Invest in Incredible India

Tuesday, March 23, 2010

Is LIC the New Unit Trust ?

In 2003, the collapse and subsequent bailout of the old Unit Trust of India was the biggest financial crisis that an Indian financial institution had ever faced. Even though many keen observers knew that the Unit Trust was unlikely to actually be in as good health as it pretended to be, the organisation's collapse came as a shock to its ordinary customers.

Seven years later, there are some uncomfortable parallels between the UTI of the time and the Life Insurance Corporation of today. That UTI was a sort of a mutual fund but since its existence predated the rest of the industry and the regulatory framework, there were all sort of exceptions, some theoretical and some just practical, for these exceptions. UTI was a pool of funds outside the government's finances that was nonetheless available to the government for certain purposes. Some of these alternative uses of this money were official and some were private initiatives of decision-makers at different levels.

The deployment of this money was not done transparently and there was no information that was available to the public and the media at large about where it was being invested and what those investments were really worth. Investors identified UTI as an arm of the government and in terms of the marketing pitch for its products, UTI enjoyed an aura of sovereign guarantee. Everyone assumed that UTI was an impregnable fortress of financial solidity without realising how hollow, years of abuse had made it.

If you sit back and think for just a moment, you'll realise that there is reasonable outward evidence that the Unit Trust's history could repeat itself with LIC. It's true that there's a lot that is different about the regulatory framework and the nature of LIC's liabilities. However, the core reasons that led to UTI's collapse also exist for the LIC today: there is an unapologetic tendency to use the LIC as a bottomless pit of money of which there wasn't enough accountability. The blata

nt use of this money to bailout the public sector IPOs is only the most recent and the most visible example-given the lack of public information, it's not possible to make any assumptions that everything else must be OK with LIC's investments-just as it wasn't with the Unit Trust.

When I first wrote about LIC's purchases of huge amounts of shares being sold by the government a few weeks ago, a rather knowledgeable person flippantly said to me, "Why should anyone worry about this? Today LIC is rescuing the government, tomorrow the government will rescue LIC-hisaab baraabar!" I wonder if it will eventually come to that.

Wednesday, February 24, 2010

SBI may raise up to Rs 20,000 cr via rights

State Bank of India plans to raise Rs 10,000-20,000 crore in the next fiscal through a rights issue and is in discussion with the Government, its principal shareholder, said Mr O.P. Bhatt, Chairman.

“We need to raise equity in the next fiscal. We have a ceiling of Rs 20,000 crore. We may raise anywhere between Rs 10,000 and Rs 20,000 crore in the next fiscal,” Mr Bhatt said, while speaking to reporters on the sidelines of the CII Banking Tech Summit, here on Wednesday.

However, he pointed out that the bank has no immediate requirement of capital as it is fairly well capitalised with a capital adequacy ratio of 14 per cent.

Mr Bhatt expects the Government to make some announcement about the fund raising in the Budget on Friday.

Over the next five years, the bank would require Rs 40,000-50,000 crore. However, the timing will depend on the group's requirement for funds and the prevailing market conditions. SBI would need funds for any acquisitions it may go in for in the future or to meet the requirements of its subsidiaries, including the insurance subsidiaries.

“In the next five years, in addition to Tier-II capital and retained earnings, we may require Rs 40,000-50,000 crore. But this number could change,” Mr Bhatt said.

“If we can raise even half of this in the next 12-18 months, it will be great,” he said.

On spends to build IT infrastructure, Mr Bhatt said that 60-70 per cent of the bank's capital expenditure is on account of IT. He pointed out that the bank will invest thousands of crores of rupees in the coming years to build up its IT infrastructure though he declined to put a specific number to the future spends.

SBI is installing 1,000 ATMs every month. Necessary infrastructure has to be set up for mobile banking. It is also undertaking a data warehousing project. It also plans to establish a gateway to integrate all the payments process. Expenditure will also be incurred to upgrade the bank's network and set up risk management practices, Mr Bhatt said.

Saturday, February 20, 2010

Reliance submits revised offer for LyondellBasell: Sources

India's largest private gas refiner, Reliance Industries is still in the race for LyondellBasell, reports CNBC-TV18, quoting sources. The company meets the February 19 deadline by submitting an updated offer for LyondellBasell. The revised offer comprises a marginal hike, a slight tweaking of its December 2009 proposal.

RIL's December proposal, which sought strategic stake and majority voting rights, valued LyondellBasell at USD 13.5 billion.

But earlier this week, the bankrupt petrochemicals maker settled a dispute with creditors, paving the way for an exit from bankruptcy. The enterprise value of LyondellBasell is now pegged at a minimum of USD 14.5 billion.

After IPO, United Bank to get new CMD

Post-IPO Kolkata based United Bank of India is set to get a new head as present chairman and managing director SC Gupta will retire by end of this month. Sources said Bhaskar Sen is likely to become the new chairman and managing director, just after the bank completes its initial public offer.

Bhaskar Sen, who had joined Dena Bank in 2007 from Union Bank of India, where he was working as general manager, headed new businesses of the bank.

Sen also looked after overseas expansion and strategic initiatives of the bank.

According to UBI insiders, Sen’s overseas experience would help the bank’s foreign operations. In fact, UBI started a representative office in Bangladesh a few weeks back and is planning to upgrade that into a branch in six months.

The bank is also planning to have a representative office in Myanmar and already has tie ups with four government banks in the country.

Meanwhile, the bank has received exemption from the Securities and Exchange Board of India (SEBI) for appointment of independent directors before its initial public offering (IPO) of shares.

“We have explained to SEBI that it might take sometime before we fill the quota of independent directors and have given an undertaking that we will keep them informed as and when we appoint them," TM Bhasin, UBI’s executive director, said.

The bank has already applied to the government of India for appointment of four more independent directors. At present the bank’s board of directors comprises seven directors of which two are only independent directors.

A delay in recruiting independent directors might have cost the bank dearly. In such a case the bank would have to continue to be in non-compliance of the corporate governance requirements of the listing agreement.

''We have to recruit two more directors and one shareholders' representative into the board,'' Bhasin said.

UBI’s IPO of 5,00,00,000 equity shares of face value of Rs 10 each will open on February 23 and close on February 25.

Sunday, October 28, 2007

SBI bottomline soars 36%

Backed by robust growth in sale of investments and commissions, State Bank of India has posted a 36 per cent growth in its net profit in the second quarter of the financial year. Profit rose to Rs 1,611.42 crore compared with Rs 1,184.49 crore in the same quarter last year.

Total income rose to Rs 13,658.22 crore from Rs 10,237 crore and interest income to Rs 11,616.28 crore as against Rs 8,799.62 crore. Interest expenses in the quarter increased sharply by 49 per cent to Rs 7,853.36 crore.

As a consequence, the net interest income grew by just 6.28 per cent to Rs 3,762.64 crore against Rs 3,540.30 crore a year ago. The other income comprising items like sale of investments/commissions rose 42 per cent to Rs 2,041.94 crore from Rs 1,437.69 crore.

The bank’s deposits grew 23.31 per cent to Rs 4,84,114 crore from Rs 3,92,615 crore. However, the share of low cost deposits (savings and current accounts) ratio declined 39.45 per cent due to higher mobilisation of term deposits. The cost of funds moved up to 5.48 per cent from 4.51 per cent due to higher term deposit mobilisation and higher interest rates.

Gross advances grew 26.21 per cent to Rs 3,63,591 crore from Rs 2,88,078 crore. Housing advances rose by 18.04 per cent to Rs 40,807 crore. It added loans of Rs 2,825 crore in April-September 2007.

Monday, October 15, 2007

Welspun Gujarat plans Rs 400cr capex

Pipe manufacturer Welspun Gujarat Stahl Rohren will invest Rs 400 crore to set up a new plant and expand the existing facilities in Gujarat.

The company will set up a new facility in Anjar, Gujarat, which will produce 300,000 tonne of pipes. The company will invest Rs 298 crore on this. The company is also planning to invest Rs 100 crore to increase its capacity, from 400,000 tonne to 550,000 tonne, at its H-saw plant in Anjar, said BK Goenka, MD, Welspun-Gujarat Stahl Rohren here today.

The company's overall capacity will increase from 1.4 million tonne to 1.7 million tonne after the capacity expansion.

The company's current orderbook stands at Rs 5,530 crore which will be completed in the next 18 months, Goenka said.

The company also bagged a order of Rs 1835 crore from Transcanada for the supply of pipes, he said. ''We are expecting a market of $5 billion of pipes in the next five years,'' he said.

Monday, October 01, 2007

DLF may build Bidadi knowledge city in Karnataka

Realty major DLF is learnt to have bagged the project for developing the 9,178-acre Bidadi Knowledge City in Karnataka. The land acquisition cost will be around Rs 3,600 crore and the total cost of the project, including development and sales, is estimated to be between Rs 50,000 crore and Rs 60,000 crore, said a source close to the development.

The project will be developed by DLF in a 50:50 joint venture with the Dubai-based firm Limitless Holdings, a part of Nakheel and Dubai World group. California-based architecture firm Berkely and design firm Calthorpe Associates have been appointed the master planners for the project.

The project is learnt to have been awarded to DLF following a global tender issued by the Bangalore Metropolitan Regional Development Authority (BMRDA). In all, 32 consortiums, formed by over 100 companies, had filed for the request for qualification (RFQ).

The project will be developed at about 30 km away from Bangalore and 15-km from Mysore. “It is aimed at supplementing the urban infrastructure of the area, and will be a world-class destination for professionals to live and work in,” sources said.

Located on the Bangalore-Mysore railway line and 30 km from the Bangalore airport, the township will have strategic connectivity advantage of being on the southern freight corridor.

The township is also likely to have a dedicated metro rail connection to Bangalore city. In order to boost existing connectivity, BMRDA is also working on a series of ring roads.

The township is set to be self-sustaining, and would be developed on the ideology of "walk-to-work." Apart from offices and residential developments, Bidadi Knowledge City will also comprise entertainment options like shopping malls, multiplexes, hotels and serviced apartments. Adequate power and water supply would also be made available to the township.

Thursday, September 27, 2007

EIH ends brand alliance with Hilton

EIH Ltd, a member of the Oberoi Group, has decided to terminate its strategic alliance with Hilton International Co for marketing and co-branding the Trident Hilton brand in the country.

According to Mr P.R.S. Oberoi, Chairman of EIH Ltd, the company today sent out a notice to Hilton of its decision, which will take effect from March 31, 2008.

Mr S.S.Mukherji, Managing Director of EIH Ltd, told Business Line that it was purely a business decision, as the company had too much at stake (some 1,300) in terms of additional rooms under the Trident brand in the next three years.

According to Mr Oberoi, consequently, the existing Trident Hilton hotels in Gurgaon, Agra, Jaipur, Udaipur, Bhubaneshwar, Chennai and Kochi will be re-branded Trident Hotels, effective from April 1, 2008.

He clarified that The Hilton Towers in Mumbai will also be re-branded as Trident Towers effective from April next.Outlining the underlying strategy behind the move, Mr Oberoi said that EIH wished to independently pursue the development of its Trident brand in the country. “The outlook for our Trident brand is excellent. We are very confident that our Trident Hotels will continue to expand successfully.”
Market leadership

He said the Trident in Gurgaon has enjoyed a position of market leadership in Delhi from the day it opened. “Our 440-room Trident, located at Bandra Kurla in Mumbai, will open in 2008 and is expected to be a market leader in north Mumbai.”

EIH now had new Trident hotel projects committed at the new international airport in Bangalore and at the Hitech City in Hyderabad. “We have a number of opportunities for new Trident Hotels in other cities which we are pursuing.” The Oberois, as announced, have already lined up investments of nearly Rs 1,000 crore in new hotel projects.

Hilton is already pursuing a joint venture with the DLF Group for both the Hilton and the Hilton Garden Inn (lower end) hotels. According to Mr Mukherji, at some future date, there may be too much confusion in the minds of customers with many types of Hilton hotels in the country.

Suzlon bags order from Turkish utility major

Wind energy major Suzlon on Thursday entered the Turkish market by securing an order for 31.5 MW of wind turbine capacity from utility major Ayen Enerji Co Inc.

The contract with Ayen Enerji will be supplied through 15 units of Suzlon's S88-2.1 MW turbine, a company release said here.

Ayen Enerji is a new entrant in wind energy with a principal focus on production, transmission, distribution and sale of electricity.

Together with its subsidiaries, the company has three hydroelectric and one natural gas power plants with total annual capacity of nearly 1.2 billion kWh.

Speaking on the order, Suzlon Wind Energy A/S' CEO Erik Winter Pedersen said "this is an exciting opportunity and we are very pleased to partner with Ayen Enerji."

"We have a winning combination with Suzlon's experience in large, successful wind projects around the world and Ayen's considerable experience in Turkey's energy market."

Ayen Energy General Manager Fahrettin Arman said "we are happy to co-operate with Suzlon in this project. Our investments will continue within developing wind energy sector of Turkey so we intend to co-operate with Suzlon in our future projects."

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