Health Insurance TPA of India formed

This company which was incorporated on August 14, 2013, as per information available from Ministry of Corporate Affairs, recently held its first board meeting

The common in-house third party administrator (TPA) of the public general insurers has been formed and is named Health Insurance TPA of India. This company which was incorporated on August 14, 2013, as per information available from Ministry of Corporate Affairs, recently held its first board meeting.

Officials involved in this project said that the Health Insurance TPA of India will be operationalised by April 2014. This common TPA to process health claims has National Insurance Company, New India Assurance Company, National insurance Company, Oriental Insurance Company and General Insurance Corporation of India (GIC) as stakeholders. While the former four public general insurers have 23.75% stake, GIC has 5% stake.

This TPA will look into health claims and would handle majority of the claims received by the public general insurers. The common TPA has been proposed to prohibit large-scale leakages while settling insurance claims in the health segment. Further, it is intended to process claims of public general insurers in-house, rather than being handled by an external agency.

Industry players said that this common TPA is expected to speed up the claim-settlement process as well as reduce the claims ratio of insurance companies. This move is also expected to reduce costs for these insurance players, who pay a commission of approximately 6% of premiums to TPAs to settle claims.

Presently, most claims in the health segment are handled by external players, which increased the time taken to settle claims. PK Bhagat has been recently appointed as the additional director of the company in the company’s first meeting held on September 4, 2013. G Srinivasan, the chairman and managing director of New India Assurance is the chairman of the board of this company, which is based in New Delhi.

When the TPA comes into operation, the claims handling and processing from external agencies will gradually be transferred to the new entity. Health Insurance TPA of India has been formed with authorised capital of Rs 300 crore and paid-up capital of Rs 10 crore.

According to details sourced from company filings with the ministry of corporate affairs, the incorporation document of the company said that the parties shall at all times be committed to increase the Share Capital of the company at least upto Rs 200 crores (Minimum Commitment) in accordance with the Business Plan and if the Board of the Company determines that such additional capital is necessary for the operation of the Company.

“The Parties shall cause the increased capital to be contributed in proportion to the Shares they hold in the Share Capital of the Company at the relevant time,” said the incorporation document. Also, if further funding is required by the Company beyond the Minimum Commitment in accordance with the Business Plan then the Board may consider further capitalisation or any other alternate source of financing such as shareholders loans, external debt financing.

Though Life Insurance Corporation of India (LIC) was offered a proposal to be a stakeholder in this venture, the life insurer decided not be become a part of it.

Sebi to soon notify norms for listing of start-ups, SMEs

Move is aimed at providing easier exit options for entities such as Angel Investors, Venture Capital Funds and Private Equities

Market regulator Sebi will soon notify new norms for listing of start-ups and small and medium enterprises on stock exchanges without having to make initial public offer (IPO).

The Sebi board had in June approved the amendments of rules to permit listing of start-ups and SMEs in Institutional Trading platform (ITP) without an IPO.

Sources said the Securities and Exchange Board of India is expected to notify the new regulations within a week.

Lack of exit opportunities for investors and restricted access to new ones is a major problem faced by start-ups and SMEs.

Sources said the move is aimed at providing easier exit options for entities such as Angel Investors, Venture Capital Funds and Private Equities. Besides, the move will provide better visibility, wider investor base and greater fund raising capabilities to such companies.

Sebi, in June, had said that the minimum amount for trading or investment on the ITP would be Rs 10 lakh. Such companies would also be exempted from the requirements of having to offer up to 25% of shareholding to public through an offer document in order to get listed.

Therefore the listing can be done without an IPO and the expenses associated with it. While such companies are listed on the ITP they would not be permitted to raise capital, though they can continue to make private placements.

Further, listing on ITP by start-ups and SMEs is expected to offer their existing investors better chances to find alternate buyers than if they search using their own network in the investment community.

L&T Construction bags order worth Rs16.05bn

The Metallurgical & Material Handling Business secured a new EPC order worth Rs 307 crores.

L&T Construction has won new orders worth Rs1605 crores across various business segments.
The Buildings & Factories Business has bagged an order valued Rs445 crores from Hospital Services Consultancy Corporation (India) Limited for the construction of a super specialty cum new paid ward including associated services at Safdarjung Hospital, New Delhi.

The Metallurgical & Material Handling Business secured a new EPC order worth Rs 307 crores from a reputed customer for the construction of a sinter plant in eastern India.

The Power Transmission & Distribution Business has bagged a major order worth Rs 675 crores from Kudgi Transmission Limited. The scope includes detailed engineering, survey, civil works, installation, testing and commissioning of three 400 kV and one 765 kV double circuit line transmission system to evacuate power from the 3 x 800 MW  Kudgi Thermal power station in Bijapur District, Karnataka.
In the Heavy Civil Infrastructure Business additional order worth Rs178 crores has been received.

Sensex jumps 114 points; Capital goods, realty stocks steal the show

Indian stock markets were trading up by over 0.5 per cent in the mid-session on Tuesday on heavy capital inflows amid weak European cues.

At 2.10 p.m., the 30-share BSE index Sensex was up 114.21 points (0.57 per cent) at 20,009.31 and the 50-share NSE index Nifty was up 27.6 points (0.47 per cent) at 5,933.75.

Capital goods, realty, consumer durables and bank stocks were the star performers and were up 1.63 per cent, 1.41 per cent, 0.92 per cent and 0.91 per cent, respectively. Metal and IT stocks were the only losers and were down 0.4 per cent and 0.05 per cent, respectively.

L&T, ICICI Bank, Tata Power, Bharti Airtel and Jindal Steel were the top five Sensex gainers, while Hindalco, Coal India, Tata Steel, Hero MotoCorp and Bajaj Auto were the top five losers.

European stocks were down as investors watched the beginning of the US earnings season and negotiations to end a government shutdown in the world’s largest economy. Asian shares were up.

Senate Democrats could introduce legislation as soon as today that gives President Barack Obama the authority to raise the debt ceiling unless two-thirds of Congress disapproves, according to a Senate Democratic aide.

But US House Speaker John Boehner said that the Republican-controlled chamber can’t pass an increase to the US debt ceiling without packaging it with other provisions.

BHEL's share in fresh orders only at 1% in Q2

Company expected to be one of the worst performing Sensex companies as orders dry up and execution slowdown

The performance of Bharat Heavy Electricals in the second quarter of FY14 is set to drag down the revenue and profit growth of benchmarks as the company is still battling structural challenges. Even though of late there has been positive news flow on the capital goods sector and order inflow has shown a pick-up, BHEL is not a beneficiary of this trend. In the second quarter, order inflows picked up to Rs 38,569 crore, up 9% annually and 23% sequentially. This is the highest order inflows seen by the capital goods sector in two years but BHEL's share is an abysmal 1% of this, says Sharekhan. Larsen & Toubro has cornered 66% of most of these orders.

Shares of BHEL rose 43%, after touching a low of Rs 101.50 in August, on expectations that the company could get new BTG orders from ultra mega power projects (UMPPs). The market believes that the risk of foreign competition has abated substantially and the rupee's depreciation would only help further. The other factor that contributed to the share price rally was the notification of standard bidding document for case-two bids with fuel cost as pass-through and approval of the coal block auction policy by the government.

However, analysts believe that operational challenges faced by BHEL continue. ICICI  Securities believes that while foreign competition may not be a threat, domestic players have already queered the pitch as 30-35GW of BTG capacity is already awaiting fresh orders. Further, incremental ordering is likely to be weak, unless current issues are addressed. The power sector is battling multiple issues, ranging from fuel shortage to outstanding dues from state electricity boards. Analysts beleive that till these are resolved, BHEL may not see any meaningful recovery. Also slower capacity addition in the sector may impact BHEL's order inflows in the coming quarters.

Analysts expect a decline in earnings per share of 21.2% CAGR over FY12-15. In the second quarter, some analysts expect BHEL's revenues to decline 17% year-on-year even though there may be an a healthy pick up sequentially. BHEL's operating margin is also expected to decline by 770 basis points between FY13 and FY15. The market is also not very keen on BHEL taking over troubled projects, which could further add to the company's balance sheet stress. Macquarie Capital believes BHEL could see sharp earnings downgrades.

BSE to transfer 56 securities to ‘T’ group

The Bombay Stock Exchange has decided to move securities of 56 companies, including Birla Capital & Financial Services and Essar Shipping, to the restricted trading category with effect from October 11.

Bharati Shipyard, Bil Energy Systems, Lotus Eye Care Hospital and Zenith Birla (India) are among other scrips which would be shifted by BSE to the trade-to-trade segment (‘T’ group category).

The measure is part of “preventive surveillance measure to ensure market safety and safeguard the interest of the investors’’, BSE said in a notice.

In the trade-to-trade segment, no speculative trading is allowed and delivery of shares and payment of consideration amount are mandatory.

BSE has asked the trading members to “take adequate precaution” while trading in these 56 stocks, “as the settlement will be done on a trade-to-trade basis and no netting off positions will be allowed’’.

However, the exchange said the transfer of these stocks to ‘T’ group “should not be construed as an adverse action against the company’’.

“Further, this is a temporary measure and will be periodically reviewed depending on the market conditions,” it added.

NTPC employees protest against performance-linked pay

A section of employees at NTPC is protesting against the performance-linked payment mechanism put in place by the public sector power producer from the current financial year.

The aggrieved employees belong to E1 (entry position) till E7 (Deputy General Manager) levels.

“Nearly 11,000 employees are protesting across all power stations of NTPC,” said Rakesh Pandey, Chairman of NTPC Executives' Federation of India.

According to the executives federation, the company is categorising the bottom 10 per cent of executives as non-performing and has denied payment of performance-linked incentives to them. Though the protesting employees are not completely against this mechanism, they feel that there is no justice in totally denying any payment.

“The company can set a performance target- say 80 or 95 per cent. But, depriving the bottom 10 per cent of any payment is not proper,” Pandey said.

Simply put, there are examples of new-recruit engineers, hired from IITs, showing performance of more than 90 per cent. But in the overall average, their performance figures in the bottom 10 per cent. Hence, they are not getting any performance-linked pay.

Till now, operations at any of the NTPC power stations are not impacted. The largest power producer in the country operates 15 coal-fired and 7 gas-fired stations on standalone basis. This accounts to nearly 41,000 mw.

When contacted, NTPC spokesperson said that the performance linked payment is as per guidelines issued by the Department of Public Enterprises. “This is a step towards enhancing productivity,” he added.

Silver futures down by 0.3% on Asian cues

Market analysts said the fall in silver prices at futures trade was mostly in tandem with subdued trend in the Asian region and profit booking by speculators

Amid a weak trend in the Asian region, silver prices fell by Rs 167, or 0.34%, to trade at Rs 49,463 per kg in futures trade today as speculators reduced positions.

At the Multi Commodity Exchange, silver for delivery in December contract traded Rs 167, or 0.34%, lower at Rs 49,463 per kg in business turnover of 884 lots.

In a similar fashion, the white metal for delivery in far-month March fell by Rs 174, or 0.34% lower, at Rs 50,601 per kg in four lots.

Market analysts said the fall in silver prices at futures trade was mostly in tandem with subdued trend in the Asian region and profit booking by speculators.

Meanwhile, silver fell by 0.18% to $22.31 an ounce in Singapore.

Sensex jumps 134 points; Capital goods, realty stocks steal the show

Indian stock markets were trading up by over 0.6 per cent in the pre-noon session on Tuesday on heavy capital inflows amid firm Asian cues.

At 11.51 a.m., the 30-share BSE index Sensex was up 133.62 points (0.67 per cent) at 20,028.72 and the 50-share NSE index Nifty was up 33.65 points (0.57 per cent) at 5,939.80.

Capital goods, realty, banks and consumer durables stocks were the star performers and were up 1.87 per cent, 1.63 per cent, 1.54 per cent and 1.09 per cent, respectively.

Metal and oil & gas stocks lost investors' support and were down 0.36 per cent and 0.01 per cent, respectively.

Bank stocks were up as the Reserve Bank of India had yesterday cut the interest rate under marginal standing facility by 50 bps to 9 per cent to ease the liquidity for banks.

L&T, ICICI Bank, Bharti Airtel, Tata Motors and Tata Power were the top five Sensex gainers, while Coal India, Tata Steel, SSLT, Hindalco and Bajaj Auto were the top five losers.

Asian stocks were up led by utilities and developers. Japan's Nikkei rose 58.26 points or 0.42 per cent to 13,911.60, Hong Kong's Hang Seng surged 239.65 points or 1.04 per cent to 23,213.60 and Australia's S&P/ASX 200 was down 11.71 points or 0.23 per cent at 5,149.40.

The US government shutdown entered its second week, leaving investors on tenterhooks as politicians in Washington made little headway in agreeing a deal to avoid the debt default.

Senate Democrats could introduce legislation as soon as today that gives President Barack Obama the authority to raise the debt ceiling unless two-thirds of Congress disapproves, according to a Senate Democratic aide.

But US House Speaker John Boehner said that the Republican-controlled chamber can’t pass an increase to the US debt ceiling without packaging it with other provisions.

The US Dow Jones Industrial Average had ended 0.9 per cent lower yesterday.

Gold futures rise to Rs 29,549 per 10 gm

Gold futures prices today rose 0.22 per cent to Rs 29,549 per 10 gram as speculators enlarged positions, largely in tandem with a firm trend overseas.

On the Multi Commodity Exchange, the metal prices for delivery in December gained Rs 63 or 0.22 per cent to trade at Rs 29,549 per 10 gram in a turnover of 1,349 lots.

Similarly, the metal prices for delivery in February 2014 edged up by Rs 22 or 0.05 per cent to Rs 29,230 per 10 gram clocking a business volume of 9 lots.

Analysts attributed the gains in the precious metal at the futures trade to a firm trend in overseas markets, besides rising demand in the domestic markets for the ongoing festive and marriage season.

Meanwhile, the yellow metal rose 0.17 per cent to $1,324.70 an ounce in Singapore today.

Canara Bank shines on entering into tie-up with Apollo Munich Health Insurance

Canara Bank, a Bangalore-based public sector lender, has entered into a bancassurance tie-up with Apollo Munich Health Insurance (AMHI). Through this tie-up, the bank will distribute AMHI products in over 4,200 branches which will act as a corporate agent for selling these products. Bancassurance is distribution of insurance products through a bank's network.

Besides, the bank will also utilize it business correspondents’ network to take health insurance to unbanked areas. This is the first such tie-up for the insurance company in its six years of existence.

On standalone basis, the bank has posted a rise of 2.17% in its net profit at Rs 792.07 crore for the quarter ended June 30, 2013 as compared to Rs 775.24 crore for the same quarter in the previous year. Total income has increased by 14.65% at Rs 10507.88 crore for quarter under review as compared to Rs 9165.47 crore for the quarter ended June 30, 2012.

Financial Technologies gains on clarification to stock exchange

The stock up 3.5% at Rs 173 on the Bombay Stock Exchange.

Shares of Financial Technologies were up 3.5% at Rs 173 on the BSE after the company clarified to a query by the stock exchange.

In response to Exchange query regarding reports in the electronic media about raids being conducted on the residences of the Directors of Financial Technologies (India) Limited (FTIL) by the Economic Offences Wing (EOW), FTIL in a release to the Bombay Stock Exchange said, "It appears to us that EOW had conducted search operations on 30.09.2013 at the residence of the Directors of NSEL including at the residence of Mr. Jignesh P. Shah, Chairman & Managing Director, FTIL, may be due to he also being a Director on the Board of NSEL. Please note that no official communication in this regard has been received by FTIL from EOW and/or NSEL."

The stock opened at Rs 170.20 on the BSE and touched in intra-day high of Rs 174. Over 1.7 million shares were traded on both the stock exchanges so far.

Jindal Steel in talks to acquire 1,320MW power plant in AP

Jindal Steel and Power (JSPL) is reportedly in talks with Hyderabad-based Kineta Power to buy its 1,320-megawatt (MW) coal-based power plant at Nellore in Andhra Pradesh. The project is currently under implementation and has already received forest and defence clearance. Further, the cost of setting up the power plant is around Rs 5,000 crore.

Kineta Mines and Minerals is primarily engaged in export of iron ore and are also the suppliers of burnt lime, limestone and dolomite.

JSPL is a part of Jindal Group and is a leading player in Steel, Power, Mining, Oil & Gas and Infrastructure. The company produces economical and efficient steel and power through backward integration from its own captive coal and iron-ore mines and passes on the benefits to its customers.

Banks set stringent norms for promoters of debt-laden companies

Concerned over the rising cases of loan defaults, Indian banks have set strict norms for offering loan restructuring to promoters who have run businesses aground. After Reserve Bank of India governor Raghuram Rajan's stern message against defaulters and failed managements, lenders have started taking more careful steps while restructuring loans and have decided to go ahead with restructuring on a loan only after ascertaining that the project is viable and the promoter has not siphoned off funds, or diverted funds to any other project.

Further, banks are now seeking upfront commitment from borrowers in form of guarantee. At Corporate Debt Restructuring (CDR), banks have made it mandatory that promoters' contribution at 25% of bank’s loan should be made upfront and if the borrower fails to repay loans, the CDR package is withdrawn and lenders can take legal action for recovery of loans. 

Recently, the RBI has noted that promoters don’t have the right to use the banking system to recapitalize their failed ventures and suggested the banks to take careful steps while restructuring loans, a method used by banks with outstanding debt obligations to alter the terms of the debt agreements to avoid default on existing debt. The stress on the asset quality is a reflection of slowdown in the economy of the country and over the past two years, non-performing Assets (NPAs) of banks have been increasing on account of prevailing economic downturn. In the April- June quarter, 2013, gross NPAs in the banking system grew by 12.02 percent to Rs. 2.06 trillion and formed 3.85 percent of the industry’s advances.

RBI eases cash squeeze again, cuts MSF rate

Launches term repos; short-term borrowing set to become cheaper

The Reserve Bank of India (RBI) on Monday further eased liquidity by cutting the marginal standing facility (MSF) rate, a key overnight interest rate, by 50 basis points to nine per cent, with immediate effect. This is the second time in less than a month that the central bank has cut the key overnight interest rate, taking advantage from the rupee’s recent surge.

The first cut, of 75 bps, was done on September 20 in the mid-quarter review of the monetary policy.

RBI has also decided to provide additional liquidity through term repos of seven-day and 14-day tenor for a notified amount equivalent to 0.25 per cent of net demand and time liabilities (NDTL) of the banking system through variable rate auctions on every Friday, beginning this week.

The move is the latest by RBI Governor Raghuram Rajan to return monetary policy settings towards normal after a harrowing run for the rupee, which had fallen 20 per cent this year, as of late August. The currency weakened 0.6 per cent to 61.80 a dollar on Monday.

“The notified amount and tenor of the term repo auctions will be announced prior to the dates of the auctions,” RBI said on Monday. It also infused Rs 9,974-crore liquidity through open-market purchase operations. Due to the cut in MSF rate, the bank rate also stands adjusted at nine per cent.

Some banks see the possibility of a cut in lending rates. Bank of Baroda CMD S S Mundra said a reduction of 25-50 basis points in lending rates in some products was possible. “Since this is traditionally the busy period and since the reduction in MSF rate has made liquidity available, spreads can be reduced for some loan segments. Earlier, the cost of deposits was high for banks. But, with additional liquidity being made available, the cost will get aligned, to some extent,” Mundra added.


Other experts said they expected a rally in short-term rates and the government securities curve could steepen and the inversion correct. “The move will ease short-term rates by around 50 bps. The introduction of term instruments will help develop the yield curve in the bucket one- to 91-day tenure,” said N S Venkatesh, chief general manager and head of treasury, IDBI Bank.

In mid-July, RBI had raised the MSF rate to 10.25 per cent from 8.25 per cent, to arrest the rupee’s volatility against the dollar.

According to Sangeet Shukla, advisor (risk), Indian Bank’s Association (IBA), the introduction of repos will bring predictability. Another benefit is that some stability would come, as banks can build pricing models that also capture risks.

Public-sector bank executives said the banking industry had sought term repos in 28- and 60-day brackets, too.

The Street believes there are more MSF rate cuts in store. “Earlier the spread between the MSF rate and the repo rate was 100 basis points. That spread may be restored,” said J Moses Harding, Group CEO, Srei Infrastructure Finance.

The weighted average call money rate stood at 9.55 per cent on Monday, compared with 6.86 on Saturday, while the weighted average collateralised borrowing and lending obligation (CBLO) stood at 9.50 per cent, compared with 7.52 on Saturday.

With further easing of rates in the domestic market, the attractiveness of funds raised using the swap facility — for foreign currency non-resident account (banks) and Tier-I capital-linked borrowings — would decline, said a senior State Bank of India official.

Now, trade currency futures on BSE

Bourse to soon become fourth player in currency futures where it will compete with NSE, MCX-SX and its own United Stock Exchange

BSE Ltd, Asia’s oldest stock exchange, is set to enter the most competitive segment in the stock exchange — currency futures. The exchange has received approval from the regulator.

“We have received the Securities and Exchange Board of India (Sebi) approval and plan to launch the currency futures segment in two months,” said Ashishkumar Chauhan, managing director and chief executive of BSE. The development is interesting as BSE already has a 15 per cent equity stake in the United Stock Exchange (USE), which is active in the currency segment and BSE also provides a trading platform facility at a fee to USE.

With this, BSE will be fourth player in currency futures, where it will compete with the NSE, MCX-SX and its own United Stock Exchange (USE). The development is happening at a time when one of the competitors is facing regulatory action. The currency futures market was Rs 50,000-60,000 crore market, which shrank to Rs 20,000 crore after several restrictions by the Reserve Bank of India in June following a volatile rupee. USE’s market share is around five per cent at present.

        

CLEAR FUTURE

Interest rate futures would also be launched simultaneously BSE to also launch segment for mutual fund distributors Purchased trading technology from Deutsche Börse which will make trading speed much faster than rivals

BSE is also improving technology for derivatives trading. It has purchased the latest technology from leading international derivative exchange and BSE’s equity partner, Deutsche Börse. The technology is so fast that the response time will increase from 10 mili seconds at present to 200 micro seconds. This will result in increase in execution of orders from 15-20,000 per second at present to 200,000 to 500,000 per second.
end. Deutsche Börse introduced this technology only this January.

In newer businesses, BSE is having a good market share, which includes the SME segment, offer for sale and now the exchange is readying for launching a segment for mutual funds where even mutual fund distributors could take membership. This is also expected in next couple of months.

The question came up on why BSE had to launch its own currency futures when it has already a 15 per cent stake in USE, which is into the currency segment. Chauhan said: “USE is working well and they are going on their own. However, BSE members’ demand was to have all the derivatives under one umbrella and, hence, we are offering currency derivatives to the existing brokers-members at virtually no extra cost.”

The timing of BSE’s entry into the currency segment is crucial as there are reports that the government and RBI considering several reforms, which will expand and deepen this market.

Another interesting development is that post the NSEL crisis, MCX-SX has seen a fall in volumes on its currency segment.

Sensex crosses 20K level

Indian stock markets jumped over one per cent in the opening session on Tuesday on heavy capital inflows despite mixed Asian cues.

At 9.15 a.m., the 30-share BSE index Sensex was up 199.19 points (1.00 per cent) at 20,094.29 and the 50-share NSE index Nifty was up 63.35 points (1.07 per cent) at 5,969.50.

Asian stocks swung between gains and losses as telecommunication shares dropped while utilities advanced.

The US government shutdown entered its second week, leaving investors on tenterhooks as politicians in Washington made little headway in agreeing a deal to avoid the debt default.

But a private survey of China's services industry helped cap the losses as it showed the sector continued to expand in September, albeit at a slower pace than in the previous month.

Japan's Nikkei was down 10.31 points or 0.07 per cent at 13,843, Hong Kong's Hang Seng rose 90.50 points or 0.39 per cent to 23,064.40 and Australia's S&P/ASX 200 was down 17.21 points or 0.33 at 5,143.90.

India-Asean trade, services pact may be inked this year

The Free Trade Agreement (FTA) in trade and services between India and the 10-member Association of South-East Asian Nations (Asean) is expected to be signed in calendar 2013, a senior official in the Ministry of External Affairs said on Monday.

“All issues covering the free trade agreement in trade and services investments have been sorted out. The legal study has been completed. There were certain observations by the Philippines and Thailand, which have been addressed. Now, the respective countries are taking their internal approvals. We believe the signing will take place in calendar year 2013. This depends on internal procedures in member countries. But we are optimistic (it will be) this year,” Secretary, East, Ashok Kantha, said.

Kantha was briefing newspersons on the forthcoming visit of Prime Minister Manmohan Singh to Brunei for the XIth India-Asean Summit and the 8th East Asia Summit and the bilateral visit to Indonesia, which begins on October 9.

He said Singh would also meet the newly-elected Australian Prime Minister Tony Abbott on the sidelines of the summit meetings. On the issue of sale of Australian uranium to India, Kantha said the third round of negotiations between the two countries could take place in December.

“There is a firm desire on both sides to try and bring these negotiations to a successful conclusion at an early date,” he said.

Central Bank of India's Tier I-II bonds downgraded by CRISIL

The Mumbai-based public sector lender is witnessing a sharp and sustained deterioration in asset quality

Rating agency CRISIL has downgraded the tier-I and tier-II bonds of Central Bank of India to ‘AA’ from ‘AA+’ on expected weakening of credit profile on the sustained deterioration in asset quality and earnings.

The Mumbai-based public sector lender is witnessing a sharp and sustained deterioration in asset quality. Its gross non-performing assets (NPA) increased significantly to 6.0 per cent as on June 30, from 1.8 per cent as on March 31, 2011.

The deterioration in the bank’s asset quality is also reflected in its higher-than-industry-average slippages at 5.6 per cent (annualised) for the quarter ended June 30, (3.5 per cent in 2012-13), CRISIL said in a statement

Rajeev Rishi, chairman and managing director, told Business Standard non-performing assets is a concern for the bank.

The bank has stepped up efforts to recover non-performing accounts. The recovery has been in excess of Rs 700 crore till now, he said.

CRISIL reaffirmed the bank’s certificates of deposit programme at “A1+”.

The ratings continue to factor in the strong support that Central Bank is likely to receive from the Government of India, the bank’s sizeable scale of operations, and its adequate resource profile.

Furthermore, the bank had a large proportion of restructured standard assets of 13.2 per cent as on June 30. The bank’s asset quality will remain weak over the medium term, given the challenging macroeconomic environment and the bank’s large exposure to vulnerable sectors such as infrastructure (particularly to power sector), construction, and iron and steel.

Central Bank also has a weak earnings profile, marked by low interest margins and high provisioning costs. The bank’s return on assets ratio remains significantly lower than that of its peers at around 0.03 per cent (annualised) for the quarter ended June 30, 2013 (0.4 per cent in 2012-13).

The bank’s profitability will continue to be adversely impacted by an increase in provisioning costs because of the asset quality challenges. Additionally, the bank’s net interest margins are likely to remain under pressure over the next few quarters because of high borrowing costs, CRISIL said.

Banking stocks to see strong opening on RBI move

However, gains made are unlikely to sustain through the day

Banking stocks are expected to open higher on Tuesday on the back of the RBI’s move to bring down short-term interest rates. The NSE Bank Nifty is expected to open up by about 2%, analysts said. However, the gains made are unlikely to sustain through the day, they added.


“The RBI’s measure will help the Bank Nifty to see a strong opening on Tuesday. It could do a peak of 4-5% during the day, but would give away some of the gains by the end of the day,” said Yogesh Nagaonkar, head of equity – institutional broking at Bonanza Portfolio. The NSE Bank Nifty closed Monday's trading session down 1.1% to 10,082.

On Monday, the central bank brought down the Marginal Standing Facility, or short-term borrowing rate by 50 basis points to 9%, further reversing measures taken by it in July to curtail the decline in the rupee.

Banking analysts said that while the rise could be across shares of all banks, those with higher short-term borrowings would benefit the most.

“Banks like Yes Bank, IndusInd bank, which have higher exposure to short-term funds could appreciate more than those with low short-term funding exposure. But the rise in the stock prices may not sustain through the day because the fear of a repo-rate hike by the RBI has still not vanished,” said Sunil Jain, VP-Equity Research, Nirmal Bang Securities.

Since July, the share price of Yes Bank has fallen by 37% while that of IndusInd bank has fallen by 22%.

“The effort of the newly appointed RBI Governor, Raghuram Rajan, has been to flatten the yield curve and the measure taken by the RBI on Monday is a step in that direction. The rupee stabilising at these levels may have prompted the central bank to take this measure,” said Varun Goel, head of PMS at Karvy Stock Broking.

Earlier this year in July, the RBI in its attempt to curb the rupee fall had increased short-term borrowing rates which put liquidity pressure on the system.

Godrej Consumer Products to acquire 30% stake in B:blunt

Godrej Consumer Products (GCPL) has entered into an agreement on October 07, 2013 to acquire a 30% stake in Bhabani Blunt Hair Dressing (B:blunt). B:blunt is a premier hair salon company with one of the strongest consumer franchises in this space.

Since launching the chain in 2005, Adhuna Bhabani Akhtar and Osh Bhabani have grown the brand across India. B:blunt, today has a pan-India presence with 17 outlets and 4 academies.

Godrej Consumer Products is a leader among India's Fast Moving Consumer Goods companies, with leading Household and Personal Care Products. Its brands include Good Knight, Cinthol, Godrej No. 1, Expert, Hit, Jet, Fairglow, Ezee, Protekt and Snuggy, among others, which are household names across the country.

Markets to get a green start cheering the RBI’s measures

The Indian markets made a good bounce back in the late trade of last session, despite being pressured by the weakness in rupee and heavy selling in banking stocks. Today, the start is likely to be modestly in green and the indices are likely to extend their momentum, as in a surprise move, the Reserve Bank of India (RBI) on Monday eased the liquidity tightening measures it had initiated earlier, by reducing the marginal standing facility (MSF) rate by a further 50 basis points (bps). The measure is likely to help the NBFCs and smaller wholesale-funded banks and easing the short-term rates and liquidity in the banking system. Meanwhile, India has lodged a strong protest against some of the proposals in the World Trade Organization's (WTO) planned agreement on trade facilitation as it will force the government to undertake major changes, including the way the Budget is presented. WTO has asked India to work out a solution to the vexed issue of food security programme ahead of the Bali ministerial meeting in December. There will be some buzz in the telecom sector, as the Telecom Commission has accepted telecom regulator’s proposal to permit spectrum trading and sharing, though it has asked TRAI to work out the modalities before implementing it.

The US markets continued their downward slide in the new week with major indices losing about a percent, as lawmakers failed to make any progress on resolving the impasse over a government spending bill. The Asian markets have made a mixed start and some of the indices are marginally in red concerned about the US developments after President Barack Obama reiterated that he won’t negotiate with Republicans over the shutdown.

Back home, Indian equity benchmarks, despite sluggish opening, managed to end the extremely volatile session near the neutral lines on Monday. Buying which emerged in late trade mainly acted as saving grace for domestic equity markets and helped Nifty to re-conquer its crucial 5,900 mark, while Sensex just shied away from 19,900 mark. Earlier, markets made a shaky start tracking weakness in Asian markets; moreover investors opted to remain on sidelines ahead of the Infosys’ quarterly results later this week that will kick start the earnings season for July-September quarter. Some cautiousness also came in after study by CII Ascon showed that industrial growth in the three months ended 30 September remained dismal despite the government introducing a number of reform measures to boost the economy. Choppy start in European counterparts too dampened the sentiments, moreover, most of the Asian markets shut shop in the red terrain with investors choosing to trim down positions on account of US lawmakers’ wrangle over the debt limit and partial government shutdown. Back home, weakness in Indian rupee against dollar too dampened the sentiments. Moreover, stocks related to banking sector remained under heavy selling pressure, led by the sharp fall of ICICI Bank which slipped by 1.50% on reports of raising an alarm over loan default by Dabhol power plant after being rendered idle due to fuel supply issues. However, key bourses witnessed sharp recovery in last leg of trade, supported by buying in software and technology counters on rupee weakness against the dollar. Sentiments also got some support as shares of metal companies continued their northward journey after encouraging data from China and on hopes of higher net profit growth on sequential basis. Additionally, shares of select non-banking finance companies (NBFC) that applied for the banking licenses edged higher after Finance Minister P Chidambaram said that the Reserve Bank of India (RBI) would shortly issue seven licenses. Finally, the BSE Sensex lost 20.85 points or 0.10%, to settle at 19895.10, while the CNX Nifty declined by 1.15 points or 0.02% to settle at 5,906.15.