Mumbai: The Reserve Bank of India (RBI) has raised the foreign institutional investors’ (FIIs’) sub-limit in government bonds by $5 billion, after the existing $20-billion limit was almost exhausted. The move is expected to stabilise yields, volatile in the recent past. The overall limit for FII investment in government bonds has been kept unchanged at $30 bn. As a result on the rise in the sub-limit, that for long-term investors like insurance and pension funds will be reduced to $5 bn. RBI said the incremental investment limit of $5 bn shall be required to be invested in government bonds with a minimum residual maturity of three years. Besides, all future investment against the limit vacated, when the current investment by these foreign investors runs off either through sale or redemption, shall also be required to be made in government bonds with a minimum residual maturity of three years. “The bond market was expecting this for some time. This is a positive step. The yields can drop by another three to five basis points tomorrow. But this FII money will come only over a period of time. We also need to see the operational guidelines to be issued by Sebi (the capital markets regulator),” said Siddharth Shah, vice-president, STCI Primary Dealer. http://www.business-standard.com/article/finance/rbi-raises-fii-sub-limit-in-govt-bonds-by-5-bn-114072301570_1.html
RBI WORKING ON EXIT SYSTEM FOR FIRMS FACING BANKRUPTCY
New Delhi: The RBI is working on a system to enable entrepreneurs seeking to exit insolvent firms, a top official said on Wednesday. “We have been thinking (about) how to create a system so that people could voluntarily withdraw from an unattractive business,” RBI executive director B Mahapatra said in his address on ‘Managing Stressed Assets’ organised by Assocham. He said it is felt there has to be a good bankruptcy system. He added that RBI has started working on an enabling a system for banks that will help those entrepreneurs seeking an honourable exit from unattractive ventures. He said: “Nobody wants to be called a bankrupt person… Indian philosophy is that we do not like failures.” http://www.financialexpress.com/news/rbi-working-on-exit-system-for-firms-facing-bankruptcy/1273085
RUPEE RISES 14 PAISE
The rupee on Thursday appreciated by 14 paise to close at over one-week high of 60.11 against the dollar following bullish local equities and sustained capital inflows, extending gains for the second straight day. Dollar selling by exporters and a weak US currency overseas too aided the rupee upmove. At the Interbank Foreign Exchange (Forex) market, the domestic currency commenced higher at 60.15 a dollar from last close of 60.25, but fell back to a low of 60.1975. Later, it bounced back and touched a high of 60.05 before concluding at 60.09, up by 14 paise. Government bonds (G-secs) surged further on persistent buying support from banks and corporates, while the call rate ended stable at the overnight call money market on alternate bouts of buying and selling. The 8.83 per cent 10-year benchmark bond maturing in 2023 shot up to Rs 101.0450 from Rs 100.86, while its yield eased to 8.66 per cent from 8.69 per cent. The overnight call money rates ended stable at 9.00 per cent. It moved in a range of 9.05 per cent and 8.25 per cent. FIIs infused Rs 412.03 crore on Thursday as per provisional data with stock exchanges. The dollar index was down 0.05 per cent against a basket of six major global currencies. Pramit Brahmbhatt, Veracity Group CEO, said: “Rupee continued to trade strong and appreciated by almost a quarter per cent. http://www.business-standard.com/article/finance/rupee-rises-14-paise-114072400039_1.html
UBI TO RAISE Rs 300 CRORE BY SHARE SALE TO LIC
New Delhi: State-owned United Bank of India (UBI) plans to raise R300 crore by soon selling shares on preferential basis to Life Insurance Corporation (LIC). “We are waiting for the government approval, and expect it to come shortly. Thereafter, we will issue shares to LIC on a preferential basis,” UBI executive director Deepak Narang said. The bank proposes to issue 8.45 crore shares to LIC for R35.50 per share. After this, the government’s share in the bank will come down from the existing 89.47%to 82%. At present, LIC owns 2.72% stake in UBI. Meanwhile, as part of its effort to recover loans, the bank will soon embark upon a process to “name and shame” its wilful defaulters. http://www.financialexpress.com/news/ubi-to-raise-rs-300-crore-by-share-sale-to-lic/1273086
PRIVATE BANKS GEAR UP TO ISSUE INFRA BONDS
Mumbai: Following the Reserve Bank of India (RBI)’s incentive to raise long-term funds, private sector banks are chalking out plans to issue infrastructure bonds in the coming months. On Wednesday, YES Bank’s board approved raising Rs 3,000 crore through long-term bonds. Even Axis Bank had announced similar plans on Tuesday. “In accordance with the recent RBI guidelines on issue of long-term bonds by banks – financing of infrastructure and affordable housing – the board of YES Bank has approved raising Rs 3,000 crore of long-term bonds, and the bank now intends to seek shareholder approval for the same,” said Rajat Monga, group president- financial markets and chief financial officer, YES Bank. According to Monga, the amount will be raised in the next 12 months. “These bonds are expected to provide cheaper long-term funding to the bank and will enable the bank to significantly accelerate its affordable housing loan business, and consequently, the overall retail asset strategy. This will also assist in lowering of funding costs for infrastructure project financing,” Monga said. RBI has announced that long-term bonds (tenor of more than seven years) will be exempt from cash and statutory reserve requirements, if the proceeds were used to fund new long-term infrastructure projects and affordable housing. http://www.business-standard.com/article/finance/private-banks-gear-up-to-issue-infra-bonds-114072400038_1.html
YES BANK’S Q1 NET RISES 9.6%
Mumbai: Private sector lender YES Bank on Wednesday reported a net profit of R439.5 crore for the quarter ended June 30, 2014, up 9.6% y-o-y, boosted by net interest income and growth in advances. Net interest income stood at R745.3 crore, up 13.1% y-o-y, and as a result, the bank was able to maintain its net interest margins (NIMs) at 3%, the same as the preceding quarter. Rajat Monga, chief financial officer, said NIMs could move up by 10-15 bps in the coming quarter. “We will, hopefully, report a jump in margins in the next quarter because of the equity that we raised and it will have a one-time impact on margins because we have zero-cost funds in the book,” he said. In the reporting period, YES Bank raised equity capital worth $500 million, or R2,941 crore, via global qualified institutional placement. However, the lender reported a 3.7% y-o-y drop in non-interest income, which Monga attributed to the base effect in Q1FY14, as the bank had extraordinary gains worth R125 crore on the bond portfolio. Correspondingly, the bank posted a 5.3% y-o-y dip in operating profit to R644.2 crore. The YES Bank scrip ended 1.72% down at R536.65 on the BSE on Wednesday. http://www.financialexpress.com/news/yes-bank-s-q1-net-rises-9.6-/1273079
YES BANK PROFIT RISES 10% IN Q1 AS PROVISIONING DECLINES
Mumbai: YES Bank posted a 10 per cent rise in net profit at Rs. 440 crore in the first quarter ended June 30, 2014 as against Rs. 401 crore in the year ago period on the back of stable interest income and loan growth. Lower provisions, which fell 75.5 per cent to Rs. 24 crore (including provision towards unhedged exposure of Rs. 19 crore) against Rs. 97 crore in the year-ago period, also aided profit growth. The mid-sized private bank’s net profit was restricted due to the drop in operating profit and non-interest income. Net interest income — the difference between interest earned and that expended — grew 13 per cent, at Rs. 745 crore. On the other hand, non-interest income dropped 4 per cent to Rs. 426 crore from Rs. 442 crore. Rajat Monga, Chief Financial Officer, said income from treasury had dropped due to a rise in bond yields. He added that retail lending was muted because of seasonal factors, though it should see a more “constructive pick-up” over the next three quarters. Total advances grew 23 per cent year-on-year while deposits rose 17 per cent as on June 30, 2014. “Advances growth came largely from corporate loan book…We should not see acceleration in bad loans…,” Monga said. Gross NPAs increased to 0.33 per cent as at June end 2014, from 0.22 per cent a year ago, while net NPAs increased to 0.07 per cent ( Rs. 43 crore) from 0.03 per cent ( Rs. 12 crore). Net interest margins (NIM) remained flat at 3 per cent. “We have more equity (raised about Rs. 3,000 crore via QIP). So, hopefully, we should see the NIM increasing by 10-15 basis points next year,” Monga added. http://www.thehindubusinessline.com/todays-paper/tp-money-banking/yes-bank-profit-rises-10-in-q1-as-provisioning-declines/article6243297.ece
MAINTAIN ‘BUY’ ON AXIS BANK SHARES: NOMURA
We maintain our ‘buy’ rating on Axis Bank with a target price of Rs 2,300, based on 2.1x FY16f book. This is higher than the multiples at which Axis has traded in the past two-three years but lower than FY04-07 multiples. While growth over the next two-three years is likely to be lower than the last cycle, ROAs are much more superior now (1.75% vs. 1.2% in FY04-07) and balance sheet and P&L granularity makes the business model less risky. We, thus, expect Axis Bank to close the valuation gap with private peers as risks surrounding large corporate asset quality ebb. Axis has delivered well on diversifying its asset mix and making its liability more granular. The stock remains our top pick. As some credit concerns ease over the next 12-18 months and corporate growth picks up, we expect further rerating. Current valuations of 1.85x Mar-16 book look reasonable in that context. Here are the positives from the bank’s Q1FY15. NIMs held up flat at ~3.9% versus our forecast of marginal contraction due to better liability mix (CASA + retail term deposits) and higher LDR. Asset quality was stable with R1,100 crore of slippages + restructuring versus R6,500 crore guided (R1,600 crore per quarter). http://www.financialexpress.com/news/maintain-buy-on-axis-bank-shares-nomura/1273077
NY FED CRITICISES DEUTSCHE BANK’S REPORTING EFFORTS
Deutsche Bank’s primary regulator in the US has found serious problems with the bank’s financial reporting procedures and oversight, a lawyer briefed on the matter said. Jordan Thomas, a lawyer who represents a former Deutsche Bank risk analyst who filed a whistle-blower claim against the bank, said that regulator, the Federal Reserve Bank of New York, sent a letter in December to officials at the German bank notifying them of the findings of its review. Mr. Thomas said he had seen a copy of the letter and it directed Deutsche to fix problems in its financial reporting procedures — problems the letter said had existed for several years. The letter coincided with a push by United States regulators for banks, especially ones based overseas, to be held to the same capital requirements as American banks. The Fed wanted the tougher measures to avoid a need for future taxpayer bailouts of financial institutions in the event of another financial crisis. Deutsche Bank, one of Europe’s largest banks, was a forceful opponent of the Fed’s push to force foreign banks to comply with the same capital requirements as domestic banks. http://www.financialexpress.com/news/ny-fed-criticises-deutsche-bank-s-reporting-efforts/1273061
SALMAN-STARRER KICK INSURED FOR RS 300 CR
Mumbai: Salman Khan’s upcoming Bollywood flick, Kick, set to hit theatres on Friday is insured for about Rs 300 crore. Insured by multiple firms, the policies cover different areas such as production, publicity and distribution. In other words, insurers would compensate for any mishap at production and post-production stages. Kick is produced by Nadiadwala Grandson Entertainment Pvt Ltd and distributed by UTV Motion Pictures. Sources said the film has been insured for Rs 250-300 crore. The production package policy covers all film and set-related incidents. The media liability/errors and omission (E&O) policy covers the film from any legal liability related to its content. Usually, film production houses take such a cover to avoid unnecessary delays and issues concerned with the script of the film. Kick’s distributor has taken a policy to cover distributors’ loss of revenue that protects their interests from the date of release till 60 days. Almost all firms take such policies that their business interests are not hampered due to a poor show at the box office. While the production package cover has been provided by a public sector insurance company, the E&O cover has been provided by a private general insurer. However, the production as well as media liability covers also cover any risks to the distributor, if any. http://www.business-standard.com/article/finance/salman-starrer-kick-insured-for-rs-300-cr-114072300623_1.html
JANALAKSHMI FINANCIAL SET FOR A RECORD PE FUND RAISE
Bangalore: Janalakshmi Financial Services, an urban micro-finance institution (MFI) started by well-known social entrepreneur Ramesh Ramanathan, is understood to be setting the stage for a record fund raise in the micro-finance space. According to information available, the funding may touch Rs 600 crore. Investment bankers who are in the know about the Bangalore-based MFI’s plans indicated that this record fund raise may be in phases and the first infusion will be in the Rs 350-crore range, besting its earlier fund raise last year. In August 2013, Janalakshmi had raised Rs 325 crore in Series D funding, led by Morgan Stanley Private Equity Asia. Tata Capital Growth Fund and QRG Enterprises, the holding company of Havells India, also participated. Citi Venture Capital, India Financial Inclusion Fund and Vallabh Bhansali, co-founder and chairman of Enam Financial Consultants, also participated in the round. Janalakshmi has raised close to Rs 600 crore so far in multiple rounds, including the last round. The promoters currently own a little under 22 per cent. Janalakshmi’s earlier fund raise of Rs 325 crore has been the benchmark for the MFI space in recent years and, according to market information, Ujjivan Financial Services, another MFI based in Bangalore, is planning a Rs 350-crore fund raise, which should be executed in 2014. If Janalakshmi scales up the Rs 600 crore fund raise, it will mark a resurgence of the MFI sector in India, after phases of turmoil in the sector. When contacted, Ramanathan said he has no comments to offer on the fresh fund raise. http://www.business-standard.com/article/finance/janalakshmi-financial-set-for-a-record-pe-fund-raise-114072301824_1.html
L&T FINANCE’S Q1 NET UP 97%
Mumbai: L&T Finance Holdings on Wednesday reported a consolidated net profit of R286 crore for the quarter ended June 30, 2014, up 97% from R145 crore in the same period last year owing to a R119-crore gain from City Union Bank share sale. Last month, L&T Finance sold a 4.55% stake in Chennai-based City Union Bank. However, the operational profit after tax (PAT) stood at R167 crore in Q1FY15. The investment management business witnessed the average assets under management (AAUM) growing by 44% on a year-on-year basis to R19,895 crore. The company’s advances as on June 30 grew by 19% year-on-year to R40,764 crore compared with R34,340 core in the same period last year. “Margins in the retail business continued to improve and the overall credit costs have stabilised. There has been an increase in the overall gross NPA arising from the seasonality seen in the retail portfolio during the first quarter and existing stress in infrastructure sector,” said chairman and managing director YM Deosthalee. The NBFC’s net NPA ratio stood at 2.67% at the end of the June quarter and was up 36 basis points (bps) from the same period in FY14. “Our efforts and the positive outlook for the medium term should bring about a gradual improvement in asset quality in the upcoming quarters,” Deosthalee added. The company believes that emergence of a stable government post elections has resulted in a positive business sentiment and heightened expectations of a faster recovery in the overall economy. http://www.financialexpress.com/news/l-t-finance-s-q1-net-up-97-/1273081
GIC HOUSING FINANCE POSTS RS. 25-CR Q1 PROFIT
Mumbai: The housing finance arm of re-insurer General Insurance Corp – GIC Housing Finance Limited – posted a net profit of Rs. 25 crore for the quarter ended June 30, 2014 compared to Rs. 24 crore, a year ago. Total income during the quarter increased to Rs. 169 crore against Rs. 148 crore, a year ago. The company had reported a net profit of Rs. 97.5 crore on an income of Rs. 624 crore in FY2014. Shares of the company gained Rs. 2.2 (1.29 per cent), to end at Rs. 173.15 per share on the Bombay Stock Exchange. http://www.thehindubusinessline.com/todays-paper/tp-money-banking/gic-housing-finance-posts-rs-25cr-q1-profit/article6243299.ece
SEBI BARS SAI PRASAD CORP FROM RAISING MONEY, LAUNCH SCHEMES
MUMBAI: In a crackdown on an unauthorised money pooling scheme promising high returns, Sebi has barred Sai Prasad Corporation and its directors from raising funds from public and from launching any new investment plans. The firm and its three directors were allegedly running ‘collective investment scheme (CIS)’ in the name of its ‘joint venture participation business for the development of land’. The Securities and Exchange Board of India (Sebi) said that Sai Prasad Corporation had raised Rs 137.12 crore from the public in 2012-2013, which increased to Rs 478.35 crore during 2013-2014. In an order dated July 22, Sebi said that Sai Prasad Corporation was “prima facie engaged in fund mobilising activity from the public” through a CIS “without obtaining a certificate of registration from Sebi”. Citing safety of investors, the regulator said steps were required to prevent the company and its directors — Balasaheb K Bhapkar, Shashank B Bhapkar and Vandana B Bhapkar — from further carrying on with the fund mobilising activity. As per the order, the firm and its directors have been asked “not to collect any money from investors from its existing JV Participation Structure/scheme” and “not to launch any new schemes or plans or float any new companies to raise fresh moneys”. The entities have also been ordered to immediately submit the full inventory of the assets owned by Sai Prasad Corporation out of the amounts collected from the investors. Besides, the company and its directors have been asked not to dispose of any of the properties or alienate the assets of the existing scheme as well as not to divert any funds mobilised from the public. http://economictimes.indiatimes.com/markets/regulation/sebi-bars-sai-prasad-corp-from-raising-money-launch-schemes/articleshow/38923132.cms?prtpage=1
CAIRN INDIA MAY ESCAPE SEBI PENALTY DESPITE FAILING TO MEET NEW BUYBACK REGULATIONS
Cairn India, which managed to repurchase a meagre 21.47% of the total shares targeted from the R5,725-crore buyback, may seek Securities and Exchange Board of India’s (Sebi) exemption for non-compliance of buyback regulations, said three people familiar with the deal and the regulations associated with it. The oil & gas exploration company, controlled by Anil Agarwal-led Sesa Sterlite, bought back 3.67 crore shares from investors of the total 17.09 crore it was looking to acquire, showed stock exchange data. Sebi’s new norms released in June last year require companies to acquire at least 50% of the funds earmarked for buybacks. While the exact amount of buyback price was not publicly available, the company is believed to have spent about R1,230 crore based on the maximum buyback price of R335 per share. Moreover, Cairn India’s last buyback transaction took place on May 9, two-and-a-half months before the date of closure. While the failure to achieve a minimum 50% repurchase could attract a penalty under the revised norms, Cairn India could get an exemption, said industry observers. This is because the company missed its target after Cairn Energy decided to withdraw its participation, pending the resolution of a tax dispute with the Indian income-tax department. http://www.financialexpress.com/news/cairn-india-may-escape-sebi-penalty-despite-failing-to-meet-new-buyback-regulations/1273076
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