Just in:
Experts come together to support updating the city’s nature conservation masterplan // 2024 Lok Sabha Election Is A Historic Battle Against The Advent Of Fascism In India // AI Boost for Galaxy Devices: Samsung Expands One UI 6.1 Update // Renewables Surge Sets Record, But Global Equity Lags // Andertoons by Mark Anderson for Thu, 28 Mar 2024 // Meta Earth Official Website Launch: The Pioneer Explorer in the Modular Public Blockchain Domain // Sharpening the Focus: Sharjah Health Department Refines Evaluation Criteria for “Healthy Schools Programme” // Andertoons by Mark Anderson for Wed, 27 Mar 2024 // Floki & TokenFi eyes MENA // Near Miss at Kolkata Airport: IndiGo Plane Makes Contact with Stationary Air India Express // Hong Kong Seen Granting Mainland Investors Access to Crypto via ETFs // In Lok Sabha Polls In Punjab, AAP Is Advantageously Placed As Against Its Three Rivals // Konica Minolta is named ASEAN 2023 Market Leader in Colour Light and Mid Digital Production Printers // Superland Announced Annual Results for 2023, 2023 Net Profit Increased approximately 39.5% to approximately HK$22.2 million as Compared to the 2022 Adjusted One // Party Nominees Refusing To Contest: Major Perception Threat For BJP // HSBC Streamlines Gold Investment for Hong Kong Residents with Tokenized Product // Employer Obligations Tighten: 30-Day Deadline for Emirati Employee Registration with GPSSA // Hullabaloo About Electoral Bonds May End Up As A Whimper Pre And Post Poll // Emirates Post Speeds Up Deliveries for GCC with Special Day // Arvind Kejriwal Gets International Heft Against The Deshi Vishwaguru //
HomeIndia TakesPOST FM NUDGE, BIG BANKS WORK ON BUYOUT BLUEPRINT

POST FM NUDGE, BIG BANKS WORK ON BUYOUT BLUEPRINT

inMUMBAI: India’s banking sector may be getting ready for a wave of consolidation as the country tries to build institutions of world-class proportions. Four big state-run banks — State Bank of India, Punjab National Bank, Bank of Baroda and Bank of India — have already begun an exercise to identify takeover targets to gain access to franchises that would augment their capabilities, said three top bankers familiar with the move.

 

The top managements of the four banks are in the process of preparing a blueprint that would explain the rationale for absorbing one or two entities, said the people cited above, none of whom wanted to be named.

ADVERTISEMENT

 

Employees at these state-run banks are engaged in the exercise after finance minister Arun Jaitley gave the lenders the go-ahead to decide how they would strategise to remain relevant in the emerging economic scenario.

 

“We are hearing from the corridors of finance ministry that there is seriousness on consolidation of banks,” said an executive from one of the top four banks.

 

“The sense we are getting is that first there could be merger of at least one SBI associate bank with SBI to kick off the consolidation process.”

 

Although no names of likely acquisition targets are being discussed at these four banks, the key conditions for a smaller bank will be regional, technological and cultural advantages.

 

For instance, a bank such as Bank of Baroda, which does not have a presence in the East, may prefer one from that part of the country.

 

State-run banks have weakened over the years as governments have treated them as an organ of the administration and used them to push their social agenda.

 

Meanwhile, lenders in neighbouring China have acquired scale while those in India are puny by comparison, giving them little clout in global markets. The economic downturn, with growth having almost halved from the peak, has exposed the fault lines in the system.

 

The parlous financial position of the government has left banks capitalstarved — the allocation for this year is tiny compared with the amount needed to meet Basel III standards. And, to access capital from the market, the staterun banks need a strategy to turn more profitable. Currently, they are labouring under bad debt on account of companies finding it difficult to repay loans because of the slump.

 

“Government has made it clear that they will not give any capital,” said one of the bankers. “Banks that have the capital and the capability to raise capital could look at acquisitions,” he said, while adding “Nothing has reached the drawing board. Banks are only doing all kinds of permutations and combinations.”

 

To be sure, state-run bank consolidation has been discussed for nearly a decade, but little progress has been made, except for shotgun weddings that were aimed at rescuing ventures in poor shape. Inertia among banks, cultural issues and fears of trade union unrest held up any such move. That may now change with the new government. “There have been some suggestions for consolidation of public sector banks,” Jaitley said in his July 10 Budget speech. “Government, in principle, agrees to consider these suggestions.”

 

A committee set up by the Reserve Bank of India under former Axis Bank chairman PJ Nayak had suggested that the health of state-run banks was poor. To strengthen them, the report said it will be better “either to privatise these banks and allow their future solvency to be subject to market competition, including through mergers; or to design a radically new governance structure for these banks which would better ensure their ability to compete successfully, in order that repeated claims for capital support from the government, unconnected with market returns, are avoided.”

 

The market share of the public sector banks is forecast to decline from 80% in 2000 to just over 60% in 2025, Nayak had said. They stack up poorly in many respects against non-state institutions.

 

For instance, net profit per employee at the new private sector banks was about four times that of the SBI Group in the year ended March 2013.

(Source: The Economic Times, July 28, 2014)

 

INDIA REAL ESTATE FUNDS LOOK TO RAISE $1 BILLION FROM OVERSEAS

 

MUMBAI: Indian real estate-focused private equity (PE) funds are hoping to raise around $1 billion from overseas investors, two people familiar with the matter said. Last year, realty funds managed to mop up close to $370 million from international markets, data from VCCEdge shows. Among the key realty funds that are in the market for money include Red Fort Capital, ASK Group, HDFC Property Fund and JP Morgan, these people said.

 

Many global investors who had shied away from investing in the Indian real estate market are beginning to show interest now that the new government is putting a lot of emphasis on housing for all. An estimated $700 million has come in so far in the calendar year; while HDFC Property Fund has completed a first tranche of $250 million, of its latest fund, earlier this month, the ASK Group had picked up a more modest $50 million in January.

 

Vikas Chimakurthy, director of Kotak Realty Fund, believes investors in funds, that are picking up stakes in commercial properties, are expecting returns of around 16%. “For residential projects the returns expectation is around 22%,” Chimakurthy told FE. Kotak Realty Fund closed an overseas fund in April, with $400 million in the kitty.

 

In the next round of fund-raising, Red Fort Capital is looking for $500 million to invest in commercial real estate projects while JPMorgan is believed to have a target of $250 million-$300 million by March end. That would be in addition to the $100 million that it is already believed to have got in 2013, industry sources indicated to FE.

 

If the proposed fund-raising materialises, it would be the first significant such exercise after a hiatus of four years. While a number of realty funds were looking to raise money overseas, they met with little success due to the ongoing uncertainty in the economic environment and the inability of existing funds to show returns to investors.

 

Moreover, exits were few and far between. Ambar Maheshwari, MD (corporate finance), JLL India, points out that several funds may announce exits from investments made five to seven years back. Profitable exits, he feels, will send out the right signals to investors. Sunil Rohokale, CEO and MD, ASK Group, told FE investments of up to $2 billion were exited in FY14. “We are hoping that number should be in the range of $3 billion-$4 billion this year,” Rohokale said.

 

Real estate projects, selling houses at a rate of Rs 4, 000-6,000 per sq ft, which can be classified as affordable housing, appear to be seeing good traction in sales and cash flows.

 

This could encourage some funds to exit, though the returns made on these investments are unlikely to be high. Rohokale said that exiting such investments could yield a return of around 15%, which although higher than what other asset classes like shares and gold have yielded in the last seven years, wasn’t too high compared to the returns witnessed earlier in this sector.

 

The geographic profile of international investors betting on Indian real estate sector is also changing. According to Chimakurthy, a significant proportion of capital was being raised from the US in 2007. But in the last two years the proportion of funds being raised in the US has come down and new investors from Canada, Europe and Asia have entered the fray. “There has also been a change in the profile of foreign limited partners that are committing capital to private equity funds, with a lot large pension funds and sovereign wealth funds participating,” Chimakurthy said. Private equity funds are primarily targeting investments in residential development projects in the large Indian cities of Mumbai, Delhi, Bangalore, Chennai, Hyderabad and Pune.

 

In 2012, New Delhi-based Red Fort Capital announced that it had raised $500 million for investing in the Indian residential market, which was the only significant overseas fundraising in the real estate space between 2008 and 2012. JP Morgan declined to comment, while an email sent to Red Fort Capital remained unanswered.

(Source: The Financial Express, July 28, 2014)

 

FM MAY BRIEF RBI BOARD ON STEPS TAKEN TO CUT DEFICIT, NEED TO LOWER RATES ON AUGUST 9

 

NEW DELHI: Finance minister Arun Jaitley will address the board of the Reserve Bank on August 9 amid expectations that the central bank will complement government actions by reducing rates to boost growth.

 

“The meeting has been scheduled for August 9 where he would be addressing the board members and talk about announcements made in the Budget to perk up growth,” a source said.

 

Jaitley is likely to inform the RBI board about the steps taken to contain the fiscal deficit and may underline the need to reduce interest rates to promote growth.

 

It has been a custom that the finance minister addresses RBI board, consisting of RBI governor and existing three deputy governors, after the Budget.

 

The meeting comes in the backdrop of the persistent high food inflation and deficient rain. Food inflation is still hovering around 8%. For the month ended June, it stood at 8.14% against 9.5% in the previous month.

 

“If inflation moderates and RBI agrees, which I am sure will agree, (the government would like) to bring down rates… We want to go back to a situation of Vajpayee’s time when buying a flat becomes cheaper than taking on rent. So that installments becomes less than rent,” the finance minister had said recently.

 

In the last policy review in June, RBI chose not to tinker with the policy rate. Thus, it was the second consecutive time that RBI governor Raghuram Rajan kept interest rates unchanged.

 

The repo rate, at which the RBI lends to banks, was retained at 8% and the cash reserve ratio (CRR) was kept unchanged at 4%.

 

The statutory liquidity ratio (SLR), the mandatory amount of bonds lenders must park at the RBI, was cut by 0.5% to 22.5% of their net demand and time liabilities (NDTL) with effect from June 14.

 

RBI is likely to announce its second bi-monthly policy review on August 5. As far as economic expansion is concerned, the country has witnessed GDP growth of sub-5% level for last two years. For 2013-14, the economic growth was restricted to 4.7%. However, the growth is expected to improve to 5.4-5.9% during the current fiscal as per the latest Economic Survey.

(Source: The Financial Express, July 28, 2014)

 

DIPP SECRETARY TAKES ON COMMERCE MINISTRY OVER FTAs

 

NEW DELHI: The wrangling within the commerce and industry ministry over the desirability of more free trade pacts has intensified.

 

Delivering a riposte to commerce secretary Rajeev Kher, who had argued for more FTAs and CEPAs, secretary in the department of industrial policy and promotion (DIPP) Amitabh Kant last week told Kher that rather than signing more such pacts, the country should focus on implementation of the National Manufacturing Policy (NMP) and reap the country’s demographic dividend (60% of Indians are in working age group of 15-59 years).

 

In a letter to Kher last week, Kant said FTAs/CEPAs would adversely affect NMP and make it difficult to achieve the targets mentioned therein. The NMP envisages raising the share of manufacturing in the GDP from around 15-16% (the level where it has stagnated since 1980s) to 25% and generating 100 million additional jobs.

 

The DIPP secretary said the duty concessions under the free-trade pacts have resulted only in an increase in imports from the partner countries, but not a corresponding growth in India’s exports to them. Besides, the FTAs have led to an inverted duty structure (where the duty on the final product is nil or low, while raw materials/intermediates attract higher duty), the DIPP said, a point which the recent Economic Survey also highlighted. This inverted duty structure is harming domestic manufacturing especially that of capital goods, indigenisation of technology, local value addition and job creation, Kant said.

 

Kant is believed to have cited Tariff Commission reports that pointed out the inverted duty structures on several items and said this anomaly needs to be removed. The Budget 2014-15 has addressed the issue partially by reducing the import duties on some inputs and raising duties on certain finished products.

 

When contacted, Kant refused to comment, but sources in DIPP and commerce department told FE that he indeed replied to Kher’s letter last week. The DIPP is trying to protect the manufacturing sector’s interests, said a source.

 

Kant is understood to have wrote in the letter that the Tariff Commission reports have been endorsed by the National Manufacturing Competitiveness Council, some Parliamentary panels and several other ministries. The reports are also being looked into by the Competition Commission of India from the competition law and market distortion perspectives.

 

Kant is learnt to have sought caution while negotiating FTAs and he added the government should hold more stakeholder consultations before signing and reviewing such pacts. In addition, the DIPP secretary has also called for an internal discussion on the ongoing studies on the impact of FTAs.

(Source: The Financial Express, July 28, 2014)

 

CROSS-BORDER E-COMMERCE TAKING GIANT STRIDES NOW

 

BANGALORE: India is fast catching up on cross-border e-commerce — export and import of goods through online channels — with the US, UK, Australia, China and Germany emerging as preferred business destinations.

 

Cross-border e-commerce in India has taken great strides to become three times the size of the $3.1-billion domestic e-commerce market. Driven by small and medium entrepreneurs who are tapping into overseas markets and the Indian consumer’s appetite for electronic gadgets, it stood at $9.8 billion in 2013, poised to grow at a CAGR of 30%.

 

Indian merchants have curated a global clientele for niche Indian products, exporting ethnic wear, handicraft, leather fashion accessories and semi-precious jewellery, which account for $1.8 billion or over half the value of the domestic e-commerce market. Out of the $8-billion imports, bulk of the orders comprise gadgets like mobiles, laptops and internationally acclaimed books, revealed data provided by Delhi-based Federation of Indian Exports Organisation (FIEO).

 

“Since the Reserve Bank of India has raised the financial limit for online transactions from $3,000 to $10,000, we will see an increase in trading of hallmarked gold jewellery as well,” said Ajay Sahai, director-general and CEO, FIEO.

 

The US, UK, Australia, Russia and Israel are major export destinations for Indian merchants taking the online route while China, Germany, Malaysia and Singapore are preferred import hubs.

 

According to Sahai, most of the medium and small entrepreneurs use global online marketplaces like eBay or Amazon to trade, while a handful have set up their individual online stores. The online marketplaces, however, account for about 95% of online exports in numbers and around 85% of the transaction value.

 

“Global online marketplaces are mainly used for retail sales. But, we export large volumes to whole-sellers through our own online store. Online is certainly a better route as it gives you a continuous flow of new customers. Besides, we save significantly on infrastructure costs,” said Sandeep Mehrotra, owner of silverware manufacturer Progress Enterprises. “We sell goods worth R6-8 crore annually through e-commerce to international markets.”

 

Sahai, however, said India has a long way to go before it catches up with the likes of China and the US in cross-border e-commerce exports. “China is already exporting goods worth $20 billion through outbound e-commerce, while the number for India is only $1.8 billion. The Centre should provide a seamless environment to realise the full potential of cross-border e-commerce,” he said.

 

Indian merchants are enthused by the scope for growth, with the global cross-border e-commerce market poised to grow from $105 billion in 2013 to $307 billion in 2018. Around 15,000 Indian merchants are listed on eBay, exporting around 9 lakh products to 31 international markets. “Besides exports, consumers from over 2,638 cities in India are importing products from global eBay merchants from 141 countries,” said Navin Mistry, head-retail exports, eBay India. He further added that around 36% exporters have recorded a growth rate of 20% while over 30% of the merchants have reported 21-40% growth.

(Source: The Financial Express, July 28, 2014)

www.pdf24.org    Send article as PDF   

http://goo.gl/xQP7uW

ADVERTISEMENT

ADVERTISEMENT
Just in:
Party Nominees Refusing To Contest: Major Perception Threat For BJP // Infineon and HD Korea Shipbuilding & Offshore Engineering jointly develop ship electrification technology // Near Miss at Kolkata Airport: IndiGo Plane Makes Contact with Stationary Air India Express // 2024 Lok Sabha Election Is A Historic Battle Against The Advent Of Fascism In India // In Lok Sabha Polls In Punjab, AAP Is Advantageously Placed As Against Its Three Rivals // Superland Announced Annual Results for 2023, 2023 Net Profit Increased approximately 39.5% to approximately HK$22.2 million as Compared to the 2022 Adjusted One // Hullabaloo About Electoral Bonds May End Up As A Whimper Pre And Post Poll // Emirates Post Speeds Up Deliveries for GCC with Special Day // Employer Obligations Tighten: 30-Day Deadline for Emirati Employee Registration with GPSSA // Court Sides with Coinbase on Wallet Service, But Staking Program Remains in Limbo // Hong Kong Seen Granting Mainland Investors Access to Crypto via ETFs // Floki & TokenFi eyes MENA // HSBC Streamlines Gold Investment for Hong Kong Residents with Tokenized Product // Arvind Kejriwal Was Used By BJP In 2011 Movement To Take On The Congress // Andertoons by Mark Anderson for Thu, 28 Mar 2024 // Ajman Celebrates Conclusion of Ramadan Activities with Grand Ceremony // AIA Hong Kong Wins More Than 20 Accolades at MPF Ratings MPF Awards, BENCHMARK MPF of The Year Awards and Bloomberg Businessweek Top Fund Awards // Lisboeta Macau’s world first LINE FRIENDS PRESENTS CASA DE AMIGO and BROWN & FRIENDS CAFE & BISTRO has officially opened // Sharpening the Focus: Sharjah Health Department Refines Evaluation Criteria for “Healthy Schools Programme” // Konica Minolta is named ASEAN 2023 Market Leader in Colour Light and Mid Digital Production Printers //