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Sunday, April 29, 2012

Telenor Threatens to Hang up on India Ops

Adding Insult to Injury After S&P's negative outlook, two big global businesses are now rethinking their India plans due to a difficult investment climate & slow policy-making 
Norway telco says it'll be impossible to carry on business if Trai proposals are accepted


    Norway's Telenor has warned it will exit India if the government accepts the telecom regulator's proposals to auction airwaves at 13 times the price used in 2008, highlighting the uncertainty shrouding a sector till recently seen as a poster child for liberalisation. 
The head of the company's Asia unit said it would be "impossible" to continue operations in the country of more than a billion people, in which it has invested over $3 billion since buying a majority stake in the telecom business of Unitech, a Delhi-based real estate company, in 2008. 
"If these recommendations become policy, we will be forced to exit India. It will be impossible for us to continue operations here," Telenor Executive Vice-President & Asia head Sigve Brekke said in an interview. "This is not a threat, it is a reality," he said. 
Brekke's comments come just a day before the Telecom Commission, the highest decision-making body in the sector, meets to decide on the recommendations put forward by the Telecom Regulatory Authority of India. But two analysts said quitting India would impact Telenor's growth potential as the Scandinavian telecom major has been depending on Asian and emerging markets for growth, with business in Europe, its main territory, declining. 
"The India exit will mark a monetary loss, but will also mean a threeyear setback to Telenor on growth in the next two years," said one. They asked not to be named. 
Telenor had forecast a breakeven for Uninor, its Indian unit, in 2013. Trai Proposals Not in Line with SC's Orders: Telenor's Brekke 
Telenor's India operations were among the worst affected by the Supreme Court's February 2 order quashing licences awarded in the controversial 2008 sale by former telecom minister A Raja. The court asked the government to issue new permits through an auction. 
Trai last week recommended that the government auction 5 MHz of airwaves in the 1800 MHz band in which Telenor operates, a quantum of airwaves sufficient for only one company to operate, though nine companies have lost licences after the court decision. 
The regulator also said mobile phone companies will have to pay a minimum . 3,622.18 crore for every unit of 2G spectrum, a 13-fold increase over what they paid in 2008 when Raja dished out pan-India permits that came bundled with 6.2 MHz of 2G spectrum for . 1,659 crore. Trai further said the first round of auctions would help establish the value of airwaves, which would be used as the base price for the next round to be held in 2013. 
Brekke, who is also the head of the Scandinavian company's India operations that offer mobile services under the Uninor brand, said Trai's recommendations were not in line with the Supreme Court's orders. 
"The Supreme Court said new licences should be given through auctions. But according to Trai's recommendations, only one licence, and not licences, can be issued. Even this is theoretical as incumbents can take away spectrum in the first round of auctions and companies like us are therefore finished," he said. 
"The main focus of the recommendations is refarming (redistribution) of airwaves in the 900 MHz band. To accommodate this, Trai has said only 5 MHz of airwaves in the 1800 MHz band can be auctioned. This is not what the court ordered. The SC simply said reaward the new licences through auction. The SC couldn't be any clearer," he reiterated. 
Trai has recommended that incumbent operators such as Bharti and Vodafone surrender a part of their airwaves in the 900 MHz band by 2014 and replace it with spectrum in the 1800 MHz band. As a result, it has not recommended the auction of airwaves freed up after the Supreme Court-ordered cancellations. Brekke said while issues like spectrum price are of concern, Telenor may not even wait for price discovery in the auction, given the nature of the recommendations. 
ROLLOUT OBLIGATIONS IMPOSSIBLE TO MEET 
The Uninor MD said the company's primary concern was the quantum of airwaves to be auctioned as well as requirements that the company establish its presence in a certain number of locations, known as rollout obligations. "With 5 MHz, the government would be setting a deliberate policy to reduce competition that has brought affordability. Auctioning 5 MHz when more than 20-30 MHz is available is nothing but creating an artificial scarcity to jack up prices. This will be the smallest spectrum auction in the world," he added. 
Brekke added that Telenor would not be able to continue operations if the government insisted on imposing Trai's rollout obligations. "It isn't logical to ask each operator to set up its own tower in every village when this is done smarter through collaboration and sharing between operators. Why use last decade's mindset to solve this decade's priorities?" 
Uninor would require an additional 120,000 towers to meet the rollout obligations, making its business here unviable, Brekke said. Brekke also slammed Trai for setting a steep price for airwaves. "We are being charged high spectrum prices and asked to recover them by using this spectrum for 3G and LTE (since this is liberalised spectrum) instead of using it for basic voice telephony that 90% of India uses. This is equivalent to taking from the masses and giving to the classes and goes against the political intention of the government," he added. 
The Trai recommendations enable telecom operators to use airwaves for all purposes, including data, to recover costs. However, for most operators, this implies massive replacement of infrastructure, which is unviable, Brekke explained. 
Some of the mobile phone companies plan to file a fresh petition in the SC, stating that Trai's recommendations are against the court's orders, according to people familiar with the plan. Brekke said he had 'heard of this plan' and added that 'Uninor had not yet decided to be party to this petition'. 
The Supreme Court last week ordered the government to conduct 2G spectrum auctions and grant licences by August 31, rejecting the Centre's plea that it required 400 days to complete the process, even as it allowed the nine mobile companies whose licences were cancelled earlier this year to continue operations till September 7, extending its earlier deadline of June 2. 
"The regulator seems determined to complicate this and bring in every telecom issue it possibly can. If this is what the SC wanted, then 400 days would have been allowed. But it wasn't," Brekke said. For now, the apex court seems to be done with its guidelines, and little more can be awaited on that front, he added.
ET reported last week that the DoT may first examine Trai's recommendations to auction 5 MHz of airwaves in the 1800 MHz band and later consider the other proposals submitted by the regulator. Some sections of the telecom department are of the view that setting aside most of Trai's proposals and focusing solely on auctioning 5 MHz of airwaves will enable the government meet the August 31 deadline set by the Supreme Court. But this will result in a limited auction, and not the re-auction of all the airwaves vacated due to the cancellation of licences by the apex court.




Indian Stocks: Consistent performers are the best bets

Instead of relying on past results over a single time scale, one should go for funds that give good results across different periods. ET Wealth helps you track down some such funds across four categories

 One of the easiest ways to pick a good mutual fund is to evaluate a fund's historical returns, which helps identify and choose top performers. However, given that different funds do well in different time frames, which period should investors consider? Take Birla Sun Life Dividend Yield Plus, which has featured in the top 10 funds across all equity schemes in the past five years, but does not figure even in the top 40 equity schemes in the past year. Similarly, DSPBR Microcap fund has been in the top five equity funds in the past three years, but doesn't appear in the past year's listing. 
    This implies that relying on the analysis of historical returns over a single time scale may not be very rewarding. To overcome this limitation, one should analyse the results over multiple time scales. In other words, the funds that are consistent in generating returns should be given weightage. This is because such funds aim for returns that beat the market and entail superior and advanced fund management skills. Picking a fund that is consistent not only saves investors the cost of portfolio churning, but also reduces the need for regular fund monitoring and portfolio rebalancing. It is advisable to invest in mutual funds, especially equity funds, for medium to long term, and if one regularly rebalances the holdings in the short term, the entire purpose of resorting to mutual funds is defeated. According to Jayant R Pai, head, marketing, PPFAS Asset Management Private Limited, "Investors have an impulsive urge to opt for the mid-cap or micro-cap fund that is the flavour of the month. One should not allocate more than 5% of the portfolio to such funds." 
    Besides, investing in consistent funds is a good option if one needs the money in the short to medium term. This is because such funds strive to invest in securities that minimise the impact of market volatility. On the other hand, a fund that is erratic in its performance exhibits high volatility, which increases the chances of losing money. 
    The consistency of a fund's performance can be measured in terms of its performance with respect to its benchmark and category average. A fund can deliver negative returns when the markets are in a bearish mode, but the funds that fall less than their benchmarks or category averages are genuine outperformers. Similarly, in a bull market, the outperformers are those that gain more than their benchmarks and category averages. 
    To help you zero in on funds that have shown consistency in their performance in different time scales, ET Wealth tracks these across various categories. We considered all equity funds, balanced equity funds, balanced debt funds and income funds. The consistency is evaluated on five time scales. Equity and balanced equity funds are evaluated over six months, 1 year, 2 years, 3 years and 5 years. Balanced debt funds and income funds are evaluated over 3 months, 6 months, 1 year, 2 years and 3 years. Besides, only regular schemes with growth options are considered for the analysis. For a fund to be consistent, it has to outperform its benchmark and category average in all the five time scales. If it fails to outperform even on one time scale, it will not make it to the consistency list. 
    In the case of equity funds, nearly 336 schemes were analysed. We found 32 equity funds that satisfied the criteria of benchmark and category average in all the five time scales. However, we are listing out funds whose latest available corpus is more than 1,000 crore (see table). 
    In the balanced equity category, 30 funds were analysed and only three funds satisfied the criteria. Similarly, 30 balanced debt funds were analysed and only two funds fulfilled the criteria. In the case of income funds, 80 funds were analysed and only five were consistent in their performance. 
    The shortlisted funds across these categories are true outperformers as one would have benefited from investing in them in any of the time periods mentioned. It is possible that a consistent fund may or may not be a top performing fund in any one time scale, but will surely prove more prosperous in the long run.







Thursday, April 26, 2012

Sachin 1st Active Sportsperson Nominated To RS God has a new House

Rekha, Anu Aga Also Named To Parliament

New Delhi: A Bharat Ratna might still be a little distant, but cricket icon Sachin Tendulkar will soon be an MP. This will be the first time that an active cricketer, rather any sportsperson, has been nominated to the Rajya Sabha. On Thursday, the Manmohan Singh government nominated Sachin along with veteran actor Rekha and spunky business leader Anu Aga. 
    Sachin's nomination to the House of Elders took political circles by surprise, even though it was in the works for a while. Cricket lovers, too, were bemused with many wondering how an active cricketer who is on the road for around 250 days a year will be able to do justice to his parliamentary duties; and if he couldn't, would the Rajya Sabha entry really enhance his stature. 
    Senior government figures, including MoS for parliamentary affairs Rajiv Shukla, have been in touch with Sachin for a couple of weeks — obviously in the hope that his acceptance of a Rajya Sabha nomination would help burnish the UPA government's credentials. 'Sachin Tendulkar not planning to pack up kit' 
    The calculation appeared correct as no one, including the opposition, had anything but a welcome for the immensely popular cricket star. 
    Sachin, it is said, had sought time to think over the offer. A week ago, he conveyed his acceptance to Congress chief Sonia Gandhi. The news of his nomination, along with that of Rekha and Anu Aga, broke when Sachin with his wife Anjali came to meet Sonia Gandhi at 10 Janpath in the company of Shukla. 
    Tendulkar's nomination comes after he completed a historic 100 international centuries in March this year. It is also seen by some cricket buffs as indicating his retirement in the foreseeable future. 
    However, when asked if his acceptance of a Rajya Sabha nomination indicates a desire to hang up his boots, sources said, "No way. He is not retiring." 
    The home ministry sent the names of Sachin, Rekha and Aga to President Pratibha Patil after Prime Minister Manmohan Singh made the recommendations on Wednesday. Patil approved the recommendation on Thursday, leaving it for the Rajya Sabha secretariat to complete the formalities.
    The names have been cleared against five existing vacancies in the Upper House under the 'nominated members' category. At present, there are seven nominated MPs, including lyricist and script writer Javed Akhtar. 
Times View: Nominating Sachin Tendulkar to the Rajya Sabha may be a populist move, but it makes little sense. There is no doubt about Sachin's greatness as a cricketer. A nomination to Rajya Sabha, however, should not be treated as a means of honouring eminent people but as a way to enrich parliamentary debate by having people with expertise in different fields. Nominating an active sportsperson defeats that purpose. The Indian team spent 292 days on the road last season and Sachin himself was on the road for 216 days. His new role will force Sachin to choose between his duty to the team and his job as a parliamentarian. It's an unfair choice, one we should not compel him to make.


S R TONDULKAR BECOMES RS TENDULKAR



Sachin R Tendulkar (39), CRICKETER 
Highest rungetter 
in Tests and ODIs; also holds the record for most centuries in both formats of the game. Having achieved virtually every conceivable landmark in cricket, may now be preparing for a fresh innings in public life



Rekha (57), ACTRESS 
Has acted in over 180 films in a career spanning over 40 yrs. Filmfare best actress award for Khubsoorat (1980) and Khoon Bhari Maang (1988) and best supporting actress for Khiladiyon Ka Khiladi (1996). Won the National Award for best actress in 
1981 for Umrao Jaan



Anu Aga (69), BUSINESSWOMAN AND SOCIAL ACTIVIST 
Chairperson of energy major Thermax from 1996-2004. Got Padma Shri for social work in 2010. Now chairperson of Teach For India. Was one of the first business leaders to attack Narendra Modi for the Gujarat riots



TOI Interactive Should Sachin have accepted the RS nomination? Comment on toi.in/sachin 


Wednesday, April 25, 2012

S&P Negative on India, but Moody’s Fine Some Good, Some Bad S&P lowers outlook on worsening fiscal nos, but rival livens up hopes

 Ahassled government has just come under more pressure. Along with bad press, angry corporates and disillusioned foreign investors, it has to now deal with a 'negative outlook' tossed by the world's largest credit rating agency, Standard & Poor's (S&P). 
The saving grace is that an hour before the S&P announcement, rival rating agency Moody's said the Indian economy is "growing solidly, but below potential". 
The divergence of views between the two agencies is a reminder of the US downgrade last August when Moody's had countered Standard & Poor's to say America was still a triple-A economy. On Tuesday morning, S&P, while retaining India's 'investment grade' rating, revised its outlook from 'stable' to 'negative' due to worsening fiscal numbers. It's a veiled threat that the sovereign rating may be downgraded from BBB-, which is the lowest-rung investment grade, to speculative grade if New Delhi fails to pull up its socks. But, the finely-timed Moody's statement helped allay fears that a downgrade was imminent. 
An Unwarranted Step, says Ranga 
PMEAC Chairman C Rangarajan, in an interview to Deepshikha Sikarwar, says S&P's decision to cut India's outlook to negative from stable was not warranted. 
•13 Governance is the key 
A rating downgrade from S&P is not the end of the world for India's economy or policymakers. After all, this is the same agency that stamped AAA ratings on worthless mortgagebacked securities in the US, leading to the great recession. India's low exposure to global credit markets means that the effect of the downgrade on interest rates will be minimal. But policymakers can't be complacent. This is as good a time as any to step on the reforms pedal. For that to happen, the Singh administration must stop squabbling and start working together as a team. Some Reason for Optimism: Moody's 
According to S&P credit analyst Takahira Ogawa, "The outlook revision reflects our view of at least a one-in-three likelihood of a downgrade if the external position continues to deteriorate, growth prospects diminish, or progress on fiscal reforms remains slow in a weakened political setting." 
However, Moody's livened up hopes as it said there was some reason for optimism due to interest rate cuts and prospects of a good monsoon. India's economy is "now growing below potential as a combination of bad luck and poor economic management weighs on sentiment", said Moody's. 
Bankers and economists ET spoke to said the outlook change would not raise overseas borrowing costs of Indian companies, particularly wellperforming ones. But the government, according to one of them, may have to think of programmes like a special NRI deposit scheme to bring in foreign capital to tackle the balance of payments problem. Partly due to Moody's and possibly because of the reduced aura of rating agencies, jumpy traders covered their short positions in the afternoon after overreacting to the morning news. The Sensex, which slipped 180 points moments after the S&P release, closed at 1,751.29, down just 56 points. The rupee ended 12 paise higher at 52.53/54 against the dollar. 
"I m concerned but I don't feel panicky because I'm confident that our economy will grow at 7%, around 7% if not plus. We will be able to control fiscal deficit and it will be around 5.1%," Finance Minister Pranab Mukherjee told reporters. He also said the government will be able to enact the Direct Taxes Code in the next session of Parliament. According to Brinda Jagirdar, head of SBI's economic research, a revision in outlook was not warranted as there was no particular event to trigger it. S&P, however, is not so bullish on India's growth forecast. It expects gross domestic product to grow at 5.3% in 2012-13 – significantly lower than IMF's forecast of 7.1% and Moody's 6.1%. The Indian government has targeted a GDP growth of 7.6% in 2012-13 as against 8.35% achieved last year. "The outlook revision may weigh down the rupee but the impact won't be much," said Rashesh Shah, chairman, Edelweiss Financial Services. Interest cost may go up marginally for tier-II companies, according to Joiel Akilan of Spanish bank BBVA, which arranges foreign currency borrowings of Indian companies. Parthasarthy Mukherjee, president treasury and international banking at Axis Bank, said while the rating revision can be a cause for concern in future, borrowing cost will not rise unless there is an actual downgrade. Investors, however, will closely track the rupee in the coming days due to widening current account deficit, lower foreign exchange reserves and possible BoP shocks due to stock selling by foreign portfolio managers. Some like Indranil Sengupta, chief economist-India, BofA-Merrill Lynch, feel since it's difficult for government to dramatically improve fiscal deficit in the short term, it should look for avenues to bring in more foreign capital, particularly with FIIs holding back investments. "A scheme to attract NRI deposits will help. It may appear expensive, but the benefits may far outweigh the costs as forex reserves will rise," said Sengupta. S&P has also revised outlooks on 11 Indian financial institutions, including SBI, ICICI, and HDFC Bank.



Wipro Q4 profit up 8% at 1,481cr

Posts 5,573Cr Net For FY12 Gives Muted Guidance For First Qtr Of FY13
Bangalore: IT major Wipro has announced a flat revenue guidance at 0.6% for Q1 in 2012-13, below market expectations. The markets were expecting a bold guidance from the company. 
    The company also reported a flat sequential growth for fiscal 2012 at 2% in dollar terms. The company said its June ending quarter revenue from IT services are expected to be in the range of $1,520 million to $1,550 million. 
    Wipro chairman Azim Premji said despite the overall macro economic environment continuing to be volatile, Wipro had achieved 8% increase in consolidated net profit at Rs 1,481 crore for the fourth quarter ended March 31. Its total revenues grew by 19% at Rs 9,869 crore in the quarter. 
    The flagship IT services business which accounted for 76% of the company's overall revenues, posted 13% growth in operating profit at Rs 1,573 crore when compared with the same quarter in the previous fiscal. The IT services revenues in the quarter grew 21% to Rs 7,590 crore on yearon-year (YoY) basis. When compared with the previous quarter (on sequential quarter basis), the operating profit and revenues of IT services business dropped marginally by 0.63 and 0.23% respectively. 
    "We have been seeing some signs of positivity in the market in the last three months. However, customers continue to be cautious. In my discussions with business leaders. we have seen customers focusing on collaborative innovation and identify growth opportunities," Premji said. 
    During the full year, Wipro posted a net profit of Rs 5,573 crore — an increase of 5.1% compared to Rs 5,297.7 crore in the previous year. Its total revenues grew by 21% at Rs 37,525 crore as against Rs 30,998 crore in the previous fiscal. 
    Wipro's IT services revenue for fiscal 2012 has increased by 21% year-on-year to Rs 28,431 crore, while sequentially it reported a flat growth at 0.2%. It has projected a flat quarter during Q1FY13, with expected revenues in the range of $1,520 million and $1,550 million. 
    Azim Premji said, "Customers were seeking a collaborative innovation and solutions which can bring evolution in their business and improve, very importantly, the insight. This approach is changing nature and demand for tech services and its is reflected in our pipeline."




India Inc’s funding costs to soar After Sovereign Rating Assessment, S&P Revises Outlook On 11 Indian Banks, 4 FIs, 3 IT Cos & 3 PSUs To Negative

Mumbai: Indian corporates could see their overseas borrowing costs shoot up should Standard & Poor's negative outlook result in an actual downgrade. A downgrade would hit overall funding and would inevitably end up being a self-fulfilling prophecy by hurting the economy rather than merely providing an opinion on its creditworthiness. 
    "A downgrade would have huge implications for the economy. India is at the lowest rung of the investment grade and a downgrade would result in the country falling to the junk category. This will result in certain allocation for India going away and a rise in the funding costs of corporates. This will also have implications for funding of the country's growing balance sheet/ funding requirements," said Ashish Vaidya, head fixed income currency and commodities at UBS India. 
    Besides revising its outlook on the sovereign, S&P has also put on its negative list three IT companies—Infosys, TCS and Wipro. Similarly three public sector entities NTPC, NHPC and Steel Authority of India have had their outlook revised to negative. Bankers say that international investors mandated to put their money in only investment grade paper will be wary of investing in bonds issued by PSUs because of the downgrade possibility. 
    For corporates a significant portion of funding comes from the external route. The global plans of Indian companies also depend on the availability of international finance. All the bigticket acquisitions by large business houses have been on the back of financing from multinational banks. "We expect spreads to be under pressure in the near term with an overhang of a potential downgrade should there be no improvement in the macroeconomic conditions or growth prospects, but issuances from strong Indian companies and institutions will continue to see investor interest," said Sunil Agarwal, head, institutional clients group, Deutsche Bank, India. 
    According to Gautam, Triveri, MD & head-equities, Religare Capital Markets, the outlook revision is incrementally negative for the rupee and capital flows (portfolio and direct). "We believe the rating remaining at investment grade contains the damage. Had a rating downgrade (to non-investment grade—Junk) happened, it would be far more negative, since it would escalate funding costs for Indian firms abroad, and preclude some FIIs to access local debt and equity markets." But several bankers see the downgrade as a clear and present danger. "I think that there are chances of a downgrade if there is no improvement in the current account or there is no reform and fiscal consolidation," said Vaidya. S&P has indicated that it will wait a few months to see if there is any improvement in the fiscal position or the direction of reforms. However, the rating agency has made it clear that it could take a downgrade decision at any time if there is deterioration in any of the macroeconomic parameters. 
    According to Deutsche Bank, a key risk to India's ratings outlook in the coming year or two is that the fiscal adjustment envisaged in the budget is not accomplished due to unfavorable macro developments like a further slowdown in growth and policy slippages such as a rise in subsidies. "More crucially, if the slippage also reflects no medium term movement toward expanding the tax base and expenditure restraint, the ratings outlook would invariably worsen," the bank said in a research report. 
    Corporates and banks will also find it tough to raise funds through international bond issues. A large number of funds that invest in these securities are mandated to put money only in investment grade paper while there are risk taking investors who buy "junk" bonds they demand a high rate of interest. 
    "The negative outlooks on the 11 financial institutions reflect the outlook on the sovereign credit rating on India. We could lower the ratings on these financial institutions if we lower the sovereign rating or the stand-alone credit profiles of these financial institutions deteriorate sharply or we believe that such deterioration is unlikely in most cases. We could revise the outlook to stable if we take a similar action on the sovereign rating," S&P said in a statement. 
DOWNGRADE FEARS 

• S&P has put Infosys, TCS and Wipro on its negative list 

• Outlook of three state-run entities, NTPC, NHPC and SAIL, has been also revised to negative 

• Fearing downgrades, international investors will be wary of investing in bonds issued by PSUs




S&P cuts India outlook to negative, sees no big reforms before ’14 poll Sensex, Re Slide; Borrowing Abroad May Get Costlier

New Delhi: Global ratings agency Standard & Poor's on Wednesday revised the outlook on India's long term sovereign rating to 'negative' from 'stable'—a thumbs down that could adversely affect the way foreign investors view India. 
    The S&P decision questions the India growth story by citing its sliding growth numbers. It also cites the high fiscal deficit, a growing debt burden and the government's inability to push through economic reforms. 
    The agency clarified that the action was not a downgrade but a revision in the outlook based on the current economic situation. It said India's rating of BBB (minus) is the lowest investment grade rating. 
    S&P's announcement immediately hurt sentiment in the financial markets and tripped shares, the rupee and bonds. Experts say the revision in the rating outlook will hit investor sentiment, increase overseas borrowing costs for Indian companies and add another element of risk for Asia's third largest economy. 
    Finance minister Pranab Mukherjee intervened to calm jittery markets, saying the government would overcome the difficult phase. "There is no need for panic. The situation may be difficult, but we will be surely able to overcome," the finance minister told reporters. 
    The revision also comes at a time when growth is slowing, business sentiment is down and the government is battling a string of issues from corruption, questionable laws like retrospective taxation to stinging criticism over stalled reforms. The Union Budget unveiled in March failed to boost sentiment and economists raised doubts about the government's ability to reduce subsidies and meet the Budget targets. 
FROM STANDARD TO POOR What Does It Mean? 
Business & investment sentiment may be hit; cost of borrowing for Indian companies may go up; foreign money into stock market may slow down; rupee & bonds may be hit; fear of India becoming noninvestment grade (junk grade) lurks 
Market Impact 
Sensex closes 56 pts down at 17,151, after plunging 190 pts 
Rupee falls 26 paisa before recovering to close at 52.50/$ How Can India Avoid A Downgrade? 
Basically, India has to reduce its fiscal deficit – that is, lower the gap between govt spending and its income 
Steps that might help prevent a downgrade are: 
Cut fuel, fertilizer subsidy Allow FDI in banking, insurance & retail Roll out GST quickly Tackle high inflation 
Countries With Same Rating As India Azerbaijan, Barbados, Colombia, Croatia, Iceland, Montserrat, Panama, Morocco and Tunisia Funding worry for corporates 
    Indian corporates could see their overseas borrowing costs shoot up should S&P's negative outlook result in an actual downgrade. Their global plans, hugely dependent on international finance, could also take a hit. The rating agency also put three IT companies (Infosys, TCS and Wipro) and three public sector entities (NTPC, NHPC & SAIL) on its negative list. Bankers say international investors will be wary of investing in bonds issued by PSUs because of the downgrade possibility. P 19 
No respite for UPA from allies, oppn 
    On a day S&P identified rising fuel subsidy as one of the reasons for its loss of confidence in India, UPA allies Trinamool and NCP said they would not allow decontrol of diesel prices, even as the government said it was committed to getting on with reforms. The S&P downgrade also gave the opposition a handle. "It is the policy paralysis of the last few years...that is responsible for this mess," BJP's Arun Jaitley said. P 19 Reforms have stopped, says Moody's Analytics 
    The outlook revision reflects our view of at least aone-in-three likelihood of a downgrade if the external position continues to deteriorate, growth prospects diminish, or progress on fiscal reforms remains slow in a weakened political setting," said S&P's credit analyst Takahira Ogawa. 
    Analysts say the announcement should serve as a wake-up call for the UPA gov. 
    The ratings agency said it expects only modest progress on fiscal and overall economic reforms before the 2014 general elections. 
    "High fiscal deficits and a heavy debt burden remain the most significant constraints on the sovereign ratings on India. We expect only modest progress in fiscal and public sector reforms, given the political cycle—with the next elections to be held by May 2014—and the current political gridlock," S&P's Ogawa said. Moody's Analytics, a division of Moody's Corporation, said India's economy is now growing below potential as a combination of bad luck and poor economic management weighs on sentiment. "The single biggest factor weighing on the outlook is the Indian government. In all economies it is impossible to separate the economic from the political outlook, and that is particularly the case in India...The wave of government reform and opening up through the 1990s lifted GDP growth above 8%. But these reforms have stopped," Glenn Levine, senior economist at Moody's Analytics, said in a statement.

1-in-3 likelihood of downgrade if external position continues to deteriorate, growth prospects diminish, or progress on fiscal reforms remains slow... 
Takahira Ogawa | S&P CREDIT ANALYST

No need for panic. The situation may be difficult, but we will be surely able to overcome 
Pranab Mukherjee | FM

Monday, April 23, 2012

India is likely to have normal monsoon in 2012

(Reuters) - India is likely to have normal monsoon in 2012 and the government will give a detailed region-wise forecast on Thursday, Farm Secretary P.K. Basu said on Monday.

The June-September monsoon, vital for agricultural output and economic growth, irrigates around 60 percent of farms in India, the world's second-biggest producer of rice, wheat, sugar and cotton. Agriculture accounts for about 15 percent of India's nearly $2 trillion economy, Asia's third biggest.

Last week a top weather official told Reuters that monsoon is likely to have average rainfall in 2012 despite fears the El Nino weather pattern may emerge in the second half of the season.

According to the state-run India Meteorological Department classification, rains between 96-104 percent of a 50-year average of 89 centimetres is considered normal.

Sunday, April 22, 2012

RIL to Build Own Towers for 4G Blow for Reliance Infratel, other tower companies eyeing the business

Mukesh Ambani-owned Infotel Broadband Services plans to set up over 1,00,000 towers for its 4G operations in three years, moving away from its 'asset-light' model and possibly disappointing telecom tower companies, including Anil Ambani's Reliance Infratel, which were hoping the RIL group company would use their passive infrastructure for its services. Infotel Broadband had invited bids earlier this year from tower operators for leasing about 26,000 towers across India for the first phase of its wireless broadband foray. But those plans are on hold, and, according to three people familiar with the development, the company has sought quotes and samples from equipment vendors for carbon fibre telecom towers. The estimated outlay for the company's launch, expected later this year or early next year, has been nearly doubled to $8-9 billion, from the originally stated $4 billion in 2010, said one of the three persons. Overcapacity in Telecom Tower Market 
An RIL official, who asked not to be named, said the company may partly use its own towers while it may rent the rest from existing tower companies. But if Infotel Broadband does meet its target of building 1,00,000 towers, there might not be any need for it to rent further capacity. Indus Towers owns around 1,10,000 telecom towers. Infotel Broadband, 95%-owned by RIL, has all along been expected to lease towers from Reliance Infratel for its 4G rollout. The lease was to mark the first major collaboration between companies owned by the Ambani siblings after they carved out the Reliance empire between themselves in 2005. It was also supposed to boost the valuations of both Reliance Infratel and Reliance Communications, the company that owns a 95% stake in the tower unit. RCom has been looking for an equity partner for the tower arm for some years now. 
Emails sent to both RIL and Reliance Communications went unanswered. In May 2010, the Ambani brothers terminated a non-compete agreement that had been in place for five years, paving the way for RIL's re-entry into telecom. Subsequently, Reliance Industries bought 95% stake in Infotel Broadband for . 4,800 crore, in addition to paying . 12,848 crore for 20 MHz of spectrum in all 22 service areas in India — the only company to do so. 
Carbon fibre towers are 25-40% more expensive than traditional steel ones but are ecologically friendly as well as easier to camouflage and relocate. They are also believed to have lower maintenance and base equipment requirements. Tenancy levels in existing towers are low and with Uninor, Loop, S-Tel and others shutting operations because of the SC order, the current overcapacity in the tower market will get further exacerbated. While this has led some to question the wisdom of creating more capacity, a telecom analyst said there could be some justification for RIL's strategy. "This strategy could make sense if the towers were set up in semi-urban or rural areas for faster rollout in remote areas. If there is little overlap with existing tower companies, this would make sense," said an analyst. Fourth-generation, or 4G, networks will offer Internet and data services at much faster speeds as compared to existing 3G services. Their initial demand will be more in metros and big cities, which are adequately covered by existing tower companies. At the time of Infotel's acquisition, RIL Chairman Mukesh Ambani had said the company would follow an 'asset-light' telecom deployment strategy, meaning it would not set up its own towers or rollout optic fibre cables to carry calls. But the thinking has changed a little along the way, said a source.

SOLO ACT: Mukesh Ambani

Friday, April 20, 2012

‘No Cap Gain Tax on Family Asset Transfer’

Capital gains tax cannot be levied on assets divided among family members after a family settlement, according to a recent judgment by the Karnataka High Court. The issue came up before the high court after an income-tax officer raised the demand for capital gains tax on the assets divided among the members of a family. The tax demand was raised on the ground that "transfer" of assets among family members had resulted in capital gains. The high court observed that the term "transfer" does not include partition of assets among family members. Adjustment of shares and crystallisation of respective rights on properties do take place within families but they cannot be construed as transfer of assets and capital gains cannot arise without transfer of assets, the court said. 
R Nagaraja Rao, the taxpayer who moved the high court, and Neelkanth Rao owned shares in the firms owned by the family. There was a dispute between the family members over the ownership of assets, which was resolved by an arbitrator. As part of the settlement, R Nagaraja Rao resigned from the partnership firm of Kaveri Breweries and transferred his interest to Neelkantha Rao, who, in turn, transferred his shares in the other family run companies to Nagaraja Rao. 
The income-tax department claimed tax had to be paid on the capital gains arising from the transfer of the assets. The commissioner of income-tax appeals confirmed the demand, but the Income-tax Appellate Tribunal (ITAT), the second appellate body for deciding tax issues, said division of assets was a family arrangement arrived at with the help of an arbitrator and, therefore, cannot be construed as transfer of assets for the purpose of levying capital gains tax. 
Citing the judgments of the Supreme Court and high courts, the division bench of the Karnataka High Court, comprising justices N Kumar and Ravi Malimath, said: "It is well settled that partition is not a transfer… Every member has an anterior title to the property, which is the subject matter of transaction, that is, partition or a family arrangement." When there is no transfer, there is no capital gain and, consequently, no tax on capital gain, the high court said.



RIL Q4 Profit Slumps 21% on Falling Refining Margins

COMPANY ROOTS FOR MARKET-LINKED PRICES

Reliance Industries' quarterly net profit fell 21% as refining margins contracted and KG-D6 gas field continued to falter, but the company said its refineries were outperforming peers and that it would make multi-billion-dollar investments in exploration and production subject to marketlinked prices and government approvals. The company also said it was a strategic priority to invest $4 billion in a petcoke project, and produce syngas, which is a clean fuel that can replace costly liquefied natural gas. Lower energy costs because of syngas would help boost refining margins by up to $1 per barrel, industry experts said. Margins of its refining, petrochemicals and oil & gas businesses contracted but its cash kitty swelled to . 70,250 crore. Reliance also reiterated its commitment to high-speed wireless data services and said its retail business, which has already become the leader in consumer electronics, food and apparel, will continue to grow. 
Refining margins, or the money made from processing crude oil at the world's largest refinery complex at Jamnagar, contracted to $7.6 per barrel from $9.2 per barrel, while a plant shutdown reduced the total crude the company processed in the quarter to 16.26 million tonnes from 17.24 million tonnes, bringing down external sales by 6.2%. 
Analysts said refining margins were better than analysts' expectations. The company said margins across all regions had improved since the third quarter and Reliance was doing better than its peers, particularly in Europe, where plants were closing down or running at reduced rates. 
"Our businesses have delivered industry-leading performances," CMD Mukesh Ambani said in a statement. "We have created a strong foundation for future growth and are investing in our core upstream and petrochemicals businesses in India. Response to our organised retail business has been very encouraging and we continue to expand our footprint by building more stores across verticals, formats and geographies," he said. Market-linked Prices Important
In a presentation to analysts, the company said market-linked prices were important. It said a "strategic priority" was, "subject to government approvals and market-linked pricing environment", ensuring "multi-billion-dollar investments to create a pipeline of production and reserves". 
Standalone net profit for the January-March quarter dropped to . 4,236 crore although it was propped up by 'other income' that rose to . 2,295 crore from . 917 crore a year ago. Other income rose during the year primarily because of higher liquid investments after the $7.2-billion deal to sell stake in oil & gas blocks to global major BP. Operating profit before other income and finance costs fell sharply to . 3,904 crore from . 6,456 crore in the last quarter of 2010-11. 
Sanjeev Prasad, director at Kotak Institutional Equities, said Reliance's refining margins would be seen as a "positive" but there were negatives as well. "Basically, RIL has benefitted from volatile crude prices this quarter as its crude inventory was largely hedged against the price swings, but a large chunk of the profits this quarter accruing from other income and the fall in production at KG-D6 are huge concerns, so the stock will definitely be downgraded." 
Reliance's oil & gas division's EBIT dropped to . 951 crore from . 1,569 crore as gas output from the KG-D6 block declined. The company attributes the fall to unexpected reservoir complexities and disagrees with the directorate general of hydrocarbons' view that production has dropped because the company did not drill the required number of wells. 
It said experts from BP and Reliance had taken steps to diagnose the field's problems. "Significant steps have been taken by the joint technical teams at BP and RIL in assessing complexities based on which an integrated plan for work-overs/side-tracks and additional wells can be executed, subject to necessary regulatory and government approvals," it said. 
Its refining business' margins shrank to 2.2% from 4% a year ago, but the company sees new trade opportunities. It said specifications of refined products are getting tighter and the company's ability to produce high-quality fuel from inferior and cheaper grades of crude oil placed it at an advantage. The company had expanded its footprint in the highmargin markets in Asia and further strengthened its presence in the ultra-low sulphur diesel market, it said.
Analysts said the company's gross refining margins (GRM) had exceeded expectations. "The GRM of $7.6 per barrel is quite encouraging especially as the street was expecting a weak set of GRMs," said Devang Mehta, vicepresident and head (equity sales), Anand Rathi Financial Services. Apurva Shah, vice-president and head of institutional research at Prabhudas Lilladher, said the market would see the margins as a "surprising positive". 
But analysts were concerned about the high share of 'other income' in its profit. "A major chunk of RIL's profits this quarter are accruing due to 'other income', which almost doubled on a yearly basis and increased significantly on a quarterly basis. The street might view this as negative as it is not an optimal operational performance that has led to the gains," said Arun Kejriwal of Kejriwal Research & Information Services.




MUMBAI:New app helps users find commuters who carpool

Mumbai: A new app will help commuters reduce their carbon footprint and make the daily commute easier. The app, Smart Mumbaikar, that was launched on Friday lets users find travellers who carpool. 
    "It's a simple Facebook app that lets you identify who among your friends shares the same route you take to office, school or college," said entrepreneur Raxit Sheth, developer of the app. 
    When users set up the app, they are asked for details about their daily commute. Users can use a drop-down menu of city landmarks to select the origin and destination of their journey. It also prompts users to select their mode of transport and timing. 
    "We have compiled a list of about 5,000 popular landmarks across Mumbai. These include locations in the western suburbs, Navi Mumbai and the central surburbs," added Sheth. Software professional Parth Lalcheta has helped Sheth develop the app. 
    According to the developers, women travellers can select if they want to travel with at least one female companion or an all-women group. 
    "During research, we realized that security was a key concern, especially for women," said the software developer who is also the creator of MumbaiAuto (an app that calculates autorickshaw and taxi fare once commuters feed the meter reading) and Mobile4Mumbai (an app that allows users to search BEST bus routes). "We know that a large number of people are underutilizing rickshaws, cars and taxis during rush hour. Autos and cabs with single passengers simply add to the city's traffic woes." 
Aid to Easy Commute 

• When users set up the app, they are asked for details about their daily commute 

• Users can use a drop-down menu of city landmarks to select the origin and destination of their journey 

• Women travellers can select if they want to travel with at least one female companion or an all-women group 

• Log on to smartmumbaikar.com

Wednesday, April 18, 2012

RIL Moves SC on KG-D6 Arbitration

Seeks appointment of arbitrator on behalf of oilmin to settle dispute
Reliance Industries has sought the Supreme Court's intervention to help start arbitration with the oil ministry over recovering its investment in the D6 block from gas sales, ruling out amicable resolution of its dispute with the government after months of discussions. It has complained to the court that the oil ministry was not approving its budgets and putting undue pressure to drill more wells, although geological data suggests this may be counterproductive. 
The move highlights the widening gulf between the oil ministry and the company, which has historically enjoyed a close relationship with the government. Since last year, RIL has been frustrated by long delays in official approvals and faced difficulties in meeting top officials. The company also felt the national auditor had ignored many of its arguments in preparing an audit report that accused the oil ministry of being lenient in enforcing contracts with private firms. "The disputes have reached a point that the (government) has refused to approve the revised work program and budgets… until such time as the petitioners agree, as it were, to a schedule to drill, complete and connect more development wells… The petitioners have repeatedly contended that the data now available establishes that the drilling of more wells will not improve the performance – on the contrary it may prove deleterious to the same," RIL and partner Niko said in their petition. Reliance Rules Out Amicable Settlement 
In the absence of approval for its work programme and budgets, its finances, particularly after April 1, 2012, "would be shrouded in doubt and uncertainty", it said in the petition. 
RIL said there was no possibility to amicably resolve the dispute between the two parties "since the Respondent denies the existence of any dispute whatsoever". 
RIL had issued an arbitration notice to the government on November 23 and appointed its arbitrator, a retired chief justice of the Supreme Court. Under the arbitration process, the government also has to appoint an arbitrator, but the oil ministry initially sought more time to respond, and subsequently asked the company to withdraw its arbitration notice. RIL's contract with the government says if one party fails to appoint an arbitrator in 30 days, the other party can request the SC to appoint an arbitrator. 
The company initiated arbitration following media reports that the government would not allow it to recover all its development costs in the D6 field. 
The oil ministry said since it had not taken such action, there was no need for arbitration. RIL says the oil ministry has refused to approve the revised work programme and budgets for 2010-11 and 2011-12. 
Gas output from D6 has dropped significantly from about 61.8 million standard cubic meters per day in March 2010 to 33.67 mmscmd in April first week.

Govt Orders PSU Banks to Cut Rates Right Away

Centre Turning Dictator?
After the Coal India fiasco, a move to force state-run lenders to lower rates at the risk of hurting profitability could raise corporate governance issues for govt
The government has ordered state-run banks to lower lending rates immediately even before the ink has dried on the Reserve Bank of India's decision to cut interest rates, potentially adding to the corporate governance debate triggered by the imposition of its will on Coal India. 
The direction from DK Mittal, secretary, financial services, may put many lenders in a tight spot as profitability and cost structures differ between banks, said two persons familiar with the development. 
"With the reduction of CRR and repo rate, all lending rates be relooked at very quickly," Mittal wrote to state-run banks' chairmen. "Direct lending to agriculture has to be 13.5% and growth has to be 25% over 2011-12." The RBI has cut cash reserve ratio twice and bought government bonds, releasing more than . 2 lakh crore into the system to ease liquidity pressures. It cut repo rate — the rate at which it lends to banks —by 50 basis points to 8% on Tuesday. A basis point is 0.01 percentage point. "Micro management is not desirable when it becomes a routine," said DK Dhingra, former executive director at state-run Uco Bank. 
IDBI Bank, a relatively small lender compared with State Bank of India or Punjab National Bank, cut its benchmark lending rates by a token 25 basis points to 15% on Wednesday. But many big banks that raised deposit rates recently are still studying the market. 
"It's not acceptable that someone interferes on a daily basis," said Ravi Trivedy, a consultant and former partner at KPMG. "The government or the Reserve Bank can frame the policy parameters. Once these are in place, one should allow the professional managers to take independent decisions. It's a governance issue," he said. Bank chairmen say policy rate cut does not automatically lead to lower market interest rates since there are issues such as slow deposit growth, rising bad loans and an uncertain environment where inflation could rear its head again and upset all calculations. "I will be genuinely concerned about the deposits growth because bank deposits are getting crowded out because of other competing savings instruments," State Bank of India Chairman Pratip Chaudhuri said after the rate cut. Slow Deposit Growth is a Major Worry 
"We had expected DTC to kick in, it would have been a level playing field for bank deposits and other competing instruments." Deposit growth fell to a seven-year low of about 13% while loans grew 19%, pressuring banks to offer more for funds. Slow deposits growth is also leading to an-time-high loans-to-deposit ratio, a measure of demand-supply for funds, of over 75%. 
"Market rates have moved up even as RBI's policy stance was to keep rates stable," says Morgan Stanley's Chetan Ahya. "Indeed, we believe banks will struggle to pass on this easing in the form of cut in lending/deposit rates unless there is systemic improvement in liquidity conditions measured by loandeposit ratios. For a systemic improvement in loan-deposit ratio, deposit growth would need to be higher than credit growth." 
The direction is likely to add fuel to the ongoing debate on whether the government is ignoring the interests of minority shareholders in public sector companies in its zeal to revive the slump in private investments. The Children's Investment Fund, an investor, is opposed to the state directive to Coal India to sigh fuel supply agreements that will compromise its profitability. The monopoly miner is being forced to sell fuel at lower than international market rates. 
"I told state-run bank chairmen to revisit the lending rates as in some retail segments, their rates are higher than even private banks," Mittal told ET. "So, they are losing customers. There is a need for lowering of lending rates and bankers have already agreed upon." 
But the profitability of banks, as measured by net interest margin, is still one of the highest with some banks having an NIM of more than 4%, considered high by global standards. 
This allows banks to sacrifice some profitability to play a role in reviving growth. "Direct monitoring is ideally not a good practice," said Robin Roy, associate director for financial services at PwC India. 
"But in a system where monetary policy transmission is weak and where certain important sectors are starved from institutional credit, it has to be a push phenomenon."



Tuesday, April 17, 2012

Tobacco-to-hotels major ITC emerged as the most influential stock on the benchmark Sensex on Tuesday


MUMBAI: Tobacco-to-hotels major ITC emerged as the most influential stock on the benchmark Sensex on Tuesday, for the first time ever, after it overtook Reliance Industries in terms of weightage. Reliance slipped to second position, while Infosys Technologies dropped to the third spot after the sharp fall in its shares following the company's poor results.

On Tuesday, ITC's weightage on the Sensex rose to 9.25% compared to Reliance's weightage of 9.23% and Infosys' weightage of 7.98%. Sensex weightage, which is measured by the market value of a company's free-float or non-promoter shares that can be freely traded in the market

"ITC will be able to retain its top position as both Reliance and Infosys are not as fast-moving," said Bharat Shah, head of institutional sales at Ventura Securities.

"ITC is a widely held stock and is present in the portfolios of most institutional investors. These two stocks are also commanding lower price-earnings multiples these days. Being an FMCG, ITC will be in good demand; this will keep the prices up," he said.

ITC shares rose 2.1% to 246.15 on Tuesday, while Reliance Industries ended 0.3% lower at 746.40 amid worries the company's fourth quarter earnings could disappoint. Infosys shares have dived 15% since Friday when the company announced its fourth quarter results.

Benchmark indices ended firm in a choppy session on Tuesday after the Reserve Bank of India's surprised the market with a higher-than-expected cut in repo rate by 50 basis points. The Sensex ended 206.99 or 1.21% higher at 17150.95 while Nifty gained 63.50 or 1.22% to 5289.70.

Foreign institutions net bought shares worth 441 crore on Tuesday, while domestic institutions net sold shares worth 213 crore, according to provisional BSE data.

"Further upside will depend on the Q4 results outcome and the global markets. Spain will be issuing 10 year bond next week, the outcome could influence the short term trend of the market" said Mehul Dedhia, associate vice-president - Equity at Sharekhan.

RBI cuts key rate by 50 bps, but banks reluctant to pass on benefit immediately

Consumer is King of this Policy
Subbarao Stuns with Giant Repo Rate Cut
Even though it may take a while for home & auto loans to get cheaper, removal of prepayment charges & transparency in deposit rates cheer consumers 

 Reserve Bank of India Governor Duvvuri Subbarao fired the bazooka from his arsenal to revive flagging economic growthwith a 50-basis-pointcut in interest rates, but said he will not hesitate to raise rates again if price pressures revive. 
The unexpectedly steep reduction — the markets had expected a 25-basis-point cut — coming in the wake of a growing clamour from governmentofficials andbusinessmen to cut rates, even though demand pressures persist, raised questions whether the governor is risking his credibility. 
Subbarao, a former finance secretary, had for much of the past year ignored markets and advice from an internal panel to reduce rates, resulting in howls of pain from business but burnishing the central bank's inflation-fighting credentials. The governor, in an interview to ET, described the decision as a "professional judgement" guided entirely by the numbers on growth and inflation. "Idon'tthink you should read us by what people are expecting us to do, or should read us by whether we deliberately wanttosurprisethe market. That's a professional judgement. We have taken into account both growth and inflation dynamics." 
Tuesday's reduction in lending rates, the first in three years, was widely welcomed by businessmen and hailed by the finance minister. "The growthwhichhasweakened in past months should now improve… The monetary policy announcement should help in investment revival and contribute to strengthening of business sentiments," Finance Minister Pranab Mukherjee said in Delhi. 
In interviews after the presentation of the Union budget, finance ministry officials had been increasingly strident in their callsfor a change in monetary policy. 
Earlier Tuesday morning, addressing a meeting of the Confederation of Indian Industry, Mukherjee said they could expect some "good news" as the RBI was likely to soften its monetary policy in about "half an hour", though he did not disclose details. This was around 10:38 am. The minister's words were somewhat unusual as news of the rate cut was embargoed till the official announcement at11 am. 
The RBI also boosted liquidity measures by doubling banks' borrowing limit under the so-called Marginal Standing Facility to 2% of their demand and time deposits. This could smoothen money market movements and help the government's borrowing programme. 
The rate cut is aimed at boosting investments, but many expressed doubts on whether corporates and individuals will benefit immediately asbanks are reluctanttocommit to lower borrowing costs any time soon. "Both deposit and lending rates will come down, though it may take a while," said Aditya Puri, CEO at HDFC Bank. "If governmentspending comes in,leading to an increased money supply and consequent velocity into the banking system, we do expect that deposits will grow." Cash Reserve Ratio Left Unchanged 
When that happens, yes, there will be enough money. Bankers will be brave. In the interim, it may lead to blood pressure rather than bravery," Puri added. 
The central bank also sought to help the consumer by abolishing prepayment charges on home loans after banks failed to do so despite persuasion, and bringing in more transparency in interest rates on deposits. 
Subbarao cut repo rate — the rate at which it lends to banks — by 50 basis points, double of what the market expected, to 8%. Reverse repo — the rate it pays banks when they deposit surplus funds — fell to 7% and the penal rate of interest on borrowings by banks under MSF dropped by the same amount to 9%. The RBI kept some power dry by leaving the cash reserve ratio untouched at 4.75%. 
"Expectations are that pricing power of corporates is quite limited so they may not be able to pass on the increase in input prices as they were able to do for much of the past one-and-a half years," Subbarao said. "Therefore, supply shocks or adjustment in administered prices may not transmit to generalised inflation. But if our calculations go wrong, our policy prescriptions will have to be different.'' The finance minister vowed to step up the fight against inflation. "Food and primary inflation have shown signs of hardening. This is a cause for some concern. We intent to continuously monitor the situation and take the required steps to manage short-term supply constraint for those food items that contribute to inflation. We will do everything possible to maintain price stability." 
The benchmark Sensex rose 1.2% to 17,358. The yield on the 8.79% bonds due November 2021 fell 12 basis points to 8.34%, the lowest since March 14. The rupee climbed 0.4% to 51.48 to the US dollar, 
"It has merged a couple of 'baby steps' into today's move and will possibly stay on hold for a while," said Siddhartha Sanyal, economist at Barclays. "We believe the central bank will examine the scope for further monetary easing on a case-by-case basis in the coming months, with a bias towards not cutting repo rate further in the next one to two policy meetings." 
Gross domestic product may expand 7.3% this fiscal compared with the baseline projection of 7% last year, Subbarao said. Inflation will probably be at 6.5% by March 2013. He forecast bank deposits to grow 16% and commercial credit 17%. 
But the government's fiscal position, borrowings of a record Rs 4.8 lakh crore, and suppressed inflation in the form of lower petroleum product and coal prices could throw a wrench in the works. "Large borrowings have the potential to crowd out credit to the private sector," said Subbarao. "Crowding out of the more productive private credit demand will become more critical if there is fiscal slippage." 
But the liquidity-boosting measures may possibly take care of the market conditions despite huge borrowings by the government. 
"The surprise was the increase in MSF to 2%, which clearly is an effort to cap borrowing costs within the corridor of 8-9% and not let temporary factors due to frictional liquidity lead to unintended tightness in inter-bank markets," said B Prasanna, managing director and CEO at ICICI Securities Primary Dealership Ltd. 
The generous rate cut and liquidity-boosting measures may push up prices again, even as high interest rates have failed to completely tame prices so far. 
The central bank has been missing the inflationary forecast for many years. Its desired level of 4-4.5% and long-term target of 3% in line with international standards may remain a dream. 
"The RBI was clearly itchier to cut policy rates more than expected, but the 50-basis-point cut may have been a bit too premature and aggressive," said Leif Eskesen, regional economist at HSBC. "If that turns out to be the case, it could hurt the RBI's credibility while doing little to raise growth on a sustained basis."

FM upbeat on growth, RBI sounds caution

New Delhi: Finance minister Pranab Mukherjee on Tuesday said the monetary policy announcement should help revive investment and strengthen business sentiment. He also promised that in coming weeks, additional steps would be taken to reinforce the focus on growth. 
    But the Reserve Bank of India (RBI) has flagged some key concerns that could hurt growth and inflation in the months ahead. "Domestically, the state of the economy is a matter of growing concern. Though inflation has moderated in recent months, it remains sticky and above the tolerance level, even as growth has slowed," RBI governor Subbarao said. 
    "Significantly, these trends are occurring in a situation in which concerns over the fiscal deficit, the current account deficit and deteriorating asset quality loom large." 
    The governor said several upside risks to the budgeted fiscal deficit of 5.1% of gross domestic product remain even though the Budget envisages a reduction in the deficit in 2012-13. Economists have also expressed doubts about the government's ability to stick to the fiscal deficit target set in the Budget for the current fiscal and have slammed the lack of any credible plan to restore the health of public finances. 
    "Going by the recent burden-sharing arrangements with the oil marketing companies (OMCs), the Budget estimate of compensation for under-recoveries at the present level of crude prices is likely to fall significantly short of the required amount. Any slippage in the fiscal deficit will have implications for inflation," the governor said. The central bank has identified the uncertainty of global commodity prices as another key risk. RBI urged the government to raise prices of petroleum products. 
    But, Mukherjee vowed there would be no slippage on the fiscal deficit front. "Let me assure you that the budgetary exercise has been done with due diligence and I would do my best to restrict the government expenditure to the budgeted figures," he told the AGM of CII.


I'd do my best to restrict govt expenditure to budgeted figures 
Pranab Mukherjee 
FINANCE MINISTER

Home loans to get cheaper as RBI cuts key rate after 3 years

GIVING A SHOT IN THE ARM
Slashes Repo Rate By 50bps To Fuel Growth No Penalty For Pre-Payment Zero-Balance Savings A/C

Mumbai: Home and auto loans are expected to become cheaper with the Reserve Bank of India cutting interest rates on Tuesday for the first time in three years by a more-than-expected half a percentage point. The move is aimed at boosting the sagging economy. 
    RBI in its annual policy reduced by 50 bps its repo rate-—the rate at which it lends overnight funds to banks and also announced a slew of consumer-friendly measures such as zero balance savings accounts for all and abolition of pre-payment charges for home loans. The availability of cheaper funds is expected to spur individuals to spend more and business to increase investment. It was expectedly cheered by bankers and industrialists across the board. 
Will curb govt expense: Pranab 
    Finance minister Pranab Mukherjee said the monetary policy announcement should help revive investment and strengthen business sentiment and promised that additional steps would be taken to reinforce the focus on growth. Though RBI flagged some concerns that could hurt growth and fiscal deficit, Mukherjee vowed there would be no slippage on fiscal deficit. "I will do my best to restrict the government expenditure to the budgeted figures," he said. P 21 
MAJOR POLICY MEASURES 
    50 basis points cut in repo rate signals shift of RBI's focus to growth 
    Liquidity support by allowing banks to borrow more from RBI 
    Economy expected to grow 7.3%, inflation 6.5%, deposits 16% and loans by 17% in 2012-13 THE BAD NEWS 
RBI wants govt to hike fuel prices 
Warns that future rate cuts not guaranteed 
Deposit rates could come down 
Inflationary pressures to continue 
THE GOOD NEWS 
Loans to individuals and businesses to become cheaper 
No foreclosure or prepayment charges on home loans 
Zero-balance savings accounts with minimum facilities to all bank customers 
Unique customer ID may pave way for savings a/c portability 
Banks not to provide undue returns for bulk depositors 
Fixed rate bank home loans may become a reality BOOSTER SHOT Is RBI rate cut a one-off affair? 
Mumbai: Giving the RBI's monetary policy a thumbs up, the BSE sensex closed 206 points higher at 17,357 points. It was buoyed largely by the magnitude of the cuts since it was only expecting a 25 bps reduction. Bonds rallied, with the yield on 10-year benchmark bonds falling to 8.34% from 8.44% on Monday. In the forex market the rupee rallied against the dollar to 51.49, up from Monday's close of 51.68. 
    While banks are unequivocal about lending rates falling, all of them may not pull down their rates immediately. "With the reduction in interest rates, EMIs will definitely fall. That is the good news. But how fast the transmission takes place…we will have to watch depending on our cost of funds. But clearly, the trend is downward," said Chanda Kochhar, MD & CEO of ICICI Bank, the country's largest private bank. The country's largest bank SBI is meanwhile looking at a 'comprehensive' reduction in lending rates. "On car loans and all other loans wherever the spreads over the base rate (benchmark rate for loans) are high, we will look at bringing down rates. I am not sure about the base rate but it is our asset liability committee that will take a call" said Pratip Chaudhuri, chairman, SBI. 
    The policy, designed to give growth a much needed push, predicted that the economy would grow at 7.3% even as it continued to remain concerned about inflation saying it would remain high at 6.5% in 2012-13. RBI governor D Subbarao denied that the government had any influence on the move. However, he said that the government needs to do its bit to 
spur growth. "Monetary easing is necessary but not sufficient condition for growth. The government should adjust oil and other subsidies and address supply side constraints," Subbarao said. 
    Besides addressing rates and setting forecasts for 2012-13, the policy also includes a number of announcements aimed at giving bank customers a better deal. New regulatory initiatives include specialized training to bankers to help them detect fake notes.



Monday, April 16, 2012

Time to Increase Exposure to Interest-sensitive Stocks Prashant Mahesh analyses how companies in the infra, banking and auto sectors are going to benefit in the event of a rate cut by the RBI on Tuesday

Stock market pundits are betting on a repo rate cut of 0.25-0.50% on April 17, when the Reserve Bank of India reviews its monetary policy. Repo rate is the rate at which the Reserve Bank of India lends money to banks. Naturally, all eyes are on the stocks in the interest rate sensitive sectors such as infrastructure, banking, housing finance and automobiles, which have been beaten badly on the bourses for sometime now. For example, in the last one year the Bankex and CNX Infrastructure indices are down by 12.73% and 22.29%, respectively, compared with the Nifty which is down only 9.66%. Arguably, a change in the interest rate scenario could definitely alter the fortunes of these sectors. "Investors should increase their allocation to the interest rate sensitive sectors gradually. These sectors could constitute about 30% of your overall portfolio," says Madhumita Ghosh, senior VP (research), Unicon Financial Intermediaries. 
That may sound a great strategy. Many traders have already taken bets on some stocks in these sectors expecting a rate cut, as the central bank has already cut CRR by 1.25% since January this year. Several stocks in the infrastructure and banking space have moved upwards during the past three months. For example, State Bank of India (SBI) has moved up from . 1,630 in January to . 2,210, a run-up of 39%. Similarly, IRB Infra has moved up from . 126.40 to . 187 a gain of 53% during the same period. But the question is whether a minor reduction in the policy rate will have a lasting impact on them, forcing investors to have a serious look at these sectors and weak stocks in their universe? The question is even more pertinent because many banking experts believe that it will be a while before the central bank may actually unwind its tight policy regime. "At the moment, we expect only a 25-50 basis points cut, after which the central bank will pause. It will then take a look at inflation, economic growth rate, crude oil prices before deciding its next course of action," says Dipen Shah, head of fundamental research at Kotak Securities. 
DON'T EXPECT MIRACLES 
"A small drop of 25 basis points alone may not be enough to make these sectors a great pick. One has to be sure that we are in a falling interest rate environment, and more cuts are likely in the near future to make these sectors attractive," says Abhishek Jain, head of research at JHP Securities. That sums the key to investing in sectors expecting a policy change. While experts may have varying views — which is always the case when it comes to taking such calls — you need to make a decision after taking into account your investment horizon and goals. For instance, if you are an investor with an investment horizon of two to three years, the long-term outlook for these sectors is bright. "With the economy expected to grow by 7-8%, one needs good infrastructure in the form of roads, power, ports, etc to support this growth, thereby pointing to a bright future for the infra sector. Similarly, high economic growth will present multiple opportunities for banks to grow in both corporate as well as retail spaces," says Sadanand Shetty, vice president and senior fund manager, Taurus Mutual Fund. 
INFRASTRUCTURE STOCKS WILL 
BENEFIT THE MOST 
One of the major reasons for poor performance from the infrastructure segment over the last couple of years has been the continuous rise in interest rates. Since infrastructure companies have a high debt component on their balance sheets, high interest rates reduced returns from such projects and even made many of them unviable. "Most infrastructure companies are highly leveraged. On an average, if a project costs . 100, . 75 is funded through debt and the balance . 25 comes in through equity. If interest rates fall by 1%, it could bring down the interest cost of infrastructure companies by 8-9%," says Gaurang Vasani, executive director, Strategic Growth Advisors. 
TWIN BENEFITS FOR BANKING 
Besides the overall increase in economic activity on account of lower interest rates, which will benefit the banks, there are a couple of other reasons why they will benefit more. "Bond portfolio of a bank benefits in a falling interest rate scenario," says Dipen Shah. When interest rates fall, bond prices rise, which in turn could give banks a capital appreciation on their bond portfolios, thereby increasing their treasury income. So, if the interest rate drops by 50 basis points, a 5-year bond could see a capital gain of approximately 2-3%. 
Public sector banks will benefit on another front, where the percentage of restructured assets as a percentage of total advances is high. Take the case of the Punjab National Bank. Restructured loans as a percentage of advances are as high as 6.4%. For the Central Bank of India, it is even higher at 7.4%. "Once the interest rate cycle reverses, restructuring of loans will go down, thereby improving profitability of banks. Thus restructured assets of banks will peak out faster," says Kartik Mehta, AVP (research), Sushil Finance. 
Housing finance and automobile companies, like LIC Housing Finance and Maruti, could also be beneficiaries of a rate cut, as it could lead to higher consumer demand. Similarly, automobile companies could gain due to higher demand for passenger vehicles. "A decrease in interest rates could lead to increase in demand for home and auto loans," says Vijay Kedia, managing director, Kedia Securities. 



India could Lose World Bank Soft Loans Middle-income tag to make it ineligible for IDA funding

World Bank has informally told India that its rapidly-growing economy may soon make it ineligible for soft loans, prompting the government to lobby for concessional lending for a few more years. 
India stands to lose over $2 billion in lowinterest funds for many of its welfare schemes, besides missing out on social initiatives spearheaded by the Washingtonbased lender over the previous decade. 
"We expect India to move into the middleincome category of countries in the next two years. This will mean that the IDA ( International Development Association) funding India got last year was the last cycle of such funding for the country," said a senior World Bank official. 
The bank lends to developing countries under two arms — IDA and International Bank of Reconstruction and Development (IBRD). IDA funds are highly concessional or interest-free loans and grants aimed at improving living conditions of the poorest. India is Currently a Blend Country 
IBRD funds infrastructure projects in middle-income and creditworthy lowincome countries at interest rates higher than those provided by IDA but lower than those offered by other commercial lending agencies. 
India is currently classified as a "blend" country — defined as one in transition from lower middle-income to middle-income — and is creditworthy for lending from both IDA and IBRD. In 2010, India's per capita national income stood at $1,330, which is higher than the operational eligibility cut-off of $1,175 per capita income. 
The finance ministry, which is lobbying with the bank, has argued that though per capita income has risen, India has the highest number of poor and should, therefore, continue to get IDA support, an official said. According to official estimates, India has more than 350 million people below the poverty line. Last July, the World Bank board approved $1 billion for the National Rural Livelihood Mission (NRLM) — an ambitious livelihood guarantee scheme launched in 2011 under the rural development ministry. The bank is helping 13 poorest Indian states in building institutional systems before the scheme is scaled up at a national level in the next three-five years. "We tried hard to get the funding for NRLM as we knew that getting IDA funding will not be possible after this. There is a huge demand for concessional lending from poorer countries, particularly in Africa," the official said.



20 Big Private Cos Lose $36b in Tough FY12

AV BIRLA, BAJAJ & HERO GROUP GAIN THE MOST

Investors in companies run by Kumar Mangalam Birla, Rajiv Bajaj and the Munjals ended up richer last fiscal year as these shares outperformed the Sensex while those with shares in firms run by Gautam Adani and the Ambani brothers lagged behind. 
The Adani Group, which runs utilities and ports, and the Ambani brothers top the list of 20 private sector business groups that lost $36 billion, or . 1,81,132 crore, in market cap last fiscal as faltering economic growth and high input and interest costs ate into profits. An ETIG analysis shows three out of five promoters among the top 20 company owners by market capitalisation reported an erosion in market value at the end of March 2012, as the markets slumped over 10%. Besides, 56 of the top 100 companies based on market capitalisation failed to earn any return during the year. 
The fall was the first in three years. The sample's market cap had fallen by $135 billion (. 6,90,623 crore) in FY09. Among the top 20 promoters who figured in the analysis, the performance of the Adani Group was the worst, with a 41.5% fall. RIL's Market-cap Takes a 28% Knock in FY12 
Adani Group's flagship company, Adani Enterprises, lost half its market capitalisation last year after a Karnataka Lokayukta report rapped the company for its alleged involvement in illegal iron ore transportation activities. The value of the group's other companies — Adani Power and Adani Port & Special Economic Zone — also fell. 
Mukesh Ambani-led Reliance Industries reported a 28% drop in market cap during the year as a fall in gas output and sliding margins at its refining and petrochemicals businesses weighed on performance. Younger brother Anil Ambani's Reliance Group was another major loser with its market capitalisation down by 20.3% as all its six group companies failed to earn returns. The Tata Group, which topped our list of largest promoter groups, ended the year with a marginal drop of 3.4% in market cap. Though as many as 20 out of 29 group companies reported a loss in market cap, the overall impact was limited thanks to the impressive performance of Tata Motors, Titan Industries, Tata Global Beverages and retail chain Trent. 
Among the gainers were the diversified AV Birla Group with a 5.6% gain, the Bajaj Group at 11.8%, and Hero Group (28.3%). Analysts say the lacklustre performance could be attributed to the slide in profitability. "What we have begun to see is the funnel effect on the income statements. Sales are rising but without imparting growth of similar magnitude to bottom lines due to difficulty in passing on higher raw material costs, steeper fuel expenses and increasing interest outgo due to relatively expensive borrowing," says Sandeep Singal, who co-heads institutional equities at Emkay Global Financial Services. 
Says Sadanand Shetty, fund manager, Taurus Mutual Fund, "At present, we are at the cheapest point in terms of valuation of companies." According to him, sectors such as capital goods, engineering and banking are expected to do well. But not many are optimistic. "With higher prices of coal, electricity and transportation, inflation may not taper off easily in the near term. If that happens, the RBI may find it challenging to cut interest rates at a faster clip any time soon," says Singal. 
Some fund managers advise against investing in sectors such as infrastructure and construction, which have concerns related to execution and high leverage. Sunil Singhania, head (equities), Reliance Mutual Fund, says, "FY13 would be a year of stock-picking. There would select stocks in sectors such as pharma, IT, cement and certain interest rate-sensitive sectors which would do well in FY13." 
(With inputs from Shailesh Kadam)



NO ’91 CRISIS Rising fiscal deficit disturbing: Subbarao

New Delhi: Reserve Bank of India (RBI) governor D Subbarao has said that rising fiscal deficit and short-term debt levels are "quite disturbing", but the nation is not facing a repeat of the 1991 balance of payment crisis. 
    While the 1991 crisis was triggered by high oil prices almost drying foreign reserves and currency crash, large fiscal deficit and current account deficit are lead indicators of stress building up in the system again, he said at a panel 
discussion on India's economic reforms and development. 
    With Prime Minister Manmohan Singh listening, Subbarao said fiscal deficit in 1991 was 7% and it is ruling at 5.9% in 2012. The current account deficit at 3.6% is higher than 1991 figure and short-term debt at 23.3% of GDP in 2012 is much more than 10.2% in 1991. 
    "That is quite a disturbing picture. Nevertheless, I would still argue that in 1991, an implosion was imminent. In 2012, an implosion is not imminent," he said. AGENCIES

RBI mulls use of cheques for loans against gold

WHAT'S UP
Expecting excessive heating up of the gold loan business in the country, the Reserve Bank of India (RBI) recently came out with regulations, limiting gold financing companies to give only up to 60% of the value of gold kept as collateral as loan. It also stopped the practice of acceptance of public deposits by subsidiaries of some gold loan companies through surrogate branding. Now the buzz is that the central bank is working to limit the amount of cash that gold loan companies can give its customers. The most likely change in rules could be that beyond a certain limit, say Rs 50,000 per loan, the advances should be through cheques. The move is aimed at limiting the use of hard cash in this flourishing business. And RBI's move would surely help in establishing some trail about the use of funds from gold loan, even if not the source of money used to buy the gold that is being kept as collateral. 







Sunday, April 15, 2012

Bandra flat rates soar 300% in 6 yrs

Mumbai: Bandra-Khar (west), Mumbai's costliest real estate belt outside the island city, exemplifies the unrealistic property prices despite a market meltdown. 
    Bandra's Carter Road, Bandstand and Pali Hill are trying to catch up with Cuffe Parade and Malabar Hill. Prices in these upmarket suburban enclaves here have spiralled to between Rs 40,000 and Rs 60,000 a sq ft from Rs 15,000 per sq ft only six years ago. 
    In a recently completed luxury building on Pali Hill, which was recently mired in controversy over construction violations, the developer is believed to be quoting a mindnumbing Rs 75,000 sq ft (carpet area) and has sold apartments at close to Rs 40 crore each. 
    Recently, a 1,140 sq ft flat (carpet) on Pali Hill was sold for Rs 7 crore. A sea-facing apartment of similar size on Carter Road has received offers of up to Rs 9 crore—the owner wants Rs 11 crore. Elsewhere in Bandra-Khar, the average rate is Rs 25,000/sq ft. 
    Even tiny one-BHK flats in old buildings are being quoted at Rs 1.5 crore while 2-BHKs command around Rs 3 crore. In brand new towers, builders demand 20% to 40% in cash upfront, encouraging only those with black money to invest. Fly-by-night bldrs may lose out in Bandra-Khar TIMES NEWS NETWORK 
Mumbai: Pankaj Kapoor of Liases Foras, a real estate research firm, said prices in Bandra-Khar are symptomatic of the malaise in Mumbai's property market. "These are unproductive prices and builders quote unrealistic figures. They are trying to equate Bandra with Nepean Sea Road,'' he said. 
    As prices reached dizzying heights, Bandra-Khar became a prime example of civic lawlessness and urban chaos. Over the past decade, the lucrative belt attracted the land mafia and a new breed of rapacious builders linked to politicians and the underworld who built luxury skyscrapers on tiny plots in narrow lanes, which once housed quaint bungalows. 
    Citizen activists consistently complained about the thriving nexus between local BMC officials and developers that led to haphazard development in this once peaceful suburb. In many of the bylanes, buildings have come up with no open spaces around them. In some of the new constructions, balconies and cantilever projections virtually touch the road line. 
    But things are about to change. Many fly-by-night builders who bucked the system by bribing BMC officers, are slowly getting edged out of the Bandra-Khar market. Building rules which were amended by the BMC and approved by the state government last January have hit them hard and affected their profits. Local property market 
sources said around 20 plots bought by such builders at astronomical rates are now up for sale. "They were used to making 200% profits on each project by selling certain areas of the building illegally to flat purchasers. The new rules have stopped this gross misuse,'' said these sources. Another local developer said, "They have realized that plots they bought at high rates will not yield them the super-profits they earned over the years through manipulation.'' These builders made a huge killing in the past decade by manipulating building concessions granted to them by successive municipal commissioners. They illegally sold areas like flower beds, voids, common lobbies, terraces at market rates to flat buyers, although these areas were not part of the building's floor space index (FSI)—the permissible built up area vis-a-vis the plot size. 
    Land prices in Bandra-Khar were artificially jacked up because these builders paid Rs 6 lakh to Rs 7 lakh a square yard for a plot, knowing that they would make super profits by misusing building areas by bribing BMC officials. 
    A crooked builder could build over 60,000 sq ft on a 1,000 sq yard plot by misusing concessions. Under the new law, he will not be able to build more than 40,000 sq ft saleable on a similar sized plot. Moreover, his profit will take a hit because of the premium he will pay the BMC for the compensatory FSI. "A new breed of builders will now move in; the old unscrupulous ones will be pushed out because they cannot reconcile themselves to decreased profit margins,'' said a building industry source.


Thursday, April 12, 2012

Govt blundered on Jan IIP, cuts it from 6.8% to 1.1%

New Delhi:The government faced a major embarrassment on Thursday when it sharply revised the industrial production data for January, with the growth rate lowered to 1.1% from the previously reported 6.8%. Finance minister Pranab Mukherjee termed the sharp revision as "disappointing". 
    For a change, the Central Statistics Office admitted that the error was due to "incorrect reporting" of the sugar production data. Chief statistician T C A Anant said the error was detected at the time of compilation of IIP for February. He said sugar production had been wrongly taken as 134.08 lakh tonne instead of the actual figure of 58.09 lakh tonne. Experts say GDP growth may be lower than 6.9% 
New Delhi: Chief statistician T V A Anant blamed the incorrect IIP figure for January on wrong reporting by the ministry of consumer affairs, food and public distribution. As a result, the growth in the consumer nondurables segment was lowered to 11% instead of 42% reported earlier. Overall, consumer goods growth slowed to 2.9% from 20.2% estimated last month. 
    While economists and even the RBI have been questioning the quality of data, when asked, Anant told TOI: "This is aone-off event. It is because of an unusual occurrence." 
    The capital goods sector too has remained volatile for the past few months, and there have been sharp revisions, drawing criticism from economists. The error in the January IIP data comes close on the heels of the sharp correction in the export numbers that was attributed to a software glitch. Economists said the revision would mean that GDP growth would be lower than the previously estimated 6.9% in 2011-12. 
    "February's IIP data reinforces the reality of a slowdown in industrial activity. However, even more telling of the trend decline in growth was the very significant downward revision in January's data print, removing the outlier characteristic of the initial number," said Saugata Bhattacharya, senior vice-president at Axis Bank. 
    When the January data was released last month, TOI had flagged the reasons for the unexpected rebound in industrial activity and pointed to the 93% rise in food and beverages output and a surge in tobacco production.




Wednesday, April 11, 2012

State orders probe into Ambani home extension

Mumbai: The Maharashtra government on Tuesday ordered a probe by an officer of the rank of secretary into an alleged unauthorized construction carried out on a footpath as part of the extension of Mukesh Ambani's 27-storey home, Antilia. 
    The probe will also look into allegations of 'generosity' shown by the civic body while legalizing work adjoining the billion-dollar structure ''at the cost of public convenience''. But senior civic officials said the controversy was being blown out of proportion and was, in fact, resolved at a meeting between BMC commissioner Subodh Kumar and Ambani late last year. 
    The probe was ordered by state urban development minister Bhaskar Jadhav after allegations in the legislative assembly that the state government was trying to shield Ambani and shrugging off its responsibility. Without committing on a time-frame, Jadhav said: "If investigations prove that illegal work did take place on the setback plot, we will take action and remove the contentious portions." 
HC: No double allotment of flats T he Bombay high court on Tuesday said no one should be allotted more than one flat, while directing the state government to produce a list of cases of double allotment of flats under the chief minister's discretionary quota. P 7 BMC officials had raised doubts over setback land 
Mumbai: Mukesh Ambani's residence Antilia is in the news again, this time over an allegedly illegal extension on an adjoining footpath. 
    The Ambani group had in May 2010 handed over 309.31 sq m of 'road setback' to the corporation in lieu of additional floor space index (FSI), which it consumed in due course. The setback was sought to widen the 18.30mwide Altamount Road. But in the absence of a setback at an adjoining Bank of India building and the presence of large trees on the land, the corporation did not proceed with the widening. 
    Setback land is claimed for public development from the owner of private land in lieu of transfer of development rights (TDR) or FSI. 
    In the meantime, Antilia carried out 'illegal' beautification on the setback, including laying out a lawn, constructing a bund wall, a staircase and a security cabin. On receiving a complaint, the civic body served a notice under section 314 of the BMC Act on December 14, 2010. 
    At a meeting between Ambani and civic chief Subodh Kumar, it was decided that since the BMC could not put the area to good use, it be handed over to Antilia Commercial Pvt Ltd for beautification on the condition that the civic body could cancel the allotment ''on its discretion''. Doubts were raised at civiv meetings over the allotment, made despite there being no policy to hand over setback land back to the owner. 
    "Doubts were raised even by senior civic officials. The government must clarify how the setback was allotted and unauthorized work legalized conveniently," said Eknath Khadse, leader of the opposition in the assembly. 
    The Antilia management said it had constructed a security wall to prevent public car parking in front of two gates of the building, and the grass was planted as a minor beautification measure. 
    The Ambani-Kumar meeting decided the civic body would levy Rs 2.82 lakh as 'pay and park charges' and 1.7 lakh as rent every year. "What is the harm if we get Rs 5 lakh every year for land which is of no use to us in the near future? Once we get the remaining setback, the land will be taken back and put to use," said a senior civic official. 
    The Ambani residence was earlier in the news over charges that it was constructed on Waqf board land reserved for the poor.

Fgn entities under govt watch Asked To Provide Details Of Employees At Regular Intervals


New Delhi: All foreign companies and organizations, including NGOs, that have offices in India will be under close watch as they will have to mandatorily provide details of employees, including those engaged to liaison work, to the Union home ministry at regular intervals. 
    Although such details of employees are provided when visas are sought, foreign companies will now have to give particulars of specific nature of work and 'contacts' in various ministries or public sector undertakings (PSUs) to the government once a year. 
    The government's circular is being read in the backdrop of controversies over foreign nationals participating in political activities like protests against Indian nuclear projects at Kudankulam in Tamil Nadu and Jaitapur in Maharashtra. 
    The Union home ministry circular seeking the details comes close on the heels of its investigation into the involvement of foreign NGOs and the allegation that the money they sent to Indian entities in Tamil Nadu was used to sustain the protest against the Kudankulam nuclear power project. 
    "The allegation that some foreign entities were also involved in funding Indian NGOs for fanning agitations, like the one at Kudankulam nuclear project in Tamil Nadu, has also highlighted the need for such a direction from the government," said an official. 
    He said the circular has been sent to various ministries, including the ministry of communication, asking them to ensure security clearance before foreign entities set up liaison, branches or project offices in India. 
    The ministry has come out with a fresh two-page form which all foreign entities are required to fill. The form seeks details of the employees working with the Indian office, bessides asking them to provide details of foreign nationals who had visited India from that firm.

 

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