Investor Club of India

Budget will give Big Boost to Development, says PM

2017-02-01T05:05:00.000-08:00

Arun Jaitley gets set to present Union Budget - 2017-18

NEW DELHI, Feb 1: Congratulating Finance Minister Arun Jaitley Jee for presenting an "excellent Budget", Prime Minister Narendra Modi expresses the hope that the various proposals will "empower the poor and live up to the expectations of all".

The Budget, PM said, "will provide an impetus to infrastructure, strength to the financial system and a big boost to the development. The budget has provisions to fulfill the expectations of everyone- from construction of highways to expansion of I-ways, from the cost of pulses to the data speed, from the modernization of railways to simple economic constructions, from education to health, from entrepreneurs to industry, from textile manufacturers to tax deduction. The Finance Minister and his entire team deserve praise for this historic budget.

"This Budget is a reflection of the development measures undertaken by the Government over the past two and a half years and the vision to carry forward the momentum in this direction. The merger of the Railway budget with the Union Budget is a major step. It will help in integrated planning of the transport sector. Railways can now contribute in a much better way in meeting the transport needs of the country, "Mr Modi said.

The focus of the budget is on agriculture, rural development and infrastructure which is also a reflection of the Government’s commitment to raise investment and create employment opportunities. The allocation for the schemes in these categories has been hiked substantially. The budgetary outlay for Railways and Road transport sector have also been substantially increased. Government’s aim is to double the farmers’ income by 2022 and the policies and schemes have been designed keeping this in mind. Maximum emphasis in this budget has been on the farmers, villages, poor, dalit and the underprivileged sections of the society. Agriculture, animal husbandry, dairy, fisheries, watershed development, Swachcha Bharat Mission are the areas which hold lots of potential to uplift the economic situation in rural India and also bring a sea change in the quality of life there, he said..

The Budget has laid emphasis on increasing the employment opportunities. Special allocation has been made for the sectors like Electronic manufacturing, Textiles which create new job opportunities. Provisions have been made to bring in the people working in the unorganized sector to the organized sector. Budget allocation for Skill development has been enhanced considerably keeping in mind the youth of our country and the need to gain the advantage from the demographic dividend. Record allocation –the highest ever has been made for Mahatma Gandhi National Guarantee Scheme. Women’s welfare is a priority for our Government. Budgetary outlay for the schemes related to women’s and children welfare has been enhanced. There has been a considerable hike in the allocation of budget for health and higher education.

Housing and Construction Sector plays a major role in the growth of economy and creating new employment opportunities. This budget will provide an impetus to the housing sector in rural as well as urban areas.

In the Railway budget, special emphasis has been on railway safety. Railway Safety Fund has been set up which will help in ensuring adequate expenditure of funds on rail safety. Capital expenditure on Railway and Road infrastructure has been hiked substantially in the budget.The Comprehensive package on digital economy will curb the tax evasion and check the circulation of black money. We have undertaken the exercise to launch Digital economy in a mission mode which will go a long way in achieving the target of 2500 crore digital transactions in 2017-18.

Mr Modi said: "The Finance Minister has brought in tax reforms and amendments which will provide relief to the Middle Class, result in setting up of industries, create job opportunities , will put an end to discrimination and will provide incentives for private investments. The move to reduce the personal income tax is significant as it touches the middle class most. Bringing down the rate from 10 to 5 percent is a bold move. Most of the taxpayers in India would be benefitted by this decision. You would have seen, my fight against black money and corruption is on. Political funding has always been a matter of discussion. Political parties are always under the scanner in this regard. The new scheme by the Finance Minister related to poll funding is along the lines of the hopes and aspirations of the people in our fight against the black money. "

He explained: "The small and medium industries across the country have been a major source of employment generation. These industries have been demanding that they are facing difficulties in competing at the global level and if the taxes are lowered, then around 90 percent of our small scale industries would be benefitted. Therefore, the Government has amended the definition of Small scale industries, widened their scope and reduced the tax rate from 30 to 25 percent. This implies that over 90 percent of our Small scale industries will be benefitted. I am hopeful that this decision will help a lot in making our SSIs globally competitive. "

This budget is an important step towards overall development of the nation. It will create new employment opportunities, help in overall economic growth and will be complementary in raising the income of the farmers. In order to ensure quality of life for the citizens, the best possible facilities of education, health and housing can be organized. It is an effort to raise the purchasing power of the middle class without increasing the fiscal deficit.

In a way, Mr Mdi said, " it is a reflection of our ongoing efforts to see to it that the speed with which our country is changing, gather momentum. This budget is associated with our aspirations, our dreams and in a way depicts our future. This is the future of our new generation, the future of our farmers. When I say future, it has a meaning in each of its letters. In FUTURE, the letter F stands for the farmer, U stands for Underprivileged which includes dalit, oppressed, women etc., T stands for Transparency, Technology Upgradation- the dream of a modern India, U stands for Urban Rejuvenation –the urban development, R stands for Rural Development and E stands for Employment for youth, Entrepreneurship, Enhancement to give a push to new employment and boost to young entrepreneurs. I congratulate the Finance Minister once again to present this FUTURE in the budget. It is my belief that the budget will carry forward the development agenda of the Government, generate a new climate of confidence and help the nation to scale new heights. Once again, my heartfelt congratulations to the Finance Minister and his team for the budget."

Misuse of law can dent Make in India, cautions UK bizman

2016-03-18T04:19:00.004-07:00

· Harassed and Hounded Nazir Mussa appeals to PM,

Maha CM to ensure his case is not repeated

NEW DELHI: At a time when the Union and various State governments are aggressively pushing the ‘Make in India’ drive, misuse of legal system and police machinery can severely impact the ambitious initiative, said UK-based businessman Nazir Mussa, who was jailed on the basis of, what he called, a fictitious case.

Nazir Mussa

“I have been jailed for 28 days at Arthur Road prison in Mumbai under horrible conditions and without any charge on the basis of a fictitious case filed by influential Indian businessman Shobit Rajan who apparently had an axe to grind with my nephew Arnool Jamal in connection with a dispute over a 13-acre prime commercial plot worth thousands of crores of rupees,” said Mussa.

“I appeal to honourable Prime Minister Mr Narendra Modi and honourable Maharashtra Chief Minister Mr Devendra Fadnavis to ensure that such cases are not repeated as it will shake the global businessmen’s confidence in Indian legal system,” he said in a statement from London.

Mussa now stands vindicated as Justices Jagdish Singh Khehar and C Nagappan of Supreme Court heard the petition ruled: “No ground for interference is made out in exercise of our jurisdiction under Article 136 of the Constitution of India.”

“The special leave petition is accordingly dismissed. As a sequel to the above, pending interlocutory applications also stand disposed of,” the order said.

Senior advocate Kapil Sibal and along with advocates Mahesh Agrawal appeared for Rajan, while Senior counsel Aryama Sundaram, Dr. A M Singhvi, Sajid Mohamed along with Aman Vachher appeared for Mussa.

On the basis of a complaint filed by Indian businessman Shobhit Rajan, Mumbai police had picked up Mussa from the CCI while he was playing cards with his friends on a late evening in June 2014 and detained him in jail without charge for 28 days.

The Bombay High Court had subsequently quashed the criminal case proceedings against Mussa and freed him on bail which Rajan challenged through his SLP.

My only fault appeared to be that Jamal is my nephew and I issued a bonafide net worth certificate to him to avail a bank loan. I am a UK certified CA and my stand has been vindicated by the Indian courts for which I am eternally grateful,” said Mussa.

“This is a clearcut case of misusing the police machinery to suit a businessman’s vested interest which we have told the courts,” he said.

Mussa had argued before the High Court that Rajan filed the case “with vengence against him apparently to hide his own acts of misdeeds and fraud to usurp control of the prime property.” Jamal pointed out and filed cases with Saki Naka police in Mumbai.

The case arises out of a long standing corporate war between Jamal, a Canadian businessman based out of Kenya, and Rajan over the prime land earlier owned by Parke Davis on which a massive commercial property development called Logitech Park has been built.

Realty analysts say the property is valued at over Rs 3,500 crores.

Jamal, through his fully owned Akkadian Housing Infrastructural Pvt. Ltd, had entered into a 50:50 JV partnership with Rajan to a float a company called Pantheon Infrastructure Pvt. Ltd for acquiring and developing the property back in 1999.

Jamal alleged that Rajan, after the acquisition of the land by the JV, coaxed him to dilute his 50% share holding in Pantheon to 28.33% in favour the latter’s own people on the pretext of bringing in expertise to develop the property.

Trouble started after the property was developed which housing many IT companies and MNCs.

In a retaliatory move, Rajan filed a criminal complaint with a metropolitan court alleging that Mussa issued a false certificate showing Jamal’s net worth to be USD 42.8444 million in 2001 to enable him to borrow from ICICI Bank to complete the transaction of the land purchase.

The magistrate directed the Mumbai police to investigate the complaint in August 2013. The case was later transferred to the Economic Offenses Wing of the Mumbai police which arrested Mussa in June 2014.

Mussa subsequently applied to the High Court with a criminal writ petition contesting the proceedings and the division bench of the HC set aside and quashed the FIR. Shobhit Rajan subsequently challenged the order before the Supreme Court, which was dismissed.

Earlier, the Bombay High Court had not found any substance in the allegations against Mussa and ordered that he be freed on bail and permitted him to travel aboard. The court upheld Mussa’s contention that the net worth certificate issued by him was genuine and that he is a professional CA.

Interestingly, the High Court division bench also observed, none of the banks involved in the financing of the project raised any complaint against the certificate's veracity.

Following the rejection of the case sought to be built against Mussa, Rajan – and not the Mumbai police - filed an SLP at the apex court which dismissed the petition.

Pantheon, now controlled by Rajan, unceremoniously threw off Jamal from the Board in 2004.

Challenging this, Jamal moved the Company Law Board seeking redress against Rajan and the Pantheon Board’s actions. The CLB initially expressed surprise at the way Jamal was treated but subsequently directed him to exit the company with the compensation of 6.6% of the original land cost, and not of the value of his shares.

Jamal challenged this in the Bombay High Court but lost the case.

Recently, the Supreme Court admitted a SLP filed by Jamal, allowing him to return to the Board of Pantheon and reinstated his equity holding of 28.33%.

Indiabulls restructured: Gehlaut retains realty biz

2014-07-11T01:45:00.002-07:00

To impart greater focus and accountability at the top leadership level and to rationalize operations of the diverse and disparate business verticals of the Indiabulls group, its three promoters, Sameer Gehlaut, Rajiv Rattan and Saurabh Mittal have mutually decided to reorganize management control of the different group companies, amongst themselves. Mr. Gehlaut will retain control over the flagship housing finance business – Indiabulls Housing Finance Limited (IBHFL); the real estate business – Indiabulls Real Estate Limited (IBREL); the securities business – Indiabulls Securities Limited (ISL) and the wholesale services business – Indiabulls Wholesale Services Limited (IBWSL). Mr. Rajiv Rattan and Mr. Saurabh Mittal will relinquish all control, management and oversight in these businesses.

This reorganization exercise is a part of the ongoing efforts to further institutionalize Indiabulls Housing Finance Limited (IBHFL), the flagship company of Indiabulls Group and India’s second largest housing finance company (HFC) in the private sector. This reorganization is in addition to the proposed induction of Dr K. C. Chakrabarty, former Deputy Governor of the Reserve Bank of India and Mr. R. M. Malla, former Chairman of IDBI Bank. The two promoters Saurabh Mittal and Rajiv Rattan have decided to step down from the Board of Directors of IBHFL.

The Board of IBHFL wants to delink ownership from management and has decided to elevate the current CEO, Gagan Banga as the Vice Chairman and Managing Director of the company. This added responsibility is a step forward toward greater professionalism of the Board and indicates the strong intent of the promoters to empower, with accountability, the top echelons of the management team.

IBHFL is the country’s second largest housing finance company in the private sector and the Board felt that the induction of experienced financial markets experts will enable the Board to better handle the complexities which come with size, and also enable effective risk management as the company strives to continue to grow at 25%. IBHFL reported profits of Rs. 1,569 Cr in FY 2013-14. IBHFL has been growing at CAGR of 26% over the last 6 years and closed FY 2013-14 with a balance sheet size of Rs. 44,418 Crs. Indiabulls Group paid out Rs. 1,200 Crores as dividends last year and was ranked 10th amongst all Indian Private Corporate Houses for dividend payouts in FY14.

The reorganization exercise amongst the promoters will also allow IBHFL to be completely ring-fenced from the Power Business. Mr. Rajiv Rattan and Mr. Saurabh Mittal will control and supervise the Power business and Mr. Gehlaut will relinquish all control, management and supervisions rights of the Power Business. The businesses not controlled by Mr. Gehlaut viz. Indiabulls Power Limited (IPL) and Indiabulls Infrastructure and Power Limited (IIPL), will change their names and delete reference of ‘Indiabulls’ within their names.

This reorganization will bear very positive results for IBHFL as it strives to grow in size and stature and will empower the board to effectively govern through the presence of four executive and four knowledgeable independent directors. The reorganization will also enable the group to continue with its efforts of ring-fencing IBHFL from contagion risks of any other business besides bringing in specialized focus towards the real estate business and power business.

This amicable reorganization exercise will enable all three young entrepreneurs to focus on their areas of expertise, consolidate their shareholding of the companies they want to run on a long-term basis and continue to maximize shareholder value.

For IBHFL this is a key development, as a large and systemically important financial institution it is vital that the company maintains the highest standards of corporate governance. It is important that the board is comprised of people with demonstrated skill sets and relevant experience that actively involve themselves in risk management and strategic planning. Over the course of the last few years, large financial services companies are de-linking the role of their owners, who are the Non-Executive Directors of the Company from management and control of the operations of the Company. It is toward this end that IBHFL has inducted eminent bankers such as former Deputy Governor of RBI, Dr. K. C. Chakrabarty and former Chairman and MD of IDBI Bank, MR. R. M. Malla as independent directors subject to shareholders’ approval in the ninth AGM to be held in August. With coming on board of such distinguished stalwarts, not only will IBHFL benefit from their intellectual leadership, but it will also strengthen corporate governance befitting an institution of IBHFL’s size and scale.

With the steady growth of IBHFL across all business parameters, the balance sheet of the company has expanded to amongst the largest in the Housing Finance business. The realignment of promoter control, the induction of independent directors and the empowerment of the company’s management have set the company firmly on the path to be a large financial institution that is independently managed and run with the highest standards of corporate governance.

Diageo makes irresistible open offer to United Spirits share holders

2014-04-17T06:30:00.000-07:00

MUMBAI: Diageo plc has launched a tender offer to the public shareholders of United Spirits Limited (“USL”) to acquire up to 37,785,214 shares in USL, which represents 26% of USL's fully diluted issued share capital as at 15 April 2014 (the “Tender Offer”). The Tender Offer will be at a price of INR 3,030 per share and the total consideration for the increased stake (assuming take-up in full at the announced price) will be INR 114,489,198,420 (approximately £1,132,458,720).Diageo has launched the Tender Offer through Relay B.V. (“Relay”), a wholly-owned indirect subsidiary of Diageo.Relaycurrently holds 28.78% of the issued share capital of USL,acquired for a total investment of INR 65,742,163,642(£726,550,972). On completion of the Tender Offer (assuming full take-up), Relay will hold 54.78% of USL’s issued share capital and will have paid approximately INR 180,231,362,062(£1,859,009,692) for its total shareholding in USL.

In the event the Tender Offer is subscribed in full, the total consideration payable at the announced price for Diageo’s increased stake will represent a 38x multiple of USL’s EBITDA on a consolidated basis for the year ended 31 March 2013 andDiageo's total investment, of INR 180,231,362,062 (£1,859,009,692), in USL is expected to be EP positive in FY2022, the 7th full financial year after completion(assuming a12 % WACC) and EPSaccretive in the year ended 30 June 2016.

Important information:

The important information set out below comprises information regarding:

• USL

• The Tender Offer, including its timing

• The Shareholders’ Agreement

• Other important information

• Status of proceedings in respect of the earlier USL Transaction

USL

USL is the leading spirits producer in India.On a consolidated basis, in the financial year ended 31 March 2013, USL earned net revenue of INR 105,980 million (£1,048.3 million) from operations, EBITDA of INR 13,548 million (£134.0 million) and losses after tax of INR 1,050 million(£10.4 million). USL had INR 163,849 million (£1,621 million) of total assets on a consolidated basis as at 31 March 2013.

Tender Offer

The Tender Offer will be governed by the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations 2011 (the "Regulations") and applicable law. The applicable Indian takeover regulator is the Securities and Exchange Board of India ("SEBI").

The Tender Offer will be made in accordance with the Regulations and on the terms and conditions set out in the public announcement made today in India and the detailed public statement and letter of offer that are to be released by Diageo and Relay in India.Diageoand Relayhave obtained the required competition approvals, and the completion of the Tender Offer is not conditional on receipt of any competition approvals in India or elsewhere.

The Tender Offer has been announced at the following price:

for each USL Share

INR 3,030 in cash

That price represents a premium of:

· 22.5% to the price at which Diageo last acquired USL shares on 31 January 2014; and

· 20.0% to the 60 day VWAP for USL (SEBI regulatory floor price).

Diageo will fund the consideration payable under the Tender Offer through existing cash resources and debt.

The Tender Offer is not subject to any condition regarding levels of acceptance. Accordingly, if the Tender Offer is not subscribed in full, all USL shares tendered would, subject to the terms and conditions of the Tender Offer, be acquired by Relay. If the Tender Offer is over-subscribed, the tenderingUSL shareholders will be scaled back and entitled to sell such number of shares calculated on a pro rata basis to the shares tendered in the Tender Offer.

Further important information relating to the Tender Offer, and certain implications of the SEBI review process required to confirm its terms and conditions (including price), are set out in the “Other Important Information” section below.

Indicative Abridged Tender Offer Timetable (see note)

Public announcement	15 April 2014
Expected publication of the detailed public statement	By 23 April 2014
Expected dispatch of the letter of offer	On or around 4 June 2014
Commencement of tendering period	On or around 11 June 2014
Expiry of tendering period	On or around 24 June 2014
Settlement of consideration for accepting USL shareholders	On or around 8 July 2014

Note: The times and dates set out in the indicative abridged timetable above and mentioned throughout this announcement may be subject to adjustment, being dependent on the timing of the completion of the review process of the draft letter of offer by SEBI, regulatory approvals in India if required, and other permitted conditions to the Tender Offer. Details of any such adjustment and the new times and dates will be notified to USL shareholders by publication in relevant newspapers and will be announced on relevant stock exchanges. The times and dates are subject to the satisfaction or waiver of all applicable conditions to the Tender Offer and completion of the SEBI review process.

Shareholders’ Agreement

The shareholders’ agreement entered into on 9 November 2012 between Diageo, Relay, United Breweries (Holdings) Limited (“UBHL”) (holder of 5.93% of USL’s issued share capital as of 31 March 2014) and Kingfisher Finvest India Limited (a subsidiary of UBHL – “KFIL”)) (holder of 3.58% of USL’s issued share capital as of 4 April 2014 per a filing made by KFIL) and which took effect on 4 July 2013 as part of Diageo’s original investment in USL (the “Shareholders’ Agreement”) will remain in force following, and (other than as described below) will be unaffected by, completion of the Tender Offer.

Pursuant to the terms of the Shareholders’ Agreement, members of the UBHL group which hold USL shares are currently obliged to vote their shares at Relay’s direction. In the event that the Tender Offer is fully subscribed such that Diageo holds, indirectly, a majority of the shares in USL, this obligation will cease. In the event Diageo does not secure a majority of the shares in USL by virtue of the Tender Offer, the obligation on members of the UBHL group to vote their USL shares at Relay’s direction will remain in force until the earlier of the Diageo group reaching a majority position in USL and the end of the fourth full financial year of Diageo after 1 July 2014.

Other Important Information

The Tender Offer is being made under Regulation 3(2) of the Regulations, which when read together with Regulation 7(1) requires Diageo to make a minimum offer for 26% of the total shares of USL. The Tender Offer is being made in compliance with the Regulations which came into effect in October 2011, and have been further amended, including amendments made in May 2012 and March 2013. The Regulations substantially changed the regulatory environment applicable to tender offers in India.

The terms, conditions, timetable and public documentation in relation to the Tender Offer, and the making of the Tender Offer itself, are subject to review and observations issued by SEBI. SEBI may require changes to be made to the terms (including price), conditions, timetable, implementation and public documentation in relation to the Tender Offer and Relay would be obliged to implement such changes (subject to a right of appeal).

There is limited precedent as to how these rules might be interpreted and the nature of the observations and directions that SEBI might issue pursuant to the Regulations, both generally and specifically in relation to the terms of the Tender Offer.

Having carefully considered the Regulations and their application to the Tender Offer, Diageo believes that the terms, conditions and offer price of the Tender Offer announced today are the terms, conditions and offer price that, under the Regulations, should apply in respect of the Tender Offer. However, it is possible that SEBI may require the terms and conditions of the Tender Offer (including price) to be modified, and it is possible that any such modifications could be material. Prior to the commencement of the formal SEBI review process and dispatch of the letter of offer for the Tender Offer, it is not possible to assess more definitively the likelihood, effect or amount of any such potential modifications that SEBI might require.

Status of proceedings in respect of the earlier USL Transaction

As previously announced on 30 January 2014 in connection with the publication of Diageo’s interim results for the six months ended 31 December 2014, on 4 July 2013 Diageo completed its acquisition, under a share purchase agreement with various sellers (the “SPA”) of 21,767,749 shares (14.98%) in USL at a price of INR 1440 per share and for total consideration of INR 31.3 billion (£342 million), including 10,141,437 shares (6.98%) from UBHL (the “UBHL Share Sale”).

At the time of the acquisition from UBHL on 4 July 2013, the High Court of Karnataka (the “High Court”) had granted leave under sections 536 and 537 of the Indian Companies Act (the “Leave Order”) to enable the UBHL Share Sale to take place notwithstanding the continued existence of five winding-up petitions (the “Original Petitions”) that were pending against UBHL on 9 November 2012, being the date of the SPA. Additional winding-up petitions have been brought against UBHL since 9 November 2012, and the Leave Order did not extend to them. At the time of the completion of the UBHL Share Sale, the Leave Order remained subject to review on appeal. However, as stated by Diageo at the time of closing on 4 July 2013, it was considered unlikely that any appeal process in respect of the Leave Order would definitively conclude on a timely basis and, accordingly, Diageo waived the conditionality under the SPA relating to the absence of insolvency proceedings in relation to UBHL and acquired the 10,141,437 USL shares from UBHL at that time.

Following closing of the UBHL Share Sale, appeals were filed by various petitioners in respect of the Leave Order. The Appellate Division of the High Court of Karnataka (the “Appeal Court”) gave its decision in respect of those appeals on 20 December 2013 (the “20 December Order”) in which it set aside the Leave Order.

Diageo and Relay have since filed petitions for special leave to appeal against the 20 December Order before the Supreme Court of India. On 10 February 2014, the Supreme Court of India issued an order, inter alia, admitting the petitions and ordering that the status quo be maintained in respect of the UBHL Share Sale notwithstanding the 20 December Order. The appeal hearing before the Supreme Court of India is currently listed to be heard on 28 April 2014.

In separate proceedings, various winding-up petitions against UBHL have been progressing in the High Court since closing of the UBHL Share Sale, with the next hearing date anticipated to be sometime in June 2014. In separate rulings issued by the High Court on 22 November 2013 and 13 December 2013, the High Court has admitted two of the winding-up petitions against UBHL. An appeal filed by UBHL against the first ruling issued on 22 November 2013 was dismissed by a division bench of the High Court on 16 December 2013, which is now the subject of a further appeal by UBHL before the Supreme Court of India. On 6 February 2014, UBHL filed an appeal before the High Court against the second ruling issued on 13 December 2013, which appeal is currently pending.

Diageo continues to believe that the acquisition price of INR 1440 paid to UBHL for the USL shares in the UBHL Share Sale is fair and reasonable as regards UBHL, UBHL's shareholders and UBHL's secured and unsecured creditors. However, adverse results for Diageo in the proceedings referred to above could, absent leave or relief in other proceedings, ultimately result in Diageo losing title to the 10,141,437 USL shares acquired from UBHL. There can be no certainty as to the outcome of the existing or any further related legal proceedings or the timeframe within which they would be concluded.

Separately, Diageo continues to pursue completion of the acquisition of an additional 3,459,090 USL shares (representing approximately 2.38% of the share capital of USL) under the SPA from the USL Benefit Trust. Currently certain lenders to USL are refusing to release security that they hold over those shares notwithstanding that they have been repaid in full. USL is taking steps, including proceedings before the High Court, to expedite the release of the security. As previously disclosed, if it is not ultimately possible to complete the acquisition in relation to these shares, they would instead continue to be held by the USL Benefit Trust subject to an undertaking that the trustees would only vote the shares at the direction of USL.

QNET dismisses charges of scam, says India operation is perfectly legal

2014-01-15T20:34:00.001-08:00

· Gross misrepresentation of facts, says spokesperson

· Consumer complaint withdrawn, case closed by Oshiwara police

· No purchase done by Gurupreet’s wife, she bounced her cheque

· Product in question is e-learning item, not Biodisc

· Business model is direct selling, NOT pyramid

MUMBAI, January 15, 2014: Pointing out a series of misrepresentation of facts against it, Hong Kong-based direct selling company QNET stressed that its operations across the globe, including in India, are perfectly within the parameters of law and any allegations of scam are entirely baseless.

“As a business interested in sustainability, we respect the laws of the land in any country that we operate in and ensure compliance accordingly. Wherever necessary, we even adjust our business model to suit local requirements. India is one such place where we conducted our due diligence and made the necessary adjustments so that our business model does not violate any legal provisions,” Mr Zaheer Merchant, Director of Corporate Affairs from QNET’s international headquarters in Hong Kong, said dismissing allegations of conducting an illegal business in India.

“QNet has no shell companies in India as has been alleged. We operate through a fully Indian company that has the franchisee rights to the QNet brand.” He clarified.

“QNet prides itself in having a wide range of life-enhancing products and services with a strong consumer proposition. We offer more than 30 different brands of products under nine different product categories globally. Products are sourced from international suppliers in Germany, Switzerland, Australia, South Korea, France, USA, India and many other countries, under strict guidelines and the highest quality control standards. Wherever applicable, our products have all the necessary certifications by credible agencies from around the world,” Mr. Merchant explained.

QNet is an international direct selling company with a proud Asian heritage that was established in 1998. Today it has more than 60 lakh distributors and customers around the world with product sales in 100+ countries, 25 worldwide offices and agencies and more than 50 stockists.

In India, QNET through its franchisee Vihaan, has approximately 50,000 distributors and customers.

Commenting on the business model, Merchant explained that QNet's grass-roots business model enables ordinary people from all walks of life to start their own business with minimal overhead. With hard work and dedication, QNET distributors, known as Independent Representatives (IRs) have the opportunity to become economically self-sufficient, raising the standard of life for their families and communities.

“Internationally, direct selling is a popular business model that has generated more than USD 160 billion in revenues in 2012. With no clear legislation in India to govern this industry, we are constantly getting lumped under the Prize Chits and Money Circulation Act. The Act bans all illegal money circulation schemes. It does not regulate the direct selling or MLM industry in any way,” he said.

“QNet operates internationally to the highest possible standards. Strict codes of conduct exist and policies and procedures are reinforced by training so that each of our many thousand Independent Representatives [IRs] understands the rules governing product sales and abide by the ethical codes of practice we follow. Whenever we are informed that any of our regulations have been broken we investigate these thoroughly. In appropriate cases, stern action is taken.” He said.

Referring to the ongoing case against it, Merchant explains: “This situation appears to be some form of orchestrated sustained attack on the company to undermine our reputation and prevent us from competing fairly and openly in India. The manner in which an alleged unmerited claim of fraud, which itself has not and cannot be substantiated, has been used to arrest IRs and freeze assets and simply does not bear up to scrutiny. We are confident that as true facts emerge authorities will also see this clearly – as a calculated attack on QNet and take appropriate action against those responsible for scheming this at the first place.”

“First of all, the complaint involving one Gurupreet Singh Anand was officially closed on May 18, 2013. The complainant Gurupreet’s wife Parmeet Kaur withdrew the complaint vide a letter dated 18th May 2013 and submitted a letter to the Police Sub-Inspector of Oshiwara Police Station (in Northwest Mumbai) giving an undertaking in writing that the matter has been resolved.,”

Mr. Merchant pointed out: “Strangely, Gurpreet Singh Anand filed the same complaint, three months after the case has been closed and the complaint withdrawn, in the same police station. In an even stranger development, this matter, a consumer complaint involving an alleged transaction of Rs 30,000, was transferred to the Mumbai EOW!”

“There are so many misrepresentations about this entire case. Gurupreet Singh claims his wife bought a biodisc, where as our records show that she ordered an e-learning course, for which no money ever was paid to the company. The cheque was stopped before it could be realized and hence the transaction was nullified. All these allegations of QNet having sold his wife a ‘cancer-curing’ product are completely false.”

Mr Merchant wondered: “We fail to understand how Gurupreet brandishes a Biodisc on TV that he claims was bought by his wife!”.

He described as yet another gross misrepresentation, the reference to the case as a “Rs 425 crore scam”.

“QNet’s Indian franchisee, Vihaan is clearly registered with the RoC, as a direct selling / MLM / network marketing company that will promote its business in India through a network of Independent Representatives (IRs). The company has been paying all its taxes and complying with all the regulations of the government of India. In fact, all commissions payable to the IRs for product sales are paid only after TDS. All documentation has been provided to the investigators and the management of Vihaan are fully cooperating with them in this investigation. So where does the question of a ‘scam’ arise?

"It is unfortunate that the dispute involving Rs 30,000 in a nullified deal has been painted as a Rs 425 crore scam and we sincerely hope that all concerned will appreciate this factual position. Truth shall prevail," Mr Merchant added.

Builder Chandru Raheja, sons in land scam

2013-10-27T01:34:00.000-07:00

EOW files charge-sheet on industrialist Wadia complaint

MUMBAI: In a sensational case, the Economic Offences Wing of Mumbai Police has filed a charge sheet against well known builder Chandru Raheja along with his sons in a cheating case involving a land development deal.

The Economic Offences wing of the Police said they filed the case against Chandru Lachmandas Raheja, Neil Chandru Raheja and Ravi Chandru Raheja in connection with alleged cheating and breach of trust.

The facts of the case as listed in the charge-sheet are: Mr. Nusli N. Wadia, the Administrator of “The Estate and Effects of The Late Eduljee Framroze Dinshaw in India” executed Development Agreement & Power of Attorney dated 02/01/1995 with Chandru Lachmandas Raheja’s “Ivory Properties and Hotels Pvt. Ltd. for development of properties under his possession.

As per the said Development Agreement, the Administrator had handed over possession of land admeasuring 1,70,656 sq ft to the accused as Agent for development of the land.

The Accused were to construct building called as Ivory Tower and give 12% of sale proceeds from the sale of the building to the Administrator. Further, as per the Development Agreement, the accused were to pay sum of Rs. 3.75 crores to the Administrator as minimum guarantee during the year 1997 and sell the units to “third parties”.

The accused, however, misrepresented that the administrator relinquished his rights over the land and prepared 9 release deeds. Thereafter, during the year 2005-2006, the accused constructed Hypercity Mall on the said land and did not disclose with malafide intentions the same to the Administrator.

Thereafter, under a “conducting agreement”, the accused gave the contract for running the Hypercity mall to their own company – Hypercity Retail India Pvt. Ltd. for monthly rental of Rs. 45 lakhs thereby cheating the Administrator for a sum of Rs. 6,87,06,835.

Hence, the accused i.e. Chandru Lachmandas Raheja, Neil Chandru Raheja and Ravi Chandru Raheja have been charged for crimes conducted under sections 406, 409, 420, 120(B) of Indian Penal Code, the charge sheet said.

Inflation on mind, RBI ups repo rate by 25 bps

2013-09-19T22:58:00.001-07:00

The Reserve Bank of India has decided to increase the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 7.25 per cent to 7.5 per cent with immediate effect.

In its monetary policy review, the first since new Governor Raghuram Rajan assumed office, RBI has also decided to reduce the marginal standing facility (MSF) rate by 75 basis points from 10.25 per cent to 9.5 per cent with immediate effect and to reduce the minimum daily maintenance of the cash reserve ratio (CRR) from 99 per cent of the requirement to 95 per cent effective from the fortnight beginning September 21, 2013, while keeping the CRR unchanged at 4.0 per cent; and

Consequently, the reverse repo rate under the LAF stands adjusted to 6.5 per cent and the Bank Rate stands reduced to 9.5 per cent with immediate effect. With these changes, the MSF rate and the Bank Rate are recalibrated to 200 basis points above the repo rate.

In its assessment of the monetary situation, RBI said since the First Quarter Review (FQR) in July, a weak recovery has been taking hold in advanced economies, with growth picking up in Japan and the UK and the euro area exiting recession. However, activity has slowed in several emerging economies, buffeted by heightened financial market turbulence on the prospect of tapering of quantitative easing (QE) in the US. The decision by the US Federal Reserve to hold off tapering has buoyed financial markets but tapering is inevitable.

On the domestic front, RBI pointed out, growth has weakened with continuing sluggishness in industrial activity and services. The pace of infrastructure project completion is subdued and new project starts remain muted. Consumption, while relatively firm so far, is starting to weaken even in rural areas, with durable goods consumption hit hard. Consequently, growth is trailing below potential and the output gap is widening. Some pick-up is expected on account of the brightening prospects for agriculture due to kharifoutput and the upturn in exports. Also, as infrastructure investments are expedited, and as projects cleared by the Cabinet Committee on Investment come on stream, growth could pick up in the second half of the year.

Sounding a note of caution on WPI inflation, which had eased in Q1 of 2013-14, RBI said it has started rising again as the pass-through of fuel price increases has been compounded by the sharp depreciation of the rupee and rising international commodity prices.

The negative output gap will exercise downward pressure on inflation, and the process will be aided as supply side constraints, especially relating to food and infrastructure, ease. However, the current assessment is that in the absence of an appropriate policy response, WPI inflation will be higher than initially projected over the rest of the year. What is equally worrisome is that inflation at the retail level, measured by the CPI, has been high for a number of years, entrenching inflation expectations at elevated levels and eroding consumer and business confidence. Although better prospects of a robust kharif harvest will lead to some moderation in CPI inflation, there is no room for complacency, RBI said.

Turning to the external sector, the central bank said, weakening domestic saving, subdued export demand and the rising value of oil imports - most recently due to geopolitical risks emanating from the Middle East - have led to a larger current account deficit (CAD). Concerns about funding the CAD, amplified by capital outflows precipitated by anticipated tapering of asset purchases by the US Federal Reserve, increased volatility in the foreign exchange market. More recently, as these concerns have been mitigated after steps taken by the Government and the Reserve Bank to contain the CAD and improve the environment for external financing, the focus has turned to internal determinants of the value of the rupee, primarily the fiscal deficit and domestic inflation.

Policy Stance and Rationale

Since mid-July, the Reserve Bank has put in place a number of exceptional measures to tighten liquidity with a view to dampening volatility in the foreign exchange market. These measures have raised the effective policy rate for monetary policy operations to 10.25 per cent, aligned to the re-calibrated MSF rate. The intent has been to maintain tight liquidity conditions at the short end of the term structure until the measures designed to alter the path of the CAD and improve prospects for its stable funding take effect. As a number of these measures are now in place and because the external environment has improved, it is now possible for the Reserve Bank to contemplate easing these exceptional measures in a calibrated manner. As a first step, therefore, the MSF rate is reduced by 75 basis points. Furthermore, the minimum daily maintenance of the CRR prescribed by the Reserve Bank is brought down from 99 per cent of the requirement to 95 per cent. The timing and direction of further actions on exceptional measures will be contingent upon exchange market stability, and can be two-way. Further actions need not be announced only on policy dates. However, any further change in the minimum daily maintenance of the CRR is not contemplated.

As the measures are unwound, the objective is to normalise the conduct and operations of monetary policy so as to allow the LAF repo rate to resume its role as the operational policy interest rate. However, inflation is high and household financial saving is lower than desirable. As the inflationary consequences of exchange rate depreciation and hitherto suppressed inflation play out, they will offset some of the disinflationary effects of a better harvest and the negative output gap. The need to anchor inflation and inflation expectations has to be set against the fragile state of the industrial sector and urban demand. Keeping all this in view, bringing down inflation to more tolerable levels warrants raising the LAF repo rate by 25 basis points immediately.

The Reserve Bank will closely and continuously monitor the evolving growth-inflation dynamics with a readiness to act pre-emptively, as necessary. The policy stance and measures set out in this review begins the process of cautious unwinding of the exceptional measures, which will restore normalcy to financial flows. They are also intended to address inflationary pressures so as to provide a stable nominal anchor for the economy, thereby mitigating exchange market pressures and creating a conducive environment for the revitalisation of sustainable growth, RBI explained.

Concept PR forays into CSR consultancy - a 1st in PR industry

2013-08-20T11:26:00.000-07:00

· Sets up Concept CR to work with corporates on customized, focused CSR projects

· To Ideate, Identity, Initiate, Implement and work on Impact Check and Image Building

Call +919820128332 or +919320048332

MUMBAI: In a first in India’s Public Relation consultancy business, Concept PR has announced the launch of its CSR wing called Concept Community Relations (CR).

“With the new Companies Act making it mandatory for corporates to make CSR spend of at least 2% of their net profits, we expect that the community and social development landscape to witness a sea change. This also offers a huge opportunity for corporates to give back to the society,” Mr. Vivek Suchanti, Chairman and Managing Director of Concept Group, said.

Vivek Suchanti

Said Mr. B N Kumar, Executive Director of Concept PR who heads Concept CR initiative: “We have been advising companies on the need to concentrate on CSR as part of their social obligation rather than looking at it as a tax saver. We are now initiating an entire new division which will advise clients with a 360-degree approach on CSR.”

Concept CR will not only rope in select NGOs after a careful scrutiny, but also work on creative and unique ways of making the CSR spend meaningful. “BNK’s team, with their vast experience can identify the right CSR project or even customize it to suit a particular company’s business,” Mr. Suchanti explained.

Apart from CSR, the bouquet of consultancy services that Concept PR offers include: Corporate Communication, Media Relations, Investor relations, Crisis Management, Media Training, Capital Market practices, Internal Communication, Sports and Event Communication, Brand and Image Building, Roadshows and the new age Online Reputation Management and Social Media.

As per the new Companies Bill that has received Parliament’s seal of approval, Section 135 stipulates: “Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director.”

BNK

The CSR Committee will also have to formulate policy and monitor the implementation and report back to the Board of Directors.

“The Board ….shall ensure that the company spends, in every financial year, at least two per cent of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy,” the Bill says.

The Act also stipulates that companies will have to give priority to local areas where they operate from, which makes it imperative for them to focus on local needs. The Act, thus, seeks to ensure an all round development of the geographies around a corporate entity.

Over the past decade or so, Concept PR has grown into a pan-India consultancy with ten offices and 40 associates understanding the local centric communication needs – be it linguistic or cultural. “Since we understand the local soil and the social pulse, we are better equipped to design and execute need-based and unique CSR projects,” said Mr. Kumar.

Under its service offerings, Concept CR will Ideate with client’s CSR teams to Identify, Initiate, Implement and Impact Check of the projects, apart from Image Building.

Since the Boards of Directors are accountable for every rupee that is spent, CSR activities may have to form part of the annual reports, much like the section on Corporate Governance. In the new, emerging transparency regime CSR spend will be most visible investment and the impact will therefore play a major role in a Company’s image, Mr Suchanti explained.

Formulating a CSR policy that fits into a particular company’s scheme of things will be a big challenge as the Companies Bill that has been passed by both the houses of Parliament and will shortly become an Act since the Presidential assent is imminent.

Concept PR is a leading PR and IR consultancy in the country with major clients spanning sectors like BFSI, infrastructure, real estate, power, aviation, transport, education, retail, tourism, lifestyle, entertainment, sports, textiles, gen and jewelry, health care amongst others. The agency is in a unique position to understand a corporate’s needs, mission and vision and above all the responsibilities of a Corporate Citizen.

“This is not going to be just another spend or a matter of routine communication exercise. Companies will have to take it very seriously and we are happy that we have geared up to meet the new challenge,” Mr. Kumar added.

RSBL: Leading the bullion juggernaut in India

2013-08-08T03:54:00.000-07:00

By A Special Correspondent

The bullion market in India is an index that signifies the economic growth of the country. It indicates the amount of wealth the country possesses. Valued by its purity and mass, bullion is the bulk quantity of precious metals comprising gold, silver and platinum that can be assessed by weight and cast as a lump.

India is one of the biggest consumers of gold in the world. People in India buy gold not only for ornamental purpose but also as an investment option. In fact, investment in gold has always been a source of profits to everyone in the long term. People are always willing to invest in gold bullion.

RiddiSiddhi Bullions Limited (RSBL) is a leading company in India which deals in bullion, specialising in bars and coins of various precious metals like gold, silver and platinum. Being a company which facilitates investment in precious metals, RSBL endeavours to combine its technical and market experience with hard work and dedication to provide people the ability to make informed investment decisions.

RSBL holds the largest variety of bullions and coins across India. The company’s commitment to excellence in customer service is evident in all facets of its business. RSBL's success is based on customer trust and respect backed by its highly valued staff and best quality products with modern trading mechanisms.

In a short period of time, RSBL has managed to become one of the leading players in the bullion industry. It has been among the market leaders in providing wholesale and retail level bullion delivery in the spot markets in India. Today, RSBL is India’s largest bullion trading company with a credit rating of SME 1 from CRISIL Ltd – the highest rating on the SME rating scale.

RSBL has successfully launched various products on the back of its expertise, brand equity and vast experience in the market. The company’s flagship product ‘RSBL SPOT’ is India’s first fully electronic over-the-counter (OTC) delivery based bullion-trading system and arguably the most successful in the world. It has more than 3000 online clients and numerous delivery centres across India. Over 90% of its bullion sale takes place through RSBL Spot.

As an extension to RSBL SPOT, RSBL has introduced an eCoins system – ‘RSBL eCoins’. This is a B2B system, wherein which one can buy or sell gold and platinum coins/bars as per competitive market price in Indian rupees. It has created new inroads in online distribution and pricing system for coins in India. This is one of the fastest growing products in the company’s portfolio.

RSBL also continues to run its successful classic model of retail coin distribution and it is a leader in that via ‘RSBL Coins’ - Pure Gold, Silver & Platinum Coins/Bars. Available in different shapes and sizes to meet individual requirements, these coins can also be customised to meet gifting/corporate requirements.

RSBL's ‘Optionally Convertible Debentures (OCDs)’ is a innovative product, which takes advantage of the price differences between gold spot/forward and futures prices of the commodity. The product has consistently provided investors with a return of over 15% per annum since its launch in 2007.

RSBL’s 'Bullion++' is another revolutionary product that provides investors with an opportunity to earn dual income: from an anticipated price appreciation and from lending income. Furthermore, investors need not worry about purity, storage charges, theft and insurance hassles. Investors can also choose non-lease model where the bullion is just stored.

Prithviraj Kothari, Director of RSBL, can be credited for the development of the gold, silver and bullion industry in India. Known as Bullion Man in the bullion market in India, Prithviraj Kothari has played a vital role in the introduction of gold ETFs in India. Under his vision, RSBL has successfully launched India's first and only electronic over the counter bullion trading system, RSBL SPOT.

Under his direction, RSBL has consistently been ranked amongst the top 10 unlisted public companies in India by Business Standard 1000.

Trimax plans IPO, files DRHP with SEBI

2013-07-31T06:17:00.000-07:00

MUMBAI, July 31, 2013: Integrated IT services company Trimax Infrastructure

& Services Limited (‘The Company”) has filed its Draft Red Herring Prospectus (DRHP) with the market regulator SEBI for a public issue of 13,050,000 equity shares of the face value of Rs 10 each through book building process, within a price band to be decided subsequently.

The issue consists of a fresh issue of 6,050,000 Equity Shares and offer for sale of 7,000,000 Equity Shares.

SBI Capital Markets Limited and Anand Rathi Advisors Limited are the book running lead managers to the issue.

Under the offer for sale portion of the issue, certain shareholders of the Company, namely Aditya Birla Trustee Company Private Limited, trustee of Aditya Birla Private Equity Trust A/c Aditya Birla Private Equity- Fund I, BanyanTree Growth Capital LLC, Pratik Technologies Private Limited, Shrey Technologies Private Limited, ZP India Advisory Private Limited, trustee of ZP II Trimax Co-Investment Trust and ZPII Trimax Limited have offered Equity shares aggregating to 7,000,000 Equity Shares.

Of the public issue, 6,525,000 Equity Shares will be available for allocation to Qualified Institutional Buyers , and not less than 1,957,500 Equity Shares and 4,567,500 Equity Shares, will be available for allocation to Non Institutional Bidders and Retail Individual Bidders, respectively. The company proposes to use the proceeds from the fresh issue for procurement of hardware, software and other equipment and for general corporate purposes

The Company provides a wide range of IT solutions and services including IT infrastructure services and turnkey solutions (coupled with on-site support across India), data centre services and cloud computing services.

The Company is proposing, subject to receipt of requisite approvals, market conditions and other considerations, to make an initial public offering of its equity shares and has filed a DRHP with the SEBI. The DRHP is available on SEBI website at www.sebi.gov.in as well as on the website of the book running lead managers at www.sbicaps.com and www.rathi.com. Investors should note that investment in equity shares involves a high degree of risk and for details relating to the same, see the section titled “Risk Factors” of the offer document. Investors should not rely on the DRHP filed with the SEBI.

“This communication is not an offer to sell or a solicitation of any offer to buy the shares (the “Securities”) of Trimax IT Infrastructure & Services Limited (the “Company”) in the United States. The Securities are not being registered under the United States Securities Act of 1933, as amended (the “Securities Act”) and may not be offered or sold in the United States (as such term is defined in Regulation S under the Securities Act) unless registered under the Securities Act or pursuant to an exemption from such registration. The Company does not intend to register the Securities under the Securities Act. Any offer of the Securities in the United States will only be made by means of an offering circular that will contain detailed information about the Company and the Securities, as well as financial information.”

IDBI Federal breaks even in Five years

2013-06-04T04:21:00.001-07:00

Posts maiden profit of Rs 9.24 crore

IDBI Federal Life Insurance has achieved break-even in 2012-13, its fifth year of operations. The company has reported a maiden profit of Rs 9.24 crore in 2012-13, thus making it one of the fastest to break-even in the Life Insurance industry. In an industry challenged by falling margins, shrinking new business volumes, high cost ratios and low profitability, this is a significant achievement.

IDBI Federal started its operations in March 2008 and is amongst the most successful start-ups in the Indian Life Insurance market. A pioneer in product innovation, IDBI Federal’s approach is very innovative and reflects a fresh way of looking at and thinking about life insurance. The Company’s innovative products with trademarked names such as WealthsuranceTM, IncomesuranceTM, RetiresuranceTM, etc have been well-received by its customers and have been an important contributing factor to its success.

IDBI Federal’s New Business Premium (APE) grew by 23% in 2012-13, which compares with the negative growth of -15% posted by the industry. The company also witnessed a 44% increase in the number of new business policies sold as compared to the previous year. IDBI Federal has also been driving profitability through the right product mix.

Mr Aneesh Khanna, Head Marketing & Product Management (right) congratulates
Mr G V Nageswara Rao, Company's MD & CEO on crossing the unique milestone

The product mix has continuously been shifted to long-term, traditional products. Share of traditional products in the new business premium increased to 83% as compared to 67% in the previous year. Share of regular premium products increased to 78% as compared to 69% in the previous year.

Mr. G V Nageswara Rao, Managing Director & CEO, IDBI Federal Life Insurance, said, “I am extremely happy to announce that IDBI Federal has recorded its maiden profit of Rs 9.24 crore in 2012-13. Achieving break-even in the fifth year is a significant landmark. We have pursued profitable growth as our company strategy. Our new business premium growth of 23% compares with negative growth of -15% reported by the industry. Our growth rate is one of the highest in the industry, with a large number of companies posting negative growth. What is even more satisfying is the fact that this achievement comes at a time when the entire Life Insurance industry is facing many challenges and growth is hard to come by.”

IDBI Federal has a healthy solvency ratio at 491% as against the regulatory requirement of 150%. Mr. Rao said, “I am delighted to say that IDBI Federal enjoys a comfortable solvency ratio to take care of its next phase of growth. As we have reached the profit-making state, we will not require any further capital infusion. Our AUM has moved up by 24% from Rs. 2,208 crores to Rs 2,732 crores during the current year.” IDBI Federal has paid-up share capital of Rs 800 crore.

The company recorded a 13th month persistency rate of 76% which is among the top 5 in the industry. In terms of 25th, 37th and 49th month persistency rates, IDBI Federal is among the top 3. IDBI Federal’s strong persistency record is testimony to the quality of its sales and the confidence the customers have shown in the company’s products and its investment performance. For the calendar year 2012, IDBI Federal’s Equity Fund raked No 1 in its investment performance among the 72 ulip funds in the industry against which it is benchmarked internally. IDBI Federal’s customer complaints, as reported by IRDA, is among the lowest in the industry.

A strong focus on cost discipline ensured a drop in IDBI Federal’s cost ratio from 26% in 2011-12 to 24% in 2012-13, which is among the lowest expense ratios in the industry.

IDBI Federal Life Insurance’s performance has been a result of its better than industry business growth, better persistency experience, more profitable product-mix, robust investment performance as well as lower cost ratio. In a fast-changing industry landscape, IDBI Federal was quick to realize the challenges and act on them. Today’s announcement validates its success in meeting these challenges.

“A customer centric approach is at the heart of IDBI Federal. We have introduced various measures to ensure that the policyholder’s interests are upheld at all times. We recognize the role of long term planning through life insurance and thus focus our efforts in selling regular premium long term products. Pre-Issuance calling to confirm all sales ensures that the customer is being sold the right product as per his needs. All this has resulted in value creation for the customer and is reflected in our high persistency rates. In fact, as a result, our customer complaints are also much lower than the industry average,” Mr. Rao said.

Mr. Rao added, “This performance is testimony to our constant focus towards innovation, offering tailor-made financial solutions that create value for our customers and help them to realize their dreams and aspirations. We entered as the 18th player in the industry and differentiation was the key to our success. Our approach of product branding is unique in the industry and has helped us achieve a strong mindshare among target audiences.”

Just Dial IPO aims to cash in on 10% retail discount, safety net

2013-05-19T20:19:00.000-07:00

Huge discount to retail investors for the first time in any IPO

NEW DELHI, May 20: On the back of the largest discount of 10% for retain investors and the growing internet penetration in the country, local search engine Just Dial Limited hits the capital markets on today with its public offering targeting to raise Rs950 crores.

“This is for the first time that any company is offering such a huge discount of 10% at the lower price band,” said Mr Arun Kejriwal, director of KRIS. “What is also notable is the fact that Just Dial has set aside only 10% for retail subscribers, coupled with a safety net and this is bound to enhance retail investor interest in the issue,” he said.

Just Dial has already raised over Rs 208 crore through issue of shares to anchor investors, including Goldman Sachs and HSBC, by allocating 39.37 lakh shares to anchor investors at a price of Rs 530 per piece.

The anchor investors include Goldman Sachs India Fund, HSBC Bank (Mauritius) Ltd, Birla Sunlife Trustee Company Pvt Ltd, DSP Blackrock Opportunities Fund and Deutsche Securities Mauritius Ltd, the filing said.

The IPO would see promoters and other investors selling 17.49 million shares or 25.2 per cent of the paid up equity capital.

Post issue the promoters would have 33 per cent and the issue does not involve the company issuing fresh shares.

As per McKinsey & Company, India’s middle class, generally comprising people with annual income range of Rs 200,000 to Rs 1,000,000, is expected to grow by over 10 times to approximately 583 million people by 2025.

According to Internet World Stats, as of June 30, 2012, Internet penetration was at 11.4% in India, compared to over 78.1% in the United States. There were approximately 137 million Internet users in India, making it the third largest population of Internet users after China and the United States. According to TRAI, the number of mobile subscribers in India is expected to exceed 1,000 million by 2014. With the growth projected for India’s middle class and for Internet and mobile usage in India, we believe our potential user base remains largely untapped and offers significant potential for growth.

Analysts say these augur well for search engines like Just Dial which also plans to expand its bouquet of services.

Citigroup and Morgan Stanley are the book-running lead managers to the issue and Justdial plans to list on the BSE, NSE and MCX-SX.

Recommending subscription to the IPO, GEPL Capital said, with its unique, un parallel business model & strong brand recognition Just Dial Is expected to maintain its dominant position in the local search market.

The company’s business model is “efficient as it promotes continuity in subscriptions and cash flows”, GEPL said and remarked: “It is also noticeable that such kind of model is difficult to be replicated due to the challenge of establishing the requisite credibility and relationship with paid advertisers.”

As of December 31, 2012, Just Dial had no long-term borrowings which are a competitive advantage for the company and a platform to grow operations without being constrained by significant reliance on external financing sources, GEPL said.

HDFC Securities notes in its analysis that Just Dial search service bridges the gap between its users and businesses by helping users find relevant providers of products and services quickly while helping businesses listed in its database to market their offerings. “Its search service is particularly relevant to SMEs, which currently, do not have many other cost effective options to access and advertise to such a large number of potential consumers,” HDFC Securities says.

In its offer document Just Dial says it intends to keep up with the latest in mobile Internet technology to provide its search services. In collaboration with service providers and vendors, the company is in the process of developing the ability for users to complete a number of bookings and purchases which are integrated in the search results from our website, mobile Internet WAP site and our Master App, including reservations at restaurants, home delivery of, ordering groceries, booking doctors’ appointments and even taxi bookings.

The company is also in the process of developing a car listings website in which users can research and rate car models being offered for sale, list their cars for sale and receive price quotes from vendors of both new and used cars.

Another new application called “Quick Quotes” will provide prospective buyers with a price quote from multiple vendors and which will be available 24x7.

Just Dial’s consolidated total revenue from continuing operations increased from Rs716.0 million in fiscal 2008 to Rs 2,770.2 million in fiscal 2012, representing a CAGR of 40.2%.

Direction for budget? RBI calls for investment boost

2013-01-28T23:10:00.000-08:00

Highlights of RBI Governor D Subba Rao's statement on Q3 Monetary policy review:

What the economy needs most of all and most urgently is new investment.
This will step up currently flagging aggregate demand and also ease the supply constraints so that existing capacity is fully utilised and new capacity is built up.
A strong and effective supply response is particularly important for bridging the infrastructure gaps and correcting structural imbalances in other segments of the economy, including key food articles.
Critical to this effort are a credible and comprehensive fiscal adjustment by the Government, implementation of structural reforms, hastening the approval process, and improving governance to inspire the trust and confidence of potential investors.

The full text:

"First of all, on behalf of the Reserve Bank, a warm welcome to you all to this Third Quarter Review of Monetary Policy for 2012-13.

2. Earlier this morning, we put out the Policy Review document. Based on an assessment of the current macroeconomic situation, we have decided to reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 8.0 per cent to 7.75 per cent.

3. Consequent to this, the reverse repo rate under the LAF, determined with a spread of 100 basis points below the repo rate, gets calibrated to 6.75 per cent. Similarly, the marginal standing facility (MSF) rate, determined with a spread of 100 basis points above the repo rate, and also the Bank Rate stand adjusted to 8.75 per cent.

4. These changes have since come into effect immediately after the announcement.

5. We have also decided to reduce the cash reserve ratio (CRR) of scheduled banks by 25 basis points from 4.25 per cent to 4.0 per cent of their net demand and time liabilities (NDTL) effective the fortnight beginning February 9, 2013.

6. This reduction in the CRR will inject primary liquidity of around `180 billion into the banking system.

Considerations Behind the Policy Move

7. Today’s decision to further ease the monetary policy stance was informed by three considerations.

8. First, both headline wholesale price inflation and its core component, non-food manufactured products inflation, have softened through the third quarter. This provided some relief from the persistence that dominated the first half of the year. Several indicators such as the weaker pricing power of corporates, excess capacity in some sectors, the possibility of international commodity prices stabilising as well as inflation momentum measures suggest that inflationary pressures have peaked. However, further moderation in inflation going into the next fiscal year is likely to be muted as the correction of under-pricing of administered items is still incomplete and food inflation remains elevated. Accordingly, the setting of monetary policy has to remain sensitive to these conflicting pressures and attendant risks.

9. Second, growth has decelerated significantly below trend through the last fiscal year and through this year so far, and overall economic activity remains subdued. On the demand side, investment activity has been way below desired levels and consumption demand too has started to decelerate. External demand has also weakened due to languid global growth. On the supply side, constraints in the availability of key raw materials and intermediates are becoming binding. While the series of policy measures announced by the Government has boosted market sentiment, the investment outlook is still lacklustre, especially in terms of demand for new projects.

10. The third consideration that informed our decision is that liquidity conditions have remained tight. Although the Reserve Bank lowered the cash reserve ratio, CRR, successively in September and October 2012, and carried out open market operations (OMO) injecting systemic liquidity of `470 billion during December and January to augment liquidity, the average net LAF borrowings at `910 billion in January have been above the Reserve Bank’s comfort level. This tightness could potentially hurt credit flow to productive sectors of the economy. The structural deficit in the system provided a strong case for injecting permanent primary liquidity into the system.

Monetary Policy Stance

11. The policy document also spells out the three broad contours of our monetary policy stance. These are:

first, to provide an appropriate interest rate environment to support growth as inflation risks moderate;
second, to contain inflation and anchor inflation expectations; and
third, to continue to manage liquidity to ensure adequate flow of credit to the productive sectors of the economy.

Guidance

12. As has become standard practice by now, we have also given the following guidance for the period forward:

13. With headline inflation likely to have peaked and non-food manufactured products inflation declining steadily over the last few months, there is an increasing likelihood that going into 2013-14, inflation will remain range-bound around the current levels. This provides space, albeit limited, for monetary policy to give greater emphasis to growth risks. This policy guidance will, however, be conditioned by the evolving growth-inflation dynamic and the management of risks from the twin deficits.

Expected Outcomes

14. We expect that today’s policy actions, and the guidance that we have given, will result in the following three outcomes:

first, investment will be encouraged, thereby supporting growth;
second, medium-term inflation expectations will remain anchored on the basis of a credible commitment to low and stable inflation;
and, finally, there will be an improvement in liquidity conditions to support credit flow.

Global and Domestic Developments

15. Our policy decisions have been based on a detailed assessment of the global and domestic macroeconomic situation. Let me comment first on the global outlook.

Global Economy

16. Since the Reserve Bank’s last quarterly Policy Review in October 2012, headwinds holding back the global economy have begun to abate gradually, although sluggish conditions prevail. In the US, activity gathered momentum in the third quarter of 2012 but this is unlikely to have been sustained in the fourth quarter. While a political consensus to avert the ‘fiscal cliff’ has calmed financial markets, how the debt ceiling is managed will be crucial in shaping the market sentiment on the way forward. The euro area economy is threatened by continuing contraction, notwithstanding the liquidity firewall of the European Central Bank (ECB) and the EU’s commitment to act collectively to backstop the union. Overall, however, apprehensions that the sovereign debt crisis will disrupt the global financial system have ebbed.

17. A pick-up in the pace of growth of China is likely. But growth in other emerging and developing economies has slowed owing to a combination of a slump in external demand and domestic structural bottlenecks. Furthermore, inflationary pressures persist in some of them. Overall, global economic prospects have improved modestly since the Reserve Bank’s last review in October 2012 even as significant risks remain.

Indian Economy

18. Moving on to the domestic economy, GDP growth slowed significantly this year, dropping to 5.5 per cent in the first quarter, and dropping even further to 5.3 per cent in the second quarter. The decline in the GDP growth rate became more broad based, with consumption demand also slowing alongside stalling investment and declining exports.

19. In July 2012, the Reserve Bank projected GDP growth for the current year, 2012-13, of 6.5 per cent. In the October Review, we revised this downwards to 5.8 per cent, signalling increasing global risks as well as accentuated domestic risks. As part of this review, we revisited this growth projection taking into account developments over the last three months. During this period, industrial activity has remained subdued. Sluggish external demand continues to inhibit improvement in services. While the coverage of rabi sowing has picked up, severe winter in certain parts of the country could affect crop prospects. New investment demand, which should be the key driver of an upturn, continues to be weak. While the series of recent policy initiatives by the Government has boosted market sentiment, it will take some time to reverse the investment slowdown and reinvigorate growth.

20. Accordingly, we have revised downwards our baseline projection of GDP growth for the current year from 5.8 per cent to 5.5 per cent.

Inflation

21. Let me now turn to inflation. Headline WPI inflation eased significantly from 8.1 per cent in September 2012 to 7.2 per cent by December. Notably, inflation on account of non-food manufactured products, which have a weight of 55 per cent in the WPI, fell sharply in November-December as input price pressures eased. The momentum indicators too suggest a moderation in headline as well as non-food manufactured products inflation. The Reserve Bank’s industrial outlook survey also points to a softening of the rate of increase of output prices, suggesting that the pricing power of corporates has weakened. Fuel group inflation moderated in December, mainly reflecting the tempering of inflation of non-administered petroleum products as well as the range-bound exchange rate of the rupee.

22. Food inflation, on the other hand, showed a contrarian behaviour, moving into double digits in December, reflecting both cyclical and structural factors.

23. In contrast to WPI inflation, CPI inflation as measured by the new consumer price index, rose to 10.6 per cent in December, largely reflecting the surge in food inflation. Excluding food and fuel groups, CPI inflation remained unchanged at 8.4 per cent during the third quarter.

24. In the October Review, the Reserve Bank made a baseline projection of inflation for March 2013 of 7.5 per cent. An environment of slower growth and excess capacity in some sectors suggests that inflation has come off its peak. However, it is expected to be range-bound around the current levels due to persisting food inflation, the pass-through of diesel price adjustments over the next several months and the possibility of adjustment in other administered prices. If international commodity prices, including the price of crude, further decline, they should cushion the phased increase in diesel prices, to the extent they are not offset by exchange rate movements. A sustained reduction in inflation pressure is, however, contingent upon alleviation of supply constraints and progress on fiscal consolidation. This will also help mitigate the cost-push pressures stemming from the surge in wages.

25. Keeping in view the expected moderation in non-food manufactured products inflation, domestic supply-demand balances and global trends in commodity prices, we revised downwards the baseline WPI inflation projection for March 2013 from 7.5 per cent to 6.8 per cent.

Monetary and Liquidity Conditions

26. Let me now turn to monetary and liquidity conditions. Money supply remained below the indicative trajectory of the Reserve Bank. This essentially reflected the deceleration of growth in aggregate deposits and moderation in economic activity. On the other hand, the overall non-food credit growth was around the indicative trajectory. However, bank credit to industry showed a significant deceleration while credit to agriculture registered an increase.

27. Keeping in view the seasonal pattern for the last quarter, M₃ growth projection for the current year has been scaled down to 13.0 per cent while non-food credit growth projection is retained at 16.0 per cent.

28. Liquidity conditions tightened from the second week of November on account of a build-up in the Centre’s cash balances, festival-related lumpy increase in currency demand, and structural pressures brought on by the widening wedge between deposit growth and credit growth. Anticipating liquidity pressures, the Reserve Bank lowered the CRR and conducted open market operations. Despite these measures, the liquidity deficit in the system remained above the Reserve Bank’s comfort level.

Risk Factors

29. Macroeconomic management going forward is subject to a number of risks. Let me briefly address them.

First, the widening of the current account deficit (CAD) to historically high levels, especially in the context of a large fiscal deficit and slowing growth, exposes the economy to the twin deficit risk. Financing the CAD with increasingly risky and volatile flows increases the economy’s vulnerability to sudden shifts in risk appetite and liquidity preference, potentially threatening macroeconomic and exchange rate stability. Large fiscal deficits will accentuate the CAD risk, further crowd out private investment and stunt growth impulses.
Second, despite the recent calm, global risks remain elevated, with the potential for spillover into the Indian economy through trade, finance and confidence channels. In the US, the risk of political inaction to manage the debt ceiling or even a sudden onset of fiscal austerity can lead to a turmoil in financial markets, followed by a downturn in economic activity. Escalation of the euro area sovereign debt stress in view of the continuing absence of credible and comprehensive policy responses remains a contingent global risk. Risks also stem from geopolitical tensions that can adversely impact supplies and prices of key commodities, particularly of crude oil. Furthermore, these forces can potentially increase global risk aversion with implications for financing of our CAD.
Third, inflation over the last three years has been a result of demand pressures as well as supply constraints. With demand pressures now on the ebb, the supply constraints need to be urgently addressed. In the absence of an effective supply response, inflationary pressures may return and persist with adverse implications for macroeconomic stability.
Fourth, the key to stimulating growth is a vigorous and sustained revival in investment. Achieving this will, however, depend on a number of factors such as bridging the infrastructure gaps, and resolute pursuit of structural and governance reforms.
Finally, risk aversion in the banking system stemming from concerns relating to growing non-performing assets (NPAs) is constraining credit flow. Notwithstanding the importance of repairing asset quality, banks should be discerning in their loan decisions and ensure adequate credit flow to productive sectors of the economy.

30. Let me conclude by summarising our macroeconomic concerns. Inflation has come off from its peak, but its further downward movement is going to be slow and gradual. On the other hand, economic activity has slowed, trailing well below its potential and opening up a negative output gap. What the economy needs most of all and most urgently is new investment. This will step up currently flagging aggregate demand and also ease the supply constraints so that existing capacity is fully utilised and new capacity is built up. A strong and effective supply response is particularly important for bridging the infrastructure gaps and correcting structural imbalances in other segments of the economy, including key food articles. Critical to this effort are a credible and comprehensive fiscal adjustment by the Government, implementation of structural reforms, hastening the approval process, and improving governance to inspire the trust and confidence of potential investors. The Reserve Bank, on its part, will have to calibrate monetary policy to the evolving growth-inflation dynamic and the management of the twin deficits risks.

All is well with Sikkim's Teesta-III Hydel project

2013-01-11T20:26:00.000-08:00

Should go on stream from June

GANGTOK: With the ending of the long standing dispute between the Sikkim Government and Teesta Urja Limited over the state government’s share holding in one of the largest hydel projects, Teesta-III is all set to on stream from June this year.

Men and machines are racing against time to ensure that project work is completed as per current schedule and provide virtually free power to Sikkim and supply to four northern States – Delhi, UP, Haryana and Rajasthan - which reel under chronic power shortages.

The Sikkim Government, through Sikkim Power Investment Corporation Limited, obtained 26% share holding in the SPV that is executing the 1200 MW Teesta-III hydro power project – the largest in the six cascade projects on the Teesta river run, a person associated with the development said.

Teesta Urja’s Board of Directors has already approved the transfer of 29,64,00,000 partly paid shares held by Athena Projects Private Limited in favour of SPICL.

The state government has, meanwhile, withdrawn its case against TUL following the amicable settlement paving the way for taking the project back on track.

The first unit will begin to produce power by June. As much as 99.2% of Tunneling Works was already completed (around 34.4 Km out of total 34.6 Km). The Excavation of 13.824 Km of Head Race Tunnel is also complete.

REC and PTC are among the big lenders to the project while a consortium of six PE players led by Morgan Stanley have pumped in Rs 750 crores signaling the FDI into country’s hydro power projects.

This was considered to be the largest PE transaction in the country’s power sector. Besides Morgan Stanley, the group of investors includes Everstone Capital, General Atlantic, Goldman Sachs Investment Management and Norwest Venture Partners.

Experts say Sikkim sets the new trend for developing hydel projects as the country is blessed with bounty of rivers flowing from Himalayan glaciers during summer when the power consumption is at its peak. Development of hydro power projects along the Himalayan river course, thus, could be a win-win situation for the people and the governments.

Leading analyst Mr. Sudip Bandyopadhyay, MD and CEO of Destimony Securities, said: “With potential FDI availability, including possible World Bank support, many similar projects can be successfully established along the Himalayan rivers.”

Mr. Nilesh H Karani, Head of Research at Magnum Equity Broking, pointed out: “Himalayan glaciers melt in summer and the rivers supply adequate water for hydel projects in the region. Teesta stands out as good example of harnessing the hydro power.”

Mr Bandyopadhyay explained that “Hydro-electricity is one of the leading sources of clean energy. For an energy starved nation like India which has been blessed with enough rivers, the potential of generating hydro-electricity in a cost effective manner is significant.

“At present with only 40% of Hydel power potential being tapped, India as a country has a huge scope of exponentially increasing hydel power capacity and reducing pollution through this clean and green power,” he pointed out

Power produced to be transmitted till Kishenganj through 400 KV DC line to be constructed by Teesta valley Power Transmission, a JV between Teesta Urja Ltd and Power grid Corporation of India Limited (PGCIL). PGCIL is to wheel the power to the beneficiary states in the northern region beyond Kishenganj.

A World Bank report notes that severe power shortage is one of the greatest obstacles to India’s development.

Over 40 percent of the people -- most living in the rural areas -- do not have access to electricity and one-third of Indian businesses cite expensive and unreliable power as one of their main business constraints, it says.

Poor electricity supply thus stifles economic growth by increasing the costs of doing business in India, reducing productivity, and hampering the development of industry and commerce which are the major creators of employment in the country, it says.

Power sector analysts say hydro power projects are zero pollutant, as compared to thermal projects which reportedly contribute to half of global carbon emissions and India relies on thermal power to the extent of 60% of its consumption today. Even the cost of raw material – water – is nil.

Some may even call it Water Gold! Look at this HSBC Global Research that says increasing hydro power generation capacity would help in strengthening India's energy security. "Given India's tight domestic coal supply and increasing reliance on imported coal, hydro capacity provides the country with greater energy security,” the report says.

The government admits India’s failure to tap hydel power. In a written reply to a question in Lok Sabha, the Minister of State for Power Mr K.C. Venugopal said out of the identified capacity, 33320.8 MW i.e. 22.93% has so far been developed and another 15130 MW i.e.10.41% of is under development. He said that about 66.66% of the identified potential is yet to be developed

Teesta-III set to ease North's power crunch; REC to pump in Rs 995 cr

2012-08-12T05:39:00.001-07:00

GANGTOK: In a significant development that may see the power woes of Northern states easing from July next, REC has set the motion in rolling for early completion of the 1200 MW Teesta Hydel project in Sikkim by increasing its loan sanction to the project to Rs 3,095 crores.

Sikkim Government on its part has appointed a high powered committee to expedite the completion of the State’s hydro power projects, including Teesta-III, and has committed to fund its share of the equity for Teesta-III in an expedited manner.

About 12% of the power produced by Teesta-III will go to Sikkim (as free power per the contract) while the rest 85% supplied to four northern States – Delhi, UP, Haryana and Rajasthan - which recently witnessed serious power crisis due to overdraw from the grid by some states.

Teesta-III, the largest of the six hydel projects on the Teesta river, is being executed by an SPV called Teesta Urja in which the Sikkim Government has a 26% stake.

REC has approved the fresh lending of Rs 995 crores to the project on account of cost over-run. The original estimated cost of the project was pegged at Rs 5,700 crores but lenders like REC and PTC have agreed to increase infuse Rs 8,500 crores to meet cost over runs on account of a massive earth quake, which Teesta-III survived, and so on.

As per revised commercial operation dates, the first unit of Teesta-III will go on stream in July 2013 for Unit-1, thereafter all the six units will become operational one after the other with the sixth and final unit becoming functional by December 2013.

The Sikkim state government has also agreed to bring in its equity share of equity. It is significant that Sikkim Power Secretary Mr A K Giri attended a recent meeting convened by REC.

In a latest development Sikkim Government appointed a high powerered committee under the chairmanship of Chief Secretary Karma Gyatso. State Power Secretary Mr A K Giri is the member secretary of the panel. The government has issued a gazette notification to this effect stating that the committee report is to be submitted by August 10, 2012.

Sikkim government has also signed the share holder agreement with Teesta Urja Limited acquiring 26% stake in the SPV executing the project, apart from agreeing to contribute its share to the base cost as well as the cost overrun.

What comes a major relief to all stake holders is the fact that the State government has decided to end its legal dispute with Teesta Urja on share holding issue and accelerating the project execution.

All equity investors, including a group of six private equity partners, have also expressed their full support and commitment to bring in equity for the revised costs. REC and PTC are among the big lenders to the project.

Six PE players led by Morgan Stanley, who have already pumped in Rs 750 crore into the project through Asian Genco, will also raise their commitment, a source familiar with the development said. “They may have to chip in another Rs 400 crores or so, to proportionately match the cost increase,” the source said.

Besides Morgan Stanley, the group of investors includes Everstone Capital, General Atlantic, Goldman Sachs Investment Management and Norwest Venture Partners.

Cement industry cracks under cost burden; CCI hefty penalty adds to crisis

2012-08-02T22:04:00.000-07:00

The cost of making cement in India has jumped by half over the last four years, and the rising prices of raw materials, energy and freight all indicate that manufacturers have a tough job on their hands to keep their plants ticking.

Ironically, almost all the costs related to the production of cement and its transportation are the monopoly of the government, leaving companies with no elbow room to control these factors. Adding to the problems, the growth in demand for cement has lost momentum due to the sharp slowdown in economic expansion, analysts say.

Cement is a bulk commodity and it needs to be shipped across vast distances to reach the consumer. Freight makes up a little more than a fifth of the total cost of cement. It has climbed more than a quarter on a compounded annual growth rate over the past seven years. This includes transportation costs of clinker, but excludes freight on raw materials which is usually added to the cost of raw materials.

So, the 30 per cent hike in freight rates in the March railway budget meant a stiff increase in costs. To move a 50 kg bag of cement from Andhra Pradesh, a key producing state, to Maharashtra the new rail freight rates added Rs.15 to each bag; to Kerala Rs.22 and as much as Rs.30 to the north east.

Cement Factory: A representative pic

Because the railways are state-owned and freight rates set by the government are not negotiable, cement producers have been using the improving highway network to move cement via road. About 35 per cent of cement produced in India is today carried by the railways, down from more than 60 per cent until a decade ago.

The railways are expected to ship at least 30 per cent of the cement in the years to come, given its predominance over longer distances. The economic size of a cement plant has risen to 5 million tonnes a year from 1 million tonnes, meaning larger long haul costs to get the stuff to the ultimate buyer.

It’s only a matter of time before the government raises diesel prices. This would have the potential to balloon transportation costs further. Again, this is out of bounds of cement producers.

The two other major costs are energy and raw materials. Stable supplies of power and coal, also mostly controlled by the state, have always been a challenge. In the absence of competition, the coal produced by government-run mines is of poor quality with high ash and low calorific value.

As a result, cement companies also depend on imported coal of high calorific value. However, the rupee’s sharp depreciation and Indonesia’s – a major coal supplier – recent moves to jack up prices and restrict exports pose huge risks to costs.

All these factors have resulted in a sharp rise in the cost of building a new cement plant over the past two years. With prices not keeping pace with the increase in input and other costs, EBITDA (earnings before interest, tax, depreciation and amortisation) have plummeted to $1,000 per tonne from a greenfield cement plant, compared with $1,500 that was initially expected.

It is against this background that the punitive fines of Rs.63 billion imposed on 11 cement companies by the Competition Commission of India must be viewed. Although the penalty for alleged cartelisation is being appealed in a higher tribunal, the stated objective to control pricing without taking into consideration costs and slowing demand is bound to cause more harm.

India is the world’s second biggest producer of cement after China, with output soaring after the sector was completely decontrolled in 1989. But the emerging scenario is detrimental for the industry and the country.

Competition Commission fine on Cement industry - Not so fine!

2012-07-31T07:25:00.001-07:00

The Competition Commission of India (CCI) has imposed a fine of more than Rs 6,000 crore on 11 cement makers alleging cartelisation and price fixing from May 2009 to March 2011.

It is a record penalty and is seen as an attempt by the ant-trust regulator to assert itself. But the last word has not been said on the issue, yet. The cement makers can go on appeal to the Competition Appellate Tribunal (COMPAT), and even to the Supreme Court.

Fact is, despite all the arguments about lower utilization at cement plants and higher prices that informants in the case -- the Builders Association of India -- has brought against the cement companies, it would be tough to prove that cement prices rose because of cartelisation. As the Cement Manufacturers Association (CMA) submitted before the commission, the report is based on surmises and conjecture.

The CCI ruling said its director general has submitted that the cement companies have enough scope to reduce the price of cement but have tried to earn better margins on sales instead of utilizing more capacity. The argument flies in the face of the very system of free market economics. The shareholders of cement companies want the managements to bring them the best possible returns. If cement demand has been going up despite rising prices, that means optimum pricing for the commodity has not been discovered and the managements did the right thing by raising prices further. If the builders thought the prices were too high to make their business unviable, then they would have stopped buying cement, and the prices would have come down naturally. That is how market economics works.

That it never happened possibly points to another interesting aspect -- by bringing the case to the CCI, the builders may have been trying to protect the fat margins that they had commanded at the height of the housing boom. As the CMA said, the third-parties from whom information was collected in this case by the CCI are builders and cement dealers, who all have their own vested interests. The CCI's very enquiry rests on thin ice here.

Another interesting observation made by the CCI was that the common platform of CMA was used for collection and dissemination of the information on prices of different companies. The CMA countered that it never collected prices by brand but only average prices for passing on to the Department of Industrial Policy and Promotion. Furthermore, it had been asked by the ministry of commerce and industry to collect the data on a monthly basis to calculate the Wholesale Price Index.

It is akin to penalizing an organization for following the orders of a government department. Besides, as the association said, the information is available publicly!

The CMA also said mere price parallelisms cannot be used to infer cartelization and it is bound to occur in cases where a homologous product is sold in the same market.

Overall, despite all the headlines the CCI made, it looks like the findings have not strong legal base and could be thrown out by higher legal institutions. Till then, however, the CCI’s action has introduced an element of uncertainty into the cement industry at a time of weak demand and slowing economy. The action will have the opposite effect to what the CCI intended under the current economic circumstances.

Indian Cement COs gear up to defend against CCI penalty

2012-07-30T21:06:00.000-07:00

Opinion - BNK

The Competition Commission of India (CCI) has imposed a fine of more than Rs 6,000 crore on 11 cement makers alleging cartelisation and price fixing from May 2009 to March 2011.

Legal experts think the CCI is on slippery ground here. Cement companies say the CCI rules require the commission to establish the existence of a cartel only if there is a written agreement among the parties involved. That is not the case here and the commission has based its findings on circumstantial evidence. There are around 47 cement players and any sort of agreement or understanding is next to impossible. That too, when the industry has added around 100 million tons capacity in the last three years.

Cement factory: A representative Pic

Fact is, despite all the arguments about lower capacity utilization at cement plants and higher prices that informants in the case -- the Builders Association of India -- has brought against the cement companies, it would be tough to prove that cement prices rose because of cartelisation. As the Cement Manufacturers Association (CMA) submitted before the commission, that the capacity utilization is bound to be lower on account of higher capacity growth rate as compared to cement demand growth rate and that the report is based on surmises and conjecture.

The CCI ruling said its director general has submitted that the cement companies have enough scope to reduce the price of cement but have tried to earn better margins on sales instead of utilizing more capacity. The argument flies in the face of the very system of free market economics where the price of cement is determined by demand and supply in the market. Interestingly CCI has totally ignored the submission of the cement industry that cement manufacturers cost is more than the increase in the Wholesale Price Index as well as the cement price increase in the market.

The shareholders of cement companies want the managements to bring them the best possible returns. But in fact, it is the government which wants to earn more from the cement sector, as government levies have gone up from Rs 49 per bag in FY07 to Rs 72 per bag in FY 12. This adds to the cement price increase. The result is that despite increase in cement prices, costs, and government levies, PAT margins of companies have come down in FY 11.

There is another interesting aspect -- by bringing the case to the CCI, the builders may have been trying to protect the fat margins that they had commanded at the height of the housing boom. As the CMA said, the third-parties from whom information was collected in this case by the CCI are builders and cement dealers, who all have their own vested interests. The CCI's very enquiry rests on thin ice here.

Cement factory: A representative pic

It is akin to penalizing an organization for following the orders of a government department. Besides, as the association said, the information is available publicly!

The CMA also said mere price parallelisms cannot be used to infer cartelization and it is bound to occur in cases where a homologous product is sold in the same market.

Sikkim’s Teesta-III hydel project to get Rs 8.5 K cr funding

2012-07-29T10:16:00.000-07:00

Sikkim’s prestigious 1200 MW Teesta-III hydel project is all set to move ahead in full swing with lenders agreeing to infuse Rs 8,500 crore toward revised project cost.

A decision to this effect was taken at a meeting of lenders called by REC in Delhi.

“We have approved in principle for the revised project cost of about 8,500 Crores,” a top official confirmed.

All equity investors, including a group of six private equity partners, have also expressed their full support and commitment to bring in equity for the revised costs.

The Sikkim state government has also agreed to bring in its equity share of equity. It is significant that Sikkim Power Secretary Mr A K Giri attended the REC meeting.

The project cost was originally estimated to be Rs 5,700 crores, but it has gone up due to delay in implementation partly because of a massive earthquake – which the project survived.

Teesta-III is expected to be back on track soon and the first unit is expected to begin to produce power by June next year.

Teesta-III, the largest of the six hydel projects on the Teesta river, is being executed by an SPV called Teesta Urja in which the Sikkim Government has a 26% stake.

About 15% of the power produced by Teesta-III will go to Sikkim while the rest 85% supplied to four northern States – Delhi, UP, Haryana and Rajasthan - which reel under chronic power shortages.

REC and PTC are among the big lenders to the project while a consortium of six PE players led by Morgan Stanley have pumped in Rs 750 crores signaling the FDI into country’s hydro power projects.

Pipavav Defence scotches market rumours, says All is Well!

2012-07-26T23:32:00.000-07:00

MUMBAI; Pipavav Defence and Offshore Engineering Company Limited today scotched market rumours leading to unusual volatile movements of its Stock Price, along with scrips of several other listed companies.

"The Company would like to state that its business is as usual and that operations of the Company are in absolute order. No new development has occurred that can have impact on the Company’s operations or business," Pipavav Defence and Offshore Enginering said in its filing with BSE.

"The Company requests its investors to ignore market rumours that are speculative and mischievous, " it added.

Teesta-III dispute over Sikkim share ends; Power to flow from June 2013

2012-07-11T06:46:00.000-07:00

GANGTOK: The stage is now set for resumption of work on the 1200 MW Teesta-III hydro power project in Sikkim with the Teesta Urja Limited ending a long standing dispute with Sikkim Government over allocation of shares to the latter.

“The Board of Directors of Teesta Urja Limited today passed a resolution to transfer 29,64,00,000 shares to SPICL,” a Teesta Urja top official confirmed.

The managing committee of Teesta Board has earlier approved the proposal to allocate the shares to SPICL and the company informed Sikkim Power Secretary Mr A K Giri.

“Now that the issue is settled amicably by the SPV partners and the Government, we expect the work on Teesta-III to be back on track and the first unit will begin to produce power by June next year,” the official said.

The work has been stalled a year ago following a dispute between the Sikkim Government and Teesta Urja over the share allocation issue. The state government had moved a Sikkim court seeking the share allocation. Teesta Urja’s argument was the SPV patners were more than willing to allocate the shares to Sikkim Government, but it was the latter that was dragging its feet in taking the stake. The dispute has led to the project being delayed by over a year.

Now, with the Teesta Board approving the share transfer to SPICL, the long standing dispute has ended. The Sikkim Government, through Sikkim Power Investment Corporation Limited, gets 26% share holding in the SPV that is executing the 1200 MW Teesta-III hydro power project – the largest in the six cascade projects on the Teesta river run, a person associated with the development said.

Over 75% of work on Teesta-III has already been completed.

REC and PTC are among the big lenders to the project while a consortium of six PE players led by Morgan Stanley have pumped in Rs 750 crores signaling the FDI into country’s hydro power projects.

The Teesta-III project will not only give power virtually free to Sikkim but supply electricity to four northern States – Delhi, UP, Haryana and Rajasthan - which reel under chronic power shortages.

“At present with only 40% of Hydel power potential being tapped, India as a country has a huge scope of exponentially increasing hydel power capacity and reduce pollution through this clean and green power, he pointed out

A World Bank report notes that severe power shortage is one of the greatest obstacles to India’s development.

CCI order on cement: punishes performers, say analysts

2012-07-08T10:49:00.001-07:00

MUMBAI, July 08, 2012: The Competition Commission of India’s recent order on eleven Indian cement companies imposing a whopping Rs 6,000 crore penalty for alleged cartelization is bound to have a crippling the industry – the world’s second largest after China - leading analysts said.

"It's a classic case of performers being punished,” said Mr Sudip Bandyopadhyay, MD and CEO of Destimony Securities.

“In some cases the penalty imposed is higher than a year’s earning for many players and this could negatively affect the health of the company jeopardizing shareholder interest,” Mr Bandyopadhyay said and wondered: “Penalty seems to have been imposed on circumstantial evidence and not on the basis of concrete proof of cartelization.”

“As it is, the Indian economy is already suffering from negative developments on account of retrospective amendment in the Income Tax laws and the reverberations of the 2G scam. Further, penalties on core sectors like cement will weaken the FII confidence, as well as that of the domestic investor which will go on to hamper growth and destabilize the economy even further," he added.

The Competition Commission of India had imposed penalty of over Rs 6,000 crores on 11 cement manufacturers based on a complaint filed by Builders Association of India. The Commission has also imposed penalty on the Cement Manufacturers Association

In its report titled "CCI bites hard; Industry ready to fight back", Anand Rathi Share and Stock Brokers Limited says the order is largely based on “circumstantial evidence and less concrete or direct evidence” for an industry with a relatively large number of players.

Emkay Global Financial Services Ltd said in its report after analysing the CCI order that “Though some of the evidence presented by CCI could be strong, we believe they may not be strong enough to prove the charge of cartelization.”

“Collection and circulation of data by CMA has been considered as anti-competitive practice. However CMA has argued it collects data under instructions from DIPP for computation of wholesale price index and, hence, no adverse inference can be drawn from this. Further, data collection and dissemination activities of CMA mentioned by CCI are pretty much the activities carried by any trade/business association,” Emkay said.

“We also observe that CCI has provided strong circumstantial and statistical evidence like date and venue of CMA’s ‘High Power Committee’ meeting and subsequent movement in cement prices indicative of coordinate price actions by cement manufactures. However the limited period and price analysis of such meetings and that too for specific season (particularly construction season when cement prices usually witness seasonal up tick) could lead to lot of subjective inference and weakens statistical assessment. For eg .Commission gave instances of CMA meeting held on Jan-11, Feb-11 and April-11 and no specific explanation of why only these three meetings have been referred to when meetings of its High Power Committee take place periodically,” it added.

According to BRIC Data, an emerging markets intelligence company, India is ranked as the second-largest producer of cement in the world, only behind China. The Indian cement industry increased in value at a compound annual growth rate (CAGR) of 13.14% during the review period (2007–2011), and is projected to grow at a CAGR of 10.64% over the forecast period (2012–2016). This growth is primarily attributed to the government’s high level of infrastructure spending, and the country’s increasing number of residential and commercial construction activities, BRIC Data says.

The Indian government invested US$500 billion on infrastructure during the Eleventh Five-Year Plan (2007–2012) and revealed plans to invest a further US$1 trillion on infrastructure during the Twelfth Five-Year Plan (2012–2017).

The large-scale investment on various infrastructure projects, including roads, railways, bridges and ports, will generate a huge demand for cement over the forecast period, BRIC Data says.

Credit rating agency CRISIL said the penalty on the four CRISIL-rated cement companies is unlikely to impact their credit quality. “CRISIL believes that the financial risk profiles of these cement manufacturers are strong enough to offset the impact of the penalty. The penalty is sizeable at 75 per cent of the aggregate net profits of the four rated cement players for 2011-12 (refers to financial year, April 1 to March 31),” the agency said.

CRISIL, however, said robust liquidity and low gearing will cushion the credit risk profiles of these companies against the impact of the penalty. Moreover, cash outflows on account of the order are unlikely immediately, given that the players may appeal against it at the Competition Appellate Tribunal.

“The credit risk profiles of these companies are, therefore, expected to remain unchanged in the near term,” it said.

Indian cement industry makes rapid strides

2012-07-02T06:58:00.000-07:00

Emerges 2nd largest globally

MUMBAI, July 02, 2012 (BusinessNewsbank): The Indian cement industry has registered a phenomenal growth contributing handsomely to the exchequer.

Starting with a mere 1.47 million tonne capacity s at the time of the independence, the Indian Cement industry is now globally competitive in technology, quality and cost of production, with a capacity of 320 million tonnes, emerging as the world’s largest cement producer after China.

It is the fourth largest contributor to the Union Excise duties and employs 10 million people directly or indirectly.

India has a cement capacity of about 320 million tonnes distributed amongst 47 players, not including mini cement plants.

In the last three years, around 100 million tonne of capacity has been added. It is pertinent to note that for every new plant, it takes at least three years to ramp up the capacity to 100% percent.

In the first two years, new plants could typically operate at about 45% and 65 % of their capacity. Hence capacity utilization numbers could be misleading unless read with the age of the plant.

So if 20 million ton capacity is added in one year, it could mean that only 45 per cent of that, i.e. 9 million tonnes can actually be produced in that year.

Teesta-III largest hydel project in Joint sector

2012-06-27T10:57:00.002-07:00

While Sikkim and parts of North wait with bated breath for completion of Teesta-III hydel project, here are some of its interesting aspects:

Teesta Stage III is the largest HE Project under construction in Joint Sector in the country.
Best and most unique HE Project with high head of 800 m against short HRT length of 13.3 km.
Best studied and investigated project in the country by agencies like CWC/CEA, GSI, NHPC and TUL.
Most dependable hydrology with data of over 30 years period for arriving at the dependable flow.
Environment friendly project – Major project components underground, minimum impact on environment.
Despite the size of the project no Resettlement and Rehabilitation issues leading to no local/ R & R issues.
Sikkim is politically most stable, peaceful and investor friendly state.
Govt. of Sikkim has 26% Equity resulting in pro-active attitude of the Government and smooth implementation of the Project.
Local people are pro-development leading to smooth implementation of the project.
Less implementation time as most of the infrastructure works are in place

(Source Teesta Urja Limited)

Hydro power with FDI may hold key to India’s energy security

2012-06-23T09:27:00.000-07:00

NEW DELHI: With coal supply and prices being erratic and ever increasing controversies over nuclear energy, hydro power holds a big promise for ensuring energy security to India while bringing in FDI, experts say.

"Given India's tight domestic coal supply and increasing reliance on imported coal, hydro capacity provides the country with greater energy security,” says a latest report by HSBC Global Research.

One the one hand, thermal power producers are yet to come to terms with Coal India Limited for uninterrupted fuel supply, while on the other nuclear power projects in Maharashtra and Tamil Nadu are faces with prolonged uncertainties, power sector analysts say.

Hydel projects could also attract FDI as demonstrated at the 1200 MW Teesta-III Hydel project on the river Teesta in Sikkim where in six PE players have invested Rs 750 crores. As much as 70% of the project work has been completed in a record time of five years and the first unit from Teesta-III may start generating power in a year, an official associated with the project said.

On harnessing hydro power, Minister of State for Power Mr K.C. Venugopal recently said in a written reply to a question in the Lok Sabha, out of the identified capacity, 33320.8 MW i.e. 22.93% has so far been developed and another 15130 MW i.e.10.41% of is under development.

He admitted that about 66.66% of the identified potential is yet to be developed.

A World Bank report said that severe power shortage is one of the greatest obstacles to India’s development. Over 40 percent of the country’s people -- most living in the rural areas -- do not have access to electricity and one-third of Indian businesses cite expensive and unreliable power as one of their main business constraints.

“Poor electricity supply thus stifles economic growth by increasing the costs of doing business in India, reducing productivity, and hampering the development of industry and commerce which are the major creators of employment in the country,” it said.

On assisting India in Hydel projects, the World Bank said it aims to assist the Government of India in meeting its targets for hydropower expansion in a sustainable manner. This entails not just ensuring financial, economical, and technical soundness but also meeting social practices which have been developed by the industry in recent years, and safeguarding environmental assets for future generations.

The Bank has been engaged in hydropower in India since the late 1950s. Several of its past engagements have been difficult, with Bank support for a number of potential hydropower projects, including the Sardar Sarovar project on the river Narmada, being cancelled before they were commissioned. The two most recent Bank engagements, the Nathpa Jhakri and Koyna IV projects which were completed in 2002 and 1998 respectively, have benefited from the lessons (FAQs) of earlier hydropower development, including more socially and environmentally sensitive safeguard policies.

At the request of the Government of India, the World Bank is supporting one hydropower project in the country -- the Rampur Hydropower Project downstream from Nathpa Jhakri on the River Satluj in Himachal Pradesh and is currently evaluating proposals for supporting two more hydropower projects in the country - the Vishnugad Pipalkoti Hydropower Project on the River Alaknanda in Uttarakhand and the Luhri Hydro Electric Project on the River Sutlej in Himachal Pradesh. While the Rampur Project is under construction, the Vishnugad-Pipalkoti and Luhri Projects are in varying stages of preparation.

The World Bank is also assisting the state governments of Himachal Pradesh and Uttarakhand adopt a river-basin approach in the planning and development of cascaded hydropower systems. The two mountain states that have made hydropower generation a significant development priority, had asked for Bank assistance in initiating a River Basin Development Optimization Study that uses the Satluj and Alaknanda rivers as case studies which has been completed and discussions are ongoing on how to take this work forward. The Study also aimed at forging effective and equitable systems of cost-and benefit-sharing among all stakeholders, including developers and operators, affected local communities, and host states.