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

 

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