Tuesday, August 4, 2009

S&P cuts Tata rating over Jaguar Land Rover worries

A leading global ratings agency on Tuesday downgraded the credit rating of India's top vehicle company Tata Motors, citing worries over its struggling British luxury car unit Jaguar Land Rover.

Standard & Poor's Ratings Services said it had lowered its long-term corporate credit rating on Tata Motors Ltd to 'B' from 'B+', pushing the company's ratings deeper into "junk debt" territory.

It also gave its long-term corporate credit rating a "negative outlook," meaning a possible further downgrade for Tata Motors, which recently launched the Nano, the world's cheapest car that retails for just over 2,000 dollars.

"We lowered the rating on Tata Motors to reflect the challenging operating performance at Jaguar and Land Rover for the year ended March 31, 2009, and our expectations of a similar operating performance in fiscal 2010," said Standard & Poor's credit analyst Suzanne Smith.

"This, along with a high debt level, has placed significant pressure" on Tata Motors' finances," Smith said in a statement.

The downgrade came as Britain's Observer newspaper reported that Tata was close to agreeing a financial aid package with the British government for Jaguar Land Rover (JLR) after a year of difficult negotiations.

Tata Motors announced a surprise 58 percent jump in first-quarter net profit to 5.13 billion rupees (105 million dollars) last week, helped by a change in its accounting policy.

But the company still has to announce consolidated financial results for the first quarter of the financial year that would include its loss-making JLR subsidiary.

The negative credit rating outlook "reflects our view on the uncertainty over when JLR's operating performance will improve, given the weak global auto market conditions," Smith said.

"It also factors in Tata Motors' highly leveraged financial risk profile, given extremely high debt levels," she said.

Tata bought motoring icons Jaguar and Land Rover from Ford Motor Co last year for 2.3 billion dollars. Their sales have been hit by the global downturn, which has hurt the market for luxury vehicles.

The company's vice-chairman Ravi Kant said in June that Jaguar Land Rover global sales for the 10 months ending March fell by 32 percent to 167,000 vehicles from 246,000 the previous year.

Refined copper output of China, India triples: ICSG

The annual production of refined copper in Asian giants China and India more than tripled during 1999-2008, according to International Copper Study Group (ICSG).

In its latest statistical year book, the Portugal-based intergovernmental organization covered world copper supply and demand data for the decade ending 2008.

In the decade, the world copper mine production rose by 21% from 12.8 million tonnes to 15.5 million tonnes. On a regional basis, Africa, Latin America and Asia experienced the highest rise of 89%, 35% and 29% respectively.

According to the year book, the annual world refined copper production increased by 25% in the decade, with an average growth rate of 2.6%. China’s production increased by 2.6 million tonnes to 3.8 million tonnes and India by 470,000 tonnes to 675,000 tonne. While countries like Chile, Australia, Japan and South Korea also witnessed significant increase, the US experienced a declined of 41% in refined copper production.

During the period, world refined copper usage increased by 26% from 14.3 Mt to 18 Mt. Growth was largely driven by China, given that the global usage growth rate excluding China was only 0.1% during the period.

China’s usage during the decade increased by around 3.7 million tonnes or 245% while that of Asia, excluding China, increased by 680,000 tonnes or 18%. Against this, usage decreased in the US by 1.2 million tonnes or 28% and in the EU-15 countries by 440,000 tonne or 11%.

The ICSG statistical year book was released at the end of July. Earlier, in the month the study group released its monthly bulletin with preliminary data for April 2009.

According to the bulletin, the world refined copper market indicated a deficit of around 120,000 t for April 2009. The deficit was caused by high net Chinese imports and the consequent rise in their monthly apparent usage (which does not include unreported stocks).

For the first four months of 2009, the world copper usage declined by 2.9% compared with the same period in 2008. The pace of decline was supported by a nearly 38% rise in Chinese apparent usage against a decline of 18.5% in the remaining countries.

In developed markets, the usage remained sluggish as it experienced a decline of 23%, 42% and 23% in US, Japan and EU-15 countries.

While China apparent usage surged, the actual usage as indicated by the production of semi manufactures increased only by 2% in the four months. The net imports of refined copper in the duration increased by 119% more than offsetting a 42% decline in the scrap imports compared with the first four months of 2008.

Sugar prices shoot to 25-year high in global market

Gear up for real pricey sugar, Rs 30/kg may soon turn history with newer, higher, highs. With global white sugar prices hitting a 25-year phenomenal high at $500/tonne and raw sugar prices following suit, the country's sugar mills may not find it uneconomical to import despite the government's easing imports with an extended deadline to end March 2010. Unless the government, already strapped for sugar stocks to release in the open market and check prices, goes slow on this and other administrative moves to control consumer price.

Crucially, the sugar industry is of the view that at the current prices in the international market, the import of raw/white sugar even at nil rate of duty becomes increasingly unviable.

Ironic, since the government only recently extended the August 1 deadline for duty-free raw sugar imports. In addition, it has also allowed duty-free imports of up to one million tonne white (or ready to eat) sugar till November 30.

Significantly, the development of sugar prices shooting up to marked highs is being attributed in the global market primarily to signals that India will be importing a substantial quantity of both raws and whites. On Monday, the Liffe October white sugar surged in London to $505.9 a tonne, the highest level since the launch of the contract in July 1983.

Andy in New York, ICE October raw sugar rose to a three-year high above 19.3 cents a pound, fast approaching a 2006 peak of 19.73 a pound. Currently, raw sugar prices is trading at a three and half year high. But the key ICE March 2010 contract, which will be the benchmark later this year, moved to 20.44 cents. At that level, raw sugar would be at a 28-year high.

World raw sugar prices rose steeply from only 11.4 cents/pound in January 2009 to 18 cents per pound in July. Worse, traders have begun projecting raw sugar prices at an unheard of 30 cents/pound. Last week, Kushagra Bajaj, Joint MD of one of the country s biggest sugar mills, Bajaj Hindusthan, projected a high raw sugar price of 25 cents/pound, indicating that higher import prices for raw sugar could make it tougher for the industry to realise its production/processing price unless the government allowed domestic retail prices to climb up further.

Currently, retail prices rule anywhere between Rs 27-Rs 30/kg. According to industry monitors, the landed cost of imported raw sugar at the prevailing price works out to around $470 a tonne and the ex-factory cost of processed sugar from the imported raws is unlikely to be lower than Rs 26,000/tonne in the coastal States and Rs 28,000/tonne for UP, even without including financing costs. At the projected retail price of around Rs 35/kg, the ex-factory price of sugar would work out to Rs 28,000-30,000/ tonne, the only way in which the sugar industry feels it can realise its processing costs on imported raws at high prices.

As an offshoot of such high import and processing price for mills, problems could compound further on many fronts for the already sugarcane strapped industry, which has faced an increase of about 60% in raw sugar prices during the year and a similar trend in white sugar prices as well, with demand outstripping consumption significantly in the world market.

In the last two years, 2006-07 to 2008-09, the sugar price realisation was uneconomical, leading to large arrears by mills in sugar cane price to farmers. A loan of Rs 4000 crore was disbursed with a two year moratorium and repayment over four years. The industry is already carrying a huge liability and repaymetn starts from 2009-10. In the meantime, the cost of production of sugar has increased steeply in 2008-09 due to higher cane price payment, under utilisation of capacity and low recovery. The government should urgently adopt a balanced policy to empower the sector by allowing a reasonable retail price for sugar so that the industry can realise its production price and cane price arrears to farmers are cleared on time and they have a good incentive to increase sugarcane production, an official of an UP-based sugar mill emphasized. The sugarcane area in UP is projected to shrink by almost 6%-8% to under 2.02 million hectares in the 2009-10 season.

Some 2.5 m tonnes of sugar have already been imported this year but the soaring international prices are expected to put a big spanner in the works for the plans of the industry to import substantial quantities to meet high doemstic demand. On the flip side, the government has already made unprecedented sugar releases into the open market this year, ensuring that there is nil carryover stocks into the 2009-10 season, thus increasing pressure for big imports. But it could still be a Hobson s choice for the government on allowing sugar retail prices to shoot up further. This, despite the political sensitivity over keeping prices down, especially in the festival period starting in early September right through to the end of the year. Sugar has a 3.6% weightage int he WPI and has contributed noticeably to higher inflation rates, but the government is working on rationalising the weightage downward.

In a bid to keep domestic sugar prices down, the governmetn also extended sugar stockholding and turnover limits upto the end of the year and banned futures trade, apart form easing imports, both under OGL and the AL scheme.

Universal ID: Going beyond smart cards & databases

The June 2009 announcement of the appointment of Nandan Nilekani, cofounder of Infosys, as the head of UIDAI (Universal ID Authority of India) has created a lot of excitement.

What is missed out in the initial reactions is the larger issue involved. The government must be congratulated in correctly terming the office as “Universal ID Authority of India”. The terms “universal ID” “identification” and “authority” are very pertinent.

In recent years, many government departments have independently started issuing IDs to citizens of India, primarily to suit their interaction with the citizens. The home ministry through passport to track their travel in and out of the country. The income-tax department through PAN (permanent account number) to track income and expenses for the purpose of taxation. The Election Commission through their voter identity card. There are also ration cards, BPL card for poor families, driving licence and gas connection certificate

Common among all these experiments is the “limited purpose” of the intended use; no sharing of information among the agencies of the government. The UIDAI goes beyond “identity cards” to the very “identity” itself. It is important to evolve“architecture” of an identification system than the identity itself.

First, being “universal” in nature it is best to have a system that can accommodate citizens, permanent residents and visitors, though the system might focus on citizens first.

Second, it must be prospective in the sense that on the day when the system comes into force there is an enabling mechanism to put the system into action; in that sense it may be better to design a system that might start functioning 20 or 25 years from now, but with the guarantee that the eco-system to support such a system will be in place, rather than rushing through with one system or another.

Third, it must have system to take care of normal accidents — users losing an identity proof, users changing their status — location, job, marital status, getting children, acquiring property, occupying special position such as member of the parliament, prime minister of the country, and even special cases — facing disability, liquidation, criminal proceedings, change of name or sex.

Fourth, there must be a system of incorporating changes and re-issuance of identity proof that is easy, affordable and hassle-free , and yet making it rather difficult for end users with malicious purposes to do “identity theft” . Fifth, the identity system must have natural start and end points; for example, an identity system may start at the time of birth and accordingly it must be captured along with the birth of the child anywhere in the country; alternately, the identity proof issuance may happen at a specific age or at a specific stage — for example at the age of 18 — on acquiring the right to vote.

Sixth, there must be a system that “links up” the identity, say of two individuals at the time of marriage, children’s identity getting linked to parents with a provision that such linkages may have to be re-established during special circumstances (divorce, adoption in case of children).

Finally, the system must form the foundation for many identity proofs — passport, PAN, driving licence, voter identity card — and be able to keep the linkages intact and secure (ability to link all identity proofs, for example, all passports issued, all linked passports (spouse, children, parents), drivers licences issued at different places , voter identities issued.

Ultimately, the identity system must address all possible end uses of identity proof, for example, access to social benefits — pension, social security, subsidies, if any, and, insurance; right to vote, right to drive, right to drink, right to acquire property, right to job, help government to track — taxes, travel out of country, movements in case of bail, and, help citizens in getting services — bank account, BPL card, senior citizens benefits, healthcare, education.

SBI, Tata Motors, Sahara figure in top 100 tax defaulters list

Country's largest state-owned bank SBI, automobile giant Tata Motors and oil major Indian Oil Corporation, besides Sahara India and its Globe's biggest M&A dealmakers promoter Subroto Roy figure in the list of top 100 tax defaulters in the country.

Disclosing the list of defaulters in the Rajya Sabha today, the Minister of State for Finance S S Palanimanickam said in a written reply that top 100 tax defaulters owe to the exchequer whopping Rs 1.41 lakh crore -- more than three times the amount the government spends on NREGA scheme annually to provide employment to BPL families.

The Centre is taking various steps to recover the outstanding dues, the minister said, adding that the government has requested the adjudicating authorities like ITAT and Settlement Commission "to dispose of high demand cases expeditiously."

As per the list, disgraced stud farm owner Hassan Ali Khan tops the list of tax defaulters with an outstanding arrear of more than Rs 50,000 crore.

The list of tax defaulters also includes stock broker late Harshad Mehta and his associates and other brokers like A D Narrotam and Hiten Dalal.

While the SBI owes Rs 333.6 crore in taxes, Tata Motors and Indian Oil Corporation have to pay Rs 206.5 crore and Rs 210.3 crore to the treasury.

As regards Sahara, many of its group companies figure in the list of defaulters, while its promoter Roy owes Rs 230 crore to the exchequer.

Monday, August 3, 2009

AIG taps former MetLife chief as CEO

Troubled insurer American International Group Inc has chosen former MetLife chief Robert Benmosche as its new CEO, The Wall Street Journal reported, citing people familiar with the matter.

The AIG board approved the choice Monday morning, the newspaper said on its website.

An AIG spokesman was not immediately available to comment. Benmosche would succeed Edward Liddy as AIG chief executive. Liddy joined the company as chairman and CEO last September, within hours of the company getting billions of dollars in support from the U.S. government after nearly collapsing under losses on repackaged mortgages it had guaranteed.

In May, Liddy said he planned to step down once replacements were found to fill the CEO and chairman roles.

AIG shares were down 13 cents, or 1 percent, to $13.01 in late-morning trade on the New York Stock Exchange.

Suzlon shares fall 4 pc on poor earnings

Shares of wind turbine maker Suzlon Energy today fell by over four per cent on the Bombay Stock Exchange after the company reported a loss of Rs 452 crore for the first quarter of 2009-10.

The scrip closed at Rs 95.65 on BSE, down by 4.11 per cent over the previous close. It had plunged by 9.02 per cent to an intra-day low of Rs 90.75.

On the National Stock Exchange, the stock closed lower by 4.16 per cent at Rs 95.65.

The company has reported a net loss of Rs 452.67 crore for the first quarter ended June 30 due to lower sales volumes.

On the volume front, over 6.21 crore shares exchanged hands on NSE and 2.1 crore shares were traded on BSE.

The BSE 30-share Sensex closed at 15,924.23 points, up 253.92 points over the previous close.

NHPC IPO to hit market on August 7

Central government enterprise, National Hydroelectric Power Corporation (NHPC) will raise Rs 6,000 crore from the Initial Public Offer (IPO), which will hit the market on August 7.

"Rs 4,000 crore will be used to finance the under construction projects of the company while Rs 2,000 will be given to the government of India," NHPC Director (project) JK Sharma told reporters here.

For its IPO, NHPC has fixed the price band between Rs 30-36 per equity share.

On the ongoing projects, Sharma said that 11 projects of 4,622 MW capacity are currently under construction at various stages.

"The company is awaiting government's nod for five more projects with a capacity of 4,565 MW and certain joint venture projects having capacity of 2,166 MW," he said.

"Our current installed capacity is 5,175 MW and by 2013 end, our total installed capacity will be 10,000 MW," Sharma said, adding, most of the under construction projects are going to be commissioned on schedule.

Nifty likely to head to 4880 this week:Finquest

Finquest Securities expects Nifty to head towards 4880 levels this week.

“For the week, Nifty appears to be positive and seems likely to head towards 4880 levels. As Nifty attempts to breach the prior high at 4693, we could witness bouts of profit booking. For the day, Nifty appears to be positive and is likely to edge higher towards 4720 levels,” said the technical report.

Merits of Mutual Funds and ULIPs

“Its success lies in the fact that it is an insurance plan and not an investment or a welfare plan,” said James Franklin Roosevelt

Sorry Mr Roosevelt, but insurers here would beg to differ. Thanks to an array of ‘insurance cum investment products’ , the idea of a complete insurance product for investors seems to have diluted.

Yes, you have guessed it right. We are talking about Unit Linked Insurance Plans (ULIPs), which are currently the most popular of all insurance schemes available in the market. But why, as someone would rightly point out, is an ULIP being discussed in an Investor’s Guide edition purely dedicated to the Mutual Funds (MFs)?

ULIPs and MFs, have locked horns against each other for quite some time now. The recent debate roots from scrapping of the entry load from the MF schemes, closely followed by Insurance Regulatory & Development Authority (IRDA) capping the ULIP charges.

But why, after all, are MFs and ULIPs, up against each other?

The answer, though simple is highly complex to deal with. And the answer lies in the manner in which the ULIPs are sold. Investors here are perceived to believe that they are buying an insurance plan with a built-in add-on feature of mutual fund investments. Thus prima facie this product seems an attractive ‘buy one get one free’ offer. But this perception goes for a toss when the investor realises that the element of insurance is just miniscule. And this revelation pops only after the scheme is bought.

Most ULIPs available in the market today offer an insurance cover in the range of 5 -10 times the amount of annual premium. Thus, for an investor paying a premium of Rs 20,000 per annum, the embedded value of insurance is simply a lakh to two lakh rupees. In a stark contrast, a traditional pure term insurance plan can fetch an insurance cover of about Rs 50 lakh with the same amount of premium.

Moreover, unlike a traditional endowment or money-back policy, ULIP does not pay back the amount of sum assured if the holder survives through the policy term. The amount receivable on maturity is purely the fund value whose growth is directly linked to the markets. There is thus a very thin line of distinction between an MF and a ULIP as far as the structure and investment strategies are concerned.

Another concern surrounding the ULIP is the fact that if at the time of maturity of the policy, the markets are sailing in troubled waters, investors have no option but to accept the returns as determined by the market then. Unlike an MF, they do not have an option to hold on to their investment until the markets recover.

Thus, though MFs and ULIPs are said to be similar, the similarity is restricted to the product structure and investment strategies. The point where this similarity ends, the dissimilarities begin.

The starting point of this dissimilarity is the extent of charges levied by both these products. An ULIP is normally loaded with a number of charges ranging from premium allocation charge to fund management fees to policy administration charge, mortality charge, top-up premium charge, switchover charges and so on. Of these, the premium allocation charge, which usually varies from about 10% to 100%, is the prime source of income for insurance distributors and is highly criticized for robbing the investor of his invest-able surplus.

On the other hand, the prime source of revenue in case of an MF is the fund management charge, which is currently capped at 2.5% per annum. There is also a small percentage of penal charge, ranging from 0.5% - 1% called as exit loads, levied in case of premature withdrawals. Premature withdrawals here generally refer to withdrawals within one year from the date of investment. The net amount invested is thus much higher in case of an MF vis-à-vis a ULIP. However, having said that, it would be wrong to conclude that ULIP is a bad product and that a MF scores over an ULIP at all times.

ULIPs are known to be tax-friendly since both the investments and the returns are fully exempt from tax. Moreover, ULIPs offer flexibility to switch between the equity and the debt investments, which are currently absent in case of an MF. This switchover, though, attracts some cost. But then ULIP is beaten by an MF when it comes to liquidity, as an early exit from an ULIP is nothing less than suicidal.

To prove this thesis, ETIG analysed two investment options – one in a ULIP and the other in an MF to analyse the returns from these two competing products over a period of time. And the results are interesting indeed. Under both the options we have assumed the age of the investor to be 30 years and annual amount of investment is Rs 20,000 for 20 years. Under the first investment option, we have assumed a ULIP scheme with a 100% exposure to equity markets.

Assuming the risk cover to be five times the first premium installment, the sum assured is Rs 1 lakh. As far as charges are concerned, we have assumed a Premium allocation charge (PAC) of 20% for the first two years and 10% for the third year. Thereafter, PAC is uniform at 2% p.a. throughout the policy term. Policy administration charge is fixed at Rs 60 per month throughout the policy term while mortality charge is based on the age of the policyholder and the amount of risk cover. The same thus increases with the age of the policy holder during the policy term.

Another charge factored in is the fund management fee, which is 1.5% p.a. and gets deducted from the fund value on a regular basis. Thus, in the first three years of the policy, almost 25% of annual premium is deducted towards these different charges.

Under the second investment option, the premium paid towards a pure term insurance plan of Rs 1 lakh is mere Rs 417 per annum while investment in equity mutual fund will attract an annual fund management charge of about 2.5% of the fund value. (While we have assumed a pure term cover of Rs 1 lakh, investors would do well to note that a pure term plan with such small cover is currently not available in the market. We have assumed the same to make investments under both the options comparable).

Emami group plans edible oils venture

The Rs 2000-crore Emami group has chalked out ambitious initiatives for its edible oils venture. The company proposes to take up plantation of bio fuel crops (jatropha) and other edible & non edible oil seeds in Ethiopia. Closer home, it is also looking to set up greenfield edible and non edible oil refineries in Gujarat and south India.

While the Ethiopian venture in the state of Oromia will entail an investment of roughly Rs 400 crore, the Gujarat and south Indian projects will involve an investment of Rs 225 crore each, Mr Aditya V Agarwal, director, Emami group of companies, told mediapersons at a meeting held in Kolkata on Monday.

The projects will be taken up by group company Emami Biotech. Mott McDonald is advising the group on the projects.

Elaborating on the group’s Ethiopian project, Mr Agarwal said: "We intend to cultivate oilseeds on 1 lakh acres. We have already been allotted some 30,000 acres by Oromia Investment Commission on a 45 year renewable lease." Incidentally, Oromia Investment Commission is the nodal agency in the state of Oromia to allot and distribute land for industrial and agricultural purposes.

Apart from jatropha, the company will also grow sunflower, castor, pulses and herbs like menthol in the East African country. The Ethiopian venture also envisages setting up an extraction plant and will churn out 1 lakh tonne of crude bio fuel/edible oil per annum. The bio fuel will be exported to India and used to produce bio-diesel at the company’s plant at Haldia, the edible oil produced in Ethiopia will be used for captive consumption.

The project will be part funded by a mix of equity and debt. The company is in talks with Exim Bank, Bank of Baroda and State Bank of India to secure long term loan for the project. Of the total investment of Rs 400 crore spread over a five-to-six years, the company plans to invest some Rs 120 crore in the first phase.

"We have chosen Ethiopia for investment because of availability of labour, contiguous land, congenial business environment and stable law & order situation. Besides catering to our domestic needs, the Ethiopian project has a huge potential for the global export market," said Mr Manish Goenka, director, Emami group of companies.

Emami Biotech has already entered into an agreement with the Gujarat government for the proposed investment. "Our third edible oil refinery unit may come up either in Karnataka or in Tamil Nadu. We have not yet zeroed in on the site for the two projects," Mr Agarwal added. Currently, the company operates an integrated edible oil refinery and bio diesel plant at Haldia, West Bengal, which produces 1,500 tonnes of edible oil per day and 300 tonnes of bio-diesel.

IT majors chase Rs 2,500-cr railways' outsourcing deal

Tech firms TCS and Wipro, apart from several others, are in pursuit of up to Rs 2,500-crore outsourcing contract at Indian Railways, as the world’s biggest civilian employer plans to procure a human resource management system (HRMS) and other modules for integrating and automating functions of payroll, accounting and pension.

With around 1.6 million employees, Indian Railways aims to have a centralised system for managing its staff better. The organisation plans to spend around $1.5 billion over the next two to three years on technology.

“We will be coming out with a request for proposal very soon. The idea is to have built-operate-transfer (BOT) model with the vendors,” said a senior railways official. He requested anonymity because he is not authorised to talk about the project.

In order to avoid high capital investments in acquiring these solutions, railways is exploring cost-effective models such as software-as-a-service, wherein entire infrastructure and application software will be owned by vendors. “We also plan to bring performance and efficiency-linked parameters for paying these vendors,” the official added. At least two senior officials at Indian tech firms chasing this contract confirmed their interest on conditions of anonymity because they are not authorised to speak to media about their companies’ business pursuits.

“It will be a PPP and the pricing will be based on the number of transactions, while the IT company will fund and manage the entire IT set-up,” one of the executives said.

Indian Railways, which is the second largest rail network in the world, also plans to outsource another contract called ‘implementation of software-aided train scheduling’, valued at around Rs 450 crore. TCS, Infosys, Wipro and Mahindra Satyam are already bidding for this contract. The project will help railways do real-time train scheduling and management with the help of a software solution.

“Wipro is already doing two pilots for Indian Railways. One is a pilot for RFID and will be rolled out in next 12-18 months. The company is doing another control charting pilot for Railways where it charts the movement of trains,” another person familiar with outsourcing contract being awarded by Railways said. Both TCS and Wipro declined to offer specific comments about these contracts.

Railways is planning to outsource three more contracts over the next few months, with each estimated to be in the range of Rs 450 crore to Rs 500 crore. Apart from the asset management contract, the railways plans to invite bids for a contract to develop and deploy a solution for automating and integrating the functions of finance and payroll and the other one for material management solution.

Sunday, August 2, 2009

Unlike Tatas, LN Mittal doesn't regret global acquisitions

Unlike business icon Ratan Tata, steel tycoon L N Mittal has no regrets about his global acquisition spree that earned him the 'biggest steel maker' title and, with it, tons of problems.

"We are the merger of the two best companies... the merged entity is a winner," Mittal told in a telephonic interview from Luxembourg when asked if he wished that his group was still Mittal Steel and not ArcelorMittal - the entity born out of Mittal's USD 32 billion deal for European steel giant Arcelor in 2006.

On whether he had any regrets like that expressed by Tata on his group's global acquisitions - Corus steel and JLR, the takeovers that made the group struggle hard to find finance due to slowdown blues, Mittal said: "I don't want to comment on this question."

However, on the amalgamation of his very own Mittal Steel with Arcelor, he said: "I think this is the merger of the two best companies. We have successfully completed and results are clearly seen. In difficult times, our strategies have not changed, our growth plans have not changed and this merged company is clearly a winner."

Incidentally, Tata had said in a recent interview to London-based Sunday Times that the acquisition of Corus Steel and Jaguar Land Rover happened at an inopportune time.

Adani Power IPO subscribed 14 times

The initial public offer of Adani Power, which closed on Friday, got subscribed over 14 times with most of the bids coming in from institutional investors.

The issue which has roped in institutional investors like Credit Suisse and T Rowe Price International Inc, received bids for over 350.26 crore shares against 24.87 crore shares on offer, achieving a demand for 14.08 times the shares on offer.

Marketmen said attractive price band of the IPO enthused investors besides the overall recovery in the secondary market that is getting reflected in the primary market.

Leading institutional investors participated in the issue as anchor investors and subscribed to over 5.28 crore shares at Rs 95 a piece. Anchor investors are the qualified institutional investors for whom bidding process is carried out a day before the issue opens.

The price band of IPO has been fixed between Rs 90-100 and the electricity generating unit of Adani Enterprises will raise Rs 3,160 crore at the upper end of the band.

The IPO began on July 28. Enam Securities, JM Financial Consultants, ICICI Securities and SBI Capital Markets are iacting as lead managers for the issue.

JSW likely to come up with an IPO

Sajjan Jindal-owned JSW Energy may go for an Initial Power Offer to raise funds for its ambitious plans to step up power generation capacity to 12,000 MW from the present 800 MW. "We may look at the IPO if the market stabilises," JSW Group Chief Financial Officer MVS Seshagiri Rao said.

However, a company source said that the JSW had already been started "working on the initial public offering" and the draft red herring prospectus submission to the market regulator, Securities and Exchange Board of India, might be a matter of couple of months'' time. The company had earlier planned for an IPO, but scrapped the plan as markets nosedived owing to the global financial meltdown.

"Whatever we raise, it will be for the future growth of the company. All the existing projects that the company is working on currently are tied up with funds," Rao said, but declined to divulge the percentage of stake JSW Energy would dilute if it goes ahead with the IPO plan.

Adani Power was the first from the energy sector to hit the market after the unprecedented financial meltdown that crippled economies across the globe. The Rs 3,000 crore issue was over-subscribed over 21 times.

SEBI gets new members on secondary market panel

Capital market regulator Securities and Exchange Board of India (SEBI) has reconstituted its Secondary Markets Advisory Committee (SMAC) by replacing four of its existing members, ET has learnt from a committee member. A formal announcement about the change in composition of the committee will be made shortly.

The 17-member SMAC is of significance to the regulator, as it advises SEBI in devising a policy framework pertaining to the secondary market. According to officials, a similar exercise is expected for other committees, including the Primary Market Advisory Committee (PMAC).

JR Varma, a professor at IIM-Ahmedabad, will now head SMAC, succeeding PG Apte, former director, IIM-Bangalore. Besides Mr Varma, other members of newly-constituted SMAC are UK Sinha, CMD, UTI Asset Management, Susan Thomas of IGIDR, and EMC Palaniappan, president, Association of National Exchanges members of India (ANMI). Mr Apte, Surjit Bhalla, MD of Oxus Investments and Chinubhai Shah, chairman and president of Gujarat Investors and Shareholders Association will not be part of the reconstituted panel. Also, the strength of SEBI officials in the committee has been reduced to four from five.

Among committee members, Ravi Narain, MD of NSEIL and Hinesh Doshi, vice-president of Investors’ Grievances Forum (IGF) will be representing the committee for the third consecutive term. Newly-appointed Madhu Kannan, MD and CEO of the BSE will be representing the bourse.

Indian ADRs gain $8.28 bn in July

he total valuation of Indian stocks trading on American bourses rose by over $8 billion last month, with IT firm Infosys alone contributing nearly half of the gains.

For the month ended July 31, Indian entities listed on the New York Stock Exchange and Nasdaq added $8.28 billion to their total market capitalisation. Infosys alone gained $3.58 billion, with its market cap at $24.66 billion.

Software firm Mahindra Satyam's valuation rose by $1.30 billion, while that of private sector lender ICICI Bank added $1.03 billion to its market cap.

Among the 16 companies trading as American Depository Receipts (ADRs), only three companies, including private sector lender HDFC Bank, have witnessed a total decline of $835 million in their market capitalisation.

HDFC Bank's valuation declined the maximum during the month and stood at $13.86 billion after it witnessed a value erosion of $760 million.

The market capitalisation of telecom firm MTNL and pharma company Dr Reddy's Laboratories fell by $41 million and $34 million, respectively.

The month of July saw a host of Indian companies reporting better-than-expected quarterly figures, which analysts believe pulled up the shares on the street.

Besides, Tata Motors' valuation shot up by $914 million to $4.75 billion after it posted better-than-expected quarterly results last week.

The net profit of the auto maker rose 57 per cent to Rs 514 crore in the first quarter of the current fiscal.

The valuation of IT major Wipro ascended by $644 million and copper producer Sterlite Industries gained $574 million.

Outsourcing firm Genpact saw its valuation increase by $487 million and IT firm Patni Computer's market capitalisation jumped by $275 million in the month.

BPO firm WNS Holdings and telecom major Tata Communications Ltd (TCL) too saw an upward movement in their market capitalisation. WNS Holdings' valuation went up by $160 million and TCL added USD 102 million.

Besides, internet majors, Sify Technologies and Reddif.com, BPO firm EXLService increased in the range of $7 million to $28 million.

The US markets were mixed on Friday with the Dow Jones Industrial Average gaining 17.15 points to 9,171.61 and S&P 500 rising 0.07 per cent to 987.48, while tech heavy Nasdaq was down 0.29 per cent to 1,978.50.

NTPC may lose up to Rs 30K cr if gas not supplied at $2.34: Anil

Amid a bitter battle with elder brother Mukesh Ambani over gas, Anil Ambani today cautioned the government that NTPC would lose up to Rs 30,000 crore if the fuel is not supplied by RIL at the committed rate of $2.34 per mmbtu.

Offering to clarify that his group company RNRL's position was in no way against the interests of NTPC, Anil sought an early meeting with Power Minister Sushil Kumar Shinde and said, "We would be delighted if NTPC, a navratna, gets its rightful share of 12 mmscmd of gas for 17 years at a price of $2.34, which was discovered through open transparent international competitive bidding in 2004."

Anil wrote a letter to Shinde on July 31 and sought a meeting to discuss the matter.

Want a loan? Check your Credit Score

Have you been paying your telephone bills on time? Do you consistently forget the due date for your insurance premiums? You better watch it! If you ever intend to apply for a loan in future all these aspects are going to count!

These are a few of the spruce up elements planned to be implemented in your current credit reports. What's more from next year (2010) there will be a system in place through which you can have access to your credit reports!

Such spruce ups have been made possible through a recent move of the RBI (Reserve Bank of India), which has granted an approval for the registration of CIBIL and a few other credit agencies namely, Equifax, Experian and Highmark under CIC Act (Credit Information Companies (Regulation) Act.

Why a credit report?

The concept of credit reports came into existence to ramp up the credit system and ensure banks have an evaluation system in place to decide if a prospective borrower is credit worthy enough to lend huge sums of money to, in the form of a home loan, car loan, personal loan, etc.

Once the RBI approval comes into effect formally, more credit information on individuals can be accessed, which includes telephone bill payments, insurance premiums etc. This should provide a well rounded study of how an individual manages finances, how they repay their debts, how timely they are with their bill payments, etc.

Access to credit reports - Advantages

There are several advantages to the enhancements set to happen with the existing credit information system. Here are a few of them.

Prevents Identity theft

If an individual's credit card or bank account is being misused, keeping track of one's credit report will help the individual take corrective action before it comes too late or before debts start mounting to unreasonable levels. It can help prevent identity theft and instances of fraudulent transactions to a large extent.

Creates discipline and improves money management skills

Often people opt for loans due to its ready availability without giving thought to their current lifestyle, other commitments and debt liabilities. Also, they fail to account for an emergency fund and a savings plan. All these could fall into perspective once a summary of a person's credit repayment is available in a single log with a score spanning 300-900 points providing a measure of an individual's creditworthiness.

More comprehensive credit reports

RBI's approval is the first step towards more comprehensive credit reports, where more periodic transactions involving money inflow and outflow can be tracked to analyze if an individual adopts a careful and methodical approach to his finances and eventually serve as a financial goal map for an individual who wishes to improve his credit score.

The proof of the pudding is in the eating

The very fact that individuals will soon have access to their credit reports can come as a sigh of relief to loan applicants.

If they have a very good repayment track record and an excellent credit score their chances for bargaining for a better interest rate on the basis of their credit report is a viable option. It would also help banks significantly decrease the percentage of defaults by opting to choose a better customer for a more competitive interest rate.

After all it makes better business sense for banks to have a higher percentage of customers who repay on time, every time, at lower interest rates compared to a higher percentage of defaulters with high interest rates.

More credit agency options

Now that they are more credit agencies to choose from, better systems that weed out errors and streamline the existing information systems will be given high priority.

Establishing a reputation for being the most accurate credit agency will provide the impetus for credit agencies to overcome the several bottlenecks that will emerge in setting up the infrastructure and the actual process.

Knowledge is Power

Access to credit reports is wonderful news for individuals who wish to apply for a loan but are unable to get one due to a faulty credit report or missing information.

Currently, rejected applicants who have been informed by their banks that CIBIL reports were the reason, would need to request for the control number of their credit report from their bank and approach CIBIL for a clarification. This can be a complicated process, especially if the bank does not provide a valid reason for the reject.

With direct access to their credit reports, individuals can directly contact CIBIL for a clarification or correction, even before they approach a bank for a loan. Verification and correction of credit scores can be far easier with such transparency.

The Flip Side

Such intensive credit tracking systems can also stir up a new set of problems to deal with. More often than not technology would play a key role in setting up systems that can source huge volumes of information of a large number of individuals.

Credit information is also very sensitive and personal to an individual, which in the wrong hands could prove dangerous. So credit information sourcing could be a new addition to the number of tracking systems that are slowly but surely evolving in all spheres of our lives.

In light of such developments could breach of privacy be one of they key issues we would need to battle in the future?

South Indian Bank takes major strides in the north

Call it a case of an institution outgrowing the dreams of its founders, and even its brand name.

Thrissur-based South Indian Bank – whose founders dreamed that the institution would grow beyond the borders of Kerala and have a presence all over south India and named it accordingly – is witnessing a rapid expansion of branches in the north and in a few years will have a significant percentage of its branches in the north, west and east of the country.

The bank opened its 300th branch in Kerala here today, taking the national branch count to 546, but more significant is the bank’s swift expansion of network in the north. Last year it opened a branch in Jammu, and over the past month new branches have been opened at Faridabad, Najafgarh and Indirapuram. Also on the bank’s radar are centers like Shillong, Meerut, Bhilai and Jamshedpur, among other locations.

“We are planning eight more branches in and around Delhi and with a string of new branches across the country in the recent past, we are now present in 25 states”, SIB managing director V A Joseph told ET.

Not content with its current network of branches that will reach 575 at the end of this fiscal when 29 more are added by March 2010, SIB has chalked out a 4-year plan that will see the branch network reach 750 by 2013. Of the 250 branches that will be opened between 2010 and 2013, as many as 150 will be in the north of the country, throwing another puzzle about the very brand name of the bank.

“We are adding branches at a quick pace, but fact remains that a vast section of the people in the country is still to have any reasonable access to a bank branch”, says Mr Joseph.

According to the bank’s projections, by 2013 the target is to reach business volumes of Rs 75,000 crore, a branch network that is 750 strong, the same number of ATMs, and an employee strength of 7,500.

Mr Joseph said the bank would continue recruiting in the range of roughly 600 staffers per year leading up to 2013, to reach the employee level of 7,500 by that year.

SIB had a net profit of Rs 60.11 crore for the first quarter of the current fiscal, up 56% from the Rs 38.62 crore net profit in the corresponding period last year.

UCO may float Rs 850-cr follow-on issue, non-life JV

UCO Bank may float an Rs 800-850 crore follow-on issue during the third quarter of the current fiscal. The bank has also decided to float a non-life joint venture (JV) company by September.

“The proposed issue will have a Rs 136 crore face value and if we consider a premium of Rs 50 per share, we may easily be able to raise Rs 800-850 crore during this quarter,” said SK Goel, chairman and managing director, UCO Bank. He was talking to reporters at a press conference to announce the company’s first-quarter results.

Currently, the government holding in UCO Bank is 64%. After the follow-on issue, the government’s holding will come down to 51%. Talking about different possibilities of raising capital, Mr Goel said: “About Rs 750 crore is slated to come from the Centre as part of the recapitalisation fund. Additionally, we have headroom for another Rs 800 crore for tier-II capital.”

On the plans to float a non-life JV, Mr Goel said: “Now that the economy is rebounding, we’ve decided to take the general insurance business plans. A JV is likely to be floated with a foreign insurer by September 2009.” Talking on the first-quarter financials, Mr Goel said: “Operating and net profit for the quarter ended June 2009 are up by 36% and 34% to Rs 310.3 crore and 178.9 crore, respectively. The bank’s total business, including overseas business, grew 26% to Rs 1,68,808 crore during the period under review.”

Total deposits and advances rose 28.37% and 22.71% to Rs 1,00,428 crore and Rs 68,380 crore, respectively.

Investments, on the other hand, rose 37.44% to Rs 32,688 crore. Interest earned for the period rose 26% to Rs 2,331.46 crore. Total income for the bank rose 29% to Rs 2,583.68 crore during the period under review against Rs 1,999.16 crore in the previous corresponding period.

Income from treasury operations for the period was Rs 658.16 crore against Rs 530.64 crore in the previous period. Corporate and wholesale banking during the first quarter was Rs 948.27 crore against Rs 763.05 crore in the previous period. Income from retail banking touched Rs 966.93 crore against Rs 763.05 in the previous corresponding period.

StanChart set to buy RBS' SME business in India, China, Malaysia

Standard Chartered is set to seal a deal to buy Royal Bank of Scotland’s retail and small and medium enterprises (SME) operations in India, China and Malaysia, two people familiar with the development said.

The deal, which could cost the UK-based bank around $250 million, is likely to be announced in a fortnight, said a dealmaker close to the negotiations. The businesses on offer are a perfect strategic fit for StanChart, which earns more than 70% of its income and over 80% of its operating profit from Asian operations.

RBS had put its retail and SME business in nine Asian countries on the block earlier this year. The Indian operations of RBS, which continue to run under the ABN Amro brand name pending regulatory approval, will account for a bulk of the consideration.

The talks, which are taking place in London, may conclude by early next week. Current discussions relate to the extent of the losses that RBS will fund in the next 12 to 18 months, said a senior bank executive.

There are also some HR issues in China and Malaysia that need to be addressed. The retail and SME portfolio under the ABN brand in India is around Rs 11,500 crore, of which the retail portfolio is around Rs 6,800 crore. Losses and provisions in these business for the last calendar year stood at around $160 million (around Rs 770 crore).

Despite losses, StanChart is keen on ABN Amro because of its one-million customers. It is also interested in Van Gogh, the premium banking service offered by ABN Amro to high net worth individuals. Both the banks have kept RBI informed about the due diligence and sale process.

The StanChart spokesperson said, “We always look at opportunities in our footprint markets but, as you would expect, we don’t comment on any specific opportunities we may be looking at.”

“The sale process of the retail and commercial assets in Asia has advanced well; however, due to regulatory constraints and the confidentiality of the process, we will not comment on any individual bidders or elements of the transaction process until its completion,” said the RBS spokesperson.

An earlier proposal by RBS to sell 26 of its 31 branches in India had to be shelved because RBI refused to transfer branch licences. StanChart is likely to receive some of the branches in order to service retail customers. Out of these 26 branches, around 10 are in cities where StanChart does not have operations.

In some of the other locations, the bank may need more branches, as ABN’s existing branches are far from StanChart’s. StanChart currently has the largest number of branches in the country at 90, and may get another 18 from the deal. Given the fact that it is the UK government, with its 70% ownership of RBS, which is selling the bank’s Asian units, RBI may take a lenient approach this time around. The transfer of branch licences, however, may not figure in the sales agreement.

The business RBS will continue to do in India include wholesale debt and debt capital market business, M&A, equities research and trading, markets and treasury, corporate banking, cash and trade business and private banking business. In China, RBS has around 13 branches while StanChart has around 55. StanChart may get only around five or six of these branches if the regulators approve the takeover.

The portfolio in China is a mix of more wealth and commercial banking. In Malaysia, the gain would be minimal for StanChart, where RBS has four branches. StanChart is one of the few banks to have been relatively insulated from the global financial crisis, as most of its income comes from emerging markets in Asia and Africa.

Indian Bank revises interest rate on NRE deposits

Public sector Indian Bank has announced revision of interest rates on FCNR (B) and NRE deposits with effect from tomorrow.

For FCNR (B) deposits, in US Dollar the revised interest rate has been fixed at 2.50 per cent for deposits of one year and above but less than two years (2.61 % existing).

The revised interest rate has been fixed at 2.56 per cent for deposits of two years and above but less than 3 years (2.53 per cent existing). It has been fixed at 3.17 per cent for deposits of three years and above but less than 4 years (3.12 percent existing).

The revised interest rate has been fixed at 3.64 percent for deposits of four years and above but less than 5 years (3.57 percent existing) and at 4.00 percent for deposits of 5 years only (3.93 percent existing), a bank release said.

For NRE term deposits, the revised interest rate has been fixed at 3.25 per cent for one year and above but less than two years (3.36 % existing); at 3.31 percent for two years and above but less than 3 years (3.28 % existing) and at 3.92 percent for deposits of 3 years and above and upto 5 years (existing 3.87 per cent), the release added.

17% jump in jobs in National Capital Region

Shrugging off recession worries, the national capital region (NCR) has recorded a 17.1 percent surge in jobs creation in the first

four months of this fiscal against the last four months of the previous fiscal, according to a study by a business body.

The study, Job Opportunities in the National Capital, conducted by the Associated Chamber of Commerce and Industry of India (Assocham) concludes that during April-July 2009, as many as 49,750 openings were created in the NCR of Delhi, Gurgaon, Noida, Greater Noida, Ghaziabad and Faridabad against 42,501 openings in the last four months of 2008-09.

Releasing the study, Assocham secretary general D.S. Rawat said that 46.4 percent of the new jobs were in the Delhi region.

As per the chamber's findings, job creation in the satellite towns of NCR - Gurgaon, Noida, Ghaziabad and Faridabad - registered a staggering growth rate of 49.5 percent in the first four months of 2009-10 over the last four months of the previous fiscal, whereas the Delhi region witnessed a decline of 6.4 percent during the same period.

However, the number of newly created jobs in the NCR as a whole increased from 42,501 during December-March 2008-09 to 49,750 during April-July 2009, a growth rate of over 17.1 percent.

Among the satellite towns, Gurgaon created the maximum new job opportunities with a 23.1 percent share in the total, followed by Noida/Greater Noida (20 percent), Ghaziabad (5.6 percent) and Faridabad (4.9 percent).

A sector-wise analysis shows the IT/ITES sector created the maximum number of jobs with a share of 27.5 percent of the total, followed by the academics sector (nearly 17 percent) and the banking, financial service and insurance (BFSI) sector (14.5 percent).