US sees 141 bank failures in just 11 months

Source:NEW YORK:

PTI, Nov 7, 2010, 12.42pm IST

 In signs of continuing financial woes, a staggering 141 American banks have gone belly up so far this year, surpassing the total count of bank failures in 2009. 

The world's largest economy saw the collapse of 140 banks last year, at a time when the country exited one of the worst recessions. 

Four banks -- Western Commercial Bank, Pierce Commercial Bank, First Vietnamese American Bank and K Bank -- were shut down by the authorities on November 5. 

According to the Federal Deposit Insurance Corporation ( FDIC), which insures deposits at over 8,000 American banks, the latest failures would cost more than $254 million. 

In October alone, 12 banks went out of business. Seven banks were closed down in September, while August saw the failure of ten entities. The maximum number of failures this year happened in April, when 23 entities went belly up. 

Official data showed that the count of 'problem' banks -- those at risk of failure -- climbed to a 17-year-high of 829 in the June quarter. 

Small and medium banks are facing the brunt due to rising defaults, triggered by high number of unemployed people. 

Notwithstanding massive stimulus measures, the jobless rate continues to hover near ten per cent. 

Last week, the US Federal Reserve announced that it would purchase government securities worth $600 billion in coming months, a move aimed at bolstering the national economy, which expanded at just two per cent in the September quarter.

Indra Nooyi keeps mystery alive on Tata top job offer

Source :NEW DELHI:Ratna Bhushan & Chaitali Chakravarty, ET Bureau, Nov 9, 2010, 01.51pm IST


 Indra Nooyi coyly suggested that she has not been made a job offer as Ratan Tata's successor while simultaneously seeking to preserve an aura of mystery around talk linking her to the top job at one of India's most respected conglomerates.

"If Ratan had asked me, it would have been difficult to trade a great job for another great job," the chairman and chief executive of PepsiCo told ET in an interview on Monday, implying that no offer had been made and prompting the question: "You mean to say Ratan Tata never offered you a job?"

Pressed thus, she responded that she "will never ever answer that question either in the positive or in the negative", and in the process raised more questions than answers.

Long speculated as one of the top names in an imagined list of candidates qualified to lead the country's oldest and most global conglomerate because of her Indian roots and international profile, Ms Nooyi, 55, nevertheless lavished praise on the salt-to-software Tata group.

"All that I can tell you is that the Tata group is a phenomenal company. It is a nation-building company. I don't think there is any country in the world that has a corporation like the Tatas in every work that they do. I have great respect for the Tata group," said Ms Nooyi, who was born and raised in Chennai.

The IIM-Kolkata and Yale alumna also said her work at PepsiCo, which she has headed for nearly four years, remains undone. "I love my job. I love being the CEO of PepsiCo... My job as CEO, PepsiCo, is not done."

The Tata Group is not the only one she has been linked with. Earlier this year, there was speculation that she could join President Barack Obama's administration as one of his key advisors, talk that stemmed from her reported friendship with the US president.

Asked if that was true, Ms Nooyi said: "My personal friend? He is my president. We don't discuss these subjects. But let me tell you that for most CEOs in the US, the chapter II of our lives is serving the country. I am yet to begin my chapter II, but it will not be in the political arena. It will be giving back to the country in some shape or form."

But she does not support America's anti-outsourcing moves to fight unemployment, which is close to 10% in the US. "I am all for globalisation, and globalisation cannot be reversed," she said.

Part of an entourage of CEOs of top US corporations that is visiting India along with President Obama, the PepsiCo boss took time out to answer a number of questions put to her by ET. Edited excerpts:

When do you expect to narrow the gap in market shares between Coca-Cola and PepsiCo globally and in India? 

Coca-Cola is ahead of PepsiCo in market share. The game we are playing is not to narrow market share with them (Coke). We are a diversified foods and snacks company; we are a completely different company. We are playing a selective game in beverages and increasing our leadership in foods. We have a natural edge and we are proud of it. If we look only at narrowing market shares with Coca-Cola, it will be foolish. The cola war is strictly a figment of imagination. Maybe it was there in the 1980s when the category was growing 8-10%. But it's completely irrelevant now.

Isn't India facing a burden of expectations as it is growing faster than some of your other markets like the US? 

I won't call it a burden of expectations. I will call it a glorious opportunity. We want to be growing away from the home base. The business in India is buoyant, which has turned attention to this country in a nice way. It is a terrific time for India. They can now ask and get resources, people, money and technology much easier.

When do you expect PepsiCo sales to revive in the US? 

It's not just about PepsiCo sales. It is about overall sales. But we are among the fastest-growing consumer packaged goods companies even in North America. If you look at core earnings, excluding impact of acquisitions, we are No. 1 in revenue growth. In the beverage business, the category is sluggish. So we make sure, we manage our pricing. We don't try to revive the category by artificial pricing. Overall, the PepsiCo business in North America is very strong because when the consumer is pinched, he doesn't give up on food and beverage. Maybe he will give up on a shirt.

You said last month that PepsiCo is making strategic investments to transform the company in specific ways. What are these investments? 

We have a great balance between day parts in our portfolio, there's Diet Pepsi, Pepsi Max, baked Lays. Step one of portfolio transformation, which we started many years ago, is that we have been sneaking goodness into our products. Step two is about positive nutrition. By that I mean giving you products which are accessible, affordable, authentic, whatever defines good nutrition. We are doing a plus-up in our nutrition business.

For a company that says it is committed to portfolio transformation to healthy foods, your biggest spends (in India) still go to fizzy drinks and chips. Isn't that contradictory? 

First, we are in a country where per-capita consumption of beverages is really very low. Second, the choices exist, but consumers have to adapt to them. It's just the way we eat here. I've been here two days and put on 10 pounds. I couldn't stop eating the Diwali ladoos and badam barfis. So diet habits here are a bigger societal issue, how do we get people to get more active? When I was growing up, there were places to walk. Today playgrounds are being converted into buildings. The playground in my school has been shut down and it breaks my heart. We are addressing these issues in our way. But as a society, we have to worry about the nutrition of people and the lifestyles they follow.

PepsiCo acquired bottlers for $7.8 billion in the US earlier this year. Are you planning similar buyouts in India? 

No. In India, the market is still growing; we are not publicly listed here; and we have good bottlers here. We will see decades of growth in India; it will be years and years before we do a buyout of the bottlers in India.

What will the newly set-up 'value foods' division do? And when will 'Project Asha', which PepsiCo earlier said is looking at low-cost foods, take shape? 

In India, we have over-nourished and under-nourished people. There's a big opportunity to tap both sections of consumers. On the one hand, we will look to plus up Quaker and Tropicana. On the other, Project Asha is looking at the bottom of the pyramid. It will look at balanced, low-cost nutrition, which should not taste bad. The project need not yield results in a year. We are looking at both beverages and snacks, priced at Rs 2 and below. We are also undertaking clinical trials for micronutrients in the products. Value foods will look at functional, nutritional foods.

You've been heading PepsiCo since 2006. Any disappointments? 

I would not call it a disappointment, but because of the economic slowdown, we had to moderate our strategy. We could not invest as much as we wanted to
.

HC asks Sebi to decide on Tayal stake in 2 months

Source :Livemint:Mon, Nov 8 2010. 1:00 AM IST

The Rajasthan high court has directed capital market regulator Securities and Exchange Board of India, or Sebi, to take a call on the fate of erstwhile Bank of Rajasthan (BoR) promoter Pravin Kumar Tayal’s holding of ICICI Bank Ltd shares worth at least Rs.1,000 crore within two months.

Maintaining that it is “not inclined to interfere” in the Sebi order that had barred at least 100 entities, including Tayal group firms, in March from accessing the stock market, the high court has asked Sebi to take a “proper view” on the matter.

Tayal had sought legal relief to unlock his holding in India’s largest private sector lender through some of his group companies that had received ICICI Bank shares following a Reserve Bank of India (RBI)-driven merger between the two banks in August.

He had argued that there was no case for Sebi to keep his shares in ICICI Bank frozen, given that the merger process was over and the entity—BoR—does not exist.

In its 29 October order, the high court allowed Tayal’s firms to submit their objections against the Sebi order within 10 days, “if they so choose”.

Sebi has to “pass appropriate orders” within two months from the date of submission of objections by the Tayals, “after hearing the parties”, the court said.

“We are of the view that the petitioners may raise their objections before Sebi itself, more so when (the) impugned order is interim in nature. We are accordingly not inclined to interfere therein,” said the order passed by a bench consisting of chief justice Jagdish Bhalla and justice M.N. Bhandari. “It is expected that Sebi would not guide itself by the interim order challenged herein and will take (a) proper view after hearing the parties.”

Tayal refused to comment on the development, but one senior official at the group confirmed on Saturday that the group was examining the order and preparing its response to the market regulator.

Four entities banned by Sebi —Jaybharat Textile and Real Estate Ltd,Eskay K‘n’IT India Ltd, 21st Century Entertainment Pvt. Ltd and Cyberinfo Zeebombia.com Pvt. Ltd—are among the petitioners that approached the high court to seek legal relief for Tayal.

Although Sebi had given 21 days to reply to the charges, Tayal had moved the court to quash the Sebi order arguing it was “illegal and arbitrary.”

One of the oldest private sector banks in the country, BoR was forced into a merger following a clampdown on the bank by Sebi and RBI early this year for alleged irregularities in its functioning and the misrepresentation of shareholding by promoters.

The merger, which came into effect on 13 August, valued BoR at Rs.3,000 crore and involved no cash changing hands. BoR shareholders received 25 shares of ICICI Bank for every 118 they held.

At least 100 entities, including those owned and controlled by the Tayals, received ICICI Bank shares in exchange for their BoR stock, but are unable to trade them because of the ban imposed by Sebi.

The Tayal group has debt running into several crores that it owes to state-run banks and it wants to encash the shares to repay the loans.

The eight firms directly promoted by the Tayal family are Jaybharat Textile and Real Estate, Eskay K‘n’IT India, KSL and Industries Ltd, Krishna Lifestyle Technologies Ltd, Asahi Fibres Ltd, Krishna Knitwear Technology Ltd, Rajasthan Bank Financial Services Ltd and Single Point Security Solutions Pvt. Ltd.

 Of these, five are listed companies.

The Sebi order alleged that besides these, Tayals had indirect control of 100 different entities belonging to the Yadav group and the Silvassa group.

According to the Sebi order, the Tayals increased their stake in BoR and many of the promoter entities made fund or share transfers through off-market deals to various other entities “in a deceptive and fraudulent manner with the active connivance of others”.

According to the regulator, the Tayal group had falsely disclosed its shareholding in BoR as 28.61% at end-December 2009, while the promoters’ holding in the bank “had actually increased” and “stood at 55.01% as at quarter ending December 2009”.

The BoR had a total of 161.3 million shares outstanding. Based on the stated holding of 28.6%, the Tayal group entities held 46.1 million shares in the bank. The entities include 21st Century Entertainment, Ahmednagar Investments Pvt. Ltd, Cumballa Hill Property Developers Pvt. Ltd, Cyber Info Zeeboombia.com, Cyber Infosystems and Tech Ltd, EDC Securities Pvt. Ltd, Girganga Investments Pvt. Ltd and Sumander Property Development Pvt. Ltd.

Following the merger, these firms would have received at least 9.7 million shares in their demat accounts.

At Friday’s closing price of Rs.1,269.70, their holding in ICICI Bank would be worth at least Rs.1,240 crore.

If the Tayal group held 55.01% stake in BoR, as per Sebi, it would have received another 9.02 million ICICI Bank shares. At Friday’s closing price, these shares would be worth at least Rs.1,145crore, which would then take the total value of the Tayal group’s holding to at least Rs.2,385crore.

Ahead of the Sebi action, RBI had imposed a Rs.25 lakh penalty on BoR for allegedly violating various prudential norms, including the acquisition of immovable properties, deletion of records in the bank’s information systems and the conduct of some accounts, among others.

FPO-Power Grid Corp

Source :ET:9th Nov 2010


With the huge success of Coal India divestment through the biggest IPO in India fresh in the minds of the investors, the government launched the divestment of Power Grid Corp on November 9. The bidding will close on November 12.

In the Power Grid follow on offering, worth approximately Rs 8,000 crore, the government and the company has split the funds in equal proportion since half of the total 84.2 crore shares are new shares being issued by the company while the government is offloading an equal number of shares.

The offering is at a price band of Rs 85-90 per share. 

For retail investors and Power Grid's own employees, there is a discount of 5 per cent to the final price on offer and one could bid in a lot size of 65 shares.


Motilal Oswal has maintained ‘Buy’ recommendation on Power Grid Corporation (PGCIL) after the state-owned company has entered the capital market to raise around Rs 7,600 crore via follow-on public offer. The FPO price band is fixed at Rs 85-90 per share. 

The brokerage has a target of Rs 123 on the stock, an upside of around 37% from the cap price. 

“We expect PGCIL's regulated asset base (RAB) to increase from Rs 113 billion as at March 2010 to Rs 173 billion by FY12 (up 50%+), with projects of ~Rs 200 billion being commissioned and capitalized in this period. 

We expect the company to report a net profit of Rs 26.6 billion in FY11 (up 15%) and Rs 33.3 billion in FY12 (up 25%). Given the delays in terms of asset capitalization and post factoring in possible equity dilution, we marginally cut our EPS estimates by 4% for FY11 to Rs 5.7 and by 6.8% for FY 12 to Rs 7.2. We maintain Buy with a target price of Rs 123,” the report said.

SC rejected an application by former chairman of Satyam Computer

Source :NEW DELHI:9 NOV, 2010, 02.48PM IST,IANS 


 The Supreme Court Tuesday rejected an application by former chairman of Satyam Computer Services Ltd B . Ramalinga Raju seeking four weeks to surrender before the trial court. 

The Supreme Court had Oct 26 cancelled Raju's bail and had directed him to surrender before the authorities on or before Nov 10. 

Raju sought four weeks time to assist his lawyer in preparing the case in the Satyam scam . The trial commenced Monday. 

Raju shocked the corporate India by admitting to a Rs.7,800-crore accounting fraud in the IT major. While resigning as chairman of the firm, he confessed Jan 7 that the company cooked its books resulting in "inflated (non-existent) cash and bank balances" over several years.

SBI provisions for non-performing assets by 96% to Rs 2,160 crore

Source :http://drt-india.blogspot.com/

SBI profit flat at Rs 2,501 cr on bad loan provisioning

State Bank of India , the nation’s biggest lender, said quarterly net profit remained almost static belying expectations as it set aside more funds for bad loans and lost money trading bonds and currencies. 

The bank said net profit for the quarter ended September 30, 2010, was Rs 2,501.37 crore, up from Rs 2,490.04 crore a year earlier.


 The poor show was due to meeting higher provisioning norms.


 Both the treasury and corporate banking faired poorly. Pre-tax treasury loss stood at Rs 410 crore as against a profit of Rs 1,341 crore a year earlier. Pre-tax earnings from corporate banking fell 12% to Rs 1,241 crore from Rs 1,408 crore a year earlier. 

The lender increased provisions for non-performing assets by 96% to Rs 2,160 crore expanding the provision ratio to 62.8%, from 60.7. 


The Reserve Bank of India, in October 2009, said it would require banks to increase the minimum provision ratio to 70% from 10%. 


Gross bad loans rose 34% to Rs 23,200 crore accentuated by `854 crore bad loans of its associate, State Bank of Indore that merged with it. 

“Most state-run banks reported accelerated growth in non-performing assets this quarter,” Sandeep Jain, an analyst at IDBI Capital Markets told Bloomberg.


 “SBI’s doubled provisioning could indicate a similar spike,” he said. Retail banking was a saving grace for the bank that will soon be under pressure as the central bank is forcing banks to get rid of ‘teaser rate’ loans, especially in mortgages.


 Loans to individuals led to a pre-tax profit of Rs 3,470 crore, that doubled from Rs 1,702 crore a year earlier. With RBI raising the rates for the sixth time this year, demand for loans may fall hurting the banks’ earnings further.