Monday, March 31, 2008
India exports to touch $ 200 bn: CII survey
India’s exports is likely to achieve twenty percent growth for the 2004-09 periods and expected to touch $200 billion by next year, said a CII Survey. However, the CEO survey conducted by the CII on Foreign Trade Policy said it required government support through tax refund schemes to achieve this feat. The survey said, to sustain the growth of exports, government should continue tax refund schemes such as Duty Entitlement Pass Book , Export Promotion Capital Goods ,Duty Free Import Authorization in the next fiscal as well. The survey said exporters are looking for new export promotion schemes from the annual supplement, to be announced on April 7. The new scheme would help exporters in getting raw material at cheaper cost and make the Indian products more competitive in the international markets, it added. The CEOs said the government should further simplify export and import procedures for small and medium enterprises, which contribute a large portion of total exports from the country. The powers of regional and zonal offices of Directorate General of Foreign Trade Policy (DGFT) should be enhanced to ensure quick approvals to exporters. Currently, the cases are sent to the Head Office of DGFT in New Delhi for approval, they said. The CEOs suggested implementing Electronic Data Interchange (EDI) across all ports, besides improving infrastructure, road linkages with ports and setting a target of a maximum of 10 hours turnaround time at ports for all goods by 2010. They said the benefits should be provided to exporters as the Indian products such as capital goods, high-tech and healthcare products, medical equipments, automobile and information technology are facing intense competition from China, Brazil, France, Bangladesh and ASEAN countries. In addition, the participants said the government should set up a mechanism to control increase in sea freight, as there is a 61 per cent increase in the cost in last one year, making exports uncompetitive.
'Kyoto II' climate talks open in Bangkok
The first formal talks in the long process of drawing up a replacement for the Kyoto climate change pact opened in Thailand on Monday with appeals to a common human purpose to defeat global warming.
"The world is waiting for a solution that is long-term and economically viable," U.N. Secretary-General Ban Ki Moon said in a video address to the 1,000 delegates from 190 nations gathered in Bangkok.
The week-long meeting stems from a breakthrough agreement in Bali last year to start negotiations to replace Kyoto, which only binds 37 rich nations to cut emissions of greenhouse gases by an average of five percent from 1990 levels by 2012.
U.N. climate experts want the new pact to impose curbs on all countries, although there is wide disagreement about how to share the burden between rich nations led by the United States and developing countries such as China and India.
No major decisions are likely from the Bangkok talks, which are intended mainly to establish a timetable for more rounds of talks culminating in a United Nations Climate Change conference in Copenhagen at the end of next year.
"We see this as very much a process-oriented meeting," chief U.S. climate negotiator Harland Watson told reporters before the opening ceremony.
However, environmental groups are keeping a close eye on Bangkok for signs of sustained commitment by rich and poor countries alike to minimising global warming by curbing emissions of greenhouse gases such as carbon dioxide.
"It's the first test of whether the goodwill and good intentions that were present in Bali are still there when they they get down to the hard negotiations," said Angela Anderson of the Washington-based Pew Environment Group.
TOUGH TALKS
Although the negotiations are likely to be tough and tortuous, a series of U.N. climate change reports last year highlighted the need to curb global warming.
One report in particular said it was more than 90 percent certain that human actions -- mainly burning fossil fuels -- were to blame for changes to the weather system that will bring more heatwaves, droughts, storms and rising seas.
One major issue to be tackled is the reluctance of big developing nations such as India and China to agree to any measures that might curb their rapid industrialisation.
Negotiators will also have to work out how to deal with the United States -- the only rich nation not to have signed up to Kyoto -- given that President George W. Bush will be leaving the White House after November's election.
Bush pulled the United States out of Kyoto in 2001, saying the pact would hurt the economy and was unfair since it excluded big developing nations from committing to emissions cuts.
The White House has since moderated its stance by saying it would accept emissions targets if all other big emitters do as well based on their individual circumstances.
This has tempered criticism, but green groups and many poorer nations say they don't expect much progress on a replacement climate pact until a new U.S. administration takes office in January 2009.
All three main presidential candidates are greener than Bush and back a cap-and-trade system to encourage business to curb carbon emissions.
The United Nations wants the new treaty to be in place by the end of 2009 to give companies and investors as much advance knowledge as possible of coming changes, and national parliaments time to ratify it before 2012, when Kyoto expires.
"The world is waiting for a solution that is long-term and economically viable," U.N. Secretary-General Ban Ki Moon said in a video address to the 1,000 delegates from 190 nations gathered in Bangkok.
The week-long meeting stems from a breakthrough agreement in Bali last year to start negotiations to replace Kyoto, which only binds 37 rich nations to cut emissions of greenhouse gases by an average of five percent from 1990 levels by 2012.
U.N. climate experts want the new pact to impose curbs on all countries, although there is wide disagreement about how to share the burden between rich nations led by the United States and developing countries such as China and India.
No major decisions are likely from the Bangkok talks, which are intended mainly to establish a timetable for more rounds of talks culminating in a United Nations Climate Change conference in Copenhagen at the end of next year.
"We see this as very much a process-oriented meeting," chief U.S. climate negotiator Harland Watson told reporters before the opening ceremony.
However, environmental groups are keeping a close eye on Bangkok for signs of sustained commitment by rich and poor countries alike to minimising global warming by curbing emissions of greenhouse gases such as carbon dioxide.
"It's the first test of whether the goodwill and good intentions that were present in Bali are still there when they they get down to the hard negotiations," said Angela Anderson of the Washington-based Pew Environment Group.
TOUGH TALKS
Although the negotiations are likely to be tough and tortuous, a series of U.N. climate change reports last year highlighted the need to curb global warming.
One report in particular said it was more than 90 percent certain that human actions -- mainly burning fossil fuels -- were to blame for changes to the weather system that will bring more heatwaves, droughts, storms and rising seas.
One major issue to be tackled is the reluctance of big developing nations such as India and China to agree to any measures that might curb their rapid industrialisation.
Negotiators will also have to work out how to deal with the United States -- the only rich nation not to have signed up to Kyoto -- given that President George W. Bush will be leaving the White House after November's election.
Bush pulled the United States out of Kyoto in 2001, saying the pact would hurt the economy and was unfair since it excluded big developing nations from committing to emissions cuts.
The White House has since moderated its stance by saying it would accept emissions targets if all other big emitters do as well based on their individual circumstances.
This has tempered criticism, but green groups and many poorer nations say they don't expect much progress on a replacement climate pact until a new U.S. administration takes office in January 2009.
All three main presidential candidates are greener than Bush and back a cap-and-trade system to encourage business to curb carbon emissions.
The United Nations wants the new treaty to be in place by the end of 2009 to give companies and investors as much advance knowledge as possible of coming changes, and national parliaments time to ratify it before 2012, when Kyoto expires.
Basel II comes into play on banks
Several frontline banks will be gearing up to face the challenge of conforming to tougher global banking standards from Monday under Basel II.
Basel II, which was conceived in June 2004, seeks to create an international standard that banking regulators can use to determine how much capital banks should set aside to cover their operational and financial risks.
The Basel II standards require banks to allocate capital in different proportions against various risks.
The Reserve Bank of India has decided to implement the new standards in phases. Domestic banks which have branches overseas will have to comply with the new capital adequacy standards by March 31.
The deadline for compliance with Basel II standards in the case of the remaining commercial banks is March 31 next year.
The State Bank of India (SBI), the Bank of Baroda (BoB), the Bank of India, Indian Bank and ICICI Bank will be among the first entities that will have to meet the new standards. All of them have high capital adequacy ratios under Basel I and are not expected to have any trouble in complying with the new standards.
In fact, it might be easier for them to do so as the Reserve Bank has lowered the risk weightages on some categories of loans — residential housing and education — from 125 per cent to 75 per cent under Basel II.
The banks will have to adopt the standard approach for credit risk and the basic indicator approach to operational risk while computing their capital requirements under the new framework.
In the standard approach, credit risk is measured on ratings given by an external credit rating agency. This is different from the earlier approach where there was a single risk weight of 100 per cent for all corporate loans, irrespective of their ratings.
Thus, if it was a AAA rated company or a firm with a much lower rating, banks had to allocate Rs 9 as capital (capital adequacy ratio of 9 per cent and the 100 per cent risk weight) for every Rs 100 lent.
Under the new regime, capital allocated will vary with the risk involved or the rating assigned. In the case of a corporate with a triple A rating, the risk weightage is only 20 per cent and the allocation of capital is lower.
So, if a bank lends Rs 100 to such a company, the capital allocated will be only Rs 1.80 (20 per cent of Rs 9).
This capital will progressively rise to Rs 13.50 in the case of a lowest rated company as the risk weightage in this case is 150 per cent. The risk weightage for unrated loans will be at 100 per cent.
While banks are already asking top companies to get rated, the BoB, the SBI and the three others are already Basel-II compliant.
It is estimated that in the past few months, more than 300 companies, ranging from leading firms such as Reliance Industries to other small and medium enterprises, have got themselves rated.
“We have rated more than 100 companies,” said a senior official from rating agency Crisil. Over the next few months, many more companies will get rated.
In the meantime, banks which have to comply with the new norms from next year have already entered into bilateral arrangements with various credit rating agencies to rate their corporate clients.
The basic indicator approach to operational risk requires banks to hold capital that is equal to the average of the 15 per cent annual gross income over the past three years. Gross income includes net interest income and non-interest income.
To comply with this additional capital requirement, banks had tapped the markets with follow-on offerings and other instruments to raise funds.
Basel II, which was conceived in June 2004, seeks to create an international standard that banking regulators can use to determine how much capital banks should set aside to cover their operational and financial risks.
The Basel II standards require banks to allocate capital in different proportions against various risks.
The Reserve Bank of India has decided to implement the new standards in phases. Domestic banks which have branches overseas will have to comply with the new capital adequacy standards by March 31.
The deadline for compliance with Basel II standards in the case of the remaining commercial banks is March 31 next year.
The State Bank of India (SBI), the Bank of Baroda (BoB), the Bank of India, Indian Bank and ICICI Bank will be among the first entities that will have to meet the new standards. All of them have high capital adequacy ratios under Basel I and are not expected to have any trouble in complying with the new standards.
In fact, it might be easier for them to do so as the Reserve Bank has lowered the risk weightages on some categories of loans — residential housing and education — from 125 per cent to 75 per cent under Basel II.
The banks will have to adopt the standard approach for credit risk and the basic indicator approach to operational risk while computing their capital requirements under the new framework.
In the standard approach, credit risk is measured on ratings given by an external credit rating agency. This is different from the earlier approach where there was a single risk weight of 100 per cent for all corporate loans, irrespective of their ratings.
Thus, if it was a AAA rated company or a firm with a much lower rating, banks had to allocate Rs 9 as capital (capital adequacy ratio of 9 per cent and the 100 per cent risk weight) for every Rs 100 lent.
Under the new regime, capital allocated will vary with the risk involved or the rating assigned. In the case of a corporate with a triple A rating, the risk weightage is only 20 per cent and the allocation of capital is lower.
So, if a bank lends Rs 100 to such a company, the capital allocated will be only Rs 1.80 (20 per cent of Rs 9).
This capital will progressively rise to Rs 13.50 in the case of a lowest rated company as the risk weightage in this case is 150 per cent. The risk weightage for unrated loans will be at 100 per cent.
While banks are already asking top companies to get rated, the BoB, the SBI and the three others are already Basel-II compliant.
It is estimated that in the past few months, more than 300 companies, ranging from leading firms such as Reliance Industries to other small and medium enterprises, have got themselves rated.
“We have rated more than 100 companies,” said a senior official from rating agency Crisil. Over the next few months, many more companies will get rated.
In the meantime, banks which have to comply with the new norms from next year have already entered into bilateral arrangements with various credit rating agencies to rate their corporate clients.
The basic indicator approach to operational risk requires banks to hold capital that is equal to the average of the 15 per cent annual gross income over the past three years. Gross income includes net interest income and non-interest income.
To comply with this additional capital requirement, banks had tapped the markets with follow-on offerings and other instruments to raise funds.
Herbal mkt to grow to Rs 14,500 cr by 2012: Assocham
Indian herbal industry is likely to register a compound annual growth rate of 20 per cent to touch Rs 14,500 crore by 2012, industry body Assocham said on Saturday. The Indian herbal market size is currently worth Rs 7,000 crore and the export of its medicines would grow at 25 per cent to Rs 9,000 crore, Assocham said in its study, Herbal Industry Biz Potential. Setting up of Herbal Farm Clusters by the government, promotion of exports, doubling the cultivation of medicinal plants, continuous focus for research and development on product and effective marketing of herbal products are the reasons cited by Assocham for the growth in herbal industry. "The study reveals that out of 700 plant species commonly used in India, only 20 per cent were earlier being cultivated on commercial scale and 90 per cent of medicinal plant used by the industries are collected from the wild," Assocham President Venugopal Dhoot said. However, the study states that the major hurdle for cultivating medicinal and aromatic plants as a sustainable agricultural profession are the lack of organised and regulated markets in India. "The regulated production on scientific lines, effective enforcement of licensing system and setting up of Export Promotion Zones (EPZ) in select states will push up exports of herbal material and medicines," it added. The study said that the farmers should be trained, particularly in post-harvest handling of the products and stressed for the dissemination of information about the prospects of cultivation, processing and marketing of medicinal plants.
Tax deduction allowed on LTA
Leave travel assistance (LTA) is generally paid as a part of the remuneration of employees. With some proper planning, an employee can save some tax through this mode. The LTA amount is received from the employer towards a journey within India. LTA is eligible for deduction under the Income Tax Act subject to compliance with specified conditions. Section 10 of the Income Tax Act specifies that in the case of an individual, the amount of any travel concession or assistance received by him is exempt. It should be received from his employer for himself and his family. He should be proceeding on leave to travel to any place in India. The exemption is available to an individual for two journeys in a block of four calendar years commencing from the calendar year 1986. The current block is calendar years (January to December) 2006 to 2009. Where such travel concession or assistance is not availed of by the individual during any such block of four calendar years, it may be carried forward. Such amount of travel concession or assistance can be availed of by the individual during the first calendar year of the immediately succeeding block of four calendar years, and is eligible for exemption. Any fixed sum paid by the employer to the employee by way of LTA on the basis of a self-declaration by the employee is not exempt from tax. In order to claim the exemption, he must produce original proofs for expenses, i.e., the tickets, bills etc. The tax benefit is for actual fare only. Hotel, food, sight seeing, local conveyance etc are not allowed. For the purposes of this exemption, 'family' means the spouse and children of the individual, and parents, brothers and sisters who are mainly dependent on the individual. In case the journey is by air, an amount not exceeding the economy fare of the national carrier by the shortest route to the place of destination is taken. In case the place of origin of journey and destination are connected by rail, and the journey is by any other mode of transport other than by air, an amount not exceeding the air conditioned first class rail fare by the shortest route to the place of destination is taken. Where the place of origin of journey and destination are not connected by rail, the amount eligible for exemption is - where a recognised public transport system exists, an amount not exceeding the first class or deluxe class fare, on such transport, by the shortest route to the destination, and where no recognised public transport system exists, an amount equivalent to the air conditioned first class rail fare, for the distance of the journey, by the shortest route. The amount exempt will not exceed the amount of expenses actually incurred for the travel. The exemption is available for a maximum of two children of an individual. The journey should be in India only. The exemption is available for the farthest place by shortest route when a circular journey is undertaken. The amount exempted under Section 10 will be the amount actually incurred on the travel.
Future picks up 70% in Godrej Aadhaar
The Future Group has picked up a 70% stake in Godrej Aadhaar, which provides agri-services in rural areas besides retailing. The stake has been bought at an undisclosed amount by Future Ventures, a Future Group company. Arvind Choudhury will be handling the business from Future Group, Future Group CEO Kishore Biyani said. “Aadhaar Retailing will have a board for joint management,” Godrej Agrovet’s CEO Balram Yadav said. Both Mr Biyani and Mr Balram declined to divulge the deal amount. “The tie-up will increase the penetration of our insurance business, micro-finance, credit business and sourcing of agri-products,” Mr Biyani said. With the joint venture, the company has now got entry into 62 new towns, apart from the existing retail network in 55 towns, he said. Godrej Aadhaar will continue with its agri-products business, Me Balram added.
NEWS UPDATES
- Bhushan Steel Limited has informed the Exchange that : "The company propose to set up a value added steel plant in Chennai with a production capacity of 0.5 million TPA with the total investment of approximately Rs. 500 crores."
- The United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) in its recent annual survey report for the region has cautioned that the global food prices would remain high and held bio-fuel programme responsible for the same.
- Suven Life Sciences Ltd has announced that two product patents were granted in Mexico and Korea for two of their new chemical entities (NCEs) for the treatment of disorders associated with neuro-degenerative diseases and these patents are valid until 2023.
- FMCG major Godrej Industries on Monday said it has received shareholders approval for further investing up to Rs 360 crore in Godrej Consumer Products Ltd.
- State-run Bank of Maharashtra said it would merge Aurangabad Jalna Gramin Bank and Thane Gramin Bank, its two sponsored banks, to form Maharashtra Godavari Gramin Bank.
- Bata India Ltd has that the board of directors of the company at its meeting held on March 28 has recommended a dividend of 15 per cent on equity shares and an additional dividend of 5 per cent to celebrate 75 years of the Company in India.
- The EPC (engineering, procurement and construction) division of Reliance Energy (REL) secured two contracts worth Rs 12 billion for transmission projects of Reliance Power Transmission (RPTL).
- Targeting a business growth of 24% in the next fiscal, state-owned Dena Bank will write off Rs 2 billion under the loan waiver package announced in the Union Budget.
- The Future Group has picked up a 70% stake in Godrej Aadhaar, which provides agri-services in rural areas besides retailing.
- The finance ministry is believed to be examining a proposal by Ruias-led Essar Group to bring in foreign investment of up to $2 billion (Rs 8,000 crore) through Mauritius-based Essar Power Holdings in Essar Power.
- India's Larsen wins $145 mln order from HPCL.
- Public sector lender Canara Bank on Saturday launched 10 new products which, the bank said, suit each and every strata of clientele.
- Syndicate bank, lead bank of the district, has released Rs 1010 crore annual credit plan for the year 2008-09.
- IDBI Ltd has put on hold its decision to cut its prime lending rate, which was supposed to come into effect from Tuesday, it said in a statement issued over the weekend.
- India's Hinduja Group is in talks to buy a controlling stake in French auto parts maker Valeo (VLOF.PA: Quote, Profile, Research) in a deal that is expected to be worth about $1.5 billion, the Business Standard said on Monday, citing a source.
- JM Financial Consultants Ltd., a unit of JM Financial Ltd said on Monday it has decided to buy out its joint venture partner in JM Financial ASK Securities Pvt Ltd.
- Spanco Tele shares open up 3.1 pct on orders.
- In April ’08 all eyes will be fixed on the credit policy. If the RBI cuts interest rates (which we do not think is likely after the growth oriented budget) then the market will get supported.
- Bank of India (BoI) plans to open 10 more branches in 2008-09 in West Bengal to step up its business in the state.
- ISPAT Industries is planning to raise Rs 10 billion by rights issue and a foreign currency convertible bonds (FCCBs) float.
- Gujarat NRE Coke is planning to invest USD 425 million in the next three years to develop its mines.
Indian Overseas Bank to take over Pune bank
India cabinet panel to discuss inflation Monday
The Indian government has convened an emergency meeting of the Cabinet Committee on Prices on Monday to discuss possible solutions to curb inflation, which hit a 14-month high earlier this month, the Economic Times said on Sunday.
The inflation data released on Friday was "quite disturbing," Finance Secretary D. Subbarao said, according to the paper.
Data on Friday showed annual inflation at 6.68 percent in the 12 months to March 15, higher than the previous week's 5.92 percent.
It is also well above 5 percent near which the central bank wants inflation contained by the March 31 fiscal year end.
The inflation data released on Friday was "quite disturbing," Finance Secretary D. Subbarao said, according to the paper.
Data on Friday showed annual inflation at 6.68 percent in the 12 months to March 15, higher than the previous week's 5.92 percent.
It is also well above 5 percent near which the central bank wants inflation contained by the March 31 fiscal year end.
Tatas spend $133 mn in advisory fees in last 2 years
Country's leading industrial conglomerate Tata group, which recently announced the acquisition of premium British car brands Jaguar and Land Rover, has spend a whopping $133 million in advisory fees related to various buyouts in the last two years. According to data compiled by leading global financial information provider Dealogic, "the Tata group of companies has paid a total of 133 million dollars in advisory fees to banks advising on acquisitions since 2006". The amount of $133 million assumes significance as the group has acquired as many as 56 businesses with a total volume of $20.6 billion in the last two years, accounting for 82 per cent of their total merger and acquisition volume. Since the year 2002, the Tata group has made as many as 106 acquisitions valued at $24.2 billion.
Tata's M&A activities are mostly outbound as only 13 per cent of Tata Group' acquisitions have been domestic, that is targets based in India. The average acquisition size by the Tata Group is $284 million. The recent acquisition of Jaguar Cars and Land Rover for $2.3 billion is the second largest acquisition by the group, following Tata Steel's acquisition of Anglo-Dutch steel maker Corus for $12.1 billion, essaying the largest overseas takeover by an Indian company. Dealogic further added that the United Kingdom is the most targeted nation with a M&A volume of 16 billion dollars through seven deals, and this accounts for 82 per cent of the total M&A acquisitions.
Tata's M&A activities are mostly outbound as only 13 per cent of Tata Group' acquisitions have been domestic, that is targets based in India. The average acquisition size by the Tata Group is $284 million. The recent acquisition of Jaguar Cars and Land Rover for $2.3 billion is the second largest acquisition by the group, following Tata Steel's acquisition of Anglo-Dutch steel maker Corus for $12.1 billion, essaying the largest overseas takeover by an Indian company. Dealogic further added that the United Kingdom is the most targeted nation with a M&A volume of 16 billion dollars through seven deals, and this accounts for 82 per cent of the total M&A acquisitions.
MARKET PREDICTION
TODAY'S MARKET IS LIKELY TO OPEN IN FLAT TO NEGATIVE NOTE BECAUSE GLOBAL MARKET IS WEAK.
LEVEL OF THE NIFTY 4850-4900-5050-5100.
AFTER POOR ROLLOVER ,FIRST DAY WAS FAIR.
WE CAN ASSUME BUY POSITION FROM LOWER SUPPORT IN METAL SPACE-TISCO AND SAIL LOOKS GOOD.
AFTER CREEPING UP INFLATION BANKING SHOWS SOME DOWNWARD TREND, WHICH WILL CONTINUE IN NEAR FUTURE.
IN A NUTSHELL NIFTY IS IN PREMIUM WE CAN ALSO GO LONG FROM LOWER SUPPORT WITH SL OF 4750.
HAVE A NICE TRADING DAY !!!!!
-MR. SAM
LEVEL OF THE NIFTY 4850-4900-5050-5100.
AFTER POOR ROLLOVER ,FIRST DAY WAS FAIR.
WE CAN ASSUME BUY POSITION FROM LOWER SUPPORT IN METAL SPACE-TISCO AND SAIL LOOKS GOOD.
AFTER CREEPING UP INFLATION BANKING SHOWS SOME DOWNWARD TREND, WHICH WILL CONTINUE IN NEAR FUTURE.
IN A NUTSHELL NIFTY IS IN PREMIUM WE CAN ALSO GO LONG FROM LOWER SUPPORT WITH SL OF 4750.
HAVE A NICE TRADING DAY !!!!!
-MR. SAM
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