Reliance Communications (RCOM) said it has received several offers for a controlling stake in its tower arm on Tuesday, a day after it reported a worse-than-expected fall in profits in the fourth quarter.India's second-largest telecom company by subscribers, owned by billionaire Anil Ambani, did not name the bidders but said it wanted to complete the deal at the earliest. "The board had approved taking the process to the next stage of due diligence," the company said in a statement.RCOM said the stake sale will help deleverage its balance sheet and substantially reduce its debt, which stood at . 32,048 crore for the quarter ended March 2011. For the same quarter, the company reported a steep decline of 86% in profits — its seventh consecutive quarter of poor results. Analysts see this as a move to calm shareholders and investors, worried by the telco's higher drop in profits. The company's quarterly earnings dropped for the 11th time on a year-on-year basis due to; a sharp spike in interest costs to service rising debts, higher costs of operations and fall in average revenue per user (ARPU). The telco owns 95% stake in its infrastructure subsidiary, Reliance Infratel, which it has been trying to sell over the past several quarters with little success. International financial investors, including HSBC Principal Investments, Galleon Group, New Silk Route and Quantum Fund (George Soros) hold the remaining 5%. A plan to spin-off the infrastructure company in 2008 through an initial public offer (IPO) of about 10% of its share to raise . 6,000 crore was also shelved due to unfavourable market conditions. Last year, a deal to sell a large stake to tower major GTL Infrastructure for $11 billion (. 50,000 crore) fell through, leaving the telco with few options. Rumours around American Tower Company buying majority stake in Reliance Infratel also emerged in the market leading to a lot of speculation but there was no result. RCOM's separate plan to sell 26% in itself did not yield because the firm found no takers. "I'll not read into it until it happens," said an analyst with an Indian broking firm who did not wish to be named. "They have got offers in the past. The GTL deal was announced which got cancelled. There was noise on ATC. Every few months there are instances of noise followed by nothing," he added. A senior executive with a leading tower company recently told ET that consolidation was imminent but mergers and acquisitions would not happen very soon because funding was hard to find and rising interest rates were not helping either. "Everybody is talking to everybody. But these are only talks," the executive said, indicating the lack of serious intent to buy assets. Analysts add that RCOM's shares have fallen more than 40% this year, becoming the worst performer among benchmark index components while the main index is down just over 10%. |
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Tuesday, May 31, 2011
Buyers Line up for Tower Stake Buy: RCOM
Posted by Unknown at 8:23 PM 0 comments
It’s Just Policy at Work
THE SLOWDOWN IN economic growth in the last quarter of 2010-11 must be seen as policy at work rather than dissipating growth calling for a salvage operation. Policy action to rein in inflation by restraining demand, through a cutback in fiscal deficit and hike in interest rates, has hit growth. In particular, investment growth has been almost flat, last quarter of 2010-11 over the last quarter of 2009-10. Since inflation continues to be high, the government's focus should be on restoring investor confidence in its ability to deliver governance, and on changing the composition of government expenditure, moving away from subsidy (deregulate diesel) to investment (build a new capital for Andhra Pradesh), rather than on reversal of fiscal or monetary discipline.
Posted by Unknown at 8:21 PM 0 comments
Monday, May 30, 2011
RCOM Q4 Net Plummets 86% to 169 cr
Reliance Communications, the country's second-largest telecom company by subscribers, missed street forecasts to post a bigger than expected 86% decline in quarterly profits, its seventh straight fall, despite call tariffs in the country stabilising over the past 12 months.
The company, owned by billionaire Anil Ambani, attributed its steep decline in quarterly profits to a sharp spike in interest costs to service rising debts, higher costs of operations and fall in average revenue per user. "During the period, company reported mark-to-market net loss of over . 1,100 crore due to currency fluctuations," president and CEO (wireless business) Syed Safawi said. RCOM's results are a pointer that 3G launch costs and interest payouts for thousands of crores in loans will continue to squeeze profits and margins, and also that of the industry in the considerable future. The company's debt stood at . 32,048 crore for the year ended March 2011. The telco's net profit fell to . 169 crore for the three-months ended March 2011, compared with . 1,220 crore for the corresponding period last year.But sales were up 55% to . 7,876 crore during this period, against . 5,092.8 crore for the three months ended March 10. Earnings before interest, tax, depreciation and amortisation (EBIDTA) jumped significantly to . 4,122 crore in fiscal 2011 from . 1,602 crore in the previous year. Reliance's primary competitor, Bharti Airtel, had posted a 31% drop in fourth-quarter profits, weighed down by its loss-making African operations. Bharti's income for the three months to end-March fell to . 1,401 core compared with . 2,044 crore in the year-ago period. Excluding its Africa business, Bharti's profits from India and South Asia fell 15%. RCOM's average revenue per user fell 23% over the last 12 months to . 107.
Posted by Unknown at 7:30 PM 0 comments
Hindalco Net Falls 37% to 2,456 cr on Derivatives Hit
Hindalco Industries, the country's largest aluminium producer, registered a 37% fall in consolidated full-year net profit because of derivative losses and higher capital spending and debt costs.Group net profit for the year ended March fell to . 2,456 crore, while revenues, including that of subsidiary Novelis, rose 19% to . 72,078 crore on strong volumes, an improved product mix and firm aluminium and copper prices."We are working on a strategy that aims to create a complementary business model. As we grow our upstream business by raising primary metal capacity, we would be exposed to volatility in LME prices. However, growth in our value-added products business will create a natural hedge against any market volatility," Hindalco managing director D Bhattacharya said. Hindalco scrip fell 2.3% to . 193.05 in Mumbai trading. The shares have fallen 22% this year, compared to an 11% drop in stock market benchmark Sensex. Hindalco's earning before depreciation, interest and tax, or EBITDA, declined to . 8,433 crore, from . 10,069 crore a year ago. Its net profit of . 3,925 crore last fiscal had included a derivative gain of . 2,736 crore, while it recorded a loss of Rs 291 crore on the same account in FY11. During the year, financing charges rose 66% to . 1,839 crore, against . 1,104 crore. |
Posted by Unknown at 7:29 PM 0 comments
Labels: Metals
Sunday, May 29, 2011
READY FOR SPRINT Fit-Again Bata Set For Rapid Expansion
Shoe retailer to launch four designs every day, open 70-100 stores of at least 5,000 sq ft every year, and push its online sales to target middle segment of the market and woo the Indian youthWRITANKAR MUKHERJEE & CHAITALI CHAKRAVARTY Bata will introduce almost four designs every day, open 70-100 stores of at least 5,000 sq ft every year, and push its online sales to shed its image as a lowcost functional footwear brand that appeals to the 40-plus age group. |
Posted by Unknown at 7:45 PM 0 comments
Q4 Net Best in 3 Years But Potholes Ahead
Data for 1,965 companies indicate no impact of rising interest rates, inflation on Indian Inc earnings
Data compiled for 1,965 companies shows they earned higher net profits per rupee of sales during the March quarter, the best performance in almost three years. These firms exclude banking, finance and staterun petroleum companies.
The operating profit margins of these firms, too, were better than the year-ago figures, indicating that rising borrowing costs have not pinched their profits yet. Rising inflation, which is pushing up the cost of raw materials, also did not impact the profit margins, as was expected.
The proportion of raw material costs to net sales did go up to 43.4%, the highest since the quarter ended September 2008. It was 110 basis points higher than the March 2010 quarter. This means India Inc was largely able to pass on the rising cost of raw materials to customers.
In the Right Quarter
Net Profit Margins: Net profit margin at 9.3% during Q4 of FY11 is the best in almost 3 years
Interest cost: Interest costs rose 33.6% over year-ago figure. Still, at 2.34% of net sales, impact on profitability was least among 4 quarters of FY11
Effective Tax Rate:
Proportion that firms pay towards tax out of pre-tax profits has hit a 2-year low of 23.5%
23.6%
Y-o-Y net sales growth. Demand was strong though firms passed on a part of cost hikes Rising Prices didn't Hit Demand
The year-on-year net sales growth was robust at 23.6% in the March quarter on the back of a high base. The year-ago quarter had recorded a 29.3% growth in sales. This indicates that rising prices did not dampen domestic consumption.
The companies continued to derive higher operational efficiency by cutting expenditure under other heads, such as employees, power and fuel. The expenditure under these heads showed a declining trend as a proportion to net sales. In other words, for every rupee spent on these items, Indian companies derived higher net sales. This was the reason behind their safeguarding, and even improving, operating profit margins in the tough scenario. As companies roll out their annual increments in the first or second quarters of FY12, this scenario could change.
Interest cost jumped 33.6% against the year-ago period and accounted for 2.34% of the sales revenue during the March quarter. Although higher year-on-year, this ratio was the lowest for FY11. The healthy sales growth seems to have taken the steam out of the rising interest cost burden. A steep 200-basis-point fall in the effective tax rate was another reason behind an improvement in the net profit margins in the March quarter. This is surprising given the government's efforts at increasing the Minimum Alternate Tax rates and bringing down the number of tax exemptions in recent years.
However, this appears to be due to a combination of three factors — increase in the number of loss-making companies, MAT credits claimed by firms and a chunk of incremental profits coming from projects that still enjoy tax exemptions.
Analysts, however, say the last quarter of FY11 did not provide much of an indication of the challenges ahead.
Posted by Unknown at 7:39 PM 0 comments
Thursday, May 26, 2011
DE Shaw-RIL Financial JV Aims to Rival Banking Giants
Venture to enter trading, lending, retail broking and asset management business
The DE Shaw-Reliance Industries joint venture in India will position itself to be a full-fledged financial services firm with offerings from algorithmic trading to lending, stock broking and asset management that may rival leading banks in a few years.
DE Shaw, the hedge fund founded by a Columbia University computer science professor, will shed its stripes as an institutions-focused firm for the first time by venturing into businesses that it had not done so far. The venture will benefit from Reliance's resources and relationships. DE Shaw's computing skills and fund management expertise may provide the edge. "Reliance is not in financial services and actually that makes the marriage better," Louis Salkind, managing director at DE Shaw said in an interview. "It makes the role of each partner clear. We won't be stepping on each other's toes. Reliance has the access to capital, resources and relationships, and they would be a great partner.'' Mukesh Ambani's Reliance and DE Shaw on March 27 announced a joint venture to provide financial services as the rising middle class provides an opportunity to sell advisory services. DE Shaw Financial Services will have a six-member board with equal representation from both. Alok Agarwal, CFO, RIL, Muralidhara Kadaba and Kandasamy Sethuraman will represent RIL and Salkind, Anil Chawla and Julius Guadio for DE Shaw. "At the intersection of finance and technology, we can create a new kind of financial services firm," said Salkind. The venture will set up a nonbanking finance company for lending and have a brokerage. It will float private equity funds that will invest in Indian companies. Investment banking and corporate banking will follow in the next few years, said Anil Chawla, chief executive at DE Shaw India Advisory Services. "The trend now is that there are a lot of under-financed sectors like real estate, infrastructure and promoter finance,'' said Abhizar Diwanji, head of financial services at consultants KPMG. "These are the areas where banks have reduced lending. Hence, there is fairly a big market to fund these areas." Prime Minister Manmohan Singh is estimating an investment of $1 trillion to build roads, ports and other infrastructure that will help firms such as DE Shaw to build their business. "Indian customers will demand low-cost, convenient banking," Boston Consulting Group (BCG) said in a report. "Customer information management and analytics will be major IT trends in retail banking." BCG forecasts mortgages at . 40 lakh crore by 2020 and that wealth management will grow 10 times in the same period. "You can never be wrong betting on India in long-term,'' said Salkind of DE Shaw, which has more than half its total of about 1,500 staff in India, plans to hire about 100 more. "TheIndianmarket is still in the process of modernising, and so there is an opportunity to take advantage of the secular growth story.'' New Designs • The DE Shaw-Reliance JV will set up a non-banking finance company for lending and a brokerage • The JV will float private equity funds that will invest in Indian companies • The partners also plan to launch investment and corporate banking services in the next few yearsPosted by Unknown at 8:15 PM 0 comments
Labels: RIL
Tata Motors Net Trebles to 9,274 cr
Tata Motors on Thursday said its full-year profit more than trebled, driven by a strong performance of its British luxury brands, Jaguar and Land Rover (JLR). India's largest truck and bus maker posted a consolidated net profit of . 9,274 crore for the fiscal year ended March, compared with . 2,571 crore a year ago. The rise in profit was largely driven by the near . 7,700 crore (£1.04 billion) net profitability of its JLR unit, which was initially loss-making, but has turned around in the last few quarters."The improved profitability was driven by higher volumes and pricing of these (JLR) products across various markets," chief financial officer C Ramakrishnan told reporters. The company'snet profit from domestic operations, however, dropped 19% to . 1,812 crore, compared with . 2,240 crore in 2009-10. An analyst tracking Tata Motors said high commodity prices and lower sales could check profitability of the company, and the auto sector in general. Tata Motors, part of salt-tosoftware Tata conglomerate, builds utility vehicles, cars and the ultra-cheap Nano. It acquired Jaguar and Land Rover from Ford Motor in 2008 for $2.3 billion. JLR's global sales volume for the year rose 26% to 2.43 lakh units, helped by improved market conditions, better market mix and strong demand from China, which has emerged as one of the strongest markets for the brand. The company's global sales for the year rose 24% to 10.80 lakh vehicles, backed by its wide product portfolio. Consolidated revenue rose by a third to . 1.23 lakh crore. In the domestic market, sales of Tata's passenger vehicles, including Fiat and JLR vehicles distributed in India, grew 23% year-on-year to 3.19 lakh units, helped by rising personal incomes and easier finance. In the commercial vehicles segment, its sales jumped 22.7% year-on-year to 4,58,828 units, mainly because of improved infrastructure. In India, the demand for cars is expected to moderate because of higher fuel costs and interest rates. It was 30% last year. Rising raw materials prices had forced Indian car makers to raise prices in recent months. The company also recommended a . 20 dividend per share. Its board approved a five-for-one stock split where Tata Motors' ordinary and 'A' ordinary shares, both of . 10 each, will be divided into shares of . 2 each. |
Posted by Unknown at 8:13 PM 0 comments
RIL Keen to Acquire Australian Coal Firm
Co to initiate due diligence on Premier Coal's assets, may submit a final bid by June-end
India's largest company by market value, Reliance Industries (RIL), has submitted an expression of interest to buy Australia's Premier Coal, a division of ASX-listed Wesfarmers Group, said two people with knowledge of the matter said on condition of anonymity, because the transaction is in its early stages.
RIL will initiate due diligence on the assets of Premier Coal, according to one of the people quoted above, and may submit a final bid at the end of June, if it is satisfied with the result of the due diligence exercise.Wesfarmers initiated a process to sell its coal mining division in April this year and is being advised by UBS and Gresham Advisory Partners. An external spokesperson for RIL declined to comment for this story. Wesfarmers did not respond to an email seeking comment. The sale process is being run as an auction and has received interest from a number of Indian and Chinese bidders, according to a person with knowledge of the process. Premier Coal has sought bids in excess of $500 million. It has proven reserves of 129 million tonnes (MT) and currently produces 4 MT of coal. Coal produced from the Premier mine is sold to customers including Australian power generation company, Verve Energy. The majority of committed sales volumes are contracted to Verve under a longterm contract. Other Indian companies, such as the Aditya Birla Group and Hyderabadbased GVK, are also looking to acquire coal mines in Australia. GVK is in talks with Hancock Coal while the Aditya Birla Group has joined a bidding process being conducted for the sale of Bandanna Energy. RIL has been scouting for coal mines to secure essential raw material for its captive power generation capacities that support many of its businesses. The company may also look at other opportunities in Australia, according to the person quoted above.
Global demand for thermal coal and in particular, sub-bituminous and low grade coal is forecast to grow strongly over the medium term, in order to meet new coal fired power generation capacity requirement.
Going Down Under
• Wesfarmers initiated a
process to sell its coal mining division in April this year and is being advised by UBS and Gresham Advisory Partners
• The sale process is being
run as an auction and has received interest from a number of Indian and Chinese bidders
• Premier Coal has sought
bids in excess of $500 m
Posted by Unknown at 8:04 PM 0 comments
Labels: RIL
Dole for LPG, Kerosene may End Next Year
The government plans to stop subsidising cooking gas and kerosene next year and give direct cash support to the poor—a move that will at least double the price of domestic fuel, but wipe out revenue losses of $15 billion for state oil refiners and expose them to intense market competition in all oil products except diesel.
Ending subsidies would triple the price of kerosene and double the rate for cooking gas. However, to protect the poor, the government will give them cash compensation but only to actual buyers of the fuel, government officials said on Thursday. The new scheme, proposed to be implemented from April 1 next year, has been recommended for approval of the empowered group of ministers on fuel pricing that is scheduled to meet on June 9. Government officials said the key ministries involved in the issue have already supported the change. The government has also drawn plans to limit the cash subsidy. If a poor person gets a cooking gas connection, he will get cash subsidy for only 2 litres of kerosene a month, and even that will be withdrawn if the customer has two gas cylinders. "The retail selling price of kerosene would be reviewed every month and aligned with the international price on an import parity basis," a government official told ET. Move to Boost Oil Cos' ProfitsThe monthly subsidy payment released by the central government to states would also vary accordingly," the official, who is involved in the decision making, said. For state refiners such as IndianOil, Bharat Petroleum and Hindustan Petroleum, the decision would significantly boost their profitability. Between them, they would earn an additional . 70,000 crore in 2011-12 if kerosene and cooking gas are sold at international rates.
However, the end of subsidy will also lure private firms to the lucrative cooking gas business. So far, private firms were not in a position to compete in the market because the government subsidises sales only by state firms. State refiners have complained about low government-set prices of fuel, but this has also helped them dominate the market. The government has already lifted controls on petrol, and has in principle freed diesel prices too. This would make the market attractive for companies like Reliance, Essar and Shell, which operate petrol pumps in the country. Several foreign firms such as Saudi Aramco and Kuwait Petroleum Corp have said in the past they are keen to retail fuel in India, but are discouraged by the subsidy regime. Higher prices of kerosene would also discourage its use in adulterating diesel. Industry officials say more than half the subsidised kerosene meant for lighting homes of the poor lands up in petrol pumps for adulteration.
Posted by Unknown at 8:02 PM 0 comments
Tuesday, May 24, 2011
US Court Asks Infosys to Provide Info on B1 Visas
District attorney in Texas asks software co to clarify on allegations of visa misuse The ongoing backlash in the US against India's $70-billion outsourcing industry gained further momentum when a district attorney in Texas asked Infosys on Tuesday to clarify on allegations of visa misuse by Jack Palmer, currently working with the company. The district attorney has launched an independent investigation on the use of B1 visas based on an ongoing case filed by Palmer in a district court in Alabama. For India's growing outsourcing firms competing with established US rivals IBM and Accenture, allegations of misusing work permits and local anti-offshoring sentiments are increasingly becoming a tough challenge to deal with.
Earlier this year, Palmer, who has been working with the company as a principal consultant since August 2008, filed a complaint saying Infosys was illegally sending employees on B1 visas to work full time in the US, though the visa was only meant for visitors who come for meetings, conferences and business negotiations. Infosys CFO V Balakrishnan has said the company would co-operate with the district attorney's request and provide the needed documents. A spokeswoman for Infosys said in an email response that her company takes the legal compliance obligations very seriously.
"As we have announced on May 23, 2011, we received a subpoena from a grand jury in the United States District Court for the Eastern District of Texas. The subpoena requires us to provide information to the grand juryregarding our sponsorships for, and uses of, B1 business visas. We intend to comply with the subpoena and to cooperate with the grand jury's investigation," she said in an email response. Som Mittal, president of Nasscom, said in an interview last week that such allegations are because of interpretation issues around work permits. "We continue to support an overhaul of immigration and believe there is a need for a separate services visa category," he said.
In his allegations, Palmer said he was asked to write "welcome letters" for Indian employees so they could come on B1 visas and when he refused and complained to the 'whistleblower team' in Infosys, they did not investigate the matter thoroughly. He also said had received threatening calls from the company. He also accused Infosys of not paying taxes in the US. Senior executives at some of the top tech firms say such allegations are opportunistic and aimed at leveraging anti-outsourcing sentiments for monetary claims.
"A company like Infosys represents the entire industry because of its brand, there's no way this company can ever misuse work permits to save few Dollars," said a senior official at one of the multinational tech firms that competes with Infosys for business. The US is the biggest market for Infosys from where it draws over 60% of its revenues. Infosys has 15,000 employees in the US and is growing this number rapidly. The use of visas by Indian IT firms has been a controversial issue and the US government last year doubled the fee of H1B visas, used to send temporary workers to the US. Indian IT firms responded to this by saying that they would increase their local workforce in the US. According to Palmer, Infosys was using B1 visas to circumvent the problem around H1B visas.
This case could make matters even more difficult for Indian IT firms. It has drawn the attention of the foreign media and of Senator Charles Grassley who has asked secretary of state Hillary Clinton and homeland security secretary Janet Napolitano to investigate the matter. Infosys has requested that the case should be put under arbitration. Palmer's attorney, Kenny Mendelsohn, in response to an email questionnaire to ET last week, said several other current and former employees of Infosys had contacted him and provided additional information that Infosys has violated US visa and tax laws and the fact that Palmer has been retaliated against.
According to him, most of these employees have said that if subpoenaed to court, they will testify to these facts under oath while a few others were scared because after seeing how Infosys retaliated against Palmer and how he had been threatened. He also said he had been contacted by other employees who were considering filing suit against Infosys. Mendelsohn said Palmer was not being paid his dues by the company and that he had been put on bench.
Posted by Unknown at 8:34 PM 0 comments
India Pledges $5b Credit to Africa
Manmohan Singh announces extra $700m for education, skill development at India-Africa summit
Prime Minister Manmohan Singh unveiled a slew of initiatives to help African nations build local capabilities, continuing the Indian strategy of treading softly on a continent where there is a scramble for natural resources. India pledged a $5 billion line of credit for development initiatives and an additional $700 million for education and skill development in Africa, Singh said at the plenary session of the second India-Africa summit here. India has traditionally adopted a lightfooted approach to economic diplomacy in Africa and there have been concerns that the Indian engagement lacked consistency and is not as effective as that of China. Officials accompanying the prime minister insisted that India's is not being outsmarted by the Chinese, pointing to the Indian initiatives to build local institutions and capacity in agriculture, education and training. "The Chinese are absent in many of these areas. We don't agree that China has outflanked us here. There is enough place to do what we are good at,'' said a senior official. Africa, with a population of 1 billion, is being wooed by developed and emerging powers because of its potential as a huge market and a continent with vast mineral and oil resources. China, in particular, has pursued an aggressive strategy of acquiring oil and mineral concessions while building large infrastructure projects. The $5 billion line of credit will be for three years, Singh said at the summit, attended by 15 African nations. A substantial chunk of the credit line -- $300 million -- will be to support the development of a new Ethio-Djibouti railway line linking Addis Ababa and the port of Djibouti. To boost engagement in the agriculture and allied sectors, the prime minister announced the formation of an India-Africa food processing cluster. "This would contribute to value addition and the creation of regional and export markets," he said. Furthermore, an India-Africa Integrated Textile Cluster will support the cotton industry and the processing of the raw material into high-value products. India, which is looking at close coordination with the Africans in climate change negotiations, has also pledged support for weather forecasting technology. "This will harness satellite technology for the agriculture and fisheries sectors as well as contribute towards disaster preparedness and management of natural resources,'' Singh said. India had announced a $5.4 billion line of credit in 2008 at the first India-Africa summit in New Delhi but much of it remains unutilised. India-Africa trade, which is about $45 billion now, is expected to reach $75 billion by 2015. Nigeria, from where India imports more than a tenth of its crude, and South Africa, are the two main trading partners. But neither attended the summit. China's trade with Africa is expected to double from its present level to $300 billion by 2015. Indian investment in Africa is driven by the private sector in contrast to China, where state-run enterprises dominate. Many Africa analysts complain that while China is unwavering in its focus on Africa at the highest level, India has been fitful. The Chinese premier or the president visit Africa every year but Indian prime ministers' visits are few and far between. Prime Minister Singh, in his address, also spoke about the need for better connectivity between India and Africa. "One of the biggest gaps in our interaction is that of insufficient air connectivity. To begin with, India would be too happy to increase the access of African airlines to Indian cities in a significant manner over the next three years," he said. With Somalia pirates becoming a major security concern, Singh said India would back African capacities in the maintenance of peace and security. "As a token of our commitment to supporting Africa's endeavours for seeking African solutions, India will contribute $2 million for the African Union Mission in Somalia." He announced the setting up of a formal arrangement for better interaction between businesses in India and Africa. "I propose that we jointly establish an India-Africa Business Council which will bring together CEOs of major corporation from both sides," he said. Among the major business groups with operations in Africa are mobile phone service provider Airtel, the Tata group, the Essar group, Reliance Industries, BHEL and software training company NIIT. India Pitches for UN Reforms at Africa Summit ADDIS ABABA India on Tuesday made a strong pitch for reform of global political and economic institutions, including the UN Security Council, as it began a second summit with Africa here. "The current international economic and political system is far from favourable, specially for developing countries. The world faces new challenges in assuring food and energy security," Prime Minister Manmohan Singh told African leaders at the African Union headquarters in the Ethiopian capital. "The global institutions of governance are outmoded and are working under stress," he said. "We, therefore, need a new spirit of solidarity among developing countries." The two-day India-Africa Forum Summit began on Tuesday morning with a rendition of the anthems of the African Union and India. PRR
Posted by Unknown at 7:31 PM 0 comments
Labels: India
New SBI Boss will Err... on the Side of Caution
Aggressive M&As to take back seat as Chaudhuri looks to set house in order
SANGITA MEHTA & SHAJI VIKRAMAN
State Bank of India Chairman Pratip Chaudhuri's voluntary baptism by fire was the first step in his journey to make the 205-year-old behemoth reach the top 50 in global rankings without future earnings shocks. Prudence and caution will take precedence over aggression. Attention-grabbing takeovers and mergers, including those of associate banks, will be on the backburner as the nation's largest lender sets its house in order with higher provisions for bad loans and pension liabilities.
Chaudhuri said investors will have to endure some pain in the upcoming quarters though not of the magnitude of the quarter to March, when SBI shocked investors and the market after reporting a net profit of a little over 20 crore—the lowest in a decade or so. "It will be slightly subdued for two more quarters as we have to make a provision of 550 crore each for provision coverage. "
But the good part, according to him, are signals which indicate the bank's net interest margin (NIM)—a key gauge of profitability, is on an upward curve. " I see it coming back " he said in an interview to ET.
SBI shares have lost a fifth of their value this year, compared with a 13% decline in the Sensex. India's largest bank is valued at $31 billion compared with Industrial and Commercial Bank of China valued at $249 billion.
In the last quarter, SBI provided a record 2,300 crore for bad loans and wage revisions. The bank was also forced to draw down over 8,000 crore from its reserves to provide for pension liabilities.
NIMs, which declined to 3.3% in the quarter to March, could widen to close to 3.5% as the impact of repricing of loans kicks in. SBI raised its interest rates by 75 basis points a few weeks ago after the RBI revised key policy rates in April. It has also raised deposit rates, mostly for shorter tenures. SBI, which under previous chairman OP Bhatt pursued an aggressive strategy to boost market share, will now focus on deposit mobilisation and lending. Rethink on Merger of Associate Banks
"It will be back to basics," Chaudhuri said. He, however, said the management will not abandon its pursuit of market share. It is also amply clear that Chaudhuri has had a rethink on the merger of associate banks of SBI. He said there will be a pause on such mergers until July 2012. "Associate bank mergers are not going to happen in a hurry.
It is not because we are not convinced that merger is the right thing, but it is because it requires capital and operational efficiency." The cost of a single merger of an associate bank with the parent would be Rs 1,500 crore in terms of payout on staff benefits.
The new chairman, a career banker with SBI who took over from Bhatt this April, said an overhaul is underway in some of the subsidiaries controlled by the bank such as SBI Funds Management-—which is in the mutual fund business—besides SBI Cards and SBI Capital Markets—the investment banking arm of the bank. In his assessment, SBI Mutual Fund had hurt the bank's brand equity while the performance of its credit cards subsidiary, which has a partnership with GE Capital, was disappointing.
SBI may have been rapped by the regulator for some of its lending to telecom companies, but Chaudhuri said all the firms the bank lent to were respected and none of the loans has been classified as a bad loan.
"In telecom, the biggest asset is licence and it cannot be pledged as accounting standards do not allow such assets to be treated as fixed assets," he said.
OVERSEAS EXPANSION
drive to focus on Australia MERGER OF associate banks on back burner TO DRIVE changes in subsidiaries to boost their performance
"We are interested in growth only if it comes with profits"
"When you are on an upward curve, you don't think that the downward trend will hit you"
PRATIP CHAUDHURI
SBI Chairman
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