Benchmark to launch India's first shariah fund

MUMBAI: Benchmark Asset Management will launch India's first shariah-compliant exchange traded fund (ETF) on Feb. 4, as part of a plan to expand its bouquet of passively-managed funds, Executive Director Rajan Mehta said on Friday. Shariah law forbids Muslims from receiving interest payments and from investing in companies involved in the production or sale of pork, alcohol, tobacco, pornography, gambling, non-Islamic finance or life insurance. The Shariah Benchmark Exchange Traded Scheme, will track the S&P Nifty Shariah index, comprising 37 stocks that represent nearly half the market capitalisation of shares listed on the National Stock Exchange, the firm said in a product note. ETFs, listed and traded like individual stocks, give investors access to the underlying securities without the risk of holding them. They are a relatively new concept in India, with a market share of about 0.6 per cent in the 4.1-trillion-rupee domestic mutual fund industry. In addition, the fund faces slumping flows to stock funds and a weak stock market, which has lost more than 50 per cent in 2008. "Response could be slow to start with," Mehta told Reuters, adding he expects interest in the fund will be piqued when the stock market revives and awareness of shariah funds grows. Muslims make up about 13 per cent of India's 1.1 billion plus population, giving it the third-largest Islamic population after Indonesia and Pakistan, and offering a vast market for investment products. Mehta also said his firm remains hopeful of attracting foreign investors looking for shariah-compliant opportunities in India. Shariah-compliant investments control about $65 billion in assets globally with almost half of this amount held in mutual funds, the fund house said in a presentation. Source:Economictimes

Govt plans easier FDI rules for hotels, tourism projects

The government plans to do away with the minimum area and capital requirements for foreign investments in realty projects involving hotels, cineplexes, health clubs and other tourism-related activities to help the tourism industry meet investment needs.

However, to avail the relaxation, the projects must use at least 50% of the total built-up area for hotels or facilities promoting tourism, food and culture, said an official with the commerce and industry ministry who asked not to be named. Builders can develop commercial and residential real estate in the remaining space, he said.

The current norms stipulate a minimum developable area of 25 acres and a minimum capitalisation of $10 million for wholly-owned subsidiaries of multi-national companies and $5 million for joint ventures investing in real estate. However, foreign investors will not be allowed to exit such projects before three years of completion of the project.

The tourism industry badly needs foreign direct investment to construct hotels. “The sector has recorded an FDI inflow of $853 million since January 2000 till March 2008. To give a fillip to the hotel and tourism sector, further policy initiatives are urgently required,” said the official.

According to tourism ministry estimates, there are about 1.2 million hotel rooms in the country. The requirement for 2010 and 2020 is estimated to be 2.9 million and 6.6 million, respectively. The department of industrial policy and promotion feels mixed projects are required for promoting tourism.

The move will result in price rationalisation in hotel sector, said Manav Thadani, MD of hotel consultant HVS International. Over the last few years, tariffs have reached unrealistic levels, especially in metros, owing to a demand-supply mismatch.

“Smaller ticket size of mixed-use projects would be commercially more viable and attract increased foreign investment,” said Gaurav Karnik, associate director, tax & regulatory services, Ernst & Young.

“There has been a huge interest among foreign investors to invest in mixed-use format but they have been hesitant because of the minimum size and capital commitments,” he said.

Source:Economictimes 

LIC, IDBI, BoB agree to lend Rs 900 cr to Satyam

Company Needs About Rs 1,700 Crore In Near Future For Paying Salary And Meeting Establishment Cost

STATE-OWNED financial institutions are likely to respond favourably to the call for financial support made by Satyam’s new board. Life Insurance Corporation, IDBI Bank and Bank of Baroda (BoB) are the institutions that agreed to provide funds. Meanwhile, the Reserve Bank of India has said that bank exposure to Satyam is ‘relatively small’ as it is not a leveraged company.

The new Satyam board, comprising HDFC chief Deepak Parekh Nasscom’s former chief Kiran Karnik and former Sebi member C Achuthan, among others, has approached lenders for a loan of close to Rs 900 crore for one year. “The IT company needs about Rs 1,700 crore in the near future for its functioning including salary payment and establishment cost. The gap between the income from clients and company requirement is close to Rs 900 crore,” said a banker familiar with the Satyam development.

Lenders, on their side, have made it clear to the new management that they will not extend general purpose loan. “Banks will lend only against receivable or against pledge of some physical property,” said sources. Only when banks are fully satisfied with the securities, the money will be lent to Satyam. Each lender is likely to peg the loan at prime lending rate ranges 12.5-13.5%.

BoB is already a banker to Satyam, although it has a very small exposure of less than Rs 2 crore. IDBI and LIC will be new lenders to the IT company. Employees had salary account with ICICI Bank, HDFC Bank and Citibank.

The objective of the government constituted board has been to keep the show going at Satyam and retain employees and customers. In the medium term, the company will require new promoters to survive. L&T, which has an IT subsidiary, has emerged a potential buyer with a 12% stake. However, cases against Satyam in the US and Sebi guidelines requiring an open offer at six month average prices are deterrents.

Responding to the queries on Satyam during the monetary policy press meet, RBI governor D Subbarao said that there was no bank irregularity in the Satyam case and the collapse of the IT giant does not pose any systemic risk. Mr Subbarao hinted that the bank exposure could be a few hundred crores. “Numbers are relatively small since Satyam was a not very leveraged company,” he said. RBI is also likely to take action against Satyam’s auditors PriceWaterhouse-Coopers once reports from the police, ICAI and Sebi come in. “Only when the report from ICAI comes in , we will be able to take any action on PwC,” he said. Among the institutions LIC has a wider interest as it is also a large shareholder in the IT company. Other insurers and MFs holding large takes in Satyam bailed out at a loss when the scale of fraud became clear. LIC, however, has decided to hold and ensure that the company gets back on the rails.

Source : insuremagic

India can grow 6.5-7% in 2009-10: Ahluwalia

India should be able to maintain economic growth of around 6.5-7 per cent in the 2009/10 fiscal year but needs to ramp up infrastructure spending to boost growth, a senior policy adviser said on Wednesday.

Growth in India, Asia's third-largest economy, has fallen from rates of about 9 per cent in the past three years, as high borrowing costs at home and recessions in key overseas markets have hit demand for manufactured goods, cars and property.

The Reserve Bank of India (RBI), the central bank, on Tuesday cut its forecast for gross domestic product growth in the 2008/09 fiscal year ending March 31 to 7 per cent, which would be the slowest pace in six years.

"If we're somewhere between 6.5 to 7 (per cent) this year, we could probably end up doing the same thing next year," the Planning Commission's deputy chairman, Montek Singh Ahluwalia, told Reuters.

Maintaining such momentum would depend in part on global financial markets starting to recover around the middle of the year, adequate fiscal stimulus and a pickup in private investment, Ahluwalia said in an interview on the sidelines of the annual meeting of the World Economic Forum.

Cutting interest rates further would not be critical to reviving growth, he said, as the central bank has already cut policy rates by 350 basis points since October and left banks with plenty of cash.

"We desperately need a lot of investment in infrastructure," he said. "It's the thing most likely to lead to a crowding in of private investment, rather than a crowding out."

Ahluwalia said that the government should not be overly concerned about drastically reducing its budget deficit next year from the anticipated level of roughly 8 per cent of GDP this year.

"You don't have to go back to 3.5 (per cent), you can easily do that later," he said.

"We should aim at a deficit that's lower than in the current year, suggesting that we're beginning to turn around, and all of the additional deficit above what would normally be the norm should be devoted to investment in infrastructure."

Ahluwalia said he was hopeful that the higher deficits would not lead to ratings downgrades, adding that the government did not have plans to issue sovereign debt on international markets.

"The key issue is, these fiscal deficits are not the result of fiscal irresponsibility starting from equilibrium," he said.

Source:Economictimes 

Reliance Power bags 4,000 MW Tilaiya UMPP

Anil Ambani Group firm Reliance Power today bagged its third 4,000 MW Ultra Mega Power Project, at Tilaiya, in Jharkhand. 

"Reliance Power has bagged the 4,000-MW Ultra Mega Power Project at Tilaiya in Jharkhand," a source said. The Reliance bid for the project was Rs 1.77 per unit. 

Five companies including NTPC, Reliance Power, Lanco Infratech, Jindal Power and Sterlite Energy, of the 11 pre-qualified bidders, were in the fray for the project. 

The financial bids for the project were opened today. A high-level committee, which includes state representatives from Bihar and Jharkhand, selected the developer. 

The financial and technical bids for the coal-based thermal power project were invited on December 29 and the final financial bids were to be opened within 15 days. 

The bidding process for the UMPP had been delayed due to various reasons, including the global slowdown. 

Apart from the delays in bidding, the Tilaiya project faced loss of time on identifying the site, getting the water source and obtaining other regulatory clearances. 

The project entails an investment of Rs 16,000-18,000 crore and will have a debt equity ratio of 70:30. 

PFC is the nodal agency for UMPPs and is facilitating the process of selecting the developer of the Tilaiya project.

Tilaiya is the fourth UMPP to be awarded to a developer. Earlier, two UMPPs bagged by Reliance Power are those of Sasan and Krishnapatnam. Tata Power got the Mundra UMPP. 

The financial closure for Tata Power's Mundra project has been completed and the other two are expected to follow suit. 

Source: Economictimes 

Baroda Pioneer Liquid Fund launches institutional plan

Baroda Pioneer AMC on Wednesday announced the launch of Institutional Plan in Baroda Pioneer Liquid Fund. The initial offer opened on Jan 27 and will close on Feb 4. 

Baroda Pioneer Liquid Fund is an open-ended liquid fund, which aims to generate reasonable returns with a high degree of safety and higher liquidity by investing in a portfolio of debt and money market instruments. It has a credit risk rating of mfA1+ from ICRA, which indicates highest-credit-quality. 

The portfolio provides investors with investment avenues for their short-term surpluses and with reasonable returns combined with high levels of liquidity and safety through portfolio construction and in depth credit evaluation of securities. The fund would largely be invested in highly rated and liquid instruments. 

“We are enhancing our product suite to offer investors a wider choice across the risk-return spectrum. It is our endeavour to continuosly make efforts to help investors achieve their financial goals through innovative products and solutions,” said Rajan Krishnan, CEO, Baroda Pioneer AMC. 

Baroda Pioneer Liquid Fund will follow a well-defined investment strategy that will attempt to minimise the credit risk, interest rate risk and liquidity risk to investors in the fund. The scheme will focus on the following investment strategies: 

* 80% of the funds portfolio will be invested in AAA/P1+(or equivalent) or sovereign securities 

* It will avoid exposure to real estate while taking exposure to good credit quality NBFCs with maximum limit of 15% 

* The average maturity will be maintained below 6 months 

* Maximum exposure will be to liquid Bank CDs, combined with CPs of public financial institutions and CPs of good manufacturing companies to enhance yield. 

The fund would be managed by Alok Sahoo, Head Fixed Income and Hetal Shah, Fund Manager, Baroda Pioneer AMC. 

The Institutional Plan will offer Growth and Dividend options. The minimum initial investment for the plan is Rs. 1 crore. The fund has no entry or exit loads. 

Source:Economictimes

LIC ups stake in IOB to over 5%

State-owned Life Insurance Corporation of India (LIC) has increased its share in Chennai-based public sector Indian Overseas Bank (IOB) to more than 5 per cent. The company had bought 2 lakh shares on January 14, 2009, which took the insurance behemoth’s total share of the 54.48 crore shares to 5.004 per cent, an IOB representative said. After the acquisition, LIC shareholding in the bank increased to 2,72,64,924 shares from 2,70,6,4924 shares.

Source:Insuremagic

Insurance companies to inform consumer on bouncing of cheque

The Delhi Consumer Commission also directed them to deposit a premium cheque within two days of receiving it

New Delhi: All insurance companies must inform an insured consumer in case a cheque issued by him for payment of a policy premium gets dishonoured, the Delhi Consumer Commission has said while directing them to deposit a premium cheque within two days of receiving it.

“All the insurance companies are directed to present the cheques of premium or any other payment received by them on the same day or on the next day,” the Commission said while sending a copy of its directions the insurance regulator IRDA for taking proper steps on the matter.

The Commission also ordered the insurance companies to intimate the issuer of a bounced cheque through their agents or on their own about the dishonouring of the cheque in writing so as to give the consumer a chance to make the payment through any other mode.

It passed the order on an appeal filed by the SBI Life Insurance Company Ltd, challenging District Forum’s order which directed it to pay Rs5,000 compensation to insured Ashok Sardana alongwith backdating of policy by one month.

The District Forum had directed the SBI Life to change the date of policy in question to 8 January, 2007 from of 8 February, 2007 as it held the delay in presentation of a cheque received from the consumer as a deficiency in service.

The insurance company alleged that the backdating was directed despite the fact that the premium cheque was encashed much later.

It noted that the delay in presenting the cheque and also in intimating about dishonouring of cheque would adversely affect the interests of the insured if incidents of theft of vehicle and damage of goods take place during this period.

Source:livemint

We have a long memory, says LIC on corporate frauds

Amid a spate of corporate frauds and white collar crimes like Satyam, the country's leading equity and debt investor LIC today cautioned India Inc against any wrongdoings saying it has a "long memory".

"We don't make a negative list but we have a long memory," the country's largest life insurer LIC's Chairman T S Vijayan said on whether they maintain a negative list of corporates found involved in frauds.

Stating that there were huge expectations of the government, policyholders and corporate holders from LIC, Vijayan said, "We are number one in financial terms with Rs 8,00,000 crore assets...nobody else comes close even near-by ...even banks don't have Rs 8,00,000 crore (assets)...

"If you look at corporates, infrastructure companies, they also come to LIC when they have problems, when they have liquidity issues, when they issue equity, they see LIC as stabilising factor in their entire portfolio."

He said that the managements know that LIC would give stability to their share prices, unless they under-perform or do some manipulation. "Corporates by far know that LIC has a very long memory, we don't easily forget," Vijayan added.

Dubbing Satyam as a one-off thing, he said that LIC has not faced anyone so far with this kind of corporate wrongdoing and added that when it has big stakes, like 10 per cent in a company, it would like to examine what was happening there. "We do not want board seats unless we have a strategic position, such as in Corporation Bank."

"As a policy, we never talk about what we have invested in a company... recipients may say, but we never say...that's the problem of bigness... any statement coming from LIC can influence the market," LIC Chairman said.

Source:Economictimes 

IRDA sees 2009 as year of consolidation for insurance industry

MUMBAI: The insurance regulator has said it sees consolidation in the insurance industry in 2009. The regulator is also concerned over the finances 

of non-life companies and is talking to ICAI to assess the audit framework for all insurers in the wake of the Satyam scandal. 

Speaking to ET, IRDA chairman J Hari Narayan said the phase of consolidation is set to begin and the regulator will soon come out with guidelines for mergers and acquisitions in the insurance industry. Industry watchers feel the consolidation could be triggered by global M&A, involving partners of Indian players, or by resistance by Indian promoters to put in more capital, either because of a fall in valuations, or because of their own capital constraints. 

The regulator is keeping a watchful eye on insurance ventures with troubled international giants are partners. “We review these companies every quarter to ensure their financial soundness. As of now, there is no cause for worry,” assured Mr Hari Narayan.

Source:Economictimes

Expressing concern over the finances of the non-life industry, Mr Hari Narayan said: “We are concerned about the financial position of the non-life insurance companies in the country. The policy holders should be covered with sound insurance by financially strong companies. We are having an internal discussion and will come out with some strategies to deal with this situation soon.” 

Although the insurance industry has done a good job in increasing insurance penetration and growing the business, many companies are yet to make profits. In the life industry, even eight years after opening up, only one company has made profit. Most non-life companies continue to make an underwriting loss, which means that their claims payout is in excess of premium collection. 

In the light of the recent Satyam scam, where auditors failed to detect irregularities, IRDA is working with the Institute of Chartered Accountants of India (ICAI) to assess the existing framework and spruce up the same, if required. 

“We have opened a discussion with ICAI to assess the strengths and weaknesses of the current systems. We will be coming out with something in the next few months. The role of auditors is defined by the law and hence, we can’t redefine their role in the insurance sector.” The IRDA chief, however, added that the regulator wants to ensure that auditors do a responsible job and give an accurate picture of the insurance companies’ financial position. 

At present, two auditors conduct a joint audit of insurance companies as a part of the checks and balance structure. In addition, every insurance company has an appointed actuary, who has access to all information and related documents of the company, and has to verify that assets are enough to meet liabilities. The actuary’s task entails attending board meetings and keeping a track of the company’s solvency position.

IRDA asks insurance cos to reapply for offshore offices

HYDERABAD: Insurance Regulatory and Development Authority (IRDA) has asked the domestic insurance companies, whose applications for permission to 

open representative offices aboard are pending, to apply again in conformity with the fresh guidelines. 

The new guidelines specify that the overseas representative office is an extended arm of Indian firm, hence is not allowed to contract any liability outside India. 

While the policies should be issued only in Indian rupees and to non-resident Indians, the acceptance of the proposal and underwriting of risks shall be done only in India, CR Muralidharan, Member IRDA, said in the notification issued recently. 

The companies can undertake development and promotional activities such as gathering financial, economic and commercial information, educating prospects about advantage of insurance, carrying out promotional activities and promoting company's products, customer service activities, identifying prospects living in the host country, among others. 

It further points out that all the insurance policies proposed to be issued shall be in tune with KYC norms and anti-money laundering guidelines besides complying with all other laws including Foreign Exchange Management Act, 1999. 

Many private insurance players, including the country's fourth largest Reliance Life, are planning to expand their footprint in offshore market. 

Reliance Life had approached Insurance Regulatory and Development Authority for their guidance regarding overseas operations. 

Source:Economictimes

Oriental Insurance to launch more health policies

MUMBAI: State-owned general insurer Oriental Insurance today said it would launch a slew of health policies early next fiscal to widen its health insurance business.

"Health segment is one of our core areas. We are planning to launch two-three long-term health policies," company Chairman and Managing Director M Ramadoss said.

The company, he said, is also "fine-tuning" its mediclaim policies to extend enhanced benefits to customers.

Ramdoss said that the company would be filling these products with the regulator, IRDA, by the end of the fiscal hoping to begin selling them from April.

The health insurance industry of the country had witnessed around 55 per cent growth last fiscal.

"Oriental's health insurance business grew by 25 per cent. This year, we expect to grow by more than 35 per cent," the CMD said.

Ramdoss said that the company was expecting a gross premium growth of five to six per cent this year, adding that the profit before tax for the current fiscal could fall by Rs 100-150 crore. Last year, the company's PBT was Rs 450 crore.

Profit after tax for the last year was Rs nine crore which was likely to grow by 70 per cent this fiscal, he said adding that the profit before tax was less last year because the company had 5-6 years of tax assessment pending.

Source:Economictimes 

MFs AUM in December increase by Rs 19,000 cr

NEW DELHI: The mutual fund industry witnessed an increase in average assets under management (AUM) by over Rs 19,000 crore in December 2008 on 

moderate recovery in stock markets. 

The total assets under management of the country's 35 mutual fund houses have soared to Rs 421,117 crore, following an increase of Rs 19,088 crore at the end of December last year, according to the data by the Association of Mutual Funds in India. The total assets under management were Rs 402,029 crore in the month of November. 

As per the AMFI data, Reliance Mutual Fund retained its position as the country's top fund house with an AUM of Rs 70,208 crore, while HDFC Mutual Fund maintained its second position with an AUM of Rs 46,757 crore in December. UTI Mutual Fund was at the third place with an AUM of Rs 42,548 crore, while ICICI Pru MF was placed fourth with an AUM of Rs 41,878 cr, and Birla Sun Life MF was placed fifth with an AUM of Rs 36,565 cr. 

Similarly, SBI Mutual Fund retained its sixth position with average assets under management of Rs 25,004 cr, while Franklin Templeton Mutual Fund was at the seventh place with an AUM of Rs 19,244 cr. 

Inflation spikes to 5.60 per cent

New Delhi: After declining for ten consecutive weeks, inflation rose to 5.6 per cent due to higher prices of edible items like fruits and vegetables, caused mainly due to the truckers' strike.

Inflation, measured by movements in wholesale prices, rose by 36 basis points for the week ended January 10 from 5.24 per cent in the previous week. It was 4.36 per cent a year ago.

The increase in the rate of price rise, noticed after a gap of more than two months, was due to an eight-day nation-wide strike by truck operators, which began on January 5.

Among the items that became expensive during the week were fruit and vegetables (9 per cent), wheat (2 per cent) and spices, milk, ragi and rice (1 per cent each). 

LIC's new policy won't be subsidized by policyholders: Chairman

CHENNAI: Existing Life Insurance Corp (LIC) policyholders will not have to subsidise holders of the insurer's new guaranteed return product Jeevan Aastha, LIC chairman T.S. Vijayan has said.

Launched for 45 days, the scheme closed Wednesday and is expected to fetch LIC around Rs.90 billion (Rs.9,000 crore).

"There is no question of robbing Peter (existing policyholders) to pay Paul (Jeevan Aastha holders)," Vijayan told IANS over phone from Delhi.

"The funds collected under Jeevan Aastha will be kept separately and investments will be made from that. Today a triple A rated corporate bond gets a return of 11 percent. We will soon be locking the investments," he added.

Vijayan said he was confident the fund will generate sufficient surplus to pay not only the guaranteed return but also the loyalty bonus.

The single premium policy guarantees a return of Rs.90 and Rs.100 for every Rs.1,000 of sum assured for a five-year and a 10-year tenure, respectively.

However, this has made competition to raise doubts as to how LIC is going to pay such high returns, as the compounded rate of interest works out around eight percent.

An official of a private life insurer preferring anonymity said: "In the case of a guaranteed return policy, 50 percent of the premium collected will have to be invested in government securities and the balance in triple A rated corporate securities."

"Today, the return on government securities is around six percent and 8.5 percent in the case of corporate bonds. After factoring in expenses like agents commission and administrative costs, LIC's margin will be around seven percent. The question is how LIC will bridge the shortfall as similar products sold by private players offer lower returns."

But according to Vijayan, LIC has taken sufficient precaution to avoid any asset-liability mismatch.

"The policy will be for two periods, five years and 10 years, and the scheme closed on Wednesday. In a couple of days we will know the amount collected selling Jeevan Aastha."

According to sources close to LIC, the product does not leave much margin for LIC.

Source:Economictimes  

Mirae Asset launches gilt fund

MUMBAI: Mirae Asset Mutual Fund on Thursday launched Mirae Asset Gilt Fund, an open-ended gilt scheme offering a portfolio comprising of Government Securities issued/guaranteed by central and state governments with varied maturity through savings and investment plans.

The new fund offering for the fund will remain open from January 22 to February 2. The Fund will re-open for ongoing sale and re-purchase on or before February 9, 2009.

The investment objective of the fund is to generate returns commensurate with low credit risk by predominantly investing in a portfolio comprising of sovereign securities issued and guaranteed by central and state governments. The scheme may also invest in money market instruments like treasury bills, CBLO, repo/reverse repo etc.

Speaking on the occasion Arindam Ghosh, CEO, Mirae Asset Global Investments (India), said, “In the current economic scenario, there is a strong need for a fund that is relatively safe and liquid. Our guilt fund will invest primarily in government securities that are issued/ guaranteed by central and state governments. Also, G-Secs contribute to around 75% of the daily trading volume in the fixed income market nowadays”.

The Scheme has 2 Plans, Investment Plan and Savings Plan. Under the Investment Plan option, the fund would invest 65, 100% in sovereign securities issued and guaranteed by State and Central Govt., with an average portfolio maturity duration of the plan exceeding 4 years and 0 – 35% in money market instruments. Under the Savings Plan while the asset allocation remains similar to the Investment Plan, the average portfolio maturity duration would not exceed 5 years.

The fund offers various sub-plans within the two main plans which include regular, institutional, bonus and provident fund sub-plan. The minimum subscription amount under these sub-plans is Rs. 5,000 (regular & bonus sub-plan), Rs. 10,000 (provident fund sub-plan) and Rs.10,00,000 (institutional sub-plan).

There will be no entry load charged to investors and the fund offers growth and dividend options in regular and institutional sub-plans. The scheme would be benchmarked against I-Sec Libex (investment plan) and I-Sec Sibex (savings plan).

Commenting further, Mr. Ghosh said “The fund offers portfolio diversification benefit to investors who prefer to construct a portfolio of bond funds. In addition, it is tax efficient being a debt fund”. The recent performance of G-Sec instruments has seen an uptrend amidst falling interest rates which makes this fund an attractive investment avenue for investors.

Source:Economictimes 

Mallya buys Rs 750 cr Monte Carlo island

BANGALORE: That Vijay Mallya, the flamboyant chairman of the UB group, likes the good life is well known. His penchant for fast cars, castles, horses, jets, yachts, game lodges and bling is well chronicled. It looks as if islands are his latest passion. 

The buzz in Bangalore is that he has bought an island in Europe, ostensibly off the coast of Monte Carlo, though the exact location couldn’t be verified. Multiple sources involved in the deal have confirmed the news to TOI and indicated that the price Mallya paid was between $100 million and $150 million (Rs 500 crore to Rs 750 crore). The man himself rubbished the news. Said Mallya, “Island? Rs 800 crore? Complete nonsense. Please quote me on this.’’ We have. 

This wouldn’t be the first island that Mallya would own. He bought a string of islands north of the Maldives years ago and now runs resorts in these islands. At one point he had a stake in an aircraft company that offered hopping flights to these islands. Recently, he acquired the island of Thinnakkara off the cost of Lakshwadeep . 

Mallya in his personal capacity has heavily invested in the tourism space. He owns the Mabula Game Lodge, close to Johannesburg in South Africa. Spread over 12,000 hectares it is said to be one of South Africa’s finest private game reserves. He is believed to have bought about 1,000 acres of land in the Himalayas to promote high end tourist properties there. 

Mallya’s lifestyle — the sheer scale and lavishness of it — leaves most bedazzled . He has houses around the globe; castles in Scotland, town houses in London, Monte Carlo, Manhattan (Trump Towers), Sausalito and innumerable properties in India. While ‘Niladri’ in Mumbai and ‘Kingfisher Villa’ in Goa are the best known, he has hidden gems like the heritage, colonial bunglow with the best garden in Ooty, besides houses in Delhi and his home town Bangalore. 

His three yachts: Indian Empress, Indian Princess and Kalizma, his four private jets, his 240-strong vintage car collection, his Force India Formula 1 team and thoroughbreads not to mention the Porsches, Bentleys, Maserattis and Ferraris make Mallya the most colourful of Indian businessmen. 

Source:Economictimes

JPMorgan, Goldman shortlisted for Satyam

Mumbai : JPMorgan and Goldman Sachs are among the banks shortlisted to advise the new board of Satyam Computer Services as it tries to save the fraud-stricken Indian outsourcing firm, three banking sources said on Wednesday.

The new six-member board appointed by the government to contain the fallout of country's largest corporate scandal will consider appointing an investment banker at a board meeting on Thursday, Deepak Parekh, a board member said on Wednesday.

"Discussions are on at the moment. It is just too complicated a deal and early to say if we have the mandate. But we are talking," a senior banker at one of the banks said.

He declined to be named and did not want his firm's identity disclosed as he is not authorised to speak to the media.

Spokesmen at the Indian offices of JPMorgan and Goldman could not be immediately reached for comment.

The Satyam restructuring mandate would be a high-profile and potentially lucrative role for the appointed investment bank, which would be responsible for helping to keep the company afloat and for keeping investors from losing everything.

Restructurings can take many shapes, from selling off to liquidating assets, to bringing in new investors.

Satyam, India's no.4 outsourcer, has been battling for survival since its founder Ramalinga Raju resigned as chairman earlier in January, revealing profits had been falsified for years and $1 billion of cash in the books did not exist.

The new board is working to secure emergency funding and Parekh, a veteran banker and chairman of top mortgage lender Housing Development Finance Corp, said at a corporate governance event that the firm has pledged receivables to raise funds.

Satyam has 17 billion rupees ($346 million) in receivables and the board has said it was in talks with banks about funding.

The corporate affairs minister said earlier on Wednesday that many companies were interested in buying Satyam, and another board member said several potential buyers had expressed interest.

Source:Indian Express 

Sensex dips below 9,000 level

Tumbling for the second straight day on Wednesday, the benchmark Sensex closed below 9,000-level, the lowest level in more than one-and-a half month, in tune with global stocks which declined, led by the Wall Street which posted more than four per cent losses overnight.

The 30-share BSE barometer dropped 321.38 points to end the day at 8,779.17, its lowest level since December 5, 2008, with blue-chips in metal and banking counters suffering heavy losses.

The broader National Stock Exchange index Nifty also plunged by 90.45 points at 2,706.15, The index even lost psychological 2700 level during the day as 44 of the 50-share index closed lower.

Marketmen said a fall in heavyweight Reliance Industries stocks on fears of a fall in quarterly profits shattered the sentiment to some extent in last one-hour of trading.

They said a gloomy financial outlook of world's major economies after fresh troubles in international banks weighed heavily on minds of investors. The Dow Jones Industrial Average declined 4 per cent.

Source:Financial Express

Oil rises to USD 41 per barrel

Oil prices rose slightly to above USD 41 a barrel on Wednesday in Asia despite dismal economic news that pointed to deteriorating crude demand.

Light, sweet crude for March delivery was up 37 cents at USD 41.21 a barrel by midday in Singapore in electronic trading on the New York Mercantile Exchange. The contract fell USD 1.53 overnight to settle at USD 40.84.

The February contract, which expired Tuesday, rose USD 2.23 to settle at USD 38.74 a barrel.

Bad news from the banking sector left investors concerned that a deepening global slowdown will further undermine demand for crude. Royal Bank of Scotland said Tuesday its losses for last year could top USD 41 billion, which would be the biggest loss ever for a British corporation.

The British government injected more money into the struggling bank Monday and announced plans for another round of bailouts for the country's banks.

US banks State Street and Regions Financial Corp. also reported big earnings drops on Tuesday.

The Dow Jones industrial index, which oil traders look to as a barometer of investor sentiment about the economy, fell 4 per cent on Tuesday.

"It's really getting ugly on the economic side," said Christoffer Moltke-Leth, head of sales trading for Saxo Capital Markets in Singapore. "There is nothing to support crude in the fundamentals."

The deteriorating global economic outlook means forecasts for crude demand are being slashed

HDFC MF demands fee refund

MUMBAI: In a move that is expected to create a flutter among mutual fund distributors, HDFC Mutual Fund has asked its distributors to refund a part of the brokerage they received for selling fixed maturity plans, as a result of premature redemptions in those schemes.

HDFC MF — the country's second-largest mutual fund in terms of assets under management — has decided to invoke a clause in its agreement with distributors, which mentioned that in the event of investors pulling out before the maturity period, brokers would have to refund the brokerage proportionate to the 'unexpired period'.

What this means is that distributors are paid the entire brokerage upfront, assuming that the investor will stay invested in the FMP through its maturity. If an FMP had a maturity period of one year, and the investor withdrew from the scheme after nine months, the broker will now have to refund the brokerage for three months.

Understandably, some of the HDFC Mutual Fund’s distributors who have been slapped with this demand are up in arms.

The letter sent to distributors, a copy of which is available with ET, says: "As per the terms of the brokerage payable for each plan, in case of redemption by the investor before maturity of respective plans, the gross upfront brokerage paid to the distributor for collections during the NFO period would be recovered from them (proportionate to the unexpired period)."

The move has surprised industry officials, because most asset management companies tend to cosy up to mutual fund distributors, who are seen as vital for the sales of their schemes.

"This is the first ever instance of a fund house doing something like that," said the CEO of a large distribution house.

"The distributors' role is to advise investors at the time of investment. Once the sale is made, they have done their job. Thereafter, neither can a fund house, nor a distributor dictate/control the actions of an investor," he adds.

In response to an email query by ET, an HDFC official said: "Brokerages are paid for the period of investments.
However, it is computed for the entire duration and paid in advance. Therefore, in case of premature redemption by the investor, HDFC AMC has a consistent policy to recover the proportionate brokerage only for the unexpired period. We have been constantly encouraging investors to seek, advise and invest through AMFI-certified distributors and the business received directly is insignificant."

On their part, distributors believe that it is not correct to seek a refund of brokerage from distributors when the fund house has charged an exit load from investors, who have redeemed prematurely.

Some funds, for instance, have an exit load of 2-3% on premature redemptions from FMPs, which is meant to offset the liquidity discount that such sales will involve.

In response, Kiran Kausik, head sales and distribution at HDFC MF said the load is not used by the AMC and is written back to the scheme.

An uncertain credit environment, and concerns on portfolio quality sparked off a huge wave of redemptions in FMPs and liquid schemes in October 2008.

Overwhelmed by the scale of withdrawal by investors, fund managers had to resort to firesale of illiquid securities in their portfolios. This further depressed the net asset values of schemes, in turn accelerating the redemptions. 

Source:Economictimes

LIC's Jeevan Aastha may collect record Rs 8000 cr as premium

Despite the turmoil in the financial markets, Life Insurance Corporation’s Jeevan Aastha policy is on course to break the record for premia collection by a scheme in a single month. The policy has been lapped up by celebrities and middle-class investors alike during the 45-day window it was open for sale.

The policy, which closed on Wednesday, is expected to collect over Rs 8,000 crore. But some insiders said the collection could be higher. “The exact amount will take some time to collate. Some large proposers have deposited only a token amount as they did not want to lock their funds in case they did not clear the medical underwriting,” said an official. Although the corporation had said it was targeting Rs 25,000 crore, this was seen as a marketing gimmick and not a real target.

Sources said the applicants include a host of big-ticket names. A sportsperson is understood to have put in Rs 35 crore, while a leading film actor has invested Rs 8 crore and a little-known business family has invested Rs 50 crore. In addition, thousands of applications have been received for Rs 1-crore policies, said sources. For high net worth individuals, the tax free earnings were a major attraction while for the middle class, there was the additional benefit of tax savings under section 80 CCC.

In the past, many of LIC’s guaranteed high-return schemes have seen runaway sales towards their closing date. These include Bima Nivesh and Jeevan Shree. But there are several differences between Jeevan Aastha and other high-return schemes. Aastha is largely an urban phenomenon, with money coming in from large cities. Unlike other products, where a sudden turn in interest rates tipped money into the schemes, Jeevan Aastha was a combination of clever structuring, planning and timing.

Understanding investors’ preference for guaranteed returns, LIC structured a product by first buying huge quantities of bonds when triple A companies were borrowing at 11-12%. The corporation then obtained permission from the industry regulator IRDA for a guaranteed return product where subscriptions would be open for only 45 days. The insurer delayed the launch of the scheme to time it closer to the third quarter, as rates were seen to be coming down. The sheer distribution strength of LIC also played a big role in pushing the product.

The policy has helped to boost LIC’s flagging market share and has enabled several offices in metro centres to achieve their premium targets for the whole year in January itself.

Despite the success, the scheme has its limitations. Jeevan Aastha is more of a bond and less of an insurance policy. Although the sum insured is five times the premium in the first year, the cover amount declines to two times from the second year. Smaller investors, who were not all that savvy in reading the fine print, were sold the policy with a promise of 10% return. But the actual returns are likely to be much lesser.

Source: Economictimes

Hopes high on Obama, markets wobble

Washington : Barack Obama takes over as US President on Tuesday with hopes riding high he can conjure up a rescue that will jolt the world's biggest economy back to life and contain the financial crisis ravaging global markets.

The first African-American to become US president will take his oath against the backdrop of plunging world stock markets, prospects of a drawn-out US and global downturn, a trillion dollar federal deficit and fears of more crippling bank losses.

As if to underscore the challenges, stock markets in Asia dropped sharply on Tuesday in the wake of European losses after Britain's multi-billion-pound bank rescue unveiled on Monday failed to assure investors.

Obama's team has vowed to make its bailout funds work harder to get credit flowing again to cash-starved consumers and companies and is expected to announce soon changes to the second half of Washington's $700 billion bank rescue scheme.

One of the options discussed in Washington is to create a government-run bank to acquire bad assets clogging the financial system.

The incoming president is also working with lawmakers to launch a two-year $825 billion fiscal stimulus plan by mid-February.

Governments around the world have commited trillions of dollars to fiscal stimulus packages and bank bailouts in response to the crisis which has spiralled from a US housing collapse and pushed much of the world into a recession and many firms deep into the red.

Britain's multi-billion-pound bank rescue announced on Monday was the second since October and came as Royal Bank of Scotland said it was on course to report a 28 billion pound loss for 2008 -- the biggest in UK corporate history.

Washington's $20 billion lifeline for Bank of America announced on Friday also had only a fleeting market impact.

After modest gains this month, investors, battered by grim economic data and news of hefty corporate losses and job cuts as the fourth-quarter reporting season gets under way, pulled back again from anything riskier than top-grade government debt.

ECONOMIC GLOOM DEEPENS

Economic figures due later this week are only set to deepen the gloom. Britain is set to confirm on Friday it is now in its first recession since 1992.

China, the world economy's main growth engine, on Tuesday reported its first rise in urban unemployment in five years and is expected to show this week its economy expanded at its slowest rate in nearly a decade in the final quarter of 2008.

Asian shares retreated more than 3 per cent and US stocks futures fell about 1.5 per cent heralding a tough day ahead on the Wall Street which reopens after the Martin Luther King holiday on Monday.

"There could be some positive psychological effect on the market about Obama's economic policy," said Tony Tong, analyst with China Everbright Securities in Hong Kong. "But the implementation will take time and its impact on the economy may take (even) longer."

Commentators point out that the public expects Obama to achieve so much that he looks doomed to disappoint no matter what he does.

"The expectations for the Obama administration are off the charts," said Willian Keylor, a history professor at Boston University. "Whatever he accomplishes will be below the extraordinary expectations that people have for him.

Even if Obama manages to push through his stimulus package and the revamp of the bank rescue quickly, the time it will take for them to bear fruit may come as disappointment for many.

"The economy does not respond to defibrillation," said Ross Baker, a political scientist at Rutgers University. "People have this notion that you can put the paddles on it and restore it back to life and that's quite unrealistic."

Confidence is running so low that credit remains very tight for businesses even after central banks have slashed their benchmark rates, driving them, as in the case of Japan or the United States, virtually to zero.

In Japan, in yet another sign of the depth of the credit crunch, the central bank announced its second special corporate debt operation supplying unlimited funds to firms at its ultra-low 0.1 per cent rate.

Markets worry not only that bank rescues and government pump-priming will take time, but are also increasingly aware that those extraordinary actions to stem the financial wildfire come at a steep price, such as for fiscal balances.

Monday's downgrade in Spain's credit rating by Standard & Poor's drove that message home, hitting the euro as investors feared other government in the euro zone could experience the same fate as they spend heavily to refloat their economies.

Worse still, the agency, which cut Greece's rating last week and has Ireland and Portugal under review, said government efforts might still be insufficient to counter what is expected to be Spain's worst recession in half a century.

Source :Indianexpress

No more tax concessions during 2008-09: Montek

New Delhi : Setting at rest speculation about the possibility of tax cuts to boost growth, Planning Commission Deputy Chairman Montek Singh Ahluwalia on Tuesday said the government will not change the tax structure during the current fiscal, ending March 31.

"Taxes will not be altered between now and the next budget," he told reporters on the sidelines of a partnership summit being organised by the Confederation of Indian Industry in the capital.

The next regular budget is likely to be presented sometime in July, while the government will come out with an interim budget and a vote-on-account in February to complete the essential business in view of the forthcoming Lok Sabha elections.

The government, Ahluwalia said, would have to actively use both monetary and fiscal policies in the coming fiscal to boost growth, which is expected to come down to around 7 per cent from 9 per cent in the previous fiscal.

"If we utilise whatever we have announced in the budget, there will be a lot of expenditure," he added.

The government, as part of the stimulus packages to neutralise the impact of the global financial meltdown on the Indian economy, had reduced excise duty by 4 percentage points and raised public investment, especially on infrastructure sector projects.

Public expenditure, as per the two supplementary demands for grants approved by Parliament earlier, will go up by 20 per cent during the fiscal, over and above the Rs 7,50,000 crore given in the budget.

The Reserve Bank too reduced key policy rates and ratios releasing Rs 3,20,000 crore into the system and signalling a soft interest rate regime.

Source:indianexpress  

Sensex closes down 229 pts

The Bombay Stock Exchange benchmark Sensex on Tuesday plunged by more than 220 points amid a free fall in Asian bourses on fresh concerns that the worst is not yet over for the world banking industry as RBS on Monday said it expected a staggering loss over 40 billion dollars for 2008.

After opening sharply lower, the BSE barometer closed the day points at 9,100.55, down by 229.02 points, or 2.45 per cent, with only power and PSU stocks escaping the selling pressure. Metal, realty and banking suffered heavy losses.

The broader index on the National Stock Exchange Nifty also lost 49.60 points, or 1.74 per cent, to end at 2796.60.

Marketmen said European bourses fell sharply on Monday which mirrored in Asian stocks on Tuesday and they closed lower by as much as 3 per cent.

They said the investors feared more capital outflows on concerns of crisis in the global financial markets deepening.

Rupee's weakening against the dollar also influenced trading in software exporting stocks as over 50 per cent of the revenue comes from the US markets.

Besides the banking and realty indices which lost 3.11 per cent and 3.31 per cent respectively, IT stocks were also hit. Infosys Technologies led the fall in IT companies by shedding Rs 10.15 at Rs 1,249.40.

Reliance Industries, amid intense anticipation of its third quarter earnings, lost Rs 47.25 at Rs 1182.40. Infosys and RIL together carry nearly 23 per cent weightage on the Sensex