SOURCE ;IIFL :Capital Market / 16:39 , Sep 09, 2010
The board of IDBI Bank in its meeting on 09 September 2010
has approved the merger of IDBI Gilts with IDBI Bank.
Thursday, September 16, 2010
SC dismisses plea against BoR merger with ICICI
14/09/2010
The Supreme Court on Monday dismissed a petition filed by shareholders of Bank of Rajasthan (BoR) challenging the Udaipur-based bank's merger with ICICI Bank, India's largest private sector lender.
A bench headed by Justice DK Jain refused relief to Ram Prasad Somani and Radhey Shyam Agarwal who had sought a direction to the Centre and RBI to forfeit the 55.1% shares held by the promoter group PK Tayal group in BoR.
RBI on August 12 had approved BoR's merger with ICICI Bank after the boards of both the banks on May 23 had approved the merger for a share exchange ratio of 25 shares of ICICI Bank for 118 shares of BoR.
The petitioners said that their rights were infringed by the merger and the extraordinary general meeting (EGM) that was never held. They also said that RBI had ignored the genuine shareholders and accepted the views of dominant shareholder group (Tayals) who have 55.1% shareholding in the bank.
The petition said that RBI was well aware of the mismangement in the bank and thus the merger was detrimental to the interest of the depositors and shareholders.
"Therefore, the order of August 12, 2010, is vitiated with extraneous reasons, malafide intention and the same is arbitrary and is liable to be quashed," the petition stated.
The two petitioners, who held total 4,620 shares, alleged that the dominant shareholder group, who took board resolution and also called EGM on June 21, was not competent to take any decision regarding merger as BoR has also been under RBI scanner for alleged violation of banking regulations, including those on corporate governance. Besides, market regulator SEBI had on March 8 prohibited the Tayal group (promoters of BoR) from trading in securities.
Somani said that since the acquistion of shares by PK Tayal and his group is under judicial scrutiny, then how can RBI grant approval to merger particularly when there is prohibition imposed by Sebi.
The Tayal family in 1999 had bought a significant stake in BoR. But the deal was challenged by Somani who had also sought Sebi intervention. He alleged that the Tayal group had committed breach of SEBI (Substantial acquisition of shares and take over of regulation) 1997 and the group should be asked to divested the holding in excess of the limit set out in the regulation and such excess shares be offered to the public for subscription also.
StanChart now India's No. 2 merger adviser
Source : Business Times :Thursday, September 16, 2010, 07.12 PM
MUMBAI: Standard Chartered plc (StanChart), ranked 14th among merger advisers in India last year, has climbed to number two by financing takeovers in the world's second fastest-growing major market for acquisitions.
The UK bank, the first foreign company to sell shares in India, has advised on US$22 billion (RM69 billion) of deals, second only to Morgan Stanley, in the nation's busiest year for takeovers since 2007, according to data compiled by Bloomberg.
Eight of the 10 largest acquisitions in India this year are cash transactions, compared with only one of the top 10 global deals, underscoring the need to provide financing to win clients. StanChart funded the nation's two biggest takeovers, by billionaires Anil Agarwal and Sunil Mittal, helping to cement India as the lender's most profitable market.
"In India, M&A is to a great extent dependant on balance sheet support," Abizer Diwanji, head of financial services at KPMG India, said in an interview. "You will see more and more banks putting their balance sheet to work."
Indian companies led by Mittal's Bharti Airtel Ltd have announced US$58.4 billion (RM182 billion) of transactions this year, on course to surpass 2007's record US$69.2 billion (RM216 billion), driven by cross-border takeovers that are also set for an all-time high.
The UK bank, the first foreign company to sell shares in India, has advised on US$22 billion (RM69 billion) of deals, second only to Morgan Stanley, in the nation's busiest year for takeovers since 2007, according to data compiled by Bloomberg.
Eight of the 10 largest acquisitions in India this year are cash transactions, compared with only one of the top 10 global deals, underscoring the need to provide financing to win clients. StanChart funded the nation's two biggest takeovers, by billionaires Anil Agarwal and Sunil Mittal, helping to cement India as the lender's most profitable market.
"In India, M&A is to a great extent dependant on balance sheet support," Abizer Diwanji, head of financial services at KPMG India, said in an interview. "You will see more and more banks putting their balance sheet to work."
The tripling in deal volume from last year makes India the fastest growing after Mexico among the Group of 20 nations, the data show.
StanChart overtook Goldman Sachs Group Inc and JPMorgan Chase & Co, the two largest global takeover advisers, in India this year. New York-based Goldman Sachs is ranked No. 10 in the Asian nation, while JPMorgan is 12th.
India's acquisition spree contrasts with a slowdown in global deals. Mergers worldwide are on course to decline for a third year, with US$1.35 trillion (RM4.2 trillion) of transactions, down 56 per cent from the first eight months of 2007.
StanChart overtook Goldman Sachs Group Inc and JPMorgan Chase & Co, the two largest global takeover advisers, in India this year. New York-based Goldman Sachs is ranked No. 10 in the Asian nation, while JPMorgan is 12th.
India's acquisition spree contrasts with a slowdown in global deals. Mergers worldwide are on course to decline for a third year, with US$1.35 trillion (RM4.2 trillion) of transactions, down 56 per cent from the first eight months of 2007.
In the US, the world's largest market, volumes dropped 63 per cent to US$577 billion (RM1.8 trillion), while Europe saw a 68 per cent decline to US$489 billion (RM1.52 trillion). - Bloomber
TCS buys Indian arm of SuperValu
BANGALORE: The country's lead tech player Tata Consultancy Services has acquired SuperValu Services India, the captive unit of Minneapolis-based grocery retailer SuperValu Inc. As per a multi-year deal, valued over $100 million, over 600 associates of SuperValu working in Bangalore will now become part of TCS. The integration procedure is expected to be completed within a month.
The engagement is transformational in nature and will drive operational efficiencies for SuperValu through integration of IT, BPO and infrastructure services, said an official communique. The captive unit was set up in 2007 and focuses on IT infrastructure, applications and business and corporate services for its parent company.
The supermarket chain SuperValu is one of the largest players in the US grocery channel with estimated annual sales of $38 billion. It serves customers through a network of 4,270 stores.
Soon, Airtel users can shop up to Rs 5000 via mobiles
NEW DELHI: Bharti Airtel customers will soon be able to make virtual payments at retail outlets and restaurants using their cell phones.
The country's largest telco by both revenues and customers has got the nod from the Reserve Bank of India (RBI) to collect a maximum of `5,000 from customers, which can be converted to virtual money stored on mobile phones, and can be used at outlets that have a tie-up with Airtel.
All leading mobile phone companies are also slated to get the 'semi-closed wallet' licence over the next couple of months.
India has over 650 million mobile users and all telecom companies are looking at offering a range of financial services, including the electronic version of the leather wallet, which can be used to make secure payments across a wide spectrum of goods and services covering all sectors, Such concepts are already operational in Japan, South Korea, parts of China and certain markets in Europe.
Earlier this year, RBI in its annual monetary policy said that it was looking to use mobile phones as a medium for taking banking facilities to the remote and far-flung areas while also adding that banks and cellular operators must cooperate, rather than compete with each other for this initiative.
"Semi-closed wallet are prepaid payment instruments that are redeemable at a group of clearly-identified merchant locations/ establishments which contract specifically with the issuer to accept the payment instrument. These instruments do not permit cash withdrawal or redemption by the holder," Bharti Airtel said in a statement. In fact, Bhutan Telecom has already introduced M-money or mobile money payment, which is a one-stop
shop for making payments of all utility bills including telephone, electricity and water bills. Bharti Airtel did not give any timeframe for the launch of services on this platform.
"Currently we are evaluating various options that this licence provides to find out how best we can create a value proposition for Airtel customers. It is imperative to design a safe & convenient deployment before we can take to the market," its statement added.
As per RBI guidelines, the pre-paid value that is being loaded will be distinct from talktime. In other words, the telecom operator will not be able to create money. For the consumer, this implies, they will not be able to exchange this money for talktime. Bharti Airtel will also be mandated to deposit the money raised in a zero balance escrow account with a bank.
Analysts say that RBI's move to approve 'Semi closed wallet' will be the first step towards democratisation of mobile commerce in the country. It is estimated that only 1% (8 million) of the country's 650 million cell phone users avail mobile commerce services. This is expected to go up to 50 million by 2012.
Tata shareholders gain Rs3L crore
MUMBAI: The four leading business houses in India — the Tatas, RIL, Reliance ADA and AV Birla — have together made its shareholders richer by nearly Rs 5.3 lakh crore since March 2009, when the BSE sensex had dipped at its recent bottom near the 8,100-mark. While the total market capitalisation of BSE has risen by about Rs 45 lakh crore to over Rs 70 lakh crore now, these four business groups have contributed about 12% to the overall rise.
Seen individually, the house of Tatas with its 27 group companies have added nearly Rs 3 lakh crore, the two companies in the Mukesh Ambani-led RIL group have added a little over Rs 1.1 lakh crore in a little over 18 months. During the same period Kumar Birla-led AV Birla group have made its investors richer by about Rs 76,000 crore while Anil Ambani-led ADA group has added about Rs 51,000 crore to their shareholders' value.
Among the companies from these four groups, as one dealer with a domestic broking house pointed out, the ones that had gone for large-size buyouts during the previous years, have done exceptionally well after crisis.
For example, Tata Steel has seen its market cap rise nearly five times since March 2009. Tata Motors, that bought marquee auto brands Jaguar-Land Rover for $2.3 billion in 2008, have seen its market cap rise about eight-and-half times to over Rs 60,000 crore now. And AV Birla group's Hindalco, that bought global aluminium giant Novelis in February 2007 for $6 billion, has seen its market value rise by over five times to nearly Rs 36,000 crore now.
On Tuesday, the BSE sensex added another 139 points to close at Rs 19,347, its sixth consecutive session of gains. Although most of the domestic fund managers and brokers are keeping their fingers crossed and advising investors to be cautious, foreign fund managers are on a 'buy India' spree, meaning picking up any good stock that is available on Dalal Street.
Interestingly, market players said that one of the largest FIIs in India was short on Indian stocks recently and is currently on covering those positions at higher levels, and in turn, driving the market even higher.
Windfall gain: EPF interest rate hiked to 9.5% for '10-11
Source : TNN, Sep 16, 2010, 12.17am IST
NEW DELHI: Diwali came early for salaried employees on Wednesday as the Employees' Provident Fund Organisation (EPFO) on Wednesday raised the interest rate on retirement benefits by a full percentage point to 9.5% for 2010-11 from 8.5% for the previous year. This move will benefit 4.70 crore organised sector workers. Corporates which run their own PF trusts will also have to match the new rates.
In fact, while the official interest rate is 9.5%, the actual rate of return works out to 13.8% (assuming investment of Rs 70,000 for the year in the instrument). That's because tax is saved both on the principal invested as well as the interest, translating into a very healthy return post tax, which is almost double that provided by fixed deposits (see graphic).
Wednesday's increase took the EPF interest rate to a five-year high and was made possible due to the surprise discovery of nearly Rs 1,700 crore in the suspense account -- meant for unclaimed PF money. The windfall was discovered after the central board of trustees last year ordered a review of all EPF accounts since 1952.
The decision of the board of trustees, headed by labour minister Mallikarjun Kharge, to hike the interest rate will be forwarded to the finance ministry for its notification. The 9.5% interest rate will result in an additional outgo of Rs 1,600 crore, which will be used from the surplus of Rs 1,731 crore in the interest suspense account of EPFO.
Kharge told reporters that the EPFO trustees had decided not to invest in the stock markets and would continue to follow the existing investment pattern. "We had received a letter from the finance ministry asking for parking of a portion of EPFO funds in the stock market. We have received huge opposition from CBT members who oppose the idea of investing in stock markets," Kharge said.
The EPFO maintains a huge corpus of over Rs 300,000 crore, whereas all recognised PFs managed by it have accumulated funds to the tune of Rs 200,000 crore.
Deepankar Mukherjee, CITU national secretary who was part of the board decision, said this was a short-term measure but the government must ensure that workers get a higher interest given the fact that there is high inflation and funds are parked in government securities.
"The interest rate was as high as 12% not very long ago. It was brought down as the government felt inflation had come down substantially. Now that inflation is in double digits, it must announce an additional interest subsidy as stimulus," Mukherjee said.
Between 1989-90 and 2000, the rate of interest on PF was 12%. It was reduced to 11% in July 2000 and thereafter the slide began. The reason for fall in interest rates was overall fall in interest rates in banks and lower inflation.
Minister of state for labour Harish Rawat clarified that the raise of an additional 1% is just for this year. Next year, the earnings of EPFO will determine the rates. "We found a surplus of Rs 1,731 crore in the suspense account and we put that before the CBT to decide," the minister said.
In another important decision, the board of trustees decided to stop paying interest on "inoperative accounts", thus reducing the interest burden on account of those who use this fund as an investment destination. "The accounts which are not operated for 36 months will stop getting interest," he said.
D L Sachdev, AITUC national secretary, welcomed the decision, but said this was only a one-time security. "What the workers need is a long-term measure to be worked out and that is only possible with the government intervention," he added.
The EPFO decision will also increase the bill of many corporates which run their own PF trusts as they will have to match the new rates announced on Wednesday.
NEW DELHI: Diwali came early for salaried employees on Wednesday as the Employees' Provident Fund Organisation (EPFO) on Wednesday raised the interest rate on retirement benefits by a full percentage point to 9.5% for 2010-11 from 8.5% for the previous year. This move will benefit 4.70 crore organised sector workers. Corporates which run their own PF trusts will also have to match the new rates.
In fact, while the official interest rate is 9.5%, the actual rate of return works out to 13.8% (assuming investment of Rs 70,000 for the year in the instrument). That's because tax is saved both on the principal invested as well as the interest, translating into a very healthy return post tax, which is almost double that provided by fixed deposits (see graphic).
Wednesday's increase took the EPF interest rate to a five-year high and was made possible due to the surprise discovery of nearly Rs 1,700 crore in the suspense account -- meant for unclaimed PF money. The windfall was discovered after the central board of trustees last year ordered a review of all EPF accounts since 1952.
The decision of the board of trustees, headed by labour minister Mallikarjun Kharge, to hike the interest rate will be forwarded to the finance ministry for its notification. The 9.5% interest rate will result in an additional outgo of Rs 1,600 crore, which will be used from the surplus of Rs 1,731 crore in the interest suspense account of EPFO.
Kharge told reporters that the EPFO trustees had decided not to invest in the stock markets and would continue to follow the existing investment pattern. "We had received a letter from the finance ministry asking for parking of a portion of EPFO funds in the stock market. We have received huge opposition from CBT members who oppose the idea of investing in stock markets," Kharge said.
The EPFO maintains a huge corpus of over Rs 300,000 crore, whereas all recognised PFs managed by it have accumulated funds to the tune of Rs 200,000 crore.
Deepankar Mukherjee, CITU national secretary who was part of the board decision, said this was a short-term measure but the government must ensure that workers get a higher interest given the fact that there is high inflation and funds are parked in government securities.
"The interest rate was as high as 12% not very long ago. It was brought down as the government felt inflation had come down substantially. Now that inflation is in double digits, it must announce an additional interest subsidy as stimulus," Mukherjee said.
Between 1989-90 and 2000, the rate of interest on PF was 12%. It was reduced to 11% in July 2000 and thereafter the slide began. The reason for fall in interest rates was overall fall in interest rates in banks and lower inflation.
Minister of state for labour Harish Rawat clarified that the raise of an additional 1% is just for this year. Next year, the earnings of EPFO will determine the rates. "We found a surplus of Rs 1,731 crore in the suspense account and we put that before the CBT to decide," the minister said.
In another important decision, the board of trustees decided to stop paying interest on "inoperative accounts", thus reducing the interest burden on account of those who use this fund as an investment destination. "The accounts which are not operated for 36 months will stop getting interest," he said.
D L Sachdev, AITUC national secretary, welcomed the decision, but said this was only a one-time security. "What the workers need is a long-term measure to be worked out and that is only possible with the government intervention," he added.
The EPFO decision will also increase the bill of many corporates which run their own PF trusts as they will have to match the new rates announced on Wednesday.
I-T dept, banks fight, Rs 2200cr recovered from Mehta scam gets stuck
NEW DELHI: The money recovered from Harshad Mehta-led 1992 banking securities scam is lying idle. The distribution of 2,200 crore recovered from Mehta group by the custodian appointed under a Special Act by government is not taking place due to differences between two major claimants — the I-T department and banks and financial institutions (FIs) — which have lost money in the scam.
It is learnt that the custodian has attached enough assets from Mehta group, more than enough to meet the liabilities of banks, FIs and I-T departments. But, all the money is not going to come at one point of time. As the attached assets are cleared by a Special Court, created under the act, for sale in the market, custodian sells them to generate cash.
At present, the custodian is sitting on a cash of over Rs 2,200 crore. Another Rs 800 crore is expected to be generated by sale of some more assets, However, attachment of them has been challenged in the Supreme Court and a judgment on this is likely to come soon. Besides this, assets worth around Rs 1,000 crore is in the process of getting clearance for sale to meet liabilities. So, a total of around Rs 4,000 crore is likely to be recovered.
As against this, I-T department is demanding Rs 2,100 crore and banks Rs 1,700 crore. The department is claiming that it should be paid their dues of Rs 2,100 crore from the present kitty of Rs 2,200 crore and banks can be paid later.
Earlier, I-T department had raised a demand of Rs 22,000 crore against loss from the scam and banks claimed Rs 5,500 crore loss. However, an earlier judgment of the Supreme court restricts priority claims to principal amount only, disallowing any penalties or interests on them. This restricted the I-T department's demand to Rs 2,100 crore and that of banks to Rs 1,700 crore.
Banks argued that the main objective of the Special Court is to recover the losses suffered by them. However, in the details of the act, banks' claims come after the Income Tax department.
When contacted, custodian Satish Lopmba, who is the statutory authority under the act for acquisition, management and liquidation of assets, said that there were sufficient assets to satisfy the primary claims of all the agencies to a large extent. He said that a consensus was being attempted within the government to facilitate release of funds recovered from Harshad Mehta Group. He however, clarified that these things would finally be a matter of judicial determination.
Interestingly, banks and financial institutions are ready for a pro-rata distribution, though it is not yet clear whether the law permits that. If Rs 2,200 crore is distributed through pro-rata basis, I-T department will get around Rs 1,216 crore, while banks and financial institutions will get Rs 984 crore.
Among the banks, the State Bank of India will get the largest amount, followed by Standard Chartered Bank.
The custodian had already recovered Rs 3,000 crore, which was distributed among various claimants. Out of this, Rs 1,800 crore was given to I-T department and the rest amount of around Rs 1,200 crore to banks and financial institutions. However, at present, several parties are yet to reach any consensus over how the remaining recovered money will be distributed.
RBI rate hike: Loans to get costlier from next month
NEW DELHI: Home, auto and corporate loans are likely to become expensive from October, with bankers today saying that interest rates may be hiked next month in response to the Reserve Bank raising policy rates to tame inflation.
"In early October, interest rates could be revised and chances are there it could be revised upwards," state-run Bank of Baroda's Executive Director R K Bakshi said after RBI today raised its short-term lending and borrowing rates by 25 basis points and 50 basis points, respectively.
The RBI move is aimed at checking inflation, which was 8.5 per cent in August, much above the central bank's tolerance limit.
The government expects inflation to cool to six per cent by December.
Bankers said they will hold on to the rates till September 30, which is the half yearly closing of the banks.
High interest rates could temper demand for loans and thus curtail consumption.
"Rate of interest may have to go up. bank have to take a view at the end of the quarter. Till September 30 I do not expect any change. Pressure is there to increase rates in the near term," Bank of Maharashtra CMD Allen Pereira said.
Short-term funds would get little costlier and there is possibility that the short-term (deposit) rates could also go up in the future, bankers said.
"Till September 30 everyone will hold on to the interest rate and following that there might be some passing on effect to customer," Punjab and Sind Bank executive Director P K Anand said.
Central Bank of India CMD S Sridhar said, "Bankers will adopt a calibrated approach. The examination of interest rates is on cards as cost of funds for banks is increasing."
However, a few bankers ruled out increase from October 1 as they will wait for further policy action of RBI.
"EMIs are not going to go up from October 1. The quarter percentage increase in policy rates were expected. Further rate hikes by bank will depend on the next policy review," HDFC Chief Executive Keki Mistry said.
He said a further increase in rate in the second quarter review in November could lead to higher rates.
The short-term lending rate (repo) goes up to 6 per cent while short-term borrowing rate (reverse repo) rise to 5 per cent with immediate effect.
The 100 basis points gap between repo and reverse repo marks the return to the pre global financial meltdown level.
"The RBI has narrowed the corridor between the repo and reverse repo rate to one per cent. I think this is in response to containing inflation and also because the apex bank does not want too much volatility in short-term rates," Citibank's CFO Abhijit Sen said
.
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