Bullish November :Greatness begings beyond your Comfort Zone

Bullish November :
Greatness begings beyond your Comfort Zone

Mahila Bank to design special products for women

BL :Mumbai, Nov. 19:  2013

Govt to help bank raise money at cheaper rate: Chidambaram

Batting strongly for the first women’s bank in the public sector, Finance Minister P. Chidambaram on Tuesday said anyone who supports the idea should open an account with the Bharatiya Mahila Bank.

“My appeal is not only to women but also to men. I think you should open an account in the name of your wife, daughter and niece. The best gift you can give your mother is to open an account in her name,” Chidambaram said at a press meet organised at the bank’s Mumbai branch at Nariman Point on Tuesday.

The Minister said he wanted more bank accounts to be opened in the next few days in the nine branches.

Expansion

“And as BMB opens more branches, I want people to stand in queues, if necessary. Only a few days ago, you stood in queues outside Wankhede Stadium,” he said.

The Minister said if BMB is able to access money at a cheaper rate, it can offer loans at a cheaper rate. “We (Government) are going to help them raise money at a cheaper rate,” he said.

Including the Mumbai branch, BMB has nine branches. By the end of the current financial year, it will have at least 25 branches.

The bank was inaugurated on Tuesday by Prime Minister Manmohan Singh in the presence of UPA Chairperson Sonia Gandhi and Agriculture Minister Sharad Pawar, among others. Chidambaram said “It is my intention to ensure that BMB has a branch in every State capital. Then we will branch out to the Tier-II towns, unbanked areas and rural areas, where the potential to tap women’s savings is infinite.”

The Minister has requested the RBI to show forbearance on the requirement to have 25 per cent of the branches in rural and semi-urban areas in the first year so that every State capital has a BMB branch.

BMB is a universal bank and will provide every facility that is now provided by a public sector or a private sector bank. In addition, it will address gender related issues, it will design and offer special products for women.

“While every bank, according to its charter, is supposed to do these things, the fact is they don’t because they have other priorities and other goals. Since our priority is women, this bank will address these issues which have been neglected for years,” the Minister said.

Catering services

According to Usha Ananthasubramanian, Chairman and Managing Director of Mahila Bank, women have capabilities in food preparation and catering but they don’t have a formal label or system to start organised business.

So, Mahila Bank will fund women who are engaged in catering services so that they are not only able to establish themselves but also provide employment to women.

“Working women are normally worried about their children. So, we want to develop hygienic day-care centres.

This would benefit the working women. We would like to come out with a product for developing day care centres,” she said.

The bank will also offer home, education loan and SME loan products.

(This article was published in the Business Line print edition dated November 20, 2013)

Chit fund regulation: SC issues notices to Centre, RBI and Sebi

 

BS Reporter  |  New Delhi  

November 20, 2013 Last Updated at 00:48 IST

The Supreme Court has asked the authorities to reply to the notices within four weeks

The Supreme Court on Tuesday issued notices to the central government, the Reserve Bank of India (RBI), the Securities and Exchange Board of India (Sebi), the Enforcement Directorate and other authorities.

A public interest petition offer said Ponzi schemes were “shaking the very foundation of the rural and the semi-urban economy in India” and robbing the innocent of their savings. The court asked the authorities to reply to the notices within four weeks.

Chief Justice P Sathasivam said the matter was serious, as it affected people across the country.

PONZI CRACKDOWN

The Supreme Court has asked the authorities to reply to the notices within four weeks Prashant Bhushan, counsel for the petitioner, said though there were laws to control chit funds, these weren’t implemented effectively The petition seeks improvement in banking facilities in rural areas

Prashant Bhushan, counsel for the petitioner, Humanity Salt Lake, said Sebi had taken strong action against M/s Rose Valley Real Estate & Construction Company and directed that the company shouldn’t collect any money from investors or launch any scheme.

 It had also asked the company not to dispose of any property, Bhushan said, adding the regulator had also ordered MPS Greenery Developers Ltd to wind up its scheme. 

The counsel also cited the Saradha Realty India Ltd irregularities and said the Sahara group companies had refunded some money to investors only after an order from the apex court.

Bhushan said though there were laws to control chit funds and other schemes, these weren’t implemented effectively. The petition sought improvement in banking facilities in rural areas. 

It also sought the constitution of a special expert committee comprising officials from Sebi, RBI, the finance ministry, the Enforcement Directorate and the Serious Fraud Investigation Office to help devise a plan to end all unauthorised and illegal deposit and collective investment schemes, launch prosecution against all violators and recover the funds to return those to depositors/investors.

The petition also sought a thorough investigation by the Central Bureau of Investigation into large-scale financial frauds, including the Saradha scandal, in eastern states, as well as a directive to set up an independent expert body for receiving complaints on financial frauds. This entity, it said, should be able to recover money and have the requisite powers of investigation and prosecution.

Why is debt-ridden Biyani interested in supermarket chain Nilgiris?

. If the deal goes through, Biyani will get access to 140 super market chains in South India. Reuters
by FP Staff Nov 20, 2013

Despite fighting a rising tide of debt, Kishore Biyani-owned Future Group, India’s largest retailer by revenues, is once again looking to expand its presence.

Biyani is in talks with private equity firm Actis Capital to buy out its majority stake in Bangalore-based supermarket chain Nilgiris, theEconomic Times reported today citing a person with knowledge of negotiations. If the deal goes through, Biyani will get access to 140 super market chains in South India.

Ironically, Biyani’s interest in Nilgris comes at a time when he is selling his non-core businesses to cut debt. According to experts, Biyani is also creating holding companies for businesses, including KB Fair Price and home improvement unit Home Town, with the intention of shedding sizeable stake. The acquisition of Nilgiris if it materialises is seen boosting its neighbourhood store format KB Price

Actis had acquired majority stake in Nilgiris Dairy Farm in September 2006 for Rs 300 crore but later increased its stake to 70 percent and was looking at an exit by the end of 2012. According to several reports, Actis has had discussions with both strategic and global private equity players including Temasek and Advent among others to offload its stake in Nilgiris but things did not progress over valuation issues and lack of clarity on whether Karnataka and Tamil Nadu would allow foreign players in multi-brand retail.

Nilgiris Dairy operates through the franchisee model. Half of its outlets are in Bangalore. Actis had invested in the back-end Nilgiris Dairy, which supplies into the franchisees. Apart from Actis, the government of Singapore owns a 23 percent stake in Nilgiris, while the rest is owned by its founders, the Mudaliar family.

“Actis has been trying to sell its stake in Niligiris for a long time but talks always failed to materialise due to the high valuation of $150 million. Given Biyani’s tryst with his investments and the fact that the company has been struggling to pare its debt, I cannot understand why Biyani is looking to a acquire a regional player,”said Arvind Singhal, chairman of Technopak Advisors, a management consultancy.

But food is where Kishore Biyani sees the Future group reigning supreme.

From Foodhall for style food’ to FoodRight (‘international hyper’) to Food Bazaar in the middle, to KB’s Fairprice for the ‘neighbourhood mall rejectors’ and, at the very bottom, the Aadhaar rural wholesale and retail food services— Biyani has the entire food pyramid covered. And with the Niligiris acquisition Biyani will be able to scale up its neighbourhood grocery format — the  KB Fair Price.

KB Fair Price is a modern, self service neighborhood convenience store which stocks all the essential needs of a household in one store. Future Group plans to have 1,000 FairPrice stores by 2015 and the  deal will help Kishore Biyani to scale up this format and to make it attractive for foreign investors or companies. Until now KB’s Fairprice shops are limited to Delhi, Mumbai and Bangalore.

Earlier this year, Biyani told BusinessWorld that he wanted to empower the kirana as a franchisee.

A few years ago, Nilgiris experimented with the concept of empowering small entrepreneurs to use its brand name. The project did take off and empowering the franchises has enabled store-level profitability while bolstering the operating margins of the company but it is intrinsically difficult to find local entrepreneurs who can work with corporate processes across every city.

Nilgiris’ small entrepreneurs were usually retired executives or businessmen who wanted to experiment with retailing. But it was Nilgiris that provided the backward linkages and supplies. If  Biyani now gets access to Nilgiri stores, he would have the largest network of stores that he can supply to.

However, Singhal points out that Niligiris strength lies in regional play as they have built their brand loyalty in the South alone. “Extending the regional brand value to the national level doesn’t make sense logically,” he said.

But on the plus side, Nilgiris has an advantage–it has a large private label portfolio, an established supply chain and more control over its products which is a big problem in this space, said Harminder Sahni, managing director at consultancy Wazir Advisors.

So with higher margins in private labels, a sharper focus on this front by Biyani is only a logical step. Currently, private labels contribute 40 percent of KB Fairprice’s sales turnover. But going forward, this is expected to increase. In-house brands, such as Golden Harvest (staples), Sach (toothpaste, juice, ghee) and Tasty Treat are housed in the stores.

The company strengthened its reach in the convenience store format after it acquired the Big Apple chain of food and grocery stores last year for Rs 62 crore.  Market research agency Nielsen expects India’s private label market to grow five-fold to $500 million by 2015. Private label sales rose 22 percent in 2012, according to the agency.

So while Biyani will get access to over a hundred stores in the South the biggest challenge will lie in running the back-end operations, since the supply chain has to be local and cannot work at a national level.

Not CBI: FM needs to free the real ‘caged parrots’ — PSU banks

The main reason why we have undifferentiated banking in India is the heavy hand of government. Combine that with regulatory over-caution, and you will only get clones of the same banking business model. Reuters

by  FP :R Jagannathan Nov 18, 2013

Last Friday (15 November) at the annual Bankers’ Conference (Bancon) in Mumbai, Finance Minister P Chidambaram called for more innovative business models in banking. As the man who controls more than 70 percent of the Indian banking system – the public sector banks – one would have thought he should be asking himself this question: why are public sector banks unable to innovate?

Chidambaram said: “I sincerely hope that when new bank licences are given out, they are given to people with innovative models. It will be a pity if the new banks are clones of existing banks…..We need different kinds of banks to cater to different segments of Indian society.”

He’s right, of course, on this observation, but wrong is presuming that he has not contributed to this atrophying of innovation. The main reason why we have undifferentiated banking in India is the heavy hand of government. Combine that with regulatory over-caution, and you will only get clones of the same banking business model.

Before we discuss the issues raised by Chidambaram more fully, it is worth pointing out that banking models have indeed been innovated upon ever since the private sector was allowed in in the 1990s. Internet banking and seamless trading, any branch banking, and large scale retail banking are all innovations brought about with the entry of private competition. Today, thanks to technology, almost any financial or physical product can be bought or financed by the click of a mouse, and banks today are the biggest custodians of investor wealth, having seamlessly integrated banking, broking and demat accounts.

Chidambaram should be asking why his own public sector banks were so slow to adopt technology that private sector banks easily walked away with their best customers.

A related issue is how will the unbanked get banked, if all banks follow the same net margins-based model based on “class” banking? How is it that the public sector banks, once the pioneers in mass banking after nationalisation, are also aping the private banks?

The answer is simple: government ownership is the biggest barrier to innovation. It is impacting the pace of innovation even in private sector banks because competition is weak from public sector banks. Private sectors banks look super efficient primarily because public sector banks are so poorly run. The latter are racking up huge amounts of bad loans based on politically mandated lending to favoured sectors, with crony capitalists being indulged endlessly.

Public sector banks need high spreads between lending and borrowing rates to hide bad loans, and the private sector is happy to use this same spread to make super profits. When super profits can be earned in the shadow of inefficient public sector banking, why should private banks take risks with innovative business models?

Government ownership also comes with low levels of financial and managerial autonomy. Consider State Bank and HDFC Bank. Since its inception, HDFC Bank has had only one CEO, Aditya Puri – that’s nearly 20 years at the helm. As against that, SBI has had around 10 chairmen weaving in and out since 1994, and, with one exception (OP Bhatt), they had tenures ranging from as little as two months to an average of two-three years. Which SBI Chairman will think of anything innovative if he (or she) has just a two-year entitlement to the chair? Forget innovation, even long-term vision will go out of the window.

To make matters worse, Chidambaram himself has been making arbitrary announcements and decisions that make nonsense out of bankers’ autonomy.

For example, a new form of inclusive banking took hold when non-bank finance companies started lending against gold. The Reserve Bank and Chidambaram banned banks from selling gold and curtailed lending against it, killing off growth in this business. Is it the FM’s business to decide which businesses banks should do or not do?

In his last budget, Chidambaram announced the creation of a women’s bank – without any thinking on why women need a separate bank.

Chidambaram has also been pressuring banks to cut lending rates at a time when inflation is still high. Is it his business to tell banks what to do?

If banks are told how much to lend and to whom, at what rate to lend and for what tenures, where is the scope for innovation?

The only way to ensure innovative banks is to do the following.

One, start reducing government holdings in banks to below 51 percent. At 51 percent, public sector banks will always be under the thumb of the finance ministry – and hence will be unable to innovate. The Bank Nationalisation Act has to be amended to privatise government banks one by one.

Two, we need sharp, but differentiated, regulation. If we need different kinds of banks with different models, we need differential regulation too. India already has a large variety of banks – from commercial banks to cooperative banks to regional rural banks to urban banks – but regulation is either the same or diffused. We need wide banks (that do everything) and narrow banks (that only collect deposits), we need urban banks and rural banks, we need wholesale banks and retail banks, and we need non-bank financial institutions – the works. We also need a path of migration from one form of banking to another – and back.

Three, the new banks to be created in the public sector – the women’s bank and the Post Bank of India – can be used to create innovative models. For example, why can’t the Post Bank, instead of trying to be a full-fledged bank be a narrow banks that merely collects deposits and sells financial products? It can then lend wholesale money to those who need it. Why can’t the women’s bank be a focused lender to women’s self-help groups and women entrepreneurs? Women even today no problem in saving money with banks; it is in receiving loans they may be discriminated against – if at all.

Many ideas are possible, but innovative thinking must start at the finance ministry – which has been unwilling to let go of its control of banks. Chidambaram himself may be happy to privatise a few public sector banks, but his government is a dyed-in-the-wool believer in public ownership.

Like the CBI, our public sector banks are “caged parrots” answerable to different masters – politicians, the RBI, investors, and North Block, among others.

 Little wonder, there is little innovation.

SoBo’s Express Tower finally finds a buyer; deal likely for Rs 900 cr

by FP Staff Nov 19, 2013

American private equity fund Blackstone along with Pune-based Panchshil Realty is all set to buy out the current owners of Express Towers, one of South Mumbai’s iconic sea-facing building in Nariman Point, for a whopping Rs 900 crore, The Economic Times reported today. 

The deal has been in the works for a while but was stuck due to differences of opinion over valuation as the building’s current owners— Vivek Goenka, chairman and managing director of the Indian Express Group, and private equity firm ICICI Venture (which has 49% stake in the property) – had expected the sale to fetch Rs 1,000 crore.

According to the ET report, the deal includes 3,84,000 square feet of the total leasable area of 4,00,000 square feet but excludes the top-floor penthouse of Vivek Goenka as well as restaurants owned by the Goenka family. Even the Indian Express Group is likely to retain some office space.

Deal sealed

ICICI IVenture (I-Ven) had initiated the process to sell Express Tower in February 2013. It hired real estate advisor Jones Lang LaSalle to search for a buyer for its minority stake. ICICI Venture had bought a 49 percent stake in the 25-storey building in 2008 for about Rs 350 crore, while the remaining stake is held by Indian Express’s Goenka. Some small-scale investors also hold shares, but very minimal. The project was built nearly four decades ago. Now as per the current deal, both ICICI Venture and Goenka will give up control.

Blackstone has been steadily acquiring commercial projects in India in the last few years. It bought the DLF-Ackruti IT park in Pune, a special purpose vehicle of Embassy, among others, while Panchshil is looking to expand its commercial portfolio.

Blackstone already has its India head office located on the fifth floor of Express Towers. The building’s better known tenants include McKinsey & Company, Blackstone Group, Ernst & Young and Warburg Pincus besides the Indian Express Limited. However, over the last couple of years, Nariman Point has lost its sheen as the most desirable business centre with rising vacancy levels due to companies preferring to move their offices to other locations like Bandra-Kurla Complex, Lower Parel and Andheri. Rentals have also fallen here from over Rs 300 per sq ft a month in early 2011 to around Rs 250 now.

According to the recent CBRE Global Research and Consulting’s semi-annual Prime Office Occupancy Costs survey, Mumbai’s Bandra Kurla Complex (BKC) pipped Nariman Point as India’s second-most  expensive office space. With little or no takers for office space in the country’s first planned central business district, Nariman Point dropped to the 26th position at $90 per square feet per annum in CBRE’s list of world’s 50 most expensive office markets. BKC retained its ranking at the 11th position.

The Express Tower was commissioned by Ramnath Goenka, founder of Indian Express Limited. Upon completion in 1972, the 105 metres tall building managed to retain the tallest building title in Sourth Asia for about two years, after which it was surpassed by Oberoi Trident Towers that measures 117 metres.