
Amount
received (Rs)#
1 60,000 44,000 12.5 38,500
2 15,000 141,900 10.0 127,710
3 15,000 249,590 7.5 230,870
4 10,000 373,549 5.0 354,871
5 10,000 509,904 2.5 497,156
*Total fund value at year-end, including returns
#Withdrawal at year-end

Here’s the catch. Given that Ulips front-load their policies in the first few years, the fund value itself will be low. For instance, there are charges under various heads like premium allocation and policy administration. The costs can be as high as 60-100 per cent in the first year itself.

As a result, even if the guidelines come into effect, buyers of these policies will not get much of their money. Rahul Aggarwal, chief executive officer of Optima Insurance Brokers, said, “The entire premium will be initially used for various costs applied on the policyholder. Therefore, there will be no premium left for any surrender charge to be levied in the initial years.”

Let’s understand this with an example. Let’s say the first year’s premium that you have paid is Rs 1 lakh for a policy of less than 10 years. Assuming the first year charges at 60 per cent of the premium (Rs 60,000), the fund value of the policy is Rs 40,000. Also, returns are being assumed at 10 per cent a year.
Even at this rate of return, the buyer of the Ulip is unlikely to get back even his principal of Rs 5 lakh if he exits the policy in the fifth year (see High costs, Low returns). In fact, if the investor exits at the end of the first year, he may get only Rs 38,500.

If he does so before the end of the first year, the number could be much less.
As far as returns go, though it has been assumed that the policy is earning 10 per cent a year, it will depend on market conditions. In a bad year, you may not get anything. “With policies with high front-end costs, you stand to get back nothing from the capital invested,” said Suresh Sadagopan, a certified financial planner.
“Things could improve slightly. 

Most insurers deduct all the remaining amount (Rs 40,000 in the first year, in this case) if the investor withdraws in the first year, to recover costs,” said an executive of a top life insurance company, who did not wish to be named.

The good part: The amount will be completely tax-free, because the product will be treated as an insurance plan by the income tax department. In case of a pension plan, both capital invested and returns are taxable if the policy is surrendered in the interim.

Insurers said since Ulips were long-term products, withdrawals or surrender charges should not worry policyholders. G V Nageswara Rao, MD and CEO, IDBI Fortis, said, “With recent regulatory changes, Ulips have become more attractive. These are best suited for the long term.”

Banks meet on cards for base rate consensus


Source :BS Reporter / Mumbai May 27, 2010, 0:21 IST

The guessing game by banks on each other’s base rate is expected to be over soon when country’s top bankers meet – at the behest of State Bank of India (SBI) – to discuss the new loan pricing mechanism.

The meeting would precede SBI’s base rate announcement on June 15, a fortnight before its roll out, SBI Chairman O P Bhatt said today.
   

Most banks are yet to decide about their base rate and the parameters to be taken into account for calculating the new benchmark. A key parameter is the cost of funds, which can cause a huge variance across banks. For example, if a bank takes overnight cost of funds, which is very low, its base rate will also be significantly lower from a bank, which, for example, takes one-year average cost of funds into account.

As a result, most banks are eagerly awaiting the move by the country’s largest lender, SBI. This meeting assumes significance, as bankers will get to know what their colleagues in other banks are contemplating and help put in place an industry-wide consensus.

Last year, the Reserve Bank of India (RBI) had constituted a committee under Executive Director Deepak Mohanty to review the present system of benchmark prime lending rate. The move was aimed at bringing about greater transparency in risk pricing. The regulator issued the final guidelines in April, but the decision about mechanism was left completely in the hands of banks.

Bhatt said SBI would have three more internal meetings to finally decide on the number. He, however, hinted that the bank’s base rate could be around 8 per cent. The bank will announce its base rate a fortnight before the scheduled roll out, so that its staff gets familiar with the model and the calculation.

Meanwhile, the country’s second-largest state-run lender, Punjab National Bank, today said its base rate might be around 8-8.5 per cent.

Apple overtakes Microsoft as biggest tech company



Source : BS:Reuters / Seattle May 27, 2010, 11:01 IST

Apple Inc shot past Microsoft Corp as the world's biggest tech company based on market value on Wednesday, the latest milestone in the resurgence of the maker of the iPhone, which nearly went out of business in the 1990s.

Apple's shares rose as much 2.8 per cent on Nasdaq on Wednesday, as Microsoft shares floundered, briefly pushing its market value above $229 billion, ahead of its longtime rival.

Both stocks ended down after a late-day sell-off, but Apple emerged ahead with a market value of about $222 billion, compared with Microsoft's $219 billion, according to Reuters data.

Apple shares closed down 0.4 per cent at $244.11 on Nasdaq, while Microsoft fell 4 per cent to a seven-month low of $25.01.

Shares of Apple are worth more than 10 times what they were 10 years ago, as it has profited from revolutionizing consumer electronics with its stylish, easy to use products such as the iPod, iPhone and MacBook laptops.

The last time Apple had a higher market value than Microsoft was Dec. 19, 1989, according to Thomson Reuters Datastream.

Microsoft, whose operating system runs on more than 90 per cent of the world's personal computers, has not been able to match growth rates from its hey-day 1990s. Its stock is down 20 percent from 10 years ago.

Apple, which struggled for many years to get its products into the mainstream, resorted to a $150 million investment from the much larger Microsoft in 1997 in order to keep it afloat. At that time, Microsoft's market value was more than five times that of Apple.

Microsoft still leads Apple in sales. In the latest quarter, Microsoft reported $14.5 billion in revenue compared with Apple's $13.5 billion.

Cupertino, California-based Apple is now the second-largest company on the Standard & Poor's 500 index by market value, behind energy behemoth Exxon Mobil Corp.

Telecom companies raise Rs 36,000 crore for 3G licence payments


Source:27 May 2010, 0036 hrs IST,Joji Thomas Philip,ET Bureau


NEW DELHI: Only seven days after India’s marathon 3G auctions ended, the licence winners have mopped up Rs 36,000 crore in loans of the total Rs 67,719 crore they will have to pay up by the month-end. In return, the seven winners will get airwaves that will enable them to offer services such as video calling and high-speed internet on mobile phones.

An analysis by ET reveals that telcos have also lined up an additional Rs 29,000 crore from their cash reserves and a further Rs 11,000 crore in internal accruals to pay for these airwaves.

A third of the Rs 36,000 crore loans that have been raised by telcos are through the issue of commercial papers (i.e. short-term note issued with a maturity period of one year or less), ET’s analysis reveal. Banking executives say that mutual funds have been the largest investors in these securities issued by telcos over the last couple of days. Commercial papers are usually not listed on exchanges, but are traded over-the-counter and foreign institutional investors are also allowed to invest in these securities

Put simply, the ability of all auction-weary mobile firms already battling a savage price war, to line up funds, erases fears of defaults as witnessed in Europe earlier this decade when mobile firms that had overbid for radio frequencies were unable to meet their commitments.

The country’s top two mobile firms-Bharti Airtel and Reliance Communications (RCOM)-each won 13 of the 22 telecom zones on offer while other major operators Aircel Cellular, Vodafone Essar, Idea Cellular and Tata won a total of 13, 9, 11 and 9 circles, respectively.

Among the seven winners, Bharti Airtel, India’s largest telco will have to shell out the maximum — it must pay Rs 12,300 crore for these airwaves in 13 circles. Bharti has raised Rs 8,500 crore from a consortium of financial institutions, including State Bank of India and HDFC Bank which has agreed to part finance the payment, two executives with direct knowledge of the development told ET. Bharti Airtel’s loan is estimated to spread over six years at an interest of 8-9%. The company did not comment its 3G funding plans, but industry executives aware of Bharti’s strategy say that it will use its cash reserves, which were at Rs 7,700 crore as of March 2010, to pay out the remaining amount for both third generation and broadband wireless spectrum.

Vodafone Essar, the country’s second-largest private operator in terms of revenues, will pay for 3G airwaves from its Rs 10,000 crore loan from SBI. Banking executives said this five-year loan carries an interest rate of less then 10% for the first two years; and thereafter, it will be re-adjusted on the basis of the average prime lending rate of four public sector banks SBI, Punjab National Bank, Canara Bank and Bank of Baroda. Vodafone Essar is securing additional funding by issuing commercial papers and has also got another loan from a consortium of banks, an executive close to the company said without divulging details.

Reliance Communications has so far raised Rs 4,000 crore from selling commercial papers at 6%, of which, LIC has picked up Rs 2,000 crore, while the remaining has been subscribed to by MFs and banks. Executives close to the company said that it was on the verge of finalising an additional Rs 4,500 crore funding to pay for 3G airwaves within the next 48 hours.



Idea Cellular too has figured out its funding for 3G airwaves. Executives with the telco said that over 40% (Rs 2,400 crore) of Rs 5,769 crore that have to paid for 3G airwaves will be through internal accruals. It is learnt that this will largely come from the leftover funds from sale of stake in subsidiary Aditya Birla Telecom to private equity player Providence last year. Idea Cellular has also raised Rs 500 crore in commercial paper, and the remaining amount would be through a mix of long- and short-term loans from a consortium of banks led by IDBI.

“Bharti’s net debt-equity ratio will stand at an estimated 1.35 including the debt taken for the Zain acquisition. Idea’s net debt-equity ratio will rise to 1.03 after the payment of the 3G bid and RCOM’s net debt-equity ratio will rise to 0.73. We continue to believe that Bharti’s financial position remains robust, despite an elevated level of leverage due to its strong cash flows,” Deutsche Bank analysts Srinivas Rao and Amyn Pirami said in a note.

Aircel Cellular, which has to shell out Rs 6,500 crore for 3G airwaves has raised Rs 4,000 crore by issuing commercial papers at 6% interest for a one-year period from Deutsche Bank, Standard Chartered, HSBC and Barclays, an executive with direct knowledge of the development said. This executive also added that the telco had further raised a 12-month bridge loan of about Rs 2,000 crore from HSBC, PNB and Axis Bank. Besides, the company may also use the proceeds from its recent sale of its tower arm, which fetched Rs 8,500 crore, to part fund the licence fee for 3G and broadband spectrums.

Tata Teleservice has so far raised close to Rs 5,000 crore to pay for 3G airwaves, the breakup of which is as follows: LIC has subscribed to 10-year bonds floated by telco for Rs 1,000 crore. It has issued commercial paper for Rs 1,000 crore at 6% with a tenure of one year to various institutions. Tata Teleservices has also secured a five-year Rs 1,500 crore loan from a clutch of banks led by Central Bank of India.

It has further raised Rs 1,100 crore from public financial institutions such as IDBI and Kotak Yearly. Interest rates for all of these range from 7.33 % to 8.3% , its spokesperson said. In addition to this, the telco also has about Rs 6,000 crore reserves in its books from its stake sale to NTT DoCoMo last year and from internal accruals, the company spokesperson added. Tata Teleservices must pay just under Rs 6,000 crore for the 3G airwaves.

S Tel, which won 3G airwaves in all the three circles it currently operates must pay Rs 338 crore for these frequencies, and its CEO Shamik Das told ET that the operator had already secured a ‘Rs 350 crore loan from IDBI at an interest rate of less then 10%’. “This is a bridge loan that will later be converted to a long term loan,” Mr Das added.

State-owned telco BSNL, which has to pay Rs 10,187 crore for 3G airwaves, will fund the entire amount from its cash reserves of Rs 35,000 crore, while MTNL will pay a significant part of its 6,653 crore for these airwaves from its cash reserves which stands at about Rs 5,000 crore, executives at both PSUs said.