Mobile Phones are must for Financial Inclusion

IAMAI's symposium on Financial Inclusion through Mobile phones emphasized on the needs of progressive policies and strong partnerships between Telecom service providers, Banks and technology enablers.

NEW DELHI (IndiaPRwire.com): With an objective to highlight the mobile phone utility and the next level of mobile telephony, Internet and Mobile Association of India (IAMAI), today organized a national symposium on financial inclusion through mobile phones.

With nearly 440 million subscribers, mobile phones cover nearly 40% of the country’s population. Given the unprecedented coverage, mobile phones are increasingly been seen as agents of socio-economic development – reaching out opportunities to people and places way beyond any other instrument.

“Financial Inclusion and penetration of organized banking among the rural Indian population is a key priority area for an all inclusive growth. There is a huge opportunity in terms of further improving existing set of methodologies for financial transactions. Mobile phones fit into the picture so well, as they could take the financial inclusion initiative to the next level. Mobile payments or financial transactions through mobile devices carry huge importance and relevance for the Indian banking scenario. Government have understood it’s potential and working very aggressively towards enabling this system as penetrative as possible,” said MrR Chandrashekhar, Secretary, Department of Information Technology, Ministry of Communications and Information Technology, Government of India while delivering a special address at the event

Mr Chandrashekhar also highlighted, “RBI has issued a detailed set of guidelines for the mobile payment transactions. This is an initial step towards recognizing mobile phones in the financial inclusion and I also see this step as a flavour-setting trend that indicates mobile payments scope in the Indian market.”

Sanjay Swamy, Chief Executive Officer of mCheck commented, “Mobile is a safest platform for financial transactions. At the backend, extremely robust technology takes care of the financial transactions. All is required is to have a well guided awareness strategy at the end user level.”

Commenting on the overall market scenario, Anil Pande, Head Product Development Management, Reliance Communications said, “Technology is very much available, mobile penetration is also extremely impressive, banking or finance related institutions are willing to collaborate and telecom service providers are also keen on coming closer for the sake of financial inclusion. This is a very healthy sign, especially when mobile subscribers are higher in number as compared to banking customers.”

Today we have the technology to deliver financial services to the remotest parts of the country; but technology by itself cannot guarantee the success of what is essentially a socio-economic process. Financial inclusion is the key to socio-economic development and it was a matter of time that people would start talking about and thinking about “marrying” financial inclusion with mobile phones.

About IAMAI

The Internet & Mobile Association of India (IAMAI) - www.iamai.in- is a not-for-profit industry body registered under the Societies Act, 1896. Its mandate is to expand and enhance the online and mobile value added services sectors. It is dedicated to presenting a unified voice of the businesses it represents to the government, investors, consumers and other stakeholders. The association addresses the issues, concerns and challenges of the Internet and Mobile economy and takes a leading role in its development.

Pipavav Shipyard fixes Price Band of Rs 55-60 for IPO

MUMBAI, September 10, 2009: Pipavav Shipyard will enter the capital market with its IPO of 85,450,225 Equity Shares of Rs 10 each, with a price band of Rs 55-60, on September 16, 2009. The IPO closes on September 18, 2009.

Of the 85,450,225 Equity Shares, up to 600,000 Equity Shares have been earmarked for employees. The total issue, including the Employee Reservation Portion, will constitute 12.83 % of the post-issue equity share capital of the company. The net issue, i.e., the issue less the Employee Reservation Portion, will constitute 12.74% of the post-issue equity share capital of the company.

JM Financial Consultants Private Limited, Citigroup Global Markets India Private Limited, Enam Securities Private Limited and SBI Capital Markets Limited, are the book running lead managers and Kotak Mahindra Capital Company Limited and Motilal Oswal Investment Advisors Private Limited are the co-book running lead managers.

The issue is on a 100% book building process. The company plans to use the proceeds of the issue for the construction of facilities for shipbuilding, ship repair and the Offshore Business, margin for working capital and general corporate purposes.

Pipavav Shipyard will have India’s largest dockyard (upon completion and based on information available on the shipyards’ websites as to their actual capacity and their capacity under construction and assuming no further increases in such capacity).

The company has commenced construction of four vessels, the first of which is expected to be delivered in April 2010, with subsequent deliveries expected to occur at intervals ranging from one to three months thereafter.

Company executive deputy chairman Bhavesh Gandhi explained that Pipavav Shipyard currently has 10 firm order agreements for Panamax size vessels, 8 firm order agreements for Panamax size vessels subject to renegotiation, 4 firm order agreements for Panamax size vessels subject to arbitration and a notification of award of contract for 12 OSVs from ONGC. It has also submitted bids for seven naval vessels - five naval offshore patrol vessels and two cadet training ships.

The Pipavav Shipyard is located on the west coast of India adjacent to major sea lanes between the Persian Gulf and Asia. Upon completion of construction, the Pipavav Shipyard will be capable of ship construction and repairs for a range of vessels of different sizes and types, including naval vessels and coast guard vessels, as well as the fabrication and construction of products such as offshore platforms, rigs, jackets and vessels (but excluding sub-sea pipelines) for oil and gas companies.

The dry dock, measuring 662 meters in length and 65 meters in width, is capable of accommodating ships of up to 400,000 DWT and/or multiple combinations of smaller vessels including vessels catering to offshore activities such as offshore supply vessels (OSV), anchor handling tug supply vessels and multi-purpose support vessels. Installation of two Goliath cranes, each having a lifting capacity of up to 600 tonnes, is also in progress.

The Pipavav Shipyard was originally promoted by SKIL Infrastructure Limited and Grevek Investments and Finance Private Limited. These original promoters have been joined by Punj Lloyd Limited through its acquisition of 129,361,538 Equity Shares of the Company, which represents approximately a 22.29% pre-Issue shareholding in the company. SKIL has a track record of promoting infrastructure projects in India, and is experienced in owner-managed construction of infrastructure projects including the Pipavav Port, which received its first vessel in 1996, the Pipavav Railway and the Pipavav Link Road. Punj Lloyd is an engineering and offshore construction company in India providing integrated design, engineering, procurement, construction and project management services for energy and infrastructure projects.

Pipavav Shipyard is led by a team of qualified and experienced managers, both from India and abroad, who are focused on different aspects of shipbuilding. The company has also executed cooperation agreements with various companies that have substantial experience in the shipbuilding business.

For instance, it has entered into agreements with KOMAC, a Korean ship design consulting firm, to provide the Company with ship design, drawings, plans and documents, procurement support for supply of non-Indian sourced shipbuilding materials, shipboard machineries and equipments, production management services related to the start-up and initial operation of the Pipavav Shipyard, and technical support services related to the construction of the Panamax bulk carriers.

It has also entered into agreements with PILS Co. Limited of South Korea, a procurement and logistics firm, to assist it with the procurement of certain component parts for production, and has also executed a technical assistance agreement with SembCorp, a company which operates shipyards and offshore construction and fabrication facilities in Singapore.

Apart from focusing attention on the serial construction of large vessels built to standard specifications and widely used by ship owners, such as the Panamax bulk carriers, Pipavav Shipyard also intends to capitalize on expected growth in offshore oil and gas exploration and production activities by providing offshore fabrication facilities at the Pipavav Shipyard.

As a co-promoter, Punj Lloyd has agreed to conduct all of its offshore business (excluding the construction and fabrication of sub-sea pipelines) in India through the company and is expected to provide the company with access to opportunities in the Offshore Business industry.

Pipavav Shipyard also intends to focus on building ships for the military and the government, initially focusing on vessels for the Indian navy and coast guard. In addition, Pipavav Shipyard intends to utilize its shipbuilding facilities to repair a wide range of vessels, including VLCCs and OSVs, as well as naval, coast guard and other specialty vessels such as LNG carriers.

The Pipavav Shipyard is located adjacent to the Pipavav Port, a modern seaport. The Pipavav Port has connecting rail and road links, including a 273 km railway completed in 2003 and a link road completed in 2001.

The company’s subsidiary, E Complex, is involved in the development of a sector-specific Special Economic Zone (SEZ). Pipavav Shipyard Limited has established a unit in the SEZ developed by E Complex.

“Pipavav Shipyard Limited is proposing, subject to market conditions and other considerations, a public issue of its equity shares and has filed a red herring prospectus (“RHP”) with the Registrar of Companies, Gujarat, Dadra and Nagar Haveli, Ahmedabad. The RHP is available on the website of SEBI at www.sebi.gov.in and on the websites of the book running lead managers at www.jmfinancial.com, www.citibank.co.in, www.enam.com and www.sbicaps.com, and the co-book running lead managers at www.kotak.com and www.motilaloswal.com. Any potential investor should note that investment in equity shares involves a high degree of risk. For details, potential investors should refer to the RHP that has been filed with the Registrar of Companies including the section titled “Risk Factors”.

This announcement has been prepared for publication in India and may not be released in the United States. This announcement is not an offer for sale or solicitation of an offer to buy securities in the United States, or any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. The securities of Pipavav Shipyard Limited have not been registered under the US Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act.

Ship shape: Pipavav Shipyard gearing up for Offshore & Defence vessels

PIPAVAV, Gujarat: Men and machines are racing against time to complete the construction of India’s largest dockyard Pipavav Shipyard while simultaneously working on building four Panamax size vessels.

Pipavav Shipyard is located on the west coast of India adjacent to major sea lanes between the Persian Gulf and Asia. Pipavav Shipyard will be capable of ship construction and repairs for a range of vessels of different sizes and types upto 400,000 DWT including naval vessels and coast guard vessels, as well as the fabrication and construction of products such as offshore platforms, rigs, jackets and vessels (but excluding sub-sea pipelines) for oil and gas companies.

Pipavav Shipyard is gearing up to focus into defence and offshore oil sectors.

Pipavav Shipyard has commenced construction of four, Panamax Bulk Carriers the first of which is expected to be delivered in April 2010, with subsequent deliveries expected to occur at intervals ranging from one to three months thereafter.

Pipavav Shipyard is divided into two distinct units having a combined area of 491.54 acres. The dock site itself is an Export Oriented Unit(EOU), and is located on land measuring 103.92 hectares (approximately 256.79 acres). For purposes of the fabrication , block making facilities being set up at the Company’s SEZ unit measuring approximately 95 hectares (approximately 234.75 acres) of land. The SEZ Unit and the EOU unit are linked by a 4.5 km dedicated road that was developed by the Company in 2008.

Pipavav Shipyard has set up integrated infrastructure using advanced ship building technology by way of deploying modern equipment / systems backed by software such as Primavera , Cadwin etc.,, apart from two Goliath cranes (currently under installation) having a span of 148 meters, height of 75 meters with lifting capacity of 600 MT each (combined lifting capacity of 1200 MT in one go) and ELL cranes etc., The dry dock, admeasuring 662 meters in length and 65 meters in width, is capable of accommodating very large ships of up to 400,000 DWT. With this, Pipavav Shipyard believes that leveraging advanced design and production technologies should give it the flexibility to manufacture a wide variety of vessels and offshore structures in a cost-efficient manner.

Pipavav Shipyard is building vessels on a modular basis. Steel plates are purchased from India and abroad and transported to our fabrication facility (Block making site) in the SEZ Unit where they are prepared and then assembled into pre-outfitted blocks. Blocks of up to 350 tonnes are transported to the dry dock site where they are assembled into the vessel hull, outfitted with propulsion systems, superstructure and other components and prepared for launch. After launch, the vessel goes through final outfitting and finishing in preparation for sea trials and commissioning.

Pivavav Shipyard has orders for a total of 22 Panamax size vessels and 12 OSVs from ONGC. It has also submitted bids for seven naval vessels - five naval offshore patrol vessels and two cadet training ships.(for further information please refer to DRHP)

The Pipavav Shipyard was originally promoted by SKIL and Grevek Investments. These original promoters have been joined by Punj Lloyd through its acquisition of 129,361,538 Equity Shares of our Company, which represents approximately a 22.29% interest as of the date of this Red Herring Prospectus. SKIL has a track record of promoting infrastructure projects in India, and is experienced in owner-managed construction of infrastructure projects including the Pipavav Port, which received its first vessel in 1996, the Pipavav Railway and the Pipavav Link Road. Punj Lloyd is an engineering and offshore construction company in India providing integrated design, engineering, procurement, construction and project management services for energy and infrastructure projects.

Pipavav Shipyard is led by a team of qualified and experienced managers, both from India and abroad, who are focused on different aspects of shipbuilding. The company has also executed cooperation agreements with various companies that have substantial experience in the shipbuilding business.

For instance, it has entered into agreements with KOMAC, a Korean ship design consulting firm, to provide our Company with ship design/ drawings. It has also entered into agreements with PILS Co. Limited of South Korea, a procurement and logistics firm, for the procurement of certain components/materials for production.

Pipavav shipyard also executed a technical assistance agreement with SembCorp Marine, Singapore, a company which operates shipyards and offshore construction and fabrication facilities. In November 2007, SembCorp acquired an equity stake of 17,500,000 Equity Shares in our Company, representing approximately a 3.02% shareholding interest..

As a co-promoter, Punj Lloyd has agreed to conduct all of its offshore business (excluding the construction and fabrication of sub-sea pipelines) in India through Pipavav and is expected to provide the company with access to opportunities in the Offshore Business industry, which includes business opportunities in the fabrication and construction of offshore platforms, rigs, jackets and vessels for the oil and gas industry.

The Pipavav Shipyard enjoys strategic location advantages, favourable marine conditions and is located adjacent to the Pipavav Port, a modern seaport which was promoted and constructed by Gujarat Pipavav Port Limited, which was promoted by SKIL. The Pipavav Port is now owned, operated and managed by the A.P. Møller Group of Denmark following its acquisition of GPPL. The Pipavav Port has connecting rail and road links, including a 273 km railway completed in 2003 and a link road completed in 2001. Due to its proximity to the Pipavav Port, the Pipavav Shipyard is positioned to benefit from its infrastructure facilities, such as approach channel and navigation facilities, roads, rail besides logistics & transport.

Its subsidiary, E Complex, is involved in the development of a sector-specific Special Economic Zone (SEZ), as stated earlier. Pipavav Shipyard Limited has established a unit in the SEZ developed by E Complex. This SEZ Unit was approved on January 8, 2008 and was established to carry out the fabrication and block assembly activities within the SEZ in order to benefit from certain advantages available to companies that operate within such SEZs. The E Complex facilities and the Pipavav Shipyard are linked by a 4.5 km dedicated road that was developed by the Company in 2008.

Quality Assurance

On October 14, 2008 Det Norske Veritas, Netherlands (“DNV”), awarded to us Management Quality Certificate No. 39820-2008-AQ-IND-RvA conforming to Quality Management System Standard ISO 9001:2000 in connection with all our activities related to design, development and construction of ships and repairs, maintenance and overhaul of ships and offshore structures.

Pipavav Shipyard has over 400 full-time employees and is in the process of recruiting more.

Early signs of recovery visible, says FM

The Finance Minister Pranab Mukherjee has said that global economy has started stabilizing and early signs of revival of the Indian economy are visible though delayed monsoons have cast a shadow on agricultural growth.

The Finance Minister opined this while inaugurating the 25th Annual Conference of Chief Commissioners and Directors General of Income Tax here today. Addressing the Conference he said that India, along with China, is being looked upon by the entire world as the engine for global economic recovery. Central revenues play a pivotal role in ensuring rapid economic development and inclusive growth by providing much-needed resources. As direct taxes have become the major source of central revenue, its role has, accordingly, increased in shaping the economic future of India, he said.

The Finance Minister emphasised that tax laws should be simple, stable and robust. Tax rates should remain moderate and multiplicity of taxes, tax exemptions and deductions should be gradually phased out to improve tax compliance.

The Finance Minister informed that the government is taking a major step forward in direct tax reforms by formulating a new Direct Taxes Code, to be put in the public domain tomorrow. While drafting this Code, the best practices in the world have been studied and incorporated. Tax policies that would promote growth with equity have been reflected in the new provisions. FM exhorted the Officers to go through the draft and give their views and suggestions to enable the department to finalise the document for taking it to the Parliament in its Winter Session.

Mukherjee said that direct tax collections have grown at an average annual rate of 26.8 per cent in the last five years, and have more than trebled from Rs.1,05,088 crore in financial year 2003-04 to Rs.3,38,212 crore in financial year 2008-09 increasing its share from 3.81 per cent to 6.21 per cent of the Gross Domestic Product (GDP). This impressive growth has been made possible by improvement in tax administration as well as better tax compliance, he added.

The Finance Minister said that for the current financial year, the direct tax collection target has been fixed in the Budget Estimates at Rs.3,70,000 crore at a growth of 9.4 per cent over the actual collection last year. “Given the likely impact on government finances due to unanticipated drought, I will like to suggest a further upward revision in the direct tax collection target to Rs.4,00,000 crore. I know what I am asking you to achieve is an extremely challenging target given the current economic situation. But it is equally true that if such a target has to be achieved, it can only be done by the Direct Tax. Tax base in India is still small and there is still substantial tax evasion or underpayment of taxes. The tax-net, therefore needs to be deepened further”, said Mukherjee.

The Finance Minister said that in the last few years, the Income tax department has made significant progress in developing infrastructure. The National Computer Network of the department has become functional after data from 36 Regional Computer Centres was seamlessly migrated last year. This is a unique exercise of its kind in the world, he said.

The Finance Minister applauded the department for taking several other initiatives to improve taxpayer services, including facilities of electronic payment of taxes. Last year, nearly a sixth of the total tax returns were filed electronically, and nearly two-thirds of the gross taxes were paid electronically. A Centralised Processing Centre has become operational at Bangalore and is likely to further speed up processing of returns and issue of refunds to taxpayers. The Refund Banker Scheme functional in six cities presently ensures that taxpayers get their refunds quickly and directly into their bank accounts. Large taxpayer Units, operational in four cities, have received good response. The department is in the process of implementing the ‘Sevottam’ scheme to deliver customer-oriented services, added Mukherjee.

STFC to beef up lending capacity, raising Rs 1K cr via NCD route

· Plans Rs 500 cr issue with option to retain over-subscription of up to Rs 500 cr

· Yield on Redemption up to 11.50%

· Credit Rating of CARE AA+ by CARE and AA (Ind) by Fitch.

MUMBAI: Shriram Transport Finance Company Limited (STFC), one of the largest asset financing NBFCs in India, plans to enter the debt capital market on 27 July, 2009 with a public issue of Non Convertible Debentures (NCDs) aggregating up to Rs 500 crores with an option to retain over-subscription of upto Rs. 500 crores for issuance of additional NCDs. The company has filed a prospectus with the Registrar of Companies to this effect.

The NCD issue, with yield on Redemption of upto 11.50% (per annum), closes on August 14, 2009 with an option to close earlier or on such dates as may be decided, by the board of directors of the Company, subject to necessary approvals.

This Issue has been rated ‘CARE AA+’ by CARE and ‘AA (ind)’ by Fitch. The rating of CARE indicates stability and timely servicing of debt obligations and very low credit risk and the rating of Fitch indicates high safety, respectively. These ratings are not a recommendation to buy, sell or hold securities and investors should take their own decisions.

Key Highlights of the Instrument:

· The face value of Rs. 1,000 per NCD and tradable lot size of 1 NCD is expected to enhance liquidity and trading in the secondary market.

· Five different investment options.

• Yield on redemption of NCDs upto 11.50% per annum.
• Additional interest of 0.25% per annum for Senior Citizens in relation to options I and II NCDs.
• The minimum application size is Rs 10,000 and in multiples of Rs 1,000 thereafter.
• Interest on application money at the rate of 8% p.a. to be paid from the date of realization of the cheque or 3 days from the date of receipt of the application, whichever is later, upto one day prior to the deemed date of allotment.
• Interest on refund at 2.50% per annum on valid applications.
• Issuance of NCDs to Non-Resident Indians (NRIs) not to exceed an aggregate of Rs 10,000 lakhs and only on a non-repatriable basis.
• No TDS deductable.
• Allotment on a First come First serve basis, in the first instance, with respect to each category of investors.

Speaking on the occasion, Mr R Sridhar, Managing Director of STFC, said: “Over the decades, STFC has achieved success in reaching its objective of offering the common man with a host of products and services that would be helpful to him on his path to prosperity. The current NCD issue will help us enhance our lending capacity and further our objective”.

STFC intends to use the funds raised through the issuance of NCDs for various financing activities including lending and investments, subject to the restrictions contained in the Foreign Exchange Management (Borrowing and Lending in Rupee) Regulations, 2000, and other applicable statutory and/or regulatory requirements, to repay its existing loans and its business operations including for its capital expenditure and working capital requirements.

ENAM Securities Private Limited, A K Capital Services Limited, ICICI Securities Limited and Kotak Mahindra Capital Company Limited have been appointed as the Lead Managers to the Issue, while Integrated Enterprises (India) Limited will be acting as the Registrar to the Issue.

STFC is a part of the Shriram conglomerate which has significant presence in financial services viz., commercial vehicle financing business, consumer finance, life and general insurance, stock broking, chit funds and distribution of financial products such as life and general insurance products and units of mutual funds. Apart from these financial services, the group is also present in non-financial services business such as property development, engineering projects and information technology.

STFC is one of the largest asset financing NBFCs in India with a niche presence in financing Small Truck Owners (STOs) and pre-owned trucks. The Company was incorporated in the year 1979 and is registered as a Deposit taking NBFC with Reserve Bank of India under Section 45IA of the Reserve Bank of India Act, 1934.

With a track record of about 30 years, STFC is among the leading organized finance provider for the commercial vehicle industry with a focus to provide various credit facilities to STOs. The Company has also added passenger commercial vehicles, multi-utility vehicles, three wheelers, tractors and construction equipment to its portfolio, making it a diversified, end to end provider of finance solutions to the domestic road logistics industry.

As on 31^st March 2009 STFC’s pan-India presence included 479 branches and Partnerships with over 500 private financiers and a customer base of over 600,000 which have contributed to its overall growth over the years. The company has a team of around 12,196 employees.

STFC has demonstrated consistent growth in its business and profitability with its total income and profit after tax growing from Rs. 34,568.84 lakhs and Rs. 4,932.38 lakhs in Financial Year 2004-05 to Rs. 3,73,112.97 lakhs and Rs. 61,240.21 lakhs in Financial Year 2008-09 at a CAGR of 81.25% and 87.71%, respectively. AUM have grown by a compounded annual growth rate (CAGR) of 68.01% from Rs. 2,92,159.35 lakhs (which comprise of AUM in the books of Company of Rs. 1,58,700.28 lakhs, assets securitised / assigned of Rs. 28,368.43 lakhs and portfolio managed by the Company of Rs. 1,05,090.64 lakhs) in FY 2005 to Rs. 23,28,110.65 lakhs (which comprise of AUM in the books of Company of Rs. 17,92,397.14 lakhs, assets securitised / assigned of Rs. 5,31,092.91 lakhs and portfolio managed by the Company of Rs. 4,620.60 lakhs) in FY 2009.

Share Khan report - Market rebounds and how!

The stock market rebounds sharply from its early volatility and posts significant gains amid strong buying in realty, metal and consumer durable stocks.

The market heaved a big sigh of relief after three consecutive sessions of battering, as a sharp turn-around in noon trades helped the Sensex gain nearly 450 points and close on a firm note above 13800 mark. The bounce-back came after a steep fall of over 1000 points in the market since the slide began last week. Earlier in the first half, the market was range-bound after a firm opening. After resuming 149 points higher over its last close at 13400, the index remained steady and moved between 13600-13700 in afternoon. While the market fluctuated sharply thereafter, the change of guard to firm bullish sentiment came in noon trades as strong buying in realty, metal, consumer durable, power and capital goods stocks spurred the index to an intra-day high of 13903. The Sensex finally ended the session with gains of 3.38% or 453 points to 13854 whereas Nifty soared 137 points to 4111.

The market breadth was positive. Of the 2,639 stocks traded on the BSE 1,956 stocks advanced, 602 stocks declined and 81 stocks ended unchanged. All the sectoral indices were back in action and moved up sharply. The BSE Realty rose 9.38%- the highest for any sector. The BSE Metal jumped 5.53%, BSE CD added 5.12%, BSE Power gained 4.60% and BSE CG was up 4.11%.

Several index heavyweights notched up significant gains. Among major gainers DLF flared up 11.44% to Rs300.10, Reliance Infrastructure zoomed 9.02% to Rs1,053.85, JP Associates shot up by 7.93% to Rs177.25, ICICI Bank flared up 7.60% to Rs679.80, HDFC vaulted 7.28% to Rs2,368, Tata Steel advanced 5.69% to Rs358.20, Reliance Communications scaled up 5.04% to Rs249, Grasim Industries surged 5.03% to Rs2,574.60 and Tata Motors added 4.41% to trade at Rs273.60. Other front-line stocks also moved up by 2-4% each. HDFC Bank however dropped 1.03% to Rs1,360.40.

Over 37 lakh shares of JP Associates changed hands on the BSE followed by DLF (34 lakh shares), Tata Steel (29 lakh shares), Reliance Communications (21 lakh shares) and ICICI Bank (20 lakh shares).

Shriram Transport Fin to tap debt market with Rs 1K cr NCD

Plans Rs 500 crore issue with option to retain upto Rs 500 crore from oversubscription

MUMBAI: Seeking to augment its financial capabilities, Shriram Transport Finance Company Limited (STFC) has filed its draft prospectus with the National Stock Exchange of India Limited (NSE) pursuant to its proposed public issue of secured Non-Convertible Debentures (NCDs), aggregating to Rs. 500 crores with an option to retain over-subscription upto Rs. 500 crores for issuance of additional NCDs.

STFC is a part of the Shriram conglomerate which has significant presence in financial services viz., commercial vehicle financing business, consumer finance, life and general insurance, stock broking, chit funds and distribution of financial products such as life and general insurance products and units of mutual funds. Apart from these financial services, the group is also present in non-financial services business such as property development, engineering projects and information technology.

STFC is one of the largest asset financing NBFCs in India with a niche presence in financing pre-owned trucks and Small Truck Owners (STOs). The Company was incorporated in the year 1979 and is registered as a Deposit taking NBFC with Reserve Bank of India under Section 45IA of the Reserve Bank of India Act, 1934.

With a track record of about 30 years, STFC is among the leading organized finance provider for the commercial vehicle industry with a focus to provide various credit facilities to STOs. The Company has also added passenger commercial vehicles, multi-utility vehicles, three wheelers, tractors and construction equipment to its portfolio, making it a diversified, end to end provider of finance solutions to the domestic road logistics industry.

STFC’s pan-India presence of 479 branches and over 600,000 customers has contributed to its overall growth over the years. The company has a team of around 12,196 employees.

STFC has demonstrated consistent growth in its business and profitability with its total income and profit after tax growing from Rs. 34,568.84 lakhs and Rs. 4,932.38 lakhs in Financial Year 2004-05 to Rs. 3,73,112.97 lakhs and Rs. 61,240.21 lakhs in Financial Year 2008-09 at a CAGR of 81.25% and 87.71%, respectively.

STFC intends to use the funds raised through the issuance of NCDs for various financing activities including lending and investments, subject to the restrictions contained in the Foreign Exchange Management (Borrowing and Lending in Rupee) Regulations, 2000, and other applicable statutory and/or regulatory requirements, to repay its existing loans and its business operations including for its capital expenditure and working capital requirements.

ENAM Securities Private Limited, A K Capital Services Limited, ICICI Securities Limited and Kotak Mahindra Capital Company Limited have been appointed as the Lead Managers to the Issue, while Integrated Enterprises (India) Limited will be acting as the Registrar to the Issue.

Sunil Hi Tech notches topline growth of 95.3% YoY

• 95.3% increase in yearly revenues,
• 11.58% increase in yearly PAT,
• Strong order book of Rs. 1177 crores and L1 of Rs. 104.50 crores as of 31 March 2009,
• Board recommends dividend @ 10%.

Nagpur, June 30, 2009: Sunil Hi Tech Engineers Ltd., (BSE: 532711) one of the leading technology and EPC companies in the power & infrastructure sector, continued its profitable growth for the year ended 31st March 2009.

For the year ended 31 March 2009, Sunil Hi Tech posted revenues of Rs. 598.21 crores (standalone), an increase of 95.3% over Rs. 306.30 crores in the previous fiscal year. Profit after Tax before extraordinary/ exceptional items for the year increased by 11.58% to Rs. 24.29 crores, as against Rs. 21.77 crores in the last fiscal year.

Additionally, the Board of Directors has recommended a dividend of 10% for fiscal year ending 31 March 2009.

Commenting on the results, Mr. Sunil Gutte, the Joint Managing Director of Sunil Hi Tech Engineers Ltd. said, “Our focus, crisp engineering execution and technical expertise coupled with our expanding product portfolio has enabled strong topline growth while maintaining margins during the tough operating climate of the past fiscal year. We expect to see further expansion and growth within our company in the coming quarters due to our numerous strategic initiatives. I am pleased with the overall results, operating performance and execution of our team.”

About Sunil Hi Tech Engineers Ltd.

Sunil Hi Tech Engineers Ltd. has over 20 years of experience in the fabrication, erection, testing and commissioning of thermal power plants including doing individual works under BoP. An ISO 9001:2000 certified company, Sunil Hi Tech undertakes the erection, testing and commissioning of boilers and auxiliaries of up to 500 MW capacity, pressure parts, ESP and piping, and structural work in main plant building, bunker bay and miscellaneous structures of up to 660 MW.

In addition to this, Sunil Hi Tech designs, supplies, transports and provides the commissioning of EHV lines of substations, CW pipelines, large diameter piping, bunker belts, steel flue can; EPC work for transmission and distribution lines, transformers sub-stations and allied works, as well as the EPC contract for fuel oil system and the erection of turbine generators.

Sunil Hi Tech has 125,000 tpa of steel fabrication capacity and specializes in building steel structures for thermal power plants and has also established a 1,00,000 tpa of equipment installation capacity in power plants. The company takes up civil works for power plants of up to 500 MW. It undertakes manufacture, supply, and commissioning of super-heater eco, reheater coils and equipment for thermal power stations.

For further details, contact:
Shahab Shaikh Concept PR 4055 8900

Good Times are coming back

Hope, confidence and optimism on the Indian economy front

by Ashok Handoo

Finally, the country has managed to record a 6.7 percent growth in financial year 2008-09, despite the global economy still in the throes of a deep recession. This has been vindicated by the official figures released recently. This growth rate, though, much lower than the 9 percent rate that we have been clocking for the previous four years, is nonetheless, well above the 6 percent growth that was being projected by some analysts. Some prophets had even predicted only a 5% growth in the last financial year. The Central Statistical Organization had pegged the GDP growth rate at 7.1 percent.

The actual growth rate is certainly in the range that the RBI had projected: 6 to 5.7 %. Our Prime Minister Dr. Manmohan Singh too had been emphasizing that the growth rate would be in the range of 6.5 to 7. That is precisely what has happened.

In a way, this growth has been somewhat unexpected. It has largely been possible by the strong 5.8 % growth in the last quarter of the financial year. The reasons for this have been the effects of huge Government spending on social programmes and construction, pumping liquidity into the market through special packages and by lowering of interest rates. Government consumption too increased by 22 percent.

The most encouraging news is the performance of the core sector which has sent clear signals of an economic recovery. In April 2009 growth rate in the core sector of infrastructure doubled to 4.3 percent, against 2.3% in the same month last year when the economy was booming. The output of cement in April went up by 11.7% compared to 6.9% in the same month last year. Steel grew by 1.6 percent against a decline of 0.6 % in April last year. Coal production grew at an impressive 13.2 percent compared to 10.4 % in the corresponding period last year. So was the case with electricity generation which jumped up by 6% in April against 1.4 % in the same month, last year.

Not less important is the increase in the collection of direct taxes by 16.88 % in May this year. In fact the collections have shown a positive growth since February this year. This will help the Government to keep the fiscal deficit under control, which could well cross 5% of the GDP against the limit of 2.5 % fixed earlier. The deficit could well be about 10 % if the state budgets are also taken into account. The actual position in this regard will, however, be known when the Finance Minister presents the budget next month. May month’s collection figures are particularly encouraging as there had been a shortfall just a month earlier.

As a result of this economic scenario, coupled with the installation of a stable Government at the centre, the financial market is also jubilant. The stocks are rising and the sensex is hovering in the 15,000 area, double than what it was less than 6 months ago. Mutual Funds too are, as a consequence, looking up.

The picture certainly would have been much better, had we not slowed down in two important sectors: manufacturing and agriculture. A sluggish manufacturing sector, which grew at just 2.4 percent during 2008-09 against 8.2% in the previous financial year, was a dampener. Similarly, agriculture, which accounts for 20 % of the country’s GDP, recorded just 1.6 % growth in the last financial year against 4.9 % in the previous financial year.

What came as a booster was the growth in the service sector: 13 % growth in the community services, 9% in transport and communications sector and a 7.8% growth in financial and other service sector. All this happened at a time when the US economy contracted by an annualized rate of 6.2 % and the Japanese economy by 12.7 %. This only proves the resilience of Indian economy. To some extent it is also due to the fact that Indian economy is more inward looking as it opened up only after 1991. It thus depends more on the domestic demand. In sectors where it looks more on the foreign markets like the textiles, the effect of global meltdown has been more pronounced. The country recorded a 33% fall in exports in March this year, leading to fall in incomes and unemployment in this sector.

President Pratiba Devi Singh Patil’s recent address to the joint sitting of the two houses of Parliament has now laid the future roadmap for the Government. It aims at pushing ahead with the economic reforms, pursuing the disinvestment and promoting Foreign Direct Investment which will also take care of the financial constraints of the Government. It also envisages increased public spending. But while doing so, care will be taken of fiscal prudence so that the widening gap in fiscal deficit is kept in check. Liquidity in the banking sector will also be improved to make way for better access to funds by the stake holders. The Reserve Bank of India has already asked the Government for a comprehensive review of the interest rate regime to nudge the banks into reducing their lending rates which they are reluctant to do. The Finance Minister Mr. Pranab Mukherjee too has clearly pointed out to the banks that they have not so far adequately reflected in their lending rates, the reduction in key rates by the RBI. But they have now agreed to take a fresh look at the issue.

Fortunately, inflation too is under control which provides additional leg space to the Government to take fiscal and monetary measures to push up growth. The current financial year will not be without challenges and the growth rate may continue to be around the existing level. The Prime Minister told the Parliament the other day that he was confident that the country would record at least 7% growth in the current fiscal as well. But if all work together, it is possible to raise it to 8-9 % “even when the world grows at a lower rate” the Prime Minister said. These are words of satisfaction indeed. A high rate of 35% of our GDP being the savings determines the money that can be deployed for development works, though heavy public spending does carry a cost in terms of increasing fiscal deficit which has already crossed 6.2 %.

The larger picture that emerges thus is of hope, confidence and optimism on the economic front.

Business captains back “Investor Champion’ Kirit Somaiya

Several business captains, including HDFC Chairman Deepak Parekh, and chartered accountants have come out in support of Dr Kirit Somaiya, the BJP candidate from Mumbai North East.

In a joint appeal the luminaries have pointed out that Dr Somaiya, who passed his CA examination with merit, has espoused the cause of the small investor and worked relentlessly through his Investor’s Grievances Forum. In fact Dr Somaiya was also responsible for creating awareness among the investor community about their rights.

His contribution in this field and expertise and understanding of the capital markets have all been well acknowledged nationwide, they said.

The business community and fellow CAs have appealed to all eligible voters in Mumbai North East to exercise their franchise on April 30, 2009 and vote for Dr Somaiya.

Known as a Politician with a Difference, Kirit Somaiya, a true Mumbaikar to the core was born and brought up in Mumbai. Working tirelessly for the interest of Mumbai, has is fondly called “Aapla Manus”.

A Chartered account by profession, Kirit Somaiya is known as “Man of Finance”. He passed C.A. Examination in 1979, figuring in the first 50 in the All India Merit List. He has been conferred the Doctorate by Mumbai University in March 2005 for hi research “Finance – Capital Market – Small Investors Protection”. He submitted one of the longest thesis of 1202 pages, submitted in Two Volumes.

A Man of Action, Kirit has been active in various segment of socio-political life, on the issues and problem of Mumbai, fighting for Small Investors, active in health awareness. He is the founder President of Investors’ Grievances Forum, an organization having ISO 9001-2000, which gave birth to Small Investors’ Protection movement.

The Investor Grievances Forum (IGF) set up by Kirit Somaiya in 1993-94 has successfully campaigned against various fraudulent activities in the capital market. It has been continuously agitating and making representations to regulatory authorities and the government, to improve the financial systems to benefit small investors. Post-election, he would further take up the issue of protection to small investors more vigorously so that the Capital Market remains healthy and wealthy.

RBI shuts down Sadhana coop bank

The Reserve Bank of India has on January 22, 2009 cancelled the licence of Sadhana Co-operative Bank Ltd., Ichalkaranji, District Kolhapur, Maharashtra. The licence has been cancelled as the bank had ceased to be solvent, all efforts to revive it in close consultation with the Government of Maharashtra had failed and the depositors were being inconvenienced by continued uncertainty. The Reserve Bank requested the Registrar of Co-operative Societies, Maharashtra to issue an order for winding up the bank and appoint a liquidator.

Consequent to the cancellation of its licence, Sadhana Co-operative Bank Ltd., Ichalkaranji, Kolhapur, Maharashtra is prohibited from carrying on ‘banking business’ as defined in Section 5(b) of the Banking Regulation Act, 1949 (As applicable to Co-operative Societies) (AACS) including acceptance and repayment of deposits.

With the cancellation of its licence and commencement of liquidation proceedings, the process of paying the depositors of Sadhana Co-operative Bank Ltd., Ichalkaranji, Kolhapur, Maharashtra will be set in motion subject to the terms and conditions of the Deposit Insurance Scheme.

On liquidation, every depositor is entitled to repayment of his/her deposits up to a monetary ceiling of Rs.1,00,000/- (Rupees One lakh only) from the Deposit Insurance and Credit Guarantee Corporation (DICGC) under usual terms and conditions.
For any clarifications, depositors may approach Shri P.K.Arora, Deputy General Manager, Urban Banks Department, Mumbai Regional Office, Reserve Bank of India, Second Floor, Garment House, Mumbai 400 018. Telephone : (022) 2493 9930-49, Direct (022) 2493 5348, Fax : (022) 2493 5495, For email click here :

The bank was granted a licence by Reserve Bank on June 18, 1996 to commence banking business. The inspection findings with reference to its financial position as on March 31, 2007 revealed deterioration in the bank's financial position. The latest inspection of the bank conducted with reference to its financial position as on March 31, 2008 revealed that the bank's financial position was precarious. Accordingly the Reserve Bank of India imposed all inclusive directions under Section 35 A of the Banking Regulation Act, 1949 (As applicable to Co-operative Societies) vide Directive dated September 4, 2008. The directions, among others, prohibited acceptance of fresh deposits and further lending and restricted repayment of deposits up to a maximum of Rs.1000/- per depositor.

The bank was served a notice on September 12, 2008, to show cause as to why the licence granted to it should not be cancelled and why steps should not be taken to wind up the bank. The bank's reply to the show cause notice was examined and it was found unsatisfactory. The bank did not come out with any concrete plan for revival or any proposal for its merger. It was therefore, decided to cancel its licence.

Reliance Money launches online magazine - Money Advisor

 India's first e-magazine that deals in equity and debt funds
 Focus on research and views on sectors and not specific stocks
 To carry interviews of senior fund managers/CIO's
 Crisp and concise content

Mumbai, February 2, 2009: Reliance Money, part of the Reliance Anil Dhirubhai Ambani Group, today announced the launch of its online Mutual Fund Magazine – Money Advisor that deals with equity as well as debt funds as a part of its investor education drive.

The announcement was made by Mr. Sudip Bandyopadhyay, Director and CEO, Reliance Money here today.

Commenting on the launch, Mr. Bandyopadhyay said, "Reliance Money endeavors to change the way people choose and use financial services in this country. Investor education forms an important ingredient in this endeavor and we are happy to launch Money Advisor – our monthly magazine on the Mutual Fund Industry in India. While most research reports are complex to understand, we have tried to make Money Advisor easy to understand for the retail investor while focusing on both equity and debt funds so far neglected in most research.'

The magazine will provide a synopsis on the Mutual Fund industry and include the latest trends in AUMs, overview and recommendations on equity and debt funds, performance snapshot, interest rate scenario and fixed income update, economic review apart from sector updates.

It will also have views shared by various Fund Managers/ CIOs and an investor education series.

Money Advisor will be mailed to all Reliance Money customers and distributors. At present, Reliance Money has over three million customers and more than 10,000 outlets across 5,165 cities and towns.

About Reliance Money
www.reliancemoney.com

Reliance Money, a part of the Reliance Anil Dhirubhai Ambani Group is a comprehensive financial services and solution provider, providing customers with access to Equity, Equity and Commodity Derivatives, Portfolio Management Services, Wealth Management Services, Mutual Funds, IPOs, Life and General Insurance and Gold Coins. Customers can also avail Loans, Credit Card, Money Transfer and Money Changing services.

The largest broking house in India with 3 million customers and a wide network of over 10,000 outlets and 20,000 touch points in 5,000+ locations. Reliance Money endeavors to change the way investors transact in financial markets and avails financial services. The average daily volume on the stock exchanges is Rs. 3,000 crores, representing approximately 4% of the total stock exchange volume.

Reliance Capital is one of India's leading and fastest growing private sector financial services companies, and ranks among the top 3 private sector financial services and banking groups, in terms of net worth.

For details contact –
Reliance Money
Mumbai: Tamanna Khanna tamanna.khanna@relianceada.com +91-93236 09510
Delhi: Sanjiv Kumar sanjiv.k.sinha@relianceada.com +91-93124 56677
Concept PR:
B. N. Kumar bnk@conceptpr.com +91-9321048332

Learnings from crisis

by Sudip Bandyopadhyay
(CEO & Director, Reliance Money)

Financial crisis have, by and large, exhibited a repetitive pattern, demonstrating the inability, or unwillingness, of financial market participants to learn.

Charles Mackay, in his book Extraordinary Popular Delusions and the Madness of the Crowds, says that while episodes of panic and disasters have their own distinctive features, they exhibit a common feature – that they are all preceded by a period of apparent prosperity when it is possible to rapidly acquire fortunes ‘otherwise than by the road of plodding”.

In their study of 18 financial crises in the US, economists Carmen Reinhart and Kenneth Rogoff of Harvard Business School found that there were ‘stunning qualitative and quantitative parallels across a number of standard financial crisis indicators’. Ahead of each big financial shock, house prices rose rapidly, as did equity prices; current account deficits ballooned; and capital inflows accelerated.

Financial crises, either global or domestic, transform ‘something close to universal trust into something akin to universal suspicion’ as Galbraith remarked in his book The Great Depression. Under these conditions, it becomes difficult for regulators and legislators to make the wisest decisions or take the best measures. Regulations originating in a crisis tend to be extreme and such measures often lead to expensive regulation.

The Sarbanes Oxley Act is one such example. The question is: if the financial crisis could not be detected despite the expensive disclosures and risk management requirements of this act and NYSE rules, are such rules serving the purpose? The recent banning of short sales in the US, Europe and Australia is another example. Banning of short sales is an extreme measure which has not worked in any market. It does little to arrest the decline in prices; on the contrary, when the ban is removed, a flood of pent up sales push the market down further. This was tried in India too on a couple of occasions, and with little effect. We ought to refrain from taking any quick-fix regulatory measure – either as a precautionary or prophylactic step or for lifting the market sentiment. Market sentiments cannot be talked up or down and when fear grips the market it would be futile to try and impact the prices by comforting statements for example, the famous Greenspan speak of ‘irrational exuberance’ had affected markets only for half a day.

Markets are known to respond to the casual market-reviving measures only casually, as they did to the recent SEBI Participatory Note-related policy changes. What works are measures that ensure that liquidity never dries up. That is the responsibility of the central banker.

RBI not very optimistic in Q3 review

The Reserve Bank has released the document “Macroeconomic and Monetary Developments Third Quarter Review 2008-09” to serve as a backdrop to the Third Quarter Review of Monetary Policy 2008-09.

The highlights of macroeconomic and monetary developments during 2008-09 so far are:

Overview

The Indian economy, after exhibiting strong growth during the second quarter of 2008-09, has experienced moderation in the wake of the global economic slowdown. Although agricultural outlook remains satisfactory, industrial growth has decelerated sharply and services sector is slowing. The economic slowdown, during the second quarter vis-à-vis the first quarter of 2008-09, was primarily driven by a moderation of consumption growth and widening of trade deficit, offset partially by an acceleration in investment demand.


The balance of payments (BoP) for the first half of 2008-09 reflected a widening of the current account deficit and moderation in capital flows. Net capital inflows reduced sharply and remained volatile during 2008-09 with foreign direct investment inflows showing an increase, while portfolio investments recording a substantial outflow.


The growth of non-food credit remained high during 2008-09, so far, albeit with some moderation in recent months. Continued high growth in time deposits enabled the banking system to sustain the credit expansion while the non-banking sources of funds to the commercial sector declined.


The total flow of resources from banks and other sources to the commercial sector during 2008-09, so far, has been somewhat lower than the comparable period of 2007-08.


Financial markets in India, which, by and large, remained orderly from April 2008 to mid-September 2008, witnessed heightened volatility subsequently reflecting the knock-on effects of the disruptions in the international financial markets and the uncertainty that followed. This necessitated the Reserve Bank to undertake a series of measures to inject rupee and foreign exchange liquidity from mid-September 2008 onwards. Liquidity conditions turned around and became comfortable from mid-November 2008.


Headline inflation has declined in major economies since July/August 2008. In India, inflation measured as year-on-year variation in the wholesale price index (WPI) has declined sharply since August 2008 and was at 5.6 per cent as of January 10, 2009.


On the macroeconomic front, the downside risks for economic growth emanate from global economic slowdown, deterioration in global financial markets and slowing down in domestic demand. On the positive side, factors include expected increase in consumption demand mainly reflecting rise in basic exemption limits and tax slabs, Sixth Pay Commission awards, debt waiver for farmers and pre-election expenditure. The easing of international oil prices and commodity prices may help in softening the inflationary pressure.


Output

According to estimates released by the Central Statistical Organisation (CSO) in November 2008, the real GDP growth was placed at 7.6 per cent during the second quarter of 2008-09 as compared with 9.3 per cent during the corresponding quarter of 2007-08, reflecting deceleration in growth of industry and services.


The Ministry of Agriculture has set a target for foodgrains production for 2008-09 at 233.0 million tonnes. According to the First Advance Estimates, the kharif foodgrains production during 2008-09 was placed at 115.3 million tonnes (Fourth Advance Estimates) as compared with that of 121.0 million tonnes during the previous year.


The index of industrial production during April-November 2008-09 recorded year-on-year expansion of 3.9 per cent as compared with 9.2 per cent during April-November 2007-08. The manufacturing sector recorded growth of 4.0 per cent during April-November 2008-09 (9.8 per cent during April-November 2007-08) and the electricity sector recorded growth of 2.9 per cent (7.0 per cent during April-November 2007-08).


Available information on the leading indicators of services sector activity during April-October 2008-09 indicate some acceleration in growth in respect of several indicators such as railway revenue earning and freight traffic and export cargo handled by civil aviation as compared with the corresponding period of 2007-08. On the other hand, growth decelerated in respect of cargo handled at major ports and other indicators of civil aviation excluding export cargo, commercial vehicles, cement and steel.


Aggregate Demand

Aggregate demand in the Indian economy is primarily domestically driven, though exports have been gaining progressively higher importance in recent years. The economic slowdown, during the second quarter vis-à-vis the first quarter of 2008-09, was primarily driven by a moderation of consumption growth and widening of trade deficit, offset partially by an acceleration in investment demand. On the other hand, the government consumption expenditure accelerated during the same period.


According to the latest information on Central Government finances for 2008-09 (April-November), the revenue deficit and fiscal deficit were placed higher than those in April-November 2007 both in absolute terms and as per cent of budget estimates (BE) primarily on account of higher revenue expenditure.


Tax revenue as per cent of BE was lower than a year ago on account of lower growth in income tax, corporation tax and customs duties owing to economic slowdown. Aggregate expenditure as per cent of BE, was higher than a year ago on account of higher revenue expenditure, particularly, subsidies, defence, other economic services, social services and plan grants to States/Union Territories.


While expenditure is slated to increase on account of the fiscal stimulus measures undertaken by the Government to address the problem of economic slowdown, growth of tax revenue is likely to decelerate in the coming months of 2008-09 due to moderation in economic activity. The net cash outgo on account of the two supplementary demand for grants is placed at Rs. 1,48,093 crore. This, in turn, will be reflected in the non-attainability of the deficit targets for 2008-09 as envisaged in the Union Budget 2008-09.


During 2008-09 (up to January 13, 2009), special bonds amounting to Rs.44,000 crore and Rs.14,000 crore have been issued to oil marketing companies and fertiliser companies, respectively.


Sales performance of select non-Government non-financial public limited companies in the private corporate sector during the first two quarters of 2008-09 was impressive; however, profits performance was subdued as compared with 2007-08. Higher increase in expenditure in relation to sales growth was primarily on account of rising input costs, interest expenses and large provisioning towards mark to market (MTM) losses on foreign exchange related transactions which exerted pressure on profits.

The External Economy

India’s balance of payments position during the first half of 2008-09 (April-September) reflected a widening of trade deficit resulting in large current account deficit, and moderation in capital flows. Merchandise trade deficit recorded a sharp increase during April-November 2008 on account of higher crude oil prices for most of the period and loss of momentum in exports since September 2008. Net surplus under invisibles remained buoyant, led by increase in software exports and private transfers. Net capital inflows reduced sharply and have remained volatile during 2008-09 so far.
The large increase in merchandise trade deficit during April-September 2008 led to a significant increase in the current account deficit over its level during April-September 2007. The widening of trade deficit during April-September 2008 could be attributed to higher import payments reflecting high international commodity prices, particularly crude oil prices.


The surplus in the capital account moderated during April-September 2008 reflecting increased gross capital outflows on the back of global financial turmoil. While the net inward FDI (net direct investment by foreign investors) remained buoyant reflecting relatively strong fundamentals of the Indian economy and continuing liberalisation measures to attract FDI, net outward FDI (net direct investment by Indian investors abroad) also remained high during April-September 2008. The gross capital inflows were higher on account of higher FDI inflows and NRI deposits during the period.


In terms of residual maturity, the revised short-term debt (below one year) comprising sovereign debt, commercial borrowings, NRI deposits, short-term trade credit and others maturing up to March 2009, was estimated at around US $ 85 billion as at end-March 2008.


According to the provisional data released by DGCI&S, India’s merchandise exports during April-November 2008 increased by 18.7 per cent while imports recorded a higher growth of 32.5 per cent, largely due to the rise in petroleum, oil and lubricants (POL) imports. The rise in oil imports was primarily due to the elevated international crude oil prices, while the volume of oil imports moderated. Merchandise trade deficit during April-November 2008 widened to US $ 84.4 billion from US $ 53.2 billion a year ago.


As of January 16, 2009, foreign exchange reserves at US $ 252.2 billion declined by US $ 57.5 billion over the level at end-March 2008, including changes due to valuation losses.


Monetary Conditions

Monetary and liquidity aggregates that expanded at a strong pace during the first half of 2008-09 showed some moderation during the third quarter reflecting the decline in capital flows and consequent foreign exchange intervention by the Reserve Bank.


Growth in broad money (M3), year-on-year (y-o-y), was 19.6 per cent (Rs. 7,36,777 crore) on January 2, 2009 lower than 22.6 per cent (Rs. 6,91,768 crore) a year ago.


Aggregate deposits of banks, y-o-y, expanded 20.2 per cent (Rs.6,49,152 crore) on January 2, 2009 as compared with 24.0 per cent (Rs. 6,21,944 crore) a year ago.


The growth in bank credit continued to remain high. Non-food credit by scheduled commercial banks (SCBs) was 23.9 per cent (Rs.5,01,645 crore), y-o-y, as on January 2, 2009 from 22.0 per cent (Rs.3,79,655 crore) a year ago.


The intensification of global financial turmoil and its knock-on effect on the domestic financial market, and downturn in headline inflation, necessitated the Reserve Bank to ease its monetary policy since mid-September 2008.


Reserve money growth at 6.6 per cent, y-o-y, as on January 16, 2009 was much lower than that of 30.6 per cent a year ago. Adjusted for the first round effect of the changes in CRR, reserve money growth was 18.0 per cent as compared with 21.6 per cent a year ago.


Financial Markets

The crisis in global financial markets deepened since mid-September 2008, triggered by the collapse of Lehman Brothers followed by the failure of a number of other financial firms across countries. The pressure on financial markets mounted with the credit spreads widening to record levels and equity prices crashing to historic lows leading to widespread volatility across the market spectrum. The turmoil transcended from credit and money markets to the global financial system more broadly. The contagion also spilled over to the emerging markets, which saw broad-based asset price declines amidst depressed levels of risk appetite.


Added to this, there was a significant deterioration in the global economic outlook. As a result, authorities in several countries embarked upon an unprecedented wave of policy initiatives to contain systemic risk, arrest the plunge in asset prices and shore up the confidence in the international banking system. While these initiatives did help in restoring some level of stability, the financial market conditions remained far from normal during the period October-December 2008.


Liquidity conditions tightened significantly in India between mid-September and October 2008 emanating from adverse international developments and some domestic factors.Financial markets in India came under pressure since mid-September 2008, reflecting the knock-on effects of the disruptions in the international financial markets. This necessitated the Reserve Bank to undertake a series of measures to inject rupee and foreign exchange liquidity from mid-September 2008 onwards.


Accordingly, money markets in India came under some pressure mirroring the impact of capital outflows and redemption pressures faced by mutual funds and other investors. The pressure on money markets was reflected in call rates breaching the upper bound of Liquidity Adjustment Facility (LAF) corridor but settling back within the corridor by November 2008. Interest rates in the collateralised segments of the money market moved in tandem with but remained below the call rate during the third quarter of 2008-09.


In the credit market, lending rates of scheduled commercial banks, which had increased initially, started declining in December 2008. Yields in the government securities market also came to soften during the third quarter 2008-09.


In the foreign exchange market, Indian rupee generally depreciated against major currencies. Indian equity markets witnessed downswings quite in line with trends in major international equity markets.


The Reserve Bank swiftly initiated a series of measures, which helped to assuage liquidity conditions, while reassuring the market that the Indian banking system continued to be safe and sound, well capitalised and well regulated.


Price Situation

The accommodative monetary policy, which was pursued by most central banks since September 2008, aimed at mitigating the adverse implications of the recent financial market crisis on economic growth and employment.


Headline inflation moderated in major economies since July/August 2008 on account of the marked decline in international energy and commodity prices as well as slowdown in aggregate demand emerging from the persistence of financial market turmoil following the US sub-prime crisis.


After remaining at elevated levels for an extended period, global commodity prices declined sharply since the second quarter of 2008-09 led by decline in the prices of crude oil, metals and food. The WTI crude oil prices have eased from its historical high of US $ 145.3 a barrel level on July 3, 2008 to around US $ 42.3 a barrel as on January 22, 2009 reflecting falling demand in the Organisation for Economic Co-operation and Development (OECD) countries as well as some developing countries, notably in Asia, following the economic slowdown. Metal prices eased further during the third quarter of 2008-09, reflecting weak construction demand in OECD countries and some improvement in supply, especially in China.


In India inflation, based on the year-on-year changes in wholesale price index (WPI), declined sharply from an intra-year peak of 12.9 per cent on August 2, 2008 to 5.6 per cent as on January 10, 2009. The recent decline in WPI inflation was driven by decline in prices of minerals oil, iron and steel, oilseeds, edible oils, oil cakes, raw cotton.


Amongst major groups, primary articles inflation, year-on-year, increased to 11.6 per cent on January 10, 2009 from 4.5 per cent a year ago and (it was 9.7 per cent at end-March 2008). This mainly reflected increase in the prices of food articles, especially of wheat, fruits, milk, and eggs, fish and meat as well as non-food articles such as oilseeds and raw cotton.
The fuel group inflation turned negative (-1.3 per cent) as on January 10, 2009 as compared to an intra-year peak of 18.0 per cent on August 2, 2008. This reflected the reduction in the price of petrol by Rs. 5 per litre and diesel by Rs. 2 per litre effective December 6, 2008 as well as decline in the prices of freely priced petroleum products in the range of 30-65 per cent since August 2008.


Manufactured products inflation, year-on-year, also moderated to 5.9 per cent on January 10, 2009 as compared with the peak of 11.9 per cent in mid-August 2008 but remained higher than 4.6 per cent a year ago. The year-on-year increase in manufactured products prices was mainly driven by sugar, edible oils/oil cakes, textiles, chemicals, iron and steel and machinery and machine tools.


Inflation, based on year-on-year variation in consumer price indices (CPIs), increased further during November/December 2008 mainly due to increase in the prices of food, fuel and services (represented by the ‘miscellaneous’ group). Various measures of consumer price inflation were placed in the range of 10.4-11.1 per cent during November/December 2008 as compared with 7.3-8.8 per cent in June 2008 and 5.1-6.2 per cent in November 2007.


Macroeconomic Outlook

The various business expectations surveys released recently reflect less than optimistic sentiments prevailing in the economy. The results of Professional Forecasters’ Survey conducted by the Reserve Bank in December 2008 also suggested further moderation in economic activity for 2008-09.


According to the Reserve Bank’s Industrial Outlook Survey of manufacturing companies in the private sector, the business expectations indices based on assessment for October-December 2008 and on expectations for January-March 2009 declined by 2.6 per cent and 5.9 per cent, respectively, over the corresponding previous quarters.


The global economic outlook has deteriorated sharply since September 2008 with several countries, notably the US, the UK, the Euro area and Japan experiencing recession. In India too, there is evidence of a slowing down of economic activity. Unlike in the advanced countries where the contagion of crisis spread from the financial to the real sector, in India the slowdown in the real sector is affecting the financial sector, which in turn, has a second-order impact on the real sector.


On the positive side factors include expected increase in consumption demand mainly reflecting rise in basic exemption limits and tax slabs, Sixth Pay Commission awards, debt waiver for farmers and pre-election expenditure.
WPI inflation has fallen sharply driven by falling international commodity prices especially those of crude oil, steel and selected food items, although, some contribution has also come from the slowing domestic demand. Going forward, the outlook on international commodity prices indicate further softening of domestic prices.

FDI will continue to flow in despite crisis: Kamal Nath

Current global crisis notwithstading, India will continue to be a magnet for foreign direct investment (FDI) funds.

Addressing the Partnership Summit 2009 “Trade & Investment: Focussing on Opportunities and Growth”, in New Delhi Union Minister of Commerce and Industry Kamal Nath said that during April-October 20008, the FDI inflows to India stood at $ 18.7 billion, which is more than double the inflow during the same period last year.

The Summit, which is organized by the Confederation of Indian Industry (CII), was attended by a large number of Ministers from India and abroad, representatives from trade and industry.

Kamal Nath said: “India looks forward to partner with countries that have a strong agri-food sector from production through processing and distribution to partner with India in bringing about the second agricultural revolution”.

The second sector that offers immense potential is the SME sector. “India’s production design and process engineering costs – especially in the case of medium sized companies, are 70-80 per cent lower than in a developed country”, he added.

On the Doha Round of talks at WTO, the Minister said: “We cannot have a Development Round without an outcome which provides full comfort to the livelihood and food security concerns of the poor in the developing countries. These are too vital to be the subject of trade-offs. There cannot be a one size fits all approach. While developing countries have aspirations of moving from poverty to a semblance of the prosperity enjoyed by common people in countries of the North, the developed countries, quite validly have expectations from the rest of the WTO membership. The challenge that we have to grapple with is how to reconcile the legitimate aspirations of some with the understandable expectations of others. The key to finding this convergence would also be, I presume, the key to finding the convergence between globalisation and social justice”.