KEEP YOUR OPTIONS OPEN
Sandeep Singh
Posted online: Monday , September 24, 2007
Over the next five days, non-promoter shareholders of Essar Steel, India’s fourth-largest steel company by sales, have a decision to make. The company’s promoters, the Ruias, who hold 87.1 per cent of Essar Steel’s equity, want to buy the balance 12.9 per cent from the public, and delist the company. As per delisting rules, the Ruias have set the floor price at the stock’s six-month average price, Rs 38. Shareholders can accept the offer; or they can quote their price through a formal process on the stock exchanges; or they can wait and watch.
It’s a choice that shareholders of DLF and Bharti Airtel in their previous incarnations had to face. It’s a choice that shareholders of Deccan Aviation are currently facing, in a different context. With India Inc getting bigger and broader, and seeing more large equity investments, mergers and acquisitions, the number of open offers is only bound to increase. How should you respond to such buyout propositions?
What are open offers?There are two reasons why an open offer is made. One, the ‘takeover code’ is triggered. If any investor buys more than 15 per cent of a company’s equity, by law, it has to offer an exit option to other shareholders for at least 20 per cent of the company’s equity. In recent times, for example, UB Group’s acquisition of Deccan, Blackstone’s purchase of Gokaldas Exports.Two, the promoters want to delist their company’s shares. It could be because they don’t want to share the fruits of their business with others or because they don’t want public scrutiny or because they think their shares are undervalued. This delisting intent is most active among multinationals, many of which were forced to list in the seventies under Fera (Foreign Exchange Regulation Act).
What are your options?The rules related to takeovers and delisting have set guidelines for the open offer price. It’s the six-month average share price. Says Kamlesh Gandhi, country head-investment banking, Religare: “Six-month average is fair. One year is too long, as many more factors can influence price. Two weeks is too small and open to manipulation.” If a stock is not traded frequently, besides price paid by the acquirer, other financial parameters like book value and PE ratio also come into play.
As an investor, you don’t have a say in the open offer price. You can take it or leave it. However, in case of delisting, the rules empower you to influence the exit price. Companies wanting to delist have to go through a reverse book-building process on the stock exchanges. As the name suggests, it’s the book-building process used to price IPOs (initial public offers) in reverse. Rather than quote a price you are willing to buy the shares at, you quote the price at which you are willing to sell. Starting from the offer price, the price at which 90 per cent of shares tendered in can be accepted is called the exit price. However, the choice to offer it or not lies with the promoters.
Reverse book-building is intended to give investors a say in setting the price. More often than not, it throws up a higher price than the floor price. For instance, Essar Shipping, another company of the Ruias, went in for a reverse book-building exercise in March. Against the floor price of Rs 31.62, the exit price was set at Rs 50, and even then only 61 per cent of the balance shares were tendered in. Similarly, in January, Eicher offered a floor price of Rs 150, but the reverse book-building process threw up an exit price of Rs 265.
What should you do?If you go by performance records over the last four years, the verdict is split. Roughly, in half the cases, investors have done better than the market by accepting the open offer. In the other half of cases, they would have done better had they availed off the open offer, and simply reinvested that money in the market (See box: Not an open and shut case).
In general, investor participation in open offers is low. For instance, in 2006-07, 90 companies came out with takeover-induced open offers.
Of these, 54 were subscribed less than 10 per cent, and 73 less than 50 per cent. Holcim got barely 0.15 per cent of Gujarat Ambuja in its open offer in April 2006. Says Gandhi: “Subscription levels are low, as investors mostly feel if someone is buying a stake, good things must be happening to the company.” But as the subsequent share performance shows, that may or may not be true.
The decision to tender in your shares should be based on the company’s business prospects. If it’s a takeover, says Gandhi, “I give maximum weightage to the new management and the purpose of the acquisition.” Adds Ashok Jain, chairman and managing director, Arihant Capital: “There is no correlation between the open offer price and future stock performance. It’s a qualitative issue that depends on the company’s future performance.” So, for instance, the call that Deccan shareholders have to make today is whether the company will turn profitable under the stewardship of Vijay Mallya.
Since it draws from the market price, the offer price generally represents the current value of a business. This may or may not be a fair representation. Also, you hold the stock keeping the company’s future in mind, which the offer price may not capture. So, if you think the business is promising and price is less than what your company is worth, stay on.
If you feel the price being offered is more than its worth, tender your shares. Says S.N. Lahiri, senior vice-president (equity), DSP Merrill Lynch Mutual Fund: “Sesa Goa, for example, is in the iron ore business, which has lots of potential. Prices of iron ore have increased by 25-30 per cent in recent times. I don’t see many investors applying to this one.”
The one situation where an additional variable enters the picture is delisting. If the promoters control more than 90 per cent of the company’s equity, they can delist the shares. You can still hold on to your shares, but you will find it difficult to sell. That doesn’t mean when a promoter makes an open offer with the intention of delisting, you should tender in your shares.
Under Sebi regulations, even if a company’s shares get delisted, you can sell your shares to the promoter at the open offer price for six months from the date of delisting. Beyond that, it is up to the promoters to accept — and that’s a risk. Keep that in mind when faced with an open offer or delisting buyout.
Sensex at 17K
Forget points and look at the percentage
Sandeep Singh
Posted online: Thursday, September 27, 2007
When the BSE Sensex, the bellwether for Indian stocks, briefly crossed another rubicon — 17,000 — today, the usual round of celebrations followed. From the perspective of sentiment and valuations, the rise from 16,000 to 17,000 holds a lot of meaning. But mathematically, the significance of every 1,000-point increase is diminishing because of the higher base effect.
For every successive 1,000-point rise in the Sensex, the percentage increase is less and less. For instance, 16,000 to 17,000 is a gain of just 6.3 per cent. To put it in context, when this bull run began, a 1,000 point increase in the Sensex — from 3,000 to 4,000 — was a percentage gain of 33.3 per cent. In other words, the latest 6.3 per cent rise being fawned over is one-fifth of what we started out with in 2003 (See table).
In the past, the Sensex has risen or fallen more than 6.3 per cent in a single day on several occasions, which says a lot about the quantum of this increase. Since July 25, 1990, when the Sensex closed above 1,000 for the first time, it has surged 6.3 per cent or more in a single day on 18 occasions; conversely, it has shed 6.3 per cent or more in a single day on 15 occasions.
The one impressive thing about this rise from 16,000 to 17,000 is the pace of increase. The latest 1,000-point gain has happened in five trading sessions. In absolute terms, that’s the quickest. However, this is a wrong way to assess speed, because it ignores the percentage variance of each crossing.
To factor in the percentage increase, we devised an indicator: sessions per 1 per cent gain. This shows how many sessions it took for each 1 per cent gain. At 0.8, the latest rise is the third-fastest 1,000-point increase in the history of the Sensex. Ahead of it are the Harshad Mehta-tainted increases from 2,000 to 3,000, and then to 4,000. But then, those were gains of 50 per cent and 33 per cent, respectively, and the latest one is 6.3 per cent. To iterate: forget the points, look at the percentage.
http://www.indianexpress.com/story/221586.html
Sandeep Singh
Posted online: Thursday, September 27, 2007
When the BSE Sensex, the bellwether for Indian stocks, briefly crossed another rubicon — 17,000 — today, the usual round of celebrations followed. From the perspective of sentiment and valuations, the rise from 16,000 to 17,000 holds a lot of meaning. But mathematically, the significance of every 1,000-point increase is diminishing because of the higher base effect.
For every successive 1,000-point rise in the Sensex, the percentage increase is less and less. For instance, 16,000 to 17,000 is a gain of just 6.3 per cent. To put it in context, when this bull run began, a 1,000 point increase in the Sensex — from 3,000 to 4,000 — was a percentage gain of 33.3 per cent. In other words, the latest 6.3 per cent rise being fawned over is one-fifth of what we started out with in 2003 (See table).
In the past, the Sensex has risen or fallen more than 6.3 per cent in a single day on several occasions, which says a lot about the quantum of this increase. Since July 25, 1990, when the Sensex closed above 1,000 for the first time, it has surged 6.3 per cent or more in a single day on 18 occasions; conversely, it has shed 6.3 per cent or more in a single day on 15 occasions.
The one impressive thing about this rise from 16,000 to 17,000 is the pace of increase. The latest 1,000-point gain has happened in five trading sessions. In absolute terms, that’s the quickest. However, this is a wrong way to assess speed, because it ignores the percentage variance of each crossing.
To factor in the percentage increase, we devised an indicator: sessions per 1 per cent gain. This shows how many sessions it took for each 1 per cent gain. At 0.8, the latest rise is the third-fastest 1,000-point increase in the history of the Sensex. Ahead of it are the Harshad Mehta-tainted increases from 2,000 to 3,000, and then to 4,000. But then, those were gains of 50 per cent and 33 per cent, respectively, and the latest one is 6.3 per cent. To iterate: forget the points, look at the percentage.
http://www.indianexpress.com/story/221586.html
Overseas Fund- Bouquet
THE BIG BIZ STORY
MF investors taste globalisation fruits
Sandeep Singh
Posted online: Sunday, September 16, 2007
Mutual funds have widened options for Indians with schemes that invest in world markets; they have also tried hard to differentiate their products
Overseas funds have been available to the Indian investor since 2004. But ever since the Reserve Bank of India (RBI) raised the limit for the Indian mutual fund (MF) industry’s international investments from $3 billion to $4 billion, and individual fund houses’ exposure limit from $150 million to $200 million, there has been a flurry of activity in this domain. A number of fund houses have launched schemes investing in foreign funds or foreign equity, while others are in the process of devising their products. While duplication of products is common in the MF industry, this time fund houses have tried to come out with products that are well differentiated from those of competitors.
The uniqueness of products is no doubt commendable, as it gives the investor more choices, but it also makes his task of investing harder. After all, he must choose from a wide buffet for a mere 10-15 per cent of equity allocation. “If all the products look the same, then the investor has no choice, whereas giving options provides the investor the choice to pick the scheme that is most appealing to him,” said SBI Mutual Fund chief investment officer Sanjay Sinha.
Fidelity’s bouquet of options: Fidelity’s World Range Fund, which is still awaiting Sebi’s nod, offers five options within one scheme. These include the Fidelity America Plan, Emerging Markets Plan, European Growth Plan, International Plan and Pacific Plan. The fund acts like a feeder fund. The investor can choose between the five plans and decide where he wants to put his money, based on his risk profile and investment pattern. For instance, an investor who wants to reduce his risk and is happy with moderate returns might want to invest in the developed economies. Another, looking for higher returns but higher risk, might opt for the Pacific plan.
Birla’s switching option: Birla Sun Life launched its International Equity Fund this week. The fund house has two new ideas to offer. One, it offers investors two options: you may either invest 100 per cent internationally, thus getting the benefit of higher diversification, or you may invest a minimum of 65 per cent in Indian equity and a maximum of 35 per cent overseas, thus getting the tax benefit on capital gains that is allowed on investment in Indian equity. The attractive feature is that you can switch between the two options any time during your investment period without being charged any entry or exit load.
Two, Birla Sun Life’s scheme will not act as a feeder fund for any international fund. Instead, it will invest directly in foreign equity. Investments will be made based on advice from Standard & Poor’s regarding which stocks to pick from the international market.
Tatas’ infrastructure fund: Tata Indo-Global Infrastructure Fund is the first thematic sectoral fund for the international market. We already have a bunch of infrastructure funds trying to capture the growth in the Indian infrastructure sector. This fund, along with capturing the growth in Indian infrastructure with at least 65 per cent investment in Indian equity, will invest up to 35 per cent in international companies benefiting from the growth in their domestic infrastructure.
So, it is suited for investors looking for high growth, and is not for those looking just for risk diversification.
Bullish on Asia: Two fund houses are offering two schemes, one of which is bullish on the Asian market, and the other specifically on China. ICICI Prudential Mutual Fund has come out with its Indo Asia Equity Fund, which will invest in Asian markets. “Asia fits in better with India. Growth in Asia is likely to be higher than in the rest of the world,” said ICICI Prudential Mutual Fund deputy managing director and CIO Nilesh Shah. “Globally, allocation will move to Asia because of its performance potential.”
Capturing the China-India growth story: ABN Amro AMC has launched the China-India Fund, which will invest predominantly in India (65-75 per cent) and China (25-35 per cent). This fund has been launched to capture the growth in the world’s two fastest growing economies — China and India.
While investing in overseas funds, investors need to answer one question: what proportion of their equity investments should be allocated to international equity? According to Delhi-based financial planner Surya Bhatia, international exposure should not exceed 10-15 per cent of your equity portfolio. “By investing this proportion in international equity, you get the benefit of diversification and international growth. You invest overseas with the purpose of diversifying country risk, and for this purpose 10-15 per cent is adequate,” he explained.
Finally, what investors must remember is that while some international exposure will do their portfolio a world of good, they must not go overboard. The bulk of their equity exposure should be to the domestic market.
After all, they have greater knowledge and familiarity with the Indian market and can, hence, monitor their domestic investments better. Most importantly, why venture abroad when your own economy is growing at above 9 per cent.
Delicious Buffet
• Investing in funds with global exposure diversifies country-specific risk
• Such investments mustn’t exceed 10-15% portfolio
• Each product offers a unique proposition
• One allows you to invest in a foreign economy you are bullish about
• Another allows you to gain from infrastructure growth in other countries
http://www.indianexpress.com/story/217290.html
MF investors taste globalisation fruits
Sandeep Singh
Posted online: Sunday, September 16, 2007
Mutual funds have widened options for Indians with schemes that invest in world markets; they have also tried hard to differentiate their products
Overseas funds have been available to the Indian investor since 2004. But ever since the Reserve Bank of India (RBI) raised the limit for the Indian mutual fund (MF) industry’s international investments from $3 billion to $4 billion, and individual fund houses’ exposure limit from $150 million to $200 million, there has been a flurry of activity in this domain. A number of fund houses have launched schemes investing in foreign funds or foreign equity, while others are in the process of devising their products. While duplication of products is common in the MF industry, this time fund houses have tried to come out with products that are well differentiated from those of competitors.
The uniqueness of products is no doubt commendable, as it gives the investor more choices, but it also makes his task of investing harder. After all, he must choose from a wide buffet for a mere 10-15 per cent of equity allocation. “If all the products look the same, then the investor has no choice, whereas giving options provides the investor the choice to pick the scheme that is most appealing to him,” said SBI Mutual Fund chief investment officer Sanjay Sinha.
Fidelity’s bouquet of options: Fidelity’s World Range Fund, which is still awaiting Sebi’s nod, offers five options within one scheme. These include the Fidelity America Plan, Emerging Markets Plan, European Growth Plan, International Plan and Pacific Plan. The fund acts like a feeder fund. The investor can choose between the five plans and decide where he wants to put his money, based on his risk profile and investment pattern. For instance, an investor who wants to reduce his risk and is happy with moderate returns might want to invest in the developed economies. Another, looking for higher returns but higher risk, might opt for the Pacific plan.
Birla’s switching option: Birla Sun Life launched its International Equity Fund this week. The fund house has two new ideas to offer. One, it offers investors two options: you may either invest 100 per cent internationally, thus getting the benefit of higher diversification, or you may invest a minimum of 65 per cent in Indian equity and a maximum of 35 per cent overseas, thus getting the tax benefit on capital gains that is allowed on investment in Indian equity. The attractive feature is that you can switch between the two options any time during your investment period without being charged any entry or exit load.
Two, Birla Sun Life’s scheme will not act as a feeder fund for any international fund. Instead, it will invest directly in foreign equity. Investments will be made based on advice from Standard & Poor’s regarding which stocks to pick from the international market.
Tatas’ infrastructure fund: Tata Indo-Global Infrastructure Fund is the first thematic sectoral fund for the international market. We already have a bunch of infrastructure funds trying to capture the growth in the Indian infrastructure sector. This fund, along with capturing the growth in Indian infrastructure with at least 65 per cent investment in Indian equity, will invest up to 35 per cent in international companies benefiting from the growth in their domestic infrastructure.
So, it is suited for investors looking for high growth, and is not for those looking just for risk diversification.
Bullish on Asia: Two fund houses are offering two schemes, one of which is bullish on the Asian market, and the other specifically on China. ICICI Prudential Mutual Fund has come out with its Indo Asia Equity Fund, which will invest in Asian markets. “Asia fits in better with India. Growth in Asia is likely to be higher than in the rest of the world,” said ICICI Prudential Mutual Fund deputy managing director and CIO Nilesh Shah. “Globally, allocation will move to Asia because of its performance potential.”
Capturing the China-India growth story: ABN Amro AMC has launched the China-India Fund, which will invest predominantly in India (65-75 per cent) and China (25-35 per cent). This fund has been launched to capture the growth in the world’s two fastest growing economies — China and India.
While investing in overseas funds, investors need to answer one question: what proportion of their equity investments should be allocated to international equity? According to Delhi-based financial planner Surya Bhatia, international exposure should not exceed 10-15 per cent of your equity portfolio. “By investing this proportion in international equity, you get the benefit of diversification and international growth. You invest overseas with the purpose of diversifying country risk, and for this purpose 10-15 per cent is adequate,” he explained.
Finally, what investors must remember is that while some international exposure will do their portfolio a world of good, they must not go overboard. The bulk of their equity exposure should be to the domestic market.
After all, they have greater knowledge and familiarity with the Indian market and can, hence, monitor their domestic investments better. Most importantly, why venture abroad when your own economy is growing at above 9 per cent.
Delicious Buffet
• Investing in funds with global exposure diversifies country-specific risk
• Such investments mustn’t exceed 10-15% portfolio
• Each product offers a unique proposition
• One allows you to invest in a foreign economy you are bullish about
• Another allows you to gain from infrastructure growth in other countries
http://www.indianexpress.com/story/217290.html
Fed Cut - Its Impact
THE BIG BIZ STORY
Fed rate cut: Brave act or desperate move?
Sandeep Singh
Posted online: Sunday, September 23, 2007
US Federal Reserve chairman Ben Bernanke said recently that he would cut interests only if there is a genuine problem in the economy. It seems nobody was listening
Ben Bernanke
Last Wednesday brought happy tidings on several fronts. The Sensex zoomed 653 points, up 4.2 per cent in a day, the adrenaline for the surge being provided by the US Federal Reserve Board’s decision to cut interest rates. Union agriculture minister Sharad Pawar’s announcement on the same day, proposing to offer financial incentives to the ailing sugar industry, brought more cheer. And finally, the mood in cricket-obsessed India turned ecstatic when, towards the end of the day, Yuvraj Singh hoisted six consecutive deliveries into the stands.
Ever since the subprime loan fiasco broke out in the US, increasing uncertainty and inducing volatility in stock exchanges around the world, market participants have been looking to Federal Reserve Board chairman Ben Bernanke to provide relief by cutting interest rates. He acted along these lines.
On September 17, he announced the first rate cut of his tenure — a 50 basis points (bps) cut in the Fed Funds Rate (the inter-bank borrowing rate), bringing it down from 5.25 to 4.75 per cent. This cut is expected to boost consumer spending, improve corporate bottomlines (by reducing interest costs), and boost the US — and world — economy. In addition, the Fed also reduced the Discount Rate (the rate at which it extends short-term loans to banks) by 50 bps, a move that will make cheaper funds available to banks.
Markets surge
Markets around the world celebrated Bernanke’s measures: the Nikkei rose 3.7 per cent, Hang Seng 4 per cent, FTSE 2.8 per cent, DAX 2.3 per cent and CAC-40 3.3 per cent. The Indian market, too, responded positively: the Sensex rose 4.2 per cent, in the process breaching the key psychologically mark of 16,000. (It has taken a mere 51 trading sessions for the Sensex to move up from 15,000 to 16,000.)
While the markets have taken the positives from Bernanke’s rate cuts, the negative implications of his decision don’t appear to have sunk in completely. Bernanke had earlier said that he would go for a rate cut only if there was a genuine problem in the US economy, and not just to bail out the banking system. Now, does the 50 basis points cut point to a larger problem in the economy?
Many experts believe that the US economy might be headed for a slowdown, which would lead to greater flight of capital into those high-growth economies that depend less on exports and are propelled more by domestic consumption. Says HDFC Bank chief economist Abheek Barua: “India, Indonesia and China are likely to hold up and are being seen as safe havens by investors.”
...And rupee follows suit
The higher influx of funds that followed the US rate cut led to further appreciation of the rupee, which on Thursday breached the Rs 40 to the dollar mark for the first time in nine years and closed at Rs 39.88.
How will the appreciation of the rupee impact our economy and the stock markets? One, by reducing the oil import bill, the stronger rupee will benefit oil companies. The BSE Oil & Gas index gained 11.4 per cent last week. Reliance Industries Ltd (RIL) gained 11.8 per cent, RPL 18.6 per cent,and ONGC 10.7 per cent. While the Oil & Gas sector has benefited from the rupee appreciation, the IT sector’s earnings are likely to be squeezed even further.
Not surprisingly, the BSE IT index was down 0.5 per cent over the previous week’s close. Satyam and Wipro were down by 2.75 and 2.3 per cent respectively. Infosys and TCS tried to hold their ground but they, too, lost 0.46 and 0.75 per cent respectively over the previous week’s closing.
Selective gains
What is noteworthy is that most of the movement on Wednesday was largely concentrated in the large-cap segment, which foreign institutional investors (FIIs) tend to prefer. The Sensex was up 4.2 per cent, the BSE 100 3.7 per cent, and the BSE 200 3.5 per cent. By contrast, mid-cap and the small-cap indices gained only 1.9 per cent and 1 per cent respectively.
“In future, activity is likely to take place in companies beyond the large cap companies,” says JP Morgan AMC chief executive officer (CEO) Krishnamurthy Vijayan. “The action in the leading stocks has been because of increasing movement of capital from developed economies to emerging markets.
India is likely to see an increase in investment in smaller companies moving beyond the top 50-100 stocks that most foreign investors and mutual funds are today pouring money into.” Over the past year, too, gains in the stock market have been selective. While the Capital Goods and Oil & Gas indices have gained by 78 and 59 per cent respectively, the Auto index has declined by 0.5 per cent.
The BSE IT and BSE Healthcare indices have grown by a mere 0.2 and 1.9 per cent respectively. So, it has not been an all-round gain, and interest rates and currency appreciation have had a major impact on the performance of sectoral indexes.
Gold: The safe haven
With the dollar losing ground, one asset class that has gained significantly is gold. Gold acts as the alternative reserve (to the dollar) for central banks around the world and as a hedge in times of uncertainty. Gold closed at Rs 9,550 per 10 grams on Friday, up 2.9 per cent during the week. With the dollar on the decline, gold appears to be emerging as the favoured asset class and is expected to remain fairly strong in future.
Long-term scenario
Once the stock market euphoria witnessed last week subsides, it remains to be seen whether the Fed’s actions actually stem the subprime crisis, or whether the markets in future have to deal with a recession in the US economy. If that were to happen, markets around the world would get impacted.
Says Barua: “The rate cut could be implying that things are much worse in the US than people expected. If the growth rate in the US economy gets revised downward, it will impact the G7 nations and all the other economies too.”
For India and a few other Asian economies, the positive comes from the fact that these economies, being driven more by domestic consumption, are likely to weather a US recession much better, and it is likely that more investments will flow into their economies and markets.
Bend it like Bernanke
• Fed rate cut expected to provide a fillip to subprime mess-plagued US economy
• Markets around the world responded euphorically to the cut
• Interest rate differential between US and India has widened
• With more funds flowing into India, rupee breached 40 per dollar mark
• Will the present cut protect the US — and world — economy from recession?
• If not, the feel-good induced by it may prove temporary
http://www.indianexpress.com/story/220007-2.html
Fed rate cut: Brave act or desperate move?
Sandeep Singh
Posted online: Sunday, September 23, 2007
US Federal Reserve chairman Ben Bernanke said recently that he would cut interests only if there is a genuine problem in the economy. It seems nobody was listening
Ben Bernanke
Last Wednesday brought happy tidings on several fronts. The Sensex zoomed 653 points, up 4.2 per cent in a day, the adrenaline for the surge being provided by the US Federal Reserve Board’s decision to cut interest rates. Union agriculture minister Sharad Pawar’s announcement on the same day, proposing to offer financial incentives to the ailing sugar industry, brought more cheer. And finally, the mood in cricket-obsessed India turned ecstatic when, towards the end of the day, Yuvraj Singh hoisted six consecutive deliveries into the stands.
Ever since the subprime loan fiasco broke out in the US, increasing uncertainty and inducing volatility in stock exchanges around the world, market participants have been looking to Federal Reserve Board chairman Ben Bernanke to provide relief by cutting interest rates. He acted along these lines.
On September 17, he announced the first rate cut of his tenure — a 50 basis points (bps) cut in the Fed Funds Rate (the inter-bank borrowing rate), bringing it down from 5.25 to 4.75 per cent. This cut is expected to boost consumer spending, improve corporate bottomlines (by reducing interest costs), and boost the US — and world — economy. In addition, the Fed also reduced the Discount Rate (the rate at which it extends short-term loans to banks) by 50 bps, a move that will make cheaper funds available to banks.
Markets surge
Markets around the world celebrated Bernanke’s measures: the Nikkei rose 3.7 per cent, Hang Seng 4 per cent, FTSE 2.8 per cent, DAX 2.3 per cent and CAC-40 3.3 per cent. The Indian market, too, responded positively: the Sensex rose 4.2 per cent, in the process breaching the key psychologically mark of 16,000. (It has taken a mere 51 trading sessions for the Sensex to move up from 15,000 to 16,000.)
While the markets have taken the positives from Bernanke’s rate cuts, the negative implications of his decision don’t appear to have sunk in completely. Bernanke had earlier said that he would go for a rate cut only if there was a genuine problem in the US economy, and not just to bail out the banking system. Now, does the 50 basis points cut point to a larger problem in the economy?
Many experts believe that the US economy might be headed for a slowdown, which would lead to greater flight of capital into those high-growth economies that depend less on exports and are propelled more by domestic consumption. Says HDFC Bank chief economist Abheek Barua: “India, Indonesia and China are likely to hold up and are being seen as safe havens by investors.”
...And rupee follows suit
The higher influx of funds that followed the US rate cut led to further appreciation of the rupee, which on Thursday breached the Rs 40 to the dollar mark for the first time in nine years and closed at Rs 39.88.
How will the appreciation of the rupee impact our economy and the stock markets? One, by reducing the oil import bill, the stronger rupee will benefit oil companies. The BSE Oil & Gas index gained 11.4 per cent last week. Reliance Industries Ltd (RIL) gained 11.8 per cent, RPL 18.6 per cent,and ONGC 10.7 per cent. While the Oil & Gas sector has benefited from the rupee appreciation, the IT sector’s earnings are likely to be squeezed even further.
Not surprisingly, the BSE IT index was down 0.5 per cent over the previous week’s close. Satyam and Wipro were down by 2.75 and 2.3 per cent respectively. Infosys and TCS tried to hold their ground but they, too, lost 0.46 and 0.75 per cent respectively over the previous week’s closing.
Selective gains
What is noteworthy is that most of the movement on Wednesday was largely concentrated in the large-cap segment, which foreign institutional investors (FIIs) tend to prefer. The Sensex was up 4.2 per cent, the BSE 100 3.7 per cent, and the BSE 200 3.5 per cent. By contrast, mid-cap and the small-cap indices gained only 1.9 per cent and 1 per cent respectively.
“In future, activity is likely to take place in companies beyond the large cap companies,” says JP Morgan AMC chief executive officer (CEO) Krishnamurthy Vijayan. “The action in the leading stocks has been because of increasing movement of capital from developed economies to emerging markets.
India is likely to see an increase in investment in smaller companies moving beyond the top 50-100 stocks that most foreign investors and mutual funds are today pouring money into.” Over the past year, too, gains in the stock market have been selective. While the Capital Goods and Oil & Gas indices have gained by 78 and 59 per cent respectively, the Auto index has declined by 0.5 per cent.
The BSE IT and BSE Healthcare indices have grown by a mere 0.2 and 1.9 per cent respectively. So, it has not been an all-round gain, and interest rates and currency appreciation have had a major impact on the performance of sectoral indexes.
Gold: The safe haven
With the dollar losing ground, one asset class that has gained significantly is gold. Gold acts as the alternative reserve (to the dollar) for central banks around the world and as a hedge in times of uncertainty. Gold closed at Rs 9,550 per 10 grams on Friday, up 2.9 per cent during the week. With the dollar on the decline, gold appears to be emerging as the favoured asset class and is expected to remain fairly strong in future.
Long-term scenario
Once the stock market euphoria witnessed last week subsides, it remains to be seen whether the Fed’s actions actually stem the subprime crisis, or whether the markets in future have to deal with a recession in the US economy. If that were to happen, markets around the world would get impacted.
Says Barua: “The rate cut could be implying that things are much worse in the US than people expected. If the growth rate in the US economy gets revised downward, it will impact the G7 nations and all the other economies too.”
For India and a few other Asian economies, the positive comes from the fact that these economies, being driven more by domestic consumption, are likely to weather a US recession much better, and it is likely that more investments will flow into their economies and markets.
Bend it like Bernanke
• Fed rate cut expected to provide a fillip to subprime mess-plagued US economy
• Markets around the world responded euphorically to the cut
• Interest rate differential between US and India has widened
• With more funds flowing into India, rupee breached 40 per dollar mark
• Will the present cut protect the US — and world — economy from recession?
• If not, the feel-good induced by it may prove temporary
http://www.indianexpress.com/story/220007-2.html
Realty Fund- IL&FS Milestone
Invest in realty with Rs 10 lakh
Sandeep Singh
Posted online: Monday , September 17, 2007
Real estate investment trusts (REITs), or real estate funds, are yet to make the transition from policy to product in India. But if you have Rs 10 lakh to invest, you can still invest in diverse pieces of real estate as a financial asset with IL&FS-Milestone Fund-I — a venture capital real estate fund that has slashed the entry limit in such funds from a few crore to Rs 10 lakh.
The productPromoted by IL&FS Investment Managers and Milestone Group, this is a closed-end fund with a tenure of four years, with option to extend by two years. The promoters are looking to collect Rs 1,000 crore for the fund. Investors have to pay only 30 per cent upfront. The remaining can be paid in two instalments between the third and twelfth month. Says Ved Prakash Arya, managing director, Milestone Capital: “We will make a call, with a 21-day notice for the two instalments.”
The fund will work like a pooled investment vehicle. It will collect the monies of investors, and buy properties that are completed and rented out, thus eliminating development risk. It will target offices, IT and ITES buildings, hospitals, warehouses and shopping malls that have long leases and can generate rental income of 12-15 per cent, net of property and service tax. The yield will be paid to investors on a quarterly basis. At the end of the tenure, the fund will sell those properties. Thus, investors get return from rentals through the term and capital gains, if any.
The fund has laid down some rules on investments. It won’t invest more than 25 per cent of its corpus in one project, not more than 40 per cent in a city. Similarly, office property and retail will have a cap of 30 per cent each, IT and ITES 20 per cent, warehouses 10 per cent.
Risks and rewardsThe fund is aiming for rental yields of 12-15 per cent and capital gains, but there are ‘ifs’ related to both. Firstly, the a 12 per cent rental yield drops reduces to 6.9 per cent after paying management fee of 1.5 per cent and tax of 33.99 per cent. Secondly, capital gains are dependent on how property prices move during this period. Thirdly, a 6.9 per cent return on 12 per cent rental is on 100 per cent occupancy. If it is unable to find tenants, or its properties see mild appreciation, worse depreciation, the returns reduce further (See table: The return scenarios). Having said that, the economic outlook is still good. If you have the surplus, invest in the fund.
http://www.expressmoney.in/news/Invest-in-realty-with-Rs-10-lakh-/92111.html
Sandeep Singh
Posted online: Monday , September 17, 2007
Real estate investment trusts (REITs), or real estate funds, are yet to make the transition from policy to product in India. But if you have Rs 10 lakh to invest, you can still invest in diverse pieces of real estate as a financial asset with IL&FS-Milestone Fund-I — a venture capital real estate fund that has slashed the entry limit in such funds from a few crore to Rs 10 lakh.
The productPromoted by IL&FS Investment Managers and Milestone Group, this is a closed-end fund with a tenure of four years, with option to extend by two years. The promoters are looking to collect Rs 1,000 crore for the fund. Investors have to pay only 30 per cent upfront. The remaining can be paid in two instalments between the third and twelfth month. Says Ved Prakash Arya, managing director, Milestone Capital: “We will make a call, with a 21-day notice for the two instalments.”
The fund will work like a pooled investment vehicle. It will collect the monies of investors, and buy properties that are completed and rented out, thus eliminating development risk. It will target offices, IT and ITES buildings, hospitals, warehouses and shopping malls that have long leases and can generate rental income of 12-15 per cent, net of property and service tax. The yield will be paid to investors on a quarterly basis. At the end of the tenure, the fund will sell those properties. Thus, investors get return from rentals through the term and capital gains, if any.
The fund has laid down some rules on investments. It won’t invest more than 25 per cent of its corpus in one project, not more than 40 per cent in a city. Similarly, office property and retail will have a cap of 30 per cent each, IT and ITES 20 per cent, warehouses 10 per cent.
Risks and rewardsThe fund is aiming for rental yields of 12-15 per cent and capital gains, but there are ‘ifs’ related to both. Firstly, the a 12 per cent rental yield drops reduces to 6.9 per cent after paying management fee of 1.5 per cent and tax of 33.99 per cent. Secondly, capital gains are dependent on how property prices move during this period. Thirdly, a 6.9 per cent return on 12 per cent rental is on 100 per cent occupancy. If it is unable to find tenants, or its properties see mild appreciation, worse depreciation, the returns reduce further (See table: The return scenarios). Having said that, the economic outlook is still good. If you have the surplus, invest in the fund.
http://www.expressmoney.in/news/Invest-in-realty-with-Rs-10-lakh-/92111.html
IPO Analysis- Koutons
PREMIUM valuations for a discount store
Sandeep Singh
Posted online: Monday , September 17, 2007
Organised retailing is here to stay, there’s no question about it. If there’s an investing question related to retailing, it’s this: which retailers will thrive, which ones will die or be swallowed? That’s essentially the call to make while considering buying the shares of Koutons Retail, which manufactures and sells apparels under the brand names Koutons and Charlie Outlaw. Will it thrive or will the arrival of the big retailer kill it?
The numbers show the company, which launched in 1994 but came into its own a decade on, has seen outstanding growth in sales of its shirts, T-shirts, trousers and suits. In the last three years, its sales have increased at a compounded annual rate of 133 per cent, net profit at 239 per cent, margins have improved. Koutons is issuing its shares at a PE of 32.9-36.9, which is stiff. To justify that pricing, it needn’t grow at historic levels, but it still needs to grow 40-50 per cent a year. While the big retailers are settling in, it’s possible. But once hypermarkets have a toehold, companies like Koutons could face the big squeeze.
The modelKoutons is an integrated apparel company. It has 18 manufacturing units, where it makes most of the garments it sells (a small percentage — 15 per cent in 2006-07 — are outsourced. These go to its finishing units, where they are groomed and packaged for sale. Till about five years ago, Koutons relied on distributors for sales. But when it found it had to share shelf space with other brands and it was distributors who called the shots, it shifted to a franchisee model, with the agreement to take back unsold merchandise. As of August 20, Koutons had 999 exclusive outlets — 566 for Koutons and 433 for Charlie Outlaw — in about 300 cities.
“High fashion value for money” is how the IPO prospectus describes the company’s brand positioning. Value for money, we don’t doubt; high fashion, we do. Koutons is a popular middle-end brand. The company sells most of its goods at discount sales — trousers for Rs 500, shirts for Rs 250. That is its strength today, but the same middle-of-the-road positioning could turn out to be its Achilles heel as the retail industry scales up and its dynamics change.
The designsAlthough the branded apparels segment is expanding, competition is heating up, and consolidation is imminent. Experts say the space could get demarcated into two: established brands (for instance, Levi’s and Pepe) and private labels (brands promoted by retailers themselves). Private labels trail established brands today, but that gap is expected to narrow as big retailers expand. Reliance, for instance, is working on its apparel brands, which will be much cheaper than the established brands.
The survivors will be established brands and private labels. Unlike, say, a Levi’s, Koutonsdoesn’t have enduring brand loyalty yet. Unless it manages to build that, it will lose out to big brands from the top and get hammered by the cheaper private labels from the bottom. The challenge before Koutons is to build a brand loyalty. It doesn’t have much time to do so, perhaps two to three years, as big retail is building up.
Koutons has plans, which is partly the reason for this IPO. On the one hand, the company plans to add 140 outlets over the next two years to increase visibility and reach. While men’s wear has been its focus, Koutons recently ventured into women’s wear (brand, Les Femme) and is now planning to get into kids wear (Koutons Jr).
On the other, it is expanding its manufacturing capacity further. The big push for Koutons came in the past two years, when it increased its manufacturing capacity from 600,000 pieces in March 2005 to 12.4 million pieces in March 2007, and its finishing capacity from 3 million to 22.9 million. Although it has unutilised capacity — for 2006-07, capacity utilisation was 22 per cent in manufacturing and 41 per cent in finishing — it’s setting up another manufacturing unit.
The finishIn other words, it has adequate, perhaps excess, manufacturing capabilities. What it needs is more sales, either through its outlets (as it has done so far) or through exports (unexplored). Organised retail has grown at 30 per cent in the last three years, and is expected to match that in the coming three to five years. Koutons should be able to match that rate for the next two to three years. Subsequently, the outlook can get dodgy and margins can come under pressure. That alignment might take longer in the case of Koutons, given its presence in smaller towns, where retailers will take longer to come up.
Koutons sells, but we doubt its ability to sell at a rate that justifies its tall pricing and its ability to keep its long-term competitive advantage. At the upper end of the price band, the stock is priced at a PE of 36.9. By comparison, Zodiac Clothing and Kewal Kiran (owner of brands like Killer, Lawman, easies, Integriti and K-Lounge) trade at 18.9 and 15.8, respectively. Granted, Koutons is bigger and has grown faster than those two, but it’s a stretch to think it can keep doing so to justify these valuations.
Two other things make us uncomfortable. One, the three promoters include chairman D.P.S. Kohli two brothers-in-laws, each of whom hold 22 per cent each. There are no rumblings yet, but family feuds in business make us a sceptic. Two, the promoters don’t seem to share the company’s wealth well with their employees. Koutons has 622 employees, but its three promoters account for 30 per cent of the wage bill, drawing an annual salary of Rs 75 lakh each. By comparison, the 55-year-old executive vice-president who is also in charge of business operations makes just Rs 8.6 lakh a year. That shows it’s a top-driven company, and might not be nimble enough to survive the upcoming big retail onslaught.
http://www.expressmoney.in/news/PREMIUM -valuations-for-a-discount-store-/92119.html
Sandeep Singh
Posted online: Monday , September 17, 2007
Organised retailing is here to stay, there’s no question about it. If there’s an investing question related to retailing, it’s this: which retailers will thrive, which ones will die or be swallowed? That’s essentially the call to make while considering buying the shares of Koutons Retail, which manufactures and sells apparels under the brand names Koutons and Charlie Outlaw. Will it thrive or will the arrival of the big retailer kill it?
The numbers show the company, which launched in 1994 but came into its own a decade on, has seen outstanding growth in sales of its shirts, T-shirts, trousers and suits. In the last three years, its sales have increased at a compounded annual rate of 133 per cent, net profit at 239 per cent, margins have improved. Koutons is issuing its shares at a PE of 32.9-36.9, which is stiff. To justify that pricing, it needn’t grow at historic levels, but it still needs to grow 40-50 per cent a year. While the big retailers are settling in, it’s possible. But once hypermarkets have a toehold, companies like Koutons could face the big squeeze.
The modelKoutons is an integrated apparel company. It has 18 manufacturing units, where it makes most of the garments it sells (a small percentage — 15 per cent in 2006-07 — are outsourced. These go to its finishing units, where they are groomed and packaged for sale. Till about five years ago, Koutons relied on distributors for sales. But when it found it had to share shelf space with other brands and it was distributors who called the shots, it shifted to a franchisee model, with the agreement to take back unsold merchandise. As of August 20, Koutons had 999 exclusive outlets — 566 for Koutons and 433 for Charlie Outlaw — in about 300 cities.
“High fashion value for money” is how the IPO prospectus describes the company’s brand positioning. Value for money, we don’t doubt; high fashion, we do. Koutons is a popular middle-end brand. The company sells most of its goods at discount sales — trousers for Rs 500, shirts for Rs 250. That is its strength today, but the same middle-of-the-road positioning could turn out to be its Achilles heel as the retail industry scales up and its dynamics change.
The designsAlthough the branded apparels segment is expanding, competition is heating up, and consolidation is imminent. Experts say the space could get demarcated into two: established brands (for instance, Levi’s and Pepe) and private labels (brands promoted by retailers themselves). Private labels trail established brands today, but that gap is expected to narrow as big retailers expand. Reliance, for instance, is working on its apparel brands, which will be much cheaper than the established brands.
The survivors will be established brands and private labels. Unlike, say, a Levi’s, Koutonsdoesn’t have enduring brand loyalty yet. Unless it manages to build that, it will lose out to big brands from the top and get hammered by the cheaper private labels from the bottom. The challenge before Koutons is to build a brand loyalty. It doesn’t have much time to do so, perhaps two to three years, as big retail is building up.
Koutons has plans, which is partly the reason for this IPO. On the one hand, the company plans to add 140 outlets over the next two years to increase visibility and reach. While men’s wear has been its focus, Koutons recently ventured into women’s wear (brand, Les Femme) and is now planning to get into kids wear (Koutons Jr).
On the other, it is expanding its manufacturing capacity further. The big push for Koutons came in the past two years, when it increased its manufacturing capacity from 600,000 pieces in March 2005 to 12.4 million pieces in March 2007, and its finishing capacity from 3 million to 22.9 million. Although it has unutilised capacity — for 2006-07, capacity utilisation was 22 per cent in manufacturing and 41 per cent in finishing — it’s setting up another manufacturing unit.
The finishIn other words, it has adequate, perhaps excess, manufacturing capabilities. What it needs is more sales, either through its outlets (as it has done so far) or through exports (unexplored). Organised retail has grown at 30 per cent in the last three years, and is expected to match that in the coming three to five years. Koutons should be able to match that rate for the next two to three years. Subsequently, the outlook can get dodgy and margins can come under pressure. That alignment might take longer in the case of Koutons, given its presence in smaller towns, where retailers will take longer to come up.
Koutons sells, but we doubt its ability to sell at a rate that justifies its tall pricing and its ability to keep its long-term competitive advantage. At the upper end of the price band, the stock is priced at a PE of 36.9. By comparison, Zodiac Clothing and Kewal Kiran (owner of brands like Killer, Lawman, easies, Integriti and K-Lounge) trade at 18.9 and 15.8, respectively. Granted, Koutons is bigger and has grown faster than those two, but it’s a stretch to think it can keep doing so to justify these valuations.
Two other things make us uncomfortable. One, the three promoters include chairman D.P.S. Kohli two brothers-in-laws, each of whom hold 22 per cent each. There are no rumblings yet, but family feuds in business make us a sceptic. Two, the promoters don’t seem to share the company’s wealth well with their employees. Koutons has 622 employees, but its three promoters account for 30 per cent of the wage bill, drawing an annual salary of Rs 75 lakh each. By comparison, the 55-year-old executive vice-president who is also in charge of business operations makes just Rs 8.6 lakh a year. That shows it’s a top-driven company, and might not be nimble enough to survive the upcoming big retail onslaught.
http://www.expressmoney.in/news/
Interview- Ashu Suyash
BIG TALK: ASHU SUYASH,
MANAGING DIRECTOR AND COUNTRY HEAD, FIDELITY FUND MANAGEMENT-->
‘NFOs should keep investor interests in mind’
Sandeep Singh Posted online: Monday , September 10, 2007
Last month, Fidelity relaunched its flagship equity scheme, Fidelity Equity Fund, with the objective of shifting focus from new fund offers (NFOs) to existing schemes. Now, it is following that up with the launch of Fidelity Growth Fund, an equity fund that targets fast-growing companies. Isn’t there a contradiction? Ashu Suyash, managing director and country head, Fidelity Fund Management, doesn’t think so. In an interview to our correspondent, Suyash defends the new fund launch and charges of product duplication, and outlines the product suite ahead.
One more equity fund. How is this different from your flagship equity fund?
It’s the first fund in our bouquet with a growth bias. Fidelity Equity Fund is a go-anywhere fund, without any preference for sectors or market cap. The Fidelity Special Situations Fund focuses on special situations. The tax-saver fund, which has a lock-in of three years, is closer to the Fidelity Equity Fund.So, given this range, it’s a different product. It takes a 360 degree view on the growth happening in the Indian economy. It considers drivers of growth — demographics, consumption, infrastructure and the corporate culture evolving in India — and captures their benefits. It seeks to pick companies whose return on investment is higher than their cost of capital, and which are in position to continuously compound their earnings.Besides companies listed in India, it will also invest in companies that get a majority of their earnings from India, but are listed outside. So, it takes a 360 degree view on growth and there is an element of differentiation.
You say the investment ideas are different, but the portfolios look so similar, as in the case of Fidelity Equity Fund and Fidelity Special Situations Fund.
There will be common stock ideas. But it’s not just ideas that shape portfolio returns. It’s also when one enters or exits a stock, and the size of the investment. The perspective of the two funds is different. Special situations are more likely to be found in large-cap companies, not in small- and mid-cap companies. Reliance Industries has been through a big restructuring recently. So, one will hold Reliance in a special situations fund, as well as in other schemes.One can have the same stocks, but different weightages, leading to a different outcome. Fidelity Growth Fund is likely to have fewer stocks — it has the option to invest 6-10 per cent of its assets in a stock — and will therefore be more risky.
Barely a month ago, you relaunched Fidelity Equity Fund, and termed the domination of NFOs in new investments as a “worrying development”. Now, you have gone ahead and launched your fourth equity fund.
In the equity investing space, there are basically nine investing styles and at least 14-15 unique products for a mainstream player. We would like to be in each segment, as each investor’s preference and buying behaviour is different.
When you launched in India, you said you won’t indulge in product duplication. Are you faithful to that philosophy?
Absolutely. Like I said, we still have to complete the standard 14-15, and so it’s a long way to go.
That’s a lot of NFOs. Do you see NFOs as penetration tool or a way to offer innovative, new products to investors?
For a nascent market like ours, NFOs are a good tool to get more investors into the fold. There is a certain consumer psychology built around NFOs, and that will remain. What’s important is all steps taken are aligned to investor interests. Our charge structure in an existing fund and a NFO is identical, and will remain so.
What’s with the relaunch of Fidelity Equity Fund? Even other fund houses do it with their schemes from time to time.
When we relaunched, there was PR activity, advertising activity, investing seminars and distributor training sessions. With our track record, we expected investors would come, but that didn’t happen. That told us that there was a need for vigorous communication like in an NFO.
What new, innovative products are you planning?
The feeder fund route is an exciting way of bringing unique products to India. Internationally, Fidelity has about 1,000 funds, which can generate umpteen ideas. We have filed a prospectus for a feeder fund. This is not a fund of funds, but five separate funds targeting major markets — US, Europe, emerging markets, Pacific region and a global option. Investors can pick and choose.
In order to make the industry more investor friendly, you welcomed Sebi’s proposal to waive the entry load for direct and Internet transactions.
It’s not zero load, but flexibility to distributors and fund houses to price load. Within this, one can have a no-load fund, but it’s not a diktat. Even when we get an investor directly, we incur some costs. So, it could be no load or a tiny load. Choice and flexibility leads to better engagement, which is the need of the hour along with better penetration.
But Internet penetration is low, as is branch reach. For instance, you have just 10 offices across the country.
Internet penetration has to increase, and it will over time. We started with five branches, but because of distributors, we are in several hundred cities. As in other industries, the manufacturer is less important than the dealer. That’s why giving distributors and manufacturers the flexibility will help. It is hard to think of a manufacturing company having branches like a bank.
What are the other aspects of the mutual funds business that can improve and benefit investors?
One area under discussion is advice: what is it, who can give it and who should regulate it. Then, development of the bond market. The equity markets have developed; the fixed-income markets haven’t. The bond market still lags in liquidity and transparency in price discovery. Today, we have selective issuance and selective trading. If transparency increases, so will issuance.
Lastly, how do you see the markets moving?
We haven’t seen the last of the sub-prime issue. The good thing is that the US Fed is monitoring the situation and will take action if necessary. That will influence share prices in India. Having said that, the long-term outlook for the economy and corporate India continues to be positive
http://www.expressmoney.in/news/NFOs-should-keep-investor-interests-in-mind/91996.html
MANAGING DIRECTOR AND COUNTRY HEAD, FIDELITY FUND MANAGEMENT-->
‘NFOs should keep investor interests in mind’
Sandeep Singh Posted online: Monday , September 10, 2007
Last month, Fidelity relaunched its flagship equity scheme, Fidelity Equity Fund, with the objective of shifting focus from new fund offers (NFOs) to existing schemes. Now, it is following that up with the launch of Fidelity Growth Fund, an equity fund that targets fast-growing companies. Isn’t there a contradiction? Ashu Suyash, managing director and country head, Fidelity Fund Management, doesn’t think so. In an interview to our correspondent, Suyash defends the new fund launch and charges of product duplication, and outlines the product suite ahead.
One more equity fund. How is this different from your flagship equity fund?
It’s the first fund in our bouquet with a growth bias. Fidelity Equity Fund is a go-anywhere fund, without any preference for sectors or market cap. The Fidelity Special Situations Fund focuses on special situations. The tax-saver fund, which has a lock-in of three years, is closer to the Fidelity Equity Fund.So, given this range, it’s a different product. It takes a 360 degree view on the growth happening in the Indian economy. It considers drivers of growth — demographics, consumption, infrastructure and the corporate culture evolving in India — and captures their benefits. It seeks to pick companies whose return on investment is higher than their cost of capital, and which are in position to continuously compound their earnings.Besides companies listed in India, it will also invest in companies that get a majority of their earnings from India, but are listed outside. So, it takes a 360 degree view on growth and there is an element of differentiation.
You say the investment ideas are different, but the portfolios look so similar, as in the case of Fidelity Equity Fund and Fidelity Special Situations Fund.
There will be common stock ideas. But it’s not just ideas that shape portfolio returns. It’s also when one enters or exits a stock, and the size of the investment. The perspective of the two funds is different. Special situations are more likely to be found in large-cap companies, not in small- and mid-cap companies. Reliance Industries has been through a big restructuring recently. So, one will hold Reliance in a special situations fund, as well as in other schemes.One can have the same stocks, but different weightages, leading to a different outcome. Fidelity Growth Fund is likely to have fewer stocks — it has the option to invest 6-10 per cent of its assets in a stock — and will therefore be more risky.
Barely a month ago, you relaunched Fidelity Equity Fund, and termed the domination of NFOs in new investments as a “worrying development”. Now, you have gone ahead and launched your fourth equity fund.
In the equity investing space, there are basically nine investing styles and at least 14-15 unique products for a mainstream player. We would like to be in each segment, as each investor’s preference and buying behaviour is different.
When you launched in India, you said you won’t indulge in product duplication. Are you faithful to that philosophy?
Absolutely. Like I said, we still have to complete the standard 14-15, and so it’s a long way to go.
That’s a lot of NFOs. Do you see NFOs as penetration tool or a way to offer innovative, new products to investors?
For a nascent market like ours, NFOs are a good tool to get more investors into the fold. There is a certain consumer psychology built around NFOs, and that will remain. What’s important is all steps taken are aligned to investor interests. Our charge structure in an existing fund and a NFO is identical, and will remain so.
What’s with the relaunch of Fidelity Equity Fund? Even other fund houses do it with their schemes from time to time.
When we relaunched, there was PR activity, advertising activity, investing seminars and distributor training sessions. With our track record, we expected investors would come, but that didn’t happen. That told us that there was a need for vigorous communication like in an NFO.
What new, innovative products are you planning?
The feeder fund route is an exciting way of bringing unique products to India. Internationally, Fidelity has about 1,000 funds, which can generate umpteen ideas. We have filed a prospectus for a feeder fund. This is not a fund of funds, but five separate funds targeting major markets — US, Europe, emerging markets, Pacific region and a global option. Investors can pick and choose.
In order to make the industry more investor friendly, you welcomed Sebi’s proposal to waive the entry load for direct and Internet transactions.
It’s not zero load, but flexibility to distributors and fund houses to price load. Within this, one can have a no-load fund, but it’s not a diktat. Even when we get an investor directly, we incur some costs. So, it could be no load or a tiny load. Choice and flexibility leads to better engagement, which is the need of the hour along with better penetration.
But Internet penetration is low, as is branch reach. For instance, you have just 10 offices across the country.
Internet penetration has to increase, and it will over time. We started with five branches, but because of distributors, we are in several hundred cities. As in other industries, the manufacturer is less important than the dealer. That’s why giving distributors and manufacturers the flexibility will help. It is hard to think of a manufacturing company having branches like a bank.
What are the other aspects of the mutual funds business that can improve and benefit investors?
One area under discussion is advice: what is it, who can give it and who should regulate it. Then, development of the bond market. The equity markets have developed; the fixed-income markets haven’t. The bond market still lags in liquidity and transparency in price discovery. Today, we have selective issuance and selective trading. If transparency increases, so will issuance.
Lastly, how do you see the markets moving?
We haven’t seen the last of the sub-prime issue. The good thing is that the US Fed is monitoring the situation and will take action if necessary. That will influence share prices in India. Having said that, the long-term outlook for the economy and corporate India continues to be positive
http://www.expressmoney.in/news/NFOs-should-keep-investor-interests-in-mind/91996.html
IPO Analysis- Power Grid
Tower POWER
Sandeep Singh
Posted online: Monday , September 10, 2007
Every summer, heat-ravaged Delhi falls short of its power needs. At the peak of the crisis, the chief minister announces arrangements to source additional power from plants in neighbouring states. As you bask in weather-tamed comfort, chew on this: that power is transmitted through a maze of towers, wires and sub-stations, and the company that enables most such inter-state and inter-regional transfers is Power Grid Corporation.
Growing demandWhile state electricity boards (SEBs) control power transmission in the states, Power Grid, a public sector undertaking, does so between states. Technically, Power Grid isn’t a monopoly in inter-state and inter-region transfer of power. This segment of the power business was opened to private players in 1998, but their presence is insignificant.
Meanwhile, the need for inter-region transmission has been increasing — and will only increase further. That’s partly due to the rising demand for power and the nature of the power plants coming up. The present capacity of the National Grid, which is Power Grid’s domain, is 14,100 mw. The government is looking to increase this to 37,150 mw by 2011-12 (2.6 times current capacity) and 65,000 mw by 2006-17 (4.6 times current capacity). Besides this, Power Grid also draws from state projects. Together, in 2006-07, it transmitted 45 per cent of all power generated in India.
In the 11th five-year plan (2007-12), the government has outlined an investment of Rs 1,40,000 crore in the transmission sector, of which, Rs 75,000 crore is for inter-state transmission. The nine ultra mega power projects (UMPP) the Centre is trying to fast-track to bridge the large - and increasing - gap between demand and supply in the country could provide a fillip to Power Grid’s numbers. The company has been asked by the ministry of power to prepare feasibility reports for construction of transmission systems for these UMPPs. The company itself plans to invest Rs 55,000 crore during this period. That’s almost twice the Rs 25,000 crore it has invested in completing 101 transmission projects since 1992.
Stable pricingEven as new capacity drives growth for Power Grid, its existing feeder lines should keep the revenues and profit counters ticking. Power Grid works with power generating companies to set up transmission systems. It transmits that power to SEBs at tariffs that are pre-decided by the Central Electricity Regulatory Commission (CERC).
The tariffs are a cost-plus calculation, which ensures a profit for Power Grid, and are reviewed every five years (the next review is in 2009). The tariff incorporates the project cost, interest on loans, operating and maintenance cost, depreciation and foreign exchange variation, and a 14 per cent return on the equity component of the project (generally, 30 per cent).
This could change, though. The new national tariff policy, notified in January 2006, advocates a shift to competitive bidding, beginning 2011 or when the CERC thinks so. Competitive bidding will reduce the price protection that Power Grid has and the high margins that it earns, so will the expected entry of private players. Those are risks Power Grid faces, but these can be managed, as there’s going to be ample demand for its transmission services.
Beyond powerPower Grid is the proverbial utility, with a captive business that assures a steady stream of sales and profits; with the new projects coming up, growth too. Increasingly, Power Grid is also looking at spin offs from its main transmission business, two in particular. The first is taking on transmission consultancy assignments. The second is leasing the fibre optic cable network it has set up alongside its transmission network, connecting over 60 cities. In 2006-07, the two businesses accounted for 8.4 per cent of Power Grid’s revenues. This could increase further. Till June 30, the company had orders for Rs 250 crore in the telecom business, up from Rs 77 crore for all of 2006-07.
In the last four years, Power Grid’s revenues have grown at a compounded annual growth rate (CAGR) of 12.7 per cent, net profit at 17.6 per cent. In spite of CERC cutting the return on equity in the tariff pricing from 16 per cent to 14 per cent from April 2004, the company has managed to improve margins. Operational expenses in running the towers are minimal. Setting them up is cost-heavy, because of which interest and depreciation become Power Grid’s main expenses.
The IPO is priced at Rs 44-52. based on its 2006-07 earnings and post-issue equity, that’s a PE of 13.7 and 16.2. That’s a fair price to buy this business for the long term. The power sector is finally seeing a lot of activity and Power Grid should be a major beneficiary. A change in rules has improved operating conditions for the good players, and SEBs can’t hold companies like Power Grid to ransom anymore. Indeed, there’s a lot of light.
http://www.expressmoney.in/news/Tower-POWER/92003.html
Sandeep Singh
Posted online: Monday , September 10, 2007
Every summer, heat-ravaged Delhi falls short of its power needs. At the peak of the crisis, the chief minister announces arrangements to source additional power from plants in neighbouring states. As you bask in weather-tamed comfort, chew on this: that power is transmitted through a maze of towers, wires and sub-stations, and the company that enables most such inter-state and inter-regional transfers is Power Grid Corporation.
Growing demandWhile state electricity boards (SEBs) control power transmission in the states, Power Grid, a public sector undertaking, does so between states. Technically, Power Grid isn’t a monopoly in inter-state and inter-region transfer of power. This segment of the power business was opened to private players in 1998, but their presence is insignificant.
Meanwhile, the need for inter-region transmission has been increasing — and will only increase further. That’s partly due to the rising demand for power and the nature of the power plants coming up. The present capacity of the National Grid, which is Power Grid’s domain, is 14,100 mw. The government is looking to increase this to 37,150 mw by 2011-12 (2.6 times current capacity) and 65,000 mw by 2006-17 (4.6 times current capacity). Besides this, Power Grid also draws from state projects. Together, in 2006-07, it transmitted 45 per cent of all power generated in India.
In the 11th five-year plan (2007-12), the government has outlined an investment of Rs 1,40,000 crore in the transmission sector, of which, Rs 75,000 crore is for inter-state transmission. The nine ultra mega power projects (UMPP) the Centre is trying to fast-track to bridge the large - and increasing - gap between demand and supply in the country could provide a fillip to Power Grid’s numbers. The company has been asked by the ministry of power to prepare feasibility reports for construction of transmission systems for these UMPPs. The company itself plans to invest Rs 55,000 crore during this period. That’s almost twice the Rs 25,000 crore it has invested in completing 101 transmission projects since 1992.
Stable pricingEven as new capacity drives growth for Power Grid, its existing feeder lines should keep the revenues and profit counters ticking. Power Grid works with power generating companies to set up transmission systems. It transmits that power to SEBs at tariffs that are pre-decided by the Central Electricity Regulatory Commission (CERC).
The tariffs are a cost-plus calculation, which ensures a profit for Power Grid, and are reviewed every five years (the next review is in 2009). The tariff incorporates the project cost, interest on loans, operating and maintenance cost, depreciation and foreign exchange variation, and a 14 per cent return on the equity component of the project (generally, 30 per cent).
This could change, though. The new national tariff policy, notified in January 2006, advocates a shift to competitive bidding, beginning 2011 or when the CERC thinks so. Competitive bidding will reduce the price protection that Power Grid has and the high margins that it earns, so will the expected entry of private players. Those are risks Power Grid faces, but these can be managed, as there’s going to be ample demand for its transmission services.
Beyond powerPower Grid is the proverbial utility, with a captive business that assures a steady stream of sales and profits; with the new projects coming up, growth too. Increasingly, Power Grid is also looking at spin offs from its main transmission business, two in particular. The first is taking on transmission consultancy assignments. The second is leasing the fibre optic cable network it has set up alongside its transmission network, connecting over 60 cities. In 2006-07, the two businesses accounted for 8.4 per cent of Power Grid’s revenues. This could increase further. Till June 30, the company had orders for Rs 250 crore in the telecom business, up from Rs 77 crore for all of 2006-07.
In the last four years, Power Grid’s revenues have grown at a compounded annual growth rate (CAGR) of 12.7 per cent, net profit at 17.6 per cent. In spite of CERC cutting the return on equity in the tariff pricing from 16 per cent to 14 per cent from April 2004, the company has managed to improve margins. Operational expenses in running the towers are minimal. Setting them up is cost-heavy, because of which interest and depreciation become Power Grid’s main expenses.
The IPO is priced at Rs 44-52. based on its 2006-07 earnings and post-issue equity, that’s a PE of 13.7 and 16.2. That’s a fair price to buy this business for the long term. The power sector is finally seeing a lot of activity and Power Grid should be a major beneficiary. A change in rules has improved operating conditions for the good players, and SEBs can’t hold companies like Power Grid to ransom anymore. Indeed, there’s a lot of light.
http://www.expressmoney.in/news/Tower-POWER/92003.html
Infrastructure Fund
On the FAST TRACK
Sandeep Singh Posted
online: Monday , September 10, 2007
If the Indian economy has to keep growing at 8-9 per cent a year, even try to scale up to 10 per cent, it has to get its infrastructure — roads, power, telecom, ports, airports and rail — in order quickly. If the government and companies are going to invest big money building that infrastructure, the companies that build these superstructures, and the companies that supply goods and services to the builders, are in for a period of heady growth. If the revenues and profits of such companies grow, so should their share prices.
That’s the central premise of infrastructure funds, which are steadily increasing in number — eight schemes are there, two more are in the new fund offer (NFO) stage. It’s a powerful investment idea, one whose time might have come.
The storySceptics, even rationalists, might cite history, and question the figures blown up in the last column that indicate the quantum of investments needed in six key infrastructure sectors. When it has come to making, or enabling, investments in places that matter, investments have fallen woefully short of needs. So, what’s changed?
For one, the economic need and logic is greater than ever before. There is greater realisation and intent among policymakers and entrepreneurs that infrastructure holds the key to the sustaining India’s economic boom. The government has outlined Rs 14,50,000 crore towards infrastructure in the eleventh five-year plan (2007-12) alone. Says Ved Prakash Chaturvedi, managing director, Tata Mutual Fund: “Infrastructure can’t be imported, it has to be built.”
Many more are coming forward to build it and fund it. Proof is the swelling order books of companies involved in this building. Proof is the ever-increasing prices of essential inputs like cement and steel. Proof is the nine ultra-mega power projects the government is trying to push through and the scores of Metro links coming up in major cities. Proof the rash of venture capital funds launched or announced by financial services companies. Says Sanjay Sinha, chief investment officer, SBI Mutual Fund: “Public-private partnership is increasing. There are many more companies participating in this area, which was earlier the preserve of the public sector.”
For businesses that are tied to this infrastructure story, wholly or partly, this is a golden period. Says Chaturvedi: “Overall earnings growth in the next year will be about 17 per cent. By comparison, infrastructure should grow at over 25 per cent.” Further, say analysts, that mark-up in earnings is likely to continue for the next five to 10 years at least. Says Chaturvedi: “Earnings growth for companies operating in the segment should continue for the next decade at least.”
The profiteersAs an investor, you should be looking to ride this surge in economic activity. While most diversified equity funds have a healthy holding of infrastructure-related companies, dedicated infrastructure funds also make for worthy investments. Although these are thematic funds, they are more broad-based than most of their peers. There are builders (for instance, construction, power companies and telecom companies) and there are suppliers (engineering, capital goods, cement, steel, banks). That broad domain brings them in the investment set of more investors.
At present, there are 10 infrastructure funds. Of this, only one scheme, Tata Infrastructure, has completed three years. Six others have completed a year, and their performance over this period is outstanding, beating the benchmark by 14-22 percentage points (See table: Your options in...).
The strategyIt mirrors the Building India story unfolding, and you should get a piece of it through these infrastructure funds. But only a piece. Such investment themes, even if they are broad-based should not be the core holding of your portfolio. Rather, only a portion of your portfolio should go there. Says Sinha: “One can invest 25-30 per cent of your equity allocation to infrastructure funds, given its attractiveness today and growth prospects.”
Pune-based financial planner Veer Sardesai advises a lower allocation and insists on a long-term horizon. “Invest about 20 per cent of your portfolio in infrastructure funds, for a minimum five years. That’s because most of the infrastructure story will play out in the next five to 10 years.”
Targets set by the government might still not be met, especially in sectors where the slow progress on policy changes is holding back investments. If telecom, where private players have the freedom to direct traffic, is a good example of how things should be, power and ports are crying for government attention on a priority basis.
Says financial planner Veer Sardesai: “The story is more of growth, than value. Faster growth will come from government investing in infrastructure and more private participation, with an increasing number of listed companies.”
In the months to come, you might have another
option in the form of dedicated infrastructure funds. These are closed-end funds that will invest in companies in the infrastructure space, both listed and unlisted, and also offer additional tax breaks (See box: Infrastructure funds: Act II). India is building, and you can build on it.
http://www.expressmoney.in/news/On-the-FAST-TRACK/92006.html
Sandeep Singh Posted
online: Monday , September 10, 2007
If the Indian economy has to keep growing at 8-9 per cent a year, even try to scale up to 10 per cent, it has to get its infrastructure — roads, power, telecom, ports, airports and rail — in order quickly. If the government and companies are going to invest big money building that infrastructure, the companies that build these superstructures, and the companies that supply goods and services to the builders, are in for a period of heady growth. If the revenues and profits of such companies grow, so should their share prices.
That’s the central premise of infrastructure funds, which are steadily increasing in number — eight schemes are there, two more are in the new fund offer (NFO) stage. It’s a powerful investment idea, one whose time might have come.
The storySceptics, even rationalists, might cite history, and question the figures blown up in the last column that indicate the quantum of investments needed in six key infrastructure sectors. When it has come to making, or enabling, investments in places that matter, investments have fallen woefully short of needs. So, what’s changed?
For one, the economic need and logic is greater than ever before. There is greater realisation and intent among policymakers and entrepreneurs that infrastructure holds the key to the sustaining India’s economic boom. The government has outlined Rs 14,50,000 crore towards infrastructure in the eleventh five-year plan (2007-12) alone. Says Ved Prakash Chaturvedi, managing director, Tata Mutual Fund: “Infrastructure can’t be imported, it has to be built.”
Many more are coming forward to build it and fund it. Proof is the swelling order books of companies involved in this building. Proof is the ever-increasing prices of essential inputs like cement and steel. Proof is the nine ultra-mega power projects the government is trying to push through and the scores of Metro links coming up in major cities. Proof the rash of venture capital funds launched or announced by financial services companies. Says Sanjay Sinha, chief investment officer, SBI Mutual Fund: “Public-private partnership is increasing. There are many more companies participating in this area, which was earlier the preserve of the public sector.”
For businesses that are tied to this infrastructure story, wholly or partly, this is a golden period. Says Chaturvedi: “Overall earnings growth in the next year will be about 17 per cent. By comparison, infrastructure should grow at over 25 per cent.” Further, say analysts, that mark-up in earnings is likely to continue for the next five to 10 years at least. Says Chaturvedi: “Earnings growth for companies operating in the segment should continue for the next decade at least.”
The profiteersAs an investor, you should be looking to ride this surge in economic activity. While most diversified equity funds have a healthy holding of infrastructure-related companies, dedicated infrastructure funds also make for worthy investments. Although these are thematic funds, they are more broad-based than most of their peers. There are builders (for instance, construction, power companies and telecom companies) and there are suppliers (engineering, capital goods, cement, steel, banks). That broad domain brings them in the investment set of more investors.
At present, there are 10 infrastructure funds. Of this, only one scheme, Tata Infrastructure, has completed three years. Six others have completed a year, and their performance over this period is outstanding, beating the benchmark by 14-22 percentage points (See table: Your options in...).
The strategyIt mirrors the Building India story unfolding, and you should get a piece of it through these infrastructure funds. But only a piece. Such investment themes, even if they are broad-based should not be the core holding of your portfolio. Rather, only a portion of your portfolio should go there. Says Sinha: “One can invest 25-30 per cent of your equity allocation to infrastructure funds, given its attractiveness today and growth prospects.”
Pune-based financial planner Veer Sardesai advises a lower allocation and insists on a long-term horizon. “Invest about 20 per cent of your portfolio in infrastructure funds, for a minimum five years. That’s because most of the infrastructure story will play out in the next five to 10 years.”
Targets set by the government might still not be met, especially in sectors where the slow progress on policy changes is holding back investments. If telecom, where private players have the freedom to direct traffic, is a good example of how things should be, power and ports are crying for government attention on a priority basis.
Says financial planner Veer Sardesai: “The story is more of growth, than value. Faster growth will come from government investing in infrastructure and more private participation, with an increasing number of listed companies.”
In the months to come, you might have another
option in the form of dedicated infrastructure funds. These are closed-end funds that will invest in companies in the infrastructure space, both listed and unlisted, and also offer additional tax breaks (See box: Infrastructure funds: Act II). India is building, and you can build on it.
http://www.expressmoney.in/news/On-the-FAST-TRACK/92006.html
Links To 22 OLD Articles
43% demat accounts suspended but no impact on trading volumes
As on December 31, 4.3 million demat accounts, almost 43 per cent of the total 9.9 million with the two depositories NSDL and CDSL... (Date: 15-Jan-2007)
http://www.indianexpress.com/story/20895.html
New companies, more NFOs to push MF assets in 2007
AUMs increased by 71% to Rs 340,629 cr in 2006 and it wasn’t just the trickle-down effect of a racing stock market (Date: 11-Jan-2007)
http://www.indianexpress.com/story/20607.html
Sundaram to launch two new funds
Sundaram BNP Paribas is launching two new funds in the equity segment - Equity Multiplier... (Date: 9-Jan-2007)
http://www.indianexpress.com/story/20426.html
Key word for the new year: selectivity
Although share prices have exceeded expectations for 2006 — the Sensex gained an impressive 46.8 per cent for the year — market players remain bullish for 2007. (Date: 7-Jan-2007)
http://www.indianexpress.com/story/20310.html
Regional stock exchanges sink as the ‘Big two’ rise
That effectively there are only two stock exchanges in the country — National Stock Exchange and Bombay Stock Exchange — is old news. Here’s how bad the state of regional stock exchanges is. (Date: 18-Dec-2006)
http://www.indianexpress.com/story/18791.html
Traffic on the IPO route increasing, but returns aren’t accelerating
The number of IPOs hitting the market has steadily increased from two a month between June and August to three a week... (Date: 11-Dec-2006)
http://www.indianexpress.com/story/18299.html
Next Bill Gates could be an Indian: Microsoft CEO
There is a special responsibility on India, the world is counting on the talent of this country to lead the next wave of innovation said Ballmer (Date: 9-Nov-2006)
http://www.indianexpress.com/story/16243.html
Multi-brand loyalty has a new catch-phrase: it pays
While plain vanilla cards offer reward points of 0.25 to 1%, multi-brand loyalty cards pay up to 6% for purchases at partner establishments (Date: 6-Nov-2006)
http://www.indianexpress.com/story/16069.html
Search results for sandeep singh
Selective, not broadbased
The big picture says share prices are up and running, but the fine print shows that not all segments, sectors or stocks have hit their highs (Date: 31-Oct-2006)
http://www.indianexpress.com/story/15693.html
India Inc’s growth story continues in first half of FY 07
The wheels are turning in corporate India. And if the financial results for the first-half of 2006-07 are anything to go by, they are turning real fast. (Date: 30-Oct-2006)
http://www.indianexpress.com/story/15635.html
Vijaya Bank plans acquisition in 2007
Vijaya Bank plans to acquire a smaller bank during the next financial year. Speaking at a press meet... (Date: 26-Sep-2006)
http://www.indianexpress.com/story/13418.html
When prices crash, hidden home loan clause may haunt
With property prices likely to follow the downward swing of the stock markets, an innocuous clause of the home loan agreement... (Date: 17-Jun-2006)
http://www.indianexpress.com/story/6614.html
Line and length
(Date: 5-Apr-2006)
http://www.indianexpress.com/story/1830.html
Sensex up; Friday the 13th may decide medium term direction
The market broke last week’s trend today. The Sensex rose 321 points or 2.5 per cent, closing at 13,177. (Date: 10-Apr-2007)
http://www.indianexpress.com/story/27946.html
Is it time to invest in banking stocks?
The Reserve Bank’s move to increase the repo rate by 25 basis points to 7.75 per cent and the Cash Reserve Ratio... (Date: 9-Apr-2007)
http://www.indianexpress.com/story/27829.html
Bearish trend likely to stay as RBI may not cut rates
What a welcome the investors had to financial year 2007-08. The market started on a bad note with the second largest fall in the history of BSE Sensex of 617 points. (Date: 3-Apr-2007)
http://www.indianexpress.com/story/27308.html
Demand for car loans may dip, sales feel the heat
Car loan rates are slated to go up further with Reserve Bank of India announcing an increase in cash reserve ratio by 50 basis points... (Date: 2-Apr-2007)
http://www.indianexpress.com/story/27221.html
With home loan floating rate at 11 per cent, banks have to increase not just your tenure but EMI too
Remember stories in books and films where a villager could never pay off his debts to the village Mahajan (moneylender) because of high interest that kept compounding? (Date: 20-Mar-2007)
http://www.indianexpress.com/story/26162.html
Why policymakers need to rethink: Hiking interest rate to control demand no help
Something’s not adding up. Interest rates of commercial banks are up but are out of sync with the rest of the world. (Date: 12-Mar-2007)
http://www.indianexpress.com/story/25437.html
As MIN deadline approaches MFs see fall in subscriptions
Call it the last minute scramble or regulatory short sightedness or even investor lethargy. (Date: 25-Jan-2007)
http://www.indianexpress.com/story/21677.html
Pension funds allowed 15% exposure to equities
Under the New Pension System 15 per cent of their pension wealth can get an equity exposure... (Date: 24-Jan-2007)
http://www.indianexpress.com/story/21603.html
As on December 31, 4.3 million demat accounts, almost 43 per cent of the total 9.9 million with the two depositories NSDL and CDSL... (Date: 15-Jan-2007)
http://www.indianexpress.com/story/20895.html
New companies, more NFOs to push MF assets in 2007
AUMs increased by 71% to Rs 340,629 cr in 2006 and it wasn’t just the trickle-down effect of a racing stock market (Date: 11-Jan-2007)
http://www.indianexpress.com/story/20607.html
Sundaram to launch two new funds
Sundaram BNP Paribas is launching two new funds in the equity segment - Equity Multiplier... (Date: 9-Jan-2007)
http://www.indianexpress.com/story/20426.html
Key word for the new year: selectivity
Although share prices have exceeded expectations for 2006 — the Sensex gained an impressive 46.8 per cent for the year — market players remain bullish for 2007. (Date: 7-Jan-2007)
http://www.indianexpress.com/story/20310.html
Regional stock exchanges sink as the ‘Big two’ rise
That effectively there are only two stock exchanges in the country — National Stock Exchange and Bombay Stock Exchange — is old news. Here’s how bad the state of regional stock exchanges is. (Date: 18-Dec-2006)
http://www.indianexpress.com/story/18791.html
Traffic on the IPO route increasing, but returns aren’t accelerating
The number of IPOs hitting the market has steadily increased from two a month between June and August to three a week... (Date: 11-Dec-2006)
http://www.indianexpress.com/story/18299.html
Next Bill Gates could be an Indian: Microsoft CEO
There is a special responsibility on India, the world is counting on the talent of this country to lead the next wave of innovation said Ballmer (Date: 9-Nov-2006)
http://www.indianexpress.com/story/16243.html
Multi-brand loyalty has a new catch-phrase: it pays
While plain vanilla cards offer reward points of 0.25 to 1%, multi-brand loyalty cards pay up to 6% for purchases at partner establishments (Date: 6-Nov-2006)
http://www.indianexpress.com/story/16069.html
Search results for sandeep singh
Selective, not broadbased
The big picture says share prices are up and running, but the fine print shows that not all segments, sectors or stocks have hit their highs (Date: 31-Oct-2006)
http://www.indianexpress.com/story/15693.html
India Inc’s growth story continues in first half of FY 07
The wheels are turning in corporate India. And if the financial results for the first-half of 2006-07 are anything to go by, they are turning real fast. (Date: 30-Oct-2006)
http://www.indianexpress.com/story/15635.html
Vijaya Bank plans acquisition in 2007
Vijaya Bank plans to acquire a smaller bank during the next financial year. Speaking at a press meet... (Date: 26-Sep-2006)
http://www.indianexpress.com/story/13418.html
When prices crash, hidden home loan clause may haunt
With property prices likely to follow the downward swing of the stock markets, an innocuous clause of the home loan agreement... (Date: 17-Jun-2006)
http://www.indianexpress.com/story/6614.html
Line and length
(Date: 5-Apr-2006)
http://www.indianexpress.com/story/1830.html
Sensex up; Friday the 13th may decide medium term direction
The market broke last week’s trend today. The Sensex rose 321 points or 2.5 per cent, closing at 13,177. (Date: 10-Apr-2007)
http://www.indianexpress.com/story/27946.html
Is it time to invest in banking stocks?
The Reserve Bank’s move to increase the repo rate by 25 basis points to 7.75 per cent and the Cash Reserve Ratio... (Date: 9-Apr-2007)
http://www.indianexpress.com/story/27829.html
Bearish trend likely to stay as RBI may not cut rates
What a welcome the investors had to financial year 2007-08. The market started on a bad note with the second largest fall in the history of BSE Sensex of 617 points. (Date: 3-Apr-2007)
http://www.indianexpress.com/story/27308.html
Demand for car loans may dip, sales feel the heat
Car loan rates are slated to go up further with Reserve Bank of India announcing an increase in cash reserve ratio by 50 basis points... (Date: 2-Apr-2007)
http://www.indianexpress.com/story/27221.html
With home loan floating rate at 11 per cent, banks have to increase not just your tenure but EMI too
Remember stories in books and films where a villager could never pay off his debts to the village Mahajan (moneylender) because of high interest that kept compounding? (Date: 20-Mar-2007)
http://www.indianexpress.com/story/26162.html
Why policymakers need to rethink: Hiking interest rate to control demand no help
Something’s not adding up. Interest rates of commercial banks are up but are out of sync with the rest of the world. (Date: 12-Mar-2007)
http://www.indianexpress.com/story/25437.html
As MIN deadline approaches MFs see fall in subscriptions
Call it the last minute scramble or regulatory short sightedness or even investor lethargy. (Date: 25-Jan-2007)
http://www.indianexpress.com/story/21677.html
Pension funds allowed 15% exposure to equities
Under the New Pension System 15 per cent of their pension wealth can get an equity exposure... (Date: 24-Jan-2007)
http://www.indianexpress.com/story/21603.html
Policy Change - RBI
Listed firms can now invest more in foreign portfolio, joint ventures
Sandeep Singh
Posted online: Wednesday, April 25, 2007
Credit policy 2007-08: RBI move will help Indian companies planning overseas acquisitions
NEW DELHI, APRIL 24: The RBI today increased the limit on portfolio investment by listed Indian companies in foreign listed companies from 25 to 35 per cent of their net worth. It also enhanced the limit for overseas investment in joint ventures or wholly owned subsidiaries by Indian companies from 200 per cent to 300 per cent of their net worth. This will help the Indian companies planning big overseas acquisitions.
“With each passing year, the government is moving towards capital account convertibility and this is a step to enhance Indian companies’ overseas investments,” said S C Gupta, chairman and managing director of PNB.
One of the impacts of economic liberalisation is that Indian companies are aspiring to become global players. They are looking for overseas acquisitions. Tata acquiring Corus, Aditya Birla group buying Novelis are some of the recent examples of Indian companies buying global majors. RBI’s move will help Indian companies in fulfilling their global dreams.
The inflows have been growing significantly due to the rising interest rates. This leads to currency appreciation. “The new credit policy will not only check this but also address the demands of Indian companies for their foreign acquisitions,” said Abheek Barua, chief economist, ABN AMRO Bank.
“The RBI has been trying to liberalise the overseas investment in a disciplined manner. The new policy will make Indian players more influential in international markets,” said Rajan Krishnan, business head of Principal PNB AMC.
Welcoming RBI’s monetary policy, said Habil Khorakiwala, president, Ficci: “This is in line with the recommendations of the Tarapore Committee on capital account convertibility and Percy Committee on IFC and clearly shows RBI’s willingness to move towards the CAC in a calibrated manner.”
Some experts have, however, aired their concerns on this issue. “This will reduce inflow and increase outflow in a scenario where we need more capital expansion. Rather than encouraging outflow of capital, the RBI should have encouraged greater capital absorption for capacity expansion,” said Rajiv Kumar, director and chief executive of ICRIER.
The monetary policy that encourages outward flow of foreign currency will check the appreciation of Rupee. “The various measures announced in the policy, which also indicate certain degree of liberal approach to outward flow of foreign currency, are most welcome under the present conditions, since they would have a sobering effect on the rapidly appreciating rupee,” said CII president R Seshasayee.
http://www.indianexpress.com/story/29235.html
Sandeep Singh
Posted online: Wednesday, April 25, 2007
Credit policy 2007-08: RBI move will help Indian companies planning overseas acquisitions
NEW DELHI, APRIL 24: The RBI today increased the limit on portfolio investment by listed Indian companies in foreign listed companies from 25 to 35 per cent of their net worth. It also enhanced the limit for overseas investment in joint ventures or wholly owned subsidiaries by Indian companies from 200 per cent to 300 per cent of their net worth. This will help the Indian companies planning big overseas acquisitions.
“With each passing year, the government is moving towards capital account convertibility and this is a step to enhance Indian companies’ overseas investments,” said S C Gupta, chairman and managing director of PNB.
One of the impacts of economic liberalisation is that Indian companies are aspiring to become global players. They are looking for overseas acquisitions. Tata acquiring Corus, Aditya Birla group buying Novelis are some of the recent examples of Indian companies buying global majors. RBI’s move will help Indian companies in fulfilling their global dreams.
The inflows have been growing significantly due to the rising interest rates. This leads to currency appreciation. “The new credit policy will not only check this but also address the demands of Indian companies for their foreign acquisitions,” said Abheek Barua, chief economist, ABN AMRO Bank.
“The RBI has been trying to liberalise the overseas investment in a disciplined manner. The new policy will make Indian players more influential in international markets,” said Rajan Krishnan, business head of Principal PNB AMC.
Welcoming RBI’s monetary policy, said Habil Khorakiwala, president, Ficci: “This is in line with the recommendations of the Tarapore Committee on capital account convertibility and Percy Committee on IFC and clearly shows RBI’s willingness to move towards the CAC in a calibrated manner.”
Some experts have, however, aired their concerns on this issue. “This will reduce inflow and increase outflow in a scenario where we need more capital expansion. Rather than encouraging outflow of capital, the RBI should have encouraged greater capital absorption for capacity expansion,” said Rajiv Kumar, director and chief executive of ICRIER.
The monetary policy that encourages outward flow of foreign currency will check the appreciation of Rupee. “The various measures announced in the policy, which also indicate certain degree of liberal approach to outward flow of foreign currency, are most welcome under the present conditions, since they would have a sobering effect on the rapidly appreciating rupee,” said CII president R Seshasayee.
http://www.indianexpress.com/story/29235.html
Big Biz- Mutual Fund
THE BIG STORY
To grow big, mutual funds turn to small investors
Sandeep Singh
Posted online: Sunday, April 29, 2007
India’s top three funds lower investment limits to reach out to households in Tier 2,3 and 4 cities
When ICICI Prudential Mutual Fund lowered the minimum limit for its systematic investment plan (SIP) to Rs 50 per month last week, it raised the basic standard for other fund management companies to follow. And with this move, the best vehicle for wealth creation has finally reached the small investor. From now on, a huge chunk of Indians will get to invest regularly in mutual funds while asset management companies (AMCs) will be able to reach out to the “teeming millions”.
Explains ICICI Prudential Mutual Fund managing director Pankaj Razdan, “In the India growth story, only the rich have become richer and there is hardly anything done for the underprivileged retail investors. We want to create an investment avenue for them and, hence, this move.” This will also remove the block in investors’ minds about mutual funds says Razdan, “We want more and more people to taste it so that they feel confident about the market. It’s a slow process but will act as a wildfire in two to three years’ time.” ICICI Prudential is not the first to lower investment limits. In April 2006, UTI Mutual Fund initiated this trend by reducing its SIP to Rs 100 per month for its “pension scheme”; it does not offer this facility for other schemes. UTI Mutual Fund’s idea was to offer MFs to the “underprivileged”, who don’t even have a bank account.
Then last month Reliance Mutual Fund, with its focus on Tier 2, 3 and 4 cities, lowered its SIP limit to Rs 100. Says Reliance Mutual Fund CEO Vikrant Gugnani, “Investors in smaller towns have stayed away from the mutual fund industry because of the higher threshold. So lowering this will remove their apprehensions and act as an entry point to investors in smaller towns.” The impact so far has been what Gugnani describes as a “striking success” for Reliance. “After the launch of this product, we have received applications from 75 new towns.”
Beyond these Big 3, too, the industry is largely lauding the effort. “This product will be able to capture the really micro investors and from that perspective, it’s a really good idea,” says Sundaram BNP Paribas AMC managing director T P Raman. “We are evaluating the feasibility of the product and will accordingly decide.” For the industry as a whole, it is penetration rather than performance that has been the bigger challenge. The customer base has grown by almost 300 per cent over the past three years. But this growth has been on a very small base and penetration is still below 3 per cent. In three years, assets under management (AUM) in the MF industry have grown at a compounded annual growth rate (CAGR) of 37 per cent from Rs 1,39,616 crore in March 2004 to Rs 3,26,388 crore in March 2007.
In the same period, the AUM for equity schemes has grown from Rs 29,362 crore in March 2004 to Rs 132,707 crore in March 2007, a CAGR of 65 per cent. During this period, the Sensex has grown at a CAGR of 35 per cent. This shows that the mutual fund industry has grown faster — which is good for now. But there is still huge scope for growth, given the low penetration levels. Traditionally, most investments in mutual funds have come from the top 20-30 towns while Tier 2, 3 and 4 towns have not gained ground, points out Gugnani, “There is significant wealth lying in bank deposits in almost 600 towns due to lack of other investment avenues. No one has tried to venture out; so no one has gained ground. The industry should try and reach out to new investors and expand the market.” Adds Razdan, “I want to reach every single household as there is no security system in India. I want them to become a part of the economic growth story.”
Though it’s a good move, there are still bottlenecks to the long-term success of this product. Notes CAMS director V Shankar, “This is a good experiment, but it will take about two to three months before we can say that it’s a real success.” The distribution, collection and transaction costs are major hurdles that will have to be addressed. Says Raman, “The accounting and administrative issues need to be taken up properly.” On the small investors’ part, the greatest challenge according to Razdan is financial literacy: “Education is a big bottleneck and we have been teaching the microfinance institutions (our partners) over the past six months who, in turn, will educate the investors. Another bottleneck is costs but we are not creating a parallel infrastructure — we are using our existing microfinance infrastructure which is the most cost-effective way of going about it.”
REACHING OUT
• Prudential ICICI
Will use existing microfinance infrastructure and customer base of ICICI.
Will educate its microfinance partners who, in turn, will teach the investors.
• Reliance
Will create its own infrastructure or recruit people who will operate from Reliance Webworld outlets.
Already has a physical presence in 124 towns and expects to touch 200 by June-end.
http://www.indianexpress.com/story/29575.html
To grow big, mutual funds turn to small investors
Sandeep Singh
Posted online: Sunday, April 29, 2007
India’s top three funds lower investment limits to reach out to households in Tier 2,3 and 4 cities
When ICICI Prudential Mutual Fund lowered the minimum limit for its systematic investment plan (SIP) to Rs 50 per month last week, it raised the basic standard for other fund management companies to follow. And with this move, the best vehicle for wealth creation has finally reached the small investor. From now on, a huge chunk of Indians will get to invest regularly in mutual funds while asset management companies (AMCs) will be able to reach out to the “teeming millions”.
Explains ICICI Prudential Mutual Fund managing director Pankaj Razdan, “In the India growth story, only the rich have become richer and there is hardly anything done for the underprivileged retail investors. We want to create an investment avenue for them and, hence, this move.” This will also remove the block in investors’ minds about mutual funds says Razdan, “We want more and more people to taste it so that they feel confident about the market. It’s a slow process but will act as a wildfire in two to three years’ time.” ICICI Prudential is not the first to lower investment limits. In April 2006, UTI Mutual Fund initiated this trend by reducing its SIP to Rs 100 per month for its “pension scheme”; it does not offer this facility for other schemes. UTI Mutual Fund’s idea was to offer MFs to the “underprivileged”, who don’t even have a bank account.
Then last month Reliance Mutual Fund, with its focus on Tier 2, 3 and 4 cities, lowered its SIP limit to Rs 100. Says Reliance Mutual Fund CEO Vikrant Gugnani, “Investors in smaller towns have stayed away from the mutual fund industry because of the higher threshold. So lowering this will remove their apprehensions and act as an entry point to investors in smaller towns.” The impact so far has been what Gugnani describes as a “striking success” for Reliance. “After the launch of this product, we have received applications from 75 new towns.”
Beyond these Big 3, too, the industry is largely lauding the effort. “This product will be able to capture the really micro investors and from that perspective, it’s a really good idea,” says Sundaram BNP Paribas AMC managing director T P Raman. “We are evaluating the feasibility of the product and will accordingly decide.” For the industry as a whole, it is penetration rather than performance that has been the bigger challenge. The customer base has grown by almost 300 per cent over the past three years. But this growth has been on a very small base and penetration is still below 3 per cent. In three years, assets under management (AUM) in the MF industry have grown at a compounded annual growth rate (CAGR) of 37 per cent from Rs 1,39,616 crore in March 2004 to Rs 3,26,388 crore in March 2007.
In the same period, the AUM for equity schemes has grown from Rs 29,362 crore in March 2004 to Rs 132,707 crore in March 2007, a CAGR of 65 per cent. During this period, the Sensex has grown at a CAGR of 35 per cent. This shows that the mutual fund industry has grown faster — which is good for now. But there is still huge scope for growth, given the low penetration levels. Traditionally, most investments in mutual funds have come from the top 20-30 towns while Tier 2, 3 and 4 towns have not gained ground, points out Gugnani, “There is significant wealth lying in bank deposits in almost 600 towns due to lack of other investment avenues. No one has tried to venture out; so no one has gained ground. The industry should try and reach out to new investors and expand the market.” Adds Razdan, “I want to reach every single household as there is no security system in India. I want them to become a part of the economic growth story.”
Though it’s a good move, there are still bottlenecks to the long-term success of this product. Notes CAMS director V Shankar, “This is a good experiment, but it will take about two to three months before we can say that it’s a real success.” The distribution, collection and transaction costs are major hurdles that will have to be addressed. Says Raman, “The accounting and administrative issues need to be taken up properly.” On the small investors’ part, the greatest challenge according to Razdan is financial literacy: “Education is a big bottleneck and we have been teaching the microfinance institutions (our partners) over the past six months who, in turn, will educate the investors. Another bottleneck is costs but we are not creating a parallel infrastructure — we are using our existing microfinance infrastructure which is the most cost-effective way of going about it.”
REACHING OUT
• Prudential ICICI
Will use existing microfinance infrastructure and customer base of ICICI.
Will educate its microfinance partners who, in turn, will teach the investors.
• Reliance
Will create its own infrastructure or recruit people who will operate from Reliance Webworld outlets.
Already has a physical presence in 124 towns and expects to touch 200 by June-end.
http://www.indianexpress.com/story/29575.html
Small Cap needs definition
MFs want uniform definition of ‘small’ in small cap firms
Sandeep Singh
Posted online: Tuesday, May 22, 2007
Mutual Funds: The word small stretches from Rs 10 crore to Rs 6,000 crore
New Delhi, May 21: If there’s one common theme binding small investors, small companies and funds launching small cap funds for small investors, it is: ambiguity. Coming up for debate is definition of “small cap”, a company whose market capitalisation is, well, small. But that “small” value could range between Rs 10 crore to over Rs 6,000 crore. At stake: investor expectations.
“In the absence of a clear classification accepted uniformly across the industry, there are as many definitions as there are small-cap schemes and indices. Says T P Raman, managing director of Sundaram BNP Paribas Mutual Fund: “We need to organise a meeting or seminar of fund houses, Sebi, NSE and AMFI officials, define a proper classification and monitor it every three to six months, as the size of companies is changing fast.”
At present, there are two dedicated small-cap funds — Sundaram BNP Paribas Select Small Cap and DSP Merrill Lynch Micro Cap Fund — and one portfolio management scheme — Kotak Origin of Kotak Securities. In the Sundaram scheme, small cap is defined as companies other than the top 100 NSE companies ranked by market capitalisation. As on Friday, that meant companies whose market cap was less than Rs 6,138 crore.
DSP Merrill Lynch, however, defines small cap as NSE companies ranked 201-300 by market cap, implying a market capitalisation of Rs 1,441-2,541 crore. So it is targeting companies ranked between 200 and 300.
“There is an overlap because everyone has his own definition. This will exist till market players draw up and accept a common classification,” says S Naganath, president and chief investment officer of DSP Merrill Lynch Mutual Fund.
Ironically, neither scheme is aligned to the definition of the benchmark they track — the BSE Small Cap Index, which as of May 18 had 508 stocks. On that day, the market cap of 507 of these stocks ranged from Rs 10 crore to Rs 3,216 crore; stock number 508 was Cairn India, with a market cap of Rs 25,473 crore.
Meanwhile, funds continue to devise their own definitions and target sets (See table).
For investors, multiple definitions mean they have to check the target stock set of the fund they are considering investing in and difficulty in comparing returns. Says Raman: “Comparison will be tough, as different funds will have companies from different market capitalisation sets.”
Why go small
Investors are attracted to small caps because potentially they can deliver higher than market returns, as smaller companies due to their smaller base can grow faster. The returns come in multiples as companies like Pantaloon (44-fold growth in five years) and Unitech (723 times) have shown. Mid- to large-sized companies like Aban Offshore (134 times), Areva T&D (62 times), Sesa Goa (54 times) and so on were all small caps five years ago. Such companies also carry a much higher risk, as the potential to fail or go bankrupt is equally high. Besides, it is not easy to sell such stocks when the going gets tough.
Finally, since small companies don’t fit into institutional investors’ portfolio and hence are not tracked by analysts, getting information about them is difficult, making the investing exercise that much more difficult — most “vanishing companies” come from this breed.
http://www.indianexpress.com/story/31501.html
Sandeep Singh
Posted online: Tuesday, May 22, 2007
Mutual Funds: The word small stretches from Rs 10 crore to Rs 6,000 crore
New Delhi, May 21: If there’s one common theme binding small investors, small companies and funds launching small cap funds for small investors, it is: ambiguity. Coming up for debate is definition of “small cap”, a company whose market capitalisation is, well, small. But that “small” value could range between Rs 10 crore to over Rs 6,000 crore. At stake: investor expectations.
“In the absence of a clear classification accepted uniformly across the industry, there are as many definitions as there are small-cap schemes and indices. Says T P Raman, managing director of Sundaram BNP Paribas Mutual Fund: “We need to organise a meeting or seminar of fund houses, Sebi, NSE and AMFI officials, define a proper classification and monitor it every three to six months, as the size of companies is changing fast.”
At present, there are two dedicated small-cap funds — Sundaram BNP Paribas Select Small Cap and DSP Merrill Lynch Micro Cap Fund — and one portfolio management scheme — Kotak Origin of Kotak Securities. In the Sundaram scheme, small cap is defined as companies other than the top 100 NSE companies ranked by market capitalisation. As on Friday, that meant companies whose market cap was less than Rs 6,138 crore.
DSP Merrill Lynch, however, defines small cap as NSE companies ranked 201-300 by market cap, implying a market capitalisation of Rs 1,441-2,541 crore. So it is targeting companies ranked between 200 and 300.
“There is an overlap because everyone has his own definition. This will exist till market players draw up and accept a common classification,” says S Naganath, president and chief investment officer of DSP Merrill Lynch Mutual Fund.
Ironically, neither scheme is aligned to the definition of the benchmark they track — the BSE Small Cap Index, which as of May 18 had 508 stocks. On that day, the market cap of 507 of these stocks ranged from Rs 10 crore to Rs 3,216 crore; stock number 508 was Cairn India, with a market cap of Rs 25,473 crore.
Meanwhile, funds continue to devise their own definitions and target sets (See table).
For investors, multiple definitions mean they have to check the target stock set of the fund they are considering investing in and difficulty in comparing returns. Says Raman: “Comparison will be tough, as different funds will have companies from different market capitalisation sets.”
Why go small
Investors are attracted to small caps because potentially they can deliver higher than market returns, as smaller companies due to their smaller base can grow faster. The returns come in multiples as companies like Pantaloon (44-fold growth in five years) and Unitech (723 times) have shown. Mid- to large-sized companies like Aban Offshore (134 times), Areva T&D (62 times), Sesa Goa (54 times) and so on were all small caps five years ago. Such companies also carry a much higher risk, as the potential to fail or go bankrupt is equally high. Besides, it is not easy to sell such stocks when the going gets tough.
Finally, since small companies don’t fit into institutional investors’ portfolio and hence are not tracked by analysts, getting information about them is difficult, making the investing exercise that much more difficult — most “vanishing companies” come from this breed.
http://www.indianexpress.com/story/31501.html
Corporate Paycheque
The big, fat, Indian paycheque
Sandeep Singh
Posted online: Sunday, June 03, 2007
As India Inc. ponders the merit of prime minister’s suggestion on curbing “excessive remuneration”, here is a look at the salary status of the men who power the country’s economy and their place in the global sweepstakes
At Rs 24.51 crore, Mukesh Ambani, chairman and managing director (CMD) of India’s largest private company Reliance Industries, is the highest paid business leader of India. With Rs 15.58 crore, Brij Mohan Munjal, chairman of Hero Honda, comes a distant second, while Sunil Bharti Mittal, who took home Rs 12.68 crore last year as CMD of Bharti Airtel, stands third.
To put these numbers in perspective, on global sweepstakes, Ambani ranks as the world’s 12th highest paid executive, sandwiched between Aviva’s Richard Harvey (Rs 21.3 crore) and IBM’s Samuel J. Palmisano (Rs 32.8 crore), while Munjal gets the 19th rank, between AXA’s Henri De Castries (Rs 14.7 crore) and Ford Motor’s Alan Mulally (Rs 17.6 crore). And this is only converting dollars into rupees not accounting for purchasing power parity, which would take Ambani, Munjal and many of India’s top company’s leaders much higher. These numbers also exclude unlisted companies.
No doubt, riding a trillion-dollar economy, which has taken Indian companies’ valuations to over trillion dollars as well, salaries of CEOs of the country’s biggest private corporations have been sky-rocketing. There are enough reasons for the increase in executive pay. Profits, for instance: over the last three years, the bottom lines of the top 50 companies that comprise National Stock Exchange’s (NSE) Nifty Index have grown by 23 per cent per annum. There is one difference, however: these gains are restricted to “private” corporations, not public sector undertakings (PSUs) whose CMDs take home what management trainees get in many private companies.
Already a raging debate in the US, Prime Minister Manmohan Singh sparked it off in India last month when in context of “extreme poverty” he said, “Resist excessive remuneration to promoters and senior executives.” But the bigger and unexplored issue around executive compensation in India is delivery—just what is it that CEOs are bringing to the table? The numbers speak for themselves.
Compared to their global counterparts, Indian business leaders take home salaries that are a significantly higher percentage of revenues that they help the companies generate. At the aggregate level, Nifty CEOs take home a total compensation that comprises 0.027 per cent of revenues. Against this, the top 20 global company heads take 0.007 per cent of the revenue generated. That is, for every Rs 1 crore of revenues, Indian CEOs take home Rs 2,700 compared to Rs 700 that CEOs of top 20 global companies do.
But if you exclude PSU chiefs, the difference gets starker. Against Rs 2,700 that CEOs of all Nifty companies get, the number rises to Rs 4,000 if you remove PSUs like ONGC, SBI, SAIL and so on. The CEO compensation divide, clearly, is not merely global but national as well.
Within the private sector too, CEOs of family-run companies take home a larger package than professionally run firms. Based on compensation, the top five Indian CEOs are Reliance, Hero Honda, Bharti Airtel (Sunil Mittal draws Rs 12.68 crore), Cipla (Y.K. Hamied, Rs 7.88 crore) and Ranbaxy (Malvinder Singh, Rs 6.57 crore). Among professionally run companies, the stagnating Hindustan Lever’s CEO Douglas Baillie takes home Rs 4.59 crore. At the other end of the spectrum, just above PSU chiefs, is Infosys’ Nandan Nilekani, who took home Rs 41 lakh last year and has since handed over charge.
When expressed as a percentage of profits, Indian company heads are far above their global counterparts. On an average the CEOs of Nifty companies take home 0.168 per cent of the net profit their companies generate. Against this, the average remuneration that the heads of top 20 global companies take is 0.099 per cent. For every Rs 1 crore earned as profit, the Indian CEOs take home Rs 16,800, whereas global CEOs take home Rs 9,900. Exceptions again: Malvinder Singh of Ranbaxy takes home 3.1 per cent of the company’s profits, Munjal of Hero Honda and Sunil Duggal of Dabur take home 1.56 per cent and 1.35 per cent of the profit.
Among PSUs, Bharat Petroleum CMD Ashok Sinha took home the highest remuneration—all of Rs 23.9 lakh—followed by C. Venkataramana of Nalco (Rs 17 lakh). The lowest paid CEO in Nifty was A.K. Purwar, CMD of India’s largest bank State Bank of India, who received Rs 5.7 lakh last year (he has retired since).
Executive compensation is not something that the government or the media can decide. At best they can provide a platform for debate. Finally, it is company boards that have to take the call on how much, how far, how stretched. The board needs to take the realities of talent availability and contrast them against delivery. But a corporate India that benchmarks almost every decision against global levels—finance, markets, technology, scale and so on—perhaps it’s time for it to look at executive compensation as well.
http://www.indianexpress.com/story/32538.html
Sandeep Singh
Posted online: Sunday, June 03, 2007
As India Inc. ponders the merit of prime minister’s suggestion on curbing “excessive remuneration”, here is a look at the salary status of the men who power the country’s economy and their place in the global sweepstakes
At Rs 24.51 crore, Mukesh Ambani, chairman and managing director (CMD) of India’s largest private company Reliance Industries, is the highest paid business leader of India. With Rs 15.58 crore, Brij Mohan Munjal, chairman of Hero Honda, comes a distant second, while Sunil Bharti Mittal, who took home Rs 12.68 crore last year as CMD of Bharti Airtel, stands third.
To put these numbers in perspective, on global sweepstakes, Ambani ranks as the world’s 12th highest paid executive, sandwiched between Aviva’s Richard Harvey (Rs 21.3 crore) and IBM’s Samuel J. Palmisano (Rs 32.8 crore), while Munjal gets the 19th rank, between AXA’s Henri De Castries (Rs 14.7 crore) and Ford Motor’s Alan Mulally (Rs 17.6 crore). And this is only converting dollars into rupees not accounting for purchasing power parity, which would take Ambani, Munjal and many of India’s top company’s leaders much higher. These numbers also exclude unlisted companies.
No doubt, riding a trillion-dollar economy, which has taken Indian companies’ valuations to over trillion dollars as well, salaries of CEOs of the country’s biggest private corporations have been sky-rocketing. There are enough reasons for the increase in executive pay. Profits, for instance: over the last three years, the bottom lines of the top 50 companies that comprise National Stock Exchange’s (NSE) Nifty Index have grown by 23 per cent per annum. There is one difference, however: these gains are restricted to “private” corporations, not public sector undertakings (PSUs) whose CMDs take home what management trainees get in many private companies.
Already a raging debate in the US, Prime Minister Manmohan Singh sparked it off in India last month when in context of “extreme poverty” he said, “Resist excessive remuneration to promoters and senior executives.” But the bigger and unexplored issue around executive compensation in India is delivery—just what is it that CEOs are bringing to the table? The numbers speak for themselves.
Compared to their global counterparts, Indian business leaders take home salaries that are a significantly higher percentage of revenues that they help the companies generate. At the aggregate level, Nifty CEOs take home a total compensation that comprises 0.027 per cent of revenues. Against this, the top 20 global company heads take 0.007 per cent of the revenue generated. That is, for every Rs 1 crore of revenues, Indian CEOs take home Rs 2,700 compared to Rs 700 that CEOs of top 20 global companies do.
But if you exclude PSU chiefs, the difference gets starker. Against Rs 2,700 that CEOs of all Nifty companies get, the number rises to Rs 4,000 if you remove PSUs like ONGC, SBI, SAIL and so on. The CEO compensation divide, clearly, is not merely global but national as well.
Within the private sector too, CEOs of family-run companies take home a larger package than professionally run firms. Based on compensation, the top five Indian CEOs are Reliance, Hero Honda, Bharti Airtel (Sunil Mittal draws Rs 12.68 crore), Cipla (Y.K. Hamied, Rs 7.88 crore) and Ranbaxy (Malvinder Singh, Rs 6.57 crore). Among professionally run companies, the stagnating Hindustan Lever’s CEO Douglas Baillie takes home Rs 4.59 crore. At the other end of the spectrum, just above PSU chiefs, is Infosys’ Nandan Nilekani, who took home Rs 41 lakh last year and has since handed over charge.
When expressed as a percentage of profits, Indian company heads are far above their global counterparts. On an average the CEOs of Nifty companies take home 0.168 per cent of the net profit their companies generate. Against this, the average remuneration that the heads of top 20 global companies take is 0.099 per cent. For every Rs 1 crore earned as profit, the Indian CEOs take home Rs 16,800, whereas global CEOs take home Rs 9,900. Exceptions again: Malvinder Singh of Ranbaxy takes home 3.1 per cent of the company’s profits, Munjal of Hero Honda and Sunil Duggal of Dabur take home 1.56 per cent and 1.35 per cent of the profit.
Among PSUs, Bharat Petroleum CMD Ashok Sinha took home the highest remuneration—all of Rs 23.9 lakh—followed by C. Venkataramana of Nalco (Rs 17 lakh). The lowest paid CEO in Nifty was A.K. Purwar, CMD of India’s largest bank State Bank of India, who received Rs 5.7 lakh last year (he has retired since).
Executive compensation is not something that the government or the media can decide. At best they can provide a platform for debate. Finally, it is company boards that have to take the call on how much, how far, how stretched. The board needs to take the realities of talent availability and contrast them against delivery. But a corporate India that benchmarks almost every decision against global levels—finance, markets, technology, scale and so on—perhaps it’s time for it to look at executive compensation as well.
http://www.indianexpress.com/story/32538.html
Corporate Gov- PSU Banks
Need experts, get political directors off my back: PSU bank chief goes public
Sandeep Singh
Posted online: Tuesday, June 26, 2007
New Delhi, June 25: In perhaps the first such case, the chairman and managing director of a PSU bank has gone public to protest the presence of directors appointed to his board at the behest of the ruling party.
“I have requested the government to reconstitute the board and I welcome people who have integrity and who can contribute...Banking is a highly complicated sector and we are custodians of depositors,” he said. “The bank board should be professionally represented so that it can contribute meaningfully,” said R P Singh, CMD of Punjab and Sind Bank, at a press conference today.
Last month, The Sunday Express had reported how the UPA government had crammed at least 32 of the 37 positions for independent directors (called in bank parlance, “non-official” directors) with men and women known for their allegiance to the Congress party.
Surprisingly, Singh is getting support from the highest quarters. Sources said he got the Finance Ministry’s OK to hold the press conference and moves are on to sack at least two of the five independent directors.
According to Singh, as the bank tried to reduce its non performing assets (NPAs) — from 17% two years ago to 2.4% today — defaulters felt the “pinch” of the recovery initiative and some of them “have been approaching the non-official directors for gaining concessions in settlements.” Since the bank refused relief, these directors “have launched a false propaganda against” the bank’s management, he said.
When the bank would go for auctions to sell distressed assets like properties, “we were put under pressure by these directors along with other political pressures from the sides,” said Singh. “We were told not to go for sale and take the settlement route,” he said. This route yields less money than an auction route.
The bank directors include Krishna Mohini, former Congress MLA from Solan, Himachal Pradesh and vice-president in the All India Mahila Congress; Harcharan Singh Josh, former secretary of the AICC minority cell; Umesh Kumar Sharma, former general secretary of the Haryana Pradesh Youth Congress and K K Sharma, former AICC Secretary.
In their complaint to the PM on May 25, these directors appreciated the Congress “tradition” of appointing party loyalists on PSU bank boards.
http://www.indianexpress.com/story/202685.html
Sandeep Singh
Posted online: Tuesday, June 26, 2007
New Delhi, June 25: In perhaps the first such case, the chairman and managing director of a PSU bank has gone public to protest the presence of directors appointed to his board at the behest of the ruling party.
“I have requested the government to reconstitute the board and I welcome people who have integrity and who can contribute...Banking is a highly complicated sector and we are custodians of depositors,” he said. “The bank board should be professionally represented so that it can contribute meaningfully,” said R P Singh, CMD of Punjab and Sind Bank, at a press conference today.
Last month, The Sunday Express had reported how the UPA government had crammed at least 32 of the 37 positions for independent directors (called in bank parlance, “non-official” directors) with men and women known for their allegiance to the Congress party.
Surprisingly, Singh is getting support from the highest quarters. Sources said he got the Finance Ministry’s OK to hold the press conference and moves are on to sack at least two of the five independent directors.
According to Singh, as the bank tried to reduce its non performing assets (NPAs) — from 17% two years ago to 2.4% today — defaulters felt the “pinch” of the recovery initiative and some of them “have been approaching the non-official directors for gaining concessions in settlements.” Since the bank refused relief, these directors “have launched a false propaganda against” the bank’s management, he said.
When the bank would go for auctions to sell distressed assets like properties, “we were put under pressure by these directors along with other political pressures from the sides,” said Singh. “We were told not to go for sale and take the settlement route,” he said. This route yields less money than an auction route.
The bank directors include Krishna Mohini, former Congress MLA from Solan, Himachal Pradesh and vice-president in the All India Mahila Congress; Harcharan Singh Josh, former secretary of the AICC minority cell; Umesh Kumar Sharma, former general secretary of the Haryana Pradesh Youth Congress and K K Sharma, former AICC Secretary.
In their complaint to the PM on May 25, these directors appreciated the Congress “tradition” of appointing party loyalists on PSU bank boards.
http://www.indianexpress.com/story/202685.html
Equity and Debt Funds
Continue to ride equity, but raise exposure to debt funds
Sandeep Singh
Posted online: Monday, July 02, 2007 at 0000 hrs Print Email
MF STUDY: State Bank of India best-performing fund house in equity; Birla leads in debt, finds Express Money-ICRA Online Best Funds 2007 survey
Over the three-year period up to May 31, 2007, SBI Mutual Fund was the best-performing fund house in the equity segment and Birla Sun Life Mutual Fund the best-performing fund house in the debt segment. As many as 39 of 51 diversified equity funds and 10 of 14 equity-linked savings schemes (ELSS) with a three-year record have beaten the benchmark BSE Sensex, and rather impressively too. Income funds and gilt funds continued to be weighed down by rising interest rates, registering a paltry 3-year CAGR (compounded annual growth rate) of 3.9 per cent and 3.1 per cent respectively.
These are some of the findings of the Express Money-ICRA Online Best Funds 2007 rankings — a performance survey of all mutual fund schemes, across all fund houses, capturing all categories. The survey evaluated fund performance using statistical tools that take into account both returns and risk, and ranked them across 10 homogenous categories (three equity, six debt, and one balanced).
In the equity segment, the rising market lifted all funds, though in varying degrees. Over a three-year time horizon, 75 per cent of diversified equity funds beat the market. However, over a one-year horizon, with the market becoming more discerning and fund managers taking divergent calls, the percentage dipped to 52 per cent.
If the number of four- and five-star funds — a rating tool used by us to capture performance — is an indicator, SBI was the clear leader with five schemes, followed by HDFC with four; Birla, DSP Merrill Lynch and Sundaram had three schemes apiece.
Market players say the long-term outlook for equities remains positive, but advise investors to tone down expectations and to stay patient. Says T P Raman, managing director, Sundaram BNP Paribas Asset Management: “Unlike the past three years, even attractive stock themes may take longer to deliver value. On 2008-09 and beyond earnings, select stocks across the capitalisation curve and sectors that are attractive.”
On the debt side, Birla had the maximum number of four-star and five-star schemes (eight), followed by ICICI Prudential (five) and Kotak and Tata (four apiece). Investors preferred short-term products that are less impacted by interest rates movements, namely liquid funds and fixed maturity plans (FMPs). Although income funds and gilt funds had a better year, their poor showing in the preceding two years reined in their three-year numbers.
However, experts say these two debt fund categories could be back in business. Says Nandkumar R Surti, chief investment officer-fixed income, JP Morgan Asset Management India: “As the slew of monetary and fiscal measures have the desired effect of checking inflation, interest rates will start to moderate; perhaps even drift lower. Investors should look to make allocations to longer-duration debt funds.”
During the period under review, the Indian mutual fund industry crossed the $100 billion mark. On May 31, the total assets under management stood at Rs 4,16,320 crore, compared to Rs 2,31,862 crore in March 2006 — an increase of 80 per cent. While all fund houses have added AUMs, the pecking order has changed. The notable climber is Reliance Mutual Fund. Not even in the top five in May 2005, it has since grown at a compounded annual rate of 141 per cent on the back of new launches, good performance and aggressive marketing, pushing down both ICICI Prudential and UTI by a spot.
Is your scheme a leader or a laggard? Find out in the Express Money-ICRA Online mutual fund rankings in today’s edition of Express Money.
http://www.indianexpress.com/story/203518.html
Sandeep Singh
Posted online: Monday, July 02, 2007 at 0000 hrs Print Email
MF STUDY: State Bank of India best-performing fund house in equity; Birla leads in debt, finds Express Money-ICRA Online Best Funds 2007 survey
Over the three-year period up to May 31, 2007, SBI Mutual Fund was the best-performing fund house in the equity segment and Birla Sun Life Mutual Fund the best-performing fund house in the debt segment. As many as 39 of 51 diversified equity funds and 10 of 14 equity-linked savings schemes (ELSS) with a three-year record have beaten the benchmark BSE Sensex, and rather impressively too. Income funds and gilt funds continued to be weighed down by rising interest rates, registering a paltry 3-year CAGR (compounded annual growth rate) of 3.9 per cent and 3.1 per cent respectively.
These are some of the findings of the Express Money-ICRA Online Best Funds 2007 rankings — a performance survey of all mutual fund schemes, across all fund houses, capturing all categories. The survey evaluated fund performance using statistical tools that take into account both returns and risk, and ranked them across 10 homogenous categories (three equity, six debt, and one balanced).
In the equity segment, the rising market lifted all funds, though in varying degrees. Over a three-year time horizon, 75 per cent of diversified equity funds beat the market. However, over a one-year horizon, with the market becoming more discerning and fund managers taking divergent calls, the percentage dipped to 52 per cent.
If the number of four- and five-star funds — a rating tool used by us to capture performance — is an indicator, SBI was the clear leader with five schemes, followed by HDFC with four; Birla, DSP Merrill Lynch and Sundaram had three schemes apiece.
Market players say the long-term outlook for equities remains positive, but advise investors to tone down expectations and to stay patient. Says T P Raman, managing director, Sundaram BNP Paribas Asset Management: “Unlike the past three years, even attractive stock themes may take longer to deliver value. On 2008-09 and beyond earnings, select stocks across the capitalisation curve and sectors that are attractive.”
On the debt side, Birla had the maximum number of four-star and five-star schemes (eight), followed by ICICI Prudential (five) and Kotak and Tata (four apiece). Investors preferred short-term products that are less impacted by interest rates movements, namely liquid funds and fixed maturity plans (FMPs). Although income funds and gilt funds had a better year, their poor showing in the preceding two years reined in their three-year numbers.
However, experts say these two debt fund categories could be back in business. Says Nandkumar R Surti, chief investment officer-fixed income, JP Morgan Asset Management India: “As the slew of monetary and fiscal measures have the desired effect of checking inflation, interest rates will start to moderate; perhaps even drift lower. Investors should look to make allocations to longer-duration debt funds.”
During the period under review, the Indian mutual fund industry crossed the $100 billion mark. On May 31, the total assets under management stood at Rs 4,16,320 crore, compared to Rs 2,31,862 crore in March 2006 — an increase of 80 per cent. While all fund houses have added AUMs, the pecking order has changed. The notable climber is Reliance Mutual Fund. Not even in the top five in May 2005, it has since grown at a compounded annual rate of 141 per cent on the back of new launches, good performance and aggressive marketing, pushing down both ICICI Prudential and UTI by a spot.
Is your scheme a leader or a laggard? Find out in the Express Money-ICRA Online mutual fund rankings in today’s edition of Express Money.
http://www.indianexpress.com/story/203518.html
Big Biz
THE BIG BIZ STORY
To rise beyond 15,000 mark, Sensex earnings have to increase by 25%
Sandeep Singh
Posted online: Sunday, July 08, 2007
With first quarter results around the corner, market men look at earnings growth to drive it higher
With historic growth in sales and earnings of India Inc, at 31 per cent and 32 per cent respectively for 2006-07, the 17-month long rise of the Sensex from 10,000 to 15,000 seems to be in line. What’s more interesting is that even with a relative slower pace expected in the first quarter of 2007-08, at 25 per cent, earnings growth should continue to power it. According to Ajay Bagga, chief executive officer, Lotus India Mutual Fund, “Market is the leading indicator and makes opinion. Lot of adverse information has already been accounted for. Technology will stabilise and telecom, PSU banks, cement and construction sectors are looking strong to lead the momentum.” Adds R Venkataraman, executive director, India Infoline, “Sensex touching 15,000 is a reflection of the strength and positiveness of India’s growth story.”
But the rally has been selective — only 12 Sensex companies have grown faster than the Sensex. The five companies whose share prices have largely driven this rally from 10,000 to 15,000 are Reliance Industries (up 84 per cent), Bharti Airtel (81 per cent), Larsen & Toubro (73 per cent), Reliance Communications (60 per cent) and ICICI Bank (55 per cent). These five companies have a combined weightage of 38.4 per cent in the Sensex.
According to D D Sharma, senior vice president (retail equity), AnandRathi, “It’s not been a confident all-round rally as very selective stocks have led to the growth and this does not bring the desired comfort level.” As many as 18 companies grew slower than Sensex and six of them registered a decline in the 17 month period — Bajaj Auto, Hero Honda, Tata Motors, Hindalco, Ranbaxy and ITC.
Even so, this is the fastest 5,000 point growth in Sensex. It took 20 years and 8 months for Sensex to reach 5,000 mark from 100, a CAGR (compounded annual growth rate) of 21.1 per cent. The next rally from 5,000 to 10,000 took 5 years and 10 months, a CAGR of 12.2 per cent and the latest one, from 10,000 to 15,000, took just 17 months or a CAGR of 33.1 per cent.
The growth over the past 17 months does not really suggest that the momentum is going to continue, said Sharma: “I don’t see a further sharp rise from here in the near future and neither do I see a sharp correction.” The first quarter results seem to hold some answer to where the market will lead.
According to Anup Maheshwari, head of equities and corporate strategy, DSP Merrill Lynch, “We expect the overall results to be fine, but we are slightly subdued on technology.” IT sector is facing problems of rupee appreciation and market men are nervous about their results. IT bellwether Infosys will declare its results on July 11, which should decide the course of the market.
Compared to other Asian markets, the Indian market has underperformed and has remained underinvested in the last six months. “With high global liquidity and low domestic participation in the past one year, I expect fresh liquidity to come in and increased domestic participation once the momentum picks after results,” said Bagga. “We can see a rally till 17,000 in a few months’ time.” The good subscription of mega IPOs of ICICI Bank and DLF also indicates the strength of the market.
Looking beyond the indices, though, growth has become broader over the past three months with smaller companies getting greater recognition and several fund houses coming up with equity schemes that are looking to invest in small and mid cap companies. “We see enough growth in smaller companies in the near term and market is also recognising them, though the growth will be sector led,” Maheshwari said.
The long-term story though holds strong with market expecting the corporate results to grow at more than 15 per cent per annum, said Sharma: “Though I am skeptical on the short term movement, the long term momentum is strong.” Adds Bagga, “the long term story is supremely positive.”
If Sensex PE of 21.5 seems a concern in comparison to international markets, it should be accounted for in terms of the growth, the markets are seeing. “Only China is growing faster than us and is trading at PE of 35 so in relative terms we are better placed looking at our sustained earnings,” said Bagga.
http://www.indianexpress.com/story/204152.html
To rise beyond 15,000 mark, Sensex earnings have to increase by 25%
Sandeep Singh
Posted online: Sunday, July 08, 2007
With first quarter results around the corner, market men look at earnings growth to drive it higher
With historic growth in sales and earnings of India Inc, at 31 per cent and 32 per cent respectively for 2006-07, the 17-month long rise of the Sensex from 10,000 to 15,000 seems to be in line. What’s more interesting is that even with a relative slower pace expected in the first quarter of 2007-08, at 25 per cent, earnings growth should continue to power it. According to Ajay Bagga, chief executive officer, Lotus India Mutual Fund, “Market is the leading indicator and makes opinion. Lot of adverse information has already been accounted for. Technology will stabilise and telecom, PSU banks, cement and construction sectors are looking strong to lead the momentum.” Adds R Venkataraman, executive director, India Infoline, “Sensex touching 15,000 is a reflection of the strength and positiveness of India’s growth story.”
But the rally has been selective — only 12 Sensex companies have grown faster than the Sensex. The five companies whose share prices have largely driven this rally from 10,000 to 15,000 are Reliance Industries (up 84 per cent), Bharti Airtel (81 per cent), Larsen & Toubro (73 per cent), Reliance Communications (60 per cent) and ICICI Bank (55 per cent). These five companies have a combined weightage of 38.4 per cent in the Sensex.
According to D D Sharma, senior vice president (retail equity), AnandRathi, “It’s not been a confident all-round rally as very selective stocks have led to the growth and this does not bring the desired comfort level.” As many as 18 companies grew slower than Sensex and six of them registered a decline in the 17 month period — Bajaj Auto, Hero Honda, Tata Motors, Hindalco, Ranbaxy and ITC.
Even so, this is the fastest 5,000 point growth in Sensex. It took 20 years and 8 months for Sensex to reach 5,000 mark from 100, a CAGR (compounded annual growth rate) of 21.1 per cent. The next rally from 5,000 to 10,000 took 5 years and 10 months, a CAGR of 12.2 per cent and the latest one, from 10,000 to 15,000, took just 17 months or a CAGR of 33.1 per cent.
The growth over the past 17 months does not really suggest that the momentum is going to continue, said Sharma: “I don’t see a further sharp rise from here in the near future and neither do I see a sharp correction.” The first quarter results seem to hold some answer to where the market will lead.
According to Anup Maheshwari, head of equities and corporate strategy, DSP Merrill Lynch, “We expect the overall results to be fine, but we are slightly subdued on technology.” IT sector is facing problems of rupee appreciation and market men are nervous about their results. IT bellwether Infosys will declare its results on July 11, which should decide the course of the market.
Compared to other Asian markets, the Indian market has underperformed and has remained underinvested in the last six months. “With high global liquidity and low domestic participation in the past one year, I expect fresh liquidity to come in and increased domestic participation once the momentum picks after results,” said Bagga. “We can see a rally till 17,000 in a few months’ time.” The good subscription of mega IPOs of ICICI Bank and DLF also indicates the strength of the market.
Looking beyond the indices, though, growth has become broader over the past three months with smaller companies getting greater recognition and several fund houses coming up with equity schemes that are looking to invest in small and mid cap companies. “We see enough growth in smaller companies in the near term and market is also recognising them, though the growth will be sector led,” Maheshwari said.
The long-term story though holds strong with market expecting the corporate results to grow at more than 15 per cent per annum, said Sharma: “Though I am skeptical on the short term movement, the long term momentum is strong.” Adds Bagga, “the long term story is supremely positive.”
If Sensex PE of 21.5 seems a concern in comparison to international markets, it should be accounted for in terms of the growth, the markets are seeing. “Only China is growing faster than us and is trading at PE of 35 so in relative terms we are better placed looking at our sustained earnings,” said Bagga.
http://www.indianexpress.com/story/204152.html
Mutual funds
Mutual funds’ daily collections drop 70-90% in a week
Sandeep Singh
Posted online: Tuesday, July 10, 2007
New Delhi, July 9: The mutual funds industry is facing a crash in daily collections. Between July 2 and today, the falls across various funds have been in the range of 70-90 per cent in their respective retail segments. This is a knee-jerk reaction to an April 27, 2007, circular of the Securities and Exchange Board of India (Sebi).
Under the circular, beginning July 2, all investors in MFs — not just those investing Rs 50,000 and more — need to attach a copy of their permanent account number (PAN) card; till December 31, 2007, an application proof would be accepted.
The funds are now worried. The two largest ones in the public sector and private sector, for instance, while accepting that the idea is good, are apprehensive about its immediate impact. Says UTI Mutual Fund chief marketing officer Joydeep Bhattacharya: “Only 10-12 per cent of retail MF investors hold a PAN, others don’t have it and so it has a direct impact.” Adds Reliance Mutual Fund chief executive officer Vikrant Gugnani: “We are facing a significant impact on daily inflows.”
Though collections are suffering, market players are welcoming the initiative, though with a cauldron of caution. “It will make the securities market transparent and cleanly regulated but this dynamic shift should be done in a phased manner without impacting the industry,” opines Gugnani. “The infrastructure and implementation process needs to be thought through.” “This is a step in the right direction that will benefit everyone in the long-term, though it will have initial hiccups,” said Bhattacharya. “Finally, all financial products should have a single identification number.”
While the MF industry may be protesting, the fact is that the 70-90 per cent fall it says it is facing is in numbers, not value. According to the head of an asset management company (AMC), “The fall is in retail applications, particularly among investors with Rs 100-500 SIPs (systematic investment plans). The high net worth inflows remain more or less the same.” Small investors putting in small sums add up to 15-20 per cent of the total corpus,”
Some funds are working towards the expansion and penetration of PAN among investors. Several fund houses have tied up with PAN issuing agencies like UTI TSL, Karvy and Bajaj Capital to make PAN forms available along with the mutual fund scheme application form and get them collected as well.
According to Bajaj Capital head of operations Harish Sabharwal: “Six AMCs have currently tied up for issuing PAN cards with us and we are being able to convince investors to apply for PAN. While investors were hesitant earlier, the number of applications for PAN has shot up by 10 times now.”
What might come as a loss for mutual funds may benefit other financial institutions, particularly life insurance and banks as they do not fall under this regulation. Aggressive insurance players offering high-cost investment options like ULIPs will benefit, as investors move from MFs to these institutions in the short term.
‘What’s wrong with PAN?’
Making PAN mandatory for all investors while buying mutual funds is only the first step. According to sources in the Ministry of Finance, the PAN condition will be extended to insurance and banking products as well. “This is only the first step,” a source said. “We plan to extend the scheme to other investment products.”
But, “What’s wrong with PAN?” he asked. “The idea is to have a sound audit trail of all transactions. If someone has something to hide, he will not invest but why should others not go for PAN? It takes just 17 days to get a PAN these days and the I-T department is not going to be hounding them.”
http://www.indianexpress.com/story/204356.html
Sandeep Singh
Posted online: Tuesday, July 10, 2007
New Delhi, July 9: The mutual funds industry is facing a crash in daily collections. Between July 2 and today, the falls across various funds have been in the range of 70-90 per cent in their respective retail segments. This is a knee-jerk reaction to an April 27, 2007, circular of the Securities and Exchange Board of India (Sebi).
Under the circular, beginning July 2, all investors in MFs — not just those investing Rs 50,000 and more — need to attach a copy of their permanent account number (PAN) card; till December 31, 2007, an application proof would be accepted.
The funds are now worried. The two largest ones in the public sector and private sector, for instance, while accepting that the idea is good, are apprehensive about its immediate impact. Says UTI Mutual Fund chief marketing officer Joydeep Bhattacharya: “Only 10-12 per cent of retail MF investors hold a PAN, others don’t have it and so it has a direct impact.” Adds Reliance Mutual Fund chief executive officer Vikrant Gugnani: “We are facing a significant impact on daily inflows.”
Though collections are suffering, market players are welcoming the initiative, though with a cauldron of caution. “It will make the securities market transparent and cleanly regulated but this dynamic shift should be done in a phased manner without impacting the industry,” opines Gugnani. “The infrastructure and implementation process needs to be thought through.” “This is a step in the right direction that will benefit everyone in the long-term, though it will have initial hiccups,” said Bhattacharya. “Finally, all financial products should have a single identification number.”
While the MF industry may be protesting, the fact is that the 70-90 per cent fall it says it is facing is in numbers, not value. According to the head of an asset management company (AMC), “The fall is in retail applications, particularly among investors with Rs 100-500 SIPs (systematic investment plans). The high net worth inflows remain more or less the same.” Small investors putting in small sums add up to 15-20 per cent of the total corpus,”
Some funds are working towards the expansion and penetration of PAN among investors. Several fund houses have tied up with PAN issuing agencies like UTI TSL, Karvy and Bajaj Capital to make PAN forms available along with the mutual fund scheme application form and get them collected as well.
According to Bajaj Capital head of operations Harish Sabharwal: “Six AMCs have currently tied up for issuing PAN cards with us and we are being able to convince investors to apply for PAN. While investors were hesitant earlier, the number of applications for PAN has shot up by 10 times now.”
What might come as a loss for mutual funds may benefit other financial institutions, particularly life insurance and banks as they do not fall under this regulation. Aggressive insurance players offering high-cost investment options like ULIPs will benefit, as investors move from MFs to these institutions in the short term.
‘What’s wrong with PAN?’
Making PAN mandatory for all investors while buying mutual funds is only the first step. According to sources in the Ministry of Finance, the PAN condition will be extended to insurance and banking products as well. “This is only the first step,” a source said. “We plan to extend the scheme to other investment products.”
But, “What’s wrong with PAN?” he asked. “The idea is to have a sound audit trail of all transactions. If someone has something to hide, he will not invest but why should others not go for PAN? It takes just 17 days to get a PAN these days and the I-T department is not going to be hounding them.”
http://www.indianexpress.com/story/204356.html
Moeny lenders Vs banks
Village India relies more on money lenders than banks
Sandeep Singh
Posted online: Tuesday, July 24, 2007
60 yrs after independence: 35% go to age-old lenders, 19% to banks
New Delhi, July 23: Money lenders have caught up with the friends and relatives segment at 35 per cent when it comes to fulfilling the loan requirements of rural India. According to the recently Invest India Savings and Income survey for June 2007, banks with 19 per cent of sourcing, stand at a distant third.
Self help groups and cooperative societies are the fourth and fifth preferred choices for sourcing loans and have a share of 9 per cent and 6 per cent respectively. Says ICRIER director and chief executive officer (CEO) Rajiv Kumar: “It is to ensure ease of transactions that the common man avoids banks. The processes of banks for loans are hide-bound, full of bureaucracy, and require a lot of collateral... these cumbersome processes take the common man away from banks.”
The banking system in our country has not been able to cater to the needs of rural India because of its lack of penetration. According to ICICI Bank head of retail assets Rajeev Sabharwal: “It’s more like being in a development stage as till now the penetration of financing has been more focussed on the urban side. What banks need to do and which they are doing is to spread the distribution network in the rural market and look for low cost solutions by way of technology that will help reduce transactions and cash management costs.”
The Invest India study also provides insights on the requirements of rural India that force them to go for these loans. Financial emergencies come out as the prime reason for taking a loan — accounting for 35 per cent.
The next in importance are medical emergencies and farm/ crop loans, which account for 20 per cent and 18 per cent respectively of loan takens. These three requirements account for 73 per cent of the loan requirements of rural earners.
At the next level come the need for homes/ land, business requirements and social obligation, which account for 12 per cent each. Says Sabharwal: “The requirements for emergencies are there but there is enough demand to finance pre-harvest agricultural implements and the post-harvest needs that come to banks.”
When it comes to taking small loans, banks’ share stands at 26 per cent and trails the loans taken from relatives, which stands at 42 per cent of the total sourced. Money lenders closely follow banks with 21 per cent.
Adds Kumar, “banks will have to come up with some innovative ways to give consumption loans so as to create productive assets.” Banks are organised lending institutions and their retreat raises concern.
According to Sabharwal, “The banks share will increase with the increasing distribution network, which all banks are working towards. Banks’ transparency is high and the interest rates charged by them are lower compared to money lenders.”
http://www.indianexpress.com/story/206480.html
Sandeep Singh
Posted online: Tuesday, July 24, 2007
60 yrs after independence: 35% go to age-old lenders, 19% to banks
New Delhi, July 23: Money lenders have caught up with the friends and relatives segment at 35 per cent when it comes to fulfilling the loan requirements of rural India. According to the recently Invest India Savings and Income survey for June 2007, banks with 19 per cent of sourcing, stand at a distant third.
Self help groups and cooperative societies are the fourth and fifth preferred choices for sourcing loans and have a share of 9 per cent and 6 per cent respectively. Says ICRIER director and chief executive officer (CEO) Rajiv Kumar: “It is to ensure ease of transactions that the common man avoids banks. The processes of banks for loans are hide-bound, full of bureaucracy, and require a lot of collateral... these cumbersome processes take the common man away from banks.”
The banking system in our country has not been able to cater to the needs of rural India because of its lack of penetration. According to ICICI Bank head of retail assets Rajeev Sabharwal: “It’s more like being in a development stage as till now the penetration of financing has been more focussed on the urban side. What banks need to do and which they are doing is to spread the distribution network in the rural market and look for low cost solutions by way of technology that will help reduce transactions and cash management costs.”
The Invest India study also provides insights on the requirements of rural India that force them to go for these loans. Financial emergencies come out as the prime reason for taking a loan — accounting for 35 per cent.
The next in importance are medical emergencies and farm/ crop loans, which account for 20 per cent and 18 per cent respectively of loan takens. These three requirements account for 73 per cent of the loan requirements of rural earners.
At the next level come the need for homes/ land, business requirements and social obligation, which account for 12 per cent each. Says Sabharwal: “The requirements for emergencies are there but there is enough demand to finance pre-harvest agricultural implements and the post-harvest needs that come to banks.”
When it comes to taking small loans, banks’ share stands at 26 per cent and trails the loans taken from relatives, which stands at 42 per cent of the total sourced. Money lenders closely follow banks with 21 per cent.
Adds Kumar, “banks will have to come up with some innovative ways to give consumption loans so as to create productive assets.” Banks are organised lending institutions and their retreat raises concern.
According to Sabharwal, “The banks share will increase with the increasing distribution network, which all banks are working towards. Banks’ transparency is high and the interest rates charged by them are lower compared to money lenders.”
http://www.indianexpress.com/story/206480.html
Financial Literacy
90% high-income urbanites think PSU banks guarantee deposits!
Sandeep Singh
Posted online: Saturday, August 04, 2007
New Delhi, August 3: The state of financial literacy in India is extremely grim. According to data released by the Invest India Incomes and Savings Survey 2007, only 9.6 per cent of the urban population in the income category of Rs 5 lakh plus understand that nationalised banks don’t guarantee deposits.
The survey also discloses that almost 83 per cent of the Indian earning population doesn’t know what a stock market is. In urban areas, in the income group of less than 2.5 lakh a month, almost 50 per cent have not heard of the stock market while in villages, as many as 91 per cent have not heard of the concept. Says Delhi-based financial planner Surya Bhatia: “I am little surprised as I think that almost 95 per cent of retail investors investing in the stock market don’t understand it, they go by what their broker says.”
If this is the case with the stock markets, the situation is even worse for mutual funds (MFs). According to Invest India Dataworks executive director Sandeep Ghosh, “Barely 9.5 per cent of Indian earners have heard of mutual funds and only half of them can actually describe what a mutual fund is.
Also, for mutual funds, the idea of systematic investment plan (SIP) has not actually percolated and people who have not invested in mutual funds think they are too costly.” The situation for insurance is better as it is a retail product and because of the incentives that it offers to distributors for promotion.
With Prime Minister Manmohan Singh and finance minister P Chidambaram both stressing the need for financial inclusion of rural India, the survey shows the enormity of the challenge before the government and industry. It shows that financial literacy has not been able to penetrate the urban population, which has greater access.
“When we talk of financial literacy, we forget that only 5-6 per cent of our country’s population is English-literate,” said Knowledge Networks chairman Rakesh Khurana. “With almost all our sources of financial knowledge in the English language, how will people understand?”
The situation seems a little better when it comes to understanding the importance of regular savings. Still, around 25 per cent of the population in the higher income group (earning more than Rs 5 lakh per annum) do not understand its importance.
What’s heartening is Indians’ understanding of risk. Almost 89 per cent of the people in the income group above Rs 2.5 lakh a year understand that high risk results in higher returns and vice versa.
http://www.indianexpress.com/story/208543.html
Sandeep Singh
Posted online: Saturday, August 04, 2007
New Delhi, August 3: The state of financial literacy in India is extremely grim. According to data released by the Invest India Incomes and Savings Survey 2007, only 9.6 per cent of the urban population in the income category of Rs 5 lakh plus understand that nationalised banks don’t guarantee deposits.
The survey also discloses that almost 83 per cent of the Indian earning population doesn’t know what a stock market is. In urban areas, in the income group of less than 2.5 lakh a month, almost 50 per cent have not heard of the stock market while in villages, as many as 91 per cent have not heard of the concept. Says Delhi-based financial planner Surya Bhatia: “I am little surprised as I think that almost 95 per cent of retail investors investing in the stock market don’t understand it, they go by what their broker says.”
If this is the case with the stock markets, the situation is even worse for mutual funds (MFs). According to Invest India Dataworks executive director Sandeep Ghosh, “Barely 9.5 per cent of Indian earners have heard of mutual funds and only half of them can actually describe what a mutual fund is.
Also, for mutual funds, the idea of systematic investment plan (SIP) has not actually percolated and people who have not invested in mutual funds think they are too costly.” The situation for insurance is better as it is a retail product and because of the incentives that it offers to distributors for promotion.
With Prime Minister Manmohan Singh and finance minister P Chidambaram both stressing the need for financial inclusion of rural India, the survey shows the enormity of the challenge before the government and industry. It shows that financial literacy has not been able to penetrate the urban population, which has greater access.
“When we talk of financial literacy, we forget that only 5-6 per cent of our country’s population is English-literate,” said Knowledge Networks chairman Rakesh Khurana. “With almost all our sources of financial knowledge in the English language, how will people understand?”
The situation seems a little better when it comes to understanding the importance of regular savings. Still, around 25 per cent of the population in the higher income group (earning more than Rs 5 lakh per annum) do not understand its importance.
What’s heartening is Indians’ understanding of risk. Almost 89 per cent of the people in the income group above Rs 2.5 lakh a year understand that high risk results in higher returns and vice versa.
http://www.indianexpress.com/story/208543.html
Indian Banking Growth
From docile also rans to go-getters, our banks have come a long way
Sandeep Singh
Posted online: Friday, August 10, 2007
Plush computerised branches, high profile corporate culture and aggressive nature is what the Indian banking sector looks like now, six decades away from when customers lacked access and banks lacked growth. It has been a slow but steady movement over the past 201 years since State Bank of India got established in 1806 (as Bank of Bengal), to now when we have 88 scheduled commercial banks in the public, private and foreign banks category offering a wide variety of services.
The major changes in the banking system started post-Independence. In 1949 came the Banking Regulation Act which empowered RBI to regulate, control and inspect Indian banks. New banks were now required to take licences from RBI to start operations. Between 1949 and 1969 a lot of steps were taken. First the RBI assumed the power to reconstruct and compulsorily amalgamate banks, as a result of which over 200 banks were merged or liquidated between 1962 and 1980. An important move in 1961 was the deposit insurance, which insured depositors’ money.
Under the New Bank Branch Licensing Policy in 1962, which has not been successful in its motive, the stress was on opening branches in unbanked or underdeveloped areas of the country. We still have around 500 million unbanked people in our country and that is the prime area of focus of bankers today, said KV Kamath, managing director and CEO of ICICI Bank: “The biggest challenge today is to bank the unbanked.”
Nationalisation of 14 big commercial banks happened in 1969. Six more private sector banks got nationalised in 1980. This gave the government sizeable control over credit delivery. With nationalisation of banks coming up, growth of banks started to pick up in terms of operations. Demand deposits and savings deposits started picking up fast.
But like all other sectors, 1991 was the turning point for banks as well. The Narsimaham Committee suggested phased reduction of the CRR/ SLR along with reforms in accounting standards, income recognition and capital adequacy norms. Licences were given to private banks, which revolutionised the banking sector in India. Private banks have brought growth. ICICI Bank, carved out of ICICI in 1994, is second only to SBI which has a two century old history.
Backed by technology, private banks raised service standards. Demand deposits expressed as a percentage of GDP, which stood at 0.4 per cent in 1950, rose to 1 per cent in 1972 (the year of nationalisation), to 4.8 per cent in 1991 to 22 per cent in 2006. In short, the growth spurt has come only post-liberalisation.
Going forward, the focus of 28 public sector banks, 29 private banks and 31 foreign banks is going to be consolidation, growth, quality and penetration. Reason: the industry is smaller than the top 50 banks of the world. Clearly, while banks have come a long way in the past 60 years, the way’s longer over the next 60 years.
http://www.indianexpress.com/story/209654.html
Sandeep Singh
Posted online: Friday, August 10, 2007
Plush computerised branches, high profile corporate culture and aggressive nature is what the Indian banking sector looks like now, six decades away from when customers lacked access and banks lacked growth. It has been a slow but steady movement over the past 201 years since State Bank of India got established in 1806 (as Bank of Bengal), to now when we have 88 scheduled commercial banks in the public, private and foreign banks category offering a wide variety of services.
The major changes in the banking system started post-Independence. In 1949 came the Banking Regulation Act which empowered RBI to regulate, control and inspect Indian banks. New banks were now required to take licences from RBI to start operations. Between 1949 and 1969 a lot of steps were taken. First the RBI assumed the power to reconstruct and compulsorily amalgamate banks, as a result of which over 200 banks were merged or liquidated between 1962 and 1980. An important move in 1961 was the deposit insurance, which insured depositors’ money.
Under the New Bank Branch Licensing Policy in 1962, which has not been successful in its motive, the stress was on opening branches in unbanked or underdeveloped areas of the country. We still have around 500 million unbanked people in our country and that is the prime area of focus of bankers today, said KV Kamath, managing director and CEO of ICICI Bank: “The biggest challenge today is to bank the unbanked.”
Nationalisation of 14 big commercial banks happened in 1969. Six more private sector banks got nationalised in 1980. This gave the government sizeable control over credit delivery. With nationalisation of banks coming up, growth of banks started to pick up in terms of operations. Demand deposits and savings deposits started picking up fast.
But like all other sectors, 1991 was the turning point for banks as well. The Narsimaham Committee suggested phased reduction of the CRR/ SLR along with reforms in accounting standards, income recognition and capital adequacy norms. Licences were given to private banks, which revolutionised the banking sector in India. Private banks have brought growth. ICICI Bank, carved out of ICICI in 1994, is second only to SBI which has a two century old history.
Backed by technology, private banks raised service standards. Demand deposits expressed as a percentage of GDP, which stood at 0.4 per cent in 1950, rose to 1 per cent in 1972 (the year of nationalisation), to 4.8 per cent in 1991 to 22 per cent in 2006. In short, the growth spurt has come only post-liberalisation.
Going forward, the focus of 28 public sector banks, 29 private banks and 31 foreign banks is going to be consolidation, growth, quality and penetration. Reason: the industry is smaller than the top 50 banks of the world. Clearly, while banks have come a long way in the past 60 years, the way’s longer over the next 60 years.
http://www.indianexpress.com/story/209654.html
Financial Literacy- Raju
Meet Raju, your new financial literacy teacher
Sandeep Singh
Posted online: Wednesday, August 22, 2007
RBI, NSE launch novel method to increase financial inclusion, devise comic character to explain difficult banking and stock market concepts
If Raj brought India to Archies, Raju is taking banking to consumers. Reserve Bank of India (RBI) and National Stock Exchange (NSE) have launched an innovative mode of propagating financial literacy by adopting comics as a means to educate people in a simplified manner on banks, their services and the understanding of stock markets. This is a step ahead by the banking regulator and the leading stock exchange of the country to make people aware and include them in the growth of the country. The poor level of financial literacy has been a growing cause of concern all across and this step to educate people is an important step forward.
RBI feels that though there are 70,000 bank branches across the country and though India has grown significantly over the past few years, financial inclusion has lagged. This is mainly because of people having wrong notions about a bank or not having the proper knowledge of its functioning. RBI thinks that people are not properly aware of the banking facilities and the services it can offer them like savings, loans and credit cards.
The central bank plans to use comics to carry financial education at various levels to specific categories of people. It has launched its first book on basic banking, Raju and The Money Tree. Four more are in the pipeline — two on basic banking (one each for rural and urban households), one on currency (its use and security), and one on the RBI as a monetary authority. Apart from Hindi and English, these books will be published in the vernacular languages. The first book has been framed in so simple and understandable a manner that even a 10 year-old-child would be able to understand the concepts. It has good caricatures that make the reading more interesting. All facets of the basic financial procedure have been weaved in very neatly in story format, which tries to teach the importance of banks in channelising money through the prism of its main character, Raju. It is explained that banks can be used as a channel to keep money safe and to earn interests. The book makes an effort to enlighten the reader on the basic needs that a bank can serve for an individual.
Other than disseminating financial education through the medium of comics, RBI is also working on the course content for making financial education a part of the school curriculum. RBI expects to complete the course in a year, after which it will approach NCERT to include it as part of the regular course curriculum. The book released by NSE tries to explain what an index is, what it signifies, how it moves and what factors are responsible for its movement. But before RBI’s Raju — who needs a serious upgrade in terms of visual and verbal complexity — NSE’s endeavour falls flat. It barely manages to cut-paste complex concepts from the medium of books to the medium of comics. It doesn’t grip, doesn’t tell a tale. The planning has been done, the books are out and now lies the most critical part — dissemination to people who actually need it and for whom it has been planned. RBI has decided to use channels like state government offices, village panchayats and schools.
What tomes on finance couldn’t and cannot communicate, perhaps Raju will.
http://www.indianexpress.com/story/211865.html
Sandeep Singh
Posted online: Wednesday, August 22, 2007
RBI, NSE launch novel method to increase financial inclusion, devise comic character to explain difficult banking and stock market concepts
If Raj brought India to Archies, Raju is taking banking to consumers. Reserve Bank of India (RBI) and National Stock Exchange (NSE) have launched an innovative mode of propagating financial literacy by adopting comics as a means to educate people in a simplified manner on banks, their services and the understanding of stock markets. This is a step ahead by the banking regulator and the leading stock exchange of the country to make people aware and include them in the growth of the country. The poor level of financial literacy has been a growing cause of concern all across and this step to educate people is an important step forward.
RBI feels that though there are 70,000 bank branches across the country and though India has grown significantly over the past few years, financial inclusion has lagged. This is mainly because of people having wrong notions about a bank or not having the proper knowledge of its functioning. RBI thinks that people are not properly aware of the banking facilities and the services it can offer them like savings, loans and credit cards.
The central bank plans to use comics to carry financial education at various levels to specific categories of people. It has launched its first book on basic banking, Raju and The Money Tree. Four more are in the pipeline — two on basic banking (one each for rural and urban households), one on currency (its use and security), and one on the RBI as a monetary authority. Apart from Hindi and English, these books will be published in the vernacular languages. The first book has been framed in so simple and understandable a manner that even a 10 year-old-child would be able to understand the concepts. It has good caricatures that make the reading more interesting. All facets of the basic financial procedure have been weaved in very neatly in story format, which tries to teach the importance of banks in channelising money through the prism of its main character, Raju. It is explained that banks can be used as a channel to keep money safe and to earn interests. The book makes an effort to enlighten the reader on the basic needs that a bank can serve for an individual.
Other than disseminating financial education through the medium of comics, RBI is also working on the course content for making financial education a part of the school curriculum. RBI expects to complete the course in a year, after which it will approach NCERT to include it as part of the regular course curriculum. The book released by NSE tries to explain what an index is, what it signifies, how it moves and what factors are responsible for its movement. But before RBI’s Raju — who needs a serious upgrade in terms of visual and verbal complexity — NSE’s endeavour falls flat. It barely manages to cut-paste complex concepts from the medium of books to the medium of comics. It doesn’t grip, doesn’t tell a tale. The planning has been done, the books are out and now lies the most critical part — dissemination to people who actually need it and for whom it has been planned. RBI has decided to use channels like state government offices, village panchayats and schools.
What tomes on finance couldn’t and cannot communicate, perhaps Raju will.
http://www.indianexpress.com/story/211865.html
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