FinXpress_16_Dec_2012

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December 16, 2012

Company In Focus : Amba Research

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Term of the Week :

INSTITUTE OF MANAGEMENT TECHNOLOGY, GHAZIABAD

Cover Story : Cheque Truncation System

EDITORIAL

Dear Readers,

Greetings from FinNiche!

We heartily congratulate all the second year students who’ve been placed. And convey our best wishes to the ones who’re waiting for their dream company.

In this edition of FinXpress, we have Amba Research as the ‘Company in Focus’. In the ‘Term of the Week’ section, we explore ‘Sinking Fund’. Moving to the ‘Markets This Week’, after closing with their biggest weekly gain last week the markets closed lower with a loss of about 50 basis points this week. The special page gives some insight into the Cheque Truncation System and its implementation.

We sincerely hope that the readers will find the content engaging. We would appreciate feedback and suggestions for improvement. We look forward to keeping you updated and adding to your knowledge base. Till then, “Enjoy Reading”!

Yours Sincerely,

The Editorial Board

FinXpress

December 16, 2012 PAGE 1 http://www.imtgfinxpress.co.cc

COMPANY IN FOCUS

Amba Research

Amba Research offers a wide range of research and analytics support services to global financial institutions. It has over 80 clients, including some of the world’s largest asset managers, investment banks, brokerages, insurance and alternative investment firms. 6 of the top 15 global asset managers, 7 of the top 15 global investment banks, and 7 of the top 15 alternative investment firms use its services to differentiate and outperform. Amba Research was founded in 2003 by senior directors of research from Goldman Sachs, Deutsche Bank, and JPMorgan. Amba’s research and analytics support services span global equities, fixed income/credit, quantitative research, insurance analytics, business research, and fund sales and marketing. Amba's delivery centres are present in Bangalore (India), Colombo (Sri Lanka), and San Jose (Costa Rica) offer 24-hour coverage to its clients. In addition, its sales offices in London and New York allow our clients to interact with their account managers on a real-time basis. Amba have invested heavily in its research delivery process, which is backed by a world-class training and knowledge management program. Amba is the only investment research support provider with an analyst training program approved by the CFA Institute. Their quality, along with Wall Street-standard compliance policies and information security standards, ensure delivery excellence while providing significant cost savings to its customers. Amba Research offers the following services:

Equity Research

Fixed Income and Credit Research

Quantitative Services

Research Production

Corporate Finance

Sales and Marketing Support

Regulatory Compliance Support Services

CLIENT SEGMENTS Representative Clients: Top 5 Global Asset Manager A team of 30+ Amba analysts provides support for thematic research, equity analysis, investment grade credit analysis, stochastic modelling, and simulations.

Top 5 Global Investment Bank A team of 45+ Amba analysts provides a wide range of sector research, financial modelling, as well as news and data gathering support.


Top 7 Global Investment Bank A team of 80+ Amba Analysts provides a full range of coverage initiation, financial modelling, and report writing services for both equity and fixed income securities.

Top 4 Global Investment Management Consultant A team of 20+ Amba analysts provides index research and statistical & mathematical modelling solutions to one of the world’s largest investment management consulting firms.

PARTNERS Amba actively partners with organizations and leading industry bodies to create significant and sustainable value for everyone involved. Partnering helps to bring forth innovative and collaborative solutions to deal with ever-changing markets. Amba Research has strategic partnerships with the following organizations/industry bodies:

CFA Institute: Amba Research is the only investment research support services firm with an analyst training program that has been approved by the CFA Institute. CFA Institute is the world’s leading and largest body of financial analysts.

Gerson Lehrman Group: Amba Research is the only investment research support services firm that is a Gerson Lehrman Group council partner. Gerson Lehrman Group is a leader in connecting institutions and expertise.

National Outsourcing Association (NOA): Amba Research is an active member of the National

Outsourcing Association (NOA). The NOA is the UK’s only outsourcing trade association and the centre of excellence in outsourcing.

CIMA: Amba Research is a Chartered Institute of Management Accountants (CIMA) CPD partner and a CIMA TTP employer. Amba also had the distinction of being runner-up, CIMA Global Employer of the Year, in 2007. CIMA is the world's largest professional body of management accountants.

ACCA: Amba Research is an Association of Chartered Certified Accountants (ACCA) Approved Employer for Professional Development. ACCA is the global body for professional accountants.

AWARDS AND RECOGNITION Amba Research is the only KPO firm to be featured in the "Ones to Watch" section of the NOA Outsourcing Yearbook 2010, a publication by the National Outsourcing Association (NOA), UK. Amba Research was ranked among the top 3 KPO Service Providers for 2010 by the Black Book of Outsourcing. Amba was also ranked among the Top 3 Financial Services and Investments KPO Vendors in the 2009 Black Book of Outsourcing survey. The Black Book of Outsourcing is a division of the Data monitor Group. All of Amba’s delivery centres have gained the globally recognized ISO 27001 certification reflecting the highest standards of information security. The International Organization for Standardization (ISO) is the world's largest developer and publisher of international standards.


TERM OF THE WEEK : Sinking Funds

A sinking fund is a fund established by a government agency or business for the purpose of reducing debt

by repaying or purchasing outstanding loans and securities held against the entity. It helps keep the

borrower liquid so it can repay the bondholder. It is a fund into which a company sets aside money over

time, in order to retire its preferred stock, bonds or debentures. In the case of

bonds, incremental payments into the sinking fund can soften the financial impact

at maturity. Investors prefer bonds and debentures backed by sinking funds because there is less risk of a

default.

It is a means of repaying funds that were borrowed through a bond issue. The issuer makes periodic

payments to a trustee who retires part of the issue by purchasing the bonds in the open market. Rather

than the issuer repaying the entire principal of a bond issue on the maturity date, another company buys

back a portion of the issue annually and usually at a fixed par value or at the current market value of the

bonds, whichever is less. Should interest rates decline following a bond issue, sinking-fund provisions allow

a firm to lessen the interest rate risk of its bonds as it essentially replaces a portion of existing debt with

lower-yielding bonds.

From the investor's point of view, a sinking fund adds safety to a corporate bond issue: with it, the issuing

company is less likely to default on the repayment of the remaining principal upon maturity since the

amount of the final repayment is substantially less. This added safety affects the interest rate at which the

company is able to offer bonds in the marketplace.

The total sinking fund amount is divided by the total number of unit entitlements, this amount is then

multiplied by each owner’s unit entitlements. For example, if an owner’s corporation calculates that it

needs $120,000 over 10 years, then it would need to levy $12,000 for each year. To meet the $12,000 per

year, contributions would need to be levied according to the unit entitlement of each lot. If there were 20

lots in the scheme and each had the same unit entitlement, each owner would be required to contribute

$600 per year towards the sinking fund.


MARKET THIS WEEK

SENSEX

Sensex lost 0.5% from last week and ended the week at 19310.

Simple Moving Averages

NIFTY

Nifty lost 0.8% from last week and ended the week at 5865.

Simple Moving Averages

30 Days 50 Days 150 Days 200 Days

18,903 18,828 17,767 17,646

MARKET THIS WEEK

30 Days 50 Days 150 Days 200 Days

5,750 5,725 5,391 5,356


Overview

There is hope everywhere as the government seems to have got back to its action plan. A host of moves to expedite approvals for projects and a new law for land acquisition are among them. Investments and growth are the need of the hour and the government appears to be moving well in that direction for now. In what is described as a game-changer, a Cabinet Committee on Investments headed by the prime minister is being set up. This will improve clearances of projects of over `10bn and of course cut red tape. The cabinet has also cleared also approved a urea policy that will make the country self-sufficient in fertilizers besides bringing in projects to the tune of `350bn, reports stated. A 30% cut in the base price of airwaves is among the other decisions taken on Friday. These moves could give the Indian indices a better start unless global cues play spoilsport. The inflation data came out much better than expected and the market moved up. Bank stocks started moving up on hopes that the low inflation data might give the Reserve Bank of India (RBI) reason to move as early as next week and not wait till January. So, the public sector banks did quite well. It was a sticky week for the market and despite Friday's half a percent rally.

Exchange Rates vs. INR

Currency Symbol Rates % Change

US Dollar $ 54.46 0.30%

Euro € 71.38 0.48%

Dirham AED 14.84 0.27%

Japanese Yen

¥ 0.65 0.03%

Chinese Yuan

CNY 8.67 0.24%

Commodities Unit Rs. / Unit % Change

Gold 10gms. 31,205 -0.42%

Silver 1 Kg. 61,348 -1.97%

Crude Oil 1 BBL 4,730 0.66 %

RESERVE RATIOS

CRR 4.25%

LRR 23.0%

LENDING DEPOSIT RATE

Base Rate 9.75%-10.50%

Savings Deposit Rate 4.00%

Term Deposit Rate 8.50%-9.00%

POLICY RATIOS

Bank Rate 9.00%

Repo Rate 8.00%

Reverse Repo rate 7.00%

Marginal Standing 9.00%


NEWS OF THE WEEK

KFA caps FII investment to 3% for FDI inflow Nearly bankrupt Kingfisher Airlines is preparing the ground for getting FDI by capping FII investment at 3%. The decision was taken at the grounded airline's board meeting on Wednesday as it talks to various foreign investors and airlines for a possible stake sale. This is being done with a "view to keeping the company's capital structure in readiness for transactions that may be identified in the future for benefit of all stakeholders". The airline's scrip gained almost 5% on BSE on Wednesday. The airline's shares prices have been constantly rising for past eight days, a rally that gathered pace after it admitted being in talks with Etihad Airways.

HDFC Life may be first to list on FDI easing HDFC Life may be the first among insurance companies to go public as it prepares to list on the stock exchanges as the government prepares to raise FDI limit in the sector. The joint venture partner, Standard Life of the UK, has agreed to list the company which could be valued at over 6,000 crore, said people familiar with the valuation process. Its internal valuation based on the market consistent embedded value method comes to 4,820 crore based on last fiscal finances. The government is planning to allow foreign institutional investors own up to 23 per cent in insurance ventures, while capping the investment limit of foreign insurers at the current level of 26 per cent, taking the total foreign holding to 49 per cent. The company has seen a 63 per cent jump in profit during the first half of the financial year at 216 crore from 132 crore. It has grown its income 11 per cent by selling new policies and registered 9 per cent growth in renewal income.

Bombay Stock Exchange launches SME index The Bombay Stock Exchange (BSE) today launched a Small and Medium Enterprises (SMEs) index that aims at tracking the current primary market conditions in the Indian capital market and measure the growth in investors' wealth over a period. The index will be constituted by SMEs listed on the BSE SME platform. So far, there are 11 companies listed on the SME platform and this index will have features similar to the BSE IPO index.

India, Pak start new visa regime Travel between India and Pakistan will become easier with the operationalisation of a new visa regime on Friday that allows multi-city visas for up to five cities, visitor visas for two years for senior citizens and children below 12 years, visa on arrival for senior citizens, and group tourist visa, besides exempting specified categories of businessmen from police reporting. The visa agreement was operationalised by home minister Sushil Kumar Shinde and visiting Pakistani interior minister Rehman Malik, both of whom agreed that it would promote people-to-people contact between the two countries. The visa agreement was signed by the two sides on September 8. Malik said the new visa agreement was not only historic but a step forward for peace. In a move aimed at promoting economic ties between the neighbours, business visa norms have been eased, with businessmen with income above 5 million Pakistani rupees or having an annual turnover above 30 million Pakistani rupees now exempt from police reporting.


http://timesofindia.indiatimes.com/topic/Bse

US school shooting puts pressure on Obama administration to act on gun laws

The shooting spree in a Connecticut school that left 20 small children and six adults dead capped a tragic year for the US, which saw similar massacres in a Colorado theatre and Wisconsin gurdwara, putting pressure on the Obama administration to take action on the country's gun laws. The incident sent shockwaves across America and an emotional President Barack Obama called for "meaningful action to prevent more tragedies" as he fought back tears in a televised press conference. He said America has gone through such "tragedies" too many times and the nation has to come together and take "meaningful action to prevent more tragedies like this, regardless of the politics." Meanwhile, an online petition addressed to the White House, which calls for addressing the issue of gun control immediately through legislation in US Congress, secured over 43,000 signatures in the aftermath of the tragic shooting at the elementary school.

IOC retains top slot in Fortune 500 India list

Indian Oil Corporation (IOC) is the biggest company in terms of revenue, followed by Reliance Industries, according to the Fortune 500 list of Indian companies for 2012. IOC is the biggest company with annual revenue of Rs.4,20,287 crore, followed by Mukesh Ambani-led RIL with a full-year revenue of Rs.3,67,539 crore. Bharat Petroleum Corporation is at the third spot with a revenue of Rs.2,14,866 crore. Hindustan Petroleum Corporation is ranked fourth with annual revenue of Rs.1,87,693 crore and State Bank of India is ranked fifth with Rs.1,77,033 crore revenue. Among others in the top 10 are Tata Motors (sixth), ONGC (seventh), Tata Steel (eighth), Coal India (ninth) and Hindalco Industries (10th). The magazine said that total sales of Fortune 500 companies had grown at 23.77 per cent year-on-year.

Centre cuts import tariff value of gold

The Centre, on Friday, slashed the import tariff value of gold marginally to $550 per 10 grams amid weak global prices of the precious metal. The tariff value of silver has, however, been hiked marginally to $1,062 a kg. The tariff value is the base price on which the customs duty is determined to prevent under-invoicing. The government decided to bring down the import tariff value of precious metals as global prices have weakened. In New Delhi, gold declined for the second consecutive day to Rs 31,400 per ten grams on Friday, taking cues from global markets.

PM says to speed up sale of stakes in PSUs

India will speed up the sale of stakes in state companies to revive the stock market and will push ahead with reforms aimed at spurring an investment recovery in the flagging economy, Prime Minister Manmohan Singh said on Saturday. Selling equity in large public industries is a central plank of the government's plan to bring down a wide fiscal deficit, a major weakness in Asia's third largest economy. This week, the sale of 10% in state miner NMDC raised $1.1 billion and the government is aiming for 300 billion rupees from such partial privatisations by March.


COVER STORY

Considered to be a major milestone in the history of Indian banking, Cheque Truncation System (CTS) aims to make cheque clearance more efficient and reduce the clearance time of cheques to one day, thereby trimming down the floating time considerably. India processes as many as 1.2 billion cheques annually and therefore, the implementation of this system would drastically cut down the waiting period involved. The system will be implemented nationwide from January 1, 2013.

How does it work? An online image-based cheque clearing system, the collecting bank branch would deploy scanned images along with the magnetic ink character (MICR) of the cheque which will be sent out electronically using their Capture System, removing the need for physical/manual transfer of cheques. The captured images and the data is then signed and encrypted and sent to the Clearing House or the central processing location and thereafter forwarded to the drawee or paying bank. This helps speed up the cheque collection process that eventually helps provide better and faster customer service.

Key Features of Cheque Truncation System User friendly graphic user interface

Automated coding and endorsing of cheques

Encryption of data file before transmission to the clearing house or the service branch

Employs a unique transaction follower process to confirm the status of cheque

Improved and efficient settlement and prevention of fraud

Equipped with enhanced archival procedure that stores images and data facilitating report generation along with future enquiry.

Alerts RMs in case of return of cheque due to insufficient funds

Cheque Truncation System – Why You May Need To Apply For a New

Cheque Book


Impact of CTS on Customers

Handling of EMIs with the Introduction of CTS In cases where customers have issues post-dated cheques (PDC) for payment of monthly instalments towards an ongoing loan, they would need to issue fresh cheques to the bank or service provider as per the new directive on CTS by the RBI. The replacement of these cheques needs to be done latest by December 31, 2012 and is applicable on all banks and NBFCs.

Encashment of Old Cheques If you have an old cheque with you, you should get it encashed by December 31, 2012. The RBI mandate states that payments for such cheques will be honoured only till then. Banks need to issue the new types of CTS-compliant cheque books with the prescribed features to all their customers latest by December 31, 2012. Customers may need to surrender their old cheque books or cancel them and show proof of cancellation. No replacement fee will be charged by the bank for issuing new cheque books. Apart from these aspects, the system does not, in any way, affect the way things function for a customer. They would continue using cheques as they do currently; however, cheques that have been altered or modified will not be permissible under the new system. The other precautions that need to be taken while issuing or writing a cheque are: Ensure that all details are clear and readable, using black or blue ink Write the name of the payee, amount and the date and sign the cheque correctly. In case you use seals on the cheque, ensure that they are imprinted in a manner that they do not

mask or hide the other important fields of the cheque.

Benefits of CTS for Customers Clearance cycle gets shortened - As this system is being implemented, the physical or manual

movement of cheques for clearance has ceased. With cheques being transmitted electronically, the settlement process becomes quicker, facilitating reduction in the clearance cycle.

The fear of loss of cheques during transfer from the collecting bank to the drawee or payee bank is eliminated.

Limitations of the current clearance system with respect to jurisdiction and geography are eradicated. This enables integration and consolidation of several clearing locations across various banks offering different service levels into one standard clearance system applicable throughout the country.

CTS helps reduce the scope of fraud significantly. Moreover, the electronic transmission is quick and allows early detection of fraud or any alteration with respect to the payee, amount or the issuer of the cheque. CTS prescribe minimum security features under ‘CTS-2010 standards’ along with superior verification process that further facilitates in the reduction of frauds.

The operational efficiency of both the bank as well as the customer is enhanced with the introduction of this system.

Source: Yahoo Finance


CAN YOU SOLVE IT?

**Rush in your entries to : [email protected]

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LAST WEEK’S ANSWERS:

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Winner: Ajay Maheska

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CARTOONS:

FinQuiz

1. Which Company’s Ticker symbol on the NYSE is “C”?

2. Economic historians usually attribute the start of the great Depression to the sudden devastating collapse US stock market prices on October 29, 1929. This day is known as what?

3. Name the first Indian woman CEO of a foreign bank.

4. Who is known as the “Oracle of Omaha”?

5. In India where is the paper for the currency manufactured?


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