Sale of Reliance Industries shares by RIL’s Petroleum Trust

In the last few days, newspapers are full of reports on the sale of RIL’s shares by Petroleum Trust managed by RIL.

Many experts have commented about the impact of the transaction. RIL has also issued a communication saying “the financial impact will be reflected in the consolidated statement of the company.”

The reality is that the RIL Group has raised Rs 3,188 crore of cash from the sale. Reports on various uses of the cash, including investment in a global acquisition, are doing the rounds.

A bit of understanding of the background and the relevant accounting standards will help the readers reach the right conclusion as to how the transaction will impact RIL’s results.

First and foremost the legal entity, which sold the shares, is Petroleum Trust, and not RIL. Reliance Industries Investments and Holdings Limited, a 100 per cent subsidiary of RIL, is the sole beneficiary of Petroleum Trust. Hence the transaction will not be reflected in the standalone accounts of RIL.

However, consolidated accounts of RIL will reflect the transaction. This is in line with the RIL’s communication issued in this regard.

Transfer of shares

This leads to the critical question of s the meaning of “will be reflected in the consolidated statement of the company.” The popular understanding is that the profit will be credited to the P&L account. Before jumping to this conclusion, let us look at the facts and the relevant accounting conventions. Let us first look at how the shares came into the possession of Petroleum Trust.

Prior to merger of the earlier Reliance Petroleum and IPCL, RIL transferred its shareholding in the merged companies to Petroleum Trust. On merger, Petroleum Trust received RIL shares as per the approved exchange ratio. The other option RIL had at the time of merger was to cancel these shares. If this option had been exercised , RIL’s share capital would have been lower to the extent of the face value of the shares issued to Petroleum Trust and reserves would have been higher by an equal amount. There would not have been any impact on the P&L account.

In consolidated accounts, there is no difference between the holding and its 100 per cent group companies. Logically, no company can generate profit by issue of its own shares.

Sale of treasury shares by the group company is equal to the issue of own shares at a premium. Hence, such transactions can’t impact the P&L account.

Accounting conventions

Let us look at the accounting convention relating to treasury stock. As per international practice, buybacks can create treasury stock. However, under the buyback regulations of India, companies are not allowed to create treasury stock through buyback.

So, let us look at the international accounting standard governing the treatment of profit or loss from the trading of treasury stock. As per IAS 32, treasury stock held on the balance-sheet date has to be deducted from the share capital. Any profit/loss on sale of treasury stock during the period has to be adjusted to reserves and cannot be reflected in the P&L account. In this context, it may be noted that RIL in the consolidated accounts for 2007-08 has not deducted the treasury stock held by Petroleum Trust but has given a note on this.

From the above, logically and also as per the accounting conventions, the profit from the sale of these shares will not form part of profit for the year. But there is no doubt that shareholders could stand to benefit from the use of the cash generated from the sale.

Fund houses try to lure investors with gold ETFs

Many mutual fund houses are planning to launch gold exchange traded funds (ETFs) to cash in on the buzz around gold.

At least four fund houses are planning to launch gold funds or gold ETFs. HDFC Mutual Fund and ICICI Prudential filed draft offer documents with SEBI in September. Religare Mutual Fund is expecting SEBI approval for its gold ETF. Principal PNB Mutual Fund is planning to apply to SEBI for a gold ETF to be launched in three months, said Mr Sudipto Roy, Business Head of Principal AMC.

Gold prices were at Rs 15,865/10 gm on Wednesday closing. According to a senior industry analyst, it is only the euphoria around gold that might be prompting fund houses to launch these gold ETFs as fundamentally one does not enter a market that might be in danger of peaking. “For example, in 2007, when the market was already at the peak, we saw a large number of equity funds being launched although it was not the right time to enter the market at such high peaks,” she explained.

Gold prices have been going up in the past few months and fund houses are looking at this as an opportune time to launch gold ETFs, said Mr Krishnan Sitaram, Head of Crisil Fund Services, CRISIL. This would not only complete the product suite of these fund houses but is also a way of tapping the current investor interest in gold, he added.

While there is a section of analysts who feel investors would stay away from investing in gold ETFs at this level, some, such as Ms Lakshmi Iyer, Head of Products of Kotak AMC, feel that there is a case for investors to enter even now as gold prices could increase further. “Maybe they could wait for price dips at some intervals and then invest,” said Ms Iyer.

However, some mutual fund houses are putting their gold plans on hold. Tata Mutual Fund that had plans for a Gold ETF has shelved them. “Gold has already touched a peak and now there is lack of appetite in the market. At this point of time it doesn’t seem appropriate to launch a gold ETF,” said a Tata Mutual Fund spokesperson.

Fresh inflows into the six existing gold ETF schemes were minimal this August, around Rs 16 crore, against Rs 45 crore in July, and Rs 34 crore in June. But the assets under management of these schemes have risen since June from Rs 844 crore to Rs 904 crore in August, largely due to the rise in gold prices.

(Source: The Hindu BusinessLine)

Housing prices may go down

Global property consultancy firm, Knight Frank India, has said that prices in the residential property segment are likely to decline in a short time.

"We feel prices of residential segment may go down over a period of time," Knight Frank India's chairman, Pranay Vakil, said.

The residential segment may see a robust demand in certain markets, he said, adding that it was also a good time for property developers to invest in land.

Demand for real estate at this stage is a combination of investor-led demand and end-user demand. While investor demand is due to shift in money from equity markets, end-user demand is due to increased consumer confidence and pent-up unmet demand from the recession period. This leads to a rapid increase in demand for real estate and a corresponding increase in property prices, he said.

Today, property buyers are worried that prices may go down further after they purchase the property and projects may not be completed on time, Vakil said.

Knight Frank launched a book titled Real Investment -- a real estate investment guide for India. The book seeks to lend a helping hand by covering all the information that one may require while investing in real estate.

The book compiles the perspectives of real estate industry experts to help deepen knowledge about real estate and consider it as an asset class.

Commenting on the book launch, Vakil said, as property advisors, we continuously work with some of the best minds in the sector. We felt the need for a single credible source of information for which we brought together the best minds in the business.

This book makes the seemingly daunting task of delving into the real estate market simpler by offering tips on how to make real estate a lucrative investment option."

Indian Vintner settles court case with Australian Vintage

Indage Vintners has settled the court case filed by the Australian Vintage by giving them Australian wine as compensation for not completing the deal to buy the Loxton winery and foregoing the initial deposit.

According to a report in Indian Wine Academy, under the settlement, Australian Vintage has received an amount that would be used towards purchase of wine from Thachi Wines in South Australia, owned by Indage. The wine is in addition to the USD six million non-refundable deposit previously paid to Australian Vintage by Indage for the Loxton acquisition. Australian Vintage has retained the Loxton winery and the suit has been withdrawn.

Indage had agreed to acquire the 90,000 tonne-capacity Loxton winery in South Australia from Australian Vintage for USD 60 million in March 2008. The sale was to be completed by September 2008 but was subsequently deferred until October, 2008 when Indage had said that it would be unable to complete the purchase of the winery at the designated time but it remained committed to the acquisition.

Uninor new brand name for Telenor-Unitech JV

Unitech Wireless and Norwegian telecom operator Telenor today announced that their mobile services in India will be named 'Uninor'"The announcement of the 'Uninor' name is a significant milestone in the roll-out of the operations in India as we move closer to the launch. Within the Telenor Group's existing markets, the Uninor brand will represent our vision and core values," Telenor Group President and Chief Executive Officer Jon Fredrik Baksaas said in a statement.

The 'Uninor' name will leverage from Telenor Group's established marketing and design framework, it added.

The new name is in line with Telenor's brand strategy in other markets like Bangladesh and Malaysia, where its mobile service is being marketed under a distinct regional brand.

Unitech Wireless has recently lined up a Rs 5,000 cr bridge finance with the State Bank of India, which includes bank gaurantees and a letter of credit that would help the company fund its 22 circle rollout.

Warren Buffett sitting on billions of paper profits

Warren Buffett has done it once again. Just like he has been doing it over and over again since the start of his career as a security analyst and money manager. 'Be greedy when other are fearful, and fearful when others are greedy' goes his simple homily. But simple doesn't necessarily mean easy, just like it wasn't easy to put your hard earned money in the stock market between September 2008 and March 2009. The markets were tanking almost everyday. Fear was everywhere, gripping everyone.

But not Warren Buffett. Buffett was busy. Busy being greedy that is. Some of his bigger buys during that period were US$ 230 m in BYD Co, a Chinese car and battery maker, and US$ 5 bn of preferred stock in Goldman Sachs along with another US$ 5 bn worth of warrants in the company. The Goldman investment has since generated a US$ 2 bn paper profit for Berkshire Hathaway.

The BYD investment too has been nothing short of a bonanza. In September 26 2008, Berkshire bought 225 m BYD shares at HK$ 8 each, then worth about US$ 230 mn in total. BYD shares closed at HK$ 42.9 this Friday, thus valuing Berkshire's stake at an eye popping US$ 1.25 bn now. Yes, value investing remains as alive and kicking as it was when Buffett started his career. And as you can see above, it can be immensely rewarding for the disciplined practitioner.

Airlines hold India to ransom

Aviation is a bewildering sector. It ranks among the finest achievements of human technical progress. It also ranks among the most difficult businesses to run profitably. Little wonder then, that in a bid to demand a bailout from the government, leading airline operators in India have called for a strike on August 18.

The pioneer of low cost airlines in India, Captain Gopinath calls the step a gimmick. He says, "The business magnates, Vijay Mallya or Naresh Goyal, know the reality: airport infrastructure is costly, oil prices are high. But they started a business and took a risk...The message to airlines is that there is lot of cost cutting they can do themselves."

He adds, "They got together as a cartel and fixed price by blaming fuel surcharge. That was the beginning of airlines’ woes - occupancy fell, collections came down and losses went up." We agree. Although the government needs to do much more in making the Indian aviation sector more viable, holding the public to ransom is hardly the way for businesses to negotiate terms.

In fact, on being asked what should the Government do if the airlines insisted on the strike, Gopinath said, "The Government can arrest airlines chiefs under the Essential Services Maintenance Act - if truckers can be arrested they can do the same thing here."

What are structured settlements and how to get them?

What are Structured Settlements?

When law suits are settled, damages may be awarded in a lump sum, or a series of payments. A settlement which is awarded in a series of payments over time is called a structured settlement. Structured settlements are generally created by using a third party intermediary to provide the financing.

How to Purchase Structured Settlements?

State and federal law may restrict the sale of structured settlements, and there are many legal complications that can arise.

Since you’ll be exchanging cash for the right to receive future payments, you’ll want to make sure that you are protected.

1. Work with an established broker.

2. Look for a structured settlement financing company who is a member of the National Structured Settlements Trade Association who also places settlements with private investors.

3. Get multiple quotes to ensure you get the best deal.

4. Retain an attorney to review the agreement to ensure your interests are protected.

Compete Detailed Instruction And Tips About Purchase Structured Settlements Links can be found on the side bars and at the bottom of this page.

Benefits of a Structured Settlements

One significant advantage of a structured settlement is tax avoidance. With appropriate set-up, a structured settlement may significantly reduce the plaintiff’s tax obligations as a result of the settlement, and may in some cases be tax-free.

A structured settlement can protect a plaintiff from having settlement funds dissipated, when they are necessary to pay for future care or needs. Sometimes a structured settlement can help protect a plaintiff from himself – some people simply aren’t good with money, or can’t say no to relatives who want to “share the wealth”, and even a large settlement can be rapidly exhausted.

Minors may benefit from a structured settlement as well, such as a settlement which provides for certain costs during their youth, an additional disbursement to pay for college or other educational expenses, and then one or more disbursements in adulthood.

An injured person who has long-term special needs may benefit from having periodic lump sums with which to purchase medical equipment or modified vehicles. In some situations, it will be better for a severely disabled plaintiff to set up a special needs trust, rather than entering into a lump sum or structured settlement.

Any plaintiff who is receiving, or expects to receive, Medicaid or other public assistance, or the guardian or conservator entering into a settlement on behalf of a disabled ward, should consult with a disabilities financial planner about their situation before choosing any particular settlement option or structure.

Buffett makes his billions

We were all surprised a year ago, when Warren Buffett bought US$ 5 bn of Goldman Sachs preferred stock. After all, Lehman Brothers had just collapsed and Wall Street was tottering. Moreover, Buffett's past involvement with bankers like Salomon Brothers had turned out to be time consuming affair.

But then, he rarely passes a good deal, even if there is bad news all around. In fact, especially when there is bad news all round. The next day Buffett had said, "The price was right, the terms were right, and the people were right." Buffett also secured a margin of safety from the terms of contract - a 10% dividend and also the right to buy US$ 5 bn of common stock at a strike price of US$ 115 per share.

A year later, his decision has turned out be correct. Buffett's investment in Goldman has made Berkshire Hathaway richer by US$ 3 bn in twelve months! Given the current share price of Goldman Sachs at US$ 183, the warrants alone are worth US$ 3 bn ((US$ 183 - US$115)*45 m warrants). Of course, the warrants were not available to the ordinary investor in the US. But then, all he needed to do was buy the common stock to comfortably outperform the broader market. Easier said than done! Don't you wish that Buffett could invest for you too?

Data source: Yahoo Finance

Monsoon deficit has come in at 22%

With the monsoons season slated to end on September 30, the rains have finally begun to withdraw in many parts of the country, and will do so in the rest of the country over the next few days. They have however, left in their wake, an overall rainfall deficit of 22% and concerns about the Kharif harvest. The maximum deficiency of 34% is seen in the north-west region of India, followed by the north-east with 25%, central India with 19% and the southern peninsula with a deficit of 8%. The only positive was the month of September, which witnessed a fresh spurt in rain that benefited the already standing Kharif crops and also raised hopes about timely sowing of Rabi crops, thus alleviating the adverse effects of the deficit to some extent.

FCCBs are back in vogue

FCCB's caused a lot of pain to Indian companies in the form of forex and mark to market losses during 2008 with the unexpected depreciation in the rupee. But that bad phase seems to be forgotten rather quickly with a spurt in FCCB issues by many companies once again. As per reports, in the past four days, four companies have announced plans to raise a total of about US$ 702 m through FCCBs. Infact, even the coupon rates being offered on the same have seen a fall, going from 7% to 8% earlier this year to 4% to 4.5% recently. Despite that, we doubt if this propensity of Indian companies to expose themselves to the risk of foreign exchange rate volatility by way of FCCBs can be good for investors.

US dollar is a 'short' of the century

The US has launched a massive offensive in Latin America and has bombed its key cities'. Well, this might be a figment of our imagination right now but if veteran investor Marc Faber is to be believed, the event could actually play out in reality in few years. Speaking to a leading daily, Faber, the author of the Gloom, Doom & Boom newsletter believes that the fiscal and monetary responses in the US and elsewhere have solved nothing and postponed everything. And hence, when the moment of truth will finally arrive, there will be a total breakdown of the financial system. But before that, it is highly likely that Governments will continue to print more money, leading to high inflation rates, lowering of standards of living and eventually, wars. Faber heaped further criticism on the US dollar and believes that it is a doomed currency and is in fact, the 'short' of the century.

However, people staying in Asia especially in countries of China and India have little or no reason to fear as he believes that these countries are living in exciting economic times and these regions could see continued prosperity for years to come. Of course, as he very rightly pointed out, Asians should learn to grow from within the region rather than through exports to sick countries.

Standard & Poor’s Responds to Discussion Draft of the ‘Accountability and Transparency in Rating Agencies Act’

Standard & Poor’s Responds to Discussion Draft of the ‘Accountability and Transparency in Rating Agencies Act’

NEW YORK, Sept. 25 /PRNewswire/ — Standard & Poor’s released the following statement regarding the discussion draft released today by Rep. Paul Kanjorski, Chairman of the House Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises:
S&P is reviewing the initiatives proposed in the discussion draft of the bill, entitled “Accountability and Transparency in Ratings Agencies Act,” released today by Chairman Kanjorski. S&P will carefully study the proposed provisions and continue to engage with policy makers in Washington. Our goals remain the same: bolstering investor confidence, improving the performance of ratings and increasing transparency.
S&P itself has made many reforms in the past year to improve performance of ratings in structured finance.

These reforms include significant enhancements to our governance and transparency, as well as a substantial strengthening of our analytics. However, industry wide regulation is required to restore overall investor confidence in ratings.

Ratings are intended to provide an important and comparable global benchmark across all asset classes in terms of credit risk, thus facilitating access to capital for entrepreneurs and businesses, which helps drive the economy and create jobs. Regulatory reform should be designed to improve transparency and ratings performance. Reforms should also increase competition and not create new barriers to entry. S&P welcomes the opportunity to compete for investor interest in its ratings regardless of whether ratings are embedded in regulation rules for investors.

Standard & Poor’s, a subsidiary of The McGraw-Hill Companies (NYSE: MHP), is the world’s foremost provider of independent credit ratings, indices, risk evaluation, investment research and data. With offices in 23 countries and markets, Standard & Poor’s is an essential part of the world’s financial infrastructure and has played a leading role for nearly 150 years in providing investors with the independent benchmarks they need to feel more confident about their investment and financial decisions.

For more information, visit http://www.standardandpoors.com.

SOURCE Standard & Poor’s

New global structure for Metals, mining & steel from Banc of America & Merrill Lynch

Banc of America Securities-Merrill Lynch Research Announces New Global Structure for Metals, Mining & Steel Research Team; Hires Peter O’Connor as Asia Pacific Mining Analyst

NEW YORK, Sept. 24 /PRNewswire/ — Banc of America Securities-Merrill Lynch Research today announced a new global structure for the Metals, Mining & Steel Research team, along with the hiring of Peter O’Connor as senior Asia Pacific mining analyst. The restructuring reflects three key markets, each with a lead regional base metal/diversified mining analyst.

Asia Pacific

O’Connor will head the Asia Pacific effort and will be based in Sydney, reporting to Andrew Kearnan, head of Australia Equity Research. O’Connor will assume lead coverage of BHP Billiton and Rio Tinto and will take a primary role in coordinating our mining research effort in this fast-growing region. He previously worked at Deutsche Bank and Credit Suisse. Takashi Enomoto will continue to cover Japanese steel, metals and mining companies.

Europe, Middle East and Africa (EMEA)

Jason Fairclough will assume the role of lead regional analyst for EMEA, covering large cap diversified miners, including Xstrata and Anglo American. In addition, Fairclough will work closely with O’Connor in the coverage of BHP Billiton and Rio Tinto for EMEA clients. Fairclough will also have direct responsibility for metals and mining research in Russia, South Africa and other regional offices. Fairclough reports to Simon Greenwell, head of EMEA Research.

Americas

Felipe Hirai will be the lead analyst covering diversified miners in the Americas, including Vale, the largest diversified miner with a primary listing in the region. Kuni Chen will continue to cover large cap U.S. mining companies, steel & coal. Hirai and Chen report to Steve Haggerty, head of Americas Equity Research.

“I am very pleased that Peter will be joining the team and increasing our metals, mining and steel research coverage in the Asia Pacific region,” said Candace Browning, head of Banc of America Securities-Merrill Lynch Global Research. “I am confident that the new structure of the group will meet the evolving needs of our increasingly globally focused client base.”

The Banc of America Securities-Merrill Lynch Global Metals, Mining and Steel Research team comprises 30 dedicated and contributing analysts covering 110 companies, representing USD$1.4 trillion in market capitalization.

Mike Jalonen will continue serving as lead global gold analyst and global coordinator for the group. Mike is based in Toronto.

The group’s research will continue to incorporate views from the global commodity research team, headed by Francisco Blanch and including Michael Widmer, recently hired metals commodity strategist.

The goal of Banc of America Securities-Merrill Lynch is to be the premier global research franchise, providing clients with exceptional service, value-added investment insights and alpha-generating investment recommendations. Since January 2009, Banc of America Securities-Merrill Lynch Global Research has hired 21 analysts in the United States and an additional 35 analysts globally.

The company covers nearly 3,000 stocks globally and ranks in the top tier in many external surveys. Most recently the company was named Top Global Broker, Top U.S. Broker and No. 2 Europe Broker by Financial Times/StarMine and Best Brokerage by Forbes/Zacks. In addition, the company ranked No. 1 in the 2009 Institutional Investor All-Europe survey for Pan-European coverage, No. 2 in the Institutional Investor 2009 All-Brazil Research team survey, and No. 3 in the Institutional Investor 2009 All-Latin America and All-America Fixed-Income Research team surveys.

Bank of America

Bank of America is one of the world’s largest financial institutions, serving individual consumers, small- and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services.

The company’s corporate and investment banking, and sales and trading businesses operate under the Bank of America Merrill Lynch brand. Bank of America Merrill Lynch focuses on middle-market and large corporations, institutional investors, financial institutions and government entities. It provides innovative services in M&A, equity and debt capital raising, lending, trading, risk management, research, and liquidity and payments management.

Bank of America Merrill Lynch serves clients in more than 150 countries and has relationships with 99 percent of the U.S. Fortune 500 companies and nearly 96 percent of the Fortune Global 500.

Bank of America Merrill Lynch is the marketing name for the global banking and global markets businesses of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., member FDIC.

Securities, strategic advisory, and other investment banking activities are performed globally by investment banking affiliates of Bank of America Corporation (”Investment Banking Affiliates”), including, in the United States, Banc of America Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, which are both registered broker-dealers and members of FINRA and SIPC, and, in other jurisdictions, locally registered entities.

Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured * May Lose Value * Are Not Bank Guaranteed

SOURCE Banc of America Securities-Merrill Lynch Research

Buy UCO Bank, Dena Bank on dip: M Thacker

Buy UCO Bank, Dena Bank, IndusInd Bank and Vijaya Bank on dips, says Mitesh Thacker, Technical Analyst, miteshthacker.com.

Thacker told CNBC-TV18, "On the midcap banking stock we have been very positive. All these stocks have formed very bullish formations for the last few weeks and now they are giving breakout above these kinds of patterns. So UCO Bank, Dena Bank, IndusInd Bank and Vijaya Bank all these stocks have got atleast 25-30% upside left into them. So this will happen over the next three-six weeks. But I think these stocks would be very good and will outperform the markets for the next couple of months. So I think very clearly we will recommend buying on every dips and as well as holding on to long positions for atleast 25-30% gains.”

Buy JP Associates at Rs 197-200: Gujral

Buy Jaiprakash Associates at Rs 197-200, says Technical Analyst, Ashwani Gujral.

Gujral told CNBC-TV18, "JP Associates is weakened; it had a breakout above Rs 257 but the management used it. Now if one wants to buy it, around Rs 197-200 is a strong support, there people could try and get into it."

Suzlon Energy has support at Rs 77-80: Gujral

Suzlon Energy has support at Rs 77-80, says Technical Analyst, Ashwani Gujral.

Gujral told CNBC-TV18, "Suzlon Energy is nothing kind of stock now; Rs 77-80 is a support. Each time it tries to get pass Rs 100 either there is selling from the public or by management, so that’s now a 25 point kind of range that’s developing in Suzlon, one would keep away from these stocks."

Mercator Lines has target of Rs 64.50: Anu Jain

Mercator Lines has target of Rs 64.50, says Anu Jain, VP, IIFL Private Wealth Management.

Jain told CNBC-TV18, "Mercator Lines is a short-term pick. We saw shipping except for Great Eastern yesterday which was relatively weak I think Mercator Lines and the other smaller shipping counters were looking smart. So this is with a stop loss of Rs 58, the counter will have a first target of about Rs 64-64.50, beyond Rs 64 actually this counter will get far more stronger than what it is today and that is when the actual move would play out. I would think that for the short-term obviously today may be opens around Rs 58 because it is a very high beta and highly volatile counter but you can accumulate it on dips as well. But at least for the current trend which it showed yesterday the stoploss is Rs 58 and the target is Rs 64.50.”

Aptech has target of Rs 295: Anu Jain

Aptech has target of Rs 295, says Anu Jain, VP, IIFL Private Wealth Management.

Jain told CNBC-TV18, "Aptech is more with a short-term view. We have seen Educomp move the way it did yesterday. Today, both Everonn and Aptech are giving buy signals atleast on the basis of where the charts closed yesterday. Given the fact that it can open down, I think a pullback in Aptech and Everonn is possible. So, I would say if you get it closer to Rs 275 then that is the stoploss around Rs 274.90. A target for the first time would be Rs 295. But again this is a trading target. Beyond this I think for a three-six month view this can definitely cross Rs 305 where the last resistance was. Beyond that, you can get a definite move closer to Rs 350 plus. So, the picks today are more from a longer point of view with a short-term positive bias as well.”

Orbit Corporation a good bet: Anu Jain

Orbit Corporation a good bet, says Anu Jain, VP,IIFL Private Wealth Management.

Jain told CNBC-TV18, "Orbit Corporation would be the best bet because that’s moving circuit-to-circuit and that’s got far more strength and I think real estate will make a bounce back."

Buy IDBI Bank on dips: Anu Jain

Buy IDBI Bank on dips, says Anu Jain, VP, IIFL Private Wealth Management.

Jain told CNBC-TV18, "Midcap banking has shown strong resurgence over the last couple of weeks. We saw how UCO Bank traded yesterday. I feel that IDBI Bank can. Obviously the market is going to open about 60 points down. So, there is going to be some kind of a pull down from yesterday’s levels. They’ll probably open closer to Rs 112-111. I have said you can buy IDBI Bank on dips right up to Rs 106 because that is where this time the breakout in it happened and it has gone right up to those Rs 118 odd levels."

She further added, "The breakout will actually happen beyond Rs 118 and I think the target in three to six months can be as high as about Rs 147 to Rs 150. So, I would keep a stoploss of Rs 105.90 because the trend began at Rs 106 and I’d pick up on dips. The idea is when the market gives you opportunities like how it gave yesterday and today, we can pick up stocks on dips like IDBI Bank, not just for day trading but also for about three to six months.”

Buy Axis Bank, target of Rs 1012: Sharekhan

Sharekhan has upgraded its rating on Axis Bank from hold to buy with a target of Rs 1012 in its September 23, 2009 research report. At 12:09 pm, the share was quoting at Rs 920.70, up Rs 2.45, or 0.27%.

"We are incorporating the capital raising exercise into our earnings model and revising our estimates upwards by 3.3% for FY2010 and by 4.7% for FY2011. Based on our revised earnings estimates, our two-stage dividend discount valuation model indicates a price target of Rs 1,012. At the current market price of Rs 920, the stock trades at 2.0x FY2011E book value per share and 2.3x FY2011E adjusted book value per share. We upgrade our recommendation on the stock to 'Buy' from 'Hold' with a revised price target of Rs 1,012," says Sharekhan's research report.

Invest in Gujarat NRE Coke: VK Sharma

Invest in Gujarat NRE Coke, says VK Sharma of Anagram Stock Broking.

Sharma told CNBC-TV18, "Gujarat NRE Coke is a better company in this sector and the ancillary companies are slated to do well incase the steel sector per say does well. So barring a quarter or two, the first two quarters of FY10 and thereafter the overall sector should do well and from that perspective it is a company, which has its all backward ends tied up in terms of mining rights which it has in Australia and extensive capacity in India at three locations. A good expertise and investor friendly company doesn’t leave one opportunity before giving a bonus to share holders whatever the issue is, so currently it’s not too expensive and going by the past track record and the prices have bottomed out at around USD 120 and thereafter this company which does not sell in terms of a yearly contract but it does sell on a monthly contract stands to benefit incase the prices go up. So you can continue to be invested in this particular stock.”

Deccan Chronicle has target of Rs 142: Hitesh Agarwal

Deccan Chronicle Holdings has target of Rs 142, says Hitesh Agarwal, Head of Research, Angel Broking.

Agarwal told CNBC-TV18, "Deccan Chronicle Holdings is a leading publications company having strong presence in south India, primarily Andhra Pradesh, Chennai and Bangalore. The main reason why we have turned bullish on this stock is that the company is now shifted its focus from its other brands to its core business of print and IPL, the company has been gaining traction in the print business by entering into the Bangalore Market. Apart from that IPL has been doing pretty well for the company and we are pretty upbeat about the prospects of money making on the IPL property front and apart from that, the newsprint prices have collapsed in the last one year by almost 35-40%, so we spent almost a 900 basis point improvement margins for this company. So in that sense we expect about a 45% CAGR for the next couple of years, so at around 10x FY11 earnings the stock is a very good buy at these levels. Our price target on this is around Rs 142.”

Cipla raises Rs 676cr via QIP to fund capex

Pharmaceutical major Cipla has raised Rs 676 crore via a qualified institutional placement (QIP) issue. Commenting on this development, Managing Director Amar Lulla said the QIP proceeds would be primarily used for capital expenditure. He clarified that the company had no plans for further fund raising in the near term. The company’s total debt was at Rs 500 crore, he said.

Reduce Cairn India: Prabhudas Lilladher

Prabhudas Lilladher has recommended a reduce rating on Cairn India, in its report dated September 25, 2009.

"With a ramp-up in crude production from the Rajasthan block, Cairn's earnings are anticipated to jump considerably over FY10-12. However, concern on the cess payment still remains. The stock price is currently discounting USD 84/bbl as long term crude prices. The stock is currently available at 6.5x FY12E EPS of Rs 39.6 and 3.6x EV/EBITDA. We have valued Cairn on NPV basis, considering crude oil and natural gas production from its existing and future assets. Considering USD 75/bbl as long term crude prices, we have arrived at NPV of Rs 240 for Cairn. We believe that the risk reward is unfavourable at this juncture and hence recommend 'REDUCE'," says Prabhudas Lilladher's report.

Is the World Losing Faith in the U.S. Dollar?

As the global economy appears headed toward recovery, concerns are growing that the United States’ addiction to massive fiscal stimulus as an economic panacea could eventually lead to an even bigger crisis — a loss of confidence in the U.S. dollar. Prominent voices are sounding dire warnings, worried that a gradual return to normalcy could undermine the political will needed to control deficit spending and prevent a disastrous long-term decline of the world’s primary reserve currency.

Nobel Prize-winning economist Paul A. Samuelson, for example, raised the specter of a “truly global financial panic” if countries funding the U.S. deficit, particularly China, decide their investments in U.S. Treasury securities are no longer safe. Similarly, Warren Buffett warned in The New York Timesthat side-effects of the current fiscal intervention could be as dangerous as the financial crisis recently averted — in the form of inflation eroding the dollar’s purchasing power.

Preserving the dollar’s strength has importance far beyond protecting American tourists from the shock of paying the equivalent of $25 for a hamburger in London or Tokyo. The U.S. dollar exchange rate is a key indicator of the nation’s economic health relative to other countries. A declining dollar leaves Americans worse off by driving up the cost of living, making imports of manufactured goods and commodities more expensive, and reducing the value of foreign investments when converted to dollars.

Economic experts are concerned about the dollar’s health for a number of reasons. Most importantly, the scale of current trade and spending imbalances puts heavy downward pressure on the dollar’s value over the long term. The U.S. imports far more goods and services than it exports, flooding international markets with dollars and undermining their value. The current account deficit — the net balance of trade in goods, services, income and transfers — was $700 billion in 2008. The U.S. trade deficit remains by far the world’s largest, although it declined 35% in the first quarter of 2009 as the recession dramatically reduced demand for oil and other imports.

“I see the potential for the dollar to deteriorate quite substantially in the long run,” says Wharton finance professor Richard C. Marston, unless Congress and the Obama administration quickly reduce spending as the economy recovers. “If we continue to borrow from foreign countries to sustain our spending, eventually there will come a time when asset holders around the world will begin to wonder whether the U.S. is credit worthy,” adds Marston, director of the Weiss Center for International Financial Research.

Reflecting the size of the fiscal stimulus, the federal budget deficit is projected to be $1.6 trillion in 2009 — the highest level since World War II — amounting to 11% of gross domestic product (GDP), a dramatic increase from 3% in 2008. To fund its deficit spending, the U.S. depends on the willingness of major trading partners, such as China, Japan and Korea, to purchase and hold Treasury securities paying low interest rates. China has recently voiced serious concern about the potential inflationary impact of the U.S. fiscal stimulus on the value of China’s $1.5 trillion in U.S. government securities and other dollar-denominated reserves.

Making matters worse, the U.S. and China have relatively few policy options to immediately address the twin deficits and strengthen the dollar. The prospect of a slow and relatively weak economic recovery in the U.S. makes it unlikely that policy makers would consider raising interest rates or taxes in the near term. As U.S. consumers have cut spending, raising the personal savings rate to 7% of GDP, China’s exports have dropped by 20% or more, causing factory closings, unemployment and social unrest that threaten political stability. “China’s economy remains export-driven, so it will take whatever steps are necessary to prevent the renminbi from appreciating, including further purchases of U.S. Treasury debt,” says Wharton management professor Marshall W. Meyer.

‘Unsustainable’ Deficits

With the prospect of an economic recovery starting by the end of 2009, the biggest threat to the dollar, according to some observers, is the shift from reckless consumer spending during the housing bubble to unprecedented levels of government spending. While aggressive intervention was initially necessary to prevent a global economic collapse, experts warn of federal deficits that could lead to a long-term decline in the dollar. Indeed, the Congressional Budget Office, projecting a cumulative 10-year deficit of $9 trillion by 2019, or 5% of GDP, said long-term deficits driven partly by Medicare and Social Security were “unsustainable” and would reduce the nation’s economic growth.

While the deficits and China will impact the long-term direction of the dollar, a different set of factors makes it extremely difficult to predict short-term fluctuations in exchange rates. In the near term, over the next six to 12 months, the dollar will be influenced primarily by the strength of the U.S. economy and the attractiveness of its financial markets, relative to other countries. “To put it mildly, the outlook for the dollar is very confusing,” says Wharton management professor Mauro F. Guillen.

“We have certain long-term structural forces that are likely to undermine the dollar,” notes Guillen, director of the Joseph H. Lauder Institute of Management and International Studies. “At the same time, the dollar is still the leading reserve currency and serves as a safe haven for investors when there is too much economic uncertainty. So it’s important to keep one eye on short-term movements, but keep the other eye on long-term trends affecting the dollar.”

The euro, for example, appreciated sharply against the U.S. dollar during the period leading up to the financial bubble, peaking at nearly $1.60 in mid-2008 amid growing concern about U.S. markets. When the financial crisis erupted in late 2008, the euro dropped precipitously to nearly $1.25 in a “flight to quality” as investors sought the relative safety of U.S. government securities. By late August 2009, the euro had appreciated to a more normal level of about $1.40, reflecting increased confidence that the eurozone had begun a sustainable recovery.Similarly, the yen has appreciated about 25% against the dollar, from 124 yen in mid-2007 to 92 yen in early September 2009. Despite weakening early this year, the yen has continued to appreciate during the second and third quarters.

Recent appreciation of the euro and yen versus the dollar partly reflect the regions’ faster-than-expected recoveries, with Germany, France and Japan returning to positive GDP growth in the second quarter, compared with a 1% decline in the U.S. A doubling of the U.S. unemployment rate to 9.5%, compared with relative stability in France, Germany and Japan, likely accounted for the slower recovery in the U.S., according to Wharton finance professorFranklin Allen, co-director of Wharton’s Financial Institutions Center. “The fear of unemployment in the U.S. is a huge drag on the economy,” he adds, as millions of consumers stop spending because they worry about losing their jobs.

Despite the success of its fiscal stimulus and a massive trade surplus with the U.S. ($300 billion in 2008), China prevents the renminbi (RMB) from appreciating by aggressively buying surplus dollars, artificially pegging the exchange rate at about 6.8 RMB to the dollar. China had allowed its currency to gradually appreciate by 17.5% against the dollar between 2005 and 2008, but halted its rise during the economic crisis to prevent further deterioration of its exports.

The policy change “is very counterproductive” because China’s massive dollar holdings “are held hostage” to its policy of supporting exports, Marston says. China must continue to invest in U.S. dollar assets and cannot diversify into other currencies without causing a decline in the dollar, which would hurt exports, he states, adding, however, that by subsidizing U.S. consumption in the short run, China increases the trade imbalance and risks a long-term decline in the dollar that will reduce the value of its $1.5 trillion in dollar reserves.

In addition to urging the U.S. to address the risks of inflation, Chinese officials have called for creating an alternative currency reserve system that would offer more stability for its foreign exchange reserves. Still, the dollar is likely to remain the dominant reserve currency for the foreseeable future because the U.S. economy and financial markets are much larger than Europe’s, and China’s currency isn’t freely traded, Marston notes. “China can always relieve its buildup of foreign exchange reserves by allowing the renminbi to start appreciating again.” For now, however, China has made a political decision to keep its currency undervalued.

With developed economies returning to normalcy following the elimination of crisis-related currency imbalances, the outlook for exchange rates in coming months will depend largely on how quickly the U.S. economy recovers relative to Europe and Japan. Another important factor is the relative performance of financial markets, “whether hedge funds and other investors choose to invest in dollar or non-dollar assets,” Marston says. He sees the potential for further appreciation of the euro and a weakening of the yen, hurting Japanese exports. Overall, though, economic recovery is likely to remain slow in the U.S. and elsewhere, with corporate profits rising much more rapidly than employment — “the kind of recovery where most Americans will believe we’re still in a recession.”

The most likely scenario over the next several years is a continuing depreciation of the U.S. dollar as currency markets gradually adjust to reduce the massive trade imbalance, notes Guillen. Despite the global economic slowdown, the U.S. current account deficit is projected to exceed $400 billion in 2009. “The dollar has to depreciate,” he says, adding that the trade deficit remains very large even though the dollar has fallen 21% since 2000 (including 5% in 2009 alone).

In addition, “the budget deficit will produce some inflation, and that is likely to undermine the value of the dollar,” Guillen notes. Two alternative scenarios would help support the dollar — global uncertainty leading to a flight-to-safety similar to 2008, or an economic recovery that is strong enough to allow the Fed to rapidly raise interest rates. Since Guillen sees these scenarios as unlikely to occur, “the balance of forces is tending toward a weaker dollar,” which he says increases the importance of controlling inflation.

Counting on Cooler Heads

Marston, Guillen and Meyer suggest two steps that can help avoid rising inflation and a loss of confidence in the U.S. dollar.

First, reduce the U.S. budget deficit.

As economic growth slowly builds to a full recovery within two to three years, the bond and currency markets will signal inflation risks requiring the Fed to raise interest rates and Congress to reduce spending. “I’m optimistic that cooler heads will prevail,” Marston says, addressing the consequences of the fiscal stimulus before the deficit spirals out of control. “Clearly there will be some deterioration in the dollar” over the next several years. But he expects the Obama administration to avoid a dramatic depreciation by adopting debt-reduction policies similar to the Clinton administration, which balanced the budget for the first time in 30 years in 1998. One likely result is “higher taxes — very hard to avoid,” Guillen says, given the size of the deficit and the unlikelihood that economic growth can generate enough new revenue.

The second step is to support China’s gradual shift to a consumer-driven economy.

Whether China allows the renminbi to appreciate, easing the U.S. trade deficit, will depend on it making a long-term transition to a consumer-driven economy, Meyer says. The shift will ultimately be in China’s interest by reducing the cost of importing oil, raw materials and food, and promoting political stability. “China faces a serious dilemma. If the U.S. has inflation, China’s holdings in dollars go down in value. But if they allow the renminbi to appreciate, it hurts the export economy.”

Meyer expects China to eventually make the transition to a consumer economy in five to 10 years, a process that will require retraining workers now in repetitive manufacturing and moving them into service jobs requiring higher skills. There is a growing realization in China, particularly among technocrats, that the export-driven model cannot lead to sustainable growth, he says. By over-investing in fixed assets, such as factories and infrastructure, the current system suppresses household consumption and creates boom-and-bust cycles that undermine stability. The U.S. should provide “every encouragement” for China’s transition, including assistance in retraining the workforce, Meyer suggests. “Our interest is served by stability in China.”

Source: Knowledge @ Wharton

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IPOs are coming back

January 2008 was a memorable month. It was when the bull market rally finally caved in. It was also when the much touted Reliance Power IPO came out and failed to live up to the huge expectations of investors. Now that the markets have left their lows far behind, the IPOs are back. As per a leading business daily, Anil Ambani plans to come out with another huge IPO of about Rs 40 bn in about two months. This time around, he plans to sell around 10% of Reliance Infratel (RITL) - the tower company that owns most of Reliance Communications' tangible assets. While the draft prospectus is yet to be filed, the strength of the company's business model (dependence on parent) and the valuations remain to be seen.

While IPOs serve a very important purpose of mobilizing savings and raising capital for companies, they are aggressively marketed and tend to come when markets are buoyant. Of course, it would be foolish to have a negative opinion on all IPOs on a blanket basis. However, in our opinion, it would be prudent for long term investors to remember the saying, 'caveat emptor' – let the buyer beware.

US$ 4.3 bn booster dose for India

India's economic growth and infrastructure development hopes are set to get a booster dose from none other than World Bank. As per a business daily, the World Bank has approved loans of US$ 4.3 bn for India to help finance India's infrastructure development. The loans are part of the World Bank's commitment to lend US$ 14 bn in crisis-related lending for Asia's third-largest economy over three years through 2012. The bank has also approved US$ 1.2 bn for India nodal infrastructure financing company - India Infrastructure Finance Co. Ltd (IIFCL) - to spur private financing for public-private partnerships in infrastructure, and to stimulate the development of a long-term local currency debt financing market. To expand the volume of credit available to Indian companies, the World Bank would also provide US$ 2 bn to India's banking sector. In addition, loans to the tune of US$ 1 bn have been approved to address India's acute power shortages by assisting the Power Grid Corporation of India in its investment programme.

We believe that while funding may not be an issue for India's infrastructure plans, execution delays and cost overruns may keep it from fructifying. Having said that, the World Bank's willingness to lend a hand to India's growth plan is at least indicative of a change in the world economic order.

Hold Orbit Corporation, says Sharmila Joshi

Hold Orbit Corporation, says Investment Advisor, Sharmila Joshi.

Joshi told CNBC-TV18, "The whole real estate pack has seen a bit of a run up and I think for that on Orbit Corp there would be a further upside from these levels as well, so I would really say a hold. We have seen all the real estate companies based in Mumbai do well and this is one of them and they have also have had a QIP issue and this will be used largely to retire part of their debt and also to fund some of the new redevelopment projects in South Mumbai. So from that perspective its okay because I think that even if you are diluting equity on one hand you are getting some offset in the gains in the interest costs that you will save, so from my side it’s a hold at this level.”

Hold Maruti Suzuki, target of Rs 1676: Sharekhan

Sharekhan has maintained its hold rating on Maruti Suzuki India with a target price of Rs 1676 in its September 22, 2009 research report. At 15:09 pm, the share was quoting at Rs 1,646.00, up Rs 5.15, or 0.31%.

"Accordingly our FY2011 estimates increase by 4.1% while our price target stands revised to Rs 1,676. At the current market price, the stock is trading at 19.8x it FY2011E earnings of Rs 83.8 and an EV/EBITDA of 12.7x. Thus, though the company’s prospects look good, considering its stock’s steep valuations we maintain our Hold recommendation on MSIL. However, MSIL remains our top pick in the auto sector," says Sharekhan's research report.

Amit Dalal positive on Reliance, Cairn, ONGC

Amit Dalal of Amit Nalin Securities is positive on Reliance Industries, Cairn India and ONGC.

Dalal told CNBC-TV18, "I remain positive on Reliance, Cairn India and ONGC not necessarily because of the USD 4 price movement in oil. But today for instance in Reliance, there is one piece of news which should not be ignored and that is NTPC ready to sign for the current requirement that it has of gas at more than USD 4 rather than wait for the agreement to be signed for the gas at more than USD 2 of its future requirements. So you now have a cash flow coming into Reliance irrespective of that particular situation and that’s already showing in advance tax figures.”

Don't buy Suzlon Energy, says Mohoni

Do not buy Suzlon Energy, says Technical Analyst, Deepak Mohoni.

Mohoni told CNBC-TV18, "This bull market has not been as kind to Suzlon as it has been to many of the other high beta stocks, this stock has to still catch up with its May peak which was over 150 and now it’s right now Rs 100 so its quite a bit, about 50% below the May peak. So it’s quite an underperforming stock and its tendency in bull markets is not showing up this time, so I would not buy this stock.”

Shubh Nivesh - Where is the labh?

SBI Life has launched its new product - SBI Life Shubh Nivesh. It is a traditional endowment plan with an option of a whole life cover. It is designed to meet the following needs of the risk-averse investor:

• Wealth Creation
• Savings
• Protection
• Income needs

The plan provides flexibility with respect to cash flows to the investors as there is a

• Lump sum payment at maturity
• Regular income for a chosen period - deferred maturity payment options (depending upon your needs)

SBI Life's Shubh Nivesh has the following two options for investors:

ENDOWMENT ASSURANCE	*WHOLE LIFE ENDOWMENT
The sum assured with all accrued bonuses will be paid on death during the endowment term	The sum assured with all accrued bonuses till the end of the endowment term will be paid to the policyholder
OR	AND
On survival, till the end of the endowment term	An amount equal to the basic sum assured will be paid on the life assured attaining 100 years of age or on the death of the life assured, if earlier.

* Investors will have to opt for the whole life endowment option at the proposal stage itself
AT A GLANCE

	Minimum Years	Maximum Years
Entry Age	18 years	60 years
Maturity Age	23 years	65 years
Policy Term	5 years	30 years
Sum Assured	Rs.75,000	No limit

TAX BENEFITS:

The plan entitles the investors to a tax benefit u/s. 80C and u/s. 10(10D), of the Income-tax Act, 1961.

Though the benefits offered by this plan are attractive, the premium paid by investors will be higher than that of a pure term insurance plan. The primary disadvantage of the whole life cover is that the internal rate of return may not be competitive as the other savings alternatives.

Importance of Critical Illness Insurance

WHAT IS CRITICAL ILLNESS INSURANCE ?

Critical illness insurance covers specified illnesses viz. cardiac arrest, coronary artery bypass surgery, cancer, multiple sclerosis, kidney failure, major organ transplant, etc. Policies for such illnesses are issued by life insurance and general insurance companies. This is available as a separate product or as a rider in a normal medical insurance policy. The person insured pays an extra premium (between Rs.3000 to Rs.8500), depending upon the term, age, coverage and desired sum assured.

FEATURES & BENEFITS

• It covers specified number of illnesses (10 in some cases of rider policies and 30 in case of most stand alone policies)



• There is a premium guarantee for a certain number of years for most policies (can change subject to approval of the Insurance Regulatory and Development Authority)



• Average age of entry is 6 years, but varies widely from product to product



• Coverage term and age up to which covered (up to 75 years is considered to be optimum) varies from policy to policy



• Survival condition expressed in number of days (example 30 days) in some policies for claim admittance



• Waiting period for claims in almost all cases (typically 3-6 months)



• Claim payments made as per pre-decided payouts (as a percentage of the sum assured are typically 50% to 100%.) Some policies limit the claim for particular illnesses



• After the claim payout is made for an illness, balance sum assured can be carried forward for other illnesses (offered by some policies - this is a very useful option)



• Benefit amount is paid over and above the other medical policy claims, as this is a defined benefit policy



• Tax benefits available under section 80D or 80C of the Income Tax Act, depending upon the plan structure

ANALYSIS - DO YOU NEED ONE?

Well, do you need one? The answer is yes. At times like these, one does not need the additional stress of worrying about expensive treatments.

We are of the opinion that the policy is not a replacement for a medical insurance - it is an additional coverage, for a specific need .

Here are some check points to enable you to take the decision:

• Assess your family health history, nature of work, financial capacity to absorb such an expense, etc.
• Take a view on the age up to which the cover is sought
• Study your policy benefit details
• Study the claim history of your insurer

Investors Rejoice!

What was initiated by SEBI on August 1, 2009 with the abolition of entry loads on mutual funds is proposed to be expanded to cover distribution of all financial products. The D Swarup Committee on Investor Awareness and Protection, in its consultation paper has made far reaching and comprehensive recommendations on this subject including a proactive approach to creating investor awareness. The paper is currently being discussed and reviewed amongst interest groups.

The recommendations have twin objectives - setting up a regulatory system with common standards for financial advisors and integrated approach to financial education.

Recommendations:

• No-load structure - all retail financial products should go "no-load" by April 2011. This will remove the bias of selling products with the highest commission



• Financial education for advisors and investors - The proposal to set up the Financial Well-Being Board of India (FINWEB) is an approach to convert awareness into knowledge



• Entry barrier - a common minimum entry barrier for all financial advisors which will include a knowledge-linked training programme and a common examination pattern. In addition, there would be different licenses based on the skill sets of the advisor and the type of products and services he can sell



• Code of Conduct - to establish a standard code of ethics across all products and organisations, to ensure that all advisors are registered with FINWEB and to set up a body with the power to admit, discipline and demit members



• Disclosure norms - investors should be informed about the total cost borne by them, the income earned by advisors from the sale and maintenance of a product, the risk carried by the product and the role of the product and its outcome



• Reporting norms - to include documentation of sale proceeds and a declaration counter-signed by the investor acknowledging the disclosures made by the advisor. This will avoid the practise of hit-and-run financial products wherein an advisor hits an investor with a product and runs



• Punitive actions for advisors - penalties, loss of license to do business or criminal proceedings in case of mis-conduct / mis-selling



• Dispute Redressing - investors will have a common interface to complain about financial products, services and outcomes


We believe these recommendations have a two-fold effect

• Increase investors knowledge of financial products and the way they are structured
• Ensure that the products are sold keeping only investors' interest in mind, without being influenced by commissions earned by distributors

Aircel signs tower sharing deal with Datacom

New Delhi: Telecom major Aircel has signed a $400-million tower sharing agreement with Datacom Solutions, part of the Videocon group, the companies said Thursday.

According to the deal, Datacom, which holds a licence to roll out mobile telecom services but is yet to launch operations, can use at least 5,000 Aircel towers for 16 months.

Aircel, which currently owns around 15,000 towers across the country, will in turn create value by increasing tenancy and reducing costs across its towers.

"This is a landmark deal and unique opportunity for Datacom to go faster on its pan-India rollout," said V.N. Dhoot, Chairman and Managing Director of the Videocon group.

"Access to Aircel's towers will help meet our aggressive rollout targets. We are also rolling out our own towers and for those towers, we would like to have other operators as tenants," he added.

HCL signs 5 year deal with Energy Future Holdings

Bangalore: HCL Technologies (HCL), a global IT services provider, has entered into a five year transformational IT infrastructure management engagement with the Energy Future Holdings (EFH), a Texas-based, privately-held energy company with a portfolio of competitive and regulated energy subsidiaries.

HCL will be responsible for managing EFH's IT Infrastructure landscape comprising of Data Center (DC), Voice and Data Networks and end user computing services. HCL's service desk will provide support to EFH end users, including desk-side support, in complete compliance with the stringent NERC, PCI, SOX and FCC regulatory frameworks. HCL will also be responsible for providing touch services for the centralized and distributed data centers.

R Srikrishna, Senior Vice President and Head-Global Sales, HCL's Infrastructure Services Division (HCL ISD), observed, "This engagement re-iterates our focus on the Texas region where we continue to invest aggressively. We are well positioned to use our transformational expertise to deliver significant operational efficiencies and provide enriched experience to EFH's consumers and end-users."

EFH will leverage HCL's state-of-the-art MTaaS' Business Service Management (BSM) platform which provides online, real-time business service visibility and ensures proactive IT management. HCL will also collaborate with EFH to develop an IT Transformation roadmap for the next five years. As part of this roadmap, HCL will be responsible for migration and consolidation of data center, disaster recovery & continuity, next generation network infrastructure and open systems and mainframe modernization. HCL AXON has been working with EFH's subsidiary TXU Energy for the last two years in design, architecture, implementation and rollout of TXU's SAP applications and underlying infrastructure.

"EFH has enjoyed a very successful relationship with HCL Axon through TXU Energy, and we are delighted to extend our relationship to HCL with this new engagement. We look forward to a long and mutually beneficial partnership" said Linda Jojo, SVP and CIO for Energy Future Holdings.

HCL was recently ranked as World's No.1 IT Infrastructure Services Provider by Blackbook of Outsourcing Survey 2009. The company has recently announced many landmark global engagements like Nokia, Reader's Digest Association, Dr. Pepper Snapple Group and Viacom Inc.

After subprime, it is crisis of another kind

After subprime crisis and liquidity crisis, it is now the turn of currency crisis. Investment guru Jim Rogers believes that the worst of the economic crisis is not yet over and a currency crisis can happen this year or the next year. And what is the reason he has cited for the same? There is too much debt in the system. For instance in the US, the deficit has soared above the US$ 1 trillion mark and is not likely to reduce dramatically for some years to come. What is more, the gargantuan stimulus packages announced by the Obama administration while they will pull up the economy in the short term, is certain to come back and haunt the economy in the longer term. Hence, the pressure on currencies notably the dollar is likely to intensify.

Rogers further believes that the current recovery is a just a consequence of the fact that consumption had plunged so drastically in 2008 that people have to buy things that they need in 2009. And that it would be folly to assume that China would bail out the world from the crisis, when it has its share of problems as well for which it is utilizing the resources it had saved up till date. We believe that Jim Rogers has come up with some valid arguments and it will be interesting to see how the dollar reacts to this chain of events over the coming months.

The Trillion Dollar Push For Markets

India's infrastructure story goes well beyond roads, bridges and ports. It anchors on the savings of Indian citizens. Yes, you read that right! As per the latest Goldman Sachs report, India will require US$ 1.7 trillion in financing over the next decade to meet its infrastructure needs. This estimate tops both Goldman Sachs' earlier estimate of US$ 620 bn as well as our government's 11th Five-Year Plan (2007-2012) infrastructure spending of US$ 500 bn. Even if the financing for the 11th Plan has been accounted for, we will need at least a trillion dollars more to execute the investments required.

Goldman Sachs expects most of the infrastructure investment to be funded by India's domestic savings without significant recourse to external borrowings. This belief stems from the trend of rising domestic savings rate and robust balance sheets of private sector companies. Goldman Sachs has pegged the gross savings rate in Asia's third largest economy to rise to 40% of GDP by 2016 (from 37% in FY09) and remain at high levels for well over a decade. These savings will be pertinent to fund public private partnership (PPP) projects that are estimated to fund 30% to 50% of the total infrastructure investment in the next decade. However, what is even more important to note is that for this plan to fructify, India's household savings must be intermediated through the financial sector (pension funds, insurance and the like) to the government, which then spends on infrastructure. Else, as the chart shows, rising savings could possibly have little or no impact on public sector / infrastructure investments.

Source: CMIE
Allowing institutions like IIFCL to raise funds through long term bonds or allowing the Pension Fund Regulatory and Development Authority (PFRDA) to route investments from pension funds to equity and debt markets for the long term could be ideal ways to tap the potential savings.

India's infrastructure buildup and financing thus presents enormous opportunities, not just for producers of capital goods, developers and raw material providers, but also for financial intermediaries.

IPO of Pipavav Shipyard – to apply or not?

The IPO of Pipavav Shipyard is priced at the price band of Rs.55 to Rs.60. The Company is promoted jointly by SKIL Infrastructure and Punj Lloyd.

Pipavav Shipyard (PSL), promoted by SKIL infrastructure and Punj Lloyd, is targeting a rapid ramp up in its order book by focusing on the defence and offshore business. PSL’s shipyard has become partly operational from April 2009 and should be fully operational by Q3FY10. Though the yard would be India’s largest in terms of capacity with the capability to build various kinds of vessels, the current order book quality does not instil confidence. The order book is highly skewed in favour of dry bulk carriers, with more than 1/3 of the order book under renegotiation/arbitration process.

Planning to focus on business from defence sector

The Indian government’s drive to go indigenous in the defence sector provides a huge opportunity for PSL. According to the company, the opportunity in the defence sector is about Rs 1,94,000 crore over the next five years. PSL has
received enquiries from defence departments to the tune of Rs 15,000 crore.

Leveraging opportunities from Punj Lloyd’s offshore business

As a co-promoter, Punj Lloyd has agreed to conduct all its offshore business (excluding the construction and fabrication of sub-sea pipelines) through PSL in India. This will enable PSL to leverage on Punj Lloyd’s present and future business opportunities and grow rapidly in the offshore segment.

Large scale capacities and flexible product mix

Pipavav Shipyard is expected to have the largest dockyard in India of approximately 662 metres. The yard is expected to have the capacity to handle a wide array of vessels ranging from very large crude carriers to offshore supply
vessels and naval defence vessels.

Out of PSL’s order book of 34 vessels, eight are under renegotiations while four are under arbitration. There are some court proceedings against PSL and its promoters, which can negatively impact the company if they are not decided in their favour.

Valuations

At the lower band of the pricing range, PSL would trade at 14.4x FY11E earnings of Rs 3.8. Indian yards like ABG Shipyard and Bharati Shipyard trade at 6.9x and 3.3x FY11E earnings, respectively. On a price/book value basis, PSL
would trade at 1.9x, whereas ABG trades at 0.9x and BSL trades at 0.6x FY11E book value. PSL has a larger yard capacity and modern equipment enabling faster execution of order book.

However, the issue is expensive considering the quality of the order book with 1/3 of the vessels to be built being under renegotiations/arbitration proceedings. At present, the risk-reward ratio for investors seems unfavourable, considering that companies in similar businesses are available at much more attractive valuations.

One may rather look to buy the existing listed companies such ABG Shipyard or Bharti Shipyard for investment and can look at investing in Pipavav post listing when the price quotes at a discount of atleast 25% of the issue price.

NATCO Pharma drug for USFDA review

The Hyderabad based NATCO Pharma Limited is pleased to announce the acceptance for review by the US Food and Drug Administration, of the ANDA (Abbreviated New Drug Application) filed by its partner – the Pittsburgh based Mylan, Inc. for Glatiramer Acetate injection (20 rng/ ml). This is the generic version of Teva’s Copaxone – a product indicated for the treatment of multiple sclerosis.

NATCO Pharma Ltd. had during 2008, entered into a licensing and supply pact with Mylan, Inc., which grants Mylan exclusive distribution rights for Glatiramer Acetate pre-filled syringes in US and other major markets.

This acceptance represents a significant achievement to bring hard to make generic version to the market. The Company awaits successful completion of review and any possible litigation.

The product sales globally are expected to be nearly 3 billon US dollars in 2009.

(Source: Company press release)

The share moved up 20% on 15 September 2009 on the back of this news.

Standard Chartered to hire 2,000 staff in 2009

Bangalore: Foreign lender Standard Chartered Bank is likely to hire around 2,000 employees in India in 2009. The bank currently has around 8,000 employees in the country.

The bank is also planning to open an office of knowledge process outsourcing network 'Scope International' in Bangalore by October. At present, Scope International has offices in Malaysia, China and Chennai with a workforce of about 7,200, 200 and 3,000, respectively. Sreeram Iyer, Standard Chartered's Chief Operating Officer, India and South Asia said, "The office in Bangalore will look at global collections work for the consumer banking business, and into customer service analytics."

Standard Chartered Bank has more than doubled its revenue and profits over the last five years and has performed consistently well, delivering record results throughout the recent financial crisis. For the year ending December 31, 2008, the bank reported a profit of $3.3 billion, up from $2.8 billion in 2007. Operating income rose 26 percent to $13.97 billion and total assets rose 32 percent to $435 billion.

Indian scientist makes encryption 40 percent faster

Bangalore: An Indian scientist has developed the fastest method to encrypt the hard disk of a computer. Encrypting helps in keeping the data on hard disk secure even from an attack by hackers. "From a practical point of view, the requirement is actually to achieve both speed and security. Otherwise, encryption and decryption may take so much time that software which runs on computer become unacceptably slow. And, in the current state of the art, this work provides the fastest known algorithm for disk encryption," claims Palash Sarkar, creator of this unique algorithm and Professor at the Indian Statistical Institute (ISI), Kolkata.

The new algorithm encrypts the data 30-40 percent faster than the previous ones. The results of the research will appear in October 2009 issue of the 'IEEE Transactions on Information Theory', one of the top research journals in the field of transmission, processing and utilization of information.

Sarkar claims that this is the fastest method to encrypt hard disk and says that he has scientific evidence to prove it. "One has to see this in the context of the anonymous and strict review process of the journal 'IEEE Transactions on Information Theory'. The reviewers allowed this claim to stand because I could scientifically justify it in the paper. A hollow claim would have been struck down by the reviewers," he added.