Govt nets Rs 110 crore from IPL 3

Source: the Hindu ,K.R. Srivats

New Delhi, March 29,2010

The third edition of the Indian Premier League is turning out to be a money spinner not only for the organisers but also for the taxman.

The Government has already mopped up over Rs 110 crore as tax deducted at source (TDS) in the first fortnight of the event , which began on March 12 and is to run for six weeks. 

The Revenue Department has, till date, collected TDS of Rs 50 crore on payments made by franchises.

The TDS on various incomes received by the Board for Cricket Control in India towards IPL-3 stood is at about Rs 61 crore, official sources said.

The TDS on certain expenses by BCCI resulted in TDS mop-up of Rs 5 crore. The TDS collections for IPL-1, which was held in India in 2008, were about Rs 90 crore. The Tax Department did not get much from the second edition of IPL as it was held in South Africa.

Currently, there are eight franchises and two more would join next year. These eight teams were auctioned in 2008 for $725 million, slightly higher than the auction amount of $703 million garnered from the latest entrants — Pune and Kochi — on March 21.

Last year, Multi Screen Media and World Sport Group bought the telecast rights for IPL for Rs 8,200 crore for nine years. The contract runs up to 2017-18. IPL gets only 20 per cent of the broadcast fees, while 72 per cent is distributed among franchises and the remaining 8 per cent is for prize money.

Stanchart to float 1st IDR for over Rs 2,200 cr; list in June

Source:Rakesh Pathak & Joyeeta Dey/PTI / New Delhi March 30, 2010, 11:31 IST

In what would be the first case of an MNC raising capital from India, UK's Stanchart today announced that it would float Indian Depository Receipts to mop up over $500 million (Rs 2,250 crore) and list the same on bourses by June.


Seeking to float 220 million IDRs, the UK-based banking major moved market regulator Sebi for approval of the scheme, guidelines for which were cleared way back in 2004. The bank had earlier said that the issue size could be between $500 million and $750 million.

"We have a strong presence in India. We are the oldest foreign bank in the country. We have good business and IDR is to give opportunity to Indian investors to participate in the global story," Stanchart PLC's CEO (India and South Asia) Neeraj Swaroop told PTI immediately after filing for IDR with Securities and Exchange Board of India.

Stanchart began its Indian operations in April 1858 in Calcutta (now Kolkata).

Asked about the pricing of the instrument, he said that at present Stanchart PLC was being traded at 17 pounds a share but "we have not decided on the conversion rate."

While the banking major is looking for mopping up at least $500 million, it has not fixed any upper limit, Swaroop said, adding that he would also want the employees to participate in the issue.

The proceeds would be repatriated to the global entity for normal business activities and there was no shortage of capital adequacy.

"We have not faced any shortage of capital in the past. We will not face (in the future). India can get capital if required," he said.

He, however, said that no decision had been taken for fixing a quota for employees and it would be decided when the issue nears completion and would depend on a host of issues like retail response.

Asserting that India, which contributes to 20 per cent of global profits, would continue to be the focus area, he said that this year the bank would enter a host of specialised corporate equity services to assist IPOs, brokerage and equity solution to the Indian industry.

He said that Stanchart had posted a significant $one billion profit in 2009 and added that the outlook was good. He, however,
refrained from giving any numbers for the future but pointed out that profits for the last five years had been growing
at an average of 41 per cent, while income was rising at an average of 30 per cent.

Citi group names Pramit Jhaveri as head of India Operation

Source:BS Reporter / Mumbai March 30, 2010, 0:55 IST

Citigroup today announced the appointment of Pramit Jhaveri as the head of its India business, replacing Mark Robinson — the second change effected by the foreign lender in 13 months.

The announcement came hours after the Melbourne-based Australia and New Zealand Banking group (ANZ) announced Robinson’s appointment as head of its south and south-east Asian businesses.

Jhaveri, who was previously head of Citi’s global banking in India and vice-chairman of Asia investment banking, will oversee all Citi’s businesses in India, including institutional clients group, consumer banking and wealth management.

Unlike Robinson, who was designated as chief executive officer (CEO) for South Asia, Jhaveri will be Citi Country Officer (CCO) for India. In South Asia, Citi operates in Bangladesh and Sri Lanka, apart from India.

In a statement, ANZ said Robinson would oversee 10 markets, including the priority markets of Indonesia, Vietnam, Malaysia and India, as well as the regional hub in Singapore.

ANZ has major plans for Asia, and last year, it picked up some assets of Royal Bank of Scotland. It started refocussing on Asia after Mike Smith, who earlier headed the Asian operations of HSBC, took over as the CEO of the Australian bank in 2007.

Jhaveri, a 23-year Citi veteran, would report to Asia-Pacific Chief Executive Shirish Apte, the bank said.

Under Jhaveri’s leadership, Citi played a key role in several high-profile deals, including advising and providing financing for Tata Motors’ purchase of JLR and Tata Steel’s acquisition of Corus. It also advised Reliance Petroleum on its merger with Reliance Industries last year, and played a role in consolidation of the Indian towers sector, including acting as financial advisor to Tata Teleservices for the merger of its tower subsidiary WTTIL with Quippo, and to GTL for its acquisition of Aircel Towers.

Before taking over as head of global banking, Jhaveri headed investment banking, corporate finance and capital markets for Citi in the Indian subcontinent. Globally, Citi has decided to offload a number of its non-core assets, choosing to focus on a much smaller portfolio. It may even exit certain countries where its presence is not substantial. For this purpose, it has divided its businesses into two groups — Citicorp and Citi Holdings. Citicorp houses all the units it plans to retain, while those it wants to wind down are clubbed under Citi Holdings.

Citi Holdings also includes the lender’s consumer finance arm, CitiFinancial, which ran up big losses during the economic downturn

LIC plans Rs 75,000-cr market booster for next year

SOURCE:BS:Shilpy Sinha / Mumbai March 30, 2010, 0:56 IST

Life Insurance Corporation of India (LIC), the country’s largest 
institutional investor, is planning to pump in at least Rs 75,000 crore
in equities during the next financial year.


This will be 25 per cent higher than the Rs 60,000 crore it invested in the stock markets this year.

Senior company executives said investment in the forthcoming initial public offers and the government’s Rs 40,000-crore disinvestment programme will be key elements of the equity strategy, as the insurer is looking to acquire a sizeable stake in companies of its interest.

During the current financial year, LIC had originally targeted to invest around Rs 50,000 crore in equities but with the markets recovering and investors returning to buy unit-linked insurance plans (Ulips), the target was breached. As a result, the public sector player ended up investing a higher than budgeted amount in equities.

What also helped matters this year was LIC scaling its projections on total premium income, which includes funds generated from the sale of new policies as well as from renewals. Against a target of around Rs 1,75,000 crore, the life insurer is likely to close the year with premium income of close to Rs 2,00,000 crore.

Against LIC’s investment in the equities segment, foreign institutional investors are expected to pump in around Rs 90,000 crore ($20 billion) during 2010-11. So far in the current financial year, against LIC’s Rs 60,000 crore, FIIs have invested Rs 1,09,000 crore.

In 2008-09, FIIs had sold around Rs 48,250 crore in the equities space, while LIC had invested Rs 40,300 crore. “If LIC is putting in Rs 75,000 crore and another Rs 40,000-50,000 crore is expected to come from other insurance companies and mutual funds, this will mean that the ratio of investment in capital markets will change,” said Rashesh Shah, chairman edelweiss group.

Earlier, FIIs invested 60-70 per cent of the institutional resources, while domestic institutions accounted for the rest. “With insurance companies led by LIC emerging as large investors in equity markets, perhaps for the first time the ratio will change, where over 60 per cent investment in the equity capital markets will come from domestic institutions. In the next two years, 75 per cent of the money will come from domestic institutional investors,” Shah added.

Over a period of two years, LIC’s investment in equities has increased by over 86 per cent.

“Our investment is a function of how our policyholders want us to invest and how we are expected to invest as per the guidelines. For us, the bottom line is safety,” a senior LIC executive said.

“It is a significant amount. LIC is known to be a long term player and more stable compared to FII or other domestic investors. It provides long term cushion to the market,” said Elara Capital Head-Institutional Equities & Global Research Harendra Kumar.

This year, apart from allocating Rs 60,000 crore to equity papers, around Rs 35,000 crore is in corporate debt instruments, while another Rs 65,000-Rs 70,000 crore has been invested in government securities. The remaining 35,000 crore have been invested in other instruments and in infrastructure sector. While the details of investment the infrastructure sector were unavailable, the company is expected to fall short of the 15 per cent exposure norm for want of quality papers, a senior LIC executive said.

During the next financial year, company executives said, LIC’s total premium income was expected to go up by around 15 per cent, which will result in a total mop up of around Rs 2,30,000 crore. Of this Rs 75,000 crore will flow into equities, while details of other investment are still being finalised.

LIC expects its premium collection from new business to go up by 25 per cent. Between April and February, first premium income was estimated at Rs 54,320 crore.

City Union Bank to raise Rs 1000 cr

Source:BS:TE Narasimhan / Chennai March 27, 2010, 0:13 IST

City Union Bank (CUB) is planning to raise around Rs 1,000 crore over the next three years to support its business target of Rs 50,000 crore by 2013-14.

“If the bank has to grow at the rate of 30 per cent, we have to increase our capital every three years. We would require Rs 1,000 crore incremental funds over the next three years to reach our business target,” said N Kamakodi, executive director, City Union Bank,

The bank would raise the money through rights issue, qualified institutional placement (QIP) or preferential allotments. In the last three years, it raised Rs 200 crore through rights issue and preferential allotments.

The Kumbakonam-based private bank had set a target of Rs 50,000 crore total business by 2013-14 of which deposits would include Rs 27,000 crore and advances Rs 23,000 crore. The bank is likely to close the current fiscal with a business of Rs 16,500-17,000 crore as compared with Rs 13,700 crore last year.

 To achieve the target, the bank would ramp up its branches. Currently, it has 222 branches and is planning to open another 62.

Of the new branches, 50 per cent will come up in Tamil Nadu, while 25 per cent in the other three southern states and the remaining across India. “Our focus will continue be South, especially Tamil Nadu, where for another 10 years we have space to grow,” said Kamakodi.

The bank recently opened branches in Madhya Pradesh, Rajasthan, Punjab and Uttar Pradesh.

This year, CUB is planning to open in Chhattisgarh and Orissa.

City Union Bank’s networth is around Rs 850 crore, which will be increased to Rs 1,000 crore by December 2010, said Kamakodi. The bank reported a net profit of Rs 122.13 crore for the year ended March 31, 2009, and is likely to close this fiscal with Rs 150-155 crore.

Kamakodi said gross non-performing asset (NPA) was around Rs 120 crore and net NPA around Rs 65 crore.

Govt approves 23 FDI proposals worth over Rs 2,300 cr

Source:PTI:STAFF WRITER29-03-2010 14:9 HRS IST

New Delhi: The government today approved 23 Foreign Direct Investment (FDI) proposals worth over Rs 2,325.21 crore, including that of broadband services provider Tikona Digital Network and auto components maker Bharat Forge.

"The Union Government has approved 23 FDI proposals amounting to approximately Rs 2,325.21 crore," an official statement said.

The highest FDI of Rs 1,142.21 crore is likely to come into Tikona Digital Network from convertible debenture and share sale, followed Kalyani group company Bharat Forge's proposal to raise Rs 576 crore by issuing warrants to overseas investors and medical device maker Opto Circuits' Rs 376.27- crore proposal.

Also, the government has deferred eight proposals, including Essar Capital Holding, Verizon Communications and Etisalat DB Telecom, besides rejecting six FDI proposals.

However, Star India Holding has withdrawn its Rs 324.59- crore proposal, the statement said.

Sahara's Subrata Roy mulls IPO for new IPL team

Source: Business standard sify news:Surajeet Das Gupta  | 2010-03-23 01:40:00

 

 

Sahara group promoter Subrata Roy said he will take his newly acquired Indian Premier League (IPL) team public by 2013, the second year of operations, and is open to having investors take a minority equity stake in the franchisee.

 

Ad sector to get big boost from IPL

"We can surely go in for an initial public offering in the second year of our operation. We expect to make money from the first year," Roy told Business Standard.
On Sunday, Sahara bid a record Rs 1,702 crore for the IPL’s Pune team, which will see action from the 2011 season, a 64 per cent premium over the price Mukesh Ambani paid for the Mumbai Indians in 2008.
Roy also said the group is already getting offers from London soccer clubs as well as some industrialists in India for a stake in his team. "We will look into their financial proposals but will only give a minority stake if we do," he added.

Companies scramble to score with IPL 2010

Sahara outbid Videocon Industries and Adani Exports for the Pune franchise. The Kochi franchisee was won by little-known Rendezvous Sports, which paid Rs 1,531 crore for the Kochi franchisee.
Justifying what seems a very high price Roy pointed out: "When the price was $100 million last time everyone said it was a very high price to pay for an IPL team. But valuations have gone up three to four times and IPL has been a success story. We expect valuations to move up at least two to three times. After all, there are only ten teams."

Roy said their bid was only 10 per cent higher than the second highest bidder. "In the last bid that was aborted on March 19, the price had touched $320-330 million. Once we made up our mind that we should win we knew it would touch $350 million. We wanted to ensure that we win," he added.
Brand IPL pips corporate biggies

Brand IPL pips corporate biggies

Sahara already has close links to cricket sponsorship. In December last year, it was given a six-month extension for its rights to sponsor the Indian cricket team after its four-year contract expired. The company had paid over Rs 400 crore for the deal.
Asked whether he had any particular players in mind for his team (considering many of them have been brand ambassadors and close friends), Roy said: "The players we choose will depend on the rules that are fixed by IPL."

IPO Special

On speculation that Sahara might bid for a stake in UK football team Manchester United, Roy said, "They have come and given a presentation, but we are not comfortable with the figures, though we are still talking."

New accounting system in 2011 for Corporates

Source: Sify News: IANS:March 27,2010,21:30:00

The Indian government is firm on its decision to make companies adopt International Financial Reporting Standards (IFRS) from 2011, Corporate Affairs Minister Salman Khurshid said here Saturday.  'We are on schedule on convergence with IFRS. Big corporates can migrate to the new standards while in the case of smaller companies it needs a calibrated approach,' he said at Innovision 2010, an event organised by the Confederation of Indian Industry (CII).  In January this year, the ministry had issued a roadmap for transition to IFRS. Citing the low percentage of household savings coming into the capital market, he said the government had started a massive investor education campaign so that more household savings could be channelised.  Instead of opting for contract farming, he urged the farmers to look at organising themselves into corporate structures for better practices.  Speaking at the function, Textiles Minister Dayanidhi Maran said economic growth has been driven by the private sector and a large number of textile units are betting on the Indian market.  He said the government is taking steps to bring natural gas to the southern states from the Krishna-Godavari basin in Andhra Pradesh.  CII President Venu Srinivasan said industrial and agricultural sectors should get assured and adequate power for the economy to grow.

Satyam scam: Did Raju launder cash before lid lifted?

 

Source:ET,28 Mar 2010, 1720 hrs IST,Sagar Kumar Mutha,TNN


HYDERABAD: In a sensational disclosure, a whistleblower has told CBI probing the multicrore Satyam scandal that the six bank accounts and fictitious firms that the company’s disgraced chairman and prime accused B Ramalinga Raju had floated in London had served their purpose and were liquidated long before the scam came to light in January 2009.

‘‘ The six companies and bank accounts which were operated from London were started in 1999 and closed down just before the listing of Satyam’s American Depository Rights on New York Stock Exchange in May 2001. These accounts and fictitious firms were clearly part of Raju’s modus operandi to divert Satyam scam money,’’ whistleblower said.

CBI sources said the whistleblower , in his late forties or early fifties, contacted the agency on his own and his statement is being currently recorded . ‘‘ Since these benami accounts no longer exist, this person will be able to provide us valuable leads as to the trail of the money that were in these accounts,’’ a CBI official said.

While CBI remained tightlipped about the identity of the whistleblower, STOI has been able to gather that he is a Hyderabadi-origin UK national settled in London and was once associated with the company’s UK operations. ‘‘ CBI got acquainted with this individual while it was pursuing its investigations into suspected moneylaundering activities of Ramalinga Raju abroad,’’ the official said and added some close family members and relatives of this mysterious individual still live in Hyderabad.



The CBI is still awaiting responses to the letters rogatory sent by Indian courts to six countries seeking their cooperation in unearthing the trail in the moneylaundering of Satyam scam money. The requests were sent to courts in US, UK, Belgium, Mauritius, Singapore and British Virgin Islands. CBI sources said it may take a few more weeks for responses to arrive from these countries as the courts there have to still complete the formality of recording statements of those connected to the foreign accounts there.

‘Legalities taking time’

Even as next hearing of Satyam scam was posted to March 31 by a special CBI court, Union minister of state for corporate affairs Salman Khurshid said: ‘‘ Sometimes , legal system takes its own time.. I can tell you that it is high priority for us that we do it as quickly as possible, so that the world knows that not only did we get back on our feet, but also made sure that people are accountable,’’ he said.

Banks don’t want SPVs to be part of group exposure limit

Source:Money life:Amritha Pillay March 29, 2010 03:55 PM 

 

A number of banks are reportedly on the verge of exceeding their group exposure limit in the infrastructure segment. Bankers don’t want SPVs to be part of their group exposure limits

India plans a huge expansion in the infrastructure segment, in the coming years. With most of these new infrastructure segments being developed as special purpose vehicles (SPVs), bankers have been raising a serious concern on exceeding their respective group exposure limits. It is being suggested that SPVs for infrastructure projects be excluded from the group exposure limit.

“The present single group exposure limit prescribed is 40% and the single company exposure limit is 20% of the banks’ infrastructure funds. However, there is a flexibility of extending it to around 45%-50% in certain cases. This single-company exposure and single-group exposure is exceeding (the group exposure limit) and thus is a concern,” said Ashish Chandak, executive director, infrastructure banking, corporate finance, Yes Bank.

“On the basis of sanctions, we would be exceeding the exposure limit. The disbursement side will start reflecting (the group exposure limit) in two to three years,” added another official from a public sector bank, who did not wish to be named.

“We don’t hear much on that side (on group exposure limit) at present. By the end of this calendar year we may see such a problem,” said Virendra Mhaiskar, managing director, IRB Infrastructure.

“Typically, the group exposure limit is an issue for the infrastructure segment because in all the other sectors the expansion happens within the same company or under the same company name, with no involvement of SPVs,” said a banker from one of the leading investment banks in India, who did not wish to be named.
To deal with this group exposure limit issue, banks and infrastructure companies have been asking not to consider the SPVs formed as subsidiaries to a group company, as a part of the overall group exposure.

“Banks and infrastructure companies are saying that SPVs are set up for the purpose of delineating the project from the group’s current balance sheet. It is a separate company that is being promoted, even if things were to go bad, no corporate guarantee has been given. If it is SPV-based financing that is happening, then why is the exposure being clubbed in the group limit?” asked Mr Chandak.

“The discussion that is going on is that these special purpose vehicles should be considered as separate SPVs and not as part of the group exposure,” said the public sector banker who preferred anonymity.

However, not including the SPV in the group exposure limit may not be justified. The group company normally shows a consolidated picture—to reflect a better top-line—to impress its investors.

Though exceeding of the group exposure limit remains a concern at present, bankers are optimistic that the issue will be sorted out in the coming days. “I believe so many people have been talking of so many reforms at the moment and there are so many ideas that they are willing to consider now. Thus this should not be a problem in the future, but at this point of time—because it is considered as a part of the group exposure limit—this could create some kind of an issue.

However, it will get sorted out,” added the investment banker.

Mr Chandak is also positive that availability of funds for the infrastructure sector will not be a problem, going forward. “People are coming out with ways (to sort out the issue). There are certain mechanisms with which things can be done. Like at Yes Bank, over a period of time, we have gone and raised capital and enhanced the balance sheet, so that we can increase the group exposure limit. Major banks which face the issue of exceeding the group exposure limit could sell a part of their total exposure to a certain group to smaller banks, who have not exceeded their limits.”

However, the government is also looking at ways and means to ease up funding for the infrastructure sector. The new NBFC (non-banking financial companies) norms will allow these entities to lend 25% to a single borrower in the infrastructure sector, up from the current cap of 20%. There could also be refinancing by the India Infrastructure Finance Company Ltd.

“I think the government will ensure certain steps in this direction (to ease up funds for the infrastructure sector),” Mr Mhaiskar said.

Japan financial assistance worth over Rs.10,500 crore to fund six infrastructure projects in India

Japanese Ambassador Hideaki Domichi (Left) exchanging documents with Joint Secretary, Department of Economic Affairs, Ministry of Finance, Alok Sheel, after signing of the Exchange of Notes for JICA ODDA loan in New Delhi on Monday. Photo: R.V.Moorthy

 Source: The Hindu: March 30,2010

Japan on Monday agreed to give financial assistance worth over Rs.10,500 crore to fund six infrastructure projects in India, which includes various phases of Metro rail projects

in Delhi, Chennai and Kolkata. 

 

With this, the official development assistance (ODA) from Japan will cross Rs.1.55-lakh crore, making India the highest recipient of ODA from Japan. Japan has agreed to give Rs.1,648 crore to construct 121-km. of new rail lines in the National Capital Region under the second phase of the Delhi Metro rail project.

 

Similarly, Japan will give over Rs.2,932 for Chennai Metro project with the objective to cope with the increase of traffic demand in Chennai metropolitan area by extending the mass rapid transportation system. Another Rs.1,146 crore will go towards Calcutta East-West Metro project phase II.

Japan will also give Rs.4,422 crore for the first phase of a dedicated freight corridor project of Indian Railways and over Rs 150 crore for Rengali irrigation project in Orissa.

It will give Rs. 263 crore for Sikkim Biodiversity Conservation and Forest Management Project that will strengthen biodiversity conservation activities, besides improving livelihood for the local people who are dependent on forests.

HC quashes three circulars issued by CJ Dinakaran

Source:PTI, Mar 28, 2010, 02.48am IST


BANGALORE: Karnataka HC has struck down three circulars issued by its Chief Justice P D Dinakaran against whom allegations of land-grabbing have been raised. The first circular that was quashed by a division bench, comprising Justice N Kumar and Justice Srinivasagowda yesterday, concerned the Chief Justice’s power to hear cases filed by employees of high court and judicial officers against his administrative decisions.

The second circular that was struck down related to the sitting Chief Justice’s jurisdiction in deciding which circuit bench should hear a particular case. The judgement paves the way for litigants in north Karnataka to approach the principal bench directly, which they could not do earlier. According to the first circular, cases by court employees and judicial officers challenging the Chief Jutice’s orders were posted to hall one, where the CJ sits.

Allowing a petition filed by M S Poojari, a peon in the high court, the court said the circular cleared the way for CJ to be a judge in a case where he is also the litigant.

Mercedes Benz is planning to launch a new small car in its A Class in India

source: PTI March 30,2010

Mercedes Benz is planning to launch a new small car in its A Class in the Indian market to compete in the compact car segment in the country, according to a senior company official.

Peter Trettin, president & CEO of Daimler, Central and Eastern Europe, Africa and Asia, said, “The competition is heating up in the small car segment and we plan to bring our small car, the A Class, to the Indian market within two years.”

The A call vehicle sold more than 680,000 units since 2004. The company is planning to expand its A and B Class from two to four models beginning in 2011.

Fresh talks on moving to GST by 2012

 

Source; forum :29 March 2010

The fear of losing autonomy over levy of taxes has led to some states striking a tough stance against the GST architecture suggested by the 13th Finance Commission (TFC)

An eye on compensation for revenue losses and tough posturing have marked positions taken by some states as they buckle down for another round of negotiations on the transition to a goods and services tax (GST).

 

Simultaneously, in recent budget presentations, some states have complicated the indirect tax regime by adding layers to tax slabs and also raised taxes, possibly with an eye on enhancing the extent ofcompensation they could claim on account of revenue losses when they make the transition to GST. 

Finance minister Pranab Mukherjee, in his Union Budget speech, hoped GST would be rolled out by the beginning of fiscal 2012. The states are yet to finalize a date on which they would meet next to discuss GST. “TFC’s report cannot be the basis of any decision,” the finance minister in a state government, who did not want to be named, said about the next round ofnegotiations. “We won’t even consider it,” he added. 

TFC had appointed a task force to suggest an architecture and tax rates for a “flawless” GST. The task force suggested a push towards uniformity in tax architecture, a single tax rate across the states and bringing in practically all items, including petroleum products and real estate, into the GST tax base. Thetask force also suggested a GST rate of 12%. 

GST is an indirect tax system, which aims to create a common market in India by harmonizing the tax structure across the states. Transition to GST is expected to translate into lower prices and fewer distortions in the business environment.

TFC, in its report, had pushed for the architecture suggested by its task force, and added an incentive of a Rs. 50,000 crore fund to transition to that model. The flip side of TFC’s recommendation was that the states would not be entitled to the incentive if they adopted another model.

The task force’s recommendations have been viewed by some states as a ploy by the Centre to rob them of their autonomy in taxation. The anger about thetask force’s report appeared to linger. “Presently, there are two festering issues,” said Satya Poddar, partner at Ernst and Young. “They are uniformity versus autonomy andcompensation to states.” 

According to Poddar, if the aim is to create a common market, the most important need would be to bring about uniformity in the architecture of the tax system. Even if there are two rates for merchandise, it is critical to have uniformity across the states on what is taxable and basic laws, he said.

“Posturing (today) is based on misinformation and inadequate analysis. It is possible to narrow down differences,” Poddar said.

There’s a thin line between posturing and a sense of grievance.

Punjab, for instance, in July filed a lawsuit in the Supreme Court against the Centre and some states such as Himachal Pradesh, which are beneficiaries of tax concession aimed at incentivizing industries to move there.

Punjab’s complaint was that the incentives have diverted investment which would have come into the state to some of its neighbours which were given concessions. The indications from GST meetings so far have been that special tax concessions would be phased out eventually. “In exasperation we filed this case. Punjab is in a boxing ring with both hands tied,” Manpreet Badal, Punjab’s finance minister, told Mint.

The lawsuit continues in the Supreme Court even as Punjab is under pressure from other states and the Centre, during the course of GSTnegotiations, to subsume purchase tax on foodgrains into GST. 

Compensation to states for revenue losses on account of the transition to GST is the other tricky issue which could dominate negotiations in the future as some key states such as Karnataka, Maharashtra and Delhi have raised tax rates or added to layers of taxation recently. “It is quite possible some of the rate increases are designed to give them a better base for highercompensation,” Poddar said. 

Karnataka’s finance minister V.S. Acharya had a different take. The initial push to raise base tax rates had come from the Centre, but it was not feasible for the states to raise tax rates when the Centre cut indirect rates as a part of the stimulus package, he said.

Recent developments have, at times, run counter to the overarching goal of GST to lower rates and make the tax system simpler.

“The picture will be clear only in April,” the finance minister of another state, who did not want to be named, said.

Price discovery of solar energy

Source:fc: Subrata K Mandal Mar 29 2010

With the onset of an early and hot summer and news repo­rts about likely low electricity generation in the months ahead from the hydro power cor­porations due to fall in water level in the dams, the thought of a hot afternoon with power cuts has started haunting the senses. The possibility of storing energy from the sun to power homes se­ems such an easy solution but has proved wishful thinking all these years. The discomfort of heat and power cuts, with the abundance of the sun for most part of the year may have led the country to set an ambitious target of 22,000 mw of solar power by 2022. It may be interesting to look at the economics of solar power in India.

Solar energy has great potential as a renewable resource in India. It has the capacity to meet the lighting and other energy needs of India’s 72 million poor households that have no access to electricity. Solar energy typically has four distinct categories of uses – it may be grid connected and generated from large photovoltaic (PV) and solar thermal power pl­ants, and smaller rooftop systems. Solar power may be distributed off grid too. Solar collectors for low temperature applications and solar lighting system for rural areas are the other two categories.

India has launched the National Solar Mission (NSM), which is one of the eight missions of the National Action Plan on Climate Change (NA­PCC). The NSM has set targets for each of the above category of uses. By 2022 the target of grid-connected electricity is 20,000 mw and off grid electricity is 2,000 mw. The target for solar collectors is 20 million square meters, which is revised downward from 30,000 million square meters, and the target for solar lighting system is 20 million. The existing capacity for grid connected solar energy is 6 mw and off grid is 2.4 mw; there are 3 million square me­tre of solar collectors and 1.3 million solar lighting systems. These initial installed capacities give an indication of the magnitude of challenge the NSM would face in the coming years to achieve targets.

The economics of solar power depends largely on the cost and finding the appropriate tariff. Due to the differences in various solar thermal and PV technologies in India, it is difficult to predict their cost and subsequently define an appropriate feed-in tariff. A low feed-in tariff might not be attractive for the industry to respond, and high feed-in tariff would attract too many but result in a very high dose of subsidy dole out. The correct price discovery is crucial for the growth of solar energy use.

There are usually two approaches for price discovery in solar energy plants. In one approach, all power may be bought at a fixed tariff and there is no bar on capacity. The second is quantity-based, wh­ere a quota ceiling is fixed and met through competitive bidding. The response of bidders to some pilot projects by the ministry of non-renewable energy and state governments has been encouraging. The MNRE set the tariff rates at Rs 13 and Rs 15 per kWh for solar thermal and PV, respectively. The state governments offered even lower tariffs. The project proposals received were far more than the capacity targets. This indicates that the tariff rates have been acceptable to the solar power developers. Experiences in ot­her countries suggest that selection process has to be transparent and objective. Without this, the NSM runs the risk of delays due to corruption.

The mechanism of feed-in tariff without a capacity ceiling has been successful in countries like Germany where they had a strict digression rate. The digression rate was determined by year-on-year tariff reduction based on capacity creation and project costs. In India, there is lack of reliable data on project costs. Therefore, it is difficult to operate this method. On the other hand, in bidding process the lowest possible tariff would be discovered, which would ensure lower cost to consumers and avoid controversies and delays in project execution. A precondition for technical capabilities and financial soundness, as followed in the US, would ensure that only serious bids are observed.

However, there is a problem with the price discovery pro­cess described above. It may be noted that there are several technologies that are in the initial stage of development and have the potential for indigenous manufacturing and long run price reduction. Such te­chnologies will be excluded in a purely price-based competitive bidding. Hence, a technology-based competitive bidding co­uld be adopted to encourage multiple solar thermal technologies.

The point of interest and optimism about solar power generation is that the cost has decreased appreciably in the past few years. Photovoltaic costs may fall significantly in the coming years due to international demand and technology improvements.

The cost of generation for solar thermal is even lower than PV. Solar thermal plants have several advantages; the option of thermal storage can generate electricity during pe­ak hours, thus providing an effective solution for base load and dispatchable power. Indian engineering and manufacturing firms can use their expertise in cost optimisation from their experience in steam-ba­sed and other conventional method of power generation. There is plenty of scope to reduce cost to make the option of solar power economically viable. A public process should be immediately set in to quickly develop a comprehensive plan for implementation of solar home lighting systems and off grid solutions - these would imply complete liberation from power cuts.

(The writer is a senior
economist at National
Institute of Public Finance and Policy, Delhi)

RBI again allows premature FCCB buyback till June 2010

Source:fc: Sneha Shah Mar 29 2010

Companies struggling with battered market price and resultant heavy debt on account of non-conversion
of foreign currency convertible bonds (FCCBs) have been provided another opportunity to extinguish the debt at a discount.

The Reserve Bank of India (RBI) on Monday ag­ain allowed premature buyback of FCCBs on a case-to-case basis till June 2010.

The FCCB buyback facility was introduced in 2008 when convertible bo­nd prices had plummeted due to the global credit crisis and was subsequently extended till December 2009.

“In view of representations made by the issuers of FCCBs, it has been decided to consider applications, under the approval route, for buyback of FCCBs until June 30, 2010,” RBI said in a notification issued on Monday evening.

The FCCB window op­ened by the RBI till December 2009 was left nearly unutilised by companies. Not more than $500 million of the total $10.9 billion outstanding bonds were bought back by companies.

A senior investment banker with a foreign bank, who did not want to be identified, said convertible bo­nds are trading well above par unlike last year and with strong growth and equity market performance, the reintroduced buyback facility is likely to remain un­utilised.

During the global credit crisis triggered by the collapse of global investment bank Lehman Brothers, convertible bonds issued by Indian companies were trading at up to 50 per cent discount. After the considerable recovery and stability in the market, bond prices have risen and, as a result, FCCB holders are unlikely to be willing to sell their investments at a discount, the banker said.

Buyback of FCCBs will make sense only if they were available at a substantial discount as otherwise it is best to wait till maturity.

RBI has retained the conditions attached for buyback of FCCBs during earlier round. Companies wanting to prematurely buy back their existing FCCBs are required to use either internal accruals, cash reserves or raise fresh funds overseas.

Companies such as Hotel Leela Venture, Tata Motors, Reliance Communications, Bhagyanagar India, 3i Infotech, Man Industries, Sical Logistics, Simbhaoli Sugars had repurchased their redeemable bonds in tranches last year.

Govt banks make a dash to start mutual fund business

Source:BS Reporter / Mumbai March 28, 2010, 0:29 IST

IDBI Bank and Union Bank are the latest entrants.

In less than 24 hours, two public sector players—IDBI Bank and Union Bank of India—announced their foray into over Rs 781,000-crore mutual fund (MF) industry, though both have taken different routes.

While IDBI Bank decided to go solo, Union Bank has partnered Belgian asset manager KBC. By doing so, Union Bank has followed peers such as State Bank of India, Bank of Baroda and Canara Bank that have tied up with foreign partners.

IDBI Bank announced the launch of its asset management business on Thursday, while Union Bank of India announced its entry on Friday.

Other than Union Bank of India, Bank of Baroda has a tie-up with Pioneer Investments, a global asset manager. Canara Bank has a joint venture with Robeco Groep NV of the Netherlands and, in SBI Mutual Fund, the partner is Société Générale Asset Management.

Most of the public sector banks forayed into the MF business in early 1990s, but could not compete with the private sector players once the sector was opened to them around the same time.

“You cannot expect a banker to run an asset management company. Different skill sets are required for it,” said Dhirendra Kumar, chief executive officer of Value Research.

Among the top 10 fund house in terms of asset under management, based on the Association of Mutual Funds in India’s February data, three are in the public sector, and among them, only SBI Mutual Fund is owned by a bank. Experts said initially the banks continued to focus on their lending business, but the rise of equity markets since 2003 led them to re-focus on the MF business.

“The launch of the asset management business is in line with the bank’s long-term vision to emerge as a leading universal bank. IDBI Bank’s established brand name and extensive branch network will enable our asset management company to grow at a fast pace and become a leading player in the business,” said Yogesh Agarwal, chairman and managing director, IDBI Bank, while launching the MF business in Mumbai yesterday.

Union Bank of India Chairman and Managing Director MV Nair said the current penetration level of asset management companies indicated the vast untapped potential. The fund house has a vision to be among the top 10 in five years. It is targeting an average asset under management of about Rs 12,000 crore in three years.

Kumar of Value Research said the huge distribution network of public sector banks through their branches was an advantage which would be difficult for a standalone asset management company to match.

Rs 16,500 cr to be infused into 13 banks in 2010-11

Source:BS Reporter / Mumbai March 27, 2010, 0:59 IST
The government has identified 13 public sector banks for capital infusion of Rs 16,500 crore during the next financial year. This is to ensure that public sector banks have Tier-I capital of 8 per cent.

Speaking to reporters after the meeting of the High Level Co-ordination Committee on Financial Markets (HLCC), Finance Secretary Ashok Chawla said: “The banks have been identified. My understanding is 13 banks and the amount is Rs 16,500 crore.”

As on December 31, at least four banks had Tier-I capital of less than 8 per cent. UCO Bank’s Tier-I capital was 6.5 per cent, IDBI Bank’s Tier-I capital was 6.6 per cent, Bank of Maharshtra ’s Tier-I capital was below 8 per cent and for Central Bank of India it was 7.14 per cent.

Tier-I capital of some of the other banks is expected to fall below 8 per cent by the end of March with the loan growth picking up in the fourth quarter. It was muted for the first nine months of 2009-10.

According to the Reserve Bank of India (RBI) norms, banks have to maintain a minimum capital adequacy ratio of 9 per cent, with Tier I capital of at least 6 per cent.

The country’s largest lender, State Bank of India (SBI), which is also aiming for a rights issue to raise Rs 10,000-20,000 crore, did not apply for capital infusion, said R Gopalan, secretary, department of financial services.

The committee reviewed the developments in the financial market and deliberated on several issues related to the development of the corporate debt market, the budget announcement on setting up of the Financial Stability and Development Council (FSDC) and the Financial Sector Legislative Reforms Commission and the report of the Committee on Investor Awareness and Protection.

While answering a question on having a super-regulator, Chawla said, “We are still discussing the broad contours of what the body (FSDC) will do and what will be the composition. It has not yet been finalised.”

The meeting was also attended by RBI Governor D Subbarao, Chief Economic Advisor, Ministry of Finance, Kaushik Basu, Securities and Exchange Board of India Chairman CB Bhave, Insurance Regulatory and Development Authority Chairman J Hari Narayan and Pension Fund Regulatory and Development Authority Chairman GC Chaturvedi.

Net beats newspapers as news source, US study finds

 
Source: DPA:Ankan Basu in Americas




San Francisco, March 29: More Americans get their news from the internet than from either newspapers or radio. But television is still the most popular news source, according to a study released Monday.

The survey by the Pew Internet and American Life Project found that 61 percent of Americans got at least some of their news online, compared to 54 percent who listened to radio news and 50 percent who read newspapers. Some 78 percent of respondents said they watched television news.

Most respondents mix and match for their news – with 92 percent saying they get their news from more than one source – combining social networking sites like Twitter and Facebook with radio, TV and newspapers, the report found.

Online users were younger than other news consumers. Some 37 percent said they have contributed to the ‘creation’ of news, commented on it online and shared or posted news on sites like Facebook and Twitter, according to the study.

Twenty-eight percent of online users customize their home pages to include news ‘from sources and on topics that particularly interest them’, the report found.

With 37 percent of cellphone owners using their mobile devices to get news, the report said that news was becoming ‘portable, personalized and participatory’.

Online users tended to ‘forage widely’ but regularly visited only a ‘handful of different sites,’ the report’s authors said. Portals and news aggregators such as Google News, Yahoo News and AOL were popular, as were the sites of traditional news organizations such as the BBC, New York Times and CNN, the report said.

Former BJP MLA, 10 others charged in bank fraud

 Source:Calcutta Tube,March 26,2010

Gandhinagar, March 26 : A former Gujarat BJP lawmaker Dilip Patel and 10 others have been charge-sheeted in connection with a fraud in Anand-based Karamsad Co-operative Bank Ltd, police sources said Friday. 

Apart from Patel, who is former chairman of the bank, bank secretary and former BJP MP Natubhai Manibhai Patel, five directors of the bank and four others have been named as accused in the case.

The chargesheet was filed by Gujarat’s crime investigation department (CID)’s economic offences cell in the court of Ahmedabad Metropolitan magistrate K.B. Mehta. It has charged the accused of misappropriating Rs.34.72 lakh by way of granting huge loans to their relatives in the name of some 15 companies.

According to the chargesheet, the loans were given to people without ascertaining possibility of return during 1996 and 2003. After these people allegedly siphoned off this huge amount, the bank witnessed financial failure.

The investigating agency arrested the accused persons recently, after the Gujarat High Court’s warning to the agency for not taking any action despite its directions.

The matter reached the high court when a businessman Hitesh Patel sought arrest of MLA Dilip Patel in 2007 after the police did not investigate the case in a proper manner.

When CID (Crime) department failed to move in the matter, he filed a PIL again in the high court seeking directions to the investigating agency. Justice M.R. Shah warned the police for the delay in the investigation and set a deadline to complete the process and submit a report.

Reliance Venture invests in logistics company

Source: ET Fri 26 Mar 2010 12:54 PM IST  

Reliance Venture Asset Management, an Anil Dhirubhai Ambani Group 
(ADAG) enterprise, said it has successfully completed the first  
round of venture funding in Reverse Logistics, a technology 
enabled end-to-end reverse supply-chain solutions company.

This is in line with Reliance Venture’s recent rebranding and widening focus on investing in disruptive and sustainable business models with a sector-agnostic philosophy, the company said in a press release issued here today. Kleiner Perkins Caufield & Byers and Sherpalo are co-investors in this round of funding in Reverse Logistics along with Reliance Venture Asset Management. The release did not, however, mention the amount of funding but it is understood that the total investment done by all the investors is between Rs 35-40-crore.

Founded in 2008, Reverse Logistics uses its proprietary technology to help its customers reduce supply-chain costs by over 25%, increase asset recovery by over 100%, improve productivity by over 10%, and get a 100% customer satisfaction while growing profitability exponentially, the release said.

Reliance Venture Asset Management’s CEO, Harshal J Shah, said, “the reverse logistics space is a fairly untapped but promising sector and will revolutionise efficiency levels of the fragmented Indian supply chain.”

“As an opportunistic investor, we see an immense potential in the industry...Reverse Logistics with its expert management backing will clearly contribute to the India growth story and compete with global compatriots and we are excited to partner them,” Shah said.

Reverse logistics refers to the backward supply-chain network where a product moves from the end-consumer to the manufacturer for re-use, disposal or surplus sale purposes with the rationale to increase overall efficiencies. In developed countries, the reverse supply-chain management is outsourced and focused to increase the overall shareholder value.

However, India is still near the bottom when it comes to supply-chain efficiencies. Estimates suggest that 3% of its GDP is lost to supply-chain inefficiencies and low compliance with the government’s e-waste regulations, the release said. Hence, with its growing importance, Indian companies are now looking to manage this network as a strategic and critical business area, the release said, adding that according to market studies, the Indian reverse logistics industry is pegged at $10-15 billion.

Intel Capital Invests $23 Million in 3 Indian Companies

 


Source: IT News Online Monday 29 Mar 2010 01:55 PM IST

Intel Capital, Intel Corp.'s global investment organization, 
announced that it is investing $23 million in three
Indian technology companies - 

July Systems, KLG Systel and MCX.

July Systems provides mobile Internet solutions that enable media brands to publish, distribute, monetize inventory and personalize services for consumers. KLG Systel provides smart grid and energy management and efficiency solutions to power utilities and end-users. MCX is a commodity futures electronic exchange in India that has permanent recognition from the Government of India for facilitating online trading, clearing and settlement operations for futures market across the country.

The individual investment amounts were not disclosed. Funding will come from the $250 million Intel Capital India Technology Fund established in December 2005. This fund invests in Indian technology companies to stimulate local technology innovation and the continued growth of India's information technology industry.

"Intel Capital's investment in July Systems, KLG Systel and MCX reinforces our commitment towards fostering Indian innovation," said Arvind Sodhani, president of Intel Capital and Intel executive vice president. "We believe that India is poised for the next phase of growth. Intel Capital's investment will help with global resources, knowledge and expertise to assist these companies with their growth and success."

July Systems developed the industry's first Mobile 3.0 publishing platform. The company plans to use Intel Capital's funds to grow its sales, business development and operations teams in North American and the Asia Pacific. In addition, it will deepen R&D investments in its Mi platform, including its cross-platform publishing across mobile Web and native applications, rich media advertising technologies, real-time interactive video and micro-payment management systems.

Rajesh Reddy, Founder and CEO, July Systems, said, "We are delighted to receive investment from Intel Capital. This represents the next phase of our growth and will allow July Systems to strengthen its position by investing in technology, operations and expanding our team. Intel Capital's strategic investment will help enhance the appeal of our offering."

KLG Systel developed Connectgaia.com and SG 61 technologies, which allow the monitoring and control of electrical devices remotely over the Internet. The company has also developed a software as a service solution, known as Vidushi, for CIS and utility billing and management. The company is developing a Smart Grid and energy efficiency device based around the Intel Atom processor, as well as creating a center of excellence to showcase technology and emerging models.Kumud Goel, Managing Director, KLG Systel, said, "Investment by Intel Capital shall enable us to access the latest technologies to upgrade our Connectgaia.com and SG 61 technologies on the Intel Atom chipset. We shall be able to provide innovative solutions to address the issues of global warming and CO2 emissions by reducing and optimizing usage of energy across the electricity supply chain."

MCX trades more than 40 commodities from various market segments including bullion (globally #1 Silver, #2 Gold), energy, metals, fiber, and agro-commodities. Intel Capital has purchased an equity investment stake in MCX via a secondary transaction with an existing MCX investor. Intel and MCX plan to work together to advance technology adoption in hinterland India, where MCX and its sister companies have deep existing reach through an existing network of 4,000 bulk warehouses and extensive broker network.

Sudheer Kuppam, managing director, Intel Capital Asia Pacific, said, "Investing in electronic financial exchanges, smart grid technology solutions and mobile Internet-enabling technology platforms demonstrates Intel Capital's strong commitment to India's on-going infrastructure build-out, as aligned with the national agenda. Investing in entrepreneurship within technology sectors vital to the growth of the country will continue to characterize Intel Capital's activities in India over the medium term."

RBI report finds Banks breaching Exposure Limits

Source:RBI,28th march,2010

With seven instances of banks exceeding the permissible exposure to large corporate groups, of 40% of their net worth, credit concentration has emerged as a key risk.

The Reserve Bank’s Financial Stability Report, released points to another 37 instances where the level of funding by banks was between 30% and 40% of the their respective net worth.

As per RBI prudential norms on credit risk, the exposure ceiling limits are 15% of capital funds in the case of a single borrower and 40% of capital funds in the case of a borrower group. The capital funds for the purpose will comprise Tier-I and Tier-II capital as defined under capital adequacy standards.

However, bankers observe that if the credit risk of the concerned corporates is good, it is not a serious concern yet. Said S Raman, executive director, Union Bank of India, “Risk concentration is always a risk but if the quality of corporate you lend money is good, it may not be an issue.”

Those banks that may have lent to their large corporate clients must have taken special permission, as a temporary measure. Going forward, RBI would want them to bring down their exposure,” said a top functionary of a large state-owned bank, who requested anonymity. HSU Kamath, executive director, Canara Bank, said, “I don’t find any case of concern in such exposures. It depends on which sectors the exposures have been made to. Normally, in such cases, banks don’t have exposures to sensitive sectors like capital goods, NBFCs and real estate.” “Though it is not known which banks have lent more than the permissible amounts to their top borrowers, it is likely to be smaller banks with lower net worth,” added Raman, who feels that at the end of the day, lending to large corporates depends on the bank’s individual perception.

The banking regulator, however, is of the opinion that loan syndication and loan sales would be useful in distributing the exposure more evenly.

According to a section of bankers, the regulator might be looking for increased participation of banks in syndicated loans, which helps mitigate risk concentration. Said Canara Bank’s Kamath, “It’s true that loans being sold down will help banks reduce exposure” Observes Rana Kapoor, managing director & CEO, Yes Bank: “The fact that so many banks are breaching the norms is an important indicator and it shows diversification of risk in the banking system is required.”

Government monitoring end use of funds raised through IPO to prevent fund diversion

Mar 29, 2010

Corporate affairs minister Salman Khurshid said his ministry is studying ways to prevent over-pricing of initial public offers and monitoring the end use of funds raised through IPOs to prevent fund diversion.Khurshid also said his ministry is examining the report of the expert group to suggest steps for monitoring the end use of IPO funds.

“The report of the expert group has been submitted. We will certainly read the report carefully. But we can only tell you the finding after we finish reading it,” Khurshid said.

Set up in August 2008, the expert group was to analyse the loopholes in the mechanism used to scrutinise how money raised through IPOs is utilised. The group comprised ministry officials and representatives from Sebi and BSE and NSE.

Mutual funds bet on metals, retail; shun telecom, cement

Source: fc:Kumar Shankar Roy Mar 28 2010 , Kolkata

MF investments rise in construction, power, hotels & mining
Mutual fund houses have systematically increased their 

exposure to consumer durables, retail, construction, chemicals,
ferrous metals, minerals and mining firms over the past six months, 

while they have shunned telecom, IT-hardware, cement, petroleum

products and auto ancillaries.

While the broader market hasn’t moved much during this period, specific stocks have clocked good gains. The trend in overall sectoral exposure of mutual funds may hold a clue on how different diversified equity, balanced or tax-saving funds may perform in the days ahead.

A comparison of equity assets under management of mutual funds at the end of September 2009 and February 2010 (the latest data) shows ferrous metals has broken into the top 10 most preferred sector club of mutual funds with total investment of Rs 6,415.42 crore, up nearly 40 per cent since September 2009.

With the rise in capacity expansion and industrial activity, companies in this industry have seen better fortunes. With the economy gaining strength, mutual funds’ equity holdings in consumer durables has risen nearly 50 per cent at Rs 1,107.37 crore. Retail, a direct beneficiary of higher consumer spend, has also benefitted with MF holdings touching Rs 1,064.72 crore in February 2010, up nearly 41 per cent from Rs 755.70 crore at the end of September 2009.

Other notable sectors that have seen significant jump in MF investments include transportation (assets up 45 per cent) and hotels (up 60 per cent) as industrial activity and travel (both leisure and business) segments too witnessed a sharp uptick. Minerals & mining, construction, power and chemicals have also see mutual fund holdings improve between 10 per cent to 20 per cent, data showed.

“While cash as a percentage of equity assets under management hasn’t really changed from 6-7 per cent levels, the trend in sectoral holdings of mutual funds indicates that fresh allocations may be tailing sectors that have performed well in the past 3 to 4 months,” said Srikanth Meenakshi, director of fundsindia.com.

On the other hand, fund houses have drastically reduced exposure in equity derivatives, telecom (services), IT-hardware, cement, petroleum products and auto ancillaries, Securities and Exchange Board of India (Sebi) data shows.

Most equity fund managers invest in equity derivative products. However, recent data shows that the trend has been on the wane over the past six months. While equity funds held around Rs 2,300 crore in derivatives at the end of September 2009, the figure was less than Rs 1,100 crore at the end of February, a drop of 55 per cent.

“The market has not been very volatile of late, and that has taken some sheen off derivatives,” said Rakesh Jha, director of MoneyTime Advisors.

As the telecom operators face stiff operating challenges in the face of rising competition and dwindling call tariffs, MF holdings in telecom companies have fallen by around 38 per cent from nearly Rs 6,200 crore to less than Rs 4,000 crore. IT-hardware firms have seen MF holdings drop by 60 per cent to Rs 400 crore. Fund houses’ holdings in cement and petroleum products companies has seen a 13 per cent drop since September 2009.

“In February 2010, large-cap funds reduced exposure to IT, telecom, FMCG, and cement. Mid-cap funds have also cut exposure in engineering, IT, telecom and auto,” said Yogesh Radke, an analyst with Edelweiss Securities.

GMR in talks with banks to refinance Rs 3,640 cr debt

Source:fc: Manju AB Mar 28 2010 , Mumbai

GMR Infrastructure is in talks with Indian banks to raise $800 million (Rs 3,640 crore) to refinance the $1.1 billion debt taken to buy Dutch power utility InterGen, the biggest overseas acquisition in the sector by an Indian company.

ICICI Bank, IDBI Bank, SBI and Uco Bank are expected to participate in the refinancing, bankers privy to the talks told Financial Chronicle.

"GMR Infrastructure wants to realign its debt and optimise the cost of funds to scale up its operations efficiently. We are discussing various financing options with the company,” bankers said.

Confirming the move, the company said in an email that it had availed a loan of about $800 million for two years at the time of buying InterGen and it is due for refinancing in October. "We are looking at various options with banks to refinance this loan. The remaining portion of the debt, $301 million, is a long-term loan for six years.”

“Usually during mergers and acquisitions, since the time available is short, companies opt for short-term financing to explore long-term finance options at a later date,” it added.

GMR bought 50 per cent stake in InterGen from AIG Highstar Capital II LP, a fund owned by American International group. The stake has given GMR access to InterGen's 12 operating power plants in the UK, the Netherlands, Mexico, Australia and the Philippines, with annual sales of $1.65 billion.

This acquisition is expected to provide GMR a platform to expand in InterGen's footprint in new regions. InterGen has a gross capacity of 12,766 mw, including 4,680 mw under development.

Earlier this month, GMR raised Rs 500 crore by issuing non-convertible debentures to ICICI Bank to finance its infrastructure projects.

It is also in talks with private equity companies such as Singapore-based Temasek Holdings for investments of more than Rs 1,000 crore to finance its expansion programme. However, the company refused to comment on private equity participation.

GMR Energy, a group company, has plans to invest up to Rs 18,000 crore in the next three years to generate about 3,300 mw from its present capacity of around 800 mw. To finance this expansion, the company is eyeing corporate debt and private equity funds in addition to bank loans.

Rs 800 cr Religare bid for Kerala based Catholic Syrian Bank

  Source:FC:Sanjay Vijay Kumar Mar 28 2010 , Chennai

Catholic Syrian to consider offer on29th March 2010

Religare Enterprises has made a Rs 800 crore offer to buy Catholic Syrian Bank (CSB), persons close to the development told Financial Chronicle. The CSB board will meet on Tuesday to discuss Religare’s offer, they added.

The move comes after a Bangkok-based Indian businessman, Sura Chansrichawla, offloaded 14 per cent of his 24 per cent stake on Friday to Religare and its associates.

Contacted by FC, the bank’s managing director, V P Iswardas, did not confirm or deny the development. He said there had been no official communication.

Shachindra Nath, group chief operating officer of Religare Enterprises, did not return a call seeking comments, while an e-mail sent to its spokespersons remained unanswered till the time of going to press.

Religare’s offer tops the aborted over Rs 400 crore offer made by Kerala-based Federal Bank, which already holds a 5 per cent stake in CSB. Federal Bank called off the deal on valuation concerns. Lar-sen & Toubro, which has plans to set up a bank, holds 5 per cent in CSB.

The acquisition will help fulfil Religare’s ambition to set up a bank. With the deal, Sura Chansrichawla has brought down his stake to 10 per cent from 24 per cent, as mandated by the Reserve Bank of India.

Any transfer of shares of over 1 per cent in CSB needs RBI’s approval.

Chansrichawla has transferred less than 1 per cent each to a number of people said to be acting in concert with Religare so that the transaction does not need RBI approval.

However, the deal needs to adhere to RBI rules on transfer of shares in private sector banks.

As per the existing RBI policy, any allotment or transfer of shares that takes the aggregate shareholding of an individual or a group to five per cent or more of the paid-up capital of the target bank requires RBI clearance.

It also restricts the shareholding of a single entity or group of related entities directly or indirectly to 10 per cent of the paid-up capital.

As per the 2004 guidelines, if the acquisition or investment takes the shareholding of the applicant to 10 per cent or more and up to 30 per cent, RBI will also take into account other factors such as source and stability of the money used for the acquisition and the ability to access financial markets as a source of continuing financial support for the bank.

Besides, RBI will also consider the business record and experience of the applicant, including any experience of acquisition of companies, the extent to which the corporate structure of the applicant will be in consonance with effective supervision and regulation of the bank.

The latest development in CSB comes in the wake of the budget which said RBI would give more banking licences to eligible finance companies.

Religare, owned by billionaire Malvinder Singh, offers insurance, broking, wealth advisory, asset management and investment banking services. He and his younger brother Shivinder are estimated to have a combined net worth of $3 billion. The Singh family sold its entire 35 per cent in Ranbaxy Laboratories, India’s biggest drugmaker, to Japan’s Daiichi Sankyo for about $2 billion in 2008

 

bankfinance555@gmail.com

Banks may have to dress up books to meet target

Source:26 Mar 2010, 0441 hrs IST, ET Bureau

MUMBAI: Banks may have to dress up their loan book to just about meet the credit growth targets set out by RBI. While they have lent Rs 35,500crore in the latest fortnight ended March 12, banks will have to find borrowers for close to Rs 95,000 crore by March 31 to clock in the 16% credit projection for FY10.

Loan disbursals of this scale are not unusual during the last fortnight of March. Banks usually inflate their books by parking large loans at low rates with blue chip companies that have active treasuries. Such loans are repaid a month later, and is reflected in subsequent credit numbers.

According to the latest RBI data, total loans extended by banks, including loans to businesses and individuals as well as food credit — rose Rs 35,527.38 crore in the latest fortnight ended March 12 to touch Rs 3,124,850.29 crore. Both food and non-food credit rose by Rs 1,510.7 crore and Rs 34,016.68 crore, respectively. The loan growth in the latest fortnight is almost the half the levels of the comparable fortnight in the previous year during which loans grew by around Rs 79,000 crore.

According to Deepak Mohanty, executive director of RBI, credit growth this year (up to January 2010) is much more broad based compared to last year. Though infrastructure has recorded the highest growth, loans to agriculture, small and medium enterprises and services has been higher than last year, he said.

At current levels, the annual year-on-year (YoY) growth works out to 18.1%, while loans have grown by around 12.6% since April. This means that banks have to lend about Rs 94,786 crore between March 13 and March 31 to meet the central bank’s revised growth projection of 16% for FY10.

According to D Sarkar, executive director of Allahabad Bank, “Corporates are demanding credit at very low interest rates which many banks are not very comfortable with. This results in slowdown in credit. In effect, banks do not want to compromise on risk and margin only to gain good volume of business.” A pointer to the risk averseness of banks is the high amounts parked by them in various mutual funds scheme. The latest data shows that they have parked over Rs 100,000 crore in essentially liquid funds that are perceived to be zero risk.

Bankers point out that though the industry may have to stretch itself to reach the target, most public sector banks are expected to reach the target with ease. Data until December suggests that public sector banks have been seeing a steady growth in loans, while private banks have witnessed a slowdown. Foreign banks, on the other hand, are seeing a contraction in their loan book. Recently, SBI chairman OP Bhatt had said his bank had not seen a significant pick-up in loans.

Total deposits mobilised by banks rose Rs 39,612.84 crore during the fortnight to touch Rs 4,402,943.09 crore as on March 12. While demand deposits dipped Rs 3,373.55 crore, term deposits rose Rs 42,986.39 crore, respectively.

   
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